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

• Commercial Launch of LUPKYNIS: Recently, the company launched its FDA approved product “LUPKYNIS” to treat adult patients with acute lupus nephritis in conjunction with a history immunosuppressive treatment regimen. LUPKYNIS is available to patients in the United States on a commercial basis. Furthermore, the company anticipate that the market access would continue to improve as the rate of COVID vaccinations in the United States continues to climb and healthcare centers re-open their doors to patients.

• Positive Guidance: As per the Management Guidance, the company expects the followings in the coming days:

1. The company expects filing of a marketing authorization application (MAA) with the European Medicines Agency (EMA), within the first half of FY21 with partner Otsuka.
2. In the second half of FY21, the group would initiate a study of voclosporin (a drug used for the treatment of lupus nephritis (LN) in adolescent patients.
3. The group expects its income generation from its current AURORA-2 study (a study done to assess the long-term safety and tolerability of drug voclosporin on renal diseases) in the first quarter of FY22.

• Ample liquidity: As of March 31, 2021, the company reported slight decline in its cash and cash equivalents and investments of USD 360.9 million compared to USD 422.7 million at December 31, 2020. The decrease was primarily related to the commercial infrastructure spend to support the launch of LUPKYNIS in addition to an upfront payment made as part of a collaborative agreement with Lonza to build a dedicated manufacturing facility. Additionally, the management believes that it has sufficient financial resources to fund its current plans.
  

Financial overview of Q1 2021 (In thousands of USD)

Source: Company

• In Q1 2021, the company reported total revenue of USD 0.9 million compared to USD 0.03 million in the previous corresponding period. The increase was primarily the result of USD 0.854 million for product revenue, net of adjustments for LUPKYNIS following FDA approval in January 2021.
• On the back of higher SG&A expenses which rose to USD 39.2 million against USD 11.0 million in pcp, the company’s total cost and operating expenses increased to USD 51.4 million against USD 27.0 million.
• Due to the above stated reason the company witnessed higher net loss at USD 50.3 million in Q1 2021, compared to USD 25.9 in Q1 2020.

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. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The company started 2021 with the commercial launch of LUPKYNIS, the first FDA-approved oral treatment for active lupus nephritis. Furthermore, it anticipates that the market access would continue to improve as the rate of COVID vaccinations in the United States continues to climb and healthcare centers re-open their doors to patients. Based on technical analysis, the stock has support at CAD 12.8 level. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 15.16 on July 07, 2021. We have considered Burning Rock Biotech Ltd, Cytokinetics Inc, Legend Biotech Corp, etc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

One-Year Technical Price Chart (as on July 07, 2021). Source: REFINITIV, Analysis by Kalkine Group

Andlauer Healthcare Group Inc.

Andlauer Healthcare Group Inc. (TSX: AND) is a Canada-based company that provides healthcare supply chain services. The Company offers a platform of customized third-party logistics (3PL) and transportation solutions for the healthcare sector. 

Key highlights

• Robust operating matrix: Despite the turmoiled environment, the Company maintained its pace and witnessed spirited performance across its revenue, operating income, net income and EBITDA & EBITDA margin. The Company is continuously working closely to carry this winning momentum as it witnessed higher scale in Q1 2021, which is appreciable.

Source: Company

• Increasing Cash from operations: The group reported a surge in cash from operations at CAD 16.8 million in Q1FY21, significantly higher than CAD 10.1 million in Q1FY20. The growth was supported by higher net income coupled with impressive working capital management.
  

• Made entry into the U.S. market: On March 1, 2021, the company acquired 100% of Skelton Canada Inc. and 49% of Skelton USA Inc. which enhanced its platform with expanded national 2-8°C specialized temperature-controlled capabilities and provided a strategic entry into the U.S. market, which is a key positive.
  

• Industry beating margins: The management’s solid determination helped them leap the industry median margins on many fronts in Q1 2021, which exhibits the competitive advantage of the company within the industry. The chart below gives a glimpse of this. 

Financial overview of Q1 2021

Source: Company

• In Q1 2021, the company posted revenue of CAD 95.7 million, significantly higher than CAD 81.6 million in Q1FY20. The increase was driven by higher income from both the Specialized Transportation segment and Healthcare Logistics segment.
• Operating income was recorded at CAD 16.6 million in Q1 2021 compared to CAD 12.4 million in the previous corresponding period. The increase was mainly due to elevated sales coupled with lower direct expenses, partially offset by an increase in the cost of transportation and services and higher selling, general and administrative expenses.
• Net income and comprehensive income stood at CAD 11.6 million, significantly higher than CAD 8.1 million in pcp. The increase was driven by higher operating income, partially offset by higher interest expense and an increase in income tax expense.

Risks associated with investment

Due to added restrictions, travel ban, the arrival of a new player within the industry, and change in client’s preferences, there might be a decline in company’s market share, which might result in a fall in financial performance.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

Apart from the organic growth, the company is also looking for inorganic growth opportunities to secure prospective clients. Moreover, the company added capacity across the Brampton facility in July 2020, which can cater to the added client’s requirements. Meanwhile, in the recent past, the company acquired 100% of Skelton Canada Inc. and 49% of Skelton USA Inc which would enhance its capabilities and provided a strategic entry into the U.S. market, a key positive. Based on technical analysis, the stock has support at CAD 31.88 level. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 38.73 on July 07, 2021. We have considered Vitalhub Corp, Akumin Inc and Medical Facilities Corp etc., as a peer group for comparison purpose.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

One-Year Technical Price Chart (as on July 07, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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