KALA

Business Context and Reporting Period

KALA BIO, Inc. is a clinical-stage biopharmaceutical company focused on developing therapies for rare eye diseases. The company's primary asset is KPI-012, a mesenchymal stem cell secretome in Phase 2b clinical development for persistent corneal epithelial defects (PCED). The company previously sold its commercial business (EYSUVIS and INVELTYS) to Alcon in July 2022 and currently has no revenue-generating products. This filing covers the quarterly period ended June 30, 2025.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Loss Improvement: The net loss for the six months ended June 30, 2025, was $20.1 million, a decrease of $1.3 million compared to $21.4 million in the same period in 2024. This improvement was driven by higher grant income ($2.9 million vs. $2.1 million) and lower interest expense ($2.2 million vs. $2.9 million), partially offset by increased R&D costs.
• Expense Trends: Research and development expenses increased by $0.6 million year-over-year, primarily due to higher employee-related costs and KPI-012 development costs. General and administrative expenses decreased by $0.5 million due to lower employee-related costs.
• Debt Repayment: The company made a $2.5 million prepayment on its Oxford Finance loan in June 2025, extending the amortization start date to January 1, 2026, and the maturity date to May 1, 2027.
• Grant Income: Grant income increased significantly due to the achievement of milestones under the California Institute for Regenerative Medicine (CIRM) award, including a $2.3 million disbursement in April 2025.

Guidance, Outlook, and Risks

• Going Concern Warning: Management has identified conditions that raise substantial doubt about the company's ability to continue as a going concern. Cash on hand ($31.9 million) is projected to fund operations only into the first quarter of 2026. The company will require additional capital to complete clinical development and operations.
• Clinical Outlook: The company completed patient enrollment in the CHASE Phase 2b trial for KPI-012 in July 2025. Topline safety and efficacy data are expected in late September 2025. Positive results could support a Biologics License Application (BLA).
• Financing Needs: The company plans to raise additional capital through equity or debt financings, collaborations, or licensing transactions. Failure to secure funding could force delays or elimination of R&D programs.
• Debt Covenants: The company is subject to covenants under its loan agreement with Oxford Finance, including maintaining Nasdaq listing. A delisting would constitute an event of default, potentially accelerating debt repayment.
• Contingent Consideration: The company recorded a loss of $0.2 million on the fair value remeasurement of contingent consideration related to the Combangio acquisition.

Investor Verification Checklist

• Cash Runway: Verify the specific timeline for cash depletion and the status of any ongoing fundraising efforts to bridge the gap beyond Q1 2026.
• CHASE Trial Data: Monitor the release of topline data from the CHASE Phase 2b trial in September 2025, as this is the primary catalyst for future valuation and funding.
• Debt Compliance: Confirm continued compliance with Nasdaq listing requirements to avoid triggering an event of default under the Oxford Finance loan agreement.
• CIRM Milestones: Track the achievement of remaining milestones under the CIRM award to ensure the receipt of the remaining $1.1 million in funding.
• Preferred Stock Conversion: Review the terms of outstanding convertible preferred stock (Series E through I) and potential dilution upon conversion.