Aurinia Pharmaceuticals Inc. (AUPH) Earnings Call Transcript & Summary

Hello, and welcome to the Aurinia Pharmaceuticals AUDREY update. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Glenn Schulman. Please go ahead, sir.

Thank you, Kevin, and good afternoon, everyone. Welcome to this afternoon's conference call as we review the top line results of the AUDREY Phase II/III clinical study of VOS for the potential treatment of dry eye syndrome. Joining me from the Aurinia team on the call this afternoon are Mr. Peter Greenleaf, President and CEO; Dr. Neil Solomons, Chief Medical Officer; Mr. Mike Martin, Chief Business Officer; and Mr. Joe Miller, our Chief Financial Officer. This afternoon, we issued the press release with the top line results from the AUDREY trial, which should be available on our website at www.auriniapharma.com. I'd like to remind everyone that today's call is being webcast live on Aurinia's Investor Relations website, and a replay will be available approximately 2 hours after the completion of today's call. Please also note that the content of today's call is the property of Aurinia. It may not be recorded, reproduced or transcribed without prior written consent obtained from Aurinia. For approval, please feel free to reach out to me, Glenn Schulman, via e-mail at ir@auriniapharma.com. During the course of this call, we may make forward-looking statements based on our current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's press release and our most recent filings with Canadian securities authorities and reports that we file on Form 6-K with the U.S. Securities and Exchange Commission. Also, please note that all these statements made during today's call are current as of today, Monday, November 2, 2020, and are based upon information currently available to us. Except as required by law, we assume no obligation to update any such statements as of this date. With that, let me now turn the call over to Peter Greenleaf, President and CEO of Aurinia. Peter?

Thanks, Glenn. And I want to thank you all for taking the time to join us as we provide an update on the top line results from our Phase II/III AUDREY clinical trial that evaluated ophthalmic formulation of voclosporin, or most of you know as VOS, as a potential treatment for dry eye syndrome. So without belaboring the point, folks, we're obviously disappointed with the results we -- that we observed in this dose-ranging trial. As many of you recall, in 2018, we conducted an exploratory Phase II trial evaluating VOS in a head-to-head against Restasis, which has a cyclosporine emulsion formulation for dry eye. We had a lot of confidence going into that study. In January, we reported results from this trial of that year showing that VOS led to robust and significant treatment effects compared to Restasis. While VOS showed no different from Restasis on the primary endpoint improvements and dropped discomfort at 1 minute, data from the secondary endpoint showed the potential for VOS to become a best-in-class therapy as measured by established approval pathways from existing treatments. We were encouraged to observe improvements across subjective and objective measures. So with that, we embarked upon a dose-ranging Phase II/III trial against vehicle to further establish the potential of VOS for this disease. As noted in today's press release, we were surprised to observe a less than robust level of activity when compared to results in the Phase IIa study. Dr. Neil Solomons will walk through the top line results momentarily. But in summary, we failed to observe a statistically superior outcome in the dry eye patient population enrolled in this Phase II/III study. While we observed a dose-dependent activity, initial analysis highlights that this study enrolled a very severe dry eye population. This population showed encouraging odds ratios versus vehicle but failed to show statistically significant improvements compared to vehicle. As many of you know, dry eye is a difficult indication to study, highlighted by the number of pivotal trials that have been required by other therapies to receive FDA approval. We will continue to dig into the data and conduct additional post-hoc analyses. We have made the strategic decision, though, at this point, to suspend the VOS development program for the near term. At Aurinia, we believe in responsible drug development for the benefits of patients in need. Obviously, this is a tough decision, but one guided by data, and of course, the strategic considerations for the dry eye patient community and our key stakeholders. We believe that the resources previously committed to advancing VOS for dry eye could potentially provide better outcomes by investing in our core capabilities of Aurinia and other areas, namely, developing autoimmune therapies for severe and less common conditions for underserved populations. We will be reporting our third quarter financial results next week. But recall that as of the end of July 2020, Aurinia had a robust cash position of approximately $442 million. This obviously provides ample resources to fully fund the launch of voclosporin following the FDA approval as well as funding for the rest of our development programs, which, of course, included VOS. With the suspension of this program, this obviously extends our cash runway and our focus can now double down on our passion, our heightened intensity and our desire to prepare for the potential approval of voclosporin and the LN launch opportunity. In parallel, we will continue to build our scientific expertise by expanding and diversifying our development pipeline over time. I'd like to once again take this opportunity to thank all the investigators and especially the patients for trusting in us and participating in our efforts to advance our understanding of VOS in this indication. And with that, I'll turn the call over now to Dr. Solomons to add additional color regarding the AUDREY trial. Neil?

