Kodiak Sciences Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Kodiak is a clinical-stage biotechnology company developing retinal-disease therapies; it had no approved products and generated no product revenue. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $267.6 million | $217.3 million |
| General and administrative expense | $73.8 million | $49.7 million |
| Operating loss | $341.4 million | $267.1 million |
| Net loss | $333.8 million | $267.0 million |
| Net loss per share, basic and diluted | $6.39 | $5.16 |
| Cash used in operating activities | $206.5 million | $182.3 million |
| Cash, cash equivalents and marketable securities at year-end | $478.9 million | $731.5 million |
Operating margins are not meaningful given the absence of revenue. Net loss widened 25% year over year, while operating expenses rose 28%. R&D expense increased 23%; G&A expense increased 48%. Stock-based compensation was $106.0 million, including $65.1 million associated with the long-term performance incentive plan. Interest income rose to $7.1 million from $0.3 million.
Investing activities used $336.5 million, primarily reflecting net purchases of marketable securities; financing activities provided $1.9 million. The balance sheet showed $486.0 million of current assets and $52.5 million of current liabilities. Total liabilities were $230.5 million, including a $100.0 million liability related to the sale of future royalties and $87.7 million of operating lease liabilities. The company reported no conventional debt balance in the supplied financial statements.
Kodiak said year-end cash, cash equivalents and marketable securities were expected to fund operating and capital needs for at least 12 months after the filing date, while cautioning that estimates depend on assumptions and additional financing may be needed. It reported $892.0 million of accumulated deficit and expected continued significant losses.
Material changes and business developments
- Tarcocimab in wet AMD: The Phase 2b/3 DAZZLE study failed its primary endpoint of non-inferior visual-acuity gains for extended dosing versus aflibercept every eight weeks. Kodiak discontinued the study in February 2022.
- Tarcocimab in RVO: Phase 3 BEACON met its primary non-inferiority endpoint at week 24 for tarcocimab dosed every two months after two monthly loading doses versus monthly aflibercept.
- Remaining pivotal program: GLEAM and GLIMMER (DME), DAYLIGHT (wet AMD) and GLOW (NPDR without DME) were fully enrolled. Management expected topline results in Q3 2023; it said GLEAM and GLIMMER results, if successful, were expected to provide the primary basis for regulatory approval.
- KSI-501: FDA cleared the IND; a Phase 1 study in DME patients was screening patients. The candidate is designed to inhibit VEGF and IL-6.
- Manufacturing: The Lonza Ursus facility was commissioned as a cGMP facility in January 2023, and commercial-scale cGMP batches began in Q1 2023. The company aims to offer a prefilled syringe, but reported no assurance it will complete development on time.
Outlook, risks and unusual items
Management’s outlook centered on clinical readouts, regulatory preparation and manufacturing scale-up; the filing provides no revenue or earnings guidance. The company’s prospects depend heavily on tarcocimab, and the DAZZLE failure and BEACON success leave clinical outcomes uncertain. Risks include trial efficacy and safety, possible study redesign or delays, regulatory and manufacturing execution, competition (including Vabysmo and potential higher-dose aflibercept), reimbursement and pricing pressure, and dependence on Lonza and other third parties.
Contractual cash commitments include $117.3 million of undiscounted operating lease payments, of which $15.6 million was due within 12 months; approximately CHF184.5 million of future payments related to the Lonza embedded lease and manufacturing arrangement, including CHF34.5 million expected within 12 months; and $56.8 million of manufacturing obligations subject to cancellation fees, of which $55.5 million was expected within 12 months. Timing and amounts under certain clinical milestone arrangements were not fixed or determinable.
The 2019 Baker Bros. funding agreement provides for a capped 4.5% royalty on future tarcocimab net sales in exchange for $100 million received; the remaining $125 million commitment was canceled in 2021. Kodiak may repurchase the royalty rights under specified terms. Royalty payments were not considered probable and estimable at year-end 2022.
As a subsequent event, Kodiak disclosed that Silicon Valley Bank was closed on March 10, 2023. The company held operating cash there, reported no losses in those accounts, and said it began using accounts at other institutions to mitigate operational risk. The filing also cites inflation, interest-rate and supply-chain uncertainty. The independent auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls and internal control over financial reporting were effective. The auditor highlighted accrued clinical-trial costs of $18.3 million as a critical audit matter because estimating them required significant judgment.
Important facts for investors to verify
- Subsequent reported results and regulatory implications of the four Phase 3 studies, especially in light of DAZZLE’s failure and BEACON’s positive endpoint.
- Current cash runway, cash held at each financial institution, and any changes to financing plans since the filing.
- Actual Lonza manufacturing capacity, cGMP readiness, supply reliability, and progress toward a prefilled syringe.
- Updated contractual commitments, cancellation exposure, and the economics of the Baker Bros. royalty and repurchase option.
- The scale and future dilution impact of stock-based awards; $311.3 million of unrecognized compensation expense remained at year-end 2022.