Aurinia Reports Second Quarter Financial Results and Operational Highlights

AURORA Phase III Trial in lupus nephritis anticipated to complete
enrollment ahead of schedule

Trials in FSGS and Dry Eye initiated

VICTORIA, British Columbia–(BUSINESS WIRE)–Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH / TSX:AUP) (“Aurinia” or the
“Company”) has released its financial results for the second quarter
ended June 30, 2018. Amounts, unless specified otherwise, are expressed
in U.S. dollars.

“We are excited to announce that the AURORA Phase III trial in lupus
nephritis is running ahead of schedule and we now anticipate completing
enrollment in early Q4 2018. We are extremely pleased with the trial’s
progress thus far and having patients roll over into the AURORA 2
extension study reinforces our confidence in the program”, said Richard
Glickman, Aurinia’s CEO and Chairman of the Board. “Our clinical team
continues to deliver on our important milestones with the Phase II
trials in FSGS and Dry Eye now initiated. We are well-capitalized into
2020 and look forward to an eventful second half of the year.”

Highlights

  • Our Phase III clinical trial (“AURORA”) to evaluate voclosporin for
    the treatment of lupus nephritis (“LN”), which we initiated in May of
    2017, is now expected to complete enrollment in early Q4 2018. We have
    over 225 clinical trial sites activated and able to enroll patients in
    29 countries around the globe.
  • The first patients have rolled over into the AURORA 2 blinded
    extension study from the AURORA Phase III clinical trial. The purpose
    of AURORA 2 is to assess the long-term safety and tolerability of
    voclosporin in patients with LN; however, this study is not a
    requirement for potential regulatory approval for voclosporin.
  • We initiated a Phase II proof-of-concept study in focal segmental
    glomerulosclerosis (“FSGS”) in June 2018. This is an open-label study
    of 20 treatment naïve patients. We submitted our Investigational New
    Drug application (“IND”) to the FDA in Q1 2018 and received agreement
    from the FDA with regards to the guidance we provided on this study.
  • We also initiated a Phase II head-to-head tolerability study of
    voclosporin ophthalmic solution (“VOS”) versus Restasis® (cyclosporine
    ophthalmic emulsion) 0.05% for the treatment of Dry Eye Syndrome
    (“DES”) in July 2018. Depending on the pace of recruitment, data could
    be available as early as the end of this year or early 2019. This
    four-week study of approximately 90 patients is expected to be
    completed by the end of 2018. We believe calcineurin inhibitors
    (“CNIs”) are a mainstay of treatment for DES, and the goal of this
    program is to develop a best-in-class treatment option, and upon
    completion, we will look to evaluate strategic alternatives for this
    asset.

Financial Liquidity at June 30, 2018

At June 30, 2018, we had cash, cash equivalents and short term
investments of $150.2 million compared to $159.1 million at March 31,
2018 and $173.5 million at December 31, 2017. Net cash used in operating
activities was $12.3 million for the second quarter ended June 30, 2018
compared to $14.0 million for the second quarter ended June 30, 2017.

We believe, based on our current plans, that we have sufficient
financial resources to fund our existing LN program, including the
AURORA trial and the NDA submission to the FDA, conduct the Phase II
trials for FSGS and DES, and fund operations into 2020.

Financial Results for the Three and Six Months Ended June 30, 2018

We reported a consolidated net loss of $15.7 million or $0.19 per common
share for the three months ended June 30, 2018, as compared to a
consolidated net loss of $2.4 million or $0.03 per common share for the
three months ended June 30, 2017.

