Kiniksa (KNSA) Q1 2026 Earnings Transcript

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DATE

Tuesday, April 28, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Sanj Patel
• Chief Operating Officer — Ross Moat
• Chief Medical Officer — John F. Paolini
• Chief Financial Officer — Mark Ragosa

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TAKEAWAYS

• ARCALYST Net Revenue -- $214.3 million, representing 56% year-over-year growth and an approximate $12 million increase sequentially from Q4 2025.
• New Prescribers -- About 400 prescribers wrote ARCALYST for the first time, producing the largest quarter-on-quarter increase since launch and bringing the total to over 4,550.
• Repeat Prescribers -- The company now has approximately 1,320 prescribers who have written ARCALYST multiple times, demonstrating expanded adoption.
• Full-Year 2026 Revenue Guidance -- Guidance was raised to $930 million-$945 million, up from the previous $900 million-$920 million range.
• Gross-to-Net Trends -- Gross-to-net increased sequentially as expected but was lower than in Q1 2025, with enhancements to the co-pay support program reducing the average payout per patient relative to prior years.
• Net Income -- Net income reached $22.6 million, a significant increase compared to $8.5 million in Q1 2025.
• ARCALYST Collaboration Profit -- Increased 73% year over year to $151.2 million, outpacing sales growth.
• Cash Balance -- Ended the quarter with $468.1 million in cash, reflecting $54 million in net cash generation for the period.
• Clinical Portfolio Progress -- KPL-387 Phase II dose-focusing data remain on track for the second half of the year, and the Phase III pivotal portion is expected to start by year-end.
• KPL-1161 Timeline -- Phase I initiation is planned by the end of the year, targeting a quarterly dosing profile.
• Direct-to-Consumer Campaign -- "Heart's Home," a targeted DTC campaign utilizing AI and digital innovation, was launched to increase awareness and drive patient engagement.
• Market Opportunity -- Management cited about 40,000 recurrent pericarditis patients annually in the U.S; current ARCALYST penetration includes approximately 18% of the 14,000 "2-plus recurrence" population, and 20% of prescriptions now in first recurrence patients.
• Prescriber Adoption Drivers -- The highest increase in new patient enrollments since launch coincided with an expanded prescriber base and enhanced reimbursement consistency across payer mixes.
• KPL-387 Clinical Design -- Phase II/III protocol integrates dose-finding and pivotal efficacy measurement, with four doses being assessed and a primary endpoint defined as time to treatment response.
• Co-Pay Program Optimization -- Co-pay payment caps and the implementation of machine learning for identifying non-traditional payment plans reduced manufacturer payments per patient, positively impacting gross-to-net dynamics.

SUMMARY

Kiniksa Pharmaceuticals (NASDAQ:KNSA) reported substantial year over year and sequential revenue growth driven by the ARCALYST franchise, which also led to a marked increase in profitability and cash reserves. Management raised full-year revenue guidance and highlighted significant commercial adoption trends, including a peak in new prescribers and repeat writer expansion, both facilitated by optimized co-pay strategies and digital engagement initiatives. The company advanced its clinical pipeline, announcing timelines for KPL-387 and KPL-1161, and implemented a targeted direct-to-consumer campaign utilizing AI to address persistent awareness gaps among patients.

• Management stated that "when a recurrent pericarditis patient inquires about ARCALYST to their provider, the healthcare professional is receptive to the inquiry, and it results in ARCALYST being prescribed in around 80% of cases."
• Less than 15% of recurrent pericarditis patients have unaided awareness of ARCALYST, underscoring ongoing patient education opportunities.
• Gross-to-net is expected to follow a historical seasonal pattern, with the highest impact in Q1 and lower gross-to-net ratios in Q2 and Q3 before increasing again in Q4.
• The liquid formulation of KPL-387 enables single syringe, once-monthly subcutaneous dosing, potentially supporting future autoinjector development.
• Phase III for KPL-387 can initiate independently of Phase II completion due to an integrated Phase II/III protocol, according to management.

INDUSTRY GLOSSARY

• Gross-to-Net: The ratio expressing the difference between product sales at list price (gross sales) and actual revenue received by the company (net sales) after discounts, rebates, and co-pay assistance.
• DTC (Direct-to-Consumer): Marketing efforts aimed directly at potential patients rather than healthcare professionals.
• PK/PD: Pharmacokinetics/Pharmacodynamics; refers to the drug’s behavior in the body (PK) and the biological effects elicited (PD).
• Monotherapy: Use of a single drug to treat a condition, without combining it with other treatments.

Full Conference Call Transcript

Sanj Patel: Thanks, Jonathan, and good day, everyone. Kiniksa continues to build strength across the business, which is driven by both our commercial progress with ARCALYST and the advancement of our pipeline programs, including KPL-387 and KPL-1161. On the commercial side, the end of the first quarter marks the fifth anniversary of the FDA approval for ARCALYST in recurrent pericarditis. Through our consistent and effective execution over those past 5 years, we've established and developed the market for this debilitating disease. This has enabled a fundamental shift in the treatment paradigm for patients and led to significant growth for the ARCALYST franchise. Within our clinical portfolio, we continue to advance the KPL-387 Phase II/Phase III study in recurrent pericarditis.

Data of the Phase II dose focusing portion of the study are on track for the second half of this year. We also expect to start the Phase III portion of the program by the end of this year. In addition, we are advancing KPL-1161 closer to the clinic. This is our Fc-modified IL-1 alpha and beta inhibitor with a target profile of quarterly dosing. And as we've previously shared, we plan to start a Phase I study by the end of this year. Our robust financial position, together with profitable ARCALYST revenue growth gives us the ability to invest in value creation across the business.

Commercially, ARCALYST continues to be on a robust trajectory 5 years from launch, and we intend to capture the additional opportunity that remains across the recurrent pericarditis market. Adoption of long-term IL-1 alpha and beta inhibition with ARCALYST is expanding in the approximately 40,000 patients each year in the United States who experience recurrent pericarditis flares. In the first quarter of this year, this expanding adoption contributed to ARCALYST sales growing to $214.3 million. Looking to the rest of the year, the marked increase in both the breadth and depth of prescribing we observed in the first quarter provides momentum going forward.

As a result, we've now raised our full year 2026 revenue guidance to $930 million to $945 million from our previous guidance of $900 million to $920 million. In summary, Kiniksa is a well-capitalized growth-orientated company that is well positioned to maximize the substantial ARCALYST commercial opportunity that is available to us. The company's portfolio of programs have numerous milestones throughout the rest of the year and that also have the potential to create meaningful value. And now Ross Moat.

Ross Moat: Thank you, Sanj. Our continued commercial execution has driven strong revenue growth in Q1, leading to an ARCALYST net revenue of $214.3 million, which represents an increase of more than $76 million compared to the first quarter 2025 and approximately $12 million over Q4 of last year. This revenue growth was driven by strong underlying commercial metrics, which outpaced the Q1 industry-wide headwinds related to co-pay resets and changes in insurance plans. In particular, growth was achieved by 2 key commercial dynamics. Firstly, we saw an acceleration in the growth of new prescribers through the quarter, which resulted in the highest quarterly increase in new patient enrollments since launch.

This bodes particularly well for the rest of the year as the new larger prescriber base, along with the durability of average duration of therapy has enabled us to increase our full year revenue guidance from between $900 million to $920 million to between $930 million and $945 million. Secondly, in Q1, our gross to net increased compared to the prior quarter as expected. However, it was lower than Q1 of 2025. This was mainly driven by changes to our co-pay support program where we made enhancements to our assistance program design, which reduced the average co-pay payout per patient relative to prior Q1s.

