Aurinia Pharmaceuticals(AUPH) - 2024 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2024, net product sales were $216.2 million, up 36$158.5 million in 2023[18]. - Total revenue was $235.1 million, a 34$175.5 million in 2023[1]. - License, collaboration, and royalty revenue was $18.9 million, an 11$17.0 million in 2023, driven by manufacturing services provided to Otsuka[1][4]. - Gross margin for 2024 was 88%, down from 92% in 2023[1][5]. - Net income for 2024 was $5.8 million, a significant improvement from a net loss of$78.0 million in 2023[1]. - Total operating expenses decreased to $239.8 million from$267.2 million in 2023, a reduction of $27.4 million[1]. - Research and development expenses decreased to$20.8 million from $49.6 million in 2023, primarily due to strategic restructuring efforts[1][6]. - Restructuring expenses for 2024 were$23.1 million, compared to nil in 2023, following a headcount reduction of approximately 25%[1][7]. - The company expects SG&A expenses to decrease in 2025 as it realizes the benefits of its strategic restructuring efforts[1][9]. Cash and Investments - As of December 31, 2024, Aurinia had cash, cash equivalents, restricted cash, and investments of $358.5 million, compared to$350.7 million at December 31, 2023[21]. - The company has cash, cash equivalents, restricted cash, and investments totaling $358.5 million as of December 31, 2024, with LUPKYNIS being the only approved product generating net sales[140]. - A hypothetical 1$2.8 million fluctuation of annual interest income in the investment portfolio[206]. - The Company recognized a $72.5 million finance lease liability related to the Monoplant agreement, which is denominated in Swiss Francs[207]. - A hypothetical 10$7.5 million fluctuation in the valuation of the lease liability[207]. - The Company maintains cash balances with reputable financial institutions and has not experienced any losses associated with credit risk[209]. - The investment policy limits excess cash investments to certain types of instruments, ensuring a conservative approach to managing financial risk[209]. Product Development and Regulatory Approvals - Aurinia entered into a collaboration and licensing agreement with Otsuka for the development and commercialization of LUPKYNIS in multiple territories, receiving a $50 million upfront cash payment[22]. - Otsuka has obtained regulatory approval for LUPKYNIS in Japan, the EU, the UK, and Switzerland[24]. - AUR200 is being developed as a dual inhibitor of BAFF and APRIL for the potential treatment of autoimmune diseases[43]. - AUR200 has shown high binding affinity for both BAFF and APRIL compared to competitor inhibitors[47]. - The American College of Rheumatology now recommends triple immunosuppressive therapy, including calcineurin inhibitors like LUPKYNIS, as first-line therapy for lupus nephritis[42]. - LUPKYNIS demonstrated a significantly higher rate of complete renal response compared to standard treatments in the pivotal Phase 3 AURORA 1 study[35]. - AUR200 demonstrated an IC50 of 0.02 nM, significantly outperforming Atacicept (0.38 nM, 19.0x) and Telitacicept (1.05 nM, 52.5x) in preclinical testing[52]. - AUR200 resulted in significant and sustained reductions in B cell antibodies IgA and IgM in non-human primates, with no adverse findings reported[52]. - The New Chemical Entity (NCE) exclusivity for LUPKYNIS in the U.S. extends until January 22, 2026, providing 5 to 7.5 years of market exclusivity[56]. - NCE-equivalent exclusivity for voclosporin in certain European countries provides 10 years of exclusivity post-approval, with 8 years in Japan[57]. - The construction of a dedicated manufacturing facility for voclosporin (Monoplant) began in January 2021, with manufacturing commencing in June 2023[65]. - The company pays a quarterly fixed facility fee of approximately$4.0 million for the exclusive right to use the Monoplant through March 31, 2030[65]. Market and Competitive Landscape - LUPKYNIS is the only FDA-approved oral therapy for adult patients with active lupus nephritis, facing competition from injectable treatments and off-label therapies[62]. - The commercial success of LUPKYNIS is heavily dependent on third-party reimbursement policies and pricing regulations in the U.S. and other markets[99]. - The potential market size for LUPKYNIS is based on prescription and sales data, and if the market size is smaller than estimated, commercial prospects may be limited[91]. - LUPKYNIS's commercial prospects may be limited due to unfavorable pricing regulations and third-party reimbursement policies[101]. - The company reported various commercial metrics for LUPKYNIS, including the number of prescriptions and patient persistency rates, but these metrics do not directly correlate to financial performance[104]. - Net product sales are primarily from two specialty pharmacies and a distributor in the U.S., with revenue from collaboration partner Otsuka for the European and Japanese markets[105]. Legal and Regulatory Risks - A paragraph IV notice of certification was received on February 25, 2025, regarding a generic version of LUPKYNIS, alleging invalidity of the 2037 Patents[60]. - The company intends to vigorously defend LUPKYNIS and its intellectual property rights, which may delay FDA approval of any ANDA for 7.5 years from the NDA approval date[61]. - The company faces significant regulatory risks due to various foreign regulations governing clinical studies and commercial sales, which can differ substantially from U.S. FDA approval processes[75]. - The Inflation Reduction Act of 2022 includes drug pricing reforms that could significantly impact the company's future business, including a drug price negotiation program[79]. - The company may face product liability lawsuits, which could incur substantial liabilities and reduce LUPKYNIS sales[92]. - The company may face significant patent litigation costs due to a paragraph IV notice related to a generic version of LUPKYNIS, which could lead to a decline in net product sales[109]. - Compliance with ongoing post-marketing obligations for LUPKYNIS may lead to product recalls or increased regulatory actions, potentially affecting sales and costs[125]. - The company is subject to various federal, state, and foreign laws that could result in substantial penalties for noncompliance, impacting operations[133]. Operational and Strategic Initiatives - The company announced a strategic restructuring that reduced headcount by approximately 25% and later by an additional 45% to focus on LUPKYNIS growth and AUR200 development[117]. - The company relies on sole-source contract manufacturers for LUPKYNIS and AUR200, making uninterrupted supply critical for commercial success[127]. - The company faces risks related to reliance on third parties for distribution and clinical studies, which could delay commercialization efforts[128]. - The company has never paid dividends on common shares, and future dividends will depend on operational results and financial conditions[139]. - The company has not experienced material adverse effects from cybersecurity threats to date[156]. - Aurinia's business continuity program was refreshed in 2024 to enhance resilience against potential threats, including cyber-attacks[155]. - Aurinia's cybersecurity risk management program is part of its overall risk management framework, with regular assessments and updates to ensure security[152][155]. - The company’s Chief Information Officer has over 20 years of experience in information security and has been in the role since 2021[158]. - Management concluded that the disclosure controls and procedures were effective as of December 31, 2024[215]. Employee Relations - As of February 26, 2025, the company had 130 employees and maintains good relations with them, with no employees represented by labor unions[83].