Kiniksa Pharmaceuticals Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 10 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Kinixa Pharmaceuticals Third Quarter 2023 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 Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms.

Operator

Rachel Frank. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining Canixa's call to discuss our Q3 2023 financial results and recent portfolio execution. 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 an introduction Ross Mote, our Chief Commercial Officer, will provide an update on our Arcola commercial execution John Paolini, our Chief Medical Officer, will provide a KTL-four zero four program review and Mark Ragosa, our Chief Financial will review our Q3 2023 financial results. And finally, Ghassan will return for closing remarks and to kick off the Q and A session.

Speaker 1

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.

Speaker 2

Thanks, Rachel, and good morning, everyone. I'm happy to review our Q3 2023 financial results today. We've continued to advance all aspects of our business, including strong revenue growth with Arclist and clinical trial execution with KPL404. On the commercial side, Q3 represented another quarter of growth for Arclist with a net product revenue of $64,800,000 We continue to execute commercially and we have seen strong prescriber adoption and patient enrollments in the Q3. We also remain encouraged by the high patient satisfaction, payer approval rates and the duration of therapy.

Speaker 2

And we're currently tracking towards the high end of our previously issued guidance of 220 $1,000,000 to $230,000,000 for 2023. We're also executing across our clinical development portfolio, and we have now completed enrollment of the 3rd cohort of the Phase 2 trial of KPL404, which is our CD40 antagonist program and is focused in rheumatoid arthritis, and we now expect data from cohorts 1 to 3 in the Q1 of 2024. This trial is designed to evaluate the efficacy, dose response, PK and safety of chronic subcu dosing over a duration of 12 weeks. Doctor. Jan Paolini will cover more details on this program in a moment.

Speaker 2

Additionally, we continue to pursue collaborative study agreements with mabrolumab to evaluate its potential in rare cardiovascular diseases. This is a molecule that has the potential to impact a number of diseases. So with that, I'll turn it over to Ross to review our commercial execution of Arcolyst. Ross?

Speaker 3

Thank you, Sanjay. I'm delighted to share further details on our Q3 commercial performance and the underlying drivers of our continued strong revenue growth. In Q3, the net revenue of Arclis grew to $64,800,000 This represents As has been the case since launch, the vast majority of growth this quarter came from increased demand due to a higher number of patients on therapy as a result of increased new patient enrollments and strong compliance and persistence. Additionally, the Q3 revenue benefited from a slight increase in inventory within the contracted range of our recently restructured specialty pharmacy network. The underlying driver of the continued increase in Arcolis demand is our focus on a dual strategy of broadening the prescriber base as well as deepening the experience within existing prescribers.

Speaker 3

This strategy has resulted in more than 1450 individual prescribers since launch and off that higher base, 24% have now prescribed the 2 or more recurrent periculitis patients. Our payer approval rate continues to be greater than 90% of all completed cases. Patient compliance remains above 85%, and the duration of therapy currently sits in a total of around 20 months on average may continue to evolve as more patients get towards the longer durations of therapy. Moving to Slide 8. We're making good progress in continuing to build the market and change the treatment paradigm to establish Arclist as the standard of care in recurrent periculitis.

Speaker 3

Through our experience launch to date, we've outlined several core priorities to drive our future growth. Firstly, we need to drive a proactive mindset for the identification and treatments of recurrent pericarditis patients. In a Harris Poll survey, 96% of patients reported that they were incorrectly diagnosed with other conditions prior to their recurrent pericarditis diagnosis. In fact, they had an average of 2.7 diagnoses before the recurrent pericarditis diagnosis. This highlights the substantial room for improvement that's possible by advancing education on the disease.

Speaker 3

Additionally, once a diagnosis is reached, we need to evolve physicians' mindsets to be more proactive in treating earlier and preventing future flares as well as increasing patient education on their disease and treatment options so they can advocate for themselves. Secondly, we're focused on closing the knowledge gap by increasing the awareness of Arcolis. We know that when Arcolis is prescribed, both physicians and patients have a very positive experience. However, to continue growing the prescribing base, we need to increase knowledge within the broad cardiology and rheumatology audience. Based on a recent survey of 200 physicians, around 95% of the respondents were generally aware of Arclist.

