Invest To Save The World

Cancer is one of the most destructive forces in the western world today.  Investing in pharmaceutical companies that specialize in oncology pays an extra dividend.  Namely the dividend of good will.  I’m not saying invest in a fiscally unsound company just because they fight cancer.  But it’s nice when you can find a healthy company developing treatments to combat this scourge.

 

QUICK FACTS

Ticker                                     SUPG

Industry                                  Drug Manufacturer

Recent Price                           $3.14

Market Cap                             $189 m

Shares Outstanding                 60.4 m

Average Volume                      165,636

Dividend Yield                          N/A

Website                                  http://www.supergen.com

 

COMPANY DESCRIPTION

SuperGen (SUPG) is a pharmaceutical company that specializes in oncology.  The company generally acquires medications developed by other companies and improves upon them.  For example, the company purchased Montigen Pharmaceuticals a couple of years ago.

From that acquisition the company has acquired and further developed Amuvatinib, a DNA repairing drug.  The company primarily develops drugs that target cancer on a small molecular level.

Their two marketed products, Dacogen and Nipent, bring in most of their revenue.  And that revenue is almost entirely derived from royalty and milestone payments.

Right now the story of SuperGen is a story of two companies.  That’s because SuperGen and a British bioscience firm, Astex Therapeutics, have decided to merge.

 

FINANCIALS

Royalty revenue in Q1 was up from last year by about $2.7 million.  Net Income increased about 17.5%.  The company expects to receive about $55 million in royalty revenue this year from Dacogen.

At the end of Q1 the company had approximately $136 million in assets.  In a recent investor presentation CEO Dr. James Manuso said that the company had been debt free for years.  And SuperGen hasn’t needed to raise money since 2004.

This company seems to take pride in not living beyond their means.  The company that they’re merging with, Astex Therapeutics, is also ‘cash flow neutral.’  They haven’t needed additional funding since 2003.

 

KEY METRICS ANALYSIS

Trailing P/E                                      11.2

Price / Sales                                     3.2

Return on Assets                               8%

Insider ownership                               4.6%

Short Ratio                                        7.9x

Current Ratio                                     16.5x

Total Debt To Equity                           N/A

 

RECENT EVENTS

SuperGen recently announced a merger with Astex Therapeutics.  This deal will net the company immediate partnerships with five of the world’s leading pharmaceutical companies.  Management estimates it could be worth nearly $2 billion in potential milestone revenue.

SuperGen will also gain access to a proprietary drug discovery platform developed by Astex.  Pyramid works at a molecular level to do tests and experiments that were formerly impossible.  This is right up SuperGen’s alley.

Not to mention the more robust clinical structure available for both companies.  Combined, they will have seven drugs in the pipeline.  Four of those drugs are already in Phase II of testing, and three are partnered with big pharmaceuticals.  That means big royalties in the future, but also big costs in Phase III.

The combined company will change its name to Astex Pharmaceuticals, and the NASDAQ ticker will be changed to ASTX.

Astex Therapeutics shareholders are being compensated with 35% of SuperGen’s outstanding equity, as well as $25 million in cash.  Astex’s current owners are also getting $30 million in stock or cash over the next 30 months.

 

MANAGEMENT TEAM

James S. J. Manuso Ph.D – Chairman, President and CEO

Michael Mokentin – CFO, Corporate Secretary

Mohammed Azab M.D. – Chief Medical Officer

 

STOCK ANALYSIS

 

 

 

 

 

 

Chart Courtesy of StockCharts.com

 

As you can see this stock bounces around a lot.  They’re not huge swings, generally between $3.30 and $2.50.  This stock has also spent a fair amount of time above the 50-day moving average.  Currently it’s trading right around the 50-day.

SUPG’s 52-week low was $1.71 and the 52-week high was $3.35.  Right now the stock is trading at $3.14.  The 50-day moving average is near $3.01 a share and the 200-day moving average is at $2.89.  The company has a market cap of $189 million and 60.4 million shares outstanding.

 

 

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