On February 28, 2023 Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH) (Aurinia or the Company) reported its financial results for the fourth quarter and the full year ended December 31, 2022. Amounts are expressed in U.S. dollars (Press release, Aurinia Pharmaceuticals, FEB 28, 2023, View Source [SID1234627895]).

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Aurinia achieved total net revenue of $28.4 million and $134.0 million for the fourth quarter and full year ended December 31, 2022, respectively. Aurinia achieved net product revenue of $28.3 million and $103.5 million for the fourth quarter and full year ended December 31, 2022, respectively.

"2022 was a year of significant growth generating $134.0 million in total net revenue representing a 194% increase over the previous year. As an organization, we continue to advocate for improved screening, diagnosis and the treatment of lupus nephritis with healthcare providers while reinforcing the clinical benefits of LUPKYNIS over the historic standard of care," said Peter Greenleaf, President and Chief Executive Officer of Aurinia. "We are focused on operational and commercial execution and are poised for continued growth in and outside the U.S., as we work to change the course of lupus nephritis and other autoimmune diseases."

For fiscal year 2023, the Company is reiterating its previous net product revenue guidance of $120 to $140 million from sales of LUPKYNIS. This range represents a double-digit percentage increase in net product revenue from sales of LUPKYNIS compared to fiscal year 2022.

Fourth Quarter 2022 Highlights & Upcoming Milestones:

There were approximately 1,525 patients on LUPKYNIS therapy at December 31, 2022, compared with 1,354 at September 30, 2022.
Aurinia added 406 PSFs during the fourth quarter 2022, a 15% decrease from the fourth quarter 2021 (477), and a 9% increase from third quarter 2022 (374), exiting the year with a total of 1,648 PSFs during 2022.
Through February 24, 2023, the Company has secured 274 PSFs for a total of approximately 3,500 PSFs since launch.
Conversion rates continue to improve with approximately 85% of PSFs converted to patients on therapy.
Time to convert continues to decrease with 30- and 60- day conversion rates at their best levels since launch.
Launched new direct to patient / consumer campaign focused on patient education and activation.
Terminated inter partes review of U.S. Patent No. 10,286,036.
Strengthened the LUPKYNIS patent position with the receipt of a Notice of Allowance from the U.S. Patent Trademark Office for an additional method of use patent associated with the LUPKYNIS proprietary dosing regimen (U.S. Patent Application (No. 17/713,140) and notification from the European Patent Office of its intent to grant the European version of the existing U.S. method of use patent (U.S. Patent No. 10,286,036) for LUPKYNIS.
Financial Results for the Quarter and Year Ended December 31, 2022

Total net revenue was $28.4 million and $23.4 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. Total net revenue was $134.0 million and $45.6 million for the years ended December 31, 2022 and December 31, 2021, respectively. The increase in the quarter and full year periods is due to an increase in LUPKYNIS product sales, which was driven predominantly by further penetration in the LN market. The increase for the year ended December 31, 2022 over December 31, 2021 also includes the recognition of a $30.0 million milestone payment from Otsuka following the European Commission (EC) granting marketing authorization of LUPKYNIS in September 2022.

Total cost of sales and operating expenses for the quarters ended December 31, 2022 and December 31, 2021 were $56.5 million and $56.1 million, respectively. Total cost of sales and operating expenses were $245.5 million and $226.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Further breakdown of operating expenses drivers and fluctuations are highlighted in the following paragraphs.

Cost of sales were $1.4 million and $0.5 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. Cost of sales were $5.7 million and $1.1 million for the years ended December 31, 2022 and December 31, 2021, respectively. The increase for the quarter and full year periods was primarily due to an increase in product related revenue, coupled with an increase in our inventory reserves, which were primarily related to reserves on process validation batches used for FDA approval.

Gross margin for the quarters ended December 31, 2022 and December 31, 2021 was approximately 95% and 98% respectively. Gross margin for the years ended December 31, 2022 and December 31, 2021 was approximately 96% and 98%, respectively.

