Feuerstein's Biotech-Stock Mailbag

Welcome back to the Biotech Mailbag. This week, I'll tackle questions on Middlebrook Pharmaceuticals(MBRK) and Isis Pharmaceuticals(ISIS).

Middlebrook Pharmaceuticals shares soared this week on the FDA approval of Moxatag, the company's proprietary, once-daily formulation of the antibiotic amoxicillin.

The news prompted an email from Neal G., who writes: "Is it me, or is this drug a big nothing? When my kids get strep they take antibiotics once a day."

I actually believe the Middlebrook story is a good one, and there's upside in the stock even with the big move Thursday. On Friday, the stock fell back to $2.75.

Middlebrook is for sale, and there's a more-than-decent shot that it finds a willing buyer. The company could go for $6 to $8 a share.

Neal is right about the non-sexiness of another antibiotic, but Moxatag employs a neat drug delivery technology owned by Middlebrook that allows for less frequent dosing. Generic amoxicillin must be taken three times a day, for example, which can be difficult to maintain.

Moxatag is more convenient and should improve compliance, especially in adolescents. Parents won't have to harangue their kids to take their pills three times a day.

There are about 60 million prescriptions written annually in this country for generic amoxicillin. Moxatag isn't going to dominate this market, because insurance companies aren't going to reimburse when they can pay for a cheaper generic instead.

But Middlebrook is being smart. The company will likely price Moxatag around $20-$25 per prescription, which is higher than the $5-$10 copay someone would pay for generic amoxicillin, but not too high to sting (especially since patients really need only one prescription to clear up their sore/strep throat or ear infection).

The company is counting on doctors and patients -- or parents of patients -- to be willing to fork out a few extra bucks for the convenience of a once-a-day antibiotic.

If Middlebrook can capture 10% to 15% of amoxicillin prescriptions, that's worth about $200 million in sales. The company's current market value is $127 million.

I also know that Middlebrook has no intention of launching Moxatag on its own. It's in no position to build or manage the primary care sales force necessary. This is why the company is up for sale. Management wants to sell out to a larger specialty pharmaceutical firm with an existing primary care sales force that desires another drug to sell to doctors.