They say death and taxes are the only certainties in life, but you can probably add a third to that exclusive list: A biotech stock will always collapse after FDA rejection.
And so to Ardelyx (ARDX). Shares bottomed out in Tuesday’s trading with a massive 74% drop after the company announced it had received a letter from the FDA suggesting the drug’s approval for dialysis patients is highly unlikely.
In particular, the FDA cited deficiencies in the NDA filing package for tenapanor, indicated for the control of serum phosphorus in adult dialysis patients with chronic kidney disease. Therefore, there will be no discussion of labeling and post-marketing requirements. Ardelyx immediately requested a meeting with the regulatory body, which was denied. While the FDA did not provide specific information on the shortcomings, it did indicate the magnitude of the treatment effect and its clinical relevance.
Cowen’s Joseph Thome is “surprised and disappointed” by the news and with the July 29 arrival of the PDUFA, says short-term approval is “unlikely”.
“Based on the core data package generated demonstrating tenapanor’s ability to lower phosphate levels as monotherapy or in combination with binding agents, we were optimistic for approval,” the analyst said. “In addition, as management indicated that it was already in discussions on labeling with the Agency in April and that the assessment was initially only subject to a three-month delay from a CRL at that time, we hoped that the Agency saw a way to approve this. summer.”
While the news doesn’t rule out approval entirely, the fact that the PDUFA date is around the corner and the letter’s language resembles Tricida’s last year for veverimer indicates to Thome that a CRL is in the works for later this month. .
The letter may contain information on what is needed to resolve the situation, but Ardelyx management has said that if the required remedy will last longer than 3-6 months, the company is likely to appeal.
After the stock price collapse, Thome says if there is a “viable path” for Tenapanor’s approval, there could be “long-term value” for the stock. However, that possibility remains an unknown for now.
In general, there is no change in Thome’s rating, which remains an Outperform (ie Buy). The analyst has no fixed price target for the stock in mind. (To view Thome’s track record, click here)
So that’s Cowen’s view, now let’s turn our attention to the rest of the street: ARDX’s 3 Buys and 2 Holds come together in a Moderate Buy rating. If the average price target of $4.17 is met, there would be about 116% upside potential. (See ARDX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.