Earnings Call Transcript - AUPH Q4 2024

Operator, Operator

Greetings, and welcome to the Aurinia Pharmaceuticals Fourth Quarter and Full-Year 2024 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, Andrea Christopher, Head of Corporate Communications and Investor Relations for Aurinia. Thank you. You may begin.

Andrea Christopher, Head of Corporate Communications and Investor Relations

Thank you, operator, and thank you to everyone for joining today's call and webcast. Joining me on the call this morning are Peter Greenleaf, Aurinia's President and Chief Executive Officer; Joe Miller, Aurinia's Chief Financial Officer; and Dr. Greg Keenan, Aurinia's Chief Medical Officer. Today, we will review and discuss Aurinia's fourth quarter and full-year 2024 financial results and provide an update on recent corporate progress, as communicated in the Company's press release and annual report on Form 10-K issued this morning. For more information, please refer to Aurinia's filings with the U.S. Securities and Exchange Commission and Canadian securities authorities, which are also available on Aurinia's website at auriniapharma.com. During today's 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 business, please refer to the disclosures in Aurinia's press release, Annual Report on Form 10-K and all other 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, February 27, 2025 unless otherwise noted and are based upon information currently available to us. 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?

Peter Greenleaf, President and CEO

Thanks, Andrea, and good morning, everyone. I want to thank you all for joining us on today's call. On this morning's call, I'll provide an update on our fourth quarter and full year 2024 results and provide an update on our recent progress. I'll then turn the call over to Joe Miller, our CFO, to provide additional details on our financial results. With the continued focus on commercial execution and operational efficiency, we achieved significant growth in total revenue and record-setting net product sales in the fourth quarter of 2024. For the fourth quarter of 2024, total revenue was $59.9 million, up 33% from $45.1 million in the same period of 2023. For the full-year 2024, total revenue was $235.1 million, up 34% from $175.5 million in 2023. For the fourth quarter of 2024, net product sales of LUPKYNIS, the first FDA-approved oral therapy for the treatment of adult patients with active LN, were $57.6 million, up 36% compared to $42.3 million in the same period of 2023. For the full-year of 2024, net product sales were $216.2 million, up 36% from $158.5 million in 2023. The increase in both periods is primarily due to an increase in the number of LUPKYNIS cartons sold to specialty pharmacies driven by further LN market penetration. For the three months ended December 31, 2024, cash flow generated from operations was $30.1 million, compared to $14.3 million in the same period of 2023. For the year ended December 31, 2024, cash flow generated from operations was $44.4 million, compared to cash flow used in operations of $33.5 million in 2023. Following last year's strategic restructuring, we are pleased with how our cash flow improved throughout 2024. Exiting the year, we have cash, cash equivalents, restricted cash and investments of $358.5 million as of December 31, 2024. As we are now into our fifth year on the market, we believe that our historical financial results provide sufficient insight into the health of our business to project forward-looking results. Therefore, we're not providing specific patient level metrics. With our strong 36% sales growth for LUPKYNIS in 2024, we are poised for continued success and have a commercial strategy that is focused on four key growth drivers. First, we've sharpened our focus on expanding our base of business at academic medical centers and lupus centers. We've also targeted key rheumatology prescriber segments and identified key lupus nephritis patient types. This includes newly diagnosed patients, patients who are only on MMF and steroids, patients receiving treatment, but not achieving treatment potential targets, and the potential for LUPKYNIS restarts. Second, we expect the new ACR lupus nephritis treatment guidelines to help drive positive momentum for LUPKYNIS this year, and we're continuing to create a treat-to-target mindset among rheumatologists that drives the overall treatment urgency to screen and treat lupus nephritis more aggressively. Third, we continue to reinforce the impressive three-year efficacy data and safety data from our AURORA clinical program to clinically differentiate LUPKYNIS and position it earlier in the treatment paradigm. Lastly, we're focused on improving continuity of care for lupus nephritis patients by growing our hospital business and keeping patients on therapy for longer periods of time. We're very pleased to start 2025 in a solid position with a highly efficient organization focused on LUPKYNIS growth, and therefore, expect total revenue for 2025 in the range of $250 million to $260 million and net product sales in the range of $240 million to $250 million for 2025. Finally, we are also continuing to advance the development of our pipeline product AUR200, a potentially best-in-class dual BAFF APRIL inhibitor for the potential treatment of a range of autoimmune diseases. We initiated a Phase 1 study last September and expect to report out initial results from this study in the second quarter of 2025. I'd now like to turn the call over to Joe Miller, our CFO, for a more detailed review of the fourth quarter and full-year financial results. I'll then return to end the call for a quick wrap-up and open up the line to any questions you might have. Joe?

Joe Miller, CFO

Thank you, Peter, and good morning, everyone. Let's take a few minutes to discuss the fourth quarter and full-year 2024 financial results. For the three months ended December 31, 2024, total revenue was $59.9 million, compared to $45.1 million for the same period of 2023. For the year ended December 31, 2024, total revenue was $235.1 million, compared to $175.5 million in 2023. As Peter mentioned, we had cash, cash equivalents, restricted cash and investments of $358.5 million as of December 31, 2024 and generated cash flows from operations of $44.4 million. We continue to be opportunistic with our share repurchase program and expect to fund any future discretionary share repurchases with cash flows from operations and cash currently on hand. As of February 25, 2025, the Company has repurchased approximately 9.7 million of its common shares for approximately $70 million since the launch of the program in the first quarter of 2024. For the three months ended December 31, 2024, cost of revenue was $5.6 million, compared to $5.4 million in the same period of 2023. For the year ended December 31, 2024, cost of revenue was $28.2 million compared to $14.1 million in 2023. The increase for the full year is primarily due to the amortization of the finance right-of-use lease asset recognized in connection with the Monoplant, which was placed into service in late 2023, and therefore, only partially impacted by prior year cost of revenue. For the three months ended December 31, 2024, gross margin was 91%, compared to 88% in the same period of 2023. For the year ended December 31, 2024, gross margin was 88%, compared to 92% in 2023. For the three months ended December 31, 2024, total operating expenses were $61.5 million, compared to $74.8 million in the same period of 2023. For the year ended December 31, 2022, total operating expenses were $239.8 million, compared to $267.2 million in 2023. The decrease in both periods is primarily due to lower personnel costs, including share-based compensation and overhead costs as a result of our strategic restructuring efforts in 2024, coupled with a reduction in non-personnel R&D expenses as a result of ceasing development of the Company's AUR300 development program. These savings in both periods are partially offset by one-time termination benefits, contract terminations and other costs associated with our strategic restructuring efforts undertaken throughout 2024. For the three months ended December 31, 2024, net income was $1.4 million or $0.01 of earnings per share compared to net loss of $26.9 million or $0.19 of net loss per share in the same period of 2023. For the year ended December 31, 2024, net income was $5.8 million or $0.04 of earnings per share compared to a net loss of $78 million or $0.54 of net loss per share in 2023. With that, I'd like to hand the call back over to Peter for some closing remarks. Peter?

Peter Greenleaf, President and CEO

Thanks, Joe. In summary, implementing a highly focused industry-leading operational strategy has allowed us to lean further into the highest growth drivers for the commercial LUPKYNIS business, accelerate clinical development of AUR200 and further strengthen our balance sheet. We now have more flexibility to engage in activities that can strategically enhance our business. I want to thank you all for your time today. We'll now open the lines for any questions. Operator?

Operator, Operator

Thank you. We'll now be conducting a question-and-answer session. Our first question is from Stacy Ku with TD Cowen. Please proceed with your question.

Vishwesh Shah, Analyst

Hi, good morning. This is Vish standing in for Stacy, and congratulations on the year. Thank you for taking our questions. We have a couple. Thank you for discussing your key growth drivers. Looking ahead to 2025, could you provide more details on how you are maximizing the opportunity for LUPKYNIS with the current sales force, especially in light of the recent addition to the ACR guidelines? It would be helpful to hear more about the prescriber segments as well. Additionally, regarding the AUR200 asset, we're eager for the Q2 read-out. Can you remind us what data we can expect and what insights we might gain from it? Thank you very much.

Peter Greenleaf, President and CEO

Thank you for the questions. Let me start with the first one, and I might ask Greg to add to my response if necessary. Regarding maximizing the opportunity for LUPKYNIS after our restructuring, we have four key areas of focus, and I'll highlight two of them. First, we're concentrating on rheumatology. It's important to note that lupus nephritis patients are those with systemic lupus erythematosus who experience worsening outcomes. They initially see primary care physicians, but once diagnosed, they are referred to rheumatologists. Our aim is to align with the ACR guidelines for disease treatment and diagnosis; thus, the initial diagnosis and treatment should be handled proactively by rheumatologists. Following our restructuring, we prioritized engaging with high-prescribing offices that specialize in SLE and LN, which we identified using patient charts analyzed in a blinded manner. Focus on high-prescribing rheumatology offices is critical. The guidelines you mentioned are also vital due to the under-diagnosis and under-treatment of the condition. Additionally, we've allocated resources to the hospital segment because major medical centers with lupus clinics play a crucial role in capturing patients early if they have elevated protein levels. These are just a few examples of how we have streamlined our resources and directed them toward key segments that are essential. As for your second question about AUR200, we look forward to providing insight from our ongoing single-ascending dose trial, which we expect to report at the end of the second quarter this year. You can expect results on normal pharmacodynamics and pharmacokinetics. In the APRIL BAFF area, we anticipate discussing significant markers like IgG, IgA, and IgM. This data will be crucial for determining the dosing strategy for the MAD study and the overall structure of that study as we progress from the SAD phase. Did I cover everything, Greg?

Greg Keenan, Chief Medical Officer

No.

Peter Greenleaf, President and CEO

Thank you. Next question?

Operator, Operator

Our next question is from Olivia Brayer with Cantor Fitzgerald.

Olivia Brayer, Analyst

Hi. Good morning. Thank you for the questions. How are you all thinking about LUPKYNIS growth beyond 2025? It looks like you're guiding to about 13% this year at the midpoint. So, is low-double-digits the right way to think about growth rate these next few years? And then, on AUR200, will you guys actually be disclosing the dose for the MAD portion and indication selection in that second quarter update? And is there anything you can tell us at this point about half-life and potential dose frequency for your candidate? Thank you, guys.

Peter Greenleaf, President and CEO

Thanks, Olivia. So, we haven't historically and don't intend to today give long-term guidance on LUPKYNIS, but you can see what we've centered our metrics upon. This product has been on the market now for four, going into its fifth year, and we think those historical trends are the best way to think about the product on a go-forward basis. Hopefully, that's helpful. On AUR200 and the SAD data, I'll just hold back on saying what we will or won't disclose, because we need to see the data first. As we move into the MAD study, it would probably be good and there would be an expectation that we will provide some steer as to how we're going to conduct the MAD. I would just ask that we get the SAD data first and see what it shows us. I think it'll provide strong context for what we think we have versus others that are also developing in the space. The next natural question is how does that inform the MAD study, which we're just a few months away from. So, I look forward to having that conversation.

Olivia Brayer, Analyst

Okay. Understood. Thanks, Peter. What about in terms of timelines? Obviously, I know we have to see the SAD data first. But in terms of next steps and timelines for that MAD portion of the study, can you put any kind of numbers or timelines around that?

Peter Greenleaf, President and CEO

Yeah. I guess I would go back to what I just said. Let us get the SAD data first and then we'll tell you what we intend to do in the MAD, and that will inform how long that's going to take and what our projections are to completion of that. So, more to come.

Olivia Brayer, Analyst

Okay. Understood. Looking forward to it. Thank you, guys.

Peter Greenleaf, President and CEO

Thanks, Olivia.

Operator, Operator

Our next question is from Farzin Haque with Jefferies.

Farzin Haque, Analyst

Hi. This is Farzin representing Maury. Thank you for addressing our questions. I have two inquiries. First, regarding the guidance, you've provided a range of $240 million to $250 million, which appears to be somewhat conservative based on the fourth-quarter run rate. What insights do you have from the first two months of this year that shape your commercial outlook for 2025? Second, concerning exclusivity, LUPKYNIS has Orange Book exclusivity until January 26, if I'm correct. As anticipated, Lotus filed an NDA earlier this month. Can you discuss your strategy in that regard? Is your base case still that the earliest a generic could enter the market is in the first half of 2028?

Peter Greenleaf, President and CEO

Yes. Let me start on the first question, which was our guidance range and what have we seen early in the year. I think our guidance range is, as we said on the call, very much driven by what we know now after being in our fifth year on the market. We are looking very closely at our historical financial results and using that to project forward where we see the year. As you may see, the low end of that projection is flattish to slightly up versus where we were in Q4. The higher end of that range obviously gets us into a higher growth category. So, we feel good about the numbers across the board. Do we think they're conservative? No, we think they're based on what we're seeing in the marketplace today. On your second question, I think your point was there was a little bit of a reiteration of some dates and times in the mid-portion of 2028, I think we can reaffirm. But I do want to just confirm for folks that we're aware of it. Obviously, we've been aware that ANDA filings will begin this year. We have a robust patent portfolio covering LUPKYNIS for its unique chemical entity and also the unique dosing paradigm, which could take us all the way out to 2037, as any company would, and we fully intend to do. We will vigorously defend LUPKYNIS and our intellectual property rights protecting the product. More to come as things continue to evolve here, but nothing has changed in terms of the dates and times, Farzin. Thank you for the question.

Farzin Haque, Analyst

Thanks.

Operator, Operator

Thanks. Our next question is from Joseph Schwartz with Leerink Partners.

Will Soghikian, Analyst

Hey, all. This is Will for Joe today. Thanks for taking our question, and congrats on the progress this quarter. So, just two from us. I guess, first, could we just go back and talk a little bit more about your decision to no longer report PSS for the final quarter in 2024? I guess, we're just trying to understand why you might make that switch in the middle of the year rather than something as you move forward in 2025? How should we be thinking about a trajectory to launch without metrics like this? And then, one on AUR200. Given it has a lower KD, IC50 as compared to other anti-APRIL assets, is it fair to assume that the higher potency should allow for a lower or less frequent dose? When looking at the NHP data, it looks like dosing was once weekly, which is in line with other assets. Can you help us understand this dynamic and the potential differentiation here versus other therapies in development? Thank you.

Peter Greenleaf, President and CEO

I'll start with the first question, and then I'll ask Greg to jump in. We want to be clear on what we've reported, not necessarily what's speculative. As we said on the call, we're now five years into this or into our fifth year on the market. We believe confidently that our historical financial results provide enough insight, sufficient insight into the health of our business to project it on a forward basis. We're excited to have grown the product more than 35% this year in 2024. We're guiding LUPKYNIS revenues this year at $240 million to $250 million, and on a total Company basis, $250 million to $260 million. We made the decision at year end because we thought it was the best time. I think you mentioned mid-year. We believe that doing it now was the best time to do it. We look forward to reporting out on the key commercial strategy areas that I mentioned on the call and previously mentioned in the previous questions. Greg, do you want to take the next one?

Greg Keenan, Chief Medical Officer

Sure. You were referencing information that had been reported or presented at the American College of Rheumatology Meeting 2022, and what you alluded to was the fact that AUR200 in the preclinical models we've conducted has shown a lower KD and lower IC50. Lower means resulting in equivalent impact with lower amounts of compound, just like you alluded to. We think that the potency of AUR200 with the work we've done thus far preclinically is very attractive with regard to the amount of compound you need and perhaps the frequency with which you'd need to give the drug, that is, less milligram per milligram basis and perhaps less frequent dosing. Of course, we're conducting the single-ascending dose study right now, and as discussed earlier, we will learn exactly what the appropriate dosing frequency will be for selected diseases later on. Thanks for the question. Good information at this point, and we're ready to move forward.

Operator, Operator

Our next question is from Ed Arce with H.C. Wainwright.

Ed Arce, Analyst

Hey, guys. Thanks for taking my questions. Two for me. Firstly, just wanted to ask again on the ACR treatment guidelines, as you mentioned, one of the key drivers for continuing growth. I wanted to get your perspectives on prescriber perspectives and ultimately their script writing and uptake of LUPKYNIS, especially since historically, script writing from rheumatologists has been a bit more difficult to penetrate than nephrologists. Secondly, with regard to AUR200, just wondering if you could help us understand. Excuse me. As you think about the timeline coming out of the SAD and then later this year into the MAD studies, what's the longer-term timeline look like as you think about ultimately selecting an initial indication and moving into an early Phase 2? Thank you.

Peter Greenleaf, President and CEO

Thanks for the question, Ed. On the ACR treatment guidelines, to oversimplify for folks on the call, the two biggest areas, and there really are three that we see as being hugely beneficial for the market, treatment, patients, and physicians. One is early diagnosis and treat-to-target guidelines. Essentially, conduct proteinuria screens on every patient that has SLE when they enter the rheumatologist's office. That doesn't happen today. Second, when they reach target levels UPCR, they need to be treated. We know today that only about 30% of those patients even receive treatment when they hit those target levels. Huge opportunity. Lastly, regardless of the product they are on, they need to be kept on that product for up to three to five years because we know that patients have to be restarted on the product. These three aspects are benefits to patients with LN, the overall market, and of course, our product. As for the behaviors, greater than 50% of our prescriptions today come from rheumatologists, and that number is slowly growing. We have not seen massive change, at least in the macro data that we have in terms of earlier diagnoses yet, but we recognize that the ACR guidelines only came out in November. So, I think there's plenty of time ahead where these guidelines, along with the EULAR and KDIGO guidelines, will be very positive for the LN market going forward and our product. We will look forward to reporting numbers on the market as we go forward, but that's the high level. We're seeing some impact, and we look forward to seeing more impact on actual treatment and diagnosis behaviors moving forward. Regarding the timeline for AUR200, once we finish the SAD and move into the MAD, I would say we will articulate our approach to the multi-dose study and whether we give guidance on longer-term timelines will largely depend on what we see in the SAD. It won't be long now; we will look at those dynamics and use that information to make informed decisions regarding the MAD study. So, more to come. Thank you for the questions, Ed.

Operator, Operator

Thank you. This concludes our question-and-answer session. I would like to hand the floor back over to Peter Greenleaf for any closing comments.

Peter Greenleaf, President and CEO

I want to thank you all for joining us today. We look forward to a strong 2025, and we'll keep you updated along the way. Have a great day, folks.

Operator, Operator

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