Greetings. Welcome to Aurinia Pharmaceuticals Third Quarter 2023 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 to everyone for joining today’s call and webcast to review and discuss Aurinia’s third quarter and nine-month 2023 financial and operational results. Joining me on the call this morning are, Peter Greenleaf, Chief Executive Officer; and Joe Miller, our Chief Financial Officer. This morning, Aurinia issued a press release announcing its financial results and operational highlights for the third quarter and nine months that ended September 30, 2023. In addition, the company filed its quarterly financial statements on Form 10-Q. 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. Those forward-looking statements are subject to a number of significant risks and uncertainties and actual results may differ materially. For a discussion of factors that could affect Aurinia’s future financial results and businesses, please refer to the disclosures in Aurinia’s press release and its quarterly report on Form 10-Q along with Aurinia’s annual report on Form 10-K and all of its recent filings with the U.S. Securities and Exchange Commission and Canadian securities authorities. Please note that all statements made during today’s call are current as of today, Thursday, November 02, 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?

Thanks, Jamie, and good morning everyone. I want to thank you all for joining us on today's call. On this morning's call, we will focus on the company's third quarter and year-to-date performance. We'll discuss key metrics and significant commercial highlights for LUPKYNIS. We'll then provide an update on our progress outside the U.S. and close with a brief update on R&D activities for both LUPKYNIS, as well as our pipeline assets. I'll then turn the call over to Joe Miller, our CFO to provide additional details on our financial results. Now let me dive into our overall business performance. I'm pleased to share that we continue to make progress over the last three months and year-to-date with LUPKYNIS, both domestically and abroad. Highlighting the third quarter, we achieved $40.8 million in LUPKYNIS net product revenue, which represents an increase of 60% versus the prior year's third quarter. We're quite pleased with these results, in particular in light of the impact that the summer months have had on our business historically. This brings year-to-date LUPKYNIS net product revenue through the end of the third quarter to $116.2 million. This represents an increase of 55% versus the same time prior year. As a result of our strong third quarter, we're narrowing our net product revenue guidance for 2023 from $150 million to $160 million to $155 million to $160 million. Additionally in the quarter, we recognized a $10 million XUS milestone from our collaboration partner Otsuka Pharmaceuticals for securing the pricing and reimbursement approval in Europe. This plus royalties from XUS sales brings our total revenue for the third quarter to $154.5 million. Leading the company's key commercial metrics for the quarter, patient start forms remain strong throughout the period with 436 PSFs in the quarter. This represents a growth of…

Thank you, Peter. And good morning everyone. As of September 30 2023, we had cash, cash equivalents restricted cash and investments of $338.5 million compared to $389.4 million at December 31, 2022 and $350.7 million at the end of Q2 2023. The decrease in cash, cash equivalents restricted cash investments is primarily related to the continued investment and commercialization activities and post approval commitments of our approved drug LUPKYNIS, inventory purchases, advancement of our pipeline and model plant payments partially offset by an increase in cash receipts from sales of LUPKYNIS. We believe that we have sufficient financial resources to fund our operations which include funding commercial activities, including FDA related post approval commitments, manufacturing and packaging of our commercial drug supply funding or 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 third quarter and the nine months ended September 30, 2023. Net Product Revenue was $40.8 million for the quarter ended September 30 2023, and $25.5 million for the quarter ended September 30m 2022. Net product revenue was $116.2 million for the nine months ended September 30 2023, and $75.1 million for the nine months ended September 30, 2022. The increase for both periods is primarily due to an increase in product sales to our two main customers LUPKYNIS, driven predominantly by further penetration of the LN market. Total net revenue was $54.5 million for the quarter ended September 30 2023 and $55.8 million for the quarter ended September 30, 2022. The decrease period-over-period is due to the recognition of a $30 million regulatory milestone from Otsuka following the EC marketing authorization of LUPKYNIS in September 2022 partially offset…

