KalVista Pharmaceuticals(KALV) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents the company's unaudited condensed consolidated financial statements for the periods ended October 31, 2020 and 2019 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | October 31, 2020 | April 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $72,076 | $88,696 | | Total Assets | $75,448 | $92,529 | | Total Current Liabilities | $9,536 | $7,720 | | Total Long-Term Liabilities | $932 | $1,057 | | Total Stockholders' Equity | $64,980 | $83,752 | | Total Liabilities and Stockholders' Equity | $75,448 | $92,529 | - Total assets decreased from $92.5 million at April 30, 2020, to $75.4 million at October 31, 2020[9] - Stockholders' equity decreased from $83.8 million to $65.0 million over the same period[9] Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended Oct 31, 2020 | Three Months Ended Oct 31, 2019 | Six Months Ended Oct 31, 2020 | Six Months Ended Oct 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $— | $3,920 | $— | $7,289 | | Research and Development Expenses | $9,148 | $9,789 | $20,313 | $19,476 | | General and Administrative Expenses | $3,633 | $3,420 | $6,912 | $6,665 | | Operating Loss | $(12,781) | $(9,289) | $(27,225) | $(18,852) | | Total Other Income | $2,355 | $3,386 | $5,984 | $5,611 | | Net Loss | $(10,426) | $(5,903) | $(21,241) | $(13,241) | | Net Loss per Share, Basic and Diluted | $(0.58) | $(0.33) | $(1.19) | $(0.75) | - Revenue for both the three and six months ended October 31, 2020, was $0, a significant decrease from $3.9 million and $7.3 million in the prior year periods, respectively, due to the expiration of the Merck Option Agreement[11] - Net loss increased to $10.4 million for the three months ended October 31, 2020, from $5.9 million in the prior year, and to $21.2 million for the six months ended October 31, 2020, from $13.2 million in the prior year[11] Condensed Consolidated Statements of Changes in Stockholders' Equity Changes in Stockholders' Equity (Six Months Ended October 31, 2020, in thousands) | Item | Amount | | :--- | :--- | | Balance at May 1, 2020 | $83,752 | | Issuance of common stock from exercise of stock options | $106 | | Stock-based compensation expense | $2,436 | | Net loss | $(21,240) | | Foreign currency translation adjustment | $211 | | Unrealized holding losses from marketable securities | $(169) | | Reclassification adjustment for realized (gain) on marketable securities included in net loss | $(116) | | Balance at October 31, 2020 | $64,980 | - Total stockholders' equity decreased from $83.8 million at May 1, 2020, to $65.0 million at October 31, 2020, primarily due to a net loss of $21.2 million[14] - Stock-based compensation expense contributed $2.4 million to additional paid-in capital during the six months ended October 31, 2020[14] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Six Months Ended October 31, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,540) | $(19,089) | | Net cash provided by (used in) investing activities | $11,884 | $(3,044) | | Net cash provided by financing activities | $106 | $11,538 | | Effect of exchange rate changes on cash and cash equivalents | $(65) | $308 | | Net increase (decrease) in cash and cash equivalents | $385 | $(10,287) | | Cash and cash equivalents at end of period | $16,174 | $21,719 | - Net cash used in operating activities decreased to $11.5 million for the six months ended October 31, 2020, from $19.1 million in the prior year[17] - Net cash provided by investing activities significantly improved to $11.9 million in 2020, compared to $3.0 million used in 2019, primarily due to higher sales and maturities of marketable securities[17] Notes to the Condensed Consolidated Financial Statements 1. The Company - KalVista Pharmaceuticals, Inc. is a clinical-stage pharmaceutical company focused on small molecule protease inhibitors for hereditary angioedema (HAE) and diabetic macular edema (DME)[19] - The COVID-19 pandemic has caused and may continue to cause delays in clinical trials, potentially impacting business, results of operations, and financial performance, and may require earlier additional capital[21] - The company anticipates sufficient funding for at least the next twelve months based on current operating plans and existing capital resources, but expects to incur continued losses and increase expenses as product candidates advance[23] 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with U.S. GAAP for interim financial information, reflecting all necessary adjustments for fair presentation[27] - The CEO manages operations as a single operating segment[28] Potential Dilutive Common Share Equivalents (October 31, in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Stock options and awards | 3,019,711 | 2,274,648 | - Due to net losses, common share equivalents are anti-dilutive, resulting in no difference between basic and diluted loss per share[30] Fair Value Measurement of Cash Equivalents and Marketable Securities (October 31, 2020, in thousands) | Category | Level 1 | Level 2 | Level 3 | Balance | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $1,257 | $— | $— | $1,257 | | Corporate debt securities | $— | $30,837 | $— | $30,837 | | U.S. government agency securities | $— | $8,863 | $— | $8,863 | | Total | $1,257 | $39,700 | $— | $40,957 | 3. Marketable Securities - The company invests excess cash in high credit