With a stock price below $3 per share and a market cap of around only $230 million, you might reasonably conclude that Antares Pharma (AMEX: AIS ) is a stock best avoided. Penny stocks are notoriously risky, after all, and many small companies never grow into big companies. Don't be hasty, though. Learn more about why you might want to buy, sell, or hold Antares before you make a decision.
Buy
One reason that investors like Antares is because it develops drug-delivery systems that can be used for many different drugs. These include self-injection devices and topical gels. Its technology can be licensed by many other drug-makers, generating increasing income through royalties. Already, Pfizer (NYSE: PFE ) , Jazz Pharmaceuticals (Nasdaq: JAZZ ) , and Teva Pharmaceutical (Nasdaq: TEVA ) , among others, are licensing the technology. These partners all have rising revenue and earnings (except Pfizer, which had an earnings stumble in 2010 and despite rebounding strongly in 2011 will have to contend with the loss of Lipitor exclusivity going forward).
The beauty of that kind of business model is that Antares doesn't have to be spending money marketing those treatments. That's typically up to its partners, though Antares reaps benefits from it as sales grow. And in general, the health-care field is a very promising one, as our global and domestic population grows and gets older, requiring more medications, procedures, and devices.
Meanwhile, Antares has a number of products either through trials like ELESTRIN for menopause (partnered with Jazz) and ANTUROL for overactive bladders, or in development like NestraGel for contraception. Also in development is Vibex MTX, which delivers methotrexate, a treatment for rheumatoid arthritis and other autoimmune diseases. With Teva, it's working on an alternative to the commonly used EpiPen epinephrine auto-injector. These are all promising areas, and just one or two big successes can make a huge difference for the company.
A final reason to buy is the price. Antares stock recently plunged 33% on less-than-unequivocally-good results for BioSante Pharmaceuticals' (Nasdaq: BPAX ) LibiGel, for which it had developed the gel. (BioSante dropped 77%.) That created a terrific buying opportunity for those convinced of a rosy future. The stock has since gained ground, but remains well below its previous high.
Sell
Reasons you might sell (or choose not to buy) Antares include the fact that it's a penny stock -- a stock selling for less than $5 per share. Yes, some pennies do grow and reward investors. But many are tied to shaky enterprises, with their relatively few shares easily manipulated by hypesters pumping and dumping the stock. As with any penny stock, proceed with caution.
You might also avoid Antares if you don't know much about biotechnology. In all investing, it's best to have a good handle on how a company operates and makes its money, and also on its competitive landscape. For most of us, who aren't scientists, this can be tough with such companies.
Meanwhile, although Antares is seeing its revenue grow briskly, that still hasn't translated into profits. It can be safer to stick with companies that are already profitable.
Hold
So should you buy or cross the company off your list? Consider just holding, or waiting, instead. Biotech companies tend to rise or fall according to binary events on the pathway to product approval. In time, Antares may have some more successful treatments under its roof, or additional lucrative partnerships for its drug-delivery systems.
The verdict
I'm not rushing out to buy shares of Antares, but I'm going to keep an eye on it, and think some more about it. You might want to do the same. It's not for the risk-averse, though -- there are plenty of solid, profitable dividend payers for those folks, and ones that are growing briskly, too.
Looking for promising investments? Here are "5 Stocks with Explosive Potential" and "4 Stocks as Cheap as They've Ever Been."
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