With the momentum created early in the year, combined with our strong underlying commercial foundation, we believe we are well positioned to continue driving ARCALYST growth through the rest of the year and believe there is substantial opportunity ahead to support many more recurrent pericarditis patients. In Q1, thanks to the strong execution from our team, approximately 400 new prescribers wrote ARCALYST for the first time, representing the highest quarter-on-quarter increase launched to date. This brings the total number of prescribers to more than 4,550. As a reminder, with more than 25,000 health care professionals seeing recurrent pericarditis patients in a given year, there is substantial opportunity ahead.

We also saw growth in the number of health care professionals who became repeat prescribers during Q1, resulting in approximately 1,320 prescribers in total who have now prescribed ARCALYST multiple times. The acceleration we've seen in both the breadth and the depth of prescribing reflects our continued commercial execution as well as the growing understanding and adoption of interleukin-1 alpha and beta inhibition as the treatment choice following the prior use of NSAIDs and colchicine, as recommended in the 2025 ACC Concise Clinical Guidance. Earlier this month, we announced the initiation of our highly targeted direct-to-consumer campaign, Heart's Home.

This campaign is designed to identify and target patients who may be suffering with recurrent pericarditis and not currently taking ARCALYST with the aim of empowering them to discuss ARCALYST with their healthcare provider. Through digital innovation, including the use of AI, we are able to deploy DTC in a way that's cost effective, highly targeted and ultimately applicable for a rare disease market. We have focused on utilizing our existing patient database and added search optimization and machine learning models informed by de-identified claims, demographics, and consumer market data to define an enriched population of potential recurrent pericarditis patients to deliver tailored content, opposed to a traditional DTC approach of broad-scale and high-cost marketing.

The centerpiece of our campaign is a connected TV commercial that is directed to potential patients through their individual streaming accounts on platforms such as YouTube and Hulu, as well as across social media channels. This campaign is informed by our market research, which demonstrated that when a recurrent pericarditis patient inquires about ARCALYST to their provider, the healthcare professional is receptive to the inquiry, and it results in ARCALYST being prescribed in around 80% of cases. As previously mentioned, our ARCALYST franchise is growing, is profitable and has significant opportunity ahead, and this has allowed us to make disciplined investment decisions to expand our reach to capture the opportunity and help more patients.

With that, I'll turn the call over to John to cover our KPL-387 development program.

John Paolini: Thank you, Ross. As a brief refresher, we leveraged our extensive clinical experience with the IL-1 signaling pathway when designing the integrated development program for KPL-387 shown here, broken down by phase of development. The core component of the program is the Phase III placebo-controlled event-driven randomized withdrawal study. Just as in RHAPSODY, the pivotal study, which supported ARCALYST approval in recurrent pericarditis, the primary efficacy endpoint for Phase III will measure the reduction in risk of pericarditis recurrence as the primary demonstration of KPL-387 efficacy for the label. We believe from our regulatory interactions that this study will be sufficient to support registration as a single pivotal study.

As a reminder, to maximize operational efficiency, we combined the Phase II dose-focusing trial and the Phase III pivotal trial into a single integrated Phase II/III protocol so that Phase III could initiate independently of Phase II execution, and we added long-term extensions to all trial activities. We previously guided that we expect data from the dose-focusing study outlined here in red in the second half of this year. And today, we guided that we expect to initiate the Phase III portion of the study by the end of this year.

The Phase II dose-focusing study builds on insights from previous clinical trials with rilonacept, and it is designed to define the KPL-387 PK/PD relationship as well as to support the data-driven approach for affirming the dose level for the Phase III pivotal trial. Looking at the rilonacept Phase II precedent in the left panels, the single active arm study demonstrated that IL-1 pathway inhibition with once-weekly rilonacept resulted in rapid and sustained reductions in reported pain and inflammation in patients with active recurrent pericarditis and elevated C-reactive protein over the initial 6-week treatment period as well as the subsequent long-term extension through 24 weeks.

