Alexza Pharmaceuticals (ALXA) - discovering a breath of cure

Company Overview
Alexza Pharmaceuticals (ALXA) is a rapidly emerging pharmaceutical development company focused on the research, development and commercialization of novel proprietary products for the acute treatment of central nervous system, or CNS conditions. All of our product candidates are based on our proprietary technology, the Staccato® system.  The Staccato system vaporizes excipient-free drugs to form a condensation aerosol that, when inhaled, allows for rapid systemic drug delivery.  Because of the ideal particle size of the aerosol, the pure drug is quickly absorbed through the deep lung into the bloodstream, providing speed of therapeutic onset that is comparable to intravenous (IV) administration but with greater ease, patient comfort and convenience.

Alexza currently has five product candidates in various stages of clinical development, and one product candidate (AZ-004 (Staccato loxapine)) for which clinical trials have been completed and an NDA has been submitted.

Trading Catalyst
PDUFA Date:  Oct. 11, 2010

Technology
AZ-004 (Staccato loxapine) 

The Staccato System

Design Principle
The key to ALXA's proprietary technology is vaporization of drug without thermal degradation, which is achieved by rapidly heating a thin film of the drug.  In less than half a second, the drug is heated to a temperature sufficient to convert the solid drug film into a vapor.  Because the duration of drug heating is so brief, thermal decomposition is minimal.  After vaporization, the drug cools rapidly in air, condensing into pure drug aerosol particles of near ambient temperature.  The Staccato system consistently creates aerosol particles averaging one to three microns in size, which is the proper size for deep lung inhalation.  The Staccato system also produces a consistent high emitted dose, regardless of the patient's breathing pattern.

Bioavailability, Pharmacokinetics & Pharmacodynamics

The aerosol produced with the Staccato system is designed to be absorbed rapidly through the deep lung, with a speed of therapeutic onset comparable to IV administration, generally achieving peak plasma levels of drug in two to five minutes, which is much faster than oral tablet delivery.  Pharmacokinetic studies show that drugs introduced through inhalation using ALXA's delivery technology achieved 100% bioavailability within 3 minutes of administration, remarkably resembling that would be achieved through IV injection.

Furthermore, in vivo pharmacodynamic studies in an animal model conducted with a commercially available migraine drug show that the Staccato system results in more rapid absorption than subcutaneous injection or oral administration.  With the same migraine drug, the delivery technology demonstrates an onset of action of less than one minute as shown in the graph below.

Recent Stock Trend

ALXA presents yet another solid target on the rise prior to the October trading catalyst.  The company has plenty of cash, a novel technology platform, and an expansive product pipeline.  Alternative dosing strategies have been the pursuit of many biotech firms including MannKind (MNKD) and Generex (GNBT).  Avoiding needles as part of the drug administration process will significantly raise patient compliance and in turn reduce unnecessary medical expenditure as a result of failure to complete a drug course.  With a number of experimental drugs in the pipeline and a late-stage candidate, ALXA is in a potent position to grow substantially should AZ-004 successfully passes FDA's scrutiny.

With the recent dilution, the stock price dropped overnight from the pre-dilution level of $3 to $2.46.  While the 18% cut was unfortunate for those already holding positions, it screams an excellent entry point for investors to catch the run-up wave at a generous discount before the Oct 11 PDUFA.

Price Target
JMP Securities:  $10 --> $12 price target (Market Outperform)
Wedbush Morgan Securities:  $6  (Buy --> Strong Buy)
WBB Securities:  Buy --> Strong Buy