Kodiak(KOD) - 2022 Q4 - Annual Report

Special Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section clarifies that the Annual Report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on current expectations and projections, not guarantees of future performance, and are subject to risks and uncertainties[11][12][14] - Key areas of forward-looking statements include: success, cost, and timing of development activities, preclinical studies, clinical trials, and regulatory filings; durability, efficacy, and safety of product candidates; manufacturing execution; timing and likelihood of regulatory approvals; ability to obtain funding; market acceptance; competition; sales, marketing, and distribution plans; intellectual property protection; and financial performance[13][16] Risk Factor Summary Summary of Key Risks This section summarizes key investment risks, including clinical development uncertainty, financial losses, tarcocimab dependence, manufacturing complexities, and intense competition - Kodiak Sciences is a clinical-stage company with a limited operating history and no commercial products, making future success and viability difficult to evaluate[18] - The company has incurred significant net losses since inception and expects this trend to continue, with no guarantee of future revenue or profitability[18] - Prospects are heavily dependent on tarcocimab, and its failure could impact other product candidates based on the ABC Platform[18] - Drug development is inherently risky, with no assurance of regulatory approval, and potential for substantial delays or failure in clinical trials[18] - The company faces significant competition and manufacturing complexities, including lack of commercial-scale manufacturing experience and rigorous regulatory standards[18] PART I Item 1. Business Kodiak Sciences is a clinical-stage biopharmaceutical company developing next-generation retinal disease therapeutics using its ABC Platform™, with lead candidate tarcocimab in registrational studies Overview - Kodiak Sciences Inc. was founded in 2009 with the goal of preventing and treating major causes of blindness through next-generation retinal therapeutics[20] - Tarcocimab tedromer (KSI-301) is the lead product candidate, advanced into six registrational clinical studies targeting high-prevalence retinal diseases, with the aim of a broad product label and long dosing intervals[21] - The company is investing in its pipeline with bispecific conjugate KSI-501 for suboptimal anti-VEGF responders and new triplet medicines for dry AMD and glaucoma, all based on its ABC Platform™[22] - Kodiak has retained all global rights to its product candidates and had $478.9 million in cash, cash equivalents, and marketable securities as of December 31, 2022[23] Tarcocimab Clinical Program Update - The Phase 2b/3 DAZZLE study in wet AMD did not meet its primary efficacy endpoint in February 2022, leading to its discontinuation[26] - The Phase 3 BEACON study in RVO met its primary efficacy endpoint in August 2022, demonstrating non-inferior visual acuity change from baseline at week 24 for tarcocimab compared to aflibercept[27] - Four Phase 3 studies (GLEAM, GLIMMER in DME; DAYLIGHT in wet AMD; GLOW in NPDR without DME) are ongoing, fully enrolled, and expected to report topline data in Q3 2023[28][29][30][31] Tarcocimab Manufacturing - Kodiak entered a manufacturing agreement with Lonza Ltd in August 2020 for clinical and commercial supply of tarcocimab drug substance[32] - The custom-built Ursus facility achieved mechanical completion in March 2022, grand opening in May 2022, and was commissioned as a cGMP facility in January 2023[32] - Manufacturing of commercial-scale cGMP batches began in Q1 2023[32] KSI-501 Program Update - The Investigational New Drug (IND) application for KSI-501 was filed and cleared by the FDA in 2022[34] - KSI-501 is a first-in-class bispecific ABC designed to inhibit both VEGF and IL-6, showing superior normalization of cell morphology and junctional biology in preclinical studies[34] - A Phase 1 study in diabetic macular edema (DME) patients is currently screening[34] Technology Platform Development - Kodiak is advancing its 'triplet' platform, which combines a phosphorylcholine-based biopolymer with small molecules and an antibody therapeutic, for multifactorial ophthalmic and systemic diseases[35] Digital Health Platform Development - The company is developing a visual engagement technology and imager (VETi) for ophthalmic examination, diagnosis, and monitoring, with a long-term goal of a wearable device for health engagement[36] - VETi is expected to begin pilot clinical testing in mid-2023 to gather user input for continued innovation[38] Competition - The current standard of care for wet AMD, DR, and RVO involves intravitreal anti-VEGF monotherapies like Avastin, Lucentis, and Eylea[39] - Newer competitors include Roche's Vabysmo (faricimab), approved in January 2022 for wet AMD and DME, offering extended dosing up to 16 weeks for some patients[40] - Regeneron reported positive Phase 3 results for a higher dose aflibercept formulation, achieving non-inferiority in wet AMD and DME with 3-4 month dosing intervals[41] - The