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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

For the transition period from to

Commission file number: 001-38492

Kiniksa Pharmaceuticals, Ltd.

(Exact name of registrant as specified in its charter)

Kiniksa Pharmaceuticals, Ltd.

Clarendon House

2 Church Street

HamiltonHM11, Bermuda

+ (44) 808-189-6257

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

Kiniksa Pharmaceuticals Corp.

100 Hayden Avenue

Lexington, MA, 02421

(781) 431-9100

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

N/A

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

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Class A Common Shares KNSA The Nasdaq Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒

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

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the common shares on The Nasdaq Global Select Market on June 30, 2020, was approximately $712.6 million.

As of January 31, 2021, there were 68,232,304 common shares outstanding in aggregate, comprised of:

31,922,546 Class A common shares, par value $0.000273235 per share

2,227,614 Class B common shares, par value $0.000273235 per share

18,024,526 Class A1 common shares, par value $0.000273235 per share

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

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2021 Annual Meeting of Shareholders, which the registrant intends to file with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2020, are incorporated by reference into Part III of this Annual Report on Form 10-K.

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Kiniksa Pharmaceuticals, Ltd.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2020

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Page

PART I

Item 1. Business 6

Item 1A. Risk Factors 47

Item 1B. Unresolved Staff Comments 119

Item 2. Properties 119

Item 3. Legal Proceedings 119

Item 4. Mine Safety Disclosures 119

EXECUTIVE OFFICER AND DIRECTOR BIOGRAPHIES 120

PART II

Item 6. Selected Financial Data 124

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 144

Item 8. Financial Statements and Supplementary Data 144

Item 9A. Controls and Procedures 144

Item 9B. Other Information 145

PART III

Item 10. Directors, Executive Officers and Corporate Governance 145

Item 11. Executive Compensation 145

Item 14. Principal Accounting Fees and Services 146

PART IV

Item 15. Exhibits and Financial Statement Schedules 147

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or Annual Report, contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report including statements regarding our future results of operations and financial position, expected timeline for our cash, cash equivalents and short-term investments, business strategy, product development, prospective products and product candidates, their expected properties, performance, market opportunity and competition, drug product supply, collaborators, license and other strategic arrangements, the expected timeline for achievement of our clinical milestones, the timing of, and potential results from, clinical and other trials, potential marketing authorization from the FDA or regulatory authorities in other jurisdictions, potential coverage and reimbursement for our product candidates, if approved, commercial strategy and pre-commercial activities, research and development costs, timing of regulatory filings and feedback, timing and likelihood of success, plans and objectives of management for future operations and funding requirements and future results of anticipated products are forward-looking statements.

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

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

● our future capital needs and our need to raise additional funds;

● the market acceptance of our product candidates;

● competitive and potentially competitive products and technologies;

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● physician awareness and adoption of our product candidates;

● the size of the market for our product candidates;

● our ability to meet the quality expectations of physicians or patients;

● our ability to improve our product candidates;

● our ability to successfully manage our growth;

● our ability to obtain regulatory exclusivity;

● our ability to attract and retain skilled personnel; and

● our ability to execute on our strategy.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Annual Report and the documents that we reference in this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

SUMMARY RISK FACTORS

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

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Industry and other data

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

ARCALYST® is a registered trademark of Regeneron Pharmaceuticals, Inc. and Yescarta® is a registered trademark of Gilead Sciences, Inc., or its related companies.

PART I

ITEM 1.BUSINESS.

Overview

We are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients with significant unmet medical need. Our product candidates, rilonacept, mavrilimumab, vixarelimab and KPL-404, are based on strong biologic rationale or validated mechanisms, target underserved conditions and offer the potential for differentiation. This pipeline of product candidates are designed to modulate immunological pathways across a spectrum of diseases.

Rilonacept is a protein cytokine trap for inhibiting interleukin-1alpha, or IL-1α, and interleukin-1beta, or IL-1β. Cytokines are small proteins that play a role in cell signaling. Rilonacept was discovered and developed by Regeneron Pharmaceuticals, Inc., or Regeneron, and is approved by the U.S. Food and Drug Administration, or FDA, under the brand name ARCALYST for the treatment of cryopyrin-associated periodic syndrome, or CAPS, specifically familial cold autoinflammatory syndrome and muckle-wells syndrome, and for the treatment of deficiency of IL-1 receptor antagonist, or DIRA. We licensed rilonacept from Regeneron in 2017.

We are initially developing rilonacept for the potential treatment of recurrent pericarditis, a painful inflammatory cardiovascular disease with an estimated U.S. prevalent population of approximately 40,000 patients

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seeking and receiving medical treatment. Currently there is no FDA-approved therapy for the treatment of recurrent pericarditis. We received Breakthrough Therapy designation from the FDA for rilonacept for the treatment of recurrent pericarditis in 2019 and Orphan Drug designation from the FDA for rilonacept for the treatment of pericarditis, which includes the treatment of recurrent pericarditis, in 2020. In June 2020, we reported final results from RHAPSODY, our pivotal Phase 3 clinical trial of rilonacept in subjects with recurrent pericarditis. RHAPSODY met its prescribed primary and all major secondary efficacy endpoints with statistical significance, showing that rilonacept improved clinically meaningful outcomes associated with unmet medical need in recurrent pericarditis. RHAPSODY data were also published in The New England Journal of Medicine simultaneously with a late-breaking scientific presentation at the American Heart Association’s Scientific Sessions 2020.

The FDA accepted the supplemental Biologics License Application, or sBLA, for rilonacept in recurrent pericarditis with priority review and assigned a Prescription Drug User Fee Act, or PDUFA, goal date of March 21, 2021. If approved by the FDA for recurrent pericarditis, we expect the potential commercial launch of rilonacept in recurrent pericarditis in the first half of 2021 and consequently would take responsibility for sales and distribution of rilonacept for all approved indications in the United States and evenly split profits on sales with Regeneron, after deducting certain commercialization expenses subject to specified limits.

Mavrilimumab is a fully-human monoclonal antibody that antagonizes granulocyte-macrophage colony stimulating factor, or GM-CSF. We licensed mavrilimumab from MedImmune Limited, or MedImmune, in 2017.

We are evaluating mavrilimumab for the potential treatment of giant cell arteritis, or GCA, a chronic inflammatory disease of the medium-to-large arteries with an estimated U.S. prevalence of approximately 75,000 to 150,000 patients. There is only one FDA-approved therapy for GCA, which is an adjunct to corticosteroid therapy, and we believe that an unmet need persists. We received Orphan Drug designation from the FDA for mavrilimumab for the treatment of GCA in 2020. In November 2020, we presented results from our Phase 2 proof-of-concept trial of mavrilimumab in subjects with GCA at the late-breaking abstracts session during the American College of Rheumatology, or ACR, Convergence 2020. The Phase 2 trial met both its prescribed primary efficacy endpoint of time-to-first adjudicated GCA flare by Week 26 in all treated patients and the secondary efficacy endpoint of sustained remission at Week 26 in all treated patients with statistical significance. In addition, while the trial was not powered for individual disease cohorts, there was a consistent trend of efficacy across the new onset and relapsing/refractory cohorts. We expect to provide next steps for mavrilimumab, including in GCA, in the first half of 2021.

We are also evaluating mavrilimumab for the potential treatment of severe coronavirus 2019 disease, or COVID-19, pneumonia and hyperinflammation. In June 2020, we announced 28-day clinical outcomes from an open-label investigator-initiated treatment protocol with mavrilimumab conducted in Italy in 13 non-mechanically ventilated patients with severe COVID-19 pneumonia and hyperinflammation. Mavrilimumab-treated patients experienced earlier and improved clinical outcomes compared to control-group patients, including earlier weaning from supplemental oxygen, shorter hospitalizations, and no deaths. These data were published in The Lancet Rheumatology. In December 2020, we reported results from a placebo-controlled investigator-initiated study in the same patient population across a consortium of academic sites in the United States showing encouraging trends of reduced mortality and duration of mechanical ventilation in patients treated with mavrilimumab on top of standard of care therapy. We are conducting a placebo-controlled Phase 2/3 clinical trial of mavrilimumab in severe COVID-19 pneumonia and hyperinflammation. We expect to provide data from the Phase 2 portion of the Phase 2/3 trial in the first half of 2021.

Vixarelimab is a fully-human monoclonal antibody that simultaneously inhibits the signaling of the cytokines interleukin 31, or IL-31, and oncostatin M, or OSM, by targeting their common receptor subunit, oncostatin M receptor beta, or OSMRβ. We believe vixarelimab is the only monoclonal antibody in development that simultaneously targets both pathways. We licensed vixarelimab from Biogen MA, Inc., or Biogen, in 2016.

We are evaluating vixarelimab for the potential treatment of prurigo nodularis, a chronic inflammatory skin condition with an estimated U.S. prevalence of approximately 300,000 patients. We received Breakthrough Therapy designation for vixarelimab for the treatment of pruritus associated with prurigo nodularis in 2020. In April 2020, we reported results from our Phase 2a trial of vixarelimab in prurigo nodularis. The Phase 2a trial met its primary efficacy endpoint, as there was a statistically significant reduction in weekly-average Worst-Itch Numeric Rating Scale, or WI-

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NRS, from baseline at Week 8 in vixarelimab recipients compared to placebo recipients. In addition, the majority of vixarelimab recipients showed a clinically meaningful greater-than-or-equal-to 4-point weekly-average WI-NRS reduction at Week 8 and a statistically significant percentage of vixarelimab recipients achieved a prurigo nodularis-investigator’s global assessment, or PN-IGA score of 0/1 at Week 8 compared to placebo recipients. We are conducting a Phase 2b dose ranging study of vixarelimab in patients with prurigo nodularis.

KPL-404 is a humanized monoclonal antibody that is designed to inhibit the CD40-CD40 ligand, or CD40L, interaction, a central control node of T-cell-dependent, B-cell-mediated humoral adaptive immunity. We believe that disrupting the CD40-CD40L interaction is an attractive approach for multiple autoimmune disease pathologies such as rheumatoid arthritis, Sjogren’s syndrome, Graves’ disease, systemic lupus erythematosus and solid organ transplant graft rejection. We acquired all of the outstanding securities of Primatope Therapeutics, Inc., or Primatope, the company that owned or controlled the intellectual property related to KPL-404 in 2019.

We are conducting a single-ascending-dose Phase 1 clinical trial of KPL-404 in healthy volunteers to evaluate the safety and tolerability of KPL-404 as well as pharmacokinetics, CD40 receptor occupancy, or RO, the immune response to the novel test antigen keyhole limpet hemocyanin, or KLH, in clinically relevant dose cohorts, and T-cell dependent antibody response, or TDAR, in these subjects. The study is divided into two parts: a single dose of KPL-404 0.03 mg/kg, 0.3 mg/kg, 1 mg/kg, 3 mg/kg or 10 mg/kg intravenously, or IV, and a single dose of KPL-404 1 mg/kg or 5 mg/kg subcutaneously, or SC. In November 2020, we reported preliminary data from the Phase 1 trial. All dose escalations occurred as per protocol with no dose limiting safety findings. All six subjects dosed with KPL-404 3 mg/kg IV showed full receptor occupancy through Day 29, which corresponded with complete suppression of TDAR to KLH through Day 29. Consistent dose relatedness was shown in the lower dose level cohorts, including 0.03 mg/kg, 0.3 mg/kg, 1 mg/kg IV and 1 mg/kg SC. We believe that the data support further evaluation in patients, including potential IV or SC monthly administration. Further, we expect final data and safety follow-up from all cohorts of the Phase 1 trial in the first half of 2021.

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The following table summarizes our current pipeline of product candidates:

We evaluate options across our portfolio in an effort to maximize value and improve capital allocation based on data, including potential additional indications for rilonacept, mavrilimumab and vixarelimab, being opportunistic in our business development activities, considering appropriate opportunities to partner or out-license our programs, as well as conducting internal research to discover and develop molecules to expand our portfolio.

Our Strategy

We are a biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need. Our product candidates, rilonacept, mavrilimumab, vixarelimab and KPL-404, are based on strong biologic rationale or validated mechanisms, target underserved conditions, and offer the potential for differentiation. These pipeline assets are designed to modulate immunological pathways across a spectrum of diseases.

Critical components of our business strategy include the following:

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Our Product Candidates

Rilonacept

Overview

Rilonacept was approved by the FDA for the treatment of CAPS, which includes cold auto-inflammatory syndrome and Muckle-Wells syndrome, and DIRA and has been commercially sold as ARCALYST in the United States by Regeneron for CAPS since 2008. We licensed rilonacept in 2017 from Regeneron. We believe that rilonacept has potential to treat certain diseases mediated by both IL-1α and IL-1β. Our lead indication for rilonacept is recurrent pericarditis, a painful autoinflammatory cardiovascular disease with an estimated U.S. prevalent population of approximately 40,000 patients seeking and receiving medical treatment. We received Breakthrough Therapy designation from the FDA for rilonacept for the treatment of recurrent pericarditis in 2019 and Orphan Drug designation from the FDA for rilonacept for the treatment of pericarditis, which includes the treatment of recurrent pericarditis, in 2020.

In June 2020, we reported final results from RHAPSODY, our global, double-blind, placebo-controlled, randomized-withdrawal design, pivotal Phase 3 clinical trial of rilonacept in subjects with recurrent pericarditis. RHAPSODY met its prescribed primary and all major secondary efficacy endpoints with statistical significance, showing that rilonacept improved clinically meaningful outcomes associated with unmet medical need in recurrent pericarditis. RHAPSODY data were also published in The New England Journal of Medicine simultaneously with a late-breaking scientific presentation at the American Heart Association’s Scientific Sessions 2020.

The FDA accepted the sBLA for rilonacept in recurrent pericarditis with priority review and assigned a PDUFA goal date of March 21, 2021. If approved by the FDA for recurrent pericarditis, we expect the potential commercial launch of rilonacept in recurrent pericarditis in the first half of 2021 and consequently would take responsibility for sales and distribution of rilonacept for all approved indications in the United States and evenly split profits on sales with Regeneron, after deducting certain commercialization expenses subject to specified limits.

There is currently no FDA-approved therapy for the treatment of recurrent pericarditis. There is currently one other FDA-approved agent that blocks both IL-1α and IL-1β signaling, anakinra (KINERET), produced by Sobi, Inc, or Sobi, is approved for other indications, and one that blocks only IL-1β, canakinumab (ILARIS), produced by Novartis Pharmaceuticals Corporation, or Novartis, is approved for other indications. We believe both therapies have limitations. Anakinra requires once-daily injections, and canakinumab blocks only IL-1β, making it less effective or potentially ineffective in diseases driven by IL-1α pathology. We believe that rilonacept with its more moderate, once-weekly dosing schedule and its ability to inhibit both IL-1α and IL-1β could provide an improved therapeutic option for a variety of diseases mediated by both IL-1α and IL-1β.

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Mechanism of Action

Rilonacept is an inhibitor of IL-1α and IL-1β. IL-1α and IL-1β have been demonstrated to play a key role in inflammatory diseases. IL-1α and IL-1β provoke potent, pro-inflammatory events by engaging the IL-1α and IL-1β receptor. Following tissue insult, the release of IL-1α acts as the primary initiating signal to coordinate the mobilization of immune cells to the damaged area, while IL-1β is secreted mostly by macrophages and is a prototypical cytokine of the canonical NLRB-3 inflammasome. IL-1α and IL-1β signaling results in a dramatic increase in the production of cytokines that orchestrate the proliferation and recruitment of phagocytes to the site of damage, resulting in inflammation. Moreover, IL-1α and IL-1β signaling also affect other immune-system cells, such as T-cells and B-cells.

IL-1β’s role in the inflammation process has been extensively studied, while in comparison, much is still unknown about the independent function of IL-1α in disease pathology. Despite driving similar immunological outcomes, IL-1α and IL-1β differ substantially in their expression and regulation, and non-redundant roles for IL-1α or IL-1β have been demonstrated in multiple inflammatory diseases. There are disease states in which IL-1β inhibition alone does not appear to be sufficient for disease remission in the absence of IL-1α inhibition. Published studies suggest certain autoinflammatory diseases may, in fact, be pathologically driven primarily by IL-1α.

An investigator-initiated study of anakinra successfully demonstrated mechanistic proof-of-concept for inhibiting both IL-1α and IL-1β in the treatment of recurrent pericarditis. In a published case study, a patient with a refractory form of recurrent pericarditis, who was well-controlled on anakinra, was switched from anakinra to canakinumab, which inhibits only IL-1β, for tolerability reasons. The patient’s disease returned despite further dose escalation of canakinumab. When the patient was switched back to anakinra, which inhibits IL-α and IL-β, the disease promptly went back into remission. These data, together with clinical data from our open-label Phase 2 proof-of-concept study and confirmatory market research, may indicate that IL-1α and IL-1β play unique roles in recurrent pericarditis and other autoinflammatory diseases in which the pathology may be driven primarily by IL-1α.

Background and Market Opportunity for Recurrent Pericarditis

Pericarditis is the most common disorder involving the pericardium, the two-layered sac that surrounds the heart. Pericarditis is an inflammation of this sac and is typically characterized by significant chest pain, shortness of breath, coughing and fatigue and is often misconstrued by patients as a heart attack. In addition, typical signs of pericarditis include pericardial friction rub, electrocardiogram changes or pericardial effusion, which is a build-up of fluid around the heart. Pericarditis is described as recurrent if, following an initial occurrence of pericarditis, it recurs after a symptom-free period of about four to six weeks. Pericarditis is considered chronic if symptoms of any one episode last longer than three months, typically causing significant pain and frustration. If pericarditis is left untreated, patients can develop thickening and scarring of the pericardium, potentially requiring invasive surgical stripping. Pericardial effusion, if large enough, can compress the heart externally, requiring emergent drainage.

We intend to focus our development of rilonacept for the treatment of recurrent pericarditis initially in the United States, and we are exploring opportunities for potential expansion into other countries. Claims analysis, cross validated with published estimates, support a prevalent population of patients with recurrent pericarditis seeking and receiving medical treatment to be approximately 40,000 patients in the United States per year. Within this estimated diagnosed and treated recurrent pericarditis patient population, there are certain subgroups of patients totaling approximately 14,000 with particularly high unmet medical needs consisting of:

● patients who are dependent on steroids (approximately 1,000).

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There may be other thoracic inflammatory syndromes where rilonacept may prove beneficial, such as pericarditis associated with post-pericardiotomy syndrome, an inflammatory reaction of the pericardium in patients who have undergone surgery that involves opening the pericardium. Post-pericardiotomy syndrome occurs in up to 30% of the 300,000 patients in the United States undergoing post-cardiac injury, and we believe rilonacept may be a therapeutic option for a subset of these patients.

Current Treatment Landscape for Recurrent Pericarditis

We are not aware of any current therapies approved by the FDA for the treatment of recurrent pericarditis. A patient’s initial acute episode of pericarditis is typically treated with over-the-counter or prescription NSAIDs or colchicine, both of which are used off-label. Recurrent episodes are treated in a similar manner or by adding systemic corticosteroids which are also used off-label. Both colchicine and corticosteroids often have deleterious effects when used at high doses or for long periods of time, including, for colchicine, gastrointestinal distress and neutropenia and, for corticosteroids, glaucoma, fluid retention, hypertension, mood changes, memory changes, other psychological effects, weight gain and diabetes. Fourth-line treatment for these patients may include other immunosuppressants such as methotrexate and azathioprine, as well as anakinra.

Our Solution

Rilonacept is a weekly, subcutaneously-injected, recombinant fusion protein that blocks IL-1α and IL-1β signaling. Beyond recurrent pericarditis, we believe there is significant potential for rilonacept to address additional indications, including other pericarditis populations. More broadly, we believe diseases characterized by painful serosal inflammation may be driven by IL-1α, and we intend to consider development of rilonacept in these indications and in others where we believe IL-1α or IL-1β play a key role in disease pathophysiology.

Phase 3 Clinical Trial in Recurrent Pericarditis

We conducted a global, randomized withdrawal design, pivotal Phase 3 clinical trial of rilonacept in recurrent pericarditis, named RHAPSODY. Eligible patients presented at screening with at least a third pericarditis episode, defined as at least 1 day with pericarditis pain of ≥ 4 on the 11-point NRS and a CRP value ≥ 1 mg/dL within the 7-day period prior to first study drug administration. Patients could be receiving concomitant NSAIDs and/or colchicine and/or oral corticosteroid treatment in any combination. The study was comprised of 4 periods: a screening period; a single-blind run-in period during which patients received a loading dose of rilonacept 320 mg injected SC followed by 160 mg SC weekly while background pericarditis medications were tapered and discontinued; a double-blind, placebo-controlled randomized withdrawal period during which clinical responders to rilonacept were randomized 1:1 and received 160 mg SC weekly rilonacept or placebo; and a long-term extension treatment period with up to 24 months of open-label rilonacept 160 mg SC weekly. The primary efficacy endpoint was time-to-first pericarditis-recurrence in the randomized withdrawal period. The Clinical Endpoint Committee adjudicated all suspected pericarditis recurrences for inclusion in the primary efficacy endpoint analysis.

Phase 3 Clinical Trial Results in Recurrent Pericarditis

In June 2020, we announced RHAPSODY met its prespecified primary and all major secondary efficacy endpoints, showing that rilonacept improved clinically meaningful outcomes associated with the unmet medical need in recurrent pericarditis. RHAPSODY data were also published in The New England Journal of Medicine simultaneously with a late-breaking scientific presentation at the American Heart Association’s Scientific Sessions in November 2020.

The primary efficacy endpoint of time-to-first adjudicated pericarditis recurrence in the randomized withdrawal period was highly statistically significant.

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All major secondary efficacy endpoints in the randomized withdrawal period were also highly statistically significant.

