Flying under the radar from many retail and institutional investors and into the new year comes Apricus Bio (NASDAQ:APRI), a company whose mere 50M market cap is substantially undervalued based on its large diverse product portfolio, healthy financial standing, and forward looking market possibilities.
The company and its two wholly owned subsidiaries, NexMed and Bio-Quant, owns a total of 12 diverse products and compounds in development from pre-clinical through phase III that are focused on dermatology, sexual dysfunction, diabetes and cancer. With several key upcoming events, of the likes including Vitaros (erectile dysfunction) NDA application during 1st quarter 2011, for Middle East market and European market expected 2nd quarter 2011 with Middle East in the 1st quarter, ProvOnco (liver cancer) whose awaiting special protocol assessment reply by FDA during 1st quarter 2011, and Femprox (female sexual arousal disorder), it seems clear that a breakout in share price with increasing momentum to the upside can occur in the blink of an eye as news begins to spread. With 2010 going down as a very busy year, which saw Apricus shares rebound nearly 300% from the lows, 2011 looks even more promising as the company moves forward and begins reaping the benefits from increasing revenues, royalties and the marketing capabilities of its products.
Perhaps what makes Apricus stand apart from its other small cap biotech peers is the fact that it has an already approved drug in Vitaros for the Canadian market, used to treat erectile dysfunction, a worldwide market valued at over $3B annually. This event took place on November 12, 2010, where Apricus Bio announced that Health Canada had approved Vitaros for marketing as the first topical treatment for ED in that country. “The drug itself is a major breakthrough in the erectile dysfunction world,” stated Apricus Bio CEO Dr. Bassam Damaj, in an interview following the approval. He added that the treatment is simple, safer, and a faster acting drug than existing treatments.
Additionally, the application for approval to market Vitaros in Europe is scheduled to be filed in April 2011. The company quickly capitalized on its opportunity to increase cash flow and generate revenues without any expenses by signing a licensing agreement for the selling of Vitaros in Italy (Europe’s largest ED market valued at $200M) with Bracco SpA, which saw it receive $7.5M up-front, with a further agreement to receive double-digit royalties based on the future sales of the product. The Middle East and North Africa markets are expecting an NDA during the 1H2011, according to the company’s website.
What makes this drug stand apart from its rivals is truly astonishing, as according to a recent Seeking Alpha article, “The drug is even safe for use by patients with hypertension, diabetes, cardiac problems, and many others who are often unable to safely use traditional oral treatments. Vitaros® has been shown to work within a couple of minutes, compared to the typical 30 minutes to two hour delay from oral medications. This is quite a remarkable medical feat and one that is sure to pique the interest of patients. Company market research also indicates that urologists would prescribe the drug to up to 30% of their patients diagnosed with erectile dysfunction—not a bad number in a $2 billion ex-US market. The company plans to use the recent approval to move forward in getting Vitaros® into over 100 international markets.”
In fact, Apricus has had a number of positive developments that went unnoticed during the past 12 months, including 3 partnerships in the past 2 months, 3 grants, and a number of highly positive conferences and presentations at some of the worlds most prestigious gatherings of pharmaceutical experts.
Moreover, PrevOnco, an orphan drug status treatment for liver cancer, is expected to receive word during 1st quarter 2011, with regards to an answer from the FDA on its phase III protocol for request of Special Protocol Assessment (SPA), which was submitted on 11/22/10. Liver cancer represents the fifth most commonly occurring cancer and the third leading cause of deaths related to cancer in the world. Each year, close to 600,000 people are newly diagnosed with primary liver cancer, also known as Hepatocellular carcinoma. According to a recent report issued by Global Industry Analysts, the global liver cancer drugs market is slated to exceed $2B annually by 2015.
During the first half of 2011, Apricus is also expected to announce an update on Femprox, potentially the first ever product to treat female sexual arousal disorder. The drug is currently in phase II testing in the US, and phase III in China.
The company’s full pipeline includes:
(Click charts to expand)
Perhaps the most surprising aspect of this company is the fact that according to their latest 10-Q filing, the company has a total of roughly $25M in total assets, current liabilities of only $1.8M. This then implies that according to the current market cap of $50M, the funds and institutions are valuing the company’s 12 product portfolio, with nearly $5B combined market product potential at a measly $25M. By this, using Wall Street’s forward 12-month forward looking principle, we can estimate that a simple 10% reach of this market would mean a market cap of $500M or nearly 10 times current price per share levels. This is even more mind boggling when you consider that with the help of the company’s first approved product, Vitaros, they was able to boost total revenues from $109,590 in 2009, to well over $5,303,749 in 2010 in its first year of marketability, or nearly a 5000% increase year-over-year.
The company also has a solid management led by Dr. Damaj, who since being appointed as CEO in December 2009, led Apricus to approval of its first drug as well as gaining NASDAQ compliance. “People don’t understand the power of our technology”, added Dr. Damaj. He goes on to state that Apricus Bio is already in 22 active partnering discussions, many of which are described as being in the ‘late stages’.
With all these upcoming developments, a short squeeze also looks to be in place, as short interest is now 15.5%, with 1.67M shares short out of a possible 10.80M float. On a more positive note, roughly 2 million shares are held by institutional, mutual fund and direct company executives.
The company’s stock is currently entrenched in an ascending triangle pattern on the apex of a breakout on strong volume should a positive development hit the wires. The measured move would see the stock test the last year’s resistance of $6.5, which could just as easily be pushed to $8. Positive metrics currently support a bullish stance, including an RSI indicator looking to begin trending upwards as money flows back in, 50-day MA moving through 200-day MA giving the ‘Golden Cross’ signal, decreasing volume showing accumulation before breakout, a steady MACD divergence and full stochastic.
Disclosure: I am long APRI.