ANI Pharmaceuticals Continues Big Run

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Investors have seen the biotechnology momentum continue during Wednesday’s trading session with several biotechnology stocks producing significant gains. While secondary offerings can often be seen in a negative light because of the dilutive effect, they can occasionally be taken in a positive way if a company can get a favorable deal. ANI Pharmaceuticals (NASDAQ:ANIP) is a shining example of the right way to price a secondary offering.

ANI Pharmaceuticals is an integrated specialty pharmaceutical company developing, manufacturing, and marketing branded and generic prescription pharmaceuticals. The company’s mission is to develop, manufacture, and market niche generic pharmaceuticals, focusing on opportunities in pain management, anti-cancer, women’s health, and complex formulations including extended release and combination products.

Shares of ANI Pharmaceuticals have had quite a run over the past few weeks. The big run started on February 18 when ANI announced extremely strong fourth-quarter earnings. The highlights included:

  • Fourth quarter revenue totaled $10.5 million, a year-over-year increase of 98 percent. The increase was due primarily to a 170 percent increase in net prescription sales.
  • Fourth quarter net income from continuing operations was $3.4 million, compared to a loss of $3.99 million during the same period a year ago.

In the weeks following the announcement, shares of ANI Pharmaceuticals have run from $21.47 all the way up to about $37 per share. Today’s big move is the result of a secondary offering at a favorable price for investors. Typically, when a biotechnology stock has a big move and decides to offer shares, the price can be fairly low compared to where the stock is trading. Not in this case. ANI Pharmaceuticals priced a firm commitment of about 1.4 million shares at a price of $31 per share. Before any fees are paid, the company will net $43.5 million.

This impressive run is also likely due to several positive developments that occurred in 2013. One of the most important moves came in December 2013 when ANI Pharmaceuticals acquired 31 generic drug products from Teva Pharmaceuticals. ANI agreed to pay $12.5 million plus a percentage of future gross profits in exchange for the rights to the generic drugs. The acquisition included:

  • 20 solid-oral immediate release products
  • 4 extended release products
  • 7 liquid products

IMS Health estimates that the market for the acquired products is approximately $860 million.

Going forward, investors are likely looking at a continuing growth story. Since 2010, ANI Pharmaceuticals has grown its revenue from about $8 million to $30 million. The company has also managed to do this while decreasing its cost of sales as a percentage of net revenues (excluding depreciation and amortization.)

  • 2010 — 39 percent cost of sales as a percentage of net revenues
  • 2011 — 42 percent cost of sales as a percentage of net revenues
  • 2012 — 43 percent cost of sales as a percentage of net revenues
  • 2013 — 33 percent cost of sales as a percentage of net revenues

Whether that trend will continue is up for debate, but it is certainly encouraging, and based on the investor appetite for today’s secondary offer, the momentum appears to be firmly in ANI’s corner.

Follow Tom on Twitter @TommyMeyer82

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