Kindred's losses expand as struggling startup boosts R&D efforts

Pet-drug developer Kindred Biosciences ($KIN) announced Thursday that its net loss in the third quarter was $6.1 million, up from $1.2 million in the same period a year ago, as research and development expenses grew to $3.8 million from $1 million. The company, which raised $56 million in its 2013 IPO, has no revenues and has been a disappointment to investors, who have pushed its stock price from a high of nearly $27 to just under $9.

Much of the disappointment centers around CereKin, Kindred's drug to treat osteoarthritis in dogs. The drug is the canine version of Amgen ($AMGN) and Pfizer's ($PFE) blockbuster Enbrel, but in a randomized trial of CereKin announced in August, the placebo group did better than expected, and the dropout rate among dogs given the larger dose of Kindred's drug was high. The study did not meet its primary endpoint, Kindred dropped the drug, and investors bailed.

Richard Chin

So its no surprise that during the conference call with analysts following the third-quarter earnings release, many of the questions centered around what are now two of Kindred's leading development projects: SentiKin for post-operative pain in dogs and AtoKin for atopic dermatitis in dogs. Kindred CEO Richard Chin began the call by announcing that the company was ahead of schedule on its FDA submission for AtoKin and that it expected to release pivotal data on both drugs next year.

The company also told analysts on the call that the company had pilot studies underway for SentiKin in cats and two other drugs: An appetite stimulant for cats and a treatment for metabolic disease in horses. If those studies succeed, Kindred could initiate pivotal studies next year, according to chief operating officer Denise Bevers.

Analysts were clearly inpatient, however, pressing Chin for details on development timelines and revenue opportunities for each planned drug. He declined to offer any guidance, saying only that "most companion animal drugs reach peak sales of between $10 million to $100 million."

Kindred has long preached the value to the company of holding onto the commercialization rights to all of its products, but as one analyst noted, the company recently revealed in an SEC filing that it is considering out-licensing some of its programs. When asked why the company had a change of heart, Chin replied, "we have not ruled out either partnering or marketing with a hybrid model…say co-promoting for limited length of time, three to five years, and then taking back the product." Still, he was quick to acknowledge that the company would be much better positioned economically if it could retain full rights to any drug that makes it out of its pipeline.

Chin tried hard to put an optimistic spin on the company's challenges. "We are pursuing a variety of indications with some very attractive product candidates," he said during the call. But investors seemed unconvinced, pushing shares down 2% in Friday trading to $8.79.

- here's the earnings release
- access a transcript of the earnings call here

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