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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2022

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 001-37345

 

CHINOOK THERAPEUTICS, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

94-3348934

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

400 Fairview Avenue North, Suite 900

Seattle, WA 98109

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (206) 485-7241

 

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, par value $0.0001 per share

KDNY

The Nasdaq Stock Market LLC

(The 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  

The number of shares of Registrant’s Common Stock outstanding as of July 31, 2022 was 62,896,299.

 

 

 

 


 

 

Table of Contents

 

 

 

 

Page

 

 

PART I—FINANCIAL INFORMATION

 

Item 1.

 

Condensed Consolidated Financial Statements (unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021

5

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

6

 

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

 

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

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

 

Controls and Procedures

35

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

37

Item 1A.

 

Risk Factors

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

 

Defaults Upon Senior Securities

76

Item 4.

 

Mine Safety Disclosures

76

Item 5.

 

Other Information

76

Item 6.

 

Exhibits

76

EXHIBIT INDEX

77

SIGNATURES

78

 

 

 

2


 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

 

Chinook Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited) 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

145,927

 

 

$

181,724

 

Marketable securities

 

 

216,687

 

 

 

105,113

 

Accounts receivable

 

 

3,115

 

 

 

10,061

 

Prepaid expenses and other current assets

 

 

5,670

 

 

 

3,741

 

Total current assets

 

 

371,399

 

 

 

300,639

 

Marketable securities

 

 

42,587

 

 

 

68,215

 

Property and equipment, net

 

 

17,500

 

 

 

18,935

 

Restricted cash

 

 

2,074

 

 

 

2,074

 

Operating lease right-of-use assets

 

 

52,277

 

 

 

55,385

 

Investment in equity securities

 

 

41,200

 

 

 

41,200

 

Equity method investment

 

 

5,345

 

 

 

8,205

 

Intangible assets, net

 

 

25,151

 

 

 

26,009

 

In-process research & development

 

 

36,550

 

 

 

36,550

 

Goodwill

 

 

117

 

 

 

117

 

Other assets

 

 

7,042

 

 

 

6,474

 

Total assets

 

$

601,242

 

 

$

563,803

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

4,907

 

 

 

8,580

 

Accrued and other current liabilities

 

 

17,373

 

 

 

17,104

 

Operating lease liabilities

 

 

4,701

 

 

 

4,401

 

Contingent value rights liability

 

 

2,500

 

 

 

10,000

 

Total current liabilities

 

 

29,481

 

 

 

40,085

 

Contingent value rights liability - non-current

 

 

22,509

 

 

 

24,591

 

Contingent consideration liability

 

 

4,220

 

 

 

5,160

 

Deferred tax liabilities

 

 

735

 

 

 

735

 

Operating lease liabilities, net of current maturities

 

 

37,166

 

 

 

39,589

 

Total liabilities

 

 

94,111

 

 

 

110,160

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized as of

   June 30, 2022 and December 31, 2021; no shares issued and outstanding at

   June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000 shares authorized as of

   June 30, 2022 and December 31, 2021; 62,873 and 54,761 shares issued

   and outstanding at June 30, 2022 and December 31, 2021

 

 

6

 

 

 

5

 

Additional paid-in capital

 

 

810,754

 

 

 

685,459

 

Accumulated deficit

 

 

(301,098

)

 

 

(231,766

)

Accumulated other comprehensive loss

 

 

(2,531

)

 

 

(55

)

Total stockholders’ equity

 

 

507,131

 

 

 

453,643

 

Total liabilities and stockholders’ equity

 

$

601,242

 

 

$

563,803

 

 

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

3


 

Chinook Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration and license revenue

 

$

418

 

 

$

34

 

 

$

3,115

 

 

$

385

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

30,023

 

 

 

22,787

 

 

 

56,275

 

 

 

48,484

 

General and administrative

 

 

8,635

 

 

 

7,768

 

 

 

16,503

 

 

 

17,311

 

Change in fair value of contingent consideration and

   contingent value rights liabilities

 

