Kymera Therapeutics(KYMR) - 2021 Q3 - 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 for Kymera Therapeutics, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit), and Statements of Cash Flows, along with detailed notes explaining the company's organization, accounting policies, fair value measurements, marketable securities, collaboration agreements, property and equipment, leases, accrued expenses, commitments, convertible preferred stock, equity-based compensation, related-party transactions, income taxes, net loss per share, and subsequent events Condensed Consolidated Balance Sheets The company's total assets increased significantly from $487.18 million at December 31, 2020, to $642.45 million at September 30, 2021, primarily driven by increases in cash and cash equivalents and marketable securities | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total Assets | $642,453 | $487,175 | | Total Liabilities | $159,318 | $203,287 | | Total Stockholders' Equity | $483,135 | $283,888 | - Cash and cash equivalents increased from $31.00 million (Dec 31, 2020) to $156.82 million (Sep 30, 2021)[18] - Marketable securities (current) increased from $265.20 million (Dec 31, 2020) to $379.57 million (Sep 30, 2021)[18] Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a significant increase in collaboration revenue and operating expenses for both the three and nine months ended September 30, 2021, compared to the same periods in 2020, with net loss widening considerably due to increased R&D and G&A expenses | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Collaboration Revenue | $20,336 | $14,533 | $57,557 | $21,249 | | R&D Expenses | $38,306 | $15,778 | $99,488 | $41,713 | | G&A Expenses | $10,667 | $6,838 | $24,605 | $13,058 | | Total Operating Expenses | $48,973 | $22,616 | $124,093 | $54,771 | | Net Loss | $(28,582) | $(7,986) | $(66,317) | $(32,908) | | Net Loss per Share (Basic & Diluted) | $(0.56) | $(0.39) | $(1.42) | $(5.11) | - Collaboration revenue increased by $5.8 million (39.9%) for the three months ended September 30, 2021, and by $36.3 million (170.8%) for the nine months ended September 30, 2021, compared to the respective prior year periods[21] - Research and development expenses increased by $22.5 million (142.8%) for the three months and $57.8 million (138.5%) for the nine months ended September 30, 2021, reflecting increased clinical activities and platform investment[21] Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) This statement details the changes in convertible preferred stock and stockholders' equity, showing significant increases in additional paid-in capital due to public offerings and private placements, alongside a growing accumulated deficit from ongoing operating losses - Additional paid-in capital increased from $412.78 million at December 31, 2020, to $678.36 million at September 30, 2021, primarily due to follow-on public offerings and private placements[18][25] - Accumulated deficit increased from $(128.77) million at December 31, 2020, to $(195.08) million at September 30, 2021, reflecting continued net losses[18][25] - All issued and outstanding convertible preferred stock was converted into common stock prior to the IPO on August 21, 2020[104] Condensed Consolidated Statements of Cash Flows Cash flows from operating activities shifted from a significant inflow in 2020 to a substantial outflow in 2021, reflecting increased R&D expenses, while investing activities consistently used cash and financing activities provided substantial cash through equity offerings | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Operating Activities | $(90,594) | $108,198 | | Investing Activities | $(31,816) | $(418,598) | | Financing Activities | $248,226 | $288,992 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $125,816 | $(21,408) | - Cash used in operating activities for the nine months ended September 30, 2021, was $90.6 million, primarily due to a net loss of $66.3 million and a $54.2 million change in deferred revenue[163] - Cash provided by financing activities for the nine months ended September 30, 2021, was $248.2 million, mainly from $243.1 million in net proceeds from a follow-on offering and concurrent private placement[167] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's financial position, operations, and cash flows, including significant accounting policies, fair value measurements, marketable securities, collaboration agreements, property and equipment, leases, accrued expenses, commitments, convertible preferred stock, equity-based compensation, related-party transactions, income taxes, net loss per share, and subsequent events, offering crucial context to the condensed financial statements 1. Organization and Nature of Business Kymera Therapeutics, Inc. is a biopharmaceutical company focused on targeted protein degradation, with a limited operating history and no revenue from drug sales to date, relying on equity offerings and collaboration agreements for funding - Kymera Therapeutics is a biopharmaceutical company focused on targeted protein degradation, with no revenue from drug sales to date[35] - The company had an accumulated deficit of $195.1 million as of September 30, 2021, and expects to incur continued losses[36] - As of September 30, 2021, the company had $611.1 million in cash, cash equivalents, and marketable securities, expected to fund operations for at least 12 months[37] - Completed