We are maintaining our Neutral recommendation on Ardea Biosciences Inc. (RDEA) with a target price of $29.00.
Ardea Biosciences, headquartered in San Diego, California, focuses on the discovery and development of small-molecule therapeutics for the treatment of gout, human immunodeficiency virus (HIV) and cancer.
Ardea recently reported fourth quarter 2010 results. The development stage biopharmaceutical company’s net loss of $0.03 per share was narrower than the year-ago loss of $0.34 and the Zacks Consensus Estimate of a loss of $0.56 per share. The narrower loss was attributable to higher revenues in the final quarter of 2010 which more than offset the rise in operating costs. (Read our full coverage on this earnings report: Ardea Loss Narrows in Q4.)
We are pleased with Ardea’s efforts to develop its lead candidate lesinurad (formerly RDEA594), which is being developed for the treatment of hyperuricemia (elevated uric acid levels) and gout. The incidence and severity of gout is increasing in the United States.
Lesinurad will target a market with a huge unmet need on approval. This should boost the company’s top line significantly. Furthermore, the lucrative agreement with Bayer (BAYRY), signed in 2009, focusing on the development of MEK (methyl ethyl ketone) inhibitors for the treatment of cancer is another positive for Ardea.
However, we remain concerned about the pipeline’s early stage development status. Furthermore, any pipeline development has risks. Moreover, the competition awaiting Ardea’s candidates on approval is another concern.
We believe that Ardea’s current valuation adequately reflects its fairly balanced risk/reward profile. We see limited upside from current levels and maintain our long-term Neutral stance on Ardea. The stance is supported by the Zacks #3 Rank (short-term Hold rating) carried by the company in the short-term.
BAYER A G -ADR (BAYRY): Free Stock Analysis Report
ARDEA BIOSCIENC (RDEA): Free Stock Analysis Report
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