What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-10 compared with 2020-05-11 · 238 added, 112 removed, 200 unchanged (64% of the section changed)

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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 retinopathy, or DR, including diabetic macular edema, or DME, and macular edema due to retinal vein occlusion, or RVO.

In our ongoing Phase 1b clinical study, in which enrollment is complete, we have administered multiple doses of KSI-301 to treatment-naïve patients with wet AMD, DME or RVO, and we continue to observe promising safety, efficacy, and clinical durability in the emerging data in each of the retinal diseases under study.

We believe the data support an acceleration of efforts to bring KSI-301 to the market in these retinal diseases and that the data lend confidence to the design of our current and planned pivotal studies of KSI-301.

In our ongoing Phase 1b clinical study, in which enrollment is complete, we have administered multiple doses of KSI-301 to treatment-naïve patients with wet AMD, DME or RVO, and we continue to observe promising safety, efficacy, and clinical durability data emerging in each of the retinal diseases under study.

We believe these clinical studies, if successful, may demonstrate a meaningfully differentiated clinical profile of KSI-301 as compared to current therapies, and we also believe that this profile would allow KSI-301 to compete effectively in the evolving commercial and product landscape.

The potential clinical (and thus commercial/competitive) advantages of a long-acting retinal therapeutic such as KSI-301 go well beyond fewer and less frequent injections over time and also include the potential for patients to better retain their vision over the long term due to fewer missed treatments or drug holidays resulting from more manageable treatment schedules.

Moreover, a longer-acting medicine allows patients with vision-threatening diseases to remain on effective treatment even in context of disruptions in the ordinary course as well as extraordinary disruptions such as that exemplified by the COVID-19 pandemic, where more frequent clinic visits may not be possible or allowed in certain regions or countries.

Based on the encouraging data that continue to be observed in our Phase 1b study, we are planning to expand the KSI-301 clinical pivotal program in the second half of 2020, and we are also entering into the manufacturing-related commitments necessary for KSI-301’s commercial scale-up and BLA submission.

We believe the intersection of these clinical and manufacturing trajectories are on track per our “2022 Vision” to submit a single BLA for wAMD, DME and RVO in calendar year 2022.

In 2019, we completed an end of phase 2 meeting with the U.S.

Food and Drug Administration, or FDA, where we agreed on the order and number of clinical studies required to support the licensure of KSI-301 in wet AMD, DME, RVO and non-proliferative DR (NPDR without DME).

Moreover, a longer-acting medicine allows patients with vision-threatening diseases to remain on effective treatment even in context of treatment disruptions in the ordinary course (such as missed visits due to travel or concurrent illnesses), as well as extraordinary disruptions of regular treatment such as that exemplified by the COVID-19 pandemic, where more frequent clinic visits may not be possible or allowed in certain regions or countries.

Based on the encouraging data that continue to be observed in our Phase 1b study, we are planning to expand the KSI-301 clinical pivotal program in the second half of 2020, and we have entered into the manufacturing-related commitments necessary for KSI-301’s commercial scale-up and BLA submission.

We believe the intersection of these clinical and manufacturing activities remain on track per our “2022 Vision” to submit a single BLA for wet AMD, DME and RVO in calendar year 2022.

In 2019, we completed an End of Phase 2 meeting with the FDA where we agreed on the order and number of clinical studies required to support the licensure of KSI-301 in wet AMD, DME, RVO and non-proliferative DR (NPDR without DME).

We confirmed that two studies conducted in a single indication are expected by FDA in order to demonstrate the initial safety and efficacy of KSI-301 and that one study each in the additional disease indications, if successful, can be used to support approval in the additional indications.

We currently plan to begin patient recruitment in our pivotal studies in DME, RVO and potentially DR (without DME) in 2020, and the pivotal study for wet AMD began recruiting in the third quarter of 2019.

Following our communications with FDA at the time of our end of phase 2 meetings as well as subsequent communications, we have further upgraded our pivotal study program and now intend to conduct two Phase 3 studies in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one Phase 2/3 study in wAMD (our ongoing DAZZLE study), one Phase 3 study in RVO, and one Phase 3 study in NPDR without DME.

By conducting our paired studies in DME, we are able to generate additional data on the efficacy, safety, and durability of KSI-301 in this area of high unmet need and commercial opportunity, while also narrowing the number of sites and countries required for successful enrollment of the entire pivotal program.

Following our communications with FDA at the time of our End of Phase 2 meetings as well as subsequent communications, we have further upgraded our pivotal study program and now intend to conduct two Phase 3 studies (GLEAM and GLIMMER) in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one Phase 2/3 study in wet AMD (our ongoing DAZZLE study), one Phase 3 study in RVO (BEACON), and one Phase 3 study in NPDR without DME (GLOW).

By conducting our paired studies in DME, we are able to generate additional data on the safety, efficacy and durability of KSI-301 in this area of high unmet need and commercial opportunity, while also narrowing the number of sites and countries required for successful enrollment of the entire pivotal program.

We expect a majority of research sites to be located in the US with contributions from EU countries and China.