a follow-on offering in July 2021, issuing 5,468,250 shares at $47.00 per share, generating approximately $257.0 million in gross proceeds[41] 2. Summary of Significant Accounting Policies This section outlines the company's significant accounting policies, including principles of consolidation, basis of presentation in accordance with GAAP and SEC rules, and notes the adoption of ASU 2019-12 with no material impact and delayed adoption of ASU 2016-13 - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, consistent with the 2020 Annual Report on Form 10-K[45][47] - Adopted ASU 2019-12 (Income Taxes) as of January 1, 2021, with no material impact on financial position or results[48] - As an emerging growth company, the company expects to delay adoption of ASU 2016-13 (Financial Instruments—Credit Losses) until January 1, 2023[49] 3. Fair Value Measurements The company's financial assets measured at fair value primarily consist of cash equivalents and marketable securities, totaling $601.49 million as of September 30, 2021, with significant portions classified as Level 1 and Level 2 | Asset Category | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--------------- | :-------------------------------- | :-------------------------------- | | Cash equivalents | $145,642 | $30,442 | | Marketable securities, current | $379,566 | $265,198 | | Marketable securities, non-current | $74,692 | $162,531 | | Restricted cash | $1,590 | $1,589 | | Total Fair Value | $601,490 | $459,760 | - As of September 30, 2021, Level 1 assets (money market fund, US treasuries, restricted cash) totaled $326.97 million, and Level 2 assets (corporate bonds) totaled $274.52 million[50] 4. Marketable Securities The company holds available-for-sale debt securities, primarily U.S. treasury and corporate securities, with a fair value of $454.26 million as of September 30, 2021, and has recorded unrealized losses not considered other-than-temporary impairments | Description | Amortized Cost (Sep 30, 2021, in thousands) | Fair Value (Sep 30, 2021, in thousands) | | :---------- | :---------------------------------------- | :------------------------------------ | | U.S. treasury securities | $179,723 | $179,741 | | Corporate securities | $274,682 | $274,518 | | Total | $454,405 | $454,259 | - As of September 30, 2021, $379.6 million of securities had a contractual maturity of less than 12 months, and $74.7 million had a maturity greater than 12 months[54] - The company held 79 securities with an aggregate fair value of $286.6 million in an unrealized loss position, but these are not considered other-than-temporary impairments[53][55] 5. Collaborations Kymera has collaboration agreements with Sanofi and Vertex Pharmaceuticals, generating significant revenue from upfront payments and research services, with revenue recognized over the research and development period using an input method - Sanofi Collaboration: Upfront payment of $150.0 million, with potential development and commercial milestones up to $1.48 billion and $700.0 million, respectively[60][137] - Vertex Agreement: Non-refundable upfront payment of $50.0 million, with potential payments up to $170.0 million per target[73][74][132] - Revenue recognition for both collaborations is based on an input method, recognizing revenue as research and development services are provided[68][80] | Collaboration | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------------ | :--------------------------------------- | :--------------------------------------- | | Sanofi | $16,500 | $42,500 | | Vertex | $3,800 | $15,100 | | Total Deferred Revenue (Sep 30, 2021) | $93,511 (Sanofi) / $22,662 (Vertex) | $116,173 (Total) | 6. Property and Equipment Net property and equipment increased to $12.18 million at September 30, 2021, from $10.84 million at December 31, 2020, primarily due to additions in lab and office equipment and leasehold improvements | Category (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------- | :----------------- | :---------------- | | Total property and equipment | $15,411 | $12,988 | | Less accumulated depreciation | $(3,227) | $(2,147) | | Property and equipment, net | $12,184 | $10,841 | - Depreciation expense for the nine months ended September 30, 2021, was $1.7 million, up from $1.3 million in the prior year[86] 7. Leases The company's lease obligations primarily relate to a noncancelable facility lease in Watertown, Massachusetts, expiring in March 2030, and finance leases for property and equipment, with total lease costs for the nine months ended September 30, 2021, at $3.07 million - Entered into a new noncancelable facility lease in Watertown, MA, in October 2019, expiring March 31, 2030, with an option to extend for five years[92] | Lease Cost Category (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease costs | $524 | $606 | $1,571 | $2,195 | | Finance lease costs (Amortization) | $279 | $183 | $650 | $539 | | Finance lease costs (Interest) | $52 | $29 | $106 | $94 | | Variable lease costs | $358 | $216 | $743 | $431 | | Total Lease Costs | $1,213 | $1,034 | $3,070 | $3,259 | - Weighted average remaining lease terms as of September 30, 2021: Operating lease 8.59 years, Finance lease 2.61 years[95] 8. Accrued Expenses Accrued expenses significantly increased to $19.22 million at September 30, 2021, from $10.33 million at December 31, 2020, primarily driven by higher research and development expenses and payroll-related accruals | Category (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------- | :----------------- | :---------------- | | Research and development expenses | $12,603 | $5,821 | | Payroll and payroll-related | $3,866 | $2,918 | | Professional fees | $2,193 | $1,585 | | Other | $557 | $6 | | Total Accrued Expenses | $19,219 | $10,330 | - Accrued research and development expenses more than doubled from $5.82 million to $12.60 million[96] 9. Other Commitments and Contingencies The company is not currently a party to any material legal proceedings and accounts for estimated losses when probable and estimable, also having indemnification agreements with unlimited potential future payments, though no liabilities have been accrued to date - The company is not currently a party to any legal proceedings that are likely to have a material adverse effect on its business[97][187] - Indemnifies investors, employees, officers, and directors for certain events, and business partners for intellectual property infringement claims[98] - The maximum potential amount of future payments under indemnification agreements is unlimited, but no liabilities have been accrued as of September 30, 2021, or December 31, 2020[99][100] 10. Convertible Preferred Stock In January 2020, the company issued Series B Preferred Stock for $4.8 million, followed by Series C Preferred Stock for $88.2 million in March 2020, and all convertible preferred stock was converted into common stock prior to the IPO in August 2020 - Issued 1,182,265 shares of Series B Preferred Stock in January 2020 for $4.8 million[101] - Issued 13,539,141 shares of Series C Preferred Stock in March 2020 for $88.2 million, and exchanged Series A for Series C, resulting in a $9.1 million deemed dividend[102] - All 50,439,595 shares of Convertible Preferred Stock were converted into 31,625,534 shares of common stock prior to the IPO in August 2020[104] 11. Equity-Based Compensation The company operates under the 2020 Stock Option and Incentive Plan and the 2020 Employee Stock Purchase Plan, with total equity-based compensation expense for the nine months ended September 30, 2021, significantly higher at $16.29 million - The 2020 Stock Option and Incentive Plan replaced the 2018 Plan, reserving 4,457,370 shares initially, with automatic annual increases[106] - The 2020 Employee Stock Purchase Plan initially reserved 445,653 shares, with automatic annual increases[107] Stock Option Activity (9 Months Ended Sep 30, 2021) | Stock Option Activity (9 Months Ended Sep 30, 2021) | Number of Options Outstanding | | :-------------------------------------------------- | :---------------------------- | | Outstanding at December 31, 2020 | 5,832,712 | | Granted | 2,155,337 | | Exercised | (1,193,773) | | Forfeited | (168,721) | | Outstanding at September 30, 2021 | 6,625,555 | Equity-Based Compensation Expense (in thousands) | Equity-Based Compensation Expense (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $3,377 | $685 | $8,019 | $1,422 | | General and administrative | $4,019 | $1,643 | $8,275 | $1,941 | | Total | $7,396 | $2,328 | $16,294 | $3,363 | 12. Related-Party Transactions In addition to collaboration agreements with Sanofi and Vertex (both considered related parties), the company made $0.8 million in rent payments to an investor during the nine months ended September 30, 2020, with no such payments in 2021 - Sanofi and Vertex are considered related parties due to their participation in equity offerings[71][73] - Made $0.8 million in rent payments to an investor (related party) during the nine months ended September 30, 2020; no such payments in 2021[115] 13. Income Taxes No income tax was recorded for the three and nine months ended September 30, 2021 and 2020, with the CARES Act allowing for net operating loss (NOL) carrybacks and removing the 80% taxable income limitation for certain NOLs - No income tax was recorded for the three and nine months ended September 30, 2021 and 2020[116] - The CARES Act permits corporate taxpayers to carryback NOLs from 2018-2020 to the five preceding tax years and removed the 80% taxable income limitation for those NOLs[117] 14. Net Loss per Share Basic and diluted net loss per share increased to $(0.56) for the three months and $(1.42) for the nine months ended September 30, 2021, compared to $(0.39) and $(5.11) for the same periods in 2020, with potentially dilutive securities excluded due to their anti-dilutive effect | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Loss Attributable to Common Stockholders | $(28,582) | $(7,986) | $(66,317) | $(41,958) | | Weighted Average Common Shares Outstanding | 50,714,846 | 20,677,392 | 46,841,636 | 8,211,003 | | Net Loss per Share, Basic and Diluted | $(0.56) | $(0.39) | $(1.42) | $(5.11) | - Potentially dilutive securities (convertible preferred stock, restricted stock, stock options) were excluded from diluted net loss per share calculation as their effect would be anti-dilutive[120] 15. Subsequent Events On October 1, 2021, the company filed an automatically effective registration statement on Form S-3, registering an unspecified amount of various securities, and simultaneously entered into an equity distribution agreement for an "at-the-market" (ATM) offering of up to $250.0 million of common stock - Filed an automatically effective registration statement on Form S-3 on October 1, 2021, for an unspecified amount of common stock, preferred stock, debt securities, warrants, and/or units[121] - Entered into an equity distribution agreement for an "at-the-market" (ATM) offering of up to $250.0 million of common stock, with no sales made to date[121] 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 status as a biopharmaceutical company with significant operating losses and reliance on collaboration revenue and equity financing, detailing the impact of R&D investments, the COVID-19 pandemic, and future funding requirements Overview Kymera Therapeutics is a biopharmaceutical company developing small molecule therapeutics using its Pegasus™ targeted protein degradation (TPD) platform, focusing on immunology-inflammation and oncology, with significant operating losses and reliance on equity sales and collaborations for funding - Kymera Therapeutics is a biopharmaceutical company focused on targeted protein degradation (TPD) using its Pegasus™ platform, with initial programs in IRAK4, IRAKIMiD, and STAT3[123] - IRAK4 program (KT-474) is in Phase 1 clinical trial, with the MAD portion initiated in July 2021 after FDA lifted a partial clinical hold[123] - IND cleared for STAT3 degrader (KT-333) for Phase 1 clinical trial in relapsed/refractory liquid and solid tumors, expected to commence before year-end[123] - Incurred net losses of $28.5 million and $66.3 million for the three and nine months ended September 30, 2021, respectively, with an accumulated deficit of $195.1 million[125][126] - The COVID-19 pandemic has caused disruptions, including reduced lab presence and reliance on third parties, potentially impacting clinical trial timelines[128][129] Components of Our Results of Operations This section details the company's revenue sources, exclusively from research collaboration arrangements with Vertex and Sanofi, and operating expenses, consisting of research and development (R&D) and general and administrative (G&A) costs, which are expected to increase significantly with advancing clinical trials and public company operations Revenue Kymera's revenue is exclusively from collaboration agreements with Vertex and Sanofi, with the Vertex agreement including a $50 million upfront payment and potential milestones up to $170 million per target, and the Sanofi agreement providing a $150 million upfront payment and potential milestones up to $2.18 billion - Revenue is derived solely from research collaboration arrangements with Vertex and Sanofi; no product sales to date[130] - Vertex Agreement: $50.0 million non-refundable upfront payment and potential payments up to $170.0 million per target[132] - Sanofi Agreement: $150.0 million upfront payment and potential development and commercial milestone payments up to $1.48 billion and $700.0 million, respectively[137] - No milestone payments or royalties have been received under any collaboration agreements to date[130] Operating expenses Operating expenses consist of research and development (R&D) and general and administrative (G&A) costs, which are expensed as incurred and are expected to increase substantially with advancing clinical development and public company operating costs - R&D expenses include external research costs, personnel costs, supplies, license fees, and facility-related expenses, expensed as incurred[139] - Expected R&D expenses to increase substantially with planned clinical development activities[141] - G&A expenses include salaries, legal fees, professional fees, insurance, and marketing expenses, expected to increase with headcount and public company operations[145][146] Other Income (Expense) Other income (expense) primarily consists of net interest income earned on invested cash balances and interest expense on finance leases - Interest income consists of interest earned on invested cash balances[147] - Interest expense relates to finance leases[147] Results of Operations Kymera experienced significant increases in collaboration revenue and operating expenses for both the three and nine months ended September 30, 2021, compared to the prior year, with net losses widening due to substantial investments in R&D and increased general and administrative costs Comparison of three months ended September 30, 2021 and 2020 For the three months ended September 30, 2021, collaboration revenue increased by $5.8 million to $20.3 million, R&D expenses surged by $22.5 million to $38.3 million, and G&A expenses rose by $3.9 million to $10.7 million, resulting in a net loss of $(28.6) million | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Collaboration Revenue | $20,336 | $14,533 | $5,803 | | R&D Expenses | $38,306 | $15,778 | $22,528 | | G&A Expenses | $10,667 | $6,838 | $3,829 | | Net Loss | $(28,582) | $(7,986) | $(20,596) | - R&D expense increase of $22.5 million was primarily due to $7.4 million for clinical activities (IRAK4, IRAKIMiD, STAT3), $6.5 million for platform investment and Vertex collaboration, and $8.6 million for personnel and related costs[150] Comparison of nine months ended September 30, 2021 and 2020 For the nine months ended September 30, 2021, collaboration revenue increased by $36.3 million to $57.6 million, R&D expenses rose by $57.8 million to $99.5 million, and G&A expenses increased by $11.5 million to $24.6 million, leading to a net loss of $(66.3) million | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Collaboration Revenue | $57,557 | $21,249 | $36,308 | | R&D Expenses | $99,488 | $41,713 | $57,775 | | G&A Expenses | $24,605 | $13,058 | $11,547 | | Net Loss | $(66,317) | $(32,908) | $(33,409) | - R&D expense increase of $57.8 million was primarily due to $17.9 million for IND-enabling studies and clinical activities, $18.2 million for platform investment and Vertex collaboration, and $21.7 million for personnel and related costs[156] Liquidity and capital resources Kymera has not generated product revenue and relies on equity offerings and collaboration agreements for funding, with $611.1 million in cash, cash equivalents, and marketable securities as of September 30, 2021, projected to fund operations into 2025, while anticipating substantial future funding needs for clinical development - As of September 30, 2021, cash, cash equivalents, and marketable securities totaled $611.1 million, expected to fund operations into 2025[161][171] | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Operating Activities | $(90,594) | $108,198 | | Investing Activities | $(31,816) | $(418,598) | | Financing Activities | $248,226 | $288,992 | - Future funding requirements are substantial and depend on the progress and costs of clinical trials, regulatory approvals, intellectual property, and commercialization efforts[170] Contractual Obligations and Other Commitments There were no material changes to the company's contractual obligations and commitments from those described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes to contractual obligations and commitments since the December 31, 2020 Annual Report on Form 10-K[174] Critical Accounting Policies and Estimates The company's financial statements rely on estimates and assumptions affecting reported asset and liability amounts and expenses, with no material changes to critical accounting policies occurring during the nine months ended September 30, 2021 - Financial statements are based on estimates and assumptions that affect reported amounts of assets, liabilities, and expenses[175] - No material changes to critical accounting policies during the nine months ended September 30, 2021[175] JOBS Act Accounting Election As an emerging growth company (EGC), Kymera has elected to delay the adoption of new accounting standards until they apply to private companies, but will cease to be an EGC and a smaller reporting company as of December 31, 2021, becoming a large accelerated filer - Elected to delay adoption of new accounting standards as an emerging growth company (EGC)[176] - Will cease to be an EGC and a smaller reporting company as of December 31, 2021, and will become a large accelerated filer[178] Recently Issued and Adopted Accounting Pronouncements Information regarding recently issued accounting pronouncements that may impact the company's financial position and results of operations is disclosed in Note 2 to the financial statements - Details on recently issued accounting pronouncements are provided in Note 2 of the financial statements[179] Item 3. Quantitative and Qualitative Disclosures About Market Risk Kymera's primary market risk exposure is to changes in interest rates, affecting its $611.1 million in cash, cash equivalents, and marketable securities, though a one percentage point change is not expected to materially affect its fair market value, operating results, or cash flows - Primary market risk exposure is to changes in interest rates, affecting $611.1 million in cash, cash equivalents, and marketable securities[180] - Conservative investment portfolio with short-term maturities means a one percentage point change in interest rates is not expected to have a material effect[180] - Minimal exposure to foreign currency exchange rates and no material effect from inflation on financial condition or results of operations[181][182] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of Kymera's disclosure controls and procedures as of September 30, 2021, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the period - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[184] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report[185] PART II. OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, defaults, and other disclosures relevant to the company's operations Item 1. Legal Proceedings Kymera Therapeutics is not currently involved in any litigation or legal proceedings that management believes would have a material adverse effect on its business, though litigation, regardless of outcome, can negatively impact its business due to defense costs and management distraction - Not currently a party to any litigation or legal proceedings likely to have a material adverse effect on the business[187] - Litigation can adversely impact business due to defense and settlement costs, and diversion of management resources[187] Item 1A. Risk Factors This section outlines significant risks facing Kymera Therapeutics, including its limited operating history, substantial operating losses, and the need for additional capital, detailing risks associated with drug development, regulatory approval, foreign markets, healthcare compliance, intellectual property, employee matters, data security, stock volatility, and corporate governance Risks Related to Our Financial Position and Need for Additional Capital Kymera is an early-stage biopharmaceutical company with a limited operating history and no drug sales revenue, having incurred significant operating losses and an accumulated deficit of $195.1 million as of September 30, 2021, and anticipates