Greetings, and welcome to the Aurinia Pharmaceuticals Inc. Fourth Quarter and 2022 Earnings Call. At this time, all participants are in a listen-only mode. A Question-And-Answer Session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jamie Harrell, Investor Relations for Aurinia Pharmaceuticals. Thank you. You may begin.

Thank you, operator, and thank you all for joining today's call and webcast to discuss Aurinia's fourth quarter and full year 2022 financial and operational results. Joining me this morning are Peter Greenleaf, Chief Executive Officer; and Joe Miller, Chief Financial Officer. This morning, Aurinia issued a press release announcing its final audited financial results for the fourth quarter and full year ending December 31, 2022, as well as its recent operational highlights. In addition, the company filed its annual financial statements on Form 10-K. For more information, please refer to Aurinia's filings with the U.S. Securities and Exchange Commission, which are also available on Aurinia's website at auriniapharma.com. During this 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 discussions of factors that could affect Aurinia's future financial results and businesses, please refer to the disclosures in Aurinia's press release and its annual financial statements on Form 10-K, along with all the recent filings with the U.S. Securities and Exchange Commission and Canadian security authorities. Please note that all statements made during today's call are as current of today, February 28,2023, unless otherwise noted and are based upon information currently available to us at this time. Except as required by law, Aurinia assumes no obligation to update any such statements. Now let me turn the call over to Aurinia's President and CEO, Peter Greenleaf. Peter?

Well, thanks, Jamie, and good morning, everyone. Let me first thank you all for joining us on the call today. As you may have noticed, we issued preliminary unaudited fourth quarter and year-end numbers in early January. So on this call today, we're going to provide you with the final audited results for the fourth quarter and year-end 2022. In addition to the quarterly and year-end financials, we'll provide you with an update to our ongoing commercialization activities with a strong focus on the progress we've made through the first couple of months of this year. We'll also provide you with an update on our efforts in the ex U.S. markets, cover off on the advancement of our pipeline and then provide a brief recap on the IP front for LUPKYNIS. After this overview, I'll then turn the call over to Joe Miller to provide additional details on the financial results. So let's get started with our 2022 business performance. For the full year, Aurinia achieved $134 million in total net revenue, which represented a 194% increase over 2021. We achieved $103.5 million in net product revenue, representing a 120% increase over the previous period. For the fourth quarter 2022, we achieved a$28.4 million in total net revenue and a $28.3 million in net product revenue, representing a 21% increase over the fourth quarter. Moving to more detail behind our financial results. During the fourth quarter, Aurinia added 406 patient start forms or PSFs. This represented a 9% increase over the 374 patient start forms that we added in the third quarter of this year. For the full year, we added a total of 1,648 PSFs. And it's important to note that the growth in PSFs was significant in the months of November and December. This momentum was achieved during…

Thank you, Peter, and good morning, everyone. At December 31, 2022, we had cash, cash equivalents, restricted cash and investments of $389.4 million compared to $466.1 million in the prior year. The decrease in cash, cash equivalents, restricted cash and investments is primarily related to the continued investment in commercialization activities, advancement of our pipeline and a payment for the achievement of a onetime milestone, partially offset by an increase in cash receipts from the sale of LUPKYNIS and the milestone payment received from Otsuka in 2022 related to the EC marketing authorization. We believe that we have sufficient financial resources to fund our current operations, which include funding commercial activities, including FDA-related post-approval commitments, manufacturing and packaging of commercial drug supply, funding our supporting commercial infrastructure, advancing our research and development programs and funding our working capital obligations for at least the next few years. Now let's take a few minutes and go into detail regarding our financial results for the quarter and year ended December 31, 2022. Total net revenue increased 21% to $28.4 million for the fourth quarter compared to the prior year period. Total net revenue for the year increased 194% to $134 million compared to the prior year period. The increase in both periods are due to an increase in product sales, driven predominantly by further penetration into the LN market as evidenced by the increase in patients on therapy year-over-year. The increase for the full year of 2022 also includes the recognition of a $30 million milestone payment from Otsuka, as Peter mentioned earlier. Total cost of sales and operating expenses for the fourth quarters of 2022and 2021 was USD56.5 million and USD56.1 million, respectively. Total cost of sales and operating expenses for the full year periods were USD245.5 million and USD226.3 million, respectively.…

