For some companies, focusing on a single specialization is the best way to build a reputation, leverage resources and maximize effectiveness. There is a Mont-Saint-Hilaire, Quebec outfit that has followed that path to leadership in the field of gastroenterology-related pharmaceuticals.
Axcan Pharma (NASDAQ: AXCA) is engaged in the development and sale of pharmaceutical products for the treatment of gastrointestinal diseases and disorders. Products include medicines for exocrine pancreatic insufficiency diseases; cholestatic liver diseases; inflammatory bowel diseases; gastric duodenal ulcers; and irritable bowel syndrome. The firm also owns the global rights to Photofrin, a drug with applications to esophageal, gastric and lung cancers. Other products include caloric supplements for cystic fibrosis patients and over-the-counter antacids. The company sells its products primarily to wholesale drug companies and distributors. Novartis (NYSE: NVS) is a major competitor.
The firm pleased investors last week, when it reported fiscal Q3 EPS of 36 cents and revenues of $92.3 million. Analysts had been expecting 26 cents and $81.6 million. Management also guided FY07 revenues to $335-$343 million, versus Street consensus of $324.74 million.
The share price popped on the news and has since begun consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with three "buys" and four "holds." The AXCA P/E ratio (16.40), PEG ratio (1.18), Price to Sales ratio (2.68), Price to Book ratio (1.64), Price to Cash Flow ratio (10.05), Price to Free Cash Flow ratio (10.32), EPS Growth rate (38.46%), Operating Margin (26.91%), Net Profit Margin (18.17%), Return on Assets (7.98%) and Net Income per Employee ($132k) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 72% of the outstanding shares. Over the past 52 weeks, the stock has traded between $11.75 and $20.36. A stop-loss of $15.50 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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