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What changed in Kiniksa Pharmaceuticals International, plc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Kiniksa Pharmaceuticals International, plc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+893 added−1054 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-02)

Top changes in Kiniksa Pharmaceuticals International, plc's 2023 10-K

893 paragraphs added · 1054 removed · 680 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

220 edited+80 added−94 removed212 unchanged
Biggest changePursuant to such agreement, we have agreed to complete our in-progress Phase 2b dose-ranging clinical trial of vixarelimab for the treatment of prurigo nodularis, a chronic inflammatory skin condition. ​ 7 Table of Contents The following table summarizes our current pipeline of products and product candidates: (1) Approved in the U.S.; ARCALYST is also approved for cryopyrin-associated periodic syndromes (CAPS) and deficiency of the interleukin-1 receptor antagonist (DIRA); (2) The FDA granted Breakthrough Therapy designation to ARCALYST for recurrent pericarditis in 2019; the FDA granted Orphan Drug exclusivity to ARCALYST in March 2021 for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and pediatric patients 12 years and older.
Biggest changeWe previously evaluated mavrilimumab in giant cell arteritis (“GCA”), a chronic inflammatory disease of the medium-to-large arteries, and COVID-19-related acute respiratory distress syndrome (“ARDS”). ​ ​ 7 Table of Contents The following table summarizes our current products, product candidates and out-licensing arrangements: (1) Approved in the United States; ARCALYST is also approved for CAPS and DIRA; (2) The FDA granted Breakthrough Therapy designation to ARCALYST for recurrent pericarditis in 2019; the FDA granted Orphan Drug exclusivity to ARCALYST in March 2021 for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and pediatric patients 12 years and older; the European Commission granted Orphan Drug designation to ARCALYST for the treatment of idiopathic pericarditis in 2021; (3) Kiniksa has worldwide rights, excluding the Middle East and North Africa; Kiniksa granted Huadong exclusive rights in the Asia Pacific Region, excluding Japan; (4) Phase 2 clinical trials of mavrilimumab in rheumatoid arthritis and giant cell arteritis achieved their primary and secondary endpoints with statistical significance; Kiniksa granted Huadong Medicine exclusive rights in the Asia Pacific Region, excluding Japan.
Government Regulation of Biological Products In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and the Public Health Service Act (the “PHSA”) and their implementing regulations. Biologics are also subject to other federal, state and local statutes and regulations.
United States Government Regulation of Biological Products In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and the Public Health Service Act (the “PHSA”) and their implementing regulations. Biologics are also subject to other federal, state and local statutes and regulations.
After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR. Medicines used in clinical trials must be manufactured in accordance with cGMP. Other national and EU-wide regulatory requirements may also apply. Medicines used in clinical trials must be manufactured in accordance with cGMP.
After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR. Medicines used in clinical trials must be manufactured in accordance with cGMP. Other national and EU-wide regulatory requirements may also apply.
We provide our employees with competitive fixed salaries, cash bonus opportunities designed to incentivize achievement of our goals and individual objectives, equity awards and opportunities for equity ownership through our employee share purchase plan as well as a robust benefit package designed to promote well-being across different aspects of our employees’ lives, including comprehensive health insurance, dental and vision plans, life and other employment related insurance, retirement planning through a 401(k) plan with partial company match, and paid time off. ​ Diversity, Equity and Inclusion.
We provide our employees with competitive fixed salaries, cash bonus opportunities designed to incentivize achievement of our goals and individual objectives, equity awards and opportunities for equity ownership through our employee share purchase plan and a robust benefit package designed to promote well-being across different aspects of our employees’ lives, including comprehensive health insurance, dental and vision plans, life and other employment related insurance, retirement planning through a 401(k) plan with partial company match, and paid time off. ​ Diversity, Equity and Inclusion.
Additionally, in 2021, the European Commission granted Orphan Drug designation to ARCALYST for the treatment of idiopathic pericarditis. In June 2020, we reported final results from RHAPSODY, our global, double-blind, placebo-controlled, randomized-withdrawal design, pivotal Phase 3 clinical trial of ARCALYST in subjects with recurrent pericarditis.
Additionally, in 2021, the European Commission granted Orphan Drug designation to ARCALYST for the treatment of idiopathic pericarditis. In June 2020, we reported results from RHAPSODY, our global, double-blind, placebo-controlled, randomized-withdrawal design, pivotal Phase 3 clinical trial of ARCALYST in subjects with recurrent pericarditis.
Since March 2021, we have marketed ARCALYST, our only commercial product, in the United States for recurrent pericarditis, a debilitating disease, and have established our own specialty salesforce to expand our commercialization efforts nationwide. Our salesforce is complemented by our current medical affairs, payor and patient services teams.
Since March 2021, we have marketed ARCALYST, our only commercial product, in the United States for recurrent pericarditis, a debilitating disease, and have established our own specialty salesforce to expand our commercialization efforts nationwide. Our salesforce is complemented by our medical affairs, payor and patient services teams.
Orphan Drug designation must be requested before submitting a BLA. After the FDA grants Orphan Drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan Drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Orphan Drug designation must be requested by the sponsor before submitting a BLA. After the FDA grants Orphan Drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan Drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Moreover, analogous state and foreign laws and regulations may be broader in scope than the provisions described above and may apply regardless of payor. These laws and regulations may differ from one another in significant ways, thus further complicating compliance efforts.
Moreover, analogous foreign laws and regulations may be broader in scope than the provisions described above and may apply regardless of payor. These laws and regulations may differ from one another in significant ways, thus further complicating compliance efforts.
See “ Risk Factors—Risks Related to Intellectual Property—If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our technology and products, if the scope of the patent protection obtained is not sufficiently broad, or if the terms of our patents are insufficient to protect our 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 .” ​ In the future, if and when our drug candidates receive approval by the FDA or comparable regulatory authorities in other jurisdictions (as applicable, “regulatory authorities”), provided the legal requirements are met, we expect to apply for patent term extensions on issued patents covering those drugs, depending upon the length of the clinical trials for each drug and other factors.
See “ Risk Factors—Risks Related to Intellectual Property— If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our technology and products, if the scope of the patent protection obtained is not sufficiently broad, or if the terms of our patents are insufficient to protect our product candidates for an adequate amount of time, our competitors could develop and 24 Table of Contents commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be materially impaired .” In the future, if and when our drug candidates receive approval by the FDA or comparable regulatory authorities in other jurisdictions (as applicable, “regulatory authorities”), provided the legal requirements are met, we expect to apply for patent term extensions on issued patents covering those drugs, depending upon the length of the clinical trials for each drug and other factors.
In addition, the patent rights in licensed under the MedImmune Agreement relating to our program include patent applications that are pending in the United States, Australia, Europe, Canada, and selected countries in Asia and Latin America.
In addition, the patent rights in licensed under the MedImmune Agreement relating to our program include patent applications that are pending in the United States, Europe, Canada, and selected countries in Asia and Latin America.
The process required by the FDA before a biologic may be marketed in the United States generally involves the following: ● Completion of extensive preclinical studies and tests in accordance with applicable regulations, including Good Laboratory Practice (“GLP”), regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations; 24 Table of Contents ● Submission to FDA of an IND which must become effective before human clinical trials may begin; ● Approval by an independent institutional review board (an “IRB”), or ethics committee at each clinical trial site before each trial may be initiated; ● Performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, Good Clinical Practices (“GCPs”) and other clinical-trial related regulations to evaluate the safety and efficacy of the investigational product for each proposed indication; ● Submission to FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results of preclinical testing and clinical trials; ● A determination by FDA within 60 days of its receipt of a BLA to file the application for review; ● Satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic will be produced to assess compliance with cGMPs to assure that the facilities, methods and controls used in product manufacture are adequate to preserve the biologic’s identity, strength, quality and purity; ● Potential FDA audit of the preclinical or clinical trial sites that generated the data in support of the BLA; ● Payment of user fees for FDA review of the BLA; and ● FDA review and approval of the BLA, including satisfactory completion of an FDA advisory committee review, if applicable, prior to any commercial marketing or sale of the product in the United States.
The process required by the FDA before a biologic may be marketed in the United States generally involves the following: ● Completion of extensive preclinical studies and tests in accordance with applicable regulations, including Good Laboratory Practice (“GLP”), regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations; ● Submission to FDA of an investigational new drug application (an “IND”) which must become effective before human clinical trials may begin; ● Approval by an independent institutional review board (an “IRB”), or ethics committee at each clinical trial site before each trial may be initiated; ● Performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, Good Clinical Practices (“GCPs”) and other clinical trial related regulations to evaluate the safety and efficacy of the investigational product for each proposed indication; ● Submission to FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results of preclinical testing and clinical trials; ● A determination by FDA within 60 days of its receipt of a BLA to file the application for review; ● Satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic will be produced to assess compliance with cGMPs to assure that the facilities, methods and controls used in product manufacture are adequate to preserve the biologic’s identity, strength, quality and purity; 25 Table of Contents ● Potential FDA audit of the preclinical or clinical trial sites that generated the data in support of the BLA; ● Payment of user fees for FDA review of the BLA; and ● FDA review and approval of the BLA, including satisfactory completion of an FDA advisory committee review, if applicable, prior to any commercial marketing or sale of the product in the United States.
If business operations are found to be in violation of any of the laws described above or any other applicable governmental regulations a pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement of profits, individual imprisonment of executive officers and employees of such companies, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional 38 Table of Contents reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of operations, any of which could adversely affect a pharmaceutical manufacturer’s ability to operate its business and the results of its operations.
If business operations are found to be in violation of any of the laws described above or any other applicable governmental regulations a pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement of profits, individual imprisonment of executive officers and employees of such companies, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of operations, any of which could adversely affect a pharmaceutical manufacturer’s ability to operate its business and the results of its operations.
Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition.
Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition 34 Table of Contents authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition.
All existing EU MAs for centrally authorized products were automatically converted or grandfathered into UK MAs, effective in GB (only), free of charge on January 1, 2021, unless the MA holder chooses to opt-out. In order to use the centralized procedure to obtain a MA that will be valid throughout the EEA, companies must be established in the EEA.
All existing EU MAs for centrally authorized products were automatically converted or grandfathered into UK MAs, effective in GB (only), free of charge on January 1, 2021, unless the MA holder chose to opt-out. In order to use the centralized procedure to obtain a MA that will be valid throughout the EEA, companies must be established in the EEA.
ARCALYST was sold by Regeneron in the United States for the treatment of CAPS from 2008 and DIRA from 2020 until we assumed responsibility for sales in such indications in March 2021. Recurrent pericarditis is a painful autoinflammatory cardiovascular disease with an estimated U.S. prevalent population of approximately 40,000 patients seeking and receiving medical treatment.
ARCALYST was sold by Regeneron in the United States for the treatment of CAPS from 2008 and DIRA from 2020 until we assumed responsibility for sales in such indications in March 2021. Recurrent pericarditis is a painful autoinflammatory cardiovascular disease with an estimated United States prevalent population of approximately 40,000 patients seeking and receiving medical treatment.
When the patient was switched back to anakinra, which inhibits ILα and ILβ, the disease promptly went back into remission. These data, together with clinical data from our pivotal Phase 3 clinical trial of ARCALYST, indicate that IL-1α and IL-1β play unique roles in recurrent pericarditis and other autoinflammatory diseases in which the pathology may be driven primarily by IL-1α.
When the participant was switched back to anakinra, which inhibits ILα and ILβ, the disease promptly went back into remission. These data, together with clinical data from our pivotal Phase 3 clinical trial of ARCALYST, indicate that IL-1α and IL-1β play unique roles in recurrent pericarditis and other autoinflammatory diseases in which the pathology may be driven primarily by IL-1α.
Other potential consequences include, among other things: ● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ● fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; ● refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product approvals; ● product seizure or detention, or refusal to permit the import or export of products; 30 Table of Contents ● injunctions or the imposition of civil or criminal penalties; and ● consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.
Other potential consequences include, among other things: ● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ● fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; ● refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product approvals; ● product seizure or detention, or refusal to permit the import or export of products; ● injunctions or the imposition of civil or criminal penalties; and ● consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.
Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients.
Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when this data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients.
Human Capital ​ We aim to cultivate a highly-skilled and passionate team determined to strive to deliver transformative therapies to the patients who need them most.
Human Capital ​ We aim to cultivate a highly-skilled and passionate team determined to deliver transformative therapies to the patients who need them most.
Although we have built a development and manufacturing facility to produce drug substance to support certain research, preclinical and other clinical development for our product candidates, we rely, and expect to continue to rely, on third parties for the manufacture of our late-stage product candidates and certain of our early-stage product candidates for the majority of our clinical development efforts, as well as for the commercial manufacture of ARCALYST and our future products and product candidates, if approved.
Although we have built a development and manufacturing facility to produce drug substance to support certain research, preclinical and other clinical development for our product candidates, we rely, and expect to continue to rely, on third parties for the manufacture of our late-stage product candidates and certain of our early-stage product candidates for the majority of our clinical development efforts, as well as for the commercial manufacture of ARCALYST and our future products.
Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time consuming.
Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare professionals, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time consuming.
Where You Can Find More Information We are subject to the information requirements of the Securities Exchange Act of 1934, as amended. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically, such as ourselves, with the SEC at http://www.sec.gov .
Where You Can Find More Information We are subject to the information requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically, such as ourselves, with the SEC at http://www.sec.gov .
Patients (n = 52) were given the option at 18 months from their most recent pericarditis recurrence to continue or suspend rilonacept treatment for observation. There were 33 patients who elected to continue ARCALYST treatment, and the only recurrence in this group was associated with a treatment interruption of 4 weeks.
Participants (n = 52) were given the option at 18 months from their most recent pericarditis recurrence to continue or suspend rilonacept treatment for observation. There were 33 participants who elected to continue ARCALYST treatment, and the only recurrence in this group was associated with a treatment interruption of 4 weeks.
The United States government, state legislatures and governments outside the United States have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded drug and biologic products.
The United States government, state legislatures and governments outside the United States have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price-controls, restrictions on reimbursement and requirements for substitution of biosimilar products for branded drug and biologic products.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. In addition, our ability to compete may be affected in many cases by insurers or other third party payors seeking to encourage the use of biosimilar products.
If granted, the data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date on which the reference product was first authorized in the EU.
If granted, the data exclusivity period prevents biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a biosimilar MA in the EU during a period of eight years from the date on which the reference product was first authorized in the EU.
Both colchicine and corticosteroids often have deleterious effects when used at high doses or for long periods of time, including, for colchicine, gastrointestinal distress and neutropenia and, for corticosteroids, glaucoma, fluid retention, hypertension, mood changes, memory changes, other psychological effects, weight gain and diabetes.
Both colchicine and corticosteroids often have adverse effects when used at high doses or for long periods of time, including, for colchicine, gastrointestinal distress and neutropenia and, for corticosteroids, glaucoma, fluid retention, hypertension, mood changes, memory changes, other psychological effects, weight gain and diabetes.
Our reliance on third-parties to manufacture certain of our products and product candidates exposes us to risks, and any technology transfer of our products or product candidates may be subject to a number of risks and uncertainties, see “ Risk Factors – Risks Related to Manufacturing and Our Reliance on Third Parties. ” Commercial Operations Our commercial team combines dozens of years of pharmaceutical commercial leadership experience with a passion for helping patients with significant unmet need.
Our reliance on third parties to manufacture certain of our products and product candidates exposes us to risks, and any technology transfer of the manufacturing process for our products or product candidates may be subject to a number of risks and uncertainties, see “ Risk Factors – Risks Related to Manufacturing and Our Reliance on Third Parties. ” Commercial Operations Our commercial team combines dozens of years of pharmaceutical commercial leadership experience with a passion for helping patients with significant unmet medical need.
KPL-404 is an investigational monoclonal antibody inhibitor of CD40-CD154 interaction. In 2019, we acquired all of the outstanding securities of Primatope Therapeutics, Inc. (“Primatope”), the company that owned or controlled the intellectual property related to KPL-404. In connection with our acquisition of Primatope, we acquired an exclusive world-wide license to KPL-404 from Beth Israel Deaconess Medical Center, Inc. (“BIDMC”) .
Abiprubart (KPL-404) is an investigational monoclonal antibody inhibitor of CD40-CD154 costimulatory interaction. In 2019, we acquired all of the outstanding securities of Primatope Therapeutics, Inc. (“Primatope”), the company that owned or controlled the intellectual property related to abiprubart. In connection with our acquisition of Primatope, we acquired an exclusive world-wide license to abiprubart from Beth Israel Deaconess Medical Center, Inc.
