Q3 2023 Kiniksa Pharmaceuticals Ltd Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the <unk> Pharmaceuticals third quarter 2023 earnings conference call at.
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I'll hand, the conference over to your Speaker today Ms. Rachel Frank Please go ahead.
Thank you operator, good morning, everyone and thank you for joining this call to discuss our third quarter of 2023 financial results and recent portfolio execution press release, highlighting these results can be found on our website under the investors section.
Absolutely agenda, our Chief Executive Officer, Don State to tell without really production well above our chief commercial officer will provide an update on our commercial execution, John Kelly, Our Chief Medical Officer will provide a kcl for a 4% above you and Mark <unk>, Our Chief Financial Officer will review, our third quarter 2007.
Financial results and finally, Doug will return for closing remarks and to kick off the Q&A session.
Before getting started please note that we'll be making forward looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from these statements.
Such statements and risk factors can be found them.
This slide as well as under the caption risk factors contained in our SEC filings. These statements speak only of the date of this presentation and we undertake no obligation to update such statements except as Rick.
By law.
I will turn it over to <unk>.
Thanks, Rachel and good morning, everyone.
I'm happy to review, our third quarter 2023 financial results today.
We continued to advance all aspects of our business, including strong revenue growth without question.
On clinical trial execution with KPN for a fee.
On the commercial side Q3 represented another quarter of growth Barack list with a net product revenue of 64 $8 million.
We continue to execute commercially.
We have seen strong prescriber adoption.
Patient enrollments in the third quarter.
We also remain encouraged by the high patient satisfaction payer approval rates and the duration of therapy.
We're currently tracking towards the high end of our previously issued guidance of $220 billion to $230 billion.
For 2023.
We're also executing across our clinical development portfolio and we have now completed enrollment of the third cohort of the phase III trial of <unk> four four which is our CD 40 antagonist program.
And his focus in rheumatoid arthritis, and we now expect data from cohorts one to three in the first quarter of 'twenty 'twenty four.
This trial is designed to evaluate the efficacy dose response, PK and safety of chronic subcutaneous over a duration of 12 weeks.
Jump I believe he will cover more details on this program in a moment.
Additionally, we continue to pursue collaborative study agreements with Madeleine map 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 Rob to review, our commercial execution, our Barclays Ross.
Thank you so much.
Delighted to share further details on our third quarter commercial performance and the underlying drivers of our continued strong revenue growth in.
In Q3, the net revenue of Barclays grew to $64 $8 million. This represents approximately 94% year on year growth and.
And just sorry about $10 million growth quarter on quarter.
Yes.
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 comp.
Tractor range of our recently restructured specialty pharmacy network.
The underlying driver of the continued increase in <unk> demand is our focus on a dual strategy at broadening the prescriber base as well as deepening the experience within existing prescribers. This strategy has resulted in more than 1450 individual prescribers since launch and <unk>.
Off that higher base, 24% have now prescribed for two or more recurrent pericarditis patients.
Our payer approval rates 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 eight we're making good progress in continuing to build the market and change the treatment paradigm to establish <unk> as the standard of care in recurrent pericarditis.
Through our experience launched to date, we've outlined several core priorities to drive our future growth.
Lastly, we need to drive a proactive mindset to the identification and treatment of recurrent pericarditis patients.
Harriss pulsar by 96% of patients reported that they were incorrectly diagnosed with other conditions prior to their recurrent pericarditis diagnosis.
They had an average of $2 seven diagnoses the for the recurrent pericarditis diagnosis. This highlights the substantial room for improvement that's possible by advancing education on the disease.
Additionally, once the diagnosis is reached we need to evolve physicians mindsets to be more proactive in treating earlier and preventing future floods as well as increasing patient education on the disease and treatment options. So they can advocate for themselves.
Secondly, we're focused on closing the knowledge gap by increasing the awareness of August. We noted that went off places prescribed both physicians and patients have a very positive experience. However to continue acquiring the prescribing base, we need to increase knowledge within the broad cardiology and rheumatology audience.
Based on our recent survey of 200 physicians around 95% of the respondents were generally aware of August however, only half were very knowledgeable, which we interpret as having the critical information you would need in order to make the prescribing decisions such as who it's for how it works and what the clinical data.
Looked 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 are seen by connector represents that in the last three months three quarters consider themselves very knowledgeable, which speaks to the impact of our sales force.
Additionally, we are starting to evolve the treatment paradigm for recurrent pericarditis. While there are currently no consensus guidelines in the U S. The recent publications coming from tornadoes introducing treatment algorithms that recommend interleukin one alpha or beta antagonism ahead of corticosteroids after a P.
<unk> files Nsaids colchicine.
When you look at the current prescribing practices around one third of health care professionals reports that prescribe an oculus 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 reports that they intend to increase their future prescriber novartis, while 58% say that they intend to decrease their utilization of corticosteroids, which is exactly aligned to our positioning of Barclays.
Based on the progress we've made to date, we believe there is significantly more opportunity to penetrate the recurrent pericarditis market.
We're excited to help even more patients who are suffering from this debilitating disease.
Overall, we're delighted with our progress over the last quarter growing both on net revenue and the profitability from our collaboration.
Based on our current trajectory and accounting for the headwinds of Q4 industry dynamics and unexpected level setting of inventory. We're currently tracking to the high end of our previously stated guidance range of $220 million to $230 million.
With that I'll hand over to John to discuss Kpis for rifle shot.
Thanks Ross.
The aim of the phase II trial of <unk> for a forward 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 Sanjay mentioned, we've completed enrolment in cohorts, one two and three of the study.
Subsequently, we initiated an additional or fourth cohort of the study.
Whereas cohort three enrolled approximately 75 patients randomized in a one to one to one ratio to the five milligram per kilo subcutaneous dose level administered weekly versus biweekly versus placebo. This new fourth cohort will enroll approximately 40 patients randomized.
In a three to two ratio to a fixed subcutaneous kcl for a four dose administered monthly versus placebo spin.
Specifically participants in the active arm will receive a 600 milligram loading dose on day, one followed by 400 milligrams Subcutaneously every four weeks for 12 weeks.
We decided to initiate cohort four in order to provide a more comprehensive picture of the <unk> 404, PK PD 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 and the other arms of the proof of concept portion of the trial.
Primary endpoint remains the same as cohort three which was changed from baseline in <unk> 2000, <unk> 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 a mechanism relative to the competitive landscape.
We expect data from cohorts, one two and three in the first quarter of 2024 and data from cohort four in the second quarter of 2024.
I will now turn it over to Mark to cover our financials Mark.
Thanks, John our detailed third quarter 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 third quarter was $67 million, including arc with net product revenue of $64 8 million, representing 94% year over year growth.
The $2 2 million of collaboration revenue from the genetic license agreement for <unk>.
Second strong Arcalis net product revenue in the third quarter drew arcalis collaborating operating profit to $34 6 million, representing more than 275% year over year growth.
And leading to collaboration expenses of $17 3 million.
Third higher cost of goods sold and collaboration expenses.
Both of which were driven by our revenue growth as well as the advancement of the <unk> phase III trial in rheumatoid arthritis and.
And investment related to Arcalis commercialization contributed to year over year operating expense growth for the period.
Lastly in the third quarter, we received a $15 million development milestone from Genentech that was disclosed and recognized as revenue in the second quarter of this year.
This led to net cash flow of $16 million for the third quarter, and an ending cash balance of $201 million.
We continue to expect these reserves as well as strong <unk> commercial execution to fund our current operating plan into at least 2027.
And with that I'll turn the call back to <unk> for closing remarks.
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 <unk> as well as providing data from cohorts one two and three of the phase III clinical trial of <unk> four in rheumatoid arthritis in the first quarter of 2024.
In addition to the potential in our rate, we believe <unk> 404 could be a best in class therapy across a number of autoimmune indications.
Given the company's cash reserves of $201 million.
Strong <unk> commercial execution.
Our financial discipline, we have a cash runway until at least 2027.
Ultimately, we continue to be focused on helping patients in need creating massive value.
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.
Thank you operator.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.
Standby as we compile the Q&A roster.
Yeah.
One moment for our first question.
Yeah.
Our first question will come from <unk> Rama of Jpmorgan. Your line is open.
Hey, guys. Thanks for taking my 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 arc lists and how are you kind of quantifying the return on investment there. Thanks, so much.
Thanks out of bankruptcy of voice roster stop mechanism strengthen yes. Thanks for the question I think I'll just start with saying that you can see from the last couple of quarters worth of revenue performance.
We've had a pretty robust growth I think a large part of is down to the sales force expansion that we did that towards the end of.
Last year, we said by the time that team in place and trained and will change the territory is rounded and hotan diverse we saw.
John pumping activity in the early part in the late stages of last year and the early parts of this year and then an increase in patient enrollments associated with the higher activity and then really from the Q2 sales, where we saw growth of more than $11 million.
Most recently, adding.
Great just a $10 million.
We are starting to see some of the fruition of that hardware sales.
And I think it just speaks to the potential that's out there, but I will say that the spread of recurrent pericarditis patient samples so get to know poorly to the cardiologists are inventory adjustments.
Okay.
Thanks, so much.
Thank you.
One moment please for our next question.
And our next question.
Our next question will come from the line of Paul Choi Goldman Sachs. Your line is open.
Hi, Thank you good morning, and thanks for taking our questions.
My first question is for John with regard to the addition of the cohort four to the <unk> study.
The loading dose and the two other doses are higher than Europe 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.
To the other cohorts.
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 are.
<unk> guide.
<unk> inclusion and then just kind of what the timing on gating factors are for that thank you.
Sure. Good morning, Paul Thanks, So much for your question so with regard to our cohort four yes. The approach was to provide a more comprehensive picture of the PK PD relationship, but to be clear the weekly and biweekly kcl for a four dose levels actually.
<unk> plasma concentrations that are higher so actually for the 400 milligram Q4 week dose sits in between the two milligram per kilo sub Q dose and a five milligram per kilo sub Q dose thinking remembering that five milligrams per kilo is roughly 350 to 400.
<unk> 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 four weeks allows for the attainment of that trough plasma concentration, which.
In between the other three.
Okay, and then Ross did you want to start with.
And then I'll pick up for next year, yes. Thank you. Thanks, Bob So maybe I'll start with your misdiagnosis question and I'll hop back on to John for the treatment guidelines.
So I think the misdiagnosis subsidy, we shared some information of how commonplace that can be among this patient population and I think that really speaks to the need for education and awareness, but I think we're taking good strides hey, Bob said much more today.
We say substantial increases around the awareness of recurrent pericarditis and I guess previously there were no targeted therapies approved for recurrent pericarditis right now we're at a different place I think we're starting to see the ramp up of education and awareness and hopefully we'll see improvements to the time that it takes a patient.
To get a correct diagnosis of we're focused across both our field team from a sales perspective, our medical affairs efforts, Alex and the sale of Princeton education to physicians.
Direct to consumer.
Wireless.
Things directly to patients so they can help to advocate for themselves as.
As well as just in the digital for morale 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.
And then with regard to guidelines maybe to point out that it's a <unk>.
Last time guidelines were made was in 2015 and that was in the European Theater said, the European Society of Cardiology, I'll put those guidelines out and of course that pre dates really almost any of the work in the IR one space.
So in that treatment paradigm patients progressed after nsaids colchicine through corticosteroids and then it's only in patients that are resistant to corticosteroids that intermediate one antagonism is used 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 two 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.
And such and culture, seeing 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.
And 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 flyers out there.
Okay. Thank you.
Yeah.
Thank you.
Operator: Good day, and thank you for standing by.
And one moment. Please next question.
Operator: Welcome to the Kiniksa Pharmaceuticals 3rd quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Okay.
Our next question will come from David Nearing Garden of Wedbush Securities. Your line is open.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1-1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your questions, please press star 1-1 again.
Hey, Thanks for taking the question I had two.
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 discontinued therapy.
Operator: Please be advised that today's conference is being recorded, and I would now like to hand a comment over to you.
Return, it's there are.
Rachel Frank: Speaking today, Ms. Rachel Frank, please go ahead. Thank you, operator. Good morning, everyone, and thank you for joining Kiniksa's call to discuss our 3rd quarter 2023 financial results in recent portfolio execution. Press really piloting these results to be found on our website under the investor section.
Less severe or earlier stage in their disease, just curious to hear kind of a handle on the distribution of.
Time on therapy, I know it seems like you have a tail there with a stable percentage on longer term therapy, but curious on the nature of those patients and then the second question was.
Sanj Patel: As for the agenda, our chief executive officer, Saunch K. Patel, will start with an introduction.
Four four.
If if we could expect.
Ross Moat: Ross Moat, our chief commercial officer, will provide an update on our specialist commercial execution.
Any additional indications beyond <unk>.
When you release the data in Q1.
John Paolini: Dump Halini, our chief medical officer, will provide a KPL for a four-footer review.
Yes.
Okay. Thanks, David This is Rob <unk> to answer the parts around the restarts patient stops and I guess, just generally about what we say at about <unk> pay.
Mark Ragosa: Then Mark Ragosa, our chief financial officer, will review our third quarter 2020 financial results.
Sanj Patel: And finally, Saunch will return for closing remarks and to kick off the Q&A session.
Duration on therapy as well as a reminder, that we we really educate physicians that the duration of therapy should be linked to the natural history of the disease, which is three years is immediate.
Unknown Executive: Before getting started, please know that we will be making forward-looking statements today that are subject to risk and uncertainties that may cause actual results to differ materially from these statements. For review of such statements and risk factors to be found on this slide, as well as under the caption, risk factors continue to know FEC filing. These statements speak only out of the date of this presentation, and we undertake no obligation to update such statements except is required by law.
Natural history, instead of one side of the patients suffer from the disease at five years out from that initial index episodic as well of course, the length of treatment should depend on how long they suffered from recurrent pericarditis at the time of diagnosis and treatment and what we've seen in the real world setting is that the initial average.
Sanj Patel: With that, I will turn it over to Saunch. Thanks Rachel, and good morning everyone.
To treatments is around 14 months. The median is 12 the restarts rates is around 45% of all those patients who have cease therapy. The first time around and come back onto therapy, most of which were the eight week time period.
Sanj Patel: I'm happy to review our third quarter 2023 financial results today. We continued to advance all aspects of our business, including strong revenue growth with our list, and clinical trial execution with KPL 404. On the commercial side, Q3 represented another quarter of growth for our list with a net product revenue of $64.8 million. We continued to execute commercially when we have seen strong prescriber adoption and patient enrollments in the third quarter. We also remain encouraged by the high patient satisfaction, pay approval rates, and the duration of therapy. And we're currently tracking towards the high end of our previously issued guidance of $220 to $230 million for 2023.
And we're seeing a total average duration of around 20 months in total across all of the patient populations.
Parts of the question around the nature of the patients. So I think it's fair to say that Theres no real commonality in terms of patient demographics that we can pick out at this moment in time or are those more likely to stop will stay on for longer and so it really just comes down to how long they've suffered from the disease at the time of diagnosis.
They are expected natural history.
Is that how long I'm not going to need treatment toll with oculus.
No and that of course is always a safety net that that if they do stop and they stop too early and there is still underlying auto information presence where patients suffer again. They can go back onto treatments, but obviously, we want to avoid that happening through robust proper treatment duration of Barclays.
John Paolini: We're also executing across our clinical development portfolio, and we have now completed enrollment of the third cohort of the phase two trial of KPL 404, which is our CD40 antagonist program. And it's focused in rumors on arthritis, and we now expect data from courts one to three in the first quarter of 2024. This trial is designed to evaluate the efficacy, dose response, PK, and safety of chronic subcute dosing over a duration of 12 weeks.
Thanks.
And David This is Vance.
And thanks for your question with regards to the cohorts.
From the <unk> four study and our rate with definitely looking forward to those data from cohorts one two and three in the first quarter as you mentioned as.
As I mentioned earlier, and we're definitely excited about potential.
404 in both alright, 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.
Those would be but certainly.
Sanj Patel: Dr. John Paolini will cover more details on this program in a moment. Additionally, we continue to pursue collaborative study agreements with Mabela Mab to evaluate its potential in rare cardiovascular diseases. This is a molecule that has been the potential to impact a number of diseases.
Watch this space, we're looking forward to some exciting developments in future data dependent.
Thanks.
Okay.
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.
Ross Moat: So with that, I'll turn it over to Ross to review our commercial execution of Arclists. Ross, thank you, Sanj. And delighted to share further details on our third quarter commercial performance and the underlying drivers of our continued strong revenue growth. In Q3, the net revenue of Arclists grew to $64.8 million. This represents approximately 94% year-on-year growth and just over $10 million growth quarter on quarter. 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.
Hey, Thanks for taking my question. This is John Joy for Jeff.
I guess I have two quick questions. One is how are you guys thinking about sort of total prescriber Tam and payer Tam do you think there is 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.
Maybe I'll just take the first part John Thanks for the question and then I'll hand over to Marco Science.
So the second bench I've made it around the prescriber growth in other spaces that I've just bear in mind that we still see that as a huge opportunity ahead.
Ounce that's out of the year that way that reached around 5% penetration, where we looked at how many patients are on therapy.