Thanks, Peter. As Peter mentioned, this was a tough data set to receive, especially after seeing the robust results we previously generated in the VOS exploratory trial. AUDREY was a randomized, double-masked, vehicle-controlled, dose-ranging study, evaluating the efficacy and safety of VOS in subjects with dry eye syndrome. Initiated back in October of 2019, we enrolled a total of 508 subjects. The study consists of 4 arms with a 1:1:1:1 randomization schedule in which patients received either 0.2%, 0.1%, 0.05% VOS or vehicle, dosed twice daily for 12 weeks. The primary outcome measure for the trial was the proportion of subjects with a 10-millimeter improvement in Schirmer Tear Test at 4 weeks or better. Secondary outcome measures evaluated in the trial included Schirmer Tear Test at other time points, Fluorescein Corneal Staining at multiple time points, change in eye dryness, burning, stinging, itching, photophobia, eye pain and foreign body sensation at multiple time points and additional safety endpoints. As detailed in today's press release, we did not observe statistically significant improvements in STT at 4 weeks when comparing the dose group against vehicle. Since receiving the data, we've been digging the results and have made several observations. First, there did appear to be both a dose-dependent effect on tolerability as well as efficacy. However, the data are somewhat inconsistent and didn't reach the threshold of activity that we had designed the study to observe. Subjects enrolled into the trial did seem to be a bit older than those subjects enrolled in our initial exposure trial. Further, the subjects came into the trial with what appeared to be a more severe dry eye disease. On average, baseline STT for all subjects were substantially lower than those result -- enrolled in either other DES studies or our exploratory study with VOS. As Peter mentioned, the team continues to interrogate the data set and is doing a number of post-hoc analyses. These analyses will take some time. But given the totality of data set, I agree that this is appropriate to suspend the dry eye program at this time. Aurinia has always aimed to fulfill the medical needs of patients in a meaningful and substantial way. And on first pass, the AUDREY results do not meet our internal goals at this time. With that, I'll pass it back to Peter for some closing remarks. Peter?

Thanks, Neil. With a strong balance sheet and cash, cash equivalents and short-term investments of approximately USD 442 million at the end of July, we remain fully funded to support the launch of voclosporin in lupus nephritis and execute on our broader pipeline ambitions in the future. We will be reporting our third quarter results next week on November 10, so we look forward to speaking with you further then. Thank you for your attention today and the team is here to take your questions. So with that, operator, can you please open us up to a Q&A session? Thank you.

[Operator Instructions] Our first question today is coming from Alethia Young from Cantor Fitzgerald.

Sorry about the readout here. But I guess sort of surprising after the Phase II and maybe a setback for patients, but it does sort of kind of clean up the story and focus you on autoimmune. So with that, can you -- I just want you to kind of level set everyone to -- there's no read to make to the ongoing review of lupus nephritis and will these data be shared with the FDA? And then second, again, what other indications might you think about strategically? Or do you think it's kind of better to deploy more of the capital for the launch here? And then just while we have you, can you just talk a little bit about what you've been doing in a launch prep potential panel side as well?

Yes. So why don't I start off and then I'd ask Neil to join me in with his commentary. I guess the first thing I would say that maybe didn't echo as loud as it should on the conference call is I think dry eye was a unique opportunity for us because of the compound that we had and what we saw in our Phase II exploratory study. We've always said along the way that strategically, it wasn't aligned with where we were looking to take the company and where the company's core capabilities have been developed from, and that's in the autoimmune disease area and rare kidney disorder [ with the start ], but more broadly, the autoimmune inflammatory space. Second, listen, if the FDA asked for the data, we'll be able to disclose the data to them and we'd be more than happy to do that. But obviously, we're dealing with different divisions here. And we've not historically had that question come from the agency on the previous studies done, but I'll ask Neil to maybe expand upon that. And then the last thing I'll say before I ask Neil to dig a little deeper maybe into the FDA question is on the deployment of capital. I think first and foremost, in priority order, this just gives us an ability to heighten our focus on the lupus -- the potential lupus nephritis launch ahead of us. It extends our runway in terms of the investment that we can make in making that launch both in the U.S. and globally, immensely successful. And it also gives us the ability to look at other potential pipeline decisions. Today, we're not really ready to disclose what our decisions will be there. But I do think for the longevity of the company, diversification of the pipeline is going to be a key priority for us. So while I wouldn't exclude any further development for voclosporin and other indications, as long as the IP holds up, I would say that diversifying the science in our pipeline probably makes a lot of sense at this stage of the game, too. Neil, what would you add about the FDA engagement?

