Kymera Therapeutics(KYMR) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with accompanying notes for the specified periods Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2023, and December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $581,945 | $603,134 | | Total Liabilities | $146,517 | $112,983 | | Total Stockholders' Equity | $435,428 | $490,151 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including collaboration revenue, operating expenses, and net loss for the three and six months ended June 30, 2023 and 2022 | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Collaboration Revenue | $16,513 | $11,514 | $25,979 | $21,136 | | Research and Development | $45,767 | $41,293 | $87,994 | $77,238 | | General and Administrative | $14,129 | $11,031 | $26,694 | $21,642 | | Net Loss | $(38,799) | $(40,257) | $(79,727) | $(76,941) | | Net Loss per Share, Basic and Diluted | $(0.67) | $(0.78) | $(1.37) | $(1.49) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the periods presented | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------- | :----------------------------- | :------------------------------- | | Common Stock (Value) | $6 | $6 | | Additional Paid-in Capital | $902,574 | $878,884 | | Accumulated Deficit | $(463,517) | $(383,790) | | Total Stockholders' Equity | $435,428 | $490,151 | Condensed Consolidated Statements of Cash Flows This section presents the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 | Cash Flow Activity | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :----------------------------- | :---------------------------------------- | :---------------------------------------- | | Operating Activities | $(79,224) | $(79,280) | | Investing Activities | $60,423 | $107,666 | | Financing Activities | $2,464 | $549 | | Net Change in Cash | $(16,337) | $28,935 | | Cash, Cash Equivalents & Restricted Cash (End of Period) | $58,187 | $83,027 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the unaudited condensed consolidated financial statements 1. Organization and Nature of Business This note describes Kymera Therapeutics as a biopharmaceutical company focused on targeted protein degradation, highlighting its research and development focus and accumulated deficit - Kymera Therapeutics is a biopharmaceutical company focused on discovering and developing small molecule therapeutics using targeted protein degradation, with efforts principally devoted to research and development since formation[27] - The company has not generated revenue from drug sales and has incurred significant operating losses, with an accumulated deficit of $463.5 million as of June 30, 2023[27][28] | Metric | June 30, 2023 (in thousands) | | :-------------------------------- | :----------------------------- | | Accumulated Deficit | $(463,517) | | Cash, Cash Equivalents & Marketable Securities | $472,300 | - The company believes its cash, cash equivalents, and marketable securities of $472.3 million are sufficient to fund operations and capital expenditures for at least twelve months from the issuance of these financial statements, but anticipates needing additional funding for future research and development[29][30] 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies used in preparing the unaudited interim condensed consolidated financial statements, consistent with GAAP and SEC rules - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, consistent with the audited consolidated financial statements for the year ended December 31, 2022[38][40] 3. Fair Value Measurements This note details the fair value measurements of the company's financial assets, primarily categorized into Level 1 and Level 2 of the fair value hierarchy | Asset Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------- | :----------------------------- | :------------------------------- | | Cash equivalents | $50,450 | $50,551 | | Marketable securities, current | $315,188 | $338,771 | | Marketable securities, non-current | $104,759 | $152,328 | | Restricted cash | $5,801 | $6,130 | | Total Fair Value | $476,198 | $547,780 | - The company's financial assets measured at fair value are primarily categorized into Level 1 (money market funds, US treasuries) and Level 2 (US government agencies, corporate bonds) of the fair value hierarchy[41] 4. Marketable Securities This note provides information on the company's marketable securities, including amortized cost, unrealized gains and losses, and fair value as of the reporting dates | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------- | :----------------------------- | :------------------------------- | | Amortized Cost | $423,586 | $496,044 | | Unrealized Gains | $4 | $53 | | Unrealized Losses | $(3,643) | $(4,998) | | Fair Value | $419,947 | $491,099 | - As of June 30, 2023, the company held 154 securities in an unrealized loss position for less than 12 months ($326.7 million fair value) and 27 securities for greater than 12 months ($71.4 million fair value)[42] - Unrealized losses on available-for-sale securities are not recognized in the statements of operations because the securities are high credit quality, and the company does not intend to sell them prior to anticipated recovery[45] 5. Collaborations This note describes the company's key collaboration agreements with Sanofi and Vertex, detailing revenue recognition, milestone payments, and agreement status - The company has a collaboration agreement with Sanofi to co-develop drug candidates directed to two biological targets (IRAK4 and one undisclosed target), with Sanofi holding exclusive licenses for development, manufacturing, and commercialization after specified milestones[46] | Sanofi Agreement Payments | Amount (Aggregate) | | :------------------------ | :----------------- | | Upfront Payment | $150.0 million | | Development Milestones | Up to $1.48 billion | | Commercial Milestones | Up to $700.0 million | | Royalties | High-single to high-teens | - Sanofi provided notice in December 2022 to advance the collaboration target 1 candidate, KT-474, into Phase 2 clinical trials, entitling the company to milestone payments[52] - The Vertex collaboration agreement expired upon completion of the initial research term in May 2023, and all remaining deferred revenue associated with it was recognized during the three-month period ended June 30, 2023[65][72] | Collaboration Revenue (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sanofi Agreement | $9,900 | $8,400 | $17,600 | $15,000 | | Vertex Agreement | $6,600 | $3,100 | $8,400 | $6,100 | 6. Property and Equipment This note presents the company's property and equipment, net of accumulated depreciation, and explains significant changes in these assets | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------- | :----------------------------- | :------------------------------- | | Total Property and Equipment | $36,185 | $20,227 | | Less Accumulated Depreciation | $(8,691) | $(6,893) | | Property and Equipment, Net | $27,494 | $13,334 | - The net property and equipment increased significantly, primarily due to an increase in assets not yet in service from $1.1 million to $16.4 million[74] 7. Leases This note details the company's lease arrangements, including a significant new office and laboratory space lease, and associated operating lease costs and liabilities - The company entered into a noncancelable lease for 100,624 square feet of office and laboratory space in Watertown, Massachusetts, with accounting commencement in January 2023 and expected occupancy in November 2023[78][79] | Lease Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Operating Lease Remaining Term | 10.61 years | 7.84 years | | Operating Lease Discount Rate | 8.82% | 10.50% |\ | Present Value of Operating Lease Liabilities (in thousands) | $73,068 | N/A | - Total operating lease costs for the six months ended June 30, 2023, were $5.0 million, a substantial increase from $1.0 million in the prior year[82] 8. Accrued Expenses This note provides a breakdown of the company's accrued expenses, including research and development, payroll, professional fees, and other categories | Accrued Expense Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------- | :----------------------------- | :------------------------------- | | Research and development | $12,153 | $16,975 | | Payroll and payroll-related | $4,951 | $8,149 | | Professional fees | $3,269 | $1,971 | | Other | $2,117 | $407 | | Total Accrued Expenses | $22,490 | $27,502 | 9. Other Commitments and Contingencies This note addresses the company's legal proceedings, indemnification agreements, and other potential commitments and contingencies - The company is not currently a party to any material legal proceedings[85] - The company indemnifies its investors, employees, officers, and directors, and enters into standard indemnification agreements with business partners for intellectual property infringement claims, with no accrued liabilities as of June 30, 2023[86] 10. Equity-Based Compensation This note details the company's equity-based compensation expense recognized across research and development and general and administrative functions, and unrecognized compensation | Equity-Based Compensation (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $5,704 | $4,765 | $10,432 | $8,670 | | General and administrative | $5,477 | $4,857 | $10,133 | $8,825 | | Total Equity-Based Compensation | $11,181 | $9,622 | $20,565 | $17,495 | - As of June 30, 2023, total unrecognized stock-based compensation expense for unvested stock options was $75.2 million (weighted average recognition period of 2.3 years) and for restricted stock was $10.6 million (weighted average recognition period of 2.7 years)[92][94] 11. Related-Party Transactions This note confirms that, apart from collaboration agreements, there were no other related-party transactions during the periods presented - Other than the collaboration agreements discussed in Note 5, there were no other related-party transactions for the periods presented[97] 12. Income Taxes This note reports the company's income tax expense, primarily related to investment income, for the three and six months ended June 30, 2023 and 2022 - The company recorded less than $0.1 million in income tax related to investment income for the three and six months ended June 30, 2023, and no income tax was recorded for the same periods in 2022[98] 13. Net Loss per Share This note presents the basic and diluted net loss per share and weighted average common stock outstanding, explaining the exclusion of anti-dilutive securities | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Loss per Share (Basic & Diluted) | $(0.67) | $(0.78) | $(1.37) | $(1.49) | | Weighted Average Common Stock Outstanding | 58,326,963 | 51,772,440 | 58,257,387 | 51,712,081 | - Potentially dilutive securities, including restricted stock and stock options, were excluded from the computation of diluted net loss per share as their effect would be anti-dilutive[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its strategic focus, financial performance, and liquidity outlook Overview This section provides an overview of Kymera Therapeutics' business, clinical programs, historical operating losses, and current capital resources - Kymera Therapeutics is a biopharmaceutical company focused on discovering and developing novel small molecule therapeutics using its proprietary targeted protein degradation (TPD) platform, Pegasus™[102] - Current clinical-stage programs include IRAK4, IRAKIMiD, STAT3, and MDM2, targeting immune-inflammatory diseases, hematologic malignancies, and solid tumors[102] - The company has incurred significant operating losses since inception, with net losses of $38.8 million and $79.7 million for the three and six months ended June 30, 2023, respectively, and an accumulated deficit of $463.5 million[105] - As of June 30, 2023, the company had $472.3 million in cash, cash equivalents, and marketable securities, which are expected to fund operations and capital expenditures into the second half of 2025[108] Components of Our Results of Operations This section describes the primary components of the company's financial results, focusing on revenue sources and operating expense categories Revenue This section details the company's revenue sources, primarily from research collaboration arrangements, and the status of key agreements with Vertex and Sanofi - The company has not generated any revenue from product sales and expects future revenue to be derived primarily from research collaboration arrangements with Vertex and Sanofi[109] - The Vertex Agreement expired on May 9, 2023, while the Sanofi Agreement, amended in November 2022, continues to provide an upfront payment, potential development milestones up to $1.48 billion, commercial milestones up to $700 million, and tiered royalties[111][115][116] - Sanofi intends to advance KT-474 into Phase 2 clinical trials for hidradenitis suppurativa (HS) and atopic dermatitis (AD), with the first indication expected to be initiated in 2023[117] Operating expenses This section outlines the company's operating expenses, primarily research and development and general and administrative costs, and their expected future trends - Operating expenses consist primarily of research and development (R&D) expenses and general and administrative (G&A) expenses[118] - R&D expenses are expensed as incurred and are expected to increase substantially with planned clinical development activities for current and future product candidates[119][121] - G&A expenses are anticipated to increase in the future due to increased headcount to support product candidate development and research activities, as well as costs associated with operating as a public company[126] Results of Operations This section presents a comparative analysis of the company's financial results for the three and six months ended June 30, 2023 and 2022 Comparison of three months ended June 30, 2023 and 2022 This section compares collaboration revenue, operating expenses, and net loss for the three-month periods ended June 30, 2023 and 2022 | Metric (3 Months Ended June 30) | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | | :------------------------------ | :------------------ | :------------------ | :-------------------- | | Collaboration Revenue | $16,513 | $11,514 | $4,999 | | Research and Development | $45,767 | $41,293 | $4,474 | | General and Administrative | $14,129 | $11,031 | $3,098 | | Total Operating Expenses | $59,896 | $52,324 | $7,572 | | Loss from Operations | $(43,383) | $(40,810) | $(2,573) | | Other Income, Net | $4,584 | $553 | $4,031 | | Net Loss | $(38,799) | $(40,257) | $1,458 | - Research and development expenses increased by $4.5 million, primarily due to increased spending on IRAK4 and STAT3 programs, other pipeline programs, and higher personnel costs, partially offset by reductions in IRAKIMiD and MDM2 activities[131] - General and administrative expenses increased by $3.1 million, mainly due to higher legal and professional service fees, personnel, facility, and other expenses to support growth[132] - Other income, net, increased by $4.0 million, primarily due to prevailing interest rates[133] Comparison of six months ended June 30, 2023 and 2022 This section compares collaboration revenue, operating expenses, and net loss for the six-month periods ended June 30, 2023 and 2022 | Metric (6 Months Ended June 30) | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | | :------------------------------ | :------------------ | :------------------ | :-------------------- | | Collaboration Revenue | $25,979 | $21,136 | $4,843 | | Research and Development | $87,994 | $77,238 | $10,756 | | General and Administrative | $26,694 | $21,642 | $5,052 | | Total Operating Expenses | $114,688 | $98,880 | $15,808 | | Loss from Operations | $(88,709) | $(77,744) | $(10,965) | | Other Income, Net | $8,982 | $803 | $8,179 | | Net Loss | $(79,727) | $(76,941) | $(2,786) | - Research and development expenses increased by $10.8 million, primarily due to increased spending on IRAKIMiD and STAT3 programs, other pipeline programs, and a $10.1 million increase in personnel, stock-based compensation, and occupancy costs, partially offset by reductions in IRAK4 and MDM2 activities[138] - General and administrative expenses increased by $5.1 million, mainly due to higher legal and professional service fees, personnel, facility, and other expenses to support growth[139] - Other income, net, increased by $8.2 million, primarily due to prevailing interest rates[140] Liquidity and capital resources This section discusses the company's funding sources, current capital position, projected funding runway, and future capital requirements for its operations and development programs - The company has funded operations primarily through equity offerings and collaboration agreements, with $472.3 million in cash, cash equivalents, and marketable securities as of June 30, 2023[141] - Existing capital is expected to fund operating expenses and capital expenditure requirements into the second half of 2025, based on current assumptions[153] | Cash Flow Activity (6 Months Ended June 30) | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Cash used in operating activities | $(79,224) | $(79,280) | | Cash provided by investing activities | $60,423 | $107,666 | | Cash provided by financing activities | $2,464 | $549 | - The company anticipates requiring substantial additional funding to continue clinical development of its programs (IRAK4, IRAKIMiD, STAT3, MDM2), commercialize product candidates if approved, and pursue in-licenses or acquisitions[153] - Future funding may involve equity offerings, debt financings, collaborations, strategic alliances, or licensing arrangements, which could dilute existing stockholders or involve restrictive covenants[155] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate sensitivity and foreign currency exchange rates, and the impact of inflation - The company's primary market risk exposure is interest rate sensitivity on its money market funds and marketable securities; an immediate 10% change in market interest rates is not expected to have a material impact due to the short-term duration and low-risk profile of its portfolio[159] - The company is exposed to foreign currency exchange rate risk from vendors located in Asia and Europe but does not currently hedge this risk and has no significant liabilities denominated in foreign currencies[160] - Inflationary pressures are increasing the cost of labor and clinical trials, but also contributing to higher interest income rates[161] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, concluding they were effective - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023[163] - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[164] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, and exhibits Item 1. Legal Proceedings The company is not currently involved in any litigation or legal proceedings that management believes would have a material adverse effect on its business - The company is not currently a party to any litigation or legal proceedings that are likely to have a material adverse effect on its business[167] Item 1A. Risk Factors This section outlines significant risks that could adversely impact the company's financial position, drug development, regulatory approval, commercialization, intellectual property, and overall business operations - The company has a limited operating history, has not generated revenue from drug sales, and has incurred significant operating losses, with an accumulated deficit of $463.5 million as of June 30, 2023, indicating it may never become profitable[169][170] - The company will need to raise substantial additional funding to support its capital-intensive drug development, preclinical and clinical activities, and potential commercialization efforts, with current capital projected to last into the second half of 2025[172][173] - The company's Pegasus™ platform, based on targeted protein degradation, is novel and unproven, making it difficult to predict the time, cost, and likelihood of successfully developing any products[188] - Delays or difficulties in initiating or enrolling patients in clinical trials, or the occurrence of adverse side effects from product candidates, could delay or prevent regulatory approval and limit commercialization[196][210] - The company faces substantial competition from other biopharmaceutical companies and traditional therapeutic modalities, many of which have significantly greater financial resources and expertise[274][275] - The ability to obtain and maintain patent and other intellectual property protection for its technology and product candidates is critical but uncertain, with risks of challenges, infringement claims, and the inability to enforce rights globally[298][303][343] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that the company did not engage in any unregistered sales of equity securities during the quarter ended June 30, 2023 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2023[389] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[390] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[390] Item 5. Other Information This section discloses Rule 10b5-1 trading arrangements adopted by officers or directors, specifically Director Jeffrey Albers' trading plan | Name and Title | Type of Trading Arrangement | Action Taken (Date of Action) | Duration or End Date | Aggregate Number of Securities to be Sold | Description of Trading Arrangement | | :------------- | :-------------------------- | :---------------------------- | :------------------- | :---------------------------------------- | :--------------------------------- | | Jeffrey Albers, Director | Rule 10b5-1 trading plan | Adoption (June 22, 2023) | September 1, 2024 | 22,500 | Exercises of vested stock options and sales of common stock | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various certifications and Inline XBRL documents - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1*, 32.2*) and Inline XBRL Instance, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[393] SIGNATURES This section contains the formal signatures of the company's executive officers, certifying the submission of the report SIGNATURES The report is formally signed by the President and Chief Executive Officer, Nello Mainolfi, Ph.D., and the Chief Financial Officer, Bruce Jacobs, CFA, MBA, on August 3, 2023, certifying its submission - The report was signed by Nello Mainolfi, Ph.D., President and Chief Executive Officer, and Bruce Jacobs, CFA, MBA, Chief Financial Officer, on August 3, 2023[397]