pleasure that I'd like to welcome Peter Greenleaf, the CEO of Aurinia. Peter's gonna talk about the company, latest progress with LUPKYNIS, their commercial drug for lupus nephritis. They also had an update today here as well. Without further ado, I'll pass it over to Peter, and we'll do some Q&A at the end as well.
Well, thanks, Maury, and thank you, everybody, for joining us here today, and for those online, welcome. I wanna thank Jefferies for having us here at the conference and supporting us in terms of their research coverage. Have been a partner with us for quite a few years. Just to get started here, so I would just point you, obviously, our start off would be our
forward-looking statement. So I'd point you to, or direct you to our website for our most recent filings with the SEC. If you don't know much about the company, and for those online, I would not be following the slides quite yet. They're still working on that. We're a company that was founded and still headquartered in Canada.
The science came out of Edmonton, and we have evolved our business by developing a drug called LUPKYNIS today, or voclosporin was a generic name, in the area of lupus nephritis. In 2021, we received approval with the U.S. FDA for the product, and since then, have been on the market several years in the U.S. We have had European approvals and reimbursement with our partner, Otsuka, outside the U.S. Last year, we did almost $176 million in revenue on the product and other revenue coming into the company, and we projected $200 million-$220 million for 2024. And we posted the first quarter. We have guidance, so we have been right on track with where we have projected for the year.
Our partner, Otsuka, we've gleaned about $100 million from that partnership since the launch of the product in non-dilutive capital, and most of that has been milestone-driven payments. So, in addition, they are in the process, we with them, of trying to get the product approved with the PMDA in Japan, and we're on track for that for a year-end.
We have another $10 million milestone coming at the end of the year, a year-end projected, if we are to get the drug approved with the PMDA in Japan. I'm just gonna take a pause there to see if we have the presentation set yet. Sounds like we do. It's not working, man. That's a new one for me, so I apologize to those that are online. Yeah, why don't we actually, since I don't actually have a presentation to be able to go through here, so we have some technical difficulties with it, why don't we just do a Q&A? Maybe like a,
Yeah.
You know, sort of a fireside chat, just to make an adjustment in real time here. So, Maury, maybe we can look to the room and to you for any questions you might have.
Sure. Yeah, that sounds good. Maybe, Peter, just starting off, I think one of the questions with commercial and just with lupus nephritis in general, is just finding these patients and getting them onto to treatment. And you've shown that you've got, a very effective drug. It's a safe drug. I guess, how can you improve the, the diagnosis rates for lupus nephritis? What are you guys doing to, to help with that and educate doctors on that?
Yeah. So Maury is pointing to something we've learned as we've gone through the process of launching the product, that obviously we were one of the first products to be approved for the treatment of lupus nephritis, and for decades, physicians have been treating the disease with a host of generic meds that have limited data on them, do not have approvals for the treatment of lupus nephritis. But there's been a core group of guidelines that have been driven by both ACR, the EULAR runs a European set of guidelines, so on the rheumatology side, and ASN and KDIGO on the nephrology side, have put together, basically, treat to target numbers, how aggressive that physician should be diagnosing the disease, and how aggressively they should be treating the disease.
Well, as we've learned, as we've been out there marketing the product, one, physicians are supposed to be taking a urine diagnosis or proteinuria diagnosis on every visit for lupus patients when they come into an office. We know from large patient record audits that less than 50% of the time, physicians are even doing that. So the patient comes in, they're complaining of joint pain, they're complaining of skin lesions or just being fatigued, the other signs and symptoms of lupus. You don't have an outward sign or symptom of having elevated proteinuria. You have to actually do the work. You actually have to take a 24-hour urine in order to diagnose having underlying elevated proteinuria or potentially lupus nephritis. So one, we have to get that number up.
Every time a lupus patient comes, we have to actually see those patients getting an actual urine screen and a diagnosis. We've seen, at least through our self-reported data that's out there from our physicians, we do attitude and awareness studies, that that's improving significantly in terms of physicians' intent to do it. When we actually look at the records, though, the records show less of that is happening at this stage, so we just have to keep on it. And then when they actually do get diagnosed, what we found is physicians are separating-...
both low proteinuria, so lupus with elevated proteinuria from lupus nephritis, and lupus nephritis being a, you know, a much more progressed patient, at least in the record audits that we see, which is totally different from where the ACR guidelines are, the EULAR guidelines are, where they definitively say, "If you've got proteinuria at X level, that you need to treat to target, and you need to treat aggressively." We think just with improving diagnosis and improving treatment rates, you could see a doubling of the size of this market in terms of its potential, over the next several years, regardless of the drug being treated. We see good progress, but it still needs to come away.
Got it. I don't know if you wanna go back to the slides or-
Do we have the presentation up and running now? Okay. Well, for those online, I'm sure that was an adventure. I apologize for the technical difficulties we've had here, but sounds like we're back on target now. I've covered most of what you see here, but the last point being, we currently have about $320 million in cash on our balance sheet. We have no debt as an organization, and as we've said in the last quarter, in 2Q of this year, we're projecting being cash flow positive and on a 12-month basis from this point, projecting somewhere between $50 million and $60 million in operating free cash flow in the company. So we'll be not just with strong balance sheet, but accruing balance sheet from this point forward.
Our goal as a company through LUPKYNIS today, but drugs, hopefully in the future too, is to transform the lives of patients suffering from autoimmune diseases. We've talked a little bit in the tee up here with Maury on his question about the disease, lupus nephritis, in and around the disease, but just a couple points to emphasize here. LN is. There's a significant market here. Patients actually have poor outcomes. The treatments that they've had historically have lacked effectiveness to be able to lower proteinuria quickly, and when that doesn't happen, patients progress on with their disease.
We talked a little bit about the total addressable market, but we honestly believe there's an underserved population here, both underdiagnosed, and when diagnosed, not treated as aggressively as need, as they need to be. LUPKYNIS actually, as a product, does represent a significant advancement here. At least in the drugs that have been studied to date, there's not a drug that seems to act as rapidly in, in lowering proteinuria as our drug. And then we have data all the way out to three years, showing both effectiveness and the balance of, you know, benefit, risk, what the safety profile of the drug looks like, and I'll talk more about that.
We think our drug actually meets the guidelines, probably most preferentially in terms of not just the drugs on market, but the drugs that are being studied to date. And then lastly, we have patents that this product run all the way out to 2037. Base composition of matter runs to July of 2028. That's with our Hatch-Waxman benefits upon the approval. And then we have method of use patents that carry all the way out to 2037. Trying to make up a little bit of time here. Lupus nephritis, I think as many of you should know, is a component of a larger disease, about three times the number of patients affected in the U.S. of lupus. And lupus is a multisystem, multi-organ disease.
It, patients present with many symptoms, everything from, you know, base symptoms of, skin and joint fatigue. And these patients suffer from, a lot in terms of, what they feel on a daily basis, and it affects the diagnosis early on in the disease because they don't present with one differential characteristic. Our disease, lupus nephritis, is probably the most impactful of lupus. So if you have the disease, and you end up progressing to the kidney, outcomes are actually quite poor. A large percentage of these patients progress on to CKD. That means dialysis, chronic kidney disease, and when you're there, you actually end up, progressing the, for the majority of the time, to, potential transplantation. If you end up with a transplant, the, the fold difference, the number fold difference in deaths is much higher.
So this is the part of the disease that if you have lupus, could potentially take you on to serious complications, transplantation, and even death. So, obviously, a large unmet medical need. And while there's a big clinical burden, everything from the possibility from kidney failure to transplantation and potentially premature death, you also have an economic story here that's significant. If these patients get sick, they end up in the hospital, they end up staying there longer, and if they progress on even further, the complications of transplantation, dialysis, et cetera, are very significant in terms of their economic burden. I talked a little bit about guidelines, and quickly to recap, active screening, routine monitoring, treating to target, and what drug you use are basically what the guidelines lay out.
And they're actually really consistent across all of EULAR, ACR, ISN, and the KDIGO guidelines that are out there in terms of what their treat to targets are, that patients need to be actively screened, and that they need routine monitoring when they come in. And as I mentioned, we've seen at least one large patient record audit that Optum did. So a payer, right? They looked at 150,000 lupus patients in the U.S. across millions of records, and they saw that. Fifty percent of patients with lupus or less get a diagnosis when they visit a rheumatologist. So they don't right now urine screen routinely. And when they actually have a positive or negative result showing elevated proteinuria, only 30% of the time are those patients even getting treated.
So just by moving those two pieces of the puzzle, we have a large opportunity to be able to grow this market. In terms of when they actually do show elevated proteinuria, these are the target rates that the guidelines point to that physicians should be trying to target. At least a 25% reduction in UPCR by 3 months, and at least a 50% by 6 months. Then you get to 1 year, having them down, but below targets of 0.5 or 0.7 by 12-24 months. The majority, at least in the approved products that are out there today, being us and Benlysta, target 12-24-month data. Our product actually is the only product currently approved by the FDA that's been able to actually achieve these 3- and 6-month targets, which is significant.
But you've got to line up the guidelines alongside of where physicians are currently treating, because at least our experience has been the majority of the market does not, at least right now, follow this criteria. Huge opportunity for the future, but we have to develop the market alongside of the product. I've mentioned all this data, but this is just a recap from the Optum study. Be happy to provide that to anyone in the room if they wanna see it. Our drug, if you don't know much about it, is a modified calcineurin inhibitor or next generation calcineurin inhibitor, targets both a dual mechanism, broad-based immunosuppression, but also working more closely to the kidney itself, and we believe it promotes podocyte stability, which both factors taking into account help to lower proteinuria.
So different new molecular entity, patents based upon that, and we think with that structure, gives us the efficacy that we've seen in the research and development work that we've done to this point. And the drug has been broadly studied, both through registrational studies, as I think many of you have seen, the AURA study into the AURORA studies, which were the pivotals that got us the approval of the drug. We're currently doing a real-world registry that's been ongoing, enrolling patients around the U.S., and the goal here is to continue to look at the efficacy of the drug and how these patients do in a real-world clinical setting. And then lastly, we've completed a lactation study and a drug-on-drug interaction study, and we have ongoing pediatric work that we've committed to the FDA.
So drug's been widely studied and continues to be studied alongside of commercialization. And in terms of the overall profile for the drug, if you're looking at complete response, overall reduction in proteinuria, stabilizing the patient in terms of their proteinuria reduction, but at the same time doing no harm, meaning are you actually injuring the kidney by doing aggressive immunosuppression up front? At least as measured by eGFR out to 3 years, and we did a biopsy sub-study, looking at a small number of patients in our pivotal study out to 18 months, looking at the histological impact to the kidney, at least as those measures at 18 and 36 months, we've not seen any degradation in terms of the effect on the kidney versus standard of care therapy being MMF and steroids. And lastly, the, the broad safety profile of the drug.
It's real. It really is differentiated. You know, you would expect with triple concomitant immunosuppression that you would see broader impact in terms of the patient impact. Through our studies, we've actually not seen that, and a very well-tolerated drug versus the standard of care. So at least as the work we've done up to this point, it demonstrates a obviously important clinical and safety benefits for patients as measured by our trials and as measured through other competitive data that's been out there. In order to try to evolve this drug to become the standard of care in the treatment of lupus nephritis, obviously, there's things we need to do. They've been consistent since the launch of the drug. We got to create a sense of urgency around treating, diagnosing lupus patients themselves.
And then once diagnosed with lupus nephritis, getting the aggressive treatment, not any more aggressive than what the current KDIGO guidelines are asking for. We need to get patients more involved because obviously, they're the ones who need to stay... not just stay on the meds, but have an opportunity to go in and ask for these things from the physician, knowing that the kidney could be the thing that impacts them the most, even if it's not the day-to-day symptom they're feeling. We have to differentiate lupus. We got a great data profile and clinical profile for this drug, so that's probably the easiest part of the equation. And then lastly, driving that trial and adoption. You know, our large early adopters are the ones that continue to drive the greater patient penetration that we've seen.
Yes, we're seeing more patients or physicians utilizing the product, but we're also seeing more depth of prescriptions in the highest decile physicians that we have out there. And then, we've actually seen good adherence and persistency over time. The three-year data, actually, we've seen from the pivotal study, has actually been quite helpful there. Lastly, this is just to go through some of the tactical deployment that we've been doing in terms of marketing and, alongside of marketing, the medical education efforts that we have. Obviously, if you're looking to evolve the standard of drug treatment out there, you gotta do a lot of education.
And everything from the studies themselves to supportive clinical education is all part of a mix of the communication work that we do with physicians and with patients, for that matter. On the patient side, it's both about understanding our product, but also diagnosis and treatment of lupus nephritis, and we have campaigns that both do disease state activation and LUPKYNIS awareness. So when they get on the drug, continuing to educate them about the need to stay on the drug and improve their disease. We have what we'll qualify as a bespoke patient support system there for physicians. This is a back-end support for patients when they're diagnosed, and then get on our drug, go on what we call a start form. That gives us the ability to ship drug directly to the patient.
Alongside of that, we have an 800 number support, as well as nurse case managers who are out there providing everything from educational resources to financial support to support through the entire treatment process. So think when they get on drug, we're shipping it to them, but then we're following up with them very regularly to ensure they're taking their meds, and then when their prescription is up, that they're calling to ensure they stay on the drug over a long time. This has been a very high touch, obviously, but a very important component to the overall support for patients and our drug in the marketplace today. To date, these numbers have all been reported. We look forward to reporting 2Q soon.
But through the first quarter of the year, we continue to drive PSFs and patient restarts and hospital starts in combination. Total start forms in 2023 were just under 1,800. This year, in our projected numbers, you know, obviously, we have to grow that. The patient start forms, we like to talk about almost as our NRx in this business. This is patients that are coming in as new patients. They come through start forms, they come through restarts, 'cause if they come off the drug and then come back on, those we qualify as a new patient as well. And then lastly, the hospital channel is totally separate. We ship to hospitals, so we have patients coming out of that channel as well.
Patients on therapy through the first quarter of the year were just under 2,200. Our persistency and adherence to treatment has been consistent. Our persistency at 12 and 18 months has actually improved quite significantly since launch at a high, all-time high of about 56% through the first quarter. We're seeing a flattening out as you get into 18-24 months as well. I've talked in the front end about Otsuka. This year we have the Japanese milestone, hopefully coming up in the back part of the year. That'll bring us another $10 million to our financials this year.
And then, obviously, we see Japan as being a potentially lucrative market, and each quarter we've been seeing the participation sales that we get from Otsuka, both through royalty and through a cost-plus manufacturing relationship we have with Otsuka, continuing to improve. So, good partner so far, and globalization of the product is on target. Lastly, I want to address changes we made in the business. Obviously, we've lowered our overall cost basis for research and development in the company. We've moved AUR300 back to its original founders, so we're not developing that moving forward. It was still in formulation development, but AUR200 is something we intend to move forward, either through the company or through a partnership externally. We filed an IND at the end of 2023.
