KODIAK SCIENCES INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and the related notes included elsewhere in this report and
with our audited financial statements and related notes thereto and management's
discussion and analysis of financial condition and results of operations for the
year ended
Overview
At Kodiak, we are bringing new science to the design and development of next generation retinal medicines. Our ABC Platform™ uses molecular engineering to merge the fields of antibody-based and chemistry-based therapies and is at the core of Kodiak's discovery engine. Our goal is to prevent and treat the major causes of blindness by developing and commercializing next-generation therapeutics for chronic, high-prevalence retinal diseases.
Throughout 2020 and into 2021, we have generated compelling clinical data with our most advanced product candidate, KSI-301, a novel anti-VEGF antibody biopolymer conjugate, which is designed to maintain potent and effective drug levels in ocular tissues for longer periods than the currently-marketed biologic medicines used to treat retinal diseases. We believe that KSI-301, if approved, has the potential to be an important therapy to treat patients with wet age-related macular degeneration, or wet AMD, diabetic macular edema, or DME, macular edema due to retinal vein occlusion, or RVO, and diabetic retinopathy, or DR.
We continue to expand the KSI-301 development program towards the goal of having the medicine approved and available to physicians for broad, first-line treatment of patients across all of these indications.
We also believe that KSI-301 has the potential to be an important therapy for other vision-threatening diseases that are less prevalent but also may be responsive to anti-VEGF therapy, such as retinopathy of prematurity and myopic choroidal neovascularization, and we may develop KSI-301 for such diseases in the future.
The ABC Platform and KSI-301 were developed at Kodiak, and we own rights to
these assets in key geographies including the US, EU,
Our overall objective is to develop our retina-focused product candidates, seek FDA and worldwide health authority marketing authorization approvals, and ultimately commercialize our product candidates.
Recent Updates
KSI-301 Pivotal Program
We are engaged in a broad development program for KSI-301 with concurrent late-stage development activities across all of the major disease indications for which intravitreal anti-VEGFs are used. We expect to include the results of all our pivotal clinical trials in wAMD, DME and RVO in a single initial BLA.
Developing and launching a novel anti-VEGF medicine with extended durability is
the central principle of our KSI-301 development program, and in the last
quarter we have continued to make substantial progress in the recruitment of our
pivotal studies evaluating long-interval dosing of KSI-301. Each study is
evaluating KSI-301's potential for best-in-class long-interval dosing regimens.
Our Phase 2b/3 DAZZLE pivotal study in patients with treatment-naïve wet AMD was
initiated in
Towards our goal of having KSI-301 be the anti-VEGF medicine of choice for all eligible patients, and through our continued engagement with the retina community, we have also learned that physicians and retina practices would like to see our potential product labeling for KSI-301 include the option for more frequent dosing in high need patients. Physicians recognize the clear unmet need for a medicine that that can last longer than existing medicines. From the commercial perspective, for KSI-301 to achieve our goal of being a first-line treatment of choice for all patients, physicians also need to be confident they will be reimbursed for more
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frequent use of it as needed in high need patients, which requires a broad label spanning monthly through five and/or six months in each of the major indications. For example, a label that lacks monthly dosing could limit access and reimbursement for KSI-301 in wAMD to an extended labeled dosing regimen of every 12-weeks or less frequent dosing. This could leave a "window" of 4 to 8 weeks where physicians may not be able to be reimbursed for additional use of KSI-301 and, in fact, may not be able to be reimbursed for additional use of any anti-VEGF medicine in high need patients. A similar reimbursement challenge occurred with Eylea until its label was revised to specifically note that "some patients may need every 4 week (monthly) dosing." Beovu similarly launched without a monthly label, and we believe faricimab may also launch without a monthly label. We believe that pursuing the broadest possible product label will provide physicians with the flexibility, agency, and reimbursement confidence required to consider KSI-301 for all their patients.
