One effective strategy in the last year or so would have been to keep away from the high-profile biotechs with their attendant shorters and concentrate on some of the lesser-known but still solid names. Unfortunately, there aren't that many of these, but one in which I have a fair holding is CNCT.
This niche dermatology player has a market cap of about 6 times forecast 2003 sales, and is projected to move to profitability during 2H03. They are basically a formulation/delivery company, so their development risk is not at all high. Revenues are growing very nicely with great margins, and they have an attractive pipeline. Just got a label extension for their steroid foam from scalp psoriasis to whole-body, which is a much bigger market.
Here's their latest release:
Press Release
Source: Connetics Corporation
Connetics Reports 50% Increase in Fourth Quarter Product Revenues
Monday January 27, 4:05 pm ET
Three Products in Phase III development
PALO ALTO, Calif., Jan. 27 /PRNewswire-FirstCall/ -- Connetics Corporation (Nasdaq: CNCT - News), a specialty pharmaceutical company focused exclusively on the development and commercialization of dermatology products, today announced revenues for the fourth quarter and fiscal year ended December 31, 2002.For the fourth quarter of 2002, product revenues rose 50% to $13.6 million, compared with $9.0 million for the comparable quarter last year. During the quarter, sales of OLUX® increased 55% to $9.3 million and sales of Luxiq® increased 37% to $4.2 million, versus the comparable quarter last year. Fourth quarter total revenues rose 52% to $15.0 million from $9.8 million last year.
Expenses were higher in the fourth quarter of 2002 due primarily to the acceleration of product development that has resulted in three key products -- Actiza(TM), Extina(TM) and Velac® Gel -- in pivotal clinical trials. Further, during the 2002 fourth quarter Connetics accrued a $2.0 million milestone payment to Yamanouchi Europe B.V. relating to the initiation of the Velac Phase III trials, and paid $350,000 to acquire rights to another currently approved dermatological product, which the Company anticipates reformulating and launching as a new brand in 2005.
Excluding one-time, non-recurring gains and charges in the fourth quarter of both 2002 and 2001, the Company's net loss in 2002 was $3.3 million, or $0.10 per share, compared with a net loss in 2001 of $5.1 million, or $0.17 per share. The Company reported a net loss for the 2002 fourth quarter of $5.6 million, or $0.18 per share, compared with a net loss of $0.3 million, or $0.01 per share, for the 2001 fourth quarter.
"In 2002 total revenues grew 55%, and we had record product sales for both of our products," said Connetics President and Chief Executive Officer Thomas G. Wiggans. "In 2003, we expect continued product growth, profitability during the second half of the year, and continued expansion of our drug development pipeline including the filing of two New Drug Applications. This is a clear demonstration of the strong business we are building and the value we are creating for our shareholders."
For the full year 2002, product revenues rose 54% to $47.6 million from $30.9 million in 2001. Total revenues for the year rose 55% to $52.8 million, up from $34.1 million in 2001. Excluding one-time, non-recurring gains and charges in the full year 2002 and 2001, the Company's net loss in 2002 was $14.0 million, or $0.46 per share, compared with a net loss in 2001 of $22.6 million, or $0.76 per share. The 2002 reported net loss totaled $16.6 million, or $0.54 per share, compared with a net loss of $16.7 million, or $0.56 per share, for 2001.
Total cash, cash equivalents and short-term investments as of December 31, 2002 were $33.8 million.
Fourth Quarter Highlights
During the 2002 fourth quarter, Connetics continued its clear focus on delivering innovation in the areas of product development and marketing. Significant accomplishments for the quarter included:
-- Receiving FDA approval for expanded label claims for OLUX (clobetasol
propionate) Foam, 0.05% to include the short-term topical treatment of
mild to moderate plaque-type psoriasis. Approximately 85% of all
prescriptions for psoriasis are for areas of the body other than the
scalp. This development will allow the Connetics' salesforce to
promote the product to dermatologists for treating patients with
psoriasis affecting non-scalp regions.
-- In-licensing a currently approved and marketed dermatological product,
which Connetics intends to reformulate and market using its proprietary
foam delivery vehicle. Details regarding the product and the target
market have not been disclosed, but the U.S. market for this class of
products is estimated to be approximately $180 million in annual retail
sales.
-- Initiating the Phase III program for Velac Gel (a first-in-class
combination of 1% clindamycin and 0.025% tretinoin) for the treatment
of acne. With the initiation of clinical development approximately two
quarters ahead of schedule, the Company now targets product launch
during the middle of 2005. Connetics is concurrently conducting two
Phase III pivotal trials that combined will enroll approximately 2,000
patients. In connection with this milestone, Connetics accrued a
$2.0 million payment to Yamanouchi in the fourth quarter of 2002.
-- Receiving the final milestone payment from Pharmacia Corporation for
minoxidil foam, Pharmacia's Rogaine(R) hair loss treatment. The
application of the foam delivery technology to the Rogaine product is a
solid example of the opportunity to innovate and to strengthen existing
brands using Connetics' proprietary foam delivery vehicle in an effort
to increase patient compliance due to the preference for foam.
Connetics announced the licensing agreement granting Pharmacia
exclusive global rights, excluding Japan, in January 2002.
-- Bolstering the Company's investor outreach program with participation
in two key investment conferences, the Salomon Smith Barney Global
Healthcare Conference in October 2002, and the JP Morgan Healthcare
Conference in January 2003. A replay of the JP Morgan conference
presentation remains available on the Company's web site until
February 28, 2003.
Full-Year 2003 Product Revenue Guidance
The Company reiterated its guidance for full-year 2003 product sales to be between $62 million and $65 million, and total revenues (which includes royalties and contract payments) to be between $65 million and $68 million. Connetics projects combined SG&A and R&D expenses for 2003 to be between $67 million to $69 million. Connetics anticipates that it will achieve profitability in the second half of 2003, which will be driven by continued positive prescription trends for the Company's core products OLUX® and Luxiq®.
There's also a presentation with slides at the current USB Piper conference:
media.corporate-ir.net
Peter |