Given that we are currently seeing continued new patient enrollment and low missed visit rates in our DAZZLE wAMD pivotal study in the US despite the ongoing COVID-19 pandemic, we believe refocusing the KSI-301 program helps minimize uncertainty with respect to clinical trial conduct during and through the COVID-19 pandemic and towards our “2022 Vision.” Additional specific reasons for running paired DME pivotals (and one RVO pivotal) include:

fewer countries and sites needed for two DME studies versus two RVO studies (avoiding the cost and logistical burdens of opening and supporting clinical trial sites that would only participate in RVO studies);

better oversight of operational execution (essentially all sites can concurrently enroll treatment naïve

patients in wAMD, DME and RVO) ;

lower probability of disruption;

Given that we are seeing strong new patient enrollment and low missed visit rates in our DAZZLE wet AMD pivotal study in the US despite the ongoing COVID-19 pandemic, we believe refocusing the KSI-301 program has helped minimize uncertainty with respect to clinical trial conduct during and through the COVID-19 pandemic and towards our “2022 Vision.” Additional specific reasons for running paired DME pivotals (and one RVO pivotal) include:

fewer countries and sites needed for two DME studies versus two RVO studies (avoiding the cost and logistical burdens of opening and supporting clinical trial

sites that would only participate in RVO studies );

better oversight of operational execution (essentially all sites can concurrently enroll treatment naïve patients in w et AMD, DME and RVO) ;

higher unmet need in DME versus RVO;

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Recent Developments

We have implemented various enhancements into our ongoing study execution to help ensure the safety of patients, physicians, study site staff and Kodiak operations team members in the current COVID-19 pandemic, including the use of remote study monitoring.

To date, we are seeing minimal disruption from COVID-19 in our ongoing clinical trials.

In DAZZLE, patient missed visit rates are less than 5%, and clinical trial sites continue to enroll new patients.

We have implemented various enhancements into our ongoing study execution to help ensure the safety of patients, physicians, study site staff and Kodiak operations team members during the ongoing COVID-19 pandemic, including the use of remote study monitoring.

To date, we have observed minimal disruption resulting from the evolving effects of the COVID-19 pandemic in our ongoing clinical trials.

In DAZZLE, patient missed visit rates remain low (less than 5%), and clinical trial sites continue to enroll new patients.

This is a testament to the serious diseases we are attempting to treat and is a vote of confidence from the patients, physicians and study sites partnering with us to advance KSI-301.

With $430.4 million in cash, cash equivalents and marketable securities and thoughtful management of our spending, we remain on a strong financial footing.

We delayed initiation of the next set of KSI-301 pivotal studies by one quarter from June to September 2020 in order to assess with physicians and business partners how best to minimize the impact of COVID-19 on clinical trial conduct.

But our 2022 Vision towards a BLA filing in the key retinal disease indications currently remains intact, and we have taken good advantage of this delay to upgrade the pivotal study plan for KSI-301.

We now intend to conduct two Phase 3 studies in DME, one Phase 2/3 study in wet AMD (our ongoing DAZZLE study), one Phase 3 study in RVO, and one Phase 3 study in non-proliferative DR.

Importantly, the data emerging in our Phase 1b study remain consistent with our observations detailed in February of this year, and we plan to provide another R&D update in July 2020, either virtually or at the American Society of Retina Specialists meeting.

With $417.1 million in cash, cash equivalents and marketable securities as of June 30, 2020, and thoughtful management of our spending, we remain on a strong financial footing.

We delayed initiation of the next set of KSI-301 pivotal studies by one quarter from June to September 2020 in order to assess how best to minimize the impact of COVID-19 on clinical trial conduct.

We have taken advantage of this time to further optimize the pivotal study plan for KSI-301.

We now intend to conduct two Phase 3 studies in DME (GLEAM and GLIMMER), one Phase 2/3 study in wet AMD (our ongoing DAZZLE study), one Phase 3 study in RVO (BEACON), and one Phase 3 study in non-proliferative DR (GLOW).

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

In March 2020, the World Health Organization declared a pandemic related to the global COVID-19 outbreak.

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The State of California, where our headquarters is located in the San Francisco Bay Area, declared a state of emergency and shelter-in-place order in March 2020 which remains in effect at this time.

Despite these orders, we and our key clinical and manufacturing partners have been largely able to continue to advance our operations.

These government actions and responses continue to evolve and are expected to continue into the summer.

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 the Company’s operations and its financial position.

The extent of the impact of COVID-19 will depend on certain 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.

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 outbreak towards achieving our “2022 Vision .

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.

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.

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To date, we are seeing low levels of patient missed visits (<5%).

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

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

We have taken steps in line with guidance from the U.S.

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In particular, the Company has implemented remote work arrangements for non-essential employees since March 17, 2020.

We are working closely with our clinical trial sites to monitor and attempt to minimize the potential impacts of the evolving COVID-19 outbreak on patient enrollment, continued participation of patients already enrolled in our clinical studies, protocol compliance, data quality, and overall study integrity.

