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Tuesday, August 11, 2009 3:05:30 PM
By Zacks Equity Research
On Tuesday August 11, 2009, 1:40 pm EDT
Companies:Amgen Inc.Eli Lilly Co.Ardea Biosciences, Inc.
On Friday, Ardea Biosciences Inc. (NasdaqGM: RDEA - News) posted a second-quarter net loss of $8 million, or 44 cents per share, which was significantly lower than the Zacks Consensus Estimate of 60 cents per share. The company had reported a net loss of $15.7 million, or $1.10 per share in the year-ago period.
The narrower quarterly loss was attributable to the licensing payment from Bayer and lower expenses. Revenue of $5.5 million came from recognition of a part of the $35 million upfront payment under the Bayer agreement on development of MEK inhibitors for treatment of cancer and other indications. Ardea had registered no sales in the year-ago quarter.
Operating expenses for the quarter fell 19% to $13.2 million primarily on lower costs for discovery research since Ardea is concentrating its resources on development of its gout candidate, RDEA594, which is in mid-stage study. The decrease was partially offset by restructuring charges of about $0.7 million associated with the 47% work-force reduction.
About 3 million to 5 million people in the U.S. and approximately 5 million people in the European Union suffer from gout, which is the most common form of inflammatory arthritis in men over 40. The incidence and severity of gout is increasing in the United States. There was a 288% increase in gout-related hospitalizations from 1988 to 2005.
Gout, also known as metabolic arthritis, is a painful and debilitating disease caused by abnormally elevated levels of uric acid in the blood stream. This causes deposition of uric acid crystals in and around the connective tissue of the joints and in kidneys, leading to inflammation, formation of disfiguring nodules (tophi), intermittent attacks of severe pain (acute flares) and kidney damage (nephropathy).
However, we are concerned about Ardea’s weak pipeline. Moreover, since RDEA594 is still in early stages of development, it is associated with higher risks. The company will also face tough competition from big players like Amgen (NasdaqGS: AMGN - News), Eli Lily (NYSE: LLY - News) and Genentech (now part of Roche (Other OTC: RHHBY.PK - News)).
While the recently signed agreement with Bayer is a positive for the company as it strengthens its balance sheet dramatically, we remind investors that Ardea is still an early-stage development company and has a long way to go to bring any product into market.
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