Business Overview and History
Kronos Bio, Inc. (NASDAQ:KRON), a biopharmaceutical company focused on developing small molecule therapeutics to address cancers and autoimmune diseases driven by deregulated transcription, has recently faced significant challenges that have led the company to reevaluate its strategic direction.
Kronos Bio was incorporated in June 2017 with the goal of leveraging its proprietary drug discovery platform to identify and develop novel therapies targeting deregulated transcription, a hallmark of cancer and autoimmune disease. The company's initial pipeline included several product candidates, including istisociclib (KB-0742), a cyclin-dependent kinase 9 (CDK9) inhibitor, and two preclinical stage programs targeting the lysine acetyltransferase (KAT) domain of p300, KB-9558 and KB-7898.
In July 2020, Kronos Bio entered into an asset purchase agreement with Gilead Sciences, Inc. to acquire certain assets related to entospletinib and lanraplenib, as well as patents and intellectual property covering their development, manufacture, and commercialization. This acquisition provided Kronos Bio with additional product candidates to advance. However, the company later made the decision to close its Phase 3 trial of entospletinib in the fourth quarter of 2022 due to significant enrollment challenges and the impact of COVID-19 on clinical trial operations.
Despite these challenges, Kronos Bio has continued to make progress with its internal pipeline. In January 2023, the company entered into a collaboration and license agreement with Genentech to jointly work on two discovery research programs in oncology. Under this agreement, Kronos Bio received an upfront payment and is eligible for additional milestone payments as the programs advance.
Discontinuation of Istisociclib Development
Kronos Bio's most recent setback came in November 2024, when the company announced the discontinuation of the development of its lead asset, istisociclib (KB-0742). This decision was made after a review of the safety data from the ongoing Phase 1/2 trial of istisociclib in patients with platinum-resistant high-grade serous ovarian cancer (HGSOC). Out of the seven patients enrolled in the trial, five experienced neurological adverse events ranging from Grade 1 to Grade 3, with three patients discontinuing treatment and two reducing the drug dosage.
The company concluded that the benefit-risk profile of istisociclib in this patient population does not support further development. This discontinuation leaves Kronos Bio without any clinical-stage assets, as the company had previously focused its efforts on istisociclib as its lead program.
Evaluation of Strategic Alternatives
In light of the discontinuation of istisociclib and the lack of clinical-stage assets, Kronos Bio's board of directors has approved a plan to evaluate a range of strategic alternatives focused on maximizing stockholder value. These alternatives may include an acquisition, merger, reverse merger, other business combination, sale of assets, or other strategic transactions.
The company has retained an independent financial advisor to assist in this process, and it will be exploring options for its remaining preclinical assets, including KB-9558, a p300 KAT inhibitor in development for multiple myeloma and human papillomavirus (HPV)-driven tumors, and KB-7898, a p300 KAT inhibitor in development for Sjögren's disease.
Financial Position and Liquidity
As of September 30, 2024, Kronos Bio reported $124.9 million in cash, cash equivalents, and investments, which the company expects will fund its operations into the second half of 2026. This cash position provides the company with the financial flexibility to pursue its strategic review process and potentially advance its remaining preclinical assets.
For the most recent fiscal year (2023), Kronos Bio reported revenue of $6.29 million, a net loss of $112.67 million, operating cash flow of -$78.58 million, and free cash flow of -$79.26 million. In the most recent quarter (Q3 2024), the company reported revenue of $2.37 million, a net loss of $14.11 million, operating cash flow of -$12.37 million, and free cash flow of -$12.36 million.
The revenue increase of 158% year-over-year in Q3 2024 was primarily due to increased work performed under the Genentech collaboration agreement. The decreases in net loss, operating cash flow, and free cash flow were mainly attributed to reduced R&D and G&A expenses from workforce reductions.
Kronos Bio's liquidity position remains strong, with a debt-to-equity ratio of 0, current ratio of 8.32, and quick ratio of 8.32. The company has no reported credit facilities or lines of credit.
For the nine months ended September 30, 2024, the company reported a net loss of $60.3 million, compared to a net loss of $87.4 million for the same period in the prior year. The discontinuation of istisociclib and the associated impairment charges have had a significant impact on Kronos Bio's financial performance.
Potential Catalysts and Risks
Moving forward, Kronos Bio's ability to unlock value for shareholders will depend on the outcome of its strategic review process. The company's remaining preclinical assets, KB-9558 and KB-7898, represent potential catalysts if the company is able to secure favorable partnerships or advance them through further development.
KB-9558 is currently in IND-enabling studies for the treatment of multiple myeloma and human papillomavirus (HPV)-driven tumors. KB-7898 has been selected as a development candidate for Sjögren's disease and is also in preclinical development.
Risks facing Kronos Bio include the uncertainty surrounding the strategic review process, the potential inability to find a suitable transaction or partner, the challenges of advancing preclinical programs without a clinical-stage asset, and the company's limited financial resources compared to its development needs.
Additionally, the competitive landscape in the targeted areas of oncology and autoimmune disease remains highly competitive, with numerous larger biopharmaceutical companies and well-funded biotechnology firms pursuing similar approaches.
Conclusion
Kronos Bio's decision to discontinue the development of istisociclib and explore strategic alternatives represents a significant inflection point for the company. While the loss of its lead asset is a setback, the company's remaining preclinical pipeline and substantial cash position provide a foundation for potential value creation through strategic partnerships or a transformative transaction.
The company is implementing significant expense reduction strategies to extend its cash runway. With its current financial position, Kronos Bio expects to fund its operations into the second half of 2026, providing time to explore strategic options and potentially advance its remaining preclinical assets.
Investors will closely monitor Kronos Bio's progress in its strategic review process and the company's ability to unlock the value of its remaining assets. The outcome of this process will be crucial in determining the long-term viability and direction of the company.