Kodiak Sciences Inc. 10-Q

Item 1. Financial Statements (Unaudited). Kodiak Sciences Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) (Unaudited) June 30, 2020 December 31, 2019 Assets Current assets: Cash and cash equivalents $ 269,836 $ 211,797 Marketable securities 147,298 124,684 Prepaid expenses and other current assets 1,880 2,749 Total current assets 419,014 339,230 Marketable securities — 11,696 Restricted cash 140 140 Property and equipment, net 1,106 996 Operating lease right-of-use asset 1,591 1,790 Other assets 7,517 5,014 Total assets $ 429,368 $ 358,866 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 7,034 $ 2,619 Accrued and other current liabilities 11,273 8,658 Operating lease liability 462 434 Total current liabilities 18,769 11,711 Operating lease liability, net of current portion 1,263 1,501 Liability related to sale of future royalties 99,863 — Other liabilities 276 295 Total liabilities 120,171 13,507 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2020 and December 31, 2019 — — Common stock, $ 0.0001 par value, 490,000,000 shares authorized at June 30, 2020 and December 31, 2019; 44,667,016 and 44,413,404 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 5 5 Additional paid-in capital 517,120 503,475 Accumulated other comprehensive income 594 10 Accumulated deficit ( 208,522 ) ( 158,131 ) Total stockholders’ equity 309,197 345,359 Total liabilities and stockholders’ equity $ 429,368 $ 358,866 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Kodiak Sciences Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating expenses Research and development $ 20,557 $ 8,838 $ 40,727 $ 14,561 General and administrative 6,222 2,976 11,775 5,713 Total operating expenses 26,779 11,814 52,502 20,274 Loss from operations ( 26,779 ) ( 11,814 ) ( 52,502 ) ( 20,274 ) Interest income 698 331 1,906 793 Interest expense ( 6 ) ( 2 ) ( 13 ) ( 6 ) Other income (expense), net 88 100 218 118 Net loss $ ( 25,999 ) $ ( 11,385 ) $ ( 50,391 ) $ ( 19,369 ) Net loss per common share, basic and diluted $ ( 0.58 ) $ ( 0.31 ) $ ( 1.12 ) $ ( 0.52 ) Weighted-average common shares outstanding used in computing net loss per common share, basic and diluted 44,969,795 37,294,853 44,897,269 37,271,638 Other comprehensive income Change in unrealized gains related to available-for-sale debt securities, net of tax 105 6 584 12 Total other comprehensive income 105 6 584 12 Comprehensive loss $ ( 25,894 ) $ ( 11,379 ) $ ( 49,807 ) $ ( 19,357 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Kodiak Sciences Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share and per share amounts) (Unaudited) Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Income Deficit Equity Balances at December 31, 2019 44,413,404 $ 5 $ 503,475 $ 10 $ ( 158,131 ) $ 345,359 Issuance of common stock upon exercise of stock options 39,297 — 159 — — 159 Stock-based compensation expense — — 6,082 — — 6,082 Other comprehensive income — — — 479 — 479 Net loss — — — — ( 24,392 ) ( 24,392 ) Balances at March 31, 2020 44,452,701 5 509,716 489 ( 182,523 ) 327,687 Issuance of common stock upon exercise of stock options 203,373 — 720 — — 720 Issuance of common stock upon vesting of restricted stock units, net of taxes withheld 10,942 — ( 206 ) — — ( 206 ) Stock-based compensation expense — — 6,890 — — 6,890 Other comprehensive income — — — 105 — 105 Net loss — — — — ( 25,999 ) ( 25,999 ) Balances at June 30, 2020 44,667,016 5 517,120 594 ( 208,522 ) 309,197 Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Income Deficit Equity Balances at December 31, 2018 36,829,857 $ 4 $ 197,595 $ — $ ( 110,766 ) $ 86,833 Issuance of common stock upon exercise of stock options 80,000 — 83 — — 83 Stock-based compensation expense — — 1,157 — — 1,157 Other comprehensive income — — — 6 — 6 Net loss — — — — ( 7,984 ) ( 7,984 ) Balances at March 31, 2019 36,909,857 4 198,835 6 ( 118,750 ) 80,095 Issuance of common stock upon exercise of stock options 21,284 — 59 — — 59 Stock-based compensation expense — — 1,244 — — 1,244 Other comprehensive income — — — 6 — 6 Net loss — — — — ( 11,385 ) ( 11,385 ) Balances at June 30, 2019 36,931,141 4 200,138 12 ( 130,135 ) 70,019 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Kodiak Sciences Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six Months Ended June 30, 2020 2019 Cash flows from operating activities Net loss $ ( 50,391 ) $ ( 19,369 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 216 260 Stock-based compensation 12,972 2,401 Amortization (accretion) of premium (discount) on marketable securities ( 231 ) ( 118 ) Amortization of operating lease right-of-use asset 199 182 Amortization of issuance costs 22 — Changes in assets and liabilities: Prepaid expenses and other current assets 933 ( 152 ) Other assets ( 2,305 ) ( 4,059 ) Accounts payable 4,338 1,342 Accrued and other current liabilities 2,620 ( 459 ) Operating lease liability ( 210 ) ( 185 ) Net cash used in operating activities ( 31,837 ) ( 20,157 ) Cash flows from investing activities Purchase of property and equipment ( 249 ) ( 126 ) Purchase of marketable securities ( 86,317 ) ( 35,066 ) Maturities of marketable securities 76,150 12,000 Net cash used in investing activities ( 10,416 ) ( 23,192 ) Cash flows from financing activities Proceeds from issuance of common stock upon options exercise 879 114 Payments for restricted stock units, net of taxes