KaloBios Cuts Net Loss in Third Quarter, Reiterates Milestones

KaloBios (KBIO) rose 6% in premarket trading on favorable third quarter results. The net loss for the third quarter of 2013 was $11.3 million, or $0.47 per basic and diluted share. This compared to a net loss of $8.6 million, or $4.05 per basic and diluted share, for the same period in 2012. The company was able to post these results despite additional spending for its clinical programs.

At the end of October, KaloBios’ new cystic fibrosis compound (KB001-A) currently in phase 2 trials, got a lift when the U.S. FDA granted orphan drug designation. The designation qualifies KBIO for various development incentives as well as a seven-year period of U.S. marketing exclusivity under certain circumstances.

Cystic fibrosis is an inherited chronic disease that affects the lungs and digestive system of about 30,000 children and adults in the United States (70,000 worldwide).  In CF, a defective gene creates unusually thick mucus that clogs the lungs and often leads to dangerous lung infections.  Many of these infections are caused by Pseudomonas aeruginosa (Pa), a gram-negative bacteria associated with a high level of respiratory failure.

KB001-A is an anti-PcrV monoclonal antibody fragment treatment for patients with cystic fibrosis (CF) with Pseudomonas aeruginosa (Pa) and is KBIO’s second compound in phase 2 clinical trials.  Antibiotics are the only currently approved treatment for these lung infections; however, the Pa bacteria are often treatment-resistant leading to high levels of complications and mortality.  KB001-A is designed to reduce inflammation associated with these lung infections, enabling the body to clear out the bacteria on its own, eliminating or delaying the need for antibiotics.

KBIO also expects to report initial top-line results for its KB004 Phase 1 dose escalation study in the fourth quarter. KB004 targets EphA3-expressing hematologic malignancies that occur in leukemia.  In 2014, expected milestones include: top-line results from KB003 phase 2 asthma study; finalized enrollment in the pivotal KB001-A cystic fibrosis study, as well as top-line results from that study.

KBIO’s balance sheet is in good condition. At the end of the third quarter, the company had $54.9 million in cash, somewhat better than anticipated. In October, the company completed a public offering of 8,625,000 (including an overallotment of 1.125 M shares) shares of common stock at $4.00 per share, for net proceeds of $32.1 M, bringing the company’s current cash balance to approximately $87 million before fourth quarter expenses.

We continue to be optimistic about KaloBios but suspect that the shares will generally mark time before the next clinical milestones.