Greetings, and welcome to the Aurinia Pharmaceuticals Inc. Q3 2022 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Walford, Investor Relations for Aurinia Pharmaceuticals. Thank you. You may begin.
Thank you, Melissa, and thank you all for joining today's call and webcast to discuss Aurinia's Q3 2022 results. Joining me this morning to lead the call are Peter Greenleaf, President and Chief Executive Officer, and Joe Miller, Chief Financial Officer. This morning, Aurinia issued a press release announcing its financial results and recent operational highlights and filed its quarterly report on Form 10-Q. For more information, please refer to Aurinia's filings with the U.S. Securities and Exchange Commission, which are also available on Aurinia's website at auriniapharma.com. During this call, Aurinia 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 Aurinia's future financial results and business, please refer to the disclosures in Aurinia's press release and its quarterly report on Form 10-Q along with Aurinia's 10-K and all of its recent filings with U.S. Securities and Exchange Commission and Canadian Securities Administrators. Please note that all statements made during today's call are current as of today, November 3rd, 2022 , unless otherwise noted, and are based upon information currently available to us at this time. Except as required by law, Aurinia assumes no obligation to update any such statements. Let me now turn the call over to Aurinia's President and CEO, Peter Greenleaf. Peter.
Thanks, John, and good morning, everyone, and thank you for joining us. On today's call, we'll provide you with a review of our commercial business, including LUPKYNIS performance in the Q3 and year to date. We will then provide our updated expectations for the remainder of this year. Since we now have three quarters of results for 2022, we will also provide a preliminary view for 2023. In addition to commercial performance, we will cover ongoing medical affairs and clinical work to reinforce LUPKYNIS basic benefits for patients. We'll then move on to providing an update on our global expansion efforts, our R&D activities, and an update on our intellectual property. I'll then turn the call over to Joe Miller to provide more details on the Q3 and year-to-date financial results and our overall strong financial position. Let's get started with our Q3 business performance.
Total net revenue for the quarter amounted to $55.8 million, which included a recognition of a one-time $30 million milestone payment from Otsuka to the achievement of the European Commission approval of LUPKYNIS. Total net product revenues for LUPKYNIS were $25.5 million for the quarter, bringing the year-to-date total for LUPKYNIS net product revenues to $75.1 million. Total reported revenue for the 2022 fiscal year through September 30thth was $105.6 million. Moving to more detail behind the financial results. Total patients on therapy grew to 1,354 by the end of Q3, up from 1,274 at the end of Q2. The increase in patients on therapy this quarter was driven predominantly by improvements in prescription or patient start form conversion rates and processing speed alongside of new patient start forms.
Our patient conversion rates onto drug at 20 and 30 days continue to improve quarter-over-quarter. As of today, overall conversion rates at 60 days remain consistent with prior periods at approximately 84%. Consistent with prior periods, adherence remains strong at approximately 80% at quarter end. Looking at our patient start forms, we saw a slight decrease quarter-over-quarter, moving from 409 in Q2 to 374 in Q3. Looking at our most recent data through October 31st, PSF year to date were 1,357. These trends are clearly something we have been watching closely and have tactical actions to address. Our net realizable revenue per patient for LUPKYNIS in the quarter remains higher than our initial guidance of $65,000 per year.
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. What we have seen from our internal analysis of claims data is that several leading market indicators, including patient visits, new lupus nephritis diagnostics, and the number of patient renal biopsies, declined in Q2 versus Q1. These lower numbers foreshadow a potential slowdown in the summer. For visits that did happen, we also saw a lower amount of proteinuria testing, which declined approximately 15% in Q3 versus Q2. These numbers, coupled with both doctor and patient summer vacations, resulted in overall lower office volume and impacted our performance during the summer months in both rheumatology and nephrology offices.
Our internal analysis leads us to believe that these market events are temporary. Seasonal or event-driven in nature. While we are currently digging deeper to better understand what impact this will have on a going-forward basis, in the interim, we are driving tactical activity to power through these external market dynamics, which I'll now walk you through. First, let's look at our selling focus and healthcare provider-driven efforts. What we have learned throughout the launch from our highest prescribing physicians is that high-frequency engagement is required to adequately deliver the LUPKYNIS clinical message and gain solid clinical adoption. As a result, we're actively increasing our focus and frequency on high-potential decile 7 through 10 rheumatology and nephrology offices. We're setting clear expectations, tracking activity closely, and even increasing our incentive targets for our field team in these areas.
We also know that physicians adopt at a greater rate when they see a sales representative frequently when they do that in combination with other program offerings. As a result, we are prioritizing peer-to-peer programs with an emphasis on smaller, more personalized engagements because we feel this better meets the needs of busy physicians and aids in advancing their understanding of the overall clinical advantages of LUPKYNIS. We recently launched a new campaign directed at high-volume lupus nephritis offices late in Q3. This campaign features a new core message and powerful graphics centered on underserved patient populations. Based on early feedback, this campaign resonates strongly with our healthcare professionals. The campaign is currently in the hands of our sales force, and we will be updating our media and web properties as we move through the next couple of months and weeks.
