Kiniksa Pharmaceuticals, Ltd. (KNSA) Q1 2023 Earnings Report, Transcript and Summary

Good day and thank you for standing by and welcome to the Kiniksa Pharmaceuticals First Quarter 2023 Earnings Conference Call. [Operator Instructions] And please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rachel Frank, Head, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining Kiniksa's call to discuss our first quarter 2023 financial results and recent portfolio execution. A press release highlighting these results can be found on our website under the Investors & Media section. As for 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 our outlook commercial execution. Then Mark Ragosa, our Chief Financial Officer, will review our first quarter 2023 financial results. And finally, Sanj will return for closing remarks and to kick off the Q&A session for which Eben Tessari, our Chief Operating Officer; and 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 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 happy to review our first quarter 2023 financial results today. We have continued to execute across our cardiovascular and autoimmune franchises which positions us for success and growth in 2023. On the commercial side, Q1 represented another quarter of growth for ARCALYST with a net product revenue of $42.7 million. We are encouraged by our commercial execution to date. And with recent increased prescriber adoption and patient enrollments, we're seeing clear signs of success from our field team expansion. We've also continued to see high patient satisfaction, strong payer approval rates as well as longer duration of therapy. With that in mind, we have raised our 2023 expected ARCALYST guidance range to $200 million to $215 million. We also remain focused on building the maximum value across our portfolio of clinical stage assets and that includes KPL-404 which is our CD40 antagonist program. We're currently enrolling the third and final cohort of our Phase II study in rheumatoid arthritis which is designed to evaluate the efficacy, dose response, PK and safety of chronic subcu dosing over a duration of 12 weeks. And we expect data from this study in the first half of next year. Additionally, we continue to pursue collaborative study agreements with mavrilimumab to evaluate its potential in rare cardiovascular diseases. This is a molecule that we continue to be excited about and it has the potential to impact a number of diseases. So with that, I'll turn it over to Ross to review our commercial execution for ARCALYST. Ross?

Thank you, Sanj. ARCALYST has now been on the market for 2 years and I'm delighted to share further details on our first quarter 2023 commercial performance and our plans for continued growth in recurrent pericarditis. We've been very encouraged by the meaningful acceleration in Q1 in both total and repeat prescribers in large part due to our expanded field force. Total prescribers since the launch of ARCALYST in recurrent pericarditis and now in excess of 1,000 which is a growth of more than 200 versus Q4 and is the largest jump we've seen to date. Additionally, repeat prescribers grew to 23% of the much larger total prescriber base. The underlying patient growth seen in Q1 drove a net revenue of $42.7 million, representing approximately 7% growth versus the prior quarter. Our revenue growth is despite the Q1 seasonal related impacts to insurance plan changes and resets of copays which are very typical for specialty drugs in the first quarter of the year. These impacts resulted in a gross to net of 10.7% which is higher than in prior quarters. In addition to growing prescriber adoption, we're also continuing to see high reported prescriber and patient satisfaction and strong compliance and adherence when patients are on therapy. I'll also highlight that the payer approval rate in Q1 remains greater than 90% of all completed cases as it has been every single quarter since launch. Moving to Slide 8. Our commercial launch is focused on building the market and establishing ARCALYST as the standard of care in recurrent pericarditis. In the 2 years since launch, we've gained several insights which have helped inform our tactics. Some of those learnings led to the expansion of our field team from around 30 to around 50 representatives during Q4 of 2022. I'm pleased to share that in the early days of this expansion, our field team are executing well. So far, we're seeing a significant jump in total activity and increased reach and frequency with our target doctors. And as a result of those metrics, we're seeing an acceleration in the total prescriber base and a more meaningful jump in overall patient enrollments than we've previously seen. We believe these are all early indications of the type of impact we need to be making in the marketplace to continue to advance our business and help many more patients suffering from this debilitating disease. In addition to the essence of our sales team, there is an increase in interest as a growing number of both private and academic institutions across the U.S. to build their own referral networks and to streamline patients' access to centers and health care professionals who focus on the treatment of pericardial diseases, in particular recurrent pericarditis. We believe this growth and expertise specific to recurrent pericarditis will help improve patient care in the future. Additionally, we're continuing to make inroads into digital marketing, having built a database of approximately 4,500 pericarditis patients and caregivers where we are advancing education to patients themself advocates for ARCALYST when appropriate. Turning to Slide 9. I'd like to provide an update on duration of therapy. As we follow more patients over longer periods of time in the commercial setting, we've seen an evolving picture in the average total duration of therapy. We have previously seen an average of approximately 18 months and now the latest data we've seen an increase to approximately 20 months. What we're currently seeing is patients are initially staying on treatment for around 14 months before trial and stop. This is an increase of 2 months over what we saw at the end of Q4. Then once patients stop treatment, given the persistence of the disease, many have seen an unmasking of the disease with a return of symptoms until they restart ARCALYST. In fact, approximately 45% of all patients who stop ARCALYST do want to restart the vast majority within 8 weeks of the stop. These factors will continue to evolve the total duration of the treatment and our efforts are placed on educating physicians and patients on the natural history of the disease which is a median of 3 years. And the continued treatment with ARCALYST results in continued treatment response. We continue to be delighted with our ongoing commercialization efforts, including the early results from our expanded field team. These results, along with the feedback that we're getting from physicians and patients, the growth in the prescriber rates, the strong payer approval dynamics and the growth in total duration of therapy, mean that today, we are increasing our 2023 ARCALYST sales guidance from a range of $190 million to $205 million to $200 million to $215 million. We continue to have a growing profitable collaboration with ARCALYST as well as a significant opportunity ahead as we build and develop the marketplace. Two years post approval; we are in a brilliant condition. With that said, we're highly ambitious and we now continue to do what we do best which is driving the opportunity and solidly executing to grow our business and help patients. I'll now hand over to Mark to cover our financial results. Mark?

