Little-known Resverlogix (RVXCF) is the type of biotech, young as it is, that investors pine for. Barely six month ago, its shares were trudging at a 52-week low of $2.10 (Canadian) a share. By Mar. 9, 2010, the Toronto Stock Exchange-listed company had climbed to a high of C$7.50. It has since slipped to $C6.25, and of course there's no guarantee its stock will ramp up again from here. But some biotech experts are betting the stock will, indeed, go much higher.

What has propelled the fast rise? Resverlogix is developing a compound called RVX-208, a novel oral drug that in early trials has demonstrated a capacity to raise levels of "good cholesterol," or HDL, by boosting endogenous levels of apolipoprotein A-1 (ApoA-1), a protein that's a major component of HDL cholesterol.

"RVX-208 holds the key potential to become a multibillion-dollar drug," says Simos Simeonidis, senior biotech analyst at investment firm Rodman & Renshaw, who rates Resverlogix at outperform. He just raised his price target from C$8 to C$11 a share. He says RVX-208 could take a sizable share of the $35 billion anticholesterol market. (Rodman has done banking for Resverlogix.)

An Early Bull

It's known that increased levels of HDL and ApoA-1, says Simeonidis, "play a protective role against heart disease." ApoA-1 is the largest protein component of HDL that plays a major part in the body's mechanism for removing fatty deposits from vessel walls, says the analyst.

Simeonidis was an early bull on Resverlogix: He first recommended the stock when it was trading at C$2.20 a share in September. At that time, RVX-208 was going through Phase I clinical trials. It has since advanced to Phase II clinical studies that started in February, way ahead of schedule. The trials are being conducted at the Cleveland Clinic, under the guidance of Dr. Steven Nissen, its chief cardiologist and a leading expert in the field.

"We view Dr. Nissen's involvement in RVX-208 Phase II development program as a 'significant validation' of the drug," says Simeonidis. The clinical trial's goal is to test whether treatment with RVX-208 can lead to an increase in plasma ApoA-1 levels after three months of dosing in 280 patients. The trials will also test the compound's safety and tolerability.

Hooking Up with a Big Pharma?

The significance of the clinical trials have attracted other drugmakers to Resverlogix's RVX-208, notes Simoenidis. So he expects a major pharmaceutical company to partner with Resverlogix in the next 12 months "given the drug's very significant market opportunity."

He believes the likes of Pfizer (PFE), Merck (MRK) and Novartis (NVS) would be interested in a partnership with Resverlogix to develop the drug. President and CEO Donald J. McCaffrey says he's in "serious talks with several large drugmakers," that are interested in a partnership or licensing agreement. But he declines to identify them. "Suffice it to say that there is great interest in Big Pharma on what we are doing," says McCaffrey, who's the company's largest shareholder, with 3.4 million shares, or an 8.7% stake.

"Big Pharma is looking for the next Lipitor," says Doug Murphy-Chutorian, portfolio manager at Select Healthcare Capital, which owns shares. If Resverlogix's clinical trials succeed in achieving their goals, that "will likely induce a partnership with one of the major drugmakers who surely wouldn't want their competitors to get in the door first," he says.

Pfizer in 2006 unsuccessfully tried to develop its own compound that would raise the level of good cholesterol to complement its Lipitor, the blockbuster drug that reduces production of bad cholesterol, or LDL. But Resverlogix may do better than Pfizer with its RVX-208, says Murphy-Chutorian. So he's advising investors to buy shares of Resverlogix now as it awaits results from the clinical trials and a possible partnership deal with a major pharmaceutical company. Although risks are always involved, "the clinical design favors success at this point in time," he says.

"Multiple-Fold Returns"

On Wall Street, the only analyst who follows Resverlogix is Rodman's Simeonidis, who describes the company as a "classic early-stage biotech story -- high risk but with very high reward." Should RVX-208 work, based on the stock's market cap of $100 million, "there is the possibility of multiple-fold returns from the stock's current levels," says Simoenidis. He argues that any drug that manages to successfully and safely lower atherosclerotic plaque by a clinically significant extent "would reach mega-blockbuster status."

Large U.S. institutional investors have yet to pile into Resverlogix's stock, but a partnership with a major drugmaker could nudge the big guys to start buying. If the results of the Phase II clinical trials come out with positive data, watch the stock soar.

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