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Aurinia Reports First Quarter Financial Results and Operational Highlights

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AURORA Phase III Trial in lupus nephritis remains on track

Trials in FSGS and Dry Eye expected to begin in June 2018

Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH, TSX:AUP) ("Aurinia" or the
"Company") has released its financial results for the first quarter
ended March 31, 2018. Amounts, unless specified otherwise, are expressed
in U.S. dollars.

"Our first quarter has been characterized by diligently executing our
clinical programs. We remain on track to complete recruitment for our
Phase III trial in lupus nephritis later this year and are pleased with
the trial's progress. Start-up activities are underway for our FSGS and
Dry Eye programs, and we expect to commence these in June. We continue
to be well-capitalized into 2020 and look forward to a productive 2018,"
said Richard Glickman, Aurinia CEO and Chairman of the Board.

2018 Highlights

  • Our Phase III clinical trial ("AURORA") to evaluate voclosporin for
    the treatment of lupus nephritis ("LN"), which we initiated in May of
    2017, is on track to complete enrollment in Q4 2018. We have 212
    clinical trial sites activated and able to enroll patients around the
    globe.
  • A Phase II proof-of-concept study in focal segmental
    glomerulosclerosis ("FSGS") is expected to initiate in June 2018. This
    will be an open-label study of 20 treatment naïve patients. We
    submitted our Investigational New Drug application ("IND") to the FDA
    in Q1 2018. We received agreement from the FDA with regards to the
    guidance we provided on this study, and the IND is now active.
  • We also expect to initiate a Phase IIa head-to-head tolerability study
    of voclosporin ophthalmic solution ("VOS") versus Restasis®
    (cyclosporine ophthalmic emulsion 0.05%) for the treatment of Dry Eye
    Syndrome ("DES") in June 2018, with data expected to be available by
    the end of 2018. This will be a four-week study of approximately 90
    patients. Upon productive meetings with the FDA, we re-activated our
    existing IND and are aligned to proceed. We believe calcineurin
    inhibitors ("CNIs") are a mainstay of treatment for DES, and the goal
    of this program is to develop a best-in-class treatment option, and
    upon completion, we will look to evaluate strategic alternatives for
    this asset.
  • We strengthened the breadth and scope of our Board of Directors with
    the additions of Dr. Michael Hayden and Joseph Hagan in February of
    2018.

Financial Liquidity at March 31, 2018

At March 31, 2018, we had cash, cash equivalents and short term
investments of $159.1 million and working capital of $156.7 million
compared to $173.5 million of cash, cash equivalents and short term
investments and $167.1 million of working capital at December 31, 2017.
Net cash used in operating activities was $14.4 million for the first
quarter ended March 31, 2018 compared to $9.7 million for the first
quarter ended March 31, 2017.

We believe, based on our current plans, that we have sufficient
financial resources to fund our existing LN program, including the
AURORA trial and the NDA submission to the FDA, conduct the planned
Phase II trials for FSGS and DES, and fund operations into 2020.

Financial Results for the First Quarter ended March 31, 2018

We reported a consolidated net loss of $15.5 million or $0.18 per common
share for the first quarter ended March 31, 2018, as compared to a
consolidated net loss of $51.9 million or $0.92 per common share for the
first quarter ended March 31, 2017.

The loss for the first quarter ended March 31, 2018 reflected a $2.6
million increase in the estimated fair value of derivative warrant
liabilities compared to an increase of $40.8 million in the estimated
fair value of derivative warrant liabilities for the first quarter ended
March 31, 2017. An increase in estimated fair value of derivative
warrant liabilities increases the loss recorded for the period.

The increases in the estimated fair value of derivative warrant
liabilities were primarily the result of increases in our share prices
at March 31, 2018 and March 31, 2017 compared to December 31, 2017 and
December 31, 2016 respectively.

The derivative warrant liabilities will ultimately be eliminated on the
exercise or forfeiture of the warrants and will not result in any cash
outlay by the Company.

The net loss before these non-cash changes in estimated fair value of
derivative warrant liabilities was $12.8 million for the first quarter
ended March 31, 2018 compared to $11.2 million for the same period in
2017.

Research and development ("R&D") expenses increased to $8.9 million in
the first quarter of 2018, compared to $7.3 million in the first quarter
of 2017. The increase in these expenses resulted from higher clinical
patient enrollment and treatment costs for our AURORA trial and costs
associated with the planning and start-up phase for the FSGS and DES
Phase II trials, and the LN continuation study. R&D expenses for the
first quarter ended March 31, 2017 included costs related to the AURORA
planning phase and completion costs for the Phase II AURA trial.

