VIAP: VIA Pharmaceuticals, Inc

Shares of VIA Pharmaceuticals, Inc (VIAP) have been toggling back and forth around $0.15 and $0.20 for the last few months. As noted on their website, their main product, VIA-2291, is an important mediator of information involved in the development and progression of atherosclerosis; VIA holds exclusive worldwide rights to develop and commercialize their product.

VIA-2291 is currently being studied in three Phase 2 clinical designed with the intent of providing proof-of-concept as early as possible in the clinical development process. While the initial plan is to target the secondary prevention market for existing adverse cardiac event patients, the product has the potential to benefit the 15 million people who suffer from atherosclerosis and cardio vascular disease. At this point, VIA-2291 is Phase III ready.

In a March 31, 2010 PR news release, VIAP announced a 63% reduction in their workforce to approximately 6 people in the business development and financial areas. This strategic move seems to be a step in the right direction since it significantly reduces over head and directs their existing funds towards core research and development.

In their 10/31/2010 10-K filing with the SEC, VIAP noted several factors that may cause actual results to differ materially from current expectations. Included in the laundry list were:
-- our ability to borrow additional amounts under the new loan from Bay City Capital, which is subject to the discretion of Bay City Capital;
-- our ability to obtain necessary financing in the near term, including amounts necessary to repay the previous loan from Bay City Capital following the April 1, 2010 maturity date;
-- our ability to comply with covenants included in the loans from Bay City Capital;
-- our ability to obtain strategic opportunities to partner and collaborate with large biotechnology or pharmaceutical companies to further develop VIA-2291;
-- our ability to form and maintain collaborative relationships to develop and commercialize our product candidates

What I found interesting is that Bay City Capital LLC (Bay City) owns approximately 92% of VIAP’s outstanding shares. Given their principal position, I think the stock price at this point is irrelevant to them since VIAP 2291 is only wrapping up Phase II. Bay City’s significant position also mutes the impact of VIAP being delisted from the NASDAQ. All of this leads me to believe that given the small float, the price per share remains with Bay City; by keeping the share price low, many retail investors will give up and jump ship making their cheap shares available to Bay City. Once Phase III is completed or near completion, Bay City will be able to sell their shares on the market at a potentially significant higher price per share.

Bay City was established in 1997, according to their website, to manage investment funds in the life sciences industry and looks for companies in various stages of development and performs a systematic and comprehensive due diligence process prior to allocating funds toward an investment. Given the size of their investment and their seasoned business acumen, I believe that Bay City will do everything possible to make VIA-2291 a success by either continuing to loan more money to VIAP or more likely, by helping VIAP find a partner. The idea of a partner seems to fit with VIAP’s forward looking statements. However, it is important to keep in mind no revenue will be generated unless VIAP-2291 reaches the market. There is also the risk that Bay City is willing to write off the investment as a loss at some point in the future.

Since I didn’t bet the farm on this one, I’m holding my position long term, at least until Phase III is completed. However, if some spikes are high enough to catch my attention, I might sell off a portion of my position to recoup my original investment. Remember, VIAP is a penny stock which makes it a risky investment and the price of the stock subject to rapid fire up/down fluctuations. It is important to do your own Due Diligence before investing your money and do not Buy/Sell based on LA's stock picks and opinions.

Disclosure: LA Long VIAP