Earnings Call Transcript
Aurinia Pharmaceuticals Inc. (AUPH)
Earnings Call Transcript - AUPH Q3 2022
Operator, Operator
Greetings, and welcome to Aurinia Pharmaceuticals Inc. Third Quarter 2022 Earnings Call. At this time all participants are in 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, John Walbert, Investor Relations for Aurinia Pharmaceuticals. Thank you. You may begin.
John Walbert, Investor Relations
Thank you, Melissa, and thank you all for joining today's call and webcast to discuss Aurinia's third quarter 2022 results. Joining me this morning to lead the call are Peter Greenleaf, President and Chief Executive Officer; Joe Miller, Chief Financial Officer. This morning Aurinia issued a press release announcing its financial results and recent operational highlights and filed its quarterly report on Form 10-Q. For more information, please refer to Aurinia’s filings with the US 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 discussion of factors that could affect Aurinia’s future financial results and business, please refer to the disclosures in Aurinia’s press release and its quarterly report on Form 10-Q, along with Aurinia’s 10-K and all of our recent filings with the US Securities and Exchange Commission and Canadian Securities Authorities. Please note that all statements made during today's call are current as of today, November 3, 2022, 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. Let me now turn the call over to Aurinia's President and CEO, Peter Greenleaf. Peter?
Peter Greenleaf, President and CEO
Thanks, John, and good morning, everyone, and thank you for joining us. On today's call, we'll provide you with a review of our commercial business, including LUPKYNIS performance in the third quarter and year-to-date. We will then provide our updated expectations for the remainder of this year. And since we now have three quarters of results for 2022, we will also provide a preliminary view for 2023. In addition to commercial performance, we will cover ongoing medical affairs and clinical work to reinforce LUPKYNIS’ basic benefits for patients. We'll then move on to providing an update on our global expansion efforts, our R&D activities, and an update on our intellectual property. I'll then turn the call over to Joe Miller to provide more details on the third quarter and year-to-date financial results and our overall strong financial position. So let's get started with our third quarter business performance. Total net revenue for the quarter amounted to $55.8 million, which included a recognition of a one-time $30 million milestone payment from Otsuka to the achievement of the European Commission approval of LUPKYNIS. Total net product revenues for LUPKYNIS were $25.5 million for the quarter, bringing the year-to-date total for LUPKYNIS net product revenues to $75.1 million. Total reported revenue for the 2022 fiscal year through September 30 was $105.6 million. Moving to more detail behind the financial results. Total patients on therapy grew to 1,354 by the end of Q3, up from 1,274 at the end of Q2. The increase in patients on therapy this quarter was driven predominantly by improvements in prescription of patient start form conversion rates and processing speed, alongside new patients or forms. Our patient conversion rates on the drug at 20 and 30 days continue to improve quarter-over-quarter. As of today, overall conversion rates at 60 days remained consistent with prior periods at approximately 84%. Consistent with prior periods, adherence remains strong at approximately 80% at quarter end. Looking at our patient start form, we saw a slight decrease quarter-over-quarter, moving from 409 Q2 to 374 in Q3. Looking at our most recent data through October 31st, PSF year-to-date were $1,357. These trends are clearly something we have been watching closely and have tactical actions to address. Our net realizable revenue per patient for LUPKYNIS for the quarter remains higher than our initial guidance of $65,000 per year. However, as I discussed previously, we expect to approach 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. What we have seen from our internal analysis of claims data is that several leading market indicators, including patient business, new lupus nephritis diagnoses, and the number of patient renal biopsies, declined from Q2 to Q1 — from decline in Q2 versus Q1 — these lower numbers foreshadow a potential slowdown in the summer. For visits that did happen, we also saw a lower amount of proteinuria testing, which declined approximately 15% in Q3 versus Q2. These numbers, coupled with both doctor and patient summer vacations, resulted in overall lower office volume and impacted our performance during the summer months in both rheumatology and nephrology offices. Our internal analysis leads us to believe that these market events are temporary, seasonal or event-driven in nature. While we are currently digging deeper to better understand what impact this will have on a going forward basis, in the interim we are driving tactical activity to power through these external market dynamics, which I'll now walk you through. First, within our selling focus in healthcare provider-driven efforts, what we have learned throughout the launch from our highest prescribing physicians is that high-frequency engagement is required to adequately deliver the LUPKYNIS clinical message and gain solid clinical adoption. As a result, we're actively increasing our focus and frequency on the high potential of decile 7 through 10 rheumatology and nephrology offices. We're setting clear expectations, tracking activity closely, and even increasing our incentive targets for our field team in these areas. We also know that physicians adopted at a greater rate when they see sales representatives frequently, particularly when they do that in combination with other program offerings. As a result, we are prioritizing peer-to-peer programs that emphasize small or more personalized engagements, as we feel this better meets the needs of busy physicians and aids in advancing their understanding of the overall clinical advantages of LUPKYNIS. We recently launched a new campaign directed at high-volume lupus nephritis offices late in Q3. This campaign features a new core message with powerful graphics centered on underserved patient populations. Based on early feedback, this campaign resonates strongly with our healthcare professionals. The campaign has enhanced our sales force, and we will be updating our media and web properties as we move through the next couple of months and weeks. The campaign will also feature prominently alongside our selling and medical efforts at the upcoming conferences at ASN and ACR in the next few months. In addition to our commercial execution, our medical affairs efforts related to LUPKYNIS are crucial to driving growth. Over the past few quarters, we have generated significant visibility with healthcare providers through a substantial in-person presence at major medical conferences. We continue to submit new data from AURORA 1 and AURORA 2 for presentations at upcoming conferences, which include 14 abstracts accepted at lupus, ACR, and ASN this year. While much of our marketing approach is designed to increase the depth and frequency of prescribing among our existing base, we also want to ensure that first-time prescribers have a meaningful experience with our product through our Aurinia Alliance patient support team. We continue to provide a seamless first patient experience with LUPKYNIS in key products. We can see direct evidence of our impact here in increased PSF approval rates, as well as ties to the receipt of initial prescriptions. Along with our sales and support team focus and intensity, we have also increased our focus on the patient. We've recently made enhancements to our brand website, lupkynis.com, to provide additional information for patients and healthcare professionals. Additionally, we've enhanced and increased our focus directly through online social media channels. In September, we began a new campaign with the Lupus Foundation of America directed towards lupus nephritis naive patients with a series of lupus blogs across the country. The full campaign launched just last week, and we plan to continue to grow this campaign as we move into 2023. While our existing anchor programs have always centered around patients, our efforts in efficacy and education continue. We also have a number of new programs that will launch over the next few months to help increase diagnosis, urgency of treatment, adherence, and persistency, all moving directly to the patient. Lastly, as we reported on previous calls, our payer access and approval rates are high. However, some payers still include administrative hurdles for patients initiating therapy. So just last week, we signed a contract with one of the largest national payers that will remove certain access hurdles to lessen the administrative work on our offices, which will also shorten the average time for the first commercial fill and further enhance the prescribing experience for physicians to patients. Where we can drive the right motivation under the right terms, we will remain open to partnering with payers to streamline access and speed conversion. Based on the third quarter revenue results and the PSF trend moments, as you saw in our press release, we're updating our 2022 LUPKYNIS net revenue guidance to $100 million to $105 million for 2022. Additionally, with more than three quarters of results for 2022 now available, we are also providing preliminary LUPKYNIS net revenue guidance for 2023 in the range of $120 million to $140 million. This represents a $17 million to 37% growth at the midpoint of our revised estimated guidance for 2022. In order to achieve this growth, it is expected to be driven by an increase in the number of quarterly PSFs, improvements in conversion time, solid persistency curves, and continued strong adherence. Moving now to our globalization efforts for LUPKYNIS. In mid-September, in collaboration with Otsuka, we achieved an important milestone as the European Commission granted marketing authorization for LUPKYNIS to treat adults with active lupus nephritis. The authorization is valid in all EU member states as well as Iceland, Liechtenstein, Norway, and Northern Ireland. Upon approval, we received a $30 million milestone from Otsuka and are eligible to receive additional regulatory and reimbursement milestones and low double-digit royalties on net sales once launched. In the quarter, we began to recognize revenues for the supply of product to Otsuka, which is reflected as product sales as well as collaboration revenues for CMC and R&D support, both under a cost-plus arrangement. Our updated 2022 net product revenue guidance of $100 million to $105 million does not include this milestone payment, any royalty payments, or any collaboration revenue related to our agreement with Otsuka in the markets of LUPKYNIS in the European Union and Japan. Marketing authorization applications have been submitted in Great Britain and Switzerland with approvals expected in the first half of 2023. As a reminder, pricing and reimbursement approval in three of the five major countries in the European market will trigger a $10 million milestone for Aurinia. Additionally, our work in Japan remains on track. Upon approval, we would be eligible for an additional $10 million milestone related to and along with our double-digit royalties on net sales once launched. The ongoing clinical updates for LUPKYNIS include the advancement of both the vocal pediatric study and the ENLIGHT-LN REGISTRY. With the REGISTRY, which we initiated at the beginning of the year, we now have 38 active sites, towards our goal of having 170 total sites. As a reminder, we plan to leverage real-world data collected from this study to gain further knowledge about patients taking LUPKYNIS and to help clinicians and payers improve patient care and ensure access to therapy. We remain on track to meet our post-approval FDA commitments. Moving on to our research pipeline, we continue to advance IND-enabling work of AUR200 and AUR300, and we continue to work towards submitting INDs for both compounds by the end of 2023. These are important next steps in the advancement of our pipeline as well as to build long-term sustainable growth for the company. And finally, I'd like to provide you an update on our ongoing Inter Partes Review relating to our method patent in July 26; we've been diligently working on our defense. In December, we and Sun mutually agreed to a 2.5-week extension to each of our upcoming filing deadlines. With that extension, our full defense is due to be filed after market tomorrow. The defense will substantively dispute all challenges raised by Sun in the IPR. The facts will be publicly available once filed, and we are confident in the arguments that we are planning to present in that defense. There are a number of future steps to be taken in the IPR proceeding, including further filings of our arguments, culminating in the decision from the PTAB expected on or before July 26, 2023. In the meantime, our patent infringement lawsuit against Sun Pharmaceuticals, in which we allege the infringement by Sun Pharmaceuticals of our patent related to voclosporin in an ophthalmic solution, remains ongoing. I want to emphasize that we are focused on taking all initiatives to protect and strengthen our IP position as a company, including other patent locations relating to LUPKYNIS that are filed and underway, which, if granted, could add additional patent protection for LUPKYNIS. Before I turn the call over to Joe, I want to remind you that, inclusive of the Otsuka milestone cash receipt received on October 31st, 2022, we now have approximately $400 million in cash on our balance sheet. This means we are well-capitalized, and we have a great drug that we believe will eventually become a profitable franchise. In line with this updated outlook, we intend to prioritize our spending to drive sales of LUPKYNIS and allow the company to further invest in its current and future pipeline. I'd now like to turn the call over to Joe Miller for a more detailed review of our financial results, and then I'll return at the end of the call for a quick recap and to open up to any questions that you might have. Joe?
