Q2 2023 Kiniksa Pharmaceuticals Ltd Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the <unk> Pharmaceuticals second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star.
One one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Rachel Frank head of Investor Relations.
Thank you operator, good morning, everyone and thank you for joining this call.
First quarter 2023.
Yes.
We can.
He said.
Properly.
It can be found on our website under the investors and media.
But he is our chief Executive Officer, Don Casey.
With the introduction.
Most of our kitchen workshop, Eric will provide an update on our aqua.
T J.
Our Chief Financial Officer, who will be our second quarter 2014 to refinance.
And finally, Taco with a closing remark is to kick off the Q&A session.
As far as our Chief operating Officer, John <unk>, Our Chief Medical 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 read that statement.
At the bottom this one under the caption risk factors and our SEC filings.
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 Bob.
Thanks, Rachel and good morning, everyone I'm happy to review, our second quarter 2023 financial results today.
We've continued to execute across our cardiovascular and autoimmune franchises.
<unk> us to success and growth in 2023.
On the commercial side Q2 represented another quarter of growth Gerlach list with a net product revenue of $54.5 million.
We're encouraged by our commercial execution to date, and we continue to see strong prescriber adoption and patient enrollment in the second quarter.
We also remained encouraged by the high patient satisfaction.
Approval rates.
And the duration of therapy.
Accordingly, we've now raised our 2023 <unk> guidance to $220 million to $230 million.
On the development side, we remained focus on enrolling the phase II study <unk>, four which is our CD 40 antagonist program in rheumatoid arthritis.
This is designed to evaluate the efficacy dose response, PK and safety of chronic sub Q.
Over a duration of 12 weeks.
We expect data from this study in the first half of next year.
Additionally, we continue to pursue collaborative study agreements with <unk> to evaluate its potential in rare cardiovascular diseases.
This is a molecule that would continue to be excited about and it has the potential to impact a number of diseases.
With that I'll turn it over to Ross to review, our commercial execution of Barclays Ross.
Thank you.
I'm delighted to share further details on our second quarter 2023, commercial performance and the underlying drivers about continued strong revenue growth.
In Q2, the net revenue of <unk> grew to $54 $5 million. This.
<unk> approximately 100% year over year growth.
The underlying driver of this success is our focus on a dual strategy of broadening the prescriber base as well as deepening the experience within existing prescribers to help as many patients with recurrent pericarditis as possible.
Total prescribers since the launch of <unk> in recurrent pericarditis and now greater than 1250, which is a growth of more than 250 versus Q1 <unk>.
Additionally, the pay prescribers are at 23% of the much larger total prescribing base highlights and an acceleration and you repeat prescribers.
This demonstrates growing awareness and commercial experience with organized which will help us in the future as more patients visit nice positions.
One of the important drivers of revenue continues to be duration of therapy at the end of Q2. The approximate initial treatment period averaged around 14 months when calculated for the restart rates and current duration of the subsequent treatment period, we have seen that the average total duration of <unk> therapy was around.
20 months.
Moving to slide eight we're making good progress in building the market and establishing <unk> as the standard of care in recurrent pericarditis and we continue to have a huge opportunity ahead al.
Our focus has been on increasing the reach and frequency with physicians to enable familiarity with our analyst as well as interleukin, one alpha and beta and the underlying drivers of recurrent pericarditis.
The need to rapidly increase awareness and knowledge informed to the expansion of our field team in Q4 2022. This strategy led to a spike in activity with doctors, we couldnt previously rage as well as an increased frequency on those that we've called on previously.
In Q2. This has resulted in a substantial growth in the number of active patients on oculus treatments, even after accounting for the stable rate of discontinuation of the growing base of total patients.
As our sales team focuses on continue inpatient growth they are complemented by our direct to consumer digital marketing, where we're advancing education. So patients can self advocates are placed where appropriate.
We also remain committed to supporting the patient experience with <unk> one connect program.
Including ensuring affordability for eligible patients prescribed to address.
Additionally, we're focused on increasing evidence generation and recurrent pericarditis.
Our residents patient registry is already enrolled over 300 patients with the goal of gathering real world physician and patient reported data to increase the understanding of the burden and the duration of recurrent pericarditis and to better inform clinical decision, making and the management of the disease.
Overall, our commercialization continues to advance as we focus on changing the treatment paradigm and helping as many recurrent pericarditis patients as possible.
Based on our strong commercial execution boosted by the impact of our sales force expansion, we delivered another quarter of growth to our prescribing base to our net revenue and so the profitability of our collaboration we had a great quarter. This led to a higher than expected number of patients on active.
Commercial therapy at the end of Q2.
As a result, we're delighted to further increase our revenue guidance for 2023 from a range of $200 million to $215 million to $220 million to $230 million.
And with that I'll hand over to Mark to cover our financial results Mark.
Great. Thanks, Ross our detailed second quarter 2023 financial results can be found in the press release, we issued earlier today. There are several items I would like to call. Your attention to this morning first total revenue in the second quarter of 2023 was $71 5 million and consisted of Arcalis net product revenue.
A $54 $5 million, representing over 100% annual growth in collaboration revenue of $17 million largely reflecting the recognition of a $15 million development milestone for a new indication under the Genentech license agreement for Victor Allomap.
To date, we have recognized approximately $110 million of the 115 million earned under the <unk> license agreement, we expect to recognize the balance of the deferred revenue over the next three quarters.
Regarding the development milestone we recognize the revenue this quarter and we'll book the cash inflow in the third quarter.
Second <unk> collaboration operating profit grew to $28 million in the second quarter and resulted in a collaboration expense of $14 million.
Third a $16 2 million tax benefit helped drive net income of $15 million in the second quarter. This tax benefit was primarily due to the release of evaluation allowance on noncash deferred tax assets.
Fourth our net cash burn was approximately $2 $5 million in the second quarter, which brought our end of period cash balance to $185 million.
We now expect these reserves as well as continued arcalis commercial execution to fund our current operating plan into at least 2027.
Lastly, turning to <unk> 2023, net product revenue guidance with a greater than that expected uptick in active patients on therapy from the sales force expansion at the beginning of this year. We now expect total 2023, Arcalis net product revenue of between $220 $230 million. This represents.
Approximately 84% year over year net product revenue growth at the midpoint and reflects our expectation for continued execution against our opportunity to help recurrent pericarditis patient.
With that I'll turn the call back to <unk> for closing remarks.
Thanks, Mark in addition to our successful commercialization of <unk>. We also have a pipeline of mid stage clinical programs aimed at making a meaningful impact on patient lives.
As a reminder, we expect data from the phase II study of <unk> in rheumatoid arthritis in the first half of next year.
Importantly, we are well capitalized thanks to growing artless revenues non diluted capital from our strategic out licensing transactions and continued financial discipline. We now expect cash runway as Mark said into at least 2027.
Ultimately our mission is to continue to help patients in need create massive value and make a generation impact. We believe we are strategically positioned to do exactly that.
I want to thank everyone for their time today, and I'll hand, it back to the operator for questions. Thank you.
Operator.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment for questions.
Okay.
Our first question comes from Manav umbrella with Jpmorgan you May proceed.
Hey, guys. Thanks, so much for taking the question and congrats on a strong quarter here I guess.
From a more qualitative standpoint, what are you seeing with pull crews from the sales force expansion in terms of driving sort of repeat prescribers as well as new prescribers. Thanks, so much.
Thanks, Pat upon greater square to talk to you again.
It was a loss, but generally efficacy as you see we have seen an increase in our prescriber base and I feel why we feel still somewhat early days, we're really encouraged by the recent expansion last year and elaborate yes, I think thats absolutely right on the high end time, but thank you very much for the question. So I think as I've said it nicely and you remember the expansion of our sales team towards.
The very end of last year and Q1 of this year, we started to see some of those early signs of the impact of having the benefits of having a larger field team in place, which included a jump up in activity and an increase in enrollment rates.
And that really in Q2, what we've seen as we've reported this morning.
Is a jump up in the total number of active patients having started having started arcalis for recurrent pericarditis. So we're pleased with how things are going Amazon said, it's early days and the expansion of that of that field teams. So we'll see how things progress from here, but I'm happy with the the onetime quick here as you get a larger number of field based <unk>.
At present it is out there.
Doctors, who we have code upon previously and just further in the frequency and the familiarity of the uplift in the current private got Ics with them as well as of course reach and brand new physicians for the first time that we were just unable to date with a slightly smaller team previously.
Thanks, so much for taking our questions.
Thank you one moment for questions.
Our next question comes from Paul Choi with Goldman Sachs. You May proceed.
Hi, Thank you good morning, and let me add my congratulations on a good quarter as well.
Two commercial questions for us and one P&L question.
First.
Sequential revenue growth the growth in the prescriber base.
Well as the number of repeat prescribers are all tracking roughly in lock step into 25% vicinity and so I just wanted to understand maybe if you could comment on.
What is sort of a tipping point for a onetime prescriber to become a.
Repeat prescriber, because it just familiarity with the reimbursement process, our comfort with the product.
Second can you maybe just comment on where you are with the commercial pay versus the government pay mix and how that's been potentially impacting our realized price.
My third question is just on the R&D expense.
