Kiora Pharmaceuticals, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; filed April 15, 2022. Kiora, formerly EyeGate Pharmaceuticals, changed its name and Nasdaq ticker to KPRX in November 2021. The company is a clinical-stage ophthalmic pharmaceutical developer with no commercial products and operates as one business segment.
Business Context and Pipeline
- KIO-301: Small-molecule photoswitch for later-stage retinitis pigmentosa and potentially other degenerative retinal diseases. A Phase 1b trial was expected to begin in the third quarter of 2022. The FDA granted Orphan Drug Designation for its active ingredient on March 17, 2022.
- KIO-101: Topical DHODH inhibitor for ocular presentation of rheumatoid arthritis and related ocular surface inflammation. The Phase 1b study reported favorable safety and tolerability, with statistically significant improvement in conjunctival hyperemia in the treated cohort. A Phase 2 trial was expected in the second half of 2022.
- KIO-201: Modified hyaluronic-acid product for corneal wound healing following PRK surgery. In a 234-patient pivotal study, 80.2% of KIO-201-treated eyes achieved complete closure by Day 3 versus 67.0% for bandage contact lenses, with a reported p-value of 0.0203. The company planned to clarify the regulatory pathway with the FDA in the second half of 2022.
Financial Results and Liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Collaboration revenue | $0 | $0.012 million | Down $0.012 million |
| Research and development expense | $5.350 million | $3.566 million | Up 50% |
| General and administrative expense | $5.324 million | $4.659 million | Up 14% |
| Goodwill impairment | $4.498 million | $0 | New charge |
| Intangible asset impairment | $1.770 million | $0 | New charge |
| Net loss | $16.395 million | $8.092 million | Loss increased $8.303 million |
| Net loss per share | $1.77 | $1.77 | Unchanged |
| Net cash used in operations | $10.888 million | $7.317 million | Use increased $3.570 million |
| Net cash provided by financing | $17.795 million | $4.998 million | Up $12.798 million |
At December 31, 2021, cash and cash equivalents were $7.855 million, or $7.900 million including restricted cash. Total assets were $18.058 million, total liabilities were $8.833 million, and stockholders' equity was $9.225 million. The company had no debt at year-end; the $0.278 million Paycheck Protection Program loan was forgiven in April 2021. Non-current contingent consideration was $6.519 million.
Operating cash use exceeded the reported net loss primarily because impairment charges and stock-based compensation were non-cash. Financing included approximately $8.0 million of net proceeds from a January 2021 private placement and $9.8 million from an August 2021 registered direct offering, partially offset by offering costs.
Material Changes Versus 2020
- Net loss approximately doubled, primarily due to higher R&D and general and administrative spending and $6.269 million of impairment charges.
- R&D spending increased as the company advanced KIO-101, KIO-201 and KIO-301.
- The company acquired Bayon Therapeutics in October 2021, adding KIO-301. The transaction included $0.097 million of cash, 33,798 common shares and potential milestone payments of up to approximately $7.1 million.
- Goodwill from the Bayon and prior Panoptes acquisitions was fully impaired at year-end. KIO-201 in-process R&D was reduced by $1.770 million because its classification as a drug, rather than a device, extended the expected development timeline.
- Common shares outstanding increased from 5.556 million at December 31, 2020 to 12.664 million at December 31, 2021, before considering additional potential dilution from warrants and options.
Outlook, Risks and Unusual Items
- Management expected continuing operating losses and stated that cash on hand at year-end would fund planned operations only into July 2022, subject to changes in spending. Additional equity, debt, grants, licensing or collaboration funding is required.
- The auditors reported substantial doubt about the company's ability to continue as a going concern. The financial statements contain no adjustments for the potential effects of a failure to continue operations.
- The company has no approved products, has never generated significant product revenue, and does not expect its candidates to be commercially available for several years, if at all.
- Clinical, regulatory, manufacturing, intellectual-property, reimbursement, competitive and patient-enrollment risks could delay or prevent commercialization. Kiora relies on third parties for clinical trials and manufacturing and had no contractual commitments for commercial bulk supply or fill-finish services.
- COVID-19 could disrupt clinical trials, manufacturing, supply chains and financing, although management reported no material adverse effect on ongoing operations as of the filing date.
- Nasdaq notified the company in February 2022 that its stock price had remained below the $1.00 minimum bid requirement for 30 consecutive business days. The initial compliance period ended August 22, 2022; management stated it might pursue a reverse stock split.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end because of material weaknesses involving staffing, segregation of duties, formal accounting processes, complex transactions and former finance personnel's system access. Remediation was ongoing.
- The company reported no material legal proceedings and no material off-balance-sheet arrangements.
Most Important Facts for Investors to Verify
- Cash runway, subsequent financing activity and whether additional capital was raised before or after the stated July 2022 funding horizon.
- Progress, enrollment, safety and efficacy results for the planned KIO-301 Phase 1b and KIO-101 Phase 2 studies.
- The FDA's regulatory pathway and any further development decision for KIO-201.
- Potential dilution from 6.757 million outstanding warrants, 515,922 employee stock options and contingent acquisition consideration.
- Remediation of the disclosed internal-control material weaknesses and any subsequent restatement or reporting-quality issues.
- Compliance with Nasdaq's minimum bid-price requirement and the consequences of any reverse stock split or delisting action.