The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, and our audited consolidated financial statements and related notes for the year ended December 31, 2025 included in the Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the risks identified in Part I, Item 1A of the Annual Report, as updated by any information appearing in Part II, Item 1A of any of our subsequent Quarterly Reports on Form 10-Q (including this Quarterly Report), and our other filings with the Securities and Exchange Commission (the “SEC”) our actual results could differ materially from the results, performance or achievements expressed in or implied by these forward-looking statements.
Overview
We are a biopharmaceutical company developing and commercializing novel therapies for diseases with unmet need, with a focus on cardiovascular indications. Our portfolio of assets is based on strong biologic rationale or validated mechanisms and offers the potential for differentiation.
ARCALYST is an interleukin-1α (“IL-1α”) and interleukin-1β (“IL-1β”) cytokine trap. In 2017, we licensed ARCALYST from Regeneron, which discovered and initially developed the drug. Our exclusive license to ARCALYST from Regeneron includes worldwide rights, excluding the Middle East and North Africa, for all applications other than those in oncology and local administration to the eye or ear. We received FDA approval of ARCALYST for the treatment of recurrent pericarditis and reduction in risk of recurrence in adults and children 12 years and older in March 2021. Recurrent pericarditis is a painful inflammatory cardiovascular disease with an estimated United States prevalent population of approximately 40,000 patients seeking and receiving medical treatment. ARCALYST is also approved in the United States for the treatment of Cryopyrin-Associated Periodic Syndromes (“CAPS”), including Familial Cold Autoinflammatory Syndrome and Muckle-Wells Syndrome in adults and children 12 years and older, and the maintenance of remission in Deficiency of Interleukin-1 Receptor Antagonist (“DIRA”) in adults and children weighing 10 kg or more. ARCALYST is commercially available across the United States through a select network of specialty pharmacies. We are responsible for sales and distribution of ARCALYST in all approved indications in the United States, and evenly split profits on sales, as well as third party proceeds, with Regeneron. In 2022, we granted Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”) exclusive rights to develop and commercialize ARCALYST in the Huadong Territory (as defined below). In 2023, Regeneron initiated a technology transfer of the manufacturing process for ARCALYST drug substance, and in June 2026 the FDA approved Samsung Biologics Co., Ltd. (“Samsung”) as our replacement contract development and manufacturing organization (“CDMO”). In December 2024, we initiated a collaborative study agreement with The Mayo Clinic (together with Johns Hopkins University) to investigate the effects of ARCALYST in the treatment of cardiac sarcoidosis.
KPL-387 is an investigational, fully human immunoglobulin G2 monoclonal antibody that binds human interleukin-1 receptor 1 (“IL-1R1”), inhibiting IL-1α- and IL-1β-mediated signaling. KPL-387 is an independently developed asset that we believe may expand the recurrent pericarditis market and provide an additional treatment option for patients, with the potential to add the convenience of monthly subcutaneous self-administration with a liquid formulation. In July 2026, we announced that the pivotal Phase 3 trial of KPL-387 in recurrent pericarditis, PASTORALE, had begun enrolling and dosing patients, supported by Phase 2 data at the 300 mg subcutaneous monthly dose level. In addition, we announced that we expect to begin commercializing KPL-387 in 2028 or 2029. We are also conducting a supplemental Phase 2 transition to KPL-387 monotherapy dosing and administration study to evaluate the efficacy and safety of dosing regimens used to transition patients from standard therapies to KPL-387 monotherapy. The FDA previously granted Orphan Drug Designation to KPL-387 for the treatment of pericarditis.
KPL-1161 is an independently developed, pre-clinical, Fc-modified immunoglobulin G2 monoclonal antibody that binds IL-1R1, inhibiting IL-1α- and IL-1β-mediated signaling. KPL-1161 is a modified version of KPL-387 designed to have an increased drug half-life that we believe could support quarterly subcutaneous dosing. We are currently conducting preclinical activities with respect to this asset, and expect to initiate a Phase 1 first-in-human clinical trial by the end of 2026.
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Abiprubart is an investigational monoclonal antibody inhibitor of CD40-CD154 costimulatory interaction, which we believe to be an attractive approach to address multiple autoimmune disease pathologies. We hold an exclusive worldwide license to abiprubart from Beth Israel Deaconess Medical Center, Inc. (“BIDMC”). In February 2025, we announced our plans to discontinue development of abiprubart in Sjogren's Disease and to explore strategic alternatives for the asset.
