After last Friday's volatile session, biotechs are now barely in the green for the year, having given back nearly all of their gains. Specifically, the iShares Biotechnology Index (NASDAQ:IBB) had been up over 20% earlier this year, but it can now only lay claim to a 1% or so rise year to date. With the weakness in biotechs spreading like wildfire, it's becoming increasingly important to focus on companies that offer deep value and growth prospects. The specialty branded and generic biopharma ANI Pharmaceuticals (NASDAQ:ANIP) has been one of the hottest biotechs over the last year, gaining an astounding 318%, although the stock has fallen 10.7% this month along with the overall sector. Because ANI grew revenue year over year by 47.7% and recently quadrupled their product portfolio, I believe it warrants a deeper look as a potential biotech bubble beater. 

ANIP 1 Year Total Returns Chart

Source: ycharts

Why did ANI shares triple over the last six months?
Before we consider ANI's prospects going forward, you need to understand its past. Even in the wild health-care sector, it's rare for a stock to triple in half a year, yet that's exactly what ANI did. Starting around October 2013, shares began to slowly churn higher and eventually shot northward after ANI announced fourth quarter earnings in February. What catalyzed this run? We can attribute most of this climb to two material events. First off, ANI reported an 89.8% increased in sales for generic drugs in the fourth quarter compared to a year ago due to a substantial increase in sales of esterified estrogen with methyltestosterone tablets, or EEMT. ANI noted that this increase is the result of an unnamed competitor halting their production of the drug in September 2013, allowing ANI to gain market share and increase their price. Secondly, ANI acquired 31 generic drug products from Teva Pharmaceuticals (NYSE:TEVA)  for $12.5 million in cash and a percentage of future gross profits from product sales. Per the terms of the deal, ANI paid Teva $8.5 million up front, with the balance due within 90 days. ANI plans on paying the balance of roughly $4 million from operating cash flow. 

While there are some additional noteworthy increases in revenue from ANI's other products and services, you need to understand the bigger picture. Looking at cash on hand, ANI reported having about $11,000 in the bank at the end of 2012. And, no, that's not a typo. Fast-forward to 2013, ANI exited the year with over $11 million. In short, ANI's fundamentals have radically changed largely because of the increase in sales for EEMT starting in the fourth quarter.  

Is ANI's future so bright I need to wear shades?
Although ANI's growth story has been amazing thus far, there are a number of reasons to be cautious moving forward. Chief among them is the regulatory history of EEMT and its viability as a major revenue source for ANI in the future. There is a good reason why ANI's main competitor stopped producing such a profitable drug, and that's because the Food and Drug Administration does not believe it's been proven to be effective as a treatment for moderate to severe vasomotor symptoms of menopause. In fact, EEMT is not approved by the FDA for this indication.

Despite numerous variations on this drug over the last 60 plus years, almost every previous manufacturer has ended up discontinuing this product because of regulatory issues with the FDA. ANI openly acknowledges these problems in their SEC filings, stating that FDA inspections have led to manufacturing disruptions and the agency could force them to withdraw it from the market. Put simply, EEMT is being marketed under an FDA policy for unapproved drugs that is both vague and subject to change with little prior notice. 

Foolish wrap-up
ANI's recent climb has been impressive by any standards, and it was based on a stark change in the company's underlying fundamentals. Even so, ANI's fundamentals are on shaky ground, in my opinion. EEMT has a long, problematic history with the FDA, with many manufacturers choosing to forgo profits from the drug due to the uncertain nature of this revenue stream. The question going forward is whether the Teva acquisitions could bridge the gap in case ANI also has to discontinue its production of EEMT altogether or if a lengthy manufacturing disruption occurs. With ANI planning on marketing some of these new generic drugs in the fourth quarter of this year, we will have an answer sooner rather than later. In the meantime, you may want to take a wait-and-see approach with this specialty biopharma, at least until the company has alternative revenue streams up and running.