On Tuesday, TD Cowen maintained a Buy rating on shares of Ardelyx, Inc (NASDAQ:ARDX) with a steady price target of $12.00. The firm's stance comes after Ardelyx's decision not to seek Transitional Drug Add-on Payment Adjustment (TDAPA) for its drug Xphozah.
The analyst at TD Cowen viewed the company’s move as a cautious step, considering the challenges Xphozah might face when included in the dialysis payment bundle in 2025.
The analyst noted that while the decision not to apply for TDAPA might have taken investors by surprise, the potential advantages of a TDAPA period were probably overestimated initially. Despite the update, the firm's overall thesis on Ardelyx remains largely unchanged.
The firm expressed optimism that future legislation could postpone the inclusion of Xphozah in the dialysis bundle or that Ardelyx's management could find ways to increase revenue through the commercial insurance channel.
TD Cowen suggested that the decline in Ardelyx's share price on Tuesday was an overreaction. The firm's recent checks indicated that Xphozah continues to experience strong demand, with growth in both new and total prescriptions following its launch. These factors support the firm's valuation of Ardelyx.
The analyst concluded by emphasizing their confidence in the company's strategy, stating that the management's decision was sensible. TD Cowen's net present value (NPV) analysis, which accounts for the possibility of Xphozah being bundled, underpins the $12 per share valuation and the recommendation to continue holding Ardelyx shares.
In other recent news, Ardelyx Inc . reported strong financial results for the first quarter of 2024, with total product-related revenue reaching $45.6 million, driven by its products IBSRELA and XPHOZAH which contributed $28.4 million and $15.2 million in net sales revenue respectively. The company also reported a solid cash position of $202.6 million at the end of the quarter.
In a significant move, Ardelyx decided not to include its kidney disease drug XPHOZAH in the Medicare Prospective Payment System (PPS), believing this decision is crucial to maintain patient access to the medication. The company's analysis indicated that the inclusion of XPHOZAH in the CMS payment system could significantly limit the drug's use, affecting patients regardless of their insurance coverage.
Ardelyx is supporting bipartisan legislation that would extend the exclusion of oral-only medications from the Medicare ESRD PPS, which they believe is the best solution to ensure continued patient access to XPHOZAH. The company has called on Congress to pass this legislation and is actively exploring alternatives to protect patient access to their therapies.
These recent developments highlight Ardelyx's ongoing efforts to navigate the complex environment of drug reimbursement and patient access. While no predictions are made about the company's future, these decisions indicate a strong commitment to patient access and the successful commercial performance of its products.
InvestingPro Insights
TD Cowen's optimistic stance on Ardelyx, Inc (NASDAQ:ARDX) is echoed by the company's remarkable sales growth and strong market performance. According to recent InvestingPro data, Ardelyx has experienced a substantial revenue growth of 152.32% over the last twelve months as of Q1 2024, with an even more impressive quarterly revenue growth of 304.81% in Q1 2024.
This data underpins the strong demand for Xphozah that TD Cowen referenced. Moreover, the company's gross profit margin stands at a healthy 62.03%, indicating efficient operations despite the current lack of profitability.
Investors may also find encouragement in the company's significant market performance, with a 123.3% return over the last year and a 25.75% return over the last week alone. These figures suggest that investor sentiment is buoyant, which may cushion the stock against short-term volatility. It is also noteworthy that Ardelyx has managed to maintain a moderate level of debt, as per an InvestingPro Tip, which could be a stabilizing factor for the company's financial health.
For those looking to delve deeper into Ardelyx's financial metrics and future prospects, InvestingPro offers additional insights and tips. There are currently 11 more InvestingPro Tips available for Ardelyx, which can be accessed through the InvestingPro platform. For readers interested in leveraging these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. This exclusive offer can provide a more comprehensive understanding of Ardelyx's potential and help inform investment decisions.
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