continued losses requiring substantial additional funding - Limited operating history and no revenue from drug sales to date; may never become profitable[189] - Incurred significant operating losses since inception, with an accumulated deficit of $195.1 million as of September 30, 2021[190] - Will need substantial additional funding to support continuing operations and growth strategy, with no guarantee of raising capital on attractive terms[193] Risks Related to Future Financial Condition The company's future financial condition is highly dependent on its ability to raise substantial additional funding to advance its product candidates and commercialization efforts, as failure to secure capital could force delays or discontinuation of programs, while operating as a public company incurs increased costs and diverts management time - Requires substantial additional funding for ongoing R&D, clinical trials, and potential commercialization; current capital ($611.1 million as of Sep 30, 2021) is estimated to fund operations into 2025[193][194][195] - Failure to raise capital could lead to delays, scaling back, or discontinuation of product candidate development programs[193] - Operating as a public company incurs significant legal, accounting, and compliance expenses, requiring substantial management time[197][199] Risks Related to Drug Development and Regulatory Approval Drug development is a lengthy, expensive, and uncertain process, with Kymera's product candidates still in early clinical or preclinical stages, and its novel targeted protein degradation approach is unproven, making development time and cost difficult to predict, while delays in clinical trials, adverse side effects, or failure to replicate early positive results could prevent regulatory approval and commercialization Risks Related to Preclinical and Clinical Development Kymera's product candidates are in early development, and their novel targeted protein degradation approach is unproven, making development time and cost unpredictable, with potential for delays in clinical trials due to patient enrollment challenges, especially exacerbated by the COVID-19 pandemic, and undesirable side effects that could delay or prevent regulatory approval - All product candidates are in preclinical or early clinical development; commercialization is uncertain and may never generate revenue from drug sales[200] - The Pegasus platform's novel targeted protein degradation approach is unproven, making development time, cost, and success difficult to predict[203] - Delays or difficulties in patient enrollment for clinical trials, exacerbated by the COVID-19 pandemic, could delay or prevent regulatory approvals[213][218] - Product candidates may cause adverse or undesirable side effects, potentially delaying or preventing regulatory approval, limiting commercial profile, or resulting in negative consequences post-marketing[223][226] Risks Related to Regulatory Approval Obtaining regulatory approval for product candidates is expensive, lengthy, and uncertain, with no guarantee of success, as delays or failures can arise from insufficient safety/efficacy data, disagreements with regulatory agencies on trial design, or manufacturing non-compliance, and even if approved, products may face limited indications, price restrictions, or post-marketing requirements - Failure or delays in obtaining regulatory approvals for product candidates will materially impair the ability to commercialize and generate revenue[236] - Regulatory approval process is complex, lengthy, expensive, and uncertain, with potential for delays or rejection due to various factors including insufficient data or manufacturing issues[237] - Breakthrough Therapy and Fast Track Designations, if granted, do not guarantee faster development, review, or approval, nor do they increase the likelihood of marketing approval[241][242] - Orphan Drug Designation may not effectively protect products from competition, and exclusivity can be lost under certain conditions, including the approval of clinically superior drugs[245][246] Risks Related to Foreign Regulatory Approval and Foreign Markets Even with U.S. marketing approval, obtaining foreign regulatory approval is a separate, complex, and uncertain process, potentially involving additional testing, administrative reviews, and pricing approvals, with failure or delays limiting market size and adversely impacting business, while commercialization in foreign markets introduces additional risks including differing regulatory requirements, reimbursement challenges, and economic instability - U.S. marketing approval does not guarantee foreign regulatory approval, which involves separate, complex, and varying requirements[251] - Foreign commercialization is subject to additional risks, including differing regulatory requirements, reimbursement challenges, economic instability, and foreign currency fluctuations[252] - Data from clinical trials conducted outside the U.S. may not be accepted by the FDA or comparable foreign regulatory authorities, requiring additional costly and time-consuming trials[254] - Governments outside the U.S. often impose strict price controls, which could adversely affect revenues if pricing is set at unsatisfactory levels[256] Risks Related to Compliance with Healthcare and Other Regulations Commercialized products may face unfavorable pricing regulations or third-party coverage and reimbursement policies, which