Kodiak Sciences Inc. (KOD) Earnings Call Transcript & Summary

Great, everybody. Thanks for joining us for the next session. I'm Matthew Harrison, one of the biopharma analysts here at Morgan Stanley. Very pleased to have Kodiak with us here for the next session. Before we get started, I just need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/research disclosures. And pleased to have with us the whole team. So we have Victor Perlroth, the CEO; Jason Ehrlich, who runs Medical; and John Borgeson, who is the CFO. So thanks for being here. Very nice to have you.

Victor, I thought maybe to start off, you obviously have sort of your first major of your clinical readouts coming up here with DAZZLE. So maybe a good place to start off is just remind people about the confidence you have in the program leading up here to DAZZLE and in particular, what you view as sort of a positive outcome for DAZZLE.

Thanks, Matthew. Thanks for having us, the Kodiak team here at the Morgan Stanley conference. It's a good annual event. Well, we're really in an execution phase of the company, and I'm very pleased with what we've put together over the last, say, 3, 6, even 12 months, in particular. So we now have our 6 pivotal studies for our lead investigational therapy, KSI-301 that are running. So we have the 5 pivotal studies that we plan for the initial DLA. And then we also now have the globe diabetic retinopathy study that we think won't come in time for the BLA, but would be part of the 6 pivotal clinical trial program for the molecule and follow shortly thereafter. So it's a pretty exciting set of 6 programs and 5 of them being in the initial BLA, right, DAZZLE that you mentioned for wet AMD, BEACON for the retinal vein occlusion, RVO, then GLEAM & GLIMMER in DME, diabetic macular edema, and then DAYLIGHT, also in wet AMD. So the 5 studies are going to come together right into that single initial file. And we're in a nice spot today. We're within 6 months of Dazzle's top line data. And certainly, within a year of BEACON's top line data. So we're sitting today right with 2 of those pivotals reading out within 12 months. And then GLEAM, GLIMMER and DAYLIGHT sort of competing amongst themselves to read out shortly in sort of that next time increment, before we'd be filing the BLA. So that's an exciting spot to be with an increased level of clinical data every day. That's coming in, in a masked form, right? All of those studies against EYLEA has an active comparator except for GLOW, the non- proliferative DR study that I mentioned that will come in later, and that's again, sham. So when we get to DAZZLE, we're 3 quarters actually, I believe, right, Jason, of the DAZZLE patients have already passed through the primary endpoint? So that's pretty exciting. We have the last patient out for the primary endpoint, just on that tail end of November, or early December. So that's an exciting place for us to be. And then given that it's the first of our pivotals in a package of 5 that we're targeting for the BLA, we're building those internal systems to clean the data and lock the database and process everything so that we can put that together right into sort of the top line data announcement, which we expect will be, to be honest, in the March 2022 time frame. So that's -- and then with BEACON, Jason, where are we on the enrollment? I think, probably north of 90% enrolled. Is that right for BEACON?

It's around 80%. Yes.

Around 8%?

Moving fact.

Yes. And that's with the 6-month primary endpoint. So that top line data will follow very quickly from DAZZLE. In terms of our broader confidence in DAZZLE, we continue to be very pleased with the whole data set that we're seeing across the program and in DAZZLE, of course, and our objective, right, being a non-inferiority study for vision against EYLEA is a good place to be, rather, I guess, than going against sham, going against a strong active comparator, we think is the right place to be with our strong and potent anti-VEGF and with that durability that we saw in the 1B, obviously, where we took 2/3 or more of the patients to 6 months across those 3 indications. We feel that our ability to showcase very strong durability in DAZZLE, and we still have a high level of internal confidence in that, where we need to come out for DAZZLE, non-inferiority of vision being the primary at that 1 year endpoint. And then where we need to come out in terms of durability, we're still, I think, feeling that our internal goal would be to have at least half the patients on the longest interval, which is the key 20 week or the 5-month regimen. That's our internal goal. I think in reality, we've built and designed our molecule for durability. And that's a core part of the design of the molecule. So with our competition fundamentally being, say, Lucentis or its biosimilars, but really EYLEA with faricimab being, in our view, fairly incremental on top of EYLEA, not really haven't shown that much durability, to be honest, in its DME studies where they have the matched regimen versus EYLEA. I think from the durability standpoint, we still see our molecule as being really the differentiated molecule in durability. And I think not just in DAZZLE, right, where we have the 3, 4, 5 months, but when you look at our other study designs in DME 2, 3, 4, 5, 6 months in BEACON, right in RVO, where we go one to every 2 months. And then in the second 6 months, we have sort of a more flexible regimen. We've really designed our whole comprehensive pivotal program in a very thoughtful manner to really allow us to tease out and I think, to strong show, right, that our molecule can be a little bit in a class of its own vis-a-vis all the other molecules. And with the safety continuing to look excellent, and with broad games and vision looking excellent and with the broader sets of pivotal study designs, we're focused on execution in clinical, and we're also focused on manufacturing, scale up and really working towards what we need to do to build the team and our capabilities towards the BLA filing. And I think, overall, in the field, we still believe we're highly relevant, and we're very pleased with the overall execution.

Okay. Great. No, perfect. That's a great introduction, Victor. And maybe we could touch on a couple of things you mentioned. So first one, obviously, the field is now very clearly aware how important inflammation is. So maybe you could just talk about what you're doing on manufacturing, your confidence around your profile related to inflammation and sort of your views on the outlook for that?

Yes. Thanks. I think for manufacturing, sometimes that is a driver of inflammation. And then there can be other drivers of inflammation that relate more to, say, the design or structure of a molecule or perhaps its dose, that kind of thing. We're continuing, in my view, our strong emphasis on quality of manufacturing as we manufacture more batches. And as we scale up elements of our manufacturing to achieve a commercial scale with our objective to be able to supply a healthy percentage of the overall market at launch and in the early years. So we're continuing to do, I think, a very good job on manufacturing, lot-to-lot batch to batching through scale up and building commercial-type facilities. So we're going to continue to do that strong work on the manufacturing. I think on the design of our molecule, of course, being a whole antibody and then being our conjugate and the safety that we've seen to date. I think running the open-label study, the Phase Ib was a very nice thing to do to really allow us to have that deep visibility into the safety and to see that visibility right through that 1 year, and now, of course, with safety as a group, right, moving through all of the masked studies and continuing to see very strong and appropriate safety. We're very pleased. So again, I think what I would say is it's not just a manufacturing element, it's the broader elements. And I think we're seeing the safety in both elements. Jason, would you like to provide any additional color around safety for Matthew and for our listeners?

Sure. Yes. Thanks, Victor. And I guess I would just say, at this point in the program, right, the vast majority of the enrolled patients are in masked ongoing studies, right? So we look at the masked data. And the safety profile in the masked data appears as of now very much in line with expectations for what you would expect for patients on EYLEA, the active comparator. So that's very good so far. So we continue to be encouraged by that.

Perfect. That's clear and that's helpful. Maybe we could -- and I know we've gone through this before, but I think it's still relevant in the sense that I still get significant questions around this. So as people are thinking about their own view on probability of success in the Phase III program, a couple of questions still come up. So maybe we could just sort of tick through those and let you guys respond to that. So I think the first one is probably related to OCT in Phase Ib and how to think about, let's call it, anatomic benefits and that related to duration. So maybe we could start there and you could comment on that and then there are a couple of others that come up a lot.

