Knocked Down? Not for Long!

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Ahh, the joys of being a platform drugmaker. One week you're getting pummeled because a partner's drug doesn't work. The next you're signing up a new partner.

Last week shares of Antares Pharma (ASE: AIS) got knocked down after BioSante Pharmaceuticals' (NAS: BPAX) LibiGel didn't live up to expectations. But it wasn't Antares' fault; the company contributed the gel delivery system, which allows the testosterone absorption through the skin. That part seems to be working fine.

And it doesn't seem to have scared away Pfizer (NYS: PFE) , which licensed one of its drug delivery technologies. The press release was light on the details, so it isn't clear what drug Pfizer needs the delivery system for. It's not even clear which of Antares' drug delivery systems Pfizer is using. In addition to the gel system, Antares has also developed injection devices, including some that are needle-free.

The lack of details makes it hard to know how much value the partnership adds to Antares, but it also shows what's special about a drug delivery company like Antares. The ability to license multiple technologies out to different companies can be extremely lucrative. It might be hard for a company to get anything higher than a single-digit royalty, but it only needs to see a couple of drugs make it to market to get the same level of profit as their partners see from one drug. Remember, those royalties come without having to shell out for manufacturing or selling costs.

Antares already generates revenue off products sold by Teva Pharmaceutical (NAS: TEVA) , Ferring Pharmaceuticals, Watson Pharmaceuticals (NYS: WPI) , and others. The revenue helps pay for the company's internal development pipeline, including Vibex MTX, which delivers methotrexate, a common first-line treatment for rheumatoid arthritis and other autoimmune diseases.

Unlike its partner BioSante, Antares looks like it's in a healthy position since it wasn't nearly as dependent on LibiGel for its future. Delivering additional revenue is as simple as signing up more partners and hoping they have better luck in the clinic.

Getting in on Antares after its LibiGel-related dip could be a pretty savvy move. But to find out the stocks only the smartest investors are buying, download this special free report. Motley Fool analysts explain why Warren Buffett ad other gurus are targeting this specific sector and highlight a great stock that is too small for Buffett to buy.

At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Teva Pharmaceutical Industries. Motley Fool newsletter services have recommended buying shares of Teva Pharmaceutical Industries and Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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