Kodiak Sciences Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 15, 2024. Kodiak is a clinical-stage biopharmaceutical company developing treatments for retinal diseases. It reported no product revenue and has no products approved for commercial sale.
Financial results and liquidity
Unless otherwise noted, amounts are in U.S. dollars.
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $29.9 million | $56.5 million |
| General and administrative expense | $16.1 million | $18.1 million |
| Total operating expenses | $46.1 million | $74.6 million |
| Net loss | $43.0 million | $70.8 million |
| Net loss per share, basic and diluted | $0.82 | $1.35 |
| Net cash used in operating activities | $39.6 million | $47.2 million |
- Research and development expense fell $26.6 million, primarily because tarcocimab clinical activity was lower; the decrease was partly offset by Ursus commercial-scale manufacturing costs. KSI-501 program expense increased $1.4 million with increased manufacturing activity.
- Q1 2024 stock-based compensation was $18.4 million, including $8.7 million in R&D and $9.7 million in G&A.
- Cash and cash equivalents were $245.9 million at March 31, down from $285.5 million at December 31, 2023. Including restricted cash, the balance was $252.1 million. Operating cash use improved by $7.6 million year over year. Investing cash flow was a $0.2 million use in Q1 2024, compared with $173.4 million provided in Q1 2023, when marketable securities matured.
- Total assets were $434.8 million and stockholders’ equity was $241.2 million. The balance sheet included a $100.0 million liability related to sale of future royalties and operating lease liabilities of $78.3 million in total. Interest expense was zero in Q1 2024. The filing does not present a conventional borrowings balance.
- Operating margins are not meaningful because the company has no product revenue.
Material changes and business developments
- Management said cash and cash equivalents were expected to support current and planned operations into 2026, while the financial-statement note states cash is expected to cover anticipated operating and capital needs for at least 12 months following the filing. Both estimates depend on assumptions and actual cash needs could be higher.
- Kodiak resumed tarcocimab development after previously pausing it in 2023. In Q1 2024, it announced two additional Phase 3 studies: GLOW2 in diabetic retinopathy (DR), with first patients treated and a goal to complete enrollment before year-end; and tarcocimab as an additional investigational arm in the KSI-501 DAYBREAK study in wet AMD, planned for activation in mid-2024.
- The company reported that tarcocimab drug product using its go-to-market formulation was released in March for GLOW2 and DAYBREAK. It says the formulation is intended to improve manufacturability and usability; regulatory acceptance and comparability remain uncertain.
- KSI-501 Phase 1 results in diabetic macular edema were described by management as showing monthly dosing was well tolerated, with clinically meaningful visual-acuity gains and fluid reduction. The Phase 3 DAYBREAK study is intended to compare KSI-501, dosed every 4 to 24 weeks, with aflibercept; activation was targeted for mid-2024. Clinical material in an enhanced formulation was manufactured and released.
- KSI-101 is being developed for retinal fluid and inflammation. Kodiak reported supportive FDA feedback that two pivotal studies with 16-week primary endpoints would be required. A dose-finding Phase 1b APEX study was planned to begin enrollment in June 2024, with PEAK and PINNACLE studies hoped to start later in the year. KSI-101 clinical material was manufactured and released.
Outlook, risks and contingencies
- Management expects continued substantial losses and negative operating cash flows, with no product revenue expected unless a candidate is approved and commercialized or the company enters into collaborations. Kodiak says additional capital will be needed to complete development and support potential commercialization; it had no committed source of additional capital.
- Key execution risks include clinical-trial outcomes and enrollment, regulatory requirements, manufacturing scale-up and supply, and the company’s ability to raise capital. Kodiak relies on third parties, including Lonza, and does not have redundant supply arrangements for its candidates.
- Tarcocimab has a mixed clinical record: prior Phase 2b/3 wet AMD and Phase 3 GLEAM and GLIMMER studies did not meet their primary efficacy endpoints. The company also reported an unexpected increase in cataracts in the GLEAM and GLIMMER tarcocimab arms, which it believes may have contributed to the results. Further development, safety, durability and formulation comparability are uncertain.
- The company’s cash estimates may prove inaccurate. If additional financing is unavailable on acceptable terms, Kodiak may need to delay, reduce or discontinue programs, or license rights to candidates. Equity financing could dilute shareholders; debt financing could add restrictive covenants.
- Management reported no pending legal matters expected to have a material adverse effect and no material changes in contractual obligations since year-end, other than as disclosed in the filing. Disclosure controls were assessed as effective at a reasonable-assurance level as of March 31, 2024; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether GLOW2, DAYBREAK and KSI-101 studies start, enroll and progress on the timelines described, and whether regulators require additional studies.
- New clinical data for efficacy, durability and safety, especially given tarcocimab’s prior trial failures and cataract signal.
- Manufacturing readiness, formulation comparability and the ability to use the Lonza Ursus facility efficiently for current programs.
- Cash burn, the assumptions supporting management’s runway estimate into 2026, and the timing and terms of any future financing.
- Potential dilution: 17.3 million stock options were outstanding at March 31, 2024, alongside 151,716 unvested restricted shares.