Kodiak Sciences Inc. (NASDAQ:KOD) Q4 2023 Earnings Call Transcript

Kodiak Sciences Inc. (NASDAQ:KOD) Q4 2023 Earnings Call Transcript March 28, 2024

Kodiak Sciences Inc. misses on earnings expectations. Reported EPS is $-1.13 EPS, expectations were $-0.86. Kodiak Sciences Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the Kodiak Sciences Business Update webcast and conference call. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be a question and answer session [Operator Instructions]. Please be advised that today’s conference is being recorded. I’d now like to hand the conference over to your first speaker today. John Borgeson, Chief Financial Officer. Please go ahead.

John Borgeson: Thank you for joining our conference call and webcast to discuss recent business updates at Kodiak. I’m John Borgeson, Kodiak’s Chief Financial Officer. Joining me today are Victor Perlroth, Chairman and CEO; and Pablo Velasquez Martin, Senior Vice President of Clinical Research and Development. After our prepared remarks, we will open the call for Q&A. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the investors and media section on our Web site. An archive of this webcast will be available shortly after the event on our Web site. We’d also like to remind you that remarks made on this call today include forward-looking statements about Kodiak that are subject to risks and uncertainties and which are outlined on this slide.

A more complete description of these and other material risks can be found in Kodiak’s filings with the Securities and Exchange Commission, including its 10-K for the year ended December 31st, 2023, which has been filed with the SEC and we encourage you to read those carefully. I will note that Kodiak does not undertake any obligation to update publicly any forward looking statements, whether as a result of new information, future events or otherwise. Now I’m pleased to turn the call over to Victor Perlroth, Kodiak’s CEO. Victor?

Victor Perlroth: Thank you, John. Good afternoon, everyone. Thanks for joining us. I trust many of you have read Kodiak’s press release of this morning announcing our recent business updates together with our financial snapshot. The goal for today’s discussion is to provide additional context and color around some of our most recent activities and our going forward plan, and we will welcome your questions at the end. We’re a retina focused company. Retina is a challenging area for innovation, but there should be an increasing return to focus in time and dedication. At Kodiak, we [Indiscernible] [hit] a top 10 plus years of fine tuning of our ABC platform in our company. Also being able to listen and to have the courage to make the important course corrections needed to get us to the finish line with medicines that are meaningful for patients and therefore valuable.

The sector is concentrated with only Roche and Regeneron as dominant players. There’s room for another major player and that remains our aspiration. We look forward today to providing you the broad view. Today, we are at a point of departure and we are in motion. We have a portfolio of three clinical programs. Two programs are ABC platform derived with its core science of durability and one program is platform independent. We think this pipeline represents a healthy diversification, both in terms of the opportunity and risk. For some of you listening today, you may say, I’m not smart enough to know whether Kodiak’s ABC platform represents a disruptive innovation that can deliver for patients and frankly, for investors or not. For you, let us show you.

But in the meantime, you don’t have to believe in the ABC platform to recognize that KSI-101 represents itself a potential important new branded molecule for retina. Highly potent on two powerful mechanisms, for patients with inflammation and some residual fluid. We call it a greenfield market opportunity. In the program, building as it does already from the base of bioactivity efficacy and safety seen in the KSI-501 program, sharing as it does the same protein. Kodiak can be a tremendously successful company and investment opportunity on the basis of KSI-101 alone. But for ourselves, we are big believers also in our ABC platform. Why? Durability remains a key unmet need and you want durability for all patients, as an inception regimen, as a maintenance for treatment naive patients and treatment experience.

And you want the durability without sacrificing immediacy, potency or safety. They say the real test is whether you give the drug to your mother or grandmother. At this stage, not being marketed, we provide our investigational medicines in context of our clinical trials. But our design, we’re proud of the ABC platform, our novel proteins, our bio conjugates, our underlying science and design for durability. And now the important adjustments we’ve made to the tarcocimab product that improve the manufacturability in a prefilled syringe, and we believe may also enhance the utility of the product, and which we have also already flowed into the KSI-501 manufactured material as well. We believe now is the time to implement these changes given the additional clinical studies we plan to conduct.

And the FDA has agreed that these additional clinical studies are sufficient to bridge the former material to the go-to-market material, which we’d like to commercialize going forward. Tarcocimab then and also KSI-501, these represent state-of-the-art molecules. And based on our view of our data and these design enhancements, I think these [Indiscernible] meet the grandmother test. And when we look commercially, given the rapid pace now of our planned development for tarcocimab and KSI-501, while yes, there is commercial complexity, we are the innovator here and we believe there can be a strong demand for our medicines in their unique design, science and their unique performance in the retina marketplace. Taking it back to the top level, across these three, what I call, late phase programs.

