Ardelyx Inc (NASDAQ: ARDX) shares have dipped on Friday, but the stock is a rare example of a gainer across the year to date. The business has recently commercialized its first FDA-approved treatment and revenues are growing.
But is ARDX stock a good investment?
What is Ardelyx Inc?
Ardelyx is a biopharmaceutical company, discovers, develops and commercializes medicines to treat gastrointestinal and cardiorenal therapeutic areas in the United States and internationally.
The company’s lead product candidate is tenapanor, which has completed Phase III clinical trial for the treatment of patients with irritable bowel syndrome with constipation under the name IBSRELA and commenced commercial sales.
Additionally, tenapanor has undergone a Phase III clinical trial to control serum phosphorus in adult patients with chronic kidney disease on dialysis, or hyperphosphatemia.
The business is also developing RDX013, a potassium secretagogue, for the treatment of hyperkalemia, which is a problem among certain patients with kidney and/or heart disease; and RDX020, an early-stage program in metabolic acidosis, a serious electrolyte disorder in patients with CKD.
The company was formerly known as Nteryx and changed its name to Ardelyx in June 2008. Ardelyx, was incorporated in 2007 and is headquartered in Waltham, Massachusetts.
How Does Ardelyx Inc Make Money?
The company has agreements with Kyowa Kirin in Japan, Fosun Pharmaceutical Industrial Development Co. Ltd. in China, and Knight Therapeutics, Inc. in Canada for the development and commercialization of tenapanor in their respective territories.
The recent commercialization of tenapanor has been a key milestone for the business, and one that looked unlikely around a year ago.
That’s because the company actually had to restructure and cut its workforce after the US Food and Drug Administration declined to approve its tenapor hyperphosphatemia treatment last July, stating that its impact was “small and of unclear clinical significance”.
However, the company has since been able to launch a tenapor treatment for IBS with constipation.
ARDX Stock Financials
The company’s most recent quarterly results, which covered the three-month period ended 30 June 2022, showed that revenue had increased from $1.3m to $2.5m compared to the same period in 2021.
This growth was attributed to $1.6m in product sales, compared to nil in the same quarter 12 months prior, as the period saw the launch of IBSRELA, the commercial name for the company’s tenapanor irritable bowel syndrome and constipation treatment.
Additionally, net loss had been slashed from $45.2m to $26.9m due to considerable reductions in R&D costs and selling, general and administrative expenses. Ardelyx reported that, as of 30 June 2022, it had total cash, cash equivalents and investments of $81.0m.
The company does not distribute a dividend to its shareholders.
The year to date has seen the company’s share price rise by 7.20% to $1.26 at the time of writing. ARDX stock has a 12-month high of $1.92 and a low of $0.49.
The stock has a price to sales ratio of 28.65 and a price to book value of 3.50, compared with biotechnology and pharmaceutical industry averages of 5.22 and 9.67. This suggests the stock could be a little overvalued.
ARDX Growth Potential
Within the United States there are more than 11 million patients with irritable bowel syndrome, with 4.9 million prescriptions for Irritable Bowel Syndrome with Constipation.
Of patients taking a prescription IBS-C treatment, 77% said they continued to experience residual abdominal and stool-related symptoms.
Ardelyx believes that its IBSRELA treatment is a perfect candidate to improve the lives of these patients, given the drug’s strong track record of reducing abdominal pain and bloating during trials, as well as high patient satisfaction scores.
In addition, further growth may be achieved through XPHOZAH, an investigational first-in-class phosphate absorption inhibitor for treatment of hyperphosphatemia, pending at the FDA. The company notes that 80% of the 550,000 patients with CKD on dialysis in US require treatment for hyperphosphatemia.
As such, the company is hopeful that the treatment can be passed by the FDA. A meeting of the FDA’s Cardiovascular and Renal Drugs Advisory Committee is “tentatively scheduled” for 16 November 2022, at which decisions are expected to be made about the new drug application.
ARDX Investment Risks
While the company has begun commercialization of its first FDA-approved treatment, its revenues remain far below its quarterly expenses. Should sales of IBSRELA fail to accelerate and XPHOZAH continue to be blocked from commercialization by the FDA, the company could struggle.
This might mean taking on more debt, diluting shareholders’ interests or failing to stay afloat.
For the moment, the business has healthy cash reserves and net losses have been reduced, but it is losing a significant amount of money each quarter.
Is ARDX Stock a Good Investment?
Ardelyx’s launch of its first FDA-approved treatment appears to be going well, with solid feedback from patients and clinicians, as well as a good deal of room for future growth. However, the business is pursuing approval for its XPHOZAH treatment and failure would be a significant blow.
Additionally, IBSRELA’s current sales only make a very small dent in the business’ quarterly expenditure. As such, the company currently looks to be a fairly speculative investment.
Additionally, ARDX is a penny stock and so likely to be subject to more volatility and risk than some other equities. As such, investors should consider their own personal appetite for risk before deciding to back ARDX stock.
Seven analysts listed by the Wall Street Journal returned a consensus rating of Overweight for the stock, with an average price target of $4.50.
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