Aurinia Pharmaceuticals Inc

INTRODUCTION

Unless the context otherwise requires, references in this Annual Report on Form 10-K for the year ended December 31, 2023, or this Annual Report, to “we”, “us”, “our” or similar terms, as well as references to “Aurinia” and "the Company," refer to Aurinia Pharmaceuticals Inc., together with our subsidiaries.

We maintain our books and records in U.S. dollars, and prepare our financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP) as issued by the Financial Accounting Standards Board (FASB).

The terms “dollar,” “U.S. dollar” or “$” refer to United States dollars, the lawful currency of the United States, the term “CA$,” refers to Canadian dollars, the lawful currency of Canada and "CHF", refers to Swiss Francs, the lawful currency of Switzerland. All references to “shares” or "common shares" in this Annual Report refer to common shares of Aurinia, with no par value per share.

We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) which are subject to the “safe harbor” created by those sections, as well as “forward-looking information” as defined in applicable Canadian securities laws. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part I, Item 1A. “Risk Factors” in this Annual Report. We strongly encourage all readers to read Part I, Item 1A. "Risk Factors" in full.

All statements, other than statements of historical fact, are forward-looking statements about the future. Forward-looking statements may include words such as “anticipate”, “believe”, “intend”, “expect”, “goal”, “may”, “outlook”, “plan”, “seek”, “project”, “should”, “strive”, “target”, “could”, “continue”, “potential”, “estimated”, "would", and "will" or the negative of such terms or comparable terminology. You should not place undue reliance on the forward-looking statements, particularly those concerning anticipated events relating to the development, clinical trials, regulatory approval, and marketing of LUPKYNIS®(voclosporin), our strategic plan following the conclusion of our strategic review process, including the anticipated timing, design, costs and benefits of the restructuring program, or any other aspect of our business and the timing or magnitude of those events, as they are inherently risky and uncertain.

These forward-looking statements include, but are not limited to, statements concerning the following:

◦our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans;

◦objectives of management;

◦our belief that we have sufficient cash resources to adequately fund our current business plans for at least the next few years; and our expectations in terms of go forward costs (including short and long term cash requirements) and revenues;

◦our potential to receive certain payments and royalties under our agreement with Otsuka Pharmaceuticals Co. Ltd;

◦our plans to conduct a share repurchase program and the timing, pricing and terms regarding such program;

◦the receipt of exemptive relief from Canadian regulators regarding the share repurchase program in a timely manner or at all;

◦our strategic plan following the conclusion of our strategic review process, including the anticipated timing, design, benefits and costs of the restructuring program;

◦Aurinia’s estimates as to the amount and type of headcount reductions resulting from the restructuring;

◦our belief in the duration of patent protection and exclusivity for voclosporin and that the patents owned by us are valid and enforceable;

◦our belief in receiving extensions to patent life based on certain events or classifications;

◦our plans and expectations and the timing of commencement, enrollment, completion and release of results of clinical trials;

◦our belief that LUPKYNIS possesses pharmacologic properties with the potential to demonstrate best-in-class differentiation;

◦our strategy to optimize the clinical and commercial value of voclosporin and become a commercial biopharmaceutical company with a global product portfolio focused on autoimmune, kidney and other rare diseases with a high unmet medical need;

◦our estimate on the timing to obtain regulatory approval for the use of the monoplant facility;

◦our estimate on the timing to obtain backup encapsulation facilities;

◦our estimates as to the key potential benefits of and market potential for LUPKYNIS, including estimates as to the number of patients with systemic lupus erythematosus (SLE) that are diagnosed with LN;

◦our estimate, based on our patient-specific estimated glomerular filtration rate (eGFR) dosing regimens, the average utilization in our clinical trials, and accounting for factors including mandatory rebates, channel discounts, and anticipated patient adherence, that we expect our average annualized net revenue per patient to be approximately $65,000;

◦our estimates as to the trajectory and timing of completion of post-marketing studies and commitments to the FDA;

◦the potential impact of shareholder activism on our business;

◦our belief that our net product revenue will continue to increase as we continue to execute on our commercialization strategy for LUPKYNIS;

◦our expectation that we will continue to incur significant expenses in Selling, General and Administrative (SG&A) in our commercialization of LUPKYNIS, and that research and development spend will decrease;

◦our belief that we have enough inventory on hand and manufacturing capacity to meet forecasted demand;

◦our intention on how to use the net proceeds from our financings;

◦our belief that additional patents may be granted in other major global pharmaceutical markets based on our filings under the Patent Cooperation Treaty (PCT);

◦management's estimates and assumptions made in conformity with U.S. GAAP that affect the reported amounts of assets and liabilities as discussed further in notes to the consolidated financial statements;

◦our belief that our results of operations or cash flows would not be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio; and

◦the potential impact of widespread health concerns on our business operations, nonclinical and clinical trials, regulatory timelines, supply chain, and potential commercialization.

Such statements reflect our current views with respect to future events and are subject to risks and uncertainties and are necessarily based on a number of estimates and assumptions that, while considered reasonable by management, as at the date of such statements, are inherently subject to significant business, economic, competitive, political, regulatory, legal, scientific social uncertainties and other contingencies, many of which, with respect to future events, are subject to change. The factors and assumptions used by management to develop such forward-looking statements include, but are not limited to:

◦the assumption that we will be able to obtain approval from regulatory agencies on executable development programs with parameters that are satisfactory to us;

◦our assumptions related to timing of generics and competitors entering the market;

◦the assumption that recruitment to clinical trials will occur as projected;

◦the assumption that we will successfully complete and enroll our clinical programs in compliance with good clinical practices (GCP) on a timely basis and meet regulatory requirements for approval of marketing authorization applications and new drug approvals, as well as favorable product labeling;

◦the assumption that our planned studies will achieve positive results;

◦the assumptions regarding the costs and expenses associated with our clinical trials and commercialization of LUPKYNIS;

◦assumptions related to the costs, benefits and scope of the restructuring program, including the steps and elements involved therein;

◦the assumption that regulatory requirements and commitments will be maintained;

◦the assumption that we and our licensees will be able to meet good manufacturing practice (GMP) standards and manufacture and secure a sufficient supply of LUPKYNIS on a timely basis to successfully complete the development and commercialization of LUPKYNIS;

◦the assumptions on the market value for the LN program;

◦the assumptions related to our estimated pricing for LUPKYNIS are accurate, including that the average utilization of LUPKYNIS in our clinical trials will remain applicable, the amount of mandatory rebates and degree of patient adherence;

◦the assumption that our patent portfolio is sufficient and valid;

◦the assumption that we will be able to extend our patents to the fullest extent allowed by law, on terms most beneficial to us;

◦the assumptions that our third party partners and suppliers will comply with their obligations under their agreements with us;

◦the assumptions about future market activity;

◦the assumption that there is a continued commercial value for LUPKYNIS in LN and other indications for voclosporin;

◦the assumption that market data and reports reviewed by us are accurate;

◦the assumptions on the burn rate of our cash for operations;

◦the assumption that another company will not violate our intellectual property rights or regulatory exclusivity periods;

◦the assumption that our current good relationships with our suppliers, service providers and other third parties will be maintained;

◦the assumption that we will be able to attract and retain a sufficient amount of skilled staff;

◦the assumption that our third party service providers and partners will comply with their contractual obligations; and/or

◦the assumptions relating to the capital required to fund our operations for at least the next few years.

It is important to know that:

◦actual results could be materially different from what we expect if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, we cannot guarantee that any forward-looking statement will materialize and, accordingly, you are cautioned not to place undue reliance on these forward-looking statements; and

◦forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on our business. For example, they do not include the effect of mergers, acquisitions, other business combinations or transactions, dispositions, sales of assets, asset write-downs or other charges announced or occurring after the forward-looking statements are made. The financial impact of such transactions and non-recurring and other special items can be complex and necessarily depend on the facts particular to each of them. Accordingly, the expected impact cannot be meaningfully described in the abstract or presented in the same manner as known risks affecting our business.

Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. If our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. Any forward-looking statement made by us in this Annual Report speaks only as of the date of this Annual Report or as of the date on which the statement was made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the U.S. Securities and Exchange Commission as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Annual Report may contain market data and industry forecasts that were obtained from industry publications. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and there is no assurance as to the accuracy or completeness of this data. While we believe the market position, market opportunity and market size information included in this Annual Report is generally reliable, such information is inherently imprecise.

Below is a summary of material factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in this Annual Report. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Special Note Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in this Annual Report. The below summary is qualified in its entirety by those more complete discussions of such risks and uncertainties. You should consider carefully the risks and uncertainties described under Part I,

Business Risks

◦difficulties we may experience in completing the marketing and commercialization of LUPKYNIS;

◦unknown impact and difficulties imposed by supply chain challenges, high inflation and elevated interest rates, and global hostilities on our business and operations including sales, marketing, operations, nonclinical and clinical and our supply chain;

◦legislative, regulatory and commercial activities, including laws regulating the pricing of LUPKYNIS;

◦difficulties obtaining adequate reimbursements from third party payors;

◦uncertainties related to the restructuring program and our ability to realize the anticipated benefits thereof;

◦difficulties obtaining formulary acceptance;

◦we are single sourced within our manufacturing supply chain, including key suppliers;

◦we rely on commercial and clinical partners who may not be able to comply with their contractual obligations with us; and

◦competitors may arise with similar products, or existing competition may be taken up and become more preferred as treatment for LN.

Business Growth Risks

◦difficulties in meeting GMP standards and the manufacturing and securing of a sufficient supply of voclosporin on a timely basis to successfully complete the development and commercialization of LUPKYNIS;

◦difficulties, delays or failures in obtaining necessary regulatory approvals;

◦not being able to extend or protect our patent portfolio for LUPKYNIS;

◦our patent portfolio not covering all of our proposed or contemplated uses of LUPKYNIS;

◦the market for the LN business (or any other indication for LUPKYNIS) may not be as we have estimated;

◦insufficient acceptance of and demand for LUPKYNIS;

◦difficulties in identifying and completing the acquisition of, and successfully developing potential targets for expansion of our product portfolio; and

◦difficulty with executing business development, integrating acquisitions and recognizing benefits of acquired assets.

Underlying Business Risks

◦product liability, patent infringement and other civil litigation;

◦injunctions, court orders, regulatory and other compliance issues or enforcement actions;

◦we may have to pay unanticipated expenses, and/or estimated costs for clinical trials or operations may be underestimated, resulting in our having to make additional expenditures to achieve our current goals;

◦difficulties, restrictions, delays, or failures in obtaining appropriate reimbursement from payors for LUPKYNIS;

◦difficulties in retaining key personnel and attracting other qualified individuals;

◦our assets or business activities may be subject to disputes that may result in litigation or other legal claims;

◦difficulties, delays, or failures we may experience in the conduct of and reporting of results of our clinical trials for LUPKYNIS, including unfavorable results;

◦difficulties we may experience in identifying and successfully securing appropriate vendors to support the development and commercialization of LUPKYNIS;

◦our significant reliance on information technology and any failure, inadequacy, or security lapse of that technology, including any cybersecurity incidents;

◦we are dependent upon key personnel to achieve our business objectives;

◦the potential need for additional capital in the future to continue to fund our development programs and commercialization activities, and the effect of capital market conditions and other factors on capital availability; and

◦our ability to raise future resources when required.