Earnings Call Transcript - AUPH Q4 2020

Glenn Schulman, Senior Vice President, Investor Relations

Thank you, Kevin and good afternoon everyone. I am pleased to welcome you to today’s call discussing Aurinia’s fourth quarter and year end financial results. Joining me on the call this afternoon are Peter Greenleaf, President and CEO of Aurinia; Neil Solomons, our Chief Medical Officer; Max Colao, Chief Commercial Officer; and Joe Miller, our Chief Financial Officer.

Peter Greenleaf, President and CEO

Thanks, Glenn and thank you all for joining our call today. Today’s agenda is pretty straightforward, folks. This afternoon, we will be recapping what was a very busy fourth quarter of 2020 for the company, sharing an update on what’s happening just 23 business days post-approval and launch of LUPKYNIS as well as what’s next as we continue to introduce this product to healthcare professionals and patients in the U.S. market. Of course, we will also provide an update on where we are at financially as we close out the year. We all know launching a product is obviously not as simple as flipping a switch or pushing a button. The fourth quarter is quite busy with label negotiations, launch readiness prep, our internal launch meeting and preparing to ship the product to the U.S. market. We were also hard at work finalizing important long-term agreements to shore up our ability to deliver and market LUPKYNIS well beyond launch and to expand the product into global markets around the world. On December 15, 2020, we announced the collaborative agreement with Lonza to build a dedicated manufacturing capacity within the company’s existing small molecule API facility in Visp, Switzerland. The dedicated facility provides cost and production efficiency for the manufacturer of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand.

Max Colao, Chief Commercial Officer

Thank you, Peter and good afternoon everyone. So I am happy to share with you what we have achieved over the past month since our approval and launch. This is actually the 13th launch in my career. I guess that’s a pretty good number. If nothing else, it just proves that I am experienced, but I am making a point because none of the other 12 were amidst an environment as unprecedented as what we all see with the COVID pandemic. There is a lot we have had to do in ways that have never been done before. The commercial team has stepped up to this challenge in a very admirable way. This is the fourth time I have launched transformative therapies for rare disease. As many of you know, the market dynamics that drive such are a world apart from launching a therapy for a larger patient population and those dynamics haven’t changed, even amidst COVID. While I can certainly appreciate everyone’s interest in hearing comments related to prescription counts, I am sure you can appreciate that such numbers at this early stage and amidst this environment can provide a good indicator of market response. Even so, I will say that we have been genuinely pleased with the level of initial prescription volume. The numbers are tracking to our expectations. In fact, if anything, they are a little ahead of what we were anticipating. We feel positive about the very early initial trend, and we will certainly be in a position to share more details around this obviously important metric on our next call. In the meantime today, it is entirely reasonable to highlight that even at this early stage, our progress in executing our strategy showcases our ability to execute strongly towards our goals. LUPKYNIS was approved late on Friday, January 22. Aurinia Alliance was online right early on Monday following the approval and receiving prescriptions within 15 minutes. 72 hours later, LUPKYNIS was in the channel. Our field team was fully trained and deployed within hours of approval. Interestingly, so far 70% of our sales calls have not been virtual; 70% have been live and in-person, fully compliant with local guidelines. We think that in the context of COVID restrictions, this high ratio of in-person calls confirms very robust interest on the part of physicians. It also speaks to the incredible dedication and tenacity of our team.

Joe Miller, Chief Financial Officer

Thank you, Max. Good afternoon, everyone. As of December 31, 2020, Aurinia had cash, cash equivalents and investments of $423 million compared to $306 million at December 31, 2019. Net cash used in operating activities was $69.9 million for the year ended December 31, 2020 compared to $63.6 million for the year ended December 31, 2019. The company believes that it has sufficient financial resources to fund its current operating plans, which include funding commercial launch activities, manufacturing and packaging of commercial drug supply, and conducting our planned R&D programs into at least 2023.

Peter Greenleaf, President and CEO

Thanks, Joe. Thank you, Max. With the launches of LUPKYNIS underway, we want you to hear from us that we are on track with our internal projections for the U.S. launch. Furthermore, with our ex-U.S. partnership with Otsuka, we look forward to working with them to expand into additional territories, including Europe with the upcoming MAA filing by the first half of the year. 2021 will also be a busy year with continued clinical development and medical presentations surrounding voclosporin. We also continue to work to enhance value by exploring opportunities to expand our pipeline and we look forward to providing additional updates in the months and quarters to come.

Unidentified Analyst, Analyst

Hi, this is on for Alethia. Thanks for taking my question. I was wondering how you think about the lupus nephritis patient population in terms of getting treatment during the pandemic? Do you feel like these patients are continuously going to their physicians to get treatment or do you anticipate maybe a bit of a challenge getting patient motivation? Thank you.

Peter Greenleaf, President and CEO

Yes. Since we have on-the-ground experience with that now, I won’t project; I will ask Max what he is hearing from our field team.

Max Colao, Chief Commercial Officer

Yes, thanks for the question. I would say that it’s variable across the United States. We are definitely hearing of patients that are delaying their visits, but we are also hearing from physicians that are actively engaged with their patients either through telemedicine or getting them in line for visits. So, we are seeing – it’s variable across the U.S., but it doesn’t take away from our confidence in seeing that the patient opportunity is there.

Ken Cacciatore, Analyst

Hey, guys. Just have a couple of questions. I was wondering now that you’ve had a little more managed care engagement? Is there any reason to sharpen the net pricing that you gave us before of $65,000? I just wanted to know if there is any additional nuance there? And also in the early going, just wondering if patients qualify for a medical exemption or how that’s going to be handled? Second question I have is just around the whole process with Aurinia Alliance. I know this is going to sound silly, but with some early prescriptions written, how smoothly is the system getting product to patients and patients to actually be able to take the medication? Any early glitches or successes that you are seeing? And then, also, I am wondering if you could help us a little bit on spending guidance for the year, some thoughts on that? Thanks so much.

Peter Greenleaf, President and CEO

Thanks, Ken. I will take the bookends on this one. I think as it pertains to the net price assumptions, at the end of the day, it’s too early to tell; policies are currently being put in place. I think our assumption is still where we want to keep it, and we will keep it tuned as things progress. Max, you want to take the following two questions on the medical exemption and the other?

Max Colao, Chief Commercial Officer

Yes. I can tell you that in all of our payer interactions, the payers have appreciated the clinical and economic burden of lupus nephritis. They have also appreciated that voclosporin offers more than the standard of care. And they have acknowledged that we are talking about a really small number of patients relative to their covered lives. So we have been encouraged with our interactions. And I can tell you that we have prescriptions that are now reimbursed across every payer segment including commercial, Medicaid, Medicare, and also federal government. This does look like any other rare disease launch where going from prescription to working through the adjudication approvals and finalizing that prescription takes some time. We are seeing that as well, consistent with what you would expect in our rare disease launch.

Joe Miller, Chief Financial Officer

Yes. Thanks Peter. As we have previously discussed, the Q4 run-rates will be burdened with the build-out of our commercial infrastructure. So looking forward, it’s probably best to look back at Q4 and I will give you a reasonable estimate about where we will try and go from here. We haven’t specifically guided to the numbers yet, but that would be a good target point to consider for the future quarters to come.

Maury Raycroft, Analyst

Hi, everyone. Thanks for taking my question. First question, I wonder if you can comment generally on the types of patients you are getting on LUPKYNIS. Are they primarily switches from off-label generics or treatment naïve and are you seeing more uptake in community or academic centers? Any additional perspective on those?

Peter Greenleaf, President and CEO

Max, jump right in.

Max Colao, Chief Commercial Officer

Sure. Yes, Maury, thanks for the question. It is too early for us to have any deep insights on the types of patients for which we are seeing prescriptions. We will definitely have more when we get into our next call. The second part of your question was regarding academic versus community centers. No, we are definitely having more access on the community side. As you can expect, academic centers, especially in heavy COVID areas, are pretty locked down. However, we are making inroads across both, but we definitely have better access on the community side.

Maury Raycroft, Analyst

Got it. Thank you. And second question was just on if you can talk more about the potential to get KDIGO guidelines updated? Is this a priority and is it contingent on the Phase 3 data getting published?

Neil Solomons, Chief Medical Officer

Yes, that’s right. Guidelines are clearly helpful. We have been in contact with the KDIGO guidelines for years now. But you are correct in pointing out that it refers to published data, and that’s why the record publication manuscript, which is, as Pete said in the introduction, coming fairly soon will be instrumental in the literature and we will also update guidelines.

Justin Kim, Analyst

Hi, good afternoon. Thanks for taking the questions. Just wondering when you think about the commercial launch's progress, how the team feels about the current commercial team and the footprint the team is able to address during the current environment? I know Max gave some color on how there are heavy in-person touch points, so I am just wondering how you feel about the size of the team and whether it could grow going forward?

Peter Greenleaf, President and CEO

Yes. I mean, I think what we have said previously is we feel very comfortable with how we are deployed against the opportunity that’s out there today. Max can give more context on their interactions. From other boards of commercial companies that I sit on, these types of access numbers that we are achieving live are significantly higher than what we are seeing at other specialty companies that I work with.

Max Colao, Chief Commercial Officer

Yes, I think that’s right on. We have the right level of deployment. It’s so early at this point that it’s really very difficult to assess otherwise.

Justin Kim, Analyst

Great, thanks. Maybe just another one on a macro level, are you seeing any differences compared to how you expected conversations between physicians and nephrologists to go? Just wondering if the commercial launch targets are ending up different from your communications with nephrologists?

Peter Greenleaf, President and CEO

Max, you can jump right in on that. The short answer is no, but he can provide more detail.

Max Colao, Chief Commercial Officer

Yes, the short answer is no. We are targeting those specialties and we are targeting about 12,000 physicians across those specialties, and the prescribing we are seeing is across both specialties as well.

Justin Kim, Analyst

Okay, got it. Just a final clarification question on the OpEx and R&D side; I noticed the numbers were a bit variable quarter-to-quarter. Is the fourth-quarter R&D number the right way to think about go-forward spending?

Joe Miller, Chief Financial Officer

Yes, thanks for the question. There are continuation studies ongoing. Directionally, there will be a shift in R&D-related expenses towards other activities, but generally speaking, directionally they will probably be fairly consistent with what you saw in Q4 going forward. There might be some timing related differences, but overall, directionally, it should be fairly correct.

David Martin, Analyst

Yes. Thank you for taking the questions. I know it’s early, but are you seeing that physicians are treating one set of patients with Benlysta and another set with voclosporin? Or are physicians making a decision to treat all their patients with one drug or the other? And if patients are already on Benlysta for SLE, are there any cases where they are adding voclosporin to Benlysta?

Peter Greenleaf, President and CEO

Yes. I think my answer to both of those would be, it’s early probably for us to observe any trends, and we are not actually out there aggregating data on where Benlysta fits into the treatment paradigm. Let me see if Max has been hearing anything regarding this, and it might also be good to see if Neil has a comment.

Max Colao, Chief Commercial Officer

Yes, it’s too early for us to have real insights to your questions; they are good questions. We haven’t even run post-launch market research surveys yet, given that we are only 23 days into the launch. We have many scheduled, but we haven’t run any yet, right? So, we will have more insights as we proceed.

Peter Greenleaf, President and CEO

Neil, anything to add?

Neil Solomons, Chief Medical Officer

No, I was going to add that although people talk theoretically about the combination of Benlysta and voclosporin, I think it’s too early for that kind of discussion.

David Martin, Analyst

Okay, thank you. Peter, you mentioned post-marketing obligations; what are those? What are you required to do?

Peter Greenleaf, President and CEO

Yes. What we are required to do is based on further questions from the FDA that we can formulate a response to and decide whether we are going to conduct further work on or not. Neil, do you want to go into some of that detail?

Neil Solomons, Chief Medical Officer

In terms of the requirements, we have to present the AURORA 2 study report next year, which we are doing anyway. The study includes pediatric and adolescent aspects, as well as the required drug-drug interaction trial.

Ed Arce, Analyst

Great, thanks for taking my questions. I realized that this is still very early days, as you have mentioned, just 23 days past approval and launch, but I wonder if you have a sense of how long variability in the early days may continue before it levels out and starts providing some indication of demand? Are there important launch-related metrics you're following that could provide further insight?

Peter Greenleaf, President and CEO

Yes. I think Max mentioned many of the high-level metrics that we are looking at, whether that be the amount of calls we are making on targets, what our access looks like in those targets, the payer work we are doing, and the policies we are following. However, as we are more than 23 business days into the launch, we promise to give more color not just on prescription trends but also on policy and coverage trends, and other leading indicators that we think are important to consider.

Max Colao, Chief Commercial Officer

I think you commented perfectly. The only other thing we are going to be watching very closely is the development of LUPKYNIS specific coverage policies. Right now, we only have one payer that has developed a LUPKYNIS specific coverage policy, which is Blue Cross Blue Shield of North Carolina, and I am sure many others will follow in the coming months.

Peter Greenleaf, President and CEO

Well, thank you, operator. I want to thank you all for joining us on the call this afternoon. As you can see, 2021 will continue to be an exciting year for the company, and I am looking forward to providing additional updates as our progress continues over the next months. Thank you all for your continued support, and have a great evening.

Operator, Operator

Thank you. That concludes today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We appreciate your participation today.