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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, 2021

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 8, 2021, the registrant had 32,949,415 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, 2021 and December 31, 2020 (unaudited)

1

 

Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (unaudited)

2

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020 (unaudited)

3

 

Condensed Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)

5

 

Notes to Unaudited Condensed Financial Statements

6

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

70

Item 3.

Defaults Upon Senior Securities

70

Item 4.

Mine Safety Disclosures

70

Item 5.

Other Information

70

Item 6.

Exhibits

71

Signatures

73

 

 

 

i


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, these statements are based on our management’s beliefs and assumptions and on information currently available to our management as of the date of this Quarterly Report on Form 10-Q. 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. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. You should read the sections titled “Risk Factor Summary” below and “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, which such factors may be updated or supplemented from time to time by subsequent reports we file with the Securities and Exchange Commission.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

i


 

 

RISK FACTOR SUMMARY

 

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. The below summary is qualified in its entirety by the more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q as part of your evaluation of an investment in our common stock.

 

 

We have a limited operating history and do not have any products approved for sale.

 

We have incurred significant losses since our inception, and we expect to continue to incur significant losses for the foreseeable future.

 

We have never generated revenue from product sales and may never achieve or maintain profitability.

 

We will require additional capital, which, if available, may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.

 

Our business and the business or operations of our research partners, including CRISPR, and other third parties with whom we conduct business could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have business operations.

 

Our business depends upon the success of our chimeric antigen receptor-natural killer cell, or CAR-NK, cell technology platform.

 

Utilizing CAR-NK cells represents a novel approach to the treatment of cancer, and we must overcome significant challenges in order to develop, commercialize and manufacture our product candidates.

 

Clinical development involves a lengthy and expensive process with an uncertain outcome, and we may encounter substantial delays due to a variety of reasons outside our control.

 

Our business is highly dependent on the success of our product candidates, and on the success of NKX101 and NKX019 in particular, and we may fail to develop NKX101, NKX019 and/or our other product candidates successfully or be unable to obtain regulatory approval for them.

 

Our preclinical pipeline programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.

 

The results of preclinical studies and early-stage clinical trials may not be predictive of future results. Initial success in any clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.

 

If any of our product candidates, or any competing product candidates, demonstrate relevant, serious adverse events, we may be required to halt or delay further clinical development.

 

If we fail to compete effectively with academic institutions and other biopharmaceutical companies that develop similar or alternatives to cellular immunotherapy product candidates, our business will be materially adversely affected.

 

Our manufacturing process is novel and complex, and we may encounter difficulties in production, or difficulties with internal manufacturing, which would delay or prevent our ability to provide a sufficient supply of our product candidates for clinical trials or our products for patients, if approved.

 

We rely on third parties to manufacture certain of our product candidates, and certain materials for use in the production of our product candidates, which increases the risk that we will not have sufficient quantities of such product candidates or materials, or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

We are reliant on a sole supplier for certain steps of our manufacturing process.

 

Delays in commissioning and receiving regulatory approvals for our manufacturing facilities could delay our development plans and thereby limit our ability to develop our product candidates and generate revenues.

 

If our license agreement with National University of Singapore and St. Jude’s Children’s Research Hospital, Inc. is terminated, we could lose our rights to key components enabling our NK cell engineering platform.

ii


 

If any patent protection we obtain is not sufficiently robust, our competitors could develop and commercialize products and technology similar or identical to ours.

 

If any of our product candidates are approved for marketing and commercialization and we have not developed or secured marketing, sales and distribution capabilities, either internally or from third parties, we will be unable to successfully commercialize such products and may not be able to generate product revenue.

 

Our product candidates, including NKX101 and NKX019, could be subject to regulatory limitations following approval, if and when such approval is granted.

 

The market price for our common stock may be volatile, which could contribute to the loss of all or part of your investment.

 

Concentration of ownership of our shares of common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

 

 

 

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

 

 

 

September 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

96,221

 

 

$

96,692

 

Short-term investments, available-for-sale

 

 

161,477

 

 

 

218,221

 

Prepaid expenses and other current assets

 

 

6,940

 

 

 

3,922

 

Total current assets

 

 

264,638

 

 

 

318,835

 

Restricted cash

 

 

2,098

 

 

 

413

 

Property and equipment, net

 

 

12,151

 

 

 

9,350

 

Operating lease right-of-use assets

 

 

12,073

 

 

 

8,505

 

Other long-term assets

 

 

1,505

 

 

 

547

 

Total assets

 

$

292,465

 

 

$

337,650

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,139

 

 

$

1,176

 

Operating lease liabilities, current portion

 

 

2,463

 

 

 

1,402

 

Accrued and other current liabilities

 

 

7,448

 

 

 

6,253

 

Total current liabilities

 

 

12,050

 

 

 

8,831

 

Operating lease liabilities, net of current portion

 

 

10,348

 

 

 

7,517

 

Other long-term liabilities

 

 

56

 

 

 

82

 

Total liabilities

 

 

22,454

 

 

 

16,430

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

451,320

 

 

 

439,235

 

Accumulated other comprehensive income (loss)

 

 

(30

)

 

 

3

 

Accumulated deficit

 

 

(181,282

)

 

 

(118,021

)

Total stockholders’ equity

 

 

270,011

 

 

 

321,220

 

Total liabilities and stockholders’ equity

 

$

292,465

 

 

$

337,650

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

16,616

 

 

$

9,828

 

 

$

46,111

 

 

$

24,950

 

General and administrative

 

 

5,812

 

 

 

3,918

 

 

 

17,431

 

 

 

8,560

 

Total operating expenses

 

 

22,428

 

 

 

13,746

 

 

 

63,542

 

 

 

33,510

 

Loss from operations

 

 

(22,428

)

 

 

(13,746

)

 

 

(63,542

)

 

 

(33,510

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of preferred stock

   purchase right liability

 

 

 

 

 

 

 

 

 

 

 

(40,163

)

Interest income

 

 

81

 

 

 

206

 

 

 

295

 

 

 

358

 

Other expense, net

 

 

(6

)

 

 

(153

)

 

 

(14

)

 

 

(149

)

Total other income (expense), net

 

 

75

 

 

 

53

 

 

 

281

 

 

 

(39,954

)

Net loss

 

$

(22,353

)

 

$

(13,693

)

 

$

(63,261

)

 

$

(73,464

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(22,353

)

 

$

(13,693

)

 

$

(63,261

)

 

$

(73,464

)

Other comprehensive gain (loss)

 

 

(36

)

 

 

3

 

 

 

(33

)

 

 

6

 

Comprehensive loss

 

$

(22,389

)

 

$

(13,690

)

 

$

(63,294

)

 

$

(73,458

)

Net loss per share, basic and diluted

 

$

(0.68

)

 

$

(0.44

)

 

$

(1.93

)

 

$

(6.39

)

Weighted average shares used to compute net loss

   per share, basic and diluted

 

 

32,902,723

 

 

 

30,981,441

 

 

 

32,823,829

 

 

 

11,499,327

 

 

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

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2020

 

 

 

 

$

 

 

 

 

32,627,963

 

 

$

3

 

 

$

439,235

 

 

$

3

 

 

$

(118,021

)

 

$

321,220

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,802

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock

   upon exercise of stock

   option, net of repurchase

 

 

 

 

 

 

 

 

 

154,489

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

756

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,347

 

 

 

 

 

 

 

 

 

3,347

 

Unrealized gain on

   short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,373

)

 

 

(19,373

)

Balance, March 31, 2021

 

 

 

 

$

 

 

 

 

32,798,254

 

 

$

3

 

 

$

443,347

 

 

$

34

 

 

$

(137,394

)

 

$

305,990

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,575

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock

   upon exercise of stock

   option, net of repurchase

 

 

 

 

 

 

 

 

 

39,032

 

 

 

 

 

 

256

 

 

 

 

 

 

 

 

 

256

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,690

 

 

 

 

 

 

 

 

 

3,690

 

Unrealized loss on

   short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,535

)

 

 

(21,535

)

Balance, June 30, 2021

 

 

 

 

$

 

 

 

 

32,852,861

 

 

$

3

 

 

$

447,302

 

 

$

6

 

 

$

(158,929

)

 

$

288,382

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,494

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Issuance of common stock

   upon exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

63,225

 

 

 

 

 

 

318

 

 

 

 

 

 

 

 

 

318

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,692

 

 

 

 

 

 

 

 

 

3,692

 

Unrealized loss on

   short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

 

 

 

(36

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,353

)

 

 

(22,353

)

Balance, September 30, 2021

 

 

 

 

$

 

 

 

 

32,931,580

 

 

$

3

 

 

$

451,320

 

 

$

(30

)

 

$

(181,282

)

 

$

270,011

 

 

3


 

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

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2019

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,600,601

 

 

$

1

 

 

$

1,179

 

 

$

(2

)

 

$

(26,660

)

 

$

(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

 

 

$

(3

)

 

$

(35,366

)

 

$

(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

 

 

$

1

 

 

$

(86,431

)

 

$

(83,890

)

Issuance of Series B second

   tranche convertible preferred

    stock, net of issuance costs

 

 

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 costs

 

 

 

 

 

 

 

 

 

16,100,000

 

 

 

1