Aurinia Prescription drugs: Gross sales Progress Would Assist Buyout Potential (NASDAQ:AUPH)

Aurinia Prescription drugs (NASDAQ:AUPH) markets Lupkynis (voclosporin) which was permitted in January 2021 by the US Meals and Drug Administration for the remedy of lupus nephritis. A current preliminary replace on This autumn’23 and full-year 2023 financials supplies a chance to have a look at the place the corporate stands now.

Is it lastly time for an AUPH buyout?

Buyout hypothesis isn’t new for AUPH, however many longs have been ready years with none motion. It’s value noting that on January 5, 2024, AUPH reported some preliminary numbers for This autumn’23, but in addition supplied a touch upon its strategic evaluate initiated in mid-2023.

As beforehand introduced, the Firm initiated a sturdy strategic evaluate on the finish of June 2023 and is constant to evaluate all strategic choices for the Firm, which embrace quite a lot of potentialities together with, however not restricted to, a possible sale, merger, or different strategic transaction. Right now, there aren’t any additional updates on the matter, aside from that the method is constant.

AUPH feedback, January 5, 2024, press launch.

Trying on the financials, I discovered web product revenues of AUPH’s Lupkynis to be pretty flat the previous few quarters, however a return to development might occur in Q1’24.

Monetary Overview

Q3’23 financials

Trying first on the Q3’23 financials, AUPH reported web product income of $40.8M for the quarter for Lupkynis, and complete web income of $54.5M aided by a $10M milestone cost from ex-US associate Otsuka Holdings (OTCPK:OTSKF, OTCPK:OTSKY). SG&A bills have been $47.8M in Q3’23, R&D bills have been $13.6M in the identical quarter. Internet loss was $13.4M in Q3’23. AUPH completed Q3’23 with money, money equivalents, restricted money and investments of $338.5M. The corporate estimates it has enough assets to fund operations for “not less than the subsequent few years.” Taking out restricted money of $0.84M from the $338.5M quantity, and contemplating web money utilized in working actions of $47.8M within the first 9 months of 2023, AUPH might proceed on the present fee of burn for over 5 years.

As of November 1, 2023, there have been 143,608,164 shares of AUPH’s frequent inventory excellent, giving it a market cap of $1.15B ($8.04/share). There have been additionally 12.4M inventory choices, 7M unvested restricted inventory models, and 0.9M unvested efficiency awards excellent as of September 30, 2023.

This autumn’23 and full yr 2023 preliminary financials

AUPH’s preliminary This autumn’23 outcomes got here with information the corporate had money, money equivalents, restricted money and investments of ~$351M on the finish of 2023. The corporate expects to change into money circulation constructive within the second half of 2024 and has web product income steerage for 2024 of $200M-$220M.

Plotting the web product revenues, which come from AUPH’s solely marketed product Lupkynis, we see that together with the current This autumn’23 preliminary variety of ~$42M paints an image of a reasonably flat few quarters. On the similar time, I can see a equally flat interval in Q2/Q3/This autumn of 2022.

AUPH enterprise worth and gross sales a number of

Contemplating the present market cap of $1.15B and together with $93.21M value of present and non-current legal responsibility associated to working and finance leases, yields an enterprise worth of $910.8M. Evaluating that to preliminary web product income for 2023 of $159M yields an EV to gross sales a number of of 5.73. Notice that utilizing web product income does imply we’re ignoring royalty from OTSKF, though proper now that isn’t enormous, however could possibly be thought of to be a part of product gross sales.

Even taking out the $93.21M from the leases, because it isn’t typical debt, and a few would possibly calculate enterprise worth like that, yields an enterprise worth of $817.6M and an EV/gross sales of 5.14. If we wish to get significantly aggressive, we are able to use preliminary year-end money of $351M to calculate an enterprise worth of $803M, and use ahead estimates to get a decrease a number of, however I’ll depart that as much as the AUPH bulls. Searching for Alpha’s valuation tab notes a sector median of three.82 for EV/Gross sales (trailing twelve months). That being mentioned the sector median goes to be calculated from many corporations the place the common marketed drug isn’t simply 3 full years into its launch. Certainly masking Coherus (CHRS) lately, Bhavneesh Sharma famous an EV/gross sales of 6 for biotech corporations in line with NYU-Stern information.

In any case, I’d say AUPH appears considerably low-cost given the gross sales numbers I’m utilizing are from its third yr available on the market, on the similar time, I can see why it is likely to be just a little low-cost due to just a few quarters of pretty flat gross sales.

Conclusions and Dangers

AUPH’s preliminary This autumn gross sales numbers have include the corporate’s steerage of reaching money circulation positivity in H2’24. Additional, AUPH’s evaluate of strategic choices is constant. Whereas I take into account these developments to be positives, just a little extra gross sales development would assist strengthen any buyout thesis, and certainly any bull thesis impartial of a buyout.

I fee AUPH a maintain right here, however I will likely be maintaining a tally of quarterly gross sales. Though I’m not score it a purchase, I can discuss just a few dangers which can be apparent to me.

First among the many dangers can be underwhelming gross sales of Lupkynis. AUPH wants to maneuver web product revenues into the $50M/quarter vary to attain 2024 steerage of $200M-$220M.

A second danger is that any strategic improvement truly includes a purchase order that the market doesn’t like or a sale of a part of the enterprise on phrases the market doesn’t take into account favorable.

Lastly, trials in lupus nephritis aren’t unprecedented. Whereas many medication beneath improvement for lupus aren’t oral therapies like Lupkynis, in the event that they display favorable efficacy or security relative to Lupkynis, the potential to steal market share might weigh on AUPH’s inventory.