Components of Our Results of Operations
Product revenue, net
We have been generating product revenue from sales of ARCALYST since April 2021. ARCALYST is sold through a third-party logistics provider that distributes primarily through a select network of specialty pharmacies (collectively, “customers”), which deliver the medication to patients by mail. ARCALYST is currently only approved for sale in the United States, and, therefore, we expect to derive substantially all of our product revenue from the United States for the foreseeable future.
Net revenue from product sales is recognized at the transaction price when the customer obtains control of our product, which occurs at a point in time, typically upon shipment of the product from the third-party logistics provider.
Our net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, and specialty pharmacy and distributor fees. These adjustments represent variable consideration under ASC 606 and are estimated using the expected value method and are recorded when revenue is recognized on the sale of the product. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.
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.
In February 2022, we entered into a collaboration and license agreement (the “Huadong Collaboration Agreement”), with Huadong, pursuant to which we granted Huadong exclusive rights to develop and commercialize ARCALYST in a specified territory, which currently includes the following countries: People’s Republic of China, Hong Kong SAR, Macao SAR, Taiwan Region, Indonesia, The Philippines, Thailand, Bangladesh, Bhutan, Brunei, Burma, Cambodia, India, Laos, Malaysia, Maldives, Mongolia, Nepal, New Zealand, Sri Lanka, and Vietnam (collectively, the “Huadong Territory”).
Under the Huadong Collaboration Agreement, we received a total upfront cash payment of $12.0 million for the Huadong Territory license of ARCALYST. In the fourth quarter of 2024, following the achievement of a regulatory milestone under the Huadong Collaboration Agreement, Huadong became obligated to make an additional cash payment of $20.0 million, which was received in the first quarter of 2025. In addition, we will be eligible to receive additional contingent sales-based milestones payments related to ARCALYST. Huadong will also be obligated to pay us tiered percentage royalties on ARCALYST ranging from the low-to-mid teens on annual net sales in the Huadong Territory, subject to certain reductions tied to ARCALYST manufacturing costs and certain other customary reductions, with an aggregate minimum floor. Royalties will be payable on a country-by-country or region-by-region basis until the later of (i) 12 years after the first commercial sale of ARCALYST in such country or region in the Huadong Territory, (ii) the date of expiration of the last valid patent claim of our patent rights or any joint collaboration patent rights that covers ARCALYST in such country or region in the Huadong Territory, and (iii) the expiration of the last regulatory exclusivity for ARCALYST in such country or region in the Huadong Territory. We have recognized $0.2 million of revenue of the $32.0 million transaction price under the Huadong Collaboration Agreement as of June 30, 2026, and will recognize the remaining revenue as materials are shipped.
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In the third quarter of 2022, we entered into a license agreement (the “Genentech License Agreement”) with Genentech, pursuant to which we granted Genentech exclusive worldwide rights to develop and commercialize vixarelimab and related antibodies (each, a “Genentech Licensed Product”).
Under the Genentech License Agreement, we will be eligible to receive up to a total of approximately $600.0 million in contingent payments, including specified development, regulatory and sales-based milestones, of which approximately $570.0 million remains as of June 30, 2026. We 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 our upstream financial obligations. Royalties will be payable on a Genentech Licensed Product-by-Genentech Licensed Product and country-by-country basis until the latest to occur of the expiration of certain patents that cover a Genentech Licensed Product, the expiration of regulatory exclusivity for such Genentech Licensed Product, or the tenth anniversary of first commercial sale of such Genentech Licensed Product in such country.
Operating expenses
Cost of goods sold
Cost of goods sold includes production and distribution costs of ARCALYST, amortization of the $20.0 million payment we made to Regeneron in the first quarter of 2021 upon achievement of a regulatory milestone and other miscellaneous product costs associated with ARCALYST. Cost of goods sold also includes labor and overhead costs associated with the production of ARCALYST associated with supply chain, quality, and regulatory activities, and the technology transfer of the manufacturing process for ARCALYST.