Yes. So -- I mean I think that the -- obviously, when the study is wrapped up, the study report will be submitted to the IND, but that is the ophthalmological division. We don't anticipate this being shared with the reviewing division or it being, in fact, relevant. It's a topical version of the drug in a sort of unique vehicle compared to the oral systemic administration. So we -- we're not so -- we don't expect this to have any impact there. Then you asked if that there was a -- oh, yes, you're also asking about perhaps currently ongoing preps for the -- with the NDA. The review is ongoing. Again, we've had word from the FDA that it was anticipating an advisory panel. And the -- we're going according to our previously stated guidance.

Our next question is coming from Maury Raycroft from Jefferies.

[ Francine ] on for Maury. So a couple of questions. Is it possible that the vehicle patients were on different background medications that probably used to manage the symptoms and this led to the placebo effect? Whereas in the head-to-head study versus Restasis, this was actually a more controlled study.

That's a good question. I'll have Neil take that and talking about the Phase II comparison to how we -- or excuse me, the IIa to the IIb and changes we may have made on background patient population or meds, et cetera. So Neil, do you want to try that?

Yes, sure. I mean the background or certainly the entry criteria were very similar. And if we look at the placebo effect or the vehicle effect, it was pretty much what we expected. And it was in line with the vehicle effect that's been observed in other studies. So we don't think that, that's an issue at all to do with that. Certainly, there were some patients that appeared to -- on the face of it to have a higher and more severe disease. But again, that wouldn't account for the entire totality of the results that we saw.

I see. And for the secondary outcomes, were any of them statically significant?

We've not reported those yet. There were some that were at various time points. But as we run through the data, that will be reported in due course. But for the most part, the key primary -- the primary and key secondaries were not statistically significant, but there were some observations at certain time points that were.

I see. And last question is, you mentioned that the more severe patients basically in the Phase II/III, were there any patients that were basically not as severe? Any distinction within the subset?

We -- there were patients, and we've certainly -- in part of our post-hoc analyses, looking to try and apply the severity that we saw in the exploratory study to the patients in the AUDREY trial, but this is ongoing post-hoc work at the moment. But also, just be aware, this is post-hoc, so the -- this is more for the team to actually understand the reasons for what we saw and see whether there's any explanation for the slightly different results that we showed in this study compared to the exploratory trial.

Our next question today is coming from Ed Arce from H.C. Wainwright.

Yes. So this result, obviously, is a bit of a disappointment, especially given the prior results. But I agree that in the big picture, this does kind of clean up the profile in the story as you get ready for the potential launch in LN. So just a couple of questions for me. One, with the study itself. I know, Neil, you had discussed in your prepared remarks, the assessment that there was a dose-dependent effect on both safety and efficacy. But I'm just wondering, given the 3 doses and the results seems so close, especially the low dose versus the high dose, which was 4x multiple on the concentration and it was very similar. I'm just wondering if there's anything further you could share there.

Yes, Neil, go ahead on that.

Yes, sure. So Ed, I think your question is more around the fact that there wasn't a profound dose effect given the sort of 4x concentration difference between the high dose and low dose. Is that your question?

Right. Yes.

Yes. Yes. I mean we observed that, too, Ed. And I think, as we said before, we don't fully understand all the reasons for that. Certainly, some of it could be related to the severity of some of the patients, perhaps they were not able to respond to any therapy, no matter how concentrated. And like I said to the caller before, to the question before, we are exploring all of this in our post-hoc analyses, trying to apply some different criteria to results to better understand them. I suppose the other thing as well is that these dry eye studies, there is inherent variability if you look across the network of dry eye trials, and maybe that's -- also we're seeing an element of that as well. But like -- I -- anything else I said is probably speculation.