Santarus Inc. (NASDAQ: SNTS)

Santarus Inc. (SNTS) is a specialty pharmaceutical company focused on acquiring, developing and commercializing products that address the needs of patients treated by gastroenterologists or primary care physicians. SNTS focuses on commercializing its Zegerid immediate-release proton pump inhibitor (PPI) products. PPI products are used for the treatment of many upper gastrointestinal (GI) diseases and disorders, including gastroesophageal reflux disease (GERD). The Company’s Zegerid products are immediate-release formulations that combine omeprazole, a PPI, and one or more antacids. SNTS has strategic alliances with Schering-Plough to develop, manufacture and sell Zegerid brand OTC products in the lower dosage strength of 20 mg of omeprazole in the United States and Canada; GlaxoSmithKline to develop, manufacture, and commercialize prescription and OTC products in approximately 100 countries, including Africa, Asia, the Middle-East, and Central and South America; and Cosmo Technologies Ltd, which grants SNTS exclusive rights to develop and commercialize Budesonide MMX and Rifamycin SV MMX for the U.S. market. The Company sells its products to wholesale distributors in the pharmaceutical industry.

SNTS was founded in 1996 and is based in San Diego, California.

Source: Reuters.com, SEC Filings.

Financial Summary

Total revenues for the third quarter of 2009 were $39.5 million, consisting of $38.3 million in product-related revenue and $1.2 million in license and royalty revenue. Total revenues for the third quarter of 2008 were $32.2 million, consisting of $29.5 million in product-related revenue and $2.7 million in license and royalty revenue.

Net product sales of ZEGERID were $31.5 million in the third quarter of 2009, reflecting a 12% increase over ZEGERID net product sales of $28.1 million in the third quarter of 2008. Promotion revenue in the third quarter of 2009 of $6.8 million increased significantly compared with promotion revenue of $1.4 million in the third quarter of 2008, due to revenue associated with the promotion of GLUMETZA.

SNTS reported net income of $5.3 million, or $0.09 per share, for the third quarter of 2009, compared with a net loss of $4.0 million, or $0.08 per share, for the third quarter of 2008.

The cost of product sales was $2.0 million in the third quarter of 2009, or approximately 6% of net product sales, compared with $1.9 million in the third quarter of 2008, which was approximately 7% of net product sales.

The Company reported license fees and royalties of $2.0 million in the third quarter of 2009, which consisted of royalties payable to the University of Missouri based on net product sales and amortization of the $12 million upfront fee paid to Depomed Inc. in July 2008. License fees and royalties were $3.6 million in the third quarter of 2008, which also included a $1.8 million accrual related to a one-time sales milestone payable to the University of Missouri.

Research and development expenses were $3.4 million in the third quarter of 2009, compared with $2.3 million in the third quarter of 2008. The increase was primarily attributable to the Company’s 50% share of costs for the ongoing budesonide MMX^® phase III clinical trials, offset in part by a decrease in manufacturing development costs associated with a new ZEGERID tablet formulation.

Selling, general and administrative (SG&A) expenses were $26.3 million for the third quarter of 2009, and $28.5 million for the third quarter of 2008. The decrease in SG&A was primarily attributable to a decrease in costs associated with advertising and promotional activities related to ZEGERID, offset in part by an increase in legal fees.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among 4 polled investment analysts. Against the Santarus Inc. company.

The 3 analysts offering 12-month price targets for SNTS have a median target of 5.00, with a high estimate of 6.00 and a low estimate of 3.50. The median estimate represents a 16.55% increase from the last price of 4.29.

Source: www.ft.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=SNTS.W

Investment Highlights

SNTS announced yesterday that the U.S. Food and Drug Administration (FDA) has approved Schering-Plough HealthCare Products Inc.’s New Drug Application (NDA) for ZEGERID OTC^TM Capsules (omeprazole/sodium bicarbonate) with a dosage strength of 20 mg of omeprazole for over-the-counter (OTC) treatment of frequent heartburn. Schering-Plough and Merck & Co. Inc. merged on November 3, 2009. The OTC heartburn market in the United States is estimated at $1.7 billion based on data from Information Resources Inc., a market research firm, and Company estimates.

The NDA was submitted by Schering-Plough under the terms of a license agreement for OTC proton pump inhibitor (PPI) products using SNTS’ proprietary technology. Upon approval of ZEGERID OTC, SNTS earned a $20 million milestone and may be entitled to receive up to an additional $37.5 million in sales milestones. SNTS will also be entitled to a low double-digit royalty, subject to adjustment in certain circumstances, on net sales of any ZEGERID OTC products sold by Schering-Plough HealthCare Products under the license agreement. In turn, SNTS will be obligated to pay royalties to the University of Missouri on net sales of any such OTC products.

SNTS announced in early October that it has entered into a licensing agreement granting exclusive rights to Norgine to develop, manufacture and commercialize prescription immediate-release ZEGERID^® products incorporating the proton pump inhibitor omeprazole in combination with one or more buffering agents in specified markets in Western, Central and Eastern Europe.

Under the license agreement, Norgine will pay SNTS a $2.5 million upfront fee. SNTS will also be entitled to receive up to an additional $10 million in milestone payments upon the achievement of certain regulatory events, subject to reductions based on Norgine’s actual out-of pocket costs directly related to its clinical, regulatory and reimbursement efforts for a “major” country as defined under the license agreement. Norgine will also pay SNTS tiered royalties ranging from the mid- to high-teens, subject to reduction in certain limited circumstances, on net sales of any products sold under the license agreement.

Technical Analysis

SNTS is trading above its 50-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

SNTS’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, SNTS is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for SNTS currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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