Posted by: ctraderd | August 21, 2012

Why Alexza Pharmaceuticals $ALXA Will be One of the Biggest % Gainers this Year- Guest Post

Alexza Pharmaceuticals $ALXA first caught my eye back in April as a run up play into their May PDUFA. It was a solid play for some momentum into the catalyst and we grabbed some nice profits, but unfortunately for those who held too long, got caught in a CRL one day early for “Manufacturing Issues.” This was their second CRL as the price dropped to about ~0.375 (3.75 adjusted after the reverse split.) After a continued bleed down to a low of $2.55, it seemed to be getting just to good to be true for a cheap entry. We had many members in BioStocks.com chat sell puts when PPS was less than $3.00 and many even took long positions. They are already seeing HUGE gains, with much more to come. To help you understand why I believe $ALXA will be one of the highest percentage gainers in 2012, I put together a timeline on its history so you can get a better understanding for the company and their situation, BUT FIRST, here is a little about Alexza Pharmaceuticals:

Business Summary: Alexza Pharmaceuticals, Inc., a pharmaceutical company, engages in the research, development, and commercialization of novel proprietary products for the acute treatment of central nervous system conditions worldwide. Its product candidates are based on a proprietary technology, the Staccato system, which vaporizes an excipient-free drug to form a condensation aerosol that, when inhaled, allows for rapid systemic drug delivery. The company’s lead product candidate includes ADASUVE (Staccato loxapine) for the acute treatment of agitation in adults with schizophrenia or bipolar disorder. Its other product candidates under development comprise AZ-007 (Staccato zaleplon), which has completed Phase I clinical trials for the treatment of insomnia; and Staccato nicotine that is in pre-Phase 1 clinical trials to help smokers quit by addressing both the chemical and behavioral components of nicotine addiction by delivering nicotine replacement through inhalation. Source: http://finance.yahoo.com/q/pr?s=ALXA

Now that you know a little about the company, here is their history of important events:

$ALXA Timeline:


10/11/10- Received first CRL for AZ-004 because of a safety concern from a Phase III trial http://ih.advfn.com/p.php?pid=nmona&article=44733961
5/3/11- Company does $16.1 Mil financing at $1.35 (now $13.50) and warrants at $1.775 (now $17.55)  http://ih.advfn.com/p.php?pid=nmona&article=47505124
8/5/11- Resubmits NDA for ADASUVE
12/12/11- Company has FDA advisory panel
2/4/12- New PDUFA date biote
FDA extends PDUFA date to 5/4/12 because the company submitted an updated REMS on 1/10/12, which the FDA considered a ‘Major Amendment’ (FDA can extend a pdufa when a company submits a major amendment within 3 months of the pdufa date)
2/17/12- The company does a $20.4 Mil Financing which issues 44 Mil of stock at 0.50 and 44 Mil warrants exercisable at 0.50 (Both at $5.00/share now)
5/3/12- Receives CRL from FDA for ‘Manufacturing Issues’ one day early. Puts out PR at 5:30 est.
6/13/12- Company does 1:10 reverse split
6/22/12- Announces resubmission of NDA for ADASUVE
7/5/12- Receives PDUFA date of 12/21/12 for ADASUVE
7/23/12- Enters into a 24 month ATM agreement with Azimuth. Company may sell up to $20 Mil of stock.

So, as you can see above, $ALXA’s new PDUFA date is 12/21/12 and I am excited to play this one for a second time because:

Cash: With the $20 Mil ATM agreement with Azimuth, the company should have enough cash to avoid a financing until after the PDUFA, which as you saw with $EXEL, can be devastating. As of 12/31/11 they had working capital of $27.5 vs $34.9.
Market Cap: Company has a current $48.4 Mil market cap. This leaves huge upside potential as the market cap could nearly double and only be back to where it was before the 2nd CRL. At the current price of $4.05, the company has a $52.9 Mil market cap. At the run up peak for the May 4th PDUFA, the market cap hit $90.1 Mil at $0.76 ($7.60 adjusted).

Low Float: The company did a 10:1  reverse split effective 6/13/12 which greatly reduced the amount of shares in the float to 11 mil. 27.47% of those are institutionally owned, which leaves even less for retail traders. Since it has a lower float, it takes less buying power to move the stock higher, and can jump to significant gains much easier than others. $HZNP is a great example of the last great low float run up.
Short Interest: Company has a fairly large short interest at 14.62%. Once this starts to run, shorts will run to the exits, cause more forward momentum.
High Odds of Approval: According to the company’s CEO, “in this CRL, there were no new clinical or safety issues identified, and there were no other identified deficiencies.” This means that the there was nothing wrong with the drug from a clinical standpoint, only light manufacturing issues, which leads to high odds of approval.

European Approval: Not only does the company have the US PDUFA on 12/21/12, but it is up for EU approval in December 2012. This second catalyst brings some extra attention to the run up.

Institutional/Insider Holdings: Before the last PDUFA run, insiders bought stock in the open market, and I would not be surprised to see a few insiders buy again this time. There are about 45 institutions holding the company. 26% of shares are held by insiders or 5% holders, and 37% of shares in the float are held by institutions or mutual funds. Source: http://finance.yahoo.com/q/mh?s=ALXA+Major+Holders

Overall: Alexza Pharmaceuticals is poised for a great run up into two catalyst in December 2012. Given the details above, I give it high chances to become a HUGE percentage runner just like we recently saw with a similar low-float set up ($HZNP).

Disclosure: I am long $ALXA stock and plan to actively trade in and out of it. All of my entries/exits will be detailed on twitter under the usernames @BsiflingTrades and @BioStockTrades. The work above is solely my opinion and should not be taken as a recommendation to buy or sell any security.

-Brett Sifling

www.BioStocks.com

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