Joe Miller, CFO
Thank you, Peter, and hello, everyone. As of September 30th, 2022, we had cash, cash equivalents, restricted cash, and investments of $376.6 million compared to $466.1 million at December 31st, 2021. As Peter mentioned, this does not include the cash receipt of the $30 million milestone payment from Otsuka related to the EC approval, recognized as revenue in the third quarter. The company received this payment on October 31st, 2022, bringing cash, cash equivalents, and restricted cash and investments at October 31, 2022, inclusive of the milestone, to approximately $400 million. 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. Total net revenue was $55.8 million compared to $14.7 million for the quarters ended September 30th, 2022, and September 30th, 2021, respectively, an increase of 280% period-over-period. Total net revenue for the nine months ended September 30th, 2022, was $105.6 million compared to $22.2 million for the nine months ended September 30th, 2021. This represents an increase in excess of 375% year-over-year. Revenue growth for both periods is primarily due to the recognition of a $30 million regulatory milestone from Otsuka following the EC approval of LUPKYNIS in September 2022, coupled with an increase in product sales for LUPKYNIS, which was driven predominantly by further penetration in the lupus nephritis market. Total cost of sales and operating expenses for the quarters ended September 30th, 2022, and September 30th, 2021, were $65.3 million and $65 million, respectively. Total cost of sales and operating expense for the nine months ended September 30th, 2022, was $189 million compared to $170.2 million for the nine months ended September 30th, 2021. Cost of sales were $2.4 million and $254,000 for the quarters ended September 30th, 2022, and September 30th, 2021, respectively. Cost of sales were $4.3 million and $610,000 for the nine months ended September 30th, 2022, and 2021. The increase for both periods is primarily due to an increase in product-related revenue, low-margin contribution for collaborative activities with our partner Otsuka, coupled with an increase in our safety stock inventory reserves. Gross margins for the three months ended September 30th, 2022, and September 30th, 2021, were approximately 96% and 98%. Gross margin for the nine months ended September 30th, 2022, and September 30th, 2021, were approximately 96% and 97%, respectively. Selling, general, and administrative, or SG&A expenses, inclusive of our share-based compensations, were $52.2 million compared to $44.6 million for the quarters ended September 30th, 2022, and September 30th, 2021, respectively. SG&A expenses, inclusive of our share-based compensation expense were $148.9 million and $128.8 million for the nine months ended September 30th, 2022, and September 30th, 2021. The increase for the three months ended September 30th, 2022, was primarily due to an increase in professional fees related to corporate legal matters, an increase in travel costs as COVID has normalized, and an increase in sponsorship and programs to support the commercialization of LUPKYNIS. For the nine months ended September 30th, 2022, the increase also included higher salaries, incentive pay, and employee benefits. Non-cash SG&A share-based compensation expense for the quarters ended September 30th, 2022, and September 30th, 2021, were $6.6 million and $6 million, respectively. Non-cash SG&A share-based comp expense for the nine months ended September 30th, 2022, and 2021, were $21.5 million and $19.2 million, respectively. R&D expenses, inclusive of share-based comp expense, were $11 million and $20 million for the three months ended September 30th, 2022, and 2021. For the nine months ended September 30th, 2022, and September 30th, 2021, R&D expenses, inclusive of share-based comp expense, were $35.1 million and $40 million. The primary driver for the decrease for both periods was that in the prior year, the company expensed a $10 million upfront license and accrued milestone obligation related to its AUR 300 program, which was partially offset by additional development expenses related to the AUR 200 and AUR 300 programs for the current year period ending September 30, 2022. Non-cash R&D share-based compensation expense for the quarters ended September 30th, 2022, and September 30th, 2021, was $1.5 million and $1 million, respectively. Non-cash R&D share-based comp expense for the nine months ended September 30th, 2022, and 2021, was $3.5 million and $3.2 million, respectively. Interest income was $1.5 million and $106,000 for the three months ended September 30th, 2022, and September 30th, 2021. Interest income was $2.2 million and $420,000 for the nine months ended September 30th, 2022, and September 30th, 2021, respectively. The increase in both periods is due to higher yields in our investment as a result of increasing interest rates. For the quarters ended September 30th, 2022, Aurinia recorded a net loss of $9 million or $0.06 net loss per common share as compared to a net loss of $50.3 million or $0.39 net loss per common share for the quarter ended September 30th, 2021. For the nine months ended September 30th, 2022, Aurinia recorded a net loss of $82.1 million or $0.58 net loss per common share as compared to a net loss of $147.6 million or $1.15 net loss per common share for the nine months ended September 30th, 2021. With that, I'd like to hand the call back over to Peter for some closing remarks.
Peter Greenleaf, President and CEO
Thanks, Joe. As you heard throughout the call, we faced a number of challenges in the quarter, but we continue to remain optimistic about the overall opportunity. We're focused on delivering LUPKYNIS to patients in need, driving revenues in the US globally, and we continue to operate with a healthy balance sheet, which enables us to execute on our long-term strategy including the advancement of our pipeline programs and the potential for opportunistic business development. We look forward to keeping you updated along the way. I want to thank everyone again for joining us today. We'll now open up the call for any questions. Operator?
Operator, Operator
Thank you. Our first question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question.
Unidentified Analyst, Analyst
Hey, good morning. This is Farzin on for Maury. Your sales expectations are low for the rest of the year and even a modest increase in the 2023 guidance. Can you provide more specifics on the assumptions behind the guidance? And maybe, Scott, I don't know if he's on the line, but any strategic initiatives you can take to basically get to boost traction at the major medical centers and turn things around?
Joe Miller, CFO
Yeah. So let me start with the run rate to end the year and then sort of bridge that into guidance for next year. I think if you look at the PSF number that we've reported through the month of October, that gives you an idea of sort of how we're seeing current trends in terms of patient start forms, which, as I've said previously, I think the best way to think about patient start forms in the quarter is the knock-on effect to the next quarter and beyond. And as you'll see for patient start forms year-to-date, we reported a number through October 31 of this year that shows that we were under 100 patient start forms for the full month of October. Now we have two full months ahead of us, and we are starting to see a pickup on our dailies. But what I can tell you is that, that was a big factor, alongside some of the more macro trends of lower office visits, lower patient diagnoses, and lower urine screens, which led us to more modest growth into 2023. The year-end number is pretty much the die is cast on. We saw the numbers of PSFs all the way through Q2 and Q3. And I think the year-end number is indicative of that. And it's kind of that simple. We've got two more months left of sales to report here in the months of November and December, and we felt we had a good bead on exactly where those months were going to come out, and we felt it was going to fall in the $100 million to $105 million range. In terms of your question on activities we can do in the major medical centers, this is somewhere we've continued to put time intensity against. And what I can tell you is we've looked at everything from a targeted approach with specialized representatives and reimbursement people and medical affairs efforts. I think the sales process in these major medical centers is longer. And as you know, during the entirety of COVID, these major medical centers were locked down and many remain to be fairly locked down in terms of access. But it is a key priority of ours and when we start to see some significant movement in these centers, we will update you accordingly.
Unidentified Analyst, Analyst
Thank you.
Peter Greenleaf, President and CEO
Thank you, operator. Next call.
Operator, Operator
Our next question comes from the line of Ed Arce with H.C. Wainwright. Please proceed with your question.
Ed Arce, Analyst
Hi. Good morning. Thanks for taking my question. Joined a bit late, so I may have missed it, but I just wanted to ask about the driver of the lower PSF, the lower diagnosis, the lower patient visits, you just mentioned. I'm curious really what's driving that because I don't really think COVID is the overwhelming driver at this point, certainly for the third quarter. Just trying to get at what specifically is impacting those relative to, say, the second quarter? And then separately, just wondering about the presidential opinion panel denial. If there's anything you can say about that and the defense filing that you're filing tomorrow and the deadline that was set for that? Thank you.
Peter Greenleaf, President and CEO
All right. So let me try to give you my best articulation of what we're trying to figure out is the driver of these lower diagnoses to COVID. In the first year of the last week, we clearly reported that we were seeing lower office visits and lower rates of diagnosis of lupus nephritis due to COVID. Then we saw some slight recovery, and we're taking this from internal claims data. So we buy planes and the back when we look at those planes and lupus nephritis, and that is what we're driving these numbers from. So we saw some recovery, but then towards the summertime, leading into the summertime — from Q1 to Q2, and then Q2 into Q3, we saw a more steep decline in both diagnosis, urinalysis within those data claims, and renal biopsies. While we don't know concretely, Ed, some of this effect, we think, is just sort of, I don't want to call it summer seasonality, but there is some effect of patients going on vacations, docs going on vacations, office staff going on vacations, because we've seen this now a few years in a row. The last year was the delta — that we believe was the major driver. This year, obviously, we don't see it as a COVID-related issue. But what we do is still clear to see that in the summertime, there is a benefactor to our patient population as it pertains to regularity of their visits and obviously, the platform when they're in there. As we continue to learn more about this, we'll report. But we are, as I said, starting to see a revival in the number of PSFs we're seeing at least the rate of the PSFs that we're observing moving into the end of October and generally in November. So there are some encouraging signs there. And as we continue to track that data in terms of the claims, we have a view of sort of Q3 into Q4 or try to give you a normalized view. But right now, the best answer I can give you is it appears to affect other drugs as well.
Joe Miller, CFO
And then your last question was on the denial of the review as normal. As a normal course of these go, obviously, when the PTAB decided to take up the review, the challenge or the company who's being challenged has the ability to go back to the PTAB and challenge that decision, which just about everybody does. But the success rate on those challenges is actually quite good. And we've been guided by our lawyers to have a low expectation there. It is not a simple response; the full response you will see will go in at the close of business or after market tomorrow.
Unidentified Analyst, Analyst
Okay. Great. One more follow-up, if I may. Just wondering what trends are you seeing recently or currently with persistence on patients existing on therapy?
Joe Miller, CFO
Well, through 12 months, which is probably hard to look at. We reported 6 months, 9 months, or 12 months, 12. So it's clearly an area we want to continue to work on. But when you benchmark that versus other electronic therapies involved in lupus, if you look at Benlysta, as an example, or if you look at other RA therapies that have a rate of 50% at 12 months is actually quite good. I underscore, but we're not settling on that. We have data that shows patients continue to show consistent reduction in their proteinuria out to 3 years. And based on what we know about the guidelines and the data this disease is not one that should be treated sporadically or on a flaring basis. So we're not accepting that number; we have the data to be able to work on persistency, but the answer is 50% at 12 months.
Unidentified Analyst, Analyst
Great. Appreciate it.
Operator, Operator
Our next question comes from the line of Stacey Cook with Cowen Company. Please proceed with your question.
Unidentified Analyst, Analyst
So the first question is a bit of a follow-up on the last one. For 2023 revenue guidance, taking that midpoint of 120 to 140 for next year, and assuming roughly 80,000 per patient for that year, that would imply that you need to capture over 3,000 patients next year with that discontinuation rate of 50%. You're making a lot of broad assumptions, including pricing in these calculations. So can you just help us understand where assumptions might be too conservative or too optimistic, where you might have more conviction and where there might be a little bit more variability? So that's the first question. And then a follow-up. Based on those persistency rates, can you just provide more commentary on the average durability of what kind of use this is being used more in, induction versus maintenance? Just help us understand where that 50% discontinuation rate is coming from? Thank you.
Peter Greenleaf, President and CEO
So let me start with your first question, which centered on how we should be thinking about the $120 million to $140 million guidance. As I said in the call, we're factoring on prescription start forms, yes, persistency, yes, speed to improvement, yes. But I think you could see any one of those metrics do better than the other in order to get to these numbers. Right now, we need to see a significant improvement in our patient start forms for sure. But to say that we need to add 3,000 new patients at $80,000 a year, I think, is probably aggressive. It's based upon how you're individually forecasting all the other parameters. The assumption that we continue to see improvements in getting patients on drug, getting them on drug quicker, and working through the backlog are all in there. In terms of our — what the average net per patient is, as we've said, we think it's probably better to be more conservative towards the $65,000 to $70,000 net per patient per year. Joe, am I missing anything?
Joe Miller, CFO
No, Peter, I think you captured it pretty well.
Peter Greenleaf, President and CEO
And I apologize for asking since you went through several questions there. Can you jump and repeat the questions?
Unidentified Analyst, Analyst
Yeah. So based on that 50% persistency rate, just more commentary around the average durability of LUPKYNIS, where you think this drug is being used more in induction, more in maintenance? Just help us understand that 50% discontinuation rate.
Peter Greenleaf, President and CEO
Well, as we've reported in the past, and I don't think there's a lot of change here. When a patient discontinues drug, we try to — or patients not just discontinue, but over time falls off drug, doesn't take a shipment, decides not to refill a prescription, we have a pretty bespoke patient support and physician support network. So we follow up with the patient and follow up with the physician. What I can tell you is we get a long range of reasons. There’s always and/or patient-driven, and the majority, I would say, are usually patient-driven. And they're across the board, everything from patient lost to follow-up to patients deciding to stop taking the drug, and some patients could not tolerate the drug anymore. It's just a broad, broad range. We're not seeing much from physicians in terms of them telling us that they have a belief that they should stop therapy at 12 months. When a patient's proteinuria gets down to a level at times, some physicians have a tendency to discontinue the drug at 12 months. We have data to support why a patient should not discontinue the drug and why a physician should not discontinue the drug. The guidelines work in our direction here; the AURORA 2 data is in our favor here concerning the results. So we do think we can continue to make headway there as part of our primary messaging. But the reasons for patients coming off the drug on average, 50% after 12 months, are a broad range of reasons.
Unidentified Analyst, Analyst
That’s very helpful. Thank you.
Operator, Operator
Thank you. Our next question comes from the line of Joseph Schwartz with SVB Securities. Please proceed with your question.
Joseph Schwartz, Analyst
Hi, thanks. So you've given us some patient prescription data. And I was wondering if you could give us some insight on how the number of prescribers has been trending. Are you hitting a wall with the prescribing audience and not broadening it as much as you need to? Can you talk about how the prescriber audience has been trending lately? And what is your strategy there?
Peter Greenleaf, President and CEO
Well, the strategy, clearly, as I mentioned, is to go after the high decile. These are the docs that we know have a large number of lupus and a large number of lupus nephritis patients. And within that subset, a large number have already prescribed. But let me give you the total prescriber number to date, through the end of the quarter was about 1,600. And that's all of a fairly large base of rheumatologists and nephrologists. So you should deduce that, although on a semi-diluted basis because our seven to ten are really where our focus is, when you start going down to your one through sixes, you're talking about docs who have very few patients. So your effort gets spread really thin. But we still do think there's opportunity over time to increase our overall prescriber base. If you look at those who have prescribed, only about, I believe, the number is 45% have been repeat trials. 35% of that number had given us trials. So they’ve tried the product, but they have not become repeat prescribers. We think that's a huge opportunity, too, Joe. If we go after those physicians who had experience, had good experience, and getting them to re-prescribe the product. I think your next follow-on question will be, well, if a physician tries our product, why are they not prescribing it again? I think while there are lots of reasons underlying, I think the most prominent one is probably that these physicians gave us one of their tough-to-treat patients right out of the gates, and they need to be more clinically sold over time. So that's why our concentration is against those physicians, and it will remain there. But the total prescriber number is 1,600, with a high concentration on 7 to 10 deciles. Our growth rate in total, as reported last quarter, was 100 new physicians. I'm not sure what it is for this quarter, but we can get back to you on that.
Joseph Schwartz, Analyst
Okay. Thank you. And then I guess, why isn't there more urgency?
Peter Greenleaf, President and CEO
Joe, we're losing you. We can't hear you, understand you.
Joseph Schwartz, Analyst
Okay. Let me try again. So in general, why isn't there more urgency for physicians and patients to treat in general, especially when they have a new tool to do so? And how much control do you have over this phenomenon? It's not a small market. So even if it's decelerating overall, I wonder why you aren't able — still have relatively low market penetration?
Peter Greenleaf, President and CEO
Yes. So we lost you on the end, but I think I got the gist of the question, so I'll repeat it for others on the call. I think the question is centered around why does it appear that there's a low sense of urgency to treat aggressively and to make sure that patients stay on drug over time. It's surprising to me in that all the data that's out there, Joe, and the published data and the guidelines speak to treatment urgency with treatment targets and they're pretty open-ended about time to treat. Again, in the guidelines, they don't talk to treating flaring episodes. They talk to proteinuria treatment targets and then the patient's proteinuria should be maintained. What we're seeing in actual practice, at least in claims data and the qualitative feedback that we have is that there tends to be a desire to treat at very high levels of proteinuria and that, over time, that drug seems to be discontinued. Now, I'm not just talking about our drug. This thing is appearing from both the use of steroids and in MMF as well. They're not keeping patients — it doesn't appear to us they're keeping patients on MMF and steroids over time. The only thing I can compare to is past experience in other markets. When we launched infliximab back in gastroenterology, gastroenterologists did the same thing. They treated with a group of generic drugs. They treated flares, and were not aggressive with the therapies they use. And you evolve to today, and biologics are a mainstay, probably close to first line today, and they keep patients on these drugs over time. It took a long time to develop that market and to get physicians to change their treatment paradigm. And that's what I think we need to do here. There's an element of market development that needs to happen, moving physicians from what has historically been a very generic-driven, not data-driven treatment protocol to one today where you have newly approved medicines operating on data and approvals that need to shift that mindset. And on the patient side, I think it's going to take education to make sure they understand that if this is not treated aggressively, it can lead to kidney failure, higher likelihood of complications, and further morbidity, not just with our drug, but all drugs. So, aggressive treatment and continuity of treatment are critical. My answer is market development is going to take time. How long will it take? And the why? I think our market research shows that there's just a need to break through this physician comfort.
Joseph Schwartz, Analyst
Okay. Thanks for those insights. And maybe if I can ask one more related question about your new marketing campaign. It's clearly designed to be impactful. Why did you design it this way? And why do you think you'll...
Peter Greenleaf, President and CEO
Yes, you're falling out on us again, Joe, let me recap, and you can just yell yes back. But I think you asked why we evolved the campaign to where we have today and maybe why we didn't have that before; I didn't get the back end of the question. But I think what you're driving at is why do we evolve the campaign?
Joseph Schwartz, Analyst
That's essentially it.
Peter Greenleaf, President and CEO
Okay. Well, listen, our data is strong across all patient types first. But our data is extremely strong in subtypes of African-American patients and Hispanic patients. The majority of the patient population is African-American, Hispanic, and female. So I think what we've tried to do in our most recent update of the campaign is to target very much toward the majority of the patient population and to use the most impactful data that we have, which at launch, of course, we didn't have the AURORA 2 data. Coupled with the AURORA 2 data, this message is having strong resonance. We've put a lot of discipline down on utilization of the tools in the offices, consistency of the offices, etc., not to say there wasn’t an emphasis on that at launch, there was, but we're just taking it down to the next level of discipline.
Operator, Operator
Thank you. Our next question comes from the line of Ken Cacciatore with Cowen & Company. Please proceed with your question.
Ken Cacciatore, Analyst
Hey, team. Thanks for taking the second question from Cowen. I wanted to talk about the IPR challenge and the challenge in general from Sun. It strikes us that they don't have much to win here. I know there are two different litigations; you're suing them, they're suing you on LUPKYNIS, and you're suing them on the ophthalmology side. But if they win, if Sun is able to win in this IPR process, they haven't certified Paragraph IV. I don't believe they can until the patent expires in 2027 or comes closer to that. I think they have a few more years before they can certify against any other patent. So what I'm asking and trying to get to is, why is this even happening? Shouldn't kind of business folks be able to reach an agreement that makes sense when there's really not much of a win here? Even if Sun is able to win in the IPR, you also are struggling, obviously, with the size of the product. So can you just help us understand why this is persisting and why we can't come to some reasonable settlement among the parties? Thanks so much.
Peter Greenleaf, President and CEO
I guess, I'll start with — yes, your conclusions are not inaccurate. The product has protection under method of use through the benefits of approval, with the hopeful addition of pediatric extension work we're doing out to 2028. So you think strategically and you say, well, you don't have an end on file. You don't get 180 days first mover advantage. You just notify a patent in a market that you don't necessarily know even what the size is going to be. This doesn't sound like a very good entry strategy or that the filing has anything to do with generic entry. We've said from outset that we think this is retaliatory and that we have ongoing litigation. All I can tell you is, Ken, that we're keeping all options open to ensure that we extend the longevity and the strength of these patents. We're business people. You can sort of see that keeping all options means all options. We do think it's important to get our defense out there in the public domain to counteract the challenges that were presented. So that's somewhat purposeful. But our goal is not different from your conclusion, which is we would like these challenges to achieve resolution. I think Sun is probably in the same place, and we want to give confidence to our employees, our investors, our physicians, and patients that this product has patent protection over the long haul. So agreeing with your strategic questions about the why, I leave you with the message that we're keeping all options open to extend longevity. This Friday's filing is important to get on the record so people see what our primary defense is.
Ken Cacciatore, Analyst
Great. Thanks so much.
Joe Miller, CFO
Thanks, Ken.
Operator, Operator
Thank you. Our next question comes from the line of Justin Kim with Oppenheimer & Company. Please proceed with your question.
Justin Kim, Analyst
Hi. Good morning, and thanks for taking the question. Maybe just one, as we try to understand better this dynamic of finite versus chronic treatment with LUPKYNIS. Just curious if the team plans to give longer-term metrics with persistency as it becomes available. Just wondering, are we going to go down the sort of 15, 18, and 21-month persistency rates in the coming quarters?
Peter Greenleaf, President and CEO
We are incorporating this into our forecasting. We are using all available data, which we have openly shared. I hope investors recognize our transparency, possibly more so than in other situations regarding the metrics we are focusing on. We have no reluctance to report data from 18 months or further out, but since the product has only been on the market for 18 months, we rely on other analogous products. Lupus nephritis is distinct, and we consider BENLYSTA and products in the rheumatoid arthritis space, along with MS and other chronic diseases that require immediate treatment. Our benchmarks indicate that a 50% persistency rate at 12 months is actually impressive. Current data and guidelines seem insufficient, and we will report more when we have it.
Justin Kim, Analyst
Okay. Great. Thanks so much.
Operator, Operator
Thank you. Our next question comes from the line of Sahil Dhingra with RBC Capital Markets. Please proceed with your question.
Sahil Dhingra, Analyst
Hi. Good morning. Thank you for taking my questions. This is Sahil for Doug Miehm. I had one question on the October PSF. So I think the monthly rate run rate for Q4 is currently $113 million versus $125 million for Q3. I understand there were some seasonality in Q3, but why is October PSF run rate running below the monthly run rate of Q3? And then my follow-up question is for the guidance for next year, what kind of PSF run rate are you building to achieve that $120 million to $140 million?
Peter Greenleaf, President and CEO
Well, we've not – so I'll answer the last question first. We've not actually given guidance on forward-looking PSFs. Because there’s variability in the quarter, right? You can see our financials came through, maybe not where we wanted them, but they were carried through in a way where persistency and speed to getting patients on drug, the backlog of the drug, and conversions drove and a lot more than in the quarter did PSFs. Given the PSF projected forward, I think would give us a full sense of accuracy because you have one fall-off on the other; you might not make a quarter. So, all things have to work in harmony. Your question on October, I think, is while I can give you answers that go backward and look at coming off the summer, I can tell you that — and we didn't report on this in the call because of today; I don't want to just run through a list of excuses. We are seeing the trend move upwards in the recent weeks. But don't forget that our highest-performing region out there in the country is the Southeast region. Florida gives us a measurable number, call it, mid to high single digits per week of PSFs, and the state of Florida has been pretty shut down because of Hurricane Ian. I think that could be one factor that's there. The recurring coming back online numbers are leading me to believe that we're powering through that. So, that's the only thing I can say that specifically could have impacted October.
Sahil Dhingra, Analyst
Okay. Thank you. Can you please remind me of the milestone payments that are expected?
Peter Greenleaf, President and CEO
Can you repeat the question?
Sahil Dhingra, Analyst
Can you please remind me again on the milestone payments? I think there's one for Japan and other European countries that was mentioned earlier in the prepared remarks?
Peter Greenleaf, President and CEO
Yes. Upon approval, we just received a $30 million milestone on approval and met with the European Commission. That's received and backed in the quarter. The net would be when we get three major countries out of the five top European countries, with approval and pricing reimbursement. That's another $10 million. Then there's a $10 million approval milestone in Japan. Coupled with that, we estimate that you're somewhere in the 24-time period for that approval. We have to file there in Japan and get approval. The cost-plus manufacturing arrangement, and we anticipate a royalty rate that we believe in those markets as well.
Sahil Dhingra, Analyst
Sorry. Just one follow-up. What's the timeline for the European $10 million?
Peter Greenleaf, President and CEO
It's very dependent on country-specific. So we've not given guidance on that.
Sahil Dhingra, Analyst
Okay. Thank you.
Operator, Operator
Thank you. Our next question comes from the line of David Martin with Bloom Burton. Please proceed with your question.
David Martin, Analyst
Thanks for taking my questions. The docs I've talked to tend to say that, if a patient's nephrotic, they'll choose LUPKYNIS; if the patient is fatigued, they'll choose BENLYSTA. I'm wondering if that's how you see it shaking out as well? And what proportion of these lupus nephritis patients are nephritic, and which ones are fatigued?
Peter Greenleaf, President and CEO
Well, to answer the question directly, if a patient has fatigue, they have lupus; if patients show persistent proteinuria, they have lupus nephritis. So I'm not surprised by that answer. I don't know that I have the most recent view on how docs are selecting one versus the other. I can tell you that — and you can look and ask the folks that GSK about this — they're positioning the product as a lupus product, and they're talking about kidney health in the lupus patients. So, the goal is to get patients before they ever become patients with lupus nephritis. We're positioning the product where we're indicated for lupus nephritis. I don't have any specific data on whether we're getting the higher proteinuria patients than other competitors. I can say that physicians seem to go to MMF and steroids or they don’t ever so to either product. So the opportunity we have ahead of us is to start to get in front of just those patients that have already seen a course of MMF and steroids.
David Martin, Analyst
Okay. Next question is how much competition or how much sales do you see going to other calcineurin inhibitors? And how important is it to emphasize the lower nephrotoxicity with LUPKYNIS? And can you really do that before you get the biopsy results from AURORA? And when should we expect those results?
Peter Greenleaf, President and CEO
Well, the only data that we have to date is very strong data since we're the only ones who've reported data out this long is the data to look at kidney function as it relates to eGFR out to three years from the AURORA 1 into the AURORA 2 extension study, which shows no degradation in terms of kidney function at least as measured by eGFR. Do we think — in patients based on this fear of nephrotoxicity? I don't see it in the data market research we have right now. There seems to be a group of physicians, nephrologists, primarily who have a strong opinion about calcineurin inhibitors, but they're a small percentage, and the overall utilization of calcineurin inhibitors supporting the hard data, that being cyclosporine intact is actually quite low, less than 10% of overall lupus nephritis patients. While I think we compete there to a degree because we're part of our class, if we're only growing now, and competing there, that's a small market opportunity. So we need to think and look bigger. Your question on the data for the biopsy data, remember, we had a slow study from the original AURORA study of a very small subset of patients that we actually did do, I believe, serial biopsies on and then those biopsies were reviewed by a central lab and outsourced central lab, so two caveats, David, super small from what I understand and I still do not know what their readout time period is. I know the central lab continues to work on this, and they're looking at the pathology work.
David Martin, Analyst
Got it. Got it. One last quick question. When patients discontinue, does the proteinuria rebound rapidly or does it pretty much stay where it is, maybe rebounding slowly?
Peter Greenleaf, President and CEO
Data-driven answer from our studies because I don't think we tracked it. And I would hesitate to give you because I'm not a practicing clinician, what I see in practice. All I can tell you is we don't track it. But we do know from claims data we have is that they do cycle. It's just very variable. If they do flare again, they get retreated.
David Martin, Analyst
Okay. Thanks.
Peter Greenleaf, President and CEO
Thanks, David.
Operator, Operator
Thank you. Our final question this morning is a follow-up from the line of Maury Raycroft with Jefferies. Please proceed with your question.
Maury Raycroft, Analyst
Thank you for taking a question again. So you talked about the two patents, additional patents around, since to build defense around the LUPKYNIS. Can you be more specific on what those patents are related to? And when do you — when should we expect those to be granted?
Peter Greenleaf, President and CEO
The two patents on file, I believe, have an April action date, or at least one of them has an April action date — they're ongoing. They center around two major areas. One is modifications and addition of new data and adjustments to the 036 patent. So think about that as an evolution of the 036 patent. As a matter of fact, I think that patent addresses many of the challenges that are centered around the Sun challenge, while we think there's a lot of invalidity to them, new data and further enhancement could be beneficial. The second is our new data claims, which I can't really get into here, but the patent issues, we'll be more than happy to talk about.
Maury Raycroft, Analyst
Okay. Thanks.
Operator, Operator
Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Greenleaf for any final comments.
Peter Greenleaf, President and CEO
I want to thank everyone for joining us this morning. We appreciate your time and your support, and we look forward to reporting back to you as we continue to progress through the launch over the next couple of months and quarters. Thank you very much.
Operator, Operator
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.