# Aurinia Pharmaceuticals Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Aurinia Pharmaceuticals Inc.](/companies/auph.md) (CIK 1600620)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 06:17 ET
- Period: 2024-09-30
- Accession: 0001600620-24-000108
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1600620/000160062024000108/auph-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1600620/000160062024000108/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $67.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $175.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $6.0m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $22.7m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $3.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $12.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $11.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$3.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $1.2m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $3.7m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $457.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $14.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $4.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 145,651,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 145,010,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $14.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $18.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $36.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $440.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $549.4m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $78.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $161.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $388.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,428 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The information in this discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended, (the Exchange Act), which are subject to the “safe harbor” created by those sections, as well as “forward-looking information” as defined in applicable Canadian securities laws. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans; objectives of management; the key potential benefits of LUPKYNIS; our anticipation of a one-time restructuring charge in the fourth quarter of 2024 of $15 to $19 million, with post‑restructuring annualized cash-based operating expense savings of more than $40 million; our estimate that we will reduce our workforce by approximately 45%; our expectation that our restructuring will further improve operational efficiency; our estimate, based on our patient-specific estimated glomerular filtration rate (eGFR) dosing regimens, the average utilization in our clinical trials, and accounting for factors including mandatory rebates, channel discounts, and anticipated patient adherence, that we expect our average annualized net realizable revenue per patient to be approximately $70,000 to $75,000; timing for data the AUR200 SAD study; our belief that we have sufficient financial resources to fund our current plans for at least the next few years; and our potential to receive certain payments and royalties under our agreement with Otsuka Pharmaceuticals Co. Ltd., or Otsuka. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “propose,” “intend,” “continue,” “potential,” “possible,” “foreseeable,” “likely,” “unforeseen” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We have made numerous assumptions about the forward-looking statements and information contained herein, including among other things, assumptions about: the accuracy of reported data from third-party studies and reports; that our IP rights are valid and do not infringe the IP rights of third parties; our assumptions relating to the capital required to fund operations for the next few years; the timing and ability to execute on our restructuring plans; the costs, benefits and scope of our restructuring plans; the assumption that our current good relationships with our suppliers, service providers and other third parties will be maintained; assumptions relating to the burn rate of our cash for operations; assumptions relating to the capital required to fund operations for the next few years; assumptions relating to the progress of our pre-clinical activities that our third party service providers will comply with their contractual obligations. Even though management believes that the assumptions made, and the expectations represented by such statements or information are reasonable, there can be no assurance that the forward-looking information will prove to be accurate. We discuss many of these risks, uncertainties and other factors in greater detail under the heading “Risk Factors” in Part I, Item 1A of our 2023 Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission on February 15, 2024 and with applicable Canadian securities regulatory authorities. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this discussion completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by our cautionary statements. Except as required by law, we assume no obligation to update our forward-looking statements publicly, or to update the reasons that actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.*

### Overview

Aurinia is a fully integrated biopharmaceutical company focused on delivering therapies to people living with autoimmune diseases with high unmet medical needs. In January 2021, we introduced LUPKYNIS (voclosporin), the first FDA-approved oral therapy for the treatment of adult patients with active LN. We continue to conduct clinical and regulatory activities to support the LUPKYNIS development program. We contracted with Otsuka as a collaboration partner for the development and commercialization of LUPKYNIS in the Otsuka Territories.

The price of LUPKYNIS is based on one unit of 60 capsules we refer to as a “wallet”. As of January 1, 2024, the wholesale acquisition cost (WAC) of a LUPKYNIS wallet is $4,898. Based on our patient-specific eGFR dosing regimens, the average utilization in our clinical trials, and accounting for factors including mandatory rebates, channel discounts, and anticipated patient adherence, duration of therapy and compliance, we have adjusted our expected average annualized net realizable revenue per patient to be approximately $70,000 - $75,000. When determining the price of LUPKYNIS, we considered the burden of LN disease in the context of value that LUPKYNIS offers to patients and the U.S. healthcare system.

On February 15, 2024, the Company announced the conclusion of its previously announced strategic review process and actions designed to enhance shareholder value. Aurinia executed a corporate restructuring in the first quarter that reduced employee headcount by approximately 25% and discontinued its AUR300 research and development program. For further discussion, refer to Note 19, Restructuring.

