Kiniksa Pharmaceuticals, Ltd. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018; unaudited. The filing identifies the registrant as Kiniksa Pharmaceuticals, Ltd. It is a clinical-stage biopharmaceutical company focused on autoimmune and autoinflammatory diseases. It had no approved products and generated no product revenue.
Financial performance and position
Amounts below are in millions of dollars unless stated otherwise. With no revenue, operating and profit margins are not meaningful.
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $17.2 | $9.3 | $29.8 | $12.4 |
| General and administrative expense | $4.3 | $2.1 | $8.0 | $4.0 |
| Total operating expenses | $21.5 | $11.4 | $37.9 | $16.4 |
| Net loss | $20.3 | $11.2 | $36.2 | $16.1 |
| Net loss per share | $0.97 | $6.69 | $3.09 | $10.47 |
| Operating cash used | Not stated for the quarter | $32.9 | $15.9 |
At June 30, cash and cash equivalents were $285.5 million and short-term investments were $73.7 million, totaling $359.2 million. Total assets were $365.1 million; total liabilities were $23.3 million. The filing reports no borrowings or other financial debt. Management expected available cash, equivalents and investments to fund operating expenses and capital expenditures for at least 12 months from the financial-statement issuance date; funding beyond that depends on raising additional capital.
Six-month investing cash use was $74.0 million, primarily purchases of short-term investments ($73.7 million). Financing provided $347.2 million, including $190.8 million net Series C proceeds and $159.2 million net IPO share proceeds. Cash, cash equivalents and restricted cash increased by $240.3 million.
Changes versus prior comparable periods
- Q2 net loss increased by $9.1 million year over year; first-half net loss increased by $20.1 million. The company attributed higher spending mainly to advancing a broader pipeline and expanding staff and public-company operations.
- First-half R&D expense rose $17.4 million. Five programs had direct costs in 2018 versus one in 2017; new spending included rilonacept, mavrilimumab, KPL-045 and KPL-404, alongside higher KPL-716 and unallocated costs. The prior-year comparison included a $4.1 million Biogen milestone for KPL-716.
- First-half G&A expense rose $4.0 million, reflecting higher personnel costs and professional fees, including public-company costs.
- The May 2018 IPO and June over-allotment generated $155.5 million net proceeds. February’s Series C financing generated $190.8 million net. Preferred shares converted to common shares upon the IPO; the company also completed a 1-for-2.73235 reverse share split.
Outlook, risks and notable items
- Management expected losses and expenses to rise as clinical and preclinical development advances. The company anticipated a Phase 3 rilonacept trial for recurrent pericarditis in 2018, Phase 2 mavrilimumab development for giant cell arteritis, and further KPL-716 development subject to clinical data. KPL-045 and KPL-404 remained preclinical.
- Execution depends on uncertain trial outcomes, enrollment, regulatory decisions, manufacturing supply and quality, and third-party CROs and manufacturers. The company disclosed a prior FDA clinical hold on mavrilimumab’s proposed rheumatoid arthritis trial following preclinical lung findings; further FDA data or monitoring requirements for its planned giant cell arteritis trial remained possible.
- All product candidates modulate the immune system. The filing discusses potential immunosuppression-related risks; mavrilimumab also has a theoretical risk of pulmonary alveolar proteinosis.
- Material potential obligations include Biogen clinical and regulatory milestones of up to $179 million, plus sales milestones and royalties; MedImmune clinical, regulatory and sales milestones and royalties; and $13.4 million of manufacturing minimum commitments. A $10 million MedImmune milestone was accrued. Future milestone amounts and timing are contingent.
- The company extended its Primatope option through October 15, 2018; exercising the option would require $10 million upfront and could trigger up to $10 million in milestones. Lexington office and laboratory lease commitments totaled $2.5 million as of June 30, 2018.
- Rilonacept composition-of-matter patents were disclosed as expiring in 2019 in the U.S. and 2023 in Europe, before any patent-term extensions; the filing notes U.S. patent-term extension for the existing CAPS approval was unavailable.
- No material legal proceedings were reported. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. The filing also warns that Class B shares carry ten votes each and management held 69.7% of voting power at June 30.
Important facts for investors to verify
- Whether clinical data and regulatory interactions support the stated trial plans, especially the planned rilonacept Phase 3 and mavrilimumab Phase 2 programs.
- Whether cash burn, trial spending and manufacturing commitments remain consistent with management’s at-least-12-month runway estimate; additional capital may be needed thereafter.
- The timing, probability and potential cash impact of license milestones, royalties, the Primatope option and manufacturing obligations.
- Rilonacept’s patent and regulatory exclusivity position, and how competing therapies could affect its potential market.
- The effects of the multi-class share structure, potential conversion of non-voting shares, and post-IPO lock-up expirations on voting control and share supply.