withheld ( 206 ) — Proceeds from sale of future royalties, net of issuance costs 99,643 — Principal payments of capital lease ( 5 ) ( 34 ) Principal payments of tenant improvement allowance payable ( 19 ) ( 18 ) Net cash provided by financing activities 100,292 62 Net increase (decrease) in cash, cash equivalents and restricted cash 58,039 ( 43,287 ) Cash, cash equivalents and restricted cash, at beginning of period 211,937 88,394 Cash, cash equivalents and restricted cash, at end of period $ 269,976 $ 45,107 Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets Cash and cash equivalents $ 269,836 $ 44,967 Restricted cash 140 140 Cash, cash equivalents and restricted cash in consolidated balance sheets $ 269,976 $ 45,107 Supplemental disclosures of non-cash investing and financing information: Operating lease right-of-use asset obtained in exchange for operating lease liability $ — $ 2,163 Purchase of property and equipment under accounts payable $ 77 $ 137 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data) 1. The Company Kodiak Sciences Inc. (the “Company”) is a biopharmaceutical company committed to researching, developing and commercializing transformative therapeutics to treat high prevalence retinal diseases in the United States and additional international markets. The Company devotes substantially all of its resources to the research and development of its product candidates including activities to conduct clinical studies of its product candidates, manufacture product candidates and provide general and administrative support for these operations. Liquidity As of June 30, 2020, the Company had cash, cash equivalents and marketable securities of $ 417.1 million. Although the Company has incurred significant operating losses since inception and expects to continue to incur operating losses and negative operating cash flows for the foreseeable future, the Company believes that the cash, cash equivalents and marketable securities will be sufficient to meet the anticipated operating and capital expenditure requirements for the 12 months following the date of this Form 10-Q. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applicable to interim periods. The condensed consolidated financial statements , in the opinion of management, include all normal and recurring adjustments necessary to present fairly the Company's financial position and results of operations for the reported periods. These condensed consolidated financial statements have been prepared on a basis substantially consistent with, and should be read in conjunction with the audited financial statements for the year ended December 31, 2019 and notes thereto, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2020. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted from this report. The results of operations for any interim period are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period. The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Reclassification Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no impact on subtotals in the prior year condensed consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and expenses during the reporting period. The impact of the ongoing COVID-19 pandemic continues to evolve. As a result, certain estimates and assumptions required increased judgment and carried a higher degree of variability and volatility, including but not limited to, the fair value of marketable securities, performance-based equity awards, and research and development accruals for the three and six months ended June 30, 2020. As events continue to unfold and additional information becomes available, these estimates may change materially in future periods. Actual results could differ from those estimates. 5 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) Risks and Uncertainties In March 2020, the World Health Organization declared a pandemic due to the global COVID-19 outbreak. The significant uncertainties caused by the ongoing COVID-19 pandemic may negatively impact the Company’s operations, liquidity, and capital resources, and will depend on certain evolving developments, including the duration and spread of the outbreak, regulatory and private sector responses and the impact on employees and vendors including supply chain and clinical partners, all of which are uncertain and cannot be predicted. During this pandemic, the Company continues to work closely with clinical sites towards maximal patient safety and the lowest number of missed visits and study discontinuations. The Company has taken and continues to take proactive measures to maintain the integrity of its ongoing clinical studies. Despite these efforts, the ongoing COVID-19 pandemic could significantly impact clinical trial enrollment and completion of its clinical studies. The Company will continue to monitor the COVID-19 situation and its impact on the ability to continue the development of, and seek regulatory approvals for, the Company’s product candidates, and begin to commercialize any approved products. Summary of Significant Accounting Policies The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2020 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, except as noted below with respect to the Company’s liability related to sale of future royalties and as noted within the “Recent Accounting Pronouncements – Recently Adopted