Chinook Therapeutics KDNY
Chinook manipulated 2021-2022 revenues via its Chinese JV SanReno; strip out the accounting tricks and reported revenue collapses by 95% and 68% respectively, reinforcing our short.
Thesis
Muddy Waters remains short Chinook Therapeutics (NASDAQ:KDNY), arguing that beyond distorting atrasentan clinical-trial data (covered in the May 2023 initial report), the company has systematically manipulated its financials via its Chinese JV SanReno Therapeutics. Chinook booked $41.2M of 2021 revenue from a non-cash license contribution to SanReno, recognized $4.2M of cost reimbursements as revenue in 2022, and improperly grossed up ~$10M of Merck pass-through revenue — adjusted, 2021 and 2022 collaboration/license revenue falls by 95.3% and 68.5%. The report flags SanReno's lack of substance (Shanghai entity set up December 2021 with zero employees and no real office), the fair-value accounting choice that isolates Chinook from 50% of SanReno's losses, and deep conflicts with Versant, Frazier and Samsara, who co-own SanReno while Versant has already sold 61.5% of its Chinook stake.
SCQA
Chinook Therapeutics is a clinical-stage kidney-disease biotech that went public via a 2020 reverse-merger SPAC, with lead asset atrasentan licensed to AbbVie and a Chinese JV (SanReno) developing the same molecule.
Beyond clinical-trial distortions on atrasentan flagged in the initial report, Chinook round-trips non-cash license contributions, reimbursement payments and Merck pass-throughs through SanReno as top-line revenue, while SanReno is essentially an empty Shanghai shell.
Apply proper GAAP: back out the non-cash JV gain, net the Merck pass-throughs, and use the equity method for a JV where Chinook has board seats, 50% economics and technology dependency — most reported revenue disappears.
Adjusted collaboration/license revenue falls from $51.6M to $2.4M in 2021 and from $6.1M to $1.9M in 2022 (-95.3% and -68.5%), validating the short thesis that Chinook's results are largely accounting fiction.
The three reasons
- 1
Chinook round-trips $41.2M non-cash JV contribution as 2021 revenue — cuts adjusted revenue 95%
- 2
SanReno JV is a Shanghai shell: zero employees, no office, yet booked $44M revenue
- 3
Fair-value accounting hides 50% of SanReno losses; equity-method test clearly met
Primary demands
- Restate 2021 and 2022 collaboration/license revenue
- Reclassify SanReno JV from fair-value to equity-method accounting
- Disclose SanReno as a related party
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- 2020 SPAC-era 'Great Dash for Trash' reverse mergers
- Muddy Waters' prior May 2023 Chinook 'Too Little, Too Late' report
Notable slides (3)
Notes
Short-seller follow-up to Muddy Waters' initial 16-May-2023 report ('Chinook Therapeutics: Too Little, Too Late'). Format is a Word-style text memo with dense footnotes (58 citations), not a slide deck — classic Carson Block rhetorical pattern: enumerate GAAP violations, triangulate with Chinese credit-report evidence (page 5 screenshot showing SanReno Shanghai has 0 employees and USD 0 paid-in capital), and reinforce with an explicit Reported-vs-Adjusted revenue table (page 8). Author attribution uses 'Director of Research: Carson C. Block' from the cover. No stake size or price target disclosed; campaign outcome: Novartis announced acquisition of Chinook for ~$3.2B on 12 June 2023 (five days after this report), effectively ending the short campaign — consider revisiting campaign_outcome later.