Deferred compensation and other non-current liabilities (of which $7.0 百万和2023年12月31日$7.6 million in December 31, 2023 is due to a related party, respectively)
辉瑞公司面临数起分开的诉讼，这些诉讼仍在进行中，需等待第三项索赔条款的裁决。2023年9月，我们与辉瑞公司同意合并2022和2023年的诉讼，并将审判日期从2024年11月推迟至2025年上半年，具体时间将由法院确定。 公司也宣布， Robert T. Foster 博士已于2024年11月5日从董事会退休。
2024年9月，董事会任命唐伟伦为董事会董事长，他是Tang Capital Management, LLC的总裁，该公司成立于2002年，专注于生命科学领域的投资。唐先生在生物制药行业投资、管理和领导公司方面拥有超过20年的经验。该公司还宣布接受了三名董事的有条件辞职，这三名董事在2024年股东大会上未获得大多数支持。
辉瑞公司面临数起分开的诉讼，这些诉讼仍在进行中，需等待第三项索赔条款的裁决。2023年9月，我们与辉瑞公司同意合并2022和2023年的诉讼，并将审判日期从2024年11月推迟至2025年上半年，具体时间将由法院确定。 公司也宣布， Robert T. Foster 博士已于2024年11月5日从董事会退休。
Total net revenue was $67.8 million and $54.5 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Total net revenue was $175.3 million and $130.4 million for the nine months ended September 30, 2024, and September 30, 2023, respectively.
License, collaboration, and royalty revenues were $12.3 million and $13.7 million for the three months ended September 30, 2024, and September 30, 2023, respectively. License, collaboration, and royalty revenues were $16.7 million and $14.2 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The revenue is primarily due to a $10.0 million milestone recognized in third quarter of 2024 for the Japanese Ministry of Health, Labour, and Welfare approval of LUPKYNIS and a $10.0 million milestone recognized in third quarter of 2023 for pricing and reimbursement approval in certain European jurisdictions, coupled with manufacturing services revenue from Otsuka related to shared capacity services that commenced in late June 2023.
Cost of Sales
Cost of sales was $6.0 million and $6.8 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Cost of sales was $22.7 million and $8.8 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The decrease for the three months ended September 30, 2024, is primarily due to inventory write downs and semi-finished product sales to Otsuka in the prior three months ended September 30, 2023. The increase for
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the nine months ended September 30, 2024, is primarily due to the amortization of the monoplant finance right of use asset, which was placed into service in late June 2023 and therefore only partially impacted prior year results.
Gross Margin
Gross margin for the three months ended September 30, 2024, and September 30, 2023, was approximately 91% and 88%, respectively. Gross margin for the nine months ended September 30, 2024, and September 30, 2023, was approximately 87% and 93%, respectively.
The primary drivers for the decrease in both periods were lower employee costs related to the reduction in headcount, which occurred late in the first quarter of 2024, a decrease of expenses related to ceasing our AUR300 development program, and lower expenses related to developing AUR200.
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Restructuring Expenses
During the three and nine months ended September 30, 2024, restructuring expenses were approximately nil and $7.8 million and nil for the three and nine months ended September 30, 2023. Restructuring expenses primarily included employee severance, one-time benefit payments, and contract termination expenses related to the restructuring, which occurred late in the first quarter of 2024.
Other Expense (Income), net
Other expense (income), net was $4.6 million and $2.6 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Other expense (income), net was $0.2 million and $(0.7) million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The change is primarily driven by changes in the fair value assumptions related to our deferred compensation liability and the foreign exchange remeasurement of the monoplant lease liability, which commenced in June 2023 and is denominated in CHF.
Interest Expense
Interest expense was $1.2 million and $1.4 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Interest expense was $3.7 million and $1.5 million for the nine months ended September 30, 2024, and September 30, 2023, respectively. The interest expense is due to the monoplant finance lease, which commenced in June 2023.
Interest Income
Interest income was $4.3 million and $4.5 million for the three months ended September 30, 2024, and September 30, 2023, respectively. Interest income was $13.0 million and $12.4 million for the nine months ended September 30, 2024, and September 30, 2023, respectively.
