Forget those stodgy, big drug makers -- Merck (NYSE:MRK), Eli Lilly (NYSE:LLY), Bristol-Myers Squibb (NYSE:BMY), Pfizer (NYSE:PFE) -- with their 12% average annual growth rates and massive research and development costs. Suckerfish clinging to their backs are turning their hard work into easy swimming for the little guys. That goes for generic-drug makers in general, and American Pharmaceutical Partners (NASDAQ:APPX) in particular.

This quick-moving company markets more than 100 generic drugs, with a focus on oncology, anti-infective, and critical care. And it has more than 50 new drug candidates in trials. In recent years, American Pharma has managed to file at least 12 Abbreviated New Drug Applications (ANDA) with the Food and Drug Administration each year -- and 2003 is no different. The company has already received five new drug approvals this year and has 13 others pending.

Swimming with new products, American Pharma reported back-flippin' second-quarter results this morning, sending the stock up another 7% to around $43. Earnings were $0.41 per share, far above the $0.30 per-share consensus estimate, and up 71% year over year. Revenue rose 31% from last year to $90 million. For the first six months of 2003, revenue is up 40% year over year to $171 million, and net income has jumped 128% to $37 million.

American Pharma is riding a wave of popularity for generic drugs as health-care costs soar. Recently, 77 of the 200 top-selling drugs in the country were generic. But despite rapid growth, American Pharma is keeping costs under control and becoming more efficient. Today, management revised 2003 gross-margin guidance from the 40% range to the 50% range, emphasizing how expectations for the company were much too low.

The stock trades at 34 times forward earnings estimates -- which might look cheap given the quarter's 71% earnings jump, but earnings can be somewhat sporadic -- and at a multiple to free cash flow in the 50s at least.

American Pharmaceutical Partners caught many Fools' attention at $18 when it made our Foolish 8 list and was highlighted in Motley Fool Select (now Motley Fool Hidden Gems). Fool analyst, Jeff Fischer (TMF Jeff) studied the generic drug industry this spring, spotlighting American Pharma for its long-term potential.