Q4 2020 Kindred Biosciences Inc Earnings Call
Welcome to the fourth quarter and full year 2020 financial results conference call and webcast for Kindred Biosciences. At this time all participants have been placed in a listen only mode. At the end of the prepared statements participants will have the opportunity to ask questions to ask a question. During the session you will be depressed star one on your telephone.
Please note that remarks made today will include forward looking statements and that actual results could differ materially from those projected or implied in the forward looking statements for a description of important factors that could cause actual results to differ we refer you to the forward looking statements in today's press release and a note on our forward looking statements in the.
The company's SEC filings, it's now my pleasure to turn the call over to Kindred Bio's CEO Richard Chin Dr. Chin. Please proceed thank.
Thank you operator.
Good afternoon, and welcome to our fourth quarter and full year 'twenty 'twenty financial results call.
Joining me today today from the management team of the Kindred bio are Wendy Wee, our CFO and touch on beer, our VP of corporate development and Investor Relations.
We are thrilled with our progress in the fourth quarter and in 2020 in general we've made excellent headway across our pipeline, including the initiation of the pivotal study for a turn off at the map and positive results on our inflammatory bowel disease program.
We also signed a partnership agreement with the logical for our parvovirus antibody and expanded our manufacturing agreement with the facts on it.
The successes in 'twenty 'twenty have set us up well for 2021 and we expect this year to be a banner year for kindred bio.
Let me start with an update on our dermatitis franchise.
The initiated the pivotal study for it turned over the map in December of last year.
It's too soon to tell how quickly it will enroll.
Our expectation that the study will take 12 to 18 months to complete Hasnt changed.
This is one of our flagship product candidates and given that the canine met dermatitis market has grown to nearly a $1 billion of here, we would expect turnover to be extremely successful.
In addition, we are advancing our other candidates for dermatitis nicely, including our IL four receptor antibody.
As a reminder, I hope for our antibody targets the underlying disease itself instead of just the symptoms. So it could potentially have significant advantages over certain available therapies.
We believe we have one of the broadest and most advanced dermatitis pipelines in the industry, including several molecules that have not yet been disclosed.
We have already incorporated our half life extension of technology into our dermatitis pipeline.
And think long acting molecules have the potential to be best in class and possibly market leaders.
With the exception of the current incumbent we estimate that we are ahead of our competition in this field and we expect to be next to market with the molecule for the indication.
So we're very excited about our highly promising dermatitis the pipeline.
Turning to the part of the virus program, we have reported compelling results on the.
The prophylaxis pivotal study.
The treatment pivotal study has been delayed longer than expected.
But we expect results in the near future.
We believe that the sent the body has the potential to revolutionize the care of dogs and pop piece with the devastating condition.
There's a lot of excitement both within the company and outside about this program, which offers hope for what is a terrible and currently untreatable disease.
We're very excited about our partnership with the line called which has one of the best commercial organizations in the industry. The terms of the partnership are very favorable with the milestones totaling over 100 millions of dollars as we previously announced.
We also read out the results for the inflammatory bowel disease program at the end of last year and the results were impressive.
Complete permission with achieved in 75 per cent of the TNF antibody group compared to 17% in the placebo group.
At day seven the first post dose 75 per cent of the treated dogs showed greater than 75 per cent reduction in disease score compared to only 17% empty for placebo.
Furthermore, 50 per cent of the treated dogs achieved and maintained 100% reduction of T score from baseline throughout all posted those visits whereas none of the placebo group achieved the same yourself.
IBD on related disorders are very common affecting over 5% of dogs.
The market has many similarities to the atopic dermatitis market before of modern treatments for approved including notable impact on the owners of quality of life.
Think of it could rival the atopic dermatitis market size.
We have an exciting year ahead of us as we continued to advance our programs, including multiple major readouts and potential approval of parvovirus.
Turning to financials, which Wendy will discuss in more detail. We're pleased with the royalty revenue, which reflects the great work that our partners doing the.
<unk> has done a terrific job of growing the market and it is clear we partnered with the right company.
In addition, we're also pleased with the revenue we're generating from our contract manufacturing business.
The work is coming along well on our backstop of partnership and with the expansion of that partnership we expect to realize about $25 million of revenue.
We have also been awarded a contract from the National Cancer Institute for manufacturer of a human papilloma virus vaccine, which further validates the taught me of manufacturing capabilities.
In order to qualify for contracts like this the companies must undergo an paths of very rigorous evaluation process.
As you know we have world class manufacturing plants and personnel. This gets us of major competitive advantage and presents an opportunity to bring in non dilutive capital on contract manufacturing at the same time on number one focus remains executing on a very attractive pipeline.
We continue to be judicious with our spending we were able to maintain on Opex took approximately $10 million in Q4.
This level to remain fairly steady in 2020 one.
The net takeaways are that we operate in a resilient and growing industry, we are amply capitalized for it.
Carefully managing our burn.
We're making strong progress on high value potential blockbuster products.
And we're executing well across the board.
We're very excited about our future.
With that I will turn the call over to Wendy for the review of our fourth quarter financials.
Thanks Richard.
The strategic actions, we took in 2020 to streamline our operations reduce operating expenditures and prioritize investment in on the highest value of biologics position of bookings for success with.
We begin 2021 with the right operational footprint business model and extended cash runway to see all of promising late stage programs.
The final stages of development.
Turning to our financials.
For the fourth quarter, we reported a net loss of $10 9 million or 28 cents per share compared to a net loss of $15 7 million or 40 cents per share for the same period in 2019.
For the full year, the net loss was $21 8 million or of 55 cents per share.
<unk> two of net loss of 61 4 million or of $1 59 per share in 2019.
The variance relates to proceeds from the sale of memory tester that crop, which was completed on April 15th.
Total revenues were 1 million for the quarter versus $1 4 million in the year ago period.
Full year revenues were $42 2 million compared to $4 3 million in 2019.
Here again, the biggest component of the variance in the full year result was due to $38 7 million from the sale of Veritas.
Substantially all of the 878000 in product revenues for the year 2020, what for Merit.
We recorded royalty revenue of 122000 in the fourth quarter and 535000 for the year.
Our agreement with Baxter for the manufacturer of the oral vaccine candidate for COVID-19 resulted in contract manufacturing of $233001 6 million based on the percentage of completion of specific milestones.
The three and 12 month periods.
The agreement Langkow partnership provided Kindred Bio Inc.
The non refundable upfront payment of five for 1000, which was recorded as part of the licensing revenue.
Research and development expenses were broadly consistent in the fourth quarter totaling $7 6 million versus seven 1 million for the same period in 2019.
For the full year R&D expenses were $31 3 million compared to $28 3 million in 2019.
As we have noted in prior quarters the year over year increase primarily reflects the inclusion of Kansas facility expenditures in R&D. That's it began to manufacture of clinical trial material.
Really upset by lower payroll and related costs consistent with the decision to discontinue small molecule development in favor of biologics programs.
Prior to 2020 construction and commissioning expenditures associated with the Kansas facility had been categorized as general and administrative expenses.
Stock based compensation the Asian expense in R&D, what's the one 9 million in 'twenty 'twenty versus one 8 million in the prior year.
SG&A expenses totaled $3 3 million for the fourth quarter versus $9 6 million for the same period in 2019.
For 2020, SG&A expenses were 22 million compared to $37 9 million in the prior year.
The $15 9 million year over year decrease is the result of the re categorization of the Kansas plant expenditures as research and development expenses.
And lower payroll and related expenses as the result of the elimination of Kindred Bio's companion animal sales force.
Stock based compensation expense was $5 7 million in 2020 versus $5 5 million in the prior year.
In connection with the prioritization of Kindred Bio's late stage programs and the associated workforce reduction we recorded a restructuring charge of $4 2 million in 2020.
We maintained a healthy cash balance providing us with the runway to reach key milestones on our late stage programs.
As of December 31, 2020, we had $59 9 billion in cash cash equivalents and investments compared to $73 5 million at December 31st 2019.
That's cash used in operating activities in 2020 watts of approximately $9 9 million.
Reflecting payment of V C.
For the mirror test at that sales.
We also invested approximately $3 6 million in capital expenditures, but the purchase of lab and manufacturing equipment for the Kansas facility.
With respect to spending in 2021.
Continue to be judicious with the outspend and expect quarterly operating expenditures to remain broadly stable on a sequential basis.
We anticipate operating expenses to range between 41 to 43 million.
We also plan to invest approximately 3 billion in capital expenditures on lab and manufacturing equipment for all of biologics programs in 2021.
We believe all existing cash cash equivalents on investments remaining proceeds from the memory test sales revenue from contract manufacturing and revenues in the form of royalties. The partner the licensing will be sufficient to fund current operating plan until early 2023.
In closing, we look forward to important pipeline catalysts in the year ahead and have the necessary cash runway and R&D expertise to realize the value of our attractive late stage programs.
We look forward to updating you on our progress.
In the next quarter I will now turn the call back over to Richard.
Thank you Wendy operator, we're ready for Q&A.
Certainly the ladies and gentlemen, if you have any.
At this time. Please press Star then one day for your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of Jon Block from Stifel. Your question. Please.
Great. Thanks, guys good afternoon.
Maybe two or three for me, but when do you all start with sort of the guidance.
On the fully funded guidance until early 2023 is better than the prior I think the language was mid 2022, the opex ex some assumption of seemingly did not change clearly you've had several positive announcements over the past few months with parvo of long ago and contract manufacturing, but can you detail on that.
Looks like maybe nine three additional quarters of nine additional months of the company being fully funded it maybe it's from that that sort of I felt Richard you Marty given of 20, some odd million dollars number there, but maybe one day if you could provide the details that'd be very helpful.
Sure it's it's.
That's the only from all of the back part.
Revenue.
And on the partnership with Banco <unk>.
And also we have.
Drawn down on a small portion of about a T M. So that extended our cash runway.
Okay, and I'm sorry, the figure that you did provide for VAG sorry, just to be clear is that something that will come on board in the next 12 to 24 months or the.
Is that does that revenue figure could extend well beyond 2023, I'm just trying to get the timeframe for the 20, some odd billion net you attributed to Baxter.
Yeah. The 25 million is really to the recognized and the year 'twenty 'twenty. One that is all of the contract with with the excellent. Okay. Great. That's great to hear and then the visit.
For the business call. It IL 31, you were very clear Hey look we just started enrolling it hasnt change is 12 to 18 months, but maybe if you could furnish us with some thoughts on the updates that you from a company perspective player to provide along the way as we think about 2021 when should we hear from Kindred Biosciences, Inc.
In terms of the timeline for IL 31, and how youre going to handle that with the street share I think in another quarter or so we'll have enough enrollment information that we could probably.
We find that guidance.
So as we are to get two or three more months of enrollment under our belt it should become clear.
Which way the enrollment is going.
Okay and last one for me and then I'll follow up off line I believe Richard when you were talking about IBD, you mentioned increased conviction that the market size could maybe even be as big as atopic derm I mean atopic derm.
Obviously, one of the you know the bigger success stories that we've had in the companion animal market can you talk to what.
Led you down that path had mentioned that on why the increased conviction. If you would the IBD could be such a material blockbuster. Thank you absolutely. So obviously, we've been talking to additional veterinarians and customers and.
And sleep on annualize the data we've realized how impressive the data is the people.
The tomorrow of Cat so topic for many times. This is about affects about 10 per cent of dogs.
Hum.
On the tour of bowel disease in diseases that are sort of in that a similar category. The effects at least five per cent for probably more than five per cent of the the dogs. We think the impact on the quality of life is actually more significant for inflammatory bowel disease because of.
The dog is basically making the mess of the carpet and there are a lot of a lot of parallels to the atopic dermatitis market right now.
Mainstay is steroids.
<unk>, which is cheap, but it's a lot of side effects, including making the.
The dog.
On the carpet and they'd be coming continent.
And just like in the atopic dermatitis market before the current therapies for launched the.
The owners had to make do with therapy.
Therapy that were either not effective or has a lot of side effects of the exact same situation at the case type.
The team.
So if we bring out of drug.
That.
Has similar well.
Works quickly that works well.
And he is very safe and we think that this could be another example of a market that goes from.
A few tens of millions of dollars to hundreds of millions of dollars.
The very rapidly.
Perfect Great color. Thanks, Richard.
Thank you and our next question comes from the line of Brooks O'neil from Lake Street Capital. Your question. Please.
Good afternoon.
I'm curious of Richard if you would mind talking just a little bit about your sort of philosophy.
As it relates to some of these <unk>.
Net G.
Generation of index in the product line in the pipeline products in terms of partnering are you thinking that you want to pursue partnerships for these.
Additional indications.
Are you thinking it's more likely the that you would continue to work with the line co or do you think.
It might make sense the work with a variety of potential partners as you move those for Ryan that's forward yeah.
So you like how has it been a great partner, so far and we're working really well with them. So I could certainly envision partnering on other product with them.
We do plan on partnering most of our products.
And depending on the product we may partner earlier or later I think some products the value is so of parent.
Early in the development that we could get attractive economics for those.
Some of the other ones, we may need to wait a little longer so.
It'll be on the case by case basis as to when we partner because it depends on what we think we can get the best economics.
I think what you're alluding to as do we.
Plan on having a multi product partnership with other companies, we have been approached about partnerships like that.
All right now.
Of our focused on individual products, but certainly it all depends on the on the terms. So we wouldnt rule that out.
Okay, great. Thank you very much for that color I was hoping one day might just give any color. She would offer with regard to the pattern of spending the the quarterly pattern of spending that you might anticipate for 2021.
Well, we do expect spending to be.
To be pretty consistent.
Typically the first quarter.
<unk> is generally higher than other quarters, but you know we do expect it to be pretty consistent.
Credit you'll see.
You don't see spending on any of these trials.
Bumping up spending in any particular quarter at least from where you sit right now.
While we do expect.
Oh of Iris trial to be completed.
That's why I mentioned, you know, we're expecting first quarter of spending to be slightly higher.
The I bet.
The than other quarters, but.
In General you know the.
The guidance is 40 41 to 43 million spending.
Okay got it that's.
That's great and then last for me I'm just curious.
Do you guys think about the sources of non dilutive financing obviously, John asked you about about the cash availability in the.
The positive developments, you've you've seen there, but as you think about non dilutive financing what do you see as your biggest opportunities in the next year or so.
Maybe I'll start.
The answer and when do you feel free to add to it.
Certainly we expect.
Additional revenues from partnerships both milestones.
And.
Royalties.
We expect to continue.
Continued to build on our contract manufacturing business, which as I said is not our primary line of work, but right now we're in the fortunate situation that there's a lot of demand for that.
For biologics.
All of.
That between those two we.
Should be getting some additional funding.
Do you want to add to that.
Wendy.
No.
Basically identified you know the.
The the main areas.
Great and just one sort of follow up to that.
Do you anticipate.
Some of your contract manufacturing opportunities to beat that.
Related biologics or do you.
Are you pretty open minded about what the opportunities might be in that.
Advantage of your capacity, Yeah, we definitely expect to have.
Opportunities for pet Biologics in fact.
As you know we have.
Right of refusal for two of your line coast Oh sure of products.
In addition, the other companies.
All are pursuing biologics manufacturing and there are some start ups looking at mono clause in the veterinary space of course, there are many years of behind us.
We are very well positioned.
To manufacture biologics for the.
That's an area of companies we have the plans we've built up the expertise in manufacturing.
For U S T a and that's a.
Different than manufacturing for F. T E. R E M E. So.
We think we will probably be one of the partners of choice for manufacturing.
In addition, we have.
The potential customers for the the human side.
And certainly we can do either either one.
So I think we'll see a mix of both.
Perfect. Thank you very much in the keep up all of the great work sure. Thank you.
Thank you. Our next question of them from the line of Brandon Folkes from Cantor Fitzgerald. Your question. Please.
Hi, Thanks for taking my question and congratulations on all of the progress during the year and maybe.
Maybe just one for me on <unk>.
Kind of zero three zero.
The true indication that are being pursued the prophylactic the therapeutic.
The therapeutic to the cool pivotal efficacy is successful.
For the leverage on the regulatory strategy there.
Is this the label expansion post approval of the prophylactic an amendment to the current submission or a completely different filing for together. Thank you sure. If the treatment study is not positive for some reason and obviously, there's always some risk whenever you're doing a clinical studies, we would launch with the profit.
Relaxing indication or a line called Hum wood.
On the advantage.
Of this.
Yes.
Molecule is that it's the same presentation at the same vial, which means that.
Veterinarians, who would be the free.
<unk> to us.
The drug for either indication.
We would follow that up with a second approval.
Because.
Even if the for some reason run into trouble with the the Sun.
<unk>.
Certainly repeat it because we know the molecule.
It works for the treatment so.
<unk>.
Would anticipate the sales would still be quite attractive because veterinarians.
The most likely use the drug for both indications, obviously, we would not be promoting free.
Unapproved.
Youth.
I think.
Under that scenario, there would be some impact but.
But the impact would not be may not be.
Okay, great and as you might otherwise think on on revenue.
And Richard maybe just if you are successful in the therapeutic indication.
Sort of what is the filing strategy just given that you've initiated the prophylactic filing.
Are they true separate filings will together or how should we think about sort of the timing of therapy you're seeing.
It would've promote therapeutic.
Therapeutic indication, yes, the clinical of filing would be separate but the manufacturing.
Part of the filing would be shared between the two.
And the manufacturing right now is the rate limiting factor.
No.
With the delay in the treatment of pivotal.
We don't anticipate the approval date will be affected because the.
That we think is going.
Going to be the rate limiting factor is the speed at which U S. T. A is April two.
Test the manufacturing samples, we send them so of U S. T E takes the the bile from your manufacturing runs and they run their own test on.
On so on the samples and for multi you've heard there is.
A delay it's taking them longer than it normally does.
Because the.
They're short staffed most.
Most likely due to COVID-19.
Great. Thank you very much.
Thank you and ask the reminder, ladies and gentlemen, if you do have the question at this time. Please press Star then one our next question comes from the line of RK from H C. Wainwright. Your question. Please.
Thank you.
And good afternoon, Richard and Randy.
Good afternoon.
Just like Jeff says you explained.
Little bit about the revenue run from back start liked to understand the.
Contact on the deployment program.
For the idea of IQ <unk>.
The IQ.
Hum.
How long is this contract for on.
Any color as to how we would see that.
See that revenue run rate from the NCI.
Sure. So this is part of the large overarching.
The program that MTI has that we announced previously that we are one of the three qualified vendors for the program.
All of the contract that we were awarded the task order.
Had a couple of different components so it.
It could be under a million to a halt for a million dollars for the first portion so.
That's why we haven't put out the <unk>.
Zach numbers, because the it's variable to have the.
They have an option for the second part of the contract.
We believe the this is the first of a multiple.
The contracts.
We are likely to be awarded under the overarching.
The program.
So right now we cant predict because obviously.
It depends on which additional contracts we get awarded.
Thank you and then.
Regarding made of tests under.
Hum on the Deca.
You know.
What do you think of what is your feeling.
Regarding how it's being commercialized and also just just so that we can understand.
On the.
The flow of revenue.
For all of these.
As you know from that product.
Sure I'll start it off and then I'll ask Scott to.
That's what I'm, saying, because she's she's trying to managing the partnerships.
Start by saying, we've been very very happy with how that crop.
He is handling of product, it's a high priority for them they really like the product. So we're getting really good feedback and they're able to leverage the rest of their portfolio too.
Get adoption.
So.
You're seeing a steady.
Upward trend the move outs.
Gotcha do you want to speak.
Speak to that little bit.
Sure. So they realized strong growth in U S marriage has sales.
The launch of the product in April 2020.
And have achieved a near 50% increase in monthly sales to U S clinic. So in the fourth quarter the sales to distributors were lower quarter over quarter, but sales from distributors to veterinary clinics, Inc.
<unk> versus the third quarter. They both I think launched in the EU and U K and so we think we'll see an acceleration of the sales trajectory going forward.
So we're very pleased with the results we've seen that today should we think that we have a strong track record currently in per se, but it needs to come out.
Thank you. Thank you all for taking my questions.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dr. Richard Chin for any further remarks. Thank you operator.
Like to thank our listeners for continued support as we look for it to an exciting and catalyst rich year.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Yeah.
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