Thanks, Joe. As you heard throughout the call, we remain encouraged by the progress we're making and remain optimistic about the overall opportunity for LUPKYNIS. We saw a positive impact from our efforts in the fourth quarter, and that momentum continues into the first quarter of 2023. We remain focused on delivering LUPKYNIS to patients in need and driving results in the U.S. and globally. We look forward to keeping you updated along the way. I want to thank everybody for joining us today. We'll now open up the call for questions. Operator?

[Operator Instructions] And our first question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question.

Hi, good morning and thanks for taking my questions. You got higher – I think it was 274 patients start forms in the first two months of 2022 or of this year versus 201patient start forms in the similar period last year. And in March, I think you got a lot more PSFs to end up with461 for the quarter for last year. Do you expect March 2023 to be similar to March 2022? And maybe talk a little bit more about the cadence of PSFs for this year and how you expect that to play out?

Hey, thanks for the call Maury. If you look at PSF progress through the first quarter, and I think as everybody knows, we report total PSFs towards the end of each Q and report that. But then we report where we are with PSFs as a leading indicator all the way through the most updated date we can leading into the quarterly call, which on this call is February 24. A couple of things. If you just back calculate the 274 to a number of prescriptions per week and per day, you can see that we're seeing more in the first quarter than we saw even in the fourth quarter. And I think that's building off the trend of both November and December growth that we saw and the actions that we've put in place during Q3 to drive that. If you look at the month of March for 2023, there's just under five weeks. So we've got, call it, five weeks or so of reporting left. And if you calculate just the average number per week we've seen year-to-date, you should get at or around or above that number that you just recently mentioned, Maury. Listen, we hope to see the type of progress that we saw last year, which as you just recounted it was our best month, I think we saw since launch coming off the sort of the tail end of the first quarter. So progress on PSFs, we're encouraged by and we look forward to reporting more out on it when we report the first quarter.

Got it. That's helpful. Thank you. And maybe one other question for the Sun settlement terms. When do you plan to disclose more about that? And can you comment generally on whether any of the terms are tied to Sun sales of CEQUA?

The latter part of the question, again, I'm sort of tied to a confidentiality here, and I know that's frustrating for people. But generally speaking, the latter part of your answer, no. And I think the best way to think about this agreement is it's -- we are and they are not able to litigate and/or drive litigation against either product and for the foreseeable future. So the positive is not only these elements in terms of the challenges we were currently having against one another move away, but also -- and the prospects of any future litigation. In terms of more disclosure, it kind of comes down to finalizing the elements of our first, the ongoing litigation we have with them, the patent infringement lawsuit. And then, there is always the prospect that more comes out. But I mean, the gist of what the agreement is, is already out there and as I just communicated.

Got it. Okay. I’ll stop there. Thank you very much.

Thanks, Maury.

Our next question comes from the line of Olivia Brayer with Cantor Fitzgerald. Please proceed with your question.

Hi, good morning and thank you for the question. I want to ask about payer changeover headwinds this quarter and whether you're seeing any positive impact to start the year from the insurance verification efforts you've been focusing on? And then it looks like United changed our pre-auth rules in September and I think that went into effect in December. So can you give us any color on whether that's helped with getting patients on therapy so far this year and whether you have a sense if other insurance providers may do the same?

Well, I think it's a good question, thanks, thanks Olivia. First off, all I can say is our -- the efforts we put into Q4 as it pertains to verifying, helping patients to verify ensuring patients are ready for the year-over-year changes, we're hopeful that those will have impact. I think a couple of things that we have reported that should point to that and sort of lead into your second question, are, first, our PSF rates are looking good entering the year. I think that's encouraging. And in terms of our speed to getting patients on therapy look really strong as well. And I think that is part of managing a better process. But alongside of it is also a part of some of the payer policy changes we're starting to see. As we've said through the start of the original launch of this product, the more patients we get on drug, the more velocity of patients that we can put through the system, the more we believe and you can witness this for other drug launches, not just ours, that payer policies will start to come in line with where physicians and payers believe the drug should be utilized. And I think if you look at our 60 – I believe it's 60% of our patients now are getting drug within the first 20 days now. So I think that's a direct reflection of the work that we're doing in Aurinia Alliance reflected in the fourth quarter, but over time and of course, payer policies coming in line over time.

Okay. Great. Thanks, Peter. And then maybe just a follow-up to that. Do you expect other insurers to actually do the same as United? Any insight into when that could potentially play out this year?

Well, I think we walked the delicate balance of trying to let the clinical adoption process and patient volume be the biggest driver of how – and of course, educating payers, but those being the 2 biggest push factors against getting payer policies to change versus going in and just offering margin at discount to try to ease access. I think we're striking the right balance. And I think over time, the best way to measure that for everyone listening today is going to be a percentage of patients that we convert. And then second to that, how fast we convert them. And I think all of those have been improving for the last 18 months, and we'll continue to see improvement. And I think if you benchmark them versus other drug launches out there, we're actually doing better than most.

Okay. Great. That’s helpful. Thanks.

Thanks, Olivia.

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

Hi, thanks so much for taking our questions. So we have a few. A follow-up first for Q1. So given all the improvements you stated for conversion rates and timing to pay drug. How should we think about the high deductible resets for Q1? You've stated that there is 1,525 patients exiting in Q4. So what might be the expected patient base from Q4 going into Q1? And to just follow up on the question, how should we think about the seasonality in patient start form additions as you think about the year, for instance, as we consider summer or winter holidays? Thank you so much.

The first question is, I don't mean to punt on that, but it's -- we're currently in the quarter working that. There are certain things that we provide within the quarter, but that's when we continue to work through and rather wait till the end of the quarter to give you a realistic accounting of how we actually did. I can tell you, very qualitatively, we feel real good about the work that we did in the fourth quarter in terms of year-over-year progress and where we were last year January doing this versus where we are this January. And I think our learnings from last year were applied. So we think positively about the progress we made in carrying patients from the fourth quarter into the new year based upon all that disruption we typically seen. But in terms of areal sort of quantitative number, we're going to have to wait until the first quarter before we report that. Second, so takeaway, we feel good, but waiting for the first quarter roll up and to give you exact numbers of what we carried over. On the PSF trend front and overall because I think it's patients on therapy as well as PSFs, how should we be thinking about seasonality as we enter the summer. Well, we had 2 confounding factors over the last two years of the launch that have been things that we're watching and trying to figure out. I think in the first year, there were – there was a lot of COVID noise as we entered the summer time. We had a spike in one of the variants right before the summer. And I think as we saw it, it was another lockdown period than the first year of the launch drove a lot of the…

Very helpful. Thank you.

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

Hi guys. Thanks for taking my questions and congrats on the continued progress on the launch. For me, I just wanted to ask a couple of questions. First, on the PSF, as you mentioned, growth in November and December really started to separate from prior months and it's gotten stronger so far this year. Just wondering, I know that you've touched upon this in some of your comments, but I was wondering if you could sort of explicitly list what's really behind that? What are the drivers? What things have you changed recently in terms of learnings over the last few months? And then sort of the same in terms of retaining patients, PSF getting new patients and basically the same question in terms of retaining patients longer term, as you mentioned, nearly half are on treatment still at 12 or 15months. Thanks so much.

