10-Q 1 kalv-20231031.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended October 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to .

Commission File No. 001-36830

 

KALVISTA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-0915291

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

55 Cambridge Parkway

Suite 901E

Cambridge, Massachusetts

 

02142

(Address of principal executive offices)

 

(Zip Code)

 

857-999-0075

(Registrant’s telephone number, including area code)

n/a

 

 

Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

KALV

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO

As of November 30, 2023, the registrant had 34,558,709 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 


 

Table of Contents

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (unaudited)

3

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows

7

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

 

 

 

Item 4.

Controls and Procedures

20

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

21

 

 

 

Item 1A.

Risk Factors

21

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

 

 

 

Item 3.

Defaults Upon Senior Securities

21

 

 

 

Item 4.

Mine Safety Disclosures

21

 

 

 

Item 5.

Other Information

21

 

 

 

Item 6.

Exhibits

22

 

 

 

Signatures

23

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

October 31,

 

 

April 30,

 

 

 

2023

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,666

 

 

$

56,238

 

Marketable securities

 

 

45,506

 

 

 

93,137

 

Research and development tax credit receivable

 

 

19,976

 

 

 

16,568

 

Prepaid expenses and other current assets

 

 

5,458

 

 

 

6,383

 

Total current assets

 

 

128,606

 

 

 

172,326

 

Property and equipment, net

 

 

2,502

 

 

 

2,948

 

Right of use assets

 

 

7,298

 

 

 

7,822

 

Other assets

 

 

337

 

 

 

106

 

Total assets

 

$

138,743

 

 

$

183,202

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,896

 

 

$

4,817

 

Accrued expenses

 

 

11,707

 

 

 

9,128

 

Lease liability - current portion

 

 

1,148

 

 

 

1,087

 

Total current liabilities

 

 

17,751

 

 

 

15,032

 

Long-term liabilities:

 

 

 

 

 

 

Lease liability - net of current portion

 

 

6,546

 

 

 

7,145

 

Total long-term liabilities

 

 

6,546

 

 

 

7,145

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 authorized

 

 

 

 

 

 

Shares issued and outstanding: 34,421,458 at October 31, 2023 and 34,171,138 at April 30, 2023

 

 

34

 

 

 

34

 

Additional paid-in capital

 

 

513,926

 

 

 

507,133

 

Accumulated deficit

 

 

(396,049

)

 

 

(343,082

)

Accumulated other comprehensive loss

 

 

(3,465

)

 

 

(3,060

)

Total stockholders’ equity

 

 

114,446

 

 

 

161,025

 

Total liabilities and stockholders’ equity

 

$

138,743

 

 

$

183,202

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,089

 

 

 

18,077

 

 

 

38,396

 

 

 

36,262

 

General and administrative

 

 

10,657

 

 

 

7,806

 

 

 

20,443

 

 

 

15,936

 

Total operating expenses

 

 

29,746

 

 

 

25,883

 

 

 

58,839

 

 

 

52,198

 

Operating loss

 

 

(29,746

)

 

 

(25,883

)

 

 

(58,839

)

 

 

(52,198

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

776

 

 

 

449

 

 

 

1,699

 

 

 

691

 

Foreign currency exchange loss

 

 

(1,299

)

 

 

(317

)

 

 

(843

)

 

 

(834

)

Other income

 

 

2,619

 

 

 

3,494

 

 

 

5,016

 

 

 

7,042

 

Total other income

 

 

2,096

 

 

 

3,626

 

 

 

5,872

 

 

 

6,899

 

Net loss

 

$

(27,650

)

 

$

(22,257

)

 

$

(52,967

)

 

$

(45,299

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(419

)

 

 

(1,297

)

 

 

(328

)

 

 

(1,700

)

Unrealized holding gain on marketable securities

 

 

440

 

 

 

52

 

 

 

832

 

 

 

150

 

Reclassification adjustment for realized (gain) loss on marketable securities included in net loss

 

 

(595

)

 

 

69

 

 

 

(909

)

 

 

85

 

Other comprehensive loss

 

 

(574

)

 

 

(1,176

)

 

 

(405

)

 

 

(1,465

)

Comprehensive loss

 

$

(28,224

)

 

$

(23,433

)

 

$

(53,372

)

 

$

(46,764

)

Net loss per share to common stockholders, basic and diluted

 

$

(0.80

)

 

$

(0.90

)

 

$

(1.54

)

 

$

(1.84

)

Weighted average common shares outstanding, basic and diluted

 

 

34,565,955

 

 

 

24,595,039

 

 

 

34,490,090

 

 

 

24,576,327

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

Six Months Ended October 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at May 1, 2023

 

34,171,138

 

 

$

34

 

 

$

507,133

 

 

$

(343,082

)

