10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _________

Commission File Number: 001-38682

 

KODIAK SCIENCES INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-0476525

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1200 Page Mill Road

Palo Alto, CA

94304

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (650) 281-0850

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001

KOD

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of July 31, 2021, the registrant had 51,451,541 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, or similar expressions and comparable terminology intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those set forth under the section of this Quarterly Report on Form 10-Q titled “Part II, Item 1A — Risk Factors” and elsewhere in this report. Forward-looking statements include, but are not limited to, statements about:

the success, cost and timing of our development activities, preclinical studies, clinical trials and regulatory filings;
the translation of our preclinical results and data and early clinical trial results in particular relating to safety, efficacy and durability into future clinical trials in humans;
the continued durability, efficacy and safety of our product candidates;
our ability to achieve our “2022 Vision” of a single Biologics License Application, or BLA, of KSI-301 in 2022;
our ability to present clinical data across our pivotal trials in 2022;
our and Lonza’s ability to successfully execute on our manufacturing development plan;
the number, size and design of clinical trials that regulatory authorities may require to obtain marketing approval, including the order and number of clinical studies required to support a BLA in wet age-related macular degeneration, or wet AMD, diabetic macular edema, or DME, retinal vein occlusion, or RVO, and diabetic retinopathy, or DR;
our expectations regarding chemistry manufacturing and controls, or CMC, requirements of the FDA and other regulatory bodies to support our BLA submission and potential commercial launch;
the timing or likelihood of regulatory filings and approvals, including the potential to achieve FDA approval of KSI-301 in wet AMD, DME, RVO and DR;
our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;
our ability to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our product candidates;
the rate and degree of market acceptance of our product candidates;
the success of competing products or platform technologies that are or may become available;
our plans and ability to establish sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain approval;
our expectation as to the concentration of retinal specialists in the United States and its impact on our sales and marketing plans;
our expectations regarding our ability to enter into manufacturing-related commitments, and the timing thereof;
future agreements with third parties in connection with the commercialization of our product candidates;
the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets;
existing regulations and regulatory developments in the United States and foreign countries;

i


 

the expected potential benefits of strategic collaboration agreements and our ability to attract collaborators with development, regulatory and commercialization expertise;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;
potential claims relating to our intellectual property and third-party intellectual property;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
the pricing and reimbursement of our product candidates, if approved;
our estimates regarding the impact of the novel coronavirus, or COVID-19, pandemic on our business and operations, the business and operations of our collaborators, and on the global economy;
our aspirational goals and objectives related to our human capital resources and workforce objectives;
our ability to attract and retain key managerial, scientific and medical personnel;
the accuracy of our estimates regarding the sufficiency of our cash resources, expenses, future revenue, capital requirements and needs for additional financing; and
our financial performance.

All forward-looking statements are based on information available to us on the date of this Quarterly Report on Form 10-Q and we will not update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law. Our actual results could differ materially from those discussed in this Quarterly Report on Form 10-Q. The forward-looking statements contained in this Quarterly Report on Form 10-Q, and other written and oral forward-looking statements made by us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, and you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Factors that might cause such a difference include, but are not limited to, those discussed in the following discussion and within the section of this Quarterly Report on Form 10-Q titled “Part II, Item 1A — Risk Factors”.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to “Kodiak” the “Company,” “we,” “us,” and “our” refer to Kodiak Sciences Inc. and its subsidiaries.

 

ii


 

SELECTED RISKS AFFECTING OUR BUSINESS

Investing in our common stock involves numerous risks, including the risks described in “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects. These risks include, among others, the following:

