Kadmon Provides Business Update and Reports Third Quarter 2016 Financial Results

- November 9th, 2016

Kadmon Holdings today provided a business update, including a review of near-term clinical milestones, and reported financial and operational results for the three and nine months ended September 30, 2016.

Kadmon Holdings, Inc. (NYSE:KDMN) (“Kadmon” or the “Company”) today provided a business update, including a review of near-term clinical milestones, and reported financial and operational results for the three and nine months ended September 30, 2016.
“Since the completion of our IPO, we have advanced our clinical pipeline
in tandem with streamlining our operations to drive overall efficiency
and ultimately increase shareholder value,” said Harlan W. Waksal, M.D.,
President and Chief Executive Officer of Kadmon.
“With the initiation of three new clinical trials in the third quarter
of 2016, we continue to make progress towards developing innovative
therapies for unmet medical needs, including in oncology, autoimmunity,
fibrosis and genetic diseases,” continued Dr. Waksal. “In the next six
weeks, we expect to present data from our ongoing trial of tesevatinib
in metastatic lung cancer at the IASLC 17th World Conference
on Lung Cancer as well as file for regulatory approvals of KD034, our
Wilson’s disease portfolio of product candidates.”
Clinical and Research Update
Kadmon continues to advance its clinical and research pipelines across
all therapeutic areas as it approaches key near-term data readouts and
regulatory milestones:
Tesevatinib

  • Kadmon continues to enroll patients in its ongoing Phase 2 trial of
    tesevatinib in EGFR-mutant non-small cell lung cancer (NSCLC) that has
    metastasized to the brain or leptomeninges. The Company continues to
    enroll patients across all three study cohorts, including in
    treatment-naïve patients with measurable brain metastases. Due to the
    high frequency of EGFR mutations in Asian populations, Kadmon is
    opening additional study sites in South Korea and Taiwan.
  • Kadmon expects to present data on the first 13 patients in its ongoing
    NSCLC trial at the IASLC 17th World Conference on Lung
    Cancer in December 2016 and to announce additional top-line data from
    the trial in the first quarter of 2017.
  • Kadmon continues to develop tesevatinib for polycystic kidney disease
    (PKD). Enrollment continues in its ongoing Phase 2a trial in autosomal
    dominant PKD and the Company plans to initiate a dose-finding clinical
    trial in the pediatric form of the disease in early 2017.
  • In August 2016, Kadmon initiated an exploratory study of tesevatinib
    in recurrent glioblastoma and has begun enrolling patients.

KD025

  • Kadmon continues to develop KD025, its ROCK2 inhibitor, for the
    treatment of autoimmune diseases. In September 2016, Kadmon initiated
    a randomized, placebo-controlled Phase 2 clinical trial of KD025 in
    moderate to severe psoriasis. The trial builds on results from
    Kadmon’s recently completed open-label Phase 2 trial, in which 85% of
    patients completing the study achieved Psoriasis Area and Severity
    Index (PASI) score reductions with minimal side effects. Patient
    enrollment is progressing as Kadmon continues to open sites and is
    expected to be completed in the first half of 2017. In addition,
    Kadmon initiated a Phase 2 trial of KD025 in chronic graft-versus-host
    disease in September 2016 and continues to enroll patients.
  • Kadmon is also exploring the role of KD025 for the treatment of
    fibrotic diseases. The Company continues to enroll patients in its
    ongoing Phase 2 trial of KD025 in patients with idiopathic pulmonary
    fibrosis, initiated in June 2016.

KD034

  • In December 2016, Kadmon expects to file Abbreviated New Drug
    Applications (ANDAs) with the U.S. Food and Drug Administration for
    its trientine hydrochloride formulations, including a room-temperature
    stable product, for the treatment of Wilson’s disease. If approved,
    these generic formulations could potentially be on the market in 2017,
    generating meaningful revenue for the Company.

Research

  • Kadmon has focused its research and development efforts on programs
    that have demonstrated encouraging data in preclinical studies:
    biologics, including KD033, its anti-PD-L1/IL-15 fusion protein, and
    KD035, its anti-VEGFR2 antibody; glucose transporter (GLU-T)
    inhibitors; and ROCK inhibitors, including blood-brain barrier
    penetrant compounds.

