The pharmaceutical industry is full of small specialty drug developers that can quietly license developmental candidates and achieve modest commercial success and profitability. Axcan Pharma (NASDAQ:AXCA), which announced its fourth-quarter earnings late last week, fits this description perfectly.

Canadian-based Axcan markets several products, all with sub-$100 million annual sales, for the treatment of gastrointestinal disorders. For the quarter, sales came in at $72 million. The vast majority of sales growth has been in the U.S. this year, and this has remained true in the fourth quarter, with all of Axcan's 7.9% quarterly sales growth coming from its U.S. operations.

Earnings were down slightly year over year, to $0.17 a share, but would have been flat had options expenses been calculated back in 2005. Absent one-time expenses related to the discontinuation of a drug following unfavorable phase 3 trial results and the costs of in-licensing another drug candidate, earnings would have been up another $0.12 a share. Gross margins were up slightly, to 75%, and leaving out the above one-time charges, operating margins would have increased as well.

On the drug development front, Axcan received approval to market its stomach ailment treatment, Pylera, but sales are not expected to be high. The drug will be facing entrenched competition and Axcan will only be detailing Pylera with its small sales force.

Axcan doesn't have much of a drug pipeline to account for the moderating growth of its existing product sales, so in September Axcan licensed a phase 1 drug candidate named AGI-10 from European pharma AGI Therapeutics. It's tough to get excited over AGI-10, since it is supposed to be a reformulated version of AstraZeneca's (NYSE:AZN) proton pump inhibitor Prilosec, which already faces numerous generic competitors. Even if AGI-10 gets approved, Axcan will have a hard time convincing people to make the switch.

For the year, Axcan experienced a 25% increase in cash flows from operating activities. If it can continue to keep its spending under control, investors will continue to be rewarded, as Axcan scales earnings even in the face of slowing sales growth. Small pharmas specializing in niche areas aren't the most exciting of drug developers, but if shares get cheaper because of unrelated market forces they could make for a nice buying opportunity. Keep your eye on this small guy to see what develops.

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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.