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

Good afternoon, everyone, and thanks for joining us on Day 3 of Morgan Stanley Global Healthcare Conference. I'm Michael [ Olson ] of biotech analyst here. It's my pleasure to introduce Victor Perlroth, CEO of Kodiak Sciences. Just a reminder of the format for today, the fireside chat. Before we get started, I just need to read a quick disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, Victor, thanks for joining us. And I thought maybe if you could just start off with an overview of where Kodiak is today as a company, and we'll go from there.

Thanks a lot, Mike. It's good to be here. First of all, I may make forward-looking statements, so please everybody refer to Kodiak SEC filings. Well, Mike, Kodiak today is a company in transition. So we're coming off from successfully executing a 6 pivotal trial clinical program. And while there are mixed results with tarcocimab, we believe we've learned critical information about the platform. And overall, we've grown as a company, and we're poised to take these learnings, this growth and evolve into a brighter future. So we continue to be retina-focused drug development company, and we've demonstrated strong execution capabilities in critical areas from drug design to drug manufacturing to clinical development. More importantly, we believe we've proven the ABC platform can deliver on the promise of durability, what the physicians are calling Kodiak signature durability. This is the true area of unmet need and opportunity in the retinal disease space and that need remains.

And maybe just for tarcocimab, it's your lead product here. Maybe what have we learned so far about the molecule to date? And then how do you see the path going forward from here?

Well, we've learned a tremendous amount of information about tarcocimab and very importantly, about our ABC platform. So we have 2 positive pivotal studies with tarcocimab, the BEACON study in retinal vein occlusion, both the primary endpoint data at 6 months and new top line data at 1 year. And we also have the positive DAYLIGHT study in wet AMD with the primary data at 1 year. And we have one more pivotal study that's going to read out shortly. That's our GLOW study. It's a prevention study in earlier diabetic retinopathy and that has 6-month dosing in every patient versus Sham. So we also have 3 studies that did not meet their primary endpoint or Phase IIb/III in wet AMD, where we did take 60% of the patients to 5-month dosing and they did very well but we didn't allow less frequent than every 12-week dosing and the subset of those patients lost an [ efficient ] to pull us out of the noninferiority versus the comparator. And we also have, of course, our GLEAM and GLIMMER studies in DME which did not meet the end point. So we did show, again, in the GLEAM and GLIMMER studies, homerun durability, for example, coming out of the loading phase, 54% of the patients were doing very well on 6-month dosing, and even 2/3 of the patients were doing very well on every 5 and 6 months dosing. And broadly speaking, we had a good safety and tolerability versus aflibercept in those 2 studies. However, we had a cataract signal that emerged in the third trimester of both of those studies, 2x over the aflibercept comparator. And then this negatively impacted the vision of the patients, our patients and was the primary driver for us not to meet the primary endpoint of vision. So what's puzzling about the cataracts is that in the concurrent wet AMD study that we are running, DAYLIGHT, we dose patients 12 times a year in 1 year with tarcocimab and the cataract rate was lower than the aflibercept comparator. So the cataracts don't seem to be related to level of exposure, and in particular, very high levels of exposure. So high frequent exposure to tarcocimab was very safe and well tolerated and cataracts are lower than existing standard of care medicines in that study in that disease. But in the GLEAM and GLIMMER studies in patients with advanced diabetes, diabetic macular edema, we did have a clear increase in the rate of cataracts. And in these studies, we gave only a median of 5 doses over 64 weeks. So less exposure and 2x the signal. So a hypothesis is emerging of some sort of [ insulin dosing ] which in the context of the diabetic patients who are all have been predisposed to cataracts. For example, 80% of the patients in GLEAM and GLIMMER already have a cataract at randomization. So when I say in insulin dosing, we're not saying it's the injection procedure per se. It's rather some combination of the procedure, the compromised lens status of the patients, the presence of the drug. I just share this because it's confusing, and we're studying this further. So given the above, what have we decided about tarcocimab. In light of our GLEAM and GLIMMER trial results in July, we discontinued further development of tarcocimab while we awaited new results such as the BEACON study 1-year data in our GLOW Phase III study. The primary endpoint data in the earlier diabetic retinopathy patients. So we expect to unmask the GLOW study results in the fourth quarter of this year. And although the BEACON 1 year results are very positive, we plan to determine what path to take with regard to the ABC platform and also the platform derived medicines, only when the GLOW results are in, and we can assess everything we've learned at one time.

