Kiniksa Pharmaceuticals, Ltd. (KNSA) Q4 2021 Earnings Report, Transcript and Summary

Thank you for standing by. And welcome to the Kiniksa Pharmaceuticals fourth quarter and full-year 2021 conference call and corporate update. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Rachel Frank, Investor Relation. Please go ahead.

Thank you, operator. Good morning everyone and thank you for joining Kiniksa's call to discuss our fourth quarter and full-year 2021 financial results and corporate update. A press release highlighting these results can be found on our website under the Investors and Media section. As to the agenda, our Chief Executive Officer, Sanj K. Patel will start with an introduction. Ross Moat, our Chief Commercial Officer, will provide an update on the Arcalyst commercial execution; Eben Tessari, Kiniksa's Chief Operating Officer, will follow with a brief review of a recently announced strategic collaboration as well as our portfolio; then Mark Ragosa, our Chief Financial Officer, will review our fourth quarter and full-year 2021 financial results; and finally, Sanj will return for closing remarks and to kick off the Q&A session, for which John Paolini, our Chief Medical Officer, will also be on the line. Before getting started, please note that we will be making forward-looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from these statements. A review of such statements and risk factors can be found on this slide, as well as under the caption Risk Factors contained in our SEC filings. These statements speak only as of the date of this presentation and we undertake no obligation to update such statements except as required by law. With that, I will turn it over to Sanj.

Thanks, Rachel. And good morning, everyone. I'm really happy to review our fourth quarter and full-year 2021 results today. We continue to make a lot of progress in bringing Arcalyst to patients in need and executing across our portfolio of clinical stage product candidates. I'm delighted to report that the net revenue for Arcalyst for the fourth quarter of 2021 was $18.7 million and the total Arcalyst net revenue since our launch in April 2021 was $38.5 million. As Rachel said, Ross will cover our commercial performance in more detail. And as you'll hear, we are very pleased with the success of Kiniksa's first commercial launch. This has been marked by continuous growth in prescriber adoption, expansion in payer coverage, and strong patient adherence. And moving forward, we plan to continue this robust commercial execution. In addition to the launch, we remain focused on building the maximum value across our portfolio of clinical stage product candidates. And these are vixarelimab, KPL-404, which is our CD40 program, and mavrilimumab. Eben will provide an overview of each of these programs. And we continue to be energized by our progress across the entire portfolio, and we believe that we're well positioned for longer term growth. So with that, I'll turn it over to Ross to discuss our commercial performance in more detail. Ross?

