Good day, and thank you for standing by. Welcome to the Kiniksa Pharmaceuticals First Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jonathan Kirshenbaum, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining Kiniksa's call to discuss our first quarter 2025 financial results and recent portfolio execution. A press release highlighting these results can be found on our website under the Investors section. As for the agenda for today's call, our Chief Executive Officer, Sanj K. Patel, will begin with an introduction. Ross Moat, our Chief Commercial Officer, will provide an update on ARCALYST commercial execution. Then Mark Ragosa, our Chief Financial Officer, will review our first quarter 2025 financial results. Finally, Sanj will share closing remarks and kick off the Q&A session, for which Dr. John Paolini, our Chief Medical Officer; and Eben Tessari, our Chief Operating 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 these statements. A review of such 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 will turn the call over to Sanj.

Thanks, Jonathan, and good morning, everyone. Kiniksa is off to a great start in 2025, and we are well positioned to build on our strong performance throughout the rest of the year. We've continued to make excellent progress with ARCALYST and our commercial franchise in recurrent pericarditis, reaching an increasing number of patients and growing to a net product revenue of $137.8 million in the first quarter. Ross will go into additional detail about our first quarter performance in a moment. Before he does, of note, the end of Q1 marks the fourth anniversary of the FDA approval of ARCALYST in recurrent pericarditis and the underlying fundamentals that have propelled our commercial success up to this point remain strong. Since launch, we have continued to observe expanding adoption among new and repeat prescribers, greater appreciation for the multiyear duration of disease, and high payer approval rates. Through consistent and effective execution, we have delivered this transformative therapy, which is the only FDA-approved treatment for recurrent pericarditis to thousands of patients, establishing and extending our position as the market leader, driving sustained revenue growth year-over-year. As a result of our strong Q1 performance, we are increasing the ARCALYST net sales guidance to between $590 million and $605 million from our previous range of between $560 million and $580 million. In addition to ARCALYST, we've been hard at work advancing KPL-387 in recurrent pericarditis since announcing the program just a couple of months ago. We're on track to initiate the Phase II/Phase III clinical trial in the middle of this year, with data from the Phase II portion expected in the second half of next year, 2026. Additionally, we've maintained a robust financial position and expect to remain cash flow positive on an annual basis, providing the flexibility to continue investing in additional value-creating opportunities across the business. With that, I'll now turn it over to Ross.

