Apricus Biosciences' Promising Pipeline Points To A Bright Future

| About: Apricus Biosciences, (APRI)
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After months of negotiations, Apricus Biosciences (NASDAQ:APRI) recently announced its Canadian partner for Vitaros, which was approved in the country in late 2010. Vitaros is a topically applied cream for the treatment of erectile dysfunction (NYSE:ED). It begins working within minutes. Vitaros represents the most radical shift in the Erectile Dysfunction treatment landscape since the release of Viagra by Pfizer (NYSE:PFE) in 1998. For the last decade and a half, the market has relied almost exclusively on oral PDE5 inhibitors. Vitaros offers a safer, faster acting solution.

The Vitaros Canadian partner is none other than Abbot Laboratories (NYSE:ABT). Abbott is a leading $85 billion global powerhouse healthcare company. The terms of the agreement allow Abbott to market and sell Vitaros in Canada. In return, Apricus receives $16 million in up-front, regulatory, and milestone payments. The agreement also includes double-digit royalties for sales of Vitaros to Apricus.

The approval of the drug by the Canadian health agency proved Vitaros is a safe and effective solution for ED. But the Abbott partnership validates that the product is economically viable and will take a big chunk of the ED market.

“The agreement shows that Vitaros is a good and profitable product,” Apricus CEO, Dr. Bassam Damaj says in our interview. Abbott no doubt thoroughly researched Vitaros and concluded that it will be a successful competitor and a profitable product.

Perhaps the most overlooked aspect of this news is that the partnership represents a major shift in the direction of the company. “Apricus has become an international pharmaceutical company,” says Damaj. With Vitaros set to hit the shelves in Canada sometime this year, the company will have a product on the market and the first major revenues flowing in.

“We are heavily focused on commercialization,” Bassam explains about the direction of the company. With approved products and several others moving though the late stages, Apricus is now shifting to monetizing is relatively large and unique pipeline.

In fact, the company also recently completed an acquisition of Topotarget USA. “It’s the first phase in a larger strategy,” explains Damaj, “We are looking to expand our commercial arm into Europe. The ultimate goal is to be able to market selective drugs ourselves.”

Apricus is building itself to be able to bypass partnerships and directly sell its products. This strategy frees the company from the need to partner with other pharmaceuticals to commercialize all of its products. Apricus will thus be able to keep a larger portion of profits from sales, which means a higher stock price for investors.

But management also acknowledges the need to partner with large companies with the resources and infrastructure in place to launch a serious blockbuster drug.

“We will continue to target and bring big pharma in to the company,” Dr. Damaj explains.

Most relevant to this development is likely Femprox, Apricus’s late stage, one-of-a-kind treatment for Female Sexual Arousal Disorder (FSAD). Currently, there are no approved drugs for FSAD, though millions of women suffer from the condition.

“Femprox is the only treatment for this indication that as successfully completed Phase III trials with statistical significance,” Dr. Damaj notes.

In many ways, Femprox represents what Viagra was for the then untapped, but massive, ED market. If approved, the product would be the first to open up the floodgates to a multi-billion dollar market, with no competition.

The monetization push has spread to other products in the pipeline, including MycoVa for treatment of nail fungus. Apricus inked two partnership signings from MycoVa alone in the past few weeks. One deal includes $8 million after approval, plus royalties, for rights to sell this product in Canada.

Apricus has multiple late stage products on the cusp of the final stages of approval as well as an array of partnerships already in place across the globe. The risk/reward for investors is becoming increasingly attractive. All of this is being accomplished by a relatively small (and cheap) $100 million business.

But Apricus is quickly transforming into a very different company than it was just a year ago. Securing a partnership with a major, global pharmaceutical company is a game changer. This adds much credibility and should help to foster further partnerships down the road. This should also attract the interest of institutions, which could seriously benefit the stock price.

It is clear the focus has shifted intensely to commercialization and monetization, which is exactly what investors are looking for. With Abbott as a partner and an imminent product launch, it is clear the birth of a new major pharmaceutical company is underway.

Disclosure: I am long APRI.