We intend to broaden KSI-301's potential product labeling to eliminate possible barriers to market access and insurance reimbursement that have impeded or complicated the commercial uptake of other anti-VEGF medications in the past. Consequently, we are electing to add another label broadening and label enabling pivotal study of KSI-301 to our initial BLA clinical development plan. This additional pivotal study, called DAYLIGHT, will be an intensive treatment study of KSI-301 in treatment-naïve wAMD patients. Patients will be randomized to receive either KSI-301 on a monthly dosing regimen or to receive standard-care aflibercept. The primary endpoint is at ten months. wAMD was chosen as the disease area for this intensive-treatment study because of the broader availability of clinical trial sites and treatment-naïve wAMD patients relative to the other diseases in which we also have studies ongoing. We believe we are on track to begin recruitment of DAYLIGHT in 3Q 2021 and, given the expected recruitment and short (10 month) follow up to the primary endpoint, we plan to include data from this study in our initial BLA for KSI-301 and do not at this time expect DAYLIGHT to impact the BLA timing.
Importantly, based on our discussions with regulators in the US, we also believe the DAYLIGHT study can provide the safety exposure database needed to support monthly labeling across the wAMD, DME and RVO indications in the US and thus maximize treatment flexibility and reimbursement confidence in all the major anti-VEGF disease areas.
We also believe we are on track to begin screening and recruiting patients in mid-2021 in our Phase 3 GLOW study in patients with non-proliferative Diabetic Retinopathy without DME, although we are not planning for this study and indication to be included in our initial BLA filing given the long timeframe we expect to be required to recruit patients in this chronic, more preventive disease indication.
This expanded pivotal program for KSI-301 reflects our conviction in KSI-301 (and our ABC Platform) and seeks labeling at launch that is supportive of a broad range of individualized dosing intervals, from every 4-week dosing up to once every 20-week dosing for wAMD patients; from every 4-week dosing up to once every 24-week dosing for DME patients; and from every 4-week dosing up to once every 8-week dosing for RVO patients.
This conviction is also reflected in our concurrent manufacturing efforts, notably increasing the capacity of our dedicated IBEX manufacturing facility by 70% (to more than ten million doses per year) and also our continued efforts towards the potential of early commercial availability of our pre-filled syringe, both key efforts supportive of strong early commercial uptake.
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Commercial Manufacturing
We have expanded and finalized the design and scope of our bioconjugation
agreement with Lonza, with a revised estimated capital contribution of
Notably, the enhanced design of our dedicated manufacturing facility increases the annual manufacturing capacity by 70% and also separates the manufacturing core into two separate suites with the benefit of allowing two manufacturing lines to operate separately and simultaneously.
Accelerated Development Strategy
The table below summarizes our current thinking on the timing of our KSI-301 program and its broad and concurrent execution, and we believe the successful prosecution of this program is achievable based on our currently available information and the evolving effects of the COVID-19 pandemic. We believe we are still on track to achieve our "2022 Vision" objectives of announcing topline data across our pivotal studies in 2022. Notably, slightly slower enrollment timelines in our GLEAM and GLIMMER trials associated with somewhat softer treatment naïve DME patient presentation at clinics during the pandemic, the addition of DAYLIGHT, and manufacturing headwinds from competition with commercial vaccine manufacturing are pushing us into early 2023 for our BLA timeline.
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China INDs
In
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KSI-301 Phase 1b Study
In
COVID-19
We are continuing to monitor the global ongoing COVID-19 pandemic. Since the
initial outbreak in early 2020, governments globally have taken preventative and
protective actions, including but not limited to, restrictions on non-essential
travel, business operations, and gatherings of individuals. The
We continue to monitor government responses and may elect to temporarily close
our office and/or laboratory space to protect our employees. We continue to
assess the potential for supply chain disruptions as the pandemic may impact
personnel at third party manufacturing facilities in
We and our key clinical and manufacturing partners have been able to continue to advance our operations. Because the diseases under study in the KSI-301 development program are serious, vision-threatening conditions for which patients are still seeking and receiving treatment from retina specialists during the pandemic, we have been able to continue advancing the clinical programs for KSI-301 during the pandemic towards achieving our "2022 Vision."