Thanks, Sanj. We're thrilled to report that Q4, our third quarter of launch, continued with very positive momentum and ended in great shape with a net revenue of $18.7 million. This represents a 55% growth versus Q3 and results in a total 2021 net revenue of $38.5 million. The primary driver of our results has been the steady incremental growth of recurrent pericarditis demand and the increase in uptake by prescribers. The other indications that we support, CAPS and DIRA, remain broadly consistent and stable with previous quarters. With three quarters of launch under our belt and greater experience in the commercial marketplace, we're providing a net revenue guidance for 2022 of between $115 million and $130 million. On slide 8, I will dive into more detail on the drivers behind the recurrent pericarditis revenue. We're extremely happy with the growth that we've seen to date and the results represent a continued steady uptake and adoption of Arcalyst from physicians, payers and patients in this previously unmet and debilitating ultra-inflammatory cardiovascular disease. We have seen a consistent increase in the prescriber base since launch, with over 300 individual prescribers who had written Arcalyst for recurrent pericarditis by the end of Q4. In 2021, we placed a huge emphasis on improving the awareness of both the disease and Arcalyst for treatments. As a result of these efforts, we are now starting to see an increase in repeat prescribers where a physician who has already prescribed Arcalyst since launch identifies and treats subsequent patients. The proportion of prescribers who have written for two or more patients has consistently increased each quarter, off an ever increasing base. At the end of Q4, 17% of the total prescriber base, meaning more than 50 physicians, had already become repeat prescribers. On the payer side, market access continued to be strong, meaning that patients and prescribers can have high confidence that their prescription will result in access to treatments. In Q4, the approval rates of completed cases grew to 95%. In terms of duration, of all of the payer approval since launch, the median time prior to requiring a preauthorization from payers is one year. Additionally, two-thirds of Arcalyst prescriptions were also written for one year of therapy. And while it's still too early to know, the average duration of therapy, approximately 70% of the recurrent pericarditis patients who started Arcalyst in the second quarter of 2021, was still on therapy at the end of the year. Overall, we're very pleased with what we're seeing in the real world. And as the data builds, we look forward to sharing more information on the duration of therapy. And turning to slide 9, I would like to highlight several key points on the demographics of those patients who are receiving Arcalyst treatments for recurrent pericarditis. Firstly, from the market research conducted on current prescribers of Arcalyst, we see that the highest share penetration is within those patient groups we have been targeting and then representative of the RHAPSODY population who are suffering from multiple recurrences and the highest burden of disease. Secondly, and owing to Arcalyst's broad label, in some cases, physicians are also exercising their flexibility to prescribe for patients who are earlier in their disease course and on their first recurrence. Regarding prior therapists, we're seeing the patients are largely coming from NSAIDs and colchicine, which is what we had hoped to see, and a smaller proportion are coming from corticosteroid treatments. This demonstrates that we're making good progress in our goal for Arcalyst to be positioned immediately after NSAIDs and colchicine and prior to corticosteroids. Our recent research also shows that there is a 60/40 split in whether the patient is actively in a flare at the time of prescribing Arcalyst. This is important information as we know the majority of patients are in between flares and are often suffering in silence with residual pain or anxious and in fear of their next flare. Our messaging emphasizes Arcalyst's ability to reduce the risk of future recurrence by 96%. So, it's encouraging to see physicians utilize the preventative part of the indication. And on slide 10, I would like to highlight how we're interacting with patients and healthcare professionals to increase the awareness of recurrent pericarditis and Arcalyst. We've been very active, delivering disease education through our field team, social media, patient advocacy supports and direct advertising. For example, a couple of weeks ago, we held a national webinar with over 60 registered patients where a leading cardiologist shared his experience and interviewed a patient who has been receiving Arcalyst for the last six months. Through these activities, we're increasing the awareness. And at the same time, we've built a database of over 2,300 patients and caregivers across the US who have opted in to receive further education on the disease and treatment. In Q4, we initiated a tailored communication plan to this patient group, designed to provide targeted information on recurrent pericarditis depending on their stage in the disease and to give them the tools and resources to ask their physician about Arcalyst. And throughout 2022, we plan to accelerate our efforts even further and reach even more patients. Before handing the call over to Eben, I'd like to reiterate how excited we are about the sequential growth that we've made since launch. We truly believe Arcalyst is becoming recognized as a breakthrough treatment that provides a targeted approach to the underlying driver of this disease. Eben, over to you.

