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Big
Pharma Smokin'- Can Little Pharma Be Far Behind? |
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It's the best kept secret on Wall
Street. Open the Wall Street Journal, turn on CNBC, get this week's Barron's-
the headlines are all dominated by the same issues: Recession or soft landing?
Where are interest rates going? How about Gold and Oil?
The best kept secret on Wall Street
is the resurgence of the big pharma stocks. If you follow Merck (NYSE:
MRK) you probably know CEO Hank Mckinnell was recently unceremoniously
dumped during the legal maelstrom around Vioxx. However, did you also know
MRK was trading at about $33 on June 14th- currently it's trading at about
$44. How about Pfizer (NYSE: PFE); out of the headlines since Vitamin V
(Viagra) was introduced, has rocketed from $23 to $28 in the last seven
weeks? Just look at this chart of the Drug Index. 320 to a high of 360
in the last 6 weeks. That's a huge move for this index.
There is a stealth rally going on
in big pharma- money tends to flow to this sector during times of uncertainty.
Wall Street knows people need to buy drugs in all economic environments,
and with the threat of recession drug manufacturers are viewed as a safe
harbor.
This stealth rally in Big Pharma
will lead to big moves in two other sectors: smaller but growing pharmaceutical
companies and biotech, which provides the rocket fuel for big pharma sales
and earnings. Today's idea is in the right sector for the coming months.
OTC Journal members have been
treated to a pretty good run of late considering the time of year. CPNE
is generating outstanding numbers and the stock is responding. Little brother
and long followed NWKI is enjoying a price resurgence as well in
case you haven't noticed. ACTC is being looked at by the White
House, and the stock charged up nearly 400% in two trading days.
Oversold USEI delivered a $55 million contract on Friday. All in
all, some pretty exciting stuff for a quiet summer.
Last week we moved a few losers to
the back burner, which opens the door to some new ideas. I have three coming
up over the coming weeks. Today you will read about the first- a small
pharma company with big plans for growth. For your review, an OTC Journal
first look at:
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Auriga Lab (OTC
BB: ARGA): Real Products Equal Real Sales |
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If you had a nasty cold last year
and went to the doctor, you might have gotten a prescription for one of
the products pictured here. These products are regularly prescribed by
doctors for relief from an assortment of nasal allergy and cold symptoms.
Visit www.extendryl.com for more
information.
These are current product offerings
of Auriga Labs, a small pharmaceutical company with the promise
of significant growth over the next several years. Www.aurigalabs.com
will also yeild information.
The Extendryl product line
equated to $7.3 million in sales over the 12 months which ended
in March of '06. ARGA enjoyed nearly $4 million in gross
profits from sales; excellent margins.
ARGA is developing new products
on several fronts. They have a Colitis treatment in development which promises
a revolutionary delivery technology for the lower GI tract.
They are also working on a revolutionary
new pain relief product which features a special taste masking technology.
This will allow users to place the pain medication under the tongue and
the relief will get into the blood stream far more rapidly.
ARGA's biggest asset might
in fact be their sales organization. 100 reps strong, they are unique and
geared up far in excess of other companies at this stage of development.
Since they are geared up for considerably
greater sales than they currently enjoy, why not take on more products?
Glad you asked. Taking on more products is, in fact, today's ephiphanal
event.
Today, post close, ARGA announced
it has acquired the rights to manufacture and market another common cold
product line. ARGA has acquired the Levall® Product Line
from Athlon Pharmaceuticals.
According to the press release, Levall
generated $9.7 million in sales in 2005. I am certain the management of
ARGA
believes it can sell more product with its efficient sales force.
Perhaps we are looking at a company
with annual sales in the $17 million range. Seasonally, the best
time of the year is ahead of them. Time to look at the stock.
As you can see from the chart, we
are starting out very near the bottom on this one. This company is virtually
unknown to market investors, and is therefore an OTC Journal "first
look".
There were some higher volume levels
back in late July which resulted in a new all time low and an opportunity
for the impatient money to get out. The stock should be pretty blown out
and positioned for higher levels once volume materializes.
Today's post close news should be
the starting point for getting ARGA on investors radar screens.
From current levels, volume should equate to price appreciation.
According to the most current SEC
filings, there are about 35.4 million shares issued and out. Hence, at
about $2 per share, the market is valuing the company at $70 million.
This number equates to 4 times annual
sales- by pharma standards this is cheap. You can't look at the valuation
relative earnings- the company is losing money and will probably continue
to do so for the foreseeable future. However, cash flow losses should be
relatively minimal if they continue to generate 60% gross margins. In 2007
they should have over $10 million in gross profits to cover the SG&A.
Most young companies in the biotech/pharmaceutical
industry are highly speculative. ARGA is no exception. They don't
have a long history as a public company. However, since they already have
real sales of real products which could equate to as much as $10 million
in '07 gross profits, they aren't going to hemorrhage cash like so many
of their brethren. On the microcap risky scale, this one isn't too bad.
As far as the upside goes, it's pretty
simple. Real sales, real new products, big sales force, and rapid growth.
This all equates to an appreciating stock as more investors learn about
this company. A particularly nasty cold and flu season this year should
equal big sales for ARGA.
Lots more detail will be coming in
future editions. Here is today's news for your review:
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Auriga Completes Major Transaction
to Significantly Expand Brand Portfolio and Drive Accelerated Revenue Growth
Company Acquires Exclusive Rights
to Athlon’s Popular Levall® Product Line to Capitalize on Multibillion-Dollar
Prescription Drug Marketplace
NORCROSS, Ga.--(BUSINESS WIRE)—September
5, 2006--Auriga Laboratories, Inc. (OTCBB:ARGA), a specialty pharmaceutical
company driving high-growth revenues through acquisition of valuable brand
portfolios and innovative drug development programs, has acquired an exclusive
license to market the popular Levall family of common cold remedy prescription
drug products from Athlon Pharmaceuticals in a transaction worth up to
$20 million.
Licensing of the Levall brand furthers
Auriga’s business plan to capitalize on high-growth opportunities in the
pharmaceutical industry though aggressive sales, integrated marketing and
application of proprietary in-house drug development capabilities.
“This milestone event is the latest
validation of Auriga’s strategic vision to couple organic growth with growth
through acquisition,” said Philip S. Pesin, Chief Executive Officer of
Auriga. “The licensing of the Levall brand provides an ideal opportunity
to expand our sales force with an additional product line that we believe
will enable our sales force to generate significant new revenues.”
Levall generated approximately $9.7 million of sales in 2005 and $9.6 million
of sales in 2004 while owned by Athlon.
The Levall product line includes
four trademarked lines that address medical needs in the multibillion-dollar
market for respiratory and common cold ailments. The existing Levall products
treat symptoms such as cough, chest congestion and stuffy nose from the
common cold, flu, or other breathing illnesses such as sinusitis and bronchitis.
Under the agreement, Auriga will
utilize at least 50 sales representatives to promote the product line by
the end of the first year.
Auriga intends to extend Levall’s
market exclusivity through the development of new drug formulations within
the brand. Among other proprietary technologies, Auriga will apply a patented
delivery system to maintain single source status and identify a generic
partner to sell the generic products.
The agreement licenses to Auriga
all patents, know-how, other intellectual property rights and all documentation
relating to the manufacturing of Levall, including any drug master files
and other documents relating to the product, including reports and manuals
for standard operating procedures.
About Auriga LaboratoriesTM
Auriga LaboratoriesTM is a specialty
pharmaceutical company capitalizing on high-revenue markets and opportunities
in the pharmaceutical industry through aggressive sales, integrated marketing
and advanced in-house drug development capabilities. The Company’s high-growth
business model combines acquisition of proven brand names, powerful product
development strategies and rapidly-growing national sales teams and marketing
operations. Auriga acquires valuable brand portfolios that are no longer
a strategic focus for large pharmaceutical companies, then capitalizes
on untapped marketplace opportunities through brand extension and directed
sales/marketing programs. The Company’s drug-development pipeline leverages
novel material science and advanced drug delivery technologies to produce
improved formulations of successful brands to further expand markets, sales
and clinical indications for proven, successful products. Auriga's exclusive
product portfolio currently includes the Extendryl® family of prescription
products, indicated for relief of symptoms associated with a range of acute
respiratory diseases. Auriga plans to become a fully integrated pharmaceutical
company by acquiring its own manufacturing and development capabilities.
Moving forward, the Company will seek to acquire and/or in-license additional
products and technologies to further grow revenues. For more information,
please visit: www.aurigalabs.com. For investor-specific information and
resources, visit http://www.trilogy-capital.com/tcp/auriga/.
To view current stock quotes and news, visit http://www.trilogy-capital.com/tcp/auriga/quote.html.
Forward-Looking Statements
The information contained herein
includes forward-looking statements. These statements relate to future
events or to our future financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual results,
levels of activity, performance, or achievements to be materially different
from any future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. You should not
place undue reliance on forward-looking statements since they involve known
and unknown risks, uncertainties and other factors which are, in some cases,
beyond our control and which could, and likely will, materially affect
actual results, levels of activity, performance or achievements. Any forward-looking
statement reflects our current views with respect to future events and
is subject to these and other risks, uncertainties and assumptions relating
to our operations, results of operations, growth strategy and liquidity.
We assume no obligation to publicly update or revise these forward-looking
statements for any reason, or to update the reasons actual results could
differ materially from those anticipated in these forward-looking statements,
even if new information becomes available in the future. Important factors
that could cause actual results to differ materially from our expectations
include, but are not limited to, those factors that are disclosed under
the heading "Risk Factors" and elsewhere in our documents filed from time
to time with the United States Securities and Exchange Commission and other
regulatory authorities. Statements regarding the regulatory status and/or
regulatory compliance of our products, our ability to secure additional
financing, our ability to sustain market acceptance for our products, our
dependence on collaborators, our ability to find and execute strategic
transactions, or potential exposure to litigation, our exposure to product
liability claims, and our prices, future revenues and income and cash flows
and other statements that are not historical facts contain predictions,
estimates and other forward-looking statements. Although the Company believes
that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved and these statements will
prove to be accurate. Important factors could cause actual results to differ
materially from those included in the forward-looking statements.
Contact:
Auriga Laboratories, Inc.
Philip Pesin, 877-287-4428
investors@aurigalabs.com
or
Financial Communications
Trilogy Capital Partners, Inc.
Paul Karon, 800-592-6067
paul@trilogy-capital.com
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