10-Q 1 knsa-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to         

Commission file number: 001-38492

Kiniksa Pharmaceuticals, Ltd.

(Exact Name of Registrant as Specified in Its Charter)

Bermuda

98-1327726

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

Kiniksa Pharmaceuticals, Ltd.

Clarendon House

2 Church Street

Hamilton HM11, Bermuda

(808) 451-3453

(Address, zip code and telephone number, including area code of principal executive offices)

Kiniksa Pharmaceuticals Corp.

100 Hayden Avenue

Lexington, MA, 02421

(781) 431-9100

(Address, zip code and telephone number, including area code of agent for service)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Shares

KNSA

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

 

Accelerated Filer

  

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  

As of April 19, 2024, there were 70,940,145 common shares outstanding in aggregate, comprised of:

40,305,405 Class A common shares, par value $0.000273235 per share

1,795,158 Class B common shares, par value $0.000273235 per share

12,781,964 Class A1 common shares, par value $0.000273235 per share

16,057,618 Class B1 common shares, par value $0.000273235 per share

Kiniksa Pharmaceuticals, Ltd.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2024

TABLE OF CONTENTS

Page

PART I — FINANCIAL INFORMATION

7

Item 1. Financial Statements (unaudited)

7

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

7

Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

8

Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023

9

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

10

Notes to Consolidated Financial Statements

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

38

Item 4. Controls and Procedures

38

PART II — OTHER INFORMATION

40

Item 1. Legal Proceedings

40

Item 1A. Risk Factors

40

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

109

Item 3. Defaults Upon Senior Securities

109

Item 4. Mine Safety Disclosures

109

Item 5. Other Information

109

Item 6. Exhibits

110

SIGNATURES

111

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”), contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report including statements regarding our commercial strategy; potential value drivers; potential indications; potential market opportunities and competitive position; ongoing, planned and potential clinical trials and other studies; timing and potential impact of clinical data; future results of operations and financial position; expected timeline for our cash, cash equivalents and short-term investments; product development; prospective products and product candidates; supply of drug products at acceptable cost and quality; collaborators, license and other strategic arrangements; the expected timeline for achievement of our clinical milestones; potential marketing authorization from the U.S. Food and Drug Administration (the “FDA”) or regulatory authorities in other jurisdictions; potential and ongoing coverage and reimbursement for our products and product candidates, if approved; clinical and commercial activities; research and development costs; timing of regulatory filings and feedback; timing and likelihood of success; and plans and objectives of management for future operations and funding requirements, are forward-looking statements.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “goal,” “design,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these identifying words. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described under the sections in this Quarterly Report entitled “Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report. These forward-looking statements are subject to numerous risks and uncertainties, including, without limitation, the following:

our ability to complete the change of domicile of our principal holding company from Bermuda to the United Kingdom (the “Redomiciliation”);
our continued ability to commercialize ARCALYST® (rilonacept) and to develop and commercialize our current and future product candidates, if approved;
incurring losses in the future, potentially requiring us to raise additional funds;
our ability to source sufficient quantities of our products and product candidates to meet patient and partner demand at acceptable cost and quality specifications;
our ability to successfully complete the technology transfer of the manufacturing process for ARCALYST drug substance;
the market acceptance of our products and product candidates;
competitive and potentially competitive products and technologies;
prescriber awareness and adoption of our products and product candidates, if approved;
the size of the market for our products and product candidates, if approved;

3

the decision of third party payors not to cover or maintain coverage of or to establish burdensome requirements prior to covering or maintaining coverage of ARCALYST or any of our current or future product candidates, if approved;
the lengthy and expensive clinical development process with its uncertain outcomes and potential for clinical failure or delay;
the decision by any applicable regulatory authority to permit clinical development of, to grant regulatory exclusivity for and to approve marketing and sale of our current and future product candidates;
our ability to anticipate and prevent adverse events caused by our products and product candidates;
our ability to identify, in-license, acquire, discover or develop additional product candidates;
our ability to undertake and execute on business combinations, out-licensing activities, collaborations or other strategic transactions and our ability to realize value therefrom;
potential product liability claims;
federal, state and foreign regulatory requirements applicable to our products and product candidates;
our ability to obtain, maintain, protect and enforce our intellectual property rights related to our products and product candidates; and
our ability to attract and retain skilled personnel.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not place undue reliance on our forward-looking statements. Except as required by applicable law, we do not assume and specifically disclaim any obligation to update any forward-looking statements, whether as a result of any new information, future events, changed circumstances or otherwise.