During this pandemic, we continue to work closely with our clinical sites towards maximal patient safety and the lowest number of missed visits and study discontinuations. We have taken and continue to take proactive measures to maintain the integrity of our ongoing clinical studies. To date, we continue to see low levels of patient missed visits.
In response to the COVID-19 pandemic with regards to business operations, clinical trials, and manufacturing activities:
• We have taken steps in line with guidance from the U.S.Centers for Disease Control and Prevention , orCDC , and theState of California to protect the health and safety of our employees and the community. • We are working closely with our clinical trial sites to monitor and attempt to minimize the potential impacts of the evolving COVID-19 pandemic on patient enrollment, continued participation of patients already enrolled in our clinical studies, protocol compliance, data quality, and overall study integrity. Some specific actions we have taken inthe United States include the use of remote study monitoring, temporarily increasing study site budget overhead rates, providing additional transportation service options for patients to attend study site visits and focusing on new patient enrollment only at study sites with appropriate backup resource plans in place and where the local COVID-19 situation allows. the overall rate of missed study visits remains <5%. As of now, we have not experienced significant delays to our ongoing or planned clinical trials; however, this could change rapidly depending on the dynamics of the pandemic. • To minimize the potential for disruption of our pivotal studies of KSI-301, we refined our study designs, including sample size and country selection. We began enrollment of our pivotal DME (GLEAM and GLIMMER) and RVO (BEACON) studies in the third quarter of 2020 inthe United States and aim to initiate the DAYLIGHT wet AMD study and our pivotal study in non-proliferativeDR (GLOW) in summer 2021, dependent on the continued evolution of the COVID-19 pandemic. All of our EU andIsrael clinical trial application submissions are active and approved for GLEAM, GLIMMER and BEACON, and global recruitment activities are underway in all three studies. • Our clinical supply chain and manufacturing activities remain intact, and we do not currently anticipate disruptions to our clinical supply of KSI-301 due to COVID-19. 14
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• As we work towards commercial scale-up and manufacturing activities to
support BLA submission, there is increasing competition with COVID-19
related vaccine and therapeutic programs for manufacturing related (i)
materials such as resins, filters, sterile tubesets, pipette tips; (ii)
personnel such as facility engineering and construction as well as plant
engineers and workers; and (iii) production slots in cGMP facilities. These
events may cause delays to our commercial manufacturing timelines.
Construction of the IBEX facility is now targeted for completion in early
2022. The primary cause of the revised timeline is construction delays
encountered at the Ibex Dedicate Facility in Switzerland due to COVID-19
vaccine related manufacturing activities, primarily limitation of
construction and facility personnel resources.
We will continue to monitor the COVID-19 situation closely. The ultimate impact of the ongoing COVID-19 pandemic on our business operations remains highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. See also the section titled "Risk Factors" for additional information on risks and uncertainties related to the evolving COVID-19 pandemic.
Components of Operating Results
Operating Expenses
Research and Development Expenses
Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our ABC Platform and product candidates. These expenses include certain payroll and personnel expenses, including stock-based compensation, for our research and product development employees; laboratory supplies and facility costs; consulting costs; contract manufacturing and fees paid to CROs to conduct certain research and development activities on our behalf; and allocated overhead, including rent, equipment, depreciation and utilities. We expense both internal and external research and development expenses as they are incurred. Costs of certain activities, such as manufacturing and preclinical and clinical studies, are generally recognized based on an evaluation of the progress to completion of specific tasks. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.
We are focusing substantially all of our resources and development efforts on the development of our product candidates, in particular KSI-301. We expect our research and development expenses to increase substantially during the next few years as we conduct our Phase 3 clinical studies, complete our clinical program, pursue regulatory approval of our drug candidates and prepare for a possible commercial launch. Predicting the timing or the final cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our drug candidates will receive regulatory approval with any certainty.
General and Administrative Expenses
General and administrative expenses consist principally of payroll and personnel expenses, including stock-based compensation; professional fees for legal, consulting, accounting and tax services; allocated overhead, including rent, equipment, depreciation and utilities; and other general operating expenses not otherwise classified as research and development expenses.
We anticipate that our general and administrative expenses will increase as a
result of increased personnel costs, including stock-based compensation,
expanded infrastructure and higher consulting, legal and accounting services
associated with maintaining compliance with requirements of the stock exchange
listing and
Interest Income
Interest income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.
Other Income (Expense), Net
Other income (expense), net consists primarily of accretion income and amortization expense on marketable debt securities net of amortized issuance costs from the liability related to the future sale of royalties to BBA in 2019.
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Results of Operations
The following table summarizes the results of our operations for the periods
indicated, in thousands:
Three Months Ended
March 31,
2021 2020 Change
Operating expenses
Research and development $ 40,337 $ 20,170 $ 20,167
General and administrative 10,221 5,553 4,668
Loss from operations (50,558 ) (25,723 ) (24,835 )
Interest income 149 1,208 (1,059 )
Interest expense (6 ) (7 ) 1
Other income (expense), net (32 ) 130 (162 )
Net loss $ (50,447 ) $ (24,392 ) $ (26,055 ) Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated, in thousands:
Three Months Ended
March 31,
2021 2020 Change
KSI-301 program expenses $ 23,486 $ 12,285 $ 11,201
KSI-501 program expenses 1,665 75 1,590
ABC Platform and other program expenses 2,076 724 1,352
Payroll and personnel expenses 9,613 5,888 3,725
Facilities and other research and development
expenses 3,497 1,198 2,299
Total research and development expenses
KSI-301 program expenses increased
KSI-501 program increased
ABC Platform expenses increased
Payroll and personnel expenses increased
Facilities and other research and development expenses increased
General and Administrative Expenses
General and administrative expenses increased
Liquidity and Capital Resources; Plan of Operations
Sources of Liquidity
We have funded our operations primarily through the sale and issuance of common
stock, redeemable convertible preferred stock, convertible notes, warrants and
the sale of royalties. As of
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Future Funding Requirements
We have incurred net losses since our inception. For the three months ended
We have based these estimates on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect. Because of the risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors.
To date, we have not generated any product revenue. We do not expect to generate any product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect our losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
We have based these estimates on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. The timing and amount of our operating expenditures and capital requirements will depend on many factors, including:
• the scope, timing, rate of progress and costs of our drug discovery,
preclinical development activities, laboratory testing and clinical trials
for our product candidates;
• the number and scope of clinical programs we decide to pursue;
• the scope and costs of manufacturing development and commercial
manufacturing activities;
• the extent to which we acquire or in-license other product candidates and
technologies;
• the cost, timing and outcome of regulatory review of our product candidates;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
• our ability to establish and maintain collaborations on favorable terms, if
at all;
• our efforts to enhance operational systems and our ability to attract, hire
and retain qualified personnel, including personnel to support the
development of our product candidates; and
• the cost and timing associated with commercializing our product candidates,
if they receive marketing approval.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license rights to our product candidates in certain territories or indications to others that we would prefer to develop and commercialize ourselves.
The significant uncertainties caused by the evolving effects of the ongoing COVID-19 pandemic may also negatively impact our operations and capital resources. We and our key clinical and manufacturing partners have been able to continue to advance our operations, and we continue to monitor the impact of COVID-19 on our ability to continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. This pandemic may ultimately have a material adverse effect on our liquidity and operating plans, although we are unable to make any prediction with certainty given the spread and rapidly changing nature of the pandemic and the evolving global actions taken to contain and treat the novel coronavirus.
Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. See the section of this report titled "Part II, Item 1A - Risk Factors" for additional risks associated with our substantial capital requirements.
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