Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
Kindred Biosciences, Inc. ("KindredBio", "we", "us" or "our") was incorporated on September 25, 2012 (inception) in the State of Delaware. On April 25, 2016, we filed a Certificate of Incorporation with the State of Delaware for a wholly owned subsidiary, KindredBio Equine, Inc. ("KindredBio Equine"). KindredBio Equine has one class of capital stock which is designated common stock, $0.0001 par value per share. The authorized number of shares of common stock for KindredBio Equine is 1,000. On February 1, 2019, we filed a Certificate of Incorporation with the State of Delaware for a wholly owned subsidiary, Centaur Biopharmaceutical Services, Inc. ("Centaur Biopharmaceutical Services"). Centaur Biopharmaceutical Services has one class of capital stock which is designated common stock, $0.0001 par value per share. The authorized number of shares of common stock for Centaur Biopharmaceutical Services is 1,000.
We are a biopharmaceutical company focused on saving and improving the lives of pets. Our activities since inception have consisted principally of raising capital, establishing facilities, recruiting management and technical staff, performing research and development, and advancing our product candidates seeking regulatory approval. Our headquarters are located in Burlingame, California.
Our first product, Mirataz® (mirtazapine transdermal ointment) was approved in May 2018 and became commercially available to veterinarians in the United States in July 2018. In November 2019, our second product, Zimeta™ (dipyrone injection) for the control of fever in horses was approved by the FDA and became commercially available in December 2019. In addition, we have multiple other product candidates, predominantly biologics, in various stages of development. We believe there are significant unmet medical needs for pets, and that the pet therapeutics segment of the animal health industry is likely to grow substantially as new therapeutics are identified, developed and marketed specifically for pets.
In March 2020, we announced a strategic realignment of our business model whereby we plan to rely more on a partnership-based model for commercialization strategy similar to the traditional human biotech commercialization strategy whereby pipeline assets are partnered with larger commercial partners that can maximize product opportunity in return for upfront payments, contingent milestones, and royalties on future sales. Our focus is on accelerating our deep pipeline of late-stage biologics candidates in canine and feline markets and strengthening our strategic position by prioritizing our most attractive late stage programs and managing our expenses to best position the company for success.
In March 2020, we sold Mirataz to Dechra Limited for a cash purchase price of $43 million. In December 2020, we entered into a Distribution and Licensing Agreement granting Dechra Veterinary Products, LLC, an exclusive license under our Patents and Marketing Authorizations to promote, market, sell and distribute Zimeta in the U.S. and Canadian territories.
In addition, we announced an agreement granting Elanco Animal Health Incorporated ("Elanco") exclusive global rights to KIND-030 in December 2020. Under the terms of the agreement, we received a non-refundable upfront payment of $500,000, and will receive development milestone payments of up to $16 million upon achievement of certain development, regulatory and manufacturing targets, and sales milestones in an aggregate amount of up to $94 million payable throughout the term of the agreement. Furthermore, royalty payments are to range from the low to high teens. The agreement specifies that KindredBio will supply the licensed product to Elanco, and that Elanco will conduct the necessary regulatory activities to achieve approvals in Europe and other key international markets.
On June 15, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Elanco Animal Health Incorporated, an Indiana corporation (“Elanco”), and Knight Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Elanco. The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into KindredBio (the “Merger”), with KindredBio surviving the Merger and becoming a wholly owned subsidiary of Elanco. (See Note 13).
We are subject to risks common to companies in the biotechnology and pharmaceutical industries. There can be no assurance that our research and development will be successfully completed, that adequate patent or other intellectual property protection for our technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. We operate in an environment of substantial competition
from other animal health companies. In addition, we are dependent upon the services of our employees and consultants, as well as third-party contract research organizations and manufacturers.
The December 2019 outbreak of the novel strain of coronavirus (COVID-19) may adversely impact both our ability to obtain sufficient and timely supplies of our products and other product candidates and our revenue from those products. In addition to adversely affecting our ability to obtain sufficient and timely supplies of products and product candidates from suppliers, any outbreak of contagious diseases, such as the recent novel strain of coronavirus (COVID-19) that is affecting the global community, could adversely affect our business and operations in other ways, many of which cannot currently be determined or quantified. These uncertain factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could impair our operations including, among others, employee mobility and productivity, availability of facilities, conduct of our clinical trials, manufacturing and supply capacity, and availability and productivity of third party service suppliers.
The accompanying unaudited interim condensed consolidated financial statements (“financial statements”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our annual report on Form 10-K as filed with the SEC on March 16, 2021. In the opinion of management, all adjustments, consisting of a normal and recurring nature, considered necessary for a fair presentation, have been included in these financial statements.
The accompanying financial statements include the accounts of Kindred Biosciences and its wholly owned subsidiaries (the "Company"). All inter-company accounts and transactions have been eliminated in consolidation.
Stock Offerings
On April 8, 2020, we entered into an At Market Offering ("ATM") whereby we may offer and sell shares of our common stock from time to time up to $25 million. Through December 31, 2020, 59,211 shares were sold through the ATM, for total gross proceeds of approximately $298,000. Net proceeds, after deducting underwriting discounts and commissions and offering expense, were approximately $201,000. In January 2021, we sold another 1,456,497 shares, for total gross proceeds of approximately $7,059,000. Net proceeds, after deducting underwriting discounts and commissions and offering expense, were approximately $6,876,000. On January 15, 2021, we entered into an amendment to the ATM. In accordance with the terms of the amended ATM, we may offer and sell shares of our common stock up to $24,366,000. From February 3, 2021 through June 30, 2021, 4,190,985 shares were sold through the amended ATM, for total gross proceeds of approximately $20,466,000. Net proceeds, after deducting underwriting discounts and commissions and offering expense, were approximately $19,939,000.
Borrowings
On September 30, 2019, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Solar Capital Ltd., to make available to KindredBio an aggregate principal amount of up to $50 million under the Loan Agreement. The Loan Agreement provides for a term loan commitment of $50 million in three tranches: (1) a $20 million term A loan that was funded on September 30, 2019; (2) a $15 million term B loan that was to be funded at our request, subject to certain conditions described in the Loan Agreement being satisfied, no later than December 31, 2020; and (3) a $15 million term C loan that was to be funded at our request, subject to certain conditions described in the Loan Agreement being satisfied, on or before June 30, 2021. Each term loan has a maturity date of September 30, 2024. We elected not to draw down on the $15 million term B loan before the December 31, 2020 deadline. We also elected not to draw down on the $15 million term C loan before the June 30, 2021 deadline. Each term loan bears interest at a floating per annum rate equal to the one-month LIBOR rate (with a floor of 2.17%) plus 6.75%. We are permitted to make interest-only payments on each term loan through October 31, 2021. See Note 6.
On March 16, 2020, we entered into the First Amendment with the Lenders in connection with the sale of our Mirataz asset. Among other things, the First Amendment increases the minimum cash amount, as defined in the Loan Agreement, required to be maintained by KindredBio to $10,000,000.
On December 23, 2020, we entered into the Second Amendment with the Lenders in connection with the Zimeta Distribution and license Agreement with Dechra. All other terms and conditions remain the same as the First Amendment.
On May 5, 2021, we entered into the Third Amendment with the Lenders in connection with the KIND-030 license agreement with Elanco. All other terms and conditions remain the same as the First Amendment.
Pursuant to the Merger Agreement, we are obligated to terminate the Loan Agreement prior to the closing of the Merger.
Liquidity
We have incurred losses and negative cash flows from operations and had an accumulated deficit of $263,723,000 as of June 30, 2021. We expect to continue to incur losses and negative cash flows as we continue our product development activities, seek regulatory approvals for our product candidates, establish a biologics manufacturing capability, and commercialize any approved products. To date, we have been funded primarily through sales of our equity and recently through an asset sale and licensing of our products. We might require additional capital until such time as we can generate operating revenues in excess of operating expenses. We believe that our cash, cash equivalents and investments totaling $74,358,000 as of June 30, 2021, along with the remaining proceeds from the Mirataz sale, revenues from partner licensing and royalties as well as contract manufacturing will be sufficient to fund our planned operations to the fourth quarter of 2023.
If we require additional funding for operations, we may seek such funding through public or private equity or debt financings or other sources, such as corporate collaborations and licensing arrangements. We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into corporate collaborations or licensing arrangements. The terms of any financing may result in dilution or otherwise adversely affect the holdings or the rights of our stockholders.
Revenue Streams
Our revenues consist of revenue from Mirataz and Zimeta associated partner royalties, remaining revenue from the sale of our Mirataz asset, partner licensing revenue and contract manufacturing revenue. While we did record product revenue for Zimeta in the first quarter of 2021, we do not expect to have product revenue going forward.
Product revenue
Our product revenues consist of product revenues resulting from the sales of Mirataz through April 2020 and Zimeta through January 2021. We account for a contract with a customer when there is a legally enforceable contract between us and our customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Our customers could either be distributors who subsequently resell our products to third parties such as veterinarians, clinics or animal hospitals, licensing partners or other third parties.
Revenue from asset sale
On March 16, 2020, we entered into an Asset Purchase Agreement to sell Mirataz to Dechra for a cash purchase price of $43 million. On April 15, 2020, we completed the sale of Mirataz to Dechra and received payment of $38.7 million on the closing date. Of the remaining $4.3 million, $2.15 million has been received in May 2021 out of escrow and the balance of $2.15 million will be paid out 18 months after closing date, assuming no escrow claims.
Partner royalties
We recognize royalty revenue in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us within 45 to 60 days of the end of each calendar quarter in which the commercial sales are made. We base our estimates of royalties earned on actual sales information from our partners when available. If actual royalties received are different than amounts estimated, we would adjust the royalty revenue in the period in which the adjustment becomes known. We do not recognize revenues if it is probable that a significant reversal of revenues will occur.
Contract manufacturing revenue
The manufacturing revenue stream generally represents revenue from the manufacturing of customer product(s). Under a manufacturing contract, a quantity of manufacturing runs is ordered and the product is manufactured according to the customer’s specifications and typically only one performance obligation is included. Each manufacturing run represents a distinct service that is sold separately and has stand-alone value to the customer. The product(s) are manufactured exclusively for a specific customer and have no alternative use. The customer retains control of their product during the entire manufacturing process and can make changes to the process or specifications at their request.
The customer and our project team typically have a timeline on each milestone and duration time. They also have an estimated start and finish date. When the project is moving forward, they constantly change to the actual date to track the project progress. The timing has been shared by both parties. This becomes the most important basis for our revenue recognition.
Because of the timing effect of revenue recognition, billings and cash collections can be recorded in three different ways: billed trade receivables, contract assets (unbilled receivables), and contract liabilities (customer deposits and deferred revenue). Contract assets are recorded when our right to consideration is conditioned on something other than the passage of time. Contract assets are reclassified to trade receivables on the balance sheet when our rights become unconditional. Contract liabilities represent customer deposits and deferred revenue billed and/or received in advance of our fulfillment of performance obligations. Contract liabilities convert to revenue as we perform our obligations under the contract.
Partner Licensing Revenue
Partner licensing revenue consists of revenue that compensates us for services performed, such as formulation, process development, and preparation of pre-clinical and clinical drug product materials under research and development arrangements with partners. Revenues related to research and development are generally recognized as the related services or activities are performed using the output method and in accordance with the contract terms. To the extent that the agreements specify services are to be performed on a fixed basis, revenues are recognized consistent with the pattern of the work performed. In agreements that specify milestones, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is recognized at a point in time. Non-refundable milestone payments related to arrangements under which we have continuing performance obligations would be deferred and recognized over the period of performance. Milestone payments that are not within our control, such as submission for approval to regulators by a partner or approvals from regulators, are not considered probable of being achieved until those submissions are submitted by the customer or approvals are received.
Revenue Recognition
We recognize revenues in accordance with ASC Topic 606 (“ASC 606”), "Revenue from Contracts with Customers". We account for a contract with a customer when there is a legally enforceable contract between us and our customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Our customers could either be distributors who subsequently resell our products to third parties such as veterinarians, clinics or animal hospitals, licensing partners or the third parties.
In accordance with ASC 606, we apply the following steps to recognize revenue that reflect the consideration to which we expect to be entitled to receive in exchange for the promised goods or services:
1. Identify the contract with a customer
A contract with a customer exists when we enter into an enforceable contract with a customer. These contracts define each party's rights, payment terms and other contractual terms and conditions of the sale. We apply judgment in determining the customer’s ability and intention to pay, which is based on published credit and financial information pertaining to the customer.
2. Identify the performance obligations in the contract
Our product in a given purchase order is delivered at the same time and we do not separate an individual order into separate performance obligations. We have concluded the sale of finished goods and related shipping and handling are accounted for as a single performance obligation as there are no other promises to deliver goods beyond what is specified in each accepted customer order.
Under a manufacturing contract, a quantity of manufacturing runs is ordered and the product is manufactured according to the customer’s specifications and typically only one performance obligation is included. Each manufacturing run represents a distinct service that is sold separately and has stand-alone value to the customer.
3. Determine the transaction price
The transaction price is determined based on the consideration which we will be entitled to receive in exchange for transferring goods or service to the customer, typically a fixed consideration in our contractual agreements.
4. Allocate the transaction price to the performance obligations
The transaction price is allocated to the performance obligations identified in each contract. The nature of the promises/obligations under our contracts is to transfer a distinct good or service. Accordingly, because a single performance obligation exists, including in each milestone pertaining to contract manufacturing, no allocation of the transaction price is necessary.
5. Determine the satisfaction of performance obligation
Revenue for product sales is recognized when control of the finished goods is transferred to the customer, net of applicable reserves for variable consideration. Control of the finished goods is transferred at a point in time, upon delivery to the customer.
For contract manufacturing service, revenue is recognized over time. Control of the finished manufactured products is transferred at a point in time, upon delivery to the customer.
Royalty revenues are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us within 45 to 60 days of the end of each calendar quarter in which the commercial sales are made.
For partner licensing, revenues related to research and development are generally recognized as the related services or activities are performed using the output method and in accordance with the contract terms. To the extent that the agreements specify services are to be performed on a fixed basis, revenues are recognized consistent with the pattern of the work performed. In agreements that specify milestones, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method.
Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. Components of variable consideration include product returns, allowances and discounts. These estimates take into consideration a range of possible outcomes for the expected value (probability-weighted estimate) or relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts. The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized where the contract will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.
No reserves for contract manufacturing service are recorded as each manufacturing run represents a distinct service that is sold separately and has stand-alone value to the customer. The product(s) are manufactured exclusively for a specific customer and have no alternative use.
Sales-based royalty revenues recorded by us are based on the licensee’s actual net sales that occurred during the relevant period. No reserves were established and to-date, there were no adjustments made in subsequent periods.
Revenues from partner licensing is recognized when non-refundable, up-front fees are allocated to a license that is determined to be distinct from the other performance obligations identified in the license agreement. No reserves were established.
