Kura Oncology, Inc. — Q2 2021 Form 10-Q Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision oncology medicines and companion diagnostics. Its principal clinical candidates are tipifarnib, evaluated in genetically defined cancers including HRAS-mutant head and neck squamous cell carcinoma, and KO-539, evaluated in relapsed or refractory acute myeloid leukemia. The company also nominated next-generation farnesyl transferase inhibitor KO-2806 in June 2021 and advanced it into IND-enabling studies.
This unaudited Form 10-Q covers the three and six months ended June 30, 2021, with comparisons to the corresponding 2020 periods. The filing was signed August 5, 2021.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $21.1 million, versus $13.7 million | $41.4 million, versus $26.3 million |
| General and administrative expense | $12.6 million, versus $7.5 million | $23.1 million, versus $15.1 million |
| Total operating expenses | $33.6 million, versus $21.2 million | $64.5 million, versus $41.4 million |
| Net loss | $33.7 million, or $0.51 per share | $64.4 million, or $0.97 per share |
| Net cash used in operating activities | Not separately provided | $56.6 million, versus $34.6 million |
As of June 30, 2021, cash and cash equivalents were $39.0 million, short-term investments were $528.5 million, and cash, cash equivalents and short-term investments totaled $567.5 million. Total current assets were $573.6 million and total assets were $584.9 million. Accumulated deficit was $366.9 million.
The company repaid all amounts under its Silicon Valley Bank term loan in May 2021 for approximately $6.6 million, including the final payment and prepayment fee. No long-term debt remained at June 30, 2021. Operating lease liabilities totaled $6.7 million, including $4.8 million classified as long term.
The company has no approved products, has generated no product-sale revenue, and continues to incur operating losses and negative operating cash flow. Management stated that existing cash, cash equivalents and short-term investments are expected to fund operating expenses and capital requirements into 2024, based on current plans.
Material changes versus the prior comparable period
- Six-month research and development expense increased $15.1 million, primarily due to higher tipifarnib clinical and companion-diagnostic costs, increased KO-539 trial and manufacturing-development costs, discovery activities, and share-based compensation.
- Six-month general and administrative expense increased $8.0 million, driven principally by additional personnel costs, higher share-based compensation, and professional fees.
- Six-month net loss increased $24.7 million, from $39.7 million to $64.4 million.
- Operating cash use increased $22.0 million. Investing cash use was $223.4 million, principally reflecting purchases of marketable securities as cash was shifted from cash equivalents into short-term investments.
- Financing cash flow changed from $137.6 million of inflows in the prior-year period, which included a public offering, to $6.5 million of outflows in 2021, primarily because of debt repayment.
- Share-based compensation increased to $11.1 million for the first six months, compared with $5.7 million in 2020.
Guidance, outlook, commentary and risks
- The AIM-HN trial of tipifarnib was amended to broaden enrollment to patients with any HRAS mutation and requires more evaluable patients. COVID-19 and the increased enrollment requirement are expected to delay timelines; management could not reasonably forecast full enrollment as of the filing.
- The FDA granted Breakthrough Therapy Designation for tipifarnib in recurrent or metastatic HRAS-mutant HNSCC with variant allele frequency of at least 20% after progression on platinum-based chemotherapy. The designation does not assure approval.
- Kura dosed the first patient in the KO-539 Phase 1b expansion cohorts in June 2021. The 200 mg and 600 mg cohorts are expected to enroll 12 evaluable patients each, with a recommended Phase 2 dose expected by the first quarter of 2022.
- Kura announced a collaboration with Novartis to evaluate tipifarnib with alpelisib in the KURRENT trial. The company planned to begin the Phase 1/2 study in the fourth quarter of 2021, subject to development execution and supply by the parties.
- The company expects research and development and general and administrative expenses to increase as clinical development and supporting activities expand.
- Kura has an unused at-the-market facility permitting up to $75.0 million of common-stock sales, but stated that no shares had been sold under the facility. Management expects substantial additional financing will eventually be required and has no committed external funding source.
- Key risks include clinical-trial enrollment and execution, COVID-19-related disruptions, regulatory approval, safety and efficacy outcomes, companion-diagnostic development, third-party manufacturing and CRO dependence, intellectual-property protection, competition, and potential dilution or unfavorable terms from future financing.
- The filing reports no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls and procedures as of June 30, 2021.
Most important facts for an investor to verify
- Progress and enrollment timing for AIM-HN, including the effect of COVID-19 and the expanded patient requirements.
- KO-539 Phase 1b safety, efficacy, enrollment, and recommended-dose data expected by the first quarter of 2022.
- Whether the planned KURRENT collaboration and fourth-quarter 2021 trial start occurred as described.
- Actual quarterly cash burn and whether the stated cash runway into 2024 remains valid as development spending increases.
- Future financing needs, including use of the $75.0 million ATM facility and potential equity dilution.
- Regulatory status and validation of companion diagnostics required for potential approval of tipifarnib and KO-539.
- Manufacturing capacity, supply continuity, intellectual-property rights, and any new clinical or regulatory safety signals.