Kiniksa(KNSA) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Kiniksa reported Q1 2022 total revenues of $32.2 million, narrowing net loss to $25.2 million from $49.5 million Consolidated Balance Sheets As of March 31, 2022, total assets were $231.0 million, with cash decreasing and liabilities increasing due to deferred collaboration revenue Consolidated Balance Sheets Data | Account | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 63,324 | 122,470 | | Accounts receivable, net | 29,440 | 3,985 | | Inventory | 13,223 | 3,675 | | Total current assets | 198,757 | 196,446 | | Total assets | 230,965 | 232,800 | | Liabilities & Equity | | | | Total current liabilities | 50,354 | 44,824 | | Deferred revenue | 12,000 | — | | Total liabilities | 64,721 | 47,763 | | Accumulated deficit | (700,607) | (675,397) | | Total shareholders' equity | 166,244 | 185,037 | Consolidated Statements of Operations and Comprehensive Loss Q1 2022 total revenue was $32.2 million, leading to a net loss of $25.2 million or $(0.36) per share, a significant improvement Consolidated Statements of Operations and Comprehensive Loss Data | Metric | Three Months Ended March 31, 2022 ($ thousands) | Three Months Ended March 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Product revenue, net | 22,189 | — | | Collaboration revenue | 10,000 | — | | Total revenue | 32,189 | — | | Cost of goods sold | 4,219 | — | | Collaboration expenses | 8,254 | — | | Research and development | 20,817 | 28,683 | | Selling, general and administrative | 22,218 | 20,600 | | Total operating expenses | 55,508 | 49,283 | | Loss from operations | (23,319) | (49,283) | | Net loss | (25,210) | (49,484) | | Net loss per share | (0.36) | (0.72) | Consolidated Statements of Cash Flows Net cash used in operating activities was $36.8 million in Q1 2022, leading to a $59.1 million net decrease in cash and equivalents Consolidated Statements of Cash Flows Data | Cash Flow Activity | Three Months Ended March 31, 2022 ($ thousands) | Three Months Ended March 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (36,846) | (40,122) | | Net cash provided by (used in) investing activities | (22,723) | 44,834 | | Net cash provided by financing activities | 423 | 1,106 | | Net decrease in cash | (59,146) | 5,818 | | Cash at end of period | 63,324 | 120,066 | Notes to Consolidated Financial Statements Key notes detail liquidity, revenue recognition, and agreements, notably a $22 million upfront payment from Huadong for Asia Pacific rights - The company believes its cash, cash equivalents, and short-term investments of $145.6 million as of March 31, 2022, are sufficient to fund operations for at least twelve months from the financial statement issuance date[40][41] - In February 2022, the company entered into collaboration agreements with Huadong, granting exclusive rights to develop and commercialize rilonacept and mavrilimumab in the Asia Pacific region for a $22 million upfront payment[75][76] - $10 million of the Huadong upfront payment was recognized as collaboration revenue for the mavrilimumab license, while $12 million related to the rilonacept license was recorded as deferred revenue[89][97] - The company evenly splits profits on ARCALYST sales with Regeneron. For Q1 2022, Kiniksa recognized $8.3 million in collaboration expenses related to this profit-sharing agreement[111][156] - As of March 31, 2022, the company had committed to minimum payments under manufacturing agreements totaling $36.6 million, with $30.1 million due within one year[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses portfolio, Q1 2022 results, and liquidity, highlighting $22.2 million ARCALYST revenue and $145.6 million cash Overview Kiniksa focuses on debilitating diseases with ARCALYST commercialization and pipeline development, expecting continued operating losses - ARCALYST received FDA approval for recurrent pericarditis in March 2021 and is being commercialized in the U.S., with profits evenly split with Regeneron[136] - The company is conducting a global Phase 2b dose-ranging clinical trial of vixarelimab in prurigo nodularis, with top-line data expected in the second half of 2022[139] - A Phase 2 proof-of-concept clinical trial of KPL-404 in rheumatoid arthritis was initiated in December 2021[140] - The company expects to continue incurring significant operating losses as it advances its product candidates and commercializes ARCALYST[142] Results of Operations Q1 2022 total revenue was $32.2 million, with R&D decreasing by $7.9 million and SG&A increasing by $1.6 million for ARCALYST Results of Operations Data | Expense Category | Q1 2022 ($M) | Q1 2021 ($M) | Change ($M) | Key Driver of Change | | :--- | :--- | :--- | :--- | :--- | | R&D Expenses | 20.8 | 28.7 | (7.9) | Decrease in mavrilimumab program costs after wind-down of COVID-19 trial. | | SG&A Expenses | 22.2 | 20.6 | 1.6 | Increased sales and marketing for ARCALYST commercial operations. | | Collaboration Expenses | 8.3 | 0.0 | 8.3 | Regeneron's share of ARCALYST profit, including from the Huadong deal. | - Direct costs for the mavrilimumab program decreased by $5.4 million YoY due to the wind-down of the Phase 3 clinical trial in COVID-19 related ARDS[176] - Direct costs for the KPL-404 program increased by $1.7 million YoY due to the continuation of the Phase 2 trial in rheumatoid arthritis[178][179] Liquidity and Capital Resources As of March 31, 2022, Kiniksa had $145.6 million in cash, sufficient for 12 months, but future capital is required - As of March 31, 2022, the company had cash, cash equivalents and short-term investments of $145.6 million[184] - The company believes its existing cash will fund operating expenses and capital expenditure requirements for at least the next 12 months[147][195] - The company has committed to minimum payments to Regeneron of $36.4 million for supply agreements, with $29.9 million due within one year[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate sensitivity on short-term investments, with a 10% change not materially impacting results - The company's primary market risk is interest rate sensitivity on its cash and short-term investments[203] - Due to the short-term nature of its investment portfolio, an immediate 10% change in interest rates is not expected to have a material impact on the company's financial position or results[203] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[207] - No material changes were made to the company's internal control over financial reporting during the first quarter of 2022[208] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material legal proceedings - The company is not currently involved in any material legal proceedings[211] Item 1A. Risk Factors The company faces risks including operating losses, ARCALYST dependence, third-party reliance, and global event impacts - The company has a history of significant operating losses ($700.6 million accumulated deficit as of March 31, 2022) and expects to incur losses for the foreseeable future[214] - The business depends heavily on the commercial success of ARCALYST and the development of its pipeline candidates, but the company has limited experience in commercializing therapeutics[232] - The company relies on single-source or limited-source third-party manufacturers (like Regeneron for ARCALYST) for its products, increasing risks of supply shortages and quality issues[376][402] - The ongoing war in Ukraine and the COVID-19 pandemic pose significant risks to clinical trial operations, global supply chains, and financial markets[315][508][513] - Concentration of voting power among executive officers and affiliated directors may influence corporate decisions and affect the stock price[581][582] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[635] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[636] Item 4. Mine Safety Disclosures This item is not applicable to the company - None[637] Item 5. Other Information The company reports no other information for this period - None[638] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including collaboration agreements with Huadong and standard certifications - Filed the Collaboration and License Agreement with Huadong for Rilonacept[641] - Filed the Collaboration and License Agreement with Huadong for Mavrilimumab[641]