Our 12-month target price for ARDX is $10, derived using a discounted cash flow (DCF) analysis. We use a weighted average cost of capital (WACC) of 10% and a -50% terminal growth rate post 2033. Ardelyx’s issued and pending patents are expected to expire in 2029 in the US and EU for tenapanor. We model four years of patent extension under the Hatch-Waxman Act given Ardelyx has filed for patent extension following the FDA approval of tenapanor (Ibsrela) in IBS-C in 2019.

We rate ARDX High Risk based on a quantitative screen of volatility in the stock. Share performance is closely linked to commercial launch progress for Ibsrela in IBS-C and Xphozah in hyperphosphatemia. Shares could fail to reach our target price if sales fall short of near-term expectations or appear unlikely to meet long-term peak sales estimates. Specific risks include: 1) the prior authorization process for Xphozah proves more cumbersome than anticipated, hampering uptake, 2) Xphozah enters the Medicare ESRD bundle in 2025 and the impact is greater than we currently account for in our model, 3) the Ibsrela launch in IBS-C plateaus earlier than anticipated, and 4) a serious safety signal arises with either Xphozah or Ibsrela in the commercial setting.