kod-10k_20201231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

For the transition period from __________ to _________

Commission File Number: 001-38682

KODIAK SCIENCES INC.

(Exact Name of Registrant as Specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (650) 281-0850

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common stock, par value $0.0001 KOD The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s common stock on June 30, 2020 as reported by the Nasdaq Global Market on such date, was approximately $1.6 billion. Shares of common stock held by each executive officer and director and by each other person who may be deemed to be an affiliate of the registrant, have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes.

As of February 19, 2021, the registrant had 51,162,424 shares of common stock, $0.0001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement relating to the 2021 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. The proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2020.

Table of Contents

Kodiak Sciences Inc.

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2020

Page

PART I.

Item 1. Business 1

Item 1A. Risk Factors 67

Item 1B. Unresolved Staff Comments 107

Item 2. Properties 107

Item 3. Legal Proceedings 107

Item 4. Mine Safety Disclosures 107

PART II.

Item 6. Selected Consolidated Financial Data 109

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 118

Item 8. Financial Statements and Supplementary Data 119

Item 9A. Controls and Procedures 145

Item 9B. Other Information 145

PART III.

Item 10. Directors, Executive Officers and Corporate Governance 146

Item 11. Executive Compensation 146

Item 14. Principal Accounting Fees and Services 146

PART IV.

Item 15. Exhibits, Financial Statement Schedules 147

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, or similar expressions and comparable terminology intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those set forth under the section titled “Risk Factors” and elsewhere in this report. Forward-looking statements include, but are not limited to, statements about:

• the continued durability, efficacy and safety of our product candidates;

• the rate and degree of market acceptance of our product candidates;

• the pricing and reimbursement of our product candidates, if approved;

• our financial performance.

All forward-looking statements are based on information available to us on the date of this Annual Report on Form 10-K and we will not update any of the forward-looking statements after the date of this Annual Report on Form 10-K, except as required by law. Our actual results could differ materially from those discussed in this Annual Report on Form 10-K. The forward-looking statements contained in this Annual Report on Form 10-K, and other written and oral forward-looking statements made by us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, and you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Factors that might cause such a difference include, but are not limited to, those discussed in the following discussion and within Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to “Kodiak” the “Company,” “we,” “us,” and “our” refer to Kodiak Sciences Inc.

RISK FACTOR SUMMARY

Investing in our securities involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10‐K.

iii

PART I

ITEM 1. BUSINESS

Overview

At Kodiak, we are bringing new science to the design and development of next generation retinal medicines. Our ABC PlatformTM uses molecular engineering to merge the fields of antibody-based and chemistry-based therapies and is at the core of Kodiak's discovery engine. Our goal is to prevent and treat the major causes of blindness by developing and commercializing next-generation therapeutics for chronic, high-prevalence retinal diseases.

Throughout 2020 and into 2021, we have generated compelling clinical data with our most advanced product candidate, KSI-301, a novel anti-VEGF antibody biopolymer conjugate, which is designed to maintain potent and effective drug levels in ocular tissues for longer periods than the currently-marketed biologic medicines used to treat retinal diseases. We believe that KSI-301, if approved, has the potential to be an important therapy to treat patients with wet age-related macular degeneration, or wet AMD, diabetic macular edema, or DME, macular edema due to retinal vein occlusion, or RVO, and diabetic retinopathy, or DR, as well as other vision-threatening diseases that are less prevalent but also may be responsive to anti-VEGF therapy.

The ABC Platform and KSI-301 were developed at Kodiak, and we own rights to these assets in key geographies including the US, EU, China and other major countries. We have applied our ABC Platform to develop additional product candidates beyond KSI-301, including KSI-501, our bispecific anti-IL-6/VEGF bioconjugate, and we are expanding our early research pipeline to include ABC Platform-based triplet inhibitors for multifactorial retinal diseases such as dry AMD and the neurodegenerative aspects of glaucoma. In October 2020, we announced that we entered a supplemental research agreement with AbCellera to generate additional therapeutic antibody candidates for novel disease targets in ophthalmology in support of our evolving research pipeline. We intend to progress these and other product candidates to address high-prevalence ophthalmic diseases.

Our overall objective is to develop our product candidates, seek FDA and worldwide health authority marketing authorization approvals, and ultimately commercialize our product candidates.

Where Kodiak Stands Today

Growing KSI-301 Clinical Experience: We remain very pleased with the current clinical profile of KSI-301. Approximately 2,000 KSI-301 injections have been administered to approximately 500 patients representing approximately 350 patient-years of exposure.When and if we submit our planned single BLA in wet AMD, DME and RVO, we expect to have durability, efficacy and safety data on KSI-301 treatment in over 1,000 patients across our concurrent pivotal studies.

In our ongoing Phase 1b clinical study, we have administered multiple doses of KSI-301 over 52-weeks or more to treatment-naïve patients with wet AMD, DME or RVO, and we continue to observe promising durability, efficacy and safety data in each of the retinal diseases under study. Some patients have been given KSI-301 injections and followed for as long as two years in the Phase 1b study. KSI-301’s clinical durability continues to be supported with maturing data that demonstrate two in every three patients with wet AMD, DME, or RVO achieving six months or longer treatment-free intervals at Year 1. Additionally, KSI-301 continues to demonstrate an efficacy and safety profile that is tracking with standard of care anti-VEGF agents.

Thoughtfully Designed Pivotal Clinical Trials: Our ongoing registrational study program, designed based on an End of Phase 2 meeting we held in 2019 with the FDA, is assessing KSI-301 in four pivotal studies: two Phase 3 studies in DME (the GLEAM and GLIMMER studies), one Phase 2b/3 study in wet AMD (the DAZZLE study) and one Phase 3 study in RVO (the BEACON study). Each study protocol design has been optimized based on Phase 1b data and experience and will include similar treatment-naïve patient populations as in the Phase 1b, as well as tighter dosing interval ranging, tighter disease control criteria, decreased subjectivity for retreatments, high dose level of 2 mg, and each study has high statistical power for non-inferiority (>90%). The DAZZLE study completed recruitment in late 2020 and top-line results are expected in early 2022. Recruitment is underway for the GLEAM, GLIMMER and BEACON trials. We plan to expand the KSI-301 clinical study program in 2021 with one Phase 3 study (GLOW) in NPDR without DME, and potentially one or more additional clinical studies that could be beneficial for product labeling and/or reimbursement and market access purposes.

Investing with Conviction Commensurate with the Opportunity:Kodiak remains focused on thoughtful execution of our KSI-301 pivotal program, the requisite manufacturing efforts, the regulatory strategy and the pre-commercial readiness. As to manufacturing, in line with our “2022 Vision” which sees us submitting our initial BLA in 2022 and potentially commercializing KSI-301 in 2023, it is our intent to be able to supply millions of doses in Year 1 from our Lonza-Kodiak Ibex Dedicate facility designed from inceptionwith Flex Up capabilities and capacity for double digit millions of doses per year to supply a growing market demand.

Poised Commercial Opportunity:We are optimistic for the future care of patients with retinal vascular diseases. The competitive landscape of intravitreally-injected anti-VEGF biologic therapies and therapeutic candidates is clearing, due to the incremental durability of competing molecules, and/or safety challenges that, even if only recently appreciated, have been observed from early in the development of these potential competitors. Adjacent surgical and gene therapy solutions may also face challenges with long-term safety, limited accessibility and the complex economics of surgical implantation.

KSI-301, with its powerful combination of design attributes, has the potential to be a Generation 2.0 anti-VEGF – a first-line anti-VEGF “product for everyone” that may achieve a significant market share.

As a company, we remain independent. This independence provides us with the flexibility to adapt both R&D and commercial decision-making within the ever-changing domestic and global landscapes. We remain well capitalized and supported by a high-quality group of long-term stakeholders who understand what is needed to build, invest and execute commensurate with the opportunity.

Recent Developments

KSI-301 Phase 1b Study

Updated Year 1 durability, efficacy and safety data from our ongoing Phase 1b trial of KSI-301 in patients with treatment naïve wet AMD, DME or RVO were presented at the Angiogenesis, Exudation, and Degeneration 2021 – Virtual Edition meeting in February 2021. The data show 2 in every 3 patients are on a 6-month or longer treatment-free interval at Year 1 in each of the 3 major retinal vascular diseases after only 3 loading doses. Robust vision gains (particularly notable in the context of very good baseline vision) and robust retinal drying (when baseline anatomical characteristics are considered) were seen across all three diseases being studied. Strong anti-VEGF efficacy (achieving at Year 1 approximately 20/40 eye chart vision on average in wet AMD and approximately 20/32 vision on average in DME and RVO) and an encouraging safety profile continue to be observed across all three diseases. We believe the data continue to support the “anti-VEGF Generation 2.0” profile of KSI-301.

KSI-301 Pivotal Program

We saw robust patient enrollment in our DAZZLE pivotal study in wet AMD through the third quarter of 2020 and completed global patient recruitment in November 2020 – a potential reflection of the enthusiasm for KSI-301 on the part of clinical investigators and patients. With a one-year primary endpoint, we remain on track for DAZZLE top-line data readout in early 2022.

In the third quarter of 2020, we initiated two Phase 3 studies in DME (GLEAM and GLIMMER) and one Phase 3 study in RVO (BEACON). The randomization of treatment-naïve patients into these three studies is a critical step to build the clinical evidence for KSI-301 as a safe, effective and highly durable therapy for patients with retinal diseases. The initiation of the additional Phase 3 studies and the robust patient recruitment into DAZZLE represent strong operational progress towards our 2022 Vision of a single BLA filed for KSI-301 in wet AMD, DME, and RVO in 2022. Clinical trial applications for BEACON, GLEAM, and GLIMMER have been submitted and approved in countries across the EU. To date, we are pleased with progress in site activation, patient screening, and recruitment in these studies. We believe we are also on track to begin recruitment of the GLOW study in NPDR without DME in 2021.

Importantly, to date the data emerging in our Phase 1b study remain consistent and provide support for and confidence in our pivotal study designs.

Follow-on Equity Offering

On November 20, 2020, we completed a follow-on equity offering and issued and sold 5,972,222 shares of the Company’s common stock at a price to the public of $108.00 per share.The gross proceeds from this offering were $645.0 million, resulting in aggregate net proceeds of $612.0 million after deducting underwriting discounts and commissions and other offering costs.

Proceeds from the equity offering together with our current cash, cash equivalents and marketable securities are expected to advance the clinical programs for KSI-301 towards achieving our “2022 Vision” of aBiologics License Application, or BLA, of KSI-301 in 2022 for wet AMD, DME, RVO and potentially DR without DME,including the manufacturing activities necessary for BLA submission, as well as to advance our pipeline of drug candidates including KSI-501 and our triplet inhibitor drug candidates and for working capital and general corporate purposes.

Our current cash, cash equivalents and marketable securities which includes the net proceeds from the November 2020 public offering provide the resources for us to advance the KSI-301 program towards achieving our “2022 Vision,” and also to advance our pipeline of drug candidates including KSI-501 and our triplet inhibitor drug candidates, and for working capital and general corporate purposes.

Commercial Manufacturing

We successfully negotiated a long-term agreement with Lonza for the manufacture of KSI-301. This agreement will provide Kodiak with a custom-built bioconjugation facility with a capacity to supply millions of doses per year. With construction targeted for completion in early 2022, the Lonza-Kodiak Ibex facility will provide Kodiak with the facility needed for commercial-scale manufacturing of KSI-301. The scale is designed to support KSI-301’s potential to achieve significant market share as a new first-line agent designed to improve outcomes for patients with common and serious retinal vascular diseases.

COVID-19

We are continuing to monitor the global ongoing COVID-19 pandemic. Since the initial outbreak in early 2020, governments globally have taken preventative and protective actions, including but not limited to, restrictions on non-essential travel, business operations, and gatherings of individuals. The State of California, where our corporate office is located, declared a state of emergency and shelter-in-place order in March 2020. Although certain restrictions have eased, and phased re-openings are underway, it is not certain when such restrictions will be fully lifted, and recent resurgences in number and rates of infections, reactions to increased testing and/or further spreading of the virus may result in the return or implementation of more restrictive measures. Global financial markets have also experienced extreme volatility and as a result, economic uncertainties have arisen which could impact our operations and its financial position. The extent of the impact of the ongoing COVID-19 pandemic will depend on certain evolving developments, including the duration and spread of the outbreak, regulatory and private sector responses, and the impact on our employees, vendors including supply chain and clinical partners, all of which are uncertain and cannot be predicted.

We continue to monitor government responses and may elect to temporarily close our office and/or laboratory space to protect our employees. We continue to assess the potential for supply chain disruptions as the pandemic may impact personnel at third party manufacturing facilities in China, Switzerland and other countries, as well as its impact on the availability and/or cost of materials. We continue to monitor financial markets and the impact on our operations and capital resources.

We and our key clinical and manufacturing partners have been able to continue to advance our operations. Because the diseases under study in the KSI-301 development program are serious, vision-threatening conditions for which patients are still seeking and receiving treatment from retina specialists during the pandemic, we have been able to continue advancing the clinical programs for KSI-301 during the pandemic towards achieving our “2022 Vision.”

During this pandemic, we continue to work closely with our clinical sites towards maximal patient safety and the lowest number of missed visits and study discontinuations. We have taken and continue to take proactive measures to maintain the integrity of our ongoing clinical studies. To date, we are seeing low levels of patient missed visits.

In response to the COVID-19 pandemic with regards to business operations, clinical trials, and manufacturing activities:

We will continue to monitor the COVID-19 situation closely. The ultimate impact of the ongoing COVID-19 pandemic on our business operations remains highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. See also the section titled “Risk Factors” for additional information on risks and uncertainties related to the evolving COVID-19 pandemic.

Additional Business Highlights

In 2020 and into the first quarter of 2021, additional highlights of our activities included:

Kodiak’s 2022 Vision and KSI-301 Accelerated Development Strategy

We believe we remain on track to achieve our “2022 Vision” of a single BLA submission and initial FDA approval for KSI-301 in wet AMD, DME and RVO in 2022 with a total of four pivotal trials - two in DME (GLEAM and GLIMMER), one in wet AMD (DAZZLE) and one in RVO (BEACON). These studies, together with our ongoing pivotal study in wet AMD, will be the basis of our intended BLA and supplemental BLA submissions. We currently expect to submit the wet AMD, DME, and RVO indications in a single initial BLA for KSI-301 and the DR indication (to be studied in the Phase 3 GLOW trial) in a supplemental BLA in the United States. We may also begin one or more additional KSI-301 clinical studies in 2021 that could be beneficial for product labeling and/or reimbursement and market access purposes.

We continue to invest in our science and our pipeline, including our bispecific ABC product candidate KSI-501 for retinal vascular diseases with a strong inflammatory component and our new triplet ABC product candidate KSI-601 for the high prevalence multifactorial retinal disease dry AMD.

Our 2022 Vision includes the following potential catalysts and milestones in 2021, 2022 and 2023, along with the important milestones achieved in 2019 and 2020 that support the accelerated development program:

Our “2022 Vision” is built on the following concurrent development strategy. This table incorporates our most recent view of the KSI-301 clinical program and its execution, as described above, and we believe the successful prosecution of this program is achievable based on our currently available information and the evolving effects of the COVID-19 pandemic:

Opportunity for Clinically Meaningful Differentiation

Current intravitreal anti-VEGF agents require frequent eye injections to achieve the best clinical results. When patients do not follow product labeling or miss treatments, improvements in their vision following treatment may be transient or decline over time. Real-world data demonstrate that most patients are not currently receiving their anti-VEGF therapy at the recommended intervals. We believe that our ABC Platform medicines could address this problem by requiring less frequent dosing, and the Year 1 Phase 1b clinical data with KSI-301 support meaningfully differentiated clinical profiles of KSI-301 relative to standard of care in each of the major retinal diseases treated today with anti-VEGF therapy. The current standard of care treatment regimens and the dosing regimens Kodiak intends to test in its pivotal trials with KSI-301 are shown in the below table.

Data From Our Ongoing Phase 1b Trial Continue to Demonstrate KSI-301’s Differentiated Profile

We have continued to make progress with our studies of KSI-301, and the Year 1 durability, efficacy and safety data we observe in the Phase 1b study continue to surpass our expectations. We now have more than 168 patient-years of clinical experience with KSI-301 in the Phase 1b study.

The overall study duration was originally nine and then 18 months, and we have now extended the treatment and follow-up period to 36 months total, to continue generating long-term outcomes data in advance of the pivotal studies. Outcomes include vision, measured as change in best corrected visual acuity or BCVA using the standard ETDRS testing protocol, and retinal anatomy, which is measured as change in retinal central subfield thickness, or CST, using optical coherence tomography imaging, or OCT. We also obtain other images such as fluorescein angiography, color fundus photos, and OCT angiography.

The figures below present the most recent data on durability and efficacy outcomes from the ongoing Phase 1b study presented at the Angiogenesis, Exudation, and Degeneration 2021 - Virtual Edition meeting, held in February 2021. Across all three diseases under study, improvements in vision and retinal anatomy were observed through Year 1 of patient follow-up, with stability in OCT and BCVA over time in the monthly follow-up intervals following the three mandatory loading doses. Year 1 data show 2 in every 3 patients are on a 6-month or longer treatment-free interval at Year 1 in each of the 3 major retinal vascular diseases after only 3 loading doses. Strong anti-VEGF efficacy (achieving at Year 1 ~20/40 eye chart vision on average in wAMD and ~20/32 vision on average in DME and RVO) and an encouraging safety profile continue to be observed across all three diseases. Vision is measured as change in BCVA, on a standardized eye chart, and retinal anatomy is measured as change in retinal CST using OCT imaging.

The Phase 1b study design, retreatment criteria, and patient baseline characteristics are described below. In the Phase 1b study, treatment-naïve patients with wet AMD, DME or RVO receive three monthly loading doses of KSI-301 at either the 2.5 mg or 5 mg dose levels and are followed thereafter; retreatment with KSI-301 is administered as per the protocol-specified retreatment criteria.

wet AMD cohort DME cohort RVO cohort

SD = standard deviation; BCVA = best corrected visual acuity; OCT = optical coherence tomography; CST = central subfield thickness

The Phase 1b data in treatment-naïve patients demonstrate that the observed vision gains of 5.7 letters in wet AMD and 7.6 letters in DME at Year 1 are appropriate for the relatively high baseline vision. After one year of treatment, wet AMD subjects in our Phase 1b study were observed to have an average visual acuity of 69.7 eye chart letters or approximately 20/40 Snellen visual acuity, and DME subjects were observed to have an average visual acuity of 73.9 eye chart letters or approximately Snellen 20/32.

Although out Phase 1b study does not have an active comparator, the chart below places the observed baseline (pre-treatment) and one-year visual acuity outcomes in the context of the starting and one-year visual acuity metrics seen in other recent and historical clinical trials and also demonstrates how post-treatment average visual acuity is dependent on the starting (baseline) visual acuity.

Wet AMD

The data below are observed from 50 wet AMD patients who received all loading doses and reached Week 12 or later. These patients had good starting vision, approximately 64 letters. They experienced a visual acuity increase after 3 loading doses and maintained a gain of 5.7 letters, to an average BCVA of 69.7 letters (Snellen ~20/40), achieved with a mean of just 2.0 individualized doses. Supporting the extended durability, we see only a very slow fluctuation in the OCT over time, which compares favorably to the OCT fluctuations observed with existing anti-VEGFs given on shorter dosing intervals. The stability in BCVA over this interval is also consistent with the prolonged duration of KSI-301.

In the Phase 1b study, the average retinal thickness or OCT CST data as reported by our clinical investigators includes the height of pigment epithelial detachments or PEDs. PEDs are an anatomic feature in some patients with wet AMD; treatment success in subjects with PEDs does not necessarily imply complete flattening of the PED, but rather eliminating the intraretinal and subretinal fluid, particularly when the PED is very high prior to anti-VEGF treatment. Additionally, comparison across studies of OCT mean CST values is difficult because it is often not clear or not disclosed in presentations and publications whether the data include or exclude the height of the PED, and whether or how the data are corrected for different OCT machine, among other reasons.

When comparing subjects with and without very high PED at baseline, which we defined as 500 microns or more total CST, the BCVA and OCT CST curves are similar in shape to those of the full cohort. Excluding give patients with high PEDs, the OCT CST values are lower at baseline and over time, and the standard error of the mean (SEM) error bars are narrower. Thus, those five patients with high PEDs thus pull the overall average CST value up.

Excluding those patients, the average retinal center subfield thickness is 316 microns after initiation of treatment with KSI-301, as measured using the Heidelberg OCT machine employed by the Phase 1b study sites, in which 305 microns is normal for a healthy (no AMD) female and 315 microns is normal for a healthy male.

Overall, 66% of our wet AMD patients have achieved a 6-months treatment-free interval at Year 1 and 74% of patients achieved a five months or longer treatment-free interval at Year 1. 80% of patients have received two or fewer retreatments in Year 1. Remarkably, 80% of these wet AMD patients have achieved a 6-month treatment free interval at least once during follow-up. As this is an anti-VEGF treatment naïve population, there is no pre-selection for “anti-VEGF responders” or patients who might require or be predicted to require less frequent dosing.

The data generated in wAMD patients in the Phase 1b study form a compelling data package. At Year 1, KSI-301 is achieving remarkable durability, strong efficacy that brings patients to an average ~20/40 vision on the Snellen chart and a favorable safety profile. Together with strong anti-VEGF activity on both vision (BCVA gains) and retinal anatomy (OCT drying) in the DME and RVO cohorts of the Phase 1b, we believe KSI-301 continues to track well towards its “Generation 2.0” profile.

Diabetic Macular Edema (DME)

We measure KSI-301 efficacy data in treatment naïve DME as change from baseline in BCVA and OCT CST. Below are data from the 32 DME patients who received all loading doses and reached Week 12 or later. These patients had good starting vision, approximately 66 letters. They experienced a visual acuity increase after three loading doses and maintained a gain of 7.6 letters, to an average BCVA of 73.9 letters (Snellen ~20/32), achieved with a mean of just 1.0 retreatments.

Consistent with the extended durability effect of KSI-301, we see again only slight fluctuations in the OCT over time, which compares favorably to the OCT fluctuations observed with existing anti-VEGF agents that are given on shorter dosing intervals.

The swim lane plot for DME durability is shown below. At Year 1, 94% of DME patients have achieved a three months or longer treatment-free interval. Of these patients, 84% have gone four months or longer, and 78% five months or longer at Year 1. Further, 69% have gone six-months or longer – as there is no cap to the treatment interval in the DME cohort. Half of patients did not require any retreatment at Year 1. 81% of patients have achieved a six months or longer treatment-free interval at least once during follow-up.

Retinal Vein Occlusion (RVO)

KSI-301 efficacy in treatment naïve RVO is also measured as change from baseline in BCVA and OCT CST. The 34 RVO patients that received all loading doses and reached Week 12 or later began with a lower visual acuity baseline of approximately 54 letters, typical of this disease. After three loading doses, their visual acuity substantially improved, with a 22.2 letter improvement at Year 1, to an average vision of 76.6 letters (Snellen ~20/32). The vision gain was maintained with an average of just 1.7 injections. A sustained OCT response with a decrease of 357 microns was also noted.

