BELLUS Health (BLUS)

Keep Selling NRMX

Posted Thu Dec 27, 12:15 pm ET

A spate of negative news over the past few months have sent the share price of biopharmaceutical firm Neurochem, Inc. (NRMX), into a tailspin forcing Zacks senior pharmaceutical sector analyst Jason Napodano, CFA to reiterate his Sell rating on the shares. The following excerpts explain his position:

"Neurochem, Inc. is a biopharmaceutical company focused on the development and commercialization of products for the treatment of neurological disorders. The company currently has three candidates under various stages of clinical development. However, late-stage pipeline setbacks have sent the company’s shares plunging. The shares of Neurochem have been heavily punished over the past few months owing to a spate of negative news.

"Kiacta, the company’s lead drug, received a second 'approvable' letter from the FDA in July 2007. The FDA indicated that an additional trial with a p-value of 0.05, along with further pharmacokinetic studies, will be required, before the agency approves the drug. This was followed by negative phase III results from the North American trial of the company’s biggest potential product, Alzhemed, in August 2007. The share price plummeted by over 40% on this news.

"To add to Neurochem’s woes, the cash position is a matter of grave concern. With such late-stage pipeline setbacks, the company intends to fund operations for the next 12 months with $70 million in cash. With the discontinuation of Alzhemed phase III trials in Europe, the company’s cash burn should reduce significantly.

"However, we believe that Neurochem will need to raise funds again in late 2008 / early 2009. The company’s credibility is extremely low at this point of time and its ability to raise money from the market, to fund its operations, has been severely crippled. Raising additional funds will either result in significant shareholder dilution or will place a large amount of debt on the company’s balance sheet. Neurochem received additional negative news recently when the Committee for Medicinal Products for Human Use recommended against granting approval to Kiacta in the E.U. This news did not come as a surprise as we expect the European authorities to follow in the footsteps of the FDA and ask for additional data on Kiacta before granting approval.

"Neurochem shares do not have much left to offer with Alzhemed development discontinued and Kiacta approval delayed. The company does have a back-up phase II pipeline candidate, Cerebril, for the prevention of hemorrhagic stroke caused by cerebral amyloid angiopathy (CAA). However, its development has been stalled since January 2004 and we have no visibility on when its development will resume again. Given the significant lack of positive catalysts, we rate the shares a Sell with a reduced target price of $1.25."

Read the full analyst report on NRMX.
http://register.zacks.com/ucd/step1.php?ALERT=FOOL_ZER&d_alert=ZER_CONF&t=nrmx&ADID=FOOL_ZERFEED