Rexahn Pharmaceuticals (NYSEMKT:RNN)

CAPS Rating: 2 out of 5


Player Avatar zzlangerhans (99.80) Submitted: 4/18/2010 3:32:14 PM : Underperform Start Price: $2.35 RNN Score: +18.76

Today's lesson in baby biotech Shakespearean tragedy comes to us from Macbeth, and Rexahn Pharmaceuticals.1. By the redness of my thumb, something bogus this way comes.Two of Rexahn's advanced compounds, Serdaxin for depression and Zoraxel for erectile dysfunction, are reformulations of an ancient generic drug called clavulanic acid. Clavulanic acid is the agent which is added to amoxicillin to improve antibacterial potency, and its best-known side effect is diarrhea. Not euphoria, not a raging blueveiner. Try finding the words "clavulanic acid" on Rexahn's website. I couldn't. Now if these guys really identified an amazing secondary effect of this old compound that's going to change the world and make them billions, shouldn't they be proud of that? Then why are they posing as though Serdaxin and Zoraxel are new and unrelated compounds that they discovered themselves?2. Double, double price then trouble! Hype churns, and pumpers bubble!Rexahn traded sub-1 for most of 2009 and the beginning of 2010. In February, BioMedReports started up the hype machine and quickly got the thinly traded stock to double to the 1.5 range. But hype drew some scrutiny from Feuerstein (our MacDuff), who pointed out that the company had never actual released topline data from their "positive" phase IIa trial of Serdaxin in depression back in October 2009. Likely in response to the specter of a class action suit, Rexahn released the topline data belatedly in mid-April. As it turned out, the study only achieved statistical significance in the post-hoc analysis of the severely depressed subgroup and not in the overall population. Having doubled in February and again in April, the share price now gave back one of those doubles.3. Out, damn'd spot! Out, I say!Enter now our own Lady Macbeth, Chang Ahn, with a press release to address the inability of the market to understand the purpose or results of the Serdaxin phase IIa trial. Ahn points out that the purpose of the trial was never designed to achieve statistical significance, but rather proof-of-concept. I guess they got exactly what they wanted. Are your hands clean yet?Why is Lady Macbeth taking such a personal interest in propping up the share price? Could it be that there's hardly any money left in the piggy bank, and it's a lot better to dilute at 4 than to dilute at 1? And is that what led to the BioMedReports witches making their timely entrance? Well, I wouldn't know. I'm just a poor playwright without the chops to run with financial geniuses.So who is Macbeth in this drama? Likely the retail investor who bought the hype and quadrupled his money (if he got in early), but will eventually die a grisly bagholder death due to his greed.

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