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Rexahn Pharmaceuticals (RNN) is a small cap cancer biotech that has seen its stock price decline in recent weeks to attractive levels . Its profile gives an idea of the key sectors it is involved in; Rexahn Pharmaceuticals, Inc., a development stage biopharmaceutical company, engages in the discovery and development of treatments for cancer and other disorders of central nervous system. The company’s product candidates include Archexin that is in Phase II clinical trials for the treatment of renal cell carcinoma, glioblastoma, ovarian cancer, stomach cancer, and pancreatic cancer; Serdaxin, which has completed Phase IIb clinical trial for the treatment of depression and Parkinson’s disease.

The stock is down 50% over the last month on the heels of financing that was priced at 33c, raising $6m in proceeds and putting added selling pressure on the stock in an active tax selling season. However, at its current stock price of 29c for the patient investor some very nice upside can be seen in the coming months.

In recent days we have started to a witness another buying frenzy again in small cap biotech stocks. Today YMI Biosciences (YMI) was bought out by Gilead (GILD) and yesterday we saw Somaxon Pharmaceuticals bought out for double on its stock price, something we mentioned in our previous article last month, Why Somaxon Pharmacueticals Should Be A Double From Here. The same double potential clearly exists here too for Rexahn.

Just last month Rexahn was trading in the 45-50c area and announced another financing deal with Teva Pharmaceuticals. Per the deal Teva will invest $750,000 to purchase Rexahn's common stock at 120% of closing price of common stock on the last trading day preceding the closing. This will complete the third closing agreed to by the parties in the Securities Purchase Agreement.

Teva has agreed to commit additional research funding for development of RX-3117. Under a new amendment to the Research and Exclusive License Option Agreement, Teva will have the right to file the IND for RX-3117 with the FDA. Teva is funding research of RX-3117 AND will be responsible for filing with the FDA. That should give potential buyers in the stock some positive views.

A quick look at the chart below shows that merely bouncing to last month's price level is a double. A bounce to the 200 day moving average at 45c would give a 50% move. Both of these are attainable in this market environment.

(click to enlarge)

We could go more into the Rexahn pipeline but the thing investors should look at it is this; Teva believes in Rexahn and is funding their drug research. Pay attention when large caps sniff around small cap biotechs. This is how YMI was bought out today.

With eight drugs in its pipeline and a recent financing complete, Rexahn should be set up for a nice rebound into 2013. A mere 50% rebound in the stock price would take Rexahn back to the level it was at last month. A double, from these prices, with small cap biotech stocks being bought out lately, is not a stretch. Biotech stocks that trade under $1 carry high risk but with that risk comes high rewards. All it takes is one success with a drug indication, or a buyout to send these stocks soaring. Teva appears to be committed to Rexahn and at 29c that makes this a value play investors should look closely at. In recent days we have seen many small cap biotech stocks explode in price such as ABIO BioPharma (ABIO) up 60% this week, and Cardiome Pharma (CRME) up 40% this week. These are two small cap biotech stocks to whet the appetite for the potential in this price range. Like all small cap biotech stocks Rexahn has risks but at a price of 29c with financing complete the upside rewards are very attractive!

Disclosure: I am long RNN. 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.

For the last year rumors of buyouts have been floated around on Biogen Idec, no surprise really given the constant pressure from corporate raider Carl Ichan.  Those rumors are likely pick up steam yet again after the earnings report from BIIB’s Tysabri partner ELN today.

 
Tysabri, the multiple sclerosis drug shared 50/50 with Ireland’s Elan Corp has been a torn in the side of Biogen for the last few years with infrequent reports of PML hammering the stock every few weeks. Tysabri is only the second drug ever pulled from the market by the FDA that was allowed back to market.  The stock soared last year on an expected buyout that eventually turned soar after cases of PML were reported.

Under the Tysabri agreement ELN has with BIIB should BIIB undergo a change of control (ie. merger or buyout) then ELN has the right to purchase BIIB’s 50% stake in Tysabri. In today’s Elan conference call ELN’s management team mentioned that Biogen Idec has approached them and offered $700m to purchase ELN’s right to the change of control clause. This large price tag for just the clause rights could suggest BIIB is about to merge or be bought and with Tysabri considered a lynchpin of any deal BIIB may be trying to tie up a potential deal breaker. Interestingly enough ELN mentioned that should there be a change of control at BIIB that JNJ has agreed to finance ELN’s purchase of Tysabri. The plot thickens. If news that BIIB has paid ELN surfaces you can bet a buyout of BIIB is just around the corner.

On Thursday Discovery Laboratories received another in a long line of rejections from the FDA and its stock price paid dearly, dropping 54% on Thursday. Was the drop warranted or is there more to DSCO than the bad news says?

With the business media and analysts all jumping on the same bandwagon and declaring the company dead there is opportunity for the beaten down biotech trader. If one actually reads through the DSCO press release you can see that DSCO looking to refocus on other late stage drugs, chief among them a different indication of their drug Surfaxin that was just trounced by the FDA. There is also an additional three Phase 3 drug trial underway as well as some promising clinical trials.

As of March 30, 2009 DSCO had $19m in cash and based on its last year’s cash flow statement they are burning on average $4m per quarter or $16m a year. In May DSCO was able to raise an additional $11m financing giving the company a nice cash cushion of approximately $30m, which based on its average cash burn, is enough to fund it through the next two years.

Trader should also remember the FDA saga Dendreon went through and their eventual FDA approval. Despite the bashings of traders and analysts alike there are many reasons to believe DSCO is a BUY down here at 50c and not a sell. Also, if we look to the trading action of DSCO after the first FDA rejection in April you will see the stock turned in these performances over the course of the last three months.

71c to $1.05 for a 48% gain

81c to $1.25 for a 54% gain

88c to $1.47 for a 67% gain

95c to $1.17 for a 23% gain

These were just the trading gains in DSCO over the last three months! Biotech stocks are made from hope and hype and DSCO has all those ingredients. The next news event to expect from DSCO, from its Wednesday press release is a reply to the FDA, which if past stock action is any indication, will lead to a nice pop in DSCO and make for some easy gains for the patient trader!

“With respect to ongoing regulatory activities for Surfaxin, Discovery Labs has submitted proposed corrections and additions to the formal FDA minutes. Following finalization of the meeting minutes, Discovery Labs will determine its next course of action, which may entail further interaction with the FDA to assess whether Surfaxin approval can be gained without additional clinical trials”

 Disclosure: Long DSCO