Product Returns
Consistent with the industry practice, we generally offer customers a limited right of return of damaged or expired product that has been purchased directly from us. Our return policy generally allows customers to receive credit for expired products within 90 days after the product’s expiration date. We estimate the amount of our product revenues that may be returned by our customers and record these estimates as a reduction of product revenues in the period the related product revenues are recognized, as well as within accrued liabilities, in the consolidated balance sheets. We currently estimate product return liabilities using probability-weighted available industry data and data provided by the distributors such as the inventories remaining in the distribution channel. To-date, we have no returns and believe that returns of our product in future periods will be minimal. We do not record a return asset associated with the returned damaged or expired goods due to such asset is deemed to be fully impaired at the time of product return. We no longer carry any product returns reserve for Mirataz, but have maintained a small amount of product return reserve for Zimeta.
Our contract manufacturing customer retains control of their product during the entire manufacturing process and can make changes to the process or specifications at their request. There are no product returns.
Sales Discounts and Allowances
We compensate our distributors for sales order management, data and distribution and other services through sales discounts and allowances. However, such services are not distinct from our sale of products to distributors and, therefore, these discounts and allowances are recorded as a reduction of product revenues in the consolidated statements of operations and comprehensive loss, as well as a reduction to accounts receivable in the consolidated balance sheets. Starting February 2021, we no longer have sales to distributors.
No discounts and allowances are recorded for contract manufacturing service as the price of each milestone is agreed upon when the contract is signed.
Cost of Revenues
Cost of product revenues consists primarily of the cost of direct materials, direct labor and overhead costs associated with manufacturing, inbound shipping and other third-party logistics costs.
Contract manufacturing costs consist primarily of the cost of direct materials, direct labor and overhead costs associated with manufacturing, rent, facility costs and related machinery depreciation.
Inventories
We value inventory at the lower of cost or net realizable value. We determine the cost of inventory using the standard-cost method, which approximates actual cost based on a first-in, first-out method. We analyze our inventory levels quarterly and write down inventory subject to expire in excess of expected requirements, or that has a cost basis in excess of its expected net realizable value. In the quarter ended March 31, 2020, we wrote off $3,494,000 Mirataz inventory related to the Dechra Asset Purchase Agreement, due to the transition to Dechra brand labelling. In January 2021, we sold all our excess Zimeta finished goods inventory to Dechra. Currently, we do not own any inventory.
Property, Plant and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. We calculate depreciation using the straight-line method over the estimated useful lives of the assets, which range from two to five years for furniture, fixtures, lab and computer equipment and software, and fifteen to thirty-nine years for land improvements and real property. Land and assets held within construction in progress are not depreciated. Construction in progress is related to the construction or development of property and equipment that have not yet been placed in service for their intended use. Expenditures for repairs and maintenance of assets are charged to expense as incurred. We amortize leasehold improvements using the straight-
line method over the estimated useful lives of the respective assets or the lease term, whichever is shorter. Upon retirement or sale, the cost and related accumulated depreciation and amortization of assets disposed of are removed from the accounts and any resulting gain or loss is included in other income/expense.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are based on historical experiences or on forecasts, including information received from third parties and other assumptions that the Company believes are reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from those estimates.
Comprehensive Income (Loss)
Our comprehensive income (loss) includes the change in unrealized gains or losses on available-for-sale debt securities. The cumulative amount of gains or losses are reflected as a separate component of stockholders' equity in the condensed consolidated balance sheets as accumulated other comprehensive income (loss).
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848)", changes to the interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate ("LIBOR"). The amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts that reference LIBOR expected to be discontinued because of reference rate reform. The expedients and exceptions do not apply to contract modifications made after December 31, 2022. The following optional expedients are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance: Modifications of contracts within the scope of Topics 470, Debt, should be accounted for by prospectively adjusting the effective interest rate. The amendments also permit an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. When elected, the optional expedients for contract modifications must be applied consistently for all contracts. It applies to all entities within the scope of the affected accounting guidance and will take effect as of March 12, 2020 through December 31, 2022. We have one loan contract which references LIBOR rate. We have not modified the contract with our lenders yet. We are currently evaluating the new guidance and have not determined the impact this standard may have on our financial statements.
We do not believe there are any other recently issued standards not yet effective that will have a material impact on our financial statements when the standards become effective.
2. Revenues and Cost of Revenues
On March 16, 2020, we entered into an Asset Purchase Agreement to sell Mirataz to Dechra for a cash purchase price of $43 million. On April 15, 2020, we completed the sale of Mirataz to Dechra and received payment of $38.7 million on the closing date. Of the remaining $4.3 million, $2.15 million has been received in May 2021 out of escrow and the balance of $2.15 million will be paid out 18 months after closing date, assuming no escrow claims.
In December 2020, we entered into a Distribution and Licensing Agreement granting Dechra an exclusive license under our patents and marketing authorizations to promote, market, sell and distribute Zimeta in the U.S. and Canadian territories. Our revenue generated from product sale of Mirataz ended as of April 2020 and from Zimeta ended as of January 2021. We record partner royalties from Dechra based on Mirataz and Zimeta net sales on a quarterly basis.
Our exclusive license and collaboration agreement with Elanco allows us to receive future development milestone payments of up to $16 million upon achievement of certain development, regulatory and manufacturing targets, and sales milestones in an aggregate amount of up to $94 million payable throughout the term of the agreement, including royalty payments ranging from the low to high teens. Under the terms of the agreement, KindredBio has received an upfront payment of $500,000 in February 2021. We did not have any royalty income or recognize any milestone payments from Elanco in the three
and six months ended June 30, 2021.
We recorded contract manufacturing revenue for the manufacture of Vaxart's oral vaccine candidate for COVID-19 based on the percentage completion of specific milestones for the quarter. The expansion of our manufacturing agreement with Vaxart for COVID-19 and other vaccine candidates will extend our contract manufacturing activities through at least the end of 2021.
In September 2019, we were selected by the National Cancer Institute ("NCI") as one of three contractors in response to the solicitation for the PREVENT Cancer Preclinical Drug Development Program ("PREVENT"): Current Good Manufacturing Practice ("cGMP") Production of Vaccines and Biologicals for Cancer Prevention (cGMP Pool). As a cGMP pool contractor, KindredBio is eligible to provide manufacturing, formulation and analytical services to meet the needs of the PREVENT pipeline. In February 2021, we were awarded a work order from the NCI and began work on our first NCI project.
We account for a contract with a customer when there is a legally enforceable contract between us and our customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Our product revenues are measured based on the consideration specified in the contract with each customer, net of product returns, discounts and allowances.
The following table summarizes revenues and costs for the three and six months ended June 30, 2021 and 2020 (in thousands).
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Three months ended June 30,
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Six months ended June 30,
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2021
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2020
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2021
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2020
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Revenues
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Net product revenues
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$
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—
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$
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163
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$
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227
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$
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766
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Partner royalty revenue
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250
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158
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576
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|
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158
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Contract manufacturing revenue
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1,137
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|
|
546
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2,979
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|
|
546
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Revenue from asset sale
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2,150
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38,700
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2,150
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38,700
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Total revenues
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3,537
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39,567
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5,932
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40,170
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Costs of revenues
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Cost of product revenues (1)
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—
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27
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207
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3,604
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Contract manufacturing costs
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639
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336
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1,022
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|
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336
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Total costs of revenues
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639
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363
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1,229
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3,940
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Gross margin
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$
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2,898
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$
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39,204
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$
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4,703
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$
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36,230
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(1) Includes $3,494 Finished Goods write-off in the first quarter of 2020 related to the Dechra Asset Purchase Agreement, due to the transition to proprietary Dechra branding on asset sale.
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The following table summarizes contract manufacturing revenues and costs by projects for the three and six months ended June 30, 2021 and 2020 (in thousands).