The increase in the loss for the three months ended June 30, 2018
compared to the same period in 2017 was primarily due to the non-cash
change in the estimated fair value of derivative warrant liabilities of
$9.4 million. The three months ended June 30, 2018 reflected a $1.9
million increase in the estimated fair value of derivative warrant
liabilities compared to a reduction of $7.5 million in the estimated
fair value of derivative warrant liabilities for the three months ended
June 30, 2017. The change in the revaluation of the derivative warrant
liabilities is primarily driven by the change in our share price at each
period end. An increase in our share price results in an increase in the
estimated fair value of derivative warrant liabilities and vice versa.
The derivative warrant liabilities will ultimately be eliminated on the
exercise or forfeiture of the warrants and will not result in any cash
outlay by the Company.

The net loss before the non-cash change in estimated fair value of
derivative warrant liabilities was $13.8 million for the three months
ended June 30, 2018 compared to $9.9 million for the same period in 2017
with the increased loss amount primarily reflecting higher research and
development expenses.

For the six months ended June 30, 2018, the consolidated net loss was
$31.2 million or $0.37 per common share compared to a consolidated net
loss of $54.3 million or $0.78 per common share for the comparable
period in 2017. For the six months ended June 30, 2018 we recorded an
increase of $4.6 million in the estimated fair value of derivative
warrant liabilities compared to $33.3 million for the comparable period
in 2017.

The net loss before the non-cash change in estimated fair value of
derivative warrant liabilities was $26.6 million for the six months
ended June 30, 2018 compared to $21.1 million for the same period in
2017. The increased loss reflected higher research and development
expenses.

Research and development expenses increased to $10.5 million for the
three months ended June 30, 2018, compared to $7.1 million for the three
months ended June 30, 2017. We incurred research and development
expenses of $19.4 million for the six months ended June 30, 2018, as
compared to $14.4 million for the same period in 2017. The increased
research and development expenses reflected higher AURORA clinical and
drug supply costs as well as startup costs for the AURORA 2 extension
study, and the FSGS and DES studies.

Corporate, administration and business development expenses increased to
$3.5 million for the three months ended June 30, 2018, compared to $2.9
million for the same period in 2017. We incurred corporate,
administration and business development expenses of $7.3 million for the
six months ended June 30, 2018 compared to $6.3 million for the
comparable period in 2017. The increase was primarily due to higher
non-cash stock compensation expense in 2018 compared to the same periods
in 2017.

About Aurinia

Aurinia Pharmaceuticals is a clinical stage biopharmaceutical company
focused on developing and commercializing therapies to treat targeted
patient populations that are suffering from serious diseases with a high
unmet medical need. The company is currently developing voclosporin,
an investigational drug, for the potential treatment of lupus nephritis,
focal segmental glomerulosclerosis, and Dry Eye Syndrome. The company is
headquartered in Victoria, British Columbia and focuses its development
efforts globally. For further information, see our website at www.auriniapharma.com.

About Voclosporin

Voclosporin, an investigational drug, is a novel and potentially
best-in-class CNI with clinical data in over 2,400 patients across
indications. Voclosporin is an immunosuppressant, with a synergistic and
dual mechanism of action. By inhibiting calcineurin, voclosporin blocks
IL-2 expression and T-cell mediated immune responses, and stabilizes the
podocyte in the kidney. It has been shown to have a more predictable
pharmacokinetic and pharmacodynamic relationship (potentially requires
no therapeutic drug monitoring), an increase in potency (vs
cyclosporin), and an improved metabolic profile compared to legacy CNIs.
Aurinia anticipates that upon regulatory approval, patent protection for
voclosporin will be extended in the United States and certain other
major markets, including Europe and Japan, until at least October 2027
under the Hatch-Waxman Act and comparable laws in other countries and
until April 2028 with anticipated pediatric extension.

About VOS

VOS (voclosporin ophthalmic solution) is an aqueous, preservative free
nanomicellar solution containing 0.2% voclosporin intended for use in
the treatment of DES. Studies have been completed in rabbit and dog
models, and a single Phase I has also been completed in healthy
volunteers and patients with DES. VOS has IP protection until 2031.