Rilonacept was well-tolerated in the study, with adverse events consistent with the FDA-approved label for the treatment of CAPS. The most common adverse events were injection site reactions.

Commercial Strategy for Rilonacept

We intend to have a focused and targeted launch effort, with a specialty cardiology salesforce of approximately 30 representatives calling on high-volume accounts and high-volume specialists. The salesforce will be complemented by our current medical affairs, payor and patient services teams, as well as an efficient digital marketing effort. Through a data-driven market assessment, we have developed what we believe to be a highly efficient launch model built around four key strategic imperatives. The first of which is, establishing the unmet need and working to ensure recurrent pericarditis is viewed as a serious, debilitating disease, that is primarily driven by IL-1. The second is, working to ensure rilonacept is viewed as the product of choice for the treatment and prevention of recurrent pericarditis. The third strategic imperative relates to reimbursement and working to ensure broad patient access at a price that reflects rilonacept’s value as a first-in-class IL-1 inhibitor of inflammation. The final strategic imperative is building robust patient support programs to optimize the patient and customer experience with rilonacept as well as with Kiniksa. Overall, our efforts are focused on developing a program and tactics to help with broad uptake and adoption of rilonacept as well as ensuring a positive patient experience.

Commercial History of Rilonacept

The FDA approved rilonacept under the brand name ARCALYST for the treatment of CAPS, specifically familial cold autoinflammatory syndrome and muckle-wells syndrome, in 2008, and subsequently approved it for the treatment of DIRA in 2020.

Mavrilimumab

Overview

Mavrilimumab is a fully-human monoclonal antibody that antagonizes GM-CSF signaling by binding to the alpha subunit of the GM-CSF receptor. Our lead indication for mavrilimumab is GCA, a chronic inflammatory disease of medium-large blood vessels with an estimated U.S. prevalence of approximately 75,000 to 150,000 patients. We received Orphan Drug designation from the FDA for mavrilimumab for the treatment of GCA in 2020. In November 2020, we presented results from our randomized, double-blind, placebo-controlled, global Phase 2 proof-of-concept trial of mavrilimumab in subjects with GCA at the late-breaking abstracts session during the ACR Convergence 2020. Before we licensed mavrilimumab in 2017, MedImmune was developing mavrilimumab for the treatment of RA. MedImmune had received authorization to conduct clinical trials for RA in Europe and executed an extensive Phase 1 and Phase 2 clinical program where the company studied mavrilimumab in over 550 patients with RA through Phase 2b. All of MedImmune’s European clinical trials achieved their prospectively defined primary endpoints of safety or efficacy.

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We are also evaluating mavrilimumab for the potential treatment of COVID-19 pneumonia and hyperinflammation. In June 2020, we announced 28-day clinical outcomes from an open-label investigator-initiated treatment protocol with mavrilimumab conducted in Italy in 13 non-mechanically ventilated patients with severe COVID-19 pneumonia and hyperinflammation. Additionally, in December 2020, we reported results from a randomized, double-blind, placebo-controlled, investigator-initiated study in the same patient population across a consortium of academic sites in the United States. We are conducting a global, randomized, double-blind, placebo-controlled Phase 2/3 clinical trial of mavrilimumab in severe COVID-19 pneumonia and hyperinflammation. We expect to provide data from the Phase 2 portion of the Phase 2/3 trial in the first half of 2021.

Mechanism of Action

Mavrilimumab is designed to inhibit the signaling of GM-CSF, a growth factor that stimulates the production of certain types of white blood cells. Studies have demonstrated that with GM-CSF overexpression, pathological changes almost always follow. Reported data suggest GM-CSF is a key player in the immune system, as follows:

Additionally, GM-CSF has been shown to be a confirmed mediator in RA based on the results from the Phase 2b clinical trial in RA conducted by MedImmune. In this trial, mavrilimumab achieved the co-primary endpoints of change from baseline in disease activity score, or DAS, at week 12 and a response of 20% or greater improvement in the American College of Rheumatology criteria, or ACR20, at week 24. Patients treated with mavrilimumab showed a statistically significant reduction in DAS scores at all dosages compared to placebo, and significantly more mavrilimumab-treated patients achieved ACR20 at all dosages compared to placebo.

Background and Market Opportunity for Giant Cell Arteritis

GCA is an inflammatory disease of the medium-to-large arteries that strikes older adults and causes headaches, jaw and other muscle claudication, and possible ischemic visual loss. Many of the symptoms and signs of GCA result from involvement of the cranial branches of arteries that originate from the aortic arch, but the disease is systemic, and vascular involvement can be widespread. GCA is characterized by infiltration of monocytes, macrophages and the formation of giant cells (i.e., multinucleated fusions of macrophages). GCA generally occurs in adults over 50 years old with a 3:1 imbalance of women to men. We estimate there to be approximately 75,000 to 150,000 prevalent patients with GCA in the United States with similar prevalence rates for other major markets and believe that the incidence of GCA will increase over time as the population ages.

Current Treatment Landscape for Giant Cell Arteritis

Glucocorticoids, a type of corticosteroid, are the mainstay for the treatment of GCA because they normalize inflammatory markers and resolve patient symptoms. Many patients receive long courses of this therapy to prevent disease flare-up, which are associated with significant and serious side effects, including glaucoma, fluid retention, hypertension, mood changes, memory changes, other psychological effects, weight gain and diabetes. Up to 80% of patients suffer from glucocorticoid toxicity as a result of GCA treatment.

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Despite being effective for some patients, many are unable to wean off of corticosteroids because they continue to experience disease flares as the dose is reduced. In one study cohort published in the literature that followed 106 patients with GCA for 4.5 to 10.1 years, 68 patients (64%) experienced at least one relapse during or after weaning, and 38 patients (36%) experienced two or more. Experimental evidence in mice suggests that corticosteroid treatment does not adequately suppress tissue-infiltrating macrophage function, a key cell type generated and maintained by GM-CSF signaling, and may explain why many patients require long-term chronic treatment and are unable to wean off corticosteroids. We believe by blocking GM-CSF signaling, mavrilimumab may provide additional benefit to these patients by reducing long-term sequelae that results from chronic vessel inflammation.

In addition, tocilizumab, an inhibitor of interleukin-6, or IL-6, is approved in the United States in GCA for use on top of a concomitant corticosteroid taper. However, up to nearly half of the patients studied in the Phase 3 clinical trial for tocilizumab experienced disease flares during the 52 weeks treatment period that included a 26-week corticosteroid taper. We believe this indicates a persistent unmet medical need exists.

Our Solution

We chose GCA as our first indication for mavrilimumab due to the mechanistic rationale of inhibiting GM-CSF. GM-CSF is a key growth factor for many of these key inflammatory cell types and is found in high concentrations at the site of damage in the vessel wall. We believe that data provide a solid rationale for antagonizing this signaling with mavrilimumab.

Phase 2 Clinical Trial for GCA

We conducted a randomized, double-blind, placebo-controlled, global Phase 2 trial consisting of a 6-week screening period, a 26-week double-blind placebo-controlled treatment period, and a 12-week washout safety follow-up period. Patients age 50 to 85 years with active GCA, confirmed by temporal artery biopsy and/or imaging, with erythrocyte sedimentation rate, or ESR, ≥ 30 mm/hour or C-reactive protein, or CRP, ≥ 1 mg/dL, and symptoms of GCA within 6 weeks from randomization, were included. All patients were required to have achieved corticosteroid-induced remission (resolution of symptoms, ESR < 20 mm/hour, CRP < 1 mg/dL) prior to randomization. Seventy (70) patients were randomized 3:2 to mavrilimumab 150 mg or placebo biweekly injected SC, co-administered with a protocol-defined 26-week oral corticosteroid taper. Patients were stratified by new onset (n=35) or relapsing/refractory (n=35) disease. The primary efficacy endpoint was time-to-first adjudicated GCA flare by Week 26 in all treated patients and the secondary efficacy endpoint was sustained remission at Week 26 in all treated patients with statistical significance.

Phase 2 Clinical Trial Results for GCA

In November 2020, we announced that results from our randomized, double-blind, placebo-controlled, global Phase 2 proof-of-concept trial of mavrilimumab in subjects with GCA were presented at the late-breaking abstracts session during the ACR Convergence 2020. The Phase 2 trial met both its prescribed primary and efficacy endpoint of time-to-first adjudicated GCA flare by Week 26 in all treated patients and the secondary efficacy endpoint of sustained remission at Week 26 in all treated patients with statistical significance. In addition, while the trial was not powered for individual disease cohorts, there was a consistent trend of efficacy across the new onset and relapsing/refractory cohorts. Mavrilimumab was well-tolerated in the Phase 2 trial; there were no drug-related SAEs, and the rates of drug-related treatment-emergent adverse events between mavrilimumab recipients and placebo recipients were similar. We expect to provide next steps for the development of mavrilimumab, including in GCA, in the first half of 2021.

The primary efficacy endpoint of time-to-first adjudicated GCA flare by Week 26 in all treated patients was statistically significant (Hazard Ratio = 0.38, p=0.0263).

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The secondary efficacy endpoint of sustained remission at Week 26 in all treated patients was also statistically significant.

Mavrilimumab was well-tolerated; there were no drug-related SAEs, and the rates of drug-related treatment-emergent adverse events between mavrilimumab recipients and placebo recipients were similar.

Clinical Development for Mavrilimumab in COVID-19 Pneumonia and Hyperinflammation

In June 2020, we announced 28-day clinical outcomes from an open-label investigator-initiated treatment protocol with mavrilimumab conducted in Italy in 13 non-mechanically ventilated patients with severe COVID-19 pneumonia and hyperinflammation. Mavrilimumab-treated patients experienced earlier and improved clinical outcomes compared to control-group patients, including earlier weaning from supplemental oxygen, shorter hospitalizations, and no deaths. These data were published in The Lancet Rheumatology.

In December 2020, we reported results from a randomized, double-blind, placebo-controlled investigator-initiated study in the same patient population across a consortium of academic sites in the United States showing encouraging trends of reduced mortality and duration of mechanical ventilation in patients treated with mavrilimumab on top of standard of care therapy. There was no difference in SAEs between the mavrilimumab arm and the placebo arm in the investigator-initiated study.

We are conducting a global, randomized, double-blind, placebo-controlled Phase 2/3 clinical trial of mavrilimumab in severe COVID-19 pneumonia and hyperinflammation. We expect to provide data from the Phase 2 portion of the Phase 2/3 trial in the first half of 2021.

Clinical History in Rheumatoid Arthritis

MedImmune had received authorization to conduct clinical trials for RA in Europe and executed an extensive Phase 1 and Phase 2 clinical program where the company studied mavrilimumab in over 550 patients with RA through Phase 2b. All of MedImmune’s European clinical trials achieved their prospectively defined primary endpoints of safety or efficacy.

