Nkarta, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Nkarta is a clinical-stage biopharmaceutical company developing engineered, off-the-shelf natural killer (NK) cell therapies. It has no products approved for sale and has never generated product revenue.
Financial results and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | None reported | No product revenue |
| Research and development expense | $19.6 million | $13.5 million; up $6.0 million |
| General and administrative expense | $6.5 million | $5.9 million; up $0.6 million |
| Total operating expenses | $26.1 million | $19.5 million; up $6.6 million |
| Net loss | $26.0 million | $19.4 million; loss increased $6.6 million |
| Basic and diluted loss per share | $0.79 | $0.59 |
| Net cash used in operating activities | $18.3 million | $14.6 million |
| Cash, cash equivalents and short-term investments, including restricted cash | $219.1 million at March 31 | Cash and cash equivalents were $41.6 million; short-term investments were $175.3 million and restricted cash $2.1 million |
Revenue-based margins are not meaningful because the company has no product sales. Cash, cash equivalents and restricted cash totaled $43.7 million at quarter-end. Total current assets were $223.2 million and current liabilities were $10.8 million. Accumulated deficit was $230.1 million. No income tax provision was recorded.
Operating expenses rose mainly with expanded NKX101 and NKX019 clinical development, increased personnel and research/facility costs. Q1 comprehensive loss was $26.4 million, including a $0.5 million unrealized loss on available-for-sale investments. Share-based compensation was $4.1 million.
The company reported $69.2 million of operating lease liabilities ($2.5 million current) and $115.7 million of undiscounted future minimum lease payments. These are lease obligations, not reported borrowings. Property and equipment purchases were $1.8 million, primarily for manufacturing-facility construction.
Programs, outlook and material developments
- NKX101, targeting NKG2D ligands, and NKX019, targeting CD19, were in Phase 1 trials. The filing notes preliminary trial data were announced in April 2022 but does not provide a clear set of results in the financial information presented here.
- Nkarta was collaborating with CRISPR Therapeutics on a CD70-targeted CAR-NK candidate and an NK+T candidate; research costs and potential profits for collaboration products are shared equally. Nkarta recorded a $1.0 million receivable for CRISPR cost sharing at March 31.
- Management expected research and development expenses to increase substantially as clinical trials, pipeline development and manufacturing activities advance. It expected continuing operating losses and stated that cash, cash equivalents, restricted cash and short-term investments at March 31 would fund obligations for at least 12 months from the filing date.
- Subsequent financing: On April 28, 2022, Nkarta sold 15,333,334 shares at $15.00 per share, including the fully exercised underwriters’ option, for approximately $215.5 million in net proceeds. This materially increased available capital but diluted existing shareholders. As of May 9, 2022, 48,404,331 shares were outstanding.
- Key risks: The company expects ongoing losses and may need additional capital; clinical outcomes and timelines are uncertain; COVID-19-related supply, site and enrollment disruptions had affected operations; and the novel cell-therapy manufacturing process depends in part on third parties and a sole supplier for certain manufacturing steps. Commercial-scale manufacturing capacity was not yet established.
- Intellectual property contingency: Third parties requested ex parte reexaminations of two licensed patents related to NKX101; two reexaminations of another patent not related to current candidates were also pending. The outcomes could narrow or eliminate patent rights and could entail costs and management distraction.
- Management said disclosure controls and procedures were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current enrollment, safety, efficacy and timing updates for NKX101 and NKX019, including final data versus the preliminary results announced in April 2022.
- Use of the $215.5 million offering proceeds, updated cash runway and expected pace of cash use as clinical and manufacturing spending grows.
- Manufacturing-facility commissioning, capacity and qualification progress; reliance on external manufacturers and the sole supplier; and any continuing supply or trial delays.
- Progress and cost-sharing obligations under the CRISPR collaboration, and outcomes of the patent reexaminations affecting NKX101-related rights.
- Future share count and potential dilution from the offering, equity awards or additional financing.