Once the MA is obtained in all EU member states and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two-year extension of the orphan market exclusivity is granted.
Once the MA is obtained in all EU member states and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary extension of the basic patent protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two-year extension of the ten-year orphan market exclusivity is granted.
Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority. U.S.
Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.
The primary objective was to assess the safety and tolerability of KPL-404. Secondary endpoints included pharmacokinetics, CD40 RO, the immune response to the novel test antigen KLH in clinically relevant dose cohorts, and the anti-drug antibody response. In May 2021, we reported final results from this Phase 1 trial of KPL-404, which met both its primary objective and secondary endpoints.
The primary objective was to assess the safety and tolerability of abiprubart. Secondary endpoints included pharmacokinetics, CD40 RO, the immune response to the novel test antigen KLH in clinically relevant dose cohorts, and the anti-drug antibody response. In May 2021, we reported final results from this Phase 1 trial of abiprubart, which met both its primary objective and secondary endpoints.
ITEM 1. BUSINESS. Overview We are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need.
ITEM 1. BUSINESS. Overview We are 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 role of CD40 in B cells has been extensively characterized and has been shown to be essential for productive primary and secondary humoral immune responses to T dependent antigens. External clinical data that point to the broad potential power of the mechanism has been established in RA, systemic lupus erythematosus, primary Sjogren’s syndrome and Graves’ disease.
The role of CD40 in B cells has been extensively characterized and has been shown to be essential for productive primary and secondary humoral immune responses to T dependent antigens. External clinical data that point to the broad potential power of the mechanism has been established in RA, systemic lupus erythematosus, Primary Sjögren’s syndrome and Graves’ disease.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. If approved, sales of our product candidates will depend, in part, on the availability of coverage and adequate reimbursement from third-party payors.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. If approved, sales of our product candidates will depend, in part, on the availability of coverage and adequate 38 Table of Contents reimbursement from third party payors.
Drug and biologics intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.
In addition, a product candidate intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.
ARCALYST is also approved in the United States for the treatment of Cryopyrin-Associated Periodic Syndromes (“CAPS”) specifically Familial Cold Autoinflammatory Syndrome and Muckle-Wells Syndrome in adults and children 12 years and older, and the maintenance of remission in Deficiency of Interleukin-1 Receptor Antagonist (“DIRA”) in adults and children weighing 10 kg or more.
ARCALYST is also approved in the United States for the treatment of Cryopyrin-Associated Periodic Syndromes (“CAPS”), including Familial Cold Autoinflammatory Syndrome (“FCAS”) and Muckle-Wells Syndrome in adults and children 12 years and older, and the maintenance of remission in Deficiency of Interleukin-1 Receptor Antagonist (“DIRA”) in adults and children weighing 10 kg or more.
Phase 2 Trial in Rheumatoid Arthritis In December 2021, we commenced a Phase 2 clinical trial of KPL-404 in RA. The Phase 2 trial is a randomized, double-blind, placebo-controlled study designed to provide pharmacokinetic data and early signal of efficacy with chronic administration, and optionality to evaluate KPL-404 across a range of other autoimmune diseases.
Phase 2 Trial in Rheumatoid Arthritis In December 2021, we commenced a Phase 2 clinical trial of abiprubart in RA. The Phase 2 trial is a randomized, double-blind, placebo-controlled study designed to provide pharmacokinetic data and early signal of efficacy with chronic administration, and optionality to evaluate abiprubart across a range of other autoimmune diseases.
We also acquired non-exclusive licenses to other MedImmune technology for use in exploiting licensed products. We also acquired reference rights to relevant manufacturing and regulatory documents, and MedImmune’s existing inventory of mavrilimumab drug substance and product. We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products.
We also acquired 21 Table of Contents non-exclusive licenses to other MedImmune technology for use in exploiting licensed products. We also acquired reference rights to relevant manufacturing and regulatory documents, and MedImmune’s existing inventory of mavrilimumab drug substance and product. We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products.
See “ Risk Factors—Risks Related to Competition, Executing our Strategy and Managing Growth—We face 21 Table of Contents substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do .” We are aware of the following products currently marketed or in clinical development for the treatment of the diseases that we are initially targeting: ARCALYST Recurrent Pericarditis : We are not aware of any FDA-approved therapies for recurrent pericarditis, but we are aware of two programs being developed in this indication.
See “ Risk Factors—Risks Related to Competition, Executing our Strategy and Managing Growth—We face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do .” We are aware of the following products currently marketed or in clinical development for the treatment of the diseases that we are targeting or may plan to target: 17 Table of Contents ARCALYST Recurrent Pericarditis : We are not aware of any FDA-approved therapies for recurrent pericarditis, but we are aware of two programs being developed for this indication.
Patent term extension could extend the expiration date of one patent in the United States and patents in certain other jurisdictions, each in accordance with applicable law. ​ 23 Table of Contents Mavrilimumab ​ We have an exclusive license under the MedImmune Agreement to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to mavrilimumab.
Patent term extension could extend the expiration date of one patent in the United States and patents in certain other jurisdictions, each in accordance with applicable law. Mavrilimumab ​ We have an exclusive license under the MedImmune Agreement to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to mavrilimumab.
The FDA will attempt to direct additional resources to the evaluation of an application for a biologic designated for priority review in an effort to facilitate the review. The FDA endeavors to review original BLAs with priority review designations within six months of the filing date as compared to ten months under its standard review goals.
The FDA will attempt to direct additional resources to the evaluation of an application for a biologic designated for priority review in an effort to facilitate the review. The FDA endeavors to review original 29 Table of Contents BLAs with priority review designations within six months of the filing date as compared to ten months under its standard review goals.
The presentation of KPL-404 is as a high-concentration, liquid formulation, which we believe may allow for a higher delivered dose in one subcutaneous injection than all other competitors whose formulations are limited mainly to high dose IV or lower-dose subcutaneous administration.
The presentation of abiprubart is as a high-concentration liquid formulation, which we believe may allow for a higher delivered dose in one subcutaneous injection than all other competitors whose formulations are limited mainly to high dose IV or lower-dose subcutaneous administration.
Under the Biogen Agreement, Biogen has a time-limited right of first negotiation to purchase the assets we acquired from Biogen or obtain a license to exploit Biogen Antibody Products, in each case, in the event we decide to sell the Acquired Biogen Assets, including through the sale of our company, or out-license the rights to the Biogen Antibody Products.
Under the Biogen Agreement, Biogen has a time-limited right of first negotiation to purchase the assets we acquired from Biogen or obtain a license to exploit Biogen Antibody Products, in each case, in the event we decide to 22 Table of Contents sell the Acquired Biogen Assets, including through the sale of our company, or out-license the rights to the Biogen Antibody Products.
IL-1α Inhibition Alone : There are other therapies which modulate IL-1α in preclinical and clinical development for diseases other than recurrent pericarditis from Johnson & Johnson and XBIOTECH USA, INC. We are not aware of any active, industry sponsored development programs for these programs seeking a label for recurrent pericarditis.
We are not aware of any active, industry sponsored development programs using canakinumab seeking a label for recurrent pericarditis. IL-1α Inhibition Alone : There are therapies which modulate IL-1α in preclinical and clinical development for diseases other than recurrent pericarditis from Johnson & Johnson and XBIOTECH USA, INC.
Under the above-described procedures, in order to grant the MA, the competent authorities of the EU make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. MAs have an initial duration of five years.
Under the above-described procedures, in order to grant the MA, the competent authorities of the EU make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. 33 Table of Contents MAs have an initial duration of five years.
The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU.
The market exclusivity period prevents a successful biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU.
Rest of the World Regulation For other countries outside of the EU and the United States, such as countries in Eastern Europe, Latin America, Asia, or Japan, the requirements governing the conduct of clinical trials, product licensing, pricing and 36 Table of Contents reimbursement vary from jurisdiction to jurisdiction.
Rest of the World Regulation For other countries outside of the EU and the United States, such as countries in Eastern Europe, Latin America, Asia, or Japan, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from jurisdiction to jurisdiction.
We otherwise retain our current rights to the Huadong Licensed Products outside the Huadong Territory. Under the Huadong Collaboration Agreements, we received a total upfront cash payment of $22.0 million, which includes $12.0 million for the Huadong Territory license of ARCALYST and $10.0 million for the Huadong 16 Table of Contents Territory license of mavrilimumab.
We otherwise retain our current rights to the Huadong Licensed Products outside the Huadong Territory. Under the Huadong Collaboration Agreements, we received a total upfront cash payment of $22.0 million, which includes $12.0 million for the Huadong Territory license of ARCALYST and $10.0 million for the Huadong Territory license of mavrilimumab.
See “— License agreement with Regeneron ” above for additional information on our rights under the Regeneron Agreement. ​ KPL-404 ​ We own, via our acquisition of Primatope, granted patents and pending patent applications in the United States and numerous other jurisdictions relating to KPL-404.
See “— License Agreement with Regeneron ” above for additional information on our rights under the Regeneron Agreement. Abiprubart ​ We own, via our acquisition of Primatope, granted patents and pending patent applications in the United States and numerous other jurisdictions relating to abiprubart.
Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.
Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a risk evaluation and mitigation strategy (“REMS”), which can materially affect the potential market and profitability of the product.
We also have an exclusive license with BIDMC to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to KPL-404. These patents and patent applications cover KPL-404 as a composition of matter and its use.
We also have an exclusive license with BIDMC to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to abiprubart. These patents and patent applications cover abiprubart as a composition of matter and its use.
The holder of a MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance (a “QPPV”) who is responsible for the establishment and maintenance of that system and oversees the safety profiles of medicinal products and any emerging safety concerns.
The holder of a MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance (a “QPPV”) who is 35 Table of Contents responsible for the establishment and maintenance of that system and oversees the safety profiles of medicinal products and any emerging safety concerns.
This review typically takes twelve months from the date the BLA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision. The FDA does not always meet its PDUFA goal dates, and the review process may be extended by FDA requests for additional information or clarification.
This review typically takes twelve 27 Table of Contents months from the date the BLA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision. The FDA does not always meet its PDUFA goal dates, and the review process may be extended by FDA requests for additional information or clarification.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be 29 Table of Contents shortened.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
These patents and patent applications cover mavrilimumab as a composition of matter and its use. As of December 31, 2022, the patent rights in-licensed under the MedImmune Agreement relating to our program include three granted patents in the United States and 109 patents granted in other jurisdictions, including Canada, Australia and selected countries in Europe and Asia.
These patents and patent applications cover mavrilimumab as a composition of matter and its use. As of December 31, 2023, the patent rights in-licensed under the MedImmune Agreement relating to our program include three granted patents in the United States and 113 patents granted in other jurisdictions, including Canada, Australia and selected countries in Europe and Asia.
Clinical and Preclinical Trials Preclinical Development ​ In preclinical development, KPL-404 has been observed to have a favorable pharmacokinetic and toxicology profile and has shown activity in multiple non-human primate models of organ transplant rejection, as well as in multiple TDAR models.
Clinical and Preclinical Trials Preclinical Development ​ In preclinical development, abiprubart has been observed to have a favorable pharmacokinetic and toxicology profile and has shown activity in multiple non-human primate models of organ transplant rejection, as well as in multiple TDAR models.
We also may elect to pursue additional CMOs for manufacturing supplies of drug substance and finished drug product in the future.
We also may elect to pursue additional CDMOs for manufacturing supplies of drug substance and finished drug product in the future.
We plan to protect our proprietary position using a variety of methods, which include pursuing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements, including compositions of matter, drug product formulations, methods of use and methods of manufacture, that are important to the development and implementation of our business.
We plan to protect our proprietary position using a variety of methods, which include pursuing United States and foreign patent applications related to our proprietary technology, inventions and improvements, including compositions of matter, drug product formulations, methods of use and methods of manufacture, that are important to the development and implementation of our business.
In addition, exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
In a published case study, a patient with a refractory form of recurrent pericarditis, who was well controlled on anakinra, was switched from anakinra to canakinumab, which inhibits only IL-1β, for tolerability reasons. The patient’s disease returned despite further dose escalation of canakinumab.
In a published case study, a participant with a refractory form of recurrent pericarditis, who was well controlled on anakinra, was switched from anakinra to canakinumab, which inhibits only IL-1β, for tolerability reasons. The participant’s disease returned despite further dose escalation of canakinumab.
The 98% reduction in risk of recurrent pericarditis events in patients who continued rilonacept treatment beyond 18 months (Hazard Ratio = 0.02, p Commercial Strategy for ARCALYST Since our commercial launch of ARCALYST for the treatment of recurrent pericarditis in 2021, we have developed a focused and targeted commercial strategy that vertically integrates multiple key functions.
The 98% reduction in risk of recurrent pericarditis events in participants who continued rilonacept treatment beyond 18 months (Hazard Ratio = 0.02, p 11 Table of Contents Commercial Strategy for ARCALYST Since our commercial launch of ARCALYST for the treatment of recurrent pericarditis in 2021, we have developed a focused and targeted commercial strategy that vertically integrates multiple key functions.
The issued composition of matter patents acquired from Primatope have statutory expiration dates in 2036, not including any patent term extensions or adjustments. As of December 31, 2022, the patent rights licensed from BIDMC include two patents granted in the United States and 32 patents granted in other jurisdictions, including Canada, Australia and selected countries in Europe and Asia.
The issued composition of matter patents acquired from Primatope have statutory expiration dates in 2036, not including any patent term extensions or adjustments. As of December 31, 2023, the patent rights licensed from BIDMC include two patents granted in the United States and 33 patents granted in other jurisdictions, including Canada and selected countries in Europe and Asia.
Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.
Whether a subsequent 31 Table of Contents application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.
The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation.
The CTA must 32 Table of Contents include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation.
Using a data-centric approach, our team considers a wide variety of metrics to drive informed capital allocation strategies and generate value from our portfolio of immune-modulating assets, including by analyzing potential additional indications for ARCALYST, KPL-404 and mavrilimumab, being opportunistic in our business development activities to in-license or acquire programs, considering appropriate opportunities to partner or out-license our programs and conducting internal research to discover and develop molecules to expand our portfolio.
Using a data-centric approach, our team considers a wide variety of metrics to drive informed capital allocation strategies and generate value from our portfolio of immune-modulating assets, including by analyzing potential additional indications for our products and product candidates, being opportunistic in our business development activities to in-license or acquire programs, considering appropriate opportunities to partner or out-license our programs and conducting internal research to discover and develop molecules to expand our portfolio.
As of December 31, 2022, the patent rights acquired from Primatope include four patents granted in the United States and 30 patents granted in other jurisdictions, including Australia, Brazil and selected countries in Europe and Asia. In addition, the patent rights acquired from Primatope include patent applications pending in the United States, Australia, Europe, Canada, and selected countries in Asia.
As of December 31, 2023, the patent rights acquired from Primatope include four patents granted in the United States and 32 patents granted in other jurisdictions, including Australia, Brazil and selected countries in Europe and Asia. In addition, the patent rights acquired from Primatope include patent applications pending in the United States, Australia, Europe, Canada, and selected countries in Asia.
The composition of matter patents for mavrilimumab generally have statutory expiration dates in 2027, although the term of some U.S. patents may be longer due to patent term adjustment to compensate for delays during the patent prosecution process.
The composition of matter patents for mavrilimumab generally have statutory expiration dates in 2027, although the term of some United States patents may be longer due to patent term adjustment to compensate for delays during the patent prosecution process.
Our specialty salesforce of approximately 50 representatives as of December 31, 2022 calls on high-volume accounts and prescribers. Our salesforce is complemented by our medical affairs, payor and patient services teams who work to ensure broad patient access to ARCALYST, educate communities, collaborate with patient advocacy groups and drive scientific understanding of recurrent pericarditis.
Our specialty salesforce of approximately 85 representatives as of December 31, 2023 calls on high-volume accounts and prescribers. Our salesforce is complemented by our medical affairs, payor and patient services teams who work to secure broad patient access to ARCALYST, educate communities, collaborate with patient advocacy groups and drive scientific understanding of recurrent pericarditis.
A BLA is eligible for priority review if the product candidate is designed to treat a serious condition, and if approved, would provide a significant improvement in safety or effectiveness compared to marketed products.
