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CEO of Tiny Drug Company Buys Big Position Just Ahead of Move to American Stock Exchange

http://www.investorideas.com/insiderscorner/Articles/041907.asp


By Michael Brush
Exclusively for InvestorIdeas.com
April 19, 2007

Pipex Pharmaceuticals (PPXP) is a grad school professor’s dream.

Founded by a venture capitalist, the company hunts at universities for promising drugs, locks them up in license agreements, and then funds their development to bring them to market.

Earlier this week co-founder and chief executive Steve Kanzer plowed about a half million dollars into the stock at an average of around $2.06 per share.

The timing is interesting, because the company is about to get approve for listing on the American Stock Exchange and move off the bulletin board.

There’s no guarantee the stock will pop on this move – but it might. However, we’re not really traders here at Insiders Corner so what’s more important is the medium term. In that time frame, the transfer to the American Stock Exchange is also a big positive because it will mean more institutions can buy Pipex and more analysts can pick up coverage.

Kanzer’s purchase this week is also interesting because as co-founder he already has a lot of exposure to the company. And the purchase can’t be read as an effort to juice the shares ahead of a financing deal since Pipex just raised $13.9 million late last year.

With a projected cash burn rate of $6 million a year, that should carry it through to early stage profitability when its first drug gets launched in early 2008, says the company. Here’s a closer look.

The big picture

Pipex likes to focus on diseases for which there aren’t very good treatments around -- like lung fibrosis and multiple sclerosis (MS). Pipex also develops drugs that are already in use in other parts of the world for decades – so their safety and risk profiles are well known.

Both factors could help the company get faster approval of drugs by the Food and Drug Administration (FDA), so they can bring them to market quicker. Here’s where Pipex might make progress.

Too much copper

The company’s lead drug, Coprexa, could be on the market as early as the first quarter of 2008 as a treatment for a neurological disorder called Wilson’s Disease.

Like many of the diseases that Coprexa may eventually treat, Wilson’s Disease is a disorder caused by elevated levels of “free copper” in the blood. “Free copper” is the toxic form of copper -- not to be confused with the essential form which is found tightly bound to proteins in the blood. The problem with free copper is that it readily crosses the blood-brain barrier, and the brain is highly sensitive to its toxic effects.

In Wilson’s Disease, for example, free copper causes psychosis-like symptoms including loss of emotional control, temper tantrums, severe depression, suicidal thoughts, delusions, and hallucinations. Without treatment, this horrible disease usually kills its victims by 30. Phase III testing suggests Coprexa treats the disease by lowering the levels of free copper in blood. Pipex is now writing the new drug application for this use of Coprexa, and it may be on the market for this use in early 2008.

There could be other applications down the road. For example, Coprexa may work against idiopathic pulmonary fibrosis. This lung disease takes about 30,000 people a year -- or more than breast cancer and prostate cancer. There is no FDA approved therapy.

Animal tests have shown that Coprexa inhibits lung fibrosis. Again, it works by reducing free copper in the blood, which is thought to play a role in lung fibrosis. Pipex has completed phase II testing for this use.

Coprexa may also work against Alzheimer’s, another disease linked to excessive free copper in the blood. Pipex just got a $306,000 grant to study the use of Coperxa against this ailment.

Multiple sclerosis

Another Pipex compound called Trimesta has been used in Europe to treat hot flashes for 40 years. Researchers think Trimesta, a form of estriol that can be taken orally, may also work against autoimmune diseases like MS.

Here’s why. Women with autoimmune diseases like MS typically see their symptoms subside during pregnancy, especially in the third trimester. It could be because estriol levels rise in women during pregnancy. (Estriol immunizes the fetus against rejection by the mother.)

Phase II studies by Pipex have shown that Trimesta reduces lesions associated with MS, a neurological disease in which the body loses the ability to transmit messages along nerve cells. This causes a loss of muscle control, paralysis, and even death. MS afflicts about 400,000 people in the U.S., and it weighs heavily on the health care system, costing more than $9 billion a year including lost wages. Pipex has another early-stage compound that may work against MS called Anti-CD4 802-2.

A pain therapy

Another Pipex compound called Effirma may be effective against a pain disorder called Fibromyalgia. Effirma has been used in Europe to treat lower back pain since 1984. Pipex is in the process of planning phase II trials for use in the U.S.

The bottom line : Pipex is a tiny $116 million market cap company that’s off the radar screen for many investors because it’s hidden on the bulletin board. That’s about to change as the company graduates to the American Stock Exchange. Pipex is also about to publish results on how Coprexa works against fibrosis, which could also serve as a catalyst. These factors may explain why the company’s CEO just plunked down a half a million dollars on the stock even though he’s already got plenty of exposure. I’d follow him into the stock right now with at least a two-year time horizon.

Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/ . InvestorI deas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp . InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.