Kiora Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2023; filed August 8, 2023. Kiora is a clinical-stage specialty pharmaceutical company developing therapies for orphan retinal diseases, including KIO-301, KIO-104, KIO-101 and KIO-201. The interim financial statements are unaudited and prepared under U.S. GAAP.
Financial Performance and Position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $2.63 million | $2.40 million | $4.55 million | $5.97 million |
| Net loss | $2.61 million | $2.40 million | $4.48 million | $5.97 million |
| Net loss per share | $0.79 | $0.18 | $1.74 | $0.46 |
| Cash used in operations | Not provided for quarter | Not provided for quarter | $4.45 million | $5.33 million |
Margins and profitability: The company has no meaningful operating or profit margins because it has not generated significant revenue and has never been profitable. Accumulated deficit was $138.9 million at June 30, 2023.
Liquidity: Cash and cash equivalents were $7.95 million, plus $4,150 of restricted cash, at June 30, 2023, compared with total cash, cash equivalents and restricted cash of $6.01 million at December 31, 2022. Management expects cash on hand to fund planned operations into May 2024, subject to changes in spending and development activities.
Debt and obligations: The filing does not disclose conventional debt. Total liabilities were $6.24 million, including $3.98 million of contingent consideration, $0.69 million of deferred tax liabilities and $1.88 million of current liabilities. The maximum contractual contingent consideration obligations were approximately $18.8 million, with estimated fair value of approximately $4.0 million.
Material Changes Versus Prior Comparable Period
- Second-quarter net loss increased by $0.2 million, primarily because research and development and contingent consideration expenses increased more than general and administrative expenses declined.
- Six-month net loss improved by $1.5 million, driven mainly by the absence of approximately $1.0 million of executive severance recorded in 2022 and lower general and administrative expenses.
- Six-month research and development expense increased by $0.6 million to $1.83 million, reflecting higher KIO-301 and KIO-101 clinical trial activity, personnel costs and related activities, partially offset by higher research and development tax credits.
- Six-month operating cash use declined by $0.9 million versus 2022, although management stated that research and development activities increased cash usage.
- Financing provided $6.45 million during the first six months, including approximately $5.6 million of net proceeds from a June public offering, approximately $0.4 million from the equity line of credit and $0.3 million from warrant exercises.
- Shares outstanding increased substantially through equity issuance and conversion of Series F preferred stock. At June 30, 2023, 6.91 million common shares were outstanding, compared with 1.80 million at December 31, 2022; the company also had 13.11 million common shares issuable upon outstanding warrants.
Outlook, Risks and Unusual Items
- Management expects significant expenses and increasing operating losses for the foreseeable future as clinical development continues. Additional financing will be required through equity, debt, licensing, grants or collaborations.
- The company states that substantial doubt exists regarding its ability to continue as a going concern. There is no assurance that additional capital will be available on acceptable terms or at all.
- An equity line of credit provides approximately $9.6 million of remaining availability, subject to timing, amount and other limitations. Further equity financing could materially dilute existing stockholders.
- The June 2023 offering issued common stock, Series F convertible preferred stock and Class C and Class D warrants. In July 2023, additional Series F preferred stock converted into common stock. On August 5, 2023, the Class C and Class D warrant exercise price reset to $0.5231 per share.
- On July 18, 2023, Nasdaq notified the company that it was not compliant with the $1.00 minimum bid-price requirement. The initial compliance period ran through January 15, 2024, with a possible additional period subject to Nasdaq requirements. Delisting could reduce liquidity and impair future capital-raising ability.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2023 because of material weaknesses previously identified. Remediation efforts include new accounting software, access controls, approval workflows and enhanced technical accounting processes, but management stated that the weaknesses had not yet been remediated.
- On June 7, 2023, the company amended its SentrX agreement to eliminate further payment obligations and entered a new agreement to out-license certain KIO-201 veterinary-use patents in exchange for a low single-digit royalty.
- On July 21, 2023, Kiora entered a memorandum of understanding with the Choroideremia Research Foundation to support development and future enrollment for KIO-301 in choroideremia.
- Clinical, regulatory, intellectual-property, financing, commercialization and development risks remain significant. The filing states that product candidates may never receive approval or generate substantial revenue.
Investor Verification Priorities
- Verify the company’s current cash balance, operating cash burn and actual runway relative to the May 2024 estimate.
- Assess the availability and dilution implications of the remaining equity line and other potential financing sources.
- Review Nasdaq compliance status and any subsequent bid-price or delisting developments.
- Track KIO-301, KIO-104 and other clinical programs, including trial enrollment, efficacy, safety and regulatory milestones.
- Reconcile common shares outstanding with convertible preferred stock, warrants, options and restricted stock that may result in substantial dilution.
- Monitor remediation of the material weaknesses in internal control over financial reporting and disclosure controls.
- Evaluate contingent consideration obligations, milestone probabilities and potential cash payments through 2028.