There’s also a significant amount of operational synergy in moving these three programs forward together. And as we’ll see, where useful, we can even run them in the same study or studies with low incremental costs per group. So where are we today? Let’s start with an overview of where we are; number one, from a cash position, we have an attractive cash position today as of Q4; number two, when we look at Kodiak, we see three late phase programs; and number three, our intention is to bring these three programs to meaningful inflections within our cash runway. So for tarcocimab, we have three positive Phase 3 studies that have been completed in diabetic retinopathy, in retinal vein occlusion and in wet AMD. We have strong and consistent six month durability signal and favorable safety seen across the pivotal program.

We have regulatory alignment now that’s been achieved on a bridging strategy for our go-to-market formulation. The Phase 3 study GLOW2 in diabetic retinopathy is now actively recruiting patients. And we’ve added as an additional arm tarcocimab into DAYBREAK to validate the durability in wet AMD to strengthen tarcocimab’s competitive position and to bolster our ex-US regulatory dossier. For 501, the Phase 1 study in DME met our objectives. We’re developing it towards the high prevalence retinal vascular diseases to bring durability and the extra mechanisms to bear. We’ve created the enhanced formulation informed from tarcocimab’s commercial manufacturing scale up with many potential benefits. And we’re in the process of gaining or finalizing FDA alignment on the design of the Phase 3 DAYBREAK study in wet AMD and targeting an enrollment start mid-year.

And for our diversified, let’s say, KSI-101 program, we’re developing it in a new area, macular edema associated with inflammation. We see it as a greenfield opportunity outside of the established anti-VEGF class and with risks and opportunities uncoupled from our ABC platform and from our other two molecules. A Phase 1b study is planned for the second quarter to identify two dose levels that we will then rapidly progress into pivotal studies. And we’re in the process of gaining FDA alignment on the design of dual Phase 2b/3 pivotal studies, which also are planned for initiation this year. Turning to Slide 6. Tarcocimab is our most advanced program and we’re one successful trial away from filing for registration in a success scenario. In the trial GLOW2, will be conducted in a patient population diabetic retinopathy where tarcocimab already showed a clear win in our GLOW1 study.

GLOW2 is actively recruiting patients. At the same time, we plan to advance KSI-501 and KSI-101 rapidly into pivotal studies this year. The Phase 1 study of KSI-501 demonstrated positive signals and efficacy and safety and support further development. We are in discussion with the FDA on the study design of the Phase 3 daybreak study in wet AMD and plan to initiate it as soon as regulatory alignment is achieved, targeting mid 2024. We also intend to advance KSI-101 into a Phase 1b dose finding study in the second quarter this year to identify the two dose levels we want to be using in our dual pivotals. We’re in the process of gaining regulatory feedback on the pivotal program design and we hope to initiate two Phase 2b studies later this year.

Our goal is to have four pivotal studies ongoing later this year across the three programs. Two serve as a broad and powerful BLA for tarcocimab, two serve as a new and powerful BLA for KSI-101 and one is half of what’s needed for a KSI-501 BLA. Turning to Slide 7. Now let’s turn to our most advanced clinical program, tarcosimab. Tarcosimab is an anti-VEGF antibody biopolymer conjugate or ABC medicine built on the ABC platform to provide extended durability. It’s been studied in six pivotal studies, three of which met their primary endpoints across the indications, diabetic retinopathy, retinal vein occlusion and wet AMD. My view is tarcocimab can bring six month durability to the majority of patients across the diseases and that we can get there as an initiating therapy, not a maintenance therapy, and without leaving any patients behind irrespective of disease severity.

That’s the future as we see it. In our GLOW1 study, in diabetic retinopathy, tarcocimab demonstrated for the first time among anti-VEGFs that six month dosing can successfully treat DR patients by improving the disease severity scores and in reducing risk of vision threatening complications by about 90%. In our BEACON study, in retinal vein occlusion, tarcocimab demonstrated we could bring all RVO patients to once every two month dosing versus the current standard of care, which is monthly dosing. And importantly, in the second six months of the study, tarcocimab was studied head-to-head against aflibercept on the same individualized dosing regimen. Approximately half of tarcocimab treated patients were injection free in the second six months compared to about a third of aflibercept treated patients.

Over the entire one year of treatment, tarcocimab treated patients achieved comparable vision and anatomic outcomes with meaningfully fewer injections compared to aflibercept to treated patients five versus seven. Lastly, in our DAYLIGHT study in wet AMD, tarcocimab met its primary endpoints and demonstrated that intensive monthly dosing of tarcocimab was safe and well tolerated. These are important studies in big indications. Nonetheless, in our tarcocimab program, they are a point of departure and the value comes when you finish things. So to that end, we have also, as I mentioned, made adjustments to the tarcocimab product that improve the manufacturability and may also enhance the utility of the product. And we have received FDA feedback that one additional successful pivotal study using the go-to market material is sufficient to bridge the clinical scale material to the go-to market material, not just to bridge our go to market formulation.

But as of today, we have three positive Phase 3 studies of tarcocimab in three different diseases and we will need one more successful pivotal study in one of these indications to file for approval. We plan to evaluate, turning to Slide 8, tarcocimab in two new Phase 3 studies, the GLOW2 study in diabetic retinopathy and the DAYBREAK study in wet AMD. We’ve obtained FDA feedback on the study design of GLOW2 and it is already actively enrolling patients. The idea behind GLOW2 was to have a very high probability of success study. Therefore, the study designed for GLOW2 builds from GLOW1, and I see it as having a high real and perceived probability of success. So from an investor standpoint, I don’t think you need to wait around to see the results to have some early confidence.

In addition, and after a much consideration, we also intend to study tarcocimab as a second investigational arm in our wet AMD DAYBREAK study with three purposes. First, to demonstrate conclusively tarcocimab’s durability in wet AMD. Second, to strengthen tarcocimab’s competitive position, given the importance of wet AMD in the anti-VEGF market. And third, to bolster tarcocimab’s ex-US regulatory dossier. We’re in the process of obtaining FDA feedback on the study design of DAYBREAK and hope to initiate recruitment mid-2024. Turning to Slide 9. The GLOW2 study design builds from the successful GLOW1 study with the benefit of a third monthly loading dose at week four as highlighted on the slide. We believe that three monthly loading dose regimen provides greater flexibility to patients and is nice to have as part of our BLA package.

The primary endpoint is the proportion of eyes with two steps or greater improvement on DRSS at week 48, the same as GLOW1. Turning to slide 10. Now let’s turn to KSI-501, our second investigational medicine, 501 is a first-in-class bispecific antibody biopolymer conjugate or APC that inhibits both IL-6 and VEGF. IL-6 is a pro-inflammatory cytokine and growth vector implicated in the pathophysiology of retinal vascular diseases. It is known to stimulate defective angiogenesis, both by upregulating VEGF and by VEGF independent pathways. It is associated with anti-VEGF treatment resistance as well as disease progression in AMD, DR and RVO. 501 is designed with three tiers of innovation. First, a two target mechanism potently inhibiting both the dominant VEGF pathway and the IL-6 inflammation pathway.

Two, the potential for six month durability based on Kodiak’s ABC platform. And three, an enhanced KSI-501 formulation informed from tarcocimab’s commercial manufacturing scale. We believe the three tiers of innovation position KSI-501 well to address the unmet needs in high prevalence retinal vascular diseases, such as the need to target disease mechanisms beyond VEGF and the need for extended durability. As I mentioned above, the KSI-501 program is the result of the fine tuning of our ABC platform and company over the past 10 plus years. And the program itself is a fast forward, the design, the manufacturing, the clinical planning and the operational expertise. Turning to Slide 11. This slide is a reminder of the substantial variability in response to today’s anti-VEGF standard of care agents.

And therefore, the need to bring additional disease mechanisms beyond VEGF into our therapies. As you can see from this data generated in our own pivotal wet AMD study, there is substantial interpatient variability in their response to anti-VEGF monotherapy, both in terms of visual acuity wounds and fluid reduction. The substantial proportion of patients underperforming vision and/or anatomical improvement compared to the mean responses, which highlights the need for additional mechanisms of action, and we believe KSI-501 can play an important role here. Turning to Slide 12. The anti IL-6 VEGF trap bispecific protein in KSI-501 has a unique design that enables it to potently inhibit one or more VEGF dimers and two IL-6 molecules simultaneously.

