The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this Annual Report on
Form 10-K, or Annual Report. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business, includes
forward-looking statements within the meaning of Section 27A of the Securities
Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, 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 "Risk Factors" section of this Annual Report and our other
filings with the Securities and Exchange Commission, or 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 global biopharmaceutical company focused on discovering, acquiring,
developing and commercializing therapeutic medicines for patients suffering from
debilitating diseases with significant unmet medical need. Our portfolio of
assets, ARCALYST® (rilonacept), mavrilimumab, vixarelimab and KPL-404, are based
on strong biologic rationale or validated mechanisms, target underserved
conditions, and offer the potential for differentiation. These assets are
designed to modulate immunological pathways across a spectrum of diseases.

ARCALYST is an interleukin-1? and interleukin-1? cytokine trap. Cytokines are
small proteins that play a role in cell signaling. We licensed ARCALYST from
Regeneron, who discovered and initially developed the drug, in 2017. 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 U.S. prevalent population of approximately 40,000 patients seeking and
receiving medical treatment. ARCALYST is commercially available through a
distribution network of specialty pharmacies, which provide access across the
United States. ARCALYST is also approved in the United States for the treatment
of CAPS in adults and children 12 years and older, and the maintenance of
remission in DIRA in adults and children weighing 10 kg or more. We are
responsible for sales and distribution of ARCALYST in all approved indications
in the United States, and evenly split profits on sales with Regeneron. In the
fourth quarter of 2021, our ARCALYST franchise achieved profitability after
three quarters of commercial availability for recurrent pericarditis. In
February 2022, we granted Huadong exclusive rights to develop and commercialize
ARCALYST in the Asia Pacific region, excluding Japan.

Mavrilimumab is an investigational monoclonal antibody inhibitor targeting
GM-CSFR?. In 2017, we licensed exclusive worldwide rights in all indications to
mavrilimumab from MedImmune. We plan to focus mavrilimumab development on
cardiovascular diseases where the GM-CSF mechanism has been implicated and that
have synergies with our existing commercial infrastructure. In parallel, we may
also explore the use of mavrilimumab through research collaborations in other
development areas. We have also been evaluating mavrilimumab in COVID-19-related
ARDS. In December 2021, we announced that the Phase 3 portion of the global
double-blind, placebo-controlled Phase 2/3 clinical trial did not meet its
primary efficacy endpoint. We subsequently decided to not progress mavrilimumab
in the COVID-19-related ARDS indication, although we are continuing the Phase 3
portion of the clinical trial through its completion date. We previously
evaluated mavrilimumab in GCA, a chronic inflammatory disease of the
medium-to-large arteries with an estimated U.S. prevalence of approximately
75,000 to 150,000 patients. In October 2020, we announced that our Phase 2
proof-of-concept clinical trial for the study of mavrilimumab in GCA achieved
both its primary and secondary efficacy endpoints with statistical significance.
In September 2020, the FDA granted Orphan Drug designation for mavrilimumab for
the treatment of GCA. In February 2022, we announced that we do not plan to
initiate a Phase 3 trial of mavrilimumab in GCA. In February 2022, we granted
Huadong exclusive rights to develop and commercialize mavrilimumab in the Asia
Pacific region, excluding Japan.

Vixarelimab is an investigational monoclonal antibody inhibitor of signaling
through OSMR?. We acquired worldwide rights to vixarelimab in all indications
from Biogen in 2016. We are evaluating vixarelimab for the potential

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treatment of prurigo nodularis, a chronic inflammatory skin condition with an
estimated U.S. prevalence of approximately 300,000 patients. In April 2020, we
announced that our Phase 2a trial of vixarelimab in prurigo nodularis achieved
its primary and secondary efficacy endpoints. In November 2020, the FDA granted
Breakthrough Therapy designation for vixarelimab for the treatment of pruritus
associated with prurigo nodularis. We are conducting a global, randomized,
double-blind, placebo-controlled Phase 2b dose-ranging clinical trial of
vixarelimab in prurigo nodularis. This trial is designed to investigate
efficacy, safety and pharmacokinetics. We expect to report top-line data from
this trial in the second half of 2022.

KPL-404 is an investigational monoclonal antibody inhibitor of CD40-CD154
interaction. In 2019, we acquired all of the outstanding securities of
Primatope, the company that owned or controlled the intellectual property
related to KPL-404. In connection with our acquisition of Primatope, we acquired
an exclusive world-wide license to KPL-404 from BIMDC. The CD40-CD154
interaction is a key T-cell co-stimulatory signal critical for B-cell
maturation, immunoglobulin class switching and Type 1 immune response. We
believe disrupting the CD40-CD154 interaction is an attractive approach to
address multiple autoimmune disease pathologies such as RA, Sjogren's syndrome,
Graves' disease, systemic lupus erythematosus and solid organ transplant graft
rejection. In May 2021, we announced positive final data from our Phase 1
clinical trial of KPL-404 in healthy volunteers, which evaluated safety and
pharmacokinetics, as well as RO and TDAR. In December 2021, we initiated a Phase
2 proof-of-concept clinical trial of KPL-404 in rheumatoid arthritis, which is
designed to enable its potential development in a spectrum of autoimmune
diseases believed to be mediated by the CD40-CD154 co-stimulatory interaction.
The trial will evaluate pharmacokinetics, safety and efficacy of KPL-404 with
subcutaneous administration. In January 2022, we provided KPL-404 to the
University of Maryland School of Medicine, as part of an experimental
immunosuppressive regimen in connection with a transplant of a
genetically-modified pig heart into an adult human with end-stage heart disease
who was not eligible for a standard allogeneic heart transplant.

