Anika Therapeutics Should Rise on European Approval

Apr.15.07 | About: Anika Therapeutics (ANIK)

Yesterday Anika announced that it has received European approval for the sale of
its cosmetic dermatology product Elevess. Elevess is an injectable dermal filler used for the treatment of wrinkles, scar remediation, and lip augmentation.

CE Mark approval for Elevess is a major step forward for Anika. The worldwide dermal filler market is estimated at about $600 million and is experiencing steady growth. The European Union represents approximately 25% of worldwide demand for dermal filler products.

Elevess was approved by the FDA in December of 2006, but the company has filed a supplement to the pre-market approval [PMA] documents. Final approval is expected in mid 2007. Anika expects to commence a worldwide launch of Elevess in the second half of 2007.

Considering current yearly revenues of about $27 million, the launch of Elevess should transform Anika into a growth stock. If Anika can capture just 5% of the worldwide market for dermal fillers (a conservative estimate) that would translate into an additional $30 million a year in revenue for Anika. Few analysts currently follow Anika, but we expect that to change with the worldwide launch of Elevess later this year. Analysts love growth stocks and with the launch of Elevess, Anika’s growth story will be hard to ignore.

We recommended Anika a few months ago at $13.30. Although it has taken longer than expected to get into the green with this trade, the EU approval of Elevess is a major step forward for Anika and should lead to significant European sales.

Shares of Anika have a reasonable valuation without even considering the addition of Elevess sales. Anika has a P/E of about 33, a strong cash position of about $47 million, and no significant long term debt. After factoring in the growth that the launch of Elevess should provide, Anika appears to be significantly undervalued at the current price of $13.85 and market cap of about $150 million.

Full disclosure: Wall Street Mayhem is long ANIK

ANIK 1-yr. chart:

ANIK Investment

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