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Is Aurinia Pharmaceuticals' Management Its Best Asset?

By Todd Campbell - Jul 14, 2017 at 8:00PM

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The company's C-suite is loaded with experienced industry veterans, and that could put it in a perfect position to successfully develop its lead drug for lupus nephritis.

Richard Glickman was the founder and CEO of Aspreva Pharmaceuticals, a small company that he sold for $915 million in 2008 after it developed CellCept, a treatment that today is commonly used in lupus nephritis (LN) patients.

Nowadays, Glickman's at it again as the founder and CEO of Aurinia Pharmaceuticals (AUPH -1.76%), a company that's developing voclosporin, a drug that can be used alongside CellCept in the same disease. Can Glickman reshape this indication a second time?

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A winning team

Aurinia Pharmaceuticals' C-suite is stacked with a slate of Aspreva Pharmaceuticals veterans. In addition to Glickman, the company's chief medical officer was the former research and development vice president who was responsible for CellCept's development at Aspreva, and its chief operating officer helped develop Aspreva's strategy for CellCept's use in LN.

So far, getting the gang back together looks smart.

In March, Aurinia reported what are arguably the best response rates ever achieved in a LN trial. Historically, fewer than 10% of LN patients go into complete remission following treatment. However, the complete remission rate was 49% in voclosporin's trial. Partial remission rates also improved significantly to 68%. For comparison, they were just 48% in the control arm of this study.

Voclosporin's efficacy in this trial is important because it suggests that its use someday could significantly reduce the likelihood of LN patients advancing to dialysis. Historically, early intervention that leads to complete remission reduces the likelihood of a LN patient advancing to end-stage renal disease. Currently, up to 30% of patients with severe LN end up in end-stage renal failure within 15 years of their diagnosis, despite existing treatments like CellCept.

A big commercial opportunity

While CellCept is used in LN, it's not officially FDA approved to treat the condition. Therefore, if phase 3 trials of voclosporin pan out, a green light could make it the first treatment specifically approved in the indication, quickly establishing it as standard of care. Aurinia's phase 3 trial recently began enrolling patients, and the study's estimated completion data listed on clinicaltrials.gov is March 2020.

If voclosporin does win FDA approval for LN, it could be a big win. There are over 500,000 Americans diagnosed with systemic lupus erythematosus (SLE), and up to 60% of them develop LN. Roughly 40% of LN patients are considered to have their disease poorly controlled, including 17% who have active disease.

Based on the size of its addressable patient population, pricing trends in the indication, and the ability to shake up standard of care, Glickman's team thinks the market opportunity for voclosporin is $1 billion annually in the United States. If voclosporin wins approval in international markets, then its opportunity climbs to around $1.4 billion. It's too early to say for sure what Aurinia Pharmaceuticals may charge for this drug, but management's current thinking is that the U.S. market could support a price for it between $50,000 and $100,000 per year.

Foolish final thoughts

I love investing in been-there-done-that management teams, because their experience can help them successfully navigate clinical and regulatory twists and turns that can send less experience managers off course. I also love investing in management teams with a track record of unlocking value via shareholder-friendly acquisitions. Given the track record of Glickman and his team, it's probably not hard to understand why I'm intrigued by Aurinia Pharmaceuticals.

Having said that, this is far from a risk-free stock to buy. There's no guarantee that Aurinia Pharmaceuticals' phase 3 trial will succeed, or that if it does, the FDA will approve voclosporin. Similarly, if it's approved, there's no guarantee doctors will prescribe it.

Nevertheless, I like the odds associated with with investing in this company -- especially since Aurinia Pharmaceuticals' market cap is hovering near $500 million, and voclosporin's peak sales potential could eclipse $1 billion.

Todd Campbell has no position in any stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Aurinia Pharmaceuticals Inc. Stock Quote
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