Kiniksa Pharmaceuticals, Ltd. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited consolidated financial statements; financial amounts below are in U.S. dollars unless noted. Kiniksa is an early-commercial-stage biopharmaceutical company. ARCALYST is its commercial product; mavrilimumab, vixarelimab and KPL-404 are investigational assets.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Product revenue, net | $22.2 million | None |
| Collaboration revenue | $10.0 million | None |
| Total revenue | $32.2 million | None |
| Operating expenses | $55.5 million | $49.3 million |
| Loss from operations | $23.3 million | $49.3 million |
| Net loss | $25.2 million | $49.5 million |
| Net loss per share, basic and diluted | $0.36 | $0.72 |
| Cash used in operating activities | $36.8 million | $40.1 million |
- ARCALYST product revenue was $22.2 million; cost of goods sold was $4.2 million. The filing reports $8.3 million in collaboration expenses, including Regeneron’s share of ARCALYST profits and $6.0 million related to the Huadong rilonacept upfront payment.
- Research and development expense declined $7.9 million to $20.8 million, mainly reflecting completion of the pivotal ARCALYST trial and wind-down of the mavrilimumab COVID-19-related ARDS trial. Selling, general and administrative expense rose $1.6 million to $22.2 million, primarily due to ARCALYST sales and marketing.
- Q1 operating cash use was $36.8 million. Cash, cash equivalents and short-term investments totaled $145.6 million at March 31, 2022, down from $182.2 million at year-end; cash and cash equivalents alone were $63.3 million. The cash decrease included $22.7 million of net purchases of short-term investments.
- Current assets were $198.8 million and current liabilities $50.4 million. The balance sheet reports no debt. Accumulated deficit was $700.6 million; shareholders’ equity was $166.2 million.
Material changes and business developments
- In February 2022, Kiniksa licensed Huadong exclusive rights to develop and commercialize rilonacept and develop, manufacture and commercialize mavrilimumab in specified Asia-Pacific territories, excluding Japan. The agreements provided $22.0 million upfront: $10.0 million for mavrilimumab was recognized as revenue in Q1; $12.0 million for rilonacept was deferred pending material deliveries. The company said the upfront payment was received after quarter-end.
- Huadong agreements also provide potential development, regulatory and sales milestones of up to approximately $70 million for rilonacept and $576 million for mavrilimumab, plus tiered royalties. These contingent amounts are not guaranteed revenue.
- Kiniksa announced it would not initiate a Phase 3 mavrilimumab trial in giant cell arteritis and would not progress the drug in COVID-19-related ARDS after the Phase 3 portion of that trial failed to meet its primary endpoint.
- Vixarelimab’s Phase 2b trial in prurigo nodularis continued; Kiniksa expected to report topline data in the second half of 2022. KPL-404’s Phase 2 rheumatoid arthritis trial continued.
Outlook, risks and contingencies
- Management expected existing cash, cash equivalents and short-term investments to fund operating and capital expenditure needs for at least 12 months from issuance of the financial statements. Kiniksa expects continued operating losses and cash use; funding beyond that period depends on ARCALYST sales and/or additional financing. No specific earnings or revenue guidance was provided.
- Commercial success depends heavily on ARCALYST. Kiniksa shares ARCALYST profits with Regeneron and has limited commercialization experience. Coverage, reimbursement, patient uptake, competition and the ability to sustain product supply could affect sales and profitability.
- Manufacturing is a significant risk: Regeneron is the sole-source manufacturer of ARCALYST, and the filing describes prior manufacturing events that restricted distribution of some material. Manufacturing commitments are substantial; the filing reports approximately $36.6 million of minimum commitments under manufacturing agreements, with $30.1 million due within one year. MD&A separately identifies approximately $36.4 million of Regeneron commitments, with $29.9 million due within one year.
- COVID-19 and the war in Ukraine could disrupt clinical trials, suppliers, manufacturing, markets and access to capital. Kiniksa terminated planned clinical trial operations in Ukraine and Russia and anticipated seeking alternative sites, with no assurance of adequate replacement enrollment or timing.
- The filing reports no material legal proceedings. Management concluded disclosure controls were effective at March 31, 2022, at the reasonable-assurance level.
Important facts for investors to verify
- Whether ARCALYST revenue, market access and profitability can grow and be sustained, after Regeneron’s profit share and commercialization costs.
- Actual collection and accounting treatment of the Huadong upfront payments, and progress toward any contingent milestones, royalties or rilonacept material deliveries.
- Vixarelimab Phase 2b results and KPL-404 Phase 2 progress, alongside the strategic implications of ending mavrilimumab development in GCA and ARDS.
- Cash use relative to management’s at-least-12-month funding estimate, and the company’s substantial manufacturing and other contractual commitments.
- Product supply continuity, trial impacts from COVID-19 and Ukraine-related disruptions, reimbursement conditions, and potential need for additional financing.