morningstar : ACR @ $1.10

http://news.morningstar.com/articlenet/article.aspx?id=711315

Acrux reported net profit after tax of AUD 11 million on revenue of AUD 25.4 million, for fiscal 2015, down 53% and 60% respectively. The result was largely as expected, given the release of fourth-quarter top-line sales data of lead product Axiron by licencing partner Eli Lilly, and reflected the impact of the U.S. Food and Drug Administration's drug safety communication in 2014 in dampening sales for the entire testosterone category. Encouragingly, Acrux ended the year with AUD 23 million in cash and no debt, and declared a final dividend of AUD 0.06 per share fully franked, representing a payout ratio of 90%. Management also unveiled a generic development strategy to target markets valued at approximately AUD 2.4 billion. While details remain scant we see this as an important development for the company that leverages its proprietary transdermal technology platform into new therapeutic areas. Acrux also intends to develop a proprietary transdermal formulation using the two non-steroidal anti-inflammatory drugs, Diclofenac and Ibuprofen. On the testosterone front, we see generic competition in low-dose patch and injectable formulations as a concern, however, regard Axiron's metered-dose gel formulation as a comparative advantage.

Our fair value estimate remains unchanged at AUD 1.10, which implies the shares are undervalued at current levels. This reflects the market's relatively more pessimistic outlook on the company's commercial prospects and undervalues potential applications of its proprietary technology. Nonetheless, Acrux's no-moat and very high fair value uncertainty ratings remain intact, given its reliance on Eli Lilly to invest in sales and marketing of lead product Axiron.