Our future success is dependent on our ability to continue to commercialize
ARCALYST and to develop, obtain regulatory approval for and successfully
commercialize one or more of our current or future product candidates. Upon
approval from the FDA of the commercial marketing of ARCALYST in the United
States for the treatment of recurrent pericarditis and reduction in risk of
recurrence in adults and children 12 years and older in March 2021, we assumed
the sales and distribution of ARCALYST for the previously approved indications
in the United States and will evenly split profits on ARCALYST sales with
Regeneron. However, as a company we have limited experience obtaining marketing
approval for product candidates, commercializing a therapeutic, supporting
sales, marketing, and distribution activities and maintaining applicable
infrastructure for these activities either directly and/or through agreements
with third parties; as a result we may not be able to continue to commercialize
ARCALYST or successfully commercialize any future approved product candidates,
if any, thus potentially impairing the commercial potential of ARCALYST and our
other product candidates.

We have incurred significant operating losses since inception. Our ability to
generate product revenue sufficient to achieve corporate profitability will
depend heavily on the continued commercialization of ARCALYST and the
development and eventual commercialization of one or more of our current or
future product candidates, if approved. In the fourth quarter of 2021, our
ARCALYST franchise achieved profitability, though such profits remain small
compared to our total net losses. Our net losses were $157.9 million and $161.4
million for the years ended December 31, 2021 and 2020, respectively. As of
December 31, 2021, we had an accumulated deficit of $675.4 million. We expect to
continue to incur significant operating losses as we advance our product
candidates through preclinical and clinical development and, ultimately, seek
regulatory approval. In addition, we expect to continue to incur significant
commercialization expenses related to product manufacturing, marketing, sales
and distribution of ARCALYST. We may also incur expenses in connection with the
in-licensing or acquisition of additional product candidates.

As a result, until such time as we can generate significant and sustained
revenue from product sales of ARCALYST and one or more of our current or future
approved product candidates, if ever, we expect to finance our operations
through a combination of sales of ARCALYST, raising additional capital such as
through debt or equity offerings or through other sources, which may include
licensing, collaborations or other strategic transactions or arrangements. We
may be unable to raise additional funds or enter into such other transactions or
arrangements when needed on favorable terms, or at all. If we fail to raise
capital or enter into such transactions or arrangements as and when needed, we
may have to significantly delay, scale back or discontinue the development

of
one or more of our

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current or future product candidates, delay our pursuit of potential in-licenses
or acquisitions or scale back on commercialization activities for ARCALYST.

Because of the numerous risks and uncertainties associated with product
development, including any impact from the COVID-19 pandemic, we are unable to
predict the timing or amount of increased expenses or when or if we will be able
to achieve or maintain corporate profitability. Even if we are able to continue
to commercialize ARCALYST and generate product sales from one or more of our
current or future product candidates, if approved, we may not become profitable.
If we fail to become profitable or are unable to sustain profitability on a
continuing basis, then we may be unable to continue our operations at planned
levels and be forced to reduce or terminate our operations.

As of December 31, 2021, we had cash, cash equivalents and short-term
investments of $182.2 million. 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
from the date of issuance of the audited consolidated financial statements
included in this Annual Report. We have based this estimate on assumptions that
may prove to be wrong, and we could exhaust our available capital resources
sooner than we expect. See "- Liquidity and Capital Resources." Our future
viability 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.

Components of Our Results of Operations

Product revenue, net

Following the FDA approval of ARCALYST in March 2021, we 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 (collectively,
"customers"), which deliver the medication to patients by mail.

Net revenue from product sales is recognized at the transaction price when the
specialty pharmacy or specialty distributors 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.

Operating Expenses

Cost of Goods Sold

Cost of goods sold includes production and distribution costs of ARCALYST, and
amortization of the regulatory milestone, and other miscellaneous product costs
associated with ARCALYST. Cost of goods sold also includes the allocations for
the labor and overhead costs associated with the production of ARCALYST
associated with quality control, quality assurance, and supply chain activities.

Collaboration expenses

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Collaboration expenses consists of Regeneron's share of the profit related to
ARCALYST sales under the Regeneron Agreement. 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.  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 of each of us and Regeneron
incurred in performing (or having performed) 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 CROs that are primarily engaged in the
oversight and conduct of our clinical trials and CMOs that are primarily engaged
to provide preclinical and clinical drug substance and product for our research
and development programs for our product candidates;

?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, CMOs 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

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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
activities.

