Kodiak Sciences: Potential For Comeback After Trial Setback

May 17, 2022 9:09 AM ETKodiak Sciences Inc. (KOD)4 Comments1 Like

Summary

  • Results from the BEACON study, which is using KSI-301 for the treatment of patients with retinal vein occlusion, are expected by Q3 of 2022.
  • The global retinal vein occlusion market is estimated to be worth $25.66 billion by 2028.
  • Additional trial readouts using new dosing schedules such as diabetic macular edema, non-proliferative diabetic retinopathy, and treatment naive Wet-AMD are expected in 2023.
  • Kodiak Sciences had $671.7 million in cash as of March 31, 2022, enough cash to fund operations for at least the next 12 months.
  • I do much more than just articles at Biotech Analysis Central: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Kodiak Sciences (NASDAQ:KOD) is a good speculative biotech play to look into. That's because in Q3 of 2022 it has a major catalyst and this is the readout of the phase 3 pivotal BEACON study. This is a study which is using KSI-301 for the treatment of patients with retinal vein occlusion (RVO). The thing is that this biotech suffered a major setback when it reported results from its phase 2/3 study using KSI-301 for the treatment of patients with wet age-related macular degeneration (Wet-AMD). That's because it missed the primary endpoint of the study. The reason why I believe it has a potential great turnaround story is because the learning it had with respect to this study. In addition, the ability to alter the other ongoing trials it has with modifications. More about this below, but the notion is that after the loading dose patients did not receive KSI-301 more often than once every 12 weeks. The hope was that it could give fewer doses and it did not achieve that goal. However, the ability to allow more often dosing like once every 4 weeks and once every 8 weeks have been deployed. I believe that these changes could possibly provide for the potential to see better improvements compared to the phase 2/3 study above, which did not meet the primary endpoint. The first test of this will come when the phase 3 BEACON study is revealed later in the year.

Potential For Kodiak To Make A Comeback With Trial Modifications

The thing is that there is potential for Kodiak to make a comeback from the major trial setback that it had. Again, this was due to the fact that the phase 2/3 study using KSI-301 noted above had failed to meet the primary endpoint. A good finding done as a pre-specified secondary analysis at year 1 was that about 59% of the patients in the KSI-301 arm with 5-month dosing achieved visual acuity gains and other anatomic improvements that was comparable to those who took Eylea (aflibercept) instead. What happened and why do I believe there is potential here after such a failure for KSI-301? I think that management was attempting to change the landscape which was bold. In essence, to allow for more infrequent dosing of an injection into the eye. Unfortunately, this was not the case because of the phase 2/3 study failing to meet the primary endpoint. Where I think that there is room for improvement is that Kodiak has a chance to redeem itself.

For instance, the first study to have another trial readout would be BEACON. This is a pivotal phase 3 study which is using the very same drug above KSI-301 for the treatment of patients with retinal vein occlusion (RVO). Branch retinal vein occlusion occurs as a result of a blockage of at least one or more branches of the central retinal vein, which runs through an optic nerve. Symptoms of BRVO include:

  • Floaters - gray or black spots in vision
  • Peripheral vision loss - gaps of side vision occurs
  • Blurred or distorted central vision

This is a huge market opportunity for sure. Consider that the global retinal vein occlusion market is estimated to be worth $25.66 billion by 2028. The thing is that this includes two types of retinal vein occlusion which are:

  • Branch retinal vein occlusion
  • Central Retinal Vein Occlusion

With central retinal vein occlusion, the main vein that drains blood from the retinal itself ends up closing partially or all the way. This leads to blurred vision and other issues with the eye. This phase 3 study is randomizing about 550 patients worldwide to receive either intravitreal KSI-301 once every 8 weeks after two loading doses or month Eylea injection every month. Patients will be treated over a 6 month period and then evaluated for the primary endpoint. The primary endpoint of this study will be non-inferiority of KSI-301 to Eylea as measured by changes in best corrected visual acuity (BCVA) over the 6 month period. The thing is that I think Kodiak has a better shot at succeeding. While RVO is a different indication compared to Wet-AMD, the fact that it changed its dosing I think should make a huge difference for the final outcome. That's because the BEACON study was changed to allow for dosing of KSI-301 once every 8 weeks. I believe that the ability to dose more often with this drug should lead to improved clinical outcomes. I think what didn't help Kodiak with respect to the phase 2/3 study was dosing out to as much as 5 months. It was a huge goal to meet and unfortunately for patients this wasn't the case. However, if Kodiak can achieve statistical significance with KSI-301 in RVO and other indications, then it can make a potential comeback. This trial modification made with the BEACON study wasn't the only one. The other studies that were changed were as follows:

