Kodiak(KOD) - 2024 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Financial Statements (Unaudited) The unaudited financial statements reflect decreased assets and continued net losses, though the 2024 loss was lower due to reduced R&D expenses and operating cash usage Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets, primarily cash and cash equivalents, alongside reductions in total liabilities and stockholders' equity from December 2023 to June 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $219,225 | $285,507 | | Total current assets | $224,628 | $289,309 | | Total assets | $401,578 | $479,372 | | Liabilities & Equity | | | | Total current liabilities | $21,203 | $41,729 | | Total liabilities | $187,072 | $213,591 | | Total stockholders' equity | $214,506 | $265,781 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a reduced net loss for the first six months of 2024 compared to 2023, primarily driven by a significant decrease in research and development expenses Operating Results (in thousands, except per share data) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Research and development | $62,445 | $123,481 | | General and administrative | $31,593 | $35,966 | | Loss from operations | ($94,038) | ($159,447) | | Net loss | ($88,156) | ($150,968) | | Net loss per share | ($1.68) | ($2.88) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from December 2023 to June 2024, primarily due to the net loss, partially offset by stock-based compensation expense Changes in Stockholders' Equity (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2023 | $265,781 | | Net loss (6 months) | ($88,156) | | Stock-based compensation (6 months) | $36,784 | | Other equity activities | $97 | | Balance at June 30, 2024 | $214,506 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities decreased year-over-year, while investing activities shifted from providing to using cash, resulting in a net decrease in cash for the period Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($66,093) | ($89,180) | | Net cash (used in) provided by investing activities | ($426) | $277,250 | | Net cash provided by financing activities | $97 | $167 | | Net (decrease) increase in cash | ($66,422) | $188,237 | Notes to Unaudited Condensed Consolidated Financial Statements The notes confirm the company's clinical-stage status, sufficient cash for 12 months, key liabilities, significant lease commitments, and stock-based compensation expenses - The company had cash and cash equivalents of $219.2 million as of June 30, 2024, and believes this is sufficient to meet anticipated operating and capital expenditure requirements for the next 12 months[13] - The company has a manufacturing agreement with Lonza Ltd for the clinical and commercial supply of its antibody biopolymer conjugate drug substance, which includes a custom-built manufacturing facility (Ursus Facility) and is treated as an operating lease[22] Stock-Based Compensation Expense (in thousands) | Category | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Research and development | $17,641 | $29,360 | | General and administrative | $19,143 | $22,421 | | Total | $36,784 | $51,781 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's clinical-stage retinal disease programs, noting reduced R&D expenses and sufficient cash to fund operations into 2026 despite an accumulated deficit Overview and Recent Updates Kodiak, a clinical-stage biopharmaceutical company, is advancing three main clinical programs for retinal diseases, including active enrollment in Phase 3 and Phase 1b studies - The company is developing a portfolio of three clinical programs: tarcocimab (anti-VEGF), KSI-501 (anti-IL-6, VEGF-trap bispecific), and KSI-101 (anti-IL-6, VEGF-trap bispecific protein)[31] - The Phase 3 DAYBREAK study is actively enrolling patients to evaluate both tarcocimab and KSI-501 in wet AMD[35] - The Phase 1b APEX study of KSI-101 is actively enrolling patients in two cohorts: DME and macular edema secondary to inflammation (MESI)[35] Results of Operations Operating expenses significantly decreased in the first half of 2024, primarily due to reduced R&D and general and administrative expenses, leading to a lower net loss Change in Research and Development Expenses (in thousands) | Program | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Tarcocimab program | $15,126 | $60,796 | ($45,670) | | KSI-501 and KSI-101 programs | $3,301 | $1,744 | $1,557 | | Payroll and personnel | $28,851 | $40,183 | ($11,332) | | Total R&D Expenses | $62,445 | $123,481 | ($61,036) | - General and administrative expenses decreased by $4.4 million for the six months ended June 30, 2024, compared to 2023, primarily due to lower stock-based compensation expense as previous awards became fully vested[42] Liquidity and Capital Resources The company, funded by equity sales, has a significant accumulated deficit but believes its current cash of $219.2 million is sufficient to fund operations into 2026, though substantial future financing will be required - As of June 30, 2024, the company had cash and cash equivalents of $219.2 million and believes this will be sufficient to support operations into 2026[43] - The company has an accumulated deficit of $1,240.7 million as of June 30, 2024, and expects to continue incurring significant losses[44] - Net cash used in operating activities for the first six months of 2024 was $66.1 million[47] Quantitative and Qualitative Disclosures About Market Risk The company states there have been no material changes to its market risk disclosures as reported in its Annual Report on Form 10-K for the year ended December 31, 2023 - There were no material changes to the company's market risk disclosures during the six months ended June 30, 2024[50] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2024[51] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls[51] PART II—OTHER INFORMATION This section details legal proceedings, comprehensive risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits Legal Proceedings The company is not involved in any legal proceedings expected to have a material adverse effect on its financial condition or results of operations - There are no