Thank you, Sanj. We're delighted we've started off the year with such strength on the commercial front, having delivered $137.8 million in net revenue in the first quarter of 2025, which is a 75% year-over-year increase compared to Q1 of 2024. The fact that we continue to drive such growth after four years on the market speaks to both the effectiveness of our strategy and our team's robust execution serving patients with this debilitating disease. Most importantly, we continue to be excited about the substantial opportunity ahead to help many more patients suffering from recurrent pericarditis. Q1 is typically a very challenging quarter due to the specialty drug headwinds associated with payer plan changes and co-pay resets. However, these were outweighed by three key drivers that led to a substantial increase in active commercial patients. Firstly, we saw robust growth in the number of prescribers with around 300 new prescribers in Q1, which is one of the highest quarterly increases we've had since launch to date. The second driver was an increase in the overall duration of therapy, which has now increased from approximately 27 months to approximately 30 months on average. This highlights the benefits that patients continue to achieve over longer periods of time, as well as a growing appreciation from healthcare professionals that this is a multiyear chronic disease for most patients. Finally, Q1 revenue also benefited from federal changes to the Medicare Part D program, which improved patient affordability by lowering the maximum co-pay as well as providing the potential to spread costs evenly through the year. While around 70% of the ARCALYST payer mix is commercial, these Medicare program changes led to a one-time influx of patients who converted to paid therapy at the start of Q1, which is a testament to the value these patients see being on ARCALYST. Overall, we're delighted with our team's performance over the first quarter, and the underlying commercial fundamentals, including payer approval rates and patient compliance, remain strong. Our commercial and marketing strategies are built around continuing to switch on more prescribers to this new way of treating recurrent pericarditis, by recognizing that the disease is driven by interleukin-1 alpha and beta, which requires a targeted immune-modulating treatment approach to resolve pain and inflammation and reduce future flares throughout the duration of the disease. As a result of this understanding, we've seen substantial increases in both the breadth and depth of ARCALYST prescribing each year that we've been on the market. In Q1, the total breadth of prescribing grew to more than 3,150 unique prescribers since launch, which is an increase of more than 1,150 from the same period in 2024. Importantly, the depth of prescribing has also continued to increase, with approximately 820 repeat prescribers who have written ARCALYST for two or more patients. These repeat prescribers are now accounting for approximately half of all new ARCALYST prescriptions, which highlights the importance of ensuring physicians have a positive experience when prescribing ARCALYST for the first time. Alongside growing prescriber adoption, our patient service initiatives under Kiniksa One Connect continue to be well received by patients. ARCALYST is designed as a long-term treatment option. And as such, we've seen growth in both the initial treatment period, which most recently grew from 16 to 17 months on average, as well as the total average duration of therapy, which increased from approximately 27 months to approximately 30 months. This underscores that recurrent pericarditis is a multiyear disease for most patients, as well as highlighting patients' willingness and desire to stay on a highly efficacious and well-tolerated treatment throughout the disease duration. Kiniksa continues to build a strong commercial franchise with ARCALYST. As a result of our excellent Q1 performance, we are increasing the 2025 net revenue guidance from $560 million to $580 million to $590 million to $605 million. We look forward to continuing to execute throughout this year, growing the commercial business and improving the lives of many more patients with recurrent pericarditis. With that, I'll turn the call over to Mark to discuss the first quarter 2025 financial results.

Thanks, Ross. Strong commercial execution in the first quarter added to Kiniksa's significant momentum with ARCALYST and combined with financial discipline and a strong balance sheet leaves Kiniksa well positioned to continue to create value across our business in both the near and long term. This morning, I will cover our first quarter 2025 financial performance. You can find our detailed financial information in today's press release. There are a few items to note. First, starting on the left-hand side of the slide with our income statement. As you've heard from Sanj and Ross, ARCALYST revenue grew 75% year-over-year in the first quarter to $137.8 million, driven by a meaningful increase in active commercial patients. Operating expenses grew 29% year-over-year in the first quarter, driven by the cost of goods sold due to ARCALYST revenue growth, collaboration expenses with continued ARCALYST collaboration profit growth, and SG&A in support of ARCALYST commercialization. Lastly, with the strong ARCALYST revenue growth against more moderate operating expense growth, net income was $8.5 million in the first quarter of 2025 compared to a net loss of $17.7 million a year ago. Second, the right-hand side of the slide provides a calculation for ARCALYST collaboration profit, which drives collaboration expense. ARCALYST collaboration profit grew a significant 118% year-over-year to $87.6 million in the first quarter as our commercial investment continues to be purposeful. Third, at the bottom of the slide, we continue to expect our current operating plan to remain cash flow positive on an annual basis. To this point, we ended the first quarter with a cash balance of $268.3 million, representing approximately $25 million of net cash flow for the period. Finally, a point on the expected impact of potential tariffs on ARCALYST cost of goods sold. Importantly, ARCALYST is currently manufactured by Regeneron in the United States. As such, if tariffs are extended to pharmaceuticals, they would not impact ARCALYST supply received from Regeneron. That said, we are in the process of transferring ARCALYST manufacturing to Samsung Biologics in South Korea. We expect any tariff on Samsung supply to be limited to the cost of drug substance entering the United States, which would have an immaterial impact on ARCALYST cost of goods sold and gross margin. And with that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. As you've heard, Kiniksa is well positioned to build tremendous more value. We are dedicated to helping as many patients as possible with ARCALYST and advancing the development of our clinical portfolio, which includes KPL-387, our liquid formulation, IL-1 receptor antagonist with a target profile of monthly dosing. Our ultimate goal is to bring additional treatment options and therapies to patients suffering from debilitating diseases with unmet need, and we won't rest until we do. With that, I'll turn the call back to the operator for questions.

