10-Q 1 nktx-20240331.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 March 31, 2024

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 Number: 001-39370

 

 

Nkarta, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4515206

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1150 Veterans Boulevard

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

 

(925) 407-1049

(Registrant’s telephone number, including area code)

 

Not applicable

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

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

NKTX

 

 

Nasdaq Global Select Market

 

 

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, 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 May 6, 2024, the registrant had 70,467,620 shares of common stock, par value $0.0001 per share, outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

1

Condensed Balance Sheets as of March 31, 2024 and December 31, 2023

1

Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

2

Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

3

Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023

5

Notes to Unaudited Condensed Financial Statements

6

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 3.

Defaults Upon Senior Securities

77

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

79

SIGNATURES

80

 

i


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


 

This Quarterly Report on Form 10-Q, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. In addition, these statements are based on our management’s beliefs and assumptions and on information currently available to our management as of the date of this Quarterly Report on Form 10-Q. While we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. You should read the sections titled “Risk Factor Summary” below and “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements, which such factors may be updated or supplemented from time to time by subsequent reports we file with the Securities and Exchange Commission.

 

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

ii


 

RISK FACTOR SUMMARY

 

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. The below summary is qualified in its entirety by the more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q as part of your evaluation of an investment in our common stock.

 

We have a limited operating history and do not have any products approved for sale.
We have incurred significant losses since our inception and we expect to continue to incur significant losses for the foreseeable future.
We have never generated revenue from product sales and may never achieve or maintain profitability.
We will require additional capital, which, if available, may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.
Our business depends upon the success of our CAR NK-cell technology platform.
Utilizing CAR NK cells represents a novel therapeutic approach, and we must overcome significant challenges in order to develop, commercialize and manufacture our product candidates.
Clinical development involves a lengthy and expensive process with an uncertain outcome, and we may encounter substantial delays due to a variety of reasons outside our control.
Our business is highly dependent on the clinical success of our product candidates, and on the clinical success of NKX019, in particular, and we may fail to develop NKX019 and/or our other product candidates successfully or be unable to obtain regulatory approval for them.
Clinical data supporting the effectiveness of CD19-targeted cell therapies against autoimmune disease are limited, and CD19-targeted CAR NK-cell therapies, such as NKX019, may not provide the same, or any, therapeutic benefit against lupus nephritis or other autoimmune diseases, or be competitive with respect to other CD19-targeted therapies for the treatment of autoimmune disease.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be delayed, made more difficult or rendered impossible by multiple factors outside our control.
Our preclinical pipeline programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.
The results of preclinical studies and early-stage clinical trials may not be predictive of future results. Interim, “topline” and preliminary data from our clinical trials may differ materially from the final data. Initial success in any clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.
If any of our product candidates, or any competing product candidates, demonstrate relevant, serious adverse events, we may be required to halt or delay further clinical development.
We have entered into a research collaboration with CRISPR Therapeutics regarding certain product candidates, and we may enter into additional collaborations with third parties to develop or commercialize other product candidates. Our prospects with respect to those product candidates will depend in significant part on the success of those collaborations, and we may not realize the benefits of such collaborations.
If we fail to compete effectively with academic institutions and other biopharmaceutical companies that develop similar or alternatives to cellular immunotherapy product candidates, our business will be materially adversely affected.
Our manufacturing process is novel and complex, and we may encounter difficulties in production, or difficulties with internal manufacturing, which would delay or prevent our ability to provide a sufficient supply of our product candidates for clinical trials or our products for patients, if approved.
We rely on third parties to manufacture certain materials for use in the production of our product candidates, or may rely on third parties to manufacture certain of our product candidates in the future, which increases the risk that we will not have sufficient quantities of such materials or product candidates, or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

iii


 

We are reliant on a sole supplier for certain steps of our manufacturing process.
Delays in commissioning and receiving regulatory approvals for our manufacturing facilities could delay our development plans and thereby limit our ability to develop our product candidates and generate revenues.
If our license agreement with National University of Singapore and St. Jude Children’s Research Hospital, Inc. is terminated, we could lose our rights to key components enabling our NK-cell engineering platform.
If any patent protection we obtain is not sufficiently robust, our competitors could develop and commercialize products and technology similar or identical to ours.
If any of our product candidates are approved for marketing and commercialization and we have not developed or secured marketing, sales and distribution capabilities, either internally or from third parties, we will be unable to successfully commercialize such products and may not be able to generate product revenue.
Our product candidates, including NKX019, could be subject to regulatory limitations following approval, if and when such approval is granted.
The market price for our common stock may be volatile, which could contribute to the loss of all or part of your investment.
Concentration of ownership of our shares of common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
Computer system interruptions or security breaches of our information systems could significantly disrupt our product development programs and our ability to operate our business.

 

 

 

 

 

 

iv


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

250,285

 

 

$

31,040

 

Short-term investments

 

 

187,109

 

 

 

217,149

 

Prepaid expenses and other current assets

 

 

5,387

 

 

 

4,882

 

Total current assets

 

 

442,781

 

 

 

253,071

 

Long-term investments

 

 

9,814

 

 

 

 

Restricted cash

 

 

2,743

 

 

 

2,743

 

Property and equipment, net

 

 

78,522

 

 

 

79,326

 

Operating lease right-of-use assets

 

 

39,357

 

 

 

39,949

 

Other long-term assets

 

 

3,719

 

 

 

3,796

 

Total assets

 

$

576,936

 

 

$

378,885

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

3,177

 

 

$

3,665

 

Operating lease liabilities, current portion

 

 

6,078

 

 

 

6,069

 

Accrued and other current liabilities

 

 

12,934

 

 

 

13,596

 

Total current liabilities

 

 

22,189

 

 

 

23,330

 

Operating lease liabilities, net of current portion

 

 

81,096

 

 

 

82,270

 

Total liabilities

 

 

103,285

 

 

 

105,600

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock

 

 

7

 

 

 

5

 

Additional paid-in capital

 

 

938,723

 

 

 

708,706

 

Accumulated other comprehensive (loss) income

 

 

(127

)

 

 

8

 

Accumulated deficit

 

 

(464,952

)

 

 

(435,434

)

Total stockholders’ equity

 

 

473,651

 

 

 

273,285

 

Total liabilities and stockholders’ equity

 

$

576,936

 

 

$

378,885

 

 

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

1


 

NKARTA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except share and per share data)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

25,237

 

 

$

26,135

 

General and administrative

 

 

7,525

 

 

 

8,178

 

Total operating expenses

 

 

32,762

 

 

 

34,313

 

Loss from operations

 

 

(32,762

)

 

 

(34,313

)

Other income, net:

 

 

 

 

 

 

Interest income

 

 

3,246

 

 

 

3,465

 

Other (expense) income, net

 

 

(2

)

 

 

33

 

Total other income, net

 

 

3,244

 

 

 

3,498

 

Net loss

 

$

(29,518

)

 

$

(30,815

)

Other comprehensive loss:

 

 

 

 

 

 

Net unrealized (loss) gain on investments

 

 

(135

)

 

 

505

 

Comprehensive loss

 

$

(29,653

)

 

$

(30,310

)

Net loss per share, basic and diluted

 

$

(0.58

)

 

$

(0.63

)

Weighted average shares used to compute net loss
   per share, basic and diluted

 

 

50,682,469

 

 

 

48,921,326

 

 

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

2


 

NKARTA, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain/(Loss)

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2023

 

49,181,295

 

 

$

5

 

 

$

708,706

 

 

$

8

 

 

$

(435,434

)

 

$

273,285

 

Issuance of common stock and pre-funded warrants, net of issuance costs of $15,027

 

21,010,000

 

 

 

2

 

 

 

225,071

 

 

 

 

 

 

 

 

 

225,073

 

Issuance of common stock
   upon exercise of stock
   options

 

128,671

 

 

 

 

 

 

578

 

 

 

 

 

 

 

 

 

578

 

Issuance of common stock
   upon vesting of restricted stock units

 

133,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation
   expense

 

 

 

 

 

 

 

4,368

 

 

 

 

 

 

 

 

 

4,368

 

Unrealized loss on
   investments

 

 

 

 

 

 

 

 

 

 

(135

)

 

 

 

 

 

(135

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,518

)

 

 

(29,518

)

Balance, March 31, 2024

 

70,453,561

 

 

$

7

 

 

$

938,723

 

 

$

(127

)

 

$

(464,952

)

 

$

473,651

 

 

3


 

NKARTA, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain/(Loss)

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2022

 

48,877,806

 

 

$

5

 

 

$

690,814

 

 

$

(679

)

 

$

(317,933

)

 

$

372,207

 

Vesting of shares of common
   stock subject to repurchase

 

395

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock
   upon exercise of stock
   options

 

253

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock
   upon vesting of restricted stock units

 

50,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock
   upon employee stock purchase plan

 

 

 

 

 

 

 

4,746

 

 

 

 

 

 

 

 

 

4,746

 

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on
   investments

 

 

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,815

)

 

 

(30,815

)

Balance, March 31, 2023

 

48,928,923

 

 

$

5

 

 

$

695,563

 

 

$

(174

)

 

$

(348,748

)

 

$

346,646

 

 

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

4


 

NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(29,518

)

 

$

(30,815

)

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

 

 

 

 

 

 

Share-based compensation expense

 

 

4,368

 

 

 

4,746

 

Depreciation and amortization

 

 

2,255

 

 

 

797

 

Accretion and amortization of premiums and discounts on investments, net

 

 

(1,568

)

 

 

(2,253

)

Realized gain on investments

 

 

 

 

 

(34

)

Non-cash lease expense

 

 

592

 

 

 

545

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(428

)

 

 

(406

)

Operating lease liabilities

 

 

(1,164

)

 

 

7,992

 

Accounts payable and accrued and other liabilities

 

 

(3,043

)

 

 

(1,330

)

Net cash used in operating activities

 

 

(28,506

)

 

 

(20,758

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(175

)

 

 

(4,823

)

Purchases of investments

 

 

(40,040

)

 

 

(84,288

)

Maturities of investments

 

 

61,700

 

 

 

126,040

 

Net cash provided by investing activities

 

 

21,485

 

 

 

36,929

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

578

 

 

 

1

 

Proceeds from issuance of common stock and pre-funded warrants, net of underwriting fees

 

 

225,688

 

 

 

 

Net cash provided by financing activities

 

 

226,266

 

 

 

1

 

Net increase in cash and cash equivalents

 

 

219,245

 

 

 

16,172

 

Cash, cash equivalents, and restricted cash beginning of period

 

 

33,783

 

 

 

40,237

 

Cash, cash equivalents, and restricted cash end of period

 

$

253,028

 

 

$

56,409

 

Reconciliation of cash, cash equivalents and restricted cash to the balance sheet:

 

 

 

 

 

 

Cash and cash equivalents

 

$

250,285

 

 

$

53,666

 

Restricted cash

 

 

2,743

 

 

 

2,743

 

Total cash, cash equivalents and restricted cash

 

$

253,028

 

 

$

56,409

 

Supplemental disclosures of non-cash investing activities:

 

 

 

 

 

 

Stock issuance costs included in accrued and other current liabilities

 

$

615

 

 

$

 

Acquisitions of property and equipment in accounts payable and accrued and other current liabilities

 

$

1,277

 

 

$

3,761

 

 

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

5


 

NKARTA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

1. Organization and Description of Business

Description of the Business

Nkarta, Inc. ("Nkarta" or the "Company") was incorporated in the State of Delaware in July 2015. The Company is a biopharmaceutical company developing engineered natural killer ("NK") cell therapies to treat cancer and autoimmune disease. The Company is focused on leveraging the natural potent power of NK cells to identify and kill abnormal cells and recruit adaptive immune effectors to generate responses that are specific and durable. Nkarta is combining its NK-cell expansion platform technology with proprietary cell engineering technologies to generate an abundant supply of NK cells, engineer enhanced NK-cell recognition of therapeutic targets, and improve persistence for sustained activity in the body. Nkarta’s goal is to develop off-the-shelf NK-cell therapy product candidates to improve outcomes for patients. The Company’s operations are based in South San Francisco, California, and it operates in one segment.

Liquidity and Management Plans

The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern. Since inception, the Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, conducting preclinical studies and initiating clinical studies, and has not realized substantial revenues from its planned principal operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues its research and development activities. As of March 31, 2024, the Company had an accumulated deficit of $465.0 million and cash, cash equivalents, restricted cash and investments of $450.0 million.

Management plans to continue to incur substantial costs in order to conduct research and development activities for which additional capital will be needed. The Company intends to raise such capital through debt or equity financings or other arrangements to fund operations. Management believes that the Company’s current cash, cash equivalents, restricted cash and investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

On March 17, 2023, the Company filed a Registration Statement on Form S-3, as amended by the Form S-3/A filed on April 24, 2023 (the "Shelf Registration Statement"), covering the offer and sale from time to time, pursuant to Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of up to $350.0 million in aggregate offering price of shares of the Company’s common stock, shares of the Company’s preferred stock, debt securities, warrants, rights and/or units, including up to $120.0 million in aggregate offering price of shares of the Company’s common stock, shares of the Company’s preferred stock, debt securities, warrants, rights and/or units registered on the Company’s Registration Statement on Form S-3 declared effective by the Securities and Exchange Commission (the "SEC") on September 2, 2021 (the "Prior Registration Statement") that have not yet been sold. The Shelf Registration Statement was declared effective by the SEC on May 5, 2023.

On August 12, 2021, the Company entered into a sales agreement with Cowen and Company, LLC, a sales agent, to provide for the offering, issuance and sale of up to an aggregate of $150.0 million of the Company’s common stock through an “at-the-market” equity offering program (the "ATM Offering Program") pursuant to the Prior Registration Statement and subject to the limitations thereof. For the three months ended March 31, 2024, no sales of the Company’s common stock were made pursuant to the ATM Offering Program.

 

On March 27, 2024, the Company completed an underwritten public offering utilizing the Shelf Registration Statement, pursuant to which it sold an aggregate of (i) 21,010,000 shares of its common stock at a price of $10.00 per share, and (ii) pre-funded warrants to purchase 3,000,031 shares of common stock at a price of $9.9999 per pre-funded warrant. The pre-funded warrants can be exercised at any time after issuance for an exercise price of $0.0001 per share, subject to certain ownership limitations. The Company raised $240.1 million in gross proceeds before underwriting discounts, commissions and other expenses of $15.0 million. See Note 9 for additional detail.

 

6


 

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared in accordance with U.S. generally accepted accounting principle ("U.S. GAAP") for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act, as amended. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows for the periods presented.

The results for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the full year or any subsequent interim period. The condensed balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed by the Company with the SEC on March 21, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to preclinical studies and clinical trial accruals, fair value of assets and liabilities, impairment of assets, leases, share-based compensation and income taxes. Management bases its estimates on historical experience, knowledge of current events and actions it may undertake in the future that management believes to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares and pre-funded warrants outstanding for the period, without consideration of potential dilutive securities. Pre-funded warrants are considered outstanding for the purposes of computing basic and diluted net loss per share because shares may be issued for little or no additional consideration and are fully vested and exercisable after the original issuance date of the pre-funded warrants. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares and pre-funded warrants plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive. The Company’s potentially dilutive securities, which include unvested common stock, outstanding stock options and restricted stock units under the Company’s equity incentive plans, have been excluded from the computation of diluted net loss per share as they would be antidilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Long-Lived Asset Impairment

The Company assesses the impairment of long-lived assets whenever events or changes in business circumstances indicate that the carrying amounts of the asset or group of assets may not be fully recoverable. In the case of property and equipment and right-of-use assets for the Company's leases, the Company determines whether there has been an impairment by comparing the carrying value of the group of assets to the anticipated undiscounted net future cash flows associated with the group of assets. If such cash flows are less than the carrying value, the Company writes down the group of assets to its fair value, which may be measured as anticipated net cash flows associated with the group of assets, discounted at a rate that the Company believes a market participant would utilize to reflect the risks associated with the cash flows, such as credit risk. See Note 6 for additional information regarding the prior year impairment charge the Company recorded in connection with its leased facilities.

7


 

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on the financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for us in the annual period beginning January 1, 2025, though early adoption is permitted. The Company is currently evaluating the presentational effect that ASU 2023-09 will have on its financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 740-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company beginning on January 1, 2024. The adoption of ASU 2020-06 does not have a material impact on the financial position, results of operations or cash flows of the Company.

There were no other significant updates to the recently issued accounting standards other than as disclosed herewith. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.

3. Net Loss Per Share

The following tables summarize the computation of the basic and diluted net loss per share (in thousands except share and per share data):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net loss

 

$

(29,518

)

 

$

(30,815

)

Denominator:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

50,517,632

 

 

 

48,921,535

 

Less: weighted average unvested common stock
   issued upon early exercise of common stock options

 

 

 

 

 

(209

)

Add: weighted average of common stock
   to be issued upon exercise of pre-funded warrants

 

 

164,837

 

 

 

 

Weighted average shares used to compute net loss
   per share, basic and diluted

 

 

50,682,469

 

 

 

48,921,326

 

Net loss per share, basic and diluted

 

$

(0.58

)

 

$

(0.63

)

 

The following table summarizes the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be antidilutive:

 

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

Common stock options

 

 

8,261,949

 

 

 

6,820,096

 

Restricted stock units

 

 

1,216,817

 

 

 

799,930

 

Unvested common stock upon early exercise of common stock
   options

 

 

 

 

 

113

 

 

 

9,478,766

 

 

 

7,620,139

 

 

8


 

 

4. Fair Value of Financial Instruments

The following tables summarize the fair value of the Company’s financial instruments (in thousands):

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

March 31,
2024

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

249,867

 

 

$

249,867

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

38,843

 

 

$

 

 

$

38,843

 

 

$

 

Commercial paper

 

 

28,676

 

 

 

 

 

 

28,676

 

 

 

 

U.S. Government securities

 

 

119,590

 

 

 

 

 

 

119,590

 

 

 

 

Total short-term investments

 

 

187,109

 

 

 

 

 

 

187,109

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

9,814

 

 

 

 

 

 

9,814

 

 

$

 

Total long-term investments

 

 

9,814

 

 

 

 

 

 

9,814

 

 

 

 

Total

 

$

446,790

 

 

$

249,867

 

 

$

196,923

 

 

$

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

December 31,
2023

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

30,751

 

 

$

30,751

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

40,609

 

 

$

 

 

$

40,609

 

 

$

 

Commercial paper

 

 

38,197

 

 

 

 

 

 

38,197

 

 

 

 

Government securities

 

 

138,343

 

 

 

 

 

 

138,343

 

 

 

 

Total short-term investments

 

 

217,149

 

 

 

 

 

 

217,149

 

 

 

 

Total

 

$

247,900

 

 

$

30,751

 

 

$

217,149

 

 

$

 

Cash Equivalents and Investments

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and investments. Cash equivalents consisted of money market funds and investments consisted of commercial paper, government securities and corporate bonds. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

Investments are classified as Level 1 within the fair value hierarchy if their quoted prices are available in active markets for identical securities. Investments in money market funds of $249.9 million and $30.8 million as of March 31, 2024 and December 31, 2023, respectively, were classified as Level 1 instruments and were included in cash and cash equivalents.

Investments in corporate debt securities, commercial paper and Government securities included in short-term and long-term investments are valued using Level 2 inputs. Level 2 securities are initially valued at the transaction price and subsequently valued and reported upon utilizing inputs other than quoted prices that are observable either directly or indirectly, such as quotes from third-party pricing vendors. Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company’s financial position and results of operations. The marketable securities of $196.9 million and $217.1 million as of March 31, 2024 and December 31, 2023, respectively, were classified as Level 2 instruments. As of March 31, 2024, marketable securities of $187.1 million were included in short-term investments, and marketable securities of $9.8 million were included in long-term investments.

9


 

Accrued interest receivable related to investments was $1.2 million as of March 31, 2024 and December 31, 2023, and included as part of prepaid expenses and other current assets in the condensed balance sheets.

The following tables summarize the Company’s short-term and long-term investments as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

 

 

 

March 31, 2024

 

 

 

Maturity
(in years)

 

Amortized
Cost

 

 

Unrealized
Losses

 

 

Unrealized
Gains

 

 

Estimated
Fair Value

 

Corporate debt securities

 

1 year or less

 

$

38,863

 

 

$

(25

)

 

$

5

 

 

$

38,843

 

Commercial paper

 

1 year or less

 

 

28,684

 

 

 

(8

)

 

 

 

 

 

28,676

 

U.S. Government securities

 

1 year or less

 

 

119,668

 

 

 

(82

)

 

 

4

 

 

 

119,590

 

Corporate debt securities

 

Greater than 1 year

 

 

9,835

 

 

 

(21

)

 

 

 

 

 

9,814

 

Total

 

 

 

$

197,050

 

 

$

(136

)

 

$

9

 

 

$

196,923

 

 

 

 

 

 

December 31, 2023

 

 

 

Maturity
(in years)

 

Amortized
Cost

 

 

Unrealized
Losses

 

 

Unrealized
Gains

 

 

Estimated
Fair Value

 

Corporate debt securities

 

1 year or less

 

$

40,602

 

 

$

(11

)

 

$

18

 

 

$

40,609

 

Commercial paper

 

1 year or less

 

 

38,198

 

 

 

(2

)

 

 

1

 

 

 

38,197

 

Government securities

 

1 year or less

 

 

138,341

 

 

 

(56

)

 

 

58

 

 

 

138,343

 

Total

 

 

 

$

217,141

 

 

$

(69

)

 

$

77

 

 

$

217,149

 

 

The Company has classified its investment securities as current and non-current assets on the condensed balance sheets based on each security's contractual maturity date, and all investment securities are accounted for as available-for-sale because these investment securities are considered available for use in current operations.

The Company considers whether unrealized losses have resulted from a credit loss or other factors. The unrealized losses on the Company’s available-for-sale securities as of March 31, 2024 and December 31, 2023 were caused by fluctuations in market value and interest rates as a result of the economic environment and not credit risk. The Company concluded that an allowance for credit losses was unnecessary as of March 31, 2024 and December 31, 2023. It is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell these investments prior to recovery of their cost basis or recovery of fair value. Unrealized gains and losses are included in accumulated other comprehensive loss.

There was no realized gain or loss on available-for-sale securities for the three months ended March 31, 2024. During the three months ended March 31, 2023, there were immaterial realized gains recognized on available-for-sale securities sold in the period. The Company uses the specific identification method to determine the cost basis of investments sold.

5. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net is comprised of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Leasehold improvements

 

$

66,618

 

 

$

66,618

 

Furniture and fixtures

 

 

746

 

 

 

745

 

Research equipment

 

 

15,430

 

 

 

14,298

 

Computers and software

 

 

404

 

 

 

404

 

Construction in progress

 

 

9,273

 

 

 

8,954

 

Total property and equipment, gross

 

 

92,471

 

 

 

91,019

 

Less accumulated depreciation and amortization

 

 

(13,949

)

 

 

(11,693

)

Total property and equipment, net

 

$

78,522

 

 

$

79,326

 

 

Depreciation and amortization expense was $2.3 million and $0.8 million for the three months ended March 31, 2024, and 2023, respectively.

10


 

Accrued and Other Current Liabilities

Accrued other current liabilities are comprised of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued compensation

 

$

3,774

 

 

$

6,722

 

Accrued research and development costs

 

 

7,452

 

 

 

5,845

 

Accrued property and equipment

 

 

91

 

 

 

174

 

Accrued stock issuance costs

 

 

615

 

 

 

 

Other accrued and current liabilities

 

 

1,002

 

 

 

855

 

Total accrued and other liabilities

 

$

12,934

 

 

$

13,596

 

 

 

6. Leases

The Company has operating leases for its current corporate offices, laboratories, manufacturing facilities, and dedicated space in a vivarium in South San Francisco, California. Rent expense was $2.7 million for the three months ended March 31, 2024, and 2023. The total cash paid for the three months ended March 31, 2024 for operating leases included in the operating cash flows was $3.3 million, inclusive of $3.1 million of rent payments and $0.2 million of tenant improvement allowance repayment, as compared to net cash received of $5.8 million for the three months ended March 31, 2023, comprised of $7.8 million cash received for the tenant improvement allowance reimbursement less $2.0 million of rent payment. The weighted average remaining lease term was 9.6 years for the corporate office, laboratory space leases, and additional facility as of March 31, 2024. The weighted average discount rate was 9.8% as of March 31, 2024.

Initial Lease Agreement

In May 2018, the Company entered into a lease agreement for corporate office and laboratory space located in South San Francisco, California with an expiration date in May 2025 (the "Initial Lease Agreement"). In April 2019, the Company executed the first amendment to the Initial Lease Agreement for additional corporate space, laboratory space and manufacturing capabilities. In May 2020, the Company executed the second amendment to the Initial Lease Agreement for additional corporate space and laboratory space in the same building. The lease for this additional space commenced in January 2021. In January 2021, the Company signed a third amendment to the Initial Lease Agreement for additional space in the same building. The lease amendment for this additional space commenced in April 2021 and expired in March 2024. In October 2021, the Company signed a fourth amendment to the Initial Lease Agreement for additional space in the same building, that commenced in April 2022. All space leased under the Initial Lease Agreement, together with the first amendment, second amendment, and fourth amendment to the Initial Lease Agreement, has a lease term through July 31, 2030, with an option to extend the lease for an additional seven-year term. This lease extension option was not considered in the right-of-use assets or the lease liability as the Company did not consider it reasonably certain the option would be exercised.

Additional Lease Agreement

In July 2021, the Company entered into an additional lease agreement for corporate office, manufacturing and laboratory space located in South San Francisco, California with an expiration date approximately twelve years after the lease commencement date (as amended from time to time, the "Additional Lease Agreement"). The lease for this additional space and the Company's obligation to pay rent commenced in January 2022. In addition to base rent, the Company is responsible for payment of direct expenses, which include operating, insurance and tax expenses. The Additional Lease Agreement provided for certain tenant improvement allowances that were fully utilized and reimbursed to the Company, and an additional tenant improvement allowance to be utilized at the option of the Company. In June 2023, the Company entered into an amendment to utilize the additional tenant improvement allowance of $4.4 million and under this amendment the Company is required to repay the tenant improvement costs in equal monthly payments at an annual rate of 8.5% over the remainder of the lease term starting in July 2023.

11


 

Maturities of operating lease liabilities under existing operating leases as of March 31, 2024 were as follows (in thousands):

 

Year ending December 31,

 

Amount

 

2024 (remaining nine months)

 

$

9,545

 

2025

 

 

13,027

 

2026

 

 

13,462

 

2027

 

 

13,912

 

2028

 

 

14,378

 

2029 and thereafter

 

 

72,876

 

Total undiscounted future minimum lease payments

 

 

137,200

 

Less imputed interest

 

 

(50,026

)

Total operating lease liabilities

 

$

87,174

 

Operating lease liabilities:

 

 

 

Current

 

 

6,078

 

Non-current

 

 

81,096

 

Total lease liability

 

$

87,174

 

 

Lease Impairment

The Company tests long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets may not be recoverable. Beginning in the second quarter of 2023, the Company started to market for sublease portions of the Company's leased corporate office space in South San Francisco. As a result of these plans, the Company reviewed these spaces for impairment. As part of the impairment evaluation of the spaces being marketed for sublease, the Company compared the estimated undiscounted income for the marketed sublease spaces to the net book value of the related long-term assets, which include right-of-use assets and certain property and equipment, primarily for leasehold improvements (collectively, "Sublease Asset Group"). The Company estimated potential sublease income using market participant assumptions, which the Company evaluated based on current real estate trends and market conditions. For the Sublease Asset Group, the Company determined that the respective right-of-use assets had net carrying values that exceeded their estimated undiscounted future cash flows. Accordingly, the Company then estimated the fair value of the Sublease Asset Group based on its discounted cash flows. The carrying value of the Sublease Asset Group exceeded its fair values and, as a result, the Company recorded a right-of-use asset impairment of $4.1 million for the six months ended June 30, 2023. The impairment is recorded within general and administrative expenses in the condensed statements of operations and comprehensive loss. There was no additional impairment recorded for the three months ended March 31, 2024.

7. Commitments & Contingencies

Guarantee Agreement

The Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts under certain circumstances and subject to deductibles and exclusions. The Company had no liabilities recorded for these agreements as of March 31, 2024, and December 31, 2023.

Letters of Credit

The Company has $2.7 million in letter of credit agreements with a financial institution that are used as collateral for the Company’s corporate headquarters’ operating leases. The letters of credit automatically renew annually without amendment unless cancelled by the financial institutions within 30 to 60 days of the annual expiration date. The letters of credit are presented as restricted cash in the condensed balance sheet.

Contingencies

The Company, from time to time, may be involved in litigation arising in the ordinary course of business. The Company assesses its potential liability in such situations by analyzing potential outcomes, assuming various litigation, regulatory and settlement strategies. If the Company determines a loss is probable and its amount can be reasonably estimated, the Company accrues an amount equal to the estimated loss. No losses and no provision for a loss contingency have been recorded to date.

12


 

Purchase Commitments

The Company enters into contracts in the normal course of business for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore the Company believes that non-cancelable obligations under these agreements are not material.

8. CRISPR Collaboration Agreement

 

On May 5, 2021, the Company entered into a research collaboration agreement (as amended, the "CRISPR Agreement") with CRISPR Therapeutics AG ("CRISPR") to co-develop and co-commercialize an allogeneic, off-the-shelf chimeric antigen receptor-natural killer ("CAR NK") product candidate targeting the CD70 tumor antigen ("NKX070") and an allogeneic, off-the-shelf product candidate that comprises both engineered NK cells and engineered T cells ("NK+T"). In May 2022, the CRISPR Agreement was amended to revise the transfer of materials and nomination provisions. On March 8, 2023, the CRISPR Agreement was further amended to permit Nkarta's advancement of CRISPR-licensed product candidates targeting a specified tumor antigen (the "Specified TA") and incorporate associated development and regulatory approval milestones and sales based royalties. In addition, the Company has received licenses from CRISPR for four CRISPR-Cas9 gene editing targets and will receive a license from CRISPR for up to one more CRISPR-Cas9 gene editing target that can be engineered into an unlimited number of its own NK-cell products. CRISPR also has an option to co-develop and co-commercialize a future CAR NK program.

 

Under the terms of the CRISPR Agreement, the Company and CRISPR share equally in all research and development costs and potential profits worldwide related to the NKX070 product candidate, NK+T product candidate, and the potential future CAR NK program. For the NK+T program, CRISPR is responsible for gene-editing activities and T-cell related activities, and Nkarta is responsible for NK-cell related activities. The impact of the cost sharing associated with the research and development activities is included in research and development expense on the condensed statements of operations and comprehensive loss. Expenses related to services performed by the Company are classified as research and development expense. Payments received from CRISPR for partial reimbursement of expenses are recorded as a reduction of research and development expense. Reduction of research and development expense resulting from partial reimbursement from CRISPR was $0.1 million and $0.9 million for the three months ended March 31, 2024, and 2023, respectively. As of March 31, 2024, the Company had a $0.1 million receivable under the research cost sharing provision, which is included as part of prepaid expenses and other current assets in the condensed balance sheet.

 

For each non-collaboration product candidate incorporating a genome editing target licensed from CRISPR (a "CRISPR-Licensed Product Candidate"), other than those targeting the Specified TA, the Company would retain worldwide rights and may be required to make potential future payments based on the achievement of development and regulatory approval milestones totaling less than mid-twenty million dollars, as well as tiered royalties up to the mid-single digits on net product sales of such product candidate. For each CRISPR-Licensed Product Candidate targeting the Specified TA, the Company would retain worldwide rights and may be required to make potential future payments based on the achievement of development and regulatory approval milestones totaling less than high-forty million dollars, as well as tiered royalties up to the mid-single digits on net product sales of such product candidate. As of March 31, 2024, the Company has not paid any amounts nor are any amounts owed by the Company under the CRISPR Agreement, and no milestones have been achieved.

9. Stockholders' Equity

Equity Incentive Plan

The Company’s 2020 Performance Incentive Plan (the "2020 Plan"), which was adopted by the Company’s board of directors in June 2020 and approved by the Company’s stockholders in July 2020, became effective upon the consummation of the Company’s initial public offering in July 2020 ("IPO"). Upon the effectiveness of the 2020 Plan, no further grants may be made under the Company’s 2015 Equity Incentive Plan (the "2015 Plan"). The 2020 Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards to its officers, directors, employees, consultants and advisors.

As of March 31, 2024, a total of 10,847,981 shares of the Company’s common stock were authorized for issuance with respect to awards granted under the 2020 Plan (this number of shares gives effect to the annual increases in the 2020 Plan share limit, as described in the next sentence, through that date). The share limit will automatically increase on the first trading day in January of each year by an amount equal to the lesser of (1) 5% of the total number of outstanding shares of the Company’s common stock on the last trading day in December in the prior year, or (2) such lesser number as determined by the Company’s board of directors. Any shares subject to awards granted under the 2020 Plan or the 2015 Plan that are not paid, delivered or exercised before they expire or are canceled or terminated, or otherwise fail to vest, as well as shares used to pay the purchase or exercise price of such awards or

13


 

related tax withholding obligations, will become available for new award grants under the 2020 Plan. A total of 2,674,638 shares were available for issuance under the 2020 Plan as of March 31, 2024.

The following table summarizes the option activity under the 2020 Plan and 2015 Plan during the three months ended March 31, 2024:

 

 

Number of shares

 

 

Weighted
average
exercise
price

 

 

Weighted
average
remaining
contractual
term
(in years)

 

 

Aggregate
Intrinsic Value

 

Outstanding at December 31, 2023

 

 

6,716,526

 

 

$

12.99

 

 

 

7.5

 

 

 

8,279

 

Granted

 

 

1,955,300

 

 

 

6.11

 

 

 

 

 

 

 

Exercised

 

 

(128,671

)

 

 

4.49

 

 

 

 

 

 

 

Forfeited

 

 

(281,206

)

 

 

22.22

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

8,261,949

 

 

$

11.18

 

 

 

8.1

 

 

 

30,907

 

Exercisable at March 31, 2024

 

 

3,591,101

 

 

$

15.68

 

 

 

6.8

 

 

 

9,692

 

Vested and expected to vest at March 31, 2024

 

 

8,261,949

 

 

$

11.18

 

 

 

8.1

 

 

 

30,907

 

 

The weighted average grant date fair value of stock option grants was $4.98 and $4.22 per share for the three months ended March 31, 2024 and 2023, respectively. The intrinsic value of options exercised was $0.7 million and immaterial for the three months ended March 31, 2024 and 2023, respectively.

 

The following table summarizes the restricted stock unit activity under the 2020 Plan during the three months ended March 31, 2024:

 

 

 

Number of shares

 

 

Weighted average
grant date fair value per share

 

 

Weighted
average
remaining
contractual
term
(in years)

 

Outstanding at December 31, 2023

 

 

594,768

 

 

$

8.16

 

 

 

1.4

 

Granted

 

 

775,153

 

 

 

6.01

 

 

 

 

Vested

 

 

(133,595

)

 

 

7.45

 

 

 

 

Forfeited

 

 

(19,509

)

 

 

7.22

 

 

 

 

Outstanding at March 31, 2024

 

 

1,216,817

 

 

$

6.88

 

 

 

2.0

 

 

The weighted average grant date fair value of restricted stock units was $6.01 and $5.57 per share for the three months ended March 31, 2024 and 2023, respectively. There were no restricted stock units that vested for the three months ended March 31, 2024 and 2023.

Employee Stock Purchase Plan

The Company’s 2020 Employee Stock Purchase Plan (the "ESPP"), which was adopted by the Company’s board of directors in June 2020 and approved by the Company’s stockholders in July 2020, became effective upon the consummation of the IPO. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. The six-month offering periods extend from June to November and December to May. As of March 31, 2024, 1,706,798 shares of the Company’s common stock remained available for issuance under the ESPP (after giving effect to share purchases under the ESPP, and annual increases in the ESPP share limit as described in the next sentence through that date). The number of shares of the Company’s common stock available for issuance under the ESPP automatically increases on the first trading day in January of each year by an amount equal to the lesser of (i) 1% of the total number of outstanding shares of the Company’s common stock issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 shares, or (iii) such lesser number as determined by the Company’s board of directors. As of March 31, 2024, employee contributions to the ESPP were $0.3 million and included as part of accrued and other current liabilities in the condensed balance sheets.

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Share-Based Compensation Expense

Share-based compensation expense for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

2,200

 

 

$

2,082

 

General and administrative

 

 

2,168

 

 

 

2,664

 

Total share-based compensation

 

$

4,368

 

 

$

4,746

 

The total unrecognized compensation cost related to unvested stock options was $25.1 million, which is expected to be recognized over a weighted average remaining service period of 3.0 years as of March 31, 2024.

The total unrecognized compensation cost related to unvested restricted stock units was $7.6 million, which is expected to be recognized over a weighted average remaining service period of 3.3 years as of March 31, 2024.

Sale of Common Stock and Pre-funded Warrants

 

On March 27, 2024, the Company completed an underwritten public offering utilizing the Shelf Registration Statement, pursuant to which it sold an aggregate of (i) 21,010,000 shares of its common stock at a price of $10.00 per share, and (ii) pre-funded warrants to purchase 3,000,031 shares of its common stock at a price of $9.9999 per pre-funded warrant. The pre-funded warrants can be exercised at any time after issuance for an exercise price of $0.0001 per share, subject to certain ownership limitations. As of March 31, 2024, none of the pre-funded warrants have been exercised. The Company raised $240.1 million in gross proceeds before underwriting discounts and commissions of $14.4 million and estimated other offering expenses of $0.6 million.

In accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("ASC 480"), and ASC 815-40 ("ASC 815"), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, the Company determined that the pre-funded warrants should be equity classified because they are freestanding financial instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of shares of common stock upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria.

 

 

10. Income Taxes

There was no provision for income taxes recorded during the three months ended March 31, 2024 and 2023. The Company’s deferred tax assets continue to be fully offset by a valuation allowance.

 

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K filed with the SEC on March 21, 2024 for the fiscal year ended December 31, 2023, including information with respect to our plans and strategy for our business and related financing. The discussion and analysis below includes forward-looking statements that involve risks and uncertainties, including those risks and uncertainties set forth in the sections titled “Risk Factors” of this Quarterly Report on Form 10-Q, which may cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. See “Cautionary Note Regarding Forward-Looking Statements” above. Unless the context otherwise requires, the terms “Company,” “Nkarta, Inc.,” “we,” “us,” or “our” refer to Nkarta, Inc. We do not have any subsidiaries.

Overview

We are a clinical-stage biopharmaceutical company pioneering the development of allogeneic, off-the-shelf engineered NK-cell therapies for the treatment of patients with hematologic malignancies or autoimmune diseases. We are currently developing NKX019, a CAR NK product candidate targeting the CD19 antigen, as our lead product candidate. We have also been developing NKX101, a CAR NK-cell product candidate targeting cells that display NKG2D ligands. Both product candidates enable an on-demand, off-the-shelf approach involving scaled manufacturing to broaden patient access. NKX019 and NKX101 incorporate proprietary technologies that enable us to generate an abundant supply of NK cells, increase NK-cell recognition of target antigens, enhance NK-cell fitness and freeze, store, and thaw our engineered NK cells for off-the-shelf administration. Our product candidates are allogeneic, which means they are produced using cells from a different person than the patient(s) being treated, and they are produced in quantity, then frozen and therefore available for treating patients without delay, unlike autologous cell therapies, which are derived from a patient’s own cells and must be manufactured as needed for each patient. We believe that engineered NK cells have the potential to be effective and accessible therapies for autoimmune diseases and cancer, be well tolerated, and avoid some of the toxicities observed with other cell therapies. NKX019 is currently being studied in an ongoing Phase 1 clinical trial for certain B-cell malignancies, and we are initiating the Phase 1 clinical trial of NKX019 for lupus nephritis (“LN”) are underway. NKX101 has been studied in a Phase 1 clinical trial for certain hematologic malignancies, although we have closed patient enrollment and deprioritized the program as part of a pipeline realignment to direct primary resources to our lead pipeline program, NKX019, for the treatment of autoimmune disease.

Our modular engineering platform builds on the distinctive biology of NK cells and their role in eradicating aberrant and pathologically transformed cells. Our process starts with differentiated, mature NK cells derived from healthy donors. We build on the intrinsic ability of these immune cells to identify and kill transformed cells with cell engineering to further enhance their activity. This engineering involves inducing the expression of a chimeric antigen receptor ("CAR") on the surface of an NK-cell to enable the cell to recognize specific proteins or antigens that are present on the surface of tumor cells. Our engineered CAR NK cells generally consist of an NK-cell engineered with a targeting receptor, OX40 costimulatory domain, CD3ζ(zeta) signaling moiety, and a membrane-bound form of the cytokine IL(interleukin)-15 ("mbIL-15").

In October 2023, we announced that we had received clearance of an Investigational New Drug ("IND") application by the United States Food and Drug Administration ("FDA") to evaluate NKX019 for the treatment of LN. The planned multi-center, open label, dose escalation Phase 1 clinical trial will evaluate the safety and clinical activity of NKX019 in patients with refractory LN. We are on track to dose the first patient in the first half of 2024. We also plan to evaluate additional autoimmune diseases for potential clinical investigation with NKX019. Following the clearance of the IND by the FDA, we have prioritized the development of NKX019 in autoimmune disease, including hiring additional personnel with the requisite education and experience, to support our expansion into that area.

NKX019 is currently being studied in a multi-center Phase 1 clinical trial for the treatment of a variety of B-cell malignancies. This ongoing first-in-human study evaluates the safety, pharmacology, and preliminary anti-tumor activity of NKX019, at multiple centers in the United States and Australia.

NKX101 has been evaluated in a multi-center Phase 1 clinical trial in the U.S. for the treatment of relapsed or refractory acute myeloid leukemia ("r/r AML") and higher risk myelodysplastic syndromes ("MDS"). This first-in-human study evaluated the safety, pharmacology, and preliminary anti-tumor activity of NKX101. We have deprioritized the development of NKX101 as part of a realignment of our pipeline to direct primary resources to our lead pipeline program, NKX019, for the treatment of autoimmune disease.

Under the CRISPR Agreement entered into in May 2021, we agreed with CRISPR to collaboratively design and advance (a) up to two allogeneic, gene-edited NK-cell therapies, one of which is the engineered CAR NK product candidate targeting the CD70 tumor antigen, and (b) one allogeneic, gene-edited NK+T cell therapy.

Since the commencement of our operations in 2015, we have devoted substantially all of our resources in support of our product development efforts, hiring personnel, raising capital to support and expand such activities and providing general and administrative

16


 

support for these operations. We have in