ProKidney(PROK) - 2025 Q2 - Quarterly Report

PART I. Financial Information (Unaudited) Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements detail the company's financial position, operational results, and cash flows with explanatory notes Condensed Consolidated Balance Sheets Total assets decreased to $372,133 thousand as of June 30, 2025, primarily due to lower cash and marketable securities balances | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $84,940 | $99,120 | | Marketable securities | $209,788 | $259,172 | | Total current assets | $324,440 | $395,884 | | Total assets | $372,133 | $441,073 | | Total liabilities | $32,680 | $39,436 | | Redeemable noncontrolling interest | $1,341,953 | $1,396,591 | | Total stockholders' deficit | $(1,002,500) | $(994,954) | Condensed Consolidated Statements of Operations Net loss available to Class A common stockholders increased to $(16,552) thousand for Q2 2025 despite new revenue generation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $221 | $– | $451 | $– | | Research and development | $25,882 | $29,404 | $53,145 | $56,637 | | General and administrative | $14,048 | $13,652 | $28,403 | $26,495 | | Operating loss | $(39,709) | $(43,056) | $(81,097) | $(83,132) | | Net loss before income taxes | $(36,117) | $(38,522) | $(73,478) | $(73,757) | | Net loss available to Class A common stockholders | $(16,552) | $(12,506) | $(33,286) | $(21,998) | | Basic and diluted EPS | $(0.13) | $(0.16) | $(0.26) | $(0.32) | Condensed Consolidated Statements of Comprehensive Loss Total comprehensive loss for Class A common stockholders increased to $(16,597) thousand in Q2 2025 due to net loss and investment losses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss including noncontrolling interest | $(36,965) | $(38,466) | $(74,917) | $(73,799) | | Unrealized income (loss) on marketable securities | $(100) | $132 | $(224) | $(515) | | Total comprehensive loss attributable to Class A common stockholders | $(16,597) | $(12,468) | $(33,386) | $(22,134) | Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders' Deficit This statement details changes in redeemable noncontrolling interest and an increasing accumulated deficit for the six months ended June 30, 2025 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Redeemable noncontrolling interest | $1,341,953 | $1,396,591 | | Additional paid-in capital | $231,576 | $205,736 | | Accumulated deficit | $(1,234,135) | $(1,200,849) | | Total stockholders' deficit | $(1,002,500) | $(994,954) | Condensed Consolidated Statements of Cash Flows Net cash used in operations decreased while cash from investing activities also decreased significantly for the six months ended June 30, 2025 | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows used in operating activities | $(61,008) | $(72,939) | | Net cash flows provided by investing activities | $46,854 | $86,969 | | Net cash flows (used in) provided by financing activities | $(26) | $139,829 | | Net change in cash and cash equivalents | $(14,180) | $153,859 | | Cash, end of period | $84,940 | $214,508 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide crucial context for the financial statements, detailing business operations, accounting policies, and specific financial items Note 1: Description of Business and Basis of Presentation The company is a clinical-stage biotech developing rilparencel for chronic kidney disease and recently domesticated to Delaware - ProKidney Corp is focused on the development of rilparencel to preserve kidney function in patients with chronic kidney disease[34] - The company operates under an umbrella partnership corporation ("Up-C") structure, with PKLP considered the accounting acquiror and predecessor entity[32][33] - As of June 30, 2025, various holders own a 54.4% economic interest in PKLP, representing a redeemable noncontrolling interest[36] - The company completed a domestication process effective July 1, 2025, changing its jurisdiction of incorporation from the Cayman Islands to the State of Delaware[35] Note 2: Significant Accounting Policies This note details key accounting policies, including the use of estimates, marketable securities classification, and R&D cost treatment - Unaudited interim financial statements are prepared in accordance with GAAP and SEC rules, with estimates made for R&D expenses, equity-based compensation, and income taxes[38][39][42] - Marketable debt securities are classified as available-for-sale and short-term[44] - Research and development costs are expensed as incurred, including salaries, benefits, third-party fees, and clinical trial expenses[48] - The company uses the liability method for income taxes and applies a full valuation allowance to offset net deferred tax assets[56] - Leases are recognized on the balance sheet, with short-term leases (12 months or less) excluded[61] - Equity-based compensation expense is based on the fair value of awards at the grant date and recognized over the service period[64] - The company operates in a single segment and is evaluating new FASB ASUs on income tax disclosures (ASU 2023-09) and expense disaggregation (ASU 2024-03)[66][67][70] Note 3: Investments The fair value of cash equivalents and marketable securities, measured at Level 2, decreased to $236,788 thousand by June 30, 2025 - All cash equivalents and marketable securities are measured at fair value within Level 2 of the fair value hierarchy[71] | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :----------------------------- | :------------------------------- | | Money