The campaign will also be a key feature alongside our selling and medical efforts at these upcoming conferences, ASN and ACR, in the next few months. In addition to our commercial execution, our medical affairs efforts related to LUPKYNIS are crucial to driving growth. Over the past few quarters, we have generated significant visibility with healthcare providers with a substantial in-person presence at the major medical conference. We continue to submit new data from AURORA 1 and AURORA 2 for presentations at the conferences coming up, which include 14 abstracts accepted at lupus, ACR, and ASN this year. While much of our marketing approach is designed to increase the depth and frequency of prescribing among our existing base, we also want to ensure that first-time prescribers have a meaningful experience with our product and through our Aurinia Alliance patient support team.
We continue to make seamless first patient experiences with LUPKYNIS a key priority. We can see direct evidence of our impact here in increased PSF approval rates as well as time to receipt of PA following initial prescription. Along with our sales and support team focus and intensity, we have also increased our focus on the patient. We've recently made enhancements to our brand website, LUPKYNIS.com, to provide additional information for patients and healthcare professionals. In addition, we've enhanced and increased our focus directly and through online social media channels. In September, we began a new campaign with the Lupus Foundation of America directed towards lupus nephritis-naive patients with a series of lupus walks across the country. The full campaign launched just last week, and we plan to continue to grow this campaign as we move into 2023.
While our existing anchor programs have always centered around patient, our efforts in advocacy and education, all of these continue. We, in addition, have a number of new programs that will launch over the next few months to help increase diagnosis, urgency of treatment, adherence, and persistency, all moving directly to the patient. Lastly, as we've reported on previous calls, our payer access and approval rates are high. However, some payers still include administrative hurdles for patients initiating therapy. Just last week, we actually signed a contract with one of the largest national payers that will remove certain access hurdles to lessen the administrative work on our offices. It will also shorten the average time to first commercial fill and further enhance the prescribing experience for physicians and patients.
Where we can drive the right motivation under the right terms, we will remain open to partnering with payers to ease access and also to speed conversion. Based on the Q3 revenue results and the PSF trend moments, as you saw in our press release, we're updating our 2022 LUPKYNIS net revenue guidance to $100-$105 million for 2022. In addition, with more than three-quarters of results for 2022 now available, we are also providing preliminary LUPKYNIS net revenue guidance for 2023 in the range of $120 million-$140 million. This represents a 17%-37% growth over the midpoint of our revised estimated guidance for 2022.
In order to achieve this growth, this growth is expected to be driven by an increase in the number of quarterly PSFs, improvements in conversion time, solid persistency curves, and continued strong adherence. Moving now to our globalization efforts for LUPKYNIS. In mid-December, in collaboration with our partner, Otsuka, we achieved an important milestone as the European Commission granted marketing authorization of LUPKYNIS to treat adults with active lupus nephritis. The authorization is valid in all EU member states as well as Iceland, Liechtenstein, Norway, and Northern Ireland. Upon approval, we received a $30 million milestone from Otsuka and are eligible to receive additional regulatory and reimbursement milestones and low double-digit royalties on net sales once launched.
In the quarter, we began to recognize revenues for supply of product to Otsuka, which is reflected as product sales as well as collaboration revenues for CMC and R&D support, both under a cost-plus arrangement. As a reminder, our updated 2022 net product guidance, revenue guidance of $100 million-$105 million does not include this milestone payment, any royalty payments or any collaboration revenue relating to our agreement with Otsuka to market LUPKYNIS in the European Union and Japan. Marketing authorization applications have been submitted in Great Britain and Switzerland, with approvals expected in the H1 of 2023. As a reminder, pricing and reimbursement approval in three of the five major countries in the European market will trigger a $10 million milestone to Aurinia. In addition, our work in Japan remains on track.
Upon approval, we would be eligible for an additional $10 million milestone related to and along with our double-digit royalties on net sales once launched. Key ongoing clinical updates to LUPKYNIS include the advancement of both the VOCAL pediatric study and the ENLIGHT-LN registry. With the registry, which we have just initiated at the beginning of the year, we now have 38 active sites towards our goal of having 17 total sites. As a reminder, we plan to leverage real-world data collected from this study to gain further knowledge about patients taking LUPKYNIS and to help clinicians and payers improve patient care and ensure access to therapy. We remain on track to meet our post-approval FDA commitments. Moving on to our research pipeline.
We continue to advance IND-enabling work on both AUR200 and AUR300, and we continue to work towards submitting INDs for both compounds by the end of 2023. These are important next steps in the advancement of our pipeline as well as to build long-term sustainable growth to the company. Finally, I'd like to provide you an update on our ongoing IPR, Inter Partes Review, relating to our method of use patent. Since the PTAB instituted the IPR on July 26th, we've been diligently working on our Patent Owner Response to the IPR. In mid-September, we and Sun mutually agreed to a 2.5-week extension to each of our upcoming filing deadlines. With that extension, our Patent Owner Response is due to be filed after market tomorrow.
The defense will be substantively disputed will substantively dispute all challenges raised by Sun in the IPR. The defense will be publicly available once filed, and we are confident in the arguments that we are planning on presenting in that defense. There are a number of future steps to be taken in the IPR proceeding, including further filings and oral arguments, culminating in a decision from the PTAB being expected on or before July 26th of 2023. In the meantime, our patent infringement lawsuit against Sun Pharmaceuticals, in which we alleged the infringement by Sun Pharmaceuticals of our patent related to voclosporin ophthalmic solution remains ongoing.