Thanks, Ross. Good morning, everyone. Our detailed first quarter 2023 financial results can be found in the press release we issued earlier today. I'd like to call your attention to a few items on this slide as well as review our 2023 ARCALYST net product revenue guidance. First, total revenue in the first quarter of 2023 was $48.3 million compared to $32.2 million in the first quarter of 2022. Total revenue in the first quarter of 2023 included ARCALYST net product revenue of $42.7 million and collaboration revenue of $5.7 million from our vixarelimab global license agreement with Genentech. To date, we have recognized close to $94 million of the $100 million upfront and near-term supply payments received from Genentech. We expect to recognize the balance over the course of the next year. Second, ARCALYST collaboration operating profit continued to grow in the first quarter of 2023 and was $16.6 million compared to $4.5 million in the first quarter of 2022. Third, Kiniksa's net loss in the first quarter of 2023 was $12.3 million compared to $25.2 million in the first quarter of 2022. Fourth, we received a $20 million supply-related milestone from Genentech in the first quarter and this inflow limited our net cash burn to approximately $3 million and brought our end-of-period cash balance to $187.5 million. Importantly, these reserves as well as continued ARCALYST commercial execution are expected to fund our current operating plan into at least 2026. Lastly, turning to our financial guidance. With an uptick in enrollment in new-to-brand patients from the recent sales force expansion as well as slightly longer average duration of therapy, we now expect 2023 ARCALYST net product revenue of between $200 million and $215 million. This represents close to 70% year-over-year net product revenue growth at the midpoint and reflects our expectation for continued execution against our opportunity to help recurrent pericarditis patients by reshaping the treatment paradigm with ARCALYST. With that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. As you've heard today and the team has a lot to be excited about in terms of the summary. In addition to our successful commercialization of ARCALYST, we also have a pipeline of mid-stage clinical programs that are aimed at making a meaningful impact on patient wise. As a reminder, we're rolling in the third and final cohort of the Phase II study of KPL-404 in rheumatoid arthritis and that date is expected in the first half of next year. Importantly, as Mark just reviewed, we are well capitalized. Thanks to those growing ARCALYST revenues, non-diluted capital from strategic out-license transactions and our continued financial discipline, we now, as Mark said, have our expected cash runway into at least 2026. Ultimately, our mission is to continue to help patients in need create massive value and make a generational impact. We believe we are strategically positioned to do exactly that. I do want to thank you all for your time today. I'm going to hand it back to the operator for the Q&A session. Thank you.

[Operator Instructions] Your first question comes from the line of Paul Choi of Goldman Sachs.

Congratulations for the quarter. One clinical question to start maybe for John which is, as you look at the landscape in RA and the 404 CD4 program which you're now enrolling the next cohort on, how do you think about what you'd like to see with regard to potential disease activity scores as you top line data here? And what would sort of be the data you'd look for to think about a go-forward decision on your Phase II? And my second question for either Sanj or Eben is, as you survey the landscape for assets, what are your thoughts on valuations for assets that could either fit into either the cardiovascular II phase that would be potentially synergistic with your commercial and/or R&D efforts?

