What changed in this filing

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Item 9A. Controls and Procedures

2024-02-28 compared with 2023-03-02 · 296 added, 273 removed, 1040 unchanged (35% of the section changed)

4 unchanged sentences

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, 2022.

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.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023 using 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, 2023, our internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

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OTHER INFORMATION.

Not applicable.

Trading Arrangements .

During the fiscal quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “ non -Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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and 92 Hayden Avenue Trust

Sixth Amendment of Sublease, dated May 24, 2023, by and between Kiniksa Pharmaceuticals Corp.

and 92 Hayden Avenue Trust

Amended and Restated Employment Agreement, dated as of May 29, 2018, by and between Kiniksa Pharmaceuticals Corp.

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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

2018 Incentive Award Plan forms of share option grant notice and share option agreement for Swiss participants, restricted share grant notice and restricted share agreement for Swiss participants, and restricted share unit grant notice and restricted share unit agreement for Swiss participants

2018 Employee Share Purchase Plan

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Restricted Share Agreement, dated as of September 16, 2015, by and between the Registrant and Sanj K.

Insider Trading Compliance Program

Subsidiaries of the Registrant

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Section 1350 Certification of Chief Financial Officer

Policy for Recovery of Erroneously Awarded Compensation

Inline XBRL Instance Document

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KINIKSA PHARMACEUTICALS, LTD.

March 2, 2023

February 28, 2024

Chief Executive Officer and Chairman of the Board of Directors

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Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)

March 2, 2023

February 28, 2024

/s/ Mark Ragosa

Chief Financial Officer (principal financial officer)

March 2, 2023

February 28, 2024

/s/ Michael R.

Group VP, Finance and Chief Accounting Officer (principal accounting officer)

March 2, 2023

February 28, 2024

Lead Independent Director

March 2, 2023

February 28, 2024

/s/ Stephen R.

March 2, 2023

February 28, 2024

/s/ Richard S.

March 2, 2023

February 28, 2024

/s/ Thomas R.

March 2, 2023

February 28, 2024

/s/ Tracey L.

March 2, 2023

February 28, 2024

/s/ Kimberly J.

March 2, 2023

February 28, 2024

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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To the Board of Directors and Shareholders of Kiniksa Pharmaceuticals, Ltd.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kiniksa Pharmaceuticals, Ltd.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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 also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting 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 audit 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.

We conducted our audits 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, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements 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.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Realizability of UK Deferred Tax Assets

As described in Notes 2 and 14 to the consolidated financial statements, the Company recognized an income tax benefit of $185.5 million for the year ended December 31, 2022 due to the release of the valuation allowance on the UK deferred tax assets.

These UK deferred tax assets were recorded as a result of the difference between the consolidated financial statement and tax basis of intangible assets transferred by the Company to Kiniksa UK, using enacted tax rates in effect for the year in which the differences are expected to reverse.

As disclosed by management, significant judgment is required in assessing both positive and negative evidence available in determining whether it is more likely than not that the UK deferred tax assets will be realized in the future.

In determining the need for a valuation allowance, management considered the weighting of the positive and negative evidence, which included, among other things, cumulative UK income in recent years, estimates of sales related to the Company’s commercial product ARCALYST, and future profitability by jurisdiction.

The principal considerations for our determination that performing procedures relating to the realizability of UK deferred tax assets is a critical audit matter are (i) the significant judgment by management when determining whether it was more likely than not that the Company’s UK deferred tax assets would be realized in the future and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence available to support the weighting of the positive and negative evidence used in management’s determination.

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 determining whether it was more likely than not that the Company’s UK deferred tax assets would be realized in the future;

(ii) evaluating the appropriateness of the methodology used by management in weighting of available positive and negative evidence;

(iii) evaluating the reasonableness of management’s estimates of sales related to ARCALYST and future profitability by considering (a) the current and past performance of the business;

(b) consistency with external market and industry data;

and (c) whether these assumptions were consistent with evidence obtained in other areas of the audit;

(iv) testing the completeness and accuracy of certain of the data used in management’s assessment of whether it was more likely than not that the Company’s UK deferred tax assets would be realized in the future;

and (v) testing the completeness and accuracy of the income tax benefit recognized due to the release of the valuation allowance on the UK deferred tax assets.

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

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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;

These procedures included testing the effectiveness of controls relating to accrued research and development costs, including controls over the review of contracts, accumulating information on actual costs incurred during the period, and assessment of progress towards completion of the research and development activities.

These procedures also 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, on a sample basis, 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

March 2, 2023

February 28, 2024

We have served as the Company’s auditor since 2016.

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Accrued expenses

Deferred revenue

Operating lease liabilities

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Class B common shares, par value of $ 0.000273235 per share;

1,813,457 shares issued and outstanding as of December 31, 2022 and 2021

1,795,158 shares and 1,813,457 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Class A1 common shares, $ 0.000273235 par value;

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

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Balances at December 31, 2020

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

Issuance of Class A1 common shares upon completion of private placements, net of placement agent fees

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.

Issuance of Class A common shares under incentive award plans and employee share purchase plan

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Share-based compensation expense

Unrealized loss on short-term investments and currency translation adjustments

Unrealized gain on short-term investments and currency translation adjustments

Balances at December 31, 2022

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Share-based compensation expense

Unrealized gain on short-term investments and currency translation adjustments

Unrealized loss on short-term investments and currency translation adjustments

Balances at December 31, 2023

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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

Proceeds from issuance of Class A1 common shares from private placements, net of placement agent fees

Payments of offering costs

Proceeds from issuance of Class A common shares under incentive award plans and employee share purchase plan

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Supplemental information:

Cash paid for income taxes

Cash paid for income taxes, net

Supplemental disclosure of non-cash investing and financing activities:

Right-of-use asset obtained in exchange for operating lease obligation

Change in right-of-use asset as a result of new, modified, and terminated leases

Additions to property and equipment included in accrued expenses and other liabilities

The accompanying notes are an integral part of these consolidated financial statements.