Now looking forward, the KPL-387 Phase II dose-focusing study, which is assessing four dose levels in up to 20 patients per arm mirrors the rilonacept Phase II study in terms of study population, number of patients per arm and the primary endpoint, which is time to treatment response. The study framework has been adjusted for the specific attributes of the long-acting pharmacokinetics of KPL-387. Thus, development stage appropriate data, which are expected in the second half of this year, are designed to provide useful information on the cadence and magnitude of initial response as well as the duration of action of KPL-387 dose levels, affirming the dose level for Phase III and informing Phase III outcomes measures.

I will now turn it over to our Chief Financial Officer. Mark?

Mark Ragosa: Thanks, John. This morning, I will cover our first quarter 2026 financial performance. As always, you can find our detailed financial information in today's press release. In the first quarter of 2026, we continue to build strong momentum across the business, advancing ARCALYST, progressing our clinical portfolio and maintaining a strong financial position. Starting on the left-hand side of this slide with our income statement. As you've heard from Sanj and Ross, ARCALYST revenue grew 56% year-over-year to $214.3 million in the first quarter. This growth was driven by strong expansion in new prescribers and new patient enrollments, which more than offset the impact of industry-wide seasonal headwinds. Operating expense growth year-over-year was driven by several factors.

Higher cost of goods sold due to ARCALYST revenue growth, increased collaboration expenses aligned with higher ARCALYST revenue and collaboration profit, higher R&D primarily due to increased clinical and manufacturing costs associated with the development of KPL-387 and additional SG&A, primarily driven by investment associated with the commercialization of ARCALYST, including personnel and leveraging new technologies to enhance our targeting strategy and reach additional patients and HCPs. As a result of the strong revenue growth against more moderate expense growth, net income increased significantly to $22.6 million in the first quarter of 2026 compared to $8.5 million in the first quarter of 2025.

Turning to the right-hand side of the slide, you'll find the calculation for ARCALYST collaboration profit, which drives total collaboration expenses. In the first quarter of 2026, ARCALYST collaboration profit continued to grow faster than sales on a year-over-year basis, up 73% to $151.2 million. Finally, at the bottom of the slide, we ended the first quarter with a $468.1 million cash balance, representing $54 million of net cash generation for the period. We expect to remain cash flow positive on an annual basis under our current operating plan, enabling us to continuinue to help patients while creating additional value in both the near and long term. With that, I will turn the call back to Sanj for closing remarks.

Sanj Patel: Thanks, Mark. As you've heard, Kiniksa is well positioned to build significant future value as we grow our IL-1 alpha and beta inhibition franchise. We are dedicated to helping as many patients as possible with ARCALYST and to advancing the development of our clinical portfolio in order to bring additional therapies to patients suffering from debilitating diseases. With that, I'll now turn the call back to the operator for questions.

Operator: [Operator Instructions] Our first question comes from Nick Lorusso with TD Cowen.

Nicholas Lorusso: Congrats on the strong quarter. Can you discuss what you have seen in terms of increased demand from the early days of the DTC campaign, acknowledging that it is still pretty early on? And what other plans do you have to accelerate demand in the future, either via patients or prescriber targeting?

Ross Moat: Yes. Nick, this is Ross. I'll take a part of that. So thank you very much. It's -- yes, as you said, it's early on for the DTC campaign. We just announced it pretty recently that we're focusing on DTC in a very targeted way in order to go and try and reach patients who we believe are recurrent pericarditis patients and in order to kind of inform them and educate them in how to go and speak with their healthcare providers about the potential of ARCALYST and recurrent pericarditis. So it's early days.

One thing that I share with you is that while we also understand that when patients go in and speak to their healthcare professionals proactively about ARCALYST, it gets prescribed. The patients get prescribed ARCALYST in around 80% of the cases. It's also true that there's only around 14% of recurrent pericarditis patients who are actually unaided aware of ARCALYST. So we know that there's a big awareness gap out there with patients. We know patients are very widely dispersed across the country.

