KADMON HOLDINGS, INC. In this Quarterly Report on Form 10-Q, unless otherwise stated or the context
otherwise requires, references to the "Company," "Kadmon," "we," "us" and "our"
refer to
Overview
We are a biopharmaceutical company engaged in the discovery, development and
commercialization of small molecules and biologics to address significant unmet
medical needs. Our clinical pipeline includes developmental treatments for
immune and fibrotic diseases as well as immuno-oncology therapies. Our
operations to date have been focused on developing first-in-class innovative
therapies for indications with significant unmet medical needs while leveraging
our commercial infrastructure. We believe that we have the ability to progress
these candidates ourselves while maintaining flexibility for commercial and
licensing arrangements. In addition to these discovery and development efforts,
our business strategy includes the efficient commercialization of these drugs in
the
Our revenues are difficult to predict and depend on several factors. For
example, our revenues depend, in part, on regulatory approval decisions for our
product and product candidates, the effectiveness of our and our collaborative
partners' commercialization efforts, market acceptance of our products,
particularly REZUROCK™ (belumosudil), the resources dedicated to our products
and product candidates by us and our collaborative partners, and our ability to
enter into or modify licensing agreements for our product candidates. We have
never been profitable and had an accumulated deficit of
Our operating expenses are also difficult to predict and depend on several factors, including commercialization expenses, research and development expenses, drug manufacturing, and clinical research activities, the ongoing requirements of our development programs and the availability of capital. As our commercialization activities for REZUROCK and research and development programs continue to advance, we expect our operating costs will increase. Management may be able to control the timing and level of research and development and selling, general and administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and/or payments.
As a result of these factors, we believe that period-to-period comparisons are not necessarily meaningful and you should not rely on them as an indication of future performance. The Company has sustained operating losses for the majority of its corporate history and the Company expects to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations. Due to all of the foregoing factors, it is possible that our operating results will be below the expectations of market analysts and investors. In such event, the prevailing market price of our common stock could be materially adversely affected.
Recent Corporate Highlights
COVID-19 Update
The ongoing COVID-19 pandemic has severely impacted global economic activity and caused significant volatility in financial markets. While our financial condition, results of operations, cybersecurity and liquidity have not been materially impacted by the direct effects of the pandemic, the COVID-19 pandemic continues to evolve. We are continuing to monitor developments with respect to the COVID-19 pandemic and to make adjustments as needed to assist in protecting the safety of our employees and communities while continuing our business activities. To date, implementation of these measures has not required material expenditures or significantly impacted our ability to operate our business or our internal control over financial reporting and disclosure controls and procedures. We are continuing to monitor the potential impacts of COVID-19 on our operations and those of our partners, suppliers, customers, and regulators, including commercial and clinical drug supply chain continuity and commercial launch of REZUROCK.
23
--------------------------------------------------------------------------------
Table of Contents
Notwithstanding the foregoing, we cannot precisely predict the impact that the
COVID-19 pandemic will have in the future due to numerous uncertainties,
including the severity of the disease and its variants, the duration of the
pandemic, actions that may be taken by governmental authorities, the impact to
the business of potential variations or disruptions in our supply chain, and
other factors identified in Part I, Item 1A. "Risk Factors" included in our
Annual Report on Form 10-K for the year ended
REZUROCK ™ (belumosudil)
REZUROCK is an oral tablet developed by Kadmon for the treatment of cGVHD.
REZUROCK was approved by the FDA on
We expect to begin generating revenue from sales of REZUROCK in the third
quarter of 2021. Revenue from sales of REZUROCK in future periods is subject to
uncertainties and will depend on several factors, including the success of our
and our partners' commercialization efforts in the
Belumosudil for the treatment of systemic sclerosis
We are also developing belumosudil for the treatment of systemic sclerosis ("SSc"). A double-blind, placebo-controlled, 60-patient Phase 2 clinical trial of belumosudil in diffuse cutaneous SSc ("dcSSc") (KD025-209) is ongoing, and an open-label Phase 2 clinical trial of belumosudil in dcSSc designed to quickly present the potential of belumosudil in dcSSc while the placebo-controlled trial is ongoing. We plan to present initial data from the open-label study by year-end 2021. The FDA has granted Orphan Drug Designation to belumosudil for the treatment of SSc.
