KALA Bio, Inc. (NASDAQ: KALA) is a clinical-stage biopharmaceutical company dedicated to the research, development, and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye. The company's lead product candidate, KPI-012, is currently in clinical development for the treatment of persistent corneal epithelial defects (PCED), a rare disease of impaired corneal healing.

Business Overview

KALA Bio was previously focused on the development and commercialization of two marketed products, EYSUVIS and INVELTYS, which were sold to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC in July 2022. Following this divestiture, the company has shifted its strategic focus to the research and development of KPI-012 and its mesenchymal stem cell secretome (MSC-S) platform.

KPI-012 and Clinical Trials

KPI-012, KALA Bio's lead product candidate, is a bone-marrow derived MSC-S therapeutic that is being evaluated for the treatment of PCED, a rare disease with an estimated incidence of 100,000 cases per year in the United States. In February 2023, the company dosed its first patient in the CHASE (Corneal Healing After Secretome therapy) Phase 2b clinical trial of KPI-012 for PCED in the United States. The CHASE trial is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group study to evaluate the safety and efficacy of two doses of KPI-012 ophthalmic solution versus vehicle. The company expects to report topline safety and efficacy data from the CHASE trial by the end of 2024.

KPI-012 has received both Orphan Drug and Fast Track designations from the U.S. Food and Drug Administration (FDA) for the treatment of PCED. In addition to PCED, the company is evaluating the potential development of KPI-012 for other rare front-of-the-eye diseases, such as Limbal Stem Cell Deficiency. The company has also initiated preclinical studies under its KPI-014 program to evaluate the utility of its MSC-S platform for the treatment of inherited retinal degenerative diseases.

Financial Performance

For the full year 2023, KALA Bio reported an annual net loss of $42.2 million, with no revenue generated. The company's annual operating cash flow was -$27.9 million, and its annual free cash flow was -$28.5 million.

In the first quarter of 2024, the company reported a net loss of $11.8 million, with no revenue generated. The company's operating cash flow for the quarter was -$10.8 million, and its free cash flow was -$10.8 million.

As of March 31, 2024, KALA Bio had $48.5 million in cash and cash equivalents, which the company believes will enable it to fund its operations, lease and debt service obligations, and capital expenditure requirements into the third quarter of 2025. The company's cash position was bolstered by the $60.0 million upfront payment received from Alcon in connection with the sale of its commercial business in July 2022, as well as $8.6 million in net proceeds from a private placement of its Series G Convertible Non-Redeemable Preferred Stock in March 2024.

Liquidity and Capital Resources

KALA Bio has financed its operations primarily through the sale of its commercial business to Alcon, public and private equity offerings, and debt financing. As of March 31, 2024, the company had $34.0 million in outstanding borrowings under its Loan Agreement with Oxford Finance LLC.

The company's future capital requirements will depend on several factors, including the timing and amount of milestone payments it receives from Alcon, the timing and amount of its future milestone payments to Combangio equityholders, the progress and costs of its ongoing and planned clinical trials for KPI-012, and the scope, progress, and costs of any other product candidates it may develop in the future.

KALA Bio expects that its existing cash resources, together with the $9.1 million of remaining funding anticipated under its CIRM Award, will enable it to fund its operations, lease and debt service obligations, and capital expenditure requirements into the third quarter of 2025. However, the company does not expect that its existing cash resources will be sufficient to enable it to complete the clinical development of KPI-012 for PCED or for any other indication.

Risks and Challenges

KALA Bio faces several risks and challenges in its pursuit of developing and commercializing KPI-012 and other product candidates. These include the inherent risks of biopharmaceutical drug development, such as the potential for clinical trial failures, regulatory hurdles, and competition from other therapies. The company also faces risks related to its substantial indebtedness, the potential inability to obtain additional financing, and the potential loss of key personnel.

Additionally, the company's reliance on third-party manufacturers and contractors for the development and potential commercialization of its product candidates introduces risks related to the availability and reliability of these third parties, as well as the company's ability to maintain control over the manufacturing process and supply chain.

Outlook and Conclusion

Despite the challenges, KALA Bio remains focused on advancing the clinical development of KPI-012 for the treatment of PCED and exploring its potential in other rare eye diseases. The company's recent private placement of Series G Convertible Non-Redeemable Preferred Stock has strengthened its balance sheet, providing additional runway to support its research and development efforts.

As KALA Bio continues to execute on its strategic priorities, investors will closely monitor the progress of the CHASE Phase 2b trial for KPI-012 and the company's ability to secure additional financing or strategic partnerships to fund its long-term growth. With a promising lead candidate, a focus on rare and severe eye diseases, and a strengthened financial position, KALA Bio appears well-positioned to create value for shareholders in the years to come.