Nkarta, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a standalone fourth-quarter report.
Business context
Nkarta is a clinical-stage biotechnology company developing allogeneic, off-the-shelf engineered natural killer (NK) cell therapies. It has no approved products and has never generated revenue from product sales. Its lead candidates, NKX101 and NKX019, were in Phase 1 trials; NKX070 and an NK-plus-T-cell program were in preclinical development with CRISPR Therapeutics.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $90.9 million | $63.4 million |
| General and administrative expense | $28.1 million | $23.0 million |
| Total operating expenses | $119.0 million | $86.4 million |
| Net loss | $113.8 million | $86.1 million |
| Net loss per share, basic and diluted | $2.61 | $2.62 |
| Net cash used in operating activities | $57.0 million | $67.9 million |
| Capital expenditures | $47.1 million | $5.0 million |
R&D spending rose 43%, principally from increased NKX101 and NKX019 clinical activity, personnel, laboratory supplies and facilities. G&A increased 22%, including higher personnel and professional-service costs. Interest income increased to $5.6 million from $0.4 million, partly offsetting operating losses. Profitability and operating margins are not meaningful because the company had no product revenue.
At year-end, cash and cash equivalents were $37.5 million, short-term investments were $314.6 million, and restricted cash was $2.7 million: $354.9 million combined. Current assets were $360.7 million and current liabilities were $22.0 million. Total liabilities were $100.7 million, including $82.9 million of operating lease liabilities; the filing reports no borrowings as debt. Management said available funds were expected to support operations for at least 12 months from the filing date, while cautioning that actual cash needs could differ.
Financing included a public offering of 15.3 million shares in April 2022, generating approximately $215.3 million net, plus $1.6 million net from the ATM program. Shares outstanding increased to 48.9 million at year-end from 33.0 million a year earlier. Cash used in investing was $184.7 million, reflecting investment purchases and $47.1 million of property and equipment spending, primarily for manufacturing-facility construction.
Material developments and outlook
- Clinical data: In April 2022, Nkarta reported that 3 of 5 higher-dose NKX101 patients treated on a three-dose regimen achieved complete response; two responses were measurable-residual-disease negative. No dose-limiting toxicities, CRS, GvHD or ICANS were reported in that update.
- NKX019: In December 2022, the company reported complete responses in 7 of 10 patients treated at higher dose levels on a three-dose regimen. It reported no dose-limiting toxicity, neurotoxicity/ICANS, GvHD or CRS above Grade 3 in the study. These are preliminary results from an ongoing early-stage trial, not confirmatory efficacy evidence.
- Manufacturing: NKX019 clinical supply was being made at Nkarta’s 2,700-square-foot facility. The company planned to move NKX101 manufacturing in-house in 2023 and was building a separate 88,000-square-foot facility for later-stage trials and potential commercial supply.
- Outlook: Management expected R&D and other expenses to increase as clinical trials, pipeline work and manufacturing development continue. No revenue or profitability guidance was provided. Continued funding may require equity or debt financing, partnerships, or licensing; these options could dilute shareholders or limit retained rights.
- Risks and contingencies: Trial outcomes and safety remain uncertain; preliminary data may change. Fludarabine shortages had delayed enrollment at some sites. COVID-related disruption, supply constraints, inflation and construction delays could affect trials and the new facility. Nkarta also cited reliance on third parties and a sole supplier for certain manufacturing steps, as well as the challenge of scaling and validating cell production.
- Unusual subsequent event: After year-end, Silicon Valley Bank was closed. Nkarta disclosed $2.7 million in collateral money-market accounts supporting lease letters of credit and said it was working with its landlord to replace the letters of credit. The filing noted the government announcement that SVB depositors would be protected.
Important facts for investors to verify
- Review updated, final clinical-trial data, patient counts, response durability and safety for NKX101 and NKX019; reconcile the favorable topline updates with the filing’s disclosure that three NKX019 dose-escalation patients experienced CRS.
- Track quarterly cash burn, investment liquidity and whether the stated runway remains adequate as trial and facility costs rise.
- Check progress, total cost and qualification timeline for the 88,000-square-foot manufacturing facility, and whether internal or third-party supply can meet trial needs.
- Assess the impact of fludarabine availability, enrollment pace and other clinical-site or supply-chain constraints.
- Monitor dilution and financing needs, as well as collaboration obligations and the status of CRISPR programs and licensed intellectual property.