Kodiak Sciences Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Kodiak is a clinical-stage retinal disease biopharmaceutical company with no approved products and no product revenue. Its lead candidate, tarcocimab tedromer, was being studied in five pivotal trials.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $73.7m | $45.4m | $149.9m | $85.7m |
| General and administrative expense | $18.3m | $10.5m | $37.9m | $20.7m |
| Net loss | $90.6m | $55.9m | $186.3m | $106.3m |
| Net loss per share, diluted | $1.74 | $1.08 | $3.57 | $2.06 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $98.3m | $71.3m |
Operating margins are not meaningful because the company had no revenue. R&D and G&A increases reflected clinical and manufacturing activity, personnel costs, and higher stock-based compensation. Six-month stock-based compensation was $54.1m, versus $21.0m a year earlier.
- Liquidity: Cash, cash equivalents, and marketable securities totaled $597.9m at June 30, 2022, including $172.7m cash and equivalents and $425.2m marketable securities. Kodiak said this was expected to fund operating and capital needs for at least 12 months following the filing date.
- Cash flows: Six-month investing outflow was $462.2m, largely purchases of marketable securities ($427.8m) and property, equipment, and related deposits. Cash, equivalents, and restricted cash fell by $558.8m to $179.0m; much of the movement reflected investment of cash in marketable securities.
- Debt and obligations: No conventional borrowings were reported. The balance sheet included a $100.0m liability related to a prior sale of future royalties, operating lease liabilities totaling about $87.0m, and material manufacturing commitments.
- Balance sheet: Total assets were $781.9m, total liabilities $251.0m, and stockholders’ equity $530.9m. Accumulated deficit was $744.6m.
Material changes and development updates
- Net loss increased 62% in Q2 year over year; total operating expenses rose 65% to $92.1m. For the first six months, operating expenses increased 76% to $187.8m.
- In February 2022, Kodiak reported that the DAZZLE Phase 2b/3 wet AMD study failed its primary non-inferiority endpoint for extended dosing and discontinued the study.
- Kodiak reported that the BEACON Phase 3 RVO study met its week-24 primary endpoint of non-inferior visual acuity versus aflibercept. This announcement occurred after the quarter; the filing reports non-inferiority in the overall population and branch RVO subgroup. Tarcocimab was dosed every eight weeks after two monthly loading doses, versus monthly aflibercept. The company reported intraocular inflammation of 1.4% versus 0.4%, respectively, and no vasculitis or retinal arterial occlusion events.
- GLEAM and GLIMMER (DME) and DAYLIGHT (wet AMD) were fully enrolled; topline results were expected in mid-2023. GLOW (NPDR without DME) completed enrollment in August 2022, after quarter-end. Kodiak intended to submit one BLA using the program’s data if successful.
- KSI-501 development and manufacturing work continued, with an IND submission expected in the second half of 2022. Kodiak also described earlier-stage KSI-601 work for dry AMD.
Outlook, risks, and unusual items
- Management expected losses and spending to continue and R&D expense to increase as pivotal studies, regulatory preparation, and manufacturing scale-up progressed. No revenue guidance was provided.
- At Lonza, Kodiak’s custom bioconjugate facility reached mechanical completion in March 2022 and opened in May. The company had paid CHF40.0m of an estimated CHF75.0m capital contribution; potential commercial supply payments of approximately CHF150.0m were contemplated over 2022–2029. Amounts and timing depend on the agreement and future supply needs.
- Key risks include clinical efficacy and safety uncertainty, especially following DAZZLE; potential changes to ongoing trial designs and timelines; regulatory and manufacturing execution; dependence on Lonza and other suppliers; competition and reimbursement; and possible clinical or supply-chain disruption from COVID-19, inflation, rising interest rates, and the Russia-Ukraine conflict.
- Kodiak reported no material legal proceedings and stated that disclosure controls were effective at a reasonable assurance level as of June 30, 2022. Management said available liquidity should cover at least 12 months, but acknowledged estimates may prove inaccurate and additional funding may be needed.
Important facts for investors to verify
- Confirm actual readouts and full safety, efficacy, and durability data from the pivotal tarcocimab trials, and assess how the DAZZLE failure affects other indications and trial plans.
- Track BLA scope, timing, and regulatory feedback, including whether the planned clinical data package supports each proposed indication and dosing regimen.
- Monitor cash burn, capital spending, marketable-security values, and the company’s stated liquidity runway against actual trial and manufacturing costs.
- Verify Lonza facility readiness, commercial-scale process validation, supply capacity, and the timing and amount of future manufacturing commitments.
- Assess financing needs, potential dilution, royalty-related obligations, and whether competitors or market-access constraints could limit commercial prospects.