Aurinia Pharmaceuticals Inc

Greetings and welcome to the Arena Pharmaceuticals Inc. fourth quarter and 2022 earnings call. At this time, all participants are on 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, Jamie Harrell, Investor Relations for Arena Pharmaceuticals. Thank you. You may begin.

Thank you, Operator, and thank you all for joining today's call and webcast to discuss ARENIA's fourth quarter and full year 2022 financial and operational results. Joining me this morning are Peter Greenleaf, Chief Executive Officer, and Joe Miller, Chief Financial Officer. This morning, ARENIA issued a press release announcing its final audited financial results for the fourth quarter and full year ending December 31, 2022, as well as its recent operational highlights. In addition, the company filed its annual financial statements on Form 10-K. For more information, please refer to Arrhenius' filings with the U.S. Securities and Exchange Commission, which are also available on Arrhenius' website at arrheniapharma.com. During this call, ARINIA may make forward-looking statements based on current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially. For discussions of factors that could affect ARINIA's future financial results and businesses, please refer to the disclosures in ARINIA's press release and its annual financial statements on Form 10-K, along with all of the recent filings with the U.S. Securities and Exchange Commission and Canadian security authorities. Please note that all statements made during today's call are as current of today, February 28, 2023, unless otherwise noted and are based upon information currently available to us at this time. Except as required by law, Arinia assumes no obligation to update any such statements. Now let me turn the call over to Arinia's President and CEO, Peter Greenleaf. Peter?

Well, thanks, Jamie, and good morning, everyone. Let me first thank you all for joining us on the call today. As you may have noticed, we issued preliminary unaudited fourth quarter and year end numbers in early January. So on this call today, we're going to provide you with the final audited results for the fourth quarter and year end 2022. In addition to the quarterly and year end financials, we'll provide you with an update to our ongoing commercialization activities with a strong focus on the progress we've made through the first couple months of this year. We'll also provide you with an update on our efforts in the XUS markets, cover off on the advancement of our pipeline, and then provide a brief recap on the IP front for Luke Kynas. After this overview, I'll then turn the call over to Joe Miller to provide additional details on the financial results. So let's get started with our 2022 business performance. For the full year, Irinia achieved $134 million in total net revenue. which represented a 194% increase over 2021. We achieved $103.5 million in net product revenue, representing 120% increase over the previous period. For the fourth quarter 2022, we achieved a $28.4 million in total net revenue and a $28.3 million in net product revenue, representing a 21% increase over the fourth quarter. Moving to more detail behind our financial results. During the fourth quarter, Arinia added 406 patient start forms, or PSFs. This represented a 9% increase over the 374 patient start forms that we added in the third quarter of this year. For the full year, we added a total of 1,648 PSFs. And it's important to note that the growth in PSFs was significant in the months of November and December. This momentum was achieved during the months with shorter weeks due to holidays, and we believe shows how the work we initiated in the third quarter is starting to pay off. We also monitor our conversion rates from patient start forms to patients on therapy as well. The amount of time that it takes to ship drugs to patients. I'm pleased to report that we continue to improve our PSF conversion to patients on therapy, reflecting more than 85% of PSFs being converted to shipped on drug. We are now also improving the time it takes to get patients on therapy. In the fourth quarter, we increased our processing speed at all time periods, 30, 60, and 90 days. with approximately 60% of our patients getting on therapy in 20 days or less. I want to note that this is meaningful improvement over the first 18 months of the launch. Our 12-month persistency remains at approximately 50%, but when we look out past one year to 15 months, we're encouraged to see almost 45% of patients remaining on therapy. Consistent with prior periods, adherence to treatment regimen remains strong at approximately 80% at year end. Exiting 2022, a total of 1,525 patients were on therapy. This is an increase of greater than 75% versus 2021 and an improvement of approximately 13% over Q3. The increase in patients on therapy in the last quarter was driven predominantly by improvements in new PSFs, conversion rates, and processing speeds. Our net realizable revenue per patient for loop kinase remains higher than our initial guidance of 65,000 per patient per year. But as we discussed previously, we expect to approach this figure on an annualized basis as more patients go on and stay on therapy over time and as persistency, dosing and payer mix evolve. Every quarter since the initial launch, this number has ranged closer and closer to our annualized estimate. As we've said in the past, the biggest driver of this estimate is dose adjusting and persistency, and I underscore not significant payer access discounts driving margin erosion. Moving to the tactical actions that we initiated in the third quarter. We launched a new marketing campaign to healthcare professionals, emphasizing improved clinical outcomes with Leukinus when compared to the historical standard of care. More specifically, we are educating physicians on the efficacy of Leukinus, its more complete response rates, including speed and durability, as well as the ability to rapidly reduce steroids. And lastly, we're emphasizing Leukinus' efficacy in minority patient populations, which represent the majority of SLE and lupus nephritis patients. Our customer-facing teams in the field are focused on clinical differentiation and delivering the lupkinus clinical story toward the highest targeted potential writers. Our activity against these targets has steadily increased throughout the quarter and into the new year. In addition, in the back half of the year, we increased initiatives focused on patient education and building awareness. In Q3, we launched a new consumer campaign focused on both disease awareness and patient activation, with the goal being to motivate the patient to seek urinalysis and treatment, and of course, when doing so, reinforcing the benefits of treatment with lupkinis. There's room for importance in screening for proteinuria during SLE patient visits. A recent 2019 Optum Healthcare study, which was compiled of 100 million electronic health records from about 150,000 SLE patients, revealed that approximately 50% did not receive urine screening for lupus nephritis. The guidelines across multiple bodies drive urine screening at every visit as a treatment goal. If every SLE patient receives a urinalysis screen during their regular visits, we would identify more lupus nephritis and do it earlier in the disease progression. This represents a big opportunity for better patient management and, of course, the potential for more disease diagnosis. Lastly, we identified and contracted with a nationally recognized spokesperson to further raise awareness around lupus nephritis and its consequences. While we're not actually talking about the details of this partnership today, We look forward to updating you more on this exciting partnership as we get closer to its launch. While much of our marketing approach is designed to increase the depth and frequency of prescribing among our existing physician base, we continuously work to ensure that all patients and prescribers have a good experience with accessing the product. Our RNA Alliance patient support team continues to make the process of product acquisition as seamless as possible for every patient and their provider. The impact of this group's work is evidenced by the increased speed of starting patients on therapy, as well as improved retention and adherence rates. In the fourth quarter, our team spent significant amount of time working with patients and caregivers on the transition into 2023. Many times, year-over-year insurance plan changes, policy changes, and patient co-pay resets can interrupt patient therapy in the first quarter of the following year. We put significant work against this to help ensure continuity of care moving into 2023. In addition to our commercial execution, it's important to note that our medical team's efforts related to loop kindness are crucial to driving education awareness, and overall adoption. Over the past few quarters, we've generated significant visibility with healthcare providers with a substantial in-person presence through one-on-one conversations with physicians in both their offices and all major medical conferences. During 2022, we developed and presented sub-analyses of data from both the Aurora I and Aurora II Extension Study to further the clinical understanding of lupus nephritis and our drug's impact on the disease. Again this year, we plan to submit or have already submitted data for abstract and podium presentations at all major medical conferences. Our medical team continues to be a critical part of our overall education efforts. We continue to build on the momentum we established in the fourth quarter with daily prescription trends improving quarter over quarter. As of February 24th, we have added an additional 274 PSFs, bringing our total PSFs since launch to approximately 3,500. Based on everything discussed, we are reaffirming our net product revenue guidance for this year of $120 to $140 million. In 2022, we achieved significant milestones on loop kindness in the global markets. As a reminder, we partnered with Atsuka to commercialize loop kindness in certain European countries and Japan. This collaboration agreement spans clinical, regulatory, commercial, and manufacturing, all in a milestone-driven, royalty-based, and cost-plus arrangement. In the fourth quarter, we received a $30 million milestone payment related to the marketing authorization for Loop Kindness in the European Union. Additionally, the UK's MHRA granted approval in Great Britain in November of 2023. Atsuka has also submitted an MAA filing to Swiss Medic, which is currently under review with approval expected in the first half of 2023. When we receive pricing and reimbursement approval in three of the five major countries in the EU, this will trigger an additional $10 million milestone from Otsuka. Currently, we expect this milestone in late 2023. We anticipate first commercial sales in Europe during the first half of this year. Moving to Japan, our efforts to gain regulatory approval remain on track. We currently expect a PMDA submission in mid-2023. Upon approval, we would be eligible for an additional $10 million milestone payment from Otsuka and then low double-digit royalties on net sales. While we have issued press releases throughout January on this topic, shifting gears, I'd like to provide you with a brief recap on our recent progress on the intellectual property front covering Lucanus. To start, we reached a settlement with Sun Pharmaceuticals resulting in part in the termination of the inter partes review of our 036 method of use patent by the US Patent Office. As a reminder, that patent has a term extending to December 2037. As we've stated previously, the terms of this settlement remain confidential, though as we've noted, both parties agreed to dismiss their claims and counterclaims and cease to bring any further action against each other. We've also received a notice of allowance from the U.S. Patent and Trademark Office for our patent application relating to an improved treatment protocol of lupus nephritis with our product Lupkinus, further strengthening our patent position with more specific language associated with our unique dosing regimen. We would be seeking to have that patent listed in the orange book once issued. And this patent, once granted, would also have a term extending to December 2037. And then finally, we recently received a notice of intention to grant from the European Patent Office for a patent application with similar claims to our 036 Method of Use patent, which, once this is granted, would provide additional IP protection in the European Union. Obviously, these are important milestones in the continued development of our IP as a company. Shifting gears to the ongoing clinical work for loop kinase, it remains on track. This includes the advancement of both the vocal pediatric study and the Enlight LN registry. With the registry, we now have 44 activated sites with 45 patients enrolled. Our plan is to leverage real-world data collected from this study to gain further knowledge about patients taking lupkinase and to help clinicians and payers improve the overall patient care of patients suffering from lupus nephritis. Throughout 2023, we look forward to updating you on the progress of our research pipeline. As of now, we continue to advance the IND enabling work for both AUR200 and AUR300. Our aim is to submit an IND for AUR 200 by the end of 2023, and an IND for AUR 300 in 2024. We ended 2022 with a strong balance sheet, and we intend to continue to prioritize and focus our investments towards commercialization, with the growth of Loop Kindness being our primary priority, and of course, the development of our emerging pipelines. So with all of that, let me now turn the call over to Joe Miller for a more detailed review of our financial results, and then I'll return at the end of the call for a quick recap and to open up the line for any questions you might have. Joe?