The FDA may designate a product candidate is eligible for priority review if the product candidate is designed to treat a serious condition, and if approved, would provide a significant improvement in safety or effectiveness compared to marketed products.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information.
In the United States, numerous federal and state laws and regulations, including state comprehensive privacy laws, data breach notification laws, health information privacy and security laws 42 Table of Contents and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information.
The initial iPSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.
Sponsors must submit an initial Pediatric Study Plan (a “iPSP”) that includes an outline of the pediatric study or studies that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.
We also previously evaluated mavrilimumab in GCA, a chronic inflammatory disease of the medium-to-large arteries with an estimated U.S. prevalence of approximately 75,000 to 150,000 patients.
We also previously evaluated mavrilimumab in GCA, a chronic inflammatory disease of the medium-to-large arteries with an estimated United States prevalence of approximately 75,000 to 150,000 patients.
Lundbeck A/S is developing Lu AG22515 (bi-specific, anti-CD40L & Albumin (scFv)2-Fab). 22 Table of Contents Mavrilimumab GM-CSF Antagonists : There are programs in clinical development in various indications that modulate GM-CSF signaling from I-MAB Biopharma (plonmarlimab), Roivant Sciences Ltd. (gimsilumab and namilumab) and Humanigen, Inc. (lenzilumab).
Lundbeck A/S is developing Lu AG22515 (bi-specific, anti-CD40L & Albumin (scFv)2-Fab, no indication announced). 18 Table of Contents Mavrilimumab GM-CSF Antagonists : There are programs in clinical development in various indications that modulate GM-CSF signaling from I-MAB Biopharma Co. Ltd. (plonmarlimab in RA), Roivant Sciences Ltd. (gimsilumab and namilumab in sarcoidosis) and Humanigen, Inc. (lenzilumab).
Notwithstanding the foregoing, we are responsible, at our sole cost, for continuing to conduct and finalize our Phase 2b clinical trial assessing the efficacy, safety and tolerability of vixarelimab in reducing pruritis in prurigo nodularis.
Notwithstanding the foregoing, we are responsible, at our sole cost, for completing the Phase 2b clinical trial assessing the efficacy, safety and tolerability of vixarelimab in reducing pruritis in prurigo nodularis.
In addition, there are several molecules in development designed to inhibit the NLRP3 inflammasome, an intracellular sensor of a broad range of danger signals, that leads to the release of IL-1β and IL-18.
We are also aware of several molecules in development designed to inhibit the NLRP3 inflammasome, an intracellular sensor of a broad range of danger signals, that leads to the release of IL-1β and IL-18.
The key competitive factors affecting the success of ARCALYST, KPL-404 and mavrilimumab and any other product candidates that we develop, if approved, are likely to be our product candidates, including their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.
The key competitive factors affecting the success of ARCALYST, abiprubart and mavrilimumab and any other product candidates that we develop, if approved, are likely to be their efficacy, safety, convenience, price, the level of biosimilar competition and the availability of reimbursement from government and other third party payors.
Ongoing Phase 2 trials from competitors implicate additional indications for potential development, including type 1 diabetes, prevention of liver transplant rejection, hidradenitis suppurativa, lupus nephritis and multiple sclerosis. 12 Table of Contents Our Solution KPL-404 inhibits CD40-CD154 interaction with low-single digit nanomolar affinity in vitro .
Ongoing Phase 2 trials from competitors implicate additional indications for potential development, including type 1 diabetes, prevention of liver transplant rejection, hidradenitis suppurativa, lupus nephritis and multiple sclerosis. Our Solution Abiprubart inhibits CD40-CD154 costimulatory interaction with low-single digit nanomolar affinity to CD40 in vitro .
As of December 31, 2022, we had approximately 220 full-time employees, of which approximately 210 were located within the United States and approximately 10 were located outside of the United States. ​ We believe that the success and growth of our business depends in large part on our continued ability to attract, retain and motivate qualified personnel at all levels of our company.
As of December 31, 2023, we had approximately 297 full-time employees, of which approximately 286 were located within the United States and approximately 11 were located outside of the United States. ​ We believe that the success and growth of our business depends in large part on our continued ability to attract, retain and motivate qualified personnel at all levels of our company.
The median [maximum at end of LTE] duration of continuous rilonacept therapy for all patients in RHAPSODY was 23 [35] months; the median [maximum at end of LTE] duration of continuous rilonacept therapy was 18 months [27] months for US patients (n=45) and 29 [35] months for non-US patients (n=29).
The median [maximum at end of LTE] duration of continuous rilonacept therapy for all participants in RHAPSODY was 23 [35] months; the median [maximum at end of LTE] duration of continuous rilonacept therapy was 18 months [27] months for United States participants (n=45) and 29 [35] months for non-United States participants (n=29).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCollaborations, licenses or other strategic transactions or arrangements are subject to numerous risks, which may include risks that the collaborator, licensee or other strategic partner, as applicable: ● may have significant discretion in determining the efforts and resources that they will apply; ● may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out its activities; ● may not properly prosecute, maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ● may own or co-own intellectual property covering products that results from our arrangement with them, that is not properly prepared, prosecuted, maintained or defended in a way that could impact that patentability of the intellectual property or validity for any granted patent, which could shorten the term during which we are owed royalties on such intellectual property; ● may own or co-own intellectual property covering products that results from our arrangement with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property, and even if we are able to license such exclusive rights, we may have to enter into a license agreement that include obligations to make milestone, royalty or other payments under such agreement; ● may not achieve applicable development, regulatory, or commercial milestones, which may materially impact the collaboration revenue that we expect to realize from such relationship ● may delay, dispute or refuse to pay milestone and royalty payments, which may impact our ability to satisfy upstream payment obligations, if applicable; and ● may conduct sales and marketing activities or other operations that may not comply with applicable laws, resulting in civil or criminal proceedings.
Biggest changeCollaborations, licenses or other strategic transactions or arrangements are subject to numerous risks, which may include risks that the collaborator, licensee or other strategic partner, as applicable: ● may not pursue development and commercialization of the applicable licensed drugs or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to their acquisition of competitive products or product candidates or their internal development of competitive products and product candidates, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; ● raise disputes with respect to the ownership or inventorship of any intellectual property developed pursuant to our collaborations or licenses; ● may not properly prosecute, maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ● may own or co-own intellectual property covering products that results from our arrangement with them, that is not properly prepared, prosecuted, maintained or defended in a way that could impact that patentability of the intellectual property or validity for any granted patent, which could shorten the term during which we are owed royalties on such intellectual property; ● may own or co-own intellectual property covering products that results from our arrangement with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property, and even if we are able to license such exclusive rights, we may have to enter into a license agreement that include obligations to make milestone, royalty or other payments under such agreement; ● may not achieve applicable development, regulatory, or commercial milestones, which may materially impact the collaboration revenue that we expect to realize from such relationship; ● raise disputes that cause the delay or termination of the research, development or commercialization of our current or future products and product candidates or that results in costly litigation or arbitration that diverts management attention and resources; ● cause us to be named defendants in lawsuits due to their improper use of the licensed intellectual property and not indemnify us against losses in such lawsuits; ● enforce licensed intellectual property rights against third parties that lead such third parties to challenge the validity or enforceability of the licensed intellectual property and potentially cause the licensed intellectual property to become invalid or rendered unenforceable; ● fail to maintain issued licensed patents that are under their control, or prosecute licensed patent applications in ways that diminish their value, all of which actions may adversely affect our business if our agreements with them terminate and the rights to the licensed intellectual property return to us or an upstream licensor; may delay, dispute or refuse to pay milestone and royalty payments, which may impact our ability to satisfy upstream payment obligations, if applicable; and ● may conduct sales and marketing activities or other operations that may not comply with applicable laws, resulting in civil or criminal proceedings.
We have and may continue periodically to increase the price of ARCALYST or any of our future products. We may be unable to realize commercial benefits from such price increases due to unfavorable actions that third-party payors (including governmental authorities and private health insurers) may take in response to price increases.
We have and may continue periodically to increase the price of ARCALYST or any of our future products and may be unable to realize commercial benefits from such price increases due to unfavorable actions that third party payors (including governmental authorities and private health insurers) may take in response.
Such challenges may also result in our inability to manufacture or commercialize our product candidates without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Such challenges may also result in our inability to manufacture or commercialize our product and product candidates without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Termination of one of these agreements for any reason, and the related discontinuation of the development or commercialization of a product candidate could impair our ability to raise additional capital, generate revenue and may significantly harm our business, financial condition and prospects.
Termination of one of these agreements for any reason, and the related discontinuation of the development or commercialization of a product or product candidate could impair our ability to raise additional capital, generate revenue and may significantly harm our business, financial condition and prospects.
In addition, third parties may initiate legal proceedings against us or licensees to assert such challenges to our intellectual property rights. The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, or foreign equivalents thereof.
In addition, third parties may initiate legal proceedings against us or our licensees to assert such challenges to our intellectual property rights. The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, or foreign equivalents thereof.
If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents covering one of our product candidates, we or our licensees would lose at least part, and perhaps all, of the patent protection covering such product candidate.
If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents covering our product or one of our product candidates, we or our licensees would lose at least part, and perhaps all, of the patent protection covering such product candidate.
Furthermore, while we intend to pursue protection for our intellectual property rights in the major markets for our product candidates, we cannot ensure that we or our licensees will be able to initiate or maintain similar efforts in all jurisdictions in which we or they may wish to market our or our out-licensed products and product candidates.
Furthermore, while we intend to pursue protection for our intellectual property rights in the major markets for our product and product candidates, we cannot ensure that we or our licensees will be able to initiate or maintain similar efforts in all jurisdictions in which we or they may wish to market our or our out-licensed products and product candidates.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (1) file any patent application related to our product candidates or (2) invent any of the inventions claimed in our patents or patent applications.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (1) file any patent application related to our product or product candidates or (2) invent any of the inventions claimed in our patents or patent applications.
Competitors could purchase our product candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights.
Competitors could purchase our product or product candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights.
Our current and future product candidates could be delayed in receiving, or fail to receive, regulatory approval or we may fail or cease to advance their development for many reasons, including the following: ● regulatory authorities may disagree with the number, design or implementation of our clinical trials to support further development or approval; ● we may be unable to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for its proposed indication or that its clinical and other benefits outweigh its safety risks; ● regulatory authorities could require us to collect additional data or conduct additional clinical trials, which could include a requirement to compare our products or product candidates to other therapies for the treatment of the same indication; ● regulatory authorities, following the discovery of adverse safety signals or side effects from approved therapeutics or therapeutics in development in the same or related class as our products or product candidates, could require us to collect additional data or conduct additional clinical trials; ● the results of clinical trials may produce negative, inconclusive or uncompetitive results, which may result in us deciding, or regulatory authorities requiring us, to conduct additional clinical trials or to modify or cease development programs for our product candidates; 71 Table of Contents ● the results of clinical trials may not meet the primary or secondary endpoints of the applicable trial or the level of statistical significance required by regulatory authorities; ● regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA, sBLA or other submission or to obtain regulatory approval in the United States or elsewhere; ● the number of participants required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or we may fail to recruit suitable participants for a trial; ● our third-party contractors may fail to comply with data quality and regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulatory authorities may not believe that we have sufficiently demonstrated our ability to manufacture the products to the requisite level of quality standards, including that such material is sufficiently comparable to material used in previous clinical trials, or they may fail to approve our manufacturing processes or facilities, or the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; ● regulatory authorities may not believe that their on-site inspections and data audits have sufficiently demonstrated the quality and integrity of the clinical trial conduct and of data submitted to regulatory authorities in support of our new product approvals and marketing applications; ● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; ● our product candidates may have undesirable side effects, toxicities or other unexpected characteristics, causing us or our investigators, regulatory authorities or IRBs to reject, suspend or terminate the clinical trials; and ● the approval policies or regulations of regulatory authorities may significantly change in a manner rendering our clinical data, biologic manufacturing process and other supporting information insufficient for approval.
Our current and future product candidates could be delayed in receiving, or fail to receive, regulatory approval or we may fail or cease to advance their development for many reasons, including the following: 67 Table of Contents ● regulatory authorities may disagree with the number, design or implementation of our clinical trials to support further development or approval; ● we may be unable to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for its proposed indication or that its clinical and other benefits outweigh its safety risks; ● regulatory authorities could require us to collect additional data or conduct additional clinical trials, which could include a requirement to compare our products or product candidates to other therapies for the treatment of the same indication; ● regulatory authorities, following the discovery of adverse safety signals or side effects from approved therapeutics or therapeutics in development in the same or related class as our products or product candidates, could require us to collect additional data or conduct additional clinical trials; ● the results of clinical trials may produce negative, inconclusive or uncompetitive results, which may result in us deciding, or regulatory authorities requiring us, to conduct additional clinical trials or to modify or cease development programs for our product candidates; ● the results of clinical trials may not meet the primary or secondary endpoints of the applicable trial or the level of statistical significance required by regulatory authorities; ● regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA, sBLA or other submission or to obtain regulatory approval in the United States or elsewhere; ● the number of participants required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or we may fail to recruit suitable participants for a trial; ● our third party contractors may fail to comply with data quality and regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulatory authorities may not believe that we have sufficiently demonstrated our ability to manufacture our candidates to the requisite level of quality standards, including that such material is sufficiently comparable to material used in previous clinical trials, or they may fail to approve our manufacturing processes or facilities, or the manufacturing processes or facilities of third party manufacturers with which we contract for clinical and commercial supplies; ● regulatory authorities may not believe that their on-site inspections and data audits have sufficiently demonstrated the quality and integrity of the clinical trial conduct and of data submitted to regulatory authorities in support of our new product approvals and marketing applications; ● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; ● our product candidates may have undesirable side effects, toxicities or other unexpected characteristics, causing us or our investigators, regulatory authorities or IRBs to reject, suspend or terminate the clinical trials; and 68 Table of Contents ● the approval policies or regulations of regulatory authorities may significantly change in a manner rendering our clinical data, biologic manufacturing process and other supporting information insufficient for approval.
Supply chain issues related to important ancillary products may also adversely affect our business. For example, we contract with a network of specialty pharmacies who distribute ARCALYST as well as peripheral supplies that are required to reconstitute and self-administer ARCALYST, such as sterile water for injection, syringes and needles.
Supply chain issues related to important ancillary products may also adversely affect our business. For example, we contract with a select network of specialty pharmacies who distribute ARCALYST as well as peripheral supplies that are required to reconstitute and self-administer ARCALYST, such as sterile water for injection, syringes and needles.
The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls; ● HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or service.
The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls; ● HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed. Because we rely on third parties to develop and manufacture our product candidates, we must, at times, share trade secrets with them.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed. Because we rely on third parties to develop and manufacture our products and product candidates, we must, at times, share trade secrets with them.
If we breach any of the agreements related to our product candidates, we could lose the ability to continue the development and commercialization of the related product. Additionally, our current licensing and acquisition agreements contain limitations and restrictions that could limit or adversely affect our ability to develop and commercialize other products in the future.
If we breach any of the agreements related to our product or product candidates, we could lose the ability to continue the development and commercialization of the related product or product candidate. Additionally, our current licensing and acquisition agreements contain limitations and restrictions that could limit or adversely affect our ability to develop and commercialize other products in the future.
In some cases, when new competitor generic and biosimilar products enter the market, there are mandatory price reductions for the innovator compound. In other cases, payors employ “therapeutic category” price referencing and seek to lower the reimbursement levels for all treatment in the respective therapeutic category.
In some cases, when new competitor biosimilar products enter the market, there are mandatory price reductions for the innovator compound. In other cases, payors employ “therapeutic category” price referencing and seek to lower the reimbursement levels for all treatment in the respective therapeutic category.
Such changes may become more likely as a result of recent economic trends in the jurisdictions in which we operate, particularly if such trends continue. If such a situation were to arise, it could adversely impact our tax position and our effective tax rate.
Such changes may become more likely as a result of recent economic trends in the jurisdictions in which we operate, particularly if such trends continue. If such a situation were to arise in the future, it could adversely impact our tax position and our effective tax rate.
If ARCALYST or any of our future approved products, if any, fail to gain market acceptance, our ability to generate revenue will be adversely affected. Even if ARCALYST or any future products achieve market acceptance, the relevant market may prove not to be large enough to allow us to generate significant and sustained revenue.
If ARCALYST or any of our future approved products, if any, fail to gain or sustain market acceptance, our ability to generate revenue will be adversely affected. Even if ARCALYST or any future products achieve market acceptance, the relevant market may prove not to be large enough to allow us to generate significant and sustained revenue.
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 product candidates instead of developing or commercializing our product candidates ourselves.
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 instead of developing or commercializing our products and product candidates ourselves.
The degree of patent protection we require to successfully commercialize our product candidates may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
The degree of patent protection we require to successfully commercialize our products and product candidates may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
As a small commercial stage company, the loss of any payor, especially a large payor, or limitations on patient access to our drugs affecting a sizeable number of patients may materially harm our ability to generate revenue and execute on our commercial strategy.
As a small commercial stage company, the loss of any payor, especially a large payor, or limitations on access to our drugs affecting a sizeable number of patients may materially harm our ability to generate revenue and execute on our commercial strategy.
The consummation or performance of any acquisition, business combination, collaboration or other strategic transaction we may undertake in furtherance of our growth strategy or any refined or otherwise altered strategy, may involve additional risks, such as difficulties in assimilating different workplace cultures, retaining personnel and integrating operations, which may be geographically dispersed, increased costs, exposure to liabilities, incurrence of indebtedness, or use a substantial portion of our available cash for all or a portion of the consideration or cause dilution to our existing shareholders if we issue equity securities for all or a portion of the consideration.
The consummation or performance of any acquisition, business combination, collaboration or other strategic transaction we may undertake in furtherance of our growth strategy or any refined or otherwise altered strategy, may involve additional risks, such as difficulties in assimilating different workplace cultures; retaining personnel and integrating operations, which may be geographically dispersed; increased costs; exposure to liabilities; incurrence of indebtedness; use of a substantial portion of our available cash for all or a portion of the consideration; or causing dilution to our existing shareholders if we issue equity securities for all or a portion of the consideration.
If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or the manufacture of a product, or if we or one of our distributors, licensees, co-marketers or other third parties operating on our behalf fails to comply with regulatory requirements, regulatory authorities could impose fines on us, instate restrictions on our product or its manufacture or require us to recall or remove the product from the market, in addition to withdrawing our marketing authorizations, or requiring us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization.
If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or the manufacture of a product, or if we or one of our distributors, licensees, co-marketers or other third parties operating on our behalf fails to comply with regulatory requirements, regulatory authorities could impose fines on us, impose restrictions on such product or its manufacture or require us to recall or remove such product from the market, in addition to withdrawing our marketing authorizations, or requiring us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization.
Since patent applications are confidential for a period of time after filing, we cannot be certain that we, our licensees or our licensors were the first to file any patent application related to our product candidates.
Since patent applications are confidential for a period of time after filing, we cannot be certain that we, our licensees or our licensors were the first to file any patent application related to our product and product candidates.
For example, the patents in the United States covering ARCALYST as a composition of matter have expired, and patents covering ARCALYST as a composition of matter in Europe have a term that expires in 2023, not including any patent term extensions, and the patents covering mavrilimumab as a composition of matter have a term that expires in 2027 in the United States, not including any patent term adjustments or patent term extensions, and in 2027 in Europe, not including any patent term extensions.
For example, the patents in the United States and Europe covering ARCALYST as a composition of matter have expired, and the patents covering mavrilimumab as a composition of matter have a term that expires in 2027 in the United States, not including any patent term adjustments or patent term extensions, and in 2027 in Europe, not including any patent term extensions.
While we and our CMOs may seek to maintain adequate inventory of the drug substance and drug product used in ARCALYST or our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain such drug substance and drug product from alternate sources of comparable quality at acceptable prices in a timely manner could impede, delay, limit or prevent our development or commercialization efforts, which could harm our business, results of operations, financial condition and prospects.
While we and our CDMOs may seek to maintain adequate inventory of the drug substance and drug product used in ARCALYST or our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain such drug substance and drug product from alternate sources of comparable quality at acceptable prices in a timely manner could impede, delay, limit or prevent our development or commercialization efforts, which could harm our business, results of operations, financial condition and prospects.
For example, as of December 31, 2022, entities affiliated with certain members of our directors could convert their Class A1 common shares and Class B1 common shares upon 61-days’ prior written notice into Class A common shares and Class B common shares, respectively, which in the aggregate would result in such entities holding approximately 78% of our aggregate voting power and having the ability to control the outcome of certain matters submitted to our shareholders for approval .
For example, as of December 31, 2023, entities affiliated with certain members of our directors could convert their Class A1 common shares and Class B1 common shares upon 61-days’ prior written notice into Class A common shares and Class B common shares, respectively, which in the aggregate would result in such entities holding approximately 78% of our aggregate voting power and having the ability to control the outcome of certain matters submitted to our shareholders for approval .
While we would expect to exercise our rights and remedies available to us in the event we fail, or our licensees cause us to fail, to meet our obligations under these agreements in any material respect, including seeking to cure any breach by us or our licensees, and otherwise seek to preserve our rights under the technology licensed to or acquired by us, we may not be able to do so in a timely manner, at an acceptable cost or at all.
While we would expect to exercise our rights and remedies available to us in the event we fail, or our sublicensees cause us to fail, to meet our obligations under these agreements in any material respect, including seeking to cure any breach by us or our sublicensees, and otherwise seek to preserve our rights under the technology licensed to or acquired by us, we may not be able to do so in a timely manner, at an acceptable cost or at all.
However, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information.
However, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare professional or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information.
If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, or if the breadth, strength or term (including any extensions or adjustments) of protection provided by the patents and patent applications we hold or pursue with respect to our product candidates or any future product candidates is successfully challenged, our or our licensees ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.
If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product or product candidates is not sufficiently broad to impede such competition, or if the breadth, strength or term (including any extensions or adjustments) of protection provided by the patents and patent applications we hold or pursue with respect to our product candidates or any future product candidates is successfully challenged, our or our licensees’ ability to successfully commercialize our product or product candidates could be negatively affected, which would harm our business.
Further, we cannot provide any assurances that we will furnish to any United States shareholders information that may be necessary to comply with the reporting and tax paying obligations discussed above. U.S. Holders should consult their tax advisors regarding the potential application of these rules to any investment in our Class A common shares. ​ ​ ITEM 1B.
Further, we cannot provide any assurances that we will furnish to any United States shareholders information that may be necessary to comply with the reporting and tax paying obligations discussed above. United States Holders should consult their tax advisors regarding the potential application of these rules to any investment in our Class A common shares. ​ ITEM 1B.
The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of related products, market acceptance by prescribers and patients, the level of generic competition and the availability of reimbursement from government and other third-party payors.
The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of related products, market acceptance by prescribers and patients, the level of biosimilar competition and the availability of reimbursement from government and other third party payors.
Similarly, payors may implement coverage criteria that further restricts the use of ARCALYST or any of our product candidates, if approved, beyond the approved label, which could adversely affect their commercial potential, including, for example, situations where a patient must be proven to not adequately respond to the lower-cost comparator.
Similarly, payors may implement coverage criteria that further restrict the use of ARCALYST or any of our product candidates, if approved, beyond the approved label, which could adversely affect their commercial potential, including, for example, situations where a patient must be proven to not adequately respond to the lower-cost comparator.
An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our or our licensees’ ability to stop others from using or commercializing similar or identical technology and products, without payment to us, could limit the duration of the patent protection covering our technology and product candidates, or could reduce the period of time during which our licensees are obligated to make royalty payments to us for the sale of licensed products.
An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our or our licensees’ ability to stop others from using or commercializing similar or identical technology and products, without payment to us, could limit the duration of the patent protection covering our technology, product and product candidates, or could reduce the period of time during which our licensees are obligated to make royalty payments to us 87 Table of Contents for the sale of licensed products.
For example, most healthcare providers, including research institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA, as amended. We do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not subject to its requirements or penalties.
For example, most healthcare professionals, including research institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA, as amended. We do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not subject to its requirements or penalties.
The impacts of climate change on the global economy and our industry are rapidly evolving. Physical impacts of climate change (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), could negatively impact our business and operations, as well as the business and operations of our third-party CMOs and CROs upon whom we rely.
The impacts of climate change on the global economy and our industry are rapidly evolving. Physical impacts of climate change (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), could negatively impact our business and operations, as well as the business and operations of our third party CDMOs and CROs upon whom we rely.
Even with FDA or any other regulatory authority approval of the marketing of ARCALYST or any of our other product candidates in the future (whether developed on our own or with a collaborator), prescribers, healthcare providers, patients, the medical community or third-party payors may not accept or use ARCALYST or any of our future product candidates, or may effectively block or limit their use in the case of third-party payors.
Even with FDA or any other regulatory authority approval of the marketing of ARCALYST or any of our other product candidates in the future (whether developed on our own or with a collaborator), prescribers, healthcare professionals, patients, the medical community or third party payors may not accept or use ARCALYST or any of our future product candidates, or may effectively block or limit their use in the case of third party payors.
Such designations may not lead to a faster development or regulatory review or approval process and do not increase the likelihood that our product candidates will receive marketing authorization. We may seek EMA PRIME (Priority Medicines) designation or other designations, schemes or tools for one or more of our product candidates.
Such designations may not lead to a faster development or regulatory review or approval process and do not increase the likelihood that our product candidates will receive marketing authorization. We may seek EMA PRIME (Priority Medicines) designation, a conditional MA or other designations, schemes or tools for one or more of our product candidates.
In addition, we may maintain sensitive personally identifiable information, including health information, that we receive throughout the clinical trial process, in the course of our research collaborations, directly from individuals (or their healthcare providers) who enroll in our patient support program and directly from individuals who consent to be included in our marketing database.
In addition, we may maintain sensitive personally identifiable information, including health information, that we receive throughout the clinical trial process, in the course of our research collaborations, directly from individuals (or their healthcare professionals) who enroll in our patient support program and directly from individuals who consent to be included in our marketing database.
Sustained market acceptance of 49 Table of Contents ARCALYST in its approved indications, or any of our future products and continued use of such products by our patients, will depend on a variety of factors, including: ● the timing of market introduction; ● disease awareness, including understanding the severity and epidemiology of the disease; ● the number and clinical profile of competing products, whether approved or not; ● the potential and perceived advantages or disadvantages of our products relative to alternative treatments; ● our ability to provide acceptable evidence of safety and efficacy; ● the prevalence and severity of any side effects; ● product labeling or product insert requirements of regulatory authorities and our ability to maintain and expand favorable labeling when and if needed; ● limitations or warnings contained in the labeling approved by regulatory authorities, including any additions mandated by authorities after initial approval; ● convenience and ease of administration, including relative to alternative therapies; ● pricing (including patient out-of-pocket costs), budget impact, affordability and cost effectiveness, particularly in relation to alternative treatments; ● market acceptance of current and future price increases of our products; ● the effectiveness of our sales, marketing and distribution activities; ● availability of adequate coverage, reimbursement and payment from health maintenance organizations and other insurers, both public and private, and the timing thereof; and ● other potential advantages over alternative treatment methods.
Sustained market acceptance of ARCALYST in its approved indications, or any of our future products and continued use of such products by our patients, will depend on a variety of factors, including: ● the timing of market introduction; ● disease awareness, including understanding the severity and epidemiology of the disease; ● the number and clinical profile of competing products, whether approved or not; ● the potential and perceived advantages or disadvantages of our products relative to alternative treatments; ● our ability to provide acceptable evidence of safety and efficacy; ● the prevalence and severity of any side effects; ● product labeling or product insert requirements of regulatory authorities and our ability to maintain and expand favorable labeling when and if needed; 49 Table of Contents ● limitations or warnings contained in the labeling approved by regulatory authorities, including any additions mandated by authorities after initial approval; ● convenience and ease of administration, including relative to alternative therapies; ● pricing (including patient out-of-pocket costs), budget impact, affordability and cost effectiveness, particularly in relation to alternative treatments; ● market acceptance of current and future price increases of our products; ● the effectiveness of our sales, marketing and distribution activities; ● availability of adequate coverage, reimbursement and payment from health maintenance organizations and other insurers, both public and private, and the timing thereof; ● publications of scientific literature and consensus papers favorable to the administration of our products and product candidates; and ● other potential advantages over alternative treatment methods.
Thus, the Leahy-Smith Act and its implementation increase the uncertainties and costs surrounding the prosecution of our or our future licensees’ patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. The U.S.
Thus, the Leahy-Smith Act and its implementation increase the uncertainties and costs surrounding the prosecution of our or our future licensees’ patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider any such approved product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated.
However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider any such approved product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated.
We have entered into certain collaboration agreements with Huadong for each of ARCALYST and mavrilimumab. Until such time as Huadong is able to manufacture these products, either on its own or through a third-party CMO, we are the only source of these products for Huadong.
We have entered into certain collaboration agreements with Huadong for each of ARCALYST and mavrilimumab. Until such time as Huadong is able to manufacture these products, either on its own or through a third party CDMO, we are the only source of these products for Huadong.
Because we are not engaged in any “relevant activities”, we believe that we are not obliged to meet the economic substance requirements. We will continue to monitor our status with respect to the ES Laws and whether further action may be required in the future by the Company to comply with the ES Laws.
Because we are not engaged in any “relevant activities”, as defined by the ES Laws, we believe that we are not obliged to meet the economic substance requirements. We will continue to monitor our status with respect to the ES Laws and whether further action may be required in the future by the Company to comply with the ES Laws.
Any performance failure on the part of our existing or future manufacturers could delay, as applicable, clinical development or marketing approval or commercialization efforts for our current and future products. If our current CMOs cannot perform as agreed, we may be required to replace such manufacturers.
Any performance failure on the part of our existing or future manufacturers could delay, as applicable, clinical development or marketing approval or commercialization efforts for our current and future products. If our current CDMOs cannot perform as agreed, we may be required to replace such manufacturers.
Our executive officers and certain other members of our senior management hold Class A common shares and Class B common shares representing approximately 30% of our aggregate voting power as of December 31, 2022 and may have the ability to influence the outcome of certain matters submitted to our shareholders for approval.
Our executive officers and certain other members of our senior management hold Class A common shares and Class B common shares representing approximately 30% of our aggregate voting power as of December 31, 2023 and may have the ability to influence the outcome of certain matters submitted to our shareholders for approval.
If our marketing approval would be obtained via the accelerated approval pathway, we could be required to conduct a successful confirmatory clinical trial to confirm clinical benefit for our products. An unsuccessful confirmatory trial or failure to complete such a trial could result in the withdrawal of marketing approval.
If marketing approval is obtained via the accelerated approval pathway, we could be required to conduct a successful confirmatory clinical trial to confirm clinical benefit for our products. An unsuccessful confirmatory trial or failure to complete such a trial could result in the withdrawal of marketing approval.
If any of the collaborators, scientific advisors, employees, contractors and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation (e.g., in countries that do not favor the enforcement of intellectual property rights), and we could lose our trade secrets as a result.
If any of the collaborators, scientific advisors, employees, contractors and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation (e.g., in countries that do not favor the enforcement of 94 Table of Contents intellectual property rights), and we could lose our trade secrets as a result.
While we review the compliance history and performance of our CMOs and have the ability to audit their compliance and performance, we have no direct control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel other than through quality monitoring in accordance with our agreements with the CMOs.
While we review the compliance history and performance of our CDMOs and have the ability to audit their compliance and performance, we have no direct control over the ability of our CDMOs to maintain adequate quality control, quality assurance and qualified personnel other than through quality monitoring in accordance with our agreements with the CDMOs.
We plan to perform an analysis to determine whether the Company or its subsidiaries are expected to be treated as PFICs for the taxable year ending December 31, 2022, and do not believe that the Company or its subsidiaries will be treated as a PFIC for the taxable year ending December 31, 2022.
We plan to perform an analysis to determine whether the Company or its subsidiaries are expected to be treated as PFICs for the taxable year ending December 31, 2023, and do not believe that the Company or its subsidiaries will be treated as a PFIC for the taxable year ending December 31, 2023.
The total addressable market for any of our products and approved product candidates in the future, if any, will ultimately depend upon, among other things, the diagnostic criteria and applicable patient population included in the final label for the product or product candidate approved for sale for its indication, the efficacy, safety and tolerability demonstrated by the product candidate in our clinical trials, acceptance by the medical community and patients, pricing, access and reimbursement.
The total addressable market for ARCALYST and any other of our current or future product candidates, if approved, will ultimately depend upon, among other things, the diagnostic criteria and applicable patient population included in the final label for the product or product candidate approved for sale for its indication; the efficacy, safety and tolerability demonstrated by the product candidate in our clinical trials; acceptance by the medical community; and patients, pricing, access and reimbursement.
Clinical trial delays could also shorten any periods during which our products have patent protection or shorten any periods during which we have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, which could impair our ability to obtain orphan exclusivity for our products that potentially qualify for this designation and to successfully commercialize our product candidates, and may 64 Table of Contents harm our business and results of operations.
Clinical trial delays could also shorten any periods during which our products have patent protection or shorten any periods during which we have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, which could impair our ability to obtain orphan exclusivity for our products that potentially qualify for this designation and to successfully commercialize our product candidates, and may harm our business and results of operations.
Any of these occurrences could materially affect our business, financial condition and results of operations. ​ Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates or products .
Any of these occurrences could materially affect our business, financial condition and results of operations. ​ Raising additional capital may cause dilution to, or impact the rights of, our shareholders, restrict our operations or require us to relinquish rights to our technologies, or product candidates or products .
Competitors may use our or technologies in jurisdictions where we or they have not obtained patent protection, or where we or they have obtained patent protection, but such jurisdictions do not favor the enforcement of patents and other intellectual property rights, to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our or our licensees’ ability to enforce our patents to stop infringing activities is inadequate.
Competitors may use our or their technologies in jurisdictions 92 Table of Contents where we or they have not obtained patent protection, or where we or they have obtained patent protection, but such jurisdictions do not favor the enforcement of patents, and other intellectual property rights, to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our or our licensees’ ability to enforce our patents to stop infringing activities is inadequate.
Furthermore, regulatory authorities may not approve the price we intend to charge, may grant approval contingent on the performance of costly post-marketing clinical trials, may impose certain post-marketing requirements that impose limits on our marketing and distribution activities, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
Furthermore, regulatory authorities or payers may not approve the price we intend to charge, may grant approval contingent on the performance of costly postmarketing clinical trials, may impose certain postmarketing requirements that impose limits on our marketing and distribution activities, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
Restrictions under applicable federal, state and foreign healthcare laws and regulations, include the following: ● the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
Restrictions under applicable federal, state and foreign healthcare laws and regulations, include the following: ● the United States federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
In addition, even if we were to obtain approval for one or more of our current or future product candidates, regulatory authorities may approve any of our current or future product candidates for fewer indications or more limited patient populations than we request.
In addition, even if we were to obtain approval for one or more of our current or future product candidates, regulatory authorities may approve such product candidates for fewer indications or more limited patient populations than we request.
If our CMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of regulatory authorities, they will not be able to secure or maintain regulatory approval for their manufacturing facilities.
If our CDMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of regulatory authorities, they will not be able to secure or maintain regulatory approval for their manufacturing facilities.
We cannot provide any assurances that we will assist investors in determining whether such investor is treated as a United States shareholder with respect to us or any of our non-U.S. subsidiaries.
We cannot provide any assurances that we will assist investors in determining whether such investor is treated as a United States shareholder with respect to us or any of our non-United States subsidiaries.
A failure by our CMOs to supply sufficient quantities of drug supply may cause us to breach our contractual obligations, triggering potential penalties under our agreements, including termination of such agreements, if we fail to adequately cure such breach.
A failure by our CDMOs to supply sufficient quantities of drug supply may cause us to breach our contractual obligations, triggering potential penalties under our agreements, including termination of such agreements, if we fail to adequately cure such breach.
We or our licensees may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to our products and technology.
We or our licensees may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to our products, product candidates and technology.
Events that have and may in the future delay or prevent commencement or successful completion of clinical development of our product candidates as planned and on schedule, if at all, include but are not limited to: ​ ● inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of human clinical trials; ● delays or failure in reaching a consensus with regulatory agencies on trial design or implementation, including the appropriate dosage levels, frequency of dosing, or treatment period in clinical trials; ● delays or failure in reaching agreement on acceptable terms with prospective CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; ● difficulties in obtaining required IRB, ethics committee approval or positive opinion at each clinical trial site; ● delays or failure in obtaining regulatory approval to commence a trial, or imposition of a clinical hold by regulatory authorities; ● difficulty in identifying and enrolling suitable participants in a particular trial, which may reduce the power of a clinical trial to detect statistically significant results; ● amendments to clinical trial protocols impacting study criteria, endpoints or design, including amendments that either we initiate or are requested by regulatory authorities; ● difficulty collaborating with patient groups and investigators; ● failure by our CROs, medical institutions, or other third parties we contract with in connection with our clinical trials to adhere to clinical trial requirements or to perform their obligations in a timely manner or in compliance with all applicable laws and regulations, including the FCPA; ● failure to perform in accordance with the FDA’s good clinical practices (“GCPs”) or applicable comparable regulatory guidelines in other countries; ● participants not completing a clinical trial or not returning for post-treatment follow-up, in either case including as a result of trial demands on participants as a result of the COVID-19 pandemic and measures taken in response to the pandemic or otherwise, among other things; ● clinical trial sites withdrawing from or being unable to conduct activities, or participants withdrawing from clinical trials, including as a result of the COVID-19 pandemic or the ongoing war in Ukraine, among other things; ● participants experiencing serious adverse events or undesirable side effects or being exposed to unacceptable health risks; ● participants failing to experience confirmed pre-specified events during the clinical trial within an expected timeframe, if at all; ● safety issues, including occurrence of adverse events associated with a product candidate, that are viewed to outweigh its potential benefits; 63 Table of Contents ● changes in regulatory requirements, policies and guidance that require amending or submitting new clinical protocols; ● the cost of clinical trials being greater than we anticipate; ● strategic decisions regarding clinical study priority for capital preservation purposes; ● failure by us, our CROs, or other third parties with whom we contract to properly collect, analyze, and/or assess clinical data, including the performance of assays, analyses and other activities; ● clinical trials of our product candidates producing negative, inconclusive or uncompetitive results, which may result in us deciding, or regulatory authorities requiring us, to conduct additional clinical trials or modify or cease development programs for our product candidates; ● failure to replicate safety, efficacy or other data from earlier preclinical studies and clinical trials conducted by us or third parties, including the companies from whom we have licensed or acquired or may in the future license or acquire our product candidates, in our later clinical trials; ● the occurrence of adverse or other events not observed in earlier studies ; ● suspensions or terminations of our clinical trials by us or the IRBs of the institutions in which our clinical trials are being conducted, the Data Safety Monitoring Board for such trials or the FDA or comparable regulatory authorities; ● failure of manufacturers, or us, to produce phase-appropriate supplies of our product candidates for use in our clinical trials in accordance with cGMP requirements and regulations or applicable comparable regulatory guidelines in other countries; ● delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing either as a result of quality assurance or due to our reliance on third party manufacturers; and ● disruptions to our business operations, including our manufacturing operations, and the business operations of our third-party manufacturers, CROs upon whom we rely to conduct our clinical trials, or other third parties with whom we conduct business or otherwise engage, as well as disruptions in supply chain distribution in the countries in which we conduct our clinical trials, our manufacturers produce our product candidates or we otherwise conduct business or engage with other third parties, now or in the future as a result of the impact of the COVID-19 pandemic.
Events that have and may in the future delay or prevent commencement or successful completion of clinical development of our product candidates as planned and on schedule, if at all, include but are not limited to: ​ ● inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of human clinical trials; ● delays or failure in reaching a consensus with regulatory agencies on trial design or implementation, including the appropriate dosage levels, frequency of dosing, or treatment period in clinical trials; ● delays or failure in reaching agreement on acceptable terms with prospective CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; ● difficulties in obtaining required IRB, ethics committee approval or positive opinion at each clinical trial site; ● delays or failure in obtaining regulatory approval to commence a trial, or imposition of a clinical hold by regulatory authorities; ● difficulty in identifying and enrolling suitable participants in a particular trial, which may reduce the power of a clinical trial to detect statistically significant results; ● amendments to clinical trial protocols impacting study criteria, endpoints or design, including amendments that either we initiate or are requested by regulatory authorities; ● difficulty collaborating with patient groups and investigators; ● failure by our CROs, medical institutions, or other third parties we contract with in connection with our clinical trials to adhere to clinical trial requirements or to perform their obligations in a timely manner or in compliance with all applicable laws and regulations, including the FCPA; ● failure to perform in accordance with the FDA’s good clinical practices (“GCPs”) or applicable comparable regulatory guidelines in other countries; 61 Table of Contents ● participants not completing a clinical trial or not returning for post-treatment follow-up, including as a result of trial demands on participants; ● clinical trial sites withdrawing from or being unable to conduct activities, or participants withdrawing from clinical trials, including as a result of a pandemic or other outbreak of disease and global conflict; ● participants experiencing serious adverse events or undesirable side effects or being exposed to unacceptable health risks; ● participants failing to experience confirmed pre-specified events during the clinical trial within an expected timeframe, if at all; ● safety issues, including occurrence of adverse events associated with a product candidate, that are viewed to outweigh its potential benefits; ● changes in regulatory requirements, policies and guidance that require amending or submitting new clinical protocols; ● the cost of clinical trials being greater than we anticipate; ● strategic decisions regarding clinical study priority for capital preservation purposes; ● failure by us, our CROs, or other third parties with whom we contract to properly collect, analyze, and/or assess clinical data, including the performance of assays, analyses and other activities; ● clinical trials of our product candidates producing negative, inconclusive or uncompetitive results, which may result in us deciding, or regulatory authorities requiring us, to conduct additional clinical trials or modify or cease development programs for our product candidates; ● failure to replicate safety, efficacy or other data from earlier preclinical studies and clinical trials conducted by us or third parties, including the companies from whom we have licensed or acquired or may in the future license or acquire our product candidates, in our later clinical trials; ● the occurrence of adverse or other events not observed in earlier studies ; ● suspensions or terminations of our clinical trials by us or the IRBs of the institutions in which our clinical trials are being conducted, the Data Safety Monitoring Board for such trials or the FDA or comparable regulatory authorities; ● failure of manufacturers, or us, to produce sufficient quantities of or phase-appropriate supplies of our product candidates for use in our clinical trials in accordance with applicable cGMP requirements and regulations or applicable comparable regulatory guidelines in other countries; ● delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing either as a result of quality assurance or due to our reliance on third party manufacturers; and ● disruptions to our business operations, including our manufacturing operations, and the business operations of our third party manufacturers, CROs upon whom we rely to conduct our clinical trials, or other third parties with whom we conduct business or otherwise engage, as well as disruptions in supply chain distribution in the countries in which we conduct our clinical trials, our manufacturers produce our product candidates or we otherwise conduct business or engage with other third parties, now or in the future. 62 Table of Contents Delays in the commencement or completion of our planned and ongoing clinical trials have occurred and may continue to occur.
If we or our CMOs are able to find a replacement supplier, such replacement supplier would need to be qualified and may require additional regulatory approval, which could result in further delay.
If we or our CDMOs are able to find a replacement supplier, such replacement supplier would need to be qualified and may require additional regulatory approval, which could result in further delay.
Any uncured, material breach under the license could result in our loss of exclusive rights and may lead to a complete termination of our product development and any commercialization efforts for each of our product candidates.
Any uncured, material breach under the in-licenses could result in our loss of exclusive rights and may lead to a complete termination of our product development and any commercialization efforts for our product and each of our product candidates.
Further, announcement of preliminary, interim or top-line data by us or differences between that data and the final data could result in volatility in the price of our Class A common shares. Risks Related to Marketing Approval and Regulatory Matters Regulatory approval processes are lengthy, time consuming and inherently unpredictable.
Further, announcement of preliminary, interim or top-line data by us or differences between that data and the final data could result in volatility in the price of our Class A common shares. 66 Table of Contents Risks Related to Marketing Approval and Regulatory Matters Regulatory approval processes are lengthy, time consuming and inherently unpredictable.
If we or our manufacturers are unable to purchase the materials necessary for the manufacture of ARCALYST or our product candidates on acceptable terms, in a timely manner, at sufficient quality levels, or in adequate quantities, if at all, our ability to produce sufficient quantities of our products for clinical or commercial requirements would be negatively impacted.
If we or our manufacturers are unable to purchase the materials necessary for the manufacture of ARCALYST or our product candidates on acceptable terms, in a timely manner, at sufficient quality levels, or in adequate quantities, if at all, our ability to produce sufficient quantities of such drugs for clinical or commercial requirements would be negatively impacted.
We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.
We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.
Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory 109 Table of Contents enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.
Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.
The development and commercialization of biopharmaceutical products is capital intensive. We are currently commercializing ARCALYST in the United States for the treatment of recurrent pericarditis, CAPS and DIRA. In addition, we are advancing our product candidates through research, preclinical and clinical development, including our Phase 2 clinical trial with KPL-404 in RA .
The development and commercialization of biopharmaceutical products is capital intensive. We are currently commercializing ARCALYST in the United States for the treatment of recurrent pericarditis, CAPS and DIRA. In addition, we are advancing our product candidates through research, preclinical and clinical development, including our Phase 2 clinical trial with abiprubart in RA .
Accordingly, we and our CMOs and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
Accordingly, we and our CDMOs and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
These issues may be exacerbated by increased clinical or commercial demand by us or our collaboration partners, should we decide to develop ARCALYST in one or more additional indications or in additional territories.
These issues may be exacerbated by increased clinical or commercial demand by us or our collaboration partners, or if we decide to develop ARCALYST in one or more additional indications or in additional territories.
However, Regeneron is not obligated to accept our forecasts or purchase orders that are not in line with accepted forecasts and Regeneron may not have sufficient manufacturing capacity to meet our commercial or clinical demand for ARCALYST. Regeneron, in turn, relies upon CMOs or other third parties to conduct fill/finish operations for ARCALYST.
Regeneron is not obligated to accept our forecasts or purchase orders that are not in line with accepted forecasts and Regeneron may not have sufficient manufacturing capacity to meet our commercial or clinical demand for ARCALYST. Regeneron, in turn, relies upon CDMOs or other third parties to conduct fill/finish operations for ARCALYST.
Further, pursuant to the investors rights agreement (a) the holders affiliated with certain of our directors are entitled to certain registration rights under the Securities Act with respect to registrable securities they may own now or in the future and (b) our executive officers are also entitled to certain registration rights under the Securities Act with respect to registrable securities they may own now or in the future, including, on an as-converted to Class A common shares basis, approximately 1.7 million Class A common shares held by certain of our executive officers as of December 31, 2022.
Further, pursuant to the Investors Rights Agreement (a) the holders affiliated with certain of our directors are entitled to certain registration rights under the Securities Act with respect to registrable securities they may own now or in the future and (b) our executive officers are also entitled to certain registration rights under the Securities Act with respect to registrable securities they may own now or in the future, including, on an as-converted to Class A common shares basis, approximately 1.8 million Class A common shares held by certain of our executive officers as of December 31, 2023.
Sales of our product candidates outside of the United States could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs. In some countries, particularly the countries in Europe, the pricing of prescription pharmaceuticals is subject to governmental control.
Sales of our product candidates outside of the United States could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs. 54 Table of Contents In some countries, particularly the countries in Europe, the pricing of prescription pharmaceuticals is subject to governmental control.
Any government investigation of alleged violations of law could require us to expend significant time, cost and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products.
Any government investigation of alleged violations of law could require us to expend significant time, cost and resources in response, and could generate negative publicity or reputational harm. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products.
Treatment with our products and product candidates may produce undesirable side effects or adverse reactions or events. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in more restrictive labels or the delay or denial of regulatory approvals by regulatory authorities.
Treatment with our products and product candidates may produce undesirable side effects or adverse reactions or events. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, 64 Table of Contents delay or halt clinical trials and could result in more restrictive labels or the delay or denial of regulatory approvals by regulatory authorities.
Additionally, under our amended and restated bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty.
Additionally, under our amended 108 Table of Contents and restated bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty.
Regeneron retains worldwide rights to develop and commercialize ARCALYST for local administration to the eye and ear and oncology. Additionally, Regeneron retains the right to develop and commercialize ARCALYST for all applications in the Middle East and North Africa.
Additionally, under the Regeneron Agreement, Regeneron retains worldwide rights to develop and commercialize ARCALYST for local administration to the eye and ear and oncology and the right to develop and commercialize ARCALYST for all applications in the Middle East and North Africa.
Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
The Supreme Court of the United States has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
It may be difficult for investors to enforce in the United States judgments obtained in U.S. courts against us based on the civil liability provisions of the U.S. securities laws.
