auph-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________________

FORM 10-Q

_____________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________ to ________________

Commission file number: 001-36421

__________________________________________

Aurinia Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

__________________________________________


Alberta, Canada
(State or other jurisdiction of incorporation or organization)
#140, 14315 - 118 Avenue Edmonton, Alberta T5L 4S6			98-1231763
(Address of principal executive offices)			(I.R.S. Employer Identification Number)

(250) 744-2487

Registrant’s telephone number, including area code

_____________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the registrant's classes of common shares, as of the latest predictable date. As of May 1, 2024, the registrant had 143,019,365 of common shares outstanding.

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common shares, no par value	AUPH	The Nasdaq Global Market LLC

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets (unaudited) as of M arch 3 1 , 202 4 and December 31, 202 3

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2024 and March 31, 2023

Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three months ended March 31, 2024 and March 31 2023

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2024 and March 31, 2023

Notes to Condensed Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


(unaudited)	March 31, 2024		December 31, 2023
ASSETS
Current assets
Cash, cash equivalents and restricted cash	$	64,459	$	48,875
Short-term investments	255,453		301,614
Accounts receivable, net	28,909		24,089
Inventories, net	39,761		39,705
Prepaid expenses	7,646		9,486
Other current assets	1,995		1,031
Total current assets	398,223		424,800
Non-current assets
Long-term investments	199		201
Other non-current assets	1,502		1,517
Property and equipment, net	3,198		3,354
Acquired intellectual property and other intangible assets, net	4,760		4,977
Finance right-of-use asset, net	104,358		108,715
Operating right-of-use assets, net	4,394		4,498
Total assets	$	516,634	$	548,062
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	50,270		54,389
Deferred revenue	4,909		4,813
Other current liabilities (of which $0.8 million in 2024 and 2023 is due to a related party, respectively)	1,150		2,388
Finance lease liability	13,724		14,609
Operating lease liabilities	999		989
Total current liabilities	71,052		77,188
Non-current liabilities
Finance lease liability	67,475		75,479
Operating lease liabilities	6,339		6,530
Deferred compensation and other non-current liabilities (of which $8.8 million in 2024 and $7.6 million in 2023 is due to a related party, respectively)	12,292		10,911
Total liabilities	157,158		170,108
Commitments and contingencies (Note 18)
SHAREHOLDER’S EQUITY
Common shares - no par value, unlimited shares authorized, 143,690 and 143,833 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	1,207,982		1,200,218
Additional paid-in capital	105,419		120,788
Accumulated other comprehensive loss	(854)		(730)
Accumulated deficit	(953,071)		(942,322)
Total shareholders' equity	359,476		377,954
Total liabilities and shareholders' equity	$	516,634	$	548,062

The accompanying notes are an integral part of these condensed consolidated financial statements.

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)


	Three months ended
	March 31,
	2024		2023
	(unaudited)
Revenue
Product revenue, net	$	48,073	$	34,337
License, collaboration and royalty revenue	2,230		72
Total revenue, net	50,303		34,409
Operating expenses
Cost of sales	7,752		421
Selling, general and administrative	47,695		50,124
Research and development	5,551		13,158
Restructuring expenses	6,683		—
Other (income) expense, net	(4,125)		290
Total cost of sales and operating expenses	63,556		63,993
Loss from operations	(13,253)		(29,584)
Interest expense	(1,283)		—
Interest income	4,526		3,814
Net loss before income taxes	(10,010)		(25,770)
Income tax expense	739		436
Net loss	(10,749)		(26,206)
Other comprehensive (loss) gain:
Unrealized (loss) gain on available-for-sale securities, net of tax of nil	(124)		73

Comprehensive loss	(10,873)		(26,133)
Basic and diluted loss per share	$	(0.07)	$	(0.18)
Weighted-average common shares outstanding used in computation of basic and diluted loss per share	144,013		142,641

The accompanying notes are an integral part of these condensed consolidated financial statements.

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

(unaudited)



	Common Shares
Three Months Ended March 31, 2024	Shares	Amount		Additional paid in capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Shareholders' Equity
Balance at December 31, 2023	143,833	$	1,200,218	$	120,788	$	(730)	$	(942,322)	$	377,954
Shares issued on exercise of stock options and vesting of restricted stock units	2,231	21,134		(21,106)		—		—		28
Shares repurchased and cancelled, inclusive of transaction costs	(2,374)	(13,370)		—		—		—		(13,370)
Share-based compensation	—	—		5,737		—		—		5,737
Unrealized loss on available-for-sale securities, net	—	—		—		(124)		—		(124)
Net loss	—	—		—		—		(10,749)		(10,749)
Balance at March 31, 2024	143,690	$	1,207,982	$	105,419	$	(854)	$	(953,071)	$	359,476

	Common Shares
Three Months Ended March 31, 2023	Shares	Amount		Additional paid in capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Shareholders' Equity
Balance at December 31, 2022	142,268	$	1,185,309	$	85,489	$	(1,061)	$	(864,302)	$	405,435
Shares issued on exercise of stock options and vesting of restricted stock units	761	7,710		(6,071)		—		—		1,639

Shared-based compensation	—	—		9,467		—		—		9,467
Unrealized gain on available-for-sale securities, net	—	—		—		73		—		73
Net loss	—	—		—		—		(26,206)		(26,206)
Balance at March 31, 2023	143,029	$	1,193,019	$	88,885	$	(988)	$	(890,508)	$	390,408

The accompanying notes are an integral part of these condensed consolidated financial statements.

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
	2024		2023
(in thousands)	(unaudited)
Cash flows used in operating activities:
Net loss	$	(10,749)	$	(26,206)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	4,847		717

Net amortization of premiums and discounts on short-term investments	(3,206)		(2,611)
Share-based compensation expense	5,737		9,467
Foreign exchange on finance lease liability	(6,025)		—
Other, net	1,559		217
Net changes in operating assets and liabilities
Accounts receivable, net	(4,820)		(5,559)
Inventories, net	(56)		(6,993)
Prepaid expenses and other current assets	873		3,588
Non-current operating assets	17		(17)
Accounts payable, accrued and other liabilities	(6,594)		(4,117)
Operating lease liabilities	(181)		(156)
Net cash used in operating activities	(18,598)		(31,670)
Cash flows used in investing activities:
Purchase of investments	(121,260)		(142,397)
Proceeds from investments	170,505		167,766
Purchase of property and equipment	—		(347)
Capitalized patent costs	(12)		(162)
Net cash provided by investing activities	49,233		24,860
Cash flows from financing activities
Repurchase of common shares, net of transaction costs	(12,301)		—
Finance lease payments	(2,778)		—
Proceeds from exercise of stock options	28		1,639
Cash (used in) provided by financing activities	(15,051)		1,639

Net increase (decrease) in cash, cash equivalents and restricted cash	15,584		(5,171)
Cash, cash equivalents and restricted cash, beginning of period	48,875		94,172
Cash, cash equivalents and restricted cash, end of period	$	64,459	$	89,001

Supplemental cash flow information
Cash received for interest	$	861	$	1,595
Cash paid for income taxes	$	—	$	(1)

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash, cash equivalents	$	63,914	$	88,327
Restricted cash	545		674
Total cash, cash equivalents and restricted cash	$	64,459	$	89,001

The accompanying notes are an integral part of these condensed consolidated financial statements.

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.Organization and Description of Business

Aurinia Pharmaceuticals Inc. (Aurinia or the Company) is a fully integrated 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 U.S. Food and Drug Administration (FDA) approved oral therapy for the treatment of adult patients with active lupus nephritis (LN) and continues to conduct clinical and regulatory activities to support the LUPKYNIS development program. Aurinia contracted with Otsuka Pharmaceutical Co., Ltd. (Otsuka) as a collaboration partner for development and commercialization of LUPKYNIS in the European Union (EU), Japan, as well as the United Kingdom, Russia, Switzerland, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the Otsuka Territories).

On February 15, 2024, the Company announced the conclusion of its strategic review process and actions designed to enhance shareholder value, including an exclusive focus on driving the commercial execution of the LUPKYNIS (voclosporin) business. Aurinia executed a corporate restructuring in the first quarter that reduced employee headcount by approximately 25%. The Company discontinued its AUR300 research and development program and is exploring alternative approaches for AUR200. The corporate restructuring involved the Company reaffirming its commitment to LUPKYNIS growth, while maintaining a sharp focus on operating efficiencies and maximizing cash flows. For further discussion, refer to Note 19, Restructuring.

Aurinia's head office and registered office is located at #140, 14315-118 Avenue, Edmonton, Alberta, Canada T5L 4S6. Aurinia also has a U.S. commercial office located at 77 Upper Rock Circle Suite 700, Rockville, Maryland, 20850 United States.

