Aurinia Pharmaceuticals Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 15, 2024

There are 8 speakers on the call.

Operator

Greetings, and welcome to Aurinia Pharmaceuticals Full Year 2023 Earnings Call. At this time, all participants are in a listen only mode. 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, Andrea Christopher, Head of the Corporate Communications and Investor Relations for Aurinia Pharmaceuticals.

Operator

Thank you. You may begin.

Speaker 1

Thank you, operator, and thank you to everyone for joining today's call and webcast. Joining me on the call this morning are Peter Greenleaf, Aurinia's Chief Executive Officer and Joe Miller, our Chief Financial Officer. Today, we will review and discuss Aurinia's 2023 4th quarter and year end financial and operational results as well as an update on our strategic review as communicated in the company's press release issued this morning. The company also filed its annual financial statements on Form 10 ks this morning. For more information, please refer to Aurinia's filings with the U.

Speaker 1

S. Securities and Exchange Commission and applicable Canadian Securities Authorities, which are also available on Aurinia's website atauriniapharma.com. During today's call, Aurinia may make forward looking statements based on current expectations. These forward looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially. For a discussion of factors that could affect Aurinia's future financial results and business, please refer to the disclosures in Aurinia's press release and its annual report on Form 10 ks and all of its recent filings with the U.

Speaker 1

S. Securities and Exchange Commission and Canadian Securities Authorities. Please note that all statements made today during today's call are current as today, Thursday, February 15, 2024, unless otherwise noted and are based upon information currently available to us. Except as required by law, Aurinia assumes no obligation to update any such statements. Now let me turn the call over to Aurinia's President and CEO, Peter Greenleaf.

Speaker 1

Peter?

Speaker 2

Thanks, Andrea, and good morning, everyone. I want to thank everybody for joining us on today's call. As you may have noted, we issued preliminary unaudited 4th quarter and year end numbers in early January. On today's call, we will provide you with the final audited results for the Q4 and the year end 2023. We'll also provide an update on our commercial activities, including key commercial metrics and significant highlights for loop kindness.

Speaker 2

We will then provide an update with the company's previously announced strategic review and our business strategy moving forward. This includes our near term plan to restructure the company and the initiation of a share repurchase program. We believe this plan allows for immediate enhancement of shareholder value and has the ability to strengthen the company's long term financial picture. After walking you through these details, I will then turn the call over to Joe Miller, our CFO, to provide additional details on our financial results. So now let me dive into the overall business performance.

Speaker 2

For the full year 2023, Aurinia achieved 175.5 $1,000,000 in total net revenue, which represented an increase of approximately 31% over the prior year. We achieved $158,500,000 in net product revenue, representing an increase of 53% over 2022. For the Q4 of 2023, we achieved a total revenue of $45,100,000 and a total net rep product revenue of $42,300,000 which represented an increase of 59% 49 over the same period in 2022. Moving to more detail behind our financial results. During the Q4, Aurinia added 4 38 patient start forms or PSFs compared to 4 0 6 PSFs in the Q4 of 2024 436 in the Q3 of 2023.

Speaker 2

In addition to the 4 38 PSFs added in the 4th quarter, the company also added approximately 101 new additional patients. This includes restarts, defined as patients coming back on to therapy who do not require a PSF and an estimate of new patients beginning therapy in the hospital channel. The addition of patient restarts and patients coming through the hospital channel are newly reported in the 4th quarter since they've achieved numerical significance for the first time. Hospital and ReSTART numbers are both new indicators of growth for us. We know that restart patients have been off therapy for a considerable amount of time before restarting.

Speaker 2

Restarts represent a strong indicator for the brand because they demonstrate that physicians are comfortable using loop kindness as a first line therapy, and they likely indicate the importance of maintaining loop kinase for a sustained period of time. It's important to note that treating flares is not aligned with the most recent treatment guidelines. These guidelines out there call for patients to remain on therapy for 3 to 5 years. I'll talk more about our commercial strategy in a moment, but this is why we continue to encourage physicians to follow the guidelines and treat lupus nephritis more aggressively. Regarding our hospital numbers, we ship wallets to hospital pharmacies with little to no visibility into how these hospitals are dispensing the drug to actual patients.

Speaker 2

Therefore we estimate how many patients come from those wallets based on average wallet utilization across all patients. As previously discussed, the hospital market was completely closed off to us for the 1st 2 years of the launch due to the global pandemic. Now that we have a broader hospital access, we're looking closely at how we approach these institutions and addressing some of the complexities that are inherent in the hospital systems and integrated healthcare networks. We're beginning to see the impact of our execution in this space with the wallet shipments and patients beginning to pull through. For the full year, we added a total of 17.91 PSS, an increase of approximately 9% year over year.

Speaker 2

And from January 1, 2024 For February 9, the same year, we added approximately 191 PSFs. Adding to the PSF number, we have approximately 40 new patients from both restarts and the hospital channel. In addition, I'm pleased to report that our conversion rates continue to improve with approximately 85% of PSFs converted to therapy. We're also improving the time it takes to get patients on therapy. Throughout 2023, we increased our processing speed at all time periods 30, 60 90 days with 63% of our patients starting therapy in 20 days or less.

Speaker 2

I'd like to point out that this is a meaningful improvement year over year. Our 12 month persistency continues to improve and is now approximately 55%. We are encouraged to see almost 45% of patients remain on therapy at 18 months with that number holding steady out to 24 months. And consistent with prior periods, adherence to lupuskinase treatment remains strong at approximately 86 percent at year end. The increase in patients on therapy in the quarter was driven predominantly by improvements in new PSFs, patient restarts, hospital fills, conversion rates and processing speeds and overall improvements in persistency.

Speaker 2

Exiting 2023, a total of 2,066 patients were on therapy. This represents an increase of over 35% over 2022. As we stated on previous calls, our strategy to grow lupus nephritis market is focused on 3 key areas. The first, educating healthcare providers on the need to screen and treat more aggressively. 2nd, activating the patient to proactively discuss screening and treatment with their physicians And lastly, continuing to clinically differentiate lupkinase and position it as part of the foundation therapy in the treatment of lupus nephritis.

Speaker 2

To address it first, we continue to increase our focus on healthcare professionals and key opinion leaders by leveraging our long term clinical data and the updated EULAR and Codigo guidelines. Our messaging is focused on encouraging physicians to recognize that all SLE patients may be at risk for lupus nephritis and that active screening for and routinely monitoring lupus nephritis patients are critical. Prioritizing early diagnosis with every SLE patient, treating to target goals and reducing protein levels to minimize steroid use. Start treatment with effective combination therapy and leverage combination therapies with the goal of increased renal response. And lastly, continuing to treat for at least to 5 years following a complete renal response.

Speaker 2

We're already seeing meaningful impact from these clinical developments and we will continue to reinforce this messaging through our robust marketing and sales efforts. In terms of patient activation, We focus our efforts on educating SLE and lupus nephritis patients and driving them to have provocative and proactive conversations with their physicians About screening and treatment, our messaging reinforces the importance of routine urine screening, the seriousness of the threat of lupus nephritis progressing and the critical need to start and stay on treatment. We deliver these messages through a mix of highly targeted social and digital initiatives as well as in person advocacy events. Finally, our customer facing teams are focused on clinical differentiation and delivering the loop kindness clinical story targeted towards the highest potential writers. Our activities against these targets have steadily increased throughout 2023.

Speaker 2

And in the Q4, we further increased adept at prescribing in our current base of customers and in addition expanded new customers and new writers. Building on the momentum we established in the Q4, we now have over 5,000 PSFs since launch. And based on everything we've discussed today, We're reaffirming our 2024 net product revenue guidance range of $200,000,000 to $220,000,000 Shifting gears, I'd like to now discuss the conclusion of our strategic review and provide additional context. Please note that you will find further details of the review located within our recently issued annual report on Form 10 ks and related press release. To remind everyone how we got here, in connection with our Annual General Meeting held May 2023, certain shareholders express their desire for the company to undergo a strategic review process.

Speaker 2

At the 2023 AGM, 2 of the company's most senior and experienced nominees for directors did not receive requisite majority under company's majority voting policy and accordingly submitted their resignations to the Board. Those resigning members We're replaced with 2 new directors, both with significant pharma and business development backgrounds. And additionally, in connection with the collaboration agreement that we entered into with 1 shareholder, we agreed to appoint Doctor. Robert Foster, the inventor of voclosporin to our Board. Given the results of the AGM as well as the desires expressed by certain shareholders, On June 29, 2023, the company announced that it had initiated exploration of strategic alternatives.

Speaker 2

It was noted that the process would consider a wide range of options for the company, including but not limited to a potential sale, merger or other strategic transactions. The company retained JPMorgan as its financial advisor to lead the strategic review. Following the announcement of the process, JPMorgan and Aurinia put together a comprehensive data room, A corporate presentation and materials to support the overall review process. JPMorgan then engaged with more than 60 parties. That engagement led to 11 non disclosure agreements being signed with potentially interested parties.

Speaker 2

Aurinia also conducted multiple meetings and presented to multiple parties, including some that did not sign non disclosure agreements on a non confidential basis. The data room itself was extensive, containing over 200,000 pages of materials across 4,300 files. Despite significant effort put into the exploration of strategic alternatives from Aurinia's Board, Its management and our advisors, only one party submitted a preliminary non binding expression of interest, which remains subject to customary conditions, including a formal due diligence. After review of that expression of interest, Aurinia's Board elected to allow that party into a detailed formal diligence process. At the conclusion of its diligence process, The counterparty elected not to submit a formal offer.

Speaker 2

In addition to exploring the sale of the company, Aurinia also explored multiple alternatives, including the potential for acquiring, merging or licensing other entities or assets. The Board ultimately determined that none of the other alternatives explored and that were available to it to pursue were in the best interest of the company and its shareholders. Based on the outcome of this extensive strategic review, The Board believes that the best path forward is for management to streamline its operations as announced today and focus on the company's commercial execution. We expect this to provide us with financial firepower to generate meaningful cash flow, which we intend in the short term to repurchase shares and over time continue to build balance sheet strength. We believe this strength will provide us with the financial flexibility to consider a wide range of alternatives over the next few years.

Speaker 2

This could include diversifying our portfolio through the addition of new pipeline assets or creating scale through the acquisition of commercial assets or other strategies that we believe will allow the company to continue to grow and drive towards its mission. For even more context, in 2018, the company under previous management and at the Board's direction engaged a leading investment bank and conducted a confidential strategic review process. After extensive outreach, The company received only one non binding expression of interest, which included a due diligence process, but in the end did not result in a formal offer. And outside of these two expressions of interest, the company has never received any offer of any kind. The Board and management though remain open to exploring opportunities that are in the best interest of the company and are open to considering any bona fide offers that the In addition, following the conclusion of the strategic review, the company is reaffirming its commitment to the value enhancement by by driving loop kindness growth while maintaining a sharp focus on operating efficiencies and maximizing cash flows.

Speaker 2

As a result, the company is ceasing further development of both AUR 200 and AUR 300. Correspondingly, the company expects to take a restructuring charge of approximately $11,000,000 to $15,000,000 in the Q1 of 2024. This charge will primarily be made up of severance costs, contract termination costs and other costs associated with terminating these programs. We anticipate reducing employee headcount by at least 25% by the end of the Q1 of 2024. There is no planned reduction in headcount in commercial or commercial supporting roles.

