Kiniksa Pharmaceuticals (NASDAQ:KNSA) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://edge.media-server.com/mmc/p/2qmct4et/
Summary
Kiniksa Pharmaceuticals reported a significant revenue increase in Q1 2026, with Arcalyst sales growing to $214.3 million, marking a 56% year-over-year growth.
The company raised its full-year 2026 revenue guidance to $930-$945 million, up from $900-$920 million, driven by strong commercial execution and increased adoption of Arcalyst.
Kiniksa Pharmaceuticals is advancing its pipeline with ongoing Phase 2/3 trials for KPL 387 and plans to initiate a Phase 1 study for KPL 1161 by the end of the year.
The company launched a targeted direct-to-consumer campaign, 'Hearts Home', to increase awareness of Arcalyst among potential recurrent pericarditis patients.
The financial position remains robust, with a net income increase to $22.6 million and a cash balance of $468.1 million, allowing continued investment in strategic initiatives.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to The Koniksa Pharmaceuticals first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press Star one one on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press Star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jonathan Kirshenbaum, Investor Relations. Please go ahead.
Jonathan Kirshenbaum (Investor Relations)
Thank you. Operator Good morning everyone and thank you for joining Kiniksa's call to discuss our first quarter 2026 financial results and recent portfolio execution. A press release highlighting these results can be found on our website under the Investors section. As for the agenda, our Chief Executive Officer, Sanj K. Patel will start with an introduction. From there, Ross Mote, our Chief Operating Officer, will provide an update on Arcalyst's commercial execution. Then Kiniksa's Chief Medical Officer, Dr. John Paolini, will review our KPL 387 development program and the ongoing Phase2.3 clinical trial in recurrent pericarditis. After that, Mark Rugosa, our Chief Financial Officer, will review our first quarter 2026 financial results. And finally, Sanj will share closing remarks and kick off the Q and A session for which Evan Tessari, our Chief Strategy Officer, will also be on the line. Before getting started, please note that we will be making forward looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from such statements. A review of these statements and risk factors can be found on this slide as well as under the caption risk factors contained in our SEC filings. These statements speak only as the date of this presentation and we undertake no obligation to update such statements except as required by law. With that, I'll turn it over to Sanj. Thanks Jonathan and good day everyone. Conicsa continues to build strength across the business, which is driven by both our commercial progress with Arcalyst and and the advancement of our pipeline programs including KPL 387 and KPL 1161. On the commercial side, the end of the first quarter marks the fifth anniversary of the FDA approval for Arcalyst in recurrent pericarditis. Through our consistent and effective execution over those past five years, we've established and developed the market for this debilitating disease. This has enabled a fundamental shift in the treatment paradigm for patients and led to significant growth for the Arclis franchise within our clinical portfolio. We continue to advance the KPL387 phase 2 phase 3 study in recurrent myocarditis. Data from the phase 2 dose focusing portion of the study are on track for the second half of this year. We also expect to start the Phase three portion of the program by the end of this year. In addition, we are advancing KPL1161 closer to the clinic. This is our SC modified IL1 Alpha and Beta inhibitor with a target profile of quarterly dosing and as we've previously shared, we plan to start a Phase one study by the end of this year. Our robust financial position together with profitable ARCLIS revenue growth gives us the ability to invest in value creation across the business
Sanj K. Patel (Chief Executive Officer)
Arcalyst continues to be on a robust trajectory five years from launch and we intend to capture the additional opportunity that remains across the recurrent pericarditis market. Adoption of long term IL1alpha and beta inhibition with ARCALYST is expanding in the approximately 40,000 patients each year in the United States who experience recurrent pericarditis flares in the first quarter of this year. This expanding adoption contributed to Arcalyst sales growing to $214.3 million. Looking to the rest of the year, the marked increase in both the breadth and depth of prescribing we observed in the first quarter provides momentum going forward. As a result, we've now raised our full year 2026 revenue guidance to 930 to $945 million from our previous guidance of 900 to $920 million. In summary, Kiniksa is a well capitalized, growth orientated company that is well positioned to maximize the substantial Arcalyst commercial opportunity that is available to us. The company's portfolio programs have numerous milestones throughout the rest of the year that also have the potential to create meaningful value for now.
