What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2020-08-10 · 151 added, 124 removed, 314 unchanged (47% of the section changed)

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Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section of this report titled “Part II, Item 1A — Risk Factors” and elsewhere in this report.

Our goal is to prevent and treat the major causes of blindness by developing next-generation therapeutics for chronic, high-prevalence retinal diseases.

Throughout 2019 and into 2020, we have generated clinical data with our most advanced product candidate, KSI-301, a biologic therapy built with our antibody biopolymer conjugate platform, or ABC Platform, which is designed to maintain potent and effective drug levels in ocular tissues for longer periods than the currently-marketed biologic medicines used to treat retinal diseases.

To date, KSI-301 has been administered approximately 1,100 times to approximately 325 patients.

Our goal is to prevent and treat the major causes of blindness by developing and commercializing next-generation therapeutics for chronic, high-prevalence retinal diseases.

Throughout 2019 and 2020, we have generated clinical data with our most advanced product candidate, KSI-301, a biologic therapy built with our antibody biopolymer conjugate platform, or ABC Platform, which is designed to maintain potent and effective drug levels in ocular tissues for longer periods than the currently-marketed biologic medicines used to treat retinal diseases.

To date, KSI-301 has been administered more than 1,500 times to more than 400 patients representing more than 250 patient-years of clinical experience.

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 data emerging 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 (registrational) studies of KSI-301.

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 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 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 currently-ongoing and planned pivotal (registrational) studies of KSI-301.

We believe these registrational 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 retain their vision over the long term due to fewer missed treatments and/or fewer drug holidays, as a result of more manageable treatment schedules.

Moreover, a longer-acting medicine allows patients with vision-threatening diseases to remain on effective treatment even in context of treatment disruptions that occur in ordinary circumstances (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 desirable, possible or allowed in certain regions or countries.

Based on the encouraging data that continue to be observed in our Phase 1b study, we have expanded the KSI-301 clinical pivotal program in the third quarter 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.

We successfully recruited patients into both of our paired pivotal studies in DME (GLEAM and GLIMMER) and into our pivotal study in RVO (BEACON) in the third quarter of 2020.

The pivotal study for wet AMD (DAZZLE) began recruiting in the third quarter of 2019 and completed U.S.

patient enrollment in the third quarter of 2020.

DAZZLE patient recruitment in the EU is expected to complete in the fourth quarter of 2020.

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 (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 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) ;

Following our communications with FDA at the time of our End of Phase 2 meetings as well as subsequent communications, we upgraded our pivotal study program to assess KSI-301 in two Phase 3 studies (our ongoing GLEAM and GLIMMER studies) in DME to provide the mutually-confirmatory studies required by FDA for initial demonstration of safety and efficacy, one Phase 2b/3 study (our ongoing DAZZLE study) in wet AMD, one Phase 3 study (our ongoing BEACON study) in RVO, and one Phase 3 study (GLOW) in NPDR without DME.

By conducting 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 U.S.

with most of the remaining sites in the EU.

Given the strong new patient enrollment and low missed visit rates seen to date in our DAZZLE wet AMD pivotal study in the U.S.

despite the ongoing COVID-19 pandemic, we

believe focusing the KSI-301 program in this way 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 wet AMD, DME and RVO);

higher unmet need in DME versus RVO;

marginal, if any, increase in overall trial execution costs;

and the potential for similar timelines for two DME versus two RVO pivotals.

On top of these operational considerations, we remain pleased with the DME clinical data we are seeing in the P hase 1b study and want to align greater clinical data generation in DME given the larger number of diabetic patients and higher unmet need and market opportunity as compared to that of RVO.

and the potential for an accelerated timeline for two DME versus two RVO pivotals.

On top of these operational considerations, we remain pleased with the DME clinical data we are seeing in the Phase 1b study and want to align greater clinical data generation in DME given the larger number of diabetic patients and higher unmet need and market opportunity as compared to RVO.

The ABC Platform and KSI-301 were developed at Kodiak, and we own rights to these assets in key geographies including the US, EU, China and other major countries.

We have applied our ABC Platform to develop additional product candidates beyond KSI-301, including KSI-501, our bispecific anti-IL-6/VEGF bioconjugate, and we are expanding our early research pipeline to include ABC Platform-based triplet inhibitors for multifactorial retinal diseases such as dry AMD and the neurodegenerative aspects of glaucoma.

In October 2020, we announced that we entered a supplemental research agreement with AbCellera to generate additional therapeutic antibody candidates for novel disease targets in ophthalmology in support of our evolving research pipeline.

We intend to progress these and other product candidates to address high-prevalence ophthalmic diseases.

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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.

In DAZZLE, patient missed visit rates remain low (less than 5%), and clinical trial sites enrolled patients rapidly in the third quarter.

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 $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.

With $380.5 million in cash, cash equivalents and marketable securities as of September 30, 2020, and thoughtful management of our spending, we remain on a strong financial footing.

KSI-301 Pivotal Program

We initiated two Phase 3 studies in DME (GLEAM and GLIMMER) and one Phase 3 study in RVO (BEACON) in the third quarter of 2020.

The randomization of treatment-naïve patients into these three pivotal studies in the third quarter is a critical step to build the clinical evidence for KSI-301 as a safe, effective and highly durable therapy for patients with retinal diseases.

We have also completed U.S.

patient enrollment in our ongoing Phase 2b/3 study in wet AMD (DAZZLE) and continue to recruit patients in the EU.

We expect to complete DAZZLE enrollment by year end 2020.

We believe that the initiation of the additional Phase 3 studies and the robust patient recruitment into DAZZLE represent strong operational progress towards our 2022 Vision of a single BLA filed for KSI-301 in wet AMD, DME and RVO in calendar year 2022.

Importantly, to date 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.

Governments have taken preventative and protective actions, including but not limited to, restrictions on non-essential travel, business operations, and gatherings of individuals.

The State of California, where our 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.

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.

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.

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

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

In 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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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.

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

We began enrollment of our pivotal DME (GLEAM and GLIMMER) and RVO (BEACON) studies in the third quarter of 2020 in the United States and aim to initiate the pivotal study in non-proliferative DR (GLOW) in the first quarter of 2021, dependent on the continued evolution of the COVID-19 pandemic.

clinical trial application submissions are underway for GLEAM, GLIMMER and BEACON.

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.

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

Emerging data show VEGF levels are elevated in COVID-19 patients, and a Chinese clinical study is currently assessing the efficacy of anti-VEGF therapy in COVID-19.

Emerging data show VEGF levels are elevated in COVID-19 patients.

OG2072, the bispecific fusion protein used to build our ophthalmology product candidate KSI-501, binds with high affinity to both of its targets simultaneously (IL-6 and VEGF).

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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.

Upgraded Pivotal Study Program :

We finalized the design of our KSI-301 pivotal study programs in RVO and DME and have launched all three studies.

We are currently conducting 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), and one study in RVO (BEACON).

Each study protocol design has been optimized based on Phase 1b data and experience and will include the same treatment-naïve patient populations as in the Phase 1b, as well as tighter dosing interval ranging, tighter disease control, and decreased subjectivity for retreatments, and each has high statistical power for non-inferiority (>90%).

We also intend to initiate in early 2021 a Phase 3 study of KSI-301 in non-proliferative diabetic retinopathy (GLOW).

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 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.

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 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.

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.

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.

We saw robust patient enrollment through the third quarter of 2020 and have completed U.S.

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

EU patient enrollment commenced in June 2020 and we continue to see robust recruitment.

We expect to complete overall DAZZLE study enrollment by year end 2020.

With a one-year primary endpoint, we remain on track for a DAZZLE study top-line data readout in early 2022.

As of November 4, 2020, over 545 of the planned 550 patients have been enrolled in DAZZLE.

GLEAM / GLIMMER and BEACON Study Initiations :

We initiated two Phase 3 studies in DME (GLEAM and GLIMMER) and one Phase 3 study in RVO (BEACON) in the third quarter of 2020.

The randomization of treatment-naïve patients into these three studies is a critical step to build the clinical evidence for KSI-301 as a safe, effective and highly durable therapy for patients with retinal diseases.

The initiation of the additional Phase 3 studies and the robust patient recruitment into DAZZLE represent strong operational progress towards our 2022 Vision of a single BLA filed for KSI-301 in wet AMD, DME, and RVO in 2022.

Continued maturation of Phase 1b Data :

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

We intend to continue presenting data updates from the Phase 1b as the study progresses over its full three-year duration.

Commercial Manufacturing Progress :

We negotiated a long-term agreement with Lonza for the manufacture of KSI-301.

We successfully negotiated a long-term agreement with Lonza for the manufacture of KSI-301.

This agreement will provide Kodiak with a custom-built bioconjugation facility with a capacity to supply millions of doses per year.

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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:

Completed Lease Agreement for Kodiak’s New U.S.

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.

These newly leased buildings will serve as Kodiak’s U.S.

headquarters for office and laboratory space.

We also leased approximately 10,750 square feet 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.

Growing KSI-301 Clinical Experience :

KSI-301 has been assessed in more than 1,500 injections in more than 400 patients with more than 250 patient-years of exposure.

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:

Thoughtfully Designed 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.

The data we are seeing in the Phase 1b study are supportive of our ability to 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.

Investing with Conviction Commensurate with the Opportunity :

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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.

We have made significant progress with enrollment in our pivotal study in wet AMD (DAZZLE), and we have reached our desired enrollment in the U.S.

in the third quarter of 2020.

We also initiated 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) and 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.

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

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 believe we remain on track to achieve our “2022 Vision” of a single BLA submission and initial FDA approval for KSI-301 in wet AMD, DME and RVO in 2022 with a total of four pivotal trials— two in DME (GLEAM and GLIMMER), one in wet AMD (DAZZLE) and one in RVO (BEACON).

We initiated three additional pivotal trials in the third quarter of 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.

We intend to initiate a pivotal study in DR in the first quarter of 2021.

These studies, together with our ongoing pivotal study in wet AMD, will be the basis of our intended BLA and supplemental BLA submissions.

We currently expect to submit the wet AMD, DME, and RVO indications in a single initial BLA for KSI-301 and the DR indication 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 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.

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

Our “2022 Vision” is built on the following concurrent development strategy.

This table incorporates our most recent view of the KSI-301 clinical program and its execution, as described above, and we believe the successful prosecution of this program is achievable based on our currently available information and the evolving effects of the COVID-19 pandemic:

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.

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

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

We now have 140+ 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.

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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 .

The f igures below present 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.

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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.

58% of the 31 patients 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.

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Remarkably, 72 %, 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.

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

It is reassuring to see that as the Phase 1b data mature, 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, the durability proportions remain stable, as do the visual acuity and OCT outcomes.

Diabetic M acular E dema (DME)

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

79% of patients have achieved a 6-month or longer treatment-free interval at least once during follow-up.

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

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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.

Now with 622 injections given in the Phase 1a/1b program (as of September 15, 2020), and with patients followed for as long as 22 months, we are continuing to track with the expectations set by the safety profile of the current standard of care intravitreal medicines.

None of the serious adverse events, or SAEs, observed have been reported as or deemed drug-related, and they are typical of the systemic SAEs expected in these patient populations.

The ocular SAE of worsening cataract was in a diabetic patient with pre-existing cataract, was not drug-related, and resolved with routine cataract surgery.

There are only two events (previously described) of intraocular inflammation.

The events were mild in nature, both trace to 1+ grade cells in the vitreous, on a standardized scale where 0 is none and 4+ is severe.

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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.

each of them had 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.

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

Wet AMD DAZZLE Study

DAZZLE 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.

DAZZLE (NCT04049266) assesses patients with treatment naïve wet AMD and are randomized 1:1 to receive KSI-301 every 12 to 20 weeks or Eylea every 8 weeks, each after 3 monthly loading doses.

The determination of treatment interval for the patients assigned to KSI-301 is based on disease activity assessments where both OCT and BCVA are measured and compared against prior data, similar to other recent and ongoing Phase 3 studies in the field.

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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.

In DME, we are conducting two Phase 3 studies in parallel with identical design.

In each of the two studies, called GLEAM (NCT04611152) and GLIMMER (NCT04603937), we will randomize 450 treatment-naïve DME patients to either KSI-301 every 8 to 24 weeks after 3 loading doses, or Eylea every 8 weeks after 5 loading doses.

The primary endpoint is the change from baseline in BCVA at one year, again the average of the week 48 and 52 visits.

The studies are non-inferiority studies with a margin of 4.5 letters.

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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.

This is different from the DAZZLE wet AMD study design where the interval can only be maintained or shortened in the first year.

In DME, patients may experience disease modification (improvement in the severity of the underlying retinopathy) that curtails the need for therapy over time, an event that has been seen in many DME patients treated with KSI-301 allowing for the treatment interval to be potentially further prolonged after the first retreatment.

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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.

The GLEAM and GLIMMER study design was also optimized using learnings from the Phase 1b study results to maintain Phase 1b study population (treatment-naïve DME patients), tighten dosing intervals and disease activity criteria, decrease subjectivity and incorporate high statistical power for non-inferiority (>90%).

To determine the treatment interval for KSI-301 patients, we are employing disease activity assessments and protocol-specified criteria.

All patients randomized to KSI-301 are on the longest interval by default.

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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 Phase 3 BEACON study (NCT04592419) in patients with RVO is a year-long study in which we will randomize 550 patients with treatment-naïve RVO, either branch or central vein type, to either every 8 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.

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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 ;

The BEACON study design was optimized using learnings from the Phase 1b study results to maintain Phase 1b study population (treatment-naïve RVO patients), tighten dosing intervals and disease activity criteria, decrease subjectivity and incorporate high statistical power for non-inferiority (>90%).

Because the first six months of the study are fixed-interval dosing, the disease activity assessment criteria are only used to determine dosing in the second six months of the RVO study.

The criteria are similar to our DME studies, and tighter than they are in Phase 1b, with the OCT and BCVA measured against the best previous measurements;

subjectivity is also reduced.

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.

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 ‘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.

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.

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 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.

We are evaluating investments in commercial manufacturing capacity.

We are investing in commercial manufacturing capacity.

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

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and hire additional personnel.

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 net loss was $86.5 million for the nine months ended September 30, 2020.

As of September 30, 2020, we had an accumulated deficit of $244.6 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 June 30, 2020, we had cash, cash equivalents and marketable securities of $417.1 million.

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $380.5 million.

Components of Operating Results

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We are focusing substantially all of our resources and development efforts on the development of our product candidates, in particular KSI-301.

We expect our research and development expenses to increase substantially during the next few years as we initiate our Phase 3 studies, complete our clinical program, pursue regulatory approval of our drug candidates and prepare for a possible commercial launch.

We expect our research and development expenses to increase substantially during the next few years as we conduct our Phase 3 studies, complete our clinical program, pursue regulatory approval of our drug candidates and prepare for a possible commercial launch.

Predicting the timing or the final cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control.

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Other Income (Expense), Net

Other income (expense), net consists primarily of accretion income on marketable debt securities net of amortized issuance costs from the liability related to the future sale of royalties to BBA in 2019.

Other income (expense), net consists primarily of accretion income and amortization expense on marketable debt securities net of amortized issuance costs from the liability related to the future sale of royalties to BBA in 2019.

Results of Operations

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses

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Three Months Ended

Six Months Ended

ABC Platform external expenses (1)

September 30,

Nine Months Ended

September 30,

KSI-301 program external expenses (1)

ABC Platform external expenses (2)

KSI-501 program external expenses (3)

Payroll and personnel expenses (4)

Other research and development expenses (4)

Payroll and personnel expenses (5)

Total research and development expenses

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.

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

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

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.

KSI-501 program external expenses relates to research and development of KSI-501.

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

Payroll and personnel expenses includes salaries, benefits and stock-based compensation for our personnel involved in research and development activities.

These expenses are separately classified and not allocated to specific programs because these expenses relate to multiple programs.

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

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.

KSI-301 program external expenses increased $ 9.6 million and $ 25.9 million during the three and nine months ended September 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 progress for KSI-301.

Our pivotal Phase 2b/3 clinical study in wAMD ( DAZZLE ) dosed the first patient in October 2019 , and patient recruitment is expected to complete in the fourth quarter of 2020.

We initiated two pivotal Phase 3 clinical studies in DME (GLEAM and GLIMMER) and one pivotal Phase 3 clinical study in RVO (BEACON) in the third quarter of 2020.

ABC Platform external expenses increased $1.7 million and $3.4 million during the three and nine months ended September 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.

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

Other research and development expenses increased $2.5 million and $3.5 million during the three and nine months ended September 30, 2020, respectively, as compared to 2019, primarily due to the allocation of lease costs for Palo Alto and Switzerland.

Payroll and personnel expenses increased $5.2 million and $12.7 million during the three and nine months ended September 30, 2020, respectively, as compared to 2019, due to increased headcount and stock-based compensation expense.

General and Administrative Expenses

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.

General and administrative expenses increased $4.7 million and $10.8 million during the three and nine months ended September 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 consulting, legal and accounting, and due to the allocation of lease costs for Palo Alto and Switzerland.

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

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $380.5 million.

Future Funding Requirements

We have incurred net losses since our inception.

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.

For the nine months ended September 30, 2020, we had net loss of $ 86.5 million , and we expect to continue to incur additional losses in future periods.

As of September 30, 2020, we had an accumulated deficit of $ 244.6 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 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 evolving effects of the COVID-19 pandemic may also negatively impact our operations and capital resources.

The significant uncertainties caused by the evolving effects of the ongoing 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.

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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:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Cash Flows from Operating Activities

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.

The $28.6 million increase in cash used in operating activities for the nine months ended September 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 used in operating activities was also driven by changes in operating assets and liabilities.

Cash Flows from Investing Activities

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.

The $69.7 million increase in cash provided by investing activities for the nine months ended September 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 $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.

The $100.7 million increase in cash provided by financing activities for the nine months ended September 30, 2020 as compared to 2019 was due to the proceeds from sale of future royalties to BBA and proceeds from stock option exercises.

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 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 .

During the nine months ended September 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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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.

During the nine months ended September 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