4

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report. You should carefully consider these risks and uncertainties when investing in our Class A common shares. The principal risks and uncertainties affecting our business include the following:

we are currently conducting the Redomiciliation, which will require significant time and resource expenditure and be subject to significant risk and uncertainty;
we have a history of losses and to further our operational plans, we may require substantial additional financing, which we may not be able to obtain when needed or on acceptable terms;
we may not be able to continue to commercialize ARCALYST or be successful in commercializing any future products, which may materially impact our ability to generate revenue;
successful commercialization of our products and product candidates, if approved, will depend in part on the extent to which third party payors, including governmental authorities and private health insurers, provide funding, establish and maintain favorable coverage and pricing policies and set adequate reimbursement levels;
if we are unable to advance our product candidates in clinical development, obtain regulatory approval and pursue commercialization, or experience significant delays in doing so, our business may be materially harmed;
the incidence and prevalence for target patient populations of our products and product candidates have not been established with precision; if the market opportunities for our products and product candidates are smaller than we estimate, or any approval that we obtain is based on a narrower definition of our targeted patient population, our revenue and ability to achieve profitability may be materially adversely affected;
clinical development of our product candidates is a lengthy and expensive process with uncertain timelines, costs and outcomes;
we may encounter substantial delays in our preclinical studies and/or clinical trials, including as a result of delays in obtaining regulatory approvals to conduct clinical trials, activating sites, enrolling participants, and conducting trials, which could delay or prevent our product development activities;
we rely on third parties, including independent contract development and manufacturing organizations (“CDMOs”) to manufacture our commercial supply of ARCALYST and our product candidates for preclinical and clinical development; and if these third parties do not have sufficient manufacturing capacity at our desired times or otherwise fail to perform satisfactorily, including by producing insufficient supply of commercial and clinical stock to meet patient demand or clinical trial requirements, or are impacted by delays or supply shortages, our product development activities, regulatory approval, and commercialization efforts may be delayed, prevented or impaired;
we are conducting a technology transfer of the manufacturing process for ARCALYST drug substance from Regeneron Pharmaceuticals, Inc. (“Regeneron”) to a new CDMO, and the analytical testing methods of ARCALYST drug substance and drug product to new contract testing labs (“CTLs”) and the process to complete the technology transfer and qualify a new CDMO may be subject to significant risks and uncertainties;
we rely, and expect to continue to rely, on third parties, including independent investigators and contract research organizations (“CROs”) to activate sites, conduct or otherwise support our research activities, preclinical studies, clinical trials and other trials for our product candidates; if these third parties do not perform satisfactorily or comply with regulatory requirements, our product development activities may be delayed, prevented or impaired and our business could be substantially harmed;

5

for our products and product candidates that have been licensed or acquired from other parties, if those parties did not adequately protect and we are unable to adequately protect such products and product candidates, or to secure and maintain freedom to operate, others could preclude us from commercializing such products and product candidates, if approved, or compete against us more directly;
if the scope of our patent protection is not sufficiently broad or the terms of our patents are insufficient to protect our products and product candidates for an adequate amount of time, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be materially impaired;
we face significant competition from other biotechnology and pharmaceutical companies, which may result in others discovering, developing or commercializing drugs before or more successfully than us;
we may not successfully execute our growth strategy to identify, discover, develop, license or acquire additional product candidates or technologies, our strategy may not deliver anticipated results or we may refine or otherwise alter our growth strategy;
we may seek to acquire businesses or undertake business combinations, collaborations or other strategic transactions which may not be successful or on favorable terms, if at all, and we may not realize the intended benefits of such transactions;
we have entered into and may seek to enter into collaboration, licensing or other strategic transactions or arrangements to further develop, commercialize or otherwise attempt to realize value from one or more of our products and product candidates; such arrangements or transactions may not be successful or on favorable terms, which could adversely affect our ability to develop, commercialize or attempt to realize value from our products and product candidates; and
concentration of ownership of the voting power of our common shares, including our Class B common shares, and conversion rights of the holders of our Class A1 and Class B1 common shares, which are held primarily by entities affiliated with certain of our directors, may prevent new investors from influencing significant corporate decisions and may have an adverse effect on the price of our Class A common shares.

Industry and other data

Unless otherwise indicated, certain industry data and market data included in this Quarterly Report were obtained from independent third party surveys, market research, publicly available information, reports of governmental agencies and industry publications and surveys. All of the market data used in this Quarterly Report involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We believe that the information from these industry publications and surveys included in this Quarterly Report is reliable.

ARCALYST is a registered trademark of Regeneron. Solely for convenience, trademarks, service marks, and trade names referred to in this Quarterly Report may be listed without identifying symbols.

6

Part I — Financial Information

Item 1. Financial Statements (unaudited)

KINIKSA PHARMACEUTICALS, LTD.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

March 31, 

December 31, 

    

2024

    

2023

Assets

 

  

 

  

Current assets:

 

 

  

Cash and cash equivalents

$

141,078

$

107,954

Short-term investments

72,474

98,417

Accounts receivable, net

15,995

21,266

Inventory

27,278

31,122

Prepaid expenses and other current assets

 

13,766

 

17,538

Total current assets

 

270,591

 

276,297

Property and equipment, net

 

712

 

734

Operating lease right-of-use assets

12,324

11,931

Other long-term assets

4,128

827

Intangible asset, net

17,000

17,250

Deferred tax assets

214,918

219,283

Total assets

$

519,673

$

526,322

Liabilities and Shareholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

5,632

$

8,246

Accrued expenses

 

44,718

 

44,667

Deferred revenue

156

307

Operating lease liabilities

2,279

2,253

Other current liabilities

11,427

8,193

Total current liabilities

 

64,212

 

63,666

Non-current liabilities:

 

  

 

  

Non-current deferred revenue

11,811

11,954

Non-current operating lease liabilities

9,864

10,005

Other long-term liabilities

 

1,891

1,858

Total liabilities

 

87,778

 

87,483

Commitments and contingencies (Note 13)

 

  

 

  

Shareholders’ equity:

 

 

Class A common shares, par value of $0.000273235 per share; 40,184,356 shares and 35,781,373 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

11

 

10

Class B common shares, par value of $0.000273235 per share; 1,795,158 shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

1

 

1

Class A1 common shares, $0.000273235 par value; 12,781,964 and 16,826,468 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

4

 

5

Class B1 common shares, $0.000273235 par value; 16,057,618 shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

4

 

4

Additional paid-in capital

 

927,582

 

916,763

Accumulated other comprehensive income (loss)

(53)

6

Accumulated deficit

 

(495,654)

 

(477,950)

Total shareholders’ equity

 

431,895

 

438,839

Total liabilities and shareholders’ equity

$

519,673

$

526,322

The accompanying notes are an integral part of these consolidated financial statements.

7

KINIKSA PHARMACEUTICALS, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

March 31, 

    

2024

    

2023

Revenue:

Product revenue, net

$

78,885

$

42,659

License and collaboration revenue

973

5,686

Total revenue

79,858

48,345

Costs and operating expenses:

    

  

Cost of goods sold

10,583

7,036

Collaboration expenses

20,801

8,288

Research and development

26,334

15,172

Selling, general and administrative

 

38,682

29,045

Total operating expenses

 

96,400

 

59,541

Loss from operations

 

(16,542)

 

(11,196)

Other income

 

2,266

1,832

Loss before income taxes

 

(14,276)

 

(9,364)

Provision for income taxes

 

(3,428)

(2,906)

Net loss

$

(17,704)

$

(12,270)

Net loss per share attributable to common shareholders—basic and diluted

$

(0.25)

$

(0.18)

Weighted average common shares outstanding—basic and diluted

 

70,633,023

69,751,697

Comprehensive loss:

Net loss

$

(17,704)

$

(12,270)

Other comprehensive income (loss):

Unrealized gain (loss) on short-term investments and currency translation adjustments, net of tax

(59)

11

Total other comprehensive income (loss)

(59)

11

Total comprehensive loss

$

(17,763)

$

(12,259)

The accompanying notes are an integral part of these consolidated financial statements.

8

KINIKSA PHARMACEUTICALS, LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

Common Shares

Additional

Accumulated

Total

(Class A, B, A1 and B1)

Paid-In

Other Comprehensive

Accumulated

Shareholders'

  

 

Shares

  

Amount

  

Capital

  

Loss

  

Deficit

  

Equity

Balances at December 31, 2023

 

70,460,617

$

20

$

916,763

$

6

$

(477,950)

$

438,839

Issuance of Class A common shares under incentive award plans

358,479

3,613

3,613

Share-based compensation expense

7,206

7,206

Unrealized loss on short-term investments and currency translation adjustments

(59)

(59)

Net loss

(17,704)

(17,704)

Balances at March 31, 2024

70,819,096

$

20

$

927,582

$

(53)

$

(495,654)

$

431,895

Common Shares

Additional

Accumulated

Total

(Class A, B, A1 and B1)

Paid-In

Other Comprehensive

Accumulated

Shareholders'

  

 

Shares

  

Amount

  

Capital

  

Income

  

Deficit

  

Equity

Balances at December 31, 2022

 

69,697,503

$

19

$

888,120

$

44

$

(492,034)

$

396,149

Issuance of Class A common shares under incentive award plans

 

 

135,576

90

 

90

Share-based compensation expense

 

 

6,115

 

6,115

Unrealized gain on short-term investments and currency translation adjustments

 

 

11

 

11

Net loss

 

 

(12,270)

 

(12,270)

Balances at March 31, 2023

69,833,079

$

19

$

894,325

$

55

$

(504,304)

$

390,095

The accompanying notes are an integral part of these consolidated financial statements.

9

KINIKSA PHARMACEUTICALS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended

March 31, 

    

2024

2023

Cash flows from operating activities:

 

  

Net loss

$

(17,704)

$

(12,270)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

Depreciation and amortization expense

 

466

 

596

Share-based compensation expense

 

7,206

 

6,115

Non-cash lease expense

 

779

 

841

Amortization of premiums and accretion of discounts on short-term investments

297

(1,061)

Loss on disposal of property and equipment

 

 

175

Deferred income taxes

4,365

1,077

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other current assets

 

3,750

 

(2,634)

Accounts receivable, net

5,271

5,236

Inventory

3,844

(1,826)

Contract asset

7,656

Other long-term assets

(3,362)

3,268

Accounts payable

 

(2,662)

 

(6,508)

Accrued expenses and other current liabilities

 

3,285

 

(10,647)

Operating lease liabilities

(1,287)

(988)

Deferred revenue

(294)

6,658

Other long-term liabilities

 

33

45

Net cash provided by (used in) operating activities

 

3,987

 

(4,267)

Cash flows from investing activities:

 

  

 

Purchases of property and equipment

 

(84)

 

(24)

Purchases of short-term investments

(36,276)

(52,896)

Proceeds from the maturities of short-term investments

61,884

15,000

Net cash provided by (used in) investing activities

 

25,524

 

(37,920)

Cash flows from financing activities:

 

  

 

Proceeds from issuance of Class A common shares under incentive award plans and employee share purchase plan

 

3,994

510

Payments in connection with Common Stock tendered for employee tax obligations

(381)

(420)

Net cash provided by financing activities

 

3,613

 

90

Net increase (decrease) in cash and cash equivalents

 

33,124

 

(42,097)

Cash and cash equivalents at beginning of period

 

107,954

122,715

Cash and cash equivalents at end of period

$

141,078

$

80,618

Supplemental information:

Cash paid for income taxes

$

$

3,196

Supplemental disclosure of non-cash investing and financing activities:

Change in right-of-use asset as a result of new, modified, and terminated leases

$

1,172

$

684

Additions to property and equipment included in accounts payable and accrued expenses and other liabilities

102

The accompanying notes are an integral part of these consolidated financial statements.

10

1.           Nature of the Business and Basis of Presentation

Kiniksa Pharmaceuticals, Ltd. (the “Company”) is a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need. The Company’s portfolio of immune-modulating assets is based on strong biologic rationale or validated mechanisms, targets a spectrum of underserved cardiovascular and autoimmune conditions and offers the potential for differentiation.

The Company is subject to risks and uncertainties common to commercial-stage companies in the biopharmaceutical industry and global health, societal, economic and market conditions, including the Company’s dependence on third parties, including contract research organizations and contract manufacturing organizations, the Company’s limited experience obtaining regulatory approvals, the potential failure of the Company to successfully complete research and development of its current or future product candidates, the potential inability of the Company to adequately protect its technology, potential competition, the uncertainty that any current or future product candidates will obtain necessary government regulatory approval, that ARCALYST will continue to be commercially viable and whether any of the Company’s current or future product candidates, if approved, will be commercially viable. Such risks and uncertainties may be subject to substantial and uncertain changes, which may cause significant disruption to the Company’s business and operations, preclinical studies and clinical trials, the business and operations of the third parties with whom the Company conducts business and the national and global economies, all of which may have material impacts on the Company’s business, financial condition and results of operations.

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, Kiniksa Pharmaceuticals Corp. (“Kiniksa US”), Primatope Therapeutics, Inc. (“Primatope”) and Kiniksa Pharmaceuticals (UK), Ltd. (“Kiniksa UK”) as well as the subsidiaries of Kiniksa UK, Kiniksa Pharmaceuticals (Germany) GmbH (“Kiniksa Germany”), Kiniksa Pharmaceuticals (France) SARL (“Kiniksa France”), and Kiniksa Pharmaceuticals GmbH (“Kiniksa Switzerland”), after elimination of all significant intercompany accounts and transactions. Where the Kiniksa Pharmaceuticals, Ltd. entity is referred to in its single, unconsolidated form, it is referred to as “Kiniksa Bermuda”.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the recognition of revenue, the accrual for research and development expenses, and the valuation of our deferred tax assets. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Unaudited Interim Consolidated Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information. The accompanying unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The Company’s accounting policies are described in the Notes to Consolidated Financial Statements included in the Company’s 2023 Form 10-K and updated, as necessary, in this report. The accompanying year-end consolidated balance sheet was derived from audited financial statements but does not

11

include all disclosures required by GAAP. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations for the three months ended March 31, 2024 and 2023, the changes in its shareholders’ equity for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods or any future year or period.

Liquidity

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. As of March 31, 2024, the Company had an accumulated deficit of $495,654. During the three months ended March 31, 2024, the Company reported a net loss of $17,704 and had provided $3,987 cash from operating activities. As of March 31, 2024, the Company had cash, cash equivalents and short-term investments of $213,552. Based on its current operating plan, the Company expects that its cash, cash equivalents and short-term investments will be sufficient to fund its operations and capital expenditure requirements for at least twelve months from the issuance date of these consolidated financial statements.

Summary of Significant Accounting Policies

Inventory

Inventories are stated at the lower of cost or estimated net realizable value with cost based on the first-in first-out method. The Company classifies inventory as long-term when the inventory is expected to be utilized beyond the Company’s normal operating cycle and includes such amounts in other long-term assets in our consolidated balance sheets. Prior to the regulatory approval of its drug candidates, the Company incurs expenses for the manufacture of product candidate supplies to support clinical development that could potentially be available to support the commercial launch of those therapeutics. Until the date at which regulatory approval has been received or is otherwise considered probable, the Company records all such costs as research and development expenses. The Company performs an assessment of the recoverability of capitalized inventories during each reporting period and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of sales in the Company’s consolidated statements of operations and comprehensive income (loss). The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional writedown of inventory may be required.

Finished goods that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified and labeled for use in clinical trials as the products are required to be re-labeled for alternative uses. The finished goods inventory that will ultimately be distributed free of charge under our patient assistance program are recognized as selling expense when they are labeled as free goods.

The Company is conducting a technology transfer of ARCALYST drug substance manufacturing from Regeneron Pharmaceuticals, Inc. (“Regeneron”) to a new contract development and manufacturing organization (“CDMO”). Costs associated with the establishment of ARCALYST production at a new manufacturing site that do not meet the criteria for research and development or capitalization into inventory, including raw materials consumed, are included in cost of goods sold in the period incurred. During the three months ended March 31, 2024 the Company incurred $2,126 of expense related to the technology transfer of ARCALYST drug substance manufacturing in cost of goods sold. No expenses were incurred in the three months ended March 31, 2023.

