Small Caps Stocks to Buy Acrux (ACR)

Small Caps Stocks Acrux (ACR) | Stocks to Buy News | ASX ACR SharesAcrux (ACR) is an Australian drug business, developing and commercialising a range of pharmaceutical products for global markets.

ACR’s product pipeline includes treatment of hormonal deficiencies, central nervous system disorders, contraception and dermatological conditions – covering areas including men’s, women’s and animal health.

The group’s first product, Axiron, is being marketed in the USA following approval by the US Food and Drug Administration (FDA). Axiron is a spray for men with low sex drive because of decreased amounts of testosterone, restoring the normal level of the hormone in most men.

ACR has products in late stage development, follows a low risk development path and is well funded.

The company recently won approval to market menopause treatment in Sweden. This has been cheered by the market and could lead to further approvals to sell the treatment elsewhere in Europe.

Fundamentally strong

As a company, Acrux benefits from a number of strong fundamentals. ACR boasts faster, lower risk, lower cost development than its peers, because its products contain proven drugs.

ACR’s products are designed to have strong competitive advantage (“patient-preferred and patent protected”) and the group boasts a track record of commercial deals.

The company’s lead product, Axiron, has moved successfully through FDA approval, whilst the group has a range of products in clinical development for a range of therapeutic areas.

The broader environment for ACR is also supportive. As a pharmaceutical and biotechnology player, ACR is part of a relatively defensive sector.

Last year, ACR concluded Australia’s largest ever biotechnology licensing deal by entering into a global and exclusive agreement with Eli Lilly, a top-10 international company with reported revenue in 2009 of US$22 billion.

ACR is understandably focused on driving ahead with its landmark product, Axiron.

Axiron was the first testosterone replacement product approved for administration under the arm.

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Swedish persuasion

Last month, ACR announced it has been granted a marketing authorisation for its Ellavie product by Sweden’s Medical Products Agency.

The move has placed ACR in a strong position to actively engage potential marketing partners for the European market.

The estrogen therapy market outside the US is valued at US$360 million a year and ACR is looking to get a share of this market.

Earnings impress

In February, ACR reported a first half profit of $56.7 million, up from a loss of $2.1 million on year.

This translated to a diluted earnings per share of 34 cents. Revenue for the period jumped to $90.5 million (from $0.6 million).

ACR received US$87 million from Eli Lilly following the Axiron approval. A first distribution of approximately 60 cents per share was declared.

Looking ahead

The fully year profit after tax is expected to be similar to the first half result which equates to a very strong year.

Axiron was launched by Eli Lilly in the US at the end of March and is a significant step for ACR given the potential for the product.

Acrux is eligible to receive further sales milestone payments of up to US$195 million and will receive royalties on worldwide sales of Axiron.

Further approvals to sell Ellaive in Europe would give the stock significant upside.

The company has high cash reserves, sitting at $147 million, leaving it well capitalised for any investments.

A threat is the surging Aussie dollar which impacts ACR negatively on its US dollar earnings.

ACR continues to deliver on milestone projects which should help in generating significant and sustainable cash flows.

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