On March 5, 2020 Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH / TSX: AUP) ("Aurinia" or the "Company") reported its financial results for the fourth quarter and year ended December 31, 2019 (Press release, Aurinia Pharmaceuticals, MAR 5, 2020, View Source [SID1234555276]). Amounts, unless specified otherwise, are expressed in U.S. dollars.
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"2019 was a truly transformational year for Aurinia, highlighted by the positive results achieved with voclosporin in the Phase 3 AURORA clinical trial for the treatment of LN. As the team works diligently to prepare and file a New Drug Application to the U.S. FDA next quarter, we continue to build out an incredibly talented and experienced commercial team that will be led by Max Colao, Aurinia’s newly appointed Chief Commercial Officer," commented Peter Greenleaf, President and Chief Executive Officer of Aurinia.
"Beyond the impact voclosporin could bring to those living with LN, we continue to evaluate voclosporin in additional indications, including the rare kidney disease, FSGS, as well as for the potential management of dry eye syndrome. During the second half of 2020, we anticipate reporting new data from both of these development programs, consisting of interim data from the exploratory Phase 2 FSGS study and results from the Phase 2/3 AUDREY DES trial evaluating 3 concentrations of VOS compared to vehicle alone," said Neil Solomons, Chief Medical Officer of Aurinia.
Recent Operational Highlights
Pre-NDA Meeting with the U.S. Food & Drug Administration ("FDA")
Aurinia held a positive and successful Pre-NDA meeting with the FDA Division of Pulmonary, Allergy and Rheumatology Products on February 25, 2020. The Company presented information about the safety and efficacy data to be included in the filing, reviewed the format and content of the planned application, and gained agreement on the rolling review plans for filing modules of the NDA. No obstacles were raised by FDA that would prevent submission of the complete NDA by the end of the second quarter as planned.
Appointment of Max Colao as Chief Commercial Officer and build out of commercial team
On February 25, 2020, Aurinia announced the appointment of Max Colao to the newly created position of Chief Commercial Officer. In addition, Aurinia has recruited an experienced team of leaders across key commercial functions including sales, marketing, market access, and commercial operations.
AURORA Phase 3 LN Trial
On December 4, 2019, Aurinia announced positive efficacy and safety results from its pivotal AURORA Phase 3 trial of voclosporin, in combination with mycophenolate ("MMF") and low-dose corticosteroids, in the treatment of LN. The global study in which 357 patients with active LN were enrolled, met its primary endpoint of Renal Response rates of 40.8% for voclosporin vs. 22.5% for the control (OR 2.65; p < 0.001). Additionally, all pre-specified hierarchical secondary endpoints achieved statistical significance in favor of voclosporin, which included Renal Response at 24 weeks, Partial Renal Response at 24 and 52 weeks, time to achieve urinary protein-to-creatinine ratio ("UPCR") ≤ 0.5, and time to 50% reduction in UPCR. The robustness of the data was also supported by all pre-specified subgroup analyses (age, sex, race, biopsy class, region, and prior MMF use) favoring voclosporin.
Voclosporin was well tolerated with no unexpected safety signals. Serious adverse events ("SAEs") were reported in 20.8% of voclosporin patients vs. 21.3% in the control arm. Infection was the most commonly reported SAE with 10.1% of voclosporin patients versus 11.2% of patients in the control arm. Overall mortality in the trial was low, with six deaths observed; one in the voclosporin arm and five in the control group. Additionally, the voclosporin arm showed no significant decrease at week 52 in estimated glomerular filtration rate ("eGFR") or increase in blood pressure, lipids or glucose, which are common adverse events associated with legacy calcineurin inhibitors ("CNIs").
The AURORA Phase 3 clinical trial was initiated in May of 2017 and completed enrollment in September 2018.
AURORA 2 Extension Trial
Eligible patients completing the AURORA trial had the option to roll over into a 104-week blinded extension study (the "AURORA 2 extension study"). A total of 216 patients enrolled into the AURORA 2 extension study. The data from the AURORA 2 extension study will allow the Company to assess the long-term benefit/risk of voclosporin in LN patients, however, this study is not a requirement for potential regulatory approval for voclosporin. Data from the AURORA 2 extension study assessing long-term outcomes in LN patients should be valuable in a post-marketing setting and for future interactions with regulatory authorities.
Voclosporin Drug-Drug Interaction ("DDI") Study
On November 7, 2019, Aurinia announced the completion of a FDA-requested clinical DDI study in patients with lupus that investigated the potential effect of voclosporin on blood levels of mycophenolate acid ("MPA"), the active metabolite of MMF. MMF, also known as CellCept, is considered by treating physicians to be part of the current standard of care for lupus nephritis ("LN") in the United States.
This FDA-requested clinical DDI study aimed to measure, and potentially quantify, the impact voclosporin may have on MPA blood levels when given concomitantly with MMF in patients with lupus. The study results indicate that the coadministration of voclosporin with MMF had no clinically significant impact on MPA blood concentrations. In past studies, it was reported that the legacy calcineurin inhibitors ("CNIs") inhibit the multidrug-resistance-associated protein 2 (MRP-2) transporter in the biliary tract thereby preventing the excretion of mycophenolic acid glucuronide (MPAG) into the bile leading to the enterohepatic recirculation of MPA1. This adverse impact of cyclosporine on MPA pharmacokinetics has resulted in a 30 – 50% reduction in MPA exposure when used in combination.1
Voclosporin ‘036 Method-of-Use Patent for Proteinuric Kidney Diseases
On May 14, 2019, Aurinia was granted U.S. Patent 10,286,036 entitled ‘PROTOCOL FOR TREATMENT OF LUPUS NEPHRITIS") with a term potentially extending to December 2037, for claims directed at our novel voclosporin dosing protocol for LN. 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 study and our 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.
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 until December 2037, supplementing an already robust manufacturing, formulation, synthesis and composition of matter patents.
AUDREY Phase 2/3 Trial for Dry Eye Syndrome ("DES")
In October 2019, Aurinia announced the initiation of patient dosing in the Phase 2/3 AUDREY clinical trial evaluating voclosporin ophthalmic solution ("VOS") for the potential treatment of DES. The AUDREY trial is a randomized, double-masked, vehicle-controlled, dose-ranging study evaluating the efficacy and safety of VOS in subjects with DES. A total of approximately 480 subjects are expected to be enrolled. The study will consist of four arms with a 1:1:1:1 randomization schedule, in which patients will receive either 0.2% VOS, 0.1% VOS, 0.05% VOS or vehicle, dosed twice daily for 12 weeks. The primary outcome measure for the trial is the proportion of subjects with a 10mm improvement in Schirmer Tear Test ("STT") at four weeks. Secondary outcome measures will include STT at other time points, Fluorescein Corneal Staining ("FCS") at multiple time points, change in eye dryness, burning/stinging, itching, photophobia, eye pain and foreign body sensation at multiple time points, and additional safety endpoints. Top-line results from the AUDREY clinical study are anticipated during the second half of 2020.
In January of 2019, Aurinia reported Phase 2 results demonstrating that VOS (voclosporin 0.2%) administered twice daily was superior to cyclosporin A 0.05% (Restasis) administered twice daily across all objective endpoints including FCS and STT. This statistical superiority was observed after two weeks of dosing. The exploratory study also showed no statistically significant nor clinically meaningful difference in drop discomfort, as measured by drop discomfort scores at one and five minutes after first application, between VOS 0.2% and cyclosporin A 0.05%.
Financial Liquidity at December 31, 2019
At December 31, 2019, Aurinia had cash and cash equivalents of $306 million at December 31, 2019, compared to $125.9 million of cash and short-term investments at December 31, 2018. Net cash used in operating activities was $63.5 million for the year ended December 31, 2019, compared to $51.6 million for the year ended December 31, 2018.
The Company received net proceeds of $179.9 million pursuant to its December 12, 2019, public offering.
The Company believes that it has sufficient financial resources to fund its current plans, which include conducting its ongoing research and development ("R&D") programs, completing the NDA submission to the FDA, conducting pre-commercial and launch activities, manufacturing and packaging commercial drug supply required for launch, and fund its supporting corporate and working capital needs through 2021.
Financial Results for the Year Ended December 31, 2019
For the year ended December 31, 2019, Aurinia recorded a consolidated net loss of $123.8 million or $1.33 per common share, which included a non-cash increase of $41.1 million related to the estimated fair value adjustment of derivative warrant liabilities during 2019 and at December 31, 2019.
The net loss before the change in estimated fair value of derivative warrant liabilities and income taxes was $82.6 million or $0.89 per common share for the year ended December 31, 2019. This compared to a consolidated net loss of $64.1 million or $0.76 per common share in 2018, which included a non-cash increase of $10 million in the estimated fair value of derivative warrant liabilities for the year ended December 31, 2018. The net loss before the change in estimated fair value of derivative warrant liabilities income taxes was $54.1 million or $0.63 per common share for the year ended December 31, 2018.
The change in the revaluation of the derivative warrant liabilities is primarily driven by the change in Aurinia’s share price. The Company’s share price was significantly higher in December 2019 when 1.83 million derivative warrants were exercised and at December 31, 2019, when the closing share price was $20.26, compared to the Company’s share price of $6.82 at December 31, 2018. This increase in share price resulted in a large increase in the estimated fair value of the derivative warrants for 2019. The derivative warrant liabilities will ultimately be eliminated on the exercise of the warrants and will not result in any cash outlay by Aurinia. In fiscal year 2019, 3.6 million derivative warrants were exercised with 1.7 million derivative warrants outstanding as of December 31, 2019.
Aurinia incurred R&D expenses of $52.9 million for the year ended December 31, 2019, as compared to $41.4 million for the year ended December 31, 2018. The increase in R&D expenses in 2019 included $6.6 million to manufacture voclosporin for potential future commercial use and higher costs related to the AURORA 2 extension trial, the DDI study and ongoing dry eye studies, partially offset by a decrease in AURORA trial costs.
Aurinia incurred corporate, administration and business development expenses of $22.2 million for the year ended December 31, 2019, as compared with $13.7 million for the same period in fiscal 2018. The increase in these expenses reflected higher corporate activity levels including pre-commercial and launch readiness activities, higher professional and recruiting fees, insurance costs and personnel compensation costs.
Non-cash stock compensation expense was $7.4 million for the year ended December 31, 2019, compared to $6.9 million for the year ended December 31, 2018, and was included in both R&D and corporate, general and business development expenses.
Financial Results for the Fourth Quarter Ended December 31, 2019
Aurinia reported a consolidated net loss of $76.5 million or $0.78 per common share for the fourth quarter ended December 31, 2019, as compared to a consolidated net loss of $14.6 million, or $0.17 per common share, for the fourth quarter ended December 31, 2018.
The increase in the loss for the fourth quarter ended December 31, 2019, primarily reflected an increase of $48.0 million in the estimated fair value of derivative warrant liabilities compared to an increase of $593,000 in the estimated fair value of derivative warrant liabilities for the fourth quarter ended December 31, 2018.This change in the estimated fair value reflected the significant increase in the Company’s share price in December 2019 when 1.83 million derivative warrants were exercised and at December 31, 2019, when the closing share price was $20.26, compared to the Company’s share price of $6.82 at December 31, 2018.
The net loss before the non-cash change in estimated fair value of derivative warrant liabilities and income taxes was $28.9 million or $0.29 per common share for the fourth quarter ended December 31, 2019, compared to $13.9 million or $0.17 per common share for the same period in 2018.
R&D expenses increased to $13.3 million in the fourth quarter of 2019, compared to $10.8 million in the fourth quarter of 2018. The increase in these expenses reflected costs related to NDA submission preparation costs, higher personnel costs, higher costs incurred for the AURORA 2 extension trial, and the AUDREY DES phase 2/3 study partially offset by lower AURORA trial costs.
Corporate, administration and business development expenses increased to $7.2 million for the fourth quarter of 2019, compared to $3.5 million for the fourth quarter of 2018, reflecting higher pre-commercial and launch readiness activities, higher consulting and professional fees, insurance costs, and personnel compensation costs as the corporate organization build continued to ramp up during the fourth quarter of 2019.
The audited financial statements and the Management’s Discussion and Analysis for the year ended December 31, 2019, 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, 2019, financial results today, Thursday, March 5, 2020, at 4:30 p.m. ET. This event can be accessed on the investor section of the Aurinia website at www.auriniapharma.com.
About Voclosporin
Voclosporin, an investigational drug, is a novel and potentially best-in-class calcineurin inhibitor ("CNI") with clinical data in over 2,600 patients across indications. Voclosporin is an immunosuppressant, with a synergistic and dual mechanism of action. By inhibiting calcineurin, voclosporin blocks IL-2 expression and T-cell mediated immune responses and stabilizes the podocyte in the kidney. It has been shown to have a more predictable pharmacokinetic and pharmacodynamic relationship (potentially requires no therapeutic drug monitoring), an increase in potency (versus cyclosporine A), and an improved metabolic profile compared to legacy CNIs. Aurinia anticipates that upon regulatory approval, 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 under the Hatch-Waxman Act and comparable laws in other countries and until April 2028 with anticipated pediatric extension. Further, a U.S. patent has also been issued covering the voclosporin dosing protocol with a term extending to December 2037, if the FDA incorporates the dosing protocol used in both the AURA and AURORA trials into the product label.