There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2023 Form 10-K.

12

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The amendments require disclosure of incremental segment information on an annual and interim basis. The amendments also require companies with a single reportable segment to provide all disclosures required by this amendment and all existing segment disclosures in Accounting Standards Codification 280, Segment Reporting. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company does not expect the adoption of the amendments to have a material impact on its financial statements.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures. The amendments require (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of the amendments to have a material impact on its financial statements.

2.           Fair Value of Financial Assets and Liabilities

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables present information about the Company’s financial instruments measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:

Fair Value Measurements

as of March 31, 2024 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents — money market funds

$

114,419

$

$

$

114,419

Cash equivalents — U.S. Treasury notes

6,358

6,358

Short-term investments — U.S. Treasury notes

72,474

72,474

$

114,419

$

78,832

$

$

193,251

Fair Value Measurements

as of December 31, 2023 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents — money market funds

$

43,554

$

$

$

43,554

Cash equivalents — U.S. Treasury notes

1,995

1,995

Short-term investments — U.S. Treasury notes

98,417

98,417

$

43,554

$

100,412

$

$

143,966

13

During the three months ended March 31, 2024 and the year ended December 31, 2023, there were no transfers between Level 1, Level 2 and Level 3. The money market funds were valued using quoted prices in active markets, which represent a Level 1 measurement in the fair value hierarchy. The Company’s cash equivalents and short-term investments as of March 31, 2024 and December 31, 2023 included U.S. Treasury notes, which are not traded on a daily basis and, therefore, represent a Level 2 measurement in the fair value hierarchy at each period end.

Gross

Gross

Amortized

Unrealized

Unrealized

Credit

Fair

Cost

Gains

Losses

Losses

Value

March 31, 2024

Cash equivalents — U.S. Treasury notes

$

6,358

$

$

$

$

6,358

Short-term investments — U.S. Treasury notes

72,482

1

(9)

72,474

$

78,840

$

1

$

(9)

$

$

78,832

Gross

Gross

Amortized

Unrealized

Unrealized

Credit

Fair

Cost

Gains

Losses

Losses

Value

December 31, 2023

Cash equivalents — U.S. Treasury notes

$

1,995

$

$

$

$

1,995

Short-term investments — U.S. Treasury notes

98,387

30

98,417

$

100,382

$

30

$

$

$

100,412

As of March 31, 2024, we consider the unrealized losses in our investment portfolio to be temporary in nature and not due to credit losses. We have the ability to hold such investments until recovery of the fair value. We utilize the specific identification method in computing realized gains and losses. We had no realized gains and losses on our available-for-sale securities for the three and three months ended March 31, 2024 or 2023.

3.           Product Revenue, Net

Product revenue, net, from sales of ARCALYST was as follows:

Three Months Ended

March 31, 

2024

2023

Product revenue, net

$

78,885

$

42,659

14

The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2024:

Contractual

Government

Adjustments

Rebates

Returns

Total

Balance at December 31, 2023

$

2,022

$

3,775

$

341

$

6,138

Current provisions relating to sales in the current year

7,319

3,916

258

11,493

Adjustments relating to prior years

(5)

836

831

Payments/returns relating to sales in the current year

(5,034)

(887)

(5,921)

Payments/returns relating to sales in the prior years

(1,957)

(1,475)

(3,432)

Balance at March 31, 2024

$

2,350

$

5,324

$

1,435

$

9,109

Total revenue-related reserves as of March 31, 2024 and December 31, 2023, included in our consolidated balance sheets, are summarized as follows:

March 31, 

December 31,

2024

2023

Components of accounts receivable

$

(411)

$

(459)

Components of other current liabilities

9,520

6,597

Total revenue-related reserves

$

9,109

$

6,138

Primarily all of the Company’s trade accounts receivable arise from product revenue in the United States due from the Company’s third party logistics provider.

4.           Inventory

Inventory consisted of the following:

March 31, 

December 31,

    

2024

    

2023

Raw materials

$

2,052

$

Semi-finished goods

 

8,721

 

18,258

Finished goods

17,531

12,864

Total inventory

$

28,304

$

31,122

Balance Sheet Classification:

Inventory

$

27,278

$

31,122

Other long-term assets

 

1,026

 

Total inventory

$

28,304

$

31,122

15

5.           Property and Equipment, Net

Property and equipment, net consisted of the following:

March 31, 

December 31, 

    

2024

    

2023

Furniture, fixtures and vehicles

$

224

$

224

Computer hardware and software

 

379

 

379

Leasehold improvements

3,931

3,931

Lab equipment

4,074

3,972

Construction in progress

 

43

 

13

Total property and equipment

8,651

8,519

Less: Accumulated depreciation

 

(7,939)

 

(7,785)

Total property and equipment, net

$

712

$

734

Depreciation expense was $154 and $289 during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, $116 and $122, respectively, of our property and equipment, net was in the United Kingdom.

6.           Intangible Assets

Intangible assets, net of accumulated amortization as of March 31, 2024 and December 31, 2023 are summarized in the following table.

As of March 31, 2024

As of December 31, 2023

Estimated

Accumulated

Accumulated

    

life

    

Cost

    

Amortization

    

Net

Cost

    

Amortization

    

Net

Regulatory milestone

20 years

$

20,000

$

3,000

$

17,000

$

20,000

$

2,750

$

17,250

7.           Accrued Expenses

Accrued expenses consisted of the following:

March 31, 

December 31, 

    

2024

    

2023

Accrued research and development expenses

$

11,028

$

7,895

Accrued employee compensation and benefits

7,317

15,954

Accrued collaboration expenses

20,123

16,939

Accrued legal, commercial and professional fees

 

5,840

 

3,553

Other

 

410

 

326

$

44,718

$

44,667

8.           Share-Based Compensation

The Company maintains several equity compensation plans, including the 2018 Incentive Award Plan (the “2018 Plan”), 2018 Employee Share Purchase Plan (the “2018 ESPP”), and Rilonacept Long-Term Incentive Plan (“RLTIP”) which was approved under the 2018 Plan. Upon the effectiveness of the 2018 Plan, the Company ceased granting awards under its 2015 Equity Incentive Plan (as amended, the “2015 Plan” and together with the 2018 Plan, the “Plans”).

16

2015 Plan

As of March 31, 2024, there were 1,814,958 Class A common shares subject to outstanding awards under the 2015 Plan and reserved for issuance thereunder pursuant to such awards.

2018 Plan

The 2018 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted shares, dividend equivalents, restricted share units (“RSUs”) and other share- or cash- based awards. Pursuant to the 2018 Plan’s evergreen provision, the number of shares available for future issuance under the 2018 Plan, as of January 1, 2024, increased by 2,818,425 Class A common shares. As of March 31, 2024, 4,207,733 shares remained available for future grant under the 2018 Plan.

2018 ESPP

In December 2023, the Company’s board of directors approved an increase, as of January 1, 2024, of 215,000 Class A common shares under the 2018 ESPP. As of March 31, 2024, 702,707 Class A common shares were available for future issuance under the 2018 ESPP.

Options

Share option activity under the Plans is summarized as follows:

Weighted

Number of

Average

Shares

Exercise Price

Outstanding as of December 31, 2023

 

11,599,089

$

13.67

Granted

 

26,750

$

18.73

Exercised

 

(282,269)

$

12.38

Forfeited

 

(104,605)

$

14.21

Outstanding as of March 31, 2024

 

11,238,965

$

13.71

Share options exercisable as of March 31, 2024

 

7,489,111

$

13.67

Share options unvested as of March 31, 2024

 

3,749,854

$

13.71

As of March 31, 2024, total unrecognized compensation expense related to the unvested share option awards was $30,915 which is expected to be recognized over a weighted average remaining period of 2.42 years.

Restricted Share Units

The Company grants RSUs with service conditions (“Time-Based RSUs”) to eligible employees as part of its equity incentive compensation. The Time-Based RSUs vest 25% on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates.

During the years ended December 31, 2020 and 2019, the Company granted the first RSU awards (“First RLTIP RSU Awards”) as part of the RLTIP to eligible employees. During the year ended December 31, 2021, the FDA Milestone (as defined in RLTIP) was achieved (the date of such achievement, the “Achievement Date”) and (1) the number of Class A common shares issuable under the First RLTIP RSU Awards were determined in accordance with the RLTIP and vested in one installment in March 2022, and (2) the Company granted a second set of RSU awards to eligible employees on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, which vested in one installment in March 2023.

During the three months ended March 31, 2024 and 2023, the Company recognized compensation expense of $2,284 and $1,529, respectively, related to RSUs including those granted in connection with the RLTIP.

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The following table summarizes RSU activity, including the RSUs issued under the RLTIP for the three months ended March 31, 2024:

Weighted

Average

Number of

Grant Date

Shares

Fair Value

Unvested RSUs as of December 31, 2023

2,396,888

$

14.00

Granted

41,410

$

18.59

Vested

(55,014)

$

18.57

Forfeited

(122,026)

$

14.12

Unvested RSUs as of March 31, 2024

2,261,258

$

13.96

As of March 31, 2024, total unrecognized compensation cost related to the RSU awards was $25,376 which is expected to be recognized over a weighted average remaining period of 2.73 years.

Share-Based Compensation

Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:

Three Months Ended

March 31, 

    

2024

    

2023

Cost of goods sold

$

359

$

286

Research and development expenses

1,453

1,444

Selling, general and administrative expenses

 

5,394

 

4,385

$

7,206

$

6,115

9.            Out-Licensing Agreements

Genentech License Agreement

The Company entered into a license agreement (the “Genentech License Agreement”) with Genentech, Inc. and F. Hoffmann-La Roche Ltd (collectively, “Genentech”), effective in September 2022, pursuant to which the Company granted Genentech exclusive worldwide rights to develop, manufacture and commercialize vixarelimab and related antibodies (each, a “Genentech Licensed Product”).

