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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.27pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.03pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.57pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+4
investigation+2
retaliatory+2
infringement+1
investigations+1
Positive rising
collaboration+1
benefit+1
good+1
Risk Factors (Item 1A)
7,497 words
Item 1A. Risk Factors.
An investment in our common shares involves a high degree of risk. You should carefully consider the material risks and uncertainties described below before deciding whether to purchase our common shares. Certain risks may be applicable to multiple categories but are only included once below. In assessing these risks, you should also refer to the other information contained in this Annual Report, including our audited financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our business, financial condition, results of operations, cash flow, reputation and prospects could be materially and adversely affected by any of these risks and uncertainties, as well as other risks and uncertainties not currently known to us or that we currently do not believe to be material. In any such case, the trading price of our common shares of stock could decline, and you could lose all or part of your investment.
RISKS RELATED TO COMMERCIALIZATION
We are substantially dependent on the commercial success of LUPKYNIS.
The success of our business is substantially dependent on our ability to commercialize LUPKYNIS, our sole approved product. The Company markets LUPKYNIS in the U.S. directly through its own commercial organization. The market for pharmaceutical sales and marketing professionals is competitive, and maintaining these capabilities is expensive and . If we are to maintain an sales and marketing organization, LUPKYNIS sales could be affected, and our business may . 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. If we are to further change treatment practices, further growth of LUPKYNIS net product sales will be limited, and our business may . We may also be subject to additional competition from future products.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
against+1
Positive rising
benefit+3
progress+1
MD&A (Item 7)
2,293 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the notes thereto and other financial information included in this Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” set forth in this Annual Report for a discussion of important factors that could cause our actual results to differ materially from the results described or implied by the forward-looking statements contained in the following discussion and analysis.
The following generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussion of 2023 and year-to-year comparisons between 2024 and 2023 that are not included in this discussion can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025.
Overview
Aurinia is a 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 FDA-approved oral therapy for the treatment of adult patients with active lupus nephritis (“LN”). Aurinia is also developing aritinercept, a dual inhibitor of B cell-activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) for the potential treatment of autoimmune diseases.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table sets forth our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Change
Revenue
Net product sales
License, collaboration and royalty revenue
Total revenue
Operating expenses
Cost of revenue
Selling, general and administrative
Research and development
Restructuring
Other expense (income), net
Total operating expenses
Income (loss) from operations
Interest income
Interest expense
Net income before income taxes
Income tax (benefit) expense
Net income
Net Product Sales
Aurinia sells LUPKYNIS to two specialty pharmacies and a specialty distributor in the United States (the “U.S.”), and Aurinia sells LUPKYNIS inventory to its collaboration partner, Otsuka Pharmaceutical Co., Ltd. (“Otsuka”), for the European and Japanese market. The two specialty pharmacies, specialty distributor and Otsuka are considered our customers for accounting purposes.
For the year ended December 31, 2025, net product sales were $271.3 million, up 25% compared to $216.2 million in 2024. The increase is primarily due to an increase in the number of LUPKYNIS cartons sold to specialty pharmacies, driven by further LN market penetration.
License, Collaboration and Royalty Revenue
License, collaboration and royalty revenue consists of revenue from a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in Japan, the European Union (the “E.U.”), the United Kingdom (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.
License, collaboration and royalty revenue also consists of revenue from a commercial supply agreement with Otsuka to provide manufacturing and other services, including sharing the capacity of a dedicated manufacturing facility at Lonza Ltd. (“Lonza”), Aurinia’s contract manufacturing partner for voclosporin.
For the year ended December 31, 2025, license, collaboration and royalty revenue was $11.7 million, down 38% compared to $18.9 million in 2024. The year ended December 31, 2024 included a milestone payment of $10.0 million associated with LUPKYNIS regulatory approval in Japan.
Cost of Revenue
Cost of revenue consists primarily of expense associated with: (i) amortization of the finance lease right-of-use asset recognized in connection with the Monoplant; (ii) manufacturing; and (iii) shipping, storage and distribution.
In December 2020, Aurinia entered into a manufacturing services agreement with Lonza for the construction of a dedicated manufacturing facility for voclosporin (the “Monoplant”). The construction of the Monoplant began in January 2021 and manufacturing of voclosporin began in late June 2023. The Monoplant is equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacturing of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand. Aurinia pays a quarterly fixed facility fee of 3.6 million Swiss Francs for the exclusive right to use the Monoplant through March 31, 2030.
