Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) Q4 2022 Earnings Call Transcript

Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Good day, and thank you for standing by. And Welcome to the Kiniksa Pharmaceuticals’ Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session . 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 of Investor Relations. Please go ahead.

Rachel Frank: Thank you, operator. Good morning, everyone. And thank you for joining Kiniksa’s call to discuss our fourth quarter and full year 2022 financial results and recent portfolio application. A press release highlighting these results can be found on our Web site 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 ARCALYST commercial execution; then Mark Ragosa, our Chief Financial Officer, will review our fourth quarter and full year 2022 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 as under the caption of 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 looking forward to reviewing our fourth quarter and full year 2022 financial results today. In 2022, we continued to execute across our cardiovascular and autoimmune franchises, which positions us for continued success and growth in 2023. On the commercial side, as we announced in January, Q4 represented another quarter of continued growth for ARCALYST. The net product revenue of $39.9 million represents approximately 20% sequential growth versus the previous quarter Q3. Our full year 2022 net revenue of $122.5 million is right in the middle of the guidance we gave at the beginning of the year, which was $115 million to $130 million. We are very pleased with our commercial execution to date.

And as we move into the year ahead, we’re highly focused on reaching more patients with recurrent pericarditis by expanding the breadth and depth of our prescriber base. Ross will provide more details on this in a few moments. We also remain focused on building the maximum value across our portfolio of clinical stage assets, including KPL-404, which is our CD40 antagonists program. We’re currently conducting a Phase 2 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. In terms of where we are right now with this program, we fully enrolled the first and second cohort of the PK lead-in and we’re now focused on starting the third and final cohort, which is the efficacy portion.

We expect the proof of concept data from this study in the first half of next year. We continue to pursue collaborative study agreements with mavrilimumab to evaluate potential in rare cardiovascular diseases. This is a molecule that we continue to be excited about and has the potential to impact a number of diseases. And with that, I’ll turn it over to Ross to review our commercial execution of ARCALYST. Ross?

Ross Moat: Thank you, Sanj. I’m pleased to share further details on our fourth quarter and full year 2022 commercial performance, and our plans for continued growth in recurrent pericarditis. Throughout the year, we continued to deliver solid sequential quarter-on-quarter growth of ARCALYST revenue. The growth in Q4 resulted in a net revenue of $39.9 million, representing approximately 20% sequential growth versus the prior quarter. This means our full year 2022 net revenue was $122.5 million. Our team has continued to activate an ever growing prescriber base and there are now more than 800 unique prescribers for recurrent pericarditis since launch, which is a growth of more than 100 additional new prescribers every single quarter.

We continue to hear from both prescribers and patients that they are having a positive experience with ARCALYST, and this is resonating in the repeat prescriber rate where considering we have a larger overall prescriber base, we have maintained about 22% of the total prescriber base who have written for two or more patients. Slide 8 outlines some of the key metrics and drivers of the ARCALYST growth. Since launch, we’ve been laser focused on the 14,000 target population of recurrent pericarditis patients who have had two or more . By the end of 2022, we have achieved $122.5 million in net revenue by activating approximately 5% of this target population on ARCALYST treatment. This penetration demonstrates that ARCALYST is being well received.

We have meaningful and growing revenue and we continue to have a significant opportunity ahead of us. The payer approval rates in Q4 remains greater than 90% of all completed cases as it has been every quarter since launch. Another important driver of growth, which I will highlight in more detail on the next slide is duration of therapy, which is currently at approximately 18 months in total. Additionally, compliance continues to be strong with greater than 85% with refills generally completed on time, highlighting that once a patient starts on therapy they see the benefits and stay adherent throughout the duration. Our gross to net also continues to be very healthy and 9% overall in 2022. All these metrics points in the direction of a successful progressive commercial launch with significant room for substantial growth, and we’re extremely excited by what we can achieve with this franchise.

I’d like to take a moment to highlight the total duration of therapy metric I mentioned on the previous slide. As we follow more patients over longer periods of time, we believe the average total duration of therapy is now at approximately 18 months. This may continue to evolve but what we’re seeing in the commercial setting is that initially patients are staying on treatment for around 12 months and then a high proportion approximately 45% are restarting treatment fairly quickly after trial and stop. This reflects what we know about the persistence of the disease where 60% of multiple recurrence patients suffer for two years and from our clinical data showing that continuous treatment with ARCALYST throughout the disease results in the long term prevention of flares.

We acknowledge that treating this debilitating and complex disease with ARCALYST requires an evolutionary mindset and practice for cardiologists. Whereas the focus in the past was aimed at minimizing treatment duration, in particular with steroids due to their toxicity burden and potentially worsening and prolonging the disease. But now with ARCALYST the aim is to treat continuously throughout the duration of the disease and we are rapidly advancing the education on this to cardiologists across the US. Our commercial launch strategy has been successful and now we are continuing to execute and enhance this strategy to reach many more patients in 2023 and beyond. We’re focused on a dual approach of continuing to broaden our base of prescribers as well as deepening the depth of repeat prescribers.

At the end of last year, we expanded our sales force to around 50 sales representatives, which we believe will enable greater core frequency with our target doctors as well as broaden our reach overall. We understand the importance of having multiple calls on our target base and how to provide the education needed to ensure cardiologists become comfortable with addressing the root cause of recurrent pericarditis by prescribing a targeted biologic therapy. We are planning to make far stronger inroads into digital marketing, having built a patient database of more than 3,000 pericarditis patients where we will advance the education so patients can self-advocate for ARCALYST if and when patients have their next recurrence. Currently, patients are widely spread throughout the country.

We plan to lead the charge to support centers who wish to advance their services by focusing on pericardial diseases and creating networks of local referrals to centers who specialize in the management of these diseases. We also want to be at the leading edge of evidence generation. For example, with our longitudinal registry called RESONANCE, which is focused on the severity and burden of the disease, as well as understanding and educating further on the outcomes associated with appropriate disease management. And turning to Slide 11, our efforts on commercializing the first and only FDA approved drug for recurrent pericarditis has resulted in a cracking launch, with hundreds of patients gaining access to therapy. The next stage for us is to dig much deeper into the opportunity.

We believe we have built strong foundations that do just that. Our data are exceedingly compelling. We have an ever growing prescriber base. Physicians and patients are reporting positive experiences with ARCALYST, and we have an excellent field team who are executing our strategy brilliantly. Looking to 2023, we expect to grow our ARCALYST net revenue to between $190 million and $205 million. This would represent a significant year-on-year growth of greater than 60% at the midpoint of that range. We’re delighted with our current commercial performance and are very excited about the growth we have ahead. With that, I’ll hand over to Mark to cover our financial results.

Mark Ragosa: Thanks, Ross. Good morning, everyone. Over the next few minutes, I’ll walk through our fourth quarter and full year 2022 financial performance and review our 2023 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 total revenue was $61.9 million and consisted of ARCALYST net product revenue of $39.9 million, as well as collaboration revenue of $21.9 million from our license agreement with Genentech. Full year 2022 total revenue was $220.2 million and consisted of ARCALYST product revenue of $122.5 million, as well as collaboration revenue of $97.7 million from our license agreements with Huadong Medicine and Genentech.

Second, ARCALYST collaboration profit grew to $15 million in the fourth quarter and collaboration expense was $7.5 million. Full year 2022 ARCALYST collaboration profit was $36.2 million and collaboration expense inclusive of a $6 million payment related to our license agreement with Huadong was $24.1 million. Third, over the course of the year, net income benefited from collaboration revenue, as well as the release of evaluation allowance on non-cash deferred tax assets. For the fourth quarter and full year 2022, net income was $4.5 million and $183.4 million respectively. Lastly, turning to our financial guidance. As Ross just mentioned, we expect total 2023 ARCALYST net revenue of between $190 million and $205 million, and we ended 2022 with cash reserves of $190.6 million.

We expect these reserves as well as continued ARCALYST commercial execution to fund our current operating plan into at least 2025. And with that, I’ll turn the call back to Sanj for closing remarks.

Sanj Patel: Thanks Mark. We believe there is a lot to be excited about as we move into the rest of the year. As a corporation, we’re revenue producing and continue to have a profitable ARCALYST collaboration. And as both Ross and Mark mentioned, we expect that full year 2023 net product revenue of $190 million to $205 million, which represents greater than 50% growth year-over-year at the midpoint of that range. As I mentioned previously, in addition to our successful collaboration and commercialization of ARCALYST and recurrent pericarditis, we also have a pipeline of mid-stage clinical programs aimed at making a big impact on patient lives. As a reminder, we’re enrolling patients in the Phase 2 study in rheumatoid arthritis and we expect data in the first half of next year.

Importantly, we are well capitalized. We have growing ARCALYST revenues, non-diluted capital from strategic out-licensing in transactions and continued financial discipline, which all supports providing us cash runway into at least 2025. Ultimately, our mission is to continue to help patients in need create massive value and make a generational impact. And with that, I want to thank all of you for your time today. And I’ll hand it back to the operator for questions.

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Q&A Session

Operator: And our first question comes from Anupam Rama from JP Morgan.

Anupam Rama: Here’s a quick question on the guidance. What’s that delta between the bottom end and the top end of the guidance range of $190 million to $205 million, is it just trade market penetration and seasonal factors we should be considering, is it compliance, reintiation post dosing, what metrics should we be considering there? And then a quick second question. What types of pull through are you seeing from the expanded sales force?

Ross Moat: I think the guidance is one, first. So we’ve provided guidance, which is $50 million delta, which is the same as what we provided last year, as well knowing that there were some uncertainties, of course those things that you mentioned, the prescriber continued growth and the growth in the fee prescribers, compliance and adherence rates as well. Also the total duration of therapy, which we announced today that is — we’re expecting 18 months worth of duration, which is higher than what we announced in previous quarter. So I think there’s multiple facets there that are important going into the guidance, which we’ve provided the range and look forward to executing against that. But the feedback we get from the field is incredibly positive.

The thing that we realize is that patients are dispersed around the US. So we’re delighted to have a 5% penetration into the 14,000 target populations so far, but we’ve got a lot more work to do to get the message out there, create awareness, create familiarity and comfortable — physicians to be comfortable in prescribing ARCALYST when they see appropriate patients. So we’ve got to keep driving that penetration throughout the year. On the sales force, we haven’t really provided many more metrics around that yet, this is really our full year ’22 and Q4 earnings call. And we’ve built the field team, we expanded field team throughout Q4 with an aim to have everyone in place by the end of the year. So it’s a bit too early to kind of judge what that is yet.

Although, we’re really happy with the people that we’ve been able to recruit at a very high number of applications into clinics to come and join our exceptional current team. And are pleased with who came in, obviously, then we completed some onboarding and training, which we are very rigorous doing as well. So that takes up some time. And then for the fields to kind of be out there in the field making a difference. And we’ve seen an uptick in activity rates associated with that in Q4. And we wait to see what the throughput of that is in the results in terms of enrollments and new patients coming onto therapy as we move throughout the year.

Operator: And our next question comes from Paul Choi from Goldman Sachs.

Paul Choi: I also want to ask a question on the guidance, particularly with regard to any sort of patient behaviors, and then if you have seen anything exiting the fourth quarter that might have indicated some patients economic sensitivity in the RP market and just maybe if you can articulate how much conservatism, because of this, is built into your guidance and then I have a couple of follow-up questions.

Ross Moat: So we haven’t really seen anything of note in Q4 around the kind of economic sensitivity of patients. Of course, this is not our first time now in the commercial setting, getting to the end of the year and of course starting off Q1 as well, and we know that there’s some seasonal implications in our specialty medicine around that around changes of insurance plans, resetting of copays, and all those types of dynamics. So we have an experienced robust patient services team on the Kiniksa OneConnect, which we set out prior to launch and have been amazing in supporting patients all throughout their journey on ARCALYST. So they have very high contract rates with the patients to understand their situations and changes to insurances and so on moving forward.