We are working closely with our clinical trial sites to monitor and attempt to minimize the potential impacts of the evolving COVID-19 pandemic on patient enrollment, continued participation of patients already enrolled in our clinical studies, protocol compliance, data quality, and overall study integrity.

Some specific actions we have taken in the United States include the use of remote study monitoring, temporarily increasing study site budget overhead rates, providing additional transportation service options for patients to attend study site visits and focusing on new patient enrollment only at study sites with appropriate backup resource plans in place and where the local COVID-19 situation allows.

In the months of March and April 2020, the rate of missed study visits remained <5%.

Since the month of March 2020, the rate of missed study visits has remained <5%.

As of now, we have not experienced significant delays to our ongoing or planned clinical trials;

however, this could change rapidly depending on the dynamics of the pandemic.

In the first quarter of 2020, we activated DAZZLE study sites in the EU, but due to the pandemic we deferred study patient screening.

We expect to begin patient recruitment activities at certain sites in the EU in the second quarter of 2020 as guided by the local COVID-19 situation.

To minimize the potential for disruption of our planned pivotal studies of KSI-301, we are currently refining the study designs, including sample size and country selection.

We currently plan to start enrollment of our pivotal DME and RVO studies in the late third quarter of 2020 or early fourth quarter of 2020, and the pivotal study in non-proliferative DR in the fourth quarter of 2020, dependent on the continued evolution of the COVID-19 pandemic.

With these planned pivotal study starts, we believe we are still on track to achieve our “2022 Vision” objective of filing a single BLA in 2022 for KSI-301 in wAMD, DME and RVO.

In June 2020, we restarted patient recruitment activities at certain sites in EU countries.

DAZZLE study sites in the EU were activated in the first quarter of 2020, but we deferred study patient enrollment until June due to the pandemic.

To minimize the potential for disruption of our planned pivotal studies of KSI-301, we have refined our study designs, including sample size and country selection.

We currently plan to start enrollment of our pivotal DME (GLEAM and GLIMMER) and RVO (BEACON) studies in the third quarter of 2020, and the pivotal study in non-proliferative DR (GLOW) in the fourth quarter of 2020, dependent on the continued evolution of the COVID-19 pandemic.

With these planned pivotal study starts, we believe we are still on track to achieve our “2022 Vision” objective of filing a single BLA in 2022 for KSI-301 in wet AMD, DME and RVO.

Our supply chain and manufacturing activities remain intact, and we do not currently anticipate disruptions to our supply of KSI-301 due to COVID-19.

We will continue to monitor the COVID-19 situation closely.

The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change.

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.

Our bispecific conjugate KSI-501 inhibits both interleukin 6, or IL-6, and Vascular Endothelial Growth Factor, or VEGF.

Tissue based IL-6 mediated inflammatory response syndromes have been associated with severe COVID-19 disease.

As such, IL-6 blockade is being explored as a novel therapeutic strategy in patients with severe COVID-19 disease and promising results have been recently reported in COVID-19 patients with critical illness.

Similarly, tissue specific edema such as pulmonary edema is implicated in severe COVID-19 disease.

As such, IL-6 blockade is being explored as a novel therapeutic strategy in patients with COVID-19 disease.

Similarly, tissue specific edema such as pulmonary edema is implicated in severe and critical COVID-19 disease.

VEGF in the alveolar space is a potent inducer of vascular permeability and resultant pulmonary edema which plays a pathological role in lung dysfunction.

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Ancillary benefits of this acceleration include the use of GMP material for KSI-501 toxicology program and a more predictable IND submission and First in Human timeline for KSI-501 in patients with retinal vascular diseases featuring an inflammatory component.

Funding Agreement

On December 1, 2019, we and our subsidiary, Kodiak Sciences GmbH, entered into a funding agreement with Baker Bros.

Advisors, or BBA, pursuant to which BBA purchased the right to receive a capped 4.5% royalty on future net sales of KSI-301 in exchange for $225.0 million in committed development funding payable to us.

Unless earlier terminated or re-purchased by us, the royalty terminates upon the date that BBA has received an aggregate amount equal to 4.5 times the funding amount paid to us.

On February 4, 2020, BBA paid us the first $100.0 million of the funding amount, and the remaining $125.0 million of the funding amount will be paid following the achievement of 50% enrollment in the planned 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.

Follow-On Offering

On December 6, 2019, we completed a follow-on equity offering and issued and sold 6,900,000 shares of the Company’s common stock at a price to the public of $46.00 per share.

The gross proceeds from this offering were $317.4 million, resulting in aggregate net proceeds of $297.6 million after deducting underwriting discounts and commissions and other offering costs payable by us.

Proceeds from the royalty funding agreement together with our current cash, cash equivalents and marketable securities, which includes proceeds from the equity offering, are expected to advance the clinical programs for KSI-301 towards achieving our “2022 Vision” of a Biologics 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.

Business Highlights

Recent highlights of our activities included:

Optimized Pivotal Study Program:

We have finalized the design of our pivotal study program.

