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TICKERS: KOD

Kodiak Shares Soar on $225 Million Royalty Deal for Retinal Drug

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Shares of Kodiak Sciences traded more than 100% higher at times after the company reported that it entered into a $225 million royalty agreement for the firm's KSI-301 used in the treatment of retinal vascular diseases including age-related macular degeneration and diabetic eye diseases.

This morning, clinical stage biopharmaceutical company Kodiak Sciences Inc. (KOD:NASDAQ), which specializes in developing novel therapeutics to treat chronic, high-prevalence retinal diseases, announced that "it has entered into a funding agreement to sell a capped royalty right on global net sales of KSI-301 to Baker Bros. Advisors for $225 million."

The company explains that KSI-301 is Kodiak's investigational therapy being developed for the treatment of retinal vascular diseases including age-related macular degeneration and diabetic eye diseases.

Under the terms of the agreement, Baker Bros. Advisors (BBA) purchased a capped 4.5% royalty on net sales of Kodiak's anti–vascular endothelial growth factor (anti-VEGF) medication. The royalty is to be paid upon marketing approval in exchange for $225 million in committed development funding payable to Kodiak Sciences. The report noted that the royalty "caps" or terminates when BBA has received an aggregate amount equal to 4.5 times the total funding amount paid to Kodiak.

According to the terms of the royalty agreement, BBA will pay Kodiak $100 million upon the closing of the funding transaction, which is expected to occur on January 10, 2020, with payment of the remaining $125 million predicated upon Kodiak achieving certain objectives. This includes, among other things, 50% enrollment in the firm's two planned pivotal clinical studies of KSI-301 in patients with retinal vein occlusion estimated to occur in late 2020.

Kodiak Sciences Chairman and CEO Victor Perlroth, MD, commented, "In thinking through how best to finance our accelerating clinical, manufacturing and commercial plans for KSI-301 and our ABC platform, royalty funding is meaningfully less dilutive than equity and preserves both our future financing and strategic flexibility...This royalty financing provides the foundation to fund the KSI-301 development program through our 2022 Vision of pivotal read-outs in retinal vein occlusion, wet age-related macular degeneration and diabetic macular edema and our anticipated Biologics License Application (BLA) and supplemental BLA submissions."

In the report, the firm identifies KSI-301 as an investigational anti-VEGF therapy built on the company's Antibody Biopolymer Conjugate (ABC) Platform designed to maintain potent and effective drug levels in ocular tissues for longer than existing agents. "Kodiak's objective with KSI-301 is to develop a new first-line agent to improve outcomes for patients with retinal vascular diseases and to enable earlier treatment and prevention of vision loss for patients with diabetic eye disease. The company's DAZZLE pivotal study in patients with treatment-naïve wet AMD was initiated in October 2019."

Kodiak Sciences is headquartered in Palo Alto, Calif., and describes its business as a clinical stage biopharmaceutical company specializing in novel therapeutics to treat chronic, high-prevalence retinal diseases. The firm states that "it has leveraged its ABC Platform to build a pipeline of product candidates in various stages of development including KSI-501, its bispecific anti-IL-6/VEGF biopolymer conjugate for the treatment of neovascular retinal diseases with an inflammatory component, and is expanding its early research pipeline to include ABC Platform based triplet inhibitors for multifactorial retinal diseases such as dry AMD and the neurodegenerative aspects of glaucoma."

Kodiak Sciences began the day with a market capitalization of about $1.1 billion with approximately 37.06 million shares outstanding and a short interest of around 7.40%. KOD shares opened almost 20% higher today at $35.00 (+$5.40, +18.24%) over Friday's $29.60 closing price, and then proceeded to take off setting a new 52-week intraday high price of $72.87. Since the open, the stock has traded between $35.00 to $72.87 per share and is presently trading at $48.72 (+$19.12, +64.59%).

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