For the year ended December 31, 2025, cost of revenue was $32.7 million, compared to $28.2 million in 2024. The increase is primarily due to an increase in: (i) Aurinia’s net product sales of LUPKYNIS in the U.S.; and (ii) Aurinia’s net product sales of LUPKYNIS inventory to Otsuka.
For the years ended December 31, 2025 and 2024, gross margin was 88%.
Selling, General and Administrative Expense
Selling, general and administrative (“SG&A”) expense consists of personnel and non-personnel expenses to support growing net product sales of LUPKYNIS. Personnel-related expense includes salaries, incentive pay, benefits and share-based compensation for personnel engaged in sales, finance and administrative functions. Non-personnel-related expense includes: (i) selling, patient services, pharmacovigilance, marketing, advertising, travel, sponsorships and trade shows; and (ii) other general and administrative costs, including consulting, legal, patent, insurance, accounting, information technology and facilities.
The following table summarizes our SG&A expense for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Change
Personnel expense:
Salaries, incentive pay and benefits
Share-based compensation
Total personnel expense
Non-personnel expense:
Professional fees and services
Marketing and advertising
Travel, sponsorships and trade shows
Other
Total non-personnel expense
Total SG&A expense
The decrease in SG&A personnel and non-personnel expense was primarily due to lower employee-related costs, including share-based compensation, and lower marketing, professional fees and services and other overhead resulting from our strategic restructuring efforts in 2024.
We expect our SG&A expense in 2026 to remain substantially consistent with 2025.
Research and Development Expense
Research and development (“R&D”) expense consists of personnel and non-personnel expenses. Personnel-related expense includes salaries, incentive pay, benefits and share-based compensation for personnel engaged in research and development functions. Non-personnel-related expense includes contract research organizations, contract manufacturing organizations and materials used for R&D activities, including development, clinical trials, clinical supply and distribution, and other professional services.
The following table summarizes our R&D expense for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Change
Personnel expense:
Salaries, incentive pay and benefits
Share-based compensation
Total personnel expense
Non-personnel expense:
Contract research organizations and developmental expenses
Clinical supply and distribution
Other
Total non-personnel expense
Total R&D expense
The increase in R&D personnel and non-personnel expense was primarily due to an increase in employee-related costs, including share-based compensation, and higher clinical supply and distribution costs to support our development activities.
We expect our R&D expense to continue to increase as we progress our development activities.
Restructuring Expense
Restructuring expense consists primarily of one-time termination benefits to affected employees, including severance and health care benefits, contract terminations and other costs related to our strategic restructuring efforts in 2024. In February 2024, we announced a strategic restructuring that reduced headcount by approximately 25% and discontinued Aurinia’s AUR300 development program. In November 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 development of aritinercept.
For the year ended December 31, 2025, restructuring expense was $1.6 million, compared to $23.1 million in 2024.
Other Expense (Income), Net
For the year ended December 31, 2025, other expense (income), net was $9.5 million, compared to $(4.3) million in 2024. The change is primarily due to: (i) changes in the foreign exchange remeasurement of the finance lease liability recognized in connection with the Monoplant, which is denominated in Swiss Francs; and (ii) changes in the fair value assumptions related to our deferred compensation liability.
Income Tax (Benefit) Expense
For the year ended December 31, 2025, income tax (benefit) expense was $(173.0) million, compared to $1.7 million in 2024. The change is primarily due to the release of the Company’s valuation allowance on deferred tax assets that the Company now expects to realize.
Liquidity and Capital Resources
As of December 31, 2025, Aurinia had cash, cash equivalents, restricted cash and investments of $398.0 million, compared to $358.5 million at December 31, 2024 . For the year ended December 31, 2025, cash flows from operating activities were $135.7 million, compared to $44.4 million in 2024. For the year ended December 31, 2025, the Company repurchased 12.2 million of its common shares for $98.2 million.
Based on our current operating plans and projections, the Company expects to fund future operations with existing cash or cash flows from operating activities.