Ross Mote (Chief Operating Officer)
Rosmos thank you Sanj Our continued commercial execution has driven strong revenue growth in Q1 leading to an Arcalyst net revenue of $214.3 million which represents an increase of more than $76 million compared to the first quarter 2025 and approximately $12 million over Q4 of last year. This revenue growth was driven by strong underlying commercial metrics which outpaced the Q1 industry wide headwinds related to co pay resets and changes in insurance plans. In particular, growth was achieved by two key commercial dynamics. Firstly, we saw an acceleration in the growth of new prescribers through the quarter which resulted in the highest quarterly increase in new patient enrollments since launch. This bodes particularly well for the rest of the year as the new larger prescriber base along with the durability of average duration of therapy has enabled us to increase our full year revenue guidance from between 900 to $920 million to between 930 and 945 million. Secondly, in Q1 our gross to net increased compared to the prior quarter. As expected, however it was lower than Q1 of 2025. This was mainly driven by changes to our co pay support program where we made enhancements to our assistance program design which reduced the average copay payout patients relative to prior Q1s. With the momentum created early in the year combined with our strong underlying commercial foundation, we believe we are well positioned to continue driving ARCLIS growth through the rest of the year and believe there is substantial opportunity ahead to support many more recurrent pericarditis patients in Q1. Thanks to the strong execution from our team, approximately 400 new prescribers wrote Arcalist for the first time, representing the highest quarter on quarter increase launched to date. This brings the total number of prescribers to more than 4,550. As a reminder, with more than 25,000 healthcare professionals seeing recurrent pericarditis patients in a given year, there is substantial opportunity ahead. We also saw growth in the number of healthcare professionals who became repeat prescribers during Q1, resulting in approximately 1,320 prescribers in total who have now prescribed Arcalystt multiple times. The acceleration we've seen in both the breadth and the depth of prescribing reflects our continued commercial execution as well as the growing understanding and adoption of interleukin 1 alpha and beta inhibition as the treatment choice following the prior use of NSAIDS and colchicine as recommended in the 2025 ACC Concise Clinical Guidance earlier this month we announced the initiation of our highly targeted direct to consumer campaign Hearts Home. This campaign is designed to identify and target patients who may be suffering with recurrent pericarditis and not currently taking Arcalyst with the aim of empowering them to discuss Arcalyst with their healthcare provider. Through digital innovation including the use of AI, we are able to deploy DTC in a way that's cost effective and highly targeted and ultimately applicable for a rare disease market. We have focused on utilizing our existing patient database and added search optimization and machine learning models informed by DE identified claims, demographics and consumer market data to define an enriched population of potential recurrent pericarditis patients such as to deliver tailored content opposed to a traditional DTC approach of broad scale and high cost marketing. The centerpiece of our campaign is a connected TV commercial that is directed to potential patients through their individual streaming accounts on platforms such as YouTube and Hulu, as well as across social media channels. This campaign is informed by our market research which demonstrated that when a recurrent pericarditis patient inquires about Arcalyst to their provider, the healthcare professional is receptive to the inquiry and it results in Arcalystt being prescribed in around 80% of cases. As previously mentioned, our Arcalystt franchise is growing, is profitable and has significant opportunity ahead and this has allowed us to make disciplined investment decisions to expand our reach to capture the opportunity and help more patients. With that, I'll turn the call over to John to cover our KPL 387 development program.
John Paolini
Thank you Ross As a brief refresher, we leveraged our extensive clinical experience with the IL1 signaling pathway when designing the Integrated Development Program for KPL387 shown here. Broken down by phase of development, the core component of the program is the Phase three Placebo Controlled Event Driven Randomized Withdrawal study. Just as in Rhapsody, the PIVOTAL study which supported arcalyst approval in recurrent pericarditis, the primary efficacy endpoint for phase three will measure the reduction in risk of pericarditis recurrence as the primary demonstration of KPL387 efficacy for the label. We believe from our regulatory interactions that this study will be sufficient to support registration as a single pivotal study. As a reminder to maximize operational efficiency, we combined the Phase two dose focusing trial and the phase three PIVOTAL trial into a single integrated phase two three protocol so that phase three could initiate independently of phase two execution and we added long term extensions to all trial activities. We previously guided that we expect data from the dose focusing study outlined here in red in the second half of this year and today we guided that we expect to initiate the phase three portion of the study by the end of this year. The Phase 2 Dose Focusing Study builds on insights from previous clinical trials with Ralodicept and it is designed to define the KPL387PKPD relationship as well as to support the data driven approach for affirming the dose level for the phase three pivotal trial. Looking at the rolonocept phase two precedent in the left panels, the single active arm study demonstrated that IL1 pathway inhibition with ONCE weekly Ralonasept resulted in rapid and sustained reductions in reported pain and inflammation in patients with active recurrent pericarditis and elevated C Reactive protein over the initial six week treatment period as well as the subsequent long term extension through 24 weeks. Now looking forward, the KPL387 Phase 2 dose focusing study which is assessing four dose levels in up to 20 patients per arm, mirrors the Relonasept Phase 2 study in terms of study population, number of patients per arm and the primary endpoint which is time to treatment response. The study framework has been adjusted for the specific attributes of the long acting pharmacokinetics of KPL387. Thus, development stage appropriate data which are expected in the second half of this year are designed to provide useful information on the cadence and magnitude of initial response as well as the duration of action of KPL387 dose levels, affirming the dose level for Phase 3 and informing Phase 3 outcomes measures, I will now turn it over to our Chief Financial Officer Mark Thanks John.
Mark Rugosa (Chief Financial Officer)
This morning I will cover our first quarter 2026 financial performance. As always, you can find our detailed financial information in today's press Release. In the first quarter of 2026 we continue to build strong momentum across the business, advancing arclis, progressing our clinical portfolio and maintaining a strong financial position starting on the left hand side of this slide with our income statement. As you've heard from sanj and Ross, Arcalyst revenue grew 56% year over year to 214.3 million in the first quarter. This growth was driven by strong expansion in new prescribers and new patient enrollments which more than offset the impact of industry wide seasonal headwinds. Operating expense growth year over year was driven by several factors higher cost of goods sold due to arclis revenue growth, increased collaboration expenses aligned with higher Arcalyst revenue and collaboration profit. Higher R and D primarily due to increased clinical and manufacturing costs associated with the development of KPL387 and additional SGA primarily driven by investment associated with the commercialization of Arcalyst, including personnel and leveraging new technologies to enhance our targeting strategy and reach additional patients and HCPs. As a result of the strong revenue growth against more moderate expense growth, net income increased significantly to 22.6 million in the first quarter of 2026 compared to 8.5 million in the first quarter of 2025. Turning to the right hand side of this slide, you'll find the calculation for Arcalystt's collaboration profit which drives total collaboration expenses. In the first quarter of 2026, Arklis collaboration profit continued to grow faster than sales on a year over year basis up 73% to $151.2 million. Finally, at the bottom of this slide, we ended the first quarter with a 468.1 million cash balance representing $54 million of net cash generation for the period. We expect to remain cash flow positive on an annual basis under our current operating plan, enabling us to continuing to help patients while creating additional value in both the near and long term. With that, I will turn the call back to Sanj for closing remarks. Thanks, Mark.
Sanj K. Patel (Chief Executive Officer)
As you've heard, Kinikset is well positioned to build significant future value as we grow our IL1 Alpha and Beta inhibition franchise. We are dedicated to helping as many patients as possible with Arcalyst and to advancing the development of our clinical portfolio in order to bring additional therapies to patients suffering from debilitating diseases. With that, I'll now turn the call back to the operator for questions.
OPERATOR
Operator thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q and A roster. Our first question comes from Nick LaRusso with TD Cowan. Your line is open.
Nick LaRusso (Equity Analyst)
Great. Thanks very much for taking our question and congrats on the strong quarter. Can you discuss what you have seen in terms of increased demand from the early days of the DTC campaign, acknowledging that it is still pretty early on and what other plans do you have to accelerate demand in future, either via patients or prescriber targeting? Thanks very much.
Ross Mote (Chief Operating Officer)
Yeah, hi Nick, this is Ross. I take a part of that. So thank you very much. As you said, it's early on for the DTC campaign. We just announced, announced it pretty recently that we're focusing on DTC in a very targeted way in order to go and try and reach patients who we believe are recurrent pericarditis patients and in order to kind of inform them and educate them in how to go and speak with their healthcare providers about the potential of Arcalyst and recurrent pericarditis. So it's early days. One thing that I share with you is that, you know, while we also understand that when patients go in and speak to their healthcare professionals proactively about Arclist, it gets, you know, prescribed. The patients get prescribed Arclist in around 80% of the cases, it's also true that there's only around 14% of recurrent pericarditis patients who are actually unaided aware of Arcalyst. So we know that there's a big awareness gap out there with patients. We know patients are very widely dispersed across the country. So this is our approach of ours of going out trying to identify those patients and serve up appropriate, very targeted, very tailored messages that can help appropriate patients to be empowered to go and speak to their healthcare professionals about arclist. So we're excited about the campaign, but as you said, it's early days. We are focused on many different initiatives to accelerate the growth. As a reminder, last announced we were around 18% penetrated into the 14,000 patient population, not accounting for patients that are even in their first recurrence. And as you know, we've seen a strong growth in patients on their first recurrence as well over time. So the opportunity is very significant. We're focused on continuing to execute incredibly well across our commercial organization. We're focused obviously on digital marketing, of which the DTC campaign is a part of that much broader umbrella of digital marketing. And we also focus on peer to peer education and growing this new wave of how to treat recurrent pericarditis patients, which has been really transforming over the last five years of the availability of arclist on the market. So we're very excited about the future. We have a multifaceted approach to how we're going to continue to grow the breadth and the depth of prescribing and help more and more patients. Very helpful. Thank you very much.
OPERATOR
One moment for our next question. Our next question comes From Anupamrama with JPMorgan. Your line is open.
Anupamrama (Equity Analyst)
Hey guys, thanks so much for taking the question and congrats on a strong quarter here for KPL387 and the second half dose. Focus update. John, I was wondering if you could comment a little bit, as when you look at the totality of the range of endpoints and assessments that you're going to be looking at in Phase two, how do you think about which ones are most important in sort of the ultimate dose selection? Moving to Phase three. Thanks so much.
John Paolini
Good morning adapam and thank you for that question. Yes, so with regard to the Phase two trial which is currently ongoing, the value I think of slide 13 is that it shows you what kind of data we had generated in the past in the Phase two program with rilonacept in terms of three critical elements, which is of course what we call the cadence and magnitude, which is basically the time of onset of action and the degree of suppression of pain and inflammation with C Reactive protein and then the additional element of durability of response. And that's what we showed previously with rilonacept and so carrying that forward to the KPL387 program, again with that initial dose of KPL387. What we've shown in our models, regardless of the dose level selected, we expect to see high drug levels which would be modeled to have a rapid cadence in terms of onset of action and magnitude of effect in suppressing the initial inflammatory response. And then the additional scientific question that we intend to glean by looking at the different dose levels is that duration of action of the four different dose levels that we take forward that we look at in trial and then from that we integrate all three of those elements to build the PKPD relationship and affirm what we believe to be the therapeutic concentration as well as the dose level that we would carry forward into phase three. So it's really the integration of those three critical elements.
Anupamrama (Equity Analyst)
Thanks so much for taking the question.
OPERATOR
One moment for our next question. Our next question comes from David Nedergarten with Wedbush Securities. Your line is open.
Mark Rugosa (Chief Financial Officer)
Hey, thanks for taking the question. Just a couple quick ones for me. First off on the DTC ad, is it fair to model in the incremental spend year over year on marketing as the DTC component or is there some additional sales guys or other folks that you hired or other expenses going in there? And then the second one on 387 on the transition study, the treatment duration 16 weeks, which is different than the 12 or 24 weeks that you've looked at in phase one or phase two. Is there any reason you picked 16 weeks versus you know, having a little bit more apples to apples duration comparison at least for patients who are moving from Arculus to 387. Thanks. Maybe David, on the first one, I mean I think as you heard us talk about on the call, you know, SGA did go up as a result of sort of personnel related expenses as well as sales and marketing issues which Ross has sort of covered. I mean I think we continue to invest responsibly in the commercialization of Arclis as shown by collaboration profit continuing to grow faster than revenue. And so I think as we haven't really guided to spend, but I think it's worth sort of noting that on a percentage of sales basis, SGA has been fairly consistent over the last year.
