3 Things to Watch With Astex Pharmaceuticals

Astex Pharmaceuticals (Nasdaq: ASTX  ) is a biotechnology firm focused on therapies in the fields of oncology and hematology and small-molecule-drug discovery. It currently has one drug approved by the Food and Drug Administration (FDA) and a pipeline filled with 10 clinical phase experimental drugs and multiple pre-clinical trials.

Today, let's look at three things investors should be watching regarding Astex Pharmaceuticals, which will provide us with better insight into the company.

1. Clinical-phase pipeline
Astex currently has one FDA-approved drug on the market, Dacogen, for the treatment of myelodysplastic syndrome. It markets this drug in cooperation with Eisai Pharmaceuticals in North America and Janssen Cilag, a subsidiary of Johnson & Johnson (NYSE: JNJ  ) , everywhere else. Dacogen's sales have hit a stagnant point in recent quarters making it extremely important that Astex continues to develop its pipeline of drug hopefuls in order to grow its bottom line.

With four drugs in phase 1 trials, five hopefuls in phase 2, and an expansion of Dacogen in phase 3 trials, Astex offers shareholders a seemingly endless parade of study data with plenty more in the pre-clinical and discovery stages. The basis for Astex's success in discovering potential therapies lies in its proprietary fragment-based drug discovery platform known as Pyramid. This technology is able to computationally determine how low-weight molecules (fragments) and proteins will interact with one another, and has allowed Astex to create a bountiful clinical-phase pipeline.

2. Partnerships
In addition to discovering potentially new therapies, a small biotechnology company having a partner with an experienced sales and marketing team, and deep pockets, is often appreciated. Astex has worked rigorously to set itself up for success by partnering with many large pharmaceutical names.

In addition to partnering with Eisai and Janssen Cilag on marketing Dacogen, Astex has collaborative clinical-phase agreements with Novartis (NYSE: NVS  ) for AT7519, a treatment for leukemia and LEE011, an enzyme inhibitor; AstraZeneca (NYSE: AZN  ) for AZD5363, an orally active, selective protein kinase B inhibitor, and AZD3293, a potential Alzheimer's treatment; and GlaxoSmithKline (NYSE: GSK  ) regarding therapies of Glaxo's choosing with the assistance of Astex Pyramid platform.

These partnerships provide milestone payments, and in some cases cost-sharing initiatives, which allow Astex to carry on multiple trials at the same time.

3. Cash
Finally, with Astex spending so much on researching and developing its now-extensive pipeline, it's imperative that you keep a close eye on its usage of cash.

Astex, thus far, has done a pretty good job of putting itself in position to receive milestone payments from its partners and spend within its means. As of its latest quarter Astex had $122.5 million in cash with no debt. Forming partnerships and Dacogen's approval have made Astex profitable and cash flow positive since 2009. Astex shareholders shouldn't have too much to worry about in terms of cash burn.

Foolish roundup
Now that you know what to watch for, it should be easier to analyze Astex Pharmaceuticals' successes and pitfalls in the future, and hopefully you'll gain a competitive investing edge.

If you're still craving even more info on Astex Pharmaceuticals, I would recommend adding the stock to your free and personalized Watchlist so you can keep up on all of the latest news with the company.

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Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of, and creating a diagonal call position in, Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that has transparency written into its DNA.


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  • Report this Comment On July 27, 2012, at 2:20 PM, MaxSanderson wrote:

    You fail to mention in this article that Astex recently received "a positive opinion, recommending the granting of a marketing authorisation for the medicinal product Dacogen, 50 mg, powder for concentrate for solution for infusion, intended for the treatment of acute myeloid leukaemia" (an indication that failed FDA muster); a likely approval by the EMA by the end of the year.

    This is very positive, as it will yield important "Phase IV" date for a future FDA decision to approve Dacogen for AML for the US market.

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