Business context and reporting period
The supplied filing is NantKwest, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2018, filed November 7, 2018. The request identifies ImmunityBio, Inc.; the filing itself names NantKwest, so the issuer identity and any corporate succession should be verified.
NantKwest was a clinical-stage immunotherapy company developing natural-killer-cell therapies for cancer and infectious diseases. It had no approved products and generated only minimal licensing revenue.
Financial performance and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $0.031m | $0.008m | $0.040m | $0.033m |
| Research and development | $14.559m | $11.069m | $43.238m | $30.023m |
| Selling, general and administrative | $9.580m | $13.381m | $37.472m | $43.736m |
| Operating loss | $24.108m | $24.442m | $80.670m | $73.726m |
| Net loss | $23.635m | $23.969m | $78.886m | $71.936m |
| Net loss per share | $0.30 | $0.30 | $1.00 | $0.89 |
- Margins: Revenue was immaterial relative to expenses; the filing does not present a meaningful positive operating margin.
- Cash flow: Nine-month operating cash use was $49.348m, versus $35.140m in 2017. Investing activities provided $41.187m, primarily from securities maturities; financing used $0.401m. Cash, cash equivalents and restricted cash ended at $15.489m.
- Liquidity: Cash and cash equivalents were $15.310m and marketable debt securities totaled approximately $80.583m at September 30, 2018. Current assets were $100.570m versus current liabilities of $30.404m.
- Debt and obligations: The balance sheet reported $7.303m in financing obligations, including current and long-term portions. It also reported a $12.000m litigation settlement accrual.
- Other: Total assets were $201.641m, total liabilities $39.555m, and stockholders’ equity $162.086m. Accumulated deficit was $577.413m.
Material changes versus the prior comparable period
- For the first nine months, R&D rose $13.215m (44%), reflecting increased staffing and related-party service costs, laboratory and manufacturing activity, and clinical and preclinical work.
- SG&A fell $6.264m (14%), largely because stock-based compensation declined; this was partly offset by higher litigation costs.
- Nine-month net loss increased $6.950m (10%) and operating cash use increased $14.208m. For Q3 alone, net loss was slightly lower than the prior year.
- Cash, cash equivalents and restricted cash declined $8.562m from year-end 2017. Marketable debt securities also declined from $133.880m at year-end 2017 to approximately $80.583m.
Outlook, risks, contingencies, and unusual items
- Management expected existing cash and marketable securities to fund operating and capital needs for at least 12 months, but said additional funding would likely be needed to advance development and that existing resources might not fund the company through commercialization. No external funding was committed.
- The company expected significant expenses and losses to continue as it advanced clinical programs and expanded manufacturing. It did not expect product-sales revenue for at least several years, if ever.
- The securities class action had a $12m settlement in principle, subject to court approval. The company accrued $12m and recorded a $13m insurance receivable; the company’s stated share was $1.2m, with $10.8m expected from insurers. Failure to obtain approval or insurance recovery could create additional exposure.
- Research and manufacturing facilities included related-party arrangements with entities affiliated with the CEO. The filing highlights potential conflicts of interest and reliance on those affiliates for services, facilities, and supplies.
- Clinical, regulatory, manufacturing, intellectual-property, competition, and financing risks were substantial. Clinical benefits remained uncertain, and cell manufacturing at commercial scale had not been demonstrated. The company also disclosed a prior financial-statement restatement and continuing patent-related litigation risk.
- The Federal Circuit affirmed the district court decision in the USPTO patent dispute; further review remained possible. The company said it could not estimate additional losses beyond specified fees.
Most important facts for investors to verify
- Confirm the issuer’s identity and the relationship, if any, between NantKwest and ImmunityBio for the requested reporting period.
- Check subsequent cash burn, financing, and whether the stated 12-month liquidity expectation was achieved.
- Verify final court approval and funding of the $12m securities-litigation settlement, including insurer payment and the company’s net cost.
- Review clinical-trial progress, regulatory status, manufacturing scale-up, and any changes to product development plans.
- Assess related-party transactions, CEO control and ownership, and the terms and continuity of affiliate-provided services and facilities.