Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
7/17/09
ALRK daily
0.12 0.11 0.10 0.09 0.08 0.07 0.06 0.05 Š BigCharts.com
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MARKET DATA
Company Overview Symbol Exchanges Current Price Rating Outstanding Shares Market Cap. Average 3M Volume
ALRX OTCOB $0.12 Speculative Buy 92.4 Million $10.4 Million NA
Source: Yahoo Finance, Analyst Estimates
AlphaRx Inc. (ALRX) is a specialty pharmaceutical company !" ! # ! ! $ % # &' * $ +,- ! ! $ /001 + 2 2 % AlphaRx in 2000. ALRX is applying its novel drug delivery technology to therapeutic
5 % % with its technology demonstrate improved biodistribution and % 6 ! $ 7 2 +,- ! % % administered in alternative dosage forms. By using its Bioadhesive ' 8 '9 ! ! $ * $ &' +,- : * 5 % 6
!" !
advantages for these manufacturers by enabling them to extend patent protection with reformulated versions of existing compounds and by broadening their potential applications. ! ! ! ! %! forming partnerships with pharmaceutical companies and research
AlphaRx Inc. (OTCOB: ALRX)
1
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
+,- ! 22 ;< 2' $ ! 8 5 = * 2 +,- ! ! ! 5 >/?@ ! ! C % * $ D E F ,5 G 5 $ D in Mexico in 2009. +,-" J! 9 ! % % ! ! & % K % ! N N $ 5 ! O@@ @@@ ! P < 5 >/ 1 % +,- 5 J! 9 !
$ * ! % 2Q22 KG and anticipates completing the clinical development program through phase IIb within 24 months. ALRX is also K 2 /TT = % % /@U O@U ?V W ! 7 ! $ $ * 7 % ! 2 OV@ $ $ Y $ 8 ! C 7 +,- P < * K 2 /TT 5 >? @ % ! 2;' 5 ! K 2 /TT +,- $ K 8 2 +,- ! >V@ ! K 2 /TT $ ! !
Investment Appeals >/O/ % ! * ' $ $ N ! ' ! ! P < $ /T ZU ! T@@T >[@ T % T@@1 5 ! T[U \ : ! T/ 1U /001 ' /@U ! >/O/ % %! T@/T +,- % * % ! ! ! ! ! $ ! # ! ! 8 ' 8 '9 $ % ! % ! $ * $ ! # % % % ! %! ! $ 7 $
AlphaRx Inc. (OTCOB: ALRX)
2
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Robust drug pipeline ! % $ ! 22 2;' 5 ! +,-" 2 \ 59 ! 22 C J! 9 % 2 K 2 /TT recently reported very positive preclinical results. Exhibit: Product pipeline
Product
Streptomycin NDS ARX606T
Initial Indication
Status
Osteoarthritis Pneumonia (Gram +ve) Pneumonia (Gram -ve) Bio-defense Bio-defense Tuberculosis Wound Healing Cardio-protection Neuro-protection Cancers
Phase II Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical R&D
Source: Company website * Licensed to Cypress Bioscience, ** Collaborated with US Army, *** Licensed to Gaia BioPharma
J! 9 * J! 9 % % % ! $
N 7 O@@ @@@ ! $ 2 P ! * G ! $ T1U >Z@ @@@ P < * 7 ! 5 >/ @ % +,- $ ! % ! 2Q22 < : ! royalty payments ALRX plans to deploy its drug delivery technology by forming partnerships with pharmaceutical companies and ! $ K 8 K 2 /TT P +,- ! ! 5 >V@ ! $ $ K 8 * K 2 /TT 2 +,- 2 \ 59 ! 8 % >//?
! % ! ! 8 $ ! * 2 \ 59 ! G G $ P < ! G , 2 2 ' P< G,22' J! 9 as a biodefense agent. AlphaRx Inc. (OTCOB: ALRX)
3
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Proprietary Drug Delivery Technology +,-" ! ! ! $ % ! ! # % % % ! $ +,-" ! ! : F $ 7 ! ! ! % ! $ ! ] + ' <! +' !C < ^ ! , % <! <^ ,^ !C < + ; <+; E!% + ! ; E+; # ! Exhibit: Drug deliveries platforms
Source: Company website
Robust Product Pipeline !" ,_' +,- ! ! ! * $ $ % 6 ! ! # ! ! 22 5
AlphaRx Inc. (OTCOB: ALRX)
4
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Exhibit: ALRX Product pipeline
Product
Streptomycin NDS ARX606T
Initial Indication
Status
Osteoarthritis Pneumonia (Gram +ve) Pneumonia (Gram -ve) Bio-defense Bio-defense Tuberculosis Wound Healing Cardio-protection Neuro-protection Cancers
Phase II Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical Pre clinical R&D
Source: Company website * Licensed to Cypress Bioscience, ** Collaborated with US Army, *** Licensed to Gaia BioPharma
J! 9 J! 9 % ! % ` % ! % !
! %! J! 9 # % $ ! 7 2 J! 9 5 # ! D J! 9
: % $] j Its extended release mechanism provides prolonged therapeutic levels. It is inhaled once a day versus current 7 % % ! N ! 5 j ; * $ % j # ! $ 7 2 % ! % ! % $ 5 ! * ! 5 ! j 2 $ ! j &' ! N
* $ J! 9 *
N P < 5 ! O@@ @@@ ! 2 P 0U TVU $ % 2 P G ! $ % % T1 /U $ V@U 5 >/ @ % ! 9 9 +,-" % ! AlphaRx Inc. (OTCOB: ALRX)
5
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
9 % # ! ! G,< ! $ ! * 5 >/ @ % ! +,- $ T@@0 $ $ 9 next stage. 2 \ 59 2 \ 59 $ * $ ;< 2' +,- ! >//? % ! $ $ * $ 5 G 5 $ ! * $ ! 22 $ ! N %! % ! ! 8 K 2 /TT K 2 /TT = % $ 5 ! # +,- K 2 /TT ! K 8 ! >V@ ! K 8
* +,- >? @k % * K 2 /TT * 5 # ! $ % !" 7 C OZU $ " 8 TZU $ " +,- < ! 8 % C ! % * $ $ >OV % ! P < >0 @ % % * >VO / % 2009.
Drug Delivery System Market K $ ! ! Rapid technology advancement and pharmaceutical industry demand for delivery systems that can extend the % 5 * ! $ ! ! * ! ! P < ! $ ! ! ! % K $ from generic drugs has prompted the large pharmaceutical companies to help fund the development of new ! $ % ! $ ! % 5
* 5 ! 8 $ T@@T T@@1 ! ! 5 /T ZU ! >[@ T % 8! T@@1 5 ! T[U $
: ! T/ 1U /001
AlphaRx Inc. (OTCOB: ALRX)
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Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Exhibit: Drug Delivery System Demand Trends
Source: Fredonia Report, 2008
& K P < ! ! $ $ /@U ! >/O/ % %! T@/T %! $ $ % 6
Exhibit: R&D Productivity
Source: Pharma Report, FDA *Estimates
' $ ,_' % $ ,_' 5 % $ * 5 >[@@ 5 /@ ! ! ,_' ! % T@@? $ 5 >Z@ % T@@1 % ;G^ ! $ % %
AlphaRx Inc. (OTCOB: ALRX)
7
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
8 * % $ * ! % ! ! # * $ 5 ! Exhibit: Number of Patents going Off-Patent
Source: FDA S
$ = ! * 5 ! % # 2 !
! % $ 5 ! % % 7 2
>V@ % $ P < qT% ^ $ 7 %! T@/@ 5 %! $ ! ! pharmas such as ALRX. ' ' ! <! <
' ! ! : %! ! ] j j j j
D Inhalation _ 2 %
D ! ! 5 !
! ! P <
* ! ! $ [ ZU ! T@@T $ >Z@ T % T@@1 ! ! * OTU
$ T/U ! T@@T >TV 0 % T@@1 ' ! ! ! $ [U ! >0 1 billion in 2007.
