Alexza Pharmaceuticals (NASDAQ:ALXA) is an up-and-coming biotech company founded by renowned biotech entrepreneur Dr. Alejandro Zaffaroni. Alexza's focus is on improving drug delivery through its proprietary Staccato platform technology. It has been a good year for Alexza, with the company reporting positive clinical trial data on several compounds. Alexza was also selected to join the Nasdaq Biotechnology Index. Alexza's President and CEO, Thomas King, discussed the company's technology and drug pipeline with the Fool's Brian Lawler.

Brian Lawler: How do you grow profits in the future?

Thomas King: We expect to develop into a fully integrated specialty pharmaceutical company. We intend to establish a specialty sales force in the United States, focused in the therapeutic area of psychiatry, and to commercialize AZ-002 (Staccato alprazolam) for the treatment of acute panic attacks, and AZ-004 (Staccato loxapine) for the treatment of agitation in schizophrenics. We intend to partner these products for sale outside of the U.S. In addition, we expect to partner for sale worldwide AZ-001 (Staccato prochlorperazine) for the treatment of migraine headache and other drugs that we bring forward in clinical development, including AZ-003 (Staccato fentanyl) for the treatment of acute pain, and AZ-007 (Staccato zaleplon) for sleep disorder.

A key element of our business strategy is that we plan to maintain manufacturing rights for all of our products. We expect that this will allow us to achieve the efficiencies of volume manufacturing and also a positive transfer price on our products that are sold by partners.

BL: What is the biggest misconception about your business/key product?

TK: The biggest misconception about Alexza is that we are "just a migraine company." In fact, we have filed four INDs in less than three years and are on track to file our fifth IND before the end of 2007. Alexza is a multi-dimensional pharmaceutical development company, utilizing our Staccato technology.

BL: Will Alexza only work on creating vaporized versions of generic compounds, or are plans in the making to partner up and work with branded products as well?

TK: To date, all of the product candidates that we have in development are generic compounds. However, all but one of the compounds is actually being studied for different indications, based upon the improvements that the Staccato technology brings to a compound. We expect that within the next few years we will enter into partnerships with pharmaceutical companies to put their patented products on our Staccato system.

BL: Why haven't other companies that work in this particular part of the drug delivery space, like Nektar or Mannkind, tried to do what Alexza is doing?

TK: At Alexza, we have focused on using our technology for the delivery of small molecule compounds for the treatment of acute and intermittent conditions. Our technology delivers pure drug without any additives. Other inhalation-based companies have focused on insulin, which is a large molecule that is administered on a frequent and chronic basis.

BL: Can you give some other examples, besides your current pipeline compounds, of drugs that could benefit from pulmonary delivery versus their current form of dosing and why there will be a market for these compounds?

TK: We have screened over 400 compounds with our technology, and approximately 200 have exhibited initial technical feasibility. Examples of drug categories that we believe could benefit from delivery with our Staccato technology include diuretics for the treatment of congestive heart failure, antihistamines, anticonvulsants, antidotes, ED drugs, drugs to treat Parkinson's disease symptoms, antiemetics, and nicotine.  

BL: Diabetes seems to be as large a market opportunity for an inhalable drug as there is, and Pfizer is one of the best sales and marketing companies, so why have inhalable insulin sales been so weak thus far? How will Alexza ensure this weak market response doesn't happen with vaporized loxapine in the similarly large schizophrenia market?

TK: We are not experts in the diabetes market, but one observation is that the methods of delivering insulin via injection have become progressively more patient-friendly, easy to use, and efficacious over the years. This may be impacting the perceived advantages of inhalable insulin.

The key advantages that our technology provides are speed of onset, ease of use, consistent particle size and dose, and broad applicability. We have demonstrated IV-like pharmacokinetics, which means that when a patient uses our technology, the drug enters the blood stream as quickly as if the patient had an IV injection of the drug, generally achieving peak plasma levels of [the] drug in two to five minutes. In treatment of acute and intermittent medical conditions such as agitation in schizophrenic patients, migraine headache, acute panic attack, and breakthrough pain, we believe that speed of onset and precision of drug dose for the therapy will be a competitive advantage.

BL: Since Alexza is working on genericized drugs, what sort of premium price to generics will Alexza be able to achieve with [its] compounds? Or will most future revenue come from selling the Staccato inhaler?

TK: Our business model is based on an assumption of cost of goods for our devices of under $5 per unit at volume manufacturing, and we need to satisfy ourselves that we will be able to achieve a sales price in excess of $15 per unit to proceed with a development program. In all of our programs under development, we believe that we will be able to achieve these unit prices based on the advantages that our technology delivers: rapid onset, ease of use, consistent particle size, and consistent dose.

BL: How early could meaningful revenues from ... lead compounds start coming in? When could they hit the market?

TK: We have consistently stated that we do not expect any product revenue before 2011 at the earliest. Drug development is time-consuming and risky, and it is very difficult to predict with any accuracy the time course of development. We believe that the fact that we have five product candidates in development and that all of our product candidates use generic drugs that are well-characterized reduces some of this inherent drug development risk.

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Fool contributor Brian Lawler does not own shares of Alexza. The Fool has a full disclosure policy.