The deal hasn’t been confirmed. In fact, representatives of both companies declined to comment in emails to Investor’s Business Daily. But SVB Leerink analyst Joseph Schwartz said the rumor “makes strategic sense.”
Aurinia’s lupus nephritis treatment, Lupkynis, gained Food and Drug Administration approval earlier this year. Schwartz estimates peak sales of $1.5 billion.
“We suspected that any sponsor with a large immunology or rheumatology sales force would view Aurinia as a strong strategic fit,” he said in a report to clients. “As Bristol seems to check this box, we believe the Lupkynis would make a logical addition to Bristol’s portfolio.”
On today’s stock market, AUPH stock surged 6.6% to 29.84. On Friday, shares surged nearly 27% on initial rumors of the deal. Bristol stock inched up a fraction to 57.81.
AUPH Stock: Will Bristol Take It On?
In addition to Lupkynis, Aurinia is testing autoimmune and nephrology condition treatments. Bristol has a number of approved cancer drugs, but some of its commercial products could allow for sales force synergies, he said.
Bristol makes Kenalog, which treats several inflammatory conditions. It also sells Orencia after its acquisition of Celgene. Orencia is approved for forms of arthritis. The company also has some drugs in development for similar conditions.
“While Lupkynis has already cleared the approval hurdle and would benefit most from commercial synergies with Bristol, we see value in research and development synergies as well, with potential add-on indications down the line,” Schwartz said.
He has an outperform rating on AUPH stock.
Another Buyer Might Pay More
Schwartz also has a 28 price target on AUPH stock. Shares closed above that point on Friday and continued their rise on Monday.
But “we think a potential acquirer could shell out more,” he said.
Aurinia shares are currently trading around 2.4 times Schwartz’s peak sales estimate for Lupkynis. But he says he could see a potential buyer going as high as 3 times peak sales. That would put the takeover price at $4.5 billion, or $35 per share of AUPH stock.
“We believe there is potential for the peak market opportunity to be even larger than we currently model, as our estimate is based on conservative assumptions, with Lupkynis only penetrating lupus nephritis patients that do not respond or reach remission on (other drugs)” Schwartz said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
YOU MAY ALSO LIKE: