Abraxis Advances

Nothing gets pharmaceutical investors more lathered-up than a drug developer with a so-called platform technology -- one that can be used to make existing drugs more potent, longer lasting, or safer, for example. Platform technologies are so exciting because they can potentially be applied across many already approved drugs, capturing a good chunk of an existing drug's market share. This is why investors have been so excited about Abraxis BioScience (NASDAQ:ABBI) since the approval of its cancer-treating compound, Abraxane, back in early 2005.

Yesterday, Abraxis reported third-quarter results, with sales of its hospital-based products up 13% year over year to $110 million. That figure excludes the $40 million in sales from recently acquired products that were picked up from AstraZeneca (NYSE:AZN). Abraxis' top product, the improved paclitaxel formulation Abraxane, brought in another $52 million in revenues, with quarterly net sales growth of 25% year over year. Overall revenues were up 57% to $203 million, and gross margins expanded a solid eight percentage points to 58%. Earnings, however, were a paltry $0.08 a share.

The quarterly results weren't all rosy for Abraxis, though. It revised 2006 Abraxane revenue estimates to $173 million-$183 million. That's at the lower end of the guidance it gave just last quarter, after previously downgrading its estimates from the more than $200 million expected from the drug earlier in the year. For the foreseeable future, Abraxane will provide the bulk of organic sales growth, while providing a glimpse of how well Abraxis' technology is being accepted into the marketplace. Investors should follow the drug's sales closely.

Abraxis is proactively working to grow Abraxane sales. A filing for European approval of the drug was submitted in September; a decision on the drug is expected to take about 12 months. In addition, Abraxis has Abraxane in numerous ongoing clinical trials to expand the scope of its label into new indications, and a European marketing partner (and associated upfront payments) for the drug will be announced by early 2007.

Besides Abraxane, much of Abraxis' value lies in its potential to use its nanotechnology to improve existing drugs; investors need to pay attention to progress on this front in the future. Using this technology, Abraxis currently plans to bring six new drug candidates to clinical trials in the next 12 to 18 months. If the company can successfully fend off the patent lawsuits, and get these drugs approved, investors will be richly rewarded for waiting.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .