Kiniksa Pharmaceuticals Q1 2025 Earnings Call Transcript

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April 29, 2025

There are 10 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Conixa Pharmaceuticals First Quarter twenty twenty five 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. To ask a question during the session, you will need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jonathan Kirsenbaum, Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining Conixa's call to discuss our first quarter twenty twenty five 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 for today's call, our Chief Executive Officer, Sanj K. Patel, will begin with an introduction Ross Mote, our Chief Commercial Officer, will provide an update on Arclus' commercial execution.

Speaker 1

Then Mark Ragosa, our Chief Financial Officer, will review our first quarter twenty twenty five financial results. Finally, Sanj will share closing remarks and kick off the Q and A session, for which Doctor. John Paulini, our Chief Medical Officer and Evan Tesori, 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.

Speaker 1

These statements speak only as of the date of this presentation, and we undertake no obligation to update statements except as required by law. With that, I will turn the call over to Saj.

Speaker 2

Thanks Jonathan and good morning everyone. Kynixa is off to a great start in 2025 and we're well positioned to build on our strong performance throughout the rest of the year. We've continued to make excellent progress with Arclis and our commercial franchise in recurrent pericarditis, reaching an increasing number of patients and growing to a net product revenue of $137,800,000 in the first quarter. Ross will go into additional detail about our first quarter performance in a moment. Before he does, of note, the end of Q1 marks the fourth anniversary of the FDA approval of Arclis in recurrent pericarditis, and the underlying fundamentals that have propelled our commercial success up to this point remain strong.

Speaker 2

Since launch, we have continued to observe expanding adoption among new and repeat prescribers, greater appreciation for the multi year duration of disease, and high payer approval rates. Through consistent and effective execution, we have delivered this transformative therapy, which is the only FDA approved treatment for recurrent pericarditis to thousands of patients, establishing and extending our position as the market leader, driving sustained revenue growth year over year. As a result of our strong Q1 performance, we are increasing the Arcelis net sales guidance to between $590,000,000 and $6.00 $5,000,000 from our previous range of between $5.60 and $580,000,000 In addition to Arcelis, we've been hard at work at advancing KPL-three eighty seven in recurrent pericarditis since announcing the program just a couple of months ago. We're on track to initiate the phase twophase three clinical trial in the middle of this year, with data from the phase two portion expected in the second half of next year twenty twenty six. Additionally, we've maintained a robust financial position and expect to remain cash flow positive on an annual basis, providing the flexibility to continue investing in additional value creating opportunities across the business.

Speaker 2

With that, I'll now turn it over to Ross.

Speaker 3

Thank you, Sant. We're delighted we've started off the year with such strength on the commercial funds, having delivered 137,800,000 in net revenue in the first quarter of twenty twenty five, which is a 75% year over year increase compared to Q1 of twenty twenty four. The fact that we continue to drive such growth after four years on the market speaks to both the effectiveness of our strategy and our team's robust execution serving patients with this debilitating disease. Most importantly, we continue to be excited about the substantial opportunity ahead to help many more patients suffering from recurrent peritonitis. Q1 is typically a very challenging quarter due to the specialty drug headwinds associated with payer plan changes and copay resets.

Speaker 3

However, these were outweighed by three key drivers that led to a substantial increase in active commercial patients. Firstly, we saw robust growth in the number of prescribers with around 300 new prescribers in Q1, which is one of the highest quarterly increases we've had launched to date. The second driver was an increase to the overall duration of therapy, which has now increased from approximately twenty seven months to approximately thirty months on average. This highlights the benefits that patients continue to achieve over longer periods of time, as well as a growing appreciation from healthcare professionals that this is a multi year chronic disease for most patients. Finally, Q1 revenue also benefited from federal changes to the Medicare Part D program, which improved patient affordability by lowering the maximum co pay, as well as providing the potential to spread costs evenly through the year.

Speaker 3

While around 70% of the Arcelis payer mix is commercial, these Medicare program changes led to a one time bolus of patients who converted to paid therapy at the start of Q1, which is testament to the value these patients see being on ArcList. Overall, we're delighted with our team's performance over the first quarter and the underlying commercial fundamentals, including payer approval rates and patient compliance remain strong. Our commercial and marketing strategies are built around continuing to switch on more prescribers to this new way of treating recurrent pericarditis by recognizing that the disease is driven by interleukin-one alpha and beta, which requires a targeted immune modulating treatment approach to resolve pain and inflammation and reduce future flares throughout the duration of the disease. As a result of this understanding, we've seen substantial increases in both the breadth and the depth of Arclis prescribing each year that we've been on the market. In Q1, the total breadth of prescribing grew to more than 3,150 unique prescribers since launch, which is an increase of more than eleven fifty from the same period in 2024.

