Nkarta(NKTX) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements for the three and nine months ended September 30, 2024, detailing balance sheets, operations, cash flows, and notes on liquidity, accounting policies, and equity structure Condensed Balance Sheets Condensed Balance Sheets (in thousands) | Financial Metric | Sep 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $56,960 | $31,040 | | Short-term investments | $226,095 | $217,149 | | Total current assets | $290,150 | $253,071 | | Total assets | $532,034 | $378,885 | | Liabilities & Equity | | | | Total current liabilities | $22,468 | $23,330 | | Total liabilities | $101,161 | $105,600 | | Accumulated deficit | $(518,289) | $(435,434) | | Total stockholders' equity | $430,873 | $273,285 | - Total assets increased significantly from $378.9 million at the end of 2023 to $532.0 million as of September 30, 2024, primarily driven by an increase in cash and investments following a public offering[14] - Total stockholders' equity rose from $273.3 million to $430.9 million, mainly due to capital raised from the issuance of common stock and pre-funded warrants[14][16] Condensed Statements of Operations and Comprehensive Loss Condensed Statements of Operations and Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $25,250 | $22,194 | $73,617 | $73,451 | | General and administrative | $8,544 | $7,100 | $23,654 | $27,014 | | Loss from operations | $(33,794) | $(29,294) | $(97,271) | $(100,465) | | Interest income | $5,453 | $3,616 | $14,423 | $10,651 | | Net loss | $(28,344) | $(25,645) | $(82,855) | $(89,747) | | Net loss per share | $(0.39) | $(0.52) | $(1.26) | $(1.83) | - Net loss for the nine months ended September 30, 2024, decreased to $82.9 million from $89.7 million in the prior-year period, primarily due to lower general and administrative expenses and higher interest income[15] - Research and development expenses for the third quarter increased to $25.3 million in 2024 from $22.2 million in 2023, while for the nine-month period, they remained relatively flat[15] Condensed Statements of Cash Flows Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(74,945) | $(62,806) | | Net cash (used in) provided by investing activities | $(125,035) | $63,178 | | Net cash provided by financing activities | $225,900 | $396 | | Net increase in cash and cash equivalents | $25,920 | $768 | - Financing activities provided $225.9 million in cash for the first nine months of 2024, primarily from the issuance of common stock and pre-funded warrants, a significant increase from the $0.4 million raised in the same period of 2023[21] - Net cash used in operating activities increased to $74.9 million for the nine months ended September 30, 2024, compared to $62.8 million in the prior year period[21] Notes to Unaudited Condensed Financial Statements The notes detail accounting policies, business description, liquidity, and balance sheet components, including the company's $405.3 million cash and investments, CRISPR collaboration, stock-based compensation, and the March 2024 public offering raising $225.1 million net proceeds - The company is a biopharmaceutical firm developing engineered natural killer (NK) cell therapies for autoimmune and other diseases, operating in a single segment[22] - As of September 30, 2024, the company had an accumulated deficit of $518.3 million; management believes its current cash, cash equivalents, and investments of $405.3 million will be sufficient to fund operations for at least twelve months from the filing date[23] - In March 2024, the company completed an underwritten public offering, selling 21,010,000 shares of common stock and pre-funded warrants to purchase 3,000,031 shares, raising gross proceeds of $240.1 million[62] - Under the CRISPR collaboration, the reduction of R&D expense from CRISPR's partial reimbursement was $0.1 million for the nine months ended September 30, 2024, down from $1.4 million in the same period of 2023[54] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operational results, highlighting the strategic shift to NKX019 for autoimmune diseases, analysis of operating expenses, and liquidity, bolstered by a $225.1 million net financing in March 2024 Overview - The company has strategically refocused its R&D activities on autoimmune diseases, with its lead product candidate, NKX019, being evaluated in a Phase 1 clinical trial (Ntrust-1) for lupus nephritis (LN)[67] - Following a review of clinical data and the competitive landscape, the company plans no further investment in the clinical development of NKX019 for B-cell malignancies and has deprioritized the NKX101 program[67] - In March 2024, the company raised approximately $225.1 million in net proceeds from an underwritten public offering of common stock and pre-funded warrants[68] Results of Operations Operating Expenses (in thousands) | Expense Category (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Research and development | $25,250 | $22,194 | $3,056 | | General and administrative | $8,544 | $7,100 | $1,444 | | Total operating expenses | $33,794 | $29,294 | $4,500 | - The $3.1 million increase in Q3 2024 R&D expenses was primarily due to higher manufacturing and clinical spending for NKX019 to support Phase I trials in autoimmune diseases, partially offset by lower costs for the deprioritized NKX101 program[78] - The decrease of $3.4 million in G&A expenses for the nine months ended September 30, 2024, was mainly due to a $4.1 million impairment of right-of-use assets recorded in the prior year period[81] - Interest income increased by $3.8 million for the nine months ended September 30, 2024, compared to the prior year, due to higher average investment balances and higher yields[83] Liquidity and Capital Resources - As of September 30, 2024, the company had $405.3 million in cash, cash equivalents, restricted cash, and investments[84] - Management believes that existing cash, cash equivalents, and investments are sufficient to fund operations for at least the next 12 months from the date of the report[89] - Net cash used in operating activities for the nine months ended September 30, 2024, was $74.9 million, an increase from $62.8 million in the same period of 2023[85][86] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to interest rate fluctuations affecting its investment portfolio and foreign currency exchange rates, though management believes these, and inflation, have not materially affected financial results - The company's main market risk is interest rate fluctuations affecting its portfolio of cash, cash equivalents, and investments[101] - The company is exposed to foreign currency risk from vendors located outside the U.S. but does not currently hedge this risk[102] - Management believes that a 10% change in interest rates would not have a material effect on the fair value of its investment portfolio, and that inflation has not had a material impact on operations[101][103] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes in internal control over financial reporting during the quarter - The company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2024[104] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[105] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or growth prospects - As of the filing date, there are no pending legal claims or actions against the company that management believes are likely to have a material adverse effect[107] Item 1A. Risk Factors This section details significant risks including limited operating history, substantial accumulated losses, dependence on NKX019 clinical success for autoimmune diseases, manufacturing challenges, intense competition, intellectual property, and stock price volatility - The company has a limited operating history, has incurred significant losses since inception (accumulated deficit of $518.3 million as of Sep 30, 2024), and expects to continue incurring losses for the foreseeable future[109][111] - The business is highly dependent on the success of its CAR NK-cell technology platform and its lead product candidate, NKX019, for which it has shifted focus from oncology to autoimmune diseases[118][140] - The manufacturing process for CAR NK cells is novel, complex, and susceptible to production difficulties, which could delay clinical trials and commercialization; the company also relies on a sole supplier for a key system in its manufacturing process[224][242] - The company faces intense competition from other biopharmaceutical companies developing cellular immunotherapies and other treatments for autoimmune diseases and cancer[168] - The company's ability to operate is dependent on key license agreements, and if these are terminated, it could lose rights to essential components of its NK cell engineering platform[254] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of its equity securities during the third quarter of 2024 - There were no unregistered sales of equity securities during the period covered by the report[404] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None[404] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[404] Item 5. Other Information The company discloses that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[405] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, XBRL data files, and incorporated by reference documents - The report includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002[409] - Interactive Data Files (Inline XBRL) are included as exhibits[409]