Oxigene Gets Legg Mason 'Buy' Rating
Wednesday May 11, 4:05 pm ET
By Wallace Witkowski, AP Business Writer
Oxigene Gets Initial 'Buy' Rating From Legg Mason Because of Drug Candidate
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NEW YORK (AP) -- Oxigene Inc. is likely to have an edge over certain cancer and eye disease treatments with a drug that kills existing abnormal blood vessels along with preventing new ones from forming, Legg Mason said Wednesday in initiating coverage of the pharmaceutical company.
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Oxigene shares rose 46 cents, or 11.3 percent, to $4.53 in afternoon trading on the Nasdaq.
Legg Mason initiated coverage of the company with a "Buy" rating and a 12-month share target price of $7. The stock, which hit a 52-week high of $9.14 in May last year, has been trading below $5 per share since early March.
The investment firm based its rating on the company's lead product candidate Combretastatin A4P, or CA4P, a vascular targeting agent that restricts blood flow to solid tumors by attacking the vessels that feed them.
"Unlike antiangiogenic agents, which only prevent the growth of new abnormal blood vessels, VTAs have been shown to target and kill existing abnormal blood vessels associated with solid tumors and ocular diseases such as myopic macular degeneration and age-related macular degeneration," said Legg Mason analyst Edward H. Nash in a note to investors. "In our opinion, this unique mechanism of action provides a therapeutic advantage over existing products."
One of the leading products to treat age-related macular degeneration, or AMD, is Eyetech Pharmaceuticals Inc.'s Macugen, which was launched by marketing partner Pfizer Inc. in the first quarter. In AMD, abnormal blood vessels grow in front of the retina and leak, causing blindness.
However, Nash said Oxigene is the only company in clinical trials evaluating a product for the treatment of myopic macular degeneration, or MMD, a similar condition to AMD where abnormal blood vessels grow to stretch and distort the eye. Nash said Oxigene could possibly be the first company to get approval for MMD by 2008. MMD, which affects about 150,000 people, is a niche market compared with AMD, which affects more than 15 million in the United States alone.
CA4P also has the potential to treat breast, lung, ovarian and thyroid cancers, and compete with Genentech Inc.'s Avastin cancer treatment, the analyst told investors. CA4P is currently being studied in clinical trials to treat these cancers and could have a possible thyroid cancer indication by 2009, Nash said in the note.
In an interview, Nash said he believes Oxigene will enter the cancer market as an adjunct product to be used with older chemotherapy drugs in patients that have failed other therapies.
"You're going to find that a lot of physicians are going to want to use CA4P for the mechanism in combination therapies," Nash said.
The analyst added that the company will also have to run trials for CA4P as a stand-alone therapy and in combination with cancer drugs such as AstraZeneca PLC's Iressa and OSI Pharmaceuticals Inc.'s Tarceva, both of which gained approval after Oxigene's current studies were designed.
Based on 2008 projections, Nash believes that Oxigene could see beginning annual revenue of $29 million for MMD and thyroid cancer sales of $25.8 million following possible approval.
The investment firm estimates a loss per share of 85 cents in 2005 and $1.10 in 2006. Analysts surveyed by Thomson Financial expect a loss per share of 81 cents in 2005 and 72 cents in 2006.
Legg Mason served as lead placement agent for the company's March sale of $15 million, or 3.3 million shares, of additional Oxigene common stock to accelerate product development. The firm also provides investment banking services to Oxigene.
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