One of the biggest winners on Monday was a biotech stock that’s already done extremely well so far this year. Shares of Kodiak Sciences (NASDAQ: KOD) were up substantially over the course of the day following news that the company decided to sell its royalty rights for its eye-disease drug known as KSI-301.
While a surprising piece of news to investors, it was very well received. Kodiak owned the rights to a steady, 4.5% royalty for all potential global sales of its experimental drug treatment KSI-301. However, shareholders of Kodiak decided to sell these rights to Baker Bros. Advisors for a sum of $225 million. For a company with a market cap (before today’s jump) of around $1 billion, it’s a pretty significant increase in cash that would help finance the rest of Kodiak’s drug portfolio.
KSI-301 is the company’s main drug candidate, which is targeted at treating patients with various eye-diseases including diabetic eye disease and age-related macular degeneration. While it’s not confirmed how many companies were competing for the rights to KSI-301, it does seem that Baker Bros wasn’t the only company making a generous offer, something which is a testament to just how promising the drug’s potential is.
“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, CEO of Kodiak in an official press release. “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.”
Not all the money will be given at once, just $100 million at first once the deal is signed in January, however, as the rest will be distributed depending on certain milestones for the drug’s late-stage clinical studies. The best part about this deal is that it allows Kodiak to secure more funding that it needs without needing to issue more shares and dilute its stock or take on more debt. The former is a big problem in the world of small biotech stocks, since issuing significant quantities of shares end up exerting a major downward pressure on the company.
In response to the news, shares of Kodiak had jumped up by as much as 150% in the early morning in response to the news but ended the day around 72% higher than it started on Monday morning. Kodiak has been one of the top-performing biotech stocks so far this year, with shares up over 700% since the beginning of the year.
Kodiak Sciences Company Profile
Kodiak Sciences Inc is a clinical stage company. It is engaged in developing innovative therapeutics to treat high prevalence of ophthalmic diseases. The most advanced product candidate of the group is KSI-301, a biologic therapy built with antibody biopolymer conjugate platform, which is designed to maintain potent and effective drug levels in ocular tissue. – Warrior Trading News