Why Anacor Pharmaceuticals Is Poised to Pull Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, biopharmaceutical company Anacor Pharmaceuticals (NASDAQ: ANAC  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Anacor and see what CAPS investors are saying about the stock right now.

Anacor facts

Headquarters (founded)

Palo Alto, Calif. (2000)

Market Cap

$422.6 million

Industry

Biotechnology

Trailing-12-Month Revenue

$10.9 million

Management

CEO David Perry (since 2002)
CFO Geoffrey Parker (since 2010)

Return on Capital (average, past 3 years)

(105.7%)

Cash/Debt

$45.8 million / $27.7 million

Competitors

Johnson & Johnson
Novartis
Sanofi

Sources: S&P Capital IQ and Motley Fool CAPS.

Just yesterday, All-Star zzlangerhans touched on Anacor's seemingly unsustainable valuation:

[T]avaborole is likely to be an also-ran to Valeant's efinaconazole which has a substantially higher cure rate in phase III trials. Tavabarole is likely to be approved, but revenues will almost certainly be disappointing. A similar fate may await atopic dermatitis drug AN2728, which is yet to begin phase III trials but was only modestly efficacious in phase II.

As always, when a stock runs like this and attracts pumpers and momo traders I have no idea where the upward trajectory will end. Good chance I go deep into the red here, but a better chance I come out green in the end.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 28, 2013, at 3:26 PM, Biomensch wrote:

    ZZ, if you’re short Anacor I’m sorry to say “deep in the red” it will be. The nails of patients in Anacor’s Tavaborole trial were in worse shape than those treated with Efinaconazole. Adjusting for this difference, both drugs are likely to have near equal efficacy.

    In any case the market for a new nail fungus treatment is huge. And even without a complete cure, most people with unsightly nails (and I know a few) would be ecstatic if they achieved enough improvement to allow them to wear open toe sandals without embarrassment. And since relatively few patients achieve a complete cure, podiatrists are likely to switch between Efinaconazole and Tavaborole to see which works best on a particular patient.

    Also noteworthy is that Anacor CFO, Geoffrey Parker, bought 23,000 shares in June and 50,000 shares in August for a total cost of over $500,000. This clearly indicates his optimism re the Valeant arbitration and Tavaborole’s potential. And it's never a good idea to bet against a company CFO.

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