Tom Gardner expects his Motley Fool Hidden Gems recommendations to face a bumpy road. They are small and have little analyst coverage. In a word, they are "hidden." But hidden is usually a good thing in investing.
Hidden Gems recommendation Flamel
To be fair, the company did miss the earnings estimates of the three analysts that follow it. One expected a $0.20 per-share profit. The lowest estimate was a $0.06 per-share loss. The actual loss was $0.07 per share. Shucks!
Flamel and its peers in the Merrill Lynch
Flamel uses its polymer chemistry expertise to make new and already-marketed drugs safer and more effective. It is the ability to work with FDA-approved drugs -- which would have greatly reduced development times -- that makes near-term revenue and earnings possible.
Remember the three analysts? They expect the company to earn anywhere from $0.20 to $1.63 per share in 2005. Yes, that is a wide range. But, the growth of revenue and earnings at Flamel could be explosive -- and that is one reason it is a Hidden Gems recommendation.
The company's Medusa nanoparticle technology improves the delivery of native protein drugs through a more evenly controlled release of the drug. The technology also avoids side effects and enables a longer span of time for drug release -- both of which are a significant advantage. Bristol-Myers Squibb
The company's microparticle Micropump allows small-molecule drugs to have extended delivery times. Generic-drug company Biovail
The company also has a number of undisclosed partnerships, an "undisclosed" Micropump project with Merck
Today's stock action is not indicative of any change of fortune at Flamel. In fact, the company announced the start of construction for a new manufacturing facility. Flamel is clearly getting ready for the future.
The company has a more than respectable $101 million in cash. That's plenty considering the latest quarter's loss was $1.6 million. The stock isn't getting respect in today's trading, but Flamel's long-term future looks like a gem.
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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.
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