The amount and timing of additional future funding needs, if any, will depend on many factors, including the success of our commercialization efforts for LUPKYNIS and our ability to control expenses. If necessary, we intend to raise additional capital through equity or debt financings. We can provide no assurance that additional financing will be available to us on favorable terms, or at all.
Refer to the Notes to Consolidated Financial Statements, including Note 5 of Item 15 of this Annual Report for Aurinia’s material cash requirements from known contractual and other obligations as of December 31, 2025.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these audited consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Critical accounting estimates are those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. While our significant accounting policies are more fully described in the notes to our consolidated financial statements in Item 15 of this Annual Report, we believe that the following critical accounting policy and underlying estimates are most critical to understanding our reported financial results.
Net Product Sales
Revenue from product sales is recognized when the customer obtains control of our product, which typically occurs on delivery. Revenue from product sales is recorded at the transaction price, net of estimates for variable consideration consisting of customer discounts, customer fees, government rebates, co-payment assistance, payor rebates and administration fees 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 our customer) or a liability (if the amount is payable to a party other than our customer).
Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. Significant judgment is required in estimating variable consideration. In making these estimates, we consider historical data, including patient mix and inventory sold to our customers that has not yet been dispensed. We use a data aggregator and historical claims to estimate variable consideration for inventory sold to our customers that has not yet been dispensed. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary materially from our estimates, we adjust these estimates, which will affect net product sales and earnings in the period such estimates are adjusted.
For the year ended December 31, 2025, we did not have any material adjustments to variable consideration estimates based on actual results.
Income taxes
Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. A valuation allowance is applied against any deferred tax asset if, based on available evidence, it is “more likely than not” that some or all of the deferred tax assets will not be realized.
Impact of Recently Issued Accounting Pronouncements
We describe the impact of recently issued accounting pronouncements that apply to us in Note 2 of Item 15 of this Annual Report.
In an effort to remain competitive in the marketplace, we may determine to change our pricing, dosage forms and strengths and other marketing strategies for LUPKYNIS, including altering the amount or availability of discounts or rebates. Any such changes could have short-term or long-term negative impacts on net product sales, which could cause our business and results of operations to suffer. Price increases or changes to our marketing strategies may also negatively affect our reputation and our ability to secure and maintain reimbursement coverage for LUPKYNIS, which could result in decreased demand and cause our business and results of operations to suffer. If we are unable to successfully price or market LUPKYNIS, the commercial prospects for LUPKYNIS will be limited, and our business may suffer.
Our estimates of the potential market size for LUPKYNIS are based on prescription and sales data for relevant in-market products, the results of clinical studies, medical literature and other information. If the potential market size for LUPKYNIS is smaller than we estimate, the commercial prospects for LUPKYNIS may be limited, and our business may suffer.
Product liability or other lawsuits against us could cause us to incur substantial liabilities and reduce LUPKYNIS sales.
Patients suffering from LN may become gravely ill. 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. Some patients who are treated with LUPKYNIS may die due to their underlying illness or sufferadverse events (which may or may not be drug-related).
As such, we may face product liability lawsuits. Although we carry product liability insurance, product liability lawsuits against us could cause us to incur substantial liabilities and reduce LUPKYNIS sales. Furthermore, any such lawsuits could impair our business reputation and result in the initiation of investigations by regulators.
Additionally, we may not have and may not be able to obtain insurance on acceptable terms or with adequate coverage against potential liabilities or other losses if any claim or lawsuit is brought against us, regardless of the success or failure of the claim or lawsuit. Even where claims are submitted to insurance carriers for defense and indemnity, there can be no assurance that the claims will be fully covered by insurance or that the indemnitors or insurers will remain financially viable to cover the cost of such claims. Any such claims or lawsuits could materially impact our financial condition, and our business may suffer.
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 August 2022, we entered into a commercial supply agreement with Otsuka to: (i) supply LUPKYNIS inventory to Otsuka at cost, plus a margin; and (ii) provide manufacturing and other services, including sharing the capacity of a dedicated manufacturing facility at Lonza, our contract manufacturing partner for voclosporin.
If we are held to not have met our commercial supply obligations, or if Otsuka is unable to successfully commercialize oral voclosporin in the Otsuka Territories, the commercial prospects for LUPKYNIS in the Otsuka Territories will be limited, and our business may suffer.
The commercial success of LUPKYNIS is dependent on pricing regulations and/or third-party coverage and reimbursement policies.
In the U.S. and markets in other countries, patients generally rely on third-party reimbursement for all or part of the costs associated with their treatment. 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. Increasingly, third-party payors are requiring that drug manufacturers provide them with predetermined discounts from list prices and are challenging the prices charged for products. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors. Private third-party payors often rely on Medicare coverage policy and payment limitations in setting their own reimbursement policies.
If LUPKYNIS is subject to unfavorable pricing regulations and/or third-party coverage and reimbursement policies, the commercial prospects for LUPKYNIS may be limited, and our business may suffer.
If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions and fines.
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. These programs generally require us to pay rebates or otherwise provide discounts to government payors in connection with LUPKYNIS, which is dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations, which are complex.
The Office of Inspector General assesses our compliance with reporting requirements under the Medicaid Drug Rebate Program. We are liable for errors associated with our submission of pricing data and for any overcharging of government payors, which could result in a civil monetary penalty. Failure to make necessary disclosures and/or to identify overpayments could result in allegationsagainst us under the FCA and other laws and regulations. Any required refunds to the U.S. government or responding to a government investigation or enforcement action would be expensive and time consuming and could have a material adverse effect on our business, results of operations and financial condition. 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.
RISKS RELATED TO PATENTS AND PROPRIETARY TECHNOLOGY
LUPKYNIS’s market exclusivity periods will depend on the validity and enforceability of issued and pending patents covering LUPKYNIS.
We depend globally on patents and other granted rights to prevent others from improperlybenefiting from our commercial product, LUPKYNIS, and products or inventions that we develop or acquire. Protecting our patents and other intellectual property may require us to file infringement actions, which may be expensive and time-consuming. For material details about our intellectual property portfolio protecting LUPKYNIS, see the section titled “Intellectual Property” in Item 1.
We have filed and plan to file additional patent applications that, if issued, would provide further protection for LUPKYNIS. Although we believe the bases for our patents and patent applications are sound, they are untested, and there is no assurance that they will not be successfullychallenged. There can be no assurance that any issued patent or any patent currently in process will protect LUPKYNIS from generic competition. If our intellectual property does not protect LUPKYNIS from generic competition, LUPKYNIS’ net product sales may decline, and/or we may incur additional costs for patent protection, including patent infringementlitigation costs arising out of ANDA submissions by generic companies to manufacture and sell generic products or arising out of 505(b)(2) submissions, which could have a material adverse effect on our business, results of operations and financial condition, and our business may suffer.
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 complaintsalleging patent infringementagainst 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.
If our products or our product candidates infringe the rights of others, we could be subject to expensive litigation, become liable for substantial damages, be required to obtain licenses from others or be prohibited from selling our products or product candidates altogether.
Our competitors or others may have patent rights that they choose to assert against us, licensees, suppliers, customers or potential marketing partners. Moreover, we may not know about patents or patent applications that our products or product candidates could infringe. Because patent applications do not publish for at least 18 months, if at all, and can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our products or product candidates could infringe. In addition, if third parties file patent applications or obtain patents claiminginventions 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. If third parties file oppositions in foreign countries, we may also have to participate in opposition proceedings in foreign tribunals to defend the patentability of claims in our foreign patent applications. If a third party claims that we infringe its proprietary rights, any of the following may occur:
• we may become involved in time-consuming and expensive litigation, even if the claim is without merit;
• we may become liable for substantial damages for past infringement if a court decides that we have infringed a patent;
• a court may prohibit us from selling or licensing our products without a license from the patent holder, which may not be available on commercially acceptable terms, if at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; or
• we may have to redesign our products or product candidates so that they do not infringe patent rights of others, which may not be possible or commercially feasible and may require new regulatory approvals.
Any of these events could have a material adverse effect on our business, results of operations and financial condition, and our business may suffer.
Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Changes in either the patent laws or interpretation of the patent laws in the U.S. or other countries may diminish the value of our patents or narrow the scope of our patent protection. 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. We therefore cannot be certain that we were the first to make the inventions claimed in our patents or pending applications, or that we were the first to file for patent protection of such inventions.
