Filing summary
Entity and period: The supplied metadata identifies ImmunityBio, Inc., but the filing itself is NantKwest, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2019, filed November 5, 2019. ImmunityBio is identified in the filing as a related party. The summary below reflects NantKwest’s reported results; verify the intended registrant.
NantKwest was a clinical-stage immunotherapy company developing natural-killer-cell therapies for cancer and viral diseases. It reported no product sales and only minimal licensing revenue.
Financial results and position
Amounts below are in millions of dollars except per-share amounts. Revenue and operating expenses were immaterial and overwhelmingly related to research and development and corporate operations.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0.012 | $0.031 | $0.034 | $0.040 |
| Research and development expense | $12.052 | $14.559 | $37.781 | $43.238 |
| Selling, general and administrative expense | $4.025 | $9.580 | $13.949 | $37.472 |
| Operating loss | $(16.065) | $(24.108) | $(51.696) | $(80.670) |
| Net loss | $(15.581) | $(23.635) | $(50.148) | $(78.886) |
| Basic and diluted loss per share | $(0.16) | $(0.30) | $(0.54) | $(1.00) |
| Cash used in operating activities | Not stated separately | Not stated separately | $(46.477) | $(49.348) |
- Margins: Not meaningful given negligible revenue and ongoing operating losses.
- Liquidity at September 30: Cash and cash equivalents were $18.291 million; marketable debt securities were $49.259 million, including $47.766 million current. Cash plus securities totaled approximately $67.550 million. Current assets were $71.613 million and current liabilities $12.519 million, implying working capital of approximately $59.094 million.
- Debt and leases: The balance sheet reported no long-term financing obligation; $1.129 million of financing obligation was included in current liabilities. Operating lease liabilities totaled approximately $14.828 million ($3.096 million current and $11.732 million noncurrent). The filing does not present conventional funded debt as a material balance.
- Equity and cash movement: Cash, cash equivalents and restricted cash increased $1.470 million over the first nine months to $18.470 million, including $0.179 million of restricted cash. Financing activities provided $38.654 million, principally from the CEO’s exercise of warrants and options for $39.221 million, partly offset by $0.501 million of repurchases and other share settlements.
Changes versus comparable periods
- Q3 net loss narrowed by $8.054 million year over year; nine-month net loss narrowed by $28.738 million. Revenue remained negligible and declined year over year in both periods.
- Q3 operating expenses fell 33% to $16.077 million; nine-month expenses fell 36% to $51.730 million. SG&A declines were primarily attributable to lower stock-based compensation, including completion of vesting on awards issued to the CEO, and lower litigation and patent-related costs. R&D fell with reduced staffing, shared-services and trial activity, and completion of intangible-asset amortization.
- Despite lower reported losses, the company continued to consume substantial operating cash: $46.477 million in the first nine months of 2019. Cash-flow improvement versus 2018 should be considered alongside the significant 2018 non-cash stock-compensation expense.
- Common shares outstanding rose from 79.1 million at December 31, 2018 to 98.4 million at September 30, 2019, largely reflecting warrant and option exercises. The company repurchased 473,586 shares for $0.5 million during the nine-month period.
Outlook, risks and unusual items
- Management expected available cash, investments and the ability to borrow from affiliated entities to fund operations and capital expenditures for at least 12 months after issuance of the statements. This assessment depends in part on the Chairman and CEO’s stated intent and ability to provide affiliate support. The company also said it would likely need additional capital and had no committed external funding source.
- Management expected R&D expense to increase significantly as clinical development advances, and expected 2019 SG&A to decrease significantly, mainly because of lower stock-based compensation. No revenue or earnings guidance was provided; management did not expect product revenue for at least several years, if ever.
- The company reported FDA authorization in June 2019 for a first-in-human PD-L1.t-haNK study and completion of enrollment in its second dose cohort. Clinical efficacy, further enrollment and regulatory outcomes remain uncertain.
- Risks include clinical-trial failure or delay, regulatory approval, manufacturing scale-up and supply, competition, and the need for further financing. The filing also highlights reliance on affiliates and related parties, including shared services, leases, clinical services and product collaborations, as well as the CEO’s control of approximately 67.3% of outstanding shares.
- Unusual items: A $0.9 million impairment of laboratory equipment was recorded in Q2 2019. Adoption of the new lease standard on January 1, 2019 added lease assets and liabilities to the balance sheet and increased accumulated deficit by $0.9 million; it had no material effect on operating results or cash flows. Securities litigation and a stockholder settlement received final approval in 2019; the company’s responsibility included $1.2 million of a $12.0 million securities settlement and half of a $0.5 million attorney-fee settlement, with the remaining amounts funded by insurers.
- The company prepaid $7.5 million under a new clinical-services agreement with the related-party Immuno-Oncology Clinic. $3.75 million was paid in July 2019, $1.875 million in October 2019, and the final $1.875 million was due January 1, 2020; the filing reported a $3.5 million prepaid balance at September 30.
Important facts for investors to verify
- Confirm whether NantKwest, Inc. is the intended filing entity, given the ImmunityBio metadata and the filing’s identification of ImmunityBio as a related party.
- Verify the basis and continuing availability of the stated 12-month liquidity runway, particularly the reliance on potential affiliate borrowing and CEO support.
- Track operating cash burn, trial spending and any financing needs; reported losses improved substantially, but the company remained pre-revenue and cash-consuming.
- Review clinical-trial progress and safety data for PD-L1.t-haNK and other candidates, along with regulatory and manufacturing milestones.
- Assess dilution and governance implications of the CEO’s control, affiliate transactions and the increase in shares outstanding; review the related-party clinical-services prepayment and other commitments.