Aurinia Pharmaceuticals Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Aurinia Pharmaceuticals Inc. (“Aurinia” or the “Company”) is a biopharmaceutical company focused on delivering therapies to people living with autoimmune diseases with high unmet medical needs. In January 2021, the Company introduced LUPKYNIS® (voclosporin), the first FDA-approved oral therapy for the treatment of adult patients with active lupus nephritis. Aurinia is also developing aritinercept, a dual inhibitor of B cell-activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) for the potential treatment of autoimmune diseases.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation, Principles of Consolidation and Use of Estimates

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures required by U.S. GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

The accompanying condensed consolidated financial statements include the accounts of Aurinia Pharmaceuticals Inc. and its wholly owned subsidiaries, including Kezar Life Sciences, Inc.’s financial results subsequent to the acquisition closing date of May 11, 2026. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full year or any other future periods.

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The Company’s significant accounting policies and recent accounting pronouncements have not materially changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 except as noted below.

Acquisitions

The Company evaluates business acquisitions to determine whether a transaction should be accounted for as a business combination or an asset acquisition under ASC Topic 805, Business Combinations(“ASC 805”). The Company considers whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If not, the Company evaluates whether the acquired assets include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

Asset acquisitions are accounted for using the cost accumulation method, under which the purchase price, including certain transaction costs, is allocated to the assets acquired on a relative fair value basis. Acquired in-process research and development pursuant to an asset acquisition that has no alternative future use is expensed immediately as a component of in-process research and development expense in the condensed consolidated statements of operations.

Contingent payments are evaluated to determine whether they are instruments within the scope of ASC Topic 815, Derivatives and Hedging(“ASC 815”). If so, contingent payments are recorded at fair value on the acquisition date and remeasured to fair value at each reporting date. These changes in fair value are recognized in the condensed consolidated statements of operations. If not, contingent payments are recognized when the amounts are probable and estimable under ASC Topic 450, Contingencies(“ASC 450”).

ASC 740-10-25-49, Acquired Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business Combinations(“ASC 740”), provides guidance that addresses the accounting when an asset is acquired outside of a business combination and the tax basis of the asset differs from the amount paid. Any deferred tax assets acquired in an asset acquisition that are realizable are included in the net assets acquired.

Under ASC 740, any purchase of future tax benefits from a third party shall be recorded as a deferred credit and shall not result in immediate income statement recognition. The deferred credit shall not be classified as part of deferred tax liabilities or as an offset to deferred tax assets. Therefore, on the acquisition date, the Company recorded $23.1 million of deferred tax assets in noncurrent assets and $23.1 million of deferred tax benefits in noncurrent liabilities on the condensed consolidated balance sheet. The deferred tax benefits will be recognized when the Company has future U.S. taxable income and will reduce income tax expense.

Cash paid related to acquisitions is recorded in cash flows from investing activities net of cash acquired.

Accounting Pronouncements Recently Adopted

In September 2025, the FASB issued ASU 2025-07, Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract (“ASU 2025-07”). ASU 2025-07 expands the scope exception in ASC Topic 815 for certain contracts not traded on an exchange whose settlement is based on the operations or activities of one of the parties to the contract. ASU 2025-07 also clarifies ASC Topic 606 for share-based payments received from a customer in a revenue contract. The Company elected to early adopt ASU 2025-07 on a prospective basis during the three months ended June 30, 2026. The new scope exception in ASC Topic 815 was applied to the evaluation of contingent payments related to the acquisition of Kezar. See Note 8 for the effect on the condensed consolidated financial statements. The new accounting standard related to share-based payments received from a customer in a revenue contract had no impact on our condensed consolidated financial statements.

3. Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding without consideration of potential common shares. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding plus potential common shares. Stock options, performance stock units (“PSUs”), restricted stock units (“RSUs”) and shares issuable under the Company’s Employee Stock Purchase Plan (“ESPP”) are considered potential common shares and are included in the calculation of diluted earnings per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted earnings per share when their effect is anti-dilutive.

For the three months ended June 30, 2026, there were 3.5 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)2.6 million stock options; (ii)0.6 million PSUs; and (iii)0.3 million RSUs. For the six months ended June 30, 2026, there were 4.3 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)2.6 million stock options; (ii)0.9 million RSUs; and (iii)0.8 million PSUs. For each of the three and six months ended June 30, 2026, there were 2.7 million of potential common shares that were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

For the three months ended June 30, 2025, there were 2.6 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)0.5 million stock options; (ii)0.5 million PSUs; and (iii)1.6 million RSUs. For the six months ended June 30, 2025, there were 3.3 million potential dilutive common shares that were included in the calculation of diluted earnings per share, which consists of: (i)0.5 million stock options; (ii)2.2 million RSUs; and (iii)0.6 million PSUs. For each of the three and six months ended June 30, 2025, there were 7.5 million of potential common shares that were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

4. Balance Sheet Details

Fair Value Measurement

The following table summarizes the financial assets measured at fair value on a recurring basis (in thousands):

The fair value of the Company’s 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.

The carrying amount and related unrealized gains (losses) by type of investment consisted of the following (in thousands):

As of June 30, 2026 and December 31, 2025, accrued interest receivable from investments was $1.0 million and $0.7 million, respectively, which was included in other current assets on the condensed consolidated balance sheets. As of June 30, 2026, short-term investments mature at various dates through May 2027. As of June 30, 2026 and December 31, 2025, no allowance for credit losses was recorded.

Inventory

Inventory consisted of the following (in thousands):

Prepaid Expenses and Deposits

Prepaid expenses and deposits consisted of the following (in thousands):

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

For each of the three months ended June 30, 2026 and 2025, the Company recorded amortization expense of $0.2 million. For each of the six months ended June 30, 2026 and 2025, the Company recorded amortization expense of $0.4 million.

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

5. Commitments and Contingencies

Lease Commitments

Finance Lease

Monoplant

In December 2020, the Company entered into a manufacturing services agreement with Lonza Ltd., Aurinia’s contract manufacturing partner for voclosporin, for the construction of a dedicated manufacturing facility for voclosporin (the “Monoplant”). The construction of the Monoplant began in January 2021 and manufacturing of voclosporin began in late June 2023. The 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. The Company completed a capital expenditure payment program for the Monoplant totaling $23.7 million, which included: (i) a $11.8 million payment in February 2021, which was treated as an upfront lease payment and recorded under other noncurrent assets on the consolidated balance sheets; and (ii) a $11.9 million payment when the facility fulfilled the required operational qualifications, which occurred in late June 2023. The Company has the exclusive right to use the Monoplant through March 31, 2030 by paying a quarterly fixed facility fee of 3.6 million Swiss Francs.

The Monoplant arrangement was determined to be an embedded lease and is accounted for as a finance lease under ASC 842. The lease term is based on the non-cancellable period for which a lessee has the right to use an underlying asset (the “Monoplant Lease”). The Company determined that the Monoplant Lease commencement occurred at the point when the FDA manufacturing validation process began, which occurred on June 26, 2023. At lease inception, the Company recorded a finance right-of-use (“ROU”) lease asset and a corresponding lease liability. As of June 30, 2026, the Monoplant Lease finance ROU lease asset and corresponding lease liability balance were $65.2 million and $60.4 million, respectively.

Operating Lease

Rockville, Maryland

In March 2020, the Company entered into a lease agreement for 30,531 square feet of office space in Rockville, Maryland (the “Rockville Lease”). The Rockville Lease commenced on March 12, 2020 and expires on August 31, 2031. Pursuant to the Rockville Lease, the Company has an option to either terminate the lease early on August 31, 2028, subject to an early termination fee of $1.4 million, or extend the lease fortwo 5-year periods at the end of the initial 11-year term. The Company has determined that it is reasonably certain that it will exercise the early termination option, which will result in a reduction of approximately $2.3 million of future lease payments net of the early termination fee. Nevertheless, the Company is exploring sublease options for potential savings in excess of the early termination option. The Rockville Lease requires the Company to pay certain taxes, insurance and operating costs relating to the leased premises (“Lease Operating Costs”); however, such costs are not material to the Company’s financial position.