Operations Update
Kadmon has implemented a number of strategic and operational changes to
increase efficiency and to prioritize the continued rapid development of
its clinical pipeline and drug discovery efforts:

  • Kadmon has streamlined its corporate overhead, reducing headcount as
    well as fixed costs related to its New York facilities. Since July
    2016, the Company has reduced its workforce by 15 percent, to 119
    employees.
  • Together with its lending syndicate, Kadmon has amended its 2015
    Credit Agreement, which allows the Company to, among other things,
    defer mandatory monthly principal payments until August 2017. This
    deferment will allow the Company to direct all of its financial
    resources to research and clinical development.
  • Kadmon has implemented several cost-saving measures in its commercial
    operation to reduce overall selling, general and administrative (SG&A)
    expenses. The Company has streamlined its product inventory,
    distribution efforts and marketing expenses for its chronic hepatitis
    C (HCV) portfolio to align with the evolving treatment landscape. In
    addition, Kadmon has focused its field operations on prescribers,
    specialty pharmacies and payer landscapes while growing its
    capabilities to coincide with the Company’s expanded product portfolio
    and therapeutic area focus.
  • As a result of these actions, Kadmon expects to reduce its cash burn
    by approximately $9.1 million over the next 12 months.

Financial Results
Third Quarter 2016 Results
Loss from operations for the three and nine months ended September 30,
2016, was $52.9 million and $94.9 million, compared to $70.3 million and
$114.5 million for the same periods in 2015.
Research and development expenses for the three and nine months ended
September 30, 2016, were $9.6 million and $27.1 million, compared
to $8.4 million and $23.3 million for the same periods in 2015.
Revenue was $5.7 million and $21.8 million for the three and nine months
ended September 30, 2016, compared to $11.3 million and $27.8 million
for the same periods in 2015. Sales from the Company’s ribavirin
portfolio continued to decline in 2016 as the treatment landscape for
chronic HCV infection has rapidly evolved, with multiple ribavirin-free
treatment regimens, including novel second-generation direct-acting
antivirals, having entered the market and becoming the new standard of
care. As a result, the Company expects sales of its ribavirin portfolio
of products to continue to decline in 2016, 2017 and beyond.
Selling, general and administrative expenses were $48.3 million and
$90.6 million for the three and nine months ended September 30,
2016, compared to $39.4 million and $82.4 million for the same periods
in 2015. The increase in selling, general and administrative expenses
for the third quarter of 2016 is primarily related to an increase in
share-based compensation of $33.4 million, partially offset by a
decrease in legal expense of $18.0 million related to legal settlements
entered into during the third quarter of 2015 and amortization of
intangible assets of $3.9 million, all of which is non-cash.
Liquidity and Capital Resources
As of September 30, 2016, Kadmon’s cash and cash equivalents
totaled $55.0 million compared to $21.5 million as of December 31, 2015.
About Kadmon Holdings, Inc.
Kadmon Holdings, Inc. is a fully integrated biopharmaceutical company
focused on developing innovative products for significant unmet medical
needs. We have a diversified product pipeline in autoimmune and fibrotic
diseases, oncology and genetic diseases.
Forward Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended. All statements, other than statements of historical
fact, included or incorporated in this press release, including
statements regarding the Company’s strategy, future operations,
collaborations, intellectual property, cash resources, financial
position, future revenues, projected costs, prospects, clinical trials,
plans, and objectives of management, are forward-looking statements. The
words “believes,” “anticipates,” “estimates,” “plans,” “expects,”
“intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,”
“continue,” “will,” and “would” and similar expressions are intended to
identify forward-looking statements, although not all forward-looking
statements contain these identifying words. Kadmon cannot guarantee that
it will actually achieve the plans, intentions or expectations disclosed
in its forward-looking statements and you should not place undue
reliance on the Company’s forward-looking statements. There are a number
of important factors that could cause Kadmon’s actual results to differ
materially from those indicated or implied by its forward-looking
statements. We believe that these factors include, but are not limited
to, (i) the initiation, timing, progress and results of our preclinical
studies and clinical trials, and our research and development programs;
(ii) our ability to advance product candidates into, and successfully
complete, clinical trials; (iii) our reliance on the success of our
product candidates; (iv) the timing or likelihood of regulatory filings
and approvals; (v) our ability to expand our sales and marketing
capabilities; (vi) the commercialization of our product candidates, if
approved; (vii) the pricing and reimbursement of our product candidates,
if approved; (viii) the implementation of our business model, strategic
plans for our business, product candidates and technology; (ix) the
scope of protection we are able to establish and maintain for
intellectual property rights covering our product candidates and
technology; (x) our ability to operate our business without infringing
the intellectual property rights and proprietary technology of third
parties; (xi) costs associated with defending intellectual property
infringement, product liability and other claims; (xii) regulatory
developments in the United States, Europe and other jurisdictions;
(xiii) estimates of our expenses, future revenues, capital requirements
and our needs for additional financing; (xiv) the potential benefits of
strategic collaboration agreements and our ability to enter into
strategic arrangements; (xv) our ability to maintain and establish
collaborations or obtain additional grant funding; (xvi) the rate and
degree of market acceptance of our product candidates; (xvii)
developments relating to our competitors and our industry, including
competing therapies; (xviii) our ability to effectively manage our
anticipated growth; (xix) our ability to attract and retain qualified
employees and key personnel; and (xx) our ability to achieve cost
savings and other benefits from our efforts to streamline our operations
and to not harm our business with such efforts. More detailed
information about Kadmon and the risk factors that may affect the
realization of forward-looking statements is set forth in the Company’s
filings with the U.S. Securities and Exchange Commission (the “SEC”),
including, without limitation, the Company’s prospectus filed pursuant
to Rule 424(b) under the Securities Act, with the SEC on July 27, 2016,
the Company’s Quarterly Report on Form 10-Q for the period ended June
30, 2016 and the Company’s Quarterly Report on Form 10-Q for the period
ended September 30, 2016. Investors and security holders are urged to
read these documents free of charge on the SEC’s website at www.sec.gov.
The Company assumes no obligation to publicly update or revise its
forward-looking statements as a result of new information, future events
or otherwise.