Speaker 3

Importantly, the depth of prescribing has also continued to increase with approximately eight twenty repeat prescribers who have written Arclis for two or more patients. These repeat prescribers are now accounting for approximately half of all new Arclis prescriptions, which highlights the importance of ensuring physicians have a positive experience when prescribing Arcalis for the first time. Alongside growing prescriber adoption, our patient service initiatives under KNICSA ONE Connect continue to be well received by patients. ArcLIS is designed as a long term treatment option. And as such, we've seen growth in both the initial treatment period, which most recently grew from sixteen to seventeen months on average, as well as the total average duration of therapy, which increased from approximately twenty seven months to approximately thirty months.

Speaker 3

This underscores that recurrent pericarditis is a multi year disease for most patients, as well as highlighting patients' willingness and desire to stay on a highly efficacious and well tolerated treatment throughout the disease duration. Kynixa continues to build a strong commercial franchise with Arclis. As a result of our excellent Q1 performance, we are increasing the 2025 net revenue guidance from $560,000,000 to $580,000,000 to $590,000,000 to $6.00 $5,000,000 We look forward to continuing to execute throughout this year, growing the commercial business and improving the lives of many more patients with recurrent pericarditis. With that, I'll turn the call over to Mark to discuss the first quarter twenty twenty five financial results. Mark?

Speaker 4

Thanks, Ross. Strong commercial execution in the first quarter added to Knicks' significant momentum with ArcList and combined with financial discipline and a strong balance sheet, these Knicks are well positioned to continue to create value across our business in both the near and long term. This morning, I will cover our first quarter twenty twenty five financial performance. You can find our detailed financial information in today's press release. There are a few items to note.

Speaker 4

First, starting on the left hand side of the slide with our income statement. As you've heard from Sanj and Ross, Arclus revenue grew 75% year over year in the first quarter to $137,800,000 driven by a meaningful increase in active commercial patients. Operating expenses grew 29% year over year in the first quarter, driven by cost of goods sold due to ARC List revenue growth, collaboration expenses with continued ARC List collaboration profit growth and SG and A in support of ARC List commercialization. Lastly, with the strong ArcLis revenue growth against more moderate operating expense growth, net income was $8,500,000 in the first quarter of twenty twenty five compared to a net loss of $17,700,000 a year ago. Second, the right hand side of this slide provides a calculation for Arclus collaboration profit, which drives collaboration expense.

Speaker 4

Arclus collaboration profit grew a significant 118 percent year over year to $87,600,000 in the first quarter, as our commercial investment continues to be purposeful. Third, at the bottom of the slide, we continue to expect our current operating plan to remain cash flow positive on an annual basis. To this point, we ended the first quarter with a cash balance of $268,300,000 representing approximately $25,000,000 of net cash flow for the period. Finally, a point on the expected impact of potential tariffs on ArcLis cost of goods sold. Importantly, ArcLis is currently manufactured by Regeneron in The United States.

Speaker 4

As such, if tariffs are extended to pharmaceuticals, they would not impact ArcLis supply received from Regeneron. That said, we are in the process of transferring ArcLis manufacturing to Samsung Biologics in South Korea. We expect any tariff on Samsung supply to be limited to the cost of drug substance entering The United States, which would have an immaterial impact on Arclip's cost of goods sold and gross margin. And with that, I'll turn the call back to Saj for closing remarks.

Speaker 2

Thanks, Mark. As you've heard, Kynixa is well positioned to build tremendous more value. We are dedicated to helping as many patients as possible with Arclis and advancing the development of our clinical portfolio, which includes KPL-three eighty seven, our liquid formulation IL-one receptor antagonist with a target profile of monthly dosing. Our ultimate goal is to bring additional treatment options and therapies to patients suffering from debilitating diseases with unmet need. And we won't rest until we do.

Speaker 2

With that, I'll turn the call back to the operator for questions. Thank you.

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, Our first question comes from the line of Jeff Meacham with Citi. Your line is now open.

Speaker 5

Good morning. This is Mary Kate on for Jeff. Thank you so much for taking our question and for the detail of the ongoing launch. You noted duration increasing here. Could you comment on what could be driving that increased usage?

Speaker 5

And then what feedback have you received from patient experience on treatment? Thank you.

Speaker 3

Hi there. Thank you very much for the question. So, is Ross. Yes, we're pleased with the increases that we've seen to duration. I think importantly, as a result of both the initial treatment period, which has increased to around seventeen months now on average with a median of around twelve months.

Speaker 3

But importantly, the total duration of therapy as well now averaging around thirty months, which is around a three month increase versus last reported. So in terms of the drivers of that, I think it's multiple items. I mean, firstly, the healthcare professional side, increasing understanding of the fact that this is a multi year disease for most patients suffering from the current pericarditis. If you focus on those patients with two or more recurrences, we know from the natural history of the disease that the median is around three years, the patients suffer for and still around a third of the patients suffer around five years post the onset of the disease and around a quarter, even eight years beyond the disease. So we know this is a multi year disease and as time goes on, healthcare professionals are treating to the duration of the disease, which is exactly how Arclis was designed and intended to be used.

Speaker 3

Then I think also on the patient side of things, I think it really speaks to how well patients get on therapy. The fact that they get the payer approvals, which remain very high, greater than ninety percent of all completed cases and in an approval. And patients continue to do well while on therapy. And that this is a drug, which is designed to improve the pain and inflammation, but ultimately to reduce the recurrence of future flares throughout the duration. And that's exactly what we saw in the trials and what patients seeing in the real world.

Speaker 3

So the willingness and desire to stay on treatments on the patient side is incredibly high. And I think that really speaks to the kind of the patient experience part of your question as well. We do provide services around adherence and compliance through our patient services program. And that supports patients throughout their entire duration of experience or their whole journey on ARC List. We continue to get very good feedback around that program and how patients are getting on our therapy.

Operator

All right. If there are no more questions, our next quest thank you. Our next question comes from the line of Roger Saul with Jefferies. Your line is now open.

Speaker 6

Great. Congrats for the strong performance for 1Q. Thank you for taking our question. A couple from us. One is regarding the patient penetration.

Speaker 6

Can you comment on how many of those script is coming from the first recurrence? Because in the past, you're talking about the fifteen percent is coming from first recurrence. Did that change in the recent quarter? And then also related to the financials, it seems your R and D cost is coming down a little bit from last quarter and the last year. So, should we use this as the new baseline for the coming quarter years and understanding your expanding to the monthly and quarterly IL-one pipeline?

Speaker 6

Thank you.

Speaker 3

Thanks very much for the questions, Roger. So maybe I'll start off on that one, then I'll hand over to Mark for your second question. In terms of the recurrences that we see patients when they're treated on ARKLIST, it's around fifteen percent of all the patients that are on ARKLIST that are on their first recurrence or have ARPALIST prescribed while they're on their first recurrence and around eighty five percent of our patients that are on two recurrences or more. And that's important, particularly the fifteen percent side, which is really showing that physicians are utilizing the breadth of the label. And as experience goes on and people become more and more familiar with the ease of prescribing Arclis and the high efficacious and well tolerated profile of the drug that is moving more towards earlier line treatments, both in terms of treatment options as well as in recurrence numbers.

Speaker 3

So we think there's a lot to be very positive about on that side And physicians just utilizing the breadth of the label that we have for Arclis, which as you know, is agnostic to the number of recurrences. It's just approved for recurrent peri keratitis overall. So I'll hand on to Mark for the second question. Thank you.

Speaker 4

Great. Roger, thanks for the question. I mean, I think it's important to keep in mind on R and D that fourth quarter two thousand and four R and D did include a $19,000,000 charge related to heavy Prubart prepaid raw materials. So R and D did decline in the first quarter, but it's really on an apples to apples basis, including a $2,500,000 Abi Pruvart manufacturing charge taken in the first quarter, R and D essentially was flat in the $16.5.17000000 dollars range. And so going forward, as far as the baseline is concerned, it's just important to note that the timing of our clinical trials and the manufacturing and clinical supply are key variables.