 

(1,984

)

 

 

19,557

 

 

 

(3,022

)

 

 

21,396

 

Amortization of intangible assets

 

 

429

 

 

 

422

 

 

 

858

 

 

 

842

 

Total operating expenses

 

 

37,103

 

 

 

50,534

 

 

 

70,614

 

 

 

88,033

 

Gain on sale of assets to equity method investment

 

 

 

 

 

7,227

 

 

 

 

 

 

7,227

 

Loss from operations

 

 

(36,685

)

 

 

(43,273

)

 

 

(67,499

)

 

 

(80,421

)

Other income (expense), net

 

 

767

 

 

 

(39

)

 

 

672

 

 

 

(106

)

Loss before income taxes and share of net loss of equity method

   investment

 

 

(35,918

)

 

 

(43,312

)

 

 

(66,827

)

 

 

(80,527

)

Income tax benefit

 

 

 

 

 

741

 

 

 

 

 

 

741

 

Share of net loss of equity method investment

 

 

(1,730

)

 

 

 

 

 

(2,505

)

 

 

 

Net loss

 

$

(37,648

)

 

$

(42,571

)

 

$

(69,332

)

 

$

(79,786

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(0.61

)

 

$

(0.97

)

 

$

(1.15

)

 

$

(1.86

)

Weighted-average shares used in computing net loss per share

   attributable to common stockholders, basic and diluted

 

 

61,983

 

 

 

43,861

 

 

 

60,175

 

 

 

43,004

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax of $0

 

 

(501

)

 

 

99

 

 

 

(394

)

 

 

137

 

Unrealized gain (loss) on marketable debt securities, net of tax of $0

 

 

(493

)

 

 

8

 

 

 

(2,082

)

 

 

24

 

Total other comprehensive income (loss)

 

 

(994

)

 

 

107

 

 

 

(2,476

)

 

 

161

 

Comprehensive loss

 

$

(38,642

)

 

$

(42,464

)

 

$

(71,808

)

 

$

(79,625

)

 

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

 

 

4


 

 

Chinook Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2021

 

 

54,761

 

 

$

5

 

 

$

685,459

 

 

$

(231,766

)

 

$

(55

)

 

 

453,643

 

Issuance of common stock upon exercise of stock options

   and vesting of restricted stock units

 

 

356

 

 

 

1

 

 

 

2,048

 

 

 

 

 

 

 

 

 

2,049

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,269

 

 

 

 

 

 

 

 

 

4,269

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,482

)

 

 

(1,482

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,684

)

 

 

 

 

 

(31,684

)

Balance at March 31, 2022

 

 

55,117

 

 

$

6

 

 

$

691,776

 

 

$

(263,450

)

 

$

(1,537

)

 

$

426,795

 

Issuance of common stock upon exercise of stock options,

   issuance of common stock under Employee Stock Purchase

   Plan, and vesting of restricted stock units

 

 

202

 

 

 

 

 

 

1,136

 

 

 

 

 

 

 

 

 

1,136

 

Issuance of common stock and accompanying pre-funded

   warrants in underwritten public offering, net of

   issuance costs

 

 

7,554

 

 

 

 

 

 

113,082

 

 

 

 

 

 

 

 

 

113,082

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,760

 

 

 

 

 

 

 

 

 

4,760

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(994

)

 

 

(994

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(37,648

)

 

 

 

 

 

(37,648

)

Balance at June 30, 2022

 

 

62,873

 

 

$

6

 

 

$

810,754

 

 

$

(301,098

)

 

$

(2,531

)

 

$

507,131

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

42,282

 

 

$

4

 

 

$

463,436

 

 

$

(128,829

)

 

$

11

 

 

$

334,622

 

Issuance of common stock upon exercise of stock options

   and warrants and vesting of restricted stock units

 

 

100

 

 

 

 

 

 

580

 

 

 

 

 

 

 

 

 

580

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,478

 

 

 

 

 

 

 

 

 

