COMPANY HISTORY AND OVERVIEW
KALA BIO, Inc. is a clinical-stage biopharmaceutical company dedicated to the research, development, and commercialization of innovative therapies for rare and severe diseases of the eye. The company's core focus is on advancing its lead product candidate, KPI-012, for the treatment of persistent corneal epithelial defects (PCED), a rare condition characterized by impaired corneal healing.
KALA BIO was incorporated on July 7, 2009, initially focusing on the research, development, and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye. The company developed and commercialized two ophthalmic products, EYSUVIS and INVELTYS, which utilized its proprietary mucus-penetrating particle drug delivery technology, known as AMPPLIFY.
A transformative event occurred in November 2021 when KALA BIO acquired Combangio, Inc., obtaining the rights to the mesenchymal stem cell secretomes (MSC-S) platform and the lead product candidate KPI-012 for the treatment of PCED. This acquisition marked a significant shift in the company's focus towards the development of KPI-012 and its MSC-S platform.
Prior to the Combangio acquisition, KALA BIO had limited revenue from product sales of EYSUVIS and INVELTYS. The company primarily financed its operations through proceeds from its initial public offering, follow-on public offerings, private placements, borrowings, and grants. Like many clinical-stage biopharmaceutical companies, KALA BIO incurred significant losses and negative cash flows from operations since its inception.
In July 2022, KALA BIO made a strategic decision to sell the commercial rights to EYSUVIS and INVELTYS, along with the AMPPLIFY drug delivery technology, to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC. This divestiture led to the termination of the company's commercial sales force and certain employees, allowing KALA BIO to focus solely on its research and development efforts centered on the MSC-S platform and the development of KPI-012.
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, underscoring its potential to address this rare and debilitating condition.
FINANCIAL PERFORMANCE AND POSITION
As of September 30, 2024, KALA BIO reported cash and cash equivalents of $49.20 million, which, combined with the remaining $5.90 million in anticipated funding from the California Institute for Regenerative Medicine (CIRM) grant, is expected to enable the company to fund its operations, lease and debt service obligations, and capital expenditure requirements into the fourth quarter of 2025.
The company's financial performance has been characterized by significant losses and negative cash flows from operations, which is common for a clinical-stage biopharmaceutical company. For the nine months ended September 30, 2024, KALA BIO reported a net loss of $30.34 million and used $24.78 million in operating cash flows. This is consistent with the company's net loss of $42.20 million and $27.93 million in operating cash outflows for the full year ended December 31, 2023.
KALA BIO's balance sheet as of September 30, 2024 shows total assets of $54.08 million, with $34.00 million in outstanding debt under its loan agreement with Oxford Finance LLC. The company's current ratio stands at 2.15, indicating a strong liquidity position, while its debt-to-equity ratio of 5.40 suggests a relatively leveraged capital structure.
For the most recent quarter (Q3 2024), KALA BIO reported a net loss of $8.95 million and negative operating cash flow of $4.73 million. The company's free cash flow for the same period was negative $4.68 million. It's important to note that as a clinical-stage biopharmaceutical company without any approved products, KALA BIO does not generate revenue, which is reflected in its financial statements.
Research and development expenses increased to $16.84 million for the nine months ended September 30, 2024, up from $13.87 million in the prior year period. This increase was primarily due to advancing the clinical development of KPI-012, particularly the ongoing CHASE Phase 2b clinical trial.
LIQUIDITY
KALA BIO's liquidity position remains strong, with a current ratio of 2.15 as of September 30, 2024. This indicates that the company has sufficient short-term assets to cover its short-term liabilities. The combination of $49.20 million in cash and cash equivalents and the remaining $5.90 million in anticipated CIRM grant funding provides the company with a solid financial runway into the fourth quarter of 2025. This liquidity position is crucial for KALA BIO to continue its clinical development programs and meet its operational needs without immediate financial pressure.
The company has a $125 million credit facility with Oxford Finance, of which $34 million was outstanding as of September 30, 2024. The loan bears interest at a floating rate equal to the greater of 8% and the sum of the 1-Month CME Term SOFR, 0.10%, and 7.89%. This debt arrangement provides additional financial flexibility but also increases the company's leverage, as reflected in the debt-to-equity ratio of 5.40.
CLINICAL DEVELOPMENT AND REGULATORY PROGRESS
The central focus of KALA BIO's clinical development efforts is the ongoing Phase 2b CHASE (Corneal Healing After Secretome Therapy) trial evaluating KPI-012 for the treatment of PCED. This multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial is designed to assess the safety and tolerability of two doses of KPI-012 ophthalmic solution versus vehicle, with the primary endpoint being the complete healing of PCED as measured by corneal fluorescein staining.
In February 2023, the company dosed the first patient in the CHASE trial, which is currently enrolling approximately 90 patients across 44 trial sites in the United States. KALA BIO has also initiated several clinical trial sites in Argentina for the CHASE trial and is in the process of initiating additional sites in Latin America, subject to regulatory clearance.
The company expects to report topline safety and efficacy data from the CHASE trial in the second quarter of 2025. If the results are positive, and subject to discussions with regulatory authorities, KALA BIO believes this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application (BLA) for KPI-012 to the FDA.
KALA BIO's development of KPI-012 is being supported by a $15.00 million grant from CIRM. The company received an initial disbursement of $5.90 million in August 2023 and an additional $3.20 million in August 2024 upon achieving a specified milestone under the CIRM award. The remaining $5.90 million under the grant is payable to the company upon the achievement of additional milestones primarily related to the progress of the CHASE trial.
MARKET OPPORTUNITY AND COMPETITIVE LANDSCAPE
PCED is a rare condition with an estimated incidence of 100,000 cases per year in the United States. Currently, Oxervate (cenegermin-bkbj) is the only approved prescription pharmaceutical product for the treatment of PCED, which represents approximately one-third of all PCED cases. To the best of the company's knowledge, KPI-012 and two other product candidates, KIO-201 from Kiora Pharmaceuticals, Inc. and Nexagon from Amber Ophthalmics, Inc., are the only product candidates in active clinical development for the treatment of a broad PCED population.
Beyond PCED, KALA BIO is also evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as Limbal Stem Cell Deficiency (LSCD). The company has also initiated preclinical studies under its KPI-014 program to evaluate the utility of its MSC-S platform for inherited retinal degenerative diseases, including Retinitis Pigmentosa and Stargardt Disease.
RISKS AND CHALLENGES
KALA BIO faces several risks and challenges that are common to clinical-stage biopharmaceutical companies, including:
1. Successful completion of the CHASE trial and obtaining regulatory approval for KPI-012: The company's future success is highly dependent on the positive outcome of the CHASE trial and subsequent regulatory approval of KPI-012 for the treatment of PCED.
2. Funding requirements and capital market access: KALA BIO will require significant additional funding to complete the clinical development and potential commercialization of KPI-012. Its ability to raise capital on favorable terms is crucial.
3. Competition and market acceptance: Even if approved, KPI-012 will face competition from existing treatments and other product candidates in development. Achieving adequate market acceptance and reimbursement will be critical.
4. Reliance on third-party manufacturers and suppliers: The company relies on third parties for the manufacture and supply of KPI-012, which introduces risks related to quality, consistency, and timely delivery.
5. Intellectual property protection: KALA BIO's success depends on its ability to obtain, maintain, and defend its intellectual property rights, including those licensed from third parties such as Stanford University.
CONCLUSION
KALA BIO is a resilient biopharmaceutical company that has navigated significant changes in its business model and is now laser-focused on advancing its lead product candidate, KPI-012, for the treatment of the rare eye disease PCED. With a strong cash position, important regulatory designations, and ongoing clinical progress, the company is well-positioned to continue its mission of developing innovative therapies for patients with rare and severe ophthalmic conditions. However, the road ahead is not without its challenges, and KALA BIO must continue to execute flawlessly to unlock the full potential of its pipeline and deliver value to shareholders.
The company's financial position, with $49.2 million in cash as of September 30, 2024, provides funding to continue the development of KPI-012 through the reporting of topline data from the ongoing CHASE Phase 2b trial. While KALA BIO continues to operate at a loss, which is typical for clinical-stage biopharmaceutical companies, its focus on cost management and strategic use of resources, including the CIRM grant, demonstrates a commitment to efficient capital allocation.
As KALA BIO progresses towards the crucial readout of the CHASE trial in the second quarter of 2025, investors and stakeholders will be closely watching for signs of clinical success. The outcome of this trial will likely have a significant impact on the company's future trajectory and its potential to address the unmet medical needs of patients with PCED and potentially other rare eye diseases.