Kiniksa Pharmaceuticals International - Q4 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Kiniksa Pharmaceuticals fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star one one again. Please be advised 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 (Head of Investor Relations)

Thank you, operator. Good morning, everyone, and thank you for joining Kiniksa's call to discuss our fourth quarter and full year 2023 financial results and recent portfolio execution. A press release highlighting these results can be found on our website under the investor 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. John Paolini, our Chief Medical Officer, will review the abiprubart program in recent phase 2 data. Then Mark Ragosa, our Chief Financial Officer, will review our fourth quarter and full year 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, 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 K. Patel (CEO)

Thanks, Rachel, and good morning, everyone. I'll review our fourth quarter and full year 2023 financial results today. Consistent execution in both commercial and clinical settings throughout 2023 has put us in a strong position to further advance our business in the year ahead. The ARCALYST co-commercialization continues to see meaningful growth, with Q4 net product revenue of $71.2 million, putting us at $233.2 million for the past year. We're very encouraged with the commercial execution to date, which is underscored by growing prescriber adoption and increased duration, as well as continued high patient satisfaction and payer approvals. Moving forward, we remain highly focused on reaching even more patients and driving long-term sustained growth with ARCALYST.

Looking to the year ahead, we have guided to ARCALYST sales of between $360 million and $380 million, which would represent roughly 59% year-over-year growth at the midpoint. In terms of our pipeline, we recently provided data from the first 3 cohorts of the abiprubart phase 2 rheumatoid arthritis trial, and data from cohort 4, the monthly dosing cohort, are expected in April. Data from this cohort will provide additional dosing insights and are intended to inform future trial design. Based on the data we have evaluated to date, we now expect to advance the asset into a phase 2b trial in a new indication, which will also be announced in April. This next step is already included in our current cash runway guidance. With that, I'll turn it over to Ross to review our commercial execution. Ross?

Ross Moat (Chief Commercial Officer)

Thank you, Sanj. I'm happy to share further details on our fourth quarter and full year 2023 commercial performance, as well as our key priorities for the long-term growth of ARCALYST in recurrent pericarditis. In the fourth quarter, ARCALYST's net revenue grew to $71.2 million, representing nearly 80% growth versus Q4 of 2022. This resulted in $233.2 million for the full year 2023, which is a 90% year-on-year growth. This revenue growth was driven by our strategy to increase the awareness of recurrent pericarditis and ARCALYST across the U.S. At the end of 2023, more than 1,700 unique prescribers had written a prescription for ARCALYST since launch, with approximately 24% of those having prescribed for two or more patients.

Additionally, we've continued to observe robust payer approval rates of greater than 90% for all completed cases, and patient compliance remains greater than 85%, even with the longer durations of therapy that we're seeing. As of the end of 2023, the average total duration of therapy had increased to approximately 23 months, and our focus through education and increasing familiarity with ARCALYST is to continue to better align real-world prescriber practice with the natural history of recurrent pericarditis, where the data show patients with two or more recurrences suffer with the disease for a median of three years. Across the business, we continue to be thoughtful and data-driven with the investments in our commercial infrastructure, and we're focused on prioritizing continued double-digit revenue growth and increasing the collaboration profit year on year.

Since launch, we've continued to activate an ever-growing prescriber base with anywhere from between 100 to 250 new first-time prescribers writing an ARCALYST prescription each quarter. As we know, recurrent pericarditis is a rare flaring disease with few high-volume specialty disease centers managing the disease, which means most prescribers can go an extended period of time until identifying their next patient. Encouragingly, as time passes since the initial prescription and further patients are identified, we've seen a steady growth in prescribers who have written for 2 or more patients. Then, as you can see on the right-hand side of this slide, over time, we also see a steady increase in the number who have written for 3, 4, or more patients. Our focus continues to be on a dual strategy of continuing to grow the total prescriber base while increasing the depth of prescribing.

To do this, we're very focused on targeting where we believe the multiple recurrent patients are, as well as ensuring that both physicians and their patients have a positive experience when initiating ARCALYST and throughout the course of the disease. Additionally, at the end of 2023, greater than 40% of all new prescriptions within the year came from repeat prescribers, demonstrating an increasingly meaningful contribution from this steadily growing group of physicians. We previously announced that as of the end of Q4, approximately 9% of the target population of 14,000 multiple recurrent patients were actively on ARCALYST therapy. This represents approximately 80% annual growth versus the 5% penetration that we announced out of the end of 2022.

This underscores the progress we've made since launch, as well as the significant opportunity we have in the years ahead to drive much greater growth into the patient population that we can support with ARCALYST. To address the opportunity ahead, our strategy is to accelerate our reach and frequency with the top-tier healthcare professionals, as well as interact with many of the long tail of physicians, making up around 11,000 healthcare professionals in total, who we believe look after the majority of patients suffering from the disease. We're nearly three years post-approval of ARCALYST for the treatment of recurrent pericarditis, and our commercial execution has been robust, driving net revenue growth every single quarter since launch and providing increasing collaboration profitability.

Earlier this year, we announced that we expect our continued execution to generate full year 2024 net revenue of between $360 million and $380 million. With that, I'll hand over to John to discuss abiprubart. John?

John Paolini (Chief Medical Officer)

Thanks, Ross. As a reminder, the phase 2 proof of concept trial of abiprubart in rheumatoid arthritis is designed to evaluate the efficacy, dose response, pharmacokinetics, and safety of chronic subcutaneous dosing over a duration of 12 weeks. We announced data from the first 3 cohorts of the trial earlier this year, and abiprubart showed meaningful clinical effect in each of those cohorts. In cohorts 1 and 2, the PK lead-in, multiple doses of abiprubart were well tolerated and enabled the proof of concept portion of the study. Cohort 3 of the trial achieved its primary efficacy endpoint, changed from baseline to DAS28-CRP versus placebo, with statistical significance in the 5 mg per kilo weekly dose group. The 5 mg per kilo biweekly dose group did not achieve statistical significance, although a higher than expected placebo rate was observed. Abiprubart was also well tolerated in this cohort.

As we have continued analyzing the data package from the first three cohorts, we are confident that abiprubart is a highly active and well-tolerated molecule and has strong potential to reduce autoantibody production, as evidenced by the greater than 40% reduction in rheumatoid factor observed in both cohort three dose levels. The phase 2 study is continuing with a fourth cohort, which advances the dosing regimen from weight-based dosing to fixed mg dosing using the 400 mg every 4-week dose level. We did that to achieve plasma concentrations intermediate between the clinically active 2 mg per kg biweekly and 5 mg per kg biweekly dose groups, and which are projected to be an order of magnitude above what is necessary to achieve complete receptor occupancy and TDAR suppression, but at a potentially more clinically relevant dosing interval.

Cohort 4 maintains the placebo-controlled efficacy and safety endpoints from cohort 3, with change from baseline in DAS28-CRP at week 12 as the primary efficacy endpoint. As Sanj mentioned, we continue our preparations for further phase 2 development and a new indication with abiprubart. As the data from cohort 4 are added to the totality of the dataset informing PK/PD relationships, we plan to finalize future dosing regimens that we will take forward in development. We will have more to say on that in April, in conjunction with the cohort 4 data. With that, I will turn it over to Mark to cover our financials. Mark?

Mark Ragosa (CFO)

Thanks, John. Over the next few minutes, I'll walk through our fourth quarter and full year 2023 financial performance. 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, total revenue for the fourth quarter was $83.4 million, including ARCALYST net product revenue of $71.2 million, representing nearly 80% growth year-over-year, and collaboration revenue of $12.2 million, driven primarily by the recognition of a $10 million development milestone for a second new indication under the Genentech license agreement for vixarelimab.

Total revenue for the full year 2023 was $270.3 million, including ARCALYST net product revenue of $233.2 million, representing approximately 90% year-over-year growth, and collaboration revenue of $37.1 million from the Genentech license agreement. Regarding the $10 million development milestone from Genentech, recognized as collaboration revenue in the fourth quarter, the cash was received in January and will be captured in our first quarter 2024 cash balance. To date, we have recognized as collaboration revenue over $124 million of the $125 million earned under the Genentech license agreement, and we expect to realize the small remaining balance over the next two quarters.

Second, ARCALYST collaboration operating profit was $33.9 million in the fourth quarter, representing over 125% growth year-over-year, and leading to collaboration expenses of $16.9 million. ARCALYST collaboration operating profit for the full year 2023 was $113 million, representing over 210% year-over-year growth and leading to collaboration expenses of $56.5 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 the abiprubart phase 2 trial in rheumatoid arthritis and investment related to ARCALYST commercialization, drove year-over-year operating expense growth for both the fourth quarter and full year 2023.

Fourth, net income for the fourth quarter and full year 2023 was $25.2 million and $14.1 million, respectively, aided by both collaboration revenue as well as the treatment of our non-cash deferred tax assets. Lastly, we received $35 million in cash from the Genentech license agreement in 2023. This contributed to net cash flow of approximately $16 million for the year and an ending cash balance of $206.4 million. We continue to expect these reserves, as well as strong ARCALYST commercial execution, to fund our current operating plan into at least 2027. And with that, I'll turn the call back to Sanj for closing remarks.

Sanj K. Patel (CEO)

Thanks, Mark. As you've heard this morning, we expect 2024 to be another exciting year for Kiniksa. Our execution in 2023 has put us on the path to continued commercial success and advancing our portfolio 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. As Mark said, our current cash position provides runway to fund our operations, including a new indication for abiprubart into at least 2027. Ultimately, we're determined to continue to provide life-changing medicines for patients and building sustainable value, and we believe we are strategically positioned to do that. We want to thank all of you for your time today, and I'll hand it back to the operator for any questions.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question at this time, please press star one one on your phone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Anupam Rama with JPM. Your line is open. Please go ahead.

Anupam Rama (Managing Director and Senior Equity Analyst)

Hey, guys, this is Anupam. Thanks so much for taking the question. We talked a lot about repeat prescribers in the opening comments. What are the keys to getting new prescribers at this point, given now we're entering kind of like the third year of launch? Or is this slowly transitioning to more of a repeat prescribers to drive growth? Thanks so much.

Ross Moat (Chief Commercial Officer)

Hi, Anupam, this is Ross. Thanks very much for the question. Yeah, and we continue to see good, good growth in both new prescribers and repeat prescribers as of the end of 2022, and think we've got a lot of headroom ahead of us as well. Just to look back a little bit, we ended 2022 with around 800 or over 800 prescribers, and about 22% of those were repeat prescribers. At the end of 2023, we had more than 1,700 prescribers. So obviously more than doubling throughout the year-on-year, and 24% of those as repeat prescribers. So as outlined in the prepared remarks, we've seen, you know, good, steady growth in the repeat prescriber base.

But to your question for new prescribers, again, we think we've still got a long way to go. You know, with the expansion of our field force, we entered this year with around 85 representatives. We're now covering through to, you know, around 11,000 doctors. So that's a significant increase from what we were targeting previously with our slightly smaller field team. So you can even just see from that, from 11,000 targeted doctors, we've got more than, you know, 1,700 total prescribers as of the end of last year. And certainly not all of those 1,700 are within the targets pool as well.

So I think from that that really shows you that there's still a huge amount of opportunity out there for us, which is also, I guess, backed up in the penetration into the target opportunity for the patients that we have on ARCALYST, around 9% as well. So, pretty excited about the opportunity we've got ahead on both the new and repeat prescribers end.

Anupam Rama (Managing Director and Senior Equity Analyst)

... Thanks so much for taking our question.

Operator (participant)

Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of Paul Choi with Goldman Sachs. Your line is open. Please go ahead.

Paul Choi (Biotechnology Analyst)

Hi, good morning, everyone, and congrats on the strong finish to 2023. My first question is just on, you know, how you're thinking about additional investment here for the commercial business. I know, obviously, Ross just mentioned the recently expanded sales force, but, you know, maybe some thoughts on, you know, promotional efforts to increase brand awareness, some DTC and or, you know, increasing medical meeting conference education and things like that. And just, you know, kind of how you're thinking about the rate of investment for the business beyond the recent sales force expansion. And then I had a follow-up question on abiprubart.

Ross Moat (Chief Commercial Officer)

Thanks, Paul. This is Ross as well, so maybe I'll take the first pass at that, at least. So, I think all those things that you mentioned continue to be important, to us, as they have done all the right way through from launch. Even with, you know, a larger field team out there now, you know, congress supports, digital marketing, peer-to-peer education, speaker programs, speaker bureau, all those types of initiatives, continue to be very important, and that's because we know patients are quite widely dispersed across the U.S., as you see from all the numbers that we share. So, those opportunities remain, and it remains important for us to do that.

But we have increased the field team and feel pretty good about that and the number of physicians that we can cover. So I think, you know, we've been very thoughtful, very data-driven in the build to that field team increase, and we continue along the other digital marketing and other types of initiatives as we always have done.

Paul Choi (Biotechnology Analyst)

Okay, great. Thanks, Ross. And then for a follow-up, for abiprubart, since you've picked a new indication, you know, which, you know, has yet to be specified, can you maybe just, you know, comment on how the data from cohort 4, you know, might affect your developmental strategy and the phase 2b strategy, you know, beyond dosing frequency? Just anything else that you're looking for in terms of insight there from cohort 4. Thanks for taking our questions.

Sanj K. Patel (CEO)

Thanks, Paul. This is Sanj. Maybe I'll start, and then John can jump in. I mean, I think, as you said, we were very encouraged by the data we had from cohorts 1, 2, and 3, which really largely has given us sort of a go signal to move forward with that program in an additional indication. So the data we already have has given us the go. I think cohort 4 will help us, as I said earlier, with the dosing design of the trial. But maybe, John, you could elaborate a little bit on that. So it's really more of a sort of design implementation as opposed to whether we go or not.

John Paolini (Chief Medical Officer)

Right. Thank you, Sanj. And Paul, nice to talk to you. So the way that cohort four is designed, is it's designed to generate plasma concentrations that sit in between two clinically active doses, the 2 mg per kilo biweekly and the 5 mg per kilo biweekly. So in that sense, it moves down the bar, if you will, to see if there's still activity at that concentration, which is still roughly an order of magnitude above what is required for full receptor occupancy and TR suppression. And so in that sense, it will round out the PK/PD modeling so that then we can choose dosing regimens that we can carry forward into subsequent development. Gives us a full range of options to choose from.

Operator (participant)

Thank you. And again, ladies and gentlemen, if you would like to ask a question at this time, please press star one one on your telephone. And I'm showing no further questions at this time, and I'd like to hand the conference back over to Sanj K. Patel, Chief Executive Officer, for any further remarks.

Sanj K. Patel (CEO)

Thanks, operator. So just thanks for all the questions and obviously the time to join the call today. We clearly have an exciting year ahead of us, and we're very much looking forward to providing additional updates in the future. So with that, thank you.

Operator (participant)

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