Speaker 3

However, only half were very knowledgeable, which we interpret as having the critical information you would need in order to make a prescribing decision such as who it's for, how it works and what the clinical data look like. So again, we have a lot of opportunity ahead. The good news is that the percentage of physicians who consider themselves very knowledgeable has been growing. And more importantly, of the physicians who were seen by a Kinixa representative in the last 3 months, 3 quarters consider themselves very knowledgeable, which speaks to the impact of our sales force. Additionally, we're starting to evolve the treatment paradigm for recurrent peritonitis.

Speaker 3

While there are currently no consensus guidelines in the U. S, recent publications coming from thought leaders are introducing treatment algorithms that recommend interleukin-one alpha and beta antagonism ahead of corticosteroids after a patient fails NSAIDs and colchicine. When you look at the current prescribing patterns, around onethree of health care professionals report that prescribing Arcolyst ahead of corticosteroids, which suggests great progress so far since launch, but still a substantial opportunity for future growth. Also encouraging is that physicians overwhelmingly report that they intend to increase their future prescribing of Arcolis, while 58% say that they intend to decrease their utilization of corticosteroids, which is exactly aligned to our positioning of Arcolyst. Based on the progress we've made to date, we believe there is significantly more opportunity to penetrate the recurrent pericarditis market, and we're excited to help even more patients who are suffering from this debilitating disease.

Speaker 3

Overall, we're delighted with our progress over the last quarter, growing both our net revenue and the profitability from our collaboration. Based on our current trajectory and accounting for the headwinds of Q4 industry dynamics and an expected level setting of inventory, we are currently tracking to the high end of the previously stated guidance range of $220,000,000 to $230,000,000 With that, I'll hand over to John to discuss KPL404.

Speaker 4

John? Thanks, Ross. The aim of the Phase II trial of KPL404 in rheumatoid arthritis shown here is to evaluate the efficacy, dose response, pharmacokinetics and safety of chronic subcutaneous dosing over a duration of 12 weeks. As Sand mentioned, we've completed enrollment in cohorts 1, 23 of the study. Subsequently, we initiated an additional or 4th cohort of the study, whereas Cohort 3 enrolled approximately 75 patients randomized in a 1:one:one ratio to the 5 milligram per kilo subcutaneous dose level administered weekly versus biweekly versus placebo, this new 4th cohort will enroll approximately 40 patients randomized in a 3:two ratio to a fixed subcutaneous KPL404 dose administered monthly versus placebo.

Speaker 4

Specifically, participants in the active arm will receive a 600 milligram loading dose on day 1, followed by 400 milligrams subcutaneously every 4 weeks for 12 weeks. We decided to initiate Cohort 4 in order to provide a more comprehensive picture of the KPL404 PKPD dose relationship. This additional cohort of patients is predicted to reach a trough exposure level, which is complementary to the trough exposure levels already being tested in the other arms of the proof of concept portion of the trial. The primary endpoint remains the same as Cohort 3, which was changed from baseline in DAS28 CRP at week 12. While this study is designed to test the efficacy of different subcutaneous dosing regimens versus placebo, we are also going to be looking at the raw horsepower of the mechanism relative to the competitive landscape.

Speaker 4

We expect data from Cohorts 1, 23 in the Q1 of 2024 and data from Cohort 4 in the Q2 of 2024. I will now turn it over to Mark to cover our financials. Mark?

Speaker 5

Thanks, John. Our detailed Q3 2023 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 Q3 was 67,000,000 dollars including ARCLIS net product revenue of $64,800,000 representing 94% year over year growth and $2,200,000 of collaboration revenue from the Genentech license agreement for vixarilumab. 2nd, strong ARCLIS net product revenue in the 3rd quarter drove ARCLIS collaborating operating profit to $34,600,000 representing more than 2 75% year over year growth and leading to collaboration expenses of $17,300,000 3rd, higher cost of goods sold in collaboration expenses, both of which were driven by our revenue growth as well as advancement of the KPL-four zero four Phase 2 trial in rheumatoid arthritis and investment related to Arclis commercialization contributed to year over year operating expense growth for the period.

Speaker 5

Lastly, in the Q3, we received the $15,000,000 development milestone from Genentech that was disclosed and recognized as revenue in the Q2 of this year. This led to net cash flow of $16,000,000 for the Q3 and an ending cash balance of 201,000,000 dollars We continue to expect these reserves as well as strong Archless 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.

