Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) Q1 2023 Earnings Call Transcript May 6, 2023

Operator: 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.

Rachel Frank: 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.

Sanj Patel: 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?

Ross Moat: 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?

Mark Ragosa: 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.

Sanj Patel: 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.

Q&A Session

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

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

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

Sanj Patel: 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.

Operator: This concludes today’s conference call. Thank you for participating and you may now disconnect.