AUPH - Aurinia Pharmaceuticals' Lupkynis Faces Challenges In Lupus Nephritis Market

2023-03-21 17:57:26 ET

Summary

• Despite positive results from the AURA-LV study, Lupkynis has not become the preferred LN treatment, leading to Aurinia's missed 2022 revenue projections.
• A study indirectly comparing drug regimens for LN induction therapy indicates tacrolimus plus MMF is likely the most effective, followed by Lupkynis plus MMF.
• Per prominent treatment recommendations, voclosporin, the active ingredient in Lupkynis, is recommended as a viable alternative for initial LN therapy, but not as the top choice.
• Although there has been a legal settlement, Aurinia's treatment protocol patent may still be subject to questioning, which could potentially enable competitors to enter the market when the exclusivity period ends in 2026, despite providing some protection against generic competition.
• Aurinia's Lupkynis, initially promising for LN treatment, has not met revenue projections, raising concerns about its long-term viability in the market. Investors should exercise caution and do thorough due diligence before investing, and based on these factors, a "Sell" position is recommended as future revenue may continue to disappoint.

Introduction

Aurinia Pharmaceuticals ( AUPH ) is a company that specializes in developing treatments for diseases that currently have few treatment options. They focus on autoimmune, kidney, and rare diseases. In January 2021, they introduced Lupkynis , which is the first oral therapy that has been approved by the FDA to treat active lupus nephritis [LN]. The active ingredient in Lupkynis is voclosporin, a calcineurin inhibitor [CNI], which is a modified version of cyclosporine (used off-label for LN). Lupkynis works by suppressing the immune system, which has been shown to improve outcomes for patients with lupus nephritis.

Recent events: Aurinia has partnered with Otsuka Pharmaceuticals to develop and commercialize Lupkynis in various territories. In August 2021, Aurinia announced that they had acquired two new assets, AUR200 and AUR300, which are currently in pre-clinical development. They plan to submit Investigational New Drug Applications for AUR200 in 2023 and for AUR300 in 2024.

The following article explores Lupkynis' prospects in the lupus nephritis market.

Financials

Let's first begin by reviewing Aurinia's financials.

The following table summarizes Aurinia Pharmaceuticals' financial data for the quarters and years ended December 31, 2021 and 2022:

Lupkynis Receives FDA Approval for Active Lupus Nephritis Treatment Based on Positive Phase III Results

The FDA approved Lupkynis for the treatment of active LN based on positive results from Aurinia's pivotal Phase III clinical trial, the AURA-LV study. The study evaluated the efficacy and safety of Lupkynis in combination with mycophenolate mofetil [MMF] and low-dose steroids versus placebo in combination with MMF and low-dose steroids in patients with active LN. Results showed that the Lupkynis combination therapy met the primary endpoint of renal response rates at 52 weeks, with 40.8% of patients in the Lupkynis group achieving complete renal response compared to only 22.5% in the control group. Additionally, the Lupkynis group also demonstrated significant improvements in proteinuria and a reduction in the time to achieve a renal response. The study also demonstrated that Lupkynis was generally well-tolerated, with no new safety signals observed.

Lupkynis a Viable Alternative for Initial Therapy in Lupus Nephritis Patients, Says UpToDate Recommendations

In line with UpToDate recommendations , Lupkynis serves as a viable alternative for initial therapy in focal or diffuse lupus nephritis [LN] patients when used alongside mycophenolate mofetil [MMF]. The main objective of immunosuppressive therapy is to attain a complete response characterized by decreased protein excretion, stable serum creatinine levels, and enhanced urinary sediment. Standard initial treatment involves glucocorticoids combined with MMF or cyclophosphamide. However, alternative options include MMF paired with a calcineurin inhibitor [CNI] such as Lupkynis or tacrolimus, or belimumab, a monoclonal antibody that binds to soluble B lymphocyte stimulators. It's important to note that Lupkynis is an available CNI option, but not necessarily the preferred CNI.

