Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) has released its financial results for the first quarter ended March 31, 2017. Amounts, unless specified otherwise, are expressed in U.S. dollars.

“I am proud of the important clinical, regulatory and financial milestones our team has successfully achieved in our first quarter this year. We released positive 48-week results from our Phase IIb AURA-LV (“AURA”) trial of voclosporin, which demonstrated significantly improved complete remission rates in patients suffering from lupus nephritis,” said Richard Glickman, Aurinia’s CEO and Chairman of the Board. “We also believe we have a clear path forward with regulators to develop voclosporin in major markets and have successfully funded the Company’s initiated Phase III lupus nephritis clinical trial (“AURORA”) and operations through 2020. Furthermore, based on the results of our AURA trial and regulatory feedback, we have moved diligently into our AURORA trial with several sites initiated and currently screening patients. Our clinical team is focused on continuing to initiate sites with an aggressive patient recruitment program. The AURORA trial design is consistent with that of the recently completed AURA clinical trial. We believe that the totality of data from both the AURORA and AURA trials will ultimately serve as the basis for a New Drug Application (“NDA”) submission as well as regulatory submissions in other major global markets.”

Recent operational highlights

48-Week AURA-LV Data presented in Late Breaker Presentation at National Kidney Foundation 2017 Scientific Clinical Meeting

On April 20, 2017 we announced additional 48-week results from the global AURA study in lupus nephritis (“LN”) during the National Kidney Foundation 2017 Spring Clinical Meetings in Orlando, FL. In addition to the trial meeting its complete and partial remission (“CR”/”PR”) endpoints at 48 weeks, all pre-specified secondary endpoints that have been analyzed to date were also met at 48 weeks. These pre-specified endpoints include: time to CR and PR (speed of remission); reduction in Systemic Lupus Erythematosus Disease Activity Index or SLEDAI score; and reduction in urine protein creatinine ratio (“UPCR”) over the 48-week treatment period. Notably, of the patients that achieved CR at 24 weeks, in the low-dose voclosporin group, 100% remained in CR at 48 weeks, which demonstrates durability of clinical response. Proteinuria levels and reduction in SLEDAI scores, which include non-renal measures of lupus activity, also continued to significantly separate over time versus the control group. Additional analyses are ongoing and will be presented at future medical and scientific meetings.

No unexpected safety signals were observed and voclosporin was generally well-tolerated, with the nature of adverse events consistent with what is expected of patients suffering from highly active LN while undergoing immunomodulation therapy. In the voclosporin arms, the renal function as measured by eGFR was stable and not significantly different from the control arm during the 48-week treatment period. Mean blood pressure was also similar between all treatment groups.

The 24 and 48-week efficacy results are summarized below:

Regulatory pathway forward

On April 7, 2017 we announced the outcome of discussions with both the European Medicines Agency (EMA) and the Pharmaceutical and Medical Devices Agency (PMDA) in Japan regarding the development of voclosporin for the treatment of active LN. Pursuant to these discussions, we believe that the confirmatory data that can be generated from the AURORA trial and the recently completed AURA trial should support regulatory submissions in the US, Europe and Japan.

The AURORA trial will be a global 52-week double-blind, placebo controlled study of approximately 320 patients. Patients will be randomized 1:1: to either of 23.7mg voclosporin BID and mycophenolate mofetil (MMF) or MMF and placebo, with both arms receiving a stringent oral corticosteroid taper. As in AURA, the study population will be comprised of patients with biopsy-proven active LN who will be evaluated on the primary efficacy endpoint of complete remission, or renal response, at 52 weeks, a composite which includes:

  • UPCR of ≤0.5mg/mg
  • Normal, stable renal function (≥60 mL/min/1.73m2 or no confirmed decrease from baseline in eGFR of >20%)
  • Presence of sustained, low dose steroids (≤10mg prednisone from week 16-24)
  • No administration of rescue medications throughout the treatment period

Key Developments in First Quarter, 2017

Completion of Public Offering

On March 20, 2017 we announced the closing of an underwritten public offering of 25.64 million common shares. The shares were sold at a public offering price of $6.75 per share. The gross offering proceeds to the Company from this Offering were US$173.1 million. Expenses of the offering including underwriting commissions and other offering expenses were $10.8 million.

AURA 48-Week Results

On March 1, 2017, we announced top-line results from the AURA trial. At 48 weeks, the trial met the CR/PR endpoints, demonstrating statistically significant greater CR and PR in patients in both low dose (23.7mg of voclosporin twice daily (p<.001)) and high dose (39.5mg twice daily (p=.026)) cohorts versus the control group. No unexpected safety signals were observed and there were no additional deaths in the voclosporin treated patients; however, there were three deaths and one malignancy reported in the control arm after completion of the study treatment period.

Japanese Phase I Ethnic Bridging Study for Voclosporin

On February 14, 2017, we announced results of a supportive Phase I safety, pharmacokinetic (“PK”) and pharmacodynamics (“PD”) study in healthy Japanese patients, which supports further development of voclosporin in this patient population. Based on evaluations comparing the Japanese ethno-bridging data vs. previous PK and PD studies in non-Japanese patients, voclosporin demonstrated no statistically significant differences in exposure with respect to Area Under the Curve measurements. Furthermore, the PK parameters in Japanese patients were generally consistent with previously evaluated PK parameters in non-Japanese volunteers. There were no unusual or unexpected safety signals in the study.

Financial Results for the First Quarter Ended March 31, 2017

As a result of completing the public offering on March 20, 2017, Aurinia had cash, cash equivalents and short term investments of $202.1 million as at March 31, 2017 compared to $39.6 million as at December 31, 2016. We believe, based on our current plans, that we have the financial resources to complete the AURORA trial and fund operations through 2020.

Cash used in operating activities for the three months ended March 31, 2017 was $9.7 million. Cash provided by financing activities was $172.2 million comprised of net proceeds of $162.3 million from the public offering and $9.9 million from the exercise of warrants and stock options during the three month period ended March 31, 2017.

For the first quarter ended March 31, 2017, we reported a consolidated net loss of $51.9 million or $0.92 per common share. This loss included a non-cash increase of $40.8 million related to the estimated fair value quarterly adjustment of derivative warrant liabilities at March 31, 2017. After adjusting for this non-cash impact, the net loss from operations was $11.2 million or $0.20 per common share.

This compared to a consolidated net loss of $4.3 million or $0.13 per common share, which included a non-cash decrease on revaluation of derivative warrant liability of $664,000 at March 31, 2016. After adjustment for the non-cash impact of the revaluation, the net loss from operations for the three months ended March 31, 2016 was $4.9 million or $0.15 per common share.

The change in the revaluation of the derivative warrant liabilities is primarily driven by the change in our share price. Our share price was significantly higher at March 31, 2017 compared to December 31, 2016 which resulted in a large fair value adjustment. These derivative warrant liabilities will ultimately be transferred to equity upon the exercise or expiry of these warrants and therefore are non-cash adjustments.

We incurred net research and development expenditures of $7.3 million for the first quarter ended March 31, 2017, as compared to $3.3 million for the same period in 2016. The increase in research and development expenditures in 2017 reflected initiation costs, including activities such as clinical site selections and regulatory submissions and drug manufacturing costs related to the AURORA trial and completion costs associated with the AURA trial.

We incurred corporate, administration and business development costs of $3.4 million for the first quarter ended March 31, 2017, as compared with $1.2 million for the same period in 2016. These costs included a non-cash stock compensation expense of $1.1 million in 2017 compared to $261,000 in 2016 primarily due to an increase in the number of options granted in 2017 compared to the same period in 2016.

On the ratings front, Aurinia has been the subject of a number of recent research reports. In a report issued on April 25, H.C. Wainwright analyst Ed Arce reiterated a Buy rating on AUPH, with a price target of $12, which represents a potential upside of 56% from where the stock is currently trading. Separately, on April 20, Cantor’s Elemer Piros reiterated a Buy rating on the stock and has a price target of $14.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ed Arce and Elemer Piros have a yearly average return of 27.2% and a loss of 4.7% respectively. Arce has a success rate of 48% and is ranked #124 out of 4561 analysts, while Piros has a success rate of 47% and is ranked #4168.

Sentiment on the street is mostly bullish on AUPH stock. Out of 4 analysts who cover the stock, 4 suggest a Buy rating . The 12-month average price target assigned to the stock is $12.00, which implies an upside of 56% from current levels.

Aurinia Pharmaceuticals, Inc. operates as a biopharmaceutical company. It focuses on discovering and developing immunomodulating therapeutics. The company’s pipeline includes voclosporin for the treatment of lupus nephritis. Aurinia Pharmaceuticals was founded by Robert Foster, Richard Glickman and Michael Martin on June 16, 1993 and is headquartered in Victoria, Canada.