PART I Business KalVista Pharmaceuticals is a clinical-stage company focused on developing small molecule protease inhibitors for Hereditary Angioedema (HAE) and Diabetic Macular Edema (DME) Overview KalVista is a clinical-stage pharmaceutical company specializing in small molecule protease inhibitors for Hereditary Angioedema (HAE) and Diabetic Macular Edema (DME) - The company's primary focus is on developing small molecule plasma kallikrein inhibitors for Hereditary Angioedema (HAE) and Diabetic Macular Edema (DME)16 - KVD900, an on-demand therapy for HAE attacks, is in a Phase 2 clinical trial expected to complete in late 201917 - KVD001, an intravitreal treatment for DME, is in a fully enrolled Phase 2 clinical trial expected to complete in the second half of 201917 Strategy The company's strategy focuses on developing novel oral therapies for HAE and DME by leveraging serine protease expertise and strategic partnerships - Apply scientific expertise in serine proteases to develop novel oral therapies for indications with high unmet need, initially focusing on plasma kallikrein inhibitors for HAE and DME24 - Advance multiple HAE product candidates into clinical development to create best-in-class oral therapies for both on-demand and prophylactic treatment24 - Continue advancing the intravitreal DME program (KVD001) while also developing a potentially transformative oral therapy for DME24 - Utilize strategic partnerships for larger markets, as demonstrated by the collaboration with Merck for DME, while potentially retaining rights for focused indications like HAE24 Hereditary Angioedema (HAE) Program KalVista is developing a portfolio of oral plasma kallikrein inhibitors for HAE, with lead candidate KVD900 in a Phase 2 trial for on-demand treatment - KVD900 is the lead candidate for on-demand treatment of HAE attacks. A Phase 2 trial is expected to complete in late 2019, evaluating efficacy in at least 50 patients across Europe1939 - Phase 1 results for KVD900 showed rapid absorption, reaching potentially effective concentrations in as little as 10 minutes, and was generally well-tolerated with no dose-limiting safety signals up to 600 mg2037 - The company aims to develop a portfolio of oral HAE therapies for both acute (on-demand) and prophylactic market segments, leveraging proprietary assays to select promising candidates344041 Diabetic Macular Edema (DME) Program KalVista's DME program focuses on plasma kallikrein inhibition, with lead candidate KVD001 in a Phase 2 trial and an oral therapy planned - The lead DME candidate, KVD001, is an intravitreal plasma kallikrein inhibitor. A double-masked Phase 2 trial is fully enrolled and expected to report data in the second half of 20192151 - The KVD001 program and future Oral DME Compounds are subject to an option agreement with Merck, which made a $37.0 million upfront payment2352 - In parallel with KVD001, the company intends to develop a safe and effective oral therapy for DME, which could reduce treatment burden and allow for earlier intervention53 Additional Earlier Stage Programs KalVista is advancing KVD824, a next-generation oral plasma kallikrein inhibitor, with a Phase 2 trial planned for HAE or DME in early 2020 - KVD824, an oral plasma kallikrein inhibitor, has completed a first-in-human study, testing single doses up to 1280 mg and multiple doses up to 640 mg twice daily, and was generally well tolerated2254 - KVD824 has potential for development in either HAE or DME. The company is conducting formulation work and expects to select an indication and initiate a Phase 2 trial in the first half of 202056 - Preclinical studies showed KVD824 effectively protects against HK cleavage in HAE models and reduces VEGF-induced retinal edema by 84.6% in DME models5758 Competition KalVista faces significant competition in HAE and DME from established injectable therapies, anti-VEGFs, and emerging oral treatments - In HAE, the company competes with approved injectable therapies from Takeda (Takhzyro, Firazyr, Kalbitor), CSL Behring (Berinert, Haegarda), and Pharming Group (Ruconest)61 - Direct competition in oral HAE therapies comes from BioCryst Pharmaceuticals and Attune Pharmaceuticals, who are also developing oral plasma kallikrein inhibitors61 - In DME, competition includes major anti-VEGF therapies (Lucentis, Eylea, Avastin) and corticosteroids. Oxurion is also developing an intravitreal plasma kallikrein inhibitor62 Intellectual Property The company's success depends on securing and defending its intellectual property, with patents for KVD001 and oral HAE programs expiring between 2032 and 2038 - As of April 30, 2019, the company owned 9 U.S. patents, 164 foreign patents, and had numerous pending applications in the U.S. and internationally64 - KVD001 is covered by patents and applications with anticipated expiration dates from 2032 to 203865 - The oral plasma kallikrein inhibitor portfolio, including KVD900, is covered by patent applications expected to expire between 2034 and 203866 Government Regulation The company's products are subject to extensive U.S., U.K., and E.U. regulations, including multi-phase clinical trials, potential Orphan Drug Designation, and post-approval compliance - Pharmaceutical product development requires extensive preclinical and clinical trials to establish safety and effectiveness before submitting a New