Tuesday, March 31, 2009

Wide Angle on Biodefense Player

PharmAthene, Inc. (PIP: NYSE AMEX) is an early stage biopharmaceutical company engaged in the development and commercialization of vaccines and therapeutics for use against toxins that are potential agents of bioterrorism. Yesterday, the company reported fourth quarter 2008 results, but all eyes are trained on the pending decision by BARDA (Office of Biomedical Advanced Research and Development Authority in the Department of Health and Human Services) on the Company’s bid to complete development of and supply 25 million doses of its second generation anthrax vaccine, SparVax, for the National Strategic Stockpile.

Award of the BARDA contract for SparVax would shift the Company into a new stage of operation - that of producer rather than developer. Granted the Company had already received a contract in 2006, from the Department of Defense that includes an option to procure 90,000 doses of Protexia, to treat military personnel exposed to chemical nerve agents. Yet, the SparVax second generation anthrax vaccine is in a later stage of development and is likely to reach production stage before Protexia. We believe success in penetrating the anthrax vaccine market in the U.S., firmly establishes PharmAthene as a biodefense player.

Demand for anthrax vaccine in the U.S. is only part of the picture for PharmAthene. We expect a successful outcome in the U.S. will encourage demand from other countries with biodefense issues, including the U.K., France and Germany among others. Meaningful progress in tests of two of the other four biodefense countermeasures in PharmAthene’s portfolio, Valortim (anthrax infection treatment) and Protexia (treatment or prevention of nerve agent poisoning) helps support our view that the company is more than the “one trick pony” image that appears to be developing with so much attention focused on SparVax.

Despite our “wide lens” view on PharmAthene, the SparVax contract award is likely to remain the dominant driver of PIP valuation. We expect the stock to continue reacting to Company presentations and announcements as well as any announcement by BARDA or PharmAthene’s principal competitor in the anthrax game, Emergent BioSolutions, Inc. (EBS: NYSE) relating to second generation anthrax vaccines or the National Strategic Stockpile.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Speculative Buy recommendation on PIP shares.

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