Filing summary: NantKwest, Inc. (Nasdaq: NK)
Period: Quarterly report for the three and nine months ended September 30, 2020, filed November 9, 2020. The supplied filing is for NantKwest, not ImmunityBio, Inc.; ImmunityBio is identified as a related-party collaborator. Figures below are in U.S. dollars unless noted.
Business context and financial position
NantKwest was a clinical-stage immunotherapy biotechnology company developing natural-killer-cell therapies for cancer and viral diseases. It reported minimal licensing-related revenue and no product sales. Financial statements are unaudited.
| Metric | Q3 2020 / September 30, 2020 | Comparable period / prior balance |
|---|---|---|
| Revenue | $68,000 for Q3; $90,000 for nine months | $12,000 for Q3 2019; $34,000 for nine months 2019 |
| Net loss | $21.8 million for Q3; $60.3 million for nine months | $15.6 million for Q3 2019; $50.1 million for nine months 2019 |
| Research and development | $17.3 million for Q3; $44.2 million for nine months | $12.1 million for Q3 2019; $37.8 million for nine months 2019 |
| Selling, general and administrative | $4.7 million for Q3; $16.6 million for nine months | $4.0 million for Q3 2019; $13.9 million for nine months 2019 |
| Cash and cash equivalents | $27.7 million | $15.5 million at December 31, 2019 |
| Marketable debt securities | $62.1 million, including $61.4 million current | $37.6 million at December 31, 2019 |
| Total assets / liabilities | $180.5 million / $31.9 million | $143.1 million / $22.4 million at December 31, 2019 |
| Lease liabilities | $16.6 million total, including $5.4 million current | Debt borrowings are not reported in the supplied statements |
For the nine months, operating cash use was $47.4 million, investing cash use was $27.2 million, and financing provided $86.7 million. The financing was primarily the June 2020 equity offering, which raised $86.3 million net; gross proceeds were approximately $90.7 million before approximately $4.4 million of offering costs. The company reported $148.6 million of stockholders’ equity and an accumulated deficit of $722.4 million at quarter-end.
Material changes versus prior comparable periods
- Q3 net loss increased 40% year over year, to $21.8 million; nine-month net loss increased 20%, to $60.3 million.
- Q3 research and development expense rose $5.2 million, primarily reflecting $3.5 million in COVID-19 collaboration-related costs, including $3.2 million of equipment expensed because it had no alternative use. Nine-month R&D expense rose $6.4 million.
- Nine-month SG&A increased $2.7 million, principally from higher corporate advisory, personnel, and directors’ and officers’ insurance costs. Investment income declined as yields on marketable securities fell.
- Operating cash use was broadly similar to the prior-year nine-month period ($47.4 million versus $46.5 million), while the company moved from $9.3 million of investing cash inflow to $27.2 million of investing cash use.
- Common shares outstanding increased to 108.6 million from 98.5 million at year-end 2019, largely reflecting the June offering.
Outlook, programs, risks, and unusual items
- Management expected cash, cash equivalents, and marketable debt securities to fund operating and capital needs for at least 12 months after issuance of the financial statements. It also said additional funding would likely be required to reach commercialization; no committed external funding source was in place.
- The company expected significant expenses and operating losses to continue, and did not expect product revenue for at least several years, if ever. Potential funding sources included equity or debt financing, collaborations, licensing, and third-party funding; availability and terms were uncertain.
- The August 2020 COVID-19 collaboration with related party ImmunityBio covers joint development, manufacturing, and marketing of ceNK, haNK, MSC, hAd5, and N-803 programs. Development and manufacturing costs are generally shared equally, with specified equipment costs borne solely by NantKwest; profit-sharing varies by product contribution. The company reported $3.5 million of collaboration-related Q3 R&D expense.
- Management said the pandemic had not materially affected the business through the reporting period, but expected slower patient enrollment and longer clinical timelines. QUILT 3.063 enrollment was affected by travel and site-access limitations. The company also warned of possible supplier and manufacturing disruptions.
- Clinical updates included completion of the QUILT 3.064 phase I study, with a reported dose level considered safe and no dose-limiting toxicities or serious adverse events related to the test article. For QUILT 3.067, the company cited previously reported response results in 6 of 9 patients, including 3 complete responses (one unconfirmed); these were company-reported results from a small trial, not evidence of approval or established efficacy.
- NantKwest reported a new Fox Chase Cancer Center litigation concerning a license and patent inventorship. The company disputed the claims, said the matter was at an early stage, and stated it did not consider the license agreement material. The filing also describes extensive related-party arrangements, including leases, shared services, and clinical and development collaborations.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2020. No material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Confirm the issuer identity: this is NantKwest’s 10-Q, while ImmunityBio is a related party—not the reporting company named on the filing.
- Review the cash runway assumptions and the pace of operating cash use against the stated minimum 12-month runway; assess the timing and dilution risk of future financing.
- Track clinical enrollment, trial results, regulatory progress, and the effects of COVID-19 on timelines; distinguish preliminary or small-trial results from confirmed outcomes.
- Assess the COVID-19 collaboration’s costs, responsibilities, manufacturing readiness, and profit-sharing terms, including its relationship to NantKwest’s oncology manufacturing and trials.
- Monitor the Fox Chase dispute and related-party transactions, including leases and services, for potential financial, governance, intellectual-property, or operational impacts.