Kodiak Sciences (KOD -79.8%), a clinical-stage biotech focused on eye diseases, has lost more than $2B of its market capitalization on Wednesday after the company said its lead asset KSI-301 did not meet the primary endpoint in a Phase 2b/3 trial for wet age-related macular degeneration.
Commenting on the setback, Morgan Stanley analyst Matthew Harrison, with an Equal Weight rating and a $77 per share target on the stock, wrote: “We expect KOD to face significant pressure today, but see value above cash given the potential with other studies.”
While the investigator Dr. Carl Regillo blamed the trial design for the underperformance of the anti-VEGF therapy, Kodiak's Chief Executive Officer Victor Perlroth said that the issues had been addressed in several other wet-AMD trials for KSI-301.
Truist Securities, which has a Buy rating on the stock, agrees. “In our opinion, the failure is due to poor trial design and there should have been more frequent dosing arms included,” analyst Robyn Karnauskas argued, adding “unclear what the path forward is for wet AMD and if this is enough to be included in the label.”
The analysts note the management’s optimistic views on KSI-301 in diabetic macular edema (DME) and retinal vein occlusion (RVO), for which pivotal data are expected in early 2023 and mid-2022, respectively. However, assuming no wet AMD indication and slashing peak sales prospects, the firm has trimmed the price target to as little as $35 from $147 per share.
However, Jefferies analyst Michael Yee expects Kodiak (NASDAQ:KOD) to experience a significant selloff for a while to eventually trade near the cash level given the uncertainty and the current weakness in the biotech space. Yee has a Buy rating and a $150 per share target on the stock.
According to Barclays analyst Carter Gould, the setback for Kodiak (KOD) “removes modest overhang” for Regeneron (NASDAQ:REGN). “The straightforward takeaway is that this removes KSI-301 as a near-term competitive threat to Eylea, and, as such, is an incremental positive for Regeneron.”