Assuming the other requirements for patentability are met, in the U.S., prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while, outside the U.S., the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (“Leahy-Smith Act”), enacted on September 16, 2011, the U.S. has moved to a first-to-file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, results of operations and financial condition, and our business may suffer.
Among some of the other changes introduced by the Leahy-Smith Act are changes that limit where a patentee may file a patent infringement suit and provide new opportunities for third parties to challenge issued patents in the USPTO. We may be subject to the risk of third-party prior art submissions on pending applications or become a party to opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patents for our products or product candidates. There is a lower standard of evidence necessary to invalidate a patent claim in a USPTO proceeding relative to the standard in U.S. federal courts. This could lead third parties to challenge and successfullyinvalidate our patents that would not otherwise be invalidated if challenged through the court system.
We may not be able to protect the confidentiality of our trade secrets.
There may be an unauthorized disclosure of confidential information under our control, such as information relating to our technology, research and development, production, marketing, and business operations and those of our collaborators, in various forms. Unauthorized disclosures of such information could subject us to complaints or lawsuits for damages, in the U.S., Canada or other jurisdictions, or could otherwise have a negative impact on our business, financial condition, results of operations, reputation and credibility, and our business may suffer.
RISKS RELATED TO FINANCIAL POSITION
Our overall financial performance may not meet our expectations.
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. Historical performance may not be indicative of future performance. For example, our net product sales may be below expectations, and our costs to operate our business, including cost of product sales, research and development expenses and selling, general and administrative expenses, could exceed our estimates. If our overall performance does not meet our expectations, our business may suffer.
Our ability to use our net operating loss carryforwards and tax credit carryforwards to offset future taxable income may be subject to certain limitations. We may also be subject to other potential tax consequences.
Under the provisions of the applicable tax legislation, our net operating loss and tax credit carryforwards are subject to review and possible adjustment by applicable tax regulatory authorities. In addition, proposed or actual changes to applicable tax legislation may significantly impact our ability to utilize our net operating losses and tax credit carryforwards to offset taxable income in the future. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of a company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. We may not be able to use some or all of our net operating loss and tax credit carryforwards.
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.
Clinical testing is expensive, can take many years to complete and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of nonclinical studies and early clinical studies of aritinercept may not be predictive of the results of later-stage clinical studies. Promising results shown in early-stage clinical studies may still suffer significant setbacks in subsequent clinical studies. There is a high failure rate for pharmaceutical product candidates proceeding through clinical studies, and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy, despite having progressed through nonclinical studies and initial clinical studies.
A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. Moreover, nonclinical and clinical data often are susceptible to varying interpretations and analyses. 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.
Pharmaceutical product candidates are subject to extensive government regulations related to development, clinical studies, manufacturing and commercialization. In order to sell any product that is under development, we must first receive regulatory approval. 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 unanticipateddelays.
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.
Compliance with ongoing post-marketing obligations for LUPKYNIS may uncover new safety information that could give rise to a product recall, updated warnings or other regulatory actions.
After a regulator, such as the FDA, approves a product for marketing, the product’s sponsor must comply with post-marketing obligations. Post-marketing obligations include, but are not limited to, the reporting of adverse events to the regulator within specified timeframes, the submission of product-specific annual reports and notification when a drug product is found to have significant deviations from its approved manufacturing specifications. Such deviations may include unforeseen side effects. Our ongoing compliance with such mandatory reporting requirements could result in additional requests for information that could result in a product recall, strengthenedwarnings, revisions to other label information, conducting additional clinical studies or the imposition of other risk-management measures. Regulators may also require the withdrawal of the product from the market. Any of these post-marketing regulatory actions could materially affect our sales and increase our costs, and our business may suffer.
Failure to obtain regulatory approval in international jurisdictions would prevent our products, our product candidates or any other products we or our current or future out-licensees may develop from being marketed abroad.
In the event we or our current or future out-licensees (together, “Marketers”) pursue the right to market and sell our products, our product candidates or any other products we may develop (“Product Candidate”) in jurisdictions where we do not already have approval, Marketers would be required to obtain separate marketing approvals and comply with numerous and varying regulatory requirements in those jurisdictions. The approval procedures vary among jurisdictions and may involve additional testing. The time required to obtain approval may differ substantially from that required to obtain, for example, FDA or EC approval. The regulatory approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product be approved for reimbursement before the product can be approved for sale in that jurisdiction. In the event Marketers choose to pursue them, Marketers may not obtain approvals from regulatory authorities in such jurisdictions on a timely basis, if at all. Our existing approvals do not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. If Marketers are unable in the future to obtain approval of a Product Candidate by regulatory authorities, the commercial prospects of that Product Candidate may be significantly diminished 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.
