Kodiak Sciences Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Kodiak is a clinical-stage biopharmaceutical company with no approved products and no product revenue; its lead candidate, KSI-301, is in late-stage trials for retinal diseases.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $56.0 million | $29.3 million | $141.7 million | $70.0 million |
| General and administrative | $11.5 million | $7.4 million | $32.3 million | $19.1 million |
| Net loss | $67.5 million | $36.1 million | $173.8 million | $86.5 million |
| Net loss per share | $1.30 | $0.80 | $3.36 | $1.92 |
- Operating margins are not meaningful because the company reported no revenue.
- At September 30, cash and cash equivalents were $799.2 million, with restricted cash of $6.3 million; current assets were $805.5 million and current liabilities $54.4 million. Management said cash and cash equivalents should fund anticipated operating and capital needs for at least 12 months from the filing date.
- Cash used in operating activities was $123.2 million for the first nine months, versus $56.4 million in 2020. Investing activities used $27.9 million, including property and equipment deposits; financing activities provided $6.0 million. Cash, cash equivalents and restricted cash declined $145.1 million over the period.
- Total liabilities were $231.9 million, including a $99.9 million liability related to the prior sale of future royalties and $78.9 million in operating lease liabilities. The filing reports no conventional borrowings in the presented balance sheet.
Changes and notable items
- Q3 net loss increased $31.4 million year over year; nine-month net loss increased $87.3 million. R&D was the main driver, reflecting clinical-trial and KSI-301 manufacturing activity. G&A also rose, largely from increased headcount, stock compensation, professional services and facility costs.
- KSI-301 R&D expense rose $23.0 million in Q3 and $52.0 million for the first nine months versus 2020. Stock-based compensation for the nine-month period increased to $33.4 million from $21.2 million.
- In April 2021, Kodiak expanded its Lonza manufacturing agreement. The planned facility’s estimated capital contribution was approximately CHF75 million; CHF35 million (reported as $38.7 million) had been paid by September 30. Potential commercial-supply payments of approximately CHF150 million may be incurred from 2022 through 2029.
- Stockholders approved the seven-year Long-Term Performance Incentive Plan on October 13, 2021, after quarter-end. The plan reserved 5.5 million shares; an additional 1.9 million performance-based options were granted under the 2018 plan. Kodiak was evaluating the accounting impact. These awards could create material future equity dilution if earned and vested.
Outlook, commentary and risks
- Management expects R&D spending to increase substantially as Phase 3 trials advance, the company pursues regulatory approval and prepares for potential commercialization. It expects continuing significant losses and negative operating cash flows; the company has never generated product revenue.
- Kodiak planned to seek an initial KSI-301 BLA incorporating pivotal results in wet AMD, DME and RVO. Management expected DAZZLE topline data in Q1 2022, BEACON data in mid-2022, and DAYLIGHT and GLEAM/GLIMMER data toward early 2023. GLOW, in diabetic retinopathy, was not expected to be included in the initial BLA.
- Management reported that COVID-19 had affected DME trial enrollment, with GLEAM and GLIMMER enrollment completion then expected in Q1 2022. It also cited competition with COVID-19 vaccine and therapeutic manufacturing for scarce capacity; overall missed study visits remained below 5% at the time of the filing.
- Key risks include pivotal-trial efficacy, durability or safety results differing from early data; enrollment or regulatory delays; reliance on KSI-301 and third-party manufacturing; commercial-scale production and supply constraints; competition from established anti-VEGF therapies and biosimilars; and uncertainty around pricing, reimbursement and future financing needs. The filing states there were no pending legal matters expected to have a material adverse effect.
Important facts for investors to verify
- Progress, topline results and regulatory implications of the KSI-301 pivotal trials, including whether planned timelines were met.
- Cash burn, capital requirements and the timing and cost of Lonza facility and commercial manufacturing commitments.
- Manufacturing capacity, supply-chain resilience and readiness to support trials and a potential BLA.
- The potential dilution and compensation expense associated with the performance incentive awards and other equity compensation.
- Whether COVID-19 or competitive developments alter clinical enrollment, approval prospects or the commercial opportunity.