With its cash injection, Kodiak needs to offer more than a convenience argument

So much for non-dilutive funding. A few hours after Kodiak unveiled a $255m royalty-based deal with Baker Bros, linked to its anti-VEGF eye disease project KSI-301, the company also hit investors for cash. This could net a further $287.5m; the Baker Bros deal caused Kodiak shares to surge 73% yesterday, cushioning the blow of the secondary somewhat. KSI-301 is being pegged as a longer acting Eylea, though confirmatory trials in several settings including retinal vein occlusion and diabetic macular oedema will not start to read out until 2021. Filings are pencilled in for 2022 and this cash injection should take Kodiak there. But the commercial potential of KSI-301, which for now rests on a convenience argument, is the big question. This is a highly competitive space: Lucentis and Eylea biosimilars are on the horizon, Novartis has just launched its new VEGF product, Beovu, while gene therapies are a longer term consideration. The Baker Bros involvement has been read as a vote of confidence though sellside coverage of this stock is notable by its absence, outside of the banks that floated the company in 2018. In a world where innovation is in high demand, Kodiak could struggle to fit the picture.

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