Back in May 2005, company insiders at ViroPharma (VPHM:NASDAQ) bought 233,500 shares of their own stock. They were obviously banking that their novel drug, Vanocin (which treated acne and various skin conditions) would be accepted by the FDA.

It was. And the stock rose from $3 to $24! Now another biopharmaceutical company may be on the verge of similar profits.

NeoPharm, Inc. (NEOL:NASDAQ) is a biopharmaceutical company that researches, discovers and commercializes cancer drugs. Its lead drug therapy (which is currently in Phase III clinical trials) is something called cintredekin besudotox (CB). CB is a recombinant protein that targets deadly brain tumors in adults, known as glioblastoma multiformes (GBMs).

GBMs are terribly aggressive tumors. They essentially have tentacles that spread and mix with normal functional brain tissue, wreaking havoc on the body and growing uncontrollably. Most people diagnosed with this form of brain cancer die within one year, despite aggressive surgeries, radiation and chemotherapy.

Over the last 20 years, there has not been any significant treatment for GBM patients. In fact, there has only ever been one form of FDA-approved chemotherapy for this kind of cancer. And it only increases a patient’s survival by a few weeks.

NeoPharm is on the verge of a much better treatment.

Its lead drug therapy, CB, is made up of a single molecule composed of two parts. One part bonds to deadly tumor cells. The other part is absorbed into the cancer cell — killing it. And unlike radiation treatment, CB does not harm healthy brain cells. Healthy brain cells do not have the receptors that are necessary for the CB molecule to bind to them.

So far, in a series of blind trials, patients treated with CB lived for an average of 55.6 weeks versus 28 weeks with currently available treatments. While this may not seem like a massive breakthrough (i.e., a cure), it is twice as effective as the current treatment.

Because of the clinical trial results, CB has received orphan drug designation in Europe. It has been fast-tracked by the FDA. And it was selected to participate in a new FDA pilot program (which allows for more frequent interaction with the FDA during the drug development process).

In addition to the interest by the FDA, several other renowned groups have partnered up with NeoPharm, including the National Institute of Health and Nippon Kayaku (to market CB in Japan).

Of course, there is no guarantee that CB will be approved by the FDA or that NeoPharm stock will rise a la ViroPharma. If CB is rejected, NEOL’s stock price will crash and burn. That is for certain. But based on insider buying patterns, it seems this tiny company has a nice shot at success.

Since the beginning of this year, insiders (including the CEO, CFO, chairman of the board, a director and a couple vice presidents) have purchased 322,782 shares for prices ranging from $4.85-10.20. And in the last 30 days, insiders have spent $390,000 on NEOL stock for their own portfolios. This is the most amount of insider money invested in any 30-day period in the company’s history.

Think they are confident about CB’s future?

You bet they are. It seems the FDA is hell-bent on bringing CB to market. And with partnerships with the NIH and Nippon, management appears to be gearing up for potential licensing and marketing deals.

Keep an eye on NeoPharm, Inc. (NEOL:NASDAQ). This could be the next big story in biopharmaceuticals.

Here’s to big profits,

James Boric
October 12, 2006

P.S.: If you would like to learn about opportunities like NeoPharm more often, I just released a brand new, 9-page report, about two companies with massive insider buying. One is a small-cap gold company on the verge of increasing production by 150%. And the second could turn millions of pounds of useless coal into an efficient energy source worth billions. I expect both companies could double — or more — in the next 12 months.

Investing in Small-Cap Pharmaceuticals was originally featured in the Penny Sleuth.