Kodiak Sciences announced the Company 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. 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 the Company's anti-VEGF antibody biopolymer conjugate therapy known as KSI-301 to be paid upon marketing approval in exchange for $225,000,000 in committed development funding payable to the Company (the "funding amount"). Unless earlier terminated or re-purchased by the Company, the royalty "caps" or terminates upon the date that BBA has received an aggregate amount equal to 4.5 times the funding amount paid to the Company. In an instance where Kodiak develops anti-VEGF containing follow-on products to KSI-301, there may be royalties of 1.5% to 2.25% owed on these products, but total payments under the funding agreement will never exceed the cap of 4.5 times the funding amount paid to the Company.
BBA is required to pay to the Company the first $100,000,000 of the funding amount at the closing of the funding transaction (expected to occur on January 10, 2020) and the remaining $125,000,000 of the funding amount upon Kodiak achieving, among other things, 50% enrollment in its two planned pivotal clinical studies of KSI-301 in patients with retinal vein occlusion (estimated to occur in late 2020).
The Company has the option, exercisable at any point during the term of the funding agreement, to repurchase from BBA 100% of the royalties due to BBA under the funding agreement for a purchase price equal to the funding amount paid to the Company 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, MD, Chairman and Chief Executive Officer 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."
The parties also agreed that, subject in all cases to compliance with applicable securities laws and regulations, in the event the Company issues shares of common stock in an underwritten public offering on or prior to June 30, 2020, the Company will use its best efforts to cause the managing underwriters of such offering to allow Baker Bros. Advisors to participate in an amount up to 25% of the shares offered in the offering plus additional shares equal to $25 million, all at the public offering price.
The royalty financing was the result of a competitive process overseen by independent and disinterested directors of Kodiak with the assistance of outside counsel.
J.P. Morgan and Goldman Sachs & Co. LLC acted as financial advisors to Kodiak on the transaction. Cooley LLP and Lenz & Staehelin served as legal advisors to Kodiak.
KSI-301 is an investigational anti-VEGF therapy built on the Company's Antibody Biopolymer Conjugate, or ABC, Platform and is 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 plans to initiate additional pivotal studies of KSI-301 in 2020 in retinal vein occlusion, diabetic macular edema and diabetic retinopathy. These studies are anticipated to form the basis of the Company's initial and supplemental BLAs to support potential approval and commercialization. KSI-301 is being developed and is fully owned globally by Kodiak Sciences Inc. In December 2019, Kodiak entered into an agreement to sell a 4.5% capped royalty right on global net sales of KSI-301 to Baker Bros. Advisors for $225 million.