Thanks, Ed. So Ed, starting point was the point that we made about the growth we saw in November and December. And I think you have to look back to what we reported in October when we reported 3Q that led you to the growth in November and December was quite different than what we saw as we entered into the month of October. So why, right? And then on the back end of that why, are we seeing strong retention and actually good improvement in speed to transition from PSF to start. A lot of this is going to be a tactical answer, Ed, but I think therein lies what I think the impact has been up to this point. I think we have, with our field sales organization, and I'll envelop into that our appropriate medical efforts in education. We have really focused our efforts towards one high decile prescribers. Not that those haven't been important since launch, but we more have spent our time working where the highest – we believe the highest number of patients are both across rheumatology and nephrology and being very religious about how we're not just setting direction, but also tracking call activity and impact against those targets. So targeting highest deciles and intense focus against those now. Second, really digging into our data and going back and not looking just at who our repeat prescribers are, but looking at a host of physicians who've tried the product but have not moved from trial to actual adoption. So taking that data, slicing it and getting into, okay, you've got your physicians who are treating regularly and have multiple patients on the drug, but let's get really close to those physicians who've tried the drug, revisit and get them to move from trial…

That's great. That's very helpful. One follow-up then for me. As you mentioned, you expect initial sales out of the EU sometime in the first half of this year. Do you have perhaps even just, qualitatively, any sense for guidance or not specific guidance, but just any sort of sense for the magnitude of sales at least this year, sort of what we could expect out of those, perhaps three out of the five EU countries?

So we've tried to be relatively conservative here, Ed, and it's not because we don't have a lot of passion and believe that the ex U.S. markets can contribute. One, I think we have to look at analog products out there. And if we just look at – and this data may be slightly dated, but I think directionally accurate. Our comparator, Benlysta, has historically seen somewhere between 10% and 15% of their sales come from ex U.S. markets. So we've always said that we believe the greatest impact that we can have financially, not from a patient base, but financially is going to be in the U.S. market. Hard to really give a quantitative answer to that. So I would say qualitatively for the year, I wouldn't plug a lot here, and I would say it's upside for us. Until we get a good idea of where we get benchmark pricing in these countries, it's pretty hard to tell, right. So I think best to have it as an upside for the company, but one that I would -- until we have pricing and reimbursement in a few large countries, it's just hard to know. But going back to what I said earlier, if you use a global benchmark over time, I think some of these analog products might be helpful. So we'll have to see as we see what pricing and reimbursement looks like in these countries, and I would think about it as upside. At least that's how we see it, and we try to get very concrete about timing around major milestone payments because those are real and they're sizable.

Great. Thanks again. I’ll get back in queue.

Thanks, Ed.

Our next question comes from the line of Joseph Schwartz with SVB Securities. Please proceed with your question.

Hi, thanks so much. It's great to see such a strong improvement in the trajectory as a result of some real fundamental tailwinds. So I guess my question is, can you quantify for us in any manner, how much more room there is for this acceleration to continue? What – as a result of some of these things like payer policy changes and access to accounts and other marketing initiatives, are there any -- is there any way for you to help us understand how much more room – how much more room for growth that supports just because you were growing initially quite well and then saw a deceleration in patient start forms last year. And I am just wondering how durable this acceleration is and whether or not it might also wane at some point?

Well, thanks, Joe, I actually think that's a great question. First, to try to quantify the opportunity, I think we put – well, I know we put data in this call from an Optum study a couple of years back that shows that on previous calls, we've talked about this element of market development, like this lupus nephritis area has a lot of room to grow in terms of not just new drugs coming into the market, but how patients are assessed, diagnosed and treated, right. If 50% of SLE patients only 50% right now over a very large sample are getting screened for proteinuria, if we could get 75%, 80% of those patients just get screened, the top end of the funnel grows dramatically. But it's always hard to predict how long that will take, right. But I think tactics like our urinalysis campaign and even getting more aggressive about how important that is are going to be helpful there. So hard to say like what our expectations could be of what the top end could be, but I think it's sizable. If 100% of those patients, 30% or 40% actually have problems in terms of proteinuria just by getting more of them screened is going to put more patients in the front end of the bucket. Optimization of our business in terms of getting patients on drug faster, work in the queue, the PSFs we have, we'll continue to see opportunity there. But eventually, you're going to hit a point of, hey, you got a really well-run machine here. And it's all going to be about how many patients you're putting into the queue. I think we've got to put up a couple of quarters to show you that we can consistently grow it. And I think the – my eye goes to the opportunity here is big because we don't even have a market where patients are being screened the right way. But it's going to take time and the best way to look at it is to see some quarters - quarter-on-quarter results. That's the best I can tell you. We got -- we actually have to prove that we can grow quarters. And the data that's outside of Aurinia like this Optum study show that these patients are there and if better diagnosed gives us a greater opportunity to find them and get them more aggressively treated.

