Aurinia Pharmaceuticals Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Figures are in U.S. dollars. Aurinia is a commercial-stage biopharmaceutical company; its principal commercial product is LUPKYNIS (voclosporin), approved in the U.S. in January 2021 for adults with active lupus nephritis.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $28.2 million | $6.6 million | $49.8 million | $7.5 million |
| Net loss | $35.5 million | $47.0 million | $73.1 million | $97.4 million |
| Operating cash used | — | — | $74.6 million | $91.5 million |
| Loss per share, basic and diluted | $0.25 | $0.37 | $0.52 | $0.76 |
- Q2 product revenue was $28.1 million, versus $6.6 million; first-half product revenue was $49.6 million, versus $7.5 million. Management attributed growth primarily to continued LUPKYNIS launch progress and market penetration.
- Gross margin was approximately 94% in Q2 and 96% for the first half, compared with 95% for both 2021 periods. Q2 cost of sales included the effects of safety-stock inventory reserves.
- Q2 operating expenses were $64.2 million, including SG&A of $51.5 million and R&D of $11.5 million. First-half SG&A rose $12.6 million year over year, mainly from professional fees, share-based compensation and commercialization infrastructure; R&D rose $4.2 million, primarily from AUR200 and AUR300 development costs.
- At June 30, cash, cash equivalents and restricted cash were $151.6 million; short-term investments were $240.1 million. Combined cash and investments were $391.7 million, down from $466.1 million at year-end 2021. Working capital was $418.6 million.
- Operating cash use improved year over year, principally because of higher LUPKYNIS receipts. Cash used in investing was $7.4 million and financing provided $1.7 million in the first half; cash, cash equivalents and restricted cash declined $80.3 million.
- Total liabilities were $58.4 million, including $8.4 million of operating lease liabilities. The filing reports no conventional borrowings. A separate Lonza manufacturing-facility arrangement is expected to be accounted for as a finance lease after completion; estimated minimum payments total approximately $74 million beginning in April 2023 and are not included in the reported lease-liability table.
Material developments, outlook and risks
- The company said its June 30 cash and investments should fund current plans for at least the next few years, including commercialization, post-approval work, manufacturing, and planned R&D. This is management’s estimate, not a guarantee; the filing gives no specific revenue or earnings guidance.
- In July 2022, the EMA’s CHMP issued a positive opinion recommending LUPKYNIS for EU marketing authorization. If approved, Aurinia could receive up to $30 million in approval-related milestones from Otsuka, plus royalties and product-supply revenue; the opinion was not itself marketing authorization.
- AUR200 and AUR300 are in preclinical development, with IND submissions projected in 2023. Aurinia paid a $4.0 million AUR300 milestone in Q1 2022.
- Supply-chain concerns led Aurinia in March 2022 to give its two main U.S. customers a nominal additional discount for the remainder of 2022 in exchange for holding more LUPKYNIS inventory. The company wrote down approximately $1.4 million of finished goods in Q2, relating to safety stock.
- Customer concentration is significant: two U.S. customers represented approximately 99% of trade receivables at June 30, and approximately 54% and 45% of total revenue for the three- and six-month periods, respectively. The filing recorded no doubtful-account allowance.
- Sun Pharmaceutical’s challenge to a LUPKYNIS patent was instituted for inter partes review on July 26, 2022; a patentability decision was expected by July 26, 2023. The filing also cites potential impacts from Ukraine-related sanctions, supply-chain disruption, inflation, foreign exchange and customer credit risk.
- After quarter-end, Aurinia announced senior leadership appointments and inducement equity awards. It also gave notice on August 3, 2022, terminating a Victoria office lease because the landlord’s work was not completed by the required time.
Important facts for investors to verify
- Whether U.S. LUPKYNIS prescription growth, net pricing and customer inventory levels support continued revenue growth, including after the temporary 2022 customer discounts.
- EMA authorization timing and conditions, and whether the potential Otsuka milestone and royalty revenues are realized.
- Cash burn relative to management’s “at least the next few years” funding estimate, including the future Lonza facility commitment and other manufacturing obligations.
- Outcome and timing of the LUPKYNIS patent inter partes review, and any further inventory write-downs or supply disruptions.
- Progress and spending on AUR200 and AUR300, including whether the projected 2023 IND submissions are achieved.