Thanks, Ross. Slide 12 is a high level overview of a strategic collaboration we announced this morning with Huadong Medicine to develop and commercialize Arcalyst and mavrilimumab in the Asia-Pacific region excluding Japan. Kiniksa will receive $22 million upfront and is eligible to receive up to approximately $640 million in specified development, regulatory and sales base milestones. Kiniksa is also eligible to receive tiered royalties ranging from the low teens to the low 20s on annual net sales. Huadong obtains exclusive rights and responsibility for the development and commercialization in the Asia-Pacific region and Kiniksa will otherwise retain all existing development and commercialization rights for both assets. Through this collaboration, we're accelerating our ability to bring multiple therapeutics to patients suffering from severe autoimmune and auto-inflammatory diseases across the Asia-Pacific region. Additionally, the collaboration provides non-dilutive capital and resources to expand our clinical trials into the region to help accelerate our drug development and commercialization efforts. Moving to slide 13, I'll provide a brief overview on where we stand with our three clinical stage programs. Starting with vixarelimab, we are currently enrolling a global randomized, placebo-controlled Phase 2b dose-ranging study in prurigo nodularis. Given we expect data from the Phase 2 trial of vixarelimab in the second half of this year, I'm going to spend some time walking through some of the key areas of potential differentiation for this molecule in the subsequent slides. But before that, for KPL-404, we're enrolling in dosing a Phase 2 proof of concept study in rheumatoid arthritis. RA is a disease where dose response has been well characterized and this 12-week study is designed to provide not only PK characterization, but also an early signal of efficacy with chronic administration in this population. The results from this study may also enable optionality to evaluate the therapeutic potential of KPL-404 across a range of autoimmune disease diseases, with pathologies believed to be mediated by CD40 signaling. As for mavrilimumab, we remain highly encouraged by the potential broad utility of mavrilimumab which has demonstrated positive clinical data across multiple indications. We're evaluating mavrilimumab for the development in cardiovascular diseases where the GM-CSF mechanism has been implicated and that has synergies with the company's existing commercial infrastructure. Moving to slide 14, you can see the details of the KPL-716 study in prurigo nodularis in more detail. And as you can see, we're enrolling and dosing patients across a range of once-monthly dosing regimens. The primary efficacy endpoint is the percent change from baseline and weekly average worst itch NRS at week 16. The objective is to define a minimum effective dose level with practical monthly subcu dosing. A key secondary efficacy endpoint is the proportion of patients achieving a score of 0 or 1 in PN-IGA at week 16, which could be a key differentiator owing to the additional blockade of oncostatin M in addition to IL-31. Slide 15 highlights that, based on our Phase 2 data, we believe vixarelimab has the potential to deliver a differentiated profile based on its novel mechanism of action and dosing regimen compared to other assets in the development for prurigo nodularis. We believe vixa is differentiated because it blocks both IL-31 and oncostatin M, the latter of which has been implicated in both fibrosis and hyperkeratosis. Furthermore, with a prevalence of around 300,000 patients in the US, we believe prurigo nodularis could be a meaningful commercial opportunity even with multiple other launch products. And from there, I'll turn it over to Mark.

Thanks, Eben. Good morning, everyone. Over the next few minutes, I'll walk through our fourth quarter and full-year 2021 financial performance and review our 2022 financial guidance. You can find our detailed financial information in today's press release. And I'd like to call your attention to a few items. First, fourth quarter and 2021 revenue, driven primarily by Arcalyst sales from recurrent pericarditis, was $18.7 million and $38.5 million respectively. Second, as a reminder, Kiniksa is responsible for the sales and distribution of Arcalyst for the approved indications in the US, including CAPS and DIRA, and splits profits on sales 50/50 with Regeneron after deducting 100% of profit-split eligible COGS, 100% of field force expenses and commercial and marketing expenses subjected to specified limits. In the fourth quarter, the Arcalyst collaboration generated a profit of approximately $1.7 million, following three quarters of commercial availability for recurrent pericarditis. This resulted in a collaboration expense in the fourth quarter of approximately $835,000, which is reflected as a separate line item within our operating expenses. Third, Kiniksa's overall net loss was approximately $36.3 million and $157.9 million for the fourth quarter and full-year 2021 respectively. And lastly, returning to our financial guidance, we expect continued commercial execution to drive total 2022 Arcalyst net revenue between $115 million and $130 million. And as previously disclosed, we ended 2021 with cash reserves of approximately $182 million, which we expect to fund our current operating plan into 2024. With that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. It's a really exciting time for Kiniksa. In addition to the success of our commercial launch in recurrent pericarditis, we're also building a footprint as an emerging leader in the development of immune-modulating therapies. The collaboration we've announced today in the Asia-Pacific region with Huadong Medicine is aimed to help accelerate the development and commercialization of Arcalyst and mavrilimumab. We're also really encouraged by the data with vixarelimab in prurigo nodularis and KPL-404 of CD40's potential in a range of autoimmune diseases. And we look forward to evaluating mavrilimumab in cardiovascular diseases that have synergies with our existing commercial infrastructure. Importantly, as Mark mentioned, we are well capitalized and we have a cash reserves that are expected to fund our operating plan into 2024. And ultimately, we are determined to continue to help patients in need and firmly aim to fulfill our plan of becoming a global generational company. So with that, I want to thank everyone for your time today and I'll turn it back to the operator for the Q&A session.

[Operator Instructions]. Our first question comes from the line of Anupam Rama from J.P. Morgan.

Congratulations on the quarter. Just a quick question on the Arcalyst launch. Thinking about 2022, specifically for 1Q, is there any seasonality with payer or gross to net dynamics we should be considering specifically for the quarter?

There are the typical dynamics in Q1, not specifically related to Arcalyst, but just broader for the markets such as insurance plan changes, we may have to support patients through bridges, they kind of change insurance plans, the copay, resets and so on, that happened at this time of the year as well. So there are definitely extra headwinds that we have there that we're focused on in Q1. But, ultimately, as it relates to gross to nets, we obviously haven't shared our year-end gross to net yet. But in our Q3 10-Q, the year-to-date was around 10%. So, whilst we expect to like in Q1, you see some fluctuations quarter to quarter, particularly in the early stages of launch, ultimately, we don't really anticipate any kind of big swings in either direction and just expecting the gross to net to be relatively consistent over time.

Our next question comes from the line of Paul Choi from Goldman Sachs.

One on KPL-404 please. As you're advancing here through RA and thinking about the path forward there, can you maybe talk to us about how you're thinking about positioning it in the initial indication and just how you're thinking about potential commercialization path there, just given the level of crowding in the indication? And then, secondly, what would be your focus area for next development, assuming positive proof of concept here?

The Phase 2 program is really designed not as part of a proof of concept approach, but really the multiple ascending dose portion of the Phase 2 trial, establishes the ability of KPL-404 to be given subcutaneously and to target the receptor and to demonstrate an early signal of efficacy. And that information from the PK portion of the study actually helps us bridge not only into the proof of concept portion in RA, but also into other potential indications. And so, that's really where the strong utility comes. And I think Eben may have some additional comments about the fact that KPL-404 is a high concentration liquid formulation that allows for subcutaneous dosing, and that could also form the foundations of additional differentiation. Eben, over to you.

Coming out of this proof of concept study, I think we'll have a pretty good view as to the power of the mechanism and the ability to differentiate from other CD40 antagonists in the space.

Ross, I'm not sure if you want to make any comments on the commercial front. But certainly, as John and Eben have talked about, the indication for rheumatoid arthritis is primarily as a proof of concept. Obviously, we're looking forward to seeing the PK characterization and potential efficacy indications in the second half of this year. But really, the idea was to then hopefully have the sort of an opportunity to jump into other rarer indications where there is a potential for us to show differentiation and potentially be first in class and the first treatment option for patients in other disease areas. But, certainly, we understand that rheumatoid arthritis is a very crowded marketplace. That isn't our primary focus for a commercialization at this point, but certainly be great to get that result in the second half of this year. Ross, anything to add?

No, I think that's been covered well, Sanj. We really believe in the utilization of KPL-404 across multiple diseases that we're very excited about for the future.

Our next question comes from the line of David Nierengarten from Wedbush Securities.

