Item 7. Management’s Discussion and Analysis
Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used in this Annual Report on Form 10-K, the “Company”, the “Registrant”, “we” or “us” refer to ProKidney Corp. and its subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes that appear elsewhere in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed elsewhere in this report under “Part I—Item 1A, Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities, potential results of our drug development efforts or trials, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Overview
We are a clinical-stage biotechnology company with a proprietary cell therapy platform that has the potential to treat CKD using a patient’s own cells. Our approach seeks to redefine the treatment of CKD, shifting the emphasis away from management of kidney failure to the preservation of kidney function.
ProKidney’s lead product candidate, rilparencel (also known as REACT®), is a first-in-class, patented, proprietary autologous cell therapy being evaluated in the ongoing Phase 3 REGEN-006 (PROACT 1) for its potential to preserve kidney function in patients with advanced CKD and type 2 diabetes. Rilparencel received RMAT designation from the FDA.
Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business and scientific planning, conducting discovery and research activities, establishing and protecting our intellectual property portfolio, developing and progressing rilparencel, raising capital, sponsoring clinical trials, establishing arrangements with third parties for the manufacture of component materials, and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue from product sales.
Other Trends and Uncertainties
We continue to monitor the impacts of ongoing macroeconomic conditions and geopolitical events. An escalation of geopolitical tensions or the implementation of global trade restrictions could adversely impact our business, financial condition or results of operations. Global conflicts, tariffs, labor disruptions, and regulations continue to create volatility in global markets and contribute to supply chain shortages and pricing volatility. We continue to actively collaborate with our suppliers to minimize shortages and reduce supply and price volatility.
Financial Operations Overview
Revenue
We have not generated any revenue from the sale of products since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for rilparencel or any other product candidates are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such agreements.
Beginning in the year ended December 31, 2024, we recognized revenue related to leasing activities associated with existing lease agreements assumed through the acquisition of two buildings in Winston-Salem, North Carolina where we also conduct our manufacturing operations.
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Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with our research and development activities, including the development of rilparencel.
Research and development costs include:
• external research and development expenses incurred under agreements with CROs and other scientific development services;
• costs of other outside consultants, including their fees and related travel expenses;
• costs related to compliance with quality and regulatory requirements;
• costs of laboratory supplies and acquiring and developing clinical trial materials;
• payments made under third-party licensing agreements;
• personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses, for individuals involved in research and development activities; and
• facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, insurance and other internal operating costs.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid clinical or as a component of total accrued expenses and other. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are recorded as prepaid clinical and are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. We expect that our research and development expenses will increase significantly for the foreseeable future as we continue to develop rilparencel and prepare for potential commercialization.
The successful development of rilparencel and any product candidates we may develop in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of rilparencel or potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, many of which are outside of our control, including the uncertainty of:
• the timing and progress of nonclinical and clinical development activities;
• the number and scope of nonclinical and clinical programs we decide to pursue;
• our ability to maintain our current research and development programs and to establish new ones;
• establishing an appropriate safety profile;
• the number of sites and patients involved in our clinical trials;
• the countries in which the clinical trials are conducted;
• per patient trial costs;
• successful patient enrollment in, and the initiation of, clinical trials, as well as drop out or discontinuation rates;
• the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA and comparable foreign regulatory authorities;
• the number of trials required for regulatory approval;
• the timing, receipt and terms of any regulatory approvals from applicable regulatory authorities;
• our ability to establish new licensing or collaboration arrangements;
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• the performance of our future collaborators, if any;
• establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
• significant and changing government regulation and regulatory guidance;
• the impact of any business interruptions to our operations or to those of the third parties with whom we work;
• obtaining, maintaining, defending and enforcing patient claims or other intellectual property rights;
• the potential benefits of rilparencel over other therapies;
• launching commercial sales of rilparencel, if approved, whether alone or in collaboration with others; and
• maintaining a continued acceptable safety profile of rilparencel following approval.
Any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We may never obtain regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits and equity-based compensation expenses for individuals involved in our executive, finance, corporate and administrative functions, as well as expenses for outside professional services, including legal, audit, accounting and tax-related services and other consulting fees, facility-related expenses, which include depreciation costs and other allocated expenses for rent and maintenance of facilities, insurance costs, recruiting costs, travel expenses and other general and administrative expenses.
We expect that our general and administrative expenses will increase for the foreseeable future as our business expands and we hire additional personnel to support our operations.
Other Income (Expense)
Other income consists primarily of interest income earned on cash, cash equivalents and marketable securities.
Income Tax (Expense) Benefit
Prior to the Domestication and other Restructuring transactions, income tax expense reflects federal and state taxes on income earned by our subsidiary that is organized as a C corporation for U.S. income tax purposes.
The Domestication and other Restructuring transactions resulted in the Company becoming subject to corporate level income taxes in the U.S. Further, the Post-Domestication Reorganization, which was effective on September 1, 2025, resulted in certain of the Company’s subsidiaries becoming part of a consolidated group and ProKidney-US becoming disregarded as separate from its owner, “PK Holdings” for U.S. federal income tax purposes
Results of Operations
In this section we discuss the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024 compared to December 31, 2023, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 17, 2025.
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Comparison of Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
2025
2024
Change
Revenue
$
893
$
76
$
817
Operating expenses:
Research and development
114,123
127,668
(13,545
)
General and administrative
51,777
56,084
(4,307
)
Total operating expense
165,900
183,752
(17,852
)
Loss from operations
(165,007
)
(183,676
)
18,669
Interest income
13,813
19,752
(5,939
)
Interest expense
(4
)
(9
)
5
Net loss before taxes
(151,198
)
(163,933
)
12,735
Income tax expense (benefit)
414
(598
)
1,012
Net loss before noncontrolling interest
(151,612
)
(163,335
)
11,723
Net loss attributable to noncontrolling interest
(82,626
)
(102,149
)
19,523
Net loss available to Class A common stockholders
$
(68,986
)
$
(61,186
)
$
(7,800
)
Revenue
The increase in revenue of approximately $0.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by the inclusion of a full year of leasing activities for the year ended December 31, 2025. For the year ended December 31, 2024, revenue reflected approximately one month of leasing activities.
Research and development expenses
The decrease in research and development expenses of approximately $13.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by the following:
• decreases in clinical study costs of $18.1 million from our clinical trials that have been completed or terminated;
• decreases in professional fees of $3.3 million related to the remediation of quality and manufacturing compliance deficiencies during the 2024 period; and
• decreases in equity-based compensation of $0.6 million driven by forfeitures of awards and lower fair value of new awards granted;
partially offset by
• increases in cash-based compensation and recruitment costs of approximately $6.1 million related to the hiring of additional employees; and
• increase in clinical study costs and cost of manufacturing materials for our ongoing Phase 3 trial (PROACT 1) of $2.4 million driven by continued enrollment and increased activities for the trial.
General and administrative expenses
The decrease in general and administrative expenses of approximately $4.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by the following:
• decrease in impairment charges of $5.0 million related to our Greensboro facility as the original charge was recognized in the 2024 period; and
• decrease in equity-based compensation of approximately $3.4 million due to forfeitures of awards and lower fair value of recent awards;
offset by
• increase in professional fees and other operating expenses of approximately $3.8 million driven by ongoing initiatives in 2025 including the domestication; and
• increases in cash-based compensation and recruitment costs of approximately $0.5 million due to the hiring of additional personnel.
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Interest income
The decrease in interest income of approximately $5.9 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024, was driven by lower investment balances and interest rates for the 2025 period.
Income tax expense
The increase in income tax expense of approximately $1.0 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024, was driven primarily by tax benefits recognized in the year ended December 31, 2024 due to the effects of the change in timing of deductions for qualified research and development costs.
Liquidity and Capital Resources
Sources of liquidity
Since our inception, we have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. From our inception through December 31, 2025, we funded our operations primarily through capital contributions from the holders of PK Holdings, the proceeds obtained through the Business Combination and related private placement financing and public equity offerings.
In January 2024, the Company entered into an Open Market Sale Agreement SM (the “2024 Sales Agreement”) with Jefferies LLC as the sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its Class A common stock, par value $0.0001 per share, having an aggregate offering price of up to $100.0 million by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act (the “ATM Offering”). The shares were offered and sold pursuant to the Company’s shelf registration statement on Form S-3. During the year ended December 31, 2024, we sold 4,170,791 shares of our Class A common stock under the 2024 Sales Agreement for net proceeds of approximately $7.7 million.
In July 2025, we terminated the 2024 Sales Agreement and entered into a new Open Market Sale Agreement SM (“2025 Sales Agreement”) with Jefferies, as the sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our Class A common stock having an aggregate offering price of up to $200.0 million by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. The shares are offered and sold pursuant to our shelf registration statement on Form S-3. During the year ended December 31, 2025, we sold 7,452,342 shares of our Class A common stock under the 2025 Sales Agreement for net proceeds of approximately $24.2 million. As of December 31, 2025, there was approximately $175.0 million remaining available to be sold under the 2025 Sales Agreement.
