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Taking Stock of Radius Health’s Financial Performance

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Financial performance

In 3Q17, Radius Health (RDUS) generated revenue of $13.4 million. Of this revenue, $3.4 million came from product revenue, which comprises Tymlos sales and licensing revenue.

For 2017 and 2018, Radius Health is expected to post revenue of $23 million and $97.7 million, respectively. Its peers Novartis (NVS) and Pfizer (PFE) are expected to post revenues of $49 billion and $52.5 billion, respectively, in 2017. Array Biopharma (ARRY) is expected to report revenue of $108 million in 2018.

Operating expenses

Radius Health’s research and development expenses fell from $27.4 million in 3Q16 to $20.9 million in 3Q17. To date, Radius has incurred expenses of ~$213 million, $41.4 million, and $62.5 million related to its abaloparatide, abaloparatide-TD, and elacestrant programs, respectively.

On the other hand, the company’s SG&A (selling, general, and administrative) expenses increased from $19.2 million in 3Q16 to $47.7 million in 3Q17. SG&A expenses are mainly made up of prelaunch and postlaunch operations and salaries. This significant change was attributable to the company’s commercialization efforts for Tymlos, which it launched in May 2017.

As a consequence of this rise in expenses, the company’s net losses increased from -$46.1 million in 3Q16 to -$57.8 million in 3Q17.

Debt financing

In 3Q17, Radius Health raised a total of $305 million via the issuance of convertible notes. These notes are senior unsecured obligations and bear interest at 3%. The semiannual payments will begin in March 2018. The notes will mature in September 2024.

Key risks facing Radius

Companies making a transition from the clinical stage to the commercial stage face key risks that are company specific. Radius Health has a limited operating history, a slowly evolving business model, and a total reliance on only one commercial product in Tymlos.

The drug has a limited sales history, and the company itself is slowly building up a marketing team. Radius will have to manage its expenses and focus on profitability. At the end of September 2017, Radius had accumulated a deficit of $811.3 million with total cash and equivalents on hand of $468 million thanks to its recent debt financing.

Radius Health makes up ~0.07% of the iShares Russell 2000 ETF’s (IWM) total portfolio holdings.

 

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