 

$

(3,060

)

 

$

161,025

 

Issuance of common stock from equity incentive plans

 

35,313

 

 

 

 

 

 

204

 

 

 

 

 

 

 

 

 

204

 

Release of restricted stock units

 

60,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

3,254

 

 

 

 

 

 

 

 

 

3,254

 

Net loss

 

 

 

 

 

 

 

 

 

 

(25,317

)

 

 

 

 

 

(25,317

)

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

91

 

Unrealized holding gain from marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

392

 

 

 

392

 

Reclassification adjustment for realized gain on marketable securities included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(314

)

 

 

(314

)

Balance at July 31, 2023

 

34,266,595

 

 

$

34

 

 

$

510,591

 

 

$

(368,399

)

 

$

(2,891

)

 

$

139,335

 

Issuance of common stock from equity incentive plans

 

18,000

 

 

 

 

 

 

128

 

 

 

 

 

 

 

 

 

128

 

Release of restricted stock units

 

136,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

3,207

 

 

 

 

 

 

 

 

 

3,207

 

Net loss

 

 

 

 

 

 

 

 

 

 

(27,650

)

 

 

 

 

 

(27,650

)

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(419

)

 

 

(419

)

Unrealized holding gain from marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

440

 

 

 

440

 

Reclassification adjustment for realized gain on marketable securities included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(595

)

 

 

(595

)

Balance at October 31, 2023

 

34,421,458

 

 

$

34

 

 

$

513,926

 

 

$

(396,049

)

 

$

(3,465

)

 

$

114,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Six Months Ended October 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at May 1, 2022

 

24,550,748

 

 

$

25

 

 

$

439,104

 

 

$

(250,175

)

 

$

(3,861

)

 

$

185,093

 

Issuance of common stock from equity incentive plans

 

20,124

 

 

 

 

 

 

168

 

 

 

 

 

 

 

 

 

168

 

Stock-based compensation expense

 

 

 

 

 

 

 

2,642

 

 

 

 

 

 

 

 

 

2,642

 

Net loss

 

 

 

 

 

 

 

 

 

 

(23,042

)

 

 

 

 

 

(23,042

)

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(403

)

 

 

(403

)

Unrealized holding gain from marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

98

 

 

 

98

 

Reclassification adjustment for realized loss on marketable securities included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

16

 

Balance at July 31, 2022

 

24,570,872

 

 

$

25

 

 

$

441,914

 

 

$

(273,217

)

 

$

(4,150

)

 

$

164,572

 

Issuance of common stock from equity incentive plans

 

31,151

 

 

 

 

 

 

168

 

 

 

 

 

 

 

 

 

168

 

Stock-based compensation expense

 

 

 

 

 

 

 

2,506

 

 

 

 

 

 

 

 

 

2,506

 

Net loss

 

 

 

 

 

 

 

 

 

 

(22,257

)

 

 

 

 

 

(22,257

)

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,297

)

 

 

(1,297

)

Unrealized holding gain from marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

52

 

 

 

52

 

Reclassification adjustment for realized loss on marketable securities included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

69

 

 

 

69

 

Balance at October 31, 2022

 

24,602,023

 

 

$

25

 

 

$

444,588

 

 

$

(295,474

)

 

$

(5,326

)

 

$

143,813

 

 

6


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

Six Months Ended

 

 

October 31,

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

Net loss

$

(52,967

)

 

$

(45,299

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

390

 

 

 

331

 

Stock-based compensation expense

 

6,461

 

 

 

5,148

 

Realized (gain) loss from sale of marketable securities

 

(909

)

 

 

85

 

Non-cash operating lease expense

 

(13

)

 

 

42

 

Amortization of premium on marketable securities

 

83

 

 

 

678

 

Foreign currency exchange loss (gain)

 

811

 

 

 

(739

)

Changes in operating assets and liabilities:

 

 

 

 

 

Research and development tax credit receivable

 

(4,109

)

 

 

(7,137

)

Prepaid expenses and other assets

 

761

 

 

 

3,650

 

Accounts payable

 

163

 

 

 

(81

)

Accrued expenses

 

2,774

 

 

 

(14

)

Net cash used in operating activities

 

(46,555

)

 

 

(43,336

)

Cash flows from investing activities

 

 

 

 

 

Purchases of marketable securities

 

(29,537

)

 

 

(10,102

)

Sales and maturities of marketable securities

 

77,917

 

 

 

61,356

 

Acquisition of property and equipment

 

(8

)

 

 

(1,112

)

Website development costs

 

(203

)

 

 

-

 

Net cash provided by investing activities

 

48,169

 

 

 

50,142

 

Cash flows from financing activities

 

 

 

 

 

Issuance of common stock from equity incentive plans

 

332

 

 

 

336

 

Net cash provided by financing activities

 

332

 

 

 

336

 

Effect of exchange rate changes on cash and cash equivalents

 

(518

)

 

 

711

 

Net increase in cash and cash equivalents

 

1,428

 

 

 

7,853

 

Cash and cash equivalents at beginning of period

 

56,238

 

 

 

30,732

 

Cash and cash equivalents at end of period

$

57,666

 

 

$

38,585

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

Website development costs included in accounts payable

$

9

 

 

$

-

 

Right of use assets obtained in exchange for operating lease liabilities

$

-

 

 

$

1,192

 

Property and equipment included in accounts payable and accrued expenses:

$

-

 

 

$

132

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

7


 

Notes to the Condensed Consolidated Financial Statements (unaudited)

 

 

1.
The Company

Company Background

KalVista Pharmaceuticals, Inc. (“Company”) is a clinical stage pharmaceutical company focused on the discovery, development, and commercialization of small molecule protease inhibitors for diseases with significant unmet need. The Company applies its insights into the chemistry and biology of proteases to develop orally delivered, small molecule inhibitors with high selectivity, potency, and bioavailability that it believes will make them successful treatments for disease. The Company’s initial focus is on developing novel, oral therapeutics targeting hereditary angioedema (HAE).

The Company has advanced its drug candidate, sebetralstat, into the Phase 3 KONFIDENT clinical trial to evaluate the safety and efficacy of sebetralstat as the first potential oral, on-demand therapy for HAE. This worldwide, double-blind, placebo-controlled crossover trial will evaluate the safety and efficacy of two dose levels of sebetralstat in adolescents and adults experiencing HAE attacks. Sebetralstat is the most advanced potential oral therapy for HAE in clinical development and is intended to provide a substantial improvement over the current on-demand standard of care for HAE attacks, which are only injectable or infused therapies. In November 2023, the Company announced that it had achieved the targeted number of 252 on-treatment attacks required to complete KONFIDENT and expects the topline data readout from the trial in early 2024. KONFIDENT randomized a total of 136 participants from 66 sites across 20 countries. If the trial is successful, the Company anticipates submitting a New Drug Application (“NDA”) to the FDA in the first half of 2024. The Company also expects to file for approval in the European Union (“E.U.”) and Japan later in 2024. In addition, the Company is conducting preclinical development of novel, oral Factor XIIa (“Factor XIIa”) inhibitors, which the Company initially is advancing to provide a next generation of HAE therapeutics. Factor XIIa also offers the opportunity for future expansion into other high unmet need indications in therapeutic areas outside HAE.

The Company’s headquarters is located in Cambridge, Massachusetts, with additional offices located in Porton Down, United Kingdom, Salt Lake City, Utah, and Zug, Switzerland.

Liquidity

The Company has devoted substantially all of its efforts to research and development, including preclinical and clinical trials of sebetralstat. The Company has not completed the development of any product candidates or commenced commercial operations. Pharmaceutical drug product candidates, like those being developed by the Company, require approvals from the FDA or foreign regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals and any failure to receive approval or delay in approval may have a material adverse impact on the Company’s business and financial results. The Company is subject to a number of risks and uncertainties similar to those of other life science companies developing new products, including, among others, the risks related to the necessity to obtain adequate additional financing, to successfully develop product candidates, to obtain regulatory approval of product candidates, to comply with government regulations, to successfully commercialize its potential products, to the protection of proprietary technology and to the dependence on key individuals.

To date, the Company has not generated any product sales revenues and does not have any products that have been approved for commercialization. As of October 31, 2023, the Company had an accumulated deficit of $396.0 million and $103.2 million of cash, cash equivalents and marketable securities. The Company does not expect to generate significant revenue unless and until it obtains regulatory approval for, and commercializes, one of its current or future product candidates. The Company anticipates that it will continue to incur losses for the foreseeable future, and it expects those losses to increase as it continues the development of, and seeks regulatory approvals for, product candidates, and begins to commercialize any approved products. The Company is subject to all of the risks inherent in the development of new therapeutic products, and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business. The Company currently anticipates that, based upon its operating plans and existing capital resources, it has sufficient funding to operate for at least the next twelve months.

The Company will need to expend substantial resources for research and development, including costs associated with the clinical testing of its product candidates and will need to obtain additional financing to fund its operations and to conduct trials for its product candidates. The Company will seek to finance future cash needs through equity offerings, future grants, corporate partnerships, and product sales.

8


 

The Company has never been profitable and has incurred significant operating losses in each year since its inception. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes, or other developments. Additional financing will be required to continue operations after the Company exhausts its current cash resources and to continue its long-term plans for clinical trials and new product development. There can be no assurance that any such financing can be obtained by the Company, or if obtained, what the terms thereof may be, or that any amount that the Company is able to raise will be adequate to support the Company's working capital requirements until it achieves profitable operations. If adequate additional working capital is not secured when needed, the Company may be required to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned research programs. Any of these actions could materially harm the Company’s business and prospects.

2.
Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Such financial statements reflect all adjustments that are, in management’s opinion, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, and cash flows. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements. There were no adjustments other than normal recurring adjustments. These unaudited interim condensed consolidated financial results are not necessarily indicative of the results to be expected for the year ending April 30, 2024, or for any other future annual or interim period. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended April 30, 2023 in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on July 10, 2023.

Segment Reporting: The chief operating decision maker, the CEO, manages the Company’s operations as a single operating segment for the purposes of assessing performance and making operating decisions.

Recent Accounting Pronouncements: In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach on expected losses to estimate credit losses on certain financial instruments, including trade receivables and available-for-sale debt securities. This guidance became effective on May 1, 2023 and did not have a material impact to the consolidated financial statements. As the Company has never recorded any other-than-temporary-impairment adjustments to its available-for-sale debt securities prior to the effective date, no transition provisions were applicable to the Company.

Net Loss per Share: Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of share options and awards.

Potential dilutive common share equivalents consist of:

 

 

October 31,

 

 

 

2023

 

 

2022

 

Stock options and awards

 

 

5,867,804

 

 

 

4,752,574

 

The Company uses the treasury stock method to calculate the weighted average shares used in computing diluted net loss per share. In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. As a result, there is no difference between the Company’s basic and diluted loss per share for the periods presented.

The weighted average number of common shares used in the basic and diluted net loss per common share calculations includes the weighted-average pre-funded warrants outstanding during the period as they are exercisable at any time for nominal cash consideration.

Fair Value Measurement: The Company classifies fair value measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets

9


 

for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. These fair values are obtained from independent pricing services which utilize Level 1 and Level 2 inputs.

The following tables summarize the cash equivalents and marketable securities measured at fair value on a recurring basis as of October 31, 2023 and April 30, 2023 (in thousands):

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

October 31, 2023

 

Cash equivalents

$

31,018

 

 

$

 

 

$

 

 

$

31,018

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

45,506

 

 

 

 

 

 

45,506

 

U.S. government agency securities

 

 

 

 

 

 

 

 

 

 

-

 

$

31,018

 

 

$

45,506

 

 

$

 

 

$

76,524

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

April 30, 2023

 

Cash equivalents

$

31,507

 

 

$

 

 

$

 

 

$

31,507

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

77,967

 

 

 

 

 

 

77,967

 

U.S. government agency securities

 

 

 

 

15,170

 

 

 

 

 

 

15,170

 

$

31,507

 

 

$

93,137

 

 

$

 

 

$

124,644

 

 

3.
Marketable Securities

The objectives of the Company’s investment policy are to ensure the safety and preservation of invested funds, as well as to maintain liquidity sufficient to meet cash flow requirements. The Company invests its excess cash in securities issued by financial institutions, commercial companies, and government agencies that management believes to be of high credit quality in order to limit the amount of its credit exposure. The Company has not realized any material losses from its investments.

The Company classifies all of its debt securities as available-for-sale. Unrealized gains and losses on investments are recognized in accumulated comprehensive loss, unless an unrealized loss is considered to be other than temporary, in which case the unrealized loss is charged to operations. The Company periodically reviews its investments for other than temporary declines in fair value below cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. Realized gains and losses are included in other income in the consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

The following tables summarize the fair values of the Company’s investments by type as of October 31, 2023 and April 30, 2023 (in thousands):

 

October 31, 2023

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Corporate debt securities

$

45,256

 

 

$

300

 

 

$

(50

)

 

$

45,506

 

Obligations of the U.S. Government and its agencies

 

 

 

 

 

 

 

 

 

 

 

Total

$

45,256

 

 

$

300

 

 

$

(50

)

 

$

45,506

 

 

10


 

 

 

April 30, 2023

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Corporate debt securities

$

77,768

 

 

$

367

 

 

$

(168

)

 

$

77,967

 

Obligations of the U.S. Government and its agencies

 

15,094

 

 

 

76

 

 

 

 

 

 

15,170

 

Total

$

92,862

 

 

$

443

 

 

$

(168

)

 

$

93,137

 

The Company has classified all of its available-for-sale investment securities, including those with maturities beyond one year, as current assets on its condensed consolidated balance sheets based on the highly liquid nature of the investment securities and because these investment securities are considered available for use in current operations.

As of October 31, 2023, unrealized losses related to individual securities that had been in a continuous loss position for 12 months or longer were insignificant.

The following table summarizes the scheduled maturity for the Company’s marketable securities at October 31, 2023 (in thousands):

 

October 31, 2023

 

Maturing in one year or less

$

28,743

 

Maturing after one year through two years

 

7,898

 

Maturing after two years through four years

 

8,865

 

Total

$

45,506

 

4. Accrued Expenses

Accrued expenses consisted of the following as of October 31, 2023 and April 30, 2023 (in thousands):

 

 

 

October 31,

 

 

April 30,

 

 

 

2023

 

 

2023

 

Accrued compensation

 

$

3,853

 

 

$

4,207

 

Accrued research expense

 

 

5,814

 

 

 

3,817

 

Accrued professional fees

 

 

1,726

 

 

 

906

 

Other accrued expenses

 

 

314

 

 

 

198

 

 

 

$

11,707

 

 

$

9,128

 

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of October 31, 2023 and April 30, 2023 (in thousands):

 

 

 

October 31,

 

 

April 30,

 

 

 

2023

 

 

2023

 

Prepaid preclinical and clinical activities

 

$

2,352

 

 

$

1,724

 

Other prepaid expenses

 

 

1,783

 

 

 

2,583

 

Interest and other receivables

 

 

369

 

 

 

654

 

VAT receivable

 

 

954

 

 

 

1,422

 

Total prepaid expenses and other current assets

 

$

5,458

 

 

$

6,383

 

 

6. Commitments and Contingencies

Clinical Studies: The Company enters into contractual agreements with contract research organizations in connection with preclinical and toxicology studies and clinical trials. Amounts due under these agreements are invoiced to the Company on predetermined schedules during the course of the studies and clinical trials and are not refundable regardless of the outcome. The Company has contractual obligations related to the expected future costs to be incurred to complete the ongoing preclinical studies and clinical trials. The remaining commitments, which have cancellation provisions, total $24.1 million at October 31, 2023.

11


 

Indemnification: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves future claims that may be made against the Company but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. No amounts associated with such indemnifications have been recorded to date.

Contingencies: From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There were no contingent liabilities requiring accrual at October 31, 2023.

7. Leases

The Company has a lease agreement for approximately 8,300 square feet of space for its headquarters located in Cambridge, Massachusetts that runs through September 2028.

The Company has lease agreements for approximately 13,400 square feet of office and research laboratory space located in Porton Down, United Kingdom that run through April 2028.

The Company has a lease agreement in Salt Lake City, Utah for approximately 6,200 square feet of office space that runs through February 2032.

The Company has a lease agreement for approximately 500 square feet of research laboratory space in Cambridge, Massachusetts that commenced in July 2022 with an option to renew annually.

The Company leases office space in Zug, Switzerland under an initial one-year term which commenced in August 2023. The Company has classified this lease as a short-term lease as the Company concluded that the non-cancelable terms of this lease was less than one year at the commencement.

Total rent expense was approximately $1.0 million and $0.9 million for the six months ended October 31, 2023 and 2022, respectively and is reflected in general and administrative expenses and research and development expenses as determined by the underlying activities.

The following table summarizes the maturity of undiscounted payments due under lease liabilities and the present value of those liabilities as of October 31, 2023 (in thousands):

 

Years ending April 30,

 

Operating
Leases

 

 2024

 

$

871

 

 2025

 

 

1,769

 

 2026

 

 

1,806

 

 2027

 

 

1,845

 

 2028

 

 

1,842

 

 Thereafter

 

 

1,537

 

Total minimum lease payments

 

 

9,670

 

Less amounts representing interest

 

 

1,976

 

Present value of minimum payments

 

 

7,694

 

Current portion

 

 

1,148

 

Long-term portion

 

$

6,546

 

 

12


 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our unaudited interim condensed financial statements and related notes included elsewhere in this report. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “potential” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements, include, but are not limited to, statements regarding the success, cost and timing of our product development activities and clinical trials as well as other activities we may undertake, global macroeconomic conditions, our business strategy, our ability to receive, maintain and recognize the benefits of certain designations received by product candidates and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates. Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or our future financial performance, are based on assumptions, and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” in our Annual Report on Form 10-K or described elsewhere in this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Unless the context indicates otherwise, in this Quarterly Report on Form 10-Q, the terms “KalVista,” “Company,” “we,” “us” and “our” refer to KalVista Pharmaceuticals, Inc. and, where appropriate, its consolidated subsidiaries.

Management Overview

We are a clinical stage pharmaceutical company focused on the discovery, development, and commercialization of small molecule protease inhibitors for diseases with significant unmet need. We apply our insights into the chemistry and biology of proteases to develop orally delivered therapeutics with high selectivity, potency, and bioavailability that we believe will make them successful treatments for diseases. We have used these capabilities to develop a novel, small molecule plasma kallikrein inhibitor targeting the disease hereditary angioedema (“HAE”). We also are conducting preclinical development on a novel, oral Factor XIIa (“Factor XIIa”) inhibitor program, which we are initially advancing to provide a next generation of HAE therapeutics, and which also offers the opportunity for expansion into other high unmet need indications in the future.

HAE is a rare and potentially life-threatening, genetically-driven disease that features episodes of debilitating and often painful swelling in the skin, gastrointestinal tract or airways. Although multiple therapies have been approved for the disease, we believe people living with HAE are in need of alternatives that better meet their objectives for quality of life and ease of disease control. Other than one oral therapy approved for prophylaxis, currently marketed therapies are all administered by injection, which patients can find challenging despite their efficacy because they can be painful, time consuming to deliver and difficult to store. As a result, many attacks are treated too late to prevent significant symptoms, and a large percentage are not treated at all, which can lead to needless suffering. We anticipate that there will be strong interest in safe and effective, orally delivered, small molecule treatments, and our strategy is to develop oral drug candidates for both on-demand and prophylactic use with the goal of providing patients with a complete set of oral options to treat their disease.

We have advanced our drug candidate sebetralstat into Phase 3 clinical development as a potential oral, on-demand therapy for HAE. In February 2021, we announced data from a Phase 2 efficacy trial in which sebetralstat demonstrated statistically and clinically significant responses across all primary and secondary endpoints. Based upon these data, we initiated the Phase 3 KONFIDENT clinical trial in early 2022 that is intended to support submission of an NDA. KONFIDENT is a double-blind, placebo-controlled, event-driven crossover trial that enrolled a total of 136 patients from 66 sites in 20 countries. Those patients are intended to treat three attacks: one each with 300 mg sebetralstat, 600 mg sebetralstat, and placebo, in a randomized sequence. At least 252 attacks will be treated across the three treatments. The study includes both adults and adolescents ages 12 and above and includes patients using on-demand therapy only as well as those also on approved prophylactic therapies. All attack locations are eligible for treatment, including laryngeal attacks. The primary endpoint of the study is time to beginning of symptom relief assessed using the PGI-C scale. In November 2023, we announced that we achieved the target of 252 treated attacks required to complete KONFIDENT and as a result, expect the topline data readout from the trial in early 2024. If the trial is successful, we anticipate submitting an NDA to the FDA in the first half of 2024. We expect also to file for approval in the E.U. and Japan later in 2024.

In August 2022, we initiated KONFIDENT-S, a two-year open-label extension trial assessing the long-term safety and tolerability of sebetralstat. In addition, this study is examining the potential use of sebetralstat as short-term prophylaxis in the setting of medical and dental procedures, where HAE attacks are known to be triggered. KONFIDENT-S continues to enroll patients, and we expect to provide a

13


 

robust safety database to support the planned NDA filing. In total, more than 600 attacks have been treated across KONFIDENT and KONFIDENT-S to date, and KONFIDENT-S includes numerous patients who have taken multiple doses for treatment. We also are developing an oral disintegrating tablet (“ODT”) formulation of sebetralstat and have received FDA feedback on our proposed development program to support a supplemental NDA submission, which did not include a requirement to conduct efficacy trials. We anticipate that the ODT formulation will follow the expected initial launch formulation in the U.S. and E.U., and may become the initial launch formulation in other geographies.

Sebetralstat has received Fast Track and Orphan Drug designation from the FDA and Orphan Drug designation in the E.U. A Pediatric Investigational Plan has also been approved by the European Medicines Agency for sebetralstat. In November 2023, sebetralstat was also granted Orphan Drug Status in Switzerland.

Our oral Factor XIIa inhibitor program targets an enzyme that plays a key role in HAE, as the most upstream mechanism in the biochemical pathway that initiates HAE attacks. For this reason, we believe that inhibition of Factor XIIa will block the underlying mediators of HAE attacks, including the uncontrolled generation of both plasma kallikrein and bradykinin which lead to swelling and pain. Clinical studies of an injectable Factor XIIa-inhibitory antibody have demonstrated a high degree of efficacy in preventing HAE attacks, and there are no known safety implications of long-term inhibition of this enzyme. We believe that our program has the potential to be the first orally delivered Factor XIIa inhibitor to enter clinical development, initially for HAE and over time for additional indications that are supported by scientific evidence. Our internal research team has discovered multiple series of low nanomolar potency Factor XIIa inhibitors that are both selective and orally bioavailable, and we continue to progress multiple compounds in IND-enabling studies. Concurrently, we have presented preclinical data supporting potential development in HAE as well as diabetic macular edema and thrombosis.

On May 21, 2021, we entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (the “Sales Agreement”), which established an at-the-market offering program ("ATM") pursuant to which we may offer and sell shares of our common stock from time to time. The Sales Agreement provides for the sale of shares of our common stock having an aggregate offering price of up to $100.0 million. We have conducted no sales under the ATM.

On December 23, 2022, we entered into subscription agreements with institutional investors to sell, in a registered direct offering, an aggregate of 9,484,199 shares of our common stock at a price of $6.00 per share and pre-funded warrants to purchase up to 182,470 shares of common stock at a price of $5.999 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, less the $0.001 per share exercise price of each pre-funded warrant. The net proceeds from the registered direct offering, after deducting estimated expenses, were approximately $57.7 million.

We have devoted substantially all our efforts to research and development, including clinical trials of our product candidates. We have not completed the development of any product candidates. Pharmaceutical drug product candidates, like those being developed by us, require approvals from the FDA or foreign regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals and any failure to receive approval or delay in approval may have a material adverse impact on our business and financial results. We are subject to a number of risks and uncertainties similar to those of other life science companies developing new products, including, among others, the risks related to the necessity to obtain adequate additional financing, to successfully develop product candidates, to obtain regulatory approval of product candidates, to comply with government regulations, to successfully commercialize our potential products, to the protection of proprietary technology and to our dependence on key individuals.

Financial Overview

Revenue

We have not generated any revenue in the current fiscal year. To date, we have not generated any revenues from the sale of products, and we do not have any products that have been approved for commercialization. We do not expect to generate product revenue unless and until we obtain regulatory approval for, and commercialize, one of our current or future product candidates.

Research and Development Expenses

Research and development expenses primarily consist of costs associated with our research activities, including the preclinical and clinical development of product candidates. We contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each study, with oversight by our clinical program managers. All research and development costs are expensed as incurred.

Costs for certain research and development activities, such as manufacturing development activities and clinical studies are recognized based on the contracted amounts, as adjusted for the percentage of work completed to date. Payments for these activities are

14


 

based on the terms of the contractual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid or accrued expenses. We defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed.

We expect to continue to incur substantial expenses related to development activities for the foreseeable future as we conduct clinical development, manufacturing, and toxicology studies. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, additional drug manufacturing requirements, and later stage toxicology studies such as carcinogenicity studies. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate is affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability. Accordingly, we may never succeed in achieving marketing approval for any of our product candidates.

Completion dates and costs for clinical development programs as well as our research program can vary significantly for each current and future product candidate and are difficult to predict. As a result, we cannot currently estimate with any degree of certainty the costs associated with development of our product candidates. We anticipate making determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early research programs, results of ongoing and future clinical trials, our ability to enter into collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to the commercial potential of each current or future product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of the costs associated with general management, obtaining and maintaining our patent portfolio, commercial planning, professional fees for accounting, auditing, consulting and legal services, and general overhead expenses.

We expect ongoing general and administrative expenses to increase in the future as we expand our operating activities, including commercial planning, maintaining and expanding the patent portfolio and incurring additional costs associated with the management of a public company such as maintaining compliance with exchange listing and SEC requirements. These potential increases will likely include management costs, legal fees, accounting fees, directors’ and officers’ liability insurance premiums, and expenses associated with investor relations, among others.

Other Income

Other income consists of interest income earned on bank interest and marketable securities, research and development tax credits from the United Kingdom government’s tax incentive programs set up to encourage research and development in the United Kingdom, realized gains and losses from marketable securities and realized and unrealized exchange rate gains and losses on cash held in foreign currencies and transactions settled in foreign currencies.

Income Taxes

We historically have incurred net losses and had no corporation tax liabilities. We file U.S. Federal tax returns, as well as certain state returns. We also file returns in the United Kingdom. Under the U.K. government’s research and development tax incentive scheme, we have incurred qualifying research and development expenses and filed claims for research and development tax credits in accordance with the relevant tax legislation. The research and development tax credits are paid out to us in cash and reported as other income. Because of the operating losses and the full valuation allowance provided on all deferred tax assets, including the net operating loss carry forward, no income tax provision has been recognized in the three months or six months ended October 31, 2023.

For tax purposes, pursuant to the Tax Cuts and Jobs Act of 2017, the Company is required to capitalize and subsequently amortize all R&D expenditures over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. The Company adopted ASU 2019-12 as of January 1, 2022.

15


 

Results of Operations

Comparison of the three months ended October 31, 2023 and 2022

The following table sets forth the key components of our results of operations for the three months ended October 31, 2023 and 2022 (in thousands):

 

 

Three Months Ended

 

 

 

 

 

 

 

October 31,

 

 

Increase

 

 

 

 

2023

 

 

2022

 

 

(decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 

 

$

 

 

$

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

19,089

 

 

 

18,077

 

 

 

1,012

 

 

General and administrative expenses

 

 

10,657

 

 

 

7,806

 

 

 

2,851

 

 

Other income

 

 

 

 

 

 

 

 

 

 

Interest, exchange rate gain and other income

 

 

2,096

 

 

 

3,626

 

 

 

(1,530

)

 

 

Revenue. No revenue was recognized in the quarters ended October 31, 2023 or 2022.

