A Long Shot In The Lupus Market Gains Attention

Anthera Pharmaceuticals, Inc. (NASDAQ:ANTH), the $112 million market cap company, was up nearly 23% on heavy volume to close at $2.74 Friday. This inflammation specializing biopharmaceutical has had a rocky 2012, but is taking aim at Large Pharma heavy hitters in the autoimmune arena. It was initiated June 13th with a market outperform rating and a $4 price target by JMP Securities. The company's key clinical product, Blisibimod, is a Phase IIb antagonist of the BAFF cytokine which reduces B-cells associated with autoimmune diseases such as lupus, rheumatoid arthritis and Graves' disease.

The risk of an Anthera investment

Trading above $6 in early March, this stock suffered a huge loss when it announced it was ceasing its Phase III Vista-16 heart disease trial for its Varespladib agent. Now, all the eggs are in the Blisibimod basket. Making things more difficult is the questionable lupus market, for which its PEARL-SC Phase IIb study is designed. Human Genome Science (HGSI) and GlaxoSmithKline's (NYSE:GSK) Benlysta, as many know, became the first approved Lupus drug in over 50 years in 2011. Benlysta sales in Q1 2012 were just north of $30 million meeting resistance with high cost and limited insurance coverage. Further, the lupus market, estimated at a potential $1.3 billion a year by 2015, is one rife with competition. Large pharma heavy hitters Bristol-Myers Squibb (NYSE:BMY), Merck (NYSE:MRK), and Eli Lilly (NYSE:LLY) each have late stage lupus drugs in development to serve the estimated 5 million people worldwide with the disease. Unlike Anthera, these companies have the luxury to bleed the cash necessary to sustain development, trials and commercialization of a drug.

The upside of speculation

The stock is up sharply on nearly triple its average volume and seems to have broken resistance. Blisibimod offers options for treatments in a variety of autoimmune diseases, meaning a mixed result study won't kill the drug as was the case with Varespladib. Further, as a peptidbody, the company holds unique IP in the market on this potentially wide reaching agent. Blisibimod offers near-term catalyst in the market with PEARL-SC Phase IIb data coming in Q4 2012. Interest especially lies with future development of trials for additional B-cell related diseases for which its IP offers opportunity.

Speaking of IP, while Anthera is no Human Genome in terms of its pipeline or history, its angle on inflammatory/autoimmune diseases may make it an interesting acquisition for a larger pharmaceutical company. Analysts and markets alike have seen GSK's bid for HGSI as a positive for ANTH.

What's an investor to think?

An investment in ANTH is obviously a speculative risk in a development stage company with a recent black eye for its failed Varespladib. Cash burn is certainly an issue for this company and a share raise is a possibility should the stock continue to see gains. Assuming Anthera hangs on to market interest and continues to produce solid data from its PEARL-SC trial, it should tic up and maintain speculation as a buyout target at best or a potential partner to a large pharma player at least.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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