On March 19, 2019 Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH / TSX: AUP) ("Aurinia" or the "Company") reported its financial results for the fourth quarter and year ended December 31, 2018 (Press release, Aurinia Pharmaceuticals, MAR 19, 2019, View Source [SID1234534506]). Amounts, unless specified otherwise, are expressed in U.S. dollars.
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2018 and Recent Highlights
Notice of Allowance from the United States Patent and Trademark Office ("USPTO") for claims which have the potential to cover voclosporin’s method of use and dosing protocol for lupus nephritis ("LN’) until December 2037.
Phase 2a Dry Eye Study results released in January 2019 demonstrating statistically superior efficacy of voclosporin ophthalmic solution ("VOS") versus Restasis.
AURORA Phase 3 trial in LN completed patient enrollment, ahead of schedule, in September 2018 – on track for top-line data in late 2019.
Phase 2 FSGS study with voclosporin initiated in June 2018 with patient recruitment ongoing.
Cash, cash equivalents, and short-term investments of $125.9 million as of December 31, 2018.
Balance sheet strengthened with additional $30 million raised through ATM facility during Q1 2019.
"The team at Aurinia has made extraordinary progress throughout 2018 by achieving a number of significant clinical milestones with voclosporin, and we are excited for what lies ahead in 2019. In addition to completing enrollment in the AURORA Phase 3 trial ahead of schedule last September, we also released Phase 2a dry eye study results with VOS that we believe further demonstrate the potential of voclosporin", commented Richard M. Glickman, Chief Executive Officer and Chairman of the Board of Aurinia Pharmaceuticals."
Dr. Glickman further commented, "With the recent Notice of Allowance we received from the USPTO for claims covering voclosporin’s method of use and dosing protocol for the treatment of proteinuric kidney diseases including LN, we are very pleased with the additional exclusivity that could extend to December 2037 which I believe provides additional value creating opportunities for our shareholders.
Highlights
USPTO Notice of Allowance
On February 25, 2019, Aurinia announced that it received a Notice of Allowance from the USPTO for claims directed at its novel voclosporin dosing protocol for LN (U.S. patent application 15/835,219, entitled "PROTOCOL FOR TREATMENT OF LUPUS NEPHRITIS").
The allowed claims broadly cover the novel voclosporin individualized flat-dosed pharmacodynamic treatment protocol adhered to and required in both the previously reported Phase 2 AURA-LV trial and the Company’s ongoing Phase 3 confirmatory AURORA trial. Notably, the allowed claims cover a method of modifying the dose of voclosporin in patients with LN based on patient specific pharmacodynamic parameters.
This Notice of Allowance concludes a substantive examination of the patent application at the USPTO, and after administrative processes are completed and fees are paid, is expected to result in the issuance of a U.S. patent with a term extending to December 2037. If the FDA approves the use of voclosporin for LN and the label for such use follows the dosing protocol under the Notice of Allowance, the issuance of this patent will expand the scope of intellectual property protection for voclosporin, which already includes robust manufacturing, formulation, synthesis and composition of matter patents.
AURORA LN Clinical Trials
Aurinia’s Phase 3 clinical trial ("AURORA") is evaluating voclosporin for the treatment of LN, which was initiated in May of 2017, completed enrollment in September 2018. The target enrolment of 324 patients was surpassed due to high patient and investigator demand with 358 LN patients randomized in sites across 27 countries. Top-line data is expected to be available in Q4 2019.
A significant percentage of patients who have completed the AURORA trial are rolling over into the AURORA blinded extension trial ("AURORA 2"). The purpose of AURORA 2 is to assess the long-term benefit/risk of voclosporin in patients with LN; this trial is not a requirement for potential regulatory approval of voclosporin.
Dry Eye Syndrome ("DES")
In July 2018, Aurinia initiated a Phase 2a head-to-head study of voclosporin ophthalmic solution ("VOS") versus Restasis (cyclosporine ophthalmic emulsion) 0.05% for the treatment of moderate to severe DES. This four-week study enrolled a total of 100 patients.
In January 2019 the Company announced results from this study. The study evaluated efficacy, safety and tolerability head to head with Restasis.
VOS showed statistical superiority to Restasis on FDA-accepted objective signs of DES
42.9% of VOS subjects vs 18.4% of Restasis subjects (p=0.0055) demonstrated ≥ 10mm improvement in Schirmer Tear Test ("STT") at Week 4
VOS showed statistical superiority to Restasis in Fluorescein Corneal Staining ("FCS") (p=0.0003)
The primary endpoint of drop discomfort at 1-minute on the first day of therapy showed no statistical difference between the treatment groups, as both groups exhibited low drop discomfort scores
With respect to the primary endpoint of drop discomfort, VOS did not meet the primary endpoint as both drugs were well tolerated and demonstrated less than anticipated drop discomfort. However, secondary outcome measures on efficacy, namely the STT and FCS, demonstrated statistically superior results over Restasis.
Focal Segmental Glomerulosclerosis ("FSGS")
Aurinia initiated a Phase 2 proof-of-concept study for FSGS in June 2018 and is currently in the process of enrolling patients with this disease. This proof-of-concept Phase 2 open-label study aims to enroll approximately 20 treatment-naïve patients diagnosed with primary FSGS.
Financial Liquidity at December 31, 2018
At December 31, 2018, Aurinia had cash, cash equivalents and short-term investments of $125.9 million compared to $173.5 million of cash and short-term investments at December 31, 2017. Net cash used in operating activities was $51.6 million for the year ended December 31, 2018, compared to $41.2 million for the year ended December 31, 2017.
At-The-Market ("ATM") Facility
On November 30, 2018, Aurinia entered into an open market sale agreement with Jefferies LLC pursuant to which the Company could from time to time sell, through ATM offerings, common shares that would have an aggregate offering amount of up to $30 million. Subsequent to year-end, the ATM was fully utilized. Aurinia received gross proceeds of $30 million and issued 4.6 million common shares. The Company incurred share issue costs of $1.2 million including a 3% commission and professional and filing fees related to the ATM offering.
February 14, 2014 Warrant Exercises
The derivative warrants outstanding related to the February 14, 2014 private placement offering were exercised subsequent to December 31, 2018. Certain holders of these warrants elected the cashless exercise option and the Company issued 687,000 common shares on the cashless exercise of 1.3 million warrants. Three holders of 464,000 warrants exercised these warrants for cash, at a price of $3.2204. We received cash proceeds of $1.5 million and issued 464,000 common shares.
The Company believes, based on its current plans that Aurinia has sufficient financial resources to fund the existing LN program, including the AURORA trial and the AURORA 2 extension trial, complete the NDA submission to the FDA, conduct the ongoing Phase 2 study for FSGS, commence additional DES studies and fund operations into mid-2020.
Financial Results for the Fourth Quarter Ended December 31, 2018
The Company reported a consolidated net loss of $14.6 million or $0.17 per common share for the fourth quarter ended December 31, 2018, as compared to a consolidated net loss of $3.3 million or $0.04 per common share for the fourth quarter ended December 31, 2017.
The loss for the fourth quarter ended December 31, 2018 reflected an increase of $593,000 in the estimated fair value of derivative warrant liabilities compared to a reduction of $9.0 million in the estimated fair value of derivative warrant liabilities for the fourth quarter ended December 31, 2017.
The net loss before this non-cash change in estimated fair value of derivative warrant liabilities was $13.9 million for the fourth quarter ended December 31, 2018 compared to $12.3 million for the same period in 2017.
Research and development ("R&D") expenses increased to $10.8 million in the fourth quarter of 2018, compared to $8.7 million in the fourth quarter of 2017. The increase in these expenses primarily reflected costs incurred for the AURORA 2 extension trial, the DDI study and the FSGS and DES Phase 2 studies which were newly enrolled studies in 2018.
Corporate, administration and business development expenses increased to $3.5 million for the fourth quarter of 2018, compared to $3.1 million for the fourth quarter of 2017, reflecting higher professional fees incurred during the fourth quarter of 2018.
Financial Results for the Year Ended December 31, 2018
For the year ended December 31, 2018, Aurinia recorded a consolidated net loss of $64.1 million or $0.76 per common share, which included a non-cash increase of $10.0 million related to the estimated fair value annual adjustment of derivative warrant liabilities at December 31, 2018. After adjusting for this non-cash impact, the net loss before this change in estimated fair value of derivative warrant liabilities was $54.1 million.
This compared to a consolidated net loss of $70.8 million or $0.92 per common share in 2017, which included a non-cash increase of $23.9 million in the estimated fair value of derivative warrant liabilities for the year ended December 31, 2017. After adjusting for this non-cash impact for 2017, the net loss before this change in estimated fair value of derivative warrant liabilities was $46.9 million.
The change in the revaluation of the derivative warrant liabilities is primarily driven by the change in our share price. Our share price of $6.82 was significantly higher at December 31, 2018, compared to our share price of $4.53 at December 31, 2017. This increase in our share price resulted in large increases in the estimated fair value of derivative warrant liabilities for each of 2018 and 2017. The derivative warrant liabilities will ultimately be eliminated on the exercise or forfeiture of the warrants and will not result in any cash outlay by Aurinia.
We incurred R&D expenses of $41.4 million for the year ended December 31, 2018, as compared to $33.9 million for the year ended December 31, 2017. The increase in R&D expenses in 2018 primarily reflected costs related to the AURORA 2 extension trial, the DDI study and the FSGS and DES Phase 2 studies.
We incurred corporate, administration and business development expenses of $13.7 million for the year ended December 31, 2018, as compared with $12.1 million for the same period in fiscal 2017. The increase in these expenses reflected higher corporate activity levels overall, and higher personnel compensation costs which included a non-cash stock compensation expense of $4.2 million for the year ended December 31, 2018, compared to $3.2 million for the year ended December 31, 2017.
The audited financial statements and the Management’s Discussion and Analysis for the year ended December 31, 2018, are accessible on Aurinia’s website at www.auriniapharma.com, on SEDAR at www.sedar.com or on EDGAR at www.sec.gov/edgar.
Aurinia will host a conference call and webcast to discuss the fourth quarter and year ended December 31, 2018 financial results today, Tuesday, March 19, 2019 at 4:30 p.m. ET. This event can be accessed on the investor section of the Aurinia website at www.auriniapharma.com.