Kodiak Sciences scored $225 million in new development funding for its eye disease drug that could rival Eylea—but at a price. In exchange for the cash, the company agreed to sell a capped 4.5% royalty on net sales of the drug worldwide to Baker Bros. Advisors.
If Kodiak changes its mind, it may end the agreement or buy back the royalties at any point. If it doesn’t, Baker Bros. will collect more than $1 billion in royalties, that is, an amount equal to 4.5 times the funding provided to Kodiak. The company may find itself paying royalties on follow-on products, but this amount will not exceed the 4.5% cap, according to a statement.
"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," said Victor Perlroth, M.D., chairman and CEO of Kodiak Sciences. "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."
Palo Alto, California-based Kodiak will pick up the first $1 million of the funding when the deal closes in early January, it said in the statement. The remaining $125 million will come in late 2020, when Kodiak enrolls half of the patients in two clinical studies of the drug, KSI-301, in patients with retinal vein occlusion—that is, swelling caused by the blockage of veins in the retina.
KSI-301 has the same target as Regeneron and Bayer’s blockbuster Eylea: vascular endothelial growth factor, or VEGF. Both drugs are anti-VEGF biologics, which work by blocking VEGF to prevent the growth of leaky blood vessels in the eye. Both are injected directly into the eye, which can be unappealing to patients. Although Eylea is approved for all three diseases that KSI-301 has been tested in, Kodiak thinks it has an advantage.
With an extended ocular half-life, KSI-301 stays in the eyes for longer, which would allow patients to go longer between injections. The hope is that more patients will stick to their treatment if injections are less frequent.
The drug posted positive early data from a phase 1b study testing it in wet age-related macular degeneration (AMD), diabetic macular edema (DME) and macular edema stemming from retinal vein occlusion (RVO). The drug improved vision and reduced swelling of the retina across the three diseases in 35 patients who had undergone 12 weeks of treatment. The RVO patients showed the most progress, reading a median of 26.5 more letters on an eye chart and logging a median 209-micron decrease in retinal central subfield thickness after treatment.
Updated data announced in October showed that the effects of the drug were long-lasting in patients with wet AMD and DME: “Our early data suggest this is achievable using KSI-301, with 87% of wet AMD patients extending beyond three months after the last loading dose without receiving retreatment. In DME, a pan-retinal disease that typically has a high initial treatment burden, we observed that 82% of patients were extended beyond three months without receiving retreatment following only three initial loading doses,” said Kodiak Chief Medical Officer Jason Ehrlich, M.D., Ph.D., at the time.
Eylea’s dosing schedule varies (PDF) between diseases, but patients with wet AMD receive their first three injections a month apart before switching to injections every two months, while patients with DME receive their first five injections a month apart before switching to bimonthly injections.