Mr. Richard Glickman reports

AURINIA REPORTS FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS AND RECENT OPERATIONAL HIGHLIGHTS

Aurinia Pharmaceuticals Inc. has released its financial results for the fourth quarter and year ended Dec. 31, 2016. Amounts, unless specified otherwise, are expressed in U.S. dollars.

Aurinia plans to initiate a single phase III clinical trial (Aurora) whose design is consistent with that of the continuing Aura-LV clinical trial. The totality of data from both the Aurora and Aura trials will serve as the basis for a new drug application submission following completion of the phase III trial. The company continues to focus its efforts on finalizing the study protocol and regulatory submissions in parallel with site selection, making the necessary investments now to ensure the team has the tools to execute a successful clinical trial.

"I am proud of the important milestones our team has reached over the past several months, including our most recent and significant achievement to date, the promising 48-week results from our Aura study of voclosporin, demonstrating significantly improved long-term outcomes for patients suffering from lupus nephritis [LN]," said Richard Glickman, Aurinia chief executive officer and chairman of the board. "The recent news that our late-breaking abstract for voclosporin has been accepted for oral presentation at the National Kidney Foundation 2017 scientific clinical meetings underscores the importance of this compelling data set. We remain committed to advancing voclosporin with the end goal of improving the lives of patients impacted by this devastating disease and potentially altering the treatment paradigm of lupus nephritis."

Recent operational highlights

Aura 48-week results

On March 1, 2017, the company announced top-line results from its Aura study in lupus nephritis. At 48 weeks, the trial met the complete and partial remission (CR/PR) end points, demonstrating statistically significant greater CR and PR in patients in both low-dose (23.7 milligrams of voclosporin twice daily (p-value less than 0.001)) and high-dose (39.5 milligrams twice daily (p-value equal to 0.026)) cohorts versus the control group. Each arm of the study included the current standard of care of mycophenolate mofetil as background therapy and a forced steroid taper to five milligrams per day by week 8 and 2.5 milligrams by week 16. No unexpected safety signals were observed, and there were no additional deaths in the voclosporin treated patients; however, there were three deaths and one malignancy reported in the control arm after completion of the study treatment period. Additional data analyses for the Aura study at 48 weeks will be released at future corporate, medical and scientific meetings, including in a late-breaker presentation at the National Kidney Foundation 2017 scientific clinical meetings from April 18 to April 22, 2017, in Orlando, Fla.

The 24- and 48-week top-line efficacy results are summarized in the attached table.

    
End point                 Treatment   24 weeks   Odds ratio   P-value (1)   48 weeks   Odds ratio        P-value (1)

Complete remission   23.7mg VCS BID      32.6%         2.03        0.045       49.4%         3.21   Less than 0.001 
                     39.5mg VCS BID      27.3%         1.59        0.204       39.8%         2.10             0.026 
                        Control arm      19.3%          N/A          N/A       23.9%          N/A               N/A
Partial remission    23.7mg VCS BID      69.7%         2.33        0.007       68.4%         2.34             0.007 
                     39.5mg VCS BID      65.9%         2.03        0.024       71.6%         2.68             0.002 
                        Control arm      49.4%          N/A          N/A       48.3%          N/A               N/A

(1) All p-values are versus control.

Japanese phase I ethnic bridging study for voclosporin

On Feb. 14, 2017, the company announced results of a supportive phase I safety, pharmacokinetic (PK) and pharmacodynamics (PD) study in healthy Japanese patients, which supports further development of voclosporin in this patient population. Based on evaluations comparing the Japanese ethno-bridging data versus previous PK and PD studies in non-Japanese patients, voclosporin demonstrated no statistically significant differences in exposure with respect to area-under-the-curve measurements. Furthermore, the PK parameters in Japanese patients were generally consistent with previously evaluated PK parameters in non-Japanese volunteers. There were no unusual or unexpected safety signals in the study. The company plans to share its findings with the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) in the second quarter of 2017 and determine a path forward for regulatory submission in Japan.