Collaboration expenses
Collaboration expenses consist of Regeneron’s share of the profit related to ARCALYST sales under the Regeneron Agreement and the cost of products sold under collaboration agreements. We evenly split profits on sales of ARCALYST with Regeneron, where profits are determined after deducting from net sales of ARCALYST certain costs related to the manufacturing and commercialization of ARCALYST. Such costs include but are not limited to (i) our cost of goods sold for product used, sold or otherwise distributed for patient use by us; (ii) customary commercialization expenses, including the cost of our field force, and (iii) our cost to market, advertise and otherwise promote ARCALYST, with such costs identified in subsection (iii) subject to specified limits. With respect to the technology transfer of ARCALYST drug substance manufacturing initiated by Regeneron in March 2023, to the extent permitted by the Regeneron Agreement, the fully-burdened costs of each of us and Regeneron incurred in performing such technology transfer shall also be deducted from net sales of ARCALYST to determine profit. We also evenly split with Regeneron any proceeds received by us 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.
Research and development expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of our product candidates. We expense research and development costs as incurred. These expenses may include:
●expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;
●expenses incurred under agreements with contract research organizations (“CROs”) that are primarily engaged in the oversight and conduct of our clinical trials and CDMOs that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs for our product candidates;
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●other costs related to acquiring and manufacturing preclinical and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
●payments made in cash or equity securities under third party licensing, acquisition and other similar agreements;
●employee-related expenses, including salaries and benefits, travel and share-based compensation expense for employees engaged in research and development functions;
●costs related to compliance with regulatory requirements; and
●allocated facilities-related costs, which include rent and utilities, depreciation and other expenses.
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license, acquisition and other similar agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical and clinical development, process development and manufacturing clinical and preclinical materials.
Research and development activities are central to our business. Product candidates in later stages of clinical development generally have higher costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will be substantial over the next several years as we conduct our ongoing and/or planned clinical trials for our product candidates, as well as conduct other preclinical and clinical development, and make regulatory filings for our product candidates.
At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of our current or future product candidates or when, if ever, we will realize revenue from the sale of our current or future product candidates.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and benefits, including share based compensation expense for personnel in selling, marketing, medical, executive, business development, finance, human resources, legal and support personnel functions. Selling, general and administrative expenses also include external commercialization, marketing, and professional fees for legal, patent, and accounting services.
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We expect that our selling, general and administrative expenses will continue to increase in the future as we continue to expand our infrastructure related to the commercialization of ARCALYST and our other product candidates, if approved.
Other income, net
Other income, net consists of interest income recognized from investments in money market funds, United States Treasury Securities and other miscellaneous income offset by expenses related to investments.
Income taxes
Our income is subject to the enacted United Kingdom statutory corporate tax rate. Our wholly owned United States subsidiaries, including Kiniksa Pharmaceuticals Corp. (“Kiniksa US”), are subject to federal and state income taxes in the United States. Our wholly owned subsidiary Kiniksa Pharmaceuticals (UK), Ltd. (“Kiniksa UK”), its Swiss branch office, and Kiniksa UK’s wholly owned subsidiaries, including Kiniksa Pharmaceuticals, GmbH (“Kiniksa Switzerland”) are subject to taxation in their respective countries.
On July 4, 2025, new U.S tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. The tax provisions of the legislation did not have a material impact on our operations.
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:
Three Months Ended
June 30,
2026 2025 Change
(in thousands)
Revenue:
Product revenue, net $ 243,600 $ 156,797 $ 86,803
License and collaboration revenue — — —
Total revenue 243,600 156,797 86,803
Costs and Operating expenses:
Cost of goods sold 23,572 18,603 4,969
Collaboration expenses 88,069 52,418 35,651
Research and development 40,899 18,753 22,146
Selling, general and administrative 63,866 46,863 17,003
Total operating expenses 216,406 136,637 79,769
Income from operations 27,194 20,160 7,034
Other income, net 3,951 2,717 1,234
Income before income taxes 31,145 22,877 8,268
Provision for income taxes (5,713) (5,045) (668)
Net income $ 25,432 $ 17,832 $ 7,600
Product revenue, net
We recognized net revenue from the sale of ARCALYST of $243.6 million for the three months ended June 30, 2026, compared to $156.8 million for the three months ended June 30, 2025, an increase of $86.8 million. The increase in product revenue was driven primarily by an increase in patients on therapy.