We intend to conduct two Phase 3 studies in DME (GLEAM and GLIMMER) to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one study in wet AMD (our ongoing DAZZLE study), one study in RVO (BEACON), and one study in NPDR without DME (GLOW).

Each study protocol design has been optimized based on Phase 1b data and experience and will include the same patient populations, tighter dosing interval ranging, tighter disease control, decreased subjectivity and high statistical power for non-inferiority.

DAZZLE Study Progress:

Recruitment into our DAZZLE pivotal study in wet AMD was robust – a potential reflection of the enthusiasm for KSI-301 on the part of clinical investigators and patients.

As of May 8, 245 patients have been enrolled in DAZZLE.

We slowed U.S.

enrollment beginning in March 2020 and deferred EU patient recruitment due to the COVID-19 pandemic.

As of July 30, 2020, over 375 patients have been enrolled in DAZZLE.

Existing patients continue to participate with few missed visits to date, and new patients continue to be enrolled in DAZZLE.

As of late April 2020, the number of weekly new patient screenings and enrollment at DAZZLE sites in the US is increasing.

EU patient enrollment commenced in June 2020.

The Independent Data Monitoring Committee responsible for safeguarding the interests of DAZZLE study participants, assessing safety during the trial, and monitoring overall study conduct met in early May 2020 and recommended that DAZZLE should continue without modification.

Phase 1b Data Presentation:

Updated safety and efficacy results 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 Annual Meeting in February 2020.

Updated safety and efficacy results from our ongoing Phase 1b trial of KSI-301 in patients with treatment naïve wet AMD, DME, or RVO were presented at the American Society of Retina Specialists, or ASRS, 2020 Virtual Annual Meeting in July 2020.

We believe the data continue to support the highly differentiated “anti-VEGF Generation 2.0” profile of KSI-301.

We intend to continue presenting data updates from Phase 1b throughout 2020, and if meetings or congresses are canceled due to COVID-19, we anticipate one or more virtual research and development, or R&D, webinars where new data will be presented.

Our next planned R&D update is anticipated for July 2020 along with the American Society of Retina Specialists meeting.

Further Extension of the Phase 1b Study:

Based on positive feedback from investigators and a desire to continue to generate long-term safety and efficacy outcomes data with KSI-301, we are amending the Phase 1b program to include an additional 18 months of treatment and follow-up per patient, for a total of up to 36 months.

Optimized Pivotal Study Program:

We have further optimized and improved our pivotal study program and now intend to conduct two Phase 3 studies in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one study in wAMD (our ongoing DAZZLE study), one study in RVO, and one study in NPDR without DME.

The paired DME studies introduce numerous operational benefits and generate additional data on the safety, efficacy and durability of KSI-301 in this area of high unmet need and commercial opportunity, while also narrowing the number of sites and countries required for successful enrollment of the entire pivotal program.

We intend to continue presenting data updates from Phase 1b.

Charles Bancroft Appointed to Board of Directors:

Charles Bancroft, formerly Chief Financial Officer of Bristol Myers Squibb (BMS), joined Kodiak’s Board of Directors as chair of our audit committee and member of our nominating and governance committee in April 2020.

Charles recently retired from a successful career at BMS where he held a number of leadership roles in commercial, strategy and finance.

Charles brings financial and management experience that will be vital to Kodiak as the company continues to scale and build its manufacturing and commercial capabilities.

Kodiak and Kodiak Sciences Trademarks Registered to Kodiak Sciences:

The company received full registration of its trademarks “Kodiak” and “Kodiak Sciences” from the U.S.

Patent and Trademark Office for the exclusive use of Kodiak Sciences Inc.

and its subsidiaries.

Obtaining exclusive trademark rights over “Kodiak” and “Kodiak Sciences” strengthens recognition of Kodiak as a leader in the research and development of medicines to treat and prevent retinal diseases.

Based on the emerging clinical data, our productive EOP meeting with the FDA, and our substantive financing events, we are accelerating our BLA- and pre-commercial manufacturing activities to match the clinical timelines for KSI-301, with the goal of demonstrating a meaningfully-differentiated ( i.e., first line) clinical profile in each of wet AMD, DME, RVO, and DR as compared to currently-marketed medicines.

Our current cash, cash equivalents and marketable securities which includes the net proceeds from the December 2019 public offering, and together with the royalty funding agreement, 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.

Bancroft recently retired from a successful career at BMS where he held a number of leadership roles in commercial, strategy and finance.

Bancroft brings financial and management experience that will be vital to Kodiak as the company continues to scale and build its manufacturing and commercial capabilities.

Commercial Manufacturing Progress:

We 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 2021, the Lonza-Kodiak Ibex facility will provide Kodiak with the facility needed for commercial-scale manufacturing of KSI-301.

The timing of this expanded partnership is designed to support Kodiak’s BLA submission timeline in 2022, and 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.

Completed Lease Agreement for Kodiak’s New Corporate Headquarters:

We have leased approximately 82,662 square feet located at 1200 Page Mill Road, Palo Alto, California and approximately 72,812 square feet located at 1250 Page Mill Road, Palo Alto, California.