On November 7, 2024, Aurinia announced it was implementing a strategic restructuring to sharpen the Company's focus on continued LUPKYNIS® growth and the rapid development of AUR200. The restructuring will result in a workforce reduction of approximately 45% and Aurinia anticipates a one-time restructuring charge in the fourth quarter of 2024 of approximately $15 to $19 million and will focus the Company’s LUPKYNIS commercial strategy on the highest growth drivers. The restructuring will also improve operational efficiency, with anticipated post-restructuring annualized cash savings of more than $40 million.

The Company is also developing its pipeline asset AUR200, a differentiated, potential next generation therapy for autoimmune diseases that targets both BAFF (B-cell Activating Factor) and APRIL (A Proliferation-Inducing Ligand).

### Recent Developments

On September 5, 2024, the Company announced the first participant has been dosed in a Phase 1 SAD study of AUR200, a differentiated, potential best-in-class therapy for autoimmune diseases that targets both BAFF and APRIL. The SAD study will assess the safety, tolerability, pharmacokinetics, and changes in biomarkers for AUR200 in healthy volunteers, with data expected in the first half of 2025.

On September 24, 2024, the Company announced that the Japanese Ministry of Health, Labour, and Welfare has approved LUPKYNIS in combination with mycophenolate mofetil (MMF) to treat LN. As part of the December 2020 agreement with Otsuka, the Company is eligible to receive a payment of $10.0 million U.S. dollars upon approval in Japan along with low double-digit royalties on net sales once launched. As a result, the $10.0 million milestone was recognized as collaboration revenue in the quarter.

In September 2024, the Board appointed Kevin Tang, President of Tang Capital Management, LLC, a life sciences-focused investment company that he founded in 2002, as a Director and Chair of the Board. Mr. Tang has more than 20 years of experience investing in, governing and leading companies in the biopharmaceutical industry. The Company also announced the acceptance of the conditional resignations of three directors who received less than majority support at the 2024 Annual General Meeting.

Effective November 7, 2024, Aurinia appointed Craig Johnson to the Board. Mr. Johnson has more than 30 years of experience serving in senior financial management roles and governing companies in the biotechnology industry.

The Company also announced that Dr. Robert T. Foster has retired from the Board effective November 5, 2024.

### Policies and Significant Judgments and Estimates

There have been no material changes to our critical accounting policies and significant judgments and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2023 other than as stated below.

### Product Revenues

We sell LUPKYNIS (voclosporin) primarily to specialty pharmacies and a specialty distributor and semi-finished product directly to our ex-U.S. partner Otsuka. These customers subsequently distribute our products. Revenues from product sales are recognized when the customer obtains control of our product, which occurs upon delivery to the customer.

*Reserves for discounts and allowances:* Product sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer).

Our estimates of reserves established for variable consideration are calculated based upon utilizing the expected value method. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.

Significant judgment is required in estimating variable consideration. In making these estimates, we consider historical data, including patient mix to accrue for variable consideration related to inventory sold to our customers that has not yet been dispensed to patients. We use a data aggregator and historical claims to estimate variable consideration for inventory sold to our specialty pharmacies that has not yet been dispensed. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment. As of September 30, 2024, we did not have any material adjustments to variable consideration estimates based on actual results. These specific adjustments are detailed further in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Results of Operations

### Three and Nine Months ended September 30, 2024 compared to Three and Nine Months ended September 30, 2023

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and September 30, 2023.

