0001558370-24-002005 | 10-K | XBRL Viewer | Kiniksa Pharmaceuticals LTD

Years Ended

December 31,

Product Revenue, net

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Dec. 31, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Share-Based Compensation - Option Valuation (Details) - Employee Stock Option [Member] - Employees	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Assumptions to determine fair value of options granted on weighted average basis:
Risk-free interest rate	3.96%	3.00%	1.00%
Expected term (in years)	6 years 1 month 24 days	6 years 2 months 1 day	6 years 1 month 17 days
Expected volatility	71.33%	73.83%	76.05%

Inventory

12 Months Ended

Dec. 31, 2023

Inventory

Inventory

5. Inventory

Inventory consisted of the following:


	December 31,		December 31,
	2023		2022
Raw materials	$	—	$	—
Work-in-process		18,258		6,312
Finished Goods		12,864		15,287
Total inventory	$	31,122	$	21,599

Accrued Expenses (Details) - USD ($) $ in Thousands	12 Months Ended
Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2023
Accrued Expenses
Accrued research and development expenses	$ 8,378	$ 7,895
Accrued employee compensation and benefits	11,213	15,954
Accrued collaboration expenses	7,522	16,939
Accrued legal, commercial and professional fees	2,866	3,553
Other	133	326
Total accrued expenses	30,112	$ 44,667
Decrease in accrued research and development expenses	$ 2,223

Share Based Compensation (Details)			1 Months Ended	12 Months Ended
Share Based Compensation (Details)	Jan. 01, 2024 shares	May 23, 2018 shares	Dec. 31, 2019 item	Dec. 31, 2023 shares	Dec. 31, 2022 shares	May 31, 2018 shares
Share-based compensation
Shares outstanding (in shares)				11,599,089	10,144,618
RSUs Granted				1,389,421
Period of equal monthly vesting after first anniversary for options with six year vesting period				5 years
Number of options granted				2,133,581
2018 Plan \| Class A common shares
Share-based compensation
Total number of common shares authorized to issue						4,466,500
Percentage of automatic increase in shares available for issue	4.00%
Additional shares authorized	2,818,425
Number of common shares available for future grant				4,030,035
2018 Plan \| Class A common shares \| Maximum
Share-based compensation
Percentage of automatic increase in shares available for issue				4.00%
Rilonacept Long-term Incentive Plan \| Restricted Share Units (RSUs)
Share-based compensation
Number of grants of RSU awards that a participant may receive \| item			2
2015 Plan \| Class A common shares
Share-based compensation
Total number of common shares authorized to issue		4,691,213
Number of shares no longer available for future grant		92,170
Shares outstanding (in shares)				1,856,506
2015 Plan \| Employee Stock Option [Member]
Share-based compensation
Voting power threshold percentage used to determine the exercise price for options				10.00%
Vesting percentage of options having four year vesting term on the first anniversary of the grant date				25.00%
Period of equal monthly vesting after first anniversary for options with four year vesting period				3 years
Vesting percentage of options having six year vesting term on the first anniversary of the grant date				16.00%
2015 Plan \| Employee Stock Option [Member] \| Minimum
Share-based compensation
Vesting period				4 years
2015 Plan \| Employee Stock Option [Member] \| Maximum
Share-based compensation
Option term of incentive awards				10 years
Option term of awards for the persons possessing more than 10% of voting power				5 years
Vesting period				6 years
2015 Plan \| Employee Stock Option [Member] \| Class A common shares
Share-based compensation
Minimum percentage of exercise price of the fair market value of shares for the persons possessing 10% or less of voting power				100.00%
Minimum percentage of exercise price of the fair market value of shares for the persons possessing more than 10% of voting power				110.00%
2018 ESPP \| Class A common shares
Share-based compensation
Total number of common shares authorized to issue						670,000
Additional shares authorized	215,000
Number of common shares available for future grant				528,130
2018 ESPP \| Class A common shares \| Maximum
Share-based compensation
Percentage of automatic increase in shares available for issue		1.00%
Maximum number of common shares may be issued		6,420,000

Commitments and Contingencies (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Manufacturing commitments
Non-cancelable purchase commitments	$ 128,297
Amount of purchase commitment obligation due within one year	$ 51,376

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

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

Reporting and Functional Currency

The financial results of the Company’s global activities are reported in U.S. dollars (“USD”) and its foreign subsidiaries other than Kiniksa UK generally utilize their respective local currency to be their functional currency.

Transactions in other currencies are recorded in the functional currency at the rate of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are re-measured into the functional currency at the rate of exchange in effect at the balance sheet date. Exchange rate gains and losses arising from re-measurement of foreign currency-denominated monetary assets and liabilities are included in income or losses in the period in which they occur.

For the Company’s foreign subsidiaries where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into USD at end-of-period exchange rates and the resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

Liquidity

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. As of December 31, 2023, the Company had an accumulated deficit of $477,950. During the year ended December 31, 2023, the Company recorded net income of $14,084 and provided $13,301 of cash from operating activities. As of December 31, 2023, the Company had cash, cash equivalents and short-term investments of $206,371.

Based on its current operating plan, the Company expects that its cash, cash equivalents and short-term investments will be sufficient to fund its operations and capital expenditure requirements for at least twelve months from the issuance date of these consolidated financial statements. The future viability of the Company beyond that point is dependent on its ability to fund its operations through sales of ARCALYST and/or raise additional capital, as needed. If the Company is unable to grow or sustain ARCALYST commercial revenue in future periods, the Company would need to seek additional financing through public or private securities offerings, debt financings, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its commercialization efforts, research and development programs for product candidates or product portfolio expansion, which could adversely affect its business prospects, or the Company may be unable to continue operations.

Cash and Cash Equivalents

The Company classifies deposits in banks, money market funds and cash invested temporarily in various instruments with maturities of three months or less at the time of purchase as cash and cash equivalents. As of December 31, 2023 and 2022 cash and cash equivalents consisted principally of U.S. Treasury notes, amounts held in money market accounts and cash on deposit at commercial banks.

Short-Term Investments

The Company generally invests its excess cash in money market funds and short-term investments in U.S. Treasury notes. Such investments which are included in short-term investments on the Company’s consolidated balance sheets are considered available-for-sale (“AFS”) debt securities and are reported at fair value with unrealized gains and losses recognized in accumulated other comprehensive income (loss) in stockholders’ equity, net of related tax effects. Realized gains and losses, if any, on short-term investments are included in interest income.

If the AFS debt security’s fair value declines below its amortized cost the Company considers all available evidence to evaluate the extent to which the decline is due to credit-related factors or noncredit-related factors. If the decline is due to noncredit-related factors then no credit loss is recorded and the unrealized loss is recognized in accumulated other comprehensive income (loss) in stockholders’ equity, net of the related tax effects. If the decline is considered to be a credit-related impairment, it is recognized as an allowance on the consolidated balance sheet with a corresponding charge to the consolidated statement of operations and comprehensive income (loss). The credit allowance is limited to the difference between the fair value and the amortized cost basis. No credit-related allowances or impairments have been recognized on the Company’s investments in available-for-sale debt securities.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and short-term investments. As of December 31, 2023 and 2022, substantially all of the Company’s cash, cash equivalents and short-term investments were held at two financial institutions. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash, cash equivalents and short-term investments and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is also subject to credit risk from the accounts receivable related to product revenue. The majority of trade accounts receivable are recorded net of allowances for cash discounts associated with prompt payments from customers. All trade accounts receivable arise from product revenue in the United States due from the Company’s third party logistics provider. There were no material write-offs charged against the allowance for the year ended December 31, 2023.

Restricted Cash

In conjunction with the Company’s lease agreement entered into in March 2018, the Company maintained a letter of credit for the benefit of the landlord. The lease expired in August 2021 and the restricted cash was released to operating cash in September 2021. As of December 31, 2023, 2022 and 2021, there was no balance in restricted cash. As of December 31, 2020, the underlying cash balance of $210 securing this letter of credit, was classified as current, in its consolidated balance sheet.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

●

Level 1—Quoted prices in active markets for identical assets or liabilities.

●

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

●

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and short-term investments, consisting of money market accounts and U.S. Treasury notes, are carried at fair value, determined based on Level 1 and 2 inputs in the fair value hierarchy described above (see Note 3). The carrying values of the Company’s prepaid expenses and other current assets, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a “lease” as defined by ASC 842. A lease is an arrangement, or part of an arrangement, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company determines if the arrangement conveys the right to control the use of an identified asset for a period of time. It assesses throughout the period of use whether the Company has both of the following (1) the right to obtain substantially all of the economic benefits from use of the identified asset and (2) the right to direct the use of the identified asset. This determination is reassessed if the terms of the arrangement are changed. Leases are classified as operating or finance leases based on the terms of the lease agreement and certain characteristics of the identified asset. Right-of-use (“ROU”) assets and lease liabilities are recognized at lease commencement date based on the present value of the minimum future lease payments.

Leases with a term greater than one year are recognized on the balance sheet as ROU assets with corresponding lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize leases with a term of one year or less on its balance sheet, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating leases, ROU assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the ROU assets may be required for items such as incentives received. The interest rate implicit in lease arrangements is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

In accordance with the guidance in ASU 2016-02, components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.); then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the arrangement consideration to the lease component only. The lease component results in an operating ROU asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense.

Property and Equipment

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the consolidated balance sheet and any resulting gains or losses are included in the consolidated statement of operations

and comprehensive income (loss) in the period of disposal. The expected useful lives of the respective assets are as follows:


		Estimated Useful Life
Computer hardware and software		3 - 5 years
Laboratory equipment		5 years
Furniture, fixtures and vehicles		5 - 7 years
Leasehold improvements		Shorter of estimated useful life or lease term

Inventory

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

The vials that will ultimately be distributed free of charge under our patient assistance program are recognized as selling expense when they are labeled as free goods.

The Company is conducting a technology transfer of ARCALYST drug substance manufacturing from Regeneron Pharmaceuticals, Inc. (“Regeneron”) to a new contract development and manufacturing organization (“CDMO”). Costs associated with the establishment of ARCALYST production at a new manufacturing site that do not meet the criteria for research and development or capitalization into inventory are included in cost of goods sold in the period incurred. During the year ended December 31, 2023 the Company incurred $3,265 of expense related to the technology transfer of ARCALYST drug substance manufacturing in cost of goods sold. No expenses were incurred in the years ending December 31, 2022 and 2021.

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.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery of the product to the customer.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. 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

Following the FDA approval of ARCALYST in March 2021, the Company began generating product revenue from sales of ARCALYST in April 2021. ARCALYST is sold through a third party logistics provider that distributes primarily through a network of authorized specialty pharmacies and specialty distributors (“customer”), which deliver the medication to patients by mail. The Company’s payment terms are between 30 to 35 days.

Net revenue from product sales is recognized at the transaction price when the specialty pharmacy or specialty distributors obtains control of the Company’s products, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider.

The Company’s 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. These adjustments represent variable consideration under ASC 606 and are estimated using the expected value method and are recorded when revenue is recognized on the sale of the product. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. 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.

Discounts and Allowances

Revenue from product sales is recorded at the transaction price, which includes estimates for discounts and allowances and includes cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees. These reserves are classified as reductions of accounts receivable (if the amount is payable to the Customer and right of offset exists) or a current liability (if the right of offset does not exist, the amount is payable to a third party, or is related to a future return). These allowances are established by management as its best estimate based on historical experience and data points available and are adjusted to reflect known changes in the factors that impact such reserves. Allowances for customer credits, chargebacks, rebates, data fees for services, returns, and discounts are established based on contractual terms with customers and analyses of historical usage of these items. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. The nature of the allowances and accruals requiring estimates, and the specific considerations the Company uses in estimating these amounts are as follows:

Government Chargebacks and Rebates

Government and other rebates and chargebacks include amounts payable to payors and healthcare professionals under various programs and by payor and individual payor plans. Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payor and individual payor plans. For qualified programs that can purchase products through wholesalers or other distributors at a lower contractual price, the

wholesalers or distributors charge back to the Company the difference between their acquisition cost and the lower contractual price.

Rebates and chargebacks are estimated primarily based on product sales, and expected payor mix and discount rates, which require significant estimates and judgment. Additionally, in developing the estimates the Company considers: historical and estimated payor mix; statutory discount requirements and contractual terms; historical claims experience and processing time lags; estimated patient population; known market events or trends; market research; channel inventory data obtained from customers; and other pertinent internal or external information. The Company assesses and updates the estimates every quarter to reflect actual claims and other current information.

Government and other chargebacks are recognized as reduction of revenue upon the sale to the Customers. These items are payable to customers and other rebates that are payable to other third party payors and healthcare professionals are classified as accrued expense liabilities.

Cash Discounts

The Company estimates cash discounts based on contractual terms and expectations regarding future customer payment patterns.

Specialty Pharmacy & Distributor Fees

Under the inventory management agreements with specialty pharmacies and distributors, the Company pays a fee primarily for compliance with certain contractually determined covenants such as the maintenance of agreed upon inventory levels. These specialty pharmacy and distributor fees are based on a contractually determined fixed percentage of sales.

The Company has contracted with certain specialty pharmacies to obtain transactional data related to the products in order to develop a better understanding of the selling channel as well as patient activity and utilization by the Medicaid program and other government agencies and managed care organizations. The Company pays a variable fee to the specialty pharmacies to provide the data. The Company also pay the specialty pharmacies a fee in exchange for providing distribution and inventory management services, including the provision of inventory management data to the Company. The Company estimates the fee for service accruals and allowances based on sales to each specialty pharmacy and the applicable contracted rate.

Sales Returns

Allowances are made for estimated sales returns by the customers and are recorded in the period the related revenue is recognized. The Company typically permit returns if the product is out of date or damaged during transition to the common carrier. The Company’s estimates of sales returns are based primarily on analysis of industry information reporting the return rates for similar products and contractual agreement terms. The Company also takes into consideration known or expected changes in the marketplace specific to ARCALYST.

Shipping and Handling

Shipping and handling activities are considered to be fulfillment activities and not considered to be a separate performance obligation.

Other Incentives

Other incentives include a co-pay assistance program for eligible patients with commercial insurance in the U.S. The co-pay assistance programs assist certain commercially insured patients by reducing each participating patient’s financial responsibility for the purchase price, up to a specified dollar amount of assistance.

Collaboration Expenses and Revenue

Collaboration Expenses

Collaboration expenses consist of Regeneron’s share of the profit related to ARCALYST sales under the license agreement (the “Regeneron Agreement”) with Regeneron (see Note 13) and the cost of products sold under collaboration agreements. The Company also evenly split with Regeneron any proceeds received by the Company 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.

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.

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (“Topic 808”). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of Topic 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of Topic 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of Topic 606.

For elements of collaboration arrangements that are accounted for pursuant to ASC 606, we identify the performance obligations and allocate the total consideration we expect to receive on a relative standalone selling price basis to each performance obligation. Variable consideration such as performance-based milestones will be included in the total consideration if we expect to receive such consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of revenue recognized under the arrangement. Our estimate of the total consideration we expect to receive under each collaboration arrangement is updated for each reporting period, and any adjustments to revenue are recorded on a cumulative catch-up basis. We exclude sales-based royalty and milestone payments from the total consideration we expect to receive until the underlying sales occur because the license to our intellectual property is deemed to be the predominant item to which the royalties or milestones relate as it is the primary driver of value in our collaboration arrangements.

Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. We recognize revenue associated with each performance obligation as the control over the promised goods or services transfer to our collaboration partner which occurs either at a point in time or over time. If control transfers over time, revenue is recognized by using a method of measuring progress that best depicts the transfer of goods or services. We evaluate the measure of progress and related inputs each reporting period and any resulting adjustments to revenue are recorded on a cumulative catch-up basis.

Consideration received that does not meet the requirements to satisfy ASC 808 or ASC 606 revenue recognition criteria is recorded as deferred revenue in the accompanying consolidated balance sheets, classified as either short-term

(less than 12 months) or long-term (more than 12 months) deferred revenue based on our best estimate of when such revenue will be recognized.

Intangible Assets

Upon FDA approval and commercial launch of ARCALYST in March 2021, the Company capitalized the $20,000 milestone payment to Regeneron for a specified regulatory milestone as a finite-lived intangible asset (see Note 13). The intangible asset will be amortized on a straight-line basis over the life of the underlying intellectual property of 20 years. Amortization expense will be recorded as cost of goods sold in the Company’s consolidated statement of operations and comprehensive income (loss).

Impairment of LongLived Assets

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets, including intangible assets and property and equipment, whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. When such events occur, the Company determines whether there has been an impairment in value by comparing the asset’s carrying value with its fair value, as measured by the anticipated undiscounted net cash flows of the asset. If an impairment in value exists, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through December 31, 2023 and there have been no events that triggered an impairment analysis.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, share-based compensation expense, allocated facility-related and depreciation expenses, third party license fees and external costs of outside vendors engaged to conduct preclinical and clinical development activities and clinical trials as well as to manufacture clinical trial materials. Non-refundable prepayments determined to be used within one year for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Non-refundable prepayments or minimum balance requirements associated to clinical trials determined to not be used within one year are classified as other long-term assets. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Milestone and other payments made to third parties with respect to in-process research and development, in accordance with the Company’s license, acquisition and other similar agreements are expensed when determined to be probable and estimable.

Research Contract Costs

The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. The related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of the end of the reporting period. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.

Patent Costs

The Company charges patent-related costs in connection with filing and prosecuting patent applications to operations as incurred as their realization is uncertain. These costs are classified as selling, general and administrative expenses.

Segment Information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on developing and delivering therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need.

Share-Based Compensation

The Company measures all share-based awards granted to employees and directors based on their fair value on the date of grant. The Company issues share-based awards with both service-based vesting conditions and performance-based vesting conditions. The Company recognizes compensation expense for awards with service conditions on a straight-line basis over the requisite service period. For awards with performance conditions, the Company recognizes compensation expense when the achievement of the performance milestone is probable and estimable through the vest date.

For share-based awards granted to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally the period during which services are rendered by such consultants and non-employees until completed.

The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive income (loss) in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the award, the risk-free interest rate, and expected dividends (see Note 11). Prior to May 2018, the Company was a private company and, accordingly, lacks company-specific historical and implied volatility information for its shares. Therefore, it estimates its expected share price volatility based on the historical volatility of the Company and historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.

The fair value of each restricted share unit award is based on the closing price of the Company’s Class A common shares on the date of grant. Restricted share unit awards with an associated performance condition are evaluated on a regular basis for probability of achievement to determine the timing of recording share-based compensation expense in the Company’s consolidated statements of operations and comprehensive income (loss).

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders. For the years ended December 31, 2023, 2022 and 2021 the Company’s other comprehensive income (loss) was comprised of unrealized gain (loss) on short-term investments and currency translation adjustments, net of tax.

Net Income (Loss) per Share

Basic net income (loss) per share attributable to common shareholders is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common shareholders is computed based on the treasury method by dividing the diluted net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding share options and unvested restricted share units are considered potential dilutive common shares.

In periods in which the Company reports a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common shareholders for the year ended December 31, 2021.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. 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. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weighting of the positive and negative available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected, cumulative recent earnings and considering prudent and feasible tax planning strategies.

The Company is an exempted company incorporated under the laws of Bermuda. Under the current laws of Bermuda, income tax is not charged or levied on an exempted company’s income. As a result, the Company has not recorded any income tax benefits from losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses. In 2023, Bermuda passed legislation enacting a corporate income tax effective in 2025 on companies that meets certain requirements. At the current time, the Company does not meet these requirements, but if the Company meets these requirements in the future, it could become subject to taxation in Bermuda. The Company’s wholly owned U.S. subsidiaries, Kiniksa US and Primatope, are subject to federal and state income taxes in the United States. The Company’s wholly owned subsidiary Kiniksa UK, its Swiss branch office and its wholly owned subsidiaries: Kiniksa Germany, Kiniksa France, and Kiniksa Switzerland, are subject to taxation in their respective countries. Certain of the Company’s subsidiaries, primarily Kiniksa US, operate under cost-plus arrangements.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Recently Adopted Accounting Pronouncements

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

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

License and Acquisition Agreements - MedImmune License Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2019	Dec. 31, 2018
License and Acquisition Agreements
Research and development		$ 76,097	$ 65,490	$ 99,297
MedImmune \| License Agreement
License and Acquisition Agreements
Upfront payment for exchange of rights	$ 8,000
Accrued milestone payments						$ 5,000
Milestone payment to be paid upon regulatory milestone achievement	10,000
Pass-through payment paid upon clinical milestone achievement					$ 5,000
Payment of accrued milestones					$ 10,000
Annual net sales excluded from calculation of specified annual net sales thresholds	$ 1,000,000
Maximum percentage of royalty payable on annual net sales of licensed products	20.00%
Notice period to terminate the agreement by both parties for material breaches	90 days
Notice period to terminate the agreement	90 days
Research and development		$ 0	$ 0	$ 0
Minimum \| MedImmune \| License Agreement
License and Acquisition Agreements
Additional specified annual net sales threshold for additional milestone payment.	$ 1,000,000
Maximum \| MedImmune \| License Agreement
License and Acquisition Agreements
Milestone payment to be paid upon specified milestone achievements for first two indications	72,500
Milestone payment to be paid upon clinical and regulatory milestone achievement	15,000
Milestone payment to be paid upon specified annual sales milestone achievements	85,000
Additional specified annual net sales threshold for additional milestone payment.	$ 1,100,000

Net Income (Loss) per Share - Anti-Dilutive Securities (Details) - shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Anti-dilutive securities excluded from computation of earnings per share
Total, anti-dilutive securities excluded from computation of net loss per share	9,473,752	9,951,421	10,111,867
Employee Stock Option
Anti-dilutive securities excluded from computation of earnings per share
Total, anti-dilutive securities excluded from computation of net loss per share	8,498,144	8,403,074	9,226,846
Unvested RSUs
Anti-dilutive securities excluded from computation of earnings per share
Total, anti-dilutive securities excluded from computation of net loss per share	975,608	1,548,347	885,021

Share-Based Compensation - Classification of Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-based compensation
Share-based compensation expense	$ 27,149	$ 25,120	$ 25,173
Cost of goods sold
Share-based compensation
Share-based compensation expense	1,812	636	197
Research and development expenses
Share-based compensation
Share-based compensation expense	5,496	6,766	8,450
Selling, general and administrative expenses
Share-based compensation
Share-based compensation expense	$ 19,841	$ 17,718	$ 16,526

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 107,954	$ 122,715
Short-term investments	98,417	67,893
Accounts receivable, net	21,266	12,660
Contract asset		7,656
Inventory	31,122	21,599
Prepaid expenses and other current assets	17,538	10,537
Total current assets	276,297	243,060
Property and equipment, net	734	1,658
Operating lease right-of-use assets	11,931	5,385
Other long-term assets	827	5,824
Intangible asset, net	17,250	18,250
Deferred tax assets	219,283	185,495
Total assets	526,322	459,672
Current liabilities:
Accounts payable	8,246	7,899
Accrued expenses	44,667	30,112
Deferred revenue	307
Operating lease liabilities	2,253	3,301
Other current liabilities	8,193	5,754
Total current liabilities	63,666	47,066
Non-current liabilities:
Non-current deferred revenue	11,954	12,000
Non-current operating lease liabilities	10,005	2,618
Other long-term liabilities	1,858	1,839
Total liabilities	87,483	63,523
Commitments and contingencies (Note 16)
Shareholders' equity:
Additional paid-in capital	916,763	888,120
Accumulated other comprehensive income	6	44
Accumulated deficit	(477,950)	(492,034)
Total shareholders' equity	438,839	396,149
Total liabilities and shareholders' equity	526,322	459,672
Class A common shares
Shareholders' equity:
Common stock value	10	9
Class B common shares
Shareholders' equity:
Common stock value	1	1
Class A1 common shares
Shareholders' equity:
Common stock value	5	5
Class B1 common shares
Shareholders' equity:
Common stock value	$ 4	$ 4

Income Taxes - Components of Income Tax Provision (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income (loss) before provision for income taxes
Bermuda	$ (91,133)	$ (84,067)	$ (164,284)
Foreign (U.K., Germany, France, Switzerland)	74,481	95,093	7,745
Income (loss) before income taxes	(16,652)	11,026	(156,539)
Current income tax benefit (provision):
Bermuda	(122)	(1,318)
U.S. federal	(566)	(4,393)	(682)
U.S. state	(567)	(3,117)	(706)
Foreign (U.K., Germany, France, Switzerland)	(1,797)	(4,330)	14
Total current income tax benefit (provision)	(3,052)	(13,158)	(1,374)
Deferred income tax benefit (provision):
U.S. federal	12,958
U.S. state	5,122
Foreign (U.K., Germany, France, Switzerland)	15,708	185,495	(11)
Total deferred income tax benefit (provision)	33,788	185,495	(11)
Total benefit (provision) for income taxes	$ 30,736	$ 172,337	$ (1,385)

Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Assets Transfers
Fair value of assets transferred from Level 1 to Level 2	$ 0	$ 0
Fair value of assets transferred from Level 2 to Level 1	0	0
Fair value of asset transfer into Level 3	0	0
Fair value of asset transfer out of Level 3	0	0
Securities in unrealized loss position	0
U.S. Treasury Notes
Short-term investments
Amortized Cost	100,382	82,897
Gross Unrealized Gains	30	9
Gross Unrealized Losses		(4)
U.S. Treasury Notes \| Cash equivalents
Short-term investments
Amortized Cost	1,995	15,006
Gross Unrealized Gains		3
U.S. Treasury Notes \| Short-term Investments
Short-term investments
Amortized Cost	98,387	67,891
Gross Unrealized Gains	30	6
Gross Unrealized Losses		(4)
Fair Value \| U.S. Treasury Notes
Assets:
Short-term investments	100,412	82,902
Short-term investments
Fair Value	100,412	82,902
Fair Value \| U.S. Treasury Notes \| Cash equivalents
Assets:
Short-term investments	1,995	15,009
Short-term investments
Fair Value	1,995	15,009
Fair Value \| U.S. Treasury Notes \| Short-term Investments
Assets:
Short-term investments	98,417	67,893
Short-term investments
Fair Value	98,417	67,893
Fair Value \| Recurring basis
Assets:
Assets	143,966	103,831
Fair Value \| Recurring basis \| Money Market Funds
Assets:
Cash equivalents	43,554	20,929
Fair Value \| Recurring basis \| U.S. Treasury Notes
Assets:
Cash equivalents	1,995	15,009
Short-term investments	98,417	67,893
Short-term investments
Fair Value	98,417	67,893
Fair Value \| Recurring basis \| Level 1
Assets:
Assets	43,554	20,929
Fair Value \| Recurring basis \| Level 1 \| Money Market Funds
Assets:
Cash equivalents	43,554	20,929
Fair Value \| Recurring basis \| Level 2
Assets:
Assets	100,412	82,902
Fair Value \| Recurring basis \| Level 2 \| U.S. Treasury Notes
Assets:
Cash equivalents	1,995	15,009
Short-term investments	98,417	67,893
Short-term investments
Fair Value	$ 98,417	$ 67,893

Out-Licensing Agreements - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Contract Assets:
Balance at Beginning of Period	$ 7,656
Balance at End of Period		$ 7,656
Contract Liabilities:
Balance at Beginning of Period	12,000
Additions		26,290
Revenue Recognized		(21,946)
Reclassification		7,656
Balance at End of Period	11,954	12,000
Collaboration Agreements
Contract Liabilities:
Balance at Beginning of Period	12,000
Additions	45,000
Revenue Recognized	(37,083)
Reclassification	(7,656)
Balance at End of Period	12,261	12,000
Territory License - Rilonacept
Contract Liabilities:
Balance at Beginning of Period	12,000
Additions		12,000
Balance at End of Period	12,000	12,000
Worldwide License - Vixarelimab
Contract Assets:
Balance at Beginning of Period	7,656
Reclassification	(7,656)	7,656
Balance at End of Period		7,656
Contract Liabilities:
Additions	45,000	14,290
Revenue Recognized	(37,083)	(21,946)
Reclassification	(7,656)	$ 7,656
Balance at End of Period	$ 261

Net Income (Loss) per Share (Tables)

12 Months Ended

Dec. 31, 2023

Net Income (Loss) per Share

Schedule of basic and diluted net income (loss) attributable to common shareholders


	Years Ended
	December 31,
		2023	2022		2021
Numerator:
Net income (loss) attributable to common shareholders	$	14,084	$	183,363	$	(157,924)
Denominator:
Weighted-average basic shares outstanding		70,058,952		69,382,275		68,576,810
Effect of dilutive securities
Options to purchase common shares		1,362,250		968,512		—
Unvested RSUs		501,712		70,535		—
Weighted-average diluted shares		71,922,915		70,421,322		68,576,810

Basic net income (loss) per share	$	0.20	$	2.64	$	(2.30)
Diluted net income (loss) per share	$	0.20	$	2.60	$	(2.30)

Schedule of anti-dilutive securities excluded from the computation of diluted EPS per share attributable to common shareholders


	Years ended December 31,
	2023	2022	2021
Share options to purchase common shares	8,498,144	8,403,074	9,226,846
Unvested RSUs	975,608	1,548,347	885,021
Total anti-dilutive shares	9,473,752	9,951,421	10,111,867

Common Shares (Details) $ / shares in Units, $ in Thousands	12 Months Ended
Common Shares (Details) $ / shares in Units, $ in Thousands	Dec. 31, 2023 USD ($) Vote $ / shares shares	Dec. 31, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($)
Nature of the Business and Basis of Presentation
Common share authorized (in shares)	200,000,000	200,000,000
Common stock, par value (in dollars per share) \| $ / shares	$ 0.000273235	$ 0.000273235
Common stock, cash dividends declared or paid \| $	$ 0	$ 0	$ 0
Class A common shares
Nature of the Business and Basis of Presentation
Common stock, par value (in dollars per share) \| $ / shares	$ 0.000273235	$ 0.000273235
Number of votes (per share) \| Vote	1
Class A1 common shares
Nature of the Business and Basis of Presentation
Common stock, par value (in dollars per share) \| $ / shares	$ 0.000273235	0.000273235
Number of votes (per share) \| Vote	0
Convertible ratio to Class A common share	1
Class B common shares
Nature of the Business and Basis of Presentation
Common stock, par value (in dollars per share) \| $ / shares	$ 0.000273235	0.000273235
Number of votes (per share) \| Vote	10
Convertible ratio to Class A common share	1
Convertible ratio to Class B1 common share	1
Class B1 common shares
Nature of the Business and Basis of Presentation
Common stock, par value (in dollars per share) \| $ / shares	$ 0.000273235	$ 0.000273235
Number of votes (per share) \| Vote	0
Convertible ratio to Class A common share	1
Convertible ratio to Class B common share	1

Nature of the Business and Basis of Presentation

12 Months Ended

Dec. 31, 2023

Nature of the Business and Basis of Presentation

Nature of the Business and Basis of Presentation

1. Nature of the Business and Basis of Presentation

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

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

Principles of Consolidation

Use of Estimates

Reporting and Functional Currency

Liquidity

Intangible Assets - Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Mar. 31, 2021
Intangible Assets
Estimated life			20 years
Cost	$ 20,000	$ 20,000
Accumulated Amortization	2,750	1,750
Net	$ 17,250	$ 18,250	$ 20,000
Regulatory milestone
Intangible Assets
Estimated life	20 years	20 years
Cost	$ 20,000	$ 20,000
Accumulated Amortization	2,750	1,750
Net	$ 17,250	$ 18,250

Fair Value of Financial Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2023

Fair Value of Financial Assets and Liabilities

Schedule of financial assets and liabilities measured at fair value on a recurring basis


	Fair Value Measurements
	as of December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	43,554	$	—	$	—	$	43,554
Cash equivalents — U.S. Treasury notes		—		1,995		—		1,995
Short-term investments — U.S. Treasury notes		—		98,417		—		98,417
Total	$	43,554	$	100,412	$	—	$	143,966


	Fair Value Measurements
	as of December 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	20,929	$	—	$	—	$	20,929
Cash equivalents — U.S. Treasury notes		—		15,009		—		15,009
Short-term investments — U.S. Treasury notes		—		67,893		—		67,893
Total	$	20,929	$	82,902	$	—	$	103,831

Schedule of short-term investments


			Gross		Gross
	Amortized		Unrealized		Unrealized		Credit		Fair
	Cost		Gains		Losses		Losses		Value
December 31, 2023
Cash equivalents — U.S. Treasury notes	$	1,995	$	—	$	—	$	—	$	1,995
Short-term investments — U.S. Treasury notes		98,387		30		—		—		98,417
Total	$	100,382	$	30	$	—	$	—	$	100,412


			Gross		Gross
	Amortized		Unrealized		Unrealized		Credit		Fair
	Cost		Gains		Losses		Losses		Value
December 31, 2022
Cash equivalents — U.S. Treasury notes	$	15,006	$	3	$	—	$	—	$	15,009
Short-term investments — U.S. Treasury notes		67,891		6		(4)		—		67,893
Total	$	82,897	$	9	$	(4)	$	—	$	82,902

- Definition

Tabular disclosure of investment in debt security measured at fair value with change in fair value recognized in other comprehensive income (available-for-sale).

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-9

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 5: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 6: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (aa)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (aaa)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 10: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 11: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 12: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

+ Details

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Short-Term Investments

Concentrations of Credit Risk

Restricted Cash

Fair Value Measurements

●

Level 1—Quoted prices in active markets for identical assets or liabilities.

●

Leases

Property and Equipment

and comprehensive income (loss) in the period of disposal. The expected useful lives of the respective assets are as follows:


		Estimated Useful Life
Computer hardware and software		3 - 5 years
Laboratory equipment		5 years
Furniture, fixtures and vehicles		5 - 7 years
Leasehold improvements		Shorter of estimated useful life or lease term

Inventory

The vials that will ultimately be distributed free of charge under our patient assistance program are recognized as selling expense when they are labeled as free goods.

Revenue Recognition

Product Revenue, Net

Discounts and Allowances

Government Chargebacks and Rebates

wholesalers or distributors charge back to the Company the difference between their acquisition cost and the lower contractual price.

Cash Discounts

The Company estimates cash discounts based on contractual terms and expectations regarding future customer payment patterns.

Specialty Pharmacy & Distributor Fees

Sales Returns

Shipping and Handling

Shipping and handling activities are considered to be fulfillment activities and not considered to be a separate performance obligation.

Other Incentives

Collaboration Expenses

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.

(less than 12 months) or long-term (more than 12 months) deferred revenue based on our best estimate of when such revenue will be recognized.

Intangible Assets

Impairment of Long-Lived Assets

Research and Development Costs

Research Contract Costs

Patent Costs

Segment Information

Share-Based Compensation

Comprehensive Income (Loss)

Net Income (Loss) per Share

Income Taxes

Recently Adopted Accounting Pronouncements

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Revenue:
Product revenue, net	$ 270,259	$ 220,180	$ 38,544
Costs and operating expenses:
Research and development	76,097	65,490	99,297
Selling, general and administrative	129,427	97,951	85,948
Total operating expenses	295,455	210,407	195,180
Income (loss) from operations	(25,196)	9,773	(156,636)
Other income	8,544	1,253	97
Income (loss) before income taxes	(16,652)	11,026	(156,539)
Benefit (provision) for income taxes	30,736	172,337	(1,385)
Net income (loss)	$ 14,084	$ 183,363	$ (157,924)
Net income (loss) per share attributable to common shareholders, basic	$ 0.20	$ 2.64	$ (2.30)
Net income (loss) per share attributable to common shareholders, diluted	$ 0.20	$ 2.60	$ (2.30)
Weighted average common shares outstanding, basic	70,058,952	69,382,275	68,576,810
Weighted average common shares outstanding, diluted	71,922,915	70,421,322	68,576,810
Comprehensive income (loss):
Net income (loss)	$ 14,084	$ 183,363	$ (157,924)
Other comprehensive income (loss):
Unrealized gain (loss) on short-term investments and currency translation adjustments, net of tax	(38)	110	(32)
Total other comprehensive income (loss)	(38)	110	(32)
Total comprehensive income (loss)	14,046	183,473	(157,956)
Product revenue, net
Revenue:
Product revenue, net	233,176	122,524	38,544
Costs and operating expenses:
Cost of goods sold	33,407	22,895	9,100
License and collaboration revenue
Revenue:
Product revenue, net	37,083	97,656
Costs and operating expenses:
Cost of goods sold	$ 56,524	$ 24,071	$ 835

Inventory (Tables)

12 Months Ended

Dec. 31, 2023

Inventory

Schedule of inventory


	December 31,		December 31,
	2023		2022
Raw materials	$	—	$	—
Work-in-process		18,258		6,312
Finished Goods		12,864		15,287
Total inventory	$	31,122	$	21,599

Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2023

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

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


	Fair Value Measurements
	as of December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	43,554	$	—	$	—	$	43,554
Cash equivalents — U.S. Treasury notes		—		1,995		—		1,995
Short-term investments — U.S. Treasury notes		—		98,417		—		98,417
Total	$	43,554	$	100,412	$	—	$	143,966


	Fair Value Measurements
	as of December 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	20,929	$	—	$	—	$	20,929
Cash equivalents — U.S. Treasury notes		—		15,009		—		15,009
Short-term investments — U.S. Treasury notes		—		67,893		—		67,893
Total	$	20,929	$	82,902	$	—	$	103,831

During the years ended December 31, 2023 and 2022 there were no transfers between Level 1, Level 2 and Level 3. The money market funds were valued using quoted prices in active markets, which represent a Level 1

measurement in the fair value hierarchy. The Company’s cash equivalents and short-term investments as of December 31, 2023 and 2022 included U.S. Treasury notes, which are not traded on a daily basis and, therefore, represent a Level 2 measurement in the fair value hierarchy at each period end.

Cash equivalents and short-term investments as of December 31, 2023 and 2022 consisted of U.S. Treasury notes which investments were each due within six months of such date.


			Gross		Gross
	Amortized		Unrealized		Unrealized		Credit		Fair
	Cost		Gains		Losses		Losses		Value
December 31, 2023
Cash equivalents — U.S. Treasury notes	$	1,995	$	—	$	—	$	—	$	1,995
Short-term investments — U.S. Treasury notes		98,387		30		—		—		98,417
Total	$	100,382	$	30	$	—	$	—	$	100,412


			Gross		Gross
	Amortized		Unrealized		Unrealized		Credit		Fair
	Cost		Gains		Losses		Losses		Value
December 31, 2022
Cash equivalents — U.S. Treasury notes	$	15,006	$	3	$	—	$	—	$	15,009
Short-term investments — U.S. Treasury notes		67,891		6		(4)		—		67,893
Total	$	82,897	$	9	$	(4)	$	—	$	82,902

As of December 31, 2023, the Company held no securities in an unrealized loss position. As of December 31, 2022 we consider the unrealized losses in our investment portfolio to be temporary in nature and not due to credit losses. We have the ability to hold such investments until recovery of the fair value. We utilize the specific identification method in computing realized gains and losses. We had no realized gains and losses on our available-for-sale securities for the years ended December 31, 2023 or 2022.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Income Taxes - Reconciliation (Details)	12 Months Ended
Income Taxes - Reconciliation (Details)	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Taxes
Bermuda statutory income tax rate	0.00%	0.00%	0.00%
U.S. and Europe tax rate differential	(103.10%)	165.90%	1.90%
Research and development tax credits	13.70%	(21.50%)	2.40%
Share-based compensation	(7.40%)	13.20%	(0.40%)
U.S. state taxes, net of federal	(7.90%)	10.40%	(0.50%)
FDII	13.80%	(35.90%)	1.40%
Uncertain tax positions		14.30%	0.20%
IP transfers and allocation	258.60%	(343.90%)	71.00%
Inventory allocation	181.40%
Other	(4.70%)	17.20%	(0.80%)
Change in valuation allowance	(159.80%)	(1382.80%)	(76.10%)
Effective income tax rate	184.60%	(1563.10%)	(0.90%)

Accrued Expenses

12 Months Ended

Dec. 31, 2023

Accrued Expenses

Accrued Expenses

9. Accrued Expenses

Accrued expenses consisted of the following:


	December 31,		December 31,
	2023		2022
Accrued research and development expenses	$	7,895	$	8,378
Accrued employee compensation and benefits		15,954		11,213
Accrued collaboration expenses		16,939		7,522
Accrued legal, commercial and professional fees		3,553		2,866
Other		326		133
Total accrued expenses	$	44,667	$	30,112

During the year ended December 31, 2022, the Company recorded out of period adjustments of $2,223 that primarily relates to a decrease in accrued research and development expenses to correct immaterial errors that originated in prior periods. The Company evaluated the materiality of the adjustments to prior-period annual and interim financial statements and the current period, and concluded the effect of the adjustments were immaterial to all periods.

Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2023

Property and Equipment, Net

Schedule of property and equipment, net


	December 31,		December 31,
	2023		2022
Furniture, fixtures and vehicles	$	224	$	224
Computer hardware and software		379		345
Leasehold improvements		3,931		3,931
Lab equipment		3,972		4,017
Construction in progress		13		—
Total property and equipment		8,519		8,517
Less: Accumulated depreciation		(7,785)		(6,859)
Total property and equipment, net	$	734	$	1,658

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Taxes

Schedule of loss before benefit (provision) for income taxes


	Years Ended
	December 31,
	2023		2022		2021
Bermuda	$	(91,133)	$	(84,067)	$	(164,284)
Foreign (U.S., U.K., Germany, France, Switzerland)		74,481		95,093		7,745
Total	$	(16,652)	$	11,026	$	(156,539)

Schedule of components of income tax benefit


	Years Ended
	December 31,
	2023		2022		2021
Current income tax benefit (provision):
Bermuda	$	(122)	$	(1,318)	$	—
U.S. federal		(566)		(4,393)		(682)
U.S. state		(567)		(3,117)		(706)
Foreign (U.K., Germany, France, Switzerland)		(1,797)		(4,330)		14
Total current income tax benefit (provision)		(3,052)		(13,158)		(1,374)
Deferred income tax benefit (provision):
Bermuda		—		—		—
U.S. federal		12,958		—		—
U.S. state		5,122		—		—
Foreign (U.K., Germany, France, Switzerland)		15,708		185,495		(11)
Total deferred income tax benefit (provision)		33,788		185,495		(11)
Total benefit (provision) for income taxes	$	30,736	$	172,337	$	(1,385)

Schedule of reconciliation of the Bermuda statutory income tax rate of 0% to the Company's effective income tax rate


	Years Ended
	December 31,
	2023		2022		2021
Bermuda statutory income tax rate	—	%	—	%	—	%
U.S. and Europe tax rate differential	(103.1)		165.9		1.9
Research and development tax credits	13.7		(21.5)		2.4
Share-based compensation	(7.4)		13.2		(0.4)
U.S. state taxes, net of federal	(7.9)		10.4		(0.5)
FDII	13.8		(35.9)		1.4
Uncertain tax positions	—		14.3		0.2
IP transfers and allocation	258.6		(343.9)		71.0
Inventory allocation	181.4		—		—
Other	(4.7)		17.2		(0.8)
Change in valuation allowance	(159.8)		(1,382.8)		(76.1)
Effective income tax rate	184.6	%	(1,563.1)	%	(0.9)	%

Summary of net deferred tax assets


	December 31,
	2023		2022
Deferred tax assets:
Research and development tax credit carryforwards	$	265	$	231
Share-based compensation		15,642		11,789
Operating lease liability		3,317		1,543
Accrued expenses and other liabilities		2,914		2,134
Intangible assets		215,396		181,458
Inventory		30,338		—
Capitalized research and development		—		5,586
Net operating losses		1,128		4,054
Total deferred tax assets		269,000		206,795
Valuation allowance		(46,260)		(19,584)
Deferred tax liabilities:
Depreciation and amortization		(237)		(312)
Right of use asset		(3,220)		(1,404)
Net deferred tax assets	$	219,283	$	185,495

Schedule of changes in the valuation allowance for deferred tax assets


	Years Ended
	December 31,
	2023		2022
Valuation allowance at beginning of year	$	(19,584)	$	(127,944)
Increases recorded through the balance sheet		—		—
Decreases (increases) recorded to income tax provision		(26,676)		108,360
Valuation allowance at end of year	$	(46,260)	$	(19,584)

Schedule of uncertainties in income tax provision liability


	Years Ended
	December 31,
	2023		2022		2021
Gross balance at the beginning of year	$	1,794	$	545	$	837
Gross increases based on current period tax positions		—		1,386		50
Gross increases based on tax positions of the prior periods		122		—		—
Gross decreases based on tax positions of the prior periods		(122)		(137)		(342)
Unrecognized tax benefits at the end of the year	$	1,794	$	1,794	$	545

Out-Licensing Agreements

12 Months Ended

Dec. 31, 2023

Out-Licensing Agreements

Out-Licensing Agreements

12.Out-Licensing Agreements

Genentech License Agreement

In August 2022, the Company entered into a license agreement (the “Genentech License Agreement”) with Genentech, Inc. and F. Hoffmann-La Roche Ltd (collectively, “Genentech”), pursuant to which the Company granted Genentech exclusive worldwide rights to develop, manufacture and commercialize vixarelimab and related antibodies (each, a “Genentech Licensed Product”). The Genentech License Agreement became effective in September 2022 (the “Genentech Effective Date”) following termination of the statutory waiting period under the Hart-Scott Rodino Act.

Under the Genentech License Agreement, the Company received an upfront payment of $80,000 for the license. During the year ended December 31 2023, the Company received cash payments of $20,000 following delivery of certain drug supplies to Genentech and $15,000 following Genentech’s achievement of a development milestone related to a new indication under the Genentech License Agreement. In the fourth quarter of 2023, following the achievement of a development milestone related to a second indication under the Genentech License Agreement, Genentech became obligated to make an additional cash payment of $10,000 which the Company recorded in accounts receivable as of December 31, 2023. Under the terms of the Genentech License Agreement, the Company is eligible to receive a total of

approximately $600,000 in contingent payments, including specified development, regulatory and sales-based milestones, before fulfilling the Company’s upstream financial obligations, of which approximately $575,000 remain as of December 31, 2023. The Company will also be eligible to receive tiered percentage royalties on a Genentech Licensed Product-by-Genentech Licensed Product basis ranging from low-double digits to mid-teens on annual net sales of each Genentech Licensed Product, subject to certain customary reductions, with an aggregate minimum floor, before fulfilling the Company’s upstream financial obligations. Royalties will be payable on a Genentech Licensed Product-by-Genentech Licensed Product and country-by-country basis until the latest to occur of the expiration of certain patents that cover a Genentech Licensed Product, the expiration of regulatory exclusivity for such Genentech Licensed Product, or the tenth anniversary of first commercial sale of such Genentech Licensed Product in such country.

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

Under the Genentech License Agreement, Genentech has the right to assume manufacturing responsibilities for Genentech Licensed Products.

Absent early termination, the Genentech License Agreement will continue until there are no more royalty or other payment obligations owed to the Company. Genentech has the right to terminate the Genentech License Agreement at its discretion with prior written notice and either party may terminate the Genentech License Agreement in the event of an uncured material breach of the other party or in the case of insolvency of the other party. In addition, the Genentech License Agreement will terminate upon termination of the Biogen Agreement (as defined below).

The Company concluded that Genentech is a customer in this license agreement, and as such, the Genentech License Agreement falls within the scope of the revenue recognition guidance in ASC 606.

Accounting for Genentech License Agreement

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

The Company also evaluated whether certain options outlined within the Genentech License Agreement represented material rights that would give rise to a performance obligation, including the option to purchase additional drug substance, and concluded that none of the options convey a material right to Genentech and therefore are not considered separate performance obligations within the Genentech License Agreement.

The Company assessed the above promises and determined that the exclusive license for vixarelimab is reflective of a vendor-customer relationship and therefore represents a performance obligation. The exclusive license for vixarelimab is considered functional intellectual property and distinct from other promises under the Genentech License Agreement as Genentech can benefit from the license on its own or together with other readily available resources and the license is separately identifiable from the other promises. The initial drug supply and drug product resupply are considered distinct from the exclusive license for vixarelimab as Genentech can benefit from such supply together with the license transferred by the Company at the inception of the Genentech License Agreement. The completion of the Phase 2b clinical trial is considered distinct from the exclusive license for vixarelimab as Genentech can benefit from the

data generated by such trial together with such license. Therefore, each represents a separate performance obligation within a contract with a customer at contract inception.

The Company determined the transaction price at the inception of the Genentech License Agreement which consists of the $80,000 upfront payment. The Company determined that the $20,000 variable consideration related to the delivery of the initial drug supply and drug product resupply was no longer constrained during the fourth quarter of 2022, as the Company determined that it could assert it was not probable that a significant reversal in the amount of cumulative revenue recognized would occur. The Company met the milestone obligation in the first quarter of 2023 and invoiced Genentech for the related $20,000 payment for the delivery of certain drug material. In 2023, the Company added $25,000 to the transaction price following Genentech’s achievement of two development milestones under the Genentech License Agreement. The Company determined that all other variable considerations related to the future development and regulatory milestones, are deemed fully constrained and therefore excluded from the transaction price due to the high degree of uncertainty and risk associated with these potential payments, as the Company also determined that it could not assert that it was not probable that a significant reversal in the amount of cumulative revenue recognized would occur. The Company also determined that royalties and sales milestones relate solely to the license of intellectual property. Revenue related to these royalties and sales milestones will only be recognized when the associated sales occur, and relevant thresholds are met, under the sales or usage-based royalty exception of Topic 606.

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


Performance Obligation		Method of Recognition
Exclusive license for vixarelimab		Point in time; that is upon transfer of the license to Genentech. As control of the license was transferred on the Genentech Effective Date and Genentech could begin to use and benefit from the license on that date.
Initial drug supply delivery		Point in time upon delivery.
Drug product resupply delivery		Point in time upon delivery.
Completion of the phase 2b clinical trial for vixarelimab		Over time; using the cost-to-cost input method, which is believed to best depict the transfer of control to the customer. Under the cost-to-cost input method, the percent of completion is based on the ratio of actual costs incurred as of the period end to the total estimated costs. Revenue is recorded as a percentage of the allocated transaction price times the percent of completion.

The Company recognized $37,083 and $87,656 of collaboration revenue during the years ended December 31, 2023 and 2022, respectively, under the Genentech License Agreement related to the license, completed portion of the Phase 2b Clinical trial for vixarelimab, and materials delivered. As a result of the $25,000 in development milestones achieved by Genentech, the Company recognized revenue of $21,914, during the year ended December 31, 2023, related to performance obligations satisfied in prior periods. The remaining revenue was recognized as a result of further progress towards completion of the phase 2b clinical trial for vixarelimab and materials delivered. The Company expects to recognize the remaining deferred revenue associated with the Genentech License Agreement over the remaining portion of the Phase 2b clinical trial for vixarelimab.

Huadong Collaboration Agreements

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

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

Pursuant and subject to the terms of the Huadong Collaboration Agreements, Huadong has the exclusive right to conduct Huadong Territory-specific development activities for the Huadong Licensed Products in the Huadong Territory, the first right to support global development of the Huadong Licensed Products by serving as the sponsor of the global clinical trials conducted in the Huadong Territory and the exclusive right to commercialize the Huadong Licensed Products in the Huadong Territory. Huadong will be responsible for all costs of development activities and commercialization in the Huadong Territory. Both the Company and Huadong participate in a joint steering committee, which coordinates and oversees the exploitation of the Huadong Licensed Products in the Huadong Territory.

The Company will supply certain materials to support development and commercialization activities for both mavrilimumab and rilonacept. Under the Huadong Collaboration Agreement for mavrilimumab, Huadong has the right to assume manufacturing responsibilities for materials in the Huadong Territory. Under the Huadong Collaboration Agreement for rilonacept, Huadong does not have rights to perform manufacturing activities in the Huadong Territory.

Absent early termination, each Huadong Collaboration Agreement will continue on a country-by-country or region-by-region basis until there are no more royalty payments owed to the Company in such country or region for the applicable Huadong Licensed Product. Huadong has the right to terminate each Huadong Collaboration Agreement at its discretion upon 12 months’ notice and either party may terminate the applicable Huadong Collaboration Agreement in the event of an uncured material breach of the other party or in the case of insolvency of the other party. In addition, the Company may terminate the applicable Huadong Collaboration Agreement if Huadong or its affiliates or sublicensees challenges the scope, validity, or enforceability of the Company’s patent rights being licensed to Huadong. If Huadong and its affiliates do not conduct any material development or commercialization activities with respect to a Huadong Licensed Product in the People’s Republic of China for a continuous period of longer than six months, then, subject to certain exceptions, the Company may terminate the Huadong Collaboration Agreement applicable to such Huadong

Licensed Product with 60 days’ prior written notice. In addition, Huadong’s rights under each Huadong Collaboration Agreement in certain regions within the Huadong Territory may be subject to termination upon failure by Huadong to perform certain clinical, development or commercialization activities, as applicable, with respect to the applicable Huadong Licensed Product in such regions.

The Company concluded that Huadong is a customer in these Huadong Collaboration Agreements, and as such, each Huadong Collaboration Agreement falls within the scope of the revenue recognition guidance in ASC 606.

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

Accounting for Mavrilimumab Huadong Collaboration Agreement

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

The Company also evaluated whether certain options outlined within the mavrilimumab Huadong Collaboration Agreement represented material rights that would give rise to a performance obligation and concluded that none of the options convey a material right to Huadong and therefore are not considered separate performance obligations within the mavrilimumab Huadong Collaboration Agreement.

The Company assessed the above promises and determined that the exclusive license for mavrilimumab in the Huadong Territory is reflective of a vendor-customer relationship and therefore represents a performance obligation. The exclusive license for mavrilimumab in the Huadong Territory is considered functional intellectual property and distinct from other promises under the Huadong Collaboration Agreement as Huadong can benefit from the license on its own or together with other readily available resources and the license is separately identifiable from the other promises. The clinical manufacturing supply of certain materials for mavrilimumab products in the Huadong Territory is considered distinct from the exclusive license for mavrilimumab as Huadong can benefit from the manufacturing services together with the license transferred by the Company at the inception of the Huadong Collaboration Agreement. Therefore, each represents a separate performance obligation within a contract with a customer at contract inception.

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

As noted above, the Company identified two performance obligations in the mavrilimumab Huadong Collaboration Agreement: (i) the delivery of the exclusive license for mavrilimumab in the Huadong Territory; and (ii) the clinical manufacturing supply of certain materials for mavrilimumab products in the Huadong Territory. The selling price of each performance obligation in the mavrilimumab Huadong Collaboration Agreement was determined based on the

Company’s standalone selling price (“SSP”) with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. The Company allocated the variable consideration related to the manufacturing obligations to the future clinical supply of mavrilimumab products in the Huadong Territory and the remaining fixed and variable consideration to the license obligation. The Company recognizes revenue for the license performance obligations at a point in time, that is upon transfer of the license to Huadong. As control of the license was transferred on the Effective Date and Huadong could begin to use and benefit from the license, the Company recognized $10,000 of collaboration revenue during the year ended December 31, 2022 under the mavrilimumab Huadong Collaboration Agreement. The Company will recognize revenue for the clinical manufacturing supply obligations at a point in time, that is upon each delivery of the supply to Huadong. The Company has not recognized any revenue under the mavrilimumab Huadong Collaboration Agreement for the year ended December 31, 2023 as there has been no delivery of clinical manufacturing supply of certain materials under the mavrilimumab Huadong Collaboration Agreement to date.

Accounting for Rilonacept Huadong Collaboration Agreement

As of the Effective Date, the Company identified the following material promises in the rilonacept Huadong Collaboration Agreement that were evaluated: delivery of (i) exclusive license for rilonacept in the Huadong Territory; (ii) clinical manufacturing supply of certain materials for rilonacept products in the Huadong Territory; and (iii) commercial manufacturing supply of certain material for rilonacept products in the Huadong Territory.

The Company also evaluated whether certain options outlined within the rilonacept Huadong Collaboration Agreement represented material rights that would give rise to a performance obligation and concluded that none of the options convey a material right to Huadong and therefore are not considered separate performance obligations within the rilonacept Huadong Collaboration Agreement.

The Company assessed the above promises and determined that there is one combined performance obligation for the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory. Huadong cannot exploit the value of the exclusive license for rilonacept products in the Huadong Territory without receipt of supply as the exclusive license for rilonacept products in the Huadong Territory does not convey to Huadong the right to manufacture and therefore the Company has combined the exclusive license for rilonacept products in the Huadong Territory and the manufacturing obligations into one performance obligation.

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

As noted above, the Company identified a single combined performance obligation in the rilonacept Huadong Collaboration Agreement consisting of the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory. The Company recognizes revenue for the combined performance obligation consisting of the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory at a point in time, upon which control of materials are transferred to Huadong for each delivery of the associated materials. The Company currently expects to recognize the revenue over the life of the agreement. This estimate considers the timing of development and commercial activities

under the rilonacept Huadong Collaboration Agreement and may be reduced or increased based on changes in the various activities.

The Company has not recognized any revenue under the rilonacept Huadong Collaboration Agreement for the years ended December 31, 2023 and 2022 as there has been no delivery of materials under the rilonacept Huadong Collaboration Agreement to date. As of December 31, 2023, $46 is recorded in current deferred revenue and $11,954 is recorded in non-current deferred revenue, based upon timing of anticipated future shipments.

The following tables summarizes the Company’s contract assets and contract liabilities in connection with license and collaboration agreements for the years ended December 31, 2023 and 2022:


	Balance at				Revenue				Balance at End
	Beginning of Period		Additions		Recognized		Reclassification		of Period
Year ended December 31, 2023
Contract Assets:
Genentech vixarelimab	$	7,656	$	—	$	—	$	(7,656)	$	—
Contract Liabilities:
Genentech vixarelimab	$	—	$	45,000	$	(37,083)	$	(7,656)	$	261
Huadong rilonacept		12,000		—		—		—		12,000
Total Contract Liabilities	$	12,000	$	45,000	$	(37,083)	$	(7,656)	$	12,261


	Balance at				Revenue				Balance at End
	Beginning of Period		Additions		Recognized		Reclassification		of Period
Year ended December 31, 2022
Contract Assets:
Genentech vixarelimab	$	—	$	—	$	—	$	7,656	$	7,656
Contract Liabilities:
Genentech vixarelimab	$	—	$	14,290	$	(21,946)	$	7,656	$	—
Huadong rilonacept		—		12,000		—		—		12,000
Total Contract Liabilities	$	—	$	26,290	$	(21,946)	$	7,656	$	12,000

Product Revenue, Net (Tables)

12 Months Ended

Dec. 31, 2023

Product Revenue, Net

Schedule of product revenue, net

Schedule of balances and activity of the product revenue allowance and reserve categories

The following tables summarizes balances and activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2023 and 2022:


	Contractual		Government
	Adjustments		Rebates		Returns		Total
Balance at December 31, 2022	$	1,464	$	2,084	$	351	$	3,899
Current provisions relating to sales in the current year		16,274		9,437		212		25,923
Adjustments relating to prior years		(88)		(199)		(182)		(469)
Payments/returns relating to sales in the current year		(14,234)		(5,694)		—		(19,928)
Payments/returns relating to sales in the prior years		(1,394)		(1,853)		(40)		(3,287)
Balance at December 31, 2023	$	2,022	$	3,775	$	341	$	6,138


	Contractual		Government
	Adjustments		Rebates		Returns		Total
Balance at December 31, 2021	$	515	$	719	$	101	$	1,335
Current provisions relating to sales in the current year		7,366		4,543		269		12,178
Adjustments relating to prior years		—		—		(19)		(19)
Payments/returns relating to sales in the current year		(5,902)		(2,535)		—		(8,437)
Payments/returns relating to sales in the prior years		(515)		(643)		—		(1,158)
Balance at December 31, 2022	$	1,464	$	2,084	$	351	$	3,899

Total revenue-related reserves as of December 31, 2023 and 2022, included in our consolidated balance sheets, are summarized as follows:


	December 31,		December 31,
	2023		2022
Reduction of accounts receivable	$	(459)	$	(304)
Components of other current liabilities		6,597		4,203
Total revenue-related reserves	$	6,138	$	3,899

Income Taxes - Uncertainties in Income Tax Provision Liability (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Unrecognized tax benefits
Unrecognized tax benefits, beginning balance	$ 1,794	$ 545	$ 837
Gross increases based on current period tax positions		1,386	50
Gross increases based on tax positions of the prior periods	122
Gross decreases based on tax positions of the prior periods	(122)	(137)	(342)
Unrecognized tax benefits, ending balance	1,794	$ 1,794	$ 545
Unremitted earnings	50,466
Undistributed earnings deferred tax liability not recognized	$ 15,140

Benefit Plans

12 Months Ended

Dec. 31, 2023

Benefit Plans

Benefit Plans

17. Benefit Plans

The Company has established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company provides matching contributions of 100% of the first 3% of each participant’s salary contributed, plus 50% for each of the next 2% contributed. Employees are immediately and fully vested in their own contributions and the Company’s match. During the years ended December 31, 2023, 2022 and 2021, the Company contributed $2,305, $1,683 and $1,558 respectively, to the plan.

Common Shares

12 Months Ended

Dec. 31, 2023

Common Shares.

Common Shares

10. Common Shares

The rights of the holders of the Company’s Class A common shares, Class B common shares, Class A1 common shares and Class B1 common shares are identical, except with respect to voting, transferability and conversion, as described below. The Company has authorized 200,000,000 shares, at a par value of $0.000273235 as of December 31, 2023 and 2022.

Voting

Each Class A common share entitles the holder to one vote on all matters submitted to the shareholders for a vote. Each Class B common share entitles the holder to ten votes on all matters submitted to the shareholders for a vote. The holders of Class A and Class B common shares, voting together as a single class, are entitled to elect the directors of the Company. Holders of Class A1 common shares and Class B1 common shares have no voting rights.

Dividends

The Company’s common shareholders are entitled to receive dividends, as may be declared by the Company’s board of directors. Through December 31, 2023, no cash dividends have been declared or paid.

Conversion

Each Class B common share automatically converts into one Class A common share upon certain transfers of such shares by the holder thereof (subject to certain exceptions). Each Class B common share is convertible, at the holder’s election into one Class A common share or one Class B1 common share. Each Class A1 common share is convertible into one Class A common share at the holder’s election (subject to certain exceptions). Each Class B1 common share automatically converts into one Class A common share upon certain transfers of such shares by the holder thereof (subject to certain exceptions). Each Class B1 common share is convertible into one Class A common share or one Class B common share at the holder’s election (subject to certain exceptions). There are no conversion rights associated with the Class A common shares.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 505
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481004/946-505-50-6

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-6

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480008/505-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 505
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//505/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
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-Paragraph 16
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-16

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

Product Revenue, Net (Details) - USD ($) $ in Thousands	12 Months Ended
Product Revenue, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Product revenue
Product revenue, net	$ 270,259	$ 220,180	$ 38,544
Contractual Adjustments
Balance at beginning of period	1,464	515
Current provisions relating to sales in the current year	16,274	7,366
Adjustments relating to prior years	(88)
Payments/returns relating to sales in the current year	(14,234)	(5,902)
Payments/returns relating to sales in the prior years	(1,394)	(515)
Balance at end of period	2,022	1,464	515
Government Rebates
Balance at beginning of period	2,084	719
Current provisions relating to sales in the current year	9,437	4,543
Adjustments relating to prior years	(199)
Payments/returns relating to sales in current year	(5,694)	(2,535)
Payments/returns relating to sales in the prior years	(1,853)	(643)
Balance at end of period	3,775	2,084	719
Returns
Balance at beginning of period	351	101
Current provisions relating sales in the current year	212	269
Adjustments relating to prior years	(182)	(19)
Payments/returns relating to sales in the prior years	(40)
Balance at end of period	341	351	101
Total
Balance at beginning of period	3,899	1,335
Current provisions relating to sales in the current year	25,923	12,178
Adjustments relating to prior years	(469)	(19)
Payments/returns relating to sales in the current year	(19,928)	(8,437)
Payments/returns relating to sales in the prior years	(3,287)	(1,158)
Balance at end of period	6,138	3,899	1,335
Product revenue, net
Product revenue
Product revenue, net	$ 233,176	$ 122,524	$ 38,544

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net income (loss)	$ 14,084	$ 183,363	$ (157,924)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	2,341	2,402	2,355
Share-based compensation expense	27,149	25,120	25,173
Non-cash lease expense	3,054	3,041	2,631
Amortization (accretion) of discounts on short-term investments	(1,068)	(82)	664
Loss on disposal of property and equipment	179	33	103
Deferred income taxes	(33,788)	(185,495)	11
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(7,067)	(3,858)	2,941
Accounts receivable, net	(8,606)	(8,675)	(3,910)
Inventory	(9,523)	(17,924)	(3,675)
Contract asset	7,656	(7,656)
Other long-term assets	4,584	2,654	(3,284)
Accounts payable	347	6,031	1,366
Accrued expenses and other current liabilities	16,940	(3,709)	10,339
Operating lease liabilities	(3,261)	(3,007)	(2,553)
Deferred revenue	261	12,000
Other long-term liabilities	19	1,569	(535)
Net cash provided by (used in) operating activities	13,301	5,807	(126,298)
Cash flows from investing activities:
Proceeds from sale of property and equipment		91
Purchases of property and equipment	(130)	(105)	(415)
Purchases of short-term investments	(204,933)	(135,864)	(157,250)
Proceeds from the maturities of short-term investments	175,506	127,800	306,300
Intangible assets acquired			(20,000)
Net cash provided by (used in) investing activities	(29,557)	(8,078)	128,635
Cash flows from financing activities:
Proceeds from issuance of Class A common shares under incentive award plans and employee share purchase plan	3,701	3,417	5,885
Payments in connection with Common Stock tendered for employee tax obligations	(2,206)	(901)
Net cash provided by financing activities	1,495	2,516	5,885
Net increase (decrease) in cash, cash equivalents, and restricted cash	(14,761)	245	8,222
Cash, cash equivalents and restricted cash at beginning of period	122,715	122,470	114,248
Cash, cash equivalents and restricted cash at end of period	107,954	122,715	122,470
Supplemental information:
Cash paid for income taxes, net	5,605	10,689	1,279
Supplemental disclosure of non-cash investing and financing activities:
Change in right-of-use asset as a result of new, modified, and terminated leases	9,600	$ 2,876	$ 1,619
Additions to property and equipment included in accounts payable and accrued expenses and other liabilities	$ 54

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Shares	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Balance at the beginning of the period at Dec. 31, 2020	$ 18	$ 829,424	$ (34)	$ (517,473)	$ 311,935
Balance at the beginning of the period (in shares) at Dec. 31, 2020	68,215,022
Changes in equity
Issuance of Class A common shares under incentive award plans		5,885			5,885
Issuance of Class A common shares under incentive award plans (in shares)	845,381
Share-based compensation expense		25,173			25,173
Unrealized gain (loss) on short-term investments and currency translation adjustments			(32)		(32)
Net Income (Loss)				(157,924)	(157,924)
Balance at the end of the period at Dec. 31, 2021	$ 18	860,482	(66)	(675,397)	185,037
Balance at the end of the period (in shares) at Dec. 31, 2021	69,060,403
Changes in equity
Issuance of Class A common shares under incentive award plans	$ 1	2,518			2,519
Issuance of Class A common shares under incentive award plans (in shares)	637,100
Share-based compensation expense		25,120			25,120
Unrealized gain (loss) on short-term investments and currency translation adjustments			110		110
Net Income (Loss)				183,363	183,363
Balance at the end of the period at Dec. 31, 2022	$ 19	888,120	44	(492,034)	396,149
Balance at the end of the period (in shares) at Dec. 31, 2022	69,697,503
Changes in equity
Issuance of Class A common shares under incentive award plans	$ 1	1,494			1,495
Issuance of Class A common shares under incentive award plans (in shares)	763,114
Share-based compensation expense		27,149			27,149
Unrealized gain (loss) on short-term investments and currency translation adjustments			(38)		(38)
Net Income (Loss)				14,084	14,084
Balance at the end of the period at Dec. 31, 2023	$ 20	$ 916,763	$ 6	$ (477,950)	$ 438,839
Balance at the end of the period (in shares) at Dec. 31, 2023	70,460,617

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 323
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481687/323-10-50-3

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 825
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 28
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482907/825-10-50-28

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 220
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482765/220-10-50-6

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 65
-Paragraph 1
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480175/815-40-65-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 8
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- Definition

Amount of equity (deficit) attributable to parent. Excludes temporary equity and equity attributable to noncontrolling interest.

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+ Details

Share-Based Compensation - Restricted Shares and RSUs (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-based compensation
Share-based compensation expense	$ 27,149	$ 25,120	$ 25,173
Number of shares
Beginning of the period	1,742,401
Granted	1,389,421
Vested	(521,440)
Forfeited	(213,494)
End of the period	2,396,888	1,742,401
Weighted Average Fair Value at Issuance
Beginning of the period	$ 12.76
Granted	15.13
Vested	13.60
Forfeited	12.27
End of the period	$ 14.00	$ 12.76
Restricted Share Units (RSUs)
Share-based compensation
Share-based compensation expense	$ 7,822	$ 4,246	$ 3,682
Total unrecognized compensation cost	$ 28,613
Expenses expected to be recognized over a weighted average remaining period	2 years 11 months 8 days
Time-based RSUs
Share-based compensation
Vesting percentage	25.00%
First RSU Award
Share-based compensation
Common shares issued			187,682
Second RSU Award
Share-based compensation
Common shares issued			142,283

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2023	Dec. 31, 2022
Common stock, par value (in dollars per share)	$ 0.000273235	$ 0.000273235
Class A common shares
Common stock, par value (in dollars per share)	$ 0.000273235	$ 0.000273235
Common stock, shares issued (in shares)	35,781,373	34,750,560
Common stock, shares outstanding (in shares)	35,781,373	34,750,560
Class B common shares
Common stock, par value (in dollars per share)	$ 0.000273235	$ 0.000273235
Common stock, shares issued (in shares)	1,795,158	1,813,457
Common stock, shares outstanding (in shares)	1,795,158	1,813,457
Class A1 common shares
Common stock, par value (in dollars per share)	$ 0.000273235	$ 0.000273235
Common stock, shares issued (in shares)	16,826,468	17,075,868
Common stock, shares outstanding (in shares)	16,826,468	17,075,868
Class B1 common shares
Common stock, par value (in dollars per share)	$ 0.000273235	$ 0.000273235
Common stock, shares issued (in shares)	16,057,618	16,057,618
Common stock, shares outstanding (in shares)	16,057,618	16,057,618

Leases

12 Months Ended

Dec. 31, 2023

Leases

Leases

7. Leases

The Company leases office, laboratory space and vehicles under operating leases. In May 2023, the Company entered into a lease amendment to extend the term of the Lexington, Massachusetts headquarters lease by forty-eight months to August 31, 2028. The Company accounted for the lease amendment as a modification and recorded increases in the right-of-use-assets and lease liability of $8,515.

The components of lease cost for the year ended December 31, 2023, 2022 and 2021 are as follows:


	Years Ended
	December 31,
	2023		2022		2021
Operating lease cost	$	3,749	$	3,380	$	2,748
Variable lease cost		1,023		132		287
Total lease cost	$	4,772	$	3,512	$	3,035


	December 31,
	2023
Weighted-average remaining lease term (years)		4.31
Weighted-average discount rate		6.52%

Maturities of operating leases liabilities were as follows:


As of December 31,
2024	$	2,944
2025		3,240
2026		2,959
2027		2,996
2028		2,037
Thereafter		—
Total future minimum lease payments	$	14,176
Less imputed interest		(1,918)
Present value of lease liabilities	$	12,258

Net Income (Loss) per Share

12 Months Ended

Dec. 31, 2023

Net Income (Loss) per Share

Net Income (Loss) per Share

15. Net Income (Loss) per Share

The rights, including the liquidation and dividend rights, of the holders of Class A, Class B, Class A1 and Class B1 common shares are identical, except with respect to voting, transferability and conversion (see Note 10). As the liquidation and dividend rights are identical, losses are allocated on a proportionate basis and the resulting net income (loss) per share attributed to common shareholders will, therefore, be the same for both Class A and Class B common shares on an individual or combined basis.

Basic and diluted Net income (loss) attributable to common shareholders was calculated as follows:


	Years Ended
	December 31,
		2023	2022		2021
Numerator:
Net income (loss) attributable to common shareholders	$	14,084	$	183,363	$	(157,924)
Denominator:
Weighted-average basic shares outstanding		70,058,952		69,382,275		68,576,810
Effect of dilutive securities
Options to purchase common shares		1,362,250		968,512		—
Unvested RSUs		501,712		70,535		—
Weighted-average diluted shares		71,922,915		70,421,322		68,576,810

Basic net income (loss) per share	$	0.20	$	2.64	$	(2.30)
Diluted net income (loss) per share	$	0.20	$	2.60	$	(2.30)

The Company’s unvested RSUs have been excluded from the computation of basic net loss per share attributable to common shareholders.

Diluted earnings per share includes the assumed exercise of dilutive options and the assumed issuance of unvested RSUs and performance-based awards for which the performance condition has been met as of the date of determination, using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the average unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase the Company’s common stock at the average market price during the period.

For year ended December 31, 2021 the Company’s potentially dilutive securities, which include options and unvested RSUs, have been excluded from the computation of diluted net loss per share attributable to common shareholders for the periods indicated as the effect would be to reduce the net loss per share attributable to common shareholders. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:


	Years ended December 31,
	2023	2022	2021
Share options to purchase common shares	8,498,144	8,403,074	9,226,846
Unvested RSUs	975,608	1,548,347	885,021
Total anti-dilutive shares	9,473,752	9,951,421	10,111,867

Income Taxes - Valuation Allowances (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Income Taxes
Valuation allowance at beginning of year	$ (19,584)	$ (127,944)
Decreases (increases) recorded to income tax provision	(26,676)	108,360
Valuation allowance at end of year	(46,260)	$ (19,584)
Decrease in valuation allowance	$ (26,676)

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2023	Feb. 23, 2024	Jun. 30, 2023
Document information
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2023
Entity File Number	001-38492
Entity Registrant Name	Kiniksa Pharmaceuticals, Ltd.
Entity Incorporation, State or Country Code	D0
Entity Tax Identification Number	98-1327726
Entity Address, Address Line One	Clarendon House
Entity Address, Address Line Two	2 Church Street
Entity Address, City or Town	Hamilton
Entity Address, Country	BM
Entity Address, Postal Zip Code	HM11
City Area Code	808
Local Phone Number	189-6257
Title of 12(b) Security	Class A Common Shares
Trading Symbol	KNSA
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	false
Error correction flag	false
Auditor Name	PricewaterhouseCoopers LLP
Auditor Firm ID	238
Auditor Location	Boston, Massachusetts
Entity Shell Company	false
Entity Public Float			$ 510.3
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	FY
Entity Central Index Key	0001730430
Amendment Flag	false
Common Shares
Document information
Entity Common Stock, Shares Outstanding		70,615,022
Class A common shares
Document information
Entity Common Stock, Shares Outstanding		39,980,282
Class B common shares
Document information
Entity Common Stock, Shares Outstanding		1,795,158
Class A1 common shares
Document information
Entity Common Stock, Shares Outstanding		12,781,964
Class B1 common shares
Document information
Entity Common Stock, Shares Outstanding		16,057,618

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Taxes
Bermuda statutory income tax rate	0.00%	0.00%	0.00%
Income tax benefits - Bermuda	$ 0
Net operating loss carryforwards - Bermuda	0
Benefit (provision) for income taxes	30,736	$ 172,337	$ (1,385)
Non-cash deferred tax benefit	(33,788)	$ (185,495)	$ 11
Decrease in valuation allowance	$ (26,676)

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Numerator:
Net income (loss) attributable to common shareholders	$ 14,084	$ 183,363	$ (157,924)
Denominator:
Weighted-average basic shares outstanding	70,058,952	69,382,275	68,576,810
Effect of dilutive securities
Weighted-average diluted shares outstanding	71,922,915	70,421,322	68,576,810
Basic EPS	$ 0.20	$ 2.64	$ (2.30)
Diluted EPS	$ 0.20	$ 2.60	$ (2.30)
Employee Stock Option
Effect of dilutive securities
Effect of dilutive securities	1,362,250	968,512
Unvested RSUs
Effect of dilutive securities
Effect of dilutive securities	501,712	70,535

Inventory (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Inventory
Work-in-process	$ 18,258	$ 6,312
Finished goods	12,864	15,287
Total inventory	$ 31,122	$ 21,599

Leases (Tables)

12 Months Ended

Dec. 31, 2023

Leases

Schedule of the components of lease cost


	Years Ended
	December 31,
	2023		2022		2021
Operating lease cost	$	3,749	$	3,380	$	2,748
Variable lease cost		1,023		132		287
Total lease cost	$	4,772	$	3,512	$	3,035


	December 31,
	2023
Weighted-average remaining lease term (years)		4.31
Weighted-average discount rate		6.52%

Schedule of maturities of operating lease liabilities


As of December 31,
2024	$	2,944
2025		3,240
2026		2,959
2027		2,996
2028		2,037
Thereafter		—
Total future minimum lease payments	$	14,176
Less imputed interest		(1,918)
Present value of lease liabilities	$	12,258

Summary of Significant Accounting Policies - Property and Equipment (Details)	Dec. 31, 2023
Laboratory equipment
Property and Equipment, Net
Expected useful life	5 years
Minimum \| Computer hardware and software
Property and Equipment, Net
Expected useful life	3 years
Minimum \| Furniture, fixtures, and vehicles
Property and Equipment, Net
Expected useful life	5 years
Maximum \| Computer hardware and software
Property and Equipment, Net
Expected useful life	5 years
Maximum \| Furniture, fixtures, and vehicles
Property and Equipment, Net
Expected useful life	7 years

Leases - Lease Cost and Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	May 31, 2023	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Lease cost
Operating lease cost		$ 3,749	$ 3,380	$ 2,748
Variable lease cost		1,023	132	287
Total lease cost		4,772	3,512	3,035
Extension of lease term	48 months
Change in right-of-use asset as a result of new, modified, and terminated leases	$ 8,515	$ 9,600	$ 2,876	$ 1,619

Out-Licensing Agreements (Tables)

12 Months Ended

Dec. 31, 2023

Out-Licensing Agreements

Schedule of identified performance obligations to recognize revenue


Performance Obligation		Method of Recognition
Exclusive license for vixarelimab		Point in time; that is upon transfer of the license to Genentech. As control of the license was transferred on the Genentech Effective Date and Genentech could begin to use and benefit from the license on that date.
Initial drug supply delivery		Point in time upon delivery.
Drug product resupply delivery		Point in time upon delivery.
Completion of the phase 2b clinical trial for vixarelimab		Over time; using the cost-to-cost input method, which is believed to best depict the transfer of control to the customer. Under the cost-to-cost input method, the percent of completion is based on the ratio of actual costs incurred as of the period end to the total estimated costs. Revenue is recorded as a percentage of the allocated transaction price times the percent of completion.

Schedule of contract liabilities and contract assets in connection with license and collaboration agreements


	Balance at				Revenue				Balance at End
	Beginning of Period		Additions		Recognized		Reclassification		of Period
Year ended December 31, 2023
Contract Assets:
Genentech vixarelimab	$	7,656	$	—	$	—	$	(7,656)	$	—
Contract Liabilities:
Genentech vixarelimab	$	—	$	45,000	$	(37,083)	$	(7,656)	$	261
Huadong rilonacept		12,000		—		—		—		12,000
Total Contract Liabilities	$	12,000	$	45,000	$	(37,083)	$	(7,656)	$	12,261


	Balance at				Revenue				Balance at End
	Beginning of Period		Additions		Recognized		Reclassification		of Period
Year ended December 31, 2022
Contract Assets:
Genentech vixarelimab	$	—	$	—	$	—	$	7,656	$	7,656
Contract Liabilities:
Genentech vixarelimab	$	—	$	14,290	$	(21,946)	$	7,656	$	—
Huadong rilonacept		—		12,000		—		—		12,000
Total Contract Liabilities	$	—	$	26,290	$	(21,946)	$	7,656	$	12,000

Intangible Assets - Future Amortization (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Future amortization of intangible assets
2024	$ 1,000
2025	1,000
2026	1,000
2027	1,000
2028	$ 1,000

License and Acquisition Agreements - Beth Israel Deaconess Medical Center License Agreement (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2019
License and Acquisition Agreements
Research and development	$ 76,097	$ 65,490	$ 99,297
License Agreement \| BIDMC
License and Acquisition Agreements
Research and development	$ 40	$ 10	$ 10
License Agreement \| BIDMC \| Maximum
License and Acquisition Agreements
Milestone payment to be paid upon clinical and regulatory milestone achievement				$ 1,200

Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Compensation

Share-Based Compensation

11. Share-Based Compensation

2018 Incentive Award Plan

In May 2018, the Company’s board of directors and shareholders approved the 2018 Incentive Award Plan (the “2018 Plan”), which became effective on May 23, 2018. The 2018 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted shares, dividend equivalents, restricted share units and other share- or cash- based awards. Upon the effectiveness of the 2018 Plan, the Company ceased granting awards under its 2015 Equity Incentive Plan (as amended, the “2015 Plan” together with the 2018 Plan, the “Plans”).

A total of 4,466,500 Class A common shares were initially reserved for issuance under the 2018 Plan. The number of Class A common shares that may be issued under the 2018 Plan will automatically increase on each January 1, beginning in 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lesser of (1) 4% of the Class A common shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (2) a smaller number of Class A common shares

determined by the Company’s board of directors. As of December 31, 2023, 4,030,035 shares remained available for future grant. On January 1, 2024, the Class A common shares issuable pursuant to the 2018 Plan increased by 2,818,425 shares, equal to 4% of the as-converted Class A common shares outstanding on December 31, 2023. The Class A common shares underlying any awards issued under the 2018 Plan or the 2015 Plan that on or after the effective date of the 2018 Plan expire, lapse unexercised or are terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited under the 2018 Plan or the 2015 Plan will be added back to the Class A common shares available for issuance under the 2018 Plan.

2015 Equity Incentive Plan

Until May 23, 2018 (the effective date of the 2018 Plan), the 2015 Plan provided for the Company to grant incentive share options, nonqualified share options, share grants and other share-based awards to employees and non-employees to purchase the Company’s Class A common shares. On the effective date of the 2018 Plan, the Company ceased granting awards under the 2015 Plan. At that time, the 4,691,213 Class A common shares subject to outstanding awards under the 2015 Plan remained reserved for issuance under the plan pursuant to such awards and the 92,170 Class A common shares that had been available for future grant under the 2015 Plan were no longer authorized and reserved for issuance or available for future grant under the 2015 Plan.

As of December 31, 2023, there were 1,856,506 Class A common shares subject to outstanding awards under the 2015 Plan and reserved for issuance thereunder pursuant to such awards. The 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Class A common shares subject to awards granted under the 2015 Plan that expire, lapse unexercised or are terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited become available for issuance under the 2018 Plan.

The exercise price for share options granted under the 2015 Plan was determined by the Company’s board of directors. All incentive share options granted to any person possessing 10% or less of the total combined voting power of all classes of shares could not have an exercise price of less than 100% of the fair market value of the Class A common shares on the grant date. All incentive share options granted to any person possessing more than 10% of the total combined voting power of all classes of shares could not have an exercise price of less than 110% of the fair market value of the Class A common shares on the grant date. The option term for incentive share options could not be greater than 10 years. Incentive share options granted to persons possessing more than 10% of the total combined voting power of all classes of shares could not have an option term of greater than five years. The vesting period for equity-based awards was determined by the board of directors, which was generally four to six years. For awards granted to employees and non-employees with four year vesting terms, 25% of the option vests on the first anniversary of the grant date and the remaining shares vest equally each month for three years thereafter. For awards granted to employees with six year vesting terms, 16% of the option vests on the first anniversary of the grant date and the remaining shares vest based on a predetermined vesting schedule for five years thereafter.

2018 Employee Share Purchase Plan

In May 2018, the Company’s board of directors and shareholders approved the 2018 Employee Share Purchase Plan (the “2018 ESPP”), which became effective on May 23, 2018. A total of 670,000 Class A common shares were initially reserved for issuance under the 2018 ESPP. The number of Class A common shares that may be issued under the 2018 ESPP automatically increases on each January 1, beginning in 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lesser of (1) 1% of the Class A common shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (2) a smaller number of Class A common shares determined by the Company’s board of directors, provided that no more than 6,420,000 Class A common shares may be issued under the 2018 ESPP. In December 2023, the Company’s board of directors approved an increase as of January 1, 2024 of 215,000 Class A common shares. As of December 31, 2023, 528,130 Class A common shares were available for future issuance under the 2018 ESPP.

Share Options

The following table summarizes option activity for the year ended December 31, 2023:


				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Term	Intrinsic
	Shares	Price		(in years)	Value


Outstanding as of December 31, 2022	10,144,618	$	13.36	7.33	$	32,634
Granted	2,133,581	$	14.69
Exercised	(319,829)	$	8.99
Forfeited	(359,281)	$	15.06
Outstanding as of December 31, 2023	11,599,089	$	13.67	6.91	$	54,653
Share options exercisable as of December 31, 2023	7,349,632	$	13.59	5.87	$	37,613
Share options vested and expected to vest as of December 31, 2023	11,599,089	$	13.67	6.91	$	54,653

The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s common shares for those share options that had exercise prices lower than the fair value of the Company’s common shares.

During the year ended December 31, 2023, share option holders exercised 319,829 share options for Class A common shares with an intrinsic value of $2,595 for total cash proceeds to the Company of $2,876. During the year ended December 31, 2022, share option holders exercised 383,106 share options for Class A common shares with an intrinsic value of $2,196 for total cash proceeds to the Company of $2,606. During the year ended December 31, 2021, share option holders exercised 795,404 share options for Class A common shares with an intrinsic value of $6,392 for total cash proceeds to the Company of $5,311.

The weighted-average grant-date fair value per share of share options granted during the years ended December 31, 2023, 2022 and 2021 was $9.82, $7.66 and $11.30, respectively.

The total fair value of share options vested during the years ended December 31, 2023, 2022 and 2021 was $19,036, $21,229 and $22,870, respectively.

As of December 31, 2023, total unrecognized compensation expense related to the unvested share option awards was $36,369 which is expected to be recognized over a weighted average remaining period of 2.53 years.

Option Valuation

The assumptions that the Company used to determine the grant-date fair value of share options granted to employees and directors from the 2018 Plan during the years ended December 31, 2023, 2022 and 2021 were as follows, presented on a weighted-average basis:


	Years Ended
	December 31,
	2023		2022		2021
Risk-free interest rate	3.96	%	3.00	%	1.00	%
Expected term (in years)	6.15		6.17		6.13
Expected volatility	71.33	%	73.83	%	76.05	%
Expected dividend yield	—	%	—	%	—	%

During the years ended December 31, 2023, 2022 and 2021, the Company did not grant share options to non-employees.

Restricted Share Units

RSUs represent the right to receive shares of the Company’s Class A common shares upon vesting of the RSUs. The fair value of each RSU award is based on the closing price of the Company’s Class A common shares on the date of grant.

Starting March 2021, the Company granted RSUs with service conditions (“Time-Based RSUs”) to eligible employees. The Time-Based RSUs vest 25% on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates.

Rilonacept Long-Term Incentive Plan

In December 2019, the compensation committee of the Company’s board of directors approved the Company’s Rilonacept Long-Term Incentive Plan (“RLTIP”) under the Company’s 2018 Plan to incentivize eligible employees of the Company or any of its subsidiaries to achieve FDA approval for the commercial sale and marketing of rilonacept for the treatment of recurrent pericarditis in the United States (“RLTIP Milestone”). The RLTIP provided for eligible employees to receive a cash award and two grants of RSU awards covering Class A common shares under the 2018 Plan.

The cash award was eligible to be earned and paid upon the date the RLTIP Milestone was achieved (the “Achievement Date”) with respect to an amount determined in accordance with the RLTIP based on the earnout percentage. The number of Class A common shares issuable under the first RSU award (“First RSU Award”) as a result of the achievement of the RLTIP Milestone was determined in accordance with the RLTIP based on the earnout percentage, and such RSUs vested on the first anniversary of the Achievement Date, subject to continued employment on such date. The second RSU award was granted on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, based on both the earnout percentage and the upside earnout percentage, and vested on the second anniversary of the Achievement Date, subject to continued employment on such date.

During the years ended December 31, 2020 and 2019, the Company granted the First RSU Awards as part of the RLTIP to eligible employees. During the year ended December 31, 2021, the RLTIP Milestone was achieved and 187,682 of Class A common shares were issued under the First RSU Awards in accordance with the RLTIP and vested in one installment in March 2022 (on the first anniversary of the Achievement Date). During the year ended December 31, 2021, the Second RSU Awards were granted to eligible employees on the Achievement Date with 142,283 shares granted in accordance with the RLTIP which vested in one installment in March 2023.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized $7,822, $4,246 and $3,682, respectively in compensation expense related to RSUs including those granted in connection with the RLTIP.

The following table summarizes RSU activity, including the Time-Based RSUs and the RSU Awards under the RLTIP, for the year ended December 31, 2023:


		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested RSUs as of December 31, 2022	1,742,401	$	12.76
Granted	1,389,421	$	15.13
Vested	(521,440)	$	13.60
Forfeited	(213,494)	$	12.27
Unvested RSUs as of December 31, 2023	2,396,888	$	14.00

As of December 31, 2023, total unrecognized compensation cost related to the RSU Awards and Time-Based RSUs was $28,613 which is expected to be recognized over a weighted average remaining period of 2.94 years.

Share-Based Compensation

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


	Years Ended
	December 31,
	2023		2022		2021
Cost of goods sold	$	1,812	$	636	$	197
Research and development expenses		5,496		6,766		8,450
Selling, general and administrative expenses		19,841		17,718		16,526
Total stock-based compensation	$	27,149	$	25,120	$	25,173

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2023

Intangible Assets

Schedule of intangible assets, net of accumulated amortization, impairment charges, and adjustments


		As of December 31, 2023						As of December 31, 2022
				Accumulated						Accumulated
	Estimated life	Cost		Amortization		Net		Cost		Amortization		Net
Regulatory milestone	20 years	$	20,000	$	2,750	$	17,250	$	20,000	$	1,750	$	18,250
Total		$	20,000	$	2,750	$	17,250	$	20,000	$	1,750	$	18,250

Schedule of future amortization of intangible assets


For the years ended December 31,
2024	$	1,000
2025		1,000
2026		1,000
2027		1,000
2028		1,000

Out-Licensing Agreements (Details) $ in Thousands	1 Months Ended		3 Months Ended		12 Months Ended
Out-Licensing Agreements (Details) $ in Thousands	Aug. 31, 2022 USD ($) item	Feb. 28, 2022 USD ($) item agreement	Dec. 31, 2023 USD ($)	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Collaborative agreements
Number of performance obligations in an agreement \| item	4
Notice period to terminate the agreement if there is no material development or commercialization activities with respect to the licensed product in China		60 days
Product revenue, net					$ 270,259	$ 220,180	$ 38,544
License and collaboration revenue
Collaborative agreements
Product revenue, net					37,083	97,656
Collaboration Agreements
Collaborative agreements
Upfront payments received		$ 22,000
Number of agreements entered into \| agreement		2
Term of agreement for royalty payments		12 years
Notice period to terminate the agreement		12 months
Collaboration Agreements \| Minimum
Collaborative agreements
Time period threshold of continuous material development or commercialization activities in China that, if not met, can trigger the right for the Company to terminate the agreement		6 months
Territory License - Rilonacept
Collaborative agreements
Upfront payments received		$ 12,000
Transaction price		$ 12,000
Number of performance obligations in an agreement \| item		1
Territory License - Rilonacept \| Maximum
Collaborative agreements
Payments to be received by the company upon the achievement of specified development, regulatory and sales milestones		$ 70,000
Territory License - Rilonacept \| Non-current deferred revenue
Collaborative agreements
Transaction price					11,954
Territory License - Rilonacept \| Current deferred revenue
Collaborative agreements
Transaction price					46
Territory License - Rilonacept \| License and collaboration revenue
Collaborative agreements
Product revenue, net					0
Territory License - Mavrilimumab
Collaborative agreements
Upfront payments received		10,000
Transaction price		$ 10,000
Number of performance obligations in an agreement \| item		2
Territory License - Mavrilimumab \| Maximum
Collaborative agreements
Payments to be received by the company upon the achievement of specified development, regulatory and sales milestones		$ 576,000
Territory License - Mavrilimumab \| License and collaboration revenue
Collaborative agreements
Product revenue, net						10,000
Worldwide License - Vixarelimab
Collaborative agreements
Upfront payments received	$ 80,000
Payments received upon delivery of certain materials	20,000			$ 20,000	20,000
Milestone receipts					15,000
Transaction price	$ 80,000
Addition to transaction price			$ 10,000		25,000
Number of performance obligations in an agreement \| item	4
Payments to be received by the company upon the achievement of specified development, regulatory and sales milestones					575,000
Revenue recognized related to performance obligations satisfied in prior periods					21,914
Worldwide License - Vixarelimab \| Maximum
Collaborative agreements
Payments to be received by the company upon the achievement of specified development, regulatory and sales milestones	$ 600,000
Worldwide License - Vixarelimab \| License and collaboration revenue
Collaborative agreements
Product revenue, net					$ 37,083	$ 87,656

Intangible Assets

12 Months Ended

Dec. 31, 2023

Intangible Assets

Intangible Assets

8. Intangible Assets

Intangible assets, net of accumulated amortization, impairment charges and adjustments are summarized in the following table.


		As of December 31, 2023						As of December 31, 2022
				Accumulated						Accumulated
	Estimated life	Cost		Amortization		Net		Cost		Amortization		Net
Regulatory milestone	20 years	$	20,000	$	2,750	$	17,250	$	20,000	$	1,750	$	18,250
Total		$	20,000	$	2,750	$	17,250	$	20,000	$	1,750	$	18,250

As of December 31, 2023 future amortization of intangible assets are as follows:


For the years ended December 31,
2024	$	1,000
2025		1,000
2026		1,000
2027		1,000
2028		1,000

Pay vs Performance Disclosure - USD ($) $ in Thousands	12 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Pay vs Performance Disclosure
Net Income (Loss)	$ 14,084	$ 183,363	$ (157,924)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies

Schedule of expected useful lives of assets


		Estimated Useful Life
Computer hardware and software		3 - 5 years
Laboratory equipment		5 years
Furniture, fixtures and vehicles		5 - 7 years
Leasehold improvements		Shorter of estimated useful life or lease term

License and Acquisition Agreements - Biogen Asset Purchase Agreement (Details) - USD ($) $ in Thousands	1 Months Ended		12 Months Ended
	Aug. 31, 2022	Sep. 30, 2016	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
License and Acquisition Agreements
Research and development			$ 76,097	$ 65,490	$ 99,297
Maximum
License and Acquisition Agreements
Royalty rate increase (percentage)	1.00%
Asset Purchase Agreement
License and Acquisition Agreements
Upfront payment for exchange of rights		$ 11,500
Technology transfer payment		500
Remaining milestone payments to be paid upon clinical and regulatory milestone achievement			165,000
One-time payment of upfront sublicense fee on retained contracts		$ 150
Notice period to terminate the agreement		90 days
Uncured period which causes termination of the agreement, due to insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured		90 days
Notice period to terminate the agreement under payment-related breaches		30 days
Research and development			$ 94	$ 56	$ 53
Asset Purchase Agreement \| Maximum
License and Acquisition Agreements
Milestone payment to be paid upon clinical and regulatory milestone achievement		$ 179,000
Milestone payment to be paid upon net sales milestone achievement		150,000
Maximum aggregate obligation to pay insignificant annual maintenance fees as well as clinical and regulatory milestone payments		$ 1,575

Nature of the Business and Basis of Presentation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Liquidity
Accumulated deficit	$ (477,950)	$ (492,034)
Net Income (Loss)	14,084	183,363	$ (157,924)
Cash provided by operations	13,301	$ 5,807	$ (126,298)
Cash, cash equivalents and short-term investments	$ 206,371

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

- Definition

Amount of accumulated undistributed earnings (deficit).

