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AtheroGenics (AGIX) is rapidly approaching the time when results from its lead program against Atherosclerotic plaque will be available to the investing public. Handicapping the results of this trial has been a favorite pastime of investment pundits as the stakes are so high. A successful trial could push the stock into the stratosphere; it is currently almost at a 4 year low of under $11. Some analysts are predicting over $50 if successful. An unsuccessful trial would result in a stock price under $5. The lead compound gaining all the interest is AGI-1067, which is being evaluated in the pivotal Phase III ARISE clinical trial as an oral therapy for the treatment of atherosclerosis, in collaboration with AstraZeneca. Market size for a successful compound is in the tens of billions of dollars.

Our view is that there is less than a 50% probability that there will be a clear benefit from the drug over placebo. Benefit is measured in the trial by reduction in the risk of cardiac events including death, heart attack, stroke, bypass surgery, angioplasty or hospitalization. The trial involved 6,000 patients who have had heart attack or unstable angina. It is difficult to easily predict Phase III results based on earlier trials as these trials did not have a reduction in events as their goal. On the positive side, however, we should remember that AGI-1067 is a derivative of probucol which had induced regression of carotid atherosclerosis in the Fukuoka Atherosclerosis Trial [FAST] as well as having a marked reduction in myocardial infarction [MI] in the same trial. However, prolongation of the QT interval (a red flag with the FDA) was a long-term safety concern with probucol (not the case with AGI-1067) which reduced its potential as a major therapeutic.

AtheroGenics has a number of times reiterated its guidance that the ARISE top line results will be available early in 2007. The Company has further refined its guidance in early January to indicate that the results will likely be available no sooner than late in the first quarter. The ARISE data base remains blinded and the Company continues to work towards its goal of presenting the results at the American College of Cardiology Scientific Sessions in March 2007. Since issuing this last guidance the stock has dropped continuously although we saw increasing volume on Monday with a more than 5% increase in price. This increase is part of a recent upward trend.

Atherogenics has a very experienced management ream that has extensive experience in developing similar drugs in large pharmaceutical companies and in addition a strong partner in AstraZeneca who has a lot to lose if this trial is not successful. A lot of people, both investors and prospective patients, are hoping for its success!

One of the safer ways to play this stock is with options; AGIX has a good field of options and these have seen a lot of activity over the past few months. This trend is likely to continue. AGIX looks washed out at present with low investor expectation which in itself is a possible good reason to consider a long investment albeit a speculative one. Short interest is extremely high at 49% another indicator of overall investor sentiment. The stock is wound up like a spring which means a large upside if the long shot pays off.

AGIX 1-yr chart

AGIX

Disclosure: Author has no position in AGIX.

Source: AtheroGenics: The Clock Is Ticking