could harm the business, and healthcare legislative reforms may also adversely affect operations, while relationships with healthcare providers and payors are subject to strict anti-kickback, fraud and abuse, and other healthcare laws, with potential for significant civil and criminal penalties for non-compliance - Commercial success depends on favorable coverage and reimbursement from third-party payors; unfavorable policies or pricing could harm the business[257][259] - Current and future healthcare legislative reforms (e.g., ACA, CARES Act) may adversely affect business and results of operations by impacting drug pricing and reimbursement[263][264][267] - Relationships with healthcare providers and payors are subject to federal and state anti-kickback, fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), with potential for severe penalties for non-compliance[274][275][277] - Employees, principal investigators, CROs, and consultants may engage in misconduct, leading to regulatory sanctions, reputational harm, and financial penalties[281] Risks Related to Intellectual Property Kymera's commercial success relies heavily on obtaining and maintaining robust patent and intellectual property (IP) protection for its technology and product candidates, as the patent landscape in biotechnology is highly uncertain, with risks including narrow patent scope, challenges to validity, and the inability to prevent competitors from developing similar products Risks Related to Patent Protection Maintaining patent protection requires strict compliance with procedural, document submission, and fee payment requirements, as non-compliance can lead to abandonment or loss of patent rights, while patent term restoration is limited and not guaranteed, and changes in patent law could diminish the value of patents - Failure to comply with procedural, documentary, and fee payment requirements for patents can result in abandonment or lapse of patent rights[342] - Patent term restoration under Hatch-Waxman Amendments is limited and not guaranteed, potentially allowing competitors to enter the market earlier[343] - Changes in patent law, including Supreme Court rulings and legislative proposals, could weaken the ability to obtain or enforce patents[344][345] Risks Related to our Trademarks, Trade Names and Trade Secrets Inadequate protection of trademarks and trade names could delay product launches or force the use of less effective branding, impacting market recognition, while the company relies on trade secret protection, confidentiality agreements, and license agreements for proprietary know-how, though trade secrets are difficult to protect and unauthorized disclosure could harm the business - Inadequate protection of trademarks and trade names could delay product launches or force the use of less effective branding, impacting market recognition[348] - Relies on trade secret protection, confidentiality agreements, and license agreements for proprietary know-how[350] - Trade secrets are difficult to protect, and unauthorized disclosure or independent development by competitors could harm the business and competitive position[350][351] Risks Related to Intellectual Property Litigation and Infringement Claims Kymera may face expensive and time-consuming intellectual property litigation or administrative challenges, including claims of infringement, misappropriation, or disputes over ownership, which, regardless of merit, can divert management resources, increase operating losses, and potentially result in substantial damages, injunctions, or the need for costly licenses - May initiate or become a defendant in lawsuits to protect or enforce intellectual property rights, which can be expensive, time-consuming, and unsuccessful[353][355] - Third parties may allege infringement, misappropriation, or other violations of their intellectual property rights, leading to substantial damages, injunctions, or the need for costly licenses[363][365] - Failure to identify relevant third-party patents or incorrect interpretation of their scope or expiration could subject the company to infringement claims[369][371] Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business Kymera's success depends on its ability to attract, retain, and motivate qualified personnel, including key executives, and to effectively manage its anticipated growth, as failure to do so could impede R&D and commercialization objectives, while the company is also vulnerable to natural disasters and system failures, including cyberattacks, which could disrupt operations and compromise confidential data Risks Related to Employee Matters and Managing Growth The company's future success is highly dependent on retaining key executives and attracting, retaining, and motivating qualified personnel, as failure to do so could impede R&D and commercialization, while managing anticipated growth will require improving managerial, operational, and financial systems, and the business is vulnerable to natural disasters and other unplanned events - Future success depends on retaining key executives and attracting, retaining, and motivating qualified personnel; loss of key individuals could harm business strategy[373][374] - Anticipated development and expansion require improved systems, expanded facilities, and additional personnel, which could divert management attention and financial resources[375] - Vulnerable to natural disasters, epidemics (like COVID-19), and other unplanned events that could disrupt operations and incur significant costs[376][378] Risks Related to Data and Privacy Kymera's internal computer systems and those of its third-party contractors are vulnerable to security breaches and cyberattacks, which could lead to material disruptions in product development, loss of data, or inappropriate disclosure of confidential information, resulting in significant liabilities under state, federal, and international laws, and damage to reputation - Internal computer systems and those of third-party CROs are vulnerable to security breaches and cyberattacks, potentially disrupting development programs and causing data loss[379] - Cyberattacks could result in theft or destruction of intellectual property, misappropriation of assets, or compromise confidential/proprietary information, leading to operational disruptions and financial loss[380] - Failure to protect information systems or prevent security breaches could lead to significant liability under various data privacy laws (HIPAA, GDPR), reputational harm, and adverse financial consequences[380][381] Risks Related to Our Common Stock The price of Kymera's common stock is highly volatile and can fluctuate substantially due to various factors, including competitive drug success, clinical trial results, regulatory developments, and general market conditions, potentially leading to investor losses, while future capital raises through equity or convertible debt could dilute existing stockholders, and the company does not anticipate paying cash dividends - Stock price is likely to be volatile and fluctuate substantially due to factors like competitive drug success, clinical trial results, regulatory developments, and market conditions[384] - Unstable market and economic conditions, including the COVID-19 pandemic, may adversely affect business, financial condition, and stock price[386] - Raising additional capital through equity or convertible debt may cause dilution to stockholders and could restrict operations or require relinquishing rights to technologies[388][389][390] - Does not anticipate paying cash dividends in the foreseeable future; capital appreciation will be investors' sole source of gain[396] Risks Related to Tax Changes in U.S. federal, state, and local tax laws, such as the TCJA and CARES Act, could adversely affect Kymera or its investors, and the company's ability to utilize its net operating loss (NOL) carryforwards and tax credits to offset future taxable income may be subject to limitations due to ownership changes - Changes in tax law (e.g., TCJA, CARES Act) may adversely affect the company or its investors[400][401] - Ability to utilize net operating loss (NOL) carryforwards and tax credits may be limited by ownership changes under Sections 382 and 383 of the Code[403] - As of December 31, 2020, had federal and state NOL carryforwards of $74.4 million and $61.2 million, respectively, and R&D tax credit carryforwards of $2.7 million and $1.3 million[403] Risks Related to Our Controls and Reporting Requirements Kymera faces risks related to establishing and maintaining effective internal control over financial reporting, which is a costly and challenging effort, as failure to comply with Section 404 of the Sarbanes-Oxley Act or to produce accurate financial statements could harm operating results and stock price, while disclosure controls, despite being designed for reasonable assurance, may not prevent or detect all errors or acts of fraud - Failure to establish and maintain proper internal control over financial reporting could harm operating results and business operations[404][406] - Disclosure controls and procedures, despite being designed for reasonable assurance, may not prevent or detect all errors or acts of fraud due to inherent limitations[407] Risks Related to Our Charter and Bylaws Anti-takeover provisions in Kymera's charter documents and Delaware law (Section 203 of DGCL) could delay or prevent a change of control, limiting the market price of common stock and frustrating stockholder attempts to replace management, while exclusive forum provisions in the bylaws for certain litigation may limit stockholders' ability to choose a favorable judicial forum - Anti-takeover provisions (e.g., classified board, no stockholder action by written consent, supermajority vote for certain amendments) could delay or prevent a change of control[408][409] - Governed by Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of voting stock[410] - Bylaws designate specific courts (Delaware Chancery Court for state law claims, U.S. District Court for District of Massachusetts for Securities Act claims) as exclusive forums for certain litigation, potentially limiting stockholders' choice of forum and increasing costs[411][412] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[413] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[414] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report for the period - No mine safety disclosures to report[415] Item 5. Other Information This section indicates that there is no other information to report for the period - No other information to report[416] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, Inline XBRL documents, and the Cover Page Interactive Data - Includes certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[417] - Contains Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[417]