In June 2024, the Company sold 46,886,452 of its Class A common stock in an underwritten public offering at a price of $2.42 per share. Additionally, in June 2024, the Company sold 11,030,574 of its Class A common stock to certain investment entities at a price of $2.42 per share in a concurrent registered direct offering pursuant to share purchase agreements. The net proceeds to the Company from the offerings were approximately $136.7 million, after deducting the underwriting discounts and commissions and offering expenses payable by the Company. The shares were offered and sold pursuant to the Company’s shelf registration statement on Form S-3.
We expect that our existing cash, cash equivalents and marketable securities held at December 31, 2025, will enable us to fund our operating expenses and capital expenditure requirements into mid-2027. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
We expect our expenses to increase substantially if, and as, we:
• initiate and continue research and clinical development of our product candidates, including in particular our clinical trials for rilparencel;
• incur third-party manufacturing costs to support our nonclinical studies and clinical trials of our product candidate and, if approved, its commercialization;
• seek to identify and develop additional product candidates;
• make investments in developing internal manufacturing capabilities; and
• seek regulatory and marketing approvals for our product candidates.
In addition, since the closing of the Business Combination we have been incurring additional costs associated with operating as a public company, including significant legal, audit, accounting, investor and public relations, regulatory, tax-related, director and officer insurance premiums and other expenses. Developing pharmaceutical products, including conducting clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which
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we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product that we do not expect to be commercially available for at least several years, if ever.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain additional funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our technology, future- revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our shares. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses, and there is no assurance that we will ever be profitable or generate positive cash flow from operating activities.
Cash Flows
Cash Flows for the Years Ended December 31, 2025 and 2024
The following table provides information regarding our cash flows for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
2025
2024
Net cash flows used in operating activities
$
(120,117
)
$
(126,351
)
Net cash flows provided by investing activities
103,965
20,414
Net cash flows provided by financing activities
25,569
144,408
Net change in cash and cash equivalents
$
9,417
$
38,471
Operating Activities
Net cash used in operating activities was approximately $120.1 million for the year ended December 31, 2025, reflecting a net loss before noncontrolling interest of approximately $151.6 million. Such uses were offset by changes in working capital of approximately $1.3 million and non-cash charges and gains on investments totaling $30.2 million. The non-cash charges primarily consisted of equity-based compensation expense of $25.3 million, depreciation and amortization expense of $6.6 million, loss on disposal of equipment of $1.4 million and an impairment charge of $0.3 million. Gains on investments in marketable securities were $3.4 million. The changes in working capital primarily relate to the timing of payments made to our vendors for services performed.
Net cash used in operating activities was approximately $126.4 million for the year ended December 31, 2024, reflecting a net loss before noncontrolling interest of approximately $163.3 million. Such uses were offset by changes in working capital of approximately $4.0 million and non-cash charges and gains on investments of $33.0 million. The non-cash charges primarily consisted of equity-based compensation expense of $29.4 million, depreciation and amortization expense of $5.4 million, an impairment charge of $5.3 million and gains on investments in marketable securities of $7.0 million. The changes in working capital primarily relate to the timing of payments made to our vendors for services performed.
The approximate $6.2 million decrease in cash used in operating activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by a decrease in net loss before noncontrolling interest after adjusting for the non-cash charges and gains on investments of approximately $8.9 million offset by the impact of changes in working capital driven by the timing of payments to our vendors.
Investing Activities
Net cash provided by investing activities were approximately $104.0 million and $20.4 million for the years ended December 31, 2025 and 2024, respectively. The cash provided by investment activities during the year ended December 31, 2025 was primarily related to net investment activity of $100.9 million and the sale of our facility in Greensboro, North Carolina, which
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provided net proceeds of $18.2 million. These were partially offset by capital spending for facility expansion of $15.2 million. The cash provided by investing activities during the year ended December 31, 2024 was primarily related to net investment activity of $49.9 million partially offset by the purchase of two facilities in Winston-Salem, North Carolina for $22.5 million.
Financing Activities
Net cash provided by financing activities was $25.6 million and $144.4 million for the years ended December 31, 2025 and 2024, respectively. The cash provided by financing activities for the years ended December 31, 2025 and 2024 was related to the sale of our Class A common stock and exercise of employee stock options.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements. Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements included in this Annual Report.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors.
Item 7A . Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 8 . Financial Statements and Supplementary Data.
The information required by this Item is included in our Financial Statements and Supplementary Data listed in Item 15 of Part IV of this Annual Report.
Item 9 . Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.