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, 2022
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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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 7, 2022, the Registrant had 44,164,683 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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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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17
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Item 3.
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29
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Item 4.
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29
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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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114
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Item 3.
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114
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Item 4.
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114
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Item 5.
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114
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Item 6.
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115
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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:
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the ability of our ongoing and planned future preclinical studies and 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 investigational new drug applications (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 future 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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•
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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 (EGC) 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, 2022
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December 31, 2021
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Assets
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Current assets:
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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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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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Right-of-use lease assets
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Long-term investments
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| Restricted cash |
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Deferred offering costs
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| Other non-current assets |
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Total assets
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$
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$
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Liabilities, Redeemable Convertible Noncontrolling Interests and Stockholders’ Equity
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||||||||
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses
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| Current portion of operating lease liabilities | ||||||||
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Total current liabilities
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| Operating lease liabilities, long-term | ||||||||
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Total liabilities
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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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Preferred stock, $
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Common stock, $
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Additional paid-in capital
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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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Total stockholders’ equity
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Total liabilities, redeemable convertible noncontrolling interests and stockholders’ 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)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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|||||||||||||||
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2022
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2021
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2022
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2021
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|||||||||||||
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Operating expenses:
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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
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Total operating expenses
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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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Other income, net
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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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Net loss attributable to redeemable convertible noncontrolling interests
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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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)
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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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(
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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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$
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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 gain (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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(
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)
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||||||||
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Comprehensive loss attributable to redeemable convertible noncontrolling interests
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|
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||||||||||||
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Comprehensive 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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||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
(Unaudited)
(in thousands, except share amounts)
|
Common Stock
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Additional
Paid-in |
Accumulated
Other Comprehensive
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Accumulated
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Total
Stockholders’ |
Redeemable Convertible Noncontrolling
|
|||||||||||||||||||||||
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|
Shares
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Amount
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Capital
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Loss
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Deficit
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Equity
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Interests
|
|||||||||||||||||||||
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|
||||||||||||||||||||||||||||
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Balance at December 31, 2021
|
|
$
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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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Stock-based compensation expense
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-
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|||||||||||||||||||||
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Exercise of stock options
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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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Other comprehensive loss
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-
|
|
|
(
|
)
|
|
(
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)
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|
|||||||||||||||||||
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Balance at March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
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)
|
$
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|
$
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|
|||||||||||||
|
Stock-based compensation expense
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- | |||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
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Shares issued under employee stock purchase plan
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||||||||||||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( |
) | ( |
) | |||||||||||||||||||||||
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Balance at June 30, 2022
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$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
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Stock-based compensation expense
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- | |||||||||||||||||||||||||||
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Exercise of stock options
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||||||||||||||||||||||||||||
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Net loss
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- | ( |
) | ( |
) | |||||||||||||||||||||||
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Other comprehensive loss
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- | |||||||||||||||||||||||||||
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Balance at September 30, 2022
|
$
|
$
|
$
|
( |
) | $
|
( |
) | $
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$
|
||||||||||||||||||
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|
||||||||||||||||||||||||||||
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Balance at December 31, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||
|
Stock-based compensation expense
|
-
|
|
|
|
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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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Other comprehensive loss
|
-
|
|
|
(
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)
|
|
(
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)
|
|
|||||||||||||||||||
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Balance at March 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||
|
Stock-based compensation expense
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- | |||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
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Shares issued under employee stock purchase plan
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||||||||||||||||||||||||||||
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Issuance of Series A preferred stock to redeemable noncontrolling interest
owners (NCI)
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- | |||||||||||||||||||||||||||
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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
|
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
$ |
||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
KINNATE BIOPHARMA INC.
(Unaudited)
(in thousands)
|
|
Nine Months Ended September 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
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:
|
||||||||
|
Prepaid expenses and other assets
|
|
(
|
)
|
|||||
|
Operating lease right-of-use assets and liabilities, net
|
|
|
||||||
|
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:
|
||||||||
|
Contributions from redeemable noncontrolling interest owners, net
|
||||||||
|
Proceeds from stock option exercises
|
|
|
||||||
|
Proceeds from issuance of common stock under employee stock purchase plan
|
||||||||
|
Net cash provided by financing activities
|
|
|
||||||
| Effect of exchange rate changes on cash and cash equivalents | ( |
) | ||||||
|
Net decrease 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:
|
||||||||
|
Capitalized value of tenant improvement allowance
|
$
|
|
$
|
|
||||
|
Operating lease liabilities arising from obtaining right-of-use assets
|
$
|
|
$
|
|
||||
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 Francisco, 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 $227.8
million and had cash and cash equivalents and short-term and long-term investments totaling $262.1 million as of September 30, 2022,
exclusive of $26.4 million at its consolidated joint venture discussed in the paragraph below. From its inception through September 30,
2022, 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, Kinnjiu Biopharma Inc. (Kinnjiu), to enable the potential development and commercialization of certain targeted oncology product candidates across Greater China (People’s Republic of China, Hong Kong, Taiwan, and
Macau). Contributions from noncontrolling interest members totaled $35.0 million before issuance costs of $0.2 million. As of September 30, 2022, the Company held an approximately 58 % equity interest in Kinnjiu.
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 condensed consolidated 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, 2021 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, 2021, included in the Company’s Annual Report on Form
10-K filed with the SEC on March 28, 2022.
The condensed consolidated financial statements include the
accounts of the Company’s variable interest entity (VIE), Kinnjiu, 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, 2022, the Company held an approximately 58 % equity interest in Kinnjiu. Based on the Company’s assessment, the Company concluded that Kinnjiu 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 COVID-19 virus, 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.
2. Summary of Significant Accounting Policies
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; fair value of investments; 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 present additional uncertainty, the Company continues to use the
best information available to update its critical accounting estimates.
Leases
The
Company determines if an arrangement is or contains a lease at inception. For leases with a term greater than one year ,
right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses its
incremental borrowing rate which represents an estimated rate of interest that the Company would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date. Leases are classified as finance or
operating, with classification affecting the pattern and classification of expense recognition in the Condensed Consolidated Statement of Operations and Comprehensive Loss. The Company’s leases often include options to extend or
terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. As of September 30, 2022, it is not reasonably certain that these options will be exercised, and
they are not included within the lease term.
Redeemable Convertible Noncontrolling Interests
The shares third parties own in Kinnjiu 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 Kinnjiu does not represent a residual equity interest, net losses of Kinnjiu 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. Additionally, net losses of Kinnjiu have not been allocated to the noncontrolling interest related to ordinary shares held by a third party as the amounts to be allocated have
been immaterial to date.
Net Loss Per Share
Basic net loss per common share is calculated by dividing
the 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 the 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 common stock
options are considered to be potentially dilutive securities. 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,
|
|||||||||||||||
| 2022 | 2021 |
2022
|
2021
|
|||||||||||||
|
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, | |||||||||||||||
|
2022
|
2021
|
2022 |
2021 |
|||||||||||||
|
Options to purchase common stock
|
|
|
||||||||||||||
| Non-vested restricted stock units |
||||||||||||||||
|
Total
|
||||||||||||||||
Recently Adopted Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) under
its accounting standard codifications (ASC) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.
In February 2016, the 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. On January 1, 2022, the Company
adopted ASC 842 using the modified retrospective approach. Accordingly, prior period financial information and disclosures have not been adjusted and continue to be reported in accordance with the Company’s historical accounting under the
previous lease standard. In addition, the Company elected the package of practical expedients available for existing contracts, which allowed it to carry forward historical assessments of lease identification, lease classification, and initial
direct costs. As a result of adopting ASC 842, the Company recognized right-of-use assets and lease liabilities of $3.7 million and $4.2 million, respectively, on January 1, 2021, which are related to the Company’s facility operating leases. The difference between the right-of-use
assets and lease liabilities is primarily attributed to unamortized lease incentives. There was no adjustment to the opening balance of accumulated deficit as a result of the adoption of ASC 842.
