Aurinia Pharmaceuticals is a biopharma stock you should own, Mackie says

All eyes are on Aurinia Pharmaceuticals (Aurinia Pharmaceuticals Stock Quote, Chart, News NASDAQ:AUPH), which just announced the start of a patient dosing in its Phase 2/3 clinical trial for its lead compound voclosporin.

In an update to clients on Thursday, Mackie Research Capital Corporation analyst André Uddin says there’s major market opportunity in dry eye syndrome (DES), which voclosporin aims at addressing in the trial.

Uddin is maintaining his “Speculative Buy” rating for Aurinia, with a target price of $10.00, representing a projected 12-month return of 108 per cent at the time of publication.

Victoria, BC-based Aurinia is a late clinical-stage biopharmaceutical company focused on therapies targeting patient populations that are impacted by serious diseases with a high unmet medical need. Its investigational drug voclosporin, a calcineurin inhibitor, is being developed to treat a number of illnesses and is at various stages in development for each: for treating lupus nephritis, voclosporin (VOS) is in a Phase 3 trial, for dry eye syndrome it is in a Phase 2/3 trial and for focal segmental glomerulosclerosis, voclosporin is in a Phase 2 trial.

The company announced on Thursday that patient dosing has begun in its DES AUDREY trial, a randomized double-blind study in 480 patients who will be randomized to receive either 0.05, 0.1 or 0.2 per cent VOS or vehicle (1:1:1:1), with the primary endpoint being more than 10 mm improvement in the Schirmer tear test (STT) after 4 weeks of treatment.

“Based upon the impressive results seen with VOS in the head-to-head exploratory Phase 2a study against cyclosporin A, we are focused on rapidly advancing this promising treatment for those who suffer from dry eye syndrome,” said Peter Greenleaf, President and CEO, in a press release. “Through the Phase 2/3 AUDREY trial, we will generate important dose-ranging and clinical data aimed at bringing VOS towards registration and commercialization.”

Uddin reports that in a Phase 2 trial, VOS was at least twice as effective as Restasis, another calcineurin inhibitor in achieving more than a 10mm increase in the Schirmer Tear Test after 4 weeks of treatment, a result that Uddin calls “very statistically significant.”

Uddin sees significant market opportunity in dry eye syndrome.

“Restasis is a blockbuster drug – it generated global peak sales of over $1.4 billion in 2016. In mid-2019, Takeda sold its marketed DES product (Xiidra) to Novartis for $3.4 billion upfront and $1.9 billion in milestones. Based on VOS’ potential of being more efficacious than Restasis, we believe VOS should generate decent sales – we have conservatively estimated VOS would be a $450 million product. We have not incorporated our sales estimates for VOS into our model yet,” Uddin writes. (All figures in US dollars.)

As far as VOS goes for the treatment of lupus nephritis, Uddin says a key catalyst is around the corner.

“Results of the on-going AURORA Phase III trial with voclosporin for lupus nephritis (LN) are expected in Q4 2019, following which AUPH expects to complete a rolling NDA submission by H1 2020,” says Uddin.

The analyst estimates that AUPH will generate negligible revenue in 2019 and 2020 and produce $155.9 million in revenue for 2021 with a fully diluted EPS of $0.64 per share.