Aurinia Stock Has Great Potential, but It’s Not a Buy Right Now

Aurinia (NASDAQ:AUPH) stock is a bet on a clinical-stage biotech firm tackling lupus nephritis with its drug, Lupkynis. Potential investors should note that the company is no longer in the developmental phases. 

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Aurinia looks like a lot of other young biotechs. That is, it doesn’t make money. A cursory glance at the company’s year-end statement of operations shows large increases in licensing revenues.

They increased from $318,000 in 2019, to $50,118,000 in 2020. This increase was solely attributable to a $50 million cash payment for licensing agreements with Otsuka. Yet, the company lost $102 million in 2020, up from $88 million in 2019. 

It is clear that Lupkynis still has a lot to prove before Aurinia is out of trouble. 

It’s important to note that Lupkynis, the only drug Aurinia produces, was recently granted FDA approval. Therefore, AUPH stock has great potential to rise when and if sales of Lupkynis take off.

Those are pretty big whens and ifs, though, so let’s dive into some of the catalysts and headwinds that face the Canadian company as it launches the drug.

A Closer Look at AUPH Stock

Lupus nephritis is a complication of lupus in which irreversible damage is done to the kidneys. Aurinia states that there are as many as 300,000 lupus patients in the U.S. Approximately one-third of these patients develop lupus nephritis. 

The disease disproportionately affects women, who account for 90% of diagnoses. Further, it is 2-3 times more prevalent among women of color and tends to cause more severe complications in those populations. 

The autoimmune disease costs $50,000 per patient annually in lost productivity and healthcare, and the costs are even greater for those with lupus nephritis.

This is likely one of the reasons that the FDA granted Aurinia and Lupkynis Fast Track designation in 2016. Ultimately that led to the breakthrough on Jan. 22. Lupkynis is the first FDA-approved oral therapy for the disease.

FDA Approval

The FDA approved Lupkynis under Priority Review as part of a regimen to treat adults with the active form of the disease. The accelerated timeline augurs well for Aurinia’s investment prospects. It’s a clear sign that the drug meets a real need and has efficacy.

According to the press release accompanying the approval, the drug does indeed have increased efficacy over other treatments.

In pivotal trials, patients treated with LUPKYNIS in combination with standard-of-care (SoC) were more than twice as likely to achieve renal response and experienced a decline in urine protein creatinine ratio (UPCR) twice as fast as patients on typical SoC alone,” the release said. 

Aurinia immediately launched the drug commercially following its FDA approval.

Competition, Cost and Market Penetration

GlaxoSmithKline’s (NYSE:GSK) Benlysta was approved in 2020 and became the first medicine approved for lupus and lupus nephritis. 

Both Benlysta and Lupkynis are improvements on cyclosporine, the previous treatment for the disease. Therefore, both drugs should have a relatively easy path to sales for lupus nephritis. Benlysta received approval for treatment of systemic lupus in 2011, and lupus nephritis in 2020. 

The cost of Lupkynis is steep. The price of a 10-day supply of 60 capsules runs $3,950. Aurinia anticipates its average net revenue to be around $65,000 per patient annually

Lupkynis is currently facing an uphill battle as sales reps adapt to a fractured Covid-19 sales model. Doctors are beginning to gain knowledge and familiarity with the newly released drug, but sales have been slow. The user base as of early March was in the single-digits.  

There is also a cheap alternative called tacrolimus. Because the drug is much cheaper, many patients are questioning the cost-benefit of Lupkynis. This fact, along with Benlysta’s entrenched sales pipeline make Aurinia’s path tougher. 

The Bottom Line on AUPH Stock

Among the ratings of the nine analysts covering Aurinia, 7 are “buy,” 1 is “overweight” and 1 is “hold.”

I am more bearish right now. I’d say that there are several significant headwinds serving to hold down both Lupkynis’ sales and AUPH stock.

The best thing to do is pay attention to any sales and revenue signals related to Lupkynis. If the numbers make sense, consider initiating a position then.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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