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

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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Q&A Session

Operator: [Operator Instructions] And one moment for our first question. And our first question comes from Anupam Rama from JP Morgan. Your line is now open.

Anupam Rama: Hi guys. Thanks so much for taking the question and congrats on the quarter. For ARCALYST, it seems like the physician prescribers continue to grow here. How much do you attribute this to the expanded sales force and getting to those kind of next tier of physicians versus deeper penetration into some of your top centers and existing academic center relationships? Thanks so much.

Ross Moat: Yes, thanks Anupam, this is Ross. Thank you very much for the question. So certainly we did go into 2024 with around 85 representatives, which gave us a boost in the coverage than we could achieve across the US. So we went from covering around 6,000 physicians up to 11,000. And so certainly some of it is done through the larger field team that we have been able to see certainly increase the breadth of how confessions [Ph] we could reach, but also within those top tier high docile doctors that we really focus on have the highest group of recurrent pericarditis patients. And we are also increasing the frequency within those. So, we do think that’s an important element along with just continued execution that we’ve always been focused on and the message that we’ve got to deliver and the number of patients we’ve got to help out there and we still believe that there’s a huge opportunity ahead of us.

So, you see from the 11,000 doctors that we target. We’ve now got around 2,000 prescribers in total since launch. So that alone tells you we’ve got a huge headroom ahead and certainly out of those 2,000 prescribers not all of them are within that target population of the 11,000 to 12,000. So we’ve got a long way to go to continue to grow the breadth of prescribers of the total prescriber base, as well as the repeat prescribing, which you can see has remained at 24% of an ever significantly increasing base of total prescribers. So, and that the fact that they contributed around 40% of all the new enrollments that we had within Q1 also tells you that that the repeat prescribers is growing nicely and contributing significantly to the business as well.

So thanks for the question. We’re very pleased with where we are and then the opportunity we have ahead.

Anupam Rama: Thanks so much for taking our question.

Operator: And thank you. And one moment for our next question. And our next question comes from Paul Choi from Goldman Sachs. Your line is now open.

Paul Choi: Hi, thanks. Good morning and congratulations on the good start to the year. My first question is for Ross and just with regards to ARCALYST patient behavior. Can you just maybe comment on if you are seeing any trends in terms of patients who discontinued therapy coming back maybe a little faster versus prior quarters? And just sort of what the messaging on restarting and maintenance of therapy has been like and how that has resonated? And then I had a Abiprubart question for John afterwards as a follow-up.

Ross Moat: Okay, Choi, I’ll maybe start from the ARCALYST one and then hand back to Paolini [Ph] for the Abiprubart’s question. So, thank you for that. I think we haven’t seen any significant changes in patient behavior from different cohorts that we’re aware of different types of patients around either the ways in which they stopped therapy or indeed with the restart and the restart rate interestingly has remained consistent for quite some time now of about 45% of all those patients who stopped therapy come back on to restart. And generally patients are able to restart if they suffer from ongoing symptomology or the symptomology returns. And very often they have pills left on their prescription. They have the title approval in place.

Sometimes they have stock on hand still from where they want it previously. So it’s often very simple for patients to restart therapy if they do suffer from the disease continuously just acknowledging that this is a chronic disease for the most patients it’s multiple years. So, for these patients they stopped too early it’s likely the symptomology will indeed come back. We just continue to focus on our education with healthcare professionals about the natural history of the disease and thus the patients who suffer for two or more recurrences, they generally have three years worth of median duration of therapy. One-third of the patients still suffer from the disease five years out. And you may remember from our clinical experience recently from our long-term extension portion of our study, the median was two years worth of oculus treatments up to three years.

So, we’ve seen the total duration of therapy grow over time in the commercial setting most recently around 23 months. But we really continue to focus on the natural history and just want patients to stay on therapy, as well the expected course of their disease is that they often multiple years.

Paul Choi: Okay. Great. Thanks for that Ross. And then for John, as you look at the prior RA data and the available preclinical data for Abiprubart, can you maybe just comment on as you think about your Phase 2 plan for Sjögren’s, just what areas do you think Abiprubart might be able to be show evidence of differentiation or what, I guess, gives you the confidence for potential success here relative to some of the other assets in the class that may be further along in the clinic? Thank you.

Ross Moat: Sure. Thank you, Paul and appreciate the question. Yes, we have confidence in the data that we’ve generated so far with Abiprubart. The data from Phase 1 show of course, important suppression of the mechanism as evidenced by suppression of antibody formation. And then we carry that forward into the Phase 2 program where we saw with all three dosing regimens, so with weekly, biweekly and even monthly dosing. Suppression of rheumatoid factor to around 40% that was highly statistically significant. And then that translated into clinical outcomes using the DASH 1 to 8 CRP score. So that’s showing us that in a clinical setting, we have strong target engagement and that’s with any of the three dosing regimens. What that means then translated forward is in terms of let’s say differentiation is that we’ve worked hard on making sure that we have a high concentration liquid formulation that’s supports chronic subcutaneous dosing.