Lower First Quarter Loss at Ardea – Analyst Blog

Ardea Biosciences Inc. (RDEA) reported a first quarter fiscal 2010 net loss of $10.1 million or 54 cents per share as against $14.1 million or 79 cents in the year-ago quarter.

 

The lower loss was attributable to higher revenues in the quarter, because of a license payment from partner Bayer, and lower operating expenses in the reported quarter. The Zacks Consensus Estimate indicated a loss of 51 cents per share.

 

Revenue in the reported quarter came in at $3.3 million as against nil in the year-ago quarter. Revenues resulted from the recognition of a portion of the upfront, non-refundable license fee and reimbursement of third-party development costs as per the global agreement with Bayer Health Care for developing MEK inhibitors to treat cancer.

 

Specifically, license fee for the first quarter of 2010 stood at $2.4 million. Meanwhile the company recorded reimbursable research and development costs of $0.85 million in the quarter, which was absent in the year-ago quarter.

 

Operating expenses decreased approximately 5% year over year to $13.2 million in the reported quarter. The reduction was primarily because of lower research and clinical development expenditure. Research and development expenses declined approximately 6.4% year over year to $10.3 million in the first quarter of 2010. The general and administrative expenses for the reported quarter came in flat year over year at $2.9 million.

 

The company exited the quarter with $38.2 million in cash, cash equivalents and short-term investments as against $50.9 million at the end of 2009. The decrease was attributable to the cash used for pipeline development, personnel costs and other general corporate costs.

 

The fall was partially offset by the reimbursement of third-party development costs pertaining to the license agreement with Bayer. Recently, Ardea augmented its cash balance by raising $77.1 million from a public offering of its common stock.

 

 

Currently we are Neutral on Ardea Biosciences Inc., which is headquartered in San Diego, California. We believe the deal signed with Bayer Health Care is turning up to be a positive for the company. Furthermore, its primary gout candidate RDEA594 has the potential to meet the huge unmet need in the market, on approval.

 

However, the company’s early pipeline status concerns us. An Ardea product hitting the market is not foreseen in the immediate future. Besides, they will face intense competition in the HIV and anti-cancer market on successful development.

 

Our Neutral long-term outlook on the stock indicates that it will perform in line with the overall US equity market over the next six to twelve months. We advise investors to retain the stock over this time period.