Meta-Analysis Suggests Tacrolimus Plus MMF as Most Effective Drug Regimen for Lupus Nephritis Induction Therapy

A recent meta-analysis examined the effectiveness and safety of various drug regimens for induction therapy in lupus nephritis. The study indirectly compared Lupkynis plus MMF, tacrolimus plus MMF, and monotherapy with either MMF or cyclophosphamide. Results indicated that tacrolimus plus MMF was likely the most effective, followed by Lupkynis plus MMF and then monotherapy. Monotherapy was likely the safest option, followed by Lupkynis plus MMF and then tacrolimus plus MMF. The effectiveness and safety of Lupkynis plus MMF were not significantly different from those of tacrolimus plus MMF, although they tended to be less effective and safer. The study authors disclosed no conflicts of interest, but there were limitations, such as varying monotherapy comparators and definitions of complete response.

Based on the meta-analysis, the VA Pharmacy Benefits Management [PBM] Services, a division of the Veterans Health Administration, recommends the following:

Considering the uncertain long-term safety profile and lack of evidence for significant clinical advantages over other CNIs, voclosporin may be considered an alternative CNI therapy for lupus nephritis after cyclosporine or tacrolimus, which are on formulary without criteria for use. A trial of CNI therapy may be considered adequate if it lasts 2 months. Providers should exercise caution when using voclosporin for more than one year.

VA PBM

VA PBM is responsible for managing the VA's outpatient prescription drug benefit program for nine million veterans. They provide various services, including medication formulary management, clinical pharmacy services, and medication safety programs. The PBM negotiates drug pricing and rebate contracts with pharmaceutical manufacturers to ensure that VA patients receive safe, effective, and affordable medications. Their recommendations can significantly impact drug usage within the VA healthcare system, as the VA formulary is based on their guidance and VA providers often refer to their recommendations when making prescribing decisions. Although their recommendations may not directly affect drug usage outside of the VA system, they can influence prescribing decisions by other healthcare providers who are aware of them.

Assessing the Viability of Aurinia's "Treatment Protocol" Patent for Lupkynis: Potential Obstacles and Limitations

Aurinia's value has increased substantially following a settlement with Sun Pharmaceuticals over legal challenges to its patents, particularly its "treatment protocol" patent, which Aurinia claims "has the potential to provide an additional layer of patent protection for Lupkynis up to 2037." However, some investors may be misinterpreting the settlement and assuming that all of Aurinia's exclusivity issues have been resolved. In reality, the market exclusivity for Lupkynis is still set to expire in January 2026, regardless of the settlement. Although the treatment protocol patent enhances Aurinia's intellectual property and helps in shielding against generic competition, it does not provide the same level of security as Aurinia's original product patent, which is set to expire in October, or exclusivity provided to new chemical entities. It is crucial to note that Sun was just one of several potential challengers, and other competitors may arise in the future.

Briefly, Aurinia's patent outlines a method for treating lupus nephritis in a subject. The treatment involves selecting a subject with LN and determining their eGFR, administering a combination of Lupkynis, mycophenolate mofetil, and corticosteroids, and assessing the subject's eGFR after starting the treatment. The Lupkynis dosage is adjusted based on changes in the subject's eGFR, with the treatment continuing for various durations. The method aims to achieve a urine protein creatinine ratio of ?0.5 mg/mg.

In theory, and from my perspective, multiple factors might challenge the non-obviousness of the Lupkynis treatment protocol patent. Firstly, there is prior art related to dosage adjustments for other immunosuppressive drugs and eGFR monitoring, suggesting that the claimed method may be an adaptation of known techniques. Secondly, the predictable outcomes of eGFR-based dosage adjustments in kidney disease management may indicate that the Lupkynis treatment protocol is a routine and obvious approach for a skilled practitioner. Furthermore, analogous treatment protocols for other proteinuric kidney diseases that involve adjustments based on renal function markers could further demonstrate the patent's obviousness. Finally, expert opinions that suggest the Lupkynis treatment protocol is a predictable and standard approach (reduce dose when eGFR drops) in the field could strengthen the case against the patent's non-obviousness. Taking these factors into account, there is, in my view, a reasonable basis for questioning the non-obviousness of the Lupkynis treatment protocol patent.