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Cost of goods sold
We recognized cost of goods sold of $23.6 million for the three months ended June 30, 2026, compared to $18.6 million for the three months ended June 30, 2025, an increase of $5.0 million. The increase in cost of goods sold relates primarily to the increase in sales of ARCALYST partially offset by favorable production variances.
Collaboration expenses
Collaboration expenses were $88.1 million for the three months ended June 30, 2026, compared to $52.4 million for the three months ended June 30, 2025, an increase of $35.7 million. The increase in collaboration expenses relates primarily to increased revenue from sales of ARCALYST.
Research and development expenses
Three Months Ended
June 30,
2026 2025 Change
(in thousands)
Direct research and development expenses by program:
ARCALYST $ 332 $ 171 $ 161
KPL-387 21,442 8,485 12,957
KPL-1161 766 370 396
Abiprubart 176 635 (459)
Unallocated research and development expenses:
Personnel related (including share-based compensation) 7,480 5,723 1,757
Other 10,703 3,369 7,334
Total research and development expenses $ 40,899 $ 18,753 $ 22,146
Research and development expenses were $40.9 million for the three months ended June 30, 2026, compared to $18.8 million for the three months ended June 30, 2025, an increase of $22.1 million.
Direct costs for our KPL-387 program were $21.4 million during the three months ended June 30, 2026, compared to $8.5 million during the three months ended June 30, 2025. The increase in expenses incurred primarily related to the enrollment and continuation of our Phase 2/3 clinical trial in recurrent pericarditis and the start of the supplemental Phase 2 transition to KPL-387 monotherapy dosing and administration study during the three months ended June 30, 2026, as compared to the Phase 1 clinical trial in normal healthy volunteers and the start-up of our Phase 2/3 clinical trial during the three months ended June 30, 2025.
Direct costs for our KPL-1161 program were $0.8 million for the three months ended June 30, 2026, compared to $0.4 million during the three months ended June 30, 2025. For the three months ended June 30, 2026 and 2025, expenses incurred primarily related to pre-clinical development.
Unallocated research and development expenses were $18.2 million and $9.1 million for the three months ended June 30, 2026 and June 30, 2025, respectively. The increase was primarily related to an increase in pre-clinical development expenses of $6.7 million during the three months ended June 30, 2026. Personnel-related costs for the three months ended June 30, 2026 and 2025 included share-based compensation of $2.5 million and $1.7 million, respectively.
Selling, general and administrative expenses
Selling, general and administrative expenses were $63.9 million for the three months ended June 30, 2026, compared to $46.9 million for the three months ended June 30, 2025. The increase of $17.0 million was primarily due to an increase of $9.6 million in personnel-related costs largely attributable to an increase in headcount and an increase in sales and marketing expenses of $4.8 million largely attributable to increased promotional activities, including our
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direct-to-consumer advertising campaign. Personnel-related costs for the three months ended June 30, 2026 and 2025 included share-based compensation of $8.5 million and $6.6 million, respectively.
Other income, net
Other income, net was $4.0 million and $2.7 million for the three months ended June 30, 2026 and June 30, 2025, respectively. The year-over-year increase was driven primarily by higher interest income generated by increased average holdings of cash, cash equivalents, and short-term investments.
Provision for income taxes
We recorded an income tax provision of $5.7 million and $5.0 million for the three months ended June 30, 2026 and June 30, 2025, respectively. The provision for income taxes was driven primarily by income earned in Switzerland, UK and the United States as well as uncertain tax positions offset in part by tax benefits related to share-based compensation, United States federal and state research and development credits (“R&D Credits”) and Foreign Derived Intangible Income (“FDII”) deduction. The increase in the provision for income taxes was driven primarily by an increase in taxable income partially offset by an increase in the tax benefits related to share-based compensation.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025:
Six Months Ended
June 30,
2026 2025 Change
(in thousands)
Revenue:
Product revenue, net $ 457,866 $ 294,582 $ 163,284
License and collaboration revenue — — —
Total revenue 457,866 294,582 163,284
Operating expenses:
Cost of goods sold 44,368 36,471 7,897
Collaboration expenses 163,646 96,208 67,438
Research and development 68,374 38,078 30,296
Selling, general and administrative 125,017 90,393 34,624
Total operating expenses 401,405 261,150 140,255
Income from operations 56,461 33,432 23,029
Other income, net 7,365 5,010 2,355
Income before income taxes 63,826 38,442 25,384
Provision for income taxes (15,802) (12,071) (3,731)
Net income $ 48,024 $ 26,371 $ 21,653
Product Revenue, Net
We recognized net revenue from the sale of ARCALYST of $457.9 million for the six months ended June 30, 2026, compared to $294.6 million for the six months ended June 30, 2025, an increase of $163.3 million. The increase in product revenue was primarily driven by an increase in patients on therapy.
