Aurinia Pharmaceuticals Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars. The filing also provides unaudited quarterly results, including Q4 2021.
Business context
Aurinia launched LUPKYNIS (voclosporin) in the United States after FDA approval on January 22, 2021, for adults with active lupus nephritis (LN), in combination with background immunosuppressive therapy. The company also added preclinical assets AUR200 and AUR300 and has an international development and commercialization collaboration with Otsuka.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net product revenue | $45.5 million | None |
| Total revenue | $45.6 million | $50.1 million |
| Cost of sales | $1.1 million | None |
| Gross margin on product sales | Approximately 98% | Not applicable |
| Selling, general and administrative expenses | $171.4 million | $96.0 million |
| Research and development expenses | $51.1 million | $50.3 million |
| Operating loss | $180.7 million | $104.3 million |
| Net loss | $181.0 million | $102.7 million |
| Basic and diluted loss per share | $1.40 | $0.87 |
| Cash used in operating activities | $157.7 million | $69.9 million |
Q4 2021 revenue was $23.4 million and net loss was $33.3 million. Revenue increased through the year, from $0.9 million in Q1 to $23.4 million in Q4.
At year-end, cash, cash equivalents and short-term investments totaled $466.1 million ($231.9 million in cash and equivalents and $234.2 million in short-term investments). Working capital was $472.7 million; total assets were $543.4 million and total liabilities were $64.3 million. The filing reports no borrowings; liabilities included operating lease obligations and deferred compensation. FY2021 operating cash outflow was funded in part by $221.1 million of financing cash inflows, including $196.7 million net proceeds from an ATM share sale and $24.0 million from option and employee share purchase exercises.
Material changes versus FY2020
- FY2021 product sales began after U.S. approval; FY2020 revenue was largely the $50.0 million Otsuka upfront license payment. Total revenue therefore declined by $4.5 million despite the new product revenue stream.
- SG&A rose $75.5 million, primarily to build and support the commercial organization, launch activities, and patient assistance programs. R&D was nearly flat, with higher development spending partly offset by reduced clinical supply and other costs.
- Net loss widened by $78.3 million and operating cash use increased by $87.8 million, reflecting commercialization, inventory, and clinical program spending.
- Cash and short-term investments rose from $398.3 million at year-end 2020 to $466.1 million at year-end 2021, supported by equity financing. Shares outstanding increased from 126.7 million to 141.6 million during the year.
Outlook, commentary, risks and unusual items
- Management expects product revenue to grow as commercialization progresses and believes available cash and investments can fund current plans for at least the next few years. This is management’s assessment, not quantified revenue or earnings guidance. The company expects continued significant SG&A spending and increased R&D investment.
- Otsuka filed marketing applications in Europe and Switzerland. Aurinia could receive up to $30 million in additional approval-related milestones under the disclosed European arrangement, plus royalties and product-supply revenue; no such milestone revenue had been recorded by year-end. The Otsuka agreement also provides for up to $50 million in additional regulatory and reimbursement milestones across specified territories and tiered royalties.
- AUR200 and AUR300 were in preclinical development, with IND submissions projected for 2023; management anticipated AUR300 submission in the first half of 2023. FDA post-approval commitments include pediatric studies, a lactation study, a drug-interaction study and a final AURORA 2 report.
- AURORA 2 topline results, announced in December 2021, showed sustained efficacy and a favorable safety profile over up to three years of treatment, with no unexpected safety signals reported. These were company-reported topline findings.
- Key risks include the still-early U.S. launch, market access and reimbursement, competition, COVID-19-related commercial and trial disruption, reliance on a limited number of customers and sole-source suppliers, and the possibility of continued losses and future financing needs. Two customers represented 99% of year-end trade receivables.
- Lonza is the sole drug-substance supplier and Catalent the sole capsule-encapsulation supplier. The company reported approximately $26.4 million of non-cancellable Lonza purchase commitments through 2023. A dedicated Lonza facility is expected to involve approximately $79.0 million in future minimum lease payments beginning in 2023, not included in the stated operating lease liability at year-end.
- In February 2022, Sun sought inter partes review of Aurinia’s U.S. dosing-protocol patent. Separately, patent litigation involving Sun’s CEQUA product remained pending, with trial scheduled around March 2023. Management said ordinary-course contingencies were not expected to materially affect the financial statements.
- The independent auditor identified measurement of the $16.0 million deferred-compensation liability as a critical audit matter, citing significant estimates of future voclosporin revenue and the discount rate. The 2021 ATM agreement was terminated in February 2022; no further sales under it were to occur.
Most important facts for investors to verify
- Subsequent LUPKYNIS sales, prescription trends, net pricing, reimbursement and progress toward management’s commercial expectations.
- Cash burn against the $466.1 million year-end liquidity balance, including future commercial, clinical, supply and Lonza facility costs.
- Regulatory progress with Otsuka, potential milestone timing, and the assumptions behind future royalty and collaboration revenue.
- Supply continuity and diversification plans for sole-source manufacturing, plus execution and costs of the dedicated Lonza facility.
- Status and potential consequences of the Sun patent proceedings, and progress on FDA post-marketing requirements and AUR200/AUR300 development.