So regarding the expectations, if you will, for the Phase II study that's going on now in rheumatoid arthritis for KPL-404 and what we like about this program is that there's a lot of external proof of concept, as you know, benchmarks in this disease area as well as with this particular pathway of blocking the CD40, CD154 stimulatory interaction. And so we've looked at those benchmarks, if you will, as a way of positioning the size of the study which, as you know, with the parallel design which is going on right now, is really testing the efficacy of the -- essentially very practical 5-milligram per kilo subcutaneous dose administered either biweekly versus placebo and then asking the question whether 5 milligrams per kilo administered weekly, if you see higher plasma concentrations in the model delivers even more efficacy. And our intention is to then compare that against those established benchmarks, whether it was our other assets in the rheumatoid arthritis phase where I think the reductions in DAS28-CRP as well as attainment of low or no disease activity with the DAS28 score. -- are really well-established benchmarks in the disease without going into specific numbers. And then similarly, we can also look at -- maybe the 2, if you will, assets that are in that space as well one CD40 asset and one CD154 targeting asset. And those also have some established benchmarks. So we'll be looking at that. And then the most important is really focusing on our own asset and testing how it is delivering using that practical subcutaneous dose.

In terms of BD, Paul, we continue to be very active, highly active, in fact. We've got a very strong team under Eben looking at a number of opportunities, as you can imagine. There are quite a few things for us to look at right now. And we do believe there are opportunities that could add substantial value. But our bar remains very high and so we'll be very discerning, as you have been to date. And to the extent that we do find something that's tangible, both scientifically and commercially, then we'll obviously elucidate at that point.

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

Just had a few. The first is when you look at ARCALYST duration of therapy, you guys gave some stats on patients who have restarted after discontinuation. The question is, are there themes? And why a patient would discontinue? And obviously, there's a benefit from keeping them on but wondering if there's an effort there to retain patients that initially start therapy. And then, just another one on 404; talk a little bit about how you see the kind of the investments needed here to get to perhaps the next step. Is there a scenario that you could sort of codevelop some indications or some geographies and still retain broader rights?

Geoff, this is Ross. So maybe I'll make a start on the first part which is around the duration which, as we said in the prepared remarks and we've seen a growth in the duration immolation of the duration through to around 20 months in total for patients now. So in terms of the restart rates, that's remained pretty consistent over the last couple of quarters at around 45% of patients who have stopped that eventually gone back on to therapy. The vast majority of those are within 8 weeks of stopping. But of course, some patients do stop and kind of go through for several months and then probably have a flare again and go back on to treatment. And there's not really any correlation right now. Bear in mind, the numbers are still reasonably small and data builds over time in terms of which patients are stopping therapy and which ones are then restarting. Ultimately, it comes down to a judgment with the physician and the patients on how long they've suffered with recurrent pericarditis as a disease which, of course, fluctuates against the time in which they start ARCALYST treatments as well. But ultimately, that judgment from the physician based upon either the patient's baseline characteristics, how long they've suffered from, how many flares they've had, what the cadence of those flares have been or informed through cardiac MRI imaging, for example, looking for whether there's underlying auto inflammation still present within the patients and not for trial in stock. I think there are multiple factors there that go into making that judgment call. I guess it's positive to know that when patients do stop therapy, then they do have ARCALYST there as a safety net to be able to go back on to therapy. And that's well proven that they go under control again very quickly. And continuous treatment results in continuous treatment response. But our focus really is on the education for physicians and for patients around the tenacity of the disease and how long it can persist. And we don't want patients going back and having to restart therapy because they've suffered a flare. Again, we want treatment throughout the course of the disease and adequately treated for the entire duration. So it's an evolving picture at this point. Sorry, Geoff, repeat the second part of your question.

Yes, the other question is just on 404. Obviously, a pretty robust marketplace in I&I but is there a scenario maybe where you codevelop some indications, some geographies? Just wanted to get kind of the strategy there with respect to maximizing the value of the asset.

Yes. No, that's a great question. It really depends on the data and the results. I mean we're certainly open to it. I think you've seen that we're open to sort of creative collaborative deals in the past. But at the same time, the results are excellent and we really believe there's an opportunity for us to do -- go ahead alone and create more value ourselves and capture all of the value or at least most of the value, then we're more than happy to do that as well. I think you've seen that we can commercialize and execute as well as develop. So I think that's important to take in mind. So I think we'll look at all options available, determining which one brings us the most value and then go from there but it's certainly an option.

And there are no further questions. I would now like to turn the conference back to Sanj Patel, Chief Executive Officer.

No, great. Thank you, everybody, for the questions and joining us on the call today. We clearly have an exciting year ahead of us and very much looking forward to providing additional updates in the future. So with that, have a great day. Thank you.

This concludes today's conference call. Thank you for participating and you may now disconnect.