Thank you for standing by, and welcome to the Kiniksa Pharmaceutical Second Quarter 2025 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. Jonathan

Thank you, operator. Good morning, everyone, and thank you for joining Kiniksa's call to discuss our second 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 start with an introduction and overview of our business. Ross Moat, Kiniksa's Chief Commercial Officer, will provide an update on ARCALYST commercial execution, then Mark Ragosa, our Chief Financial Officer, will review our second quarter 2025 financial results. Finally, Sanj will share closing remarks and kick off the Q&A session, for which John F. 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 the date of this presentation, and we undertake no obligation to update such statements, except as required by law. With that, I will turn it over to Sanj.

Thanks, Jonathan, and good morning, everyone. I'm happy to review Kiniksa's second quarter financial results and the highlights across our portfolio. Kiniksa continues to build upon the strength across our business, which is driven by both our commercial execution with ARCALYST and our pipeline development programs, including KPL-387. ARCALYST continues to generate strong revenue growth. Our continued execution across key commercial drivers and increased penetration across the pericarditis population led to a net revenue of $156.8 million in the second quarter. This represents a growth of $19 million over the first quarter. In just over 4 years since the launch of ARCALYST, as the first and only FDA-approved therapy for recurrent pericarditis, Kiniksa has generated over $1 billion in cumulative net sales. Surpassing this milestone is a result of our effective commercial strategy and our team who work relentlessly to bring this highly efficacious therapy to thousands of patients suffering from this debilitating disease. Kiniksa is well positioned to continue maximizing the potential of ARCALYST. For full year 2025, we're raising our ARCALYST net sales guidance to between $625 million and $640 million from $590 million to $605 million. Importantly, growing ARCALYST revenue continues to support our robust balance sheet, providing capacity for continued investment in value-creating opportunities across the business without the need to access the capital markets. Turning to our pipeline. We've now initiated and have begun recruiting in the Phase II/Phase III clinical trial of KPL-387 in current pericarditis. This next slide highlights the design of the Phase II, Phase III clinical trial. In designing this study, we've leveraged our experience with that RHAPSODY, which was the successful Phase III pivotal trial, supporting FDA approval of ARCALYST in recurrent pericarditis. This study consists of 3 overlapping parts, which have been combined into a single protocol. The Phase II dose focusing portion, the Phase III double-blind placebo-controlled pivotal portion and the long-term extensions. We're now recruiting patients in the dose focusing portion of the study and expect data in the second half of next year. From there, we'll continue to move as fast as possible and our goal is to deliver this treatment option to patients in the '28-'29 time frame. Thanks to the excellent work of our teams, Kiniksa is the leader in the recurrent pericarditis. Importantly, we are committed to driving additional innovation for these patients and maintaining our leadership position. Our physician and patient market research shows an IL-1 alpha and beta inhibitor with the target profile of KPL-387 could be a meaningful treatment option for patients with recurrent pericarditis. Specifically, the potential for a once-monthly dosing of a liquid formulation in an auto-injector could drive further adoption as well as potentially enhance both duration and compliance. We continue to make solid progress in the second quarter, both commercially and clinically, and we continue to crack on across the portfolio. With that, I'll turn it over to Ross.