John Paolini
And then with regard to your question, David, thank you for that question about the transition to KPL 387 monotherapy dosing and administration study. So yes, the 16 week treatment duration for the posology portion of the study is in fact, appropriate for this type of study. This study is really designed to look at well controlled patients as they move from their prior therapies to KPL 387. And in this study, patients are transitioning from regimens of NSAIDs and colchicine, from corticosteroids and IL1 pathway inhibitors, including Anakinra and Ralonasept. And so what we had seen previously with regard to Ralonasept was a time to monotherapy of under eight weeks in the Rhapsody program. And so this program is designed to basically move patients off of those other therapies onto KPL387 and achieve monotherapy within that time window. And then of course, there are additional doses that are administered to achieve steady state by the week 16 time point. But then importantly, patients transition to a long term extension where they can continue to receive KPL 387 for up to two total years. So it's a well designed study to inform that element of the label, if you will, clinical practice for transitioning patients to KPL3H7. Maybe a quick follow up is there. Obviously you look at the patients by prior treatment to determine if anyone has a new attack of pericarditis. Of course you'll know which prior treatment they're on and you'll stratify accordingly. Or how are you thinking about the differences in prior treatments for the transition? That's a very reasonable statement. And if you look at, for example, the Arcalyst label, it covers all of the different therapies that patients can transition from. So it talks about NSAIDs and colchicine, it talks about corticosteroids. And then we didn't do this study specifically for recurrent pericarditis for Anakinra because that had already been done for dira. And so what we reported in that trial was how patients responded across the different treatments and the time to monotherapy. So similarly in this trial, of course, you would look at each one of those different types of dosing regimens that patients came from and then look to make sure that the transition to KPL 387 is robust. It's important to point out that the onset that the duration of action of KPL387 with our anticipated Phase 3 dose level is once monthly dosing, which covers most of that initial transition period, depending on the therapy. Thanks.
OPERATOR
One moment for our next question. Our next question comes from Edward Nash with Canaccord Genuity. Your line is open.
Edward Nash (Equity Analyst)
Hi, good morning guys and really great quarter. Congratulations. So I wanted to ask, I know Obviously the DTC program is relatively new and you just want to kind of understand with regards to what's driving the biggest change in new patient starts. You said that on awareness, the awareness gap has shrunk and that you've seen increasing physician adoption. What effect has reimbursement referral patterns had into this new patient starts?
Ross Mote (Chief Operating Officer)
Thanks Ed, appreciate your question. So, yeah, there are lots of different things driving the increases that we've seen, not just in Q1, but over time as well. But of note, Q1 was the highest ever quarter on quarter growth that we've had in terms of new prescribers. It was also the highest ever since the time of our launch five years ago, the highest ever number of new patient enrollments or new prescriptions coming in for our cls. So clearly we're at a stage five years out from our launch where we're growing very nicely with a substantial opportunity ahead. Reimbursement continues to be very strong across all the different payer mixes and that's both for new patients coming on as well as the revalidation of, of the script, usually after a one year time period. So that continues to really be very positive in terms of referrals. I think certainly there are some centers out there, around 18 centers that are centers of excellence, if you like, or whole pericardial disease specific clinics. And they're acknowledged partially under one program, which is the AHA addressing recurrent pericarditis, of which we are a sponsor of. And that's been a helpful initiative, I think, to grow the expertise and share expertise in how to diagnose and treat recurrent pericarditis over time among those 18 groups. But it also remains the case that recurrent pericarditis patients are broadly dispersed across the country. We have to touch many touchpoints across the country in order to educate physicians. We focus on peer to peer education to do that as well as of course our sales team and the digital marketing initiatives such as the new DTC campaign which we're excited about. But as I mentioned earlier, with only around 14% of patients that suffer recurrent pericarditis having an unaided awareness of Arcalystt, clearly putting the power in the hands of the patient and the knowledge in the hands of the patient of their disease, acknowledging that many patients go through multiple physicians and multiple misdiagnoses before they get the recurrent pericarditis diagnosis, we think can play a substantial role in helping the awareness and empowering patients to go and ask their physicians about recurrent pericarditis, about ARCALIS and ultimately could play one of of the roles amongst many things that we're doing in continuing to seize the opportunity that we have ahead. It's very helpful. Thank you. Thank you.
OPERATOR
One moment for our next question. Our next question comes from Paul Choi where Goldman Sachs line is open.
