January 22, 2021

Aurinia Pharmaceuticals Inc. 
FDA approval of voclosporin for active LN 
Impact: Positive

First impression

Our take - We expect a positive share price reaction given that Aurinia’s sole product, voclosporin (brand name LUPKYNIS), is now FDA approved for the treatment of active lupus nephritis (LN) in adults. Overall, the FDA product label is essentially in line with our expectations, including the approval for active LN and potential extended exclusivity. Pricing was not disclosed. We note that there was potential for approval in all LN rather than active LN, and the label includes a black box warning, both of which may be viewed as disappointing by investors but offset by potential incremental exclusivity. We reiterate our view that Aurinia is well-positioned to gain market share in this underpenetrated therapeutic area, with only one other drug FDA-approved for the treatment of LN (BENLYSTA, approved in Dec. 2020), robust Ph. III data, a sizeable cash position, and an experienced commercialization team in place. We compare key voclosporin label items vs. our expectations below.

• Approved for treatment of active LN. This is consistent with our forecasts which assume an addressable active LN patient population of ~40K/year.

• Label with dosing data likely extends IP runway due to 2037 patent. An existing patent and added exclusivity give voclosporin exclusivity to late 2027. Importantly, the FDA product label incorporated a US patent related to the eGFR dosing used in Aurinia's AURA and AURORA trials, potentially extending exclusivity through 2037. Our forecasts and US $20 price target for Aurinia reflect a risk-weighted approach based on potential for LOE beyond 2027.

• The label includes a black box warning of "Increased risk for developing malignancies and serious infections with LUPKYNIS or other immunosuppressants that may lead to hospitalization or death". We note that this is consistent with many other immunosuppressants.

Aurinia's release did not include details on potential pricing. We currently assume an annual price of $55K/patient, vs. the company's previously disclosed potential range of $45-90K. An ICER Draft Evidence Report published Jan. 22, 2021 assumed average pricing of ~$32K for voclosporin "based on analysts' estimates" vs. BENLYSTA at ~$42K. We note that eGFR dosing of voclosporin, which we believe could potentially apply to ~50% of patients, could result in daily doses of 2/3 or 1/3 of the starting dose, which would decrease the average price per patient. Our latest estimates for Aurinia include US product revenues of $110MM in 2021, assuming initial 5% penetration (vs. RBCe 30% peak US penetration) of a 40K addressable patient population in active LN, at $55K/patient; lowering this to ~$32K/patient would decrease our US sales estimate to ~$64MM, similar to the FactSet consensus average of ~$62MM. As such, pending clarity on pricing from management, we currently believe consensus appears achievable, and we see upside potential vs. our 5% penetration assumption with lower pricing. We note that our published 2021 total revenue estimate of $192MM included an assumed $75MM licensing payment (whereas Aurinia received $50MM in Dec. 2020, discussed below) and other revenue. For 2022, we currently estimate product sales of $238MM (consensus $219MM).

Well-positioned to execute on the voclosporin launch. We believe Aurinia has ample cash to fund the launch and ramp-up of voclosporin. The company had cash of $421MM as of Q3/20, and in December announced an EU/Japan licensing agreement with an upfront payment of $50MM and potential milestone payments of up to $50MM (likely to be largely received in 2022) upon regulatory approval in these regions. In addition, Aurinia has built an experienced commercialization team and prepared for a launch amid COVID-19, including virtual tactics.

Conference call: Monday, Jan. 25 at 8:30am ET. Dial-in: 1-877-407-9170;