Alexza Pharma Outlook Cautious

We are enthusiastic on Alexza Pharmaceuticals, Inc.’s (ALXA - Snapshot Report) proprietary novel Staccato system that reformulates oral or injectable small molecule compounds into an inhalable aerosol. Preliminary data on AZ-001 (migraine) and AZ-004 (agitation in schizophrenia) looks encouraging, but the company still has to complete phase III trials before we proclaim either a success. Our rating is Hold.

Funding operations doesn’t seem to be an issue for now. Alexza probably has enough cash to fund its development programs into the first quarter of 2010. But the only clinical stage candidate we expect to be on the market in 2011 is AZ-001. The company could be in position to file with AZ-004 in 2010 / 2011, so by 2012 both AZ-001 and AZ-004 could be on the market.

The stock took a big hit after the failure of AZ-002 candidate for panic attacks associated with panic disorder. At this time we think investors can be patient with Alexza. Upside over the next few quarters could come from the announcement on a partnership for any of the pipeline candidates. In the meantime, we see $7 as fair value.

Read the full analyst report on ALXA