MKT Capital to withhold director support, says Aurinia should explore sale

MKT Capital, a significant shareholder of Aurinia Pharmaceuticals, which together with its affiliates beneficially owns approximately 4.2% of Aurinia’s outstanding shares, issued a letter to the company’s shareholders announcing its intention to withhold support for three directors at 2023 Annual Meeting. The letter partial reads, "We initially invested in Aurinia in 2019 because we believed the drug LUPKYNIS had the potential to become a great commercial success as an oral treatment option for advanced lupus nephritis. Unfortunately, since the drug’s commercialization three years ago, the Company has been unable to broaden its distribution or grow sales under Chairman Dr. George Milne and Chief Executive Officer Peter Greenleaf’s leadership. As a result, LUPKYNIS is being used for the treatment needs of 1,500 patients three years in, or roughly less than 1% of the total 135,000 patient addressable market in the U.S. alone. As a long-term shareholder of Aurinia, we have spent a considerable amount of time reviewing the Company’s corporate governance, executive compensation practices and capital allocation decisions and have attempted to engage meaningfully with management to better understand its overall strategy. Our diligence over the past several years has led us to the following conclusion: a reconstituted Board of Directors should commence a strategic review process immediately to explore a sale of the entire business, which we believe could attract a well-capitalized strategic acquirer or private equity buyer and yield up to $28 per share, or more than a 192% premium for shareholders. We are deeply troubled by the Board’s decisions, especially as it relates to executive compensation, which we believe illustrate that several incumbent directors are either unable or unwilling to advance shareholders’ best interests or embrace and act on shareholder feedback… we intend to WITHHOLD support for three current directors at the 2023 Annual General Meeting of Shareholders scheduled for May 17, 2023: Chairman Dr. George Milne, CEO Peter Greenleaf and Compensation Committee Chair Joseph Hagan. In our view, these incumbents have perpetuated a culture of failure and self-enrichment at the expense of shareholders and must be held accountable."