Aurinia Reports Third Quarter 2017 Financial Results and Provides Operational Highlights

AURORA Phase III Trial in lupus nephritis on track

Trials in FSGS, MCD and Dry Eye to begin in the first half of 2018

Cash of $182.4 million as of September 30, 2017

VICTORIA, British Columbia–(BUSINESS WIRE)–Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) (TSX:AUP) (“Aurinia” or the
“Company”) has released its financial results for the third quarter
ended September 30, 2017. Amounts, unless specified otherwise, are
expressed in U.S. dollars.

Operational highlights

On October 20, 2017 we announced plans to expand our renal franchise by
investigating voclosporin in focal segmental glomerulosclerosis (FSGS)
and minimal change disease (MCD). Additionally, we announced plans to
evaluate our proprietary nanomicellar voclosporin ophthalmic solution
(VOS) for the treatment of keratoconjunctivitis sicca or dry eye
syndrome (DES). The advancement of these new indications, in addition to
lupus nephritis (LN), represents an expansion of the company’s strategy,
pipeline and commercial opportunities.

A Phase II proof of concept clinical trial for voclosporin in FSGS and
MCD patients will be initiated in the first half of 2018. FSGS and MCD
affect nearly 150,000 patients globally, accounting for almost 50% of
patients with Nephrotic Syndrome (NS). The prevalence of FSGS and MCD is
increasing through improved diagnosis, and it has been shown that the
control of proteinuria is important for long-term survival of these
patients. Interim data readouts are anticipated in the second half of
2018.

We also plan to begin a Phase IIa tolerability study of VOS versus the
standard of care for the treatment of DES by the second quarter of 2018,
with data available in the second half of 2018. Calcineurin inhibitors
(CNIs) are a mainstay in the treatment for DES, and the goal of this
program is to develop a best-in-class treatment option.

Our Phase III clinical trial (AURORA) for the treatment of LN is on
track to complete enrollment in the second half of 2018, with 138
clinical trial sites active around the globe. Additionally, under
voclosporin’s fast-track designation, we intend to utilize a rolling New
Drug Application (NDA) process, with the first module being submitted in
the second half of 2018.

“With the AURORA trial in LN on track to complete enrollment in the
second half of 2018, we’re thrilled to enter this exciting next phase of
development for Aurinia,” said Richard Glickman, L.L.D., CEO and
Chairman of Aurinia Pharmaceuticals. “By expanding our renal franchise
and launching a development program in dry eye, we have the potential to
create significant value for shareholders.”

Financial Results for the Third Quarter Ended September 30, 2017

Cash, cash equivalents and short term investments were $182.4 million as
at September 30, 2017 compared to $189.8 million as of June 30, 2017,
and $39.6 million as at December 31, 2016. We believe, based on our
current plans, that we have sufficient financial resources to fund our
existing LN program, including the AURORA trial, conduct work on the new
indications and fund operations into 2020.

For the three months ended September 30, 2017, we reported a
consolidated net loss of $13.1 million or $0.16 per common share
compared to a consolidated net loss of $7.4 million or $0.21 per common
share for the three months ended September 30, 2016.

We incurred research and development expenses of $10.8 million for the
three months ended September 30, 2017, as compared to $3.3 million for
the same period in 2016. The increase in research and development
expenses for the three months ended September 30, 2017 reflected AURORA
clinical expenses such as contract research organization (CRO) service
fees and pass thru costs for activities including site activations,
regulatory submissions, patient treatment and drug costs for manufacture
of voclosporin drug product, and drug encapsulation, packaging and
distribution for the trial.

We incurred corporate, administration and business development costs of
$2.6 million for the three months ended September 30, 2017, as compared
with $1.7 million for the same period in 2016. These costs included a
non-cash stock compensation expense of $795,000 for the three months
ended September 30, 2017 compared to $469,000 for the three months ended
September 30, 2016.

This press release should be read in conjunction with our unaudited
interim condensed consolidated financial statements and the MD&A for the
third quarter ended September 30, 2017 which are accessible on Aurinia’s
website at www.auriniapharma.com,
on SEDAR at www.sedar.com
or on EDGAR at www.sec.gov/edgar.

About Aurinia

Aurinia 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 treatment of LN, FSGS, MCD and DES. The
company is headquartered in Victoria, BC and focuses its development
efforts globally.

About FSGS, MCD and NS

NS is a collection of 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 and reduction of proteinuria is thought to
be critical to long-term kidney health. Aurinia is focused specifically
on FSGS, a lesion characterized by persistent scarring identified by
biopsy and proteinuria and on MCD, a kidney disease in which large
amounts of protein are lost in the urine. FSGS and MCD both are causes
of NS and characterized by high morbidity. Currently, there are no
approved therapies for FSGS and MCD in the United States and the
European Union.

About DES

DES, or keratoconjunctivitis sicca, is a chronic disease in which a lack
of moisture and lubrication on the eye’s surface results in irritation
and inflammation of the eye. DES is a multifactorial, heterogeneous
disease estimated to affect greater than 20 million people in the United
States.

About 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 and affects more than
500,000 people in the United States (mostly women). The disease is
highly heterogeneous, affecting a wide range of organs & tissue systems.
It is estimated that as many as 60 percent of all SLE patients will
develop clinical LN requiring treatment. 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 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, an increase in
potency, an altered metabolic profile and potential for flat dosing
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 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. In April 2017, Aurinia announced an agreement
granting Merck Animal Health (MAH) worldwide rights to develop and
commercialize (VOS) for the treatment of DES in dogs. MAH previously
conducted proof of concept research in dogs suffering from DES, which
affects one out of every 22 dogs.

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 being on track to complete
enrollment in the second half of 2018, the timing voclosporin being
potentially a best-in-class CNI with robust intellectual property
exclusivity; the timing for Aurinia initiating a Phase II clinical trial
for voclosporin in FSGS and MCD patients; the timing for interim data
readouts for the Phase II clinical trial for FSGS and MCD patients; the
timing for commencement of a Phase IIa tolerability study of VOS; the
timing for data availability for the Phase IIa tolerability study; the
anticipated commercial potential of voclosporin for the treatment of LN,
NS, FSGS, DES and other autoimmune diseases; that the expansion of the
renal franchise could create significant value for shareholders and that
Aurinia has sufficient financial resources to fund the existing LN
program, including the AURORA trial, conduct work on the new indications
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 planned 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 Balance Sheet (Unaudited)

(Expressed in thousands of U.S. dollars, except per share data)

 
 

September 30,
2017
$

 

December 31,
2016
$

Assets
 
Current assets
Cash and cash equivalents 87,546 39,649
Short term investments 94,860
Accrued interest and other receivables 415 86
Prepaid expenses, deposits and other 2,064   1,683
184,885 41,418
 
Clinical trial contract deposits 448
Property and equipment 27 29
Acquired intellectual property and other intangible assets 14,472   15,550
 
199,832   56,997
 
Liabilities
 
Current liabilities
Accounts payable and accrued liabilities 6,665 5,791
Current portion of deferred revenue 118 118
Contingent consideration 72   2,021
6,855 7,930
 
Deferred revenue 472 560
Contingent consideration 3,654 3,419
Derivative warrant liabilities 21,207   9,138
 
32,188   21,047
 
Shareholders’ equity
 
Share capital
Common shares 498,698 299,815
Warrants 906 971
 
Contributed surplus 17,442 17,017
Accumulated other comprehensive loss (894) (805)
Deficit (348,508)   (281,048)
 
167,644   35,950
 
199,832   56,997
 
 

Aurinia Pharmaceuticals Inc.

Interim Condensed Statements of Operations and Comprehensive Loss (Unaudited)

(Expressed in thousands of U.S. dollars, except per share data)

 
  Three months ended

September 30,
2017
$

 

September 30,
2016
$

 
Revenue
Licensing revenue 29 29
Contract services   2
 
29   31
 
Expenses
Research and development 10,807 3,342
Corporate, administration and business development 2,650 1,716
Amortization of acquired intellectual property and other intangible
assets
357 357
Amortization of property and equipment 5 5
Contract services 1
Other expense (income) (315)   1,078
 
13,504   6,499
 
Net loss before change in estimated fair value of derivative
warrant liabilities

(13,475)

(6,468)

 
Change in estimated fair value of derivative warrant liabilities

355

 

(951)

 
Net loss for the period (13,120)   (7,419)
 
Other comprehensive income (loss)

Item that may be reclassified subsequently to income (loss)

Net change in fair value of short term investments

(89)  
 
Net comprehensive loss for the period (13,209)   (7,419)
 
Net loss per common share (expressed in $ per share)
Basic and diluted loss per common share (0.16)   (0.21)
 

Contacts

Aurinia Pharmaceuticals Inc.
Investors & Media:
Celia
Economides
Head of IR & Communications
ceconomides@auriniapharma.com
or
Chief
Financial Officer:

Dennis Bourgeault
dbourgeault@auriniapharma.com