Kiniksa Pharmaceuticals, Ltd. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 5, 2020. This is an annual report, not a standalone fourth-quarter report. Kiniksa is a clinical-stage biopharmaceutical company with no product-sales revenue.
Financial results and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $135.0 million | $86.6 million |
| General and administrative expense | $35.0 million | $21.6 million |
| Total operating expenses / operating loss | $170.0 million | $108.2 million |
| Net loss | $161.9 million | $103.2 million |
| Basic and diluted loss per share | $2.99 | $3.49 |
| Cash, cash equivalents and short-term investments at year-end | $233.4 million | $307.3 million |
| Net cash used in operating activities | $158.4 million | $81.0 million |
| Working capital at year-end | $213.8 million | $271.2 million |
- Net loss widened by $58.6 million, while operating expenses increased $61.8 million year over year. R&D growth reflected continued clinical development and manufacturing; G&A growth included increased staffing and pre-commercial preparation.
- R&D by program included $25.7 million for rilonacept, $13.8 million for mavrilimumab, $28.8 million for KPL-716 and $22.8 million for KPL-404. KPL-404 expense included $18.0 million associated with the Primatope acquisition and related milestones; KPL-716 expense included a $10.0 million Biogen milestone.
- Operating cash use rose by $77.4 million. Financing provided $84.1 million, primarily from the 2019 follow-on offering and concurrent private placement, which generated $83.0 million net proceeds.
- The balance sheet reported $29.1 million of total liabilities, including lease liabilities, accrued expenses and accounts payable; it showed no separate borrowings or debt line. Operating cash flow was negative, and profitability and operating margins are not meaningful while product revenue is zero.
- Management said available cash, cash equivalents and short-term investments were expected to fund operations and capital needs for at least 12 months from the filing date. The auditor’s report included an emphasis regarding the need for additional financing.
Business developments and outlook
- Rilonacept: The company completed enrollment in RHAPSODY, a pivotal Phase 3 trial for recurrent pericarditis, and expected top-line data in the second half of 2020. FDA Breakthrough Therapy designation was granted in 2019. The Phase 2 study showed improvements in pain and inflammation, but was open-label and small; one treatment-related serious adverse event, a skin abscess, led to discontinuation.
- Mavrilimumab: A global Phase 2 GCA trial was underway, with top-line results expected in the second half of 2020. The company also entered a Kite collaboration for a Phase 2 study combining mavrilimumab with Yescarta; Kite would sponsor and conduct the study.
- KPL-716: A Phase 2a prurigo nodularis trial was underway, with data expected by the end of April 2020; interim data from an exploratory chronic-pruritus trial were expected in the first half of 2020. In an atopic dermatitis Phase 1b study, the company reported anti-itch responses but more disease flares with KPL-716 than placebo (47.6% versus 4.5%); flares were managed with topical corticosteroids.
- KPL-404: The company initiated a Phase 1 study in healthy volunteers and expected top-line data in the second half of 2020. Kiniksa acquired Primatope in 2019, accounting for the transaction as an asset acquisition and expensing the acquired in-process research and development.
- In January 2020, Kiniksa terminated its Novo Nordisk license and ceased development of KPL-045.
- The company reported no material legal proceedings. Management assessed disclosure controls and internal control over financial reporting as effective at year-end. The filing also identified the emerging coronavirus outbreak as a potential risk to clinical trials, suppliers and operations.
Principal risks and contingencies
- Clinical, regulatory and commercial risk is high: Kiniksa had not completed a pivotal trial or obtained marketing approval for its own product candidates, and all programs could require additional trials or fail.
- Ongoing losses and cash use mean further financing will be needed beyond the stated runway. Additional capital may dilute shareholders or require unfavorable financing or partnering terms.
- The company depends on third-party manufacturers and suppliers, including single-source supply arrangements, and had no formal commercial-scale manufacturing agreements in place.
- Safety, coverage and reimbursement, competition, intellectual-property protection and the ability to build commercial capabilities could limit a product’s prospects even if approved. Mavrilimumab has a disclosed theoretical risk of pulmonary alveolar proteinosis; KPL-716’s observed flare imbalance merits follow-up.
- Kiniksa disclosed senior-management changes: its COO departed in November 2019 and its CFO was expected to move to a consulting role in March 2020. The company was searching for a new CFO.
- Potential future milestone obligations are substantial: up to $27.5 million to Regeneron for rilonacept, up to $315.0 million to Biogen for KPL-716-related assets, and significant clinical, regulatory and sales milestones to MedImmune for mavrilimumab. These are contingent obligations, not current debt.
Most important facts for investors to verify
- Whether RHAPSODY and the GCA and dermatology trials delivered results consistent with the timelines and efficacy expectations stated in the filing.
- Whether the reported cash runway assumptions held, and what subsequent financing, cash burn and share dilution occurred.
- Whether KPL-716’s pruritus signal translated into benefit in its target diseases and whether the atopic dermatitis flare imbalance affected its safety assessment.
- Whether manufacturing supply, process development and commercial-scale arrangements can support later-stage trials and potential launches.
- Current status of the disclosed milestone, royalty and profit-sharing terms, including the rilonacept arrangement with Regeneron and the KPL-716 obligations to Biogen.