Kiora Pharmaceuticals, Inc. — Q3 2021 Form 10-Q Summary
Business context and reporting period
The filing covers the unaudited three and nine months ended September 30, 2021. Kiora was a clinical-stage specialty pharmaceutical company developing ophthalmic therapies, including KIO-101 for inflammatory and ocular-surface diseases and KIO-201 for corneal wound repair and dry-eye-related conditions. After quarter-end, the company acquired Bayon Therapeutics and added KIO-301, a potential vision-restoring photoswitch therapy. The company changed its name from EyeGate Pharmaceuticals, Inc. to Kiora Pharmaceuticals, Inc. effective November 8, 2021 and began trading under the ticker KPRX.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $2.967 million, or $0.29 per share | $8.017 million, or $0.99 per share |
| Research and development expense | $1.628 million | $4.349 million |
| General and administrative expense | $1.339 million | $3.945 million |
| Operating expenses | $2.967 million | $8.293 million |
| Net cash used in operating activities | Not separately presented | $7.478 million |
Because the company reported no revenue, gross and operating margins are not meaningful. Cash and cash equivalents were $11.107 million at September 30, 2021, compared with $1.186 million at December 31, 2020. Including restricted cash, total cash was $11.152 million. Total assets were $25.493 million and total liabilities were $8.145 million, including $5.343 million of contingent consideration. The company reported no additional indebtedness at September 30, 2021; its $0.278 million Paycheck Protection Program loan was forgiven in April 2021.
Financing activities provided $17.517 million during the first nine months, principally from approximately $8.0 million of net proceeds from a January private placement and approximately $9.8 million from an August registered direct offering. Cash increased by $9.921 million during the period. Stockholders' equity increased to $17.348 million from $6.999 million at year-end 2020, while common shares outstanding increased to 12.619 million from 5.556 million. The company also had 6.815 million outstanding warrants and 472,049 outstanding stock options at September 30, 2021.
Material changes versus the prior comparable periods
- Third-quarter R&D expense increased $0.643 million, or approximately 65%, to $1.628 million, primarily from KIO-101 development and personnel costs associated with Panoptes.
- Third-quarter G&A expense increased $0.317 million, or approximately 31%, to $1.339 million, primarily due to higher professional fees and personnel costs.
- Nine-month operating expenses increased $2.594 million, or approximately 45%, to $8.293 million.
- Nine-month net loss increased $2.341 million, or approximately 41%, from $5.676 million to $8.017 million. The increase was partly offset by a $0.278 million gain from PPP loan forgiveness.
- Nine-month operating cash use increased $1.870 million, or approximately 33%, from $5.608 million to $7.478 million.
- The Panoptes acquisition, completed in December 2020, contributed $2.551 million of net loss to the first nine months of 2021 and expanded the company's KIO-101 pipeline.
Guidance, outlook, risks and unusual items
Management expected to have sufficient cash to fund planned operations into the second half of 2022 based on cash available at September 30, 2021, but stated that additional capital will be required to continue product development. Management expressly disclosed substantial doubt about the company's ability to continue as a going concern because of recurring losses and negative operating cash flows.
The company expects increasing R&D expenses and operating losses as it advances KIO-301, KIO-101 and KIO-201 through clinical development. It expected top-line data from a Phase 2 proof-of-concept study of KIO-101 in the fourth quarter of 2021 and expected KIO-301 to enter clinical testing in 2022. The filing provides no specific revenue, earnings or cash-burn guidance beyond the estimated cash runway.
- Additional equity, debt, licensing, collaboration or grant financing may be unavailable or obtainable only on unfavorable terms. Equity financing would dilute existing stockholders.
- Clinical trials, regulatory approvals, product development costs and commercial timelines remain uncertain; the product candidates may never receive marketing approval or generate meaningful revenue.
- COVID-19 could disrupt clinical studies, operations and access to capital, although the company reported no material adverse operational effects as of the filing date.
- Contingent consideration totaled $5.343 million and included milestone-related obligations associated with prior acquisitions. KIO-201 also carried potential milestone payments of up to $4.750 million under its manufacturing license agreement.
- The October 21, 2021 Bayon acquisition occurred after the balance-sheet date and added potential consideration of up to approximately $7.1 million in cash and/or approximately 2.2 million shares, subject to milestones and limitations.
- The company reported no material legal proceedings, no material off-balance-sheet arrangements and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Cash runway assumptions and the timing, size and terms of required future financing.
- Progress and results of KIO-101 clinical studies, including the expected fourth-quarter 2021 Phase 2 data.
- Clinical entry and development milestones for KIO-301 and continued development of KIO-201.
- Potential dilution from 6.815 million warrants, 472,049 options and future Bayon or acquisition-related earn-out shares.
- The going-concern disclosure and whether recurring losses and operating cash use are improving or accelerating.
- Milestone and royalty obligations under the Panoptes, Jade and KIO-201 license arrangements.