retinal disease therapeutic space is expected to become increasingly competitive with other companies developing treatments targeting various molecular targets, gene therapies, stem cell transplants, and medical devices[42] Funding Agreement - In December 2019, Kodiak entered a funding agreement with Baker Bros. Advisors, LP (BBA) to sell a capped 4.5% royalty right on global net sales of tarcocimab for $225.0 million in committed development funding[43] - The agreement was amended in July 2021, at Kodiak's request, such that the remaining $125.0 million of the funding amount would not be paid, with $100.0 million having been paid at closing[43][582] - Kodiak has an option to repurchase 100% of the royalties, and BBA also holds royalty rights on future net sales of other anti-VEGF-A products or related products with additional biologies[44] Government Regulation - Drug and biological products are subject to extensive regulation by government authorities in the U.S. (FDA) and other countries, covering research, development, testing, manufacturing, approval, labeling, marketing, and post-approval monitoring[45][46] - The U.S. drug development process involves preclinical studies (GLP), IND submission, clinical trials (Phase 1, 2, 3), NDA/BLA submission, FDA review, pre-approval inspections (cGMP), and potential advisory committee review[47][49][51][58] - Expedited programs like Fast Track, Priority Review, Accelerated Approval, and Breakthrough Therapy Designation exist to accelerate development and review for serious conditions with unmet medical needs[63][64][65][66] - The Biologics Price Competition and Innovation Act (BPCIA) established an abbreviated pathway for biosimilar and interchangeable biological products, granting reference products 12 years of data exclusivity[67][69][70] - Post-approval, products are subject to ongoing regulatory requirements including cGMP compliance, adverse event reporting, restrictions on off-label promotion, and potential Risk Evaluation and Mitigation Strategies (REMS)[71][72][74] - U.S. operations must comply with federal and state fraud and abuse laws (Anti-Kickback Statute, False Claims Act, HIPAA), data privacy laws (CCPA, CPRA), and transparency laws (Physician Payments Sunshine Act)[75][76][77][78][79][80][81][82][84] - EU data protection laws, including GDPR, impose stringent requirements for processing personal data and restrict cross-border data transfers, with significant penalties for non-compliance[85][86] U.S. Health Care Reform - The Affordable Care Act (ACA) has significantly impacted the healthcare industry, including provisions for biosimilars, Medicaid rebates, and annual fees for drug manufacturers[89] - The Inflation Reduction Act of 2022 (IRA) directs HHS to negotiate Medicare drug prices, imposes rebates for price increases exceeding inflation, and eliminates the Medicare Part D 'donut hole' by 2025[89][90] - Heightened governmental scrutiny over pharmaceutical pricing practices has led to legislative proposals aimed at increasing transparency and reforming reimbursement methodologies[90] U.S. Patent-Term Restoration and Marketing Exclusivity - The Hatch-Waxman Act allows for patent term restoration of up to five years to compensate for time lost during FDA regulatory review, not exceeding 14 years from product approval[91] - The FDCA provides five years of non-patent marketing exclusivity for new chemical entities (NCEs) and three years for new clinical investigations of existing drugs[92] - Reference biological products are granted twelve years of data exclusivity from first licensure, delaying biosimilar applications[93] European Union Drug Development - Medicinal products in the EU are subject to significant regulatory controls for preclinical and clinical research, with ongoing efforts to harmonize and streamline clinical trial authorization through the Clinical Trials Regulation EU No 536/2014[94][95][96] European Union Drug Review and Approval - In the EEA, marketing authorization (MA) can be obtained via the Centralized Procedure (mandatory for certain products, valid across EEA) or National MAs (recognized through Mutual Recognition or Decentralized Procedure)[98][102] Coverage and Reimbursement - Sales of products depend on coverage and reimbursement by third-party payors (government, commercial insurance), with no uniform policy in the U.S., leading to a time-consuming and costly process[100] - Cost containment programs, including the ACA's increased Medicaid rebates and mandatory discounts, and the MMA's Medicare Part D program, can limit profitability and demand for drug products[101][103][104] - The 340B drug pricing program requires manufacturers to extend discounts for federal reimbursement, and foreign countries often have price controls and reimbursement limitations[105][107] Intellectual Property - Kodiak protects its proprietary technology, inventions, and product candidates through patents, trade secrets, and know-how in the U.S. and internationally[109] - As of December 31, 2022, the company held approximately 8 U.S. issued patents, 15 U.S. pending applications, 1 pending PCT application, 40 foreign issued patents, and 69 foreign pending