Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) Q3 2022 Earnings Conference Call November 1, 2022 8:30 AM ET
Company Participants
Rachel Frank – Head-Investor Relations
Sanj K. Patel – Chief Executive Officer
John Paolini – Chief Medical Officer
Ross Moat – Chief Commercial Officer
Mark Ragosa – Chief Financial Officer
Eben Tessari – Chief Operating Officer
Conference Call Participants
Anupam Rama – JPMorgan
Paul Choi – Goldman Sachs
Alex Hammond – Bank of America
Operator
Good day and thank you for standing by. Welcome to the Kiniksa Pharmaceuticals Third Quarter 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 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 third quarter 2022 financial results and corporate updates. 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; John Paolini, our Chief Medical Officer will provide a clinical update; 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 third quarter 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 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 K. Patel
Thanks Rachel and good morning, everyone. We’re excited to discuss our continued commercial execution of ARCALYST today. Highlight the long-term extension data from RHAPSODY, which was the pivotal Phase 3 study in recurrent pericarditis and provide an update on KPL-404. We’re very pleased with the continued momentum of ARCALYST in recurrent pericarditis, the third quarter of 2022 was strong with an ARCALYST net product revenue of $33.4 million, representing 24% sequential growth.
We’re also very much focused on building value across our entire portfolio of clinical stage assets, including 404, which is our CD40 antagonist program. We’re conducting a Phase 2 study of KPL-404 in rheumatoid arthritis, which is designed to evaluate the efficacy, dose response, pharmacokinetics and safety of chronic subcu dosing over 12 weeks. We’re currently enrolling the second and final cohort of the multiple ascending dose portion of the study and we expect data, proof-of-concept from the trial in the first half of 2024.
Additionally, long-term extension data from RHAPSODY demonstrated rilonacept treatment beyond 18 months resulted in continued treatment response. These new data highlighted that patients who continued rilonacept treatment experienced a 98.2% reduction in the risk of recurrent pericarditis events. The abstract was just published and the full presentation detailing these data will be presented at the upcoming American Heart Association Scientific Sessions later this week.
So with that, I’ll turn it over to Dr. John Paolini to review the long-term extension data as well as provide updates on our Phase 2 study with KPL-404 in rheumatoid arthritis. John?
John Paolini
Thanks Sanj. As was just mentioned, today we announced that an abstract highlighting the long-term extension data from RHAPSODY was just published in circulation and will subsequently be presented in detail at the American Heart Association Scientific Sessions 2022 this coming weekend. As a reminder, RHAPSODY was the pivotal Phase 3 trial of rilonacept in recurrent pericarditis. As we reported in 2020 that the study had met its primary efficacy endpoint, specifically that patients randomized to rilonacept experienced a 96% reduction in the risk of an adjudicated recurrent pericarditis event with a highly statistically significant p-value of less than 0.0001.
The long-term extension was designed to provide supplemental information about the history of the disease and potential duration of therapy. As a reminder, at the end of the event-driven randomized withdrawal study, the median duration of rilonacept therapy had reached nine months up to 14 months. Patients were then offered the opportunity to continue uninterrupted for an additional 24 months of open-label rilonacept treatment in a long-term extension.
Looking at the far right of the graphic during the long-term extension at the time point 18 months after a patient’s most recent recurrence, investigators made a decision for each patient based upon clinical status and at their discretion to one, continue rilonacept on therapy. Two, suspend rilonacept and remain on study for observation or three, discontinue from the long-term extension without observation. Endpoints included pericarditis recurrence and quality of life.
Turning to the next slide. Before reviewing the data, I will point out that the data on this slide have been excerpted specifically from the published abstract and represent the results at the time of the abstract submission in April of 2022. The trial concluded in June of 2022 and final data will be presented by Professor Massimo Imazio on behalf of the RHAPSODY investigators at the American Heart Association on November 6. The more detailed final data presentation is currently under embargo until the time of that presentation.
