Cantor: analysis suggests ranges of $45-53 /share
Thoughts on Recent $AUPH Stock Moves Related to
M&A in the Press

Aurinia (AUPH) shares have been moving up significantly over the past few months, but
especially since the Bloomberg arcle on Oct 22 that Bristol Myers (BMY, NC) approached
AUPH about an acquision. The shares have risen ~36% (vs. 1.3% for the NBI) since that
arcle was released, and they are at all-me highs. Addionally, in the past six months,
the shares have risen ~148%, although we think the inial recovery was driven by beer
launch trends and some speculaon that, at those valuaons, M&A could occur.
We think a potenal BMY acquision based on the company's clinical and development
profile makes sense. LUPKYNIS is the focus asset here for AUPH and was a drug approved
for lupus nephris as of Jan 22, 2021. We know that there is roughly a 5050 split between
nephrologists and rheumatolgists who treat these paents. BMY has a rheumatology sales
force that markets Orencia. The company also has pipeline assets like deucravacinib
(TYK2), iberdomide (cereblon modulator), and branebrunib (BTK), so it is certainly
invested in the space. In BMY's comments on the 3Q earnings call, the company noted it
has financial flexibility and that business development remains a priority. Of course, it was
a general reference, so there is not a direct read to AUPH.



We also think that other companies could be interested in AUPH that have
rheumatology, nephrology, or both commerical franchises. In our view, companies like
Amgen (AMGN, OW), AbbVie (ABBV, NC), JNJ (OW, covered by L. Chen), and, of course,
Otsuka (4578:Tokyo, NC) could be interested in a commerical stage asset in addion
to BMY. We believe that all of these companies have commerical franchises that could
easily tuck LUPKYNIS into their marketed porolios. We have included a chart to map out
commercial products to companies on Page 4.


Our M&A DCF sensivity analysis suggests ranges of $45-53share. We think the key
queson on takeout valuaon is really how the acquirer looks at the intellectual property.
Our base case is not based on M&A. Our price target is $34share, which assumes 2027E
sales of $1.8B in the US and $504M ex-US pre-royalty, which we esmate is 12% of ex-US
sales. We also probability-adjust the revenue stream starng in 2029 to 2037 to highlight
some risk of losing the method-of-use patent. If we assumed no sales post 2030 to proxy
the cliff, our base case DCF would be $19share. Therefore, that might suggest M&A
valuaon more in the range of $30-40sh.
Intellectual property is a potenal "X factor" in this deal and would determine ulmately
what an acquirer might pay. The LUPKYNIS method-of-use patent expires at the end of
2028 in the US (the '036 patent). The drug's approval label includes a proprietary patenttailored
dosing protocol effecvely patenng the dose reducon. With the addional
patents, the company has protecon out to 2037, and the patent office did grant that it
was a unique claim.
We think inial LUPKYNIS launch trends look very good in spite of COVID, so we believe
that the ming of a change of control could make sense. It is our general view that
companies acquire products either before launch or aer a few months to see how the
launch is going. In this case, it is the laer that we would ponder. We note that new paent
scripts increased to 415 in 2Q21 from 257 in 1Q21, and as of the first week of Aug, they
were north of 800 start forms. The company has guided for 2021 revenues of $40-50M.
We esmate that, by 2027, LUPKYNIS could be a ~$2B drug in the US alone. Lupus
nephris is a market that could have a significant addressable market over me; hence, we

see the aracon to big pharmaceucal companies. In the US, roughly 100K paents are
currently diagnosed with lupus nephris. We esmate roughly 45-50% likely have acve
lupus nephris, which is 45-50K paents that would be eligible for LUPKYNIS per the label.
AUPH recieves a royalty from Otsuka in Europe, and Otsuka filed for approval in Europe
on June 25, 2021.
We think LUPKYNIS clinical acvity looks more robust than GSK's (NC) Benlysta, which
was approved in late-2020 (see our note here). Roche (RHHBY, NC) presented Ph2 data for
Gazyva for lupus nephris in 2019, and started its Ph3 trial in 2020. ct.gov suggests that the
esmated primary compleon is 2024. We don't view Gazyva as a significant competor
to LUPKYNIS, which was approved in 2021.

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