Why Did Jefferies Downgrade Radius Health?

Jefferies' Eun K. Yang downgraded the rating on Radius Health Inc RDUS from Buy to Hold, with a price target of $37.

Yang has moved to the sidelines, given that the approvability of abaloparatide-SC is already priced into the stock and significant upside from the current levels is unlikely. The share price has appreciated about 25 percent on "not so strong" Phase 3 romo data on abalo.

Checks with osteoporosis experts reveal that they do not see any meaningful difference among anabolic drugs, since none of them are able to reduce the hip fractures.

"Despite competitor romosozumab Ph3 data not as strong as RDUS' abaloparatide-SC, osteoporosis experts don't seem to view abalo as more competitive than room," Yang said.

On the other hand, experts also do not see any risk to the FDA approval of romo, with the analyst expecting the drug candidate to replace Forteo if it is priced at parity, given that room might be easier to "sell" to patients due to little or no out-of-pocket cost and lower frequency of injection.

"Experts continue to view romo as a more "likeable"/user-friendly anabolic vs. abalo or Forteo, particularly as a bridge to Prolia which physicians like considerably," Yang mentioned.

Given that abalo lacks any practical advantages over room and has little differentiation versus Forteo, the analyst expects abalo to capture 16 percent share of the anabolic market.