Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the notes thereto included in this Annual Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of this Annual Report. Our actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

The following generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussion of historical items and year-to-year comparisons between 2021 and 2020 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, 2021, filed with the SEC on February 28, 2022 and such comparisons are incorporated herein by reference.

Overview

Aurinia is a fully integrated biopharmaceutical company focused on delivering therapies to treat targeted patient populations that are impacted by autoimmune, kidney and rare diseases with a high unmet medical need. In January 2021, we introduced LUPKYNIS (voclosporin), the first FDA-approved oral therapy for the treatment of adult patients with active LN. We continue to conduct pre-clinical, clinical and regulatory activities to support the LUPKYNIS development program as well as our other assets. We engaged with Otsuka as a collaboration partner for development and commercialization of LUPKYNIS in the Otsuka Territories.

LUPKYNIS is an orally administered CNI immunosuppressant that has been demonstrated to improve near and long-term outcomes in LN when used in combination with MMF (although MMF is not currently approved as such) and steroids. By inhibiting calcineurin, LUPKYNIS reduces cytokine activation and blocks interleukin IL-2 expression and T-cell mediated immune responses. LUPKYNIS also potentially stabilizes podocytes, which can protect against proteinuria.

Voclosporin, the active ingredient in LUPKYNIS, is made by a modification of a single amino acid of the cyclosporine molecule. The mechanism of action of LUPKYNIS has been validated with certain earlier generation CNIs for the prevention of rejection in patients undergoing solid organ transplants and in several autoimmune indications, including uveitis, keratoconjunctivitis sicca, psoriasis, rheumatoid arthritis, and for LN in Japan. We believe that LUPKYNIS possesses pharmacologic properties with the potential to demonstrate best-in-class differentiation.

On September 15, 2022, the EC granted marketing authorization of LUPKYNIS. The centralized marketing authorization is valid in all EU member states as well as in Iceland, Liechtenstein, Norway and Northern Ireland. The approval triggered a $30.0 million milestone payment to us, which was recognized as collaboration revenue during the third quarter in 2022. We continue to progress with regulatory approval with Otsuka in the other Otsuka Territories.

Our net product revenue in 2022 increased to $103.5 million from $45.5 million in 2021. We did not have any products approved for sale before 2021. We expect our net product revenue to continue to increase as we continue to execute on our post approval commercialization strategy for LUPKYNIS.

Our total cost of sales and operating expenses increased in 2022 to $245.5 million from $226.3 million in 2021, primarily as a result of additional efforts related to the commercialization of LUPKYNIS, along with an increase in cost of sales recognized for product sales. We anticipate continuing to spend in R&D to support our development programs and post approval commitments to the FDA for LUPKYNIS and in respect of our two additional assets, AUR200 and AUR300.

We ended 2022 with $389.4 million in cash, cash equivalents and restricted cash and short-term investments, which we believe to be sufficient to fund our current business plans for at least the next few years.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, are reflected in our financial statements prospectively from the date of the change in estimate.

We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

Product Revenues

In the United States (and territories), we sell LUPKYNIS primarily to specialty pharmacies and specialty distributors. These customers subsequently resell our products to health care providers and patients. Revenues from product sales are recognized when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer.

Reserves for discounts and allowances: Product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration 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).

Our estimates established for variable consideration are calculated based upon utilizing the expected value method. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.

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, including specialty pharmacies and specialty distributors, that has not yet been dispensed. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment. As of December 31, 2022, we did not have any material adjustments to variable consideration estimates based on actual results.

License, Collaboration and Other Revenues

We enter into out-licensing agreements in which we license certain rights to our product candidates to third parties. The terms of these arrangements typically include payment to us of one or more of the following: non-refundable, up-front license fees, development, regulatory and commercial milestone payments, payments for collaboration services we provide through our contract manufacturers, and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. We recorded $50.0 million for upfront, non-refundable revenue in 2020 related to the Otsuka agreement. The upfront fee of $50.0 million was fixed consideration for the transfer of the license and distribution rights and was recognized upon transfer in December 2020. In 2022, we recognized $30.6 million in license and collaboration revenue from Otsuka.

Deferred Compensation Arrangements

We have recorded deferred compensation arrangements in liabilities for estimated future employee benefits relating to applicable historical employment arrangements. In 2012, deferred compensation arrangements were approved by a resolution of the board of directors. Pursuant to ASC Topic 710 – Compensation, we recognize future benefits provided by employee retention arrangements, as deferred compensation, which is recognized when we determine that it is probable to make future payments. The deferred compensation is based on an income approach for the estimated future net revenues of voclosporin using an internal risk-adjusted net present value of the future payments to be made to the individuals.

Initially, these obligations are measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting periods. Subsequent re-measurements as a result of performance obligations we meet or changes in assumptions are recognized in the consolidated statement of operations. There have been no material historical adjustments to amounts recorded in the consolidated statement of operations in prior periods.

Impact of Recently Issued Accounting Pronouncements

For information of recent accounting pronouncements and their impact on our consolidated financial statements or disclosures, see Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements included in "Financial Statements and Supplementary Data" in this Annual Report.

Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

The following table sets forth our results of operations for the years ended December 31, 2022 and 2021:

Years Ended December 31,

Revenue:

Operating expenses:

Revenues

Total net revenue were $134.0 million and $45.6 million for the years ended December 31, 2022 and 2021, respectively. Our total net revenue during 2022 increased primarily as a result of net product revenue from our two main customers for LUPKYNIS driven predominantly by further penetration in the LN market, as well as the recognition of a $30.0 million milestone payment from Otsuka following the EC granting marketing authorization of LUPKYNIS in September 2022. Revenues from our two main customers in the U.S. accounted for approximately 45% and 35%, respectively, of our total revenues for the year ended December 31, 2022.

Cost of Sales

Cost of sales were $5.7 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively. The increase was primarily due to an increase in product related revenue, coupled with an increase in our inventory reserves which were mainly related to reserves on process validation batches used for FDA approval.

Gross margin for the years ended December 31, 2022 and 2021 was approximately 96% and 98%, respectively.

Selling, General and Administrative Expenses

SG&A expenses increased to $196.4 million for the year ended December 31, 2022 compared to $173.5 million for the year ended December 31, 2021. SG&A expenses consisted of the following:

Years Ended December 31, Change

Salaries, incentive pay and employee benefits $ 82,129 $ 78,991 $ 3,138

The primary drivers for the increase of $22.8 million in SG&A were an increase of professional fees and services mainly related to corporate legal matters and pharmacovigilance; and travel, trade shows and sponsorships to support the commercialization of LUPKYNIS. Additionally, salaries, incentive pay and employee benefits increased due to inflationary increases and routine year over year merit and promotion increases.

We expense SG&A costs in the periods in which they are incurred. We anticipate continuing to incur significant expenses in SG&A to support the commercialization of LUPKYNIS.

Research and Development Expenses

R&D expenses decreased to $45.0 million for the year ended December 31, 2022 compared to $51.1 million for the year ended December 31, 2021. R&D expenses consisted of the following:

Years Ended December 31, Change

The primary drivers for the decrease of R&D were due to the $10.0 million upfront license and accrued milestone expense within the CRO and developmental expenses line item for AUR300 in the prior year, offset partially by additional expenses related to AUR200 and AUR300 for the year ended December 31, 2022.

We spent approximately $13.5 million and $16.0 million on early stage pre-clinical research programs in the years ended December 31, 2022 and 2021, respectively. The spend does not include internal resource expenses as we currently do not track these for early stage research programs, prior to IND.

We expect our R&D expenses will increase as we continue to meet our post-approval obligations for LUPKYNIS with the FDA, invest in R&D activities related to developing voclosporin and product candidates, and as programs advance into later stages of development and we begin to conduct larger clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and R&D is highly uncertain. As a result, we are unable to determine the duration and completion costs of our R&D projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

Other Expenses (Income), Net

Other income was $1.5 million for the year ended December 31, 2022 compared to other expense of $0.6 million for the year ended December 31, 2021. The primary driver for the change was the revaluation of deferred compensation based on a change in discount rate.

Interest Income

Interest income was $5.1 million for the year ended December 31, 2022 compared to $0.5 million for the year ended December 31, 2021. The increase was mainly due to higher yields on our investments as a result of increasing interest rates.

Liquidity and Capital Resources

As of December 31, 2022, we had cash, cash equivalents and restricted cash of $94.2 million and short-term investments of $295.2 million compared to cash, cash equivalents and restricted cash of $231.9 million and short-term investments of $234.2 million at December 31, 2021. Cash, cash equivalents and restricted cash and investments are primarily held in U.S. dollars. As of December 31, 2022 and 2021, we had working capital of $396.4 million and $472.7 million, respectively.

We are devoting the majority of our operational efforts and financial resources towards the commercialization and post approval commitments of our approved drug, LUPKYNIS. We are also expending efforts towards the development of our AUR200 and AUR300 assets. Taking into consideration the cash, cash equivalents and restricted cash and investments as of December 31, 2022, we believe that our cash position is sufficient to fund our current plans which include funding commercial activities, including our FDA related post-approval commitments, manufacturing and packaging commercial drug supply, funding our supporting commercial infrastructure, advancing our R&D programs and funding our working capital obligations for at least the next few years.

The following table summarizes our cash flows forDecember 31, 2022, 2021 and 2020:

Net cash (used in) provided by:

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2022 was $79.5 million, compared to $157.7 million, for the year ended December 31, 2021. Net cash used in both periods was primarily related to the continued investment in commercialization activities, payments made for our ongoing post approval obligations, advancement of our pipeline, and inventory purchases partially offset by cash receipts from sales of LUPKYNIS. The decrease in net cash used for operating activities is primarily due to an increase in cash receipts from sales of LUPKYNIS and the milestone payment received from Otsuka in 2022 related to the EC marketing authorization.

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2022 was $60.6 million compared to $103.9 million for the year ended December 31, 2021. Investing activities during 2022 consisted primarily of $524.0 million for purchases of investments of commercial paper and corporate bonds offset by $464.3 million in proceeds as discussed in Note 4 of the audited consolidated financial statements for the year ended December 31, 2022. The decrease in cash used in investing activities is

mainly related to the shift to a shorter duration of investments in our portfolio in 2022 in addition to upfront lease and license payments made in 2021 not recurring in 2022.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2022 was $2.4 million compared to cash provided by financing activities of $221.1 million for the year ended December 31, 2021. The decrease in cash provided by financing activities is mainly due to the Company not completing financings and less stock option exercises occurring in 2022.

A discussion of changes in our cash flow from the year ended December 31, 2020 to the year ended December 31, 2021 can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the 2021 Form 10-K.

November 2021 ATM facility

In November 2021, we entered into an Open Market Sale Agreement under which we issued 10.2 million common shares, resulting in net proceeds of $196.7 million through December 31, 2022. There were no sales subsequent to December 31, 2021. In February 2022, we terminated the Open Market Sale Agreement and no further sales occurred.

We intend to use the net proceeds to fund our operations, which includes, but is not limited to, commercial activities, including our FDA related post approval commitments, manufacturing and packaging commercial drug supply, funding our supporting commercial infrastructure, advancing our R&D programs and funding our working capital obligations.

Material Cash Requirements

As of December 31, 2022, our material short-term cash requirements are approximately $181.4 million. We anticipate our long-term cash requirements to be approximately $157.5 million, which does not include per annum requirements related to human capital, insurance and government payor rebates, each of which we anticipate to fluctuate based on future requirements (those per annum amounts, calculated on a short-term cash requirement basis, amount to approximately $104.9 million). These short and long-term cash requirement estimates are all based on our current operating plans and strategies, and could fluctuate if our plans were to change.

Our material cash requirements include the following:

•short-term per annum expenses for human capital (which includes estimates for personnel headcount, performance bonuses, salaries, benefits and commissions);

•payor and government rebates and co-payment programs;

•marketing and promotional services;

•corporate insurance premiums;

•cash requirements related to R&D projects, clinical trials, milestone expenses and post-approval related studies and support;

•short-term and long-term lease liabilities included on our consolidated balance sheet or Note 15 Leases for further details;

•deferred compensation arrangements included on our consolidated balance sheet or Note 14, Deferred Compensation and Other Non-Current Liabilities for further details; and

•purchases for inventory and production costs to support our commercial and clinical product supply requirements, as well as capital expenditures. For further details see Note 13, Commitments and Contingencies.

There are several factors that we believe could impact our future cash requirements, including:

•the amount of revenue received from commercial sales of LUPKYNIS, from our licensing partners and potential future drug candidates;

•the scope, rate of progress, results and costs of our clinical trials, preclinical studies and other related regulatory requirements and activities;

•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

•the number and characteristics of the R&D assets we seek to acquire, develop or commercialize;

•the expenses needed to attract and retain skilled personnel as well as any other personnel changes that we may implement; and

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs and the outcome of any such litigation.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

Our activities can expose us to market risks which include interest rate risk, foreign currency risk, inflation risk and credit risk. Risk management is carried out by management under policies approved by our Board of Directors. Our overall risk management program seeks to minimize adverse effects on our financial performance.

Interest Rate Risk

Financial assets and financial liabilities with variable interest rates expose us to cash flow interest rate risk. We manage our interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. As of December 31, 2022 our investment portfolio includes cash. cash equivalents and restricted cash and investments of $389.4 million that earn interest at market rates. Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investments held during the year were comprised of highly rated instruments such as certificates of deposits, money market instruments, obligations issued by the U.S. government and U.S government agencies as well as corporate debt securities. As of December 31, 2022, these instruments have a maturity of less than a year.

As of December 31, 2022, a hypothetical annual change of 100 basis points on the interest rates of our investments would result in a $3.0 million fluctuation of interest income in our portfolio.

Accounts receivable, accounts payable and accrued liabilities bear no interest. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio.

Foreign Currency Risk

We are exposed to financial risk related to the fluctuation of foreign currency exchange rates. Foreign currency risk for the Company is the risk variations in exchange rates between the U.S. dollar and foreign currencies, primarily with the Canadian dollar, Swiss Franc and Great British Pound, which could affect our operating and financial results.

As of December 31, 2022, we had approximately $2.2 million of foreign denominated third-party payables included in the Company's accounts payable and accrued liabilities balance. An assumed 10% fluctuation in the exchange rates would have an approximate $0.2 million fluctuation in the amounts due. There were no other foreign currency fluctuations that would have had a material impact on our financial condition or results of operations as of December 31, 2022.

Inflation Risk

Inflation has continued to increase during 2022 and is expected to continue to increase for the near future. Inflation generally affects us by increasing our cost of labor, commercial support, manufacturing and clinical trial expenditures. In addition, our investment portfolio may experience the risk of realized losses on our investments if we were to sell before maturity due to the market volatility caused by increasing interest rates.

Credit Risk

Our exposure to credit risk generally consists of cash and cash equivalents, short-term investments and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions and invest the excess cash in highly rated investments. Our investment policy limits investments to certain types of debt and money market instruments issued by institutions primarily with investment grade credit ratings and places restriction on maturities and concentrations by asset class and issuer. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio, due to the short-term nature of the investments and our current ability to hold these investments to maturity.

We are subject to credit risk in connection with our accounts receivable due from our two customers which accounted for all of our accounts receivable, net balances as of December 31, 2022. We monitor economic conditions and the creditworthiness of our customers. We regularly communicate with our customers regarding the status of receivable balances and have not experienced any issues with collectability. The timing between the recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms range from 30 to 45 days. In 2022, we did not recognize any allowance for doubtful accounts receivable related to credit risk for our customers or write any amounts off.

ITEM 8. Financial Statements and Supplementary Data

The information required by this Item 8 is contained on pages F-1 through F-34 of this report and is incorporated herein

by reference.

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 271) F-1

Consolidated Balance Sheets F-5

Consolidated Statements of Shareholders' Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Financial Statements F-9

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive and financial officers (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

Management has assessed the effectiveness of our internal control over financial reporting based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting has been audited by PricewaterhouseCoopers LLP an independent registered public accounting firm, as stated in their attestation report herein, which appears in the "Index to Consolidated Financial Statements" in Part IV.

Inherent Limitations of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During the quarter ended December 31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

The information required by this Item and not set forth below will be set forth in the section headed “—Election of Directors” and “Information Regarding the Board of Directors and Corporate Governance” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders (or amended Annual Report on Form 10-K) to be filed with the SEC by April 28, 2023 (our Proxy Statement) and is incorporated in this Annual Report by reference.

We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Corporate Code of Ethics and Conduct. The Corporate Code of Ethics and Conduct is available on our website at http://www.auriniapharma.com under the Corporate Governance section of our Investors page. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver. Shareholders may request a free copy of the Corporate Code of Ethics and Conduct from c/o Aurinia Pharmaceuticals Inc., #1203-4464 Markham St., Victoria, BC, V8Z 7X8, Attn: Corporate Secretary.

Item 11. Executive Compensation

The information required by this Item will be set forth in the section headed “Executive Compensation” in our Proxy Statement and is incorporated in this Annual Report by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement and is incorporated in this Annual Report by reference.

Information regarding our equity compensation plans will be set forth in the section headed “Executive Compensation” in our Proxy Statement and is incorporated in this Annual Report by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this Item will be set forth in the section headed “Transactions With Related Persons” in our Proxy Statement and is incorporated in this Annual Report by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item will be set forth in the section headed “Appointment of Selection of Independent Registered Public Accounting Firm” in our Proxy Statement and is incorporated in this Annual Report by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

a.We have filed the following documents as part of this Annual Report:

1.Consolidated Financial Statements.

The following financial statements are filed as part of this report:

Our consolidated financial statements are listed under Part II, Item 8. "Index to Consolidated Financial Statements" in this Annual Report.

2.Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not material or the required information is shown under Part II, Item 8. “Index to Consolidated Financial Statements” in this Annual Report.

3.Exhibits

The following exhibits, as required by Item 601 of Regulation S-K, which are incorporated herein by reference, are filed or furnished with this Annual Report, in each case as indicated therein.

Incorporation by Reference

ExhibitNumber Description Form SEC File No. Exhibit Filing Date

4.2 Reference is made to Exhibits 3.1 and 3.2

10.20+* Form of Inducement Restricted Stock Unit Award

10.21+* Form of Restricted Stock Unit Award under the Equity Incentive Plan

21.1* List of Subsidiaries of Registrant

24.1* Power of Attorney (contained in signature page of this report)

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

+ Indicates a management contract or compensatory plan.

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AURINIA PHARMACEUTICALS INC.

February 27, 2023 By: /s/ Peter Greenleaf

Peter Greenleaf

Chief Executive Officer

(Principal Executive Officer)

SIGNATURES AND POWER OF ATTORNEY

We, the undersigned directors and officers of Aurinia Pharmaceuticals Inc., hereby severally constitute and appoint Peter Greenleaf and Joseph Miller, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of us might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Title Date

/s/ Peter Greenleaf Chief Executive Officer, Director February 27, 2023

Peter Greenleaf (Principal Executive Officer)

/s/ Joseph Miller Chief Financial Officer February 27, 2023

Joseph Miller (Principal Financial and Accounting Officer)

/s/ Brinda Balakrishnan Director February 27, 2023

Brinda Balakrishnan, M.D., Ph.D.

/s/ Daniel Billen Director February 27, 2023

Daniel Billen, Ph.D.

/s/ Joseph P. Hagan Director February 27, 2023

Joseph P. Hagan

/s/ David R.W. Jayne Director February 27, 2023

David R.W. Jayne, M.D., FRCP, FRCPE, FMedSci

/s/ Jill Leversage Director February 27, 2023

Jill Leversage

/s/ R. Hector MacKay-Dunn Director February 27, 2023

R. Hector MacKay-Dunn, J.D., Q.C.

/s/ George M. Milne, Jr. Chairman February 27, 2023

George M. Milne, Jr., Ph.D.

F-1

F-2

F-3

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants, Licensed Public Accountants

Oakville, Canada

February 27, 2023

We have served as the Company's auditor since at least 1997. We have not been able to determine the specific year we began serving as auditor of the Company.

F-4

AURINIA PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31,

Assets

Current assets:

Cash, cash equivalents and restricted cash $ 94,172 $ 231,900

Non-current assets:

Acquired intellectual property and other intangible assets, net 6,425 8,404

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued liabilities 39,990 34,947

Operating lease liabilities 936 1,059

Non-current liabilities:

Deferred compensation and other non-current liabilities 12,166 15,950

Commitments and Contingencies (Note 13)

Shareholders’ Equity:

Accumulated other comprehensive loss (1,061) (852)

Total liabilities and shareholders' equity $ 470,860 $ 543,367

The accompanying notes are an integral part of these consolidated financial statements.

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Years ended December 31,

Revenue:

Operating expenses:

Other comprehensive loss:

Unrealized loss on available-for-sale securities, net of tax of nil (209) (47) —

Basic and diluted loss per common share $ (0.76) $ (1.40) $ (0.87)

The accompanying notes are an integral part of these consolidated financial statements.

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(in thousands) Shares Amount

Exercise of warrants 1 2 (1) — — 1

Issuance of common shares in conjunction with ESPP program 37 808 (223) — — 585

Unrealized loss on available-for-sale securities, net — — — (47) — (47)

Unrealized loss on available-for-sale securities, net — — — (209) — (209)

The accompanying notes are an integral part of these consolidated financial statements.

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Years ended December 31,

Cash flows from operating activities:

Upfront license and milestone expense — 10,000 —

Net changes in operating assets and liabilities:

Prepaid expenses and other current assets (2,404) (5,335) 2,559

Deferred revenue 3,048 — —

Cash flows from investing activities:

Upfront license payment — (6,000) —

Purchase of long-lived assets and intangibles (292) (303) (5,668)

Additions to internal use-software implementation costs — (1,198) (1,675)

Capitalized patent costs — — —

Cash flows from financing activities:

Proceeds from exercise of warrants — 365 1

Supplemental cash flow information:

The accompanying notes are an integral part of these consolidated financial statements.

F-8

1. Organization and Description of Business

Aurinia Pharmaceuticals Inc. (Aurinia or the Company) is a fully integrated biopharmaceutical company focused on delivering therapies to treat targeted patient populations that are impacted by autoimmune, kidney and rare diseases with a high unmet medical need. In January 2021, the Company introduced LUPKYNIS® (voclosporin), the first U.S. Food and Drug Administration (FDA) approved oral therapy for the treatment of adult patients with active lupus nephritis (LN) and continues to conduct pre-clinical, clinical and regulatory activities to support the LUPKYNIS development program as well as our other assets. We engaged with Otsuka Pharmaceutical Co., Ltd. (Otsuka) as a collaboration partner for development and commercialization of LUPKYNIS in the European Union (EU), Japan, as well as the United Kingdom, Russia, Switzerland, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the Otsuka Territories).

On August 17, 2021, the Company announced the addition of two novel assets AUR200 and AUR300. AUR200 and AUR300 are currently undergoing pre-clinical development with projected submission of Investigational New Drug Applications (INDs) to the FDA for AUR200 in 2023 and for AUR300 in 2024.

On September 15, 2022, the European Commission (EC) granted marketing authorization of LUPKYNIS to Otsuka. The centralized marketing authorization is valid in all EU member states as well as in Iceland, Liechtenstein, Norway and Northern Ireland.

Aurinia's head office is located at #1203-4464 Markham Street, Victoria, British Columbia, Canada and its registered office is located at #201, 17873-106 A Avenue, Edmonton, Alberta. Aurinia also has a U.S. Commercial office located at 77 Upper Rock Circle, Rockville, Maryland, United States.

Aurinia is incorporated pursuant to the Business Corporations Act (Alberta). The Company’s common shares are traded on the Nasdaq Global Market (Nasdaq) under the symbol AUPH.

2. Summary of Significant Accounting Policies

Basis of presentation: The Company follows accounting standards established by the Financial Accounting Standards Board (FASB) to ensure consistent reporting of financial condition, results of operations, and cash flows. References to generally accepted accounting principles (GAAP) or U.S. GAAP in these footnotes are to the FASB Accounting Standards Codification (ASC or the Codification). At the end of the second quarter of 2020, the Company determined that it no longer qualified as a Foreign Private Issuer under the SEC rules. As a result, beginning January 1, 2021 the Company is required to report with the SEC on domestic forms and comply with domestic company rules in the United States.

Certain prior year amounts and notes to the consolidated financial statements have been reclassified to conform with the current year presentation. Other current assets and deferred revenue which were previously included in prepaid expenses and other current liabilities respectively, has been separately presented on the consolidated balance sheets as of December 31, 2022. Inventory reserves which was previously included in other, net on the consolidated statements of cash flows, has been separately presented for the years ended December 31, 2022 and December 31, 2021. Additionally, amortization of intangible assets which was presented separately on the statements of operations, has been included in SG&A and is included with depreciation on the consolidated statements of cash flows. Accounts payable and accrued liabilities and cash, cash equivalents and restricted cash and short-term investments balances have been reclassified in the notes to the consolidated financial statements. These reclassifications have no impact on previous reported total assets, total liabilities, net loss, stockholders’ equity or operating cash flows.

Principles of consolidation: These financial statements present the consolidated financial position of the Company and its wholly owned subsidiaries, Aurinia Pharma U.S., Inc. (Delaware incorporated) and Aurinia Pharma Limited (UK incorporated) as of December 31, 2022 and 2021, and the results of operations and cash flows for the three years ended December 31, 2022, 2021 and 2020. All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates: The preparation of the accompanying financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure

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of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from those estimates.

Segment information: The Company operates in one operating segment engaged in the research, development and commercialization of therapeutic drugs in which revenues are derived from product, license, and contract revenues. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (CODM), the chief executive officer, in deciding how to allocate resources and assessing performance. The Company's CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

Functional currency: The functional currency for the Company and all of its foreign subsidiaries is determined to be the U.S. dollar, therefore there is no currency translation adjustment upon consolidation as the remeasurement of gains or losses are recorded in the consolidated statement of operations. All monetary assets and liabilities denominated in a foreign currency are remeasured into U.S. dollars at the exchange rate on the balance sheet date. Non-monetary assets and liabilities (along with their related expenses) are translated at the rate of exchange in effect on the date assets were acquired. Monetary income and expense items are translated at the average foreign currency period. Foreign exchange gains and losses arising on translation or settlement of a foreign currency denominated monetary item are included in the consolidated statements of operations.

COVID-19: U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the annual consolidated financial statements and accompanying notes. The annual consolidated financial statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The full extent to which the novel coronavirus (COVID-19) pandemic will directly or indirectly impact the Company’s financial statements related to our estimates and assumptions or results of operations will depend on future developments that are uncertain at this time. As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

Fair value measurements: The Company's financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities. The Company has determined the carrying values of these financial instruments approximate their fair value because of the relatively short period to maturity of the instruments.

Financial assets and liabilities are categorized based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

Concentration of credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash, cash equivalents and restricted cash, short term investments and accounts receivable, net. The Company attempts to minimize the risks related to cash and cash equivalents and restricted cash and investments by investing in a range of financial instruments. The Company established guidelines related to credit ratings and maturities intended to safeguard principal balances, earn a return on investments and to maintain liquidity. The Company's investment portfolio is maintained in accordance with its investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. The Company does not enter into any investment transaction for trading or speculative purposes.

The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as high quality corporate debt securities, and places restrictions on maturities and concentration by type and issuer. The Company maintains cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation and Canada Deposit Insurance Corporation and concentrated within a limited number of financial institutions. The accounts are monitored by management to mitigate the risk.

The Company is exposed to financial risk related to the fluctuation of foreign currency exchange rates which could have a material effect on its future operating results or cash flows. Foreign currency risk is the risk that variations in exchange rates between the U.S. dollar and foreign currencies, primarily with the Canadian dollar, Swiss Franc and Great British Pound will

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affect the Company's operating and financial results. The Company holds the majority of its cash and cash equivalents in U.S. dollars and the majority of its expenses, including commercial and clinical trial costs are also denominated in U.S. dollars, which mitigates the risk of material foreign exchange fluctuations.

Major customers: The Company currently has two main customers for U.S. commercial sales of LUPKYNIS and a collaboration partner for sales of LUPKYNIS in the Otsuka Territories. Revenues from the Company's two main customers in the U.S. accounted for approximately 45% and 35%, respectively, of the Company's total revenues for the year ended December 31, 2022. The two main customers accounted for 100% of the Company’s accounts receivable, net balance as of December 31, 2022. Otsuka, the Company's collaboration partner for sales outside the U.S. accounted for approximately 20% of the Company's total revenue for the year ended December 31, 2022.

In late March 2022, the Company provided a nominal additional discount to both of its two main U.S. customers, applicable for the 2022 calendar year, in connection with holding additional amounts of LUPKYNIS on hand due to supply chain concerns. In December 2022, the Company extended the nominal discount to the end of 2023. Such discounts, or any future discounts, may result in reduced sales to these customers in subsequent periods and substantial fluctuations in our revenues from period to period. The Company monitors economic conditions, the creditworthiness of customers and government regulations and funding, both domestically and abroad. The Company regularly communicates with its customers regarding the status of receivable balances. Global economic conditions and customer specific factors may require the Company to periodically re-evaluate the collectability of its receivables and based on this evaluation the Company could potentially incur credit losses. The Company has had no historical write-offs related to our customers or receivables.

