Aurinia Pharmaceuticals (NASDAQ:AUPH) has emerged as one of the hottest biotechs on the market this year. Its stock has tripled in value so far in 2017. And that's after a significant pullback of close to 40% from Aurinia's all-time high, set in March.

Some investors might be concerned about that big pullback. However, all of the positives for Aurinia that existed earlier this year are still in place. Actually, the biotech is probably a better investment alternative now than it was in March. Here are three reasons to buy Aurinia Pharmaceuticals stock right now.

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1. Great prospects for voclosporin 

Aurinia stock soared after the company's announcement on March 1, 2017 of positive results from a phase 2 study of voclosporin in treating lupus nephritis (LN), an inflammation of the kidneys caused by systemic lupus erythematosus that can lead to kidney failure. Patients taking both higher and lower doses of the experimental drug experienced significantly higher complete and partial remission after 48 weeks than patients in the control arm of the study.

While there are treatments currently available for LN, they have toxic side effects. These current treatments also tend to have low complete remission rates. Voclosporin, on the other hand, appears to have the potential to cause high rates of remission when administered along with low-dose steroids, while minimizing any renal toxicity.

In addition, Aurinia's presentations at two major medical conferences in Europe in June provided even more good news about voclosporin. Not only did patients taking the drug experience higher remission rates, they also went into remission faster. And patients on the low dose of voclosporin maintained remission for nearly twice as long as the control group.

2. Attractive risk-adjusted valuation

Voclosporin has now advanced to a phase 3 clinical trial. Aurinia expects to complete enrollment for this trial by early 2019, with final data collection for the primary outcome measure wrapping up at the end of 2019.

The biotech certainly faces risks. Problems could arise in the late-stage trial. However, I think Aurinia's current valuation looks attractive adjusting for those risks.

Aurinia's market cap stands at around $520 million. Cantor Fitzgerald analyst Elemer Piros thinks that peak U.S. sales for voclosporin could reach $1.6 billion if the drug is approved. According to the FDA, around 30% of drugs that make it to late-stage studies win approval.

Let's make a few assumptions for a quick-and-dirty risk-adjusted valuation. First, let's say that voclosporin has a 30% chance of approval. Second, let's assume Piros is overly optimistic and that peak sales of the drug are closer to $1.2 billion. Third, let's use a reasonable price-to-sales ratio for biotechs of 4.0. If we use all of these assumptions, Aurinia's risk-adjusted market cap could be in the ballpark of $1.4 billion ($1.2 billion peak sales times a price-to-sales ratio of 4.0 times 30% probability of approval).

Is the company really worth $1.4 billion right now? No. There are other risk factors beyond just winning approval for voclosporin, such as problems winning reimbursement and potential issues with a commercial launch of the drug. More important, it would take a while for voclosporin to reach its peak annual sales level. Still, this back-of-the-envelope calculation shows the potential for Aurinia stock. 

I also suspect that the probability of approval for voclosporin is greater than 30%. The phase 2 results were that good. Elemer Piros wrote that the drug appears "well-positioned in late-stage development to succeed." My view is that he's right -- although anything can happen with clinical studies.

3. The stock might not be this cheap again

It's also important to understand why Aurinia stock fell so much after soaring earlier in the year. The reason is simple: The company had a big stock offering. This is a standard move for a clinical-stage biotech. While these stock offerings dilute the value of existing shares, driving the stock lower, they also generate much-needed cash.

The good news, though, is that Aurinia reported $189.8 million in cash, cash equivalents, and short-term investments at the end of June, thanks to the stock offering. Aurinia thinks that its cash position should be enough to carry it through the phase 3 study and anticipated regulatory approval process for voclosporin.

There shouldn't be any further dilution on the horizon. Aurinia is moving full-steam ahead with the late-stage study of its promising drug. It's entirely possible that the stock might not be this cheap again. If you're comfortable taking on the risk associated with a clinical-stage biotech stock, buying Aurinia Pharmaceuticals stock right now could be a move that pays off big down the road. 

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.