Kiniksa Pharmaceuticals International PLC (KNSA) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Kiniksa Pharmaceuticals Second Quarter 2021 Financial Results Conference Call. (Operator Instructions)

I would now like to hand the conference over to your host, Rachel Frank. Please go ahead.

Thank you, operator. Good morning, and thank you for joining Kiniksa's call to discuss our Second Quarter 2021 Financial Results and our recent Corporate and Pipeline Activity. A press release highlighting these results can be found on our website under the Investors & Media section.

As for the agenda, our CEO, Sanj K. Patel, will start with an introduction; Ross Moat, our Head of Commercial, will detail our commercial launch; John Paolini, Kiniksa's Chief Medical Officer, will follow with a brief pipeline update, including a review of additional data from our mavrilimumab Phase II clinical trial in COVID-19-related ARDS; Mark Ragosa, our Chief Financial Officer, will review our second quarter 2021 financial results; and finally, Sanj will return for closing remarks and to kick off the Q&A session for which Eben Tessari, our Chief Business 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 fillings. 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.

Thanks, Rachel, and good morning, everyone. I'm incredibly excited to have the opportunity to discuss our second quarter 2021 results today, which include the first quarter of ARCALYST sales in recurrent pericarditis. We are very encouraged by our initial launch progress, and that is a direct result of focused execution by the Kiniksa team.

I'm excited to report that net revenue for ARCALYST for the second quarter of 2021 was $7.7 million. While we are still in the early stages of the launch, the team continues to execute extremely well. The prelaunch work that they've done to identify the patient population provided a clear call to action for physicians to prescribe.

And the team continues to identify patients and expand upon the prescribing base. All these efforts have facilitated the encouraging uptake that we've seen to date, and positions us for continued growth in the coming quarters and years.

Ross will cover our commercial performance in a bit more detail. And as you'll hear, we are very pleased with the breadth of physician and patient adoption as well as the viable reimbursement condition ahead of payers establishing coverage policy.

Aside from ARCALYST, we're also focused on building maximum value across our entire portfolio. Over the last few months, we've continued to execute across our pipeline of clinical-stage product candidates. In particular, in the past quarter, we were pleased to announce positive results for mavrilimumab in the Phase II trial in severe COVID-19-related ARDS as well as positive final data from the Phase I trial of KPL-404, which is our CD40 program.

John Paolini will provide a more detailed update on the recent pipeline progress, but in essence, we believe we are well positioned for longer-term growth with ARCALYST, and our pipeline assets, mavrilimumab, Vixarelimab and KPL-404 will also aid our growth.

I'll now turn it over to Ross to discuss our commercial performance in more detail. Over to you, Ross.

Thank you, Sanj, and good morning. We were thrilled to have launched ARCALYST in recurrent pericarditis in quarter 2 of 2021, marking a revolution for Kiniksa becoming a commercial stage company as well as establishing the third indication for ARCALYST and underscoring the utility of this interleukin-1 alpha and beta mechanism in autoinflammatory diseases. We successfully assembled the team, readied the organization and launched rapidly at the beginning of Q2, knowing that patients were in need of ARCALYST, and with ARCALYST is the first and only FDA-approved drug in recurrent pericarditis.

We are delighted to share that our launch quarter ended in superb shape with a Q2 net revenue of $7.7 million. The sources of revenue were relatively evenly split between recurrent pericarditis, the legacy CAPS and DIRA indications and the initial channel inventory build to supply all indications. We have seen a very strong start in recurrent pericarditis and are pleased that revenue has already caught up with and slightly surpassed the revenue of the legacy indications. This result was driven by a steady flow of new-to-ARCALYST patients as well as converting patients from the RHAPSODY trial to commercial therapy.

For the indications of CAPS and DIRA, I'm pleased to confirm that whilst there was some Regeneron drug in the channel in the early weeks, those patients successfully transitioned to commercial Kiniksa supply throughout the quarter, and they now receive the full support from Kiniksa OneConnect, our patient services program. We ended the quarter with approximately $2.5 million of revenue -- of inventory revenue at the specialty pharmacies. This volume represents the one-off build in the launch quarter, which was required to meet the legacy CAPS and DIRA demand as well as keeping up with the new growth from recurrent pericarditis.

