Aurinia Pharmaceuticals(AUPH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial information, including financial statements and management's discussion and analysis Item 1. Financial Statements This section provides Aurinia Pharmaceuticals Inc.'s unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and shareholders' equity as of June 30, 2025, and December 31, 2024 | (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | ASSETS | | | | Total current assets | $408,970 | $446,596 | | Total assets | $502,562 | $550,645 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $78,266 | $97,763 | | Total liabilities | $167,261 | $173,167 | | Total shareholders' equity | $335,301 | $377,478 | - Total assets decreased from $550.6 million at December 31, 2024, to $502.6 million at June 30, 2025. Total current assets decreased by $37.6 million, primarily due to a reduction in cash, cash equivalents, and short-term investments[11] - Total liabilities decreased from $173.2 million at December 31, 2024, to $167.3 million at June 30, 2025, driven by a reduction in current liabilities, particularly accrued expenses and deferred revenue[11] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Details the company's revenues, expenses, and net income or loss for the three and six months ended June 30, 2025 and 2024 | (in thousands, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $70,008 | $57,192 | $132,473 | $107,495 | | Total operating expenses | $49,925 | $58,705 | $90,543 | $122,261 | | Income (loss) from operations | $20,083 | $(1,513) | $41,930 | $(14,766) | | Net income (loss) | $21,513 | $722 | $44,857 | $(10,027) | | Basic EPS | $0.16 | $0.01 | $0.33 | $(0.07) | | Diluted EPS | $0.16 | $0.01 | $0.32 | $(0.07) | - The company achieved significant net income for both the three and six months ended June 30, 2025, reversing losses from the prior year. Net income for the six months ended June 30, 2025, was $44.9 million, compared to a net loss of $10.0 million in the same period of 2024[12] - Total revenue increased by 22.4% for the three months and 23.2% for the six months ended June 30, 2025, compared to the same periods in 2024, primarily driven by net product sales[12] Condensed Consolidated Statements of Shareholders' Equity Outlines changes in shareholders' equity, including common shares, additional paid-in capital, and accumulated deficit | (in thousands) | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :----------------------- | | Common Shares (Shares) | 140,883 | 132,668 | | Common Shares (Amount) | $1,187,696 | $1,122,582 | | Additional paid-in capital | $126,999 | $105,337 | | Accumulated deficit | $(936,570) | $(891,713) | | Total Shareholders' Equity | $377,478 | $335,301 | - Total shareholders' equity decreased from $377.5 million at December 31, 2024, to $335.3 million at June 30, 2025, primarily due to significant share repurchases totaling $90.8 million for the six months ended June 30, 2025[15][50] - The company repurchased 11.2 million common shares for $90.8 million during the six months ended June 30, 2025, under its Share Repurchase Plan[50] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $45,541 | $(2,755) | | Net cash provided by investing activities | $17,759 | $10,611 | | Net cash used in financing activities | $(93,731) | $(23,324) | | Net decrease in cash, cash equivalents and restricted cash | $(30,431) | $(15,468) | | Cash, cash equivalents and restricted cash, end of the period | $53,002 | $33,407 | - Operating activities generated $45.5 million in cash for the six months ended June 30, 2025, a significant improvement from a cash usage of $2.8 million in the prior year, primarily driven by increased net income and reduced restructuring payments[20][67] - Cash used in financing activities increased substantially to $93.7 million for the six months ended June 30, 2025, mainly due to increased share repurchases[20] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Description of Business Describes Aurinia Pharmaceuticals Inc.'s core business, primary product LUPKYNIS, and development pipeline - Aurinia Pharmaceuticals Inc. is a biopharmaceutical company focused on autoimmune diseases. Its primary commercial product is LUPKYNIS (voclosporin), an FDA-approved oral therapy for active lupus nephritis (LN), launched in January 2021[22] - The company is also developing aritinercept (AUR200), a dual inhibitor for B cell-activating factor (BAFF) and a proliferation-inducing ligand (APRIL), for potential treatment of autoimmune diseases[22] 2. Basis of Presentation and Summary of Significant Accounting Policies Explains the basis of financial statement preparation and key accounting policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, omitting certain annual disclosures[23] - The company's significant accounting policies and recent accounting pronouncements remain unchanged from the December 31, 2024, Annual Report on Form 10-K, except for the new ASU 2023-09 on Income Tax Disclosures effective for annual periods beginning after December 15, 2024[25][26] 3. Earnings (Loss) Per Share Details the calculation of basic and diluted earnings per share for the reporting periods - Basic EPS for Q2 2025 was $0.16 (vs. $0.01 in Q2 2024) and for H1 2025 was $0.33 (vs. $(0.07) in H1 2024). Diluted EPS followed a similar trend[12] - For the six months ended June 30, 2025, 3.3 million potential dilutive common shares (2.2 million RSUs, 0.6 million performance awards, 0.5 million stock options) were included in diluted EPS calculation, while 7.5 million potential common shares were excluded as anti-dilutive[28] 4. Balance Sheet Details Provides disaggregated information for specific balance sheet accounts, including fair value measurements and inventory Fair Value Measurement (in thousands) | | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total cash, cash equivalents, restricted cash and short-term investments | $315,133 | $358,476 | Inventory, net (in thousands) | | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Raw materials | $771 | $1,702 | | Work in process | $43,165 | $36,623 | | Finished goods | $2,567 | $903 | | Total inventory, net | $46,503 | $39,228 | Intangible Assets, Net (in thousands) | | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total intangible assets, net | $4,046 | $4,355 | Accrued Expenses (in thousands) | | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Accrued sales rebates and fees | $25,000 | $24,568 | | Accrued payroll and related expenses | $7,256 | $18,639 | | Accrued research and development expenses | $6,495 | $3,990 | | Accrued restructuring expenses | $312 | $10,855 | | Total accrued expenses | $49,704 | $64,971 | 5. Commitments and Contingencies Outlines the company's contractual obligations, including lease payments and potential liabilities - The company has a finance lease for the Monoplant, a dedicated voclosporin manufacturing facility, with a lease term through March 31, 2030, and quarterly fixed facility fees of 3.6 million Swiss Francs[37][38] Future Minimum Lease Payments (in thousands) | | Finance Lease Payments | Operating Lease Payments | | :------------------------------------ | :--------------------- | :----------------------- | | Remainder of 2025 | $9,091 | $575 | | 2026 | $18,186 | $1,169 | | Total lease payments | $86,385 | $7,471 | - Finance lease expense for amortization of ROU assets was $4.4 million for Q2 2025 and $8.8 million for H1 2025. Interest expense on finance lease liabilities was $1.1 million for Q2 2025 and $2.2 million for H1 2025[41] 6. Deferred Compensation and Other Noncurrent Liabilities Details the nature and changes in deferred compensation and other long-term liabilities - Deferred compensation and other noncurrent liabilities increased to $12.0 million at June 30, 2025, from $9.4 million at December 31, 2024, related to employee retention arrangements with former executive officers[45] 7. License and Collaboration Agreements Describes key licensing and collaboration agreements, including terms with Otsuka - Aurinia has a collaboration and licensing agreement with Otsuka for oral voclosporin in certain territories, including Japan and the E.U., which includes milestone payments and royalties[46] - Collaboration revenue from manufacturing and other services provided to Otsuka increased to $3.4 million for Q2 2025 (from $2.2 million in Q2 2024) and $5.9 million for H1 2025 (from $4.4 million in H1 2024)[47] 8. Shareholders' Equity Details changes in shareholders' equity, including share repurchase programs and common share activity - The Board approved an increase of an additional $150 million to the Share Repurchase Plan on July 31, 2025, bringing the total authorized repurchase to $300 million[48][60] - For the six months ended June 30, 2025, the company repurchased 11.2 million common shares for $90.8 million. From July 1 to July 29, 2025, an additional 1.1 million shares were repurchased for $8.4 million[50][61] 9. Equity Incentive Plans Summarizes activity under the company's stock option, performance award, and RSU plans Stock Option Activity (Six Months Ended June 30, 2025) | | Number of shares (in thousands) | Weighted-average exercise price $ | | :------------------------------------ | :------------------------------ | :------------------------------ | | Outstanding at December 31, 2024 | 9,276 | 11.05 | | Granted | 2,391 | 7.61 | | Exercised/released | (227) | 6.89 | | Cancelled/forfeited | (1,820) | 12.22 | | Outstanding at June 30, 2025 | 9,620 | 10.08 | Performance Awards and RSUs Activity (Six Months Ended June 30, 2025) | | Number of shares (in thousands) | Weighted-average fair value price | | :------------------------------------ | :------------------------------ | :------------------------------ | | Unvested balance, December 31, 2024 | 7,986 | 8.08 | | Granted | 1,421 | 6.80 | | Vested | (2,634) | 8.58 | | Forfeited | (2,023) | 8.17 | | Unvested balance, June 30, 2025 | 4,750 | 7.38 | Share-based Compensation Expense (in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $335 | $87 | $428 | $(2,079) | | Selling, general and administrative | $4,877 | $8,078 | $1,364 | $15,615 | | Capitalized in inventory, net | $228 | $421 | $239 | $787 | | Share-based compensation expense | $5,440 | $8,586 | $2,031 | $14,323 | 10. Restructuring Describes the company's strategic restructuring initiatives and associated expenses - The company underwent two strategic restructurings in 2024, reducing headcount by approximately 25% (February) and an additional 45% (November) to focus on LUPKYNIS growth and aritinercept development[55] - Restructuring expense for the six months ended June 30, 2025, was $1.6 million, primarily for one-time termination benefits, contract termination costs, and other restructuring costs related to the November Restructuring[56] - Restructuring activities were substantially completed in the first half of 2025[56] 11. Income Taxes Provides information on income tax expense and effective tax rates for the reporting periods - Income tax expense for the three months ended June 30, 2025, was $0.6 million (vs. $0.8 million in 2024) and for the six months was $1.6 million (vs. $1.5 million in 2024), primarily due to U.S. source income[59] - The effective tax rates differed from the federal statutory rate mainly due to valuation allowances[58] 12. Subsequent Events Discloses significant events occurring after the balance sheet date - On July 31, 2025, the Board approved an additional $150 million increase to the Share Repurchase Plan[60] - From July 1, 2025, through July 29, 2025, the company repurchased 1.1 million common shares for $8.4 million under the Share Repurchase Plan[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Aurinia's financial condition and operational results, highlighting improved net product sales, positive cash flow, and the impact of restructuring for the periods ended June 30, 2025 and 2024 Overview Provides a high-level summary of Aurinia's business, key product performance, and financial highlights - Aurinia is a biopharmaceutical company focused on autoimmune diseases, with LUPKYNIS (voclosporin) as its FDA-approved oral therapy for active lupus nephritis (LN)[65] - Net product sales increased by 21% to $66.6 million for Q2 2025 and 23% to $126.5 million for H1 2025, driven by increased LUPKYNIS cartons sold[66] - Cash flow from operating activities was $45.5 million for H1 2025, a significant improvement from $(2.8) million in H1 2024. Excluding restructuring payments, cash flow from operations was $57.0 million[67] - As of June 30, 2025, cash, cash equivalents, restricted cash, and investments totaled $315.1 million, down from $358.5 million at December 31, 2024, partly due to $90.8 million in share repurchases[68] Results of Operations Analyzes the company's revenues and expenses, detailing changes in net product sales, cost of revenue, and operating expenses Results of Operations (in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net product sales | $66,574 | $55,028 | $126,545 | $103,101 | | License, collaboration and royalty revenue | $3,434 | $2,164 | $5,928 | $4,394 | | Total revenue | $70,008 | $57,192 | $132,473 | $107,495 | | Cost of revenue | $7,115 | $8,909 | $15,689 | $16,661 | | Selling, general and administrative | $26,018 | $44,934 | $46,357 | $92,629 | | Research and development | $7,432 | $4,080 | $13,175 | $9,631 | | Restructuring | $114 | $1,072 | $1,647 | $7,755 | | Other expense (income), net | $9,246 | $(290) | $13,675 | $(4,415) | | Income (loss) from operations | $20,083 | $(1,513) | $41,930 | $(14,766) | | Net income (loss) | $21,513 | $722 | $44,857 | $(10,027) | - Net product sales increased by $11.5 million (21%) for Q2 2025 and $23.4 million (23%) for H1 2025, primarily due to increased LUPKYNIS cartons sold and market penetration[71] - License, collaboration, and royalty revenue increased by $1.3 million for Q2 2025 and $1.5 million for H1 2025, mainly from increased manufacturing services provided to Otsuka[74] - Cost of revenue decreased by $1.8 million for Q2 2025 and $1.0 million for H1 2025, primarily due to a decrease in sales of low-gross-margin LUPKYNIS inventory to Otsuka, leading to improved gross margins of 90% (Q2 2025) and 88% (H1 2025)[77] - SG&A expense decreased significantly by $18.9 million for Q2 2025 and $46.3 million for H1 2025, primarily due to lower employee-related costs and non-personnel expenses resulting from 2024 strategic restructuring efforts[79][81][82] - R&D expense increased by $3.4 million for Q2 2025 and $3.5 million for H1 2025, driven by increased development activities for aritinercept and voclosporin, partially offset by lower employee headcount[84][85] - Restructuring expense decreased to $0.1 million for Q2 2025 and $1.6 million for H1 2025, down from $1.1 million and $7.8 million respectively in 2024, as restructuring activities were substantially completed[88] - Other expense (income), net, shifted to an expense of $9.2 million for Q2 2025 and $13.7 million for H1 2025, primarily due to foreign exchange remeasurement of the Monoplant finance lease liability and changes in deferred compensation liability fair value[89] Liquidity and Capital Resources Discusses the company's cash position, cash flow generation, and strategies for funding future operations - As of June 30, 2025, Aurinia had $315.1 million in cash, cash equivalents, restricted cash, and investments[90] - Cash flow from operating activities was $45.5 million for the six months ended June 30, 2025, compared to a cash outflow of $2.8 million in the prior year period[90] - The company expects to fund future operations with existing cash or cash generated from operations and may seek additional capital through equity or debt financings if needed[91][92] Critical Accounting Estimates States that there have been no material changes to critical accounting estimates since the prior annual report - There have been no material changes to the company's critical accounting policies and significant judgments and estimates since the Annual Report on Form 10-K for the year ended December 31, 2024[93] Off-Balance Sheet Arrangements Confirms the absence of any off-balance sheet arrangements during the reporting periods - The company did not have any off-balance sheet arrangements during the periods presented or currently[94] Contractual Obligations Notes no material changes to contractual obligations since the prior annual report - There have been no material changes outside the ordinary course of business to the company's contractual obligations and commitments since the Annual Report on Form 10-K for the year ended December 31, 2024[95] Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes to quantitative and qualitative disclosures regarding market risks since the December 31, 2024, Annual Report on Form 10-K - No material changes to quantitative and qualitative disclosures about market risks have occurred since the December 31, 2024, Annual Report on Form 10-K[96] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Assesses the effectiveness of the company's disclosure controls and procedures - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2025[97] Changes in Internal Control over Financial Reporting Reports on any material changes in internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the most recent quarter[98] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Details ongoing patent infringement lawsuits against generic drug manufacturers seeking to market LUPKYNIS before patent expiry - Aurinia received Paragraph IV notices from eight generic drug companies (Hikma, Lotus, Galenicum, Zydus, Teva, Dr. Reddy's, DifGen, Sandoz) seeking to market generic LUPKYNIS before the December 2037 patent expiry[101] - The company filed patent infringement complaints against all eight generic manufacturers in April and May 2025[102] - Due to the patent infringement complaints filed within 45 days of notice, the FDA cannot approve the ANDAs for these generic products earlier than 7.5 years from LUPKYNIS's new drug application approval, as per the Hatch-Waxman Act[103] - Aurinia intends to vigorously enforce its intellectual property rights relating to LUPKYNIS[104] Item 1A. Risk Factors Updates risk factors, highlighting potential adverse impacts from changes in U.S. economic laws or policies affecting pharmaceutical imports - No material changes to risk factors have occurred since the December 31, 2024, Annual Report on Form 10-K, except for potential impacts from changes in U.S. economic laws or policies[105] - A national security investigation into pharmaceutical imports by the U.S. federal government could lead to measures like pricing restrictions, tariffs, or trade restrictions, potentially harming Aurinia's business as it imports products from Switzerland[106] - Retaliatory actions by international governments in response to U.S. economic policies, such as tariffs on pharmaceutical imports, could materially affect Otsuka's voclosporin business and, consequently, Aurinia's business[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common share repurchase activities, including the increased authorization and shares repurchased under the plan - The Board approved an additional $150 million for the Share Repurchase Plan on July 31, 2025, increasing the total authorized amount[108] - As of June 30, 2025, the company repurchased 11,159,291 common shares for an average price of $8.09 per share during the first six months of 2025[110] - The company has a Rule 10b5-1 stock repurchase plan to purchase common shares in accordance with applicable regulations[110] Item 3. Defaults Upon Senior Securities Reports no defaults upon senior securities - There were no defaults upon senior securities[111] Item 4. Mine Safety Disclosures Reports no mine safety disclosures - There were no mine safety disclosures[112] Item 5. Other Information States that there is no other information to report - There is no other information to report[113] Item 6. Exhibits Lists exhibits filed with the report, including organizational documents and certifications - Exhibits include Articles of Amalgamation, Amended and Restated By-Law No. 2, Certifications of Principal Executive and Financial Officers (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[114] Signatures Contains the required signatures for the financial report