*(in thousands)*

| Revenue | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Product revenue, net | **$55,503** | $40,781 | $14,722 | **$158,604** | $116,218 | $42,386 |
| License, collaboration, and royalty revenue | **12,268** | 13,734 | (1,466) | **16,662** | 14,200 | 2,462 |
| Total revenue, net | **67,771** | 54,515 | 13,256 | **175,266** | 130,418 | 44,848 |
| **Operating expenses** |  |  |  |  |  |  |
| Cost of sales | **6,035** | 6,769 | (734) | **22,696** | 8,753 | 13,943 |
| Selling, general and administrative | **42,367** | 47,759 | (5,392) | **134,996** | 144,964 | (9,968) |
| Research and development | **3,047** | 13,605 | (10,558) | **12,678** | 39,413 | (26,735) |
| Restructuring expenses | **—** | — | — | **7,755** | — | 7,755 |
| Other expense (income), net | **4,574** | 2,645 | 1,929 | **159** | (695) | 854 |
| Total cost of sales and operating expenses | **56,023** | 70,778 | (14,755) | **178,284** | 192,435 | (14,151) |
| Income (Loss) from operations | **11,748** | (16,263) | 28,011 | **(3,018)** | (62,017) | 58,999 |
| Interest expense | **(1,208)** | (1,400) | 192 | **(3,689)** | (1,465) | (2,224) |
| Interest income | **4,267** | 4,514 | (247) | **12,982** | 12,429 | 553 |
| Net income (loss) before income taxes | **14,807** | (13,149) | 27,956 | **6,275** | (51,053) | 57,328 |
| Income tax expense | **457** | 298 | 159 | **1,952** | 92 | 1,860 |
| **Net income (loss)** | **$14,350** | $(13,447) | $27,797 | **$4,323** | $(51,145) | $55,468 |

22

#### Total Revenue, Net

Total net revenue was $67.8 million and $54.5 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Total net revenue was $175.3 million and $130.4 million for the nine months ended September 30, 2024, and September 30, 2023, respectively.

We currently sell to two main specialty pharmacies for U.S. commercial sales of LUPKYNIS and a collaboration partnership with Otsuka for sales of semi-finished product and license, collaboration, and royalty revenue in the Otsuka Territories.

The percentage of total net revenues from our main customers were as follows:

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Two main specialty pharmacies | **81%** | 77% | **87%** | 90% |
| Collaboration partnership | **16%** | 21% | **11%** | 9% |

#### Product Revenue, Net

Net product revenue was $55.5 million and $40.8 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Net product revenue was $158.6 million and $116.2 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The increase in both periods is primarily due to increased LUPKYNIS sales to our two main specialty pharmacies, driven predominantly by further penetration of the LN market. Additionally, for the nine months ended September 30, 2024, we had sales of semi-finished product to Otsuka as Otsuka continues to commercialize in its territories.

The U.S. penetration can be demonstrated by a total of approximately 2,422 patients on therapy as of September 30, 2024, compared to approximately 1,939 patients on therapy as of September 30, 2023. Additionally, our 12-month persistency rate has increased to 57% at September 30, 2024, from approximately 54% at September 30, 2023.

#### License, Collaboration, and Royalty Revenues

License, collaboration, and royalty revenues were $12.3 million and $13.7 million for the three months ended September 30, 2024, and September 30, 2023, respectively. License, collaboration, and royalty revenues were $16.7 million and $14.2 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The revenue is primarily due to a $10.0 million milestone recognized in third quarter of 2024 for the Japanese Ministry of Health, Labour, and Welfare approval of LUPKYNIS and a $10.0 million milestone recognized in third quarter of 2023 for pricing and reimbursement approval in certain European jurisdictions, coupled with manufacturing services revenue from Otsuka related to shared capacity services that commenced in late June 2023.

#### Cost of Sales

Cost of sales was $6.0 million and $6.8 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Cost of sales was $22.7 million and $8.8 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The decrease for the three months ended September 30, 2024, is primarily due to inventory write downs and semi-finished product sales to Otsuka in the prior three months ended September 30, 2023. The increase for the nine months ended September 30, 2024, is primarily due to the amortization of the monoplant finance right of use asset, which was placed into service in late June 2023 and therefore only partially impacted prior year results.

#### Gross Margin

Gross margin for the three months ended September 30, 2024, and September 30, 2023, was approximately 91% and 88%, respectively. Gross margin for the nine months ended September 30, 2024, and September 30, 2023, was approximately 87% and 93%, respectively.

#### Selling, General and Administrative Expenses

SG&A expenses decreased to $42.4 million for the three months ended September 30, 2024, compared to $47.8 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, and September 30, 2023, SG&A expenses were $135.0 million and $145.0 million, respectively. SG&A expenses consisted of the following:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Salaries, incentive pay and employee benefits | **$17,563** | $19,563 | **$57,493** | $61,851 |
| Professional fees and services | **11,982** | 12,716 | **38,727** | 37,202 |
| Share-based compensation expense | **7,812** | 9,560 | **23,427** | 26,969 |
| Other public company costs, facility costs, insurance, information technology, amortization of property and equipment | **2,728** | 3,284 | **8,225** | 10,546 |
| Travel, trade shows and sponsorships | **2,282** | 2,636 | **7,124** | 8,396 |
|  | **$42,367** | $47,759 | **$134,996** | $144,964 |

The primary drivers for the decrease in both periods were lower employee related costs including share-based compensation and overhead costs due to the reduction in general and administrative headcount, which occurred late in the first quarter of 2024.

#### Research and Development Expenses

R&D expenses were $3.0 million and $13.6 million for the three months ended September 30, 2024, and September 30, 2023, respectively. For the nine months ended September 30, 2024, and September 30, 2023, R&D expenses were $12.7 million and $39.4 million, respectively. R&D expenses consisted of the following:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Contract research organizations (CRO) and developmental expenses | **$1,380** | $5,751 | **$6,486** | $14,046 |
| Clinical supply and distribution | **354** | 2,208 | **2,353** | 8,355 |
| Salaries, incentive pay and employee benefits | **900** | 3,619 | **5,240** | 10,879 |
| Share-based compensation expense | **306** | 1,975 | **(1,773)** | 5,679 |
| Other costs | **107** | 52 | **372** | 454 |
|  | **$3,047** | $13,605 | **$12,678** | $39,413 |

The primary drivers for the decrease in both periods were lower employee costs related to the reduction in headcount, which occurred late in the first quarter of 2024, a decrease of expenses related to ceasing our AUR300 development program, and lower expenses related to developing AUR200.

#### Restructuring Expenses

During the three and nine months ended September 30, 2024, restructuring expenses were approximately nil and $7.8 million and nil for the three and nine months ended September 30, 2023. Restructuring expenses primarily included employee severance, one-time benefit payments, and contract termination expenses related to the restructuring, which occurred late in the first quarter of 2024.

#### Other Expense (Income), net

Other expense (income), net was $4.6 million and $2.6 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Other expense (income), net was $0.2 million and $(0.7) million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The change is primarily driven by changes in the fair value assumptions related to our deferred compensation liability and the foreign exchange remeasurement of the monoplant lease liability, which commenced in June 2023 and is denominated in CHF.

#### Interest Expense

Interest expense was $1.2 million and $1.4 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Interest expense was $3.7 million and $1.5 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The interest expense is due to the monoplant finance lease, which commenced in June 2023.

#### Interest Income

Interest income was $4.3 million and $4.5 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Interest income was $13.0 million and $12.4 million for the nine months ended September 30, 2024, and September 30, 2023, respectively.

### Liquidity and Capital Resources

As of September 30, 2024, we had cash, cash equivalents, and restricted cash of approximately $37.1 million and investments of $311.6 million compared to cash, cash equivalents, and restricted cash of $48.9 million and investments of $301.8 million at December 31, 2023. Cash needs were primarily related to the continued investment in LUPKYNIS commercialization activities, post approval commitments for LUPKYNIS, monoplant payments, share repurchases and restructuring related payments and were partially offset by an increase in cash receipts from sales of LUPKYNIS and cash payments from Otsuka. Cash, cash equivalents, restricted cash, and investments are primarily held in U.S. dollars. As of September 30, 2024, and December 31, 2023, we had working capital of $361.9 million and $347.6 million, respectively.

We are devoting the majority of our operational efforts and financial resources towards the commercialization and post- approval commitments for LUPKYNIS. Taking into consideration the cash, cash equivalents, and investments as of September 30, 2024, we believe that our cash position is sufficient to fund our current plans which include funding commercial activities, such as our FDA related post approval commitments, manufacturing and packaging commercial drug supply, funding our supporting commercial infrastructure, advancement of our pipeline, funding our working capital obligations and share repurchases for at least the next few years.

