On November 2, 2023 Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH) (Aurinia or the Company) reported its financial results for the three and nine months ended September 30, 2023 (Press release, Aurinia Pharmaceuticals, NOV 2, 2023, View Source [SID1234636733]). Amounts are expressed in U.S. dollars.

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Net product revenue was $40.8 million for the three months ended September 30, 2023 and $25.5 million for the same period in 2022, representing growth of approximately 60%. Net product revenue was $116.2 million for the nine months ended September 30, 2023 and $75.1 million for the same period ended 2022, representing growth of approximately 55%.

Total net revenue was $54.5 million for the three months ended September 30, 2023 and $55.8 million for the same period in 2022. Total net revenue was $130.4 million for the nine months ended September 30, 2023 and $105.6 million for the same period in 2022.

"We are very pleased with our overall results for the first nine months of the year. Reporting another strong quarter of results reinforces our ability to execute and deliver against key metrics. Our team continues to focus on business fundamentals and steady performance," said Peter Greenleaf, President, and Chief Executive Officer of Aurinia. "We continue to deliver new data on LUPKYNIS and grow the overall LN market. In addition, we received a $10.0 million milestone from our collaboration partner outside the U.S. as a result of securing pricing and reimbursement approvals in three of the five major European markets."

For the fiscal year 2023, the Company is narrowing its net product revenue guidance to a range of $155 – $160 million for net product sales of LUPKYNIS. This guidance range is based on assumptions regarding PSF run rates, consistent conversion rates, time to convert, persistency and pricing.

Third Quarter 2023 and Recent Highlights

Full results from AURORA 2 (the long-term extension study of the Phase 3 AURORA trial) were published in Arthritis & Rheumatology, the official peer-reviewed journal of the American College of Rheumatology, demonstrating kidney preservation over the 3-year study period as measured by eGFR (estimated glomerular filtration rate) along with additional efficacy, safety, and tolerability of LUPKYNIS over the study duration.
A total of 14 LUPKYNIS clinical abstracts were accepted for presentation at the upcoming American Society of Nephrology and the American College of Rheumatology being held in November 2023. Led by several leading experts in nephrology and rheumatology, these presentations reinforce the long-term safety and efficacy profile of LUPKYNIS for the treatment of adults with active lupus nephritis (LN), a serious complication of systemic lupus erythematosus (SLE). The robust set of data demonstrates Aurinia’s deep commitment to sustained research in autoimmune diseases, including lupus.
Received notification that the pricing and reimbursement milestone was secured. As a result, this triggered a $10 million milestone from Otsuka Pharmaceutical Co. Ltd (Otsuka). Additionally, LUPKYNIS received marketing acceptance in Scotland by the Scottish Medicines Consortium.
Appointed three new directors to the Board of Directors – Dr. Karen Smith, Jeffrey Bailey, and Dr. Robert Foster.
LUPKYNIS Product Performance Highlights

There were approximately 1,939 patients on LUPKYNIS therapy at September 30, 2023, compared with 1,354 at September 30, 2022, representing an increase of approximately 43% year over year.
Aurinia added 436 patient start forms (PSFs) during the three months ended September 30, 2023, compared to 374 during the three months ended September 30, 2022, representing an increase of approximately 17% over the same period last year.
Through the end of October 2023, the Company recorded approximately 1,510 PSFs since January 1, 2023.
Conversion rates remain consistent with approximately 90% of PSFs converted to patients on therapy.
Time to convert has improved to an all-time high with the large majority (64%) of patients on therapy by 20 days.
Adherence improved from 84% at September 30, 2022 to 87% at September 30, 2023.
Persistency at 12 months has maintained at 54%; and remained stable at further months on therapy: 48% at 15 months and 43% at 18 months.
Financial Results for the Three and Nine Months Ended September 30, 2023

Total net revenue was $54.5 million and $55.8 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Total net revenue was $130.4 million and $105.6 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Net product revenue was $40.8 million and $25.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Net product revenue was $116.2 million and $75.1 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The increase for both periods is primarily due to an increase in product sales to our two main customers for LUPKYNIS, driven predominantly by further penetration of the LN market.