Under the Genentech License Agreement, the Company received an upfront payment of $80,000 for the license. During the year ended December 31, 2023, the Company received cash payments of $20,000 following delivery of certain drug supplies to Genentech and $15,000 following Genentech’s achievement of a development milestone related to a new indication under the Genentech License Agreement. In the fourth quarter of 2023, following the achievement of a development milestone related to a second indication under the Genentech License Agreement, Genentech became obligated to make an additional cash payment of $10,000 which the Company received in the first quarter of 2024. Under the terms of the Genentech License Agreement, the Company is eligible to receive a total of approximately $600,000 in contingent payments, including specified development, regulatory and sales-based milestones, before fulfilling the Company’s upstream financial obligations, of which approximately $575,000 remain as of March 31, 2024. The Company will also be eligible to receive tiered percentage royalties on a Genentech Licensed Product-by-Genentech Licensed Product basis ranging from low-double digits to mid-teens on annual net sales of each Genentech Licensed Product, subject to certain customary reductions, with an aggregate minimum floor, before fulfilling the Company’s upstream financial obligations. Royalties will be payable on a Genentech Licensed Product-by-Genentech Licensed Product and country-by-country basis until the latest to occur of the expiration of certain patents that cover a Genentech

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Licensed Product, the expiration of regulatory exclusivity for such Genentech Licensed Product, or the tenth anniversary of first commercial sale of such Genentech Licensed Product in such country.

Pursuant and subject to the terms of the Genentech License Agreement, Genentech has the exclusive worldwide right to conduct development and commercialization activities for Genentech Licensed Products at its sole cost. Notwithstanding the foregoing, the Company is responsible, at its sole cost, for finalizing its Phase 2b clinical trial assessing the efficacy, safety and tolerability of vixarelimab in reducing pruritis in prurigo nodularis. Both the Company and Genentech participate in a joint transition committee, which coordinates and oversees the Company’s finalization of its Phase 2b clinical trial.

Accounting for the Genentech License Agreement

As of the Genentech Effective Date, the Company identified the following performance obligations in the Genentech License Agreement: (i) the delivery of the exclusive license for vixarelimab; (ii) an initial drug supply delivery; (iii) a drug product resupply delivery; and (iv) completion of the Phase 2b clinical trial for vixarelimab.

The Company determined the transaction price of the Genentech License Agreement consisted of the $80,000 upfront payment and the $20,000 variable consideration related to the delivery of the initial drug supply and drug product resupply which was added to the transaction price in 2022. In 2023, the Company added $25,000 to the transaction price following Genentech’s achievement of two development milestones under the Genentech License Agreement.

As noted above, the Company identified four performance obligations in the Genentech License Agreement: (i) the delivery of the exclusive license for vixarelimab; (ii) an initial drug supply delivery; (iii) a drug product resupply delivery; and (iv) completion of the Phase 2b clinical trial for vixarelimab. The selling price of each performance obligation in the Genentech License Agreement was determined based on the Company’s standalone selling price with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. The Company allocated the transaction price to each of the four performance obligations noted above.

Performance Obligation

Method of Recognition

Exclusive license for vixarelimab

Point in time; upon transfer of the license to Genentech, as control of the license was transferred on the Genentech Effective Date and Genentech could begin to use and benefit from the license on that date.

Initial drug supply delivery

Point in time upon delivery.

Drug product resupply delivery

Point in time upon delivery.

Completion of the phase 2b clinical trial for vixarelimab

Over time; using the cost-to-cost input method, which is believed to best depict the transfer of control to the customer. Under the cost-to-cost input method, the percent of completion is based on the ratio of actual costs incurred as of the period end to the total estimated costs. Revenue is recorded as a percentage of the allocated transaction price times the percent of completion.

The Company recognized $105 of collaboration revenue under the Genentech License Agreement during the three months ended March 31, 2024 related to the completed portion of the Phase 2b clinical trial for vixarelimab. The Company recognized $5,686 of collaboration revenue during three months ended March 31, 2023 under the Genentech License Agreement related to the license, completed portion of the Phase 2b clinical trial for vixarelimab, and materials delivered. The Company expects to recognize the remaining deferred revenue associated with the Genentech License Agreement over the remaining portion of the Phase 2b clinical trial for vixarelimab.

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Huadong Collaboration Agreements

In February 2022 (the “Effective Date”), the Company entered into two collaboration and license agreements (each, a “Huadong Collaboration Agreement” and together, the “Huadong Collaboration Agreements”) with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”), pursuant to which the Company granted Huadong exclusive rights to develop and commercialize rilonacept and develop, manufacture and commercialize mavrilimumab (each, a “Huadong Licensed Product” and together, the “Huadong Licensed Products”) in the following countries: People’s Republic of China, Hong Kong SAR, Macao SAR, Taiwan Region, South Korea, Indonesia, Singapore, The Philippines, Thailand, Australia, Bangladesh, Bhutan, Brunei, Burma, Cambodia, India, Laos, Malaysia, Maldives, Mongolia, Nepal, New Zealand, Sri Lanka, and Vietnam (collectively, the “Huadong Territory”). The Company otherwise retained its current rights to the Huadong Licensed Products outside the Huadong Territory.

