Analysis: Wine flowing for Sirtris?

WASHINGTON, July 3 (UPI) -- Wall Street's endorsement of Sirtris -- a new pharmaceutical company focused on developing medications based on a compound found in wine -- sent shares rising this week.

Sirtris, based in Cambridge, Mass., is focused on sirtuins, a class of enzymes that could be good targets for medications intended to treat diabetes and other metabolic diseases.

The company's lead compound, SRT501, is a formulation of resveratrol, a naturally occurring substance found in wine that has been shown to have several beneficial effects in animals, including lowering fat and cholesterol levels and increasing insulin sensitivity.

Shares of Sirtris rose from just above $10 per share to nearly $11 Monday before closing at $10.55. The stock was apparently driven by the initiation of coverage of three analysts who all rated it a "buy."

Bret Holley, an analyst with CIBC, said he anticipates Sirtris' pipeline could generate more than $1 billion in sales for diabetes alone.

"We believe candidates derived from Sirtris' unique platform will drive long-term upside," Holley stated in a research report.

He expects SRT501, which is currently in phase 1 trials, to show that the sirtuin enzyme, SIRT1, is a valid target and to open the door for next-generation compounds Sirtris currently has in preclinical development. In addition, the company could also be a target for collaboration or acquisition.

"With the likelihood of proof-of-concept data for SRT501 in diabetes in the second half of 2007 or 2008, and near-term potential for a major partnership or acquisition, we believe Sirtris is attractive at its current valuation," Holley stated.

Rodman and Renshaw analyst Michael King Jr. also had a high opinion of Sirtris, rating the stock "outperform" and saying the company could achieve greatness.

"The shares of Sirtris represent a rare opportunity to invest in a small company dominant in such an attractive space with this kind of grasp on both the fundamental biology and the chemistry that pairs with it," King stated in a research report.

He thinks the company's strategy of targeting sirtuins could lead to treatments for a variety of diseases that have billions of dollars in market potential.

"Because sirtuins play such a fundamental role in cellular metabolism, they have enormous potential in metabolic disease in general and in diabetes and obesity in particular," he stated. "In addition, modulation of the sirtuin pathway may play a role in such disease states as orphan disorders, cancer, and neurology."

In the near-term, the stock could see gains from clinical trials being conducted in type 2 diabetes and the orphan disorder, MELAS.

"Both indications should see value-driving events during the second half of 2007," King stated.

He also noted that Sirtris has recruited the world's leading sirtuin scientists and is years ahead of the nearest competitor.

The top scientists include David Sinclair, who co-founded the company and is on the scientific advisory board.

King also likes Sirtris' management team, which includes former employees of Wyeth, Millennium and Pfizer who have proven themselves capable of successfully commercializing pharmaceutical products.

"This combination of thought-leading science and experienced management raises the odds of favorable investor returns," he stated.

Charles Duncan, an analyst with JMP Securities, also endorsed Sirtris, rating the stock "market perform."

Sirtris shares were up 2.65 percent to $10.83 in late-day trading Tuesday.