Why Aurinia Pharmaceuticals stock crashed after hours on Friday

What happened

Actions of Pharmaceutical Aurinia (NASDAQ: AUPH) fell 18.1% in after-hours trading on Friday. The drugmaker’s inventory fell in response to a mixed bid of $ 250 million.

The accompanying prospectus filed with the Securities and Exchange Commission indicated that the proceeds from any sale of shares in connection with this offering would be used for the clinical development and commercial production of the drug approved by the Food and Drug Administration for the Lupus nephritis (LN) Lupkynis. It would advance its pipeline, business development opportunities, capital spending and working capital.

By the end of the third quarter, Aurinia had a cash flow trail of around six to maybe eight quarters, depending on Lupkynis’ business trajectory, as well as the company’s clinical development plans.

Image source: Getty Images.

So what

Shareholders are hitting the exits on this biotech stock for a clear reason: This mixed plateau offer may spell the end of buyout talks. Aurinia shares soared last month following rumors that Bristol Myers Squibb (NYSE: BMY) was considering an offer for the company. Soon after, more rumors surfaced claiming that Aurinia had multiple suitors. To date, however, no formal takeover bid has yet been finalized by either party.

And while neither Bristol nor Aurinia have publicly denied these rumors, there are obvious issues with this hypothetical tie-up. Specifically, Bristol has several holes to fill to keep its revenue in the right direction, and only around $ 16 billion in cash to meet that target. Aurinia, for her part, is unlikely to accept an offer of less than $ 6 billion. In addition, biotech could expect an offer of more than $ 8 billion.

Now what

Is Aurinia’s stock a screaming buy after this after-hours drop? The answer is most definitely yes. While sales of Lupkynis may be slow to increase with Aurinia at the helm, the drug is starting to turn heads among prescribers, according to a recent survey. As such, Aurinia’s top line is expected to grow in leaps and bounds eventually. Savvy investors should therefore not hesitate to take advantage of this unjustified decline in this undervalued biotech value.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Virginia Ahn

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