Aurinia Pharmaceuticals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 12 speakers on the call.

Operator

Greetings, and welcome to Aurinia Pharmaceuticals Incorporated Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jamie Harrell, Investor Relations for Aurinia Pharmaceuticals.

Operator

Thank you. You may begin.

Speaker 1

Thank you, operator, and thanks everyone for joining today's call and webcast to review and discuss Aurinia's Q2 6 month 2023 Financial and Operational Results. Joining me on the call this morning are Peter Greenleaf, Chief Executive Officer and Joe Miller, our Chief Financial Officer. This morning Aurinia issued a press release announcing its financial results and operational highlights for the Q2 6 months ended June 30, 2023. In addition, the company filed its quarterly financial statements on Form 10 Q. For more information, please refer to Aurinia's filings with the U.

Speaker 1

S. And earnings call. Thank you, sir. Our next question comes from the line of our financial results. Please go ahead.

Speaker 1

Thank you, sir.

Speaker 2

Our next question comes from the line of

Speaker 1

our financial results. Your line is open. Thank you, sir. Our first question comes from the line of based on current expectations. These forward looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially.

Speaker 1

For a discussion of factors that could affect Aurinia's future financial results and businesses, please refer to the disclosures in Aurinia's press release and its quarterly report on Form 10 Q along with Aurinia's annual report on Form 10 ks and all of its recent filings with the U. S. Securities and Exchange Commission and Canadian Securities Authorities. Please note that all statements made during today's call are current as of today, Thursday, August 3, 2023, unless otherwise noted and are based upon information currently available to us at this time. Except as required by law, Aurinia assumes No obligation to update any such statements.

Speaker 1

Now, let me turn the call over to Aurinia's President and CEO, Peter Greenleaf. Peter?

Speaker 3

Thanks, Jamie, and good morning, everyone. I want to thank you all for joining us on the call today. On this Morning's call, we will focus on the company's 2nd quarter 6 month performance. Our key commercial metrics for lupkinis as well as a brief update on R and D and our progress outside the U. S.

Speaker 3

I will then turn the call over to Joe Miller, our CFO, to I'm pleased to share that we've continued to make significant progress over the last 3 months, reporting our highest quarterly sales since the launch of Luke Conus with net product revenues of $41,100,000 This represents an increase of 46% versus the prior year 2nd quarter and a 20% increase over the Q1 of 2023. These results bring our year to date lupkinus net product revenue through the end of the second quarter to $75,400,000 That represents an increase of over 52% versus the mid year mark of 2022. Underlying this top line financial performance, we had our best quarter to date across a number of commercial metrics, including number of wallets shipped, patient conversion to drug, processing speeds in terms of Time from PSF to drugs shipped as well as patient persistency rates. Patients converted from patient start forms therapy was at an all time high of 89%. Insurance processing speeds were improved as well.

Speaker 3

We are now converting more than 65% of our patients from initial PSF to drug being shipped within 20 days. And importantly, our 12 month persistency rates improved from 51% in the last quarter to 54% in Q2. Lastly, we now have a total of 1911 patients currently on therapy as of June 30, 2023, and nearly 3,500 Patients exposed to the drug since launch. As I've stated on previous calls, our business plan for Luke Kinase is focused on 3 major interrelated strategies. The first is driving patient awareness and activation, The second being clinically differentiating loop kindness.

Speaker 3

And the last is ensuring that patients get access to therapy, Because of course getting patients on drug and keeping on drug is critical. So how are we doing? On the patient front, We believe an informed patient can play a major role in their own disease management by understanding the need for and seeking routine urine screening and treatment. At the beginning of the Q2, we announced and drove awareness across traditional and social media platforms with the launch of our branded disease awareness campaign, Get Uncomfortable, with our new spokesperson, Tony Braxton. This initiative reinforces the need for screening, routine monitoring and treatment by engaging and educating SLE patients to get uncomfortable and get serious about their kidney health by engaging with their physician.

Speaker 3

I'm pleased to report that through the 1st 100 days of this campaign, we've seen marked increases in overall awareness, media impressions The campaign has already reached over 750,000,000 people across social and digital media with 100 of 1,000 visits to the campaign website. Patients and family members are coming to our customer education website to learn more about the importance of screening and early treatment. Also, this site is where patients can find a specialist in their area to While our consumer marketers are reaching patients via social media and direct to patient marketing campaign, our commercial sales team is continuing to drive in the field execution by delivering the lukeinase clinical message. They are reinforcing the treatment guidelines for patient screening and treatment as well as the AURORA data to our top decile customers. On our last call, we shared that we closed As we've previously communicated, lupkinus is a highly sensitive to promotion drug and there is a strong Correlation between call volume and prescribing behavior.

