Alexza Pharmaceuticals (NASDAQ:ALXA) first caught my eye back in April as a run up play into their May PDUFA. It was a solid play for some momentum into the catalyst and quick profits were grabbed. Unfortunately for those who held too long, a CRL was issued one day early for "manufacturing issues." This was their second CRL as the price dropped to about 0.375 (3.75 adjusted after the reverse split).
After a continued bleed down to a low of $2.55, it seemed to be getting just to good to be true for a cheap entry. To help you understand why I believe ALXA will be one of the highest percentage gainers in 2012, I put together a timeline on its history so you can get a better understanding for the company and their situation, but first, here is a little about Alexza Pharmaceuticals:
Alexza Pharmaceuticals, Inc., a pharmaceutical company, engages in the research, development, and commercialization of novel proprietary products for the acute treatment of central nervous system conditions worldwide. Its product candidates are based on a proprietary technology, the Staccato system, which vaporizes an excipient-free drug to form a condensation aerosol that, when inhaled, allows for rapid systemic drug delivery. The company's lead product candidate includes ADASUVE (Staccato loxapine) for the acute treatment of agitation in adults with schizophrenia or bipolar disorder. Its other product candidates under development comprise AZ-007 (Staccato zaleplon), which has completed Phase I clinical trials for the treatment of insomnia; and Staccato nicotine that is in pre-Phase 1 clinical trials to help smokers quit by addressing both the chemical and behavioral components of nicotine addiction by delivering nicotine replacement through inhalation. [Source: Yahoo Finance]
Now that you know a little about the company, here is their history of important events:
- 10/11/10- Received first CRL for AZ-004 because of a safety concern from a Phase III trial
- 5/3/11- Company does $16.1 Mil financing at $1.35 (now $13.50) and warrants at $1.775 (now $17.55)
- 8/5/11- Resubmits NDA for ADASUVE
- 12/12/11- Company has FDA advisory panel
- 2/4/12- New PDUFA date
- FDA extends PDUFA date to 5/4/12 because the company submitted an updated REMS on 1/10/12, which the FDA considered a 'Major Amendment' (FDA can extend a PDUFAwhen a company submits a major amendment within 3 months of the PDUFA date)
- 2/17/12- The company does a $20.4 Mil Financing which issues 44 Mil of stock at 0.50 and 44 Mil warrants exercisable at 0.50 (Both at $5.00/share now)
- 5/3/12- Receives CRL from FDA for 'Manufacturing Issues' one day early. Puts out PR at 5:30 est.
- 6/13/12- Company does 1:10 reverse split
- 6/22/12- Announces resubmission of NDA for ADASUVE
- 7/5/12- Receives PDUFA date of 12/21/12 for ADASUVE
- 7/23/12- Enters into a 24 month ATM agreement with Azimuth. Company may sell up to $20 Mil of stock.
So, as you can see above, ALXA's new PDUFA date is 12/21/12 and I am excited to play this one for a second time because:
- Cash: With the $20 Mil ATM agreement with Azimuth, the company should have enough cash to avoid a financing until after the PDUFA, which as you saw with Exelixis Inc. (NASDAQ:EXEL), can be devastating. As of 12/31/11 they had working capital of $27.5 vs $34.9.
- Market Cap: Company has a current $48.4 Mil market cap. This leaves huge upside potential as the market cap could nearly double and only be back to where it was before the 2nd CRL. At the current price of $4.05, the company has a $52.9 Mil market cap. At the run up peak for the May 4th PDUFA, the market cap hit $90.1 Mil at $0.76 ($7.60 adjusted).
- Low Float: The company did a 10:1 reverse split effective 6/13/12 which greatly reduced the amount of shares in the float to 11 mil. 27.47% of those are institutionally owned, which leaves even less for retail traders. Since it has a lower float, it takes less buying power to move the stock higher, and can jump to significant gains much easier than others. $HZNP is a great example of the last great low float run up.
- Short Interest: Company has a fairly large short interest at 14.62%. Once this starts to run, shorts will run to the exits, cause more forward momentum.
- High Odds of Approval: According to the company's CEO, "in this CRL, there were no new clinical or safety issues identified, and there were no other identified deficiencies." This means that the there was nothing wrong with the drug from a clinical standpoint, only light manufacturing issues, which leads to high odds of approval.
- Seeking European Approval: Not only does the company have the US PDUFA on 12/21/12, but it is up for EU approval in December 2012. This second catalyst brings some extra attention to the run up.
- Institutional/Insider Holdings: Before the last PDUFA run, insiders bought stock in the open market, and I would not be surprised to see a few insiders buy again this time. There are about 45 institutions holding the company. 26% of shares are held by insiders or 5% holders, and 37% of shares in the float are held by institutions or mutual funds.
Alexza Pharmaceuticals is poised for a great run up into two catalysts in December 2012. Given the details above, I give it high chances to become a huge percentage runner just like we recently saw with a similar low-float set up Horizon Pharmaceuticals (NASDAQ:HZNP).
Disclosure: I am long ALXA, EXEL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.