market funds | $2,256 | $5,979 | | Time deposits | $2,082 | $6,737 | | Commercial paper | $14,902 | $34,894 | | Asset backed securities | $5,506 | $6,935 | | Government bonds | $63,740 | $80,571 | | Corporate debt securities | $148,302 | $180,030 | | Total Fair Value | $236,788 | $315,146 | - As of June 30, 2025, $228,162 thousand of investments are due in one year or less[73] - Total gross unrealized losses on marketable securities were $(27) thousand as of June 30, 2025[74] Note 4: Income Taxes The company is exempt from Cayman Islands taxes but its US subsidiary is subject to US taxes, with a full valuation allowance on deferred tax assets - ProKidney Corp (Cayman Islands) is exempt from income taxes, while its US subsidiary (ProKidney-US) is subject to US federal and state income taxes[75][76] - A full valuation allowance is recorded to offset net deferred tax assets due to uncertainty of realization[56][79] - The company is assessing the impact of the 'One Big Beautiful Bill Act,' signed July 4, 2025, on its consolidated financial statements[81] - The domestication to Delaware, effective July 1, 2025, is not expected to adversely impact the company's tax positions[82] Note 5: Leases The company holds operating and finance leases, incurring rent expense while also generating leasing revenue from subleased properties | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | | Rent expense | $298 | $513 | | Leasing revenue | $221 | $– | | Lease Type | June 30, 2025 (in thousands) | | :------------------------ | :----------------------------- | | Operating lease liabilities, current | $896 | | Operating lease liabilities, noncurrent | $3,446 | | Finance lease liabilities, current | $7 | | Finance lease liabilities, noncurrent | $69 | - The weighted average remaining lease term for operating leases is 4.3 years, and for finance leases, it is 4.5 years[85] Note 6: Related Party Transactions The company maintains several agreements with related parties governing stock exchanges, tax savings, and consulting services - The Exchange Agreement allows holders of Post-Combination ProKidney Common Units and Class B common stock to exchange them for Class A common stock or cash[88] - The Lock-Up Agreement imposes transfer restrictions on certain shares, with 50% of shares held by Closing ProKidney Unitholders (excluding Earnout Shares) having expired in January 2023[89][90] - The Tax Receivable Agreement obligates the company to pay Closing ProKidney Unitholders 85% of certain tax savings resulting from increases in tax basis due to unit exchanges[91] - Earnout Rights, totaling 17.5 million units, vest in three equal tranches if the Class A common stock's VWAP reaches $15.00, $20.00, and $25.00 per share within five years post-closing[92] - ProKidney-KY and ProKidney-US each pay Nefro Health, an entity controlled by a company director, $25,000 per quarter for consulting services related to research and development[93][94] Note 7: Redeemable Noncontrolling Interest The redeemable noncontrolling interest, representing a 54.4% economic stake in PKLP, is recognized at the greater of fair value or redemption value - The redeemable noncontrolling interest represents a 54.4% economic interest in PKLP[95] - The noncontrolling interest is recognized at the higher of its initial fair value plus accumulated earnings/losses or its redemption value[96] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss attributable to noncontrolling interest | $(20,413) | $(25,960) | $(41,631) | $(51,801) | Note 8: Stockholders' Equity The company established a new $200 million at-the-market offering in July 2025 after raising $136.6 million from offerings in June 2024 - On July 14, 2025, the company entered into a new Open Market Sales Agreement with Jefferies LLC, allowing it to offer and sell up to $200 million of Class A common stock[99] - No shares were sold under the 2024 Sales Agreement during the three and six months ended June 30, 2025[101] - Subsequent to June 30, 2025, the company sold 1,490,748 shares of Class A common stock for net proceeds of $5,669,000 under the 2025 Sales Agreement[101] - In June 2024, the company sold 46,886,452 shares in a public offering and 11,030,574 shares in a concurrent registered direct offering, generating approximately $136,618,000 in net proceeds[102] Note 9: Net Loss per Share Basic and diluted net loss per share are identical as potential shares are anti-dilutive, with Q2 2025 EPS improving to $(0.13) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss per share attributable to Class A common stock | $(0.13) | $(0.16) | $(0.26) | $(0.32) | - Outstanding anti-dilutive securities as of June 30, 2025, include 159,288,931 Class B common stock, 742,684 unvested Restricted Stock Rights, 17,500,000 Earnout Rights, and 30,504,248 stock options[104] Note 10: Equity-Based Compensation Equity-based compensation expense decreased to $6,540 thousand in Q2 2025 under the company's 2022 Incentive Equity Plan - The 2022 Incentive Equity Plan provides for various equity awards to employees, non-employee directors, consultants, and other service providers[105] - As of June 30, 2025, there were 29,110,498 time-vested stock options outstanding with a weighted average exercise price of $3.83, and $37,836 thousand in unrecognized compensation expense[108] - As of June 30, 2025, there were 1,393,750 performance-based stock options outstanding with a weighted average exercise price of $1.57, with no remaining unrecognized compensation expense[111] - As of June 30, 2025, there were 742,684 unvested Legacy Profits Interests outstanding, with $3,042 thousand in unrecognized compensation expense[116][117] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total equity-based compensation expense | $6,540 | $7,808 | $12,957 | $15,489 | Note 11: Segment Information The company operates as a single business segment and currently generates revenue only from leasing activities, not product sales - The company manages its business as a single operating segment[119] - No revenue has been generated from product sales; revenue is recognized from leasing activities related to facilities[120] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net loss before noncontrolling interest | $(36,965) | $(38,466) | | Rental income | $221 | $– | | Depreciation and amortization | $1,491 | $964 | | Equity-based compensation | $6,540 | $7,808 | | Income tax (benefit) expense | $848 | $(56) | | Interest expense | $(1) | $(3) | | Interest income | $3,593 | $4,537 | Note 12: Subsequent Events Effective July 1, 2025, the company completed its domestication to Delaware, restructuring its corporate organization and related agreements - The company completed its domestication from the Cayman Islands to the State of Delaware, effective July 1, 2025[123] - As part of the restructuring, PKLP contributed substantially all its assets to ProKidney Holdings, LLC, and subsequently commenced winding-up[123] - Key agreements, including the Tax Receivable Agreement, Lock-Up Agreement, and Exchange Agreement, were amended and restated to reflect the updated corporate structure[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical trial progress, financial performance, and future capital needs through mid-2027 Overview ProKidney is a clinical-stage biotech developing rilparencel, an autologous cell therapy for chronic kidney disease, which has RMAT designation - ProKidney is a clinical-stage biotechnology company focused on cell therapy to treat chronic kidney disease (CKD) by preserving kidney function[126] - Rilparencel (REACT®), the lead product candidate, is a patented autologous cell therapy in an ongoing Phase 3 REGEN-006 (PROACT 1) trial[127] - Rilparencel received Regenerative Medicine Advanced Therapy ("RMAT") designation from the United States Food & Drug Administration ("FDA")[127] - The company has not generated any revenue from product sales since its inception[128] Recent Developments The FDA confirmed eGFR slope as a surrogate endpoint for accelerated approval, with topline data for the PROACT 1 trial expected in Q2 2027 - The FDA confirmed that the eGFR slope in patients from the ongoing Phase 3 PROACT 1 study can serve as the surrogate endpoint for a Biologics License Application (BLA) submission under the accelerated approval pathway[130] - Topline data readout of eGFR slope to support accelerated approval is anticipated in the second quarter of 2027[130] - In the completed Phase 2 REGEN-007 trial, Group 1 (n=24) showed a statistically significant (p<0.001) 78% improvement in annual eGFR slope, from -5.8 to -1.3 mL/min/1.73m2, after receiving rilparencel[135] - No rilparencel-related serious adverse events were observed across all 49 patients who received at least one injection in the REGEN-007 study, with a safety profile consistent with previous results[137] - Effective July 1, 2025, the company completed its domestication process, changing its jurisdiction of incorporation from the Cayman Islands to the State of Delaware[138] Financial Operations Overview The company expects to incur increasing R&D and G&A expenses as it advances clinical trials, with revenue currently limited to leasing activities - The company has not generated any revenue from product sales since its inception and does not expect to in the near future[142] - Revenue is currently recognized from leasing activities associated with acquired buildings in Winston-Salem, North Carolina, where manufacturing operations are also conducted[143] - Research and development expenses are expected to increase significantly as rilparencel moves into later stages of clinical development[148] - General and administrative expenses are expected to increase as the business expands and additional personnel are hired[153] - Other income primarily consists of interest income earned on cash, cash equivalents, and marketable securities[154] Results of Operations For Q2 2025, R&D expenses decreased by $3.5 million while G&A expenses rose slightly, resulting in a net loss of $(16.5) million | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | | Revenue | $221 | $– | $221 | | Research and development | $25,882 | $29,404 | $(3,522) | | General and administrative | $14,048 | $13,652 | $396 | | Net loss available to Class A common stockholders | $(16,552) | $(12,506) | $(4,046) | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Revenue | $451 | $– | $451 | | Research and development | $53,145 | $56,637 | $(3,492) | | General and administrative | $28,403 | $26,495 | $1,908 | | Net loss available to Class A common stockholders | $(33,286) | $(21,998) | $(11,288) | - The decrease in R&D expenses was primarily due to a $7.4 million decrease in clinical study costs from completed/terminated trials and a $1.1 million decrease in professional fees, partially offset by a $4.3 million increase in costs for the ongoing Phase 3 PROACT 1 trial and a $1.5 million increase in cash-based compensation[157] - The increase in G&A expenses was mainly driven by an $0.8 million increase in cash-based compensation and a $0.4 million increase in other operational expenses, partially offset by a $0.7 million decrease in equity-based compensation[157] - Interest income decreased by approximately $0.9 million for the three months and $1.8 million for the six months, primarily due to lower investment balances and interest rates[158][161] Liquidity and Capital Resources Existing cash is expected to fund operations into mid-2027, but substantial additional funding will be required thereafter - The company has funded operations primarily through capital contributions, proceeds from the Business Combination, and public equity offerings[164] - As of June 30, 2025, the company had sold $7.9 million worth of Class A common stock under the 2024 Sales Agreement, generating $7.7 million in net proceeds[165] - In July 2025, a new Open Market Sale Agreement was entered into, allowing for the sale of up to $200 million of Class A common stock[166] - In June 2024, the company raised approximately $136.7 million in net proceeds from public and direct offerings of Class A common stock[167] - Existing cash, cash equivalents, and marketable securities are expected to fund operating expenses and capital expenditure requirements into mid-2027[168] - Substantial additional funding will be required, likely through public or private equity sales, debt financings, or collaborations, which may result in stockholder dilution or restrictive covenants[169][171] Cash Flows For the first half of 2025, cash used in operations decreased by $11.8 million, while cash from investing also decreased significantly | Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows used in operating activities | $(61,008) | $(72,939) | | Net cash flows provided by investing activities | $46,854 | $86,969 | | Net cash flows (used in) provided by financing activities | $(26) | $139,829 | | Net change in cash and cash equivalents | $(14,180) | $153,859 | - The $11.8 million decrease in cash used in operating activities for the six months ended June 30, 2025, was primarily driven by the timing of payments to vendors and receipt of interest due[175] - Net cash provided by investing activities decreased from $87.0 million in 2024 to $46.9 million in 2025, mainly due to the timing of investment conversions[176] - Net cash used in financing activities was insignificant in 2025, compared to $139.8 million provided in 2024 from the sale of Class A common stock[177] Critical Accounting Policies and Significant Judgments and Estimates Financial statement preparation requires management to make significant estimates, particularly for R&D expenses and equity-based compensation - Management makes estimates and judgments that affect reported amounts of assets, liabilities, costs, and expenses, particularly for research and development expenses, equity-based compensation, and income taxes[179] - The company's significant accounting policies are detailed in Note 2 to the unaudited condensed consolidated financial statements[180] JOBS Act Accounting Election As an emerging growth company, ProKidney uses the extended transition period for new accounting standards under the JOBS Act - ProKidney is an emerging growth company and has elected to use the extended transition period for complying with new or revised accounting standards[182] - This election may result in the company's consolidated financial statements not being comparable to those of companies that comply with earlier effective dates for new accounting standards[182] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, ProKidney is not required to provide detailed disclosures about market risk - ProKidney Corp is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk[183] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[184] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[187] - Management acknowledges that control systems provide only reasonable assurance and can be subject to inherent limitations, including errors, collusion, or management override[185][186] PART II. Other Information Item 1. Legal Proceedings ProKidney Corp is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[190] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K and Q1 2025 Form 10-Q - No material changes to the risk factors described in the 2024 Annual Report on Form 10-K and the 1Q Form 10-Q[191] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the three months ended June 30, 2025 - No sales of unregistered equity securities occurred during the three months ended June 30, 2025[192] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This item is not applicable[193] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[194] Item 5. Other Information No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2025 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter ended June 30, 2025[195] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance and employment-related documents - Exhibits include corporate documents (e.g., Certificate of Incorporation, Bylaws), amended agreements (e.g., Tax Receivable Agreement, Lock-Up Agreement, Exchange Agreement) reflecting the domestication, employment agreements, and certifications (e.g., Principal Executive Officer and Financial Officer certifications)[196][198] Signatures The report was duly signed by the Chief Executive Officer and Chief Financial Officer on August 12, 2025 - The report was signed by Bruce Culleton, Chief Executive Officer, and James Coulston, Chief Financial Officer, on August 12, 2025[201]