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Radius Health (RDUS) Reports Wider-than-Expected Q1 Loss

Radius Health, Inc. RDUS posted a loss of 94 cents per share in the first quarter of 2016, wider than both the Zacks Consensus Estimate of a loss of 83 cents and the year-ago loss of 47 cents, primarily due to an increase in research and development, and general and administrative expenses.

The company has yet to generate any revenues.

The Quarter in Detail

Research and development (R&D) expenses were $27.5  million, up 137.8% year over year due to an increase in contract service costs related to the development of pipeline candidate RAD1901 to support a phase I study in metastatic breast cancer that commenced in late 2014 and a phase IIb study in postmenopausal vasomotor symptoms. Expenses also rose due to higher compensation expenses resulting from an increased headcount.

General and administrative expenses were up 183.3% to $13.6 million primarily due to higher professional support costs and legal fees that included costs related to the increased headcount, and preparations for a potential commercialization of abaloparatide-SC.

Pipeline Update

Radius Health filed for an approval of its lead candidate, abaloparatide (postmenopausal osteoporosis), in the EU, which is currently under review. The company expects an opinion from the Committee for Medicinal Products for Human Use (CHMP) on its application later this year.

In Mar 2016, Radius Health submitted a new drug application (NDA) in the U.S. for the treatment of postmenopausal women with osteoporosis. It expects to hear from the FDA on the acceptance of an NDA for abaloparatide-SC in the second quarter of 2016. The company is also looking for a collaboration partner for the potential commercialization of abaloparatide-SC prior to its launch.

A potential approval would allow Radius Health to record its first commercial sales in 2016. The company also is developing abaloparatide-transdermal, (abaloparatide-TD) for potential use as a short wear-time transdermal patch. In Dec 2015, the company initiated a human replicative clinical evaluation to compare the optimized abaloparatide-TD patch with its subcutaneous formulation, with an update expected by mid 2016.

Meanwhile, a phase I multicenter, open-label, two-part, dose-escalation study on RAD1901 in postmenopausal women with advanced estrogen receptor-positive and HER2-negative breast cancer, is currently ongoing. While the phase I study is designed to evaluate escalating doses of RAD1901 in Part A, the Part B expansion cohorts allow for an evaluation of additional safety, tolerability and preliminary efficacy.

Our Take

Radius Health’s wider-than-expected loss in the first quarter and surging expenses were disappointing. We expect investor focus on further updates on the NDA submission of abaloparatide in the U.S., which has already experienced a quarter’s delay. The company is now gearing up for a potential launch in both the U.S and the EU. On the other hand, expenses are expected to rise even higher as the company increases its investment and launch preparations.

Radius Health carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Shire plc SHPG, Biodel, Inc. BIOD and Nektar Therapeutics NKTR. All these stocks have a Zacks Rank #2 (Buy).

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