It may be difficult for investors to enforce in the United States judgments obtained in United States courts against us based on the civil liability provisions of the United States securities laws.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeKiniksa US has also leased approximately 4,400 square feet of office space in San Diego, California which expires in January 2024. Further, Kiniksa Pharmaceuticals (UK), Ltd., our wholly owned subsidiary (“Kiniksa UK”), has leased approximately 164 square meters of office space in London, UK which expires in November 2025 with an option for early termination in November 2023.
Biggest changeKiniksa US has also leased approximately 2,000 square feet of office space in San Diego, California which expires in March 2025. Further, Kiniksa Pharmaceuticals (UK), Ltd., our wholly owned subsidiary (“Kiniksa UK”), has leased approximately 164 square meters of office space in London, UK which expires in November 2025.
ITEM 2. PROPERTIES. Our U.S. headquarters are located in Lexington, Massachusetts, where Kiniksa Pharmaceuticals Corp., our wholly owned subsidiary (“Kiniksa US”), has leased approximately 55,924 square feet of office and laboratory space, under a lease which expires in August 2024.
ITEM 2. PROPERTIES. Our United States headquarters are located in Lexington, Massachusetts, where Kiniksa Pharmaceuticals Corp., our wholly owned subsidiary (“Kiniksa US”), has leased approximately 55,924 square feet of office and laboratory space, under a lease which expires in August 2028.
While we believe that our offices are sufficient to meet our current needs, we may in the future seek office space in the US or internationally to facilitate our operations. ​ ITEM 3. LEGAL PROCEEDINGS. We are not party to any material legal proceedings. ​ ​ ITEM 4. MINE SAFETY DISCLOSURES.
While we believe that our offices are sufficient to meet our current needs, we may in the future seek additional or alternative office space in the United States or internationally to facilitate our operations, as needed. ​ ITEM 3. LEGAL PROCEEDINGS. We are not party to any material legal proceedings. ​ ​ ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable. 123 Table of Contents ​ ​ ​ PART II
Not applicable. 113 Table of Contents ​ ​ ​ PART II
Added
Kiniksa UK’s Swiss branch office has leased approximately 57 square meters of office space in Zug, Switzerland, which can be terminated upon six months’ notice.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures ​ 123 ​ ​ ​ ​ ​ ​ PART II ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 124 ​ ​ ​
Biggest changeItem 4. Mine Safety Disclosures ​ 113 ​ ​ ​ ​ ​ ​ PART II ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 114 ​ ​ ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrincipal Market Our Class A common shares are listed on The Nasdaq Global Select Market under the symbol “KNSA.” ​ Holders ​ As of February 28, 2023, there were nine holders of record of our Class A common shares, four holders of record of our Class B common shares, three holders of record of our Class A1 common shares and two holders of record of our Class B1 common shares.
Biggest changePrincipal Market Our Class A common shares are listed on The Nasdaq Global Select Market under the symbol “KNSA.” ​ Holders ​ As of February 23, 2024, there were eight holders of record of our Class A common shares, three holders of record of our Class B common shares, two holders of record of our Class A1 common shares and two holders of record of our Class B1 common shares.
Issuer Purchases of Equity Securities ​ None. ​ ITEM 6. RESERVED. ​ ​ 124 Table of Contents
Issuer Purchases of Equity Securities ​ None. ​ ITEM 6. RESERVED. ​ ​ ​ 114 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe expect to incur expenses as we: ● conduct our current and planned clinical trials for our current and future product candidates; ● increase clinical and commercial manufacturing capabilities or make arrangements with additional third party manufacturers to successfully manufacture our products and product candidates; ● develop and timely deliver clinical grade and commercial grade product formulations that can be used in our clinical trials and for commercial sale; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● maintain, establish, and/or expand a sales, marketing, medical affairs and distribution infrastructure to commercialize ARCALYST or any of our current or future product candidates for which we may obtain marketing approval and intend to commercialize on our own; ● launch commercial sales of any of our current or future product candidates, if and when approved, whether alone or in collaboration with others; ● make milestone or other payments under any current or future license, acquisition, collaboration or other strategic transaction agreements; 135 Table of Contents ● expand our operational, financial and management systems and increase personnel globally to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; ● maintain, expand and protect our intellectual property portfolio; and ● in-license or acquire other product candidates and technologies or their related businesses, if we determine to do so.
Biggest changeWe expect to incur expenses as we: ● support our sales, marketing and distribution capabilities, infrastructure and organization to commercialize ARCALYST and any product candidates for which we may obtain marketing approval; ● conduct new and ongoing research and pre-clinical and clinical development of our product candidates, including our Phase 2 clinical trial for abiprubart ; ● manufacture our products and product candidates for clinical or commercial use, increase our manufacturing capabilities, add additional manufacturers or suppliers and perform activities related to our technology transfer of the process for manufacturing ARCALYST drug substance; ● seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any; ● make milestone or other payments under any current or future license, acquisition, collaboration or other strategic transaction agreement; ● seek to identify, assess and study new or expanded indications for our products or product candidates, new or alternative dosing levels and frequency for our products or product candidates, or new or alternative administration of our products or product candidates, including method, mode or delivery device; ● seek to identify, assess, acquire or develop additional product candidates; ● enter into licensing, acquisition, collaboration or other strategic transaction agreements; ● seek to maintain, protect and expand our intellectual property portfolio; ● seek to attract and retain skilled personnel; ● create additional infrastructure to support our product development and commercialization efforts; and ● experience delays or encounter issues with any of the above, including but not limited to failed trials, complex results, safety issues, regulatory challenges that require longer follow-up of existing trials, additional major trials, additional supportive trials in order to pursue marketing approval, a pandemic or other outbreak of disease, or the global economic slowdown and rising inflation.
This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs.
This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs.
Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the (provision) benefit for income taxes.
Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the benefit (provision) for income taxes.
These expenses may include: ● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval; ● expenses incurred under agreements with CROs that are primarily engaged in the oversight and conduct of our clinical trials and CMOs that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs for our product candidates; ● other costs related to acquiring and manufacturing preclinical and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services; ● payments made in cash or equity securities under third-party licensing, acquisition and other similar agreements; ● employee-related expenses, including salaries and benefits, travel and share-based compensation expense for employees engaged in research and development functions; ● costs related to compliance with regulatory requirements; and ● allocated facilities-related costs, which include rent and utilities, depreciation and other expenses.
These expenses may include: ● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval; ● expenses incurred under agreements with CROs that are primarily engaged in the oversight and conduct of our clinical trials and CDMOs that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs for our product candidates; ● other costs related to acquiring and manufacturing preclinical and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services; ● payments made in cash or equity securities under third party licensing, acquisition and other similar agreements; ● employee-related expenses, including salaries and benefits, travel and share-based compensation expense for employees engaged in research and development functions; ● costs related to compliance with regulatory requirements; and ● allocated facilities-related costs, which include rent and utilities, depreciation and other expenses.
In addition, if we obtain regulatory approval for any of our current or future product candidates, pursue additional indications for our products or any of our current or future product candidates, we expect to incur significant expenses related to product development and manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
In addition, if we obtain regulatory approval for any of our current or future product candidates, pursue additional indications or additional territories for our products or any of our current or future product candidates, we expect to incur significant expenses related to product development and manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products. ​ As of December 31, 2022, a 10% change in our product revenue allowance and reserve would not result in a material change in our net revenue. ​ Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses.
Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products. ​ As of December 31, 2023, a 10% change in our product revenue allowance and reserve would not result in a material change in our net revenue. ​ Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses.
ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. ​ Product Revenue, Net Net revenue from product sales is recognized at the transaction price when the specialty pharmacy or specialty distributors obtains control of our products, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider. ​ Our net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees.
ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. ​ ​ 126 Table of Contents Product Revenue, Net Net revenue from product sales is recognized at the transaction price when the specialty pharmacy or specialty distributors obtains control of our products, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider. ​ Our net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities.
Significant judgment is required in assessing both positive and negative evidence available and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recognized against our income tax provision in the period of such reversal.
Significant judgment is required in assessing both positive and negative evidence available and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recorded in our income tax benefit (provision) in the period of such reversal.
Financing Activities During the years ended December 31, 2022 and 2021, net cash provided by financing activities was $2.5 million and $5.9 million, respectively, consisting of proceeds from the exercise of employee share options and our 2018 Employee Share Purchase Plan (the “2018 ESPP”).
Financing Activities During the years ended December 31, 2023, 2022 and 2021, net cash provided by financing activities was $1.5 million, $2.5 million and $5.9 million, respectively, consisting of proceeds from the exercise of employee share options and our 2018 Employee Share Purchase Plan (the “2018 ESPP”).
Huadong will also be obligated to pay us 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.
Huadong will also be obligated to pay us tiered percentage royalties on a Huadong Licensed Product-by-Huadong Licensed Product basis ranging from the low-teens to low-twenties on 116 Table of Contents 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.
Such costs include but are not limited to (i) our cost of goods sold for product used, sold or otherwise distributed for patient use by us; (ii) customary commercialization expenses, including the cost of our field force, and (iii) our cost to market, advertise and otherwise promote ARCALYST, with such costs identified in subsection (iii) 127 Table of Contents subject to specified limits.
Such costs include but are not limited to (i) our cost of goods sold for product used, sold or otherwise distributed for patient use by us; (ii) customary commercialization expenses, including the cost of our field force, and (iii) our cost to market, advertise and otherwise promote ARCALYST, with such costs identified in subsection (iii) subject to specified limits.
Overview We are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need.
Overview We are 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.
ARCALYST is sold through a third party logistics provider that distributes primarily through a network of authorized specialty pharmacies and specialty distributors (collectively, “customers”), which deliver the medication to patients by mail. ​ Net revenue from product sales is recognized at the transaction price when the specialty pharmacy or specialty distributors obtains control of our product, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider. ​ Our net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees.
ARCALYST is sold through a third party logistics provider that distributes primarily through a select network of specialty pharmacies (collectively, “customers”), which deliver the medication to patients by mail. ​ Net revenue from product sales is recognized at the transaction price when the customer obtains control of our product, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider. ​ Our net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services 127 Table of Contents performed may vary and may result in reporting amounts that are too high or too low in any particular period.
Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our annual consolidated financial statements included elsewhere in this Annual Report. 138 Table of Contents ​ I TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our annual consolidated financial statements included elsewhere in this Annual Report. I TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products. ​ License and collaboration revenue ​ License and collaboration revenue includes amounts recognized related to upfront payments, royalty revenue, and milestone payments. 126 Table of Contents ​ In February 2022, we entered into the Huadong Collaboration Agreements, pursuant to which we granted Huadong exclusive rights to develop and commercialize the Huadong Licensed Products in the Huadong Territory.
Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products. ​ License and collaboration revenue ​ License and collaboration revenue includes amounts recognized related to upfront payments, royalty revenue, milestone payments and products sold under collaboration agreements. ​ In February 2022, we entered into the Huadong Collaboration Agreements, pursuant to which we granted Huadong exclusive rights to develop and commercialize the Huadong Licensed Products in the Huadong Territory.
We received FDA approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older in March 2021. Recurrent pericarditis is a painful inflammatory cardiovascular disease with an estimated U.S. prevalent population of approximately 40,000 patients seeking and receiving medical treatment.
We received FDA approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older in March 2021. Recurrent pericarditis is a painful inflammatory cardiovascular disease with an estimated United States prevalent population of approximately 40,000 patients seeking and receiving medical treatment.
We expect to incur operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and, ultimately, seek regulatory approval. In addition, we expect to continue to incur significant expenses related to product manufacturing, including potential technology transfer costs as early as March 2023, marketing, sales and distribution of ARCALYST.
We expect to incur operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and, ultimately, seek regulatory approval. In addition, we expect to continue to incur significant expenses related to product manufacturing, including technology transfer costs, marketing, sales and distribution of ARCALYST.
Examples of estimated accrued research and development expenses include fees paid to: 137 Table of Contents ● vendors, including research laboratories, in connection with preclinical development activities; ● CROs and investigative sites in connection with preclinical studies and clinical trials; ● third parties in the connection with the achievement of milestones due under license acquisition and other similar agreements; and ● CMOs in connection with drug substance and drug product formulation and manufacturing of materials.
Examples of estimated accrued research and development expenses include fees paid to: ● vendors, including research laboratories, in connection with preclinical development activities; ● CROs and investigative sites in connection with preclinical studies and clinical trials; ● third parties in the connection with the achievement of milestones due under license acquisition and other similar agreements; and ● CDMOs in connection with drug substance and drug product formulation and manufacturing of materials.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biologic products, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements may be impacted by a number of factors, including those described in Part I, Item 1A. “Risk Factors” in this Annual Report.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biologic products, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements may be impacted by a number of factors, including those described in Part I, Item 1A.
However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations. ​ ​
However, because of the short-term nature of the instruments in our portfolio, an immediate 100 basis point change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations. ​
The license and collaboration revenue for the year ended December 31, 2022 primarily consisted of $10.0 million in revenue recognized upon the signing of the mavrilimumab Huadong Collaboration Agreement in February of 2022 and $87.7 million for revenue related to the Genentech License Agreement.
We reported $97.7 million of license and collaboration revenue for the year ended December 31, 2022, which primarily consisted of $87.7 million for revenue related to the Genentech License Agreement and $10.0 million in revenue recognized upon the signing of the mavrilimumab Huadong Collaboration Agreement in February of 2022.
Our actual results may differ from these estimates under different assumptions or conditions. 136 Table of Contents While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. ​ Revenue Recognition ​ ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied. ​ We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. ​ Revenue Recognition ​ ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied. ​ We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
The increase was due primarily to higher interest rates on U.S. Treasury notes and a higher average balance in short term investments. Other income was $0.1 million for the year ended December 31, 2021, compared to other income of $1.1 million for the year ended December 31, 2020. The decrease was due primarily to lower interest rates on U.S.
The increase was due primarily to higher interest rates on U.S. Treasury notes and a higher average balance in short term investments. Other income was $1.3 million for the year ended December 31, 2022, compared to other income of $0.1 million for the year ended December 31, 2021. The increase was due primarily to higher interest rates on U.S.
ARCALYST is commercially available across the United States through a network of distributors. ARCALYST is also approved in the United States for the treatment of CAPS, specifically Familial Cold Autoinflammatory Syndrome and Muckle-Wells Syndrome in adults and children 12 years and older, and the maintenance of remission in DIRA in adults and children weighing 10 kg or more.
ARCALYST is commercially available across the United States through a network of distributors. ARCALYST is also approved in the United States for the treatment of CAPS, including FCAS and Muckle-Wells Syndrome in adults and children 12 years and older, and the maintenance of remission in DIRA in adults and children weighing 10 kg or more.
The increase of $12.0 million in 2022 from 2021 was primarily due to an increase of $8.8 million in sales and marketing associated with the commercial operations of ARCALYST.
The increase of $12.0 million in 2022 from 2021 was primarily due to an increase of $8.8 million in sales and marketing associated with our first full year of commercial operations of ARCALYST.
Additionally, we expect to continue to incur costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.
Additionally, we expect to continue to incur costs associated with operating as a public 124 Table of Contents company, including significant legal, accounting, investor relations and other expenses.
Collaboration expenses Collaboration expenses consists of Regeneron’s share of the profit related to ARCALYST sales under the Regeneron Agreement. We evenly split profits on sales of ARCALYST with Regeneron, where profits are determined after deducting from net sales of ARCALYST certain costs related to the manufacturing and commercialization of ARCALYST.
Collaboration expenses Collaboration expenses consist of Regeneron’s share of the profit related to ARCALYST sales under the Regeneron Agreement and the cost of products sold under collaboration agreements. We evenly split profits on sales of ARCALYST with Regeneron, where profits are determined after deducting from net sales of ARCALYST certain costs related to the manufacturing and commercialization of ARCALYST.
Personnel-related costs for the years ended December 31, 2022, 2021 and 2020 included share-based compensation of $6.8 million, $8.5 million and $8.9 million, respectively. ​ Selling, General and Administrative Expenses Selling, general and administrative expenses were $98.0 million, $85.9 million and $45.3 million for the years ended December 31, 2022, 2021 and 2020.
Personnel-related costs for the years ended December 31, 2023, 2022 and 2021 included share-based compensation of $5.5 million, $6.8 million and $8.5 million, respectively. ​ Selling, General and Administrative Expenses Selling, general and administrative expenses were $129.4 million, $98.0 million and $85.9 million for the years ended December 31, 2023, 2022 and 2021.
