Advanced Life Sciences Attractive After Recent Sell-Off

The recent sell-off in shares of Advanced Life Sciences (ADLS) represents an attractive entry point for micro-cap biotech investors. The downturn occurred after the company released clinical trial data for its lead antibiotic drug candidate called cethromycin in the treatment of community-acquired pneumonia (CAP). In the first of two pivotal Phase 3 trials for CAP, cethromycin achieved non-inferiority to the related antibiotic Biaxin.

Specifically, after seven days of treatment cethromycin cured 91.5% of patients with CAP, while Biaxin cured 95.9% of patients. Based on the study design, a statistical analysis concluded that cethromycin was not inferior to Biaxin. The company noted that the Biaxin cure rate was the highest ever observed in a clinical trial for CAP. Lazard Capital analyst Matthew Osborne maintained his "Buy" rating on Advanced Life, noting that while the safety of both drugs were similar, cethromycin offered a cleaner safety profile when it came to liver toxicity.

Results from the second pivotal Phase 3 CAP study are expected by early July at the latest, and the Lazard analyst believes the company will also announce a drug partnership with another company before filing a NDA for cethromycin later this year. Shares of Advanced Life had soared in early May when cethromycin was shown to be more effective in a primate study at preventing inhalation anthrax infection as compared to the current standard of care ciprofloxacin.

Given the potential for several positive near-term catalysts, shares of Advanced Life represent an opportunity for micro-cap biotech investors after the recent, unwarranted sell-off to less than $2.50 per share. Pending results from the second Phase 3 CAP trial should support the filing of a NDA and a partnership for cethromycin, providing the company with adequate liquidity and a clear path to FDA approval for its lead drug candidate.

Disclosure: Author is long ADLS

Comments

[appledeadmoney:]

Good breakdown on the study involving the company's premier drug candidate, cethromycin. However, my pharma background makes me skeptical about any real positive catalysts coming from an anticipated launch of this particular antibiotic.

Although the efficacy data appears positive, the safety data may become a much larger concern as cethromycin moves closer to market. Cethromycin is a ketolide. One only has to look at the first ketolide (Ketek) launched two years ago by Sanofi-Aventis. Ketek was probably one of the most powerful and effective antibiotics ever brought to market. Although the drug had a fairly solid launch, it was probably never going to be a huge blockbuster. Hurting the drug even more was the safety issues that surfaced last year. The FDA raised concerns regarding deaths and liver toxicity which eventually spelled the demise for the promising young antibiotic.

With this as a recent example, I would not be keen to take bets on small biotech companies banking on an antibiotic for its first big splash in the world of pharmaceuticals. First of all antibiotics are usually not cash cows and doctors are reserved about prescribing a new antibiotic. Factor in Ketek's recent woes and the reservations could be even stronger.

I would need to be confident of the product pipeline at Advanced Life Sciences (ADLS) in order to invest in it. I would not be buying the company based on the hype surrounding cethromycin. The oncology and inflammation drugs would be my focus regarding this particular stock, and they are not far enough along in the FDA process to garner my attention.

2007 Jun 30 11:24 PM