Kura Oncology, Inc. — Form 10-Q Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision oncology therapies and potential companion diagnostics. The filing covers the three and nine months ended September 30, 2018, and was filed November 5, 2018. Kura had no approved products and no product sales revenue.
Key programs include tipifarnib, including a registration-directed study in HRAS-mutant head and neck squamous cell carcinoma (HNSCC); KO-947, in a Phase 1 trial; and KO-539, for which Kura targeted an investigational new drug application in the first quarter of 2019.
Financial condition and results
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $11.7 million | $7.1 million | $34.7 million | $18.3 million |
| General and administrative expense | $4.3 million | $2.4 million | $11.5 million | $6.8 million |
| Net loss | $15.0 million | $9.3 million | $44.4 million | $24.7 million |
| Net loss per share | $0.40 | $0.38 | $1.30 | $1.16 |
| Operating cash flow | Not separately provided | Not separately provided | $(38.4) million | $(21.0) million |
Because Kura generated no product revenue, gross margin and operating margin are not meaningful. The nine-month net loss increased approximately 80% year over year, while research and development expense increased approximately 90% and general and administrative expense increased approximately 70%.
- As of September 30, 2018, cash and cash equivalents were $20.6 million and short-term investments were $166.9 million, for total cash, cash equivalents and short-term investments of approximately $187.4 million.
- Total assets were $191.5 million, compared with $95.9 million at December 31, 2017.
- Total debt was approximately $6.3 million, consisting of $2.8 million current debt and $3.4 million long-term debt, compared with approximately $7.1 million at year-end 2017.
- Accumulated deficit was $133.6 million at September 30, 2018.
- Net cash provided by financing activities was $131.5 million, primarily from common-stock issuances, including the January ATM sales and July public offering.
- Net cash used in investing activities was $83.9 million, reflecting purchases and maturities of marketable securities.
- Share-based compensation expense was $6.9 million for the first nine months, compared with $3.1 million in the prior-year period.
Material changes versus the prior comparable period
- Tipifarnib-related external research and development spending increased to $20.4 million for the first nine months from $8.2 million, principally due to registration-directed trial start-up, clinical development, companion-diagnostic and manufacturing activities.
- KO-947 spending declined to $2.1 million from $2.5 million for the first nine months.
- Discovery and preclinical program spending increased to $3.2 million from $1.8 million, largely due to IND-enabling work for KO-539.
- Interest income increased to $2.1 million from $0.4 million as the company held substantially more invested cash.
- Kura sold 3.1 million shares through its ATM facility for net proceeds of approximately $57.7 million and sold 4.6 million shares in a July public offering for net proceeds of approximately $74.5 million. The ATM facility was terminated in July 2018.
- Cash, cash equivalents and short-term investments nearly doubled from approximately $93.1 million at December 31, 2017 to $187.4 million at September 30, 2018, primarily reflecting equity financing.
Guidance, outlook, risks and unusual items
- Management stated that existing cash, cash equivalents and short-term investments were expected to fund current operations for at least the next 12 months, but that substantial additional financing would be required in the future.
- Kura expected research and development and general and administrative expenses to increase as it advanced tipifarnib and KO-947, prepared KO-539 for the clinic, and expanded supporting activities.
- The AIM-HN registration-directed trial was designed to enroll at least 59 patients at approximately 100 sites worldwide and was expected to take approximately two years to enroll. The company highlighted risks involving the small HRAS-mutant population, screening, patient enrollment, trial execution and regulatory review.
- Preliminary RUN-HN data presented after quarter-end showed five confirmed partial responses among 11 evaluable HNSCC patients as of the September 7, 2018 cutoff, but management cautioned that these results might not be replicated in AIM-HN. The filing also noted that prior responses were investigator-assessed, whereas AIM-HN will use independent radiologic review.
- The FDA informed Kura that an approved companion diagnostic would be required for approval of tipifarnib in HRAS-mutant HNSCC.
- On November 1, 2018, after the quarter-end, Kura entered a Silicon Valley Bank facility providing up to $20.0 million of term loans and initially borrowed $7.5 million. Approximately $0.6 million of net proceeds remained after repayment of prior debt. The facility matures May 1, 2023, bears interest at the greater of 5.50% or prime plus 0.25%, includes a 7.75% final payment, and is secured by substantially all assets other than intellectual property.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of September 30, 2018.
- Principal risks include continued losses, dependence on additional capital, clinical-trial failure or delay, patient-enrollment challenges, adverse events, manufacturing and third-party execution risks, regulatory approval uncertainty, companion-diagnostic development, limited patent protection for tipifarnib, dilution and debt covenants.
Most important facts for investors to verify
- Whether the AIM-HN trial enrolls patients on schedule and confirms the efficacy and safety signals observed in RUN-HN.
- Progress toward development and regulatory acceptance of the HRAS companion diagnostic.
- Actual cash burn, financing needs and the duration of the stated liquidity runway.
- Terms, covenants, collateral and utilization of the November 2018 term-loan facility.
- Clinical data and milestones for KO-947 and the planned KO-539 IND submission.
- Future equity issuance, dilution, stock-option overhang and the company’s ability to obtain financing on acceptable terms.