Under the Huadong Collaboration Agreements, the Company received a total upfront cash payment of $22,000, which includes $12,000 for the Huadong Territory license of rilonacept and $10,000 for the Huadong Territory license of mavrilimumab. The Company will be eligible to receive up to approximately $70,000 in payments for rilonacept, and up to approximately $576,000 in payments for mavrilimumab, including specified development, regulatory and sales-based milestones. Huadong will also be obligated to pay the Company tiered percentage royalties on a Huadong Licensed Product-by-Huadong Licensed Product basis ranging from the low-teens to low-twenties on annual net sales of each Huadong Licensed Product in the Huadong Territory, subject to certain reductions tied to rilonacept manufacturing costs and certain other customary reductions, with an aggregate minimum floor. Royalties will be payable on a Huadong Licensed Product-by-Huadong Licensed Product and country-by-country or region-by-region basis until the later of (i) 12 years after the first commercial sale of the applicable Huadong Licensed Product in such country or region in the Huadong Territory, (ii) the date of expiration of the last valid patent claim of the Company’s patent rights or any joint collaboration patent rights that covers the applicable Huadong Licensed Product in such country or region in the Huadong Territory, and (iii) the expiration of the last regulatory exclusivity for the applicable Huadong Licensed Product in such country or region in the Huadong Territory.

The Company concluded that the Huadong Collaboration Agreements should not be combined and treated as a single arrangement for accounting purposes as the Huadong Collaboration Agreements were negotiated separately with separate and distinct commercial objectives, the amount of consideration in one Huadong Collaboration Agreement is not dependent on the price or performance of the other Huadong Collaboration Agreement, and the goods and services promised in the Huadong Collaboration Agreements are not a single performance obligation.

Accounting for the Mavrilimumab Huadong Collaboration Agreement

As of the Effective Date, the Company identified the following performance obligations in the mavrilimumab Huadong Collaboration Agreement: delivery of (i) exclusive license for mavrilimumab in the Huadong Territory and (ii) clinical manufacturing supply of certain materials for mavrilimumab products in the Huadong Territory.

The Company determined the transaction price at the inception of the mavrilimumab Huadong Collaboration Agreement which includes $10,000, consisting of the upfront payment. The Company also includes an estimate of variable consideration associated with the clinical manufacturing supply of certain materials when those materials are shipped. The Company determined that any variable consideration related to development and regulatory milestones is deemed fully constrained and therefore excluded from the transaction price due to the high degree of uncertainty and risk associated with these potential payments, as the Company determined that it could not assert that it was probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company also determined that royalties and sales milestones relate solely to the licenses of intellectual property. Revenue related to these royalties and sales milestones will only be recognized when the associated sales occur, and relevant thresholds are met, under the sales or usage-based royalty exception of Topic 606.

The Company recognizes revenue for the license performance obligations at a point in time, that is upon transfer of the license to Huadong. As control of the license was transferred on the Effective Date and Huadong could begin to use and benefit from the license, the Company recognized $10,000 of collaboration revenue during the year ended December 31, 2022 under the mavrilimumab Huadong Collaboration Agreement. The Company will recognize

20

revenue for the clinical manufacturing supply obligations at a point in time, that is upon each delivery of the supply to Huadong.

Accounting for the Rilonacept Huadong Collaboration Agreement

As of the Effective Date, the Company identified one performance obligation in the rilonacept Huadong Collaboration Agreement: the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory. Huadong cannot exploit the value of the exclusive license for rilonacept products in the Huadong Territory without receipt of supply as the exclusive license for rilonacept products in the Huadong Territory does not convey to Huadong the right to manufacture and therefore the Company has combined the exclusive license for rilonacept products in the Huadong Territory and the manufacturing obligations into one performance obligation.

The Company determined the transaction price at the inception of the rilonacept Huadong Collaboration Agreement which includes $12,000, consisting of the upfront payment. The Company also includes an estimate of variable consideration associated with the clinical and commercial manufacturing supply of certain materials when those materials are shipped. The Company determined that any variable consideration related to development and regulatory milestones, sales milestones and royalties are deemed fully constrained and therefore excluded from the transaction price due to the high degree of uncertainty and risk associated with these potential payments, as the Company determined that it could not assert that it was probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Royalties and sales milestones will be recognized as the Company delivers the commercial manufactured product to Huadong. Any changes in estimates may result in a cumulative catch-up based on the number of units of manufactured product delivered.

The Company recognizes revenue for the single performance obligation in the rilonacept Huadong Collaboration Agreement consisting of the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory at a point in time, upon which control of materials are transferred to Huadong for each delivery of the associated materials. The Company currently expects to recognize the revenue over the life of the agreement. This estimate considers the timing of development and commercial activities under the rilonacept Huadong Collaboration Agreement and may be reduced or increased based on changes in the various activities.

The Company recognized $189 of the upfront payment in collaboration revenue during the three months ended March 31, 2024 under the rilonacept Huadong Collaboration Agreement related to materials delivered. The Company did not recognize any revenue from the $12,000 upfront payment under the rilonacept Huadong Collaboration Agreement during the three month ended March 31, 2023. As of March 31, 2024, $11,811 of the transaction price is recorded in non-current deferred revenue, based upon timing of anticipated future shipments.

The following table summarizes the Company’s contract assets and contract liabilities in connection with license and collaboration agreements for the three months ended March 31, 2024:

Balance at

Revenue

Balance at End

Beginning of Period

Additions

Recognized

Reclassification

of Period

Three Months Ended March 31, 2024

Contract Liabilities:

Genentech vixarelimab

$

261

$

$

(105)

$

$

156

Huadong rilonacept

12,000

(189)