Q4 2023 Aurinia Pharmaceuticals Inc Earnings Call

Speaker Change: [music].

Greetings and welcome to Arena Pharmaceuticals full year 2023 earnings call. At this time, all participants are in a listen only mode.

Operator: Greetings and welcome to Aurinia Pharmaceuticals' full year 2023. At this time, all participants are in a listen-only mode.

Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please let me know; please press star zero on your telephone keypad. 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 Investment Relations for Aurinia Pharmaceuticals. Thank you.

A question and answer session was solid the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host Andrea Christopher at Evercore.

Andrea Christopher: Corporate communications and Investor Relations for Arena Pharmaceuticals.

Andrea Christopher: You may begin.

Andrea Christopher: You may begin. 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 Chief Executive Officer, and Joe Miller, our Chief Financial Officer. Today we will review and discuss Aurinia's 2023 fourth quarter and year-end financial and operational results, as well as an update on our strategic review, as communicated in the company's press release issued this morning. The company also filed its annual financial statements on Form 10-K this morning. For more information, please refer to Aurinia's filing with the U.S. Securities and Exchange Commission and applicable 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. However, these forward-looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially.

Thank you operator, and thank you to everyone for joining today's call and webcast.

Andrea Christopher: <unk> me on the call. This morning are Peter Greenleaf, erroneous, Chief Executive Officer, and Joe Miller, Our Chief Financial Officer, David will review and discuss erroneous 2023 fourth quarter and year end financial and operational results as well as an update on our strategic review as communicated in the company's press release issued this morning. The company also filed its.

Andrea Christopher: The annual financial statements on Form 10-K. This morning for more information please refer to erroneous filings.

Andrea Christopher: With the U S Securities and Exchange Commission and applicable Canadian Securities authorities, which are also available on our radius website at or many of pharma dotcom.

Andrea Christopher: During today's call already I 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.

Andrea Christopher: 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 annual report on Form 10-K, and all of its recent filings with the U.S. Securities and Exchange Commission and Canadian securities authorities. Please note that all statements made today during today's call are current as of today, Thursday, February 15th, 2024, 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 statement. Now, I'll turn the call over to Aurinia's President and CEO, Peter Greenleaf. Peter?

Andrea Christopher: For a discussion of factors that could affect <unk> future financial results and business. Please refer to disclosures and Iranians press release and its annual report on Form 10-K, and all of its recent filings with the U S Securities and Exchange Commission and Canadian Securities authorities.

Andrea Christopher: Please note that all statements made today during today's call are current as of today Thursday February 15th 'twenty 'twenty four unless otherwise noted and are based upon information currently available to us.

Andrea Christopher: Except as required by law hernia assumes no obligation to update any such statements.

Andrea Christopher: Now, let me turn the call over to Iranians, President and CEO, Peter Greenleaf Peter.

Peter Greenleaf: Thanks, Andrea, and good morning everyone. I want to thank everybody for joining us on today's call. As you may have noted, we issued preliminary, unaudited fourth quarter and year-end numbers in early January. On today's call, we will provide you with the final audited results for the fourth quarter and the year-end 2023. We will also provide an update on our commercial activities, including key commercial metrics and significant highlights for Leukinis. We will then provide an update on the company's previously announced strategic review and our business strategy moving forward. This includes our near-term plan to restructure the company and the initiation of a share repurchase program. We believe this plan allows for an immediate enhancement of shareholder value and has the ability to strengthen the company's long-term financial picture. After walking you through these details, I will then turn the call over to Joe Miller, our CFO, to provide additional details on our financial results.

Peter Greenleaf: Thanks, Andrea and good morning, everyone I want to thank everybody for joining us on today's call. As you May have noted we issued preliminary unaudited fourth quarter and year end numbers in early January on today's call. We will provide you with a final audited results for the fourth quarter and the year end 2023.

Peter Greenleaf: We'll also provide an update on our commercial activities, including key commercial metrics and significant highlights for lip kindness.

Peter Greenleaf: We will then provide an update with the company's previously announced strategic review and our business strategy moving forward.

Peter Greenleaf: This includes our near term plan to restructure the company and the initiation of a share repurchase program.

Peter Greenleaf: We believe this plan allows for immediate enhancement of shareholder value and has the ability to strengthen the company's long term financial picture.

Peter Greenleaf: After walking you through these details I will then turn the call over to Joe Miller, our CFO to provide additional details on our financial results.

Joseph Patrick Schwartz: So now let me dive into the overall business performance for.

Peter Greenleaf: So now, let me dive into the overall business performance. For the full year 2023, Aurinia achieved $175.5 million in total net revenue, which represented an increase of approximately 31% over the prior year. We achieved $158.5 million in net product revenue, representing an increase of 53% over 2022. For the fourth quarter of 2023, we achieved a total revenue of $45.1 million and a total net rep product revenue of $42.3 million, which represented an increase of 59% and 49% over the same period in 2022. Moving to more detail behind our financial results, during the fourth quarter, Aurinia added 438 patient start forms, or PSFs, compared to 406 PSFs in the fourth quarter of 2022 and 436 in the third quarter of 2023.

Joseph Patrick Schwartz: For the full year 2023 arena achieved a $175 $5 million in total net revenue.

Joseph Patrick Schwartz: Which represented an increase of approximately 31% over the prior year.

Joseph Patrick Schwartz: We achieved $158 5 million of net product revenue, representing an increase of 53% over 2022.

For the fourth quarter of 2023, we achieved a total revenue of about $45 $1 million and a total net product revenue of $42 $3 million, which represented an increase of 59% and 49% over the same period in 2022.

Joseph Patrick Schwartz: Moving to more detail behind our financial results during the fourth quarter or any added 438 patient start forms or P. S. S compared to 406 P. S apps in the fourth quarter of 2022 and 436 in the third quarter of 2023.

Peter Greenleaf: In addition to the 438 PSFs added in the 4th quarter, the company also added approximately 101 new additional patients. This includes restarts, defined as patients coming back onto therapy who do not require a PSF, and an estimate of new patients beginning therapy in the hospital channel. The addition of patient restarts and patients coming through the hospital channel is newly reported in the fourth quarter since they've achieved a numerical significance for the first time. Hospital and restart numbers are both new indicators of growth for us. We know that restart patients have been off therapy for a considerable amount of time before restarting. Restarts represent a strong indicator for the brand because they demonstrate that physicians are comfortable using lupokinase as a first-line therapy, and they likely indicate the importance of maintaining loop kinase for a sustained period of time. It's important to note that treating flares is not aligned with the most recent treatment guidelines.

Joseph Patrick Schwartz: In addition to the 438 Psf's added in the fourth quarter. The company also added approximately 101, new additional patients. This includes restarts defined as patients coming back onto therapy, who do not require a P. S F and an estimate of new patients beginning therapy in the hospital.

Joseph Patrick Schwartz: Panel.

Joseph Patrick Schwartz: The addition of patient restarts and patients coming through the hospital channel our newly reported in the fourth quarter since they've achieved a numerical significance for the first time.

Hospital and restart numbers are both new indicators of growth for us we know that restart patients had been off therapy for a considerable amount of time before restarting.

Joseph Patrick Schwartz: Restarts represent a strong indicator for the brand because they demonstrate that physicians are comfortable using loop kindness as a first line therapy.

Joseph Patrick Schwartz: And they likely indicate the importance of maintaining loop China's first sustained period of time.

Joseph Patrick Schwartz: It's important to note that treating flares is not aligned with the most recent treatment guidelines. These.

Peter Greenleaf: These guidelines out there call for patients to remain on therapy for three to five years. I'll talk more about our commercial strategy in a moment, but this is why we continue to encourage physicians to follow these guidelines and treat lupus nephritis more aggressively. Regarding our hospital numbers, we ship wallets to hospital pharmacies, with little to no visibility into how these hospitals are dispensing the drug to actual patients. Therefore, we estimate how many patients come from those wallets based on average wallet utilization across all patients. As previously discussed, the hospital market was completely closed off to us for the first two years of the launch due to the global pandemic.

Joseph Patrick Schwartz: These guidelines out there call for patients to remain on therapy for three to five years I'll talk more about our commercial strategy in a moment, but this is why we continue to encourage physicians to follow the guidelines and treat lupus nephritis more aggressively.

Joseph Patrick Schwartz: Regarding our hospital numbers, we ship wallets to hospital pharmacies with little to no visibility into how these hospitals are dispensing the drug to actual patients.

Joseph Patrick Schwartz: Therefore, we estimate how many patients come from those wallets based on average wallet utilization across all patients.

Joseph Patrick Schwartz: As previously discussed the hospital market was completely closed off to us through the first two years of launch due to the global pandemic now that we have a broader hospital access we're looking closely at how we approach these institutions and addressing some of the complexities that are inherent in the hospital systems and integrated health care networks.

Peter Greenleaf: Now that we have broader hospital access, we're looking closely at how we approach these institutions and addressing some of the complexities that are inherent in the hospital systems and integrated healthcare networks. We're beginning to see the impact of our execution in this space with the wallet shipments and patients beginning to pull through. For the full year, we added a total of 1,791 PSFs, an increase of approximately 9% year-over-year.

Joseph Patrick Schwartz: We're beginning to see the impact of our execution in this space with the wallet shipments in patients beginning to pull through.

Joseph Patrick Schwartz: For the full year, we added a total of 1700 91 P. S. S. An increase of approximately 9% year over year.

Joseph Patrick Schwartz: And from January one 2024 through January or February 9th in the same year, we added approximately 191 P. S. S.

Peter Greenleaf: And from January 1st, 2024 through February 9th of the same year, we added approximately 191 PSFs. Adding to the PSF number, we have approximately 40 new patients from both restarts and the hospital channel. In addition, I'm pleased to report that our conversion rates continue to improve with approximately 85% of PSFs converted to therapy. We're also improving the time it takes to get patients on therapy.

Joseph Patrick Schwartz: Adding to the Psf number we have approximately 40, new patients from both restarts and the hospital channel.

In addition, I'm pleased to report that our conversion rates continue to improve with approximately 85% of P. S fs converted to therapy.

Joseph Patrick Schwartz: We're also improving the time it takes to get patients on therapy throughout 2023, we increased our processing speed at all time periods 30, 60, and 90 days was 63% of our patients starting therapy in 20 days or less.

Peter Greenleaf: Throughout 2023, we increased our processing speed at all time periods, 30, 60, and 90 days, with 63% of our patients starting therapy in 20 days or less. I'd like to point out that this is a meaningful improvement year over year. Our 12-month persistency continues to improve and is now approximately 55%. We are encouraged to see almost 45% of patients who remain on therapy at 18 months, with that number holding steady out to 24 months.

Joseph Patrick Schwartz: I'd like to point out that this is a meaningful improvement year over year.

Joseph Patrick Schwartz: Our 12 month persistency continues to improve and is now approximately 55%.

Joseph Patrick Schwartz: We are encouraged to see almost 45% of patients who remain on therapy at 18 months with that number holding steady out to 24 months.

Peter Greenleaf: And consistent with prior periods, adherence to lupokinase treatment remains strong at approximately 86% at year end. The increase in patients on therapy in the quarter was driven predominantly by improvements in new PSFs, patient restarts, hospital fills, conversion rates, and processing speeds, and overall improvements and persistence. By exiting 2023, a total of 2,066 patients were on therapy. This represents an increase of over 35% over 2022. As we stated on previous calls, our strategy to grow lupokinase in the lupus nephritis market is focused on three key areas. First, educating health care providers on the need to screen and treat more aggressively. Second, activating the patient to proactively discuss screening and treatment with their physicians. And lastly, continuing to clinically differentiate lupokinase and position it as part of the foundation therapy in the treatment of lupus nephritis.

Joseph Patrick Schwartz: And consistent with prior periods adherence to loop the loop kindness treatment remains strong at approximately 86% at year end.

Joseph Patrick Schwartz: The increase in patients on therapy in the quarter was driven predominantly by improvements in new P. S. S patient restarts hospital sales conversion rates and processing speeds.

Joseph Patrick Schwartz: And overall improvements and persistency.

Joseph Patrick Schwartz: Exiting 2023, a total of 2066 patients were on therapy. This represents an increase of over 35% over 2022.

Joseph Patrick Schwartz: As we stated on previous calls our strategy to grow loop kind of seen the lupus nephritis market is focused on three key areas.

Joseph Patrick Schwartz: The first educating health care providers on the need to screen and treat more aggressively.

Joseph Patrick Schwartz: Second activating the patient to proactively discuss screening and treatment with their physicians.

Joseph Patrick Schwartz: And lastly, continuing to clinically differentiate loop kindness and position it as part of the foundation therapy in the treatment of lupus nephritis.

To address the first we continue to increase our focus on health care professionals and key opinion leaders by leveraging our long term clinical data and the updated you Lauren can do go guidelines.

Peter Greenleaf: To address AVERSE, we continue to increase our focus on health care professionals and key opinion leaders by leveraging our long-term clinical data and the updated ULAR and CADEGO guidelines. Our messaging is focused on encouraging physicians to recognize that all SLE patients may be at risk for lupus nephritis and that active screening and routine monitoring of lupus nephritis patients are critical. Prioritizing early diagnosis with every SLE patient

Joseph Patrick Schwartz: Our messaging is focused on encouraging physicians to recognize that all SLE patients may be at risk for lupus nephritis and that active screening for and routinely monitoring lupus nephritis patients are critical.

Joseph Patrick Schwartz: Prioritizing early diagnosis with every SLE patient.

Peter Greenleaf: Treating to target goals and reducing protein levels to minimize steroid use. Start treatment with an effective combination therapy and leverage combination therapies with the goal of increased renal response. And lastly, continuing to treat for at least three to five years following a complete renal response. We're already seeing meaningful impact from these clinical developments, and we will continue to reinforce this messaging through our robust marketing and sales efforts. In terms of patient activation, we focus our efforts on educating SLE and lupus nephritis patients and driving them to have provocative and proactive conversations with their physicians about screening and treatment. Our messaging reinforces the importance of routine urine screening, the seriousness of the threat of lupus nephritis progressing, and the critical need to start and stay on treatment.

Joseph Patrick Schwartz: Treating to target goals and reducing protein levels to minimize steroid use.

Joseph Patrick Schwartz: Start treatment with effectively an effective combination therapy and leverage combination therapies with the goal of increase renal response.

And lastly, continuing to treat for at least three to five years following a complete renal response.

Joseph Patrick Schwartz: We're already seeing meaningful impact from these clinical developments and we will continue to reinforce this messaging through a robust marketing and sales efforts.

Joseph Patrick Schwartz: In terms of patient activation, we focus our efforts on educating SLE in lupus nephritis patients and driving them to have provocative and proactive conversations with their physicians about screening and treatment.

Joseph Patrick Schwartz: Our messaging reinforces the importance of routine urine screening the seriousness of the threat of lupus nephritis progressing and the critical need to start and stay on treatment.

Peter Greenleaf: We deliver these messages through a mix of highly targeted social and digital initiatives, as well as in-person advocacy events. Finally, our customer-facing teams are focused on clinical differentiation and delivering the lupokinase clinical story targeted towards the highest potential writers. Our activities against these targets have steadily increased throughout 2023, and in the fourth quarter, we further increased the depth of prescribing in our current base of customers and, in addition, expanded new customers and new writers. Building on the momentum we established in the fourth quarter, we now have over 5000 PSF since launch.

Joseph Patrick Schwartz: We deliver these messages through a mix of highly targeted social and digital initiatives as well as in person advocacy events.

Joseph Patrick Schwartz: Finally, our customer facing teams are focused on clinical differentiation and delivering the loop kind of clinical story targeted towards the highest potential writers.

Joseph Patrick Schwartz: Our activities against these targets have steadily increased throughout 2023 and in the fourth quarter. We further increase the depth of prescribing in our current base of customers and in addition expanded new customers and new riders.

Joseph Patrick Schwartz: Building on the momentum we established in the fourth quarter. We now have over 5000 psf since launch and based on everything we've discussed today, we're reaffirming our 2024 net product revenue guidance range of $200 million to $220 million.

Peter Greenleaf: And based on everything we've discussed today, we're reaffirming our 2024 net product revenue guidance range of 200 to 220 million dollars. Shifting gears, I'd like now to discuss the conclusion of our strategic review and provide additional context. Please note that you will find further details of the review located within our recently issued annual report on Form 10-K and related press release. To remind everyone of how we got here, in connection with our annual general meeting held on May 17th, 2023, certain shareholders expressed their desire for the company to undergo a strategic review process. At the 2023 AGM, two of the company's most senior and experienced nominees for directors did not receive the requisite majority under the company's majority voting policy and accordingly submitted their resignations to the board. Those resigning members were replaced with two new directors, both with significant pharma and business development backgrounds. Additionally, in connection with the collaboration agreement that we entered into with one shareholder, we agreed to appoint Dr. Robert Foster, the inventor of voclasporin, to our board.

Joseph Patrick Schwartz: Shifting gears I'd like to now discuss the conclusion of our strategic review and provide additional context. Please note that you will find further details of the review located within our recently issued annual report on Form 10-K and related press release.

Joseph Patrick Schwartz: To remind everyone of how we got here in connection with our annual General meeting held may 17th of 2023 certain shareholders expressed their desire for the company to undergo a strategic review process.

Joseph Patrick Schwartz: At the 2023 AGM two of the company's most senior and experienced nominees for directors did not receive requisite majority under the company's majority voting policy and accordingly submitted their resignation to the board.

Joseph Patrick Schwartz: Those resigning members were replaced with two new directors, both with significant pharma and business development backgrounds.

Joseph Patrick Schwartz: And Additionally in connection with the collaboration agreement that we entered into with one shareholder we agreed to appoint Dr. Robert Foster the inventor of Voc less boring to our board.

Joseph Patrick Schwartz: Given the results of the AGM as well as the desires expressed by certain shareholders on June 29th of 2023, the company announced that it had initiated exploration of strategic alternatives.

Peter Greenleaf: Given the results of the AGM, as well as the desires expressed by certain shareholders, on June 29th, 2023, the company announced that it had initiated an exploration of strategic alternatives. It was noted that the process would consider a wide range of options for the company, including but not limited to a potential sale, merger, or other strategic transactions. The company retained J.P. Morgan as its financial advisor to lead the strategic review.

Joseph Patrick Schwartz: It was noted that the process would consider a wide range of options for the company, including but not limited to a potential sale.

Joseph Patrick Schwartz: Merger or other strategic transactions the company retained J P. Morgan as its financial advisor to lead the strategic review.

Peter Greenleaf: Following the announcement of the process, J.P. Morgan and Aurinia put together a comprehensive data room, a corporate presentation, and materials to support the overall review process. JPMorgan then engaged with more than 60 parties. That engagement led to 11 nondisclosure agreements being signed with potentially interested parties. Aurinia also conducted multiple meetings and presented to multiple parties, including some that did not sign non-disclosure agreements on a non-confidential basis. The data room itself was extensive, containing over 200,000 pages of documents across 4,300 files.

Joseph Patrick Schwartz: Following the announcement of the process J P Morgan and already have put together a comprehensive data room.

Joseph Patrick Schwartz: As corporate presentation and materials to support the overall review process.

Joseph Patrick Schwartz: J P. Morgan that engage with more than 60 parties that engagement led to 11, nondisclosure agreements being signed with potentially interested parties.

Joseph Patrick Schwartz: Iran. He also conducted multiple meetings and presented to multiple parties, including some that did not sign nondisclosure agreements on a non confidential basis.

Joseph Patrick Schwartz: The data room excel itself was extensive containing over 200000 pages of materials across 4300 files.

Despite significant effort put into the exploration of strategic alternatives from Erinyes Board its management and our advisors only one party submitted a preliminary non binding expression of interest, which remains subject to customary conditions, including a formal due diligence.

Peter Greenleaf: Despite significant effort put into the exploration of strategic alternatives by Aurinia's board, its management, and our advisors, only one party submitted a preliminary non-binding expression of interest, which remained subject to customary conditions, including formal due diligence. After review of that expression of interest, Aurinia's board elected to allow that party into a detailed formal diligence process. At the conclusion of its diligence process, the Counterparty elected not to submit a formal offer. In addition to exploring the sale of the company, Aurinia also explored multiple alternatives, including the potential for acquiring, merging, or licensing other entities or assets. The board ultimately determined that none of the other alternatives explored and that were available to it to pursue were in the best interests of the company and its shareholders.

Joseph Patrick Schwartz: After review of that expression of interest arena as board elected to allow that party into a detailed formal diligence process.

Joseph Patrick Schwartz: At the conclusion of its diligence process, the counterparty elected not to submit a formal offer.

Joseph Patrick Schwartz: In addition to exploring the sale of the company Arena also explored multiple alternatives, including the potential for acquiring merging our licensing other entities or assets.

Joseph Patrick Schwartz: The board ultimately determined that none of the other alternatives explored and that were available to it to pursue we're in the best interest of the company and its shareholders.

Peter Greenleaf: Based on the outcome of this extensive strategic review, the board believes that the best path forward is for management to streamline its operations as announced today and focus on the company's commercial execution. We expect this to provide us with financial firepower to generate meaningful cash flow, which we intend to redeploy in the short term to repurchase shares and, over time, continue to build balance sheet strength. We believe this strength will provide us with the financial flexibility to consider a wide range of alternatives over the next few years. These could include diversifying our portfolio through the addition of new pipeline assets, or creating scale through the acquisition of commercial assets, or other strategies that we believe will allow the company to continue to grow and drive towards its mission.

Joseph Patrick Schwartz: Based on the outcome of this extensive strategic review the board believes that the best path forward is for management to streamline its operations as announced today and focus on the company's commercial execution we.

Joseph Patrick Schwartz: We expect this to provide us with financial firepower to generate meaningful cash flow, which we intend to redeploy in the short term to repurchase shares and over time continue to build balance sheet strength.

Joseph Patrick Schwartz: We believe this strength will provide us with the financial flexibility to consider a wide wide range of alternatives over the next few years.

Joseph Patrick Schwartz: This could include diversifying our portfolio through the addition of new pipeline assets or creating scale through the acquisition of commercial assets or other strategies that we believe will allow the company to continue to grow and drive towards its mission.

Peter Greenleaf: For even more context, in 2018, the company, under previous management and at the board's direction, engaged a leading investment bank and conducted a confidential strategic review process. After extensive outreach, the company received only one non-binding expression of interest, which included a due diligence process but, in the end, did not result in a formal offer. And outside of these two expressions of interest, the company has never received any offer of any kind.

Joseph Patrick Schwartz: For even more context in 2018, the company under previous management and at the Board's direction engaged a leading investment banking conducted a confidential strategic review process.

Joseph Patrick Schwartz: After extensive outreach the company received only one non binding expression of interest which included a due diligence process, but in the end did not result in a formal offer.

Joseph Patrick Schwartz: And outside of these two expressions of interest the company has never received any offer of any kind the board management, though remain open to exploring opportunities that are in the best interest of the company and are open to considering any bona fide offers at the company receives.

Peter Greenleaf: The board management, though, remains open to exploring opportunities that are in the best interest of the company and are open to considering any bona fide offers that the company receives. In addition, following the conclusion of the strategic review, the company is reaffirming its commitment to value enhancement by driving loop kinase growth while maintaining a sharp focus on operating efficiencies and maximizing cash flows. As a result, the company is ceasing further development of both the AUR-200 and the AUR-300.

Joseph Patrick Schwartz: In addition, following the conclusion of the strategic review the company is referring reaffirming its commitment to the value enhancement by driving loop kindness growth, while maintaining a sharp focus on operating efficiencies and maximizing cash flows.

Joseph Patrick Schwartz: As a result, the company is ceasing further development of both AUR 200, and a EUR 300.

Peter Greenleaf: Correspondingly, the company expects to take a restructuring charge of approximately $11-15 million in the first quarter of 2024. This charge will primarily be made up of severance costs, contract termination costs, and other costs associated with terminating these programs. We anticipate reducing employee headcount by at least 25% by the end of the first quarter of 2024. There is no planned reduction in headcount in commercial or commercial supporting roles.

Joseph Patrick Schwartz: Correspondingly the company expects to take a restructuring charge of approximately $11 million to $15 million in the first quarter of 2024.

Joseph Patrick Schwartz: This charge will primarily be made up of severance costs contract termination costs and other costs associated with terminating these programs.

Joseph Patrick Schwartz: We anticipate reducing employee head count by at least 25% by the end of the first quarter of 2024.

Joseph Patrick Schwartz: There is no planned reduction in head count in commercial or commercial supporting roles.

Joseph Patrick Schwartz: The company expects to recognize annual cost savings of approximately $50 million to $55 million on a go forward basis with no impact on our commercial investment.

Peter Greenleaf: The company expects to recognize annual cost savings of approximately $50 to $55 million on a go-forward basis with no impact on our commercial investment. In addition, the board has approved a share repurchase program of up to $150 million of the company's common shares, the maximum amount of which is subject to receipt of regulatory approval in Canada. This reflects confidence in Aurinia's growth prospects and a continued commitment to enhancing both short and long-term value for shareholders and other stakeholders. While we know there will be questions about the timing and details of this near-term strategic shift, I can tell you that we will execute quickly and decisively to maximize the benefits. I'd now like to turn the call over to Joe to provide additional details of the share repurchase program that we announced today, as well as a more detailed review of our financial results. I will then return at the end of the call for a quick recap and to open up the line for your questions. With that, Joe.

Joseph Patrick Schwartz: In addition, the board has approved a share repurchase program of up to $150 million of the company's common shares the maximum amount of which is subject to receipt of regulatory approval in Canada.

Joseph Patrick Schwartz: This reflects confidence in <unk> growth prospects and our continued commitment to enhancing both short and long term value for shareholders and other stakeholders.

Joseph Patrick Schwartz: While we know there will be questions about timing and details of this near term strategic shift I can tell you that we will execute quickly and decisively to maximize the benefits.

Joseph Patrick Schwartz: I would now like to turn the call over to Joe to provide additional details of the share repurchase program that we announced today as well as more detailed review of our financial results.

Joseph Patrick Schwartz: I will then return at the end of the call for a quick recap and open up the line for your questions with that Joe.

Joseph Patrick Schwartz: Thank you Peter and good morning, everyone as Peter previewed the board has approved a share repurchase program of up to $150 million in common shares of the company of which the maximum amount is subject to receipt of Exemptive relief in Canada.

Joseph Patrick Schwartz: Thank you, Peter, and good morning, everyone. As Peter previewed, the Board has approved a share repurchase program of up to $150 million in common shares of the company, of which the maximum amount is subject to receipt of exemptive relief in Canada. If granted, it would permit Aurinia to purchase up to 15% of the issued and outstanding common shares of the company in any 12-month period over 36 months. However, there is no assurance that exemptive relief will be granted.

If granted it would permit Iranian to purchase up to 15% of the issued and outstanding common shares of the company in any 12 month period over 36 months. There is no assurance that Exemptive relief will be granted if the exemptive relief is not granted the maximum the company may purchase under the share repurchase program is 5% of our current issued and outstanding.

Joseph Patrick Schwartz: If the exemptive relief is not granted, the maximum the company may purchase under the Share Repurchase Program is 5% of our current issued and outstanding common shares, being 7,230,888 common shares. We plan to begin opportunistic, discretionary purchases of shares on the open market beginning on or around February 21, 2024. The company expects to fund the share repurchases from cash flows from operations and cash currently on hand. Further details can be found in our recently issued press release on Form 10-K. I want to emphasize that this repurchase program truly reflects our confidence in Aurinia's growth prospects. Now, let's take a few moments and go into detail regarding our financial results for the fourth quarter and 12 months ended December 31, 2023.

Joseph Patrick Schwartz: Common shares being 7 million 230008 down there in 88 common shares.

Joseph Patrick Schwartz: To begin opportunistic discretionary purchases of shares on the open market beginning on or around February 21, 2024, the company expects to fund the share repurchases from cash flows from operations and cash currently on hand.

Joseph Patrick Schwartz: Further details can be found in our recently issued press release and Form 10-K.

Joseph Patrick Schwartz: I want to emphasize that this repurchase program truly reflects our confidence in <unk> growth prospects now.

Joseph Patrick Schwartz: Now, let's take a few moments and go into detail regarding our financial results for the fourth quarter and 12 months ended December 31 2023.

Joseph Patrick Schwartz: As of December 31, 2023, Aurinia had cash, cash equivalents, and restricted cash in investments of $350.7 million compared to $389.4 million at December 31, 2022. The decrease is primarily related to the continued investment in commercialization activities and post-approval commitments of our approved drug Lupkindis, inventory purchases, advancement of our pipeline, and monoplant payments, partially offset by an increase in cash receipts from sales of Lupkindis. Total net revenue increased 59% to $45.1 million for the fourth quarter compared to the prior year period of $28.4 million. Total net revenue for the year was $175.5 million, an increase of over 31% over the prior year period of $134 million. Total net product revenue increased 49% to $42.3 million for the fourth quarter compared to the prior period of $28.4 million.

Joseph Patrick Schwartz: As of December 31, 2023 arena had cash cash equivalents and restricted cash and investments of $350 7 million compared to $389 4 million at December 31, 2022.

The decrease is primarily related to the continued investment in commercialization activities and post approval commitments of our approved drug <unk> tightness inventory purchases advancement of our pipeline and mono plant payments, partially offset by an increase in cash receipts from sales of loose guidance.

Joseph Patrick Schwartz: Total net revenue increased 59% to $45 1 million for the fourth quarter compared to the prior year period of $28 4 million total net revenue for the year was $175 5 million an increase of over 31% over the prior year period of $134 million.

Joseph Patrick Schwartz: Total net product product revenue increased 49% to $42 3 million for the fourth quarter compared to the prior year period of $28 4 million.

Joseph Patrick Schwartz: Total net product revenue was $158.5 million and $103.5 million for the years ended December 31, 2023 and 2022, respectively. The increase in both periods is primarily due to an increase from our two main customers for Loop Kindness sales, driven predominantly by further penetration of the LN market. Licensed collaboration and royalty revenue was $2.8 million for the fourth quarter compared to the prior period of $109,000.

Total net product revenue was $158 5 million and $103 5 million for the years ended December 31, 2023 and 2022.

Joseph Patrick Schwartz: The increase in both periods is primarily due to an increase from our two main customers for this kind of sales driven predominantly by further penetration of the all end market.

Joseph Patrick Schwartz: License collaboration and royalty revenue was $2 8 million for the fourth quarter compared to the prior year period of 109000 licensed collaboration royalty revenue was $17 million and $30 6 million for the years ended December 31, 2023, and 2022, respectively for the years ended December 31 2023.

Joseph Patrick Schwartz: Licensed collaboration and royalty revenue was $17 million and $30.6 million for the years ended December 31, 2023 and 2022, respectively. For the year ending December 31, 2023, Licensed Collaboration and Royalty revenue included a $10 million pricing and reimbursement milestone and additional collaboration and manufacturing service revenue from ATSUCA. For the year ended December 31, 2022, Licensed Collaboration and Royalty Revenue was primarily due to the recognition of a $30 million regulatory milestone from ATSUCA following the EC Marketing Authorization of Luke Kindness in September of 2022. Cost of sales and operating expenses for the fourth quarter ended December 31, 2023 and December 31, 2022 were $74.8 million and $56.5 million, respectively. Total cost of sales and operating expenses were $267.2 million and $245.5 million for the years ended December 31, 2023 and December 31, 2022. Let me now give you a further breakdown of Operating Expenses, Drivers, and Flux UAC. Cost of sales was $5.4 million and $1.4 million for the quarters ended December 31, 2023 and December 31, 2022. Cost of sales for the year ended December 31, 2023 were $14.1 million and $5.7 million for the year ended December 31, 2022.

License collaboration and royalty revenue included a 10 million dollar pricing and reimbursement milestone and additional collaboration in manufacturing service revenue from our Super <unk> for the year ended December 31, 2022 license collaboration and royalty revenue was primarily due to the recognition of a $30 million regulatory milestone from otsuka following the E C.

Joseph Patrick Schwartz: Getting authorization of loop kindness in September of 2022.

Joseph Patrick Schwartz: Cost of sales and operating expenses for the fourth quarter ended December 31, 2023, and December 31, 2022 were $74 8 million and $56 5 million.

Joseph Patrick Schwartz: Total cost of sales and operating expenses were $267 2 million and $245 5 million for the years ended December 31, 2023 and December 31 2022.

Speaker Change: Let me now give you a further breakdown of operating expenses drivers and fluctuations.

Speaker Change: Cost of sales were $5 4 million and $1 4 million for the quarters ended December 31, 2023, and December 31 2022.

Speaker Change: Cost of sales for the year ended December 31, 2023 were $14 1 million and $5 7 million for the year ended December 31, 2022, the increase in both periods was primarily due to increased sales of loose guidance, coupled with the amortization of the mono plant finance lease right of use asset which was placed into service in late June 2023.

Speaker Change: Gross margin for the quarter ended December 31, 2023, and December 31, 2022 was approximately 88% and 95%.

Speaker Change: Gross margins for the year ended December 31, 2023, and December 31, 2022 was approximately 92% and 96%.

Joseph Patrick Schwartz: The increase in both periods was primarily due to increased sales of lupkinis coupled with the amortization of the monoplant finance lease right-of-use asset, which was placed into service in late June, 2023. Gross margin for the quarter ended December 31, 2023 and December 31, 2022 was approximately 88% and 95%. Gross margins for the year ended December 31, 2023 and December 31, 2022 were approximately 92% and 96%. Selling general and administrative expenses, inclusive of share-based compensation expense, were $50.1 million and $47.5 million for the fourth quarters of 2023 and 2022, respectively. The increase in total SG&E expenditures was primarily due to an increase in share-based compensation expenditures.

Speaker Change: Selling general and administrative expenses inclusive of share based compensation expense were $50 1 million and $47 5 million for the fourth quarters 2023, and 2022, respectively. The increase in total SG&A was primarily due to an increase in share based compensation expense.

Speaker Change: For the years ended December 31, 2023, SG&A expenses inclusive of share based compensation expense was $195 million for the year ended December 31, 2022, SG&A expenses inclusive of share based compensation was $196 4 million. The decrease was primarily due to a reduction in expenses associated with corporate legal matter.

Speaker Change: <unk> and insurance.

Speaker Change: Noncash SG&A share based compensation expense was $9 5 million and 7 million for the quarters ended December 31, 2023, and December 31, 2022, noncash SG&A share based compensation expense was $36 5 million and $28 4 million for the years ended December 31, 2023 and December 31.

Joseph Patrick Schwartz: For the years ended December 31, 2023, SG&A expenses, inclusive of share-based compensation, were $195 million. For the year ended December 31, 2022, SG&A expenses, inclusive of share-based compensation, were $196.4 million. The decrease was primarily due to a reduction in expenses associated with corporate legal matters and insurance.

Speaker Change: 2022 <unk>.

Speaker Change: Research and development expenses inclusive of share based compensation expense were $10 2 million and $9 9 million for the quarters ended December 31, 2023, and December 31 2022.

Speaker Change: R&D expenses inclusive of share based compensation expense were $49 6 million and 45 million for the years ended December 31, 2023 and December 31 2022.

Speaker Change: Primary driver for the increase in R&D expenses for both periods was due to an increase in share based compensation expense.

Speaker Change: For the quarter ended December 31, 2023, noncash R&D share based compensation expense was $1 9 million for the quarter ended December 31, 2022, noncash R&D shared based compensation was income of 260000 <unk>.

Joseph Patrick Schwartz: Non-cash SG&A share-based compensation expense was $9.5 million and $7 million for the quarters ended December 31, 2023, and December 31, 2022. Non-cash SG&A share-based compensation expense was $36.5 million and $28.4 million for the years ended December 31, 2023 and December 31, 2022. Research and Development Expenses, inclusive of Share-Based Compensation Expense, were $10.2 million and $9.9 million R&D Expenses, inclusive of Share Based Compensation Expense, were $49.6 million and $45 million for the years ended December 31, 2023 and December 31, 2022. The primary driver for the increase in R&D expenses for both periods was due to an increase in share-based compensation expenses.

Speaker Change: Noncash R&D share based compensation expense was $7 5 million and $3 3 million for the years ended December 31, 2023 and December 31 2022.

Speaker Change: Other expense was 9.1 million versus other income of $2 2 million for the quarters ended December 31, 2023, and December 31 2022, respectively.

Speaker Change: Other expense was $8 4 million versus other income of $1 5 million for the years ended December 31, 2023, and December 31, 2022, the increase in expense for both periods is primarily the increase of the foreign exchange loss related to the revaluation of the mono plant finance lease liability, which commenced in June 2023, and it's denominated in.

Speaker Change: CHF.

Speaker Change: Interest income was $4 6 million for the quarter ended December 31, 2023, and $2 9 million for the quarter ended December 31, 2022 inter.

Speaker Change: Interest income was $17 million and $5 1 million for the years ended December 31, 2023, and December 31, 2020 to increase for the quarter and full year was primarily due to higher yields in our investment as a result of higher interest rates year over year.

Joseph Patrick Schwartz: For the quarter ended December 31, 2023, non-cash R&D shared base compensation expense was $1.9 million. For the quarter ended December 31, 2022, non-cash R&D shared base compensation was an income of $260,000. Non-cash R&D share-based compensation expense was $7.5 million and $3.3 million for the years ended December 31, 2023 and December 31, 2022. Other expense was $9.1 million versus other income of $2.2 million for the quarters ended December 31, 2023 and December 31, 2022. Respectively, other expense was $8.4 million versus other income of $1.5 million for the years ended December 31, 2023 and December 31, 2022. The increase in expense for both periods is primarily the increase in the foreign exchange loss related to the revaluation of the monoplant finance lease liability, which commenced in June 2023 and is denominated in CHF. Interest income was $4.6 million for the quarter ended December 31, 2023 and $2.9 million for the quarter ended December 31, 2022. Interest income was $17 million and $5.1 million for the years ended December 31, 2023 and December 31, 2022.

Speaker Change: For the quarter ended December 31, 2023, Irina had recorded a net loss of $26 9 million or 19 net loss per common share as compared to a net loss of $26 million or 18 net loss per common share for the quarter ended December 31, 2022 for the year ended December 31, 2023 Iranian recorded in <unk>.

Speaker Change: Net loss of 78 million or <unk> 54, net loss per common share as compared to a net loss of $108 2 million or <unk> 76, net loss per common share for the previous period.

Speaker Change: With that I'd like to hand, the call back over to Peter for some closing remarks Peter.

Peter Greenleaf: Thanks, Joe I want to close by saying that we built a strong foundation for <unk> growth. This near term shift will make us financially stronger in the years to come it will allow us more financial flexibility to continue to explore a range of strategic initiatives.

Peter Greenleaf: We have a deeply experienced management team, that's dedicated and committed to driving commercial success of loop kindness and improving the lives of people suffering from lupus nephritis.

Speaker Change: We're looking forward to a continued strong performance carried through in 2024 and I want to thank you all for joining us and giving US your time today I'll now open the lines for any questions operator.

Speaker Change: Thank you at this time, we will be conducting a question and answer session.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Information tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up in your head your handset before pressing the star keys.

Speaker Change: And our first question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question Hi.

Joseph Patrick Schwartz: The increase for the quarter and full year was primarily due to higher yields in our investment as a result of higher interest rates year over year. And with that, I'd like to hand the call back over to Peter for some closing remarks. Thanks, Joe.

Maury Raycroft: Good morning, this is financing on for Marty.

Maury Raycroft: Thank you for taking my question.

Maury Raycroft: Peter can you talk more about assumptions and key drivers behind your revenue guidance of 200 to 200 $200 million to $235 million and how you.

Maury Raycroft: You had like 231 patient starts and the restart factor in Sydney.

Speaker Change: At the same time period last year, you had like 274, so just wondering on the assumptions.

Peter Greenleaf: I want to close by saying that we built a strong foundation for Aurinia's growth, and this near-term shift will make us financially stronger. In the years to come, it will allow us more financial flexibility to continue to explore a range of strategic initiatives. We have a deeply experienced management team that's dedicated and committed to driving the commercial success of lupokinase and improving the lives of people suffering from lupus nephritis. We're looking forward to a continued strong performance carried through in 2024. And I want to thank you all for joining us and giving us your time today. I'll now open the lines for any questions. Operator.

Peter Greenleaf: Yeah, well first the assumptions to get to the range that we put out there in terms and thank you for the question of guidance factor in as we said all the elements of our business right, but obviously, we've got a keen eye on the metric that you pull out which is you know.

Peter Greenleaf: What's your new starts going into the first quarter and how does that potentially impact the full year view.

If you look at our PSS year over year, and then you add back in the new starts that we've had in the hospital channel and then your project that on a daily basis towards the end of the quarter I think what you'll see is that we have we're experiencing growth, albeit you know how significant it depends on what the continued rate.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Peter Greenleaf: Is that from now until the end of the quarter, but should project outgrowth to the end of the first quarter versus what we did last year. So the psf and new start number. When you include all three of those looks quite strong through the first several weeks of the year.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. And our first question comes from Maury Raycroft with Jeffries. Please proceed with your question. Hi, good morning. This is Farzeen Anwar from MAURI.

Peter Greenleaf: Recall also that our March is usually at least historically has been one of our best months. So we're we're not even factoring that in the numbers, but if you do factor that in our numbers could significantly contribute to the to the overall performance, but for Zane just to give you the over the overall, we have to continue to see the type of persistency.

Farzeen Anwar: Thank you for taking our questions. So, Peter, can you talk more about the assumptions and key drivers behind your revenue guidance of $200 to $225 million and how you had 231 patient starts and restarts, whereas in the same time period last year, he had 270,000.

Peter Greenleaf: We've seen we have to see growth and restarts in the hospital channel Psf's for sure time to getting patients on drug and and of course, the new patient starts that you pointed out but it's across all elements and so far the first quarter read on those has been strong.

Speaker Change: Makes sense and then if possible for you to share more insights into the strategic review process unless the apprehension to buy primarily due to the valuation disconnect or something else and do you think interested parties could come back to negotiate.

Douglas Miehm: Douglas Miehm, Aurinia, Yeah, well, first, the assumptions to get to the range that we put out there in terms, and thank you for the question, about the guidance factor and, as we said, all the elements of our business, right? But obviously, we've got a keen eye on the metric that you pull out, which is, you know, what are your new starts going into the first quarter, and how does that potentially impact the full year view? If you look at our PSFs year over year, and then you add back in the new starts that we've had in the hospital channel, and then you project that on a daily basis towards the end of the quarter, I think what you'll see is that we're experiencing growth, albeit how significant depends on what the continued rate is from now until the end of the quarter, but I should project out growth to the end of the first quarter versus what we So the PSF and new start number, when you include all three of those, looks quite strong through the first several weeks of the year.

Speaker Change: And like I say milestones related to the commercial sales at IPL met.

Speaker Change: Well I listened to the latter part of your question as we said on the call. We remain open to any and all bona fide opportunities that are brought forward to the company I can't speak for other parties, nor can I predict the future, but I can tell you that you have a board and a management team that will always remain open to alter.

Speaker Change: Innovative strategies, we don't need test generally run a strategic review process, we've always been open to.

Speaker Change: Talk to other opportunities as for feedback to this specific process. So listen we had a variety of interactions with the parties involved in the strategic review process and given the nature and the variety and the depth of these interactions as well as the confidential nature of the strategic review process, we can't divulge.

Peter Greenleaf: Recall also that March is usually, at least historically, one of our best months, so we're not even factoring that in the numbers, but if you do factor that in the numbers, it could significantly contribute to the overall performance. But Farzeen, just to give you an overview, we have to continue to see the type of persistency we've seen. We have to see growth in restarts and in the hospital channel, PSFs for sure, time to get patients on drugs, and, of course, the new patient starts that you point out, but it's across all elements, and so far, the first quarter read on those has been strong. And then, if possible, for you to share more insights into the strategic review process. Was the apprehension to buy primarily due to the valuation disconnect or something else?

<unk> details at this point, we also can't speak on any other parties behalf as the information would be material to their business.

Speaker Change: Thank you for taking the questions.

Speaker Change: Thanks, Susan.

Speaker Change: Thank you. Our next question comes from the line of Joseph Schwartz with Leerink Partners. Please proceed with your question.

Will: Hi, all this is will on for Joe Thanks for taking our questions today.

Speaker Change: Two from us so just to start zeroing in on the 101 patients that were restarts are those from the hospital channel.

Will: Provide a breakdown between the two and do you see this as an area of potential growth driver for 2024 and are there any kind of appreciable patterns between those patients who are starting therapy.

Will: Yeah.

Speaker Change: Thanks, well, yes. The 101 is referring back to the fourth quarter result that were when we reported the numerical significance increasing in two channels that we hadn't really historically seen and that's the patient restarts happening, which we think is a positive signal and then did the opening of the hospital channel and.

Peter Greenleaf: And do you think interested parties could come back to negotiate certain milestones related to commercial sales or intellectual property rights? Well, I listened to the latter part of your question. As we said on the call, we remain open to any and all bonafide opportunities that are brought forward to the company. I can't speak for other parties, nor can I predict the future.

Speaker Change: As we've said the split there and listen we've got one quarter of a trend here. So this could vary but the split at least in the fourth quarter was more driven approximately 75% to 80% of those patients came on a restart basis and about 20% of those patients came out of the hospital as.

Peter Greenleaf: But I can tell you that you have a board and a management team that will always remain open to alternative strategies. We don't necessarily need to run a strategic review process. We've always been open to other opportunities.

Speaker Change: As we look at the first several weeks of this quarter.

Speaker Change: So far we've seen about 40 in the combination and unfortunately at least today I don't have how that break percentage comes across but I would I would assume it's similar to what we saw in the fourth quarter. We look forward to detailing this as we move forward and I guess, what I'd like to underscore here is that while we will.

Peter Greenleaf: As for feedback on this specific process, listen. We had a variety of interactions with the parties involved in the strategic review process. And given the nature, the variety, and the depth of these interactions, as well as the confidential nature of the strategic review process, we can't divulge additional details at this point. We also can't speak on any other party's behalf, as the information would be material to their business.

Speaker Change: Always continue to report how patient start forms come into the company. These other channels are going to become more important and I think on a on a go forward basis, it's going to be very important to look at that.

Peter Greenleaf: Thank you for taking our questions. Thank you. Thank you. Our next question comes from the line of Joseph Schwartz with Lear Inc. Partners. Please proceed with your question. Hi, all. This is Will on behalf of Joe.

Speaker Change: Net new patients and that will be inclusive of these restarts that we've kicked out of our overall tracking under PSS in channels like hospitals and other networks that havent historically been purchasing and we'll as we always have continued to give transparency in all areas.

Operator: Thanks for taking our questions today. Two from us. So just to start zeroing in on the 101 patients that were restarted for those from the hospital channel. You provide a breakdown between the two. And do you see this as an area as a potential growth driver for 2024? And are there any kind of appreciable patterns between those patients who are restarting therapy?

Speaker Change: Yes.

Speaker Change: Okay, great. Thank you for that and then just quickly thinking about the 9% growth in PSS year over year.

Peter Greenleaf: Thank you. Thanks, Will. Yeah, the 101 is referring back to the fourth quarter result when we reported the numerical significance increasing in two channels that we hadn't really historically seen, and that's the patient restarts happening, which we think is a positive signal, and then the opening of the hospital channel. And as we've said, this split there, and, you know, listen, we've got one quarter of a trend here, so this could vary, but the split, at As we look at the first several weeks of this quarter, so far, we've seen about 40 in the combination, and unfortunately, at least today, I don't know how that break percentage comes across, but I would assume it's similar to what we saw in the fourth quarter.

Speaker Change: But seeing 35% growth in the patients on therapy, if I'm quoting or numbers right can you just talk a little bit about the dynamic between the two and how PSS might be a bit of a leading indicator in kind of a time lag that's associated with that thank you.

Speaker Change: Well I think there is a couple of things you got to factor in right, where we've never said nor will we say that new patient starts are important to look at but you know when the first couple of years and the launch is always a question of how long will patients stay on drug over time and with the little the persistency look like.

Speaker Change: And when patients do eventually come off of drug do they come back to drug and we're now starting to understand those dynamics better. So when you look at overall patient growth and when you look at that relative to new patients coming in I think for US. It is somewhat of it it's a forecasting dynamic right like it's the persistency.

Speaker Change: That we've seen and as reported in this quarter, we've seen improvements in 12 month persistency now above 55%, 56% and interestingly when you get to when you get to 18, and then 24 months, we've seen at least up to this point sort of a flattening out of the curve and I guess I would point to a couple of things.

Peter Greenleaf: We look forward to detailing this as we move forward, and I guess what I'd like to underscore here is that while we'll always continue to, you know, report how patient star forms come into the company, these other channels are going to become more important, and I think on a go-forward basis, it's going to be very important to look at, you know, net new patients, and that will be inclusive of these restarts that we've kicked out of our overall tracking under PSFs and channels like hospitals and other networks that haven't historically been purchasing, and we'll, as we always have, continue to give transparency in all areas. Okay, great. Thank you for that.

Speaker Change: New U lar and could ego guidelines emphasize very clearly that patients should be on medications in this as irregardless of what medication for three to five years.

Speaker Change: That hasnt been historically, how the how physicians have treated this disease. So you know all although guidelines have been pushing it it's been treating episodic sort of Flyers of proteinuria and I think those guidelines are helpful. Second you know in the last 12 months to 18 months, we've launched different element so data.

Peter Greenleaf: And then just quickly thinking about the 9% growth in PSFs year over year, but seeing 35% growth in patients on therapy, if I'm quoting your numbers right, can you just talk a little bit about the dynamic between the two and how PSFs might be a bit of a leading indicator and kind of the time lag that's associated with that? Thank you. Well, I think there's a couple of things you've got to factor in, right?

Speaker Change: That.

Speaker Change: That have crossed a couple of different key areas. One three year data looking at both safety and efficacy of the product so.

Speaker Change: So we were first to have data out that far in particular looking at Egfr, that's an important safety component of tracking impact to the kidney and then 18 month biopsy data. So remember in our first year, obviously, we only had the one year or a study. So I think all that's impacting and I think you got to look at persistency.

Peter Greenleaf: We've never said, nor will we say, that new patient starts aren't important to look at. But, you know, in the first couple of years of the launch, there's always a question of how long will patients stay on the drug over time. What will the persistency look like? And when patients do eventually come off a drug, do they come back on it?

Speaker Change: Alongside of new patient starts and we have to be hitting on both.

Speaker Change: Great. Thanks again.

Peter Greenleaf: And we're now starting to understand those dynamics better. So when you look at overall patient growth and when you look at that relative to new patients coming in, I think for us, and it's somewhat of a forecasting dynamic, right? Like, it's the persistency that we've seen, and as reported in this quarter, we've seen improvements in 12-month persistency, now above 55% and 56%. And interestingly, when you get to 18 and then 24 months, we've seen, at least up to this point, sort of a flattening out of the curve. And I guess I would point to a couple things. The new ULAR and KADIGO guidelines emphasize very clearly that patients should be on medications, and this is irregardless of what medication they are on, for three to five years.

Speaker Change: Thanks, Haynesville all right Nick.

Speaker Change: Our next question comes from the line of Stacy <unk> with Cowen. Please proceed with your question.

Stacy: Hi, Thanks for taking our question. So we had a few.

Stacy: Understand that you can't develop to too many details, but if we could just quickly follow up on an earlier question on strategic review, if you could at least self critique.

What do you think could be the best explanation.

Stacy: Blowing the 16th.

Stacy: Think it could be related to something like IP.

Stacy: Competitors coming on not getting enough traction with patient and adds to some commentary from yourself would be really helpful. Thank you so much.

Stacy: So I'm going to repeat myself, but because of the confidential nature of the strategic review process. There's a limit to the details that we can provide particularly when it comes to other parties business decisions and how they saw things. So we can't speak to the on another parties behalf as information could be material to their business.

Peter Greenleaf: That hasn't been historically how physicians have traditionally treated this disease. So, you know, although guidelines have been pushing for it, they've been treating episodic sort of flares of proteinuria, and I think those guidelines are helpful. Second, you know, in the last 12 to 18 months, we've launched different elements of data that cover a couple different key areas. One, three-year data looking at both safety and efficacy of the product. So we were the first to have data out that far, in particular, looking at EGFR. That's an important safety component of tracking impact on the kidney.

Speaker Change: Okay understood and then.

Speaker Change: Can you talk about kind of these patient restarts.

Speaker Change: As you think about our kind of long term do you think this could really help improvements in retention.

Speaker Change: And then a quick follow up on kind of your kind of conversion rates for this year and next year do you expect to still stick around that 85%, 90% level or do you think that could continue to improve thank you.

Speaker Change: Starting with the defeat the last question first I think the 85 has been fairly consistent while we've seen you know quarter to quarter, you know a percentage point or two.

Peter Greenleaf: And then 18-month biopsy data. So remember, in the first year, obviously, we only had the one-year Aurora study. So I think all that's impacting, and I think you've got to look at persistency alongside new patient starts, and we have to be hitting on both. Great, thanks again. Thank you, Aurinia.

Speaker Change: Directionally up or down it's been you know on average pretty consistent so I would hold that fairly consistent in terms of conversions.

Operator: Our next question comes from the line of Stacy Kuh with TD Cowan. Please proceed with your question. Hi, thanks for taking our questions. We had a few, so I understand that you can't divulge too many details, but if we could just quickly follow up on an earlier question on strategic review. If you could at least self-critiquing, what do you think could be the best explanation following the strategic review? Do you think it could be related to something like IP, competitors coming, not getting enough traction with patient ads? Just some commentary from yourself would be really helpful. Thank you so much. I'm going to repeat myself, but because of the confidential nature of the strategic review process, there's a limit to the details that we can provide, particularly when it comes to other parties' business decisions and how they see things. So we can't speak to you on another party's behalf, as the information could be material in their interest.

Speaker Change: I still think we have opportunity to continue to increase speed and and time to conversion to getting patients on drugs. So I do think that's a that's one that we can continue to work on even though we were at a fairly high level getting 60% of patients onto north of 60% of patients onto drug within <unk>.

Speaker Change: Many days and then the persistency thing if you look at the market research data, we have and the claims data that we have internally.

Speaker Change: They show a pretty wide disconnect between what actually happens with patients in the market and where the guidelines are pushing things to go to in terms of two elements. Three actually one is diagnosis, we know that SLE patients at a low percentage actually get a 24 hour urine screen when they come into a doctor's office.

Peter Greenleaf: Okay, understood. And then, as you talk about kind of these patient restarts, and as you think about kind of the long term, do you think this could really help improvements in retention? And then a quick follow-up on your kind of conversion rates for this year and next year. Do you expect them to stick around that 85 to 90 percent level, or do you think that could continue to improve? Starting with the last question first, I think the 85 has been fairly consistent. While we've seen quarter to quarter percentage points or two directionally up or down, it's been, on average, pretty consistent, so I would hold that fairly consistent.

Speaker Change: We need to continue to improve on that that will grow the market second.

Speaker Change: Treating to target is second so we know from our data that there's a that there's a proportion of positions actually who only treat to high proteinuria above.

Speaker Change: What the current guidelines recommend in terms of proteinuria level that would qualify a patient is having active lupus nephritis, so getting active treatment and treatment to target are key opportunities and goals for us and then lastly, there's just element of physicians treating episodic proteinuria versus sticky.

Peter Greenleaf: In terms of conversions, I still think we have an opportunity to continue to increase speed and time to conversion to getting patients on drugs, so I do think that's one that we can continue to work on, even though we're at a fairly high level getting 60% of patients on to, north of 60% of patients on to drugs within 20 days. And then the persistency thing, if you look at the market research data we have and the claims data that we have internally, they show a pretty wide disconnect between what actually happens with patients in the market and where the guidelines are pushing things to go in terms of two elements, actually. One is diagnosis. We know that SLE patients, a low percentage actually get a 24-hour urine screen when they come into a doctor's office.

Speaker Change: The guidelines and and treating four and keeping those patients you can control for.

Speaker Change: At least three to five years, which we think obviously bodes well for continuing to see at least stabilization if not improvement in our persistency rates out past 12 months 2024 months. So all of those elements I think when you look at the data we have aligned with the guidelines and the Mark.

Speaker Change: Opportunity bodes well for our growth in the future.

Speaker Change: Thank you.

Speaker Change: Thanks, Stacey thank you.

Speaker Change: Our next question comes from the line of Ed Arce with H C. Wainwright and company. Please proceed with your question.

Ed Arce: Alright, Thanks for taking my questions I have three.

Ed Arce: First I wanted to ask about the share repurchase.

Ed Arce: If you could you tell us.

Peter Greenleaf: We need to continue to improve on that. That'll grow the market. Second, you know, treating to target is second, so we know from our data that there is a proportion of physicians actually who only treat to high proteinuria levels above what the current guidelines recommend in terms of proteinuria levels that would qualify a patient as having active lupus nephritis. So getting active treatment and treatment to target are key opportunities and goals for us. And then lastly, there's this element of physicians treating episodic proteinuria versus sticking to guidelines and treating for and keeping those patients in control for at least three to five years, which we think obviously bodes well for continuing to see at least stabilization, if not improvement in our persistency rates out past 12 months and 24 months.

Ed Arce: What expectations you have for the timeline on the decision for Exemptive relief and is that something.

Ed Arce: If that decision comes in is that something that you would announce publicly.

Speaker Change: Well why don't I start and if I Miss anything Joe can jump in here. The Exemptive relief I don't know that we have an exact timeline for when well get.

Speaker Change: Read back from the.

Speaker Change: The Canadian authorities on that but without the Exemptive relief, we have up to 5% 5% of our market cap that we have the ability to initiate.

Joseph Patrick Schwartz: Oh without that exactly that Exemptive relief, so as mentioned on the call at or around the 20 <unk> of February is when we would have the ability to be in market. If we so chose and at that point, we would not need the executive Exemptive relief to at least do up to 5%.

Peter Greenleaf: So all of those elements, I think when you look at the data we have aligned with the guidelines and the market opportunity, it bodes well for our growth. Thank you.

Operator: Thank you. Our next question comes from the line of Ed Arce with H.C. Wainwright & Company. Please proceed with your question. Hi, thanks for taking my questions. I have three.

Joseph Patrick Schwartz: Our market cap after that would be how we expand above if we get that Exemptive relief Joe did I Miss anything to answer your second question around that Ed. We would also announced that Exemptive relief was granted if and when it was granted.

Ed Arce: First, I wanted to ask about the share repurchase. If you could, could you tell us what expectations you have for the timeline on the decision for exemptive relief, and is that something, if that decision comes in, is that something that you would announce publicly? Why don't I start, and if I miss anything, Joe can jump in here.

Joseph Patrick Schwartz: Okay.

Secondly, just in terms of.

The growth drivers.

Joseph Patrick Schwartz: You bet.

Joseph Patrick Schwartz: <unk> been consistent over a number of quarters and how.

Joseph Patrick Schwartz: Educating physicians and activating the patient.

Peter Greenleaf: The exemptive relief, I don't know that we have an exact timeline for when we'll get a read back from the Canadian authorities on that, but without the exemptive relief, we have up to... 5% of our market cap that we have the ability to initiate without that exemptive relief. So, as mentioned on the call, at or around the 21st of February is when we, you know, have the ability to be in the market if we so choose, and at that point, we would not need the exemptive relief to at least reach up to 5% of our market cap. After that would be how we expand above if we get that exemptive relief. Joe, did I miss anything?

Joseph Patrick Schwartz: Is really critical here and I'm wondering as you work through that dynamic.

Joseph Patrick Schwartz: This.

Joseph Patrick Schwartz: Market.

Joseph Patrick Schwartz: And getting both patients and physicians even more importantly.

Joseph Patrick Schwartz: Changing the paradigm the way they treat.

Joseph Patrick Schwartz: Maybe talk about some of the.

Joseph Patrick Schwartz: More recent.

Joseph Patrick Schwartz: Wins that you see in changes in attitudes and perspectives.

Joseph Patrick Schwartz: What is currently working right now.

Speaker Change: Well as we mentioned on the call and although we didn't give the exact numbers I can tell you we've seen significant improvement in both depth of prescriptions and breadth diverse scriptures, so we're going deeper and more going wider so I think our.

Peter Greenleaf: To answer your second question around that, Ed, we would also announce that exemptive relief was granted if and when it was granted. Okay, great. Secondly, just in terms of, you know, the growth drivers, you've been consistent over a number of quarters and how educating physicians and activating the patient is really critical here. And I'm wondering, as you work through the dynamics of this market, in getting both patients and physicians, even more importantly, changing the paradigm of the way they treat. Maybe talk about some of the more recent wins that you see and changes in attitudes and perspectives and what is currently working right now. Well, as we mentioned on the call, although we didn't give the exact numbers, I can tell you we've seen significant improvement in both depth of prescriptions and breadth of prescriptions.

Speaker Change: Ability to impact our eight to 10 decile our sales force's ability has been there.

Speaker Change: And even and in addition, the broader message of more aggressive treatment novel therapies like Lugano as getting out to the broader base of physicians.

Speaker Change: I would also point to add the progress that we've seen on persistency, both with improvements at <unk>.

Speaker Change: 12 months and sort of a stabilization out to 18 and 24 months I think those are both directly correlated to the data that's been out that we put into the marketplace that we produce through the extension study and through the biopsy extension as well are the biopsy sub study and or commercial execution.

Peter Greenleaf: So we're going deeper, and we're going wider. So I think our ability to impact our eight to ten deciles, our sales force's ability has been there. And even more importantly, the broader message of more aggressive treatment and novel therapies like gluconus is getting out to the broader audience of physicians. I would also point to, Ed, the progress that we've seen on persistency, both with improvements at 12 months and sort of a stabilization out to 18 and 24 months. I think those are both directly correlated to the data that's been out, that we put into the marketplace, that we produced through the extension study and through the biopsy extension as well, or the biopsy sub-study, and our commercial execution.

Speaker Change: We look forward to continuing to sharpen the edges of those results with more specifics, but I can tell you there's been progress on every front.

Speaker Change: Okay, Great and then last question if I may.

Speaker Change: Given the streamlined focus here on commercial execution.

Speaker Change: <unk> kinase I'm wondering.

Speaker Change: Post.

Speaker Change: The the reduction in cost structure.

Speaker Change: <unk> head count as you look towards the second half of the year could you perhaps share any commentary on achieving near term profitability and any any gross profit.

Speaker Change: Growth and profitability overtime.

Speaker Change: Yes.

Speaker Change: Yeah, you want to jump on that Joe sure.

Peter Greenleaf: We look forward to continuing to sharpen the edges of those results with more specifics, but I can tell you there's been progress on every front. Okay, great. And then last question, if I may. You know, given the streamlined focus here on commercial execution of luteinis, I'm wondering about the, you know, post, um, reduction in cost structure and headcount as you look towards the second half of the year. Could you perhaps share any commentary on achieving near-term profitability and any growth and profitability over time? Thanks. Yeah, you want to jump on that, Joe?

Joseph Patrick Schwartz: Yes, Thanks, Ed as you know.

Speaker Change: No. We don't provide long term guidance, we've indicated that on an annualized operating expense basis, we'd cut about $55 to $60 $60 million.

Joseph Patrick Schwartz: Over the next 12 months of which approximately 75% of that will be a.

Joseph Patrick Schwartz: Our recognized in at least 2024.

Joseph Patrick Schwartz: We do believe that with these reduced operating expenses and our focus on commercial execution the kindness grow specifically.

Joseph Patrick Schwartz: We expect significant cash flows going forward on a go forward basis, we will obviously update you going forward on profitability. Some of this is tied to the timing around the restructuring charge as well as the share.

Joseph Patrick Schwartz: Sure. Yeah, thanks, Ed. As you know, we don't provide long-term guidance.

Joseph Patrick Schwartz: We've indicated that on an analyzed operating expense basis, we'd cut about $55 to $60 million over the next 12 months, of which approximately 75% of that will be recognized in at least 2024. We do believe that with these reduced operating expenses and our focus on commercial execution, the time this grows specifically, we expect significant cash flows going forward on a go-forward basis. We will obviously update you going forward on profitability, but some of this is tied to the timing of the restructuring charge, as well as the shared buyback plan. So further insights will come in the future. But for now, we've kind of got it to a $55 to $60 million op-ex savings on an annualized basis.

Joseph Patrick Schwartz: Back plan. So further further insights will come in the future, but for now we've kind of guided to a $55 million to $60 million opex savings on an annualized basis.

Speaker Change: Great Fair enough. Thanks for taking my questions.

Speaker Change: Thanks, Ed.

Speaker Change: Thank you we have reached the end of the question and answer session I'll now turn the call back over to Peter Greenleaf for closing remarks.

Peter Greenleaf: Thank you very much I want to thank everybody for their time today, and we look forward to coming up on future quarters reporting our results in keeping you updated on our plans. Thank you very much for joining us today have a great day.

Peter Greenleaf: Okay.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Yeah.

Joseph Patrick Schwartz: Great, fair enough. Thanks for taking my question. Thanks, Ed. Thank you. We have reached the end of the question and answer session. I will now turn the call back over to Peter Greenlee for his closing remarks. Thank you very much. I want to thank everybody for their time today, and we look forward to coming up in future quarters, reporting our results, and keeping you updated on our plans. Thank you very much for joining us today. Have a great day! This concludes today's conference, and you may disconnect your line. Thank you for your participation. It was the one thing that stood out to me. It's a nice little neck pickup. THE END, www.aurinaheal.com www.plastics-car.com, Please comment, like, comment, and share and leave your comments below, the for for to the Joseph Schwartz, Douglas Miehm, Aurinia, www.verbalink.com www.verbalink.com www.verbalink.com www.verbalink.com www.verbalink.com www.verbalink.com and and and and and and and

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