Barron’s Alzheimer’s Article Only Scratches the Surface

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This weekend, Barron’s has run its cover story on which companies may stand to win in the medical war against Alzheimer’s Disease.  This really only scratches the surface of this devastating problem,even though it is addressing the pipelines that may yield newtreatments.  Barron’s notes drugs that may be able to treat the disease rather than just the symptoms in the next two years.  The article still does a good job to point out the current treatments and some of the companies that have studies that have either completed or being close to completion.   

Wyeth (WYE-NYSE) was the one noted as the best investment bet in the cover story article from Barron’s, which also was noted at the biggest discount to peers. Barron’s also notes: Neurochem (NRMX-NASDAQ) out of Canada, Elan (ELN-NYSE/ADR) in Ireland (and US) (with mixed results in recent years), Novartis (NVS-NYSE/ADR) is Switzerland (And US and elsewhere), Pfizer (PFE-NYSE), Forest Labs (FRX), Eli Lilly (LLY-NYSE), Johnson & Johnson (JNJ-NYSE) were all noted with currently "on the market" drugs in the ongoing studies for possible Alzheimer’s treatments in some form or fashion.  The current drugs from J&J, Novartis, Forest and Pfizer are really meant more as slowing-agents rather than cures.  Unfortunately, there is no magic pill that just zaps this disease.

Neurochem (NRMX) mentioned in the Barron’s article is in Phase III studies in Europe and recently completed Phase III’s in North America for its Alzhemed(TM). It has already filed to raise $102 million in aggregate securities and its balance sheet indicates it may need more cash again at some point in the near future.  This one is perhaps one of the more leveraged names in the article.

Myriad Genetics (MYGN-NYSE) has just completed enrollment ofpatients in its global Phase 3 clinical trial of Flurizan(TM) inAlzheimer’s disease, the first in a new class of drugs known asSelective Amyloid Lowering Agents (SALAs).  This was also noted briefly in the Barron’s article, but these results look promising so far even though the interim results are not planned and results will be unknown until next year.

Forest Lab’s (FRX-NYSE) fiscal March 2006 saw $505 million of $2.96Billion total sales come from Namenda (R) (not Manenda), which was approved in 2003 asan Alzheimer’s treatment.

AstraZeneca (AZN-NYSE) and Targacept (TRGT-NASDAQ) are in Phase II’s for AZD3480 to stimulate the brain’s memory neurotransmitters.

BUT…..there are many more companies here that need to be given some attention.  This is a huge field and there are many mid-cap and small-cap stocks that can be huge beneficiaries of this.  As we have said the Barron’s article is incomplete, and the same will obviously be true here because there are so many aspects to the story.

Our own Douglas McIntyre pointed out several nursing home and assisted care facility operators just on March 20, 2007 after the Wall Street Journal ran an article about the boomers reaching retirement age and the long-term forecasts in the dementia epidemic.  The facilities Doug noted there were Senior Housing (SNH-NYSE) (a REIT), Sunrise Senior Living (SRZ-NYSE), Brookdale Senior Living (BKD), Assisted Living (ALC-NYSE), and Manor Care (HCR).   There are many, many others worth note that have the potential to benefit from this.

Emeritus Corporations (ESC-AMEX) is a national provider of assisted living and Alzheimer’s and related dementia care services to senior citizens.  After the acquisition of Summerville Senior Living announced this last week it will operate 284 communities in 36 states comprising 24,448 units with a capacity for over 28,000 residents. Summerville is adding 81 communities comprising 7,935 units in 13 states which provide independent living, assisted living, and Alzheimer’s and dementia related services to seniors.  This one is more of a pure-play in the assisted living sector, but keep in mind that its stock ran up on this acquisition and its earnings has been spotty.

Nymox Pharmaceutical Corporation’s (NYMX-NASDAQ) in Canada holds some patent rights for statin use for the treatment and prevention of Alzheimer’s disease, so some of these larger statin makers could theoretically end up shelling out some royalties down the road.  Will they really?  Who knows, that’s a long-term issue. 

Icagen, Inc. (ICGN-NASDAQ) has potential candidates as lead compounds for dementia, including Alzheimer’s disease, for which the Company’s collaborator Astellas Pharma Inc. is conducting preclinical studies, and lead compounds for attention deficit/hyperactivity disorder, which were derived from the collaboration and for which the Company is conducting preclinical studies.

Memory Pharmaceuticals (MEMY-NASDAQ) just raised cash ($10M) to help fund its pipeline studies.  These conditions include Alzheimer’s disease, schizophrenia, bipolar disorder and depression.  This one recently saw its stock implode when its MEM1003 failed to show its effectiveness in acute mania in bipolar disorder, and this MEM1003 is actually being studied for Alzheimer’s.  We noted this at the time, so they better hope for better luck there on the new indication.

EPIX Pharmaceuticals (EPIX-NASDAQ) has a compound PRX-03140 which is in a Phase IIa clinical trial in Alzheimer’s disease.  Siemens (SI-NYSE/ADR) an agreement with Wyeth Pharmaceuticals to utilize Siemens’ new research imaging agent in Wyeth’s clinical studies of new therapies in development for Alzheimer’s disease.

 

Eisai Co. Ltd (ESALY-NASDAQ/OTC) has increased its research facilities in the US and is studying E2012 in preliminary Phase I of its gamma secretase modulator that is being evaluated as a potential new treatment for Alzheimer’s disease.  Merck (MRK-NYSE) and Martek Biosciences (MATK-NASDAQ) are each studying seperate tests (not related to each other).

Even in 2000, the Biotechnology Industry Organization estimated that in the United States alone the total cost of Alzheimer’s Disease was approximately $100 Billion per year.  Healthcare costs haven’t been static by any means, so you can take that number on up drastically from there.  After getting to witness on multiple personal occasions the devastationAlzheimer’s and Dementia causes to the patient, their finances, and theimpacts it has on immediate family, this is a topic of personalimportance and interest.  I have added on to the article because thisis a far reaching issue where it doesn’t really seem like one miraclealone is going to be a true cure that eradicates what is by no meansshort of an epidemic as we live longer and longer.  It is estimatedthat 5 million people in the United States alone are living withAlzheimer’s Disease.

Jon C. Ogg
March 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.