Kodiak Sciences Inks Royalty-Based R&D Development Deal for $225 Million


Kodiak Sciences, based in Palo Alto, California, inked a funding deal with Baker Bros. Advisors (BBA). Under the terms of the agreement, Kodiak sold a capped royalty right on global net sales of KSI-301 to BBA for $225 million.

KSI-301 is an investigational therapy developed using the company’s proprietary Antibody Biopolymer Conjugate (ABC) Platform. It is designed to maintain drug levels in eye tissues longer than existing drugs. The drug is being developed for patients with retinal vascular diseases and the prevention of vision loss for people with diabetic eye disease.

On October 11, the company announced promising safety, efficacy and durability results from its ongoing Phase Ib clinical trial of KSI-301 in patients with treatment-naïve wet age-related macular degeneration (AMD), diabetic macular edema (DME) and retinal vein occlusion (RVO).

At the time, Jason Ehrlich, Kodiak’s chief medical officer, said, “We continue to observe encouraging safety and efficacy data in the Phase Ib study of KSI-301, and the emerging durability data are remarkable. In wet AMD, a next-generation intravitreal biologic would bring nearly all patients to a three months or longer dose interval. 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, the drug has demonstrated 82% of patients were extended beyond three months without requiring retreatment after the three initial loading doses. And the drug has shown promising early signs of improvement in diabetic retinopathy, with 40% of patients’ severity level improving within the first three months of treatment and none getting worse.

Under the terms of the deal with BBA, BBA acquired a capped 4.5% royalty on net sales of KSI-301 that will be paid upon marketing approval. BBA is paying $225 million in committed development funding. The royalty tops out when BBA has received an aggregate amount equal to 4.5 times the funding amount unless the deal is terminated early or re-purchased.

If Kodiak develops anti-VEGF containing additional products to KSI-301, BBA may be eligible for royalties of 1.5% to 2.25%, but total payments will never exceed the 4.5-times cap.

BBA will pay the first $100 million at the closing of the deal, which is planned for January 10, 2020. The remaining $125 million is based on various milestones, including Kodiak hitting 50% enrollment in its two planned pivotal clinical trials of KSI-301 in patients with retinal vein occlusion. This expected to happen in late 2020.

At any time during the funding agreement period, Kodiak can buy back 100% of the royalties due to BBA for a purchase price equal to the funding amount paid to Kodiak “as of such time times 4.5 less amounts paid by the Company to BBA.”

“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, chairman and chief executive officer of Kodiak. “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 (VLA) and supplemental BLA submissions.”

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