### Cash Flow Summary

The following table summarizes our cash flows for the nine months ended September 30, 2024, and September 30, 2023:

*(in thousands)*

| Net cash (used in) provided by: | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | **$14,274** | $(47,773) |
| Investing activities | **39** | (449) |
| Financing activities | **(26,046)** | 447 |
| Net decrease in cash and cash equivalents | **$(11,733)** | $(47,775) |

Net cash provided by operating activities was $14.3 million for the nine months ended September 30, 2024, compared to net cash used in operating activities of $47.8 million for the nine months ended September 30, 2023. The increase in net cash provided by operating activities is primarily due to an increase in cash receipts from sales of LUPKYNIS and cash receipts from Otsuka, coupled with a reduction in operating expenses year over year, as a result of the restructuring in the first quarter of 2024. See "Total Revenue" above for further discussion regarding our increased sales of LUPKYNIS.

Cash provided by investing activities was $39 thousand during the nine months ended September 30, 2024, compared to net cash used of $0.4 million during the nine months ended September 30, 2023. The increase in cash provided by investing activities was primarily related to the timing of purchases and proceeds of investments and an upfront capital expenditure payment for the monoplant in 2023.

Cash used in financing activities was $26.0 million during the nine months ended September 30, 2024, compared to cash provided by financing activities of $0.4 million during the nine months ended September 30, 2023. The decrease was primarily due to share repurchases, which began in February 2024, and quarterly lease payments for our monoplant finance lease, which commenced during the third quarter of 2023.

### Share Repurchase Program

In February 2024, the Board approved a share repurchase program of up to $150 million of our common shares. On February 29, 2024, Canadian securities regulators granted exemptive relief for the Company’s share repurchase program, authorizing the Company to purchase up to 15 percent of its issued and outstanding shares in any 12-month period for up to 36 months, including under the current program.

As of September 30, 2024, we had repurchased approximately 3.4 million of our common shares for $18.6 million (including transaction costs which consist of commissions and excise tax). The cost of repurchased shares are reported as a reduction in common shares and under Alberta law, the shares were cancelled and not reissued.

### Off‑Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off‑balance sheet arrangements as such term is defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Act.

### Contractual Obligations

There have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 5,141 characters.

Our activities can expose us to market risks which include interest rate risk, foreign currency risk, inflation risk and credit risk. Risk management is carried out by management under policies approved by the Board, with oversight provided by the Audit Committee of the Board. Our overall risk management program seeks to minimize adverse effects on our financial performance.

### Interest Rate Risk

Financial assets and financial liabilities with variable interest rates expose us to cash flow interest rate risk. We manage our interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct

operations on a day-to-day basis. As of September 30, 2024, our investment portfolio includes cash, cash equivalents, restricted cash, and investments of $348.7 million that earn interest at various rates. Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investments held during the year were comprised of highly rated instruments such as certificates of deposits, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities. As of September 30, 2024, these instruments primarily have a maturity of less than a year.

As of September 30, 2024, a hypothetical decrease of 100 basis points on the interest rates of our investments would result annually in approximately $3.1 million less interest in our portfolio. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio, due to the short-term nature of the investments and our current ability to hold these investments to maturity.

Accounts receivable, accounts payable and accrued liabilities bear no interest unless payments are not received timely. We do not believe that our results of operations or cash flows would be affected to a significant degree by a sudden change in market interest rates relative to our investment portfolio.

### Foreign Currency Risk

We are exposed to financial risk related to the fluctuation of foreign currency exchange rates. Foreign currency risk for the Company is the risk variations in exchange rates between the U.S. dollar and foreign currencies, primarily with the Swiss franc, Canadian dollar and Great Britain Pound, which could affect our operating and financial results.

As of September 30, 2024, we had an $80.7 million finance lease liability on our balance sheet related to the monoplant. An assumed 10% fluctuation in the Swiss franc would have an approximate $8.1 million fluctuation in the valuation of the lease liability.

There were no other foreign currency fluctuations that would have had a material impact on our financial condition or results of operations as of September 30, 2024.

### Inflation Risk

Inflation has been volatile in recent periods and may continue to be volatile in the future. Inflation generally affects us by increasing our cost of labor, commercial support, manufacturing and clinical trial expenditures. In addition, inflation also impacts our government and payer rebates as it pertains to the consumer price index (CPI) penalty. Our investment portfolio may experience the risk of realized losses on our investments if we were to sell before maturity due to the market volatility caused by increased interest rates.