Selling, general and administrative (SG&A) expenses, inclusive of share-based compensation, were $47.5 million and $44.8 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. SG&A expenses, inclusive of share-based compensation, were $196.4 million and $173.5 million for the years ended December 31, 2022 and December 31, 2021, respectively. The primary drivers for the increase for the quarter and full year periods ended December 31, 2022 as compared to December 31, 2021 were an increase of professional fees and services mainly related to corporate legal matters and pharmacovigilance; and travel, trade shows and sponsorships to support the commercialization of LUPKYNIS. Additionally, salaries, incentive pay and employee benefits increased due to inflationary increases and routine year over year merit and promotion increases.

Non-cash SG&A share-based compensation expense were $7.0 million and $7.2 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. Non-cash SG&A share-based compensation expense were $28.4 million and $26.4 million for the years ended December 31, 2022 and December 31, 2021, respectively.

Research and Development (R&D) expenses, inclusive of share-based compensation, were $9.9 million and $11.1 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. R&D expenses, inclusive of share-based compensation expense, were $45.0 million and $51.1 million for the years ended December 31, 2022 and December 31, 2021, respectively. The primary drivers for the decrease were due to the $10.0 million upfront license and accrued milestone expense for AUR300 in the prior year, offset partially by additional developmental expenses related to AUR200 and AUR300 for the year ended December 31, 2022. In accordance with U.S. GAAP, AUR200 and AUR300 were recorded as asset acquisitions and expensed as R&D expense at the acquisition dates.

Non-cash R&D share-based compensation income and expense were $0.3 million and $1.2 million for quarters ended December 31, 2022 and December 31, 2021, respectively. Non-cash R&D share-based compensation expense were $3.3 million and $4.4 million for the years ended December 31, 2022 and December 31, 2021, respectively.

Interest income was $2.9 million and $0.1 million for the quarters ended December 31, 2022 and December 31, 2021, respectively. Interest income was $5.1 million and $0.5 million for the years ended December 31, 2022 and December 31, 2021, respectively. The increase for the quarter and full year was mainly due to higher yields on our investments as a result of increasing interest rates.

For the quarter ended December 31, 2022, Aurinia recorded a net loss of $26.0 million or $0.18 net loss per common share, as compared to a net loss of $33.3 million or $0.25 net loss per common share for the quarter ended December 31, 2021. For the year ended December 31, 2022, Aurinia recorded a net loss of $108.2 million or $0.76 net loss per common share as compared to a net loss of $181.0 million or $1.40 net loss per common share for the previous period.

Financial Liquidity at December 31, 2022

As of December 31, 2022, Aurinia had cash, cash equivalents and restricted cash and investments of $389.4 million, compared to $466.1 million at December 31, 2021. The decrease in cash, cash equivalents and restricted cash and investments is primarily related to the continued investment in commercialization activities, advancement of our pipeline and a payment for the achievement of a one-time milestone, partially offset by an increase in cash receipts from the sale of LUPKYNIS and the achievement of a $30.0 million one-time milestone upon the EC granting marketing authorization of LUPKYNIS in September 2022.

Aurinia believes that it has sufficient financial resources to fund its operations, which include funding commercial activities, including FDA related post approval commitments, manufacturing and packaging commercial drug supply, funding its 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 consolidated financial statements and Management’s Discussion and Analysis for the year ended December 31, 2022 in the Company’s Annual Report on Form 10-K, which will be accessible on Aurinia’s website at www.auriniapharma.com, on SEDAR at www.sedar.com or on EDGAR at www.sec.gov/edgar.

Conference Call Details

Aurinia will host a conference call and webcast to discuss the quarter and year ended December 31, 2022 financial results today, Tuesday, February 28, 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 +1-877-407-9170 (Toll-free U.S. & Canada).

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.