Aurinia Pharmaceuticals Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Aurinia Pharmaceuticals Inc. (“Aurinia” or the “Company”) is a biopharmaceutical company focused on delivering therapies to people living with autoimmune diseases with high unmet medical needs. In January 2021, the Company introduced LUPKYNIS® (voclosporin), the first FDA-approved oral therapy for the treatment of adult patients with active lupus nephritis (“LN”). Aurinia is also developing aritinercept (AUR200), a dual inhibitor of B cell-activating factor (BAFF) and a proliferation-inducing ligand (APRIL) for the potential treatment of autoimmune diseases.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation, Principles of Consolidation and Use of Estimates

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures required by U.S. GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

The accompanying condensed consolidated financial statements include the accounts of Aurinia Pharmaceuticals Inc. and its wholly owned subsidiary, Aurinia Pharma U.S., Inc., a Delaware corporation. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the full year or any other future periods.

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The Company's significant accounting policies and recent accounting pronouncements have not changed from those previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued final guidance in Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures requiring entities to provide additional information in the rate reconciliation and disclosures about income taxes paid. For public business entities, the new disclosure requirements are effective for annual periods beginning after December 15, 2024, which will be reflected in our consolidated financial statements for the year ended December 31, 2025.

3. Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding without consideration of potential common shares. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding plus potential common shares. Stock options, performance awards, restricted stock units (“RSUs”) and shares issuable under the Company's Employee Stock Purchase Plan (“ESPP”) are considered potential common shares and are included in the calculation of diluted earnings (loss) per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted earnings (loss) per share when their effect is anti-dilutive.

For the three months ended June 30, 2025, there were 2.6 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)1.6 million RSUs; (ii)0.5 million performance awards; and (iii)0.5 million stock options. For the six months ended June 30, 2025, there were 3.3 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)2.2 million RSUs; (ii)0.6 million performance awards; and (iii)0.5 million stock options. For each of the three and six months ended June 30, 2025, there were 7.5 million of potential common shares that were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

For the three months ended June 30, 2024, there were 0.8 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)0.6 million RSUs and (ii)0.2 million performance awards. For the three and six months ended June 30, 2024, there were 9.8 million and 18.5 million of potential common shares, respectively, that were excluded from the calculation of diluted earnings (loss) per share because their effect was anti-dilutive.

4. Balance Sheet Details

Fair Value Measurement

The following table summarizes the financial assets measured at fair value on a recurring basis (in thousands):

The fair value of the Company’s investments classified within Level 2 is based upon observable inputs that may include benchmark yield curves, reported trades, issuer spreads, benchmark securities and reference data including market research publications.

The carrying amount and related unrealized gains (losses) by type of investment consisted of the following (in thousands):

As of June 30, 2025 and December 31, 2024, accrued interest receivable from investments was $0.3 million and $0.6 million, respectively, which was included in other current assets on the condensed consolidated balance sheets. As of June 30, 2025, short-term investments mature at various dates through January 2026. As of June 30, 2025 and December 31, 2024, no allowance for credit losses was recorded.

Inventory, net

Inventory, net consisted of the following (in thousands):

As of June 30, 2025 and December 31, 2024, inventory reserves werenil.

Prepaid Expenses and Deposits

Prepaid expenses and deposits consisted of the following (in thousands):

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

For each of the three months ended June 30, 2025 and 2024, the Company recorded amortization expense of $0.2 million. For the six months ended June 30, 2025 and 2024, the Company recorded amortization expense of $0.4 million and $0.5 million, respectively.

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

5. Commitments and Contingencies

Lease Commitments

Finance Lease

Monoplant

In December 2020, the Company entered into a manufacturing services agreement with Lonza for the construction of a dedicated manufacturing facility for voclosporin (the “Monoplant”). The construction of the Monoplant began in January 2021 and manufacturing of voclosporin began in late June 2023. The Monoplant is equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacturing of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand. The Company completed a capital expenditure payment program for the Monoplant totaling $23.7 million, which included: (i) a $11.8 million payment in February 2021, which was treated as an upfront lease payment and recorded under other noncurrent assets on the consolidated balance sheets; and (ii) a $11.9 million payment when the facility fulfilled the required operational qualifications, which occurred in late June 2023. The Company has the exclusive right to use the Monoplant through March 31, 2030 by paying a quarterly fixed facility fee of 3.6 million Swiss Francs.

The Monoplant arrangement was determined to be an embedded lease and is accounted for as a finance lease under ASC 842. The lease term is based on the non-cancellable period for which a lessee has the right to use an underlying asset (the “Monoplant Lease”). The Company determined that the Monoplant Lease commencement occurred at the point when the FDA manufacturing validation process began, which occurred on June 26, 2023. At lease inception, the Company recorded a finance right-of-use (“ROU”) lease asset and a corresponding lease liability. As of June 30, 2025, the Monoplant Lease finance ROU lease asset and corresponding lease liability balance were $82.6 million and $75.4 million, respectively.

Operating Lease

Rockville, Maryland

In March 2020, the Company entered into a lease agreement for 30,531 square feet of office space in Rockville, Maryland (the “Rockville Lease”). The Rockville Lease commenced on March 12, 2020 and expires on August 31, 2031. The Company has the option to extend the Rockville Lease fortwo 5-year periods at the end of the initial 11-year term and has the option to terminate after 7 years; however, such options were not recognized as part of the Company's lease liabilities and corresponding ROU lease assets. The Rockville Lease requires the Company to pay certain taxes, insurance and operating costs relating to the leased premises (“Lease Operating Costs”); however, such costs are not material to the Company’s financial position.

Future minimum lease payments, excluding Lease Operating Costs, as of June 30, 2025 consisted of the following (in thousands):

For each of the three months ended June 30, 2025 and 2024, finance lease expense related to the amortization of finance ROU lease assets was $4.4 million. For the six months ended June 30, 2025 and 2024, finance lease expense related to the amortization of finance ROU lease assets was $8.8 million and $8.7 million, respectively. For the three months ended June 30, 2025 and 2024, interest expense on finance lease liabilities was $1.1 million and $1.2 million, respectively. For the six months ended June 30, 2025 and 2024, interest expense on finance lease liabilities was $2.2 million and $2.5 million, respectively. For the six months ended June 30, 2025 and 2024, cash paid for amounts included in the measurement of finance lease liabilities classified in financing cash flows was $6.2 million and $6.0 million, respectively. For the six months ended June 30, 2025 and 2024, cash paid for amounts included in the measurement of finance lease liabilities classified in operating cash flows was $2.3 million and $2.2 million, respectively.

For the three and six months ended June 30, 2025 and 2024, operating lease expense was not material to the Company's results of operations.

Manufacturing Commitments

The Company’s manufacturing commitments have not changed in any material manner from those previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Contingencies

From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation other than as described in Item 1 of Part II Legal Proceedings.

6. Deferred Compensation and Other Noncurrent Liabilities

In March 2012, the Company entered into employee retention arrangements with certain former executive officers, whereby the Company is required to make payments to such former officers based on net revenues of voclosporin for a certain period of time. As of June 30, 2025 and December 31, 2024, the Company recorded deferred compensation and other noncurrent liabilities of $12.0 million and $9.4 million, respectively.

7. License and Collaboration Agreements

In December 2020, the Company entered into a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in Japan, the E.U., the U.K., Switzerland, Russia, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the “Otsuka Territories”) in exchange for: (i) a $50 million upfront cash payment; (ii) regulatory and commercial milestone payments; and (iii) royalties ranging from 10% to 20% on net sales in the Otsuka Territories. As of June 30, 2025 and December 31, 2024, the Company had received an aggregate of $50 million of regulatory and commercial milestone payments.

In August 2022, the Company entered into a commercial supply agreement with Otsuka to: (i) supply LUPKYNIS inventory to Otsuka at cost plus a margin; and (ii) provide manufacturing and other services, including sharing the capacity of the Monoplant. For the three months ended June 30, 2025 and 2024, the Company recognized $3.4 million and $2.2 million, respectively, of collaboration revenue from manufacturing and other services, which includes sharing capacity of the Monoplant. For the six months ended June 30, 2025 and 2024, the Company recognized $5.9 million and $4.4 million, respectively, of collaboration revenue from manufacturing and other services, which includes sharing capacity of the Monoplant.

8. Shareholders’ Equity

On February 15, 2024, the Company announced that the Board had approved a share repurchase program of up to$150 million of the Company's common shares, excluding commissions and excise tax (the “Share Repurchase Plan”). As discussed in Note 12, on July 31, 2025, the Company announced that the Board has approved an increase to the previously announced Share Repurchase Plan of an additional $150 million of common shares.

The timing and amount of future repurchase transactions will be determined by the Company based on its evaluation of market conditions, share price, legal requirements, including applicable blackout period restrictions, and other factors. The Company has entered into a Rule 10b5-1 stock repurchase plan for the purpose of establishing a trading plan to purchase the Company’s common shares in a manner intended to satisfy the affirmative defense of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934, as amended and in accordance with applicable Canadian laws.

For the three months ended June 30, 2025 and 2024, the Company repurchased 5.4 million and 1.1 million of its common shares for $43.4 million and $5.2 million, respectively, including commissions and excise tax. For the six months ended, June 30, 2025 and 2024, the Company repurchased 11.2 million and 3.4 million of its common shares for $90.8 million and $18.6 million, respectively, including commissions and excise tax. The cost of repurchased shares is recorded as a reduction in common shares. Under Alberta law, the common shares were cancelled and not reissued.

9. Equity Incentive Plans

Stock Options

The activity related to stock options during the six months ended June 30, 2025 consisted of the following:

The following weighted-average assumptions were used to estimate the fair value of the options granted during the six months ended June 30, 2025 and 2024:

Performance Awards and Restricted Stock Units

The fair value of performance awards and RSUs is based on the market price of the Company's common shares on the date prior to the grant. During the six months ended June 30, 2025, the Company granted performance awards that vest infour tranches upon the Company’s common shares achieving four progressively higher target prices, and each tranche is further subject to aone year service period following tranche achievement. The Company estimated the fair value of each award with a market and service condition on the date of grant by using a Monte Carlo simulation (lattice model).

The activity related to performance awards and RSUs for the six months ended June 30, 2025 consisted of the following:

Share-based Compensation Expense

The classification of share-based compensation expense consisted of the following (in thousands):

As of June 30, 2025, there was $21.5 million of unrecognized share-based compensation expense related to unvested awards granted which is expected to be recognized over a weighted-average period of 1.2 years.

10. Restructuring

On February 15, 2024, the Company announced a strategic restructuring that reduced headcount by approximately 25% and discontinued the Company's AUR300 development program (the “February Restructuring”). On November 7, 2024, the Company announced another strategic restructuring that further reduced headcount by approximately 45% to sharpen the Company's focus on continued LUPKYNIS growth and the development of aritinercept (the “November Restructuring”).

For the six months ended June 30, 2025, total expense for the November Restructuring was $1.6 million, which was comprised of: (i) $0.3 million for one-time termination benefits to affected employees, including severance and health care benefits; (ii) $0.1 million of contract termination costs; and (iii) $1.2 million of other restructuring costs. For the six months ended June 30, 2025, the Company paid $11.5 million for November Restructuring costs. As of June 30, 2025 and December 31, 2024, the Company paid $16.3 million and $4.8 million, respectively, related to the November Restructuring. The Company's restructuring activities were substantially completed in the first half of 2025.

For the six months ended June 30, 2024, total expense for the February Restructuring was $7.8 million, which was comprised of: (i) $6.1 million for one-time termination benefits to affected employees, including severance and health care benefits; (ii) $1.1 million of contract termination costs; and (iii) $0.6 million of other restructuring costs. For the six months ended June 30, 2024, the Company paid $7.1 million for February Restructuring costs. As of December 31, 2024, the Company had recognized all expense and made all payments related to the February Restructuring.

11. Income Taxes

The effective tax rates for the three and six months ended June 30, 2025, and 2024, differed from the federal statutory rate applied to net income (loss) before income taxes primarily as a result of valuation allowances.

For the three months ended June 30, 2025 and 2024, the Company recognized an income tax expense of $0.6 million and $0.8 million, respectively. For the six months ended June 30, 2025 and 2024, the Company recognized an income tax expense of $1.6 million and $1.5 million, respectively. The income tax expense recognized is a result of U.S. source income. For the six months ended June 30, 2025, the Canadian parent entity also recorded net income, which is subject to income tax and is fully offset by a partial release of the valuation allowance.

12. Subsequent Events

On July 31, 2025, the Company announced that the Board has approved an increase to the Share Repurchase Plan of up to an additional $150 million of common shares.

Purchases under the Share Repurchase Plan, which to date have totaled 18.3 million of its common shares for $138.4 million, excluding commissions and excise tax, began on February 21, 2024. From July 1, 2025 through July 29, 2025, the Company repurchased 1.1 million of its common shares for $8.4 million, excluding commissions and excise tax, under the Share Repurchase Plan.