Thanks, Joe. As you heard throughout the call, we're obviously excited about our strong results for the quarter and our momentum through the first three quarters of the year. We continue to focus on business fundamentals and commercial execution. Our commercial teams are concentrated on delivering the newly published data from the AURORA II extension study and educating healthcare providers on the promise of kidney prevention for their lupus nephritis patients. Our R&D teams are focused on our regulatory commitments for LUPKYNIS, and advancing our to pipeline molecules into the clinic. And our executive team and our board are working behind the scenes of our day to day business on the strategic review process to deliver value to all stakeholders in Aurinia. We remain focused on delivering LUPKYNIS to patients in need and driving results in the U.S. and key markets globally. We look forward to keeping you all posted along the way. I want to thank you all for joining us today. And I'd now ask the operator to open lines for any questions there may be. Operator?

Thank you. [Operator Instructions] He's our first question is from Maury Raycroft with Jefferies. Please proceed.

Hi, good morning. This is Farzin on for Maury. It’s good to see the persistent stabilizing so far at 12 months and 18 months. So can you talk more about the feedback you're getting from the prescribers on the -- for those patients and how much leveraging how much leverage you're doing the guidelines to further educate?

Yes, I mean, listen, thank you for the question. Yes, we're encouraged by not only a 12 month persistency but 18 month and we didn't report on the call 24 months persistency kind of shows a flattening of the curve after 12 month to 18 months, which is encouraging. I think the key takeaway should be most of this was driven in a time period where we had launched the product and got approval with on the AURORA, the original AURORA data, which was one year data. And since that time period, and has recently come to a head with the publication of the AURORA extension study, which has added an additional two years of data on top with a one year data. So three years of safety and efficacy now and the Biopsy data which was recently presented at one of the regional meetings and will continue to be presented an ACR and ASN are all adding to our ability to go out there and promote actively through the right channels in the right way, through medical affairs and through providing information on medical requests that data to physicians. So we're encouraged by feedback we get from physicians and patients is, historically this has been sort of a start and stop disease and patients actually show reducing of proteinuria. Many times physicians will remove meds and that includes MMF and steroids. On the new guidelines published through EULAR future guidelines coming from ACR and ASN, we’re encouraged that we already see a reinforcement of the importance of keeping patients on therapy and maintaining the control of that inflammatory process because obviously the results would be quite negative for patients. So there's a shift happening and we're encouraged by the data. So the feedback we've gotten so far has been good.

Great. And then based on your efforts so far, do you have a sense of whether they're leading to increased diagnosis rates yet?

No, all we have is qualitative data at this point on that front. And what I would tell you is the qualitative is yes, but we look forward to reporting more quantitative as it's important for the future growth, not only of the brand, but of the market in total. So encouraging qualitative data, but nothing quantified yet.

Okay. And then quickly for Joe, the COGS came in significantly higher versus prior quarters. If you can provide some color on that.

Yes, Farzin as mentioned in the prior quarter call, the model plan came online right at the tail end of the second quarter. So this quarter, third quarter, we had a full absorption of the model plan facility, which a portion, approximately 50%, is actually reimbursed via Otsuka under the supply agreement, which is reflected in the collaboration revenue. So you see a little bit of an offset reflected in the collaboration revenue. Did I answer your question?

Yes, perfect. Thank you so much.

Our next question is from Joseph Schwartz with Leerink Partners. Please proceed.

Hi, thanks very much. I was wondering, first of all, if you could talk a bit about how you arrived at your new guidance and why it might not be proportionally higher to what you delivered this quarter. It looks like you will be able to hit the low end, even if sales decrease from the third to the fourth quarter, especially given the robust patient start forms numbers we've seen for October. So I'm just wondering, is there any reason for pensiveness? Or if you can give us your insight into that, and then I have a follow up.

Yes, we expected the question, Joe. The short answer is we raised the low end of the guidance, because I think you're right. I think you'd have to decline to even get to the low end of guidance. We've tightened the range, because based upon the quarter and the new patient starts that we actually saw in the quarter, we want it to be somewhat conservative about where we were going to fall in that range. So for example, if we saw the same sort of new patient starts in Q4, we feel conservatively that we can still hit that guidance range. If you fell below, you'd have to decline in the quarter to be below that guidance range. And I think there's just a level of conservatism there that we wanted to be predictable and be consistent with our performance. Had we seen a higher number of new patients starts in Q3, there's no doubt we would have taken up the upper end of that range.

Okay, great. Thanks. That's helpful. And then how has the number of prescribers and repeat prescribers been trending relative to the total number of patients on drug? We appreciate the latter numbers, but any insight into the former would be helpful. I'm just wondering how satisfied you are with the breadth of LUPKYNIS prescribers relative to the penetration for LUPKYNIS within each practice.

Yes, I think as you know, Joe, we haven't given the total prescriber numbers yet, but it's one for us to go back and chew on and think about reporting. Some of that's been for competitive reasons, but what I can tell you is there now are thousands of physicians within that total universe that have utilized the product and that we've seen double-digit increases in terms of percentages on both volume of prescribing from our repeat prescribers and in our prescriber base. So we're happy with the penetration. As we've said all along, of the universe of nephrologists and rheumatologists that prescribe products for the treatment of lupus and LN, the 80-20 rule applies here. 80% of prescriptions come from somewhere around 20% of the prescribers. And we think our penetration within that universe is actually quite good, and the depth of our prescribing in there continues to improve. As we get on future calls, we'll look into whether we want to start reporting the specific numbers. But as I said, that's more for competitive reasons as to why we haven't rolled that out.

Thanks again.

Thanks, Joe.

Our next question is from Stacy Ku with TD Cowen. Please proceed.

Hi Peter and Joe, thanks for taking question. And congrats on a very strong quarter. This is Vish [Ph] on line for Stacy. So given we have three results from three quarters behind it, could you talk a little bit more about your expectations for next year? How do you see sales and patient start forms panning out over 2024?

Yes, so I think -- did you have another question?

I can I can ask that after this one. Thank you.

Yes, I have a fast response to that. I mean, we're going to try to stay consistent with what we did last year and give some sort of steer, prior to or around or before JPMorgan next year. And I think there's a lot of things weighing on net. But that's, that's what we did last year. I think we gave some characterization in Q3, due to the summer challenges we saw in 2022. And then we reaffirmed that or got tighter on it prior to JPMorgan. So we're going to stay consistent with that, and not give any look for 2024 until then. You had another question, Vish?

Yes, I had a question regarding the net pricing. So based on the information given in the press release, and on the call, it seems that even for Q3, that guided price, the net price that we're seeing is a little bit above that guidance price. How do you see that settling over Q4?

I think the best way to think about this, and I realize, we've been pretty dogmatic about this, our estimate of average net of 65,000 per patient per year. But I think I would hope that everyone can appreciate that we have slowly sailed down closer and closer to that point. We don't give quarterly guidance. So not going to be much very helpful there. But I guess what I would encourage you to do is just look at the trend, and then continue to trend it downward into the quarter. And we think as that settles out, it'll be closer to an average of 65 net per patient per year.

Got it. Thank you.

Our next question is from Olivia Brayer with Cantor Fitzgerald. Please proceed.

Hey, good morning, guys. Thank you for the question. Wanted to drill down on PSF trends? It looks like there's a downward trend in October versus what you saw in August and September. So how should we be thinking about patient start form growth over the next few months? And then I got a quick follow up?

Yes, well, first thing I would just take you backwards a little bit on is, it was encouraging to see the PSF work that we did in those summer months that we had not historically seen the two years before that. And then the trend in October was still higher than what we had seen in the same time period last year. So I guess what I would lead with is we're trying not to read too much into it. And, recent numbers look, encouraging is all I will leave you with and we're talking somewhere around 5 to 10 PSF difference from what we saw in those summer months to what we saw on in October. So I'd say there's a level of consistency there. And our hope would be as we get into now, October, November, December, that we're going to see an increase in that trend. So…

Okay, thanks Peter there. And can you give us any color on or any more color on how the strategic review process is going? And really, I guess my question is whether there have been any learnings or takeaways from the process, since you began it back in June.

As I'm sure you can appreciate, my hands are somewhat tied on what I can and can't say here. But so I'm going to I'm going to stick to that outside of saying that we're working hard, and we're taking it very serious. And that's both at the management level and the board level, we see this as a real opportunity to accelerate our strategy and to keep an open mind in all directions. Not that we've not historically done that. But this gives us a very focused way to do it. When we have more or something material to report. It's on our -- it's in our obviously our best interest to report that out. And we'll make sure to do so. But outside of that I can't give much more color.

Okay, great. Thank you.

Thanks, Olivia

Our next question is from Justin Kim with Oppenheimer and Company. Please proceed.

Hi, good morning from ASN actually and congrats on the progress and thanks for letting us ask the questions. And I just want to touch on the script question again. Are you kind of seeing maybe more of a smoothening and avoiding of maybe that seasonality this summer. I'm just curious, do you have any color as to what might be driving that smoothing, or whether there's sort of a new level being reached here? Just any additional sort of color that maybe is more sort of patient and prescriber practice-based would be helpful. Thank you.

Justin, I hope Philadelphia is going well for you. Our team is on the ground as well for ASN. We worked a lot of different angles, and I think in the summer months, and I give a lot, I give credit to the people who are driving this, which is our marketing and sales people out there doing their work on a day-to-day basis. I think the data around the extension study being published was quite helpful, the Biopsy data quite helpful. We had a blitz of tactical execution during that time period. I think all points to potential levers, but I think the base of your question, and the one that we need to continue to prove out, is that it's consistent, and that it can pull forward, and that we're going to start reaching new levels on PSF trends. It's important for the, not just the near-term execution, but more importantly, the long-term growth and how big the product can be in the future. So yes outside of a host of different tactics and the new data that we have to bring to bear on the market, those are the two things I would point to. And then, I guess, reinforce what your underlying question is, which is we need to continue to see a new plateau start to be reached in terms of PSF performance moving from that, let's call it 450 or so PSFs per quarter to 480 and 500 and 500 and beyond. We believe that this new data, alongside of our push on talking about guidelines, impacted disease, treating to target, are all parts of key components of unleashing that.

Thank you.

Our next question is from Ed Arce with HC Wainwright. Please proceed.

Hey, Peter and Joe. Congrats on a strong quarter, and let me add my greetings as well from ASN. I wanted to ask you about the guidelines. And as you mentioned, some of the points from the EULAR guidelines, it seems really quite supportive of LUPKYNIS. But I wanted to ask, as the guidelines from KDIGO and ACR are forthcoming. How do you view these as important in driving awareness with physicians and growing strips more consistently? And would you expect these other two guidelines to be as supportive as EULAR? And I guess, along with that would they include the three major studies that you mentioned, as well as the DDI study?

Obviously, I can't predict where the guidelines will go, but I'm hopeful that they will be somewhat in line with where EULAR is, which, with emerging therapies and pipelines starting to show productivity for many companies within our space today, you're going to have to address novel therapies and novel treatment approaches. And I think there'll be consistency, although I can't think for that group as they do their work. But we're predicting that they'll address more aggressive use of novel therapies. I guess just to rewind back, prior to the EULAR guidelines and new ones being published, when there was the old approach to EULAR, KDIGO and ACR, there are several things in there that reinforce really important components for us. One is, doing consistent diagnosis for SLE patients. We believe only about 50% of SLE patients that visit an office practice on any given day get a urine screen for lupus nephritis. The guidelines have always been consistent that every time an SLE patient visits the office, they need to be screened. We see that as a huge driver of potentially newly diagnosed or existing patients that aren't currently getting diagnosed. The second is treating to target and trying to reach certain proteinuria levels by three months and six months and a year, target levels that we know today rheumatologists and nephrologists don't aggressively treat to. And aligned with our data, we're the only product that actually shows consistent performance at those levels aligned to the guidelines. So, there's a lot of gems within the guidelines that if we can just get physicians treating more, I guess more in a more congruent fashion, that we can actually see the market start to grow. Your last question of whether they'll incorporate the new data, published data is usually what they look for. And the extension data has now been published. The AURORA study has been published. The biopsies and poster form, we'll see when they actually publish these guidelines. We're working hard to get the Biopsy study published too, but usually they point at published data, not stuff that's been an abstract or poster. Sorry for the length of the question or answer. Do you have another question, Ed?