Speaker 2

The company expects annual cost savings of approximately $50,000,000 to $55,000,000 on a go forward basis with no impact on our commercial investment. In addition, the Board has approved a share repurchase program of up to $150,000,000 of the company's common shares, The maximum amount of which is subject to receipt of regulatory approval in Canada. This reflects in Aurinia's growth prospects and a continued commitment to enhancing both short- and long term value for shareholders and other stakeholders. While we know there will be questions about timing and details of this near term strategic shift, I can tell you that we will execute quickly and decisively to maximize the benefits. I'd now like to turn the call over to Joe to provide additional details of the share repurchase program that we announced today as well as more detailed review of our financial results.

Speaker 2

I will then return at the end of the call for a quick recap and to open up the line for your questions. With that, Joe?

Speaker 3

Thank you, Peter, and good morning, everyone. As Peter previewed, the Board has approved the share repurchase program of up to 150,000,000 in common shares of the company, of which the maximum amount is subject to receipt of exempted relief in Canada. If granted, it would permit Aurinia to purchase up to percent of the issued and outstanding common shares of the company in any 12 month period over 36 months. There is no assurance that exempted relief will be granted. If the exempted relief is not granted, the maximum the company may purchase under the share repurchase program is 5% of our current issued and outstanding common shares being 7,230,888 common shares.

Speaker 3

We plan to begin opportunistic discretionary purchases shares on the open market beginning on or around February 21, 2024. The company expects to fund the share repurchases from cash flows from operations cash currently on hand. Further details can be found in our recently issued press release and Form 10 ks. I want to that this repurchase program truly reflects our confidence in Aurinia's growth prospects. Now let's take a few moments and go into detail regarding our financial results for the 4th quarter 12 months ended December 31, 2023.

Speaker 3

As of December 31, 2023, Arena had cash, cash equivalents and restricted cash and investments of 300 $50,700,000 compared to $389,400,000 at December 31, 2022. The decrease is primarily related to the continued investment in commercialization activities and post approval commitments of our approved drug Loop Kindness, inventory purchases, advancement of our pipeline and mono plan payments, partially offset by an increase in cash receipts from sales of Loop Kindness. Total net revenue increased 59 percent to $45,100,000 for the 4th quarter compared to the prior year period of $28,400,000 Total net revenue for the year was $175,500,000 an increase of over 31% over the prior year of $134,000,000 Total net product revenue increased 49 percent to $42,300,000 for the 4th quarter Compared to the prior year period of $28,400,000 total net product revenue was $158,500,000 $103,500,000 for the years ended December 1, 2023 and 2022. The increase in both periods is primarily due to an increase from our 2 main customers for the Kindness sales, driven predominantly by further penetration of the LN market. License collaboration and royalty revenue was $2,800,000 for the 4th quarter compared to the prior year period of $109,000 License collaboration and royalty revenue was $17,000,000 30 point $6,000,000 for the years ended December 31, 2023, 2022 respectively.

Speaker 3

For the years ended December 31, 2023, License collaboration and royalty revenue included a $10,000,000 pricing and reimbursement milestone and additional collaboration and manufacturing service revenue from Otsuka. For the year ended December 31, 2022, license collaboration and royalty revenue was primarily due to the recognition of a $30,000,000 regulatory milestone for Matsuka following the EC marketing authorization of Loop Kindness in September of 2022. Cost of sales and operating for the Q4 ended December 31, 2023 December 31, 2022 were $74,800,000 $56,500,000 Total cost of sales and operating expenses were $267,200,000 $245,500,000 for the years ended December 31, 2023 December 31, 2022. Let me now give you a further breakdown of operating expenses, drivers and fluctuations. Cost of sales were $5,400,000 $1,400,000 for the quarters ended December 31, 2023 December 31, 2022.

Speaker 3

Cost of sales for the year ended December 31, 2023 were $14,100,000 $5,700,000 for the year ended December 31, 2022. The increase in both periods was primarily due to increased sales of Luke Kindness coupled with the amortization of the mono plant finance lease right of use asset, which was placed into service in late June 2023. Gross margin for the quarter ended December 31, 20 2023 December 31, 2022 was approximately 92% 96%. Selling, general and administrative expenses inclusive of share based compensation expense were $50,100,000 $47,500,000 for the 4th quarters 2023 2022, respectively. The increase in total SG and A was primarily due to an increase in share based compensation expense.

Speaker 3

For the years ended December 31, 2023, SG and A expenses, inclusive of share based compensation expense, was 195,000,000 the year ended December 31, 2022, SG and A expenses inclusive of share based compensation was $196,400,000 The decrease was primarily due to a reduction in expenses associated with corporate legal matters and insurance. Non cash SG and A share based compensation expense was $9,500,000 $7,000,000 for the quarters ended December 31, 2023 December 31, 2022. Non cash SG and A share based compensation expense was $36,500,000 $28,400,000 for the years ended December 31, 2023 December 31, 2022. Research and development expenses inclusive of share based compensation expense were 10 $200,000 $9,900,000 for the quarters ended December 31, 2023 December 31, 2022. R and D expenses inclusive of share based compensation expense were $49,600,000 $45,000,000 for the years ended expense.

Speaker 3

For the quarter ended December 31, 2023, non cash R and D share based compensation expense was 1,900,000 the quarter ended December 31, 2022, non cash R and D shared based compensation was income of 260,000 Non cash R and D share based compensation expense was $7,500,000 $3,300,000 for the years ended December 31, 2023 December 31, 2022. Other expense was $9,100,000 versus other income of $2,200,000 for the quarters ended December 31, 2023 December 31, 2020 respectively. Other expense was $8,400,000 versus other income of $1,500,000 for the years ended December 31, 2023 December 31, 2022. The increase in expense for both periods is primarily the increase of the foreign exchange loss related to the revaluation of the Mono Plant Finance lease liability, which commenced in June 2023 and is denominated in CHF. Interest income was $4,600,000 for the quarter ended December 31, 2023 $2,900,000 for the quarter ended December 31, 2022.

Speaker 3

Interest income was $17,000,000 $5,100,000 for the years ended December 31, 2023 December 31, 2022. Increase for the quarter and full year was primarily due to higher yields in our investment as a result of higher interest rates year over year. For the quarter ended December 31, 2023, Aurinia had recorded a net loss of $26,900,000 or $0.19 net loss per common share as compared to a net loss of $26,000,000 or $0.18 net loss per common share for the quarter ended December 31, 2022. For the year ended December 31, 2023, Aurinia recorded a net loss of $78,000,000 or $0.54 net loss per common share as compared to a net loss of $108,200,000 or $0.76 net loss per common share for the previous period. With that, I'd like to hand the call back over to Peter for some closing remarks.

Speaker 3

Peter?

Speaker 2

Thanks, Joe. I want to close by saying that we've built Strong foundation for Aurinia's growth. This near term shift will make us financially stronger. In the years to come, it will allow us more financial ability to continue to explore a range of strategic initiatives. We have a deeply experienced management team that's dedicated and committed to driving commercial success of lupus nephritis and improving the lives of people suffering from lupus nephritis.

Speaker 2

We're looking forward to a continued strong performance carried through in 2024. And I want to thank you all for joining us and giving us your time today. I'll now open the lines for any questions. Operator?

Operator

Thank you. At this time, we will be conducting a question and answer session. And our first question comes from the line of Maury Raycroft with Jefferies. Please proceed with your questions.

Speaker 4

Hi, good morning. This is Farsin on for Maury. Thank you for taking my questions. So for Peter, can you talk more about the assumptions and key drivers behind your revenue guidance of $200,000,000 to $225,000,000 and how you had like 231 patient starts and restarts factor in, whereas in the same time period last year you had like 274. So just wondering on the assumptions?

