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Radius (RDUS) Q2 Loss Wider than Expected on Higher Expenses

Zacks

Radius Health, Inc. RDUS posted a loss of $1.58 per share in the second quarter of 2017, wider than the loss of $1.01 per share in the year-ago quarter and wider than the Zacks Consensus Estimate loss of $1.35. The year-over-year increase in net loss was attributable to an increase in general and administrative expenses.

Radius’ share price increased 13.3% year to date against the industry’s gain of 1%.

The company reported sales of Tymlos (abaloparatide) of $1.0 million from the first four weeks of launch, missing the Zacks Consensus Estimate of $1.96 million.


Quarter in Detail

Research and development expenses for the reported quarter were $19.6 million, down 27% year over year due to a decrease in regulatory and professional fees associated with abaloparatide-SC regulatory applications, decrase in elacestrant (RAD1901) project costs and a decrease in development costs associated with abaloparatide-TD.

General and administrative expenses for the reported quarter jumped to $50.1 million from $17.2 million. The increase was attributed to growth in professional support costs, including the costs associated with increasing headcount for the commercialization of Tymlos. Higher compensation expenses, including stock-based compensation, due to an increase in headcount were also responsible for increased costs.

Pipeline Updates

On Apr 28, the FDA approved Radius Health’s lead candidate Tymlos injection for the treatment of postmenopausal women with high risk osteoporosis for fracture – defined as history of osteoporotic fracture – multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy.

The company is developing two formulations of abaloparatide- abaloparatide-SC and abaloparatide-transdermal.

Meanwhile, Radius Health’ Marketing Authorisation Application (MAA) for Eladynos (abaloparatide-SC) for the treatment of postmenopausal women with osteoporosis in Europe is under review by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency. The company however suffered a setback when the CHMP issued a second Day-180 List of Outstanding Issues. Consequently, Radius is working with the CHMP to address these issues and the company expects a response prior to the end of 2017.

In May, Radius Health announced positive top-line results from the completed 24-month ACTIVExtend clinical trial on Tymlos, which met all of its primary and secondary endpoints. The company expects to submit a sNDA to the FDA in connection with the ACTIVExtend results by year end.

The company reported positive data from its ongoing phase I dose-escalation and expansion study on elacestrant in advanced metastatic breast cancer. The company discussed these data from the ongoing phase I studies with the FDA to determine the next steps for elacestrant breast cancer program, including the design of a phase II trial.

Following this discussion, the FDA agreed that a single-arm monotherapy phase II study of under 200 patients is appropriate. The agency also provided additional feedback on the proposed clinical protocol, including confirmation that the primary endpoint will be objective response rate, along with durability of response. The FDA also stated that if the study results demonstrate superiority to the then-available therapies, the single-arm phase II trial could be considered a pivotal study for accelerated approval as long as the company has also commenced a confirmatory study by the time of its new drug application (NDA) submission.

In addition, elacestrant is also being evaluated at low doses as an estrogen receptor ligand for the potential relief of the frequency and severity of moderate to severe hot flashes in postmenopausal women with vasomotor symptoms. The company expects to report results from its phase IIb clinical study of elacestrant for the potential treatment of postmenopausal vasomotor symptoms in the second half of 2017.

Our Take

The company’s wider-than-expected loss in the second quarter was disappointing as expenses continue to increase with the launch of Tymlos. The company is moving ahead with its plans in contracting with managed care organizations with access to over 133 million covered lives across Commercial and Medicare Part D plans.

Although the osteoporosis market in the U.S. has great potential as approximately 1.4 million postmenopausal women in the U.S. experience an osteoporotic fracture each year, Tymlos is expected to face significant competition from Eli Lilly &Co's LLY Forteo and Amgen Inc's AMGN Prolia. Moreover, the approved label carries a boxed warning of osteosarcoma (a malignant bone tumor). The company, however, suffered a setback when the CHMP issued a second Day-180 List of Outstanding Issues.

Zacks Rank & Key Pick

Radius Health currently has a Zacks Rank #4 (Sell).

A better-ranked stock in the healthcare sector is Gilead Sciences. Inc. GILD which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gilead’s earnings per share estimates increased from $7.92 to $8.53 for 2017, over the last 30 days following strong results in the second quarter. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 8.18%.

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