Following this strong launch quarter results, we would like to provide a forward look to Q3 revenue. Now that the conversion is complete in CAPS and DIRA, we believe this revenue is likely to remain stable moving forward. We do not expect the inventory build to repeat in Q3. Whilst patient demand will increase, the weeks on hand in our specialty pharmacy network is likely to decrease from current levels, as our pharmacies get a better handle on the growth trajectory. Hence, we're likely to see 0 or very marginal inventory growth. Therefore, recurrent pericarditis will be the major growth driver for ARCALYST in Q3. We expect the recurrent pericarditis demand will deliver a greater than twofold increase from Q2 to Q3 and that this will more than account for the one-off inventory build that we saw in Q2.

We expect that this growth will drive our total ARCALYST revenue to between $9 million to $10 million in Q3.

On Slide 9, I will dive into more detail on the drivers of the strong recurrent pericarditis performance. We are thrilled with the initial prescription volume we saw in Q2. This was delivered from both the RHAPSODY clinical trial sites and much broader of practices without the prior clinical experience. At the close of Q2, clinical trial sites accounted for around 35% of the total recurrent pericarditis prescriptions, showing continued prescribing in the commercial setting by those physicians who have substantial trial experience. This also means that around 65% of the total prescribing came from physicians practicing outside of the 12 clinical trial sites, highlighting an early, broad adoption and a willingness from physicians to prescribe and treat patients for the first time.

At an individual prescriber level, we saw greater than 100 physicians who did not participate in the RHAPSODY prescribe ARCALYST to at least 1 recurrent pericarditis patient. This highlights a very promising breadth of prescriber base straight out of the gate.

To ensure strong uptake into the 14,000 target patient population, we also need a depth of prescribing. Currently, a small, but growing percentage of those prescribers have started to prescribe ARCALYST for multiple patients, and we expect this steady growth to continue.

In addition to the new-to-therapy patients, a driver of Q2 demand has been the conversion of patients from the RHAPSODY trial. At the time of FDA approval, the long-term extension portion of our Phase III study came to an end in the U.S. The sites have now completed the end-of-treatment visits and the patients had the opportunity to continue therapy in the commercial setting. And greater than 70% of these patients decided to continue therapy and have since initiated on to commercial drug, indicating satisfaction on therapy.

On the payer side, we believe the early payer engagement prior to launch, which quickly ramped up in the early launch phase, has facilitated great access for patients under the medical exceptions processes. Currently, of the completed cases with a final payer decision, we've seen a greater than 90% approval rate, demonstrating positive early access for patients to initiate ARCALYST, and we continue to expect that the majority of payers will publish their ARCALYST policies within 6 months of launch. Additionally, while it's still too early to provide any meaningful updates on patient compliance and duration, we've started to see patients receive their initial refills on time and continue to expect compliance levels to be similar to that of other comparable self-injectables.

Turning to Slide 10. I want to highlight some of the work that contributed to this excellent first launch quarter and how it sets the foundation for subsequent quarters. We are thrilled to have our experienced cardiovascular sales team in the field. They are highly targeted based on our prelaunch market's understanding of the institutions and the doctors seeing the highest throughput of recurrent pericarditis patients. We previously outlined that we would start by being hyper-focused on around 45% of the recurrent pericarditis patients in the U.S. at around 350 accounts before penetrating further to the 70% of patients concentrated at around 800 practices. The field team have executed well on the launch plan and have met with over 70% of the initial target accounts. The team are focused and diligent, and our robust clinical data enables them to have a clear call to action on exactly who and when to prescribe ARCALYST.

