KOD - Kodiak Sciences: Navigating Clinical Trials And A Competitive Landscape

2023-07-24 02:54:50 ET

Summary

• Kodiak Sciences shows improved financial performance in Q1 2023, and it's actively developing treatments for prevalent retinal diseases.
• Kodiak's primary candidate, tarcocimab, is undergoing several clinical trials, aiming to provide a potent anti-VEGF treatment for retinal diseases.
• Despite progress, Kodiak faces fierce competition in the retinal disease therapeutic space, with Regeneron's high-dose aflibercept formulation posing a significant threat.

Company Overview

Kodiak Sciences ( KOD ), established in 2009, concentrates on the creation of advanced treatments for retinal diseases , aiming to prevent and manage blindness. Its primary product candidate, tarcocimab, is involved in six clinical trials and is designed to address widespread retinal diseases that can be treated with anti-VEGF therapies. Moreover, Kodiak is actively developing its Antibody Biopolymer Conjugate Platform to counter prevalent retinal conditions like dry AMD and glaucoma. The company, which retains global rights to its products, is targeting FDA approval and commercialization, harboring potential to emerge as a notable retinal development franchise.

The subsequent article offers a concise overview of Kodiak's financials, imminent trial outcomes, and competitive landscape. Towards the conclusion, I furnish an assessment regarding their future potential and provide an investment recommendation.

Financial Performance

Let's first review financials: In Q1 2023, Kodiak Sciences recorded cash, cash equivalents and marketable securities of $421.2 million. Judging by their quarterly OpEx, this should, by my estimates, fund operations through the end of 2024. Management did not provide an estimate within the earnings report. In May, Kodiak filed for a $350 million mixed securities offerings, but it remains to be seen if and when they intend to implement such an offering. The firm also noted a net loss of $70.8 million ($1.35/share), marking an improvement from a loss of $95.7 million ($1.83/share) in Q1 2022. This figure encapsulated $26.0 million in non-cash stock-based compensation. The company's research and development expenses dropped to $56.5 million, including $14.7 million in non-cash stock-based compensation, primarily due to the forward movement of the tarcocimab clinical program and changes in manufacturing scheduling. General and administrative expenses settled at $18.1 million, incorporating $11.3 million in non-cash stock-based compensation.

Clinical Trials and Tarcocimab Prospects

The clinical program for tarcocimab, Kodiak's lead product aimed at key retinal diseases like wet age-related macular degeneration [AMD], diabetic macular edema [DME], retinal vein occlusion [RVO], and non-proliferative diabetic retinopathy [NPDR] without DME, has been making steady progress. In 2022, the DAZZLE study (Phase 2b/3) in wet AMD failed to meet its primary endpoint and was halted, while the BEACON study (Phase 3) in RVO successfully met its primary endpoint. These results are set to influence future tarcocimab licensing applications. Currently, four Phase 3 studies – GLEAM, GLIMMER, DAYLIGHT, and GLOW – are fully enrolled with topline data slated for release in the third quarter of 2023. Success in these studies could potentially set the stage for tarcocimab's regulatory approval.

Tarcocimab tedromer , an investigational anti-VEGF treatment, aims to deliver extended potency and efficacy in ocular tissues compared to available treatments. It's designed to prolong dosing intervals and enhance patient outcomes for those dealing with retinal vascular diseases. Anti-VEGF treatment aims to control the growth of new blood vessels stimulated by an overproduction of Vascular Endothelial Growth Factor (VEGF), thereby preventing vision loss and, in some cases, improving vision.

Market Competition and Potential Challenges

If approved, Kodiak Sciences' drug will square off against established anti-VEGF treatments like Avastin, Lucentis, and Eylea, which are commonly used for treating wet AMD, DR, and RVO. Emerging competitors include Roche's FDA-approved Vabysmo and Regeneron's ( REGN ) high-dose aflibercept formulation, both of which show promising results and offer enhanced durability. Additionally, the market sees competition from alternative treatments in development such as gene therapies, stem cell transplants, and medical devices. This makes the retinal disease therapeutic space fiercely competitive.

My Analysis & Recommendation

As I reflect on Kodiak Sciences' current position and future prospects, several key factors come to mind. The company has made strides in the development of treatments for retinal diseases, with its primary candidate, tarcocimab, undergoing several clinical trials. However, the landscape of this market is changing rapidly and becoming increasingly competitive, with both established and emerging players introducing innovative treatments.

Of particular concern is Regeneron's high-dose formulation of aflibercept, which has shown promise in Phase 3 results. Its potential approval could lead to a significant market shift. Kodiak's standout feature for tarcocimab has been its less frequent dosing. However, with aflibercept potentially achieving similar dosing intervals, Kodiak's edge seems to be in jeopardy.

In my opinion, for tarcocimab to remain relevant in such a market, it will need to significantly outperform competitors like aflibercept, which, in my view, is a heavy burden to prove. The failed primary endpoint in the DAZZLE study also raises concerns, although other ongoing Phase 3 trials could potentially offset this setback.

Given these factors, my investment recommendation is to 'Hold' Kodiak's stock with a higher likelihood of downside. The company is at a critical juncture with the upcoming results of their Phase 3 trials. If they yield positive data, the firm could see significant upside potential. However, the looming competition, particularly from Regeneron, introduces a substantial level of uncertainty. As such, I believe it's prudent to monitor the situation closely before making any further investment decisions

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