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Radius (RDUS) Posts Narrower Q1 Loss, Misses on Revenues

Zacks Equity Research

Radius Health, Inc. RDUS reported mixed results for the first quarter of 2019, wherein loss was narrower than expected but sales missed estimates.

The company incurred a loss of 94 cents per share in the quarter, narrower than the Zacks Consensus Estimate of a loss of 95 cents and the year-ago loss of $1.11. The year-over-year improvement was backed by an increase in revenues.

The company reported Tymlos’ sales of $29.8 million, missing the Zacks Consensus Estimate of $34.8 million.

Quarter in Detail

We remind investors that Radius Health obtained the FDA approval for Tymlos (abaloparatide) injection in April 2017 for the treatment of postmenopausal women with osteoporosis at high risk of fracture. The company began shipments of the drug to wholesalers at the end of May 2017.

Hence, revenues recorded in the year-ago quarter were $14.6 million only. Tymlos U.S. net sales were negatively impacted by anabolic market seasonality that showed lower volumes in the quarter versus the fourth quarter of 2018, higher gross-to-net expenses due to the impact of the Medicare Part D coverage gap on manufacturers and increased support for commercial patient deductibles.

Tymlos captured, on average, 30% of the U.S. anabolic osteoporosis market (based on Patient Months on Therapy, TRx PMOT) in the first quarter of 2019 and 42% of new anabolic patient starts. At the end of the first quarter of 2019, the drug was covered for approximately 283 million U.S. insured lives, representing approximately 99% of U.S. commercial, 67% of Medicare and 97% Medicaid/Other insured lives. Growth in new scripts in the commercial business was also strong, with a 17% increase from the fourth quarter of 2018.

Research and development expenses for the reported quarter were $23.3 million, up 1.7% year over year due to increases in elacestrant project costs and abaloparatide-patch project costs. General and administrative expenses decreased 14% to $41.2 million.

Pipeline Updates

The pipeline includes abaloparatide injection for potential use in the treatment of men with osteoporosis, abaloparatide patch for potential use in osteoporosis, and elacestrant (RAD1901) for potential use in hormone-receptor positive breast cancer.

Radius Health presented a post-hoc subset analysis on postmenopausal osteoporosis patients with type 2 diabetes from the phase III ACTIVExtend Study at the American Association of Clinical Endocrinologists conference in April 2019. The ACTIVE Study cohort included patients with Type 2 diabetes. The data from the study showed that use of abaloparatide-SC for 18 months led to significant improvement in lumbar spine TBS (trabecular bone score) and suggested that abaloparatide-SC improved bone microarchitecture.

As the incidence of both type 2 diabetes and osteoporosis increase with age, they frequently coexist and represent a high unmet medical need population with a lower diagnosis rate for osteoporosis, compromised bone quality and higher fracture risk.

The company is developing two formulations — abaloparatide-Subcutaneous (SC) and abaloparatide-transdermal patch. Radius Health is on track with its preparations for the phase III trial on abaloparatide patch and expects to start the study in August 2019.

2019 Sales Guidance Updated

Radius Health expects Tymlos net revenues to be $160-$175 million (previous guidance was $155-$175 million in 2019).

Our Take

The narrower-than-expected loss in the first quarter was encouraging.

The company’s sales surpassed expectation in the first quarter of 2019 as Tymlos continued to gain traction.

Tymlos market share increased in April, with a 34% share of the U.S. anabolic osteoporosis market and more than 44% of new anabolic patient starts.

Shares of Radius Health have gained 28.2% in the year so far, outperforming the industry’s’s growth of 8.7%.

 

During the second half of 2019, Radius Health expects the drug to become the NBRx anabolic market leader by reaching more than 50% of new patient starts.

Although the osteoporosis market in the United Sates has great potential, Tymlos is expected to face significant competition from Eli Lilly & Co's LLY Forteo and Amgen's AMGN Prolia.

Zacks Rank & Stock to Consider

Radius Health currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the healthcare sector is Roche Holdings RHHBY, which sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Roche’s earnings per share estimates have increased from $2.35 to $2.40 for 2019 in the past 60 days.

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