Kodiak Sciences Inc. — Q3 2019 Form 10-Q
Business context and period. Clinical-stage biopharmaceutical company developing treatments for retinal diseases. This unaudited report covers the quarter and nine months ended September 30, 2019. Kodiak had no approved products and generated no product revenue.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data. No revenue or gross margin was reported.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Research and development expense | $10.1 | $4.7 | $24.7 | $11.9 |
| General and administrative expense | $2.6 | $1.7 | $8.3 | $5.1 |
| Total operating expenses | $12.7 | $6.4 | $33.0 | $17.0 |
| Net loss | $12.4 | $10.5 | $31.7 | $26.8 |
| Basic and diluted loss per share | $0.33 | $1.33 | $0.85 | $3.45 |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $27.9 | $20.7 |
- R&D expense increased 115% in Q3 and 107% for the nine-month period, mainly from KSI-301 clinical-trial and manufacturing costs, increased personnel, and KSI-501 research. G&A rose with personnel, public-company insurance, and professional costs.
- At September 30, cash and cash equivalents were $37.0 million and marketable securities were $23.6 million, totaling $60.6 million in liquid resources. Current assets were $61.0 million; current liabilities were $7.3 million.
- Total liabilities were $9.2 million, including $2.0 million of operating lease liabilities. No borrowing or convertible-note balance was reported at quarter-end; prior convertible notes converted at the 2018 IPO.
- Cash, cash equivalents, and restricted cash fell $51.2 million during the first nine months. Investing activities used $23.7 million, primarily reflecting net purchases of marketable securities; operating activities used $27.9 million. The cash-flow decline therefore includes cash shifted into securities.
- Accumulated deficit was $142.5 million. Management expected existing cash and marketable securities to fund current operational commitments and objectives at least through the first half of 2020, while warning that substantial doubt remained about the company’s ability to continue as a going concern beyond one year from issuance of the financial statements.
Material changes and business developments
- Compared with the prior-year periods, operating expenses and net losses increased as Kodiak expanded research, manufacturing, and clinical activity. Interest expense and other expenses recorded in 2018 were largely absent in 2019 following conversion of notes and related instruments at the IPO.
- The reported loss per share was lower than in 2018 despite a higher net loss, principally because weighted-average shares increased substantially after the IPO.
- Kodiak initiated enrollment in DAZZLE, its pivotal wet AMD KSI-301 study, and reported encouraging preliminary Phase 1b safety, efficacy, and durability observations across wet AMD, diabetic macular edema (DME), and retinal vein occlusion (RVO). These were early, open-label data from small patient cohorts, not confirmatory trial results.
- Following an FDA Type B end-of-Phase-2 meeting, the company said FDA feedback supported a potential five-pivotal-trial program: two RVO studies and one each in wet AMD, DME, and diabetic retinopathy (DR) without DME. Kodiak planned at least four additional US/EU pivotal trials in 2020, subject to execution and funding.
Outlook, risks, and unusual items
- Kodiak’s stated “2022 Vision” was a development objective, not assured guidance: an initial RVO BLA and potential FDA approval in 2022, with supplemental submissions for wet AMD and DME in 2022 and DR in 2022 or 2023. Timing depends on trial outcomes, enrollment, manufacturing, regulatory review, and financing.
- Management expected losses and R&D spending to increase as clinical programs advance. Kodiak anticipated needing additional capital; failure to obtain it could force delays, reductions, or termination of development programs, or licensing of product rights on unfavorable terms.
- On November 1, 2019, after quarter-end, Kodiak filed a shelf registration statement allowing offers of up to $400 million of securities over up to three years after effectiveness. It had not thereby raised those funds.
- On October 4, 2019, Nasdaq notified Kodiak that its audit committee did not meet the minimum independent-director requirement. The company requested a hearing, scheduled for November 21, and said delisting was stayed pending the panel’s decision.
- Key operating risks include KSI-301’s early clinical stage and dependence on small preliminary datasets; trial enrollment, safety, efficacy, and regulatory uncertainty; reliance on third-party manufacturing, including single-source suppliers; competition; and limited financial runway.
- Kodiak adopted the new lease standard in 2019, recording an initial $2.2 million right-of-use asset and $2.3 million lease liability, with no material impact on reported operations or cash flows. No material legal proceedings were disclosed.
Investor verification points
- Check subsequent cash use, financing activity, and whether the shelf registration became effective or was used; the reported runway estimate extended only through the first half of 2020.
- Track Nasdaq hearing outcomes and whether Kodiak restored audit committee compliance.
- Verify the enrollment, design, timing, and results of DAZZLE and the planned RVO, DME, and DR pivotal trials against the company’s stated development timetable.
- Assess whether larger, controlled trials confirm the preliminary KSI-301 durability and safety observations, including the company’s dosing-interval claims.
- Monitor manufacturing capacity, supply continuity, and regulatory requirements that could affect clinical timelines and funding needs.