2,478

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

54

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(37,215

)

 

 

 

 

 

(37,215

)

Balance at March 31, 2021

 

 

42,382

 

 

$

4

 

 

$

466,494

 

 

$

(166,044

)

 

$

65

 

 

$

300,519

 

Issuance of common stock upon exercise of stock options

   and warrants, issuance of common stock under Employee

   Stock Purchase Plan, and vesting of restricted stock units

 

 

178

 

 

 

 

 

 

1,188

 

 

 

 

 

 

 

 

 

1,188

 

Issuance of common stock under the at-the-market sales agreement,

   net of offering costs

 

 

2,216

 

 

 

 

 

 

33,891

 

 

 

 

 

 

 

 

 

33,891

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,595

 

 

 

 

 

 

 

 

 

3,595

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

107

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(42,571

)

 

 

 

 

 

(42,571

)

Balance at June 30, 2021

 

 

44,776

 

 

$

4

 

 

$

505,168

 

 

$

(208,615

)

 

$

172

 

 

$

296,729

 

 

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

 

 

5


 

 

Chinook Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(69,332

)

 

$

(79,786

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,702

 

 

 

1,552

 

Loss on disposal of property and equipment

 

 

234

 

 

 

 

Amortization of intangible assets

 

 

858

 

 

 

842

 

Non-cash operating lease expense

 

 

3,092

 

 

 

2,596

 

Stock-based compensation expense

 

 

9,029

 

 

 

6,073

 

Change in fair value of contingent consideration and contingent value rights liabilities

 

 

(3,022

)

 

 

21,396

 

Accretion of discounts and amortization of premiums on marketable securities

 

 

706

 

 

 

(6

)

Deferred income tax

 

 

 

 

 

(741

)

Gain on sale of assets to equity method investment

 

 

 

 

 

(7,227

)

Share of net loss of equity method investment

 

 

2,505

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,946

 

 

 

(205

)

Prepaid expenses and other assets

 

 

(2,503

)

 

 

(153

)

Accounts payable

 

 

(3,723

)

 

 

5,610

 

Accrued and other liabilities

 

 

273

 

 

 

(3,956

)

Operating lease liabilities

 

 

(2,105

)

 

 

(1,413

)

Deferred revenue

 

 

 

 

 

(95

)

Net cash used in operating activities

 

 

(55,340

)

 

 

(55,513

)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(152,213

)

 

 

(105,328

)

Proceeds from marketable securities

 

 

63,479

 

 

 

73,615

 

Purchases of property and equipment

 

 

(601

)

 

 

(744

)

Proceeds from sale of property and equipment

 

 

 

 

 

267

 

Net cash used in investing activities

 

 

(89,335

)

 

 

(32,190

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock and accompanying pre-funded warrants in underwritten

   public offering, net of issuance costs

 

 

113,505

 

 

 

 

Proceeds from exercise of stock options and warrants and from Employee Stock Purchase Plan

 

 

3,185

 

 

 

1,768

 

Proceeds from at-the-market sales agreement, net of issuance costs

 

 

 

 

 

33,891

 

Previously incurred issuance costs related to an underwritten public offering

   paid during period

 

 

(286

)

 

 

 

Payment of contingent value rights liability

 

 

(7,500

)

 

 

 

Net cash provided by financing activities

 

 

108,904

 

 

 

35,659

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(26

)

 

 

84

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(35,797

)

 

 

(51,960

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

183,798

 

 

 

189,500

 

Cash, cash equivalents and restricted cash at end of period

 

$

148,001

 

 

$

137,540

 

Reconciliation of Cash, Cash Equivalents and Restricted Cash

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

145,927

 

 

$

135,466

 

Restricted cash

 

 

2,074

 

 

 

2,074

 

Total cash, cash equivalents and restricted cash

 

$

148,001

 

 

$

137,540

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

3,686

 

 

$

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and in accrued

   and other current liabilities

 

$

87

 

 

$

129

 

Issuance costs incurred but unpaid

 

 

423