I wanna emphasize that we remain focused on taking all initiatives to protect and strengthen our IP position as a company, including other patent applications relating to LUPKYNIS that are filed and underway, which, if granted, could add and grant us additional patent protection for LUPKYNIS. Before I turn the call over to Joe, as a reminder, inclusive of the Otsuka milestone cash receipt, which it was received on October 31st, 2022, we now have approximately $400 million in cash on our balance sheet. This means we are well capitalized, and we have a great drug that we believe in will become profitable, eventually become a profitable franchise. In line with this updated outlook, we intend to prioritize our spend to drive sales of LUPKYNIS and to allow the company to further invest in its current and future pipeline.
I'd now like to 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 to any questions you might have. Joe?
Thank you, Peter, and hello, everyone. At September 30thth, 2022, we had cash equivalents and restricted cash and investments of $376.6 million, compared to $466.1 million at December 31st, 2021. As Peter said, this does not include the cash receipt of the $30 million milestone payment from Otsuka related to EC approval that was recognized as revenue in the Q3. The company received this payment on October 31st, 2022, bringing cash equivalents and restricted cash and investments at October 31, 2022, inclusive of all the milestone, to approximately $400 million.
We believe that we have sufficient financial resources to fund our current operations, which include funding commercial activities, including FDA-related post-approval commitments, manufacturing and packaging of commercial drug supply, funding our supporting commercial infrastructure, advancing our research and development programs, and funding our working capital obligations for at least the next few years. Total net revenue was $55.8 million and $14.7 million for the quarters ended September 30thth, 2022 and September 30thth, 2021, respectively, an increase of 280% period-over-period. Total net revenue for the nine months ended September 30th, 2022 was $105.6 million and $22.2 million for the nine months ended September 30th, 2021. This represents an increase in excess of 375% year-over-year.
Revenue growth for both periods is primarily due to the recognition of a $30 million regulatory milestone from Otsuka following the EC approval of LUPKYNIS in September 2022, coupled with an increase in product sales for LUPKYNIS, which was driven predominantly by further penetration in the lupus nephritis market. Total cost of sales and operating expenses for the quarters ended September 30thth, 2022 and September 30thth, 2021 were $65.3 million and $65 million respectively. Total cost of sales and operating expense for the nine months ended September 30thth, 2022 were $189 million in comparison to $170.2 million for the nine months ended September 30thth, 2021.
Cost of sales were $2.4 million and $254,000 for the quarters ended September 30thth, 2022 and September 30thth, 2021 respectively. Cost of sales were $4.3 million and $610,000 for the nine months ended September 30thth, 2022 and 2021. The increase for both periods is primarily due to an increase in product related revenue, a low margin contribution for collaboration activities with our partner, Otsuka, coupled with an increase in our safety stock inventory reserves. Gross margins for the three months ended September 30th, 2022 and September 30thth, 2021 was approximately 96% and 98%. Gross margin for the nine months ended September 30th, 2022 and September 30th, 2021 was approximately 96% and 97%, respectively.
Selling, general and administration or SG&A expenses inclusive of our share-based compensations was $52.2 million or $44.6 million for the quarters ended September 30thth, 2022 and September 30thth, 2021 respectively. SG&A expenses inclusive of our share-based compensation expense were $148.9 million and $128.8 million for the nine months ended September 30thth, 2022 and September 30thth, 2021. The increase for the three months ended September 30thth, 2022 was primarily due to an increase in professional fees related to corporate legal matters, an increase in travel costs now that COVID has normalized, and an increase in sponsorship and programs to support the commercialization of LUPKYNIS. For the nine months ended September 30thth, 2022, the increase also included higher salaries, incentive pay and employee benefits.
Non-cash SG&A share-based compensation expense for the quarters ended September 30th, 2022 and September 30th, 2021 was $6.6 million and $6 million. Non-cash SG&A share-based comp expense for the nine months ended September 30th, 2022, September 30th, 2021 was $21.5 million and $19.2 million, respectively. R&D expenses inclusive of share-based comp expense were $11 million and $20 million for the three months ended September 30th, 2022 and 2021. For the nine months ended September 30th, 2022 and September 30th, 2021, R&D expenses inclusive of share-based comp expense were $35.1 million and $40 million.
The primary driver for the decrease for both periods was that in prior year the company expensed a $10 million upfront license and accrued milestone obligation related to its AUR300 program, which was partially offset by additional development expenses related to the AUR200 and AUR300 programs for the current year period ending September 30th, 2022. Non-cash R&D share-based compensation expense for the quarters ended September 30th, 2022 and September 30th, 2021 was $1.5 million and $1 million respectively. Non-cash R&D share-based comp expense for the nine months ended September 30th, 2022 and 2021 was $3.5 million and $3.2 million, respectively. Interest income was $1.5 million and $106,000 for the three months ended September 30th, 2022 and September 30th, 2021.
Interest income was $2.2 million and $420,000 for the nine months ended September 30th, 2022 and September 30th, 2021 respectively. The increase in both periods is due to higher yields in our investment as a result of increasing interest rates. For the quarters ended September 30th, 2022, Aurinia recorded a net loss of $9 million or $0.06 net loss per common share as compared to a net loss of $50.3 million or $0.39 net loss per common share for the quarter ended September 30th, 2021.
