Aurinia Pharmaceuticals Inc (AUPH) 2020 Q2 法說會逐字稿

Greetings, and welcome to the Aurinia Pharmaceuticals Second Quarter 2020 Results Conference Call. (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, Jesse, 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 of 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 2 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 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's 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 that, let me turn the call over to Peter Greenleaf, Aurinia's President and CEO. Peter?

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 into potentially life-threatening kidney failure. Lupus nephritis creates significant specific burdens on both patients and the health care system, even relative to sufferers of SLE, and we are incredibly proud of the work we're 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 continued 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 they're 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 onboarded, 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 nondilutive 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's 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 with lupus nephritis, we are truly humbled to be on the cusp of delivering on a potential therapy that can make a 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 its regulatory momentum through the COVID-19 pandemic and filed the NDA with the FDA approximately 30 days ahead of our internal estimates. The day 60 letter we received in July was also welcome news, as 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 22nd of January 2021.

As we also announced last month, the agency indicated in their response as well as in the recently received day 74 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 and outcome prior to the PDUFA date. Therefore, the team continues to prepare as though an AdCom will take place and continue its ongoing dialogue 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 insight from across the organization. And we look forward to providing you an update 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've completed patient enrollment in the AUDREY Phase II/III study. This 12-week dose-ranging study is evaluating 3 doses of VOS: 0.2%; 0.1%; and 0.05% compared to vehicle. The primary end point of the study is improvement in Schirmer Tear Test of greater or equal to 10 millimeters at 4 weeks with secondary end points at 12 weeks. In addition, we are evaluating corneal staining as well as improvements in symptoms of dry eye. With enrollment complete, thanks to the incredible work of our clinical operations, development and biostats teams, we are on track to report top line results from this Phase II/III clinical trial during the fourth quarter of this year. The results will also determine the next steps in the development program and guide our planned interactions with the FDA that we expect to have after results are available and before the initiation of a second potentially 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 in becoming launch-ready for voclosporin's potential approval in lupus nephritis. As Peter mentioned earlier, the commercial organization has grown exponentially over the course of 2020, and it's especially gratifying for me to see the depth and breadth of relevant experience of the individuals that we've recruited to 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 all 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 8,000 applicants for our open positions. We've interviewed more than 1,000 candidates, and we've hired more than 100 in the last 3 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 a PDUFA date, and we're well on track to do so.

The commercial organization also continues to come online in appropriately engaging customers. We have now started to engage payers to ensure they recognize the burden of LN and the value of our therapy for appropriate patients. We've enhanced our education 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 a 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 million 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 afternoon's press release, for the 3 months 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 to 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 or forfeiture of the warrants and will not result in any cash outlay by the company. 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 II/III 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 as 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 due to an overall increase in the company's share price.

Corporate, administration and business development expenses increased to $15.5 million for the second quarter of 2020 compared to $4.9 million for the second quarter of 2019. These expenses included the expansion of the commercial team, higher consulting and professional fees, insurance costs and personnel compensation costs as the corporate organization buildout continued into the second quarter of 2020. Noncash stock compensation expense charge 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 of personnel in 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 development programs, completing the NDA submission to the FDA, conducting pre-commercial launch activities, manufacturing and packaging of our commercial drug supply and fund our support, our corporate and working capital needs.

With that review, I'll pass it back to Peter for some closing remarks. Peter?

Thanks, Joe. And let me echo, before opening up to Q&A, our overall pride and 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 II 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 a Q&A session.

(Operator Instructions) Our first question comes from the line of Alethia Young with Cantor Fitzgerald.

Congrats on a lot of the continuing progress that you guys have been making. One, I guess just 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 -- who are the people that might benefit the most, whether it be by race or gender or any other kind of like prespecified measure that might be the most obvious people to start the therapy.

And then can you just talk a little bit about kind of how you're managing and thinking about kind of dose adjustments in the real world? I know it happened during the clinical trial, but just trying to just kind of understand how some of these physicians will work through that in the real world and what kind of guidance you can give them.

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's going to come down to how the label comes across, but it's a great question as to how we're going to sort of guide physicians. Neil might be also be able to give some input on -- sort of 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 incorporated in the trial. And as I said, post-data, I think we're going to try our best to start at an aspirational point here and really challenge physicians on what patients shouldn't be on the drug. Our trial, it was not a drug -- a trial done just for failure patients. We incorporated a broad group of patients and our -- 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 give the patients what they deserve, which is the beneficial -- the additional benefit of our drug in the results that we've seen.

And I want to turn it over to maybe Max Colao, and he can talk a little bit about sort of the question 2 and maybe dig a little bit more into some of the work as we're doing as it pertains to both patient 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.

I know, I got you. Thanks, Peter, and thanks for your -- as you know, LN is one of the most serious complications of SLE. And if it's 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 III trial compared a 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 opening for a 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 this irreversible kidney damage. And that is a tremendous benefit as we think about long-term outcomes for LN.

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

Yes. Just talking about other therapies that are currently either being -- are under investigation or going through the review process like Benlysta. I think one of the benefits, and I think, obviously, there's multiple, to our product is the fact 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 it matters how quickly patients are put into control as to how the disease is impacted. And to have the types of numbers we have as early as 6 months, we believe we're going to be critically important, not just to physicians in 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 had a well-defined treatment effect, it would appear, at least from the data they presented so far, that their response rates at 18 months or 2 years are similar to ours at about 6 months. So I think there's a magnitude of effect there. But also the caveat and caution that they use different outcome measures in their trials as well, and we have limited amounts of data on that particular compound. All we can do is talking to you about what our compound does.

Our next question comes from the line of Georgi Yordanov with Cowen.

So first, given the 6-month priority review, could you comment on your progress in negotiation with payers 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's anything I miss, feel free. But 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 looks 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 even post-Phase II, we took and went out and did quite a bit of research work with both payers and physicians to get a good idea for 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, intro comments, we're already out there engaging payers. So know that 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 break 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, the -- 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 that if you just want to use a benchmark of how other products are competing today in similar areas, that's sort of where the median is hitting today. I think we also have to take in consideration that we could have a competitor coming into the market in Benlysta. While they're an injectable formulation right now for SLE, that product was studied as a lyophilized IV infusion in lupus nephritis, so there may be some changes. But if we try to just look at the average patient that 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 $30,000s, 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 context that's sort of separate from the drug. Max, what did I miss 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, ESRD. So far, the feedback has been positive.

That's great. That's very helpful. And I guess just assuming that there will be no advisory committee meeting, do you expect any stand-alone 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, there'll 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 got -- 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'd ask him for his 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 to approval. Neil, what would you add to that?

Yes. No, I think that you covered most of it. The discussions seem to go on in parallel with the general review. If something in the review brings about a consequent discussion point for the FDA in the label, then that's what comes out.

Our next question comes from the line of Ed Arce with H.C. Wainwright.

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, I was 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.

Yes. Well, I mean, I'll start. The -- probably one of the most exciting things I've seen as 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 external commercial people 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 -- hired just to go a little deeper 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 have 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, 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 overemphasize that I haven't seen sort of a ramp to commercial like this since either my MedImmune or my Cerecor days, so it's exciting.

The other part of your question, I think as I look at everything we're trying to do and necessarily 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 use 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 is right in the physician's 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 labor 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 Max, well, we probably aren't going to give him everything. It'd probably be good just to -- if we can reinforce some of the activity that we're doing up to this point. Max?

Yes, no. 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 from going from SLE to being a diagnosed LN patient, and the early intervention matters for these patients.

So really, 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. The other question I had was I realize 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, the approach that you're taking as it relates to potential ex U.S. partnerships.

Yes. I mean as we've said strategically in building the company that we want to take a focus on the largest market opportunity, and that's the U.S. For context, you can look at quite a few analog products, Benlysta being even one, where north of 85% of their 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, 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, in terms of COVID and being just harder to predict when you can get a deal done today when everything is 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 how their internal processes are being impacted. So we still feel very comfortable we can get a deal done, and that it's a goal for us for the year. So stay tuned. And it's ongoing, I guess, it's all I can say, Ed.

Our next question comes from Joseph Schwartz with SVB Leerink.

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

Yes. I think it's a really good question. I mean obviously, the 2 main specialties we're calling on here are nephrologists and rheumatologists. And obviously, the -- as COVID situation has had impacts on everyone, especially patients and physicians and the relationship between the 2, while we see regional differences, 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 and Max as well, but 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 know that our assumptions include everything from -- on Federate access, which I don't think is reality today to -- if we get back to a full lockdown, 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 the pandemic, we will be prepared to do what we think will be best to launch the product, 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 staff is good or better than it's ever 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 is the very, very strong pre-existing relationships that the Aurinia groups have with a very broad range of opinion leaders and that helps access and helps the quality of the communications moving forward. But now, I mean, I think as Peter 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 -- in -- 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 exactly what we're building to.

Our next question comes from Justin Kim with Oppenheimer & Company.

Congrats on all the progress. I don't have too many questions on my end, but maybe just on the anticipated AUDREY readout in 4Q. Can you just talk a little bit on a high level what types of results would help inform dose selection to future trial design and sort of the path forward generally for the program?

