Ardelyx Inc. (NASDAQ:ARDX) just announced that it has scrapped one of its lead development assets. On the back of the news, the company is trading relatively flat, suggesting that the markets aren’t overly perturbed by the news.
Here's a look at what happened and why markets aren’t reacting as might be expected (i.e. selling off on Ardelyx).
So, the drug in question is called RDX7675 and it's a drug that the company was trying to get approved in a target indication of a condition called hyperkalemia. For anyone not familiar with hyperkalemia, it's a term used to describe a situation whereby the potassium level in a patient's blood is higher than normal. Potassium is critical to the function of nerve and muscle cells, including those in the heart and – as such – too high a level can inhibit the effective and efficient activity a huge range of vital processes in the body.
Right now, the current standard of care treatment in the space is something called sodium polystyrene sulfonate (SPS). SPS works to reduce the levels of potassium in a patient's blood to within a relatively normal range but – at the same time – brings with it a whole host of unpleasant side effects. These include GI problems, elevated magnesium levels (which brings with it a host of problems in and of itself), nausea, diarrhea, fatigue and more. Basically, while a patient suffering from this condition needs to undergo treatment (in the vast majority of cases) the treatment options open to them are unsatisfactory.
So Ardelyx was hoping to fill that unmet need with RDX7675.
The drug is what's called a polymer-based potassium binder, which binds to the potassium in a patient's bloodstream and – in doing so – ensures that it's removed from the body before it can have a derogatory impact on any of the above mentioned vital systems and processes.
The company has just wrapped up a phase III trial investigating the safety and efficacy of the drug and – as per the outcome of this trial, and as is backed up with a host of other earlier stage trials – the drug seems to work in achieving its aim of reducing potassium levels in patients.
So why the discontinuation?
Well, apparently, at the same time as reducing potassium levels, RDX7675 also leads to a sharp decrease in serum bicarbonate. This, in turn, leads to a rise in the acidity of the blood of the patients taking the drug, which can bring with it problems that are far more serious than those brought about by the underlying hyperkalemia and – in some instances – can be fatal.
So, even with a strong efficacy profile, RDX7675 isn't tolerable enough to justify patients being treated with it – especially given the fact that most of the patients would require chronic treatment (i.e. treatment over an extended period of time).
Why aren’t markets responding to the news negatively?
Well, the drug is discontinued and the company's focus now turns to a drug called tenapanor, which the company is about to put through a phase III trial in patients with end-stage renal disease (ESRD).
This is going to be an expensive trial to conduct and it's one that markets (and, primarily, current shareholders) have been looking at as being potentially the source of a considerable amount of dilution going forward.
With the RDX7675 program no longer active, Ardelyx is going to save somewhere in the region of $40 million, meaning the dilution risk is reduced dramatically over the next twelve months.