RDEA Ardea Biosciences, Inc. (MM)

Ardea Biosciences Inc.’s (RDEA) first quarter 2012 net loss of $1.25 per share was wider than the Zacks Consensus Loss Estimate of 97 cents and the year-ago loss of 59 cents per share. Lower revenues and higher costs led to the wider loss in the first quarter of 2012.

Revenue in the reported quarter declined 16.6% to approximately $1.5 million and missed the Zacks Consensus Estimate of $2 million. The decline was attributable to a decrease in reimbursable research and development costs pertaining to BAY86-9766 under Ardea’s global deal with the Healthcare unit of Bayer (BAYRY). We remind investors that Ardea and Bayer inked the deal in 2009 focused on the development of MEK (methyl ethyl ketone) inhibitors for the treatment of cancer.

Ardea, which does not have any marketed product, earned its entire revenue from license fees, reimbursable research and development (R&D) costs and sponsored research in the reported quarter. License fees in the reported quarter came in flat at $1.1 million.

Operating expenses in the reported quarter climbed 150.5% to $42.5 million. Both research and development (R&D) expenses (up 189.4%) and general and administrative (G&A) expenses (up 33.8%) were on the upswing during the final quarter of 2011.

While the massive jump in R&D expenses was attributable to Ardea’s efforts to develop its pipeline candidates especially lesinurad and RDEA3170, the increase in G&A expenses was due to the rise in personnel and other expenditures.

Ardea to be taken over by AstraZeneca

On April 22, 2012, Ardea announced that it will be acquired by AstraZeneca (AZN) for approximately $1.26 billion in cash or $32 per share. The deal, expected to close in the second or third quarter of 2012, has been approved by the Boards of both companies.

Our Recommendation

Currently, we have a Neutral recommendation on Ardea. The company carries a Zacks #3 Rank (short-term Hold rating).

 
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