UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2021
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _________________ to _______________________
Commission file number: 001-39743
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (858 ) 299-4699
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on
Which Registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐ |
Accelerated filer
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☐ |
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 9, 2021, the Registrant had 43,696,095 shares of common stock,
$0.0001 par value per share, outstanding.
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Page
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PART I—FINANCIAL INFORMATION
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Item 1.
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1
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1
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2
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3
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4
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5
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Item 2.
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16
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Item 3.
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27
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Item 4.
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28
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PART II—OTHER INFORMATION
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Item 1.
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30
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Item 1A.
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30
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Item 2.
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112 | |
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Item 3.
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113 | |
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Item 4.
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113 | |
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Item 5.
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113 | |
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Item 6.
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113 | |
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10‑Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10‑Q, including statements regarding our
future results of operations and financial position, business strategy, development plans, ongoing and planned future preclinical studies and clinical trials, future results of ongoing and planned future clinical trials, expected research and
development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, investors can identify forward-looking statements by terms
such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar
expressions. Forward-looking statements contained in this Quarterly Report on Form 10‑Q include, but are not limited to, statements about:
| • |
the ability of our ongoing and planned future preclinical studies and ongoing and planned future clinical trials to demonstrate safety and efficacy of our product
candidates, and other positive results;
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the timing, progress and results of ongoing and planned future preclinical studies and clinical trials for our current product candidates and other product candidates
we may develop, including statements regarding the timing of initiation and completion of preclinical studies or clinical trials and related preparatory work, the period during which the results of the preclinical studies or clinical trials
will become available, and our research and development programs;
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the timing, scope and likelihood of regulatory filings and approvals, including timing of INDs and final U.S. Food and Drug Administration (FDA) approval of our
current product candidates and any other future product candidates;
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the timing, scope or likelihood of foreign regulatory filings and approvals;
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our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical trials;
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our manufacturing, commercialization, and marketing capabilities and strategy;
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our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;
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the need to hire additional personnel and our ability to attract and retain such personnel;
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the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
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our expectations regarding the approval and use of our product candidates in combination with other drugs;
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our competitive position and the success of competing therapies that are or may become available;
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our estimates of the number of patients that we will enroll in our clinical trials;
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the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our product candidates;
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our ability to obtain and maintain regulatory approval of our product candidates;
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our plans relating to the further development of our product candidates, including additional indications we may pursue;
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existing regulations and regulatory developments in the United States, Europe and other jurisdictions;
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our expectations regarding the impact of the COVID‑19 pandemic on our business;
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our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current product candidates and other product candidates we may develop, including
the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
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our continued reliance on third parties to conduct ongoing and planned future preclinical studies and clinical trials of our product candidates, and for
the manufacture of our product candidates for preclinical studies and clinical trials;
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our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
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the pricing and reimbursement of our current product candidates and other product candidates we may develop, if approved;
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the rate and degree of market acceptance and clinical utility of our current product candidates and other product candidates we may develop;
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our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
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our financial performance;
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the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;
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the impact of laws and regulations;
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our expectations regarding the period during which we will remain an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS
Act); and
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our anticipated use of our existing resources.
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We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business,
financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10‑Q
and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10‑Q. Because forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified, investors should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be
achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein,
whether as a result of any new information, future events or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly
Report on Form 10‑Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
PART I—FINANCIAL INFORMATION
KINNATE BIOPHARMA INC.