Overall, these abstract data from the long-term extension demonstrate that continued rilonacept treatment for 18 months and beyond resulted in continued treatment response. Here are the details. In May of 2020, the event-driven base trial ended and 74 of 75 eligible subjects continued into the long-term extension. In April of 2021 with the commercial launch of ARCALYST, the 45 U.S. subjects who wished to remain on therapy were switched to commercial ARCALYST therapy.
Meanwhile, the 29 non-U.S. subjects in Italy, Israel and Australia continued on study until the long-term extension formally ended in June of 2022. The data cutoff date for data included in the published abstract was April of 2022. The median duration of continuous rilonacept therapy from the run in through the data cutoff point in the LTE was 18 months for U.S. patients and 27 months for non-U.S. patients. The maximum duration through the data cutoff point was 27 months for U.S. patients and 33 months for non-U.S. patients.
The annualized incidents of investigator assessed pericarditis recurrences while on therapy for all patients and of 74 during the portion of a long-term extension prior to the 18 month decision point was 0.04 events per patient year. After that point, as I mentioned before, once patients have reached to the point 18 months from their most recent pericarditis recurrence, they were given the option to continue rilonacept treatment or to suspend rilonacept treatment for observation.
The figure on the right of this slide highlights data from this latter portion of the trial starting with this decision point, after patients had already been treated with continuous rilonacept for 18 months. The primary outcome of the study is that patients who remained on continuous rilonacept therapy after the 18 month treatment milestone experienced a 98.2% reduction in the risk of recurrent pericarditis events compared to those who suspended therapy at the 18 month milestone. The hazard ratio was 0.018 with a p-value of less than 0.0001.
Specifically of the 33 patients who continued rilonacept treatment beyond 18 months, only one subject experienced a pericarditis recurrence at 23.4 weeks into the long-term extension and this event was associated with a treatment interruption of four weeks. Meanwhile, 75% of patients who chose to suspend treatment experienced a pericarditis recurrence with a median time to event of 11.8 weeks. These long-term data speak to the natural history of recurrent pericarditis as being a chronic autoinflammatory disease characterized by multiple recurrences mediated by IL-1 and demonstrate that duration of therapy should be matched to the duration of the disease.
Turning to KPL-404. We continue to be encouraged by the optionality that our high concentration liquid formulation could provide in targeting chronic diseases. External proof of concept has already been demonstrated with other agents that inhibit the CD40, CD154 interaction by various targeting mechanisms. And so we are particularly excited about the potential of KPL-404 to enable practical subcutaneous administration and chronic diseases.
At present, we are focused on our ongoing Phase 2 trial of KPL-404 in rheumatoid arthritis for which we recently filed a protocol amendment with the FDA. An updated version of the trial design can be found here on the slide and will be posted shortly on clinicaltrials.gov. At a high level, these study design modifications include, first, removing the third or 10 milligram per kilo subc cohort in the multiple ascending dose or PK portion of the study leading only the two MAD cohorts shown here, second, advancing the proof of concept portion of the study consisting of parallel randomization to be the third cohort of the study rather than the fourth, and then thirdly, replacing the 10 milligram per kilo biweekly dose level group in the proof of concept portion with a 5 milligram per kilo subcutaneous once weekly dosing group to focus the study on the practical 5 milligram per kilos subcutaneous administered dose and to assess whether weekly administration adds benefit over biweekly administration.
We have completed the first cohort and we are currently enrolling the second and final cohort of the MAD PK portion. Following completion of this PK portion of the trial, the proof of concept portion or Cohort 3 will commence. The company expects data from the proof of concept portion of the trial in the first half of 2024.
I’ll now turn it over to Ross for the commercial update. Thank you.
Ross Moat
Thank you, John. I’m pleased to share further details on our quarterly commercial performance and our plans for continued growth in recurrent pericarditis. As you heard from Sanj Q3 represented yet another quarter of consistently strong growth driven by patient identification in recurrent pericarditis, which led to a quarterly growth of 24% or $6.4 million and resulted in a Q3 net revenue of $33.4 million. With these results, we have recorded $82.6 million in net revenues so far in 2022 and are pleased to continue to guide towards a range of $115 million to $130 million for the totality of 2022.
On Slide 12, I want to highlight some of the key drivers behind our increasing revenue. We’re pleased to report that our robust execution continues to drive awareness of recurrent pericarditis and ARCALYST, and this is reflected in the strong growth of both the total and repeat prescribers. In the 18 months since launch, we’ve seen more than 650 unique prescribers prescribe ARCALYST for recurrent pericarditis, which is a growth of more than 100 additional new doctors every single quarter since our launch.
Furthermore, we continue to hear from both prescribers and patients that they’re having a positive experience with ARCALYST, and this is resonating in the repeat prescriber rate where we now have around 22% of the total prescribing base who have written for two or more patients. One component of that positive experience was the payer approval rate in Q3, which remained greater than 90% of all completed cases.
In terms of duration on commercial therapy, while this number will continue to evolve as we follow more patients over longer periods of time. As of the end of Q3, the duration of initial therapy in the commercial setting was on average approximately 12 months. And for those patients who chose to stop initial therapy, whether of their own volition or from a belief of having come to an end of their disease duration, around 35% went on to restart commercial therapy, the majority being within eight weeks from when they’ve stopped ARCALYST.
Moving to Slide 13, I want to highlight how ARCALYST is starting to become the stand of care in recurrent pericarditis and a few additional considerations that speak to the duration of the disease. As you can see on the left hand side, we’re pleased that external thought leaders are starting to suggest a treatment paradigm that is broadly aligned to our promotional positioning, notably using ARCALYST ahead of corticosteroid use.
We believe this is a sign that ARCALYST is making headway towards becoming the standard of care for patients suffering multiple recurrences. We also acknowledge that treating this debilitating and complex disease with ARCALYST requires an evolution of mindset and practice for cardiologists. Whereas the focus in the past was aimed at minimizing treatment duration, in particular with steroids due to the toxicity burden and the drug potentially worsening and prolonging the disease. Now with ARCALYST, the aim is to treat continuously throughout the duration of the disease to ensure adequate control and to prevent recurrences.
This mindset shift is important because what you see on the right hand side of this slide is that the majority, 60% of patients with multiple recurrences have a disease duration of at least two years. As you heard from John, we now have the long-term extension data that further supports our message that patients need to be treated throughout the course of the natural history of their disease and that continued treatment results in continued treatment response.
In summary, our first 18 months on the market as the first and only FDA approved drug for recurrent pericarditis has resulted in hundreds of patients getting access to therapy. The prescribing base continues to rapidly grow with more than 650 unique prescribers, and both physicians and patients are reporting positive experiences with ARCALYST. This is providing a solid foundation for our future commercial growth.
Our net revenues have been steadily growing every single quarter since launch, most recently by 24%. Our collaboration profitability is growing and we’re on track to deliver within the revenue guidance that we stated right at the start of the year of $115 million to $130 million in net revenue.
More importantly, we are just getting started with ARCALYST. And our mission is to find and help many, many more patients within our addressable population.
I’ll now hand over to Mark to cover the financial results. Mark?
Mark Ragosa
Thanks, Ross. Our detailed third quarter 2022 financial results can be found in the press release we issued earlier today. There are a few items I’d like to call your attention to this morning. First, total revenue in the third quarter of 2022 was $99.1 million. It consisted of ARCALYST’s net product revenue of $33.4 million, representing 24% sequential growth and collaboration revenue of $65.7 million from the vixarelimab global license agreement with Genentech.
Second, ARCALYST collaboration profit grew in the third quarter of 2022 to $9.2 million and resulted in a collaboration expense of $4.6 million.
And third, net income in the third quarter of 2022 was $224.1 million and was driven by both collaboration revenue as well as an approximately $177 million tax benefit. This tax benefit was primarily due to the release of evaluation allowance on approximately $186 million of non-cash deferred tax assets.
Lastly, we received the $80 million upfront payment for vixarelimab global rights in the third quarter. And our cash balance at the end of the period was approximately $200 million. We continue to expect these reserves as well as ARCALYST commercial execution to fund our current operating plan into at least 2025.
With that, I’ll turn it back to Sanj for closing remarks.
Sanj K. Patel
Thanks, Mark. In addition to our successful commercialization of ARCALYST and recurrent pericarditis, we’re also strengthening our foundation as an emerging leader in immune modulating therapies.
As a corporation, we’re revenue producing and continue to have a profitable ARCALYST collaboration. And as we look to the end of the year, we maintain our estimated net revenue guidance of $115 million to $130 million.
Importantly, we are well capitalized. Our cash reserves as well as our continued commercial performance with ARCALYST puts Kiniksa in a strong financial position and our cash reserves are expected, as Mark said, to fund operations into at least 2025. Ultimately, our mission is to continue to help patients in need create massive value, and we aim to fulfill our goal of becoming a global generational company.
And with that, I want to thank all of you for your time today and hand it back to the operator for questions.
Question-and-Answer Session
Operator
Certainly. [Operator Instructions] And our first question will come from Anupam Rama of JPMorgan. Your line is open.
Anupam Rama
Hey, guys. Thanks so much for taking the question. Two quick ones from me. The first one is the 35% of patients that reinitiated therapy after discontinuing ARCALYST, how soon after did symptoms return? And how soon did they reinitiate therapy? Are there any trends note – worth noting here that may be similar or different to what you saw in RHAPSODY?
And then the second question is, what are the timelines to better understanding the mavri strategy and sort of rare CD indication? I’m assuming sort of moving in that direction is assumed in the 2025 cash guidance. Thanks so much.
Sanj K. Patel
Ross, why don’t you start and then maybe jump – and jump in on that mavri.
Ross Moat
Yes, very happy to. Hi, Anupam. This is Ross. Thank you very much for the question. So, yes, this is the first time we announced some information around restart. I guess since the time of launch, we’ve always talked around the average duration of therapy and continuous therapy. Now, we’re at a situation where we have a bank of patients who have stopped therapy throughout the time of launch and starting to see that a fairly high proportion of those patients go back onto therapy, which I think really speaks to the tenacity of the disease and needing to treat throughout the course of the disease. We believe there are different reasons why patients stop therapy whether that’s in consultation with their healthcare professional or whether they are just feeling better, want to try to stop for various reasons.
But yes, 35% of the – all of the patients that stopped, regardless of which stage of initial therapy they had went on to restart ARCALYST in the commercial setting. And they did so within eight weeks of stopping therapy, which is actually quite consistent with what we saw within the RHAPSODY study where if you remember, we did have two patients within the treatment arm of RHAPSODY who had some temporary stocks throughout therapy. And if you think about the wash out period and so on of the ARCALYST as well, it really makes sense that within eight weeks patients are starting back on therapy.
So we’re pleased to know that ARCALYST is there as a safety net, when patients stop therapy. But I ultimately want to make sure that patients are treated throughout the duration adequately so that they can come off therapy eventually and help readout.
John Paolini
And Anupam, nice to talk with you, regarding mavrilimumab. So as you know, we continue to be excited about the mechanism, enthusiastic about the mechanism and mavrilimumab has positive data in Phase 2 with both in rheumatoid arthritis and in giant cell arthritis. And our goals at this point is really are around pursuing collaborative study agreements to evaluate the potential of mavrilimumab and rare cardiovascular diseases where that GM-CSF mechanism has been implicated. And so we’re keen to do additional work on the mechanism.
Anupam Rama
Thanks so much for taking our questions.
Operator
One moment. Our next question comes from Paul Choi of Goldman Sachs. Your line is open.
Paul Choi
Hi. Thanks. Good morning. Congrats on the progress and thank you for taking our questions. Regarding the details on the KPL-404 Phase 2 trial, can you maybe elaborate a little bit more on what types of patients you’ll allow in, in terms of other co-morbidities in addition to RA and just how you’re thinking about data collection for other endpoints in order to make a determination for which other indications to pursue? And then I had a follow-up question.
John Paolini
So thanks Paul, appreciate the question. So regarding the specific inclusion criteria of what we’ve disclosed publicly at least is what you can find on clinicaltrials.gov when they’re primarily focused – the inclusion criteria you might imagine are primarily focused on the patient – the criteria around the rheumatoid arthritis and the difficulties that they’ve had in achieving disease control on currently available regimens. Most of the additional co-morbidities that are listed in the trial there are primarily what you might expect for a Phase 2 program regarding data collection. I mean, the data collection is primarily focused on the rheumatoid arthritis endpoints DAS-28-CRP is a prime example.
We are collecting other information and we have as you might imagine a rich biomarker plan that we also feel would help us understand more about the downstream signaling that is inhibited with blockade of CD40. So we continue to follow that only with our own dataset but also the data sets that are coming out in the literature.
Paul Choi
Okay, great. Thanks for that, John. And then one for Ross, just on the commercial piece, can you maybe just update us on where you are with regard to coverage among the major plans and so forth, are there any sort of bellwethers or any other meaningful commercial plans that are still remaining out there or just in terms of percentage of potential lives covered here? Thank you.
Ross Moat
Yes. Thanks very much, Paul. So maybe just to look backwards first and we’re really pleased with the coverage that we have had right out from the gates since launch always been above 90% of all completed cases. All the major plans have policies in place now for ARCALYST. That’s been the case for quite some time. And actually some of the major plans have also re-looked at their payer coverage at the one year time point as well. And most of those have stayed the same moving forward without any meaningful changes.
But maybe of notes looking forward as well that the payer challenge is a constant barrier that we look at and we try to work with payers on. One example, some of the headwinds that we see is that we did receive notice from CVS Caremark fairly recently that they will actually place ARCALYST on its exclusion list before the CAPS indication. That will go into effect as of January of next year. CVS have confirmed with us that all current patients will be grandfathered across into the new plan for next year.
But ultimately it’s an example where we need to work through with CVS trying to understand what the potential impact on recurrent pericarditis patients may be, knowing that the exclusion ultimately is for CAPS. But that has some logistical operational ramifications across other indications of how we ensure that coverage continues as well. So it’s a constant barrier and hurdle that we try to overcome and work with across all the payer plans. But certainly, historically been very happy with where we are at 90%. It’s probably worth just mentioning that even though that plan is for CAPS, CAPS of course is a very small percentage of our total commercial scripts.
Paul Choi
Got it. Thank you very much for taking our questions.
Operator
One moment. And our next question will come from Geoff Meacham of Bank of America. Your line is open.
Alex Hammond
Hi. This Alex Hammond on for Geoff Meacham. Thank you for taking our question. Can you provide any additional color on the timelines for the near-term payment for vixa? And what is the range of royalties we should expect? And then secondly, can you walk us through your capital allocation strategy? Is BD a key with a focus on late stage assets? Thank you.
Eben Tessari
Yes, sure. Thanks for the question. This is Eben, I can help you out with that. So we – as we are no longer in control of development, it’s tough for us to help with timing to milestone, suffice it to say. We do expect more mile milestone achievements upcoming. And then in terms of capital allocation, certainly we’re always opportunistic on a BD side and highly active, but the bar is pretty high for bringing things in. We believe we have a robust and really exciting portfolio and there’s always a give and take tradeoff for bringing new things in. But suffice to say, very highly active.
Alex Hammond
Thank you.
Operator
And I’m showing no further questions. I would now like to hand the call back to Sanj Patel, Chief Executive Officer for closing remarks.
Sanj K. Patel
Well, thank you, operator and thank you everybody for the questions and for joining the call today. We clearly have some exciting milestones ahead of us and hopefully you are able to get a sense of our excitement as we look forward to providing additional updates in the future. So with that, we’ll just crack on. Thank you.
Operator
And this concludes today’s conference. Thank you for participating. You may now disconnect.
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