Greetings. And welcome to Aurinia Pharmaceuticals Incorporated Second 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. 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 thanks everyone for joining today’s call and webcast to review and discuss Aurinia’s second quarter and six-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 second quarter and six months ended June 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. These 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, August 3, 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 the call today. On this morning’s call, we will focus on the company’s second quarter and six-month performance, our key commercial metrics for LUPKYNIS, as well as a brief update on R&D and our progress outside the U.S. I will then turn the call over to Joe Miller, our CFO to provide additional detail on our financial results. I’m pleased to share that we’ve continued to make significant progress over the last three months, reporting our highest quarterly sales since the launch of LUPKYNIS, with net product revenues of $41.1 million. This represents an increase of 46% versus the prior year second quarter and a 20% increase over the first quarter of 2023. These results bring our year-to-date LUPKYNIS net product revenue through the end of the second quarter to $75.4 million. That represents an increase of over 52% versus the midyear mark of 2022. Underlying this topline financial performance, we had our best quarter-to-date across several commercial metrics, including the number of wallets shipped, patient conversion to drug, processing speeds in terms of time from PSF to drug shipped, as well as patient persistency rates. Patients converted from patient start forms to therapy was at an all-time high of 89%. Insurance processing speeds were improved as well. We are now converting more than 65% of our patients from initial PSF to drug being shipped within 20 days. And importantly, our 12-month persistency rates improved from 51% in the last quarter to 54% in Q2. Lastly, we now have a total of 1,911 patients currently on therapy as of June 30, 2023 and nearly 3,500 patients exposed to the drug since launch. As I’ve stated on previous calls, our business plan for LUPKYNIS is focused on three major inter-related strategies. The first is driving patient awareness and activation, the second being clinically differentiating LUPKYNIS, and the last is ensuring that patients get access to therapy, because, of course, getting patients on drug and keeping them on drug is critical. So how are we doing? On the patient front, we believe an informed patient can play a major role in their own disease management by understanding the need for and seeking routine urine screening and treatment. At the beginning of the second quarter, we announced and drove awareness across traditional and social media platforms with the launch of our branded disease awareness campaign, Get Uncomfortable, with our new spokesperson, Toni Braxton. This initiative reinforces the need for screening, routine monitoring, and treatment by engaging and educating SLE patients to get uncomfortable and get serious about their kidney health by engaging with their physician. I’m pleased to report that through the first 100 days of this campaign, we’ve seen marked increases in overall awareness, media impressions, and online activity. The campaign has already reached over 750 million people across social and digital media, with hundreds of thousands of visits to the campaign website. Patients and family members are coming to our customer education website to learn more about the importance of screening and early treatment. Also, this site is where patients can find a specialist in their area to complete routine testing and discuss the management of their lupus nephritis. While our consumer marketers are reaching patients via social media and direct-to-patient marketing campaigns, our commercial sales team is continuing to drive in-the-field execution by delivering the LUPKYNIS clinical message. They are reinforcing the treatment guidelines for patient screening and treatment, as well as the AURORA data to our top decile customers. On our last call, we shared that we closed Q1 with our highest average healthcare provider engagement per day since launch. In March, we had our highest number of repeat and new prescribers in a month since we’ve launched the product. As we’ve previously communicated, LUPKYNIS is highly sensitive to promotion, and there is a strong correlation between call volume and prescribing behavior. Well, today, I’m happy to share that we continued that momentum into the second quarter and beat our first quarter watermark. This makes the second quarter of 2023 our best quarter to-date in terms of call activity towards healthcare professionals, providing deeper penetration into top decile physicians, as well as first time and repeat prescribers. Our recent attitude awareness and usage market research study reinforces that our clinical message is resonating. Intent-to-prescribe continues to grow and is at an all-time high. Additionally, LUPKYNIS is leading over other therapies in the category on intent-to-prescribe over the next 30 days and over the next three months. In regard to our second imperative, clinical differentiation, we’re excited with the new data, which we launched into the market that further differentiates LUPKYNIS from the current standard-of-care. Our medical affairs team recently released the Biopsy Sub-study from the AURORA trial. This poster was presented at the Congress of Clinical Rheumatology East. These data demonstrated that LUPKYNIS-treated patients showed histologic activity improvement with stable chronicity scores similar to the active control arm of MMF and low-dose steroids alone. Meaning, that the patient’s kidney appears to be stable and does not demonstrate any further worsening of kidney function or nephrotoxicity at 18 months. Additionally, the AURORA 2 long-term extension study of the AURORA trial, looking at eGFR, efficacy, and safety across two years and three years was accepted and published online in Arthritis & Rheumatology. A&R is the official journal of the American College of Rheumatology and it should be in the journal during the month of September. These two publications provide our medical affairs team with more data to share with prescribing physicians. These publications reinforce why LUPKYNIS should be the drug of choice in the management of lupus nephritis. These data also further differentiate LUPKYNIS from the current standard-of-care across numerous parameters, specifically, when looking at three-year eGFR efficacy and long-term safety. All of the aforementioned activities are having a measurable impact on patients, physicians, and of course, LUPKYNIS. By educating and activating the patient to get involved with their lupus nephritis care through our consumer marketing campaigns, alongside our sales team messaging to physicians, we are helping to expand the market and drive further prescribing. This leads me to our patient start form activity for the second quarter. We had a solid performance with PSFs for Q2, totaling 451 patient start forms. This represents an increase of approximately 10% over the second quarter of 2022 and is reasonably consistent with our first quarter performance of 2023. Through the end of July, we’ve recorded approximately 100 new PSFs. We can say with certainty that there is a summer effect to LN care when it comes to seeing patients, screening them, and absolute treatment. We believe it is most likely due to the asymptomatic nature of the condition and patients not feeling the need to check in with their rheumatologist or nephrologist during the summer months. Also, there were fewer selling days in July, and the timing of the July 4th holiday took more people out of the office. That said, our business fundamentals remained at an all-time high. All of our other marketing metrics are positive and we believe that PSFs will return to growth over the coming months and in the fourth quarter. As I referenced earlier in the call, during this period, our conversion rates, that is converting patient start forms to patients on therapy are at an all-time high, with about 89% of patients converting onto drug. Our team has made further progress and continues to reduce time from PSF to submission to conversion to patients on drug with approximately 65% of patients getting on therapy in 20 days or less. This continues to improve over the past several quarters and is up over the first quarter of 61%, meaningful progress and improvement on all fronts. At the end of the second quarter 2023 about 54% of patients remain on therapy at 12 months. This is an increase over previous quarters. We are extremely pleased to see this level of patient retention at 12 months. It shows that LUPKYNIS persistency is in line with or actually better than treatments for other chronic diseases. In May, we reported about 47% of patients remained on therapy for 15 months and we’re now seeing that more than 48% of patients remain on therapy at 15 months, as the number of patients across that timeframe continues to grow. And while we’ve only seen a small number of patients through 18 months of therapy, about 44% remain on therapy through that time. This is up from the previously reported 41%. We believe this persistency can be attributed to the product’s efficacy and safety profile out to three years and our patient support programs pulling through the work that’s done by Aurinia Alliance. Consistent with prior periods, patients adhering to the treatment regimen, that is dosing and tablets per day continues to be stable at approximately 80% to 85%. Based on everything I’ve just discussed, we’re increasing our net product revenue guidance range from the updated guidance we gave in Q1 of $135 million to $155 million to $150 million to $160 million for the year 2023. Turning now to our R&D activity. We remain on track to file an IND for AUR200 by the end of the year and we continue to enroll in our lupus nephritis registry and our post-approval regulatory commitment of a pediatric study. Lastly, let me close with our globalization efforts for LUPKYNIS. Our partnership with Otsuka has resulted in significant launch momentum outside the U.S. this year. Our partner has now launched LUPKYNIS in Germany, Austria, Sweden, Finland, and Norway. LUPKYNIS was recently approved in Switzerland and has received formal reimbursement approval in both the U.K. and Italy. And as a reminder, upon pricing and reimbursement approval in three of the five major EU countries, the company would be eligible for an additional $10 million milestone from Otsuka, which we still expect in the second half of 2023. In addition, our work in Japan remains on track for regulatory submission towards the end of the year. Upon approval in Japan, we would be eligible for an additional $10 million approval-related milestone along with low double-digit royalties on net sales once the product is launched. So, with that, I’d like to turn the call over now to Joe for a more detailed review of our financials and I’ll then return at the end of the call for a quick recap and to open up the line to see what questions you might have. So, with that, let me turn it over to Joe.

Thank you, Peter, and good morning, everyone. As of June 30, 2023, we had cash, cash equivalents, restricted cash, and short-term investments of $350.7 million, compared to $389.4 million at December 31, 2022 and $361.5 million at the end of the first quarter 2023. The decrease in cash, cash equivalents, restricted cash, and investments is primarily related to the continued investment in commercialization activities, post-approval commitments of our approved drug LUPKYNIS, inventory purchases, advancement of our pipeline, and the second capital expenditure payment for the monoplant, partially offset by an increase in cash receipts from the 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 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 second quarter and the six months ended June 30, 2023. Total net revenue in the second quarter increased 47% to $41.5 million from the prior year second quarter of $28.2 million. Total net revenue increased 52% to $75.9 million from $49.8 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase is primarily due to an increase in net product revenue from our two main customers for LUPKYNIS, driven predominantly by further penetration into the LN market. Net realizable revenue per patient for LUPKYNIS remains higher than our initial guidance of $65,000 per patient per year on a quarterly basis. But as we discussed previously, we expect net realizable revenue per patient to continue approaching this figure on an annualized basis as more patients go on and stay on therapy over time and as persistency, dosing, and payer mix evolve. Total cost of sales and operating expenses for the quarters ended June 30, 2023 and June 30, 2022, were $57.7 million and $64.2 million, respectively. Total cost of sales for the six months ended June 30, 2023 was $121.7 million versus $123.7 million in the prior year period. Let me now give you a further breakdown of operating expenses, drivers, and fluctuations. Cost of sales were $1.6 million for the quarters ended June 30, 2023 and June 30, 2022. Cost of sales were $2 million and $1.9 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Cost of sales for both periods remain consistent due to an increase in revenues, offset by a write-down of FDA process validation batches that occurred during the second quarter of 2022. Gross margins for the quarters ended June 30, 2023 and June 30, 2022 was approximately 96% and 94%. Gross margin for the six months ended June 30, 2023 and June 30, 2022 was approximately 97% and 96%. Selling, general and administrative, SG&A expenses, inclusive of share-based compensation expense were $47.1 million and $51.5 million for the quarters ended June 30, 2023 and June 30, 2022, respectively. SG&A expenses, inclusive of share-based compensation expense were $97.2 million and $96.7 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The primary drivers for the decrease in SG&A expense were a decrease in professional fees and services, including legal fees incurred during the respective quarters. For the six months ended June 30, 2023, compared to the prior year period, the increase was due to an increase in share-based compensation expense and marketing expenses, offset by a decrease in professional fees and services which includes legal fees. Non-cash share-based compensation expense included within SG&A expense for the quarter was $9.8 million versus $8.9 million for the prior year period. Non-cash share-based compensation expense included within SG&A was $17.4 million and $14.9 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Research and development, R&D expenses, inclusive of share-based compensation, were $12.7 million and $11.5 million for the quarters ended June 30, 2023 and June 30, 2022. R&D expenses, inclusive of share-based compensation expense, were $25.8 million and $24.1 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The primary drivers for the increase for the quarter and six months ended June 30, 2023 as compared to the same periods ended June 30, 2022, were an increase in salaries and related employee benefit costs, share-based compensation expense, and clinical supply cost as a company advances its AUR200 and AUR300 programs and fulfills the post-approval FDA commitments related to LUPKYNIS. The increase was partially offset by a decrease in contract resource organization costs related to the completion of the AURORA 2 continuation study and drug-drug interaction study, which was substantially completed in 2022. Non-cash share-based compensation expense included within R&D expense was $2.1 million and $1.1 million for the quarters ended June 30, 2023 and June 30, 2022, respectively. Non-cash share-based compensation expense included within R&D expense was $3.7 million and $2 million for the six months ended June 30, 2023 and June 30, 2022. Other income net was $3.6 million and $500,000 for the quarters ended June 30, 2023 and June 30, 2022, respectively. For the six months ended June 30, 2023, other income expense net was $3.3 million in income versus $1 million expense in the prior year period. The increase in other income is primarily related to a change in fair value assumptions related to our deferred compensation liability, coupled with the foreign exchange gain related to our monoplant finance liability. Interest income was $4.1 million at June 30, 2023 versus $500,000 for the prior year second quarter. Interest income was $7.9 million and $700,000 for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase between periods is due to higher yields on our investment as a result of increased interest rates. For the quarters ended June 30, 2023, Aurinia recorded a net loss of $11.5 million or $0.08 net loss per common share, as compared to a net loss of $35.5 million or $0.25 net loss per common share for the quarter ended June 30, 2022. For the six months ended June 30, 2023, Aurinia recorded a net loss of $37.7 million or $0.26 net loss per common share, as compared to a net loss of $73.1 million or $0.52 net loss per common share for the six months ended June 30, 2022. With that, I’d like to hand the call back over to Peter for some closing remarks.

Thanks, Joe. As you heard throughout the call, we’re obviously excited about our strong results for the second quarter and our momentum through the first half of the year, hitting many all-time highs across the business. We remain focused on delivering LUPKYNIS to patients in need and driving results in the U.S. and globally, and we look forward to keeping you posted along the way. I want to thank everyone for joining us again for the call. We’ll now open up the call for any questions you might have.

Thank you. Our first question comes from Joseph Schwartz from Leerink Partners. Go ahead, Joseph.

Hi, all. This is Will on for Joe this morning, and thank you for taking our questions and congrats on the progress this quarter. So one for us to start just on seasonality, since LUPKYNIS has been in the market for several years now and as the company has more experience with the launch. Can you maybe provide some color on the strategies in place to help mitigate this impact of seasonality? And as we look to the third quarter, how should we be thinking about sales relative to the prior quarter? And I have a quick follow-up. Thank you.

Okay. Thanks, Will. So, as I said on the call, if you go back, not just quarters, but the last few years since launch, we’ve seen an impact in the summertime. And I think moving into this summer, our biggest question was being able to peel back whether the impact was, I hate to use the term seasonality, because it brings people to viruses and infectious disease more so than a typical specialty business. But clearly, in our business, the question was, is this a summer effect or was it a COVID hangover or COVID impact prior during the shutdown we saw during COVID. And I think what we’ve clearly seen coming into this year is that, during the summertime, there’s an impact on patient flow. So because this is a quiet disease and patients are often asymptomatic, they aren’t running into the physician's office during the summer months to get regular screening. Second, we’ve seen office staff, physicians, etc., spending less time in the office. We clearly saw that during the month of July. And we can track this not just through what we hear qualitatively, but we can see it quantitatively, in our numbers, in the diagnosis numbers that we track and even in the testing numbers that we track. And then, lastly, even in our own company, we have the effect of people taking summer vacations, etc.; even though we manage that well, there are just time periods where there’s less activity. So if you look at the July performance as it relates to PSFs, because we’ve not talked about patients on therapy, we’ve not talked about revenue performance through the first month of the third quarter. Clearly, we’ve seen some impact. But if you look at the trending so far this year and the trending into July, it’s fairly predictive of what we’ve seen over the last two years. So our belief is that we’ll get back to a growth pattern as we move into August, and we’ll see that continue into Q3 and Q4, just like we saw last year. So we feel confident that we’ll be able to continue on the growth pattern. But as we think about forecasting this business moving forward, although we don’t give quarterly guidance, it’s clear that during the month of July, we see a little bit of a dip and that the summer has an impact. Your question on mitigating strategies. Well, we do everything from special incentive compensation in our sales organization to increasing the flow of our marketing spend to targeted initiatives during the summertime to try to increase awareness of patients to continue or have continuity within their care, and really, we put a blitz during pre-summer and through the summer. So that’s why I say this is a predictive thing that we’re going to have to continue to manage through, and I think as I think about forecasting the business forward, that the summer is going to be something we need to take into account as being potentially softer than other quarters on a go-forward basis. In Q4, we feel very confident not just based on past trends but the tactical activity we have and the amount of emphasis we’re going to have in terms of the flow of our tactics and people in the field. And lastly, the AURORA 2 messaging that we’re working through our medical team and through the publication that’s now been issued out there, I think will have a big impact as well. Remember, the extension study was three-year data, not just looking at safety measures like EGFR, but also clinical efficacy measures as well.

Great. Very helpful. Thank you. And then if I could just sneak in a quick follow-up here. Could you just remind us on the Biopsy data, if you are going to be submitting this to the FDA and what your thoughts are on a potential timeline for an updated label to include these data? Thank you.

We have been in regular communication with the FDA and have submitted a data package that includes not only the Biopsy data but also extension data and additional analyses from the original AURORA trial. Our aim is to get this information added to the label, which involves negotiations with the FDA. We do not have a specific timeline yet. We will share any concrete feedback we receive from the agency. We believe this information is crucial for prescribers and can significantly benefit patients. We are advocating for its importance regarding where it will be positioned on the label, its impact on the indication statement, usage statement, and the clinical trial section, which is still to be decided. We have submitted the information to the agency and hope to see it featured prominently after discussions with them.

Great. Thanks again.

And our next question comes from Ed Arce from H.C. Wainwright. Go ahead, Ed.

Hi. Good morning, everyone, and thanks for taking my questions and congrats on the quarter. So I just wanted to ask a broader question on sort of what underlying drivers are here. I mean this is the second sort of beat-and-raise quarter in a row. And PSFs are down slightly this quarter, while all other metrics are basically at or very near all-time highs and there hasn’t been a pricing change since December of 2021. So I’m just wondering how you would characterize sort of puts and takes, and how you get to the increase in your revenue guidance? And then I have a couple of follow-ups.

Thanks for the question, Ed. I think you described it well. Almost every metric we track in the business reached an all-time high this quarter, similar to last quarter. We're converting patients onto the drug more quickly and maintaining their usage for increasing lengths of time, all of which are showing positive trends and some improvements. Compliance with the regimen has remained consistent, almost hitting an all-time high over the last two quarters. With these measures, we are effectively retaining patients on the drug, positively impacting our revenue each quarter. We view PSFs as a key leading indicator, similar to AURORA NRX. This leading indicator will remain unchanged until we modify our distribution strategy. For instance, our limited specialty distribution means that the initial prescription process, or patient start form, is crucial. If we broaden our distribution, we would see typical IQVIA data and actual prescribing at the retail level become more significant, which is not the case for us at this point. However, it remains a key indicator; if patients are starting the drug at a certain rate, there is an inevitable delay before those PSFs translate into actual numbers. Thus, we are effectively working through PSFs from previous quarters in the current quarter, allowing our financial metrics to keep growing. I believe that as we refine our business, focusing on patient retention and quicker onboarding, we can sustain growth in revenue even if PSFs do not increase. It’s important to note that while you mentioned no pricing changes since 2021, we did implement a price increase in 2022 of 7.9%. In our contracts with price control mechanisms for annual increases, our anticipated price increase for the year will be around 3 percent due to existing agreements. I believe I've addressed some of your questions, so let me confirm if that was what you were looking for.

Yes, Peter. That’s very helpful. I appreciate that. I have a couple more questions. I think you may have mentioned this before, but I didn’t catch the number. Do you have the metric for new patients on therapy for this quarter and Q1? Lastly, could you repeat the milestone payments you expect with the upcoming approvals and launches outside of the U.S.? Thanks.

So within the quarter itself, in terms of new patients on therapy, we had approximately 190 new patients on therapy in the quarter. Your question on milestones and this is driven from our ex-U.S. agreement with Otsuka, there are two in the near-term that we’ve guided to and talked about on the call. One is, of course, in Europe, we continue to get countries approving the drug. We have a global EU approval, but then the individual countries are doing their own assessments and that continues to go well. Our agreement is when three of the five top countries in the EU get pricing approval, which is separate, obviously, from actual drug approval in the country. Then we have a $10 million milestone coming from Otsuka, and we’ve said we believe that can happen in the calendar year towards the back half of the year. The second near-term milestone is the work we’re doing in Japan. We’ve said that we believe we can submit to the PMDA by year-end. And if we do that under a normal review cycle, you should see in 2024, but could lead into 2025 if you have a longer review cycle, a $10 million milestone upon the approval of the drug in Japan, and included in that, of course, we get low double-digit royalties and we have a cost-plus management supply agreement with Otsuka as well.

Great. Thanks so much.

Thanks, Ed.

And our next question comes from Jacqueline Lu from Oppenheimer. Go ahead, Jacqueline.

Hi. This is Jacqueline on Justin Kim. Thank you for taking our question. Great to see the improvement in persistency numbers at 12 months. Would you be able to share how those numbers have been evolving at later time points, what sort of long tail product utilization the product is having, especially given the added publications, education, and awareness of such chronic use?

That's a great question. Thank you, Jacqueline. First, as we've mentioned, we provide metrics that show a lot of numbers, to the point where reviewing our transcript may require looking back to capture everything. We value sharing meaningful quantitative information. At this moment, we haven’t provided data out to 24 months because historically, we’ve avoided making insignificant projections when we lack enough patients in that time frame. Once we have sufficient patients crossing that 24-month mark, we will be happy to share those estimates. However, we have noted improvements in 12-month, 15-month, and 18-month persistency rates, which are all slightly higher than previously reported, indicating that our initiatives are having a positive impact. We've seen that compliance with the 30-day dosing regimen is also improving, thanks to our efforts through the Aurinia Alliance and our patient awareness programs. I spoke with our commercial team recently about an interesting point we hope to report soon regarding diagnosis rates. We want to see if there’s an increase in patients being diagnosed with lupus nephritis, which represents a significant opportunity for us. Our Get Uncomfortable campaign, featuring Toni Braxton, focuses not only on medication adherence but also on ensuring that individuals with lupus are monitored for kidney-related issues. We’ll share updates once we gather enough data for the 24-month period, but for now, all other persistency metrics we’ve shared show positive trends.

Great. Thank you.

And our next question comes from David Martin from Bloom Burton. Go ahead, David.

Hi, guys. Thanks for taking my questions. Back to the persistency. I’m wondering when patients come off LUPKYNIS, does the proteinuria stay low for a period, and therefore, docs think that patients can take a holiday on the drug or does it rebound quickly and should the patients come back on quickly?

When patients stop taking the drug, there are various reasons for this. It could be due to patients being lost to follow-up, choosing not to continue the drug, or a physician deciding to give them a break because their protein levels have dropped. While this decision might not align with guidelines, it does occur frequently. Generally, these decisions are made by doctors or patients rather than insurance companies. For instance, if a patient reaches a year on the medication, insurers do not typically decline to cover it. Regarding the likelihood of patients returning after discontinuation, we have data suggesting that when protein levels rise again, doctors often reinstate treatment. Many physicians view it as a disease that can flare and remit, despite the lack of formal guidelines on this approach. The encouraging news is that patients who were previously on our medication can be treated with it again, and we observe this happening often.

You started a strategic review that might lead to a potential sale of the company. During your Q1 call, you seemed certain that selling the company at this time was not advisable. I'm curious about what factors influenced your change of perspective. I understand that there have been some changes in the Board, but what prompted you to reconsider?

To clarify my earlier comments from the first quarter, the decision to sell the company is not solely determined by us. It requires agreement from both parties involved. As a public company, we have a duty to our shareholders, and we must remain open to all strategic options. In June, we announced that we were considering these alternatives, responding to shareholder requests. We believe that examining strategic options is a routine part of our leadership's responsibilities. This review might lead to various outcomes, ranging from a complete sale of the company to a merger or even licensing assets, or we might choose to continue focusing on growing LUPKYNIS. It's important to note that a strategic review takes time, and we have not established a timeline for its conclusion. While we feel a sense of urgency, we will not provide updates on our progress until we find it appropriate. Therefore, we won't be reporting on the status of the strategic review at every call until it concludes. As for the notion that we are firmly opposed to selling the company, that's not something we've ever claimed. It takes mutual agreement to pursue that path, and we are aware of our obligations as a public company, remaining open to various strategic options beyond our current activities.

Okay. Got it. Thanks.

Thanks, David.

And our next question comes from Stacy Ku from TD Cowen. Go ahead, Stacy.

Hi. This is Vish on for Stacy. Thank you so much for taking our questions and congratulations on another very strong quarter. So we’ve done some clinician tests on LUPKYNIS, and it’s striking that all our clinicians are very aligned in their long-term positive views on LUPKYNIS’s long-term potential. But even among those specialists, prescribing is very diverse. So could you maybe speak to a little bit on what you are seeing right now in terms of the percentage of patients that are getting prescribed LUPKYNIS for induction alone versus maintenance alone versus both induction and maintenance so that we can get a sense of how LUPKYNIS is being used right now? And where do you think this adoption pattern will change as long-term experiences gained and in light of the new published data?

We don't often hear physicians discussing the treatment of the disease in terms of wanting to induce remission and maintain it. The best way to guide investors on how long patients are staying on the drug is by looking at the time periods and the percentage of patients on the drug at those time intervals that we report. This helps reflect how doctors are using the drug. There are various reasons patients and doctors may discontinue treatment, but the percentages over the course of a year and extending to 18 months and two years indicate how the drug is genuinely being utilized. Prominent thought leaders in physician lectures have mentioned that while guidelines suggest getting a patient under control and keeping them there, a range of three to five years for patients to stay on therapy has been noted. However, there are different strategies employed by physicians, such as using our drug for induction, combining it with Benlysta, or continuing with MMF and steroids over the long term. There is significant potential for data to provide answers about this variability, as new data continues to emerge that will influence physician practices. Our persistence numbers reported over the time periods we track show that about 50% of our patients are still receiving the drug around the 12-month mark. After that point, while there is a decline, it is not as steep, with no significant reductions each month. Regarding the comments about doctor engagement, our awareness and usage data, which is more qualitative, indicates that physicians intend to use the product within the next 30 days and plan to increase their usage over time, reflecting a positive outlook on our penetration strategy. One key area is ensuring that all physicians recognize a patient with a gram of protein as appropriate for treatment. There are notable disparities in how actively physicians treat patients, with some waiting for protein levels to reach 3 to 5 grams before diagnosing lupus nephritis, despite guidelines indicating that it should be addressed at lower levels. We need to encourage earlier treatment and continue to build our prescriber base, expanding the number of prescribers and increasing depth per prescriber. Progress has been made this year, but there is still further to go in terms of acceptance and adoption.

Perfect. Thank you.

And our next question comes from Maury Raycroft from Jefferies. Go ahead, Maury.

Hi, good morning. This is Farzin on for Maury. Congrats on the update and thank you for taking our questions. So just want to clarify, what proportion of the prescribers or repeat prescribers? And then on the patient side, what are you hearing from patients for them to remain on therapy for longer term?

So we’ve not given percentage penetration numbers. But in terms of total number of prescribers, we’re probably at or around, call it, 1,500 prescribers and growing that have utilized the product to date, and a large percentage of that number are repeat prescribers. So we’ve also said that our decile 7 to 10 are a highly concentrated group in terms of the prescriptions that they do. So this is not a disease where you should be thinking, okay, well, how many rooms, how many nets and I got to get all of them using some room, some nets treat very little of this disease. So, but we want to see more prescribers for sure and then we want to get the depth of prescribing happening. And I’ll go back to my previous statement that some of it is not that they just don’t want to use our drug. Some of it is that they believe they shouldn’t be treating lupus nephritis until it turns to 3 grams to 5 grams of protein in the urine. And this is obviously not congruent with the guidelines that are out there. So all these numbers have been improving and are on a good pace. But in order to increase PSFs and increase the revenue run rate, we’ve got to go deeper and wider.

Got it. And then…

I didn’t answer your question about patients, so let me do that quickly. I'm not sure we have market research from the patient perspective to determine what will motivate them to start and continue using the drug. We know that they need to be informed about the seriousness of their condition. With Systemic Lupus Erythematosus (SLE), much of the disease management focuses on fatigue as well as skin and joint issues, which are felt daily. However, it's the underlying factors that are not felt, like proteinuria, that can have the most significant impact and lead to poor outcomes. The strategies we're implementing, such as the pee in a cup campaign and the Get Uncomfortable campaign, are designed to educate patients about the more severe aspects of their lupus and what actions they need to take, which includes staying on medication. The best way to gauge our success, as we don't have a qualitative metric available, is to monitor our persistency and adherence numbers to the prescribed regimen to see if they are improving each quarter.

Makes sense. Just another clarification, you mentioned an increase in revenue from two main customers. I am wondering if you can provide some more color on that?

We have a limited distribution model with two specialty distributors. It was mentioned in Joe’s section because it involves financial qualification. We recognize revenue when we ship to those distribution centers.

Got it. And the last question, I guess, for Joe. Like you have said that you have better gross margins. So wondering what the gross to net is at this point?

Yeah. We have not guided specifically to our gross to net percentages. The margin fluctuation was driven by the fact that in 2022 we had reserves for some FDA validation batches. So we had to build some inventory reserves in the prior year. We didn’t have the same thing in 2023.

Got it. Thanks so much.

Thank you.

And our next question comes from Justin Kim from Oppenheimer. Go ahead, Justin.

Hi. Hi, everyone. Sorry for joining a little late. I just wanted to ask a follow-up to one of the questions asked. With the announced strategic priorities, I just wanted to touch base on the pipeline and any updates there in terms of your expectations for milestones or guidelines on 200 to 300?

Yeah. No changes. We basically said that we are projecting an IND filing for AUR200 by year-end and we believe we’re on target to do that. And I think under that, we’ll then be able to engage in more of a conversation as to where this goes, how it competes, where you’re going to develop it, all the right next questions for an early-stage asset moving into an IND filing. AUR300, as we’ve talked about previously, Justin, we’re still doing some tweaking on the formulation, and we think that’s a 2024 deliverable for IND. Nothing off target there in terms of our previous projections, but no change on either. And then other pipeline, to some degree, was also to a big degree was externalization or business development. Obviously, I would develop that into the strategic review process we’re looking at right now.

All right. Great. Thanks so much.

Thanks, Justin. Okay. Operator, if that’s our last question. I just want to close by saying thank you all for joining us today. We look forward to updating you in the next quarter. Have a great day.

Thank you. This does conclude today’s conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.