Why Santarus' Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Santarus (NASDAQ: SNTS  ) popped as much as 16% after announcing the Food and Drug Administration approval of Uceris for active, mild-to-moderate ulcerative colitis, following an update to its 2012 and 2013 guidance.

So what: The big news, of course, is the approval of Uceris -- which, when combined with its existing pipeline, is expected to generate close to $110 million in additional revenue for Santarus in 2013 based on its revenue projections. Commercial launch of the drug will begin in March, and Santarus plans on hiring 85 sales representatives to help with the launch. For 2013, Santarus is expecting research and development expenses to total $34 million to $38 million with net income of $50 million to $54 million, or approximately $0.79-$0.85 in EPS.

Now what: For those interested, yes, I do prefer my crow with ketchup. Just a few days ago, I didn't expect Uceris to gain FDA approval, and that opinion was quickly debunked by the FDA ruling. While revenue is expected to increase from $210 million in 2012 to a midpoint of $322.5 million in 2013, I'd prefer to sit back and watch this drug launch from a distance. Santarus has had a huge run already, and while the midpoint of its income guidance places the company at just 15 times forward earnings as of this writing -- a reasonable figure by most standards -- I'm inclined to see how well Uceris runs out of the gate. Perhaps by summer, we'll have a better indication of that, but for now I'm perfectly happy remaining on the sidelines.

Craving more input? Start by adding Santarus to your free and personalized watchlist so you can keep up on the latest news with the company.

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Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On January 15, 2013, at 2:43 PM, egobasher wrote:

    Wow, I'm sorry but you have not done the research and should not be posting without an editor.

    First off, they never said "the approval of Uceris -- which, when combined with its existing pipeline, is expected to generate close to $110 million in additional revenue for Santarus in 2013 based on its revenue projections."

    Correction, they expect an increase of $110 million combined sales from all product lines.

    Going deeper you would of noticed that they will get all the Par sales on Zegerid PLUS and increase in sales price! If you did the numbers you would of seen a combined sales (Par and Santarus) of Zegerid in the order of $17 million for the quarter. Now you double the price (that is what Santarus did) and expect 1st quarter sales increase to $30 million. Last quarter it was around $8 million. So Santarus will increase sales by $22 million per quarter from Zegerid alone.

    I think they will easily beat that $325 million in sales next year.

  • Report this Comment On January 15, 2013, at 2:55 PM, TMFUltraLong wrote:

    Egobasher,

    The inference is the same... Approx. $110 million from Uceris & its existing pipeline... I fail to see the problem with my statement.

    As for sales, if you're a shareholder I wish you good luck. I have no vested interest in Santarus either way but I've become increasingly concerned with the prevalence of launch failures in recent months. Following a huge spike in its share price, I'd rather hold off.

    TMFUltraLong

  • Report this Comment On January 15, 2013, at 3:32 PM, Macsjv wrote:

    I continue to lose respect for motley fool considering the lack of research required for publication. As egobasher pointed out 110 m is the increase in total product sales. Glumetza had 39m Q3 2012 and was on pace to do 44m in Q4. With the steep trendlines the product could do 190-200m in 2013. With the price increase for Zegerid and the salesforce selling the product I think 100m for 2013 is very possible. Cycloset sales 20-30m and fenoglide 10m for 2013. Without Uceris, sales of 320-340m are possible. Santarus has always been ultraconservative in respect to guidance and the company certainly has the experience to successfully launch Uceris. But, even without a huge launch this stock is still grossly undervalued. I can't quite figure out your motivation for this article. You basically provided 0 value to readers. I have no problem with you waiting on the sidelines to see how the Uceris launch goes but you have nothing to back up your argument. And your previous article discussing a CRL also lacked any valid argument to support your theory. Do yourself a favor and dump your short position for a loss and move on to another stock. You're embarrasing yourself!

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