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Imprimis Pharmaceuticals Inc.: The "Anti-Turing Pharmaceuticals"

|Includes: Imprimis Pharmaceuticals, Inc. (IMMY), VRX

By now, most people have read articles or seen news reports on Turing Pharmaceuticals purchase of the rights to Daraprim, prescribed to AIDS patients with weakened immune systems, and Turing's subsequent price increase from $13.50 per tablet to $750 per tablet. Despite the overwhelming negative public reaction to this, physicians have had very little alternatives to prescribing Daraprim leaving patients no other option but to pay.

In response to this, Imprimis Pharmaceuticals Inc. (NASDAQ: IMMY) announced yesterday it is offering a $1 per tablet as a customzied compound for physicians to consider prescribing as an alternative to Daraprim. While compounded medications have traditionally been prescribed by physicians to address specific needs of a patient not covered by traditional medication, some physicians have been prescribing compounded medications in an expanded role to ease the burden of sky-rocketing drug prices to patients.

As an investment, Imprimis looks quite compelling. While $99 for a 100 count bottle doesn't seem all that significant, Imprimis generated less than $5mm in revenue over the last 12 months. Just 2000 prescriptions alone will increase revenue by 50%. With the increase in revenue, the company would meet revenue targets which would allow them to access an additional $5mm next year pursuant to their current debt agreement. IMMY has a small float of 4.3mm shares out of 9.5mm shares outstanding. Yesterday's announcement has already been getting positive media coverage which should continue to bring attention to the stock.

Imprimis is also looking to introduce other compound medications for other high priced drugs. For example, if IMMY introduces 5 more compounds with similar figures as Deraprim, revenue could increase 200%. The company did not give information on what it expects margins to be for their Deraprim compound, but assuming 50% margins, the new products would generate an additional $5mm in profit. This would be significant for a $60mm market cap company. The growth perspective into other drugs will diversify the company's product base and bring attention to small cap funds and sophisticated investors.

IMMY has taken the first step to position itself to benefit from the current environment. Rising drug costs have been an issue for years, but pharma companies justify it with the increasing costs associated with research and development. However, huge price increases in drugs that have been around for decades, there is no justification. The negative media coverage and public outlash from Turing is still very fresh. More significant, the recent questions revolving around pharmaceutical giant Valeant Pharmaceuticals Inc. (NYSE: VRX) in addition to the federal investigation into VRX's practices shines light onto how common this practice is on a large scale. Imprimis's strategy to be the "Anti-Turing" was not only a great PR move, it brings awareness and momentum to expanded application for compounded medication as an alternative to costly medications. However, as a PR move, Imprimis managed to put itself into position for politicians to tout as a model pharmaceutical company when discussing one of the key campaign issues in an upcoming election year.

Disclosure: I am/we are long IMMY.