nktx-10q_20200930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                       

Commission File Number: 001-39370

 

 

Nkarta, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4515206

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6000 Shoreline Court, Suite 102

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

 

(415) 582-4923

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

NKTX

 

 

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

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, 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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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, 2020, the registrant had 32,595,397 shares of common stock, par value $0.0001 per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements:

1

 

Condensed Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019

1

 

Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (unaudited)

2

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019 (unaudited)

3

 

Condensed Statements of Cash Flows for the three and nine months ended September 30, 2020 and 2019 (unaudited)

5

 

Notes to Unaudited Condensed Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

Signatures

32

 

 

 

i


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:

 

 

the success, cost, timing and potential indications of our product candidate development activities and clinical trials, including our currently planned and potential future clinical trials of NKX101 and NKX019;

 

our ability to achieve our milestones for development of our product candidates;

 

our ability to obtain and maintain regulatory approval of our product candidates, including NKX101 and NKX019, in any of the indications for which we plan to develop them, and any related restrictions, limitations and/or warnings in the label of an approved product;

 

the future results of ongoing or later clinical trials, including of NKX101 and NKX019;

 

our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our product candidates;

 

risks associated with the COVID-19 pandemic, which may adversely impact our business, preclinical studies and clinical trials;

 

our plans to research, develop and commercialize our product candidates;

 

our ability to complete construction and qualification of manufacturing facilities to produce clinical and commercial products;

 

our ability to develop, characterize, and control manufacturing processes for our product candidates;

 

the size and growth potential of the markets for our products, and our ability to identify target patient populations and serve those markets, especially for diseases with small patient populations;

 

our ability to successfully commercialize our products, including obtaining reimbursement on favorable terms;

 

our ability to develop and maintain sales and marketing capabilities;

 

the rate and degree of market acceptance of our products;

 

our ability to obtain and maintain insurance coverage and reimbursement for our product candidates;

 

our ability to grow our organization and increase the size of our facilities to meet our anticipated growth;

 

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

our ability to attract and retain strategic partners with development, regulatory and commercialization expertise;

 

the success of competing therapies that are or become available;

 

our ability to attract and retain key scientific, commercial or management personnel;

 

our expectations regarding the period during which we qualify under the JOBS Act as an emerging growth company or a smaller reporting company;

 

the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others;

 

regulatory developments in the United States and foreign countries; and

 

our ability to maintain our license agreement with National University of Singapore and St. Jude Children’s Research Hospital with respect to certain rights to NKX101 and NKX019;

 

other risks and factors described in this Quarterly Report on Form 10-Q and those listed under “Risk Factors” in our Form S-1 filed with the SEC, which became effective on July 9, 2020, as updated by our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

 

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

 

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 report, 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.

i


 

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. 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, changed circumstances or otherwise.

 

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

 

 

ii


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

188,568

 

 

$

20,607

 

Short-term investments, available-for-sale

 

 

141,191

 

 

 

16,384

 

Prepaid expenses and other current assets

 

 

3,635

 

 

 

474

 

Total current assets

 

 

333,394

 

 

 

37,465

 

Restricted cash

 

 

413

 

 

 

268

 

Property and equipment, net

 

 

9,180

 

 

 

3,080

 

Operating lease right-of-use assets

 

 

8,763

 

 

 

7,144

 

Other long-term assets

 

 

545

 

 

 

455

 

Total assets

 

$

352,295

 

 

$

48,412

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,262

 

 

$

1,882

 

Operating lease liabilities, current portion

 

 

1,476

 

 

 

1,516

 

Preferred stock purchase right liability

 

 

 

 

 

1,478

 

Accrued and other current liabilities

 

 

5,821

 

 

 

3,289

 

Total current liabilities

 

 

9,559

 

 

 

8,165

 

Operating lease liabilities, net of current portion

 

 

7,659

 

 

 

5,780

 

Other long-term liabilities

 

 

96

 

 

 

134

 

Total liabilities

 

 

17,314

 

 

 

14,079

 

Commitments

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

 

 

 

59,815

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

1

 

Additional paid-in capital

 

 

435,098

 

 

 

1,179

 

Accumulated other comprehensive loss

 

 

4

 

 

 

(2

)

Accumulated deficit

 

 

(100,124

)

 

 

(26,660

)

Total stockholders’ equity (deficit)

 

 

334,981

 

 

 

(25,482

)

Total liabilities and stockholders’ equity (deficit)

 

$

352,295

 

 

$

48,412

 

 

The accompanying notes are an integral part of these condensed financial statements.

1


NKARTA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands except share and per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Collaboration revenue

 

$

 

 

$

 

 

$

 

 

$

115

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

9,828

 

 

 

4,620

 

 

 

24,950

 

 

 

10,535

 

General and administrative

 

 

3,918

 

 

 

1,289

 

 

 

8,560

 

 

 

3,281

 

Total operating expenses

 

 

13,746

 

 

 

5,909

 

 

 

33,510

 

 

 

13,816

 

Loss from operations

 

 

(13,746

)

 

 

(5,909

)

 

 

(33,510

)

 

 

(13,701

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of preferred stock

   purchase right liability

 

 

 

 

 

3,383

 

 

 

(40,163

)

 

 

3,383

 

Change in fair value of derivative liability

 

 

 

 

 

858

 

 

 

 

 

 

858

 

Loss from extinguishment of debt

 

 

 

 

 

(752

)

 

 

 

 

 

(752

)

Interest income

 

 

206

 

 

 

 

 

 

358

 

 

 

60

 

Interest expense

 

 

 

 

 

(283

)

 

 

 

 

 

(472

)

Other income (expense), net

 

 

(153

)

 

 

35

 

 

 

(149

)

 

 

35

 

Total other income (expense), net

 

 

53

 

 

 

3,241

 

 

 

(39,954

)

 

 

3,112

 

Net loss

 

$

(13,693

)

 

$

(2,668

)

 

$

(73,464

)

 

$

(10,589

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,693

)

 

$

(2,668

)

 

$

(73,464

)

 

$

(10,589

)

Other comprehensive loss

 

 

3

 

 

 

 

 

 

6

 

 

 

 

Comprehensive loss

 

$

(13,690

)

 

$

(2,668

)

 

$

(73,458

)

 

$

(10,589

)

Net loss per share, basic and diluted

 

$

(0.44

)

 

$

(1.75

)

 

$

(6.39

)

 

$

(7.45

)

Weighted average shares used to compute net loss

   per share, basic and diluted

 

 

30,981,441

 

 

 

1,528,510

 

 

 

11,499,327

 

 

 

1,421,882

 

 

The accompanying notes are an integral part of these condensed financial statements.

2


NKARTA, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in thousands except share data)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Loss

 

 

Deficit

 

Balance, December 31, 2019

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,600,601

 

 

$

1

 

 

$

1,179

 

 

$

(26,660

)

 

$

(2

)

 

$

(25,482

)

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

17,494

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Issuance of common stock upon

   exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

2,871

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

482

 

 

 

 

 

 

 

 

 

482

 

Unrealized loss on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,706

)

 

 

 

 

 

(8,706

)

Balance, March 31, 2020

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,620,966

 

 

$

1

 

 

$

1,676

 

 

$

(35,366

)

 

$

(3

)

 

$

(33,692

)

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

19,110

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

Issuance of common stock upon

   exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

110,425

 

 

 

 

 

 

285

 

 

 

 

 

 

 

 

 

285

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

566

 

 

 

 

 

 

 

 

 

566

 

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51,065

)

 

 

 

 

 

(51,065

)

Balance, June 30, 2020

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,750,501

 

 

$

1

 

 

$

2,539

 

 

$

(86,431

)

 

$

1

 

 

$

(83,890

)

Issuance of Series B second

   tranche convertible preferred

   stock, net of issuance cost

 

 

27,066,206

 

 

 

64,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of preferred

   stock purchase right liability

   to equity upon issuance of

   convertible preferred stock

 