These newly leased buildings will serve as Kodiak’s corporate headquarters for office and laboratory space.

We also leased approximately 10,750 square feet at Rottenstrasse 5 in Visp, Switzerland, for manufacturing support and supervision.

Our current cash, cash equivalents and marketable securities 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.

Where Kodiak is Today

KSI-301 is Well Characterized:

KSI-301 has been assessed in more than 325 patients with over 150+ patient-years of exposure.

With a majority of patients in the Phase 1b clinical study achieving six months or longer between doses in wet AMD and DME and four months or longer between doses in RVO, KSI-301’s clinical durability continues to be supported with maturing data and continues to surpass the high expectations we had for KSI-301 when we first initiated clinical studies.

With over 540 injections administered in the Phase 1/1b program and approximately 1,100 injections administered across the ongoing KSI-301 development program in total, we remain very pleased with the current clinical profile of KSI-301.

Notably, KSI-301 continues to demonstrate a safety profile that is tracking with standard of care anti-VEGF agents.

When and if we submit our planned single BLA in wet AMD, DME and RVO, we expect to have safety, efficacy and durability data on KSI-301 treatment in over 1,000 patients in concurrent pivotal studies.

High M argin of Confidence Designed into Pivotal Clinical Trials:

T he exploratory Phase 1b study was designed to push KSI-301 in terms of dosing intervals and provide us with a broad view of our product’s clinical profile .

The data we are seeing in the Phase 1b study provide confidence that we can demonstrate a strong clinical profile in registrational studies .

W e have applied the learnings from the exploratory Phase 1b study to further optimize each of our pivotal study protocols to build in a high margin of confidence and predictability.

Investing with Conviction Commensurate with the Opportunity:

There remains a great unmet need among patients receiving anti-VEGF therapies today.

Despite the promise of today’s medicines as demonstrated in their registrational clinical trials, visual gains are not maintained.

In the real world, patients cannot be treated frequently enough and are over-extended between doses.

Under treatment leads to disease progression and permanent retinal damage, and high-intensity treatment regimens lead to patient and caregiver treatment fatigue and/or abandoning of treatment.

A new, better, longer-lasting medicine is required to shift the curve, to reset what has been appropriately called an “epidemic of preventable blindness”.

We believe KSI-301 stands the best chance among treatments currently in development to directly address this great need.

We have made significant progress with enrollment in our pivotal study in wet AMD (DAZZLE), and we expect to reach our desired enrollment cap in the US in the third quarter of 2020.

We are also on track to initiate pivotal studies in DME (GLEAM and GLIMMER) and RVO (BEACON) in the third quarter of 2020.

We are moving forward with the preparations for a study in non-proliferative diabetic retinopathy (GLOW) but are currently assessing the timing of study initiation in light of the impact of COVID-19 on this less acute yet high unmet need indication.

Kodiak remains focused on thoughtful execution of our KSI-301 pivotal program, the requisite manufacturing efforts, the regulatory strategy and the pre-commercial readiness.

We continue to build our team, and we are thankful for the positive interest in KSI-301 and our ABC Platform by the retina community.

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 inception with 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 investors who understand what is needed to build, invest, and execute commensurate with the opportunity.

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

We believe that we can achieve our “2022 Vision” of a BLA submission and initial FDA approval for KSI-301 in wet AMD, DME, RVO and DR with a total of five pivotal trials— two in DME, one in wet AMD, one in RVO and one in DR without DME.

Consequently, we now intend to initiate at least four US/EU-based pivotal trials in 2020 – two matched studies in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one in patients with either branch RVO, or BRVO, or central RVO, or CRVO, and one in non-proliferative DR without DME.

We believe we remain on track to achieve our “2022 Vision” of a BLA submission and initial FDA approval for KSI-301 in wet AMD, DME, RVO and (potentially) DR in 2022 with a total of five pivotal trials— two in DME (GLEAM and GLIMMER), one in wet AMD (DAZZLE), one in RVO (BEACON) and one in DR without DME (GLOW).

We intend to initiate at least three additional pivotal trials in 2020 – two matched studies in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, and one in patients with RVO.

In addition, we may potentially initiate a pivotal study in DR in the fourth quarter of 2020.

These studies, together with our ongoing pivotal study in wet AMD, will be the basis of our intended BLA and supplemental BLA, or sBLA, 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 in a supplemental BLA in the United States.

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 inhibitors for the high prevalence multifactorial retinal diseases dry AMD and the neurodegenerative aspects of glaucoma.

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

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 2020, 2021, 2022 and 2023, along with the important milestones achieved in 2019 that support the accelerated development program:

Our “2022 Vision” is built on the following accelerated development strategy, which follows from our FDA End of Phase 2 meeting and recent additional discussions.

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 current evolving status of the COVID-19 pandemic:

Ongoing Phase 1b Data Continue to Validate KSI-301’s Differentiated Profile

We have continued to make progress with our studies of KSI-301, and the maturing durability data we have observed to date in the Phase 1b study continue to surpass our expectations.

