Nkarta, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Nkarta is a clinical-stage biopharmaceutical company developing engineered, off-the-shelf natural killer (NK) cell therapies. Its lead candidates, NKX101 and NKX019, were in Phase 1 trials. The company has no approved products and has not generated product-sales revenue.
Financial performance and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development | $25.1 | $21.0 | $51.3 | $40.6 |
| General and administrative | $11.7 | $6.6 | $19.9 | $13.1 |
| Total operating expenses | $36.9 | $27.6 | $71.2 | $53.7 |
| Net loss | $33.3 | $26.9 | $64.1 | $52.9 |
| Net loss per share | $0.68 | $0.61 | $1.31 | $1.38 |
| Interest income | $3.6 | $0.7 | $7.0 | $0.8 |
- At June 30, cash and cash equivalents were $29.1 million, restricted cash $2.7 million, and short- and long-term investments $270.4 million; together, these totaled $302.2 million. Total assets were $429.0 million and stockholders’ equity was $318.0 million.
- Six-month operating cash use was $42.5 million, versus $34.9 million in 2022. Capital expenditures were $15.2 million, primarily for manufacturing-facility construction. The company reported no debt borrowings; operating lease liabilities totaled $90.5 million.
- Management believes available cash, cash equivalents, restricted cash, and investments will fund operations for at least 12 months from the filing date. The company expects significant ongoing losses and says it will need substantial additional funding.
Changes versus the prior comparable period
- Q2 operating expenses rose $9.2 million year over year; six-month expenses rose $17.5 million. R&D growth reflected higher personnel, clinical-development, and internal research costs, particularly for NKX101 and NKX019.
- G&A increased by $5.2 million in Q2 and $6.8 million in the first half. A $4.1 million right-of-use asset impairment was a major driver in both comparisons; personnel and professional-service costs also increased.
- Net loss increased by $6.4 million in Q2 and $11.2 million in the first half. Higher interest income partially offset increased operating costs.
- Cash and investments declined from $354.9 million at December 31, 2022 to $302.2 million at June 30, 2023. No ATM shares were sold in the first half of 2023; a shelf registration effective May 5, 2023 permits offerings of up to $350 million in aggregate.
Outlook, commentary, and risks
- NKX101 and NKX019 remain early-stage clinical programs, and management expects R&D expenses to increase as trials and development advance. Nkarta also collaborates with CRISPR Therapeutics on gene-edited NK and NK+T programs.
- A continuing fludarabine shortage has delayed enrollment at some clinical-trial sites. Patient recruitment, clinical outcomes, manufacturing reliability, and regulatory requirements remain material uncertainties.
- The company began marketing portions of its South San Francisco office space for sublease and recorded a $4.1 million impairment. It has substantial long-term lease commitments, with $90.5 million in recognized lease liabilities.
- Other key risks include reliance on a sole supplier for certain manufacturing steps, construction and qualification of commercial-scale manufacturing capacity, dependence on collaborators and third parties, and the possibility of future financing that could dilute stockholders or constrain operations.
- Management reported effective disclosure controls as of June 30, 2023. It reported no material pending legal proceedings and no material change in contractual obligations from its prior annual report.
Important facts for investors to verify
- Progress, enrollment, safety, and final results in the NKX101 and NKX019 trials; interim clinical data may differ from final data.
- Whether the fludarabine shortage, patient recruitment challenges, or manufacturing constraints further delay trials.
- Cash burn and available liquidity relative to management’s stated 12-month runway, and any future financing or share issuance.
- Sublease plans, facility-construction spending, and lease obligations, including repayment of the $4.4 million optional tenant-improvement allowance beginning July 2023.
- Execution and economics of the CRISPR collaboration and any resulting milestone or royalty obligations.