Biopharmaceutical company Ardelyx (ARDX) posted top-and-bottom-line beats for Q3, sparking a 12% share rally. The company specializes in developing treatments for gastrointestinal and cardiorenal therapeutic areas. Its main product, Tenapanor, is used in the branded treatments IBSRELA and XPHOZAH. The company also has several promising medicines in the pipeline, including RDX013 & RDX020, to treat hyperkalemia and metabolic acidosis.
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The company has faced legal challenges, including a class action lawsuit from investors and a lawsuit against CMS regarding the inclusion of its drug XPHOZAH in the Medicare’s End-Stage Renal Disease (ESRD) Prospective Payment System (PPS). These issues have depressed its stock’s performance and investors’ sentiment. The incoming Trump administration may be more disposed to support the passage of the Kidney Patient Act – a bill would allow dialysis patients to receive their medication (oral-only) through their local pharmacy for at least another two years, which could mitigate the legal issues and catalyze the shares higher. It is a high-risk, high-reward situation that biotech investors might find interesting.
Making the Most of Tenapanor
Ardelyx is a biopharmaceutical company that specializes in discovering, developing, and commercializing medicines for gastrointestinal and cardiorenal therapeutic areas. Its leading treatment is Tenapanor, branded as IBSRELA and XPHOZAH.
IBSRELA is targeted to treat patients with irritable bowel syndrome with constipation (IBS-C) and is on track to achieve a roughly 10% share of a multi-billion-dollar market. XPHOZAH is the only FDA-approved phosphate absorption inhibitor for treating adults with chronic kidney disease (CKD).
Other significant developments include XPHOZAH, in Phase III clinical trial, intended to reduce serum phosphorus in adults with chronic kidney disease on dialysis; RDX013, a potassium secretagogue, developed for the treatment of hyperkalemia, a condition common among patients with kidney and/or heart failure; and RDX020, designed for metabolic acidosis in adults.
Ardelyx’s Strategic Partnerships
Ardelyx has entered agreements with several companies, including Kyowa Kirin (KYKOF), Fosun Pharmaceutical Industrial Development Co. Ltd. (SFOSF), and Knight Therapeutics, Inc. (KHTRF), to further develop and commercialize Tenapanor in their respective regions.
The company recently advanced its loan agreement with SLR Capital Partners. Initially, it borrowed $50 million at SOFR plus 4.02%, due in October 2024. The modification allows them to draw an extra $50 million at the same rate and lengthens the interest-only period for all funded tranches until July 1, 2028.
Significant Revenue Leap Drives Results That Exceed Expectations
The company recently released its Q3 2024 financial report, exceeding expectations. Total revenue was $98.24 million, a significant leap from the $56.4 million reported during the same period in 2023 and beating analysts’ expectations. The main contributors to this rise were the U.S. net product sales of IBSRELA and XPHOZAH, which brought in $40.6 million and $51.5 million, respectively. Licensing revenue, however, dropped from $32 million in 2023 to $20 thousand in 2024.
R&D expenses almost doubled on a year-on-year basis to $15.3 million, and SG&A expenses also saw a considerable rise to $65 million, up from $32.7 million. The quarter ended with a net loss of $0.8 million, compared to a net income of $6.6 million in the same quarter of the previous year. However, GAAP earnings per share (EPS) of $0.00 still beat analysts’ projections by $0.05.
As of the quarter’s end, the company reported cash, cash equivalents, and short-term investments amounting to $190.4 million. This shows a positive increase from $184.3 million in Dec 2023. In October, the company also drew $49.7 million under its term loan with SLR Investment Corp.
Stock Looking to Make a Momentum Turn
After a few years of stellar results, that stock has been relatively lackluster this year, posting a -15% return year-to-date. It trades near the lower end of its 52-week price range of $4.34 – $10.13 and shows ongoing negative price momentum as it trades below major moving averages. Yet, the post-Q3 uptick is worth watching as a potential start of a turnaround in that regard. The P/S ratio of 4.85x sits above the 3.7x average of the Health Care sector.
Analysts following the company have mainly been bullish on ARDX stock. For instance, Leerink Partners’ Roanna Ruiz has recently reiterated a Buy rating while increasing the share price target from $11 to $12. She notes the potential of Ibsrela in the IBS-C market based on results from a MEDACorp survey of U.S. physicians, suggesting that Ibsrela addresses an unmet need for new therapies with patients who are not well-controlled on current treatments. The survey results indicate that IBS-C is the most prevalent subtype of IBS, and Ibsrela is likely to see increased adoption with greater awareness.
Eight analysts recommend Ardelyx as a Strong Buy. Their average price target for ARDX stock is $10.25, representing a potential upside of 96.36% from current levels.
Final Analysis of ARDX
Ardelyx has shown promising results with its main product, Tenapanor. Despite legal challenges, the company’s shares have rallied due to better-than-expected financial results from the rise in U.S. net product sales of IBSRELA and XPHOZAH. The company’s strategic partnerships and modified loan agreement, allowing for additional capital, provide more growth opportunities. Following this upbeat performance, analysts remain largely bullish on Ardelyx, predicting a potential stock price rise. Nonetheless, investors should know the stock is a high-risk, high-reward situation, not for the faint of heart.
