Aurinia Pharmaceuticals Inc.

Aurinia Pharmaceuticals Inc. (TSX: AUP), is a fully integrated biopharmaceutical company focused on delivering therapies to treat targeted patient populations that are impacted by serious diseases with a high unmet medical need.

Key highlights 

• Received FDA approval for LUPKYNIS (voclosporin): Recently, the company announced that the U.S. Food and Drug Administration (FDA) has approved LUPKYNIS (voclosporin) in combination with a background immunosuppressive therapy regimen to treat adult patients with active lupus nephritis (LN). This FDA approval is a key milestone for the company as LUPKYNIS is the first FDA-approved oral therapy for LN, which causes irreversible kidney damage and significantly increases the risk of kidney failure, cardiac events, and death. LUPKYNIS is now commercially available to patients in the United States.

• Collaboration and Licensing Agreement with Otsuka Pharmaceutical: The company has entered into a collaboration and license agreement with Otsuka Pharmaceutical Co., Ltd. for the development and commercialization of oral voclosporin for the treatment of Lupus Nephritis (LN) in the European Union (EU), Japan, as well as the United Kingdom, Russia, Switzerland, Norway, Belarus, Iceland, Liechtenstein and Ukraine. As part of the agreement, the company would receive an upfront cash payment of USD 50 million along with tiered royalties ranging from 10 to 20% on net sales upon commercialization.

• Exclusive Agreement with Lonza for Dedicated Voclosporin Manufacturing Capacity: The company recently announced that it has expanded its exclusive manufacturing relationship through a collaborative agreement to build a dedicated manufacturing capacity within Lonza’s existing small molecule API facility in Visp, Switzerland. This State-of-the-Art Monoplant would provide cost and production efficiency and secure Active Pharmaceutical Ingredient (API) supply for future commercial demand. 

• Ample liquidity: As of September 30, 2020, the company had cash & cash equivalents of USD 421 million, increased by USD 115 million, compared to USD 306 million on December 31, 2019. The management believes that it has sufficient financial resources to fund its current plans and fund its supporting corporate and working capital needs through the end of 2022. 

Financial overview of Q3 2020 (amounts in thousands of U.S. dollars)

Source: Company 

• In Q3 2020 the Company posted licensing revenue of USD 29,000 compared to USD 0.23 million in the previous corresponding year.
• R&D expenses decreased to USD 4.8 million in Q3 2020, compared to USD 17.8 million in Q3 2019. The decrease is due to a reduction in clinical trials activities.
• The Company increased its Corporate, administration and business development expenses to USD 31.1 million in Q3 2020, compared to USD 6.1 million in Q3 2019. The increase reflects the investment incurred to build out the organization to support the launch of voclosporin as a treatment for LN planned for early 2021.
• On the back of lower revenues coupled with higher operating expenses, the Company posted a net loss of USD 36 million in the reported quarter, compared to a loss of USD 19 million in the previous corresponding period. 

Risks associated with Investment.

The company's income 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 more funds and delay the launch's timeline. 

Stock recommendation

The Company has introduced LUPKYNIS (voclosporin), the first FDA-approved oral therapy dedicated for the treatment of adult patients with active lupus nephritis (LN). This FDA approval will be a key milestone for the company. Further, the Company had made a license agreement with Otsuka Pharmaceutical Co., Ltd. to develop and commercialize oral voclosporin to treat (LN) in the European Union, Japan as well as the United Kingdom along with many other European nations and will receive an upfront cash payment of USD 50 million along tiered royalties ranging from 10% to 20% on net sales upon commercialization. The management also believes that it has sufficient financial resources od USD 421 million, to fund its current plans and fund its supporting corporate and working capital needs through the end of 2022. Therefore, based on the aforementioned facts, and risks involved, we recommend a “Speculative Buy” on the stock at the closing price of CAD 20.03 as on February 12^th, 2021.

1-year Price Chary (as on February 12^th, 2021). Source: Refinitiv (Thomson Reuters)

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