Newsletter

Big Pharma Rockin: Can Auriga Labs Be Far Behind?

September 11, 2006
Volume VII, Issue 68
Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com

To OTC Journal Members:
 

Big Pharma Smokin'- Can Little Pharma Be Far Behind?

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:
 

Auriga Lab (OTC BB: ARGA): Real Products Equal Real Sales

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:
 

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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