AUPH

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How AUPH rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

An investment in our common shares involves a high degree of risk.
LUPKYNIS’s competition as a treatment in LN patients includes BENLYSTA and GAZYVA and physicians continuing to treat LN with an off-label combination of MMF and corticosteroids alone or in combination with first generation CNIs such as tacrolimus.
We may also be subject to additional competition from future products.
The most commonly reported adverse reactions occurring in ≥3% of patients treated with LUPKYNIS 23.7 mg twice a day and ≥2% higher than placebo in AURORA 1 and AURA-LV were: glomerular filtration rate decreased, hypertension, diarrhea, headache, anemia, cough, urinary tract infection, abdominal pain upper, dyspepsia, alopecia, renal impairment, abdominal pain, mouth ulceration, fatigue, tremor, acute kidney injury and decreased appetite.
The commercial success of LUPKYNIS in certain ex-U.S. territories is dependent on the fulfillment of contractual obligations under our collaboration and licensing agreement and commercial supply agreement.
In December 2020, we entered into a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in the Otsuka Territories in exchange for: (i) a $50 million upfront cash payment; (ii) regulatory and commercial milestone payments; and (iii) royalties ranging from 10% to 20% on net sales in the Otsuka Territories.
In the U.S., adequate coverage and reimbursement from governmental healthcare programs, such as Medicaid and Medicare, and commercial payors is critical to market acceptance of our products.
Government authorities and other third-party payors, such as private health insurers and pharmacy benefit managers, decide which medication they will pay for and establish reimbursement levels.
Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular pharmaceutical products.
We participate in the Medicaid Drug Rebate Program, administered by CMS, and other federal and state government pricing programs in the U.S., and we may in the future participate in additional government pricing programs.
Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the FCA and other laws and regulations.
If CMS were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare for LUPKYNIS, which could harm our business.
We have filed and plan to file additional patent applications that, if issued, would provide further protection for LUPKYNIS.
In February and March 2025, we received paragraph IV notices of certification (the “Notice Letters”) related to submissions of ANDAs to the FDA seeking authorization to manufacture, use or sell a generic version of LUPKYNIS in the U.S., prior to the expiry of U.S.
Patent Nos. 10,286,036 and 11,622,991 in December 2037 (the “2037 Patents”), which are listed in the FDA's Orange Book.
The Notice Letters allege that the 2037 Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in the ANDAs.
We have filed complaints alleging patent infringement against each of the senders of the Notice Letters.
We expect to incur significant patent litigation costs to protect our intellectual property rights relating to LUPKYNIS, and, if any entity that may file an ANDA is successful in the introduction of the generic product described in its ANDA, then LUPKYNIS net product sales may decline, which could have a material adverse effect on our business, results of operations and financial condition.
In addition, if third parties file patent applications or obtain patents claiming inventions also claimed by us in issued patents or pending applications, we may have to participate in interference proceedings in the USPTO to determine priority of invention.
The laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Our overall financial performance, including but not limited to, net product sales and cash flows from operating activities, including any milestone, royalty and other payments resulting from our collaboration and licensing agreement and commercial supply agreement with Otsuka, is difficult to predict and may fluctuate from quarter to quarter and year to year.