So this is our approach of ours of going out, trying to identify those patients and serve up appropriate, very targeted, very tailored messages that can help appropriate patients to be empowered to go and speak to their healthcare professionals about ARCALYST. So we're excited about the campaign. But as you said, it's early days. We are focused on many different initiatives to accelerate the growth. As a reminder, last announced, we were around 18% penetrated into the 14,000 patient population, not accounting for patients that are even in their first recurrence. And as you know, we've seen a strong growth in patients on their first recurrence as well over time. So the opportunity is very significant.

We're focused on continuing to execute incredibly well across our commercial organization. We're focused obviously on digital marketing, of which the DTC campaign is a part of that, a much broader umbrella of digital marketing. And we're also focused on peer-to-peer education and growing this new wave of how to treat recurrent pericarditis patients, which has been really transforming over the last five years of the availability of ARCALYST on the market. So we're very excited about the future. We have a multifaceted approach to how we're going to continue to grow the breadth and the depth of prescribing and help more and more patients.

Operator: One moment for our next question. Our next question comes from Anupam Rama with JPMorgan.

Anupam Rama: And congrats on a strong quarter here. For KPL-387 and the second half dose focus update, John, I could -- I was wondering if you could comment a little bit as when you look at the totality of the range of endpoints and assessments that you're going to be looking at in Phase II, how do you think about which ones are most important in sort of the ultimate dose selection moving to Phase III?

John Paolini: Anupam, thank you for that question. Yes. So with regard to the Phase II trial, which is currently ongoing, -- the value, I think of Slide 13 is that it shows you what kind of data we had generated in the past in the Phase II program with rilonacept in terms of three critical elements, which is, of course, the -- what we call the cadence and magnitude, which is basically the time of onset of action and the degree of suppression of pain and the inflammation with C-reactive protein. And then the additional element of durability of response. And that's what we showed previously with rilonacept, and so carrying that forward to the KPL-387 program.

Again, with that initial dose of KPL-387, what we've shown in our models, regardless of the dose level selected, we expect to see high drug levels, which would be modeled to have a rapid cadence in terms of onset of action and magnitude of effect in suppressing the initial inflammatory response. And then the additional scientific question that we intend to glean by looking at the different dose levels is that duration of action of the four different dose levels that we take forward that we look at in the trial.

And then from that, we integrate all three of those elements to build the PK/PD relationship and affirm the -- what we believe to be the therapeutic concentration as well as the dose level that we would carry forward into Phase III. So it's really the integration of those three critical elements.

Operator: Our next question comes from David Nierengarten with Wedbush Securities.

David Nierengarten: Just a couple of quick ones for me. First off, on the DTC ad, is it fair to model in the incremental spend year-over-year on marketing as the DTC component? Or is there some additional sales guys or other folks that you hired or other expenses going in there? And then the second one on 387. On the transition study, the treatment duration is 16 weeks, which is different than the 12 or 24 weeks that you've looked at in Phase I or Phase II. Is there any reason you picked 16 weeks versus having a little bit more apples-to-apples duration comparison, at least for patients who are moving from ARCALYST to 387.

Mark Ragosa: Maybe David, on the first one, I mean, I think as you heard us talk about on the call, SG&A did go up as a result of sort of personnel related expenses as well as sales and marketing initiatives, which Ross has sort of covered. I mean I think we continue to invest responsibly in the commercialization of ARCALYST as shown by collaboration profit continuing to grow faster than revenue. And so I think as we -- we haven't really guided to spend, but I think it's worth sort of noting that on a percentage of sales basis, SG&A has been fairly consistent over the last year.

John Paolini: And then with regard to your question, David, thank you for that question about the transition to KPL-387 monotherapy dosing and administration study. So yes, the 16-week treatment duration for the posology portion of the study is, in fact, appropriate for this type of study. This study is really designed to look at well-controlled patients as they move from their prior therapies to KPL-387. And in this study, patients are transitioning from regimens of NSAIDs and colchicine from corticosteroids and IL-1 pathway inhibitors, including anakinra and rilonacept. And so what we have seen previously with regard to rilonacept was a time to monotherapy of under eight weeks in the RHAPSODY program.

