Full Press Release Details
Financial statements First quarter ended march 31, 2017 Q1 17
Financial Statements First Quarter Ended March 31, 2017 Q1 17
Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Financial Statements
(expressed in thousands of US dollars)
First Quarter Ended March 31, 2017
Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Financial Position
(expressed in thousands of US dollars)
| March 31, 2017 $ | December 31, 2016 $ | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | 199,066 | 39,649 | ||||||
| Short-term investment (note 3) | 3,050 | |||||||
| Accounts receivable | 123 | 86 | ||||||
| Prepaid expenses, deposits and other | 2,236 | 1,683 | ||||||
| 204,475 | 41,418 | |||||||
| Property and equipment | 26 | 29 | ||||||
| Acquired intellectual property and other intangible assets | 15,193 | 15,550 | ||||||
| 219,694 | 56,997 | |||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | 6,132 | 5,791 | ||||||
| Current portion of deferred revenue | 118 | 118 | ||||||
| Contingent consideration (note 4) | 2,066 | 2,021 | ||||||
| 8,316 | 7,930 | |||||||
| Deferred revenue | 530 | 560 | ||||||
| Contingent consideration (note 4) | 3,499 | 3,419 | ||||||
| Derivative warrant liabilities (note 5) | 34,686 | 9,138 | ||||||
| 47,031 | 21,047 | |||||||
| Shareholders Equity | ||||||||
| Share capital | ||||||||
| Common shares (note 6) | 487,965 | 299,815 | ||||||
| Warrants (note 6) | 911 | 971 | ||||||
| Contributed surplus | 17,581 | 17,017 | ||||||
| Accumulated other comprehensive loss | (805 | ) | (805 | ) | ||||
| Deficit | (332,989 | ) | (281,048 | ) | ||||
| 172,663 | 35,950 | |||||||
| 219,694 | 56,997 | |||||||
| Subsequent events (note 11) |
The accompanying notes are an integral
part of these interim condensed consolidated financial statements.
Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
For the three month periods ended March
(expressed in thousands of US dollars, except per share data)
| March 31, 2017 $ | March 31, 2016 $ | |||||||
| Revenue | ||||||||
| Licensing revenue | 30 | 30 | ||||||
| Research and development revenue | 25 | |||||||
| Contract services | 1 | 2 | ||||||
| 31 | 57 | |||||||
| Expenses | ||||||||
| Research and development | 7,325 | 3,324 | ||||||
| Corporate, administration and business development | 3,427 | 1,192 | ||||||
| Amortization of acquired intellectual property and other intangible assets | 357 | 382 | ||||||
| Amortization of property and equipment | 6 | 5 | ||||||
| Contract services | 1 | 1 | ||||||
| Other expense (note 7) | 75 | 84 | ||||||
| 11,191 | 4,988 | |||||||
| Net loss before change in estimated fair value of derivative warrant liabilities | (11,160 | ) | (4,931 | ) | ||||
| Change in estimated fair value of derivative warrant liabilities (note 5) | (40,781 | ) | 664 | |||||
| Net loss and comprehensive loss for the period | (51,941 | ) | (4,267 | ) | ||||
| Net loss per common share (note 8) (expressed in $ per share) | ||||||||
| Basic and diluted loss per common share | (0.92 | ) | (0.13 | ) |
The accompanying notes are an integral
part of these interim condensed consolidated financial statements.
Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders Equity (Deficit)
For the three month periods ended March
(expressed in thousands of US dollars)
| Common shares $ | Warrants $ | Contributed surplus $ | Deficit $ | Accumulated other comprehensive loss $ | Shareholders equity (deficit) $ | |||||||||||||||||||
| Balance January 1, 2017 | 299,815 | 971 | 17,017 | (281,048 | ) | (805 | ) | 35,950 | ||||||||||||||||
| Issue of common shares (note 6) | 173,104 | 173,104 | ||||||||||||||||||||||
| Share issue costs | (10,780 | ) | (10,780 | ) | ||||||||||||||||||||
| Exercise of warrants | 271 | (60 | ) | 211 | ||||||||||||||||||||
| Exercise of derivative warrants | 23,898 | 23,898 | ||||||||||||||||||||||
| Exercise of stock options | 1,657 | (677 | ) | 980 | ||||||||||||||||||||
| Stock-based compensation | 1,241 | 1,241 | ||||||||||||||||||||||
| Net loss and comprehensive loss for the period | (51,941 | ) | (51,941 | ) | ||||||||||||||||||||
| Balance March 31, 2017 | 487,965 | 911 | 17,581 | (332,989 | ) | (805 | ) | 172,663 | ||||||||||||||||
| Balance January 1, 2016 | 261,645 | 1,297 | 15,579 | (257,753 | ) | (805 | ) | 19,963 | ||||||||||||||||
| Stock-based compensation | 329 | 329 | ||||||||||||||||||||||
| Net loss and comprehensive loss for the period | (4,267 | ) | (4,267 | ) | ||||||||||||||||||||
| Balance March 31, 2016 | 261,645 | 1,297 | 15,908 | (262,020 | ) | (805 | ) | 16,025 |
The accompanying notes are an integral
part of these interim condensed consolidated financial statements.
Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Cash Flow
For the three month periods ended March
(expressed in thousands of US dollars)
| March 31, 2017 $ | March 31, 2016 $ | |||||||
| Cash flow provided by (used in) | ||||||||
| Operating activities | ||||||||
| Net loss for the period | (51,941 | ) | (4,267 | ) | ||||
| Adjustments for | ||||||||
| Amortization of deferred revenue | (30 | ) | (55 | ) | ||||
| Amortization of property and equipment | 6 | 5 | ||||||
| Amortization of acquired intellectual property and other intangible assets | 357 | 382 | ||||||
| Change in value of short-term investment | (6 | ) | ||||||
| Revaluation of contingent consideration | 125 | 62 | ||||||
| Change in provision for restructuring costs | (39 | ) | ||||||
| Loss on disposal of equipment | 1 | |||||||
| Change in estimated fair value of derivative warrant liabilities | 40,781 | (664 | ) | |||||
| Stock-based compensation | 1,241 | 329 | ||||||
| (9,466 | ) | (4,247 | ) | |||||
| Net change in other operating assets and liabilities (note 10) | (249 | ) | (973 | ) | ||||
| Net cash used in operating activities | (9,715 | ) | (5,220 | ) | ||||
| Investing activities | ||||||||
| Purchase of short-term investment | (3,044 | ) | (7,043 | ) | ||||
| Proceeds on disposal of short-term investment | 10,000 | |||||||
| Purchase of equipment | (4 | ) | (1 | ) | ||||
| Net cash generated from (used in) investing activities | (3,048 | ) | 2,956 | |||||
| Financing activities | ||||||||
| Net proceeds from issuance of shares | 162,324 | |||||||
| Proceeds from exercise of derivative warrants | 8,665 | |||||||
| Proceeds from exercise of warrants | 211 | |||||||
| Proceeds from exercise of stock options | 980 | |||||||
| Net cash generated from financing activities | 172,180 | |||||||
| Increase (decrease) in cash and cash equivalents during the period | 159,417 | (2,264 | ) | |||||
| Cash and cash equivalents Beginning of period | 39,649 | 5,756 | ||||||
| Cash and cash equivalents End of period | 199,066 | 3,492 |
The accompanying notes are an integral
part of these interim condensed consolidated financial statements.
Aurinia Pharmaceuticals Inc.
Notes to Interim Condensed Consolidated Statements
For the three month periods ended March
(amounts in tabular columns expressed in thousands of US dollars)
Aurinia Pharmaceuticals Inc. or the Company is a clinical stage
pharmaceutical company with its head office located at #1203-4464 Markham Street, Victoria, British Columbia, V8Z 7X8 where clinical, regulatory and business development functions of the Company are conducted. The Company has its registered office
located at #201, 17904-105 Avenue, Edmonton, Alberta, T5S 2H5 where the finance function is performed.
Aurinia Pharmaceuticals Inc. is
incorporated pursuant to the Business Corporations Act (Alberta). The Company s common shares are currently listed and traded on the NASDAQ Global Market (NASDAQ) under the symbol AUPH and on the Toronto Stock Exchange (TSX) under the symbol
AUP. The Company s primary business is the development of a therapeutic drug to treat autoimmune diseases, in particular lupus nephritis (LN).
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Aurinia Pharma Corp., Aurinia
Pharma U.S., Inc. (Delaware incorporated) and Aurinia Pharma Limited (UK incorporated).
Statement of compliance
These interim condensed consolidated financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards ( IFRS ), as applicable to interim financial reports including IAS 34, Interim Financial Reporting, and should be read in conjunction with the annual financial statements of the Company for the year ended
December 31, 2016 which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board ( IASB ).
These interim condensed consolidated financial statements were authorized for issue by the audit committee of the Board of Directors on
Basis of measurement
These interim condensed consolidated financial statements have been prepared on a going concern and historical cost basis, other than certain
financial instruments which are recognized at fair value.
Functional and presentation currency
These interim condensed consolidated financial statements are presented in United States (US) dollars, which is the Company s functional
The short-term investment, recorded initially at fair value and
subsequently at amortized cost using the effective interest method, is a 3 month HSBC Bank US denominated discount note due April 5, 2017, with an amortized cost of $3,050,000 and an initial cost of $3,044,000. The note has an effective
interest rate of 0.79%.
The outstanding fair value of contingent consideration payable
to ILJIN SNT Co., Ltd. (ILJIN), a shareholder and related party, is the result of an Arrangement Agreement (the Agreement) completed on September 20, 2013 between the Company, Aurinia Pharma Corp. and ILJIN. Pursuant to the Agreement, payments
of up to $10,000,000 are to be paid dependent on the achievement of pre-defined clinical and marketing milestones.
Aurinia Pharmaceuticals Inc.
Notes to Interim Condensed Consolidated Statements
For the three month periods ended March
(amounts in tabular columns expressed in thousands of US dollars)
If all milestones are met, the timing of these payments is estimated to occur as follows:
| $ | ||||
| 2017 | 2,250 | |||
| 2019 | 625 | |||
| 2020 | 2,000 | |||
| 2021 | 5,125 |
The fair value of this contingent consideration as at March 31, 2017 was estimated to be $5,565,000
(December 31, 2016-$5,440,000) and was determined by estimating the probability and timing of achieving the milestones and applying the income approach.
The fair value estimates at March 31, 2017 were based on a discount rate of 10% and an assumed probability adjusted payment range between
50% and 95%. There were no changes in the assumptions since December 31, 2016. The current portion of the contingent consideration liability of $2,066,000 represents the first milestone and a portion of a second milestone that are expected to
be achieved within the year. The change in the passage of time resulted in a revaluation of contingent consideration expense of $125,000 (March 31, 2016-$62,000).
This is a Level 3 recurring fair value measurement. If the probability for success were to increase by a factor of 10% for each milestone, this
would increase the net present value (NPV) of the obligation by approximately $758,000 as at March 31, 2017. If the probability for success were to decrease by a factor of 10% for each milestone, this would decrease the NPV of the obligation by
approximately $753,000 as at March 31, 2017. If the discount rate were to increase to 12%, this would decrease the NPV of the obligation by approximately $241,000. If the discount rate were to decrease to 8%, this would increase the NPV of the
obligation by approximately $267,000.
In accordance with IFRS, a contract to issue a variable
number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at estimated fair value with changes in estimated fair value recognized in the consolidated statements of operations and
comprehensive loss at each period-end. The derivative liabilities will ultimately be converted into the Company s equity (common shares) when the warrants are exercised, or will be extinguished on the expiry of the outstanding warrants, and
will not result in the outlay of any cash by the Company. Immediately prior to exercise, the warrants are remeasured at their estimated fair value. Upon exercise, the intrinsic value is transferred to share capital (the intrinsic value is the share
price at the date the warrant is exercised less the exercise price of the warrant). Any remaining fair value is recorded through the statement of operations and comprehensive loss as part of the change in estimated fair value of derivative warrant
| December 28, 2016 Warrants | February 14, 2014 Warrants | Total | ||||||||||||||||||||||
| # of warrants (in thousands) | $ | # of warrants (in thousands) | $ | # of warrants (in thousands) | $ | |||||||||||||||||||
| Balance at January 1, 2017 | 6,388 | 7,405 | 3,748 | 1,733 | 10,136 | 9,138 | ||||||||||||||||||
| Conversion to equity (common shares and contributed surplus) upon exercise of warrants | (2,859 | ) | (12,399 | ) | (516 | ) | (2,834 | ) | (3,375 | ) | (15,233 | ) | ||||||||||||
| Revaluation of derivative warrant liabilities | 24,948 | 15,833 | 40,781 | |||||||||||||||||||||
| Balance at March 31, 2017 | 3,529 | 19,954 | 3,232 | 14,732 | 6,761 | 34,686 | ||||||||||||||||||
| Balance at January 1, 2016 | 4,548 | 5,499 | 4,548 | 5,499 | ||||||||||||||||||||
| Revaluation of derivative warrant liability | (664 | ) | (664 | ) | ||||||||||||||||||||
| Balance at March 31, 2016 | 4,548 | 4,835 | 4,548 | 4,835 |
Aurinia Pharmaceuticals Inc.
Notes to Interim Condensed Consolidated Statements
For the three month periods ended March
(amounts in tabular columns expressed in thousands of US dollars)
Derivative warrant liability related to December 28, 2016 Bought Deal public offering
On December 28, 2016, the Company completed a $28,750,000 Offering. Under the terms of the Offering, the Company issued
12,778,000 units at a subscription price per Unit of $2.25, each Unit consisting of one common share and one-half (0.50) of a common share purchase warrant (a Warrant), exercisable for a period of five years from the date of issuance at an exercise
price of $3.00. The holders of the Warrants issued pursuant to this offering may elect, if the Company does not have an effective registration statement registering, or the prospectus contained therein is not available for the issuance of the
Warrant Shares to the holder, in lieu of exercising the Warrants for cash, a cashless exercise option to receive common shares equal to the fair value of the Warrants based on the number of Warrants to be exercised multiplied by the weighted average
market price less the exercise price with the difference divided by the weighted average market price. If a Warrant holder exercises this option, there will be variability in the number of shares issued per Warrant.
At initial recognition on December 28, 2016, the Company recorded a derivative warrant liability of $7,223,000 based on the estimated fair
value of the Warrants with allocated share issuance costs of $655,000 recognized as other expense. As at December 31, 2016, the Company revalued the derivative warrant liability to $7,405,000.
In the three month period ended March 31, 2017, 2,859,000 warrants were exercised at $3.00 per share for gross proceeds of $8,577,000. As
the Company had an effective registration statement during this period these warrants could only be exercised for cash. These Warrants had an estimated fair value of $16,235,000 on the dates of exercise, determined using the Black-Scholes warrant
pricing model. Of this amount, $12,399,000 was transferred from derivative warrant liabilities to equity (common shares) and $3,836,000 was recorded through the statement of operations and comprehensive loss as part of the change in estimated fair
value of derivative warrant liabilities.
As at March 31, 2017, the Company revalued the remaining derivative warrants at a fair value
of $19,954,000 (December 31, 2016 $7,405,000).