And while the COVID-19 pandemic has limited some in-person sales interactions, the team has remained incredibly productive and focused, utilizing our digital marketing assets. We are also pleased with the access the team has achieved, which indicates the willingness of physicians to engage on recurrent pericarditis. And additionally, nearly 80% of all of our calls were conducted face-to-face. And as states and institutions start to reopen further, we're looking forward to progressing even more with our target accounts. To supplement the field team's efforts, we also held multiple patient and physician, local and national webinars and speaker events.

These have been very well received and created awareness and education further than the field team alone would have been able to achieve. Additionally, we're very proud to continue to support the patient advocacy community, which includes patient support groups across all of the approved indications. As I've mentioned previously, Kiniksa OneConnect, our patient support program, continues to be crucial to optimizing the experience with ARCALYST and Kiniksa. This service provides personalized one-to-one support for every ARCALYST patient through every step of the treatment journey. The Kiniksa patient access leads serve as the primary point of contact for health care providers and patients to help with determining insurance coverage, assist in the prior authorization and any appeals when required, provide an injection training during the patient's initiation and providing financial assistance that aims to ensure patient affordability for eligible patients.

Before handing the call to John, I'd like to say that having led many launches, I'm very proud of the dedicated and diligent Kiniksa team, and I'm humbled by the patients that we've interacted with. We are delighted and encouraged by the first launch quarter results. This launch stage is about setting the commercial wheels in motion and laying the foundations for continued success in the coming quarters. We're just getting started, and we look forward to supporting more patients on their journey with ARCALYST. John, over to you.

Thank you, Ross, and good morning, everyone. I will provide a brief overview on where we stand with our 3 clinical stage programs. We are encouraged by the potential broad utility of mavrilimumab, which has demonstrated positive clinical data across multiple indications, including COVID-19-related ARDS and giant cell arteritis. Our recent interactions with the FDA resulted in defined paths or Phase III development of mavrilimumab in these diseases with significant unmet need. Currently, we're focused on completing our Phase III trial of mavrilimumab in COVID-19-related ARDS and generating data in the first quarter of 2022.

On Vixarelimab, last year, we reported that our Phase IIa study in prurigo nodularis achieved its primary efficacy endpoint with a statistically significant 50.6% reduction in weekly average Worst-Itch NRS from baseline at week 8. There was also a disease benefit shown. Almost 1/3 of Vixarelimab recipients achieved a prurigo nodularis investigator's global assessment, or PN-IGA score of 0 or 1, which is clear or almost clear at week 8 compared to only 7.7% of placebo recipients.

Moving forward, building on those data, we are currently enrolling a global randomized, placebo-controlled Phase IIb dose-ranging trial in prurigo nodularis testing 3 different once-monthly dose regimens. The primary efficacy endpoint is change in Worst-Itch NRS at week 16. Finally, for KPL-404, in May of this year, we announced final data from our Phase I trial in healthy volunteers, showing not only that KPL-404 was well tolerated with dose-related pharmacokinetics, but also that target engagement and pharmacodynamic data were supportive of further development in the patients with optionality for chronic subcutaneous as well as intravenous administration. We plan to initiate a Phase II proof-of-concept trial in the fourth quarter of 2021. This 12-week trial in rheumatoid arthritis patients is designed to provide, not only pharmacokinetic characterization and early signal of efficacy with chronic administration in a well-described patient population, but also optionality to evaluate the therapeutic potential of KPL-404 across a range of autoimmune diseases with pathologies believed to be mediated by CD40 signal.

On Slide 14, I want to return to mavrilimumab for a moment to highlight some new data that we announced today from the Phase II portion of the Phase II/III trial of mavrilimumab in patients with severe COVID-19 pneumonia. For context, you will remember that in April, we reported data from the Phase II portion of the study, showing that at Day 29, mavrilimumab reduced the risk of mechanical ventilation or death by 65% in hospitalized non-mechanically ventilated patients versus placebo.

Shown here are the data for overall survival in the same non-mechanically ventilated cohort patients now carried out through Day 90. The results demonstrate persistence of the substantial mortality reduction over time, thus confirming and extending the previously reported Day 29 data. This prolonged outcomes effect is also consistent with the prolonged pharmacokinetics of the single administration of mavrilimumab, which had been given on Day 1.