And so this program is designed to basically move patients off of those other therapies on to KPL-387 and achieve monotherapy within that time window. And then, of course, there are additional doses that are administered to achieve steady state by the week 16 time point. But then importantly, patients transition to a long-term extension where they can continue to receive KPL-387 for up to two total years. So it's a well-designed study to inform that element of the label, if you will, clinical practice for transitioning patients to KPL-387.

David Nierengarten: Maybe a quick follow-up. Is there -- obviously, you look at the patients by prior treatment to determine if anyone has a new attack of pericarditis, of course, you'll know which prior treatment they're on and you'll stratify accordingly? Or how are you thinking about the differences in prior treatments for the transition?

John Paolini: That's a very reasonable statement. And if you look at, for example, the ARCALYST label, it covers all of the different therapies that patients can transition from. So it talked about NSAIDs and colchicine, it talked about corticosteroids. And then we didn't do the study specifically for recurrent pericarditis for anakinra, because that had already been done for DIRA. And so what we reported in that trial was how patients responded across the different treatments and the time to monotherapy. So similarly, in this trial, of course, you would look at each one of those different types of dosing regimens that patients came from and then look to make sure that the transition to KPL-387 is robust.

It's important to point out that the onset -- that the duration of action of KPL-387 with our anticipated Phase III dose level is once monthly dosing, which covers most of that initial transition period depending on the therapy.

Operator: Our next question comes from Edward Nash with Canaccord Genuity.

Edward Nash: Really great quarter. Congratulations. So I wanted to ask, I know, obviously, the DTC program is relatively new. And you -- I just want to kind of understand with regards to what's driving the biggest change in new patient starts. You said that on awareness, the awareness gap has shrunk and that you've seen increasing physician adoption. What effect has reimbursement or referral patterns had into this new patient starts?

Ross Moat: Thanks, Ed. Appreciate your question. So yes, there are lots of different things driving the increases that we've seen, not just in Q1, but over time as well. But of note, Q1 was the highest ever quarter-on-quarter growth that we've had in terms of new prescribers. It's also the highest ever since the time of our launch five years ago, the highest ever number of new patient enrollments or new prescriptions coming in for ARCALYST. So clearly, we're at a stage, five years out from our launch where we're growing very nicely with a substantial opportunity ahead.

The reimbursement continues to be very strong across all the different payer mixes, and that's both for new patients coming on as well as the revalidation of the scripts usually after a one-year time period. So that continues to really be very positive.

In terms of referrals, I think certainly, there are some centers out there around 18 centers that are centers of excellence, if you like, or whole pericardial disease-specific clinics, and they're acknowledged partially under one program, which is the AHAs addressing recurrent pericarditis, of which we are a sponsor of -- and that's been a helpful initiative, I think, to grow the expertise and share expertise in how to diagnose and treat recurrent pericarditis over time among those 18 groups. But it also remains the case that recurrent pericarditis patients are broadly dispersed across the country. We have to touch many touchpoints across the country in order to educate physicians.

We focus on peer-to-peer education to do that as well as, of course, our sales team and digital marketing initiatives such as the new DTC campaign, which we're excited about.

But as I mentioned earlier, with only around 14% of patients that suffer recurrent pericarditis having an unaided awareness of ARCALYST clearly, putting the power in the hands of the patient and the knowledge in the hands of the patient of their disease, acknowledging that many patients go through multiple physicians and multiple misdiagnoses before they get the recurrent pericarditis diagnosis, we think can play a substantial role in helping the awareness and empowering patients to go and ask their physicians about recurrent pericarditis, about ARCALYST and ultimately could play one of the roles amongst many things that we're doing in continuing to seize the opportunity that we have ahead.

Operator: Our next question comes from Paul Choi with Goldman Sachs.