Cost of Goods Sold
We recognized cost of goods sold of $44.4 million for the six months ended June 30, 2026, compared to $36.5 million for the six months ended June 30, 2025, an increase of $7.9 million. The increase in cost of goods sold relates primarily to the increase in sales of ARCALYST partially offset by favorable production variances.
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Collaboration Expenses
Collaboration expenses were $163.6 million for the six months ended June 30, 2026, compared to $96.2 million for the six months ended June 30, 2025, an increase of $67.4 million. The increase in collaboration expenses relates primarily to increased revenue from sales of ARCALYST.
Research and Development Expenses
Six Months Ended
June 30,
2026 2025 Change
(in thousands)
Direct research and development expenses by program:
ARCALYST $ 673 $ 526 $ 147
KPL-387 37,594 13,663 23,931
KPL-1161 1,721 470 1,251
Abiprubart 229 5,002 (4,773)
Unallocated research and development expenses:
Personnel related (including share-based compensation) 13,413 11,646 1,767
Other 14,744 6,771 7,973
Total research and development expenses $ 68,374 $ 38,078 $ 30,296
Research and development expenses were $68.4 million for the six months ended June 30, 2026, compared to $38.1 million for the six months ended June 30, 2025, an increase of $30.3 million.
Direct costs for our KPL-387 program were $37.6 million during the six months ended June 30, 2026, compared to $13.7 million during the six months ended June 30, 2025. The increase in expenses incurred primarily related to the enrollment and continuation of our Phase 2/3 clinical trial in recurrent pericarditis and the start of the supplemental Phase 2 transition to KPL-387 monotherapy dosing and administration study during the six months ended June 30, 2026, as compared to the Phase 1 clinical trial in normal healthy volunteers and the start-up of our Phase 2/3 clinical trial during the six months ended June 30, 2025.
Direct costs for our KPL-1161 program were $1.7 million for the six months ended June 30, 2026, compared to $0.5 million during the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, expenses incurred primarily related to pre-clinical development.
The direct costs for our abiprubart program were $0.2 million during the six months ended June 30, 2026, compared to $5.0 million during the six months ended June 30, 2025, a decrease of $4.8 million. For the six months ended June 30, 2025, expenses incurred primarily related to the close-out of our Phase 2b clinical trial in Sjögren’s Disease and $2.5 million of termination expenses associated with cancelled manufacturing agreements.
Unallocated research and development expenses were $28.2 million for the six months ended June 30, 2026, compared to $18.4 million for the six months ended June 30, 2025. The increase was primarily related to an increase in pre-clinical development expenses of $6.6 million during the six months ended June 30, 2026. Personnel-related costs for the six months ended June 30, 2026 and 2025 included share-based compensation of $4.1 million and $3.2 million, respectively.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses were $125.0 million for the six months ended June 30, 2026, compared to $90.4 million for the six months ended June 30, 2025. The increase of $34.6 million was primarily due to an increase of $20.4 million in personnel-related costs largely attributable to an increase in headcount and an increase in sales and marketing costs of $10.0 million largely attributable to promotional activities, including our direct-to-consumer advertising campaign. Personnel-related costs for the six months ended June 30, 2026 and 2025 included share-based compensation of $16.4 million and $12.4 million, respectively.
Provision for Income Taxes
We recorded an income tax provision of $15.8 million and $12.1 million for the six months ended June 30, 2026 and June 30, 2025, respectively. The provision for income taxes was driven primarily by income earned in Switzerland, UK and the United States as well as uncertain tax positions offset in part by tax benefits related to share-based compensation, R&D Credits and FDII deduction. The increase in the provision for income taxes was driven primarily by an increase in taxable income partially offset by an increase in the tax benefits related to share-based compensation.
Liquidity and Capital Resources
As of June 30, 2026, our principal source of liquidity was cash, cash equivalents and short-term investments, which totaled $525.9 million. Net income was $48.0 million and $26.4 million for the six months ended June 30, 2026 and 2025, respectively. We expect our cash balance and our expected cash inflows from operations to allow us to meet our current operating plan.
