Targeted cancer therapy is a revolution in drug company research, and Rexahn Pharmaceuticals, Inc. (RNN:NYSE MKT), recent recipient of a notice of allowance from the US Patent and Trademark Office for a new delivery platform,  might one day join the leagueof bigger players.

Chemotherapy cocktails, a standard in past years, have proven suboptimal with poisonous side effects. Rexahn’s technology, if effective, could realistically compete in this emerging area of cancer treatment.

Forming the basis of the technology platform is carboxypropyl methacrylamide, or CPMA, a polymer-based molecule that has the ability to carry chemotherapy drugs directly to tumors, leaving surrounding cells and tissue unharmed. Because of its chemical properties, CPMA enters cancer cells and passes drugs to the site of disease. In this way, the potential for adverse side effects, so common with cocktails, is reduced. CPMA also has the unique ability to bind with a number of commercially-available chemotherapy agents, an advantage that invites potential partners to extend branded medicines.

The addition of CPMA complements and expands Rexahn’s nano drug pipeline: they had already blended their nano-polymer-drug conjugate system (NPDCS) with docetaxel – brand named Taxotere and made by Sanofi (SNY:NYSE) before patent expiration in 2010 – with their compound RX-21101 to target cancer cells. Preclinical data presented last April showed tumor inhibition and tumor regression, with extended survival in mice. Evidence of reduced toxicity was displayed through a lack of significant reductions in animal body weight, as compared to dosages of docetaxel alone. Potential indications for RX-21101 include breast, ovarian, prostate and lung cancers.

Toxicity of standard chemotherapy has led to strong interest in targeted therapy, a new breed of medicine that uses genetic information to prevent, diagnose, and treat disease. But limitations do exist; the most important are eventual loss of efficacy as targets themselves mutate or whether tumors find new pathways to continue their growth. This disadvantage has prompted oncologists to use targeted therapies in combination with chemo drugs; however, treatment regimens such as these summon up toxic side effects attempted to be avoided than if targeted therapy could be used alone.

One of the earliest targeted therapies was Herceptin for breast cancer, FDA-approved in 2006 and marketed by Roche Holding AG (RHHBY:PNK). Risk of damage to the heart ranges between 5%-30%. Nexavar for liver cancer, available since 2007 and made by Bayer Pharmaceuticals can cause high blood pressure and hepatitis. Avastin for renal cell carcinoma and cervical cancer, also by Roche has a list of serious effects that includes convulsions. Bristol-Myers Squibb’s (BMY:NYSE) Erbitux for a variety of cancers approved three years ago may cause swelling of the face and extremities, in addition to deep cracks in the skin. By far the worst, recently-approved Zaltrap, a monoclonal antibody made by Regeneron Pharmaceuticals, Inc. (REGN:NASDAQ) for metastatic colorectal cancer may cause fatal side effects that include severe internal bleeding of the digestive system, brain, or lungs; holes in the stomach, esophagus, or intestines; and wounds that don’t heal.

The patent’s language  lends itself to broad coverage of possible combinations of CPMA with chemotherapy because of its ability to be chemically mixed with a variety of drugs due to CPMA’s water solubility that allows entry into cancer cells. Full issuance of the patent should happen within a few months and afterwards, will permit exclusive rights to the invention for 20 years. Composition of the patent also permits combinations of CPMA with docetaxel, gemcitabine – or Gemzar, initially marketed by Eli Lilly (LLY:NYSE) – and cisplatin.

Nanoparticles such as Rexahn investigates may prove a better treatment option, although research is early. The advantage rests on their small size, drug carrying capacity, and ability to release therapy more specifically. Whether adverse side effects can be reduced or even eliminated, even though both CPMA and NPDCS will be studied in combination with chemotherapy, will become clearer in human studies. If successful, CPMA and NPDCS would give pharmaceutical firms the chance to market new versions of their branded chemotherapy drugs about to turn generic. This is part of Rexahn’s strategy, extending patent portfolios for potential pharmaceutical partners.

Rexahn has a robust pipeline, consisting of Supinoxin to treat progression and metastasis in solid tumors currently involved in dose-escalated Phase I studies; the trial should conclude near the end of this year. Archexin, used to halt the cell signaling protein Akt-1 known to promote cancer growth, is in a Phase IIa trial in solid tumors where, combined with gemcitabine, has shown safety and tolerability. RX-3117, designed to target DNA/RNA mechanisms involved in tumor cell death, is in the midst of a Phase Ib in humans with solid tumors, to evaluate safety and dose-related toxicity. Enrollment should be finished by either the fourth quarter of 2014, or early next year. Progress with this compound has led Rexahn to discussions with possible drug firm partners, whose identities have not yet been disclosed.

Recently came the announcement of the FDA’s Orphan Drug designation for RX-3117 in pancreatic cancer that affects almost 50,000 Americans each year with mortality of roughly 85%, and increasing in occurrence. Preclinical studies show an anti-tumor activity in human cancer cell lines resistant to gemcitabine, a drug notorious for its tendency fail in 40% of patients within one month of therapy. All the attendant benefits come with the designation – marketing exclusivity, tax credits for clinical trials that qualify under FDA rules, and possible discharge from application fees as regulatory progress moves forward.

With a market capitalization of $150.6 million, Rexahn would be considered a risky investment despite good results in clinical studies. The shares trade well, however, giving owners and new buyers liquidity if clinical results do not materialize, and prices fall. Early, smaller trials are not indicative of bigger ones, where compounds may tend to fail. Investors’ confidence, though, should be bolstered by the company’s expertise at drug exploration – its NPDCS and CPMA platforms offer multiple opportunities for less harmful cancer drug delivery and possible patent extension for pharmaceutical partners. Harmful side effects still exist in targeted therapy, and amelioration through nanotechnology may not occur.    

Cash of $38.3 million (as of June 30, 2014) should be sufficient to fund operations and clinical trials until the middle of 2016. Research and development expense in the second quarter did not meaningfully exceed the sequential quarter, even though more trials were initiated, suggesting a conservative use of money.

I believe Rexahn’s management is in large part key to its regulatory progress in 2014, and the company’s focus on cancer is smart given a worldwide market for the disease estimated at $47.7 billion, recognized as the most rapidly growing of all medical indications and fueled by fierce rivalry among pharma companies to bring new cancer drugs to market.

Chemotherapy cocktails have proven hard on cancer sufferers already compromised with sickness. Rexahn offers therapeutic improvements to patients that could reduce side effects through targeted therapy and, to drug companies, a way to extend a valuable franchise.