KALA BIO, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report; quarterly financial results are not clearly provided in the filing text. The company changed its name from Kala Pharmaceuticals, Inc. to KALA BIO, Inc. on August 2, 2023.
Business context and reporting period
KALA is a clinical-stage biopharmaceutical company focused on rare and severe eye diseases. Its lead candidate, KPI-012, is in Phase 2b development for persistent corneal epithelial defects (PCED). The company sold its EYSUVIS and INVELTYS commercial business to Alcon in July 2022 and reported no commercial products or product revenue in 2023. It has focused research and development on its mesenchymal stem cell secretome platform; KPI-014 remains preclinical.
Key financial metrics
| Metric | FY2023 / December 31, 2023 | FY2022 / December 31, 2022 |
|---|---|---|
| Product revenue | $0 | $3.9 million |
| Research and development expense | $18.6 million | $17.7 million |
| Selling, general and administrative expense | $20.6 million | $65.0 million |
| Loss from operations | $39.7 million | $81.7 million |
| Net loss | $42.2 million | $44.8 million |
| Net loss per share, basic and diluted | $17.35 | $29.48 |
| Net cash used in operating activities | $27.9 million | $78.9 million |
| Cash and cash equivalents | $50.9 million | $70.5 million |
| Outstanding debt principal | $34.0 million | $43.3 million |
| Total assets / total liabilities | $55.9 million / $48.4 million | $86.8 million / $67.8 million |
| Stockholders’ equity | $7.5 million | $19.0 million |
Margins are not meaningful for 2023 because KALA had no product revenue. Operating cash use fell by $51.0 million year over year. Cash declined by $19.9 million during 2023. The company reported an accumulated deficit of $629.4 million.
Material changes versus the prior comparable period
- Revenue and product costs ceased after the Alcon divestiture; 2022 included partial-year product sales and the $47.0 million gain on sale of the commercial business.
- SG&A fell $44.5 million, primarily due to the divestiture and related workforce reduction. R&D rose $0.9 million as KPI-012 development advanced.
- 2023 net loss improved by $2.6 million, despite the absence of the prior-year divestiture gain. Key 2023 items included $4.8 million of CIRM grant income, $2.7 million of interest income, $5.8 million of interest expense, and $4.3 million of other expense, including the write-off of remaining commercial inventory and related balances.
- Debt principal decreased by $9.3 million from year-end 2022. Common shares outstanding increased to 2.76 million at year-end from 1.71 million, including issuance through at-the-market sales and acquisition-related consideration.
Liquidity, debt and financing
Management estimated that year-end 2023 cash, the $8.6 million gross proceeds from a March 2024 preferred-stock placement, and the remaining $9.1 million expected under the CIRM award would fund operations, lease and debt-service obligations, and capital spending into the third quarter of 2025. The company expects its available resources to fund CHASE safety and efficacy readout, but not the full clinical development of KPI-012. The estimate depends on assumptions, including receipt of CIRM milestone funding; additional capital will be needed.
KALA had $34.0 million of debt principal outstanding at year-end, secured by substantially all assets. The loan carries a floating interest rate subject to an 8.00% floor; its effective interest rate was 17.22% at year-end, including fees and discount amortization. Amortization is scheduled to begin January 1, 2025, with principal payments through May 2026 unless qualifying prepayments extend the schedule. Nasdaq delisting or certain other covenant breaches could trigger default and acceleration.
Financing included $18.5 million net proceeds from common-stock at-the-market sales and approximately $2.0 million gross proceeds from the December 2023 Series F preferred placement. The March 2024 Series G placement raised approximately $8.6 million gross. Series E, F and G preferred shares are convertible into common shares and carry preferential liquidation rights; conversion and future equity issuance may dilute common holders.
Outlook, management commentary and principal risks
- KPI-012: The CHASE Phase 2b trial’s final cohort is designed to enroll approximately 90 patients and compare two doses with vehicle. The primary endpoint is complete defect healing at week 8. KALA targeted topline safety and efficacy data by the end of 2024. If results are positive and regulators agree, the trial could be the first of two pivotal trials supporting a BLA. KPI-012 has FDA Orphan Drug and Fast Track designations; neither assures approval.
- Other programs: KALA is evaluating KPI-012 for additional corneal diseases, including limbal stem cell deficiency, and conducting preclinical work on KPI-014 for inherited retinal degenerative diseases.
- Alcon consideration: KALA may receive up to $325 million in commercial sales milestones, but none had been achieved or paid as of the filing. Payments depend on Alcon sales thresholds and timing and are uncertain.
- CIRM funding: The $15 million award included an initial $5.9 million disbursement; the remaining $9.1 million is conditional on co-funding, milestones, compliance and funding availability. The award also carries potential royalties and compliance obligations.
- Development and operating risks: KALA has incurred recurring losses and negative operating cash flows, has no revenue-generating product, and is substantially dependent on KPI-012. Clinical outcomes, enrollment, regulatory review, manufacturing scale-up and third-party supply are uncertain. The company has limited supply agreements and no redundant source for bulk drug substance.
- Other exposures: Risks include future financing needs, debt covenants and high interest costs, potential equity dilution, Nasdaq listing requirements, competition, intellectual-property and licensing challenges, reimbursement uncertainty, and reliance on CIRM and third-party manufacturers. No material legal proceedings were reported.
Important facts for investors to verify
- Whether CHASE enrollment, trial conduct and the targeted topline readout timing have progressed as planned, and what the full safety and efficacy results show.
- Actual cash burn and updated runway, including whether CIRM co-funding and milestone conditions are met and whether additional financing is required.
- Debt amortization, interest costs, covenant compliance and any prepayments or changes to the maturity schedule.
- Whether Alcon achieves any sales milestone thresholds and whether KALA receives payments; these potential proceeds are not assured.
- The terms, conversions and potential dilution associated with preferred stock, equity sales and outstanding equity awards, as well as current Nasdaq listing compliance.
Audit and controls: The independent auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023; the auditor was not required to attest to internal control effectiveness.