
ROCKVILLE, Md. & EDMONTON, Alberta–(BUSINESS WIRE)–Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH) today issued its financial results for the first quarter ended March 31, 2024. Amounts are expressed in U.S. dollars.
Total net revenue was $50.3 million for the three months ended March 31, 2024 and $34.4 million for the same period in 2023. representing growth of approximately 46%. Net product revenue was $48.1 million for the three months ended March 31, 2024 and $34.3 million for the same period in 2023, representing growth of approximately 40%.
Aurinia rapidly completed its corporate restructuring in the first quarter, reducing employee headcount by approximately 25%. The Company discontinued its AUR300 research and development program and is exploring alternative approaches for AUR200 to maintain its development momentum. As previously reported, the Company expects to recognize $50 to $55 million in annual cost savings, with 75% of those savings recognized in 2024, excluding a one-time restructuring charge of approximately $7 million incurred in the first quarter. Following the restructuring, the Company expects total annualized operating expenses on a go-forward basis to be in the range of $185 to $195 million, with cash-based operating expenses of approximately $155 to $165 million.
“We are pleased to be on track to reach positive free cash flows, excluding share repurchases, in the second quarter of 2024, ahead of prior projections, further strengthening our financial position, and with further balance sheet growth, allowing more strategic flexibility for the Company,” said Peter Greenleaf, President and Chief Executive Officer of Aurinia. “We recently achieved several key milestones, including FDA approval of a label update for LUPKYNIS which now includes long-term efficacy data from our AURORA Clinical Program. We have also launched an innovative new marketing campaign to further educate rheumatologists on the seriousness of lupus nephritis and the urgent need for appropriate treatment. This momentum demonstrates our full commitment to solid execution and driving growth, as we continue in our work of delivering LUPKYNIS to patients in need.”
Earlier this week, Aurinia announced that the FDA has approved a label update for LUPKYNIS that provides physicians with important information to treat and manage their lupus nephritis (LN) patients. Notably, the updated label no longer includes language indicating that the safety and efficacy of LUPKYNIS has not been established beyond one year. The label now includes long-term data from a post-hoc analysis of the AURORA 2 extension study showing that patients receiving LUPKYNIS achieved sustained complete renal response at every time point assessed through three years, compared to mycophenolate mofetil (MMF) and low-dose glucocorticoids alone. Additionally, the updated label now requires quarterly, rather than monthly kidney function assessment after the first year of treatment. The safety profile of LUPKYNIS in the updated label remains unchanged and is aligned with the safety findings in the AURORA Clinical Program.
Aurinia recently launched “Know the Signs,” a disease state education campaign designed to increase awareness among rheumatologists around the severity of LN, the critical need to prioritize kidney health for people with systemic lupus erythematosus (SLE), and to increase screening for LN among people with SLE.
In addition to the Company’s operational execution, Aurinia has also released its 2023 ESG report, which details the holistic approach the Company takes to address environmental, social and governance priorities, including energy and emissions, addressing barriers to care among LN patients, (Diversity, Equity and Inclusion) DE&I practices, employee engagement, and risk management. The full report is available here.
For the fiscal year 2024, the Company maintains its established net product revenue guidance for a range of $200 to $220 million. The guidance range is based on assumptions regarding historical patient start form (PSF) run rates, consistent conversion rates, time to convert, persistency, and pricing.
First Quarter 2024 and Recent Highlights
- There were approximately 2,178 patients on LUPKYNIS therapy as of March 31, 2024, compared to 1,731 as of March 31, 2023.
- In the first quarter, the Company added 448 patient start forms and approximately 148 new patients who were either restarting LUPKYNIS or receiving it through a hospital pharmacy, compared to 466 PSFs in the prior year first quarter, representing significant year-over-year growth.
- From January 1, 2024, through April 28, 2024, the Company added approximately 582 PSFs and approximately 170 new patients from restarts and the hospital channel.
- Conversion rates were sustained, with approximately 85% of PSFs converted to patients on therapy.
- Time to convert was sustained with approximately 60% of patients on therapy by 20 days.
- The overall adherence rate remained high at approximately 87% through the first quarter of 2024.
- Persistency continues to improve, with approximately 56% of patients remaining on therapy at 12 months, 50% at 15 months, and 46% at 18 months.
Financial Results for the Three Months Ended March 31, 2024
Total net revenue was $50.3 million and $34.4 million for the three months ended March 31, 2024 and March 31, 2023, respectively. Net product revenue was $48.1 million and $34.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The Company currently sells to two main specialty pharmacies for U.S. commercial sales of LUPKYNIS and pursuant to a collaboration partnership with Otsuka for sales of semi-finished product and license, collaboration and royalty revenue in Otsuka Territories. The increase is primarily due to an increase in product sales to our two specialty pharmacies for LUPKYNIS, driven predominantly by further penetration of the LN market.
This penetration can be demonstrated by a total of 2,178 patients on therapy as of March 31, 2024, compared to 1,731 patients on therapy as of March 31, 2023. The increase in patients was driven by 448 additional patients start forms and 148 new patients who were either restarting LUPKYNIS or receiving it through a hospital pharmacy during the three months ended March 31, 2024, compared to 466 PSFs received during the three months ended March 31, 2023. Additionally, our 12-month persistency rate has increased to 56% at March 31, 2024 from approximately 51% at March 31, 2023.
License, collaboration and royalty revenue was $2.2 million and $0.1 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase is due to manufacturing services revenue from Otsuka related to shared capacity services that commenced in the third quarter of 2023.
