On August 3, 2023 Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH) (Aurinia or the Company) reported its financial results for the three and six months ended June 30, 2023. Amounts are expressed in U.S. dollars (Press release, Aurinia Pharmaceuticals, AUG 3, 2023, View Source [SID1234633736]).

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Total net revenue was $41.5 million for the three months ended June 30, 2023, compared to $28.2 million in the prior year three months ended June 30, 2022, representing growth of approximately 47% year over year. Year to date net revenue increased to $75.9 million for the six months ended June 30, 2023 compared to $49.8 million for the same time period for 2022, representing growth of approximately 52% period over period.

"We are extremely pleased with our results in the second quarter of 2023. Building on three successful quarters in a row, this represents our most successful quarter to date from a net revenue perspective," said Peter Greenleaf, President, and Chief Executive Officer of Aurinia. "Strong commercial execution continues as we see further utilization of LUPKYNIS (voclosporin) across the lupus nephritis marketplace. Moreover, we are excited by the depth of usage in nephrology and the continued expansion into rheumatology. Our marketing and selling efforts continue to produce patient start forms (PSFs), patients on therapy (POT), wallets shipped, and net product revenue at or near all-time highs."

For the fiscal year 2023, the Company is increasing its net product revenue guidance to a range of $150 – $160 million for net product sales of LUPKYNIS. The guidance range is based on assumptions regarding PSF run rates, consistent conversion rates, time to convert, persistency, and pricing.

Second Quarter 2023 and Recent Highlights

Arthritis & Rheumatology published full results of AURORA 2, a Phase 3, double-blind, placebo-controlled extension study out to 3 years, demonstrating that kidney preservation, sustained renal response, and reductions in steroid use were achieved with LUPKYNIS with mycophenolate mofetil (MMF) and low-dose steroids, compared to MMF and low-dose steroids alone.
A post-hoc, pooled analysis of the Phase 2 AURA-LV and Phase 3 AURORA 1 studies presented at the annual meetings of the European League Against Rheumatism (EULAR) and the European Renal Association (ERA) found that LUPKYNIS with MMF and low-dose steroids resulted in significantly higher renal response rates and earlier and greater reductions in proteinuria in LN patients with high proteinuria, compared to MMF and low-dose steroids alone.
Refined method of use patent (‘991) was issued by the U.S. Patent and Trademark Office and Orange Book listed.
Received reimbursement recommendation from National Institute for Health and Care Excellence (NICE) in the United Kingdom, Swissmedic marketing authorization in Switzerland and most recently reimbursement approval in Italy.
Initiated strategic review of the company in association with J.P. Morgan Securities LLC as our financial advisor.
LUPKYNIS Product Performance Highlights

There were approximately 1,911 patients on LUPKYNIS therapy at June 30, 2023, compared with 1,274 at June 30, 2022, representing an increase of approximately 50% year over year.
Aurinia added 451 patient start forms (PSFs) during the three months ended June 30, 2023, compared to 409 during the three months ended June 30, 2022, representing an increase of approximately 10% over the previous period last year.
As of July 31, 2023, the Company recorded approximately 1,017 PSFs since January 1, 2023.
Conversion rates remain consistent with more than 89% of PSFs converted to patients on therapy.
Time to convert has improved to an all-time high with the large majority (65%) of patients on therapy by 20 days.
As of June 30, 2023, 12 month persistency improved to 54% from 51% at March 31, 2023.
Financial Results for the Three and Six Months Ended June 30, 2023

Total net revenue was $41.5 million and $28.2 million for the three months ended June 30, 2023 and June 30, 2022, respectively. Total net revenue was $75.9 million and $49.8 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase is primarily due to an increase in net product revenue from our two main customers for LUPKYNIS driven predominantly by further penetration in the LN market.

Total cost of sales and operating expenses for the three months ended June 30, 2023 and June 30, 2022 were $57.7 million and $64.2 million, respectively. Total cost of sales and operating expenses for the six months ended June 30, 2023 and June 30, 2022 were $121.7 million and $123.7 million, respectively. Further breakdown of operating expense drivers and fluctuations are highlighted in the following paragraphs.

Cost of sales were $1.6 million for the three months ended June 30, 2023 and June 30, 2022. Cost of sales were $2.0 million and $1.9 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Cost of sales for both periods ended June 30, 2023 and June 30, 2022 remained consistent due to an increase of revenues, offset by a write down of FDA process validation batches that occurred during the second quarter of 2022.

Gross margin for the three months ended June 30, 2023 and June 30, 2022 was approximately 96% and 94%, respectively. Gross margin for the six months ended June 30, 2023 and June 30, 2022 was approximately 97% and 96% respectively.

Selling, general and administrative (SG&A) expenses, inclusive of share-based compensation, were $47.1 million and $51.5 million for the three months ended June 30, 2023 and June 30, 2022, respectively. SG&A expenses, inclusive of share-based compensation, were $97.2 million and $96.7 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The primary drivers for the decrease in SG&A expense for the three months ended June 30, 2023 compared to the same period ended June 30, 2022 was a decrease in professional fees and services, including legal fees incurred during the respective quarters, with respect to litigation matters that were taking place in the three months ended June 30, 2022. For the six months ended June 30, 2023 compared to the same period ended June 30, 2022, the increase was due to an increase in share-based compensation expense and marketing expenses offset by a decrease in professional fees and services which includes legal fees.

Non-cash SG&A share-based compensation expense included within SG&A expenses was $9.8 million and $8.9 million for the three months ended June 30, 2023 and June 30, 2022, respectively. Non-cash SG&A share-based compensation expense included within SG&A expenses, was $17.4 million and $14.9 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

Research and development (R&D) expenses, inclusive of share-based compensation, were $12.7 million and $11.5 million for the three months ended June 30, 2023 and June 30, 2022, respectively. R&D expenses, inclusive of share-based compensation expense, were $25.8 million and $24.1 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The primary drivers for the increase for the three and six months ended June 30, 2023 as compared to the same periods ended June 30, 2022, were an increase in salaries and related employee benefit costs, share-based compensation expense and clinical supply and distribution as the Company advances its AUR200 and AUR300 programs and fulfills the post approval FDA commitments related to LUPKYNIS. The increase was partially offset by a decrease in contract research organization costs related to the completion of the AURORA 2 continuation study and drug interaction study, which were substantially completed in 2022.

Non-cash R&D share-based compensation expense included with R&D expense was $2.1 million and $1.1 million for the three months ended June 30, 2023 and June 30, 2022, respectively. Non-cash R&D share-based compensation expense included with R&D expenses was $3.7 million and $2.0 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

Other (income) expense, net was $(3.6) million and $(0.5) million for the three months ended June 30, 2023 and June 30, 2022, respectively. Other (income) expense, net was $(3.3) million and $1.0 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase in other income is primarily related to change in fair value assumptions driven predominantly by rising interest rates related to our deferred compensation liability coupled with the foreign exchange gain related to our monoplant finance liability.

Interest expense was $0.1 million for the three and six months ended June 30, 2023 due to the commencement of the monoplant finance lease during the second quarter of 2023. We did not incur interest expense during 2022.

Interest income was $4.1 million and $0.5 million for the three months ended June 30, 2023 and June 30, 2022, respectively. Interest income was $7.9 million and $0.7 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase between periods is due to higher yields on our investments as a result of increased interest rates.

For the three months ended June 30, 2023, Aurinia recorded a net loss of $11.5 million or $0.08 net loss per common share, as compared to a net loss of $35.5 million or $0.25 net loss per common share for the three months ended June 30, 2022. For the six months ended June 30, 2023, Aurinia recorded a net loss of $37.7 million or $0.26 net loss per common share, as compared to a net loss of $73.1 million or $0.52 net loss per common share for the six months ended June 30, 2022.

Financial Liquidity at June 30, 2023

As of June 30, 2023, Aurinia had cash, cash equivalents and restricted cash and short-term investments of $350.7 million compared to $389.4 million at December 31, 2022. The decrease is primarily related to the continued investment in commercialization activities and post approval commitments of our approved drug, LUPKYNIS, inventory purchases, advancement of our pipeline and the second capital expenditure payment for the monoplant, partially offset by an increase in cash receipts from sales of LUPKYNIS.

Aurinia believes that it has sufficient financial resources to fund its operations, which include funding commercial activities, such as FDA related post approval commitments, manufacturing and packaging of commercial drug supply, funding its supporting commercial infrastructure, advancing its R&D programs and funding its working capital obligations for at least the next few years.

This press release is intended to be read in conjunction with the Company’s unaudited condensed consolidated financial statements and Management’s Discussion and Analysis for the quarter ended June 30, 2023 in the Company’s Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, including risk factors disclosed therein, which will be accessible on Aurinia’s website at www.auriniapharma.com, on SEDAR at www.sedarplus.ca or on EDGAR at www.sec.gov/edgar.

Conference Call Details

Aurinia will host a conference call and webcast to discuss the quarter ended June 30, 2023 financial results today, Thursday, August 3, 2023 at 8:30 a.m. ET. The audio webcast can be accessed under "News/Events" through the "Investors" section of the Aurinia corporate website at www.auriniapharma.com. In order to participate in the conference call, please dial +1 (888) 645-4404 (Toll-free U.S. & Canada). An audio webcast can be accessed under "News/Events" through the Investors section of the Aurinia corporate website at www.auriniapharma.com. A replay of the webcast will be available on Aurinia’s website.

About Lupus Nephritis

Lupus Nephritis is a serious manifestation of systemic lupus erythematosus (SLE), a chronic and complex autoimmune disease. About 200,000-300,000 people live with SLE in the U.S. and about one-third of these people are diagnosed with lupus nephritis at the time of their SLE diagnosis. About 50 percent of all people with SLE may develop lupus nephritis. If poorly controlled, lupus nephritis can lead to permanent and irreversible tissue damage within the kidney. Black and Asian people with SLE are four times more likely to develop lupus nephritis and Hispanic people are approximately twice as likely to develop the disease compared to White people with SLE. Black and Hispanic people with SLE also tend to develop lupus nephritis earlier and have poorer outcomes, compared to White people with SLE.