Kodiak Sciences Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Kodiak is a clinical-stage biopharmaceutical company developing retinal-disease therapies. It had no approved products and generated no product revenue.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $61.7 million | $56.0 million | $211.6 million | $141.7 million |
| General and administrative expense | $17.8 million | $11.5 million | $55.7 million | $32.3 million |
| Net loss | $77.0 million | $67.5 million | $263.4 million | $173.8 million |
| Net loss per share, basic and diluted | $1.47 | $1.30 | $5.04 | $3.36 |
- Operating loss was $79.5 million in Q3 and $267.3 million for the first nine months. Profit margins are not meaningful given the absence of revenue and ongoing development-stage losses.
- At September 30, cash, cash equivalents and marketable securities totaled $537.4 million, including $359.0 million of short-term U.S. Treasury securities. Cash, cash equivalents and restricted cash were $184.7 million.
- Operating cash use was $151.4 million in the first nine months, versus $123.2 million a year earlier. Investing cash use was $403.5 million, mainly reflecting purchases of marketable securities and capital expenditures; financing provided $1.8 million.
- Total assets were $724.0 million and stockholders’ equity was $479.5 million. Liabilities included a $100.0 million liability related to the sale of future royalties, $87.8 million in operating lease liabilities, and no material conventional borrowing disclosed in the supplied filing text.
- Stock-based compensation was $26.2 million in Q3 and $80.3 million for the first nine months, compared with $12.4 million and $33.4 million in the respective 2021 periods.
Material changes versus prior comparable periods
- Q3 net loss increased $9.5 million year over year; nine-month net loss increased $89.6 million. Higher R&D and G&A expenses were partly offset by higher interest income.
- Nine-month R&D expense rose $69.9 million, reflecting pivotal tarcocimab trial and manufacturing activity, pipeline manufacturing, increased personnel costs and stock compensation. Q3 tarcocimab program expense declined year over year, which the company attributed to discontinuation of its Phase 2b/3 wet AMD study and manufacturing timing.
- Cash and cash equivalents fell from $731.5 million at year-end 2021 to $178.4 million; marketable securities, absent at year-end, were $359.0 million at September 30, 2022. The portfolio’s $2.5 million unrealized loss was recorded in other comprehensive loss.
Outlook, developments and risks
- Management said available cash, cash equivalents and marketable securities were expected to fund anticipated operating and capital needs for at least 12 months after the filing date. Kodiak expects continuing losses and negative operating cash flows; the estimate depends on assumptions, and additional funding may be needed.
- Tarcocimab is being studied in five pivotal Phase 3 trials. GLEAM and GLIMMER (DME) and DAYLIGHT (wet AMD) were fully enrolled, with topline data expected in mid-2023. GLOW (NPDR without DME) completed enrollment in August 2022, with topline data expected in the second half of 2023. The company said the program’s trials were expected to report within the following 12 months and could support a single BLA if successful.
- Clinical results are mixed: the Phase 2b/3 wet AMD study announced in February 2022 failed its primary non-inferiority endpoint for extended dosing. In August 2022, BEACON met its week-24 primary non-inferiority endpoint in RVO; patients continued follow-up and treatment. The filing cautions that study results may affect designs, timelines and prospects of other trials.
- The Lonza manufacturing facility for tarcocimab reached mechanical completion in March 2022 and opened in May. Kodiak reported a revised estimated capital contribution of about CHF 75 million, of which CHF 40 million had been paid, and potential manufacturing payments of about CHF 150 million over 2022–2029. Commercial-scale production and prefilled-syringe readiness remain execution risks.
- Kodiak said it was on track to file an IND for KSI-501 in Q4 2022 and begin a Phase 1 study in early 2023. These are forward-looking plans, not assured outcomes.
- Key risks include tarcocimab clinical efficacy and safety, regulatory and BLA requirements, manufacturing scale-up and dependence on third parties, competition, capital needs, and potential clinical-trial disruption. The company cited inflation, rising interest rates, supply-chain constraints, the Russia-Ukraine conflict and COVID-19; missed visits remained below 5% across ongoing studies, according to management.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable assurance level as of September 30, 2022, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent reported results and timing for each pivotal tarcocimab trial, particularly in light of the failed extended-dosing wet AMD study and BEACON’s week-24 result.
- Whether the planned trial portfolio and manufacturing data satisfy FDA requirements for a BLA, and whether the expected 2023 readouts remain on schedule.
- Actual cash use, capital spending, commitments to Lonza and other manufacturers, and whether management’s stated runway remains adequate.
- Commercial-scale manufacturing progress, product supply capacity and prefilled-syringe plans, as well as the potential need for additional financing.
- Potential effects of stock-based compensation, competitive therapies and pricing or reimbursement policy on future costs and commercial prospects.