We rely on sole-source contract manufacturers to produce LUPKYNIS and clinical drug supply and expect to continue to do so to meet our commercial and development needs. In all of our manufacturing agreements, we require that contract manufacturers produce active pharmaceutical ingredients (“APIs”) and drug products in accordance with cGMP and all other applicable laws and regulations. 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 there is an interruption in the supply from our contract manufacturers, our business may suffer.
We rely on third parties to provide certain services relating to our commercial distribution, clinical studies and other activities. 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. If they provide us with improper information to properly estimate our inventory management, conduct themselves in a manner that violates applicable law, or cease to comply with our agreements with them, it may result in lower net product sales of LUPKYNIS, which would harm our results of operations and business.
We rely on clinical sites to comply with study protocols and regulations applicable to clinical study conduct. 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.
We rely on clinical sites to enroll patients in our clinical studies. The rate of enrollment of patients into our clinical studies at these clinical sites is dependent on a number of factors, including the number of eligible patients and the interest level of investigators, study staff and patients in our clinical studies relative to other enrolling studies. If the clinical sites participating in our clinical studies do not enroll patients in a timely manner, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of aritinercept.
We have agreements with contract research organizations and other third parties to provide services relating to our clinical programs. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the work they perform is compromised due to the failure to adhere to regulatory requirements or for other reasons, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of aritinercept.
RISKS RELATED TO GOVERNMENT REGULATION
We are subject to various federal, state and foreign laws and regulations governing the health care industry that could result in substantial penalties for noncompliance.
We are subject to various federal, state and foreign laws and regulations governing the health care industry that could result in substantial penalties for noncompliance. These laws and regulations may impact our ability to operate, including our sales and marketing efforts. In addition, we may be subject to patient privacy regulation by federal, state and foreign governments that govern jurisdictions in which we conduct our business. The laws and regulations that may affect our ability to operate include:
• the AKS, which prohibits, among other things, persons from soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, an item or service reimbursable under a federal health care program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value, including for example gifts, cash payments, donations, the furnishing of supplies or equipment, waivers of payment, ownership interests, and providing any item, service or compensation for something other than fair market value.
• falseclaims and civil monetary penalties laws, including the FCA, which prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services that are false or fraudulent. Although we may not submit claims directly to payors, manufacturers can be held liable under these laws in a variety of ways. These include: providing inaccurate billing or coding information to customers; improperly promoting a product’s off-label use; violating the AKS; or misreporting pricing information to government programs.
• HIPAA, which prohibits, among other things, knowingly and willfully executing a scheme to defraud any health care benefit program or making false statements in connection with the delivery of or payment for health care benefits, items or services.
• the U.S. Physician Payment Sunshine Act requirements, under the ACA, which require manufacturers of certain drugs and biologics to track and report to U.S. Centers for Medicare & Medicaid Services payments and other transfers of value they make to U.S. physicians and teaching hospitals as well as physician ownership and investment interests in the manufacturer.
• various federal, state and foreign data privacy and security laws and regulations. These include provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information in the U.S. and the GDPR in the E.U. We may not be directly subject to certain of these laws and regulations, such as privacy and security requirements under HIPAA; however, we may be subject to criminalpenalties for knowingly, aiding and abetting these violations.
• section 1927 of the Social Security Act, which requires that manufacturers of drugs and biological products covered by Medicaid report pricing information to CMS on a monthly and quarterly basis, including the best price available to any customer of the manufacturer, with certain exceptions for government programs, and pay prescription rebates to state Medicaid programs based on a statutory formula derived from reported pricing information.
• various state and/or foreign law equivalents of each of the above federal laws, such as the California Consumer Privacy Act, many of which differ from each other in significant ways and may not have the same effect, which complicates our compliance efforts.