No, that's it. Thank you.

Thank you.

Our next question is from Sahil Dhingra with RBC Capital Markets. Please proceed.

Hi, this is Sahil for Doug. I have two questions. My first question is on the comment made in the prepared remarks that there were some higher discontinuation this quarter. So, is it related to summer seasonality to a degree or is it more dependent on where the patients are on the, for how long the patients have been on the drug?

It's the latter. I think you have to think about this in a dynamic, as you model it, think about it in a dynamic fashion. And during this quarter, we saw more patients who have seen therapy for longer periods of time. And obviously the discontinuation rate for patients who've been on drug for 12 months versus patients who have been on drug for nine months, if you see a higher average of them in a quarter, you're going to see higher discontinuation rates. There's no, that we can tell summer rationale as to why it was more just a mix of the patients in the quarter. You have another question?

Yes. Thank you for that response. And my second question is related to the prescribers. I know this was asked before, but if you could provide more color. I think in one of the earlier calls you had mentioned that 55% of the prescribers are not repeat prescribers. How has that trend changed given the new data that we have on hand? Thank you.

The short answer is we've seen improvement across the board and we see less patients than 55% now, a higher percentage who are prescribing more than having a higher dependence upon, first time tries, initial tries. So as I said the reason we haven't, because we segment this data pretty, we do a lot of quant on this. We haven't rolled that out primarily because, we think we give a lot of data and this one I think is important, at least at this stage, to keep a little closer to our best in terms of the competitive set that's out there. But I can tell you that whether it's depth of prescription and or total number of prescribers, we've made meaningful movement on both fronts during the quarter.

Thank you.

Our next question is from David Martin with Bloom Burton. Please proceed.

Good morning. Thanks for taking my questions. The first one is a follow up to the question Ed asked. Have you made any progress in getting the nephrotoxicity language changed on the U.S. label based on the AURORA extension and the Biopsy data? And when the U.S. guidelines are crafted, do you think they'll be affected by that language in the label or more by the EULAR type language?

I can't predict where the agency is going to go, but I can reinforce to everyone on the call that we announced in June that we had submitted this data to the U.S. FDA. It was expected the extension data and the Biopsy data as sub-study and extension study were both expected from the agency. We're hopeful that this will be incorporated in a meaningful way into the label here in the U.S., but we can't predict where the agency is going to land on it. And we've not heard back anything from the agency at this stage.

And do you think the guidelines are swayed by the label that much or not?

No, I think it's a published data.

Okay. Second question. Do the restarts require new PSFs?

The restarts require new PSFs? No.

Okay. And last question. What pricing did you get in the European countries where you got the pricing?

We can't speak specifically for every country. And sort of it's Otsuka’s domain, so I'm not sure how much of this they want to disclose. But I can just give you the color that in terms of appropriate pricing as we see it in terms of reference pricing would be novel therapies like Benlysta. A negative outcome would be getting pricing in the generic set like a Trolomus [Ph] or something like that.

Okay. Fair enough. Thank you.

Thank you, David. It appears that that's all the questions we have for today. I want to thank you all for your time and we'll look forward to talking to you again next quarter. Thank you very much and have a great day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.