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KaloBios Reports First Quarter 2015 Financial Results

May 11, 2015

SOUTH SAN FRANCISCO, Calif., May 11, 2015 /PRNewswire/ -- KaloBios Pharmaceuticals, Inc. (Nasdaq: KBIO) today reported its financial results for the first quarter of 2015.

Net loss for the quarter ended March 31, 2015 was $9.6 million or $0.29 per common share, as compared to $10.4 million or $0.32 per common share for the same period in 2014.

Research and development (R&D) expenses were $5.9 million for the quarter ended March 31, 2015, as compared to $7.7 million for the same quarter in 2014. The decrease in R&D expense was primarily due to decreased clinical trial activity compared with the prior period, largely as a result of the completion of the KB003 Phase 2 study in patients with severe asthma in the first quarter of 2014. General and administrative (G&A) expenses were $3.4 million for the first quarter of 2015, compared to $2.5 million for the first quarter of 2014. The increase in G&A expenses was primarily due to costs incurred as a result of restructuring activities and due to the retirement of our former Chief Executive Officer, both of which occurred in the first quarter of 2015.

As of March 31, 2015, KaloBios had cash, cash equivalents and investments totaling $30.2 million.

"During the first quarter of 2015, we have continued to focus on advancing our oncology portfolio," said Herb Cross, KaloBios' Chief Financial Officer and Interim CEO. "In addition to accelerating enrollment in the Phase 2 expansion study of KB004 in myelodysplastic syndrome and myelofibrosis, we are continuing to evaluate additional potential oncology indications for KB004 where EphA3 is expressed. We are also working towards progressing KB003, our anti-GM-CSF antibody, into the clinic later this year in chronic myelomonocytic leukemia, an orphan oncology indication. With a number of potential oncology indications under evaluation in addition to those already in the clinic, we are excited about continuing to strengthen our focus in oncology."

About KaloBios

KaloBios Pharmaceuticals, Inc. is developing a portfolio of proprietary first-in-class monoclonal antibodies designed to treat severe life-threatening or debilitating diseases for which there is an unmet medical need, with a focus on cancer.

Currently, KaloBios is focused on the advancement of the following oncology programs in clinical development:

KB004 is an anti-EphA3 mAb with the potential to treat hematologic malignancies and solid tumors. KaloBios is running an ongoing Phase 1/2 study evaluating KB004 in hematologic malignancies. The Phase 1 dose escalation portion of the study in subjects with hematologic malignancies is fully enrolled, and KaloBios is currently enrolling in the Phase 2 expansion portion of the study. The Phase 2 study, which is screening patients for EphA3 expression, is currently focused on patients with myelofibrosis (MF) or myelodysplastic syndrome (MDS). KaloBios is evaluating other potential oncology indications for KB004, including additional hematologic malignancies as well as solid tumors.
KB003 is an anti-GM-CSF mAb that KaloBios intends to evaluate in oncology indications where GM-CSF may play a key role such as chronic myelomonocytic leukemia (CMML). KaloBios is working with clinical investigators to commence clinical evaluation of KB003 in this patient population in the second half of 2015.

All of the company's antibodies were generated using its proprietary Humaneered^® technology, a method that converts nonhuman antibodies (typically mouse) into recombinant antibodies that have a high binding affinity to their target and are designed for chronic therapeutic use. The company believes that antibodies produced using its Humaneered^® technology offer important clinical and economic advantages over antibodies generated by other methods in terms of high binding affinity, high manufacturing yields, and minimal to no immunogenicity (inappropriate immune response) upon repeat administration in humans.

For more information on KaloBios Pharmaceuticals, please visit our web site at http://www.kalobios.com.

Forward Looking Statements

This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and statements regarding the company's clinical development of KB004 and KB003. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, they give no assurance that such expectations will prove to be correct and you should be aware that actual results could differ materially from those contained in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties including, but not limited to, the potential timing and outcomes of clinical studies of KB004 undertaken now or in the future; the ability of the company to timely source adequate supply of its development products from third party manufacturers on whom the company depends; the potential, if any, for future development of KB003 and KB001-A; the company's limited cash reserves and its ability to obtain additional capital on acceptable terms, or at all, including the additional capital which will be necessary to complete the clinical trials that the company has initiated or plans to initiate; the company's ability to successfully progress, partner or complete further development of its programs; the uncertainties inherent in clinical testing; the timing, cost and uncertainty of obtaining regulatory approvals; the company's ability to protect the company's intellectual property; competition; changes in the regulatory landscape or the imposition of regulations that affect the company's products; and other factors listed under "Risk Factors" in the company's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 6, 2014, the Annual Report on Form 10-K filed on March 16, 2015, and the company's other filings with the Securities and Exchange Commission.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this release. The company has no obligation, and expressly disclaims any obligation to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise.

For more information, visit http://www.kalobios.com.

Contact:

Herb Cross
Chief Financial Officer
KaloBios Pharmaceuticals, Inc.
(650) 243-3114
ir@kalobios.com

Media Contact:

Joan E. Kureczka
Kureczka/Martin Associates
Tel: (415) 821-2413
Mobile: (415) 690-0210
Joan@Kureczka-Martin.com

Consolidated Balance Sheets
March 31, 2015 and December 31, 2014
(in thousands, except share and per share information)

	March 31,	December 31,
	2015	2014
Assets
Current assets:
Cash and cash equivalents	$ 12,624	$ 10,923
Marketable securities	17,597	29,790
Prepaid expenses and other current assets	950	1,532
Total current assets	31,171	42,245

Restricted cash	193	193
Property and equipment, net	473	414
Other assets	113	125
Total assets	$ 31,950	$ 42,977

Liabilities, convertible preferred stock and stockholders' deficit
Current liabilities:
Accounts payable	$ 857	$ 1,822
Accrued compensation	1,267	1,400
Deferred rent, short-term	21	16
Accrued research and clinical liabilities	3,311	3,470
Notes payable, short-term	9,677	10,928
Financing derivative	92	89
Other accrued liabilities	315	328
Total current liabilities	15,540	18,053

Deferred rent, long-term	305	311
Total liabilities	15,845	18,364

Stockholders' equity:
Common stock, $0.001 par value: 85,000,000 shares and 85,000,000 shares authorized at March 31, 2015, and December 31, 2014, respectively; 32,992,178 shares and 32,992,178 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	33	33
Additional paid-in capital	203,909	202,801
Accumulated other comprehensive income	(2)	(8)
Accumulated deficit	(187,835)	(178,213)
Total stockholders' equity	16,105	24,613
Total liabilities and stockholders' equity	$ 31,950	$ 42,977

Consolidated Statements of Operations
Three Months Ended March 31, 2015 and 2014
(in thousands, except share and per share information)

	Three Months Ended March 31,
	2015	2014

Operating expenses:
Research and development	$ 5,905	$ 7,690
General and administrative	3,437	2,470
Total operating expenses	9,342	10,160

Loss from operations	(9,342)	(10,160)

Other income (expense):
Interest income	16	14
Interest expense	(280)	(260)
Other income (expense), net	(16)	(2)
Net loss	(9,622)	(10,408)
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities	6	(4)

Comprehensive loss	$ (9,616)	$ (10,412)

Basic and diluted net loss per common share	$ 0.29	$ 0.32

Weighted average common shares outstanding used to calculate basic and diluted net loss per common share	32,992,178	32,966,471




Stock Based Compensation Expense
Three Months Ended March 31, 2015 and 2014
(in thousands)

Total stock-based compensation expense included in the consolidated statements of operations is as follows:

	Three Months Ended March 31,
	2015	2014
Research and development	$ 163	$ 265
General and Administrative	142	226
Total stock-based compensation expense	$ 305	$ 491