Shares of small biopharmaceutical companies with only one drug in the pipeline will either experience enormous gains or wither into nothingness, depending on the results of that drug's phase 3 trials. AtheroGenics (Nasdaq: AGIX) is one such small biotech, and the company's announcement of phase 3 trial results early next year for its lead product, AGI-1067, to treat atherosclerosis, or hardening of the arteries, will determine AtheroGenics' future.
AtheroGenics is finally nearing the finish line of a large (6,100-person) trial testing the ability of AGI-1067 to improve the outcomes of people with coronary heart disease. The event-driven trial was modified in 2005 to include an additional 2,000 people, because patients were taking longer than expected to show signs of disease progression. Even with the increased size, which statistically makes it easier to see a drug's effect, the trial will have a hard hurdle to overcome in showing AGI-1067's ability to improve outcomes. This is because patients in the trial are able to take all other medications, such as the popular cholesterol-lowering drugs, to help their disease.
Until the results of the pivotal AGI-1067 trial are released next year, the only things investors can do are look at the quarterly results from AtheroGenics and watch the company's cash burn rate. For the third quarter, the company burned through roughly $22 million in cash, leaving its balance sheet flush with $172 million worth of cash and equivalents. With a predicted net cash burn for 2006 in the range of $30 million to $35 million, AtheroGenics will have no need to raise money to fund its clinical trials any time soon.
Due to differences in trial design and endpoints between its phase 2 and phase 3 trials, it's tough to handicap the chance of success for AGI-1067. If it does solidly succeed in this phase 3 trial and gets approved, then AGI-1067 will easily become a more than billion-dollar drug marketed by the company's partner, AstraZeneca (NYSE: AZN).
Nearing the finish line on this long trial, almost all of AtheroGenics' eggs are in AGI-1067's basket -- and investors in shares of this company are either going to get a great belated Christmas present in 2007, or end up with egg all over their faces.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a
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