Aurinia Pharmaceuticals Inc. (AUPH) Q2 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to the Aurinia Pharmaceuticals Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dr. Glenn Schulman, Head of Investor Relations. Thank you, you may begin.

Thank you, Jessie, and good afternoon, everyone. Welcome to Aurinia's second quarter 2020 conference call. Joining me on the call from the Aurinia team today are Mr. Peter Greenleaf, President and CEO; our chief commercial officer, Mr. Max Colao; Mr. Joe Miller, our Chief Financial Officer; and Dr. Neil Solomons, Chief Medical Officer, Aurinia. This afternoon we issued our press release and associated financial statement package detailing the second quarter 2020 financial results, both of which are available on our website at www.auriniapharma.com and filed via 6-K with the SEC. Before jumping into some brief remarks from the team, I'd like to remind everyone that today's call is being webcast live on Aurinia's Investor Relations website, and a replay will be available approximately two hours after the completion of today's call. Please also note that the content of today's call is the property of Aurinia. It may not be recorded, reproduced or transcribed without prior written consent obtained from Aurinia. For approval, please feel free to reach out to me, Glenn Schulman, via e-mail at ir@auriniapharma.com. Also note, during the course of 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 disclosure in today's press release, our most recent filings with Canadian Securities authorities and reports we file on Form 6-K with the U.S. Securities and Exchange Commission. Also, please note that all of the statements made during today's call are current as of today, Tuesday, August 11, 2020, and are based upon information currently available to us. Except as required by law, we assume no obligation to update any such statements as of this date. So, I know everyone is busy in the summertime, so I'm going to turn it over to Peter for some brief opening remarks and updates from Neil and Max and Joe regarding our pipeline, commercial preparation for voclosporin and our financial results. After that, we'll give a quick – after those quick remarks we'll also open it up for Q&A. With all of that, let me turn the call over to Peter Greenleaf, Aurinia's President and CEO. Peter?

Hey, thanks Glenn. And on behalf of the company I want to thank you all for taking the time with us to review our second quarter results. As Glenn mentioned, we issued our second quarter 2020 results this afternoon along with operational highlights from the past few months. As a team we're incredibly pleased to be making such a significant progress towards our goal of launching the potentially first ever FDA approved therapy for lupus nephritis and getting our chance to make a real difference for the lupus nephritis community. This community has been underserved for too long with no approved treatment options for the management of their disease and the prevention of progression and to potentially life-threatening kidney failure. Lupus nephritis creates significant specific burdens on both patients and the healthcare system. Even relative to sufferers of SLE, and we are incredibly proud of the work were doing, both with voclosporin and in our engagement with this community to improve awareness and hopefully outcomes for patients suffering from lupus nephritis. So moving on to our operational highlights, we will spend just a few minutes this afternoon to provide a quick recap before turning the call over to your questions. And needless to say, 2020 has been a very, very busy year for us so far and things are ramping up even more so as we focus on potentially successfully launching voclosporin in the near future. We have made significant progress since we turned the data card last December from the AURORA pivotal trial and have been rapidly and responsibly growing the organization in order to be launch ready with voclosporin for the treatment of lupus nephritis by the end of 2020. Our clinical and regulatory teams continue their excellent execution with the early filing of our NDA package for voclosporin with the U.S. FDA this past May even besting our internal goal by getting the filing into the agency nearly 30 days earlier than we had anticipated. As we announced a few weeks ago, our NDA filing for voclosporin was accepted by the U.S. Food and Drug Administration, it was granted priority review and given a PDUFA date - action date of January 22, 2021. In addition, based on communication received from the Agency, the FDA has stated that they do not intend on holding an advisory committee meeting prior to the action date. We internally view this as a positive signal, but that hasn't stopped our internal preparations for an Adcom since the agency reserves the right to change their view during the course of their review process. In parallel we've been building out an experienced and nationally distributed commercial team which we are actively recruiting in the months we last spoke in May. Despite the almost entirely virtual nature of our current operations, our recruitment efforts have gathered a world-class team with many talented and high-performing individuals with successful track records in the industry. This specialist phenotype is strongly aligned with our commercial leadership team put into place earlier this year. The rapid development of the commercial function has been gratifying and are united in their drive to swiftly move and efficiently get voclosporin to patients in need after the potential approval. To that end, we anticipate on having our sales force on-boarded, trained and launch ready by year-end. I also thought it was important to make mention of the successfully completed follow-on offering, which brought in over $200 million in gross proceeds to fortify the balance sheet and provide working capital for the next several years excluding any revenue or non-dilutive capital realized from possible in-licensing or other ex-U.S. partnerships for voclosporin. With a robust cash position of nearly $442 million we can now fully execute on our plans. So with that brief overview, I'll now turn the call over to Dr. Neil Solomons to add additional color regarding the ongoing NDA review process and the ongoing voclosporin development programs. Neil?

Thanks, Peter and good afternoon everyone. As Peter mentioned, it has been a very exciting and busy time for the entire clinical and regulatory groups. Given the number of years that my team has worked on advancing the standard of care for patients suffering from lupus nephritis, we are truly humbled to be on the cusp of delivering on a potential therapy that can make the difference for these patients. And we are also quite gratified in the progress we've made through our recent regulatory interactions with the FDA. As a reminder, the Aurinia team maintained is regulatory momentum through the COVID-19 pandemic and filed the NDA with the FDA approximately 30 days ahead of our internal estimates. The date the letter received in July was also welcome news, but not only did the FDA validate and accept our voclosporin filing for review but also granted it Priority Review with the PDUFA date scheduled for the 22 January 2021. As we also announced last month, the Agency indicated in their response as well as and recently we received a 74 [ph] letter that they do not anticipate the need to host an Advisory Committee Meeting for this application. That said, as Peter mentioned earlier, the FDA retains their right to change their mind throughout the review period with respect to scheduling an outcome process PDUFA date. Therefore the team continues to prepare as though an outcome will take place and continues ongoing [indiscernible] with the Agency regarding the proposed label, scheduling clinical and manufacturing site visits and other routine activities during the review period. We are also working diligently to characterize additional proteinuric kidney conditions that we could evaluate voclosporin against. Over the next few months, we will complete an internal deep dive combining insights from across the organization and we look forward to provide updates on the indications later this year. Switching gears to our voclosporin ophthalmic solution or VOS, the program for dry eye, we were pleased to announce recently that we have completed patient enrollments in the AUDREY Phase 2/3 study. This 12-week dose ranging study is evaluating three doses of VOS, 0.2, 0.1, and 0.05% compared to vehicle. The primary endpoints of the study is improvement in Schirmer Tear Test of greater [indiscernible] thermometers at four weeks, with secondary endpoints at 12 weeks. In addition, we are evaluating corneal staining as well as improving symptoms of dry eye. With enrollment complete, thanks to the incredible work of our clinical operations, developments and biostats teams we are on track to report topline results in this Phase 2/3 clinical trial during the first quarter of this year. The results will also determine the next steps in the development program and guide our planned interactions with the FDA we expect to have after results are available and before the initiation of a second potential pivotal trial of VOS. With that brief update on the clinical and regulatory fronts, I'll pass the call over to Max. Max?

Thanks Neil, and good afternoon everyone. Thanks for taking the time. I want to take a couple of minutes to highlight the progress that we're making and becoming launch ready for voclosporin potential approval in lupus nephritis. As peter mentioned earlier the commercial organization has grown exponentially over the course of 2020 and it is especially gratifying for me to see the depth and breadth of relevant experience of the individuals that we recruit as they join our team. Across the board, we've attracted the most tenured individuals with nephrology and/or rheumatology experience in the industry. Each member of our field team has at least 10 years of nephrology and/or rheumatology experience. As a potentially first pharmaceutical company to support LN directly, we feel the responsibility to serve this patient community and we're holding ourselves to the highest standards in building a premier rare disease commercial team. The patient will be at the center of our efforts surrounded by specialized, highly trained resources to support every step of the treatment journey, from LN diagnosis to a treatment decision, to navigating access and reimbursement and to remaining on treatment as prescribed. At every step of the treatment journey, we understand how LN patients can miss the opportunity to receive optimal care and potentially avoid disease consequences, such as kidney failure. We aim to be at every step of the journey to support LN patients with dedicated experts in a way that is different from others. During the last call, we introduced our expanded and highly experienced commercial leadership team. We have made great progress in building on our strong foundation of leadership across access, sales professional relations, advocacy, patient services, training and operations. At last count, we've had more than 8000 applicants for our open positions. We have interviewed more than 1000 candidates and we've hired more than 100 in the last three months. As of now we've completed hiring for almost all our customer facing roles. As Peter said, we are focused on being launch ready before our PDUFA date and we're well on track to do so. The commercial organization also continues to come online and appropriately engaging customers. We have now started to engage payers to ensure they recognize the burden of LN and value of our therapy for patients. We've enhanced our occasion efforts and we're finalizing our launch plans. We're also well on track with building the infrastructure for customer engagement, compliance and operations, that aims to meet the highest expectations of our patients and customers. With that review, I'll now pass it over to Joe for recap of the financial results. Joe?

Thank you, Max. On the financial front, Aurinia had cash, cash equivalents and short term investments of $264.4 million at June 30, 2020 compared to $286.1 at March 31, 2020 and $306 million at December 31, 2019. Net cash used in operating activities was $22.6 million for the second quarter ended June 30, 2020 compared to $13.3 million in the same period last year. As we detailed in this afternoons press release for the three month ended June 30, 2020 we reported a consolidated net loss of $29.5 million or $0.26 per common share compared to a consolidated net loss of $15.9 million or $0.17 per common share for the second quarter ended June 30, 2019. The loss for the second quarter ended June 30, 2020 reflected an increase of $3 million in the estimated fair value of derivative warrant liabilities compared a reduction of $625,000 in the estimated fair value of derivative warrant liabilities for the second quarter ended June 30, 2019. The derivative warrant liability will ultimately be eliminated on the exercise of forfeiture of the warrants and will not result in any cash outlay by the outstanding warrants expire on December 28, 2021. The loss before the change in estimated fair value of derivative warrant liabilities and income taxes was $26.6 million for the second quarter ended June 30, 2020 compared to $16.5 million for the same period in 2019. R&D expenses decreased to $11.1 million for the second quarter ended June 30, 2020 compared to $11.2 million for the second quarter ended June 30, 2019. The decrease in the expenses primarily reflected higher costs related to the preparation of the NDA submission and related supporting activities, the ongoing VOS Phase 2/3 AUDREY trial, the AURORA 2 extension trial and the expansion of the medical affairs team to support the launch of voclosporin partially offset by lower AURORA trial costs, and this trial has now been completed. Noncash stock compensation expense charged to R&D also increased to $1.1 million for the second quarter ended June 30, 2020 compared to $749,000 for the comparable period in 2019 reflecting the hiring of a significant number of personnel in 2020 and an increase in the fair value of the stock options granted into an overall increase in the company's share price. Corporate administration and business development expenses increased $15.5 million for the second quarter of 2020 compared to $4.9 million for the second quarter of 2019. The expenses included the expansion of the commercial team, higher consulting and professional fees, insurance costs and personnel compensation costs as the corporate, organization build out continued into the second quarter of 2020. Non-cash stock compensation expense charged to corporate, administration and business development also increased to $3.1 million for the second quarter ended June 30, 2020 compared to $1.2 million for the comparable period in 2019 reflecting the hiring of a significant number on 2020 and an increase in the fair value of the stock options granted due to an increase in the company's share price. Following the recently completed $200 million public offering, which closed on July 27, 2020. The company's cash, cash equivalents and short-term investments totaled approximately $442 million at July 31, 2020. We believe that following this raise we have sufficient financial resources to fund our current operating plans, which include our ongoing research and developing programs, completing the ANDA submission to the FDA, conducting pre commercial launch activities, manufacturing and packaging of our commercial drug supply and fund and support our corporate and working capital needs. With that review I'll pass it back to Peter for some closing remarks. Peter?

Hey, thanks Joe. Let me echo before opening up the Q&A, our overall pride in the ability to attract so many high quality professionals, to our mission as a company at this exciting and really productive time for us here at Aurinia. Our deepened engagement with the lupus nephritis community has underscored the importance of delivering a new standard of care to these people and potentially changing the course of their disease and their lives. We feel the importance of that mission which we've been impressing on all our new staff and it's driving our feeling of urgency to deliver an outstanding launch of voclosporin. With regards to the dry eye syndrome program for voclosporin, the AUDREY results anticipated in the fourth quarter will build upon the exploratory Phase 2 data produced last year which pending regulatory discussions would lead to a confirmatory pivotal study for VOS. With a strong balance sheet and cash, cash equivalents and short-term investments of approximately $442 million at the end of July, we are amply funded to support the launch of voclosporin and continued execution on our pipeline. I want to thank you all for your attention today and the team and I are here to answer your questions. So with that operator, please open up for the Q&A session.

Thank you. [Operator Instructions] Our first question comes from the line of Alethia Young with Cantor Fitzgerald. Please proceed with your question.

Hey guys, thanks for taking my questions and congrats on a lot of the continued progress that you guys have been making. One I guess is kind of focusing a little bit on the launch and I mean, I was looking at some of the subgroups in the AURORA study and just wanted to kind of talk about where you might think some of the – who are the people that might benefit the most, you know whether it be by race, or gender, or any other kind of like prespecified measure that might be the – obviously for the therapy? And then can you just talk a little bit about kind of how you are managing and I'm thinking about kind of dose adjustments in the real world, I know happened during the clinical trial, but just trying to kind of understand how some of these, physicians will work through that in the real world and kind of guide and give them, thanks?

Yes, so I think the first question, let me start and then I'm going to try to pass to Max and he can give you a little bit of an update on what we've been doing in terms of our commercial preparation how we're thinking about population, the dose adjustments. I mean a lot of it is going to come down to how the label comes across and but it is a great question as to how we're going to sort of guide physicians and Neil might also be able to get some input on so from a real-world medicine standpoint whether this is something that's common practice which I think in terms of monitoring in these adjustments we feel pretty comfortable that physicians are going to be able to incorporate this into their practice. So on the work that we've been doing in terms of the patient populations and where we think the drug could best be suited today, I think the beauty of our trials is we had a pretty broad capture strategy in terms of who could be incorporating in the trial. And as I said post data, I think we're going to try their best to start at an aspirational point here and really challenge physicians on what patients shouldn't be on the drug. Our trial was not a drug trial done just for failure patients. We incorporated a broad group of patients and depending on our label of course our goal would be to really try to challenge the current standard of care add our drug to the mix and get the patients what they deserve which is the beneficial, the additional benefit of our drug and the results that we’ve seen. I want to turn it over to may be Max Colao and he can talk a little bit about sort of the question two and maybe dig a little bit more into some of the worker as we're doing as it pertains to both patients on flow modeling, positioning, et cetera. Max do you want to give a little bit of a, just a preview on that? And Max you may need to unmute yourself.

Yes, no, I got you, thanks Peter and thanks for your question. As you know, LN is one of the most serious complications of SLE and if it is left untreated, it leads to irreversible kidney damage, kidney failure and even death. And you know that the standard of care focuses on immune suppression. Our Phase 3 trial compared voclosporin regimen relative to the standard of care. We know that with the standard of care that long-term outcomes in LN are unsatisfactory due to the fact that a good subset of these patients progress to kidney failure and need replacement therapy. So, as Peter said, we see this as an opportunity to reset the standard of care and we see ourselves the name for our first line patient. We're very excited about the potential for early intervention with voclosporin and we think that we can change the course of the disease and possibly prevent the irreversible kidney loss damage. And that is, a tremendous benefit as we think about long term outcomes for LN.

Got it. Can I ask one quick follow-up? Some people have asked me about like the, the Glaxo compound, and I know it works tends to work slower, but I just wanted to get your perspective on kind of matching up some of these different compounds of voclosporin. Thanks.

Yes, it's easy, just talking about other therapies that are currently out there being on under investigation or going through the review process like Benlysta. Your know, I think one of the benefits, and I think obviously, there's multiple product is affected in the clinical studies we've done to date there. The rapidity of response that we see with this drug, happens quickly and most of the other investigational drugs that we've seen so far appear to take a longer time to get there. And all the trials are different, slightly different. And I think you have to take that into account too. But at the end of the day, we have an internal mantra that time is Nephrons and that matters, how quickly patients are put into control as to how they're, the disease is impacted and to have the types of numbers we have as early as six months we believe we're going to be, we're going to be critically important not just to physicians and their treatment but to the outcomes of patients. Neil, anything you want to add to that?

No, I mean, I think Alethia the takeaway from Benlysta is that although the drug is well tolerated, and certainly well defined treatment effect, it would appear at least from the data they have presented so far their response rates at 18 months or two years are similar to ours is about six months. So I think, that there's a magnitude of effect there. But also, the caveat and caution that they've used different outcome measures in their trials, as well and we have limited amounts of data on that particular compound, or we can do is talk in detail about what our compound does.

Great, thank you.

Thanks, Alethia.

Thank you. Our next question comes from the line of Georgie Gordonhoff [ph] with Cowen. Please proceed with your question.

Thank you, guys for taking my question. So yes, first given the six month's priority review, could you comment on your progress and negotiation with peers [ph] and if we have any clarity on potential pricing? And then I do have a follow-up on the commercialization.

Yes, I'll jump in here and then Max if there is anything I miss, feel free. But you know, as we've said in previous calls, I mean the song remains the same a little bit here in terms of pricing, we're not going to come to a final price until we really see what the label looked like if of course, we get an approval and we get to go through label negotiations, I think it's going to be very finally determined by what that label looks like. And Max and his team, and, actually probably even post Phase 2, we took and went out and did quite a bit of research work with both payers and physicians to get a good idea of what price elasticity could look like, for the drug and we're doing the next round of that as we speak. And Max said in his comments in troll comments were already out there engaging payers So that's happening and we're out there supporting the value proposition of voclosporin, making the right introductions and ensuring that once we do have a label and a price that we have as much ease of access as we can, right from the outset. I have said in a lot of our past calls that, I think if you look at the drugs that have been launched in like areas today over the last 10 areas, and when I say like areas, similar patient, population size, mostly autoimmune disease, disease burden, similar and that would include everything from RA to MS to some of the GI indications for Biologics and small molecules. There's been a fairly wide range of prices taken by companies at least in the work that we've done anywhere from sort of call it the high $15,000 to $20,000 a year all the way up to, the hundreds of thousands of dollars a year. But at the end of the day, there's sort of a fat grouping of where those product launch prices seem to sit and it's somewhere in call it a $50,000 to $70,000 a year range. So I've guided of sorts to some of our other investors and analysts that, I think you know, that if you just want to use a benchmark of how other products are competing today in similar areas that sort of where the median is hitting today. I think we also have to take into consideration that we could have a competitor coming into the market and Benlysta while they're an injectable formulation right now for SLE. That product, was studied as for IV infusion in lupus nephritis. So, there may be some changes, but if we try to, just look at the average patient has lupus nephritis their weight, et cetera, and what we think a weight based infusion would look like or we just look at what the average SLE patient is getting on an annual basis, you're probably looking at the, high 30s, mid to low $40,000 a year range for Benlysta. So I think we have to keep that in mind. It's a beacon we can look at. So key takeaways, we're talking to payers today aggressively. We're out there in the community starting to do our access work. At the end of the day pricing is going to be determined by label and our overall value proposition. Everything else I've given you is just context around which we will be looking at other contexts that's sort of separate from the drug. Max, what did I missed on?

Yes, thanks, Peter. You covered it pretty comprehensively. I could add that we're pretty early in our payer engagement, but the payer feedback has been positive so far, and we found payers to recognize the seriousness of LN and the associated burden from a clinical and economic standpoint. We've heard the payers appreciate our clinical results in showing superior efficacy to the standard of care, while demonstrating a safety profile that's comparable. And we've also heard payers appreciate the potential to prevent irreversible kidney damage, which can lead to kidney failure at ESRD. So far the feedback has been positive.

Thank you. This was very helpful. And I guess, just assuming that there'll be no Advisory Committee Meeting, do you expect any standalone labeling discussions with the FDA, and do we expect to have any clarity on labor or any sort of communication prior to the PDUFA date?

Well, it will be ongoing dialogue with the Agency that's not something that's formal and communicated on a day-to-day basis. And, as for example, of course, we get, we just passed our day 74. And we did receive correspondence from the agency at day 74 it was confirmatory, of everything we've already reported. So there's nothing meaningful in terms of changes in there. But there are elements of what would go in around directly and indirectly the label throughout that entire process. And I think as Neil would support and I had asked him for his comments here, it's a that as some first comments here, it's an ongoing process and then the label itself will be something that will be in the mix all the way through up till approval. Neil for what would I, what would you add add to that?

Yes, no, I think that's you covered most of it. The discussions seem to go on in parallel with the general review is something in the review brings about a consequent discussion point for the FDA and the labels and that's what comes down.

That's great. Thank you so much. Thanks so much for giving time.

Thanks.

Thank you. Our next question comes from the line of Ed Arce with H.C. Wainwright. Please proceed with your question.

Hi, everyone. Thanks for taking my questions. I have a couple here. First, given the expanded leadership team that you have in place, and many of the folks that you've just recently hired, both in medical affairs and in the sales and marketing teams, so wondering if you could just give us a bit more detail qualitatively around how you think about helping physicians specifically with diagnosis and treatment decisions? And then I have a follow-up, thanks.

Yes, well, I mean, I'll start. Probably the - one of the most exciting things I've seen is part of this process, especially in the current market environment with COVID and the fact that a lot of us aren't flying around the globe and doing live one-on-one interviews has been the excitement that we've seen from the external commercial people on looking at the company. I would put a lot of this on the fact that you have commercially driven and sort of commercially raised people that are both running the company and newly brought into the company. So there's an element of followership that comes from that. But we're, we're hired just to a little deeper on, on what I've seen from the resumes that Max has been able to recruit so far. I mean, these are deeply experienced folks, the majority of decades of experience. The majority come from more of a biologic or highly scientific orientation and there's a huge percentage that are deep in Rheumatology and deep in the area of nephrology. Many of these people does they've worked in and around Max and or myself for the last 10 or 20 years in some cases more. So I can't over emphasize that. I haven't seen sort of a ramp to commercial like this since either my MedImmune or my AstraZeneca days. So it's exciting. The other part of your question, I think, as I look at everything we're trying to do in this early lead up to launch here at the areas of trying to educate and get physicians on the patient identification side are going to be some of the most important. And I used the word that I really want people to hang on and that's, we've got an aspiration to really try to change the course of the disease and change the course of how it's managed as it pertains to our drug if we're able to get the drug approved. And that starts with the first rep call first day, how our medical affairs folks work. You can go for low hanging fruit and identify the patient that his right in the physicians mind, or you can go wide and aspirational and challenge the physician and challenge the system a little bit to ensure that you're getting as broad as possible. And that's what we intend to do. Now, our label will be a part of that. And the research work we've done in terms of the trials we've done are going to be a part of that. But as I said earlier, we have pretty wide open access on that. I think the question about diagnostics, I'm going to maybe push to Max, because I know he's working on some of this. And Maxwell, we probably aren't going to give him everything and probably good just to, if we can reinforce some of the activity that we're doing up to this point, Max?

Yes, thanks. Thanks, Peter. Yes, and I would add to Peter's comments that whether you think about it from a diagnostic standpoint, or even from a treatment standpoint, this is not a satisfied market. We've heard this clearly from KOLs. We've heard it clearly from through market research. Physicians are not satisfied with the standard of care and the types of outcomes that they achieve in treatment. And frankly, also in the delays in from going from SLE to being a diagnosed LN patient and early intervention matters for these patients. So really, that the, on the foundation of, really tenured experienced, folks with deep, long standing relationships, it's going to boil down to clinical acumen, and it's going to boil down to education, and it's going to boil down to, really effective promotion. And so, and that's what we're setting ourselves up for in terms of, fostering the change in current practices.

Okay, that's helpful. Thank you. The other question I had was, I realized this may be still a bit early, and there may be some parties that would prefer to engage in more substantive discussions, post approval, but just wondering if you could perhaps give any detail around the types of approaches that - the approach that you're taking as it relates to potential ex-U.S. partnerships? Thanks.

Yes, I mean, as we've said, strategically and building the company is that we want to take a focus on the largest market opportunity, and that's the US for context, you can look at quite a few analog products and listed even being one where north of 85% of the overall product sales come from the U.S. So, this is the area that should get the intense focus and should get the build and the investment in the company is going to drive the most shareholder value for investors and for the long-term build out of the company. So outside the U.S. we've basically concluded that a partner would be better served helping us out in terms of marketing and selling the drug. I can't really give you much update on the who and the when but we've talked to both regional and global Pharma companies, and then most of size and scale that have infrastructure, obviously, those are going to be the ones and we feel good about our progress. I've not guided to timing on this, or set, sort of concrete expectations in terms of when we want to get this concluded for a number of reasons. The biggest being the situation, we're in terms of COVID. And being just harder to predict when you can get a deal done today, when, everything's being done remotely diligence and conversations have moved to fully phone and fully computer at this stage. And while we have long standing relationships with many of these companies, we can't predict with how their internal processes are being impacted. So we still don't feel very comfortable, we can get a deal done. And it's a goal for us to the year, so stay tuned. And it's ongoing, I guess see all I can say it.

Great, thanks, Peter. I appreciate it.

Thank you.

Thank you. Our next question comes from Joseph Schwartz with SVB Leerink. Please proceed with your question.

Great, thanks very much. Congrats on all the progress. I was wondering if you can talk about how your field force is structured and positioned to cover the landscape of treaters, for LN patients. How effective do you think that the, the resources that you're putting in place can be?

Yes, I think it's a really good question. I mean, obviously, the two main specialties we're calling on here nephrologists and rheumatologists. And, obviously, the as COVID situation has had impacts on everyone, especially patients and physicians and the relationship between the two, while we see regional differences in sort of state-by-state, as to - and actually doctor office-by-office, in terms of how open access is to, face-to-face interactions, et cetera. I would say that, just this is a sick patient population and patients are still being seen by physicians and, we're not hearing of any major lapses and I'll turn to Neil for comment Max as well, but as lapses in treatment and care, et cetera because it is a serious patient population. But the question around access and promotion and how you launch a drug in this space, we're learning as we go just like everybody else and that our assumptions include everything from, on fettered access, which I don't think is reality today to, if we get back to a full locked down how we would do that as well. There's a lot more virtual going in. And our team is being I think very smart about how they're looking at this evolving market under our feet. And all I can tell you is depending on where the situation is with pandemic, we will be prepared to do what we think will be best to launch the product and whether that's in a lockdown situation or sort of a hybrid or completely wide open which I actually don't think will be the case by January, but we will have to see. Neil, any comments from you on what you're hearing from trial sites et cetera and then maybe we can have Max just give any comment he might have on planning around this pandemic et cetera?

I mean, I think, access to site stuff is as good or better than that is have a been remotely because people I guess are less physically tied up with their work in the hospitals for the most part, they're getting more time to be able to use virtual communications. I think one of the things that helps as well as the very, very strong pre existing relationships that the Aurinia groups have with a very broad range of opinion leads. And that certainly helps access and helps with the aa call to the communications moving forward, but now I mean nothing come. As Pete said, we'll have to see how things go, but at the moment we don't seem to be compromised, in that matter.

Yes, thanks. And what I would add is that we're paying very close attention to best practices in terms of launching therapeutics during this time. And, frankly, by the sales force continues to be the fundamental success factor to successful launches today. We're adapting of course, we're adapting our training. We're adapting and also what we do in terms of our engagement above and beyond our sales force. As Peter said, we're learning as we go along with everybody else. But we firmly believe that the sales force is going to be key to our success. And that's what that's what exactly what we're building to.

Thanks for the added information.

Thanks, Joe.

Thank you. Our next question comes from Justin Kim with Oppenheimer and Company. Please proceed with your question.

Hi, good afternoon everyone, and congrats on all the progress. I don't have too many questions on my end, but maybe just on the anticipated audio readout in 4Q, can you just talk a little bit on a high level, what types of results would help inform dose selections through future trial design and through the passcode generally for the program?

Yes, so that I don't over simplify this answer. Let me ask Neil to maybe comment on what we hope to see in terms of making a directional decision on the right dose from the next trial.

I think with any dose ranging study, we're looking to the right balance of efficacy and tolerability. Although with our highest concentration formulation that we tried in the [indiscernible] study, the data visits tolerated. We obviously - the primary endpoint is the improvement in Schirmer Tear test because that's consistent with the endpoints that have been used to approve other calcineurin inhibitors and drives [indiscernible] and hemostasis. But also we seem to see a very good signal from purchase study of extremely good outcomes in terms of corneal staining, which of course is on the label for Zodra [indiscernible] as well. And so I think her good combination of Schirmer Tear test scores, corneal stain, but also symptoms for example, like joints, which is built into our pre specified hierarchical endpoints is going to take, which one we move forward. And also, in terms of our ideal results, it would be very good to see where the efficacy lies. So, for example, our hope is for the efficacy is less visible in the very, very low concentration, but we don't know, that's how we did in the trial.

Okay, that's really helpful. And then maybe just a modeling question on the P&L front. It seems that, some of the precommercialization activities for 2Q have been reflected in SG&A, just wondering how should we think about R&D spend and the potential for expenses based on production of commercial supply going forward?

We haven't given much guidance on this yet for a number of reasons. But, Joe, do you want to try to tap this around a little bit? Maybe give him a directional answer on that.

Yes, sure. Thanks, Peter. I would say directionally as we mentioned, we continue to kind of build out the infrastructure. So one would expect it to cost throughout the remainder of the year will increase accordingly, as we come fully burned quarter-over-quarter. As we kind of look toward towards R&D expenses, obviously we have some trials that are still ongoing. There's been somewhat of a shift in R&D related costs, obviously, towards NDA/submission approval and away from some of the clinical trial costs. As we move through the back half of this year. I think that shift will continue. We look into the outer years. Obviously, we're evaluating other, indications at this point. So it's a little tough to say what will happen with R&D in the out years. I would say, probably remaining fairly flat compared to this year, as we kind of look, and again, it'll be more of a shift in the nature of the spend than the actual spend itself. As far as inventory cost, yes, there was obviously some expensing of inventory that ran through R&D in the past. As we look into the future, those will obviously shift from R&D related expenditures into cost of goods sold.

And I guess the last thing I would add to that just and obviously, with an approval and a launch, eminent like we gain the approval, it's going to be on us to come forward and say, here's what our here's what our infrastructure looks like, here's how many sales reps and or other infrastructure we've brought on board and to try to give some directional guidance on how that will look going forward. I guess the other thing I would mention is on the R&D front, obviously we have voclosporin today. Our goal is going to continue to be a company focused on the development of drugs and, as I’ve said in the past, I think it's important that we continue to look to diversify our pipeline. And until we do that, it's just sort of a speculative thing. If we're only investing in voclosporin, the amount of R&D line is going to be, limited as we move forward. But our goal won't be to be there. It'll be to diversify the pipeline as we have in other companies prior to this.

Okay, great. Just had last question, in terms of a European filing, just wondering what the progress was towards that and with the guidance, I think, maybe last time I checked was by first half of next year. Is that still correct?

Yes, as you said, is six to nine months behind where we are with the FDA right now and our work with the FDA in the U.S. filing, and we've added the extra three months on there just for a little bit of buffer in terms of this current pandemic situation on previously I think we had said, more like six we could still be there. But we're probably thinking somewhere in the six to nine month range for the EMA. And then when we look out to Japan where we need trying to work to schedule a meeting with the MDA, our ongoing work there to try to get a little bit more of a range and on target for Japan and when we have that will provide it.

Great. Thanks so much.

Thank you.

Thank you. Our next question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question.

Hi, everyone, congrats on the progress and thanks for taking my questions. I'll try to be quick, I was wondering for AURORA to the double blind extension study. It seems like you should have the one year extension data by year end this year. And so I'm just wondering if you're planning on reporting that at the end of this year, or what the plans are there for disclosure?

Neil you want to bat this around or do you want me…

Yes. I mean, actually, it's a two year extension Maury. So the results the final results for that will not be available till the end of next year.

Got it, okay. And then the other question I had was just on additional proteinuric indications that you could pursue with voclosporin. It could theoretically work in a lot of different indications. I guess, can you say if the new program, if that's going to be focused on one indication or while you're on a basket study? And what are some of the main considerations that you have for choosing which indications to pursue?

Neil, do you want to take this?

Sure, yes. Actually, yes, we were still looking at plans or considerations I'll take first. And, , it's not only the commercial, potential commercial viability, and where the drug would work that's a little bit more straightforward. There's also the competitors in the space the off label use of other CNIs and the potential to be able to touch or recruit especially during the pandemic in the disease. What we want to do is, as when we launch into this study it is going to be clinically meaningful to physicians, but also of ease to a prescribing physician from a results perspective at the end of the day. So, we've got all those kinds of considerations. And you're right, we have the potential to do a basket study where we can learn more about which indications to progress. But also, I think, there's some exclusive thoughts, especially in our physician community, that think, to believe that we know enough about this drug and many of these diseases, and we may potentially go into just one or more indications, but we will update you towards the end of the year on that. We're doing a deep dive. We have to get input from our commercial and also our key opinion leader colleagues to make sure that we're making the right decision here.

Got it. That's helpful. Thanks for taking my questions.

Thanks Maury.

Thank you. Our next question comes from the line of Dae Gon Ha from BTIG. Please proceed with your question.

Great. Good afternoon. Thanks for taking my questions and congrats on all the progress. You've laid out the commercial work that's going on, the pre-commercialization work that's been going on. So just looking ahead, I guess, based on your interactions with paywalls, and your commercial strategy and other pre-commercialization efforts. I was wondering in the backdrop of the current COVID-19, what kind of a ramp or kind of a launch dynamic are you guys anticipating, recognizing the fact that doctor visits are not as frequent but at the same time, the telemedicine and virtual access seems to be helping in some ways, how should we think about that, and I've got a follow-up.

Yes, I mean, I'm going to take this one for Max. As we've said, we're not at the stage right now are we're guiding on specific revenue numbers and what the sort of shape of our curve is going to look like in general. All the COVID situation aside, I mean, but we, as we get closer to year end, and a potential approval, will start to help folks understand more what our expectations are. But we're working on all that right now, we don't have a drug, we don't have a label yet. We don't have an approval, we don't have a price. So we want to make sure that we roll all that out at the right time. Know though, that our aspirations are to do really well with this drug and as Max said in his notes and transcripts. We want to surprise people and we want a very successful launch for patients for investors and for the company and our growth, but more to come as we get closer to potential approval at the end of the year.

Great and just real quickly, as we look toward AUDREY, obviously AUDREY has implications for your future development and dry eye disease. Just wondering, in terms of your commercial plan in ophthalmology, and you previously mentioned that you'll be looking for a partner but at the same time, you could maybe even start commercializing on your own while concurrently working on a partnership. So if you wouldn't mind just reminding us sort of the considerations that you're looking for in your partnership, and is there a “timeline” that you currently have in terms of when you want that kind of thing? Is it before or after Phase 2, 3, AUDREY data?

Well, I think the market will somewhat dictate to us a little bit the timing of when a deal can get done. We think we fully expected in our plans, so that will fund this thing all the way through, through the regulatory process like we did LN, I think that's a smart assumption. But if someone were to come in and talk to us now and want to do something in terms of co-development, be involved in that process, be involved in the regulatory process, I think you'd have open ears on this side of the phone. That being said, we've made sure to say to investors are two things, one our core is really autoimmune disease with a really sort of acute focus on renal and, even more so, sort of rare renal diseases and we'd like to try to stay in and around there. That doesn't necessarily mean that if we get a burden hand and we have a drug that looks great and dry eye is commercially competitive, and we don't have a partner that we couldn't figure out a way to launch the drug. And I think the ideal path for launch is as a global company that would have deeper pockets and have the ability to invest at a much higher level than then a small company would. We're firm believers that dry eye is like many other diseases crosses multispecialty. It is primarily an ophthalmology play. But these patients see the pharmacy, they see a primary care physician, then they see an ophthalmologist and they see a lot of different types of ways to take care of the disease even before it's diagnosed, in some cases even after. So we think a partner that has an infrastructure and has the ability to do direct-to-consumer marketing, et cetera, and spend money to get this to where it could potentially go in terms of size is probably a better approach. But that being said, if we get caught in a situation where we have a drug approval, and we have the ability to launch it I do think there are targeted ways to launch in this space as well and we won't miss the opportunity on the other side, but strategically right now our primary focus is autoimmune disease, lupus nephritis, the kidney, and the like. Ophthalmology is a great bolt-on because of the great molecule that we have, but we would probably look to partner and timing on that will be ongoing.

Great. Thanks for taking our questions.

Thank you.

Thank you. Our next question comes from the line of Doug Miehm with RBC Capital Markets. Please proceed with your question.

Good afternoon. Just a single question it has to do with the label. Peter, you've mentioned this a couple of times in terms of its importance, but based on the quality of your data that you're generating, perhaps what you could do provide us with what do you think the bookends are in terms of what the optimal label could be, and maybe what the negative label could be in your opinion? And then, if you could tie that into an important question that I think you asked at the beginning of the call, which was, which patients that are currently on standard of care would not go on this? If you could sort of walk us through that, that'd be helpful? And that's it from me. Thanks.

Yes, oh God, you know I'm going to need your help a little bit on this one and then it's always difficult like when you ask a question on, what is the best case, worse scenarios. I mean, I'll generalities because we're in the middle of talking to the Agency. So I think that you know to really start pegging what expectations should be for the label, et cetera, I wouldn’t want anything to poison those conversations or sort of lead those conversations to the company in our clinical focuses are in dialogue. But I think that the short answer to what could be a much more complex question on the label is, we would hope that we're allowed, we're afforded the ability to have in our label the ability to have a drug to treat active lupus nephritis, and it’s probably not have a lot of color around how long that treatment is maybe the appropriate warnings where they need to be brought on what's been studied not but, a pretty open area of patience to be able to try to help with the drug. And we've looked at probably the transplant area is a good area to look at and, sort of how those labels are written for CNIs and, they're there. I wouldn't say they have the appropriate warnings and precautions but at the end of the day, they're written pretty widely in terms of like duration of use and in terms of the patient population, so that would be our hope. And worst case scenario is always when it becomes limiting where, here's what you studied. Here's what the expectation should be. This has not been studied. The patient should be limited to only these areas, et cetera. Those are the things, pitfalls we're trying to avoid. And since we're first, hopefully first, potentially first to be approved here, our hope is that the agency will allow for patients to get the benefit of the drug that we studied bottom-line. And in terms of patient populations, that we should expect, I'll go back to previous answer where, we want to go as far as we can, as wide as we can, and really be aspirational. And really try to change the standard here. Patients that maybe wouldn't be appropriate, patients that have, if there are contraindications to contraindications, obviously. And, patients may be that are that are doing just fine. But even there, challenging that physician to go out and ensure that they're really looking at the diagnostic approach to those patients to ensure that they are truly doing fine, not just of opinion, would be important, since it's a very silent disease. It's not like patients are coming in complaining of symptoms with this. It's proteinuric is measured, and we got to ensure that, that continues to happen. So hopefully I just answered that for you. Neil, if we get a lot more technical there, but I don't think it's in our best interest with our ongoing negotiations with the FDA to say anything, but we hope to be aspirational on how wide we can go.

Thank you. We have reached the end of our question-and-answer session. So I'd like to pass the floor back over to Mr. Greenleaf for any additional closing comments.

I want to thank everybody for taking the time with us this evening. I hope you all have a great end of your week and thanks for continuing to take the ride with us. Have a great day.

Ladies and gentlemen, this does conclude today's teleconference and webcast. Once again, we thank you for your participation and you may disconnect your lines at this time.