In this swim lane plot of the durability of individual patients with RVO, the disease with arguably the highest VEGFload, the bars in pink and orange now denote retreatment intervals of six months or longer and two months or shorter, respectively. 87% of RVO patients have achieved a three months or longer treatment-free interval at Year 1. Only 3% of patients were on a monthly treatment interval at Year 1. 75% of patients achieved a four months or longer treatment-free interval at Year 1, and 69% achieved a five months or longer interval at Year 1. Remarkably, given that many RVO patients require monthly therapy for the best results with existing medicines, 66% of patients have achieved a six months or longer treatment-free interval at Year 1.

Safety of KSI-301 Injections

We believe the safety profile of KSI-301 continues to be very encouraging. Now with 710 injections given in the Phase 1a/1b program (as of January 26, 2021), and with patients followed for as long as 26 months, we are continuing to track with the expectations set by the safety profile of the current standard of care intravitreal medicines.

None of the serious adverse events, or SAEs, observed have been reported as or deemed drug-related, and they are typical of the systemic SAEs expected in these patient populations. The ocular SAE of worsening cataract was in a diabetic patient with pre-existing cataract, was not drug-related, and resolved with routine cataract surgery. The ocular SAE of subretinal hemorrhage in a wAMD patient is often found in wAMD patients and was not drug-related.

There have been only two events (previously described) of intraocular inflammation. The events were mild in nature, both trace to 1+ grade cells in the vitreous, on a standardized scale where 0 is none and 4+ is severe. They resolved completely, and there was no vasculitis or retinitis in either patient. Both patients have done very well with substantial improvements in vision from baseline; each of them had gained 30 letters or 6 lines of vision as of their last visits.

KSI-301 Pivotal Study Designs

Our pivotal study designs for wet AMD (our ongoing DAZZLE study), DME (our ongoing GLEAM and GLIMMER studies), and RVO (our ongoing BEACON study) have been optimized based on Phase 1b data and experience.

Wet AMD DAZZLE Study

DAZZLE (NCT04049266) assesses patients with treatment naïve wet AMD and are randomized 1:1 to receive KSI-301 every 12 to 20 weeks or Eylea every 8 weeks, each after 3 monthly loading doses. The determination of treatment interval for the patients assigned to KSI-301 is based on disease activity assessments where both OCT and BCVA are measured and compared against prior data, similar to other recent and ongoing Phase 3 studies in the field. By default, patients are on an every 20 week regimen. If disease activity criteria are met before 20 weeks, that is, 12 or 16 weeks after the last dose, then the treatment interval is correspondingly shortened.

The primary endpoint is at one year and is a non-inferiority comparison to Eylea, with a four-letter non-inferiority margin. The one-year endpoint is measured as the average of the BCVA change from baseline to weeks 48 and 52. All of the KSI-301 patients are analyzed together as a single group with respect to the primary comparison to Eylea. In the second year of the study, patients whose disease is stable can have their KSI-301 treatment interval extended, and patients originally randomized to Eylea will be re-randomized 1:1 to either continued Eylea or switched to every eight week KSI-301.

Disease assessment criteria are used to determine whether the treatment interval is 12, 16 or 20 weeks. These criteria are tightened, and subjectivity has been reduced, compared to the retreatment criteria used in the Phase 1b study. The DAZZLE criteria, and the overall approach to dosing regimen determination in DAZZLE, are very similar to other recent Phase 3 programs in wet AMD. The aim is to customize the dose interval per patient, in a way that is feasible in a large, multicenter, double-masked trial.

Diabetic Macular Edema Paired Studies, GLEAM and GLIMMER

In DME, we are conducting two Phase 3 studies in parallel with identical design. In each of the two studies, called GLEAM (NCT04611152) and GLIMMER (NCT04603937), we will randomize 450 treatment-naïve DME patients to either KSI-301 every 8 to 24 weeks after 3 loading doses, or Eylea every 8 weeks after 5 loading doses. The primary endpoint is the change from baseline in BCVA at one year, again the average of the week 48 and 52 visits. The studies are non-inferiority studies with a margin of 4.5 letters.

At each monthly study visit, patients who have been randomized to KSI-301 will undergo a disease activity assessment, using data from both BCVA and OCT measurements. Depending on their disease activity status, the dosing interval can be shortened, lengthened, or maintained at the same interval. This is different from the DAZZLE wet AMD study design where the interval can only be maintained or shortened in the first year. In DME, patients may experience disease modification (improvement in the severity of the underlying retinopathy) that curtails the need for therapy over time, an event that has been seen in many DME patients treated with KSI-301 allowing for the treatment interval to be potentially further prolonged after the first retreatment. The minimum KSI-301 treatment interval in GLEAM and GLIMMER is every eight weeks, and the maximum interval is every 24 weeks or six months.

In the second year of both studies, the same approach is maintained. Eylea will stay on its q8 week regimen, and patients on KSI-301 will continue to be on an 8 to 24 week regimen based on disease activity.

To determine the treatment interval for KSI-301 patients, we are employing disease activity assessments and protocol-specified criteria. All patients randomized to KSI-301 are on the longest interval by default. If patients meet any of these disease activity criteria at earlier timepoints, the retreatment interval is shortened. The criteria for shortening the treatment interval are tighter than they are in Phase 1b, and the subjectivity is reduced. Additional anatomic criteria have also been included.

Retinal Vein Occlusion BEACON Study Design

The Phase 3 BEACON study (NCT04592419) in patients with RVO is a year-long study in which we will randomize 550 patients with treatment-naïve RVO, either branch or central vein type, to either every 8 weeks KSI-301 after two loading doses, or to monthly Eylea, for the first six months. The primary endpoint is at six months, with a non-inferiority margin of 4.5 letters.

In the second six months, patients in both groups will receive treatment on an individualized regimen, again using typical disease activity assessments. This phase of the study will provide a direct, head-to-head comparison of Eylea and KSI-301 on the same criteria-driven regimen. The minimum interval is monthly and there is no upper limit to the retreatment interval in this six-month period.

Because the first six months of the study are fixed-interval dosing, the disease activity assessment criteria are only used to determine dosing in the second six months of the RVO study. The criteria are similar to our DME studies, and tighter than they are in Phase 1b, with the OCT and BCVA measured against the best previous measurements; subjectivity is also reduced.

Current Standard of Care for Wet AMD, DME/DR, and RVO

Overexpression of vascular endothelial growth factor, or VEGF, in ocular tissues is central to the pathogenesis and clinical manifestations of wet AMD, DME/DR, and RVO. VEGF is a protein produced by cells that stimulates the formation of new blood vessels, a process called neovascularization, and induces vascular permeability. In wet AMD, DME, and RVO fluid that exits from blood vessels causes swelling, or edema, of the retina and loss of vision. This loss of vision can be reversed if treated early with an anti-VEGF agent to suppress VEGF signaling. Delayed treatment or undertreatment can result in permanent retinal damage and blindness. To reach effective ocular tissue concentrations, these agents must be injected into the vitreous humor, the jelly-like substance that fills the area between the lens and retina. These injections must occur at regular intervals in order to maintain anti-VEGF effects.

Lucentis (ranibizumab), marketed by Genentech, Inc., a subsidiary of the Roche Group, in the United States and by Novartis AG outside the United States, and Eylea (aflibercept), marketed by Regeneron Pharmaceuticals, Inc. in the United States and by Bayer HealthCare LLC outside the United States, are anti-VEGF therapies that have become the standard of care for treating wet AMD and severe forms of DR based on pivotal clinical studies in which Lucentis was injected every four weeks and Eylea was injected every eight weeks (after three initial monthly doses in the case of wet AMD and after five initial monthly doses in the case of DR with DME). Beovu (brolucizumab), marketed worldwide by Novartis, was approved in late 2019 in the United States and early 2020 in Europe for the treatment of wet AMD and is injected every eight to 12 weeks after three initial monthly doses. It is not currently approved for diseases other than wet AMD. Avastin (bevacizumab), marketed for non-ocular indications by Genentech in the United States and by Roche outside of the United States, is an anti-VEGF cancer therapy that shares structural characteristics with Lucentis and is commonly used off-label to treat wet AMD, DME, and RVO through intravitreal injection dosed every four weeks.

Annual worldwide sales of branded anti-VEGFs for all indications totaled more than $11.5 billion in 2020. We believe that a substantial majority of these sales were in connection with the treatment of wet AMD and DME. Avastin, which is currently approved and marketed for the treatment of cancer, is also used off-label to treat wet AMD, DME, and RVO. We estimate that off-label Avastin represents approximately 60% of the U.S. wet AMD market by volume. We believe that an improved anti-VEGF therapy could further increase both adoption of approved therapies and extend the duration patients remain on treatment, and thus the total addressable market opportunity in wet AMD, DME/DR, and RVO could be substantial.

Limitations of Current Anti-VEGF Therapies

The limitations of current anti-VEGF therapies include:

Market Opportunity

Wet AMD

Overview of Wet AMD

AMD is a common eye condition affecting people of age 55 years and older with a reported prevalence of approximately 11 million people in the United States and 170 million people globally. It is a progressive disease affecting the central portion of the retina, known as the macula, which is the region of the eye responsible for sharp, central vision and color perception. The likelihood of AMD progression and associated vision loss increases with age.

Wet AMD is an advanced form of AMD characterized by neovascularization and fluid leakage under the retina. It is the leading cause of severe vision loss in patients over the age of 50 in the United States and the EU, with a reported prevalence of approximately 1.25 million people and an annual incidence of approximately 200,000 people in the United States. The likelihood of disease progression increases with age, so the prevalence and incidence of wet AMD is projected to accelerate in countries with aging populations. It has additionally been observed that approximately 50% of patients presenting with wet AMD in one eye will develop wet AMD in the other eye within five years, leading to a relatively significant number of patients requiring treatment in both eyes. While wet AMD represents only 10% of the number of cases of AMD overall, it is responsible for 90% of AMD-related severe vision loss. In many eyes with wet AMD, the disease can progress quickly with rapid loss of central vision needed for activities such as reading and driving. Untreated or undertreated wet AMD results in blood vessel leakage, fluid in the macula, and ultimately scar tissue formation, which can lead to permanent vision loss, or even blindness, as a result of the scarring and retinal deformation that occur during periods of non-treatment or undertreatment.

Current Therapies for Wet AMD

The standard of care treatments for wet AMD are two anti-VEGF drugs, Lucentis (ranibizumab) and Eylea (aflibercept). Lucentis (ranibizumab), marketed by Genentech, Inc., a subsidiary of the Roche Group, in the United States and by Novartis AG outside the United States, is a recombinant humanized monoclonal antibody fragment that binds to and inhibits VEGF proteins in the eye and was approved in the United States in 2006 and in Europe in 2007. Eylea (aflibercept), marketed by Regeneron Pharmaceuticals, Inc. in the United States and by Bayer HealthCare LLC outside the United States, is a recombinant fusion protein containing portions of the human VEGF receptor that binds to soluble VEGF and was approved in the United States in 2011 and in Europe in 2012. These drugs became the standard of care for treating wet AMD based on pivotal clinical trials in which Lucentis was injected every four weeks and Eylea was injected every eight weeks (after three initial monthly loading doses). Since its approval, Eylea has been widely adopted largely due to a durability advantage compared to Lucentis, but both agents were effective in improving visual acuity in the first months of the treatment period and sustaining this gain throughout the duration of their respective clinical trials. Avastin (bevacizumab), marketed for non-ocular indications by Genentech in the United States and by Roche outside of the United States, is an anti-VEGF cancer therapy that shares structural characteristics with Lucentis and is commonly used off-label as a monthly, intravitreal injection for wet AMD. Beovu (brolucizumab), marketed worldwide by Novartis, was approved in late 2019 in the United States and early 2020 in Europe for the treatment of wet AMD and is injected every eight to 12 weeks after three initial monthly doses. Its competitiveness with Lucentis and Eylea in the commercial marketplace has yet to be observed.