Drug Application (NDA) to the FDA for approval71 - The company may seek Orphan Drug Designation for HAE, which is for diseases affecting fewer than 200,000 people in the U.S. and provides a seven-year market exclusivity period upon approval8386 - The company is subject to numerous U.S. healthcare laws, including the federal Anti-Kickback Statute, False Claims Act, and the ACA, which regulate marketing, sales, and pricing practices9394106 - Operations in the U.K. and EU are subject to similar rigorous regulatory processes for clinical trials and marketing authorization, with Brexit creating potential uncertainty for the U.K. regulatory regime112113 Risk Factors The company faces significant risks including ongoing losses, high development and regulatory uncertainties, commercialization challenges, reliance on third parties, and intellectual property vulnerabilities Risks Related to Our Business The company faces risks from a history of losses, uncertain profitability, and the need for substantial additional funding, which could lead to dilution or program delays - The company has incurred significant losses since inception and expects to continue incurring losses for the foreseeable future, with no guarantee of ever achieving profitability122 - Substantial additional funding is needed for ongoing activities, and an inability to raise capital could force the company to delay, reduce, or eliminate product development or commercialization efforts127 - As an early-stage company, it has not yet demonstrated the ability to complete large-scale clinical trials, obtain marketing approvals, or successfully commercialize a product125 Risks Related to the Discovery and Development of Our Product Candidates Product candidates face high development risks, including lengthy, expensive, and uncertain clinical trials, potential delays, and the risk of abandonment due to adverse events - Clinical drug development is a lengthy, expensive process with an uncertain outcome, and failure can occur at any stage. Early trial results are not predictive of later-stage success132134 - Clinical trials may be delayed, suspended, or terminated due to a variety of factors, including regulatory holds, enrollment difficulties, and lack of funding135 - Enrollment for clinical trials, especially for the rare disease HAE, may be slow or limited, leading to significant delays and increased development costs138 - Serious adverse events or unacceptable side effects identified during development could lead to the abandonment or limitation of product candidates143 Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters Regulatory approval is uncertain and complex, with potential delays, Brexit impacts, limited orphan drug protection, and strict post-approval compliance requirements - Failure to obtain, or delays in obtaining, required regulatory approvals from the FDA, EMA, and other authorities will prevent the commercialization of product candidates and materially impair revenue generation144 - Brexit could materially impact the regulatory framework in the U.K. and E.U., potentially delaying or preventing marketing approvals for the company's product candidates146 - Even if orphan drug exclusivity is obtained for a product, it may not provide effective protection from competition, as different drugs can be approved for the same condition if shown to be clinically superior150 - Approved products are subject to extensive post-marketing regulations, and non-compliance can lead to restrictions, recalls, fines, or withdrawal of approval156158 Risks Related to the Commercialization of Our Product Candidates Commercialization risks include failure to achieve market acceptance, intense competition from larger companies, and challenges in securing adequate insurance coverage and reimbursement - Commercial success depends on achieving market acceptance, which is influenced by factors like efficacy, safety, price, convenience, and marketing support170172 - The company faces substantial competition from large, well-resourced companies, and competitors may develop more successful products174176 - Failure to obtain or maintain adequate coverage and reimbursement from third-party payors could limit the ability to market products and generate revenue177 - The company faces an inherent risk of product liability lawsuits, and current insurance coverage may not be adequate to cover all potential liabilities181182 Risks Related to Our Dependence on Third Parties The company heavily relies on third parties, including its critical collaboration with Merck and external manufacturers, posing risks to control, supply, and quality - The company has limited control over the resources and efforts its collaborators, like Merck, dedicate to development and commercialization, and their strategic priorities may not align with KalVista's183184 - The existing collaboration with Merck is important, and if Merck ceases development or terminates the agreement, the company may not receive expected milestone payments or royalties187 - The company relies on third-party manufacturers for its product candidates, which increases the risk of insufficient quantities, unacceptable cost or quality, and potential development or commercialization delays191 Risks Related to Our Intellectual Property Intellectual property risks include uncertainty in obtaining and maintaining patent protection, potential for expensive litigation, and vulnerability of trade secrets to disclosure - The ability to obtain and maintain patent protection is uncertain and critical for success; competitors could develop similar products if protection is insufficient203 - The patent position of biotech companies is highly uncertain, and pending applications may not result in issued patents that effectively prevent competition205 - The company may become involved in expensive lawsuits to enforce its patents or defend against infringement claims, which could result in invalidation of its patents or significant monetary damages212213 - Reliance on trade secrets is risky, as they can be difficult to protect and may be disclosed or independently developed by competitors216 Risks Related to Employee Matters, Facilities, Managing Growth and Macroeconomic Conditions Risks include dependence on key personnel, challenges of managing growth, potential negative impacts from Brexit on U.K. operations, and vulnerability to cybersecurity breaches - The company is highly dependent on its ability to attract and retain key executives and qualified scientific personnel217218 - The U.K.'s vote to leave the European Union (Brexit) could negatively impact the company's business and operations, particularly its U.K.-based scientific activities and regulatory interactions221 - Business operations are vulnerable to system failures or security breaches, which could result in material disruption of drug development programs222 Risks Related to Ownership of Our Common Stock Risks include high stock price volatility, significant public company costs, anti-takeover provisions, limitations on NOL utilization, and no anticipated dividends - The trading price of the common stock is highly volatile and subject to wide fluctuations224 - Operating as a public company incurs significant costs and requires substantial management time for compliance, including Sarbanes-Oxley Act requirements228 - The ability to use net operating loss (NOL) carryforwards to offset future taxable income is substantially limited due to prior ownership changes under Section 382 of the Code237 - The company does not intend to pay dividends, so stockholder returns depend solely on the appreciation of the stock price238 Unresolved Staff Comments The company reports no unresolved staff comments - The company reports no unresolved staff comments240 Properties KalVista leases office and lab spaces in Cambridge, MA, Porton Down, U.K., and Boston, MA, which are deemed adequate for future needs - Corporate headquarters are located in Cambridge, MA (approx. 2,700 sq ft)241 - Maintains office and research laboratory space in Porton Down, UK (approx. 8,800 sq ft) and additional lab space in Boston, MA (approx. 1,000 sq ft)241 Legal Proceedings The company is not currently involved in any material legal proceedings or claims - The company is not currently a party to any material legal proceedings243 Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company244 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under 'KALV', has 39 holders, has never paid dividends, and details equity compensation plans - Common stock is traded on the NASDAQ stock market under the symbol "KALV"247 - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future248 Equity Compensation Plan Information as of April 30, 2019 | Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 1,704,283 | $10.06 | 902,251 | | Equity compensation plans not approved by stockholders | 80,055 | $8.49 | — | | Total | 1,784,338 | | 902,251 | Selected Financial Data This section presents selected consolidated financial data, showing increasing revenue and expenses, consistent net losses, and growth in assets and equity Selected Consolidated Financial Data (in thousands, except per share data) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Statement of Operations Data: | | | | | Revenue | $16,127 | $8,394 | $1,504 | | Research and development | $35,021 | $18,237 | $12,666 | | General and administrative | $10,926 | $8,862 | $11,177 | | Operating loss | $(29,820) | $(18,705) | $(22,339) | | Net loss | $(20,816) | $(15,805) | $(18,603) | | Net loss per share, basic and diluted | $(1.38) | $(1.53) | $(4.47) | | Balance Sheet Data (at April 30): | | | | | Cash and cash equivalents | $32,006 | $51,055 | $30,950 | | Total assets | $118,132 | $61,389 | $34,345 | | Total stockholders' equity | $96,738 | $27,253 | $31,327 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses FY2019 financial results, highlighting increased revenue from the Merck agreement, higher R&D expenses, a net loss, and sufficient cash for the next 12 months Results of Operations FY2019 saw revenue increase to $16.1 million due to the Merck agreement, R&D expenses rise 92% to $35.0 million, and a net loss of $20.8 million Comparison of Fiscal Years 2019 and 2018 (in thousands) | | Year Ended April 30, 2019 | Year Ended April 30, 2018 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Revenue | $16,127 | $8,394 | $7,733 | | Research and development expenses | $35,021 | $18,237 | $16,784 | | General and administrative expenses | $10,926 | $8,862 | $2,064 | Research and Development Expenses by Program (in thousands) | Program | Year Ended April 30, 2019 | Year Ended April 30, 2018 | Increase (Decrease) | % Change | | :--- | :--- | :--- | :--- | :--- | | Intravitreal | $10,169 | $3,020 | $7,149 | 237% | | Clinical stage oral programs | $6,141 | $4,212 | $1,929 | 46% | | Additional oral programs | $3,630 | $1,142 | $2,488 | 218% | | Early stage research activities | $15,081 | $9,863 | $5,218 | 53% | | Total | $35,021 | $18,237 | $16,784 | 92% | Liquidity and Capital Resources The company, with an accumulated deficit of $92.5 million, held $100.8 million in cash and securities as of April 30, 2019, sufficient for the next 12 months - As of April 30, 2019, the company had $100.8 million in cash, cash equivalents, and available-for-sale securities, with an accumulated deficit of $92.5 million263306389 - Management anticipates that existing capital resources are sufficient to fund operations for at least the next 12 months311 Summary of Net Cash Flow Activity (in thousands) | | Year Ended April 30, 2019 | Year Ended April 30, 2018 | | :--- | :--- | :--- | | Cash flows (used in) provided by operating activities | $(36,365) | $10,558 | | Cash flows (used in) provided by investing activities | $(69,422) | $(1,427) | | Cash flows provided by financing activities | $87,943 | $8,986 | Quantitative and Qualitative Disclosures About Market Risk The company's market risks include interest rate fluctuations on investments and foreign exchange rate volatility, primarily from GBP expenses and USD cash holdings - The company's primary market risks are interest rate fluctuations on its investment portfolio and foreign exchange rate volatility318322 - Foreign exchange risk stems from incurring significant expenses in British Pounds (GBP) while holding cash primarily in U.S. Dollars (USD). As of April 30, 2019, 88% of cash and cash equivalents were in USD and 12% in GBP322 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal years 2017-2019, including balance sheets, income statements, equity changes, and cash flows Consolidated Balance Sheets As of April 30, 2019, total assets increased to $118.1 million, liabilities decreased to $21.4 million, and stockholders' equity rose to $96.7 million Consolidated Balance Sheet Data (in thousands) | | April 30, 2019 | April 30, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $32,006 | $51,055 | | Marketable securities | $68,805 | $— | | Total current assets | $115,546 | $59,380 | | Total assets | $118,132 | $61,389 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $18,052 | $23,216 | | Total liabilities | $21,394 | $34,136 | | Total stockholders' equity | $96,738 | $27,253 | | Total liabilities and stockholders' equity | $118,132 | $61,389 | Consolidated Statements of Operations and Comprehensive Loss FY2019 revenue was $16.1 million, with an operating loss of $29.8 million and a net loss of $20.8 million, or ($1.38) per share Consolidated Statement of Operations Data (in thousands, except per share amounts) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Revenue | $16,127 | $8,394 | $1,504 | | Research and development expenses | $35,021 | $18,237 | $12,666 | | General and administrative expenses | $10,926 | $8,862 | $11,177 | | Operating loss | $(29,820) | $(18,705) | $(22,339) | | Net loss | $(20,816) | $(15,805) | $(18,603) | | Net loss per share, basic and diluted | $(1.38) | $(1.53) | $(4.47) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - The company reports no changes in or disagreements with its accountants on accounting and financial disclosure325 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of April 30, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2019326 - Management concluded that the company's internal control over financial reporting was effective as of April 30, 2019, based on the COSO framework329 - No changes in internal control over financial reporting occurred during the fourth quarter of fiscal 2019 that materially affected, or are reasonably likely to materially affect, internal controls332 Other Information The company reports no other information for this item - The company reports no other information for this item333 PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2019 Proxy Statement336 Executive Compensation Information regarding executive compensation is incorporated by reference from the forthcoming 2019 Proxy Statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2019 Proxy Statement337 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners and management is incorporated by reference from the 2019 Proxy Statement - Information regarding security ownership is incorporated by reference from the forthcoming 2019 Proxy Statement338 Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the forthcoming 2019 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the forthcoming 2019 Proxy Statement339 Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the forthcoming 2019 Proxy Statement - Information regarding principal accounting fees and services is incorporated by reference from the forthcoming 2019 Proxy Statement340 PART IV Exhibits, Financial Statement Schedules This section lists exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications - This section provides an index of all exhibits filed with the Form 10-K, including financial statements and material contracts345 Form 10-K Summary The company provides no summary for this item - The company provides no summary for this item349
KalVista Pharmaceuticals(KALV) - 2019 Q4 - Annual Report