Aurinia is incorporated pursuant to the Business Corporations Act (Alberta). The Company’s common shares are traded on the Nasdaq Global Market (Nasdaq) under the symbol AUPH.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments considered necessary for fair presentation in accordance with U.S. GAAP. The condensed consolidated balance sheet as of March 31, 2024 was derived from audited annual consolidated financial statements but does not include all annual disclosures required by U.S. GAAP. 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, 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year or any other future periods.

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Aurinia Pharma U.S., Inc. (Delaware incorporated) and Aurinia Pharma Limited (UK incorporated). All intercompany balances and transactions have been eliminated in consolidation and operate in one segment.

These unaudited condensed consolidated financial statements are presented in U.S. dollars, which is the Company's and all of its foreign subsidiaries' functional currency. Therefore, there is no currency translation adjustment upon consolidation as the remeasurement of gains or losses are recorded in the condensed consolidated statements of operations. All monetary assets and liabilities denominated in a foreign currency are remeasured into U.S. dollars at the exchange rate on the balance sheet date. Non-monetary assets and liabilities (along with their related expenses) are translated at the rate of exchange in effect on the date assets were acquired. Monetary income and expense items are translated at the average foreign currency rate. Foreign exchange gains and losses arising on translation or settlement of a foreign currency denominated monetary item are included in the consolidated statements of operations and recorded in other (income) expense, net.

Significant Accounting Policies

The Company's significant accounting policies have not changed from those previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Product Revenues

We sell LUPKYNIS (voclosporin) primarily to specialty pharmacies and specialty distributors and directly to our ex-U.S. partner Otsuka. These customers subsequently distribute the Company's products to patients and healthcare providers. Revenues from product sales are recognized when the customer obtains control of the Company's product, which typically occurs upon delivery to the customer.

Reserves for discounts and allowances: Product sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

The Company's estimates of reserves established for variable consideration are calculated based upon utilizing the expected value method. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.

Significant judgment is required in estimating variable consideration. In making these estimates, the Company considers historical data, including patient mix and inventory sold to customers that has not yet been dispensed. The Company uses a data aggregator and historical claims to estimate variable consideration for inventory sold to customers, including specialty pharmacies and specialty distributors, that has not yet been dispensed to patients. Actual amounts may ultimately differ from the Company's estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment. As of March 31, 2024, the Company did not have any material adjustments to variable consideration estimates based on actual results. These specific adjustments are detailed further in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Major Customers: The Company currently has two main specialty pharmacies for U.S. commercial sales of LUPKYNIS and a collaboration partnership with Otsuka for sales of semi-finished product and royalty, collaboration and manufacturing services revenue in the Otsuka Territories. The percentages of total revenues, net from our main customers were as follows:


	Three months ended March 31,
	2024	2023
Two main specialty pharmacies	91%	99%
Collaboration partnership	7%	—%

In late March 2022, the Company provided a nominal additional discount to both of its two main U.S. specialty pharmacies, applicable for the 2022 calendar year, in connection with holding additional amounts of LUPKYNIS on hand due to supply chain concerns. In December 2022, the Company extended the nominal discount to the end of 2024. Such discounts, or any future discounts, may result in reduced sales to these customers in subsequent periods and substantial fluctuations in revenues from period to period. The Company monitors economic conditions, the creditworthiness of customers and government regulations and funding, both domestically and abroad. The Company regularly communicates with its customers regarding the status of receivable balances. Global economic conditions and customer specific factors may require the Company to periodically reevaluate the collectability of its receivables and based on this evaluation the Company could potentially incur credit losses. The Company has had no historical write-offs related to customers or receivables.

Accounts Receivable, net: Accounts receivable are stated at their net realizable value. The Company's accounts receivable primarily represent amounts due to the Company from product sales and from its Otsuka collaboration agreement (Note 12). As of March 31, 2024 and December 31, 2023, accounts receivable, net are $28.9 million and $24.1 million, respectively. The Company's standard credit terms range from 30 to 45 days. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between the transfer of the promised good to

the customer and receipt of payment will be one year or less. The Company estimates the allowances using the current expected credit loss, or CECL, model. Under the CECL model, the allowances reflect the net amount expected to be collected from the account receivables. Aurinia evaluates the collectability of these cash flows based on the asset’s amortized cost, the risk of loss even when that risk is remote, losses over an asset’s contractual life, and other relevant information available to the Company. Accounts receivable balances are written off against the allowance when it is probable that the receivable will not be collected. Given the nature of the Company's accounts receivable, it determined that an allowance for current expected credit losses was nil as of March 31, 2024 and December 31, 2023.

