If you follow stocks on explosive runs, you have already found NitroMed (NASDAQ:NTMD). In 10 trading days, it has increased a heart-pounding fourfold.
NitroMed's IPO in November left shareholders with little enthusiasm. As former Fool Tom Jacobs reported at the time, "NitroMed shares were offered at $11 and closed down 16% to $9.29. They slid another 8% in morning trading today."
NitroMed continued to implode -- all the way down to $5.70 in July. Then there was the news that the phase 3 clinical trial for the company's lead drug, BiDil -- a treatment for African-Americans with heart failure -- was being halted because the reported benefits were so compelling. Ah, those are words that would make an investor's heart race with joy.
And off to the races went NitroMed stock. One problem, though. The company likes the results, but the Food and Drug Administration has not approved the drug for sale, and the trial results will not be available until the fourth quarter.
Could NitroMed make a 42-fold jump, as non-lethal weapons manufacturer Taser (NASDAQ:TASR) did over a 52-week period? It is not likely.
Taser was a unique combination of no competition and only 10 million shares outstanding. By comparison, NitroMed has 26 million shares outstanding, and BiDil is a combination of two already available drugs -- Isosorbide and Hydralazine. While investors seem to be anticipating big margins and explosive growth, the company has yet to show that it can develop a successful sales force and deliver high margins.
While NitroMed might not be the next stock to soar like Taser, it is hardly a one-trick pony. The company has agreements with Merck (NYSE:MRK) to develop nitric oxide COX-2 inhibitors and with stent giant Boston Scientific (NYSE:BSX) to develop nitric-oxide-coated cardiovascular stents.
Thanks to its IPO, NitroMed is cash-rich -- with net cash of $70 million. The company is also quickly building its resources in anticipation of a 2005 product launch. For example, an executive from Bristol-Myers Squibb (NYSE:BMY) was just hired to lead marketing and sales efforts.
What is likely is that NitroMed will continue to lose money through 2005. Launching products while keeping the pipeline moving is expensive.
Merck's a Motley Fool Income Investor holding. Take a free, no-obligation trial to learn more.
Fool contributor W.D. Crotty owns shares of Boston Scientific, but not of any of the companies mentioned here.
