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With a diverse clinical program looking for new treatments in several different and key central nervous system disorders, Adeona Pharmaceuticals, Inc. (AEN) has great potential and some of those programs look quite likely move into a commercial deal similar to the one the Ann Arbor-based drug development firm locked up earlier this year. That was a $17.5 million deal with Swedish drug maker Meda, but there is likely to be more where that came from.

"The drugs are extremely exciting," says James Kuo, chairman and CFO of Adeona Pharmaceuticals. "They address the needs of large pharma."

Adeona Pharmaceuticals has five drugs in various stages of development and hopes to form another similar corporate partnership or two this year. It’s too bad their depressed stock price doesn’t reflect the progress they are making in the clinic and at their laboratory.

In fact, we’ve noticed that they are starting to become a little more active in their efforts for visibility (CEO is scheduled to start making the rounds and presenting at more conferences, for instance) and maybe that will resonate more with those who follow the company and it should certainly attract new followers and investors to the stock.

Adeona Pharmaceuticals is developing innovative medicines for the treatment of serious Central Nervous System (CNS) diseases. Their primary strategy is to license product candidates that have demonstrated a certain level of clinical efficacy and develop them to a stage that results in a significant commercial collaboration – basically this means they develop their product candidates to attract large pharmaceutical partners with deep pockets.

Those looking for a good trade, need to look elsewhere. We see this as a low-risk, nice reward investment candidate. They have a robust pipeline that includes product candidates in spaces that represent some big markets and unmet needs: a prescription medical food for Alzheimer’s disease, and four drugs for multiple sclerosis, fibromyalgia, age-related macular degeneration and rheumatoid arthritis.

In May 2010, Adeona demonstrated their ability to attract a partner when they entered into a $17.5 million corporate deal with Sweden-based Meda AB for the development of their product candidate flupirtine for the treatment of fibromyalgia. They received an up-front payment of $2.5 million and are entitled to milestone payments of $5 million upon filing of a New Drug Application with the FDA for flupirtine for fibromyalgia and $10 million upon marketing approval. Adeona is also entitled to receive royalties of 7% of net sales of flupirtine approved for the treatment of fibromyalgia.

Below is a listing of the diseases and associated product candidates that they are working on. For those with nearer term potential additional comments have been included:

Treatment of fibromyalgia – Effirma (flupirtine):

  • Partnered with Meda AB
  • In the press release about the corporate partnership, the company stated that Meda estimates the US market for fibromyalgia to be near $1 billion at the time of potential launch of flupirtine

Dietary management of Alzheimer’s disease and mild cognitive impairment with a prescription medical food – Zinthionein (zinc cysteine):

  • Enrollment is 100% complete in the clinical trial evaluating Zinthionein in patients with Alzheimer’s disease and mild cognitive impairment
  • All 60 patients should complete their 6 month treatment by the end of March 2011
  • They anticipate top-line clinical study results should be available after that.
  • If this treatment is clinically successful, they expect to make the Zinthionein product commercially available as a prescription medical food for patients.
  • The classification “prescription medical foods” is not heard about often, but in quick internet searches, prescription medical foods: 1) do have to demonstrate validated effectiveness using double-blind controlled clinical trials, 2) do have to have all of its ingredients designated as Generally Recognized As Safe (GRAS) by the FDA and 3) do need a prescription from a doctor.
  • They have 5 peer-reviewed scientific articles that have recently been published supporting the role of copper toxicity and zinc deficiency in patients with Alzheimer’s disease and mild cognitive impairment.

Treatment of relapsing-remitting multiple sclerosis in women – Trimesta (estriol):

  • 115 of 150 patients have been enrolled in the clinical trial evaluating Trimesta in women suffering from relapsing-remitting multiple sclerosis.
  • On their 3rd quarter 2010 conference call, the CEO said that they anticipate full enrollment by the second half of 2011; however, they give no assurances.

Treatment of age-related macular degeneration – ZincMonoCysteine (zinc-monocysteine):

  • They continue additional work on manufacturing and scale-up of zinc-monocysteine to support the further nonclinical testing and cGMP manufacturing.

Treatment of rheumatoid arthritis – dnaJP1 (hsp peptide):

  • They are currently conducting further preclinical activities and planning the clinical development strategy. In addition to drug development, AEN purchased a CLIA-certified diagnostic laboratory in July of 2009 (now called Adeona Clinical Laboratory) to measure metabolic serum zinc and copper levels. But, according to their 3rd quarter 2010 conference call, the business has really grown – the client base has increased from 5 to 9 health service providers and earlier this year the in-house diagnostic testing services were expanded to include a full array of microbiology testing. They said that these significant changes represent a 567% increase in laboratory revenues for the quarter ended September 30, 2010, compared to the same quarter in the previous year.

As of June 30, 2010, AEN emerged, for financial reporting purposes, from being a development stage enterprise with a $979,782 profit in second quarter of 2010, mainly due to the $2,125,000 of net license revenue received as a result of the Meda AB sublicense agreement.

Total net revenues for the three and nine months ended September 30, 2010, were $289,898 and $2,544,825, respectively, compared to $51,085 for both periods in 2009. The increase in total net revenues for the three months ended September 30, 2010 reflects a 567% increase in net laboratory revenues from the three months ended September 30, 2009.

The increase in total net revenues for the nine months ended September 30, 2010 reflects $2,125,000 of net license revenue received as a result of the Meda AB sublicense agreement of flupirtine for fibromyalgia during the second quarter of 2010 and increases in net laboratory revenues for expanded client services provided by Adeona Clinical Laboratory from the nine months ended September 30, 2009.

As of September 30, 2010, they had approximately $3.3 million in cash compared to approximately $2.7 million on December 31, 2009. And as reported in their 3rd quarter 2010 filing, their cash at October 31, 2010 was approximately $3.1 million.

In November 2010, an announcement came out that they were awarded two grants totaling $488,959 under the Qualifying Therapeutic Discovery Project Program to support their Alzheimer’s disease and multiple sclerosis programs currently in clinical testing. This was a pretty good amount for two clinical programs; Dr. Kuo even put it into perspective on their quarterly conference call when he said “these grants represent approximately 38% of our total research and development expenses based on trailing twelve month calculations. These grants are highly significant for us from an economic perspective, and in comparison to many of our industry peers, we appear to have covered more of our R&D spend.”

When it comes to risk-vs-reward, an investment in AEN seems like a smart play with multiple shots on goal. Best of all, the price appears to have bottomed out at these levels. In listening to Dr. Kuo on various webcasts, conference calls and presentations, things seem to be moving along and current longs seem happy with everything but stock performance- largely due to the fact that they have remained mostly undiscovered.

AEN has demonstrated success with corporate partnering, they have started actively promoting the progress and potential of the clinical programs. They have expanded current revenue potential with their own clinical lab and we see them diligently trying to preserve cash.

With several potential product candidates in the pipeline – it not only seems likely they should attract additional partners, they are actively working on it.

I’m keeping my eye on the prescription medical food, Zinthionein, for the dietary management of patients suffering from Alzheimer’s disease and mild cognitive impairment as it seems to have the most near-term milestone (Q2 or Q3 2011) and a different regulatory path through the FDA, which as we all know, can take a drug candidate years and years.

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Disclosure: Author holds no Position

Source: Adeona Pharmaceuticals Addresses the Needs of Large Pharma