Under various agreements with third parties, we have agreed to make milestone payments, pay royalties, pay annual maintenance fees and to meet due diligence requirements, each based upon specified events. Pursuant to the Regeneron Agreement, we have entered into a supply agreement with Regeneron to purchase both clinical and commercial product. We have committed to minimum payments to Regeneron of $51.0 million, all of which are due within one year. We have entered into lease agreements for office and laboratory space, and vehicles, with total future lease payments of $9.6 million, $4.4 million of which are due within one year. We are also party to a Master Services Agreement and a Product Specific Agreement with Samsung related to the manufacture of ARCALYST drug substance. Our commitments under such agreements, which includes the purchase of raw materials and related service fees, obligates us to minimum payments of $140.4 million, $53.1 million of which are due within one year. We have additionally entered into agreements with several CDMOs to provide us with preclinical and clinical trial materials for our non-ARCALYST assets, which obligate us to minimum payments of $14.5 million all of which are due within one year. We have long-term incentive plans for our employees that may result in cash award payments of $24.9 million, based upon the achievement of certain regulatory milestones, none of which are expected to be achieved in the next year.
Under various agreements with third parties, we are entitled to receive upfront payments, milestone payments, and royalties, each based upon specified milestones. In 2025, we received a $20.0 million milestone payment related to Huadong’s achievement of a regulatory milestone under the Huadong Collaboration Agreement, $10.0 million of which was paid to Regeneron in 2025 as part of the Regeneron Agreement.
These agreements impact our short-term and long-term liquidity and capital needs.
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Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Six Months Ended
June 30,
2026 2025
(in thousands)
Net cash provided by operating activities $ 97,394 $ 50,414
Net cash used in investing activities (105,496) (55,424)
Net cash provided by financing activities 18,183 13,466
Net increase in cash and cash equivalents $ 10,081 $ 8,456
Operating Activities
Net cash provided by operations was $97.4 million and $50.4 million for the six months ended June 30, 2026 and 2025, respectively. The increase in cash provided by operating activities is primarily due to an increase in net contribution from higher ARCALYST sales.
Investing Activities
Net cash used in investing activities was $105.5 million and $55.4 million for the six months ended June 30, 2026 and 2025, respectively. The increase in net cash used in investing activities was driven by managing our cash and short-term investment portfolio mix as we deployed higher levels of cash into Treasury Securities with longer-terms.
Financing Activities
During the six months ended June 30, 2026 and 2025, net cash provided by financing activities was $18.2 million and $13.5 million, respectively, consisting of proceeds from the exercise of share options offset by payments in connection with ordinary shares tendered for employee tax obligations.
Funding Requirements
We expect to incur significant expenses in connection with our ongoing and planned activities as we continue to commercialize ARCALYST and advance our current and future product candidates through preclinical and clinical development, seek regulatory approval and commercialize one or more of our current or future product candidates, if approved. We may also incur expenses in connection with collaboration, licensing or other strategic transactions. Further, we may incur expenses related to milestone, royalty and other payments payable to third parties with whom we have entered into license, acquisition and other similar agreements to acquire the rights to our product candidates
We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. The future viability of our company is dependent on our ability to fund our operations through sales of ARCALYST and/or raise additional capital, such as through debt or equity offerings, as needed. We anticipate that we may require additional capital if we choose to pursue collaboration, licensing or other strategic transactions. We expect to continue to incur significant expenses related to product manufacturing, sales, marketing and distribution of ARCALYST. In addition, if we obtain regulatory approval for any of our current or future product candidates, pursue additional indications or additional territories for our products or any of our current or future product candidates, we expect to incur significant expenses related to product development and manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biologic products, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements may be impacted by a number of factors, including those described in Part I, Item 1A of the Annual
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Report, as updated by any information appearing in Part II, Item 1A of any of our subsequent Quarterly Reports on Form 10-Q, including this Quarterly Report.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Annual Report and the notes to the consolidated financial statements included in Item 1, “Financial Statements (Unaudited)” included in this Quarterly Report. We believe that of our critical accounting policies, the following accounting policies involve the most judgment and complexity:
● revenue recognition
● accrued research and development expenses
● uncertain tax positions; and
● realizability of deferred tax assets.