ROC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 July 31, 2024, the registrant had
Table of Contents
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Page |
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PART I. |
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Item 1. |
1 |
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1 |
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2 |
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Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
Item 3. |
31 |
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Item 4. |
31 |
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PART II. |
33 |
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Item 1. |
33 |
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Item 1A. |
33 |
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Item 2. |
89 |
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Item 3. |
89 |
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Item 4. |
89 |
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Item 5. |
90 |
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Item 6. |
90 |
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91 |
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Kyverna Therapeutics, Inc.
Condensed Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Available-for-sale marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable convertible preferred stock and stockholders’ |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Accrued license expense – related party |
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Other accrued expenses and current liabilities |
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Operating lease liabilities, short-term portion |
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Finance lease liabilities, short-term portion |
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Total current liabilities |
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Operating lease liabilities, net of short-term portion |
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Finance lease liabilities, net of short-term portion |
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Total liabilities |
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Redeemable convertible preferred stock, |
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Stockholders’ equity (deficit) |
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Preferred stock, |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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( |
) |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ equity (deficit) |
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( |
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Total liabilities, redeemable convertible preferred stock and |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
1
Kyverna Therapeutics, Inc.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Other expense, net |
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( |
) |
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( |
) |
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( |
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( |
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Total other income, net |
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Net loss |
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( |
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( |
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( |
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( |
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Other comprehensive (loss) gain |
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Unrealized (loss) gain on available-for-sale marketable securities, net |
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( |
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( |
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Total other comprehensive (loss) gain |
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( |
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( |
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Net loss and other comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares of common stock outstanding, basic and diluted |
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The accompanying notes are an integral part of these condensed financial statements.
2
Kyverna Therapeutics, Inc.
Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)
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Redeemable Convertible |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity (Deficit) |
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Balance as of December 31, 2023 |
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$ |
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$ |
— |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Issuance of common stock upon initial public offering, net of underwriting commissions and issuance costs of $ |
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— |
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— |
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— |
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— |
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— |
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Conversion of redeemable convertible preferred stock into common stock in connection with initial public offering |
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( |
) |
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( |
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— |
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— |
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— |
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Common shares issued upon exercise of options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Vesting of early exercised options and restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized loss on available-for-sale marketable securities, net |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of March 31, 2024 |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Common shares issued upon exercise of options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized loss on available-for-sale marketable securities, net |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of June 30, 2024 |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance as of December 31, 2022 |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Common shares issued upon exercise of options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Vesting of early exercised options and restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized gain on available-for-sale marketable securities, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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Issuance of Series B redeemable convertible preferred stock for cash, net of issuance costs of $ |
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— |
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— |
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— |
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— |
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— |
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— |
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Common shares issued upon exercise of options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Vesting of early exercised options and restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized gain on available-for-sale marketable securities, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance as of June 30, 2023 |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
— |
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$ |
( |
) |
The accompanying notes are an integral part of these condensed financial statements.
3
Kyverna Therapeutics, Inc.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used by operations: |
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Stock-based compensation |
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Accretion of discounts on available-for-sale marketable securities |
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( |
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( |
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Depreciation and amortization expense |
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Non-cash lease expense |
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Changes in assets and liabilities: |
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Prepaid expense and other current assets |
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( |
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Other non-current assets |
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( |
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Accounts payable |
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Accrued compensation |
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( |
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( |
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Other accrued expenses and current liabilities |
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Operating lease liability |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of available-for-sale marketable securities |
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( |
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— |
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Proceeds from maturities of available-for-sale marketable securities |
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Purchases of property and equipment |
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( |
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( |
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Net cash (used in) provided by investing activities |
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( |
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Cash flows from financing activities |
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Proceeds from issuance of common stock upon initial public offering, net of underwriting commissions |
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— |
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Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs |
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— |
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Proceeds from exercise of common stock options |
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Principal paid on finance lease liabilities |
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( |
) |
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( |
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Payments for offering costs |
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( |
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— |
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Net cash provided by financing activities |
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Net increase in cash and cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, at beginning of period |
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Cash, cash equivalents and restricted cash, at end of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents and restricted cash to statement of financial position |
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Cash and cash equivalents |
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Restricted cash |
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Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure for non-cash investing and financing activities |
|
|
|
|
|
|
||
Conversion of |
|
$ |
|
|
$ |
— |
|
|
Purchases of property and equipment in accounts payable |
|
$ |
|
|
$ |
|
||
Vesting of restricted stock |
|
$ |
|
|
$ |
|
||
Right-of-use asset obtained in exchange for operating and finance lease liability |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
The accompanying notes are an integral part of these condensed financial statements.
