Kura Oncology(KURA) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides key financial data, management's analysis, market risk disclosures, and internal controls for Kura Oncology, Inc Financial Statements This section presents Kura Oncology's unaudited condensed financial statements, including balance sheets, statements of operations, and cash flows, for the period ended June 30, 2021 Condensed Balance Sheet Data (in thousands) | | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $38,974 | $325,493 | | Short-term investments | $528,520 | $307,827 | | Total current assets | $573,632 | $637,292 | | Total assets | $584,891 | $647,212 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $21,290 | $26,024 | | Total liabilities | $26,340 | $36,307 | | Total stockholders' equity | $558,551 | $610,905 | Condensed Statements of Operations (in thousands, except per share data) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2021 | 2020 | 2021 | 2020 | | Research and development | $21,074 | $13,697 | $41,398 | $26,272 | | General and administrative | $12,573 | $7,476 | $23,145 | $15,101 | | Total operating expenses | $33,647 | $21,173 | $64,543 | $41,373 | | Net Loss | $(33,663) | $(20,487) | $(64,357) | $(39,697) | | Net loss per share, basic and diluted | $(0.51) | $(0.40) | $(0.97) | $(0.82) | Condensed Statements of Cash Flows (in thousands) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2021 | 2020 | | Net cash used in operating activities | $(56,591) | $(34,556) | | Net cash (used in) provided by investing activities | $(223,441) | $5,774 | | Net cash (used in) provided by financing activities | $(6,487) | $137,615 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(286,519) | $108,833 | - In May 2021, the company repaid all amounts owed under its Term Loan with Silicon Valley Bank, paying $6.6 million This transaction was accounted for as an extinguishment of debt, resulting in a recorded loss of approximately $0.2 million for the three and six months ended June 30, 2021[44] - Share-based compensation expense increased significantly to $11.1 million for the six months ended June 30, 2021, compared to $5.7 million for the same period in 2020[54] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Kura Oncology's business, financial condition, and operational results, highlighting clinical program advancements and increased operating expenses Overview Kura Oncology is a clinical-stage biopharmaceutical company focused on precision cancer medicines, with lead candidates tipifarnib and KO-539 advancing in clinical trials - Tipifarnib received Breakthrough Therapy Designation from the FDA for treating recurrent or metastatic HRAS mutant HNSCC[64] - KO-539, a menin-KMT2A inhibitor, is in a Phase 1/2 trial (KOMET-001) for relapsed or refractory AML The trial was amended to include Phase 1b expansion cohorts to determine the recommended Phase 2 dose (RP2D)[67][68][70] - A clinical collaboration was announced with Novartis to evaluate the combination of tipifarnib and alpelisib in HNSCC patients, with the KURRENT trial planned to start in Q4 2021[65] - A next-generation farnesyl transferase inhibitor, KO-2806, was nominated for development, with an Investigational New Drug (IND) application expected by the end of 2022[73] Results of Operations This section details the operating results for the three and six months ended June 30, 2021, showing increased net loss driven by higher Research and Development and General and Administrative expenses R&D Expense Breakdown (Six Months Ended June 30, in thousands) | Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Tipifarnib-related costs | $17,723 | $12,863 | $4,860 | | KO-539-related costs | $8,062 | $1,444 | $6,618 | | Discovery stage programs | $1,835 | $854 | $981 | | Personnel costs and other expenses | $10,560 | $9,496 | $1,064 | | Share-based compensation expense | $3,218 | $1,615 | $1,603 | | Total R&D expenses | $41,398 | $26,272 | $15,126 | - The increase in R&D expenses for the six months ended June 30, 2021, was primarily driven by higher costs for the Phase 1/2 clinical trial of KO-539 and increased activities for the registration-directed trial of tipifarnib, including companion diagnostics development[85] - General and administrative expenses for the six months ended June 30, 2021, increased by $8.0 million compared to the same period in 2020, primarily due to a $3.8 million increase in non-cash share-based compensation and a $3.2 million increase in personnel costs from additional headcount[87] Liquidity and Capital Resources This section details Kura Oncology's financial position, including $567.5 million in cash and investments, and discusses future funding needs for ongoing operations and clinical development - As of June 30, 2021, the company had cash, cash equivalents, and short-term investments of $567.5 million[74][93] - Management believes that existing cash reserves are sufficient to fund operating expenses and capital expenditure requirements into 2024[93] Summary of Net Cash Flow Activities (Six Months Ended June 30, in thousands) | | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(56,591) | $(34,556) | $(22,035) | | Net cash (used in) provided by investing activities | $(223,441) | $5,774 | $(229,215) | | Net cash (used in) provided by financing activities | $(6,487) | $137,615 | $(144,102) | - The company anticipates needing substantial additional funding for its continuing operations, including R&D, clinical trials, and potential commercialization efforts[92][94] Contractual Obligations The company's significant contractual obligations as of June 30, 2021, primarily consist of operating leases, with potential additional milestone payments under in-license agreements Contractual Obligations as of June 30, 2021 (in thousands) | | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $8,578 | $2,242 | $4,751 | $1,585 | $— | - The company may be required to pay up to approximately $80.2 million in milestone payments under in-license agreements, which are contingent upon achieving certain regulatory and commercial milestones and are excluded from the table[101] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk on its investments, with management believing a 10% change would not materially affect portfolio fair value - The company's main market risk is interest rate risk on its portfolio of cash, cash equivalents, and short-term investments, which include money market funds, corporate debt, and government securities[106] - Management believes that a hypothetical 10% change in interest rates as of June 30, 2021, would not have had a material effect on the fair value of its investment portfolio[106] - Inflation is not believed to have had a material effect on the company's business, financial condition, or results of operations[107] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021[109] - 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[110] PART II. OTHER INFORMATION This section covers legal proceedings, key risk factors, and a list of exhibits filed with the report Legal Proceedings As of the filing date, Kura Oncology is not a party to any legal proceedings expected to have a material adverse effect on its financial position or results of operations - The company is not currently a party to any legal proceedings that would have a material adverse effect on its results of operations or financial position[113] Risk Factors This section details significant risks, including dependence on clinical success, COVID-19 impacts, funding needs, reliance on third parties, and intellectual property challenges, particularly for tipifarnib - The company is highly dependent on the success of its lead product candidates, tipifarnib and KO-539, which are still in clinical development and require regulatory approval[114][118] - The COVID-19 pandemic has adversely impacted and could continue to adversely impact clinical trials through delays in site startup, patient enrollment, and supply chain disruptions[114][116] - The company will need to obtain substantial additional capital to fund its operations, and raising capital may cause dilution to stockholders or restrict operations[114][169] - The company relies on third-party contractors for clinical trials and manufacturing, increasing risks related to performance, quality, and supply continuity[114][172][179] - Intellectual property risks are significant, as the composition of matter patents for tipifarnib have expired, increasing reliance on method-of-use patents and regulatory exclusivity which may not provide sufficient protection[115][189][226] Exhibits This section lists all exhibits filed with the 10-Q report, including corporate governance documents, warrants, and newly filed agreements - The report includes a list of all exhibits filed, such as corporate governance documents, warrants, and newly filed agreements[315] - New exhibits filed with this report include a lease agreement dated May 11, 2021, and a first amendment to an executive employment agreement for Bridget Martell[315] Signatures This section contains the official signatures of the company's President, CEO, CFO, and Chief Business Officer, certifying the report's submission - The report was duly signed on August 5, 2021, by Troy E Wilson, Ph.D., J.D. (President and Chief Executive Officer) and Marc Grasso, M.D. (Chief Financial Officer and Chief Business Officer)[318]