Avoid This Biotech Stock

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Antares Pharma profile

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS

This Week's Pitch:

A large float allows Antares to hide a generous market cap of 270M behind a puny share price of 2.6. Antares' share price has nearly doubled this year, likely due to enthusiasm over potential FDA approval of Anturol for overactive bladder on 12/8/11. Antares also has some stake in [BioSante Pharmaceuticals' (NAS: BPAX) ] Libigel, so when Biosante goes up Antares will usually do the same.

I'm not too excited about Anturol. Approved or not, this is a transdermal reformulation of a medication that has been generic in the oral form for years. Of course, the company has a million and one reasons why Anturol is better than generic oral oxybutynin but I'm not convinced that urologists will buy in. In July the company partnered Anturol with [Watson Pharmaceuticals (NYS: WPI) ] for undisclosed compensation, which usually means low compensation. In Q3 total development revenue was 1M, indicating that their compensation from Watson was less than 1M. Even if they are amortizing an upfront payment over several quarters, that doesn't amount to much. I'm guessing the deal was heavily backloaded, likely because Watson sees a high risk of this product not taking off commercially.

Libigel is more of a wild card. Antares has international marketing rights if Libigel is approved, and the share price could certainly pop in the short-term with positive phase III efficacy data for Libigel before the end of 2011. Long-term I don't think the commercial prospects for Libigel are good but I do have a green thumb on Biosante with the expectation of positive data. So my red thumb on Antares is somewhat contradictory in that respect. I see the upward momentum this week being somewhat excessive, and I'd like to escape the red thumb with a positive score before the Anturol PDUFA and Libigel data. If not, I might be in this for a while.

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At the time thisarticle was published The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. 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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