The market correction has been a gift.
After combing through low-flyer biotechs for over one year, I am convinced that the two very best biotechs under $3/share are: BioSante Pharmaceuticals (BPAX) and Antares Pharma (AIS). If I was pressed to add a third stock to my list, it would be AEterna Zentares (AEZS), but for now I will stick with only two. The basis for my researched conclusion is as follows:
BioSante recently gave investors a taste of the good things to come when it hit a $4.02/share high on 17 July 2011. This demonstrated the explosive potential behind the company's vision to focus on female sexual health. As keen investors know, the phase 3 LibiGel studies are closing in on the home stretch in 2012 which has included very promising safety data. With respect to LibiGel alone, I foresee the potential for a megalithic return. This recent peak suggests the market isn't going to wait until next year before the stock price goes up.
Furthermore, I like the flamboyant energy and passion of BioSante's CEO Simes. His communication style embodies optimism backed up by the company's focused pipeline. I like that he compares LibiGel with Viagra and intuitive insight into the potential market. I agree with Simes - I think the potential female dysfunction market is worth all of $2B plus more. I also expect LibiGel's phase 3 clinical studies will ultimately result in FDA approval. The safety data alone gives LibiGel a clear edge as we await next year's results. So getting into BioSante now, represents a whopping opportunity to earn triple-digit gains.
Meanwhile, the recent fund-raising of $48M at $3/share represents how under-valued BioSante currently is. There is every reason to think $3/share will be an August base from which the share price will rise. Should Bio-T-Gel move forward under TEVA (TEVA) at the 14 November PDUFA date with the FDA, that will only bring a new wave of deep pocket investors. With daily volume on average over 3M shares, one can expect volatility and wild price swings will come as they did for Dendreon (DNDN). Therefore, expect higher highs and lower lows.
Finally, I applaud CEO Simes for floating his muse that BioSante could be sold or that a lucrative partnership for LibiGel might emerge. The market likes a winner. CEO Simes knows he's in the driver's seat and he isn't afraid to say it. I like his chutzpah.
Why is BioSante among the two best under $3/share? In one word: LibiGel. The rest is gravy.
My researched conclusion is that Antares is significantly under-valued at $2.10/share (Friday close) primarily for its business model that is steadily moving towards net positive. I only need to point to the company's revenue generation ($3.543M - 30 June 2011; $3.570M - 31 March 2011; $3.282M - 31 December 2010; and $3.122M - 30 September 2010) with an average negative net loss of $1.466M/Q over the last twelve months. Going forward, how well the company has done is captured in the following statement from their 10-K (see page 48):
- "In 2010, the net loss decreased by $4,199,554 to $6,091,198 from $10,290,752 in 2009 primarily as a result of an increase in product gross profit of $1,281,356, licensing and development gross profit of $1,634,017, and royalties of $1,458,887."
- "In 2009, the net loss decreased by $2,399,701 to $10,290,752 from $12,690,453 in 2008 primarily as a result of an increase in gross profit of $530,102 and decreases in general and administrative expenses of $1,436,641 and sales marketing and business development expenses of $573,569."
Given the partnerships cited thereafter, Antares's management record of revenue generation suggests that they will close and surpass their average $1,466M/Q net loss gap for four specific reasons (in no particular order):
- LibiGel in partnership with BioSante
- Anturol in partnership with Watson
- Additional growth in marketed products
- VIBEX, VIBEX 2 (near-term) in partnership with Ferring/TEVA and VIBEX MTX (long-term)
Clearly Antares is gaining ground. For example, Antares recently announced an exclusive licensing partnership with Watson (WPI) for its Anturol gel. Anturol is currently under review by the FDA for overactive bladder. Landing Watson demonstrates management strength and a documented history of signing multiple revenue-generating partnerships with big pharma. (Click here for Antares's impressive collaboration history, which includes/has included Ferring, TEVA, JCR, Jazz (JAZZ), Dr. Reddy's (RDY), Population Council, and BioSante). These names alone demonstrate big pharma's confidence in Antares management and Antares products.
Antares is a "sleeper-stock". All Antares needs is wider market visibility and its share price should head north. Antares has a: (1) healthy balance sheet with ample cash and (2) lucrative partnerships in motion validating a business model for a net positive future. For $2.10/share, Antares is a well-managed company that speaks volumes for where CEO Wotton is leading his firm. I am very bullish about this company because their collaborations with BioSante, TEVA, and now Watson is a triple-head revenue winner.
Why is Antares among the two best under $3/share? Answer: Growing revenue-stream via key big pharma partnerships.
Disclaimer: Investors buy or sell at their own risk.