We are in the clinical stage of drug development and have a very limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.
We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur significant and increasing net losses for the foreseeable future.
Drug development is a highly uncertain undertaking and involves a substantial degree of risk. We have never generated any revenue from product sales, and we may never generate revenue or be profitable.
Our prospects are heavily dependent on our KSI-301 product candidate, which is currently in clinical development for multiple indications.
A failure of KSI-301 in clinical development may require us to discontinue development of other product candidates based on our ABC Platform.
Research and development of biopharmaceutical products is inherently risky. We cannot give any assurance that any of our product candidates will receive regulatory, including marketing, approval, which is necessary before they can be commercialized.
We may encounter substantial delays in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.
We may encounter difficulties enrolling patients in our clinical trials, and our clinical development activities could thereby be delayed or otherwise adversely affected.
Our clinical trials may fail to demonstrate substantial evidence of the durability, efficacy and safety of our product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.
We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may retain their market share with existing drugs or achieve regulatory approval before us or develop therapies that are safer, more advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.
The manufacture of our product candidates is highly complex and requires substantial lead time to produce.
We have no experience manufacturing any of our product candidates at a commercial scale. If we or any of our third-party manufacturers encounter difficulties in production or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical trials or our ability to provide the information needed in the regulatory dossiers for our BLA filing, or our ability to supply our products for patients, if approved, could be delayed or stopped, or we may be unable to establish a commercially viable cost structure.
The regulatory approval processes of the FDA, EMA, NMPA and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.
We plan to conduct clinical trials for our product candidates outside the United States, and the FDA, EMA, NMPA and applicable foreign regulatory authorities may not accept data from such trials.
Our business is subject to complex and evolving U.S. and foreign laws and regulations relating to privacy and data protection. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, or monetary penalties, and otherwise may harm our business.
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We expect to rely on third parties to conduct many aspects of our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.

iii


 

If we are unable to obtain and maintain patent protection for any product candidates we develop or for our ABC Platform, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.
Third-party claims of intellectual property infringement, misappropriation or other violation against us or our collaborators may prevent or delay the development and commercialization of our ABC Platform, product candidates and other technologies.
We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming and unsuccessful.
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our business is currently affected and could be materially and adversely affected in the future by the effects of disease outbreaks, epidemics and pandemics, including the ongoing effects of the COVID-19 pandemic. The COVID-19 pandemic continues to impact our business and could materially and adversely affect our operations, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business. Our manufacturers are also engaged in the manufacturing of COVID-19 related vaccines and therapeutic treatments, and the success of and demand for these vaccines and therapeutic treatments means we and our programs are competing for scarce manufacturing resources.

 

iv


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

PART II.

OTHER INFORMATION

21

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 3.

Defaults Upon Senior Securities

62

Item 4.

Mine Safety Disclosures

62

Item 5.

Other Information

62

Item 6.

Exhibits

63

Signatures

64

 

v


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

Kodiak Sciences Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

880,870

 

 

$

944,396

 

Marketable securities

 

 

 

 

 

24,578

 

Prepaid expenses and other current assets

 

 

3,462

 

 

 

3,031

 

Total current assets

 

 

884,332

 

 

 

972,005

 

Restricted cash

 

 

6,324

 

 

 

6,324

 

Property and equipment, net

 

 

9,460

 

 

 

5,136

 

Operating lease right-of-use asset

 

 

70,278

 

 

 

73,672

 

Other assets

 

 

27,207

 

 

 

10,210

 

Total assets

 

$

997,601

 

 

$

1,067,347

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,738

 

 

$

8,646

 

Accrued and other current liabilities

 

 

37,034

 

 

 

20,402

 

Operating lease liability

 

 

1,248

 

 

 

2,374

 

Total current liabilities

 

 

41,020

 

 

 

31,422

 

Operating lease liability, net of current portion

 

 

77,004

 

 

 

75,028

 

Liability related to sale of future royalties

 

 

99,916

 

 

 

99,890

 

Other liabilities

 

 

234

 

 

 

256

 

Total liabilities

 

 

218,174

 

 

 

206,596

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized;
   
0 shares issued and outstanding at June 30, 2021 and
   December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 490,000,000 shares authorized
   at June 30, 2021 and December 31, 2020;
51,434,408 and
   
51,112,302 shares issued and outstanding at June 30, 2021 and
   December 31, 2020, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

1,176,948

 

 

 

1,151,920

 

Accumulated other comprehensive income

 

 

 

 

 

53

 

Accumulated deficit

 

 

(397,526

)

 

 

(291,227

)

Total stockholders’ equity

 

 

779,427

 

 

 

860,751

 

Total liabilities and stockholders’ equity

 

$

997,601

 

 

$

1,067,347

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

Kodiak Sciences Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended
  June 30,

 

 

Six Months Ended
  June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

45,404

 

 

$

20,557

 

 

$

85,741

 

 

$

40,727

 

General and administrative

 

 

10,505

 

 

 

6,222

 

 

 

20,726

 

 

 

11,775

 

Total operating expenses

 

 

55,909

 

 

 

26,779

 

 

 

106,467

 

 

 

52,502

 

Loss from operations

 

 

(55,909

)

 

 

(26,779

)

 

 

(106,467

)

 

 

(52,502

)

Interest income

 

 

81

 

 

 

698

 

 

 

230

 

 

 

1,906

 

Interest expense

 

 

(5

)

 

 

(6

)

 

 

(11

)

 

 

(13

)

Other income (expense), net

 

 

(19

)

 

 

88

 

 

 

(51

)

 

 

218

 

Net loss

 

$

(55,852

)

 

$

(25,999

)

 

$

(106,299

)

 

$

(50,391

)

Net loss per common share, basic and diluted

 

$

(1.08

)

 

$

(0.58

)

 

$

(2.06

)

 

$

(1.12

)

Weighted-average common shares outstanding used in
   computing net loss per common share, basic and diluted

 

 

51,573,894

 

 

 

44,969,795

 

 

 

51,644,946

 

 

 

44,897,269

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains related to available-for-sale
   debt securities, net of tax

 

 

(18

)

 

 

105

 

 

 

(53

)

 

 

584

 

Total other comprehensive income (loss)

 

 

(18

)

 

 

105

 

 

 

(53

)

 

 

584

 

Comprehensive loss

 

$

(55,870

)

 

$

(25,894

)

 

$

(106,352

)

 

$

(49,807

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

Kodiak Sciences Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

51,112,302

 

 

$

5

 

 

$

1,151,920

 

 

$

53

 

 

$

(291,227

)

 

$

860,751

 

Issuance of common stock upon
   exercise of stock options

 

 

113,559

 

 

 

 

 

 

1,483

 

 

 

 

 

 

 

 

 

1,483

 

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

9,925

 

 

 

 

 

 

 

 

 

9,925

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

(35

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,447

)

 

 

(50,447

)

Balances at March 31, 2021

 

 

51,225,861

 

 

$

5

 

 

$

1,163,328

 

 

$

18

 

 

$

(341,674

)

 

$

821,677

 

Issuance of common stock upon
   exercise of stock options

 

 

131,276

 

 

 

 

 

 

2,228

 

 

 

 

 

 

 

 

 

2,228

 

Issuance of common stock upon
   vesting of restricted stock units,
   net of taxes withheld

 

 

72,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant
   to employee stock purchase plans

 

 

4,295

 

 

 

 

 

 

305

 

 

 

 

 

 

 

 

 

305

 

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

11,087

 

 

 

 

 

 

 

 

 

11,087

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55,852

)

 

 

(55,852

)

Balances at June 30, 2021

 

 

51,434,408

 

 

$

5

 

 

$

1,176,948

 

 

$

 

 

$

(397,526

)

 

$

779,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2019

 

 

44,413,404

 

 

$

5

 

 

$

503,475

 

 

$

10

 

 

$

(158,131

)

 

$

345,359

 

Issuance of common stock upon
   exercise of stock options

 

 

39,297

 

 

 

 

 

 

159

 

 

 

 

 

 

 

 

 

159

 

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

6,082

 

 

 

 

 

 

 

 

 

6,082

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

479

 

 

 

 

 

 

479

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,392

)

 

 

(24,392

)

Balances at March 31, 2020

 

 

44,452,701

 

 

$

5

 

 

$

509,716

 

 

$

489

 

 

$

(182,523

)

 

$

327,687

 

Issuance of common stock upon
   exercise of stock options

 

 

203,373

 

 

 

 

 

 

720

 

 

 

 

 

 

 

 

 

720

 

Issuance of common stock upon
   vesting of restricted stock units,
   net of taxes withheld

 

 

10,942

 

 

 

 

 

 

(206

)

 

 

 

 

 

 

 

 

(206

)

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

6,890

 

 

 

 

 

 

 

 

 

6,890

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

105

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,999

)

 

 

(25,999

)

Balances at June 30, 2020

 

 

44,667,016

 

 

$

5

 

 

$

517,120

 

 

$

594

 

 

$

(208,522

)

 

$

309,197

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Kodiak Sciences Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended
  June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(106,299

)

 

$

(50,391

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

466

 

 

 

216

 

Stock-based compensation

 

 

21,012

 

 

 

12,972

 

Amortization (accretion) of premium (discount) on marketable securities

 

 

25

 

 

 

(231

)

Amortization of operating lease right-of-use asset

 

 

3,897

 

 

 

199

 

Amortization of issuance costs

 

 

26

 

 

 

22

 

Changes in assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(431

)

 

 

933

 

Other assets

 

 

(35

)

 

 

(2,305

)

Accounts payable

 

 

(5,753

)

 

 

4,338

 

Accrued and other current liabilities

 

 

15,459

 

 

 

2,620

 

Operating lease liability

 

 

347

 

 

 

(210

)

Net cash used in operating activities

 

 

(71,286

)

 

 

(31,837

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,772

)

 

 

(249

)

Deposits on property and equipment

 

 

(16,962

)

 

 

 

Purchase of marketable securities

 

 

 

 

 

(86,317

)

Maturities of marketable securities

 

 

24,500

 

 

 

76,150

 

Net cash provided by (used in) investing activities

 

 

3,766

 

 

 

(10,416

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock upon options exercise

 

 

3,711

 

 

 

879

 

Payments for restricted stock units, net of taxes withheld

 

 

 

 

 

(206

)

Proceeds from issuance of common stock pursuant to employee stock purchase plans

 

 

305

 

 

 

 

Proceeds from sale of future royalties, net of issuance costs

 

 

 

 

 

99,643

 

Principal payments of capital lease

 

 

 

 

 

(5

)

Principal payments of tenant improvement allowance payable

 

 

(22

)

 

 

(19

)

Net cash provided by financing activities

 

 

3,994

 

 

 

100,292

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(63,526

)

 

 

58,039

 

Cash, cash equivalents and restricted cash, at beginning of period

 

 

950,720

 

 

 

211,937

 

Cash, cash equivalents and restricted cash, at end of period

 

$

887,194

 

 

$

269,976

 

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

880,870

 

 

$

269,836

 

Restricted cash

 

 

6,324

 

 

 

140

 

Cash, cash equivalents and restricted cash in consolidated balance sheets

 

$

887,194

 

 

$

269,976

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash investing and financing information:

 

 

 

 

 

 

Operating lease right-of-use asset obtained in exchange for operating lease liability

 

$

498

 

 

$

 

Purchase of property and equipment under accounts payable and accruals

 

$

1,821

 

 

$

77

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Kodiak Sciences Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

1. The Company

Kodiak Sciences Inc. (the “Company”) is a biopharmaceutical company committed to researching, developing and commercializing transformative therapeutics to treat high prevalence retinal diseases in the United States and additional international markets. The Company devotes substantially all of its resources to the research and development of its product platforms and product candidates including activities to conduct clinical studies of its product candidates, manufacture product candidates and provide general and administrative support for these operations.

Liquidity

As of June 30, 2021, the Company had cash and cash equivalents of $880.9 million. Although the Company has incurred significant operating losses since inception and expects to continue to incur operating losses and negative operating cash flows for the foreseeable future, the Company believes that the cash and cash equivalents will be sufficient to meet the anticipated operating and capital expenditure requirements for the 12 months following the date of this Form 10-Q.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applicable to interim periods. The condensed consolidated financial statements, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the Company's financial position and results of operations for the reported periods.

These condensed consolidated financial statements have been prepared on a basis substantially consistent with, and should be read in conjunction with the audited financial statements for the year ended December 31, 2020 and notes thereto, the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted from this report. The results of operations for any interim period are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.