Accounting Pronouncements” section. Liability related to Sale of Future Royalties On December 1, 2019, the Company and its subsidiary Kodiak Sciences GmbH entered into a funding agreement with Baker Bros. Advisors, LP (“BBA”), which holds more than 5 % of the Company’s stock, pursuant to which BBA purchased the right to receive a capped 4.5 % royalty on future net sales of KSI-301, the Company’s anti-VEGF antibody biopolymer conjugate therapy, in exchange for $ 225.0 million. Under the terms of the funding agreement, there is no obligation to repay any funding amount received, other than through the capped royalty payments on future product revenues. The Company recorded the funding amount paid by BBA as a liability on the consolidated balance sheet net of issuance costs , in accordance with ASC 730, Research and Development . Under ASC 730, the significant related party relationship between the Company and BBA creates an implicit obligation to repay the funding amount paid to the Company. Once royalty payments to BBA are determined to be probable and estimable, and if such amounts exceed the liability balance, the Company will impute interest to accrete the liability on a prospective basis based on such estimates. If and when the Company makes royalty payments under the funding agreement, it would reduce the liability balance at such time. Refer to Note 7. Credit Losses – Available-for-Sale Debt Securities For available-for-sale debt securities in an unrealized loss position, the Company will periodically assess its portfolio for impairment. The assessment first considers the intent or requirement to sell the security. If either of these criteria are met, the amortized cost basis will be written down to fair value through earnings. If not met, the Company will evaluate whether the decline resulted from credit losses or other factors by considering the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income or loss, as applicable. Recent a ccounting p ronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) , under its ASC or other standard setting bodies, and adopted by the Company as of the specified effective date, unless otherwise discussed below. 6 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements , which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. The Company assessed the impact of ASU 2016-13 on its available-for-sale debt securities and determined there were no credit losses within the portfolio requiring an allowance upon adoption. The Company adopted this new guidance as of January 1, 2020, which did not impact its consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements , which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The Company adopted this new guidance as of January 1, 2020, which did not impact its consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation, set-up, and other upfront costs incurred in cloud computing arrangements. The Company adopted this new guidance as of January 1, 2020, which did not impact its consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and related disclosures. 3. Accrued and Other Current Liabilities Accrued and other current liabilities consist of the following (in thousands): June 30, 2020 December 31, 2019 Accrued research and development $ 8,353 $ 4,894 Accrued salaries and benefits 2,165 3,108 Accrued legal fees 246 302 Accrued professional fees 175 195 Accrued other liabilities 334 159 Total accrued and other current liabilities $ 11,273 $ 8,658 7 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) 4. Fair Value Measurements The following tables present the Company’s fair value hierarchy for assets measured at fair value on a recurring basis (in thousands): Fair Value Measurements at June 30, 2020 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 227,060 $ — $ — $ 227,060 Marketable securities: U.S. treasury securities — 60,410 — 60,410 Commercial paper — 43,877 — 43,877 Corporate notes — 43,011 — 43,011 Total $ 227,060 $ 147,298 $ — $ 374,358 Fair Value Measurements at December 31, 2019 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 155,276 $ — $ — $ 155,276 Repurchase agreements 50,000 — — 50,000 Commercial paper — 5,987 — 5,987 Marketable securities: U.S. treasury securities — 50,185 — 50,185 Commercial paper — 34,533 — 34,533 Corporate notes — 51,662 — 51,662 Total $ 205,276 $ 142,367 $ — $ 347,643 5. Marketable Securities The marketable securities are classified as available-for-sale and consist of U.S. treasury securities, commercial paper and corporate notes. The fair value measurement data for marketable securities is obtained from independent pricing services. The Company validates the prices provided by the third-party pricing services by understanding the valuation methods and data sources used and analyzing the pricing data in certain instances. The following table summarizes the marketable securities held at June 30, 2020 and December 31, 2019 (in thousands): As of June 30, 2020 Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. treasury securities $ 60,120 $ 290 $ — $ 60,410 Commercial paper 43,877 — — 43,877 Corporate notes 42,707 304 — 43,011 Total marketable securities, current $ 146,704 $ 594 $ — $ 147,298 As of December 31, 2019 Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. treasury securities $ 50,190 $ — $ ( 5 ) $ 50,185 Commercial paper 34,532 1 — 34,533 Corporate notes 