Accounts receivable, net: Accounts receivables are stated at their net realizable value. The Company's accounts receivable represents amounts due to the Company from product sales and from its Otsuka collaboration agreement (Note 10). Sales and services that have not been invoiced as of the balance sheet date are recorded as unbilled accounts receivable. As of December 31, 2022 and December 31, 2021, accounts receivable, net are $13.5 million and $15.4 million, respectively. The timing between the recognition of revenue for product sales and the receipt of payment is not significant. The Company's standard credit terms range from 30 to 45 days. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between the transfer of the promised good to the customer and receipt of payment will be one year or less.

The Company's estimates the allowance for doubtful accounts using the current expected credit loss (CECL) model. Under the CECL model, the allowance for doubtful accounts reflects the net amount expected to be collected from the account receivables. The Company evaluates the collectability of these cash flows based on the asset’s amortized cost, the risk of loss even when that risk is remote, losses over an asset’s contractual life, and other relevant information available to us. Accounts receivable balances are written off against the allowance when it is probable that the receivable will not be collected. Given the nature of the Company's accounts receivable, it determined that an allowance for doubtful accounts was nil at December 31, 2022 and December 31, 2021.

Accounts receivables are recorded net of estimates of variable consideration for which reserves are established and which result from discounts that are offered within contracts between us and two specialty pharmacies and one specialty distributor in the United States. These reserves are recorded as a reduction of accounts receivable.

Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist primarily of operating accounts, money market funds and bank money market accounts which are recorded at fair value. Cash and cash equivalents totaled $94.2 million as of December 31, 2022. The Company has invested its cash reserves in short term U.S. dollar denominated, fixed rate, highly liquid and highly rated financial instruments such as treasury notes, banker acceptances, bank bonds, and term deposits.

Restricted cash: Restricted cash consists of the 2021 Employee Share Purchase Plan (ESPP) deposits of $0.1 million and $0.3 million as of December 31, 2022 and December 31, 2021, respectively.

Investments: The Company classifies its debt securities as either held to maturity or available-for-sale in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320, Investments — Debt Securities. Investments classified as held to maturity are carried at amortized cost when management has the positive intent and ability to hold them to maturity. Investments classified as available-for-sale are carried at fair value with unrealized losses

F-11

reported in other comprehensive loss within shareholders’ equity. Realized losses on available-for-sale securities are recorded in other income (expense), net. Interest income (expense) is recorded separately on the consolidated statements of operations.The cost of securities sold is based on the specific-identification method.

Intangible assets: Intangible assets are amortized over their useful lives using methods that correlate to the pattern in which the economic benefits are expected to be realized. All intangible assets are amortized on a straight-line basis. The Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. The carrying amounts of these assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Refer to the long-lived assets section below for impairment considerations.

Acquired intellectual property and patents

External patent costs specifically associated with preparing, filing, obtaining and protecting patents are capitalized and amortized straight-line over the shorter of the estimated useful life and the patent life, commencing in the year of the grant of the patent. Other intellectual property expenditures are recorded as R&D expenses on the consolidated statements of operations as incurred. Patents do not contain the option to extend or renew. External legal costs incurred to defend a patent are capitalized when it is believed that the future economic benefit of the patent will be increased and a successful defense is probable.

Separately acquired intellectual property is shown at historical cost. The initial recognition of a reacquired right is recognized as an intangible asset measured on the basis of the remaining contractual term of the related contract. If the terms of the contract giving rise to a reacquired right are favorable relative to the terms of current market transactions for the same or similar items, the difference is recognized as a gain or loss in the consolidated statements of operations and comprehensive loss. Purchased intellectual property and reacquired rights are capitalized and amortized on a straight-line basis in the consolidated statements of operations and comprehensive loss over periods ranging from 10 to 20 years.

Property, plant and equipment: Property, plant and equipment are recorded at cost and are depreciated using the straight-line method. Expenditures for additions are capitalized and leasehold improvements are amortized over the lesser of the expected lease term or the estimated useful life of the improvement. Expenditures for maintenance and repairs are charged to expense as incurred; however, maintenance and repairs that improve or extend the life of existing assets are capitalized. The carrying amount of assets disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses from property and equipment disposals are recognized in the year of disposal.

Recoverability and impairment of long-lived assets: ASC Topic 360 requires long-lived assets, including definite-lived intangible assets, to be evaluated for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The judgments made related to the expected useful lives of long-lived assets, definitions of lease terms and the Company’s ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance and other factors. If indicators are present, assets are grouped to the lowest level for which identifiable cash flows are largely independent of other asset groups and cash flows are estimated for each asset group over the remaining estimated life of each asset group. If the undiscounted cash flows estimated to be generated by the asset group are less than the asset’s carrying amount, impairment is recognized in the amount of excess of the carrying value over the fair value. The Company recorded no asset impairment charges during the years ended December 31, 2022, 2021 and 2020.

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Leases: The Company assesses all contracts at inception to determine whether a lease exists. The Company’s leases are all classified either as operating or finance leases per ASC 842. The Company leases office space under operating leases that typically provide for the payment of minimum annual rentals and may include scheduled rent increases. The Company also entered into a manufacturing agreement that contained an embedded lease of a dedicated manufacturing facility that will be accounted for as a finance lease once lease commencement begins (see Note 15).

The Company made an accounting policy election, the practical expedient that allows lessees to treat the lease and non-lease components of leases as a single lease component. Leases with an initial term of 12 months or less are not recorded on the Company's consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of operations. Fixed costs associated with these arrangements are disclosed in Note 15 of the financial statements.

Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company used the incremental borrowing rate for all of its leases, as the implicit interest rate was not readily determinable. In determining the Company’s incremental borrowing rate of each lease, the Company considered recent rates on secured borrowings, observable risk-free interest rates and credit spreads correlating to the Company's creditworthiness, the impact of collateralization and the term of each of the Company's lease agreements. The lease terms range from 12 to 128 months.

Deferred Compensation Arrangements: The Company has recorded deferred compensation arrangements in liabilities for estimated future employee benefits relating to applicable historical employment arrangements. The deferred compensation arrangements are part of the resolution of the board of directors of the company dated March 8, 2012. Pursuant to ASC Topic 710, the Company recognizes future benefits provided by employee retention arrangements, as deferred compensation, which is recognized when the Company determines that it is probable to make future payments. The deferred compensation is based on an income approach for the estimated future net revenues of voclosporin using an internal risk-adjusted net present value of the future payments to be made to the individuals.

The Company is required to use judgment to determine the most appropriate model to use to measure the deferred compensation liability and is required to use significant judgment and estimates in determining the inputs into the model. The royalty rates applied to the net revenue are dependent on the type of net revenue earned, which includes product sales and royalty revenue. There are multiple unobservable and inherently uncertain inputs. The determination of this deferred compensation is subject to significant judgments and estimates in determining the assumptions related to future net revenues and the determination of the discount rate for the net present value calculation. The net revenue estimate for the United States includes assumptions related to the number of patients being treated (including patients who initially start taking the product but subsequently discontinue), dosing adjustments, duration of treatment, timing of generics and competitors entering the market, market penetration and potential future use in new indications. Additional variables for ex-U.S. geographies include timing of approval in ex-U.S. territories, escalating royalty rates, net pricing, government payor coverage of the product, and market penetration. In determining the estimate for ex-U.S. revenues, the Company relies on forecasts provided by its collaboration partner.

Management developed the model and inputs in conjunction with their internal scientific team and utilized third party scientific studies, information provided by third party consultants engaged by the Company, information from medical and pharmacy claims databases and research papers as sources to develop their inputs; application and usage of these inputs is also informed by product sales and distribution data, ongoing market research fielded by the company and third parties, and our continually evolving understanding of the market as the U.S. launch progresses. Management believes the liability is based on reasonable assumptions; however, these assumptions may be incomplete or inaccurate and unanticipated events and circumstances may occur. There are numerous significant inputs into the model all of which individually or in combination may result in a material change to the obligation.

Initially, these obligations are measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting periods. Subsequent re-measurements as a result of performance obligations met by the Company or changes in assumptions are recognized in the consolidated statement of operations.

Contingencies:In the normal course of business, the Company may be subject to loss contingencies, such as legal proceedings, amounts arising from contractual arrangements and claims arising out of the Company’s business that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental liability, and tax

F-13

matters. In accordance with ASC Topic 450, Accounting for Contingencies, (ASC 450), the Company records accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company, in accordance with this guidance, does not recognize gain contingencies until realized or realizable.

Common Shares: The Company’s shares have no par value and therefore, upon issuance of shares, all amounts related to the shares are credited to common shares on the balance sheet. The value of common shares includes cash amounts received or paid for the shares and the fair value of equity awards and warrants. Amounts for common shares are offset by share issue costs associated with equity offerings.

Inventories: Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value. The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. Capitalized costs of inventories mainly include third party manufacturing costs, transportation, storage, insurance and allocated internal labor. The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

Revenue Recognition: Pursuant to Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when a customer obtains control of promised goods or services. The Company records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) a performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Revenue is recognized for the applicable performance element when each distinct performance obligation is satisfied.

Product Revenues

In the United States (and territories), the Company sells LUPKYNIS primarily to a limited number of specialty pharmacies and specialty distributors. These customers subsequently resell the Company's products to health care providers and patients. Revenues from product sales are recognized when the customer obtains control of the Company's product, which typically occurs upon delivery to the customer.

The Company's estimates of reserves established for variable consideration are calculated based upon utilizing the expected value method. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as addition information becomes available.

Significant judgment is required in estimating variable consideration. In making these estimates, the Company considers historical data, including patient mix and inventory sold to our customers that has not yet been dispensed. The Company uses a data aggregator and historical claims to estimate variable consideration for inventory sold to our customers, including specialty pharmacies and specialty distributors, that has not yet been dispensed. Actual amounts may ultimately differ from the Company's estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment. As of December 31, 2022, the Company did not have any material adjustments to variable consideration estimates based on actual results.

More specifically, these adjustments include the following:

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Prompt Pay Discounts: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Customer Fees: The Company pays certain customer fees, such as fees for certain data that customers provide to the Company. The Company records fees paid to its customers as a reduction of revenue, unless the payment is for a distinct good or service from the customer and the Company can reasonably estimate the fair value of the goods or services received. If both conditions are met, the Company records the consideration paid to the customer as SG&A expense.

Government Rebates: The Company estimates its government rebates, primarily Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses on the consolidated balance sheet.

Medicaid rebates relate to the Company's estimated obligations to states under established reimbursement arrangements. Rebate accruals are recorded in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability, which is included in other current liabilities. The Company's liability for Medicaid rebates consists of estimates for claims that a state will make for the current quarter, claims for prior quarters that have been estimated for which an invoice has not been received, invoices received for claims from the prior quarters that have not been paid and an estimate of potential claims that will be made for inventory that exists in the distribution channel at period end.

For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.

Co-payment Assistance: Co-payment assistance represents financial assistance to qualified patients, assisting them with prescription drug co-payments required by insurance. The program is administered by the specialty pharmacies. The calculation of the accrual for co-payment assistance is based on the co-payments administered on the Company's behalf by the specialty pharmacies.

Payor Rebates and Administration Fees: Payor rebates and administration fees represent our estimated obligations to third parties, primarily benefit managers. Accruals are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability. These rebates and fees result from formulary position and price increase limit allowances (price protection) and administration fees. The calculation of the accrual for these items are based on the estimated payors buying patterns and the resulting applicable contractual rebate rate(s) to be earned over a contractual period.

Manufacturing Supply Services: The Company also has agreements with its partners that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, any additional payments are recorded as product sales when the licensee obtains control of the goods, which is typically upon delivery. Certain agreements include terms where the Company can partially bill for drug substance used before the manufacturing cycle is complete, resulting in a deferred revenue which is to be recognized once delivery occurs.

License and Collaboration Revenue

The Company enters into out-licensing agreements that are within the scope of ASC 606, under which it licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments, payments for manufacturing supply services the Company provides through its contract manufacturers, and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues.

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In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

Licenses of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of each arrangement that includes development or commercial sales milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Other Services Revenue: The Company’s agreements may include R&D, manufacturing or other services to be performed by the Company on behalf of the counterparty. If these services are determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to these services as revenue either over time based on an appropriate measure of progress when the performance by the Company does not create an asset with an alternative use and the Company has an enforceable right to payment for the performance completed to date or at a point in time as the related performance obligations are satisfied.

Royalty Revenue

For arrangements that include sales-based royalties, revenue is recognized when the underlying product sales have occurred. Revenue is recorded based on estimated quarterly net sales reports provided by our partner. Differences between actual results and estimated amounts are adjusted in the period in which they become known, which typically follows the quarterly period in which the estimate is made. Sales based milestone payments are recognized in the period once the milestone objectives have been achieved.

Costs to obtain a contract

As the majority of our contracts are short-term in nature, sales commissions are generally expensed when incurred as the amortization period would have been less than one year. The costs are recorded within SG&A.

Cost of sales: Cost of sales consist primarily of cost of inventories for LUPKYNIS and semi-finished product, which mainly includes third party manufacturing costs, transportation, storage, insurance and allocated internal labor. Cost of sales also includes costs related to collaboration revenues.

Research and development costs: R&D costs are accounted for in accordance with ASC Topic 730, Research and Development, (ASC 730) and are expensed as incurred. R&D costs consist primarily of the cost of salaries, share-based

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compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for R&D activities, including nonclinical studies, clinical trials, manufacturing costs and professional services. The costs of services performed by others in connection with the R&D activities of the Company, including R&D conducted by others on behalf of the Company, shall be included in R&D costs and expensed as the contracted work is performed.

We accrue the costs incurred under our agreements with these third parties based on actual work completed in accordance with agreements established with these third parties. We determine the accruals for R&D costs through monitoring invoices received and discussions with internal personnel and external service providers as to the progress or stage of completion of the clinical studies and the agreed-upon fee to be paid for such services. Where contingent milestone payments are due to third parties under R&D arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are probable to be achieved.

R&D expenses for the years ended December 31, 2022, 2021 and 2020, were $45.0 million, $51.1 million and $50.3 million, respectively, and are included in total cost of sales and operating expenses on the accompanying consolidated statements of operations.

Selling, general and administrative expenses: The Company's SG&A expenses include commercial and allocated administrative personnel, corporate facility and external costs required to support the marketing and sales of LUPKYNIS. These

SG&A costs include corporate facility operating expenses and allocated depreciation; commercial, marketing, advertising, pharmacovigilance, publications, tradeshows, advisory boards, samples and operations in support of LUPKYNIS; patient assistance program costs; human resources; finance, legal, information technology and support personnel expenses; and other corporate costs such as telecommunications, insurance, audit and government affairs. We expense SG&A expenses as they are incurred.

The Company uses a third-party logistics provider to perform a full order to cash service, which includes warehousing and shipping directly to two specialty pharmacies and receiving orders from a specialty distributor for shipping to hospitals, on our behalf. As such, since these costs are not integral to bringing the inventories to a salable condition, we elected not to treat shipping and handling costs as a fulfillment activity. Shipping and handling costs related to order fulfillment are recorded in SG&A expenses.

Advertising and marketing costs are expensed as incurred and included in SG&A. For the years ended December 31, 2022, 2021 and 2020, advertising and marketing costs totaled $16.3 million, $15.4 million and $10.0 million, respectively.

SG&A expenses for the years ended December 31, 2022, 2021 and 2020 were $196.4 million, $173.5 million and $97.3 million, respectively, and are included in total cost of sales and operating expenses on the accompanying consolidated statements of operations.

Shared-based compensation: The Company follows ASC Topic 718, Compensation - Stock Compensation (ASC 718), which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors. The Company records compensation expense based on the fair value on the grant date using the graded accelerated vesting method for all share-based payments related to stock options, performance awards (PAs), restricted stock units (RSUs) and purchases under the Company's 2021 ESPP. The estimated fair value of performance-based awards is measured on the grant date and is recognized when it is determined that it is probable that the performance condition will be achieved. The Company has elected a policy for all share-based awards to estimate forfeitures based on historical forfeiture experience at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates.

Income taxes:The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, Income Taxes (ASC 740). Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that such tax rate changes are enacted. The portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized must then be offset by recording a valuation allowance. Financial statement recognition of a tax position taken or expected to be taken in a tax return is determined based on a more-likely-than-not threshold of that position being sustained. If the tax position meets this threshold, the benefit to be recognized is measured

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as the largest amount that is more likely than not to be realized upon ultimate settlement. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard requiresthat credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishesadditional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances tobe recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized foravailable-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized creditlosses if fair value increases. The adoption of the standard as of January 1, 2020 did not have a material impact on the Company’s consolidated financialstatements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement. Topic 820 requires to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when the restrictions from redemptions might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. The new standard also amends that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The new standard is effective for fiscal years beginning after December 15, 2019. The standard should be applied retrospectively to the date of initial application of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The Company elected to adopt the amendment as of January 1, 2020, which did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)-Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. ASU 2018-15 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company adopted ASU 2018-15 effective January 1, 2020 and applied the standard prospectively to implementation costs incurred in its cloud computing arrangements.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangement (Topic 808): Clarifying the Integration between Topic 808 and Topic 606. The new standard clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. Further, the new standard adds unit-of-account guidance to Topic 808 to align with the guidance in Topic 606 when an entity is assessing whether the collaborative arrangement or part of the arrangement is within the scope of Topic 606. The new standard requires that in transactions with a collaborative arrangement participant that is not directly related to sales to third parties, presenting under Topic 606 is precluded if the collaborative arrangement participant is not a customer. The new standard is effective for fiscal years beginning after December 15, 2019. The standard should be applied retrospectively to the date of initial application of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company elected to adopt the amendment as of January 1, 2020, which did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which clarifies and simplifies certain aspects of the accounting for income taxes. The standard is effective for years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2020. The Company adopted the ASU effective January 1, 2021 with no material impact on the consolidated financial statements.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to make annual disclosures about transactions with a government (including government assistance) by analogizing to a grant or contribution accounting model. The required

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disclosures include the nature of the transaction, the entity's related accounting policy, the financial statement line items affected and the amounts reflected in the current period financial statements, as well as any significant terms and conditions. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted the ASU effective January 1, 2022, with no material impact on the consolidated financial statements.

3. Fair Value Measurement

The Company's financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities. The carrying value of accounts receivable, accounts payable and accrued liabilities approximate their fair values because of their short-term nature. Estimated fair values of available-for-sale debt securities are generally based on prices obtained from commercial pricing services.

In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities). As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

•Level 1 - Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3 - Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table summarizes the financial assets (cash, cash equivalents, restricted cash and short-term investments) measured at fair value on a recurring basis:

(in thousands) Level 1 Level 2 Level 3 Total

Financial assets:

Cash, cash equivalents and restricted cash $ 94,172 $ — $ — $ 94,172

(in thousands) Level 1 Level 2 Level 3 Total

Financial assets:

Cash, cash equivalents and restricted cash $ 231,900 $ — $ — $ 231,900

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The Company's Level 1 instruments include cash, cash equivalents and restricted cash that are valued using quoted market prices. We estimate the fair values of our investments in corporate debt securities, government and government related securities and certificates of deposits by taking into consideration valuations obtained from third-party pricing services. The fair value of our short-term investments classified within Level 2 is based upon observable inputs that may include benchmark yield curves, reported trades, issuer spreads, benchmark securities and reference data including market research publications. At December 31, 2022 and December 31, 2021, we reclassified $125.2 million and $206.7 million of commercial paper from Level 1 to Level 2, respectively. Additionally, at December 31, 2022 and December 31, 2021, the weighted average remaining contractual maturities of our Level 2 investments were approximately for 7 months and 8 months, respectively. It is the Company's intent for these investments to have an overall rating of A-1, or higher, by Moody’s, Standard & Poor’s and Fitch.

No credit loss allowance was recorded as of December 31, 2022 and December 31, 2021, as we do not believe the unrealized loss is a result of a credit loss due to the nature of our investments. We also considered the current and expected future economic and market conditions and determined that the estimate of credit losses was not significantly impacted.

Refer to Note 4, “Cash, Cash Equivalents and Restricted Cash and Short-Term Investments,” for the carrying amount and related unrealized gains (losses) by type of investment.

4. Cash, Cash Equivalents and Restricted Cash and Short-Term Investments

As of December 31, 2022 and December 31, 2021, the Company had $389.4 million and $466.1 million, respectively of cash, cash equivalents, restricted cash and short-term investments, summarized below. As of December 31, 2022, $295.5 million were available-for-sale debt securities which are carried at fair market value and nil were held to maturity. As of December 31, 2021, $215.0 million were classified as available-for-sale and $19.2 million were held to maturity which was carried at amortized cost and was approximately equal to fair market value.

Cash, cash equivalents and restricted cash $ 94,172 $ — $ — $ 94,172

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Cash, cash equivalents and restricted cash $ 231,900 $ — $ — $ 231,900

Held-to-maturity securities corporate bond 19,228 19,228

As of December 31, 2022 and December 31, 2021, accrued interest receivable from the investments were $1.1 million and $0.1 million, respectively and recorded as prepaid expenses and other current assets on the consolidated balance sheets. As of December 31, 2022 and December 31, 2021, the Company had $0.3 million and $47 thousand of unrealized losses on available-for-sale securities, net of tax, respectively, which are included as a component of comprehensive loss on the consolidated statement of operations. Currently the Company does not intend to sell the investments before recovery of their amortized cost basis, which may be maturity. We have determined that the gross unrealized losses on our investments at December 31, 2022 were temporary in nature. Realized gains or losses were immaterial for the years ended December 31, 2022 and December 31, 2021.

The Company's investments as of December 31, 2022 mature at various dates through September 2023.

5. Inventories, net

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value. The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. Capitalized costs of inventories mainly include third party manufacturing costs, transportation, storage, insurance, and allocated internal labor.

The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories. As of December 31, 2022, we have recorded reserves of finished good inventories of approximately $3.9 million which were primarily related to process validation batches used for FDA approval. Additionally, as of December 31, 2022 and December 31, 2021 we have inventory deposits of $5.5 million and $3.9 million that are primarily related to the purchase of drug substance that are currently recorded under prepaid expenses and other current assets.

The components of inventories, net are as follows:

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6. Prepaid Expenses

Prepaid expenses are as follows:

7. Property and Equipment, net

Property and equipment, net are as follows:

Construction in progress — $ 255 $ 393

Less accumulated depreciation (1,455) (836)

Property and equipment, net $ 3,650 $ 4,418

Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $629 thousand, $663 thousand and $82 thousand, respectively, which is included in SG&A expenses on the consolidated statements of operations.

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8. Intangible Assets

The following table summarizes the carrying amount of intangible assets, net of accumulated amortization.

Acquired intellectual property and reacquired rights 12 15,126 (9,838) 5,288

Internal-use software implementation costs 3 2,873 (2,043) 830

Acquired intellectual property and reacquired rights 12 15,126 (8,804) 6,322

Amortization expense recognized by the Company related to intangible assets was $2.1 million, $2.1 million and $1.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. Amortization expense as it relates to the amortization of acquired intellectual property and other intangible assets resides within amortization on the consolidated statements of operations. The estimated aggregate amortization expense for intangible assets over the next five fiscal years ending December 31, 2023 through December 31, 2027 is approximately $5.6 million.

9. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are as follows:

Total accounts payable and accrued liabilities $ 39,990 $ 34,947

10. License and Collaboration Agreements

Otsuka Contract

On December 17, 2020, the Company entered into a collaboration and license agreement with Otsuka for the development and

commercialization of LUPKYNIS in the Otsuka Territories.

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As part of the agreement, the Company received an upfront cash payment of $50.0 million in 2020 for the license agreement and has the potential to receive up to $50.0 million in regulatory and pricing approval related milestones. The Company will provide semi-finished product of LUPKYNIS to Otsuka on a cost-plus basis, and will receive tiered royalties on future sales ranging from 10 to 20 percent (dependent on territory and achievement of sale thresholds) on net product sales by Otsuka, along with additional milestone payments based on the attainment of certain annual sales. In addition, certain collaboration services are to be provided to Otsuka on agreed upon rates.

In furtherance of the collaboration and license agreement with Otsuka mentioned above, on August 1, 2022, the Company entered into a commercial supply agreement with Otsuka, formalizing the terms to supply semi-finished goods of LUPKYNIS to Otsuka in the Otsuka Territories, including capacity sharing of the monoplant.

On September 15, 2022, the European Commission (EC) granted marketing authorization of LUPKYNIS. The centralized marketing authorization is valid in all EU member states as well as in Iceland, Liechtenstein, Norway and Northern Ireland. The

approval triggered a $30.0 million milestone payment to the Company, which was recognized as collaboration revenue for the year ended December 31, 2022.

For the year ended December 31, 2022 and December 31, 2021, the Company recognized $0.5 million and nil, respectively, of additional collaboration revenue from services provided under the agreement.

Riptide License

On August 17, 2021, AUR300 (M2 macrophage modulation via CD206 binding) was secured through a global licensing and research agreement with Riptide Bioscience, Inc. (Riptide), a private company. As part of the agreement, in 2021 the Company paid Riptide an upfront license fee of $6.0 million which was expensed as research and development on the condensed consolidated statements of operations. During the first quarter of 2022, Aurinia paid an additional $4.0 million to Riptide for the achievement of a onetime milestone. Additional payments are due upon certain development, clinical and regulatory milestones, and royalties will be payable upon commercialization.

11. Segment Information and Geographic Data

As the operations comprise a single reporting segment, amounts disclosed in the consolidated financial statements represent those of the single reporting unit. We have elected to disclose geographical revenue from customers based on geographical location of contracting entity (and where the related payment stream of the customer is located). Revenues from our two main customers in the U.S. accounted in total of approximately 45% and 35% of the Company's total revenues for the year ending December 31, 2022. Our collaboration partner for sales outside the U.S. accounted for approximately 20% for the year ending December 31, 2022 of the Company's total revenues.

Revenues from two customers accounted for approximately 56% and 43% for the year ending December 31, 2021. There was one customer that accounted for the vast majority of the revenues for the year ended December 31, 2020.

Revenues by Geographic Location

The following geographic information reflects revenue, net of adjustments, based on customer location:

Revenue

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Long-lived Assets by Location

Long-lived assets by location consist of net property and equipment and right-of-use assets:

Long-lived assets, net

12. Income Taxes

Income (losses) before income taxes for the years ended December 31, 2022, 2021 and 2020 was as follows:

The components of income tax expense (benefit) consisted of the following for the years ended December 31, 2022, 2021 and 2020:

Current:

Canada $ — $ — $ —

Deferred:

Canada — — —

Foreign — — —

Total deferred — — —

Income tax expense (benefit) $ 1,828 $ 760 $ (94)

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The Company's parent entity is located in Canada and therefore the Canadian statutory rate is utilized. The provision for income taxes varied from the income taxes provided based on the Canadian statutory rate of 26.7%, 26.8%, and 26.8% for the years ending December 31, 2022, 2021 and 2020, respectively. The Company's increase in tax expense is primarily driven by withholding tax payments of $1.2 million paid during 2022.

Canada statutory income tax benefit 26.7 % 26.8 % 26.8 %

Effect of tax rates on foreign jurisdictions 0.3 — (2.4)

Withholding taxes (1.1) — —

Impact of future rates and tax rate changes (0.1) (0.1) 6.1

Foreign tax credit 1.1 — —

Non-deductible share-based compensation (8.1) (4.5) (4.5)

Change in valuation allowance (21.5) (21.8) (26.0)

Scientific Research and Experimental Development (SRED) 1.1 0.3 0.4

Effective tax rate (1.7) % (0.4) % 0.1 %

The net deferred tax assets (liabilities) consisted of the following for the years ending December 31, 2022 and 2021:

Deferred tax assets:

SRED (Scientific Research and Experimental Development) 7,462 6,059

Capitalized research and development 1,663 —

Deferred tax liabilities:

Property and equipment and intangible assets (677) (837)

Total deferred tax liabilities (1,805) (2,193)

Net deferred tax assets (liabilities) $ — $ —

The Company’s valuation allowance increased by $23.2 million in 2022 as compared to 2021 as a result of the additional pre-tax book losses.

As of December 31, 2022, the Company has $518.1 million of Canada gross net operating loss (NOL) carryforwards with an expiration period of 2029 through 2042. As of December 31, 2022, the Company has approximately $5.8 million of Canada Investment Tax Credits and British Columbia Scientific Research and Experimental Development (SRED) with an expiration period of 2029 through 2042. As of December 31, 2022 the Company has approximately $10.1 million of U.S. federal gross NOL carryforwards that carryforward indefinitely, although limited to eighty percent of taxable income annually.