applications[110] - These patents and applications cover therapeutic proteins, biopolymer conjugates (ABC Platform), specific therapeutics like tarcocimab, and components, with anticipated U.S. expiration dates ranging from 2027 to 2042[111][112][114] Human Capital Management - As of December 31, 2022, Kodiak had 112 employees worldwide, with 77 engaged in or supporting research, development, and clinical activities[116] - The company offers competitive compensation and benefits, and regularly assesses employee turnover, recruitment, and diversity[116] Legal Proceedings - As of the report date, Kodiak is not a party to any material legal proceedings, though it may face various claims in the ordinary course of business[117] Additional Information - Kodiak maintains an internet website (https://kodiak.com) where it makes available SEC filings, including 10-K, 10-Q, and 8-K reports[118][119] Item 1A. Risk Factors This section details significant risks impacting Kodiak Sciences' business, including product development, regulatory compliance, third-party reliance, intellectual property, and financial condition Risks Related to the Discovery, Development and Commercialization of Our Product Candidates - Kodiak's prospects are heavily dependent on tarcocimab, its first product candidate in clinical trials, and its success is uncertain[121] - Early clinical trial results for tarcocimab are not necessarily predictive of future outcomes, and the Phase 2b/3 DAZZLE study in wet AMD failed its primary efficacy endpoint[122][123] - Failure of tarcocimab could lead to discontinuation of other ABC Platform product candidates[126] - Drug development is inherently risky, with no assurance of regulatory approval, and product candidates may fail at any stage due to lack of efficacy, safety concerns, or other factors[127][128][129] - Clinical trials may experience substantial delays due to various factors, including regulatory disagreements, patient enrollment difficulties, and adverse events[134][136][137][138][139] - Product candidates may cause undesirable side effects, leading to clinical trial halts, restrictive labels, or denial of regulatory approval[141][142][143][144][145][146][147] - Difficulties in enrolling patients in clinical trials can significantly delay or halt development activities[148][149][152] - Clinical trials may fail to demonstrate substantial evidence of safety, efficacy, or durability, which is crucial for regulatory approval, especially for anti-VEGF agents with established competitors[150][151][153][154][155] - Topline results from the DAZZLE (wet AMD) and BEACON (RVO) studies may necessitate further modifications to ongoing pivotal studies, impacting timelines and success likelihood[156][157][158] We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products. If we fail to successfully identify and develop additional product candidates, our commercial opportunity may be limited. - The ABC Platform may not consistently produce viable product candidates, or competitors may develop superior platform technologies[159] - Identifying, developing, and commercializing additional product candidates requires substantial funding and carries inherent drug development risks[159] 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 drug development market is highly competitive, with major pharmaceutical and biotechnology companies developing treatments for retinal diseases[160][161] - Existing standard-of-care therapies (Roche, Regeneron, Novartis) are widely accepted, and newer FDA-approved competitors like Vabysmo and high-dose aflibercept offer extended dosing benefits[161][162] - Competitors possess significantly greater financial resources, expertise, and may achieve regulatory approval faster or develop superior therapies, potentially impeding tarcocimab's market adoption through discounts or rebates[162][163] - The company could face intellectual property infringement litigation from competitors[164] The manufacture of our product candidates is highly complex and requires substantial lead time to produce. - Manufacturing product candidates involves complex processes, specialized facilities, and specific raw materials, making it costly, less reliable, and difficult to reproduce compared to small molecule compounds[165] - The manufacturing process is susceptible to product loss due to contamination, equipment failure, operator error, and raw material shortages, especially given the international and single-source nature of the supply chain[167][170] - Changes in manufacturing methods during development carry risks of affecting product performance and clinical trial results[169] 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 and regulatory applications or our products for patients, if approved, could be delayed or stopped, or we may be unable to establish a commercially viable cost structure. - Kodiak and its third-party manufacturers lack experience in commercial-scale manufacturing for product candidates, and process validation for tarcocimab has not yet been satisfied[171] - Risks include inability to increase manufacturing capacity, quality issues during scale-up, failure to comply with cGMP regulations, and