KD033
We have a biologics research platform focused on the development of
immuno-oncology therapeutics, specifically, IL-15-containing fusion proteins for
the treatment of cancer. KD033 is an anti-PD-L1/IL-15 fusion protein and is the
most advanced product candidate from our IL-15 platform. A Phase 1 clinical
trial of KD033 in adults with metastatic or locally advanced solid tumors
(KD033-101) is ongoing. In
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with
See our significant accounting policies disclosed in "Note 2. Summary of
Significant Accounting Policies" in our audited financial statements for the
year ended
Recent Accounting Pronouncements
See Note 2 of the notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recently issued and adopted accounting pronouncements.
24
--------------------------------------------------------------------------------
Table of Contents
Results of Operations
Three and six months ended
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(unaudited)
(in thousands)
Revenues
Net sales $ 24 $ 299 $ 384 $ 888
Other revenue 173 149 377 6,295
Total revenue 197 448 761 7,183
Cost of sales and inventory
write-down 11 784 107 1,396
Gross profit 186 (336) 654 5,787
Operating expenses:
Research and development 18,525 16,516 33,799 29,390
Selling, general and
administrative 13,656 10,068 26,252 19,434
Total operating expenses 32,181 26,584 60,051 48,824
Loss from operations (31,995) (26,920) (59,397) (43,037)
Total other income (expense) 1,650 (232) 674 (13,412)
Income tax expense - - - -
Net loss $ (30,345) $ (27,152) $ (58,723) $ (56,449)
Deemed dividend on convertible
preferred stock 543 518 1,086 1,035
Net loss attributable to common
stockholders $ (30,888) $ (27,670) $ (59,809) $ (57,484)
Revenues
The decrease in total revenue for the six months ended
Research and development expenses
The increase in research and development expenses for the three and six months
ended
Selling, general and administrative expenses
The increase in selling, general and administrative expenses for the three and
six months ended
Total other income (expense)
The following table provides components of other income (expense):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(unaudited) (unaudited)
(in thousands) (in thousands)
Interest income $ 1,120 $ 128 $ 1,720 $ 594
Interest expense (2,497) (5) (3,726) (5)Unrealized gain (loss) on equity securities 747 (15,702) 251 (29,505) Realized gain on equity securities
- 15,510 - 15,510
Gain on extinguishment of obligation 3,091 - 3,091 -
Other expense (811) (163) (662) (6)
Total other income (expense) $ 1,650 $ (232) $ 674 $ (13,412) The increase in other income for the three and six months ended
25
--------------------------------------------------------------------------------
Table of Contents
Deemed dividend on convertible preferred stock
We have 28,708 shares of 5% convertible preferred stock outstanding at
Liquidity and Capital Resources
Sources of Liquidity
Since our inception through
The following table sets forth the primary sources and uses of cash, cash equivalents and restricted cash for each period set forth below:
Six Months Ended
June 30,
2021 2020
(unaudited)
(in thousands)
Net cash (used in) provided by:
Operating activities $ (52,568) $ (37,514)
Investing activities (161,039) 15,350
Financing activities 201,065 52,371
Net (decrease) increase in cash, cash equivalents and
restricted cash $ (12,542) $ 30,207
Operating Activities
The net cash used in operating activities was
The net cash used in operating activities was
Investing Activities
Net cash used in investing activities was
Net cash provided by investing activities was
Financing Activities
Net cash provided by financing activities for the six months ended
Net cash provided by financing activities for the six months ended
26
--------------------------------------------------------------------------------
Table of Contents
Future Funding Requirements
Our operations have principally been funded through the issuance of equity and debt securities. As our commercialization activities and our planned research and development programs continue to advance, we expect our costs will increase. Furthermore, given the uncertain economic conditions caused by the COVID-19 pandemic, we will continue to monitor the nature and extent of the impact of the COVID-19 pandemic on our liquidity and capital resources. As a result, our management will retain broad discretion over the allocation of our existing cash, cash equivalents and marketable debt securities.
The expected use of our cash, cash equivalents and marketable debt securities at
Our future working capital requirements, including the need for additional working capital, will be largely determined by the advancement of our portfolio of product candidates and commercialization of REZUROCK. More specifically, our working capital requirements will be dependent on:
?the timing, magnitude and scope of commercial spending and our development programs;
?regulatory approval of our product candidates;
?the costs of obtaining patent protection for our product candidates;
?the timing and terms of business development activities;
?the rate of technological advances relevant to our operations;
?the efficiency of manufacturing processes developed on our behalf by third parties; and
?the level of required administrative support for our daily operations.
Contractual Obligations and Commitments
There have been no material changes in our contractual obligations and
commitments during the six months ended
Off-balance Sheet Arrangements
During the periods presented we did not have, and we do not currently have, any
off-balance sheet arrangements, as defined under
© Edgar Online, source
