Aurinia Pharmaceuticals Inc.: Form 10-Q for the period ended Jun 30, 2026

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and our audited financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission on February 26, 2026 (the “Form 10-K”) and with applicable Canadian securities regulatory authorities.

This Quarterly Report contains “forward-looking statements” within the meaning of U.S. federal securities laws and “forward-looking information” within the meaning of Canadian securities laws, and such statements may involve substantial risks and uncertainties. All statements, other than statements of historical facts included in this Quarterly Report, including statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, future expenses, business trends and other information referred to under this section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan,” “anticipate,” “target,” “forecast” or the negative of these terms and similar expressions intended to identify forward-looking statements. Forward-looking statements are not historical facts and reflect our current views with respect to future events. Forward-looking statements are also based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

We discuss a number of risks, uncertainties and other factors in greater detail under the heading “Risk Factors” in Part I, Item 1A of the Form 10-K as well as in Part II, Item 1A of this Quarterly Report. 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

Background

Aurinia is a biopharmaceutical company focused on delivering therapies to people living with autoimmune diseases with high unmet medical needs. In January 2021, the Company introduced LUPKYNIS® (voclosporin), the first FDA-approved oral therapy for the treatment of adult patients with active lupus nephritis. Aurinia is also developing aritinercept, a dual inhibitor of B cell-activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) for the potential treatment of autoimmune diseases.

Recent Development Progress

LUPKYNIS

Aurinia has recently initiated PRESERVE, a Phase 4, multicenter study investigating the combination of LUPKYNIS and belimumab, obinutuzumab or anifrolumab in patients with lupus nephritis. Belimumab is a B cell-activating factor (BAFF) inhibitor indicated for the treatment of both systemic lupus erythematosus (SLE) and lupus nephritis. Obinutuzumab is a CD20-directed cytolytic antibody indicated for the treatment of lupus nephritis. Anifrolumab is a type 1 interferon receptor antagonist indicated for the treatment of SLE. PRESERVE will investigate whether the multi-target approach of combining LUPKYNIS with these biologic agents improves outcomes in patients with lupus nephritis. Planned enrollment is approximately 150 patients across approximately 50 sites in the US. The Study’s primary endpoint is the proportion of patients achieving complete renal response (CRR) at 6 months.

Aritinercept

Aritinercept is a dual inhibitor of B cell-activating factor (BAFF) and a proliferation-inducing ligand (APRIL) for the potential treatment of autoimmune diseases. Aurinia has now initiated clinical development of aritinercept in four potential indications.

Net Product Sales

For the three and six months ended June 30, 2026, net product sales of LUPKYNIS were $79.4 million and $153.0 million, up 19% and 21%, respectively, from $66.6 million and $126.5 million, respectively, in the same periods of 2025.

Cash Flows from Operating Activities

For the six months ended June 30, 2026, cash flows from operating activities were $85.1 million, up 87% from $45.5 million in the same period of 2025.

Cash Position

As of June 30, 2026, Aurinia had cash, cash equivalents, restricted cash and investments of $443.1 million, compared to $398.0 million at December 31, 2025. For the six months ended June 30, 2026, cash outflows from financing activities were $48.9 million, which included the repurchase of 5.0 million of the Company’s common shares for $74.9 million partially offset by proceeds from issuance of common shares for equity awards, net of tax withholding payments, of $32.7 million.

Results of Operations

Comparison of the Three and Six Months ended June 30, 2026 and 2025

The following table sets forth our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands):

Net Product Sales

Aurinia sells LUPKYNIS to two specialty pharmacies and a specialty distributor in the United States (the “U.S.”), and Aurinia sells LUPKYNIS inventory to its collaboration partner, Otsuka Pharmaceutical Co., Ltd. (“Otsuka”), for the European and Japanese market. The two specialty pharmacies, specialty distributor and Otsuka are considered our customers for accounting purposes.

For the three and six months ended June 30, 2026, net product sales of LUPKYNIS were $79.4 million and $153.0 million, up 19% and 21%, respectively, from $66.6 million and $126.5 million, respectively, for the same periods in 2025. The increase is primarily due to an increase in the number of LUPKYNIS cartons sold to specialty pharmacies, driven by further lupus nephritis market penetration.

License, Collaboration and Royalty Revenue

License, collaboration and royalty revenue consists of revenue from a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in voclosporin in Japan, the European Union (the “E.U.”), the United Kingdom (the “U.K.”), Switzerland, Russia, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the “Otsuka Territories”) in exchange for: (i) a $50 million upfront cash payment; (ii) regulatory and commercial milestone payments; and (iii) royalties ranging from 10% to 20% on net sales in the Otsuka Territories.

License, collaboration and royalty revenue also consists of revenue from a commercial supply agreement with Otsuka to provide manufacturing and other services, including sharing the capacity of a dedicated manufacturing facility at Lonza Ltd. (the “Monoplant”), Aurinia’s contract manufacturing partner for voclosporin.

For the three and six months ended June 30, 2026, license, collaboration, and royalty revenue was $3.8 million and $8.0 million, up 12% and 36%, respectively from $3.4 million and $5.9 million for the same periods in 2025. The increase is primarily due to manufacturing services provided to Otsuka for sharing the capacity of the Monoplant.

Cost of Revenue

Cost of revenue consists primarily of expense associated with: (i) amortization of the finance lease right-of-use asset recognized in connection with the Monoplant; (ii) manufacturing; and (iii) shipping, storage and distribution.