### Credit Risk

Our exposure to credit risk generally consists of cash and cash equivalents, investments and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions and invest the excess cash in highly rated investments. It is the

Company's intent for these investments to have an overall rating of A-1, or higher, by Standard & Poor’s, or an equivalent rating by Moody’s or Fitch. Our investment policy limits investments to certain types of debt and money market instruments issued by institutions primarily with investment grade credit ratings and places restriction on maturities and concentrations by asset class and issuer.

We are subject to credit risk in connection with our accounts receivable due from our two main specialty pharmacies for U.S. commercial sales, specialty distributor and collaboration partnership with Otsuka which accounted for the majority of our accounts receivable, net balances as of September 30, 2024. We monitor economic conditions, including the creditworthiness of our customers and collaboration partner. We regularly communicate with our customers regarding the status of receivable balances and have not experienced and issues with collectability. The timing between the recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms range from 30 to 45 days. During the quarter ended September 30, 2024, we did not recognize any allowance for credit losses related to credit risk for our customers or write any amounts off.

## Controls and procedures

As filed, 1,233 characters.

### Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2024, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,370 characters.

Under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, we identified important factors that could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Quarterly Report. There has been no material change in our risk factors subsequent to the filing of our prior reports referenced above, other than as set out below. However, the risks described in our reports are not the only risks we face. Additional risks and uncertainties that we currently deem to be immaterial or not currently known to us, as well as other risks reported from time to time in our reports to the SEC, also could cause our actual results to differ materially from our anticipated results or other expectations.

***Aurinia's restructuring program and associated organizational changes may not adequately reduce its operating costs or improve operating margins, may lead to additional workforce attrition, and may cause operational disruptions, and there can be no assurance that Aurinia will realize the anticipated benefits of the restructuring program.***

On November 7, 2024, Aurinia announced it was implementing a strategic restructuring to sharpen the Company's focus on continued LUPKYNIS growth and the rapid development of AUR200. This restructuring will result in a workforce reduction of approximately 45% and anticipates a one-time restructuring charge in the fourth quarter of 2024 of approximately $15 to $19 million and will focus the Company’s LUPKYNIS commercial strategy on the highest growth drivers.

The estimates of charges and expenditures, and the associated annual cost savings, Aurinia expects to incur in connection with the restructuring program, and timing thereof, are subject to a number of assumptions, including local law requirements in various jurisdictions, and Aurinia may incur costs that are greater, or recognize lower annual cost savings, than Aurinia currently anticipates in connection with the restructuring program.

The restructuring program may yield unintended consequences, such as the loss of institutional knowledge and expertise, employee attrition beyond Aurinia's intended reduction in force, a reduction in morale among Aurinia's remaining employees, greater than anticipated costs incurred in connection with implementing the restructuring program, and the risks that Aurinia may not achieve the anticipated benefits from the restructuring program to the extent or as quickly as Aurinia anticipates, if at all, all of which may materially adversely affect Aurinia's results of operations or financial condition. These restructuring initiatives could place substantial demands on Aurinia's management and employees, which could lead to the diversion of management’s and employees’ attention from other business priorities. In addition, while certain positions are being eliminated in connection with the restructuring program, many functions necessary to Aurinia's reduced operations remain, and Aurinia may be unsuccessful in distributing the duties and obligations of departed employees among its remaining employees or to external service providers, which could result in disruptions to Aurinia's operations. Aurinia may also discover that the workforce reduction and other restructuring efforts will make it difficult for Aurinia to pursue new opportunities and initiatives and require Aurinia to hire qualified replacement personnel, which may require Aurinia to incur additional and unanticipated costs and expenses. Aurinia may further discover that, despite the implementation of its restructuring program, Aurinia may require additional capital to continue expanding its business, and Aurinia may not be able to obtain such capital on acceptable terms, if at all. Aurinia's failure to successfully accomplish any of the above activities and goals may have a material adverse impact on its business, financial condition and results of operations.

Additionally, the workforce reduction Aurinia will implement as part of the restructuring program may negatively impact its ability to attract, integrate, retain and motivate highly qualified employees, and may harm Aurinia's reputation with current or prospective employees.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0001600620-24-000108. Last ingested by Listed: Oct 30, 2026, 08:08 ET. No prices; not investment advice.