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SmallCaps Online LLC Initiates Coverage of Connetics Corporation with a BUY Recommendation
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New York, NY, July 6 1999 — SmallCaps Online LLC announced today that it has initiated coverage of Connetics Corporation (Nasdaq: CNCT) with a BUY recommendation. The full text of this report can be accessed at SmallCaps Online’s web site, at www.SmallCapsOnline.com.
Excerpts from the report follow:
Connetics Corporation ("CNCT") is an emerging pharmaceutical company focused on the development and commercialization of products in niche dermatology and rheumatology markets. CNCT’s is executing a reduced-risk, three-part strategy: (1) to in-license and acquire FDA-approved products, or late-stage products in development, (2) to develop and market these novel products through its targeted sales force, focused on the dermatology and rheumatology markets, and (3) to engage in corporate partnerships to market products outside the U.S. that should generate royalty streams to CNCT. CNCT currently markets three products (Luxiq(TM), Ridaura® and ACTIMMUNE®) through a specialized sales force that calls on high-prescribing dermatologists and rheumatologists in the U.S. CNCT also has two promising products (OLUXÔ and ConXnÔ ) in late-stage clinical development.
We believe CNCT represents a compelling investment opportunity at this time. With Luxiq (launched 2Q99) anticipated to show strong revenue growth this year, profitability expected in the near-term, and multiple milestones, news events and potential new partnerships and/or acquisitions over the next 6 to 12 months, we believe the stock to be undervalued at current levels. We are initiating coverage with a BUY rating and recommend purchase of CNCT stock for those investors tolerant of the risks associated with small-cap stocks.
Lower-Risk Strategy of Acquisition & Partnering - Steady Flow of News Events Expected
- Having already demonstrated its ability to in-license technology and products, we are confident in CNCT’s ability to further license late-stage development and currently marketed products over the next 6 to 12 months. Specifically, we anticipate additional compounds that can be re-formulated with CNCT’s proprietary foam delivery system (e.g. Olux).
- Following its agreements with Medeva and Suntory to develop and market relaxin in Europe and Japan, respectively, we are expecting CNCT to partner additional products for international development.
- In March 1999, CNCT bolstered its US salesforce strength by entering into a promotion agreement with MGI Pharma, a contract salesforce, to market Ridaura and Luxiq primarily to rheumatologists.
Currently Marketed Products and Pipeline - Growing Product Sales & Upcoming Milestones
- Luxiq : CNCT recently launched Luxiq™ (betamethasone valerate in a 0.12% foam), which was approved by the FDA in February 1999 to treat scalp dermatoses. Three million people suffer from scalp psoriasis in the US alone; we believe Luxiq represents a significant marketing opportunity, and anticipate strong revenue growth this year.
- CNCT’s other two marketed products are Ridaura, an oral gold salt formulation for the treatment of rheumatoid arthritis (RA), and ACTIMMUNE, a formulation of the protein interferon (IFN) gamma-1b, approved for the treatment of chronic granulamatous disease (an inflammatory disease). CNCT’s targeted salesforce has been able to grow sales of Ridaura. ACTIMMUNE was recently spun-off into a separate company, with CNCT retaining equity and certain revenue streams and royalty rights.
- Products in development: OLUX(TM), a foam formulation of a corticosteroid to treat severe scalp psoriasis and other dermatoses of the scalp, on which an NDA should be filed shortly, and ConXn(TM) (relaxin), a recombinant human protein licensed from Genentech, currently in Phase III trials for the treatment of scleroderma, a life-threatening disease resulting from the overproduction of collagen that hardens the skin and internal organs.
Strong Financial Position - Sufficiently Financed Through To Profitability
- As a result of financings over the past year and expected cash flow from product sales, milestones payments and potential new partnerships, we believe CNCT is adequately financed to fund its existing operations and reach profitability.
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SmallCaps Online LLC is a registered investment advisor focused on identifying emerging growth companies in the healthcare and information technology sectors that offer compelling investment opportunities over the long term. By providing comprehensive financial services, including corporate finance, M&A advisory, strategic partnering and communications consulting, the company positions itself to provide a fully integrated package of value-added services to emerging growth companies.
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The information in this press release has been obtained from sources that SmallCaps Online LLC believes to be reliable, but the Company does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by SmallCaps Online LLC for the purchase or sale of any securities. SmallCaps Online LLC and/or any of its affiliates may have performed investment banking, consulting or other services for CNCT and may solicit investment banking, consulting or other business from, any company mentioned in this release. SmallCaps Online LLC or any of its affiliates or persons associated with SmallCaps Online LLC may at anytime be long or short any of the securities referred to herein and may make purchases or sales thereof while the Company’s reports are in circulation or posted on the SmallCaps Online LLC web site at www.SmallCapsOnline.com. This material, or any portion thereof, may not be reproduced without prior permission from SmallCaps Online LLC. SmallCaps Online LLC is not responsible for the contents of this document that is intended for electronic transmission and could be thus subjected to tampering or alteration. Copyright © 1999 by SmallCaps Online LLC. All rights reserved.