SEC Filing | Kodiak Sciences Inc.

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10-Q

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

☐ 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;



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.

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.

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

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.

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.

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.

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.

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.

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

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.

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