 

 

 

 

41,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible

   preferred stock to

   common stock

 

 

(54,350,179

)

 

 

(165,777

)

 

 

 

14,689,215

 

 

 

1

 

 

 

165,776

 

 

 

 

 

 

 

 

 

165,777

 

Issuance of common stock

   upon initial public offering,

   net of issuance cost

 

 

 

 

 

 

 

 

 

16,100,000

 

 

 

1

 

 

 

265,129

 

 

 

 

 

 

 

 

 

265,130

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

18,246

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock

   upon exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

10,370

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

36

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,609

 

 

 

 

 

 

 

 

 

1,609

 

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,693

)

 

 

 

 

 

(13,693

)

Balance, September 30, 2020

 

 

 

 

$

 

 

 

 

32,568,332

 

 

$

3

 

 

$

435,098

 

 

$

(100,124

)

 

$

4

 

 

$

334,981

 

 

The accompanying notes are an integral part of these condensed financial statements.

3


NKARTA, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(Unaudited, in thousands except share data)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Loss

 

 

Deficit

 

Balance, December 31, 2018

 

 

6,170,349

 

 

$

12,709

 

 

 

 

1,231,840

 

 

$

1

 

 

$

187

 

 

$

(5,584

)

 

$

 

 

$

(5,396

)

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

134,601

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

20

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67

 

 

 

 

 

 

 

 

 

67

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,083

)

 

 

 

 

 

(3,083

)

Balance, March 31, 2019

 

 

6,170,349

 

 

$

12,709

 

 

 

 

1,366,441

 

 

$

1

 

 

$

274

 

 

$

(8,667

)

 

$

 

 

$

(8,392

)

Beneficial conversion feature

   upon issuance of convertible

   promissory notes

 

 

 

 

 

261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

96,030

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88

 

 

 

 

 

 

 

 

 

88

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,838

)

 

 

 

 

 

(4,838

)

Balance, June 30, 2019

 

 

6,170,349

 

 

$

12,970

 

 

 

 

1,462,471

 

 

$

1

 

 

$

367

 

 

$

(13,505

)

 

$

 

 

$

(13,137

)

Reacquisition of

   beneficial conversion

   feature upon settlement

   of promissory notes

 

 

 

 

 

(145

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series B

   convertible preferred stock,

   net of issuance costs

 

 

18,817,499

 

 

 

44,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B preferred stock

   purchase right liability

   upon issuance of Series B

   convertible preferred stock

 

 

 

 

 

(2,795

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

97,054

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Issuance of common stock upon

   exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

6,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

227

 

 

 

 

 

 

 

 

 

227

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,668

)

 

 

 

 

 

(2,668

)

Balance, September 30, 2019

 

 

24,987,848

 

 

$

54,356

 

 

 

 

1,565,859

 

 

$

1

 

 

$

599

 

 

$

(16,173

)

 

$

 

 

$

(15,573

)

 

The accompanying notes are an integral part of these condensed financial statements.

4


NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(73,464

)

 

$

(10,589

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

2,657

 

 

 

382

 

Depreciation and amortization

 

 

503

 

 

 

272

 

Accretion and amortization of investments, net

 

 

116

 

 

 

 

Non-cash lease expense

 

 

220

 

 

 

124

 

Change in fair value of preferred stock purchase right liability

 

 

40,163

 

 

 

(3,383

)

Change in fair value of derivative liability

 

 

 

 

 

(858

)

Non-cash loss from extinguishment of debt

 

 

 

 

 

752

 

Non-cash interest expense on convertible notes

 

 

 

 

 

472

 

Others

 

 

(15

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(3,355

)

 

 

28

 

Accounts payable and accrued and other liabilities

 

 

2,523

 

 

 

1,069

 

Net cash used in operating activities

 

 

(30,652

)

 

 

(11,731

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(6,442

)

 

 

(1,306

)

Purchases of short-term investments

 

 

(144,916

)

 

 

 

Maturities of short-term investments