Kodiak Sciences Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited results; comparisons are to the corresponding 2020 periods. Kodiak is a clinical-stage retinal-disease biopharmaceutical company with no approved products and no product-sales revenue. Its lead candidate, KSI-301, is in late-stage clinical development.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $45.4m | $20.6m | $85.7m | $40.7m |
| General and administrative expense | $10.5m | $6.2m | $20.7m | $11.8m |
| Total operating expenses | $55.9m | $26.8m | $106.5m | $52.5m |
| Net loss | $55.9m | $26.0m | $106.3m | $50.4m |
| Net loss per share, basic and diluted | $1.08 | $0.58 | $2.06 | $1.12 |
| Cash used in operating activities | — | $71.3m | $31.8m |
At June 30, cash and cash equivalents were $880.9m; restricted cash was $6.3m. Marketable securities were zero, versus $24.6m at year-end 2020. Current assets were $884.3m and current liabilities $41.0m. Total liabilities were $218.2m, including a $99.9m liability related to the sale of future royalties and $78.3m in operating lease liabilities. The filing reports no conventional borrowings. The company had an accumulated deficit of $397.5m. Profitability and operating margins are not meaningful because the company had no revenue and recorded operating losses.
Management stated that cash and cash equivalents were expected to fund anticipated operating and capital needs for at least 12 months following the filing. The company nevertheless expects continuing losses and negative operating cash flows. Cash, cash equivalents and restricted cash declined $63.5m in the first half of 2021. Investing activities provided $3.8m net, while financing provided $4.0m, primarily from stock-option exercises and the employee stock purchase plan. Stock-based compensation was $21.0m for the six months.
Material changes versus the prior comparable period
- Q2 net loss increased to $55.9m from $26.0m; first-half net loss increased to $106.3m from $50.4m.
- First-half R&D expense more than doubled, chiefly due to KSI-301 pivotal-trial activity and manufacturing progress. KSI-301 program expense was $51.2m, up $29.0m year over year.
- First-half G&A expense rose $9.0m, reflecting higher headcount, stock-based compensation, professional services and facility costs.
- Operating cash use increased to $71.3m from $31.8m. The prior-year first half included $99.6m net proceeds from the sale of future royalties; no such proceeds were received in first-half 2021.
- Common shares outstanding were 51.4m at June 30, 2021, compared with 51.1m at December 31, 2020.
Outlook, management commentary and key risks
- KSI-301 program: DAZZLE completed enrollment in November 2020; topline data were expected in Q1 2022. Enrollment in GLEAM, GLIMMER, BEACON and DAYLIGHT was expected to finish in Q4 2021 or early 2022. Kodiak planned to include pivotal results for wet AMD, DME and RVO in a single initial BLA, with its stated objective of a 2022 submission and pivotal-trial data during 2022. These are forward-looking expectations, not assured outcomes.
- Additional studies: The first patients were randomized in the DAYLIGHT wet AMD Phase 3 study in June 2021. Kodiak expected to begin screening and recruitment for the GLOW diabetic-retinopathy study in August 2021; it did not plan to include that indication in the initial BLA.
- Manufacturing: Completion of the dedicated Lonza IBEX facility was targeted for 2022, with the filing specifying first-half 2022 in its risk discussion. COVID-19-related competition for construction resources, manufacturing capacity, materials and personnel had delayed the facility. The Lonza agreement was amended to increase capacity; estimated capital contribution was approximately CHF 75m, with potential commercial-supply fees of approximately CHF 150m over 2022–2029.
- Funding agreement: After quarter-end, Baker Bros. confirmed that it would not pay the second $125m funding amount, despite Kodiak being positioned to satisfy development criteria. The royalty cap was reduced from $1,012.5m to $450m. The filing says the decision reflected Kodiak’s strong balance sheet and clinical progress. Kodiak had received $100m at the agreement’s 2020 closing.
- Subsequent commitment: After quarter-end, Kodiak entered a binding purchase commitment for manufacturing equipment, with approximately $20m of minimum non-cancelable obligations expected to be paid through 2023.
- Clinical evidence: Management reported encouraging Phase 1b Year 1 results, including two in three patients at a six-month-or-longer treatment-free interval after loading doses, and described the safety profile as encouraging. These are early-stage findings; the pivotal studies remained ongoing and blinded, and later-stage results may differ.
- Principal risks: KSI-301 is the company’s only candidate in clinical trials and Kodiak’s prospects depend heavily on its success. Risks include pivotal-trial efficacy, safety, enrollment and timing; regulatory and CMC requirements; manufacturing scale-up and reliance on third parties; competition; reimbursement and commercialization; and the continuing effects of COVID-19. The company had no product revenue and stated that additional capital might be needed if costs, plans or timelines change.
The company reported no material legal proceedings pending and stated that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021.
Important facts for investors to verify
- Subsequent DAZZLE results and whether they support the anticipated KSI-301 label, dosing intervals and initial BLA plan.
- Actual enrollment completion and data timelines for GLEAM, GLIMMER, BEACON and DAYLIGHT, and progress and scope of GLOW.
- IBEX facility completion, commercial-scale manufacturing validation, Lonza capacity and the timing and cost of supply commitments.
- Cash burn and runway against the company’s 12-month liquidity statement, including the impact of the $20m equipment commitment and other capital needs.
- Terms and implications of the reduced Baker Bros. royalty cap, including how the royalty obligation may affect future economics.
- Whether larger and longer pivotal-trial exposure continues to support management’s early safety assessment and whether COVID-19 or other factors affect trial integrity or supply.