Costly $20M offering gives Alexza a chance for FDA and EMA approvals
This article was originally published in Scrip
Investors placed bets on 16 February on whether Alexza Pharmaceuticals could get its inhaled antipsychotic drug Adasuve approved either in the US or European Union when they bought into the Mountain View, California-based company at $0.50 per share, the stock's lowest price in the past year.
The company’s stock price had fallen by 50% to around $0.50 in mid-December following a positive but marginal approval recommendation for Adasuve from the FDA's Psychopharmacologic Drugs Advisory Committee (PDAC). Alexza had another setback in January 2012 when its PDUFA hearing was postponed from February to May 2012.
Investors buying into Alexza now, at what the company must hope is the bottom of the market, are anticipating at least two potentially value-adding events as the company seeks FDA and European Medicines Agency approval in the next few months of Adasuve for rapid control of agitation in adults with schizophrenia or bipolar disorder. The drug uses the company's Staccato inhalation delivery system.
Alexza president and CEO Thomas B. King said the funding was completed at a "market-clearing price", the price investors were willing to pay before regulatory approval of Adasuve. He confirmed that proceeds would fund the company's pursuit of FDA and EMA approval for Adasuve and EU regulatory approval of the company's manufacturing facility in Mountain View.
Analyst Jason Kantor at RBC Capital Markets in San Francisco said of the stock sale that he was "not particularly pleased with the terms they were able to get" but the FDA's decision in January to extend Alexza's PDUFA date (scripintelligence.com, 25 January 2012) from 4 February to 4 May "left them in an awkward position in terms of their cash. They needed to raise money."
In its last quarterly report for the nine months ending 30 September 2011, Alexza had $28.3 million in cash and cash equivalents and, while it had reduced its burn rate from around $30 million a quarter in 2010, it still spent just over $13 million in its last reported quarter.
In 2007, Alexza’s stock reached $14 per share, but it has been trading a fraction of that for some time. It fell to $0.72 on 24 January, the day after the FDA moved the PDUFA for the review Alexza’s revised risk evaluation and mitigation strategy (REMS). Alexza closed at $.70 on 16 February after its common stock sale, but sank to $0.48 when the market opened the next morning.
Mr King said the 4 May PDUFA date is where investors are looking for the company to gain value.
"Clearly, anybody investing in Alexza is doing so on the assumption that the drug will get approved either in the US or Europe, and also, potentially, that they will get a partnership or sell the company based on that approval,” Mr Kantor said. "That’s why investors would do a deal at the price they did. They could lose money, but if it gets approved, it will look like a smart bet."
Alexza sold 44 million units of one share and one warrants to raise $22 million: each warrant allows the holder to purchase another shares for $.50 within a year from the initial sale.