Share-Based Compensation: The Company follows ASC Topic 718, Compensation - Stock Compensation (ASC 718), which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors. The Company records compensation expense based on the fair value on the grant date using the graded accelerated vesting method for all share-based payments related to stock options, performance awards (PAs), restricted stock units (RSUs) and purchases under the Company's 2021 Employee Share Purchase Plan (ESPP). The estimated fair value of performance-based awards is measured on the grant date and is recognized when it is determined that it is probable that the performance condition will be achieved. The Company has elected a policy for all share-based awards to estimate forfeitures based on historical forfeiture experience at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates.

Restructuring Expenses: Restructuring expense consists primarily of employee severance, contract termination costs and other costs. Liabilities for costs associated with a restructuring activity are recognized when the liability is incurred and are measured at fair value. According to ASC 420, Exit or Disposal Cost Obligations, one-time employee severance and termination benefits are expensed at the date the entity notifies the employee of the plan, unless the employee must provide future service, in which case the benefits are expensed in the period when the service ends. One-time termination benefits include severance, continuation of health insurance coverage for certain employees, and other benefits such as outplacement support services for a specified period of time.

Common Shares: The Company’s shares have no par value or stated value and therefore, upon repurchase or issuance of shares, all amounts related to the shares are recorded under common shares on the balance sheet. The value of common shares includes cash amounts paid or received for the shares and the fair value of equity awards and warrants. Amounts for common shares are offset by share issue costs or transactions costs associated with repurchases or equity offerings.

Recent Accounting Pronouncements

In December 2023, the FASB issued final guidance in 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 guidance is effective for annual periods beginning after December 15, 2024. The Company is not early adopting, and therefore, this ASU is not adopted in the current period. The Company does not expect this ASU to have a material impact on the consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which requires public entities to disclose significant segment expenses regularly provided to the chief operating decision-maker. Public entities with a single reporting segment have to provide all disclosures required by ASC 280, including the significant segment expense disclosures. For public business entities, the guidance is effective for annual periods beginning after December 15, 2023. This ASU does not have a material impact on the consolidated financial statements.

3. Fair Value Measurements

The Company's financial instruments consist primarily of cash and cash equivalents, investments, accounts receivable, accounts payable and accrued liabilities. The carrying value of accounts receivable, accounts payable and accrued liabilities approximate their fair value because of their short-term nature. Estimated fair value of available-for-sale debt securities are generally based on prices obtained from commercial pricing services.

In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities). As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

•Level 1 - Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3 - Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table summarizes the financial assets (cash, cash equivalents, restricted cash and investments) measured at fair value on a recurring basis:


	March 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash, cash equivalents and restricted cash	$	64,459	$	—	$	—	$	64,459

Corporate bonds	—		23,745		—		23,745
Commercial paper	—		38,243		—		38,243
Treasury bills	—		134,974		—		134,974
Treasury bonds	—		58,690		—		58,690

Total financial assets	$	64,459	$	255,652	$	—	$	320,111


	December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash, cash equivalents and restricted cash	$	48,875	$	—	$	—	$	48,875

Corporate bonds	—		33,781		—		33,781
Commercial paper	—		39,304		—		39,304
Treasury bills	—		122,806		—		122,806
Treasury bonds	—		105,924		—		105,924

Total financial assets	$	48,875	$	301,815	$	—	$	350,690

The Company's Level 1 instruments include cash, cash equivalents and restricted cash that are valued using quoted market prices. Aurinia estimates the fair values of investments in corporate debt securities, government and government related securities and certificates of deposits by taking into consideration valuations obtained from third-party pricing services. 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. At March 31, 2024 and December 31, 2023, the weighted average remaining contractual maturities of Aurinia's Level 2 investments were approximately 6 months and 7 months, respectively. It is the Company's policy for these investments to have an overall rating of A-1, or higher, by Standard & Poor's, or an equivalent rating by Moody’s or Fitch.

No credit loss allowance was recorded as of March 31, 2024 and December 31, 2023, as the Company does not believe the unrealized loss is a result of a credit loss due to the nature of the investments. Aurinia also considered the current and expected future economic and market conditions and determined that the estimate of credit losses was not significantly impacted.

Refer to Note 4, Cash, Cash Equivalents, Restricted Cash and Investments, for the carrying amount and related unrealized gains (losses) by type of investment.

4. Cash, Cash Equivalents, Restricted Cash and Investments

As of March 31, 2024 and December 31, 2023, the Company had $320.1 million and $350.7 million, respectively of cash, cash equivalents, restricted cash and investments summarized below. As of March 31, 2024 and December 31, 2023, $255.7 million and $301.8 million were available-for-sale debt securities which are carried at fair market value.


	March 31, 2024
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Cash, cash equivalents and restricted cash	$	64,459	$	—	$	—	$	64,459

Corporate bonds	23,547		—		(3)		23,544
Commercial paper	38,273		—		(30)		38,243
Treasury bills	134,984		—		(9)		134,975
Treasury bonds	58,697		—		(7)		58,690

Total cash, cash equivalents, restricted cash and short-term investments	319,960		—		(49)		319,911
Total long-term investment corporate bond	199		1		—		200
Total cash, cash equivalents, restricted cash and investments	$	320,159	$	1	$	(49)	$	320,111

	December 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Cash, cash equivalents and restricted cash	$	48,875	$	—	$	—	$	48,875

Corporate bonds	33,576		4		—		33,580
Commercial paper	39,305		—		(1)		39,304
Treasury bills	122,757		49		—		122,806
Treasury bonds	105,903		21		—		105,924

Total cash, cash equivalents, restricted cash and short-term investments	350,416		74		(1)		350,489
Total long-term investment corporate bond	200		1		—		201
Total cash, cash equivalents, restricted cash and investments	$	350,616	$	75	$	(1)	$	350,690

As of March 31, 2024 and December 31, 2023, accrued interest receivable from investments was $1.0 million and $0.7 million, respectively. During the three months ended March 31, 2024 and 2023, the Company had $(124) thousand and $73 thousand of unrealized losses and gains on available-for-sale securities, net of tax, respectively, which are included as a component of comprehensive loss on the consolidated statements of operations. Currently, the Company does not intend to sell investments that are in an unrealized loss position, and it is unlikely the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. The Company has determined that the gross unrealized losses on investments at March 31, 2024, were temporary in nature. Realized gains or losses were immaterial during the three months ended March 31, 2024 and 2023.

The Company's short-term investments as of March 31, 2024 mature at various dates through November 2024 and the longer-term investment matures in August 2025.

5. Inventories, net

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value. The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of

costs. Capitalized costs of inventories for LUPKYNIS (voclosporin) mainly include third party manufacturing costs, transportation, storage, insurance, and allocated internal labor. Due to the nature of the Company's supply chain process, inventory that is owned by the Company, is physically stored at third-party warehouses, logistics providers, and contract manufacturers.

The Company assesses recoverability of inventory each reporting period to determine any write-down to net realizable value resulting from excess or obsolete inventories. As of March 31, 2024 and December 31, 2023, Aurinia recorded reserves of finished goods inventories of approximately $0.5 million and $0.8 million, respectively, which were primarily related to potential inventory obsolescence.

The components of inventory, net are as follows:


(in thousands)	March 31, 2024		December 31, 2023
Raw materials	$	1,702	$	1,746
Work in process	35,994		37,376
Finished goods, net of reserve	2,065		583
Total inventories, net	$	39,761	$	39,705

6.Prepaid Expenses

Prepaid expenses are as follows:


(in thousands)	March 31, 2024		December 31, 2023

Prepaid assets	$	4,707	$	6,892
Prepaid deposits	2,376		1,345
Prepaid insurance	563		1,249
Total prepaid expenses	$	7,646	$	9,486

7.Intangible Assets

The following table summarizes the carrying amount of intangible assets, net of accumulated amortization.


	March 31, 2024
(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Amount
Patents	$	1,860	$	(1,307)	$	553
Acquired intellectual property and reacquired rights	15,126		(10,937)		4,189
Internal-use software implementation costs	2,873		(2,855)		18
	$	19,859	$	(15,099)	$	4,760


	December 31, 2023
(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Amount
Patents	$	1,847	$	(1,297)	$	550
Acquired intellectual property and reacquired rights	15,126		(10,737)		4,389
Internal-use software implementation costs	2,873		(2,835)		38
	$	19,846	$	(14,869)	$	4,977

Amortization expense for the three months ended March 31, 2024 and 2023 was approximately $0.2 million and $0.5 million, respectively.

8. Property and Equipment, net

Property and equipment, net are as follows:


(in thousands)	March 31, 2024		December 31, 2023

Leasehold improvements	$	3,243	$	3,243
Office equipment	631		631
Furniture	1,155		1,155
Computer equipment	235		235
	5,264		5,264
Less accumulated depreciation	(2,066)		(1,910)
Property and equipment, net	$	3,198	$	3,354

9. Lease Obligations

The Company has the following lease obligations:

Victoria, British Columbia

In December 2020, Aurinia entered into a lease for office space in Victoria, British Columbia. During September 2022, the fixed lease term ended on the Victoria lease and the Company exercised its right to enter into a short-term month to month lease, of which expenses are incurred in SG&A. On March 31, 2023, the Company terminated the Victoria lease.

Rockville, Maryland

During March 2020, the Company entered into a lease for its U.S. commercial office in Rockville, Maryland for a total of 30,531 square feet of office space. The lease has a remaining term of approximately seven years and has an option to extend for two five-year periods after the initial term of 11 years has elapsed and has an option to terminate after seven years. As of March 31, 2024, the Company had a right-of-use (ROU) asset of $4.4 million and lease liability of $7.2 million included in the condensed consolidated balance sheets. As of December 31, 2023, the Company had a right of use asset of $4.5 million and lease liability of $7.4 million included in the condensed consolidated balance sheets. The Company recorded leasehold improvement incentives in the amount of $2.3 million as additions to the lease liability.

The lease term commenced on March 12, 2020. When measuring the lease liability, the Company discounted lease payments using its incremental borrowing rate at March 12, 2020. The incremental borrowing rate applied to the lease liability on March 12, 2020 was 5.2% based on the financial position of the Company, geographical region and term of lease.

Edmonton, Alberta

During October 2022, the Company entered into a long term lease in Edmonton for a total of 4,375 square feet of office space. The lease is a six year lease and has an option to renew after five years at prevailing market rates. The lease commenced on November 1, 2022 and the Company recorded the lease as an operating lease. The lease is not material to the Company's financial position.

For all leases, the Company incurs variable lease costs. These costs include operation and maintenance costs included in SG&A and are expensed as incurred. The variable lease costs are not material to the Company's financial position.

The operating lease costs for all leases for the three months ended March 31, 2024 and March 31, 2023 were $0.2 million for both periods.

Monoplant

The Company, at lease inception, recorded an ROU asset of approximately $117.6 million and a corresponding lease liability of $94.1 million, which is the present value of the minimum lease payments beginning July 2023 and expiring in 2030. The incremental borrowing rate applied to value the lease liability at inception is 6.19%, which was based on the financial position of the Company, geographical region and term of lease.

As of March 31, 2024, the ROU asset, net and corresponding lease liability balance were $104.4 million and $81.2 million, respectively. As of December 31, 2023, the ROU asset, net and corresponding lease liability balance were $108.7 million and $90.1 million, respectively. For the three months ended March 31, 2024, ROU amortization was $4.4 million and interest expense was $1.3 million.

The following table represents the weighted-average remaining lease terms and discount rates as of March 31, 2024:


	As of March 31, 2024
	Weighted Average Remaining Lease Term (years)	Weighted Average Discount Rate
Operating leases	7.4	5.28%
Finance lease	6.0	6.19%

Supplemental cash flow information related to leases are as follows:


	Three months ended March 31,
	2024		2023
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance lease	$	(2,778)	$	—
Operating cash flows from finance lease	$	(1,370)	$	—
Operating cash flows from operating leases	$	(276)	$	(263)

Supplemental disclosure of noncash transactions
Finance right-of-use asset obtained in exchange for lease obligations (monoplant)	$	104,359	$	—
Finance lease liability arising from obtaining right-of-use assets (monoplant)	$	81,199	$	—

Future maturities of lease liabilities as of March 31, 2024 are as follows:


(in thousands)	Finance Lease Payments		Operating Lease Payments
Remainder of 2024	$	12,052	$	838
2025	16,070		1,141
2026	16,070		1,169
2027	16,070		1,198
2028	16,070		1,227
Thereafter	20,087		3,303
Total lease payments	96,419		8,876
Less: imputed interest	(15,220)		(1,538)
Total	$	81,199	$	7,338

Beinheim

The Company has entered into an equipment and facility finance lease for a backup manufacturing encapsulation site in Beinheim, France that has not yet commenced operations and is therefore, not included in the above table. As part of the agreement, the Company expects to make payments of approximately $1.0 million prior to lease commencement and the present value of minimum lease payments will total approximately $0.1 million.

10.Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabil

SEC Form 10-Q filed by Aurinia Pharmaceuticals Inc