Speaker 2

Thanks, Mark. As you've heard today and as demonstrated by our consistent execution, we are a well capitalized and highly growth orientated company. We're focused on maximizing the commercial opportunity with Arcolist as well as providing data from Cohorts 1, 2 and 3 of the Phase II clinical trial of KPO-four zero four in rheumatoid arthritis in the Q1 of 2024. In addition to the potential in RA, we believe KPL-four zero four could be a best in class therapy across a number of autoimmune indications. Given the company's cash reserves of $201,000,000 strong Arclis commercial execution and our financial discipline, we have a cash runway into at least 2027.

Speaker 2

Ultimately, we continue to be focused on helping patients in need, creating massive value and making a generational impact. And we believe we are strategically positioned to do exactly that. I do want to thank you all for your time today, and I'll now hand it back to the operator for questions.

Operator

Thank you. Thank Our first question will come from Anupam Rama of JPMorgan. Your line is open.

Speaker 5

Hey, guys. Thanks for taking the question and congrats on all the progress. I'm wondering maybe what are you seeing on the pull through from the sales force expansion for Arcless? And how are you kind of quantifying the return on investment there? Thanks so much.

Speaker 2

Thanks, Anupam. Good to hear your voice. Ross, do you want to start and I can almost jump in?

Speaker 3

Yes. I mean thanks, Anupam, for the question. I think I'll just start with saying, you can see from the last couple of quarters' worth of revenue performance where we've had a pretty robust growth. I think a large part of that is down to the sales force expansion that we did towards the end of last year. By the time that team were in place and trained and we changed the territories around and had handovers, we saw a jump up in activity in the early part the late stages of last year and the early parts of this year and then an increase in patient enrollments associated with that higher activity.

Speaker 3

And then really from the Q2 sales where we saw a growth of more than $11,000,000 and then most recent earnings, a growth of over $10,000,000 We're starting to see some of the fruition of that hard work out there in the field. And I think it just speaks to the potential that's out there, but also the spread of recurrent periculitis patients, the importance of getting out broadly to the cardiologists and rheumatologists.

Speaker 5

Thanks so much.

Operator

Thank you. One moment please for our next question. And our next question will come from the line of Paul Choi of Goldman Sachs. Your line is open.

Speaker 6

Hi, thank you. Good morning and thanks for taking our questions. My first question is for John with regards to the addition of the Cohort 4 to the KPL-four zero four study. The loading dose and the two other doses are higher than you're generally testing with the other weekly or every other weekly cohorts. So can you maybe just characterize for us, is there a view that you need to increase exposure here or given the monthly dosing schedule, is it more of a test to see if we can improve on convenience relative to the other cohorts?

Speaker 6

My second question is for Ross, just with regard to his comments on misdiagnosis and the lack of treatment guidelines. Can you maybe just update us on what the status is of potentially getting a either a consensus ACC or guideline inclusion and just kind of what the timing and gating factors are for that? Thank

Speaker 4

you. Sure. Good morning, Paul, and thanks so much for your question. So with regard to Cohort 4, yes, the approach was to provide a more comprehensive picture of the PKPD relationship. But to be clear, the weekly and biweekly KPL404 dose levels actually provide plasma concentrations that are higher.

Speaker 4

So actually the 400 milligramq4 week dose sits in between the 2 mg per kilo subcu dose and the 5 mg per kilo subcu dose, thinking remembering that 5 mg per kilo is roughly 350 to 400 milligrams absolute depending on the weight of the patient. And so this actually provides us an opportunity to test not only that intermediate trough plasma concentration, but also to your point to test the different dosing interval of giving it every month, which is, as you mentioned, more convenient. And so that's basically the approach. And the 600 milligram loading dose allows us to get to that trough plasma concentration quickly. And then yes, the 400 milligrams every 4 weeks allows for the attainment of that trough plasma concentration, which is in between the other 3.

Speaker 2

Okay. And then Ross, did you want to

Speaker 4

start with the and then I'll pick up from the next one?

Speaker 3

Yes. Thank you. Thanks, Paul. So maybe I'll start with your misdiagnosis question and have back on to John for the treatment guideline part. So I think for the misdiagnosis, obviously, we shared some information on how commonplace that can be among this patient population.

Speaker 3

And I think that really speaks to the need for education and awareness that I think we're taking good strides in, but have so much more to do. We're seeing substantial increases around the awareness of recurrent pericarditis. And I guess previously, there were no targeted therapies approved for recurrent pericarditis. So now we're in a different place. I think we're starting to see the ramp up of education and awareness.

Speaker 3

And hopefully, we'll see improvements to the time that it takes for patients to get a correct diagnosis. So we're focused across both our field team, from a sales perspective, our medical affairs efforts out in the field, boosting education to physicians, direct to consumer awareness around doing things directly to patients, so they can help to advocate for themselves, as well as just in the digital forum around webinars and speaker programs and various other ways that we can get messages out there very effectively across the populations as well. So we're seeing some good improvements to that, but certainly have a lot more work to do. John?

Speaker 4

And then with regard to guidelines, maybe to point out that the last time guidelines were made was in 2015 and that was in the European theater. So the European Society of Cardiology put those guidelines out. And of course that predates really almost any of the work in the IL-one space. And so in that treatment paradigm, patients progress after NSAIDs and colchicine through corticosteroids. And then it's only in patients that are resistant to corticosteroids that IL-one antagonism is used.

Speaker 4

So therefore, the real evolution in the field came with the data from Rhapsody demonstrating not only the resolution of the acute pericarditis flare, but also the prevention of subsequent flares while on therapy in 2 populations of patients, not only those who had been on corticosteroids, which is according to the old paradigm, but also about half of the patients in this study had failed NSAIDs and colchicine and had not yet progressed to corticosteroids. And so the similarity of the data in those two populations actually then provides an opportunity to advance the treatment paradigm into this space of using IL-one antagonism in advance of corticosteroids. And so that is in fact what has been picked up in the literature by American thought leaders in showing kind of that sequence of how to best manage the disease. And so we see that as a very encouraging sign for patients to achieve resolution of their acute flares and prevention of subsequent flares out there.

Speaker 6

Okay. Thank you.

Operator

Thank you. And one moment please for our next question. Our next question will come from David Nierengarten of Wedbush Securities. Your line is open.

Speaker 7

Hey, thanks for taking the question. I had 2. Just on the patient stops and restarts again, with a little bit with another quarter worth of data. Do you have any idea on the patients who discontinue therapy and don't return if they are less severe or earlier stage in their disease. I'm just curious to get kind of a handle on the distribution of time on therapy?

Speaker 7

I know it seems like you have a tail there with a stable percentage on longer term therapies, but I'm curious on the nature of those patients. And then the second question was on 404. If we could expect discussion of any additional indications beyond RA when you release the data in Q1 to text?

Speaker 3

Okay. Thanks, David. So this is Ross. Happy to answer the part around the restarts, patient starts. And I guess just generally about what we're seeing around patient duration on therapy as well as a reminder that we really educate physicians that the duration of therapy should be linked to the natural history of the disease, which is 3 years as a median from a natural history and still 1 third of the patients suffer from the disease 5 years out from their initial index episode as well.

Speaker 3

So of course, the length of treatment should depend upon how long they've suffered from recurrent pericarditis at the time of diagnosis and treatment. And what we're seeing in the real world setting is that the initial average time for treatment is around 14 months, the median is 12. The restart rate is around 45% of all those patients who have ceased therapy the first time around and come back on to therapy, most of which within 8 time period. And we're seeing a total average duration of around 20 months in total across all the patient populations. To your part of the question around the nature of the patients, I think it's fair to say that there's no real commonality in terms of patient demographics that we can pick out at this moment in time around those that are more likely to stop or stay on for longer and so on.

Speaker 3

It really just comes down to how long they've suffered from the disease at the time of diagnosis and what their expected natural history is, how long they're going to need treatment for with Arcolis. Knowing that, of course, there's always a safety net there, that if they do stop and they stop too early and there's still underlying auto information present or the patients suffer, again, they can go back on to treatment. But obviously, we want to avoid that happening through robust proper treatments duration of Arcolist in the first place.

Speaker 2

David, this is Sanj. Thanks for your question with regards to the cohorts from the KPO-four zero four study in RA. We're definitely looking forward to those data from cohorts 1, 2 and 3 in the first quarter, as you mentioned. As I mentioned earlier, we're definitely excited about the potential of KPO-four zero four in both RA, but also do believe there is a potential to show hopefully some differentiated effects and some strong efficacy hopefully across a number of autoimmune indications. At this point, we've not disclosed what those would be, but certainly watch your space.

Speaker 2

We're looking forward to some hopefully exciting developments in the future, data dependent. Thanks.

