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FOMX: The Undervalued Pharmaceutical

|About: Foamix Pharmaceuticals (FOMX), Includes: BHC

Summary

Promising phase II clynical trial results of minocycline foam. Should gain approval from FDA soon.

2.6 billion Market for its products.

5.9 million shares offered on its IPO.

Business Insights

A few numbers for FOMX in a nutshell (6 month period ended in June 30, 2014):

  1. Share price: $6,15
  2. Revenues: $2M
  3. Net Loss: $3.47M
  4. Total Assets: $11.4M
  5. Total Liabilities: 4.13M
  6. Stockholders' equity: (6.2M)

Foamix Pharmaceuticals Ltd. (NASDAQ:FOMX) Specializes in the development and commerce of minocycline foam for the treatment of severe acne. The company recently launched its IPO on NASDAQ and since then, the company has declined consistently from its original price to settle in about $6. However, there is more than one reason to think this company will be a good position to hold in the midterm. For starters, the acne market in the US alone is about 2.6 billion, and the 65 million FOMX is planning on raising after its initial IPO would definitely aid in the expansion of the company and the consolidation of a slice of market share.

On September 18th 5.9 million shares were launched into the market at a price of about $9. Today, each share is worth $6. The bottom-line is the IPO was expensive but the fact remains that the company operates in a promising market and holds interesting products that, if launched, would definitely gain an important chunk of the market and therefore revenues. Even if the company holds promising prospects in the near future, it still has to face competition in the acne solutions market. Companies like Valeant (VRX), Actavis plc and Galderma also offer useful products to fight acne and this is a barrier that FOMX will have to overcome and deal with satisfactorily.

In any case, the company is focused on the development of its topical foam for acne. The market is there and there is a good chance the pending patents will be approved by the FDA. If this eventually came true, FOMX would be in a good position to penetrate the market and gain momentum to consolidate itself as a company

Conclusion

Foamix Pharmaceuticals ltd seems to be on the right track to become a profitable company in the near future. Essentially, the company has promising pending patents that, if approved by the FDA, will help it to get a foothold on the $2.6 billion US market. Moreover, the company is raising cash to expand on the development of new topical acne treatments which would further enhance their chances of succeeding. I would recommend to regard this share as a long play. Once the price settles, buying and holding is definitely a good idea.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.