Speaker 2

Yes. Well, first, the assumptions to get to the range that we put out there in terms and thank you for the question, of guidance factor and As we said, all the elements of our business, right? But obviously, we've got a keen eye on the metric that you pull out, which is What's your new starts going into the Q1 and how does that potentially impact the full year view? If you look at our PSF's year over year and then you add back in the new starts that we've had in the hospital channel and then you project that on a daily basis towards

Speaker 5

the end of the quarter, I

Speaker 2

think what you'll see is that we have Towards the end of the quarter, I think what you'll see is that we have, we're experiencing growth, albeit how significant depends on what the rate is from now until the end of the quarter, but should project out growth to the end of the Q1 versus what we did last So the PSF and Newstart number when you include all three of those, looks quite strong to the 1st several weeks of the year. Recall also that our March is usually, at least historically, has been one of our best months. So we're not even

Speaker 5

factoring that in the numbers, but

Speaker 2

if you do factor that in the numbers, but if you do factor that in the numbers could significantly contribute to the overall performance. But Fazin, just to give you the overall, we have to continue to see the type of persistency we've seen. We have to see growth in restarts in the hospital channel, PSFs for sure, time to get in patients on drug and of course the new patient starts that you point out, but it's all elements and so far the Q1 read on those has been strong.

Speaker 4

Makes sense. And then if possible for you to share more insights into the review process, was the apprehension to buy primarily due to the valuation disconnect or something else? And do you think interested parties could come back to negotiate Is there any like say milestones related to the commercial sales of IP are met?

Speaker 2

Well, I listen the latter part of your question, as we said on the call, we remain open to any and all bona fide Opportunities that are brought forward to the company. I can't speak for other parties nor can I predict the future, but I can tell you that you have a Board and a management team that will always remain open to alternative strategies? We don't need to necessarily run a strategic review process. We've always been open to other opportunities. As for feedback to this specific process, listen, we had a variety of interactions with parties involved in the strategic review process.

Speaker 2

And given the nature and the variety and the depth of these interactions as well as the confidential nature of the strategic review process, we can't divulge additional details at this point. We also can't speak on any other party's behalf as the information would be material their business.

Operator

Thank you. Our next question comes from the line of Joseph Swartz with Leerink Partners. Please proceed with your question.

Speaker 6

Hi, all. This is Will on for Joe. Thanks for taking our questions today. 2 from us. So just to start, Zeroing in on the 101 patients that were restarted for those from the hospital channel, could you provide a breakdown between the 2?

Speaker 6

Do you see this as an area as a potential growth driver for 2024 and are there any kind of appreciable patterns between those patients who are restarting therapy? Thank you.

Speaker 2

Thanks, Will. Yes, the 101 is referring back to the 4th quarter result that when we reported the numerical Significance increasing in 2 channels that we hadn't really historically seen and that's the patient restarts happening, which we think is a positive signal and then the opening of the hospital channel. And as we've said, the split there and listen, we've got 1 quarter of a trend here, so this could vary. But the split at least in the Q4 was more driven approximately 75% to 80% of those patients came on a restart basis about 20% of those patients came out

Speaker 4

of the

Speaker 2

hospital. As we look at the 1st several weeks of this quarter, So far we've seen about 40% in the combination and unfortunately at least today I don't have how that break percentage comes across. But I would assume it's similar to what we saw in the Q4. We look forward to detailing this as we move forward. And I guess What I'd like to underscore here is that while we'll always continue to report how patient start forms come into the company, these other Annals are going to become more important.

Speaker 2

And I think on a go forward basis, it's going to be very important to look at net new patients and that will be inclusive of these restarts that we've kicked out of our overall tracking under PSFs and channels like hospitals and other networks that haven't historically been purchasing and as we always have continue to give transparency in all areas.

Speaker 6

Okay, great. Thank you for that. And then just quickly thinking about the 9% growth in PSFs year over year, But seeing 35% growth in the patients on therapy, if I'm quoting your numbers right, can you just talk a little bit about the dynamic between the two and how PSF might be a bit of a leading indicator and kind of the time lag that's associated with that? Thank you.