Total Market for Wet AMD

Annual worldwide sales of branded anti-VEGFs for all indications were an estimated $11.5 billion in 2020. We believe a substantial majority of these sales were in connection with the treatment of wet AMD, DME, and RVO. Avastin, which is currently approved and marketed for the treatment of cancer, is also used off-label to treat wet AMD, DME, RVO, and DR. We estimate that off-label Avastin represents approximately 60% of the U.S. wet AMD market by volume. We believe that an improved anti-VEGF therapy could further increase both adoption of approved therapies and extend the duration patients remain on treatment, and thus the total addressable market opportunity in wet AMD and DR could be substantial.

With an improved anti-VEGF therapy, we believe the total addressable market opportunity in wet AMD could be substantially greater than sales of Lucentis and Eylea in wet AMD, DME and RVO. A clinically meaningful durability advantage over existing treatments could increase long-term compliance rates and maintain patients on a consistent and FDA approved treatment regimen for this chronic condition. Furthermore, we believe that an anti-VEGF therapy that is more durable than Avastin may reduce the relative weight of cost as a deciding factor for patients and providers who currently favor Avastin and expand the market for “branded” treatments.

Diabetic Retinopathy

Overview of Diabetic Retinopathy

DR is an eye disease resulting from diabetes, in which chronically elevated blood sugar levels cause damage to blood vessels in the retina. There are two major types of DR:

DME, which occurs when fluid accumulates in the macula due to leaking blood vessels, can develop at any stage of DR. PDR, together with DME, are the primary causes of vision-threatening DR, or VTDR. VTDR is the leading cause of blindness among people with diabetes and the leading cause of blindness among working age adults in the United States and the EU. Patients with mild or moderate NPDR who have not developed DME are characterized as patients with non-vision threatening DR, or NVTDR.

Current Therapies for DR

PDR has historically been treated with laser therapy. In recent years, use of anti-VEGF therapies has emerged as a complementary first-line treatment for PDR. Lucentis and Eylea are also approved for the treatment of DME with or without PDR. In April 2017, Lucentis’ approval was expanded to include all forms of DR, whether or not the patient also has DME. The approval was based on the demonstration that treatment with Lucentis results in more patients experiencing improvement of their diabetic retinopathy severity (disease regression). In March 2018, Regeneron announced results from its study in which Eylea demonstrated it can reverse disease progression in patients with moderately severe to severe NPDR when administered on average 4.4 times over 24 weeks. In 2019, Eylea received FDA approval as a treatment for DR without DME. For DR without DME, the recommended Lucentis regimen is monthly and the recommend Eylea regimen is every 8 weeks after 5 initial monthly injections.

The first-line interventions for non-vision threatening DR are observation, lifestyle changes and treatment of underlying diabetes. In practice, anti-VEGF therapies are not commonly prescribed for patients with NVTDR. However, results from the RISE and RIDE trials for Lucentis as well as the PANORAMA study for Eylea showed that anti-VEGF therapies can slow disease progression in patients with NPDR as well as induce regression.

Figure: Time to disease worsening (DR progression as defined by a composite endpoint)

from baseline in DME patients with NPDR treated with sham procedures vs. Lucentis.

Figure: Proportion of subjects improving or worsening per treatment arm.

Total Market for DR

According to the Center for Disease Control, or CDC, and National Institutes of Health, or NIH, (1) an estimated 30 million people in the United States have diabetes, with approximately 1.5 million additional people in the United States diagnosed with diabetes each year, and (2) 285 million people worldwide have diabetes. We estimate that the number of people in the United States and the EU with DR in 2015 was approximately 28.5 million. According to the NIH, the number of Americans with DR is expected to nearly double from 2010 to 2050. The CDC estimates that approximately 900,000 Americans are affected by VTDR. We believe a substantial majority of the approximately $11.5 billion in global sales of branded anti-VEGFs in 2020 were for the treatment of wet AMD, DME and RVO, with only a small proportion of sales for the treatment of NPDR without DME. Furthermore, we believe that the frequent injections required by current anti-VEGF therapies may dissuade patients with mild or asymptomatic forms of DR from accepting treatment. A more durable agent such as KSI-301 could be attractive for these untreated patients and extend the anti-VEGF market to include patients with NVTDR.

Limitations of Current Anti-VEGF Therapies

The underlying pathophysiologies of wet AMD, DME, DR and RVO are responsive to anti-VEGF drugs. Both conditions suffer from the limitations of current anti-VEGF therapies such as limited on-mechanism durability and frequent dosing intervals. On-mechanism durability is a function of the time that therapeutic levels are sustained in the ocular tissues. Data suggest that the effectiveness of Lucentis and Eylea in clinical practice is inferior to the results seen in well-controlled clinical studies, an observation attributed to insufficiently frequent dosing and resulting undertreatment even, in the case of Eylea, with its labeled eight-week regimen. Other studies show that while patients may benefit from anti-VEGF therapies in the early treatment phase, they may fail to sustain their visual acuity gains over the long term. Clinical studies have also shown that non-treatment or undertreatment with anti-VEGF agents in the months or years after disease onset may reduce the benefit of anti-VEGF therapies once therapy is initiated. These factors contribute to permanent and unnecessary vision loss for many patients.

Existing anti-VEGF therapies block VEGF activity effectively but have limited durability.

Wet AMD, DME, and DR are chronic and progressive diseases that require protracted treatment, possibly for life. Currently available anti-VEGF agents have relatively short durability. To maintain effective drug levels in the eye, existing anti-VEGF treatments must be administered on a frequent and sustained schedule. Lucentis was approved based on a monthly dosing interval. For wet AMD and DME, Eylea was approved based on a dosing interval of every eight weeks (following three initial, monthly loading doses for wet AMD, and five for DME). The most accepted sign of disease activity in wet AMD for retina specialists worldwide is recurrent accumulation of fluid in the macula, as determined by evaluating the retinal thickness and anatomic appearance with OCT. As can be seen in the figure below, when Eylea or Lucentis are dosed on a Q4W (once every four weeks) regimen, the retinal thickness remains stable between doses, as measured on OCT. However, when Eylea dosing is shifted to its Q8W (once every eight weeks) labeled regimen, the retina expands and contracts as it begins to swell with fluid before its next retreatment, exhibiting a seesaw pattern that we refer to as OCT flutter. This suggests that, although vision outcomes are comparable on average between fixed-interval 4-weekly and 8-weekly dosing, Eylea’s durability and ability to maintain disease control as measured by OCT is less than the approved 8-week per-label dosing.

Figure: Retinal thickness (y-axis), measured in microns, decreases upon treatment with Eylea. Rq4 = Lucentis every four weeks; 0.5q4 = Eylea 0.5mg every four weeks; 2q4 = Eylea 2mg every four weeks; 2q8 = Eylea 2mg every eight weeks.

The clinical implication is that when a patient’s dosing cycle is extended beyond the durability of the anti-VEGF agent and the amount of drug remaining in the eye falls below therapeutic levels, disease activity can recur. At this point, the disease can progress and begin to cause cumulative and possibly permanent retinal damage. To this point, the Eylea product labeling in the United States notes that “some patients may need every 4-week (monthly) dosing after the first 12 weeks (3 months).”

Additional evidence of the recognition of limited durability is seen in the FDA’s evaluation of both Lucentis and Eylea. Lucentis was tested for its potential to reach quarterly dosing in a Phase 3b study; it failed to successfully deliver the same efficacy results as monthly dosing. The FDA did accept dosing every three months after three initial monthly loading doses in the Lucentis product labeling, with the following wording: “Although not as effective, patients may be treated with 3 monthly doses followed by less frequent dosing with regular assessment. In the 9 months after three initial monthly doses, less frequent dosing with 4-5 doses on average is expected to maintain visual acuity while monthly dosing may be expected to result in an additional average 1-2 letter gain. Patients should be assessed regularly.” The loss of one line of vision translates into patients going back to baseline or even losing vision at the end of the first year of treatment, on average. Furthermore, the required wording of regular assessments means that the high burden of frequent office visits remains. For Eylea, recently, the FDA updated the product labeling to allow 12-week dosing but only in the second year of treatment, after one full year of intensive treatment. The labeling refers to it as “not as effective as the recommended every 8-week dosing.” For both Lucentis and Eylea, the recommended fixed interval dosing of monthly and bimonthly, respectively, appear to result in the best and most consistent visual acuity results, with all flexible or less-frequent dosing intervals labeled by FDA as “not as effective.”

Real-world utilization of current anti-VEGF therapies results in undertreatment which diminishes effectiveness.

Extended treatment intervals caused by the burden of frequent treatments causes undertreatment and visual outcomes that fall short of the results seen in pivotal clinical trials.

Compared to Lucentis’ pivotal trials in wet AMD, ANCHOR and MARINA, where initial vision gains are maintained with monthly dosing over two years, a variety of studies have shown that the initial gains (if achieved) are not maintained, on average, after the initial loading phase.

This is clearly seen in AURA, a multi-country real-world practice study of Lucentis. The visual acuity improvement seen in AURA falls significantly short of the visual acuity improvement that patients showed in MARINA and ANCHOR. A gradual loss of the initial vision gains can be seen as early as three months after initiation of treatment as depicted in the graph below. A key finding in AURA is that populations that received less frequent anti-VEGF treatment tended to experience less improvement in visual acuity, on average, as illustrated in the table below.

Figure: Vision gains seen in the AURA study over time for all patients by country (adapted from Holz et al).

*Last observation carried forward analysis.

Table: Summary of changes in visual acuity (VA) score from baseline and number of injections over two years, per country.

*Last observation carried forward analysis.

Consistent with the AURA study, an observational study following patients who completed the SEVEN UP and HORIZON trials for Lucentis in wet AMD showed a correlation between the number of injections and level of visual acuity benefit. Patients who received 11 or more injections during the period from four to eight years after they exited the pivotal clinical trial were more likely to experience improved vision (average gain of 3.9 letters) than patients who received six to ten injections during the same period (average loss of 6.9 letters).

Letter change:

1p<0.05

Table: Mean letter change from HORIZON to SEVEN UP by total number of anti-VEGF treatments.

The implication of these data is that in clinical practice and outside of clinical studies, patients are receiving fewer injections than the labeled regimens for Lucentis (12 per year) and Eylea (seven to eight in the first year and six in subsequent years). In 2017, the Angiogenesis Foundation reported that in routine clinical practice, 65% of wet AMD patients receive six or fewer injections during the first year of treatment. Likewise, a recent publication from the American Academy of Ophthalmology’s IRIS (Intelligent Research In Sight) patient registry showed that, in 13,859 U.S. patients with wet AMD, the average number of injections in the first year of treatment was approximately six.

As illustrated in the top right of the figure below, data regarding long-term anti-VEGF treatment show that visual acuity outcomes are positively correlated with number of injections, with the greatest benefit seen when therapies are used at 10.5 or more injections per year reflecting high intensity, fixed Q4W or Q8W dosing.

Figure: Five-year visual acuity outcomes versus injection frequency for three or more years in AMD.

