Why Pros Have a Nose for Nastech

Some investment managers have been loading up on Nastech Pharmaceutical (NSTK ), trading at 15, for their own accounts--but not for clients. Not yet, anyway. The reason: It looks too speculative. Yet the pros like what they see in Nastech, which has developed an intranasal drug-delivery technology. More important, Nastech has completed Phase II clinical trials for its "intranasal apomorphine" for treating sexual dysfunction in both men and women. Intranasal delivery, in spray form, "materially shortens the onset of action, compared with oral or injectable delivery," says Louis Webb of RBC Capital Markets, a unit of Royal Bank of Canada, which has provided banking to Nastech in the past 12 months. Webb and RBC don't own shares. The drugs enter the bloodstream through tissue in the nose, avoiding metabolism, which can alter drug activity and produce side effects. Morphine is used to make apomorphine, but the latter isn't addictive, says Webb. In February, 2002, Pharmacia signed a pact with Nastech to help make and market intranasal apomorphine once the Food & Drug Administration gives its O.K. Nastech will get from Pharmacia $54 million in milestone payments and equity investments, plus a 15% sales-based royalty. Pharmacia has its own injectable sexual-dysfunction product, Caverject. But it has been eclipsed by Pfizer's Viagra. Nastech holds 25 patents for its product in the U.S. and 75 from other countries. Intranasal apomorphine, says Webb, gives Pharmacia an effective noninvasive treatment for sexual dysfunction with "potentially a superior safety profile." He sees Nastech in the black by 2003, earning $1.4 million, or 15 cents a share, on sales of $19.2 million. His 12-month stock price target: 30.

By Gene G. Marcial

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