Shares of biotech startup Zalicus
So what's all the fuss about Zalicus -- and does it deserve it?
Obviously, Oppenheimer thinks so. According to the analyst, Zalicus is in line to receive $15 million in high-margin royalty payments from partner Covidien
If Oppenheimer's right about that sales target, it would be easy to conclude that it's right about the stock. With a market cap around $250 million today, Zalicus is a pipsqueak in a world of pain medication dominated by the likes of Pfizer
Currently, the company's doing less than $7 million in annual business. (Put down your calculators. The answer is "37 times sales.") This poses an investor dilemma: Do you buy a profitable, slow-growth pharmaceutical giant today, or pay 37 times sales for the chance of owning a bargain tomorrow -- with little idea of how far off "tomorrow" might actually be, if it ever comes at all?
As so often in investing, you pays your money and you takes your chances. For those rolling the dice, though, I have some good news: While Zalicus' income statement reports nearly $43 million in losses over the past 12 months, in fact the company burned only about $21 million worth of cash during the period. With more than $50 million in the bank, Zalicus has a good two years left to make good on Oppenheimer's promises. Here's hoping.
Do you hold out hopes that Zalicus can challenge the big boys? Head over to Motley Fool CAPS now, and tell us what you think about it.)