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spk03: Greetings and welcome to Aurinia Pharmaceuticals' third quarter 2021 results conference call. At this time, our participants are in a listen-only mode. A question and answer session will follow 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, Dana Lynch, Aurinia's Investor Relations and Corporate Communications. Thank you. You may begin.
spk08: Thank you, LaTanya, and thank you to those joining today's call to discuss ARINIA's third quarter financial results. Leading the call this morning are Peter Greenlee, President and CEO, and Joe Miller, Chief Financial Officer. Other members of the ARINIA Executive Team, Max Kalal, Chief Commercial Officer, Neil Solomons, Chief Medical Officer, and Robert Heisiger, Executive Vice President of Research, are also on the call and available for the Q&A portion of the agenda. Today, Peter will begin with an update on our progress with loop kinase commercialization, review recent and anticipated clinical and regulatory milestones for buccal sporen, as well as provide an update on the arrhenia pipeline. Then, Joe will discuss our financial performance in more detail. At this point, our participating executive team members are available for your questions. Today's press release announcing our financial results and recent operational highlights is accessible from our website at www.IraniaPharma.com and has been filed on a Form 8K with the U.S. Securities and Exchange Commission. This afternoon, we plan on filing our financial statements and accompanying management discussion and analysis in the quarterly report on Form 10Q. During this call, we may make forward-looking statements based on our current expectations These forward-looking statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosures in our press release and our quarterly report on Form 10-Q once filed, along with our recent filings with the U.S. Securities and Exchange Commission and Canadian securities authorities. Please note that all of the statements made during today's call are current as of today, November 3rd, 2021, unless otherwise noted, and are based upon information currently available to us at this time. Except as required by law, we assume no obligation to update any such statements as of this date. Let me now turn the call over to Arunia's President and CEO, Peter Greenlee. Peter.
spk11: So thanks Dana, and I want to thank everyone for joining us today. We're now well into the launch in the U.S., and I'm happy to report strong results for the third quarter. We continue to execute on our commercial strategy and increase access to and adoption of Leukinus for the treatment of adults with active lupus nephritis. This morning, I'll take you through our performance results, as well as provide you with some Leukinus clinical and regulatory updates. I'll also provide you with an overview of two exciting pipeline assets we've recently acquired. Finally, we will report our financial position and answer any questions that you may have. So let's start with our business performance related to the launch, starting first with the quarter. In Q3, we generated $14.7 million in net sales, which exceeded analysts' expectations and represents a 122% increase over the prior quarter. Since the launch in late January, our total recognized revenue is $22.2 million. Based on our current metrics and anticipated year-end results, we maintain our guidance in the range of $40 to $50 million for 2021. In the third quarter, we added 412 new patient start forms. While COVID-19 challenges with the Delta variant in southern states impacted PSF prescribing early in the summer, it should be noted that we saw a steady increase in prescribing rates throughout September and continuing into October. As of this week, we have now logged a total of more than 1,265 patient start forms year-to-date and remain optimistic that this upward momentum will continue. We also continue to see improvements in movement from patient start forms to patients on therapy, with a conversion rate in excess of 68% currently. This is up from approximately 50% in Q2. In addition, our time to convert is shrinking. Both 30 and 60-day conversion rates have continued to improve each month. On the payer coverage front, we continue to make progress, especially with regional and local plans. As of early October, we have confirmed Loop Kindness coverage through published payer policies for 65% of total lives in the market. Through patients gaining access to Loop Kindness, we have now confirmed coverage in plans covering 87% of total lives. While our goal is to ensure there are specific policies in place, healthcare professionals and patients are gaining access to Loop Kindness through medical justifications and working in conjunction with Arrhenius personalized patient support resources. We continue to work to make the access process as seamless as possible for providers and patients so that patients can quickly gain access and start our treatment. just over nine months post launch we're not slowing down our team continues to work tirelessly to educate professional and both professional and patient audience about lupkinis and the urgent need to diagnose and treat lupus nephritis patients as quickly as possible the most recent healthcare provider market research shows that lupkinis awareness has increased significantly with both rheumatologists and nephrologists and is on par with the competition, which, by the way, this competition has been on the market for over 10 years. Leukinus' remarkable clinical results continue to differentiate our product and bolster this awareness and confidence in