Axonyx (NASDAQ:AXYX) leapt up 50% just this month, continuing its jaw-dropping ascent from $1.10 per share in Jan. 2003 to its current trading level around $7.50. Even in a great year for biotech stocks, those gains stand out.

Buzz has grown around the company's new drug candidate, Phenserine, for Alzheimer's disease (AD). Interestingly, investors greeted the Phase IIA trial data presented way back in Oct. 2001 with a collective shrug, followed by a long, torturous decline. So, what's different now?

Besides a renewed enthusiasm for all things biotech, Axonyx has been pushing the development of Phenserine right along, discovering potential new ways it helps slow AD. Relisting on the Nasdaq certainly helped, along with several infusions of cash from investors, including a million-dollar milestone payment from Serono (NYSE:SRA).

But I think one of the main catalysts to the 13-month climb out of penny-stock purgatory to high single-digit heaven is the discovery that Phenserine seems to reduce the production of beta-APP (amyloid precursor protein) and beta-amyloid peptide -- at least in mice. Researchers think that reducing the levels of these proteins is key to reducing the tangles of proteins, or amyloid plaques, that characterize AD.

If this finding holds up, Phenserine would be the first in its class. Beforehand, in 2001, the compound was "only" thought to be an acetylcholinesterase inhibitor, in the same class as Pfizer's (NYSE:PFE) Aricept, Shire Pharmaceuticals (NASDAQ:SHPGY) and Johnson & Johnson's (NYSE:JNJ) Reminyl, and Novartis' (NYSE:NVS) Exelon. As such, it seemed that investors were not impressed in 2001 by a "me-too" drug, but now they're singing a different tune. In fact, with the building stock price and enthusiasm, private investors gobbled up $75 million of stock and warrants that the company has issued over the past four months.

The company's Phase IIB and Phase III trial data for Phenserine should be coming out by the end of the year. At best, the trials will show that inhibiting amyloid production coupled with inhibiting acetylcholinesterase makes for a better drug. At worst, assuming that the earlier data hold up, there will be another acetylcholinesterase inhibitor on the market. Given the huge market potential for drugs to treat AD, and the company's small enterprise value (about $250 million), Axonyx might be worth a second look for risk-tolerant biotech investors.

Last week, I wrote that Pfizer's Lipitor is coming off patent in 2006. Pfizer was granted a patent extension until 2009. There are challenges to that claim, but as several readers pointed out, that's the current earliest expiration date, unless it is reversed in court. It does not change my thesis that Lipitor sales will be affected in 2006 as other statins come off patent, and that Pfizer, along with the other pharmaceutical companies mentioned, is searching for new formulations and drug combinations to stem the future revenue losses.

David Nierengarten, Ph.D., works with a biotechnology venture capital fund. He often contributes to, is an active member of the TMF community as DavidMN, and enjoys the Biotechnology discussion board. He owns shares of Johnson & Johnson.