SAN FRANCISCO -- After the long weekend, people are going to be clamoring to get back into the swing of things when trading resumes on Tuesday...
Oh wait. That's right. There
Monday. It just felt like the stock market took a "mental health day," which is certainly understandable (and needed) after its recent gyrations.
That 885 million shares traded on the
and 1.36 billion in over-the-counter trading -- and that the session felt like a holiday -- is pretty astounding. Still (of course), there was some excitement, even beyond the "headline" issues such as
Take, for example,
, which jumped 13.2% to an all-time high of 125 after the
Food and Drug Administration
gave tentative approval to its generic version of
, Prilosec is a treatment for ulcers and other stomach ailments common to people who trade for a living (among countless others). With global sales totaling nearly $6 billion, Prilosec was the biggest prescription drug in the world last year. Over $3.5 billion was spent on the drug in the U.S. alone in 1999.
No matter how you slice it, that's a lot of tummy aches and a huge market potential.
When I first wrote about Andrx -- way back on
Aug. 19 , to be precise -- Clarke Adams and Mark Lapolla, partners at
, a hedge fund based in Scottsdale, Ariz., effusively detailed the potential for the company's generic version of Cardizem CD, a treatment for certain heart ailments.
I return to that issue now because expectations that Andrx can replicate its success with the Cardizem generic are key to the optimism over the Prilosec substitute.
Andrx officials declined to give specific sales data for Cardizem CD, but analysts estimate the company sold about $100 million of the drug in the second half of 1999. Andrx didn't have clearance to market the drug until late June, but did enjoy its status as the only generic for six months because it was the first company to file for approval of a generic version.
Extrapolating Andrx's results for the full year and taking into account the potential for competition (which complicates the issue, for sure), the Street is estimating Andrx enjoyed a roughly 14.3% penetration rate into the Cardizem market. U.S. sales of Cardizem totaled around $700 million last year.
There are no guarantees, but similar success with Prilosec would mean sales of around $500 million in the U.S. alone.
However, AstraZeneca's patent doesn't expire until April 5, 2001, and the company is likely to file with the FDA for an extension that could extend the patent until Oct. 5, 2001.
But Adams (for one) expects to see earnings and revenue from the Prilosec generic "long before that" because of the likelihood the company will partner with a "major " pharmaceutical company to distribute the drug outside of the U.S. Andrx has done similar ventures with companies such as
in the past, he noted.
"Either independently or in conjunction with another
firm, the company is exploring opportunities to launch Prilosec outside the U.S. earlier as patents outside the U.S. expire," said Angelo Malahias, Andrx CFO.
Malahasis (surprise!) declined to discuss who those potential partners might be and did not have specific information about when patents outside the U.S. expire.
When I first wrote about Andrx, the shares were trading in the low 60s. They promptly went to as high as 75 in early September before steadily declining, ending 1999 in the low 40s. Not exactly the stuff legends are made of, especially given the ramp many biotech stocks were on as the year was ending.
But shareholders such as Petroscapital have been rewarded for their faith and patience. The stock has climbed steadily in 2000, save for a brief dip in conjunction with other health care and biotech names in early March.
Andrx certainly has been a strong performer this year. But going from 40 to 125 is not like going from 4 to 125, a trick some biotechs pulled off in recent months before (most) retreated sharply in the
great biotech selloff earlier this month. (I won't name names to save myself the vitriolic emails.)
"It's too mature a company" for those kind of gains, Adams quipped when I asked about such issues.
He was half-kidding. But as with technology, it seems biotech and health care investors are now focusing their efforts on companies with a bit more history, a bit more earnings and a bit more stability than some of the highfliers. A bit more maturity, you might say.
Andrx earned $1.97 per share last year and the current consensus is for profits of $1.31 this year and $2.62 in 2001. Adams, for one, believes those estimates are extremely conservative, especially given the potential for the Prilosec substitute (and not to mention for other drugs in development).
"Clearly, there's nothing in any
earning estimates for a drug of this size," he said of the Prilosec generic. "Not even close."
Andrx is the biggest holding of Petroscapital, which has about $200 million under management.
The Saga, the Saga
Faithful readers will recall how I detailed the comings and goings of Michael Stanek. The software analyst was first believed to be going from
but ended up becoming CFO of
, as I reported on
As it turns out, that wasn't the end of the story.
In a dramatic twist worthy of Oliver (or
), Lehman Brothers today confirmed Stanek has returned to the brokerage firm and will resume coverage of the software industry, including Mediaplex.
Stanek could not be reached for comment but said in a statement released by Lehman: "My decision is based solely on my desire to rejoin Lehman and to be an industry research analyst and in no way reflects on my admiration for Mediaplex."
Perhaps, but I'm sure the next meeting between the once and future analyst and management of his erstwhile employers will be a lulu.
Citing the quiet period surrounding the company's plans to sell up to 5.5 million shares in a secondary offering, an outside spokesman for Mediaplex declined to comment.
Mediaplex's (remaining) management team is currently on the roadshow for said secondary. I can't imagine they're able to keep quiet about this latest turn of events. Nor can they be having much fun explaining it.
Mediaplex shares fell 19% to 41 Friday as rumors circulated about Stanek's (latest) change of heart. Monday, the stock recovered some of the decline, rising 17.4% to 49.