Speaker 4

And as we mentioned, we are planning to initiate a Phase twothree trial for KPL-three eighty seven in RP in the middle of twenty twenty five. And then we're also advancing KPL-eleven sixty one towards the clinic.

Speaker 6

Excellent. Thank you for the comment.

Operator

Thank you so much for that. Our next question comes from the line of Eva Fortia with Wells Fargo. Your line is now open.

Speaker 5

Hi, good morning. Congrats on the quarter and thanks for taking our questions. A couple from us. First, regarding the increase in the prescriber base, can you discuss the initiatives you're taking here to continue to increase this base? And how do you expect these numbers to change over this year and the next?

Speaker 5

And second question is, can you discuss your gross to net for this quarter? Thanks.

Speaker 3

Hi, Eva. Thank you very much for the questions. Maybe I'll take a pass at both of those and the rest of the team can chime in if they don't want to add anything additional. So in terms of the prescriber base, yes, we were pleased that was one of the key drivers of the performance of Q1 along with the increased duration and then also the bonus, one time bonus of the Medicare patients transitioned across as a result of the changes to the federal program for Medicare Part D making it more affordable for those patients relating to their co pays. We had a growth of more than 300 in the last quarter, which was one of the highest that we've had launched to date, which is very positive, particularly at this stage of launch.

Speaker 3

And I think goes to speak to the opportunity that we have ahead as well. Clearly, haven't guided to how we see kind of future increases happening, but we do believe that there are there is substantial opportunity still left for us to continue to grow in this marketplace. And I think at the end of twenty twenty four, when we provided the penetration into the two plus recurrences of 13%, that also speaks to the opportunity still ahead. In order to drive that the prescriber base, we just continue to be focused very targeted, very clear execution in the field. We have a marvelous team in the field for our sales representatives who have done a great job educating physicians around the disease, ensuring that it's really distinct from acute pericarditis and people are aware how to prescribe Arclis.

Speaker 3

And that certainly continue to help in substantial way. So we continue with our tight execution in the field. But we also supplement that with a lot of digital initiatives on the marketing side as well. Of course, we take place we take a significant share of voice in congresses and conferences. But the digital marketing piece is very important to us of finding new channels to get information out there to the wide array of cardiologists and indeed rheumatologists around the country.

Speaker 3

So we're optimistic for the future and the growth potential that we have. In terms of the gross to net, the Q1 twenty twenty five gross to net was 10.7%. And if you compare that to the full year of 2024, which was 9.8% or Q1 of twenty twenty four, which was 13.5%. Clearly, we've seen a drop versus the same time of last year. We continue to see a similar pattern in gross to net, meaning the historical performance has generally been higher on a gross to net basis in Q1, dropping in Q2 and Q3 before increasing slightly in Q4.

Speaker 3

That's the historical pattern. And we haven't provided gross to net moving forward as guidance. But historically, we've been around 10% for the full year. The Q1 twenty twenty five number, which was a reduction versus Q1 of twenty twenty four, was ultimately down to a bolus of Medicare Part D patients who moved from free goods to commercial therapy associated with those Medicare IRA related changes. And that meant that we had a lower proportion of the total patients in our payer in our patient mix that were eligible for co pay assistance.

Speaker 3

So this brought down the gross to net of Q1 this year versus Q1 last year.

Speaker 5

Got it. Thanks.

Operator

Thank you so much. Our next question comes from the line of Anupam Rama with JPMorgan. Your line is now open.

Speaker 7

Hey, guys. Thanks so much for taking the question and congrats on the quarter. On the uptick on new unique prescribers, I'm assuming most of these are coming from the community setting and should we be thinking about this as sort of like the pull through from the Salesforce expansion? Thanks so much.

Speaker 3

Thanks, Anupam. This is Ross again. So, thank you very much for your comments. Not so much from the community setting. I mean, we're very focused on cardiologists in the specialty setting, not primary care, just to be clear.

Speaker 3

But we're really agnostic and actually always have been since launch to the setting of the cardiologists in particular that focus on, whether it's academic or more kind of cardiology offices. We've spent a huge amount of time prior to launch, but building our understanding since launch as well for the throughput of patients and really understanding the patient journey that are suffering from multiple recurrences of pericarditis. So we've done a lot of research and triangulation of data sources to try to make sure that we send ourselves representatives to areas that we believe have the highest throughput of recurrent pericarditis patients. That's been very effective since launch, but it's a constant updating of dynamics associated with that. So where we're kind of relatively agnostic with the actual setting of the cardiologist, we really follow the patient journey and making sure that we're pushing our resources in the areas where we think we can help the highest number of patients.

Speaker 3

So I think that's the type of work that's really gone into the increase the prescriber base. And we're pleased to be in a situation where we've had constant increases on a quarterly basis since the time of launch with no signs up until the end of Q1 of slowing down, which I think speaks to the future opportunity.

Speaker 7

Thanks so much for taking the question.

Operator

Thank you so Our next question comes from the line of David Nieregaardin with Wedbush. Your line is now open.

Speaker 4

Hey, thanks for taking the question. I just had a quick one. When you look forward on the development of three eighty seven, should we expect to see a trial that resembles what ArcLISS pivotal study looked like? And also, are you planning, I assume so a switch component for that study of the people switching off of ArcLISS into trying out three eighty seven? Thanks.

Speaker 8

Yeah, hi David. This is John Pelley, Chief Medical Officer. Thanks so much for your question. Yes, we're very excited about the development program in March. And as Sandge mentioned, we're getting the Phase twothree study off the ground in the middle of this year.

Speaker 8

As far as the details of that, at this point, we are not sharing that information. What we can say is that at this time, what we can say is that we have had interactions with regulatory authorities about the basics of the plan and are moving forward with that plan. But more details to come as we go forward. And as always, clinicaltrials.gov is a great place to look for updates and clinical trial designs. Thanks so much.

Speaker 8

Thanks.

Operator

Thank you. Our next question comes from the line of Paul Choi with Goldman Sachs. Your line is now open.

Speaker 9

Hi, everyone. This is Khalil calling in for Paul. Thank you for taking our question and congrats on the quarter. I guess I wanted to circle back to Medicare Part D. I know you mentioned earlier on the call that you referenced the historic increase in the number of prescribers and then mentioned Medicare Part D.

Speaker 9

We're wondering how many you think of those new physicians were driven by the increase in Medicare Part D patients? And whether you expect this benefit to continue going forward for the next quarter and the rest of the year? Thank you so much.

Speaker 3

Thanks very much for the question. So just to be clear, vast majority of the Medicare Part D patients that came across the commercial therapy were historic patients that have been on our PAP program, our patient assistance program historically, so free goods. But as a result of the federal changes under the IRA, which improves the affordability by capping the co pays $2,000 as well as introducing the ability to evenly spread the payments kind of across the Medicare prescription payments plan evenly spread throughout the remaining months in the year. That led to many of those patients changing over historically from free goods onto commercial therapy. So they're not part of the new prescribing growth, if you like, that's really focused on new patients and new prescribers coming in as a result, when the vast majority of these are patients have kind of changed over plans rather than receiving a new prescription.

Speaker 3

So maybe it's worthwhile just mentioning that Medicare Part D patient group is really a one time bolus of patients that kind of switched over at the start of the year. And there is some unknowns like how that population will continue through the rest of the year. Of course, patients may come in now that there's greater affordability under Medicare Part D and the prescription payments plan. But for the patients that switched over, I think it's worth bearing in mind that this is a new federal program. There's a grace period, a two month grace period when patients can be disenrolled if they don't pay their premiums to the payers, the Medicare payers.

Speaker 3

There's also the potential for these patients opt out of the prescription payment plan at any time. And ultimately, many of these patients are making payments under their co pays for the first time. So I think there's some uncertainty on the future of those patients that exactly what the dynamics would look like through the rest of the year. But overall, we're really pleased that there's been some changes that make greater affordability across Medicare Part D for patients and thus increase the number of active patients alongside the increase in new prescribers for new patients that have come in, in Q1 as well as patients staying on therapy for longer under the increased duration. So it's kind of three key dynamics there that we're ultimately very pleased with in Q1 and we'll see how they play out through the rest of the year.

Speaker 9

Got it. Thank you.

Speaker 3

Thank you very much.

Operator

Thank you so much. I'm showing no further questions at this time. I would now like to turn it back to Song Patel for closing remarks.

Speaker 2

Thank you, operator. And thank you everybody for the questions and joining the call this morning. We look forward to the remainder of the year and to providing additional updates in the future when they crack on. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Kiniksa Pharmaceuticals Q1 2025
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