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Radius (RDUS) to Acquire Rights for Cannabidiol Oral Solution

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Zacks Equity Research
·3 min read
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Radius Health, Inc. RDUS announced a definitive agreement to acquire the global development and commercialization rights of Benuvia Therapeutics Inc.’s synthetic cannabidiol oral solution (“RAD011”).

RAD011 is a synthetic cannabidiol oral solution with potential utilization in multiple endocrine and metabolic orphan diseases.

The initial indication, for which the candidate will be evaluated, is Prader-Willi syndrome (“PWS”).

Radius intends to begin a phase II/III study on the candidate for patients suffering from PWS in the second half of this year, pending regulatory discussions with the FDA.

RAD011 was granted Fast Track Designation in 2017 and Orphan Drug Designation in August 2020 for the treatment of hyperphagia behavior and weight loss in patients with PWS.

Per the agreement, Radius acquired RAD011 for $12.5 million. It will also pay an additional $15 million on the successful conclusion of PWS development milestones. The company may also pay up to $45 million in development milestones for any of the next three indications. In addition, Radius might make sales-based milestone payments and a tiered, high-single-digit effective royalty.
The acquisition did not result in any equity dilution to Radius’ shareholders, as the company has financed the acquisition through cash on hand and the utilization of $15 million from an existing debt facility. It expects the combination of a rationalized cost structure and ongoing growth in lead drug, Tymlos, to fully fund the development of RAD011. As part of this transaction, Radius expects to take a one-time charge of up to $16 million in the fourth quarter of 2020.

We note that Radius’ abaloparatide subcutaneous injection, marketed as Tymlos, is approved by the FDA for the treatment of postmenopausal women with osteoporosis at high risk 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 therapies.

The acquisition leverages Radius’ endocrine expertise and adds a late-stage pivotal trial-ready orphan disease product to its existing phase III programs for abaloparatide and elacestrant.

Earlier, the company entered into definitive agreements with Endo Ventures Limited, a subsidiary of Endo International plc ENDP, to register, commercialize and distribute abaloparatide on an exclusive basis in Canada.

Shares of Radius have gained 12.1% in the past year against the industry’s decline of 1.8%.

Tymlos generated sales worth $148.5 million in the first nine months of 2020, reflecting an increase of 26.2% year over year. However, competition in the market remains stiff from bigwigs like Eli Lilly’s LLY Forteo and Amgen's AMGN Prolia. Hence, the successful development of other treatments will diversify Radius’ revenue base.

Radius currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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