MedImmune’s investigational new drug application, or IND, for the clinical development of mavrilimumab for the treatment of RA in the United States was initially put on clinical hold in 2010 before human data had been generated due to certain effects that were observed in non-clinical studies, which coincides with a theoretical risk of developing pulmonary alveolar proteinosis, or PAP, possibly in the setting of GM-CSF inhibition. Since then, in 2014, the FDA acknowledged that clinical studies in refractory RA may be appropriate based on MedImmune’s clinical studies in Europe in which it dosed over 550 RA patients with mavrilimumab with no evidence of PAP attributable to mavrilimumab following long-term administration. MedImmune did not engage in further dialogue with the FDA and withdrew the IND for mavrilimumab for the treatment of RA.

We believe that the trials conducted by MedImmune provide substantial support for the potential of mavrilimumab in autoimmune diseases. In these trials, mavrilimumab was observed to be well-tolerated. The most common adverse event was infection, with all dose groups (30 mg, 100 mg, 150 mg) in a Phase 2b clinical trial reporting similar rates of infection compared to the placebo group. We believe that these safety results provide an accurate early representation of the safety profile of mavrilimumab, which we believe to be at least competitive with and potentially better than existing systemically administered agents for autoimmune diseases.

Mavrilimumab’s results from MedImmune’s European Phase 2b clinical trials in RA have provided important information about its safety and efficacy profile and helped solidify our choice for focusing our development efforts in GCA as a lead indication. In addition to the reductions to the primary endpoint demonstrated in MedImmune’s European Phase 2b trials, other markers of inflammation, such as CRP, ESR, and IL-6, were similarly reduced, as shown in the

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graphs below. CRP, ESR and IL-6 are key markers of disease activity for GCA. We believe that these results may also provide evidence for mavrilimumab’s potential utility across a broad range of indications with a similar biomarker profile.

Source: Burmester GR, et al. Ann Rheum Dis 2017. *p<0.05, **p<0.01, ***p<0.001 mavrilimumab versus placebo

Vixarelimab

Overview

Vixarelimab is a fully-human monoclonal antibody that targets OSMRβ, which mediates signaling of IL-31 and OSM, two key cytokines implicated in inflammation, pruritus and fibrosis. We believe vixarelimab to be the only monoclonal antibody in development that targets both pathways simultaneously. We acquired the assets relating to vixarelimab from Biogen, in 2016. We are evaluating vixarelimab for the potential treatment of prurigo nodularis, a chronic inflammatory skin condition with an estimated U.S. prevalence of approximately 300,000 patients. We received Breakthrough Therapy designation for vixarelimab for the treatment of pruritus associated with prurigo nodularis in 2020. In April 2020, we reported results from our randomized, double-blind, placebo-controlled Phase 2a trial of vixarelimab in prurigo nodularis. We are conducting a randomized, double-blind, placebo-controlled Phase 2b dose ranging study of vixarelimab in patients with prurigo nodularis designed to investigate the efficacy, safety, and pharmacokinetics.

Mechanism of Action

The OSMRβ subunit is an IL-6 type receptor which combines with one of two other subunits to form two distinct cytokine receptors used for the signaling of two different cytokines: IL-31, and OSM. IL-31 binds to the IL-31 receptor on keratinocytes, epidermal cells, leading to a sensation of pruritus and further inflammatory responses in the skin. In addition to interacting with IL-31 receptors on keratinocytes, IL-31 also stimulates pruritus directly through IL-31 receptors expressed on unmyelinated C-fibers in the skin responsible for the sensation and transmission of pruritic signaling.

OSM is produced primarily under inflammatory conditions and stimulates dermal fibroblast proliferation and migration as well as synthesis of collagen and glycosaminoglycan in the skin, leading to fibrosis. In addition to these functions, OSM signaling through the type II OSM receptor upregulates interleukin-4, or IL-4, interleukin-13 receptor, or IL-13Rα1, and interleukin-4 receptor, or IL-4Rα, in human skin equivalent cultures, upregulates IL-4Rα in primary human keratinocytes and also impairs expression of filaggrin, loricrin and involucrin (classical “differentiation” markers of the epidermal differentiation complex cluster) in human skin equivalent cultures. These data implicate OSM signaling as important in many autoimmune diseases characterized by barrier dysfunction, fibrosis and inflammation.

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Vixarelimab inhibits both IL-31 and OSM activities at their respective receptors, potentially disrupting the pruritus, inflammation and fibrosis mediated by these cytokine pathways.

Background and Market Opportunity for Prurigo Nodularis

Prurigo nodularis is a chronic inflammatory skin condition that affects primarily older adults and is characterized by multiple firm and extremely pruritic nodules typically located on the arms and legs. The etiology of prurigo nodularis is largely unknown, however, human biopsy studies have shown that the cytokines IL-31 and OSM and the receptor chains IL-31Rα and OSMRβ are highly expressed in prurigo nodularis lesions. The pruritus is severe and distressing and can be sudden, sporadic or continuous, worsening with heat, sweating or irritation from clothing. The itching sensation in prurigo nodularis is extreme and often leads to scratching to the point of bleeding, infection or pain. Our market research to-date with physicians and patients highlights the severe and debilitating nature of this disease and the significant levels of unmet need. Multiple physicians have reported suicidal tendencies among their prurigo nodularis patients due to an overwhelming inability to control the unrelenting itch. The exact prevalence of prurigo nodularis is unknown, however, we estimate there to be approximately 300,000 prevalent cases in the United States.

Current Treatment Landscape for Prurigo Nodularis

Prurigo Nodularis

We are not aware of any FDA-approved therapies for treating prurigo nodularis, and the treatment approach ranges from topical corticosteroids and occlusive steroid containing bandages for more mild patients to systemic corticosteroid, ultraviolet phototherapy and systemic therapies such as thalidomide, methotrexate and cyclosporine for those patients who fail initial treatments. Patients have reported using opioid pain medications to attempt to control the disease in its most severe form.

Our Solution

Vixarelimab is a fully-human monoclonal antibody that targets two key pathways for the development of pruritus, inflammation and fibrosis through inhibition of OSMRβ. Chronic pruritic diseases are often characterized by a complex interplay among pruritus, inflammation and fibrosis. The pathogenesis of chronic pruritic diseases involves interlocking positive feedback loops in which pruritus causes scratch, and scratch causes reactive inflammation through mechanical disruption of the skin architecture. The decline in skin barrier function and resulting bacterial colonization or infection ultimately increase extracellular matrix formation and collagen deposition, leading to fibrosis. Fibrosis then begets more pruritus through disruption and dysregulation of sensory nerve fiber expression.

Current therapies target only one or two aspects of this complex pathophysiology and are inevitably limited in their effectiveness. Targeting only one pathway may address a single aspect of the symptomatology, e.g., pruritus, but not the full spectrum of the pathophysiologic components of the disease. This point is particularly relevant since OSM is upregulated in many chronic inflammatory skin diseases and synergistically interacts with pruritic and inflammatory pathways. Of particular relevance is the central role of OSM in inflammation and barrier function and its autocrine effects on type II OSM receptor in IL-31-dependent epidermal proliferation and remodeling as well as inflammation.

There is a relatively large body of literature linking inflammatory pruritic and inflammatory diseases to both IL-31 and OSM via signaling though OSMRβ. Vixarelimab has been specifically designed to target both pathways simultaneously and thus vixarelimab may disrupt this pathologic cycle in patients afflicted by prurigo nodularis and atopic dermatitis.

OSMRβ Axis Identified in Prurigo Nodularis

In 2019 at the Annual Meeting of the Society for Investigative Dermatology, we presented preclinical data identifying the OSMRβ axis in prurigo nodularis subjects. Data from our longitudinal observational study in prurigo nodularis, or LOTUS-PN suggest that the OSMRβ axis (IL-31, OSM, IL-31 receptor alpha (IL-31Rα) and OSMRβ) may play a role in the pathogenesis of prurigo nodularis given its prevalent expression in lesional prurigo nodularis. IL-31

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messenger ribonucleic acid was expressed in approximately two-thirds of lesional biopsies from prurigo nodularis patients with WI-NRS ≥ 7 compared to one-tenth in healthy volunteers. Additionally, lesional biopsies from prurigo nodularis patients contained mononuclear cells expressing OSM, OSMRβ, IL-31 and IL-31Rα protein compared with non-lesional biopsies.

Phase 2a Clinical Trial in Prurigo Nodularis

We conducted a Phase 2a randomized, double blind, placebo-controlled clinical trial to evaluate the efficacy, safety, tolerability, PK and immunogenicity of vixarelimab administered SC in subjects with moderate-to-severe prurigo nodularis experiencing moderate-to-severe pruritus.The trial enrolled and treated 49 patients with moderate-to-severe prurigo nodularis (mean PN-IGA of 3.4) experiencing moderate-to-severe pruritus (mean WI-NRS score of 8.3). Patients were randomized 1:1 to receive a loading dose of vixarelimab 720 mg (n=23) or placebo (n=26) SC followed by vixarelimab 360 mg or placebo SC weekly. The primary efficacy endpoint was percent change versus baseline in weekly-average WI-NRS at Week 8 (using the last observation carried forward analysis).

Phase 2a Clinical Trial Results in Prurigo Nodularis

In April 2020, we reported results from our randomized, double-blind, placebo-controlled Phase 2a trial of vixarelimab in prurigo nodularis. The Phase 2a trial met its primary efficacy endpoint, as there was a statistically significant reduction in weekly-average WI-NRS from baseline at Week 8 in vixarelimab recipients compared to placebo recipients. In addition, the majority of vixarelimab recipients showed a clinically meaningful greater-than-or-equal-to 4-point weekly-average WI-NRS reduction at Week 8 and a statistically significant percentage of vixarelimab recipients achieved a prurigo nodularis-investigator’s global assessment, or PN-IGA, score of 0/1 at Week 8 compared to placebo recipients.

In this Phase 2a trial, vixarelimab was well-tolerated by all subjects and no dose-limiting adverse experiences were observed. There were no SAEs or atopic dermatitis flares.

Phase 2b Clinical Trial in Prurigo Nodularis

In December 2020, we announced the commencement of dosing in the Phase 2b clinical trial of vixarelimab in prurigo nodularis. The Phase 2b trial is a randomized, double-blind, placebo-controlled study designed to investigate the efficacy, safety, and pharmacokinetics of vixarelimab in patients with prurigo nodularis. The trial is expected to enroll approximately 180 patients experiencing severe pruritus. Patients will be randomized 1:1:1:1 to receive vixarelimab 540 mg, 360 mg, 120 mg, or placebo as a once-monthly SC injection. The primary efficacy endpoint is the percent change from baseline in the weekly-average WI-NRS at Week 16. Key secondary endpoints include the proportion of patients achieving greater-than-or-equal-to 4-point weekly-average WI-NRS reduction at Week 16 and the proportion of patients achieving a 0/1 score (clear/almost clear) on the PN-IGA at Week 16.

KPL-404

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Overview

KPL-404 is a humanized monoclonal antibody that is designed to inhibit the CD40-CD40L interaction, a key T-cell co-stimulatory signal critical for B-cell maturation and immunoglobulin class switching. Since September 2017, we have had a license to conduct research and development on KPL-404 from Primatope, the company that owned or controlled the intellectual property related to KPL-404 and, in March 2019, we acquired the company. In connection with our acquisition of Primatope, we acquired an exclusive world-wide license with Beth Israel Deaconess Medical Center for certain patent applications and patents related to KPL-404.

