By Gene Marcial, cpreports.com
If you believe that the unsung biotechs will finally have their day in the sun, you are right on the money. The smart-money crowd is betting that this year, it will be the biotech stocks that will provide the leadership among the small-caps. In fact, some budding late-development stage pharmaceuticals are already displaying impressive strength.
One in particular is the still undiscovered Rexahn Pharmaceuticals, trading on the AMEX with the ticker symbol RNN, which has zoomed from a 52-week low of 40 cents share on Sept. 2, 2009, to $1.62 on Mar. 30, 2010.
That sharp upswing may be a prognosticator of what lies ahead for the stock. Some close watchers of the company, which is developing signal inhibitor therapies for cancer and treatments for central nervous system diseases, predict that Rexahn will bounce back to its 52-week high of $2 a share reached on May 12, 2009 — If not higher – sometime this year. Analyst Elemer Piros of investment firm Rodman & Renshaw, who rates the stock outperform, sees it climbing to $2 a share this year.
What’s behind the excitement over the stock? Rexahn has a number of promising drugs in its pipeline and one that’s catching a lot of attention on Wall Street is Serdaxin, a treatment for depression and mood disorders. Management is expected to release sometime in the second quarter the results of the Phase IIA clinical trials. The results are expected to be very positive.
“We believe the results of this trial will be extremely positive, demonstrating considerable efficacy,” says Rob Goldman of the Goldman Small-Cap Research, who rates the stock a “speculative buy, with a target of $4 a share. The results could lead to an eventual partnership with a major pharmaceutical company, he says. “with a flurry of favorable news ahead, we expect the stock wil begin to garner significant attention and a higher valuation in the coming months,” says Goldman.
Top Rexahn executives are believed to be in serious talks with at least five large drug makers on a possible partnership deal for the production and commercialization of Serdaxin. There is serious interest by the major pharmaceuticals in Serdaxin because it addresses a huge $18 billion market, says one Rexahn insider. The company is also expected to submit a protocol to the Food and Drug Administration for the first studies of Serdaxil as a treatment for Parkinson’s disease.
Already, Rexahn has a partnership agreement with Teva Pharmaceuticals, one of the largest drug makers in the world, which has invested some $3.5 million to co-develop the company’s anti-cancer compound named RX-3117. The drug has therapeutic potential for the treatment of a broad range of cancers, including colon, lung, and pancreatic cancer, says Goldman. Rexahn is expected to receive a total of $200 million from Teva in milestone payments for RX-3117 over a period of time.
Based on the Teva parrtnership model, Rexahn could get some $750 million in milestone payments for Sersdaxin from a major pharmaceutical company that will parrtner with Rexhan, according to a source close to the company. With that kind of a milestone payment to a company whose market cap is just $115 million, Rexahn's stock could be several multiples higher from where it is today.
Rexahn has two other drug candidates that are in phase II trials: Zoraxel, a treatment for erectile dysfunction, and Archexin, a treatment fro metastatic pancreatic cancer.
Zoraxel, unlike other existing treatments for erectile dysfunction, is a central nervous system based mechanism that acts as a dual enhancer of serotonin and dopamine in the brain, where the neurotransmitters play a key role in sexual activity, notes Goldman. Rexahn believes Zoraxel may be the first erectile dysfunction drug to affect all three phases of sexual activity – sexual motivation, arousal, and erection. Another significant aspect of the drug: It has a potential to also treat female sexual dysfunction, according to the company’s research.
Archexin is a first-in-class potent inhibitor of the Akt-1 protein kinase in cancer cells, and has been granted by the Food and Drug Administration a orphan drug designation for five cancers – renal cell carcinoma, glioblastoma, and cancers of the stomach, ovary, and pancreas, notes Goldman.
For a small, little known company, Rexahn could, indeed, become a significant player in the universe of biotechs with its rich pipeline of new drugs. The next catalyst for the stock is the release of the results of the phase IIA trials on Serdaxil. And once a partnership is announced for Serdaxn, expect the stock to soar.
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Featured on CPreports.com is Gene Marcial’s “Inside Wall Street” column, written by the guru who has been providing insights into large and smallcap investment strategies for over 28 years through his columns in BusinessWeek and the Wall Street Journal.