Aurinia Pharmaceuticals Inc. (AUPH) Q2 2020 Earnings Call Transcript

Aurinia Pharmaceuticals Inc  (NASDAQ: AUPH) Q2 2020 earnings call dated Aug. 11, 2020

Corporate Participants:

Glenn Schulman — Senior Vice President, Corporate Communications and Investor Relations

Peter Greenleaf — Chief Executive Officer and Director

Neil Solomons — Chief Medical Officer

Max Colao — Chief Commercial Officer

Joe Miller — Chief Financial Officer

Analysts:

Alethia Young — Cantor Fitzgerald — Analyst

Georgie Gordonov — Cowen — Analyst

Ed Arce — H.C. Wainwright — Analyst

Joseph Schwartz — SVB Leerink — Analyst

Justin Kim — Oppenheimer — Analyst

Maury Raycroft — Jefferies — Analyst

Dae Gon Ha — BTIG — Analyst

Douglas Miehm — RBC Capital Markets — Analyst

Presentation:

Operator

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.

Glenn Schulman — Senior Vice President, Corporate Communications and Investor Relations

Thank you, Jessie and good afternoon everyone. Welcome to Aurinia’s second quarter 2020 conference call. Joining me on the call from the Aurinia team today are Mr. Peter Greenleaf, President and CEO; our Chief Commercial Officer, Mr. Max Colao; Mr. Joe Miller, our Chief Financial Officer; and Dr. Neil Solomons, Chief Medical Officer at Aurinia.

This afternoon, we issued our press release and associated financial statement package detailing the second quarter of 2020 financial results, both of which are available on our website at www.auriniapharma.com and filed via 6-K with the SEC.

Before jumping into some brief remarks from the team, I’d like to remind everyone that today’s call is being webcast live on Aurinia’s Investor Relations website and a replay will be available approximately two hours after the completion of today’s call. Please also note that the content of today’s call is the property of Aurinia and 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 email 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 summer time, 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?

Peter Greenleaf — Chief Executive Officer and Director

Hey, thanks, Glenn, and on behalf of the company, I want to thank you all for taking the time with us to review our second quarter results. As Glenn mentioned, we issued our second quarter 2020 results this afternoon along with operational highlights from the past few months.

As a team, we’re incredibly pleased to be making such a significant progress towards our goal of launching the potentially first ever FDA-approved therapy for lupus nephritis and getting our chance to make a real difference for the lupus nephritis community. This community has been underserved for too long with no approved treatment options for the management of their disease and the prevention of progression into potentially life-threatening kidney failure. Lupus nephritis creates significant — specific burdens on both patients and the healthcare system, even relative to sufferers of SLE, and we are incredibly proud of the work 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 were 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 there you noted in their drive to swiftly move and efficiently get voclosporin to patients in need after the potential approval. To that end, we anticipate on having our sales force on-boarded, trained and launch-ready by year-end.

I also thought it was important to make mention of the successfully completed follow-on offering, which brought in over $200 million in gross proceeds to fortify the balance sheet and provide working capital for the next several years excluding any revenue or non-dilutive capital realized from possible in-licensing or other ex-U.S. partnerships for voclosporin. With a robust cash position of nearly $442 million, we can now fully execute on our plans.

So with that brief overview, I’ll now turn the call over to Dr. Neil Solomons to add additional color regarding the ongoing NDA review process and the ongoing voclosporin development programs. Neil?

Neil Solomons — Chief Medical Officer

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 on 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 FDA letter we received in July was welcome news, as not only did the FDA validate and accept our voclosporin filing for review, but also granted it Priority Review with a 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 the 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 outcome will take place and continue with ongoing dialog with the agency regarding the proposed label, scheduling clinical and manufacturing site visits and other routine activities during the review period.

We are also working diligently to characterize additional proteinuric kidney conditions that we could evaluate voclosporin against. Over the next few months, we will complete an internal deep dive combining insights from across the organization and we look forward to providing 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 have completed patient enrollment in the AUDREY Phase 2/3 study. This 12-week dose ranging study is evaluating three doses of VOS, 0.2%, 0.1% and 0.05% compared to vehicle. The primary endpoint of the study is improvements in Schirmer Tear Test of greater or equal to 10 millimeters at four weeks with secondary endpoints at 12 weeks. In addition, we are evaluating Corneal Staining, as well as improvements in symptoms of Dry Eye.

With the enrollment complete, thanks to the incredible work of our clinical operations, development and VOS stats teams, we are on track to report top-line results from this Phase 2/3 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 potential pivotal trial of VOS.

With that brief update on the clinical and regulatory fronts, I’ll pass the call over to Max. Max?

Max Colao — Chief Commercial Officer

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 were 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 a 100 in the last three months. As of now, we’ve completed hiring for almost all our customer-facing roles. As Peter said, we are focused on being launch-ready before our PDUFA date and we’re well on track to do so.

The commercial organization also continues to come online in appropriately engaging customers. We have now started to engage payors 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?

Joe Miller — Chief Financial Officer

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 three 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 2/3 AUDREY trial, the AURORA 2 extension trial and the expansion of the medical affairs team to support the launch of voclosporin, partially offset by lower AURORA trial costs as this trial has now been completed.

Non-cash 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. Non-cash stock compensation expense charged to corporate, administration and business development also increased to $3.1 million for the second quarter ended June 30, 2020 compared to $1.2 million for the comparable period in 2019, reflecting the hiring of a significant number of personnel in 2020 and an increase in the fair value of the stock options granted due to the 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 or support our corporate and working capital needs.

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

Peter Greenleaf — Chief Executive Officer and Director

Hey, 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 2 data produced last year, which pending regulatory discussions, would lead to a confirmatory pivotal study for VOS. With a strong balance sheet and cash, cash equivalents and short-term investments of approximately $442 million at the end of July, we are amply funded to support the launch of voclosporin and continued execution on our pipeline.

I want to thank you all for your attention today, and the team and I are here to answer your questions. So with that, operator, please open up for a Q&A session.

Questions and Answers:

Operator

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

Alethia Young — Cantor Fitzgerald — Analyst

Hey, guys. Thanks for taking my question and congrats on a lot of the continued progress that you guys have been making. One, I guess, just kind of focus on a little bit on the launch. And I mean, I’ve been looking at some of the subgroups in the AURORA study and just wanted to kind of talk about where you might think some of the — who are the people who might benefit the most, whether it’d be by race or gender or any other kind of like pre-specified 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 don’t happen during the clinical trial, but just trying to kind of understand how some of these physicians will work through that in the real world and what kind of guidance you can give them. Thanks.

Peter Greenleaf — Chief Executive Officer and Director

Yeah. So I think the first question, let me start and then I’ll probably 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 and — 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 — so from a real world medicine standpoint on 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 date, I think we’re going to try our best to start at an aspirational point here and really challenge physicians on what patient shouldn’t be on the drug. Our trial was not a drug — a trial done just for failure patients, we incorporated a broad group of patients and are 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. I want to turn it over to maybe Max Colao and you can talk a little bit about sort of the question too, 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, etc. Max, you want to give a little bit of a — just a preview on that? And, Max, you may need to unmute yourself.

Max Colao — Chief Commercial Officer

I know, I got you. Thanks, Peter.

Peter Greenleaf — Chief Executive Officer and Director

No worries.

Max Colao — Chief Commercial Officer

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 3 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 aren’t 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 [Technical Issues] for our first line patient. We’re very excited about the potential for early intervention with voclosporin and we think that we can change the course of the disease and possibly prevent this irreversible kidney damage. And that is a tremendous benefit as we think about long-term outcomes for LN.

Alethia Young — Cantor Fitzgerald — Analyst

Okay. Can I just ask one quick follow-up? Some people have asked me about like the Glaxo compound. And I know it works — [Indecipherable] but I just wanted to get your perspective on kind of matching up some of these different compounds of voclosporin. Thanks.

Peter Greenleaf — Chief Executive Officer and Director

Yeah, Alethia, you’re just talking about other therapies that are currently either being on — are under investigation or going through the review process like BENLYSTA. I think one of the benefits — and I think obviously there’s multiple products is the fact that 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. 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 monitor that times nephrons and that matters how quickly patients are put into control as to how they’re — the disease is impacted and to have the types of numbers we have as early as six months, we believe, are going to be — are 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?

Neil Solomons — Chief Medical Officer

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 rate’s at 18 months or two years, dissimilar to — ours is about six months. So I think there is a magnitude of effect there but also the caveat and caution that they’ve used different outcome measures in their trials, as well, and we have limited amounts of data on that particular compound. What we can do is talk in detail about what our compound does.

Alethia Young — Cantor Fitzgerald — Analyst

Great. Thank you.

Peter Greenleaf — Chief Executive Officer and Director

Thanks, Alethia.

Operator

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

Georgie Gordonov — Cowen — Analyst

Thank you guys for taking my question. So, I guess, first, given the six months Priority Review, could you comment on your progress in negotiation with payors, and if we have any clarity on potential pricing? And then I do have a follow-up on the commercialization.

Peter Greenleaf — Chief Executive Officer and Director

Yeah, 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 2, we took and went out and did quite a bit of research work with both payors and physicians to get a good idea of what price elasticity could look like for the drug. And we’re doing the next round of that, as we speak. And Max said in his comments — intro comments that we’re already out there engaging payors. 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 right from the outset.

I have said in a lot of our past calls that I think if you look at the drugs that have been launched in like areas today over the last 10 years [Phonetic] 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 has 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, etc, 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 should probably be looking at the high-30s, mid-to-low $40,000 a year range for BENLYSTA. So I think we have to keep that in mind. It’s a beacon we can look at. So key takeaways, we’re talking to payors 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?

Max Colao — Chief Commercial Officer

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

Georgie Gordonov — Cowen — Analyst

That’s great. That’s very helpful. And I guess just assuming that there will be no Advisory Committee meeting, do you expect any standalone labeling discussions with the FDA? And do you expect to have any clarity on labor or any sort of communication prior to the PDUFA date?

Peter Greenleaf — Chief Executive Officer and Director

Well, it’ll be ongoing dialog with the agency. That’s not something that’s formal and communicated on a day-to-day basis. And as for example, of course, we get — we just passed our Day 74 and we did receive correspondence from the agency at Day 74. It was confirmatory of everything we’ve already reported, so there is 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 the label itself will be something that will be in the mix, all the way through up to approval. Neil, what would I — what would you add to that?

Neil Solomons — Chief Medical Officer

Yeah, no, I think that you covered most of it. The discussions seemed going in parallel with the general review. If something in the review brings about a consequent discussion point for the FDA and the label, then that’s what comes out.

Georgie Gordonov — Cowen — Analyst

That’s great, thank you so much. Thanks so much for taking the time.

Peter Greenleaf — Chief Executive Officer and Director

Thanks.

Operator

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

Ed Arce — H.C. Wainwright — Analyst

Hi, everyone. Thanks for taking my questions. I have a couple here. First, given the expanded leadership team that you have in place and many of the folks that you’ve just recently hired both in medical affairs and in the sales and marketing teams, 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. Thanks.

Peter Greenleaf — Chief Executive Officer and Director

Yeah, well, I mean, I’ll start. The — probably the — 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 new leap brought into the company. So, there’s an element of followership that comes from that. But we’re — hired just going [Phonetic] 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 is 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 Centocor days. So it’s exciting.

The other part of your question, I think, as I look at everything we’re trying to do in this early lead up to launch here at the areas of trying to educate and get physicians on the patient identification side are going to be some of the most important. And I used a 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 the low-hanging fruit and identify the patient that’s right in the physicians mind or you can go wide and aspirational and challenge the physician and challenge the system a little bit to ensure that you’re getting as broad as possible. And that’s what we intend to do. Now, our 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 is working on some of this. And, Max, while we probably aren’t going to give him everything, it’ll probably be good just to — if we can reinforce some of the activity that we’re doing up to this point. Max?

Max Colao — Chief Commercial Officer

Yeah. No. Thanks. Thanks, Peter. Yeah. 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 longstanding 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.

Ed Arce — H.C. Wainwright — Analyst

Okay, that’s helpful. Thank you. 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 that — the approach that you are taking as it relates to potential, ex-U.S. partnership. Thanks.