In the Phase II cohort of mechanically ventilated patients, not shown here on this slide, the data did not show a reduction in mortality at Day 29 due in part to the competing complications for mechanical ventilation. Kiniksa has discontinued enrollment in a mechanically ventilated cohort in the Phase III trial, and we are focusing our resources on non-mechanically ventilated patients, given that the recent cohort 1 data demonstrate that this is the group, most likely to benefit from upstream blockade of modulation of inflammatory cascade triggered by COVID-19.

Based on the Phase II data, Kiniksa, in consultation with the FDA, has expanded the sample size of the Phase III portion of the trial to enroll approximately 600 nonmechanically ventilated patients in total. The primary efficacy endpoint remains as the proportion of patients alive and free of mechanical ventilation at Day 29. The trial is approximately over 75% enrolled and data are expected in the first quarter of 2022.

One final note on the data. We and others have observed the emergence of variants that are allowing the virus to potentially evade the protective effects of some vaccines and virus-neutralizing antibody cocktails. Kiniksa believes the way mavrilimumab blocks the body's counterproductive inflammatory reaction is agnostic to coronavirus variant. I'll now turn the call over to Mark to review our financial results. Thank you.

Thanks, John, and good morning, everyone. Today, I'm going to walk through our financial performance for the second quarter of 2021, and review our guidance. You can find our detailed financial information in today's press release, and I'd like to call your attention to a few items. First, ARCALYST revenue is recognized upon sales to our distribution network of specialty pharmacies. And in the second quarter, revenue was $7.7 million, driven primarily by the commercial launch of ARCALYST in recurrent pericarditis as well as continued legacy CAPS and DIRA sales upon transition to Kiniksa inventory during the quarter. Second, based upon the strong uptake in recurrent pericarditis, driven by patient demand, broad physician adoption and a notable medical exception approval rate, we expect total third quarter 2021 ARCALYST net revenue of between $9 million and $10 million. Assuming stable CAPS and DIRA revenue, and minimal, if any, revenue contribution from inventory changes, we believe recurrent pericarditis sales, in the third quarter, could represent a greater than twofold increase over second quarter recurrent pericarditis sales.

Given the variables that remain at this early stage of launch, such as continued physician adoption, patient compliance, duration of therapy and final payer coverage policies, we are not providing longer-term ARCALYST revenue guidance at this point. Third, as a reminder, with the FDA approval of ARCALYST for recurrent pericarditis, we are responsible for the sales and distribution of all approved indications in the U.S., including CAPS and DIRA and evenly split profits on sales with Regeneron. When profitable, collaboration profit sharing will be reflected as a separate line item within our operating expenses.

In the second quarter of 2021, we do not make a collaboration profit sharing payment.

Lastly, net loss for the second quarter of 2021 was $41.6 million compared to $37.5 million for the same period last year. And we ended the second quarter of 2021 with cash reserves of approximately $226 million, which we continue to expect to fund our operating plan into 2023. As you've heard from the team, we are executing on our ARCALYST commercial strategy. And combined with the continued advancement of our clinical stage assets, mavri, Vixa and KPL-404, we are well positioned to continue to help patients and to drive future growth. And with that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. At Kiniksa, we are very focused on building the maximum value across our portfolio and building a company that directly and positively impacts the lives of patients. And the fact that we have multiple programs gives us tremendous amount of optionality to allocate capital relative to our opportunities. It's clearly a very exciting time for Kiniksa. We're off to a jolly strong start with the launch of ARCALYST in recurrent pericarditis. The positive feedback we continue to receive from physicians and patients validates the unmet need for patients with recurrent pericarditis. And with this launch, we have started, as we mean to go on. And as I mentioned previously, we continue to be energized by our progress across our entire portfolio, and we believe that we're well positioned to execute throughout this year and beyond. We're encouraged by the broad utility of mavrilimumab seen to date in GCA and COVID. Vixa in prurigo nodularis and KPL-404's potential in a range of autoimmune diseases. Importantly, as Mark said, we're well capitalized, and we have cash reserves that are expected to fund our current operating plan into 2023.

