We are upgrading Ardea Biosciences Inc. (RDEA) to Outperform from Neutral due to the promise shown by its lead pipeline candidate lesinurad, which is being developed to treat hyperuricemia (elevated uric acid levels) and gout. Our target price on the stock is $30.00.
Lesinurad, which has performed well in clinical studies, will target a market with huge unmet need on approval. The incidence and severity of gout is increasing in the United States. The market has a huge unmet need with Takeda’s Uloric (febuxostat) and allopurinol being the two most widely-prescribed therapies (xanthine oxidase inhibitors) for treating gout patients. The inhibitors reduce the production of uric acid in the body.
However, the effectiveness of xanthine oxidase inhibitors is limited since approximately only 10% of patients affected by gout are over-excretors of uric acid. Uloric and allopurinol account for the bulk of the prescriptions written in the US for the treatment of chronic gout. However many gout patients fail to respond favorably to these therapies. The limited efficacy of the current therapies provide lesinurad with the opportunity to fast capture market share on approval.
The impressive balance sheet at Ardea, which has been strengthened by the signing of the lucrative agreement with Bayer (BAYRY), is another positive for the company. The deal is focused on the development of MEK (methyl ethyl ketone) inhibitors for the treatment of cancer.
The lead compound in this program is BAY86-9766, which is currently in a phase II study with Onyx Pharmaceuticals Inc. (ONXX)/Bayer’s Nexavar for treating patients suffering from primary liver cancer. The candidate is also being evaluated in a phase I/II study in conjunction with Eli Lilly’s (LLY) Gemzar in patients suffering from advanced pancreatic cancer. We see significant upside potential from current levels and hence upgrade the stock to Outperform from Neutral.
BAYER A G -ADR (BAYRY): Free Stock Analysis Report
LILLY ELI & CO (LLY): Free Stock Analysis Report
ONYX PHARMA INC (ONXX): Free Stock Analysis Report
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