Recently Issued Accounting Pronouncements Not Yet Adopted
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 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, and for interim periods beginning after December 15, 2022. 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, 2022
|
December 31, 2021
|
|||||||
|
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 Kinnjiu and the use of such cash is limited to the operations of
Kinnjiu (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, 2022
|
December 31, 2021
|
|||||||
|
Furniture and fixtures
|
$
|
|
$
|
|
||||
|
Computers and equipment
|
|
|
||||||
|
Computer software
|
|
|
||||||
| Leasehold improvements |
||||||||
|
Property and equipment
|
|
|
||||||
|
Less accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Property and equipment, net
|
$
|
|
$
|
|
||||
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
September 30, 2022
|
December 31, 2021
|
|||||||
|
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, 2022 and December 31, 2021. The following is a summary by significant investment category (in thousands):
|
September 30, 2022
|
||||||||||||||||||||
| Maturity |
Amortized |
Unrealized |
Unrealized |
Estimated |
||||||||||||||||
|
in Years
|
Cost
|
Gains
|
Losses
|
Fair Value
|
||||||||||||||||
|
Corporate debt securities
|
less than
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Commercial paper
|
less than
|
|
|
|
|
|||||||||||||||
| U.S. Treasury securities |
less than |
( |
) | |||||||||||||||||
|
Short-term investments
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
|
Corporate debt securities
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Asset-backed securities
|
|
|
|
(
|
)
|
|
||||||||||||||
|
Long-term investments
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
| December 31, 2021 |
||||||||||||||||||||
| Maturity |
Amortized |
Unrealized |
Unrealized |
Estimated |
||||||||||||||||
| |
in Years
|
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||||
|
Corporate debt securities
|
less than |
$ | $ | $ | ( |
) | $ | |||||||||||||
| U.S. Treasury securities | less than |
( |
) | |||||||||||||||||
|
Asset-backed securities
|
less than |
( |
) | |||||||||||||||||
|
Short-term investments
|
$ | $ | $ | ( |
) | $ | ||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( |
) | $ | ||||||||||||||
|
Long-term investments
|
$ | $ | $ | ( |
) | $ | ||||||||||||||
At September 30, 2022 and December 31, 2021, the Company held
securities in a total unrealized loss position of $2.6 million and $0.5 million, respectively. The Company generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position.
Further, such investments are invested in high grade securities. As such, the Company has classified these losses as temporary in nature.
The Company has determined that there were no
7. Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for
measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own assumptions.
The carrying amounts of the Company’s prepaid expenses and other current assets,
accounts payable and accrued expenses are generally considered to be representative of their fair value because of the short-term nature of these instruments. The Company’s investments, which may include money market funds and available-for-sale
investment securities consisting of high-quality, marketable debt instruments of corporations and the U.S. government are measured at fair value in accordance with the fair value hierarchy.
The following tables present the hierarchy for assets measured at fair value on a
recurring basis (in thousands):
|
Fair Value Measurements at September 30, 2022
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Corporate debt securities
|
|
|
|
|
||||||||||||
|
Commercial paper
|
|
|
|
|
||||||||||||
|
U.S. Treasury securities
|
|
|
|
|
||||||||||||
|
Asset-backed securities
|
|
|
|
|
||||||||||||
|
Total cash equivalents and
investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Fair Value Measurements at December 31, 2021
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Corporate debt securities
|
|
|
|
|
||||||||||||
| U.S. Treasury securities | ||||||||||||||||
|
Asset-backed securities
|
|
|
|
|
||||||||||||
|
Total cash equivalents and
investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Money market funds are classified as cash and cash equivalents
in the Company’s balance sheets at September 30, 2022 and December 31, 2021.