Kyuwon Choi: Congratulations on the strong quarterly results. I was wondering, first, if you could maybe elaborate a little bit more on the co-payment commentary for the quarter. Is this going to be something just specific to this particular quarter? Or could it be more potentially structurally favorable to gross-to-net over the long term? And my second question is on KPL-387. Just with regard to the transition to the switch study that's ongoing. Can you comment if the implication here is that you have a fairly confident view on the dose going forward for the Phase III? Or are you still testing multiple doses there?

Mark Ragosa: Might take the first on the gross to net. So I think, Paul, we haven't provided specific guidance on gross-to-net. So we still do not expect major fluctuations relative to 2025, but we do anticipate now that co-pay support will be favorable to gross-to-net on an annual basis with the majority of the impact having taken place in the first quarter.

And I think as we sort of take a look at gross-to-net over the course of the year, I'll kind of say what we've said before here, but we do expect to return to our historical pattern where absent any sort of prior period reserve adjustments, we do expect gross-to-net to be highest in the first quarter to work lower in the second and the third quarter and then begin to shift higher again in the fourth quarter due to industry dynamics as they begin to play a factor again. I don't know if there's components of the co-pay that you want to discuss further than that, but at least that's the impact on gross-to-net.

Ross Moat: Yes. That's why I made Mark, thank you for that. I'll just maybe add a little bit more flavor on to the co-pay dynamics, Paul. So we did make enhancements to our co-pay assistance program at the beginning of this year, which ultimately reduced the average co-pay payment per patient and subsequently had the knock-on effect to the more favorable gross-to-net versus Q1 of last year, albeit higher than Q4 of last year. And that's driven by a couple of things. Firstly, reducing the maximum amount of co-pay payments that we make per patient.

And secondly, we also implemented a machine learning solution to proactively identify patients who are on non-traditional payment plans such as maximizer plans in order to kind of pick up those patients, which you may know a lot of these plans are designed to take the cost to the manufacturers all the way until funds are exhausted before the insurance companies pick up on it. So by lowering that co-pay amount for those non-traditional plans, it reduced the maximum amount that we paid per patient before the patients got full coverage under their insurer. So that had the knock-on effect into the gross-to-net. So thank you for the question, Paul.

John Paolini: Paul, thank you for your question about the transition to monotherapy study. So the details of the study design that we've shared so far can be found in clinicaltrials.gov. And what you will see there is the overall architecture of the study, but the disclosure does not include specific information of the dose levels that are being -- dose level or dose levels that would be studied. So we will have more to say at a later date about the design of the study.

Operator: Our next question comes from Geoff Meacham with Citi.

Geoffrey Meacham: Just had two quick ones. Ross, on the commercial side, is there a tipping point for adding more patients to the first recurrent segment? I wasn't sure maybe if you wanted to wait a little bit longer on the awareness and DTC visibility? Or do you feel like you have to navigate maybe reimbursement hurdles in that more upstream segment? And then the second one for Sanj. -- with the positive cash flow, you have consistent profitability, how do you think about maximizing value from here? Would you want to be in the Phase III for 387 before you take another look at BD? I wasn't sure how you thinking about it.

Ross Moat: Thanks very much, Geoff. I appreciate the question. So yes, as mentioned earlier, we're -- the last reported, we were around 18% penetrated into the 2-plus recurrence group. About 20% of prescriptions that we have now are in the first recurrence group that's grown over time. We think the 2025 ACC Concise Clinical Guidance is also helpful towards that as it places the use of IL-1 inhibition prior to the use of corticosteroids, so moving ARCALYST further upstream, if you like, early on in the disease. So we think those things are all important and acknowledging that ARCALYST really has a very broad label, which is agnostic to the number of flares that a patient has suffered.

And we have broad patient coverage really across the labeled indication for the majority of plans. So we're in a pretty good situation there, which is why we feel that the opportunity that we have ahead is still very significant when you take those metrics around the 2-plus recurrences and the first recurrence group.

