Kiniksa Pharmaceuticals International, plc 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021. In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. ​ Management’s Report on Internal Control over Financial Reporting for the Fiscal Year Ended December 31, 2021. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. ​ Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. ​ Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective. ​ Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ​ ​ ITEM 9B. OTHER INFORMATION. Not applicable. ​ ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. ​ ​ 137 Table of Contents ​ PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Except to the extent provided below, the information required to be disclosed by this Item will be set forth in our proxy statement for our 2022 Annual Meeting to be filed with the SEC within 120 days of December 31, 2021, and is incorporated into this Annual Report by reference. ​ We have adopted a written code of business conduct and ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. Our code of business conduct and ethics is available in the “Investors” section of our website at www.kiniksa.com under “Corporate Governance”. We intend to post on our website all disclosures that are required by law or the Nasdaq rules concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report. ​ ITEM 11. EXECUTIVE COMPENSATION. The information required to be disclosed by this Item will be set forth in our proxy statement for our 2022 Annual Meeting to be filed with the SEC within 120 days of December 31, 2021, and is incorporated into this Annual Report by reference. ​ ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS. The information required to be disclosed by this Item will be set forth in our proxy statement for our 2022 Annual Meeting to be filed with the SEC within 120 days of December 31, 2021, and is incorporated into this Annual Report by reference. ​ ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required to be disclosed by this Item will be set forth in our proxy statement for our 2022 Annual Meeting to be filed with the SEC within 120 days of December 31, 2021, and is incorporated into this Annual Report by reference. ​ ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required to be disclosed by this Item will be set forth in our proxy statement for our 2022 Annual Meeting to be filed with the SEC within 120 days of December 31, 2021, and is incorporated into this Annual Report by reference. ​ 138 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a)(1) Financial Statements. See the “Index to Consolidated Financial Statements” on page F-1 below for the list of financial statements filed as part of this report. (a)(2) Financial Statement Schedules. All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth below beginning on page F-1. (a)(3) Exhibits. See Exhibit Index. ​ 139 Table of Contents EXHIBIT INDEX ​ ​ ​ ​ Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed/ Furnished Herewith ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3.1 ​ Memorandum of Association of Kiniksa Pharmaceuticals, Ltd. ​ S-1 ​ 333-224488 ​ 3.1 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3.2 ​ Amended and Restated Bye-Laws of Kiniksa Pharmaceuticals, Ltd. ​ 8-K ​ 001-38492 ​ 3.1 ​ 5/29/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4.1 ​ Specimen Share Certificate evidencing the Class A common shares ​ S-1/A ​ 333-224488 ​ 4.1 ​ 5/14/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4.2 ​ Second Amended and Restated Investors’ Rights Agreement, dated as of February 9, 2018 ​ S-1 ​ 333-224488 ​ 4.2 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4.3 ​ Description of Kiniksa Pharmaceuticals, Ltd. Securities ​ 10-K ​ 001-38492 ​ 4.3 ​ 3/5/20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.1# ​ Amended and Restated Employment Agreement, dated as of May 29, 2018, by and between Kiniksa Pharmaceuticals Corp. and Sanj K. Patel ​ 10-Q ​ 001-38492 ​ 10.7 ​ 8/6/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.2# ​ Amended and Restated Employment Agreement, dated as of May 29, 2018, by and between Kiniksa Pharmaceuticals Corp. and John F. Paolini ​ 10-Q ​ 001-38492 ​ 10.9 ​ 8/6/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.3† ​ Asset Purchase Agreement, dated September 7, 2016, by and between the Registrant and Biogen MA Inc., as amended ​ S-1 ​ 333-224488 ​ 10.6 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.4† ​ License Agreement, dated September 25, 2017, by and between the Registrant and Regeneron Pharmaceuticals, Inc. ​ S-1 ​ 333-224488 ​ 10.7 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.5† ​ License Agreement, dated as of December 21, 2017, by and between the Registrant and MedImmune, Limited ​ S-1 ​ 333-224488 ​ 10.8 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.6† ​ Amendment No. 1 to the License Agreement, effective as of July 9, 2020, by and between Kiniksa Pharmaceuticals, Ltd. and MedImmune Limited ​ 8-K ​ 001-38492 ​ 10.1 ​ 7/15/20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.7 ​ Clinical Supply Agreement, dated as of September 27, 2017, by and between the Registrant and Regeneron Pharmaceuticals, Inc. ​ S-1 ​ 333-224488 ​ 10.9 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.8 ​ Sublease Agreement, dated as of March 13, 2018, by and between Kiniksa Pharmaceuticals Corp. and Shire Human Genetic Therapies, Inc. ​ S-1 ​ 333-224488 ​ 10.10 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.9 ​ First and Second Amendment to Sublease Agreement, dated as of June 26, 2018 and July 17, 2018, respectively, by and between Kiniksa Pharmaceuticals Corp. and Shire Human Genetic Therapies, Inc. ​ 10-Q ​ 001-38492 ​ 10.10 ​ 8/6/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 140 Table of Contents 10.10 ​ Third Amendment to Sublease Agreement, dated as of November 7, 2018, by and between Kiniksa Pharmaceuticals Corp. and Shire Human Genetic Therapies, Inc. ​ 8-K ​ 001-38492 ​ 10.1 ​ 11/13/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.11 ​ Recognition and Attornment Agreement and Amendment of Sublease by and between Kiniksa Pharmaceuticals Corp. and 92 Hayden Avenue Trust dated as of November 6, 2020 ​ 8-K ​ 001-38492 ​ 10.1 ​ 11/10/20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.12 ​ Form of Indemnification Agreement for Non-Fund-Designated Directors ​ S-1 ​ 333-224488 ​ 10.11 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.13 ​ Form of Indemnification Agreement for Fund-Designated Directors ​ S-1 ​ 333-224488 ​ 10.12 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.14 ​ Form of Indemnification Agreement for Officers ​ S-1 ​ 333-224488 ​ 10.13 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.15# ​ 2015 Equity Incentive Plan, as amended, and form of share option grant notice and option agreement thereunder ​ S-1 ​ 333-224488 ​ 10.1 ​ 4/27/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.16# ​ 2018 Incentive Award Plan, and the form of share option grant notice and option agreement, form of restricted share grant notice and restricted share agreement, and form of restricted share unit grant notice and restricted share unit agreement thereunder ​ 10-Q ​ 001-38492 ​ 10.3 ​ 5/4/20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.17# ​ 2018 Incentive Award Plan; Sub-Plan for UK Employees, and the form of share option grant notice for UK participants ​ S-1 ​ 333-229394 ​ 10.23 ​ 1/28/19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.18# ​ Form of Restricted Share Unit Grant Notice and Restricted Share Unit Agreement Thereunder for UK Participants under the 2018 Incentive Award plan; Sub-Plan for UK Employees ​ S-8 ​ 333-237589 ​ 99.3 ​ 4/7/20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.19# ​ 2018 Incentive Award Plan forms of share option grant notice and share option agreement for German participants, restricted share grant notice and restricted share agreement for German participants, and restricted share unit grant notice and restricted share unit agreement for German participants ​ 10-K ​ 001-38492 ​ 10.27 ​ 3/12/19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.20# ​ 2018 Employee Share Purchase Plan ​ S-1/A ​ 333-224488 ​ 10.14 ​ 5/14/18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.21# ​ Offering Document under the 2018 Employee Share Purchase Plan (effective July 1, 2019) ​ 10-K ​ 001-38492 ​ 10.22 ​ 2/25/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.22# ​ Offering Document under the 2018 Employee Share Purchase Plan (effective January 1, 2021) ​ 10-K ​ 001-38492 ​ 10.23 ​ 2/25/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.23†# ​ Kiniksa Pharmaceuticals, Ltd. Rilonacept Long-Term Incentive Plan ​ 8-K ​ 001-38492 ​ 10.1 ​ 12/16/19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.24# ​ Form of U.S. Performance Restricted Share Unit and Performance Cash Award Grant Notice and Agreement under the Rilonacept Long-Term Incentive Plan ​ 8-K ​ 001-38492 ​ 10.2 ​ 12/16/19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.25# ​ Form of U.S. Restricted Share Unit Grant Notice and Agreement under the Rilonacept Long-Term Incentive Plan ​ 8-K ​ 001-38492 ​ 10.3 ​ 12/16/19 ​ ​ 141 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.26# ​ Forms of Performance Restricted Share Unit and Performance Cash Award Grant Notice and Performance Restricted Share Unit and Performance Cash Award Agreement thereunder and Restricted Share Unit Grant Notice and Restricted Share Unit Agreement thereunder for UK participants and German participants under the Rilonacept Long-Term Incentive Plan ​ S-8 ​ 333-237589 ​ 99.8 ​ 4/7/2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.27# ​ Non-Employee Director Compensation Program ​ 10-Q ​ 001-38492 ​ 10.4 ​ 5/6/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.28# ​ Restricted Share Agreement, dated as of September 16, 2015, by and between the Registrant and Sanj K. Patel ​ S-1 ​ 333-229394 ​ 10.25 ​ 1/28/19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.29†† ​ Commercial Supply Agreement, dated February 26, 2021, by and between Kiniksa Pharmaceuticals (UK) Ltd. and Regeneron Pharmaceuticals, Inc. ​ 10-Q ​ 001-38492 ​ 10.1 ​ 5/6/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.30†† ​ Amendments Nos. 1 and 2 to the License Agreement, dated September 25, 2017, by and between Kiniksa Pharmaceuticals Ltd. and Regeneron Pharmaceuticals, Inc. ​ 10-Q ​ 001-38492 ​ 10.2 ​ 5/6/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.31# ​ Employment Agreement, effective as of April 1, 2021, by and between the Company and Mark Ragosa ​ 10-Q ​ 001-38492 ​ 10.3 ​ 5/6/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.32# ​ Amended and Restated Employment Agreement, effective as of January 3, 2022, by and between Eben Tessari and Kiniksa Pharmaceuticals Corp. ​ 8-K ​ 001-38492 ​ 10.1 ​ 1/3/2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.33# ​ Change in Control Agreement, effective as of January 3, 2022, by and between Michael Megna and Kiniksa Pharmaceuticals Corp. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.34†††# ​ Amended and Restated Employment Agreement, effective as of February 1, 2022, by and between Ross Moat and Kiniksa Pharmaceuticals (UK), Ltd. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.35†††# ​ Letter Agreement, dated as of February 1, 2022, by and between Ross Moat and Kiniksa Pharmaceuticals, Ltd. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.36# ​ Employment Agreement, effective as of April 1, 2021, by and between Arian Pano and Kiniksa Pharmaceuticals Corp. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.37†††# ​ Separation Agreement, effective as of February 3, 2022, by and between Arian Pano and Kiniksa Pharmaceuticals Corp. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.38†† ​ Exclusive License Agreement, dated as of November 1, 2013, by and between The Beth Israel Deaconess Medical Center and Primatope Therapeutics Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 21.1 ​ Subsidiaries of the Registrant ​ 10-K ​ 001-38492 ​ 21.1 ​ 2/25/2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23.1 ​ Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.1 ​ Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Office r ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 142 Table of Contents 31.2 ​ Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.1 ​ Section 1350 Certification of Chief Executive Officer ​ ​ ​ ​ ​ ​ ​ ​ ​ ** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.2 ​ Section 1350 Certification of Chief Financial Officer ​ ​ ​ ​ ​ ​ ​ ​ ​ ** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.INS ​ Inline XBRL Instance Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.SCH ​ Inline XBRL Taxonomy Extension Schema Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.DEF ​ Inline XBRL Extension Definition Linkbase Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.LAB ​ Inline XBRL Taxonomy Label Linkbase Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document ​ ​ ​ ​ ​ ​ ​ ​ ​ *** ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Filed herewith ** Furnished herewith *** Submitted electronically herewith # Indicates management contract or compensatory plan † Confidential treatments of certain provisions has been granted by the SEC pursuant to Rule 406 under the Securities Act of 1933, as amended †† Portions of the exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv) ††† Portions of the exhibit have been redacted in compliance with Regulation S-K Item 601(a)(6) ​ 143 Table of Contents ITEM 16. FORM 10-K SUMMARY None. ​ 144 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ KINIKSA PHARMACEUTICALS, LTD. ​ ​ ​ Date: February 24, 2022 By: /s/ Sanj K. Patel ​ ​ Sanj K. Patel ​ ​ Chief Executive Officer and Chairman of the Board of Directors ​ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. ​ ​ ​ Signature ​ Title ​ Date ​ ​ ​ ​ ​ /s/ Sanj K. Patel ​ Chief Executive Officer and Chairman of the Board of Directors (principal executive officer) ​ February 24, 2022 Sanj K. Patel ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Mark Ragosa ​ Chief Financial Officer (principal financial officer) ​ February 24, 2022 Mark Ragosa ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Michael R. Megna ​ Group VP, Finance and Chief Accounting Officer (principal accounting officer) ​ February 24, 2022 Michael R. Megna ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Felix J. Baker ​ Lead Independent Director ​ February 24, 2022 Felix J. Baker ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Stephen R. Biggar ​ Director ​ February 24, 2022 Stephen R. Biggar ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ G. Bradley Cole ​ Director ​ February 24, 2022 G. Bradley Cole ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Richard S. Levy ​ Director ​ February 24, 2022 Richard S. Levy ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Thomas R. Malley ​ Director ​ February 24, 2022 Thomas R. Malley ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Tracey L. McCain ​ Director ​ February 24, 2022 Tracey L. McCain ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Kimberly J. Popovits ​ Director ​ February 24, 2022 Kimberly J. Popovits ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Barry D. Quart ​ Director ​ February 24, 2022 Barry D. Quart ​ ​ ​ ​ ​ ​ ​ ​ 145 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) ​ F-2 Consolidated Balance Sheets ​ F-4 Consolidated Statements of Operations and Comprehensive Loss ​ F-5 Consolidated Statements of Shareholders’ Equity ​ F-6 Consolidated Statements of Cash Flows ​ F-7 Notes to Consolidated Financial Statements ​ F-8 ​ ​ ​ ​ F-1 Table of Contents ​ Report of Independent Registered Public Accounting Firm ​ To the Board of Directors and Shareholders of Kiniksa Pharmaceuticals, Ltd. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Kiniksa Pharmaceuticals, Ltd. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). ​ In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion ​ These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Emphasis of Matter ​ As discussed in Note 1 to the consolidated financial statements, the Company is dependent on its ability to fund operations through sales of Arcalyst and/or raise additional capital, as needed. Management’s evaluation of the events and conditions and Management’s plans in regards to this matter is also described in Note 1. ​ F-2 Table of Contents Critical Audit Matters ​ The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ Accrued Research and Development Costs ​ As described in Notes 2 and 9 to the consolidated financial statements, the Company has entered into various research and development contracts with companies both inside and outside of the United States. When billing terms under these contracts do not coincide with the timing of when the work is performed, management is required to make estimates of outstanding obligations to those third parties as of the end of the reporting period. Within accrued expenses, total accrued research and development expenses amounted to $25.0 million as of December 31, 2021, which include accruals for these estimated research and development obligations. Accrual estimates are based on a number of factors, including management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. ​ The principal considerations for our determination that performing procedures relating to accrued research and development costs is a critical audit matter are (i) the significant judgment by management in determining the accrued costs, which in turn led to (ii) significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence for these accrued costs and the factors related to management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts and communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced. ​ Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing management’s process for estimating accrued research and development costs, (ii) evaluating the appropriateness of the methodology used by management to determine the estimate, (iii) evaluating the reasonableness of the factors related to management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts and communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced by testing specific tasks and the associated cost incurred for services the Company has not yet been invoiced for or otherwise notified of the actual cost at period end, and (iv) testing the completeness and accuracy of the data inputs to the estimate, including total costs included within executed contracts and actual billed expenses under these contracts. ​ /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 24, 2022 ​ We have served as the Company's auditor since 2016. ​ ​ F-3 Table of Contents ​ ​ KINIKSA PHARMACEUTICALS, LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Assets ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 122,470 ​ $ 114,038 Short-term investments ​ ​ 59,731 ​ ​ 209,444 Restricted cash ​ ​ — ​ ​ 210 Accounts receivable, net ​ ​ 3,985 ​ ​ — Inventory ​ ​ 3,675 ​ ​ — Prepaid expenses and other current assets ​ 6,585 ​ 9,557 Total current assets ​ 196,446 ​ 333,249 Property and equipment, net ​ 2,834 ​ 4,051 Operating lease right-of-use assets ​ ​ 5,550 ​ ​ 6,566 Other long-term assets ​ ​ 8,720 ​ ​ 5,588 Intangible asset, net ​ ​ 19,250 ​ ​ — Deferred tax assets ​ — ​ 10 Total assets ​ $ 232,800 ​ $ 349,464 ​ ​ ​ ​ ​ ​ ​ Liabilities and Shareholders’ Equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 1,868 ​ $ 503 Accrued expenses ​ 38,031 ​ 29,199 Operating lease liabilities ​ ​ 3,381 ​ ​ 2,107 Other current liabilities ​ ​ 1,544 ​ ​ 37 Total current liabilities ​ 44,824 ​ 31,846 Non-current liabilities: ​ ​ Non-current operating lease liabilities ​ ​ 2,669 ​ ​ 4,878 Other long-term liabilities ​ 270 ​ ​ 805 Total liabilities ​ 47,763 ​ 37,529 Commitments and contingencies (Note 15) ​ ​ Shareholders’ equity: ​ ​ ​ ​ Class A common shares, par value of $ 0.000273235 per share; 34,059,725 shares and 31,777,420 shares issued and outstanding as of December 31, 2021 and 2020, respectively ​ 8 ​ 8 Class B common shares, par value of $ 0.000273235 per share; 1,813,457 shares and 2,355,458 shares issued and outstanding as of December 31, 2021 and 2020, respectively ​ 1 ​ 1 Class A1 common shares, $ 0.000273235 par value; 17,129,603 shares and 18,024,526 issued and outstanding as of December 31, 2021 and 2020, respectively ​ 5 ​ 5 Class B1 common shares, $ 0.000273235 par value; 16,057,618 shares issued and outstanding as of December 31, 2021 and 2020 ​ 4 ​ 4 Additional paid-in capital ​ 860,482 ​ 829,424 Accumulated other comprehensive loss ​ ​ ( 66 ) ​ ​ ( 34 ) Accumulated deficit ​ ( 675,397 ) ​ ( 517,473 ) Total shareholders’ equity ​ 185,037 ​ 311,935 Total liabilities and shareholders’ equity ​ $ 232,800 ​ $ 349,464 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-4 Table of Contents KINIKSA PHARMACEUTICALS, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2021 2020 2019 Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 38,544 ​ $ — ​ $ — Operating expenses: ​ ​ ​ ​ Cost of goods sold ​ ​ 9,100 ​ ​ — ​ ​ — Collaboration expenses ​ ​ 835 ​ ​ — ​ ​ — Research and development ​ ​ 99,297 ​ ​ 112,042 ​ ​ 135,001 Selling, general and administrative ​ 85,948 ​ ​ 45,321 ​ ​ 34,962 Total operating expenses ​ 195,180 ​ 157,363 ​ 169,963 Loss from operations ​ ( 156,636 ) ​ ( 157,363 ) ​ ( 169,963 ) Interest income ​ 97 ​ ​ 1,134 ​ ​ 6,049 Loss before (provision) benefit for income taxes ​ ( 156,539 ) ​ ( 156,229 ) ​ ( 163,914 ) (Provision) benefit for income taxes ​ ( 1,385 ) ​ ​ ( 5,152 ) ​ ​ 2,047 Net loss ​ $ ( 157,924 ) ​ $ ( 161,381 ) ​ $ ( 161,867 ) Net loss per share attributable to common shareholders—basic and diluted ​ $ ( 2.30 ) ​ $ ( 2.61 ) ​ $ ( 2.99 ) Weighted average common shares outstanding—basic and diluted ​ 68,576,810 ​ ​ 61,842,722 ​ ​ 54,049,477 Comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 157,924 ) ​ $ ( 161,381 ) ​ $ ( 161,867 ) Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized gain (loss) on short-term investments and currency translation adjustments, net of tax ​ ​ ( 32 ) ​ ​ ( 67 ) ​ ​ 37 Total other comprehensive income (loss) ​ ​ ( 32 ) ​ ​ ( 67 ) ​ ​ 37 Total comprehensive loss ​ $ ( 157,956 ) ​ $ ( 161,448 ) ​ $ ( 161,830 ) ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-5 Table of Contents KINIKSA PHARMACEUTICALS, LTD. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Additional ​ Accumulated ​ ​ ​ ​ Total ​ ​ ​ (Class A, B, A1 and B1) ​ Paid-In ​ Other Comprehensive ​ Accumulated ​ Shareholders' ​ Shares Amount Capital Income (Loss) Deficit Equity Balances at December 31, 2018 ​ 49,489,647 ​ ​ 13 ​ ​ 473,483 ​ ​ ( 4 ) ​ ​ ( 194,225 ) ​ ​ 279,267 Issuance of Class A common shares upon completion of follow-on offering, inclusive of the over-allotment option exercise, net of underwriting discounts and commissions and offering costs ​ ​ 2,816,110 ​ ​ 2 ​ ​ 48,474 ​ ​ — ​ ​ — ​ ​ 48,476 Issuance of Class A1 common shares upon completion of private placement, net of underwriting discounts and commissions and offering costs ​ ​ 2,000,000 ​ ​ — ​ ​ 34,511 ​ ​ — ​ ​ — ​ ​ 34,511 Class A common shares issued or to be issued in connection with the acquisition of all issued and outstanding equity securities of Primatope Therapeutics, Inc. ​ ​ 337,008 ​ ​ — ​ ​ 7,000 ​ ​ — ​ ​ — ​ ​ 7,000 Class A common shares issued or to be issued in connection with a milestone payment due to Primatope Therapeutics, Inc. ​ ​ 94,284 ​ ​ — ​ ​ 1,800 ​ ​ — ​ ​ — ​ ​ 1,800 Issuance of Class A common shares under incentive award plans and employee share purchase plan ​ ​ 200,579 ​ ​ — ​ ​ 1,119 ​ ​ — ​ ​ — ​ ​ 1,119 Share-based compensation expense ​ ​ — ​ ​ — ​ ​ 15,080 ​ ​ — ​ ​ — ​ ​ 15,080 Unrealized gain on short-term investments and currency translation adjustments ​ ​ — ​ ​ — ​ ​ — ​ ​ 37 ​ ​ — ​ ​ 37 Net loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 161,867 ) ​ ​ ( 161,867 ) Balances at December 31, 2019 ​ ​ 54,937,628 ​ ​ 15 ​ ​ 581,467 ​ ​ 33 ​ ​ ( 356,092 ) ​ ​ 225,423 Issuance of Class A common shares upon completion of follow-on offerings, inclusive of the over-allotment option exercise, net of underwriting discounts and commissions and other offering costs ​ ​ 8,712,381 ​ ​ 2 ​ ​ 164,586 ​ ​ — ​ ​ — ​ ​ 164,588 Issuance of Class A1 common shares upon completion of private placements, net of placement agent fees ​ ​ 3,028,572 ​ ​ 1 ​ ​ 55,944 ​ ​ — ​ ​ — ​ ​ 55,945 Issuance of Class A common shares in connection with the release of escrow from the acquisition of all issued and outstanding equity securities of Primatope Therapeutics, Inc. ​ ​ 76,103 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of Class A common shares under incentive award plans and employee share purchase plan ​ ​ 1,460,338 ​ ​ — ​ ​ 6,552 ​ ​ — ​ ​ — ​ ​ 6,552 Share-based compensation expense ​ ​ — ​ ​ — ​ ​ 20,875 ​ ​ — ​ ​ — ​ ​ 20,875 Unrealized loss on short-term investments and currency translation adjustments ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 67 ) ​ ​ — ​ ​ ( 67 ) Net loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 161,381 ) ​ ​ ( 161,381 ) Balances at December 31, 2020 ​ ​ 68,215,022 ​ $ 18 ​ $ 829,424 ​ $ ( 34 ) ​ $ ( 517,473 ) ​ $ 311,935 Issuance of Class A common shares under incentive award plans and employee share purchase plan ​ ​ 845,381 ​ ​ — ​ ​ 5,885 ​ ​ — ​ ​ — ​ ​ 5,885 Share-based compensation expense ​ ​ — ​ ​ — ​ ​ 25,173 ​ ​ — ​ ​ — ​ ​ 25,173 Unrealized loss on short-term investments and currency translation adjustments ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 32 ) ​ ​ — ​ ​ ( 32 ) Net loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 157,924 ) ​ ​ ( 157,924 ) Balances at December 31, 2021 ​ ​ 69,060,403 ​ $ 18 ​ $ 860,482 ​ $ ( 66 ) ​ $ ( 675,397 ) ​ $ 185,037 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-6 Table of Contents KINIKSA PHARMACEUTICALS, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2021 ​ 2020 ​ 2019 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 157,924 ) ​ $ ( 161,381 ) ​ $ ( 161,867 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization expense ​ 2,355 ​ ​ 2,405 ​ ​ 2,068 Share-based compensation expense ​ 25,173 ​ ​ 20,875 ​ ​ 15,080 Class A common shares issued as consideration for Primatope, including milestone payments ​ ​ — ​ ​ — ​ ​ 8,800 Loss on disposal of property and equipment ​ ​ 103 ​ ​ — ​ ​ 21 Non-cash lease expense ​ 2,631 ​ ​ 1,400 ​ ​ 1,211 Amortization (accretion) of discounts on short-term investments ​ ​ 664 ​ ​ 123 ​ ​ ( 3,501 ) Deferred income taxes ​ 11 ​ ​ 4,361 ​ ​ ( 3,156 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other current assets ​ 2,941 ​ ​ ( 1,334 ) ​ ​ ( 1,020 ) Accounts receivable, net ​ ​ ( 3,910 ) ​ ​ — ​ ​ — Inventory ​ ​ ( 3,675 ) ​ ​ — ​ ​ — Other long-term assets ​ ​ ( 3,284 ) ​ ​ ( 5,588 ) ​ ​ — Accounts payable ​ 1,366 ​ ​ ( 4,969 ) ​ ​ ( 4,705 ) Accrued expenses and other current liabilities ​ 10,339 ​ ​ 8,797 ​ ​ 4,638 Accrued milestones ​ — ​ ​ — ​ ​ ( 15,000 ) Operating lease liabilities ​ ​ ( 2,553 ) ​ ​ ( 1,699 ) ​ ​ ( 1,264 ) Other long-term liabilities ​ ( 535 ) ​ ​ 478 ​ ​ 326 Net cash used in operating activities ​ ( 126,298 ) ​ ​ ( 136,532 ) ​ ( 158,369 ) Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 415 ) ​ ​ ( 283 ) ​ ​ ( 3,203 ) Purchases of short-term investments ​ ​ ( 157,250 ) ​ ​ ( 430,211 ) ​ ​ ( 488,773 ) Proceeds from the maturities of short-term investments ​ ​ 306,300 ​ ​ 407,050 ​ ​ 541,190 Intangible assets acquired ​ ​ ( 20,000 ) ​ ​ — ​ ​ — Net cash provided by (used in) investing activities ​ 128,635 ​ ​ ( 23,444 ) ​ 49,214 Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Proceeds from issuance of Class A common shares from follow-on offerings, net of underwriting discounts and commissions, inclusive of the over-allotment option exercise ​ ​ — ​ ​ 165,725 ​ ​ 48,595 Proceeds from issuance of Class A1 common shares from private placements, net of placement agent fees ​ ​ — ​ ​ 55,944 ​ ​ 34,511 Payments of offering costs ​ — ​ ​ ( 1,136 ) ​ ​ ( 118 ) Proceeds from issuance of Class A common shares under incentive award plans and employee share purchase plan ​ 5,885 ​ ​ 6,553 ​ ​ 1,119 Net cash provided by financing activities ​ 5,885 ​ ​ 227,086 ​ 84,107 Net increase (decrease) in cash, cash equivalents and restricted cash ​ 8,222 ​ ​ 67,110 ​ ( 25,048 ) Cash, cash equivalents and restricted cash at beginning of period ​ 114,248 ​ ​ 47,138 ​ 72,186 Cash, cash equivalents and restricted cash at end of period ​ $ 122,470 ​ $ 114,248 ​ $ 47,138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for income taxes ​ $ 1,279 ​ $ 482 ​ $ 1,724 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ Right-of-use asset obtained in exchange for operating lease obligation ​ $ 1,619 ​ $ 6,039 ​ $ — Property