I have a couple of questions. A quick commercial one on the 60% of patients who aren't flaring when presented and prescribed Arcalyst. I don't know if you could describe kind of their patient history or general patient profile. Are they patients who have been third or fourth line recurrent and the doctor is obviously prescribing to prevent recurrence? Are they a little bit earlier in their disease? Curious about that. And then, on 404, I didn't quite catch it. With the announcement, a comment on the xenotransplant use – or potential use, is organ transplant a – do you have a future direction for you that you're considering or is that a one-off? I hate to say experiment, one-off use in that patient.

Maybe I'll make a comment on the latter part. And then, John or Ross can jump in as far as the earlier question on Arcalyst. But, yeah, we're certainly very excited by the xenotransplantation that occurred at the University of Maryland. Obviously, there's a great team there. We've really enjoyed working with them. Yeah, very excited. So far, the patient from what I understand continues to do well. It certainly has the potential that we will consider other ones at this point. There's nothing to disclose, but we're certainly very interested in continuing to understand the real potential for our CD40, KPL-404's potential in xenotransplantation. So, I'd definitely watch this space, David. I think it's very, very exciting. Ross, do you want to cover the Arcalyst question?

So, yes, you're picking up on the 60% of patients who are not actively in flares since the time of launch, the patients have gone on to Arcalyst. This is really from market research of a subsection of prescribing physicians that we've worked with through market research to try to understand some of the patient dynamics. So, we were very pleased when that result came back that that there is a good healthy spirit between patients who are in a flare and going into the clinic in debilitating pain and so on and having Arcalyst prescribed to them at that stage. But also, I went to the broad label that we have, which I think is important for two things. One is, the label does not stipulate how many recurrences a patient must have before prescribing Arcalyst and also does not stipulate whether the patient must actively be in a flare or not. And we're very pleased with the data coming out of our Phase 3 RHAPSODY study of the 96% reduction in risk of future flares that physicians are really taking that on board and delighted with that market research results showing that they're not only waiting for patients to attend the clinic or the emergency department in debilitating pain, but are really utilizing it to prevent patients to try to give them an opportunity of a life free of flares. And that's very much how we'd like the drug to be used. So very happy with, what came out of the market research there. We expect the 60% not in flares is very much within our target population of those two or more recurrences. However, there's the 14,000 patients that we're very focused on as a field team perspective in a very targeted approach.

And then, a quick follow-up. I presume that there hasn't been a noticeable difference in payer response to that in patients being able to obtain their prescriptions?

Yeah, correct. No noticeable differences there. Pleased with the payer uptake. Previously, we said it was above 90% in Q4. Actually grew to 95% of all the completed cases gaining an approval, so we're seeing very broad coverage there. And as you can see from the slide on the demographics, some of those patients had two plus recurrences. In fact, most of them are, but some are on their first recurrence. And so, we're seeing kind of broad access across the group. And also, if you think about whether it's commercial, Medicare, Medicaid as well, we're also seeing strong access across all of the payer mixes as well.

Our next question comes from the line of Geoff Meacham from Bank of America.

Hi, this is Alex Hammond on for Geoff Meacham. So, you mentioned that 70% of RP patients data on Arcalyst treatment, Can you provide any color on why 30% of the patients discontinued treatment? Was is just that they completed their treatment regimen? And then one additional question, can you provide any color on the decision not to initiate a Phase 3 trial of mavri for GCA? And what other indications are you thinking about moving forward?

We announced, out of those patients who started Arcalyst therapy in Q2, which was our first launch quarter, 70% of them were still on therapy at the end of 2021, meaning that 30% had stopped. I think your analysis is probably correct that many of those patients would have just completed the intended course of treatments and in decision either by the patient or with the physician decided to try to stop medication. There also could be other reasons as well, of course, a patient stopping, which could be just multifaceted, but generally being very pleased with the number of patients who remained on therapy through that time period, which means that many of those will be kind of six to nine months' worth of treatment duration. Of course, 70% of them still remain on therapy, which is why we need more time to work through what the average duration will be further down the line and look forward to sharing more data there.

