Is Aurinia Pharmaceuticals Stock a Buy?

Aurinia Pharmaceuticals (NASDAQ:AUPH) is a Canadian biopharmaceutical company that targets a variety of serious illnesses with commercialized treatments.

Its Voclosporin calcineurin inhibitor (CNI) is useful for both organ transplants and Lupus Nephritis, and it’s under review for a 2021 approval from the Food and Drug Administration (FDA).

Stock prices more than tripled by the end of 2019, and it leveled off after the coronavirus pandemic. So, is Aurinia Pharmaceuticals Stock a Buy?

Aurinia Pharma Isn’t Another Vaccine Stock

Aurinia isn’t like a lot of the other major pharmaceutical companies buzzing in the news. Although it is involved in COVID-19 research, it’s not seeking a vaccine.

It’s only working with Lupus Nephritis patients and others with autoimmune and inflammatory diseases who may experience coronavirus-related complications.

The submission of its New Drug Application (NDA) to the FDA for Voclosporin is promising, because it’s the first treatment that may be approved for LN patients across the U.S., Europe, and Japan.

Calcineurin inhibitors like Voclosporin inhibit the enzyme calcineurin from activating T-cells (also known as T-lymphocytes), the white blood cells responsible for helping our body build immunity.

This plays a key factor during organ transplants, as your body may reject someone else’s organ, even if you both have the same blood type. In addition, there are other roles it may play for those suffering from autoimmune disorders.

The drug also has promise in treating other afflictions, like focal segmental glomeruloscelerosis (FSGS), dry eye syndrome, and other proteinuric kidney diseases.

The Aurinia team is experienced through a variety of pharmaceutical companies, including Abeona Therapeutics, Alexion Pharmaceuticals, Sanofi, AstraZeneca, and Amgen. Although it has plenty of potential, it’s still short of breaking even with investors, leading some investors to wonder if it’s worth buying.

Is Aurinia Pharmaceuticals Stock A Buy?

While Aurinia isn’t pre-revenue, it’s also not earning a lot, reporting revenue of $315,000 in the first quarter. It poured nearly $14 million into research and development during the same time.

This pushed the company to a net loss, but it still has plenty of money to spend. In fact, its assets of $286 million give it a healthy runway that far outpaces the FDA approval track.

This means it has everything it needs to pay off its liabilities and maintain short-term liquidity.

The stock price in Q3 2020 looks like it’s leveling off between $10-15 per share. Investors and analysts rating Aurinia Pharmaceuticals a Buy are doing so based on its late-stage positioning in LN treatment.

The FDA’s NDA fast-track approval shortens the research window to under 12 months, which means we’ll know by the end of 2021 whether the treatment works.

Once efficacy and dosage is approved, investors who were already on board look to gain healthy returns as the company’s profitability grows.

Of course, this is all hinging on one product.

Risks of Buying Aurinia Stock

Unlike larger rivals with large drug pipelines covering a wide array of conditions like Pfizer, Aurinia has all its eggs in one basket.

That’s not to say it’s a bad basket – its treatment does show promise, and the company’s c-suite comes from a pharmaceutical background.

However, even the team with the best intentions could fail to make a medical breakthrough. Should the FDA clinical trials fail to show efficacy, it will severely hinder the company’s bottom line, and it’s already losing money.

Earnings declined from Q1 to Q2 2020, and declines across the board in healthcare brought on by the novel coronavirus pandemic are only making things harder. Fewer patients are seeking treatments or participating in clinical studies unrelated to COVID-19.

It costs a lot of money to operate in pharmaceuticals, as evidenced by the eight-figure R&D spending on the company’s books each quarter. FDA approvals, clinical trials, applications, and everything else costs money.

The company is also trading on both NASDAQ and the Toronto Stock Exchange (TSX), meaning it has a lot of shareholders, none of which are being paid a regular dividend yet. This makes Aurinia a risky proposition for those not willing to take the leap of faith in its one drug.

There’s also the competition.

Can Aurinia Pharmaceuticals Competitors Win?

Lupus is a harsh disease that causes kidney failure in up to 30 percent of patients. Permanent scars occur during Lupus Nephritis, which is the most severe form of the disease, it is puts people at a higher risk of catching cancers like B-cell lymphoma.

This cancer of the immune system is deadly, as are the associated risks for heart disease and blood vessel problems. At the moment, nobody is competing with Aurinia in the treatment of Lupus, but that will certainly change if it shows promise.

Cancer has been killing people long before COVID-19, and there were an estimated 606,520 cancer-related deaths in 2020 so far.

Any treatment of diseases that are likely to lead to or cause cancer is a win, and Aurinia may have an exit strategy in being acquired by a larger pharmaceutical company in the coming years. However, it does have first-mover advantage in the Lupus arena.

Final Thoughts: Is Aurinia Pharma Stock A Buy? 

Analysts have high hopes and positive expectations for Aurinia Pharmaceuticals. This relatively small company is battling a condition that so far has no cure – Lupus Nephritis.

Early research shows promise, and the U.S. FDA provided fast-tracked approval for the drug treatment to enter clinical trials. They will be seeking those with and without coronavirus infections to determine how that affects it as well.

The company’s earnings are so far minimal, but it does generate revenue. It also has plenty of cash reserves to complete its runway and pivot if necessary, should the treatment fail its clinical trials.

It’s already trading for much more than it did last year, and if you believe its FDA approval will go through in 2021, there’s no better time than now to buy Aurinia Pharmaceuticals.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.