competition for manufacturing resources (e.g., COVID-19 vaccines)[171][172] - Challenges in developing a prefilled syringe for tarcocimab or securing sufficient glass vials could also cause delays[172] If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved. - Kodiak lacks a sales or marketing infrastructure and experience in commercializing pharmaceutical products[173] - Establishing internal commercial capabilities is expensive, time-consuming, and risky, with potential for lost investment if product launch is delayed or fails[174][177] - Reliance on third-party commercialization partners may result in lower revenue or profitability, and the company may have limited control over their efforts[175] Even if any product candidates we develop receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success. - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is not guaranteed even with marketing approval[176] - Factors influencing market acceptance include efficacy, safety, perceived advantages, competitive pricing, patient access programs, physician recommendations, dosing convenience, and regulatory labeling[178] Even if we are able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business. - Drug pricing and access policies in the U.S. and internationally are subject to change, with potential for Medicare negotiation under the Inflation Reduction Act (IRA) to limit competitive pricing[180] - Reimbursement from government and private payors is critical, but cost containment efforts, mandatory discounts (Medicaid, Medicare Part D, 340B), and foreign price controls could limit payments[181][182][184] - Significant delays in obtaining reimbursement and inconsistent coverage policies among payors are expected, potentially hindering commercialization and profitability[182][184] Our product candidates may face competition from biological products that are biosimilar to or interchangeable with our product candidates sooner than anticipated. - The Biologics Price Competition and Innovation Act (BPCIA) allows for abbreviated approval pathways for biosimilar products, potentially leading to earlier competition[185] - There is a risk that the 12-year exclusivity period for reference biological products could be shortened or that Kodiak's product candidates may not be considered reference products, accelerating generic competition[186] If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates. - The company faces inherent product liability risk from clinical testing and commercialization, with potential for lawsuits alleging defects, negligence, or failure to warn[187] - Successful product liability claims could result in substantial liabilities, decreased demand, reputational harm, and diversion of management resources[187][188] - Insurance coverage may be inadequate or unavailable at reasonable costs, potentially leaving the company responsible for significant damages[189] Risks Related to Regulatory Approval and Other Legal Compliance Matters - The regulatory approval processes of the FDA, EMA, and other foreign authorities are lengthy, unpredictable, and may not result in approval for any product candidates[190][191][193] - Data from clinical trials conducted outside the United States may not be accepted by regulatory authorities, requiring additional costly and time-consuming trials[194] - Even with regulatory approval, products remain subject to extensive scrutiny, including ongoing manufacturing, labeling, promotion, and post-marketing study requirements, with non-compliance leading to severe penalties[197][198][199][200][201] - Healthcare legislative measures, such as the ACA and IRA, aimed at reducing costs, could adversely impact product pricing, reimbursement, and profitability[202][204][205][206][208][209][210] - The company is exposed to risks of misconduct by employees and third parties, including non-compliance with healthcare fraud and abuse laws (Anti-Kickback Statute, False Claims Act, HIPAA, Physician Payments Sunshine Act), leading to significant penalties[211][212][213][215][216] - Stringent and evolving data privacy and security obligations (CCPA, CPRA, GDPR) pose risks of regulatory investigations, fines, litigation, and business disruptions, especially concerning cross-border data transfers[217][218][219][220][221][222] - Failure to comply with environmental, health, and safety laws and regulations could result in fines, penalties, and adverse effects on business success[223][224] - Business activities may be subject to the Foreign Corrupt Practices Act (FCPA) and similar anti-bribery laws, with violations leading to fines, sanctions, and reputational damage[226] Risks Related to Our Reliance on Third Parties - Kodiak relies on third parties (CROs, medical institutions, investigators) for clinical trials and preclinical testing, reducing control and posing risks of unsatisfactory performance or delays[227][228][229][230] - Exclusive reliance on third-party manufacturers (e.g., Lonza AG) for product candidate materials carries risks of insufficient quantities, unacceptable costs, and non-compliance with cGMP regulations[231][232][233][234][235] - Sharing trade secrets with third parties increases the risk