ResVerlogix: A Biotech on the Block

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The market appears to agree with him. On Jan. 25, the company said that it had enlisted UBS (UBS) to advise it on strategic alternatives, a signal that the company is looking for a buyer.

Searching for a Buyer

Will it find one? "Cholesterol, up for good and down for bad, is a very exciting area," says Piper Jaffray (PJC) analyst Edward Tenthoff, who does not cover ResVerlogix. "Pharma is starting to look earlier because some of the late-stage pipelines have been picked through."

McCaffrey says ResVerlogix is in talks with seven major pharmaceutical companies including a few in the New York area. Those could include New Jersey-based Merck or Johnson & Johnson (JNJ), but Pfizer might be a better fit.

In addition to having a gaping hole where its next superstar cholesterol drug used to be, the New York-based drug giant has the legions of salespeople required to sell widely used cholesterol drugs. One executive, Jan Johansson, ResVerlogix's senior vice-president of clinical affairs, was a co-founder of Esperion, a cholesterol drug outfit that Pfizer bought for $1.3 billion in 2003.

McCaffrey would not confirm any company names, but says Pfizer "would fully understand the quality of the work being done" by ResVerlogix. Pfizer did not return calls requesting comment.

High-Risk Bet

Douglas Chow, an analyst with Caris & Co., says a number of big pharmaceutical companies could be interested in ResVerlogix. Among others, he speculates that Pfizer could be a good fit. "It would make sense given that they do have expertise in [cardio] and are familiar with that market." (Caris has an investment banking relationship with ResVerlogix.)

Chow has a hold rating on ResVerlogix shares. In a recent report he called the loss-making outfit "an extremely high-risk speculative biotechnology investment." The main concern he cites is that the company has not released safety data on RVX-208.

McCaffrey says the company has shared more information with potential buyers than with the public and they are "quite comfortable" with it. And for the moment, investors look quite comfortable without knowing too much. The fear is, with the stock already frothy, investors could get heartburn if a deal doesn't go through.

Halperin is a reporter for BusinessWeek.com in New York.