Well, I can start and Jason can finish. I think vision, right, BCVA, best corrected visual acuity is the regulated endpoint in terms of non-inferiority. So that's the core focus. And then the secondary focus is durability. And I think OCT is something that people attract carefully. It's used from a physician standpoint for decision making, perhaps more so in the United States maybe than in other territories. Other molecules that maybe seem to drive better, does that really translate into vision in the short, medium or long term, that doesn't seem to be the case. There's a lot of controversy in the field. So it's an area where there's a lot of noise in reality. When the studies read out, we do have comparisons at different points. I think the community will be able to observe the data. We don't know what the data will show. We do believe, and we certainly know that our anti-VEGF is strong and potent, right, and drives very high letter changes in the diseases as appropriate and that it's a strong agent, right, even anatomically, right, as you look at the Phase Ib data and perhaps when you want to look at RVO or DME, which is sort of a cleaner background system. I think we're generating data, and we're going to have a chance to take a look. But OCT and anatomical, those are not regulated endpoints. And so I think, actually, there's a lot of noise there. And really the unmet need is durability with strong vision gain, and that's what our molecule has been built for. And the OCT data will come along for the ride, and we're going to have all of that data across all of the indications available in the BLA. So the community will have a strong confidence in the molecule, right, as it's getting a chance to begin using it. And we'll be able to make, I think, a broader assessment than just trying to look at a couple of small data points under the microscope, because that's what some people like to do. But we're going to be providing a broad tableau, a broad picture with a molecule that I think is going to be hopefully, really important for patients and also for physicians. Jason, do you have any comments on a little bit of the back and forth on OCT?

Sure. Yes. Thanks, Victor. Thanks, Matthew. Yes, I mean, just maybe a couple of other points to add or for folks to consider, right. I think as we look across the Phase I data from the open-label study that we've presented, right, across all 3 of those indications, we see what we believe are strong and appropriate improvements in both vision and retinal anatomy, right. When you get to the point of trying to compare OCC outcomes across medicines and across studies, it's just really important to remember that almost every one of these studies, the OCT was evaluated at a different leading center under different protocols. And so really like the only way to -- when you talk about CST, the only way to really compare it is within 1 study, where the data were evaluated in a masked fashion at the same reading center under the same protocol and quality systems and so on. And then I think, really, to Victor's point, right, let's say like brolucizumab or even the data from faricimab in year 1, some incremental greater numeric improvement in OCT did not translate into any difference in vision. If anything, there's some data to suggest that like too much dry may not be good. So I think all in all, at the end of the day, like vision is important, anatomy is important, and as Victor said, we'll see the head-to-head results with EYLEA across all the studies, where all the data are being evaluated by the same leading center across our program.

Okay. Perfect. No, great, great. Good. And then obviously, the second question, and then I think we can turn to sort of the competitive landscape in the market you might be entering, because I think that's an interesting discussion. It's just obviously around redosing and when redosing occurs and differences between the early stage work you did and sort of the pivotal work right now.

Well, there are subtle differences in the pivotals from, say, the Phase Ib. I don't think in the end, as we move further away from the 1b and as we move into much deeper pivotal data across the program. To be honest, those differences aren't so material. And then if you get into the nitty gritty of differences between our study design and the study design for, say, faricimab, there are differences in the design. Having said that, we think the changes or what -- the step edits that we've done to the protocols and what we've put into our pivotals, we think they were thoughtful and that they increase our overall probability of showing strong vision and strong durability at the same time. So I think you have to really want to step above those. The decisions that were made with faricimab to lock and only allow patients to shift durability regimens at sort of defined intervals, whereas, in our case, with DAZZLE or GLEAM & GLIMMER, people can shift at different times. I don't think it's that important to get lost in those distinctions. I think at a higher level, right, we have our full program. And we've designed our medicine for durability from the beginning, which is what nobody else has done. And so we believe we have a high probability of showing appropriate non-inferiority of vision with the best durability profile. That's really at a high level what's important. I think you never know in our business, of course. However, for DAZZLE, we believe there is a really high probability based on the study design and based on the data and the design of the molecule to really show that non-inferiority vision and to show the strongest durability. That's our view from what we see.

Okay. Great. Good. So maybe we can talk to the landscape. So obviously, right now, the landscape is -- and branded is pretty clear, right? You've got EYLEA and Lucentis. But by the time I think you guys hopefully come to market, right, we're going to have probably a -- or potentially a biosimilar Lucentis. We'll have faricimab, as you talked about we'll have [indiscernible] delivery. And then there's obviously high dose EYLEA that may make it to market. So I know it's sort of a lot, and I don't know maybe we could break it down a little bit. But I guess the first question is just is, how do you think about the broad development of the market? And what do you think about the market that you're going to be entering?

Right. Well, at this stage, we're highly independent as a company. So we have a tremendous amount of optionality as we look forward. I think that's an important thing to recognize. Retina is a specialty type marketplace. So that's very good. There are high barriers to entry for other players, I would say, more technical barriers in terms of true capability in retina, which is what we built in our building, right, so whether it's Roche, Novartis, Regeneron, who have those technical abilities, we're -- we certainly have those in terms of manufacturing, drug design and clinical execution. So that's good. Certainly, we want to build that type of excellence as we think about the pre-commercial and then into the commercial. And we think in retina, that's certainly possible to do built on the back of our comprehensive clinical program where we're going to have very powerful data right across the whole thing. So what kind of marketplace are we dropping into in the United States or even globally? I think don't we have something like 80% of revenues for anti-VEGF globally, really in only a handful of countries, which again reflects in some way the very interesting dynamics of retina. So what about molecules, right? Lucentis biosimilars coming shortly. While we'll have a chance to observe some of those dynamics, we happen to be in the group that believes that's really going to eat Lucentis' share rather than grabbing share from other molecules. EYLEA is certainly a very strong molecule. With EYLEA biosimilars, in our view, the time line there, I'm certain, and we'll be interested to see how that develops in the United States and let's say, in Europe and globally. And with faricimab, I guess our view is it's still unknown a little bit what the true contribution of that ANG2 mechanism is. So in other words, is there a strong science behind the design of the molecule, right, or is it just sort of a higher strength to anti-VEGF as in TBD, really. I think what physicians tell us, right, on the margin for faricimab, it seems incrementally better than EYLEA across a number of different axes, and so physicians are going to be interested to use it commercially. Our interest will be also to see how Roche or Genentech with Genentech often operating a bit more independent, let's say, than Roche. But in this context, say, in the United States, to what degree would genetic and Roche have a little bit more of an integrated commercial system, right, as they try to drive patients from Lucentis, where they're fighting it out on the biosimilar front into faricimab. That will be very interesting. Pricing for faricimab will be very interesting. The emphasis for faricimab on wet AMD versus diabetic patients also will be very interesting, and that on top of, I think, we're going around doing a little bit more of a push to try and build that diabetes market, which is, of course, very favorable for Kodiak. I think our diabetes data is just phenomenal. We're extremely excited, not just about the Phase Ib data that we have in DME, but also by evolving data, let's say, broadly within GLEAM & GLIMMER. So certainly, this is an unusual strength also of our molecule, not to push wet AMD down, but really to pull up the whole tremendous opportunity for our platform in DME and even in earlier non-proliferative DR. The more investment the existing players put into diabetes, the better for Kodiak to step on top of that with a molecule that's going to be, hopefully, let's say, clearly superior there. So I think the other thing with faricimab, I think there was a matched regimen, as I mentioned, in DME versus EYLEA for faricimab and the overall durability for faricimab in DME when you look at media number of injections in year 1 is actually very weak. So again, another tremendous opportunity. The commercial dynamics in retina as they're evolving provide information for Kodiak as we make our decisions because we have full optionality, right, and we're coming in with a molecule that's designed with the right science and with a comprehensive pivotal program. So I think there's tremendous opportunity for Kodiak alone or with other players together on a global basis. Our ambition would be to build a global franchise, certainly focused in those core countries. And I think we have the right asset to do that and then to follow behind that asset with our platform, right, KSI-501 and then our new triplets, broadly speaking. So we think there -- Matthew, in summary, there's going to be a lot of information for us that are going to allow us to make the best decisions, and we think we have a superior molecule.

Okay. Great. Good. Maybe you could comment directly on high-dose EYLEA. I think limited data set, not a lot of information about durability, more information really around anatomic benefits. I mean how do you think about -- or I guess the first question would be is, can we really gather anything about the profile of that molecule based upon the data that we have so far? And then secondarily, how do you look at that as potentially a competitive molecule?

