What happened

Shares of Tricida (NASDAQ:TCDA), a pharmaceutical company developing a solution for patients with kidney problems, took flight after the company reported surprising trial results for its lead candidate. Investors anticipating significant sales from TRC101 drove the stock 67% higher in March, according to data from S&P Global Market Intelligence.

So what

An estimated 14% of the general population has chronic kidney disease, and millions have trouble removing enough of the acid that digests their food. Tricida stock surged last month because it looks like removing acid with TRC101, instead of neutralizing it with sodium bicarbonate, leads to a stronger benefit than expected.

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When Tricida reported success from TRC101's phase 3 trial, meeting the 12-week endpoint didn't receive much attention. Signs of metabolic acidosis fell for 59% of patients treated with TRC101, compared with 22% of the placebo group.

The stock jumped last month because Tricida reported surprising 52-week follow-up safety data, from the same study, that was more positive than anyone could have hoped for. Just five patients among 124 treated with TRC101 experienced a kidney function loss of 50% or worse, and all survived through the 52-week treatment period. In the placebo group, 10 out of 93 experienced a 50% reduction, and four of the subjects died before reaching 52 weeks.

Now what

Tricida will submit a New Drug Application to the Food and Drug Administration in the second half of the year. Since any side effects caused by TRC101 are clearly outweighed by the benefit it provides, a regulatory green light seems likely. Once doctors and insurers understand how much they could save by treating metabolic acidosis with TRC101, it could become a new standard treatment for millions of patients in the U.S. alone.

Tricida runs a fairly tight ship. It finished 2018 with $243 million in cash and investments after losing $103 million last year. I'll be surprised if the company doesn't receive a juicy buyout offer, or at least a collaboration deal soon.

If a deal doesn't materialize, Tricida thinks cash on hand plus its potential borrowing capacity will see the company through 2020 and into 2021 before it needs to visit the equity tap again. 

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