Speaker 3

Well, today, I'm happy to share that we continued that momentum into the 2nd quarter and beat our Q1 watermark. This makes the Q2 of 2023 our best quarter to date in terms of call activity towards healthcare professionals, providing deeper penetration into top decile physicians as well as first time and repeat prescribers. Our recent attitude awareness and usage market research study reinforces that our clinical message is resonating. Intent to prescribe continues to grow and is on an all time high. Additionally, lupkinis is leading over other therapies in the category on to prescribe over the next 30 days and over the next 3 months.

Speaker 3

In regard to our second imperative, Clinical differentiation. We're excited with the new data which we launched into the market that further differentiates Luke Conus from

Speaker 4

the current standard of care.

Speaker 3

Our medical affairs team recently released the biopsy stub study from the AURORA trial. This poster was presented at the Congress of Clinical Rheumatology East. These data demonstrated that lupinus treated patients showed histologic improvement was stable chronicity scores similar to the active control arm of MMF and low dose steroids alone, Meaning that the patient's kidney appears to be stable and does not demonstrate any further worsening of kidney function or nephrotoxicity at 18 months. Additionally, the AURORA 2 long term extension study of the AURORA trial Looking at eGFR, efficacy and safety across 2 3 years was accepted and published online in arthritis and Rheumatology. ANR is the official journal of the American College of Rheumatology, and it should be in the journal during the month of September.

Speaker 3

These two publications provide our medical affairs team with more data to share with prescribing physicians. These publications reinforce why lupkinis should be the drug of choice in the management of lupus nephritis. These data also further differentiate Lupconis from the current standard of care across numerous parameters. Specifically when looking at 3 year eGFR, efficacy and long term safety. All of the aforementioned activities are having a measurable impact on patients, physicians and of course, lukeinase.

Speaker 3

By educating and activating the patient to get involved with their lupus nephritis care through our consumer marketing campaigns, Alongside our sales team messaging to physicians, we are helping to expand the market and drive further prescribing. This leads me to our Patient Start form activity for the Q2. We had a solid performance with PSFs for Q2 totaling 451 patient start forms. This represents an increase of approximately 10% over the Q2 of 2022 and is reasonably consistent with our Q1 performance of 2023. Through the end of July, we've recorded approximately 100 new PSFs.

Speaker 3

We can say with certainty that there is a summer effect to Align Care when it comes to seeing patients, screening them and absolute treatment. We believe it is most likely due to the asymptomatic effect of the condition and patients not feeling the need to check-in with their rheumatologist or nephrologists just during the summer months. Also, there were fewer selling days in July and the timing of the July 4th holiday took more people out of the office. That said, our business fundamentals remained at an all time high. All of our other marketing metrics are positive, and we believe that PSS will return to growth over the coming months and in the Q4.

Speaker 3

As I referenced earlier in the call, During this period, our conversion rates, that is converting patients' start forms to patients on therapy, are at an all time high with about 89% of patients converting on to drug. Our team has made further progress and continues to reduce time from PSF to submission to conversion to patients on drug with approximately 65% of patients getting on therapy in 20 days or less. This continues to improve over the past several quarters and is up over the Q1 of 61%, Meaningful progress and improvement on all fronts. At the end of the Q2 2023, about 54 We are extremely pleased to see this level of patient retention at 12 months. It shows lupkinus persistency is in line with or better than treatments for other chronic diseases.

Speaker 3

In May, we reported about 47% of patients remain on therapy for 15 months, and we are now seeing that more than 48% of patients remain on therapy at 15 months as the number of patients across that time period continues to grow. And while we've only seen a small number of patients through 18 months of therapy, about 44% remain on therapy through that time. This is up from the previously reported 41%. We believe this persistency can be attributed to the product's safety profile out to 3 years and our patient support programs pulling through the work that's done by Aurinia Alliance. Consistent with prior periods, patients adhering to treatment regimen, that is dosing in tablets per day, continues to be stable at approximately 80% to 85%.

Speaker 3

Based on everything I've just discussed, we're increasing our net product revenue guidance range from the updated guidance we gave in Q1 of $135,000,000 to $155,000,000 to $150,000,000 to $160,000,000 for the year 2023. Turning now to our R and D activity. We remain on track to filing an IND for AUR-two hundred by the end of the year, And we continue to enroll in our lupus nephritis registry and our post approval regulatory commitment of a pediatric study. Lassie, let me close with our globalization effort for LUKINIS. Our partnership with Otsuka has resulted in significant launch momentum outside the U.

Speaker 3

S. This year. Our partner has now launched lube kindness in Germany, Austria, Sweden, Finland and Norway. Lupkinis was recently approved in Switzerland and has received formal reimbursement approval in both the U. And as a reminder, upon pricing and reimbursement approval in 3 of the 5 major EU countries, The company would be eligible for an additional $10,000,000 milestone from Otsuka, which we still expect in the second half of twenty twenty three.