Sanj Patel: Geoff, this is Sanj. Thanks for the question as well. As you know for many years, this team is very much focused on creating value. We also have to execute. So to your point on 387, clearly, there's a lot of focus right now on getting through this Phase II study in the second half of this year and starting our Phase III study this year, which I think is very exciting. Clearly, we're very much focused on capturing further growth with ARCALYST very important continued effort for us. But then as we said, 1161 also should enter the clinic this year. So a number of milestones for us.

And we balance all that consistently looking at how there are other ways to create value. And as you said, we continually look at BD opportunities. We have a very, very high bar, though. So we try to be as pragmatic as possible, looking at all the value of internal creation from internal value drivers, but also looking at business development. So we'll continue to do that. But Capital allocation is very important to us. Being efficient is very important to us. We've done that very nicely, I think, through this digital DTC effort and looking at AI ways to really do it very efficiently.

So trust us when we say that we'll continue to think about value creation over time and balance it well going forward.

Operator: Our next question comes from Roger Song with Jefferies.

Fiona Huang: This is Fiona on for Roger. Congrats on the strong quarter. Maybe just a quick one on KPL-387. Any meaningful difference in terms of formulation versus ARCALYST? And do you plan to use an autoinjector? And maybe just down the line, if 387 gets approved, how do you plan your commercial strategy around incorporating to potentially transition to 387?

John Paolini: Yes. So thanks for that question. I'll handle some of the biophysical characteristics of the molecules to maybe lay a little bit of groundwork and then turn it over to Sanj with regard to next steps. So yes, there is a difference with regard to KPL-387 in that it is a liquid formulation. And so that liquid formulation allows for the total dose, if you will, of KPL-387 to be delivered in a single syringe subcutaneously. And we anticipate that with the extended pharmacokinetics, which we've shown previously in Phase I that, that would support once monthly dosing.

And so once you have that profile, it then does set up a situation, if you will, that is quite favorable for the development of an autoinjector. And we have not discussed that in detail at this time. But I'll turn it over to Sanj.

Sanj Patel: Yes. And nothing really to add. Obviously, we'll continue to execute on the ongoing clinical trials -- we talked about those today, Phase II, Phase III study, starting Phase III this year, obviously, but nothing else to add other than that we plan to do them as fast as humanly possible and as well as possible.

Operator: Our next question comes from Eva Fortea with Wells Fargo.

Eva Fortea-Verdejo: Congrats on the quarter. Two quick ones from us. First, how should we be thinking about R&D expense for the rest of the year and into 2027 as 387 Phase III and 1161 Phase I are initiated? And the second question is you've guided to initiating the Phase III pivotal portion for 387 by year-end '26. Are there any key steps or milestones you need to clear to initiate the study? Or is it just a matter of seeing the Phase II data before moving forward?

Mark Ragosa: Thanks, David, for the question. Maybe just to touch upon the R&D question first here. Similarly to an earlier question, we haven't provided explicit guidance. But that being said, I think on a percentage of sales basis, R&D has been fairly consistent over the last year. And really with R&D, it's timing of our clinical trials and manufacturing of clinical supply that are the key variables. And so we've disclosed several ongoing investments that we plan to further advance in 2026, including the development of 387 into Phase III and KPL-1161 into Phase I. And so obviously, the longer trials go on, they tend to get a little bit more expensive.

But I think keeping in the context of where sales growth has been and where we've been fairly consistent on R&D to sales over the last year is an important metric to keep in mind.

John Paolini: And then, Eva, thank you for your question with regard to the Phase II/III transition. So with Phase II data expected in the second half of 2026, we're on track for receiving dose level confirmation data in that time framework. And because the Phase II dose focusing portion and the Phase III pivotal portion have been integrated into a single Phase II/III protocol, the Phase III pivotal trial can begin independently of Phase II execution.

Operator: And I'm not showing any further questions at this time. I'd like to turn the call back over to Sanj for any further remarks.

Sanj Patel: Thanks, operator. Thank you for all the questions and joining the call today. We look forward to the remainder of the year and look forward to providing additional updates in the future. Thank you.

Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

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