92 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this report. Overview We are a clinical-stage biopharmaceutical company specializing in novel therapeutics to treat chronic, high-prevalence retinal diseases. Our most advanced product candidate is KSI-301, a biologic therapy built with our antibody biopolymer conjugate platform, or ABC platform, which is designed to maintain potent and effective drug levels in ocular tissues. We believe that KSI-301, if approved, has the potential to become an important anti-vascular endothelial growth factor, or anti- VEGF, therapy in wet age-related macular degeneration, or wet AMD, diabetic retinopathy, or DR, including diabetic macular edema, or DME, and other retinal vascular diseases. KSI-301 and our ABC Platform were developed at Kodiak, and we own worldwide rights to those assets, including composition of matter patent protection with respect to KSI-301. We have applied our ABC Platform to develop additional product candidates beyond KSI-301, including KSI-501, our bispecific anti- IL-6/VEGF bioconjugate. We intend to progress these and other product candidates to address high-prevalence ophthalmic diseases. We initiated our first-in-human, single ascending dose Phase 1a clinical study of KSI-301 in the United States in nine patients with severe diabetic macular edema in July 2018. We successfully dosed all patients at the pre-planned dose levels and reached the 12-week last visit in November 2018. The last visit (twelve-week) data demonstrated safety and durability of responses following the single dose of KSI-301. Notably: • Rapid high-magnitude and durable treatment responses were seen at all dose levels tested in a heavily pre-treated Phase 1 patient population. • Twelve weeks after a single dose, median vision improvement from baseline of almost two lines of vision (9 eye chart letters) and median improvement in retinal edema of 121 microns were achieved across all three dose levels tested. • No dose-limiting toxicities, drug-related adverse events, or intraocular inflammation were observed through each patients' last visit at 12 weeks. In the fourth quarter of 2018, we initiated an open-label, multiple-dose Phase 1b study of KSI-301 in the United States in treatment naïve patients with wet AMD, DME/DR, and retinal vein occlusion and expect to complete enrollment of these cohorts of patients in 2019. We intend to present on-going data from the Phase 1b study at medical and investor meetings in 2019. Having successfully demonstrated early safety and tolerability in the Phase 1 study, with the additional observations around bioactivity and durability, we plan to further evaluate the highest dose tested of KSI-301, 5 mg, in a series of Phase 2 studies in wet AMD and DME/DR. We expect to be enrolling patients in a global Phase 2 study of KSI-301 in wet AMD in the second quarter of 2019. This study is intended to evaluate the non-inferiority of intravitreal KSI-301 dosed on an every 12-, 16- or 20-week regimen compared to standard of care aflibercept dosed every 8 weeks. The FDA indicated that this study, if successful, can be supportive of a marketing application for KSI-301, and we are designing and intend to execute this Phase 2 study as a pivotal study, with an option for an administrative interim analysis in 2020. A primary data readout is anticipated in 2021. We additionally plan to initiate two Phase 2 studies in China, one in wet AMD and one in DME, and we are planning for these studies to have the same clinical design frameworks as our United States and European Union studies. We are on track to hold our China pre-IND meeting for KSI-301 in the first half of 2019. Since inception in June 2009, we have devoted substantially all of our resources to discovering and developing product candidates and manufacturing processes, building our ABC Platform and assembling our core capabilities in drug development for ophthalmic disease. We plan to continue to use third-party contract research organizations, or CROs, to carry out our preclinical and clinical development. We rely on third-party contract manufacturing organizations, or CMOs, to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates. We currently do not need commercial manufacturing capacity. We do not have any products approved for sale and have not generated any product revenue since inception.