Speaker 3

In addition, our work in Japan remains on track for regulatory submission towards the end of the year. Upon approval in Japan, we would be eligible for an additional $10,000,000 approval related milestone along with low double digit royalties on net sales once the product is launched. So with that, I'd like to turn the call over now to Joe for a more detailed review of our financials, And I'll then return at the end of the call for a quick recap and to open up the line to see what questions you might have. So with that, let me turn it over to Joe. Joe?

Speaker 4

Thank you, Peter, and good morning, everyone. As of June 30, 2023, we had cash, cash equivalents, Restricted cash and short term investments of $350,700,000 compared to $389,400,000 at December 31, 2022 and $361,500,000 at the end of the Q1 2023. The decrease in cash, cash equivalents, restricted cash and investments is primarily related to the continued investment in commercialization activities, post approval commitments of our approved drug, Loop Kindness, inventory purchases, Advancement of our pipeline and the second capital expenditure payment for the mono plant, partially offset by an increase in cash receipts from the sales of Kindness. We believe that we have sufficient financial resources to fund our operation, which include funding commercial activities, including FDA related post approval commitments, Manufacturing and packaging of commercial drug supply, funding our supporting commercial infrastructure, advancing our research and development programs and funding our working capital obligations for at least the next few years. Now let's take a few minutes and go into detail regarding our financial Results for the Q2 and the 6 months ended June 30, 2023.

Speaker 4

Total net revenue in the 2nd quarter increased 47 percent $41,500,000 from the prior year Q2 of $28,200,000 Total net revenue increased 52 percent to $75,900,000 from $49,800,000 for the 6 months ended June 30, 2023 June 30, 2022 respectively. The increase is primarily due to an increase in net product revenue from our 2 main customers for LoopKindness, driven predominantly by further penetration into the LN market. Net realizable revenue per patient for Loop Kindness remains higher than our initial guidance of $65,000 per patient per year on a quarterly basis. But as we discussed previously, we expect net realizable revenue per patient to continue approaching this figure on an annualized basis as more patients go on and stay on therapy over time and as persistency, dosing and payer mix evolve. Total cost of sales and operating expenses for the quarters ended June 30, 2023 June 30, 2022 were 57 point $4,200,000 respectively.

Speaker 4

Total cost of sales for the 6 months ended June 30, 2023 was $121,700,000 versus 123 $7,000,000 in the prior year period. Let me now give you a further breakdown of operating expenses, drivers and fluctuations. Cost of sales were $1,600,000 for the quarters ended June 30, 2023 June 30, 2022. Cost of sales were $2,000,000 $1,900,000 for the 6 months ended June 30, 2023 June 30, 2022 respectively. Cost of sales for both periods remain consistent due to an increase of revenues offset by a write down of FDA process validation that occurred during the Q2 of 2022.

Speaker 4

Gross margins for the quarters ended June 30, 2023 June 30, 2022 was was approximately 96% 94%. Gross margin for the 6 months ended June 30, 2023 June 30, 2022 was approximately 97% 96%. Selling, general and administrative SG and A expenses inclusive of share based compensation expense were $47,100,000 $51,500,000 for the quarters ended June 30, 2023 June 30, 2022, respectively. SG and A expenses inclusive of share based compensation expense were $97,200,000 $96,700,000 for the 6 months ended June 30, 2023 and June 30, 2022, respectively. The primary drivers for the decrease in SG and A expense was a decrease in professional fees and services, including legal fees incurred during their respective quarters.

Speaker 4

For the 6 months ended June 30, 2023 compared to the prior year period, the increase was due to an increase in share based compensation expense and marketing expenses, offset by a decrease in professional fees and services, which includes legal fees. Non cash share based compensation expense included within SG and A expense for the quarter was $9,800,000 versus $8,900,000 for the prior year period. Non cash share based compensation expense included with SG and A was $17,400,000 $14,900,000 for the 6 months ended June 30, 2023 and June 30, 2022, respectively. Research and development R and D expenses, inclusive of share based compensation, were $12,700,000 $11,500,000 for the quarters ended June 30, 2023 June 30, 2022. R and D expenses, inclusive of share based compensation expense, were $25,800,000 $24,100,000 for the 6 months ended June 30, 2023 June 30, 2022 respectively.