Speaker 2

Well, I think there's a couple of things you got to factor in, right? We've never said nor will we say that new patient starts aren't important to look at. But in the 1st couple of years of the launch, it's always a question of how long will patients stay on drug over time and what will the persistency look like. And when patients do eventually come off a drug, do they come back to drug? And we're now starting to understand those dynamics better.

Speaker 2

So when you look at overall patient growth and when you look at that relative to new patients coming in, I think for us and somewhat of it's Forecasting dynamic, right, like it's the persistency that we've seen and as reported in this quarter, we've seen improvements in 12 month persistency now above 55% or 56%. And interestingly, when you get to 2018 and then 24 months, We've seen at least up to this point sort of a flattening out of the curve. And I guess I would point to a couple of things. New Eular and Cadego guidelines emphasize very clearly that patients should be on medications and this is irregardless of what medication for 3 to 5 years. That hasn't been historically how physicians have treated this disease.

Speaker 2

So, although guidelines have Pushing it, it's been treating episodic sort of flares of proteinuria and I think those guidelines are helpful. 2nd, in the last 12 to 18 months, we've launched different elements of data that have crossed a couple of different key areas. 1, 3 year data looking at both safety and efficacy of the product. So we were first to have data out that far, in particular looking at EGFR that's an important safety component of tracking impact to the kidney. And then 18 month biopsy data.

Speaker 2

So, remember, in the 1st year, obviously, we only had the 1 year AURORA study. So I think all that's impacting and I think you got to look at persistency alongside of new patient starts and we have to be hitting on both.

Speaker 6

Great. Thanks again.

Operator

Thank you. Our next question comes from the line of Stacy Ku with TD Cowen. Please proceed with your question.

Speaker 5

So we had a few. So I understand that you can't divulge too many details, but if we could just quickly follow-up on an earlier question on strategic review. If you could at least self critique, what do you think could be the best explanation following the strategic review? Do you think It could be related to something like IP, competitors coming, not getting enough traction with patient ads, Just some commentary from yourself would be really helpful. Thank you so much.

Speaker 2

So I'm going to Repeat myself, but because of the confidential nature of the strategic review process, there's a limit to the details that we can provide, particularly when it comes to other parties' business decisions and how they saw things. So we can't speak to the on another party's behalf as the information could be material their business.

Speaker 5

Okay, understood. And then as you talk about kind of these patient restarts, As you think about kind of long term, do you think this could really help improvements in retention? And then a quick follow-up on kind of Your kind of conversion rates for this year and next year, do you expect to stick around that 85% to 90% level or do you think continue to improve? Thank you.

Speaker 2

Starting with the last question first. I think the 85 Fairly consistent. While we've seen quarter to quarter, a percentage point or 2, directionally up or down, it's been on average pretty consistent. So I would hold that fairly consistent. In terms of conversions, I still think we have opportunity to continue to increase speed and time to conversion to getting patients on drugs.

Speaker 2

So I do think That's one that we can continue to work on even though we're at a fairly high level getting 60% of patients on to north of 60% of patients on to drug within 20 days. And then the persistency thing, if you look at the market research data we have and the claims data that we have internally, They show a pretty wide disconnect between what actually happens with patients in the market and where the guidelines are pushing things to go to in terms of 2 elements, 3 actually. 1 is diagnosis. We know that SLE patients, The low percentage actually get a 24 hour urine screen when they come into a docs office. We need to continue to improve on that.

Speaker 2

That'll grow the market. 2nd, treating to target is second. So we know from Our data that there's a proportion of physicians actually who only treat to high proteinuria, above what the Current guidelines recommend in terms of proteinuria level that would qualify a patient as having active lupus nephritis. So getting active treatment and treatment to target are key opportunities and goals for us. And then lastly, there is this element of physicians Treating episodic proteinuria versus sticking to guidelines and treating for and keeping those patients in control for At least 3 to 5 years, which we think obviously bodes well for continuing to see At least stabilization, if not improvement in our persistency rates out past 12 months and 24 months.