of misappropriation or disclosure, harming competitive position[237] - Reliance on third-party suppliers for key raw materials poses risks of supply interruption, limited control over pricing, and quality issues[238] - Dependence on collaborations for product candidate development and commercialization introduces risks such as shared control, intellectual property disputes, and potential termination of agreements[239][240][241][243] Risks Related to Our Intellectual Property - Inability to obtain and maintain broad patent protection for product candidates or the ABC Platform could allow competitors to commercialize similar products[244][245][246] - The scope of patent protection may be insufficient, or patents may be challenged, narrowed, or invalidated by third parties, diminishing their commercial value[247][248][249][250] - Protecting intellectual property globally is expensive and challenging, as foreign laws may not offer the same level of protection as U.S. laws[251][252][253] - Non-compliance with procedural requirements for patent agencies can lead to loss of patent rights[254] - Changes in U.S. patent law, including the first-inventor-to-file system and post-grant review procedures, have increased uncertainty and costs for patent prosecution and enforcement[255][256][257][258][259] - Failure to obtain patent term extension and data exclusivity for product candidates could allow competitors to enter the market sooner[260] - Claims challenging inventorship or ownership of patents and other intellectual property could result in litigation, loss of rights, and diversion of resources[262][265][266] - Inability to protect trade secret confidentiality could harm business and competitive position, as trade secrets are difficult to enforce[263][264] - Third-party claims of intellectual property infringement could prevent or delay commercialization, lead to substantial litigation expenses, and require licensing or product redesign[267][268][269][270][271][272][274][275] - Inadequate protection of trademarks and trade names could hinder brand recognition and competitive effectiveness[279] - Intellectual property rights have limitations and may not address all potential threats, such as competitors developing non-infringing similar products or operating in countries without patent protection[280][281] Risks Related to Our Operations - Kodiak is highly dependent on key managerial, scientific, and medical personnel, and failure to attract or retain them could harm business strategy and product development[282][283][284][285] - The company needs to grow its organization and may experience difficulties managing this growth, including recruiting, integrating, and retaining employees, and expanding operational controls[287][288][289] - Engaging in acquisitions or strategic partnerships could increase capital requirements, dilute stockholders, incur debt, and divert management attention[290][291][292] - Compromised security measures or failures in information technology systems could lead to significant fines, interrupt development programs, and harm reputation[293][294][295][296][297][298][299][300] - Business disruptions from natural disasters, epidemics (e.g., COVID-19), or geopolitical events (e.g., Russia-Ukraine conflict) could seriously harm revenue and financial condition[301][302][308][310][311][312][314] - International operations are subject to economic, political, and regulatory risks, including those related to Brexit and the Russia-Ukraine conflict, which could adversely affect business[304][305][306][307][308][309] Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. - As of December 31, 2022, Kodiak had $68.7 million in federal and $614.9 million in state net operating losses (NOLs) that may be limited by 'ownership changes' under Sections 382 and 383 of the Code[315] - The Tax Act, as modified by the CARES Act, limits the deductibility of federal NOLs incurred after 2017 in taxable years beginning after 2020, potentially impacting future utilization[316] Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations. - New or changed tax laws (e.g., Tax Act, IRA) or their interpretations could adversely affect business operations and financial performance, including corporate tax rates, foreign earnings, and expense deductibility[317] Item 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[358] Item 2. Properties Kodiak Sciences leases approximately 155,000 square feet of office and R&D space in Palo Alto, California, and 1,000 square meters in Visp, Switzerland - Kodiak's corporate offices and R&D facilities are located in Palo Alto, California, leasing approximately 155,000 square feet under lease agreements commencing in June 2020[359][360] - The company also leases about 1,000 square meters of office and laboratory space in Visp, Switzerland, under an initial 5-year lease term that began in April 2020[361] Item 3. Legal Proceedings Kodiak Sciences is not currently a party to any material legal proceedings. While the company may face various legal claims in the ordinary course of business, management does not anticipate any outcomes that would have a material adverse effect on its financial position, results of operations, or cash flows - Kodiak Sciences is not a party to any material legal proceedings as of the date of this Annual Report on Form 10-K[362] - The company may be subject to ordinary course legal claims, but management does not expect a material adverse effect on financial position, results of operations, or cash flows[362] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - There are no mine safety disclosures[363] PART II Item 5. Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities Kodiak Sciences' common stock trades on Nasdaq under 'KOD', with no cash dividends paid or anticipated, and no recent unregistered sales or issuer purchases - Kodiak Sciences' common stock trades on the Nasdaq Global Market under the trading symbol 'KOD'[366] - As of February 28, 2023, there were approximately 22 holders of record of the company's common stock[367] - The company has never declared or paid any cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future[368] - There have been no recent sales of unregistered securities or issuer purchases of equity securities[369][370] Item 6. Reserved This item is reserved and not applicable for this Annual Report on Form 10-K - Item 6 is reserved and not applicable[371] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Kodiak Sciences' financial condition and operations, noting significant operating losses, reliance on equity financing, and $478.9 million in cash as of December 31, 2022 - Kodiak Sciences is a biopharmaceutical company focused on researching, developing, and commercializing transformative therapeutics for high-prevalence retinal diseases, leveraging its ABC Platform™[374] - The company's lead product candidate, tarcocimab, has four Phase 3 studies (GLEAM, GLIMMER, DAYLIGHT, GLOW) fully enrolled, with topline data expected in Q3 2023[375][376][377][378] - Tarcocimab manufacturing at the custom-built Ursus facility, in partnership with Lonza, was commissioned as cGMP in January 2023, with commercial-scale batch manufacturing starting in Q1 2023[379] - The KSI-501 program, a bispecific ABC targeting VEGF and IL-6, has an IND cleared by the FDA, and a Phase 1 study in DME patients is currently screening[380] - Kodiak is also advancing its 'triplet' technology platform and developing a visual engagement technology and imager (VETi) digital health platform, with pilot clinical testing for VETi expected mid-2023[381][383][384][385] - The company has incurred significant operating losses since inception, with a net loss of $333.8 million in 2022, and an accumulated deficit of $892.0 million as of December 31, 2022[389] - Operations are funded primarily through equity securities, and as of December 31, 2022, cash, cash equivalents, and marketable securities totaled $478.9 million, expected to be sufficient for at least 12 months[388][391][410] Operating Results Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------- | :----- | :----- | :----- | | Research and development | $267,591 | $217,340 | $107,389 | | General and administrative | $73,788 | $49,711 | $28,618 | | Loss from operations | $(341,379) | $(267,051) | $(136,007) | | Net loss | $(333,823) | $(266,990) | $(133,096) | - Research and development expenses increased by $50.3 million (23%) in 2022 compared to 2021, driven by increased payroll and personnel expenses (including stock-based compensation) and ABC Platform development, despite a decrease in tarcocimab program expenses[400][401][402][403] - General and administrative expenses increased by $24.1 million (48%) in 2022 compared to 2021, primarily due to higher stock-based compensation expense[404] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Kodiak Sciences faces market risk primarily from interest rate changes affecting its $478.9 million in cash and marketable securities, with minimal foreign currency risk - As of December 31, 2022, Kodiak held $478.9 million in cash, cash equivalents, and marketable securities, primarily invested in money market funds and U.S. treasury securities[432] - A hypothetical 100 basis point increase in market interest rates would result in an estimated $0.6 million decline in the net fair value of interest-sensitive marketable securities[432] - Foreign currency exchange rate risk did not have a significant impact on the company's results of operations for the periods presented[433] Item 8. Financial Statements and Supplementary Data This section presents Kodiak Sciences' audited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, cash flows, and related notes Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP provided an unqualified opinion on the consolidated financial statements for the period ended December 31, 2022 and 2021[439] - The firm did not audit the effectiveness of internal control over financial reporting[441] - Accrued clinical trial and related costs were identified as a critical audit matter due to the judgment involved in management's estimates and the auditor's effort in evaluating supporting evidence[444][445][446] Consolidated Balance Sheets Consolidated Balance Sheet (in thousands) | Asset/Liability/Equity | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $190,433 | $731,510 | | Marketable