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Kiniksa Pharmaceuticals, Ltd.

(the “Company”) is a biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need.

The Company’s portfolio of immune-modulating assets is based on strong biologic rationale or validated mechanisms, target a spectrum of underserved cardiovascular and autoimmune conditions and offer the potential for differentiation.

The Company is subject to risks and uncertainties common to small commercial stage companies in the biopharmaceutical industry and global health, societal, economic and market conditions, including the Company’s dependence on third parties, including contract research organizations and contract manufacturing organizations, the Company’s limited experience obtaining regulatory approvals, the potential failure of the Company to successfully complete research and development of its current or future product candidates, the potential inability of the Company to adequately protect its technology, potential competition, the uncertainty that any current or future product candidates will obtain necessary government regulatory approval, that ARCALYST will continue to be commercially viable, whether any of the Company’s current or future product candidates, if approved, will be commercially viable, adverse impact from the coronavirus disease 2019 (“COVID-19”) pandemic and global and political turmoil, including the ongoing war in Ukraine.

(the “Company”) is a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need.

The Company’s portfolio of immune-modulating assets is based on strong biologic rationale or validated mechanisms, targets a spectrum of underserved cardiovascular and autoimmune conditions and offers the potential for differentiation.

The Company is subject to risks and uncertainties common to small commercial stage companies in the biopharmaceutical industry and global health, societal, economic and market conditions, including the Company’s dependence on third parties, including contract research organizations and contract manufacturing organizations, the Company’s limited experience obtaining regulatory approvals, the potential failure of the Company to successfully complete research and development of its current or future product candidates, the potential inability of the Company to adequately protect its technology, potential competition, the uncertainty that any current or future product candidates will obtain necessary government regulatory approval, that ARCALYST will continue to be commercially viable and whether any of the Company’s current or future product candidates, if approved, will be commercially viable.

Such risks and uncertainties may be subject to substantial and uncertain changes, which may cause significant disruption to the Company’s business and operations, preclinical studies and clinical trials, the business and operations of the third parties with whom the Company conducts business and the national and global economies, all of which may have material impacts on the Company’s business, financial condition and results of operations.

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(“Kiniksa UK”) as well as the subsidiaries of Kiniksa UK, Kiniksa Pharmaceuticals (Germany) GmbH (“Kiniksa Germany”), Kiniksa Pharmaceuticals (France) SARL (“Kiniksa France”), and Kiniksa Pharmaceuticals GmbH (“Kiniksa Switzerland”), after elimination of all significant intercompany accounts and transactions.

Where the Kiniksa Pharmaceuticals, Ltd.

entity is referred to in its single, unconsolidated form it is referred to as “Kiniksa Bermuda”.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the recognition of revenue, the accrual for research and development expenses, the valuation of our deferred tax assets and the valuation of share-based awards.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

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

Follow-on Offerings and Private Placements

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 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.

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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, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements.

If the Company is unable to grow or sustain ARCALYST commercial revenue in future periods, the Company would need to seek additional financing through public or private securities offerings, debt financings, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements.

Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.

If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its commercialization efforts, research and development programs for product candidates or product portfolio expansion, which could adversely affect its business prospects, or the Company may be unable to continue operations.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies

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Realized gains and losses, if any, on short-term investments are included in interest income.

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.

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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.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Fair Value Measurements

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● 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.

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.

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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.

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.

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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.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

In accordance with the guidance in ASU 2016-02, components of a lease should be split into three categories:

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Maintenance and repairs are charged to expense as incurred.

When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the consolidated balance sheet and any resulting gains or losses are included in the consolidated statement of operations and comprehensive income (loss) in the period of disposal.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

and comprehensive income (loss) in the period of disposal.

The expected useful lives of the respective assets are as follows:

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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.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

The Company is conducting a technology transfer of ARCALYST drug substance manufacturing from Regeneron Pharmaceuticals, Inc.

(“Regeneron”) to a new contract development and manufacturing organization (“CDMO”).

Costs associated with the establishment of ARCALYST production at a new manufacturing site that do not meet the criteria for research and development or capitalization into inventory are included in cost of goods sold in the period incurred.

During the year ended December 31, 2023 the Company incurred $ 3,265 of expense related to the technology transfer of ARCALYST drug substance manufacturing in cost of goods sold.

No expenses were incurred in the years ending December 31, 2022 and 2021.

Revenue Recognition

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Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery of the product to the customer.

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

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.

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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.

Following the FDA approval of ARCALYST in March 2021, the Company began generating product revenue from sales of ARCALYST in April 2021.

ARCALYST is sold through a third party logistics provider that distributes primarily through a network of authorized specialty pharmacies and specialty distributors (“customer”), which deliver the medication to patients by mail.

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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

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

established based on contractual terms with customers and analyses of historical usage of these items.

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.

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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.

Government and other rebates and chargebacks include amounts payable to payors and healthcare professionals under various programs and by payor and individual payor plans.

Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payor and individual payor plans.

For qualified programs that can purchase products through wholesalers or other distributors at a lower contractual price, the wholesalers or distributors charge back to the Company the difference between their acquisition cost and the lower contractual price.

For qualified programs that can purchase products through wholesalers or other distributors at a lower contractual price, the

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

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.

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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.

These items are payable to customers and other rebates that are payable to other third party payors and healthcare professionals are classified as accrued expense liabilities.

Cash Discounts

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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

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

the common carrier.

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.

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

KINIKSA PHARMACEUTICALS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Other Incentives

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The co-pay assistance programs assist certain commercially insured patients by reducing each participating patient’s financial responsibility for the purchase price, up to a specified dollar amount of assistance.

Collaboration Revenue

Collaboration Expenses

Collaboration expenses consist of Regeneron’s share of the profit related to ARCALYST sales under the license agreement (the “Regeneron Agreement”) with Regeneron (see Note 13) and the cost of products sold under collaboration agreements.

The Company also evenly split with Regeneron any proceeds received by the Company from any licensees, sublicensees and distributors in consideration for the sale, license or other disposition of rights with respect to ARCALYST, including upfront payments, milestone payments and royalties.

License and Collaboration Revenue

License and collaboration revenue includes amounts recognized related to upfront payments, royalty revenue, milestone payments and products sold under collaboration agreements.

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (“Topic 808”).

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We evaluate the measure of progress and related inputs each reporting period and any resulting adjustments to revenue are recorded on a cumulative catch-up basis.

Consideration received that does not meet the requirements to satisfy ASC 808 or ASC 606 revenue recognition criteria is recorded as deferred revenue in the accompanying consolidated balance sheets, classified as either short-term (less than 12 months) or long-term (more than 12 months) deferred revenue based on our best estimate of when such revenue will be recognized.

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

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

Intangible Assets

Upon FDA approval and commercial launch of ARCALYST in March 2021, the Company capitalized the $ 20,000 milestone payment to Regeneron for a specified regulatory milestone as a 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 .

57 unchanged sentences

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 and 2020.

The Company reported a net loss attributable to common shareholders for the year ended December 31, 2021.

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.

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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.

As a result, the Company has not recorded any income tax benefits from losses incurred in Bermuda during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses.

In 2023, Bermuda passed legislation enacting a corporate income tax effective in 2025 on companies that meets certain requirements.

At the current time, the Company does not meet these requirements, but if the Company meets these requirements in the future, it could become subject to taxation in Bermuda.

The Company’s wholly owned U.S.

subsidiaries, Kiniksa US and Primatope, are subject to federal and state income taxes in the United States.

The Company’s wholly owned subsidiary Kiniksa UK, and its wholly owned subsidiaries, Kiniksa Germany, Kiniksa France, and Kiniksa Switzerland, are subject to taxation in their respective countries.

The Company’s wholly owned subsidiary Kiniksa UK, its Swiss branch office and its wholly owned subsidiaries:

Kiniksa Germany, Kiniksa France, and Kiniksa Switzerland, are subject to taxation in their respective countries.

Certain of the Company’s subsidiaries, primarily Kiniksa US, operate under cost-plus arrangements.

The Company’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.

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.

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

federal and state research and development credits, the Foreign Derived Intangible Income (“FDII”) deduction and share-based compensation taxable events.

The Company’s UK benefit for income taxes relates to the deferred tax benefit associated with the release of the valuation allowance on the deferred tax assets partially offset by the current tax expense associated with the taxable income in the United Kingdom of its wholly owned subsidiary, Kiniksa UK.

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.

4 unchanged sentences

Recently Adopted Accounting Pronouncements

Accounting standards that have been issued by the Financial Accounting Standards Board or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

In November 2023, the FASB issued Accounting Standards Update No.

2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures.

The amendments require disclosure of incremental segment information on an annual and interim basis.

The amendments also require companies with a single reportable segment to provide all disclosures required by this amendment and all existing segment disclosures in Accounting Standards Codification 280, Segment Reporting.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

The Company does not expect the adoption of the amendments to have a material impact on its financial statements.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, Income Taxes - Improvements to Income Tax Disclosures.

The amendments require (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction.

The amendments are effective for annual periods beginning after December 15, 2024.

The Company does not expect the adoption of the amendments to have a material impact on its financial statements.

Fair Value of Financial Assets and Liabilities

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Cash equivalents — money market funds

Cash equivalents — U.S.

Treasury notes

Short-term investments — U.S.

1 unchanged sentence

During the years ended December 31, 2023 and 2022 there were no transfers between Level 1, Level 2 and Level 3.

The money market funds were valued using quoted prices in active markets, which represent a Level 1 measurement in the fair value hierarchy.

The money market funds were valued using quoted prices in active markets, which represent a Level 1

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(Amounts in thousands, except share and per share amounts)

measurement in the fair value hierarchy.

The Company’s cash equivalents and short-term investments as of December 31, 2023 and 2022 included U.S.

2 unchanged sentences

Treasury notes which investments were each due within six months of such date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

December 31, 2023

4 unchanged sentences

December 31, 2022

Cash equivalents — U.S.

Treasury notes

Short-term investments — U.S.

Treasury notes

As of December 31, 2022, the Company held 2 securities that were in an unrealized loss position.

The aggregate fair value of securities held by the Company in an unrealized loss position was $ 7,471 as of December 31, 2022.

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 as of December 31, 2021.

As of both December 31, 2022 and 2021 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, 2022 and 2021.

As of December 31, 2023, the Company held no securities in an unrealized loss position.

As of December 31, 2022 we consider the unrealized losses in our investment portfolio to be temporary in nature and not due to credit losses.

We have the ability to hold such investments until recovery of the fair value.

We utilize the specific identification method in computing realized gains and losses.

We had no realized gains and losses on our available-for-sale securities for the years ended December 31, 2023 or 2022.

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.

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

Product Revenue, net

15 unchanged sentences

Balance at December 31, 2022

(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, 2023 and 2022, included in our consolidated balance sheets, are summarized as follows:

2 unchanged sentences

Total revenue-related reserves

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.

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(Amounts in thousands, except share and per share amounts)

Inventory consisted of the following:

3 unchanged sentences

Total inventory

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Property and Equipment, Net

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

Kiniksa US and Kiniksa UK leases office and laboratory space under operating leases.

Additionally, Kiniksa US leases vehicles under an operating lease.

The Company leases office, laboratory space and vehicles under operating leases.

In May 2023, the Company entered into a lease amendment to extend the term of the Lexington, Massachusetts headquarters lease by forty-eight months to August 31, 2028.

The Company accounted for the lease amendment as a modification and recorded increases in the right-of-use-assets and lease liability of $ 8,515 .

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

2 unchanged sentences

Total lease cost

Weighted-average remaining lease term (years)

Weighted-average discount rate

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

Weighted-average remaining lease term (years)

Weighted-average discount rate

Maturities of operating leases liabilities were as follows:

As of December 31,

2025 and thereafter

Total future minimum lease payments

22 unchanged sentences

Common Shares

The rights of the holders of the Company’s Class A common shares, Class B common shares, Class A1 common shares and Class B1 common shares are identical, except with respect to voting, transferability and conversion, as described below.

12 unchanged sentences

There are no conversion rights associated with the Class A common shares.

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(Amounts in thousands, except share and per share amounts)

Share-Based Compensation

4 unchanged sentences

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.

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(Amounts in thousands, except share and per share amounts)

determined by the Company’s board of directors.

As of December 31, 2023, 4,030,035 shares remained available for future grant.

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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

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(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.

For awards granted to employees with six year vesting terms, 16 % of the option vests on the first anniversary of the grant date and the remaining shares vest based on a predetermined vesting schedule for five years thereafter.

2018 Employee Share Purchase Plan

2 unchanged sentences

The number of Class A common shares that may be issued under the 2018 ESPP automatically increases on each January 1, beginning in 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lesser of (1) 1 % of the Class A common shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (2) a smaller number of Class A common shares determined by the Company’s board of directors, provided that no more than 6,420,000 Class A common shares may be issued under the 2018 ESPP.

In December 2022, the Company’s board of directors resolved not to increase the number of Class A common shares reserved for issuance under the 2018 ESPP.

In December 2023, the Company’s board of directors approved an increase as of January 1, 2024 of 215,000 Class A common shares.

As of December 31, 2023, 528,130 Class A common shares were available for future issuance under the 2018 ESPP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Share Options

1 unchanged sentence

Outstanding as of December 31, 2022

( 1,628,437 )

Outstanding as of December 31, 2023

6 unchanged sentences

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

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

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

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

The total fair value of share options vested during the years ended December 31, 2022, 2021 and 2020 was $ 21,229 , $ 22,870 and $ 17,931 , respectively.

As of December 31, 2022, total unrecognized compensation expense related to the unvested share option awards was $ 36,400 which is expected to be recognized over a weighted average remaining period of 2.62 years.

Option Valuation

5 unchanged sentences

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

Restricted Share Units

RSUs represent the right to receive shares of the Company’s Class A common shares upon vesting of the RSUs.

The fair value of each RSU award is based on the closing price of the Company’s Class A common shares on the date of grant.

Starting March 2021, the Company granted RSUs with service conditions (“Time-Based RSUs”) to eligible employees.

The Time-Based RSUs vest 25 % on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates.

Rilonacept Long-Term Incentive Plan

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”).

2 unchanged sentences

The number of Class A common shares issuable under the first RSU award (“First RSU Award”) as a result of the achievement of the RLTIP Milestone was determined in accordance with the RLTIP based on the earnout percentage, and such RSUs vested on the first anniversary of the Achievement Date, subject to continued employment on such date.

The second RSU award was granted on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, based on both the earnout percentage and the upside earnout percentage, and will vest on the second anniversary of the Achievement Date, subject to continued employment through such date.

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.

The second RSU award was granted on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, based on both the earnout percentage and the upside earnout percentage, and vested on the second anniversary of the Achievement Date, subject to continued employment on such date.

During the years ended December 31, 2020 and 2019, the Company granted the First RSU Awards as part of the RLTIP to eligible employees.

During the year ended December 31, 2021, the RLTIP Milestone was achieved and 187,682 of Class A common shares were issued under the First RSU Awards in accordance with the RLTIP and vested in one installment in March 2022 (on the first anniversary of the Achievement Date).

During the year ended December 31, 2021, the Second RSU Awards were granted to eligible employees on the Achievement Date with 142,283 shares granted in accordance with the RLTIP which vested in one installment in March 2023.

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

Starting March 2021, the Company granted RSUs with service conditions (“Time-Based RSUs”) to eligible employees.

The Time-Based RSUs vest 25 % on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates.

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.

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

During the year ended December 31, 2020, 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, 2023:

8 unchanged sentences

Total stock-based compensation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Out-Licensing Agreements

4 unchanged sentences

Under the Genentech License Agreement, the Company received an upfront payment of $ 80,000 for the license.

In the first quarter of 2023, following the Company’s last delivery of certain drug supplies to Genentech, Genentech became obligated to make an additional cash payment of $ 20,000 .

In addition, the Company will be eligible to receive up to approximately $ 600,000 in contingent payments, including specified development, regulatory and sales-based milestones, before fulfilling the Company’s upstream financial obligations.

