SFY - Kymera Therapeutics: A Status Update

2023-08-06 07:21:39 ET

Summary

• Kymera Therapeutics is a clinical-stage developmental firm focused on developing small molecule therapeutics to degrade disease-causing proteins.
• Analysts are mixed on the shares and the stock has a large short position in the equity currently.
• The company ended the second quarter with over $470 million in cash and marketable securities, providing a cash runway into the second half of 2025.
• An updated analysis follows in the paragraphs below.

We always vilify what we don't understand . ? Nenia Campbell

Today, we put Kymera Therapeutics ( KYMR ) in the spotlight for the first time since our initial article on this clinical-stage developmental firm in February of 2022. We concluded that piece stating Kymera has significant potential, but its pipeline was too early stage in development to merit a large stake. We did promise to revisit this name at some point in the future, however. The company also just posted its second quarter results . An updated analysis follows below.

Company Overview:

Kymera Therapeutics is headquartered just outside of Boston in Watertown, MA. The company is focused on developing novel small molecule therapeutics that selectively degrade disease-causing proteins by harnessing the body's own natural protein degradation system. The stock currently trades just north of $22.00 a share and sports an approximate market capitalization of $1.3 billion.

Kymera's pipeline relies on a platform using targeted protein degradation or TPD to produce new candidates to target diseases with limited or no known treatment options.

This approach is capable of targeting proteins traditionally undrugged by small molecules. Arvinas ( ARVN ) is also using a similar developmental focus. TPD I harnesses the body's natural cellular recycling machinery - the ubiquitin proteasome system or UPS - to break down or degrade unwanted proteins.

Kymera Therapeutics has dubbed this development platform 'Pegasus'. As you can see below, Kymera's pipeline of candidates is very early stage with one exception.

It should be noted that the FDA has recently granted orphan drug designation to Kymera's candidate KT-253 targeting the treatment of Acute Myeloid Leukemia (AML). The company dosed first patient in a KT-253 Phase 1 study targeting AML in the first quarter of this year. Management has stated that it plans to share initial safety and proof-of-mechanism data from this study before year end.

Earlier this year, Kymera shared clinical data around candidates KT-333 and KT-413. It showed that both compounds reached degradation levels that were associated with anti-tumor activity in preclinical models. KT-333 has an orphan drug designation to treat Cutaneous T-cell Lymphoma (CTCL).

The one candidate within Kymera's pipeline moving into mid-stage development is called KT-474 and is partnered with French drug giant Sanofi (SNY) . KT-474 is a potent, highly selective, orally bioavailable IRAK4 degrader that was created to target IL-1R/TLR-driven complex inflammatory diseases. There are many diseases in this category as can be seen below.

In the fourth quarter, partner Sanofi is scheduled to initiate two Phase studies around KT-474. One will be targeting hidradenitis suppurativa [HS] and the other, atopic dermatitis [AD], which is also known as eczema. Earlier studies produced some encouraging to treat these two afflictions.

Analyst Commentary and Balance Sheet:

This week both JP Morgan ($42 price target) and Credit Suisse ($37 price target) reissued Hold ratings on KYMR while Goldman Sachs ($46 price target) and H.C. Wainwright ($85 price target) reiterated Buy ratings on the shares.

Approximately 22% of the outstanding float in the shares are currently held short. Several insiders disposed of nearly $4 million worth of shares collectively in the first quarter of this year. A beneficial owner also sold just over $3 million of stock in January. That has been the only insider activity in the stock so far in 2023. The company ended the second quarter with just over $470 million of cash and marketable securities on its balance sheet. Management guided that this will provide 'c ash runway into second half of 2025'. Kymera posted a net loss of $38.8 million for the quarter.

Verdict:

As you can see above, pipeline development continues to a be slow grind with most of the company's articulated milestones for 2023 being around very early-stage pipeline assets. The one exception is advancing KT-474 partnered with Sanofi into Phase 2 development.

Kymera Therapeutics came public nearly three years ago. The shares have lost over 75% of their value from their post - IPO peak. The company is also still many years from potential commercialization. The stock also has a large short position currently in the shares. I would like to see some Phase 2 data around KT-474 before reassessing the company's prospects and I would project the company is likely to raise additional capital at some point in 2024 given its current cash runway (CFOs rarely like to have less than 18 months of operational capital on hand). Therefore, I am passing on any investment recommendation around Kymera Therapeutics at this time.

With no expectations anything can become . ? Steven Farmer

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