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. We also
expect to incur additional expenses related to milestone and royalty 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.

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
significant revenue from product sales or be profitable. This uncertainty is due
to the numerous risks and uncertainties, including those described in Part I,
Item 1A. "Risk Factors" in this Annual Report.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and
benefits, travel and 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 insurance and professional fees for legal, patent,
consulting, accounting and audit services.

Upon approval from the FDA of the commercial marketing of ARCALYST in the United
States for the treatment of recurrent pericarditis and reduction in risk of
recurrence in adults and children 12 years and older in March 2021, we assumed
the sales and distribution of ARCALYST for the previously approved indications
in the United States. We expect that our selling, general and administrative
expenses will continue to increase in the future as we continue to perform
commercialization and sales activities. We also anticipate that we will continue
to incur significant costs, including accounting, audit, legal, compliance and
director and officer insurance costs as well as investor and public relations
expenses, and that such costs will increase over time as the company continues
to expand.

Interest Income

Interest income consists of income recognized from investments in money market
funds and U.S. Treasury notes offset by expenses related to investments.

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Income Taxes

As an exempted company incorporated under the laws of Bermuda, we are
principally subject to taxation in Bermuda. Under the current laws of Bermuda,
tax on a company's income is assessed at a zero percent tax rate. As a result,
we have not recorded any income tax benefits from our losses incurred in Bermuda
during each reporting period, and no net operating loss carryforwards are
currently available to us for those losses, while our assets remain in Bermuda.
Our wholly owned U.S. subsidiaries, Kiniksa US, and Primatope are subject to
federal and state income taxes in the United States. Our wholly owned subsidiary
Kiniksa UK, and its wholly owned subsidiaries, Kiniksa Pharmaceuticals (Germany)
GmbH, Kiniksa Pharmaceuticals (France) SARL, and Kiniksa Pharmaceuticals GmbH
are subject to taxation in their respective countries. Our provision for income
taxes relates mainly to U.S. taxable income, generated by our wholly owned
subsidiary Kiniksa US. 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.

As of December 31, 2021 and 2020, we had federal research and development tax
credit carryforwards of approximately $1.5 million and $1.4 million
respectively, available to reduce future tax liabilities, which begin to expire
in 2041. As of December 31, 2021 and 2020, we had state research and development
tax credit carryforwards of approximately $0.3 million and $0.8 million
respectively, available to reduce future tax liabilities.

Results of Operations

Comparison of the Years Ended December 31, 2021, 2020 and 2019

The following table summarizes our results of operations for the years ended
December 31, 2021, 2020 and 2019:

                                                                            2021/2020                 2020/2019
                                       Years Ended                         Comparison                 Comparison
                                      December 31,                     Increase/(Decrease)       Increase/(Decrease)
                           2021           2020           2019              $            %             $           %

                                     (in thousands)                         (in thousands, except percentages)
Revenue:
Product revenue, net    $    38,544    $         -    $         -    $       38,544     100%    $           -       0%
Operating expenses:
Cost of goods sold            9,100              -              -             9,100     100%                -       0%
Collaboration
expenses                        835              -              -               835     100%                -       0%
Research and
development                  99,297        112,042        135,001          (12,745)    (11)%         (22,959)    (17)%
Selling, general and
administrative               85,948         45,321         34,962            40,627      90%           10,359      30%
Total operating
expenses                    195,180        157,363        169,963            37,817      24%         (12,600)     (7)%
Loss from operations      (156,636)      (157,363)      (169,963)               727       0%           12,600     (7)%
Interest income                  97          1,134          6,049           (1,037)    (91)%          (4,915)    (81)%
Loss before
(provision) benefit
for income taxes          (156,539)      (156,229)      (163,914)             (310)       0%            7,685     (5)%
(Provision) benefit
for income taxes            (1,385)        (5,152)          2,047             3,767    (73)%          (7,199)   (352)%
Net loss                $ (157,924)    $ (161,381)    $ (161,867)    $        3,457     (2)%    $         486       0%


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Product Revenue, Net

Following the FDA approval of ARCALYST in March 2021, we began generating
product revenue from sales of ARCALYST in April 2021. We recognize product
revenue, net of ARCALYST at the transaction price when the specialty pharmacy or
specialty distributors obtains control of our products, which typically occurs
upon shipment of the product from the third party logistics provider. We
recognized net revenue from the sale of ARCALYST of $38.5 million for the year
ended December 31, 2021.

Cost of goods sold

Upon the first sale commencing in April 2021, we began generating cost of goods
sold associated with the sales of ARCALYST. We recognized cost of goods sold
from the sale of ARCALYST of $9.1 million for the year ended December 31, 2021,
which includes $0.8 million for the amortization of the regulatory milestone.
During the year ended December 31, 2021, we sold the remaining relabeled
ARCALYST product previously acquired to support the clinical trials which
carried zero cost.

Research and Development Expenses

                                                                                   2021/2020                                     2020/2019
                                       Years Ended                                Comparison                                      Comparison
                                      December 31,                            Increase/(Decrease)                             Increase/(Decrease)
                              2021        2020         2019                     $                         %                     $                      %
Direct research and
development expenses by
program:
Rilonacept                  $ 10,842       25,729    $  25,677   $                       (14,887)        (58)%      $                      52            0%
Mavrilimumab                  30,704       25,862       13,840                              4,842          19%                         12,022           87%
Vixarelimab                   10,739        8,796       28,772                              1,943          22%                       (19,976)         (69)%
KPL-404                        5,316        3,738       22,848                              1,578          42%                       (19,110)         (84)%
Unallocated research and
development expenses:
Personnel related
(including share-based
compensation)                 27,736       33,489       29,019                            (5,753)        (17)%                          4,470           15%
Other                         13,960       14,428       14,845                              (468)         (3)%                          (417)          (3)%
Total research and
development expenses        $ 99,297    $ 112,042    $ 135,001   $                       (12,745)        (11)%      $                (22,959)         (17)%


Research and development expenses were $99.3 million for the year ended December
31, 2021, compared to $112.0 million for the year ended December 31, 2020, or a
decrease of $12.7 million. Research and development expenses were $112.0 million
for the year ended December 31, 2020, compared to $135.0 million for the year
ended December 31, 2019, or a decrease of $23.0 million.

Direct costs for our rilonacept program were $10.8 million, $25.7 million and
$25.7 million for the years ended December 31, 2021, 2020 and 2019,
respectively. During the year ended December 31, 2021, the decrease in expenses
incurred related primarily to the completion of RHAPSODY, our global, pivotal
Phase 3 clinical trial in recurrent pericarditis, and transition to the
long-term extension. During the year ended December 31, 2020, expenses incurred
primarily related to conducting RHAPSODY, a milestone payment of $7.5 million
for the achievement of a specified regulatory milestone event under the
Regeneron Agreement, and supply chain costs. During the year ended December 31,
2019, expenses incurred primarily related to our clinical research and
development for RHAPSODY, including $6.6 million related to purchases of drug
materials under our clinical supply agreement with Regeneron, as well as for our
open-label Phase 2 proof-of-concept clinical trial.

Direct costs of our mavrilimumab program were $30.7 million, $25.9 million and
$13.8 million for the years ended December 31, 2021, 2020 and 2019,
respectively. During the year ended December 31, 2021, expenses primarily

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related to our Phase 2/3 clinical trial in COVID-19 related ARDS. During the
year ended December 31, 2020, expenses incurred primarily related to conducting
our global Phase 2 clinical trial in GCA, including manufacturing costs for our
clinical drug supply, and initiation of our Phase 2/3 clinical trial in COVID-19
related ARDS. During the year ended December 31, 2019, expenses incurred
primarily related to costs related to our global Phase 2 clinical trial in GCA.

Direct costs for our vixarelimab program were $10.7 million, $8.8 million and
$28.8 million for the year ended December 31, 2021, 2020 and 2019, respectively.
During the year ended December 31, 2021, expenses incurred related primarily to
the initiation of our Phase 2b clinical trial in prurigo nodularis. During the
year ended December 31, 2020, expenses incurred related primarily to conducting
our Phase 2a clinical trial in prurigo nodularis and our exploratory Phase 2
clinical trial in diseases characterized by chronic pruritus, which concluded
earlier in the year. During the year ended December 31, 2019, expenses incurred
primarily related to a milestone payment of $10.0 million under the Biogen
Agreement associated with the achievement of a specified clinical milestone
event as well as expenses incurred for our Phase 2a clinical trial in prurigo
nodularis, our exploratory Phase 2 clinical trial in diseases characterized by
chronic pruritus and our Phase 1b clinical trial, and approximately $2.1 million
of manufacturing and development costs for our clinical drug supply.

Direct costs for our KPL-404 program were $5.3 million, $3.7 million and $22.8
million for the years ended December 31, 2021, 2020 and 2019, respectively.
During the year ended December 31, 2021, expenses incurred primarily related to
manufacturing of drug product supply for our anticipated Phase 2 trial in
rheumatoid arthritis. During the year ended December 31, 2020, expenses incurred
primarily related to preclinical and clinical trial costs for our Phase 1 trial
of KPL-404 in healthy volunteers, including toxicology costs. During the year
ended December 31, 2019, expenses incurred primarily related to the acquisition
of all of the outstanding securities of Primatope for aggregate upfront and
contingent payments of $18.0 million paid in a combination of cash and Class A
common shares in accordance with the Primatope Agreement. The Primatope
acquisition was accounted for as an asset acquisition in 2019 as it did not meet
the definition of a business. We recorded the upfront payment, milestone
payments and the accrued milestone as research and development expense because
the acquired technology represented in-process research and development and had
no alternative future use.

Unallocated research and development expenses were $41.7 million, $47.9 million
and $43.9 million for the years ended December 31, 2021, 2020 and 2019,
respectively. The decrease of $6.2 million in unallocated research and
development expense in 2021 from 2020 was due to a decrease in cost associated
with ARCALYST including quality control and supply chain of $4.9 million
included in costs of goods sold beginning with the approval of ARCALYST. The
increase of $4.0 million in unallocated research and development expenses in
2020 from 2019 was due to increases of $2.9 million in operating costs of our
laboratory and $4.5 million in personnel-related costs primarily related to
share-based compensation and additional personnel in our research and
development functions to support our ongoing clinical trials, partially offset
by decreases of $2.0 million related to the cessation of our development of a
pre-clinical product candidate and $1.4 million in other operating expenses
including costs related to our internal lab and costs related to preclinical
studies and discovery research. The increase in personnel-related costs was
primarily due to additional personnel in our research and development functions
to support our ongoing clinical trials, including development and manufacture of
clinical supply and regulatory filings. Personnel-related costs for the years
ended December 31, 2021, 2020 and 2019 included share-based compensation of $8.5
million, $8.9 million and $5.7 million, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $85.9 million, $45.3 million
and $35.0 million for the years ended December 31, 2021, 2020 and 2019. The
increase of $40.6 million was primarily due to an increase of $22.0 million in
personnel-related costs related to the build out of our commercial function,
including hiring of a sales force and $8.9 million in marketing expenses
associated with the commercial launch of ARCALYST. The increase of $10.3 million
in 2020 from 2019 was primarily due to increases of $5.2 million in
personnel-related costs and $6.7 million in marketing costs associated with the
pre-commercialization activities to support our future launch of ARCALYST
partially offset by a decrease $1.6 million of other expenses primarily due to a
decrease in travel costs due to the travel restrictions associated with the
COVID-19 pandemic and other miscellaneous professional fees. Personnel-related
costs for the years ended December 30, 2021, 2020 and 2019 included share-based
compensation of $16.5 million, $12.0 million and $9.3 million, respectively.

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Collaboration Expenses

Collaboration expenses was $0.8 million for the year ended December 31, 2021.
Our collaboration with Regeneron achieved profitability in the fourth quarter of
2021, following three quarters of commercial availability for recurrent
pericarditis. We expect to continue to incur collaboration expenses associated
with sales of ARCALYST.

Interest Income

Interest income was $0.1 million for the year ended December 31, 2021, compared
to interest income of $1.1 million for the year ended December 31, 2020. The
decrease was due primarily to lower interest rates on U.S. Treasury notes and a
lower average balance in short term investments.

Interest income was $1.1 million for the year ended December 31, 2020, compared
to $6.0 million for the year ended December 31, 2019. The decrease was primarily
due to lower interest rates on U.S. Treasury notes.

(Provision) Benefit for Income Taxes

For the year ended December 31, 2021, we recorded a provision for income taxes
of $1.4 million relating primarily to U.S. current taxes from the cost-plus
arrangement less amounts related to the impact of Foreign Derived Intangible
Income, or FDII deduction and U.S. federal and state research credits. As of
December 31, 2021 we maintained a full valuation allowance against our deferred
tax assets of $127.9 million because we believe, more likely than not, it is not
realizable. For the year ended December 31, 2020, we recorded a provision for
income taxes of $5.2 million relating primarily to the recognition of the
valuation allowance and the current year tax expense. For the year ended
December 31, 2019, we recorded a $2.0 million benefit for income taxes relating
primarily to the impact of the FDII deduction, and U.S. federal and state
research and development tax credits.

Liquidity and Capital Resources

As of December 31, 2021, our principle source of liquidity was cash, cash
equivalents and short-term investments, which totaled $182.2 million. Our net
losses were $157.9 million, $161.4 million and $161.9 million for the years
ended December 31, 2021, 2020 and 2019, respectively. We expect to incur
operating losses for the foreseeable future.

On February 4, 2019, we completed a follow-on offering of 2,654,984 Class A
common shares at a public offering price of $18.26 per share and concurrent
private placement of 2,000,000 Class A1 common shares at an offering price of
$18.26 per share for aggregate gross proceeds of $85.0 million. In addition, on
March 1, 2019, we completed the sale of 161,126 Class A common shares to the
underwriters of the follow-on offering following the exercise in part of their
option to purchase additional shares at a public offering price of $18.26 per
share for gross proceeds of $2.9 million. The aggregate net proceeds to us from
the follow-on offering and concurrent private placement, inclusive of the option
exercise, was $83.0 million after deducting underwriting discounts and
commissions, placement agent fees and other offering costs.

On May 18, 2020, we 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 per share 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 $79.6 million. The aggregate net proceeds to us from
the follow-on offering and concurrent private placement, inclusive of the option
exercise, was $74.5 million after deducting underwriting discounts and
commissions, placement agent fees and other offering costs.

On July 24, 2020, we 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 $155.0 million. The estimated aggregate net proceeds
to us from the follow-on offering and concurrent private placement was $146.0
million after deducting underwriting discounts and commissions, placement agent
fees and other offering costs.

