Kiniksa Pharmaceuticals, Ltd. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unless noted otherwise, amounts are in U.S. dollars. Kiniksa is a commercial-stage biopharmaceutical company; its first product revenue came from ARCALYST sales beginning in April 2021.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net product revenue | $12.1 million | None | $19.8 million | None |
| Cost of goods sold | $2.8 million | None | $5.2 million | None |
| Gross profit / margin | $9.3 million / 77.1% | Not applicable | $14.6 million / 73.6% | Not applicable |
| Research and development | $19.2 million | $31.4 million | $71.9 million | $74.6 million |
| Selling, general and administrative | $20.8 million | $11.8 million | $63.2 million | $29.8 million |
| Net loss | $30.5 million | $43.8 million | $121.6 million | $107.7 million |
| Net loss per share, diluted | $0.44 | $0.66 | $1.78 | $1.80 |
| Cash used in operations | Not provided for quarter | Not provided for quarter | $107.4 million | $95.3 million |
Gross profit and margins above are calculated from reported revenue less cost of goods sold. The filing says Q3 COGS included sales of remaining relabeled clinical-trial product carried at zero cost, which may affect comparability of margins.
- At September 30, 2021, cash and cash equivalents were $190.2 million and short-term investments were $10.0 million, totaling $200.2 million. Total current assets were $217.5 million and current liabilities $34.4 million.
- Total liabilities were $38.8 million; the balance sheet reports lease liabilities but no borrowings or other debt. Accumulated deficit was $639.1 million.
- Net cash provided by investing activities was $178.7 million, mainly from investment maturities net of purchases; financing provided $4.7 million, primarily from employee share-plan proceeds. The $75.9 million increase in cash, cash equivalents and restricted cash does not represent operating cash generation.
Changes versus the prior comparable period
- Revenue rose from zero to $12.1 million for Q3 and $19.8 million for the first nine months, following ARCALYST’s March 2021 FDA approval for recurrent pericarditis and U.S. commercial launch.
- Q3 net loss narrowed by $13.3 million year over year, helped by lower R&D and new product revenue. For the nine-month period, net loss increased by $13.9 million: higher SG&A and COGS more than offset lower R&D and new revenue.
- Nine-month R&D declined $2.8 million, including reduced rilonacept spending after completion of the RHAPSODY pivotal trial; spending increased for mavrilimumab, vixarelimab and KPL-404 programs. Nine-month SG&A rose $33.4 million, largely from commercial staffing and ARCALYST launch marketing.
- Operating cash use increased $12.1 million year over year. The company also paid a $20.0 million Regeneron regulatory milestone, capitalized as an intangible asset and amortized over 20 years.
- Cash and short-term investments fell from $323.5 million at December 31, 2020 to $200.2 million at September 30, 2021, reflecting operating use and the milestone payment, among other cash movements.
Outlook, commentary and risks
- Management expects continued significant operating losses and commercialization and development spending for the foreseeable future. Based on its current operating plan, it expects available cash, cash equivalents and short-term investments to fund operations and capital expenditures for at least 12 months from the financial statements’ issuance date; future viability beyond that depends on raising additional capital.
- Management expected Phase 3 data for mavrilimumab in non-mechanically ventilated patients with severe COVID-19-related ARDS in Q1 2022, and vixarelimab Phase 2b prurigo nodularis data in the second half of 2022. It planned to initiate a KPL-404 Phase 2 rheumatoid arthritis trial in Q4 2021. These are forward-looking expectations, not reported outcomes.
- In the mavrilimumab COVID-19 trial, the mechanically ventilated cohort did not show a reduction in death at Day 29; enrollment of that cohort in Phase 3 was discontinued. The company reported favorable Phase 2 findings in non-mechanically ventilated patients, while noting that results remained subject to further study.
- Supply is a significant risk: ARCALYST is sourced through Regeneron and its contract manufacturers. Manufacturing-process events identified in July 2021, and additional events subsequently identified, were under investigation; the filing said their impact on supply was not yet clear. Minimum manufacturing commitments totaled $45.7 million, of which $32.7 million were due within one year.
- Other highlighted risks include uncertain market access and reimbursement, reliance on third-party manufacturers and research organizations, clinical and regulatory uncertainty, COVID-19 disruptions, and the need for future financing. ARCALYST profits are split evenly with Regeneron after specified commercialization expenses, subject to contractual limits.
- No material legal proceedings were reported. Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of September 30, 2021.
Important facts for investors to verify
- Subsequent ARCALYST sales, net revenue, patient access and payer coverage, including the effect of discounts, rebates and returns on reported net revenue.
- Whether the ARCALYST manufacturing events were resolved, their effect on commercial supply, and the status and timing of the disclosed manufacturing commitments.
- Actual cash burn, updated liquidity runway and any financing needs relative to management’s 12-month estimate.
- Reported outcomes and updated timelines for mavrilimumab, vixarelimab and KPL-404 trials, including regulatory feedback and safety findings.
- The commercial profit-sharing calculation with Regeneron and the extent to which commercialization costs, milestone amortization and launch spending affect product economics.