The VEGF trap portion mimics the native receptor and binds multiple targets, including VEGF. One, VEGF-A, VEGF-B, and placental growth factor. The anti IL-6 antibody binds IL-6, therefore, inhibiting both IL-6-trans and cis signaling by its binding to soluble and membrane bound IL-6 receptors respectively. Inhibition of IL-6 blocks IL-6 mediated inflammation and immune activation and normalizes blood retinal barriers. Turning to Slide 13. We conducted a Phase 1a/1b type study in DME patients that is now complete. The study was a multiple ascending dose study in DME patients, both treatment naive and pretreated patients. Four dose levels were studied in the Phase 1. Each subject received three monthly doses and was followed for ’24 weeks, which allowed us to evaluate the safety, tolerability and bioactivity signals of KSI-501.

Turning to Slide 14, we are pleased with the Phase 1 study results where KSI-501 demonstrated strong visual acuity gains in both treatment naive and pretreated DME patients that were sustained over the 24 week study period. It also demonstrated meaningful CST reductions in patients. Though this was a small patient sample size, so we should try not to overinterpret the results, but rather we look for the essential signals that suggest this could be a molecule with meaningful therapeutic effects. The Phase 1 study also demonstrated that repeated monthly dosing of 501 was safe and well tolerated. Overall, we think the Phase 1 study results support further clinical development of the 501 program. Turning to Slide 15. We’re planning to advance KSI-501 into a Phase 3 study in wet AMD, called DAYBREAK later this year.

There is abundant preclinical and clinical evidence for the role of IL-6 in choroidal neovascularization, both in terms of driving disease pathogenesis and also in mediating treatment response to anti-VEGF agents and disease reactivations. We believe the three tiered innovation designed into KSI-501, as mentioned before, namely the bispecific mechanism of action, the potential for six months durability based on the ABC platform and the enhanced formulation, position the molecule well to address the unmet needs in wet AMD. The DAYBREAK study is intended to be a non-inferiority study to evaluate the efficacy, durability and safety of KSI-501 and tarcocimab in wet AMD against aflibercept 2 mg. Both 501 and tarcocimab will be dosed on extended regimen from every for to 24 weeks, while aflibercept 2 mg will be dosed per label.

The study will use the go to market formulations for both 501 and tarcocimab that improve the manufacturability in a prefilled syringe and may also enhance the utility of the products. We are currently in conversation with the FDA to obtain feedback on the study design for DAYBREAK and intend to initiate enrollment as soon as alignment is achieved targeting mid 2024. Turning to Slide 16. Now we’ll turn our attention to our third investigational medicine, KSI-101. This is the unconjugated protein portion of KSI-501 with the same anti IL-6 and VEGF trap design and its unique features as we mentioned previously. This is a greenfield development opportunity for us as it focuses on a market outside the established anti-VEGF market. KSI-101 also is independent from the ABC platform with opportunities and risks uncoupled from the platform, which presents a healthy diversification.

With its bispecific anti-inflammatory mechanism of action, high potency on both targets and high formulation strength at 100 milligram per ml, this is a powerful medicine and we are exploring it in difficult conditions, what we call the uveitic complex of diseases that as hallmark have macular edema, that’s retinal edema and inflammation, and for which no intravitreal biologic therapies exist today. Turning to Slide 17. Current treatments for patients with macular edema associated with retinal inflammation show limited efficacy and many undesirable and potentially serious side effects. Treatment is generally non-specific, such as steroids and immunomodulators. There is only one approved biologic therapy, adalimumab, which is an anti-TNF alpha agent that is administered systemically but it also is associated with limited treatment efficacy and serious side effects.

There are no approved intravitreal biologic therapies today that target the underlying disease mechanisms. We believe this disease area is prime for a powerful, safe and effective branded intravitreal biologic therapy to change the treatment paradigm. Turning to Slide 18. We plan to advance KSI-101 into a dose finding Phase 1b study in the second quarter of this year to identify the two dose levels to progress into our pivotals. We are currently in the process of obtaining FDA feedback on the design of the pivotal program here for KSI-101 and hope to initiate two Phase 2b/3 pivotal studies later in 2024. Turning to Slide 19 and summarizing. In summary, we’re excited to be on plan to advance our three clinical programs into Phase 3 studies in 2024, with GLOW2 two for tarcocimab already enrolling, with DAYBREAK up next and bringing forward two of our molecules, KSI- 501 as well as tarcocimab, and then dual pivotals for KSI-101 in planning.

We are at a point of departure and we’re in motion. And we have our eyes focused on delivering meaningful Phase 3 BLA facing value inflection points within our current cash runway. Now we will open the floor to analysts for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question will come from the line of Michael Yee from Jefferies.

Unidentified Analyst: This is [Indiscernible] [Xiao Jin Wei] on the line for Michael Yee. I have two questions regarding the 501 bispecific pivotal study. I noticed that there are multiple arms for tarcocimab and KSI-501 in that study. I wonder if those patients would be randomized to each of the arms at the beginning or they would be treated as needed and given more flexibility of the dosing, and what’s your estimate of the sample size? And second question is, can you clarify if you plan to include data from the DAYBREAK, the pivotal study for 501 as well in the same BLA filing of tarcocimab?

Victor Perlroth: To try to make sure that we understood the question. It’s around the DAYBREAK study, and that study is planned to include aflibercept as the comparator and then to include arms for tarcocimab as well as KSI-501. So the first objective of including an experimental arm with tarcocimab in the study is it’s very efficient economically for us and operationally. But also, the data from the study will yes be included in the BLA filing for tarcocimab. So our objective on the timing of the DAYBREAK study and also the GLOW2 study are for those studies to finish at approximately the same time and to feed the same BLA. So that’s an important element. Then on the study designed for DAYBREAK, we’re still in discussions with FDA to make sure that we get to the study that meets our needs.

Our objective is to include durability for both tarcocimab and KSI-501 and to be able to go from monthly dosing all the way through six month dosing to be able to showcase the power of our ABC platform medicines from the standpoint of immediacy but also their powerful durability.

Unidentified Analyst: So does that mean that you would have multiple arms of tarcocimab as well as 501, and that essentially requires a big study for you to run?

Victor Perlroth: We haven’t disclosed the precise design of the study yet. As you know, within ophthalmology, the regulatory landscape is evolving. One of our core objectives for the DAYBREAK study is that it’d be cost effective. Kodiak has a substantial amount of experience running many of these studies in the big diseases in retina. And so, obviously we’re going to try not to have more groups than we need to have to be able to like achieve our objectives. So let’s stay tuned and see where we come out on the study design.

Operator: Our next question comes line on Michael DiFiore from Evercore ISI.

Michael DiFiore: A few questions from me. Number one, regarding the upcoming Phase 3 DAYBREAK trial. I know the design is currently being finalized, but if you could provide any color on what dose will be used? And a follow up question to that is how is the enhanced KSI-501 formulation different from the formulation used in the recent prior Phase 1 DMA study, and have a follow up?

Victor Perlroth: For the DAYBREAK study, the plan is to use a similar 100 microliter volume. So therefore, it’ll be driven by the formulation strength of the formulations themselves. So both the tarcocimab and the KSI-501 formulations are 50 mg/mil strength. For this pivotal at 100 microliters, so there’ll be 5 milligrams each. And each one of those molecules will be in there, what we call, kind of go to market formulation or commercial scale up formulation, which as we’ve mentioned does include adjustments from what was tested previously with tarcocimab in our pivotal program and also what was used in the Phase 1 program for KSI-501. So as I said, we’re at an important point of departure as we step into these new studies with these adjusted and enhanced formulations. And we’re excited to be able to showcase what these molecules can do in these next set of pivotals.

Michael DiFiore: And I guess my follow up question is, just want to clarify why exactly tarcocimab is being added as an active comparator in the DAYBREAK trial. Is it correct to assume that the FDA is not requiring this and that Kodiak is proactively doing this in order to have dosing flexibility on the label?

Victor Perlroth: We really struggled somewhat with what to do to finish the tarcocimab program and I would say it took us some months to figure out what we wanted our plan to be. And on the one hand, we wanted to lean into additional work in wet AMD, because that represents a large part of the market, right, for the anti-VEGFs. On the other hand, we didn’t want to run the study where, let’s say, different stakeholders or investors were worried about the probability of success, because we’d have so much hanging on the outcome. So in the end, we decided to run the GLOW2 study as our core study for approval for tarcocimab, which will have a very high probability of success given that it’s essentially the same study as GLOW1, which was a tremendously successful outcome.

And then in addition, we decided that we would tuck in an additional group into the pivotal study we wanted to run for KSI-501. So economically, it’s very cash efficient to tuck that in. Having decided to run that additional wet AMD study then we will end up with the DAYLIGHT study as a successful study, and we hope the DAYBREAK study also has a successful study for tarcocimab. And our overall package will then include five successful, we hope, pivotal studies for tarcocimab. And at the same time, we’re checking a box for KSI-501 and it will be the first of its two pivotal studies that we will need to file [approved] [Indiscernible]. So if you think about Kodiak’s program with three, what I call, late phase molecules, right, with all of them being run through pivotal studies starting imminently, that’s the philosophy that we’re bringing to the next several years of Kodiak’s development.