Pharmaceutical companies that depend completely on one drug for their success can make for some volatile investments as that single drug goes through clinical trials or its revenue potential becomes clearer. Santarus
Santarus announced its third-quarter results yesterday. With guidance calling for 2008 sales to grow to more than $200 million, the next few quarters will be pivotal in seeing whether the company can meet that goal. This quarter, sales of Zegerid grew to $12 million, compared to the $4 million earned last year, and the cost of sales was 9%. That shows the type of margins the company can achieve, if it can scale sales larger than its general corporate and marketing expenses, which totaled $25 million this quarter.
But since Zegerid loses patent protection in 2016, Santarus needs to create value for its shareholders immediately. To do that, Santarus announced this quarter that it will expand its sales force by 150 people, to bring its total to 520. The company expects that the move will drain as much as an additional $35 million in expenses annually but will help it get to breakeven earnings by the second half of 2008.
The other notable event this quarter was the deal Santarus made with Schering-Plough
Specialty pharma companies without a lot of moving parts -- like Santarus -- are fairly easy to analyze. Either they ramp up sales fast enough and become a juicy target for a big pharma looking for a synergistic acquisition, or their sales growth lags along with their share price. In a few quarters, investors should be able see which scenario fits Santarus.
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