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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

(Mark One)

x

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

For the quarterly period ended September 30, 2020

or

 

¨

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

For transition period from ___________ to ___________.

Commission File Number: 001-37841

Kadmon Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware

(State or other jurisdiction of
incorporation or organization)

27-3576929

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

450 East 29th Street, New York, NY

(Address of principal executive offices)

10016

(Zip Code)

(833900-5366

(Registrant’s telephone number, including area code)

_______________________________

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 x     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 x     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 x

 

Non-accelerated Filer ¨

 

Smaller reporting company x

 

Emerging growth company x

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. x

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, par value $0.001 per share

KDMN

Nasdaq Global Select Market

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

The number of shares of the registrant’s common stock outstanding as of November 2, 2020 was 171,512,945.

1


Kadmon Holdings, Inc.

Form 10-Q

Table of Contents

Page

PART I – Financial Information

Item 1

Consolidated Financial Statements:

5

Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019

5

Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (unaudited)

6

Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)

7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)

9

Notes to Consolidated Financial Statements (unaudited)

10

Item 2

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

24

Item 3

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4

Controls and Procedures

29

PART II – Other Information

Item 1

Legal Proceedings

30

Item 1A

Risk Factors

30

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3

Defaults Upon Senior Securities

32

Item 4

Mine Safety Disclosures

32

Item 5

Other Information

32

Item 6

Exhibits

32

Signatures

34

 


2


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding future expenditures, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors that 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. We believe that these factors include, but are not limited to, the following:

whether our New Drug Application for belumosudil will be accepted by the U.S. Food and Drug Administration;

the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

our ability to advance product candidates into, and successfully complete, clinical trials;

the impact of the COVID-19 pandemic on our business, workforce, patients, collaborators and suppliers, including delays in anticipated timelines and milestones of our clinical trials and on various government agencies who we interact with and/or are governed by;

our reliance on the success of our product candidates;

the timing or likelihood of regulatory filings and approvals, especially in light of the COVID-19 pandemic;

the benefits of U.S. Food and Drug Administration designations such as Breakthrough Therapy, and review of our New Drug Application under the FDA's Oncology Center of Excellence pilot program, Real-Time Oncology Review;

the commercialization, pricing and reimbursement of our product candidates, if approved, and our ability to expand our sales and marketing capabilities;

the implementation of our business model, strategic plans for our business, product candidates and technology;

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;

cost associated with defending or enforcing, if any, intellectual property infringement, misappropriation or other intellectual property violation, product liability and other claims;

regulatory and governmental policy developments in the United States, Europe and other jurisdictions;

our ability to maintain and establish strategic agreements and collaborations and the potential benefits of those arrangements;

the rate and degree of market acceptance, if any, of our product candidates, if approved;

developments relating to our competitors and our industry, including competing therapies;

our ability to effectively manage our anticipated growth;

our ability to attract and retain qualified employees and key personnel;

our ability to achieve cost savings and benefits from our efforts to streamline our operations and to not harm our business with such efforts;

our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act;

statements and estimates regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements, needs for additional financing and share performance;

litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes or settlements not covered by insurance;

our expected use of cash and cash equivalents and other sources of liquidity;

the future trading price of the shares of our common stock and the impact of securities analysts’ reports on these prices;

3


the future trading price of our equity investments and our potential inability to sell those securities;

our ability to apply unused federal and state net operating loss carryforwards against future taxable income; and

other risks and uncertainties, including those listed under the caption “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions, and we may not actually achieve the plans, intentions or expectations included in our forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

4


PART I. FINANCIAL INFORMATION

Kadmon Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

September 30,

December 31,

  

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

105,949

  

$

139,597

Marketable debt securities, available-for-sale

44,514

  

Accounts receivable, net

373

  

954

Inventories, net

28

640

Prepaid expenses and other current assets

2,240

1,416

Investment, equity securities

9,238

  

41,997

Total current assets

162,342

  

184,604

Fixed assets, net

1,620

  

2,444

Right of use lease asset

17,013

19,651

Goodwill

3,580

  

3,580

Restricted cash

2,117

  

2,116

Investment, at cost

2,300

  

2,300

Other noncurrent assets

17

103

Total assets

$

188,989

  

$

214,798

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

12,110

  

$

9,043

Accrued expenses

10,212

  

14,248

Term debt - current

679

Lease liability - current

4,143

  

3,966

Warrant liabilities

1,016

  

1,485

Total current liabilities

28,160

  

28,742

Lease liability - noncurrent

16,631

  

19,759

Deferred tax liability

461

  

461

Term debt - noncurrent

2,378

Other long term liabilities

  

101

Total liabilities

47,630

  

49,063

Commitments and contingencies (Note 12)

 

 

Stockholders’ equity:

Convertible preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2020 and December 31, 2019; 28,708 shares issued and outstanding at September 30, 2020 and December 31, 2019.

44,011

  

42,433

Common stock, $0.001 par value; 400,000,000 shares authorized at September 30, 2020 and December 31, 2019; 171,220,592 and 159,759,996 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

171

  

160

Additional paid-in capital

512,904

  

456,211

Accumulated deficit

(415,702)

(333,069)

Accumulated other comprehensive loss

(25)

Total stockholders’ equity

141,359

165,735

Total liabilities and stockholders’ equity

$

188,989

$

214,798

 

See accompanying notes to consolidated financial statements (unaudited)

5


Kadmon Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(in thousands, except share and per share amounts)

   

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenues:

Net sales

$

339

$

50

$

1,227

$

164

Other revenue

151

176

6,446

529

Total revenue

490

226

7,673

693

Cost of sales

214

73

704

149

Write-down of inventory

148

1,054

932

Gross profit

128

153

5,915

(388)

Operating expenses:

Research and development

17,268

13,227

46,658

43,326

Selling, general and administrative

10,865

10,174

30,299

27,101

Total operating expenses

28,133

23,401

76,957

70,427

Loss from operations

(28,005)

(23,248)

(71,042)

(70,815)

Other income (expense) :

Interest income

208

418

802

1,622

Interest expense

(8)

(931)

(13)

(2,799)

Change in fair value of warrant liabilities

602

(126)

469

(70)

Realized gain on equity securities

4,274

19,784

Unrealized (loss) gain on equity securities

(3,254)

(38,634)

(32,759)

22,304

Gain on extinguishment of obligation

1,626

1,754

Other (expense) income

(49)

126

(50)

115

Total other income (expense)

3,399

(39,147)

(10,013)

21,172

Loss before income tax expense

(24,606)

(62,395)

(81,055)

(49,643)

Income tax expense

Net loss

$

(24,606)

$

(62,395)

$

(81,055)

$

(49,643)

Deemed dividend on convertible preferred stock

543

517

1,578

1,540

Net loss attributable to common stockholders

$

(25,149)

$

(62,912)

$

(82,633)

$

(51,183)

Basic and diluted net loss per share of common stock

$

(0.15)

$

(0.49)

$

(0.50)

$

(0.40)

Weighted average basic and diluted shares of common stock outstanding

169,310,056

128,225,469

165,107,295

128,360,618

Other comprehensive loss:

Net unrealized loss on available-for-sale securities

25

25

Other comprehensive loss

25

25

Comprehensive loss attributable to common shareholders

$

(25,174)

$

(62,912)

$

(82,658)

$

(51,183)

See accompanying notes to consolidated financial statements (unaudited)


6


Kadmon Holdings, Inc.

Consolidated Statements of Stockholders’ Equity (unaudited)

(in thousands, except share amounts)

For the Three Months Ended September 30, 2020

Preferred stock

Common stock

Additional

paid-in

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

capital

Comprehensive Loss

Deficit

Total

Balance, July 1, 2020

28,708

$

43,468

171,097,067

$

171

$

510,171

$

$

(390,553)

$

163,257

Share-based compensation expense

2,453

2,453

Common stock issued for option exercises

123,525

280

280

Beneficial conversion feature on convertible preferred stock

109

(109)

Accretion of dividends on convertible preferred stock

434

(434)

Other comprehensive loss

(25)

(25)

Net loss

(24,606)

(24,606)

Balance, September 30, 2020

28,708

$

44,011

171,220,592

$

171

$

512,904

$

(25)

$

(415,702)

$

141,359

For the Three Months Ended September 30, 2019

Preferred stock

Common stock

Additional
paid-in

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

capital

Comprehensive Loss

Deficit

Total

Balance, July 1, 2019

28,708

$

41,398

129,634,540

$

130

$

357,443

$

$

(257,914)

$

141,057

Share-based compensation expense

1,462