Personnel-related costs for the years ended December 31, 2022, 2021 and 2020 included share-based compensation of $17.7 million, $16.5 million and $12.0 million, respectively. Other Income Other income was $1.3 million for the year ended December 31, 2022, compared to other income of $0.1 million for the year ended December 31, 2021.
Personnel-related costs for the years ended December 31, 2023, 2022 and 2021 included share-based compensation of $19.8 million, $17.7 million and $16.5 million, respectively. ​ Other Income Other income was $8.5 million for the year ended December 31, 2023, compared to other income of $1.3 million for the year ended December 31, 2022.
We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical and clinical development, process development and manufacturing activities. 128 Table of Contents Research and development activities are central to our business.
We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical and clinical development, process development and manufacturing clinical and preclinical materials. Research and development activities are central to our business.
We will be eligible to receive up to approximately $600.0 million in contingent payments, including specified development, regulatory and sales-based milestones as well as royalties in the low double digits to mid-teens on annual net sales, in each case before fulfilling our upstream financial obligations.
We will be eligible to receive up to a total of approximately $600.0 million in contingent payments, including specified development, regulatory and sales-based milestones, of which approximately $575.0 million remain as of December 31, 2023, as well as royalties in the low double digits to mid-teens on annual net sales, in each case before fulfilling our upstream financial obligations.
Interest Rate Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2022, our cash, cash equivalents and short-term investments consisted of money market funds and U.S. Treasury notes.
Interest Rate Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2023, our cash, cash equivalents and short-term investments consisted of money market funds and United States Treasury notes.
We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates. As of December 31, 2022, we had cash, cash equivalents and short-term investments of $190.6 million.
We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates. As of December 31, 2023, we had cash, cash equivalents and short-term investments of $206.4 million.
This uncertainty is due to the numerous risks and uncertainties, including those described in Part I, Item 1A.
This uncertainty is due to the numerous risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in this Annual Report.
Our portfolio of immune-modulating assets, ARCALYST® (rilonacept), KPL-404 and mavrilimumab, are based on strong biologic rationale or validated mechanisms, target a spectrum of underserved cardiovascular and autoimmune conditions, and offer the potential for differentiation. ​ ARCALYST is an interleukin-1α and interleukin-1β cytokine trap. In 2017, we licensed ARCALYST from Regeneron, who discovered and initially developed the drug.
Our portfolio of immune-modulating assets, ARCALYST® (rilonacept), abiprubart, and mavrilimumab, is based on strong biologic rationale or validated mechanisms, targets a spectrum of underserved cardiovascular and autoimmune conditions, and offers the potential for differentiation. ARCALYST is an interleukin-1α and interleukin-1β cytokine trap. In 2017, we licensed ARCALYST from Regeneron, which discovered and initially developed the drug.
Until such time, if ever, as we can generate substantial and sustained product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, or other sources, including, licensing, collaboration, marketing, distribution or other strategic transactions or arrangements with third parties.
“ Risk Factors ” in this Annual Report. 125 Table of Contents Until such time, if ever, as we can generate substantial and sustained product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, or other sources, including, licensing, collaboration, marketing, distribution or other strategic transactions or arrangements with third parties.
To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. As of December 31, 2022, we have accrued $8.4 million of estimated research and development expenses.
To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. As of December 31, 2023, we have accrued $7.9 million of estimated research and development expenses.
We are responsible for sales and distribution of ARCALYST in all approved indications in the United States, and evenly split profits on sales as well as third-party proceeds with Regeneron. In February 2022, we granted Huadong exclusive rights to develop and commercialize ARCALYST in the Asia Pacific region, excluding Japan. KPL-404 is an investigational monoclonal antibody inhibitor of CD40-CD154 interaction.
We are responsible for sales and distribution of ARCALYST in all approved indications in the United States, and evenly split profits on sales as well as third party proceeds with Regeneron. In February 2022, we granted Huadong exclusive rights to develop and commercialize ARCALYST in the Asia Pacific region, excluding Japan.
The CD40-CD154 interaction is a key T-cell co-stimulatory signal critical for B-cell maturation, immunoglobulin class switching and Type 1 immune response. We believe disrupting the CD40-CD154 interaction is an attractive approach to address multiple autoimmune disease pathologies such as RA, Sjogren’s syndrome, Graves’ disease and systemic lupus erythematosus.
The CD40-CD154 interaction is a key T-cell co-stimulatory signal critical for B-cell maturation, immunoglobulin class switching and Type 1 immune response. We believe disrupting the CD40-CD154 costimulatory interaction is an attractive approach to address multiple autoimmune disease pathologies.
During the year ended December 31, 2022, expenses related primarily to the wind-down activities of the Phase 3 portion of our clinical trial in COVID-19 related ARDS. During the year ended December 31, 2021, expenses primarily related to our Phase 2/3 clinical trial in COVID-19 related ARDS.
During the year ended December 31, 2023, expenses related primarily to intellectual property maintenance. During the year ended December 31, 2022, expenses related primarily to the wind-down activities of the Phase 3 portion of our clinical trial of mavrilimumab in COVID-19 related ARDS.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.
We recognized the $10.0 million related to the mavrilimumab license during the year ended December 31, 2022. We deferred the $12.0 million related to the rilonacept license agreement as of December 31, 2022, as no materials were shipped during the year ended December 31, 2022.
We recognized the $10.0 million related to the mavrilimumab license during the year ended December 31, 2022. We deferred the $12.0 million related to the rilonacept license agreement as of December 31, 2023, and will recognize revenue as materials are shipped.
Research and development expenses were $99.3 million for the year ended December 31, 2021, compared to $112.0 million for the year ended December 31, 2020, or a decrease of $12.7 million. Direct costs for our rilonacept program were $0.9 million, $10.8 million and $25.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Research and development expenses were $65.5 million for the year ended December 31, 2022, compared to $99.3 million for the year ended December 31, 2021, or a decrease of $33.8 million. Direct costs for our rilonacept program were $2.6 million, $0.9 million and $10.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.
In 2019, we acquired all of the outstanding securities of Primatope , the company that owned or controlled the intellectual property related to KPL-404. In connection with our acquisition of Primatope, we acquired an exclusive world-wide license to KPL-404 from BIDMC .
Abiprubart is an investigational monoclonal antibody inhibitor of CD40-CD154 costimulatory interaction. In 2019, we acquired all of the outstanding securities of Primatope , the company that owned or controlled the intellectual property related to abiprubart. In connection with our acquisition of Primatope, we acquired an exclusive world-wide license to abiprubart from BIDMC .
We also evenly split with Regeneron any proceeds received by us from any licensees, sublicensees and distributors in consideration for the sale, license or other disposition of rights with respect to ARCALYST, including upfront payments, milestone payments and royalties.
We also evenly split with Regeneron any proceeds received by us from any licensees, sublicensees and distributors in consideration for the sale, license or other disposition of rights with respect to ARCALYST, including upfront payments, milestone payments and royalties. ​ 117 Table of Contents Research and Development Expenses Research and development expenses consist primarily of costs incurred in connection with the research and development of our product candidates.
Direct costs for our vixarelimab program were $12.8 million, $10.7 million and $8.8 million for the year ended December 31, 2022, 2021 and 2020, respectively. During the year ended December 31, 2022, expenses incurred related primarily to our ongoing Phase 2b clinical trial in prurigo nodularis.
During the year ended December 31, 2021, expenses primarily related to our Phase 2/3 clinical trial in COVID-19 related ARDS. Direct costs for our vixarelimab program were $7.7 million, $12.8 million and $10.7 million for the year ended December 31, 2023, 2022 and 2021, respectively.
We believe our estimates for the valuation allowances against certain deferred tax assets recognized in our financial statements are appropriate based upon our assessment of the factors mentioned above. We released a valuation allowance of $185.5 million during the year-ended December 31, 2022.
We believe our estimates for the valuation allowances against certain deferred tax assets recognized in our financial statements are appropriate based upon our assessment of the factors mentioned above.
As a result, we have not recorded any income tax benefits from our losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards are currently available to us for those losses, while our assets remain in Bermuda.
As a result, we have not recorded any income tax benefits from our losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards are currently available to us for those losses. In December 2023, Bermuda passed legislation enacting a corporate income tax effective in 2025 on companies that meets certain requirements.
During the year ended December 31, 2022, expenses incurred primarily related to the first two cohorts of our Phase 2 trial in RA, which was initiated in December 2021. During the year ended December 31, 2021, expenses incurred primarily related to manufacturing of drug product supply and other start up activities for our anticipated Phase 2 trial in RA.
During the year ended December 31, 2022, expenses incurred primarily related to the first two cohorts of our Phase 2 clinical trial of abiprubart in RA, which was initiated in December 2021.
“Risk Factors” in this Annual Report. ​ Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and benefits, travel and share based compensation expense for personnel in selling, marketing, medical, executive, business development, finance, human resources, legal and support personnel functions.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and benefits, including share based compensation expense for personnel in selling, marketing, medical, executive, business development, finance, human resources, legal and support personnel functions. Selling, general and administrative expenses also include external commercialization, marketing, and professional fees for legal, patent, and accounting services.
During the year ended December 31, 2022, expenses primarily related to close-out activities of our RHAPSODY trial, our global, pivotal Phase 3 clinical trial in recurrent pericarditis. During the year ended December 31, 2021, expenses primarily related to the completion of RHAPSODY and the transition to the long-term extension portion of the trial.
During the year ended December 31, 2023, expenses primarily related to the purchase of supply to support life-cycle management. During the year ended December 31, 2022, expenses primarily related to close-out activities of our RHAPSODY trial, our global, pivotal Phase 3 clinical trial in recurrent pericarditis.
In addition, should there be a transfer of technology related to the manufacture of ARCALYST, then, to the extent permitted in accordance with the Regeneron Agreement, the fully-burdened costs of each of us and Regeneron incurred in performing (or having performed) such technology transfer shall also be deducted from net sales of ARCALYST to determine profit.
With respect to the technology transfer of ARCALYST drug substance manufacturing initiated by Regeneron in March 2023, to the extent permitted by the Regeneron Agreement, the fully-burdened costs of each of us and Regeneron incurred in performing such technology transfer shall also be deducted from net sales of ARCALYST to determine profit.
Our net income (losses) were $183.4 million, ($157.9) million and ($161.4) million for the years ended December 31, 2022, 2021 and 2020, respectively. We expect to incur operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and, ultimately, seek regulatory approval.
Our net income (losses) were $14.1 million, $183.4 million and ($157.9) million for the years ended December 31, 2023, 2022 and 2021, respectively. We expect to incur significant operating losses for the foreseeable future.
Our wholly owned U.S. subsidiaries, Kiniksa US, and Primatope are subject to federal and state income taxes in the United States. Our wholly owned subsidiary Kiniksa UK, and its wholly owned subsidiaries, Kiniksa Pharmaceuticals (Germany) GmbH, Kiniksa Pharmaceuticals (France) SARL, and Kiniksa Pharmaceuticals GmbH are subject to taxation in their respective countries.
Our wholly owned subsidiary Kiniksa UK, its Swiss branch office, and Kiniksa UK’s wholly owned subsidiaries, Kiniksa Pharmaceuticals (Germany) GmbH, Kiniksa Pharmaceuticals (France) SARL, and Kiniksa Pharmaceuticals, GmbH are subject to taxation in their respective countries.
In addition, payments and royalties arising from out-licensing, collaboration or other similar agreements, though potentially substantial, are often isolated events and cannot be relied upon to generate significant and sustained revenue.
While our ARCALYST collaboration with 115 Table of Contents Regeneron has achieved profitability, there is no guarantee that our ARCALYST collaboration with Regeneron will remain profitable in the future. In addition, payments and royalties arising from out-licensing, collaboration or other similar agreements, though potentially substantial, are often isolated events and cannot be relied upon to generate significant and sustained revenue.
Under the current laws of Bermuda, there is no corporate income tax levied on an exempted company’s income, resulting in an effective zero percent tax rate.
Income Taxes Because our parent company, Kiniksa Pharmaceutical, Ltd. (“Kiniksa Bermuda”) is an exempted company incorporated under the laws of Bermuda, we are principally subject to taxation in Bermuda. Under the current laws of Bermuda, there is no corporate income tax levied on an exempted company’s income, resulting in an effective zero percent tax rate.
We expect to continue to incur collaboration expenses associated with sales of ARCALYST. ​ Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022/2021 ​ 2021/2020 ​ ​ Years Ended ​ Comparison ​ Comparison ​ December 31, ​ Increase/(Decrease) ​ Increase/(Decrease) ​ ​ 2022 2021 2020 ​ $ % $ % ​ ​ (in thousands) ​ (in thousands, except percentages) Direct research and development expenses by program: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rilonacept ​ $ 853 ​ $ 10,842 ​ $ 25,729 ​ $ (9,989) ​ (92)% ​ $ (14,887) ​ (58)% KPL-404 ​ 11,563 ​ ​ 5,316 ​ ​ 3,738 ​ ​ 6,247 ​ 118% ​ ​ 1,578 ​ 42% Mavrilimumab ​ 6,379 ​ ​ 30,704 ​ ​ 25,862 ​ ​ (24,325) ​ (79)% ​ ​ 4,842 ​ 19% Vixarelimab ​ 12,809 ​ ​ 10,739 ​ ​ 8,796 ​ ​ 2,070 ​ 19% ​ ​ 1,943 ​ 22% Unallocated research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personnel related (including share-based compensation) ​ 22,548 ​ ​ 27,736 ​ ​ 33,489 ​ ​ (5,188) ​ (19)% ​ ​ (5,753) ​ (17)% Other ​ 11,338 ​ ​ 13,960 ​ ​ 14,428 ​ ​ (2,622) ​ (19)% ​ ​ (468) ​ (3)% Total research and development expenses ​ $ 65,490 ​ $ 99,297 ​ $ 112,042 ​ $ (33,807) ​ (34)% ​ $ (12,745) ​ (11)% ​ Research and development expenses were $65.5 million for the year ended December 31, 2022, compared to $99.3 million for the year ended December 31, 2021, or a decrease of $33.8 million.
The increase of $23.2 million in 2022 from 2021 relates primarily to an increase in revenue from the sales of ARCALYST and to a $6.0 million payment due to Regeneron related to the rilonacept Huadong Collaboration Agreement. ​ Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023/2022 ​ 2022/2021 ​ ​ Years Ended ​ Comparison ​ Comparison ​ December 31, ​ Increase/(Decrease) ​ Increase/(Decrease) ​ ​ 2023 2022 2021 $ % $ % ​ ​ (in thousands) ​ (in thousands, except percentages) Direct research and development expenses by program: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rilonacept ​ $ 2,628 ​ $ 853 ​ $ 10,842 ​ $ 1,775 ​ 208% ​ $ (9,989) ​ (92)% Abiprubart ​ 28,388 ​ ​ 11,563 ​ ​ 5,316 ​ ​ 16,825 ​ 146% ​ ​ 6,247 ​ 118% Mavrilimumab ​ 768 ​ ​ 6,379 ​ ​ 30,704 ​ ​ (5,611) ​ (88)% ​ ​ (24,325) ​ (79)% Vixarelimab ​ 7,717 ​ ​ 12,809 ​ ​ 10,739 ​ ​ (5,092) ​ (40)% ​ ​ 2,070 ​ 19% Unallocated research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personnel related (including share-based compensation) ​ 22,739 ​ ​ 22,548 ​ ​ 27,736 ​ ​ 191 ​ 1% ​ ​ (5,188) ​ (19)% Other ​ 13,857 ​ ​ 11,338 ​ ​ 13,960 ​ ​ 2,519 ​ 22% ​ ​ (2,622) ​ (19)% Total research and development expenses ​ $ 76,097 ​ $ 65,490 ​ $ 99,297 ​ $ 10,607 ​ 16% ​ $ (33,807) ​ (34)% ​ Research and development expenses were $76.1 million for the year ended December 31, 2023, compared to $65.5 million for the year ended December 31, 2022, or an increase of $10.6 million.
We have entered into lease agreements for office and laboratory space, and vehicles, with total future lease payments of $6.2 million, of which $3.5 million are due within one year. These agreements impact our short-term and long-term liquidity and capital needs.
We have committed to minimum payments to Regeneron of $24.9 million, all of which are due within one year. We have entered into lease agreements for office and laboratory space, and vehicles, with total future lease payments of $14.2 million, $3.0 million of which are due within one year.
As of December 31, 2022, we had cash, cash equivalents and short-term investments of $190.6 million. ​ ​ 133 Table of Contents Cash Flows The following table summarizes our cash flows for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2022 2021 2020 ​ ​ (in thousands) Net cash provided by (used in) operating activities ​ $ 5,807 ​ $ (126,298) ​ $ (136,532) Net cash provided by (used in) investing activities ​ (8,078) ​ 128,635 ​ (23,444) Net cash provided by financing activities ​ 2,516 ​ 5,885 ​ 227,086 Net increase in cash and cash equivalents and restricted cash ​ $ 245 ​ $ 8,222 ​ $ 67,110 Operating Activities During the year ended December 31, 2022, operating activities provided $5.8 million of cash which primarily consisted of our net income of $183.4 million, adjusted for non-cash items of $155.0 million and working capital decreases of $22.6 million.
As of December 31, 2023, we had cash, cash equivalents and short-term investments of $206.4 million. 123 Table of Contents Cash Flows The following table summarizes our cash flows for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2023 2022 2021 ​ ​ (in thousands) Net cash provided by (used in) operating activities ​ $ 13,301 ​ $ 5,807 ​ $ (126,298) Net cash provided by (used in) investing activities ​ (29,557) ​ (8,078) ​ 128,635 Net cash provided by financing activities ​ 1,495 ​ 2,516 ​ 5,885 Net increase in cash and cash equivalents and restricted cash ​ $ (14,761) ​ $ 245 ​ $ 8,222 Operating Activities Net cash provided by operations was $13.3 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $5.8 million for the year ended December 31, 2022.
During the year ended December 31, 2020, expenses incurred primarily related to preclinical and clinical trial for our Phase 1 trial of KPL-404 in healthy volunteers, including toxicology costs. Direct costs of our mavrilimumab program were $6.4 million, $30.7 million and $25.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
During the year ended December 31, 2021, expenses incurred primarily related to manufacturing of drug product supply and other start up activities for our anticipated Phase 2 clinical trial of abiprubart in RA. Direct costs of our mavrilimumab program were $0.8 million, $6.4 million and $30.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
As a result, we expect that our research and development expenses will be substantial over the next several years as we conduct our ongoing and/or planned clinical trials for our product candidates as well as conduct other preclinical and clinical development, and make regulatory filings for our product candidates.
As a result, we expect that our research and development expenses will be substantial over the next several years as we conduct our ongoing and/or planned clinical trials for our product candidates, as well as conduct other preclinical and clinical development, and make regulatory filings for our product candidates. 118 Table of Contents At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of our current or future product candidates or when, if ever, we will realize revenue from the sale of our current or future product candidates.
While we still maintain a full valuation allowance on our US deferred tax assets as of December 31, 2022, based on current US forecasted income, we may release our valuation allowance on US deferred tax assets in the future. ​ For the year ended December 31, 2021, we recorded a provision for income taxes of $1.4 million relating primarily to U.S. current taxes from the cost-plus arrangement less amounts related to the impact of Foreign Derived Intangible Income (“FDII”) deduction and U.S. federal and state research credits.
Our UK deferred tax asset consists primarily of the tax basis of the intangible assets that were transferred to our wholly-owned UK subsidiary in 2021 and 2022. ​ For the year ended December 31, 2021, we recorded a provision for income taxes of $1.4 million relating primarily to U.S. current taxes from the cost-plus arrangement less amounts related to the impact of FDII deduction and R&D Credits.
During the year ended December 31, 2021, expenses incurred related primarily to the initiation of our Phase 2b clinical trial in prurigo nodularis.
During the year ended December 31, 2021, expenses incurred related primarily to the initiation of our Phase 2b clinical trial of vixarelimab in prurigo nodularis. Unallocated research and development expenses were $36.6 million, $33.9 million and $41.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Our income tax benefit relates mainly to the release of the valuation allowance on our UK deferred tax assets partially offset by provision for income taxes relating to U.S. and UK taxable income. ​ 129 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022, 2021 and 2020 The following table summarizes our results of operations for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022/2021 ​ 2021/2020 ​ ​ Years Ended ​ Comparison ​ Comparison ​ ​ December 31, ​ Increase/(Decrease) ​ Increase/(Decrease) ​ 2022 2021 2020 $ % $ % ​ ​ (in thousands) ​ (in thousands, except percentages) Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 122,524 ​ $ 38,544 ​ $ — ​ $ 83,980 ​ 218% ​ $ 38,544 ​ 100% License and collaboration revenue ​ ​ 97,656 ​ ​ — ​ ​ — ​ ​ 97,656 ​ 100% ​ ​ — ​ 0% Total revenue ​ ​ 220,180 ​ ​ 38,544 ​ ​ — ​ ​ 181,636 ​ 471% ​ ​ 38,544 ​ 100% Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold ​ ​ 22,895 ​ ​ 9,100 ​ ​ — ​ ​ 13,795 ​ 152% ​ ​ 9,100 ​ 100% Collaboration expenses ​ ​ 24,071 ​ ​ 835 ​ ​ — ​ ​ 23,236 ​ 2783% ​ ​ 835 ​ 100% Research and development ​ ​ 65,490 ​ ​ 99,297 ​ ​ 112,042 ​ ​ (33,807) ​ (34)% ​ ​ (12,745) ​ (11)% Selling, general and administrative ​ 97,951 ​ 85,948 ​ 45,321 ​ 12,003 ​ 14% ​ 40,627 ​ 90% Total operating expenses ​ 210,407 ​ 195,180 ​ 157,363 ​ 15,227 ​ 8% ​ 37,817 ​ 24% Income (loss) from operations ​ 9,773 ​ (156,636) ​ (157,363) ​ 166,409 ​ (106)% ​ 727 ​ 0% Other income ​ 1,253 ​ 97 ​ 1,134 ​ 1,156 ​ 1192% ​ (1,037) ​ (91)% Income (loss) before income taxes ​ 11,026 ​ (156,539) ​ (156,229) ​ 167,565 ​ (107)% ​ (310) ​ 0% Benefit (provision) for income taxes ​ 172,337 ​ (1,385) ​ (5,152) ​ 173,722 ​ (12,543)% ​ 3,767 ​ (73)% Net income (loss) ​ $ 183,363 ​ $ (157,924) ​ $ (161,381) ​ $ 341,287 ​ (216)% ​ $ 3,457 ​ (2)% ​ ​ Product Revenue, Net We recognized net revenue from the sale of ARCALYST of $122.5 million for the year ended December 31, 2022, compared to $38.5 million for the year ended December 31, 2021, an increase of $84.0 million.
In connection with each of the foregoing transfers and /or allocations, we recognized a step-up in basis and did not incur any material tax liabilities. ​ ​ 119 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023/2022 ​ 2022/2021 ​ ​ Years Ended ​ Comparison ​ Comparison ​ ​ December 31, ​ Increase/(Decrease) ​ Increase/(Decrease) ​ 2023 2022 2021 $ % $ % ​ ​ (in thousands) ​ (in thousands, except percentages) Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 233,176 ​ $ 122,524 ​ $ 38,544 ​ $ 110,652 ​ 90% ​ $ 83,980 ​ 218% License and collaboration revenue ​ ​ 37,083 ​ ​ 97,656 ​ ​ — ​ ​ (60,573) ​ (62)% ​ ​ 97,656 ​ 100% Total revenue ​ ​ 270,259 ​ ​ 220,180 ​ ​ 38,544 ​ ​ 50,079 ​ 23% ​ ​ 181,636 ​ 471% Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold ​ ​ 33,407 ​ ​ 22,895 ​ ​ 9,100 ​ ​ 10,512 ​ 46% ​ ​ 13,795 ​ 152% Collaboration expenses ​ ​ 56,524 ​ ​ 24,071 ​ ​ 835 ​ ​ 32,453 ​ 135% ​ ​ 23,236 ​ 2783% Research and development ​ ​ 76,097 ​ ​ 65,490 ​ ​ 99,297 ​ ​ 10,607 ​ 16% ​ ​ (33,807) ​ (34)% Selling, general and administrative ​ 129,427 ​ 97,951 ​ 85,948 ​ 31,476 ​ 32% ​ 12,003 ​ 14% Total operating expenses ​ 295,455 ​ 210,407 ​ 195,180 ​ 85,048 ​ 40% ​ 15,227 ​ 8% Income (loss) from operations ​ (25,196) ​ 9,773 ​ (156,636) ​ (34,969) ​ (358)% ​ 166,409 ​ (106)% Other income ​ 8,544 ​ 1,253 ​ 97 ​ 7,291 ​ 582% ​ 1,156 ​ 1192% Income (loss) before income taxes ​ (16,652) ​ 11,026 ​ (156,539) ​ (27,678) ​ (251)% ​ 167,565 ​ (107)% Benefit (provision) for income taxes ​ 30,736 ​ 172,337 ​ (1,385) ​ (141,601) ​ (82)% ​ 173,722 ​ (12,543)% Net income (loss) ​ $ 14,084 ​ $ 183,363 ​ $ (157,924) ​ $ (169,279) ​ (92)% ​ $ 341,287 ​ (216)% ​ ​ Product Revenue, Net We recognized net revenue from the sale of ARCALYST of $233.2 million, $122.5 million and $38.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
In addition, we expect to continue to incur significant expenses related to product manufacturing, including potential technology transfer costs as early as March 2023, marketing, sales and distribution of ARCALYST. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates.
We expect to continue to incur significant expenses related to product manufacturing, including technology transfer costs, sales, marketing and distribution of ARCALYST.
Following completion of this portion of the trial, the proof-of-concept portion will begin. We expect data from the trial in the first half of 2024. Mavrilimumab is an investigational monoclonal antibody inhibitor targeting GM-CSFRα. In 2017, we licensed exclusive worldwide rights in all indications to mavrilimumab from MedImmune.
We expect to announce data from Cohort 4 of the trial in the second quarter of 2024. Mavrilimumab is an investigational monoclonal antibody inhibitor targeting GM-CSFRα. In 2017, we licensed exclusive worldwide rights in all indications to mavrilimumab from MedImmune. We are currently evaluating potential partnership opportunities to advance mavrilimumab’s development.
In December 2021, we initiated a Phase 2 clinical trial of KPL-404 in RA, which is designed to evaluate pharmacokinetics, safety and efficacy with subcutaneous administration. In January 2023, we announced that we had completed enrollment of the second and final cohort of the multiple ascending dose portion of such trial.
In December 2021, we initiated a Phase 2 clinical trial of abiprubart in RA, which is designed to evaluate pharmacokinetics, safety and efficacy with subcutaneous administration. In January 2024, we announced topline clinical data from Cohorts 1, 2 and 3 of the trial, and that the trial met its primary efficacy endpoint in Cohort 3 at the weekly dose level.
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, which increased substantially over the course of 2022.
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates. Such interest rates have and in the future may be subject to significant volatility.
For the twelve months ended December 31, 2022, we recognized net income of $183.4 million, primarily as a result of out-licensing activities and the release of our deferred tax asset valuation allowance, as compared to net losses of $157.9 million for the year ended December 31, 2021. As of December 31, 2022, we had an accumulated deficit of $492.0 million.
For the twelve months ended December 31, 2023, we recognized net income of $14.1 million, as compared to net income of $183.4 million for the year ended December 31, 2022. As of December 31, 2023, we had an accumulated deficit of $478.0 million.
The increase in the average cost per unit is largely attributable to selling through repurposed clinical supply that was previously expensed through R&D and carried at zero-cost during 2021. ​ Collaboration Expenses Our collaboration with Regeneron continued to be profitable for the year ended December 31, 2022 after first achieving profitability in the fourth quarter of 2021.
The increase of $13.8 million in 2022 from 2021 related primarily to the increase in sales and an increase in the average cost per unit. The increase in the average cost per unit was largely attributable to selling through repurposed clinical supply that was previously expensed through R&D and carried at zero-cost during 2021.
The future viability of the Company is dependent on its ability to fund its operations through sales of ARCALYST and/or raise additional capital, such as through debt or equity offerings, as needed. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
The future viability of our company is dependent on our ability to fund our operations through sales of ARCALYST and/or raise additional capital, such as through debt or equity offerings, as needed. We anticipate that we may require additional capital if we choose to pursue in-licenses or acquisitions of other product candidates and technologies or their related businesses.
Treasury notes and a lower average balance in short term investments. 132 Table of Contents Benefit (Provision) for Income Taxes For the year ended December 31, 2022, we recorded an income tax benefit of $172.3 million relating primarily to the release of the valuation allowance on our UK deferred tax assets.
We expect that our reported income tax expense for future periods will be higher due to the utilization of our deferred tax assets. ​ For the year ended December 31, 2022, we recorded an income tax benefit of $172.3 million relating to a non-cash deferred tax benefit of $185.5 million primarily associated with the release of the valuation allowance on our UK deferred tax assets.
Operating Expenses Cost of Goods Sold Cost of goods sold includes production and distribution costs of ARCALYST, and amortization of the regulatory milestone, and other miscellaneous product costs associated with ARCALYST. Cost of goods sold also includes the allocations for the labor and overhead costs associated with the production of ARCALYST.
Cost of goods sold also includes labor and overhead costs associated with the production of ARCALYST associated with supply chain, quality, and regulatory activities, and the technology transfer of the manufacturing process for the ARCALYST drug substance.
The increase in product revenue was primarily driven by an increase in patients as 2022 was our first full year of sales following our commercial launch of ARCALYST in April 2021. ​ License and Collaboration Revenue ​ License and collaboration revenue for the year ended December 31, 2022 was $97.7 million.
The increase of $84.0 million in 2022 from 2021 was primarily driven by an increase in patients as 2022 was our first full year of sales following our commercial launch of ARCALYST in April 2021. ​ License and Collaboration Revenue ​ We reported $37.1 million of license and collaboration revenue for the year ended December 31, 2023, related to the Genentech License Agreement primarily driven by the achievement of $25.0 million in development milestones related to two new indications, materials delivered and our ongoing recognition of the transaction price related to the in-progress Phase 2b clinical trial of vixarelimab in prurigo nodularis.
During the year ended December 31, 2020, expenses incurred primarily related to conducting RHAPSODY, a milestone payment of $7.5 million for the achievement of a specified regulatory milestone event under the Regeneron Agreement, and supply chain costs. 131 Table of Contents Direct costs for our KPL-404 program were $11.6 million, $5.3 million and $3.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
During the year ended December 31, 2021, expenses primarily related to the completion of RHAPSODY and the transition to the long-term extension portion of the trial. Direct costs for our abiprubart program were $28.4 million, $11.6 million and $5.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2021, we maintained a full valuation allowance against our deferred tax assets of $127.9 million because we believed we would not be able to benefit from those tax deductions in the future. ​ For the year ended December 31, 2020, we recorded a provision for income taxes of $5.2 million relating primarily to the recognition of the valuation allowance and the current year tax expense. ​ Liquidity and Capital Resources As of December 31, 2022, our principle source of liquidity was cash, cash equivalents and short-term investments, which totaled $190.6 million.
As of December 31, 2021, we maintained a full valuation allowance against our deferred tax assets of $127.9 million. ​ Liquidity and Capital Resources As of December 31, 2023, our principal source of liquidity was cash, cash equivalents and short-term investments, which totaled $206.4 million.
In the first quarter of 2023, following our last delivery of certain drug supplies to Genentech, Genentech became obligated to make an additional cash payment of $20.0 million.
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 $10.0 million, which was received in the first quarter of 2024.
Investing Activities During the year ended December 31, 2022, investing activities used $8.1 million of cash, consisting of $135.9 million of purchases of short-term investments, partially offset by $127.8 million from proceeds of maturities of short-term investments. 134 Table of Contents During the year ended December 31, 2021, investing activities provided $128.6 million of cash, consisting of $306.3 million from proceeds of maturities of short-term investments, offset by $157.3 million of purchases of short-term investments and $20.0 million related to the payment of a regulatory milestone incurred under the Regeneron Agreement.
Net cash used in investing activities was $8.1 million for the year ended December 31, 2022, compared to net cash provided by investing activities of $128.6 million for the year ended December 31, 2021 as we were able to fund our operations through operating cash flows in 2022 due to increased ARCALYST sales and cash received from out licensing activities, offset by a $20.0 million regulatory milestone incurred under the Regeneron Agreement in 2021.

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