Why You Should Adopt Little Orphan ANI

ANI Pharmaceuticals (ANIP) has consistently grown revenues and earnings since 2010 both organically and via small acquisitions, but its shares pulled back to as low as around $50 recently after trading north of $70. The stock has since recouped about half of that decline, and I picked up my stake in this promising and fast-growing pharma play at just over $52 a share last month. A small, off-the-radar drugmaker, ANI develops, manufactures and markets both branded and generic prescription pharmaceuticals. With a well-rounded approach that meshes accretive acquisitions with internal product development, the firm's long-term outlook seems promising. Portfolio Growth Net revenues for 2015's first quarter totaled just under $20 million, an increase of better than 70% year over year. For 2014, revenues grew by more than 80% from the previous year to $56 million. Unlike more-speculative biotech concerns, ANI also actually turns a profit, posting $1.14 of 2014 earnings per share. Consensus estimates have ANI making just under $3 EPS in this fiscal year, as well as almost $4 EPS in fiscal-year 2016. Product development includes anticancer drugs, extended-release pharmaceuticals and hormone-and-steroidal medicines to target menopause and testosterone deficiency. The majority of ANI's revenues comes from its generic products. Consider Esterified Estrogen with Methyltestosterone, which treats moderate-to-severe vasomotor symptoms of menopause that don't improve with estrogen replacement alone. EEMT accounted for 42% of ANI's 2014 net sales and has approximately half of the market share in its space. (Most of ANI's products have large market shares and little competition.) The firm also sells a number of branded pharmaceuticals that are growing fast, but are still just a small part of overall revenues. Additionally, ANI generates some income via contract manufacturing for other drugmakers. Pipeline ANI has a number of key products in development. An FDA-expedited review of the company's generic oral anticancer product was filed last August and is progressing through preapproval inspection activities. ANI expects this drug to be the only generic in the space, and the firm says the product should add a material percentage to the company's current business. ANI also acquired an approved abbreviated-new-drug application for Lansoprazole orally disintegrating tablets, which treat stomach ulcers and gastro-reflux disease. The firm estimates the market for this drug at $220 million. Finally, ANI has submitted a new drug application for Testosterone Gel, which it hopes to launch in 2016. The estimated market is approximately $300 million. If any of these pipeline products receive final FDA approval, their potential upside should serve as a catalyst for more capital appreciation. Outlook Although I'm getting more and more concerned that biotech has started to form a bubble (especially in the small cap-space), I like ANI's long-term prospects. The biotech has consistently acquired products from other companies to bolster its revenue streams. Management has selected these additional revenue sources wisely in the past, and I expect the company to continue to make such bolt-on acquisitions in the future. ANI also has a solid balance sheet with some $50 million in net cash, while the stock has approximately $700 million in market capitalization. Lastly, the stock sells for less than 16x next year's earnings projections. That's in line with overall sector multiples, even though ANI should show much-faster profit growth than the market as a whole.

Why You Should Adopt Little Orphan ANI

The sun could come out tomorrow for this small, depressed biotech.

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