securities | $288,500 | — | | Prepaid expenses and other current assets | $7,072 | $3,301 | | Total current assets | $486,005 | $734,811 | | Restricted cash | $6,324 | $6,324 | | Property and equipment, net | $56,384 | $41,330 | | Operating lease right-of-use asset | $59,369 | $66,744 | | Other assets | $58,546 | $55,011 | | Total assets | $666,628 | $904,220 | | Accounts payable | $9,130 | $12,431 | | Accrued and other current liabilities | $33,440 | $48,319 | | Operating lease liability (current) | $9,926 | $3,933 | | Total current liabilities | $52,496 | $64,683 | | Operating lease liability (non-current) | $77,807 | $76,063 | | Liability related to sale of future royalties | $99,996 | $99,943 | | Other liabilities | $162 | $211 | | Total liabilities | $230,461 | $240,900 | | Common stock | $5 | $5 | | Additional paid-in capital | $1,329,509 | $1,221,532 | | Accumulated other comprehensive income (loss) | $(1,307) | — | | Accumulated deficit | $(892,040) | $(558,217) | | Total stockholders' equity | $436,167 | $663,320 | | Total liabilities and stockholders' equity | $666,628 | $904,220 | Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :----- | :----- | :----- | | Research and development | $267,591 | $217,340 | $107,389 | | General and administrative | $73,788 | $49,711 | $28,618 | | Total operating expenses | $341,379 | $267,051 | $136,007 | | Loss from operations | $(341,379) | $(267,051) | $(136,007) | | Interest income | $7,071 | $298 | $2,966 | | Interest expense | $(18) | $(47) | $(25) | | Other income (expense), net | $503 | $(190) | $(30) | | Net loss | $(333,823) | $(266,990) | $(133,096) | | Net loss per common share, basic and diluted | $(6.39) | $(5.16) | $(2.91) | | Weighted-average shares outstanding | 52,249,620 | 51,788,918 | 45,741,845 | | Other comprehensive income (loss) | $(1,307) | $(53) | $43 | | Comprehensive loss | $(335,130) | $(267,043) | $(133,053) | Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) | Metric | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | :----------- | | Common Stock (Shares) | 52,333,850 | 51,826,257 | 51,112,302 | | Common Stock (Amount) | $5 | $5 | $5 | | Additional Paid-In Capital | $1,329,509 | $1,221,532 | $1,151,920 | | Accumulated Other Comprehensive Income (Loss) | $(1,307) | — | $53 | | Accumulated Deficit | $(892,040) | $(558,217) | $(291,227) | | Total Stockholders' Equity | $436,167 | $663,320 | $860,751 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :-------------------------------------------------- | :--------- | :--------- | :--------- | | Net cash provided by (used in) operating activities | $(206,459) | $(182,270) | $(83,428) | | Net cash provided by (used in) investing activities | $(336,513) | $(38,798) | $104,834 | | Net cash provided by (used in) financing activities | $1,895 | $8,182 | $717,377 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(541,077) | $(212,886) | $738,783 | | Cash, cash equivalents and restricted cash, at end of period | $196,757 | $737,834 | $950,720 | - Net cash used in operating activities increased to $206.5 million in 2022 from $182.3 million in 2021, primarily due to increased net loss, payroll, personnel expenses, and manufacturing/clinical trial costs[417] - Net cash used in investing activities significantly increased to $336.5 million in 2022 from $38.8 million in 2021, mainly due to net purchases of marketable securities[418] - Net cash provided by financing activities decreased to $1.9 million in 2022 from $8.2 million in 2021, primarily from stock option exercises and employee stock purchase plans[419] Notes to Consolidated Financial Statements - Kodiak Sciences is a clinical-stage biopharmaceutical company focused on retinal diseases, with $478.9 million in cash, cash equivalents, and marketable securities as of December 31, 2022, deemed sufficient for at least 12 months of operations[460][461] - The company operates as one reportable segment and prepares financial statements in accordance with US GAAP, making estimates for accrued R&D and stock-based compensation[462][465][466] - Global macroeconomic uncertainties, including health epidemics, labor shortages, bank failures, inflation, and the Russia-Ukraine conflict, pose risks to the company's financial condition and operations[469] - Property and equipment, net, increased to $56.4 million in 2022 from $41.3 million in 2021, with depreciation expense of $3.8 million in 2022[507][508] Accrued and Other Current Liabilities (in thousands) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------ | :----------- | :----------- | | Accrued clinical trial and related costs | $18,334 | $21,776 | | Accrued salaries and benefits | $6,033 | $6,187 | | Accrued manufacturing and R&D costs | $5,978 | $6,041 | | Accrued leasehold improvements | $1,893 | $13,021 | | Total accrued and other current liabilities | $33,440 | $48,319 | - Marketable securities, classified as available-for-sale U.S. treasury securities, totaled $288.5 million in fair value as of December 31, 2022, with $1.3 million in unrealized losses[511][512] - Operating lease liabilities totaled $87.7 million as of December 31, 2022, with a weighted-average remaining lease term of 8.4 years and a weighted-average discount rate of 6.8%[518] - An embedded lease for a custom-built manufacturing facility with Lonza was commissioned as cGMP on January 31, 2023, with estimated capital contributions of 75.0 million Swiss Francs and potential manufacturing payments of 150.0 million Swiss Francs[519][520][521] - Contractual obligations related to manufacturing agreements subject to cancellation fees totaled $56.8 million as of December 31, 2022[524] - The company had a total loss before income taxes of $333.8 million in 2022 and recorded a full valuation allowance against its net deferred tax assets, which include $68.7 million federal and $614.9 million state NOLs[532][537] - As of December 31, 2022, 52,333,850 shares of common stock were issued and outstanding, with 19,182,414 shares reserved for future issuances[550] - Stock-based compensation expense was $106.0 million in 2022, including $65.1 million from the 2021 Long-Term Performance Incentive Plan (LTPIP) and $6.3 million from performance-based awards[555][571][574] - Net loss per common share (basic and diluted) was $(6.39) in 2022, with 16.8 million common share equivalents excluded from diluted EPS calculation due to antidilution[578] - The 401(k) plan included employer matching contributions of $0.9 million in 2022[579] - The liability related to the sale of future royalties to BBA, initially $100.0 million, remains on the balance sheet, with royalty payments not yet probable and estimable as of December 31, 2022[581][582][583] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures This section confirms that there have been no changes in or disagreements with the company's accountants regarding accounting and financial disclosures - There have been no changes in or disagreements with accountants on accounting and financial disclosures[586] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes - Management, with the participation of the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022[588] - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2022, based on the COSO framework, and concluded it was effective[589] - The company is a non-accelerated filer and is not required to comply with auditor attestation requirements for internal control over financial reporting[590] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2022[592] Item 9B. Other Information This section states that there is no other information required to be disclosed - There is no other information to report[593] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section states that the disclosure regarding foreign jurisdictions that prevent inspections is not applicable to Kodiak Sciences Inc - This item is not applicable[594] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance, including the Code of Business Conduct and Ethics, is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive Proxy Statement[596] - The company's Code of Business Conduct and Ethics applies to all employees, officers, and directors, and is available on its website[597] Item 11. Executive Compensation Information concerning executive compensation is incorporated by reference from the company's definitive Proxy Statement - Information regarding executive compensation is incorporated by reference from the definitive Proxy Statement[598] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters Information on security ownership of certain beneficial owners and management, as well as related stockholder matters, is incorporated by reference from the company's definitive Proxy Statement - Information on security ownership of certain beneficial owners and management is incorporated by reference from the definitive Proxy Statement[599] Item 13. Certain Relationships and Related Transactions, and Director Independence Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the definitive Proxy Statement[600] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the definitive Proxy Statement[601] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists documents filed as part of the Annual Report, including consolidated financial statements and a comprehensive exhibit index - The consolidated financial statements are filed as part of this Annual Report on Form 10-K under Item 8[604] - All schedules to the consolidated financial statements are omitted as the required information is either inapplicable or presented within the consolidated financial statements[605] - A detailed exhibit index is provided, listing various documents incorporated by reference or filed herewith, including corporate governance documents, employment agreements, and certifications[606][607][608][609] Item 16. Form 10-K Summary This section indicates that no Form 10-K summary is provided in this report - No Form 10-K Summary is included[610] Signatures This section contains the required signatures for the Annual Report on Form 10-K, affirming compliance with the Securities Exchange Act of 1934 - The Annual Report on Form 10-K is duly signed by authorized representatives, including the Chairman and Chief Executive Officer (Victor Perlroth, M.D.) and Chief Financial Officer (John Borgeson), and members of the Board of Directors[613][615][618]