We now have over 100 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 f igures below present additional the most recent data on durability and efficacy outcomes from the ongoing Phase 1b study presented at the ASRS 2020 Virtual Annual Meeting , held in July 2020 .

Across all three diseases under study, improvements in vision and retinal anatomy were observed through 44 weeks of patient follow-up, with stability in OCT and BCVA over time in the monthly follow-up intervals following the three mandatory loading doses.

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 data below are from the 31 wet AMD patients who reached the week 44 visit prior to the ASRS meeting data cutoff date of June 9, 2020.

Improvements in BCVA and OCT from the initial treatments are noted, as expected for an anti-VEGF.

From baseline to week 12, patients gained an average of 6.7 letters off their good starting base of approximately 65 letters and an improvement in OCT CST of 93 microns.

In the period between week 12 and week 44, the treatment effect is maintained both in terms of BCVA and OCT with just an average of 1.32 injections per patient, and notably 44% of those treatments were the mandatory every 6-month doses.

58% of the 31 patients here received their first retreatment at week 32, six months after the last loading dose.

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, t he BCVA and OCT CST curves are similar in shape to those of the full cohort .

E xcluding the high PED patients, the OCT CST values are lower at baseline and over time, and the standard error of the mean (SEM) error bars are narrower.

T hose four patients with high PEDs thus pull the overall average CST value up.

Excluding those four patients, the average retinal center subfield thickness is around 300 micron s after initiation of treatment with KSI-301 .

Overall, 92% of our wet AMD patients have achieved a time to first retreatment of three months or longer.

Of these patients, 82% went four months or longer , and most patients have not received their first retreatment until five to six months after the last loading dose.

49% reached the six - month cap without retreatment after the initial loading doses.

Remarkably, 68%, of these wet AMD patients have achieved a six -month treatment interval at least once during follow-up.

As this is an anti-VEGF treatment naïve population, there is no pre-selection for VEGF responders or patients who might require less frequent dosing.

It is reassuring to see that as the data set matures, the vision, OCT and durability outcomes have remained consistent.

For example, when comparing the outcomes presented at the Angiogenesis meeting earlier in 2020 versus the data presented in July 2020 at the ASRS virtual meeting, t he durability proportions remain stable, as do the visual acuity and OCT outcomes.

Diabetic M acular E dema (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 18 DME patients who reached the week 44 visit prior to the data cutoff date.

These patients had good starting vision, approximately 70 letters.

They experienced a visual acuity increase after 3 loading doses and maintained a gain of 6.6 letters with a mean of just 0.61 retreatments.

Notably, two thirds of patients never required retreatment during this nine-month follow-up period.

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 .

So far, 97% of DME patients have gone three months or longer before their first retreatment ;

o nly one patient of 33 required their first retreatment at two months after the loading doses.

Of these patients, 76% have gone four months or longer, and 70% five months or longer before their first treatment.

Further, 67% have gone six-months or longer – as there is no cap to the treatment interval in the DME cohort.

Almost half of the patients, or 45%, have not required retreatment to date, denoted by the purple bars.

Some of these patients have gone for a year without needing any additional treatment.

The data set has also remained consistent over time, comparing the follow-up data available at the Angiogen e sis meeting earlier in 2020 to the data presented at ASRS.

Retinal Vein Occlusion (RVO)

KSI-301 efficacy in treatment naïve RVO is also measured as change from baseline in BCVA and OCT CST.

The 33 RVO patients that completed their week 44 visit began with a lower visual acuity baseline of approximately 55 letters, typical of this disease.

After three loading doses, their visual acuity substantially improved, with a 22.4 letter improvement at week 44, which is over four lines of vision gained on the standardized eye chart.

The vision gain was maintained with an average of just 1.33 injections, with only a third of patients requiring more than one retreatment in this period.

A sustained OCT response with a decrease of 370 microns was also noted.

In this swim lane plot of the durability of individual patients with RVO, the disease with arguably the highest VEGF-load, the bars in pink and orange now denote retreatment intervals of four months or longer and two months or shorter, respectively.

94% of RVO patients, 31 of the 33 patients, have gone two months or longer before their first retreatment.

Only 6% of patients had their first retreatment at one month after the loading doses.

66% had their first retreatment three months or later since the loading doses, and 56% achieved a first interval of four months or longer.

Remarkably, given that many RVO patients require monthly therapy for the best results with existing medicines, 71% of patients have achieved a four month or longer interval at least once during follow-up .

Looking at the recent efficacy and durability data compared to where they stood earlier this year, we see the consistency in the maturing Phase 1b data, both with longer follow-up and more patients.

In particular , the OCT and VA outcomes were stable from week 24, presented at Angiogenesis, to week 44, presented at the recent ASRS meeting .

Safety of KSI-301 Injections

We believe the safety profile of KSI-301 continues to be very encouraging.

Now with nearly 550 injections given in the Phase 1a/1b program, and with patients followed for as long as 18 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 drug-related, and they are typical of the systemic SAEs expected in these patient populations.

