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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 June 30, 2021

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)

_______________________________

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: (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 ¨

 

Non-accelerated Filer x

 

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

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 August 2, 2021 was 172,350,363.

1


Kadmon Holdings, Inc.

Quarterly Report Form 10-Q

Table of Contents

Page

PART I – Financial Information

Item 1

Consolidated Financial Statements:

4

Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020

4

Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020 (unaudited)

5

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)

6

Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)

8

Notes to Consolidated Financial Statements (unaudited)

9

Item 2

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

23

Item 3

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4

Controls and Procedures

27

PART II – Other Information

Item 1

Legal Proceedings

28

Item 1A

Risk Factors

28

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3

Defaults Upon Senior Securities

28

Item 4

Mine Safety Disclosures

28

Item 5

Other Information

28

Item 6

Exhibits

28

Signatures

30

 


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,” “would,” “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:

our ability to commercialize REZUROCK™ (belumosudil) and execute on our marketing plans for any other drugs or indications that may be approved in the future;

risks that REZUROCK revenue, expenses and costs may not be as expected;

risks relating to REZUROCK’s market acceptance, competition, reimbursement and regulatory actions;

our ability to obtain and maintain reimbursement for REZUROCK and any approved product and the extent to which patient assistance programs and copay programs are utilized;

our ability to manage our reliance on sole-source third parties such as our third party drug substance and drug product contract manufacturers;

the inherent uncertainty in estimates of patient populations and incidence and prevalence estimates;

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, on various government agencies who we interact with and/or are governed by and commercial and clinical drug supply chain continuity and the commercial launch of REZUROCK;

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 (“FDA”) designations such as the Orphan Drug Designation;

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 and product candidates and technology;

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 their potential benefits;

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;

statements and estimates regarding future revenue, hiring plans, operating 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, cash equivalents and marketable debt securities and other sources of liquidity;

our ability to manage our liquidity needs, including our ability to raise additional capital, to fund our operations or repay our debt obligations; 

the future trading price of the shares of our common stock;

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

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. Except as required by law, we disclaim any duty to update any forward looking statements, whether as a result of new information, future events or otherwise.

3


PART I. FINANCIAL INFORMATION

Kadmon Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

 

June 30,

December 31,

 

2021

2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

61,881

 

$

74,423

Marketable debt securities, available-for-sale

208,613

 

49,435

Accounts receivable, net

1,543

 

695

Inventories, net

12

102

Prepaid expenses and other current assets

3,894

2,082

Investment, equity securities

10,815

 

10,564

Total current assets

286,758

 

137,301

Fixed assets, net

1,012

 

1,287

Right of use lease asset

14,504

16,112

Goodwill

3,580

 

3,580

Restricted cash

2,117

 

2,117

Investment, at cost

2,300

 

2,300

Other noncurrent assets

9

13

Total assets

$

310,280

 

$

162,710

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

10,559

 

$

10,933

Accrued expenses

14,544

 

11,534

Term debt - current

1,699

Lease liability - current

4,482

 

4,223

Warrant liabilities

733

 

1,082

Total current liabilities

30,318

 

29,471

Lease liability - noncurrent

13,359

 

15,579

Deferred tax liability

278

 

278

Term debt - noncurrent

1,359

Convertible notes, net

232,870

 

Total liabilities

276,825

 

46,687

Commitments and contingencies (Note 12)

 

 

Stockholders’ equity:

Convertible preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2021 and December 31, 2020; 28,708 shares issued and outstanding at June 30, 2021 and December 31, 2020.

45,641

 

44,555

Common stock, $0.001 par value; 400,000,000 shares authorized at June 30, 2021 and December 31, 2020; 171,985,864 and 171,530,045 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

171

 

171

Additional paid-in capital

491,721

 

515,429

Accumulated deficit

(503,913)

(444,104)

Accumulated other comprehensive loss

(165)

(28)

Total stockholders’ equity

33,455

116,023

Total liabilities and stockholders’ equity

$

310,280

$

162,710

 

See accompanying notes to consolidated financial statements (unaudited)

4


Kadmon Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(in thousands, except share and per share amounts)

   

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Revenues:

Net sales

$

24

$

299

$

384

$

888

Other revenue

173

149

377

6,295

Total revenue

197

448

761

7,183

Cost of sales

11

162

107

490

Write-down of inventory

622

906

Gross profit

186

(336)

654

5,787

Operating expenses:

Research and development

18,525

16,516

33,799

29,390

Selling, general and administrative

13,656

10,068

26,252

19,434

Total operating expenses

32,181

26,584

60,051

48,824

Loss from operations

(31,995)

(26,920)

(59,397)

(43,037)

Other income (expense):

Interest income

1,120

128

1,720

594

Interest expense

(2,497)

(5)

(3,726)

(5)

Realized gain on equity securities

15,510

15,510

Unrealized gain (loss) on equity securities

747

(15,702)

251

(29,505)

PPP Loan forgiveness

3,091

3,091

Other income (expense)

(811)

(163)

(662)

(6)

Total other income (expense)

1,650

(232)

674

(13,412)

Loss before income tax expense

(30,345)

(27,152)

(58,723)

(56,449)

Income tax expense

Net loss

$

(30,345)

$

(27,152)

$

(58,723)

$

(56,449)

Deemed dividend on convertible preferred stock

543

518

1,086

1,035

Net loss attributable to common stockholders

$

(30,888)

$

(27,670)

$

(59,809)

$

(57,484)

Basic and diluted net loss per share of common stock

$

(0.18)

$

(0.17)

$

(0.35)

$

(0.36)

Weighted average basic and diluted shares of common stock outstanding

171,967,623

162,416,059

171,829,335

161,101,923

Other comprehensive (income) loss:

Net unrealized (gain) loss on available-for-sale securities

(105)

137

Other comprehensive (income) loss

(105)

137

Comprehensive loss attributable to common stockholders

$

(30,783)

$

(27,670)

$

(59,946)

$

(57,484)

See accompanying notes to consolidated financial statements (unaudited)


5


Kadmon Holdings, Inc.

Consolidated Statements of Stockholders’ Equity (unaudited)

(in thousands, except share amounts)

For the Three Months Ended June 30, 2021

Preferred stock

Common stock

Additional
paid-in

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

capital

Comprehensive Loss

Deficit

Total

Balance, April 1, 2021

28,708

$

45,098

171,816,945

$

171

$

487,230

$

(270)

$

(473,025)

$

59,204

Share-based compensation expense

3,948

3,948

Common stock issued under ESPP plan

94,420

313

313

Common stock issued for option exercises

74,499

230

230

Beneficial conversion feature on convertible preferred stock

108

(108)

Accretion of dividends on convertible preferred stock

435

(435)

Other comprehensive income

105

105

Net loss

(30,345)

(30,345)

Balance, June 30, 2021

28,708

$

45,641

171,985,864

$

171

$

491,721

$

(165)

$

(503,913)

$

33,455

For the Three Months Ended June 30, 2020

Preferred stock

Common stock

Additional
paid-in

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

capital

Comprehensive Loss

Deficit

Total

Balance, April 1, 2020

28,708

$

42,950

159,830,774

$

160

$

458,539

$

$

(362,883)

$

138,766

Share-based compensation expense