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Three months ended June 30,
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Six months ended June 30,
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2021
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2020
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2021
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2020
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Vaxart project
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Contract manufacturing revenues
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$
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960
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$
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546
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$
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2,760
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|
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$
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546
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Contract manufacturing costs
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479
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|
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336
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824
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|
|
336
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Net profit
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481
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|
|
210
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1,936
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|
|
210
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NCI Project
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Contract manufacturing revenues
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177
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—
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219
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—
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Contract manufacturing costs
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160
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—
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|
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198
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—
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Net profit
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17
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—
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|
|
21
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—
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Total
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|
|
Contract manufacturing revenues
|
|
1,137
|
|
|
546
|
|
|
2,979
|
|
|
546
|
|
|
Contract manufacturing costs
|
|
639
|
|
|
336
|
|
|
1,022
|
|
|
336
|
|
|
Net profit
|
|
$
|
498
|
|
|
$
|
210
|
|
|
$
|
1,957
|
|
|
$
|
210
|
|
The following table summarizes product revenues and costs for the three and six months ended June 30, 2021 and 2020 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Mirataz
|
|
|
|
|
|
|
|
|
|
Net product revenues
|
|
$
|
—
|
|
|
$
|
156
|
|
|
$
|
—
|
|
|
$
|
752
|
|
|
Cost of product revenues (1)
|
|
—
|
|
|
24
|
|
|
—
|
|
|
3,599
|
|
|
Net profit/(loss)
|
|
—
|
|
|
132
|
|
|
—
|
|
|
(2,847)
|
|
|
Zimeta
|
|
|
|
|
|
|
|
|
|
Net product revenues
|
|
—
|
|
|
7
|
|
|
227
|
|
|
14
|
|
|
Cost of product revenues
|
|
—
|
|
|
3
|
|
|
207
|
|
|
5
|
|
|
Net profit
|
|
—
|
|
|
4
|
|
|
20
|
|
|
9
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Net product revenues
|
|
—
|
|
|
163
|
|
|
227
|
|
|
766
|
|
|
Cost of product revenues (1)
|
|
—
|
|
|
27
|
|
|
207
|
|
|
3,604
|
|
|
Net profit/(loss)
|
|
$
|
—
|
|
|
$
|
136
|
|
|
$
|
20
|
|
|
$
|
(2,838)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes $3,494 Finished Goods write-off in the first quarter of 2020 related to the Dechra Asset Purchase Agreement, due to the transition to proprietary Dechra branding on asset sale.
|
Concentrations of credit risk
Our net product revenue for the quarter ended March 31, 2021 was generated entirely from sales within the United States for excess Zimeta inventory sold to Dechra. There are no other product sales in the second quarter of 2021. Our partner royalties for Mirataz and Zimeta are also with Dechra. In total, Dechra accounted for approximately 7% and 14% of total revenue in the three and six months ended June 30, 2021. Product sales to two large distributors, namely Covetrus and MWI Animal Health, and three large distributors, namely Covetrus, MWI Animal Health and Midwest Veterinary Supply, each accounted for more than 10% of net revenues for the three and six months ended June 30, 2020. Approximately 95% and 75% of our gross product revenues were to two and three distributors for the three and six months ended June 30, 2020, respectively.
Vaxart accounted for 84% and 93% of the contract manufacturing services we provided for the three and six months ended June 30, 2021, respectively. We started to have manufacturing revenue from the second quarter of 2020, and Vaxart was
the only manufacturing customer in the whole year of 2020. Manufacturing contracts require up-front payments and installment payments during the service period. We perform periodic evaluations of the financial condition of our customers and generally do not require collateral, but we can terminate any contract if a material default occurs.
Product returns
Our return policy generally allows customers to receive credit for expired products within 90 days after the product’s expiration date. We estimated product return liabilities of 3% for Zimeta of gross product revenue using probability-weighted available industry data and data provided by distributors such as the inventories remaining in the distribution channel. We are no longer marketing Zimeta and will not be increasing the product return liabilities, but adjustments will be made to the reserves based on actual returns in the future.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are stated at their carrying values, net of any allowances for doubtful accounts. Accounts receivable consist primarily of amounts due from distributors, for which collection is probable based on the customer's intent and ability to pay. Receivables are evaluated for collection probability on a regular basis and an allowance for doubtful accounts is recorded, if necessary. We have no allowance for doubtful accounts as of June 30, 2021 and December 31, 2020 as our analysis did not uncover any collection risks.
Contract assets
Because of the timing effect of revenue recognition, billings and cash collections can be recorded into three different ways: billed trade receivables, contract assets (unbilled receivables), and contract liabilities (customer deposits and deferred revenue). Contract assets are recorded when our right to consideration is conditioned on something other than the passage of time. Contract assets are reclassified to trade receivables on the balance sheet when our rights become unconditional. Contract liabilities represent customer deposits and deferred revenue billed and/or received in advance of our fulfillment of performance obligations. Contract liabilities convert to revenue as we perform our obligations under the contract. We recorded $160,000 contract assets and no contract liabilities on June 30, 2021. We did not record any contract asset and/or contract liabilities on December 31, 2020.
3. Fair Value Measurements
Certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The carrying amount of financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to the short maturities of these financial instruments. Financial assets, which consist of money market funds and available-for-sale securities, are measured at fair value on a recurring basis.
Financial assets, which consist of money market funds and available-for-sale securities, are measured at fair value on a recurring basis and are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2021
|
|
Description
|
|
Total
|
|
Quoted Prices in
Active Markets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Unobservable Inputs
(Level 3)
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
42,290
|
|
|
$
|
42,290
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Commercial paper
|
|
3,000
|
|
|
—
|
|
|
3,000
|
|
|
—
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
U.S. treasury bills
|
|
3,507
|
|
|
3,507
|
|
|
—
|
|
|
—
|
|
|
Commercial paper
|
|
20,286
|
|
|
—
|
|
|
20,286
|
|
|
—
|
|
|
Corporate notes
|
|
3,691
|
|
|
—
|
|
|
3,691
|
|
|
—
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
|
159
|
|
|
—
|
|
|
159
|
|
|
—
|
|
|
|
|
$
|
72,933
|
|
|
$
|
45,797
|
|
|
$
|
27,136
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2020
|
|
Description
|
|
Total
|
|
Quoted Prices in
Active Markets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Unobservable Inputs
(Level 3)
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
219
|
|
$
|
219
|
|
$
|
—
|
|
$
|
—
|
|
U.S. treasury bills
|
|
4,060
|
|
4,060
|
|
|
—
|
|
—
|
|
Commercial paper
|
|
3,899
|
|
—
|
|
3,899
|
|
|
—
|
|
U.S. government agency notes
|
|
2,000
|
|
—
|
|
2,000
|
|
|
—
|
|
Corporate notes
|
|
315
|
|
—
|
|
315
|
|
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
U.S. treasury bills
|
|
6,531
|
|
6,531
|
|
—
|
|
—
|
|
U.S. government agency notes
|
|
36,444
|
|
—
|
|
36,444
|
|
—
|
|
Corporate notes
|
|
3,783
|
|
—
|
|
3,783
|
|
—
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
U.S. government agency notes
|
|
1,500
|
|
—
|
|
1,500
|
|
—
|
|
|
|
$
|
58,751
|
|
$
|
10,810
|
|
$
|
47,941
|
|
$
|
—
|
During the six months ended June 30, 2021, there were no transfers of assets between Level 1, Level 2 or Level 3 of the fair value hierarchy.
At June 30, 2021 and December 31, 2020, we did not have any financial liabilities which were measured at fair value on a recurring basis.