If we are found to be in violation of any of the laws or regulations described above or any other laws or regulations that apply to us (including any changes made to such laws or regulations, or new laws or regulations implemented, by applicable government entities), we may be subject to substantial penalties, including civil and criminalpenalties, damages, fines and possible exclusion from participation in Medicare, Medicaid and other federal health care programs. If we are subjected to substantial penalties, our business may suffer, and we may be forced to curtail or cease our operations.
Drugs approved by the FDA, EC and/or other regulatory agencies are subject to ongoing regulation.
Any products manufactured or distributed by us pursuant to FDA, EC and/or other regulatory agency approvals may be subject to continuing regulation by such agencies, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA, EC and/or other regulatory agencies and may be subject to periodic unannounced inspections by such agencies for compliance with cGMPs, which impose certain procedural and documentation requirements on us and our third-party manufacturers. Even after regulatory approval is obtained, under certain circumstances, such as later discovery of previously unknown safety risks, the FDA, EC and/or other regulatory agencies can withdraw approval, recall the product or subject the drug to additional restrictions. In addition, governments outside of the U.S. tend to impose strict price controls, which may adversely affect our revenues or our royalty payments received from license agreements.
Changes or developments in U.S. economic laws or policies, including the reaction of other countries thereto, may have a material adverse effect on our business.
The U.S. federal government has announced that it has commenced a national security investigation of imports of “pharmaceuticals and pharmaceutical ingredients.” Depending on the findings of its investigation, the U.S. federal government could implement additional measures related to the import of pharmaceuticals and pharmaceutical ingredients. The degree and extent of those measures or other measures the U.S. federal government could implement (such as pricing restrictions, tariffs or other trade restrictions or deterrents on foreign companies doing business outside of the U.S.) are not fully known at this time. Aurinia is an Alberta, Canada incorporated company, and we manufacture and import certain products in our supply chain into the U.S. primarily from Switzerland. If implemented, and depending on the degree and extent (including how directly they relate to our operations) of any changes or developments in U.S. economic laws or policies, additional measures related to “pharmaceuticals and pharmaceutical ingredients” could have a material adverse effect on Aurinia’s business.
In addition, we sell encapsulated voclosporin to our collaboration partner, Otsuka, which Otsuka then sells to customers in the Otsuka Territories. Certain international governments have responded to other recent related economic policies announced by the U.S. with retaliatory action. If a government in one of the Otsuka Territories implemented a retaliatory action, such as a tariff, on the import of pharmaceutical products from the U.S., such action could have a material adverse effect on Otsuka's voclosporin business which, in turn, could have a material adverse effect on our business.
RISKS RELATED TO OWNERSHIP OF OUR COMMON SHARES
The volume and trading price of our common shares may fluctuate significantly, and you may lose all or part of your investment.
The volume and trading price of our common shares may fluctuate significantly. These fluctuations could be based on various factors, including factors described elsewhere in this Annual Report and below:
• changes in analyst estimates, ratings and price targets;
• negative press reports or other negative publicity, whether or not true, about our business;
• developments concerning the pharmaceutical and biotechnology industry in general;
• market sentiment towards pharmaceutical and biotechnology stocks;
• developments concerning the overall economy; and
• market sentiment toward equity securities.
Any of these factors may result in volatile changes in the volume and trading price of our common shares. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigationagainst that company. If we were involved in a class action suit, it could divert the attention of management, result in negative press reports and, if adversely determined, have a material adverse effect on our results of operations and financial condition.
In addition, shareholder activists have become involved in numerous public companies. Responding to actions by shareholder activists may disrupt our business, divert the attention of management and employees and impact the price of our common shares.
We have never paid a dividend on our common shares.
We have never paid a dividend on our common shares. Even if we decide to pay dividends, the timing, amount and form of future dividends will depend on future results of operations, financial condition, contractual restrictions and other factors. You should not rely on dividend income from your investment.
Our capital requirements and our potential need for, and ability to obtain, additional financing are uncertain. If we need to obtain additional financing in the future, such financing could result in dilution to your investment, adversely affect the trading price of our common shares and/or create future operating and financial restrictions.
