Aurinia Pharmaceuticals Inc.AUPH
Aurinia Pharmaceuticals Inc. Leases Disclosure
Leases
The Company has the following lease obligations:
Victoria, British Columbia
In December 2020, Aurinia entered into a lease for office space in Victoria, British Columbia. During September 2022, the fixed lease term ended on the Victoria lease and the Company exercised its right to enter into a short-term month to month lease, of which expenses were incurred in SG&A. On March 31, 2023, the Company terminated the Victoria lease.
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 8 years and has an option to extend for two five-year periods after the 11 years has elapsed and has an option to terminate after seven years. During 2020, the Company received lease incentives for tenant leasehold improvements by the landlord in the amount of $2.3 million for the Maryland lease. The Company recorded the lease 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 term of lease. As of December 31, 2023, the Company had a right-of-use asset of $4.5 million and lease liability of $7.4 million included in the consolidated balance sheets. 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.
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 for a six year term and has an option to renew after 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.
For all operating leases, the Company incurs variable lease costs. 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, 2023, December 31, 2022 and December 31, 2021 were approximately $0.8 million, $1.0 million and $1.0 million, respectively.
Monoplant
On December 15, 2020, the Company entered into a collaborative agreement with Lonza to build a dedicated manufacturing facility within Lonza’s existing small molecule facility in Visp, Switzerland. The dedicated facility (also referred to as "monoplant") is equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacturing of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand.
Following U.S. regulatory approval of LUPKYNIS in January 2021, the construction of the monoplant began. The Company has completed a capital expenditure payment program for the monoplant 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 consolidated balance sheets. The second payment of $11.9 million (CHF 10.5 million) became due when the facility fulfilled the required operational qualifications, which occurred during the second quarter of 2023. The Company now has the exclusive right to use the monoplant by paying a quarterly fixed facility fee.
The Company has determined that the monoplant arrangement will be accounted for as a finance lease under ASC 842. Under ASC 842, the lease term begins at the commencement date and is based on the noncancellable period for which a lessee has the right to use an underlying asset. Aurinia determined that the lease commencement occurred at the point when the FDA manufacturing validation process began, which occurred during the three months ended June 30, 2023.
The Company, at lease inception, recorded an ROU asset of approximately $117.6 million and a corresponding lease liability of $94.1 million, which is the present value of the minimum lease payments beginning July 2023 and ending in 2030. The incremental borrowing rate applied to value the lease liability at inception is 6.19%, which was based on the financial position of the Company, geographical region and term of lease.
As of December 31, 2023 the ROU asset, net and corresponding lease liability balance were $108.7 million and $90.1 million, respectively. For the year ending December 31, 2023, ROU amortization related to the finance lease and interest expense was $8.9 million and $2.8 million, respectively. For the year ending December 31, 2023, approximately $5.9 million foreign exchange loss related to the revaluation of the monoplant finance lease liability was recorded in other expense (income) on the consolidated statements of operations and comprehensive loss. The monoplant finance lease commenced in June 2023 and is denominated in CHF.
The following table represents the weighted-average remaining lease term and discount rates for the Company's leases for the years ended December 31, 2023 and December 31, 2022:
| As of December 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||
| Weighted Average Remaining Lease Term (years) | Weighted Average Discount Rate | Weighted Average Remaining Lease Term (years) | Weighted Average Discount Rate | |||||||||||||||||||||||
| Operating leases | 7.6 | 5.28% | 8.7 | 5.3% | ||||||||||||||||||||||
Finance lease | 6.3 | 6.19% | — | — | ||||||||||||||||||||||
Supplemental cash flow information related to leases for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 are as follows:
| (in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||||||
Financing cash flows from finance lease | $ | (10,025) | $ | — | $ | — | ||||||||||||||
Operating cash flows from finance leases | $ | (2,311) | $ | — | $ | — | ||||||||||||||
Operating cash flows from operating lease | $ | (1,080) | $ | (1,160) | $ | (646) | ||||||||||||||
Initial recognition of operating lease right-of-use asset | $ | — | $ | 57 | $ | 419 | ||||||||||||||
Supplemental disclosure of noncash transactions | ||||||||||||||||||||
Finance right-of-use asset obtained in exchange for lease obligations (monoplant) | $ | 117,622 | $ | — | $ | — | ||||||||||||||
Finance lease liability arising from obtaining right-of-use assets (monoplant) | $ | 94,140 | $ | — | $ | — | ||||||||||||||
Future maturities of lease liabilities as of December 31, 2023 are as follows:
| (in thousands) | Finance Lease Payments | Operating Lease Payments | ||||||||||||
| 2024 | $ | 17,240 | $ | 1,114 | ||||||||||
| 2025 | 17,240 | 1,142 | ||||||||||||
| 2026 | 17,240 | 1,170 | ||||||||||||
| 2027 | 17,240 | 1,199 | ||||||||||||
| 2028 | 17,240 | 1,228 | ||||||||||||
| Thereafter | 21,551 | 3,302 | ||||||||||||
| Total lease payments | 107,751 | 9,155 | ||||||||||||
| Less: imputed interest | (17,663) | (1,636) | ||||||||||||
| Total | $ | 90,088 | $ | 7,519 | ||||||||||
Beinheim
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 $1.0 million prior to lease commencement and the future value of minimum lease payments will total approximately $0.1 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 15, 2024 | Showing above |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 24, 2021 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.