Speaker 4

The primary drivers for the increase for the quarter 6 months ended June 30, 2023 as compared to Same periods ended June 30, 2022 were an increase in salaries and related employee benefit costs, share based compensation expense In clinical supply costs as the company advances its AUR200 and AUR300 programs and fulfills the post approval FDA commitments related to Libtayness. The increase was partially offset by a decrease in contract resource organization costs related to the completion of the AURORA 2 continuation study and drug drug interaction study, which was substantially completed in 2022. Non cash share based compensation expense included within R and D expense was $2,100,000 $1,100,000 for the quarters ended June 30, 2023 June 30, 2022, respectively. Non cash share based compensation expense included within R and D expense was $3,700,000 $2,000,000 for the 6 months ended June 30, 2023 June 30, 20 Other income net was $3,600,000 $500,000 for the quarters ended June 30, 2023 June 30,

Speaker 2

2022, respectively. For the

Speaker 4

6 months ended June 30, 2023, For the 6 months ended June 30, 2023, other income expense net was $3,300,000 in income versus $1,000,000 expense in the prior year period. The increase in other income is primarily related to a change in fair value assumptions related to our deferred compensation liability coupled with the foreign exchange gain related to our mono plant Finance liability. Interest income was $4,100,000 at June 30, 2023 versus $500,000 for the prior year Q2. Interest income was $7,900,000 for the 6 months ended June 30, 2023 June 30, 2022 respectively. The increase between periods is due to higher yields on our investment as a result of increased interest rates.

Speaker 4

For For the quarters ended June 30, 2023, Arena recorded a net loss of $11,500,000 or 0 point as compared to a net loss of $35,500,000 or $0.25 net loss per common share for the quarter ended June 30, 2022. For the 6 months ended June 30, 2023, Arena recorded a net loss of $37,700,000 or 0 point 26 dollars net loss per common share as compared to a net loss of $73,100,000 or $0.52 net loss per common share for the 6 months ended June 30, 2022. With that, I'd like to hand the call back over to Peter for some closing remarks. Peter?

Speaker 3

Thanks, Joe. As you heard throughout the call, we're obviously excited about our results for the Q2 and our momentum through the first half of the year, hitting many all time highs across the business. We remain focused on delivering lukeinase to patients in need and driving results in the U. S. And globally, and we look

Operator

Thank you. The floor is now open for And our first question comes from Joseph Schwartz from Leerink Partners. Go ahead, Joseph.

Speaker 5

Hi, all. This is Will on for Joe this morning and thank you for taking our questions and congrats on the progress this quarter. So one for us to start just on seasonality. Since Blucanix has been on the market for several years now and as the company has more experience with the launch, Can you maybe provide some color on the strategies in place to help mitigate this impact of seasonality? And as we look to the Q3, how should we be thinking about sales relative to the prior quarter.

Speaker 5

And I have

Speaker 3

a quick follow-up. Thank you. Thanks, Will. So as I said on the call, If you go back not just quarters, but the last few years since launch, we've seen an impact in the summertime. And I think moving into this summer, our biggest question was being able to peel back whether the impact was I hate to use seasonality because it brings people to viruses and infectious disease more so than A typical specialty business, but clearly in our business, the question was, is this a summer effect or Was it a COVID hangover, a COVID impact prior during the shutdown we saw in COVID?

Speaker 3

And I think What we've clearly seen coming into this year is that during the summertime, there's an impact on patient flow. So because this is a quiet disease and patient and asymptomatic, patients aren't running into the physician office during the summer months To get regular screening. 2nd, that we've seen office staff, physicians, etcetera, spending less time in the We clearly saw that during the month of July. And we can track this not just through what we hear qualitatively, but we can see it Quantitatively, in our numbers, in the diagnosis numbers that we track and even in the testing numbers that we track. And then lastly, even in our own company, we have the effect of people taking summer vacations, etcetera, even though We manage that and can manage that.

Speaker 3

Clearly, these are time periods where there is just less activity. So if you look at the July performance, As it relates to PSFs, because we've not talked about patients on therapy, we've not talked about revenue performance Through the 1st month of the quarter 3, clearly, we've seen some impact. But if you look at the Trending so far this year and the trending into July, it's fairly predictive of what we've seen over the last 2 years. So our as we said on the call, belief is that we'll get back to a growth pattern as we move into August And we'll see that get back to continued growth into Q4 Q3 and Q4, just like we saw last year. So we feel confident that we'll be able to continue on the growth pattern.

Speaker 3

But as thinking about forecasting this business Moving forward, although we don't give quarterly guidance, it's clear that during the month of July Time period that we see a little bit of a dip and that this summer has impact. Your question on mitigating strategies, while we do everything from Special incentive compensation in our sales organization to increasing the flow of our marketing spend To targeted initiatives during the summer time to try to increase awareness of patients to continue or have continuity within their care. And really we put a blitz during pre summer and through this summer. So that's why I say this is a predictive thing that we're going to have to continue to manage through and I think as I think about forecasting the business forward that the summer is going to be something we need to take an impact as being Softer than other quarters on a go forward basis. Into Q4, we feel very confident, not just based on past trends, but the tactical activity we have And the amount of emphasis we're going to have in terms of the flow of our tactics, people in field.

Speaker 3

And lastly, the Aurora 2 messaging that we're working through our medical team and through the publication that's now been issued out there. I think we'll have big impact as well. Remember, the extension study was a 3 year data, Not just looking at safety measures like eGFR, but also clinical efficacy measures as well.

Speaker 6

Great. Very helpful. Thank you. And then if I could just sneak in

Speaker 5

a quick follow-up here. Could you just remind us on the biopsy data you are going to be submitting these to the FDA and what your thoughts are on a potential timeline for an updated label to

Speaker 3

include these data? Thank you. Yes. So the short answer is, we've been in regular dialogue and have submitted a package of data to the FDA, Not just including the biopsy data, but also including the extension data and other cuts of data that we had from the original AURORA trial. As we've said in the past, our goal will be to try to get this added to the label, but that's a negotiation with The FDA, we don't have a set timeline for it, but when we get more concrete dialogue back from the agency, We'll communicate that to you.

Speaker 3

Our hope would be, we believe this is extremely important to the prescriber and can affect the patient benefit. So that's the way we're positioning it to the agency. We think it's important as to where it will appear in the label, how it affects the Indication statement, usage statement and or the clinical trial section is to be determined. But Know that we've packaged it to the agency and our hope is that we're going to see this appear and hopefully appear prominently, but that's

Operator

And our next question comes from Ed Arce from H. C. Wainwright. Go ahead, Ed.

Speaker 7

Hi, good morning everyone and thanks for taking my questions and congrats on the quarter. So I just wanted to ask A broader question on sort of what underlying drivers are here. I mean, this is the 2nd sort of beat and raise quarter in a row. And PFS are down slightly this quarter, while all other metrics are basically at or very near all time highs. And there hasn't been a pricing change since December of 2021.

Speaker 7

So I'm just wondering How you would characterize sort of puts and takes and how you get to the increase in your revenue guidance? And then I have a couple of follow ups.

Speaker 3

Thanks for the question, Ed. Yes, I think you characterized it well. I mean, Just about every metric we track in the business was at an all time high in the quarter and we saw that last quarter too. So whether it's Converting patients on the drug, we're doing it faster. Keeping patients on the drug at 3 months, 6 months, 9 months, 12 months, 15 months, 18 months, all seem to be doing well and in some cases improving, right?

Speaker 3

These types And then compliance to the regimen has been fairly consistent, but in past two quarters has been almost at an all time high too. So with those types of measures, we're keeping patients, keeping patients on drug. Obviously, those are having impact on revenue every quarter. We look at PSFs as our leading indicator or our NRx, our equivalent of an NRx. And that Leading indicator won't change in terms of the measure, until we would have to change our distribution pattern in order for that Measure to change.

Speaker 3

So for example, we do limited specialty distribution in the prescription start form or the patient start form is our initial prescription process. If we were to open up our class of trade, go broader, You could see typical IQVIA data and prescribing data to become more actual prescribing at the retail level to become more important. But at this stage, it's not But it is a leading indicator and if those patients are getting on, as we said, 20% or at 20 days, 65 For Center Get Non Drug, there's at very least, for 65% of our patients 20 days delay before those PFS become reality. So any prior quarter, we're working those PSS from that prior quarter in the current quarter. So all of your financial metrics The way I think about PSFs is eventually when you 6 Sigma this Business and you work every angle of persistency, getting patients on drug faster, keeping them on drug, you're eventually going to Grow, you could hit a point in your business where you stopped seeing new patients come into the mix.

Speaker 3

But that can still be offset if you see improvements in persistency at 18 months, at 24 months, etcetera. Like if we

Speaker 4

were keeping

Speaker 3

40% or 50% of our patients out to 3 years, Ed, you need to bring less patients into the mix In order to keep growing revenue and that will be a continued learning process as we go through the years of the product. One thing I do want to just correct, I think you said pricing, we haven't taken it since 2021. We did take up 20 But you said 2021. We did take a price increase in 2022, which I think and Joe is here with me, In there for annual price increases, it's good to think about our price increase for the year at or around 3 ish or so percent. That will net out with some of the agreements that we have in place.

Speaker 3

So I think I

Speaker 7

Yes, Peter. That's very helpful. Appreciate that. And then just a couple more. I don't I think You may have mentioned this before, but I didn't get the number.

Speaker 7

This metric of new patients on therapy, if you have that for this Quarter and Q1. And then lastly, if you could repeat the milestone payments that you would expect with the coming approvals and launches ex U. S. Thanks so much.

Speaker 3

So within the quarter itself, in terms of new patients on therapy, we had approximately 190 new patients on therapy in the quarter. Your question on milestones and this is driven from our ex U. S. Agreement with Otsuka, there is 2 in the near term that we've guided to and talked about on the call. One is, Of course, in Europe, we continue to get countries approving the drug.

