Kodiak Sciences Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Kodiak is a clinical-stage biopharmaceutical company developing treatments for retinal diseases. It had no approved products and generated no product revenue.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $20.2 million | $5.7 million; up 252% |
| General and administrative expense | $5.6 million | $2.7 million; up 103% |
| Total operating expenses | $25.7 million | $8.5 million |
| Net loss | $24.4 million | $8.0 million |
| Net loss per share, basic and diluted | $0.54 | $0.21 |
| Net cash used in operating activities | $17.9 million | $7.2 million |
Margins are not meaningful because Kodiak reported no product revenue. R&D growth primarily reflected KSI-301 clinical trial and manufacturing costs, plus higher personnel expense. G&A growth mainly reflected personnel and stock-based compensation.
At March 31, cash and cash equivalents were $226.5 million and marketable securities were $203.9 million, totaling $430.4 million in cash, cash equivalents and marketable securities. Total assets were $443.0 million; total liabilities were $115.4 million; stockholders’ equity was $327.7 million. The company reported no conventional borrowings; liabilities included $99.9 million related to the sale of future royalties and lease obligations. Management stated available cash and securities should fund anticipated operating and capital needs for at least 12 months following the filing date.
Operating cash use increased year over year. Investing activities used $67.2 million, primarily from net purchases of marketable securities. Financing activities provided $99.8 million, principally from the royalty funding agreement. Cash, cash equivalents and restricted cash increased $14.7 million during the quarter.
Material changes and financing
- In February 2020, Kodiak received the first $100 million under its agreement with Baker Bros. Advisors, a shareholder holding more than 5% of the company. The agreement grants BBA a capped 4.5% royalty on future KSI-301 net sales. The remaining $125 million is payable upon enrollment of 50% of patients in the planned RVO program. Kodiak recorded the initial funding, net of issuance costs, as a liability.
- Manufacturing purchase obligations, including accrued amounts, rose to $29.8 million at March 31, 2020, from $4.7 million at year-end 2019. Kodiak reported no cancellation fees incurred.
- Accumulated deficit reached $182.5 million. Shares outstanding at March 31 were 44.45 million.
Outlook, management commentary and risks
- Management maintained its “2022 Vision” for a KSI-301 BLA filing in 2022, initially targeting wet AMD, DME and RVO, with a possible supplemental filing for non-proliferative diabetic retinopathy. The planned pivotal program comprised two Phase 3 DME studies, one wet AMD study, one RVO study and one non-proliferative DR study.
- Because of COVID-19, the company delayed the next KSI-301 pivotal-study starts by about one quarter. It expected DME and RVO enrollment to begin in late Q3 or early Q4 2020 and non-proliferative DR enrollment in Q4, subject to pandemic conditions. Management reported missed visits below 5% and no significant disruption to ongoing studies at the time of filing; EU DAZZLE recruitment had been deferred.
- KSI-301 was the lead clinical program. Management said emerging Phase 1b data continued to support its development plans, while noting results remain subject to clinical and regulatory uncertainty. DAZZLE had enrolled 245 patients as of May 8, 2020; its independent monitoring committee recommended continuing without modification.
- The company expected losses and negative operating cash flows to continue and R&D spending to rise as pivotal trials and manufacturing scale-up advanced. Additional financing may be needed; adequate funding may not be available on acceptable terms.
- COVID-19 could affect trial enrollment and completion, suppliers, manufacturing, operations and capital resources. Kodiak reported that its supply chain remained intact and it did not then anticipate KSI-301 supply disruption, but emphasized that impacts were uncertain.
- Other significant risks include dependence on KSI-301 and third-party manufacturers, clinical failure or adverse effects, regulatory delays, competition, intellectual-property disputes and the need to scale manufacturing and commercial capabilities. The filing disclosed no legal matters expected to have a material adverse effect. Management assessed disclosure controls as effective as of March 31, 2020.
Important facts for investors to verify
- Whether KSI-301’s pivotal trials start on the revised schedule and support the targeted 2022 BLA timeline.
- Clinical efficacy, safety and durability results in Phase 1b and pivotal studies, including the scope and timing of future data updates.
- Whether the RVO program reaches 50% enrollment, triggering the remaining $125 million royalty funding.
- Cash burn, manufacturing commitments and whether management’s stated liquidity runway remains adequate as development spending increases.
- Effects of COVID-19 on trial enrollment, missed visits, manufacturing partners and the company’s supply chain.