Yes. So that I don't oversimplify 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 for the right balance of efficacy and tolerability, although with our highest concentration formulation that we tried in the exploratory service, the drug is extremely well tolerated. We obviously -- the primary end point is the improvement in Schirmer Tear Test because that's consistent with the end points that have been used to approve other customary inhibitors in dry eyes, Cequa and RESTASIS. But also we seem to see a very good signal from our exploratory study of extremely good outcomes in terms of corneal staining, which, of course, is on the label for Xiidra as well.

And so I think a good combination of Schirmer Tear Test score, corneal staining, but also symptoms, for example, eye dryness, which is built into our prespecified end point is going to take which -- when we move forward. 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 -- that the efficacy is less sort of visible in the very, very low concentration, but we don't know, that's why we're doing 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 pre-commercialization activities for 2Q have been reflected in G&A. Just wondering, how should we think about R&D spend and the potential for expenses based on production of commercial supply going forward?

Well, we haven't given much guidance on this yet for a number of reasons. But Joe, 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 that the costs throughout the remainder of the year will increase accordingly as we become fully burned quarter-over-quarter. As we kind of look 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 will be more of a shift in the nature of the spend than the actual spend itself.

As far as inventory costs, 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 obviously, with an approval and a launch imminent, like, we gained the approval, it's going to be honest to come forward and say, 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 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 will be to diversify the pipeline as we have in other companies prior to this.

Okay, great. Just the last question, in terms of 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 we said, it's 6 to 9 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 3 months on there just for a little bit of buffer in terms of this current pandemic situation. Previously, I think we had said more like 6, we could still be there. But we're probably thinking somewhere in the 6- to 9-month range for the EMA. And then when we look out to Japan where we -- trying to work to schedule a meeting with the PMDA, 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, we'll provide it.

Our next question comes from the line of Maury Raycroft with Jefferies.

Congrats on the progress. I'll try to be quick. For -- I was wondering for AURORA to the double-blind extension study, it seems like you should have the 1-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 bout this round or you want me to?

Yes. Yes. I mean actually, it's a 2-year extension, Maury. So the results, the final results for that will not be available until the end of next year.

Got it. Okay. Okay. And then 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 1 indication or where you in a basket study? And what are some of the main considerations that you have for choosing which indications to pursue?

Neil, you want to take this?

Sure. Yes. Actually, we're still looking at plans. Our considerations, I'll take first. It's not an easy commercial -- potential commercial viability and where the drug would work because that's a little bit more straightforward. But it's also the competitors in the space, the off-label use of other CNIs and the potential to be able to actually recruit, especially during the pandemic in the disease. What we want to do is, as when we launch these studies, it's got to be clinically meaningful to physicians, but also of use to a prescribing physician from the results perspective at the end of the day.

So we've got all those kind 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 are some schools of thoughts, especially in our physician community, that think -- that believe that we know enough about this drug and many of these diseases. And we may potentially go into just 1 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.

Our next question comes from the line of Dae Gon Ha from BTIG.

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 KOLs and your commercial strategy and other re-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 the virtual access seems to be helping in some way. So 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 where 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, we'll 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 in the transcript, 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 in dry eye disease. Just wondering, in terms of your commercial plan in ophthalmology, I know 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 "time line" that you currently have in terms of when you want that kind of inked? Is it before, after Phase II/III AUDREY data?

Well, I think the market will somewhat dictate to us a little bit the timing of when a deal can get done. I think we fully expected in our plans that we'll fund this thing all the way 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 made sure to say to investors are 2 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 bird in hand and we have a drug that looks great in 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 a global company that would have deeper pockets and have the ability to invest at a much higher level than a small company would. We're firm believers that dry eye is, like many other diseases, crosses multi-specialty. It's 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, and I do think there are targeted ways to launch in this space as well, we won't miss the opportunity on 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.

Our next question comes from the line of Doug Miehm with RBC Capital Markets.

Just a single question. This 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've generated, perhaps what you could do is provide us with what 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 would be helpful. And that's it for me.

Yes. Got you. Neil, I'm going to need your help a little bit on this one, and it's always difficult, like, when you ask a question on, hey, would it be-best case, worst-case scenarios. I mean I'll speak in generalities because we're in the middle of talking to the agency, so I think that 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 for the company and our clinical folks as are in dialogue.

But I think 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 for -- to have in our label the ability to have a drug to treat active lupus nephritis. And to probably not have a lot of color around how long that treatment is, maybe the appropriate warnings where they need to be, around what's been studied or not, but a pretty open area of patients 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 sort of how those labels are written for C&Is. And they're 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 in terms of the patient population, so that would be our hope.

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. In terms of patient populations that we should expect, I'll go back to the 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, obviously, and patients maybe 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 this is a very silent disease. It's not like patients are coming and complaining of symptoms with this. It's -- proteinuria is measured, and we've got to ensure that that continues to happen. So hopefully, I just answered that for you, Neil. 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 in how wide we can go.

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.