Aurinia Pharmaceuticals Inc

Greetings, and welcome to the Arena Pharmaceuticals first quarter 2024 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the conference over to Andrea Christopher, Head of Corporate Communications and Investor Relations for Arena Pharmaceuticals. Please go ahead, Andrea.

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, ARINIA's Chief Executive Officer, Joe Miller, our Chief Financial Officer, and Dr. Greg Keenan, our Chief Medical Officer. Today, we will review and discuss ARINIA's 2024 first quarter financial and operational results, as communicated in the company's press release issued this morning. The company also filed its quarterly financial statements on Form 10-Q this morning. For more information, please refer to Arrania's filings with the U.S. Securities and Exchange Commission and applicable Canadian securities authorities, which are also available on Arrania's website at arraniapharma.com. During today's call, Arrania may make forward-looking statements based on current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially. For a discussion of factors that could affect Arrania's future financial results and business, Please refer to the disclosures in ARINIA's press release, its quarterly report on Form 10-Q, 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 Authority. Please note that all statements made during today's call are current as of today, Thursday, May 2, 2024, unless otherwise noted and are based upon information currently available to us. Except as required by law, ARINIA assumes no obligation to update any such statement. Let me turn the call over to Arunia's President and CEO, Peter Greenleaf. Peter?

Thanks, Andrea, and good morning, everyone. I want to thank everybody for joining us on today's call. On this morning's call, we will focus on the company's first quarter performance. I'll then turn the call over to Joe Miller, our CFO, to provide additional details on our financial results. We saw continued strong momentum in the first quarter, reflecting the initiatives that the company's focused on. including demonstrating solid commercial execution, rapidly restructuring the company and reducing our headcount by approximately 25%, and accelerating the company's timeline towards cashflow positivity. So now let me dive into the first quarter business performance and how we're executing on these overall initiatives. For the first quarter of 2024, Arunia achieved $50.3 million in total net revenue, representing growth of approximately 46% year over year. We achieved $48.1 million in net product revenue, representing significant growth of approximately 40%. With this momentum, we remain on track to achieve our net product revenue guidance range of approximately $200 to $220 million. In terms of our restructuring efforts, We executed with speed and precision following the announcement on February 15, while maintaining our focus on loop kindness and growth. While we've ceased development on AUR 300, we are currently exploring alternative approaches for AUR 200. Taken as a whole, we expect the restructuring will drive the organization to a cash flow positive position, excluding share repurchases, and over time will provide meaningful accumulation of cash, increasing tangible value, and allowing more flexibility for the company for the future. As part of our corporate restructuring, we reduced employee headcount by approximately 25% in the first quarter. With this effort, we expect to reduce operating expenses by $50 to $55 million over the next 12 months. and approximately 75% of that will be recognized in this year. The company expects total annualized operating expenses on a go-forward basis to be in the range of $185 to $195 million, with cash-based operating expenses of approximately $155 to $165 million. With these achievements in mind, I'm very pleased to confirm that we expect to be cash flow positive, excluding share repurchases, in the second quarter of 2024 ahead of our prior projections. On the commercial front, we are laser focused on driving loop kinase revenues and have several key commercial metrics driving the brand's trajectory. In the first quarter, we added 448 patient start forms and approximately 148 new patients who were either restarting loop kinase or receiving it through the hospital pharmacy. Together, these total approximately 596 PSFs in combination with restarts and hospital fills versus 466 PSFs in the prior year first quarter, representing substantial year-over-year growth. There were approximately 2,178 patients on loop kinase therapy as of March 31, 2024. In comparison to approximately 1,731 patients as of March 31st, 2023, an increase of approximately 26%. And this was driven by overall improvements in all key commercial metrics. Net realizable revenue per patient for Lupconis remains higher than our initial guidance of $65,000 per patient on an annualized basis. As persistency, adherence, and pricing have evolved over time, we now believe that net realizable revenue per patient will be in the range of $70,000 to $75,000 on an annualized basis. From the start of the year through April 28, 2024, the company has added approximately 582 PSFs and approximately 170 new patients from restarts in the hospital channel. We continued to sustain high conversion rates with approximately 85% of PSFs converting to patients on therapy. We also sustained a rapid conversion time with approximately 60% of patients starting therapy within 20 days. Our overall adherence rates remained high at 87% through the first quarter and persistency grew year over year from approximately 51% of patients remaining on therapy at 12 months to approximately 56% remaining on therapy at 12 months. Additionally, in the first quarter, 50% and 46% of patients remained on therapy at 15 and 18 months, respectively. Based on all of the above, we are reiterating our full-year guidance Our metrics demonstrate continued growth that is driving the upward trajectory of lupkinus. We are heading towards cash flow positivity and increasing the company's financial strength and flexibility for the future. Along with this strong financial performance, we also recently achieved several key milestones reflecting the importance of lupkinus as a best-in-class drug with a strong clinical portfolio that aligns with the most current treatment guidelines. As announced earlier this week, the FDA has approved a label update for loop kinase. The label no longer includes language indicating that the safety and efficacy of loop kinase has not been established beyond one year. The label now includes long-term data from a post hoc analysis of the Aurora 2 extension study. The data showed that patients receiving loop kinase achieved sustained complete renal response at every time point assessed throughout the three years when compared to MMF and low-dose glucocorticoid steroids alone. Shifting to our marketing efforts, we recently launched the Know the Signs campaign, an innovative and new campaign designed to increase awareness among rheumatologists about the severity of lupus nephritis and the urgent need to prioritize kidney health for people with lupus, as well as encouraging them to increase screening for lupus nephritis among lupus patients. With an underdiagnosed and underserved population, we continue to believe there is still significant untapped potential in the LN market. Current screening and treatment guidelines are not actually being followed. We know that a high percentage of lupus and lupus nephritis patients are not being given regular urine screens at every visit and may still only receive steroids when proteinuria levels indicate additional treatment is necessary. Yet, Our clinical trials have shown that lupkinase reduced proteinuria roughly three times faster than MMF in steroids alone. This is why we're heavily focused on improving physicians' understanding of the seriousness of lupus nephritis. We want rheumatologists to understand the necessity of more aggressively treating and diagnosing LN patients by treating to target protein levels and keeping them on therapy for a minimum of three to five years. all of which closely aligns with current treatment guidelines. Regarding commercial activities outside the U.S., we're seeing continued revenue from Otsuka's launch activities in Europe, and we're also working diligently to expand access to loop kinase to another key market with our pending regulatory approval in Japan. As previously noted, we expect to receive a response from the Japanese regulatory authorities in the second half of this year regarding the JNDA that Otsuka filed in November of 2023 for the approval of lupkinis to treat adults with active lupus nephritis. Upon approval, we expect to receive a milestone of $10 million, and from there, low double-digit royalties on net sales once launched. So in summary, we believe our first quarter accomplishments reflect solid execution against our previously announced business priorities. I also want to recognize that May is Lupus Awareness Month. At Arrhenia, we take great pride in the work we do every day to improve the lives of people living with lupus nephritis. We are committed to making a difference for this patient community, and we never lose sight of that.