President and CEO Peter Greenleaf led Aurinia through the U.S. drug approval process
Credit: Aurinia Pharmaceuticals

President and CEO Peter Greenleaf led Aurinia through the U.S. drug approval process

The Victoria drug developer may be the target of a takeover bid

The stock: Aurinia Pharmaceuticals (NASDAQ:AUPH) set itself the audacious (in Canada, anyway) goal of becoming an integrated pharmaceutical. The Victoria-based company took a big step in that direction last January, when the U.S. Food and Drug Administration approved its drug Lupkynis for treating lupus nephritis.

Now the fulfilment of that dream is in doubt, though. Bloomberg reported on October 25 that Bristol Myers Squibb Co. (NYSE:BMY) has expressed interest in acquiring the biotech firm, sending Aurinia stock up another 7 percent. Trading for US$30.35 as of Tuesday's close, it’s already up 60 percent on the year.

The drivers: Under the leadership of president and CEO Peter Greenleaf going on three years, Aurinia deserves credit for getting Lupkynis over the finish line in the world’s largest medicine market. The question now is how big the market for its intellectual property and drug pipeline really is. Lupus nephritis is an autoimmune disease afflicting about 135,000 Americans, especially women and people of colour. It can lead to heart disease, kidney failure and death.

READ MORE: The Innovators: Aurinia Pharmaceuticals is improving the treatments for rare diseases

Aurinia expects net revenue from the drug of US$40-50 million this year, even with the closure of many screening and treatment facilities due to COVID-19, but that’s nowhere near enough to justify its nearly US$4-billion market capitalization. Over the first half of 2021, the company reported a net loss of US$97.4 million, or 76¢ per common share.

Aurinia has partnered with Otsuka Pharmaceutical Co. of Japan (TYO:4578) to obtain regulatory approvals in the European Union, the U.K., Japan and other countries over the pond. It also aims to roll out new formulations of the drug for different autoimmune conditions in the coming years. Still, its rich valuation appears to stem largely from the fact the pharma industry is awash with cash and in need of new revenue streams.

Word on the street: Although “much of the upside from a potential acquisition is already priced in,” RBC Capital Markets analyst Douglas Miehm raised his target for the stock to US$34 following the Bloomberg report. Even if the BMS transaction fails to materialize, Miehm spies several other possible suitors and estimates a 70-percent probability of a takeover within the next 12 months.

Coming and going: Dan Park, CEO of BuildDirect Technologies (TSXV:BILD), announced that he will be stepping back and moving upstairs to chair of the company as of year-end, citing personal reasons. Park led the restructuring and re-listing of the online building materials marketplace over the past few years. The company says the search is on for a new CEO.