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

Good morning, and thank you for joining us today. My name is Mallika, and I'm an associate in JPMorgan's Healthcare Group. [Operator Instructions] With that, I'm pleased to introduce you to Peter Greenleaf, CEO of Aurinia Pharmaceuticals. I know that he is very excited to tell you about his story, so we'll turn it over to Peter.

Good morning, Mallika, and good morning, everyone. Thanks for joining the call, and thank you to everyone at JPMorgan for having us as part of the conference today. Well, I know it's late in the game, we're Thursday, and this all kind of kicked off on Monday or over the weekend. So I know as investors, you've been I'm sure, going through many presentations and individual one-on-ones. Two things before we get started off here. One is just logistically, I'm not sharing my screen. So there is a slide deck associated with the presentation. So what I'll try to do is, as I move from a slide is at least call out where I am within the presentation, so you can follow along logistically. The second part is -- obviously, if you go to Slide 2 in your deck, is just to, as we always have to do, just point out the forward-looking statements, and remind you that all recent filings with the SEC can be found at our website at auriniapharma.com. What I hope to do in the presentation today is walk you through who we are as a company. Some of you may know, but as you can appreciate, we get a whole host of different investors who joined. So I'd like to just walk you through a little bit about who we are what our strategy is as a company, what we've been up to, most specifically, we've just launched a commercial product, and we're almost rounding out our first year on the market. So I want to kind of walk you through what our impact has been there. and then walk you through where we see our future going and the work we've done to fortify our R&D side of the house. So moving to Slide 3 in the deck, if you're following along. Let me first just start with walking through who we are in terms of the management team that's leading the company. And I can tell you that if you look at our Board of Directors, what I'm about to say about the management team sort of doubles down on our Board of Directors. We have a very tenured team, probably with an average of 25-plus years in the industry. I think what's unique about the group is the diversity of the group in terms of its experience. I think every one of the folks on the management team of the company have worked both in large. So I think we all have a base of what it's like to work in a large multinational, complex company with tremendous resources. But more importantly, most of the team -- actually, all of the team are a class of entrepreneurs who have sort of moved that experience into smaller, more entrepreneurial environments. And the experience that this group has spans both research, research and development, some level of investing through venture capital work and commercializing assets. And this team has touched some of the biggest brands that are in the space today, both on the small molecule side and on the large molecule or biologics side. What's important as it pertains to what we're doing today. I think just about every one of those elements, the majority of the presentation will concentrate on the commercial side of the house today. But know that we've got a core capability in development and an emerging capability on the research side of the house as well. Moving to Slide 4. Well, what's our mission? What are we trying to accomplish as a company. Well, first, I'll get into the tactical execution in the day-to-day soon. But we're trying to deliver new therapeutic agents that change the course of not just lupus and lupus nephritis where we're concentrated today, but broadly autoimmune disease. And we've moved from just a short 2 years ago being just a development-stage company with less than 50 people in the company to today being a fully integrated biopharmaceutical company. We're currently marketing LUPKYNIS, which was approved by the FDA in late January last year. And in the future, we're committed to going further than that to building a differentiated pipeline of innovative assets that try to attack and change the course of other autoimmune diseases. And see a couple of proof points to that as I go through the deck here today. Moving to -- quickly through Slide 4, and on to Slide 5, LUPKYNIS, which many of you who invested in the company in the early days, now is voclosporin its generic name, is the first and only approved -- therapy orally administered approved therapy specifically to treat adults with active lupus nephritis. As you'll see on Slide 6, just to get into the particulars of how that label came through were indicated in the combination with background immunosuppressive therapy and adult praise to suffer from the disease. If you recall, because I'm not going to go into depth on our Phase II and Phase III trials, but I think one of the things that was unique about our development programs that were run head-to-head versus the current standard of care. So our control wasn't a placebo-controlled trial. It was active control with MMF and steroids, and then for the treatment arm, we added voclosporin on top of MMF and low-dose steroids. And saw a near-doubling effect of reduction in proteinuria, which is the major endpoint we're looking at to solve in the trial. As you know, it's dosed in 3 capsules twice daily. Unlike first-generation CNIs, there's no serum dose monitoring required. And in total, I guess the other thing I would mention about the dosing is we have proprietary dosing that we used in our Phase II and our Phase III trial, which was an eGFR-based dosing modification based on patient response. We got a patent on this. We have a method of use patent that takes our patent protection from today all the way out to as far as 2037. Lastly, safety. I think while we in total, did acquire some of the first-generation CNI warnings. The product was very well safe and well tolerated in the patients we studied through 1 year. And then I'll share with you today data that we have an additional 2 years that further emphasizes this. Moving on to the next slide, Slide 7 in your deck. Let me first just talk a little bit about lupus nephritis. I think most of you know that it's a serious disease. It's precursor disease or it is the result of the progression of SLE or general lupus. And lupus effects in the U.S. according to our estimates and others that have published, approximately 200,000 to 300,000 patients just in the U.S. alone. And as we look at Europe, we would tell you our belief is Europe alone has probably the same amount of patients suffering from lupus. And of that, approximately 1 in 3 of these patients will progress on to lupus nephritis during their time and suffering from SLE. These patients are primarily female in sort of a middle-aged category. They're primarily in the U.S., African-American, Hispanic and Asian patients. This is not a disease of white people, although there are some -- the majority -- the mass majority of this population is across those 3 demographics that I just laid out. And you can see just on the rates of how much higher it is in African-American and Asian descent patients and Hispanic and even patients of native descent. So if you look at just yes, this is a large disease. Yes, it affects -- if you just do the calculus on what percentage of patients with SLE somewhere between 80,000 and 120,000 patients that are diagnosed with it in the U.S. It also has a huge clinical burden to the disease itself. If you look at just the -- once a patient progresses from non-renal SLE into lupus nephritis, they rapidly accelerate their nephron loss or degradation of kidney function. And you can see that just from some of the data that's out there, not produced by our company but produced over time. These patients are at a hugely higher rate risk of moving on to kidney failure. Of that when they end up there, a huge percentage end up on dialysis, kidney transplantation. And even if you go further on, if patients aren't treated aggressively, and they progress into these other problematic disease states, they have a very high risk of death. So when we talk to physicians about lupus nephritis, we may be educating on the need to treat and treat aggressively. But when we talk about the disease and the potential for bad outcomes, physicians rapidly and quickly understand that there is a need to treat these patients because they're at serious risk for clinical problems if it's -- if not treated aggressively. And then if not obvious, if they progress on to these problems or even in the day-to-day management of their disease itself, these patients end up in the hospital. They end up staying longer when they're in the hospital. And then lastly, if they end up in kidney failure dialysis, transplantation, obviously, these are hugely costly factors. And when we launched the product, there was a nice review of our compound, looking at our data to show whether the product was cost-effective. And clearly, our results that we produced showed that the drug was. And I think some of these factors weigh on why it's so important to treat aggressively clinically and, of course, economically. Okay. Moving to Slide 9. Then you look at what the goals of treatment are when a patient actually does have an elevated -- has elevated proteinuria, or UPCR, elevation. What are the treatment goals? And if you look at EULAR guidelines, the ACR guidelines or the newly published KDIGO guidelines, there's pretty strong alignment on treating to reduce proteinuria and to do it as rapidly as 3-months and to get optimal performance from 3-months out to 12-months. And then once the patient does get a lower proteinuria number to hold that patient in control is absolutely critical as well. So -- and you can see what these target reductions look like on the slide in front of you. Why is this important? Well, our drug did in combination with MMF and steroids versus a standard of care, nearly doubled the impact of what just the current standard of care could do at 12-months. And I can tell you that benefit in terms of UPCR reduction appears to be carried all the way out to 3 years from our recently launched data, which I'll talk to you about in a minute. Second, that -- to my knowledge, there aren't any products that are approved or are currently being studied that have been able to do it as rapidly as our products, seeing benefit as early as 3-months. And obviously, our original pivotal trial was at 1 year. So rapid and sustained control of the disease. Moving on to the next slide. Well, we see our product is clearly being positioned as a product that should be looked at as first-in-line treatment for lupus nephritis. We have superior response rates versus the current standard of care. We do that with a background of reducing steroids. We often hear from physicians or whether this is a step forward to potentially eliminate steroids. I think that would be a good goal, but our drug was studied with low dose of reduced steroids. The reduction was done very rapidly. And with that, it was across all classes, immunologically active classes of