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Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) Just Confirmed Our Expectations

Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) Just Confirmed Our Expectations
Written by
Chris Sandburg
Published on
April 10, 2017
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Back at the end of March, we published this piece on Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). The company was declining into the close of the month, seemingly driven by nothing more than a bit of negative press. We argued that the decline wasn’t representative of the underlying fundamentals, and that the deeper it got, the bigger the discount on an exposure to an inevitable turnaround.Aurinia just put out a press release detailing the outcome of some regulatory discussions (and some feedback from these discussions) and it looks as though this release is more than enough to get said turnaround going. It's also given us some insight into what to expect between now and any potential commercial activity.With this in mind, here's what happened, and what it means for Aurinia and its shareholders going forward.So, the company is developing a drug called Voclosporin as a potential treatment for lupus nephritis (LN). LN is a sort of secondary condition that comes about on the back the immune system induced inflammation in patients with systemic lupus (SL). The current SOC is what's called CellCept, but CellCept isn’t a cure all, and it's generally combined with steroids in the LN population. These steroids bring about unwanted side effects. With Voclosporin, Aurinia is trying to remove the need for steroids, and improve upon the current succesfull therapy rate, by bringing the drug to market as a combo-type product with and for CellCept.Data from a phase II study hit press during the first quarter and showed a clean safety profile (something that markets were a bit worried about based on some patient deaths from last year) and some strong efficacy signals. Aurinia jumped on the news, but then raised through issue and markets soured to the stock a little.Then, at the end of last month, suggestions that the company might need to alter its primary endpoint for any phase III study started circling (primarily rooted in this short's Seeking Alpha piece). The suggestion was that the metric used to signal efficacy in the phase II study, what's called the urinary protein creatinine ratio (UPCR), doesn’t necessarily indicate improved disease, and that the FDA would require Aurinia to biopsy its trial patients and use the biopsy outcome as a primary efficacy endpoint, not the UPCR metric.It didn’t sound bad from a short perspective, but we argued here that the suggestion held little water, and that Aurinia should have no problem chasing the UPCR metric, and that the FDA wouldn’t require any alterations.The company just put out this release, reinforcing our argument.As per the update, Aurinia has confirmed that it will only need to conduct one phase III study (there was some suggestion that it might need two to collect the necessary data), and that it could combine the results from this phase III with the already collected phase II data to support a regulatory registration application. That, and that the trial will go after a few predefined markers as indicative of efficacy, the primary of which is renal response as determined by UPCR.All of this means, then, that Aurinia only has to replicate the results that Voclosporin already produced in a previous trial in an expanded population. If the company can achieve this replication, then there's very little in the way of the drug picking up approval, and quickly taking a large portion of the market in the LN indication.The trial is going to enroll around 325 patients, and pitch Voclosporin against placebo when used in conjunction with the above discussed CellCept. Management hasn’t expressly stated when it's going to start enrolling, but the trial is on clinicaltrials.org here, and study start is labeled as April 2017. It's a 52-week study, but we're likely not going to see topline until the end of 2019 (as per the study protocol). We should see some interim results, however, or at least a DMC indication of success likelihood, so there's plenty of opportunity for run between now and commercialization.The raise we mentioned above brought in around $170 million, so there looks to be plenty on the books to carry Voclosporin through to readout.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 AUPH and have not been compensated for this article.

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