Potential Heart Attack Cure Could Reward Investors Big Time

By Michael Brush
July 06, 2006

When doctor Mark Hyman is out promoting his popular book “Ultraprevention : The 6-Week Plan That Will Make You Healthy for Life,” he likes to point out that inflammation is the scourge behind many of the main ailments that do us in.

Inflammation, of course, is our body’s reaction to problems like infection. It’s part of the healing process. But when it turns into a permanent condition lasting for years inside our arteries, it is the main culprit causing heart attack and stroke.

Hyman suggest diet and lifestyle changes to correct the problem. But an Alpharetta, GA-based biotech company called Atherogenics (AGIX) thinks it has a silver bullet – a drug that safely blocks inflammation in the arteries.

The stock market is not so sure. Since the start of the year, Atherogenics’ stock has declined to $13 from $21.

Down here, however, insiders have shown their confidence. They recently bought $850,000 worth of the stock for around $13. The giant pharmaceutical company AstraZeneca (AZN) is also a believer. At the end of last year it entered into a co-marketing deal in which it helps fund Atherogenics in exchange for a piece of the action later.

If the insiders are right and the compound ultimately makes it to market, investors who buy now will be amply rewarded. A.G. Edwards & Sons analyst Alexander Hittle estimates the market for the drug will be $2 billion by 2010, of which Atherogenics would get half. He thinks that kind of potential revenue could help propel the stock to $45 -- for a cool triple if you buy now.

The company has other irons in the fire – potential cures for other inflammation-related ailments like organ transplant rejection, rheumatoid arthritis and asthma. But for now it’s all about the silver bullet against the inflammation in our arteries that leads to heart attack and stroke.

That’s one reason why betting along with the insiders here is a risky venture. Brean Murray, Carret & Co. analyst Jonathan Aschoff, for example, thinks the drug will fail. That’s why he has a $2 price target on the stock – which would mean if you buy now you will lose most of your money.

I’d just take his warning as a reminder of the risk inherent in all biotech companies. Given the level of insider buying recently, I’d put a small amount of money in this stock for a potential three bagger.

Here’s a closer look.

Inflammation

Inflammation is the body’s normal reaction to fight infection, disease and injury. It generates signals that recruit leukocytes – which destroy infection and remove debris from the area around an injury. That’s all good. But when inflammation persists for years, the leukocytes that it continues to attract can worsen the inflammation and cause problems like atherosclerosis. Atherosclerosis leads to the buildup of plaque along the arteries which reduces or blocks blood flow – causing heart attack or stroke.

Atherogenics’ silver bullet, called AGI-1067, works by blocking proteins that make genes produce other proteins that cause the inflammation. The compound may also block oxidants that cause inflammation. It does all this without compromising the body's ability to protect itself against infection, says the company.

The ultimate test

A phase III study of AGI-1067 launched in June 2003 may be proving the company right. It is known as Aggressive Reduction of Inflammation Stops Events (ARISE). Researchers are giving AGI-1067 to a sample of people at high risk for coronary disease, heart attack and stroke – hoping for a lower-than-expected number of negative outcomes like these.

While the study won’t close until August, so far the numbers look good. Fewer people than expected are having these problems. It’s hard to know just yet whether this is due to any positive effects from AGI-1067 or other factors like better care from their doctors.

In a recent note on Atherogenics, Canaccord Adams analyst Joseph Pantginis, said he thinks it’s because the drug works. A.G. Edwards & Sons analyst Hittle has the same view.

“We continue to recommend purchase of Atherogenics shares for the truly speculative investor who has the capacity to withstand both ongoing volatility and the possibility of near total loss of capital should the ARISE trial fail,” he says. “In exchange for running these risks, should the ARISE trial succeed the upside potential of a drug that adds meaningful benefit on top of the current standard of care in cardiovascular medicine is vast.”

But Brean Murray, Carret & Co. analyst Aschoff thinks other factors could explain the positive results -- like the use by participants of anti-cholesterol drugs, beta blockers and aspirin. That’s why he expects the stock to be a wash out.

The bottom line: We probably won’t know who is right until the start of next year when the company releases definitive results. Before then, I’d place a small bet on a positive outcome, given the recent insider buying and the potential upside for you if they are right.

Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.