and equipment included in accrued expenses and accounts payable ​ $ — ​ $ — ​ $ 222 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ F-7 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share amounts) ​ 1. Nature of the Business and Basis of Presentation Kiniksa Pharmaceuticals, Ltd. (the “Company”) is a global biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need. The Company was incorporated in July 2015 as a Bermuda exempted company. The Company’s portfolio of assets is based on strong biologic rationale or validated mechanisms, target underserved conditions and offer the potential for differentiation. The Company is subject to risks and uncertainties common to early, commercial stage companies in the biopharmaceutical industry and global health, societal, economic and market conditions, including from the impact from the coronavirus disease 2019 (“COVID-19”) pandemic, the Company’s limited experience obtaining regulatory approvals, the potential failure by the Company to successfully complete research and development of its current or future product candidates, potential inability to adequately protect its technology, that any current or future product candidates will obtain necessary government regulatory approval, that ARCALYST will continue to be commercially viable, that any of the Company’s current or future product candidates, if approved, will be commercially viable, potential competition, and the Company’s dependence on third parties. Risks and Uncertainties Related to COVID-19 In addition to risks and uncertainties common to the Company’s industry, the Company is subject to global societal, healthcare, economic and market conditions, including from the impact of the COVID-19 pandemic. The COVID-19 pandemic, and measures undertaken in response to the pandemic, or the easing of any of such measures, may cause significant disruptions in the Company’s business or operations as well as in the business and operations of third parties with whom the Company conducts business or otherwise engages now or in the future. The COVID-19 pandemic may also adversely impact the Company’s preclinical studies and clinical trials, which could impede, delay, limit or prevent the clinical development of the Company’s product candidates and ultimately lead to the delay or denial of regulatory approval of its product candidates, which would materially adversely affect the Company’s business and operations, including its ability to generate revenue. Moreover, the COVID-19 pandemic is impacting the global economy, and the U.S. economy in particular, with the potential for an economic downturn to be severe and prolonged. A severe or prolonged economic downturn could result in continued disruptions in the financial markets, which could adversely impact the Company’s ability to raise additional capital when needed or on acceptable terms, if at all. ​ In response to the COVID-19 pandemic and measures introduced by federal and state governments in the United States, the Company implemented workplace protocols in the jurisdictions where it has facilities. While the majority of the Company’s employees are able to carry out their responsibilities working outside of the Company’s physical locations, for the Company’s essential workers and those choosing to return to the Company’s offices to carry out their responsibilities, the Company implemented additional safety measures, including occupancy limits, restricting business travel, providing and requiring the use of personal protective equipment, self-screening prior to accessing the Company’s facilities, among other things. While the Company continuously looks to identify business-critical activities and to develop contingencies and mitigation strategies for those activities to potentially minimize the impact of the COVID-19 pandemic on its business and operations, there can be no assurance that it will be able to identify all such activities or that any identified contingencies and mitigation strategies will be effective. Further, the COVID-19 pandemic, and measures undertaken in response to the pandemic continue to rapidly evolve. There is uncertainty relating to the potential effect of the pandemic on the Company’s business and operations. The extent of the impact on the Company’s business and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate spread of the disease, duration of the pandemic, business and travel restrictions and social distancing measures, and the effectiveness of these and other actions taken to contain and treat the disease as well as the impact of the easement of any such restrictions, measures and actions. ​ F-8 ​ Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, Kiniksa Pharmaceuticals Corp. (“Kiniksa US”), Primatope Therapeutics, Inc. (“Primatope”) and Kiniksa Pharmaceuticals (UK), Ltd. (“Kiniksa UK”) as well as the subsidiaries of Kiniksa UK, Kiniksa Pharmaceuticals (Germany) GmbH (“Kiniksa Germany”), Kiniksa Pharmaceuticals (France) SARL (“Kiniksa France”), and Kiniksa Pharmaceuticals GmbH (“Kiniksa Switzerland”), after elimination of all significant intercompany accounts and transactions. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the recognition of revenue, the capitalization of inventory, the accrual for research and development expenses and the valuation of share-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Reporting and Functional Currency The financial results of the Company's global activities are reported in U.S. dollars (“USD”) and its foreign subsidiaries other than Kiniksa UK generally utilize their respective local currency to be their functional currency. Transactions in other currencies are recorded in the functional currency at the rate of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are re-measured into the functional currency at the rate of exchange in effect at the balance sheet date. Exchange rate gains and losses arising from re-measurement of foreign currency-denominated monetary assets and liabilities are included in income or losses in the period in which they occur. For the Company’s foreign subsidiaries where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into USD at end-of-period exchange rates and the resulting translation adjustments are reported as a component of accumulated other comprehensive gain (loss) within shareholders' equity. Follow-on Offerings and Private Placements On February 4, 2019, the Company completed a follow-on offering of 2,654,984 Class A common shares at a public offering price of $ 18.26 and a concurrent private placement of 2,000,000 Class A1 common shares at an offering price of $ 18.26 per share for aggregate gross proceeds of $ 85,000 . In addition, on March 1, 2019, the Company completed the sale of 161,126 Class A common shares to the underwriters of the follow-on offering following the exercise in part of their over-allotment option to purchase additional shares at a public offering price of $ 18.26 per share for gross proceeds of $ 2,942 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement, inclusive of the over-allotment option exercise, was $ 82,988 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ On May 18, 2020, the Company completed a follow-on offering of 2,760,000 Class A common shares, inclusive of the exercise of the underwriters’ overallotment option at a public offering price of $ 18.25 and a concurrent private placement of 1,600,000 Class A1 common shares at an offering price of $ 18.25 per share for aggregate gross F-9 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ proceeds of $ 79,570 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement, inclusive of the over-allotment option exercise, was $ 74,495 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ On July 24, 2020, the Company completed a follow-on offering of 5,952,381 Class A common shares, at a public offering price of $ 21.00 and a concurrent private placement of 1,428,572 Class A1 common shares at an offering price of $ 21.00 per share for aggregate gross proceeds of $ 155,000 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement was $ 146,037 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ Liquidity The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. As of December 31, 2021, the Company had an accumulated deficit of $ 675,397 . During the year ended December 31, 2021, the Company incurred a net loss of $ 157,924 and used $ 126,298 of cash in operating activities. The Company expects to continue to generate operating losses and cash used in operations for the foreseeable future. As of December 31, 2021, the Company had cash, cash equivalents and short-term investments of $ 182,201 . Based on its current operating plan, the Company expects that its cash, cash equivalents and short-term investments will be sufficient to fund its operations and capital expenditure requirements for at least twelve months from the issuance date of these consolidated financial statements. The future viability of the Company beyond that point is dependent on its ability to fund its operations through sales of ARCALYST and/or raise additional capital, as needed. If the Company is unable to grow sales of ARCALYST in future periods, the Company would need to seek additional financing through public or private securities offerings, debt financings, government funding or grants, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its commercialization efforts, research and development programs for product candidates or product portfolio expansion, which could adversely affect its business prospects, or the Company may be unable to continue operations. ​ 2. Summary of Significant Accounting Policies Cash and Cash Equivalents The Company classifies deposits in banks, money market funds and cash invested temporarily in various instruments with maturities of three months or less at the time of purchase as cash and cash equivalents. At December 31, 2021 and 2020 cash and cash equivalents consisted principally of U.S. Treasury notes, amounts held in money market accounts and cash on deposit at commercial banks. Short-Term Investments The Company generally invests its excess cash in money market funds and short-term investments in U.S. Treasury notes. Such investments which are included in short-term investments on the Company's consolidated balance sheets are considered available-for-sale (“AFS”) debt securities and are reported at fair value with unrealized gains and losses recognized in accumulated other comprehensive loss in stockholders’ equity, net of related tax effects. Realized gains and losses, if any, on short-term investments are included in interest income. F-10 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ If the AFS debt security’s fair value declines below its amortized cost the Company considers all available evidence to evaluate the extent to which the decline is due to credit-related factors or noncredit-related factors. If the decline is due to noncredit-related factors then no credit loss is recorded and the unrealized loss is recognized in accumulated other comprehensive loss in stockholders’ equity, net of the related tax effects. If the decline is considered to be a credit-related impairment, it is recognized as an allowance on the consolidated balance sheet with a corresponding charge to the statement of operations. The credit allowance is limited to the difference between the fair value and the amortized cost basis. No credit-related allowances or impairments have been recognized on the Company’s investments in available-for-sale debt securities. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and short-term investments. At December 31, 2021 and 2020, substantially all of the Company’s cash, cash equivalents and short-term investments were held at two financial institutions. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash, cash equivalents and short-term investments and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company is also subject to credit risk from the accounts receivable related to product revenue. Trade accounts receivable are recorded net of allowances for cash discounts associated with prompt payments from customers. All trade accounts receivable arise from product revenue in the United States due from the Company’s third party logistics provider. There were no material write-offs charged against the allowance for the year ended December 31, 2021. Restricted Cash In conjunction with the Company’s lease agreement entered into in March 2018, the Company maintained a letter of credit for the benefit of the landlord. The lease expired in August 2021 and the restricted cash was released to operating cash in September 2021. As of December 31, 2021, there was no balance in restricted cash. As of December 31, 2020, the underlying cash balance of $ 210 securing this letter of credit, was classified as current, in its consolidated balance sheet. Fair Value Measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ● Level 1—Quoted prices in active markets for identical assets or liabilities. ● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. F-11 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ ● Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The Company’s restricted cash, which was held in a money market fund, carried at fair value, determined based on Level 1 inputs in the fair value hierarchy described above (see Note 3). The Company’s cash equivalents and short-term investments, consisting of money market accounts and U.S. Treasury notes, are carried at fair value, determined based on Level 1 and 2 inputs in the fair value hierarchy described above (see Note 3). The carrying values of the Company’s prepaid expenses and other current assets, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. Leases At the inception of an arrangement, the Company determines whether the arrangement is or contains a “lease” as defined by ASC 842. A lease is an arrangement, or part of an arrangement, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company determines if the arrangement conveys the right to control the use of an identified asset for a period of time. It assesses throughout the period of use whether the Company has both of the following (1) the right to obtain substantially all of the economic benefits from use of the identified asset and (2) the right to direct the use of the identified asset. This determination is reassessed if the terms of the arrangement are changed. Leases are classified as operating or finance leases based on the terms of the lease agreement and certain characteristics of the identified asset. Right-of-use (“ROU”) assets and lease liabilities are recognized at lease commencement date based on the present value of the minimum future lease payments. Most leases with a term greater than one year are recognized on the balance sheet as ROU assets with corresponding lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize leases with a term of one year or less on its balance sheet, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating leases, ROU assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the ROU assets may be required for items such as incentives received. The interest rate implicit in lease arrangements is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In accordance with the guidance in ASU 2016-02, components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.); then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the arrangement consideration to the lease component only. The lease component results in an operating ROU asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense. Property and Equipment Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from F-12 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ the consolidated balance sheet and any resulting gains or losses are included in the consolidated statement of operations and comprehensive loss in the period of disposal. The expected useful lives of the respective assets are as follows: ​ ​ ​ ​ ​ ​ Estimated Useful Life Computer hardware and software ​ 3 - 5 years Laboratory equipment ​ 5 years Furniture, fixtures and vehicles ​ 5 - 7 years Leasehold improvements ​ Shorter of estimated useful life or lease term ​ Inventory Inventories are stated at the lower of cost or estimated net realizable value with cost based on the first-in first-out method. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified and labeled for use in clinical trials as the products are required to be re-labeled for alternative uses. Prior to the regulatory approval of its drug candidates, the Company incurs expenses for the manufacture of product candidate supplies to support clinical development that could potentially be available to support the commercial launch of those therapeutics. Until the date at which regulatory approval has been received or is otherwise considered probable, the Company records all such costs as research and development expenses. The Company performs an assessment of the recoverability of capitalized inventories during each reporting period and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of sales in the Company’s consolidated statements of operations and comprehensive loss. The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional writedowns of inventory may be required. ​ The vials that will ultimately be distributed free of charge under our patient assistance program are recognized as selling expense when they are labeled as free goods. ​ Revenue Recognition ​ ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied. ​ The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery of the product to the customer. ​ ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. The Company did not have any contract assets or liabilities as of December 31, 2021 and 2020. F-13 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ ​ Product Revenue, Net Following the FDA approval of ARCALYST on March 18, 2021, the Company began generating product revenue from sales of ARCALYST in April 2021. ARCALYST is sold through a third party logistics provider that distributes primarily through a network of authorized specialty pharmacies and specialty distributors (“customer”), which deliver the medication to patients by mail. The Company’s payment terms are between 30 to 35 days. ​ Net revenue from product sales is recognized at the transaction price when the specialty pharmacy or specialty distributors obtains control of the Company’s products, which occurs at a point in time, typically upon shipment of the product from the third party logistics provider. ​ The Company’s net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees. These adjustments represent variable consideration under ASC 606 and are estimated using the expected value method and are recorded when revenue is recognized on the sale of the product. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products. ​ Discounts and Allowances ​ Revenue from product sales are recorded at the transaction price, which includes estimates for discounts and allowances and includes cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees. These reserves are classified as reductions of accounts receivable (if the amount is payable to the Customer and right of offset exists) or a current liability (if the right of offset does not exist, the amount is payable to a third party, or is related to a future return). These allowances are established by management as its best estimate based on historical experience and data points available and are adjusted to reflect known changes in the factors that impact such reserves. Allowances for customer credits, chargebacks, rebates, data fees for services, returns, and discounts are established based on contractual terms with customers and analyses of historical usage of these items. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. The nature of the allowances and accruals requiring estimates, and the specific considerations the Company uses in estimating these amounts are as follows: ​ Government Chargebacks and Rebates ​ Government and other rebates and chargebacks include amounts payable to payors and healthcare providers under various programs and by payor and individual payor plans. Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payor and individual payor plans. For qualified programs that can purchase products through wholesalers or other distributors at a lower contractual price, the wholesalers or distributors charge back to the Company the difference between their acquisition cost and the lower contractual price. ​ Rebates and chargebacks are estimated primarily based on product sales, and expected payor mix and discount rates, which require significant estimates and judgment. Additionally, in developing the estimates the Company considers: historical and estimated payor mix; statutory discount requirements and contractual terms; historical claims experience and processing time lags; estimated patient population; known market events or trends; market research; F-14 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ channel inventory data obtained from customers; and other pertinent internal or external information. The Company assesses and updates the estimates every quarter to reflect actual claims and other current information. ​ Government and other chargebacks are recognized as reduction of revenue upon the sale to the Customers. These items are payable to customers and other rebates that are payable to other third party payors and healthcare providers are classified as accrued expense liabilities. ​ Cash Discounts ​ The Company estimates cash discounts based on contractual terms and expectations regarding future customer payment patterns. ​ Specialty Pharmacy & Distributor Fees ​ Under the inventory management agreements with specialty pharmacies and distributors, the Company pays a fee primarily for compliance with certain contractually determined covenants such as the maintenance of agreed upon inventory levels. These specialty pharmacy and distributor fees are based on a contractually determined fixed percentage of sales. ​ The Company has contracted with certain specialty pharmacies to obtain transactional data related to the products in order to develop a better understanding of the selling channel as well as patient activity and utilization by the Medicaid program and other government agencies and managed care organizations. The Company pays a variable fee to the specialty pharmacies to provide the data. The Company also pay the specialty pharmacies a fee in exchange for providing distribution and inventory management services, including the provision of inventory management data to the Company. The Company estimates the fee for service accruals and allowances based on sales to each specialty pharmacy and the applicable contracted rate. ​ Sales Returns ​ Allowances are made for estimated sales returns by the customers and are recorded in the period the related revenue is recognized. The Company typically permit returns if the product is out of date or damaged during transition to the common carrier. The Company’s estimates of sales returns are based primarily on analysis of industry information reporting the return rates for similar products and contractual agreement terms. The Company also takes into consideration known or expected changes in the marketplace specific to ARCALYST. ​ Shipping and Handling ​ Shipping and handling activities are considered to be fulfillment activities and not considered to be a separate performance obligation. ​ Other Incentives ​ Other incentives include a co-pay assistance program for eligible patients with commercial insurance in the U.S. The co-pay assistance programs assist commercially insured patients who have and are intended to reduce each participating patient’s portion of the financial responsibility of the purchase price up to a specified dollar amount of assistance. ​ F-15 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Intangible Assets Upon FDA approval and commercial launch of ARCALYST in March 2021, the Company capitalized the $ 20,000 milestone payment to Regeneron for a specified regulatory milestone as a f inite-lived intangible asset. The intangible asset will be amortized on a straight-line basis over the life of the underlying intellectual property of 20 years . Amortization expense will be recorded as cost of goods sold in the Company’s consolidated statement of operations and comprehensive loss. Impairment of Long-Lived Assets The Company assesses the impairment of long-lived assets, including intangible assets and property and equipment, whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. When such events occur, the Company determines whether there has been an impairment in value by comparing the asset’s carrying value with its fair value, as measured by the anticipated undiscounted net cash flows of the asset. If an impairment in value exists, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through December 31, 2021 and there have been no events that triggered an impairment analysis. Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, share-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs of outside vendors engaged to conduct preclinical and clinical development activities and clinical trials as well as to manufacture clinical trial materials. Non-refundable prepayments determined to be used within one year for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Non-refundable prepayments or minimum balance requirements associated to clinical trials determined to not be used within one year are classified as other long term assets. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Milestone and other payments made to third parties with respect to in-process research and development, in accordance with the Company’s license, acquisition and other similar agreements are expensed when determined to be probable and estimable. Research Contract Costs and Accruals The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. The related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of the end of the reporting period. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company's estimates. The Company's historical accrual estimates have not been materially different from the actual costs. F-16 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Patent Costs The Company charges patent-related costs in connection with filing and prosecuting patent applications to operations as incurred as their realization is uncertain. These costs are classified as selling, general and administrative expenses. Segment Information The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on developing and delivering therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need. Share-Based Compensation The Company measures all share-based awards granted to employees and directors based on their fair value on the date of grant. The Company issues share-based awards with both service-based vesting conditions and performance-based vesting conditions. The Company recognizes compensation expense for awards with service conditions on a straight-line basis over the requisite service period. For awards with performance conditions, the Company recognizes compensation expense when the achievement of the performance milestone is probable and estimable through the vest date. For share-based awards granted to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally the period during which services are rendered by such consultants and non-employees until completed. The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient's payroll costs are classified or in which the award recipient's service payments are classified. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the award, the risk-free interest rate, and expected dividends (see Note 11). Prior to May 2018, the Company was a private company and, accordingly, lacks company-specific historical and implied volatility information for its shares. Therefore, it estimates its expected share price volatility based on the historical volatility of the Company and historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future. ​ The fair value of each restricted share unit award is based on the closing price of the Company’s Class A common shares on the date of grant. Restricted share unit awards with an associated performance condition are evaluated on a regular basis for probability of achievement to determine the timing of recording share-based compensation expense in the Company’s consolidated statements of operations and comprehensive loss. F-17 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Comprehensive Loss Comprehensive loss includes net loss as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders. For the years ended December 31, 2021, 2020 and 2019 the Company’s other comprehensive loss was comprised of unrealized gain (loss) on short-term investments and currency translation adjustments, net of tax. Net Loss per Share Basic net loss per share attributable to common shareholders is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common shareholders is computed by adjusting net loss attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common shareholders is computed by dividing the diluted net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding share options and unvested restricted share units are considered potential dilutive common shares. In periods in which the Company reports a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common shareholders for the years ended December 31, 2021, 2020 and 2019. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the (provision) benefit for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. ​ The Company is an exempted company incorporated under the laws of Bermuda. Under the current laws of Bermuda, income tax is not charged or levied on an exempted company’s income. As a result, the Company has no t recorded any income tax benefits from losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses. The Company’s wholly owned U.S. subsidiaries, Kiniksa US and Primatope, are subject to federal and state income taxes in the United States. The Company’s wholly owned subsidiary Kiniksa UK, and its wholly owned subsidiaries, Kiniksa Germany, Kiniksa France, and Kiniksa Switzerland, are subject to taxation in their respective countries. Certain of the Company’s subsidiaries, primarily Kiniksa US, operate under cost-plus arrangements. ​ The Company’s U.S. provision for income taxes relates to current tax expense associated with the taxable income in the United States of its wholly owned subsidiary, Kiniksa US, as well as the recognition of a valuation allowance. The current income tax expense is a result of the taxable income earned by Kiniksa US under its cost-plus arrangement offset in part by tax benefits from the U.S. federal and state research and development credits, the Foreign F-18 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Derived Intangible Income (“FDII”) deduction and share-based compensation taxable events. The Company has recorded an immaterial foreign provision for income taxes related to income in non-U.S. subsidiaries. ​ The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. In 2021, the Company recognized an uncertain tax position related to research and development credits (see Note 13). ​ Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”) . The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740 Income Taxes and clarifying existing guidance to facilitate consistent application. The Company adopted the standard on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements and related disclosures. 3. Fair Value of Financial Assets and Liabilities The following tables present information about the Company’s financial instruments measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ as of December 31, 2021 Using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Cash equivalents — money market funds ​ $ 94,324 ​ $ — ​ $ — ​ $ 94,324 Short-term investments — U.S. Treasury notes ​ ​ — ​ ​ 59,731 ​ ​ — ​ ​ 59,731 ​ ​ $ 94,324 ​ $ 59,731 ​ $ — ​ $ 154,055 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ as of December 31, 2020 Using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Restricted cash — money market funds ​ $ 210 ​ $ — ​ $ — ​ $ 210 Cash equivalents — money market funds ​ 22,942 ​ ​ — ​ ​ — ​ 22,942 Cash equivalents — U.S. Treasury notes ​ — ​ ​ 72,695 ​ ​ — ​ 72,695 Short-term investments — U.S. Treasury notes ​ ​ — ​ ​ 209,444 ​ ​ — ​ ​ 209,444 ​ ​ $ 23,152 ​ $ 282,139 ​ $ — ​ $ 305,291 ​ During the years ended December 31, 2021 and 2020 there were no transfers between Level 1, Level 2 and Level 3. The money market funds were valued using quoted prices in active markets, which represent a Level 1 measurement in the fair value hierarchy. The Company's cash equivalents and short-term investments as of December 31, 2021 and 2020 included U.S. Treasury notes, which are not traded on a daily basis and, therefore, represent a Level 2 measurement in the fair value hierarchy at each period end. ​ F-19 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Cash equivalents and short-term investments as of December 31, 2021 and 2020 consisted of U.S. Treasury notes which investments were each due within six months of such date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Credit ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ Losses ​ Value December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term investments — U.S. Treasury notes ​ $ 59,745 ​ $ 1 ​ $ ( 15 ) ​ $ — ​ $ 59,731 ​ ​ $ 59,745 ​ $ 1 ​ $ ( 15 ) ​ $ — ​ $ 59,731 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Credit ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ Losses ​ Value December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents — U.S. Treasury notes ​ $ 72,694 ​ $ 1 ​ $ — ​ $ — ​ $ 72,695 Short-term investments — U.S. Treasury notes ​ ​ 209,459 ​ ​ 4 ​ ​ ( 19 ) ​ ​ — ​ ​ 209,444 ​ ​ $ 282,153 ​ $ 5 ​ $ ( 19 ) ​ $ — ​ $ 282,139 ​ As of December 31, 2021, the Company held 11 securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position was $ 49,739 at December 31, 2021. As of December 31, 2020, the Company held 17 securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position was $ 107,753 at December 31, 2020. As of both December 31, 2021 and 2020 these securities were held by the Company in an unrealized loss position for less than 12 months. The Company determined that there was no material change in the credit risk of these securities. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of December 31, 2021 and 2020. ​ 4. Product Revenue, Net ARCALYST ​ Following the FDA approval of ARCALYST on March 18, 2021, the Company began generating product revenue from sales of ARCALYST in April 2021. As of December 31, 2020 the company did not have revenue. ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2021 Product Revenue, net ​ $ 38,544 ​ F-20 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractual ​ Government ​ ​ ​ ​ ​ ​ Adjustments ​ Rebates ​ Returns 1 ​ Total Balance at December 31, 2020 ​ $ — ​ $ — ​ $ — ​ $ — Current provisions relating to sales in the current year ​ ​ 2,219 ​ ​ 1,131 ​ ​ 327 ​ ​ 3,677 Adjustments relating to prior years ​ ​ — ​ ​ — ​ ​ — ​ ​ — Payments/returns relating to sales in the current year ​ ​ ( 1,704 ) ​ ​ ( 412 ) ​ ​ ( 226 ) ​ ​ ( 2,342 ) Payments/returns relating to sales in the prior years ​ ​ — ​ ​ — ​ ​ — ​ ​ — Balance at December 31, 2021 ​ $ 515 ​ $ 719 ​ $ 101 ​ $ 1,335 (1) Included in the return reserve, is a provision of $ 226 for a specific return associated with product that was damaged in transit. ​ Total revenue-related reserves as of December 31, 2021, included in our consolidated balance sheets, are summarized as follows: ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 Reduction of accounts receivable ​ $ ( 50 ) Components of other current liabilities ​ ​ 1,385 Total revenue-related reserves ​ $ 1,335 ​ placeholder ​ 5. Inventory During the year ended December 31, 2021, the Company commenced the capitalization of ARCALYST inventory in connection with receiving FDA approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older. During the year ended December 31, 2021, the Company identified and relabeled certain ARCALYST product previously acquired initially intended to support the clinical trials as inventory to be sold as commercial product classified as finished goods. The value of this inventory had previously been expensed to research and development costs and was sold at zero cost. As of December 31, 2021 the Company did not have any remaining zero cost inventory. As of December 31, 2020, the Company did not have commercial inventory. ​ Inventory consisted of the following: ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 Raw materials ​ $ — Work-in-process ​ — Finished Goods ​ ​ 3,675 ​ ​ $ 3,675 ​ ​ ​ ​ F-21 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ 6. Property and Equipment, Net Property and equipment, net consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Furniture, fixtures and vehicles ​ $ 62 ​ $ 62 Computer hardware and software ​ 341 ​ 349 Leasehold improvements ​ ​ 3,931 ​ ​ 3,667 Lab equipment ​ ​ 4,249 ​ ​ 4,602 Construction in progress ​ 166 ​ 101 Total property and equipment ​ ​ 8,749 ​ ​ 8,781 Less: Accumulated depreciation ​ ( 5,915 ) ​ ( 4,730 ) Total property and equipment, net ​ $ 2,834 ​ $ 4,051 ​ As of December 31, 2021, construction in progress is primarily comprised of fixtures related to commercial operations which the Company anticipates will be placed into service in 2022. ​ Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $ 1,455 , $ 2,405 and $ 2,068 , respectively. ​ 7. Leases Kiniksa US and Kiniksa UK leases office and laboratory space under operating leases. Additionally, Kiniksa US leases vehicles under an operating lease. The components of lease cost for the year ended December 31, 2021, 2020 and 2019 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2021 2020 ​ 2019 Operating lease cost ​ $ 2,748 ​ $ 1,578 ​ $ 1,443 Variable lease cost ​ ​ 287 ​ ​ 167 ​ ​ 152 Total lease cost ​ $ 3,035 ​ $ 1,745 ​ $ 1,595 ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 Weighted-average remaining lease term (years) ​ ​ 1.66 Weighted-average discount rate ​ ​ 5.62 % ​ F-22 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Maturities of operating leases liabilities were as follows: ​ ​ ​ ​ ​ As of December 31, ​ ​ ​ 2022 ​ $ 3,580 2023 ​ ​ 2,512 2024 ​ 242 2025 and thereafter ​ — Total future minimum lease payments ​ $ 6,334 Less imputed interest ​ ​ ( 284 ) Present value of lease liabilities ​ $ 6,050 ​ ​ 8. Intangible Assets Intangible assets, net of accumulated amortization, impairment charges and adjustments are summarized in the following table. As of December 31, 2020, the Company did not have intangible assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ Estimated life Cost Amortization Net Regulatory milestone ​ 20 years ​ $ 20,000 ​ $ 750 ​ $ 19,250 ​ ​ ​ ​ $ 20,000 ​ $ 750 ​ $ 19,250 ​ As of December 31, 2021 future amortization of intangible assets are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the years ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,000 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,000 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,000 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,000 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,000 ​ ​ 9. Accrued Expenses Accrued expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Accrued research and development expenses ​ $ 24,977 ​ $ 16,945 Accrued employee compensation and benefits ​ ​ 8,916 ​ ​ 7,704 Accrued legal, commercial and professional fees ​ 3,768 ​ 3,988 Other ​ 370 ​ 562 ​ ​ $ 38,031 ​ $ 29,199 ​ ​ 10. Common Shares On February 4, 2019, the Company completed a follow-on offering of 2,654,984 Class A common shares at a public offering price of $ 18.26 and a concurrent private placement of 2,000,000 Class A1 common shares at an offering F-23 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ price of $ 18.26 per share for aggregate gross proceeds of $ 85,000 . In addition, on March 1, 2019, the Company completed the sale of 161,126 Class A common shares to the underwriters of the follow-on offering following the exercise in part of their over-allotment option to purchase additional shares at a public offering price of $ 18.26 per share for gross proceeds of $ 2,942 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement, inclusive of the over-allotment option exercise, was $ 82,988 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ On May 18, 2020, the Company completed a follow-on offering of 2,760,000 Class A common shares, inclusive of the exercise of the underwriters’ overallotment option at a public offering price of $ 18.25 and a concurrent private placement of 1,600,000 Class A1 common shares at an offering price of $ 18.25 per share for aggregate gross proceeds of $ 79,570 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement, inclusive of the over-allotment option exercise, was $ 74,495 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ On July 24, 2020, the Company completed a follow-on offering of 5,952,381 Class A common shares, at a public offering price of $ 21.00 and a concurrent private placement of 1,428,572 Class A1 common shares at an offering price of $ 21.00 per share for aggregate gross proceeds of $ 155,000 . The aggregate net proceeds to the Company from the follow-on offering and concurrent private placement was $ 146,037 after deducting underwriting discounts and commissions, placement agent fees and other offering costs. ​ The rights of the holders of the Company’s Class A common shares, Class B common shares, Class A1 common shares and Class B1 common shares are identical, except with respect to voting, transferability and conversion, as described below. The Company has authorized 200,000,000 shares, at a par value of $ 0.000273235 as of December 31, 2021 and 2020. Voting Each Class A common share entitles the holder to one vote on all matters submitted to the shareholders for a vote. Each Class B common share entitles the holder to ten votes on all matters submitted to the shareholders for a vote. The holders of Class A and Class B common shares, voting together as a single class, are entitled to elect the directors of the Company. Holders of Class A1 common shares and Class B1 common shares have no voting rights. ​ Dividends The common shareholders are entitled to receive dividends, as may be declared by the Company’s board of directors. Through December 31, 2021, no cash dividends have been declared or paid. Conversion Each Class B common share shall automatically convert into one Class A common share upon certain transfers of such shares by the holder thereof (subject to certain exceptions). Each Class B common share is convertible, at the holder’s election into one Class A common share or one Class B1 common share. Each Class A1 common share is convertible into one Class A common share at the holder’s election (subject to certain exceptions). Each Class B1 common share shall automatically convert into one Class A common share upon certain transfers of such shares by the holder thereof (subject to certain exceptions). Each Class B1 common share is convertible into one Class A common share or one Class B common share at the holder’s election (subject to certain exceptions). There are no conversion rights associated with the Class A common shares. ​ ​ F-24 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ 11. Share-Based Compensation 2018 Incentive Award Plan In May 2018, the Company’s board of directors and shareholders approved the 2018 Incentive Award Plan (the “2018 Plan”), which became effective on May 23, 2018. The 2018 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted shares, dividend equivalents, restricted share units and other share- or cash- based awards. Upon the effectiveness of the 2018 Plan, the Company ceased granting awards under its 2015 Equity Incentive Plan (as amended, the “2015 Plan” together with the 2018 Plan, the “Plans”). A total of 4,466,500 Class A common shares were initially reserved for issuance under the 2018 Plan. The number of Class A common shares that may be issued under the 2018 Plan will automatically increase on each January 1, beginning in 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lesser of (1) 4 % of the Class A common shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (2) a smaller number of Class A common shares determined by the Company’s board of directors. In December 2021, the board of directors approved the automatic increase as of January 1, 2022 of 2,762,416 shares, equal to 4 % of the as-converted Class A common shares outstanding on December 31, 2021. No more than 27,915,000 Class A common shares may be issued under the 2018 Plan upon the exercise of incentive options. The Class A common shares underlying any awards issued under the 2018 Plan or the 2015 Plan that on or after the effective date of the 2018 Plan expire, lapses unexercised or are terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited under the 2018 Plan or the 2015 Plan will be added back to the Class A common shares available for issuance under the 2018 Plan. As of December 31, 2021, 3,603,209 shares remained available for future grant. 2015 Equity Incentive Plan Until May 23, 2018 (the effective date of the 2018 Plan), the 2015 Plan provided for the Company to grant incentive share options, nonqualified share options, share grants and other share-based awards to employees and non-employees to purchase the Company’s Class A common shares. On the effective date of the 2018 Plan, the Company ceased granting awards under the 2015 Plan. At that time, the 4,691,213 Class A common shares subject to outstanding awards under the 2015 Plan remained reserved for issuance under the plan pursuant to such awards and the 92,170 Class A common shares that had been available for future grant under the 2015 Plan were no longer authorized and reserved for issuance or available for future grant under the 2015 Plan. As of December 31, 2021, there were 2,191,014 Class A common shares subject to outstanding awards under the 2015 Plan and reserved for issuance thereunder pursuant to such awards. The 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Class A common shares subject to awards granted under the 2015 Plan that expire, lapse unexercised or are terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited become available for issuance under the 2018 Plan. The exercise price for share options granted under the 2015 Plan was determined by the Company’s board of directors. All incentive share options granted to any person possessing 10 % or less of the total combined voting power of all classes of shares could not have an exercise price of less than 100 % of the fair market value of the Class A common shares on the grant date. All incentive share options granted to any person possessing more than 10 % of the total combined voting power of all classes of shares could not have an exercise price of less than 110 % of the fair market value of the Class A common shares on the grant date. The option term for incentive share options could not be greater than 10 years . Incentive share options granted to persons possessing more than 10 % of the total combined voting power of all classes of shares could not have an option term of greater than five years . The vesting period for equity-based awards was determined by the board of directors, which was generally four to six years . For awards granted to employees and non-employees with four year vesting terms, 25 % of the option vests on the first anniversary of the grant date and the remaining shares vest equally each month for three years thereafter. For awards granted to employees with F-25 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ six year vesting terms, 16 % of the option vests on the first anniversary of the grant date and the remaining shares vest based on a predetermined vesting schedule for five years thereafter. 2018 Employee Share Purchase Plan In May 2018, the Company’s board of directors and shareholders approved the 2018 Employee Share Purchase Plan (the “2018 ESPP”), which became effective on May 23, 2018. A total of 670,000 Class A common shares were initially reserved for issuance under the 2018 ESPP. The number of Class A common shares that may be issued under the 2018 ESPP will automatically increase on each January 1, beginning in 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lesser of (1) 1 % of the Class A common shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (2) a smaller number of Class A common shares determined by the Company’s board of directors, provided that no more than 6,420,000 Class A common shares may be issued under the 2018 ESPP. In December 2021, the board of directors approved an increase as of January 1, 2022 of 90,000 shares. As of December 31, 2021, 598,817 Class A common shares were available for future issuance under the 2018 ESPP. Share Options ​ The following table summarizes option activity for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ ​ ​ Average ​ Contractual ​ Aggregate ​ ​ Number of ​ Exercise ​ Term ​ Intrinsic ​ ​ Shares ​ Price ​ (in years) ​ Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding as of December 31, 2020 9,958,858 ​ $ 13.53 ​ 8.15 ​ $ 52,394 Granted 2,596,475 ​ $ 16.96 ​ ​ ​ ​ ​ Exercised ( 795,404 ) ​ $ 6.68 ​ ​ ​ ​ ​ Forfeited ( 2,533,083 ) ​ $ 16.97 ​ ​ ​ ​ ​ Outstanding as of December 31, 2021 9,226,846 ​ $ 14.14 ​ 7.37 ​ $ 14,947 Share options exercisable as of December 31, 2021 4,733,191 ​ $ 12.67 ​ 6.47 ​ $ 13,469 Share options vested and expected to vest as of December 31, 2021 9,226,846 ​ $ 14.14 ​ 7.37 ​ $ 14,947 ​ The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s common shares for those share options that had exercise prices lower than the fair value of the Company’s common shares. During the year ended December 31, 2021, share option holders exercised 795,404 share options for Class A common shares with an intrinsic value of $ 6,392 for total cash proceeds to the Company of $ 5,311 . During the year ended December 31, 2020, share option holders exercised 1,324,429 share options for Class A common shares with an intrinsic value of $ 18,271 for total cash proceeds to the Company of $ 6,058 . During the year ended December 31, 2019, share option holders exercised 150,253 share options for Class A common shares with an intrinsic value of $ 1,776 for total cash proceeds to the Company of $ 590 . The weighted-average grant-date fair value per share of share options granted during the years ended December 31, 2021, 2020 and 2019 was $ 11.30 , $ 11.38 and $ 9.36 , respectively. F-26 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ The total fair value of share options vested during the years ended December 31, 2021, 2020 and 2019 was $ 22,870 , $ 17,931 and $ 13,997 , respectively. As of December 31, 2021, total unrecognized compensation expense related to the unvested share option awards was $ 43,968 which is expected to be recognized over a weighted average remaining period of 2.53 years. Option Valuation The assumptions that the Company used to determine the grant-date fair value of share options granted to employees and directors the 2018 Plan during the years ended December 31, 2021, 2020 and 2019 were as follows, presented on a weighted-average basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 2019 ​ Risk-free interest rate ​ 1.00 % 0.55 % 2.07 % Expected term (in years) ​ 6.13 ​ 6.21 ​ 6.22 ​ Expected volatility ​ 76.05 % 80.81 % 79.14 % Expected dividend yield ​ — % — % — % ​ During the years ended December 31, 2021 and 2020, the Company did not grant share options to non-employees. During the year ended December 31, 2019, the assumptions that the Company used to determine the fair value of share options granted to non-employees were as follows, presented on a weighted-average basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ ​ December 31, ​ ​ ​ 2019 Risk-free interest rate ​ ​ ​ 1.38 % Expected term (in years) ​ ​ ​ 2.77 ​ Expected volatility ​ ​ ​ 68.17 % Expected dividend yield ​ ​ ​ — % ​ Rilonacept Long-Term Incentive Plan A restricted share unit (“RSU”) represents the right to receive shares of the Company’s Class A common shares upon vesting of the RSU. The fair value of each RSU is based on the closing price of the Company’s Class A common shares on the date of grant. In December 2019, the compensation committee of the Company’s board of directors approved the Company’s Rilonacept Long-Term Incentive Plan (“RLTIP”) under the Company’s 2018 Plan to incentivize eligible employees of the Company or any of its subsidiaries to achieve FDA approval for the commercial sale and marketing of rilonacept for the treatment of recurrent pericarditis in the United States (“RLTIP Milestone”). The RLTIP provided for eligible employees to receive a cash award and two grants of RSU awards covering Class A common shares under the 2018 Plan. The cash award was eligible to be earned and paid upon the Achievement Date with respect to an amount determined in accordance with the RLTIP based on the earnout percentage. The number of Class A common shares issuable under the first RSU award (“First RSU Award”) as a result of the RLTIP Milestone was determined in accordance with the RLTIP based on the earnout percentage, and such RSUs will vest on the first anniversary of the Achievement Date, subject to continued employment on such date. The second RSU award was granted on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, based on both the earnout percentage and the upside earnout percentage, and will vest on the second anniversary of the Achievement Date, subject to continued employment through such date. F-27 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Restricted Share Units RSUs represent the right to receive shares of the Company’s Class A common shares upon vesting of the RSUs. The fair value of each RSU award is based on the closing price of the Company’s Class A common shares on the date of grant. Starting March 2021, the Company granted RSUs with service conditions (“Time-Based RSUs”) to eligible employees. The Time-Based RSUs will vest 25 % on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates. In December 2019, the Company granted Time-Based RSUs that vested in one installment on December 31, 2020, subject to the recipient’s continued employment through that date. As of December 31, 2020, 56,369 Class A common shares were issued with the remaining shares 24,332 shares withheld for tax purposes. During the years ended December 31, 2020 and 2019, the Company granted the First RSU Awards as part of the RLTIP to eligible employees. During the year ended December 31, 2021, the Achievement Date was met and 187,682 of Class A common shares were issued under the First RSU Awards in accordance with the RLTIP and will vest in one installment on the first anniversary of the Achievement Date, subject to continued employment through such date. During the year ended December 31, 2021, the Second RSU Awards were granted to eligible employees on the Achievement Date with 142,283 shares granted in accordance with the RLTIP which will vest on the second anniversary of the Achievement Date, subject to continued employment through such date. For the years ended December 31, 2021 and 2020, the Company recognized $ 3,682 and $ 980 , respectively in compensation expense related to RSUs including those granted in connection to the RLTIP. During the years ended December 31, 2020 and 2019 the Company did not recognize any compensation expense related to the First RSU Award, as achievement of the RLTIP Milestone was determined to be not probable. The following table summarizes RSU activity, including the Time-Based RSUs and the RSU Awards under the RLTIP, for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ Shares ​ Fair Value Unvested RSUs as of December 31, 2020 ​ 205,312 ​ $ 13.41 Granted ​ 905,555 ​ $ 16.73 Vested ​ - ​ $ — Forfeited ​ ( 225,846 ) ​ $ 17.68 Unvested RSUs as of December 31, 2021 ​ 885,021 ​ $ 15.72 ​ As of December 31, 2021, total unrecognized compensation cost related to the RSU Awards and Time-Based RSUs was $ 10,249 which is expected to be recognized over a weighted average remaining period of 3.16 years. ​ F-28 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Share-Based Compensation Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2021 ​ 2020 2019 Cost of goods sold ​ $ 197 ​ $ — ​ $ — Research and development expenses ​ ​ 8,450 ​ ​ 8,866 ​ ​ 5,746 Selling, general and administrative expenses ​ 16,526 ​ 12,009 ​ 9,334 ​ ​ $ 25,173 ​ $ 20,875 ​ $ 15,080 ​ 12. License and Acquisition Agreements Biogen Asset Purchase Agreement In September 2016, the Company entered into an asset purchase agreement (the “Biogen Agreement”) with Biogen MA Inc. (“Biogen”) to acquire all of Biogen’s right, title and interest in and to certain assets used in or relating to vixarelimab and other antibodies covered by certain patent rights, including patents and other intellectual property rights, clinical data, know-how, and clinical drug supply. In addition, Biogen granted to the Company a non-exclusive, sublicensable, worldwide license to certain background patent rights related to the vixarelimab program. The Company is obligated to use commercially reasonable efforts to develop and commercialize such acquired products. In exchange for these rights, the Company made an upfront payment to Biogen of $ 11,500 and a technology transfer payment of $ 500 . The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business. The Company recorded the upfront payment and technology transfer payment as research and development expense in the consolidated statement of operations and comprehensive loss because the acquired technology represented in-process research and development and had no alternative future use. Under the Biogen Agreement, the Company is obligated to make milestone payments to Biogen of up to $ 179,000 upon the achievement of specified clinical and regulatory milestones in multiple indications in various territories, including milestone payments of $ 4,000 and $ 10,000 paid during the year ended December 31, 2017 and the year ended December 31, 2019, respectively, each payment was associated with the achievement of a specified clinical milestone event. Additionally, the Company could be obligated to make up to an aggregate of up to $ 150,000 of payments upon the achievement of specified annual net sales milestones and to pay tiered royalties on escalating tiers of annual net sales of licensed products starting in the high single-digit percentages and ending below the teens. The Company also agreed to pay certain obligations under third-party contracts retained by Biogen that relate to the vixarelimab program. Under these retained contracts, the Company paid a one-time upfront sublicense fee of $ 150 and is obligated to pay insignificant annual maintenance fees as well as clinical and regulatory milestone payments of up to an aggregate of $ 1,575 . The Biogen Agreement will terminate upon the expiration of all payment obligations with respect to the last product in all countries in the territory. The Company has the right to terminate the agreement with 90 days ’ prior written notice. Both parties may terminate by mutual written consent or in the event of material breach of the agreement by the other party that remains uncured for 90 days (or 30 days for payment-related breaches). During the year ended December 31, 2021, the Company recorded research and development expense of $ 53 , related to the annual maintenance fee in connection with the retained contracts. During the year ended December 31, F-29 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ 2020, the Company recorded research and development expense of $ 106 primarily related to a milestone occurring in the first quarter of 2020 and the annual maintenance fee in connection with the retained contracts. During the year ended December 31, 2019, the Company recorded research and development expense of $ 10,347 primarily related to milestone payments associated with the achievement of a specified clinical milestone event as well as other payments in connection with the retained contracts due under the Biogen Agreement. Primatope Stock Purchase Option Agreement In September 2017, the Company entered into a stock purchase option agreement (the “Primatope Agreement”) with Primatope Therapeutics, Inc. (“Primatope”), pursuant to which the Company was granted a license to certain intellectual property rights owned or controlled by Primatope to research, develop, and manufacture the preclinical antibody, KPL-404. The agreement provided the Company with an exclusive call option to purchase all of the outstanding securities of Primatope. Upon execution of the agreement, the Company made $ 500 in upfront payments for the initial option period through April 2018 (the “Initial Option Period”). The Primatope Agreement allowed for up to three extensions of the Initial Option Period through January 2019 (including the initial option period, the “Option Period”) for total extension payments of up to $ 800 . Through December 31, 2018, the Company made payments totaling $ 800 to extend the Option Period to January 15, 2019. During the Option Period, the Company could conduct research and preclinical work to assess the viability of the asset. The Company determined that the call option represented a variable interest in Primatope and that Primatope is a VIE. However, as the Company had no ability to control the board of directors or direct the ongoing activities of Primatope during the Option Period, the Company did not have power over the activities that most significantly impact Primatope’s economic performance and was not the primary beneficiary of Primatope. As a result, the Company did not consolidate the assets, liabilities, and results of operations of Primatope prior to 2019. In January 2019, the Company exercised the call option and in March 2019, the Company acquired all of the outstanding securities of Primatope (the “Primatope Acquisition”). The aggregate amount of upfront and contingent payments the Company paid to the former Primatope shareholders to acquire the Company was comprised of (1) $ 15,000 paid at closing in March 2019, comprised of upfront consideration of $ 10,000 and milestone payments of $ 5,000 , which had been achieved as of the closing date, and (2) $ 3,000 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 Class A common shares (inclusive of escrow and holdback share amounts) in accordance with the Primatope Agreement. At the closing of the Primatope Acquisition, Primatope became a wholly owned subsidiary of the Company and the acquisition was accounted for as an asset acquisition as it did not meet the definition of a business. The Company released the escrow and issued the shares that were held back at closing in June 2020 and issued the shares that were held back at the final milestone payment in September 2020. The Company recorded the upfront payment and milestone payments as research and development expense in the consolidated statement of operations and comprehensive loss because the acquired technology represented in-process research and development and had no alternative future use. During the years ended December 31, 2021 and 2020, the Company did not incur any research and development expense directly in connection with milestone or other payments related to the Primatope Acquisition or the Primatope Agreement. During the year ended December 31, 2019, the Company recorded research and development expense of $ 18,000 related to the Primatope Acquisition. F-30 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Beth Israel Deaconess Medical Center License Agreement As a result of the Primatope Acquisition, the Company acquired the rights to an exclusive license to certain intellectual property rights controlled by Beth Israel Deaconess Medical Center, Inc. (“BIDMC”) to make, use, develop and commercialize KPL-404 (the “BIDMC Agreement”). Under the BIDMC Agreement, the Company is solely responsible for all development, regulatory and commercial activities and costs. The Company is also responsible for costs related to filing, prosecuting and maintaining the licensed patent rights. Under the BIDMC Agreement, the Company is obligated to pay an insignificant annual maintenance fee as well as clinical and regulatory milestone payments of up to an aggregate of $ 1,200 to BIDMC. The Company is also obligated to pay a low single-digit royalty on annual net sales of products licensed under the agreement. During the years ended December 31, 2021, 2020 and 2019, the Company recorded research and development expense of $ 10 , $ 10 and $ 10 , respectively in connection with the BIDMC Agreement. Regeneron License Agreement In September 2017, the Company entered into a license agreement (the “Regeneron Agreement”) with Regeneron Pharmaceuticals, Inc. (“Regeneron”), pursuant to which the Company has been granted an exclusive license under certain intellectual property rights controlled by Regeneron to develop and commercialize ARCALYST worldwide, excluding the Middle East and North Africa, for all indications other than those in oncology and local administration to the eye or ear. Upon receiving positive data in RHAPSODY, the Company’s pivotal Phase 3 clinical trial of ARCALYST, Regeneron transferred the biologics license application, or BLA, for ARCALYST to the Company. In March 2021, when the FDA granted approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older, the Company assumed the sales and distribution of ARCALYST for CAPS and DIRA in the United States. In exchange for these rights, the Company made an upfront payment of $ 5,000 . In addition, the Company made a $ 7,500 payment in the fourth quarter of 2020 in connection with the achievement of a specified regulatory milestone event and a regulatory milestone payment of $ 20,000 in the first quarter of 2021. The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business. The Company recorded the upfront payment as research and development expense in the consolidated statement of operations and comprehensive loss because the acquired technology represented in-process research and development and had no alternative future use. The Company evenly splits profits on sales of ARCALYST with Regeneron, where profits are determined after deducting from net sales of ARCALYST certain costs related to the manufacturing and commercialization of ARCALYST. Such costs include but are not limited to (i) the Company’s cost of goods sold for product used, sold or otherwise distributed for patient use by the Company; (ii) customary commercialization expenses, including the cost of the Company’s field force, and (iii) the Company’s cost to market, advertise and otherwise promote ARCALYST, with such costs identified in subsection (iii) subject to specified limits.  In addition, should there be a transfer of technology related to the manufacture of ARCALYST, then, to the extent permitted in accordance with the Regeneron Agreement, the fully-burdened costs incurred by each of the Company and Regeneron in performing (or having performed) such technology transfer shall also be deducted from net sales of ARCALYST to determine profit. The Company also evenly splits with Regeneron any proceeds received by the Company from any licensees, sublicensees and distributors in consideration for the sale, license or other disposition of rights with respect to ARCALYST, including upfront payments, milestone payments and royalties. For the year ended December 31, 2021, the company recognized $ 835 of expenses related to the profit sharing agreement presented within collaboration expenses. ​ Pursuant to the Regeneron Agreement, in September 2017, the parties entered into a clinical supply agreement under which Regeneron agreed to manufacture product solely for the Company’s use in development activities. Pursuant F-31 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ to the Regeneron Agreement, during the year ended December 31, 2021, the Company entered into a commercial supply agreement under which Regeneron agreed to manufacture product for the Company’s use, including for commercial sales. The commercial supply agreement terminates upon the termination of the Regeneron Agreement or the date of completion of the transfer of technology related to the manufacture of ARCALYST. During the years ended December 31, 2021 and 2020, the Company did not incur any research and development expense related to the purchase of drug materials under the clinical supply agreement. As of December 31, 2021, the Company recorded inventory of $ 3,675 related to the purchase of commercial product under the commercial supply agreement (see Note 5). As of December 31, 2021, the Company had non-cancelable purchase commitments under the commercial supply agreement (see Note 15). The Regeneron Agreement will expire when the Company is no longer developing or commercializing any licensed product under the Regeneron Agreement. Either party may terminate the agreement upon the other party’s insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured for 90 days (or 30 days for payment related breaches). Regeneron has the right to terminate the agreement if the Company suspends its development or commercialization activities for a consecutive 12 month period or does not grant a sublicense to a third party to perform such activities, or if the Company challenges any of the licensed patent rights. The Company may terminate the agreement at any time with one year ’s written notice. The Company may also terminate the agreement with three months ’ written notice if the licensed product is determined to have certain safety concerns. MedImmune License Agreement In December 2017, the Company entered into a license agreement (as amended from time to time, the “MedImmune Agreement”) with MedImmune, Limited (“MedImmune”), pursuant to which MedImmune granted the Company an exclusive, sublicensable, worldwide license to certain intellectual property rights to make, use, develop and commercialize mavrilimumab. Under the MedImmune Agreement, the Company also acquired reference rights to relevant manufacturing and regulatory documents and MedImmune’s existing supply of mavrilimumab drug substance and product. The Company is obligated to use commercially reasonable efforts to develop and commercialize the licensed products. In exchange for these rights, the Company made an upfront payment of $ 8,000 . The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business. The Company recorded the upfront payment as research and development expense in the consolidated statement of operations and comprehensive loss because the acquired technology represented in-process research and development and had no alternative future use. ​ In addition, the Company is obligated to make clinical, regulatory and initial sales milestone payments of up to $ 72,500 in aggregate for the first two indications, including, a $ 5,000 pass-through payment due upon the achievement of a specified clinical milestone event which was achieved in the fourth quarter of 2018. Also included is a milestone payment of $ 10,000 due upon the earlier to occur of a specified regulatory milestone and December 31, 2018, unless the MedImmune Agreement is earlier terminated by either party. During the year ended December 31, 2019, the Company made both the $ 5,000 and $ 10,000 previously accrued milestone payments in accordance with the MedImmune Agreement. In addition, the Company is obligated to make clinical and regulatory milestone payments of up to $ 15,000 in the aggregate for each subsequent indication. In July 2020, the Company entered into an amendment to the MedImmune Agreement to establish a new coronavirus field and defer the payment of certain development and regulatory milestones as applied to the new coronavirus field. The Company is obligated to make milestone payments to MedImmune of up to $ 85,000 upon the achievement of annual net sales thresholds up to, but excluding, $ 1,000,000 in annual net sales as well as additional milestone payments aggregating up to $ 1,100,000 upon the achievement of additional specified annual net sales thresholds starting at $ 1,000,000 and higher. The Company has also agreed to pay tiered royalties on escalating tiers of annual net sales of licensed products starting in the low double-digit percentages and ending at twenty percent. Royalty rates are subject to reductions upon certain events. ​ F-32 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ The Company is solely responsible for all development, manufacturing, and commercial activities and costs of the licensed products, including clinical studies or other tests necessary to support the use of a licensed product. The Company is also responsible for costs related to the filing, prosecution and maintenance of the licensed patent rights. The MedImmune Agreement will expire upon the expiration of the royalty term in the last country for the last indication, as defined in the agreement. Either party may terminate the agreement upon the other party’s insolvency or bankruptcy or for material breach of the agreement by the other party that remains uncured for 90 days . MedImmune has the right to terminate the agreement if the Company challenges any of the licensed patent rights. The Company may terminate the agreement at any time upon 90 days ’ prior written notice. During the years ended December 31, 2021, 2020 and 2019, the Company did no t record research and development expense in connection with milestone payments due under the MedImmune Agreement. ​ ​ ​ 13. Income Taxes As a company incorporated in Bermuda, the Company is principally subject to taxation in Bermuda. Under the current laws of Bermuda, tax on a company’s income is assessed at a zero percent tax rate. As a result, the Company has no t recorded any income tax benefits from its losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses. In July 2020, the IRS issued final regulations regarding Foreign Derived Intangible Income (“FDII”), which was enacted as part of the U.S. Tax Cuts and Jobs Act in December 2017. The final FDII requirements outlined in the 2020 guidance did not materially impact the Company’s income taxes. ​ On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act made various tax law changes, including, among other things: (i) modifications to the federal net operating loss rules, including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and eliminating the 80% of taxable income limitations in years 2018-2020; (ii) enhanced recoverability of alternative minimum tax credit carryforwards; and (iii) delayed payment of employer payroll taxes. On December 27, 2020 updates to the CARES Act were enacted which provided the temporary allowance of a full deduction for business meals paid or incurred between December 31, 2020 and January 1, 2023. The Company will continue to monitor for any updates but currently the only material impact to the Company’s tax provision is the ability to defer employer payroll taxes for which the Company will not get a deduction until the amounts are paid. ​ Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years pursuant to IRC Section 174. Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. If the requirement is not modified, the Company anticipates this will have a significant impact on current tax expense beginning in 2022. ​ In August 2015, the Company entered into agreements with its wholly owned subsidiary, Kiniksa US, under which Kiniksa US provides management and research and development services to the Company for which the Company pays costs plus a service fee. In connection with its launch readiness activities, the Company transferred all of its rights, title and interest in, among other things, certain contracts (including the Regeneron Agreement), intellectual property rights, product filings and approvals and other information, plans and materials owned or controlled by the Company insofar as they related exclusively or primarily to ARCALYST to Kiniksa UK in January 2021 pursuant to an asset transfer agreement between the Company and Kiniksa UK for the consideration described therein. F-33 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Loss before benefit (provision) for income taxes consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ December 31, ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ Bermuda ​ $ ( 164,284 ) ​ $ ( 161,983 ) ​ $ ( 168,053 ) ​ Foreign (U.S., U.K., Germany, France, Switzerland) ​ ​ 7,745 ​ ​ 5,754 ​ ​ 4,139 ​ ​ ​ $ ( 156,539 ) ​ $ ( 156,229 ) ​ $ ( 163,914 ) ​ ​ The components of the Company’s income tax (provision) benefit were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2021 2020 2019 Current income tax provision: ​ ​ ​ ​ ​ ​ ​ ​ ​ Bermuda ​ $ — ​ $ — ​ $ — U.S. federal ​ ( 682 ) ​ ( 392 ) ​ ( 567 ) U.S. state ​ ( 706 ) ​ ( 366 ) ​ ( 530 ) Foreign (U.K., Germany, France, Switzerland) ​ ​ 14 ​ ​ ( 33 ) ​ ​ ( 12 ) Total current income tax provision ​ ( 1,374 ) ​ ( 791 ) ​ ( 1,109 ) Deferred income tax (provision) benefit: ​ ​ ​ Bermuda ​ — ​ — ​ — U.S. federal ​ — ​ ( 3,056 ) ​ 2,397 U.S. state ​ — ​ ( 1,315 ) ​ 759 Foreign (U.K., Germany, France, Switzerland) ​ ​ ( 11 ) ​ ​ 10 ​ ​ — Total deferred income tax (provision) benefit ​ ( 11 ) ​ ( 4,361 ) ​ 3,156 Total (provision) benefit for income taxes ​ $ ( 1,385 ) ​ $ ( 5,152 ) ​ $ 2,047 ​ A reconciliation of the Bermuda statutory income tax rate of 0 % to the Company’s effective income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 Bermuda statutory income tax rate ​ — % — % — % Foreign (U.S.) tax rate differential 1.9 ​ ( 0.8 ) ​ ( 0.5 ) ​ Research and development tax credits 2.4 2.4 2.2 ​ Share-based compensation ​ ( 0.4 ) ​ 1.3 ​ ( 0.5 ) ​ Permanent differences ​ — ​ ( 0.1 ) ​ ( 0.1 ) ​ U.S. state taxes, net of federal ​ ( 0.5 ) ​ 0.1 ​ ( 0.3 ) ​ FDII ​ 1.4 ​ 0.6 ​ 0.9 ​ Uncertain tax positions ​ 0.2 ​ ( 0.2 ) ​ ( 0.3 ) ​ IP Transfer ​ 71.0 ​ — ​ — ​ Other ​ ( 0.8 ) ​ ( 0.9 ) ​ — ​ Change in valuation allowance ​ ( 76.1 ) ​ ( 5.7 ) ​ ( 0.1 ) ​ Effective income tax rate ( 0.9 ) % ( 3.3 ) % 1.3 % ​ F-34 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Net deferred tax assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 Deferred tax assets: ​ ​ ​ ​ ​ ​ Research and development tax credit carryforwards ​ $ 1,620 ​ $ 1,674 Share-based compensation ​ ​ 9,492 ​ ​ 6,271 Operating lease liability ​ ​ 1,574 ​ ​ 1,764 Accrued bonus ​ ​ 1,443 ​ ​ 1,208 Accrued expenses and other liabilities ​ ​ 426 ​ ​ 634 Intangible Asset ​ ​ 107,037 ​ ​ — Net operating losses ​ ​ 8,559 ​ ​ 198 Total deferred tax assets ​ ​ 130,151 ​ ​ 11,749 Valuation allowance ​ ( 127,944 ) ​ ( 9,307 ) Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ ( 762 ) ​ ​ ( 786 ) Right of use asset ​ ( 1,445 ) ​ ( 1,646 ) Net deferred tax assets ​ $ — ​ $ 10 ​ As of December 31, 2021 and 2020, the Company had federal research and development tax credit carryforwards of approximately $ 1,546 and $ 1,383 respectively, available to reduce future tax liabilities, which begin to expire in 2041. As of December 31, 2021 and 2020, the Company had state research and development tax credit carryforwards of approximately $ 251 and $ 844 respectively, available to reduce future tax liabilities, which can be carried forward indefinitely. As required by ASC 740, the Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. The Company has a full valuation allowance against all of its deferred tax assets due to its negative evidence in the form of cumulative losses. In the prior year the only deferred tax asset that did not have a valuation allowance related to Kiniksa UK operations. Kiniksa UK has generated significant operating losses and the Company has determined that it is not more likely than not that it will be able to utilize the generated losses and has booked a full valuation allowance against the deferred tax assets of Kiniksa UK. These deferred tax assets grew significantly during 2021 as a result of the transfer of intangible assets to Kiniksa UK, which resulted in tax basis with a limited book basis. ​ Utilization of the state research and development tax credits may be subject to substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the shares of a corporation by more than 50% over a three-year period. Changes in the valuation allowance for deferred taxes were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2021 2020 2019 Valuation allowance at beginning of year ​ $ ( 9,307 ) ​ $ ( 330 ) ​ $ ( 49 ) Increases recorded through the balance sheet ​ — ​ — ​ ( 200 ) Increases recorded to income tax provision ​ ​ ( 118,637 ) ​ ​ ( 8,977 ) ​ ​ ( 81 ) Valuation allowance at end of year ​ $ ( 127,944 ) ​ $ ( 9,307 ) ​ $ ( 330 ) ​ F-35 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ The valuation allowance increased by $ 118,637 in 2021 primarily as a result of the recognition of a valuation allowance against the UK deferred tax assets associated with the tax basis in intellectual property and net operating losses. The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The amount of unrecognized tax benefits is $ 545 and $ 837 as of December 31, 2021 and 2020, respectively. The net decrease relates to new tax positions on research and development credits generated in 2021, offset by positions related to completed R&D tax studies and other credits. A roll forward of the Company’s uncertainties in its income tax provision liability is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2021 2020 2019 Gross balance at the beginning of year ​ $ 837 ​ $ 528 ​ $ — Gross increases based on current period tax positions ​ ​ 50 ​ ​ 411 ​ ​ 528 Gross decreases based on tax positions of the prior periods ​ ​ ( 342 ) ​ ​ ( 102 ) ​ ​ — Unrecognized tax benefits at the end of the year ​ $ 545 ​ $ 837 ​ $ 528 ​ The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company had recorded immaterial interest on the tax positions during the year ended December 31, 2021, 2020 and 2019. The Company files income tax returns in the United States as well as in certain state and in certain country jurisdictions. Kiniksa US’s federal and state income tax returns are subject to tax examinations for the tax years ended December 31, 2018 and subsequent years. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period. There are currently no income tax examinations pending. 14. Net Loss per Share The rights, including the liquidation and dividend rights, of the holders of Class A, Class B, Class A1 and Class B1 common shares are identical, except with respect to voting, transferability and conversion (see Note 10). As the liquidation and dividend rights are identical, losses are allocated on a proportionate basis and the resulting net loss per share attributed to common shareholders will, therefore, be the same for both Class A and Class B common shares on an individual or combined basis. F-36 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ Basic and diluted net loss per share attributable to common shareholders was calculated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2021 2020 2019 Numerator: ​ ​ ​ ​ ​ ​ Net loss attributable to common shareholders ​ $ ( 157,924 ) ​ $ ( 161,381 ) ​ $ ( 161,867 ) Denominator: ​ ​ ​ Weighted average common shares outstanding—basic and diluted ​ 68,576,810 ​ 61,842,722 ​ 54,049,477 Net loss per share attributable to common shareholders— basic and diluted ​ $ ( 2.30 ) ​ $ ( 2.61 ) ​ $ ( 2.99 ) ​ The Company’s potentially dilutive securities, which include share options and unvested RSUs, have been excluded from the computation of diluted net loss per share attributable to common shareholders as the effect would be to reduce the net loss per share attributable to common shareholders. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2021 2020 2019 Share options to purchase common shares 9,226,846 9,958,858 8,491,734 Unvested RSUs 885,021 205,312 328,296 ​ 10,111,867 10,164,170 8,820,030 ​ ​ ​ 15. Commitments and Contingencies License Agreements The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 12). Manufacturing Commitments The Company entered into supply agreements with Regeneron to provide both clinical supply and commercial product (see Note 12). The Company entered into agreements with several CMOs to provide the Company with preclinical and clinical trial materials. As of December 31, 2021, the Company had committed to minimum payments under these agreements totaling $ 45,438 , of which $ 32,389 are due within one year. Indemnification Agreements In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors, officers and other key personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or other key personnel. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material F-37 Table of Contents KINIKSA PHARMACEUTICALS, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in thousands, except share and per share amounts) ​ effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2021, 2020 or 2019. Legal Proceedings The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. 16. Benefit Plans The Company has established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company provides matching contributions of 100 % of the first 3 % of each participant’s salary contributed, plus 50 % for each of the next 2 % contributed. Employees are immediately and fully vested in their own contributions and the Company’s match. During the years ended December 31, 2021, 2020 and 2019, the Company contributed $ 1,558 , $ 993 and $ 851 respectively, to the plan. ​ 17. Subsequent Event ​ On February 21, 2022, the Company entered into two collaboration and license agreements (together, the “Collaboration Agreements”) with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”), pursuant to which the Company granted Huadong exclusive rights to develop and commercialize rilonacept and mavrilimumab, respectively, in the Asia Pacific region, excluding Japan. The Company will otherwise retain its current rights to the Licensed Products. Under the Collaboration Agreements, the Company will receive an upfront cash payment of $ 22,000 and will be eligible to receive up to approximately $ 640,000 in contingent payments, including specified development, regulatory and sales-based milestones. ​ ​ ​ ​ ​ ​ F-38