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Apricus Biosciences Inc (NASDAQ:APRI) Looks Cheap, Even With Recent Gains

Apricus Biosciences Inc (NASDAQ:APRI) Looks Cheap, Even With Recent Gains
Written by
Chris Sandburg
Published on
January 20, 2017
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Throughout the majority of the final month last year, Apricus Biosciences Inc (NASDAQ:APRI) struggled to get above the $1.50 mark. Fast forward to this week, however, and the company broke through resistance to reach highs just ahead of four dollars a share, representing gains of more than 160% for those who timed it right. Since these highs, the company has corrected somewhat, and currently trades for circa $2.90. That's still a significant run, but the correction poses the question – what's next?From its current $22 million market capitalization, is their further upside revaluation on the cards?We think there might be.For those new to Apricus, the company is a San Diego, California-based biotechnology entity, with a focus on the development and commercialization of pharmaceutical assets in the areas of urology and rheumatology. The focus asset of this discussion is a topical treatment called Vitaros. The drug is a cream that targets erectile dysfunction. The commercialization landscape for Vitaros is pretty fragmented, but also serves to paint a relatively rosy picture for Apricus. Specifically, the cream is approved in its target erectile dysfunction indication in Europe and Canada, and Apricus has a spate of distribution deals in place that have already led to the product hitting shelves in 25 countries spread across the just mentioned regions.These countries are Argentina, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Spain, Sweden, Switzerland and the United Kingdom.The latest announcement, details the approval of Vitaros in Mexico, making this country the 26th addition to the above list. Now, in our opinion, the detailing of 26th nation to a list of approved regions doesn't really warrant an upside revaluation of more than 150%. With that said, the implications of the approval might. Specifically, the Mexican approval means that Vitaros has picked up a regulatory green light in every jurisdiction for which Amicus has targeted approval. Next comes the big market, and the real upside catalyst for Apricus – a US approval; something that the company is seeking this year.A US approval would be a big deal for two reasons.First, there is a considerable market for erectile dysfunction therapies outside of the currently available pill form options (Viagra, etc.) and an advancing into the US market would present the company with a chance to dramatically improve its topline. However, there is what might be an even more attractive option, and this relates to pharmaceutical giant Allergan plc Ordinary Shares (NYSE:AGN). Apricus sold the rights to Vitaros to Allergan (at the time it was to Warner Chilcott, but the latter is now a subsidiary of Allergan) back in 2009. In 2015, however, the company in-licensed the treatment back from Allergan, and gained commercialization rights in the US.If the drug picks up an FDA approval, Allergan can exercise a one-time opt-in right to take over all US commercialization activities. If Allergan chooses to exercise this opt-in, Apricus will be entitled to receive up to $25 million in upfront and launch milestone payments plus a double-digit royalty on net sales of Vitaros. As mentioned, the company is only worth $22 million right now, so a US approval could potentially translate to a cash injection worth more than the entire company, and if all runs smoothly, this could come at some point over the next 12 to 24 months. That is why the company is running up on the back of a seemingly insignificant Mexican approval – investors are taking a position ahead of wider markets taking interest in the near term potential upside of the stock.Nothing is guaranteed, of course, and cash isn’t great on this one ($5 million at September 30), so chances are we will see some dilution ahead of any potential Allergan opt-in. With that said, the upside on offer if the FDA gives the drug the green light dramatically outweighs the value likely lost through any capital raise, and this makes the company look cheap, even given the recent run up.We will be updating our subscribers as soon as we know more. For the latest updates on APRI, sign up below!Disclosure: We have no position in APRI and have not been compensated for this article.

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