Aurinia Pharmaceuticals Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts below are in U.S. dollars. Aurinia is a biopharmaceutical company commercializing LUPKYNIS (voclosporin) for adult patients with active lupus nephritis and advancing preclinical candidates AUR200 and AUR300.
Financial highlights
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net revenue | $54.5M | $55.8M | $130.4M | $105.6M |
| Product revenue | $40.8M | $25.5M | $116.2M | $75.1M |
| License, royalty and collaboration revenue | $13.7M | $30.3M | $14.2M | $30.5M |
| Operating loss | $16.3M | $9.5M | $62.0M | $83.4M |
| Net loss | $13.4M | $9.0M | $51.1M | $82.1M |
| Basic and diluted loss per share | $0.09 | $0.06 | $0.36 | $0.58 |
| Gross margin | 88% | 96% | 93% | 96% |
Q3 product revenue rose 60% year over year, which management attributed primarily to greater LUPKYNIS market penetration. Nine-month product revenue increased 55%. Total revenue was lower in Q3 year over year because Q3 2022 included a $30.0M Otsuka regulatory milestone; the $10.0M pricing and reimbursement milestone recognized in Q3 2023 partly offset that comparison. Nine-month total revenue grew 24%.
Operating expenses for the first nine months were $192.4M, including $145.0M SG&A and $39.4M R&D. Q3 operating loss widened year over year as total revenue was nearly flat while expenses increased. Higher cost of sales, including amortization of the monoplant finance-lease asset, reduced gross margin. Nine-month net loss narrowed year over year, aided by higher revenue and interest income.
Cash, liquidity and obligations
- Cash, cash equivalents, restricted cash and investments totaled $338.5M at September 30, 2023, versus $389.4M at December 31, 2022. Cash and restricted cash alone were $46.4M; short- and long-term investments were approximately $292.1M.
- Working capital was $352.6M, down from $396.4M at year-end 2022. Management said resources were sufficient to fund current plans for at least the next few years.
- Nine-month operating cash use was $47.8M, compared with $90.0M in 2022, primarily reflecting increased cash receipts from LUPKYNIS sales. Investing cash use was $0.4M; financing cash provided was $0.4M.
- The monoplant finance lease began in Q2 2023. At quarter-end, its liability was $85.5M and related right-of-use asset was $113.1M. The filing reports no traditional borrowings. Operating lease liabilities were $7.7M.
- Interest income was $12.4M for the first nine months, up from $2.2M, primarily due to higher yields. Share-based compensation expense was $33.5M, up from $25.4M.
Outlook, developments and risks
- No specific revenue or earnings guidance was provided. Management’s stated liquidity outlook was that available cash and investments could fund current plans for at least the next few years.
- The board began exploring strategic alternatives in June 2023. The filing provides no outcome or timetable. New directors were appointed during the quarter, and a cooperation agreement with MKT-related parties was filed as an exhibit.
- Management reported approximately 1,939 patients on LUPKYNIS therapy at quarter-end, versus approximately 1,354 a year earlier. It cautioned that patient start forms and other prescription metrics do not directly predict revenue; conversion, persistence, coverage, free-drug participation and customer ordering can affect results.
- AUR200 and AUR300 remained in preclinical development. The filing cited projected regulatory submissions in 2023 for AUR200 and 2024 for AUR300; these are forward-looking targets, not reported achievements.
- Key risks include reliance on two U.S. specialty-pharmacy customers and Otsuka (together about 97% of trade receivables), potential variability in customer orders and discounts, supply-chain and geopolitical exposures, foreign-exchange sensitivity, and dependence on successful commercialization and development. A 10% Swiss-franc fluctuation was estimated to change the monoplant lease liability by about $8.6M.
- A shareholder securities class action alleges misleading statements regarding financial guidance and commercial prospects. Aurinia filed a motion to dismiss on October 20, 2023 and said it intends to defend the case; the filing states that outcomes of legal matters remain uncertain.
Important facts for investors to verify
- Progress and economics of the board’s strategic-alternatives review, including any announced transaction or change in plans.
- Whether LUPKYNIS sales growth, patient conversion and persistence translate into durable revenue, and how customer inventory and order timing affect reported sales.
- Timing and status of the AUR200 and AUR300 development milestones, including the stated submission targets.
- Cash and investment balances, operating cash burn, and the financial impact of monoplant lease payments and amortization.
- Developments in the securities litigation and any material changes in customer concentration, supply arrangements or commercial discounts.