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Kodiak Sciences - >>> Longtime biotech investor injects $250M into Palo Alto company a year after IPO


By Ron Leuty

Francisco Business Times

Dec 2, 2019


https://www.bizjournals.com/sanfrancisco/news/2019/12/02/longtime-biotech-investor-injects-250m-into-palo.html?ana=yahoo&yptr=yahoo


Eye drug developer Kodiak Sciences Inc. lined up a royalty rights deal with longtime biotech investor Baker Bros. Advisors LP for $225 million and the promise of another $25 million in the Palo Alto company's next stock raise.

The competitively bid deal is a big one for 10-year-old Kodiak (NASDAQ: KOD), whose stock has risen more than 200% since a $90 million initial public offering in October 2018: Its experimental drug, KSI-301, is enrolling patients in a clinical trial designed to lead to regulatory approval as a treatment for a blinding eye disease known as wet age-related macular degeneration. But the deal also is interesting because New York-based Baker Bros. is putting down big money — with some hedges — on an experimental drug that hasn't even fully enrolled the clinical trial.

Baker Bros. — big investors already in Kodiak, recently sold Genomic Health Inc. of Redwood City, San Francisco genetic tests developer Invitae Corp. (NYSE: NVTA), South San Francisco's Principia Biopharma Inc. (NASDAQ: PRNB) and other Bay Area biotech companies — will receive a 4.5% royalty on net sales of KSI-301 that would be capped at more than $1 billion.

The sales are dependent on successful clinical trials and Food and Drug Administration approval of injectable KSI-301 — both significant "ifs" in the biotech industry. Yet the investment of $100 million when the deal closes in January and $125 million when the clinical trial enrolls 50% of its two pivotal clinical trials, expected to occur in late 2020.

Kodiak Chairman and CEO Dr. Victor Perlroth said less-dilutive royalty financing made sense as a way to fund the company's clinical, manufacturing and commercial plans for KSI-301, which is being tested on patients with wet AMD and diabetic eye disease and could challenge Genentech Inc. drugs Lucentis and Avastin as well as Regeneron Pharmaceuticals Inc.'s Eylea and Novartis AG's new Beovu.

"This royalty financing provides the foundation to fund the KSI-301 development through our 2022 vision of pivotal readouts in retinal vein occlusion, wet age-related macular degeneration and diabetic macular edema" and regulatory filings, Perlroth said in a statement Monday morning.

Kodiak has the option at any time to buy back 100% of the royalties times 4.5.

Kodiak's stock has gone from a $10-per-share IPO price to as high as $32.42. It closed Friday at $27.27 and was up more than 8.5% to $29.60 in early trading Monday.

KSI-301, like its potential competitors, are anti-VEGF treatments, blocking a protein called vascular endothelial growth factor. VEGF leads to the rapid growth of blood vessels behind the retina, ultimately blurring vision.

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