So with that, thanks very much. Thanks for joining the call, and I'll turn it back over to the operator for Q&A.

(Operator Instructions)

Your first question comes from the line of Anupam Rama with JPMorgan.

Congrats on the quarter. Just a quick one for me. Of the 100-plus physicians who prescribed ARCALYST that were not in the Phase III, were these physicians largely from the academic setting or community setting? Or was it a mix? And the doubling of growth that you're expecting in recurrent pericarditis going from 2Q to 3Q, does that assume scripts from existing prescribers? Or does it assume new prescribers as well?

Ross, do you want to take that?

Yes, very happy to, Sanj. Anupam, thanks very much for the question. So maybe to your first point, whether it's from academic or other centers, I think really the answer is that it is a mixed approach that we've seen. We're delighted to see the continued uptake in amongst those centers that have trial experience and the really broad experience that we started to see since launch outside of that. Our focused targeted strategy is really based from market research and claims data where we see the highest throughput of recurrent pericarditis and that's really agnostic to whether they're an academic center or otherwise. So we're very focused on that 350 target accounts and happy to see a really broad prescriber base come out of that.

And then maybe to your point around the next quarter, whether it's existing or new prescribers. Again, we expect to see a mixture. We have more than 100 prescribers, as we said, outside of the RHAPSODY PIs now as well. We expect that to continue to grow in terms of the breadth, but also hope to start to make some more penetration into the depth of prescribing as well. And I mentioned in the presentation that we started to see a small, but a growing number of physicians repeat prescribing. And we think that steady increase will continue as we move forward.

Your next question comes from the line of Paul Choi with Goldman Sachs.

This is Corinne Jenkins on for Paul. Can you just talk about how that set of 100 physicians compares to the initial targeted accounts you had identified? Are these mostly from the target accounts? And how does the pace compare to what you expected?

Yes. So this is Ross, again. Happy to answer that. Thank you for the question. So yes, as we said, we're pleased with the 100 prescribers. Many of those come from within the target accounts that we set out and have really focused on. But also, whilst the field team are very heavily focused on those 350 accounts, we've also been busy on the digital marketing side and also through webinars and speaker meetings and other means as well, by making sure that we get a greater breadth of coverage to increase the awareness of the disease and of ARCALYST as well. So that, along with, I think, patients that have mobilized and gone to their physicians, who wanted to hear about ARCALYST as well has all kind of helped impact on the uptake from how we got to in the first quarter.

That's helpful. Then can you just talk about any impact from the Delta variant on the pace of enrollment in the Phase III study for COVID-related ARDS?

John, you want to take that?

Absolutely. Thank you, Sanj. So yes, thank you for the question. Yes. Undoubtedly, as you know, the Delta variant has resulted in a recent upsurge in cases across the world. As you also know, the Phase III trial is a global trial, which is running in the United States, Brazil, South Africa, Chile and Peru. And so in that sense, the Phase III trial continues on pace. And as I mentioned, it is greater than 75% enrolled at this time, with a target population that we discussed with the FDA of approximately 600 patients.

Your next question comes from the line of David Nierengarten with Wedbush.

A couple of questions here. First off, I was wondering what the -- kind of what the disposition of patients are who got prescriptions this quarter? Were they -- patients who are -- have been treated long term for recurrent pericarditis or they are relatively new diagnoses, maybe 3- or 6-month history or whatever? I'm just a little bit curious as to how quickly they might be treated with rilonacept over time after diagnosis? And then on Vixa, on the recruitment in the prurigo nodularis study, is there any additional guidance on when you could present data from that?

Ross, do you want to start and then I'm sure John will jump in.

