Forget The Short Shots, Buy Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) On The Dip

Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is taking a bit of a hit at the moment, likely primarily on the back of this article at Seeking Alpha. The article, the author of which disclosed a short position on its publication, claims that the FDA will likely necessitate an extra component added to the planned phase III registration study for the company's lead asset and indication, and that this extra component will reduce the chances of the drug getting an agency nod when Aurinia submits for registration.We're looking at this as an opportunity to buy on the dip.To outline the point that the Seeking Alpha author is trying to make, they are basically saying that the mechanism of action (MOA) of the drug in question, Voclosporin, could result in it reducing what's called the urinary protein creatinine ratio (UPCR), but that this reduction doesn’t necessarily translate to any alleviation of the inflammation driven tissue damage associated with the target indication – lupus nephritis.The company is using a reduction in UPCR as a primary endpoint in the trial, and based on this, the author suggests (well, more outright states, but we're not going to argue over semantics) that the FDA won't approve Voclosporin in this indication without the company adding a biopsy component to the study. The basis of this suggestion is that a biopsy can confirm tissue response, and remove any uncertainty surrounding the drug's ability to improve disease severity in these patients.There are a couple of quotes in the piece from articles that seem to confirm the potential for disparity between proteinuria (as measured by the above mentioned UPCR) and actual histological impact in LN sufferers.It's not difficult to find articles that go against those that the Seeking alpha author has used to support their argument.Here's one.And another.What's important here, however, isn’t the fact that a couple of articles, and an anonymous but respected KOL in the space, claim that that UPCR can't be used as a surrogate type LN severity measurement. What's important is that to-date, the FDA has supported the suggestion that it can, and it has worked with Aurinia to design and confirm a phase III protocol based on this suggestion.The protocol is outlined at the clinicaltrials.gov page here, and it details renal response, as measured by (and by proxy, defined by) Voclosporin's ability reduce the level of proteinuria (measured by UPCR) while demonstrating an acceptable safety profile, as the efficacy endpoint. There's no mention of any biopsy post administration, and there is biopsy inclusion criteria. If the FDA was going to add a biopsy post admin criterion, it would have done so already, and we would have heard about it by now.All the data that Aurinia has collected to date, and this includes the latest 48 week data announced at 12th International Congress on SLE (LUPUS 2017) & the 7th Asian Congress on Autoimmunity (ACA 2017), points to the surrogate relevance of UPCR in LN severity, and in turn tissue histology, and actively reinforces the ability of the endpoint criteria that the company is using to correlate with LN severity, and in turn, improvement.The short side argument that the FDA might introduce a last minute biopsy requirement to confirm correlation sounds great, and with it being supported by a couple of publications derived quotes, may even come across as compelling to some. Indeed, it seems to be doing just that, as markets are selling off on the company as we speak.In reality, however, it's just not that likely.This is a condition with no current effective standard of care. It's a huge unmet need, and Voclosporin is one of the only options these patients are going to have available to them for the foreseeable future, if it gets approved. The safety concerns that hit press last year have all but disappeared, and that the FDA will dismiss what amounts to a solid surrogate endpoint last minute and delay the bringing of this one through registration, and to the patents that need it, is a real stretch. Add in the macro political situation, in which the Trump administration is pushing to get drugs to patients faster, and it becomes even less likely.We will be updating our subscribers as soon as we know more. For the latest updates on AUPH, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.