Q1 2023 Aurinia Pharmaceuticals Inc Earnings Call
It had an audience of nearly 550 million people over 30 over 30 online articles and television appearance appearances that reach our target audience.
This outreach has generated pull through engagement on social media.
Which is of course to get uncomfortable web site and has created 20000 website visits in just three days.
Moving now to intellectual property I would like to briefly highlight our recent progress to further strengthen our lipkind as patent position.
The U S patent office issued a new method of use patent patent number 99, 1%, reflecting the unique and proprietary dosing regimen and further refines the method of use of using <unk> in combination with MMF and corticosteroids using egfr as a method of <unk>.
Our market dynamically dosing the product in patients with lupus nephritis from the dosing used in both the Aurora, one and the Aurora extension trial.
This patent has the potential to provide an additional layer of patent protection for loop kindness up to 2037.
We're currently working to list this newly issued patent in the Orange book.
Closing out with our globalization effort for loop kindness, our partnership with US Sukkah has resulted in significant launch momentum outside the U S. This year.
As announced yesterday nice the uk's governing body for value based healthcare issued a recommendation that <unk> can be used in combination with MMF to treat patients with lupus nephritis.
The UK agency, just issued their reimbursement guidance and Luke <unk> will be soon available across the entire United Kingdom.
And as a reminder, upon pricing and reimbursement approval in three of the five major EU countries. The company would be eligible for an additional $10 million milestone.
In Japan, we currently are working towards a <unk> submission in the second half of 2023.
We anticipate approval the second half of 2024.
The combination of these European market approvals and our pending Japanese submission further support our globalization efforts for <unk>.
So I'd now like to turn the call over to Joe for a more detailed review of our financial results. I will then return at the end of the call for a quick recap and open up the line for any questions that you might have Joe.
Thank you Peter and good morning, everyone as of March 31, 2023, we had cash cash equivalents restricted cash and short term investments of $361 5 million compared to $389 4 million at December 31, 2022, the decrease in cash cash equivalents restrict.
Cash and investments is primarily related to the continued investment in commercially commercialization activities and post approval commitments of our approved drug with kindness inventory purchases and advancement of our pipeline, partially offset by an increase in cash receipts from sales of loose guidance. 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 are supporting commercial infrastructure advancing our research and development programs and funding our working capital obligations for at least the next few years.
Now, let's take a few minutes and go into detail regarding our financial results for the first quarter of 2023.
Total net revenue increased 59% to $34 4 million for the first quarter compared to the prior year period. The increase was primarily due to an increase in net product revenue from our two main customers for the kindness driven predominantly by further penetration in the <unk> market as evidenced by increase in patients on therapy year over year.
Net realizable revenue per patient for the tightness remains higher than our initial guidance of 65000 per patient per year on a quarter basis.
But as we discussed previously we expect net realizable revenue per patient to continue approaching this figure on an annualized basis as more patients go on and stay on therapy over time, and as persistency dosing and payer mix evolve.
Every quarter since the initial launch this number is range closer and closer to our annualized estimate as we've said in the past the biggest driver of this estimate as our dose adjusting and persistency.
Total cost of sales and operating expenses for the first quarters of 2023, and 2022 were $64 million and $59 $5 million respectively. Let.
Let me now give a further breakdown of operating expenses drivers and fluctuations.
Cost of sales was $421000.
256000 for the first quarters of 2023, and 2022, respectively. The increase was primarily due to an increase in product related revenue as gross margin for the first quarters of 2023, and 2022 was approximately 99% for both periods.
Selling general and administrative expenses inclusive of share based compensation were $50 1 million and $45 2 million for the first quarters of 2023 and 2022, respectively.
The primary drivers for the increase in SG&A expense for the three months ended March 31, 2023 as compared to the same period ended March 31, 2022 were an increase in professional fees and services related to marketing and pharmacovigilance noncash share based compensation expense and travel and related costs.
Noncash SG&A share based compensation expense was $7 6 million and $6 million for the first quarters of 2023 and 2022, respectively.
Research and development expenses inclusive of noncash share based compensation were $13 2 million and $12 6 million for the first quarters of 2023 and 2022. The primary drivers for the increase were due to an increase in salaries employee benefits and share based compensation expense to further the advancement of EUR 200.
AUR 300, and the post approval FDA commitments for tightness. The increase was partially offset by a decrease in contract research organization costs related to the completion of the Aurora two continuation study in 2022.
Noncash R&D share based compensation expense was $1 6 million and $1 million for the first quarters of 2023 and 2022, respectively.
Interest income was $3 8 million for the first quarter ended March 31, 2023 versus 262000 for the prior year period. The increase was mainly due to higher yields on our investment a result of rising interest rates.
For the first quarter of 2023 Arena recorded a net loss of $26 2 million or 18 net loss per common share compared to a net loss of $37 6 million or 27 net loss per common share for the prior year first quarter.
Before turning the call back to Peter for some closing comments I'd like to update you on a corporate initiative. We recently undertook I am pleased to share that arena recently published its first ESG report, which highlights the companys performance and provides baseline figures within their ESG priorities, such as energy and emissions supply chain management patient.
Access and affordability community engagement talent management, and retention employee engagement diversity equity and inclusion and business ethics. Among other topics to learn more about <unk> approach to ESG and our priority topics. Please look within the IR section of our corporate website with that I'd like to hand.
The call back over to Peter for some closing remarks Peter.
Thanks, Joe as you heard throughout the call. We're obviously excited about our strong results for the first quarter hitting many all time highs across the business.
We remain focused on delivering Luke <unk> to patients in need and driving results in the U S and globally.
We look forward to keeping you posted along the way.
I want to thank everyone again for joining us on the call today, we will now open the call for any questions you might have.
Operator.
Thank you ladies and gentlemen.
Floor is now open for questions and we do have a question. Please press star one on your telephone keypad at this time.
Using a speaker phone, we ask that while posing a question you pick up your handset to provide favorable found quality once again, ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone keypad at this time, please hold as we poll for questions.
And we will take our first question from Olivia Brayer from Cantor Fitzgerald. Please go ahead Olivia.
Hey, good morning, Thank you for the questions and congrats on a nice print.
Where are you guys seeing the biggest commercial tailwind so far this year in the U S and just trying to get a better sense for where growth acceleration is coming from whether it's positive impact from the pre op requirement changes or if you are starting to see some new prescribers coming online and then can you guys address the recent letter that came out from MK T capital have you actually.
Had any prior contact with them and any other comments around the letter or a strategic review process more broadly thanks guys.
Thanks, Olivia and let me start with the commercial question first I think as.
As we said in the call.
Today's results I think show our strategy is delivering results positioning us to further unlock significant value for shareholders near term and long term and our board has played an integral role in the current momentum. We're seeing so we are disappointed that mkt's seems to be ignoring these facts and launching a distracting campaign the Shah.
To be clear and sort of roundness out the board is open to any value enhancing opportunities because most would know just by looking at the backgrounds of our directors seven out of the eight directors have M&A experienced in several of the members of our board and our management.
Had been involved in companies that have been acquired during their tenures and successful value, creating transactions bored and I will continue to focus on creating value for all shareholders. So we won't be commenting further on our interactions with this investor during the call, but I. Thank you for the question.
Excellent. Thank you and we will take our next question from <unk> from Caffrey. Please go ahead Maury.
Hi, Good morning. This is financing on for Murray. Thanks, Okay anything on the empty capital.
Issue.
Eschewing the guidance.
And then so the 2023 draft question.
Go guidelines, we thought that and with the auto or a lot and two data out there, but then the loop kindness risk benefit profile of this group that illegal cni's as a class.
So I wanted to clarify whether the guidance will remain as east orange to anything in the works deflected at drifts based on the lip kindness is differentiated data profile.
Yeah. So as you know these these guidelines and the ones reference of the <unk> guidelines, but there are also guidelines that are driven by the ACR and.
By ASN and other large.
They should practice bodies out there governing bodies and nephrology and rheumatology Yeah. I think these first past guidelines or something we continue to work work on I don't think they take the totality of our evidence into account.
I understand that these guidelines take <unk>.
And we have the data to be able to sell against a position that puts us.
Because of the nature of how they do guidelines as totality of our evidence sits out there wasn't probably wasn't in there we have some work to do.
Makes sense.
It's a good question and I would say.
There is not a majority of patients today that have seen b cell therapy first.
Majority of our patients I think I've seen a course of MMF steroids and.
Our goal is to get those.
Those patients treated with kindness in combination with low dose steroids and MMF as in earlier treatment and the treatment cycle I do believe as more b cell therapies become available for the treatment of lupus not lupus nephritis that we will experience more patients that will have experienced b cell therapy.
First but I want to underscore that these patients are being treated by progressive b cell therapy in the treatment of lupus. So it's not a competitive positioning for nephritis before us, but <unk> <unk> and <unk> products that are obviously approved for the treatment of lupus and we see it as a positive.
More patients are treated with newly approved therapies for the treatment of lupus and then when they get lupus nephritis. They consider more aggressive therapies like ours that lower proteinuria much more rapidly and of course sustained over time, so we would assume that over time pace.
Patients, having seen b cell therapies will be a natural course of just progression of new therapies in the marketplace for lupus.
Thank you so much.
Thank you and our next question and consciousness Stacy queue from TB Cowan. Please go ahead Stacey.
Hi, there thanks for taking our questions and congratulations on the strong performance.
First question is actually on.
Their patents the different at potential moats. In addition to your at 036 and 991 patent regarding the composition is matter that you have for the pennies can you provide an update regarding timing our progress on the patent term extension, we understand that we have an entrance patent kinda makes sense.
October of 2023 at any additional updates would be appreciated and then on yeah, three six and nine and one can you just follow up on the different subtleties.
And the importance so what did the examiners find surprising so that's that's the first question and then the second is gonna be on the 2023 quarterly trajectory as a follow up.
He did mention potential seasonality is implied in your guidance that as the exit the seasonal coupon dynamics, what basic assumptions that we have should we expect steady grass quarter over quarter.
Through the approval of the product and of course any.
Let's call at the end of 2007 couple months into 2028 right.
We have to file for that patent term extension every year. So it is somewhat of a formality. It's a good question, but but we do it annually and we can't predict when the exact response comes in but.
If you feel comfortable that these are actual accident benefits that we get that patent term extension each year once filed.
I don't want to call it a formality, but to some degree it's a formality.
To get into a little bit the differentiation between okay. You had to <unk> six and you filed 991, the new issued number for the most recently issued patent.
Around our method of us what's the difference in how should investors be thinking about those two patents well first bearing combination 036 doesn't go away or three six is still there and I think represents something that a patent that when challenged someone would have to first.
Look at the merits of 036 and address those and then second what 991 does is it further refines the 036 patent it adds more data remember we submitted 036.
Data from the the original or trials and this adds in the Aurora trials, the Aurora extension et cetera, and it narrows the scope of the patents quite.
Quite significantly specifically to lupus nephritis and <unk>.
<unk> some of the language and the pattern.
So I think it creates a tighter patent a more refined patented additive to 036.
Lastly, could question, where on 2000 twenty-three guidance, we don't give quarterly.
But I guess the one area I would just say to focus is look at two years worth of sales and what the pattern of our <unk>.
We.
As we've said, we're going to need to continue to drive all fronts commercially, but if there is any level of caution. It's just we've seen two years, one year being COVID-19 driven we believe the next year being hard to understand because of Covid was gone was it more vacation dynamics and less patience visiting offices.
Because we haven't historically, giving quarterly guidance as it pertains to our annual guidance.
Thank you.
And our next question comes from Justin came from Oppenheimer. Please go ahead Justin.
Hi, good morning, and thanks for taking my question, Yeah, it's really great to see that.
Business, forming under loop kind of and I.
The strength that we've seen in this first quarter would sort of need to persist over the coming quarters.
How you think about for the low and high end bitcoin forgotten.
Basically break it out that way, we just give the range.
I don't want to be overly simplistic here, but we need to continue to see new patient starts and if you look at the <unk>, yet, but I'm assume it's in queue to be asked if you don't ask it next Justin.
Which I think we're 138 that we reported that's about one patient per day.
I guess, a more simple way to think about it is the.
We look at the business, but I would not be extreme about it I would not peg at all in the back half of the year I think in order to get that high end of of the of.
Influences that number just for any graduated and how you calculate that number.
Help in that process once they bumped into.
Getting helping education from us. So we have to continue to do that but I don't think there's there's not an insurance plan driver that says patients can only get drug through yearend.
We get more collective action as an organization due to the fact that we're not locked down in our houses I think that's true in institutions too. So COVID-19 is one the second is we.
The product and put.
Continuity of care is a big driver and sort of mitigating the new year reset affects that we've seen in the last couple of years and frankly I was expecting flat sit down for this quarter from the fourth quarter and it was up pretty significantly.
Which would either make you real confident or probably.
Probably make you more confident how we look at this daily and we look at whether it's five better one better to to worse.
It doesn't have us concerned at this stage of the game. We're looking at it closely I think you've got to look at the fact that you know.
Versus where we were last year. It is it is looking good.
And we.
We always see quarter were not quarter ends and a new month begins we can see some softness.
Joan I, if you were asking us.
April and May are going to be important to look at and I wouldn't call April data a trend yet I think we've got to look at what may shows et cetera, but positively speaking after a really strong first quarter.
Still less than 1% one patient off of the trajectory that we had in the first quarter per day. So.
Okay got it thanks.
Thank you and next forgotten Joseph shorts from SDB Securities. Please go ahead Joseph.
Hi, all this is <unk>. Thank you for taking our questions today, and all that crap for the corner.
So for US I guess could you just help us contextualize the growth a bit more in the first quarter, specifically are seeing more prescriptions from certain centers and has this growth in prescription has been consistent nephrologist admin rheumatologists.
So a couple of things and.
I wouldn't call any of these trends that I would say our hearts statistically significant they're more leading indicators that we're looking at so our focus has been on top decile physicians and we're seeing more repeat prescriptions coming from desktop decile dark so good sign that our focus is working.
And in addition, we're seeing more new prescribers coming out of that group and new prescribers coming in the below <unk> eight to 10. So again good good metrics more concentration in the top because that's where our focus has been and then while.
This is one that we've always said as an opportunity to crack we are seeing lupus.
Lupus centers or major medical institutions academic centers out there.
Opening up more.
None that I would say are such a large volume that I would call. It a trend break but I would say we have seen the majority of the lupus centers actually treating patients now and previous quarters that was quite limited and I don't think that's a individual sales rep and marketing tactic impact issue I.
A lot of it has to do with Covid and then there are some more complexities that will continue to need to think about as we want to crack that marketplace. Some moving into academic centers and the and the complexities around the sale process, there's quite different than a community office physician. So we are thinking about that strategically and tactically.
And we've seen more prescriptions coming out of that area as well.
The last question was on the percentage break Nephrologist, a rheumatologist and what I would tell you is it's still pretty evenly split down the middle and.
As I've said in the past lupus.
Patients generate first in the Rheumatologists office, so I look very acutely at the Rheumatologists office for.
Understanding how earlier, we can get in a disease and I look at the Nephrologist office is one of the physicians deeply understand the kidney and how is our message penetrating there because they are the kidney experts and we need to make sure that they they buy our drug and that they buy our story our data around the drug and I think all or.
Metrics or improving their but drove in terms of prescription base is evenly step room to room to nerf right now.
Excellent. Thank you and our last question comes from to Hell Sandra Some RBC. Please go ahead to Hell.
Hi, This is <unk>. Thank you for taking our questions.
I just want some incremental kind of from what you have already provided so I think in the past.
Highlighted that 55% of the prescribers not repeat prescribers and you see this as an opportunity. So given the long term study data that you have and also the.
Renal biopsy study how has that evolved and has been improved competitive positioning list has been Mr. Thank you.
So as I just mentioned.
We've seen increases both the new prescribers and repeat prescribers and I would probably put more emphasis on repeat prescribers because as I said, we've been focused on that eight to 10 decile and that's where we're seeing the majority of our impact as well in terms of.
Persistence C.
I think you have to look across the total and I wouldn't call a trend yet <unk>.
15 months persistent see changing from 45% to 47%.
But I think represented in the percentage of patients that we retain over that time, if you bench market versus other products in light categories would that be other rheumatoid indications like psoriatic arthritis, rheumatology other gi indications like like IBD or even moving into error.
He was like M M M S and other.
More specialty areas of chronic diseases that persistence you were seeing what the drug is actually quite good.
So we will continue to keep the updated along the way but I.
I think it's you're seeing improvements in those areas and you're seeing it through our what we announce each quarter every three months increment that we're maintaining patience over those periods of time.
Mr. Claiming that was our last question.
Okay. Thank you very much I want to thank everybody for joining the call with US today. We're obviously excited about the progress we've seen in the first quarter of the year.
Well look forward to talking to you again next quarter have great day.
Thank you ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you May guess connect your lines at this time and have a great day.
Mhm.