Robert K. asks, "Adam, how does something like Rexahn Pharmaceuticals (RNN) happen?"

Ha! I take it you mean, how does a company with a long history of drug development failure, abandoned by investors, somehow resurrect itself and become one of this year's top stock performers?

Rexahn "happens" because the biotech stock bubble has an amnestic effect on a lot of investors. They buy what they think is a shiny new stock, when in fact, it's just a throwaway vamped up with new paint.

Take Rexahn's lead cancer drug Archexin. In January, the company announced the start of a phase II study in patients with advanced kidney cancer.

Um... Rexahn tried this before unsuccessfully. A phase II study of Archexin in kidney cancer was abandoned in 2009:

From Rexahn's 2009 10-K:

Archexin is currently in Phase II clinical trials for the treatment of pancreatic cancer with patient enrollment underway. Archexin's Phase II clinical trial protocol for the treatment of renal cell carcinoma (RCC) was accepted by the FDA, but issues with enrollment have delayed the trial. Such enrollment issues were primarily due to the fact that there is a small number of patients that have been diagnosed with RCC and such patients are often treated with surgery instead of drug therapies. After further consideration of the trial design and the limited number of patients, there was a reallocation of resources and Rexahn reprioritized Archexin to pursue studies in pancreatic cancer and ovarian cancer.

Mediocre (and frankly, unreliable) results from that phase II study of Archexin in pancreatic cancer were released in August 2012. Last September, Rexahn admitted Rexahn's development path in pancreatic cancer was futile

Sell-side analysts like H.C Wainwright's Andrew Fein are telling investors to buy Rexahn today with nary a mention of Archexin's troubled history. Surprise, surprise.

Rexahn and its enablers like Fein are also playing selective disclosure with a second cancer drug candidate. "Management indicated that RX-3117 partnership discussions have been ongoing and are confident of a deal by mid-2014," Fein wrote in a January research note.

Left unsaid: Rexahn had a partner for RX-3117. Teva (TEVA) signed on to fund early development of the drug in 2009. Last August, Teva gave the drug back to Rexahn.

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