Speaker 3

We have the global EU approval, but then the individual countries are doing their own assessments, and that continues to go well. But our agreement is when 3 of the 5 top countries in the EU Pricing approval, which is separate obviously then from actual drug approval in the country, Then we have a $10,000,000 milestone coming from Otsuka and we've said we believe that can happen in the calendar year towards the back half of the year. The second near term milestone is the work we're doing in Japan. We've said that we believe we can submit to the PMDA by year end. And if we do that under a normal review cycle, you should see in 2024, Could bleed into 2025 if you have a longer review cycle, a $10,000,000 milestone upon the approval of the drug in Japan.

Speaker 3

And included in that, of course, we get low double digit royalties and we have a cost plus on management supply agreement with SUCO as well.

Speaker 7

Great. Thanks so much.

Speaker 3

Thanks, Ed.

Operator

And our next comes from Jacqueline Lu from Oppenheimer. Go ahead, Jacqueline.

Speaker 8

Hi, this is Jacqueline on Justin's team. Thank you for taking our questions. To see the improvement in persistency numbers at 12 months, would you be able to share how those numbers have been evolving at later time points? What sort of long tail current utilization the product is having, especially given the added publications, education and awareness of such

Speaker 3

That's a good question. Thank you, Jacqueline. So first off, as we've said, And I hope people appreciate that we give metrics to the point where when I go back and look at our transcript, I'm throwing so many numbers out there that you guys So just appreciating the fact that when we have meaningful information quantitatively, we like to report it. I think it's important just to give the perspective. So we've not given out to 24 months at this stage.

Speaker 3

And the reason for that historically has been, When we don't have enough of an N or enough of a number of patients coming into that time period, we don't want to give an insignificant projection And we've gone pretty low on those numbers. But crossing 24 months right now, we just when we have enough patients crossing that time period, We'll be more than happy to provide what that estimate is. But as we said on the call, 12, 15 and 18 month persistency have all improved. They're all around within the vicinity of Previously reported, but they're up single digit percentages over where they've been. So we believe some of our initiatives are helping that.

Speaker 3

We also believe Compliance to the dosing regimen on a 30 day basis is due to a lot of the work we're doing around persistency through Aurinia Alliance, The patient awareness programs that we're doing, etcetera. As I was talking to our commercial team just yesterday, One of the interesting ones that I hope we'll be able to report at some point is what the diagnosis rates look like and are we seeing an uptick Over time, in the number of patients sort of filling the top end of the funnel in terms of being diagnosed with lupus nephritis, we think there is a big opportunity there as well and our Toni Braxton Get Uncomfortable campaign centers on a lot of that, not just staying on your medicines, but also If you have lupus going in and making sure you get checked for kidney related problems. Anyway, we'll report when we get to

Speaker 8

Great. Thank

Operator

you. And our next question comes from David Martin from Bloom Burton. Go ahead, David.

Speaker 9

Hi, guys. Thanks for taking my questions. Back to the persistency, I'm wondering when patients come off LUKOILIS, Does her proteinuria stay low for a period and therefore docs think the patients can take a holiday on the drug or Does it rebound quickly and should the patients come back on quickly?

Speaker 3

So when patients come off of drug, it is for, as we've said in the past, David, a host of different reasons. It can be anything from patients being lost to follow-up, to patients deciding they don't want to take the drug anymore, To a physician deciding clinically that they're going to put them on a drug holiday because their proteinuria has reduced, which By the way, it does not align with guidelines, but we do see happen. Like the list is long. All I can tell you is it's usually doc driven Patient driven, not payer driven. In other words, hey, patient crossed the year and after a year payers are saying they won't pay for the therapy.

Speaker 3

In terms of the positive around like how can if a patient discontinues off of drug, Do they come back? We do have data, while albeit not we've not Like posting quantitative numbers on this, we do know that patients and physicians, if proteinuria elevates again, they get them back in And they almost treated not the majority of physicians, but a grouping of physicians treated as almost a flaring and remitting disease, although there is not a Guideline out there, a program that I've attended that talks about it that way. The positive is patients who do get on our drug can be readdressed with drug. So and we do see that happening.

Speaker 9

Okay, great. Shifting gears a bit. So you initiated a Strategic review that could possibly include sale of the company. When you had your Q1 call, You were kind of adamant that selling the company now wasn't the right thing to do. I'm wondering what are the factors that kind of went into you I know the Board has changed a bit, but why have you changed your mind?

Speaker 3

So just to qualify what I may have said in the Q1, I guess from a selling the company standpoint, I don't necessarily see that as something that's determined by us per se. There has to be 2 parties in that equation. And We're a public company. We have a fiduciary responsibility to shareholders. It's we have to always Keep an open mind to all strategic alternatives.

