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

Okay. Great. Thanks, everyone, for joining the Aurinia fireside. We're really happy to have today with us Peter, Neil, Max and Glenn. Thanks for taking the time. You're in the midst of real busy time, exciting time for the company with the launch. So we're appreciative of having you guys for at least a half an hour here. With that, Peter, why don't we turn it over to you see if you have any opening comments or thoughts?

Ken, first and foremost, on behalf of the company, I want to thank Cowen and yourself and your team for having us here today. Obviously, it's an exciting time for the company. I mean we've gone through the last 2 years pushing our way through Phase III data and a positive outcome in our lupus nephritis trial after years of work, post the acquisition of the asset from the original founders of the company. And that rolled into a busy year of NDA filing, the building of a commercial team in the midst of COVID, led by Max Colao, who's here on the call with me today, and the eventual approval of the drug, right on the date, on the hour, at 6:30 p.m. on Friday in lupus nephritis. And listen, we were out of the gates. We had prepped fully to launch this. We had a fully deployed team. We had trained everybody up in this launch meeting the weeks before that. So we have been busy at work ever since that approval date, which, if you can believe it, was a short 30-or-so business days ago. So it really hasn't been that long. We had an earnings call just recently, where we talked a little bit about some of the early launch parameters, and we look forward to digging a little more into that with you and your team today. So thanks for having us, Ken.

Of course. No, that's great. Yes. So why don't we get right into it. It's fascinating to us as we think about in launches. And we have the privilege at times of seeing a lot of different companies bring products to market. There's obviously uniqueness to every opportunity, and there's things that we can learn and different approaches we can take. But one of the things that seems to be persistent, especially when it comes to orphan launches, is literally the plumbing of that launch. And that -- what I mean by that is a clinician wanting to prescribe, and then the ease in which wanting to prescribe to the patient, that the patient eventually gets drug and drug gets into the patient. And so it seems, sometimes, from the outside looking in, it's a trivial thing. But we know that there's a lot of complexities to it and how to make that system cleaner, easier more seamless, is really critical. So I don't know if we could step back and just talk about -- we know you have the Aurinia Alliance platform. Can you talk about the level of kind of individualized interaction from a clinician level, from a patient level, from a managed care perspective to help ease that system?

Yes. I have a comment here, but I'm going to turn it right to Max since he's got the ground troops out there that are doing it. My comment is more about the pre -- how we set things up upfront, but jump right in, Max.

Max, you're on mute.

You're on mute, Max.

I'm coming. Thanks, guys. So thanks for the question, Kenneth. And we recognized upfront, we're launching in a rare disease. And as you highlighted, Ken, that plumbing of just going from a prescription to getting the drug in the patient's hand so the patient can realize the benefits of the drug, is not trivial. It takes a tremendous amount of work. We also recognized very early on that, before launch, that patients themselves, when they come out of a diagnosis of LN, many times, they -- the medical jargon, the health literacy, they're confused. They don't know exactly what's happening and the -- and we firmly believe that the more patients understand their disease, their consequences, the importance of monitoring, the importance of following the benefits, is linked to their compliance, right? We want these patients, not just to get the drug, but to realize the benefit of the drug, right? And that means that plumbing and then staying on therapy until they get to a complete response. That's what we took into account with Aurinia Alliance. And so what we've done is we developed a closed system that surrounds the patient and provider, and it's all linked. It's interlinked. The Aurinia Alliance, the case manager that is dedicated to the patient, is communicating with a field access navigator that's working with the provider and they understand from the specialty pharmacy as well, exactly what's going on at every step of the process, as that prescription is written, to when it's adjudicated by the payer. So literally, we do this compliantly, we can follow by the hour where it is in the process. And that allows -- that visibility, that communication, that collaboration helps to avoid the delays in the plumbing of prior odds, getting it filled out, getting the right information. And it also, again, with the patient, provides that education as to what they're getting, why it's important, why they need to monitor and what the benefits that they will receive. So it's a rare disease model for sure. Many people call it high touch. There's -- we've gone to exceptional means. We really want to exceed everybody's expectations in what we've set up. And when I mean everybody, I mean, the patient, the provider, and the results that we get.

And Peter and Max, I know that there was the balance sheet, which we often talk about in kind of an abstract form, but that really is a strategic advantage at times and the level of investments we can make. And I know we're very early into launch. The bullets are just starting to fly now to the degree -- I usually make people laugh when I say this, but to the degree in which the CEO's cellphone number is known to folks, if there's a problem, are we already doing adoption here in terms of -- we're hearing from clinicians, we're making sure that the process is smooth, that the access is right in almost real time? And are we already learning, real-time, some of the point to the system that we need to kind of move resources to versus less?

Yes. I think the short answer to that is yes, which we could answer in much more detail from sort of initial prescription, all the way through to the back and forth of the payer before policy is put in place to try to get that patient on drug. It's -- but it's no different than any other launch in a specialty disease category like ours. I think we're experiencing all the same pains. The different thing is we've had the people in place with a strategy who are deeply experienced in doing this that are executing. I think something you also mentioned right upfront, Ken, and at times, in our business, you get a lot of flak for raising money. But as we looked at this launch and moving into the possibility of launching this drug, we knew there were 2 things we did not want to miss on. One was going to be the people. So having the right high-caliber people at the [ team]. People deliver everything for a company. So if we've got the right drug, we've got the right patient population, we got the right people to plug it all together for us commercially. And I don't think we shorted anything there. The second was really having enough money to be able to do what you're going to do. And that's not just for the first year. So I see companies that are trying to launch specialty disease drugs going to [ bat ] with an FDA approval with $100 million in the bank. The only thing you know is that they don't have enough to do what they really want to do, and they're making investment decisions based upon stringing out the $100 million that they've got. Know that when we launched this thing and where we sit today, we have the ability to be agile. We can make changes, we can reduce investments in certain areas, we can pump up investments in other areas because we've got more than 2 years of cash on our balance sheet, with no incoming revenue. And I think that was a very important strategic call right upfront.

And when it comes to clinician awareness, obviously, not all clinicians, although we have infinite respect for all clinicians, but not all are built the same in terms of knowledge. And so as you approach this launch, I know Peter, you've spoken about the sales force being a bit more sophisticated than your normal group and your ability to kind of attract folks that already had relationships. But can you talk, generally speaking, to the degree in which the clinician base is already prepped in terms of educational or knowledge, and what level of kind of patients we should have as you hit the first wave of education?

I think Max will talk more specifically about individual physician interactions. But the reality with any drug launch is that it's varied, right? And I think that our adoption curve really shouldn't be looked at any differently than any other company that's launching in this space today. I think the -- putting the right people in play, really, just helps you to get into that top-tier launch. The best sales forces are the ones that launch great drugs, and that was our expectation from day 1. But Max, do you want to talk just a little more about what we're seeing from both nephrologists and rheumatologists in this early stage of launch?

Yes, sure. Absolutely. And I would say that when you get out into the community, the physicians in the community, they may have 5, 10, 15 lupus nephritis patients in their practice. So it's a small number of patients, relative to their practice as a whole. So lupus nephritis isn't necessarily top of mind for the physician that's in the community, whether it's a nephrologist or rheumatologist, right? And so -- and they've got a way of doing things. So there's an educational -- kind of there's lots of education needed there to help them understand the relative benefit of LUPKYNIS, how it compares to the standard of care, all of the facets associated with it. And frankly, lots of our access right now is better in the community than it is in academic centers that are pretty locked down. The flip is true in academic centers that have lupus centers. There, the physicians really have, I would say, are more primed. They understand -- they've already been, frankly, as many of them have been preparing for LUPKYNIS for quite some time, well before approval. They understand the data, they've been following the data, and so they're much more primed. I think the issues that you have in the lupus centers that are within the academic centers are that the -- there's variability there in terms of how the restrictions, how restricted access there is. And some of them, frankly, right now, their lupus clinics are completely telemedicine, right? So the ability to get in there and interact is a little different right now. So as Peter highlighted, it's variable. And we have a lot of education to do all around, whether it's related to gaining access or related to the drug itself.

And in terms of -- obviously, you all provided us with a view of net value per patient, we'll call it. I know we're all trying to always figure out gross to nets, but we try to look at it as net value per patient. There's a lot of different things that are going on as you support patients and also given your discounting and rebating and whatnot. Just wondering, we have seen in some specialty launches where kind of medical exemption early on is pretty easy, and coverage is fairly rapid. And I don't want to set unfair expectations, because this has always have their own unique challenges. But can you just give us an early sense of the managed care and how we feel about the early ability to capture value for you all as you go through the launch? And it should be kind of a traditional -- look, the net value is going to really escalate as we get closer to quarter 3, quarter 4 of the launch, but are we having any early success or any early anecdotes you can give us?

Sure. Yes. So -- and we talked about this. We've been really proactive with payers, right, in providing a tremendous amount of education. Now we cover more than 200 million lives in our interaction with payers. And they get the value proposition from a clinical standpoint, they get the burden of disease. They understand the price. So to your question, which is, okay, well, how is that going to actually kind of play out over time, and what does that mean in terms of value? The -- it really will boil down to these policies, coverage policies going into place. That really will be determined in terms of establishing the access. We've been encouraged, right now, there is one. It's very consistent with the label, the Blue Cross, Blue Shield of North Carolina. But we are seeing payers that are moving. And there are some payers moving very quickly in terms of covering the [ clients ]. And like I said, we have paid scripts in commercial, Medicare, Department of Defense. We've had some traditionally difficult payers like Blue Cross, Blue Shield of California, turn around a prescription in 3 days. So there are really good -- there's good momentum, I suppose, but still it's very, very early, and the policies will really drive this.

Okay. That makes sense. Before we ask you kind of more point blank metrics, which we'll get to, Peter and see what you're willing to share with us in a second. I think one of the issues that The Street has is trying to figure out, obviously, the size of this patient population. And when you're dealing with 330 million and I know we have all the epidemiological work, but you -- if you're off a little bit in one direction to the other, when you come down from 330 million to maybe the 60,000 to 80,000, you can really be off in a direction, and it can be meaningful. So maybe if there's any type of claims data on CellCept or any other kind of more rigorous kind of metrics that I don't know if you all care to share, can help us. Or maybe just go ahead and remind us of the view that you have from kind of the work that you've done about the patient size? And then from there, we'll try to grab some nitty-gritties from you in terms of kind of what we're experiencing real time.

Yes. I mean, 2 years ago, when I joined the company, and Neil can definitely vouch for this, too. I think numbers -- and they still are, a little all over the place. Depending on the group that you talk to, we've heard numbers as high as 0.5 million of these patients. We've heard numbers that it's about half of the SLE population, which is closer to probably 250,000. What I can tell you is through the work that we've done, and this is across using multiple sources, including epidemiological work, claims work, what analog prescription work we could do that we think there's about somewhere between in the U.S., 80,000 to 120,000 of these patients. So I know that's a pretty wide number. But what the takeaway should be is it's a sizable market opportunity, no matter whether it's 80,000 or it's 120,000. But the model that we put in place, this rare disease model, is because of that, because we don't see this as being 0.5 million patients that are suffering from the disease. It's still a huge market opportunity. And from there, that's how many patients have LN, how many of them actually have active disease. And we believe somewhere probably around 80% of that number has some form of active disease. So it's still a very sizable patient population. And we're out there now, actually, getting it real time. We're not just seeing how many patients are there within an office practice. We're seeing the variability, whether you're a high-volume community practicing physician, rheumatologist, nephrologist, how the major medical centers differ and we're now getting more granularity around that number, more comfort around where the patient opportunity sits. Obviously, as we get deeper into this, we'll share more information.

Okay. Is there any -- now before I get into any other kind of questions, is there any other kind of data points you could point us to? Enrollment forms? Obviously, you are receiving scripts, and we know we can't track them. So I don't know whatever you're comfortable sharing with us that would give a little bit more metrics as to the very early goings, and we're very appreciative how early it is. But I guess, throw it out there, kind of broadly speaking, to -- I can keep asking and try to land on it, but if there's anything you're willing to...

Tell him how many prescription [ job ], Peter.

Listen, I think that it would be too early for us to really lay out the exact number of prescriptions. Know that we track the 3 major buckets of areas that will continue to make people more comfortable with. One is it sort of access broadly. And to me, that's what is coverage, so how many millions or hundreds of millions of lives do you have that are covered. And then second, underlying that coverage is policy. So are the policies onerous? Do they have step-throughs? Do they -- is there a prior odd? And we'll continue to report on elements of that. But as Max has said, we've hit all those major plans. We're now doubling back with them. We're putting daily prescription pressure on them, and policies are starting to come through. And even without policies, we are seeing prescriptions getting fulfilled. But the reality is that there are multiple steps that most payers will put on a patient and a physician when there's not a policy in place. So the first thing we need to do is continue to report on that. But I can tell you, we are at or ahead of our expectations on where we would be with coverage and policies surrounding coverage at this stage of the game. The second is patients. So when a physician prescribes the drug, how many of those are we queuing up to get in the mix? I can tell you, we're on target with where we want to be, but we're not -- we haven't disclosed as of yet how many of those patients there are. Lastly is prescriptions, and those are the patients that actually get on drug and become revenue-producing patients. And over time, all of those will become more real numbers that we're going to have to share every day. And I guess the last one is leading in sort of lagging indicators. And this is the market research work that we'll do around intent to prescribe, actual prescribing, sort of the typical market research that you'll see from launch all the way through as a product starts to see itself up the adoption curve. I'm not trying to bounce around the message. I want to reinforce that if we were more than 30 days into this, we'd be disclosing more. But to say anything, but we're ahead of our internal expectations, we feel we're not afraid of, which must mean I'm fairly comfortable with where consensus is today. And we're ahead of our internal plans right now, albeit it's early. We got a lot of work to do. We got the right team, and we think we got the right drug.

Okay. No, that was all helpful. And especially the last point that you still feel good about where the consensus estimates are. This patient population, all patient populations are unique and different. Max, at one point in the dialogue, you talked about really persistency on medication. It's going to be one of the components. Oftentimes, we just stop at drug gets taken, and you really went one step further and talked about persistency. So can you talk about a little bit about connectivity, maybe even advertising to this population? At what point do you want to try to activate the patients? I know oftentimes, you first want to have a couple of passes with the clinicians and get the message out. But do you talk about the process here, one, the persistency of the patients, how you're going to help with that? And then two, further activation of the patients, when that -- we should anticipate that?

Yes. Thanks, Ken. Yes. I think the primary support for the patients for persistency will be through Aurinia Alliance and the case manager. But that being said, we're activating patients through digital channels already. That's already starting. It's actually even started pre-launch through just education campaigns. And then also, we have a very, very active work with our advocacy partners. We have a broad set of advocacy partners we work with. And through them, also, we engage patients and provide -- help provide education and support. Especially in these times, these patients, we're talking about a non-white patient population, so black part of the patient population that may be more impacted by COVID challenges. And so we're stepping up our efforts across every means, digital advocacy and then clearly through the case management side.

Okay. Great. Now that's very helpful. As we've done our work going into the launch and as we've asked clinicians, we polled them, clearly do survey work, and then we have one-on-one interaction. We're dealing oftentimes with the KOLs. But they've cited to us 40% to 50% penetration to this target market wouldn't be unreasonable expectation than when we nuance and get on the phone with the clinicians and you're able to go a little bit deeper, you hear things like all, why wouldn't they -- there is that type of feedback. Now I don't want to set expectations that are far beyond unreasonable. But -- and you do have a competitor in the marketplace as well. So can you either walk back crazy, excited folks like myself, Stacy and Georgi? And can you position against the competitor as well? What should we be thinking about, potentially, as we look 3, 4, 5 years down the road in terms of penetration rates?

Well, we do -- I mean, as we said, we think this drug has all the potential in the world to be north of $1 billion in peak year sales. So I think that underlies your point about how big it could be and what the initial reaction has been from physicians. I think the reality is we're in this COVID time period, these patients see their -- obviously, they're going to see their physician because they're sick. But we've got to capture them when the doc sees them. So it's a timing thing. And we've got to start with those patients we can get right out of the gates, any new patient and then over time, challenge physicians and even patients who are on the current cocktail of drugs that would be called the standard of care today, even that, we need to challenge. So it's going to take a little bit of time, but we think this drug has all the potential in the world to be north of $1 billion someday. Max, how would you...

I would just say that, Ken, I think what you've heard from physicians, we firmly believe that we kind of should be the standard of care and will become the standard of care over time. And that it should be the majority, if not all of the patients, that are requiring a decrease in proteinuria, and it could decrease in proteinuria that will go on therapy. I think, also, we're -- but also, you have to put that in context of where we are at a stage in any launch and have been in a few -- in any launch at the beginning, physicians want to gain experience. They haven't been part of the clinical trial, right? So they'll put in a patient or 2 to gain experience and see how it works and see the kind of response. And then based on the success, and if they see the same things that they would see in the clinical trials, then their prescribing grows. And really, that's the expectation that we have as we kind of work through our launch.

Okay, good. And Peter, last call. You made a point of putting it to your formal remarks. I believe it was part of the formal remarks. That clearly, as you build out an infrastructure and you invest in an infrastructure, that you're going to be seeking, potentially, to leverage off a bit. And so trying to listen to what management teams say and reasons why they're saying it, and I just wanted to know if you can put a little bit more context around it. Are we -- do we have our eyes on specific assets? I'm not saying on timing, but are there already a thought process or 2 of a pathway, understanding a lot of this depends on price, willing sellers, timing, all the different things that go into trying to make business development work? But do you feel that there's a bit of a white board, if we spun around your computer up on the wall, that there is some thought process behind where we may be going?

Yes. I think to believe that we can build a sustainable enterprise just through a single asset would be naive. I think we're in the business of continuous innovation, no matter what company you are. And in order to do that, we need to continue to leverage the #1 capability that we have in the organization today, which is our development stage capability. Neil and his team have been doing this. They have a proven track record in autoimmune disease, and we should continue to give them things to work on that can continue to move the needle in lupus, lupus nephritis and in other rare kidney diseases. So the short answer is at the right time, because right now, our -- we're very clear on our priorities. This commercial launch is priority 1A, right? 1AA. And in parallel, we continue to look at we diversify and build the company for the future, and that would be through enriching and diversifying our pipeline, but done in a way that's smart and that's at the right value and at the right time.

Okay. I don't know if Stacy and Georgi, if there's any questions that make sense to ask. If there aren't, we'll get -- I can ask a last one. So if I see you come off mute, I know that there's one you want to ask, but I'll give you a second to see. Since we are in the business of pleasing clients, we should see if they have any. I guess, one last one, Peter, from me is, obviously, this intellectual property conversation is one that persists with folks. We've done an extensive dive with our legal consultants. There is a prosecution history to the patent, which is different than most patents where folks can see the declarations and kind of the back and forth. But maybe you, or Neil wants to talk about the uniqueness of the patent and why we believe it's as strong as we believe as you -- I know you share a sentiment in it, but maybe talk about that. And then maybe also just, specifically, when is it that of the first generics can file on the patent?

Well, last part of the question first. Generic companies can file whenever they want. There are plenty of baseless claims that generic companies have made at oddball times in drug life cycle. So I can't really predict what the ideal timing for a generic company would be to file an [ NDA ] against the company. And quite frankly, I can't -- I couldn't tell you when they should do it versus other newly launched drugs either. But they have their -- a method to their madness. Hey, listen, our law firms that we use internally sort of have the same view as the law firms that you were consulting with when you went through your process and diligence on our specifically our 036 patent, which is our method of use patent, which takes the life cycle of the product and, hopefully gives it IP extension from -- at the end of 2027, all the way out to 2037. We've gotten comfort not only through the unique observations that we saw in both Phase II and Phase III trials that are specifically attached to our product and what it delivers when there's this dose adjustment based on patients' eGFR response. The U.S. Patent office gave us a patent saying it was a unique claim and unique to the drug. What I think we have had added since 2019, when that patent was added to the equation is, one, it's now been reinforced by being in the Dosage Administration Section of our package insert. So the FDA has seen this as a way we studied the drug, a dosing regimen that's unique to the drug. Therefore, it should be dosed and used this way. And we'll then use that to go out and reinforce with physicians that they should be treating this way. I think as you think about all of those and how they set up the starting of a picket fence around the patent itself are important elements. Last point, we continue to look at ways for unique claims that we can picket fence around the 036 patent. And when those are -- and if those are issued, we'll report those out. There's no -- I think more broadly, when we get to question it, it just seems method of use is something people don't have a lot of education around. And we point to other drugs. I mean, Gilenya at Novartis just won a very big patent win on their product based on a method-of-use patent. So there are plenty of analogs to point to. Why ours is unique and why people, they are asking a lot of questions about it, I think it's because we're a small single product company, and we have to do better by that by diversifying our pipeline in the future.

Yes. No, it's understandable. You're right. These are -- there's a surprising result. It's in the label, and it's captured in a patent, and that, I think, needs to be better appreciated by The Street. Okay. With that, I know we're bumping up against the time but Peter, Neil, Max, Glenn, thanks so much. We're wishing you all the best during this launch. For folks that are listening that are part of the conference, we actually have a lupus panel coming up in another hour or so. So we'll be getting another KOL view of the launch real time. We really appreciate it, guys, and continued good luck as you bring what is a great product to the patients. Thanks so much.

Thank you so much, Ken.

Thank you.

Thanks, Ken.