Future minimum lease payments, excluding Lease Operating Costs, as of June 30, 2026 consisted of the following (in thousands):

For each of the three months ended June 30, 2026 and 2025, finance lease expense related to the amortization of finance ROU lease assets was $4.4 million. For the six months ended June 30, 2026 and 2025, finance lease expense related to the amortization of finance ROU lease assets was $8.7 million and $8.8 million, respectively. For the three months ended June 30, 2026 and 2025, interest expense on finance lease liabilities was $0.9 million and $1.1 million, respectively. For the six months ended June 30, 2026 and 2025, interest expense on finance lease liabilities was $2.0 million and $2.2 million, respectively.

For the six months ended June 30, 2026 and 2025, cash paid for amounts included in the measurement of finance lease liabilities classified in cash flows from financing activities was $7.1 million and $6.2 million, respectively. For each of the six months ended June 30, 2026 and 2025, cash paid for amounts included in the measurement of finance lease liabilities classified in cash flows from operating activities was $2.3 million.

Manufacturing Commitments

The Company’s manufacturing commitments have not changed in any material manner from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Contingencies

From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation other than as described in Item 1 of Part II Legal Proceedings.

6. Other Noncurrent Liabilities

In March 2012, the Company entered into arrangements with certain former executive officers, whereby the Company is required to make payments to such former officers based on net revenues of voclosporin for a certain period of time. As of June 30, 2026 and December 31, 2025, the Company recorded other noncurrent liabilities of $0.9 million and $6.7 million, respectively. During the three months ended June 30, 2026, the Company made a one-time payment to fully settle all future obligations under one former officer’s arrangement.

7. License and Collaboration Agreements

In December 2020, the Company entered into a collaboration and licensing agreement with Otsuka to develop and commercialize oral voclosporin in Japan, the European Union (the “E.U.”), the United Kingdom (“U.K.”), Switzerland, Russia, Norway, Belarus, Iceland, Liechtenstein and Ukraine (collectively, the “Otsuka Territories”) in exchange for: (i) a $50 million upfront cash payment; (ii) regulatory and commercial milestone payments; and (iii) royalties ranging from 10% to 20% on net sales in the Otsuka Territories.

In August 2022, the Company entered into a commercial supply agreement with Otsuka to: (i) supply LUPKYNIS inventory to Otsuka at cost plus a margin; and (ii) provide manufacturing and other services, including sharing the capacity of the Monoplant. For the three months ended June 30, 2026 and 2025, the Company recognized $3.8 million and $3.4 million, respectively, of collaboration revenue from manufacturing and other services, which includes sharing capacity of the Monoplant. For the six months ended June 30, 2026 and 2025, the Company recognized $8.0 million and $5.9 million, respectively, of collaboration revenue from manufacturing and other services, which includes sharing capacity of the Monoplant.

8. Acquisition

On May 11, 2026, Aurinia completed its acquisition of Kezar Life Sciences, Inc. (“Kezar”) for $6.955 in cash per share of Kezar common stock, plus one non-transferable contingent value right (“CVR”), which represents the right to receive: (i) potential payments relating to the ongoing clinical development or disposition of zetomipzomib; (ii) certain proceeds relating to Kezar’s collaboration with Everest Medicines and Kezar’s sale of its Sec61‑based discovery and development program to Enodia Therapeutics; and (iii)100% of Kezar’s closing net cash in excess of $50 million, net of certain post-closing CVR-related expenses (“Net Cash Excess”).

The Company concluded that the CVRs are contingent liabilities under the scope of ASC Topic 450 and will be recognized when the amounts are probable and estimable. As of June 30, 2026, the Company recorded a CVR liability of $3.7 million related to the Net Cash Excess within other current liabilities in the condensed consolidated balance sheet.

As of May 11, 2026, the total purchase consideration for Kezar was as follows (in thousands):

The acquisition of Kezar was accounted for as an asset acquisition because the assets acquired did not meet the definition of a business under ASC Topic 805. As such, the Company recognized the assets acquired and liabilities assumed based on the purchase consideration allocated on a relative fair value basis. The value of the acquired IP assets was expensed immediately as a component of in-process research and development expense in the condensed consolidated statements of operations. The deferred tax assets and deferred tax benefits will be offset against future U.S. taxable income.

The following table shows the allocation of the purchase consideration based on the relative fair values of assets acquired and liabilities assumed by the Company on May 11, 2026 (in thousands):

9. Shareholders’ Equity

In February 2024, the Company announced that the Board had approved a share repurchase program of up to$150 million of the Company’s common shares (the “Share Repurchase Plan”). In July 2025, the Company announced that the Board approved an increase to the previously announced Share Repurchase Plan of an additional $150 million of the Company’s common shares.

The timing and amount of future repurchase transactions will be determined by the Company based on its evaluation of market conditions, share price, legal requirements, including applicable blackout period restrictions, and other factors. The Company has entered into a Rule 10b5-1 stock repurchase plan for the purpose of establishing a trading plan to purchase the Company’s common shares in a manner intended to satisfy the affirmative defense of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934, as amended and in accordance with applicable Canadian laws.

For the three months ended June 30, 2026 and 2025, the Company repurchased 2.5 million and 5.4 million of its common shares for $38.1 million and $43.4 million, respectively, including commissions and excise tax. For the six months ended June 30, 2026 and 2025, the Company repurchased 5.0 million and 11.2 million of its common shares for $74.9 million and $90.8 million, respectively, including commissions and excise tax. The cost of repurchased shares is recorded as a reduction in common shares. Under Alberta law, the common shares were cancelled and not reissued.

Purchases under the Share Repurchase Plan, which to date have totaled 23.3 million of the Company’s common shares for $213.4 million, excluding commissions and excise tax, began on February 21, 2024.

10. Equity Incentive Plans

Stock Options

The activity related to stock options during the six months ended June 30, 2026 consisted of the following:

The following weighted-average assumptions were used to estimate the fair value of the options granted during the six months ended June 30, 2026 and 2025:

Performance Stock Units and Restricted Stock Units

During the six months ended June 30, 2026 and 2025, the Company granted PSUs that vest in 4 tranches upon the Company’s common shares achieving four progressively higher target prices, and each tranche is further subject to aone year service period following target price achievement. During the six months ended June 30, 2026, the Company also granted PSUs that vest in 2 tranches at the 3- and 5-year anniversary date of the grant upon the Company’s common shares achieving specified target prices that represent significant increases from the share price on the date of grant before the respective vesting date. The Company estimated the fair value of each PSU with a market and service condition on the date of grant by using a Monte Carlo simulation (lattice model).

Beginning in 2026, RSUs are no longer being granted. RSUs granted prior to 2026 vest in 3 equal annual installments on the first, second and third anniversary of the grant date. The fair value of RSUs is based on the market price of the Company’s common shares on the date prior to the grant.

The activity related to PSUs and RSUs for the six months ended June 30, 2026 consisted of the following:

Share-based Compensation Expense

The classification of share-based compensation expense consisted of the following (in thousands):

As of June 30, 2026, total unrecognized share-based compensation expense related to unvested stock options, PSUs, RSUs and ESPP was $35.0 million, which is expected to be recognized over a weighted-average period of 2.1 years.

11. Income Taxes

For the three and six months ended June 30, 2026, the Company recognized an income tax expense of $11.4 million and $20.9 million, respectively, compared to $0.6 million and $1.6 million, respectively, for the same periods of 2025. For the three and six months ended June 30, 2026, the Company’s effective income tax rate was 23.3% and 22.6%, respectively, compared to 2.9% and 3.5% respectively, for the same periods of 2025. The increase in the Company’s income tax expense and effective tax rate in 2026 is primarily the result of the Company’s ability to utilize unrecognized deferred tax assets in 2025. Prior to December 31, 2025, the Company maintained a full valuation allowance against its deferred tax assets. However, during the three months ended December 31, 2025, the Company released its remaining valuation allowance and recognized the full remaining benefit of the Company’s deferred tax assets. Thus, for the three and six months ended June 30, 2026, there are no available unrecognized deferred tax assets to offset income tax expense. For the three and six months ended June 30, 2026, the Company’s effective tax rate is comparable to the statutory rate. The deferred tax benefits resulting from the acquisition of Kezar will be recognized when the Company has future U.S. taxable income and will reduce income tax expense (see Note 8).