4
Kyverna Therapeutics, Inc.
Notes to Unaudited Condensed Financial Statements
1. Description of Business, Organization and Liquidity
Kyverna Therapeutics, Inc. (“Kyverna” or “the Company”) is a patient-centered, clinical-stage biopharmaceutical company focused on developing cell therapies for patients suffering from autoimmune diseases. The lead product candidate, KYV-101, is advancing through clinical development across two broad areas of autoimmune disease: rheumatology and neurology. The Company was incorporated on
Initial Public Offering
On February 7, 2024, the Company’s Registration Statement on Form S-1 for its initial public offering (the “IPO”) was declared effective, and on February 12, 2024, the Company closed the IPO and issued
Reverse Stock Split
Liquidity
The Company has incurred losses and negative cash flows from operations since inception. As of June 30, 2024, the Company has an accumulated deficit of $
The Company has historically financed its operations primarily through issuances of redeemable convertible preferred stock and convertible notes, revenue from its collaboration agreement and sale of shares of its common stock in the IPO. As of June 30, 2024, the Company had cash and cash equivalents and available-for-sale marketable securities of $
5
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed financial statements have been prepared on the same basis as the annual financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 26, 2024, except as noted below.
In the opinion of our management, the information in these condensed financial statements reflects all adjustments, all of which are of a normal and recurring nature necessary for a fair statement of the financial position and results of operations for the reported interim periods. We consider events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.
Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to research and development accrued expenses, valuation of its common stock prior to the IPO, stock-based compensation, valuation of deferred tax assets and uncertain income tax positions. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amount reported as revenue and expenses that are not readily apparent from other sources. Actual results may differ materially from those estimates.
Segment Information
The Company operates and manages its business as
Significant Accounting Policies
There have been no material changes to the accounting policies discussed in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 26, 2024.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard on its financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.
6
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU aligns the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.
In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. The amendments in ASU 2024-02 clarify and simplify references to certain concept statements within U.S. GAAP. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024, with early application permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.
3. Fair Value Measurements and Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The Company’s fair value hierarchy for its cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis as of June 30, 2024, was as follows (in thousands):
|
|
Fair Value Measurements |
|
|||||||||||||
As of June 30, 2024 |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. Treasury bills |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Available-for-sale marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury notes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. Treasury bills |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total fair value of assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
The Company’s fair value hierarchy for its cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis as of December 31, 2023, was as follows (in thousands):
|
|
Fair Value Measurements |
|
|||||||||||||
As of December 31, 2023 |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Available-for-sale marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury bills |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total fair value of assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and available-for-sale marketable securities. Cash equivalents consisted of money market funds and U.S. Treasury bills, and available-for-sale marketable securities consisted of U.S. Treasury notes and bills. The Company obtains pricing information from its investment manager and generally determines the fair value of available-for-sale marketable securities using standard observable inputs, including reported
7
trades, broker/dealer quotes and bids and/or offers. The Company recognizes transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.
4. Available-for-Sale Marketable Securities
As of June 30, 2024, the Company’s available-for-sale marketable securities consisted entirely of debt securities issued by the U.S. Treasury with contractual maturities on various dates through November 2024.
The following table summarizes the amortized cost, unrealized gains and losses and fair value of the Company’s available-for-sale marketable securities as of June 30, 2024 (in thousands):
|
|
Total |
|
|
Total |
|
|
Total |
|
|
Total |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
As of June 30, 2024: |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
U.S. Treasury notes |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
U.S. Treasury bills |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total available-for-sale marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
The following table summarizes the amortized cost, unrealized gains and losses and fair value of the Company’s available-for-sale marketable securities as of December 31, 2023 (in thousands):
|
|
Total |
|
|
Total |
|
|
Total |
|
|
Total |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
As of December 31, 2023: |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
U.S. Treasury bills |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Total available-for-sale marketable securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
As of June 30, 2024 and December 31, 2023, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the issuers of the Company’s marketable securities, and the Company has no requirement or intention to sell these securities before maturity or recovery of their amortized cost basis. The Company considered the current and expected future economic and market conditions and determined that its investments were not significantly impacted by such conditions. For all securities with a fair value less than its amortized cost basis, the Company determined the decline in fair value below amortized cost basis to be immaterial and non-credit related, and therefore no allowance for losses has been recorded. During the three and six months ended June 30, 2024 and 2023, the Company did
As of each of June 30, 2024 and December 31, 2023, accrued interest receivable was $
5. Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Laboratory equipment |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
Depreciation and amortization expense related to property and equipment was $
8
6. Significant Agreements
Patent License Agreements with the National Institutes of Health
In May 2021, the Company entered into
Unless terminated sooner, the NIH Agreements remain in effect until the last licensed patent right granted pursuant to the respective agreement expires.
The acquisition of the licenses, including patent rights and know-how, was accounted for as an asset acquisition. As the acquired technology did not have an alternative use for accounting purposes, the consideration of $
Intellia License and Collaboration Agreement
In December 2021, the Company entered into a License and Collaboration Agreement (the “Intellia Agreement”) with Intellia Therapeutics, Inc. (“Intellia”) to research and develop an allogeneic CD19-directed CAR cell therapy product (the “CRISPR Product”), suitable for validation through pre-clinical and clinical proof-of-concept clinical trials, including the performance of activities as agreed in the collaboration plan. Pursuant to the Intellia Agreement, Intellia granted to the Company an exclusive, worldwide, sublicensable in multiple tiers, royalty bearing license under certain of Intellia’s intellectual property to research, develop, sell and otherwise exploit the CRISPR Product. The Company is performing the majority of the work under the collaboration plan.
As consideration for the licenses granted to the Company pursuant to the Intellia Agreement, the Company issued to Intellia shares of its Series B Preferred Stock with the fair value of $
In addition, the Company granted Intellia an exclusive option (the “Intellia Option”) to enter into a co-development and co-commercialization agreement with the Company for the CRISPR Product, (the “Co-Co Agreement”) for a fee payable to the Company. If Intellia exercises the Intellia Option, the Company and Intellia would share equally the regulatory and clinical development expenses associated with obtaining approval of the CRISPR Product in the U.S. and would also share equally all net profits and losses from commercialization of the CRISPR Product in the U.S. If Intellia exercises the Intellia Option, no milestone payments will be due and payable from that time forward and the Company will only pay royalties on sales outside of the U.S. In addition, upon exercise of the Intellia Option, following regulatory approval of the CRISPR Product, Intellia will have exclusive commercialization rights for the CRISPR Product for U.S. administration, subject to the Company’s rights to co-promote the CRISPR Product in the U.S., and the Company will retain the sole and exclusive rights to research, develop, or otherwise exploit the CRISPR
9
Product for rest-of-world administration and shall have sole decision-making authority in relation thereto, subject to the parties’ obligations to cooperate regarding certain development, regulatory and commercialization strategies.
During the term of the Co-Co Agreement, subject to certain exceptions, neither party will clinically develop or commercialize a cell therapy product directed to CD19 other than the CRISPR Product for use in the treatment or prevention of certain indications set forth in the Intellia Agreement and any additional indication that the parties mutually agree to include (any such product, a Competitive Product); provided, however, that (i) any products for use in any indications that are the subject of a development program or third-party collaboration as of the effective date of the Co-Co Agreement shall not be considered Competitive Products and (ii) any products for use in any additional indications that are the subject of a development program or third-party collaboration as of the date that such additional indications are included in the global development plan shall not be considered Competitive Products.
The Intellia Agreement terminates on a country-by-country basis upon the expiration of the last valid claim within Intellia’s patent rights covering the CRISPR Product within such country, unless the agreement is earlier terminated in its entirety by either party for insolvency, by either party for material breach of contract, by Intellia if the Company participates in legal action or proceeding challenging the validity or enforceability of Intellia’s patents, or by the execution of the Co-Co Agreement. The Company may terminate the Intellia Agreement in its entirety, or on a country-by-country basis, by providing a written notice after the expiration or termination of the Intellia Option. Following the expiration of the term for a given country, the licenses granted to the Company in such country will automatically become fully paid-up, perpetual, irrevocable and royalty-free licenses.
Gilead Collaboration, Option and License Agreement (Related Party)
In January 2020, the Company entered into the Collaboration, Option and License Agreement (the “Gilead Agreement”) with Gilead Sciences, Inc. (“Gilead”). Simultaneously with the entry into the Gilead Agreement, the Company entered into (i) a License Agreement (the “Kite Agreement”) with Kite Pharma, Inc. (“Kite”), an affiliate of Gilead (see below), and (ii) a stock purchase agreement, pursuant to which the Company issued to Gilead an aggregate of
Pursuant to the Gilead Agreement, the Company and Gilead collaborated to develop potential cell-based therapy products, which could use the SynNotch Technology and the SynNotch intellectual property related thereto, controlled by Gilead through Kite, for the treatment, diagnosis or prevention of autoimmune, inflammatory, or allogeneic stem cell transplant inflammatory diseases (excluding post-transplant infectious diseases), subject to certain exceptions. The Gilead Agreement initially involved the research and development of cell-based products for the treatment, diagnosis or prevention of two indications under two research programs and non-exclusive research licenses, specifically, Crohn’s disease, or Program A, and Ulcerative colitis, or Program B. Upon execution of the Gilead Agreement, Gilead paid the Company a one-time, non-refundable and non-creditable payment of $
Unless terminated earlier, the Gilead Agreement was to expire, with respect to each program, (i) upon such program becoming a terminated program, or (ii) on an optioned product-by-optioned product and country-by-country basis, upon the expiration of the royalty term with respect to such optioned product in such country with respect to such program. Gilead had the right to terminate the Gilead Agreement at will, in its sole discretion, in its entirety or on a program-by-program or optioned program-by-optioned program basis at any time upon ninety days’ prior written notice to the Company. In addition, either party was able to terminate the Gilead Agreement for uncured material breach by the other party, or upon the occurrence of insolvency-related events of the other party.
The royalty term under the Gilead Agreement continued on an optioned product-by-optioned product and country-by-country basis until the latest of: (i) the date on which there is no valid claim of a program patent; (ii) the expiration of any regulatory exclusivity with respect to such optioned product in the relevant country; and (iii) the ten-year anniversary of the date of the first commercial sale of such optioned product in such country.
The Company concluded that the Gilead Agreement was in the scope of ASC Topic 606. The Company estimated the transaction price as $
10
On October 24, 2023, after agreement by both parties that the Gilead Agreement had no active programs, Gilead provided the Company with
Kite License Agreement (Related Party)
Concurrently with the Gilead Agreement, the Company entered into the Kite Agreement. Pursuant to the Kite Agreement, Kite granted to the Company a ten-year, co-exclusive license for the SynNotch technology primarily used in the Company’s own internal research and development programs for the treatment, diagnosis or prevention of autoimmune, inflammatory or allogeneic stem cell transplant inflammatory diseases (excluding post-transplant infectious diseases). Upon expiration of the ten-year co-exclusive license term, the license will become a non-exclusive license through expiration of the related patents.
Kite had licensed certain of the SynNotch technology included in the Kite Agreement pursuant to that certain Amended and Restated Exclusive License Agreement, between The Regents of the University of California and Kite (as successor to Cell Design Labs, Inc.), or the UCSF License Agreement. The Company is responsible for all costs and payments arising under the UCSF License Agreement and as a result of activities under the Kite Agreement, including earned royalties based on a low single-digit percentage of net sales, milestone payments in an aggregate amount of up to $
Unless terminated earlier, the Kite Agreement will expire upon the expiration of all licensed patents and Kite improvement patents therein. The Company has the right to terminate the Kite Agreement at will, in the Company’s sole discretion, in its entirety upon 90 days’ written notice to Kite. In addition, either party may terminate the Kite Agreement for uncured material breach by the other party, or upon the occurrence of insolvency-related events of the other party.
The acquisition of the co-exclusive license under the Kite Agreement, including patent rights and know-how, was accounted for as an asset acquisition. As the acquired technology did not have an alternative use for accounting purposes, the license consideration of $
As of June 30, 2024 and December 31, 2023, the Company recognized the total sublicensing fee of $
The annual maintenance fee, patent prosecution costs and minimal annual royalties are expensed as incurred and were minimal for each of the three and six months ended June 30, 2024 and 2023.
7. Commitments and Contingent Liabilities
License Agreements
The Company entered into license agreements with the NIH, Intellia and Kite (see Note 6), pursuant to which the Company is required to pay certain milestone payments contingent upon the achievement of specific development and regulatory events.
Contractual Obligations and Commitments
The Company enters into contracts in the normal course of business with CROs for clinical trials, with CMOs for clinical supplies manufacturing and with other vendors for preclinical studies, supplies and other products and services for operating purposes. These agreements generally provide for termination at the request of either party generally with less than one-year notice. The Company did not expect any of these agreements to be terminated and did not have any non-cancellable obligations under these agreements as of June 30, 2024.
11
Legal Contingencies
From time to time, the Company may become involved in legal proceedings arising from the ordinary course of business. The Company records a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. Management is not aware of any legal matters that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Guarantees and Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of June 30, 2024 and December 31, 2023, the Company does not have any material indemnification claims that were probable or reasonably possible.
Leases
The Company has multiple leases for laboratory equipment with terms of
Components of the lease expense for the three and six months ended June 30, 2024 and 2023, were as follows (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|