The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no impact on subtotals in the prior year condensed consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and expenses during the reporting period. The impact of the ongoing COVID-19 pandemic continues to evolve. As a result, certain estimates and assumptions required increased judgment and carried a higher degree of variability and volatility, including but not limited to, the fair value of marketable securities, performance-based equity awards, and research and development accruals for the three and six months ended June 30, 2021. As events continue to unfold and additional information becomes available, these estimates may change materially in future periods. Actual results could differ from those estimates.

5


Kodiak Sciences Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

 

Risks and Uncertainties

In March 2020, the World Health Organization declared a pandemic due to the global COVID-19 outbreak. The significant uncertainties caused by the ongoing COVID-19 pandemic may negatively impact the Company’s operations, liquidity, and capital resources and will depend on certain evolving developments, including the duration and spread of the outbreak, regulatory and private sector responses and the impact on employees and vendors including supply chain and clinical partners, all of which are uncertain and cannot be predicted. During this pandemic, the Company continues to work closely with clinical sites towards maximal patient safety and the lowest number of missed visits and study discontinuations. The Company has taken and continues to take proactive measures to maintain the integrity of its ongoing clinical studies. Despite these efforts, the ongoing COVID-19 pandemic could significantly impact clinical trial enrollment and completion of its clinical studies. During this pandemic, we continue to work closely with our manufacturing suppliers, partners and facilities to maintain the supply of our product candidates needed for the expansion of our clinical trials and to retain the number, scale and design of manufacturing runs that regulatory authorities may require to obtain marketing approval, including those required to support a BLA submission. Despite these efforts, the ongoing COVID-19 pandemic could significantly impact the timing or likelihood of clinical resupply and of regulatory filings and approvals. The Company will continue to monitor the COVID-19 situation and its impact on the ability to continue the development of, and seek regulatory approvals for, the Company’s product candidates, and begin to commercialize any approved products.

Summary of Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2021, respectively, are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, except as noted within the “Recent Accounting Pronouncements – Recently Adopted Accounting Pronouncements” section.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), under its Accounting Standards Codification or other standard setting bodies, and adopted by the Company as of the specified effective date, unless otherwise discussed below.

Recently Adopted Accounting Pronouncements

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics and disclosure requirements to improve alignment with the SEC's regulations. The Company adopted this new guidance as of January 1, 2021, and this guidance did not have a material impact on its consolidated financial statements and related disclosures.

New Accounting Pronouncements Not Yet Adopted

The Company continues to monitor new accounting pronouncements issued by the FASB. All other newly issued accounting pronouncements issued through the date of this report have been deemed either immaterial or not applicable. 

3. Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Accrued clinical trial and related costs

 

$

26,398

 

 

$

11,119

 

Accrued research and development

 

 

3,953

 

 

 

3,082

 

Accrued salaries and benefits

 

 

3,425

 

 

 

5,094

 

Accrued legal fees

 

 

707

 

 

 

252

 

Accrued professional fees

 

 

118

 

 

 

253

 

Accrued other liabilities

 

 

2,433

 

 

 

602

 

Total accrued and other current liabilities

 

$

37,034

 

 

$

20,402

 

 

6


Kodiak Sciences Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

 

4. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for assets measured at fair value on a recurring basis (in thousands):

 

 

 

Fair Value Measurements at June 30, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

825,676

 

 

$

 

 

$

 

 

$

825,676

 

Total

 

$

825,676

 

 

$

 

 

$

 

 

$

825,676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

917,485

 

 

$

 

 

$

 

 

$

917,485

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

 

 

 

 

10,006

 

 

 

 

 

 

10,006

 

Corporate notes

 

 

 

 

 

14,572

 

 

 

 

 

 

14,572

 

Total

 

$

917,485

 

 

$

24,578

 

 

$

 

 

$

942,063

 

 

As of June 30, 2021 and December 31, 2020, the fair value of the liability related to sale of future royalties is based on our current estimates of future royalties expected to be paid to Baker Bros. Advisors, LP (“BBA”), which are considered Level 3 inputs. 

5. Marketable Securities

The marketable securities are classified as available-for-sale and consist of U.S. treasury securities and corporate notes. The fair value measurement data for marketable securities is obtained from independent pricing services. The Company validates the prices provided by the third-party pricing services by understanding the valuation methods and data sources used and analyzing the pricing data in certain instances.

The Company had no marketable securities at June 30, 2021. The following table summarizes the marketable securities (in thousands):

 

As of December 31, 2020

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

U.S. treasury securities

 

$

10,003

 

 

$

3

 

 

$

 

 

$

10,006

 

Corporate notes

 

 

14,522

 

 

 

50

 

 

 

 

 

 

14,572

 

Total marketable securities, current

 

$

24,525

 

 

$

53

 

 

$

 

 

$

24,578

 

 

All marketable securities held at December 31, 2020 had effective maturities of less than one year. There were no realized gains or losses recognized on the sale or maturity of available-for-sale debt securities during the three and six months ended June 30, 2021, respectively, and as a result, the Company did not reclassify any amounts out of accumulated comprehensive loss. As of June 30, 2021 and December 31, 2020, the Company had no allowance for credit losses for available-for-sale debt securities. There were no impairment charges or recoveries recorded during each of the six months ended June 30, 2021 and June 30, 2020, respectively.

 

7


Kodiak Sciences Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

 

 

6. Commitments and Contingencies

Embedded Lease

In August 2020, the Company and its wholly-owned subsidiary Kodiak Sciences GmbH entered into a manufacturing agreement with Lonza Ltd (“Lonza”) for the clinical and commercial supply of drug substance for KSI-301. A custom-built manufacturing facility is planned to be completed and dedicated to the manufacture of the Company’s drug substance. The manufacturing agreement has an initial term of eight years, and the Company has the right to extend the term up to a total of 16 years. The Company and Lonza each have the ability to terminate this agreement upon the occurrence of certain conditions.

In April 2021, the agreement was amended to provide for higher annual manufacturing capacity. The Company expanded and finalized the design and scope of the bioconjugate manufacturing facility with a revised estimated capital contribution of approximately 75.0 million Swiss Francs. Over the period from 2022 through 2029, manufacturing fees totaling approximately 150.0 million Swiss Francs may be incurred for potential commercial supply of KSI-301 drug substance.

The Company concluded that this agreement contains an embedded lease as the custom-built manufacturing suite will be dedicated for the Company’s use. As of June 30, 2021, the Company did not have control of this manufacturing space and therefore, did not record a right-of-use asset and corresponding lease liability.

Manufacturing Agreements

The Company has entered into service agreements in the normal course of business with various service providers, pursuant to which such service providers agreed to perform activities in connection with the manufacturing process of certain materials. These agreements, and any related amendments, state that planned activities that are included in the signed work orders are, in some cases, binding and, hence, obligate the Company to pay the full price of the work order upon satisfactory delivery of products and services or obligate the Company to the binding amount regardless of whether such planned activities are in fact performed. Per the terms of the agreements, the Company has the option to cancel signed orders at any time upon written notice, which may or may not be subject to payment of a cancellation fee. The level of cancellation fees may be dependent on the timing of the written notice in relation to the commencement date of the work, with the maximum cancellation amount dependent on the agreement or the work order.

Other Funding Commitments

In the normal course of business, the Company enters into agreements with third-parties for services to be provided to the Company. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the applicable agreement. The actual amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of services to be provided to the Company.

The Company has also entered into various cancellable license agreements for certain technology. The Company may be obligated to make payments on future sales of specified products associated with such license agreements. Such payments are dependent on future product sales and are not estimable.

8


Kodiak Sciences Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

 

Indemnification

To the extent permitted under Delaware law, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not specified in the agreements; however, the Company has director and officer insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

7. Stock-Based Compensation

In January 2021 and 2020, the number of shares of common stock available for issuance under the 2018 Equity Incentive Plan (the "2018 Plan") was increased by approximately 2.0 million and 1.8 million shares, respectively, as a result of the automatic increase provision in the 2018 Plan.

Stock Options

Stock option activity under the 2018 Plan and 2015 Equity Incentive Plan (the "2015 Plan") is summarized as follows:

 

 

 

Number
of
Options

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)