INTRODUCTION
Unless the context otherwise requires, references in this Annual Report on Form 10-K for the year ended December 31, 2020, or this Annual Report, to “we”, “us”, “our” or similar terms, as well as references to “Aurinia”, 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 accounting principles generally accepted in the United States, or U.S. GAAP, as issued by the Financial Accounting Standards Board, or FASB.
The term “CA$,” refers to Canadian dollars, the lawful currency of the Canada, and the terms “dollar,” “U.S. dollar” or “$” refer to United States dollars, the lawful currency of the United States. 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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or 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.
A statement is forward-looking when it uses what we know and expect today to make a statement 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” and “estimated”, 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 LUPKYNISTM (voclosporin) 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 belief in the duration of patent exclusivity for voclosporin and that the patents owned by us are valid;
◦our belief in receiving extensions to patent life based on certain events or classifications;
◦our expectation that 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;
◦our plans and expectations and the timing of commencement, enrollment, completion and release of results of clinical trials;
◦our intention to demonstrate our belief that voclosporin possesses pharmacologic properties with the potential to demonstrate best-in-class differentiation with first-in-class status for the treatment of adult patients with active lupus nephritis (LN) outside of Japan;
◦our belief of the key potential benefits of LUPKYNIS in the treatment of LN;
◦our belief that LUPKYNIS has the potential to improve near and long-term outcomes in LN when added to mycophenolate mofetil (MMF);
◦our belief of specified key benefits of LUPKYNIS in the treatment of LN versus marketed calcineurin inhibitors (CNIs) (the cornerstone of therapy for the prevention of organ transplant rejection);
◦our strategy to optimize the clinical and commercial value of voclosporin and become a commercial biopharmaceutical company with a global product portfolio focused on less common kidney and autoimmune diseases with a high unmet need;
◦our strategy for the potential expansion of the existing label for additional kidney indications, the evaluation of voclosporin in novel formulations for the treatment of other autoimmune related disorders, as well as the addition of new pipeline assets that align with our core expertise;
◦our plans to ensure adequate supply of LUPKYNIS by entering into long term supply agreements with our key suppliers;
◦our belief that LUPKYNIS has the potential to address critical needs for LN by controlling active disease rapidly, lowering the overall steroid burden, and doing so with a convenient oral twice-daily treatment regimen;
◦our expectation to receive "new chemical entity" exclusivity for LUPKYNIS in certain countries, which provides this type of exclusivity for five years in the United States and up to ten years in Europe;
◦our belief that the voclosporin modification of a single amino acid of the cyclosporine molecule may result in a more predictable pharmacokinetic and pharmacodynamics relationship, an increase in potency, an altered metabolic profile, and easier dosing without the need for therapeutic drug monitoring;
◦our belief in voclosporin being potentially a best-in-class CNI with benefits over existing commercially available CNIs;
◦our estimates as to the 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 glomular 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 belief that we have enough inventory on hand and manufacturing capacity to meet forecasted demand;
◦our belief that we have built a world class commercial organization;
◦our intention to use the net proceeds from financings for the stated purposes;
◦our belief that we have sufficient cash resources to adequately fund our plans for at least the next 12 months;
◦our plan to file, together with Otsuka Pharmaceutical Co. Ltd. (Otsuka), a marketing authorization application (MAA) with the European Medicines Agency (EMA) during the first half of 2021;
◦statements concerning the potential market for LUPKYNIS;
◦our belief that additional patents may be granted worldwide based on our filings under the Patent Cooperation Treaty (PCT);
◦our belief that patents corresponding to United States Patent No. 10,286,036 issued to us covering dosing protocol, which reads upon our U.S. Food and Drug Administation (FDA) approved label for LUPKYNIS in LN, could be granted with similar claims in all major global pharmaceutical markets;
◦our strategy to become a global commercial biopharmaceutical company;
◦our plan to evaluate LUPKYNIS in pediatric patients and additional patient populations diagnosed with LN;
◦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; and
◦the potential impact of COVID-19 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 and social uncertainties and 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;
◦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 the planned studies will achieve positive results;
◦the assumptions regarding the costs and expenses associated with our clinical trials and commercialization of LUPKYNIS, including that the COVID-19 pandemic will not have a significant impact on the costs and expenses planned for our clinical trials and commercialization of LUPKYNIS;
◦the assumption that regulatory requirements and commitments will be maintained;
◦the assumption that we 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 (including Otsuka) and suppliers will comply with their obligations under their agreements with us;
◦the assumptions about future market activity;
◦the assumption that there is a potential commercial value for LUPKYNIS 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 operations for at least the next 12 months.
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.
The factors discussed below and other considerations discussed in the Item 1A Risk Factors section of this Annual Report could cause our actual results to differ significantly from those contained in any forward-looking statements. We strongly encourage all investors to read Item 1A Risk Factors of this Annual Report in full.
Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to differ materially from any assumptions, further results, performance or achievements expressed or implied by such forward-looking statements.