Paul Choi (Equity Analyst)
Thank you. Good morning and congratulations on the strong quarterly results. I was wondering first if you could maybe elaborate a little bit more on the CO payment commentary for the quarter. Is this going to be something just specific to this particular quarter or could it be more potentially structurally favorable to gross to net over the long term? And my second question is on KPL387 just with regard to the transition, the switch study that's ongoing. Can you comment if the implication here is that you have a fairly confident view on the dose going forward for the phase three or are you still testing multiple doses there? Thank you very much.
Shauna
Take the first. Shauna. So I think, Paul, you know, we haven't provided specific guidance on gross to net, you know, so we, you know, we still do not expect major fluctuations relative to 2025, but we do anticipate now the copay support will, you know, be favorable to gross to net on an annual basis with the majority of the impact having taken place in the, in the first quarter. And I think as we, you know, sort of take a look at gross to net over the course of the year, you know, I'll kind of say what we've said before here, but we do expect to return to our historical pattern where absent any sort of prior period reserve adjustments, we do expect gross net to be highest in the first quarter, to work lower in the second and the third quarter, and then begin to shift higher again in the fourth quarter due to industry dynamics as they begin to play a factor again. I don't know if there's components to the CO pay that you want to discuss further than that, but at least that's the impact on gross to net. Yeah, that's right, Mark, thank you for that. I'll just maybe add a little bit more flavor onto the CO pay dynamics. So we did make enhancements to our CO pay assistance program at the beginning of this year which ultimately reduced the average CO payment per patient and subsequently had the knock on effect of the more favorable gross to net versus Q1 of last year, albeit higher than Q4 of last year. And that's driven by a couple of things. Firstly, reducing the maximum of amount of copay payments that we, we make per patient. And secondly, we also implemented a machine learning solution to proactively identify patients who are on non traditional payment plans such as maximizer plans in order to kind of pick up those patients, which you may know. A lot of these plans are designed to take the cost to the manufacturers all the way until funds are exhausted before the insurance companies pick up on it. So by lowering that co pay amount for those non traditional plans, it reduced the maximum amount that we paid per patient before the patients got full coverage under their insurer. So that had to knock on effect into the gross to net.
John Paolini
So thank you for the question Paul and good morning. Paul, thank you for your question about the transition to monotherapy study. So the details of the study design that we've shared so far can be found in ClinicalTrials.gov and what you will see there is the overall architecture of the study, but the disclosure does not include specific information of the dose levels that are being dose level or dose levels that would be studied. So we will have more to say at a later date about the design of the study. Okay, great. Thank you.
OPERATOR
One moment for our next question. Next question comes from Jeff Meacham with Citi. Your line is open.
Jeff Meacham (Equity Analyst)
Hey guys, good morning. Thanks for the question. Just had two quick ones. Ross, on the commercial side, is there a tipping point for adding more patients to the first recurrence segment? I wasn't sure. Maybe if you wanted to wait a little bit longer on the awareness and DTC visibility or do you feel like you have to navigate maybe reimbursement hurdles in that more upstream segment and then the second one for Sanch with the positive cash flow you got consistent profitability. How do you think about maximizing value from here? Would you want to be in the Phase 3 for 387 before you take another look at VD? I wasn't sure you're thinking about it. Thank you.
Ross Mote (Chief Operating Officer)
Thanks very much Jeff. Appreciate the question. So yeah, as mentioned earlier, we're the last reported we were around 18% penetrating into the two plus recurrence group. About 20% of prescriptions that we have now are in the first recurrence group that's grown over time. We think the 2025 ACC concise clinical guidance is also helpful towards that as it places the use of IL1 inhibition prior to the use of corticosteroids. So moving Oculus further upstream if you like, early on in the disease. So we think those things are all important and acknowledging that oculus really has a very broad label which is agnostic to the number of flares that a patient has suffered and we have broad patient coverage really across the labeled indication for the majority of plans. So we're in a pretty good situation there, which is why we feel that the opportunity that we have ahead is still very significant. When you take those metrics around the two plus recurrences and the first recurrence group.
