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Why Aurinia Pharmaceuticals Stock Is Blasting Higher Today

By George Budwell – Oct 22, 2021 at 9:13PM

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The biotech is reportedly in buyout talks with Bristol Myers Squibb.

What happened

Shares of Aurinia Pharmaceuticals (AUPH 2.43%) jumped by 26% during today's regular trading session. In Friday's after-hours session, however, the biotech's shares jumped by another 10.3% on exceedingly heavy volume.

What's driving this sudden upward trend? A report from Bloomberg News today said that the biopharma heavyweight Bristol Myers Squibb (BMY -1.96%) might be interested in buying Aurinia Pharmaceuticals for an undisclosed sum. The report also noted that Bristol could still walk away from the negotiations.  

A rocket taking off.

Image source: Getty Images.

So what

Rumors of a buyout of Aurinia are nothing new. The biotech's name has bubbled up to the top of the buyout rumor mill multiple times in the past few months, thanks to the stellar commercial potential of its orally administered lupus nephritis (LN) medication known as Lupkynis. Although the drug competes against an injected medication from GlaxoSmithKline called Benlysta, Wall Street still thinks Lupkynis could generate nearly $2 billion in sales at peak. In fact, the drug is expected to achieve blockbuster status (over $1 billion in annual sales) before the middle of the current decade. 

Now what

What should investors expect? When news of takeover talks become public within the biotech industry, a deal is usually close to being done. That historical pattern, however, doesn't guarantee that a deal will get done in this case. However, Bristol recently lost out on a bid for its former partner Acceleron Pharma, and the drugmaker could definitely use another blockbuster drug in its line-up. So my hunch (and it's only a hunch) is that Bristol will ultimately acquire Aurinia for a figure somewhere in the area of $7 billion to perhaps $8 billion. To put this possible buyout number into context, Aurinia's market cap stood at roughly $3.6 billion at Friday's close. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends GlaxoSmithKline. The Motley Fool has a disclosure policy.

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