Rexahn: The Undiscovered Biotech

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Includes: GSK, LLY, PFE, RNN, TEVA
by: M. E. Garza

On January 21st, 1990, the founder of Rexahn Pharmaceuticals (Amex: RNN) lost his sister to stomach cancer. What came of that tragedy has become a rare find in the space of thousands of publicly traded biotechnology and health care companies. A remarkable find that has gone almost completely undiscovered by most investors until now.

In short, this is a clinical stage biopharmaceutical company trading under a dollar on a major exchange (AMEX), with multiple catalysts to help its share price move significantly higher in the short term (this quarter), but as we dive deeper we see that there is so much more here. In fact it will require several articles to truly cover some of the amazing potential in the treatments and drugs in the company's pipeline. Three of those drugs have been labled potential blockbusters that have several big pharmaceutical companies lining up as interested partners.

In fact, already one partner - Teva Pharmaceuticals (NYSE:TEVA) - signed a development & commercialization agreement for RX-3117; a novel anti-cancer compound last September.

Teva, the world's biggest generics pharmaceutical company in the world, is scheduled to drop millions of dollars worth of milestone payments into this small but promising company's coffers this year alone. If two of those milestones - which are scheduled to take place around mid-year - are indeed reached as planned, RNN will receive around $4 million. In addition, according to contractual obligations Teva will also be forced to make an additional multi-million dollar investment into the company at 20% above market prices. The higher the shares are trading at that point, the higher the influx of capital from Teva's investment will be.

When it comes down to it, my "biotech geek squad" and I have been digging and researching this company since we stumbled upon it weeks ago and frankly, we felt a need to somewhat rush this report out for our readers. When we found out the company was doing a presentation at the12th Annual BIO CEO & Investor Conference at The Waldorf Astoria, in New York City this week, we knew then that it wouldn't remain undiscovered for long so we wanted you to beat the crowds and stake your claim of shares. And as you'll see, these are definitely shares you may want to hold on to.

The company, Rexahn, is named after Chang Ahn the doctor who founded the company after he saw his sister pass away due to cancer.

Prior to founding Rexahn, he held dual positions as both Expert Regulatory Officer and Laboratory Chief at the FDA Center for Drug Evaluation and Research.

"(My sister) was four years older than I and we were very close," Dr. Ahn explains.

At the time I was at the FDA and prior to that I was at the National Cancer Institute. My background was in cancer research and I had a vast network of prominent clinicians, you know?

And all those friends and all my network contacts couldn't help my sister. Through my sister's struggle, seeing her last stage suffering from stomach cancer, that was devastating.

Before that time I was confident that I was a good cancer researcher. But after that, I was really humbled. It was at that moment, that I decided to develop drugs toward the cure side, rather than just treating the illness. In fact, I prepared myself at the FDA because that is a really good place to learn how to develop drugs and I was able to gain lots of knowledge during my time there. Drug development is a multi-faceted art, actually, so I picked up lots of necessary skills and information. About ten years later, I was finally ready to start my own journey and that's when we started the company.

Dr. Ahn is an internationally recognized drug development expert in the therapeutic areas of cancer and other life-threatening diseases. He has over 20 years of scientific experience in pharmacology and biotechnology fields.

Since they founded the company, they now have 8 oncology drugs in the pre-clinical stage and also have three very interesting and unique drug discovery platforms that support the company's goals to generate first-in-class or potentially market leading products. Those breakthrough products have successfully completed the phase 2a or proof of concept phase. That makes those products very viable licensing targets for product hungry pharmaceutical companies.

RNN also has "multi-indication" therapeutics that positions it for long-term success. Their three market leading compounds have all shown excellent safety profiles and we will likely have to come back and talk about each of these at length in order to fully communicate just how ground-breaking these treatments truly are:

Serdaxin is a game-changing mood disorder drug in a huge market filled with major players (Pfizer (NYSE:PFE), Eli-Lilly (NYSE:LLY), Glaxo (NYSE:GSK)). It is being developed to treat depression and mood disorders. It is a dual enhancer of serotonin and dopamine levels in the brain. It has a mechanistic action unique from the widely used antidepressants called selective serotonin re-uptake inhibitors (SSRIs or SNRIs). These SSRIs/SNRIs may be effective in treating the negative mood state, but may not be effective in depression resulting from loss of positive mood state. There are high unmet needs in treating depression, including the need for drugs with faster onset of action, greater efficacy, and minimum side effects. Among antidepressants, SSRIs/SNRIs appear to be the leading therapy, but are only partially effective and have a 50% estimated response rate and up to 30% relapse rate.

Serdaxin aims to change all of that. In the next 4 years over $5 billion of the $11 billion anti-depressant market will come off patent protection and it means that RNN has perhaps the best shot at replacing those compounds and expanding the market for patients who did not do well on prozac or zoloft. In addition it appears Serdaxin also is a neuroprotector for Central Nervous System Disorders. Already there are some strong indications that its neuroprotector properties could help treat Parkinson's and Alzheimer’s diseases when detected early. If a partner is announced for this drug- as the company hopes- the stock price will rise dramatically and clinical trials for those two ailments would kick off as soon as this year.

Zoraxel for erectile dysfunction is a CNS-based sexual dysfunction drug that simultaneously enhances the levels of both serotonin and dopamine neurotransmitters in the brain. It is being developed as the first sexual dysfunction (SD) drug to have effects on all three phases of sexual activities, i.e., sexual motivation, erection and release. The company's initial focus will be male sexual dysfunction markets such as erectile dysfunction (ED) and and premature ejaculation (PE), but the drug is also showing some strong future applications in female sexual dysfunctions as well. Unlike Viagra and other SD drugs who only address blood flow issues, Zoraxel "makes you want to have sex." Keep in mind also that roughly half the patients who suffer from SD do not respond to Viagra. This drug candidate is also has multi-billion dollar blockbuster potential.

Archexin for Cancer: A first-in-class AKT Inhibitor for glioblastoma, pancreatic, stomach, ovarian, & renal cell cancers, as well as other solid tumors. Incredibly, the FDA granted orphan drug status in all 5 tumor types for this drug. It significantly reduces production of AKT protein via inhibition of AKT mRNA.

In preclinical studies, ArchexinTM significantly reduced AKT in cancer cells of many human solid tumors. Once again, a multi-billion dollar blockbuster in the making.

The company has a proprietary drug development platform addressing multiple disease indications which have incredible value as "separate businesses" to many other drug companies. This is yet another indication that the technology at RNN is very deeply seeded. In fact, some analysts who have looked at the company think that there is "too much here" for the company to develop on their own, so these drug development platforms could become a revenue generating backbone whose pieces could be licensed off to many companies throughout the pharmaceutical industry.

A testament to the science may be found in the fact that one of the top shareholders in the company is a top 5 pharmaceutical company in Korea. The company is said to own 9% of the outstanding shares.

Another investor is the largest Pharmacy Chain in Korea- which owns and manages 1500 pharmacies throughout the country. They own 20% of the shares.

Among the ranks of some of the bigger investors in the company, you will also find KT&G, originally the "Korea Tobacco & Ginseng Corporation." A leading tobacco company in South Korea with sales over two billion US dollars per annum yielding significant profits on a consistent basis. The company sees them as a very important long-term investor whose collaboration runs deep. They also own roughly 9% of the shares.

"These are very unique investors," says Dr. Ahn whose family owns 50% of the company's outstanding shares. "That's one of the main reasons we didn't need venture capital money early on."

Those "closely held" investors account for holding 88% of the company's outstanding shares and by all indications, they are in it for the long haul.

With catalysts and developments like the company plans to file INDs for Serdaxin (PD) and Archexin (ovarian cancer) this year, it may make sense for you to become a long term investor as well.

As always, do your own Due Diligence.

Disclosure: Long RNN