Speaker 2

So all of those elements I think, when you look at the data we have aligned with the guidelines and the market opportunity It bodes well for our growth in the future.

Speaker 5

Thank you.

Speaker 2

Thanks, Stacy.

Operator

Thank you. Our next question comes from the line of Ed Arce with H. C. Wainwright and Company. Please proceed with your question.

Speaker 7

Hi, thanks for taking my questions. I have 3. First, I wanted to ask about the share repurchase. If you could, can you tell us what expectations you have for the timeline on the decision For exemptive relief and is that something if that decision comes in, is that something that you would announce publicly?

Speaker 2

Well, why don't I start and if I miss anything, Joe can jump in here. The exemptive really, I don't know that we have an exact timeline And for when we'll get a read back from the Canadian authorities on that. But without the exemptive relief, we have up to 5%. Yes, 5% of our market cap that we have the ability to initiate without that exemptive relief. So as mentioned on the call, at or around 21 February is when we would have the ability to be in market if we so chose.

Speaker 2

And at that point, we would not need the Exemptive relief to at least do up to 5% of our market cap. After that would be how we expand above if we get that exemptive relief. Joe, did I miss anything?

Speaker 3

To answer your second question around that, Ed, we would also announce that exempted relief was granted, if and when it was granted.

Speaker 7

Okay, great. Secondly, just in terms of the growth drivers, You've been consistent over a number of quarters on how educating physicians and activating the patient is really critical here. And I'm wondering as you work through the dynamic of this market in getting both patients and physicians even more importantly, Changing the paradigm of the way they treat, maybe talk about some of the More recent wins that you see and changes in attitudes and perspectives and what is currently working right now?

Speaker 2

Well, as we mentioned on the call, although we didn't give the exact numbers, I can tell you we've seen significant improvement in both depth of Prescriptions and breadth of prescriptions. So we're going deeper and we're going wider. So I think our ability To impact our 8 to 10 deciles, our sales force's ability has been there. And even in addition, the broader message of more aggressive novel therapies like lupkinase is getting out to the broader base of physicians. I would also point to Ed the progress that we've seen on persistency, both with improvements at 12 months and sort of a stabilization out to 18 24 months.

Speaker 2

I think those Both directly correlated to the data that's been out that we put into the marketplace that we produce through the extension study through the biopsy extension as well or the biopsy substudy and our commercial execution. We look forward to Continuing to sharpen the edges of those results with more specifics, but I can tell you there's been progress on every front.

Speaker 7

Okay, great. And then last question, if I may. Given the streamlined focus here on commercial execution Of lupus, I'm wondering

Operator

post

Speaker 7

The reduction in cost structure and headcount, as you look towards the second half of the year, Could you perhaps share any commentary on achieving near term profitability and any growth profit growth and profitability over time? Thanks.

Speaker 2

Yes. You want to jump on that, Joe? Sure.

Speaker 3

Yes. Thanks, Ed. As you know, we don't provide long term guidance. We've indicated that on an annualized operating expense basis, We've cut about $55,000,000 to $60,000,000 over the next 12 months of which 75% of that will be recognized in at least 2024. We do believe that with these reduced operating expenses and our focus on Commercial execution, the Timeless Growth specifically, we expect significant cash flows going forward on a go forward basis.

Speaker 3

We will we obviously update you going forward on profitability. Some of this is tied to the timing around the restructuring charge as well as The share buyback plan. So further insights will come in the future, but for now we've kind of guided to a $55,000,000 to $60,000,000 OpEx savings on an

Operator

Thank you. We have reached the end of the question and answer session. I'll now turn the call back over to Peter Greenlee for closing remarks.

Speaker 2

Thank you very much. I want to thank everybody for their time today and we look forward to coming up on future quarters reporting our results and keeping you updated on plans. Thank you very much for joining us today. Have a great day.

Operator

And this concludes today's conference and you may disconnect your lines at this time. You for your participation.

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Earnings Conference Call
Aurinia Pharmaceuticals Q4 2023
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