Speaker 3

And we announced back in June that we were exploring strategic alternatives. And as we said, we were doing this in response to requests from shareholders. So first, exploring we believe exploring strategic alternatives is something that our leadership team actually does every day. This review may or may not result in a transaction and the nature of the type of transaction could be anything from an outright sale of a company To a merger, to the company acquiring or licensing an outset, to doing nothing and just staying the course and continuing to grow Luke Kindness in the company. And then second, in particular, given the fulsomeness of what a strategic review is because you went right to selling the company and as we've said, we're looking at Strategic alternatives, because it's wholesome in nature.

Speaker 3

We're how we're approaching this process, these things take time, right? And we've not set a timetable for the completion of the process, although we have a sense of urgency and we don't anticipate providing updates along the way in terms of a progress review until we actually believe it's appropriate and or necessary. So as a result, David, we're not going to get on every call and say where are we with the strategic review process until we concluded upon it. But I To your first point about Adam being adamant against the sale of a company, it's not probably what we've ever said. I think that takes 2 to tango in that And we are a public company and we understand our fiduciary responsibilities.

Speaker 3

So we're always open to strategic alternatives for the company outside of what we're Right now.

Speaker 9

Okay, got it. Thanks.

Speaker 3

Thanks, Dave.

Operator

And our next question comes from Stacy Ku from TD. Cowen, go ahead Stacy.

Speaker 10

Hi, this is Vish on for Stacy. Thank you so much for taking our questions and congratulations on another very strong quarter. So we've done some clinician checks on lupkinus and it's striking that all our clinicians are very aligned in their long term positive views on LUKOILYNS' long term potential. But even among those specialists, prescribing is very diverse. So could you maybe Speak to a little bit on what you are seeing right now in terms of the percentage of patients that are getting prescribed lipokinase for Induction alone versus maintenance alone versus both induction and maintenance, so that we can get a sense of how Lukynus is being used right now?

Speaker 10

And where do you think this adoption pattern will change as long term experience is gained and in light of the new published data?

Speaker 3

Well, we don't hear physicians talk about the treatment of the disease in a world of I want to induce remission and I want I maintain remission. So I think the best way we can guide investors towards how should I think about How long patients stay on drug are the time periods or the time intervals and the percent of patients on drug at time intervals that we report As the best way to say how are docs using the drug, right? And while there's a multitude of different reasons as to why patients and or docs Discontinue, I think the percentage that cross a year, the percentage that cross 18 months 2 years says something about how the drug is actually being used. We've seen physician lectures from the top thought leaders out there that say, well, how long should I actually look to maintain patients? And while the guidelines are pretty open ended on this, they say you should get a patient under control and keep them under control.

Speaker 3

We've heard numbers Like 3 to 5 years patients should stay on therapy, but there's a mix of how physicians do that, whether they put them on our drug to induce, Put them on Benlysta in combination, keep them on MMF and steroids over the long haul. There's a host of different strategies that are being Enacted out there and I think there's huge opportunity by data to drive data driven Answers to that question because there is a lot of new data out there that should drive physician practice and new data being produced that will continue to evolve it. So I think our persistency numbers that we report across the time periods we do is the best way to look at Whether there's induction and maintenance, 50% or so of our patients are still seeing drug at or around 12 months. That's the best way to think about it. And it looks like after 12 months that the curve starts to flatten out more.

Speaker 3

Although it's declining, it flattened. You're not seeing 30% 40% reductions per month. On your question about your doc Your comment on Doc Checks. Listen, all of our awareness usage data and predictive data, which is more Qualitative, but we try to take a representative sample of our physician call on universe says They intend to use the product in the next 30 days. They intend to use more of it over time, and it's all extremely positive.

Speaker 3

To oversimplify how we need to deeper penetrate, one is on the patient front. We've got to get all physicians to universally see that a patient when they're at A gram of protein that this is an appropriate patient to treat. There's wide differences in how physicians see and don't, At least from what we see, always follow the guidelines, how aggressively they treat. Some wait till a patient is at 3 to 5 grams of protein Before they actually call it, LN. And if you look at the guidelines, the guidelines get to LN at a much to lower levels.

Speaker 3

So we've got to push that continuum down. And then lastly, we have to continue to work on our prescriber base. We have to Continue to expand the total number of treaters and get more depth per prescriber. And both of those have increased Significantly year to date, but we still have a ways to go in terms of the adoption curve.

Speaker 10

Perfect. Thank you.

Operator

And our next question comes from Maury Raycroft from Jefferies. Go ahead Maury.

Speaker 6

Hi, good morning. This is Fazin on for Maury. Congrats on the update and thank you for taking our questions. So So just want to clarify, what proportion of the prescribers are repeat prescribers? And then on the patient side, what are you hearing from patients for them to remain on

Speaker 3

Can you repeat the second part of that question, because I was still just I was I didn't catch it.

Speaker 6

And then on the patient side, what are you hearing from patients for them to remain on therapy for longer term?