39,956 13 ( 3 ) 39,966 Total marketable securities, current $ 124,678 $ 14 $ ( 8 ) $ 124,684 Corporate notes $ 11,692 $ 4 $ — $ 11,696 Total marketable securities, noncurrent $ 11,692 $ 4 $ — $ 11,696 8 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) All marketable securities held at June 30, 2020 and December 31, 2019 had contractual maturities of less than 18 months . There were no realized gains or losses recognized on the sale or maturity of available-for-sale debt securities during the three and six months ended June 30, 2020 and 2019, respectively, and as a result, the Company did not reclassify any amounts out of accumulated comprehensive loss. As of June 30, 2020 and December 31, 2019, the Company had no allowance for credit losses for available-for-sale debt securities. There were no impairment charges or recoveries recorded during each of the three and six months ended June 30, 2020 and 2019. 6. Commitments and Contingencies Leases As of June 30, 2020, the Company has a lease agreement for office and laboratory space at 2631 Hanover Street in Palo Alto, California through October 2023. In April 2020, the Company entered into a lease agreement for office and laboratory space at Rottenstrasse 5 in Visp, Switzerland. The space is approximately 1,000 square meters. The monthly rent during the initial 5-year term will be approximately 0.03 million Swiss Francs. In June 2020, the Company entered into lease agreements for two buildings at 1200 and 1250 Page Mill Road in Palo Alto, California, which are expected to serve as its corporate headquarters. The facilities are approximately 82,662 square feet and 72,812 square feet, respectively, and includes office and laboratory space. For 1200 Page Mill Road, the monthly rent during the initial 6.5-year term will be approximately $ 0.6 million, with annual year-over-year increases of 3 % and total rent abatement of approximately $ 7.2 million. For 1250 Page Mill Road, the monthly rent during the initial 13-year term will be approximately $ 0.5 million, with annual year-over-year increases of 3 % and total rent abatement of approximately $ 6.3 million. As of June 30, 2020, the Company did not have control of these spaces at Rottenstrasse 5 and 1200 and 1250 Page Mill Road and therefore, did no t record right-of-use assets and corresponding lease liabilities. These commitments are not included in the below table. The maturities of the operating lease liabilities as of June 30, 2020 were as follows (in thousands): Year ending December 31, As of June 30, 2020 2020 $ 244 2021 $ 598 2022 $ 616 2023 $ 526 Total undiscounted lease payments $ 1,984 Less: imputed interest $ ( 259 ) Total operating lease liabilities $ 1,725 Other Commitments and Contingencies The Company has entered into service agreements with a variety of service providers, pursuant to which such service providers agreed to perform activities in connection with the manufacturing of certain materials. Such agreements, and related amendments, state that planned activities that are included in the signed work orders are, in some cases, binding and, hence, obligate the Company to pay the full price of the work order upon satisfactory delivery of products and services or obligate the Company to the binding amount regardless of whether such planned activities are in fact performed. Per the terms of the agreements, the Company has the option to cancel signed orders at any time upon written notice, which may or may not be subject to payment of a cancellation fee. The level of cancellation fees may be dependent on the timing of the written notice in relation to the commencement date of the work, with the maximum cancellation amount dependent on the agreement or the work order. As of June 30, 2020 and December 31, 2019, the total amount of cancelable and/or non-cancelable purchase obligations, including accrued amounts, under these agreements were $ 38.6 million and $ 4.7 million, respectively. Expense recognized under these agreements during the period, including amounts paid and accrued, for the three and six months ended June 30, 2020 were $ 3.5 million and $ 7.6 million, respectively, and for the three and six months ended June 30, 2019 were $ 2.4 million and $ 3.4 million, respectively. As of June 30, 2020, the Company had no t incurred any cancellation fees. The Company has also entered into various cancellable license agreements for certain technology. The Company may be obligated to make payments on future sales of specified products associated with such license agreements. Such payments are dependent on future product sales and are not estimable. 9 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) Legal Proceedings From time to time, the Company may become involved in legal proceedings arising from the ordinary course of its business. Management is currently not aware of any matters that could have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company records a legal liability when it believes that it is both probable that a liability may be imputed, and the amount of the liability can be reasonably estimated. Significant judgment by the Company is required to determine both probability and the estimated amount. Indemnification To the extent permitted under Delaware law, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not specified in the agreements; however, the Company has director and officer insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. 