Thank you, Sanj. Strong execution in Q2 led to significant revenue growth to $156.8 million, representing a 52% year-over-year increase compared to Q2 of last year. This performance was driven by expansion in both the breadth and depth of the prescriber base, which led to the highest number of quarterly new patient enrollments since launch and resulted in a substantial increase to our active commercial patients. Additionally, we've seen good persistence from the Medicare Part D patients who transitioned to commercial therapy at the start of the year due to the affordability changes associated with the Inflation Reduction Act. We are seeing this patient cohort follow similar metrics to other groups of patients on ARCALYST. And while the onetime bolus of patients observed in Q1 will not repeat, we have seen an increase in new Medicare Part D patients initiating commercial therapy versus the previous years. As a result of the increase in active patients, our penetration into the multiple recurrence population increased from approximately 13% at the end of last year to approximately 15% at the end of Q2. Ultimately, this growth reflects that patients and healthcare professionals continue to report high degrees of satisfaction with ARCALYST and we've built a robust foundation of commercial fundamentals. For example, in Q2, our payer approval rate remained greater than 90%. Total duration of therapy was approximately 30 months on average, patient compliance with therapy remains strong at over 85%, and we continue to see ARCALYST used earlier in the course of the disease. Importantly, our strong Q2 performance highlights the progress we've made but more importantly, we continue to be even more excited about the significant opportunity ahead with ARCALYST. On this slide, I'm going to highlight how ARCALYST has continued to shift the treatment paradigm to become the standard of care for recurrent pericarditis. Our promotional efforts have been focused on educating patients and healthcare professionals to recognize recurrent pericarditis as an interleukin-1 alpha and beta mediated disease best managed with targeted immunomodulation. Since launch, we've seen continuous robust increases in both the new and repeat prescribers every single quarter. This growth not only speaks to the effectiveness of our educational efforts but it also illustrates how receptive physicians have been to this evolved paradigm that utilizes a targeted highly efficacious and well-tolerated treatment. In Q2, more than 325 additional health care professionals wrote their first ARCALYST prescription representing one of the highest quarter-on-quarter increases to date and bringing the total number of prescribers to more than 3,475. Additionally, repeat prescribing also continued to increase with more than 120 ARCALYST prescribers writing for their second patients. Finally, we've also seen an increase in prescribing earlier in the disease. Of all the patients on ARCALYST, around 20% were prescribed ARCALYST while on their first recurrence and roughly 80% when they had 2 or more recurrences. This highlights the growing physician appreciation for the value ARCALYST provides in preventing their patients from suffering future flares. In addition to more patients receiving ARCALYST at every stage of the disease, there has been a marked increase in the number of dedicated pericardial disease centers where patients are able to access expert care for healthcare providers, well versed in their disease. We have sponsored the AHAs addressing recurrent pericarditis initiative as part of our ongoing efforts to shorten the treatment journey for patients by providing expert care close to home. There are also several more dedicated pericardial clinics outside of this initiative and our aim is to continue supporting this growth to help patients gain an earlier diagnosis and appropriate treatment of their disease. As the treatment approach continues to change across the country, there's a growing body of published literature recommended IL-1 pathway inhibitors, such as ARCALYST to be used ahead of corticosteroids, which is well aligned with our commercial positioning of ARCALYST. Furthermore, looking at data from RESONANCE, our real-world evidence disease registry, which is driven by expert pericardial centers across the country, ARCALYST has increasingly become the second-line treatment choice after NSAIDs and colchicine. In Q2, we delivered $156.8 million in net revenue as well as increase the franchise profitability. As a result, we are pleased to increase our 2025 net revenue guidance by $35 million between the midpoint of the prior range and of the new range. This takes us far expecting between $590 million to $605 million to now expecting between $625 million and $640 million. This guidance indicates year-on-year net revenue growth of $215 million at the midpoint compared to full year 2024. This would be the highest annual increase in net revenue to date. As you can hear, we are excited about the future of ARCALYST as well as the progress of our pipeline. We are determined to bring future launches of novel therapies to patients who are suffering from debilitating diseases. And with that, I'll turn the call over to Mark to discuss our financial results. Mark?

Thanks, Ross. This morning, I will cover our second quarter 2025 financial performance. You can find our detailed financial information in today's press release. There are a few items I'd like to call your attention to. First, starting with our income statement on the left-hand side of the slide. ARCALYST revenue grew 52% year-over-year in the second quarter to $156.8 million, driven primarily by strong growth in new patient enrollments, prescribers and active commercial patients. Operating expenses grew 26% year-over-year in the second quarter driven primarily by cost of goods sold and collaboration expenses from continued ARCALYST revenue growth and SG&A in support of ARCALYST commercialization. Lastly, due to strong revenue growth, coupled with more moderate expense growth, net income was $17.8 million in the second quarter compared to a net loss of $3.9 million a year ago. Second, the right-hand side of the slide provides the calculation of ARCALYST collaboration profit, which grew 75% year-over-year in the second quarter to $104.8 million, driven by sales volume and disciplined commercial investments. Third, at the bottom of this slide, our cash balance increased by approximately $40 million to $307.8 million in the second quarter and we continue to expect our current operating plan to remain cash flow positive on an annual basis. As you've heard from Sanj and Ross, both commercial and clinical execution in the second quarter added to Kiniksa significant momentum across its business. Combined with financial discipline and a strong balance sheet, Kiniksa remains well positioned to continue to help patients as well as to create additional value in both the near and long term. And with that, I'll turn the call back to Sanj for closing remarks.

Thanks, Mark. As you've heard, Kiniksa continues to execute both clinically and commercially and is well positioned to build significant future value. We are dedicated to helping as many patients as possible with ARCALYST and to advancing the development of our clinical portfolio, which includes KPL-387, the liquid formulation IL-1 receptor antagonist, which has 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. I'll now turn the call 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 know you highlighted 15% penetration into the multiple recurrence setting at the end of 2Q. Wondering if you could provide some commentary on kind of the trends that you're seeing in the first recurrent setting. I think the slide said about 20% of total prescriptions are coming from this setting?

Yes. Thanks very much, Anupam. This is Ross. Thank you for the question. So you're right that in the 2-plus recurrence group, as a reminder, that's the 14,000 patient population in any given year. We've seen continuous increase since the launch into the penetration into that group. Most recently, going to 15% versus last reported at the end of 2024 of 13%. So seeing some nice increase within that group, and that remains our key target base as the patient groups who are suffering the most had the highest burden of the disease, also most closely aligned with the data in RHAPSODY as well. But we've also seen, as the treatment paradigm has changed over time, significant growth in early on in the disease. So those patients are still very much within label with the broad label that we have, just for recovering pericarditis agnostic to the number of flares. And there's an additional group of 26,000 patients in that first recurrence group, which is a significant opportunity for us. And I think what we're seeing now with around 20% of all the ARCALYST patients that were prescribed to the drug when they were on their first recurrence is greater confidence, familiarity, knowledge of how to prescribe, how to look after patients while they're on ARCALYST, and just greater comfort for healthcare professionals having greater experience with the drug and having seen the impact that it has on patients in the real-world setting to utilize this drug early on in the disease. I think as well as an increase in understanding the recurrent pericarditis is a disease, which is mediated by interleukin-1 alpha and beta, and in order to control the disease and prevent future flares, patients are having to needlessly suffer those future flares, the utilization of an inhibitor of interleukin 1 alpha, beta that's very well tolerated with high efficacy, is being very well received by both patients and health care professionals. So we are pleased to see an increase across really the whole population, which is a total of 40,000 patients in totality when you include the first recurrence on top of the 2 plus recurrence groups.

And our next question comes from the line of Geoff Meacham from Citi.

I just want to, I guess, follow up on Anupam's question. I guess when you look at the patients who've dropped off, maybe over, say, the past year or so, was the dosing frequency a big driver? I guess I'm trying to get a sense for what the new start outlook could be for 387. And I'm under the assumption that you'll have a pretty good switch rate as well looking from ARCALYST?

Thanks, Jeff. So we're seeing the patients continuing to stay on therapy for quite some time. We've seen an average of 30 months in total. Patients are also pretty compliant to therapy overall at 85% or more, and patients reacting very well while on ARCALYST. So we're pleased about that, and we believe that there's a significant opportunity ahead for ARCALYST as we continue to switch on more and more physicians. And when you take the penetration numbers of 15%, I think that shows that we've had good growth up until this moment in time but the opportunity ahead is significant, and that's without taking into account the first recurrence patient. So we're very focused on continuing the growth of ARCALYST. Maybe, I'll pause here. Sanj, do you want to comment on 387?

Yes. No, thanks, Jeff. I mean, obviously, we're very excited about 387, and we are definitely tracking on as far as the Phase II, Phase III study is concerned. Obviously, that will be data dependent. But clearly, we've shown we know to commercialize in this space. We've developed an awful lot of great contacts and relationships with physicians. So that will be key. But ultimately, depending on data but we certainly know how to do it. And we've -- as I said, we've leveraged a lot of the learnings we had from RHAPSODY and from ARCALYST earlier on. So we'll continue to keep working on.

And our next question comes from the line of Paul Choi from Goldman Sachs.

Congrats on the quarter. My first question is, just given the pace of growth here, how do you think about potentially further expansion of the sales force and/or some sort of larger form of marketing/DTC to continue to expand awareness and drive penetration? And my second question is with 387, how are you thinking about potential in office utilization in the future as part of the paradigm? Do you vision this potentially being more administered in office? And just how you're thinking about self-administration versus physician administration down the road here?

Thanks, Paul. This is Sanj. Maybe I'll make a few comments and pass it over to Ross if he has anything to add. But yes, very excited about the growth that we've had in ARCALYST without a doubt. And as far as the sales force is concerned, obviously, as we've always said, we do an awful lot of analytical work on what the rightsizing is, looking at the territories. And we've done that, as you know, since launch just over 4 years ago. And as you've heard in the past, we have increased that. So at the moment, really, we've not made any comments as to exactly what we've done on the size of it. Last reported was around 85. We're certainly continuing to look at what's needed as far as growth is concerned but I think they're being utilized incredibly well. And as far as DTC and other things, clearly, our marketing groups had a great impact in the launch so far. We're certainly don't rests on our laurels. We're certainly looking at in addition to what we've done as far as sales force is concerned in our existing materials and disease education, physician education, we continue to look at other ways. I'm sure Ross can go into more detail but we've certainly got a massive focus on digital marketing, and looking at other ways we can really apply sort of not just the metrics but also some of the new technologies that are out there to identify patients that are very much in need. So it's a very exciting area for us. As you can see, it's still growing. There's an awful lot more we can do. We certainly are tapping into that in the future. But maybe Ross, you can comment on how we're looking at marketing and expanding our efforts there.

Yes, absolutely. Thanks, Sanj. Thank you, Paul. Yes, I think the key thing here on what Sanj is we are an organization that never rests on our laurels, we're quite happy with how the launch has gone to date but we have so much more to do as an organization. And we're very innovative in our approach, constantly evolving and refreshing what we do and finding better ways of doing things. And as we get more and more into this market and increase our understanding of the market, we find that we can get more effective over time as we just have way to understanding. The utilization of newer technologies is also important to us. We have looked utilizing AI in our tucked-in targeting strategy and in a variety of different digital marketing environments. And that's proven very successful for us, and we haven't shared great detail on that but we're utilizing a lot of new technologies now, which is really paying dividends and helping us to get out there to physicians and to patients and making a difference in this marketplace. So we constantly evolve and look at new ways of doing things to get better and better over time. To the second part of your question, Paul, regarding in-office versus outpatient use, the vast majority of ARCALYST is in outpatients under pharmacy benefits. With KPL-387, obviously, as Sanj has said, everything is data dependent, and we'll see as we progress further but with a target profile of monthly and in a liquid formulation with the potential to go to an auto injector. That also plays nicely into the -- where the patients are, which is ultimately not wanting to be in hospital suffering from this disease but being treated appropriately and kept at home and preventing flares and preventing them going into a hospital for the future. So whether that precipitates a change in kind of in office versus outpatients and patients administered in their own home is to be seen but we don't see a substantial call for in hospital utilization.

And our next question comes from the line of Eva Fortea from Wells Fargo.

Two quick ones from us. So on ARCALYST from the 30-month average therapy duration, can you give us a sense in terms of numbers on how -- are you seeing a shorter treatment duration the patients in first recurrence versus patients in second and beyond? And the second question is on 387, can you discuss how you're thinking about like the balance between remaining cash flow positive on an annual basis and initiating studies in new indications beyond the recurrent pericarditis?

Thanks, Eva. Thank you very much for the question. So I'll certainly take the first part and then hand over to someone else to cover the second part. Yes, we're not really seeing any meaningful differences in terms of duration from the different cohorts, including patients on the first recurrence versus second, third, fourth, fifth recurrence groups. But of course, the data is always evolving and building and as more patients starting to be initiated on ARCALYST earlier on in the disease. We just don't have some of that data yet but it will build, and we'll report as we see it later down the line. But from what we see so far, no significant differences. The average is 30 months. The median of the initial duration of therapy is around 17 months and the restart rate remains around 45%. I think importantly, of all those patients that started as ARCALYST in our launch quarter back in Q2 of 2021 now, around 10% of all of those patients that started way back then are still on therapy, meaning their initial treatment of therapy and have just stayed on throughout, which I think is testament to the effect and how well tolerated ARCALYST could be for many of these patients. So no significant differences today. It's obviously something that we will keep an eye on and report as we see.