Research and Development Expenses. Research and development expenses increased $1.0 million due to increases in spending on personnel costs of $0.5 million and sebetralstat spending of $3.3 million, offset by decreases in spending on KVD824 of $1.8 million and preclinical and other activities of $0.9 million compared to the same period in the prior fiscal year. The impact of exchange rates on research and development expenses resulted in an increase to expenses of $0.9 million in the three months ended October 31, 2023 compared to the same period in the prior fiscal year, which is reflected in the figures above.

Research and development expenses by major programs or categories were as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

 

 

 

October 31,

 

 

Increase

 

 

 

2023

 

 

2022

 

 

(decrease)

 

 

 

 

 

 

 

 

 

 

 

Program-specific costs

 

 

 

 

 

 

 

Sebetralstat

 

$

8,307

 

 

 

5,015

 

 

 

3,292

 

KVD824

 

 

472

 

 

 

2,313

 

 

 

(1,841

)

 Unallocated costs

 

 

 

 

 

 

 

 

 

Personnel

 

 

6,359

 

 

 

5,874

 

 

 

485

 

Preclinical and other activities

 

 

3,951

 

 

 

4,875

 

 

 

(924

)

Total

 

$

19,089

 

 

$

18,077

 

 

$

1,012

 

 

Expenses for the sebetralstat program increased primarily due to the ongoing Phase 3 KONFIDENT and KONFIDENT-S trials. We anticipate that these expenses will remain at or above current levels as KONFIDENT moves towards completion, KONFIDENT-S continues to enroll participants, and we initiate other clinical studies to support the expansion of the sebetralstat commercial opportunity.

Expenses for KVD824 decreased due to the termination of the Phase 2 KOMPLETE clinical trial in October 2022. We anticipate that these expenses will cease in the near term as we do not anticipate any further development of KVD824.

Personnel expenses increased primarily due to higher research and development and medical headcount compared to the same period in the prior year. We anticipate that these expenses will continue to increase for the medical team as we support ongoing development activities and prepare for the planned eventual commercialization of sebetralstat.

Expenses for preclinical and other activities decreased primarily due to decreased manufacturing costs compared to the same period in the prior year. We anticipate that these expenses will continue at or above current levels as we continue development on the oral Factor XIIa inhibitor program and other preclinical activities.

16


 

General and Administrative Expenses. General and administrative expenses increased by $2.8 million primarily due to increases in employee related expenses of $2.0 million, commercial strategy expenses of $0.7 million, and administrative expenses of $0.1 million. We anticipate that expenses will continue at or above current levels as we continue to expand to support the growth of the Company and the planned eventual commercialization of sebetralstat.

Other Income. Other income decreased $1.5 million primarily due to a decrease of $1.5 million in income from research and development tax credits. The decrease was driven by the U.K. government's changes to the research and development tax credit program which reduced the tax credit rates from 130% to 86% effective on April 1, 2023.

Comparison of the six months ended October 31, 2023 and 2022

The following table sets forth the key components of our results of operations for the six months ended October 31, 2023 and 2022 (in thousands):

 

 

Six Months Ended

 

 

 

 

 

 

October 31,

 

 

Increase

 

 

 

2023

 

 

2022

 

 

(decrease)

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 

 

$

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

38,396

 

 

 

36,262

 

 

 

2,134

 

General and administrative expenses

 

 

20,443

 

 

 

15,936

 

 

 

4,507

 

Other income

 

 

 

 

 

 

 

 

 

Interest, exchange rate gain and other income

 

 

5,872

 

 

 

6,899

 

 

 

(1,027

)

Revenue. No revenue was recognized in the six months ended October 31, 2023 or 2022.

Research and Development Expenses. Research and development expenses increased $2.1 million due to an increase in spending on sebetralstat of $6.6 million and an increase in personnel costs of $1.6 million, offset by decreases in spending on KVD824 of $4.5 million and preclinical activities of $1.6 million as compared to the same period in the prior fiscal year. The impact of exchange rates on research and development expenses resulted in an increase to expenses of $1.4 million in the six months ended October 31, 2023 compared to the same period in the prior fiscal year, which is reflected in the figures above.
 

Research and development expenses by major programs or categories were as follows (in thousands):

 

 

Six Months Ended

 

 

 

 

October 31,

 

Increase

 

 

2023

 

2022

 

(decrease)