In real-world practice, even a small deviation from per-labeled dosing can result in significant vision loss. In the PERSEUS Study, the real-world effectiveness of Eylea was evaluated in patients treated per-label (regular treatment) compared to patients treated irregularly. Patients treated regularly received a mean of 7.4 injections compared to 5.2 in the irregular treatment group. The initial vision gains seen after the loading doses started to decrease at month four, with vision returning, on average, to almost baseline in the irregularly treated patients, as shown in the graph below. The difference in vision of 4.6 letters gained between the two groups is statistically significant, and, more importantly, represents almost a line (five eye chart letters) of vision difference on average, which is recognized in the field as clinically meaningful. Additionally, in this study, the majority of patients (70.5%) did not receive regular treatment.

Figure: mean change in visual acuity for regularly and irregularly treated patients in the PERSEUS Study (effectiveness set)

Real-world outcomes of anti-VEGF treatment in patients with DME show similar patterns to wet AMD. For instance, a recently published report of electronic health records real-world data from 15,608 DME patient eyes showed that patients on average receive fewer injections over 12 months and have meaningfully worse visual acuity outcomes compared to randomized controlled trials.

Patients are not sustaining visual acuity gains over the long term.

Patients treated with anti-VEGF agents can sustain visual acuity gains over time if they adhere to a tighter dose frequency. Results from the VIEW 1 extension study demonstrate that it is possible for patients treated with anti-VEGF agents to sustain visual acuity gains over time, as long as patients adhere to a tighter dose frequency that is closer to the labeled regimen. In the early intensive treatment phase, patients in VIEW 1 achieved a ten-letter visual acuity gain, which they then maintained over two years on a Q8W regimen. At the end of two years, patients shifted into a less-intensive clinical monitoring regimen and into a more flexible dosing regimen in which they were required to maintain at least Q12W dosing. In this hybrid setting, patients showed a slow but steady decrease in average visual acuity from ten letters to seven letters; however, their average visual acuity did not drop to pretreatment levels or below.

Figure: Mean visual acuity and 95% confidence interval for 647 patients in the Comparison of Age-Related

Macular Degeneration Treatments Trials Follow-up Study: (A) overall and by drug assigned in the clinical

trial and (B) overall and by dosing regimen assigned in the clinical trial. PRN = “as needed.”

As mentioned above, AURA and many other real-world practice studies show that the vision gains seen in tightly controlled clinical trials are not transferrable to clinical practice. A United Kingdom study of approximately 93,000 Lucentis injections reviewed EMRs of thousands of patients treated outside the context of clinical trials. On average, patients received a median of 5, 4, and 4 injections of Lucentis over years one, two and three, respectively. The study found that although patients showed early improvement, they regressed, on average, to pretreatment levels by the end of year two with continued deterioration below their starting visual acuity by year three, as shown in the chart below.

Figure: Mean visual acuity (VA), as measured by letter score, over time comparing patients with follow-up of at least 1, 2 or 3 years.

More importantly, with many patients losing vision, during the study follow-up many patients experienced new sight impairment (29.6%, 41%, 48.7% and 53.7% in years one, two, three and four, respectively) and even new cases of blindness (5.1%, 8.6%, 12% and 15.6% in years one through four, respectively).

In the United States, an EMR study of 7,650 eyes treated with Lucentis and Eylea outside of the clinical trial setting showed that these therapies improved patients’ visual acuity less in practice than they do in clinical trials. Further, by the end of the first year of treatment, patients’ average visual acuity had deteriorated below their pretreatment levels.

Figure: Mean change in visual acuity (VA) letter score at 3, 6 and 12 months in the first year of treatment.

VA was lower at 12 months than at the beginning of treatment.

When patients leave the tightly controlled clinical trial environment, their eyesight, on average, falls to pretreatment levels. In practice, anti-VEGF therapies are not delivering the level of benefit that their pivotal clinical trials suggested. In the pivotal Lucentis trials MARINA and ANCHOR, patients were able to gain and maintain vision gains with monthly dosing over two years. After exiting the clinical trials, patients were followed in the HORIZON study with as needed dosing (Pro Re Nata or PRN) for three more years. Gradual vision decline can be seen immediately after exiting the trials, returning to pre-treatment baseline vision before the end of the third year of follow-up in HORIZON.

Figure: Mean change in visual acuity (VA) letter score in MARINA and ANCHOR

(years one and two) and in HORIZON (years three to five).

VA gradually decreased immediately after the patients exited monthly dosing in a clinical trial setting.

A study funded by the National Eye Institute followed patients who left the tightly controlled clinical trial environment into clinical practice and showed that these patients, on average, lost all the gains in visual acuity that they obtained while enrolled in the trial.

Undertreatment in the early course of patients’ disease risks the patients’ ability to benefit from anti-VEGF therapies after the passage of time.

After disease onset, how soon patients receive appropriate treatment is important to whether they can respond to treatment. Failure to appropriately treat neovascularization in the early period may reduce patients’ ability to respond to anti-VEGF therapies as the disease progresses, possibly leading to irreversible damage. In the RIDE/RISE clinical studies of Lucentis in DR, patients who received Lucentis saw an increase in visual acuity of 10 to 12 letters at month 24. Patients who received sham treatment (a procedure that is intended to mimic a therapy in a clinical trial as closely as possible without having any actual efficacy) for 24 months saw no benefit. At the 24-month mark, the patient arms were crossed over, such that the patients who had initially received sham treatment now began to receive Lucentis. These patients were only able to improve by four letters by year three. The interpretation is that the unchecked disease progression in the initial period damaged the retina to such an extent that patients were subsequently unable to respond to Lucentis to the same degree as patients treated with Lucentis earlier in their disease process.

Figure: At 36 months, patients who received Lucentis 0.5mg experienced a mean BCVA change from

baseline of 11.4 letters and 11.0 letters in RIDE and RISE, respectively. Patients who received sham treatment for

24 months and then crossed over to Lucentis 0.5mg experienced a diminished benefit in mean best corrected visual

acuity change from baseline at 36 months of 4.7 letters and 4.3 letters in RIDE and RISE, respectively.

Conclusions

There is a significant and urgent unmet medical need to find better therapeutic options for patients with neovascular diseases of the retina that can:

In the 2018 Preferences and Trends Survey conducted by the American Society of Retina Specialists, retina specialists worldwide cited both reduced treatment burden and long-acting durability as the greatest unmet needs regarding wet AMD treatment, and in the 2019 Survey, the majority of retina specialists believed that wet AMD patients are being undertreated.

Our Lead Product Candidate: KSI-301

Our lead product candidate, KSI-301, is a novel, clinical-stage anti-VEGF biological agent that combines inhibition of a known pathway with a potentially superior on-mechanism durability profile compared to currently marketed drugs for wet AMD, DME, DR and RVO. By addressing the primary causes of undertreatment, KSI-301 has the potential to improve and sustain visual acuity outcomes in patients with retinal vascular and exudative diseases.

Components of KSI-301

KSI-301 is a bioconjugate comprised of two novel components. The first component is a recombinant, full-length humanized anti-VEGF monoclonal antibody. The second component is a branched, optically clear phosphorylcholine biopolymer. The antibody is conjugated to the biopolymer in a one-to-one ratio through a stable and site-specific chemical linkage to form the antibody biopolymer conjugate. The molecular weight of KSI-301 is approximately 950,000 Daltons (Dalton is a standard measure of molecular weight), of which approximately 150,000 Daltons are attributable to the antibody component and 800,000 Daltons are attributable to the biopolymer component. It is well-established that substances, when injected intravitreally, with a smaller molecular weight will be cleared from ocular tissues more quickly than larger substances.

Figure: Functional structure of the KSI-301 antibody biopolymer conjugate.

Antibody Intermediate

The antibody intermediate of KSI-301 consists of a humanized anti-VEGF antibody. KSI-301 behaves pharmacologically similar to Lucentis by inhibiting VEGF-mediated neovascularization and vascular permeability.

Biopolymer Intermediate

The biopolymer component is a branched, optically clear phosphorylcholine biopolymer. Phosphorylcholine is a naturally occurring phospholipid head group present on the external surface of mammalian cellular membranes. Phosphorylcholine demonstrates physiological inertness that has been attributed to its molecular structure, where a permanent positive charge on the nitrogen group is equally balanced by a negative charge on the phosphate, yielding a net neutral charge over a wide range of conditions. Because of these biophysical properties, phosphorylcholine-based materials demonstrate super-hydrophilic properties in which they bind large amounts of water molecules very tightly, to create what we call “structured water.” Phosphorylcholine is used successfully in marketed medical materials as the key water control monomer, in particular as a hydrogel in certain contact lenses and as a polymeric surface coating in certain cardiac drug-eluting stents. In these applications, phosphorylcholine containing monomers are polymerized via “uncontrolled” free radical polymerization. For an external hydrogel application (contact lens) and an internal surface coating application (drug eluting stent), control of molecular weight and architecture are not important performance attributes. Kodiak’s objective was to incorporate phosphorylcholine into well-controlled biomaterials to use as conjugates for soluble, injectable medicines such as biopharmaceuticals. In such an application, control of molecular weight and architecture are important manufacturing and performance parameters. Therefore, we used controlled “living” polymerization techniques to build precise, star-shaped, high molecular weight, well-characterized phosphorylcholine-based biopolymers that preserve functional chemistry for subsequent conjugation to biologically active proteins and, once conjugated, bring a highly structured water environment into close proximity with the bioactive antibody’s target binding regions. We are also applying these controlled “living” polymerization techniques to develop phosphorylcholine-based biopolymers as copolymers of phosphorylcholine-containing and drug-containing comonomers to build chemistry-based product candidates that we believe may demonstrate high biocompatibility, high drug loading and sustained release of small molecule drugs for ophthalmology applications.

Characteristics of KSI-301

We believe that KSI-301 can be a highly differentiated treatment with an improved durability and bioavailability profile compared to current anti-VEGF therapies due to the following design features and resulting performance benefits we have observed with KSI-301 in our preclinical development:

• Associated performance benefits:

• Design feature: KSI-301’s phosphorylcholine-based ABC Platform

• Associated performance benefits:

• 4x increase in key target ocular tissue bioavailability, as compared to Eylea

• Associated performance benefits:

We believe that the aggregated effects of these properties could afford KSI-301 a longer on-mechanism durability that will more closely match the frequency of physician visits that is realistic for patients in clinical practice.

We also believe that these properties along with KSI-301’s delivery by intravitreal injection position it favorably compared to other therapies being studied in the clinic with the aim of long-interval dosing in retinal vascular disease. For example, both subretinal gene therapy and an implantable drug reservoir require the patient to undergo surgery, which is generally riskier than an intravitreal injection. This need for surgery may reduce the likelihood that those technologies could be useful for or adopted by a broad range of physicians and patients, especially those patients with earlier-stage disease. An implantable drug reservoir also leaves a foreign body permanently in the eye, with an attendant increased risk of infection or other long-term postoperative complications such as implant dislocation. Coated microsphere drug depots that deliver small-molecule receptor tyrosine kinase inhibitor drugs into the eye may leave a foreign residual material, which may cause visual symptoms and/or other safety problems. Additionally, receptor tyrosine kinase inhibitor drugs affect signaling through additional receptors other than VEGF receptor; the effects on the eye of this additional receptor inhibition, either good or bad, are not yet known. Likewise, intravitreally-administered gene therapy vectors have been associated with chronic intraocular inflammation in a high percentage of treated patients, which may limit the efficacy of these treatments, the ability to retreat the first eye or treat the second eye over time, and the overall adoption of these approaches if they are successful. Finally, bispecific antibodies that target VEGF as well as other angiogenic signaling pathways are attempting to increase durability of treatment effect both through high molar doses and the targeting of additional pathways beyond VEGF, but the antibodies being used are the same size as typical monoclonal antibodies (~150 kDa) and we believe they do not have any unique size or half-life extending properties.