AlphaRx Inc. (OTCOB: ALRX)
8
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Exhibit: Drug Delivery System Demand, 2007 (Total value =$80.2 billion)
Source: Fredonia 2008 report
$ ! ! ! %
%!
! ! ] j j j j j
; <! ;< Respiratory agents E _ K K2 D Exhibit: Drug Delivery System Demand by Application, 2007 ($80.2 billion)
Source: Fredonia Report, 2008
' ! ! ; <! ;< O/U
* , ! * 5 ! /1U $ %! /V TU /V @U 2 P < 5 ^ $ ! ! * ' 5 5 ! >TT V T@@1 >O/ 1 %! T@/T $ " AlphaRx Inc. (OTCOB: ALRX)
9
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
N $ 5 ' % 6 ! ! ! $ $ 7 ! ! % % $ $ !
Exhibit: Key Indicators for Drug Delivery Systems (billion dollars) % Annual Growth Item Gross Domestic Product Resident Population (million) Population 65 Years & Older (million) ! " # $
Pharmaceutical Demand Acute Conditions (million) Chronic Conditions (million)
2002
2007
2012
07/02
10470 287.9 35.6 1603.3 200.6 425 935
13850 301.6 37.9 2250 287.6 437 1012
17550 315 42.6 3165 410 450 1100
5.8 0.9 1.3 7 7.5 0.6 1.6
12/07 4.8 0.9 2.4 7.1 7.3 0.6 1.7
Source: Fredonia 2008 report
ALRX Business Strategy ALRX is using partnerships with pharmaceutical companies and research institutions to leverage its own # ,_' * : * 5 ! # ! % $ % * Q
: partner. + ' % +,-" ! ,_' ! $ % * +,- $ +,-" $ ! * +,- % ! ! ! $ ! N %! ! 8
6 5 % * $ 5 G 5 ;< 2' 2 \ 59 2 +,- ! >//? ! % ! 2 D % T@@[ +,- K 2 /TT K 8 ! >V@ V ! K 8 * , ' +,-" % ! 5 $
! $ 7 2 & % ! T@@[ +,- G $ P < ! G , 2 2 ' P< G,22' P< G,22' $ +,- ! AlphaRx Inc. (OTCOB: ALRX)
10
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
% $ +,- ! $ % intracellular bacterial infections in animal models.
Competitors $ ! !
< ! $ +,-" ! !" % ! ; K K < $ $ ; * + % 2 : ! ! * +,- 6 N ! !" ! ! : ! ; K ; < <$ : % ; K * % ! $ % P < ! * ; " D82 % % 6 &' ! & % & % % ! % $ ! $ +,-" J! 9 ; >ZT ? % # >[ 0 billion last year. K < 2 K+2' P < % K <
: K " % : ! % ! &' $ +,-" J! 9 K < T@@[ >V O % # >T 1 % ; * ;F , ; * % ^K! ! = ; * $ !
! ! >0@ T T@@[ and posted a $32.3 million operating loss. + % 2 +8 % + % * G 2 $ +,-" 2 \ 59 >[T 1 # T@@[ % 5 : of $29.0 million.
AlphaRx Inc. (OTCOB: ALRX)
11
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Financial Analysis , } ' N G O/ T@@0 +,- $ ! ! >/?Z /@0 >/1 TZO ! , ! ! $ ! $ >/Z ZVV >/1 TZO ! $ >/Z0 ?VZ ! 2 G T@@0 N ! # # ; $ >T@ 0V/ >O01 TVV N ! ; # 6 % % K_ ,_' 5 ! ! $ : 5 }T @0 ` : 5 $ >Z[ TO? N ! Exhibit: Financial Performance Quarter Particulars ($)
31-Mar-09 31-Mar-08
Net Sales % ' * #
: ;" * ' #
Net Income (Loss) Total Current Assets Long term assets (including plant, property and equipment) " " < #=$ > ?; @
164,109 72,495 44,262 20,951 170,263 110,370 (529,403)
17,243 211,846 190,402 (397,255) 33,052 149,498 (537,421)
Annual 30-Sep-08 97,499 753,118 583,195 (1,335,457) 33,052 149,498 (639,045)
30-Sep-07 170,441 1,023,684 727,046 (1,750,236) 146,714 217,626 (458,798)
Source: Company10-K and 10-Q filings
' # ! < % O@ T@@[ ZOU >01 Z00 \ % !" >/ OO1 V1[ % >/ 1VZ ?T/ ! ! % K_ ,_' 5 K_ 5 T?U ! ! $ : 5 O[U ,_' 5 T@U 5 /VU 2 5 >OV [V1 ! >/TT ?@@ ! , D * G ! T@@0 +,- ! >O?@ @@@ ! % T@@0 ,_' 5 ! >T@@ @@@ K_ >TV@ @@@ 8 ! $ ! ! ! ! ! $ ! = ` * $ +,-" $ ] j +,- # }T @0
5 * ! % 6 C AlphaRx Inc. (OTCOB: ALRX)
12
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
j ! ! % C j +,- ! * 2 \ 59 K 2 /TT C j +,- % ! 5 >/VV royalties on future product sales. ! $ % *% K 2 /TT J! 9 K 2 /TT >? @k %
* % K 8 $ $ ! *
: /@U * VU ! +,- % >O@ ! ! K 2 /TT ! $ J! 9 N ! 8 >ZV@ P < * % ! [U * * $ ! J! 9 ! 5 >Z@ = < ; * + % $ ! O [ $ Q< TVU * +,- !
: K 2 /TT J! 9 * % +,-" * : 5 ! >// ! >[@ = $ ! # $ Q< +,- Peer P/E and P/S Multiples Company Name Novartis AG Nektar Therapeutics Paladin Labs Inc. Gilead Sciences Inc. Average for the Peer group " : ;E
Ticker Price Market Symbol $ Cap. $ Mn NVS NKTR PLB GILD
$39.75 $ 5.95 $19.17 $44.91
1,052 56 29 4,105
ALRX
$0.12
11.1
2007
P/E 2008
2009
2007
P/S 2008
2009
10.00 NM 68.46 26.73 35.06
10.92 NM 29.05 21.39 20.45
11.19 NM 26.70 18.07 18.65
2.75 2.05 4.57 9.70 4.77
2.52 6.20 3.48 7.69 4.97
2.54 7.81 2.67 6.33 4.84
Source: Reuters
` * ! 7 6 *Q $ # +,- $ < 8 ! ! ! ! * !
: ! $ $ ! * % $ $ !" /@ F # % investing in ALRX shares.
AlphaRx Inc. (OTCOB: ALRX)
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Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Risk Factors History of operating losses < N G O/ T@@0 +,- >/1 ? # ! # # N $ * ! % T@@0 ! ! % ! $ ! ! ! +,- $
: ! ! ! ! 2 \ 59 $ % * G 5 % $ 2 & < ; # ! $ * # +,- # # < ! 5 ! >/V ! $ % % $ % all. ALRX may be forced to delay or even abandon clinical development of some of its products if it failures to Q &' ! N ! * D $ ! ! $ ! ! $ ! &' * +,- 6 : * %! $ * $ &' ^ P ! N $ !" * % # % K < !" $ $ * : %! N $ D * W %! ! 2 +,- ! # $ $ $ # * , * ! ! % ! +,- * % % ! infrastructure.
AlphaRx Inc. (OTCOB: ALRX)
14
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Management Team
Michael Lee
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G P %
= ,5 G P % &D D ! + ; ! E E & G P % % * P !
 < $ : Chief Scientist
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AlphaRx Inc. (OTCOB: ALRX)
15
Analyst: Lisa Springer, CFA Initial Report July 21th, 2009
Disclaimer 'D ;D 8 <^ ; 2; ^< G^; '^ 2<2D; P D; ; G ^,2 +< &DP;' D; E2< ,^ D, ` % * $ P < < ^5
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AlphaRx Inc. (OTCOB: ALRX)
16