Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) Q1 2024 Earnings Call Transcript April 23, 2024

Kiniksa Pharmaceuticals, Ltd. beats earnings expectations. Reported EPS is $-0.00025, expectations were $-0.14. KNSA isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by and welcome to Kiniksa Pharmaceuticals First Quarter 2024 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. [Operator Instructions] 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 first quarter 2024 financial results and recent portfolio execution. A press release highlighting these results can be found on our website under the Investors section. As for the agenda, our Chief Executive Officer, Sanj K. Patel, will start with the introduction. Ross Moat, our Chief Commercial Officer will provide an update on our ARCALYST commercial execution. John Paolini, our Chief Medical Officer, will provide the abiprubart program review, then Mark Ragosa, our Chief Financial Officer will review our first quarter 2024 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 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.

Sanj Patel: Thanks, Rachel, and good morning, everyone. We are very encouraged with the ARCALYST commercial progress we continued to build upon the ARCALYST performance this quarter, marked by reaching an increasing number of recurrent pericarditis patients and growing to a net product revenue of $78.9 million. We continue to see strength across key commercial drivers including growing prescriber adoption and high physician and patient satisfaction, which is been supported by our focus on frequent engagement with the existing and potential prescribers. Importantly, we're also seeing an expanding utilization of ARCALYST as a steroid-sparing therapy for patients suffering from recurrent pericarditis. Looking to the year ahead, we now expect ARCALYST full year sales to be between $370 million to $390 million and this would represent 63% year-over-year growth at the midpoint.

In terms of our pipeline, we recently announced plans to initiate a Phase 2b trial with Abiprubart in Sjögren’s Disease. This is a debilitating disorder with no current FDA approved therapies and we believe Abiprubart has the potential to provide meaningful benefit to patients. Dr. John Paolini, our Chief Medical Officer will provide additional details about our planned Phase 2b trial, which is expected to initiate in the second half of this year. And with that, I'll now turn it over to Ross to review our commercial execution.

Ross Moat: Thank you, Sanj. I want to start by highlighting that the end of Q1 marks the third anniversary of the approval of ARCALYST in recurrent pericarditis and we continue to deliver robust growth and be excited by the future of this franchise. In Q1, ARCALYST net revenue was $78.9 million, which is an 85% growth versus Q1 of 2023. This revenue growth also represents strong quarter-on-quarter growth especially against the backdrop of Q1 specialty industry headwinds and a gross to net of 13.5%, which was predominantly due to co-pay resets. The net revenue growth was in part due to an acceleration in the number of prescribers. Total prescribers of ARCALYST since launch grew to approximately 2,000 at the end of Q1 making it the largest quarter-on-quarter growth since launch.

Additionally, we continued to observe robust underlying fundamentals across our commercialization including greater than 90% payer approval of completed cases, a total average duration of therapy of 23 months and high physician and patient satisfaction with ARCALYST. Recurrent pericarditis is a debilitating rare flaring disease where patients are widely dispersed across the country. Since ARCALYST approval as the first and only FDA approved drug for the disease, we've been making robust inroads through our field teams and our marketing strategy to educate both physicians and patients on the disease. We've seen increasing acknowledgement that interleukin-1 Alpha and Beta are the underlying drivers of the disease. And once patients become recurrent, they require a targeted treatment to address the disease directly.

As a result, the total prescriber base has continued to grow every quarter since launch and as physicians gain positive prescribing experience, and witness the impact ARCALYST can have on their patients, more and more physicians are becoming repeat prescribers. In fact, in Q1, greater than 40% of all new prescriptions were written by healthcare professionals who are repeat prescribers. We are making solid progress towards our ambition of ARCALYST becoming the standard of care in recurrent pericarditis. For the next slide, I’ll hand the call over to Dr. John Paolini, our Chief Medical Officer to share some of the latest information coming from our RESONANCE Registry, describing the evolution in recurrent pericarditis management since launch.

John?

John Paolini : Thanks, Ross. We're very excited to share some insights we’ve gained from our RESONANCE Registry and that we've recently shared at the American College of Cardiology. The data show a paradigm shift in RP management amongst cardiologists at the 21 participating centers in the US, away from the steroid-based 2015 European Society of Cardiology guidelines and towards a steroid-sparing approach using IL-1 pathway inhibition. Amongst these registry patients with a median three-year RP disease duration, IL-1 pathway inhibition use increased to 25% of medication patient years in 2023 with ARCALYST use driving this pattern. Also, amongst patients who had failed Aspirin NSAIDs and Colchicine and intensified treatment, the proportion of patients who transitioned to rilonacept has increased year-on-year with commensurately fewer patients transitioning to corticosteroids such that by 2023, 65% of transitions were made to ARCALYST with a two to one preference over corticosteroids.

These data affirm the evidence-based adoption and growth of the steroid-sparing paradigm by RP-focused cardiologists. Back to you, Ross.

Ross Moat: Thanks, John. These compelling new data from pericarditis-focused cardiologists mirror our promotional messaging that recurrent pericarditis is an Interleukin-1 Alpha and Beta-driven disease. ARCALYST addresses the root cause of the disease and should be utilized prior to corticosteroids. Our Q1 net revenue growth signifies strong underlying business fundamentals and with only 9% of the target population addressed as of the end of 2023 we have a significant opportunity ahead. In Q1, we delivered robust growth that broke through the typical Q1 industry headwinds. As such, we're pleased to increase our revenue guidance for 2024 from $360 million to $380 million to $370 million to $390 million. And with that, I hand it back to John to discuss Abiprubart. John?

John Paolini: Thanks, Ross. As Sanj mentioned, and as we outlined in our previous announcement, several factors contributed to our decision to move forward with Abiprubart in Sjögren’s Disease. Importantly, Sjögren’s Disease is a debilitating disease currently with no FDA approved therapies. Second, there are substantial external proof-of-concepts that inhibition of the CD40-CD154 co-stimulatory interaction could be an efficacious therapeutic approach for Sjögren’s Disease. Additionally, the totality of the Phase 2 Abiprubart data we've generated including highly statistically significant reductions in rheumatoid factor of approximately 40% across all three dose regimens demonstrate clear biological activity of the molecule and thus bolster our confidence in the potential efficacy in Sjögren’s Disease in Phase 2b the with either biweekly or monthly subcutaneous dosing.

Understanding that there are other assets in development for Sjögren’s Disease, we believe Abiprubart has the potential to demonstrate comparable efficacy, but with a more convenient route of administration, a profile which could potentially represent a compelling and differentiated option for patients. With that in mind, we are planning to initiate in the second half of 2024, a randomized double-blind placebo-controlled Phase 2b trial designed to evaluate the treatment response of chronic subcutaneous administration of Abiprubart in patients with Sjögren’s Disease. The intended trial design begins with a placebo-controlled portion that will randomize approximately 201 patients in a one-to-one-to-one ratio to receive Abiprubart 400 milligrams subcutaneously biweekly, 400 milligrams subcutaneously monthly, or placebo over a period of 24 weeks.

The primary efficacy endpoint will be changed from baseline versus placebo in EULAR Disease Activity Index called ESSDAI at week 24. Subsequently, we plan for patients to enter a long-term extension in which all participants will receive active treatment for an additional 24 weeks. I will now turn the call over to Mark to discuss the first quarter financials. Mark?

Mark Ragosa: Thanks, John. Our detailed first quarter 2024 financial results can be found in the press release we issued earlier this morning. Over the next couple of minutes, I'd like to call your attention to a few items on this slide. First, total revenue in the first quarter of 2024 was $79.9 million, driven by ARCALYST net product revenue, which grew 85% year-over-year to $78.9 million. Second, ARCALYST collaboration operating profit in the first quarter grew 142% year-over-year to $40.2 million and primarily drove collaboration expenses of $20.8 million. Third, higher cost of goods sold and collaboration expenses, both of which are largely driven by ARCALYST revenue growth, as well as the advancement of Abiprubart development and investment related to ARCALYST commercialization drove year-over-year operating expense growth in the first quarter.

Fourth, net loss in the first quarter was $17.7 million, compared to $12.3 million in the first quarter of last year. And lastly, our cash balance at the end of the first quarter was $213.6 million. This balance reflects net cash flow of $7.2 million, inclusive of the $10 million development milestone received from Genentech in the first quarter that was previously recognized as revenue in the fourth quarter of 2023. We continue to expect cash reserves, as well as strong commercial execution and financial discipline to support our current operating plan, which we expect to remain cash flow positive on an annual basis. And with that, I'll turn the call back to Sanj for closing remarks.

Sanj Patel: Thanks, Mark. As you’ve heard, we remain committed to advancing all areas of our business in the year ahead. Importantly, we expect our robust commercial performance to meaningfully contribute to our strong financial position and our ability to drive growth across the business. Based on the current operating plan, which includes advancing Abiprubart through Phase 2 development in Sjögren’s Disease, we expect to remain cash flow positive on an annual basis. We're excited by the opportunity to continue to provide life-changing medicines for patients and we believe we are in a strong position to deliver on our goals. I do want to thank all of you for your time today and I'll now hand it back to the operator for any questions.

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