For the nine months ended September 30th, 2022, Aurinia recorded a net loss of $82.1 million or $0.58 net loss per common share as compared to a net loss of $147.6 million or $1.15 net loss per common share for the nine months ended September 30th, 2021. With that, I'd like to hand the call back over to Peter for some closing remarks. Peter?
Thanks, Joe. As you heard throughout the call, we faced a number of challenges in the quarter, but we continue to remain optimistic on the overall opportunity. We're focused on delivering LUPKYNIS to patients in need, driving revenues in the U.S. and globally, and we continue to operate with a healthy balance sheet, which will enable us to execute on our long-term strategy. Including the advancement of our pipeline programs and the potential for opportunistic business development. We look forward to keeping you updated along the way. I wanna thank everyone again for joining us today. We'll now open up the call for any questions. Operator?
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Maury Raycroft with Jefferies. Please proceed with your question.
Hi, good morning. This is Farzin on for Maury Raycroft. Your sales expectations are low for the rest of the year and even a modest increase in the 2023 guidance. Can you provide more specifics on assumptions behind the guidance? Maybe Scott, I don't know if he's on the line, but any strategic initiatives he can take to basically get to boost traction at the major medical centers and turn things around?
Yeah. Let me start with the run rate to end the year and then sort of bridge that into guidance for next year. I think if you look at the PSF number that we've reported through the month of October, that gives you an idea of, you know, sort of how we're seeing current trends in terms of patient start forms. Which, as I've said previously, I think the best way to think about patient start forms in the quarter is the knock-on effect to the next quarter and beyond. As you'll see for patient start forms, year to date, we reported a number through October 31st of this year that shows that we were under 100 patient start forms for the full month of October.
Now, we have two full months ahead of us, and we are starting to see a pickup on our dailies. What I can tell you is that that was a big factor. That alongside of some of the more macro trends of lower office visits, lower patient diagnoses, lower urine screens, that led us to you know, more modest growth into 2023. The year-end number is pretty much the die is cast on. You know, it's you know, we saw the numbers of PSFs all the way through Q2 and Q3, and I think the year-end number is indicative of that, and it's kinda that simple.
We've got two more months left of sales to report here in the months of November and December, obviously, and, you know, we felt we had a good bead on exactly where those months were gonna come out, and we felt it was gonna fall in the $100 million-$105 million range. In terms of your question on activities we can do in the major medical centers, this is somewhere we've continued to put time and intensity against. What I would tell you is, we've looked at everything from a targeted approach with specialized representatives and reimbursement people and medical affairs efforts.
I think the sales process in these major medical centers is longer, and as you know, during the entirety of COVID, these major medical centers were locked down and many remain to be fairly locked down in terms of access. It is a key priority of ours, and when we start to see some significant movement in these centers, we will update you accordingly.
Thank you.
Thank you. Operator, next call.
Our next question comes from the line of Ed Arce with H.C. Wainwright. Please proceed with your question.
Hi, good morning. Thanks for taking my question. Joined a bit late, but I may have missed it. I just wanted to ask about the driver of the lower PSFs, the lower diagnoses, the lower patient visits you just mentioned. I'm curious really at what's driving that because I don't really think COVID is an overwhelming driver at this point, certainly for Q3. Just trying to get at what specifically is you know impacting those relative to say the Q2. Separately, just wondering about the Precedential Opinion Panel denial. You know, if there's anything you can say about that and the defense filing that you're filing tomorrow, and the deadline that was set for that. Thank you.
All right. Let me try to give you my best articulation of, you know, what we're trying to figure out as a driver of these lower diagnosis, not pegged to COVID. I mean, I think in the first year of the launch, we clearly reported that we were seeing lower office visits and lower rates of diagnosis of lupus nephritis due to COVID. Then we saw some slight recovery. We're taking this from internal claims data. We buy claims and we go back and we look at those claims as we're in that offices and, you know, that's where we're deriving these numbers from.
We saw some recovery, but then towards the summertime leading into the summertime, so from Q1 to Q2 and then Q2 into Q3, we saw a more steep decline in both diagnoses, urinalysis within those data claims and renal biopsies. What we don't know concretely, Ed, some of this effect we think is just, you know, sort of I don't wanna call it summer seasonality, but there is some effect of patients going on vacations, doc going on vacations, office staff going on vacations. 'Cause we've seen this now two years in a row. Last year it was the Delta variant that we believe was the major driver. This year, obviously, we don't see it as a COVID-related issue.
We do still clearly see that you know in the summertime there is effect happening to our patient population as it pertains to the regularity of their visits and obviously the lab work that they're doing when they're in there. As we continue to learn more about this, we'll report, but we are, as I said, starting to see a revival in the number of PSFs we're seeing, at least the rate of the PSFs that we're seeing moving into October, end of October, and into early November. There's some encouraging signs there. As we continue to track that data in terms of claims, we'll, when we have a view of sort of into Q3 into Q4, we'll try to give you a view as to whether it normalized.
Right now the best answer I can give you is, it happened. It appears to have affected other drugs as well, Enbrel and other drugs that we track. The summer period is the best we can peg it to. Your second question was around the IPR. As I mentioned in the call, we and Sun agreed to an extension to the date for the filing of the initial response, both from us and from Sun, to Friday of this week. In order to get all of our expert witnesses' work done and everything we needed to do, we wanted to take the time to get a submission in by Friday, which is the due date. The expectation should be that it'll come after market tomorrow.
That's on track with the filing and the issuance of approval of that filing about a month back, I believe it was. Your last question was on the denial of the re-review as normal. In the normal course of business, obviously when the PTAB decided to take up the review, the challenge or the company who's being challenged has the ability to go back to the PTAB and challenge that decision, which just about everybody does. The success rate on those challenges is actually quite low, and we've been guided by our lawyers to have a low expectation there. It is not a fulsome, you know, response. The fulsome response you will see go in at the close of business or after market tomorrow.
Okay. Great. Thank you for that. Oh, one more follow-up, if I may. Just wondering, what trends are you seeing recently or currently with persistence on patients existing on therapy?
Well, through 12 months, which is, you know, probably the best number to look at, you know, we reported, six months, nine months and 12 months. That 12 months number was 50%. It's clearly an area we wanna continue to work on, but when you benchmark that versus other chronic therapies in both lupus, so if you look at Benlysta as an example, or if you look at other RA therapies, to have a rate of 50% at 12 months is actually quite good. But, and I underscore but, we're not settling on that. We have data that shows patients continue to show, you know, consistent, reduction in their proteinuria, out to three years.
That this disease is, from what we know about the guidelines and the data, is not one that should be treated sporadically or on a flaring basis. We're not accepting, you know, that number, and we'll continue to work on and we think we have the data to be able to work on persistency. The answer is 50% at 12 months in.
Great. Thanks, Peter. Appreciate it.
Thanks, Ed.
Thank you. Our next question comes from line of Stacy Ku with TD Cowen. Please proceed with your question.
Thanks. The first question is a bit of a follow-up on the last one. For 2023 revenue guidance, taking that midpoint of $120-$140 for next year, and assuming roughly $80,000 per patient for the year, that would imply that you need to capture over 3,000 patients next year, with that discontinuation rate of 50%. We are making a lot of broad assumptions, including pricing in these calculations. Can you just help us understand where assumptions might be too conservative or too optimistic, where you might have more conviction, and why, where there might be a little bit more variability? That's the first question. Then a follow-up, based on that persistency rates, can you just provide more commentary on the average durability of LUPKYNIS use? Is this being used more in induction versus maintenance? Just help us understand.
Okay.
Where that 50% discontinuation rate is coming from. Thank you.
Let me start with your first question, which centered on how we should be thinking about the $120-$140 guidance. As I said in the call, we're factoring in prescription start forms, yes. Persistency, yes. Speed to improvement, yes. But I think you could see any one of those metrics do better than the other in order to get to these numbers. Right now we need to see a significant improvement in our patient start forms for sure. But to say that we need to add 3,000 new patients at $80,000 a year, I think is probably. I don't know if I would say that's aggressive. I mean, it's all based upon how you're individually forecasting all the other parameters.
The assumption that we continue to see improvements in getting patient on drug, getting them on drug quicker, working any backlog of patients are all in there. In terms of, you know, our, what the average net per patient is, as we've said, we think it's probably better to be more conservative towards the $65,000-$70,000 net per patient per year. Joe, am I missing anything there?
No, Peter, I think you got it, captured it fairly well.
I apologize for asking, since you went through several questions there, can you jump to and repeat the questions?
Based on that 50% persistency rate, just more commentary around the average durability of LUPKYNIS use, where you think the drug is being used, more in induction, more in maintenance, just help us understand that 12-month persistency rate?
As we've reported in the past, I don't think there's a lot of change here. When a patient discontinues drug, we try to, or you know, a patient not just discontinues, but over time falls off drug, doesn't take a shipment, decides not to refill a prescription. We have a pretty bespoke patient support, physician support network called Aurinia Alliance. We follow up with the patient, we follow up with the physician, and what I can tell you is we get a broad range of reasons. They're always doc and/or patient-driven. The majority, I would say, you know, are usually patient-driven.
They're across the board, everything from patient, you know, lost to follow-up to patient decided to stop taking the drug, no answer, to patient could not tolerate the drug anymore. It's just a broad range. We're not seeing much from physicians in terms of them telling us that they have a belief that they should stop therapy at 12 months. When a patient's proteinuria gets down to a level, at times it appears that physicians are, you know, have a tendency, some physicians to discontinue drug at 12 months. All of which we have data to support why a patient should not discontinue drug and why a physician should not discontinue drug. The guidelines work in our direction here. The AURORA 2 data is, you know, in our favor here in terms of the results.
We do think we can continue to make headway there and it's part of our primary messaging. The reasons for patients coming off drug on average 50% after 12 months are a broad range of reasons.
That's very helpful. Thank you.
Thank you. Our next question comes from the line of Joseph Schwartz with SVB Securities. Please proceed with your question.
Hi. Thanks. You've given us some patient prescription data, and I was wondering if you could give us some insight on how the number of prescribers has been trending. Are you hitting a wall with the prescribing audience and not broadening it as much as you need to? Can you talk about how the prescriber audience has been trending lately? What is your strategy there?
Yeah. Well, the strategy clearly as I mentioned, is to go after the high decile. These are the docs that we know have a large number of lupus and a large number of lupus nephritis patients. Within that subset, a large number have already prescribed. Let me give you know, the total prescriber number to date through the end of the quarter was about 1,600, and that's off of a fairly large base of rheumatologists and nephrologists. You should deduce, although on a semi-diluted basis, because our seven to 10s are really where our focus are. When you start going down to your one through six's, you're talking about docs who have very few patients, so your effort gets spread really thin.
We still do think there's opportunity, you know, over time to increase our overall prescriber base. If you look at those who have prescribed, only about, I believe the number is 45% have been repeat prescribers. 55% of that number have given us trial. They've tried the product, but they have not become repeat prescribers. We think that's a huge opportunity too, Joe. Going after those physicians who've had experience, had good experience, and getting them to re-prescribe the product.
I think your next follow-on question will be, "Well, if a physician tries your product, why have they not, you know, prescribed it again?" I think, you know, while there's, you know, lots of reasons underlying, I think the most prominent one is probably that these physicians gave us one of their tough-to-treat patients right out of the gates. They need to be more clinically sold over time. That's why our concentration is against those physicians, and will remain there. 1,600 and a high concentration on 7-10 deciles. Our growth rate in a total number, as reported last quarter, was 100 new physicians. I'm not sure what it is for this quarter, but we can get back to you on that.
Okay, thank you. I guess why isn't there more urgency for especially when they have a new?
Joe, we're losing you. We can't hear you on this end, Joe.
Okay, let me try again.
That's better.
In general, why isn't there more urgency for physicians and patients to treat LN in general, especially when they have a new tool to do so? How much control do you have over this phenomenon? It's not a small market, so even if it's decelerating overall, I wonder why you aren't able to take more initiative, still have relatively low market penetration.
Yeah. We lost you on the end, but I think I got the gist of the question, so I'll repeat it for others on the call. I think the question centered around why does it appear that there's a low sense of urgency to treat aggressively and to make sure that patients stay on drug over time? You know, it's surprising to me in that all the data that's out there, Joe, and the published data and the guidelines speak to treatment urgency with treatment targets, and they're pretty open-ended about time to treat. Again, in the guidelines, they don't talk to treating flaring episodes. They talk to proteinuria treatment targets, and that a patient's proteinuria should be maintained.
What we're seeing in actual practice, at least through the claims data and the qualitative feedback that we have, is that there tends to be a desire to treat at very high levels of proteinuria, and that over time, that drug seems to be discontinued. Now, I'm not just talking about our drug. This seems apparent in both the use of steroids and in MMF as well. It doesn't appear to us they're keeping patients on MMF and steroids over time. You know, the only thing I can compare it to is sort of past experience in other markets. You know, when we launched Infliximab back in gastroenterology back decades ago, gastroenterologists kind of did the same thing. They treated with a group of generic drugs. They treated flares.
They were not aggressive with the therapies they used. You know, you evolve to today, and biologics are a mainstay. They're probably close to first line today, and they keep patients pretty chronically on these drugs. It took a long time to develop that market and to get physicians to change their treatment paradigm. That's what I think we need to do here. There is an element of market development that needs to happen, moving physicians from what has historically been a very generic-driven, not data-driven, treatment protocol to one today where you have newly approved medicines operating on data and approvals that need to shift that mindset.
On the patient side, I think it's gonna take education to, you know, make sure they understand that if this is not treated aggressively, that it can cause, and this is data-driven, patients to, you know, have kidney failure, patients to lose kidneys, patients to have a higher increase in likelihood of death and further morbidity. Not just with our drug, all drugs. Aggressive treatment and continuity of treatment are critical. My answer is market development is gonna take time. How long will it take, you know, and the why, I think our market research shows that there's just this, you know, this physician comfort that we need to continue to break through.
Okay. Thanks for those insights. Maybe if I can ask one more related question about your new marketing campaign. It's clearly, you know, designed to be impactful. My question is, why did you design it this way? Why do you think it'll go far?
Yeah, you're falling out on us again, Joe, and let me recap, and you can just yell yes back. I think you asked why we evolved the campaign to where we have today, and maybe asked why, you know, we didn't have that before. I didn't get the back end of the question, but I think what you're driving at is why did we evolve the campaign?
Yeah, that's essentially it.
Okay. Well, you know, listen, our data is strong across all patient types first, but our data is extremely strong in subtypes of African-American patients and Hispanic patients. You know, the majority of the patient population is African-American, Hispanic, and female. So I think what we've tried to do in our most recent is update our campaign with all data available to target it very much towards the majority of the patient population and to use the most impactful data that we have which, at launch, of course, we didn't have the AURORA 2 data and, you know, coupled with the AURORA 2 data, this message is having strong resonance. We're putting a lot of discipline down on utilization of the tools, getting in the offices, consistency in the offices, et cetera.
Not to say there was an emphasis on that at launch, there was, but we're just taking it down to the next level of discipline.
Thanks for the color.
Thank you. Our next question comes from the line of Ken Cacciatore with TD Cowen. Please proceed with your question.
Hey, team. Thanks for taking a second question from Cowen. I was late getting on. I know Stacy asked the question. Peter, I wanted to talk about the IPR challenge and the challenge in general from Sun. It strikes us that they don't have much to win here, and I know there's two different litigations here. You're suing them, they're suing you on LUPKYNIS, and you're suing them on the ophthalmology side. If they win, if Sun is able to win in this IPR process, they haven't certified Paragraph IV. I don't believe they can until the patent expires in 2027 or comes closer to that, and I think they have a few more years before they can certify against any other patents.
What I'm asking and trying to get to is why is this even happening? Shouldn't kind of business folks be able to reach an agreement that makes sense when there's really not much of a win here if Sun is able to win in the IPR? You also are struggling, obviously, with the size of the product, so even if there is a quote-unquote "win" that can't launch for a while, the size of the product is struggling. Can you just help us understand, you know, why this is persisting and why we can't come to some kind of reasonable settlement amongst the parties? Thanks so much.
I guess I'll start with yeah, your conclusions are not inaccurate. I mean, the product has protection under method of use through to the benefits of approval and with the hopeful addition of, you know, pediatric extension work we're doing out to 2028. You think strategically and you say, well, you don't have an ANDA file. You don't get 180 days first mover advantage. You just nullify a patent in a market that you don't necessarily know even what the size is going to be. Gee, this doesn't sound like a very good entry strategy or that the filing has anything to do with generic entry. I think we've said from the outset that we think this is retaliatory and that we have ongoing litigation.
All I can tell you is, Ken, that we're keeping all options open to, you know, ensure that we extend the longevity and the strength of these patents, period. You know, we're business people, so I think you can, you know, sort of see that all options means all options. We do think it's important to get our defense out there in the public domain, to the challenges that we're presented. That's somewhat purposeful. Our goal is not different from your conclusion, which is we would like, you know, these challenges to get resolution. I think Sun's probably in the same place, and we want to give confidence to our employees, our investors, our physicians and patients that, you know, this product has patent protection over the long haul.
Agreeing with your strategic questions about the why and leaving you with the message that we're keeping all options open to extend longevity. That this Friday filing is important to get on the record so people see what our primary defense are. Don't forget, we also have on Track One patents on file with the PTO, that if issued could give us even more ring fencing around that method of use patent.
Great. Thanks so much.
Thanks, Ken.
Thank you. Our next question comes from the line of Justin Kim with Oppenheimer & Co. Please proceed with your question.
Hi, good morning, and thanks for taking the question. Maybe just one. You know, as we try to understand better this dynamic of finite versus chronic treatment with LUPKYNIS, just curious if the team plans to give longer term metrics with persistency as it becomes available. You know, just wondering, you know, are we gonna go down the sort of 15, 18, 21-month persistency rates, you know, as in the coming quarters?
Yeah. All I can say is that we are benchmarking that, and we sort of think in a forecasting way the same way you would, which is we take the data that we have, i.e., the data we've reported. We're not holding anything back here. I hope investors see that we're being transparent, probably even more so in some cases about the metrics that we're driving in the business. Well, there's nothing that would hold us back from reporting, you know, 18 months and beyond. In lieu of doing that and having any data, 'cause we've barely been on the market 18 months here, we use other analog products. You know, lupus and lupus nephritis are different.
We do look at Benlysta, and we look at products in the rheumatoid arthritis category and other arthropathies, and we look at MS and, you know, chronic diseases that have a level of acuity that doesn't necessarily amount to, if you don't take drugs, you know, you die, but if you don't take drugs, you have more morbidity, more morbidity, like diseases and see what we should be benchmarking against. If you look at our benchmarks, 50% persistency at 12 months is actually quite good.
If you look at the data we have and the guideline expectation, to me, they fall quite short of that. We're not accepting it, although we look at other analog products like the anti-TNF class, for example, in rheumatoid arthritis, and say 50% is actually not doing that bad. It's actually quite good. We forecast it based on analogs, and we'll report it when we've got it.
Okay, great. Thanks so much.
Thank you. Our next question comes from the line of Sahil Dhingra with RBC Capital Markets. Please proceed with your question.
Hi, good morning. Thank you for taking our questions. This is Sahil Dhingra for Douglas Miehm. I had one question on the October PSFs. I think the monthly rate, run rate for Q4 is currently 113 versus 125 for Q3 . I understand there was some summer seasonality in Q3, but why is October PSF run rate running below the monthly run rate of September of Q3? And then my follow-up question is, for the guidance for next year, what kind of PSF run rate are you building in to hit that $120 million-$140 million? Thank you.
Well, we've not. I'll answer the last question first. We've not actually given guidance on forward-looking PSF. 'Cause there's variability in a quarter, right? You can see our financials came through, maybe not where we wanted them, but they were carried through in a way where, you know, persistency and speed to getting patients on drug and the backlog of drug and conversions drove a lot more than in the quarter did PSF. You know, providing a PSF projected forward, I think would give us a false sense of accuracy, 'cause if you had one fall off on the other, you might not make a quarter. All things have to work in harmony. Your question on October, I think is, you know.
While I can give you answers that go backward and look at coming off of the summer, I can tell you that we didn't report on this in the call because I don't wanna just run through a list of excuses. We are seeing the trend move upwards in the most recent weeks. Don't forget that our highest performing region out there in the country is the Southeast region. You know, Florida gives us somewhere between, I don't know, a measurable number, call it mid to high single digits per week of PSFs, and the state of Florida has been pretty shut down because of Hurricane Ian. I think that could be one factor that's there. The current coming back online numbers are leading me to believe that we're powering through that. That's the only thing I can say that specifically could have impacted October.
Okay, thank you. Can you please remind me of the milestone payments that are expected?
