Business Overview and History
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 eye. The company's rich history and unwavering focus on ophthalmology have positioned it as a rising leader in the field.
KALA BIO was incorporated on July 7, 2009 with the goal of developing novel treatments for eye diseases. The company initially focused on developing and commercializing two ophthalmic products, EYSUVIS and INVELTYS, which utilized a proprietary mucus-penetrating particle drug delivery technology. This technology, known as AMPPLIFY, was a key component of KALA's early success.
KALA achieved significant milestones with the launch of its two products. INVELTYS was successfully launched in 2018 for the treatment of post-operative inflammation and pain following ocular surgery. This was followed by the launch of EYSUVIS in 2020 for the short-term treatment of the signs and symptoms of dry eye disease. To support the commercialization of these products, KALA established a dedicated sales, marketing, and distribution infrastructure.
A pivotal moment in KALA's history came in November 2021 with the acquisition of Combangio, Inc. This strategic move brought with it the lead product candidate KPI-012 for the treatment of persistent corneal epithelial defects (PCED), a rare eye disease. The acquisition marked a significant shift in KALA's focus towards researching and developing innovative therapies for rare and severe diseases of the eye.
In July 2022, KALA made a strategic decision to divest its commercial business, including EYSUVIS and INVELTYS, to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC. This pivotal move allowed the company to shift its full focus towards the research and development of its lead product candidate, KPI-012, and other pipeline candidates.
Throughout its history, KALA has faced several challenges. The company has incurred significant losses since its inception and has had to rely on various financing activities to fund its operations and research and development efforts. These activities have included public offerings, private placements, and debt financing. The sale of its commercial business in 2022, while allowing for a more focused approach on KPI-012, also resulted in the loss of revenue-generating commercial products.
KPI-012 is a mesenchymal stem cell secretome (MSC-S) therapy that has demonstrated promising results in early clinical trials. In February 2023, the company initiated a Phase 2b CHASE (Corneal Healing After Secretome Therapy) trial to further evaluate the safety and efficacy of KPI-012 for PCED. The trial is currently ongoing, with topline data expected in the second quarter of 2025.
Alongside the development of KPI-012 for PCED, KALA BIO is also exploring opportunities to expand the use of this innovative therapy into other corneal diseases, such as Limbal Stem Cell Deficiency (LSCD). Additionally, the company is conducting preclinical studies for its KPI-014 program, which is focused on developing therapies for rare inherited retinal diseases, including Retinitis Pigmentosa and Stargardt Disease.
Financial Performance and Liquidity
KALA BIO's financial performance has been impacted by its strategic shift away from commercial operations and towards clinical-stage drug development. In the fiscal year 2023, the company reported a net loss of $42.2 million, with no revenue generated as a result of the divestiture of its commercial business. The company's annual operating cash flow and free cash flow for 2023 were -$27.9 million and -$28.5 million, respectively.
For the third quarter of 2024, KALA BIO reported no revenue and a net loss of $9 million. The company's net loss for the nine months ended September 30, 2024, was $30.3 million. Research and development expenses for the nine-month period were $16.84 million, an increase of $2.97 million compared to the same period in 2023, primarily due to the advancement of the clinical development of KPI-012. General and administrative expenses for the same period were $14.14 million, a decrease of $1.80 million compared to the previous year, mainly due to a reduction in administrative and professional service fees.
As of September 30, 2024, KALA BIO had cash and cash equivalents of $49.2 million on its balance sheet. The company has also secured funding from the California Institute for Regenerative Medicine (CIRM), with $5.9 million remaining under the CIRM Award as of the latest reporting period. Additionally, in March 2024, the company raised $8.6 million through a private placement of its Series G Convertible Non-Redeemable Preferred Stock, and in June 2024, it raised a further $12.5 million through a private placement of common stock and Series H Convertible Non-Redeemable Preferred Stock.
KALA BIO's liquidity position is further supported by a loan agreement with Oxford Finance LLC, which provides for a term loan of up to $125 million. As of September 30, 2024, $34 million was outstanding under this agreement. The company's current ratio and quick ratio both stand at 2.15, indicating a relatively healthy short-term liquidity position. However, the debt-to-equity ratio of 5.40 suggests a significant reliance on debt financing.
Taken together, KALA BIO's cash resources, including the anticipated funding from the CIRM Award and the proceeds from the recent private placements, are expected to fund the company's operations into the third quarter of 2025, providing a runway to deliver on its key clinical milestones.
Regulatory Milestones and Partnerships
KALA BIO's lead product candidate, 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. These designations are designed to expedite the development and review of drugs for rare and serious conditions, potentially accelerating the path to market for KPI-012.
In December 2022, KALA BIO's investigational new drug application (IND) for KPI-012 was accepted by the FDA. This acceptance allowed the company to initiate its CHASE Phase 2b clinical trial, which began dosing patients in February 2023. The CHASE trial consists of two patient cohorts. In March 2023, KALA BIO announced positive safety data from the first cohort, an open-label study evaluating the safety of the high dose of KPI-012 ophthalmic solution. The company has since initiated the second and final patient cohort, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and tolerability of two doses of KPI-012 versus vehicle.
KALA BIO has opened 44 trial sites for the CHASE trial in the United States and has also initiated several clinical trial sites in Argentina, with plans to expand to additional sites in Latin America, subject to regulatory clearance. The primary endpoint of the CHASE trial is the complete healing of the PCED as measured by corneal fluorescein staining.
In addition to its internal development efforts, KALA BIO has collaborated with various research institutions and organizations to advance its pipeline. The company's acquisition of Combangio, Inc. in 2021 provided it with exclusive rights to a patent portfolio related to KPI-012, strengthening the company's intellectual property position.
Furthermore, KALA BIO's partnership with the California Institute for Regenerative Medicine (CIRM) has provided $15 million in funding to support the ongoing development of KPI-012 for PCED, including the current Phase 2b CHASE trial.
Competitive Landscape and Risks
The ophthalmology market is highly competitive, with numerous pharmaceutical and biotechnology companies vying for a share of the market. KALA BIO's KPI-012 faces competition from other therapies in development for the treatment of PCED, such as KIO-201 by Kiora Pharmaceuticals, Inc. and Nexagon by Amber Ophthalmics.
Additionally, KALA BIO's reliance on the successful development and commercialization of KPI-012 presents significant risks. Failure to achieve positive results in the ongoing CHASE trial or to obtain regulatory approval for KPI-012 could have a material adverse impact on the company's financial performance and future prospects.
Furthermore, KALA BIO's operations are subject to various regulatory requirements, including compliance with the Sarbanes-Oxley Act, the Dodd-Frank Act, and data privacy laws such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Failure to meet these regulatory obligations could result in fines, penalties, and reputational damage.
The company's success is heavily dependent on its ability to develop, obtain regulatory approval for, and commercialize KPI-012 and any other product candidates it may develop in the future. KALA BIO faces risks and uncertainties related to the clinical development and regulatory approval process, as well as potential reimbursement challenges and the ongoing need for additional capital to fund its operations and research and development activities.
Outlook and Conclusion
KALA BIO's strategic shift towards clinical-stage ophthalmology drug development has positioned the company as a promising player in the rare and severe eye disease space. The company's focus on KPI-012 for PCED, as well as its plans to explore the therapy's potential in other corneal indications and its KPI-014 program for inherited retinal diseases, demonstrate its commitment to innovative solutions for unmet medical needs.
The ongoing CHASE trial represents a critical milestone for KALA BIO, with topline safety and efficacy data expected in the second quarter of 2025. This data will be crucial in determining the future trajectory of KPI-012 and the company's overall success. The expansion of trial sites to international locations, including Argentina and potentially other Latin American countries, shows KALA BIO's commitment to thorough clinical evaluation and global market potential.
While the company faces notable risks, including competition and regulatory challenges, KALA BIO's strong cash position, robust pipeline, and promising early clinical data for KPI-012 suggest that the company is well-positioned to navigate the road ahead. The multifactorial mechanism of action of KPI-012 also presents opportunities for expansion into other rare front-of-the-eye diseases, potentially broadening KALA BIO's therapeutic reach.
As KALA BIO continues to execute on its strategic objectives and advance its clinical programs, the company's story remains one of innovation and potential in the rapidly evolving ophthalmology landscape. Investors and industry observers will be closely watching the progress of the CHASE trial and the development of KALA BIO's pipeline as indicators of the company's future success in addressing unmet needs in rare and severe eye diseases.