lupus nephritis. So we didn't stop -- and this is Slide 11 in your deck, if you're following along. We didn't stop with the pivotal data in terms of not just achieving major milestones, but on the data display side, the continued production of data, and alongside of that, the process of globalizing the product. Let me run you through what we've been up to over the last 12-plus months. Originally, we rolled out the data in the latter part of 2020. December -- November, December time period. We published the original pivotal in May of last year. We started the globalization process with the filing of an MAA in Europe in Q3 of '20 -- or excuse me -- and vastly after the publication about June time period of 2021, and we're progressing to a hopeful outcome with that MAA and an approval, hopefully, in Q3 of this year, so a major milestone for this year. At EULAR and ACR, we started to show cuts of an extension study that we did in addition to the pivotal study. This extension study was tracking the patients all the way out to an additional 2 years or 3 years of total data for that program, which I'll talk about in a second. We've read out those results for that continuation study just a couple of weeks ago. And we announced as well that we are going to not just stop here, but to create what we're calling the enlight LN registry, which will prospectively track in the U.S. patients across a target number of centers, approximately 60 centers in the U.S., sort of a real-world experience for how LUPKYNIS-treated patients are doing in the market. We're starting to enroll sites there, and we look forward to giving you more detail on that study, in particular, as we roll out more about it, but it has kicked off. So let me go deeper into AURORA 2. This is the next slide in your deck. In total or in balance, AURORA 2 demonstrated that blue kinase had a favorable risk-benefit profile over a 3-year period, that which was very comparable to AURORA 1, and showed sustained efficacy all the way out to 3 years. And let me show you what are the most important 2 areas within that first, that when talking to physicians seem to be the most important. The first is looking at kidney function over time as measured by estimated glamular filtration rate or eGFR. As you can see here through the chart that's up in front of you, you can see that whether at the baseline, time period or all the way out to 3 years of time period, there appears to be no degradation or no greater degradation in kidney function for voclosporin over the active treatment arm. So for those who are looking for an answer of whether the class of CNI effect, which at super high doses over long periods of time in transplant first-generation CNIs have shown some level of nephrotoxicity. At least through this data, it's reassuring to show that as measured through eGFR, we didn't see that with this drug. The other measure, which is, again, moving to the next slide, is while this wasn't an efficacy study, it was primarily tracking safety measures. We did track where patients were doing with their proteinuria levels. And as you can see through this up to 36-months, or 3-years, patient UPCR was kept in control. all the way throughout that time period, reinforcing the original pivotal 1-year data. And then lastly, again, next slide, we saw no other expected -- no other unexpected safety signals from the study in total. And you can see whether it's voclosporin or the active treatment arm through placebo, whether it's any AE, [ DEP ] all the way down to DES, we were either on balance or even slightly better, although not statistically significant. We intend to -- it was part of our original package with the AURORA 1 submission to provide this data to the agency, we -- the FDA, and it will be an important part of our MAA package as well. Investors often ask whether we expect label change with that. And the answer is that this was not a supplemental NDA. It was in addition to the original NDA. So we'll have a conversation with the agency. We think it's very important in terms of providing this information to prescribers. We think they'll align. We hope they'll align, but this was not from a technical standpoint, a supplemental package that's being submitted to the agency. So we'll keep you posted on where that progresses. And then last point, Obviously, we're treating this like pivotal data. And done appropriately, we are out there educating physicians on what this data looks like through our medical affairs group, our medical and clinical group and upon requests through our sales organization as well. So know that whether it was launch to investors, through an investor call and PR work, all the way through to how we're getting this in the hands of our sales representatives, we think this is critically important for physicians to have knowledge of in their treatment of the disease. So prior to approval, and I'm moving on now to Slide 16 in your deck. We had the investment decision to as to when to launch the drug once approved, if approved, and when to start to invest the dollars to be ready to commercialize the product. And we made the choice to do that heavily. In the year, we were submitting the NDA, about 6-months to a year depending on the major function of adding in a cross-functional team to prepare for the potential launch of the product. And today, we've built what we believe is a world-class capability to execute on our commercial strategy. And I know that we're in the early days of launch, but I can tell you this cross-functional team has deep commercial experience. Our strategy that we put in place, which I'll get into a little more tactically, but at a very high level, one, was to establish LUPKYNIS as a standard of care. That's going to take time. It's not right out of the gates. But over time, when a physician thinks patient has lupus nephritis to not think MMF and steroids but to think MMF, steroids, in combination with voclosporin LUPKYNIS. Two, to improve early diagnosis. And we get the question many times about the importance of rheumatology versus nephrology. And I can tell you 1 area where rheumatology is clearly very important. I mean how -- today, they own probably 50% of the overall prescriptions for lupus nephritis. So they're absolutely important there. But these are SLE patients first. And and the rheumatologists primarily treats SLE. So when we're talking about improving diagnosis the disease, we want to try to more aggressively talk to rheumatologists about making sure they're doing urine screens on all these patients and when levels are right to aggressively treat. We want to provide in a rare disease fashion, best-in-class patient support. You'll hear me talk about Aurinia Alliance, which is our investment in one-on-one case manager support to ensure that the physician and the patient are handheld through the entire kind of experience, and they receive the benefit of both the drug education, but also on the disease education from us as well. And then lastly, realize this in a way where we have as best we can on restricted access to the appropriate patients for the drug. On Slide 17, just looking at how we lay out and deploy that. And this is more of an infrastructure view, and we're often asked how many people we have out there on the sales side. From a customer-facing, direct customer-facing standpoint, we have approximately 150 total people, and that includes sales representatives. It includes support services that we have, and reimbursement-type work. It includes advocacy, government affairs, et cetera. So it's sort of multifunctional. But the net is these are the people who are touching patients and some -- or physician targets in some way, shape or form. Our sales force, as I've said before, has deep enough and room experience, average 10 years of room, and 7 across our team for nephrology. And alongside of them, we have a very seasoned group of both access and advocacy specialists who are working in the field as well. On the patient side of the equation, as I mentioned, our Aurinia Alliance program is set up for this case one -- case manager one-on-one support for the patient and the physician through their journey. This is as much an important tool of creating some sense of competitive immunity for us in the future as it is to ensuring patients move from an initial patient start form on the drug. We align them directly with field reimbursement specialists. And alongside of all that, we have a very comprehensive direct-to-patient digital program that's in play today. Lastly, 2 areas that are extremely important in any specialty drug, especially in rare diseases. We have a deployed team against the payers. I'll talk more about what our current coverage looks like. I think they've done a great job. And they've got deep experience not only in the large payer format, but also in pharmacy benefit and dealing with the multiple levels of payer customers and intermediaries that we have to deal with. And then lastly, we have for patients out there today, we have a robust group of financial support programs, which would include co-pay foundation for the uninsured and patient support and co-pay cards for those who need -- or are underinsured and need more support. Lastly, we want to keep LN this patient population and its uniqueness in front of state, local and federal government, and we have a field-based team deployed to do just that. They are actively engaging with the major foundations out there and talking to those who represent us in Congress about the impact of the disease and the important -- importance of aggressive treatment. Next slide, on Slide 18, just gives you a view through Q3 of this year, and I'll preempt the question that's probably going to come and has come quite a bit on how we're we're guiding for 2022 in a second. But before I do, let me give you the latest and greatest through as we've reported through the end of Q2, we had about $22 million -- $22.2 million in total revenue as a company. This equated to -- and this entered into the first 5 weeks of the fourth quarter as well, approximately 1,265 total patient start forms from launch to that time period. And I can tell you that patient start form activity continued on that pace throughout the fourth quarter. We are obviously not done auditing the fourth quarter numbers. So we're not preliminary giving preliminary numbers today for the fourth quarter, but I can tell you that our patient start form activity continued on a growth trajectory throughout the fourth quarter. On the -- in terms of access for patients, upwards of almost 90% of total lives have coverage today. And of those, looking at LUPKYNIS-specific policies approximately 65% of those patients. And we said at that time, we've guided to $40 million to $50 million in revenue for calendar 2021, and we have since reinforced that we are holding on this goal. We look forward to once the quarter is audited and rolled up, getting out to you with our end of year numbers. And in addition with that, getting to you some steerage for 2022 and how we feel about 2022. I think it's important to see the first couple of weeks of the year with this Omicron factor. And as well, we've not seen a January for the drug, a new January for the drug. And yet, as you