Nkarta(NKTX) - 2025 Q2 - Quarterly Report

Risk Factor Summary Risk Factor Summary This section provides a high-level overview of the material factors that make an investment in Nkarta's common stock speculative or risky, highlighting key challenges including a limited operating history, significant financial losses, and dependence on its CAR NK-cell technology platform - The company has a limited operating history, has incurred significant losses since inception, and has no products approved for sale[13] - Business success is highly dependent on the clinical success of its CAR NK-cell technology platform, particularly the NKX019 product candidate[13] - The manufacturing process is novel and complex, with reliance on third parties and sole suppliers for certain materials, posing risks of production difficulties and delays[13] - The company faces risks related to intellectual property, including the potential loss of key licenses and insufficient patent protection, which could allow competitors to develop similar products[14] PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed financial statements for the period ended June 30, 2025, show a decrease in total assets and an increase in accumulated deficit, with ongoing net losses driven by research and development expenses Condensed Balance Sheets As of June 30, 2025, total assets decreased to $448.3 million from $501.2 million, while the accumulated deficit grew to $599.2 million, reflecting ongoing net losses Condensed Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $53,414 | $27,873 | | Total current assets | $296,571 | $273,338 | | Total assets | $448,312 | $501,203 | | Total liabilities | $90,644 | $93,227 | | Accumulated deficit | $(599,184) | $(544,224) | | Total stockholders' equity | $357,668 | $407,976 | Condensed Statements of Operations and Comprehensive Loss For Q2 2025, the net loss was $23.0 million, and for H1 2025, it was $55.0 million, with changes driven by fluctuations in operating expenses, particularly R&D costs Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $20,778 | $23,130 | $44,950 | $48,367 | | General and administrative | $6,408 | $7,585 | $18,800 | $15,110 | | Loss from operations | $(27,186) | $(30,715) | $(63,750) | $(63,477) | | Net loss | $(22,977) | $(24,993) | $(54,960) | $(54,511) | | Net loss per share | $(0.31) | $(0.34) | $(0.74) | $(0.88) | Condensed Statements of Cash Flows For H1 2025, net cash used in operating activities was $48.4 million, offset by $73.8 million from investing activities, resulting in a $25.5 million net increase in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,365) | $(50,400) | | Net cash provided by (used in) investing activities | $73,829 | $(86,140) | | Net cash provided by financing activities | $77 | $225,898 | | Net increase in cash and cash equivalents | $25,541 | $89,358 | Notes to Unaudited Condensed Financial Statements The notes detail the company's business, liquidity, accounting policies, and specific financial items, including a workforce reduction and deprioritized programs - The company is a biopharmaceutical firm developing engineered natural killer (NK) cell therapies for autoimmune diseases and believes its current cash of $334.0 million is sufficient to meet obligations for at least twelve months from the report's filing date[29][30][31] - In March 2025, the company initiated a reduction in force, cutting 53 positions (34% of its workforce) to decrease costs, resulting in severance and benefit costs of approximately $5.4 million[79][80] - The collaboration with CRISPR Therapeutics to co-develop NKX070 and NK+T product candidates has been deprioritized[61] - In March 2024, the company raised $240.1 million in gross proceeds through an underwritten public offering of common stock and pre-funded warrants[71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing NKX019 for autoimmune diseases, recent clinical trial updates, and the financial impact of a March 2025 workforce reduction, noting strong liquidity Overview Nkarta is a clinical-stage biopharmaceutical company focused on developing allogeneic, off-the-shelf engineered NK cell therapies, with its lead program NKX019 targeting autoimmune diseases, alongside recent trial modifications and a workforce reduction - The company's lead program is NKX019, a CAR NK product candidate for treating autoimmune diseases like lupus nephritis (LN) and primary membranous nephropathy (pMN)[83][86] - In May 2025, the company modified the lymphodepleting conditioning (LD) for its Ntrust-1 and Ntrust-2 trials to use a combination of fludarabine (Flu) and cyclophosphamide (Cy)[86] - A reduction in workforce was approved in March 2025 to decrease costs and streamline the organization to support its reprioritized product pipeline[85] Results of Operations R&D expenses decreased for Q2 and H1 2025 due to lower personnel costs, while G&A expenses increased for H1 2025 primarily due to $5.1 million in severance costs from the workforce reduction Comparison of Operating Expenses (in thousands) | Expense Category | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $20,778 | $23,130 | $(2,352) | $44,950 | $48,367 | $(3,417) | | General and administrative | $6,408 | $7,585 | $(1,177) | $18,800 | $15,110 | $3,690 | - The decrease in R&D expenses for Q2 2025 was primarily due to a $3.1 million reduction in personnel costs resulting from lower headcount after the March 2025 reduction in force[102][104] - The increase in G&A expenses for H1 2025 was primarily due to $5.1 million in severance expenses from the reduction in force, partially offset by a $2.0 million decrease in other personnel and facilities expenses[102] Liquidity and Capital Resources As of June 30, 2025, the company had $334.0 million in cash and investments, with management believing this capital is sufficient for at least the next 12 months, though substantial additional funding will be required long-term - The company had cash, cash equivalents, restricted cash and investments of $334.0 million as of June 30, 2025[105] - In March 2024, the company raised $225.1 million in net proceeds from an underwritten public offering of common stock and pre-funded warrants[105][107] - Management believes that current cash