And Eva, as far as your second question regarding cash flow and further investment, I think at this point in our life cycle, we are focused on continuing to create value. And importantly, as we've talked about in the past, we do think that through commercial execution and continued financial discipline, we do have the capacity to continue to create value across our business, whether it's to further maximize the opportunity with ARCALYST to further advance our pipeline and/or to pursue strategic initiatives.

[Operator Instructions] Our next question comes from the line of Roger Song from Jefferies.

Congrats for the quarter. Maybe 2 quick ones for the pipeline, the first one, KPL-387. So understanding you're doing the Phase II portion to decide the dosing. Just curious about what is the target efficacy safety profile particularly in the context of comparison to ARCALYST, you can make a decision to decide those and how likely you will move multiple dose into the Phase III portion, something like induction maintenance? And then a quick one for the 1161 IND enabling right now? And then what's the current thinking about the potential indication for this quarterly IL-1?

Yes. Thanks for that question. We were actually both of those questions. So regarding the profile of KPL-387 what we're looking for in the dose focusing portion of the trial is to select the dose that we'll use in the pivotal portion of the trial. And so in that sense, the ability to treat the acute flare as it happens and then prevent the subsequent flare is really the profile that we established with ARCALYST and that we're looking for similar profile, if you will, with regard to the KPL-387 efficacy. So once we've selected that dose, we then carry that forward into the randomized withdrawal portion, pivotal section of the trial, which bears a remarkable similarity in terms of its design, in terms of the end points that we have structured. And so at that point, it will be data-driven in terms of the -- what the actual profile of KPL-387 is but we're very confident in the study design and is being able to show the strength of KPL-387 and its target profile of 1 monthly dose. Regarding the second question of 1161, at this point, we've not announced any specific indication. We realize that there's broad potential of having an IL-1 alpha and IL-beta inhibitor pathway inhibition, if you will, that has a target profile of dosing every 3 months. So that really opens the possibility of a range of chronic lifelong diseases that are auto-inflammatory. So we'll continue to do that work. But in the meantime, our focus is on the IND-enabling studies so that we can begin the first in-human study as soon as possible. Thank you so much.

And our next question comes from the line of David Nierengarten from Wedbush Securities.

I had 2 and maybe 1 is kind of a follow-up to the last one. But is there any specific kind of efficacy boundaries that you're looking for out of the 387 study? So of course, ARCALYST showed a near 100% drop-off in recurrences. I mean is that the kind of efficacy bar we should be thinking about? Or could it be a little bit lower because of the more convenient dosing? And then I had another question on just emerging competition. There's a potential oral competitor out there that's going to report out data this half. Is there any thinking on that or any thoughts on how we should think about the potential competition emerging?

Sure. Thanks, David. Appreciate the questions. So regarding the efficacy profile in the Phase II studies, the dose focusing portion, we're really looking across a range of different dose levels in order to understand the performance characteristics of KPL-387. And so in that sense, we intend to use the totality of the data in order to define the dose level that we'll take forward. So at this point, it's a little early to describe exactly what the expectation is precisely, but rather to say that I think this will be a very informative study based upon its design that will help us optimize the performance of the drug. Regarding competition that's on the horizon, we remain the leaders in the space of recurrent pericarditis for the reason that we have really done the deep work in understanding the mechanism of this disease. And we've identified the fact that IL-1 alpha and IL-1 beta inhibition is a critical element for maintaining control of the disease, an important effect to be able to maintain control of the disease as monotherapy. And so we continue to look with interest to see other data as they emerge but understanding those. So we say those mechanisms will have to define themselves in the context of the fact that, as I mentioned, we understand that complete control of the disease requires control of both cytokines.

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sanj Patel for any further remarks.

Thank you, operator, and thanks, everybody, for the questions and joining the call today. We look forward to the remainder of the year and to providing additional opportunities and updates in the future. So very excited, and thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.