During the year ended December 31 2023, the Company received cash payments of $ 20,000 following delivery of certain drug supplies to Genentech and $ 15,000 following Genentech’s achievement of a development milestone related to a new indication under the Genentech License Agreement.

In the fourth quarter of 2023, following the achievement of a development milestone related to a second indication under the Genentech License Agreement, Genentech became obligated to make an additional cash payment of $ 10,000 which the Company recorded in accounts receivable as of December 31, 2023.

Under the terms of the Genentech License Agreement, the Company is eligible to receive a total of

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(Amounts in thousands, except share and per share amounts)

approximately $ 600,000 in contingent payments, including specified development, regulatory and sales-based milestones, before fulfilling the Company’s upstream financial obligations, of which approximately $ 575,000 remain as of December 31, 2023.

The Company will also be eligible to receive tiered percentage royalties on a Genentech Licensed Product-by-Genentech Licensed Product basis ranging from low-double digits to mid-teens on annual net sales of each Genentech Licensed Product, subject to certain customary reductions, with an aggregate minimum floor, before fulfilling the Company’s upstream financial obligations.

3 unchanged sentences

Both the Company and Genentech participate in a joint transition committee, which coordinates and oversees the technology and inventory transition activities relating to the development of the Genentech Licensed Products and the Company’s conduct and finalization of its Phase 2b clinical trial.

Genentech has the right, for a specified period of time, to purchase an additional batch of vixarelimab drug substance under the Genentech License Agreement at cost plus a markup.

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

9 unchanged sentences

and (iv) completion of the Phase 2b clinical trial for vixarelimab.

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(Amounts in thousands, except share and per share amounts)

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

2 unchanged sentences

The initial drug supply and drug product resupply are considered distinct from the exclusive license for vixarelimab as Genentech can benefit from such supply together with the license transferred by the Company at the inception of the Genentech License Agreement.

The completion of the Phase 2b clinical trial is considered distinct from the exclusive license for vixarelimab as Genentech can benefit from the data generated by such trial together with such license.

The completion of the Phase 2b clinical trial is considered distinct from the exclusive license for vixarelimab as Genentech can benefit from the

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(Amounts in thousands, except share and per share amounts)

data generated by such trial together with such license.

Therefore, each represents a separate performance obligation within a contract with a customer at contract inception.

1 unchanged sentence

The Company determined that the $ 20,000 variable consideration related to the delivery of the initial drug supply and drug product resupply was no longer constrained during the fourth quarter of 2022, as the Company determined that it could assert it was not probable that a significant reversal in the amount of cumulative revenue recognized would occur.

The Company met the milestone obligation subsequent to year-end and invoiced Genentech for the related $ 20,000 payment for the delivery of certain drug material.

The Company met the milestone obligation in the first quarter of 2023 and invoiced Genentech for the related $ 20,000 payment for the delivery of certain drug material.

In 2023, the Company added $ 25,000 to the transaction price following Genentech’s achievement of two development milestones under the Genentech License Agreement.

The Company determined that all other variable considerations related to the future development and regulatory milestones, are deemed fully constrained and therefore excluded from the transaction price due to the high degree of uncertainty and risk associated with these potential payments, as the Company also determined that it could not assert that it was not probable that a significant reversal in the amount of cumulative revenue recognized would occur.

22 unchanged sentences

Revenue is recorded as a percentage of the allocated transaction price times the percent of completion.

The Company recognized $ 37,083 and $ 87,656 of collaboration revenue during the years ended December 31, 2023 and 2022, respectively, under the Genentech License Agreement related to the license, completed portion of the Phase 2b Clinical trial for vixarelimab, and materials delivered.

As a result of the $ 25,000 in development milestones achieved by Genentech, the Company recognized revenue of $ 21,914 , during the year ended December 31, 2023, related to performance obligations satisfied in prior periods.

The remaining revenue was recognized as a result of further progress towards completion of the phase 2b clinical trial for vixarelimab and materials delivered.

The Company expects to recognize the remaining deferred revenue associated with the Genentech License Agreement over the remaining portion of the Phase 2b clinical trial for vixarelimab.

KINIKSA PHARMACEUTICALS, LTD.

1 unchanged sentence

(Amounts in thousands, except share and per share amounts)

The Company recognized $ 87,656 of collaboration revenue during the year ended December 31, 2022 under the Genentech License Agreement related to the license, completed portion of the Phase 2b Clinical trial for vixarelimab, and materials delivered.

Huadong Collaboration Agreements

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Huadong has the right to terminate each Huadong Collaboration Agreement at its discretion upon 12 months ’ notice and either party may terminate the applicable Huadong Collaboration Agreement in the event of an uncured material breach of the other party or in the case of insolvency of the other party.

In addition, the Company may terminate the applicable Huadong Collaboration Agreement if Huadong or its affiliates or sublicensees

In addition, the Company may terminate the applicable Huadong Collaboration Agreement if Huadong or its affiliates or sublicensees challenges the scope, validity, or enforceability of the Company’s patent rights being licensed to Huadong.

If Huadong and its affiliates do not conduct any material development or commercialization activities with respect to a Huadong Licensed Product in the People’s Republic of China for a continuous period of longer than six months , then, subject to certain exceptions, the Company may terminate the Huadong Collaboration Agreement applicable to such Huadong

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

challenges the scope, validity, or enforceability of the Company’s patent rights being licensed to Huadong.

Licensed Product with 60 days ’ prior written notice.

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

14 unchanged sentences

Revenue related to these royalties and sales milestones will only be recognized when the associated sales occur, and relevant thresholds are met, under the sales or usage-based royalty exception of Topic 606.

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(Amounts in thousands, except share and per share amounts)

As noted above, the Company identified two performance obligations in the mavrilimumab Huadong Collaboration Agreement:

1 unchanged sentence

and (ii) the clinical manufacturing supply of certain materials for mavrilimumab products in the Huadong Territory.

The selling price of each performance obligation in the mavrilimumab Huadong Collaboration Agreement was determined based on the Company’s standalone selling price (“SSP”) with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis.

The selling price of each performance obligation in the mavrilimumab Huadong Collaboration Agreement was determined based on the

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Company’s standalone selling price (“SSP”) with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis.

The Company allocated the variable consideration related to the manufacturing obligations to the future clinical supply of mavrilimumab products in the Huadong Territory and the remaining fixed and variable consideration to the license obligation.

2 unchanged sentences

The Company will recognize revenue for the clinical manufacturing supply obligations at a point in time, that is upon each delivery of the supply to Huadong.

The Company has not recognized any revenue under the mavrilimumab Huadong Collaboration Agreement for the year ended December 31, 2023 as there has been no delivery of clinical manufacturing supply of certain materials under the mavrilimumab Huadong Collaboration Agreement to date.

Accounting for Rilonacept Huadong Collaboration Agreement

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The Company recognizes revenue for the combined performance obligation consisting of the exclusive license for rilonacept and clinical and commercial manufacturing obligations for rilonacept products in the Huadong Territory at a point in time, upon which control of materials are transferred to Huadong for each delivery of the associated materials.

The Company currently expects to recognize the

The Company currently expects to recognize the revenue over the life of the agreement.

This estimate considers the timing of development and commercial activities

KINIKSA PHARMACEUTICALS, LTD.

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(Amounts in thousands, except share and per share amounts)

revenue over the life of the agreement.

This estimate considers the timing of development and commercial activities under the rilonacept Huadong Collaboration Agreement and may be reduced or increased based on changes in the various activities.

The Company has no t recognized any revenue under the rilonacept Huadong Collaboration Agreement for the year ended December 31, 2022 as there has been no delivery of materials under the rilonacept Huadong Collaboration Agreement to date.

The full transaction price of $ 12,000 is recorded in long-term deferred revenue, based upon timing of anticipated future shipments.

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

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

The Company has no t recognized any revenue under the rilonacept Huadong Collaboration Agreement for the years ended December 31, 2023 and 2022 as there has been no delivery of materials under the rilonacept Huadong Collaboration Agreement to date.

As of December 31, 2023, $ 46 is recorded in current deferred revenue and $ 11,954 is recorded in non-current deferred revenue, based upon timing of anticipated future shipments.

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

Balance at End

1 unchanged sentence

Reclassification

Years Ended December 31, 2022

Year ended December 31, 2023

Contract Assets:

4 unchanged sentences

Total Contract Liabilities

Balance at End

Beginning of Period

Reclassification

Year ended December 31, 2022

Contract Assets:

Genentech vixarelimab

Contract Liabilities:

Genentech vixarelimab

Huadong rilonacept

Total Contract Liabilities

License and Acquisition Agreements

5 unchanged sentences

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 accounted for the acquisition of technology as an asset acquisition because it

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(Amounts in thousands, except share and per share amounts)

did not meet the definition of a business.

The Company recorded the upfront payment and technology transfer payment as research and development expense in the consolidated statement of operations and comprehensive income (loss) because the acquired technology represented in-process research and development and had no alternative future use.

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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

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(Amounts in thousands, except share and per share amounts)

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.

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.

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

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

During the year ended December 31, 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.

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)

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(Amounts in thousands, except share and per share amounts)

$ 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 income (loss) because the acquired technology represented in-process research and development and had no alternative future use.

During the years ended December 31, 2022, 2021 and 2020, the Company did no t 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 years ended December 31, 2023, 2022 and 2021, the Company recorded research and development expenses of $ 94 , $ 56 and $ 53 respectively, related to a milestone and the annual maintenance fee in connection with the retained contracts.

Beth Israel Deaconess Medical Center License Agreement

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”).

In 2019, the Company acquired all of the outstanding securities of Primatope Therapeutics, Inc.

(“Primatope”), the company that owned or controlled the intellectual property related to abiprubart ( also known as KPL-404).

In connection with the Company’s acquisition of Primatope, the Company acquired the rights to an exclusive license to certain intellectual property rights controlled by Beth Israel Deaconess Medical Center, Inc.

(“BIDMC”) to make, use, develop and commercialize abiprubart (the “BIDMC Agreement”).

Under the BIDMC Agreement, the Company is solely responsible for all development, regulatory and commercial activities and costs.

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The Company is also obligated to pay a low single-digit royalty on annual net sales of products licensed under the agreement.

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(Amounts in thousands, except share and per share amounts)

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

Regeneron License Agreement

In September 2017, the Company entered into 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.

In September 2017, the Company entered into the Regeneron Agreement with Regeneron, pursuant to which the Company has been granted an exclusive license under certain intellectual property rights controlled by Regeneron to develop and commercialize ARCALYST worldwide, excluding the Middle East and North Africa, for all indications other than those in oncology and local administration to the eye or ear.

Upon receiving positive data in RHAPSODY, the Company’s pivotal Phase 3 clinical trial of ARCALYST, Regeneron transferred the biologics license application (“BLA”) for ARCALYST to the Company.

In March 2021, when the FDA granted approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older, the Company assumed the sales and distribution of ARCALYST for CAPS and DIRA in the United States.

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 has made $ 32,500 in payments under the Regeneron Agreement in connection with upfront fees and achievement of regulatory milestones, including a $ 20,000 payment in the first quarter of 2021 in connection with the achievement of a regulatory milestone.

The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business.

The Company recorded the upfront payment as research and development expense in the consolidated statement of operations and comprehensive income (loss) because the acquired technology represented in-process research and development and had no alternative future use.

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(Amounts in thousands, except share and per share amounts)

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.

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(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.

To the extent permitted in accordance with the Regeneron Agreement, the fully-burdened costs incurred by each of the Company and Regeneron in performing (or having performed) the technology transfer of the manufacturing process for ARCALYST drug substance will also be deducted from net sales of ARCALYST to determine profit.

The Company also evenly splits with Regeneron any proceeds received by the Company from any licensees, sublicensees and distributors in consideration for the sale, license or other disposition of rights with respect to ARCALYST, including upfront payments, milestone payments and royalties.

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Pursuant to the Regeneron Agreement, during the year ended December 31, 2021, the Company entered into a commercial supply agreement under which Regeneron agreed to manufacture product for the Company’s use, including for commercial sales.

The commercial supply agreement terminates upon the termination of the Regeneron Agreement or the date of completion of the transfer of technology related to the manufacture of ARCALYST.

The commercial supply agreement terminates upon the sooner of the termination of the Regeneron Agreement and the date of completion of the transfer of technology related to the manufacture of ARCALYST.

During the year ended December 31, 2023, the Company incurred $ 1,356 of research and development expense related to the purchase of drug materials under the clinical supply agreement.

During the years ended December 31, 2022 and 2021, the Company did no t incur any research and development expense related to the purchase of drug materials under the clinical supply agreement.

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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.

Regeneron has the right to terminate the agreement if the Company suspends its

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(Amounts in thousands, except share and per share amounts)

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.

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(Amounts in thousands, except share and per share amounts)

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.

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During the years ended December 31, 2023, 2022 and 2021, the Company did no t record research and development expense in connection with milestone payments due under the MedImmune Agreement.

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(Amounts in thousands, except share and per share amounts)

As a company incorporated in Bermuda, the Company is principally subject to taxation in Bermuda.

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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.

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.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five or fifteen years (depending on where research is conducted) pursuant to IRC Section 174.

The most significant impact of this provision is an increase to our FDII benefit and an increase to our cash tax liability for 2022, the tax year in which the provision took effect.

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

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

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

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

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

The consolidated Company did not incur tax liabilities on any of these intra-entity transfers since the transferor, Kiniksa Bermuda, is exempt from income tax in Bermuda, its jurisdiction of incorporation.

Kiniksa UK accounted for the 2021 and 2022 intra-entity transfers as transfers of assets between related parties and received stepped up tax bases in the contributed intellectual property assets, equal to the fair value of the assets at the time of transfer.

The Company recorded UK deferred tax assets as a result of these contributions, which represent the difference between the stepped-up tax bases and the book bases for financial statement purposes.

At the time of the 2021 and 2022 transfers of the relevant assets, the Company recorded a valuation allowance on the full amount of the recognized deferred tax assets.

The fair value of the January 2021 transfer of ARCALYST intellectual property assets was determined utilizing forecasted cash flows attributable to commercial operations and estimated probabilities of success of such cash flows, discounted to present value utilizing the discounted cash flow method.

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

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

The December 2023 allocation of the assets to the Swiss branch did not result in a taxable disposal for Kiniksa UK as the allocation was to a branch within the entity.

The future results of Kiniksa UK’s Swiss branch office are subject to income taxes in Switzerland and the Company expects it will not be subject to tax in the UK.

Kiniksa UK’s Swiss branch office received a step up in basis resulting in a Swiss deferred tax asset.

The fair value of the allocated ARCALYST intellectual property assets was determined utilizing forecasted cash flows attributable to commercial

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(Amounts in thousands, except share and per share amounts)

The Company including Kiniksa UK entered into agreements with, Kiniksa US, under which Kiniksa US provides management, commercial, manufacturing and research and development services to those parties for which Kiniksa US receives costs plus a service fee.

In 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.

In February 2022, the Company transferred exclusive rights to develop and commercialize mavrilimumab in the Asia Pacific region, excluding Japan, to Kiniksa UK.

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

The Company did no t incur any material tax liabilities in connection with the transfers and Kiniksa UK received a stepped up tax basis in the intellectual property that was transferred.

The Company recorded deferred tax assets as a result of these transfers which represents the difference between the stepped up tax basis and book basis for financial statement purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse.

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

operations and estimated probabilities of success of such cash flows, discounted to present value utilizing the discounted cash flow method.

The fair value of the ARCALYST inventory was determined utilizing the average net selling price less estimated costs to sell.

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

Foreign (U.S., U.K., Germany, France, Switzerland)

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

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

Current income tax benefit (provision):

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Share-based compensation

Permanent differences

state taxes, net of federal

Uncertain tax positions

IP transfers and allocation

Inventory allocation

Change in valuation allowance

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Accrued expenses and other liabilities

Intangible Asset

Intangible assets

Capitalized research and development

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Net deferred tax assets

As of December 31, 2022, the Company had no federal research and development tax credit carryforwards available to reduce future tax liabilities.

As of December 31 2021, the Company had federal research and development tax credit carryforwards of approximately $ 1,546 available to reduce future tax liabilities.

As of December 31, 2023 and 2022, the Company had no federal research and development tax credit carryforwards available to reduce future tax liabilities.

As of December 31, 2023 and 2022, the Company had state research and development tax credit carryforwards of approximately $ 337 and $ 297 respectively, available to reduce future tax liabilities, which can be carried forward indefinitely.

As of December 31, 2023 and 2022 the Company had foreign net operating loss (NOLs) carryforwards of $ 1,128 and $ 3,902 respectively, available to reduce future tax liabilities.

The NOLs maybe carried forward indefinitely subject to local utilization limitations.

The NOLs maybe carried forward and utilized, subject to local limitations.

As required by ASC 740 management regularly reassesses the valuation allowance on the Company’s deferred income tax assets.

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After assessing both the positive evidence and negative evidence, the Company determined it was more likely than not that its UK deferred tax assets would be realized in the future and released the associated valuation allowance during the year ended December 31, 2022.

This resulted in a benefit of $ 185,495 .

This resulted in a non-cash deferred tax benefit of $ 185,495 .

As of December 31, 2022, the Company maintained a full valuation allowance against its U.S.

deferred tax assets.

While the Company still maintains a full valuation allowance on its US deferred tax assets as of December 31, 2022, based on current US forecasted income, it is reasonably possible that the Company will release its valuation allowance on its US deferred tax assets within one year .

There are no material deferred tax assets in the jurisdictions outside Kiniksa US and Kiniksa UK.

In the second quarter of 2023, the Company assessed the valuation allowance on its U.S.

deferred tax assets and considered positive evidence, including cumulative U.S.

income in recent years, primarily related to cost plus arrangements and expectations regarding future profitability.

The Company determined it was more likely than not that its U.S.

deferred tax assets are realizable in the future and released the associated valuation allowance as of June 30, 2023.

In the fourth quarter of 2023, the Company assessed the valuation allowance on its Kiniksa UK deferred tax assets and considered positive and negative evidence, including among other things, the impact of future profitability decreasing in the UK as a result of the allocation of ARCALYST to the Swiss branch office.

After assessing both the positive and negative evidence, the Company determined it was more likely than not that a portion of the UK deferred tax assets would not be realized in the future and established a partial valuation allowance on those assets during the year ended December 31, 2023.

The Company recognized a non-cash deferred tax benefit of $ 33,788 during the year ended December 31, 2023.

This benefit primarily resulted from the step up in basis of intangible assets and inventory received in Switzerland associated with the allocation of ARCALYST to the Swiss branch office and the release of the U.S.

valuation allowance.

This was partially offset by the establishment of a partial UK valuation allowance.

There are no material deferred tax assets in the jurisdictions outside the United States, UK and Switzerland.

Utilization of the state research and development tax credits may be subject to substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that could occur in the future.

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Valuation allowance at end of year

The valuation allowance decreased by $ 108,360 in 2022 primarily as a result of the release of the valuation allowance for the UK deferred tax assets which primarily consisted of the tax basis in intellectual property transferred from Bermuda and net operating losses.

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

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(Amounts in thousands, except share and per share amounts)

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.

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Gross increases based on current period tax positions

Gross increases based on tax positions of the prior periods

Gross decreases based on tax positions of the prior periods

Unrecognized tax benefits at the end of the year

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

The Company had recorded immaterial interest on the tax positions during the year ended December 31, 2023, 2022 and 2021.

The Company files US federal income tax returns and income tax returns in various state, local and foreign jurisdictions.

The Company files U.S.

federal income tax returns and income tax returns in various state, local and foreign jurisdictions.

The Company’s income tax returns are subject to tax examinations for the tax years ended December 31, 2020 and subsequent years.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by tax authorities to the extent utilized in a future period.

No additional provision has been made for withholding taxes related to undistributed foreign earnings of the Company’s wholly owned foreign subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries.

As such, earnings are expected to be permanently reinvested, the investments are permanent in duration, or the Company has estimated that no additional tax liability will arise as a result of the distribution of such earnings.

Unremitted earnings are $ 50,466 as of December 31, 2023 and a liability could arise if amounts are distributed by the subsidiaries or if subsidiaries are ultimately disposed, which could result in up to $ 15,140 withholding taxes related to permanently reinvested earnings.

Net Income (Loss) per Share

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As the liquidation and dividend rights are identical, losses are allocated on a proportionate basis and the resulting net income (loss) per share attributed to common shareholders will, therefore, be the same for both Class A and Class B common shares on an individual or combined basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

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

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The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the average unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase the Company’s common stock at the average market price during the period.

For years ended December 31, 2021 and 2020 the Company’s potentially dilutive securities, which include options and unvested RSUs, have been excluded from the computation of diluted net loss per share attributable to common shareholders for the periods indicated as the effect would be to reduce the net loss per share attributable to common shareholders.

For year ended December 31, 2021 the Company’s potentially dilutive securities, which include options and unvested RSUs, have been excluded from the computation of diluted net loss per share attributable to common shareholders for the periods indicated as the effect would be to reduce the net loss per share attributable to common shareholders.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation

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(Amounts in thousands, except share and per share amounts)

of diluted net income (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:

Years ended December 31,

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

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(Amounts in thousands, except share and per share amounts)

Manufacturing Commitments

The Company entered into supply agreements with Regeneron to provide both clinical supply and commercial product (see Note 13).

The Company entered into agreements with several CMOs to provide the Company with preclinical and clinical trial materials.

In May 2023, the Company signed a letter of intent with a CDMO related to its technology transfer of the manufacturing process for ARCALYST drug substance.

The Company has additionally entered into agreements with several CDMOs to provide the Company with preclinical and clinical trial materials for its non-ARCALYST assets.

As of December 31, 2023, the Company had committed to minimum payments under these agreements totaling $ 128,297 , of which $ 51,376 are due within one year.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures