Trade Insights

Markets finished mixed in Fridays half day with Apple weighing on the Dow. The tech giant has come under pressure as inventory shortages begin to hint at a tougher than expected holiday season for the giant. On a positive note, the Fed is showing signs of easing up on rate hikes with Novembers minutes highlighting a shift in policy as inflation cools. In the final week of November, investors will be focused on earnings, personal consumption, and labor data for November. In this evenings session, futures are lower as investors position for the final week of November. 

Biotech Highlights

• Merck doubled down on their agreement with MRNA to develop a cancer vaccine 
• Merck entered a $3.7B deal with Orna Therapeutics (who recently raised their series B) as the mRNA space heats up
  • $150M upfront, $100M equity
  • Orna keeps the rights to its platform and will continue work on its own programs
• LJPC is being acquired by Innovia for $6.23 per shares, congrats on the gains everyone!
• EPZM is being acquired by Ipsen for $1.45 per share, congrats on the gains everyone!
• FSTX will be acquired by InvoX for for $7.12 per share at a deal value of ~$161M
• Bristol Myers bought Turning Point in a $4.1B deal to bolster its cancer portfolio. 
• Reports of clinical study costs have surfaced as biotech investors weather the tough conditions and become critical of burn:
  • $150-175K per patient in oncology (more if biomarker testing needed)
  • $130K in autoimmune diseases
  • $250K in oncology P1/2
• Peter Kolchinsky from Rapport outlined his thoughts on biotechs toughest bear market in ~ 20 years. We believe its a great summary of the waters ahead and opportunities moving forward

Covid Updates:

• • VERU received 8 no’s and 5 yes votes during their ADCOM for a covid asset
  • Germany is experiencing a surge in ICU admissions as yet another covid variant emerges
  • The FDA approved Omicron boosters without human studies, raising controversy across the medical space. In the preceding days, vaccine demand has taken a sharp decline as many question the benefit of gen 1 tech amid rising cases and dropping protection. 
  • Cases continue to rip throughout various countries with Japan seeing a spike in cases and hopsitilizations
  • Among the infected, leaders such as Biden, and quadruple vaxed Pfizer CEO have reported positive cases
    • Biden rebounded after taking a course of Paxlovid
  • This setting lead to White House event where Fauci laid out steps for the future covid response
    • Of note, Gritstone was mentioned as one of the only candidates in the clinic for future proofing
  • FDA authorized NVAX in hopes of reaching holdouts
  • First gen vaccine efficacy is now reported as low as 55% after 3 months as emerging variants continue to disprove the immunity theory with the U.K. breaking yet another record hospitalization peak for the year
  • ARCT Covid-19 data saw 55% protection from infection and 95% overall efficacy
  • Nature.com released an article focusing on the pan-covid vaccine race
  • Bloomberg released an article focusing on T-cells and highlighted Gritstone’s approach, future proofing for

Background:

•  Based in California, Ardelyx is a clinical stage biotech focused on developing drugs to better manage complications related to kidney and cardiorenal diseases
• Lead asset tenapanor (IBSRELA) = first-in-class, twice daily, therapy approved in the U.S. and Canada for adults with IBS-C
  • Has a unique mechanism of action and acts locally in the gut to inhibit the sodium/hydrogen exchanger 3 (NHE3)
• Tenapanor (XPHOZAH)= received a CRL in July 2021 for the control of serum phosphorus in adult patients with CKD on dialysis 
  • While the FDA agreed tenapanor is effective in reducing serum phosphorus in CKD patients on dialysis, they noted unclear clinical significance 
• Most recently, the company announced positive results from an ADCOM panel on XPHOZAH for this indication; 11/16/22
  • Voted 9:4 in favor of XPHOZAH as a monotherapy and 10:2 in favor of XPHOZAH in combination with phosphate binders
  • An appeals decision from the the Office of New Drugs is expected within 30-days
  • The stock rocketed over $79% reaching a high of $2.19

• Has several late-stage partnered ex-US studies
  • Japan: Kyowa Kirin,  $30 million upfront payment, development and commercialization milestones worth up to $130 million, and high-teen royalties
  • China: Fuson Pharma, upfront payment of $12 million, additional milestones of up to $113 million, and tiered royalty payments from the mid-teens to 20%
  • Canada: Knight Pharma, up to $25 million CAD

Relevant Developments: 

• Secured up to $20M in a financing agreement with HealthCare Royalty Partners; 6/30/22 
  • Funding to support the ongoing US launch of IBSRELA
• Announced that its collaboration partner in Japan, Kyowa Kirin, submitted an NDA to the Japanese regulatory body (MHLW); 10/31/22
  • ARDX to receive a $35M milestone payment
• Shared new analyses of P3 data supporting the clinical utility of XPHOZAH ASN) Kidney Week; 11/3/22
• Announced the vote of the FDA Advisory Committee meeting for XPHOZAH for the control of serum phosphorus in adult with CKD on dialysis; 11/16/22-> webcast
  • Voted 9:4 in favor of XPHOZAH as a monotherapy and 10:2 in favor of XPHOZAH in combination with phosphate binders
  • The Office of New Drugs is expected to provide a response to Ardelyx’s appeal within thirty (30) days
  • If approved, XPHOZAH will be the first and only phosphate absorption inhibitor, reducing serum phosphorus with one pill taken twice daily

Highlights from 3Q22 earnings reported 11/3/22

• Management is encouraged by the commercial progress they’re making on the IBSRELA launch six months in
  • ARDX CEO noted strong demand and market receptivity for the novel treatment option in the IBS-C market
  • Net sales for Q3= $5M and ~$7M for the 9-mos ended 9/30/22
• The company had a significant presence at the American College of Gastroenterology 2022 Annual Conference (October 21-26)
• Expects to receive $35M in milestone payments associated with the 2022 amendment of the license agreement with its partner in Japan (Kyowa Kirin)
• Modest financials with $62M in cash as of 9/30/22 and a net loss for Q3 of $23M

Upcoming Catalysts:

• Approval decision for XPHOZAH (By ~YE22)

Technicals/Notes:

• Entering here on the pull back from the pump following the ADCOM vote with the stock near the upper end of its 52-wk range ($.49-2.19), but still on the lower end of its 3-year range ($0.49-9.53)
• Considering the ADCOM vote was overwhelmingly in favor of approval we are optimistic regarding the upcoming FDA decision
• Moreover, we noticed that following the ADCOM update the stock had its highest trading volume in over 2-years
• With the IBSRELA launch gaining momentum we see significant revenue growth prospects for the company in 2023+ if XPHOZAH can also secure approval
• Watching support closely at the 20-day SMA ($1.53)

• Support: The share price we monitor to remain bullish on a position, this serves as our mental stop loss
• Resistance: The share price we monitor to indicate a potential breakout zone
• Time Frame: A rough estimate on the amount of time a stock will take to reach our price target
• Core Positions: For this evenings copy of our core position updates, click here
• Trade Updates: For stocks on previous emails or SMS alerts that aren’t on this evenings email, click here
• *Risk estimates are rough estimates we use to gauge the potential volatility of a stock
• Red: High risk, most speculative play.
  Generally companies with market caps under
  $100M and weak cash positions (under $20M)
• Yellow: Medium risk. Decent cash position (over $20M),
  present a decent trade-setup, and ideally have catalysts
• Green: Lower risk relative to yellow and red rated trades.
  These trades are supported by strong underlying
  fundamentals and have upcoming catalysts. Ideally,
  there is a nice technical setup too.