There are only two events (previously described) of intraocular inflammation resulting in a rate of 0.37% per injection or 1.5% on a per-patient basis.

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 has gained 30 letters or 6 lines of vision as of their last visits.

KSI-301 Pivotal Study Design s

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

Wet AMD DAZZLE Study

DAZZLE 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

We will run two Phase 3 studies in parallel with identical design.

In each of the two studies, called GLEAM and GLIMMER, 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.

Approximately 450 patients will be randomized per study, and 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 than in DAZZLE 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.

I n 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 will again employ 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 study in patients with RVO (BEACON), 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 week 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, t he 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 a re in Phase 1b, with the OCT and BCVA measured against the best previous measurements ;

subjectivity is also reduced.

Overall, we believe that the continued maturation of the safety, efficacy, and durability data of KSI-301, as shown in the Phase 1b study, support our efforts to bring KSI-301 to the market as a potentially disruptive ‘Generation 2.0’ anti-VEGF in these retinal diseases, and that the data lend confidence to the design of our current and planned pivotal studies of KSI-301.

Since inception in June 2009, we have devoted substantially all of our resources to discovering and developing product candidates and manufacturing processes, building our ABC Platform and assembling our core capabilities in drug development for ophthalmic disease.

We plan to continue to use third-party contract research organizations, or CROs, to carry out our preclinical and clinical development.

We plan to continue to use third-party clinical research organizations, or CROs, to carry out our preclinical and clinical development.

We rely on third-party contract manufacturing organizations, or CMOs, to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates.

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We do not have any products approved for sale and have not generated any product revenue since inception.

We h ave funded our operations primarily through equity securities .

I n October 2018, we completed our initial public offering, or IPO.

We have funded our operations primarily through equity securities.

In October 2018, we completed our initial public offering, or IPO.

In December 2019, we completed a follow-on offering.

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and hire additional personnel.

In addition, we expect to continue incurring costs associated with operating as a public company.

Our net loss was $24.4 million for the three months ended March 31, 2020.

As of March 31, 2020, we had an accumulated deficit of $182.5 million.

Our net loss was $50.4 million for the six months ended June 30, 2020.

As of June 30, 2020, we had an accumulated deficit of $208.5 million.

Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates.

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If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of KSI-301 for wet AMD, RVO, DME or DR without DME or delay our efforts to advance and expand our product pipeline.

As of March 31, 2020, we had cash, cash equivalents and marketable securities of $430.4 million.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $417.1 million.

Components of Operating Results

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and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including stock-based compensation, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with requirements of the stock exchange listing and the Securities and Exchange Commission, or SEC, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income

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Three Months Ended

(in thousands, except percentages)

Six Months Ended

Operating expenses

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Other income (expense), net

Percentage is not meaningful

Research and Development Expenses

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Three Months Ended

(in thousands)

Six Months Ended

ABC Platform external expenses (1)

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ABC Platform external expenses primarily relates to manufacturing of biopolymer intermediate drug substance which can be used with multiple product candidates.

These expenses are primarily for services provided by CMOs and CROs.

These expenses are primarily for services provided by CMOs.

KSI-301 program external expenses relates to development of KSI-301, including manufacturing and clinical trial costs.

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Other research and development expenses includes direct costs related to research and development activities other than those listed above.

ABC Platform external expenses remained relatively constant during the three months ended March 31, 2020, as compared to 2019.

These expenses were primarily driven by manufacturing runs to support our product candidate pipeline.

KSI-301 program external expenses increased $10.5 million during the three months ended March 31, 2020, as compared to 2019.

The increase was primarily due to clinical trial costs as well as manufacturing runs for KSI-301.

Our pivotal DAZZLE clinical study dosed the first patient in October 2019 and over 200 patients were enrolled as of March 31, 2020.

KSI-501 program external expenses decreased $0.3 million during the three months ended March 31 , 2020, as compared to 2019, due to timing of manufacturing activities from ongoing research and development of KSI-501.

Payroll and personnel expenses increased $3.4 million during the three months ended March 31 , 2020, as compared to 2019, due to increased headcount and stock-based compensation expense.

Other research and development expenses increased $0.7 million during the three months ended March 31 , 20 20 , as compared to 201 9 , due to increased costs on our early research pipeline .

ABC Platform external expenses increased $1.5 million and $1.7 million during the three and six months ended June 30, 2020, respectively, as compared to 2019.

The increase was primarily driven by manufacturing runs to support our product candidate pipeline.

KSI-301 program external expenses increased $5.8 million and $16.3 million during the three and six months ended June 30, 2020, respectively, as compared to 2019.

The increase was primarily due to clinical trial costs to support ongoing trials and planned trials, as well as manufacturing runs for KSI-301.

Our pivotal DAZZLE clinical study dosed the first patient in October 2019 and over 375 patients were enrolled as of July 30, 2020.

KSI-501 program external expenses remained relatively constant during the three and six months ended June 30, 2020, as compared to 2019.

Payroll and personnel expenses increased $4.0 million and $7.4 million during the three and six months ended June 30, 2020, respectively, as compared to 2019, due to increased headcount and stock-based compensation expense.

