Best known for its Mucinex chest decongestant, Adams Respiratory Therapeutics (NASDAQ:ARXT) announced on Wednesday that it had filed a New Drug Application with the FDA for another extended-release version of this popular cough medicine.
With its Mucinex cough treatment one of the top over-the-counter cough medicines, sales of $240 million for the fiscal year ending in June, and revenues growing 92% in this latest quarter, Adams proves that there's big money to be made in fixing phlegm problems.
Part of the growth in Adams sales this quarter was due to the acquisition of the Delsym cough syrup medicine that it made earlier in the year for $122 million, but sales growth in all its Mucinex brands have been strong as well. If it can get FDA approval for more versions of this drug, it will only help solidify the brand among consumers.
With the cold and flu season now upon us (and not ending until around April), this quarter will be the prime proving ground for how smart a deal the Delsym acquisition was and what sort of potential Mucinex has.
Shares of Adams were down 10% in August, when the company revealed that a generic drug manufacturer had filed an application with the FDA to market a version of certain types of Mucinex. Adams is currently fighting to enforce its Mucinex patents in court, with a trial date set for April of next year. Even the presence of generic competitors, though, shouldn't hurt its sales too much since with over-the-counter products, branding is much more important than the actual ingredients of the drugs.
Adams is not sitting on its laurels, though. It's leveraging its expertise in respiratory disorders into its drug pipeline, with results expected from a phase 2 clinical trial for a compound to treat chronic obstructive pulmonary disease expected no later than the end of March next year.
Luckily for Adams shareholders, despite some humorous branding and its Mrs. MucusT advertising campaign, its Mucinex brand has become popular with sick folks everywhere. Even with similar products on the market, Adams still achieves very pharmaceutical-like near 80% gross margins and solid high teens net margins on a rapidly growing sales base. With so much money to be made in cough and cold medicines, that's nothing to sneeze at.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article.
