2012 Preview: K-V Pharmaceuticals

With 2011 finally in the books, it's time to reflect on what transpired last year and which companies could be facing business-altering decisions in 2012. On today's plate, we have small-cap biotechnology company K-V Pharmaceuticals (NYSE: KV-A)

But before we dig too deeply into what 2012 may have to offer, let's get a quick snapshot at how 2011 treated shareholders:

Source: Yahoo! Finance.TTM = trailing 12 months; NM = not meaningful.

Stealing a scene right out of Wayne's World, 2011 was more like a "camera one -- camera two" kind of year. The first three months were marked by the stock spiking higher, by more than 1,000% at one point, relating to the FDA approving Makena, the company's preventative pre-term birth injection. The final nine months of the year involved a series of bungles that would make the Cincinnati Bengals proud, securing CEO Greg Divis the No. 2 spot on my list of the worst CEOs of 2011. But these results are now in the past. Let's look ahead and see what could be driving K-V Pharmaceuticals' stock in 2012.

What to expect
The first thing K-V needs to tackle is its pricing of Makena. Last year, the threat of congressional involvement and a ruling by the FDA disallowing Makena exclusivity rights forced the company to drastically reduce its pricing on the drug from $1,500 to $690 per dose. At $690 -- still a marked hike over the previous combination of treatments that ran around $20 -- it's quite possible that K-V's drug may not ever return a profit following the significant capital invested in developing the drug with Hologix (Nasdaq: HOLX). Hologix smartly handed Makena off to K-V following approval, washing its hands of the drug and collecting $199.5 million in the process.

For K-V, establishing methods that make Makena more affordable and accessible to the public, along with bettering its public image are paramount to its success. Conserving cash will also be a primary objective for K-V in 2012. If 2011 proved anything, it was that getting a drug approved by the FDA doesn't guarantee that the drug will successfully sell. Dendreon's (Nasdaq: DNDN) prostate cancer drug Provenge has had difficulty gaining traction after doctors, unsure of speedy reimbursement, balked at fronting $93,000 per patient, while Human Genome Sciences' (Nasdaq: HGSI) lupus drug Benlysta hasn't exactly flown out of the gate, either, with demand for the drug weaker than expected likely because of the waxing-and-waning nature of the disease. Because of K-V's cash burn rate, I wouldn't be surprised if more layoffs were announced this year or if the company sought out a buyer. If anything, shareholders should be prepared for a secondary offering by midyear, in my opinion.

Foolish roundup
Up until recently, I've held out hope that K-V would be able to turn things around, but my lack of confidence in its management is making that reality very hard to believe. K-V is facing a potential cash-crunch soon and is having a difficult time marketing Makena. That creates a scary scenario for shareholders heading into 2012 and is the primary reason I'll be ending my outperform rating on CAPS this week.

What are your thoughts on K-V's future? Share them in the comments section below and consider adding K-V Pharmaceuticals to your free and personalized watchlist to keep track of the latest news with the company.

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