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Additionally, the Company has approximately $0.1 million of various state net operating loss carryforwards with varying expiration periods including carryforwards with indefinite carryforward periods and has approximately $0.4 million of U.K. gross net operating loss carryovers that carryforward indefinitely.

Uncertain Tax Positions

The Company was under examination by the Canadian Revenue Agency for years 2017 and 2018. In March 2022, the Company was notified by the Canadian Revenue Agency that the examination is now complete and there were no findings and as a result, there is no additional tax expense or benefit recognized in regards to the audit. There are no outstanding tax audits ongoing at December 31, 2022. The Company is subject to examination in the U.S., U.K. and Canada. In the U.S. and U.K., tax periods remain open in 2015 through 2022 and 2020 through 2022, respectively. Canada's tax periods remain open from 2009 due to the tax attribute carryforwards.

13. Commitments and Contingencies

The Company may, from time to time, be subject to claims and legal proceedings brought against it in the normal course of business. Such matters are subject to many uncertainties. Management believes the ultimate resolution of such contingencies will not have a material adverse effect on the consolidated financial statements.

On December 18, 2020, the Company commenced an action in the United States District Court for the District of New Jersey against Sun Pharmaceutical Industries, Inc., Sun Pharmaceutical Industries, Ltd., and Sun Pharma Global FZE (collectively, "Sun"). The action was a claim for patent infringement under the patent laws of the United States arising from Sun's commercial manufacture, use, offer to sell, or sales within the United States, and/or importation into the United States of Sun's CEQUA product. In January 2023, we announced a settlement of this action with Sun.

On February 24, 2022, Sun Pharmaceuticals Inc. petitioned for an IPR by the USPTO in respect of the '036 patent. The IPR was instituted on July 26, 2022. On January 25, 2023, the USPTO announced that the inter partes review had been terminated, based on a Joint Motion for Termination filed by us and Sun Pharmaceuticals Inc.

On April 15, 2022, a purported shareholder class action complaint, Ortmann v. Aurinia Pharmaceuticals, Inc. et al., case no. 1:22-cv-02185, was filed in the United States District Court for the Eastern District of New York (Eastern District of New York), naming us and certain of our officers as defendants. The lawsuit alleges that we made materially false and misleading statements regarding our financial guidance and commercial prospects in violation of certain federal securities laws. The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. On June 2, 2022, the case was transferred from the Eastern District of New York to the United States District Court for the District of Maryland. On February 20, 2023, the Court appointed a lead plaintiff and approved lead plaintiff’s selection of lead counsel. We expect that lead plaintiff will file an amended complaint, against which we intend to vigorously defend.

Manufacturing Commitments

The Company has various manufacturing agreements to support our commercial and clinical product supply requirements.

We rely on Lonza, a third party manufacturer, to produce a portion of commercial and clinical quantities of our commercial and clinical drug substance requirements. We have firm orders with Lonza for future purchases of drug substance, with remaining total non-cancellable future commitments of approximately $29.3 million through 2024 of which $5.5 million was paid during 2022. If we terminate certain firm orders with Lonza without cause, we will be required to pay for drug substance scheduled for manufacture under our arrangement.

14. Deferred Compensation and Other Non-current Liabilities

The Company recorded other non-current liabilities of $12.2 million and $16.0 million as of December 31, 2022 and December 31, 2021, respectively. The balance as of December 31, 2022 and December 31, 2021 primarily included deferred compensation arrangements whereby certain executive officers as of March 8, 2012 were provided with future potential employee benefit obligations for remaining with the Company, for a certain period of time. These obligations were also contingent on the occurrence of uncertain future events. At December 31, 2021, the other non-current liabilities also include milestone payments deemed probable to be paid in the future which were reclassed to current liabilities in 2022.

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15. Leases

The Company has the following lease obligations:

Victoria, British Columbia

During August 2020, the Company signed a lease for commercial office space in Victoria, British Columbia for a new corporate headquarters that was expected to commence in April 2022.

During the fourth quarter of 2020, the Company entered into 18-month facility and furniture leases for its existing corporate head office located in Victoria, British Columbia. The lease terms commenced on January 1, 2021 with an end date of August 31, 2022.

On August 3, 2022, we provided notice of termination for the lease of the intended new corporate headquarters space in Victoria on the basis that the landlord's work was not completed by the time required under the lease. As a result of the termination, the Company expensed $0.3 million of Construction in Progress (CIP) cost that was related to the new corporate headquarters.

On September 1, 2022, the fixed lease term ended for Aurinia's existing corporate headquarters and the Company exercised its

right to enter into a month to month lease, of which expenses are incurred in SG&A.

Rockville, Maryland

During March 2020, the Company entered into a lease for its U.S. commercial office in Rockville, Maryland for a total of 30,531 square feet of office space. The lease has a remaining term of approximately 9 years and has an option to extend for twofive-year periods after the 11 years has elapsed and has an option to terminate after seven years. As of December 31, 2022, the Company had a right-of-use asset of $4.9 million and lease liability of $8.0 million included in the consolidated balance sheets. As of December 31, 2021, the Company had a right of use asset of $5.2 million and lease liability of $8.6 million included in the consolidated balance sheets. During 2020, the Company received reimbursements for tenant leasehold improvements by the landlord in the amount of $2.3 million for the Maryland lease. The Company recorded leasehold improvement incentives as additions to the lease liability. The lease term commenced on March 12, 2020. When measuring the lease liability, the Company discounted lease payments using its incremental borrowing rate at March 12, 2020. The incremental borrowing rate applied to the lease liability on March 12, 2020 was 5.2% based on the financial position of the Company, geographical region and terms of lease.

Edmonton, Alberta

During October 2022, the Company entered into a long term lease in Edmonton for a total of 4,375 square feet of office space. The lease is a 6 year lease and has an option to renew of five years at prevailing market rates. The lease commenced on November 1, 2022 and the Company recorded the lease as an operating lease. The lease is not material to the Company's financial position.

The Company incurs variable lease costs under the existing Victoria and Rockville leases. These costs include operation and maintenance costs included in SG&A and are expensed as incurred. The variable lease costs are not material to the Company's financial position.

The operating lease costs for the years ended December 31, 2022 and December 31, 2021 are $1.0 million for both periods respectively.

The weighted-average remaining lease term and discount rate for the years ended December 31, 2022 and December 31, 2021 are as follows:

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Weighted average remaining lease term (in years) 8.7 9.5

Weighted average discount rate 5.3% 5.2%

Supplemental cash flow information related to operating leases for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 are as follows:

Initial recognition of operating lease right-of-use asset $ 57 $ 419 $ 5,804

Future maturities of operating lease liabilities as of December 31, 2022 are as follows:

(in thousands) Operating Lease Payments

Total lease payments 10,136

Less: imputed interest (2,048)

On December 15, 2020, the Company entered into a collaborative agreement with Lonza to build a dedicated manufacturing capacity within Lonza’s existing small molecule facility in Visp, Switzerland. The dedicated facility (also referred to as "monoplant") will be equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacture of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand.

Following U.S. regulatory approval of voclosporin in January 2021, the Company has commenced a capital expenditure payment program totaling approximately CHF 21.0 million. The first capital expenditure payment was made in February 2021 of $11.8 million (CHF 10.5 million) and was treated as an upfront lease payment and recorded under other non-current assets on the consolidated balance sheets. The second payment is not due until the facility fulfills the required operational qualifications which is estimated to be during the first half of 2023. Upon completion of the monoplant, the Company will maintain sole dedicated use of the monoplant by paying a required quarterly fixed facility fee. The Company expects to account for the arrangement as a finance lease under ASC 842. The present value of the minimum lease payments total approximately $85.0 million, beginning April 2023 and expiring in 2030, and are not included in the above table.

The Company has entered into an equipment and facility finance lease for a backup manufacturing encapsulation site in Beinheim, France that has not yet commenced and is therefore, not included in the above table. As part of the agreement, the Company expects to make payments of approximately $0.9 million prior to lease commencement and the future value of minimum lease payments will total approximately $0.1 million.

16. Shareholders' Equity

Common shares: The Company has authorized an unlimited number of common shares with no par value. As of December 31, 2022, 2021 and 2020, 142.3 million, 141.6 million and 126.7 million Common Shares, respectively, were issued and outstanding. Each common share entitles the holder to one vote on all matters submitted to a vote of the Company’s shareholders. Common shareholders are not entitled to receive dividends unless declared by the Company’s Board of Directors.

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Any future determination regarding the declaration and payment of dividends is expected to be declared and paid in the Company's functional currency, the U.S. dollar.

As discussed below from time to time, we intend to use the net proceeds from the sale of securities to fund our operations, which includes, but is not limited to, commercial activities, including our FDA related post approval commitments, manufacturing and packaging commercial drug supply, funding our supporting commercial infrastructure, advancing our R&D programs and funding our working capital obligations.

November 19, 2021 ATM facility

On November 19, 2021 the Company entered into an Open Market Sale Agreement (Sale Agreement) with Cantor Fitzgerald & Co. pursuant to which the Company may from time to time sell, through ATM offerings, common shares that would have an aggregate offering price of up to $250.0 million. Pursuant to this agreement the Company issued 10.2 million common shares at a weighted average price of $19.90 resulting in gross proceeds of $202.4 million as of December 31, 2021. The Company incurred share issue costs of approximately $5.6 million which included up to a 3% underwriting commission of $5.3 million and professional fees of $0.3 million directly related to the ATM.

On February 25, 2022, the Company gave notice to Cantor Fitzgerald & Co. to terminate the Open Market Sale Agreement. No further sales occurred under the Open Market Sale Agreement.

July 27, 2020 public offering

On July 27, 2020 the Company completed a public offering of 13.3 million common shares at a price of $15.00 per share. Gross proceeds from this offering were $200.0 million and the share issue costs totaled an estimated $12.3 million which included a 6% underwriting commission of $12.0 million and professional fees of $0.3 million.