+ References + Details

Property and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Property and Equipment, Net
Total property and equipment	$ 8,519	$ 8,517
Less: Accumulated depreciation	(7,785)	(6,859)
Total property and equipment, net	734	1,658
Depreciation expense	1,109	1,179	$ 1,455
UK
Property and Equipment, Net
Total property and equipment, net	122	226
Furniture, fixtures, and vehicles
Property and Equipment, Net
Total property and equipment	224	224
Computer hardware and software
Property and Equipment, Net
Total property and equipment	379	345
Leasehold improvements
Property and Equipment, Net
Total property and equipment	3,931	3,931
Lab equipment
Property and Equipment, Net
Total property and equipment	3,972	$ 4,017
Construction in progress
Property and Equipment, Net
Total property and equipment	$ 13

Summary of Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($) item	Dec. 31, 2022 USD ($) item	Dec. 31, 2021 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Concentration risk
Number of financial institutions holding cash, cash equivalents and short-term investments \| item	2	2
Restricted cash
Restricted cash	$ 0	$ 0	$ 0
Cash securing letter of credit					$ 210
Intangible assets
Intangible asset, net	17,250	$ 18,250		$ 20,000
Estimated life				20 years
Income Taxes
Income tax benefits - Bermuda	0
Net operating loss carryforwards - Bermuda	0
Clinical Supply Agreement
Revenue recognition
Cost of goods sold	$ 3,265

Income Taxes - Components of Deferred Tax Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets:
Research and development tax credit carryforwards	$ 265	$ 231
Share-based compensation	15,642	11,789
Operating lease liability	3,317	1,543
Accrued expenses and other liabilities	2,914	2,134
Intangible assets	215,396	181,458
Inventory	30,338
Capitalized research and development		5,586
Net operating losses	1,128	4,054
Total deferred tax assets	269,000	206,795
Valuation allowance	(46,260)	(19,584)	$ (127,944)
Deferred tax liabilities:
Depreciation and amortization	(237)	(312)
Right of use asset	(3,220)	(1,404)
Net deferred tax assets	219,283	185,495
Foreign
Deferred tax assets:
Research and development tax credit carryforwards	0
Net operating losses	1,128	3,902
State
Deferred tax assets:
Research and development tax credit carryforwards	$ 337	$ 297

Property and Equipment, Net

12 Months Ended

Dec. 31, 2023

Property and Equipment, Net

Property and Equipment, Net

6. Property and Equipment, Net

Property and equipment, net consisted of the following:


	December 31,		December 31,
	2023		2022
Furniture, fixtures and vehicles	$	224	$	224
Computer hardware and software		379		345
Leasehold improvements		3,931		3,931
Lab equipment		3,972		4,017
Construction in progress		13		—
Total property and equipment		8,519		8,517
Less: Accumulated depreciation		(7,785)		(6,859)
Total property and equipment, net	$	734	$	1,658

Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $1,109, $1,179 and $1,455, respectively.

As of December 31, 2023 and 2022, $122 and $226, respectively, of our property and equipment, net was in the United Kingdom.

Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

14. Income Taxes

As a company incorporated in Bermuda, the Company is principally subject to taxation in Bermuda. Under the current laws of Bermuda, tax on a company’s income is assessed at a zero percent tax rate. As a result, the Company has not recorded any income tax benefits from its losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses.

The Company and its wholly-owned subsidiaries have entered into agreements with Kiniksa US, under which Kiniksa US provides management, commercial, manufacturing and research and development services to those parties for which Kiniksa US receives costs plus a service fee.

In 2021, 2022 and 2023 the Company engaged in a series of intra-entity asset transfers and allocations to contribute assets to its wholly owned UK subsidiary and its UK Swiss branch office.

In January 2021, in connection with its launch readiness activities, Kiniksa Bermuda contributed all of its rights, title and interest in, among other things, certain contracts (including the Regeneron Agreement), intellectual property rights, product filings and approvals and other information, plans and materials owned or controlled by Kiniksa Bermuda insofar as they related exclusively or primarily to ARCALYST to Kiniksa UK.

In February 2022, Kiniksa Bermuda contributed its exclusive rights to develop and commercialize mavrilimumab in the Huadong Territory to Kiniksa UK.

In July 2022, Kiniksa Bermuda contributed all of its rights, title and interest in, among other things, certain contracts (including the Biogen Agreement), intellectual property rights, product filings and approvals and other information, plans and materials owned or controlled by Kiniksa Bermuda insofar as they related exclusively or primarily to vixarelimab to Kiniksa UK.

The consolidated Company did not incur tax liabilities on any of these intra-entity transfers since the transferor, Kiniksa Bermuda, is exempt from income tax in Bermuda, its jurisdiction of incorporation. Kiniksa UK accounted for the 2021 and 2022 intra-entity transfers as transfers of assets between related parties and received stepped up tax bases in the contributed intellectual property assets, equal to the fair value of the assets at the time of transfer. The Company recorded UK deferred tax assets as a result of these contributions, which represent the difference between the stepped-up tax bases and the book bases for financial statement purposes. At the time of the 2021 and 2022 transfers of the relevant assets, the Company recorded a valuation allowance on the full amount of the recognized deferred tax assets.

The fair value of the January 2021 transfer of ARCALYST intellectual property assets was determined utilizing forecasted cash flows attributable to commercial operations and estimated probabilities of success of such cash flows, discounted to present value utilizing the discounted cash flow method. The fair values of the transferred mavrilimumab and vixarelimab intellectual property assets were determined utilizing future cash flows related to agreements with third parties for the use of the applicable intellectual property and estimated probabilities of success of such cash flows, discounted to present value utilizing the discounted cash flow method.

In December 2023, Kiniksa UK allocated all of its rights, title and interest in, among other things, certain contracts (including the Regeneron Agreement), intellectual property rights, product filings and approvals and other information, plans and inventory owned or controlled by the Company insofar as they related exclusively or primarily to ARCALYST to Kiniksa UK’s Swiss branch office.

The December 2023 allocation of the assets to the Swiss branch did not result in a taxable disposal for Kiniksa UK as the allocation was to a branch within the entity. The future results of Kiniksa UK’s Swiss branch office are subject to income taxes in Switzerland and the Company expects it will not be subject to tax in the UK. Kiniksa UK’s Swiss branch office received a step up in basis resulting in a Swiss deferred tax asset. The fair value of the allocated ARCALYST intellectual property assets was determined utilizing forecasted cash flows attributable to commercial

operations and estimated probabilities of success of such cash flows, discounted to present value utilizing the discounted cash flow method. The fair value of the ARCALYST inventory was determined utilizing the average net selling price less estimated costs to sell.

Income (loss) before benefit (provision) for income taxes consisted of the following:


	Years Ended
	December 31,
	2023		2022		2021
Bermuda	$	(91,133)	$	(84,067)	$	(164,284)
Foreign (U.S., U.K., Germany, France, Switzerland)		74,481		95,093		7,745
Total	$	(16,652)	$	11,026	$	(156,539)

The components of the Company’s income tax benefit (provision) were as follows:


	Years Ended
	December 31,
	2023		2022		2021
Current income tax benefit (provision):
Bermuda	$	(122)	$	(1,318)	$	—
U.S. federal		(566)		(4,393)		(682)
U.S. state		(567)		(3,117)		(706)
Foreign (U.K., Germany, France, Switzerland)		(1,797)		(4,330)		14
Total current income tax benefit (provision)		(3,052)		(13,158)		(1,374)
Deferred income tax benefit (provision):
Bermuda		—		—		—
U.S. federal		12,958		—		—
U.S. state		5,122		—		—
Foreign (U.K., Germany, France, Switzerland)		15,708		185,495		(11)
Total deferred income tax benefit (provision)		33,788		185,495		(11)
Total benefit (provision) for income taxes	$	30,736	$	172,337	$	(1,385)

A reconciliation of the Bermuda statutory income tax rate of 0% to the Company’s effective income tax rate is as follows:


	Years Ended
	December 31,
	2023		2022		2021
Bermuda statutory income tax rate	—	%	—	%	—	%
U.S. and Europe tax rate differential	(103.1)		165.9		1.9
Research and development tax credits	13.7		(21.5)		2.4
Share-based compensation	(7.4)		13.2		(0.4)
U.S. state taxes, net of federal	(7.9)		10.4		(0.5)
FDII	13.8		(35.9)		1.4
Uncertain tax positions	—		14.3		0.2
IP transfers and allocation	258.6		(343.9)		71.0
Inventory allocation	181.4		—		—
Other	(4.7)		17.2		(0.8)
Change in valuation allowance	(159.8)		(1,382.8)		(76.1)
Effective income tax rate	184.6	%	(1,563.1)	%	(0.9)	%

Net deferred tax assets consisted of the following:


	December 31,
	2023		2022
Deferred tax assets:
Research and development tax credit carryforwards	$	265	$	231
Share-based compensation		15,642		11,789
Operating lease liability		3,317		1,543
Accrued expenses and other liabilities		2,914		2,134
Intangible assets		215,396		181,458
Inventory		30,338		—
Capitalized research and development		—		5,586
Net operating losses		1,128		4,054
Total deferred tax assets		269,000		206,795
Valuation allowance		(46,260)		(19,584)
Deferred tax liabilities:
Depreciation and amortization		(237)		(312)
Right of use asset		(3,220)		(1,404)
Net deferred tax assets	$	219,283	$	185,495

As of December 31, 2023 and 2022, the Company had no federal research and development tax credit carryforwards available to reduce future tax liabilities. As of December 31, 2023 and 2022, the Company had state research and development tax credit carryforwards of approximately $337 and $297 respectively, available to reduce future tax liabilities, which can be carried forward indefinitely. As of December 31, 2023 and 2022 the Company had foreign net operating loss (NOLs) carryforwards of $1,128 and $3,902 respectively, available to reduce future tax liabilities. The NOLs maybe carried forward and utilized, subject to local limitations.

As required by ASC 740 management regularly reassesses the valuation allowance on the Company’s deferred income tax assets. Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that the Company will be able to recover its deferred tax assets. Such assessment is

required on a jurisdiction-by-jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

In the third quarter of 2022, the Company assessed the valuation allowance on its UK deferred tax assets and considered positive evidence, including, among other things, cumulative UK income in recent years, estimates of sales related to the Company’s commercial product ARCALYST, and future profitability by jurisdiction. After assessing both the positive evidence and negative evidence, the Company determined it was more likely than not that its UK deferred tax assets would be realized in the future and released the associated valuation allowance during the year ended December 31, 2022. This resulted in a non-cash deferred tax benefit of $185,495. As of December 31, 2022, the Company maintained a full valuation allowance against its U.S. deferred tax assets.

In the second quarter of 2023, the Company assessed the valuation allowance on its U.S. deferred tax assets and considered positive evidence, including cumulative U.S. income in recent years, primarily related to cost plus arrangements and expectations regarding future profitability. The Company determined it was more likely than not that its U.S. deferred tax assets are realizable in the future and released the associated valuation allowance as of June 30, 2023.

In the fourth quarter of 2023, the Company assessed the valuation allowance on its Kiniksa UK deferred tax assets and considered positive and negative evidence, including among other things, the impact of future profitability decreasing in the UK as a result of the allocation of ARCALYST to the Swiss branch office. After assessing both the positive and negative evidence, the Company determined it was more likely than not that a portion of the UK deferred tax assets would not be realized in the future and established a partial valuation allowance on those assets during the year ended December 31, 2023.

The Company recognized a non-cash deferred tax benefit of $33,788 during the year ended December 31, 2023. This benefit primarily resulted from the step up in basis of intangible assets and inventory received in Switzerland associated with the allocation of ARCALYST to the Swiss branch office and the release of the U.S. valuation allowance. This was partially offset by the establishment of a partial UK valuation allowance. There are no material deferred tax assets in the jurisdictions outside the United States, UK and Switzerland.

Utilization of the state research and development tax credits may be subject to substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the shares of a corporation by more than 50% over a three-year period.

Changes in the valuation allowance for deferred taxes were as follows:


	Years Ended
	December 31,
	2023		2022
Valuation allowance at beginning of year	$	(19,584)	$	(127,944)
Increases recorded through the balance sheet		—		—
Decreases (increases) recorded to income tax provision		(26,676)		108,360
Valuation allowance at end of year	$	(46,260)	$	(19,584)

The valuation allowance increased by $26,676 in 2023 primarily as a result of the establishment of the valuation allowance for the UK deferred tax assets which primarily consisted of the tax basis in intellectual property transferred from Bermuda and net operating losses.

The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The amount of unrecognized tax benefits is $1,794, $1,794 and $545 as of December 31, 2023, 2022 and 2021, respectively. The net change in 2023, 2022 and 2021 relate to tax positions on our intellectual property transfers and positions on research and development credits.

A roll forward of the Company’s uncertainties in its income tax provision liability is presented below:


	Years Ended
	December 31,
	2023		2022		2021
Gross balance at the beginning of year	$	1,794	$	545	$	837
Gross increases based on current period tax positions		—		1,386		50
Gross increases based on tax positions of the prior periods		122		—		—
Gross decreases based on tax positions of the prior periods		(122)		(137)		(342)
Unrecognized tax benefits at the end of the year	$	1,794	$	1,794	$	545

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company had recorded immaterial interest on the tax positions during the year ended December 31, 2023, 2022 and 2021.

The Company files U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company’s income tax returns are subject to tax examinations for the tax years ended December 31, 2020 and subsequent years. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by tax authorities to the extent utilized in a future period.

No additional provision has been made for withholding taxes related to undistributed foreign earnings of the Company’s wholly owned foreign subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries. As such, earnings are expected to be permanently reinvested, the investments are permanent in duration, or the Company has estimated that no additional tax liability will arise as a result of the distribution of such earnings. Unremitted earnings are $50,466 as of December 31, 2023 and a liability could arise if amounts are distributed by the subsidiaries or if subsidiaries are ultimately disposed, which could result in up to $15,140 withholding taxes related to permanently reinvested earnings.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Paragraph 21
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-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
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-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
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-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies

Commitments and Contingencies

16. Commitments and Contingencies

License Agreements

The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 13).

Manufacturing Commitments

The Company entered into supply agreements with Regeneron to provide both clinical supply and commercial product (see Note 13). In May 2023, the Company signed a letter of intent with a CDMO related to its technology transfer of the manufacturing process for ARCALYST drug substance. The Company has additionally entered into agreements with several CDMOs to provide the Company with preclinical and clinical trial materials for its non-ARCALYST assets. As of December 31, 2023, the Company had committed to minimum payments under these agreements totaling $128,297, of which $51,376 are due within one year.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors, officers and other key personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or other key personnel. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2023, 2022 or 2021.

Legal Proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

Benefit Plans (Details) - USD ($) $ in Thousands	12 Months Ended
Benefit Plans (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Benefit Plans
Matching contributions by the Company for first 3% of each participant's salary contributed (as a percent)	100.00%
Percentage of employees' salary contributed matched 100% by employer	3.00%
Matching contributions by the Company for next 2% of each participant's salary contributed (as a percent)	50.00%
Percentage of employees' salary contributed matched 50% by employer	2.00%
Contributions made by the Company to defined contribution savings plan	$ 2,305	$ 1,683	$ 1,558

Product Revenue, Net - Revenue Related Reserves in Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Revenue-related reserves
Revenue-related reserves	$ 6,138	$ 3,899	$ 1,335
Accounts receivable, net
Revenue-related reserves
Revenue-related reserves	(459)	(304)
Other current liabilities
Revenue-related reserves
Revenue-related reserves	$ 6,597	$ 4,203

Product Revenue, Net

12 Months Ended

Dec. 31, 2023

Product Revenue, Net

Product Revenue, Net

4. Product Revenue, Net

ARCALYST

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

The following tables summarizes balances and activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2023 and 2022:


	Contractual		Government
	Adjustments		Rebates		Returns		Total
Balance at December 31, 2022	$	1,464	$	2,084	$	351	$	3,899
Current provisions relating to sales in the current year		16,274		9,437		212		25,923
Adjustments relating to prior years		(88)		(199)		(182)		(469)
Payments/returns relating to sales in the current year		(14,234)		(5,694)		—		(19,928)
Payments/returns relating to sales in the prior years		(1,394)		(1,853)		(40)		(3,287)
Balance at December 31, 2023	$	2,022	$	3,775	$	341	$	6,138


	Contractual		Government
	Adjustments		Rebates		Returns		Total
Balance at December 31, 2021	$	515	$	719	$	101	$	1,335
Current provisions relating to sales in the current year		7,366		4,543		269		12,178
Adjustments relating to prior years		—		—		(19)		(19)
Payments/returns relating to sales in the current year		(5,902)		(2,535)		—		(8,437)
Payments/returns relating to sales in the prior years		(515)		(643)		—		(1,158)
Balance at December 31, 2022	$	1,464	$	2,084	$	351	$	3,899

Total revenue-related reserves as of December 31, 2023 and 2022, included in our consolidated balance sheets, are summarized as follows:


	December 31,		December 31,
	2023		2022
Reduction of accounts receivable	$	(459)	$	(304)
Components of other current liabilities		6,597		4,203
Total revenue-related reserves	$	6,138	$	3,899

placeholder

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
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-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
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-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Share-Based Compensation - Options (Details) - USD ($)	12 Months Ended
Share-Based Compensation - Options (Details) - USD ($)	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Number of Shares
Outstanding, beginning of the period	10,144,618
Granted	2,133,581
Exercised	(319,829)	(383,106)	(795,404)
Forfeited	(359,281)
Outstanding, end of the period	11,599,089	10,144,618
Options exercisable	7,349,632
Options unvested	11,599,089
Weighted Average Grant Date Fair Value
Outstanding, beginning of the period	$ 13.36
Granted	14.69
Exercised	8.99
Forfeited	15.06
Outstanding, end of the period	13.67	$ 13.36
Options exercisable	13.59
Options unvested	$ 13.67
Weighted Average Remaining Contractual Term (in years)
Outstanding	6 years 10 months 28 days	7 years 3 months 29 days
Exercisable	5 years 10 months 13 days
Unvested	6 years 10 months 28 days
Aggregate Intrinsic Value
Outstanding	$ 54,653,000	$ 32,634,000
Exercisable	37,613,000
Unvested	54,653,000
Intrinsic value of options exercised	2,595,000	2,196,000	$ 6,392,000
Proceeds from exercise of options	2,876,000	$ 2,606,000	$ 5,311,000
Employee Stock Option [Member]
Aggregate Intrinsic Value
Total unrecognized compensation cost	$ 36,369,000
Expenses expected to be recognized over a weighted average remaining period	2 years 6 months 11 days
Class A common shares \| Employee Stock Option [Member]
Aggregate Intrinsic Value
Weighted-average grant-date fair value per share of options granted	$ 9.82	$ 7.66	$ 11.30
Total fair value of options vested	$ 19,036	$ 21,229,000	$ 22,870,000

Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2023

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of share option activity under the Plans


				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Term	Intrinsic
	Shares	Price		(in years)	Value


Outstanding as of December 31, 2022	10,144,618	$	13.36	7.33	$	32,634
Granted	2,133,581	$	14.69
Exercised	(319,829)	$	8.99
Forfeited	(359,281)	$	15.06
Outstanding as of December 31, 2023	11,599,089	$	13.67	6.91	$	54,653
Share options exercisable as of December 31, 2023	7,349,632	$	13.59	5.87	$	37,613
Share options vested and expected to vest as of December 31, 2023	11,599,089	$	13.67	6.91	$	54,653

Schedule of share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss


	Years Ended
	December 31,
	2023		2022		2021
Cost of goods sold	$	1,812	$	636	$	197
Research and development expenses		5,496		6,766		8,450
Selling, general and administrative expenses		19,841		17,718		16,526
Total stock-based compensation	$	27,149	$	25,120	$	25,173

Employees

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of stock option valuation assumptions presented on weighted-average basis


	Years Ended
	December 31,
	2023		2022		2021
Risk-free interest rate	3.96	%	3.00	%	1.00	%
Expected term (in years)	6.15		6.17		6.13
Expected volatility	71.33	%	73.83	%	76.05	%
Expected dividend yield	—	%	—	%	—	%

Restricted Share Units (RSUs)

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of restricted share activity


		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested RSUs as of December 31, 2022	1,742,401	$	12.76
Granted	1,389,421	$	15.13
Vested	(521,440)	$	13.60
Forfeited	(213,494)	$	12.27
Unvested RSUs as of December 31, 2023	2,396,888	$	14.00

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

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+ Details

License and Acquisition Agreements - Regeneron License Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
License and Acquisition Agreements
Research and development		$ 76,097	$ 65,490	$ 99,297
Intangible asset - Regulatory milestone		20,000	20,000
Commercial product inventory		31,122	21,599
Regulatory milestone
License and Acquisition Agreements
Intangible asset - Regulatory milestone		20,000	20,000
Clinical Supply Agreement
License and Acquisition Agreements
Commercial product inventory		31,122	21,599
Regeneron
License and Acquisition Agreements
Research and development		1,356
Regeneron \| Regulatory milestone
License and Acquisition Agreements
Intangible asset - Regulatory milestone		32,500			$ 20,000
Regeneron \| Arrangement Other than Collaborative
License and Acquisition Agreements
Uncured period which causes termination of the agreement, due to insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured	90 days
Notice period to terminate the agreement under payment-related breaches	30 days
Consecutive suspension of activities period for termination of agreement	12 months
Notice period to terminate the agreement	1 year
Notice period to terminate the agreement if products are having safety concerns	3 months
Regeneron \| License Agreement
License and Acquisition Agreements
Research and development			0	0
Profit sharing recognized		$ 56,524	$ 24,071	$ 835

License and Acquisition Agreements

12 Months Ended

Dec. 31, 2023

License and Acquisition Agreements

License and Acquisition Agreements

13. License and Acquisition Agreements

Biogen Asset Purchase Agreement

In September 2016, the Company entered into an asset purchase agreement (the “Biogen Agreement”) with Biogen MA Inc. (“Biogen”) to acquire all of Biogen’s right, title and interest in and to certain assets used in or relating to vixarelimab and other antibodies covered by certain patent rights, including patents and other intellectual property rights, clinical data, know-how, and clinical drug supply. In addition, Biogen granted to the Company a non-exclusive, sublicensable, worldwide license to certain background patent rights related to the vixarelimab program. The Company is obligated to use commercially reasonable efforts to develop and commercialize such acquired products.

In exchange for these rights, the Company made an upfront payment to Biogen of $11,500 and a technology transfer payment of $500. The Company accounted for the acquisition of technology as an asset acquisition because it

did not meet the definition of a business. The Company recorded the upfront payment and technology transfer payment as research and development expense in the consolidated statement of operations and comprehensive income (loss) because the acquired technology represented in-process research and development and had no alternative future use.

Under the Biogen Agreement, the Company is obligated to make milestone payments to Biogen of up to $179,000 upon the achievement of specified clinical and regulatory milestones in multiple indications in various territories, of which $165,000 remains as of December 31, 2023. Additionally, the Company could be obligated to make up to an aggregate of up to $150,000 of payments upon the achievement of specified annual net sales milestones and to pay tiered royalties on escalating tiers of annual net sales of licensed products starting in the high single-digit percentages and ending below the teens.

The Company also agreed to pay certain obligations under third party contracts retained by Biogen that relate to the vixarelimab program. Under these retained contracts, the Company paid a one-time upfront sublicense fee of $150 and is obligated to pay insignificant annual maintenance fees as well as clinical and regulatory milestone payments of up to an aggregate of $1,575. The Biogen Agreement will terminate upon the expiration of all payment obligations with respect to the last product in all countries in the territory. The Company has the right to terminate the agreement with 90 days’ prior written notice. Both parties may terminate by mutual written consent or in the event of material breach of the agreement by the other party that remains uncured for 90 days (or 30 days for payment-related breaches).

In July 2017, the Company and Biogen entered into Amendment No. 1 to the Biogen Agreement, which clarified the scope of the antibodies subject to the Biogen Agreement.

In August 2022, the Company entered into Amendment No. 2 to the Biogen Agreement (the “Second Biogen Amendment”). Pursuant to the terms of the Second Biogen Amendment, commencing on the effective date of the Genentech License Agreement, certain defined terms in the Biogen Agreement were amended, including “Net Sales”, “Indication”, “Product”, “Combination Product” and “Valid Claim”. In addition, the tiered royalty rates to be paid by the Company to Biogen increased by an amount equal to less than one percent.

Upon the termination or expiration of the Genentech License Agreement, the amendments to the terms of the Biogen Agreement, as set forth in the Second Biogen Amendment, will terminate and all terms of the Biogen Agreement will revert to the version of such terms in effect as of immediately prior to the effective date of the Genentech License Agreement.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded research and development expenses of $94, $56 and $53 respectively, related to a milestone and the annual maintenance fee in connection with the retained contracts.

Beth Israel Deaconess Medical Center License Agreement

In 2019, the Company acquired all of the outstanding securities of Primatope Therapeutics, Inc. (“Primatope”), the company that owned or controlled the intellectual property related to abiprubart (also known as KPL-404). In connection with the Company’s acquisition of Primatope, the Company acquired the rights to an exclusive license to certain intellectual property rights controlled by Beth Israel Deaconess Medical Center, Inc. (“BIDMC”) to make, use, develop and commercialize abiprubart (the “BIDMC Agreement”). Under the BIDMC Agreement, the Company is solely responsible for all development, regulatory and commercial activities and costs. The Company is also responsible for costs related to filing, prosecuting and maintaining the licensed patent rights. Under the BIDMC Agreement, the Company is obligated to pay an insignificant annual maintenance fee as well as clinical and regulatory milestone payments of up to an aggregate of $1,200 to BIDMC. The Company is also obligated to pay a low single-digit royalty on annual net sales of products licensed under the agreement.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded research and development expense of $40, $10 and $10, respectively in connection with the BIDMC Agreement.

Regeneron License Agreement

In September 2017, the Company entered into the Regeneron Agreement with Regeneron, pursuant to which the Company has been granted an exclusive license under certain intellectual property rights controlled by Regeneron to develop and commercialize ARCALYST worldwide, excluding the Middle East and North Africa, for all indications other than those in oncology and local administration to the eye or ear. Upon receiving positive data in RHAPSODY, the Company’s pivotal Phase 3 clinical trial of ARCALYST, Regeneron transferred the biologics license application (“BLA”) for ARCALYST to the Company. In March 2021, when the FDA granted approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older, the Company assumed the sales and distribution of ARCALYST for CAPS and DIRA in the United States.

The Company has made $32,500 in payments under the Regeneron Agreement in connection with upfront fees and achievement of regulatory milestones, including a $20,000 payment in the first quarter of 2021 in connection with the achievement of a regulatory milestone. The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business.

The Company evenly splits 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. Such costs include but are not limited to (i) the Company’s cost of goods sold for product used, sold or otherwise distributed for patient use by the Company; (ii) customary commercialization expenses, including the cost of the Company’s field force, and (iii) the Company’s cost to market, advertise and otherwise promote ARCALYST, with such costs identified in subsection (iii) subject to specified limits.  To the extent permitted in accordance with the Regeneron Agreement, the fully-burdened costs incurred by each of the Company and Regeneron in performing (or having performed) the technology transfer of the manufacturing process for ARCALYST drug substance will also be deducted from net sales of ARCALYST to determine profit. The Company also evenly splits with Regeneron any proceeds received by the Company 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. For the years ended December 31, 2023, 2022 and 2021, the Company recognized $56,524, $24,071 and $835 respectively, of expenses related to the profit sharing agreement presented within collaboration expenses.

Pursuant to the Regeneron Agreement, in September 2017, the parties entered into a clinical supply agreement under which Regeneron agreed to manufacture product solely for the Company’s use in development activities. Pursuant to the Regeneron Agreement, during the year ended December 31, 2021, the Company entered into a commercial supply agreement under which Regeneron agreed to manufacture product for the Company’s use, including for commercial sales. The commercial supply agreement terminates upon the sooner of the termination of the Regeneron Agreement and the date of completion of the transfer of technology related to the manufacture of ARCALYST. During the year ended December 31, 2023, the Company incurred $1,356 of research and development expense related to the purchase of drug materials under the clinical supply agreement. During the years ended December 31, 2022 and 2021, the Company did not incur any research and development expense related to the purchase of drug materials under the clinical supply agreement. As of December 31, 2023 and 2022, the Company recorded inventory of $31,122 and $21,599 related to the purchase of commercial product under the commercial supply agreement (see Note 5). As of December 31, 2023, the Company had non-cancelable purchase commitments under the commercial supply agreement (see Note 16).

The Regeneron Agreement will expire when the Company is no longer developing or commercializing any licensed product under the Regeneron Agreement. Either party may terminate the agreement upon the other party’s insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured for 90 days (or 30 days for payment related breaches). Regeneron has the right to terminate the agreement if the Company suspends its

development or commercialization activities for a consecutive 12 month period or does not grant a sublicense to a third party to perform such activities, or if the Company challenges any of the licensed patent rights. The Company may terminate the agreement at any time with one year’s written notice. The Company may also terminate the agreement with three months’ written notice if the licensed product is determined to have certain safety concerns.

MedImmune License Agreement

In December 2017, the Company entered into a license agreement (as amended from time to time, the “MedImmune Agreement”) with MedImmune, Limited (“MedImmune”), pursuant to which MedImmune granted the Company an exclusive, sublicensable, worldwide license to certain intellectual property rights to make, use, develop and commercialize mavrilimumab. Under the MedImmune Agreement, the Company also acquired reference rights to relevant manufacturing and regulatory documents and MedImmune’s existing supply of mavrilimumab drug substance and product. The Company is obligated to use commercially reasonable efforts to develop and commercialize the licensed products.

In exchange for these rights, the Company made an upfront payment of $8,000. The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business. The Company recorded the upfront payment as research and development expense in the consolidated statement of operations and comprehensive income (loss) because the acquired technology represented in-process research and development and had no alternative future use.

In addition, the Company is obligated to make clinical, regulatory and initial sales milestone payments of up to $72,500 in aggregate for the first two indications, including, a $5,000 pass-through payment due upon the achievement of a specified clinical milestone event which was achieved in the fourth quarter of 2018. Also included is a milestone payment of $10,000 due upon the earlier to occur of a specified regulatory milestone and December 31, 2018, unless the MedImmune Agreement is earlier terminated by either party. During the year ended December 31, 2019, the Company made both the $5,000 and $10,000 previously accrued milestone payments in accordance with the MedImmune Agreement. In addition, the Company is obligated to make clinical and regulatory milestone payments of up to $15,000 in the aggregate for each subsequent indication. In July 2020, the Company entered into an amendment to the MedImmune Agreement to establish a new coronavirus field and defer the payment of certain development and regulatory milestones as applied to the new coronavirus field. The Company is obligated to make milestone payments to MedImmune of up to $85,000 upon the achievement of annual net sales thresholds up to, but excluding, $1,000,000 in annual net sales as well as additional milestone payments aggregating up to $1,100,000 upon the achievement of additional specified annual net sales thresholds starting at $1,000,000 and higher. The Company has also agreed to pay tiered royalties on escalating tiers of annual net sales of licensed products starting in the low double-digit percentages and ending at twenty percent. Royalty rates are subject to reductions upon certain events.

The Company is solely responsible for all development, manufacturing, and commercial activities and costs of the licensed products, including clinical studies or other tests necessary to support the use of a licensed product. The Company is also responsible for costs related to the filing, prosecution and maintenance of the licensed patent rights.

The MedImmune Agreement will expire upon the expiration of the royalty term in the last country for the last indication, as defined in the agreement. Either party may terminate the agreement upon the other party’s insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured for 90 days. MedImmune has the right to terminate the agreement if the Company challenges any of the licensed patent rights. The Company may terminate the agreement at any time upon 90 days’ prior written notice.

During the years ended December 31, 2023, 2022 and 2021, the Company did not record research and development expense in connection with milestone payments due under the MedImmune Agreement.

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2023

Accrued Expenses

Schedule of accrued expenses


	December 31,		December 31,
	2023		2022
Accrued research and development expenses	$	7,895	$	8,378
Accrued employee compensation and benefits		15,954		11,213
Accrued collaboration expenses		16,939		7,522
Accrued legal, commercial and professional fees		3,553		2,866
Other		326		133
Total accrued expenses	$	44,667	$	30,112