Well, I guess we're sort of in the watchful waiting category, there wasn't much true information that was announced recently. So the Phase IIIs are running. Is it really going to solve the problem, right? We don't know. What is it going to do and how many patients should it be used? And how is it going to be priced? And to be honest, what is the true safety profile, if you want to use it in every patient? So watchful waiting, basically. It's not designed for the durability. So they're using it in a little bit of a different way. So I think it's likely to be on the margin, but we keep our eyes open.

Okay. Okay. No, good, that's helpful. Victor, you mentioned some of the pipeline beyond 301. So maybe in the last few minutes, we should touch on that because I think that's something that doesn't -- people don't spend a lot of time on or probably ask you about a lot. So maybe if you could talk about 501 and just sort of your thoughts on how to progress some of those molecules and what's sort of next from Kodiak?

Yes. Well, based on we would say the excellent data or confidence that we have from KSI-301, that's allowed us to increase our investment overall in our pipeline and within -- which is focused in retina. As KSI-501, we've taken it a little bit more slowly, I think, than we had thought. In certain cases, we've stolen some of the manufacturing slots, I would say, from a GMP standpoint for KSI-301, as we expanded our clinical program to continue clinical supply and then shifted KSI-501 out. Related to that, a little bit is some of the shortages of monkeys to run some of the GLP non-clinical toxicology. So there were -- I guess, I would say, on the margin, a delay or 2 there. Having said that, we've had such a large focus on KSI-301 clinical execution in terms of expanding the overall clinical program, adding DAYLIGHT and really driving enrollment for BEACON and GLEAM & GLIMMER. So I think it's been an appropriate set of priority and prioritization. Having said that, I believe we're on track for IND mid next year for KSI-501. We're very excited about the molecule, right, a very potent anti-IL-6 combined with a potent anti-VEGF as a bioconjugate. So a key area there that we think, not just a broader concept of inflammatory disease in retinal vascular, but actually there's a group of patients and it may be as large as 30% that are suboptimal responders to anti-VEGF and some interesting data suggests that, that subpopulation has high IL-6 levels. And so it's possible that this molecule could be in some way a holy grail for those patients that are suboptimal responders and that alone could be a massive opportunity for patients and for the medicine. So 501 builds very closely on the platform knowledge, manufacturing and also clinical for -- very similar to KSI-301 in those regards, that going into what we think can be a pretty interesting opportunity for patients. So that's 501, our bispecific. And then the new triplets, which we don't talk about that much, but we have a lot of activities internally. It's really a whole new drug format. Our focus, of course, is in retina, but where we have hundreds of copies of small molecule that we design in-house, very potent that are conjugated into the polymer, and you have your, say, antibody or your bispecific. So again, it builds on the whole platform capability and knowledge. It builds on the ability for our drugs to be potent, and it builds on our ability to manufacture them with excellence and then to bring both intracellular small molecule of what we call high sociometry of loading, right, not just a couple copies of a small molecule that are like toxic right on an ADC, but to bring what I call mechanistic small molecules, hundreds of them into that same water structure, which is fundamental to our ABC Platform, inject those into the vitreous, right, as an intraocular therapy. Those small molecules fall off, they go into the cell and have their activity while at the same time, that conjugate with its water structures needling its way through the retina. So we are excited about dry AMD as an opportunity area. I think if anything, recent data in the field highlight the need for multiple mechanisms of action to be brought to bear on that disease and even further to bring, say, small molecule and large molecule therapies together into single medicines. And that's our triplets. And we're focused on those. We take a long-term view, right, as a company, I think, and the triplets are moving. Our bispecific is moving and KSI-301 is moving. And we're doing, I hope, a good job of building that multiyear value, right, in kind of one stack on top of the other. So we're pleased. And that value, I think, will emerge, Matthew, over time as we disclose more about the power of our science and our platform. And of course, I think from a market standpoint, the focus really is on top line Phase III data, which we're going to be happening over the next 12 to 18 months.

Perfect. Perfect. Victor, John, Jason, thanks for being here. Thanks for the time. We appreciate it.

Thanks a lot, Matthew. Bye.

Thanks, Matthew.

Thanks, Matthew.