Kala Pharmaceuticals, Inc. (now identified in the request as KALA BIO) — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual filing; the provided text does not give standalone fourth-quarter results. The filing was signed March 29, 2022. The registrant’s name in the filing is Kala Pharmaceuticals, Inc.
Business context
The company develops and commercializes eye therapies using its AMPPLIFY drug-delivery technology. Its marketed products are EYSUVIS for short-term treatment of dry-eye signs and symptoms, and INVELTYS for post-operative ocular inflammation and pain. In November 2021, it acquired Combangio and its clinical-stage candidate KPI-012, being developed for persistent corneal epithelial defects (PCED). KPI-287 and selective glucocorticoid receptor modulators (SEGRMs) remained preclinical programs.
Key financial metrics
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Net product revenue | $11.2 million | $6.4 million |
| Cost of product revenue | $4.1 million | $3.2 million |
| Gross profit and approximate gross margin | $7.1 million; 63.5% | $3.2 million; 50.1% |
| Operating expenses, net of deferred-purchase remeasurement gain | $141.5 million | $102.6 million |
| Loss from operations | $130.2 million | $96.2 million |
| Net loss | $142.6 million | $104.3 million |
| Net loss per share, basic and diluted | $2.19 | $1.99 |
| Cash used in operating activities | $108.2 million | $90.7 million |
| Cash and cash equivalents at year-end | $92.1 million | $77.3 million |
| Debt principal outstanding at year-end | $80.0 million | $75.0 million |
FY 2021 revenue comprised $6.3 million from EYSUVIS and $4.9 million from INVELTYS; FY 2020 revenue comprised $0.3 million and $6.1 million, respectively. At December 31, 2021, current assets were $124.4 million and current liabilities were $37.4 million. The company reported an accumulated deficit of $542.4 million. The $80.0 million Oxford loan had a $78.9 million carrying value, net of unamortized discount and issuance costs.
Changes versus prior year and unusual items
- Revenue rose $4.9 million, driven by EYSUVIS’s first full promotional launch in 2021 and higher INVELTYS unit sales and per-unit gross selling price; higher INVELTYS allowances partly offset growth.
- Net loss increased $38.3 million. SG&A rose $24.0 million, including higher launch-related selling and marketing costs and employee expenses. Research and development expense fell $6.8 million, mainly because EYSUVIS Phase 3 trial spending declined.
- The Combangio acquisition was accounted for as an asset acquisition. Kala recorded $26.6 million of acquired in-process R&D expense and $8.7 million of contingent-consideration liabilities at fair value. The acquisition included $5.0 million cash and 7.79 million shares of deferred purchase consideration; additional development, regulatory and sales milestones and royalties may be payable.
- Other notable FY 2021 items included a $5.8 million gain from remeasuring deferred purchase consideration, a $5.4 million loss on extinguishing the Athyrium debt, and a $1.3 million gain from terminating the Watertown lease.
- Operating cash use increased $17.5 million. Investing activities provided $70.8 million, largely from maturities or sales of short-term investments; financing activities provided $42.6 million, including Oxford loan proceeds and ATM equity issuance, offset substantially by repayment of Athyrium debt.
Outlook, commentary and principal risks
- Management expected year-end cash, together with anticipated EYSUVIS and INVELTYS revenue, to fund operations, lease and debt service, and capital expenditures into the second quarter of 2023. The filing cautions that this estimate depends on assumptions and could change; the financial statements state funding for at least 12 months from issuance.
- Management expected R&D expense to increase in 2022 as KPI-012 development and preclinical programs advance, while SG&A was expected to decrease in 2022 due to completed commercial buildout, nonrecurring launch costs and the Watertown lease termination. Costs could rise substantially if KPI-012 is commercialized.
- The company planned to submit an IND for KPI-012 and, subject to regulatory clearance, begin a U.S. Phase 2/3 PCED trial in Q4 2022. This was a plan, not assured guidance. Phase 1b evidence came from a small, nine-patient PCED cohort in Mexico; six of eight completers achieved complete healing by four weeks.
- COVID-19 had affected INVELTYS demand through disruptions to elective eye surgery and was believed to have affected EYSUVIS’s launch. Future effects on sales, trial timelines, supply and financing remained uncertain.
- Key risks include continuing losses and cash burn, potential need for additional capital, substantial debt and covenants, product acceptance and reimbursement, concentrated wholesaler revenue, generic and branded competition, third-party manufacturing reliance and minimum purchase commitments, and KPI-012 clinical, regulatory, integration and scale-up risks. Three customers each represented at least 10% of revenue; together they accounted for 100% of revenue in 2021.
- The Oxford loan bears a floating rate of 30-day LIBOR or 0.11%, whichever is higher, plus 7.89%, with principal due by May 1, 2026. The loan is secured by substantially all company assets and includes restrictive covenants. Kala reported no material legal proceedings.
Important facts for investors to verify
- Check subsequent filings for actual cash burn, product sales, liquidity and whether the stated runway into Q2 2023 was maintained.
- Track EYSUVIS and INVELTYS prescriptions, net pricing, payer coverage, returns and rebates, and dependence on three major customers.
- Confirm whether KPI-012’s IND and planned Phase 2/3 trial proceeded, and assess the small early-trial evidence against later controlled results and manufacturing readiness.
- Review the Oxford debt’s interest-rate exposure, covenants, repayment schedule and any refinancing or additional borrowing.
- Assess acquisition-related dilution and potential cash obligations: contingent payments may reach $105 million, including up to $65 million in sales milestones, plus royalties; the sales milestones were not recorded as probable at year-end.
- Note that the reported $92.1 million cash balance excludes restricted cash; also review the company’s minimum EYSUVIS/INVELTYS supply commitments, reported at $47.4 million in total.