Kodiak Sciences Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. The filing also presents unaudited fourth-quarter results. Kodiak is a clinical-stage biopharmaceutical company developing retinal disease treatments; it had no approved products and generated no product revenue.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $18.8 million | $22.0 million |
| General and administrative expense | $7.6 million | $3.5 million |
| Total operating expenses / operating loss | $26.4 million | $25.5 million |
| Net loss | $41.4 million | $27.9 million |
| Net loss per share, basic and diluted | $2.77 | $3.72 |
| Net cash used in operating activities | $29.0 million | $17.7 million |
| Cash and cash equivalents at year-end | $88.3 million | $1.4 million |
| Working capital at year-end | $85.6 million | $(7.6) million |
| Total liabilities at year-end | $5.4 million | $22.0 million |
Fourth-quarter 2018 net loss was $14.7 million, versus $11.6 million in Q4 2017; Q4 operating loss was $9.4 million, versus $9.8 million. Profitability and margins are not meaningful for this pre-revenue company.
Cash from financing activities was $116.5 million in 2018, principally reflecting $83.5 million of net IPO proceeds and $33.0 million of convertible-note proceeds. The notes converted into common stock upon the IPO; no convertible notes or preferred-stock warrant liability remained at year-end. Annual net loss included $5.5 million of debt-extinguishment loss and noncash fair-value and interest items. Management estimated available cash would fund projected operations for at least 12 months from the filing date, while stating that additional funding would be needed over time. No conventional financial guidance was provided.
Business developments and material changes
- KSI-301 is Kodiak’s lead anti-VEGF biologic, built using its antibody biopolymer conjugate (ABC) platform, and is wholly owned. The company is pursuing wet AMD, diabetic eye disease and other retinal vascular conditions.
- In a Phase 1a single-dose study of nine heavily pretreated DME patients, Kodiak reported median improvement at 12 weeks of 9 vision-chart letters and 121 microns in retinal thickness. It reported no dose-limiting toxicities, drug-related adverse events or intraocular inflammation through the 12-week follow-up. These small, early-stage results do not establish efficacy or durability in larger trials.
- A Phase 1b multiple-dose study was underway. Kodiak planned a global Phase 2 wet AMD study of approximately 400 patients comparing KSI-301 at 12-, 16- and 20-week intervals with aflibercept every eight weeks; enrollment was expected to begin in Q2 2019. Management said FDA feedback indicated a successful study could support a marketing application as one of two pivotal studies, but this was not assured.
- Planned programs also included Phase 2 studies in DME and in China. Kodiak selected a lead candidate for KSI-501, a preclinical dual IL-6/VEGF program, while deprioritizing KSI-401 for dry AMD.
- Compared with 2017, R&D expense fell 15%, mainly due to fewer KSI-301 manufacturing runs, while personnel expense increased. G&A rose 117%, primarily due to IPO-related and public-company costs and higher compensation. Net loss increased 48%, reflecting higher G&A and financing-related expenses.
Outlook, risks and other notable items
Management expected losses and R&D spending to rise as clinical programs advance; future development timing, costs and revenue remain uncertain. The company relies on third-party manufacturers, particularly Lonza, and reported $3.2 million of unconditional purchase obligations under manufacturing agreements at year-end. It also depends on external research and clinical vendors, has no commercial manufacturing or sales infrastructure, and disclosed that KSI-301 manufacturing has not been validated at commercial scale.
Key risks include clinical failure or safety findings, regulatory delay or rejection, patient-enrollment and manufacturing constraints, competition from established anti-VEGF drugs and emerging therapies, uncertain reimbursement and pricing, intellectual-property disputes, and the need for additional capital. The company reported no material legal proceedings. Its independent auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls were effective, but the 10-K did not include management’s internal-control assessment or auditor attestation under the newly public-company transition period.
Important facts for investors to verify
- Whether larger, controlled KSI-301 trials confirm clinically meaningful efficacy, safety and 12-, 16- or 20-week dosing durability.
- Actual Phase 2 start dates, enrollment progress, interim-analysis plans and FDA agreement on pivotal-trial requirements.
- Cash burn, forecast runway and timing and terms of any additional financing.
- Manufacturing scale-up, supply reliability, validation status and dependence on Lonza and other suppliers.
- Competitive, regulatory and intellectual-property developments that could affect approval prospects or commercial differentiation.