Corporate, administration and business development expense also
increased to $3.8 million for the first quarter ended March 31,2018,
compared to $3.4 million for the first quarter ended March 31, 2017,
primarily reflecting increased personnel costs due to the expansion of
our activities.

This press release should be read in conjunction with our unaudited
interim condensed consolidated financial statements and the Management's
Discussion and Analysis for the first quarter ended March 31, 2018 which
are accessible on Aurinia's website at www.auriniapharma.com,
on SEDAR at www.sedar.com
or on EDGAR at www.sec.gov/edgar.

About Aurinia
Aurinia is a clinical stage biopharmaceutical
company focused on developing and commercializing therapies to treat
targeted patient populations that are suffering from serious diseases
with a high unmet medical need. The Company is currently developing
voclosporin, an investigational drug, for the potential treatment of LN,
FSGS and DES. The Company is headquartered in Victoria, BC and focuses
its development efforts globally.

About LN
LN in an inflammation of the kidney caused by
Systemic Lupus Erythematosus ("SLE") and represents a serious
progression of SLE. SLE is a chronic, complex and often disabling
disorder. The disease is highly heterogeneous, affecting a wide range of
organs & tissue systems. Unlike SLE, LN has straightforward disease
outcomes (measuring proteinuria) where an early response correlates with
long-term outcomes. In patients with LN, renal damage results in
proteinuria and/or hematuria and a decrease in renal function as
evidenced by reduced estimated glomerular filtration rate ("eGFR"), and
increased serum creatinine levels. LN is debilitating and costly and if
poorly controlled, LN can lead to permanent and irreversible tissue
damage within the kidney, resulting in end-stage renal disease ("ESRD"),
thus making LN a serious and potentially life-threatening condition.

About FSGS
FSGS is a lesion characterized by persistent
scarring identified by biopsy and proteinuria. FSGS is a cause of
Nephrotic Syndrome ("NS") and is characterized by high morbidity. NS is
a collection of symptoms that indicate kidney damage, including: large
amounts of protein in urine; low levels of albumin and higher than
normal fat and cholesterol levels in the blood, and edema. Similar to
LN, early clinical response and reduction of proteinuria is thought to
be critical to long-term kidney health. Currently, there are no approved
therapies for FSGS in the United States and the European Union.

About DES
DES, or keratoconjunctivitis sicca, is a chronic,
multifactorial, heterogeneous disease in which a lack of moisture and
lubrication on the eye's surface results in irritation and inflammation
of the eye.

About Voclosporin
Voclosporin, an investigational drug, is a
novel and potentially best-in-class CNI with clinical data in over 2,400
patients across indications. Voclosporin is an immunosuppressant, with a
synergistic and dual mechanism of action. By inhibiting calcineurin,
voclosporin blocks IL-2 expression and T-cell mediated immune responses
and stabilizes the podocyte in the kidney. It has been shown to have a
more predictable pharmacokinetic and pharmacodynamic relationship, an
increase in potency, an altered metabolic profile and potential for flat
dosing compared to legacy CNIs. Aurinia anticipates that upon regulatory
approval, patent protection for voclosporin will be extended in the
United States and certain other major markets, including Europe and
Japan, until at least October 2027 under the Hatch-Waxman Act and
comparable laws in other countries and until April 2028 with anticipated
pediatric extension.

About VOS
VOS is an aqueous, preservative free nanomicellar
solution containing 0.2% voclosporin intended for use in the treatment
of DES. Studies have been completed in rabbit and dog models, and a
single Phase I has also been completed in healthy volunteers and
patients with DES. VOS has IP protection until 2031.

