By writer to seekingalpha.com
One of the simplest ways to show your youngsters about taxes is by consuming 30% of their ice cream”
– Invoice Murray
Right now, we have a look at a small however intriguing biopharma title. The shares look very undervalued at present buying and selling ranges if the corporate will get an FDA approval in 2021, which appears possible. A full funding evaluation follows within the paragraphs beneath.
Ardelyx , Inc. (ARDX) is a Fremont, California-based biopharmaceutical firm targeted on the event of therapies for kidney and cardiovascular ailments. The corporate’s lead asset is tenapanor, which is accredited (however not but marketed as IBSRELA) within the U.S. for irritable bowel syndrome with constipation (IBS-C). Ardelyx has additionally submitted an NDA for tenapanor within the management of serum phosphorus in grownup sufferers with persistent kidney illness (CKD) on dialysis. The corporate was shaped in 2007 and went public in 2014, elevating internet proceeds of $61.2 million at $14 a share. This busted IPO now trades just below $6 a share, translating right into a market cap of ~$515 million.
Supply: Company Presentation
Tenapanor acts by inhibiting the NHE3 transporter within the GI tract, which leads to the tightening of epithelial cell junctions, decreasing paracellular uptake of phosphate, whereas largely not affecting the absorption of different ions (save sodium) or vitamins. Phosphate, which enters the physique by means of protein consumption, is a necessary component of mobile perform, and any extra quantities in wholesome topics are excreted by means of the kidneys with regular serum ranges between 2.5 and 4.5 mg/dL. Nonetheless, phosphorus ranges above 5.5 mg/dL are a danger issue for cardiovascular morbidity and mortality in CKD sufferers, as it’s not readily eliminated through dialysis. Hyperphosphatemia is a matter with ~95% of CKD sufferers on dialysis, and is presently addressed utilizing low-phosphate diets and phosphate binders, that are taken with meals to forestall absorption.
Supply: Firm Presentation
The issues with phosphate binders are manifold. First, in addition they bind with calcium, iron, and different important minerals, thus requiring supplementation. Second, compliance is a matter, as mass portions of binders are required every day, leading to a bunch of serious GI tract irregularities. Most sufferers require 10-30 grams, or as much as 63 tablets every week. Even with this extreme tablet burden, many CKD sufferers (~72%) on dialysis nonetheless can’t get their serum phosphorus ranges beneath 5.5 mg/dL. As such, there’s loads of alternative for a greater class of remedy.
Supply: Firm Presentation
Ardelyx places that market alternative for twice-daily tenapanor at $500-700 million within the U.S. with ~320,00Zero end-stage renal sufferers affected by hyperphosphatemia. Add in ~260,00Zero comparable sufferers in Europe and ~289,00Zero in Japan and the prospects look even higher.
Tenapanor has been evaluated in three Section Three research for hyperphosphatemia. Within the first trial that was learn out in 2017, Ardelyx’s compound was discovered to reveal statistically vital variations in serum phosphorus ranges from the tip of the eight-week therapy interval to the tip of the four-week randomized withdrawal versus placebo (imply -1.01 mg/dL, median -1.Three mg/dL). Diarrhea was the one tolerability situation (39%), which was the first reason for discontinuation in remedy (8%).
Supply: Firm Presentation
The second examine (AMPLIFY), which was learn out in September 2019, focused sufferers (n=236) who had been on a secure phosphate regime however nonetheless had serum phosphorus ranges between 5.5 mg/dL and 10.Zero mg/dL. Sufferers had been randomized to obtain the addition of tenapanor or placebo twice every day with a baseline imply of 6.Eight mg/dL. The first endpoint was achieved with a imply discount in phosphorus ranges of 0.84 mg/dL within the tenapanor arm versus 0.19 mg/dL within the binder arm (p=0.0004) at week 4. Additionally, 49.1% of sufferers within the tenapanor arm achieved serum phosphorus of <5.5 mg/dL as in comparison with 23.5% within the binder arm (p<0.0097). Tenapanor was well-tolerated, with 4.3% discontinuing therapy as in comparison with 2.5% within the binder arm.
Supply: Firm Presentation
This constructive information was adopted on by a readout of a 3rd, longer-term examine (PHREEDOM) in December 2019. The 52-week trial was designed to guage tenapanor as a monotherapy, with the first endpoint being the distinction in change in serum phosphorus between the tenapanor-treated arm and the placebo-treated arm from the tip of a 26-week open label therapy interval to the tip of the primary 12-week randomized withdrawal interval (n=420). This endpoint was achieved with a imply change of 1.Four mg/dL within the tenapanor arm versus the placebo arm, leading to a statistically vital (p<0.0001) distinction in least squared imply serum phosphorus change. Moreover, within the 26-week open label therapy interval, 77% of tenapanor sufferers within the intent-to-treat inhabitants (n=408) achieved a lower in serum phosphorus, with a imply lower of two.Zero mg/dL.
A security management arm was added with 137 sufferers receiving phosphate binder sevelamer for 26 weeks. The median dose of tenapanor was 60 milligrams per day as in comparison with 4.Eight grams of sevelamer, which elevated to 7.2 grams by the tip of the 26-week open-label therapy interval. Tenapanor was better-tolerated, with 17.6% experiencing a critical opposed occasion versus 22.6% for sevelamer. Sixteen p.c of tenapanor sufferers discontinued as a result of diarrhea within the 26-week open-label therapy interval. General, 52% of sufferers taking tenapanor reported diarrhea, though nearly all of occurrences had been within the first 5 days and had been transient. Solely 10% of the 220 circumstances had been extreme.
Additionally encouraging was the truth that 96% of sufferers eligible sufferers (116/121) signed up for an 18-month open-label extension examine of PHREEDOM referred to as NORMALIZE, the place sufferers will obtain sevelamer, if essential, as an adjunct to the tenapanor routine in an try and convey serum phosphorus ranges into regular vary (beneath 4.6 mg/dL). So far, outcomes from the extension examine have been encouraging, with 42% of sufferers handled for multiple month (n=73) reaching phosphorus ranges <4.6 mg/dL and 71% <5.5 mg/dL. The endgame of NORMALIZE is to supply physicians a highway map for using tenapanor – possible initially as a monotherapy after which with binders added as wanted.
Whereas all this was transpiring across the hyperphosphatemia indication, tenapanor acquired FDA approval for IBS-C in September 2019. Commercially named IBSRELA, Ardelyx seems to be holding off on its home launch till approval for the hyperphosphatemia indication has been obtained (or, for the extra cynical, as a result of it couldn’t discover a industrial associate within the U.S.). Armed with a substantial quantity of constructive information, Ardelyx submitted an NDA for the hyperphosphatemia indication on June 30, 2020. Approval is predicted in mid-2021, and the therapy has patent safety till 2029. A Chief Business Officer has been employed to orchestrate the U.S. launch.
For territories outdoors the U.S., Ardelyx has inked a number of offers, together with one with Kyowa Kirin Co., Ltd. (OTCPK:KYKOF) in 2017, which was expanded right into a analysis collaboration in November 2019. For the Japanese rights to tenapanor, Ardelyx acquired $30 million upfront and is eligible to obtain $55 million in growth milestones – $5 million collected up to now – and ~$80 million in industrial milestones along with excessive teenagers royalties on internet gross sales. The analysis collaboration concerned $5 million upfront plus one other $5 million in a single 12 months, and will finally yield growth and industrial milestones of $500 million. It was additional strengthened with a $20 million funding by Kyowa into Ardelyx at $6.96 a share.
Additionally in 2017, a industrial deal for China was struck with Fosun (OTCPK:FOSUF), the place Ardelyx acquired $12 million upfront and is eligible to obtain $113 million in milestones – $Three million collected up to now – and mid-teens to twenty p.c royalties on internet gross sales.
Then, in 2018, Ardelyx struck an settlement for Canadian industrial rights with Knight Therapeutics (OTC:KHTRF) that would convey CAD $25 million (~$18.5 million) in complete funds and royalties on internet gross sales starting from mid-single digits to low twenties. In April 2020, Knight acquired approval to market IBSRELA in Canada.
Stability Sheet and Analyst Commentary
Shortly after the $20 million Kyowa non-public placement, Ardelyx raised internet proceeds of $134.9 million in a secondary providing priced at $6.25 per in December 2019. As of March 31, 2020, the corporate held $223.2 million of money and ~$50 million of debt, which is able to come due between now and 2022. It ended the second quarter with virtually $205 million in money and marketable securities. With the buildout of a home industrial effort upcoming and one other compound (RDX013) about able to enter the clinic, Ardelyx ought to have sufficient funding to hold it by means of 2021, assuming no additional licensing offers are consummated.
The small Road following is on board with tenapanor, with three Purchase and two Outperform rankings and a median twelve-month worth goal of $12 a share. Piper Sandler has it as a high decide.
Board member David Mott shares the Road’s sentiment based mostly on his buy of ~145,00Zero shares at a mean worth beneath $7, made June 22nd-June 25th.
With a a lot smaller tablet burden to extend compliance, strong efficacy as a monotherapy, glorious efficacy paired with phosphate binders, and approval for an additional indication, tenapanor will possible be accredited in mid-2021 for the management of serum phosphorus in grownup sufferers with persistent kidney illness (CKD) on dialysis. There are some considerations relating to reimbursement, as dialysis is a closely managed industrial alternative, however with an apparent affected person profit, these hurdles needs to be overcome. With a peak internet gross sales alternative between U.S. commercialization and royalties from aboard, a case could be made for peak income approaching $1 billion. A current article pegged peak gross sales simply over $750 million.
With that stated, there isn’t a lot when it comes to catalysts between now and the anticipated approval in mid-2021, wanting a industrial licensing deal in Europe or different territory. If there’s a vital delay or shock rejection, it will be catastrophic with no different asset presently within the clinic. Additionally, with the excessive charge of diarrhea, affected person uptake could possibly be a difficulty, though it appears to typically clear up in two weeks. Moreover, GI troubles plague the phosphate binders as properly.
With a market cap of solely ~$515 million, a considerable amount of internet money, and a ~90% likelihood of approval for at the least a $500 million alternative, Ardelyx seems significantly undervalued at present buying and selling ranges from a danger/reward perspective.
I used to have a drug downside, now I make sufficient cash.”
– David Lee Roth
Bret Jensen is the Founding father of and authors articles for the Biotech Discussion board, Busted IPO Discussion board, and Insiders Discussion board
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Disclosure: I’m/we’re lengthy ARDX. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from In search of Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.
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