Can you repeat the question?
Oh, can you please remind me again on the milestone payments? I think there's one for Japan and another European country that was mentioned earlier in the prepared remarks.
Yeah. Upon approval. We just received a $30 million milestone on approval with the European Commission. That's received and banked in the quarter. The next would be when we get three major countries out of the five top European countries with approval and pricing reimbursement. That's another $10 million. Then there's a $10 million approval milestone in Japan. Then coupled with that, and we estimate, you know, hopefully, that, you know, you're somewhere in the 2024 time period for that approval. We have to file there in Japan, and we have to get approval. So in addition to that, we have a cost plus manufacturing arrangement, and we have a royalty rate that we believe in those markets as well.
Sorry, just one follow-up. What's the timeline for the European $10 million?
It's very dependent, country specific, so we've not given a guide on that.
Okay, thank you.
Thank you. Our next question comes from the line of David Martin with Bloom Burton. Please proceed with your question.
Thanks for taking my questions. The docs I've talked to tend to say that if a patient's nephrotic, they'll choose LUPKYNIS. If the patient is fatigued, they'll choose Benlysta. I'm wondering if that's how you see it shaking out as well. What proportion of these lupus nephritis patients are nephrotic and which ones are fatigued?
Well, I mean, to answer the question directly, if a patient's fatigued, they have lupus. If a patient's showing persistent proteinuria, they have lupus nephritis. I'm not surprised by that answer. I don't know that I have a most recent view on how docs are selecting one versus the other. I can tell you that, and you can look and ask the folks at GSK this, they're positioning the product as a lupus product. They're talking about kidney health in lupus patients. The goal there is clearly to get patients before they ever become patients with lupus nephritis. We're positioning the product for where we're indicated, which is for lupus nephritis.
I don't have any data, specific data on are we getting a higher proteinuria patient than Benlysta. That I don't know. I can say that physicians seem to go to the MMF and steroids done before they ever go to either product. The opportunity we have ahead of us is to start to get in front of, you know, just those patients that have already seen a course of MMF and steroids.
Okay. Next question is how much competition or how much sales do you see going to other calcineurin inhibitors? How important is it to emphasize the lower nephrotoxicity with LUPKYNIS? Can you really do that before you get the biopsy results from AURORA? When should we expect those results?
The only data that we have to date that's very strong data, since we're the only ones who've reported data out this long, is the data that look at kidney function as it relates to eGFR out to three years from the AURORA 1 into the AURORA 2 extension study, which shows no degradation in terms of kidney function, at least as measured by eGFR. Do we think we're losing patients based upon this fear of nephrotoxicity? I don't see it in the data, the market research that we have right now. There do seem to be a group of physicians, nephrologists primarily, who have a strong opinion about calcineurin inhibitors, but they're a small percentage.
The overall utilization of calcineurin inhibitors, according to our data, that being cyclosporine A and tacrolimus, is actually quite low, less than 10% of overall lupus nephritis patients. While I think we compete there to a degree because we're part of a class, you know, if we're only growing there and we're only competing there, it's a small market opportunity. I think we need to think and look bigger. Your question on the data for the biopsy data is, remember we had a sub-study from the AURORA, original AURORA study of a very small subset of patients that we actually did do, I believe, serial biopsies on, and then those biopsies were then reviewed by a central lab, an outsourced central lab. Two caveats, David.
Super small, from what I understand, and I still do not know exactly what their readout time period. I know that the central lab continues to work on this, and they'll be looking. They're looking at the pathology work, and then they have an oversight that's looking at their work as well. I don't have a definitive date for you, but I will underscore that it is a small N. The reason it's a small N is because most patients, it's a difficult ask to have a patient opt in for a, an invasive procedure as part of doing a clinical trial.
Got it. One last quick question. When patients discontinue LUPKYNIS, does the proteinuria rebound rapidly, or does it pretty much stay where it is, maybe rebounding slowly?
I don't have a data-driven answer from our studies because I don't think we tracked it. I would hesitate to give you, 'cause I'm not a practicing clinician, what I see in practice. All I can tell you is we don't track it. What we do know from the claims data we have is patients do cycle. It's just very variable across. If they do flare again, they do get retreated.
Okay, thanks.
Thanks, David.
Thank you. Our final question this morning is a follow-up from the line of Maury Raycroft with Jefferies. Please proceed with your question.
Hi. Thank you for taking our question again. You talked about the two patents, like additional patents around fence to build a fence around the LUPKYNIS. Can you be more specific on what those patents are related to and when should we expect those to be granted?
The two patents on file, I believe, have an April action date, or at least one of them has an April action date. They're ongoing. They center around two major areas. One is modifications and addition of new data and adjustments to the '036 patent. Think about, you know, that as a evolution of the '036 patent. Matter of fact, I think that patent addresses many of the challenges that are centered around the Sun challenge. While we think there's a lot of invalidity to them, new data and further enhancement through that could potentially be beneficial. The second is our new data claims, which, you know, I can't really get into here, but if the patent's issued, we'll be more than happy to talk about.
Okay, thanks.
Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Greenleaf for any final comments.
I wanna thank you, everyone, for joining us this morning. We appreciate your time and your support, and we look forward to reporting back to you as we continue to progress through the launch over the next couple of months and quarters. Thank you very much.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.