SAN FRANCISCO, March 16, 2020 /PRNewswire/ -- Kindred Biosciences, Inc. (NASDAQ: KIN), a biopharmaceutical company focused on saving and improving the lives of pets, today announced that it has entered into a transaction for the sale of Mirataz® to Dechra Pharmaceuticals PLC (LSE: DPH) for an upfront payment of $43 million and royalties on worldwide sales.
In addition, the company announced that it will substantially reduce its commercial footprint. This, along with partnership deals, is expected to significantly reduce the amount of additional dilutive capital the company will require.
"We believe Dechra is an ideal company to deliver results for Mirataz globally, given their expansive commercial footprint, proven success selling specialist products, and synergies between Mirataz and their existing product portfolio targeting diseases linked to feline weight loss," said KindredBio's Chief Executive Officer, Richard Chin, M.D.
"Given the amount that partners are willing to pay for our assets, and the richness of our pipeline, we have recognized that we can likely achieve better returns for our shareholders while reducing dilutive financing by relying more on a partnership-focused business model. This model has been very successful in the human pharmaceutical industry, and we expect the same for the veterinary industry."
In addition, the company will further prioritize biologics programs for dogs and cats, and discontinue development of canine and feline small molecule programs.
"We have had seven positive pilot programs in a row, which is a higher success rate than we had expected. Furthermore, we have additional new programs based on our recently announced half-life extension technology. We clearly have more attractive opportunities than we can pursue. While our small molecule programs are very promising, we have decided to devote our resources to the part of the business where we can create the most value and where we have the clearest competitive advantage. We believe monoclonal antibodies are the future of veterinary medicine, and given significant market opportunities for our biologics programs, provide the greatest potential for value creation."
"We have had a very successful 2019, with two product approvals and multiple positive pilot studies. For 2020 and beyond, we look forward to executing on the exciting strategy we have laid out today," Dr. Chin concluded.
Proceeds from the Mirataz transaction, alongside the reduction in the company's workforce and operations, will extend cash runway through 2022, while maintaining a focused research engine dedicated to the development of KindredBio's biologics pipeline. KindredBio also remains in late-stage discussions with a number of parties regarding a commercial partnership for its interleukin-31 monoclonal antibody for canine atopic dermatitis.
In addition, the company reported financial results for the fourth quarter and full year ended December 31, 2019, and provided updates on its programs.
The major components of the strategic realignment are outlined below:
Development and Corporate Updates
Pending the strategic review process, development of certain candidates may be put on hold.
Fourth Quarter and Full Year 2019 Financial Results
For the quarter ended December 31, 2019, KindredBio reported a net loss of $15.7 million, or $0.40 per share, compared to a net loss of $15.4 million, or $0.46 per share, for the same period in 2018. For the year ended December 31, 2019, the net loss was $61.4 million, or $1.59 per share, as compared to a net loss of $49.7 million, or $1.60 per share, in 2018.
The company recorded $1.4 million of net product revenues for the fourth quarter of 2019, versus $1.3 million in the year-ago period. Full year 2019 net product revenues were $4.3 million, compared with $2.0 million for the year ended December 31, 2018. Mirataz became commercially available in July 2018, while Zimeta became commercially available in December 2019.
The cost of product sales totaled $0.2 million in the fourth quarter, resulting in a gross margin of 87%, and $0.6 million for the year, resulting in a gross margin of 86%.
Research and development expenses totaled $7.1 million for the fourth quarter ended December 31, 2019 compared to $7.8 million for the same period in 2018. For the full year 2019, research and development expenses were $28.3 million, compared to $26.4 million in 2018. Stock-based compensation expense related to research and development was $1.8 million, versus $1.7 million in 2018. The $1.9 million increase in full year research and development expenses was primarily due to higher headcount and related expenses as the Company advances its biologics programs, higher consulting expenses for quality assurance programs, and increased capital equipment depreciation expense.
Selling, general and administrative expenses totaled $9.6 million for the fourth quarter ended December 31, 2019, compared to $9.2 million for the same period in 2018. For the full year 2019, selling, general and administrative expenses were $37.9 million, compared to $26.5 million for 2018. The $11.4 million increase in full year expenses is the result of being a commercial company, as well as increased expenses incurred by the Elwood, Kansas plant in the lead up to its commissioning. In addition, higher corporate infrastructure costs and stock-based compensation expense also contributed to the increase in expenses. Stock-based compensation expense included in selling, general and administrative was $5.5 million in 2019, versus $4.5 million in 2018.
As of December 31, 2019, KindredBio had $73.5 million in cash, cash equivalents and investments, compared to $73.9 million at December 31, 2018. Net cash used in operating activities in 2019 was approximately $56.3 million. The company also invested approximately $8.4 million in capital expenditures for the build-out of its Elwood, Kansas manufacturing facility, including equipment purchases.
With respect to spending in 2020, the company expects operating expenses of between $58.0 million and $61.0 million, excluding the impact of stock-based compensation expense and the impact of acquisitions, if any. The 2020 operating expense includes a one-time restructuring charge of approximately $1.7 million and first quarter expenditures that reflect a full organizational structure. Excluding first quarter expenditures, the annualized run rate for 2020 is expected to be between $54 million and $56 million. Additionally, KindredBio plans to invest $4.0 million to $6.0 million in capital expenditures on lab and manufacturing equipment for its biologics programs in 2020.
As noted earlier in the press release, KindredBio believes its existing cash, cash equivalents and investments, the net reduction in the company's workforce and proceeds from the Mirataz sale will be sufficient to fund the current operating plan through 2022.
Webcast and Conference Call
KindredBio will host a conference call and webcast today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Interested parties may access the call by dialing toll-free (855) 433-0927 from the US, or (484) 756-4262 internationally, and using conference ID 2367136. The call will be webcast live here, with a replay available at that link for 30 days.
Important Safety Information
Mirataz® (mirtazapine transdermal ointment) is for topical use in cats only under veterinary supervision. Do not use in cats with a known hypersensitivity to mirtazapine or any of the excipients or in cats treated with monoamine oxidase inhibitors (MAOIs). Not for human use. Keep out of reach of children. Wear gloves to apply and wash hands after. Avoid contact with treated cat for 2 hours following application. The most common adverse reactions include application site reactions, behavioral abnormalities (vocalization and hyperactivity) and vomiting. Please see the full Prescribing Information.
Zimeta™ (dipyrone injection) should not be used more frequently than every 12 hours. For use in horses only. Do not use in horses with a hypersensitivity to dipyrone, horses intended for human consumption or any food producing animals, including lactating dairy animals. Not for use in humans, avoid contact with skin and keep out of reach of children. Take care to avoid accidental self-injection and use routine precautions when handling and using loaded syringes. Prior to use, horses should undergo a thorough history and physical examination by a veterinarian. Monitor for signs of abnormal bleeding and use caution in horses at risk for hemorrhage. Concurrent use with other NSAIDs, corticosteroids and drugs associated with kidney toxicity, should be avoided. As a class, NSAIDs may be associated with gastrointestinal, kidney, and liver toxicity. The most common adverse reactions observed during clinical trials were elevated glucose conversion enzymes, decreased blood protein, and gastric ulcers. Please see the full Prescribing Information.
About Kindred Biosciences
Kindred Biosciences is a biopharmaceutical company developing innovative biologics focused on saving and improving the lives of pets. Its mission is to bring to pets the same kinds of safe and effective medicines that human family members enjoy. The company's strategy is to identify targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated targets for dogs and cats. KindredBio has a deep pipeline of novel biologics in development across many therapeutic classes, alongside state-of-the-art biologics manufacturing capabilities and a broad intellectual property portfolio. The company has two approved drugs, namely Mirataz® (mirtazapine transdermal ointment) and Zimeta™ (dipyrone injection).
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to, statements regarding our expectations about the trials, regulatory approval, manufacturing, distribution and commercialization of our current and future product candidates, and statements regarding our anticipated revenues, expenses, margins, profits and use of cash.
These forward-looking statements are based on our current expectations. These statements are not promises or guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements. These risks include, but are not limited to, the following: our limited operating history and expectations of losses for the foreseeable future; the absence of significant revenue from our products and our product candidates for the foreseeable future; the likelihood that our revenue will vary from quarter to quarter; our potential inability to obtain any necessary additional financing; our substantial dependence on the success of our products and our lead product candidates which may not be successfully commercialized even if they are approved for marketing; the effect of competition; our potential inability to obtain regulatory approval for our existing or future product candidates; our dependence on third parties to conduct some of our development activities; our dependence upon third-party manufacturers for supplies of our products and our product candidates and the potential inability of these manufacturers to deliver a sufficient amount of supplies on a timely basis, including by reason of the coronavirus disease (COVID-19) currently impacting multiple jurisdictions worldwide; uncertainties regarding the outcomes of trials regarding our product candidates; our potential failure to attract and retain senior management and key scientific personnel; uncertainty about our ability to enter into satisfactory agreements with third-party licensees of our biologic products or to develop a satisfactory sales organization for our equine small molecule products; our significant costs of operating as a public company; potential cyber-attacks on our information technology systems or on our third-party providers' information technology systems, which could disrupt our operations; our potential inability to repay the secured indebtedness that we have incurred from third-party lenders, and the restrictions on our business activities that are contained in our loan agreement with these lenders; the risk that our 2020 strategic realignment plan will result in unanticipated costs or revenue shortfalls; the risk that our sale of Mirataz® to Dechra Pharmaceuticals PLC will not be completed because one or more of the closing conditions described in the sale agreement are not satisfied and uncertainty about the amount of royalties that we will receive if the sale is completed; our potential inability to obtain and maintain patent protection and other intellectual property protection for our products and our product candidates; potential claims by third parties alleging our infringement of their patents and other intellectual property rights; our potential failure to comply with regulatory requirements, which are subject to change on an ongoing basis; the potential volatility of our stock price; and the significant control over our business by our principal stockholders and management.
For a further description of these risks and other risks that we face, please see the risk factors described in our filings with the U.S. Securities and Exchange Commission (the SEC), including the risk factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q filed with the SEC. As a result of the risks described above and in our filings with the SEC, actual results may differ materially from those indicated by the forward-looking statements made in this press release. Forward-looking statements contained in this press release speak only as of the date of this press release and we undertake no obligation to update or revise these statements, except as may be required by law.
The results stated in this press release have not been reviewed by the Food and Drug Administration or the United States Department of Agriculture Center for Veterinary Biologics, as applicable.
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Kindred Biosciences, Inc.
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