and investments are sufficient to meet cash needs for at least 12 months following the date of this report[110][117] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Nkarta is not required to provide the information for this item - The company is not required to provide this information as it qualifies as a "smaller reporting company"[129] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[130] - No material changes to the internal control over financial reporting were identified during the quarter ended June 30, 2025[131] PART II. OTHER INFORMATION Legal Proceedings The company reports no pending claims or actions likely to have a material adverse effect on its business, financial condition, or growth prospects - As of the report date, there are no material legal proceedings pending against the company[134] Risk Factors This section details numerous risks associated with an investment in Nkarta, categorized into financial position, business and industry, manufacturing, intellectual property, commercialization, and common stock Risks Related to our Financial Position The company faces significant financial risks due to its limited operating history, lack of approved products, and a history of substantial net losses, with an accumulated deficit of $599.2 million as of June 30, 2025 - The company has incurred significant operating losses since its 2015 inception, with an accumulated deficit of $599.2 million as of June 30, 2025, and expects losses to continue for the foreseeable future[138] - Nkarta will require substantial additional capital to advance its product candidates, particularly NKX019, into pivotal trials, and failure to raise capital may cause dilution or force curtailment of operations[145] Risks Related to Our 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, regulatory, and competitive challenges due to the newness of the approach - The business is highly dependent on the success of its CAR NK-cell platform and its lead candidate, NKX019, for autoimmune diseases, having deprioritized its hematologic malignancy programs[149][156] - Utilizing CAR NK cells for autoimmune diseases is a novel approach with limited clinical data, and regulatory agencies may lack precedents for evaluation, potentially causing delays and additional costs[150][172] - The company has experienced and may continue to face significant challenges in enrolling patients for its Ntrust-1 and Ntrust-2 clinical trials due to competition and the novelty of the therapy in autoimmune indications[174][177] Risks Related to Manufacturing Nkarta's novel and complex manufacturing process is susceptible to product loss and contamination, with reliance on third parties and sole suppliers for critical materials, posing risks of delays and disruptions - The manufacturing process for genetically engineered human cells is complex, highly regulated, and subject to risks of product loss, failure, and contamination, which could delay clinical trials[252][254] - The company is reliant on Miltenyi as a sole supplier for the CliniMACS® Plus system and related reagents, creating a significant supply chain risk[266] - Delays in commissioning and receiving regulatory approvals for its new commercial-scale manufacturing facility could limit the ability to develop product candidates and generate revenue[269] Risks Related to Our Intellectual Property The company's intellectual property position is critical but uncertain, relying on a potentially terminable exclusive license and facing risks that its patents may not be robust or could be challenged, allowing competitors to enter the market - The company's rights to key NK-cell engineering technology depend on a license agreement with the National University of Singapore and St. Jude Children's Research Hospital; termination of this agreement would severely impact its product candidates, including NKX019[276] - The patent position of biotechnology companies is uncertain, and the company's pending applications may not result in issued patents that provide meaningful protection against competitors[278][279] - The company may face costly litigation if accused of infringing on third-party intellectual property rights, which could delay or prevent the commercialization of its product candidates[282] Risks Related to Commercialization Commercial success is not guaranteed even if products are approved, as the company lacks sales capabilities, market acceptance is uncertain, and securing adequate reimbursement from third-party payors will be critical and challenging - The company has limited sales, marketing, or distribution expertise and will need to build these capabilities or partner with third parties to commercialize any approved products[325] - Commercial success depends on market acceptance by physicians, patients, and payors, which is uncertain and relies on factors like perceived efficacy, safety, cost-effectiveness, and advantages over alternative treatments[332] - Failure to obtain and maintain adequate coverage and reimbursement from government and private payors for potentially high-cost cell therapies could significantly limit the ability to market products and generate revenue[335] Risks Related to Our Common Stock The market price of Nkarta's common stock is likely to be highly volatile, with significant ownership concentration among insiders, and the company's status as an "emerging growth company" may affect investor attractiveness - 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 conditions[363] - As of August 8, 2025, directors, executive officers, and principal stockholders beneficially own 58% of the common stock, enabling them to control or significantly influence all matters requiring stockholder approval[367] - The company qualifies as an "emerging growth company" and a "smaller reporting company," allowing it to rely on exemptions from certain disclosure and governance requirements, which may result in less information available to investors[371][373] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period covered by this report - There were no unregistered sales of equity securities during the quarter[408] Other Information During the quarter ended June 30, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[412]