Specialty generic pharmaceutical manufacturer IGI Laboratories (NASDAQ:TLGT) has been quite the winning stock recently. While the company has been publicly traded for years, the stock really came alive in 2012 after a talented CEO named Jason Grenfell-Gardner took the top chair. Since then, the stock has been a rocket ship, up more than 650% in the past three years.

What is this small-cap biotech doing so right recently that has caused its stock to go gangbusters? Can investors expect more of the same in the future?

The TICO strategy
While the company currently generates revenue in a few different ways, IGI's long-term strategy hinges on selling a large portfolio of specialty generic pharmaceutical products. Specifically, the company is focused on creating products for the "topical, injectable, complex, and ophthalmic" markets, or, to use the company's own language, the "TICO" markets.

Image Source: IGI.

Each year, a number of drugs that fit into the company's sweet spot lose their patent protection. IGI has been aggressive in stepping in to make copycats, submitting new products to the FDA for review, and getting them on pharmacy shelves at a discount.

Currently, the company sells seven products in 12 different formats, but that number is going to be moving substantially higher over time. The company currently boasts 30 abbreviated new drug applications, or ANDAs, on file with the Food and Drug Administration.

An ANDA is an application for a U.S. generic-drug approval for an existing licensed medication or approved drug. As each of these drugs gains approval, the company puts them on pharmacy shelves around the country at a discount and steals market share from competitors.

While any one of these products on its own won't likely amount to huge sales, the sheer number of them helps to bulk up the company's addressable market. As of right now, the company estimates its 30 ANDAs represent a total market opportunity of $1.4 billion.

Image Source: IGI.

Better yet, that $1.4 billion is certainly poised to grow rapidly over time, as the company set a goal to submit up to 20 ANDAs to the FDA by the end of the year and thus far has successfully submitted eight of them. Each successful submission helps that number creep higher.

Beyond developing solutions in-house, IGI has been buying up products from other players in the industry, as well. Last year, it bought 18 injected ophthalmic products from AstraZeneca, and an additional two from Valeant Pharmaceuticals, which give the company another possible means to grow into the future.

Market share and pricing
That $1.4 billion addressable market certainly sounds huge, but that's based on branded pricing and the assumption of capturing 100% market share, which IGI is unlikely to ever reach. So how can we look at that number to get a better idea of the company's actual growth prospects?

On the last earnings call, CEO Grenfell-Gardner gave us some clues on how to think about it: "We would say that there is about a 20% market share target that we have and we would say that there is probably about a 20% discount to the installed market pricing in order to induce switching from installed players to us."

Let's use his math and the currently estimated addressable market of $1.4 billion for the 30 ANDAs that the company has pending with the FDA. If we subtract 20% from that number to account for the generic discounted price, and assume the company eventually grabs a 20% market share, then IGI should be able to grab roughly $224 million in revenue from its currently pending ANDAs alone.

That's a huge number compared to the $19.1 million that the company generated through the first six months of the year.

All for a price
For the full year, management plans to generate between $35 million and $40 million in revenue, and as the company continues to scale operations, they see gross margins expanding from 45% to 50%. When factoring in growth, the company thinks it should reach breakeven at the operating level by the fourth quarter of this year. With more than $150 million in cash on the balance sheet, the company appears to have plenty of capital to fund its research and development efforts needed to complete the additional ANDA filings. 

The market has certainly gotten excited about this name. Since it has no current profits, I like to value this company using the price-to-sales ratio. When you look at this metric, shares do look pricey.

While I have a hard time calling a stock trading at roughly 14 times sales cheap, given this company's growth prospects and the near-term catalyst of reaching breakeven, the price may not be outrageously expensive, either.

The Foolish bottom line
If the company can continue to win approvals from its many ANDA filings, the odds are good that it will have years of strong growth ahead. IGI has captured my attention, and if the company continues to execute against its plan, I may just be willing to add a few shares to my portfolio.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool owns and recommends Valeant Pharmaceuticals. 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.