Mechanism of Action and External Clinical Proof of Concept

KPL-404 is designed to block the CD40/CD40L interaction by binding to and inhibiting signaling through the CD40 receptor. CD40 is a member of the Tumor Necrosis Factor Receptor superfamily which is constitutively or inducibly expressed on the surface of a variety of immune and non-immune cell types including B cells, macrophages, dendritic cells, microglia, endothelial cells, epithelial cells, and keratinocytes and can also be upregulated on other cell types in the context of autoimmune disease. Interactions between B cell-expressed CD40 and its binding partner, CD40L, mainly expressed on activated CD4+ T cells, play a critical role in promoting germinal center formation and the production of class-switched antibodies. The role of CD40 in B cells has been extensively characterized and has been shown to be essential for productive primary and secondary humoral immune responses to T dependent antigens. External clinical data that point to the broad potential power of the mechanism has been established in RA, systemic lupus erythematosus, primary Sjogren’s syndrome, Graves’ disease and prevention of kidney transplant rejection. Ongoing Phase 2 trials from competitors implicate additional indications for potential development, including type 1 diabetes, inflammatory bowel disease, prevention of liver transplant rejection, hidradenitis suppurativa, lupus nephritis and multiple sclerosis.

Our Solution

KPL-404 inhibits the signaling of CD40 and CD40L with low-single digit nanomolar affinity in vitro. The presentation of KPL-404 is as a high-concentration, liquid formulation potentially suitable for SC administration at doses of up to 5mg/kg, which we believe may, allow for a higher delivered dose in one SC injection than all other competitors who are mainly limited to high dose IV formulations or SC formulations. We believe high-dose IV and SC formulations do not fully antagonize signaling as evidenced by the generation of anti-drug antibodies ever at maximum delivered dose levels.

Preclinical Development

In preclinical development, KPL-404 has been observed to have a favorable pharmacokinetic and toxicology profile and has shown activity in multiple non-human primate models of organ transplant rejection, as well as in multiple TDAR models. The data in the graphs below show in a non-human primate TDAR model that KPL-404 had linear pharmacokinetics with low variability which translated into complete suppression of antibody responses to a novel antigen (KLH) at drug levels achieving 100% receptor occupancy.

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Phase 1 Program

We are conducting a Phase 1 trial of KPL-404. The Phase 1 trial is a randomized, double-blind, placebo-controlled, single-ascending-dose, first-in-human study that is divided into two parts: a single dose of KPL-404 0.03 mg/kg, 0.3 mg/kg, 1 mg/kg, 3 mg/kg or 10 mg/kg IV and a single dose of KPL-404 1 mg/kg or 5 mg/kg SC. The primary objective is to assess the safety and tolerability of KPL-404. Secondary endpoints include pharmacokinetics, CD40 receptor occupancy, the immune response to the novel test antigen KLH in clinically relevant dose cohorts, and the anti-drug antibody response.

In November 2020 we announced preliminary data from the Phase 1 clinical trial. All dose escalations occurred as per protocol with no dose limiting safety findings. All 6 subjects dosed with KPL-404 3 mg/kg IV showed full receptor occupancy through Day 29, which corresponded with complete suppression of the TDAR to KLH through Day 29. Consistent dose relatedness was shown in the lower dose level cohorts, including 0.03 mg/kg, 0.3 mg/kg, 1 mg/kg IV and 1 mg/kg SC. Data collection for the higher dose level cohorts, 10 mg/kg IV and 5 mg/kg SC, is ongoing.

We believe the data support subsequent study in patients, including potential IV or SC monthly administration. We expect final data and safety follow-up from all cohorts in the first half of 2021.

Discovery Activities

We conduct internal discovery activities directed toward wholly owned molecules for the treatment of debilitating disease targets where we believe there to be a strong mechanistic rationale and potential for clear differentiation from existing approved agents or those in development.

License and Acquisition Agreements

License Agreement with Regeneron

In September 2017, we entered into a license agreement with Regeneron, or the Regeneron Agreement. Pursuant to the Regeneron Agreement, Regeneron granted us an exclusive license under certain intellectual property rights controlled by Regeneron to develop and commercialize rilonacept worldwide, aside from Israel, Egypt, Turkey and select countries in the Middle East and northern Africa, which we refer to collectively as the excluded territory, or the Excluded Territory. In the United States and Japan, our license is initially for all indications other than those involving local administration to the eye or ear, oncology, deficiency of the interleukin-1 receptor antagonist, or DIRA, and CAPS. If we are successful in receiving marketing approval for rilonacept in the United States for a new indication, the scope of the license granted to us will automatically expand to include DIRA and CAPS in the United States and Japan, and we will assume the sales and distribution of rilonacept in these additional indications. Outside the United States and Japan, our license is for all indications other than local application to the eye or ear, oncology, DIRA, CAPS and certain periodic fever syndromes set forth in the Regeneron Agreement, collectively the Excluded Indications. Under the Regeneron Agreement, we are obligated to use commercially reasonable efforts to develop and commercialize

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rilonacept outside of the excluded indications, or the Excluded Indications, in our territory. Upon receiving positive data in a Phase 3 clinical trial, Regeneron transferred the biologics license application, or BLA, for rilonacept to us.

Under the Regeneron Agreement, we made an upfront payment of $5.0 million. In addition, we made a $7.5 million payment in the fourth quarter of 2020 in connection with the achievement of a specified regulatory milestone event. We are obligated to make a regulatory milestone payment of $20.0 million, which may be met in the first quarter of 2021. If we are successful in receiving marketing approval for rilonacept in the United States for a new indication, such as recurrent pericarditis, we will assume the sales and distribution of rilonacept in DIRA and CAPS. Thereafter, we have agreed to evenly split profits on our sales of rilonacept with Regeneron after deducting certain commercialization expenses subject to specified limits.

Regeneron has a right of first negotiation over our engagement of third parties to support our promotional activities in excess of a specified level and over the assignment or sale of our rights to any product we develop under the Regeneron Agreement to a third-party. Furthermore, under certain circumstances, we will need Regeneron’s prior consent to assign our rights under the Regeneron Agreement.

The Regeneron Agreement will expire on the date on which we, our affiliates or sublicensees are no longer developing or commercializing any product containing rilonacept. We may terminate the agreement for convenience at any time after the date that is eighteen months after the effective date of the agreement with 180 days’ written notice or one year’s written notice if we terminate the agreement following U.S. marketing approval of a rilonacept product developed by us. We may also terminate with three months’ written notice if we reasonably determine that rilonacept is unsafe in the indications we are pursuing. Regeneron may terminate the agreement if there is a consecutive twelve month period during which we do not conduct any material development or commercialization activities or we do not grant a sublicense to a third-party to do so, or if we challenge Regeneron’s patent rights in any country in our territory. Either party may terminate the agreement in the event of a material breach by the other party that remains uncured for 90 days (or 30 days for payment-related breaches), or by either party due to the insolvency or bankruptcy of the other party.

We have also entered into a clinical supply agreement with Regeneron, or the Supply Agreement. Pursuant to the Supply Agreement, Regeneron has the exclusive right to manufacture and supply all of our requirements of rilonacept for clinical development. If Regeneron determines to discontinue the supply of rilonacept to us, it must use its reasonable efforts to transfer all relevant documentation, materials and technology necessary for the manufacture of rilonacept to us or our designee. The Supply Agreement terminates upon the termination of the Regeneron Agreement or the transfer of technology related to the bulk manufacture of rilonacept.

License Agreement with MedImmune

In December 2017, we entered into a license agreement with MedImmune, or the MedImmune Agreement. Pursuant to the MedImmune Agreement, MedImmune granted us an exclusive, worldwide license under certain intellectual property rights controlled by MedImmune to make, use, develop and commercialize mavrilimumab and any other product containing an antibody to the GM-CSF receptor alpha that is covered by certain MedImmune patent rights for all indications. We also acquired non-exclusive licenses to other MedImmune technology for use in exploiting licensed products. We may sublicense these rights subject to consent of MedImmune and any applicable licensors of rights under which we are licensed. We also acquired reference rights to relevant manufacturing and regulatory documents, and existing inventory of mavrilimumab drug substance. We must use commercially reasonable efforts to develop and commercialize the licensed products.

Under the MedImmune Agreement, we made an upfront payment of $8.0 million. In addition, we made a $5 million pass-through payment and a $10 million milestone payment in year ended December 31, 2019 related to the achievement of specified clinical milestone events achieved during the year ended December 31, 2018. We are also obligated to make future clinical, regulatory and initial sales milestone payments of up to $57.5 million in the aggregate for the first two indications. In addition, we are also obligated to make future clinical and regulatory milestone payments of up to $15.0 million in the aggregate for each subsequent indication. In July 2020, we 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. We are obligated to make milestone payments to

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MedImmune of up to $85.0 million upon the achievement of annual net sales thresholds up to, but excluding, $1.0 billion in annual net sales as well as additional milestone payments aggregating up to $1.1 billion upon the achievement of additional annual net sales thresholds starting at $1.0 billion and higher. Commencing on the first commercial sale of licensed products, we are obligated 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. We must pay such royalties on a product-by-product and country-by-country basis until the latest to occur of the expiration of licensed patents, the expiration of regulatory exclusivity or the tenth anniversary of first commercial sale of such product in such country.

In countries where licensed patents have issued, the statutory expiration date is 2027, not including any patent term extensions or adjustments. While the current expected patent expiration dates are known in countries where licensed patents have issued, these expiration dates are subject to significant uncertainty. For example, the patents may be challenged, and accordingly, the relevant expiration dates could be shortened. In addition, as we continue to file and prosecute new patent applications related to mavrilimumab, the granting of such pending applications or future patent applications could extend the relevant statutory expiration dates beyond 2027. The expiration date of regulatory exclusivity is determined on a country-by country-basis if the applicable product is approved in such country and if any applicable regulatory exclusivity applies and is granted. The actual expiration date of any such regulatory exclusivity, however, is subject to significant uncertainty. For instance, the applicable regulatory exclusivity period is often triggered by the date a product candidate obtains regulatory approval, and we cannot predict with any certainty whether and if so, when, the applicable product would receive regulatory approval in any given jurisdiction. Furthermore, the type, scope and duration of such exclusivities will vary on a country-by-country basis depending on the jurisdictions in which a product candidate is approved and the particular regulatory exclusivity for which the product is eligible as of the time of approval. For example, in the United States, a reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, which means that the FDA cannot make effective the approval of a biosimilar product that references the biologic product until 12 years from the date on which the reference product was first licensed. In the EEA, new products authorized for marketing (i.e. reference products) may qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The two-year period may be extended to three years if during the first eight years the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Furthermore, if a product candidate that has received orphan designation is subsequently approved for the disease or condition for which it has such designation, the product may be entitled to orphan drug exclusivity, which generally grants seven years of market exclusivity in the United States and up to 10 years of market exclusivity in the EEA, and such period may run contemporaneously with the other exclusivities that may apply. In the EEA, the ten-year period of market exclusivity is extended by two years for drugs that also have complied with an agreed pediatric investigation plan, or PIP, granted at the time of review of the orphan drug designation. In the United States, an additional six-month period of pediatric exclusivity may be available as an extension to any existing non-patent regulatory exclusivity period if the sponsor has conducted and submitted pediatric studies in response to a written request from the FDA. Additionally, our eligibility for regulatory exclusivity may depend in part on the indications for which we seek regulatory approval of our product candidates, which may depend on the data we receive from our clinical studies, and accordingly, may change over time, and the laws and regulations governing regulatory exclusivity may change in various jurisdictions as the political focus on drug exclusivity increases. For risk related to regulatory exclusivity matters, see “Risk Factors—Risks related to product development and regulatory approval.”

The MedImmune Agreement will remain in effect until the expiration of the royalty term in all countries for all licensed products. The MedImmune Agreement may be terminated earlier at any time by us with at least 90 days’ prior notice, by either party in the event of material breach by the other party that remains uncured for 90 days, by either party for insolvency or bankruptcy of the other party, or immediately by MedImmune if we challenge the licensed patents.

Biogen Asset Purchase Agreement

In September 2016, we completed the acquisition of certain assets of Biogen pursuant to an asset purchase agreement, or the Biogen Agreement. Pursuant to the Biogen Agreement, we acquired 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, together the Acquired Assets, including patents and other intellectual property rights, clinical data, certain contracts,

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know-how and inventory, which we refer to collectively as the acquired assets, or the Acquired Assets. In addition, Biogen granted us a non-exclusive, sublicensable, worldwide license to certain background patent rights related the vixarelimab program. Under the Biogen Agreement, we are obligated to use commercially reasonable efforts to develop and commercialize the Acquired Assets.

Under the Biogen Agreement, we made an upfront payment of $11.5 million and a technology transfer payment of $0.5 million to Biogen. In addition, we made a milestone payment of $4.0 million during the year ended December 31, 2017, associated with the achievement of a specified clinical milestone event. We made milestone payments of $10.3 million during the year ended December 31, 2019, primarily associated with the achievement of a specified clinical milestone event. We are also obligated to make future milestone payments for each antibody product that includes the Acquired Assets, or an Antibody Product, of up to $315.0 million in the aggregate upon the achievement of specified milestones. These milestone payments relate to multiple indications for an Antibody Product, and are comprised of up to $165.0 million in the aggregate upon achievement of specified clinical and regulatory milestone events and $150.0 million in the aggregate upon the achievement of specified annual net sales thresholds. Commencing on the first commercial sale of an Antibody Product, we are obligated 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. We must pay such royalties on a product-by-product and country-by-country basis until the latest to occur of the expiration of patents that cover an Antibody Product, the expiration of regulatory exclusivity or the tenth anniversary of first commercial sale of such product in such country. We have also agreed to pay certain obligations under third-party contracts retained by Biogen that relate to vixarelimab.

In countries where patents covering Antibody Products have issued, the statutory expiration date is 2034, not including any patent term extensions or adjustments. While the current expected patent expiration dates are known in countries where licensed patents have issued, these expiration dates are subject to significant uncertainty. For example, the patents may be challenged, and accordingly, the relevant expiration dates could be shortened. In addition, as we continue to file and prosecute new patent applications related to Antibody Products, the granting of such pending applications or future patent applications could extend the relevant statutory expiration dates beyond 2034. The expiration date of regulatory exclusivity is determined on a country-by country-basis if the applicable product is approved in such country and if any applicable regulatory exclusivity applies and is granted. The actual expiration date of any such regulatory exclusivity, however, is subject to significant uncertainty. For instance, the applicable regulatory exclusivity period is often triggered by the date a product candidate obtains regulatory approval, and we cannot predict with any certainty whether and if so, when, the applicable product would receive regulatory approval in any given jurisdiction. Furthermore, the type, scope and duration of such exclusivities will vary on a country-by-country basis depending on the jurisdictions in which a product candidate is approved and the particular regulatory exclusivity for which the product is eligible as of the time of approval. For example, in the United States, a reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, which means that the FDA cannot make effective the approval of a biosimilar product that references the biologic product until 12 years from the date on which the reference product was first licensed. In the EEA, new products authorized (i.e. reference products) for marketing may qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The two-year period may be extended to three years if the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Furthermore, if a product candidate that has received orphan designation is subsequently approved for the disease or condition for which it has such designation, the product may be entitled to orphan drug exclusivity, which generally grants seven years of market exclusivity in the United States and up to 10 years of market exclusivity in the EEA, and such period may run contemporaneously with the other exclusivities that may apply. In the EEA, the ten-year period of market exclusivity is extended by two years for drugs that also have complied with an agreed pediatric investigation plan, or PIP, granted at the time of review of the orphan drug designation. In the United States, an additional six-month period of pediatric exclusivity may be available as an extension to any existing non-patent regulatory exclusivity period if the sponsor has conducted and submitted pediatric studies in response to a written request from the FDA. Additionally, our eligibility for regulatory exclusivity may depend in part on the indications for which we seek regulatory approval of our product candidates, which may depend on the data we receive from our clinical studies, and accordingly, may change over time, and the laws and regulations governing regulatory exclusivity may change in various jurisdictions as the political focus

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on drug exclusivity increases. For risk related to regulatory exclusivity matters, see “Risk Factors—Risks related to product development and regulatory approval.”

Under the Biogen Agreement, Biogen has a time-limited right of first negotiation to purchase the assets we acquired from Biogen or obtain a license to exploit Antibody Products, in each case, in the event we decide to sell the acquired assets, including through the sale of our company, or out-license the rights to the Antibody Products.

The Biogen Agreement will remain in effect until expiration of all payment obligations in all countries related to the last antibody product subject to the Biogen Agreement. The Biogen Agreement may be terminated by us with 90 days’ prior notice, by either party in the event of a material breach by the other party that remains uncured for 90 days (or 30 days for payment-related breaches) or by both parties upon mutual consent. In the event of a termination, the Acquired Assets, including certain licenses and rights related thereto, will revert to Biogen, and, upon written request by Biogen, we are required to grant to Biogen an exclusive, worldwide, sub-licensable license to certain of our intellectual property related to the Acquired Assets, including know-how and patent rights.

Primatope Stock Purchase Option Agreement

In September 2017, we entered into a stock purchase option agreement, or the Primatope Agreement, with Primatope, pursuant to which we were granted a license to certain intellectual property rights owned or controlled by Primatope to research, develop, and manufacture the preclinical antibody, KPL-404, and an exclusive call option through April 2018 to purchase all of the outstanding securities of Primatope with up to three extensions periods through mid-January 2019. Upon execution of the agreement, we made $0.5 million in upfront payments for the initial option period and we made payments totaling $0.8 million for extending option period through mid-January 2019. During the option periods, we conducted research and preclinical work to assess the viability of the program.

In January 2019, we exercised the call option and in March 2019, we acquired all of the outstanding securities of Primatope, or Primatope Acquisition. The aggregate amount of upfront and contingent payments we paid to the former Primatope shareholders to acquire Primatope was comprised of (1) $15.0 million paid at closing in March 2019, comprised of upfront consideration of $10.0 million and milestone payments of $5.0 million which had been achieved as of the closing date, and (2) $3.0 million paid in June 2019 for the final milestone payment, which was achieved following the closing during the six months ended June 30, 2019, each paid in a combination of cash and our Class A common shares (inclusive of escrow and holdback share amounts) in accordance with the Primatope Agreement. We released the escrow and issued Class A common shares that were held back at closing in June 2020 and issued the Class A common shares that were held back at the final milestone payment in September 2020.

As a result of the Primatope Acquisition, we acquired the rights to an exclusive license to certain intellectual property rights controlled by Beth Israel Deaconess Medical Center, Inc., or BIDMC, to make, use, develop and commercialize KPL-404 under the BIDMC license agreement, or BIDMC Agreement. Under the BIDMC Agreement, we are solely responsible for all development, regulatory and commercial activities and costs. We are also responsible for costs related to filing, prosecuting and maintaining the licensed patent rights. Under the BIDMC Agreement, we are obligated to pay an insignificant annual maintenance fee as well as clinical and regulatory milestone payments of up to an aggregate of $1.2 million to BIDMC. We are also obligated to pay a low single-digit royalty on annual net sales of products licensed under the agreement, if approved.

Manufacturing

We do not currently own or operate any late stage manufacturing facilities. Although we have built a development and manufacturing facility to produce drug substance to support certain research, preclinical and other clinical development for our product candidates, we rely, and expect to continue to rely, on third parties for the manufacture of our late-stage product candidates and certain of our early-stage product candidates for the majority of our clinical development efforts, as well as for the potential commercial manufacture of our product candidates, if approved. We have also entered into a Supply Agreement with Regeneron pursuant to which Regeneron has the exclusive right to manufacture and supply all of our requirements of rilonacept for clinical development. If Regeneron determines to discontinue the supply of rilonacept to us, it must use its reasonable efforts to transfer all relevant documentation,

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materials and technology necessary for the manufacture of rilonacept to us or our designee. The Supply Agreement terminates upon the termination of the Regeneron Agreement or the transfer of technology related to the bulk manufacture of rilonacept. Regeneron, in turn, relies upon a third-party CMO to conduct fill/finish operations for rilonacept. Under certain circumstances, we or Regeneron could initiate a technology transfer to either us or another CMO to manufacture rilonacept.

We also have entered into an agreement with a CMO to produce mavrilimumab beyond our current inventory and have engaged CMOs to manufacture vixarelimab drug substance and drug product currently in use in our on-going clinical trials. We intend to use CMOs for development and scale-up work for any future clinical trials and eventual commercialization of mavrilimumab and vixarelimab, if approved.

We have also engaged CMOs to produce our clinical drug substance for certain preclinical studies, but we intend to produce our preclinical product candidates for Phase 1 and Phase 2 studies in our own early stage manufacturing facilities. We plan to continue to use CMOs to produce the corresponding drug product clinical material. Longer-term, we expect to use CMOs to produce these product candidates for later-phase clinical studies and eventual commercialization, if approved.

We require our CMOs to conduct manufacturing activities in compliance with current good manufacturing practice, or cGMP, requirements. We have assembled a team of experienced employees and consultants to provide the necessary technical, quality and regulatory oversight of our CMOs. We currently perform process development internally but are reliant on CMOs for late stage clinical manufacturing, process qualification and validation and commercial supply. We anticipate that these CMOs will have the capacity to support both clinical supply and commercial-scale production, but we do not have any formal agreements at this time with any of these CMOs to cover commercial production. We also may elect to pursue additional CMOs for manufacturing supplies of drug substance and finished drug product in the future.

Commercial Operations

Our team is experienced in commercial leadership and we intend to expand our capabilities in parallel with the development path of our product candidates. If the FDA approves rilonacept for recurrent pericarditis, we intend to market and commercialize rilonacept in the United States and, in anticipation of a potential commercial launch, we are establishing our own a specialty cardiology salesforce that will be complemented by our current medical affairs and payor and patient services teams as well as an efficient digital marketing effort by our current marketing team targeting a subset of cardiologists currently treating pericarditis. For our other product candidates, we intend to establish commercialization strategies for each as we approach potential marketing approval and, due to the specialization among physicians treating the indications we are targeting, we expect to be able leverage our then-existing medical affairs, payor and patient services, and marketing organizations.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize, including rilonacept, mavrilimumab, vixarelimab and KPL-404, and any other product candidates that we may develop, may compete with existing products and new products that may become available in the future.

Our competitors may have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific, sales, marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

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The key competitive factors affecting the success of rilonacept, mavrilimumab, vixarelimab and KPL-404 and any other product candidates that we develop, if approved, are likely to be our product candidates, including their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors. Our commercial opportunity for any of our product candidates could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.

We are aware of the following products currently marketed or in clinical development for the treatment of the diseases that we are initially targeting:

Rilonacept

Recurrent Pericarditis: We are not aware of any approved therapies in recurrent pericarditis, but are aware of one program (RPH-104) being developed by R-Pharm International, which inhibits IL-1β/IL-1F2-induced signaling and is in Phase 2 development in recurrent pericarditis subjects in Russia.

Dual IL-1α and IL-1β Inhibition: Anakinra (KINERET), marketed by Swedish Orphan Biovitrum AB, is currently approved for use in Rheumatoid Arthritis, CAPS and DIRA. We are not aware of any active, industry sponsored development programs using anakinra seeking a label for recurrent pericarditis.

IL-1β Inhibition Alone: Canakinumab (ILARIS), marketed by Novartis Pharmaceuticals Corporation, is currently approved for use in CAPS, Tumor Necrosis Factor Receptor Associated Periodic Syndrome (TRAPS), Hyperimmunoglobulin D Syndrome (HIDS), Mevalonate Kinase Deficiency (MKD) and Familial Mediterranean Fever (FMF), Still’s Disease and Systemic Juvenile Idiopathic Arthritis (SJIA). We are not aware of any active, industry sponsored development programs using canakinumab seeking a label for recurrent pericarditis. Additionally, Novartis is also developing gevokizumab for use in oncologic indications.

IL-1α Inhibition Alone: There are other therapies which modulate IL-1α in preclinical and clinical development for diseases other than recurrent pericarditis from Johnson & Johnson and XBIOTECH USA, INC. We are not aware of any active, industry sponsored development programs for these programs seeking a label for recurrent pericarditis.

Mavrilimumab

Giant Cell Arteritis: Tocilizumab (ACTEMRA), produced by Hoffmann—La Roche AG, or Roche, and Chugai Pharmaceutical Co., Ltd., is an IL-6 inhibitor that is approved by the FDA for the treatment of GCA on top of a concomitant corticosteroid taper. In addition, Eli Lilly and Company AbbVie, Inc. are conducting clinical trials for oral janus kinase inhibitors; Novartis International AG, is recruiting a trial with their IL-17 antagonist secukinumab (Cosentyx) and Janssen Global Services, LLC is in active development with their IL-23 antagonist guselkumab (Tremfya).

COVID-19: We are also pursuing mavrilimumab development for the treatment of COVID-19 pneumonia and hyperinflammation. There are currently hundreds of active, industry sponsored clinical trials testing many different mechanisms of action for the treatment of COVID-19 related therapeutic areas in addition to the approved vaccines, and the many other clinical trials testing vaccines, for the prevention of COVID-19.

GM-CSF Antagonists: There are also five other programs in clinical development outside of GCA in various indications that modulate GM-CSF signaling from GlaxoSmithKline plc, or GSK (otilimab), Izana Bioscience Ltd. (namilumab), I-MAB Biopharma (plonmarlimab), Roivant Sciences Ltd. (gimsilumab) and Humanigen, Inc. (lenzilumab). All of these competitive programs target the GM-CSF ligand itself versus targeting the GM-CSF receptor.

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Vixarelimab

We are not aware of any therapies currently approved by the FDA for the treatment of prurigo nodularis and we are also not aware of any programs in preclinical or clinical development targeting OSMRβ antagonism.

Prurigo Nodularis: Trevi Therapeutics, Inc., is conducting a Phase 2/3 study with their k-opioid antagonist, nalbuphine ER; Galderma SA is conducting a Phase 3 study with their IL-31 specific antagonist nemolizumab; and, Regeneron / Sanofi SA are conducting a Phase 3 study with their IL-4 antagonist dupilumab (Dupixent).

KPL-404

There are various programs in clinical development antagonizing the CD40 / CD40L signaling pathway that can be distinguished by the potential to be administered subcutaneously and those programs, that due to their high required doses or short plasma half-lives, are currently being studied as intravenous only:

Intravenous Administration Only: Astellas Pharma Inc. is developing bleselumab (anti-CD40R); Viela Bio (currently in the process of being acquired by Horizon Therapeutics plc) is developing the Tn3 fusion protein, VIB4920 (anti-CD40L); Biogen, Inc. and UCB S.A. are developing dapirolizumab pegol (anti-CD40L); and, Eledon Pharmaceuticals, Inc. (formerly Novus, and also formerly Anelixis) are developing AT-1501 (anti-CD40L).

Potential Subcutaneous Administration: Novartis A.G. is developing CFZ-533, or iscalimab (anti-CD40), Sanofi S.A./ImmuNext Inc. are developing SAR441344 (anti-CD40L), and Abbvie, Inc. and Boehringer Ingelheim International GmbH are developing ravagalimab (anti-CD40).

Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates, manufacturing and process discoveries, and other know how, to operate without infringing the proprietary rights of others, and to prevent others from infringing our proprietary rights. We plan to protect our proprietary position using a variety of methods, which include pursuing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements, including compositions of matter, drug product formulations, methods of use and methods of manufacture, that are important to the development and implementation of our business. For example, we or our licensors have or are pursuing patents covering the composition of matter for each of our product candidates and we generally pursue patent protection covering methods of use for each clinical program. We also rely on trade secrets, know how, continuing technological innovation and potential in licensing opportunities to develop and maintain our proprietary position.

Rilonacept

We have a field specific exclusive license under the Regeneron Agreement to granted patents and pending applications in the United States and numerous other jurisdictions relating to rilonacept. As of December 31, 2019, the patent rights in licensed under the Regeneron Agreement relating to our program include one granted patent in the United States and 47 patents granted in other jurisdictions, including Canada, Australia, Brazil and selected countries in Europe and Asia. In addition, the patent rights in licensed under the Regeneron Agreement relating to our program include patent applications that are pending in the United States. A U.S. patent covering rilonacept as a composition of matter has a statutory expiration date in 2019, not including patent term adjustment, and relevant counterparts outside of the United States are expected to expire between 2019 and 2023, in each case, not including any patent term extensions. The FDA granted orphan drug designation for rilonacept for the treatment of pericarditis, which includes recurrent pericarditis. If we are successful in obtaining regulatory approval of rilonacept for the treatment of recurrent pericarditis, we would rely on orphan exclusivity, which generally grants seven years of marketing exclusivity in the United States and, if orphan designation is similarly granted in the European Union, 10 years of marketing exclusivity in Europe. See “—License agreement with Regeneron” above for additional information on our rights under the Regeneron Agreement.

Mavrilimumab

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We have an exclusive license under the MedImmune Agreement to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to mavrilimumab. These patents and patent applications cover mavrilimumab as a composition of matter and its use. As of December 31, 2020, the patent rights in licensed under the MedImmune Agreement relating to our program include three granted patents in the United States and 106 patents granted in other jurisdictions, including Canada, Australia and selected countries in Europe and Asia. In addition, the patent rights in licensed under the MedImmune Agreement relating to our program include patent applications that are pending in the United States, Europe, Canada, and selected countries in Asia and Latin America. The composition of matter patents for mavrilimumab generally have statutory expiration dates in 2027, although the term of some U.S. patents may be longer due to patent term adjustment to compensate for delays during the patent prosecution process. Patent term extension could extend the expiration date of one patent in the United States and patents in certain other jurisdictions, each in accordance with applicable law. There can be no assurances that patents will issue from any pending patent applications. See “—License agreement with MedImmune” above for additional information on our rights under the MedImmune Agreement.

Vixarelimab

We own, via our acquisition of certain assets from Biogen, granted patents and pending patent applications in the United States and numerous other jurisdictions relating to vixarelimab. These patents and patent applications cover vixarelimab as a composition of matter and its use. As of December 31, 2020, the patent rights acquired from Biogen include four patents granted in the United States and 38 patents granted in other jurisdictions, including Australia, Mexico, South Africa and selected countries in Europe and Asia. In addition, the patent rights acquired from Biogen include patent applications pending in the United States, Europe, Canada, and selected countries in Asia and Latin America. The issued composition of matter patents for vixarelimab have statutory expiration dates in 2034. Patent term extension could extend the expiration date of one patent in the United States and patents in certain other jurisdictions, each in accordance with applicable law. There can be no assurance that patents will issue from any of our pending patent applications. See “—Biogen asset purchase agreement” above for additional information on our rights under the Biogen Agreement.

KPL-404

We own, via our acquisition of Primatope, granted patents and pending patent applications in the United States and numerous other jurisdictions relating to KPL 404. We also have an exclusive license with Beth Israel Deaconess Medical Center to granted patents and pending patent applications in the United States and numerous other jurisdictions relating to KPL-404. These patents and patent applications cover KPL 404 as a composition of matter and its use. As of December 31, 2020, the patent rights acquired from Primatope include three patents granted in the United States. In addition, the patent rights acquired from Primatope include patent applications pending in the United States, Europe, Canada, and selected countries in Asia. The issued composition of matter patents have statutory expiration dates in 2036. As of December 31, 2020, the patent rights licensed from Beth Israel Deaconess Medical Center include two patents granted in the United States and 30 patents granted in other jurisdictions, including Australia and selected countries in Europe and Asia. In addition, the patent rights licensed from Beth Israel Deaconess Medical Center include patent applications pending in the United States, Europe, Canada, and selected countries in Asia. The issued composition of matter patents licensed from Beth Israel Deaconess Medical Center have statutory expiration dates in 2032, not including any patent term extensions or adjustments. Patent term extension could extend the expiration date of one patent in the United States and patents in certain other jurisdictions, each in accordance with applicable law. There can be no assurance that patents will issue from any of our pending patent applications.

The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries, including the United States, the patent term is 20 years from the earliest filing date of a non provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO, in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier expiring patent. In certain countries, the term of a patent that covers a drug product may also be eligible for patent term extension when regulatory approval is granted, provided the legal requirements are met. In the future, if and when our drug candidates receive approval by the FDA or

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comparable regulatory authorities in other jurisdictions, provided the legal requirements are met, we expect to apply for patent term extensions on issued patents covering those drugs, depending upon the length of the clinical trials for each drug and other factors. There can be no assurance that any of our pending patent applications will issue or that we will benefit from any patent term extension or favorable adjustment to the term of any of our patents.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products, such as rilonacept, mavrilimumab and our other product candidates. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. Government Regulation of Biological Products

In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending biologic license applications, or BLAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

The process required by the FDA before a biologic may be marketed in the United States generally involves the following:

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● Payment of user fees for FDA review of the BLA; and

Preclinical Studies and CMC Evaluations

Before testing any biological product candidate, including our product candidates, in humans, the product candidate must undergo rigorous preclinical testing. The preclinical development stage generally involves laboratory evaluations of the chemistry, formulation and stability of the product candidate, as well as trials to evaluate toxicity in animals, which support subsequent clinical testing. The conduct of the preclinical tests must comply with federal regulations and requirements, including GLP regulations. The sponsor must submit the results of the preclinical studies, together with chemistry manufacturing and controls, or CMC, information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin. Some preclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to CMC issues, preclinical issues, or one or more issues in the proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not necessarily result in the FDA allowing clinical trials to commence. The FDA also may place the IND on partial clinical hold, and a proposed study may only be partially executable, including due to FDA restrictions.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by, or under control of, the trial sponsor, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and inclusion/exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about most clinical trials in must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of certain qualifying clinical trials after completion. Disclosure of the results of these trials can be delayed in some cases for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of product candidates.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

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Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow up. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. The FDA or the sponsor may suspend or terminate a clinical trial at any time or the FDA may impose a clinical hold on other sanctions on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB can refuse, suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRBs requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrently with clinical trials, companies usually complete additional preclinical studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Review and Approval

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must contain proof of safety, purity, potency and efficacy and may include both negative and ambiguous results of preclinical studies and clinical trials as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the United States.

In most cases, the submission of a BLA is subject to a substantial application user fee. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, for original BLAs, the FDA has ten months from the filing date in which to complete its initial review of a standard application and respond to the applicant, and six months from the 60-day filing date for an application with priority review. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification. This review typically takes twelve months from the date the BLA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision.

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Before approving a BLA, the FDA will typically conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether the manufacturing processes and facilities comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may inspect the sponsor and one or more clinical trial sites to assure compliance with GCP requirements and the integrity of the clinical data submitted to the FDA.

Additionally, the FDA may refer applications for novel biologic candidates which present challenges in interpretation of the safety or efficacy data to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. The FDA also may require submission of a Risk Evaluation and Mitigation Strategy, or REMS, plan if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the biological product. The REMS plan could include medication guides, physician communication plans, assessment plans or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.

Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data that are adequate to assess the safety and efficacy of the product candidate for the claimed indications in all relevant pediatric populations and to support dosing and administration for each pediatric population for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. The Food and Drug Administration Safety and Innovation Act, or FDASIA, amended the FDCA to require that a sponsor who is planning to submit a marketing application for a product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or iPSP, within sixty days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 clinical trial. The initial iPSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the iPSP. A sponsor can submit amendments to an agreed upon initial iPSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials or other clinical development programs.

After the FDA evaluates a BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA identified by the FDA. The Complete Response Letter may require additional clinical or other data, additional pivotal Phase 3 clinical trial(s) or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the re-submitted BLA does not satisfy the criteria for approval.

If a product receives regulatory approval, the approval is limited to the conditions of use (e.g., patient population, indication) described in the label. Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on

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the results of post-marketing trials or surveillance programs, or new safety findings after market introduction. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, by providing a major contribution to patient care or in instances of drug supply issues. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do of the same product, as defined by the FDA, for the same indication we are seeking, or if our product candidate is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Expedited Review and Approval

The FDA has various programs, including Fast Track designation, Breakthrough Therapy designation, accelerated approval and priority review, which are intended to expedite or simplify the process for the development and FDA review of drugs and biologics that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs and biologics to patients earlier than under standard FDA review procedures.

To be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. Fast Track designation provides opportunities for more frequent interactions with the FDA review team to expedite development and review of the product. The FDA may also review sections of the BLA for a Fast Track product on a rolling basis before the complete application is submitted, if the sponsor and the FDA agree on a schedule for the submission of the application sections, and the sponsor pays any required user fees upon submission of the first section of the BLA.

Any product submitted to the FDA for approval, including a product with a Fast Track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it is designed to treat a serious condition, and if approved, would provide a significant improvement in safety or effectiveness compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a biologic designated for priority review in an effort to facilitate the review. The FDA endeavors to review original BLAs with priority review designations within six months of the filing date as compared to ten months under its standard review goals.

In addition, a product may be eligible for accelerated approval. Drug and biologics intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be

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measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to verify the predicted clinical benefit. A product that receives accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails conduct the required post-marketing trials or if such trials fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

In addition, a sponsor can request designation of a product candidate as a “Breakthrough Therapy.” A Breakthrough Therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance. The Breakthrough Therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as Breakthrough Therapy, the FDA will expedite the development and review of such drug. All requests for Breakthrough Therapy designation will be reviewed within 60 days of receipt, and the FDA will either grant or deny the request.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, Fast Track designation, Breakthrough Therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

Post-approval Requirements

Following approval of a new product, the manufacturer and the approved product are subject to pervasive and continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting of adverse experiences with the product, product sampling and distribution restrictions, complying with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (i.e., “off-label use”) and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. If there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require the applicant to develop additional data or conduct additional preclinical studies and clinical trials. The FDA may also place other conditions on approvals including the requirement for a REMS to assure the safe use of the product. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMPs. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. The discovery of conditions that violate these

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rules, including failure to conform to cGMPs, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including voluntary recall.

Once an approval or clearance of a drug is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

● injunctions or the imposition of civil or criminal penalties; and

Biosimilars and Exclusivity

An abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act. This amendment to the PHSA, in part, attempts to minimize duplicative testing. A recent federal district court ruling struck down the Affordable Care Act in its entirety. This decision means numerous reforms enacted as part of the Affordable Care Act, but not specifically related to health insurance, such as the BPCIA, are invalid as well. While the presidential administration and CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business. To date, the FDA has approved a number of biosimilars, and numerous biosimilars have been approved in Europe. The FDA has issued several guidance documents outlining its approach to reviewing and approving biosimilars.

Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity and potency, must be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch. Complexities associated with the larger, and often more complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

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A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a supplement for the reference product for a subsequent application filed by the same sponsor or manufacturer of the reference product (or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency. Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed product that results in a change in safety, purity or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation and meaning of the BPCIA remain subject to significant uncertainty.

U.S. Patent Term Restoration

Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended, the extension must be based on the first approval for the product, and the extension cannot extend the total patent term beyond fourteen years from approval. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner.

European Union Drug Development, Review and Approval

In the European Union, or EU, our product candidates also may be subject to extensive regulatory requirements. As in the United States, medical products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained whether or not product candidates obtain FDA approval for a pharmaceutical product, we would need to obtain the necessary approvals by the comparable foreign regulatory authorities before we can start clinical trials or marketing of the products in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls.

The EU Clinical Trials Directive 2001/20/EC as well as the Directive 2005/28/EC on good clinical practice as regards investigational drug products for human use, or GCP, and the related national implementing provisions of the individual EU Member States govern the system for the approval of clinical trials in the in the European Economic Area,

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or EEA (27 EU Member States plus Iceland, Norway and Liechtenstein). Under this system, before a clinical trial can be initiated, an applicant must obtain approval in each EEA Member State in which the clinical trial is to be conducted by two separate entities: the national competent authority and one or more ethics committees much like the FDA and the IRB, respectively. In all cases, the clinical studies must be conducted in accordance with GCP. Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use, or ICH, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. All suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the competent national authority and the ethics committee of the Member State where they occurred. The requirements and process governing the conduct of clinical studies are to a significant extent harmonized at EU level but could vary from country to country. During the development of a medicinal product, the European Medicines Agency, or EMA, and national regulators within the EU provide the opportunity for dialogue and guidance on the development program.

The EU Member States have transposed and applied the provisions of the Clinical Trials Directive in a manner that is not always uniform. This has led to variations in the rules governing the conduct of clinical trials in the individual EU Member States. The EU has, therefore, adopted Regulation (EU) No 536/2014 (Clinical Trials Regulation) in April 2014. The Regulation is expected to come into application in 2022. The Clinical Trials Regulation will be directly applicable in all the EU Member States, repealing the current Clinical Trials Directive. Conduct of all clinical trials performed in the European Union will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial.

The Clinical Trials Regulation harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which will notably contain a centralized EU portal and database.

To obtain a marketing authorization, or MA, of a drug in the EEA, we may submit marketing authorization applications, or MAA, either under the so-called centralized (mandatory for biologics) or national authorization procedures.

Centralized Procedure

The centralized procedure provides for the grant of a single MA by the European Commission following a favorable opinion by the Committee for Medicinal Products for Human Use, or CHMP, of the EMA, that is valid throughout the entire territory of the EEA. The centralized procedure is compulsory for certain types of medicines, such as medicines derived from biotechnological processes, products designated as orphan medicinal products, advanced-therapy medicines (such as gene-therapy, somatic cell-therapy or tissue-engineered products) and products with a new active substance indicated for the treatment of specified diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions and viral diseases. The centralized procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that represent a significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest of public health. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP.

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National Authorization Procedures

There are also other possible routes to authorize medicinal products in several EEA countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure. National MAs, are issued by the competent authorities of the Member States of the EEA and only cover their respective territory.

Under the above described procedures, in order to grant the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

MAs have an initial duration of five years. After these five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance.

Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. Such products are generally eligible for accelerated assessment (according to which the timeframe for the evaluation of a MA application is reduced to 150 days, excluding clock stops) and may also benefit from different types of fast track approvals, such as a conditional marketing authorization or a marketing authorization under exceptional circumstances granted on the basis of less comprehensive clinical data than normally required (respectively in the likelihood that the sponsor will provide such data within an agreed timeframe or when comprehensive data cannot be obtained even after authorization).

European Union Regulatory Exclusivity

In the EEA, new products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon MA. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the European Union during a period of eight years from the date on which the reference product was first authorized in the European Union. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU. The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

European Union Orphan Designation and Exclusivity

The criteria for designating an “orphan medicinal product” in the European Union, are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product

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will be of significant benefit to those affected by the condition. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before the application for MA. The applicant will receive a fee reduction for the marketing authorization application if the orphan designation has been granted, but not if the designation is still pending at the time the MA is submitted. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The ten-year market exclusivity in the European Union may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, MA may be granted to a similar product for the same indication at any time if (1) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (2) the applicant consents to a second orphan medicinal product application; or (3) the applicant cannot supply enough orphan medicinal product.

Pediatrics Development

In the EEA, MAA for new medicinal products have to include the results of studies conducted in the pediatric population, in compliance with a PIP agreed with the EMA's Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained in all Member States of the EU and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity is granted.

Post-approval Requirements

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KNSA · 10-K · period ended 2020-12-31

ITEM 1.BUSINESS.

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KNSA · 10-K · period ended 2020-12-31

ITEM 1.BUSINESS.

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