When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether it's possible upside outweighs its risks. Let's take a look at Antares Pharma (NASDAQ:ATRS) today, and see why you might want to buy, sell, or hold it.
Founded in 1979 and based in New Jersey, Antares sports a market capitalization of about $500 million. It's a pharmaceutical company specializing in self-injection and topical-gel products. Antares stock is up some 54% over the past year and has averaged gains of 22% annually over the past decade. That's enough to have some wondering whether they should jump in to share in profits, too, or whether the stock is no longer a good buy.
One reason to consider buying Antares Pharma is its business. With the world's population growing, getting older, and living longer, demand for health care products and services is likely to remain in demand.
Better still, unlike some drug-development companies, Antares isn't just working on some formulas that might or might not end up approved by the Food and Drug Administration. It actually has products on the market, generating revenue. And these products include some rather interesting ones, too -- such as pressure-assisted, needle-less injection technology and drug-delivery gels. If you don't like getting shots or taking pills, pay attention to Antares Pharma. (Self-injected drugs are also promising because they can cut down on health-care costs, if doctor-office visits aren't necessary when patients need shots.
Antares' pipeline features the Vibex MTX Medi-Jet drug delivery system that administers methotrexate to treat rheumatoid arthritis. Recent trials have been successful, and if it gains FDA approval, Antares will be marketing Vibex MTX itself (except in Canada) and will thus be able to reap more reward from it. The company is also looking to apply the same technology for testosterone replacement therapy. The more applications it's approved for (assuming that happens), the more money it can make.
Another thing going for Antares is its wide range of partnerships. Much of its revenue comes from Teva Pharmaceuticals (NYSE:TEVA), which uses Antares technology in a human-growth hormone injection. (Teva is also looking to market a Vibex-based epinephrine self-injector.) Another big chunk of revenue is tied to Ferring Pharmaceuticals BV, which employs Antares technology with its own human-growth hormones. Watson Pharmaceuticals (NYSE:AGN) has begun selling a gel to treat overactive bladders with Antares technology, and BioSante (NASDAQ:ANIP) is hoping to win FDA approval for its LibiGel testosterone gel to treat female sexual dysfunction. Antares is also receiving licensing dollars from Pfizer (NYSE:PFE), though it's not yet clear for what.
Other bullish signals for the company are some recent Wall Street analyst upgrades, though its important to remember that such analysts are not all alike, and many don't have the best track records. The folks at Guggenheim recently started covering Antares and slapped a "buy" rating on it.
The company's growth rate is another plus, with revenue recently rising more than 40% over year-ago levels, and averaging more than 25% over the past five years.
A look at Antares' financial statements offers a few red flags. Net income is still negative, for example, despite rising revenue. That's not unusual for small, fast-growing companies that are heavily investing in their futures. But all other things being equal, it's always preferable to have profits. Free cash flow is also negative, though at least there's little to no debt. And despite a red bottom line, the company has been outperforming expectations.
The company's valuation is another consideration. On some measures, such as price-to-sales and forward P/E ratios, it looks overvalued. There's no current P/E because of net losses.
One concern that some have with Antares is the dilution of its stock. Indeed, the stock took a hit last month when the company issued 12.5 million new shares, thereby shrinking the value of existing shares. This generated millions of dollars for the company, but presumably, if it performs well, it soon won't need to issue more shares for cash. Shares outstanding have risen from 60 million in 2007 to 125 million recently.
Given the reasons to buy or sell Antares Pharma, it's not unreasonable to decide to just hold off on it. You might want to wait for it to start posting a string of profitable quarters, or for it to earn FDA approval for one or more products. Or check out some other interesting biotech or pharmaceutical companies, to see if they inspire more confidence than Antares. Spectrum Pharmaceuticals (NASDAQ:SPPI), for example, sells a colorectal cancer drug and seems attractively valued.
I'm holding off on Antares Pharma for now, but I'm intrigued. Everyone's investment calculations are different, though. Do your own digging and see what you think. The company may perform spectacularly in the coming years, but remember that there are plenty of compelling stocks out there.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Teva Pharmaceutical Industries. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.