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Under various agreements with third parties, we have agreed to make milestone
payments, pay royalties, annual maintenance fees and to meet due diligence
requirements based upon specified milestones. Under our license agreement with
Regeneron, we have entered into supply agreements to provide both clinical and
commercial product. We have committed to minimum payments to Regeneron of $43.6
million, of which $30.6 million are due within one year. We have entered into
lease agreements for office and laboratory space, and vehicles, with total
future lease payments of $6.3 million, of which $3.6 million are due within one
year. These agreements impact our short-term and long-term liquidity and capital
needs.

As of December 31, 2021, we had cash, cash equivalents and short-term
investments of $182.2 million.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

                                                                    Years Ended
                                                                   December 31,
                                                        2021           2020           2019

                                                                  (in thousands)
Net cash used in operating activities                $ (126,298)    $ (136,532)    $ (158,369)
Net cash (used in) provided by investing
activities                                               128,635       (23,444)         49,214
Net cash provided by financing activities                  5,885        227,086         84,107
Net increase (decrease) in cash and cash
equivalents and restricted cash                      $     8,222    $    67,110    $  (25,048)


Operating Activities

During the year ended December 31, 2021, operating activities used $126.3
million of cash, primarily resulting from our net loss of $157.9 million,
partially offset by non-cash charges of $30.9 million. Net cash used in our
operating assets and liabilities for the year ended December 31, 2021 consisted
of a $10.3 million increase in accrued expenses and other liabilities primarily
due to increases in the accrued costs for our clinical trials and accrual of the
2021 employee bonus, a $3.9 million increase in accounts receivable due to the
start of sales for ARCALYST, and a $3.7 million increase in inventory.

During the year ended December 31, 2020, operating activities used $136.5
million of cash, primarily resulting from our net loss of $161.4 million and net
cash used in our operating assets and liabilities of $4.3 million, partially
offset by non-cash charges of $29.2 million. Net cash used in our operating
assets and liabilities for the year ended December 31, 2020 consisted of a $5.0
million decrease in accounts payable primarily due to the timing of vendor
invoicing and payments, a $8.8 million increase in accrued expenses and other
liabilities primarily due to increases in the accrued costs for our clinical
trials and pre-commercialization activities for ARCALYST, a $0.5 million
increase in other long-term liabilities, a $1.7 million decrease in operating
lease liabilities due to monthly payments for our right-of-use assets, a $5.6
million increase in other long term assets due to payments associated with
minimum balance requirements of our clinical trials which are not expected to be
completed within a year, and $1.3 million increase in prepaid expenses and other
current assets.

During the year ended December 31, 2019, operating activities used $158.4
million of cash, primarily resulting from our net loss of $161.9 million and net
cash used by changes in our operating assets and liabilities of $17.0 million
partially offset by non-cash charges of $20.5 million. Net cash used by changes
in our operating assets and liabilities for the year ended December 31, 2019,
consisted of a $15.0 million decrease in accrued milestones, a $4.7 million
decrease in accounts payable, and a $1.3 million decrease in operating lease
liabilities partially offset by a $1.0 million increase in prepaid expenses and
other current assets, a $0.3 million increase in other long-term liabilities and
a $4.6 million increase in accrued expenses. The decrease in accrued milestones
resulted from the payment of outstanding milestones for which the expense was
recognized in prior years. The decrease in accounts payable was primarily due to
the timing of vendor invoicing and payments. The increase in prepaid expenses
and other current assets was due to increases in

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prepaid insurance expenses and prepaid expenses to CROs related to our clinical
trials. The decrease in operating lease liabilities is due to monthly payments
for our right-of-use assets.

Investing Activities

During the year ended December 31, 2021, investing activities provided $128.6
million of cash, consisting of $306.3 million from proceeds of maturities of
short-term investments, offset by $157.3 million of purchases of short-term
investments and $20.0 million related to the payment of a regulatory milestone
incurred under the Regeneron Agreement.

During the year ended December 31, 2020, investing activities used $23.4 million
of cash, consisting of $430.2 million of purchases of short-term investments and
$0.3 million of purchases of property and equipment, partially offset by $407.1
million from proceeds of maturities of short-term investments.

During the year ended December 31, 2019, investing activities provided $49.2
million of cash, consisting of $541.2 million from proceeds of maturities of
short-term investments partially offset by $488.8 million of purchases of
short-term investments and $3.2 million of purchases of property and equipment.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing
activities was $5.9 million, consisting of proceeds from the exercise of
employee share options and our ESPP.

During the year ended December 31, 2020, net cash provided by financing
activities was $227.1 million, consisting of net proceeds of $220.5 million in
aggregate from our issuance and sale of Class A common shares in two follow-on
public offerings, inclusive of the exercise of the underwriters' option to
purchase additional Class A common shares, as applicable, and the concurrent
issuances and sales of Class A1 common shares in two private placements, after
the deduction of underwriting discounts and commissions, placement agent fees
and other offering costs, and $6.6 million of proceeds primarily from the
exercise of share options and our employee share purchase plan.

During the year ended December 31, 2019, net cash provided by financing
activities was $84.1 million, consisting of net proceeds of $83.0 million from
our issuance and sale of Class A common shares in a follow-on public offering,
inclusive of the concurrent issuance and sale of Class A1 common shares in a
private placement, and exercise in part of the underwriters' option to purchase
additional Class A common shares after the deduction of underwriting discounts
and commissions, placement agent fees and other offering costs.

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. In addition, if we obtain
marketing approval for any of our current or future product candidates, we
expect to incur significant additional commercialization expenses related to
such activities. We may also incur expenses in connection with the in-licensing
or acquisition of additional product candidates. As a result, we expect to incur
additional 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.
Additionally, we expect to continue to incur costs associated with operating as
a public company, including significant legal, accounting, investor relations
and other expenses. We expect to incur expenses as we:

? conduct our current and planned clinical trials for our current and future

product candidates;

increase clinical and commercial manufacturing capabilities or make

? arrangements with additional third party manufacturers to successfully

manufacture our products and product candidates;

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? develop and timely deliver clinical grade and commercial grade product

formulations that can be used in our clinical trials and for commercial sale;

? seek regulatory approvals for any product candidates that successfully complete

clinical trials;

maintain, establish, and/or expand a sales, marketing, medical affairs and

? distribution infrastructure to commercialize ARCALYST or any of our current or

future product candidates for which we may obtain marketing approval and intend

to commercialize on our own;

? launch commercial sales of any of our current or future product candidates, if

and when approved, whether alone or in collaboration with others;

? make milestone or other payments under any current or future license,

acquisition, collaboration or other strategic transaction agreements;

expand our operational, financial and management systems and increase personnel

? globally to support our clinical development, manufacturing and

commercialization efforts and our operations as a public company;

? maintain, expand and protect our intellectual property portfolio; and

? in-license or acquire other product candidates and technologies or their

related businesses, if we determine to do so.

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 the
Company is dependent on its ability to fund its operations through sales of
ARCALYST and/or raise additional capital, such as through debt or equity
offerings, as needed. We have based these estimates on assumptions that may
prove to be wrong, and we could utilize our available capital resources sooner
than we expect. We anticipate that we may require additional capital if we
choose to pursue in-licenses or acquisitions of other product candidates and
technologies or their related businesses. 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 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. “Risk Factors” in this Annual Report.

Until such time, if ever, as we can generate substantial and sustained product
revenue, we expect to finance our cash needs through a combination of public or
private equity offerings, debt financings, or other sources, including,
licensing, collaboration, marketing, distribution or other strategic
transactions or arrangements with third parties. To the extent that we raise
additional capital through the sale of equity or convertible debt securities,
our shareholders' ownership interest may be materially diluted, and the terms of
such securities could include liquidation or other preferences that adversely
affect our shareholders' rights as a common shareholder. Debt financing and
preferred equity financing, if available, may involve agreements that include
restrictive covenants that limit our ability to take specified actions, such as
incurring additional debt, making capital expenditures or declaring dividends.
In addition, debt financing would result in fixed payment obligations.

If we raise funds through licensing, collaboration, marketing, distribution or
other strategic transactions or arrangements with third parties, we may have to
relinquish valuable rights to our technologies, product candidates or

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future revenue streams, or otherwise agree to terms that may not be favorable to
us. If we are unable to obtain funding, we could be forced to delay, reduce or
eliminate some or all of our research and development programs for product
candidates, product portfolio expansion or commercialization efforts, which
could adversely affect our business prospects, or we may be unable to continue
operations.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States. The preparation of our
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.

While our significant accounting policies are described in more detail in Note 2
to our consolidated financial statements included elsewhere in this Annual
Report, we believe that the following accounting policies are those most
critical to the judgments and estimates used in the preparation of our
consolidated financial statements.

Revenue Recognition

ASC 606 outlines a five-step process for recognizing revenue from contracts with
customers: (i) identify the contract with the customer, (ii) identify the
performance obligations in the contract, (iii) determine the transaction price,
(iv) allocate the transaction price to the separate performance obligations in
the contract, and (v) recognize revenue associated with the performance
obligations as they are satisfied.

We only apply the five-step model to contracts when it is probable that we will
collect the consideration we are entitled to in exchange for the goods or
services we transfer to the customer. Once a contract is determined to be within
the scope of ASC 606, we determine the performance obligations that are
distinct. We recognize as revenues the amount of the transaction price that is
allocated to each respective performance obligation when the performance
obligation is satisfied or as it is satisfied. Generally, our performance
obligations are transferred to customers at a point in time, typically upon
receipt of the product by the customer.

