RespireRx Pharmaceuticals Inc (RSPI)

[gfp927z]

Fearfrost, Whew, glad to hear you didn't buy Northfield. I've seen my share of blowups, and rule #1 in bio investing is to live to fight another day, which means don't bet the farm on anything.

Here's a stock (see below) I would recommend as part of a diversified bio portfolio. They're not without risk, but they already have 2 products on the market which are ramping up nicely (enzyme replacements - a safe, boring, but extremely profitable area, just look at Genzyme). Their third, Phenoptin for PKU, looks very strong for approval in late '07. The active ingredient in Phenoptin, called 6R-BH4, is a naturally occurring enzyme cofactor that has been found to be deficient in numerous endothelial dysfunction related conditions (cardiovascular, diabetes, etc). It's in Phase 2a for poorly controlled hypertension, and will enter Phase 2 in other indications in 2007. 6R-BH4 has true monster potential. Anyway, I would recommend it as a core holding. As I see it, the key to bio investing is to not go overboard on any one stock, since that will sooner or later end in disaster, as we saw with Northfield. So spread the money around, there's no shortage of good ideas out there -

>>> Cross Over to BioMarin
By Marc Lichtenfeld
Senior Columnist
12/6/2006 10:09 AM EST
URL: http://www.thestreet.com/newsanalysis/investing/10326020.html

Tucked away in the affluent bedroom communities of Marin County in Northern California is BioMarin Pharmaceuticals (BMRN) , a small-cap biotech company that hopes to strike gold by improving and extending the lives of patients with rare diseases.

Shares of BioMarin have had a tremendous run over the past two years, rising 339% since hitting a low of $3.87 in November 2004. But there could be more gains around the corner if the company continues to execute with its existing products as well as its pipeline.

BioMarin's bread and butter are two drugs for versions of the rare disorder Mucopolysaccharidosis (MPS). People who suffer from MPS are unable to produce specific enzymes that break down materials in cells. As a result, they may not grow properly, suffer mental retardation and have other physical abnormalities including difficulty in breathing. There is no known cure for the disease, and patients often die before reaching adulthood.

BioMarin's Naglazyme for MPS VI and Aldurazyme for MPS I are the first drugs approved for these indications. The two were granted orphan status, which entitles them to seven years of market exclusivity in the U.S. and Europe. Aldurazyme is manufactured by BioMarin and sold by partner Genzyme (GENZ) .

The economics around the two drugs are strong. While it is believed that only 3,000 people worldwide are afflicted with MPS I and just over 1,000 with MPS VI, according to Pacific Growth Equities, treatment doesn't come cheap. Aldurazyme costs an average of just under $200,000 per year per patient, while Naglazyme averages $300,000.

Furthermore, dosing is calculated by a person's weight, so as patients grow, the average price of treatment should increase. BioMarin's CEO Jean-Jacques Bienaime believes "our products will prolong patients' life expectancy. Consequently, they will get bigger, and the value of our market will increase."

He compares the economics to those of Genzyme's Cerezyme, which has been on the market for 15 years but is still seeing sales growth. In Genzyme's most recent quarter, the company reported that Cerezyme sales grew 6% year over year. It is expected that patients will remain on the MPS drugs for their entire lives. The two drugs were launched last year and have racked up $100 million in sales in the first nine months of 2006.
The Pipeline

BioMarin has an intriguing pipeline as well. While there aren't a plethora of compounds in development, one in particular has potential to treat a variety of ailments.

In a test of 23 patients at the Emory University School of Medicine, researchers found that blood-pressure levels were reduced in those that took 6R-BH4, the active ingredient in Phenoptin, a drug expected to receive approval next year.

In the study, according to Dr. Mick Ozkor, a researcher in the Cardiovascular Research Group at Emory, there were no safety issues, and patients' blood pressure returned to the baseline four weeks after the trial was over and they were no longer on the drug, indicating that 6R-BH4 did have an effect.

The drug is currently in a company-sponsored phase IIa trial with 116 patients that's expected to conclude in January. The trial is for poorly controlled hypertension, involving patients who are currently on other blood pressure medications that aren't working for them. Additionally, 6R-BH4 is being tested in peripheral arterial disease, coronary artery disease and erectile dysfunction, among other disorders. Those indications have a patient base in the tens of millions each. Phase IIa data are expected for several of these conditions in 2007.

Phenoptin for mild to moderate phenylketonuria, or PKU, is expected to be approved late next year. It is estimated that PKU affects roughly 50,000 people worldwide. The disorder, which is tested for at birth, causes mental problems including retardation and also seizures. Additionally, BioMarin has Phenylase for severe PKU. The drug is expected to enter clinical trials next year. Currently, there are no medical treatments available for PKU.
In Play?

There are many, including TheStreet.com's own Jim Cramer, who believe the company will be taken over. (To watch a video clip of Cramer discussing BioMarin, click here.)

I agree that BioMarin is an attractive acquisition candidate. The company has proven it can bring products to market. It has a virtual monopoly in a few rare and very expensive diseases and may soon have a drug for the mass market. BioMarin is forecast to turn a profit in 2008. While the company has nearly $300 million in debt, it also has roughly the same amount in cash and short-term investments.

Karen Andersen, an analyst with Morningstar, says that a company that would be interested in BioMarin would likely be one that "has experience in rare diseases and an international sales force but also has an interest in the cardiovascular diseases." She adds, "It's possible that Genzyme would be interested. They've been a very acquisitive company."

BioMarin is also teamed with Serono (SRA) , its partner in Phenoptin and the cardiovascular indications of 6R-BH4. Serono is in the process of being acquired by Germany's Merck KGaA.

If the 6R-BH4 data are positive in the phase II results next year, I would expect some larger company to snap up BioMarin, especially if the mergers-and-acquisition environment is as hot as it is today.

CEO Bienaime says he has no plans to sell the company. Then again, he acknowledges he's not vehemently opposed to the idea. "Because we have multiple product opportunities, are generating significant revenue and are pretty close to being cash-flow positive, we believe we have the ability to build this company for the long term," he says. "At the same time, we cannot guarantee we will remain independent forever."

Morningstar's Andersen believes that the company can operate just fine on its own and that joint ventures with larger biotechs or pharmas are unnecessary. She states, "Naglazyme's success shows the company doesn't need a partner like Genzyme to successfully educate and navigate the reimbursement environments internationally."

Even without 6R-BH4, BioMarin has proven itself in the difficult area of rare diseases and should be able to continue to grow sales in MPS and eventually PKU. The cardiovascular and other indications could be a nice bonus while the company brings in cash serving its niche base.

Invesors will likely continue to notice. Don't be surprised if a suitor does too. <<<