What happened

Aurinia Pharmaceuticals (AUPH 2.47%), a company focused on developing treatments for autoimmune diseases, saw its share price fall by more than 5% in early trading on Monday. The stock has recovered some of its losses since hitting this intraday low, but it was still 3.3% lower than Friday's close as of 12:17 p.m. ET. Aurinia's trading volume is also on the high side despite the lack of any significant news from the company, its competitors, or the biopharma industry at large. 

So what

Aurinia Pharmaceuticals has been the subject of takeover speculation since it got the green light from the Food and Drug Administration (FDA) for its lupus nephritis drug, Lupkynis, in January 2021. However, a formal tender offer has yet to emerge nearly two years into its commercial launch and Lupkynis has not met some investors' high expectations from a sales standpoint. 

The key issue is that the biotech's shares have been commanding a premium (over 7.5 times its projected 2024 sales) this year because of the company's appeal as a buyout target. In a market that seems to be growing increasingly more cautious toward pure-play growth stocks, it's not entirely surprising to see Aurinia Pharmaceuticals shed some of its premium valuation -- especially with a lack of additional buyout rumors recently.   

AUPH PS Ratio (Forward) Chart

AUPH PS Ratio (Forward) data by YCharts

Now what

Is this dip a buying opportunity? From a fundamental standpoint, this small-cap biotech stock probably isn't worth buying at these levels. Aurinia Pharmaceuticals' shares aren't exactly cheap, and the company's near-term organic growth prospects aren't quite strong enough to justify its current valuation.

If you're willing to take the long view, though, this autoimmune disease specialist could be worth adding to your portfolio. Lupkynis may not be meeting some expectations, but the drug is actually performing reasonably well in the marketplace. Eventually, it could support a fundamental-based run in the stock.