Rexahn Higher on Deja Vu Stock Promotion

BOSTON ( TheStreet) -- Rexahn Pharmaceuticals ( RNN) jumped 24% to $1.84 a share Monday after a web site that promotes biotech penny stocks to retail investors told subscribers the stock was a "solid bet" to reach $10 or more by the end of the year.

The same web site, BioMedReports.com, last promoted Rexahn heavily one year ago with repeated promises that the small drug developer was close to signing a $1 billion drug licensing deal that would propel the stock to $15. Those reports helped fuel a speculative run in Rexahn shares from 70 cents to more than $3. The promised licensing deal never happened and Rexahn's stock price crashed to below $1 a share.

Rexahn's lead drug, Serdaxin, is an antidepressant that failed a mid-stage clinical trial last year. Despite the negative results and the inability to find a partner, Rexahn elected to move ahead with a larger phase II study of Serdaxin in patients with major depressive disorder. Results from the new Serdaxin study are expected late in 2011.

On Monday, BioMedReports was back promoting Rexahn to its subscribers and promised a new report on the stock today:

"Given what just happened to Clinical Data, RNN has become the next candidate in line for positive FDA developments in the anti-depressant market. There is little doubt about that and I will go into why that is important for RNN step-by-step. So as a mid-to-long term investment, this is very solid bet. I will explain in detail why this can become a $10+ stock by the end of the year," BioMedReports said in its Monday alert.

The FDA approved Clinical Data's ( CLDA) antidepressant Viibryd at the end of January.

BioMedReports send its alert on Rexahn to subscribers at 12:48 pm ET Monday. At that time, Rexahn shares were trading around $1.50, flat on the day, but the stock quickly spiked, hitting an intraday high of $1.90 before closing Monday at $1.84. Trading volume was light but surged after the BioMedReports alert, with more than 5 million shares trading hands by the end of Monday -- almost six times normal.

Rexahn shares were up 3% to $1.90 in Tuesday pre-market trading.

The author of the BioMedReports alert sent Monday owns shares of Rexahn. The author also owned shares of Rexahn last year when he promoted the stock heavily to retail investors and traders, making claims and promises that never materialized.
  • Feb. 10, 2010: BioMedReports called Rexahn a "remarkable find" developing drugs "lableed potential blockbusters that have several big pharmaceutical companies lining up as interested partners."
  • April 15, 2010: BioMedReports writes, "We believe they Rexahn will make a deal with one of the six interested major pharmas for Serdaxin. Sources tell us that would happen (worst case scenario) by year's end. When that deal is announced, this stock's price should quite easily find itself in the teens. In other words, short term the stock will rip the shorts."
  • April 20, 2010: BioMedReports writes, "In the opinion of many of us who follow the company Rexahn, RNN is a $15 stock waiting to happen... they will make a deal with one of the six interested major pharmas for Serdaxin. As a matter of fact, sources anticipate that partnership for Serdaxin by year's end is imminent."

    The April 20 report ends with a plea for BioMedReports subscribers to buy Rexahn stock: "Don't listen to the dips, buy on them."
  • When BioMedReports urged investors to buy Rexahn shares on April 20, the stock was trading at $2.52, down from a high of $3.68 just a week earlier. Buying the dip turned out to be money-losing fiasco for anyone who listened to the web site's advice.

    By June, Rexahn shares were trading at $1.19.

    On June 21, BioMedReports reiterated its bullish stance on Rexahn and once again told investors to buy the stock because a blockbuster partnering deal for Serdaxin was still imminent:

    "Wall Street believes the potential deal to be nearly $1 billion and to be made up of milestone payments and double digit royalties with at least $50 million upfront," BioMedReports wrote.

    By December, Rexahn still hadn't announced a partnership for Serdaxin, choosing instead to move ahead with another clinical trial. Rexahn shares fell to 98 cents.

    BioMedReports says it does not receive payment from the biotech companies it promotes on its web site. The owners and writers who post stories and alerts on BioMedReports are allowed to own stock in the biotech companies they cover, which is explained in the web site's disclaimer:

    "Please note that our writers, analysts and site administrators all reserve the right, without prior notice, to sell, buy, cover, liquidate, increase or decrease any positions disclosed in any of the securities covered or written about on this news portal at any time, for any reason. BioMedReport.com's directors, officers and employees may anticipate purchasing shares mentioned in this report or may already have purchased shares and may profit in the event those shares rise in value. We reserve the right to buy or sell the shares of any companies mentioned in any reports or materials published on this portal at any time."

    Last June, Rexahn raised $9 million in a registered direct offering of stock. As of the end of the September quarter, Rexahn had $15.8 million in cash, sufficient to last through the end of the year.

    --Written by Adam Feuerstein in Boston.

    >To contact the writer of this article, click here: Adam Feuerstein.

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    Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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