Case Study: Aspreva Pharmaceuticals
Aspreva Pharmaceuticals Corporation (ASPV) "engages in the identification, development, and commercialization of new indications for approved drugs and late stage drug candidates for patients living with less common diseases." The company is headquartered in Victoria, Canada. The company has 106 employees, and as stated above its focus is on specific niche drugs for patients with uncommon illnesses. Due to the company's location in Canada, an investment in this company is an instant diversification into the Canadian Dollar. In this manner, this is also a form of international diversification, similar to the case study I did on TBV.
Valuable Points
The company has virtually little to no debt.
Price/earnings is very low, at only 5.58.
The short interest as a percentage of public float is 8%, which is extremely high for ASPV, which only has a market capitalization of 642 million.
Its 52-week range is 11.18 - 34.89, which gives this stock some significant potential.
Pre-tax return on capital greater than 100%!!!
Concluding Thoughts
This is an extremely undervalued healthcare company that has relatively little downside due to its very low price earnings and low market capitalization. If the company becomes any more undervalued, it has the potential to be acquired by a larger healthcare company looking to gain snatch up ASPV's expertise in niche disease markets. For example, one could look to Merck's recent $1.1 Billion acquisition of Sirna Therapeutics, whose stock surged 98 percent in after hours trading after the announcement.
Labels: Case Studies
2 Comments:
Cellcept is already widely used off-label -- approval of cellcept in any other indications won't increase revenue beyond what it is currently...competing drugs have recently been approved and others are due within the next few years...hence, expect cellcept revenues to decline steadily from current levels...as it is ASPV is a biotech "buggy whip" factory...without more deals ASPV will disappear in over the next 5-7 years...and it's highly unlikely to ever find a deal as sweet as the one it got from Roche -- Roche has already paid out in royalties three or four times what it would have spent had it simply gone out and hired the drug testing companies itself.
Thank you for your opinions regarding ASPV's product line and potential future revenue streams. Honestly, it is usually extremely difficult for CEO's and CFO's to forecast how their company wil perform over the next 2-3 quarters, let alone 5-7 years.
That's why I concentrate on no debt, price/earnings of 5.44, 100% return on capital, and the incredibly high short interest. You may be correct about the "buggy whip" effect, however, which is why it's always a good idea after doing all the value financial analysis, to hold 5-10 positions or so in equities which are all very undervalued.
The Million Dollar Portfolio
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