know, through most specialty products, patient reups, patient co-pays, et cetera, reset, and there usually can be some impact to the January numbers. And we want to kind of see what that looks like for us as a company before we give any steer for the full year. So stay tuned. We usually report or have historically reported in the month of February for that, and we look forward to getting those numbers out to you then. Let me now shift to the areas of our pipeline that are emerging. On Slide 20, you can see that we don't want to stop here. We've tried to acquire assets and look at our business through a mindset of -- the only way you succeed in this industry is to continually innovate. No single product is going to get you there. No single product has unlimited patent life. And if you're not continuously innovating, eventually, you're going to run out of gas. So as a company that believes this strongly. We acquired 2 new assets in late 2021 that have potential for IND submissions in 2023. We did this with very little capital for 2 new assets, less than $7 million for both assets. And we are, by doing this, leveraging the standing research development and emerging commercial capability that we have in the company. Our pipeline now on '21 just shows you that in addition to the work we've done on LUPKYNIS, we've added AURORA 200 and 300 -- AUR200 and AUR300 to the mix that are early stage programs. And as I've said, on multiple calls, historically, we have the desire to continue to look to add innovation to our pipeline from what you see here on Slide 21. And then we have ongoing work on voclosporin as well, both looking at ways that we can continue to ring fence around the current program through formulation work. And as I mentioned earlier, registry and other research-based programs to further reinforce differentiation. Slide 22 just gives you an idea of what AUR200 is. It's a B-cell drug. It acts quickly, and it's got a proven mechanism of action. Obviously, this is not a drug that we would be a first mover on. We think this has the ability to be a best-in-class, not a first-in-class. But what it is, is it's a fusion protein that basically targets BAFF, or B-cell activating factor in APRIL, which is A proliferation-inducing ligand. Both, we know play a key role in B-cell-mediated autoimmune disease, including lupus and lupus nephritis, potentially, overlapping functions to the receptor that regulate B-cell activity, and we know that it's responsible for the survival of B cells. We have proof-of-concept on this, and the mechanism we know is widely studied. We have a targeted IND, and we're doing the enabling work this year for 2023. We look forward to talking more about this because the obvious question is, how is this drug different? And why would you have even brought it into your pipeline of others that aren't yet approved, beat you to market. And we think there are clear differentiators for this asset that can make for a very strong, fast-follower strategy, if, in fact, the others are successful. And I think we always need to underscore that. There is not an APRIL-BAFF combination in development right now that has hit the approval side of the equation or at least the new generation ones. Next slide, 23. AUR300, which here, I think we have the ability to not only have a major impact on autoimmune disease, but to do it in a first-in-class sort of way. The mechanism for AUR300 is targeting early macrophage modulation against inflammatory and fibrotic diseases by targeting the CD206 receptor. We know that the dysregulation of M2 macrophages actually drives fibrosis, which those macrophages are a type of white blood cell. So we know that, and we know that CD206 is actually highly expressed in these type of white blood cells. And we know that this drug acts to reduce this dysregulation of M2 macrophages upstream. And hopefully, by doing that would decrease fibrotic and inflammatory cytokine steer and by doing that have real impact on disease. We think we have proof of principle here. And again, we have an IND target for 2023. We look forward to continuing to talk more about both these programs as they progress in our pipeline. So in close, listen, we're a company on a mission here. We have a very strong foundation for growth. We've got very strong capital in the company, a very experienced management team, and we have a mission to develop and deliver new therapeutics in addition to what we have that really changed the course of autoimmune disease. This team has the relevant leadership experience at all levels, small molecule, large molecule, small company, large large assets, small asset commercially and our first commercial asset, which I think is a key differentiator for us. We have incoming revenue and a product that we're marketing out there. LUPKYNIS is making a real impact in the U.S. market and ongoing studies to support the brand in and currently in work. And then lastly, we're partnering with Otsuka to globalize the asset. We get milestone payments. We get a royalty stream from their work. and we look forward to their success in supporting that so that we can globalize the voclosporin brand. Last point, diversification of pipeline is key. We've taken steps in that direction. We want to continue to be a research and development company and drive innovation in autoimmune disease, and we've started down that path. I want to thank you all for your time today. Hope you enjoyed the presentation and enjoying the conference in total. I will now see if Mallika can join me and see if we have time for some questions. I think we have about 10, 15 minutes left. So Mallika?

Thank you, Peter. Congratulations on the positive study data and the acquisitions last year. We have a couple of questions from the audience. [Operator Instructions] So the first question is, we'd love to hear a little more about the rationale behind these early-stage pipeline acquisitions? And what are some of the milestones we can look forward to here?

Yes. I mean I covered some of this, but not -- I guess not the rationale and total for the stage of the programs. I think I said multiple times in the presentation that continuing to focus on innovation was absolutely key for us, and we're going to continue to drive to do that. The stage of the programs I think were important choices for us in the life cycle of where we were. I want to -- or overestimate for investors that we know what our focus is and we know what our goal is. 90% to 95% of the effort of this company is against making LUPKYNIS a successful asset both in the U.S. and outside the U.S. We brought in 2 programs that didn't disrupt our balance sheet significantly. We have not changed our cash runway guidance with the addition of these, and we have cash right now to take us through a good part of 2023. With the addition of these programs, that stays consistent. And it gave us the ability to sort of wall off these programs into our research group during the most important time period, which was the U.S. and the European launch of LUPKYNIS. In the future, we might look to more progressed assets to add to the pipeline. But these give us 2 early-stage shots on goal and low focus, low impact in the near term. Hopefully, that changes in the future. We look forward to that problem. But at this stage, they were the right focus at the right time, which what we think are, one, a fairly de-risked asset and, one, a highly novel asset.

And could you tell us a little more about the registry and what prompted this idea and how it will be used?

Yes. I mean I think many of us on the team had really good experience with registries and other indications in the early stages of biological launches in the marketplace. There was so much learned from the real-world on-market studying of the drug. It's one thing to do it in a controlled environment. It's another thing when a physician is selecting patients, and we can track all sorts of parameters on the back-end real world in terms of the data that you get, the insights that you get and the insights that you can share back to to physicians on a regular basis. So it becomes a tool where you have constant data display hopefully, throughout its life. And it's more real world than the clinical trial setting, which is really just set up to get to that ultimate view on what the drug actually works in the patient population. So more to come as we continue to work with it, but I think we went down that path because we didn't want to go quiet on the product. in terms of its research and its impact. And we think the real-world view of these medicines as they actually hit the doc's office is equally important. So more to come, but we're excited about the kickoff of it. And that we'll keep you posted as data rolls through on that.

Thank you so much. Well, we have enjoyed hearing about Aurinia Therapeutics, and thank you for all the amazing work that you have been doing. I think you did a great job anticipating the questions because we don't see any further questions from the audience. But do you have any further -- any parting thoughts for us?

No. Just that I want to thank -- thank you all for having us and thank investors for continuing to support our work as we go through this incredibly energizing time of launching our first product, but I realize at times frustrating because with the COVID environment out there and the investment we're trying to make. And the results always need to be there, and we think we've had a great year so far. We look forward to sharing how that year rolls up. and we are thankful to the investors who've supported us up to this point and continue to support us moving forward. Thank you for your time and again for having us at the healthcare conference here in 2022.

Thank you so much, Peter.