Why Aurinia Pharmaceuticals Shares Are Exploding Today

What happened

Actions of Pharmaceutical Aurinia (NASDAQ: AUPH) jumped 26% during today’s regular trading session. However, in Friday’s after-hours session, biotech stocks jumped a further 10.3% on hugely large volume.

What is driving this sudden upward trend? A report of Bloomberg News said today that the biopharma heavyweight Bristol Myers Squibb (NYSE: BMY) may be interested in purchasing Aurinia Pharmaceuticals for an undisclosed sum. The report also noted that Bristol could still withdraw from the negotiations.

So what

Rumors of Aurinia’s takeover are not new. The biotech name has peaked in buyout rumors several times over the past few months, thanks to the stellar market potential of its orally administered lupus nephritis (LN) drug known as Lupkynis. Although the drug competes with a drug injected with GlaxoSmithKline called Benlysta, Wall Street still believes Lupkynis could generate nearly $ 2 billion in sales at its peak. In fact, the drug is expected to reach blockbuster status (over $ 1 billion in annual sales) by the middle of the current decade.

Now what

What should investors expect? When news of the takeover talks becomes public within the biotech industry, a deal is usually close to being struck. This historic model, however, does not guarantee that an agreement will be reached in this case. However, Bristol recently lost an offer for their ex-partner Acceleron Pharma, and the drugmaker could certainly use another successful drug in their line. So my hunch (and this is just a hunch) is that Bristol will eventually acquire Aurinia for a figure of between $ 7 billion and $ 8 billion. To put that possible buyout number into context, Aurinia’s market cap stood at around $ 3.6 billion at Friday’s close.