Forward-Looking Statements

Certain statements made in this press release may constitute
forward-looking information within the meaning of applicable Canadian
securities law and forward-looking statements within the meaning of
applicable United States securities law. These forward-looking
statements or information include, but are not limited to statements or
information with respect to: AURORA being on track to complete
enrollment in the second half of 2018, the timing voclosporin being
potentially a best-in-class CNI with robust intellectual property
exclusivity; the timing for Aurinia initiating a Phase II clinical trial
for voclosporin in FSGS patients; the timing for interim data readouts
for the Phase II clinical trial for FSGS patients; the timing for
commencement of a Phase IIa tolerability study of VOS; the timing for
data availability for the Phase IIa tolerability study; the anticipated
commercial potential of voclosporin for the treatment of LN, FSGS, DES
and other autoimmune diseases; that the expansion of the renal franchise
could create significant value for shareholders and that Aurinia has
sufficient financial resources to fund the existing LN program,
including the AURORA trial, conduct work on the new indications and fund
operations into 2020. It is possible that such results or conclusions
may change based on further analyses of these data Words such as
"anticipate", "will", "believe", "estimate", "expect", "intend",
"target", "plan", "goals", "objectives", "may" and other similar words
and expressions, identify forward-looking statements. We have made
numerous assumptions about the forward-looking statements and
information contained herein, including among other things, assumptions
about: the market value for the LN program; that another company will
not create a substantial competitive product for Aurinia's LN business
without violating Aurinia's intellectual property rights; the burn rate
of Aurinia's cash for operations; the costs and expenses associated with
Aurinia's clinical trials; the planned studies achieving positive
results; Aurinia being able to extend its patents on terms acceptable to
Aurinia; and the size of the LN market. Even though the management of
Aurinia believes that the assumptions made, and the expectations
represented by such statements or information are reasonable, there can
be no assurance that the forward-looking information will prove to be
accurate.

Forward-looking information by their nature are based on assumptions and
involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of Aurinia to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking information.
Should one or more of these risks and uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements or
information. Such risks, uncertainties and other factors include, among
others, the following: difficulties, delays, or failures we may
experience in the conduct of our planned AURORA clinical trial;
difficulties we may experience in completing the development and
commercialization of voclosporin; the market for the LN business may not
be as estimated; Aurinia may have to pay unanticipated expenses;
estimated costs for clinical trials may be underestimated, resulting in
Aurinia having to make additional expenditures to achieve its current
goals; Aurinia not being able to extend its patent portfolio for
voclosporin; and competitors may arise with similar products. Although
we have attempted to identify factors that would cause actual actions,
events or results to differ materially from those described in
forward-looking statements and information, there may be other factors
that cause actual results, performances, achievements or events to not
be as anticipated, estimated or intended. Also, many of the factors are
beyond our control. There can be no assurance that forward-looking
statements or information will prove to be accurate, as actual results
and future events could differ materially from those anticipated in such
statements. Accordingly, you should not place undue reliance on
forward-looking statements or information.

Except as required by law, Aurinia will not update forward-looking
information. All forward-looking information contained in this press
release is qualified by this cautionary statement. Additional
information related to Aurinia, including a detailed list of the risks
and uncertainties affecting Aurinia and its business can be found in
Aurinia's most recent Annual Information Form available by accessing the
Canadian Securities Administrators' System for Electronic Document
Analysis and Retrieval (SEDAR) website at www.sedar.com
or the U.S. Securities and Exchange Commission's Electronic Document
Gathering and Retrieval System (EDGAR) website at www.sec.gov/edgar.

We seek Safe Harbor.

Aurinia Pharmaceuticals Inc.
Interim Condensed
Consolidated Statements of Financial Position

(unaudited –
amounts in thousands of U.S. dollars)

 

March 31,
2018
$

 

   

December 31,
2017
$

 

Assets
Cash and cash equivalents 131,227 165,629
Short term investments 27,905 7,833
Other current assets 2,850     1,790
Total current assets 161,982 175,252
 
Acquired intellectual property and other intangible assets 13,720 14,116
Other non-current assets 708     479
Total assets 176,410     189,847
 
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 5,121 7,959
Other current liabilities 190     191
Total current liabilities 5,311 8,150
 
Derivative warrant liabilities 14,424 11,793
Other non-current liabilities 4,221     4,161
Total liabilities 23,956     24,104
       
Shareholders' equity 152,454     165,743
Total liabilities and shareholders' equity 176,410     189,847
 

Aurinia Pharmaceuticals Inc.
Interim Condensed
Consolidated Statements of Operations

(unaudited – amounts
in thousands of U.S. dollars, except per share data)

 

Three months
ended March 31,
2018

 

   

Three months
ended March 31,
2017

 

$ $
Revenue
Licensing revenue 30     30
 
Expenses
Research and development 8,887 7,325
Corporate, administration and business development 3,791 3,427
Amortization of acquired intellectual property and other intangible
assets
396 357
Amortization of property and equipment 3 6
Other (income) expense (200)     75
 
12,877     11,190
 
Net loss before change in estimated fair value of
derivative warrant liabilities (12,847) (11,160)
 
Change in estimated fair value of derivative warrant liabilities

(2,631)

   

(40,781)

 
Net loss and comprehensive loss for the period (15,478)     (51,941)
 
Net loss per common share (expressed in $ per share)
Basic and diluted loss per common share (0.18)     (0.92)
 
Weighted average common share outstanding

(in thousands)

84,052

   

56,680

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