RISKS RELATED TO DRUG DEVELOPMENT AND REGULATORY APPROVAL Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies of aritinercept may not be predictive of future study results.
The results of nonclinical studies and early clinical studies of aritinercept may not be predictive of the results of later-stage clinical studies.
We do not know whether any clinical studies we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval, including for aritinercept.
Results from studies of aritinercept may not be sufficient to obtain regulatory approvals to market it on a timely basis, if at all.
To obtain regulatory approval, we must conduct nonclinical and clinical studies that demonstrate that aritinercept is safe and effective.
The process of obtaining FDA, European Commission (“EC”) and other regulatory authority approvals is costly, time-consuming, uncertain and subject to unanticipated delays.
The FDA, EC and other regulatory authorities have substantial discretion in the approval process and may not agree that we have demonstrated that aritinercept is safe and effective.
If aritinercept is not found to be safe and effective, we would be unable to obtain regulatory approval to manufacture, market and sell aritinercept.
We can provide no assurances that the FDA, EC or other regulatory authorities will approve aritinercept or, if approved, what the scope of the approved indication might be.
Our development of aritinercept may be delayed or halted.
Our development of aritinercept may be delayed or halted for various reasons, including: • insufficient supplies of drug product to treat the patients in the studies; • failure of patients to enroll in the studies at the rate we expect; • ineffectiveness of aritinercept; • patients experiencing unexpected side effects or other safety concerns being raised during treatment; • changes in governmental regulations or administrative actions; • failure to conduct studies in accordance with required good clinical practices; • inspection of clinical study operations or study sites by the FDA or other regulatory authorities, resulting in a clinical hold; • political unrest affecting clinical sites; • a shutdown of the U.S. government, including the FDA; • an adverse determination by an FDA advisory committee; • insufficient financial resources; or • natural disasters, public health crises or other catastrophic events impacting any of our clinical sites.
If the development of aritinercept is delayed or halted, we may incur significant additional expenses, and the potential approval of aritinercept may be delayed or could be made impossible to obtain, which would have a material adverse effect on our business and financial condition, and our business may suffer.
RISKS RELATED TO OUR RELIANCE ON THIRD PARTIES The commercial success of LUPKYNIS and the clinical success of aritinercept will depend on our ability to obtain an uninterrupted supply from our contract manufacturers.
The long-term commercial success of LUPKYNIS and clinical success of aritinercept will depend in part on the ability of our contract manufacturers to supply cGMP-compliant API and drug product without interruption.
If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of aritinercept, or the commercialization of LUPKYNIS.
We rely on two specialty pharmacies and a specialty distributor in the U.S. to distribute LUPKYNIS to patients.
We and these clinical sites are required to comply with Good Clinical Practices (“GCP”), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities governing the conduct of clinical investigations.
Regulatory authorities enforce GCPs through periodic inspections of study sponsors, principal investigators and clinical sites.
If we, the investigators or the clinical sites fail to comply with applicable GCPs, the clinical data generated in our clinical studies may be deemed unreliable and the regulatory authorities may require us to perform additional clinical studies before approving our marketing applications, which would delay or compromise the regulatory approval process.

and 26 more.

Gone since FY2024

Risk Factors An investment in our common shares involves a high degree of risk.
LUPKYNIS’s competition as a treatment in LN patients includes BENLYSTA and physicians continuing to treat LN with an off-label combination of MMF and corticosteroids alone or in combination with first generation calcineurin inhibitors such as tacrolimus.
We may be subject to additional competition from future products.
The most commonly reported adverse reactions in our AURORA 1 and AURORA 2 clinical studies (≥3%) were: glomerular filtration rate decreased, hypertension, diarrhea, headache, anemia, cough, urinary tract infection, abdominal pain upper, dyspepsia, alopecia, renal impairment, abdominal pain, mouth ulceration, fatigue, tremor, acute kidney injury, and decreased appetite.
The commercial success of LUPKYNIS in certain ex-U.S. territories is dependent on the fulfillment of contractual obligations under our out-license agreement and commercial supply agreement.
In December 2020, we entered into a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in Japan, the E.U., the U.K., Switzerland, Russia, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the “Otsuka Territories”) in exchange for: (i) a $50 million upfront cash payment; (ii) regulatory and commercial milestone payments; and (iii) royalties ranging from 10% to 20% on net sales in the Otsuka Territories.
Adequate coverage and reimbursement from governmental healthcare programs, such as Medicaid and Medicare, and commercial payors is critical to market acceptance of our products.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medication they will pay for and establish reimbursement levels.
Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular products.
We participate in the Medicaid Drug Rebate Program, administered by Centers for Medicare and Medicaid Services, and other federal and state government pricing programs in the U.S., and we may in the future participate in additional government pricing programs.
Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the U.S.
False Claims Act (“FCA”) and other laws and regulations.
If Centers for Medicare and Medicaid Services were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare for LUPKYNIS, which could harm our business.
We have reported on various commercial metrics relating to LUPKYNIS, and no single metric is indicative of, or directly correlated to, our current or future financial performance.
We have reported on various commercial metrics relating to LUPKYNIS activity, including the number of prescriptions/PSFs, persistency rates, the number of patients on therapy, patient restarts and patients resulting from hospital fills.
None of these metrics, in and of themselves, is indicative of current or future financial performance.
Even when a patient becomes a patient on LUPKYNIS therapy, there is no guarantee that they will be a patient for which we recognize revenue, or that they will remain on therapy for any period of time.
A patient on therapy who discontinues treatment generally results in zero future revenue, and discontinuations can occur at any time once a patient commences therapy.
Our net product sales are primarily the result of our net sales of LUPKYNIS to two specialty pharmacies and a specialty distributor in the U.S., and net sales of LUPKYNIS inventory to our collaboration partner, Otsuka, for the European and Japanese market.
Revenue from the two specialty pharmacies do not necessarily correlate to any of our commercial metrics.
Revenue from Otsuka has no relevance to any of the above noted metrics.
Our revenue could therefore fluctuate in a manner contrary to any trend of our commercial metrics.
We have and plan to file additional patent applications that, if issued, would provide further protection for LUPKYNIS.
On February 25, 2025, we received a paragraph IV notice of certification (the “Notice Letter”) related to a submission of an ANDA to the FDA seeking authorization to manufacture, use or sell a generic version of LUPKYNIS in the U.S., prior to the expiry of U.S.
Patent Nos. 10,286,036 and 11,622,991 (the “2037 Patents”), which are listed in the FDA's Orange Book.
The Notice Letter alleges that the 2037 Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in the ANDA.
Although we intend to vigorously defend our intellectual property rights protecting LUPKYNIS, we may incur significant patent litigation costs, and, if any entity that may file an ANDA is successful in the introduction of the generic product described in its ANDA, then LUPKYNIS net product sales may decline, which could have a material adverse effect on our business, results of operations and financial condition.
In addition, if third parties file patent applications or obtain patents claiming inventions also claimed by us in issued patents or pending applications, we may have to participate in interference proceedings in the U.S.
Patent and Trademark Office (“USPTO”) to determine priority of invention.
The laws of foreign countries may not protect our rights to the same extent as the laws of the U.S.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Our overall financial performance, including but not limited to, net product sales and net cash provided by or used for operating activities, including any milestone, royalty and other payments resulting from our collaboration and license agreement and commercial supply agreement with Otsuka, is difficult to predict and may fluctuate from quarter to quarter and year to year.
Our restructuring efforts and associated organizational changes may not adequately reduce our operating costs, may lead to additional workforce attrition and may cause operational disruptions.
On February 15, 2024, we announced a strategic restructuring that reduced headcount by approximately 25% and discontinued Aurinia’s AUR300 development program.
On November 7, 2024, we announced another strategic restructuring that further reduced headcount by approximately 45% to sharpen the Company's focus on continued LUPKYNIS growth and the rapid development of AUR200.
The restructuring efforts may not adequately reduce our operating costs and could yield unintended consequences, such as loss of institutional knowledge and expertise, employee attrition and a reduction in employee morale, as well as substantial demands on our employees, all of which may materially adversely affect our revenues, results of operations or financial condition, and our business may suffer.
Additionally, should an event occur that causes or is deemed to cause a change in the residency of Aurinia from Canada to the U.S., for example, we may be subject to certain tax rules that could cause a deemed disposition of our assets for tax purposes.
Should that occur, we may be subject to a material amount of tax owing, without corresponding revenue from any actual disposition of our assets, which would have a material adverse effect on our business and financial condition.
RISKS RELATED TO DRUG DEVELOPMENT AND REGULATORY APPROVAL Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.
The results of nonclinical studies and early clinical studies of AUR200 may not be predictive of the results of later-stage clinical studies.

and 37 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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