Warrants:

Warrant related to December 28, 2016 bought deal public offering:On December 28, 2016, the Company completed a $28.8 million Bought Deal public offering (2016 Public Offering). Under the terms of 2016 Public Offering, each Unit consists of one common share and one-half (0.50) of a common share purchase warrant (December 2016 Warrant). The Company issued 12.8 million Units at a subscription price per Unit of $2.25, exercisable for a period of five years from the date of issuance at an exercise price of $3.00. These December 2016 Warrants also meet the scope exceptions provided in ASC 815, Derivatives and Hedging, as they are indexed to the Company’s own shares, and therefore are accounted for under ASC 505, Equity.

At initial recognition on December 28, 2016, the Company recorded a warrant in the amount of $7.2 million based on the estimated fair value of the December 2016 Warrants with allocated share issuance costs of $655 thousand recognized as a reduction of equity.

During 2019, certain holders of these Warrants exercised at $3.00 per share for gross proceeds of $5.5 million. During 2020, a holder exercised 500 Warrants at $3.00 per share for gross proceeds of $2 thousand. During 2021, 1.7 million warrants had been exercised at $3.00 per share for gross proceeds of $0.3 million. Of these 1.7 million warrants, the Company issued 1.3 million common shares in lieu of 1.6 million warrants. All gross proceeds were recorded as an increase in cash and equity. The remaining 6,000 warrants expired as of December 31, 2021.

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There was no warrant activity during 2022. The warrant activity for 2021 is as follows:

Number of warrants(in thousands)

Warrants exercised (1,684)

Warrants expired (6)

17. Shared-Based Compensation

The Company's Amended and Restated Equity Incentive Plan (the Plan), which was adopted and approved by the Company's shareholders in June 2021, allows for an issuance of up to an aggregate of 23.8 million shares (inclusive of then outstanding awards) and provides for grants of stock options, performance awards (PAs) and restricted stock units (RSUs) that may be settled in cash and common shares. Also in June 2021, the Company's shareholders adopted and approved the Company's Employee Stock Purchase Plan (2021 ESPP), which allows for the issuance of up to 2.5 million shares of which 286 thousand and 37 thousand were purchased during 2022 and 2021. The 2021 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code (the Code) but also permits the Company to include the employees, including non-United States employees, in offerings not intended to qualify under Section 423. The purpose of the 2021 ESPP is to provide eligible employees with opportunities to purchase the Company’s common shares at a discounted price.

During 2022, the Company modified the 2021 ESPP for the current and future offerings. The new ESPP terms shortened the plan from four (4) purchases over a 24 month offering period to two (2) purchases over a 12 month offering period. Additionally, the ESPP now contains a rollover mechanism; that is, if the stock price on the purchase date is less than the offering price (as that is determined under the 2021 ESPP), that offering is then canceled and any participants are rolled into the new 12 month offering period at the lower price. As a result of the modification, we recorded incremental expense during 2022 which was immaterial to the consolidated statements of operations.

In addition to stock options, PAs and RSUs granted under the Plan, the Company has granted certain stock options and RSUs as inducements material to new employees entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). The inducements were granted outside of the Plan during 2022.

Stock Options

The Plan requires the exercise price of each option not to be less than the closing market price of the Company’s common shares on the day immediately prior to the date of grant. The board of directors approves the vesting criteria and periods at its discretion. The options issued under the plan are accounted for as equity-settled share-based payments. The stock options and inducement stock options have a ten-year term and vest over three years with one-third of the shares vesting on the twelve month anniversary from the grant date, and the remaining options vesting in twenty-four equal monthly installments thereafter.

The following table summarizes the number of stock options outstanding under the Plan for the years ended December 31, 2022.

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Exercised/released (77) $ 6.55

The weighted average grant date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $6.52, $7.34 and $5.58, respectively. The total fair value of options vested during the years ended December 31, 2022, 2021 and 2020 was $49.2 million, $24.9 million and $14.9 million, respectively.

Total intrinsic value of options exercised was $0.9 million, $50.3 million and $13.1 million for years ended December 31, 2022, 2021 and 2020, respectively.

In determining the fair value of the options granted, the Company uses the Black-Scholes option pricing model and reviews the following assumptions each reporting period:

Expected Term - Expected term (in years) is based upon the contractual term, taking into account expected employee exercise and expected post-vesting employment termination behavior. Based on the Company's historical expected lives data and the growth during 2022 and 2021, the expected life extends further into the contractual life increasing the expected life. The increase of the expected life in 2022 is in line with historic data and what management expects in the future.

Volatility - The Company considers historical volatility of its common shares in estimating its future stock price volatility. The expected life is used to determine market volatility of the underlying stock. The change in the volatility from in 2022 and 2021 was due to the Company's stock being more volatile. Given the growth of the Company, the expected life used to determine previous market volatility and comparable peer group reflects an appropriate estimate of future volatility.

Risk-free interest rate - The risk-free interest rate for the expected life of the options was based on the yield available on government benchmark bonds with an approximate equivalent remaining term at the time of the grant.

Dividend yield - The Company has never paid dividends on its common shares and has no plans to pay dividends on our common shares in the near future. Therefore, the Company dividend yield is zero.

The following weighted average assumptions were used to estimate the fair value of the options granted during the years ended December 31, 2022, 2021 and 2020:

Expected term (in years) 5 years 4 years 3 years

Dividend yield 0.0 % 0.0 % 0.0 %

Performance Awards and Restricted Stock Units

On October 23, 2020, the Company issued 439,000 PAs to executive management of the Company whose vesting was contingent upon meeting specific performance metrics based on the results for the year ended December 31, 2021. Each PA which vested entitled the participant to receive common shares on the basis of the performance metrics set. On March 18, 2021

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performance metrics were set and formally communicated. Therefore, March 18, 2021 was the grant date and the fair value on the grant date was $13.56. The PAs vested in 2022 and the participant was required to achieve at least one of the performance metrics to obtain the portion of the award associated with the metric.

On August 6, 2021, the Company granted approximately 619,000 PAs and RSUs. The grant date for the PAs and RSUs was August 6, 2021 and the fair value on the grant date was $14.42 as this was the date performance measures were set and communicated to employees. The PAs vested on the employee's first anniversary of the grant date and the employee was required to achieve at least one of the performance metrics to obtain the portion of the award associated with the metric. The RSUs had no performance metrics and vested on the one year anniversary of the grant.

During 2022, the Company has granted RSUs and intends to grant RSUs under the Plan, as well as inducements for certain new hires as discussed above. The RSUs are fair valued based on the market price of our common shares on the date of the grant. The RSUs and inducement RSUs shall vest in three equal annual installments on the first, second and third anniversary of the grant date.

The following table summarizes the PA and RSU activity for the year ended December 31, 2022:

Number of Shares(in thousands) Weighted-Average Grant Date Fair Value

Compensation Expense

Share-based compensation expense for the years ended December 31, 2022, 2021 and 2020 totaled approximately $32.3 million, $31.2 million and $17.5 million, respectively, as shown in the table below.

The Company recorded approximately $11.4 million of share-based compensation expense related to PAs and RSUs during the year ended December 31, 2022.

Unrecognized Share-Based Compensation Expense and Weighted Average Remaining Amortization Period

As of December 31, 2022, the unrecognized share-based cost, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows (in thousands, except amortization period):

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Total unrecognized share-based compensation expense $ 22,780 1.30

18. Net Loss Per Common Share

Basic and diluted net loss per Common Share is computed by dividing net loss by the weighted average number of common shares outstanding. The numerator and denominator used in the calculation of basic and diluted net loss amounts per Common Share are as follows:

Net loss per common share (expressed in $ per share) $ (0.76) $ (1.40) $ (0.87)

The Company did not include the securities in the following table in the computation of the net loss per common share because the effect would have been anti-dilutive during each period:

Unvested performance awards — 64 —

Unvested restricted units 1,980 191 —

19. Related-Party Transactions

ILJIN SNT Co., Ltd (ILJIN) was considered to be a related party due to their equity ownership of over 5% as per their public filings. During 2021, Aurinia paid $6.0 million upon achievement of specific milestones. The amount payable to ILJIN is nil as of December 31, 2022 and 2021.

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20. Selected Quarterly Financial Information (unaudited)

The following condensed quarterly financial information is for the years December 31, 2022 and 2021:

Basic and diluted loss per common share $ (0.27) $ (0.25) $ (0.06) $ (0.18)

Basic and diluted loss per common share $ (0.40) $ (0.37) $ (0.39) $ (0.25)

21. Subsequent Events

On January 3, 2023, the Company announced that it had entered into a settlement agreement with Sun to file a joint motion to terminate the ongoing IPR and to settle the ongoing patent infringement litigation in the United States related to Sun's CEQUA product. The settlement agreement was contingent on receipt of termination of the IPR by the USPTO in respect of our '036 patent.

On January 24, 2023, the Company announced that the USPTO allowed a method of use patent application titled IMPROVED PROTOCOL FOR TREATMENT OF LUPUS NEPHRITIS. This newly allowed patent application reflects the unique and proprietary dosing regimen of LUPKYNIS. Specifically, this patent further refines the method of using LUPKYNIS in combination with MMF and corticosteroids using eGFR as a method of pharmacodynamically dosing LUPKYNIS in patients with LN. The newly allowed application provides patent coverage that supplements our existing ‘036 patent. The claims in this additional patent add further specificity on dosing consistent with the FDA approved product label. This patent has the potential to provide an additional layer of patent protection for LUPKYNIS up to 2037. The Company intends to list this newly allowed patent in the Orange Book once issued.

On January 25, 2023, the USPTO terminated the IPR it had instituted with respect to Aurinia's '036 patent.

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AUPH US Equity

AUPH · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

ITEM 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers, and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

AUPH US Equity☆

AUPH · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

ITEM 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers, and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

AUPH US Equity