Please note that although I have presented some hypothetical scenarios that could potentially challenge Aurinia's patent, it is important to recognize that patent law is an intricate field and I am not a legal specialist. The intention of this section is to showcase that Aurinia's patent is not entirely foolproof and there remains a possibility for generic competitors to enter the market following Aurinia's exclusivity period. For more color on patents vs. market exclusivity, read the following FDA document .

My Analysis & Recommendation

In conclusion, Lupkynis, developed by Aurinia Pharmaceuticals, has demonstrated promising results in the treatment of active lupus nephritis and has received FDA approval based on the positive outcomes of the AURA-LV study. However, despite its efficacy and safety profile, Lupkynis has not become the preferred treatment for LN, due to factors such as its high cost compared to alternative CNIs like cyclosporin and tacrolimus, which have similar effectiveness and safety profiles. As a result, patients, healthcare providers, and payers may opt for more affordable alternatives, potentially limiting the market potential of Lupkynis.

Moreover, Aurinia's "treatment protocol" patent for Lupkynis, while offering some protection against generic competition, is not entirely foolproof, as various factors could potentially challenge its non-obviousness. It is crucial for investors to recognize that Aurinia's patent does not guarantee total security against competitors entering the market following the expiration of its market exclusivity period in January 2026.

Initially, Lupkynis seemed to be a promising treatment for LN, but its adoption has fallen short of expectations, as shown by Aurinia's failure to meet its 2022 revenue projections ($115-$135 million projected, compared to the actual $103.5 million). This raises concerns about the long-term viability of Lupkynis in the LN treatment market. Given the current treatment guidelines, cost-effectiveness, and potential limitations of Aurinia's market exclusivity, investors should exercise caution and perform thorough due diligence before making any investment decisions regarding Aurinia Pharmaceuticals and Lupkynis. Based on these factors, I recommend a "Sell" position and anticipate that future Lupkynis revenue may continue to disappoint.

Risk Factors That Could Positively Impact Aurinia and Lupkynis

There are several risk factors to my bearish thesis on Aurinia Pharmaceuticals and Lupkynis that could potentially lead to a more positive outcome for the company:

1. Positive long-term data: Further clinical studies or real-world data demonstrating improved long-term efficacy and safety of Lupkynis compared to alternative treatments could bolster the drug's position in the market, leading to higher adoption rates.
2. Strong marketing and sales efforts: If Aurinia successfully strengthens its marketing and sales strategies, it could increase awareness and adoption of Lupkynis among healthcare providers and patients, driving higher revenues.
3. Successful development and commercialization of pipeline products: If Aurinia successfully develops and commercializes its pipeline products, AUR200 and AUR300, this could diversify the company's revenue streams and reduce its reliance on Lupkynis, leading to an improved financial position.
4. Strategic partnerships or acquisitions: Aurinia could enter into strategic partnerships or acquisitions that could expand its product portfolio, provide additional resources, or enhance its market presence, potentially increasing the company's overall value.
5. Legal victories: If Aurinia manages to defend its "treatment protocol" patent successfully against future challenges, it could help to extend its market exclusivity and maintain a competitive edge over generic competitors.
6. Regulatory changes: Any potential changes in regulatory policies or recommendations that favor Lupkynis as the preferred treatment for lupus nephritis could lead to increased adoption and stronger revenues for the drug.

These risk factors, if realized, could lead to a more positive outlook for Aurinia and Lupkynis, potentially contradicting my bearish thesis. Investors should consider these factors and weigh them against the potential downside risks to make a more informed decision about their investment in Aurinia.

For further details see: