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Altus Pharmaceuticals (ALTU) is a small cap (~$400M) biopharmaceutical company with a unique crystallization technology that amongst other things allows for better purity and longer half life for otherwise rapidly broken down proteins and enzymes. This technology is very difficult to master and creates a natural barrier to entry even beyond patent expiration.

I have previously written about ALTU when the stock was trading around $18 back in November 2006 (link).

Since then Altus has signed a development and commercialization agreement with Genentech (DNA) for ALTU-238, a longer acting version of human growth hormone currently in phase II clinical trials with a $2 billion market. On May 10th, Altus announced initiation of a phase III clinical trial for ALTU-135, an enzyme replacement therapy for cystic fibrosis. To fund this large and expensive trial, Altus had a stock offering earlier this year which raised about $89 million dollars.

Altus' pipeline contains other promising pre-clinical products including ALTU -237 (oral) for kidney stones and ALTU-236 (oral) for phenyloketonurea. Altus has a high probability of success mostly because its first two products are improved versions of existing products, lowering the degree of difficulty because they do not have the burden of a proof-of-principal that a novel medicine must overcome.

For some strange reason, Altus' financials do not reflect the new money raised through public offering. The correct balance sheet cash should be closer to $200 million. The company is undervalued with a market cap of only $413 million at $13/share with about $6/share in cash, a partnership with Genentech and two products in or near phase III. I expect the stock to rise to $20-25 by year end as more clinical trial data becomes available or a new phase III is started
for ALTU-238.

altu-may07

Disclaimer: The author has an investment position in ALTU.

Source: Altus Pharmaceuticals Makes Clinical And Financial Progress