It ticked up quite a bit this quarter sequentially is that mostly related to four before getting into the final stages of that study or is there anything else that's driving that increase thank you.
Yeah, Hi, Paul This is Rob so thanks very much for the question. So I'll take your first base.
To begin with which is really around the growth that we've seen in both the revenue the.
Initial prescribers and then also repeat prescribers and while the tipping point is that and then I'll go onto the commercial versus government payer mix question.
For the chip in place I mean, we strongly believe that once patients get once physicians very good experience with <unk> list that will precipitate prescribing and future patients. So that means to US festival, making sure that physicians are aware recurrent pericarditis really is a disease, which is driven by the underlying.
And wishes interleukin, one alpha and beta so understanding that mechanism of the disease and then going on to prescribe <unk> for the first time, which is often a new experience for many cardiologists in particular.
Their office staff.
And that they have familiarity around how to prescribe the drug how to complete the enrollment form what's required on the payer side regarding prior authorizations at all of the mechanisms around that are very important. So we spent a lot of time educating.
Physicians and their office staff and how to do that certainly saying the benefits of that through the.
Right.
Initial prescribers and then really the tipping point to become in repeat prescribers as one the patient flow and waiting for the next patient identified the next patients to come through.
Who are suitable for oculus treatment, but also having the havent seen success. The first time round in terms of the whole process I explained a little bit, but as well as that patient getting onto therapy, making sure that that's a very good access rates for patients across the payer mix average I'll go on to discuss a little bit.
But also that the drug is affordable for all eligible patients as well that we can support things like the co pay program.
We have for eligible patients that.
They have a good prescribing experience that patients get onto therapy, and then go back into the clinic reported positive outcomes from being on therapy, we strongly believe that will be.
Advantageous for continue and prescribe it and as time goes on and we've seen that repeat prescribing rate.
Increase in the size increase.
Significantly quarter on quarter, we think we're making really good progress with that.
So if I go on to talk a little bit about the payer mix I think the important point here is that.
We see a very high approval rates for patients with <unk> in recurrent pericarditis across all of the payer mix, whether it's commercial or government based and as a reminder, we have about 70% of patients on the commercial insurance about 20% Medicare.
Maintenance epicentre in Medicaid.
So we're seeing high approval rates across the board.
And I'll hand over to the P&L question Yeah great.
Paul I think your question.
Sort of answered it but I think you saw R&D tick up sequentially and largely related to 404, right where cohort one and cohort two are continuing and we have the initiation of cohort three so that really speaks to sort of the incremental or the additional R&D spend in the quarter.
Got it thanks again.
Thank you one moment for questions.
Our next question comes from Geoff Meacham with Bank of America.
You May proceed.
Hi, This is Alex Shannon on for Geoff Meacham. Thank you for taking my question and congrats on the quarter.
Can you walk us through the capital deployment needed to continue to build out the recurrent pericarditis market.
And then on <unk> connect has been continuing to appreciate the collaborative agreements and a rare cardiovascular diseases.
And can you speak to where you are now versus one.
And what are you looking for in a collaborator and how high is the bar. Thank you very much.
Ross do you want to take the first part and I think essentially we have.
Ross described we did increase sales.
Sales force late last year.
And really feel we have a good reach now we obviously continue to assess.
Within that <unk> seen growing revenue.
Fourth quarter marketing comments on that as far as expanding the CE Mark.
It needs going forward.
Yeah.
Yes.
Absolutely correct me I think we always are evaluating ways to look at the data and do our best to help more patients sooner and so I think thats where were at.
On the investment behind archivist.
Remember John do you want to make some comments on what we're looking for that clearly we are very excited about that program. We are looking at leveraging study agreements with various sensors and there is some.
Very interesting lines of scientific research that we're looking at there to hopefully increase the value and increase the reach into patients.
Absolutely. Thank.
Thank you for the question. So yes, we're very confident in the mechanism of Maverick <unk> map.
And so with regard to collaborate and steady agreements, we see this as a very capital efficient way.
To provide new data.
<unk> is generating.
Experiment and so the approach of engaging with our academic collaborators to do these type of this type of research.
Our primary focus at this time.
Many of the IND that would be filed.
By the investigators and as a result.
At this point, we don't have any additional comment on the one platform.
Yes.
More than all others.
Yes.
Okay.
Thank you one moment for questions.
Okay.
Our next question comes from David Nearing Garden with Wedbush Securities You May proceed.
Hey, just a quick question on the financial guidance.
Our cash runway.
I guess, how much additional development for <unk>.
Yes.
The phase III in a future indication or something else. Thanks.
Yes, David So I appreciate the question I think what we've said in the past.
We continue to say is that that guidance does provide flexibility to continue to invest behind.
Arcalis commercialization, where we're profitability continues to grow nicely.
Provides flexibility to continue to advance the pipeline and then also to pursue strategic alternatives, including business development and so we haven't really sort of outline the buckets and how much flexibility, but certainly we do have confidence in the runway into 2027 based upon our time in the market with arc list.
Our collaboration revenue as well as sort of general financial discipline, which has helped lower burn over the last little while so very confident in the runway and it does provide some flexibility to continue to invest.
Okay. Thank you.
Thank you one.
One moment for questions.
Our next question comes from Lisa <unk> with Evercore ISI ISI you May proceed.
Hi, Thanks for taking my question just a follow up on R&D. So.
$24 million is that a good run rate to think about for.
The remainder of the year might've looked up from here, maybe you can just access.
Hello, a bit on that.
Yes, So I think I think on R&D as we take a look at them sort of what I have.
Just sort of talk to David about we really haven't.
Discuss too much where we're investing beyond beyond our current ongoing.
Ongoing trials right. So our resources are largely focused on the phase III <unk> trial.
There are some costs that remained to complete the VIX roadmap Pn trial and then.
You heard John talk about we are sort of evaluating opportunities specifically with matter of aluminum Avon synergistic sort of cardiovascular indications and so.
That's really where our focus is at the moment.
Really have not provided further R&D guidance.
Looking forward.
Okay.
Can you comment on what gross to net you had for arc list for the quarter and.
Maybe quantify that any free drug in addition to that.
So.
Yes, we can start we haven't really.
We haven't really talked about.
Antiphon level of free goods in the past as far as gross to net year to date in the second quarter or through the second quarter was 10, 3%.
The year over year increase is largely attributable to sort of more patients on therapy and some additional co pay assistance as a result, we take these factors certainly into consideration when setting up guidance.
As we said in the past and continue to believe Theres always some quarterly fluctuation, but we don't expect big swings in our gross to net at this point.
Okay, and then I was really struck by the 20th.
Ration of therapy, it's a really great update.
How are you thinking about the duration of therapy analysis do you think this is going to be more like a chronic therapy or what's the kind of latest thinking on how long patients may be an entre that.
Yeah, Hi, Lisa this is Rob so I think there are different ways of thinking about this is that data grows and becomes more robust three OSC Luca.
And more information around what we're seeing I think given time, but while we say at the moment is that the initial treatment duration is about 14 months.
Average for patients who are seeing a restart rates once patients discontinue or trial or stop usually believing that at the end of.
The natural history of that disease, so about 45% of patients come back on to therapy and.
Usually pretty quickly within an eight week time period as well and then the data is really building on the subsequent duration when patients come back onto therapy.
At the moment, we're saying a median duration of around six months. So it takes you to your total of about 20 months total average duration for the patients as we say at the end of Q2 bearing in mind that this is something that continues to evolve and continues to build I mean, it is against the backdrop of the natural history of disease.
<unk> had a median of three years around a third of patients.
Still continue to suffer from recurrent pericarditis at five years out from the disease and then the additional dynamic to Thompson.
Contemplate into that is how far into the disease or the patients when they are ascribed to oculus and obviously, that's something that you need to weigh in and say, while the eventual duration of therapy may end up being but that's what we're seeing to date.
We look forward to the day to build a moat.
Great. Thanks, and then just one final question if I can sneak one in.
Mark you talked about.
Genentech.
Development milestone the balance of the deferred revenue in the next few quarters can you just explain what.
What exactly you mean by that I noticed you had a seven.
$15 million milestone.
Development related and are you referring to continuation of that being completed in the next three quarters are you.
Talking about the upfront payment if you could just elaborate a little bit. Thanks.
Yes, sure. So I think as we when we announced the Genentech transaction.
We talked about $100 million in upfront and near term payments.
As well as sort of milestones of $600 million in royalties in the low double digits to mid teens.
Before fulfilling upstream obligations and so as of today as of.
The end of the second quarter.
<unk> recognized $110 million of the 115 million earned under the license agreement and so obviously thats more than the $100 million in upfront reflects the recognition of.
A portion.
<unk>.
It also reflects the recognition of the development milestone.
From Genentech for a new indication that they began development for and so theres $5 million of the $115 million earned to date under the license agreement. We have recognized 110 theres $5 million of deferred revenue that we expect to recognized over the course of the next three quarters.
Really helpful. Thank you.
Thank you.
I'd like to turn it back to Sandra Zhang for any closing remarks.
Thank you operator, and thanks, everybody for the questions and for joining the call today, we clearly have an exciting rest of the year ahead of us looking forward to providing additional updates in the future. So thank you all.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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