That IND was approved by the U.S. FDA, and we're in process of getting both MAD and SAD and animal tox studies up and running within the company. So I just want people to take away that these are not shelved assets. They continue to move forward within the company, and this is... Obviously, AUR200 is a B-cell agent targeting APRIL and BAFF. We think it's a balanced inhibitor, has quite high potency, and we think as we move it into our dosing work that our goal will be to try to find how we can give this drug in low doses, high concentrations, see more effectiveness, more balance in terms of its inhibition. Obviously, we have to prove that as we continue to move it through clinical development. This has been a very interesting space, obviously.
There's been quite a few companies that have progressed into the IgAN space here. Our goal will be to try to bring this into more orphan, rare-oriented areas alongside of some differentiated indications, probably not developing it as a next-gen, best-in-class IgAN therapy. We'll keep you updated, but this continues to progress forward. Lastly, I've covered most of this, our projections for this year, $200-$220 in terms of total net product revenue. This doesn't include milestones alongside of it. We've got a high gross margin on this product. We've been very diligent about discounting for access. We almost don't do it.
We have $320 million in cash on our balance sheet with no debt. We are accruing cash to our balance sheet as we've projected 12-month cash flow positivity in the $50-$60 million range. Targeting to start hitting cash flow positive in 2Q, and we don't talk about much, but we have about $560 million in net operating losses that we can offset against that incoming revenue as we've developed the product in Canada. I will close here by just walking you through, obviously, the reason to believe. Obviously, we have a great product, and we have a mission as an organization to try to build upon that for the future. Our team has done this before.
This is not the first time we've actually come in, taken a single-product company and projected it into a broader, fully integrated, commercial and research and development organization for the future. We're globalizing the product that we have through partnerships, and we have plenty of cash to do not just what we're doing in terms of running our commercial business, but to do things like business development if we so choose in the future to diversify the company. I apologize for all the technical difficulties up front. That was a first for me. I thank you all for being patient, and if we have any time left, I'm happy to take any more questions that there might be.
Sounds good. Thanks. Thanks, Peter. I'll, I'll do two quick questions. Maybe just for second quarter, is there anything you could say about how PSFs are going and how the quarter's trending versus first quarter and even year-over-year?
I think each year we report, or at least historically, have reported 2Q in, like, in and around the first week of August. I can tell you we can't give you detail as to what the numbers are, but we've not seen anything to lead us to believe that right now, we're not continuing to progress in the right direction.
Got it. Okay. And then, you talked about how patients are staying on drug longer. That's a key part of the, the market opportunity is, is keeping patients on for a longer period of time. Is there a way to standardize that process when the patient comes off treatment and to, to get them back onto treatment? Is there anything you guys can do with that?
Yeah. There's a pretty significant disconnect here again with the guidelines. The guidelines all seem to say 3-5 years, you keep a patient on therapy once you get proteinuria controlled. What we actually see is they're treating this as a flaring and remitting disease. So once proteinuria comes down, they tend to, after a year, want to take them off a drug or longer, depending on the physician. So that's where restarts comes into the equation. Tactically, this, this Aurinia Alliance group that we have, we can actually reach out to those patients. "Hey, so you've come off drug. You need to make sure you stay on drug.
You need to go in and get actively diagnosed again by your physician." So that one-on-one connection we have from Aurinia Alliance is probably the biggest, most direct impacting tactic that we have out there in the marketplace today.
Got it. Is there any question from the audience? Maybe last question just on BD. Anything you could say on that, if you're planning on in-licensing assets at some point?
Obviously, our priority and our focus is crystal clear. We need to continue to drive this commercial business, drive to profitability, and grow the product for the long haul. That's how we're being evaluated and valued today. But we are a single-product company, so, you know, progressing AUR200 in some fashion is gonna be critical. It's a hot space right now, so we're excited about that. And there is always the possibility for some sort of diversification in the future, probably, either in the commercial space, accretive-type deals, or in late-stage drug development in the immunology space.
Great. Thanks, Peter.
Thank you, everyone. Have a good day.