Our first question comes from the line of Geoff Meacham with Citi.

This is Mary Kate on for Geoff. Thank you for the detail of the ongoing launch. You noted duration increasing here. Could you comment on what could be driving that increased usage? And then what feedback have you received from patient experience on treatment?

Thank you very much for the question. So this is Ross. Yes, so we're pleased with the increases that we've seen to duration. I think, importantly, as a result of both the initial treatment period, which has increased to around 17 months now on average with a median of around 12 months. But importantly, the total duration of therapy as well, now averaging around 30 months, which is around a 3-month increase versus last reported. So in terms of the drivers of that, I think it's multiple items. I mean, firstly, on the healthcare professional side, an increasing understanding of the fact that this is a multiyear disease for most patients suffering from recurrent pericarditis. If you focus on those patients with two or more recurrences, we know from the natural history of the disease, that the median is around three years that patients suffer for, and still around one-third of the patients suffer around five years post the onset of the disease, and around one-fourth, even eight years beyond the disease. So we know this is a multiyear disease, and as time goes on, healthcare professionals are treating to the duration of the disease, which is exactly how ARCALYST was designed and intended to be used. Then I think also on the patient side of things, I think it really speaks to how well patients get on therapy. The fact that they get the payer approvals, which remain very high, greater than 90% of all completed cases in an approval. And patients continue to do well while on therapy and that this is a drug that is designed to improve the pain and inflammation, but ultimately to reduce the recurrence of future flares throughout the duration. And that's exactly what we saw in the trials and what patients are seeing in the real world. So the willingness and desire to stay on treatment on the patient side is incredibly high. And I think that really speaks to the kind of the patient experience part of your question as well. We do provide services around adherence and compliance through our patient services program, and that supports patients throughout their entire duration of experience or their whole journey on ARCALYST, and we continue to get very good feedback around that program and how patients are getting on therapy.

All right. If there are no more questions, our next question comes from the line of Roger Song with Jefferies.

Great. Congrats for the strong performance for 1Q. A couple from us. One is regarding the patient penetration. Can you comment on how many of those scripts are coming from the first recurrence? Because in the past, you're talking about 15% coming from the first recurrence. Did that change in the recent quarter? And then also related to the financials, it seems your R&D costs are coming down a little bit from last quarter and last year. So should we use this as the new baseline for the coming quarter years, understanding you're expanding to the monthly and quarterly IL1 pipeline?

Thanks very much for the questions, Roger. So maybe I'll start off on that one, then I'll hand over to Mark for your second question. In terms of the recurrences that we see patients when they're treated on ARCALYST, it's around 15% of all the patients that are on ARCALYST that are on their first recurrence or have ARCALYST prescribed while they are on their first recurrence and around 85% of our patients that are on two recurrences or more. And that's important, particularly the 15% side, which is really showing that physicians are utilizing the breadth of the label. And as experience goes on and people become more and more familiar with the ease of prescribing ARCALYST and the high efficacy and well-tolerated profile of the drug, it's moving more towards earlier line treatment, both in terms of treatment options as well as in recurrence numbers. So we think there's a lot to be very positive about on that side and physicians just utilizing the breadth of the label that we have for ARCALYST, which, as you know, is agnostic to the number of recurrences. It's just approved for recurrent pericarditis overall. So I'll hand on to Mark for the second question.

Yes. Great. Roger, thanks for the question. I mean, I think it's important to keep in mind on R&D that fourth quarter 2024 R&D did include a $19 million charge related to abiprubart prepaid raw materials. And so R&D did decline in the first quarter. But it really on an apples-to-apples basis, including a $2.5 million abiprubart manufacturing charge taken in the first quarter, R&D essentially was flat in the $16.5 million to $17 million range. And so going forward, as far as the baseline is concerned, it's just important to note that the timing of our clinical trials and the manufacturing and clinical supply are key variables. And as we mentioned, we are planning to initiate a Phase II/III trial for KPL-387 in recurrent pericarditis in the middle of 2025. And then we're also advancing KPL-1161 towards the clinic.

Our next question comes from the line of Eva Fortea with Wells Fargo.

Congrats on the quarter. A couple from us. First, regarding the increase in the prescriber base. Can you discuss the initiatives you're taking here to continue to increase this base? And how do you expect these numbers to change over this year and the next? And the second question is, can you discuss your gross to net for this quarter?

Yes, Evan, thank you very much for the questions. Maybe I'll take a pass at both of those, and the rest of the team can chime in if they want to add anything additional. So in terms of the prescriber base, yes, we were pleased that was one of the key drivers of the performance of Q1, along with the increased duration and the one-time bolus of the Medicare patients that transitioned across as a result of the changes to the federal program for Medicare Part D, making it more affordable for those patients relating to their co-pays. We had a growth of more than 300 in the last quarter, which was one of the highest that we've had since launch to date, which is very positive, particularly at this stage of launch, and I think goes to speak to the opportunity that we have ahead as well. Clearly, we haven't guided to how we see kind of future increases happening, but we do believe that there are substantial opportunities still left for us to continue to grow in this marketplace. I think at the end of 2024, when we provided the penetration into the two-plus recurrences of 13%, that also speaks to the opportunity still ahead. In order to drive the prescriber base, we just continue to be focused on very targeted, very clear execution in the field. We have a marvelous team in the field for our sales representatives who have done a great job educating physicians around the disease, ensuring that it's really distinct from acute pericarditis and that people are aware how to prescribe ARCALYST, and that has certainly continued to help in a substantial way. So we continue with our tight execution in the field. But we also supplement that with a lot of digital initiatives on the marketing side as well. Of course, we take a significant share of voice in congresses and conferences. But the digital marketing piece is very important to us and finding new channels to get information out there to the wide array of cardiologists and indeed rheumatologists around the country. So we're optimistic for the future and the growth potential that we have. In terms of the gross to net, the Q1 2025 gross to net was 10.7%. And if you compare that to the full year of 2024, which was 9.8% or Q1 of 2024, which was 13.5%. Clearly, we've seen a drop versus the same time last year. We continue to see a similar pattern in gross to net, meaning the historical performance has generally been higher on a gross-to-net basis in Q1, dropping in Q2 and Q3 before increasing slightly in Q4. That's the historical pattern. And we haven't provided gross to net moving forward as guidance. But historically, we've been around 10% for the full year. The Q1 2025 number, which was a reduction versus Q1 of 2024 was ultimately down to a bolus of Medicare Part D patients who moved from free goods to commercial therapy associated with those Medicare IRA-related changes. And that meant that we had a lower proportion of the total patients in our patient mix that were eligible for co-pay assistance. So this brought down the gross to net of Q1 this year versus Q1 last year.

Our next question comes from the line of Anupam Rama with JPMorgan.

Congrats on the quarter. On the uptick on new unique prescribers, I'm assuming most of these are coming from the community setting. And should we be thinking about this as sort of like the pull-through from the sales force expansion?

Thanks, Anupam. This is Ross again. So yes, thank you very much for your comments. Not so much from the community setting. I mean, we're very focused on cardiologists in the specialty setting, not primary care, just to be clear. But we're really agnostic, and actually always have been since launch, to the setting of the cardiologists, in particular, that we focus on, whether it's academic or more kind of cardiology offices. We've spent a huge amount of time prior to launch, but building our understanding since launch as well for the throughput of patients and really understanding the patient journey that are suffering from multiple recurrences of pericarditis. So we've done a lot of research and triangulation of data sources to try to make sure that we send our sales representatives to areas that we believe have the highest throughput of recurrent pericarditis patients. That's been very effective since launch, but it's a constant updating of dynamics associated with that. So where we're kind of relatively agnostic with the actual setting of the cardiologists, we really follow the patient journey and making sure that we're pushing our resources in the areas where we think we can help the highest number of patients. So I think that's the type of work that's really gone into the increase of the prescriber base. And we're pleased to be in a situation where we've had constant increases on a quarterly basis since the time of launch with no signs up until the end of Q1 of slowing down, which I think speaks to the future opportunity.

Our next question comes from the line of David Nierengarten with Wedbush.

I just had a quick one. When you look forward on the development of KPL-387, should we expect to see a trial that resembles what ARCALYST pivotal study looks like? And also, are you planning, I assume so, a switch component for that study of people switching off of ARCALYST into trying out KPL-387?

David, this is John Paolini, Chief Medical Officer. Thanks so much for your question. Yes, we're very excited about the development program of KPL-387. And as Sanj mentioned, we're getting the Phase II/III study off the ground in the middle of this year. As far as the details of that, at this point, we are not sharing that information. What we can say is that at this time. And what we can say is that we have had interactions with regulatory authorities about the basics of the plan and are moving forward with that plan, but more details to come as we go forward. And as always, clinicaltrials.gov is a great place to look for updates and clinical trial designs. Thanks so much.

Our next question comes from the line of Paul Choi with Goldman Sachs.

This is Kalia calling in for Paul. Congrats on the quarter. I guess I wanted to circle back to Medicare Part D. I know you mentioned earlier on the call that you referenced the historic increase in the number of prescribers and then mentioned Medicare Part D. We're wondering how many you think of those new physicians were driven by the increase in Medicare Part D patients and whether you expect this benefit to continue going forward for the next quarter and the rest of the year?

Thanks very much for the question. So just to be clear, the vast majority of the Medicare Part D patients that came across to commercial therapy were historic patients that have been on our PAP program, our patient assistance program historically, so free goods. But as a result of the federal changes under the IRA, which improves affordability by capping the co-pays at $2,000, as well as introducing the ability to evenly spread the payments kind of across the Medicare prescription payments plan evenly spread throughout the remaining months of the year. That led to many of those patients changing over historically from free goods to commercial therapy. So they're not part of the new prescribing growth, if you like, that's really focused on new patients and new prescribers coming in as a result, where the vast majority of these are patients who have kind of changed over plans rather than receiving a new prescription. So maybe it's worthwhile just mentioning that, that Medicare Part D patient group is really a one-time influx of patients that kind of switched over at the start of the year. And there are some unknowns to like how that population will continue through the rest of the year. Of course, new patients may come in now that there's greater affordability under Medicare Part D and the prescription payments plan. But for the patients that switched over, I think it's worth bearing in mind that this is a new federal program. There is a grace period, a 2-month grace period when patients can be disenrolled if they don't pay their premiums to the payers, the Medicare payers. There's also the potential for these patients to opt out of the prescription payment plan at any time. And ultimately, many of these patients are making payments under their co-pays for the first time. So I think there's some uncertainty on the future of those patients like exactly what the dynamics will look like through the rest of the year. But overall, we're really pleased that there's been some changes that make greater affordability across Medicare Part D for patients, and that's increased the number of active patients alongside the increase in new prescribers for new patients that have come in, in Q1, as well as patients staying on therapy for longer under the increased duration. So there's kind of three key dynamics there that ultimately we're very pleased with in Q1, and we'll see how they play out through the rest of the year.

I'm showing no further questions at this time. I would now like to turn it back to Sanj Patel for closing remarks.

Thank you, operator, and thank you, everybody, for the questions and joining the call this morning. We look forward to the remainder of the year and to providing additional updates in the future. We better crack on. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.