7. Liability related to Sale of Future Royalties On December 1, 2019, the Company and its subsidiary Kodiak Sciences GmbH entered into a funding agreement with Baker Bros. Advisors, LP (“BBA”), which holds more than 5 % of the Company’s stock, pursuant to which BBA purchased the right to receive a capped 4.5 % royalty on future net sales of KSI-301, the Company’s anti-VEGF antibody biopolymer conjugate therapy, in exchange for $ 225.0 million. The royalty terminates upon the date that BBA has received an aggregate amount equal to 4.5 times the funding amount paid to the Company, unless earlier terminated or repurchased by the Company. Under the terms of the funding agreement, there is no obligation to repay any funding amount received, other than through the capped royalty payments on future product revenues. The Company has the option, exercisable at any point during the term of the funding agreement, to repurchase 100 % of the royalties due to BBA for a purchase price equal to 4.5 times the funding amount paid to the Company as of such time, less amounts paid by the Company to BBA. The closing of the funding agreement was subject to certain conditions and occurred in February 2020. The Company received $ 100.0 million of the funding on February 4, 2020. The remaining $ 125.0 million shall be payable to the Company upon enrollment of 50 % of the patients in the planned RVO clinical program. The Company recorded the initial $ 100.0 million payment as a liability on the consolidated balance sheet net of issuance costs , in accordance with ASC 730, Research and Development . Under ASC 730, the significant related party relationship between the Company and BBA creates an implicit obligation to repay the funding amount paid to the Company. Once royalty payments to BBA are determined to be probable and estimable, and if such amounts exceed the liability balance, the Company will impute interest to accrete the liability on a prospective basis based on such estimates. If and when the Company makes royalty payments under the funding agreement, it would reduce the liability balance at such time. 8. Stock-Based Compensation In January 2020 and 2019, the number of shares of common stock available for issuance under the 2018 Equity Incentive Plan was increased by approximately by 1.8 million and 1.5 million shares, respectively, as a result of the automatic increase provision in the 2018 Plan. 10 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) Stock Options Stock option activity under the 2018 Plan and 2015 Equity Incentive Plan is summarized as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2019 6,671,542 $ 25.22 8.73 $ 362,081 Granted 948,560 $ 53.78 Exercised ( 242,670 ) $ 3.65 Forfeited or canceled ( 73,144 ) $ 20.48 Outstanding at June 30, 2020 7,304,288 $ 23.01 8.51 $ 246,301 Restricted Shares Restricted share activity, including restricted stock awards, restricted stock units, and performance-based restricted stock units, under the 2018 Plan and 2015 Plan is summarized as follows: Number of Restricted Shares Weighted Average Grant Date Fair Value Unvested at December 31, 2019 160,747 $ 60.81 Granted 179,345 $ 49.52 Vested ( 12,789 ) $ 8.62 Shares withheld related to net share settlement of RSUs ( 4,058 ) $ 9.90 Canceled ( 4,250 ) $ 73.51 Unvested at June 30, 2020 318,995 $ 57.03 Performance-Based Stock Options and Restricted Stock Units The Company granted 170,150 performance-based stock options and 128,900 performance-based restricted stock units (“RSUs”) to employees in 2019. These performance-based equity awards will vest one-quarter upon the achievement of specific clinical development milestones. The remaining shares will then vest in three equal annual installments after that date. Performance-based stock options and performance-based restricted stock units are recorded as expense beginning when vesting events are determined to be probable. None of these performance-based equity awards vested during 2019. The Company believes that the achievement of the requisite performance condition continues to be probable. Stock-based compensation expense recognized was $ 1.8 million and $ 3.6 million during the three and six months ended June 30, 2020, respectively, and none during the three and six months ended June 30, 2019, respectively. Stock-Based Compensation Expense Stock-based compensation for options and restricted shares is classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Research and development $ 3,776 $ 703 $ 7,224 $ 1,409 General and administrative 3,114 541 5,748 992 Total stock-based compensation $ 6,890 $ 1,244 $ 12,972 $ 2,401 11 Kodiak Sciences Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) As of June 30, 2020, the unrecognized stock-based compensation of unvested stock options, restricted stock units, and performance-based options and restricted stock units was $ 103.0 million and it is expected to be recognized over a weighted-average period of 3.48 years. 9. Net Loss per Common Share The following common share equivalents were excluded from the computation of diluted net loss per common share for the periods presented because their inclusion would have been antidilutive: As of June 30, 2020 2019 Outstanding stock options 7,304,288 5,468,167 Unvested restricted shares 318,995 16,320 Total 7,623,283 5,484,487 12