The biotech companies that tend to get all the publicity are the ones that have potential blockbuster drugs in their pipelines. Often, the high-profile drug becomes so important that its fate will either propel the company to stardom if it works, or drag the company into the dustbin if it fails. These sink-or-swim outcomes cause tremendous volatility in biotech stock prices, as has been seen recently with OSI Pharmaceuticals (NASDAQ:OSIP), Genta (NASDAQ:GNTA), and Allos Therapeutics (NASDAQ:ALTH).
While these all-or-none scenarios attract most of the attention, another small drug developer, Connetics (NASDAQ:CNCT), has quietly built a profitable business on the back of several small products. Yesterday, Connetics reported first-quarter sales of $25 million and net income of $1.9 million. Revenue grew at a robust 63% over last year's first quarter.
Full-year revenue guidance is $128 million to $137 million with diluted earnings per share in the range of $0.33 to $0.37. The expected earnings performance this year is even stronger if the onetime charge of $0.10 coming in the third quarter is backed out.
In contrast to the one-trick ponies, Connetics has become a profitable drug company by marketing several products, all within the dermatology space. In addition to OLUX and Luxiq, which are steroids for the treatment of scalp dermatoses, the company recently acquired Soriatane from Roche. Soriatane could be a good growth driver as it is approved for the treatment of severe psoriasis. While Soriatane will have to compete with drugs like Amgen's (NASDAQ:AMGN) Enbrel and Biogen Idec's (NASDAQ:BIIB) Amevive, it will have a significant marketing advantage over the biologics as it is much cheaper.
Over the next 18 to 24 months, the product line could grow from three to six approved products. The FDA will make decisions on Actiza and Extina this fall. In the third quarter, Connetics is going to file its new drug application for Velac, which has looked solid in the treatment of severe acne. All three of these drugs are within the company's dermatology focus, which will allow it to effectively market the products with an established sales force.
Connetics is not building a company around a single stellar drug. Instead, it has put together a lineup of smaller products, which, in aggregate, are starting to produce some impressive results. The next few years should see considerable growth in revenues and earnings.
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Fool contributor Charly Travers does not own shares of any of the companies mentioned in this article.