As of December 31, 2025, we had cash, cash equivalents, restricted cash and investments of $398.0 million. LUPKYNIS is our only approved product and our only source of net product sales. Prior to the year ended December 31, 2024, we had negative cash flows from operating activities for multiple years. The amount and timing of future funding requirements, if any, will depend on many factors, including the success of our commercialization efforts for LUPKYNIS and our ability to control expenses and our decisions on how to deploy capital. If necessary, we will raise additional capital through equity or debt financings. We can provide no assurance that additional financing will be available to us on favorable terms, or at all. If we issue additional equity securities or securities convertible into equity securities, you may suffer dilution to your investment, and such issuance may adversely affect the trading price of our common shares. Any new debt financing we enter into may involve covenants that restrict our operations, which may include limitations on borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens or pay dividends. If we need to raise additional capital and are unable to do so, we may be forced to curtail or cease our operations.
There can be no assurance that we will continue to repurchase Common Shares or that we will repurchase Common Shares at favorable prices.
Our Board has the authority to authorize share repurchase programs. In February 2024, the Board approved a share repurchase program of up to $150 million of our common shares (the “Share Repurchase Plan”). On July 31, 2025, the Company announced that the Board had approved an increase to the previously announced Share Repurchase Plan of an additional $150 million of our common shares. The timing and amount of repurchase transactions will be determined by the Company based on its evaluation of market conditions, share price, legal requirements, including applicable blackout period restrictions, and other factors. A reduction in repurchases under, or the completion of, our share repurchase programs could have a negative effect on the market price of our common shares. Additionally, the Canada Income Tax Act includes an excise tax on share repurchases, which will increase the cost of share repurchases. We can provide no assurance that we will repurchase common shares at favorable prices, if at all.
GENERAL RISK FACTORS
Our ability to hire and retain key employees is uncertain.
The market for effective professionals in the pharmaceutical industry is competitive and hiring and retaining these professionals is expensive and challenging. If we are unable to hire and retain key employees, we may be unable to effectively execute on our operating plan, and our business may suffer.
Our employees, consultants, contract manufacturing organizations, principal investigators, and clinical research organizations may engage in misconduct, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of misconduct by employees, consultants, contract manufacturing organizations, principal investigators, and clinical research organizations, which could include intentionalfailures to comply with regulatory standards and requirements, such as FDA regulations, federal and state healthcare fraud and abuse laws and regulations, or similar laws and regulations established and enforced by comparable foreign regulatory authorities. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commissions, customer incentive programs and other business arrangements. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in protecting us from governmental actions or lawsuits. If any such actions are instituted against us, and we are not successful in defending ourselves, those actions, including the imposition of significant fines or other sanctions, could have a material adverse effect on our business and results of operations.
Business interruptions resulting from geopolitical actions, natural disasters, public health crises or other catastrophic events could have an adverse impact on our business.
Business interruptions resulting from geopolitical actions, such as war and terrorism, natural disasters, public health crises, such as a pandemic, or other catastrophic events could have an adverse impact on our business. For example, if one of these events were to adversely affect one of our contract manufacturers, our supply of LUPKYNIS could be interrupted.
You may be unable to enforce actions against us, or certain of our officers under U.S. laws.
We are an Alberta, Canada corporation, and some of our officers reside outside of the U.S. Because all or a substantial portion of the assets of these persons are located outside of the U.S., it may not be possible to effect service of process upon those persons. Furthermore, it may not be possible for investors to enforce judgments obtained in U.S. courts based upon the civil liability provisions U.S. laws against any of those persons. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon U.S. federal securities laws and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based upon the civil liability provisions of U.S. laws.
Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.
Despite the implementation of security measures, our internal computer systems, and those of other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our all or a significant part of our business. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to our customer or clinical data or disruption of the manufacturing process, we could incur liability and the further development of our products or product candidates could be delayed. We may also be vulnerable to cyber-attacks or other malfeasance by hackers, employees and others. This type of breach of our cybersecurity may compromise our confidential information or our financial information and adversely affect our business or result in legal proceedings. Additionally, compliance with privacy laws, data breach notification laws, and data security requirements is rigorous, time-intensive and may increase our costs.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
Disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
Use of hazardous materials might expose us to risk in the form of damages.
Drug manufacturing processes involve the controlled use of hazardous materials. We and our third-party manufacturing contractors are subject to regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our third-party manufacturers have the required safety procedures for handling and disposing of such materials and comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and such liability could exceed our resources.