pending claims or actions against the company that could have a material adverse effect on its results of operations or financial condition[52] Risk Factors The company faces extensive risks including dependence on clinical-stage candidates, high development costs, trial failures, intense competition, manufacturing complexities, regulatory hurdles, intellectual property challenges, and significant future financing needs Risks Related to Discovery, Development and Commercialization The company faces significant risks in drug development, including dependence on clinical-stage candidates, past trial setbacks, potential for future failures, and intense competition from established pharmaceutical companies - The company is a clinical-stage entity with a limited operating history and no products approved for sale, making it difficult to evaluate its future success[54] - The company's prospects are heavily dependent on its tarcocimab, KSI-501, and KSI-101 product candidates, which are in clinical development[54] - The company faces significant competition from major pharmaceutical companies with approved products for retinal diseases, including Roche's Vabysmo and Regeneron's Eylea HD[64] Risks Related to Regulatory Approval and Legal Compliance The company faces lengthy, unpredictable, and costly regulatory approval processes, ongoing scrutiny post-approval, and potential negative impacts from healthcare reforms like the Inflation Reduction Act - The regulatory approval processes of the FDA, EMA, and other authorities are lengthy, time-consuming, and inherently unpredictable, and the company may never obtain approval for its product candidates[75] - Even if a product is approved, it will remain subject to extensive regulatory scrutiny regarding manufacturing, labeling, promotion, and post-marketing studies[80] - Healthcare legislative measures, such as the Inflation Reduction Act (IRA), are aimed at reducing healthcare costs and may adversely affect the company's ability to price its products profitably[82] Risks Related to Reliance on Third Parties The company heavily relies on third parties for clinical trials and manufacturing, introducing risks of performance failures, delays, supply interruptions, and potential misappropriation of trade secrets - The company relies on third parties like CROs to conduct clinical trials, which reduces control over these activities but does not relieve Kodiak of its responsibilities to comply with regulations like GCPs[88] - The company contracts with third parties, such as Lonza AG, for the manufacturing of its product candidates, which carries risks related to regulatory compliance (cGMP), quality assurance, and supply continuity[90] - Reliance on third parties requires sharing trade secrets, increasing the risk that they could be misappropriated or disclosed, impairing the company's competitive position[90] Risks Related to Intellectual Property The company's success depends on obtaining and maintaining patent protection for its platform and candidates, facing risks from uncertain patent landscapes, challenges, infringement claims, and difficulties in global IP protection - The company's ability to successfully commercialize its products depends on obtaining and maintaining patent protection for its ABC Platform and product candidates[96] - The patent position of biotech companies is highly uncertain, and patents may be challenged, narrowed, or invalidated. Changes in U.S. patent law have created additional uncertainty[98][99] - Third-party claims of intellectual property infringement may prevent or delay the development and commercialization of the company's product candidates[109] Risks Related to Operations Operational risks include high dependency on key personnel, challenges in talent retention, managing growth, potential business disruptions from natural disasters or health epidemics, and cybersecurity threats - The company is highly dependent on its key personnel, especially its CEO, Dr. Victor Perlroth, and the loss of their services could harm the business[114] - Cyberattacks and other security incidents could compromise sensitive data, interrupt development programs, and adversely affect the business[117][119] - Business disruptions from events like earthquakes, power shortages, or health epidemics could seriously harm future revenue and financial condition[120] Risks Related to Business, Financial Condition and Capital Requirements The company has a history of significant net losses and no product revenue, requiring substantial additional financing, and faces risks from unfavorable economic conditions - The company has incurred significant net losses since inception, with an accumulated deficit of $1,240.7 million as of June 30, 2024, and anticipates continued losses[125] - The company has never generated revenue from product sales and may never be profitable[126] - Failure to obtain additional financing may prevent the completion of development and commercialization of product candidates[127] Risks Related to Ownership of Common Stock The company's common stock market price is volatile, principal stockholders hold significant influence, future capital raises may cause dilution, and charter provisions could deter changes of control - The market price of the company's common stock has been and may continue to be volatile[130] - Principal stockholders own a significant percentage of common stock, allowing them to influence management and matters requiring stockholder approval[135][136] - Bylaws designate the Court of Chancery of the State of Delaware and U.S. federal district courts as exclusive forums for certain legal disputes, which could limit stockholders' ability to choose a favorable judicial forum[136] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[140] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[140] Mine Safety Disclosures This item is not applicable to the company - None[140] Other Information The company reported no other information required to be disclosed under this item - None[140] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - Lists exhibits filed with the report, including CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents[142]