Who is right about Rexahn? Big stakes bring attention to undervalued biotech player Print E-mail
By M.E.Garza   
Tuesday, 08 February 2011 11:47

Events surrounding Clinical Data’s (NASDAQ: CLDA) FDA approval of vilazodone HCl tablets (to be sold under brand name Viibryd), for the treatment of adults with major depressive disorder have set the table for shares of Rexahn Pharmaceuticals Inc. (AMEX:RNN) to continue their recent ascent.

In a detailed report filed last year, we first told you that Rexahn Pharmaceuticals was one of the most undervalued biotech plays on Wall Street with three potential best-in-class drugs in Phase II clinical trials The stock was trading under $0.75 at the time.

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Soon after that initial report, the company was approached by six different pharmaceutical companies seeking to partner based on early clinical data from their study of Serdaxin- a drug candidate described as a potential market leading CNS therapeutic that activates dual enhancement of serotonin and dopamine levels in the brain.

According to our sources, instead of accepting a hefty offer with over $1 billion in milestone payments, with $20 million upfront, financial advisors convinced the company’s conservative management team to finish Phase II studies of the drug as a treatment for major depressive disorder. Other experts suggested that by doing so, Rexahn would return armed with stronger data and bigger bargaining chips next time they spoke to Big Pharma.

After completing a financing designed to take the company through the end of Phase IIb, management at the clinical stage pharmaceutical company began to plan their recently announced randomized, double blind, and placebo-controlled trial.

Two weeks ago, the first of up to 300 patients was enrolled in the study to test Serdaxin as a treatment of major depressive disorder. Preliminary data is not expected from that study until later in the year, but each of those potential pharmaceutical partners have their eye RNN’s progress, especially given the market’s need for anti-depressants with minimal sexual side-effects and problems like weight gain and insomnia.

Rick Soni, President of Rexahn, commented, “Data from our Phase IIa study in MDD suggest that Serdaxin has the potential to improve symptoms of depression without the side effects commonly associated with currently marketed antidepressants, and we look forward to further assessing Serdaxin in patients with MDD.”

Like Clinical Data’s Viibryd, Serdaxin has all the markings of a blockbuster; but in addition, it has shown the potential to treat multiple CNS illnesses including depression, anxiety, and other mood disorders and that clearly makes it even more attractive to Big Pharma. In addition, Serdaxin has demonstrated neuroprotective activity that may have the unique ability to not only treat symptoms, but also slow the progression of neurodegenerative diseases, such as Parkinson’s and Alzheimer’s disease. A Phase I study looking at the drug candidate’s abilities against Parkinson’s should be announced this quarter.

Serdaxin works on the pleasure center of the brain and helps raise both dopamine and serotonin levels. Scientists believe the drug will continue to show excellent efficacy and that its safety profile is solid.
In addition to Serdaxin, Dr. Chang Ahn, Rexahn’s Chairman and Chief Executive Officer is convinced his team can push two additional and equally promising Phase II compounds, Archexin and Zoraxel, to market.

Unfortunately, now the same tabloids writer who warned investors to stay away from Clinical Data prior to our successfully predicted FDA approval has begun bashing RNN and Serdaxin despite the company’s endorsement by several publications and analysts, including one at the same tabloid.

Big industry player TEVA Pharmaceuticals has invested millions of dollars into the company and they expect to increases their investment in Rexahn by another $4 million- for the continued development of an early Anti-Cancer Compound, RX-3117.  That payment should arrive sometime during the next four to five months, according to sources familiar with the situation.

Is Rexahn one of the more solid, undervalued investment opportunities in biotech or just another over pumped scam? Seriously, could it be that Dr. Ahn and his company are simply frauds whose research data is full of holes?

Whose pocket are these guys in?  The simple fact is, that over the past 12 months since we firt told you about the stock shares of Rexahn Pharmaceuticals have more than doubled in value, against a mere 18% gain for the S&P 500.

Consider for a moment that Ahn is the same person who previously held dual positions as both Expert Regulatory Officer and Laboratory Chief at the FDA’s Center for Drug Evaluation and Research. The same man who helped write and enforce the rules of FDA approvals left the regulatory agency to launch Rexahn.  In a relatively short time he has positioned the company with not only a strong pre-clinical pipeline, which he describes as “a major strength of Rexahn,” but he has convinced companies like Teva to recognize the commercial potential of their discoveries.

Despite Ahn’s efforts to correct the clueless by issuing a publicly disclosed statement to the contrary, some continue to either misinterpret or misreport report the facts for their own purposes at the expense of hurting retail investors.

Like the clinical trial which Clinical Data conducted for Viibryd, Ahn has designed his studies as a randomized, double blind, and placebo-controlled effort. Viibryd was the first drug that Clinical Data developed and it received marketing approval from the FDA on its first review. Rexahn is aiming for the same goal, but before they even get there, we continue to believe that Rexahn shares will continue to move significantly higher. Some analysts have issued a $3 price target in the short term, but other long term investors have their sights set on much higher prices- believing that the company’s proprietary drug development platform addressing multiple disease indications each has value as "separate business" to several drug companies. The fact that the management team has made it clear that one or several of these could be licensed off to various, bigger pharmaceutical firms after completing Phase II studies has been pushing shares higher.

In addition, because several "closely held" investors account for holding over 80% of the company's outstanding shares, we continue to feel that it will only add to the demand for free trading shares as this year, full of critical milestones as it is, progresses.

Again, we urge you not to listen to the dips, but instead to buy on them after doing your own due diligence on the stock. We're sure you'll come to your own intelligent conclusions.

Disclosure: Long RNN

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