Liquidity and Capital Resources
As of September 30, 2024, we had cash, cash equivalents, and restricted cash of approximately $37.1 million and investments of $311.6 million compared to cash, cash equivalents, and restricted cash of $48.9 million and investments of $301.8 million at December 31, 2023. Cash needs were primarily related to the continued investment in LUPKYNIS commercialization activities, post approval commitments for LUPKYNIS, monoplant payments, share repurchases and restructuring related payments and were partially offset by an increase in cash receipts from sales of LUPKYNIS and cash payments from Otsuka. Cash, cash equivalents, restricted cash, and investments are primarily held in U.S. dollars. As of September 30, 2024, and December 31, 2023, we had working capital of $361.9 million and $347.6 million, respectively.
We are devoting the majority of our operational efforts and financial resources towards the commercialization and post- approval commitments for LUPKYNIS. Taking into consideration the cash, cash equivalents, and investments as of September 30, 2024, we believe that our cash position is sufficient to fund our current plans which include funding commercial activities, such as our FDA related post approval commitments, manufacturing and packaging commercial drug supply, funding our supporting commercial infrastructure, advancement of our pipeline, funding our working capital obligations and share repurchases for at least the next few years.
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Cash Flow Summary
The following table summarizes our cash flows for the nine months ended September 30, 2024, and September 30, 2023:
Nine Months Ended September 30,
(in thousands)
2024
2023
Net cash (used in) provided by:
Operating activities
$
14,274
$
(47,773)
Investing activities
39
(449)
Financing activities
(26,046)
447
Net decrease in cash and cash equivalents
$
(11,733)
$
(47,775)
Net cash provided by operating activities was $14.3 million for the nine months ended September 30, 2024, compared to net cash used in operating activities of $47.8 million for the nine months ended September 30, 2023. The increase in net cash provided by operating activities is primarily due to an increase in cash receipts from sales of LUPKYNIS and cash receipts from Otsuka, coupled with a reduction in operating expenses year over year, as a result of the restructuring in the first quarter of 2024. See "Total Revenue" above for further discussion regarding our increased sales of LUPKYNIS.
Cash provided by investing activities was $39 thousand during the nine months ended September 30, 2024, compared to net cash used of $0.4 million during the nine months ended September 30, 2023. The increase in cash provided by investing activities was primarily related to the timing of purchases and proceeds of investments and an upfront capital expenditure payment for the monoplant in 2023.
Cash used in financing activities was $26.0 million during the nine months ended September 30, 2024, compared to cash provided by financing activities of $0.4 million during the nine months ended September 30, 2023. The decrease was primarily due to share repurchases, which began in February 2024, and quarterly lease payments for our monoplant finance lease, which commenced during the third quarter of 2023.
Share Repurchase Program
In February 2024, the Board approved a share repurchase program of up to $150 million of our common shares. On February 29, 2024, Canadian securities regulators 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, including under the current program.
As of September 30, 2024, we had repurchased approximately 3.4 million of our common shares for $18.6 million (including transaction costs which consist of commissions and excise tax). The cost of repurchased shares are reported as a reduction in common shares and under Alberta law, the shares were cancelled and not reissued.
Off‑Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off‑balance sheet arrangements as such term is defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Act.
Contractual Obligations
There have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
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Item 3. Quantitative and Qualitative Disclosures About Market Risks
Our activities can expose us to market risks which include interest rate risk, foreign currency risk, inflation risk and credit risk. Risk management is carried out by management under policies approved by the Board, with oversight provided by the Audit Committee of the Board. Our overall risk management program seeks to minimize adverse effects on our financial performance.
Interest Rate Risk
Financial assets and financial liabilities with variable interest rates expose us to cash flow interest rate risk. We manage our interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct
operations on a day-to-day basis. As of September 30, 2024, our investment portfolio includes cash, cash equivalents, restricted cash, and investments of $348.7 million that earn interest at various rates. Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investments held during the year were comprised of highly rated instruments such as certificates of deposits, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities. As of September 30, 2024, these instruments primarily have a maturity of less than a year.
As of September 30, 2024, a hypothetical decrease of 100 basis points on the interest rates of our investments would result annually in approximately $3.1 million less interest in our portfolio. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio, due to the short-term nature of the investments and our current ability to hold these investments to maturity.
Accounts receivable, accounts payable and accrued liabilities bear no interest unless payments are not received timely. We do not believe that our results of operations or cash flows would be affected to a significant degree by a sudden change in market interest rates relative to our investment portfolio.
Foreign Currency Risk
We are exposed to financial risk related to the fluctuation of foreign currency exchange rates. Foreign currency risk for the Company is the risk variations in exchange rates between the U.S. dollar and foreign currencies, primarily with the Swiss franc, Canadian dollar and Great Britain Pound, which could affect our operating and financial results.
As of September 30, 2024, we had an $80.7 million finance lease liability on our balance sheet related to the monoplant. An assumed 10% fluctuation in the Swiss franc would have an approximate $8.1 million fluctuation in the valuation of the lease liability.
There were no other foreign currency fluctuations that would have had a material impact on our financial condition or results of operations as of September 30, 2024.
Inflation Risk
Inflation has been volatile in recent periods and may continue to be volatile in the future. Inflation generally affects us by increasing our cost of labor, commercial support, manufacturing and clinical trial expenditures. In addition, inflation also impacts our government and payer rebates as it pertains to the consumer price index (CPI) penalty. Our investment portfolio may experience the risk of realized losses on our investments if we were to sell before maturity due to the market volatility caused by increased interest rates.
Credit Risk
Our exposure to credit risk generally consists of cash and cash equivalents, investments and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions and invest the excess cash in highly rated investments. It is the
Company's intent for these investments to have an overall rating of A-1, or higher, by Standard & Poor’s, or an equivalent rating by Moody’s or Fitch. Our investment policy limits investments to certain types of debt and money market instruments issued by institutions primarily with investment grade credit ratings and places restriction on maturities and concentrations by asset class and issuer.
We are subject to credit risk in connection with our accounts receivable due from our two main specialty pharmacies for U.S. commercial sales, specialty distributor and collaboration partnership with Otsuka which accounted for the majority of our accounts receivable, net balances as of September 30, 2024. We monitor economic conditions, including the creditworthiness of
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our customers and collaboration partner. We regularly communicate with our customers regarding the status of receivable balances and have not experienced and issues with collectability. The timing between the recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms range from 30 to 45 days. During the quarter ended September 30, 2024, we did not recognize any allowance for credit losses related to credit risk for our customers or write any amounts off.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2024, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. For further discussion, refer to Note 18, Commitments and Contingencies.
Other than as set out below, there are no material developments to report in respect of the litigation described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
On April 15, 2022, a purported shareholder class action complaint, Ortmann v. Aurinia Pharmaceuticals, Inc. et al., case no. 1:22-cv-02185, was filed in the United States District Court for the Eastern District of New York (Eastern District of New York), naming the Company and certain of its officers as defendants. The lawsuit alleges that the Company made materially false and misleading statements regarding its financial guidance and commercial prospects in violation of certain federal securities laws. The plaintiff sought unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. On June 2, 2022, the case was transferred from the Eastern District of New York to the United States District Court for the District of Maryland. On February 20, 2023, the Court appointed a lead plaintiff and approved lead plaintiff’s selection of lead counsel. On May 22, 2023, the lead plaintiff filed its amended complaint. On October 20, 2023, the Company filed a motion to dismiss the amended complaint (the "Motion to Dismiss"). On December 8, 2023, the lead plaintiff filed its opposition to the Motion to Dismiss. On January 12, 2024, the Company filed its reply in support of the Motion to Dismiss. On August 13, 2024, the Court entered an order granting the Motion to Dismiss, with prejudice. The lead plaintiff did not file a motion for reconsideration or appeal the Court's order, and as such the action is dismissed in its entirety.
Item 1A. Risk Factors.
Under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, we identified important factors that could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Quarterly Report. There has been no material change in our risk factors subsequent to the filing of our prior reports referenced above, other than as set out below. However, the risks described in our reports are not the only risks we face. Additional risks and uncertainties that we currently deem to be immaterial or not currently known to us, as well as other risks reported from time to time in our reports to the SEC, also could cause our actual results to differ materially from our anticipated results or other expectations.
Aurinia's restructuring program and associated organizational changes may not adequately reduce its operating costs or improve operating margins, may lead to additional workforce attrition, and may cause operational disruptions, and there can be no assurance that Aurinia will realize the anticipated benefits of the restructuring program.
On November 7, 2024, Aurinia announced it was implementing a strategic restructuring to sharpen the Company's focus on continued LUPKYNIS growth and the rapid development of AUR200. This restructuring will result in a workforce reduction of approximately 45% and anticipates a one-time restructuring charge in the fourth quarter of 2024 of approximately $15 to $19 million and will focus the Company’s LUPKYNIS commercial strategy on the highest growth drivers.
The estimates of charges and expenditures, and the associated annual cost savings, Aurinia expects to incur in connection with the restructuring program, and timing thereof, are subject to a number of assumptions, including local law requirements in various jurisdictions, and Aurinia may incur costs that are greater, or recognize lower annual cost savings, than Aurinia currently anticipates in connection with the restructuring program.
The restructuring program may yield unintended consequences, such as the loss of institutional knowledge and expertise, employee attrition beyond Aurinia's intended reduction in force, a reduction in morale among Aurinia's remaining employees, greater than anticipated costs incurred in connection with implementing the restructuring program, and the risks that Aurinia may not achieve the anticipated benefits from the restructuring program to the extent or as quickly as Aurinia anticipates, if at all, all of which may materially adversely affect Aurinia's results of operations or financial condition. These restructuring initiatives could place substantial demands on Aurinia's management and employees, which could lead to the diversion of management’s and employees’ attention from other business priorities. In addition, while certain positions are being eliminated in connection with the restructuring program, many functions necessary to Aurinia's reduced operations remain, and Aurinia may be unsuccessful in distributing the duties and obligations of departed employees among its remaining employees or to
29
external service providers, which could result in disruptions to Aurinia's operations. Aurinia may also discover that the workforce reduction and other restructuring efforts will make it difficult for Aurinia to pursue new opportunities and initiatives and require Aurinia to hire qualified replacement personnel, which may require Aurinia to incur additional and unanticipated costs and expenses. Aurinia may further discover that, despite the implementation of its restructuring program, Aurinia may require additional capital to continue expanding its business, and Aurinia may not be able to obtain such capital on acceptable terms, if at all. Aurinia's failure to successfully accomplish any of the above activities and goals may have a material adverse impact on its business, financial condition and results of operations.
Additionally, the workforce reduction Aurinia will implement as part of the restructuring program may negatively impact its ability to attract, integrate, retain and motivate highly qualified employees, and may harm Aurinia's reputation with current or prospective employees.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The following table summarizes the common share activity of our repurchased shares under our share repurchase program announced on February 15, 2024. Refer to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources" for further details of the share repurchase program.
Period
Total number of shares purchased
Average price paid per share in $
Total number of shares purchased as part of publicly announced program
Approximate dollar value of shares that may yet be purchased under program
(in thousands)(1)(2)
2/21/2024-3/21/2024
1,732,787
$5.77
1,732,787
$140,000
3/22/2024-3/28/2024
640,587
$4.98
640,587
$136,809
4/1/2024-4/30/2024
1,049,556
$4.93
1,049,556
$131,638
5/1/2024-5/31/2024
891
$4.99
891
$131,633
Total
3,423,821
3,423,821
(1)The approximate value of shares that may yet be purchased under the program does not include commissions that may be paid to brokers in connection with such purchases.
(2)The approximate dollar value of shares that may be purchased under the program may differ from time to time from the value set out in the table above, as the Company is limited in how much it may repurchase both by the maximum dollar value of the program established by the Board, and also the maximum number of shares that may be repurchased in any 12 month period is limited by the Exemptive Relief (which may produce a lower maximum dollar value depending on the prices that common shares are repurchased under the program). As of September 30, 2024, the maximum dollar value would be approximately $131.6 million.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are filed as part of this report:
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith.
**
Furnished herewith. Exhibits 32.1 and 32.2 are being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AURINIA PHARMACEUTICALS INC.
November 6, 2024
By:
/s/ Peter Greenleaf
Peter Greenleaf
Chief Executive Officer, Director (Principal Executive Officer)
November 6, 2024
By:
/s/ Joseph Miller
Joseph Miller
Chief Financial Officer (Principal Financial and Accounting Officer)