Let me start by saying we continue to be very excited by the progress we've made with mavrilimumab. And as you know, that's demonstrated robust safety and efficacy across multiple indications to date. You're right, this morning, we did announce that we're evaluating development of mavri in cardiovascular diseases, and this is where the GM-CSF mechanism has been implicated. And certainly, we've got synergies with our existing commercial infrastructure. So rather than initiating a Phase 3 trial in GCA, we certainly are moving in that direction. At this point, we feel that strategy offers the greatest potential value, certainly, given the fact that the competitive landscape in GCS evolved significantly since we began the mavri trials in GCA. But also that we've already built a specialty cardiovascular sales force to help commercialize Arcalyst and we believe could also be leveraged to cover some indications in that similar area with mavrilimumab. Obviously, on top of that, we've announced this morning the collaboration with Huadong Medicine. It's very exciting. And that will obviously [indiscernible] for Arcalyst and mavrilimumab in the cardiovascular space, potentially. So, very exciting movement there. And we will continue to be very jazzed by mavri in general.

Our next question comes from the line of Liisa Bayko from Evercore ISI.

Just a couple of questions. First, for rilonacept, can you break out sales between RP and CAPS?

We have it directionally shown on one of the slides as well, breaking out the $18.7 million. But, ultimately, CAPS and both DIRA as well really remain stable. So, I think you'll probably see, historically, it was around kind of $2.5 million to $3 million a quarter in CAPS and DIRA revenue. And that's kind of what we're seeing continue to play through.

And then, for vixarelimab, can you talk about your expectations for this next data read out at week 16? Because it was a little longer than you've treated before. You're studying lower doses. Should we expect the data to be relatively consistent with what we've seen before, even though – sorry, you're not saying lower doses, less frequent dosing. How should we think about kind of that? And what do you want to see in this next data set to kind of feel like you're in a good competitive position in terms of the different efficacy metrics you're looking at?

You're absolutely right that the Phase 2b program is really a continuation of the Phase 2a program. Remember that the Phase 2a program had endpoints at eight weeks and we used weekly dosing of vixarelimab subcutaneously in order to really test a high subcutaneous dose to give the raw horsepower of the mechanism. What we saw there was a reduction in pruritus that was rapid and sustained. And we also saw, through the PN-IGA score, of almost clear attainment of 0 to 1, that there was also lesion resolution that occurred very rapidly. So, it met the endpoint that we gave, but even got to that point even at week six with curve separation at week 4. So, we believe that that may be part of the second mechanism of vixarelimab beyond IL-31 inhibition to block OSM as well. So carrying forward into Phase 2b, it's really to define, as Eben said, a minimum efficacious dose. And the way that we do that is to then explore lower concentrations of drug. And so, the monthly dosing, and you can see this in our slides that are posted on the on the web, that show that we're exploring lower doses and also extending of the interval of dosing in order to probe those lower concentrations. The study is powered, of course, to demonstrate similar outcomes in terms of reduction in pruritus as well as 0 to 1 attainment on the IGA. And we've extended the primary efficacy endpoint to week 16 in order to provide greater resolution on those endpoints as well as to get additional exposures with a primary study as well as the long-term extension.

Just for KPL-404, I know you've just recently initiated the study in RA and you're looking at different cohorts. Should we expect any readouts of those different dose cohorts this year? Is that really something more next year or thereafter? Can you give us a sense of timing?

We haven't actually disclose when we expect data from that. So, we've, obviously, as you said, started enrolling in multiple sites. So, we're looking forward to that. But we'll obviously come back to you in the future date when we know a bit better handle of when we expect to have results.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sanj Patel, Chief Executive Officer, for any further remarks.

Thanks, operator. No, just very pleased, obviously, with the court and the full-year 2021 results. Got an awful lot going on, excited with the Huadong Medicine collaboration. It can only help us fuel, accelerate our development. So, thanks for joining in and stay tuned. Cheers.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.