Ross Moat: 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 Arclists demand is our focus on a dual strategy of broadening the prescriber base as well as deepening the experience within existing prescribers. This strategy has resulted in more than 1,450 individual prescribers since launch and off that higher base, 24% have now prescribed the two or more recurrent paracolitis patients.
At the end of 2022.
While we haven't updated that figure as of yet.
That speaks to the opportunity that still that and the fact that patients are reasonably widely dispersed around the U S and we say that good growth in both.
The number of individual prescribers as well as the repeat prescribers I think I'll speak to the opportunity that stood out that I feel that we're still relatively embryonic in our launch.
Pretty exciting opportunity ahead to reach many many more recurrent pericarditis patients who are suffering.
Ross Moat: 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 sitting at a total of around 20 months on average may continue to evolve as more patients get towards the longer durations of therapy.
Yes, I guess.
To your question regarding <unk>.
Our thinking on capital I mean, we think we're very well capitalized as I mentioned $201 million and reserves at the end.
End of the third quarter.
At the end of the day, our runway, which we guided to having cash until at least 2027.
Ross Moat: Moving to slide 8, we're making good progress in continuing to build the market and change the treatment paradigm to establish Arclists as these standard of care in recurrent paracolitis. Through our experience launch today, we've outlined several core priorities to drive our future growth. Firstly, we need to drive a proactive mindset for the identification and treatment of recurrent paracolitis patients. In a Harris poll survey, 96% of patients reported that they were incorrectly diagnosed with other conditions prior to their recurrent paracolitis diagnosis.
The ultimate timeline it depends upon the success of our current and future investments.
No.
Any future investments.
That our spot from the original investments so.
We feel very confident in our runway and.
And.
And our cash reserve base of 201 at the end of the quarter.
Great. Thanks.
Thank you.
One moment for our next question.
Yeah.
Our next question will come from looser Baker.
Ross Moat: In fact, they had an average of 2.7 diagnoses before the recurrent paracolitis diagnosis. This highlights the substantial room for improvement that's possible by advancing education on the disease. 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 We know that when Arclis is prescribed, both physicians and patients have a very positive experience.
Evercore ISI your line is open.
Alright, Thanks for taking my question, maybe quantitate, a little bit more.
The amount of inventory changes that youre seeing.
And how that's contributing to kind of.
I guess, what seems like a flat quarter over quarter into the fourth quarter, but I know this is offset by some inventory change that so if you could quantify that would be helpful. Thank you.
Yes.
And some of that's really said this is Ross so maybe I'll go through literally I mean, we continue to see robust performance across all of the key drivers of the commercialization and as I said, we believe we still got huge potential ahead, but when we look at the growth that we have in Q4 and thinking forward to the end of the year.
Ross Moat: 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 Arclis. However, only half were very knowledgeable, which we interprets as having the critical information you would need. In order to make a prescribed decision, such as who it's for, how it works, and what the clinical data looked like.
To be very clear, we expect continued growth in.
In Q4, despite a.
A couple of expected headwinds in those bad firstly related to some pressure on our gross to net in Q4, that's driven a couple of things firstly from end of year accounting for insurance resets and increases the copay assistance, so that really kind of industry wide.
Ross Moat: 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. More importantly, of the physicians who were seen by Kiniksa representative in the last three months, three quarters consider themselves very knowledgeable, which speaks to the impact of ourselves. Additionally, we're starting to evolve the treatment paradigm for recurrent pericarditis. While there are currently no consensus guidelines in the US, recent publications, coming from thought leaders, are introducing treatment algorithms that recommend into looking one alpha and beta antagonism ahead, of course, co-steroids, after a patient fails and sends and cultures in.
Items in specialty medicine, but as wireless changes that we've had to our specialty pharmacy network, which might drive a slightly higher gross to net in Q4, 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.
Certainly still expecting revenue growth in Q4.
And as we said.
Tracking to the high end of the guidance we provided.
Great can you can you just quantitate the inventory change a little bit more like what what amount are we talking about and then also what were gross to nets in the third quarter.
Ross Moat: When you look at the current prescribing patterns, around one third of health care professionals report that prescribing Arclis ahead, of course, of co-steroids, 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 Arclis, while 58% say that they intend to decrease their utilization of co-steroids, which is exactly aligned to our position of Arclis.
Yes, so we haven't really quantified the inventory amount, but what we have said is that the majority the vast majority of the quarter. It comes down to having a higher number of patients on therapy.
This has really been the key driver of all of our quarters worth of growth since the time of launch.
The vast majority and then to a smaller level.
It's a way of inventory dynamics habits as we've mentioned.
Gross to net year to date is nine 9%.
And thats versus 9% in 2022.
Ross Moat: Based on the progress we've made today, 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. 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're currently tracking to the high end of the previously stated guidance range of 220 to 230 million dollars.
I'd say theres always some quarterly fluctuations but.
That's why we at nine 9% so far this year.
Thank you.
Thank you.
Okay.
I am seeing no further questions in the queue I would now like to turn the conference back to Sanjay Patel for closing remarks.
Thank you very much for the questions and joining 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.
This concludes today's conference call.
Thank you all for participating you may now disconnect and have a pleasant day.
Yeah.
John Paolini: With that, I'll hand out to John to discuss KPL for a full jump. Thanks Ross. The aim of the phase 2 trial of KPL 404 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, 2 and 3 of the study. Subsequently, we initiated an additional or fourth cohort of the study, whereas cohort 3 enrolled approximately 75 patients randomized in a 1 to 1 to 1 ratio to the 5 milligram per kilo subcutaneous dose level administered weekly versus biweekly versus placebo.
Okay.
[music].
Okay.
Yes.
Yes.
[music].
Okay.
[music].
John Paolini: This new fourth cohort will enroll approximately 40 patients randomized in a 3 to 2 ratio to a fixed subcutaneous KPL 404 dose administered monthly versus placebo, specifically participants in the active arm will receive a 600 milligram loading dose on day one, followed by 400 milligrams subcutaneously every four weeks for 12 weeks. To the tropic exposure levels already being tested in the other arms of the proof of concept portion of the trial.
John Paolini: The primary endpoint remains the fame as cohort three, which is changed from baseline in death 28 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 a mechanism relative to the competitive landscape.
John Paolini: We expect data from cohorts one, two, and three in the first quarter of 2024 and data from cohort four in the second quarter of 2024.
Mark Ragosa: I will now turn it over to Mark to cover our financials, right? Thanks, John. Our detailed third quarter of 2023 financial results can be found in the press release we issued earlier today.
Mark Ragosa: There are a few items I'd like to call your attention to this morning. First, total revenue in the third quarter was 67 million, including Arklis net product revenue of 64.8 million, representing 94% year over year growth. And 2.2 million of collaboration revenue from the genetic license agreement for fixer will amount. Second, strong Arklis net product revenue in the third quarter through Arklis collaborating operating profit to 34.6 million, representing more than 275% year over year growth, and leading to collaboration expenses of 17.3 million.
Mark Ragosa: Third, higher cost of goods sold in collaboration expenses, both of which were driven by our revenue growth, as well as advancement of the KPL 404 phase two trial and rheumatoid arthritis, and investment related to Arklis commercialization contributed to year over year operating expense growth for the period. Lastly, in the third quarter, we received the $15 million development milestone from genetic that was disclosed and recognized as revenue in the second quarter of this year.
Mark Ragosa: This led to net cash flow of 16 million for the third quarter and an ending cash balance of 211 million. We continue to expect these reserves as well as strong Arklis commercial execution to fund our current operating plan into at least 2027.
Sanj Patel: We'll turn the call back to science for closing remarks. Thanks Mark. As you've heard today and demonstrated by our consistent execution, we are a well capitalized and highly growth orientated company. We're focused on maximizing the commercial opportunity with Arklis as well as providing data from cohorts one, two and three of the phase two clinical trial at KPL 404 in rheumatoid arthritis in the first quarter of 2024. In addition to the potential in our array, we believe KPL 404 could be a best-in-class therapy across a number of autoimmune indications given the company's cash reserves of $201 million, strong, archolous commercial execution, financial discipline, we have a cash runway into at least 2027.
Sanj Patel: 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.
Operator: I do want to thank you all for your time today, and I'll now hand it back to the operator for questions. Thank you. As a reminder to ask a question, please press star 11 on your phone and wait for your name to be announced. To control your question, please press star 11 again. Stand by as the compile the Q&A roster. One moment for our first question.
Anupam Rama: Our first question will come from Anupam Rama of David Morgan. Your line is open. Hey, guys.
Ross Moat: 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 Salesforce expansion for archolous, and how are you kind of quantifying the return on investment there? Thanks so much. Thanks for your voice.
Operator: Ross, do you want to start? Thanks for the question. I think I just start with saying that 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 Salesforce expansion that we did towards the end of last year. By the time that team were in place and trained, and we changed the territory around and had hand over as we saw a jump up in activity in the early part of the late stages of last year and the early parts of this year.
Operator: And then an increase in patient enrollments associated with a higher activity. And then really from the Q2 sales where we saw a growth of more than $11 million in most recent earnings growth of over $10 million. We started 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 the current prioritized patients, the importance of getting out broadly to the cardiologists of rheumatologists. Thanks so much. Thank you. One moment, please.
Operator: We're on the next question.
Paul Choi: And our next question. Our next question will come from the line of poll Choi of Goldman Sachs. Your line is open.
Operator: Hi. Thank you. Good morning and thanks for taking our questions.
John Paolini: My first question is for John with regards to the addition of the cohort for to the KPL 404 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. Can you maybe just characterize for us a review that you need to increase exposure here, or given the monthly dosing schedule, is it more of a test to see if you can improve on convenience relative to the other cohorts?
Ross Moat: My second question is for Ross, just with regard to his comments on misdiagnosis and the lack of treatment guidelines.
Ross Moat: Can you maybe just update us on what the status is of potentially getting either a consensus ACC or AHA guideline inclusion and just kind of what the timing and gating factors are for that? Good morning, Paul. Thanks so much for your question. So with regard to cohort four, yes, the approach was to provide a more comprehensive picture of the PKPD relationship, but to be clear, the weekly and biweekly KPL 404 dose levels actually provide plasma concentrations that are higher.
Ross Moat: So actually the 400 milligram Q4 week dose sits in between the two milligram per kilo sub Q dose and the five milligram per kilo sub Q dose, thinking and remembering that five milligrams per kilo is roughly 350 to 400 milligrams, absolutely, 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.
Ross Moat: 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, 400 milligrams every four weeks allows for the attainment of that trough plasma concentration, which is in between the other three. Okay, and then, right, did you want to start with the, and I'll pick up from that. Yeah, thank you. Thanks, Paul.
Ross Moat: 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 share some information on how commonplace that can be among this patient population. And I think that really speaks to the need for education and awareness that I think we're taking good stride in, but I have so much more to do. We're seeing, you know, substantial increases around the awareness of the current paracoditis.
Ross Moat: And I guess previously there were no targeted therapies approved for the current paracoditis. So now we're in a different place. I think we're starting to see the ramp up of education and awareness. And hopefully we'll see improvements to the time that it takes for patients to get to correct diagnosis. So we're focused across both our field team, from the sales perspective, our medical affairs efforts out in the field, boosting education to physicians, direct to consumer awareness around 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.
Ross Moat: 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 I-O-1 space. And so in that treatment paradigm, patients progress after endsets and culture stain through corticosteroids. And then it's only in patients that are resistant to corticosteroids that 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 two populations of patients.
Ross Moat: Not only those who had been on corticosteroids, which is according to the old paradigm, but also about half of the patients in the study had failed endsets in culture stain and did not yet progress 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 I-O-1 antagonism in advance in corticosteroids. And so that is in fact what has been picked up in the literature by American font leaders in showing 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 subsequent flares not there. Okay, thank you. Thank you.
Operator: And one moment please for our next question.
David Nierengarten: Next question will come from David Nierengarten of Wet Bush Securities. Your line is open. Thanks for taking the question.
Ross Moat: I had two. Just on the patient stops and restarts again. Yeah, 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 there are less severe or earlier station their disease, just curious to get kind of a handle on the distribution of time on therapy. I know it seems like they have a tail there with a stable percentage on longer term therapy, but I'm sure it's on the nature of those patients.
John Paolini: And then the second question was on 404. If if we could expect, you know, a discussion of any additional indications beyond RA when you release the data in Q1 text. Okay, thanks, David.
Ross Moat: This is Ross. I'll be going on to the part around the restarts, patient spots. And I guess just generally about what we see it around patient duration on therapy as well as a reminder that we we really educate physicians that the duration of therapy should be linked to the natural history of the disease, which is three years as a median from the natural history. And still one third of the patients suffer from the disease at five years out from their initial index episode as well.
Ross Moat: So, of course, the length of treatment should depend upon how long they've suffered from the current perioditis at the time of diagnosis and treatments. And what we're seeing in the real world setting is that the initial average time to 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 round and come back on to therapy, most of which within eight week time period.
Ross Moat: And we're seeing a total average duration of around 20 months in total across all the patient populations. So you're part of the question around the nature of the patient. So 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. It really just comes down to how long they've suffered from the disease at the time of diagnosis and what they're expected.
Ross Moat: Natural history is how long they're going to need treatment for with our list. 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 presence or patient suffer. Again, they can go back on to treatments, but obviously we want to avoid that happening through robust proper treatments duration of our list in the first place.
John Paolini: David, this is thanks.
John Paolini: Thanks for your question regards to the cohorts from the KPO 444 study in R.A. We're definitely looking forward to those data from courts one two and three in the first quarter. As you mentioned, you know, as I mentioned earlier, and we're definitely excited about potential of KPO 444 involved R.A. But also do believe there is a potential to show hopefully some differentiated effects and some strong efficacy, hopefully across a number of auto immunification.
Operator: So this one would not disclose what those would be, but certainly what's your space for looking for some more exciting developments in the future. Data dependence. Thank you. And one moment for our next question.
Geoff Meacham: Our next question will come from Geoff Meacham of Bank of America. Your line is open. Hey, thanks for giving me the question.
John Moat: This is John Joy for Geoff. I guess I have two quick questions. One is, you know, how are you guys thinking about sort of total prescriber Pam and, and payer like Pam? Do you think there's still a headroom to grow or are you starting to kind of see that, that flatten out a bit?
Ross Moat: And second, just as you continue to grow, how are you thinking about capital structure? Maybe I'll just take the first part, John, thanks for the question. And then I head over to Mark of Sanj for the second bit. I really think around the prescriber growth and other patients that I just bear in mind that we still see that there's a huge opportunity ahead. We announced that the turn of the year that we reached around 5% penetration when we looked at how many patients were on therapy at the end of 2022.
Ross Moat: And while we haven't updated that figure out of the ads, that speaks to the opportunity that's still there. And the fact that patients are recently widely dispersed around the US, and we're seeing the good growth in both the number of individual prescribers as well as the repeat prescribers, I think all the speak to the opportunity that's still out there.
Mark Ragosa: I feel that we're still relatively embryonic in our launch, with a pretty exciting opportunity ahead to reach many, many more recurrent paricanitis patients who are suffering. I guess, you know, to your question regarding our thinking on capital, I mean, we think we're very well capitalized. As I mentioned, $201 million in reserves at the end of the third quarter, you know, at the end of the day, you know, our runway, which we've got it to haven't cash until this 2027, you know, the ultimate timeline depends upon the success of our current and future investments in sort of, you know, any future investments that are spawned from the original investment. So, we feel very confident in our runway and, you know, in our cashews of the base of 201 at the end of the quarter.
Operator: Great.
Operator: Thanks.
Operator: Thank you.
Liisa Bayko: One moment for our next question.
Liisa Bayko: Our next question will come from Lilsa Baker of Evercore ISI. Your line is open. Hi, thanks for taking my question.
Ross Moat: You may be quantitative 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 of a quarter into the fourth quarter, but I know this is offset by some inventory changes, so if you could quantify that, it'd be helpful. Thank you. Yeah, and that's that's right.
Ross Moat: In some of us really said, this is Russ, 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 there's still got a huge potential ahead, 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 growth to net in Q4.
Ross Moat: That's driven from a couple of things, firstly, from end of year accounting for insurance resets and increases the co-pay assistance, so they're really kind of industry-wide items in specialty medicine, but as well as changes that we've had to our specialty pharmacy network, which may drive us slightly higher growth to net in Q4. And secondly, we're expecting inventory to level out in Q4 following some of the favourability we had in that regard under the prior call, of Q3.
Ross Moat: So we expect some additional pressure to the magnitude of the Q4 revenue growth, but certainly to expect in revenue growth in Q4. Okay, we said we are tracking to the high end of the guidance we provided.
Ross Moat: Great, can you can you just kind of take the inventory change a little bit more like what what amount are we talking about and then also what we're crossing that's on the third quarter thanks. Yeah, so we haven't really quantified the inventory amount but what we have said is that the 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.
Ross Moat: So that's the vast majority and then to a smaller level there's a little bit of inventory dynamic care as we've mentioned. Washington at year to date is 9.9% and that's versus 9% in 2022 so there's always some quarterly fluctuations but that's that's where we are at 9.9% so far this year. Thank you. I am seeing no further questions in the queue.
Sanj Patel: I would now like to turn the conference back to Sergeant Patel for closing remarks. Thank you very much for the questions and join 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.