Yes, absolutely, Sanj. David, thank you very much for the question around the patient disposition and where they're coming from. So I mean, really, what we've seen in this early stage, albeit that they -- relatively low in the first launch quarter, but we really see a mixture of patients that have started ARCALYST at the moment. Broadly speaking, we've had patients that come from other treatments, hence, they've had our recurrent pericarditis for some time and have been cycling through treatments or whether that's corticosteroids, and we know many patients that are are stuck on corticosteroids and suffering the toxicity effects of that as well as elongating the actual disease and making it difficult to come off. So we've seen some of those patients transition across to ARCALYST as well as, of course, those patients coming from clinical trial of ARCALYST through to commercial ARCALYST as well. So that's been a certain amount. But I think the majority really are coming from those kind of multiple relapsing or refractory type of buckets, which are those really new to ARCALYST patients.

And then, David, nice to speak with you. This is John. Regarding your question about Vixarelimab and the prurigo nodularis Phase IIb study. Yes. So we did announce at the end of last year that we had started enrolling and dosing patients in this trial, which is testing 3 different monthly subcutaneous dose regimens of Vixarelimab. It's 180 patients with moderate to severe prurigo nodularis. At this point in time, we haven't disclosed any particular time lines and aren't providing guidance on enrollment on this time, but we are excited about this study because of the fact that it does provide -- it's designed to provide this important dose-ranging information, especially with a longer time frame over a 16 weeks. And so that's where we are at this point. Thank you.

Your next question comes from the line of Geoff Meacham with Bank of America.

This is Jason on for Jeff. Congratulations on the quarter. I just wanted to maybe do a gut check, thus far, of the launch. As you compare what has happened to your expectations, what has gone well, maybe what hasn't gone as well? And in terms of thinking about the trajectory of the launch and uptake and maybe an overall inflection, where does that stand at this point?

Thanks, Jason. Yes. So this is Sanj. Obviously, we feel very good about the launch, and we're really pleased with the second quarter results. Maybe I'll hand over to Ross. I certainly can't think of what hasn't gone so well other than the fact that, obviously, the COVID virus being out there has impeded some sort of face-to-face visits, but that has been increasing steadily. And thanks to digital formats, we've been able to have the actual number of interactions with physicians severely improve over time, including face-to-face visits. But maybe, Ross, if you want to comment on some of Jason's points?

Yes. Very happy to, Sanj. Thanks, Jason. Thanks for the question. So yes, I think we really kind of readied the team. We've got a great experienced team in place in the field of cardiovascular experience, that's really helped us to open the doors and meet with physicians as well, of course, as the compelling data of wanting to get out there. So I think there's a big lift, as an organization, moving towards a commercial launch for the first time as a company, but really very successfully done and delighted with the large quarter results. Maybe I'll intimate to your question around kind of expectations, maybe more forward looking, if I just clarify 1 or 2 things on the forward-looking statement going to Q3, which we said the guidance is $9 million to $10 million as we move forward. Of course, when we look at Q2, it was $7.7 million, that was fairly evenly split between the 3 different areas of RP, CAPS and DIRA and the inventory build that we always see at the beginning of a launch. In Q3, we expect the CAPS and DIRA to really remain very similar to in Q2. We expect marginal, if any, inventory growth from that side. So really, everything is down to recurrent pericarditis growth moving forward. So if you take the -- like the Q3 midpoint of $9.5 million and deduct the expected CAPS revenue, you see that around $7 million, moving forward, needs to come from recurrent pericarditis. So we've got a significant growth, greater than twofold growth moving forward. So we feel good about that. We feel that is certainly very, very ambitious on the growth trajectory. But given the nature of the disease, and it's a flaring disease as well as a rare disease, it's going to be a steady build through to the peak, plus we know, in Q3, that the bonus of patients that we had in Q2 is no longer there with the LTE, the long-term extension patients that have already transitioned across. So really excited about where we are so far. Haven't had a great launch quarter, excited about looking forward. It's going to continue to be a steady build through to our people.

I would now like to turn the call back over to Sanj Patel for closing remarks.

Thanks, operator. So obviously, just to end, thanks, everybody, for joining in. We're obviously very pleased with the performance to date, and we're exceedingly focused now on our future execution. This is what we do. So let's get back to work, and we'll be in touch soon. Thank you. Thanks, everybody.

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