Okay. That's very helpful. Thanks, Peter. And then it looks like the WACC for LUPKYNIS increased about 8% earlier this year. So how should we be thinking about the average net price and the gross to net looking forward?

Joe, do you want to take this one? Do you want me to handle it?

Okay, Peter. Yes, the price increase we took towards the back half of 2022, starting to bleed into 2023. Just remember that based on payer mix and other things like that, Joe, and all doesn't flow through to the bottom-line. So I would say if you're kind of looking at overall price increase, about half of that actually makes its way through our gross to net calculations at the end of the day.

And just one thing, Joe, on that. Joe mentioned back half of the year, we took a price increase in the last month of the year. So the price increase is not realized in our really realized in our 2022 numbers, it's a '23 factor.

Okay. Got it. Thanks again.

And our next question comes from the line of Justin Kim with Oppenheimer. Please proceed with your question.

Hi, good morning and thanks for taking my question. Peter, the team has done a really great job giving fair guidance over the quarters. And so as we think about the $120 million to $140 million into this year, how should we think about the puts and takes towards achieving the low versus high end just because our estimates and assumptions kind of land us closer to the higher end? And just trying to understand what headwinds and tailwinds may change this trajectory?

Yeah, I mean listen, I think if I'm hearing what the company is reporting out today, I would say we've done a really strong job at working all the elements of our patients through the system, and we're doing a good job keeping patients on drug, getting them on drug faster, sort of working the back end of the process once the patient is identified, and we're seeing good pickup in terms of PSFs. The range for me, first, I think you can land in the range if you sort of just continue to optimize the business, but how you get to the outside of the range as you have to see. And again, this is a fairly qualitative answer to a quantitative question. To me, how you get outside the range as you see a pickup in PSFs and it's going to take the first quarter report to know whether the trajectory is in the right direction. I think everything through the February 24 point tells you it's picking up speed. A headwind against that could be to the previous question, if we see this seasonality thing kick up on us again in the summer months of the year or that was two years of anomaly based on COVID and COVID hangover, second year once the COVID crisis sort of moved past us, if those things continue to be there, then that could slow down our PSF activity. But to me, it's all about the number of patients we're putting in, in the top end of the funnel. And if we can continue to see solid progress against that, you get to the upper end or potentially outside of our guidance range. And the first quarter is going to be the time where we're going to have to address that based upon the absolute result.

Okay, great, great. And maybe just a separate line of questioning. On the scientific presentation expected this year, is there any chance for seeing biopsy data out of AURORA 2 sub-population?

Yes, as I've noted historically, just the one caveat around this is a sub study that was done within the original AURORA study of a low number of patients and a low number of patients just because, obviously, a biopsies and invasive procedure. So it's hard to get patients to commit to it. But a sizable enough end where we can look at another measure of impact of the drug on the disease and impact of the drug specific – more specifically on the kidney by doing a view of what's happening in the actual kidney through biopsy, staining, et cetera and histologically. Our hope would be that we can get something to you this year. So stay tuned, I guess, is what I would tell you.

Okay, thanks for taking the questions.

Thanks, Justin.

And we have reached the end of the question-and-answer session. And I will now turn the call back over to management for closing remarks.

Well, I think as everyone's heard through the call today, we are excited about the progress we're seeing early in 2023. We look forward to continue to keep you updated on calls to follow. We want to thank you all for joining us today. Have a good day.

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