About $AUPH: changing the course of autoimmune disease

In the words of the Aurinia team:

Aurinia exists to make a difference. Our mission is to transform people’s lives by delivering therapeutics that change the course of autoimmune disease. From the earliest days of the company, we’ve applied a creative, thoughtful and responsible approach to developing therapies for people in need.
In addition to driving adoption of our approved therapy for appropriate people with lupus nephritis, we are also actively pursuing a broader portfolio of innovative drugs for autoimmune disease.
Our strategy leverages the skills and knowledge of our incredible team and our deep experience in principled drug development and commercialization. Together, we are driven to make an impact for our patient communities as advocates and partners in innovation.
[Note from Adam: this post will focus purely on LUPKYNIS, (voclosporin) their treatment for lupus nephritis]

What is Lupus Nephritis (LN)?

Via Mayo Clinic

Lupus is an autoimmune disease. It causes your immune system to produce proteins called autoantibodies that attack your own tissues and organs, including the kidneys. Lupus nephritis occurs when lupus autoantibodies affect structures in your kidneys that filter out waste. This causes kidney inflammation and may lead to blood in the urine, protein in the urine, high blood pressure, impaired kidney function or even kidney failure. Between 10 to 30 percent of people who have lupus nephritis develop kidney failure. The most severe form of lupus nephritis, called diffuse proliferative nephritis, can cause scars to form in the kidneys. Scars are permanent, and kidney function often declines as more scars form. Early diagnosis and treatment may help prevent long-lasting damage. People who have lupus nephritis are at a high risk for cancer, primarily B-cell lymphoma —a type of cancer that begins in the cells of the immune system. They are also at a high risk for heart and blood vessel problems.

How many people suffer from LN?

From the American College of Rheumatology (note: I have learned the difficult lesson of not trusting this data from early/commercial-stage pharma companies themselves, not because they may be wrong, but may be ambitious about developing a market that doesn’t exist - it’s not the case with AUPH thankfully, but is now a checkbox in my diligence process).

Prevalence estimates of Systemic Lupus Erythematosus (SLE) in the U.S. vary, with numbers ranging from 161,000 to 1.5 million (Lupus Foundation of America). Renal involvement (Lupus Nephritis; LN), the most common serious manifestation of SLE is reported to develop in up to two-thirds of patients cared for in specialty centers. In the absence of population-based data, it is difficult to estimate the burden of SLE and LN in the US population.
Based on an analysis of billing records from 81 million subjects, the disease burden of SLE and LN in the US is estimated at 313,436 (100 per 100,000) and 63,256 (20 per 100,000) respectively. The estimate for SLE is consistent with the conservative published estimates, and reflects the stringent case definition applied.

What are treatments for LN?

Via Mayo Clinic:

Treatment
There's no cure for lupus nephritis. Treatment aims to:
Reduce symptoms or make symptoms disappear (remission)
Keep the disease from getting worse
Maintain remission
Avoid the need for dialysis or a kidney transplant
Drug therapy
For lupus nephritis, you might take medications that slow/stop immune system from attacking healthy cells, such as:
Steroids, such as prednisone
Cyclosporine
Tacrolimus
Cyclophosphamide
Azathioprine (Imuran)
Mycophenolate (CellCept)
Rituximab (Rituxan)
Belimumab (Benlysta) ←we will go into this one shortly

Tracking progress of AUPH’s voclosporin results & management comms

See full investor presentation on Voclosporin here. I highly suggest skimming before continuing if you’ve not seen this… oh and one note: they also are a leadership team mature enough to not include a certain few slides (you know, the outrageously audacious promissory stuff) that are red flags for me for this stage of life science company. Bonus points to management for being adults in the room here.

Selection of milestones/key bits from news releases on voclosporin

December, 2019: P3 trial results (link)

Voclosporin achieved statistically superior Renal Response rate (p < 0.001) and comparable safety profile versus standard of care -
- Statistically significant results demonstrated in all pre-specified hierarchical secondary endpoints -
- Aurinia plans to file an NDA submission to the FDA during the first half of 2020 -
“This extraordinary pivotal data confirms voclosporin’s ability to achieve statistically significant improvements in clinically meaningful endpoints for this complex disease, with a comparable safety profile to the current standard of care,” said Neil Solomons, M.D., Chief Medical Officer of Aurinia. “This data represents a significant advance for people living with LN, which can lead to irreversible kidney damage, eventual kidney failure and death.”
This global study in which 357 patients with active LN were enrolled, met its primary endpoint of Renal Response rates of 40.8% for voclosporin vs. 22.5% for the control (OR 2.65; p < 0.001). Additionally, all pre-specified hierarchical secondary endpoints achieved statistical significance in favor of voclosporin, which included Renal Response at 24 weeks, Partial Renal Response at 24 and 52 weeks, time to achieve urinary protein-to-creatinine ratio (“UPCR”) ≤ 0.5, and time to 50% reduction in UPCR. The robustness of the data was also supported by all pre-specified subgroup analyses (age, sex, race, biopsy class, region, and prior MMF use) favoring voclosporin.

November, 2020: Time to Renal Response Data (link)

- Integrated analysis confirms addition of voclosporin to standard-of-care resulted in faster Renal Response compared to standard-of-care alone in lupus nephritis -
- DDI study demonstrates no clinically meaningful interaction between voclosporin and MMF, supporting differentiation as a potential best-in-class CNI -

January, 2021: FDA Approval (link)

- LUPKYNIS is the first FDA-approved oral therapy for lupus nephritis (LN), a condition that causes irreversible kidney damage and increases the risk of kidney failure, cardiac events, and death -
- LUPKYNIS demonstrated significantly improved renal response rates compared to typical standard-of-care (SoC) in clinical trials
- LUPKYNIS is now commercially available in the U.S. -
“People with lupus nephritis have desperately needed approved treatments to help them avoid irreversible kidney damage and the eventual need for kidney transplant,” said Stevan W. Gibson, President and CEO, Lupus Foundation of America. “The approval of a tailored therapy represents a significant step forward in treating lupus nephritis and is excellent news for the lupus community.”

November, 2021: Updated Interim Results (link)

In the interim analysis, patients in the voclosporin group maintained meaningful reductions in proteinuria. From pre-treatment baseline in AURORA 1 to month 30 in AURORA 2, mean urine protein/creatinine ratio (UPCR) was -3.32 mg/mg for the voclosporin group (n=90) and -2.55 mg/mg for the control group (n=78). In the voclosporin group, estimated glomerular filtration rate (eGFR), an important measurement of kidney function, remained stable through month 30. There were no unexpected new adverse events reported in the voclosporin group compared to the control group.
“In this updated interim analysis, reductions in proteinuria were sustained with no impact on renal function at a total of 30 months of treatment with voclosporin,” said Amit Saxena, M.D., assistant professor, department of medicine at NYU Langone Medical Center and presenting author of the AURORA 2 study. “The consistent outcomes over time reinforce confidence in LUPKYNIS as an important treatment choice for people experiencing the dangerous manifestation of lupus nephritis.”

You can also read their full presciber info here, but the main point to take away is their drug is both safe and effective oral therapeutic, soon to be competing against an inferior injectable (win on all counts, delivery matters greatly for patients with chronic issues, more on that shortly).

Competition in the space and total addressable market

Via Pharma Letter:

In the systemic lupus erythematosus (SLE) drug market, Human Genome Sciences/GlaxoSmithKline’s (LSE: GSK) Benlysta (belimumab, which we mentioned above), will be the market leader in 2021 with sales of more than $1.7 billion in the USA, France, Germany, Italy, Spain, the UK and Japan, according to a new report from Decision Resources.
Benlysta’s position as the first agent approved for SLE in over 50 years, its perceived favorable safety profile and the demonstration of efficacy in clinical trials will drive uptake of this agent, the report notes.
Market to grow to $3.9 billion
The Pharmacor advisory service titled Systemic Lupus Erythematosus also finds that the overall SLE market will grow dramatically, from around $691 million in 2011 to $3.9 billion in 2021. The SLE market will see the entry of several different B-cell inhibitors - including Eli Lilly’s tabalumab, UCB/Immunomedics’ epratuzumab and Anthera Pharmaceuticals’ blisibimod - that will compete for market share and could ultimately occupy specific niches in SLE treatment, based on factors that include route of administration, onset of action and efficacy.

The market here is proven. Unlike risks I’ve taken for “potential” (according to management) blue oceans which were over-promises based on biased research, rare diseases frequently present a clear picture, especially when existing assets have sales. That is wrongly seen as negative and I would argue not the case: that is a point of diligence to cross off your list (vs trusting management on building a net-new market, which is almost assured to be a Sisyphean task for a small biotech). Of course, the new asset must be significantly better.

So, as noted earlier, Benlysta has drawbacks…on manufacturing side, delivery side and ultimately with follow-ons on Lupkynis, I anticipate superior results long term including minimal side effects.

Via non-profit Lupus dot org:

Lupkynis and Benlysta are both immunosuppressant drugs, which means that they both prevent the immune system from attacking healthy cells. But they are different in how they are taken and how they work.
Lupkynis is a pill. It works by binding to a type of protein called calcineurin. This stops the calcineurin from sending a signal to activate part of the immune system called a T cell. By stopping T cells from being activated, Lupkynis can prevent inflammation and damage to the kidneys.
Benlysta is given either directly into a vein (called intravenous infusion) in a doctor’s office or as a shot given under the skin (called subcutaneous injection). Benlysta is a type of protein called a monoclonal antibody. A monoclonal antibody is a type of protein made in the laboratory that is developed to find and attach to only one type of substance in the body. Benlysta works by stopping a part of the immune system called B cells from causing inflammation of the kidneys.

Do we really believe MDs will opt to continue injecting people with an inferior drug, which requires IV administration time in an environment with increasingly strained human resources (during COVID and beyond)? Speaking to MD friends on this one (way above my paygrade understanding this condition) I feel it is highly likely AUPH’s drug - which nearly doubled the complete response and markedly increased the partial response at one year compared with standard therapy alone - starts eating into existing Benlysta revenue and then beyond as the market grows.

As my friend on Twitter Dimitri adds:

People who have never been on regular medication underestimate the importance of the drug administration method. Oral is a huge advantage over injection. Patients on Benlysta would be willing to try $AUPH Lupkynis because lack of injections increases the quality of life.

I too required about 15 (very painful) treatments at Stanford post-surgery to ensure the rare disease I was diagnosed with did not recur. The chances of not opting for an oral option, if available would have been zero for me after the first procedure. Everyone is the same here, unless you enjoy acute pain and taking up valuable MD time (so: no one).

I believe the value of voclosporin is defined, unmet need exists and by itself can reasonably grow $AUPH into a $5-7B company (ignoring any partnerships, rest of pipeline, etc, which can get factored in later-if they prove themselves).

Some additional recent commentary

Brief summation from another investor, Dulan Lokuwithana:

In a conference call arranged to discuss the regulatory win, the company estimated that the average annualized net revenue from the treatment could be ~$65K per patient after accounting for rebates, channel discounts, and anticipated patient adherence.
Considered as a rare disease lupus nephritis affects nearly a third of people diagnosed with systemic lupus erythematosus estimated at ~200 – 300K patients in the U.S. alone.
The company has already completed the pre-approval information exchange with more than 50 payers covering two-thirds of commercially insured lives.
With the in-person and virtual launch of voclosporin taking place in 2021, Aurinia projects a peak annual U.S. net sales of more than $1B from the therapy
The company has a collaboration and license agreement with Otsuka Pharmaceutical for the development and commercialization of oral voclosporin in countries outside the U.S.

Even my friend and life science journalist Adam Feuerstein took note of their successful FDA approval (of course, this was prior to the recently M&A drama we’ll go through next).

Adam Feuerstein 💉 @adamfeuerstein

$AUPH drug to treat autoimmune kidney disease hits its goals in late-stage trial statnews.com/2019/12/04/aur… This is a feel-good story for patients and investors.

Aurinia’s drug for autoimmune kidney disease hits goals in late-stage trialAurinia Pharmaceuticals’ experimental medicine to treat lupus nephritis, an autoimmune kidney disease, achieved its goals in a late-stage clinical trial.statnews.com

Adam also noted what CEO told him in January when the drug was approved, that they (at least at time) were fully interested in building a future standalone institution in the biotech space. I don’t see this as a negative at all, in fact companies who consciously pursue M&A while holding aces shouldn’t be cheered on for the short term layup - for the same reason a great poker player knows not to lay down the best hand when holding it.

And then, somewhat predictably, the M&A rumor mill kicked in to gear

Acquisition rumors spike the stock figuring at $45-$53/share potential sale, which for this stage would be an altogether reasonable takeover price (some were speculating 100+, which is ambitious today although a fair representative of a potential future with strong execution, $BHVN P2, anyone?).

And of course, here’s where the chart got fun …added a few key milestones for context. Looks right for nearing/commercial stage biotech. Also remember, sector is in bear market and post P3 companies in space are classically known for being bought (or dying). So when buyout rumors fail to materialize, hot $ exists. This of course has nothing to do with underlying value of assets, but certainly changes sentiment. It’s also potentially a great opportunity.

What happened with another novel, superior asset replacing old standard of care? just ask Relypsa

This is what solid new drug launch looks like including M&A to let a larger team handle the launch - great job to bay area Relypsa on helping patients & MDs replace an aging and high side effect asset.

Veltassa, Relypsa's now standard of care hyperkalemia drug no one believed in, is now doing net sales >130M & continues trending up. So, as most of us had predicted, they had a real and orders of magnitude better product than the 50 year old(!) drug replaced. MDs and patients agree. Acquisition made sense here likely due to cash runway and a decent offer.

*A winning launch in nephrology space…as hyperkalemia is quite common (3-4m patients/yr)*

This name was so hated an MS analyst repeatedly put out bearish notes and single digit price targets (all while funds such as Orbimed continued to add shares on volatility). If I listened to social or wall street (both always divisive) on this I would have sold Relypsa before seeing 200%+ run and buyout. The truth is no one here really knows what will happen to any of these pre/early-revenue life science interests. You have to be confident enough already to participate & know what is correct/misinformed. And realize retail can be right too! "Pros" and especially analysts aren't god and wrong just as often as anyone else, sometimes more.

Of note, Relpysa competitor ZSPH was purchased previously going after the same condition, and despite the obvious investor win (what a chart) their acquirer ended up with a less desirable asset.

Bummer for AstraZeneca who torched 2.7B on it only to get a CRL (M&A is hard, even for the big guys):

More examples of commercial stage promising biotechs post-FDA approval

Go it alone success story: Biohaven

Since initial public offering in 2017, BHVN has made rapid progress with multiple compounds across our CGRP receptor antagonist, glutamate modulator, and myeloperoxidase (MPO) inhibitor platforms. Nurtec™ ODT (Rimegepant 75 mg) received FDA approval in February 2020 and is quickly gaining traction as the only orally disintegrating CGRP antagonist for acute treatment of migraine.

People are so afraid of these companies going it alone, because of the decent amount of failed commercial launches and zombie companies with no sales, as their asset didn’t actually have the market promised. But was $BHVN really so bad for shareholders staying indie? A cool 500% isn’t anything to scoff at. If they sold earlier, it wouldn’t have been close to their 7.3 billion market cap today.

Go it alone, followed by sale for peanuts: Portola

PTLA ended up throwing the towel and selling for a fraction of their previous highs for a number of reasons I don’t believe are germane to AUPH. But this M&A was fairly out of the blue (same with AIMT for that matter, but I know many who were willing to hold that one no matter what). I only share these examples for investors new to life sciences as I notice a lot of people seem to want to bet on a takeout for short term gains with $AUPH. But, buyouts are very tricky business and never assured. Bet on products and management teams, not rumors/news headlines. Always.

Wrapping up

In conclusion I have been through enough of these rodeos to find $AUPH a compelling entry here. I had followed approvals but was staying out of opening new biotech positions due to sector being in a bear market while other sectors climbed higher daily on seemingly no news. However, the bear tape combined with M&A drama has become too interesting to pass up, especially as I wished I picked up shares earlier. My sense is the story is finally ready to come together.

Also at this point, life science investors are despondent. Similar to how no one wanted oil or fuel cell makers recently but are now all up multiples. Opportunity favors those willing to be early on sectors too important to ignore forever, especially with so little opportunity elsewhere currently. Finding out of style names in this tape of course inevitably involves near term pain, but longer term opportunity is favorable. No one is racking outsized gains following the herd now. It’s time again to go shopping for the unloved, misunderstood or simply mispriced.

Disclosure: The author is long $AUPH shares, and recommends conducting personal diligence before purchasing any asset you’ve read about online, on TV, a podcast, or found on a note in a bottle that washed up on shore. Additionally, life science company investing is at the far extreme of the risk/reward spectrum, and should be done with careful consideration and understanding of risk and volatility.

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