quality securities to ensure safety, preservation, and liquidity, classifying all debt securities as available-for-sale[34][35] Marketable Securities Held (October 31, 2020, in thousands) | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | | :--- | :--- | :--- | :--- | :--- | | Corporate debt securities | $30,726 | $148 | $(37) | $30,837 | | Obligations of the U.S. Government and its agencies | $8,791 | $72 | $— | $8,863 | | Total | $39,517 | $220 | $(37) | $39,700 | Scheduled Maturity for Marketable Securities (October 31, 2020, in thousands) | Maturity Period | Amount | | :--- | :--- | | Maturing in one year or less | $25,192 | | Maturing after one year through two years | $5,817 | | Maturing after two years | $8,691 | | Total | $39,700 | 4. Accrued Expenses Accrued Expenses (in thousands) | Expense Type | October 31, 2020 | April 30, 2020 | | :--- | :--- | :--- | | Compensation expense | $2,952 | $2,333 | | Research expense | $3,501 | $2,821 | | Professional fees | $410 | $173 | | Other expenses | $78 | $128 | | Total | $6,941 | $5,455 | - Total accrued expenses increased to $6.9 million at October 31, 2020, from $5.5 million at April 30, 2020, driven primarily by increases in compensation and research expenses[38] 5. Commitments and Contingencies - The company has remaining contractual commitments of $1.8 million at October 31, 2020, related to preclinical studies and clinical trials[39] - No contingent liabilities required accrual at October 31, 2020[40] - Upon successful regulatory approval and first commercial sale of certain DME products, the company may be required to pay royalty fees of up to $1.0 million, with additional follow-on payments depending on commercial success[41] 6. Leases - The company has lease agreements for its Cambridge, Massachusetts headquarters (5-year term from Sept 2017) and Porton Down, UK office/research lab space (through April 2023, with option to extend)[42] - Total rent expense for operating leases was $396,000 for the six months ended October 31, 2020, an increase from $378,000 in the prior year[43] Maturity of Undiscounted Lease Payments (October 31, 2020, in thousands) | Fiscal Years | Operating Leases | | :--- | :--- | | 2021 | $297 | | 2022 | $390 | | 2023 | $245 | | 2024 | $149 | | 2025 | $149 | | Thereafter | $459 | | Total Lease Payments | $1,689 | | Less: imputed interest | $(335) | | Total Lease Liabilities | $1,354 | | Current lease liabilities | $422 | | Long-term lease liabilities | $932 | 7. Subsequent Events - On November 20, 2020, the company amended its Cambridge lease to include an additional 5,600 square feet for an eight-year term, with an average annual rent of $0.6 million, and extended the existing space's term to be coterminous[46] - Subsequent to October 31, 2020, the company issued 27,508 shares of common stock for approximately $0.5 million in cash proceeds under a Sales Agreement with Cantor Fitzgerald & Co[47] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's analysis of financial condition, operational results, and progress of key drug candidates Management Overview - KalVista is a clinical-stage pharmaceutical company developing small molecule protease inhibitors for hereditary angioedema (HAE) and diabetic macular edema (DME)[49] - For HAE, the company aims to offer a complete set of oral options, including KVD900 for on-demand treatment (currently in Phase 2, completed patient dosing) and KVD824 for prophylactic treatment (IND application for Phase 2 expected Q1 2021)[51][52] - A novel oral Factor XIIa inhibitor program is in lead optimization, with IND-enabling studies anticipated in 2021, aiming to be the first orally delivered Factor XIIa inhibitor in clinical development[56][57] - The COVID-19 pandemic continues to pose risks of delays in preclinical studies and clinical trials, potentially impacting operational and financial performance[60] Financial Overview - No revenue was generated in the current fiscal year due to the expiration of the Merck Option Agreement in February 2020[62] - Research and development expenses are expected to remain substantial and increase as product candidates advance through clinical development, manufacturing, and toxicology studies[65] - General and administrative expenses are anticipated to increase due to expanding operating activities, patent portfolio maintenance, and public company compliance costs[68] - Other income includes interest income, UK R&D tax credits, and realized/unrealized foreign currency exchange gains/losses[69] Results of Operations Key Components of Results of Operations (Three Months Ended October 31, in thousands) | Metric | 2020 | 2019 | Increase (decrease) | | :--- | :--- | :--- | :--- | | Revenue | $— | $3,920 | $(3,920) | | Research and development expenses | $9,148 | $9,789 | $(641) | | General and administrative expenses | $3,633 | $3,420 | $213 | | Interest, exchange rate gain and other income | $2,355 | $3,386 | $(1,031) | Research and Development Expenses by Program (Three Months Ended October 31, in thousands) | Program | 2020 | 2019 | | :--- | :--- | :--- | | KVD001 | $58 | $1,385 | | KVD900 | $2,757 | $2,914 | | KVD824 | $2,381 | $818 | | Preclinical activities | $3,952 | $4,672 | | Total | $9,148 | $9,789 | - R&D expenses decreased by $0.6 million for the three months ended October 31, 2020, primarily due to decreases in KVD001 ($1.3M) and preclinical activities ($0.7M), partially offset