Mulling the Myogen Options

Upbeat trial results for a blood pressure drug mean expectations are running high.
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There's more than one way to react when financial analysts unanimously recommend a stock.

You might take the contrarian view and sell. Or do you get on board the moving train? Or do you sit on the sidelines and kick yourself for not investing on that hunch you had a few days ago?

That's the choice facing investors in

Myogen

(MYOG)

, a Westminster, Colo., biopharmaceutical company with very little revenue, some promising compounds, one big headline and a stock that has nearly tripled since Independence Day.

The headlines arrived Aug. 18 when Myogen issued results of a midstage clinical trial showing that an experimental drug, called darusentan, reduced blood pressure in patients for whom other medications were insufficient.

The news sent the stock soaring by 60% that day and prompted three analysts to raise their ratings. Now, seven analysts have buy ratings, according to Thomson First Call. Three months ago, there were four buys and three holds on a company that's expected to continue losing money at least through 2007.

Needing Research

Still, there are caution flags. A "potential downside" is the possibility that upcoming late-stage clinical trials "with larger numbers

of patients may not show the same impressive results," says Sagient Research Systems of San Diego, whose BioMedTracker report analyzes biotech drugs. "Additionally, details on side effects

for the latest clinical trial were not reported, and there may be competition from other early stage drugs being developed by large pharmaceutical companies."

Alternately, Sagient Research says the optimistic news is that the drug "may have substantial benefits replacing other drugs used earlier on in treatment."

Wall Street analysts acknowledge the caution flags -- and drive right through them as they predict the drug could reach the U.S market in 2008 or 2009 in a best-case scenario. Their latest commentaries cite the need for more details about the the midstage clinical trial and the need to confirm these results with several years of more extensive testing.

"It remains to be seen whether the rate of adverse events increases with chronic therapy," says Martin D. Auster of Wachovia Capital Markets in a recent research report. Myogen tested 115 patients for 10 weeks; some received a placebo, the others received darusentan. "Given the fairly large population that could be addressed, a reasonably clean side effect profile is mandatory," says Auster, who doesn't own shares.

The test results show that people taking the Myogen pill at the highest dose achieved a statistically significant reduction in blood pressure vs. people who received a placebo. "Clinically meaningful reductions ... were also observed at earlier time points at lower doses," says Myogen, adding that there was no indication of liver problems.

Many drugs fail to make it from clinical trials to the marketplace because their potential risk of liver damage outweighs their potential benefit, but there weren't any problematic liver enzyme elevations with darusentan, says Joseph P. Schwartz of Leerink Swann in a recent research report. He doesn't own shares.

The other big issue is how many patients might use darusentan. Although Myogen says some 50 million Americans have hypertension, only a fraction have "resistant hypertension." These patients can't achieve a blood pressure level of 140/90 despite taking "full doses of an appropriate three-drug regimen that includes a diuretic." For patients with diabetes and chronic kidney disease, the blood pressure limit is 130/80.

Still, a small fraction is a big number for Myogen. Wall Street's estimates on how many U.S. patients might benefit range from 2 million to 16 million. In a ferociously competitive blood-pressure drug market, Myogen is betting that darusentan, "could provide additional blood pressure-lowering benefit in this patient population."

Ups and Downs

Investors' blood pressure has been severely tested since Myogen went public in October 2003. The initial offering price was $14, and the stock has spent most of its time in single digits, hitting a low of $5.30 last September. It closed at $20.03 on Thursday, having reached an all-time intraday high of $23.20 on Aug. 18.

Myogen sells one intravenous drug, Perfan I.V., in eight European countries, via a license from

Sanofi-Aventis

(SNY) - Get Report

. Recent clinical trials of a Perfan pill for congestive heart failure didn't meet their goals.

A spokesman says Myogen has no plans to market Perfan I.V. in the U.S. The drug is used in hospitals to treat patients with acute, rapid heart failure and for patients who have undergone open-heart surgery. The drug produced sales of $3.3 million last year.

Before the darusentan announcement, analysts had been focusing on ambrisentan, an experimental drug for pulmonary arterial hypertension, or PAH. (Both drugs are licensed from

Abbott

(ABT) - Get Report

.) PAH is a rare and dangerous disease, creating high pressure in the artery that carries blood from the heart to small arteries in the lungs.

PAH can cause a narrowing of these arteries. Narrow or blocked arteries force the heart to pump harder, damaging the heart muscle and increasing the risk of heart failure. If drugs don't help, a patient faces lung-transplant surgery.

There are only about 50,000 PAH patients in the U.S. and another 50,000 in Europe, says Sagient Research, noting that there are five PAH drugs on the market and more in development.

The market leader is Tracleer from the Swiss firm

Actelion

. Other participants include

GlaxoSmithKline

(GSK) - Get Report

and

Pfizer

(PFE) - Get Report

. Pfizer's PAH drug Revatio contains

the same main ingredient as the impotence drug Viagra. The FDA approved Revatio in June.

Another biotech company,

Encysive Pharmaceuticals

(ENCY)

asked the Food and Drug Administration in May to approve its once-a-day PAH pill called Thelin.

Competition is intense because each drug has a drawback. For example, the GlaxoSmithKline drug must be taken intravenously. The Tracleer pill is easier to take, but its label carries a "black box warning" -- the strongest alert by the FDA -- about potential liver damage and birth defects.

Myogen's pill could be the "best in class" because it appears to match or exceed competing drugs' effectiveness but may have fewer side effects, says Schwartz of Leerink Swann. Tests so far indicate that ambrisentan "should have a tangible advantage" over Tracleer and Thelin because it doesn't interact with other drugs taken by PAH patients.