AUPH - Buyout or EFFECT

[EV1]

I’d like to preface this with this is my first DD on the forums - As well as I don’t know much about Pharma, so I’m hopeful others with educated opinions will chime in.

Aurinia Pharma - AUPH - Has an FDA approved Lupus Nephritis treatment here is a excerpt and a link from Seeking Alpha - Circling Back On Aurinia Pharmaceuticals Stock (NASDAQ:AUPH) | Seeking Alpha

This British Columbia based firm Aurinia Pharmaceuticals is pursuing a broader portfolio of innovative drugs for autoimmune diseases. Aurinia also has one compound LUPKYNIS approved for lupus nephritis or LN, which the company sees at least $1 billion annually in peak sales. The compound is also known as voclosporin. LUPKYNIS is the first and only oral therapy approved for this affliction.

LN is a serious manifestation of systemic lupus erythematosus (SLE), a chronic and complex autoimmune disease. Approximately 200,000-300,000 people live with SLE in the U.S. and approximately one out of three of these individuals develop LN. The usual or starting dose for LUPKYNIS is three capsules twice daily with no requirement for serum drug monitoring. Currently, the stock trades right at $15.50 a share with an approximate market cap of just over $2 billion.

Buyout rumors have been rampant with this ticker since at least October of last year over their FDA approved LUPKYNIS therapeutic. October of '21 had a BMY buyout rumor which caused the stock to surge out of the 18-24 range all the way to the 30-33 range. Soon after in the middle of November AUPH issued a shelf of 250m, and Adam F. tweeted that not only did AUPH issue a 250m shelf, but also entered into an agreement with Cantor Fitzgerald for an ATM sales agreement. Below is a chart highlighting buyout candle and shelf candle.

Since then other buyout rumors have surfaced of GlaxoSmithKline - $GSK (who have denied) and Biogen -$BIIB. The Biogen speculation comes from STAT on January 13th, who says Biogen is working with Goldman Sachs on a strategic purchase and AUPH is one of their potential targets. link - With Aduhelm in turmoil, Biogen eyes a list of potential acquisitions
Bristol Myers - $BMY- as far as im aware the speculation potential buyout is not dead, and since their earnings they have stated they are looking for Bolt-on acquisitions, AUPH should very much fall into that category.

Buyout speculation has been rampant - and the buyout targets are just as much so, some speculate as low at 30 and as high as 90(lol this isn’t IMMU and the balls in the Acquiring companies hands now). Ive seen mostly speculation that based on multiples of max revenue of 1b a year the offering could come at 40-46 about a 5x multiple of max revenue, which would represent a 120-150% premium over the current price of $18. The daily chart is clearly a heads and shoulders pattern, AUPH has earnings soon as well on the 23rd(unconfirmed as of now). The XBI and BioPharma in general has been beaten down, and larger companies are looking at bolt-on’s so I think now would be the time we start to see some.

The overhead on this is very clearly the Shelf, which I believe im correct when I say (won’t go into affect until they actually file with the SEC and we get an EFFECT), its for $250m, I personally think if we get no buyout news between now and their earnings that AUPH will need to dilute, at this point I would probably wait on a pullback and maybe take some longer term calls or leaps - I’m not too sure yet. As of right now I’ve taken some Monthly February 25c Lotto’s.

TLDR;

1. This is a lotto play on lots of buyout rumors, big Pharma looking for acquisitions, and this pulling all the way back from 34ish.
2. Their is a shelf and I believe they would need to raise and put it in EFFECT soon if no buy out offer, which may put this into a LEAPS territory after raise, I’d expect if there is dilution it would happen about Earnings time on the 23rd.

P.S - does any1 know how executive options are awarded, and if they can be delayed if the company is in M&A talks? AUPH hasn’t issued any this year and it seems like they usually do by now…

Edit:~~~~~
I say Effect, because in my brain I use it interchangeably with a takedown, this is wrong. This is an Auto S3 and was Effective when it was issued. It is a ATM through Cantor, and they will offer from time to time when Auphrinia submits a request. This is a “Controlled Equity Offering” something cantor specializes in.

As of now, there have been no shares issued on this shelf that we are aware of, and the last statement coming from Aurinia Pharma, was that the company has no immediate intention to undertake an offering. However, the preliminary shelf prospectus will enable Aurinia to potentially access new capital if and when needed.

This is what I am talking about when I say Buyout or Effect, that if they don’t get a buyout its more than likely they start to access this shelf, as their capital tightens. We will know more Monday 02.28.22 morning.

[Genti]

I started a significant position when it dropped beginning of the year. The majority of Big Pharma will face the next 2 years significant disruption in their sales due to loss of exclusivity of their cash cows. So they have to compensate and AUPH is a candidate because of the reasons you mentioned.

[EV1]

Yes I’ve seen a lot of talk about this, how a significant portion of the large Pharma companies (at least BMY specifically as far as I’ve seen) has IP protection expire over the next couple of years on several products and need to acquire new protected products. Ive entered AUPH on Friday twice this past month over the weekend as I’ve read more and more into it and sold on Mondays (3 days of potential buyout deal announcement for the price of a single days theta) but at this point I’ve just acquired these Lottos and will probably hold into expiration unless something changes.

Something that has my leaning towards BO more and more beyond the BMY/BIIB rumors circling, is that its basically been radio silence out of the company. when AUPH was in the 30’s insiders sold hard, after “rumors” surfaced. Then came the shelf and plummet, then there was no one selling basically, and one exec purchased albeit very small, like 1600 shares at $20 or so. Since then there has been no options granted at all, the theory spreading around is this is confirmation that there are buyout negotiations happening behind the scenes and options can’t be granted because of SOX insider trading regulations. Typically by now over the past couple of years, options have been granted at this point in time

I don’t like the way my original post is laid out, think ill copy the entire thing and put it into word to format my thoughts better I got jumbled in my presentation on my OP, maybe I will do it for the next post I Make if I don’t go back and edit this one.

[Genti]

AUPH on a little run, took a bit of profit here.

[EV1]

seems smart in hind site, I’m planning on rolling my options but they’re so worthless at this point I’ll probably end up picking up more March options and just let these expire. I’m very curious about earnings even though I’m holding these on buyout potential. The CEO on todays presentation made it seem like guidance will be “aggressive”, it will be interesting to see what exactly happens, I still think if numbers are bad we get an Effect, if they are OK and guidance is excellent perhaps no EFFECT, and the buyout rumor picks back up. They pushed their earnings to a Monday…at the very end of the month, that will be when I decide to cut my lotto’s or not unless something changes, until then I’m just rolling

[EV1]

Just an update on this- This play for me has been around the buyout rumors since October of last year. Here are some bullet points for anyone paying attention

1. Earnings are Monday morning on the 28th before the market opens.
2. CEO in a recent presentation stated they are going to be aggressive on guidance.
3. BMY has a ton of cash available starting the beginning of March, and are looking for Bolt-ons.
4. GSK, BIIB, BMY have all previously been rumored/linked with Aurinia. The last time I checked, there haven’t been any acquisitions recently, even while the XBI is trading very well below its peaks from covid.

How I’m positioning

1. My original monthly lotto position for February expired worthless. Since then I picked up March 25 monthys. During this downturn for the entire market I tried averaging down and oversized my lotto position. I since have closed it entirely and rolled into April 20 calls, a much smaller size cash value, but I was trying to pick up more each day, not getting fills, I have ammo to add to this position.
2. If earnings are good, guidance is very aggressive and it looks like they don’t need reach for extra capital anytime soon I’ll hold my April 20’s and try to add. If earnings are bad and looking like they need capital soon I’ll probably just end up taking the L on this lotto and close my position, and keeping an eye out for a sell off for a bit, and look for leaps so I can set it and forget it.

This is still a buyout high risk play for me, but with earnings Monday it could turn into a swing trade opportunity.

[EV1]

Ive exited my lotto position, “aggressive” seems like very much an overstatement. Cant imagine with new guidance they won’t reach for new capital. I may start scaling Leaps here, but most likely let dust settle for a bit. This play is dead to me

EDIT - I was busy didnt read the whole report, issued ATM and raised before 2022 started, so they are sitting flush with capital. CEO comments still rubbish IMO, but they have also cancelled their ATM offering, and the dilution was about 10m shares. So a buyout offer on this of roughly 5b on total dilution of about 150m shares would still put a price of about $33 USD on it for a buyout. I’ve decided to start my long term option position here, but other than that this is backburnered, Gluck ya’ll
#2 Total outstanding shares now is 141m, I imagine 150 on sell of company. Ive got back into my April calls, basically around the same price I sold them for, figure I’ll let these run there course as I scale into LEAPS, still imagine buyout coming I just don’t want to have to think about it anymore, I didnt expect dilution considering the comments immediately after shelf, and I didnt expect guidance because of the CEO saying “aggressive” a couple weeks ago. This was always high risk/reward, but I’m feeling a bit kicked in the side with the boards misleading comments, well, misleading to me.