Last week, Memory Pharmaceuticals (NASDAQ:MEMY) reported a first-quarter loss of $8.9 million on revenues of $2.7 million, ending the quarter with enough liquidity to fund operations into the last half of 2008. The Motley Fool CAPS community is very bullish on the stock, with a total of 72 outperform ratings versus only seven underperform ratings.
More importantly, the company began a pair of phase 2a clinical trials for Alzheimer's disease for drug candidates MEM 3454 and MEM 1003. Preliminary data is expected from both of these trials in the fourth quarter. In March 2007, Memory announced disappointing results in a phase 2a trial of MEM 1003 for treating bipolar mania, although the drug was well-tolerated. Despite the setback, investors are eagerly anticipating the results of lead drug candidate MEMY 1003; the company plans a larger phase 2b trial by the first half of 2008 if it's shown to be effective.
I recommend that biotech investors take a cautious stance toward Memory because of the results for MEMY 1003 for bipolar mania; trying to find a treatment for Alzheimer's, which has eluded many companies both large and small; and the company's unproven drug candidates. The risks of investing in Memory at just under $2.50 per share outweigh the potential rewards, because the stock has traded below $1 per share in the last year. While I would like to see the company succeed in the trials and offer hope to patients with Alzheimer's, investors should cheer from the sidelines in this case.
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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. The Fool has a disclosure policy.
