Aurinia Pharmaceuticals (NASDAQ:AUPH) could eventually change how doctors treat kidney failure in lupus patients. If so, buying shares, which have fallen significantly from their peak in March, could prove profit-friendly. Is this stock about to go higher?

An important new option

Aurinia Pharmaceuticals' lead product candidate is voclosporin, a drug that is designed to be used alongside CellCept in lupus nephritis (LN) patients.

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There are more than half a million people with systemic lupus erythematosus (SLE) in the United States, and over half of these patients will develop LN, an inflammation of the kidneys that can lead to end-stage kidney disease.

Unfortunately, current treatment options for LN patients are limited. Common approaches include steroids plus cyclophosphamide, a chemotherapy, or CellCept, an immunosuppressant that's primarily used to prevent your body from rejecting a kidney, liver, or heart transplant.

Neither of these drugs are specifically approved by the U.S. Food and Drug Administration for use in LN patients, and in many patients they don't work. Only 8% of patients achieve complete response to cyclophosphamide, and only 9% achieve a complete response to CellCept after 24 weeks. As a result, up to 30% of patients with severe LN advance to end-stage kidney failure within 15 years of their diagnosis.

That's particularly discouraging when you realize that the early intervention resulting in a complete response significantly reduces the likelihood of disease progressing to a point where dialysis is required.

Fortunately, it appears that adding Aurinia Pharmaceuticals' voclosporin to CellCept therapy may significantly boost the percentage of patients with a complete response. Earlier this year, the company said that dosing voclosporin and CellCept together resulted in a complete response rate of 49% at the 23.7 mg dose after 24 weeks. That was the best rate ever achieved in a LN trial, and it handily beat the 24% rate achieved in the control group.

In June, additional data was presented showing that all of the people in complete remission at the 24-week mark remained in remission at 48 weeks, suggesting that the two-drug approach provides a lasting improvement. Its duration of remission was nearly twice that of CellCept alone.

Tapping a blockbuster opportunity

The company is enrolling patients in a phase 3 study to evaluate voclosporin's efficacy at the 52-week mark, and if this trial pans out and an FDA approval is granted, then this drug could become standard-of-care, and as a result, a best-seller.

There are as many as 200,000 LN patients being treated in the U.S. alone, and LN is considered to be poorly controlled or uncontrolled in 42% of them. Based on the company's market research, it believes that voclosporin could win use as both maintenance and acute therapy, and if so, then it thinks its peak addressable market in the U.S. could total $1 billion, or more.

Management thinks this data, combined with results from a phase 3 study that began enrolling patients last month, can support eventually filing for voclosporin's approval from the U.S. Food and Drug Administration.

Is this company's stock on sale?

Despite voclosporin producing arguably best-in-class data in its phase 2 study, its shares have fallen to below $6.50 each, from a peak north of $10 earlier this year when results were first presented:

AUPH Chart

AUPH data by YCharts.

The retreat has cut the company's market cap to a little over $500 million, or roughly half what its peak annual sales opportunity could someday be in the U.S. alone. Up to 40% of phase 3 trials end up failing, so some caution is warranted. But given the market opportunity and big unmet need, I can't help but think that shares could trade higher leading up to phase 3 data, and that if the trial is a success, shares could climb significantly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.