Operator

Thank you. And one moment for our next question. Our next question will come from Geoff Meacham of Bank of America. Your line is open.

Speaker 8

Hey, thanks for giving me

Speaker 2

the question. This is John Joy for Geoff.

Speaker 8

I guess I have two quick questions. One is, how are you guys thinking about sort of total prescriber TAM and payer like TAM? You think there's still headroom to grow or are you starting to kind of see that flatten out a bit? And second, just as you continue to grow, how are you thinking about capital structure?

Speaker 3

Maybe I'll just take the first part, John. Thanks for the question. And then I'll hand over to Mark or Sanje for second bit. And really around the prescriber growth and on the space side, I'd just bear in mind that we still see that there's a huge opportunity ahead. We announced at the turn of the year that we had reached around 5% penetration when we looked at how many patients were on therapy at the end of 2022.

Speaker 3

And while we haven't updated that figure as of yet, that speaks to the opportunity that's still there and the fact that patients are reasonably widely dispersed around the U. S. And we're seeing the good growth in both the number of individual prescribers as well as the repeat prescribers. I think all speak to the opportunity that's still out there. I feel that we're still relatively embryonic in our launch with a pretty exciting opportunity ahead to reach many, many more recurrent peritonitis patients who are suffering.

Speaker 5

Yes. I guess to your question regarding our thinking on capital, I mean, we think we're very well capitalized. As I mentioned, dollars 201,000,000 in reserves at the end of Q3. At the end of the day, our runway, which we've guided to having cash into at least 2027, the ultimate timeline depends upon success of our current and future investments and sort of any future investments that are spawned from the original investments. So we feel very confident in our runway

Speaker 2

and in our cash reserve base of 201 at the end of the quarter. Great. Thanks.

Operator

Thank you. One moment for our next question. Next question will come from Liisa Bayko of Evercore ISI. Your line is open.

Speaker 9

Hi, thanks for taking the question. Can you maybe quantitate a little bit more the amount of inventory changes that you're seeing and how that's contributing to kind of, I guess, what seems like a flat quarter over quarter into the Q4, but I know this is offset by some inventory changes. So if you could quantify that, it would be helpful. Thank you.

Speaker 3

Yes, that's right. It's Elvador, Lisa, and this is Ross. So maybe I'll go through that a little bit. I mean, we continue to see robust performance across all the key drivers of the commercialization. And as I said, we believe we still got a huge potential ahead.

Speaker 3

But when we look at the growth that we had in Q4 and thinking forward to the end of the year, to be very clear, we expect continued growth in Q4 despite a couple of expected headwinds and those being firstly related to some pressure on our gross to net in Q4. And that's driven from a couple of things. Firstly, from end of the year accounting for insurance resets and increases to co pay assistance. So they're really kind of industry wide items in specialty medicine. But as well as changes that we had to our Specialty Pharmacy network, which may drive a slightly higher gross to net in Q4.

Speaker 3

And secondly, we're expecting inventory to level out in Q4 following some of the favorability we had in that regard under the prior quarter of Q3. So we expect some additional pressure to the magnitude of the Q4 revenue growth, but certainly still expecting revenue growth in Q4. As we said, they are tracking to the high end of the guidance we provided.

Speaker 9

Great. Can you just quantitate the inventory change a little bit more? Like what amount are we talking about? And then also what were gross to net for the Q3? Thanks.

Speaker 3

Yes. So, we haven't really quantified the inventory amount, but what we have said is that the majority, the vast majority of the growth comes down to having a higher number of patients on therapy, has really been the key driver of all of our quarters' worth of growth since the time of launch. So that's the vast majority. And then to a smaller level, there's a little bit of inventory dynamic there, as we've mentioned. Gross to net year to date is 9.9 percent and that's versus 9% in 2022.

Speaker 3

So there's always some quarterly fluctuations, that's where we are at 9.9% so far this year.

Speaker 9

Thank you.

Operator

Thank you. I am seeing no further questions in the queue. I would now like to turn the conference back to Sanj Patel for closing remarks.

Speaker 2

Thank you very much for the questions. Enjoying the call today. We clearly have an exciting time ahead of us and very much looking forward to providing additional updates in the future. So until then, thanks very much.

Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.

Powered by Quartr
Earnings Conference Call
Kiniksa Pharmaceuticals Q3 2023
00:00 / 00:00