Long-term manufacturing agreement with Lonza

In the fourth quarter of 2016, Aurinia announced a long-term agreement with Lonza for the manufacture of voclosporin active pharmaceutical ingredient (API). The agreement followed a successful multiyear clinical manufacturing relationship where the companies had refined the process and analytical methods to produce clinical and commercial supplies of voclosporin. Under the terms of the agreement, Lonza agreed to produce current-good-manufacturing-practice-grade voclosporin drug substance for use in the Aurora trial and for future commercial use. The agreement also provides an option to have Lonza exclusively supply API for up to 20 years.

The company expects the following additional milestones and events in the first half of 2017:

• Late-breaking presentation of Aura 48-week results at the National Kidney Foundation 2017 scientific clinical meetings;
• Outcome of European Medicines Agency and PMDA discussions;
• Aurion open-label study 48-week results;
• Initiation of phase III Aurora trial.

Financial results for the year ended Dec. 31, 2016

For the year ended Dec. 31, 2016, the company recorded a consolidated net loss of $23.3-million, or 66 cents per common share, as compared with a consolidated net loss of $18.6-million, or 58 cents per common share, in 2015.

The increase in the reported consolidated net loss was primarily attributable to recording a non-cash gain of $1.7-million in 2016 on the fair value revaluation of the derivative warrant liability, compared with a gain of $5.1-million in the same period in 2015.

After adjusting for the non-cash impact of the revaluation of the derivative warrant liability, the net loss from operations for the year ended Dec. 31, 2016, was $25-million, compared with $23.7-million for the corresponding period in 2015.

The company incurred net research and development expenditures of $14.5-million for the year ended Dec. 31, 2016, as compared with $16-million for the same period in 2015. Research and development expenditures included planning, regulatory, site selection costs and drug manufacturing related to the planned phase III LN clinical trial, clinical costs related to completing the Aura trial, and costs related to conducting the Japanese PK study. Research and development expenditures in 2015 reflected higher costs incurred for the Aura trial, including drug distribution, patient recruitment, enrolment and treatment activities.

The company incurred corporate, administration and business development expenditures of $7-million for the year ended Dec. 31, 2016, as compared with $6.3-million for the same period in fiscal 2015.

Other expense (income) reflected a net expense of $2.2-million for the year ended Dec. 31, 2016, compared with a net expense of $128,000 for 2015. The company recorded as other expense, a revaluation adjustment on contingent consideration to ILJIN Life Science Co. Ltd. in the amount of $1.6-million in 2016, compared with $337,000 in 2015. The company also recorded an expense of $655,000 in other expense (income) related to share issue costs allocated to derivative warrants incurred to complete the Dec. 28, 2016, bought deal public offering.

Financial results for the fourth quarter ended Dec. 31, 2016

The company reported a consolidated net loss of $8.3-million, or 21 cents per common share, for the three months ended Dec. 31, 2016, as compared with a consolidated net loss of $4.1-million, or 13 cents per common share, for the three months ended Dec. 31, 2015. The increased loss was attributable to increased expenditures for both research and development and corporate activities as the company was finishing the Aura trial while also commencing set up activities for the Aurora trial, including drug manufacturing, contract reserach organization, and country and site selections.

The increase in the consolidated net loss also reflected a reduction in the fair value adjustment gain on derivative warrant liabilities to $658,000 in the fourth quarter of 2016 from a gain of $1.5-million in the comparable period in 2015 and the $655,000 in share issue costs discussed above.

Research and development expenses increased to $5.5-million in the fourth quarter of 2016, compared with $3.7-million in the fourth quarter of 2015, as the company ramped up activities required for commencing the planned Aurora clinical trial in the second quarter of 2017.

Corporate and administration expenses also increased to $2.2-million for the fourth quarter of 2016, compared with $1.6-million for the fourth quarter of 2015, reflecting increased activities related to investor relations, patient advocacy and market research.

Financial liquidity

In 2016, the company raised net proceeds of $40.6-million from equity financings and received $2-million from the exercise of warrants and options. As a result, at Dec. 31, 2016, the company had cash of $39.6-million and working capital of $33.5-million.

The audited financial statements and the management's discussion and analysis for the year ended Dec. 31, 2016, are accessible on Aurinia's website, on SEDAR or on EDGAR.

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