About Lupus Nephritis (LN)

LN in an inflammation of the kidney caused by Systemic Lupus
Erythematosus (“SLE”) and represents a serious progression of SLE. SLE
is a chronic, complex and often disabling disorder. The disease is
highly heterogeneous, affecting a wide range of organs & tissue systems.
Unlike SLE, LN has straightforward disease outcomes (measuring
proteinuria) where an early response correlates with long-term outcomes.
In patients with LN, renal damage results in proteinuria and/or
hematuria and a decrease in renal function as evidenced by reduced
estimated glomerular filtration rate (“eGFR”), and increased serum
creatinine levels. LN is debilitating and costly and if poorly
controlled, LN can lead to permanent and irreversible tissue damage
within the kidney, resulting in end-stage renal disease (“ESRD”), thus
making LN a serious and potentially life-threatening condition.

About FSGS

FSGS is a rare disease that attacks the kidney’s filtering units
(glomeruli) causing serious scarring which leads to permanent kidney
damage and even renal failure. FSGS is one of the leading causes of
Nephrotic Syndrome (NS) and is identified by biopsy and proteinuria. NS
is a collection of signs and symptoms that indicate kidney damage,
including: large amounts of protein in urine; low levels of albumin and
higher than normal fat and cholesterol levels in the blood, and edema.
Similar to LN, early clinical response (measured by reduction of
proteinuria) is thought to be critical to long-term kidney health in
patients with FSGS. Currently, there are no approved therapies for FSGS
in the United States and the European Union.

About Dry Eye Syndrome (DES)

Dry eye syndrome (DES) is characterized by irritation and inflammation
that occurs when the eye’s tear film is compromised by reduced tear
production, imbalanced tear composition, or excessive tear evaporation.
The impact of DES ranges from subtle, yet constant eye irritation to
significant inflammation and scarring of the eye’s surface. Discomfort
and pain resulting from DES can reduce quality of life and cause
difficulty reading, driving, using computers and performing daily
activities. DES is a chronic disease. There are currently two FDA
approved therapies for the treatment of dry eye; however, there is
opportunity for improvement in the effectiveness by enhancing
tolerability and onset of action and alleviating the need for repetitive
dosing.

Forward-Looking Statements

Certain statements made in this press release may constitute
forward-looking information within the meaning of applicable Canadian
securities law and forward-looking statements within the meaning of
applicable United States securities law. These forward-looking
statements or information include, but are not limited to statements or
information with respect to: AURORA completing enrollment in early Q4,
2018, the timing voclosporin being potentially a best-in-class CNI with
robust intellectual property exclusivity; the timing of completion of
the Phase II tolerability study of VOS; and that Aurinia has sufficient
financial resources to fund the existing LN program, including the
AURORA trial, and the NDA submission to the FDA, conduct the Phase II
trials for FSGS and DES and fund operations into 2020. It is possible
that such results or conclusions may change based on further analyses of
these data Words such as “anticipate”, “will”, “believe”, “estimate”,
“expect”, “intend”, “target”, “plan”, “goals”, “objectives”, “may” and
other similar words and expressions, identify forward-looking
statements. We have made numerous assumptions about the forward-looking
statements and information contained herein, including among other
things, assumptions about: the market value for the LN program; that
another company will not create a substantial competitive product for
Aurinia’s LN business without violating Aurinia’s intellectual property
rights; the burn rate of Aurinia’s cash for operations; the costs and
expenses associated with Aurinia’s clinical trials; the planned studies
achieving positive results; Aurinia being able to extend its patents on
terms acceptable to Aurinia; and the size of the LN market. Even though
the management of Aurinia believes that the assumptions made, and the
expectations represented by such statements or information are
reasonable, there can be no assurance that the forward-looking
information will prove to be accurate.

Forward-looking information by their nature are based on assumptions and
involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of Aurinia to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking information.
Should one or more of these risks and uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements or
information. Such risks, uncertainties and other factors include, among
others, the following: difficulties, delays, or failures we may
experience in the conduct of our AURORA clinical trial; difficulties we
may experience in completing the development and commercialization of
voclosporin; the market for the LN business may not be as estimated;
Aurinia may have to pay unanticipated expenses; estimated costs for
clinical trials may be underestimated, resulting in Aurinia having to
make additional expenditures to achieve its current goals; Aurinia not
being able to extend its patent portfolio for voclosporin; and
competitors may arise with similar products. Although we have attempted
to identify factors that would cause actual actions, events or results
to differ materially from those described in forward-looking statements
and information, there may be other factors that cause actual results,
performances, achievements or events to not be as anticipated, estimated
or intended. Also, many of the factors are beyond our control. There can
be no assurance that forward-looking statements or information will
prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly, you
should not place undue reliance on forward-looking statements or
information.

Except as required by law, Aurinia will not update forward-looking
information. All forward-looking information contained in this press
release is qualified by this cautionary statement. Additional
information related to Aurinia, including a detailed list of the risks
and uncertainties affecting Aurinia and its business can be found in
Aurinia’s most recent Annual Information Form available by accessing the
Canadian Securities Administrators’ System for Electronic Document
Analysis and Retrieval (SEDAR) website at www.sedar.com
or the U.S. Securities and Exchange Commission’s Electronic Document
Gathering and Retrieval System (EDGAR) website at www.sec.gov/edgar.

We seek Safe Harbor.

 

Aurinia Pharmaceuticals Inc.
Interim Condensed
Consolidated Statements of Financial Position

(unaudited
– amounts in thousands of U.S. dollars)

 
   

June 30,
2018
$

 

December 31,
2017
$

Assets
Cash and cash equivalents 132,302 165,629
Short term investments 17,899 7,833
Other current assets 3,598   1,790
Total current assets 153,799 175,252
 
Acquired intellectual property and other intangible assets 13,354 14,116
Other non-current assets 702   479
Total assets 167,855   189,847
 
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities 4,886 7,959
Other current liabilities 190   191
Total current liabilities 5,076 8,150
 
Derivative warrant liabilities 16,357 11,793
Other non-current liabilities 4,252   4,161
Total liabilities 25,685 24,104
 
Shareholders’ equity 142,170   165,743
Total liabilities and shareholders’ equity 167,855   189,847
 
 

Aurinia Pharmaceuticals Inc.
Interim Condensed
Consolidated Statements of Operations and Comprehensive Loss

(unaudited
– amounts in thousands of U.S. dollars, except per share data)

 

 

    Three Months Ended   Six months Ended

June 30,
2018

 

June 30,
2017

June 30,
2018

 

June 30,
2017

$ $ $ $
Revenue
Licensing revenue 29   329   59   359
 
Expenses
Research and development 10,504 7,107 19,391 14,432
Corporate, administration and business development 3,462 2,901 7,253 6,328

Amortization of acquired intellectual property and other
intangible assets

397 364 793 721
Amortization of property and equipment 6 6 9 12
Other (income) expense (566)   (152)   (766)   (77)

13,803

 

10,226

  26,680   21,416
 

Net loss before change in estimated fair value of derivative
warrant liabilities

(13,774) (9,897) (26,621) (21,057)
 

Change in estimated fair value of derivative warrant liabilities

(1,933)

 

7,498

  (4,564)   (33,283)
 
Net loss and comprehensive loss for the period (15,707)   (2,399)   (31,185)   (54,340)
 
 
Net loss per common share (expressed in $ per share)
Basic and diluted loss per common share (0.19)   (0.03)   (0.37)   (0.78)
 
Weighted average number of common shares outstanding (in
thousands)
84,350   82,973   84,833   69,899
 

Contacts

Investors & Media:
Celia Economides
VP, Public
Affairs
ceconomides@auriniapharma.com
or
Dennis
Bourgeault
Chief Financial Officer
dbourgeault@auriniapharma.com