Piper Jaffray Downgrades Ardea Biosciences To Neutral

Piper Jaffray is downgrading Ardea Biosciences RDEA from Overweight to Neutral primarily on valuation. Piper is maintaining its revenue estimates for RDEA594, however the price target declines from $34 to $30 as additional shares from secondary offering reduce EPS in its valuation year. Piper Jaffray also increasingly believes shares fully reflect positive Phase IIb Study 203 data in combination with allopurinol and two recent equity financings increase the likelihood that Ardea will pursue independent development of '594 in the US and partner ex-US. This could reduce the premium assigned to RDEA shares as potential for a takeout diminishes in the near term and as the next major clinical catalyst, Phase III data, is unlikely until 2H 2012. Piper believes that the recently announced financing confirms Ardea's intent to conduct Phase III trials independently in the US as the company will have an estimated $160mn in cash, and Piper expects the signing of regional partners later this year to further strengthen the company's balance sheet. RDEA closed Friday at $27.41