Thursday, April 4, 2019

My 1st Growth Stock from Nasdaq

I have started to search for growth stock from Nasdaq a few weeks ago.

I was particularly zooming my target to Pharmaceutical companies for the following reasons:

(1) Pharmaceutical companies tend to have high barriers to entry business, especially in United States due to high research and manufacturing startup costs, time to build and maintain functioning capital requirements, brand recognition, and long process of legal requirements with a few cycles of approvals by relevant authorities.

(2) Market size of pharmacy industry is very wide and growing.

(3) High gross and net profit margins.

(4) High operation cash generator.

(5) Is not a seasonal market.

I selected ANI Pharmaceuticals, Inc as my 1st Growth Stock from Nasdaq.

ANI Pharmaceuticals, Inc., incorporated on April 11, 2001, is an integrated specialty pharmaceutical company. The Company is engaged in developing, manufacturing and marketing branded and generic prescription pharmaceuticals. The Company focuses on areas, including controlled substances, anti-cancer (oncolytics), hormones and steroids, and complex formulations.

Below are few short summaries for ANI Pharmaceuticals:

(1) Basic data:

My purchase price is about US$71/share with market capitalisation of about US$842mil.

No of common shares: 11.863mil

Revenue 2018: US$201.6mil (increase of 14% from 2017)

GAAP net income 2018: US$15.5mil

Adjusted Non GAAP EBITDA 2018: US$84.4mil

Current ratio: 0.9x

Debt/equity: 0.93x

Net leverage: 1.5x

Gross profit margin 2018: 63.8%

FCF 2018: US$61.3mil

Number of employee: 304

(2) Projected 2019:

Revenue: US$231mil - 245mil

Adjuted Non GAAP EBITDA: US$95mil - 105mil

(3) Raising of capital:

1. Public offering of common stock: US$46.7m

2. Convertible debts: US$143.8mil

3. Credit line with Citibank: US$265.2mil

(4) Acquisitions:

1. Acquired 75 total products,

2. WellSpring Pharma Services Inc,

3. The NDAs (New Drug Application from FDA- Food and Drug Administration) for Cortrophin gel,

4. The NDAs for Cortrophin-zinc.

(5) High barriers to entry:

1. Formulation complexity: manufacture complex products and also low dosages products.

2. Patent status: products whose branded bioequivalents do not have long-term patent protection or existing patent challenges.

3. Market size: strong market share position: top 10 products has average approximately 50% market share as of February 2019.
ANI's pipeline consists of 75 products, addressing a total annual market size of $4.5 billion, based on data from IQVIA.

4. Profit potential: high profit margin.

5. Manufacturing: own facilities to have quality control and maximise profits.

(6) Industry Peers Market Capitalization:

1. Amgen, Inc: market cap is about US$120b.
2. Gilead Sciences, Inc: market cap is about US$85b.
3. Celgene Corporation: market cap is about US$66b.
4. Vertex Pharmaceuticals Incorporated : market cap is about US$48b.
5. Biogen Inc: market cap is about US$45.5b.

(7) Risks:

1. Two of their products are marketed without approval from NDAs. (Esterified Estrogen with Methyltestosterone (EEMT) & Opium Tincture) which made up to 12% of their total revenue 2018.

2. Three wholesalers are the main contribution of their revenues which made up about 77%: McKesson Corporation (21%), AmerisourceBergen Corporation (33%),and CardinalHealth, Inc. (23%).

3. Possible risks derived from products, customers, consumers, suppliers, raw materials, management team and employees, rules & regulations, etc.

(8) My Strategy:

1. Invested 200 shares for the first time purchase.
2. To allocate budget of SG$50k in total for this company.
3. To add when the share price drop to about US$64/share.
4. To add when the share price drop to about US$56/share.
5. To add when the share price drop to about US$46/share.
6. To keep monitoring their 10-Q, 10-K reports or any other reports relating to their business.
7. If their business continues to grow with double-digit rate yearly as well as their bottom line, will hold it for a minimum of 3-5 years.

Above are only my personal views and it is solely for my personal references/case study. The accuracy or completeness of the information provided in this blog cannot be guaranteed. Readers should carry out independent verification of information provided.

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