Gene Marcial's Inside Wall StreetFighting depression, a highly prevalent and serious mood disorder that affects about 18.1 million adults in the U.S. is one of the largest markets in the pharmaceutical industry -- and it's still growing. More than 212 million antidepressant prescriptions were written last year, with 2009 antidepressant therapy sales totaling about $12 billion.

The major players in this market are the larger drugmakers, including Pfizer (PFE, through its recent purchase of Wyeth), Eli Lilly (LLY), Forest Laboratories (FRX), GlaxoSmithKline (GSK) and Merck (MRK, through its acquisition of Schering-Plough).

To this impressive list of Big Pharma companies, add the name of a tiny and little-known biotech, Clinical Data (CLDA). Why? The young company has developed a potential blockbuster antidepressant called Vilazodone, which analysts expect will be approved by the Food and Drug Administration for marketing early next year.

Because of Vilazodone, the buzz is Clinical Data has become an attractive takeover target for any one of the major players in the field. Vilazodone, if approved by the FDA, will be the first new entry into the antidepressant market in more than 15 years. Its importance is enhanced by the fact that several of the existing therapies are due to lose their patent protection before long. The three drugmakers likely to be interested -- and said to have had some talks with several Clinical Data executives -- are Eli Lily, Forest Labs and Pfizer.

No Impact on Sexual Function

What's so special about Vilazodone when compared with the rest of the crowd? One major difference: Unlike its rivals, Vilazodone doesn't suppress or affect a patient's sexual function. That is a very important difference, indeed, according to industry analysts.

"Patients with depression usually experience difficulties with sexual functioning, which tends to be worsened by antidepressant treatments," notes Chrystyna Bedrij, biotech analyst at Griffin Securities. Vilazodone, she says, is "neutral" on that particular issue, because it doesn't harm a patient's sexual ability. It neither enhances nor suppresses sexual functions, she explains.

Dr. Carol Reed, chief medical officer of Clinical Data, confirms that Vilazodone has a dual mechanism of action, which combines "selective serotonin reuptake inhibition" and "partial 5-HT receptor agonist" to reduce the impact on sexual function as measured by validated scales. Study findings corroborate, she says, that "there was no impairment of sexual function."

The serotonin inhibitors, which enhance the availability of synaptic serotonin -- a key brain chemical -- are approved as safe and effective treatment for depression, says Reed. And the 5-HT receptor agonists have also been shown to be effective for treating mood disorders, including depression and anxiety, she adds.

Significantly Upbeat Results

Given the potential worth of Vilazodone's lack of effect on sexual functioning, "it is positively differentiated from other antidepressants in the market," says Griffin's Bedrij. So, she rates Clinical Data's stock a buy based alone on the appeal and potential value of Viladozone. She puts the intrinsic worth of Clinical Data, currently trading at $18 a share, at $33 a share.

Although no one can predict what the FDA will do, the betting is that Vilazodone, in all likelihood, will win approval because it has completed all the required clinical trials with significantly upbeat results on efficacy and safety, argues Bedrij. And Clinical Data's new-drug application for Viladozone is supported by data from nearly 3,000 patients who "received the drug safely with a low occurrence of side effects," notes the analyst.

All the other seven Wall Street analysts who track Clinical Data also rate the stock a buy, including those from Piper Jaffray, Roth Capital Partners and BMO capital Markets.

Well-Connected in Biotech and Big Pharma

The founder and chairman of clinical Data, R.J. Kirk, is one of the most active players and dealmakers in the biotech world. In 1993, he founded painkiller maker King Pharmaceuticals (KG), which Pfizer recently acquired. In 1996, Kirk founded New River Pharmaceuticals, which was eventually acquired by Shire in 2007. Kirk also serves on the board of a number of companies, including the biotech Scios -- until it was purchased by Johnson & Johnson (JNJ) in 2002.

Clearly, Kirk is well-connected in the both the biotech and Big Pharma circles, which analysts say makes it conceivable that he would agree to selling Clinical Data at this point. Kirk is also in the process of forming a new company called Intrexon, which aims to develop a revolutionary engineering platform for reducing the cost and length of time in producing a drug.

Shares of Clinical Data have been on the move, rising from a low of $12 in July to $18.80 as of Oct. 22's close. Some large institutional investors have already caught on to the stock's bright prospects. Fidelity Management has accumulated a stake of more than 14%. Also big holders are Times Square Capital Management, which owns 3.35%; Vanguard Group, with 2.31%; and BlackRock, whose various funds own a total of 2%. Kirk is the largest shareholder with about 40% of the company. Which means he would be the largest beneficiary if he agrees to sell the Clinical Datat.

The possible buyers, however, face a conundrum: If they want to buy Clinical Data close to its current price, they'll have to act fast -- before the FDA's decision. But if they do that, they face the risk of the FDA not quickly favoring Vilazodone. On the other hand, if potential suitors tarry and wait until the FDA approves the antidepressant, they'll likely have to pay a steeper price.

Both for investors not yet in the stock and for the potential buyers of the company, the opportunity is the same: Act soonest.


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47 Comments

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dterraman

maybe it should be in the water supply......or is it?

October 26 2010 at 6:28 AM Report abuse rate up rate down Reply
bluays2

Notice that the article is more about MONEY than it is about HEALTH. That should tell you everything you need to know about the greedy corrupt world we live in. Most times I wonder if our corporate world (which runs this country, by the way) EVER has our best interest at heart. They manipulate us every step of the way.

October 26 2010 at 4:29 AM Report abuse rate up rate down Reply
bandy4321

All this is about is manipulation of the stock price. It wlll run up the stock price and in a few weeks you will see a big sell off. This company is in debt big time and be a takeover company. Just invest in the big name player who will takeover this company.

October 26 2010 at 3:02 AM Report abuse rate up rate down Reply
Carrie

I am amazed at how many people have absolutely no clue about depression. It is a very serious illness. Why is it okay for the heart, lungs, liver, kidneys and other organs to get sick, but when it comes to the brain it's not okay? The brain is an organ and can get sick just like any of the others. The body doesn't exist only from the neck down. You don't hear people telling someone with heart problems "just get ahold of yourself or deal with it". That's like telling a bleeder to quit bleeding. It's sad so many on here are making light of this and joking about it.

October 26 2010 at 12:03 AM Report abuse rate up rate down Reply
jmeehan102

If proposition 19 (legalization of marijuana) passes in California, I'd start selling that pharma stock.

October 25 2010 at 11:46 PM Report abuse +1 rate up rate down Reply
dremawolfe

No comment on the new antidepressant. Just wonder why politicians, government, et al will not talk about the exorbitant costs of drugs. The cost of prescription drugs need to be regulated in this country or else let us buy them elsewhere like Canada.

October 25 2010 at 11:25 PM Report abuse rate up rate down Reply
manatia2

Since the introduction of antidepressants in the late 80's, suicide rates have not droped. However, Murder-Suicide rates are up, road rage incidents are up etc. You really think this stuff helps you in the long term? Every so many years the drug companies have to come up with "new and better" pills as people are developing tolorance to their crap which threatens their bottom line. That great feeling you get when you first start the stuff is the increase of steroids when your adrenal gland is stimulated. Didn't know that was a side effect did you? No, the keep that one quiet as that is how this stuff really works. When the adrenals can't keep up over time, the crash happens, you go to the doc. "my piils arn't working no more" An increase in dose will follow and you are on the rollercoaster of hell. As with alcohol, the problems are still out there. Figure out what they are and deal with them so you are not making these drug companies any richer. They are next to banks in their greed and don't give a fig about your health!

October 25 2010 at 10:13 PM Report abuse +1 rate up rate down Reply
John

First we have Viagra and now this new anti-depressant drug. What a great world we live in. But they still can't get LiLo off of drugs.

October 25 2010 at 9:15 PM Report abuse rate up rate down Reply
acheermom1

AS somebody who does suffer from depression I must admit I am surprised at how many people do not understand it. As for the side effects, well I don't have a problem with suppression. I am thankful for my "happy pills". They do make dealing with depression much easier. There are many reasons that people suffer from depression, those reasons are usually tragic and nothing to joke about. To those who take it so lightly, I pray you nor any of your loved ones ever has to experience severe clinical depression. I do wish they could come up with medication with fewer side effects and that wasn't addictive. I've been through withdrawals via a generic version of my meds that did not work. That was one of the scariest things I have ever experienced. So to those that need the meds, be very careful before switching over to any new medicine or generic, make sure you are watched by your doctor or you also will suffer the horrible effects of withdrawals. That is nothing to joke about!!

October 25 2010 at 7:18 PM Report abuse +6 rate up rate down Reply
antipodal2u

Deny the lie..Smoke marijuana instead

October 25 2010 at 6:22 PM Report abuse +5 rate up rate down Reply