Trajectories in Field of Medicines Development for Retinal (Intravitreal) Therapies

Since the initial FDA approval of Lucentis in 2006 as a monthly therapy for wet AMD, efforts have been made to improve the durability of intravitreal anti-VEGF therapy. Primarily, two parameters have been varied: size of molecule and amount of injected dose. First, increasing molecular weight, which can increase durability or ocular pharmacokinetics, or PK, in the eye because a larger molecule can lead to a slower exit from the eye. For example, Lucentis has a molecular weight of 48 kDa whereas Eylea, approved in 2011, has a molecular weight of 115 kDa. The second parameter is increasing the formulation strength (concentration) to increase the effective dose of anti-VEGF, given the limited volume of medicine that can be injected intravitreally in a single administration. This increases effective durability by keeping drug concentrations in the eye above a minimal threshold for longer periods of time. For example, Eylea has a 2x molar equivalence to Lucentis. In designing KSI-301, we addressed both parameters: first, increasing the molecular weight to 950 kDa through our ABC approach, and second, increasing the molar strength through a high concentration formulation of 50 mg/mL (by weight of protein). We believe our design decisions for KSI-301 may provide increased durability. The following figure illustrates these concepts.

Affinity for and Inhibition of VEGF

The therapeutic activity of KSI-301 is driven by its antibody component, OG1950, which (1) binds to VEGF and (2) prevents VEGF from carrying out its functions that promote neovascularization and increase vascular permeability. Our preclinical tests have demonstrated that OG1950 and KSI-301 bind to VEGF with similar affinity, which indicates that, despite the size and complex architecture of the biopolymer intermediate, the biopolymer does not interfere with antibody binding.

Table: Binding kinetics of OG1950 and KSI-301 to huVEGF-A165 by SPR or KinExA analysis.

Molecule Platform (°C) Kon (M) Koff (M) KD (pM)

°C = degrees Celsius; KD = dissociation constant

We have also tested OG1950 and KSI-301 in vitro alongside other anti-VEGF biologics to test their respective abilities to inhibit VEGF from binding to VEGF receptors. As shown in the figure and table below, while KSI-301 and OG1950 have similar IC50 (the concentration at which binding is reduced by half) compared to Eylea, KSI-301 consistently demonstrates a higher maximal inhibition than Eylea or Lucentis. Of note, KSI-301 improved maximal inhibition more than OG1950, suggesting that the special nature of our antibody biopolymer conjugate synergistically improves the bioactivity of the antibody intermediate acting alone.

Figure: Inhibition of VEGF binding to VEGF receptors by anti-VEGF agents.

Molecule IC50 (nM) Maximal inhibition (%)

Table: Average IC50 and maximal inhibition of anti-VEGF agents. IC50 values measured in nanomoles (nM) and

calculated from concentration of anti-VEGF agents. All values shown as average with standard deviation.

Inhibition of VEGF-Mediated Processes

Based on its ability to bind and inhibit VEGF, KSI-301 is expected to behave pharmacologically similar to Lucentis, Eylea and Avastin to decrease the leakage of blood proteins and fluid into the retina. In fact, in vitro testing of KSI-301 against Lucentis, Eylea and Avastin in their respective ability to inhibit VEGF-mediated endothelial cell proliferation (a key component of neovascularization) in primary human retina microvascular endothelial cells, or HRMVECs, showed that KSI-301 inhibited proliferation to approximately the same degree as Eylea and with greater potency than Lucentis or Avastin. In addition, KSI-301 displayed a superior maximal inhibition of VEGF-mediated proliferation relative to Eylea and Avastin.

Figure: Effects of KSI-301, Lucentis, Eylea and Avastin on HRMVEC proliferation.

Molecule IC50 (nM) Maximal Inhibition (%)

Table: IC50 Values and maximal inhibition of anti-VEGF agents on VEGF-mediated proliferation of HRMVECs. IC50 values were calculated from concentration of anti-VEGF agents. All values shown as average with standard deviation.

To mimic in vivo conditions where endothelial cells and pericytes coexist in blood vessels, a three-dimensional co-culture of HRMVECs and human mesenchymal pericytes, or HMPs, grown on beads was established. This model was then used to test the ability of KSI-301 to inhibit VEGF-mediated vascular sprouting compared to Lucentis and Eylea. The average number of sprouts per bead and the length per sprout were analyzed under each treatment condition.

As shown in the figures below, at maximal anti-VEGF inhibition the average sprout length of cultures treated with KSI-301 was substantially less than that of the control (481 compared with 990 microns) and comparable to Lucentis and Eylea (505 and 428 microns respectively). The average number of sprouts per bead for cultures treated with KSI-301 was 11.5, which was comparable to 13.3 and 13.0 sprouts per bead observed for the cultures treated with Lucentis and Eylea, respectively.

Figure: Effects of KSI-301 and other anti-VEGF molecules on length and number of vascular sprouts in 3-dimensional culture.

Extended Ocular Half-Life versus Standard of Care Agents

The addition of the biopolymer intermediate increases the size of the biologic, thereby extending the ocular half-life of the molecule beyond that of standard of care anti-VEGF agents. Preclinical studies with KSI-301 in the well-established rabbit ocular pharmacokinetics model have demonstrated that KSI-301 has ocular tissue half-lives of 10+ days in the retina and 12.5+ days in the choroid. This is in comparison to published data for ocular tissue half-lives for Lucentis of 2.9 days and Eylea of 4-5 days.

Enhanced Ocular Tissue Bioavailability versus Eylea

The data also show that KSI-301, despite its large size, penetrates ocular tissues well and has a retina and choroid ocular tissue biodistribution that is more than four-fold higher than Eylea.

Modeling On-Mechanism Durability and Human Dose Frequency

In order to estimate the impact of high potency and extended ocular half-life on durability of effect, we used a pharmacokinetic and pharmacodynamic model that overlays rabbit ocular tissue pharmacokinetic profiles of intravitreally injected anti-VEGF therapeutics and correlates the drug levels with (1) human OCT data to define a rabbit minimal inhibitory concentration to maintain human on-mechanism durability that corresponds with human OCT outcomes, and (2) human dose frequency to define a rabbit minimal inhibitory concentration to support a dose frequency in humans which corresponds to the ability to maintain visual acuity outcomes over the long-term. Specifically, we overlay the ocular tissue pharmacokinetic profiles of Lucentis at 0.5 mg dose (the marketed dose in wet AMD), Eylea at 2.0mg dose (the marketed dose), and bioconjugate KSI-301 at 5.0 mg dose (our selected dose), as separately tested.

Our modeling suggests a single dose of KSI-301 can stay above both on-mechanism and “dosing” minimal inhibitory concentrations for longer than 12 weeks in wet AMD patients. A minimal inhibitory concentration is the minimum concentration of a drug that still has the desired therapeutic effect. The implication is that KSI-301 may on average keep the retina dry for longer than 12 weeks after dosing, allowing patients to be dosed in regular 12-week intervals or less frequently and still maintain anti-VEGF mediated visual acuity gains over the long term. This contrasts with overextending the treatment interval beyond a point where retinal swelling recurs as observed in Eylea’s VIEW 2 Phase 3 clinical trial (as described above).

KSI-301 has demonstrated superior stability compared to typical protein therapeutics

Stability studies have shown that KSI-301 bioconjugate is stable in ex vivo vitreous for at least 4 months at 37°C. Further, forced degradation studies at the extreme condition of 64°C have shown that KSI-301 bioconjugate remains in solution and is optically clear for at least 48 hours whereas the precursor antibody protein precipitated forming an opaque white suspension within several hours.

Toxicology Profile

KSI-301 has demonstrated an attractive safety profile. In all GLP monkey toxicology studies conducted through ocular or systemic administration, KSI-301 has been well tolerated. In ocular studies, KSI-301 was dosed bilaterally via intravitreal injection at 2.5 or 5.0 mg per eye every four weeks up to seven doses and evaluated through 40 weeks. Findings were limited to a dose-related anterior segment and posterior segment mild inflammatory response, which was not associated with other ocular abnormalities. The anterior segment response declined during the interval between doses and generally the finding was not present one-week post dose. The posterior segment response was attributed to a mild immune mediated response typically observed to a humanized therapeutic in monkeys. No drug related systemic toxicity was observed. Additionally, in a systemic administration study, KSI-301 was well tolerated up to the highest dose of 5 mg/kg when dosed intravenously every four weeks for ten weeks. In summary, the results of the toxicology studies strongly indicate that KSI-301’s well tolerated safety profile in monkeys is favorable compared to that reported for Lucentis and Eylea.

KSI-301 Commercialization

We currently have no sales, marketing or commercial product distribution capabilities and have no experience as a company in marketing products. We intend to build our own commercialization capabilities over time.

If KSI-301 receives marketing approval, we plan to commercialize it in the United States with our own focused, specialty sales force. We believe that retinal specialists in the United States, who perform most of the medical procedures involving diseases of the back of the eye, are sufficiently concentrated that we will be able to effectively promote KSI-301 to these specialists with a sales and marketing group of fewer than 200 persons.

We expect to use a variety of types of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize KSI-301 in markets outside the United States.

KSI-301 Manufacturing

We believe it is important to our business and success to have a reliable, high-quality clinical drug supply. As we mature as a company and approach commercial stage operations, securing reliable high-quality commercial drug supply will be critical.

We do not currently own or operate facilities for product manufacturing, storage, distribution or testing.

We rely on third-party contract manufacturers, or CMOs, to manufacture and supply our clinical materials to be used during the development of our product candidates. We have established relationships with several CMOs, including Lonza AG, or Lonza, for the manufacture of KSI-301, as well as certain of our other product candidates.

We currently do not need commercial manufacturing capacity. When and if this becomes relevant, we intend to evaluate both third-party manufacturers as well as building out internal capabilities and capacity. We may choose one or both options, or a combination of the two.

The process for manufacturing KSI-301 consists of conjugating our antibody intermediate with our biopolymer intermediate. Our antibody intermediate is produced in a recombinant GS-CHO (Glutamine Synthetase—Chinese Hamster Ovary) cell line in a protein-free and animal component-free medium. Our biopolymer intermediate is synthesized via a multi-step controlled “living” polymerization process, purified and formulated. Following conjugation of the intermediates, the bioconjugate drug substance is further purified, concentrated, and stored.

To date, we have relied primarily on Lonza for the manufacture of KSI-301. Notably, in the first quarter of 2020, we completed three successful re-supply batches of cGMP-manufactured KSI-301 drug substance. We believe that supply from these new batches, together with previously available KSI-301 supply from prior cGMP drug substance manufacturing, is sufficient to support our ongoing and planned clinical development activities.

The manufacture of KSI-301, like other biologic products, is complex and we have actively worked with Lonza to develop and refine our manufacturing process. As our need for KSI-301 increases in connection with pre-BLA manufacturing and validation activities and, if approved, commercial quantities, we anticipate continued collaboration with Lonza. We have also identified multiple other CMOs that we believe would be capable of implementing, validating and commercializing our manufacturing process for KSI-301 should the need arise.

ABC Platform

We believe that our ABC Platform is well suited to extend the durability of soluble, injectable retinal medicines, while at the same time providing for other useful benefits. We intend to develop additional drug candidates by applying our ABC Platform in other significant areas of unmet medical need in retina and ophthalmic disease.

We believe our ABC Platform differentiates us and has the potential to fuel a pipeline of differentiated product candidates in high-prevalence ophthalmic diseases. In addition to KSI-301, we have leveraged our ABC Platform to build a pipeline of potential product candidates, including KSI-501, a recombinant, mammalian cell expressed dual inhibitor antibody biopolymer conjugate, targeting both VEGF and IL-6 for the treatment of retinal diseases with an inflammatory component. The cGMP master cell bank for KSI-501 has been completed, and KSI-501 is being further developed towards an IND in 2021.

In addition, we have expanded our early research pipeline to include ABC Platform-based triplet inhibitors. In this approach, a bispecific or dual inhibitor antibody is conjugated to a phosphorylcholine biopolymer variant that is embedded with hundreds of copies of a small-molecule drug. As a result, multiple disease-related biologies - both intracellular and extracellular - can be targeted with a single medicine. This approach can be of particular relevance for common vision-threatening diseases that are more complex because of their multifactorial pathophysiology, such as dry AMD and glaucoma. KSI-601 is a triplet inhibitor for dry AMD, and we currently intend to submit an IND in 2022.

Overview of KSI-501

In addition to angiogenesis, inflammation has been implicated in the pathogenesis of a number of retinal diseases. Anti-inflammatory therapies such as steroids have been effective in treating both uveitis (a spectrum of diseases with intraocular inflammation as a defining characteristic) and DME. Similarly, genetically inherited variations in the interleukin 6, or IL-6, gene have been associated with higher PDR incidence in patients with type 2 diabetes. Moreover, disease progression in AMD, DR and RVO have been reported to be associated with increased serum and/or ocular levels of IL-6. Additionally, chronic inflammatory cells have been seen on the surface of the basement membrane behind the retina in eyes with wet AMD. Interestingly, IL-6 has been implicated in resistance to anti-VEGF treatments in DME patients. This in part is believed to be an indirect result of IL-6 mediated upregulation of VEGF expression as well as more direct VEGF-independent angiogenic functions mediated by IL-6 signaling that occur in the presence of VEGF inhibitors.

Our KSI-501 product candidate is a dual inhibitor Trap-Antibody-Fusion, or TAF, bioconjugate molecule designed to target concurrent inflammation and abnormal angiogenesis observed in the pathogenesis of retinal vascular diseases. KSI-501 acts through an anti-VEGF mechanism similar to Eylea and an anti-inflammatory mechanism that targets the potent cytokine IL-6. Similar to KSI-301, KSI-501 uses the ABC Platform and is a bioconjugate of the TAF protein conjugated to our phosphorylcholine-based biopolymer. Preclinical binding and functional studies demonstrate that the TAF protein binds specifically and simultaneously to its intended targets. We believe that this dual inhibition may provide a superior treatment option for patients with retinal vascular diseases and in particular those patients with diseases known to have a high inflammatory component such as DME, as well as in ocular inflammatory diseases such as uveitis.

KSI-501 is now in GMP manufacturing, and we are currently working towards IND submission in early 2022.

Components of KSI-501

KSI-501 is a bioconjugate of a dual inhibitor TAF protein and a phosphorylcholine-based biopolymer. The protein portion of KSI-501 has two VEGF binding domains from human VEGF receptors which together act as a trap or soluble receptor decoy to bind the most abundant isoforms of VEGF. The anti-VEGF trap domains are fused to a high-affinity IgG1 antibody that binds with high specificity and affinity to IL-6 and disrupts the ligand’s association with its cognate IL-6 receptor. Moreover, the Fc domain has been engineered to reduce immune effector function and facilitate site-specific conjugation to our phosphorylcholine-based biopolymer.

Notably, this IgG1 antibody sequence is identical to that from KSI-301, except for the six CDR regions that mediate target binding and which are specific for binding to the IL-6 target. Retaining the IgG1 frameworks across ABC Platform-derived product candidates enables “platform capability” which simplify manufacturing and product development. KSI-501, furthermore, uses the same cGMP biopolymer intermediate as KSI-301.

Figure: Functional structure of the KSI-501 antibody biopolymer conjugate. CH – constant heavy, CL – constant light, VH – variable heavy, VL – variable light, – Complementarity Determining Regions (CDR).

Characteristics of KSI-501

We believe that KSI-501 can be a highly differentiated treatment due to its dual mechanism of action, with an improved durability and bioavailability profile due to the ABC Platform component. In addition, there are currently no IL-6 inhibitors approved for use in the eye.

We incorporated the following design features into KSI-501:

• Binds with high affinity to the most abundant isoforms of VEGF

Design Feature: KSI-501’s anti-IL-6 domain

• IgG1 Fc domain engineered to reduce immune effector functions

Design Feature: KSI-501’s phosphorylcholine-based ABC Platform

Note that the in vitro data shown below are generated using the TAF (protein) of KSI-501, without conjugation to our ABC biopolymer.Results using KSI-501 may be different, but experience with a structurally similar prior molecule, KSI-201, has shown that these individual components, i.e., trap antibody fusion protein and biopolymer, can function together simultaneously as a dual inhibitor bioconjugate. Prior experiences with bioconjugates KSI-201 and KSI-301 have also demonstrated that the biopolymer portion does not interfere with the bioactivity of the protein portion.

Affinity and concurrent binding to VEGF and IL-6

Preclinical studies indicate that the TAF portion of KSI-501 binds with high affinity to both VEGF and IL-6, as measured by SPR analysis (Table). Importantly, binding of each molecule has no effect on the binding of the other, and KSI-501 can bind to both molecules as shown below. Thus, we believe our dual inhibitor can simultaneously inhibit both of its targets with high potency.

Table: Binding kinetics of TAF portion of KSI-501 to huVEGF-A165 or IL-6 by SPR analysis.

Molecule Kon (M) Koff (M) KD (pM)

Figure: TAF of KSI-501 simultaneously binds to IL-6 and VEGF by sandwich ELISA, which only shows a signal if a compound binds to both IL-6 and VEGF concurrently.

Inhibition of VEGF and IL-6

KSI-501 was designed to inhibit both VEGF and IL-6 mediated signaling that occur after the ligands bind to their respective receptors. The figure below shows that the TAF protein of KSI-501 effectively prevents VEGF from stimulating downstream VEGFR2 signaling in a reporter assay in a comparable manner to Eylea, while anti-IL-6 alone served as a negative control.

Figure: VEGF stimulated reporter assay with increasing concentrations of anti-VEGF inhibitors

The figure below shows that the control anti-IL-6 antibody and TAF protein of KSI-501 effectively compete with IL-6R for binding to plate-bound IL-6 and therefore inhibit this specific antigen-receptor interaction. The IC50 values for the control anti-IL-6 monoclonal antibody and the TAF protein are comparable (anti-IL-6 = 0.36 nM, KSI-501 = 0.47 nM), while Eylea had no effect.

Figure: ELISA measuring IL-6 binding to IL-6R in the presence of increasing concentrations of anti-IL-6 inhibitors

Together, these data indicate that the TAF protein of KSI-501 inhibits both VEGF and IL-6 from binding their cognate receptors as effectively as the monotherapies. Importantly, these data also demonstrate that the TAF protein of KSI-501 can simultaneously block downstream signaling mediated by both VEGF and IL-6.

IL-6 and VEGF mediated proliferation of HUVECs

The ability of the TAF protein of KSI-501 to inhibit IL-6 and VEGF mediated angiogenic functions was tested in a Human Vascular Endothelial Cell, or HUVEC, proliferation assay as shown in the figure below. Importantly, the concentrations of VEGF and IL-6 used to stimulate proliferation were below the saturation point for each individual stimulant and under these conditions VEGF and IL-6 showed some synergy for growth. The presence of TAF protein significantly attenuated proliferation to approximately 50% of maximal growth, while neither Eylea nor control anti-IL-6 alone had quantifiable effects. These data provide supporting evidence that KSI-501 can synergistically abrogate endothelial cell proliferation that is driven by concurrent inflammatory and VEGF mediated signaling.

Figure: VEGF/IL-6 mediated HUVEC proliferation in the presence of inhibitors

IL-6 and VEGF mediated tubule formation of HUVECs:

TAF protein of KSI-501 was also tested in an endothelial cell tubule formation assay. Treatment of HUVECs seeded on an extracellular basement membrane matrix (Matrigel) with VEGF and IL-6 together stimulate tubule formation to a higher degree than either treatment alone. The TAF protein of KSI-501 demonstrated superior inhibition of this tubule formation when compared to Eylea or control anti-IL-6 antibody.

Furthermore, quantification of the effects of each inhibitor on twenty parameters of HUVEC tubule formation show that the TAF protein significantly inhibited 17 of 20 angiogenic parameters versus control (compared to 4 of 20 for Eylea and 7 of 20 for control anti-IL-6 antibody). TAF protein was statistically better than Eylea and anti-IL-6 control in 12 of 20 parameters.

Figure: Quantification of IL-6/VEGF mediated HUVEC tubule formation in the presence or absence of inhibitor molecules using the Angiogenesis Analyzer plugin for ImageJ

Together, these data show that the TAF protein of KSI-501 can simultaneously bind IL-6 and VEGF to inhibit their downstream angiogenic signaling pathways. We believe that this novel dual inhibitor can provide an alternative option for the treatment of retinal vascular diseases, especially those that have a high inflammatory component and/or that do not respond adequately to anti-VEGF treatments alone.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Our potential competitors include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic or biosimilar drug companies. Many of our competitors have significantly greater financial and human resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring products, product candidates or other technologies complementary to our programs.

The key competitive factors affecting the success of KSI-301, if approved, are likely to be its efficacy, safety, method and frequency of administration, on-mechanism durability of therapeutic effect, convenience, price, the level of generic and biosimilar competition and the availability of coverage and reimbursement from government and other third-party payors. The method of administration of KSI-301, intravitreal injection, is commonly used to administer ophthalmic drugs for the treatment of severe disease and is generally accepted by patients facing the prospect of severe visual loss or blindness. However, a therapy that offers a less invasive method of administration might have a competitive advantage over one administered by intravitreal injection, depending on the relative safety of the other method of administration.

The current standard of care for wet AMD, advanced stages of DR (including DME), and RVO is monotherapy administration of anti-VEGF drugs, principally Avastin, Lucentis and Eylea, which are well-established therapies and are widely accepted by physicians, patients and third-party payors. Physicians, patients and third-party payors may not accept the addition of KSI-301 to their current treatment regimens for a variety of potential reasons, including:

• if they do not wish to incur the additional cost of KSI-301;

• if they perceive the addition of KSI-301 to be of limited benefit to patients;

• if they wish to treat with more than an anti-VEGF drug;

• if sufficient coverage and reimbursement are not available; and

• if they do not perceive KSI-301 to have a favorable risk-benefit profile.

We are developing KSI-301 as an alternative to existing anti-VEGF drugs, including Avastin, Lucentis and Eylea. Accordingly, KSI-301 would directly compete with these therapies. While we believe KSI-301 will compete favorably with existing anti-VEGF drugs, future approved standalone or combination therapies with demonstrated improved efficacy over KSI-301 or currently marketed therapies with a favorable safety profile and any of the following characteristics might pose a significant competitive threat to us:

• a mechanism of action that does not involve VEGF;

• a method of administration that avoids intravitreal injection; and

Our commercial opportunity could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. A drug with greater convenience than KSI-301 might make such a drug more attractive to physicians and patients. An anti-VEGF gene therapy product might substantially reduce the number and frequency of intravitreal injections when treating wet AMD, DME, RVO, or DR, making KSI-301 unattractive to physicians

and patients. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected because in many cases insurers or other third-party payors seek to encourage the use of generic products.