Speaker 3

So we've not given percentage penetration numbers, but in terms of total number of prescribers, we're probably at or around, Call it 1500 prescribers and growing that have utilized the product to date. And A large percentage of that number are repeat prescribers. So we've also said that Our decile 7 to 10s are a highly concentrated group in terms of the prescriptions that they do. So this is not a disease where you should be thinking, okay, well, how many rooms, how many nephs and I got to get all of them using. Some rooms, some nephs treat very little of this disease.

Speaker 3

So But we want to see more prescribers for sure and then we want to get the depth of prescribing happening. And I'll go back to my Previous statement that some of it is not that they just don't want to use our drugs, some of it is that they believe they shouldn't be treating lupus It is not congruent with the guidelines that are out there. So all these numbers have been improving and are on A good pace, but in order to increase PSFs and increase the revenue run rate, we've got to go deeper and wider. Got it. And then your question on patients, I didn't answer, so let me quickly answer.

Speaker 3

I'm not sure we've seen market research from the patient side to say what's going to get them on drug and keep them on drug. We do know that They need to be made aware of the seriousness of their condition. When you have SLE, the predominance The management of the disease centers around fatigue and skin and joint, the things that actually you feel every day. It's the underlying things you don't feel that are the most impactful and can be the most significant in terms of Bad outcomes for the disease like proteinuria and the tactics we're using whether it's the pee in the cup campaign or the get Comfortable campaign with patients are to educate them on the more severe component of their lupus And what they need to do to get enacted and part of that messaging is to stay on drug. I think the best way to measure the effectiveness out Because we don't at least in front of me have a qualitative metric is to look at our persistency numbers and say is it happening and look at our Adherence numbers to prescribing regimen and to say if it's happening in both those metrics are not just Doing well, but improving so far every quarter.

Speaker 6

Makes sense. Just another You mentioned increase in revenue from 2 main customers. Wondering if you can provide some more color on that.

Speaker 3

Yes. We have a limited distribution model. We have 2 specialty distributors and we and it was in Joe's section because it's a

Speaker 2

financial qualification. We recognize revenue

Speaker 3

when we ship to those DCs.

Speaker 6

And the last question, I guess, for Joe, like you said that you have Better gross margin, so wondering what the gross to net is at this point?

Speaker 4

Yes, we have not guided specifically to our gross to net percentages. The margin Fluctuation was driven by the fact that in 2022, we had reserves for some FDA validation batches. So we had to build some inventory reserves in the prior year. We didn't have the same thing in 2023.

Speaker 6

Got it. Thank you so much.

Operator

Thank you. And our next question comes from Justin Kim from Oppenheimer. Go ahead, Justin.

Speaker 11

Hi, everyone. Sorry for I just wanted to ask a follow-up to one of the questions asked. With the announced sort of strategic priorities, I just wanted to touch base on the pipeline and any updates there in terms of your expectations for milestones or

Speaker 3

As to where this goes, how it competes, where you're going to develop it, all the right next questions for an early stage asset moving into an IND filing. AUR-three hundred, as we've talked about previously, Justin, we're still doing some tweaking on the formulation And we think that's a 24 deliverable for IND. Nothing off target there in terms of our Previous projections, but no change on either. And then other pipeline, to some degree was To a big degree was externalization or business development. Obviously, I would envelop that into the strategic review process we're looking at right now.

Speaker 3

Okay. Operator, if that's Our last question, I just want to close by saying thank you all for joining us today. We look forward to updating you in the next quarter. Have a great day.

Operator

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Key Takeaways

  • Record Q2 sales of $41.1 M, up 46% year-over-year and 20% sequentially, driving year-to-date Lupkynis revenues to $75.4 M (+52% YoY) alongside peak commercial metrics (89% patient conversion, 65% shipped within 20 days, 54% 12-month persistency).
  • “Get Uncomfortable” disease awareness campaign featuring Toni Braxton reached over 750 million people and generated 1 million visits to the patient education site, while field call activity hit a new high and intent-to-prescribe metrics climbed to record levels.
  • New data from the AURORA program—including an 18-month biopsy substudy showing stable kidney histology and a 3-year AURORA-2 extension illustrating sustained eGFR efficacy and safety—further differentiate Lupkynis from standard of care.
  • Based on strong commercial momentum and improved patient metrics, full-year 2023 Lupkynis revenue guidance has been raised to $150–160 M (up from $135–155 M).
  • Global expansion with partner Otsuka has launched Lupkynis in multiple EU countries (with a $10 M milestone expected upon pricing/reimbursement in 3 of 5 major EU nations in H2 2023) and a Japan regulatory submission remains on track for year-end (triggering a $10 M approval milestone and future royalties).
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Earnings Conference Call
Aurinia Pharmaceuticals Q2 2023
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