Aurinia Pharmaceuticals Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020. Amounts are in U.S. dollars. Aurinia is a commercial-stage biopharmaceutical company, with resources focused primarily on launching and supporting LUPKYNIS (voclosporin) for adults with active lupus nephritis.
Business context and developments
- The FDA approved LUPKYNIS on January 22, 2021, and Aurinia reported its first commercial sale that same week. The treatment is approved for use with background immunosuppressive therapy.
- U.S. launch and post-approval activity began during the quarter. FDA commitments include pediatric studies, a lactation study, a drug-interaction study and a final AURORA-2 study report, with deadlines extending from 2022 to 2031.
- Otsuka holds rights to develop and commercialize LUPKYNIS in specified international territories. Aurinia recognized no further Otsuka consideration in Q1; potential regulatory milestones and royalties remain contingent.
Financial highlights
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $0.914 million | $0.030 million |
| Net product revenue | $0.884 million | Nil |
| Cost of sales / gross margin | $0.048 million / approximately 95% | Nil cost of sales |
| SG&A expense | $39.282 million | $11.053 million |
| R&D expense | $9.833 million | $13.835 million |
| Net loss | $50.379 million | $25.932 million |
| Basic and diluted loss per share | $0.40 | $0.23 |
| Cash used in operating activities | $53.541 million | $22.608 million |
SG&A rose $28.229 million, mainly reflecting expansion of the commercial team, share-based compensation and launch-support activities. R&D declined $4.002 million, primarily due to lower clinical-trial and supply costs following approval and capitalization of inventory costs. The filing reports $0.884 million in product revenue; its discussion separately cites $0.854 million of LUPKYNIS revenue net of adjustments, without clearly reconciling the difference.
Liquidity, cash flow and obligations
- At March 31, cash and cash equivalents were $156.591 million, short-term investments were $191.668 million and long-term investments were $12.603 million. Cash plus short-term investments totaled approximately $348.3 million; working capital was $351.1 million.
- Operating cash outflow was $53.5 million. Investing cash outflow was $67.2 million, including investment purchases net of maturities and an $11.8 million upfront payment for a planned Lonza manufacturing facility. Financing provided $5.0 million, principally from option exercises. Cash and cash equivalents fell $115.8 million; this includes cash allocated to investments.
- The balance sheet reports $46.850 million of total liabilities, including lease liabilities and other non-current liabilities primarily related to royalty obligations. The filing does not report conventional borrowings.
- The Lonza facility arrangement is expected to be accounted for as a finance lease; approximately $91 million of minimum lease payments are expected to begin in April 2023 and run through 2030, and are excluded from the operating-lease maturity table. Separately, non-cancellable Lonza manufacturing commitments were approximately $25.4 million through 2023.
- Management stated that cash and short-term investments were sufficient to fund current plans for at least 12 months beyond issuance of the statements. No formal revenue or earnings guidance was provided.
Outlook, risks and unusual items
- Management planned for Otsuka to submit an EU marketing authorization application during the first half of 2021. Potential Otsuka regulatory milestones of up to $50 million and tiered royalties of 10%–20% are subject to applicable approvals, sales and other conditions; none of the regulatory milestones were included in Q1 revenue.
- Revenue concentration is material during the early commercial launch: two specialty pharmacies accounted for approximately 59% and 37% of total revenue, respectively. The filing also identifies one customer for certain international voclosporin sales.
- Commercial performance, continued access to manufacturing and suppliers, post-approval study execution, reimbursement and customer collections are relevant uncertainties. Aurinia also cited potential disruption from COVID-19 to trials, commercialization and capital-market access.
- Other notable items include $7.821 million of share-based compensation expense and a $4.0 million payment to related party ILJIN following milestone achievement. Management reported no material change to previously disclosed risk factors and no material legal developments.
Important facts for investors to verify
- Whether launch uptake, net pricing, reimbursement and specialty-pharmacy distribution support growth beyond the initial $0.884 million of reported product revenue.
- How product revenue net of adjustments reconciles between the financial statements and the MD&A discussion.
- Whether cash burn and commercial spending remain consistent with management’s stated runway, including the timing and cost of post-approval commitments.
- Progress against FDA study deadlines and Otsuka’s planned regulatory submission, and the conditions and timing for any milestones or royalties.
- Future financing and supply exposure from the Lonza manufacturing commitments and expected finance-lease payments, as well as customer concentration and collection risk.