In addition to currently available therapies, we are aware of a number of products in preclinical research and clinical development by third parties to treat wet AMD, DME, RVO and DR. We expect that product candidates currently in clinical development, or that could enter clinical development in the near future, that inhibit the function of VEGF or inhibit the function of both VEGF and other factors, could represent significant competition if approved. These product candidates may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. For example, Novartis has received FDA and EMA approval for Beovu (brolucizumab) for the treatment of wet AMD, and is studying Beovu as a potential treatment option for patients with DME and RVO. Roche is developing faricimab, a bispecific antibody targeting VEGF and another mechanism, in wet AMD, DME, and RVO, and recently presented Phase 3 data demonstrating the non-inferiority of faricimab to Eylea in wet AMD and DME. There are also several companies and research organizations pursuing treatments targeting other molecular targets, potential gene therapy treatments, stem cell transplant treatments and medical devices for the treatment of wet AMD, DME, DR, and RVO.

Because there are a variety of means to treat wet AMD, DME, DR, and RVO, our patents and other proprietary protections for KSI-301 will not prevent development or commercialization of product candidates that are different from KSI-301.

Funding Agreement

On December 1, 2019, we, and our subsidiary, Kodiak Sciences GmbH, entered into a funding agreement to sell a capped royalty right on global net sales of KSI-301 to BBA for $225,000,000. Under the funding agreement, BBA purchased the right to receive a capped 4.5% royalty on net sales following marketing approval of KSI-301 in exchange for $225,000,000 in committed development funding payable to us. Unless earlier terminated or re-purchased by us, the royalty “caps” or terminates upon the date that BBA has received an aggregate amount equal to 4.5 times the funding amount paid to us. Under the terms of the funding agreement, BBA was required to pay the first $100,000,000 of the funding amount at the closing of the funding transaction and the remaining $125,000,000 of the funding amount, subject to delivery of notice by the Company, payable upon enrollment of 50% of the patients in the RVO clinical program. We have the option, exercisable at any point during the term of the funding agreement, to repurchase from BBA 100% of the royalties due to BBA under the funding agreement for a purchase price equal to the funding amount paid to us as of such time times 4.5, less amounts paid by us to BBA. Under the funding agreement, BBA also received a right to a royalty interest on future net sales following marketing approval of other of our products that employ an anti-VEGF A, or VEGF-A, biology as a sole molecular or chemical biology. In the event we commercialize related products that contain both an anti-VEGF-A biology together with at least one additional molecular or chemical biology(ies), BBA would have the right to receive a fractional royalty of up to 2.25% for one additional molecular or chemical biology or 1.5% for two additional molecular or chemical biologies provided that such other products are being progressed in indications for, or patient populations with, retinal vein occlusion, wet AMD or diabetic macular edema, or indications or patient populations in which KSI-301 or a VEGF-A product has received marketing approval. Total royalty payments under the funding agreement are not to exceed the cap of 4.5 times the funding amount paid to us. The funding agreement was the result of a competitive process overseen by independent and disinterested directors of Kodiak with the assistance of outside counsel.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. Drug Development

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations, and biologics under the FDCA, the Public Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics also are subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Any future product candidates must be approved by the FDA through either a new drug application, or NDA, or a biologics license application, or BLA, process before they may be legally marketed in the United States. The process generally involves the following:

• submission to the FDA of an NDA or BLA;

The data required to support an NDA or BLA are generated in two distinct developmental stages: preclinical and clinical. The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for any future product candidates will be granted on a timely basis, or at all.

Preclinical Studies and IND

The preclinical developmental stage generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which support subsequent clinical testing. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin.

Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA or BLA. The FDA will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP requirements and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials in the United States generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug, findings from animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the trial. Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that our product candidates do not undergo unacceptable deterioration over their shelf life.

NDA/BLA Review Process

Following completion of the clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of an NDA or BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. In short, the NDA or BLA is a request for approval to market the drug or biologic for one or more specified indications and must contain proof of safety and efficacy for a drug or safety, purity and potency for a biologic. The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA or BLA must be obtained before a drug or biologic may be marketed in the United States.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA or BLA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for approved human drugs and biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The FDA reviews all submitted NDAs and BLAs before it accepts them for filing, and may request additional information rather than accepting the NDA or BLA for filing. The FDA must make a decision on accepting an NDA or BLA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months, from the filing date, in which to complete its initial review of a new molecular-entity NDA or original BLA and respond to the applicant, and six months from the filing date of a new molecular-entity NDA or original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs or BLAs, and the review process is often extended by FDA requests for additional information or clarification.

Before approving an NDA or BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. After the FDA evaluates an NDA or BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the

applicant may either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.

Expedited Development and Review Programs

The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor can request the FDA to designate the product for fast track status any time before receiving NDA or BLA approval, but ideally no later than the pre-NDA or pre-BLA meeting.

Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies.

A product may also be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it may require such post-marketing restrictions, as it deems necessary to assure safe use of the product.

Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.

Abbreviated Licensure Pathway of Biological Products as Biosimilar or Interchangeable

The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products shown to be highly similar to an FDA-licensed reference biological product. An application for licensure of a biosimilar product must include information demonstrating biosimilarity based upon the following, unless the FDA determines otherwise:

• animal studies (including the assessment of toxicity); and

In addition, an application must include information demonstrating that:

Biosimilarity means that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components; and that there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product. In addition, the law provides for a designation of “interchangeability” between the reference and biosimilar products, whereby the biosimilar may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product. The higher standard of interchangeability must be demonstrated by information sufficient to show that:

• the proposed product is biosimilar to the reference product;

FDA approval is required before a biosimilar may be marketed in the United States. In addition, as with BLAs, biosimilar product applications will not be approved unless the product is manufactured in facilities designed to assure and preserve the biological product’s safety, purity and potency.

The timing of final FDA approval of a biosimilar for commercial distribution depends on a variety of factors, including whether the manufacturer of the branded product is entitled to one or more statutory exclusivity periods, during which time the FDA is prohibited from approving any products that are biosimilar to the branded product. The FDA cannot approve a biosimilar application for twelve years from the date of first licensure of the reference product. Additionally, a biosimilar product sponsor may not submit an application for four years from the date of first licensure of the reference product. A reference product may also be entitled to exclusivity under other statutory provisions. For example, a reference product designated for a rare disease or condition (an “orphan drug”) may be entitled to seven years of exclusivity, in which case no product that is biosimilar to the reference product may be approved until either the end of the twelve-year period provided under the biosimilarity statute or the end of the seven-year orphan drug exclusivity period, whichever occurs later. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block biosimilarity applications from being approved on or after the patent expiration date. In addition, the FDA may under certain circumstances extend the exclusivity period for the reference product by an additional six months if the FDA requests, and the manufacturer undertakes, studies on the effect of its product in children, a so-called pediatric extension.

Post-Approval Requirements

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping requirements, requirements to report adverse experiences, and comply with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the drug or biologic, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new NDA/BLA or NDA/BLA supplement, which may require the development of additional data or preclinical studies and clinical trials.

The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

• fines, warning letters or holds on post-approval clinical studies;

• applications, or suspension or revocation of product license approvals;

• injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Other U.S. Regulatory Laws

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, or HHS, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.

For example, in the United States, our business operations, including any sales, marketing and scientific and educational programs, also must comply with state and federal fraud and abuse laws, including the federal Anti-Kickback Statue and false claims laws; federal data privacy and security laws; and federal transparency laws related to payments and/or other transfers of value made to physicians and other healthcare professionals and teaching hospitals. The federal Anti-Kickback Statute makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Federal false claims laws, including the False Claims Act, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment of federal funds, and knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Many states have similar laws and regulations that may differ from federal law in significant ways, thus complicating compliance efforts. For example, states have anti-kickback and false claims laws that may be broader in scope than analogous federal laws and may apply regardless of payer. In addition, the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act,” created under the ACA and its implementing regulations, require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report

such information related to payments or other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses and their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information as well as their covered subcontractors, relating to the privacy, security, and transmission of such individually identifiable health information. In addition, state data privacy laws that protect the security of health information may differ from each other and may not be preempted by federal law.

Moreover, several states and local jurisdictions have enacted legislation requiring pharmaceutical manufacturers to, among other things, establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales and marketing activities, report information related to drug pricing, require the registration of sales representatives, and prohibit certain other sales and marketing practices.

Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of biologic and pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

Data Privacy

Privacy laws in the U.S. are also increasingly complex and changing rapidly. For example, the California legislature enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020. The CCPA requires covered companies to provide new disclosures to California residents, and honor their requests to access, delete and opt-out of certain sharing of their personal information. The CCPA provides for civil penalties for violations. Since the enactment of the CCPA, new privacy and data security laws have been proposed in more than half of the states and in the U.S. Congress, reflecting a trend toward more stringent privacy legislation in the U.S. The CCPA itself will expand substantially as a result of California voters approving a November 2020 ballot measure that adopted the California Privacy Rights Act of 2020, or CPRA, which will, among other things, create a new administrative agency to implement and enforce California’s privacy laws effective January 1, 2023.

In addition, the processing of personal data in connection with clinical trials in the EU must comply with comprehensive data protection requirements imposed by EU’s General Data Protection Regulation, or GDPR. GDPR, which took effect on May 25, 2018, imposes stringent data protection requirements and provides for penalties for noncompliance that can include bans on processing personal data and fines of up to the greater of 20 million euros or four percent of worldwide annual revenues. The GDPR requires organizations to give detailed disclosures about how they collect, use and share personal information; in most cases, obtain explicit consent to process sensitive personal information, such as health or genetic information; contractually require vendors to meet data protection requirements; maintain adequate data security measures; notify regulators and affected individuals of certain data breaches; meet extensive privacy governance and documentation requirements; and honor individuals’ data protection rights, including their rights to access, correct and delete their personal information.

European data protection laws, including the GDPR, also restrict the transfer of personal information from Europe, including the European Economic Area, the United Kingdom and Switzerland, to the U.S. and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal information. One of the primary safeguards allowing U.S. companies to import personal information from Europe has been certification to the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield frameworks administered by the U.S. Department of Commerce. However, the Court of Justice of the European Union adopted a decision in July 2020 invalidating the EU-U.S. Privacy Shield. The same decision also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, can lawfully be used for personal information transfers from Europe to the U.S. or most other countries. Authorities in Switzerland also have issued guidance raising similar questions about the Swiss-U.S. Privacy Shield and the Standard Contractual Clauses.

The failure to comply with any of these laws or regulatory requirements may result in possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant penalties, including administrative, civil, and criminal penalties, fines, imprisonment, disgorgement, injunctions, exclusion from participation in federal healthcare programs, integrity oversight and reporting obligations,requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

U.S. Health Care Reform

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (1) changes to our manufacturing arrangements; (2) additions or modifications to product labeling; (3) the recall or discontinuation of our products; or (4) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business. Further, the United States, there have been and continue to be a number of healthcare-related legislative initiatives that have significantly affected the healthcare industry. For example, there remain judicial challenges to certain aspects of the ACA. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was Tax Cuts and Jobs Act of 2017 (the Tax Act), the remaining provisions of the ACA are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The United States Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the United States Supreme Court has yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the United States Supreme Court ruling, other such litigation, and the healthcare form measures of the Biden administration will impact the ACA and our business. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Further, on November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. However, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

U.S. Patent-Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of any future product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits restoration of the patent term of up to five years as compensation for patent term lost during product development and FDA regulatory review process. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent-term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA or BLA plus the time between the submission date of an NDA or BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA or BLA.

KOD US Equity

KOD · 10-K · period ended 2020-12-31

ITEM 1. BUSINESS

KOD US Equity☆

KOD · 10-K · period ended 2020-12-31

ITEM 1. BUSINESS

KOD US Equity