You mentioned the BEACON data. So maybe you could talk about that a little bit and how those results factor into your thoughts for the program as well as the platform moving forward?

Yes. Thanks, Mike. The 1-year BEACON study design led the tarcocimab and the aflibercept medicine show their relative strengths, independent of sort of the artifact or the artifice or the clinical study design differences. What they call a head-to-head PRN dosing study, which is a first as a pivotal study as far as we're aware. We believe the results reinforced tarcocimab signature durability profile and showed in the head-to-head overlapping and comparable potency and safety. So -- and this is in the retinal disease with the highest VEGF drive RVO. As we look to the future, we're planning to unmask and share the 1-year primary endpoint data for the GLOW study in NPDR in the fourth quarter. And then the GLOW data, combined with the 1-year results from BEACON may provide us additional insights as we evaluate future options for the platform and for like what we call our platform derived medicines. As to whether we would continue tarcocimab, just to be clear, we've previously said that we might do future testing but regardless, we think we need to wait until all the data are in before making any strategic decision, and we expect that to be this coming quarter.

Okay. And maybe just sort of taking all those learnings from tarcocimab and thinking about your second clinical program, KSI-501, just how do you take those learnings from tarcocimab and in the context of 501?

Our results with tarcocimab increase our conviction in the 501 program. It's a first of its kind bispecific ABC medicine. We remain excited about the 501 program, both in the form of a reformulated conjugate and also as a separate dosage form of the naked biospecific protein. So we're exploring a two-pronged development plan, which includes orphan disease indications, such as uveitic macular edema, a very attractive area with high clinical unmet need and a strong linkage into the bispecific mechanisms of action and also looking to the high-prevalence retinal vascular diseases as well. So we've learned a tremendous amount of information about tarcocimab and importantly, the platform. So across the program, we've learned the following about the platform. There are 2 -- at least 2 critical benefits and perhaps some liabilities. So the durability, the signature durability that the physicians are calling it is real and it's meaningful. It's still a key unmet need in the retinal vascular diseases representing the anti-VEGF marketplace today. New product approvals are important advances for the patients, and they don't provide yet true durability. Okay. That's the first. The second is that the platform is safe. whether you say safe and well tolerated or comparable safety, in particular, our monthly wet AMD DAYLIGHT study, as I said, where we dosed 12 injections over 1 year is an important study for the platform, in particular, from the safety point of view. So as to liabilities, well, obviously, there was an increased rate of cataract in the diabetic patients. I think from the standpoint of -- it's the question of adverse event versus finding -- the patients have cataracts and acceleration or an exacerbation of cataract is not good. So an increased rate of cataract in the diabetic patients. Also, as we saw in the wet AMD study or studies, there is a potency deficit in drawing or the speed of onset of the activity of the conjugate in a minority of patients. And that's important that physicians don't necessarily like that. So in other words, is there some trade-off on early potency versus ultra-long durability? And is there something that we can do about that and perhaps there is. And the third, I guess, liability is the high viscosity of the tarcocimab clinical formulation. And that might, as I said, from an [ insult ] point of view, have played a key role in the cataract imbalance in the diabetic patients. And is there something at a platform level that we can do about these things. So with the KSI-501, the kind of, say, the 2 liabilities can immediately be overcome from a design standpoint. So the first is that the 501 comes with a better anti-VEGF effect. So the protein is a VEGF trap, as a fusion similar to EYLEA, which has consistently shown to be highly effective, right, EYLEA is a tough comparator as it also inhibits PIGF and other elements, and has a very high [indiscernible] kind of binding affinity. On top of that, there's the bispecific component of the 501 protein targeting IL-6 and thus inhibiting the inflammatory component that's prevalent in all of the retinal diseases to different degrees. So that should help with concepts around the potency "deficit", really what I call a biology deficit. So that's the first thing. And the second is we're developing an enhanced formulation of the conjugated KSI-501. So it's really a balanced co-formulation that includes 30% of the naked protein, okay? Mixed in with 70% of antibodies being conjugated as a traditional ADC conjugate. So this sort of biphasic or sort of dual formulation having 30% free protein, we hope that the remaining gap should be able to be filled from a potency standpoint, for example, as well as the viscosity is lowered substantially so that it becomes much more vanilla or much closer to the injection feeling and the injection preparation of today's standard of care medicines to removing insults at the time of dosing. So we believe that's an important advance. And then the third thing is we're also developing a 100% free protein version within the KSI-501 program. We call that sort of the naked protein. And that will just have the protein properties. And that really hedges risks around the program. It removes some of the benefits and advantages of the ABC platform. But by progressing both dosage forms "in parallel" it allows us to move fairly quickly on the protein because it's a little bit simpler and also to be bringing new knowledge around the platform and to be developing that, let's say, the protein more for orphan diseases and the modified conjugate far more for the high-prevalence retinal diseases. So that's a mouthful, but it does show a lot of the learnings looking backwards on how we're immediately translating those into the 501 program.

You're currently in a Phase I study for 501. So maybe just give us an update on the status there and when we might see some of the initial data?

Right. The Phase I study for KSI-501 is fully enrolled in all but 2 subjects have received all their doses. So we expect the last patient, last visit to occur in the first quarter of 2024. It's a 24-week endpoint and sharing the data very soon after at a scientific meeting. So we're very close.

And I guess, Kodiak, you guys are very well financed right now as of the end of last quarter with greater than $350 million in cash. Maybe talk about the runway. What are you doing to maybe potentially extend the runway and your thoughts on the best way to sort of utilize that cash going forward?

Well, we continue to evaluate all options for the company as we evaluate what's the right future plan and as new data is coming in. In the transition period that we're in now, we're discontinuing ongoing clinical studies with tarcocimab. And so when you look backwards at say, Q1 or Q2, those burn numbers represent a tremendous number of patients under study. So as those studies are closed down very rapidly, the cash burn associated with those activities will also decrease substantially. We're also, as I mentioned, bringing together all of the clinical data from the tarcocimab pivotal studies, right, the BEACON 1-year data, the GLOW 1-year data, and we want to be presenting those in the fourth quarter at medical conferences. So all of that data is available. And cementing what we know on our platform. That's an important set of activities in this sort of transition period and defining the development plan for our 501 program in more detail, right, with its innovative 2-track approach with the bispecific protein towards orphan and then the conjugate. And importantly, understanding and sharing where we expect to be from a cash standpoint what we think the burn rate could be on a going-forward basis, so that everybody can look at Kodiak kind of from a going-forward point of view from a common understanding.

Maybe just last question for me. Just you're currently trading below cash. I think that sort of reflects the negative sentiment on the stock here even for 501. I guess what do you see the path to rebuilding the value here in sort of reshaping things or shifting sentiment?

That's a great question. We were very well positioned for a successful outcome as a company in the GLEAM and GLIMMER studies. I think not to be defensive. I think it's important to recognize we believe, to capture it. We believe we were on track for a positive outcome with homerun durability and very comparable safety and nice match potency in GLEAM and GLIMMER through the first and even the second trimester of the study. And it was the surprise and the negative impact on vision of that cataract and balance that really destroyed the studies. So trying to disrupt a $15 billion or $20 billion category is difficult. We're being punished for the failure in the GLEAM and GLIMMER and that negative surprise. And we understand that. But in this transition period, we're working to organize what we've learned and what we can take into the future. Retina is an attractive space for drug development. It's challenging space, clearly, we're good at it at the execution part of it. We'll continue to evaluate the best next steps for Kodiak. We find the 501 program to be very exciting, as we've said, and we're developing it in the bifurcated manner, that removes the risks around the ABC platform, right, by looking at the bispecific protein alone as one of the dosage forms. And that also develops the enhanced bioconjugate form that brings all of the learning around the platform into the future. We're trading below cash. We obviously hope that's a temporary phenomenon. We want to clarify our knowledge and our execution plan. And from that, shape the narrative the plan and the shared excitement to rebuild value. And we hope to be able to do that through the next quarter.

Okay. Maybe we can just pause there, we take questions from the audience, if there is one. If not, why don't we just wrap it up there. Thanks so much, Victor. I appreciate your time today.

Thanks a lot, Mike.