This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Alexza Pharma: Run-Up Trade Into December's Approval Decisions

NEW YORK (TheStreet) -- Biotech traders have the unique opportunity to trade a company multiple times for the same indication. Such is the case with Alexza Pharmaceuticals (ALXA) and the Dec. 21 FDA approval decision date for Adasuve, an inhaled formulation of the anti-psychotic drug loxapine. European regulators are likely to make an approval decision known in the same time frame.

There are a few factors that set up Alzexza to be a very interesting trade over the next few weeks.

Low Float: Alexza recently completed at 10-for-1 reverse stock split, necessary to raise the company's share price to meet minimum Nasdaq listing requirements. This reverse split dramatically reduced the size of Alexza's float down to 15 million shares outstanding. The lower the float, the quicker the stock can move.

Reasons for initial FDA rejection: Alexza management has been candid in discussing the reasons FDA rejected Adasuve last May. I'm usually cautious when interpreting the way management discusses FDA communications, but in this case, Alexza has been very specific. Here's what Alexza Senior Vice President of R&D Jim Cassella said recently:

The issue that the FDA noted was an inspectional issue, so that was the only thing really in the letter. We addressed the issues with the CDRH reviewers who had raised the issue and then we responded to their questions. We resubmitted the NDA, which is basically a labeling resubmission. . . So there is not a lot of work left to do. We believe that we have addressed the inspectional issues and we have resubmitted the pretty advanced draft of the label and we have probably a little bit of work left to do on some of the REMS documents.

Alexza believed these deficiencies were related to the Adasuve inhaler device and readily addressable. Importantly, FDA didn't raise any new clinical or safety issues.

Price: Alexza opened 2012 trading at $10 per share after reaching a high of over $18 in 2011. The day after FDA rejected Adasuve in May, Alexza closed at $4.80 (split adjusted.) The stock's current price is still below this level, with a market cap of only $67 million.

Cash position: In July, Alexa announced a new committed equity financing facility with Azimuth Opportunity which replaced a similar agreement that expired in June. The $20 million financing facility is expected to provide adequate capital beyond the FDA and EU approval decisions expected in December. Since July, Alexza has tapped this funding source three times to raise $13.6 million. Azimuth can immediately flip the shares they buy in these financing on the open market.

Multiple Catalysts: Not only does Alexza have a Dec. 21 FDA approval decision date, but the company is also up for European approval around the same time. In its third-quarter release, Alexza said European regulators had identified two major issues in their 180-day review letter. Concerns about these issues caused Alexza's stock price to fall as low as $3.78 per share. Last Monday, Alexza said the issues raised by European regulators had been resolved, putting the company on a fast track to regulatory decision in December. I expect European regulators will announce a decision on Adasuve on Dec. 15 following their December 10-14 meeting.

Traders have multiple ways to trade Alexza going into its multiple December regulatory catalysts. The simplest way is with common shares. Alexza options are also available with strikes priced at 50-cent increments. January options expire after Alexza's FDA and European approval decision dates, making them an excellent trading vehicle.

Messier is long Alexza.

Mark Messier is the founder of BioRunUp.com. Messier is a DOJ-certified Criminal Intelligence Analyst and former IT professional, specializing in law enforcement applications. In 2008, Messier began trading biotech stocks, using his analytical expertise to detect and capitalize on human and market patterns. Starting with only $2,200 in his trading account, he has booked over $400,000 in profit in just 4 years. In April 2010, Messier founded the subscription-based stock-trading web site BioRunUp.com to share his biotech trading ideas with the online investor community. Messier enjoys spending time with his wife and two young boys and visiting his "home away from home" in Costa Rica.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,891.31 -94.30 -0.56%
S&P 500 1,963.33 -9.50 -0.48%
NASDAQ 4,392.9380 -26.0960 -0.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs