Kodiak Sciences Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 1, 2021. Kodiak is a clinical-stage biotechnology company developing retinal-disease therapies. It has no approved products and has generated no product revenue.
Financial performance and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $107.4 million | $37.5 million |
| General and administrative expense | $28.6 million | $11.7 million |
| Total operating expenses / operating loss | $136.0 million | $49.2 million |
| Net loss | $133.1 million; $2.91 per share | $47.4 million; $1.25 per share |
| Net cash used in operating activities | $83.4 million | $39.1 million |
| Cash, cash equivalents and marketable securities | $969.0 million | $348.2 million |
| Working capital | $940.6 million | $327.5 million |
Margins are not meaningful because the company had no product revenue. FY2020 net loss increased 181%; R&D expense rose 186%, mainly from expanded KSI-301 clinical and manufacturing activity, while G&A increased 145%, including higher staffing, stock compensation and professional costs. Stock-based compensation was $30.7 million, versus $6.1 million in 2019.
Financing included $612.0 million net proceeds from a November 2020 equity offering. The company reported $99.6 million net cash proceeds from its royalty funding arrangement in 2020. At year-end, liabilities included a $99.9 million liability related to future royalties and lease liabilities; the filing reports no conventional borrowings outstanding. Contractual obligations totaled $371.6 million, including $242.3 million under manufacturing agreements and $128.5 million of undiscounted operating lease payments. The manufacturing commitments are cancellable but may entail cancellation fees.
Business progress and changes
- KSI-301 is the company’s lead anti-VEGF antibody-biopolymer conjugate, being studied for wet AMD, diabetic macular edema (DME), retinal vein occlusion (RVO), and diabetic retinopathy (DR).
- Four pivotal studies were underway: DAZZLE in wet AMD, GLEAM and GLIMMER in DME, and BEACON in RVO. DAZZLE recruitment was completed in November 2020; enrollment was underway in the other three trials.
- Management reported Phase 1b Year 1 results in treatment-naïve patients: about two-thirds in each of the three studied diseases had a treatment-free interval of at least six months. The study was not an active-comparator trial; these findings are preliminary and do not establish pivotal efficacy.
- KSI-501, an investigational VEGF/IL-6 dual inhibitor, and early ABC Platform programs broaden the pipeline. Kodiak also entered a supplemental research agreement with AbCellera.
- In 2020, the company entered a long-term Lonza manufacturing arrangement, including plans for a dedicated commercial-scale facility. Construction was targeted for completion in early 2022. New Palo Alto offices and laboratory leases increased the company’s operating footprint and commitments.
Outlook, risks and unusual items
- Management’s “2022 Vision” was to submit a single BLA for KSI-301 in wet AMD, DME and RVO in 2022, with potential commercialization in 2023. DAZZLE top-line results were expected in early 2022. The company planned to begin the GLOW study in non-proliferative DR without DME in 2021, with DR potentially addressed through a supplemental BLA. These are targets, not assured outcomes.
- Management said available cash was expected to support the KSI-301 program toward its planned BLA and pipeline development, but provided no definitive cash-runway period. The company expects increasing losses and may require additional financing.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, dependence on KSI-301, competition, manufacturing scale-up and third-party supply dependence, commercialization and reimbursement challenges, intellectual-property disputes, and the continuing effects of COVID-19.
- Kodiak reported low COVID-related missed-visit rates (below 5%) and no significant trial delays to date, while cautioning that impacts on trials, suppliers, costs and timelines remained uncertain.
- The BBA royalty funding agreement provides for a capped 4.5% royalty on future KSI-301 net sales, subject to a cap of 4.5 times funding paid; Kodiak may repurchase the royalty interest under specified terms. Royalty payments were not considered probable and estimable at year-end.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Accrued clinical-trial costs of $11.1 million were identified as a critical audit matter because they depend on estimates of enrollment, site activity and vendor services. No material legal proceedings were reported.
Most important facts for investors to verify
- Whether pivotal KSI-301 trials meet their endpoints and confirm the Phase 1b durability, efficacy and safety findings.
- Actual trial enrollment, readout dates, regulatory requirements and feasibility of the 2022 BLA target.
- Lonza facility construction, validation, supply capacity, manufacturing costs and the scale-up timeline.
- Cash burn, forecast runway and the remaining conditions and obligations under the BBA royalty funding agreement.
- Potential dilution, stock-based compensation, lease and manufacturing commitments, and the commercial impact of the royalty burden.