Kodiak Sciences Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Kodiak is a clinical-stage biopharmaceutical company developing retinal-disease therapies, principally KSI-301. It had no approved products and generated no product revenue.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $5.7 million | $3.6 million; up 57% |
| General and administrative expense | $2.7 million | $1.9 million; up 44% |
| Total operating expenses | $8.5 million | $5.5 million |
| Net loss | $8.0 million | $8.9 million; loss narrowed $0.9 million |
| Basic and diluted loss per share | $0.21 | $1.16 |
| Net cash used in operating activities | $7.2 million | $11.3 million |
| Cash, cash equivalents and marketable securities | $81.1 million at March 31, 2019 | $88.3 million cash and equivalents at December 31, 2018; no marketable securities then |
| Current assets / current liabilities | $83.3 million / $4.8 million | At March 31, 2019 |
| Total liabilities | $7.0 million | Includes $2.3 million operating lease liability; no material debt balance reported |
| Accumulated deficit | $118.8 million | At March 31, 2019 |
Margins: Not meaningful because the company had no revenue. The company reported $0.5 million interest income and only $4,000 interest expense in Q1 2019; Q1 2018 included $1.5 million interest expense and $2.0 million other expense, primarily related to financing instruments that converted or were extinguished at the IPO. Thus, the lower net loss occurred despite higher operating costs.
Material changes and cash flows
- R&D expense rose mainly from higher payroll and personnel costs, including stock compensation, increased ABC Platform manufacturing activity, and continued KSI-501 development. KSI-301 external program expense declined with fewer manufacturing runs, partly offset by clinical-trial costs.
- G&A expense increased primarily due to salaries and stock-based compensation and higher insurance costs.
- Operating cash use decreased by $4.1 million year over year, which management attributed mainly to timing of vendor payments. Investing cash use was $23.9 million, primarily purchases of available-for-sale securities; financing provided $47,000. Cash and restricted cash declined $31.0 million during the quarter.
- Marketable securities totaled $23.9 million, all with contractual maturities under one year. Kodiak adopted the new lease standard in January 2019, recognizing a $2.1 million right-of-use asset and lease liabilities; the adoption had no material impact on operations or cash flows.
Outlook, commentary and risks
- Management believes available cash, cash equivalents and marketable securities can fund projected operations for at least 12 months from issuance of the financial statements, but expects substantial and increasing losses and plans to raise additional funding as needed. No formal revenue or earnings guidance was provided.
- KSI-301 Phase 1a involved nine patients with severe diabetic macular edema. The filing reports 12-week median improvement of nine eye-chart letters and retinal edema reduction of 121 microns after a single dose, with no dose-limiting toxicities, drug-related adverse events or intraocular inflammation observed through the last visits. These early results are not proof of later-stage efficacy or durability.
- The Phase 1b multiple-dose study in wet AMD, diabetic macular edema and retinal vein occlusion expanded its target enrollment from 50 to 90 patients. Management reported bioactivity across the indications and no observed intraocular inflammation after more than 75 doses; it expected to complete enrollment in 2019 and present ongoing data in the second half of 2019.
- Kodiak expected to begin a global Phase 2 wet-AMD study in Q3 2019, testing KSI-301 at 12-, 16- or 20-week intervals against aflibercept every eight weeks. The company intended to design it as a pivotal study; FDA feedback was that a successful study could support a marketing application. Primary data were anticipated in 2021. China IND submissions were planned for the second half of 2019.
- Principal risks include clinical and regulatory failure or delay, uncertain durability and safety, dependence on KSI-301, substantial future financing needs, competition, and reliance on third-party manufacturers and suppliers. Kodiak disclosed single-source supply dependencies for KSI-301 and noted that large-scale new batches could require at least 12 months to manufacture. It was aware of third-party patent claims that could affect future development or launch options.
- Management reported no pending legal matter expected to have a material adverse effect and concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether Phase 1b results substantiate safety, activity and dosing durability, and whether enrollment and data-presentation timing remain on plan.
- Whether the planned Phase 2 wet-AMD trial starts as expected, its final design and endpoints, and whether regulators will accept it as pivotal.
- Actual cash burn and runway as clinical programs expand, and the timing, terms and dilution risk of any additional financing.
- Manufacturing capacity, supplier continuity and patent developments that could delay or constrain KSI-301 development or commercialization.