Kiniksa Pharmaceuticals International, plc (KNSA) Earnings Call Transcript

Thank you for standing by, and welcome to the Kiniksa Pharmaceuticals Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jonathan Kirshenbaum, Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to the Kiniksa Pharmaceuticals Third Quarter 2026 Earnings Call. A press release highlighting our financial results and recent portfolio execution can be found on our website under the Investors section. As for the agenda, our Chief Executive Officer, Sanj K. Patel, will start with an introduction. From there, Ross Moat, our Chief Operating Officer, will provide an update on Artist commercial execution. After that, Mark Ragosa, our Chief Financial Officer, will review our third quarter 2026 financial results. And finally, Sanj will return at the end of the call to share closing remarks and kick off the Q&A session, for which John Paolini, Kiniksa's Chief Medical Officer, will also be on the line. Before getting started, please note that we will be making forward-looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from such statements. A review of these statements and risk factors can be found on this slide as well as under the caption Risk Factors contained in our SEC filings. These statements speak only as of the date of this presentation, and we undertake no obligation to update such statements, except as required by law. With that, I'll turn it over to Sanj.

Thanks, Jonathan, and good morning or good afternoon, everyone. Over the last 10, 11 years, we've built this company through multiple stages of growth. And today, and as excited as ever about what the team and I can accomplish together in the years ahead. Kiniksa continues to build a leading IL-1 alpha and beta inhibition franchise, driven by the commercialization of ARCALYST in recurrent pericarditis as well as our progress with KPL-387 and KPL-1161. This morning, we announced a press release that we've raised our full year revenue guidance to between $1.045 billion and $1.050 billion. We continue to see robust growth with ARCALYST in recurrent pericarditis, driven by strong execution and strategic investments across the business. On the clinical side, we're excited about the progress of KPL-387 and KPL-1161. The pivotal Phase III study with KPL-387 continues to enroll in those patients. We announced today that we expect data from this trial in the second half of 2027. The team and I are really looking forward to potentially launching this drug in the '28-'29 time frame. In addition to providing an important treatment option for patients with recurrent pericarditis, we believe KPL-387 could help grow the market by enabling a once-monthly subcu dosing. We're also on track to have KPL-1161, our quarterly IL-1 alpha and beta inhibitor in a Phase I clinical trial by the end of this year. Importantly, Kiniksa's robust financial profile allows us to continue to invest in penetrating the recurrent pericarditis market and growing the IL-1 alpha and beta inhibition franchise whilst also pursuing additional value-creating opportunities. In the third quarter, we saw a continuation of strong ARCALYST momentum with Q3 revenue of $286 million. The penetration into the annual population of 14,000 multiple recurrence patients increased to 23% as of the end of Q3. As shown by the increased breadth and depth of prescribing over time, adoption of IL-1 alpha and beta inhibition continues to expand among the approximately 40,000 recurrent pericarditis patients each year. The underlying fundamentals that propelled our commercial success remains strong. Since launch, we've observed robust payer approval, strong patient compliance and greater appreciation of the need to treat throughout the multiyear duration of the disease. Underpinning this growth is strong execution by our commercial organization and data-driven investments in artist. Our AI supported patient identification initiatives and targeted direct-to-consumer campaign Parts Home have positively contributed to growing patient and physician awareness of recurrent pericarditis and the important role of IL-1 alpha and beta inhibition in controlling this debilitating disease. As you've heard, we now expect ARCALYST to achieve over $1 billion in revenue in 2026 and we look forward to continuing to bring this blockbuster drug to more patients suffering from this debilitating disease. In order to grow the recurrent pericarditis market over the next several years, we plan to drive greater adoption in both the 14,000 multiple recurrence patients annually and the additional 26,000 patients annually that are experiencing their first recurrence. Kiniksa is executing against its strategy to help more patients drive more ARCALYST growth and advance KPL-387 and KPL-1161. This trajectory will help put the company on a path to having multiple commercial products continued strong and profitable growth and the flexibility to invest in future value creation. I can tell you that the team and I won't rest until we helped many, many more patients. And now our President and COO, Ross Moat.

Thank you, Sanj. As you've heard, we're pleased with the continued strength of our commercial performance with ARCALYST, and we are even more excited by the substantial growth opportunity ahead. We continue to be highly focused on further increasing the penetration rate into the many thousands of recurrent pericarditis patients and continuing to evolve the treatment paradigm towards interleukin-1 alpha and beta inhibition. As illustrated on the left side of this slide, physicians continue to report an increasing consideration of ARCALYST earlier in the disease course, including at the first recurrence. Additionally, we also see a growing appreciation for ARCALYST to be utilized earlier in the line of therapy, meaning after NSAIDs and colchicine and importantly, prior to corticosteroids as ratified in the 2025 American College of Cardiology concise clinical guidance for recurrent pericarditis. In fact, approximately 50% of physicians surveyed now support this treatment approach, representing a doubling from levels over the last 3 years prior to the publication of this independent guidance. As we continue to build and lead this market, our team are laser-focused on value-driven investments that aim to increase market penetration and help many more patients. Increasing education and awareness on recurrent pericarditis, ARCALYST and the new treatment paradigm remain critical components of our strategy, and we've enhanced our capabilities through the use of AI and machine learning to reach a larger audience. On the health care professional side, we've done this through improving our data sources to inform us not only which health care professionals we should be seeing, but importantly, when we should be seeing them. On the patient side, we've seen encouraging early indicators from our Hearts Home direct-to-consumer campaign. Based on this initial traction, we plan to expand the campaign with additional content and outreach initiatives aimed at empowering more patients to engage with their health care professionals about ARCALYST. As a reminder, Heart's Home is a highly targeted DTC campaign where we've innovated from traditional DTC and by using AI to produce and deliver a campaign that's effective for a rare disease audience. This campaign is aimed at educating an enriched population of likely with current pericarditis patients who are currently not taking our list and empowering them to discuss ARCALYST with their health care provider. As an early indicator of the impact of this campaign, we've seen a 12-fold increase in the traffic to our ARCALYST website compared to baseline levels prior to the campaign. Additionally, there's been an eightfold increase with engaged sessions, meaning visits where the individual spends meaningful time on the website or interact with the content. More importantly, approximately 55% of patients who saw the ad strongly agreed that they are motivated to speak with their health care provider about ARCALYST. All of these indicators are strong signals that our digital strategy is reaching the right audience and is empowering action. As this disease has a very high annual incident rate of patients coming into the labeled indication, this DTC initiative is nicely supplementing our robust execution in the field and helps us to address the substantial opportunity that we have ahead to help many more patients. As previously mentioned, our interleukin-1 alpha and beta inhibition franchise is growing, is profitable and has significant opportunity in the months and years ahead. With that, I'll turn the call over to Mark to review our financial results.

Thanks, Ross. Our third quarter delivered continued ARCALYST sales growth, advancement of KPL-387 and KPL-1161 development and a solid financial position. This morning, I'll review our financial results and key performance drivers. Detailed financial information is available in today's press release. Starting with the income statement, ARCALYST revenue grew 58% year-over-year to $286 million in the third quarter. driven by continued gains in patient and physician adoption. Operating expenses increased year-over-year, driven by higher ARCALYST revenue, which resulted in additional cost of goods sold and collaboration expenses, advancement of KPL-387 development, which drove additional R&D investment and support of ARCALYST's commercialization to reach more patients, which led to additional SG&A investment. Operating income rose to $54.2 million and net income to $47.3 million, both up significantly year-over-year. Turning to the calculation of ARCALYST collaboration profit, which drives total collaboration expenses on our income statement, ARCALYST's collaboration profit increased 67% year-over-year to $211.6 million, outpacing sales growth and reflecting disciplined commercial investment. Next, we ended the third quarter with $568.8 million in cash, reflecting approximately $43 million in net cash generation during the quarter. Looking ahead, in addition to our updated 2026 ARCALYST sales guidance of $1.045 billion to $1.050 billion, we are providing full year R&D and SG&A expense guidance. We expect full year R&D expenses of $160 million to $170 million in 2026. This range includes continued development of KPL-387 and KPL-1161 as well as significant fourth quarter KPL-387 pre-commercial manufacturing costs. We expect full year SG&A expenses of $270 million to $280 million in 2026. This range supports continued Artist commercialization, including additional personnel and promotional activities in the fourth quarter to further build disease awareness and enhance patient and positioning targeting. In closing, our third quarter results show the strength of our operating plan, a growing and profitable ARCALYST business funding the advancement of key development assets and positioning us to create value in the near and long term. With that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. As you've heard, Kiniksa is surely well positioned to build significant future value as we grow our IL-1 alpha and beta inhibition franchise. The team and I are on it and focused on helping as many patients as possible with our list and to advancing the development of our clinical portfolio in order to bring additional therapies to patients. With that, I'll turn it back to the operator for questions. Thank you.

And our first question for today comes from the line of Anupam Rama from JPMorgan.

Congrats on the quarter. I just wanted to ask a quick KPL-387 question. I think the guidance for pivotal data in the second half of 2027 is new today. So can you tell us what you're seeing in terms of enrollment dynamics and where you are on site initiation that give you confidence to playing out this time line?

Thanks, Anupam. I think I'll let John Paolini answer that. Suffice to say that our execution cost is not just commercial but also use of the development organization. And as I've said before, we are enrolling and dosing patients. It's a global clinical study with global sites. And both myself, John and Ross take pride in meeting with investigators and just getting them excited about the future. So there's been some massive momentum, both internally and with our investigators. And as with that, when we go out things with full force, and that's why the guidance is as we nasty results in the second half of next year. But John...

I think that's excellent guidance from Sanj. The only thing that I would add is that on clinicaltrials.gov, you can see the extent of the global nature of our program. And so the sites that are involved in the program across the world are all listed there. And so you can see the scope of effort. And as Sanj mentioned, we are on the ground and engaging with clinicians, and we can feel the excitement about the program, and so we continue forward.

I've also said we have a track clinical operations team and having [indiscernible] so many years at Genzyme before I run commercial, I've got a very high bar for clinical research and [indiscernible] operations. And so many, many years, I feel like we've really got the best team to do the job.

And our next question comes from the line of Edward Nash from Canaccord Genuity.

Really excited to see that over $1 billion number now for the guidance. So congratulations. I just want to ask now you're at 23% active penetration, that's 2% higher than last quarter, which is really, I think, impressive. Can you maybe give us an idea of how we should think about the shape of the penetration curve from here? Is there anything structurally different about the next quartile of patients versus the patients you've already converted. You're going up on the SG&A number, which makes a lot of sense. And you've put a lot of focus on the DTC campaign, which clearly seems to be paying off. Just kind of curious as to how many extra dollars need to be put in to kind of achieve greater uptake of scripts?

Thanks, Edward. This is Ross. Thanks very much for your comments. And yes, we're pleased to announce that we were around 23% at the end of the quarter in terms of penetration into the multiple recurrence group, which is the patients that have suffered for 2 or more recurrences. And that's without allocating anything to the first recurrence group, which we've got about 20% of our prescriptions in the first recurrence group also. So the opportunity is very significant. While on one hand, we're happy with the 23%, and that's obviously showing a couple of percent growth versus the end of Q2 number when we shared it at the time before that, the last time we shared the penetration number, I think it was at the end of Q4, which was 18% at the end of last year. So that's been growing relatively nicely. But I think more importantly is the opportunity that's ahead. I mean, clearly, there are a lot of patients in the 2-plus recurrence group that we still got to help and as I said, not allocating for even those who are in the first recurrence. And as we shared from some of the market research today, the propensity and the desire for physicians to look and treat patients with IL-1 alpha and beta inhibition in the first group has also been growing quite substantially over time. So we think the future is very bright from that perspective. In terms of kind of different patient groups, aside from the recurrence number, there's really not much else to report. We're not seeing significant changes necessarily in the demographics of the patients or severity levels or anything else. It's just that this is a rare flare in cardiovascular disease. There are a lot of patients out there relative to a rare disease. And we're trying to get out and reach as many patients as possible. We know that they are widely dispersed around the country, and that takes a certain efforts, as you have alluded to from our kind of -- our sales and marketing spend and so on. But our efforts are ultimately on value-driven investments that can make sure we reach those physicians and switch more and more of them on to this new way of treating and ultimately get greater penetration into this opportunity to ultimately help more patients.

I'm sorry, go ahead.

Yes. No, Edward, maybe just to add the final part as well as the DTC spend and field team spend that we have and we've announced in our guidance looking forward as well, is ultimately very efficient. We are very focused on this as a rare disease market. And from the DTC side of things, this is not kind of broad spectrum, massive spend DTC. It's very efficient, very targeted type of expenditure to address appropriately the market that we have.

Great. Thanks for the additional color and really great quarter. Congratulations.