The sharp peaks and valleys in Esperion Therapeutics’ stock performance last year resemble the ping-ponging trace of an electrocardiogram – from a patient fighting for life.

Esperion’s most significant drop occurred last November when investors misread an article in the Journal of American Medical Association, believing it downplayed the efficacy of one of the company’s key drug candidates, ETC-216. In fact, the article was actually favorable. Nonetheless, Esperion’s stock price tumbled 33 percent in a single day, from $24 to $17.

Just five weeks later, after the stock recovered from its plummet, pharmaceutical giant Pfizer announced plans to acquire Esperion for a cash offer of $1.3 billion. That placed Esperion stock at a premium price of $35 (its shares were hovering around $23) and the company’s stock shot up 50 percent in one day.

Just another season in the life of a small-cap biotech company. "If I had an aversion to risk, this is certainly not the area I should be in," says Roger Newton, co-founder and CEO of Esperion. "In biotech all you need is one study to be equivocal and your stock can get hit anywhere from 30 to 60 percent."

Pfizer’s year-end tender offer capped a 500 percent run-up in Esperion's stock in 2003. "Esperion was the best-performing small-cap biotech stock of the year," notes US Bancorp Piper Jaffray senior research analyst Mark Schoenebaum.

Like many drug makers, Esperion faced expensive clinical trials. By becoming a division of Pfizer, Esperion was able to trim development time for its biopharmaceuticals by a year or more. The Pfizer acquisition also generated a $39 million personal windfall for Newton, who will remain in charge of the biotech research operation. It also means that he no longer has to devote a major portion of his time to wooing fickle investors.

Things weren’t always so bright for Esperion. On the day of its August 2000 IPO, the company’s stock lept from $9 to $21 a share. It then fell to about $4 when the biotech sector tanked. Mr. Newton worked hard in 2003 to revive investor interest in the company – for instance, raising the number of investors covering the company from two to 10. "I did between 250 and 300 investor presentations this year alone," Mr. Newton says. "Now maybe I can spend less time in the air and more time on the ground. I want to go back to helping develop new drugs."

Prior to starting Esperion, Mr. Newton spent 12 years heading the atherosclerosis drug discovery team at Warner-Lambert's Parke-Davis Pharmaceutical Research division. It was there that he co-discovered a cholesterol-lowering statin, called atovastatin. The company brought it to market as Lipitor, one of pharma's greatest hits. Lipitor is the top-selling prescription drug in the world, fast approaching annual sales of $10 billion, a new milestone for pharmaceuticals.

In the U.S., Lipitor outsells almost all of its competitors combined. The drug is so lucrative that in 2000 Pfizer bought Warner-Lambert for $111 billion, primarily for Lipitor's revenues. At a cost of little more than 1% of that acquisition, Pfizer has bought itself exclusive rights to Newton's next generation of cardiovascular drugs.

But there is a hitch with Lipitor and other statins like Merck's Zocor and Bristol-Myers' Pravachol. While lowering cholesterol levels and the pace of plaque accumulation on artery walls, they do not reduce the cumulative plaque that has already built up. Esperion was founded in 1998 to develop drug candidates for enhancing the plaque-dissolving abilities of so-called "good cholesterol," the high-density lipoprotein (HDL) that carries cholesterol from the arteries and other tissues back through the blood to the liver for disposal outside the body.

To shorten development times typical for chronic treatments, Esperion focused on acute treatments instead. "Our target patient is someone with unstable angina who has come into the hospital with a heart attack," Mr. Newton says. For 1.5 million cases a year of acute coronary syndrome in the U.S. alone, Esperion's arterial Drano could be crucial in preventing a second, often fatal, heart attack.

"Esperion's approach is one of the most compelling and exciting developments in cardiovascular care since the statins," says Christopher Raymond, biotechnology analyst for Robert W. Baird. All four candidate drugs in Esperion's portfolio capitalize on the body's own mechanism for removing and expelling arterial plaque, a process called reverse lipid transport (RLT). Two of the products, injected into the blood, are meant to mimic HDL. One of these, ETC-216, a recombinant version of a protein that is a key component of HDL, synthesizes a genetic variant found in families with a low incidence of cardiovascular disease in the Italian town of Limone sul Garda. Another biopharmaceutical infusion, ETC-588, offloads cholesterol from lipid-laden HDL, improving the efficiency of the RLT process and earning the title of "cholesterol sponge." Though not as far along in development, ETC-1001, administered in pill form, shows signs of potentially being a blockbuster drug; in early tests its small molecule chemistry lowered LDL or "bad cholesterol", increased HDL, boosted RLT, and even reduced obesity.

By initially targeting acute cases, Esperion has staked out a niche market with little direct competition. But ultimately its competition is the entire cardiovascular drug sector, (see Cardiovascular Sector Analysis). Raising HDL levels and stimulating plaque removal are the goals for a new generation of rival drugs in the product pipeline, all taking different approaches from Esperion.

Already on the market is Merck and Schering-Plough's Zetia, which works by blocking the absorption of cholesterol in the intestine; this in turn raises HDL, though by only a small amount. Drugs in development at Lilly and Sankyo, as well as Pfizer rely on inhibiting the ACAT enzyme. Also at Pfizer is the great hope for extending the life of Lipitor, the potential additive torcetrapib, an enzyme inhibitor which halts the action of CETP, the agent for transfering cholesterol from HDL to LDL. In another approach to blocking the enzyme, Avant Immunotherapeutics is working on an anti-CETP vaccine. Several major drug companies are pursuing products to activate the PPAR cell receptors that increase the production of HDL components in the body.

With the sale of Esperion, there are no more "pure" HDL therapy investment plays, but a couple of small-cap biotech firms are working on arterial plaque fighters that show promise. AtheroGenics is pursuing an anti-inflammatory strategy, blocking the molecule that binds white blood cells to artery walls, a first step toward plaque accumulation (GlaxoSmithKline is also developing a cardiovascular anti-inflammatory, based on an enzyme inhibitor). Lipid Sciences is developing a lipid removal process for a patient's plasma, enhancing the effectiveness of HDL when returned to the blood.

With the aging of the U.S. population, cardiovascular disease is one of the few illnesses on the rise. According to one estimate, as many as one-third of U.S. men could be candidates for chronic treatment with statins to prevent heart attack. Though Esperion’s drug candidates are so far meant to supplement statins and not to replace them, further development of HDL therapies could result in a successor to Lipitor and its ilk for a significant patient population. If so, Pfizer’s buyout of veteran cholesterol-buster Roger Newton’s firm would prove to be one of biotech’s biggest deals.