by an increase in KVD824 spending ($1.6M)[72] Key Components of Results of Operations (Six Months Ended October 31, in thousands) | Metric | 2020 | 2019 | Increase (decrease) | | :--- | :--- | :--- | :--- | | Revenue | $— | $7,289 | $(7,289) | | Research and development expenses | $20,313 | $19,476 | $837 | | General and administrative expenses | $6,912 | $6,665 | $247 | | Interest, exchange rate gain and other income | $5,984 | $5,611 | $373 | Research and Development Expenses by Program (Six Months Ended October 31, in thousands) | Program | 2020 | 2019 | | :--- | :--- | :--- | | KVD001 | $144 | $3,268 | | KVD900 | $7,209 | $4,448 | | KVD824 | $4,669 | $2,324 | | Preclinical activities | $8,291 | $9,436 | | Total | $20,313 | $19,476 | - R&D expenses increased by $0.8 million for the six months ended October 31, 2020, driven by increased spending on KVD900 ($2.8M) and KVD824 ($2.3M), partially offset by decreases in KVD001 ($3.1M) and preclinical activities ($1.1M)[80] Liquidity and Capital Resources - Operations are primarily funded through capital stock issuance and the former Merck Option Agreement; future funding is expected from capital stock issuance, including sales under the Sales Agreement with Cantor Fitzgerald & Co[88] - The company anticipates sufficient funding for at least the next twelve months based on current operating plans and existing capital resources, subject to potential COVID-19 impacts[88][93] Summary of Net Cash Flow Activity (Six Months Ended October 31, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(11,540) | $(19,089) | | Cash flows provided by (used in) investing activities | $11,884 | $(3,044) | | Cash flows provided by financing activities | $106 | $11,538 | | Net increase (decrease) in cash and cash equivalents | $385 | $(10,287) | - Net cash used in operating activities decreased to $11.5 million in 2020 from $19.1 million in 2019, primarily due to favorable changes in working capital, including R&D tax credit receivable and prepaid expenses[90] - Net cash provided by investing activities was $11.9 million in 2020, a significant improvement from $3.0 million used in 2019, driven by higher sales and maturities of marketable securities[91] - Net cash provided by financing activities decreased substantially to $0.1 million in 2020 from $11.5 million in 2019, as the prior year included significant common stock sales[92] Contractual Obligations and Commitments - There were no material changes to contractual obligations and commitments during the three months ended October 31, 2020, compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended April 30, 2020[96] Off-Balance Sheet Arrangements - As of October 31, 2020, the company was not a party to any off-balance sheet arrangements as defined by SEC rules and regulations[97] Critical Accounting Policies and Significant Judgments and Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, which are evaluated on an ongoing basis using historical experience, known trends, and other reasonable factors[98] - Actual results may differ from these estimates under different assumptions or conditions[98] Recently Issued Accounting Pronouncements - No recently issued accounting pronouncements are applicable to the company[99] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, KalVista is exempt from providing disclosures about market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[100] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures as of October 31, 2020, with no material changes identified Evaluation of Disclosure Controls and Procedures - Management, under the supervision of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of October 31, 2020[102] Changes in Internal Controls over Financial Reporting - No material changes in internal control over financial reporting were identified during the quarter ended October 31, 2020[103] - The company is continuously monitoring and assessing the impact of the COVID-19 pandemic on its internal controls[103] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not aware of any legal proceedings expected to materially impact its business or financial condition - The company is not aware of any legal proceedings or claims that are expected to have a material adverse effect on its business, financial condition, or operating results[106] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended April 30, 2020[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for the reporting period - This item is not applicable[109] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This item is not applicable[110] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[111] Item 5. Other Information This item is not applicable to the company for the reporting period - This item is not applicable[112] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including a lease amendment and officer certifications - Exhibits include the First Amendment of Lease dated November 20, 2020, and certifications from the Principal Executive Officer and Principal Financial Officer[114] - XBRL Instance Document and Taxonomy Extension Documents are also filed as exhibits[114] SIGNATURES The report is duly signed on behalf of the company by its CEO and CFO on December 10, 2020 - The report was signed by T. Andrew Crockett, Chief Executive Officer, and Benjamin L. Palleiko, Chief Business Officer and Chief Financial Officer, on December 10, 2020[119]