Saturday, January 9, 2016

24th AIM Student Update (by William Pink) Anika Therapeutics (ANIK): A Biotech Stock That Faces an Interesting 2016!

Anika Therapeutics, Inc. (ANIK, $37): The Year Ahead for this Exciting Biotech Firm
By: William Pink, AIM student at Marquette University

Image result for anika therapeutics logo

Disclose: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary

·         Anika Therapeutics Inc. (NSDQ: ANIK) is a biotech firm that develops, manufactures, and commercializes therapeutic products for tissue protection, healing, and repair.

·         The company posted strong third quarter financial performance, revenue and net income increasing roughly 8% and was growing momentum heading into the fourth quarter of 2015.

·         Leading products Monovisc and Orthovisc increased in market share growing to 27% of the U.S. viscosupplementation market. Orthovisc continued their market leading position in the multi-injection treatment while Monovisc holds the second position in the single-injection treatment market.

·         On November 3, 2015 Anika releases information that pipeline product Cingal gained approval from Health Canada.

·         On December 9, 2015 the company announced that the FDA assigned Anika’s pipeline product Cingal to the Center for Drug Evaluation and Research for premarket review.

·         In early 2015, Cingal had positive results on initial studies with the product and was hoping to market Cingal in early 2016. However, the recent FDA premarket review will pose an obstacle to Cingal’s release date.

·         On December 29, 2015 Anika Therapeutics announced the introduction of their Hyalofast FastTrack Phase III study. Hyalofast is a biodegradable scaffold that represents the company’s expansion of regenerative medicine in the orthopedic space.

Anika Therapeutics has seen a lot of volatility over the past month. After the release of their third quarter financial performance along with news of Cingal approval in Canada, the stock enjoyed a nice spike in share price reaching $42.50. The third quarter revenue and net income displayed growth within the company as well as increased market share by the company’s two leading products.

Going into the fourth quarter, the company was displaying momentum with increasing revenue and their next pipeline product Cingal set to hit the market. Anika Therapeutics products are based off the technology of hyaluronic acid and new product Cingal is a cross-link of hyaluronic acid and a steroid to treat inflammation giving patients an ultimate healing experience.

After gaining approval in Canada for the new product, investors assumed that the company’s goal of marketing this product in the U.S. in early 2016 would be achievable. Despite passing phases II, and I Cingal was called for premarket review by the FDA in early December delaying the release date for the product until the second half of 2016.

Another pipeline product Hyalofast recently began phase III in which it will be tested upon 200 patients. The product currently carries the CE approval in Europe and Anika hopes that it will gain FDA approval quickly in order to hit the market in early 2016.

Recent Stock Activity
As stated above, the stock market price reached as high as $42.50 after the news announcement of Cingal acquiring Canada’s Health approval. The stock suffered a major hit dropping 13% down to $37.00, after the FDA’s decision to file a premarket review of new product Cingal. The stock price has since not moved given the high volatility in the market to open the new year and has been floating between the range of $36 and $38.

Past Year Performance: ANIK has decreased 4.49% in share price over the past year but has exhibited a nice rebound and gain of momentum heading into 2016. The stock price bottomed out amidst the Greece crisis in early July and after a disappointing earnings report hitting as low as $32 but has begun to rally again after closing 2015 with a stock price of $37.50.


Source: FactSet
Conclusion

Anika experienced a strong third quarter and was looking to close out 2015 slightly higher than the beginning year price. The third quarter report displayed product revenue increase, higher market share for their two leading products, and net income increase by 25% YoY. However, the news about the FDA premarket review gave the stock price a hit, but the drop in share price is an overreaction by investors.

Although the release of Cingal will be delayed until the FDA finishes their premarket review, Anika still has their two leading products to lean on. With Orthovisc and Monovisc gaining additional market share in the third quarter, the company should continue to see a stable and slight increase in revenue derived from these products in the future. The company has released new products in the past, but management strongly believes that Cingal will be the leading product in the treatment of osteoarthritis.

Anika will continue to see their two leading products be the stable mainstream of revenue, and the question becomes when will Cingal become available in the market and if they can provide the high source of income that management is expecting.

The past month has seen a 12% price decline for ANIK, while the Russell 2000 was down 9%. Once the market stabilizes and normalizes in 2016, the stock could see above benchmark performance.



 Source: Yahoo!Finance

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