Rexahn Pharmaceuticals (NYSEMKT:RNN) is developing drugs for cancer, sexual dysfunction and central nervous system disorders and has three experimental drugs in Phase II clinical trials. Several investors wrote me to request an update on this company.
Based on my research, I believe Rexahn offers investors far greater upside return than downside risk. Given the recent stock price trading range in the $1.20's, Rexahn is now a bargain buy in my opinion. The following commentary is a quick update on Rexahn. Investors can read my prior Rexahn research report here for a detailed analysis on the company.
1) In March 2011, Rexahn stock price sold off from the $1.50 range after Rexahn announced (here) it had received commitments from certain institutional investors to purchase an aggregate of $10 million of Rexahn’s securities in a registered direct offering.
Rexahn received net proceeds of approximately $9.32 million after deducting placement agent fees and other offering expenses. Rexahn sold an aggregate of 8.33 million shares of its common stock and warrants exercisable for 3.33 million additional shares of its common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.4 of a share of common stock. The purchase price per unit was $1.20.
The warrants to purchase shares of common stock are exercisable beginning six months following issuance at an exercise price of $1.50 per share and will expire on September 30, 2016. The proceeds from the transaction will be used for further development of the Company’s lead clinical programs, including the funding of Rexahn’s Phase II clinical programs for Serdaxin®, Zoraxel™ and Archexin®, and other general corporate purposes.
2) Also in March 2011, Rehaxhn reported (here) Dr. Chang H. Ahn made a personal decision to give up his CEO title and serve as the company's chief science officer. Rexahn has begun a search for a new CEO and hopes to name one by September. Ahn will remain CEO until then. He will also continue to serve as chairman of the board.
"I founded this company as a personal mission to develop new medical treatments for cancer. Going forward, I believe I can best contribute to the success of the company as its chairman and CSO," Ahn said in a statement.
3) This year, Ahn has aggressively increased his stock holdings (here) in Rexahn. On April 1, he purchased 320,846 shares at $1.22 (cost of $391,432). On May 18, he purchased 1,008,078 shares at $1.31 (cost of $1,320,582). Insiders currently hold around 37% of Rexahn, which includes the recent stake increase by the CEO now holding a total 11,338,924 shares, or about 14% .
4) Rexahn has made considerable progress in implementing the research and development phases of its strategic plan: The major candidates are beginning or should begin critical Phase II clinical trials this year, believes Leonard Bogner, who has recently updated his research report on Rexahn. I encourage investors to read (here) his price targets: 6-12 month target price to be raised to $2.50-3.00 per share (from $2.00-3.00 per share) and Bogner continues to project a long-term price target of $7.50-10.00 per share. He has put together a detailed projected earnings assessment that I consider to be accurate.
In short, we have the following points: The CEO buying shares is a very encouraging sign; news of a new CEO will likely drive the price upward; the recent capital raise is sufficient for clinical trails; Rexahn Serdaxin’s Phase IIb clinical trial enrollment is on schedule; Rexahn is on track to report preliminary results by the end of this year; and the prospects for Rexahn detailed in my prior research report -- along with the updated Bogner report -- clearly provide good reasons to hold Rexahn in your portfolio for a rewarding investment.
Disclosure: I am long RNN