What happened
Shares of the commercial-stage biopharma Aurinia Pharmaceuticals (AUPH 3.74%) rose by as much as 13.7% during Friday's trading session. The drugmaker's stock perked up today in response to yet another buyout rumor.
This time around, Japanese drug manufacturer Otsuka Holdings is rumored to be considering a bid, according to a report posted on the subscription-based Betaville website and subsequently circulated on Twitter. Aurinia, for its part, has not commented on this takeover speculation.
So what
Aurinia's name has floated to the top of the biopharma rumor mill multiple times since the U.S. Food and Drug Administration approved its oral lupus nephritis medication, Lupkynis, back in January 2021. So far, these rumors have proven to be just that -- rumors.
Investors, therefore, probably shouldn't get too excited about this latest buyout speculation. Otsuka, after all, probably doesn't have the financial firepower to meet Aurinia's asking price. Speaking to this point, Lupkynis is a potential $2 billion-a-year revenue generator -- implying that $8 billion could be the company's floor in regards to a buyout.
As a moderate-size biopharma with a market cap of approximately $20 billion at present, Otsuka would likely have a tough time financing such an acquisition.
Now what
Aurinia's shares are likely to remain on the volatile side until Lupkynis' sales start to live up to expectations. Underscoring this point, the company's latest annual guidance badly missed Wall Street's consensus estimate due to the COVID-19 pandemic, causing the biopharma's shares to lose approximately half of their value over the prior six months.
While this sharp downturn may prove to be a buying opportunity, it's still probably a good idea to wait for additional sales data before buying the dip. If Lupkynis is indeed a blockbuster in the making, after all, there ought to be plenty of upside to this beaten-down biopharma stock over the next few years.