Sanj K. Patel (Chief Executive Officer)
Jeff, this is Ange. Thanks for the question. As well as you know, for many years this team is very much focused on creating value and we also know how to sq. So to your point on 387, clearly there's a lot of focus right now on getting through this phase two study. You know, how you did in the second half of this year and starting that phase three study this year, I think is very exciting. You know, clearly we're very much focused on capturing further growth at Arclis. Very important continued effort for us. But then as we said, 1161 also should enter the clinic this year. So a number of milestones for us, we balance all that consistently. Looking at how there are other ways to create value and as you said, we can certainly look at BD opportunities. We have a very, very high bar though. So, you know, we try to be pragmatic as possible, looking at all the valuable internal creators with, you know, VF creation from internal value drivers, but also looking at business development. So we'll continue to do that. But capital allocation is very important to us. Being efficient is very important to us. You know, we've done that very nicely, I think, through this digital DTC effort and looking at AI ways to really do it very efficiently. So trust us when we say that we'll continue to think about value inflation all the time and balance it well going forward. Okay, thank you.
OPERATOR
One moment for our next question. Our next question comes from Roger Song with Jeffries. Your line is open.
Fiona Alpha (Equity Analyst)
Hi, good morning team. This is Fiona Alpha. Roger, congrats on the strong quarter and thanks for taking our question, maybe just a quick1 on KPL 387. Any meaningful difference in terms of formulation versus Arculus? And do you plan to use autoinjector? And maybe just down the line, if 387 gets improved, how do you plan your commercial strategy around incorporating to potentially transition to 3 7? Thank you.
John Paolini
Yes. So thanks for that question. I'll handle some of the biophysical characteristics of the molecules to maybe lay a little bit of groundwork and then turn it over to Sanj with regard to next steps. So yeah, there is a difference with regard to KPL 387 in that it is a liquid formulation. And so that liquid formulation allows for the total dose, if you will, of KPL 387 to be delivered in a single syringe subcutaneously. And we anticipate that with the extended pharmacokinetics, which we've shown previously in phase one, that that would support once monthly dosing. And so once you have that profile, it then does set up a situation, if you will, that is quite favorable for the development of an autoinjector. And we have not discussed that in detail at this time, but I'll turn it over to Sandra.
Sanj K. Patel (Chief Executive Officer)
Yeah, and Fiona, nothing really to add. Obviously we'll continue to execute on the ongoing clinical trials. We talked about those today. Phase two, Phase three study starting at phase three this year, obviously entering more ontis one, but nothing else to add other than that we plan to do them as fast as humanly possible and as well as humanly possible. Thank you.
OPERATOR
One moment for our next question. Our next question comes from Eva Fortier with Wells Fargo. Your line is open.
Eva Fortier
Hey, good morning. Congrats on the quarter and thanks for taking our questions. Two quick ones from us. First, how should we be thinking about R and D expense for the rest of the year and into 2027 as 387 Phase 3 and 1161 Phase 1 are initiated? And the second question is you've guided to initiating the phase three pivotal portion for 387 by year end 26. Are there any key steps or milestones you need to clear to initiate the study or is it just a matter of seeing the phase two data before moving forward? Thanks.
Mark Rugosa (Chief Financial Officer)
Thanks Eva for the question. Maybe just to touch upon the R and D question first here. Similarly to an earlier question, we haven't provided explicit guidance. But that being said, I think on a percentage of sales basis, R and D has been fairly consistent over the last year. And really with R and D, it's timing of our clinical trials and manufacturing of clinical supply that are the key variables. And so we've disclosed several ongoing investments that we plan to further advance in 2026, including the development of 387 into Phase 3 and KPL 1161 into Phase 1. And so, you know, obviously the longer trials go on, they tend to get a little bit more expensive and but I think keeping in the context of where sales growth has been and where we've been fairly consistent on R and D to sales over the last year is an important metric to keep in mind.
John Paolini
And then Eva, thank you for your question with regard to the phase two three transition. So with phase two data expected in the second half of 2026. We're on track for receiving dose level confirmation data in that time framework. And because the phase two dose focusing portion and the phase three pivotal portion have been integrated into a single phase two three protocol, the phase three pivotal trial can begin independently of phase two execution. Got it. Thanks.
OPERATOR
And I'm not showing any further questions this time. I turn the call back over to SAJ for any further remarks.
Sanj K. Patel (Chief Executive Officer)
Thanks, operator. Thank you for all the questions and joining the call today. We look forward to the remainder of the year and of course, providing additional updates in the future. Thank you. It's Craig.
OPERATOR
Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment