KOD - NASDAQ

Good day, ladies and gentlemen, and welcome to the Kodiak Sciences Third Quarter 2019 Business Highlights Conference Call. [Operator Instructions] At this time, I would like to hand the conference over to Mr. John Borgeson, CFO. Please go ahead, sir.

Thank you for joining Kodiak Science's third quarter 2019 business highlights conference call. I'm John Borgeson, Kodiak's Chief Financial Officer. Joining me today are Victor Perlroth, Chairman and CEO; and Jason Ehrlich, Chief Medical Officer and Chief Development Officer. 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 Investor Relations section of our website. An archive of this webcast will be available on our website. I'd also like to remind you that remarks made on this call today include forward-looking statements about Kodiak. A more complete description of these and other material risks can be found and Kodiak's filings with the Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended September 30, 2019, which has been filed with the SEC today. Kodiak will 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, our CEO.

Thanks, John. Good afternoon, everyone and thank you for joining us. This is the first end of quarter business highlights conference call we have hosted -- we'll dive right in. We're a public retina focused ophthalmology medicines development company. We've applied and continue to apply a creative and thoughtful approach to science and medicines design and development, most notably with our antibody biopolymer conjugate platform and our lead asset KSI-301 which we built on this platform. Our objective is to design, develop, and ultimately commercialize a new standard of care best-in-class medicines for the leading causes of blindness in the developed world which diseases are driven by the growing demographics of aging and diabetes. We are focused exclusively in ophthalmology and retina, and we believe this gives us a distinct advantage. Retina is a highly technical area for medicines development and there are increasing returns to focus over time. On Slide 4, for those of you who did not yet watch the live webcast from our October 14, R&D Day event, we encourage you to do so, and it can still be found on the IR page of our Company website. Over three hours, we took the time to introduce the platform with a bit of a deep dive into the underlying philosophy and concepts and to review the data of our KSI-301, ABC medicine, and to provide first line of sight to a registrational path for KSI-301. And Jason and I together discuss these items with clinical and market experts. The R&D Day event being not quite one month ago, as you listen to today's updates, you can see and hear the progress we are making at Kodiak, and feel the acceleration of our efforts, an acceleration that has been 10 years in the making. Here on Slide 4, you can see the components of our ABC platform, where we bring novel antibodies together with a state-of-the-art phosphorylcholine-based biopolymer to form stably linked biologics that are designed for increased durability and efficacy after intravitreal ophthalmic injection. We call them the same where it matters, administered in the same way as a biologic in an optically clear solution and formulation, and with fast and potent clinical responses, and different where it counts. Importantly, our biopolymer is not done mass or size. It's a form of macromolecular water. It is a bioconjugate with an integrated set of properties, and allows us to enhance ocular durability, enhance potency, enhance bioavailability to the retina, enhance stability and at the same time designing in a rapid systemic clearance. This is truly a next-generation platform to service a pipeline of future retinal medicines. On Slide 5, you can see the application of our ABC platform across this next generation of retinal medicines, including monospecific ABCs like KSI-301, bispecific ABCs like our KSI-501, and our new triplet ABCs deeper in our pipeline. On Slide 6, we took a no-compromise approach to the design of KSI-301, our lead assets, our anti-VEGF ABC. We have an industry-leading molecular weight which drives durability at 950,000 molecular weight versus EYLEA at 115,000 molecular weight, and most of which in our conjugate is really that phosphorylcholine-based macro-molecular water. And we achieved this molecular weight with the high formulation strength such that we are dosing 5 milligrams of product. This allows us to achieve a 3.5 times smaller excess of anti-VEGF finding units versus EYLEA at its label dose. And we have an industry-leading half-life, which over time translates into a powerful concentration advantage in the eye versus the marketed anti-VEGF biologics. Our objective at Kodiak is to develop KSI-301 to demonstrate a meaningfully differentiated profile in each of the four major retinal vascular diseases. The way to think about it is our Phase 1b study is treating -- treatment-naive patients in each of the four anti-VEGF retinal vascular diseases, wet AMD, diabetic macular edema or DME, retinal vein occlusion or RVO, and also diabetic retinopathy as a component of DME. In the design of the Phase 1 b allows us to generate data that we believe can be predictive of how KSI can perform in indication-specific pivotal studies in the same and or very similar patient populations. And we want to design each pivotal to have primary and secondary endpoints such that if we hit them, we would be clearly differentiated from the pack of existing anti-VEGF biologics in use namely EYLEA, Lucentis, the new Beovu, and Avastin. This group which Dr. Holekamp synthesized at our most recent R&D Day as essentially similar medicines traveling in a common pack. Our medicine KSI-301 has the potential to be the unique medicine, a unique biologic separate from the pack. Our objective is to run pivotal studies in each major disease and in which we have a differentiated design, and in which we have a high probability of technical and regulatory success based on our ABC design and our data being generated in our Phase 1b study. For example, in wet AMD, our objective and being explored in our DA

Thank you, Victor, and good afternoon, everyone. It's been an exciting quarter for the Kodiak clinical team. And before getting into the updated Phase 1 b data, I wanted to take just a moment to thank everybody who has contributed our clinical investigators, the whole Kodiak team here, our partners and most importantly, the patients who are participating in our clinical studies of KSI-301. So as Victor mentioned, current intravitreal anti-VEGF medicines require frequent eye injections in order to achieve the best clinical results. So personally as an ophthalmologist and drug developer, I'm really excited about the potential of our ABC platform and of KSI-301 to address this challenge. We believe the emerging KSI-301 Phase 1b clinical data support meaningfully differentiated clinical profiles of KSI-301 relative to the standard of care in each of the major retinal diseases treated today with the existing anti-VEGF therapies. So looking at Slide 10 then as Victor said, we're deepening and accelerating the development program for KSI-301 on the basis of the data and our recent end of phase meeting with the FDA. This was really a very collaborative discussion and the net result of that meeting was that we can achieve a potential approval for KSI-301 in the key anti-VEGF indications on the basis of the plan described on the slide here. So two pivotal and RVO for an initial BLA. And then one pivotal study each in wet AMD and DME pro forma basis of a supplement. And then one additional pivotal study for DR without DME that would be a third supplement for BLA or second supplement. The information shown on Slide 10 reflects our current thinking as to the duration and the size of these studies. Now getting these studies going is, of course, a big operational lift and we're really pleased so far with the infrastructure that we've put in place for a DA

Thank you, Jason. In summary, we are very pleased with the business highlights for the third quarter and the first part of the fourth quarter. And we now open the floor to questions. Operator?

Thank you, sir. [Operator Instructions] We'll go first to Matthew Harrison, Morgan Stanley.

Hi. This is Max Skor on for Matthew. I was wondering if you can comment on KSI, CMC activities, and how the FDA feedback compares with your current plan? Thank you very much.

Sure. Thanks, Max.

And?

This is Victor. I think obviously with the no inflammation in any patient record that we maintain having in the Phase 1A and the 1B come, we feel very good about the manufactured quality of the material that we've made to-date. And we have spent a lot of time and effort and some treasurer to build a manufacturing path that we feel from a technical standpoint will scale up well. And we I think we received very positive feedback from FDA kind of on the manufacturing framework for the antibody intermediate -- for the biopolymer intermediate for the drug substance bioconjugate and also for the drug product. Another outcome from our meeting was an agreement to have a CMC specific meeting with FDA next year when we feel that we're ready for that. Certainly, we believe that our timelines in the 2022 vision that we articulate also include our views on requisite timing and activities to service the initial BLA and then those supplemental BLAs. So we have spent a lot of time and effort, thinking about and executing on our CMC plans and they are kind of included under the hood here in the 2022 vision.

Okay. Thank you very much. Operator Our next question will come from Gena Wang, Barclays.

Hi. This is Peter for Gena. Congratulations on all the updates and progress, and thank you for taking the questions. a few from us. First on the confirmatory Phase 3 study, which no longer seems to be required. Could you give us some color on FDA feedback? And it sounded like it was part of an sBLA. Could each of the sBLA be approved on its own or do both studies have to meet positive to be required? And I have a couple of more follow-ups. Thank you.

And the path that we discussed and have an agreement with from FDA is really an integrated package. So the RVO dual pivotal with their six-month endpoint, which we expect to start, let's say, mid next year performed the basis of an initial BLA submission that stands on its own. We're running the DA

Yes. So, Peter, I think the key advancement here is that rather than having to do two wet AMD studies and two DME studies, we can do one of each and submit those together as a supplement and get approved in both.

Right. And as a result of that, we're going to slightly increase the power of those individual studies, that's part of our plan. And at the same time, that represents a powerful cost efficiency and time efficiency, and operational kind of efficiency for the Company.

Got it. Just a couple more. I guess just following up on that, increase in size, assuming just for example or wet AMD assuming stand there at 12 to 13 on the baseline, like how much power increase like are you gaining with the extra 150? And do you still have the optionality of expanding patients with that analysis?

Yes. So -- that's right, Peter. So, as we discussed before, the DA

Right.

Great. That's extremely helpful. And last one from me, I think, appreciating a small number of patients and difference in safety measurement and definitions, like when you compare magnitude of CST reduction to brolucizumab, any thoughts here? And thank you very much again and congratulations.

Yes. I mean, I think for instance, if you look at that slightly larger dataset there that we presented through week 12, where -- and for instance, if you take out those two patients with a very high PEDs and you look at the average thickness of the rest of like whatever so 287 microns at week 12. So I think that our OCT values are really appropriate, and now we're getting in that normal range. Obviously, you don't know how they directly compare to each other, outside of a head-to-head study where they're done at the same reading center, so that -- which is directly assessed greater in the same way. So I guess the bottom line is, we're very happy with where things seem to be netting out on the OCT values on the extent of the retinal drawing, and I think that overall the data including the durability, efficacy and safety kind of speak on their own as an integrated package.

Thank you.

[Operator Instructions] Next up we'll go to Gbola Amusa, Chardan.