In December 2020, Aurinia entered into a manufacturing services agreement with Lonza Ltd. for the construction of the Monoplant. The construction of the Monoplant began in January 2021 and manufacturing of voclosporin began in late June 2023. The Monoplant is equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacturing of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand. Aurinia pays a quarterly fixed facility fee of 3.6 million Swiss Francs for the exclusive right to use the Monoplant through March 31, 2030.

For the three and six months ended June 30, 2026, cost of revenue was $6.6 million and $13.1 million, respectively, down 7% and 17%, respectively from $7.1 million and $15.7 million, respectively, for the same periods in 2025. The decrease is primarily due to a decrease in sales of LUPKYNIS inventory to Otsuka, which has a low gross margin.

For each of the three and six months ended June 30, 2026, gross margin was 92%, compared to 90% and 88%, respectively, for the same periods in 2025.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expense consists of personnel and non-personnel expenses to support growing net product sales of LUPKYNIS. Personnel-related expense includes salaries, incentive pay, benefits and share-based compensation for personnel engaged in sales, finance and administrative functions. Non-personnel-related expense includes: (i) selling, patient services, pharmacovigilance, marketing, advertising, travel, sponsorships and trade shows; and (ii) other general and administrative costs, including consulting, legal, patent, insurance, accounting, information technology and facilities.

The following table summarizes our SG&A expense for the three and six months ended June 30, 2026 and 2025 (in thousands):

For the three months ended June 30, 2026, the decrease in SG&A personnel expense was primarily due to: (i) a decrease in the amount of non-cash share-based compensation expense related to the departures of certain former Company officers in March 2026; and (ii) an increase in the amount of non-cash share-based compensation expense that was reversed due to forfeited, unvested equity awards during the three months ended June 30, 2026.

For the six months ended June 30, 2026, the increase in SG&A personnel expense was primarily due to a one-time expense for severance and health care benefits, related to employee departures, including certain former Company officers in March 2026 offset by: (i) a decrease to employee-related costs; and (ii) an increase in the amount of non-cash share-based compensation expense that was reversed due to forfeited, unvested equity awards during the six months ended June 30, 2026.

For the three months ended June 30, 2026, the increase in SG&A non-personnel expense was primarily due to an increase in professional fees and services, partially offset by a decrease to travel-related expenses.

For the six months ended June 30, 2026, the decrease in SG&A non-personnel expense was primarily due to lower marketing and advertising costs and professional fees and services.

We continue to expect our SG&A expense in 2026 to remain substantially consistent with 2025.

Research and Development Expense

Research and development (“R&D”) expense consists of personnel and non-personnel expenses. Personnel-related expense includes salaries, incentive pay, benefits and share-based compensation for personnel engaged in research and development functions. Non-personnel-related expense includes contract research organizations, contract manufacturing organizations and materials used for R&D activities, including development, clinical trials, clinical supply and distribution, and other professional services.

The following table summarizes our R&D expense for the three and six months ended June 30, 2026 and 2025 (in thousands):

For the three and six months ended June 30, 2026, the increase in R&D personnel-expense was primarily due to an increase in employee-related costs to support development activities.

For the three and six months ended June 30, 2026, the increase in R&D non-personnel expense was primarily as a result of an increase in clinical supply and distribution, partially offset by lower contract research organization and developmental expenses due to timing and support of our development activities.

We expect our R&D expense to increase as we progress our development activities.

Other (Income) Expense, Net

For the three and six months ended June 30, 2026, other (income) expense, net was $(6.2) million and $(6.0) million, respectively, compared to $9.2 million and $13.7 million, respectively, for the same periods in 2025. The change is primarily due to: (i) favorable changes in the foreign exchange remeasurement of the finance lease liability recognized in connection with the Monoplant, which is denominated in Swiss Francs; (ii) reduction in other liabilities from the one-time payment to fully settle all future obligations under one arrangement; and (iii) reduction of an accrual related to shareholder matters.

Income Tax Expense

For the three and six months ended June 30, 2026, income tax expense was $11.4 million and $20.9 million, respectively, compared to $0.6 million and $1.6 million, respectively, for the same periods in 2025. The increase in the Company’s income tax expense in 2026 over the same periods in 2025 is primarily the result of the Company’s ability to utilize unrecognized deferred tax assets in 2025 to reduce the income tax expense. These unrecognized deferred tax assets were recognized in the three months ended December 31, 2025 and were not available to offset income tax expense for the three and six months ended June 30, 2026.

Liquidity and Capital Resources

As of June 30, 2026, Aurinia had cash, cash equivalents, restricted cash and investments of $443.1 million, compared to $398.0 million at December 31, 2025. For the six months ended June 30, 2026, cash flows from operating activities were $85.1 million, up 87% from $45.5 million in the same period of 2025. For the six months ended June 30, 2026, cash outflows from financing activities were $48.9 million, which included the repurchase of 5.0 million of the Company’s common shares for $74.9 million partially offset by proceeds from issuance of common shares for equity awards, net of tax withholding payments, of $32.7 million.

Based on our current operating plans and projections, the Company expects to fund future operations with existing cash or cash flows from operating activities.

The amount and timing of additional future funding needs, if any, will depend on many factors, including the success of our commercialization efforts for LUPKYNIS and our ability to control expenses. If necessary, we intend to raise additional capital through equity or debt financings. We can provide no assurance that additional financing will be available to us on favorable terms, or at all.

Critical Accounting 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, 2025.

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, 2025.

There have been no material changes to our quantitative and qualitative disclosures about market risks as described in our Annual Report on Form 10-K for the year ended December 31, 2025.

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 June 30, 2026, 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 was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, 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. 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.