Aurinia Pharmaceuticals Inc.

Aurinia Pharmaceuticals Inc. (TSX: AUP) is a clinical-stage pharmaceutical company with a focus on developing and commercialization of the cure for patients suffering from serious diseases with a high unmet medical need.

Recently, the company reported that it had completed enrollment for the Phase 2/3 AUDREY™ clinical trial evaluating voclosporin ophthalmic solution (VOS) for the potential treatment of dry eye syndrome (DES), a chronic disease estimated to affect more than 16 million people in the United States.

Q1FY20 Financial Highlights: Aurinia declared its quarterly numbers, wherein the company reported Licensing revenue of USD 0.030 million, at par with the previous corresponding quarter. The quarter was marked by a higher research and development expense of USD 13.83 million, higher from USD 10.63 million pcp. The was due to a higher cost related to the preparation of the NDA submission and related supporting activities, followed by ongoing trials related to VOS Phase 2/3 AUDREY, the AURORA 2 extension trial. The quarter was marked by the expansion of the medical affairs team in order to support the launch of voclosporin. Corporate, administration and business development swelled to USD 11.06 million against USD 3.90 million in Q1FY19. Other expenses surged to USD 2.21 million, from USD 0.055 million in pcp. Loss before change in estimated fair value of derivative warrant liabilities and income taxes stood at USD 26.62 million, against USD 14.14 million in pcp. The company reported a net loss and comprehensive loss for the period at USD 16.53 million as compared to USD 12.43 million in pcp. The company exited the quarter with cash, cash equivalent and short-term investments of USD 286.12 million, while total assets stood at USD 314.97 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risks: The income of the company depends upon the results of the clinical trial and the subsequent approval of trials. There is a chance of cancellation of the drug approval, which might result in the commencement of new clinical activities and require additional funds and delay the timeline of the launch.

Stock Recommendation: The stock of AUP soared ~162% in last one year. The group mentioned that COVID-19 has not affected the timeline and rolling submission of voclosporin New Drug Application to the U.S. Food & Drug Administration remains on track and is expected to complete by the end of 2Q20. The group has setup a commercial hub in Maryland, and the group is preparing for the U.S. launch of voclosporin as the first FDA-approved treatment for lupus nephritis. Further, the group mentioned that VOS development program remains on target. The group is expecting to report top-line results from the Phase 2/3 AUDREY dose-ranging trial of VOS during the fourth quarter of this year. The treatment of dry eye syndrome offers a huge potential market for the company and successful trial would lead to a higher business prospect for the company. Investors should note that the stock is closed above the 200-day simple moving average of CAD 18.39, indicating a long-term bullish pattern. Based on the aforementioned facts, and risk involved, we recommend a ‘Speculative Buy’ on the stock at the closing price of CAD 21.14 as on June 26, 2020.

AUP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Aptose Biosciences Inc.

Aptose Biosciences Inc. (TSX: APS) is a clinical-stage biotechnology company which develops targeted medicines and personalized therapies for the precision treatment of life-threatening cancers. The Company is yet to report its revenue as it is conducting clinical trials and yet to commercialize its products.

Q1FY20 Financial Highlights: For the period ended 31 March 2020, APS reported a net loss of USD 11.53 million, as compared to USD 5.49 million in the previous corresponding quarter. Higher net loss is primarily attributable to an increase in research and development expenses and higher general and administrative expenses due to higher stock-based compensation expense, increased in program costs and related labor costs etc. Due to scaling up, the Group reported higher manufacturing cost related to CG-806 program coupled with research costs associated with optimizing the formulation. Cash used for investing activities stood at USD 12.42 million, significantly higher than USD 0.024 million in pcp. Cash and cash equivalents and total assets stood at USD 59.75 million and USD 92.55 million, respectively at the end of the first quarter of FY20.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risk: The Company is yet to commercialize its products and hence does not have an income. The management highlighted that business is likely to run with negative cash flows for the time being and is planning to issue capital for the funding purposes.

Stock Recommendation: The stock of APS made an exuberant return of ~177% in the last one year, as investors were accumulating the stock on the expectation of commercialization of its products. Amidst the current economic challenges, the company continued to advance its clinical programs for the CG-806 and APTO-253 and exhibited favorable safety profiles and have generated proof of pharmacologic activity and early indications of clinical activity. The above updates are encouraging. However, the stock has corrected ~17% in the last one month and currently trading above the 200-days simple moving average (SMA) of CAD 7.18, indicating a bullish trend. We believe there is sufficient uncertainty involved in the commercialization of the products, and hence, we prefer to remain on the sidelines. Further, the management is expecting to generate negative cash flow in the near term as the company is in the clinical stage. Hence, considering the above factors, we recommend a ‘Watch’ stance on the stock of APS at the closing price of CAD 8.59 as on 26 June 2020.

APS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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