Zacks_Analysts' Blog : Anadys Narrows Loss - Analyst Blog

Anadys Pharmaceuticals Inc.’s (ANDS) fourth quarter 2010 loss of 8 cents per share (excluding special items) was narrower than the year ago adjusted loss of 15 cents per share. The Zacks Consensus loss estimate for the final quarter of 2010 was 9 cents. The narrower loss was attributable to lower operating costs in the quarter.

The company, which does not have any products in the market, did not report any revenues in the final quarter of 2010, like a year ago. Total operating expenses declined approximately 20% to $4.5 million in the reported quarter. The decline was attributable to lower spending on research & development (down 30% to approximately $2.8 million).

The reduction was primarily attributable to lower costs incurred on the development of hepatitis C candidates ANA598 and ANA773. The decrease in research & development expenses more than offset the 6% rise in general and administrative expenses.

For full year 2010, Anadys suffered an adjusted loss of 42 cents per share as opposed to an adjusted loss of 80 cents in 2009. Lower operating expenses (down 33%) incurred in 2010 accounted for the narrower loss. The Zacks Consensus Estimate for 2010 was a loss of 43 cents per share.

Pipeline Update

Apart from releasing financial results, Anadys also provided an update regarding its pipeline. Anadys’ lead candidate, ANA598 being evaluated for combating chronic hepatitis C virus (HCV) is currently in mid-stage development. Key data regarding the candidate is expected in 2011.

In 2010, Anadys announced its intention to resume evaluating ANA773 for the treatment of HCV, with a mid-stage study expected to commence in the second quarter of 2011.

Lucrative HCV market

The HCV market is highly lucrative and is projected to be worth approximately $8.5 billion by 2016. The market, whose major players are Roche Holdings Ltd. (RHHBY) and Merck & Co. Inc. (MRK), has a huge unmet need. Consequently, if Anadys’ candidates are able to navigate through the clinical and regulatory hurdles smoothly, then they would bring in revenues for Anadys.

Our Recommendation

We have a ‘Neutral’ stance on Anadys which is supported by the Zacks #3 Rank (Hold rating) carried by the stock in the short run.