ASC 606 requires entities to record a contract asset when a performance
obligation has been satisfied or partially satisfied, but the amount of
consideration has not yet been received because the receipt of the consideration
is conditioned on something other than the passage of time. ASC 606 also
requires an entity to present a revenue contract as a contract liability in
instances when a customer pays consideration, or an entity has a right to an
amount of consideration that is unconditional (e.g. receivable), before the
entity transfers a good or service to the customer.

Product Revenue, Net

Net revenue from product sales is recognized at the transaction price when the
specialty pharmacy or specialty distributors obtains control of our products,
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 us as our 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.

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As of December 31, 2021 a 10% change in our product revenue allowance and
reserve would not result in a material change in our net revenue.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we
are required to estimate our accrued research and development expenses. 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. The majority of our service providers invoice us in arrears for
services performed, on a pre-determined schedule or when contractual milestones
are met; however, some require advanced payments. We make estimates of our
accrued expenses as of each balance sheet date in the consolidated financial
statements based on facts and circumstances known to us at that time. We
periodically confirm the accuracy of these estimates with the service providers
and make adjustments if necessary. Examples of estimated accrued research and
development expenses include fees paid to:

? vendors, including research laboratories, in connection with preclinical

development activities;

? CROs and investigative sites in connection with preclinical studies and

clinical trials;

? third parties in the connection with the achievement of milestones due under

license acquisition and other similar agreements; and

? CMOs in connection with drug substance and drug product formulation and

manufacturing of materials.

We base our expenses related to preclinical studies and clinical trials on our
estimates of the services received and efforts expended pursuant to quotes and
contracts with multiple research institutions and CROs that conduct and manage
preclinical studies and clinical trials on our behalf. The financial terms of
these agreements are subject to negotiation, vary from contract to contract and
may result in uneven payment flows. There may be instances in which payments
made to our vendors will exceed the level of services provided and result in a
prepayment of the expense. Payments under some of these contracts depend on
factors such as the successful enrollment of patients and the completion of
clinical trial milestones. Non-refundable prepayments determined to be used
within one year for goods or services that will be used or rendered for future
research and development activities are recorded as prepaid expenses.
Non-refundable prepayments or minimum balance requirements associated to
clinical trials determined to not be used within one year are classified as
other long-term assets. In accruing service fees, we estimate the time period
over which services will be performed and the level of effort to be expended in
each period. If the actual timing of the performance of services or the level of
effort varies from the estimate, we adjust the accrual or the amount of prepaid
expenses accordingly. Although we do not expect our estimates to be materially
different from amounts actually incurred, our understanding of the status and
timing of services performed relative to the actual status and timing of
services performed may vary and may result in reporting amounts that are too
high or too low in any particular period. To date, there have not been any
material adjustments to our prior estimates of accrued research and development
expenses.

As of December 31, 2021 we have accrued $25.0 million of estimated research and
development expenses.

Share-Based Compensation

We measure all share-based awards granted to employees and directors based on
their fair value on the date of the grant and recognize compensation expense for
those awards over the requisite service period. Forfeitures are accounted for as
they occur. We issue share-based awards with both service-based vesting
conditions and performance-based vesting conditions. Expense for awards with
service-based vesting is recorded using the straight-line method, and expense
for awards with performance-based vesting conditions is recognized using the
accelerated-attribution method.

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For share-based awards granted to consultants and non-employees, compensation
expense is recognized over the vesting period of the awards, which is generally
the period during which services are rendered by such consultants and
non-employees until completed.

We classified share-based compensation expense in the consolidated statements of
operations and comprehensive loss in the same manner in which the award
recipient’s payroll costs are classified or in which the award recipient’s
service payments are classified.

The fair value of each restricted share award was estimated on the date of grant
based on the fair value of the Company’s Class A common shares on that same
date.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model, which requires inputs based on certain
subjective assumptions, including the expected share price volatility, the
expected term of the award, the risk-free interest rate, and expected dividends
(see Note 11 to in our annual consolidated financial statements included
elsewhere in this annual report). Prior to May 2018, we were a private company
and, accordingly, lacked company-specific historical and implied volatility
information. Therefore, we estimate our expected share price volatility based on
a blend of our historical volatility and the historical volatility of publicly
traded peer companies and expect to continue to do so until such time as we have
adequate historical data regarding the volatility of our traded share price. The
expected term of our share options has been determined utilizing the
"simplified" method for awards that qualify as "plain-vanilla" share options.
The expected term of share options granted to non-employees is equal to the
contractual term of the share option award. The risk-free interest rate is
determined by reference to the U.S. Treasury yield curve in effect at the time
of grant of the award for time periods approximately equal to the expected term
of the award. Expected dividend yield is based on the fact that we have never
paid cash dividends and do not expect to pay any cash dividends in the
foreseeable future.

The fair value of each restricted share unit award is based on the closing price
of our Class A common shares on the date of grant. Restricted share unit awards
with an associated performance condition are evaluated on a regular basis for
probability of achievement, to determine the timing of recording share-based
compensation expense to include in our consolidated statements of operations and
comprehensive loss.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
to our annual consolidated financial statements included elsewhere in this
Annual Report.

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