4. Investments
We classify all highly-liquid investments with stated maturities of greater than three months from the date of purchase and remaining maturities of less than one year as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such investments are viewed as being available to support current operations. We classify and account for investments as available-for-sale and reflect realized gains and losses using the specific identification method. Changes in market value, if any, excluding other-than-temporary impairments, are reflected in other comprehensive income (loss).
The fair value of available-for-sale investments by type of security at June 30, 2021 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Commercial paper
|
$
|
20,287
|
|
|
$
|
1
|
|
|
$
|
(2)
|
|
|
$
|
20,286
|
|
|
U.S. treasury bills
|
3,507
|
|
|
—
|
|
|
—
|
|
|
3,507
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
3,691
|
|
|
1
|
|
|
(1)
|
|
|
3,691
|
|
|
|
27,485
|
|
|
2
|
|
|
(3)
|
|
|
27,484
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
159
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
|
159
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
Total available-for-sale investments
|
$
|
27,644
|
|
|
$
|
2
|
|
|
$
|
(3)
|
|
|
$
|
27,643
|
|
The fair value of available-for-sale investments by type of security at December 31, 2020 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
U.S. treasury bills
|
$
|
6,531
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,531
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency notes
|
36,437
|
|
|
8
|
|
|
(1)
|
|
|
36,444
|
|
|
Corporate notes
|
3,778
|
|
|
5
|
|
|
—
|
|
|
3,783
|
|
|
|
46,746
|
|
|
13
|
|
|
(1)
|
|
|
46,758
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
U.S. government agency notes
|
1,500
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
|
Total available-for-sale investments
|
$
|
48,246
|
|
|
$
|
13
|
|
|
$
|
(1)
|
|
|
$
|
48,258
|
|
5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Accrued consulting
|
$
|
2,120
|
|
|
$
|
468
|
|
|
Accrued research and development costs
|
519
|
|
|
1,654
|
|
|
Other expenses
|
429
|
|
|
623
|
|
|
|
$
|
3,068
|
|
|
$
|
2,745
|
|
6. Borrowings
On September 30, 2019, we entered into the Loan and Security Agreement with Solar Capital Ltd. The Lenders have agreed to make available to KindredBio an aggregate principal amount of up to $50 million under the Loan Agreement. The Loan Agreement provides for a term loan commitment of $50 million in three tranches: (1) a $20 million term A loan that was funded on September 30, 2019; (2) a $15 million term B loan that was to be funded at our request, subject to certain conditions described in the Loan Agreement being satisfied, no later than December 31, 2020; and (3) a $15 million term C loan that was to be funded at our request, subject to certain conditions described in the Loan Agreement being satisfied, on or before June 30, 2021. Each term loan has a maturity date of September 30, 2024. We elected not to draw down on the $15 million term B loan before the December 31, 2020 deadline. We also elected not to draw down on the $15 million term C loan before the June 30, 2021 deadline. Each term loan bears interest at a floating per annum rate equal to the one-month LIBOR rate (with a floor of 2.17%) plus 6.75%. We are permitted to make interest-only payments on each term loan through October 31, 2021. We were in compliance with all covenants as of June 30, 2021.
In conjunction with the Dechra Asset Purchase Agreement, on March 16, 2020, we entered into the First Amendment with the Lenders in connection with the sale of our Mirataz asset. Among other things, the First Amendment increases the minimum cash amount, as defined in the Loan Agreement, required to be maintained by KindredBio to $10,000,000. We paid an amendment fee of One Hundred Thousand Dollars $100,000, which was deemed fully earned and non-refundable on the First Amendment's effective date.
On December 23, 2020, we entered into the Second Amendment with the Lenders in connection with the Zimeta Distribution and License Agreement with Dechra. We paid an amendment fee of $15,000. All other terms and conditions remain the same as the First Amendment.
On May 5, 2021, we entered into the Third Amendment with the Lenders in connection with the KIND-030 license agreement with Elanco. All other terms and conditions remain the same as the First Amendment. Pursuant to the Merger Agreement, we are obligated to terminate the Loan Agreement prior to the closing of the Merger.
As of June 30, 2021, assuming the principal payments start on November 1, 2021, our future debt payment obligations towards the principal and final fee, excluding interest payments and exit fee, for the respective fiscal years are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
1,186
|
|
|
2022
|
|
6,667
|
|
|
2023
|
|
6,667
|
|
|
2024
|
|
6,275
|
|
|
Total principal and final fee payments
|
|
20,795
|
|
|
Less: Unamortized debt issuance costs
|
|
(457)
|
|
|
Less: Unaccreted value of final fee
|
|
(468)
|
|
|
Loan payable, total
|
|
$
|
19,870
|
|
|
|
|
|
|
Loan payable, short-term
|
|
$
|
4,519
|
|
|
Loan payable, long-term
|
|
$
|
15,351
|
|
7. Common Stock and Stock-Based Awards
Common Stock
During the six months ended June 30, 2021, we issued 209,400 shares of common stock in connection with the exercise of stock options for gross proceeds of $774,000, of which $183,000 was received in July 2021. In addition, 208,175 restricted stock awards and restricted stock units vested during the six months ended June 30, 2021. 19,933 shares of restricted stock awards and 82,344 shares restricted stock units were withheld to satisfy employee tax withholding obligations arising in conjunction with the vesting of restricted stock and restricted stock units (see below).
Stock-Based Awards
The table below shows the number of shares of common stock underlying options granted to employees, directors and consultants, the assumptions used in the Black-Scholes option pricing model used to value those options and the resulting weighted-average grant date fair value per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Plan
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Shares underlying options granted
|
29,000
|
|
1,000
|
|
1,448,849
|
|
750,000
|
|
|
|
|
|
|
|
|
|
Weighted-average exercise price
|
$4.95
|
|
$4.85
|
|
$4.49
|
|
$9.80
|
|
|
|
|
|
|
|
|
|
Weighted average risk- free interest rate
|
1.05 %
|
|
0.42 %
|
|
0.56 %
|
|
1.66 %
|
|
|
|
|
|
|
|
|
|
Weighted average expected term (years)
|
6.1
|
|
6.1
|
|
5.7
|
|
5.8
|
|
|
|
|
|
|
|
|
|
Weighted average expected volatility
|
61%
|
|
56%
|
|
61%
|
|
54%
|
|
|
|
|
|
|
|
|
|
Expected dividend yield
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Weighted-average grant date fair value per share
|
$2.77
|
|
$2.49
|
|
$2.44
|
|
$5.00
|
|
|
|
|
|
|
|
|
In June 2018, we adopted the 2018 Equity Incentive Plan (the “2018 Plan”), and reserved 3,000,000 shares of our common stock for issuance under the 2018 Plan. At the Annual Meeting of Stockholders of the Company held on June 15, 2020 (the “2020 Annual Meeting”), our stockholders approved an amendment to the 2018 Equity Incentive Plan (as amended, the “2018 Plan”) to increase the number of shares of common stock authorized for issuance by 1,600,000 shares. The 2018 Plan is the successor to our 2016 Equity Incentive Plan (the “2016 Plan”), which was retired on June 21, 2018 upon stockholders’ approval of our 2018 Plan. The 2016 Plan was the successor to our 2012 Equity Incentive Plan (the "2012 Plan"), which was retired on May 23, 2016 upon stockholders' approval of our 2016 Plan. All awards made under the 2016 and 2012 Plans shall remain subject to the terms of these plans. Options granted under the 2018 Plan may be either incentive stock options or nonstatutory stock options. The 2018 Plan also provides for the grant of stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards. The exercise price of a stock option may not be less than 100% of the closing price of our common stock on the date of the grant. If, at any time we grant an incentive stock option, and the optionee directly or by attribution owns stock possessing more than 10% of the total
combined voting power of all classes of KindredBio stock, the option price shall be at least 110% of the fair value and shall not be exercisable more than five years after the date of grant. Options generally vest over a period of one or four years from the date of grant. Options granted under the 2018 Plan expire no later than 10 years from the date of grant. As of June 30, 2021, there were 3,391,342 option shares outstanding, and 717,818 shares available for future grants under the 2018 Plan.
Our Employee Stock Purchase Plan (the "Stock Purchase Plan" or "ESPP"), adopted in December 2014, permits eligible employees to purchase common stock at a discount through payroll deductions during defined six-month consecutive offering periods beginning December 1 with the exception of our first offering period which commenced on January 1, 2015 for a five month duration. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock on the first day of the offering or 85% of the fair market value of our common stock on the purchase date. A total of 200,000 shares of common stock are authorized for issuance under the Stock Purchase Plan. At the Annual Meeting of Stockholders of Kindred Biosciences, Inc. held on June 22, 2018, our stockholders approved an amendment to increase the number of shares that may be issued under the ESPP from 200,000 shares to 500,000 shares. A participant may purchase a maximum of 2,000 shares of common stock during each offering period, not to exceed $25,000 worth of common stock on the offering date during each calendar year.
We use the Black-Scholes option pricing model, in combination with the discounted employee price, in determining the value of the Stock Purchase Plan expense to be recognized during each offering period. The following assumptions were used in the Black-Scholes option pricing model to calculate employee stock-based compensation:
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|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Weighted average risk-free interest rate
|
0.04%
|
|
0.18%
|
|
0.07%
|
|
0.91%
|
|
|
|
|
|
|
|
|
|
Weighted average expected term (years)
|
0.5
|
|
0.5
|
|
0.5
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Weighted average expected volatility
|
59.3%
|
|
124.5%
|
|
63%
|
|
88.5%
|
|
|
|
|
|
|
|
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|
Expected dividend yield
|
—
|
|
—
|
|
—
|
|
—
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|
|
|
|
|
|
|
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Weighted-average grant date fair value per share
|
$1.37
|
|
$2.08
|
|
$1.28
|
|
$2.14
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|
|
|
|
|
|
|
|
Under the Stock Purchase Plan, employees purchased 21,815 shares of common stock for $71,000 during the six months ended June 30, 2021. At June 30, 2021 and December 31, 2020, we had an outstanding liability of $16,000 and $16,000, respectively, which is included in accrued compensation on the condensed consolidated balance sheets, for employee contributions to the Stock Purchase Plan for shares pending issuance at the end of the next offering period.
We recorded stock-based compensation expense as follows (in thousands):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
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|
Six months ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Research and development
|
$
|
476
|
|
|
$
|
509
|
|
|
$
|
912
|
|
|
$
|
1,062
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
1,042
|
|
|
1,414
|
|
|
3,102
|
|
|
2,925
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,518
|
|
|
$
|
1,923
|
|
|
$
|
4,014
|
|
|
$
|
3,987
|
|
|
|
|
|
|
|
|
|
We had an aggregate of approximately $5,650,000 of unrecognized stock-based compensation expense for options outstanding and the Stock Purchase Plan as of June 30, 2021 which is expected to be recognized over a weighted-average period of 2.1 years.
Restricted Stock Award and Restricted Stock Units
On January 22, 2018, we granted 315,000 shares of restricted stock units to four employees. Shares will vest 25% on each one year anniversary of the grant date provided that the employee is in the employment of the Company on such vesting date. In Q1 2019, we granted 300,775 shares of restricted stock units to most of our employees. Shares will vest 25% on each one year anniversary of the grant date provided that the employee is in the employment of the Company on such vesting date. In Q1 2020, we granted 586,915 shares of restricted stock units to most of our employees. Shares will vest 25% on each one year
anniversary of the grant date provided that the employee is in the employment of the Company on such vesting date. In July 2020, we granted 51,750 shares of restricted stock units to most of our employees except officers. Shares will vest 100% on the one year anniversary of the grant date provided that the employee is in the employment of the Company on such vesting date. As of June 30, 2021, we have an aggregate of approximately $2,723,000 unrecognized stock-based compensation expense for restricted stock awards and units outstanding which is expected to be recognized over a weighted-average period of 2.2 years.
Restricted stock award and restricted stock units activity for six months ended June 30, 2021 was as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Award / Restricted Stock Units
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Unvested balance at December 31, 2020
|
|
633,742
|
|
$9.16
|
|
Granted
|
|
—
|
|
—
|
|
Vested
|
|
(208,175)
|
|
9.04
|
|
Forfeited
|
|
(43,914)
|
|
8.92
|
|
Unvested balance at June 30, 2021
|
|
381,653
|
|
$9.26
|
Stock Option Information
A summary of stock option activity under all stock plans for the six months ended June 30, 2021, is presented as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Number of Outstanding
|
|
Weighted Average Exercise Price Per Share
|
|
Balance at December 31, 2020
|
|
6,377,732
|
|
$8.02
|
|
Granted
|
|
1,448,849
|
|
4.49
|
|
Exercised
|
|
(209,400)
|
|
3.70
|
|
Forfeited
|
|
(102,593)
|
|
5.49
|
|
Expired
|
|
(99,230)
|
|
10.10
|
|
Balance at June 30, 2021
|
|
7,415,358
|
|
$7.46
|
As of June 30, 2021, options to purchase 5,498,728 shares of common stock were exercisable at a weighted average price of $7.90 per share.
Equity Award Modifications
Stock Option Modifications
On February 5, 2021, KindredBio's directors approved amending existing and future option agreements for non-employee directors to provide that, following a director's retirement, the director will be given a period of three years (instead of the current period of three months) in which to exercise vested options. A non-employee director shall be eligible to retire from the Board and obtain the three-year option exercise period if (1) the director has attained age 55, (2) the director has completed at least three years of service as a KindredBio director as of the date on which his or her service as a director terminates, and (3) the sum of the director's age and years of service as a director is at least 65 as of the date on which his or her service as a director terminates. We accounted for the extension as a modification of an equity award under ASC 718 (Accounting Standards Codification (ASC) Topic 718 - "Compensation - Stock Compensation"). Accordingly, we recognized incremental stock compensation expense of approximately $1,014,000 during the three months ended March 31, 2021.
Merger Agreement
The Merger Agreement provides for payments upon closing of the Merger in connection with our equity awards, as described in our Definitive Proxy Statement on Schedule 14A filed with the SEC on July 21, 2021.
8. Stockholders' Equity
Stockholders' Equity
The following tables present the changes in stockholders' equity (in thousands except share amount in footnotes):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
|
|
|
Common stock
|
|
Additional Paid in Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Stockholders' Equity
|
|
|
|
Shares
|
|
Amount
|
|
Balance at March 31, 2021
|
|
44,708
|
|
|
$
|
4
|
|
|
$
|
338,374
|
|
|
$
|
2
|
|
|
$
|
(254,595)
|
|
|
$
|
83,785
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,128)
|
|
|
(9,128)
|
|
|
Change in unrealized gain/(loss) on available for sale securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
(9,131)
|
|
|
Stock-based compensation expenses
|
|
—
|
|
|
—
|
|
|
1,518
|
|
|
—
|
|
|
—
|
|
|
1,518
|
|
|
Exercise of common stock options
|
|
144
|
|
|
—
|
|
|
753
|
|
|
—
|
|
|
—
|
|
|
753
|
|
|
At-the-Market issuance of common stock, net of $73 offering costs
|
|
565
|
|
|
1
|
|
|
2,772
|
|
|
—
|
|
|
—
|
|
|
2,773
|
|
|
Common stock issuance under ESPP
|
|
22
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
Balance at June 30, 2021
|
|
45,439
|
|
|
$
|
5
|
|
|
$
|
343,488
|
|
|
$
|
(1)
|
|
|
$
|
(263,723)
|
|
|
$
|
79,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
|
|
|
Common stock
|
|
Additional Paid in Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Stockholders' Equity
|
|
|
|
Shares
|
|
Amount
|
|
Balance at December 31, 2020
|
|
39,492
|
|
|
$
|
4
|
|
|
$
|
312,321
|
|
|
$
|
12
|
|
|
$
|
(244,855)
|
|
|
$
|
67,482
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
(18,868)
|
|
|
(18,868)
|
|
|
Change in unrealized gain/(loss) on available for sale securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
(18,881)
|
|
|
Stock-based compensation expenses
|
|
—
|
|
|
—
|
|
|
4,014
|
|
|
—
|
|
|
—
|
|
|
4,014
|
|
|
RSU issuance of shares when vested
|
|
89
|
|
|
—
|
|
|
(409)
|
|
|
—
|
|
|
—
|
|
|
(409)
|
|
|
Shares withheld related to net share settlement of equity awards
|
|
(20)
|
|
|
—
|
|
|
(98)
|
|
|
—
|
|
|
—
|
|
|
(98)
|
|
|
Exercise of common stock options
|
|
209
|
|
|
—
|
|
|
774
|
|
|
—
|
|
|
—
|
|
|
774
|
|
|
At-the-Market issuance of common stock, net of $709 offering costs
|
|
5,647
|
|
|
1
|
|
|
26,815
|
|
|
—
|
|
|
—
|
|
|
26,816
|
|
|
Common stock issuance under ESPP
|
|
22
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
Balance at June 30, 2021
|
|
45,439
|
|
|
$
|
5
|
|
|
$
|
343,488
|
|
|
$
|
(1)
|
|
|
$
|
(263,723)
|
|
|
$
|
79,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2020
|
|
|
|
Common stock
|
|
Additional Paid in Capital
|
|
Accumulated Other Comprehensive Income
|
|
Accumulated Deficit
|
|
Stockholders' Equity
|
|
|
|
Shares
|
|
Amount
|
|
Balance at March 31, 2020
|
|
39,290
|
|
|
$
|
4
|
|
|
$
|
306,482
|
|
|
$
|
4
|
|
|
$
|
(245,820)
|
|
|
$
|
60,670
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,046
|
|
|
24,046
|
|
|
Change in unrealized gain on available for sale securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
24,086
|
|
|
Stock-based compensation expenses
|
|
—
|
|
|
—
|
|
|
1,923
|
|
|
—
|
|
|
—
|
|
|
1,923
|
|
|
Exercise of common stock options
|
|
13
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
Common stock issuance under ESPP
|
|
30
|
|
|
|
|
109
|
|
|
|
|
|
|
109
|
|
|
Balance at June 30, 2020
|
|
39,333
|
|
|
$
|
4
|
|
|
$
|
308,542
|
|
|
$
|
44
|
|
|
$
|
(221,774)
|
|
|
$
|
86,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2020
|
|
|
|
Common stock
|
|
Additional Paid in Capital
|
|
Accumulated Other Comprehensive Income
|
|
Accumulated Deficit
|
|
Stockholders' Equity
|
|
|
|
Shares
|
|
Amount
|
|
Balance at December 31, 2019
|
|
39,204
|
|
|
$
|
4
|
|
|
$
|
304,963
|
|
|
$
|
13
|
|
|
$
|
(223,059)
|
|
|
$
|
81,921
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,285
|
|
|
1,285
|
|
|
Change in unrealized gain on available for sale securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
1,316
|
|
|
Stock-based compensation expenses
|
|
—
|
|
|
—
|
|
|
3,987
|
|
|
—
|
|
|
—
|
|
|
3,987
|
|
|
RSU issuance of shares when vested
|
|
95
|
|
|
—
|
|
|
(461)
|
|
|
—
|
|
|
—
|
|
|
(461)
|
|
|
Shares withheld related to net share settlement of equity awards
|
|
(22)
|
|
|
—
|
|
|
(208)
|
|
|
—
|
|
|
—
|
|
|
(208)
|
|
|
Exercise of common stock options
|
|
26
|
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
Common stock issuance under ESPP
|
|
30
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
Balance at June 30, 2020
|
|
39,333
|
|
|
$
|
4
|
|
|
$
|
308,542
|
|
|
$
|
44
|
|
|
$
|
(221,774)
|
|
|
$
|
86,816
|
|
9. Leases
Leases
We have non-cancelable operating leases for laboratory space in Burlingame, California with several amendments to expand the facility. In February 2020, we further amended non-cancelable operating leases for laboratory space in Burlingame, California for an expansion of an additional 2,260 square feet of laboratory space commencing on May 1, 2020 and expiring on May 31, 2025. The total non-cancellable operating lease for the entire existing laboratory space is 13,736 square feet, expiring May 31, 2025. In August 2015, we entered into a new non-cancelable operating lease for 3,126 square feet of office space in San Diego, California and in June 2019, renewed the lease through February 2025. In September 2020, we renewed our headquarters 6,900 square feet of office space for another 3 years, expiring November 30, 2023. In May 2019, we signed another lease in Burlingame ("May 2019 lease"), consisting of 1,346 square feet of space through April 2022. In addition, we have five equipment leases expiring through 2027.
Operating lease expense was $263,000 and $520,000, respectively for the three and six months ended June 30, 2021, which includes $3,000 and $6,000 sublease income, respectively. Operating lease expense was $266,000 and $531,000, respectively for the three and six months ended June 30, 2020, which includes $5,000 and $26,000 of short-term lease expenses,
respectively. The following tables below do not include short term leases. We also have various equipment operating lease agreements.
Supplemental cash flow information, for the six months ended June 30, 2021, related to operating leases as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amortization of operating lease
|
|
$
|
407
|
|
|
Cash paid within operating cash flows
|
|
$
|
502
|
|
|
Right-of-use assets obtained in exchange for new lease liabilities
|
|
$
|
—
|
|
Supplemental balance sheet information, as of June 30, 2021, related to operating leases was as follows (in thousands, except lease term and discount rate):
|
|
|
|
|
|
|
|
|
|
|
Reported as:
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
3,021
|
|
|
|
|
|
|
Current portion of operating lease liabilities
|
|
$
|
864
|
|
|
Long-term operating lease liabilities
|
|
2,492
|
|
|
Total lease liabilities
|
|
$
|
3,356
|
|
|
|
|
|
|
Weighted average remaining lease term (years)
|
|
3.6 years
|
|
Weighted average discount rate
|
|
5.50%
|
As of June 30, 2021, we are obligated to make minimum lease payments under non-cancelable operating leases, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
Lease Payments
|
|
2021 (remaining of year)
|
|
$
|
510
|
|
|
2022
|
|
1,058
|
|
|
2023
|
|
1,047
|
|
|
2024
|
|
837
|
|
|
2025
|
|
249
|
|
|
2026 and thereafter
|
|
9
|
|
|
Total lease payments
|
|
3,710
|
|
|
Less: imputed interest
|
|
(354)
|
|
|
Total lease liabilities
|
|
$
|
3,356
|
|
10. Commitments and contingencies
Purchase Commitments
In June 2018, we entered into a Strategic Supply Agreement (the “Agreement”), with Pall Corporation (“Pall”) for the purchase of equipment and consumables to be used in support of our manufacturing requirements, including, but not limited to the Plant. Pursuant to the agreement, we will purchase certain pharmaceutical manufacturing equipment and related services in the aggregate amount of $3.8 million with a seven year consumable purchase obligation in the aggregate amount of approximately $16.5 million. The agreement is subject to customary undertakings, covenants, obligations, rights and conditions. We have incurred $3,778,000 in equipment purchase costs during the year ended of December 31, 2019. As of June 30, 2021, we are obligated to make consumable purchases and committed purchases as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
Consumable commitments
|
|
Consumable purchases
|
|
Remaining commitments
|
|
2021
|
|
$
|
3,300
|
|
|
$
|
391
|
|
|
$
|
2,909
|
|
|
2022
|
|
3,625
|
|
|
—
|
|
|
3,625
|
|
|
2023
|
|
3,625
|
|
|
—
|
|
|
3,625
|
|
|
2024
|
|
4,285
|
|
|
—
|
|
|
4,285
|
|
|
Total
|
|
$
|
14,835
|
|
|
$
|
391
|
|
|
$
|
14,444
|
|
11. Net Income (Loss) Per Share
Basic and diluted net loss per share was calculated as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(9,128)
|
|
|
$
|
24,046
|
|
|
$
|
(18,868)
|
|
|
$
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, basic
|
45,277
|
|
|
39,240
|
|
|
43,195
|
|
|
39,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic
|
$
|
(0.20)
|
|
|
$
|
0.61
|
|
|
$
|
(0.44)
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(9,128)
|
|
|
$
|
24,046
|
|
|
$
|
(18,868)
|
|
|
$
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
—
|
|
|
845
|
|
|
—
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested RSAs/RSUs
|
—
|
|
|
1
|
|
|
—
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, diluted
|
45,277
|
|
|
40,086
|
|
|
43,195
|
|
|
40,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, diluted
|
$
|
(0.20)
|
|
|
$
|
0.60
|
|
|
$
|
(0.44)
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential shares of common stock that were excluded from the computation of diluted earnings per common share as they were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
7,415
|
|
|
5,370
|
|
|
7,415
|
|
|
4,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested RSAs/RSUs
|
382
|
|
|
685
|
|
|
382
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of potentially issuable shares
|
7,797
|
|
|
6,055
|
|
|
7,797
|
|
|
5,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There was no difference between the Company’s net income (loss) and the net income (loss) attributable to common stockholders for all periods presented.
12. Restructuring plan
On March 16, 2020, we announced a strategic realignment of our business model whereby we plan to rely more on a partnership-based model for commercialization strategy similar to the traditional human biotech commercialization strategy whereby pipeline assets are partnered with larger commercial partners that can maximize product opportunity in return for upfront payments, contingent milestones, and royalties on future sales. We announced that our focus would be on accelerating our deep pipeline of late-stage biologics candidates in canine and feline markets, while stopping small molecule development for these species. Accordingly, the companion animal commercial infrastructure was substantially reduced. In connection with this restructuring, we eliminated 53 positions, representing about one-third of our workforce. The eliminated positions primarily related to the companion animal sales force and research and development for small molecule programs. Restructuring expenses and retirement costs related to severance and health care benefits were approximately $1.7 million, exclusive of stock compensation.
On June 8, 2020, we announced a plan to strengthen our strategic position by, among other things, prioritizing our most attractive late stage programs and substantially reducing our expenses to best position the Company for success with the previously announced business model. This restructuring reduced our workforce by approximately 24 employees and involved a restructuring charge of approximately $2.3 million related to severance payments and health care benefits, exclusive of stock compensation. We further eliminated another 5 positions and incurred a restructuring charge of approximately $0.3 million related to severance payments and health care benefits in the third quarter of 2020. We have completed our restructuring and do not anticipate any further reductions in our workforce for the foreseeable future.
13. Agreement and Plan of Merger
On June 15, 2021, the Company entered into the Merger Agreement with Elanco and Knight Merger Sub, Inc., a wholly owned subsidiary of Elanco (“Merger Sub”). Upon the terms and subject to the conditions of the Merger Agreement, Elanco and the Company have agreed that Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Elanco.
Upon completion of the Merger, each share of KindredBio common stock that is issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than certain excluded shares as described in the Merger Agreement) will automatically be converted into the right to receive $9.25 in cash, without interest (the “Merger Consideration”).
The Merger Agreement contains representations, warranties and covenants of the parties customary for a transaction of this nature. Among other things, until the earlier of the termination of the Merger Agreement and the Effective Time, KindredBio has agreed to operate its business in all respects within 120 days from the date of the Merger Agreement, and in all material respects thereafter, in the ordinary course consistent with past practice and has agreed to certain other operating covenants, as set forth fully in the Merger Agreement. The Merger Agreement also prohibits KindredBio’s solicitation of proposals relating to alternative transactions and restricts KindredBio’s ability to participate in any discussions or negotiations with, or furnish nonpublic information to, any third party with respect to any such transaction, subject to certain limited exceptions.
The completion of the Merger is subject to the satisfaction or waiver of certain conditions, including (i) requisite approval of the holders of KindredBio common stock; (ii) the absence of any law or order in the United States or the European Union prohibiting the Merger and (iii) the expiration or earlier termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which waiting period expired on July 30, 2021). In addition, each of Elanco’s and KindredBio’s obligations to complete the Merger is subject to certain other conditions, including (a) the accuracy of the representations and warranties of the other party, subject to the standards set forth in the Merger Agreement, (b) compliance of the other party with its covenants in all material respects; and (c) with respect to Elanco’s obligation to complete the Merger, the absence of a material adverse effect with respect to KindredBio.
The foregoing descriptions of the Merger and the Merger Agreement do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement.
Additional information about the Merger is set forth in the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC on July 21, 2021.
14. Subsequent Event
Following the announcement of the Merger, a purported stockholder complaint was filed in the United States District Court for the Northern District of California, captioned Janet Deakins v. Kindred BioSciences, Inc., et al., Case No. 3:21-cv-05490-TSH, filed July 16, 2021. This action names as defendants KindredBio and its Board members. The complaint alleges that all defendants violated provisions of the Securities Exchange Act of 1934 (the "Exchange Act") insofar as the preliminary proxy statement filed by KindredBio on July 9, 2021 allegedly omits material information and purportedly renders the preliminary proxy statement false and misleading. The complaint seeks, among other things, injunctive relief, damages, and an award of plaintiff’s fees and expenses.
Subsequently, two additional purported stockholders filed complaints: one in the United States District Court for the Southern District of New York, captioned Matthew Whitfield v. Kindred BioSciences, Inc., Denise Bevers, Nanxi Liu, Ervin Veszprémi, Raymond Townsend, Herbert D. Montgomery, Joseph S. McCracken, Lyndon Lien, and Richard Chin, Case No. 1:21-cv-06280, filed July 23, 2021, and one in the United States District Court for the Eastern District of New York, captioned Milan Singh v. Kindred BioSciences, Inc., Denise Bevers, Nanxi Liu, Ervin Veszprémi, Raymond Townsend, Herbert D. Montgomery, Joseph S. McCracken, Lyndon Lien, and Richard Chin, Case No. 1:21-cv-04185, filed July 26, 2021. These actions also name as defendants KindredBio and its Board members. The complaints allege that all defendants violated provisions of the Exchange Act insofar as the definitive proxy statement filed by KindredBio on July 21, 2021 allegedly omits material information that purportedly renders the definitive proxy statement false and misleading. The complaints seek, among other things, injunctive relief, rescissory damages and an award of plaintiffs’ fees and expenses.