Other research and development expenses increased $0.4 million and $1.1 million during the three and six months ended June 30, 2020, respectively, as compared to 2019, due to increased costs on our early research pipeline.

General and Administrative Expenses

General and administrative expenses increased $2.8 million during the three months ended March 31, 2020 as compared to 2019.

The increase in general and administrative expenses was primarily attributable to an increase of $0.4 million in professional services related to accounting, audit, legal and consulting services and costs associated with operating as a public company, and an increase of $2.3 million in salaries, including stock-based compensation.

Interest Income

Interest income increased $0.7 million during the three months ended March 31, 2020 as compared to 2019, which was mainly attributable to interest income earned on increased balances of cash, cash equivalents and marketable securities.

Other Income (Expense), Net

Other income (expense), net increased $0.1 million during the three months ended March 31, 2020 as compared to 2019, which was mainly attributable to accretion income on marketable debt securities offset by amortized issuance costs from the liability related to the future sale of royalties to BBA in 2020 .

General and administrative expenses increased $3.2 million and $6.1 million during the three and six months ended June 30, 2020, respectively, as compared to 2019.

The increase was primarily driven by increased headcount and stock-based compensation expense as well as professional services related to accounting, audit, legal and consulting services and costs.

Liquidity and Capital Resources;

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In addition, we entered into a royalty funding agreement and received an initial payment of $100.0 million in February 2020.

As of March 31, 2020, we had cash, cash equivalents and marketable securities of $430.4 million.

As of June 30, 2020, we had cash, cash equivalents and marketable securities of $417.1 million.

Future Funding Requirements

We have incurred net losses since our inception.

For the three months ended March 31, 2020, we had net loss of $ 24.4 million , and we expect to continue to incur additional losses in future periods.

As of March 31 , 2020, we had an accumulated deficit of $ 182.5 million.

For the six months ended June 30, 2020, we had net loss of $ 50.4 million , and we expect to continue to incur additional losses in future periods.

As of June 30, 2020, we had an accumulated deficit of $ 208.5 million.

We have based these estimates on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect.

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We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Moreover, we expect to continue incurring additional costs associated with operating as a public company.

We have based these estimates on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.

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We may also be required to sell or license rights to our product candidates in certain territories or indications to others that we would prefer to develop and commercialize ourselves.

The significant uncertainties caused by the COVID-19 global pandemic may also negatively impact our operations and capital resources.

We continue to monitor the impact of COVID-19 on our ability to continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products.

The significant uncertainties caused by the evolving effects of the COVID-19 pandemic may also negatively impact our operations and capital resources.

We and our key clinical and manufacturing partners have been able to continue to advance our operations, and we continue to monitor the impact of COVID-19 on our ability to continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products.

This pandemic may ultimately have a material adverse effect on our liquidity and operating plans, although we are unable to make any prediction with certainty given the spread and rapidly changing nature of the pandemic and the evolving global actions taken to contain and treat the novel coronavirus.

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The following table sets forth the primary sources and uses of cash for each of the periods presented below, in thousands:

Three Months Ended

Six Months Ended

(in thousands)

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Cash Flows from Operating Activities

The $10.7 million increase in cash used in operating activities for the three months ended March 31, 2020 as compared to 2019 was primarily driven by the increase in net loss during this period due to increased payroll and personnel expenses and manufacturing and clinical trial costs to support overall growth .

The $11.7 million increase in cash used in operating activities for the six months ended June 30, 2020 as compared to 2019 was primarily driven by the increase in net loss during this period due to increased payroll and personnel expenses and manufacturing and clinical trial costs to support overall growth.

Cash Flows from Investing Activities

The $43.3 million increase in cash used in investing activities for the three months ended March 31, 2020 as compared to 2019 was driven by the net purchase of marketable securities.

The $12.8 million decrease in cash used in investing activities for the six months ended June 30, 2020 as compared to 2019 was driven by the investment of funds from maturities of marketable securities into money market funds during 2020.

Cash Flows from Financing Activities

The $99.7 million increase in cash provided by financing activities for the three months ended March 31, 2020 as compared to 2019 was due to the proceeds from sale of future royalties to BBA.

The $100.2 million increase in cash provided by financing activities for the six months ended June 30, 2020 as compared to 2019 was due to the proceeds from sale of future royalties to BBA.

Contractual Obligations and Commitments

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We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

During the three months ended March 31, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020, except as otherwise described in Note 2 to our unaudited condensed consolidated financial statements included in this report .

During the six months ended June 30, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020, except as otherwise described in Note 2 to our unaudited condensed consolidated financial statements included in this report .

Off-Balance Sheet Arrangements

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A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is discussed under Note 2 to our unaudited condensed consolidated financial statements included in this report .

Quantitative and Qualitati ve Disclosures About Market Risk.

During the three months ended March 31, 2020, there were no material changes to our market risk disclosures as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020.

Quantitative and Qualitative Disclosures About Market Risk.

During the six months ended June 30, 2020, there were no material changes to our market risk disclosures as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis