Nkarta(US:NKTX)2024-08-13 20:08PART I. FINANCIAL INFORMATION Financial Statements (unaudited) The unaudited condensed financial statements for the period ended June 30, 2024, show a significant increase in cash and total assets due to a March 2024 public offering, while the company continues to incur net losses, reporting $54.5 million for the first six months of 2024, a decrease from $64.1 million in the prior year, with slightly decreased operating expenses Condensed Balance Sheet Data (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $120.4 | $31.0 | | Total current assets | $331.8 | $253.1 | | Total assets | $554.1 | $378.9 | | Total current liabilities | $20.9 | $23.3 | | Total liabilities | $100.9 | $105.6 | | Total stockholders' equity | $453.2 | $273.3 | Condensed Statement of Operations Data (in millions, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $23.1 | $25.1 | $48.4 | $51.3 | | General and administrative | $7.6 | $11.7 | $15.1 | $19.9 | | Net loss | $(25.0) | $(33.3) | $(54.5) | $(64.1) | | Net loss per share | $(0.34) | $(0.68) | $(0.88) | $(1.31) | Condensed Statement of Cash Flows Data (in millions) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(50.4) | $(42.5) | | Net cash (used in) provided by investing activities | $(86.1) | $33.8 | | Net cash provided by financing activities | $225.9 | $0.4 | | Net increase (decrease) in cash | $89.4 | $(8.4) | - In March 2024, the company completed an underwritten public offering, selling 21.01 million shares of common stock and pre-funded warrants to purchase 3.00 million shares, raising gross proceeds of $240.1 million before expenses56 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing allogeneic NK-cell therapies, particularly NKX019 for autoimmune diseases, while deprioritizing NKX101, and notes that $225.1 million in net proceeds from a March 2024 public offering are sufficient to fund operations for at least 12 months - The company has realigned its pipeline to direct primary resources to the development of its lead product candidate, NKX019, for the treatment of autoimmune diseases, while deprioritizing the development of NKX10161 Research and Development Expenses Breakdown (in millions) | Expense Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Direct External Program Expenses: | | | | | | NKX019 | $4.1 | $3.6 | $7.6 | $8.4 | | NKX101 | $0.3 | $4.6 | $3.4 | $9.5 | | Unallocated Internal R&D Costs: | | | | | | Personnel related | $10.0 | $10.4 | $20.4 | $20.7 | | Others | $8.7 | $6.6 | $17.0 | $13.0 | | Total R&D Costs | $23.1 | $25.1 | $48.4 | $51.3 | - The decrease in R&D expenses for the six months ended June 30, 2024, was primarily driven by a $7.5 million reduction in program costs from lower manufacturing and materials spending as NKX101 was deprioritized71 - As of June 30, 2024, the company had cash, cash equivalents, restricted cash, and investments of $426.7 million, which management believes are sufficient to meet cash needs for at least 12 months from the filing date of the report7477 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from changes in interest rates affecting its investment portfolio, foreign currency exchange rates due to international vendor contracts, and inflation, though management believes these have not had a material effect on financial results - The company's primary market risks are interest rate fluctuations on its investment portfolio and foreign currency exchange rates, but management believes a 10% change in interest rates would not have a material effect on the portfolio's fair value90 - Inflation is noted as a factor that increases labor, manufacturing, and R&D costs, but the company does not believe it has had a material effect on results of operations during the periods presented91 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2024, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2024, the company's management concluded that its disclosure controls and procedures were effective92 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls93 PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not currently involved in any legal proceedings likely to have a material adverse effect on its business, financial condition, or growth prospects - As of the report date, there are no pending claims or actions against the company that management believes are likely to have a material adverse effect95 Risk Factors This section details significant risks to the company's business, categorized into financial, operational, manufacturing, intellectual property, commercialization, and stock-related risks, including limited operating history, significant losses, dependence on its CAR NK-cell platform and lead candidate NKX019, complex manufacturing, reliance on licenses, and intense competition Risks Related to Financial Position The company has a limited operating history, has incurred significant losses since inception ($489.9 million accumulated deficit as of June 30, 2024), expects losses to continue, has never generated product revenue, and will require substantial additional capital to fund operations, which may not be available on favorable terms - The company has incurred significant operating losses since its inception in 2015, with a net loss of $54.5 million for the six months ended June 30, 2024, and an accumulated deficit of $489.9 million98 - Nkarta will require additional capital to advance its product candidates, and future financing may cause dilution to stockholders, restrict operations, or require relinquishing rights to its products101 Risks Related to Business and Industry The company's success is highly dependent on its novel CAR NK-cell technology platform and lead candidate NKX019, facing significant development, manufacturing, and regulatory challenges, especially for autoimmune diseases where no cell therapies are yet approved, with clinical development being lengthy, expensive, and uncertain - The business is highly dependent on the clinical success of its CAR NK-cell technology platform and specifically its lead product candidate, NKX019105121 - Clinical data for CD19-targeted cell therapies in autoimmune disease is limited, and there is a risk that NKX019 may not provide a therapeutic benefit or be competitive with other therapies131 - The company faces intense competition from other biopharmaceutical companies and academic institutions developing similar or alternative cellular immunotherapies, which could render its products obsolete or non-competitive149150 Risks Related to Manufacturing The manufacturing process for the company's cell therapies is novel, complex, and susceptible to product loss, contamination, and variability, relying on third parties for critical materials and a sole supplier for certain steps, with potential delays in commissioning its new commercial-scale facility impeding development plans - The manufacturing process for genetically engineered human cells is complex, highly regulated, and subject to risks of product loss, failure, or contamination, which could delay clinical trials and regulatory approval198199201 - The company is reliant on a sole supplier, Miltenyi, for the CliniMACS® Plus system and related reagents, creating a significant supply chain risk214 Risks Related to Intellectual Property The company relies on a key license agreement with the National University of Singapore and St. Jude Children's Research Hospital, where termination would result in the loss of critical rights, and faces uncertainties in obtaining robust patent protection, potential infringement claims, and challenges in adequately protecting its trade secrets - Termination of the license agreement with the National University of Singapore and St. Jude Children's Research Hospital could lead to the loss of rights to key components of the NK cell engineering platform, impeding product development226227 - The company faces risks of third-party claims of intellectual property infringement, which could be costly, time-consuming, and potentially prevent or delay the commercialization of its product candidates233234 Risks Related to Commercialization Nkarta currently lacks sales, marketing, and distribution capabilities, with the commercial success of its products, if approved, depending on uncertain market acceptance, adequate insurance coverage, and reimbursement, while also being subject to healthcare reform initiatives and complex fraud and abuse laws - The company has no internal marketing, sales, or distribution capabilities and will need to build them or partner with third parties to commercialize any approved products273274 - Failure to obtain or maintain adequate insurance coverage and reimbursement from government and private payors for its high-cost cell therapies could severely limit the ability to market and generate revenue from its products286287 Risks Related to Our Common Stock The market price of the company's common stock is likely to be highly volatile, with ownership concentrated among executive officers, directors, and principal stockholders, potentially preventing new investors from influencing corporate decisions, and the company relies on certain disclosure exemptions as an "emerging growth company" - The trading price of the company's common stock is likely to be highly volatile due to factors such as clinical trial results, regulatory decisions, and broader market conditions313 - As of August 9, 2024, directors, executive officers, and principal stockholders beneficially own 58% of the common stock, allowing them to control or significantly influence all matters requiring stockholder approval317 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period covered by this report - There were no unregistered sales of equity securities during the quarter ended June 30, 2024354 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None354 Mine Safety Disclosures This item is not applicable to the company - Not applicable354 Other Information During the quarter ended June 30, 2024, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter355 Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to the Certificate of Incorporation, amendments to the Research Collaboration Agreement with CRISPR Therapeutics, and officer certifications - Exhibits filed include amendments to the company's collaboration agreement with CRISPR Therapeutics AG and certifications by the Principal Executive Officer and Principal Financial Officer357