Ardelyx Phase 3 IBS-C Results Represent Buying Opportunity

| About: Ardelyx (ARDX)

Summary

Ardelyx has had a lot of bad news in 2016.

However, the one good news from the tenapanor story has been in IBS-C.

The IBS-C phase 3 trial results will be out in the next few months, representing a buying opportunity.

I would never buy and hold Ardelyx (NASDAQ:ARDX) long term, because there is a long list of ifs and buts associated with this company. Its CKD trial with tenapanor in patients with type II diabetes failed to meet its primary endpoint, while its ESRD trial in hyperphosphatemic patients with chronic kidney disease on hemodialysis had more than acceptable levels of diarrhoea and had to be shut down. Its partner for 5 years, AstraZeneca (NYSE:AZN), just dumped the company and left it high and dry. It's other partner, Sanofi, also cancelled their partnership. This is a sinking ship, and a disaster in the making; but on the principle that even a sinking ship can be valuable if properly salvaged, and even a dead cat sometimes does bounce, I am going to buy some ARDX shares just to play the upcoming phase 3 trial results. The one good thing that has come out of the tenapanor story is that its IBS-C phase 2 trial met its primary endpoint without actually causing unmitigated diarrhoea in patients. Why that happened is anybody's guess. But because of that positive safety data, this indication is the phase 3 trial whose results I am most interested in. Although I still do not believe IBS-C will be a killer market for ARDX - there are too many players, including Synergy Pharma (NASDAQ:SGYP), the star player - I think that phase 3 results will be positive enough to bounce this stock up even from its current stretched levels. Of course, a pullback to below $10 will be an even better deal.

So, what does the successful phase 2 say about the possible outcome of phase 3 in IBS-C? Here's a quote from the press release:

The clinical trial was a Phase 2b, randomized, double blind, placebo-controlled, multi-center study to evaluate the safety and efficacy of three dose levels of tenapanor in 371 subjects with IBS-C… Subjects … received 5, 20, or 50 mg of tenapanor or placebo twice daily for 12 consecutive weeks…At the 50 mg dose, the study met its primary efficacy endpoint of an increase in the complete spontaneous bowel movement (CSBM) responder rate. Most secondary endpoints, including abdominal pain and other abdominal and IBS-C symptoms, demonstrated clinically meaningful improvements….The most common adverse events at 50 mg twice daily (greater than or equal to 5 percent) that occurred more frequently in tenapanor-treated patients compared to placebo-treated patients were diarrhea at 11.2 percent vs. 0 percent, and urinary tract infections at 5.6 percent vs. 4.4 percent….safety results were consistent with those observed in previous tenapanor trials."

Compare that to the diarrhoea results from its ESRD trial:

"However, significant levels of diarrhoea adverse events were reported, with 26-64% of tenapanor treated patients experiencing diarrhoea compared with 8% in the placebo group. The severity of the adverse event was also dose related."

So there's something good going on with IBS-C patients that is keeping the diarrhoea in check. It isn't probably the other way round - it isn't that something bad was going on with the ESRD patients to increase diarrhoea levels because the same problem also occurred in the failed CKD trial, which had its own problems with diarrhoea.

So I am hopeful that tenapanor will pass the safety test in IBS-C at the least. The drug already demonstrated efficacy in the decent-sized phase 2b trial in 371 patients, with intent-to-treat basis results showing primary endpoint being met in 60.7% of patients receiving tenapanor 50 mg twice daily versus 33.7 percent receiving placebo (p<0.001). I see nothing in the results to suggest that the efficacy endpoint will not be met in the larger trial.

As to the trial, here's what the company says, "In the fourth quarter of 2015, the Company initiated two pivotal Phase 3, randomized, placebo-controlled clinical trials evaluating tenapanor in IBS-C patients. The Company expects to enroll approximately 600 patients in each trial and expects results from these two Phase 3 clinical trials in 2017. The primary endpoint in each of the trials is the 6 of 12-week overall responder rate."

Latest data is that results will be released in the first few months of 2017. The two trial sizes combined is just about 3 times the phase 2b trial, and the primary endpoint remains the same. So there's every indication that this trial will be just as successful as the phase 2b trial. After positive results from the IBS-C trial in October 2014, the stock had seen dramatic movements, going up to $35 at one point. It is trading at $14 now, and its 52-week low was $6. Frankly, I would be more comfortable doing this strategy if the stock was nearer $10 than now. But overall, it looks like a decent bet that positive IBS-C results will push the stock at least a few percentage points.

As for buffer, the company is doing a phase 3 trial in ESRD; and although the phase 2 trial had diarrhoea problems, and primary endpoints have been changed mid-stage in phase 3 to better reflect efficacy data, there is still a lot of hope that something good will come out of it. Similarly, its other product, RDX227675, the lead product candidate from the RDX022 program, has demonstrated good potassium binding effect in the GI in early stage studies in hyperkalemia. So there's a buffer zone to my investment in tenapanor in IBS-C.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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