License, royalty and collaboration revenue was $13.7 million and $30.3 million for the three months ended September 30, 2023 and September 30, 2022, respectively. License, royalty and collaboration revenue was $14.2 million and $30.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The decrease for both periods is due to the recognition of a $30.0 million regulatory milestone from Otsuka following the EC marketing authorization of LUPKYNIS in September 2022 partially offset by the recognition of a $10.0 million pricing and reimbursement milestone as well as recognition of collaboration revenue from Otsuka in the quarter ended September 2023.

Total cost of sales and operating expenses were $70.8 million and $65.3 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Total cost of sales and operating expenses were $192.4 million and $189.0 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Further breakdown of cost of sales and operating expense drivers and fluctuations are highlighted in the following paragraphs.

Cost of sales were $6.8 million and $2.4 million for the three months ended September 30, 2023 and September 30, 2022, respectively. The increase is primarily due to increased sales of LUPKYNIS, coupled with the amortization of the monoplant finance right of use asset, which was placed into service in late June 2023.

Cost of sales were $8.8 million and $4.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The increase is primarily due to increased sales of LUPKYNIS coupled with the amortization of the monoplant finance right of use asset, partially offset by higher inventory reserves in 2022 due to the write-down of FDA validation batches.

Gross margin for the three months ended September 30, 2023 and September 30, 2022 was approximately 88% and 96%, respectively. Gross margin for the nine months ended September 30, 2023 and September 30, 2022 was approximately 93% and 96% respectively.

Selling, general and administrative (SG&A) expenses, inclusive of share-based compensation, were $47.8 million and $52.2 million for the three months ended September 30, 2023 and September 30, 2022, respectively. The decrease is primarily due to a decrease in professional fees and services (including legal fees with respect to litigation matters that occurred during the three months ended September 30, 2022), partially offset by an increase in share-based compensation expense.

SG&A expenses, inclusive of share-based compensation, were $145.0 million and $148.9 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The decrease was primarily due to a decrease in professional fees and services (including legal fees) and other corporate costs (including rent and insurance), partially offset by an increase in share-based compensation expense.

Non-cash SG&A share-based compensation expense included within SG&A expenses was $9.6 million and $6.6 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Non-cash SG&A share-based compensation expense included within SG&A expenses, was $27.0 million and $21.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Research and development (R&D) expenses, inclusive of share-based compensation, were $13.6 million and $11.0 million for the three months ended September 30, 2023 and September 30, 2022, respectively. The primary drivers for the increase were due to an increase in CRO and developmental costs as the Company advances its preclinical assets.

R&D expenses, inclusive of share-based compensation expense, were $39.4 million and $35.1 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The increase was primarily due to an increase in costs to advance the Company’s preclinical assets coupled with an increase in share-based compensation expense partially offset by the decrease in costs associated with 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 $2.0 million and $1.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Non-cash R&D share-based compensation expense included with R&D expenses was $5.7 million and $3.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Other (income) expense, net was $2.6 million and $(0.3) million for the three months ended September 30, 2023 and September 30, 2022, respectively. The change is primarily related to expenses incurred for shareholder matters partially offset by foreign exchange gain related to the revaluation of the monoplant finance lease liability.

Other (income) expense, net was $(0.7) million and $0.6 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The change is primarily related to change in fair value assumptions driven predominantly by rising interest rates related to our deferred compensation liability and foreign exchange gain on revaluation of the monoplant finance lease liability, partially offset by expenses incurred for shareholder matters.

Interest income was $4.5 million and $1.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Interest income was $12.4 million and $2.2 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The increase for both periods is due to higher yields on our investments as a result of increased interest rates.

For the three months ended September 30, 2023, Aurinia recorded a net loss of $13.4 million or $0.09 net loss per common share, as compared to a net loss of $9.0 million or $0.06 net loss per common share for the three months ended September 30, 2022. For the nine months ended September 30, 2023, Aurinia recorded a net loss of $51.1 million or $0.36 net loss per common share, as compared to a net loss of $82.1 million or $0.58 net loss per common share for the nine months ended September 30, 2022.

Financial Liquidity at September 30, 2023

As of September 30, 2023, Aurinia had cash, cash equivalents and restricted cash and investments of $338.5 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 monoplant payments, 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 September 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 September 30, 2023 financial results today, Thursday, November 2, 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 the corrected call-in number for participants +1 (877) 407-9170 / + 1 201-493-6756 (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.