Peter Greenleaf — Chief Executive Officer and Director

Yeah, as we’ve said, strategically and 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 spend list, even being 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 in the company is going to drive the most shareholder value for investors and for the long-term build-out of the company. So outside the U.S., we’ve basically concluded that a partner would be better served helping us out in terms of marketing and selling the drug. I cannot 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 through the year. So stay tuned and it’s ongoing, I guess, is all I can say it.

Ed Arce — H.C. Wainwright — Analyst

Very good. Thanks, Peter. I appreciate it.

Peter Greenleaf — Chief Executive Officer and Director

Thank you.

Operator

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

Joseph Schwartz — SVB Leerink — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

Yeah, I think it’s a really good question. I mean, obviously the two 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 two. 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, etc., I would say that just — this is a sick patient population and patients are still being seen by physicians and we’re not hearing of any major lapses. And I’ll turn to Neil for comment, Max as well, but the lapses in treatment and care, etc, 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 note that our assumptions include everything from unfettered access, which I don’t think is reality today too. If we had to 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 and whether that’s in a lockdown situation or sort of a hybrid or completely wide open, which I actually don’t think will be the case by January, but we will have to see. Neil, any comments from you on what you’re hearing from trial sites etc? And then maybe we can have Max just give any comment he might have on planning around this pandemic etc.

Neil Solomons — Chief Medical Officer

I mean, I think access to site and staff is good or better in the sense, it has been remotely, because people I guess are less physically tied up with their work in the hospitals for the most part. They are 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’s something that helps access and helps the quality of the communications moving forward. But, now, I mean, I think as Peter said there, we’ll have to see how things go, but at the moment, we don’t seem to be compromised in that matter.

Max Colao — Chief Commercial Officer

Yeah, 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 — and 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. We’re — 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.

Joseph Schwartz — SVB Leerink — Analyst

Thanks for the added information.

Peter Greenleaf — Chief Executive Officer and Director

Thanks, Joe.

Operator

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

Justin Kim — Oppenheimer — Analyst

Hi, good afternoon, everyone, and congrats on all the progress. I don’t have too many questions on my end. But maybe just on the anticipated AUDREY readout in 4Q. Can you just talk a little bit on a high level what types of results would help inform dose selection through future trial design and through the path for general incremental [Phonetic] program?

Peter Greenleaf — Chief Executive Officer and Director

Yeah, 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.

Neil Solomons — Chief Medical Officer

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 this largest study, later visits were extremely well tolerated. We — obviously, the primary endpoint is the improvement in the Schirmer Tear Test, because that’s consistent with the endpoints that are being used to approve other kinds of inhibitors and drives the Xiidra and Restasis. But also we seem to see a very good signal from our [Indecipherable] 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 scores, Corneal Staining, but also symptoms — for example eye dryness which is built into pre-specified hierarchical endpoints. It’s going to take, which one we move forward. Also in terms of an ideal result, it would be very good to see where the efficacy lies. So for example, our hope is that the efficacy is less sort of visible in the very, very low concentration, but we don’t know. That’s how we’re doing the trial.

Justin Kim — Oppenheimer — Analyst

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?

Peter Greenleaf — Chief Executive Officer and Director

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?

Joe Miller — Chief Financial Officer

Yeah, 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 cost throughout the remainder of the year will increase accordingly as we come fully burdened quarter over quarter. I mean, as we kind of look more towards R&D expenses, obviously we have some trials that are still ongoing. There has been somewhat of a shift in R&D related costs, obviously towards the NDA submissions/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. When you 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 cost, yes, there is 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.

Peter Greenleaf — Chief Executive Officer and Director

And I guess the last thing I would add to that, Justin, obviously with an approval and a launch imminent like we gain the approval, it’s going to be on us 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 continue to be a company focused on the development of drugs. And as I’ve said in the past, I think it’s important that we continue to look to diversify our pipeline and until we do that, it’s just sort of a speculative thing. If we are 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.

Justin Kim — Oppenheimer — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

Yeah. As we said, it’s six to nine months behind where we are with the FDA right now and our work with the FDA in the U.S. filing. And we’ve added the extra three months on there just for a little bit of buffer in terms of this current pandemic situation. Previously, I think we had said more like six, we could still be there, but we’re probably thinking somewhere in the six to nine month range for the EMA. And then when we look out to Japan we’re trying to work to schedule a meeting with the PMDA. Our ongoing work there’s 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.

Justin Kim — Oppenheimer — Analyst

Great. Thanks so much.

Peter Greenleaf — Chief Executive Officer and Director

Thank you.

Operator

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

Maury Raycroft — Jefferies — Analyst

Hi, everyone. Congrats on the progress and thanks for taking my questions. I’ll try to be quick. For — I was wondering for AURORA 2, the double-blind extension study, it seems like you should have the one-year extension data by year-end this year. And so I’m just wondering if you’re planning on reporting that at the end of this year or what the plans are there for disclosure?

Peter Greenleaf — Chief Executive Officer and Director

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

Neil Solomons — Chief Medical Officer

Yeah, yeah. I mean, actually, it’s a two-year extension, Maury. So the results — the final results for that will not be available through the end of next year.

Maury Raycroft — Jefferies — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

Neil, you want to take this?

Neil Solomons — Chief Medical Officer

Sure, yeah. Actually, we were still looking at plans or considerations, I’ll take first. And it’s not only the commercial — potential commercial viability and where the drug would work because that’s a little bit more straightforward but it’s also the competitors in this 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 and when we launch into the study, it’s going 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 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 thought especially in our physician community, I think, to believe that we know enough about this drug and many of these diseases, and we may potentially go into just one or more indications. But we will update you towards the end of the year on that. We’re doing a deep dive. We have to get input from our commercial and also our key opinion leader colleagues to make sure that we’re making the right decision here.

Maury Raycroft — Jefferies — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

Thanks, Maury.

Operator

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

Dae Gon Ha — BTIG — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

Yeah, 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 and 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.

Dae Gon Ha — BTIG — Analyst

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

Peter Greenleaf — Chief Executive Officer and Director

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 in 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, what we’ve made sure to say to investors are two things. One, our core is really autoimmune disease with a really sort of acute focus on renal and even more so sort of rare renal diseases and we’d like to try to stay in and around there. That doesn’t necessarily mean that if we get a burden hand, and we have a drug that looks great in Dry Eye as commercially competitive and we don’t have a partner that we couldn’t figure out a way to launch the drug in.

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, etc, and spend money to get this to where it could potentially go in terms of size, is probably a better approach. But that being said, if we get caught in a situation where we have a drug approval and we have the ability to launch it, I do think there are targeted ways to launch in this space as well. And we won’t miss the opportunity on the other side.

But strategically, right now, our primary focus is autoimmune disease, lupus nephritis, the kidney and the like. Ophthalmology is a great bolt-on because of the great molecule that we have, but we would probably look to partner and timing on that will be ongoing.

Dae Gon Ha — BTIG — Analyst

Great, thanks for taking our questions.

Peter Greenleaf — Chief Executive Officer and Director

Thank you.

Operator

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

Douglas Miehm — RBC Capital Markets — Analyst

Good afternoon. Just a single question. It has to do with the label. Peter, you’ve mentioned this a couple of times in terms of its importance but based on the quality of your data that you’re generating, perhaps what you could do 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 were asked at the beginning of the call, which was, which patients that are currently on standard-of-care would not go on this. If you could sort of walk us through that, that’d be helpful. And that’s it from me. Thanks.

Peter Greenleaf — Chief Executive Officer and Director

Yeah. Oh God, Neil, I’m going to need your help a little bit on this one. And it’s so — it’s difficult to — just the question on, hey, what would be best-case, worst-case scenarios. I mean, I’ll speak in generalities because we’re in the middle of talking to the agencies. So I think that to really start pegging what expectations should be for the label etc., I wouldn’t want anything to poison those conversations or sort of lead those conversations for the company and our clinical folks as they’re in dialog. 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 up 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 CNIs and they’re — I wouldn’t say — they have their appropriate warnings and precautions. But at the end of the day, they’re written pretty widely in terms of length, duration of use and 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, patient should be limited to only these areas, etc. 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, 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 it’s a very silent disease. It’s not like the patients are coming and complaining of symptoms with this. It’s — proteinuria is measured and we got to ensure that, that continues to happen. So hopefully I just answered that for you, Neil. We can 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.

Operator

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

Peter Greenleaf — Chief Executive Officer and Director

Yeah. 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.

Operator

[Operator Closing Remarks]