Total cost of sales and operating expenses, inclusive of a one-time restructuring charge in Q1 2024, were $63.6 million and $64.0 million for the three months ended March 31, 2024 and March 31, 2023, respectively. Further breakdown of cost of sales and operating expense drivers and fluctuations are highlighted in the following paragraphs.
Cost of sales were $7.8 million and $0.4 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase is primarily due to increased sales of LUPKYNIS (voclosporin), coupled with the amortization of the monoplant finance right of use asset, which was placed into service in late June 2023.
Gross margin was approximately 85% and 99% for the three months ended March 31, 2024 and March 31, 2023, respectively.
SG&A expenses, inclusive of share-based compensation, were $47.7 million and $50.1 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The decrease is primarily due to lower employee costs due to a reduction in general and administrative headcount, which occurred late in the first quarter of 2024, lower corporate costs related to insurance and information technology and lower spend for travel and business meetings.
Non-cash SG&A share-based compensation expense included within SG&A expenses was $7.5 million and $7.6 million for the three months ended March 31, 2024 and March 31, 2023, respectively.
R&D expenses, inclusive of share-based compensation expense, were $5.6 million and $13.2 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The primary drivers for the decrease were lower employee costs due to a reduction in headcount, which occurred late in the first quarter of 2024 and a decrease of clinical supply and distribution costs related to ceasing development of our AUR200 and AUR300 programs.
Non-cash R&D share-based compensation expense included within R&D expense was $(2.2) million and $1.6 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The non-cash R&D share-based compensation credit in the three months ended March 31, 2024 is due to the reversals of expense for forfeitures related to a reduction in headcount.
Restructuring expenses were approximately $6.7 million and nil for the three months ended March 31, 2024 and March 31, 2023, respectively. Restructuring expenses included employee severance, one-time benefit payments and contract termination expenses. The company recognized the majority of the planned restructuring costs in the first quarter of 2024.
Other (income) expense, net was $(4.1) million and $0.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase was primarily due the foreign exchange remeasurement of the monoplant lease liability, which commenced in June 2023 and is denominated in CHF.
Interest income was $4.5 million and $3.8 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase is due to higher yields on our investments as a result of increased interest rates.
For the three months ended March 31, 2024, Aurinia recorded a net loss of $10.7 million or $(0.07) net loss per common share, as compared to a net loss of $26.2 million or $(0.18) net loss per common share for the three months ended March 31, 2023.
Financial Liquidity at March 31, 2024
As of March 31, 2024, Aurinia had cash, cash equivalents and restricted cash and investments of $320.1 million compared to $350.7 million at December 31, 2023. The decrease is primarily related to the continued investment in commercialization activities and post approval commitments of our approved drug, LUPKYNIS, monoplant payments, share repurchases and restructuring related payments, partially offset by an increase in cash receipts from sales of LUPKYNIS and payments from Otsuka.
Cash used in operations and non-GAAP free cash flow used were $18.6 million for the three months ended March 31, 2024 compared to cash used in operations of $31.7 million and non-GAAP free cash flow used of $32.0 million for the three months ended March 31, 2023.
Free cash flow is a non-GAAP financial measure calculated by subtracting purchases of property and equipment from net cash provided by or used in operating activities. Free cash flow reflects a view of our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate the principal portion of payments made or expected to be made on finance lease obligations. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
A reconciliation of free cash flow to its most directly comparable GAAP measure, net cash provided by or used in operating activities, is set out in the Condensed Consolidated Statement of Cash Flows included at the end of this press release.
Share Repurchase Program
As previously announced, Aurinia’s Board of Directors approved a share repurchase program of up to $150 million common shares of the Company. Canadian securities regulators also granted exemptive relief for the Company’s share repurchase program, authorizing the Company to purchase up to 15 percent of its issued and outstanding shares in any 12-month period for up to 36 months. Through April 30th, Aurinia has repurchased 3.4 million shares for approximately $18.4 million at an average cost of $5.37. The Company expects to fund its future discretionary share repurchases from cash flows from operations and cash currently on hand.
This press release is intended to be read in conjunction with the Company’s unaudited condensed consolidated financial statements and Management’s Discussion and Analysis for the quarter ended March 31, 2024 in the Company’s Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, including risk factors disclosed therein, which will be accessible on Aurinia’s website at www.auriniapharma.com, on SEDAR at www.sedarplus.ca or on EDGAR at www.sec.gov/edgar.
About Lupus Nephritis
Lupus Nephritis (LN) is a serious manifestation of systemic lupus erythematosus (SLE), a chronic and complex autoimmune disease. LN affects approximately 120,000 people in the U.S. and disproportionately affects women and people of color. People living with LN have high unmet needs and often face significant barriers to optimal care. If poorly controlled, LN can lead to permanent and irreversible tissue damage within the kidney. Medical guidelines recommend that all SLE patients receive routine LN screenings at every visit. Guidelines also note that delaying LN diagnosis has profound prognostic repercussions. Yet, research shows that approximately 50% of SLE patients are not screened for LN and 77% of people with LN go untreated. Aurinia is committed to improving health outcomes for people living with LN by educating patients and providers on the critical need for routine screening and transformative therapies that can help improve health outcomes.
About Aurinia
Aurinia Pharmaceuticals is a fully integrated 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 dedicated to the treatment of adult patients with active lupus nephritis. The Company’s head office is in Edmonton, Alberta, with its U.S. commercial office in Rockville, Maryland. The Company focuses its development efforts globally.