Aurinia Pharmaceuticals said it's exploring strategic alternatives, including a potential buyout, leading AUPH stock to surge Friday.
Analysts have long considered Aurinia a possible acquisition target. At one point, Wall Street believed Bristol Myers Squibb would buy Aurinia, SVB Securities analyst Joseph Schwartz said in a note to clients.
Aurinia makes Lupkynis, a treatment for lupus nephritis, an affliction of the kidneys. Schwartz says Lupkynis could be an easy bolt-on product for companies offering rheumatology or nephrology medications.
The company recently settled a patent dispute over Sun Pharmaceuticals' dry-eye drug Cequa, and won a new patent protecting the method of use for Lupkynis.
"We believe potential purchasers may find the unencumbered asset, Lupkynis, and more than 98% gross margin on the drug attractive," RBC Capital Markets analyst Douglas Miehm said in his note to clients. "Certain investors have been pushing the company to start a strategic review process which likely precipitated this action."
On today's stock market, AUPH stock jumped 5.7% to close at 9.68.
AUPH Stock: Sale, Merger Or Another Deal
Aurinia cautioned it has yet to make any decisions. The strategic review process could result in a sale, merger or other transaction. The company hasn't set a timeline for the process.
In the event of a takeover, RBC's Miehm says a fair price would value AUPH stock at $18-$20 a share. A premium deal could go as high as the high $20 to low $30 range for Aurinia shares.
Beyond the strategic review, investors will likely focus on continued execution for Lupkynis, said Schwartz, the SVB analyst. Following a first-quarter beat, Aurinia guided to $135 million to $155 million in full-year sales. He expects $149 million in sales, lining up with Street views for $150.6 million.
Schwartz kept his outperform rating on AUPH stock.
Also, Aurinia announced it had accepted the resignations of board members George Milne and Joseph Hagan. Both received less than majority support during the May 17 annual general meeting. The company is now looking for their replacements.
AUPH stock is forming a consolidation with a buy point at 12.13, according to MarketSmith.com.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
