Is There an Opportunity in Ardelyx Stock After Massive Selloff? Analyst Weighs In

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 crater following rejection from the FDA.

And so to Ardelyx (ARDX). Shares were scraping the bottom in Tuesday’s trading with a massive 74% drop after the company announced it had received a letter from the FDA which suggests approval of its drug for dialysis patients is highly unlikely.

Specifically, the FDA cited deficiencies in the NDA submission package for tenapanor, indicated for the control of serum phosphorus in adult patients with chronic kidney disease on dialysis. Therefore, any discussion of labeling and post-marketing requirements won’t take place. Ardelyx immediately requested a meeting with the regulatory body which was denied. While the FDA did not provide specific information regarding the deficiencies, it did indicate the size of the treatment effect and the clinical relevance were concerns.

Cowen’s Joseph Thome is “surprised and disappointed” by the news and with the July 29th PDUFA coming up, says near-term approval is “unlikely.”

“Based on the pivotal data package generated demonstrating tenapanor’s ability to reduce phosphate levels as monotherapy or in combination with binders, we were optimistic for approval,” the analyst said. “Additionally, as management indicated it was already in labeling discussions with the Agency in April and that the review was only initially subjected to a three-month delay vs. a CRL at that time, we were hopeful the Agency saw a path to approval this summer.”

Although the news does not entirely rule out approval, the fact the PDUFA date is just around the corner and the letter’s language resembles the one Tricida received last year for veverimer, indicate to Thome that a CRL is in the cards for later this month.

The letter could include information regarding what is needed to fix the situation, but Ardelyx management has said that if the remedy required will take longer than 3-6 months, the company is likely to appeal.

Following the share price meltdown, Thome says that should there be a “viable path” for tenapanor’s approval, there could be “long-term value” for the stock. However, that possibility remains an unknown for now.

Overall, there’s no change to Thome’s rating, which stays an Outperform (i.e., Buy). The analyst has no fixed price target in mind for the shares. (To watch Thome’s track record, click here)

So, that’s Cowen’s view, let’s turn our attention now to rest of the Street: ARDX’s 3 Buys and 2 Holds coalesce into a Moderate Buy rating. Should the $4.17 average price target be met, about 116% upside could be in store. (See ARDX stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Harry Byrne

Harry Byrne

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