Kadmon Holdings, Inc.
Consolidated Statements of Operations – Unaudited
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenues
Net sales $ 4,345 $ 9,802 $ 15,504 $ 23,576
License and other revenue 1,350 1,482 6,274 4,205
Total revenue 5,695 11,284 21,778 27,781
Cost of sales 880 1,304 2,845 3,142
Write-down of inventory 129 1,143 266 2,069
Gross profit 4,686 8,837 18,667 22,570
Operating expenses:
Research and development 9,550 8,439 27,134 23,344
Selling, general and administrative 48,311 39,408 90,580 82,419
Impairment of intangible asset 31,269 31,269
Gain on settlement of payable (256 ) (4,131 )
Total operating expenses 57,605 79,116 113,583 137,032
Loss from operations (52,919 ) (70,279 ) (94,916 ) (114,462 )
Total other expense (income) 64,049 11,800 91,293 (1,850 )
Income tax expense 315
Net loss $ (116,968 ) $ (82,079 ) $ (186,524 ) $ (112,612 )
Deemed dividend on convertible preferred stock 21,264 21,264
Net loss attributable to common stockholders $ (138,232 ) $ (82,079 ) $ (207,788 ) $ (112,612 )

Basic and diluted net loss per share of
common stock

$ (4.23 ) $ (9.94 ) $ (12.60 ) $ (13.95 )

Weighted average basic and diluted
shares of common stock
outstanding

32,678,259 8,255,011 16,487,715 8,070,165
Kadmon Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2016 2015
(unaudited)
Cash and cash equivalents $ 55,001 $ 21,498
Other current assets 4,876 11,243
Other noncurrent assets 26,924 51,396
Total assets $ 86,801 $ 84,137
Current liabilities 33,763 49,686
Other long term liabilities 36,861 36,783
Secured term debt – net of current portion and discount 24,939 26,264
Convertible debt, net of discount 183,457
Total liabilities 95,563 296,190
Commitments and contingencies 58,856
Total stockholders’ deficit (8,762 ) (270,909 )
Total liabilities, redeemable convertible units, and stockholders’
deficit
$ 86,801 $ 84,137

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