$1.61
$8.34
bear $1.61
base $1.96
bull $8.34
margin of safety $1.50
market price* $16.51
Aurinia sells one product, LUPKYNIS (voclosporin), the first FDA-approved oral therapy for adult lupus nephritis. In 2025 it earned $283.1M of revenue ($271.3M net product sales, up 25%, plus $11.7M of license and royalty revenue from its partner Otsuka for Japan, the EU and other territories). Operating cash flow rose to $135.7M from $44.4M in 2024, and the first half of 2026 continued the trend (revenue $160.9M versus $132.5M a year earlier; operating cash flow $85.1M versus $45.5M). How we measured earnings. We start from operating cash flow, remove working-capital swings, and subtract stock compensation ($14.7M in 2025) and capital spending. We treated the roughly $13.1M a year of principal paid on the finance lease for the dedicated Lonza voclosporin plant (the Monoplant, fixed fee payable through March 2030) as a capital cost, since it is a recurring price of making the drug even though it is reported in financing cash flow. On that basis 2025 owner earnings were about $116M, or $0.84 per diluted share (138.7M shares). The 2025 net income of $287M is not used because it includes a $176M one-time deferred tax benefit. Earlier years were loss-making or near break-even as the drug launched (about -$0.59 per share in 2023 and -$0.03 in 2024), so only 2025 describes the business as it now exists. We use 2025 rather than the stronger recent half-years, because a level change needs more corroboration than two quarters. One item we could not fully reconcile: stock compensation fell from $31.6M in 2024 to $14.7M in 2025 and we did not establish why, so 2025 may flatter the run rate slightly. The central question is generic competition. Eight generic makers (Hikma, Lotus, Galenicum, Zydus, Teva, Dr. Reddy's, DifGen and Sandoz) filed applications in early 2025 challenging Aurinia's patents that run to December 2037; Aurinia sued each in New Jersey federal court. Because LUPKYNIS is a new chemical entity, the FDA cannot approve those generics before 7.5 years after its January 2021 approval, about mid-2028, unless a court finds the patents invalid or not infringed. The 2037 patents cover the dosing protocol, and the filings do not say how the litigation will come out. The composition-of-matter patent itself has been extended only to October 2027. This makes the outcome close to two-sided, and we value each side separately. Base case ($1.96 per share): owner earnings hold at about $116M a year, with no growth credited, through mid-2028. We do not credit further patient growth even though sales are rising 20%+, because market penetration is not something already secured. Generics then arrive on the earliest date and the drug's earnings fade: about 60% of the level in the second half of 2028, 30% in 2029, 15% in 2030 and 5% in 2031, after which nothing we can name and evidence persists.
Bear case ($1.61): same $116M until mid-2028, then a faster collapse to 40% in late 2028, 10% in 2029 and nothing afterwards.
Bull case ($8.34): Aurinia's 2037 patents hold in court, and owner earnings run at about $140M a year, the level implied by first-half 2026 cash flow after stock compensation and the plant lease, until December 2037, then end. We give no value to the pipeline candidate aritinercept, which is early-stage, or to any cash balance or net-debt adjustment, as the earnings stream is already after interest and lease costs. What would make this wrong: a court ruling for Aurinia on the 2037 patents moves value toward the bull case; an early settlement that lets generics enter before 2028 would push it toward or below the bear case. Growth in LUPKYNIS patient numbers, new territories via Otsuka, or an approved follow-on drug would add value that we have deliberately left out. The margin-of-safety price of $1.50 sits below the bear case because the outcome hinges on a single legal dispute, and a business with one product and a dated exposure to generics warrants a wide margin of safety.