SAN FRANCISCO - Kindred Biosciences, Inc. (NASDAQ: KIN), a biopharmaceutical company focused on saving and improving the lives of pets, today announced that it has entered into a transaction for the sale of Mirataz to Dechra Pharmaceuticals PLC (LSE: DPH) for an upfront payment of $43 million and royalties on worldwide sales.

In addition, the company announced that it will substantially reduce its commercial footprint. This, along with partnership deals, is expected to significantly reduce the amount of additional dilutive capital the company will require.

'We believe Dechra is an ideal company to deliver results for Mirataz globally, given their expansive commercial footprint, proven success selling specialist products, and synergies between Mirataz and their existing product portfolio targeting diseases linked to feline weight loss,' said KindredBio's Chief Executive Officer, Richard Chin, M.D.

'Given the amount that partners are willing to pay for our assets, and the richness of our pipeline, we have recognized that we can likely achieve better returns for our shareholders while reducing dilutive financing by relying more on a partnership-focused business model. This model has been very successful in the human pharmaceutical industry, and we expect the same for the veterinary industry.'

In addition, the company will further prioritize biologics programs for dogs and cats, and discontinue development of canine and feline small molecule programs.

'We have had seven positive pilot programs in a row, which is a higher success rate than we had expected. Furthermore, we have additional new programs based on our recently announced half-life extension technology. We clearly have more attractive opportunities than we can pursue. While our small molecule programs are very promising, we have decided to devote our resources to the part of the business where we can create the most value and where we have the clearest competitive advantage. We believe monoclonal antibodies are the future of veterinary medicine, and given significant market opportunities for our biologics programs, provide the greatest potential for value creation.'

'We have had a very successful 2019, with two product approvals and multiple positive pilot studies. For 2020 and beyond, we look forward to executing on the exciting strategy we have laid out today,' Dr. Chin concluded.

Proceeds from the Mirataz transaction, alongside the reduction in the company's workforce and operations, will extend cash runway through 2022, while maintaining a focused research engine dedicated to the development of KindredBio's biologics pipeline. KindredBio also remains in late-stage discussions with a number of parties regarding a commercial partnership for its interleukin-31 monoclonal antibody for canine atopic dermatitis.

In addition, the company reported financial results for the fourth quarter and full year ended December 31, 2019, and provided updates on its programs.

The major components of the strategic realignment are outlined below: KindredBio becomes a biologics-focused company pursuing canine and feline markets, while discontinuing small molecule development for these species. The following publicly disclosed biologics programs will continue to advance, namely the company's interleukin (IL)-31, IL-4/13 SINK, IL-4R and IL-17 programs for canine atopic dermatitis, KIND-030 for parvovirus in dogs, KIND-510a for the control of non-regenerative anemia in cats, and anti-TNF antibody for inflammatory bowel disease in dogs, alongside other undisclosed biologics candidates. In addition, KindredBio has multiple platform technologies including half-life extension and Fc modification technologies for manufacturing and other applications. All programs are advancing well, consistent with previously disclosed timelines.

The company signed an agreement to sell Mirataz to Dechra for an upfront payment of $43 million, alongside an ongoing royalty on global net sales. As is customary, 10% of the upfront payment shall be held in escrow for up to 18 months. The sale comprises worldwide marketing rights, intellectual property rights, marketing authorizations and associated regulatory documentation, third party supply contracts related to raw material and manufacture of the finished product, and certain product inventory. Completion is expected before the end of June 2020, following satisfactory completion of certain deliverables. Dechra, which is based in the United Kingdom, plans to launch Mirataz in the UK and the European Union, and intends to conduct the necessary regulatory activities to achieve approvals in other key international markets. With commercial sales and marketing teams in 25 countries, and distributor relationships in an additional 68 countries, Dechra is strongly positioned to market Mirataz in the United States,Europe, and globally. KindredBio recorded net product revenues of $4.1 million for Mirataz in 2019.

KindredBio plans to rely more on a partnership-focused 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 payment, contingent milestones, and royalties on future sales. Accordingly, the companion animal commercial infrastructure will be substantially reduced.

In order to fully realize the value of the equine franchise, the equine assets will be segregated into the KindredBio Equine subsidiary. A strategic review process will commence for this subsidiary, including a potential spin-out or divestiture of assets. The KindredBio Equine asset portfolio will include Zimeta (dipyrone injection) for the control of pyrexia in horses, KIND-012 (dipyrone oral gel), KIND-014 for equine gastric ulcers, KIND-015 for metabolic syndrome, and anti-TNF antibody for sick newborn foals, alongside undisclosed equine product candidates. Equine is an attractive market, with high willingness to spend and low commercialization costs.

In connection with the company's strategic shift, KindredBio is eliminating approximately 53 positions, representing about one-third of its current workforce. The eliminated positions primarily relate 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 are expected to be approximately $1.7 million, exclusive of stock compensation. The workforce reduction is anticipated to lower compensation and benefits cost by approximately $7.1 million annually. In the coming year, KindredBio intends to hire additional staff to enhance its capabilities in biologics manufacturing, but still expects a net reduction in headcount. Operating expenses, projected to range between $58 million and $61 million in 2020, include the one-time restructuring charge of $1.7 million and first quarter expenditures that reflect a complete organizational structure. Excluding first quarter expenditures, the annualized run rate for 2020 is expected to be between $54 million and $56 million. KindredBio believes its existing cash, cash equivalents and investments, the net reduction in the company's workforce and proceeds from the Mirataz sale will be sufficient to fund the current operating plan through 2022.

About Kindred Biosciences

Kindred Biosciences is a biopharmaceutical company developing innovative biologics focused on saving and improving the lives of pets. Its mission is to bring to pets the same kinds of safe and effective medicines that human family members enjoy. The company's strategy is to identify targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated targets for dogs and cats. KindredBio has a deep pipeline of novel biologics in development across many therapeutic classes, alongside state-of-the-art biologics manufacturing capabilities and a broad intellectual property portfolio. The company has two approved drugs, namely Mirataz (mirtazapine transdermal ointment) and Zimeta (dipyrone injection).

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to, statements regarding our expectations about the trials, regulatory approval, manufacturing, distribution and commercialization of our current and future product candidates, and statements regarding our anticipated revenues, expenses, margins, profits and use of cash.

These forward-looking statements are based on our current expectations. These statements are not promises or guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements. These risks include, but are not limited to, the following: our limited operating history and expectations of losses for the foreseeable future; the absence of significant revenue from our products and our product candidates for the foreseeable future; the likelihood that our revenue will vary from quarter to quarter; our potential inability to obtain any necessary additional financing; our substantial dependence on the success of our products and our lead product candidates which may not be successfully commercialized even if they are approved for marketing; the effect of competition; our potential inability to obtain regulatory approval for our existing or future product candidates; our dependence on third parties to conduct some of our development activities; our dependence upon third-party manufacturers for supplies of our products and our product candidates and the potential inability of these manufacturers to deliver a sufficient amount of supplies on a timely basis, including by reason of the coronavirus disease (COVID-19) currently impacting multiple jurisdictions worldwide; uncertainties regarding the outcomes of trials regarding our product candidates; our potential failure to attract and retain senior management and key scientific personnel; uncertainty about our ability to enter into satisfactory agreements with third-party licensees of our biologic products or to develop a satisfactory sales organization for our equine small molecule products; our significant costs of operating as a public company; potential cyber-attacks on our information technology systems or on our third-party providers' information technology systems, which could disrupt our operations; our potential inability to repay the secured indebtedness that we have incurred from third-party lenders, and the restrictions on our business activities that are contained in our loan agreement with these lenders; the risk that our 2020 strategic realignment plan will result in unanticipated costs or revenue shortfalls; the risk that our sale of Mirataz to Dechra Pharmaceuticals PLC will not be completed because one or more of the closing conditions described in the sale agreement are not satisfied and uncertainty about the amount of royalties that we will receive if the sale is completed; our potential inability to obtain and maintain patent protection and other intellectual property protection for our products and our product candidates; potential claims by third parties alleging our infringement of their patents and other intellectual property rights; our potential failure to comply with regulatory requirements, which are subject to change on an ongoing basis; the potential volatility of our stock price and the significant control over our business by our principal stockholders and management.

As a result of the risks described above and in our filings with the SEC, actual results may differ materially from those indicated by the forward-looking statements made in this press release. Forward-looking statements contained in this press release speak only as of the date of this press release and we undertake no obligation to update or revise these statements, except as may be required by law.

The results stated in this press release have not been reviewed by the Food and Drug Administration or the United States Department of Agriculture Center for Veterinary Biologics, as applicable.

Contact:

Katja Buhrer

Tel: (917) 969-3438

Email: Katja.buhrer@kindredbio.com

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