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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 September 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 November 4, 2022 was 63,940,620.

 

 

 

 


 

 

Table of Contents

 

 

 

 

Page

 

 

PART I—FINANCIAL INFORMATION

 

Item 1.

 

Condensed Consolidated Financial Statements (unaudited)

3

 

 

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

3

 

 

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

4

 

 

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

5

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

22

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

 

Controls and Procedures

33

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

36

Item 1A.

 

Risk Factors

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

75

Item 3.

 

Defaults Upon Senior Securities

75

Item 4.

 

Mine Safety Disclosures

75

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) 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

126,072

 

 

$

181,724

 

Marketable securities

 

 

247,211

 

 

 

105,113

 

Accounts receivable

 

 

2,919

 

 

 

10,061

 

Prepaid expenses and other current assets

 

 

5,468

 

 

 

3,741

 

Total current assets

 

 

381,670

 

 

 

300,639

 

Marketable securities

 

 

24,412

 

 

 

68,215

 

Property and equipment, net

 

 

16,827

 

 

 

18,935

 

Restricted cash

 

 

2,074

 

 

 

2,074

 

Operating lease right-of-use assets

 

 

50,546

 

 

 

55,385

 

Investment in equity securities

 

 

41,200

 

 

 

41,200

 

Equity method investment

 

 

5,118

 

 

 

8,205

 

Intangible assets, net

 

 

24,720

 

 

 

26,009

 

In-process research & development

 

 

36,550

 

 

 

36,550

 

Goodwill

 

 

117

 

 

 

117

 

Other assets

 

 

7,102

 

 

 

6,474

 

Total assets

 

$

590,336

 

 

$

563,803

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

11,843

 

 

 

8,580

 

Accrued and other current liabilities

 

 

25,583

 

 

 

17,104

 

Operating lease liabilities

 

 

4,810

 

 

 

4,401

 

Contingent value rights liability

 

 

2,500

 

 

 

10,000

 

Total current liabilities

 

 

44,736

 

 

 

40,085

 

Contingent value rights liability - non-current

 

 

30,430

 

 

 

24,591

 

Contingent consideration liability

 

 

4,040

 

 

 

5,160

 

Deferred tax liabilities

 

 

735

 

 

 

735

 

Operating lease liabilities, net of current maturities

 

 

35,759

 

 

 

39,589

 

Total liabilities

 

 

115,700

 

 

 

110,160

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

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

   September 30, 2022 and December 31, 2021

 

 

 

 

 

 

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

   September 30, 2022 and December 31, 2021; 63,822 and 54,761 shares issued

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

 

 

6

 

 

 

5

 

Additional paid-in capital

 

 

835,330

 

 

 

685,459

 

Accumulated deficit

 

 

(357,077

)

 

 

(231,766

)

Accumulated other comprehensive loss

 

 

(3,623

)

 

 

(55

)

Total stockholders’ equity

 

 

474,636

 

 

 

453,643

 

Total liabilities and stockholders’ equity

 

$

590,336

 

 

$

563,803

 

 

The accompanying notes are an integral part of these unaudited 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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration and license revenue

 

$

2,501

 

 

$

4

 

 

$

5,616

 

 

$

389

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

41,984

 

 

 

23,573

 

 

 

98,259

 

 

 

72,057

 

General and administrative

 

 

10,023

 

 

 

6,847

 

 

 

26,526

 

 

 

24,158

 

Change in fair value of contingent consideration and

   contingent value rights liabilities

 

 

7,741

 

 

 

167

 

 

 

4,719

 

 

 

21,563

 

Amortization of intangible assets

 

 

431

 

 

 

423

 

 

 

1,289

 

 

 

1,265

 

Total operating expenses

 

 

60,179

 

 

 

31,010

 

 

 

130,793

 

 

 

119,043

 

Gain on sale of assets to equity method investment

 

 

 

 

 

 

 

 

 

 

 

7,227

 

Loss from operations

 

 

(57,678

)

 

 

(31,006

)

 

 

(125,177

)

 

 

(111,427

)

Other income (expense), net

 

 

1,690

 

 

 

(69

)

 

 

2,362

 

 

 

(175

)

Loss before income taxes and equity method investment

  gain (loss)

 

 

(55,988

)

 

 

(31,075

)

 

 

(122,815

)

 

 

(111,602

)

Income tax benefit

 

 

 

 

 

463

 

 

 

 

 

 

1,204

 

Equity method investment gain (loss)

 

 

9

 

 

 

(84

)

 

 

(2,496

)

 

 

(84

)

Net loss

 

$

(55,979

)

 

$

(30,696

)

 

$

(125,311

)

 

$

(110,482

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(0.83

)

 

$

(0.69

)

 

$

(2.00

)

 

$

(2.54

)

Weighted-average shares used in computing net loss per share

   attributable to common stockholders, basic and diluted

 

 

67,779

 

 

 

44,661

 

 

 

62,736

 

 

 

43,563

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax of $0

 

 

(550

)

 

 

202

 

 

 

(944

)

 

 

339

 

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

 

 

(542

)

 

 

(1

)

 

 

(2,624

)

 

 

23

 

Total other comprehensive income (loss)

 

 

(1,092

)

 

 

201

 

 

 

(3,568

)

 

 

362

 

Comprehensive loss

 

$

(57,071

)

 

$

(30,495

)

 

$

(128,879

)

 

$

(110,120

)

 

The accompanying notes are an integral part of these unaudited 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

 

Issuance of common stock upon exercise of stock options and

   vesting of restricted stock units

 

 

94

 

 

 

 

 

 

453

 

 

 

 

 

 

 

 

 

453

 

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

   net of offering costs

 

 

855

 

 

 

 

 

 

18,804

 

 

 

 

 

 

 

 

 

18,804

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,319

 

 

 

 

 

 

 

 

 

5,319

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,092

)

 

 

(1,092

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(55,979

)

 

 

 

 

 

(55,979

)

Balance at September 30, 2022

 

 

63,822

 

 

$

6

 

 

$

835,330

 

 

$

(357,077

)

 

$

(3,623

)

 

$

474,636

 

 

 

 

 

 

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

 

Issuance of common stock upon exercise of stock options

   and vesting of restricted stock units

 

 

54

 

 

 

 

 

 

259

 

 

 

 

 

 

 

 

 

259

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,287

 

 

 

 

 

 

 

 

 

3,287

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

201

 

 

 

201

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(30,696

)

 

 

 

 

 

(30,696

)

Balance at September 30, 2021

 

 

44,830

 

 

$

4

 

 

$

508,714

 

 

$

(239,311

)

 

$

373

 

 

$

269,780

 

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

 

 

5


 

 

Chinook Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(125,311

)

 

$

(110,482

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2,540

 

 

 

2,243

 

Loss on disposal of property and equipment

 

 

256

 

 

 

 

Amortization of intangible assets

 

 

1,289

 

 

 

1,265

 

Non-cash operating lease expense

 

 

4,676

 

 

 

4,134