(Unaudited)
(in thousands, except share and par value amounts)
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September 30, 2021
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December 31, 2020
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Assets
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||||||||
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Current assets:
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||||||||
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Cash and cash equivalents
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$
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$
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Cash at consolidated joint venture
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||||||||
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Short-term investments
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||||||
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Prepaid expenses and other current assets
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Total current assets
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Property and equipment, net
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Long-term investments
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| Restricted cash |
||||||||
| Other non-current assets |
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Total assets
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$
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$
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Liabilities and Stockholders’ Equity
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||||||||
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Current liabilities:
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||||||||
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Accounts payable
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$
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$
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Accrued expenses
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||||||
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Total current liabilities
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||||||
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Commitments and contingencies (See Note 12)
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||||||||
| Redeemable convertible noncontrolling interests | ||||||||
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Stockholders’ equity:
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|||||||
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Preferred stock, $
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||||||
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Common stock, $
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||||||
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Additional paid-in capital
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||||||
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Accumulated other comprehensive loss
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(
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)
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(
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)
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Accumulated deficit
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(
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)
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(
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)
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||||
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Total stockholders’ equity
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||||||
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Total liabilities and equity
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$
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$
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||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share amounts)
|
Three Months Ended September 30,
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Nine Months Ended September 30,
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|||||||||||||||
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2021
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2020
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2021
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2020
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|||||||||||||
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Operating expenses:
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||||||||||||||||
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Research and development
|
$
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$
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$
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$
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||||||||
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General and administrative (includes related party amounts of $
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||||||||||||
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Total operating expenses
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|
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||||||||||||
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Loss from operations
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
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Other income:
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Interest income
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Other expense, net
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(
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)
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(
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)
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||||||||||
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Total other income, net
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||||||||||||
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Net loss
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
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Net loss attributable to redeemable convertible noncontrolling interests
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|
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||||||||||||
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Net loss attributable to Kinnate
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$
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(
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)
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$
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(
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)
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$
|
(
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)
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$
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(
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)
|
||||
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Weighted-average shares outstanding, basic and diluted
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||||||||||||
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Net loss per share, basic and diluted
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$
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(
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)
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$
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(
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)
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$
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(
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)
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$
|
(
|
)
|
||||
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Comprehensive loss:
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||||||||||||||||
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Net loss
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$
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(
|
)
|
$
|
(
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)
|
$
|
(
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)
|
$
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(
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)
|
||||
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Other comprehensive loss:
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||||||||||||||||
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Unrealized income (loss) on investments
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|
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(
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)
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|||||||||||
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Total comprehensive loss
|
(
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)
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(
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)
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(
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)
|
(
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)
|
||||||||
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Comprehensive loss attributable to redeemable convertible noncontrolling interests
|
|
|
|
|
||||||||||||
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Comprehensive loss attributable to Kinnate
|
$
|
(
|
)
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$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
(Unaudited)
(in thousands, except share amounts)
|
Series A
Convertible Preferred Stock |
Series B
Convertible Preferred Stock |
Series C Convertible Preferred Stock |
Common Stock
|
Additional
Paid-in |
Accumulated
Other
Comprehensive
|
Accumulated
|
Total
Stockholders’
|
Redeemable
Convertible Noncontrolling
|
||||||||||||||||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares | Amount |
Shares
|
Amount
|
Capital
|
Loss
|
Deficit
|
(Deficit) Equity
|
Interests
|
||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | - |
$ | - | - |
$ | - | - | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
- |
- |
- |
- |
- | - | - | |||||||||||||||||||||||||||||||||||||||||||||
|
Net loss
|
- |
- |
- |
- |
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive loss
|
- |
- |
- |
- |
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | - | $ | - | - | $ | - | - | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Shares issued under employee stock purchase plan
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Contributions from redeemable convertible noncontrolling interest owners
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
|
Issuance costs for Series A preferred stock to redeemable NCI
|
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive loss
|
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | - | $ | - | - | $ | - | - | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | - | $ | - | - | $ | - | - | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||||||
|
Balance at December 31, 2019
|
|
$
|
|
|
$
|
|
$ |
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||||||||||||||
|
Issuance costs for Series B convertible preferred stock
|
-
|
|
-
|
(
|
)
|
- |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
- | - |
-
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
-
|
-
|
-
|
-
|
- | - |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Net loss
|
-
|
|
-
|
|
- |
-
|
|
|
|
(
|
)
|
(
|
)
|
|
||||||||||||||||||||||||||||||||||||||
|
Balance at March 31, 2020
|
|
$
|
|
|
$
|
|
$ |
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
- | - |
-
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
-
|
-
|
-
|
-
|
- | - |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Net loss
|
-
|
|
-
|
|
- |
-
|
|
|
|
(
|
)
|
(
|
)
|
|
||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2020
|
|
$
|
|
|
$
|
|
$ |
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||||||||||||||
|
Issuance costs for Series C convertible
preferred stock
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares acquired upon forfeiture | - | - | - | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
(Unaudited)
(in thousands)
|
Nine Months Ended September 30,
|
||||||||
|
2021
|
2020
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Stock-based compensation expense
|
|
|
||||||
|
Depreciation
|
|
|
||||||
|
Amortization/accretion of investments
|
|
|
||||||
|
Loss on disposal of property and equipment
|
|
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Related party receivables, net
|
|
|
||||||
|
Prepaid expenses and other assets
|
(
|
)
|
(
|
)
|
||||
|
Accounts payable and accrued expenses
|
|
|
||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of short-term and long-term investments
|
(
|
)
|
|
|||||
|
Sales and maturities of short-term and long-term investments
|
||||||||
|
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Issuance costs for Series B convertible preferred stock
|
|
(
|
)
|
|||||
|
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs
|
||||||||
|
Payment of deferred offering costs
|
( |
) | ||||||
|
Contributions from redeemable convertible noncontrolling interest owners, net
|
||||||||
|
Proceeds (payments) upon stock option exercises, net of shares acquired upon forfeiture
|
|
(
|
)
|
|||||
|
Proceeds from issuance of common stock under employee stock purchase plan
|
||||||||
|
Net cash provided by financing activities
|
|
|
||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(
|
)
|
|
|||||
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
|
|
||||||
|
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
|
$
|
|
||||
| Supplemental non-cash investing and financing activity: |
||||||||
|
Property and equipment included in accounts payable and accrued expenses
|
$ |
$ |
||||||
|
Deferred offering costs included in accounts payable and accrued expenses
|
$ |
$ |
||||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
1. Organization and Basis of Presentation
Organization and Nature of
Operations
Kinnate Biopharma Inc. (Kinnate or the Company) was incorporated in the State of
Delaware in January 2018 and is headquartered in San Diego, California. The Company is a biopharmaceutical company focused on the discovery and development of small molecule kinase inhibitors for difficult-to-treat, genomically defined cancers.
Since its inception, the Company has devoted substantially all of its resources to
research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. It has incurred
losses and negative cash flows from operations since commencement of its operations. The Company had an accumulated deficit of $116.9
million and had cash and cash equivalents and short-term and long-term investments totaling $347.9 million as of September 30, 2021. From
its inception through September 30, 2021, the Company has financed its operations primarily through issuances of common stock, including in the Company’s initial public offering (IPO), and private placements of convertible preferred stock.
In May 2021, the Company announced the closing of a Series A preferred stock
financing of a China joint venture to enable the potential development and commercialization of certain targeted oncology product candidates across Greater China. Contributions from noncontrolling interest members totaled $35 .0 million before issuance costs of $0.2
million. As of September 30, 2021, the Company held a 54.9 % equity interest in the joint venture.
As the Company continues to pursue its business plan, it expects to finance its
operations through the sale of equity, debt financings or other capital resources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or
from grants. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain
additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business, results of operations or financial condition. The
accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at
least the next twelve months from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC).
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, since they are interim statements, the
accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.
The accompanying unaudited interim consolidated financial statements include all
known adjustments which, in the opinion of management, are necessary for a fair presentation of the results as required by GAAP. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets
and liabilities. The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial
statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form
10-K filed with the SEC.
The condensed consolidated financial statements include the
accounts of the Company’s variable interest entity (VIE), the China joint venture, for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
The Company evaluates its ownership, contractual and other
interests in entities that are not wholly-owned to determine if these entities are VIEs, and, if so, whether the Company is the primary beneficiary of the VIE. In determining whether the Company is the primary beneficiary of a VIE and therefore
required to consolidate the VIE, the Company applies a qualitative approach that determines whether the Company has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the
obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE. As of September 30, 2021, the Company held a 54.9 % equity interest in the China joint venture. Based on the Company’s assessment, the Company concluded that the China joint venture is a VIE and the Company is the
primary beneficiary.
The Company will continuously assess whether it is the
primary beneficiary of a VIE, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of such VIE. During the periods presented, the Company has not provided any other financial or other
support to the Company’s VIE that it was not contractually required to provide.
Operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of future results, particularly in light of the COVID-19 pandemic and its impact on domestic and global
economies. To limit the spread of the novel coronavirus that causes COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted,
reduced or suspended operating activities. Between March 2020 and June 2021, the Company’s employees worked almost exclusively from home. Since June 2021, the Company’s employees have been working in a hybrid model both in the Company’s
offices and also from home. Although some of the governmental orders and guidelines have terminated or are now less restrictive than when originally implemented, the Company continues to monitor and assess the spread of COVID-19 and may need
to further adjust its working model from time to time. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change, based, in part, on the length and severity of any additional restrictions and other limitations
that may be imposed on the Company’s business. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from the COVID-19
pandemic on the costs and timing associated with the conduct of the clinical activities and other related business activities.
Initial Public Offering
On December 3, 2020, the Company completed the IPO selling 13,800,000 shares of common stock, which included the full exercise by the underwriters of their option to purchase up to 1,800,000 additional shares, at a price of $20.00
per share resulting in gross proceeds of $276.0 million. After deducting underwriting discounts and commissions and other offering
expenses related to the IPO of $22.7 million, the net proceeds to the Company from the transaction were $253.3 million. In connection with the IPO, all shares of convertible preferred stock outstanding at the time of the IPO converted into 25,778,437 shares of common stock.
On November 25, 2020, the Company filed a certificate of amendment to its amended
and restated certificate of incorporation effecting a 1 -for-1.23453 reverse stock split of its issued and outstanding common stock and
convertible preferred stock. The par value of the authorized stock was not adjusted as a result of the reverse stock split. Other than the par value, all share and per share data shown in the accompanying financial statements and related notes have
been retroactively revised to reflect the reverse stock split.
2. Summary of Significant Accounting Policies
Redeemable Convertible Noncontrolling Interests
The shares third parties own in the China joint venture represent an interest in the equity the Company does not
control. The redeemable convertible noncontrolling interests attributable to other owners has been classified in temporary equity on the Condensed Consolidated Balance Sheets as the preferred stock is redeemable by the noncontrolling interests.
Since the preferred stock held at the China joint venture does not represent a residual equity interest, net losses of the China
joint venture are not allocated to the preferred shares. As a result, the balance of the preferred stock classified as a redeemable convertible noncontrolling interest equals its carrying value.
Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of expenses during the reporting period. Accounting estimates and management judgments reflected in the financial statements include: normal recurring accruals, including the accrual of
research and development expenses; valuation of deferred tax assets; and stock-based compensation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may
materially differ from these estimates and assumptions. Although the impact of the COVID-19 pandemic to the Company’s business and operating results presents additional uncertainty, the Company continues to use the best information available
to update its critical accounting estimates.
Net Loss Per Share
Basic net loss per common share is calculated by dividing net loss attributable
to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing net loss attributable to common
stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the Company’s outstanding convertible preferred stock and
common stock options are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities as
the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common
stockholders. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.
The following table sets forth the computation of the basic and diluted net loss
per share (in thousands, except share and per share amounts):
| Three Months Ended September 30, |
Nine Months Ended September 30,
|
|||||||||||||||
| 2021 |
2020 |
2021
|
2020
|
|||||||||||||
|
Numerator
|
||||||||||||||||
|
Net loss attributable to Kinnate
|
$ | ( |
) | $ | ( |
) |
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Denominator
|
||||||||||||||||
|
Weighted-average shares outstanding used in computing net loss per share, basic and diluted
|
|
|
||||||||||||||
|
Net loss per share, basic and diluted
|
$ | ( |
) | $ | ( |
) |
$
|
(
|
)
|
$
|
(
|
)
|
||||
The following outstanding shares of potentially dilutive
securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:
| Three Months Ended September 30, |
Nine Months Ended September 30,
|
|||||||||||||||
| 2021 |
2020 |
2021
|
2020
|
|||||||||||||
|
Options to purchase common stock
|
|
|
||||||||||||||
|
Convertible preferred stock
|
|
|
||||||||||||||
|
Total
|
|
|
||||||||||||||
Recently Issued Accounting Standards
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, Leases (Topic 842) (ASC 842), which sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the
principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the
lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. ASC 842 provides a lessee with an option to not
account for leases with a term of 12 month or less as leases in the scope of the new standard. ASC 842 supersedes the previous leases standard, ASC 840 Leases. For public business entities, this ASU is effective for fiscal years beginning
after December 15, 2018, and interim periods within those fiscal years, and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements. Early adoption is permitted. As amended by ASU No. 2020-05, for all other entities, this ASU is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years
beginning after December 15, 2022. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, ASU No. 2016-02 is effective for
the Company for the year ended December 31, 2022, and all interim periods within. In July 2018, the FASB issued supplemental adoption guidance and clarification to ASC 842 within ASU No. 2018-10, Codification Improvements to Topic 842, Leases
and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-11 provides another transition method in addition to the existing modified retrospective transition method by allowing entities to initially apply the new leasing
standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. The Company is currently evaluating the impact the adoption of these ASUs will have on
financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (ASC
326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss
methodology. The amendments in ASU No. 2016-13 added Topic 326, Financial Instruments—Credit Losses, made several consequential amendments to the Codification. ASU No. 2016-13 also modified the accounting for available-for-sale debt securities,
which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The guidance is effective
for public business entities for annual periods beginning after December 15, 2019, including interim periods within those years. For all other entities, the standard is effective for annual periods beginning after December 15, 2022 and interim
periods, therein. Early adoption is permitted. Since the Company has elected to use the extended transition period under the JOBS Act available to emerging growth companies (EGCs), the ASU is effective for the Company for fiscal years beginning
after December 15, 2022. The Company does not expect the adoption to have a material impact on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the
Accounting for Income Taxes (ASU No. 2019-12). Among other items, the amendments in ASU No. 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of
a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in
which the law is effective. This exception was removed under ASU No. 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate.
Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date
basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the
anticipated loss for the full year. ASU No. 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU No.
2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. For EGCs, the standard is effective for fiscal years beginning after December 15,
2021. The Company does not expect the ASU to have a material impact on its financial statements and related disclosures.
3. Cash, cash equivalents and restricted cash
The following table
provides a reconciliation of the components of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
September 30, 2021
|
December 31, 2020
|
|||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
| Cash at consolidated joint venture | ||||||||
|
Restricted cash, non-current
|
|
|
||||||
|
Total cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows
|
$
|
|
$
|
|
||||
The cash at the consolidated joint venture represents cash held at the China joint venture and the use of such cash is limited
to the operations of the China joint venture (see Note 11). The restricted cash balance relates to the Company’s office lease in San Diego, California (see Note 12).
4. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
September 30, 2021
|
December 31, 2020
|
|||||||
|
Furniture and fixtures
|
$
|
|
$
|
|
||||
|
Computers and equipment
|
|
|
||||||
|
Computer software
|
|
|
||||||
|
Property and equipment
|
|
|
||||||
|
Less accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Property and equipment, net
|
$
|
|
$
|
|
||||
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
September 30, 2021
|
December 31, 2020
|
|||||||
|
Accrued research and development
|
$
|
|
$
|
|
||||
|
Accrued compensation
|
|
|
||||||
|
Accrued legal fees
|
|
|
||||||
|
Other accruals
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
6. Investments
The Company has invested its excess cash in marketable securities as of September
30, 2021 and December 31, 2020. The following is a summary by significant investment category (in thousands):
|
September 30, 2021
|
|||||||||||||||||||
|
Maturity
in Years
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
|||||||||||||||
|
Corporate debt securities
|
less than
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Commercial paper
|
less than
|
|
|
|
|
||||||||||||||
| U.S. Treasury securities |
less than |
||||||||||||||||||
| Asset-backed securities | less than |
( |
) | ||||||||||||||||
|
Short-term investments
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Corporate debt securities
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
U.S. Treasury securities
|
|
|
|
(
|
)
|
|
|||||||||||||
|
Asset-backed securities
|
|
|
|
(
|
)
|
||||||||||||||