Hi. Thanks for the increased visibility and the articulation of your path forward. So two questions. First is, could you talk a little bit more about the impact of your announced clinical trials on cash burn, maybe at a minimum, just the timing of when any upticks could happen and whether, for example, it makes sense now or later to find a partner for ex-U.S. markets? So I'll pause there before question two.

Thanks, Gbola. And -- well, our plans are to look for additional capital in the fourth quarter of this year or in the first quarter of next year. We've had quite a lot of progress in the Company over the past couple of months and it's been great to see the increased interest in the Company, both from the standpoint of investors, but also from the standpoint of I would say, potential strategic partners for the assets, in particular with a view toward like ex-U.S. partnering, I think. We've been very thoughtful if you look back over the past 10 years in terms of buildup the Company, right, in terms of the decisions and choices we made from an R&D design standpoint, right, because at any point, you can make decisions that decrease your future optionality in the R&D side of a Company. But we've also been thoughtful from the corporate side in terms of decisions that we've made that could decrease our future optionality. I think as we look at cash burn, obviously, we're excited by the potential right in our 2022 vision, right, as we talked about in terms of the efficiencies that come out of -- at the end of Phase 2 meeting, and the ability and the desire to run our studies more in parallel, right. to capture those efficiencies. But also, of course, recognize the cash burn required to really do that. I think we're very pleased with the growing interest in the Company and definitely feel that the capital needed to run the plan in 2020, 2021 and 2022 right through approval can be there for the Company based on the interest that we're seeing. I think we don't necessarily believe that we have to raise all the capital at one time. I mean that's certainly is not our current plan. I think we are looking forward to raising capital like inappropriate tranches, right over in the next several years, starting in say Q4, Q1. And we also, as you know, there is an increasing set of kind of alternative financing kind of approaches that Kodiak as a company with the kind of, let's say, increasingly de-risked assets, that we have can turn to, right, not just necessarily ex-U.S. partnering, of course, we do own global territorial rights for the product, currently. So I think the long answer to your question is that we think capital has many different types, is going to be available to Kodiak to make sure that we can properly execute on this kind of accelerating vision for the product and the Company. And we have our eyes on that and I think we'll hopefully have more to say over the next three months to six months.

Great. And then the second question, we've seen a couple of your gene therapy competitors being quite volatile of late. One company had competitor data around your R&D Day, then the partial clinical hold, done a lawsuit with the FDA and other things started dosing a new cohort. So my question is given that you have new data -- updated data, what's your updated perspective on where KSI-301 fits relative to the gene therapies?

And one of the things I think that's interesting -- this is Victor, and just to give a quick view, and I think Jason can speak longer. I think the better that we do with KSI-301 in terms of our durability, I think in some way, the less white space there is for more exotic approaches, right, whether there are surgical approaches or whether there are sort of earlier gene therapy players. I think as Jason mentioned, we're quite intrigued to see, quite a high percentage of patients capping out at the six-month treatment in our wet AMD cohort. And also seen a number of patients in DME, where we don't cap, right, reaching four, five, six and even seven months post-loading dose. So the better we do, I guess, as an intravitreally injected, optically clear solution, right injected in the same way with an intriguing safety profile, I guess the question is, well, why should somebody turn to a very different approach, right? Why wouldn't we want to stay with the tried and true approach? The same where it matters, right, different where it counts kind of approach. And not just for KSI-301, right, but in the context of a broader pipeline, right, as our Company focused right broadly across retina. So that's one way to look at it from a simple person's point of view. I think to dig in more deeply, Jason, if he can weigh-in, in terms of what we think some of our thoughts on gene therapy?

Yes. Victor, I think you articulated, it very nicely. I think there is, people are exploring a variety of different types of platforms and approaches because of this question of how do you get a long with a therapeutic effect in the eye. This question is really important, right? And so we've seen a lot of different types of approaches over time and you know the reality is it's a very hard problem. It's a very hard problem to solve. And so there are the surgical implants, there is intravitreal approach like our ABC platform and there's a gene therapies, either with concomitant surgery or intravitreal, those are all things that are in the clinic now. And we're platform developers here at Kodiak, right, and I think we've been thoughtful and patient, and platforms are tough, right. If you get the science, right, if you get the manufacturing, right. And so I think on the basis of the data that we're seeing, we're accelerating into a Phase 3 sort of comprehensive program where I think we can do very well in each of those studies that we described, which is, you know, let's say, independent of how the competitors may do last month, versus next month versus over time. I think we're moving ahead as expeditiously and thoughtfully as we can. And a lot of these other platforms are still quite early. And I think again as Victor said, there the better our durability continues to be or is and continues to be, I think the less whitespace there is for the exotic approaches and the surgical approaches where the short and long-term safety may not be as good as intravitreal administration, right? I mean intravitreal injections have turned out to be a way safer than anybody thought they were going to be 15 years ago when we started doing them for these kinds of retinal vascular diseases. And -- so -- yes, maybe I'll stop there.

Great. Thanks a lot and congrats on the progress.

Thanks, Gbola.

And everyone, at this time, there are no further questions. I'd like to hand things back to Victor Perlroth for any additional or closing remarks.