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NexMed: Unbowed Despite CPA Doubts

Investors in NexMed (NEXM) were jarred on Apr. 1, when PricewaterhouseCoopers expressed "substantial doubt" about the biotech's viability as a going concern. In a filing with the Securities & Exchange Commission the Friday before, the auditor said NexMed had "suffered recurring losses and negative cash flows from operations--and expects to incur future losses." The stock dived from 4.75 to 3.32 that day. "Evidently, the auditor's stark warning was issued in the wake of Enron," says Gary Goldstein of Gilford Securities, who didn't pull his buy rating.

One NexMed product--a topical cream, Alprox-TD, that's expected to rival Viagra in treating erectile dysfunction--has created a buzz in the medical community. NexMed also has Femprox(R), a treatment for "female sexual-arousal disorder." Says Goldstein: "We believe in the products, and see no cash crunch." He's confident NexMed has a "number of options for a quick cash infusion."

Top NexMed brass weren't available for comment, but spokeswoman Deborah Carty told BusinessWeek, "there's no danger of a financial collapse." Current clinical trials will continue, she adds. NexMed will do a sale-and-lease-back deal on its New Jersey facility, which should bring in $6 million to $8 million. And it expects to sign up a pharmaceutical house soon for the U.S. marketing rights to Alprox-TD. That, she says, will produce $75 million to $125 million, excluding royalty. Carty says none of NexMed's large shareholders bailed out. On Apr. 3, shares closed at 3.38. By Gene G. Marcial

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