Where Will Aurinia Pharmaceuticals Be in 5 Years?

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Predicting the future isn't hard at all. Predicting the future accurately is a different matter altogether.

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I wanted to state that at the outset before attempting to predict how things will unfold for Aurinia Pharmaceuticals (NASDAQ: AUPH). It's difficult enough to have a sense of how a large, established company will perform. But Aurinia is a clinical-stage biotech, which makes prognosticating with any degree of confidence next to impossible. Nevertheless, here's where I think Aurinia Pharmaceuticals will be five years from now.

Playing the odds

Aurinia has one and only one pipeline candidate. Voclosporin is a calcineurin inhibitor that suppresses immune responses. Blocking a person's immune system usually isn't a good thing, but it's a huge positive when the body's immune system is attacking a person's own tissues. That's exactly what happens with lupus nephritis (LN), an inflammation of the kidney that affects more than 500,000 people in the U.S. 

The company has one late-stage study underway evaluating voclosporin in treating LN. Aurinia plans to initiate a phase 2 study of voclosporin in 2018 for treating focal segmental glomerulosclerosis (FSGS) and minimal change disease (MCD). It also intends to kick off another phase 2a study of voclosporin ophthalmic solution (VOS), an aqueous solution containing 0.2% voclosporin, next year assessing tolerability in patients with dry eye syndrome (DES). 

Probably the smartest thing to do in predicting the future for Aurinia is to simply play the odds. When you don't know an outcome, going with probabilities isn't a bad idea. So what are voclosporin's (and, by extension, Aurinia's) chances for success?

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Based on data published by biotechnology trade association Biotech Innovation Organization (BIO), fewer than half (49.6%) of drugs in late-stage clinical studies ultimately win approval. Just 15% of drugs in phase 2 studies gain approval. If I were to simply play the odds, my prediction would be that Aurinia won't be in good shape five years from now. 

Nostradamus and numbers

However, the great predictors of the past like Nostradamus couldn't care less about numbers. There are some numbers for Aurinia, though, that I think are important in predicting its future -- and much more important than probabilities.

Aurinia's results from the phase 2b study of voclosporin in treating LN give ample reason to expect more than just a 50-50 chance of eventual approval. It wasn't a tiny study, with 256 patients participating across 20 centers. Nearly half (49%) of patients taking the lower dose of voclosporin experienced complete remission after 48 weeks, compared to 24% of patients on placebo. Over two-thirds of the patients taking voclosporin had partial remission after 48 weeks, versus 48% of patients on placebo. These are highly significant differences.

There weren't any serious safety concerns from the study, either. Actually, patients on placebo had worse safety results than did either group taking voclosporin, with three deaths and one malignancy reported in the control arm after the study treatment period. 

Another number that I feel is key to thinking through Aurinia's future is zero. That's how many treatments are approved for LN in the U.S. and in Europe. If voclosporin wins approval, there's a large market potential -- perhaps $1.5 billion annually or higher. It's no wonder that Aurinia's clinical success earlier this year caused the stock to soar.

And the prediction is...

Where will Aurinia Pharmaceuticals be five years from now? I predict the biotech will have a couple of years of marketing voclosporin under its belt by then. This assumes that the late-stage study goes well and that Aurinia starts its rolling New Drug Application (NDA) submission in the second half of 2018 and wraps it up in the first half of 2019.

However, I don't think Aurinia will be Aurinia in 2022. If voclosporin is successful as I suspect it will be, my view is that a major drugmaker will scoop up Aurinia before too long. I won't go out on a limb and predict which company will acquire Aurinia. However, it wouldn't surprise me at all if it was AbbVie. Rich Gonzalez, AbbVie's CEO, stated at the Credit Suisse healthcare conference last week that lupus is an area of "high interest" to the company. 

Like I said earlier, making accurate predictions is a lot harder than making predictions. Aurinia's results from its late-stage study of voclosporin, which should be available by early 2019, will go a long way in determining whether I'm on track. I wouldn't put any money on the accuracy of my prediction, but I wouldn't bet against it, either.

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Keith Speights owns shares of AbbVie. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.