Ardea Takes the More Exciting Route

Most compounds that enter the clinical trial process never make it to market. But yesterday, Ardea Bioscicences (Nasdaq: RDEA) announced phase 2a data for its lead anti-HIV drug that was good enough to encourage further testing.

Ardea's lead compound, RDEA806, comes from the same class of HIV therapies (called non-nucleoside reverse transcriptase inhibitors, or NNRTIs) that have produced such hit drugs as Bristol-Myers Squibb's (NYSE: BMY) Sustiva and Johnson and Johnson's (NYSE: JNJ) recently approved Intelence.

Proving that it is possible for even a development-stage drugmaker to run a timely phase 2 clinical study (ahem), Ardea showed that RDEA806 reduced the levels of HIV in patients' bloodstreams by around 99% (2 log at the median) at one point in time in the study.

As an early peek at a drug's potential efficacy, this study comes across as positive. While it's too early to make claims regarding RDEA806's longer-term safety profile from these results, they do at least warrant further clinical testing.

RDEA806 is Ardea's lead pipeline drug candidate and all of its other compounds are still in even earlier clinical- or preclinical-stage testing, so  RDEA806's performance in testing will have a large effect on Ardea's share price.

Ardea wants to position RDEA806 as a frontline anti-HIV drug, which means it could be one of the HIV drugs of choice for newly diagnosed sufferers, if approved. Frontline HIV therapies have a relatively longer and harder development path than easier salvage-therapy drugs, intended for patients not being treated effectively with other HIV drugs.

The upshot to this strategy (although Ardea may not have had much of a choice) is that the rewards for producing a front-line HIV drug can eventually be significantly more lucrative than for developing a compound like Trimeris' (Nasdaq: TRMS) Fuzeon, which is used later on as HIV patients fail to improve with other drugs.

Ardea's next step with RDEA806 is for it to initiate a phase 2b study in the third quarter. This study could make or break RDEA806's future, because it will be tested head-to-head against the aforementioned Sustiva. If Sustiva significantly outperforms RDEA806 on some measures, then it will be hard to justify RDEA806's existence on the grounds of pure efficacy. Conversely, if the RDEA806 data looks good, then Ardea could have a compound worth at least a couple of hundred million dollars, considering that Sustiva sales were $956 million and grew 21% last year.