Over the past 12 months, shares of biotech start-up Rexahn Pharmaceuticals
The stock's most recent boost came from Teva Pharmaceutical
On the one hand, you can view Teva's investment as a vote of confidence in Rexahn. The latter company may have almost no revenue of its own at present, but it does have three drugs already in Phase II clinical trials:
- Archexin, a cancer drug, would compete with rival therapies by Bayer and Onyx
and another from Pfizer (Nasdaq: ONXX) if ultimately approved. (NYSE: PFE)
- Serdaxin, an anti-anxiety drug, claims to be a better alternative than existing products such as Pfizer's Zoloft, Eli Lilly's
Prozac, and GlaxoSmithKline's (NYSE: LLY) Paxil. (NYSE: GSK)
- Finally, Zoraxel is a sexual dysfunction drug that claims broader effects than either Lilly's Cialis or Pfizer's Viagra.
The drug attracting Teva's greatest interest, though, is "RX-3117," a new product targeting colon, lung, and pancreatic cancers that recently won patent protection in Europe. Perversely, this drug also lies at the core of Rexahn's bear thesis.
The company says says it will use Teva's investment to fund further research and development of RX-3117. But based on its most recent financials, Rexahn already had $16.4 million in the bank, and no debt. At its current rate of cash-burn, that should have been enough to fund operations for at least a couple of years. If Rexahn finds it necessary to add additional funds now, we could soon see the company's cash consumption accelerate.
Rexahn's run-up is not without justification. The company does have a number of irons in the fire, and a strong partner in Teva. That said, its products are aimed at an already crowded marketplace dominated by larger, better-funded competitors. And if I'm right, Rexahn's own financial position may be about to undertake some significant changes. Remember that before you invest in this moonshot.
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Fool contributor Rich Smith does not own shares of any company named above. Pfizer is a Motley Fool Inside Value pick. GlaxoSmithKline is a Motley Fool Global Gains recommendation. The Fool owns shares of GlaxoSmithKline and Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.