  • GLEAM study- Dosing as frequently every 8 weeks in Diabetic macular edema patients
  • GLIMMER study- Dosing as frequently every 8 weeks in diabetic macular edema patients
  • DAYLIGHT study - Dosing as frequently as every 4 weeks in treatment naive Wet age-related macular degeneration

I think that the modifications of how often patients are dosed compared to before, may be enough to improve clinical outcomes. The first test again will be results from the BEACON study which are expected in Q3 of 2022.

Financials

According to the 10-Q SEC Filing, Kodiak Sciences had $671.7 million of cash and cash equivalents as of March 31, 2022. A big reason for the amount of cash on hand is because of a very large stock offering it did back in November of 2020. That is when it sold a total of 5,193,237 shares of common stock at a price of $108 per share. The underwriters were even given a 30-day option to purchase up to an additional 778,985 shares of its common stock at the same offering price. The aggregate gross proceeds from the offering was to be about $560.9 million The company believes that its current cash on hand should be enough to fund its operations for at least the next 12 months from the filing date of the 10-Q SEC Filing, which was released on May 10, 2022. That gives it about one year worth of cash to fund its pipeline and operations. I believe that it will likely have to raise cash at least before the end of 2022. I think that if the results of the phase 3 BEACON study using KSI-301 are positive, then it may choose to raise cash at that time.

Risks To Business

There are several risks that investors should be aware of. I believe that the trial modifications of altering the doses to being given more frequently should help improve clinical outcomes and possibly meeting the primary endpoint. There is no guarantee that this will work with complete certainty for the phase 3 BEACON study, but there is a better chance I think with more frequent dosing. Hopefully, the modification to more frequent dosing helps the other indications in the pipeline like RVO, Diabetic macular edema (DME) and non-proliferative diabetic retinopathy. The second risk would be any safety issues that may or may not arise. Frequent dosing of KSI-301 might help in terms of clinical outcomes, but it's possible that it could also cause a safety issue. I don't believe there is any incidence with such dosing, but just keep it in mind as a possible risk. The final risk would be the financial situation. The company only has enough cash for about 12 months give or take. It will not wait until 2023 to raise cash and will likely need to establish some type of a cushion. As such, I believe it may raise cash on a positive new development. For instance, if the phase 3 BEACON study meets the primary endpoint. I expect the stock to climb considerably, but at the same time I think the company will quickly take advantage of such a rise in share price with a cash raise. Another possible option for financing could be that it doesn't want to wait for the clinical data and enact a cash raise beforehand to avoid any possible disaster.

Conclusion

I believe that Kodiak Sciences is a great speculative biotech play to look into. That's because it has several additional shots on goal in the pipeline. While it did end up having a huge roadblock with respect to KSI-301 for Wet-AMD, the company is moving forward with several adjustments of dosing for its other indications. These include the indications of RVO, Diabetic macular edema (DME), non-proliferative diabetic retinopathy and treatment naive Wet-AMD patients. The first major catalyst to see if such dosing schedule changes work would be the upcoming results from the phase 3 BEACON study. This study is using KSI-301 for the treatment of patients with Retinal Vein Occlusion (RVO). Results from this late-stage study using this drug are expected in Q3 of 2022. Another short-term catalyst investors can look forward to would be the IND submission of KSI-501 for retinal disorders which is expected in the 2nd half of 2022. Additional results from the other programs are expected in 2023. These will be results from the GLOW study in patients with non-proliferative diabetic retinopathy (NPDR) and results from both GLEAM and GLIMMER which are treating patients with Diabetic macular edema (DME). With trial modifications in more frequent dosing, I think the company can stage a comeback. It did not fail horribly with its phase 2/3 study with KSI-301 in Wet-AMD. Its major issue on failing the study was dosing patients out as much as once every 3/4/5 months. I think that the new changes should make improvements in clinical outcomes. As such, this is why I think it's a good speculative biotech play to look into.

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