All figures are in US$ and their upside scenario target is also raised to US$38. GLTA

January 26, 2021

Aurinia Pharmaceuticals Inc.

First oral FDA-approved drug for lupus nephritis; raising price target to $28

Our view: Aurinia’s sole product, voclosporin (brand name LUPKYNIS), is now FDA-approved for the treatment of active lupus nephritis in adults, and the product label overall is in line with our expectations while average pricing guidance is above our prior forecast. We reiterate our view that Aurinia is well positioned to gain market share in this underpenetrated therapeutic area, with robust Ph. III data, a sizeable cash position, and an experienced commercialization team in place. We raise our price target to $28 from $20 and reiterate our Outperform rating.

Key points:

On Friday, January 22, the FDA approved voclosporin (LUPKYNIS) for the treatment of active LN in adults. Importantly, the FDA product label incorporated a US patent related to the eGFR dosing used in Aurinia’s AURA and AURORA trials, potentially extending exclusivity to 2037 from 2027. We note that there was potential for approval in all LN rather than active LN, and the label includes a black box warning (consistent with many other immunosupressants). Management expects average annual net pricing of $65K/patient, above our prior estimate of $55K/patient and within Aurinia’s previously disclosed potential range of $45–90K.

Well positioned to execute on the launch. Aurinia has built an experienced commercialization team and has significant funding to launch LUPKYNIS. The company had cash of $421MM as of Q3/20, and in December it secured an EU/Japan licensing agreement with an upfront payment of $50MM and potential milestone payments of up to $50MM (estimated to be largely received in 2022 upon regulatory approval in these regions). Only one other drug is FDA-approved for LN (BENLYSTA, as of Dec. 2020), and we view LUPKYNIS as more competitive (see p. 10).

Revising our forecasts to account for label details and recent licensing agreement. We continue to assume an addressable active LN patient population of ~40K/year in the US, now assuming average annual pricing of $65K/patient (prev. $55K), in line with Aurinia’s expectations. We maintain our peak penetration rates of 30%, 18%, and 13% in US, EU, and Japan. We now assume US exclusivity to 2037; our prior outlook reflected a risk-weighted approach with potential for LOE beyond 2027. We estimate US product sales of $93MM in 2021 (prev. $110MM; FactSet consensus $67MM), now assuming initial penetration of 3.75% (prev. 5%) in 2021 due to COVID-19 and the recent BENLYSTA approval. For 2022, we forecast product revenue of $263MM (prev. $238MM; consensus $236MM), still assuming 10% penetration in the US, and with an initial $7MM of royalty revenues from the EU and Japan.

Raising price target to $28 from $20 to reflect higher assumed pricing and extended exclusivity. Our price target remains based on a blend of a DCF@9% and a 25x 2023E P/E multiple.