prescribing. This week, Irinia has five presentations at two key medical meetings, the American College of Rheumatology and the American Society of Nephrology. These include data from our pivotal AURORA-1 study showing lupkinus efficacy in newly diagnosed patients and patients with severe lupus nephritis. An oral presentation at ACR will also feature an updated analysis of the AURORA-2 continuation study, assessing the safety and tolerability of lupkinus at 30 months. As a reminder, we expect to announce results from this continuation study looking at the final data from two additional years of lupkinase treatment, or three years in total, by the end of this year. This will represent the longest lupus nephritis treatment duration in recent studies. Lupus nephritis is a lifelong condition, and this long-term data will provide necessary support for HCPs, patients, and payers to safely continue lupkinus treatment beyond one year. So let's now shift to a look at the ongoing work to establish voxosporin as a global therapy. The EMA marketing authorization application, which as you recall was filed in June with our licensing partner Otsuka, remains on track for review. We continue to expect a CHMP opinion around mid-2022 and a final EMA decision sometime in the third quarter of 2022. As part of this submission, on October 1st of this year, Otsuka filed an MAA with the Swiss Agency for Therapeutic Products, or Swiss Medic, seeking approval for the use of Baclosporin in the treatment of adult patients living with active lupus nephritis. Additionally, Otsuka continues to work towards finalizing the timeline for the Japanese NDA regulatory filing with the PMDA to seek approval for Baclosporin in the treatment of LN in Japan. We continue to be pleased with this progress and look forward to supporting Atsuka in launching our therapy in these markets. And as we said before, reaching these milestones will provide us with opportunities to continue to strengthen our company's financial position as we work to globalize Loopkinus. Moving now to R&D updates. on august 17th of this year we announced the acquisition of two exciting and innovative additions to our pipeline the first of these compounds is aur 200 which is an fc protein targeting bath or b cell activating factor and april or a proliferation inducing ligand As you may know, both BAS and APRIL play a key role in B-cell-mediated autoimmune disease, and while this mechanism of action has been widely studied and we have proof of concept, we believe this compound has differentiated properties compared to those in development, and we're eager to establish those preclinically and then, of course, advance into clinical development. The IND for AUR200 is expected to be filed in late 2022. The second compound that we acquired is AUR300. AUR300 is a novel peptide therapeutic that modulates M2 macrophages, which is a type of white blood cell via the CD206 receptor. While there's less research with this mechanism of action, it has been established that dysregulation of M2 macrophages causes fibrosis, and with AUR300, the goal will be to reduce M2 dysregulation early and decrease fibrosis and inflammation. The IND filing for this compound is targeted for the first half of 2023. These transactions allow us to leverage our existing R&D capabilities in growing commercial experience. We strive to further diversify and grow our pipeline, which is a key strategic imperative for us and our goal to provide stakeholders with long-term value. In summary, we're making significant progress as we work to expand adoption of LoopKindness in the U.S., as well as other parts of the world. At the same time, in parallel, our R&D teams are committed to advancing our new pipeline assets and addressing autoimmune diseases beyond lupus nephritis. I'll be back to close out the call, but for now, let me ask Joe Miller to get into more specifics regarding our financial position. Joe?
spk10: Thank you, Peter, and good morning, everyone. As of September 30th, 2021, ARENIA had cash and cash equivalents and investments of $286.4 million compared to $422.7 million at December 31st, 2020. The decrease was primarily related to the commercial infrastructure spend to support the launch of Loop Kindness, an upfront payment made as part of a collaborative agreement with Lonza to build a dedicated manufacturing capability, and an upfront license payment related to our recently acquired developmental programs. net cash used in operating activities was 131.8 million for the nine months ended september 30th 2021 compared to 73.1 million for the nine months ended september 30th 2020. the increase was primarily due to the commercial infrastructure spend to support the launch of loop kindness payments for inventory and a one-time payment to a related party upon achievement of specified milestones partially offset by an increase in cash receipts As a reminder, in the prior year, the company was still in the development phase of Loop Timeness and was only in the beginning phase of building out its commercial and back office infrastructures. The company believed that it had sufficient financial resources to fund its current plans, which include funding commercial activities, including FDA-related post-approval commitments, manufacturing, and packaging of commercial drug supply, funding or supporting corporate infrastructure, conducting planned research and development programs, and investing in our pipeline into at least 2023. Total revenue was $14.7 million and $29,000 for the quarters ended September 30, 2021 and September 30, 2020, respectively. Total revenue was $22.2 million and $88,000 for the nine months ended September 30, 2021 and September 30, 2020. Our revenues primarily consisted of Loop Kindness product revenue net of adjustments following FDA approval in January of 2021. Cost of sales was $254,000 and zero for the quarters ended September 30, 2021 and September 30, 2020, respectively. Cost of sales was $610,000 and zero for the nine months ended September 30, 2021 and September 30, 2020. The increase for both periods was primarily the result of commercial sales of Loop Kindness. Gross margins for the three and nine months ended September 30th, 2021 was approximately 98% and 97%, respectively. Selling general and administrative expenses, or SG&A, were $44.1 million and $30.7 million for the quarters ended September 30th, 2021 to September 30th, 2020, respectively. For the nine months ended September 30th, 2021, SG&A expenses were $127.2 million and $57.2 million for the comparable period and prior year. The increase for both periods was due to employee-related costs associated with the expansion of the commercial and administrative functions to support the launch of Loop Kindness, which ramped up during the third quarter of 2020. Also contributing was an increase in professional fees for activities such as patient assistant programs, consulting, recruiting, legal, market research, and marketing-related activities. Non-cash SG&A shared base compensation for the three and nine months ended, was $6 million and $19.2 million compared to $3.8 million and $9.2 million in the same periods in 2020. Research and development expense were $20.1 million and $12.2 million for the quarters ended September 30, 2021 and September 30, 2020, respectively. For the nine months ended September 30, 2021 and September 30, 2020, R&D expenses were $40 million and $37.2 million. The primary driver for the increase for the three months ended September 30th, 2021 as compared to the same period in prior year was the upfront license and accrued milestone expense related to our recently acquired developmental programs. In accordance with US GAAP, these transactions did not meet the definition of a business combination and therefore were recorded as asset acquisitions. The company expensed the cost of the assets as R&D related expense at the acquisition date. The increase was partially offset by a decrease in clinical supply and distribution costs due to our new drug application and vocals form related clinical trial expenditures in 2020, not recurring in 2021. Also contributing was a decrease in employee related expenses. The primary drivers for the increase for the nine months ended September 30th, 2021 as compared to the same period in prior year were due to the upfront license and accrued milestone related to our recently acquired developmental programs and higher CRO costs related to our new clinical programs offset by a decrease in clinical supply and distribution costs following the approval of loop kindness, including a reduction in NDA preparation costs and termination of the dry eye trial during the fourth quarter of 2020. Non-cash R&D shared based compensation expense for the three and nine months ended September 30th, 2021 was $1 million and $3.2 million respectively compared to $800,000 and $3.1 million in the same periods in 2020. For the quarters ended September 30, 2020, ARENIA recorded a net loss of $50.3 million, or $0.39 per common share, as compared to a net loss of $42.1 million, or $0.34 per common share, for the quarter ended September 30, 2020. For the nine months ended September 30, 2021, ARENIA recorded a net loss of $147.6 million, or $1.15 per common share, as compared to a net loss of $94.6 million, or $0.82 per common share for the previous period. With that, I would like to hand the call back to Peter for some closing remarks.
spk11: Peter? Well, thanks, Joe. And I want to thank everyone again for joining us today. Let me close by saying that I'm proud of the work we've done so far this year. Under the backdrop of a challenging and unprecedented global pandemic, we continue to see strong and significant progress in our efforts to drive adoption of Leukinus in the U.S. Our clinical and regulatory teams are working hard to advance and achieve important milestones for Vaklasporin, including the completion of the Aurora 2 continuation study. And we're pleased with the work achieved so far this year with our partner, Otsuka, to ensure regulatory approval of Aquasporin outside of the US. And then finally, we're excited to have two new pipeline assets that will help us further our mission in changing the course of rare and autoimmune diseases. We look forward to providing additional updates in the months and quarters to come. And I'd now like to open up the line for questions. So with that, operator, Please feel free to open it up to the Q&A.
spk03: Thank you. At this time, we will conduct 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we post our first question. Our first question comes from Althea Young with CancerFitch General. Please proceed.
spk04: Hey, guys. Thanks for taking my questions, and congrats on all the progress so far with this launch. One question is just between the rooms and the nephrologists who you speak to, are there kind of different concerns, or is one population more concerned about maybe what to do after a year versus the other, just trying to get to finer points of what the dynamics are between those two prescribing groups? I know we haven't experienced those yet, at least with loop kinase. But can you talk a little bit how you're thinking about maybe potential seasonality as you head into the end of the year and how we should think about working through that in the model thing?
spk11: Thanks, Alethea. Let me start out and Max can build on what I might miss on. Obviously, rheumatologists and nephrologists are different in the specialty and how they think about the disease. I think that the treatment goals are aligned. But obviously, a lupus patient starts first at a rheumatologist's office. If you look at our market research, though, in terms of both awareness and intent to treat, they're pretty close to overlapped in terms of, you know, awareness of the drug one and intent to treat moving forward. But in terms of our day-to-day, our messaging, etc., You know, we still call on high targets, high targets both in nephrology and rheumatology. And right now, both from our impact scores in terms of the market research we track, we're right on target with both nephrologists and with rheumatologists. Max, what would you add there? Anything?
spk05: Yeah, I'd just add that, you know, our prescribing is actually pretty much split down the middle with... half being nephrologists and half rheumatologists. So it kind of reflects again what Peter just highlighted, which is the intent to treat pretty much overlap as what we see in our research.
spk11: And Alethea, can you just ask the second question again? I missed it.
spk04: No worries. It was just on like season, how to think about maybe seasonality from like Thanksgiving to Christmas. Do you think that you'll kind of slow down or just, you know, kind of talking about the dynamics that we may see over the fourth quarter? I know it seems like COVID is waning. and scripts were picking up, but then you kind of have the holidays. But I know you haven't gone through the holidays yet with this drug yet.
spk11: Yeah, I think it's still a little early to understand whether there's sort of a summer seasonality to this or not. Because the Delta variant, you know, sort of hit right at the front end of the summer, and we couldn't discern between the two. Matter of fact, I could probably almost pose the question back to you since you talk to a lot of specialty companies out there in this space and what they saw that they thought was pandemic-related or, you know, more summer seasonal. But we're watching it very closely. i want to make sure that people are really clear in the message that we communicated though where we were in a quarter in terms of psfs and where we've trended to as we moved into september and october we've had north of 1265 psfs year to date and if you just do the backwards math on that in the month of october alone it's approximately 160 new patient start forms in the month of october alone so i don't want anyone to take away that we've seen a slowing down of this business. We saw impact specifically in the southeast as it was related to the Delta variant that was off target with what we've seen since the start of this launch. We still feel very confident in our prescription Starform performance as it pertains to year to date, and we don't know yet if the summer was something that's going to be a predictable seasonality. Sorry for the long-winded answer.
spk05: And I would add to that that, you know, we did see a slowdown specifically from Texas to Florida and, you know, to Peter's point, and that has rebounded as we've gotten into September and October.
spk04: Great. Thank you.
spk03: Our next question comes from Ed Ars with H.C. Wainwright and Company. Please proceed.
spk06: Hi, good morning, everyone. Thanks for taking my questions. And let me add my congrats on a strong quarter. First question is, sure, just thinking about the drivers of clinical adoption here. I know you just went over some of the variants early in the summer and what drove that. But given that you're seeing some real acceleration more recently, just thinking about what we should be focused on in terms of the drivers as you increase your PSFs. And in particular, perhaps discuss the impact on prescribing from more recent data. I know we just got 30 months from Aurora 2 and 36 months to come very soon. Maybe talk about the impact of that as you go out there in the field. Thanks.
spk11: Well, to answer your first question, Ed, I think we report the meaningful numbers that we want people to be focused on. And really that's, you know, at the top end of the funnel, it's new prescriptions or patient start forms. And then as we report, it's the conversion of those percentage of those patients to getting on therapy. And you can see whether it's patient start forms, you know, from the time point of the launch to year to date, We continue to see strong growth there. On the conversion front, we've moved from an early stage at the front end of the launch, you know, in or around 30% to 40% to today just below 70% conversion. So obviously that's a critical one. And then lastly, I would say over the course of really this year and into next year, it's going to be tracking compliance or persistency, whatever the right word is you want to use there, how long patients stay on therapy. And obviously, our expectations aren't that 100% of patients are going to stay on therapy. The patients will fall off over time, either for their own reasons or for physicians deciding how long they want to use the therapy. And I'd say the reason we haven't reported more on that to date is because it's just too early. If you think about the max number of doses a patient could have seen if they were approved for the drug in January, it would be in and around nine months' worth of doses up to this point. just don't have enough to really point to a trend there. Max, anything you'd add?
spk05: Yeah, I would say the only thing I would add is that repeat prescribing is now becoming a bigger part of our PSS, and I think that reflects really just the overall increase in confidence with prescribers, both from just understanding our data better as well as gaining experience in treating patients.
spk06: Okay, great. That's helpful. And then a couple more just on the finances for Joe. One is around the R&D expense in the quarter. I know you mentioned the upfront license of the new assets and that being booked as an asset acquisition and that impacted the quarter, but wondering what levels or trajectory in R&D expense we can expect over the coming quarters. And then also with gross margin still staying really high, 98%, 97%. Just thinking about when that will normalize and at what level. Thanks so much.
spk10: Thanks, Ed. Yeah, in regards to the R&D expenses, I think if you kind of trend them out and you take out the one-time payments associated with the two recent acquisitions, and as I mentioned in the script, we also had an accrual of a milestone that we had to fair value as well. So our R&D-related op expenses for the quarter were about, just call it $20 million, just a touch above $20 million. If you look in the prior quarter, that number was around $10 million or so. You take out those one-time upfront payments coupled with the accrual of a one-time milestone and your run rate pretty consistently around 10 million dollars or so and as as we spoke previously i think those numbers will continue uh you know consistently quarter over quarter uh the nature of the expense will obviously change moving away from some of the post approval obligations for uh you know vocal sport and loop kindness into more of our new early stage programs but looking out into you know the outer years and outer quarters i think r d burden will remain fairly consistent In regards to your second question, Ed, I think on gross margin, it'll fluctuate going forward. Obviously, you know, I mentioned we have a monoplant operating manufacturing facility coming online likely in 2023. Once we're kind of have exclusive manufacturing associated with that plant, the margins will move around slightly, but it'll remain very healthy. They may move within a percentage or two one way or the other, but they should be running fairly consistent. This product has a very nice margin associated with it.
spk06: Great. Thanks so much.
spk03: Our next question comes from Marty Raycroft with Jefferies. Please proceed.
spk07: Hi. Good morning, everyone. This is Faiz Dinan from Maury. Can you provide a breakdown of the dose reductions and the compliance you have seen in real-world patients so far? And if your assumptions to get to the 65K net pricing is in line or better than what you initially envisioned?
spk11: So, last question answered first, Maury, on the average net price. We're still, you know, in the range to support, in or above the range to support the assumption that we put out. At this stage, we've not gone deeper on that, primarily because it's still early in the launch, and as a result, we're still getting an understanding of how doctors are prescribing loop kinase. and the number and time to discontinuation, persistence, patient, and payer mix, all of which really impact the actual net realizable revenue per patient per year going forward. Looking at the results we have to date, which is about nine months post-launch, we're currently on or above the guidance we've given previously on average net. now in terms of um what we understand about you know dose reductions that we see out there again i'd say it's early but it's getting long enough in the launch to um to understand it more and you know as we get a little bit more data we'll start to report on it i would say at this stage we're probably close and or hopefully trending slightly above where the trials were. And if you remember, both in the phase two and the phase three trials, we were somewhere in the 25% to call it 30% of patients that saw a dose reduction. So I'd say that we're consistent with that. But we want to see a little bit more data as patients get more experience with the drug. In terms of compliance, it's all wrapped up in what I just said, Maury. You know, we've got to see a year's worth of data at least to really understand what the average patient persistency looks like on this drug. You know, with only nine months under our belt, it's really hard to say what's going to be realizable and projectable forward.
spk07: Got it. One question is, as you know, there have been rumors circulating on several companies approaching you about a potential takeover. So can you provide, like, can you confirm whether any deals are in works and what are you looking for from an ideal perspective?
spk11: Well, we obviously can't comment or speculate on the source of the rumor or recent report, so I'll just leave it at that. Okay.
spk07: Thank you.
spk11: Thank you.
spk03: Our next question comes from Ken Katakotora from Cowan & Company. Please proceed.
spk13: Hey, Peter. I'm going to follow up on that question, even though you're not going to comment on it. Try to just elicit something from you. Obviously, you've been massively in the news, and the stock price is clearly pulling forward what we believe to be eventually wonderful performance on the kinase. But maybe get you to talk a little bit about how you think about standalone versus thinking of or engaging with others? I mean, is it a matter of folks just viewing the opportunity the same as you, kind of coming into an agreement around size of opportunity? Is it what you see in front of you in terms of how you can leverage your own sales force? Obviously, a lot of infrastructure build for a single product, and you're starting the process of building it out. But can you just help frame out for us a little bit, given kind of the the breadth and depth of the rumors that we're all hearing about, just how you think, generally speaking, about either putting your hand up or willingness to speak to others. Thanks so much.
spk11: Thanks for the question, Ken. And I'll repeat what I already said. I mean, we really can't comment or speculate on the source of any of these rumors or recent reports that are circulating in the market. But I think the second part of your question, which is fair, to understand where management and our board's mindset would be as it pertains to continuing to create shareholder value, drive shareholder value, and I guess how I would answer that question is to reinforce what we've said in many calls before this time. We have a business plan and we have a mission as a company, and that business plan is to get this drug to as many patients suffering from autoimmune disease and lupus nephritis as humanly possible. And we remain committed to doing that in a way that drives the most shareholder value, and we remain committed to exploring any and all avenues to complete that mission and do it in a way that is best for driving shareholder value. So I realize that that's a wide open answer, but I think if you read between the lines, No one here at ARINIA has a boxed-in way of thinking about how we both create value and expand access to this product more broadly, either in our hands or in someone else's or in partnership with someone. We remain open to all potential avenues.
spk13: Okay. Thanks, Peter. That's helpful. Appreciate it.
spk03: Our next question comes from Joseph Schwartz with SVD Learing. Please proceed.
spk12: Thanks very much. In terms of the long-term data that you've generated already and the longer-term data that you'll have in late fourth quarter, I was wondering if there's any way that you can quantify for us how important this is in the marketplace. Are there segments of the market that you think are reluctant to use Lipkinus until they see such data? And, you know, how large are these segments? Is there any way that you can provide us with any parameters to help us appreciate the importance of this data?
spk11: Yeah, I think it's a great question, and I think the two biggest In my mind, the two biggest swing factors that are hard to quantify for me today around the launch and the business, one has been the impact of COVID on our first year to launch. To quantify that for you would be difficult. I would say it definitely has, but to say whether it's 20% or 30%, we just don't know. The second, and by the way, COVID decreasing, you know, and seeing lower virus rates, et cetera, we know it will have a positive impact on our business, both with a physician access, patient access, access to care, patients staying on drugs, we know that. The other thing we know that's hard to quantify is that obviously having three years' worth of data on both safety and tolerability data out to three years is better than having just one. And we know that it's going to help our business in lots of different ways. One, we're one of the only products that has data out this long in this patient population. So that's an important thing to note. And with our drug in the class of CNIs, obviously we want to, while we're a new and differentiated new drug, we want to continue to reinforce that utilizing this drug over longer periods of time doesn't compromise in any way the patient's kidney function, which we're hopeful that in three years will actually show that. We know that's going to have meaningful impact both prescribing behavior and probably even more importantly how payers react to reimbursing the drug over longer periods of time when as you know our label today says safety and efficacy beyond one year has not been established so hopefully that it's not a quant answer for you and I apologize for that but we think it's going to be really meaningful to to both our patients physicians and our efforts in getting the drug off the ground and I we will launch this data to the market in terms of what the outcomes are as if it were an extension of a pivotal trial, which it is.
spk12: So you'll be filing an SNDA for that, or what is the actual process in order to be able to promote that data?
spk11: It's a really good question, and no, this is not a supplemental for us. We do owe this data to the agency. They didn't quote-unquote ask for it, but we said we were going to do it, and it is part of our application. But I want to be really clear, technically, we're not putting this in as a supplemental application. We will discuss with the agency how meaningful the data is, what it tells us, and see if we can get to an aligned approach as to how that may or may not be added to the label. Because, I mean, as you know, a supplemental package opens up the entire label for review. And I personally have seen many times where you go in to get – something like this added to the label and they end up changing three or four other areas. So I think we need to be smart and strategic and, you know, talk to the agency. We think it's very meaningful and there should be merit to adding it to some area of the label, but not at this stage as a supplemental package.
spk12: Okay, thank you. And then we notice that the guidance remains unchanged at $40 to $50 million in lymphokinase sales for this year. Can you provide us with any color commentary on how ambitious you think it might be to achieve the high end versus the low end and what the biggest swing factors that you're focused on are? Is it patient star forms, which you've noted are accelerating, or the conversion rate, which is already quite healthy? What do you think will determine where you end up for the year and how ambitious do you think the range is?
spk11: Well, I think what we said when we put up any sort of guidance in the first year of the launch was that we weren't trying to softball anything. In a global pandemic situation, you know, first year of a drug launch, we gave a 10 million range. And what I said when we put it out there was, you know, we're not, obviously we want to be a beat and beat kind of company. But at the same stage, in the first 9, 10, 12 months of a launch, these are not layup numbers for sure. But we remain confident that we can be in this range. And I think, to me, the biggest swing factor here, yes, we want new patient start forms in the quarter. That's critical, right? But a new patient started in the quarter doesn't drive a lot of revenue for us. So it comes down to Continuing to work, convert, and keep compliant those patients that have seen the drug in quarters before. That's going to be the single biggest driver of our performance in the queue, ending out the year, and the biggest driver of what will continue to build that base into first quarter of next year will be those patients start forms. So it comes down to compliance and conversion.
spk12: Thanks very much.
spk03: Our next question comes from Justin Kim with Oppenheimer and Company. Please proceed.
spk02: Hi, good morning, Peter and team, and let me add my congrats on the commercial progress during what's been a certainly challenging environment. Maybe just to probe a little bit more on that point with respect to patient start forms. As you think about the guidance range, is an acceleration in those sort of scripts something that we would need to see to enter the higher end of guidance? That's just sort of, you know, what we're sort of getting at based on our back of the envelope model.
spk11: No, I think the way you want to look at patient start forms, because it was, this is a clear example of it in the quarter is as a, you know, general health and growth of our business, we need to continue to be pushing new patients into this system to, um, effectively thwart any patients that are going to fall out of the system. If we had 100% compliance, we could, you know, we probably wouldn't worry about this as much, but as we continue to see compliance over time, we want to continue to drive patient start forms. The conversion, though, we could, even if patient start forms were lower, like we saw in, not lower, but sort of flat quarter on quarter that we saw due to the Delta variant in Q3, you can still achieve a financial metric as long as your patients convert and stay on drug. But I think you always got to be looking at that patient star form number because it is a general health of business and, you know, sort of future growth of business metric for us.
spk02: Okay, got it. And then maybe just to talk a little bit about Aurora too, does the team have insight on how physicians have been implementing dosing of Aquasporin in those outer years and how representative that may be of real-world practice as sort of more meaningful patients transition from having hypoteneuric disease going into 2022?
spk11: Yeah, as we've said, it's early, so it's really hard to deduce what the trend will be going forward. We are watching both physician behavior here And patient behavior. Remember, we have this patient population is a difficult one and can be pretty notoriously uncompliant. So we are looking very closely not only at physician prescribing behavior, but at persistency as it pertains to the patient and staying compliant and staying on drug. And I just think we're not trying to in any way walk away from this question. I just think you need more than six to nine months' worth of data to say you know anything about the persistency of your drug. But over time, this is going to be one that we can't not speak about when you have a year's worth of data that's out there or more. And we, as we've said on previous calls, have every belief that we'll do that. So far, things have looked good, but I don't want to false report that, you know, what compliance will be until I have a project of what I believe will be a projectable number, and that's time.
spk02: Understood. And maybe just a final question. In terms of that insight on persistency, does that complicate or make it more challenging to provide guidance for 2022? And when might we be able to have that sort of viewpoint and color?
spk11: Yeah, we haven't given any feel on what and if we're going to guide for 2022. Much like the first year of launch, there are factors we just got to take into case like patient re-ups. how the Aurora II extension study and what that readout will mean for us. There are a lot of factors that are going to be playing on 2022, and I think we need to just be careful and really know, you know, see what we do know as we roll into Q4 and how we can project that out for the year. I'm not saying we won't give guidance, but at the same time, I'm not conclusively saying we will. I think we've got to look at all the factors. If anything, I think investors should feel very comfortable that we've been extremely transparent and maybe even more than we should about the early launch metrics and how they bled into this year. And I wouldn't see anything changing for us in terms of our desire to be transparent, very transparent with investors about our performance and how our brand is performing. Agreed. Thanks so much and congrats on the progress.
spk03: Thanks, Justin. Our next question comes from David Martin with Bloomberg. Please proceed.
spk09: Yes, good morning. First question, if a patient is coming in with newly diagnosed lupus nephritis, are the physicians first treating them with MMF and steroids and then adding leucinus if they don't respond to that combination, or are they starting with the three drugs?
spk11: I think the majority of patients today, David, are being treated in the way you're laying it out. But there are a minority of patients, and of course our aspiration, which will be to totally change the treatment paradigm and start with the triple therapy up front. I think the thought leader basin where people are challenging each other right now at that level is on thinking about therapy in the future in that way. But the reality of our systems today, how payers work, et cetera, the majority of patients that are being treated today are ones who are seeing breakthrough after seeing an MMF and steroid regimen. That's not where we aspirationally position the drug, which is where we position it right up front with where our data is, which could be a newly diagnosed patient or it could be a patient who's seen a course of a therapy or multiple therapies.
spk09: Okay, great. Next question. Are there any thoughts of doing a trial in combination with cyclophosphamide or is that becoming less and less used in treating lupus nephritis?
spk11: It's not a discussion we have at this stage. Other combo trials, yes, but not with cyclophosphamide. I think if anything, and my comment here is not a commitment to do anything, but an area where we get questions is, you know, combination therapy with B-cell therapies as they move forward. Okay.
spk09: And then last question. I know there was a sub-study with pre- and post-biopsies. Any idea when that data is going to be published or presented?
spk11: No, because of the complexity of the study, the central readership, the fact that, you know, there are a lot of complexities around how that study can be executed or how that subset can be executed. We've not committed to a timeline on that. First step, of course, would be getting the extension data. And as we've said, we have that by year end. But no definitive timeline yet.
spk09: Okay, great. Sorry, I do have one other quick question. With the two- and three-year data, is there a chance you think you could get the nephrotoxicity warning off the label if everything comes up clean?
spk11: Neil's on the call, too, and I think he'd have an opinion here. I think it's a reach. You know, there's a class of drugs that came before us that have, you know, decades of experience in transplant. where this is prominent in their label. And I think we should be very happy with how our label came out as it pertains to class labeling. And I would not see a world where three years' worth of safety and tolerability data is going to get us that. Neil, would you have a different view?
spk01: No, I would agree completely. This is class labeling, David, that's based on decades of experience with the other calcineurin inhibitors and we would have to positively disprove in all areas that we cause any of that, and this study was not designed to do that.
spk09: Got it. Okay. Thank you.
spk03: Our next question comes from Doug Meeam with RBC Capital Markets. Please proceed.
spk14: Good morning, Peter. Just a quick question in terms of a follow-up with respect to compliance. Can you tell me what the company is specifically doing to –
spk05: aid in ensuring that the compliance stays as high as possible yeah i'll kick that one to max klaus since we tactically and medically have a lot of things we're doing max yeah sure so um you know about 90 of our patients are consented through arena alliance and so they they through that through any alliance we provide case management support, regular case management support to all the patients. The patients have dedicated nurses that reach out to them again consistently for education and support. So that's probably the most impactful part of how we support compliance. And then beyond that, we also make sure that the communication is really clear between the patient, the physician, the office staff through, again, through Arrhenia Alliance. So I would say that's really, you know, again, we developed Arrhenia Alliance to really support patients, you know, considering the fact that this is a rare disease and a disadvantaged patient population. And we absolutely hear and see the benefit of the support that we provide.
spk14: Okay, great. And the second question, Peter, and maybe I misheard you and you can correct me, but in speaking about the drug, you said obviously it's indicated for LN, but more broadly autoimmune disease. Has there been any evidence that you're seeing or could see off-label use of this drug based on any doctor conversations that you've had?
spk11: Well, to be crystal clear, what I said is our mission as a company is to get this drug to as many LN patients and to continue to move our pipeline forward in other autoimmune diseases. And obviously, we don't do anything in the market to drive off-label promotion of any kind. Physicians are free to prescribe the drug where they want to as long as they get their payers aligned to do it, but we surely are not promoting to that. Your broader question about where will we take the drug or could we see the drug going in different areas in terms of a regulatory filing approach. What I've said historically is we've looked at this as a team and at least at this stage we don't see other areas that would warrant full development programs, but we get tested on that pretty often from physicians out there who have curiosity about where they might use the drug. So right now that's centered through our clinical and our medical affairs organization. And if anything becomes bigger than a conversation or something that's looked at from an individual investigator basis, we'll be sure to reach out to you and let you know.
spk14: Okay, thanks very much.
spk03: Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back over to management for closing comments.
spk11: No further closing comments here. I want to thank everybody for their time and look forward to updating you in the months and quarters to come. Have a great day.
spk03: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
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