Why Did ALQA Jump 58% in April?

In This Issue: "Analyst Kevin Kedra of Gabelli & Co. says that a non-branded lidocaine patch could take away about 65% of Endo's annual revenue – $760 million." Countdown to $1.4 Billion Market Takeover… Tiny ALQA Could Seize 80% of Lidoderm™ Market in One Year. Investors are Starting to Jump in for a Huge Profit Ride. Don't Miss Your Chance to Get in Early.... May 2, 2011 Not many companies can go from $1 million in sales to nearly $1 billion in a year. But Alliqua (ALQA) might be on its way to doing just that. And judging by its booming share price, plenty of investors are betting it's going to happen. Since announcing their patent filing for a transdermal "pain patch" in April, share price has shot up 87%. Investors are excited because ALQA set its sights on the billion-dollar market for transdermal pain management – a market currently 100% controlled by Lidoderm™ from Endo Pharmaceuticals. They're hot on Endo's heels, too. Which spells trouble for Endo because Lidoderm™ is about to come off patent. That means Endo could face nearly immediate erosion of their $760 million annual Lidoderm™ sales to Alliqua or other competitors. The race is on, but you might want to put your money on Alliqua (ALQA). For a couple of reasons, they could quickly corner 65 percent of the lidocaine pain patch market. One of Only Two Manufacturers in the World A little-known fact about Alliqua is that: Alliqua is one of only two manufacturers in the world that can manufacture the high water content aqueous hydrogels needed to make transdermal patches with Allequa's unique competitive advantages. Alliqua owns one facility, and Covidian owns two, making this a very small and elite universe. Alliqua's advantages include product stability and purity, biocompatibility, and – most significantly – reproducibility and with high water content, which could result in substantial manufacturing cost savings. Any other potential entrant in the fast-growing pain patch market would have to contract Alliqua or Covidian to make competitive patches. Talk about a high barrier to entry for Alliqua's competitors! It would take millions of dollars and potentially several years for competitors to build and gain FDA certification for a comparable new facility. That makes any possible competition a distant speck in the rear-view mirror. Which means AQLA can race ahead to a close-by and very lucrative rung on the Big Pharma ladder. It's a race that is already heating up ALQA's share price – shooting up 87% in the three weeks after announcing their patent filing in April! But it's still early in the game. ALQA could rocket to unheard of profits for early investors. Here's why: ALQA's Quick Road to $1 Billion Revenue The non-branded drug industry makes it possible for companies to grow revenues with unheard-of speed. A report from Johns Hopkins University business law professor, Stacey Lee says, "Generic drugs generally enter the market priced 20 to 80 percent lower than their branded counterparts…." Those low prices fuel rapid growth from the managed healthcare industry, which strives to keep costs down. That's why, as Lee continues, when a drug goes off patent, a new non-branded version "…can capture 44 to 80 percent of brand-name drug sales within a year after release." Even at the low end, that means Alliqua could rapidly hit $600 million in sales. But analyst Kevin Kedra of Gabelli & Co. says that, "…a generic Lidoderm patch could take away about 65% of Endo's annual revenue – $910 million. Imagine what happens to a company's share price when they race from under $5 million in sales to $910 million within one year! Alliqua (prounounced a-LEE-qua) is the obvious and natural player to grab that market share. Alliqua is already a supplier of ultra-high tech sheet hydrogels. The hydrogels are manufactured in huge sheets which are then shipped in bulk or cut and shaped to customer specifications. If you've had a wound care patch applied in the hospital or doctor's office, there's a chance it was manufactured by Alliqua. But unlike other hydrogels on the market, Allequa's hydrogels are cured with an electron beam. This results in a number of process benefits, as well as a natural adhesive feature that is compatible with human skin and does not adhere aggressively, as is the case with many chemically cured gels. You're already familiar with hydrogel patches. They are applied like bandages, and deliver medications directly through the skin. You can get them for smoking cessation, motion sickness, and even vitamin B12 deficiency. And lately, they're being introduced for acne and cold sore treatments, wart removal, and cosmetic product delivery. Alliqua's patented hydrogel technologies and exclusive manufacturing facility have already given them a lock on the transdermal drug delivery materials market. But ALQA's unique hydrogel technology puts the entire transdermal delivery market in reach. Next Up: The $32 Billion Global Transdermal Delivery Market Transdermal wound care, medical device and cosmetic product delivery together are a massively large and growing market. Research firm, Nerac, says, "Thanks to advances in drug delivery and formulation technology, combined with the threat of patent expiration and diminishing sales of blockbuster drugs, those small, sticky skin patches aren't just for smokers anymore. The once stagnant transdermal delivery market is picking up steam and is forecast to grow dramatically over the next few years…. Some market analysts predict that the global market could reach as high as $32 billion by 2015." The firm also points to dramatic drug development savings for companies with transdermal delivery technologies: "Average R&D for a typical drug is $500 million over 15 years, while for a transdermal drug development time is roughly 4-8 years and costs $10 million to $15 million." Like an mighty assembling army, Alliqua is aligning for victory in the battle for market domination. They're filling out the ranks of their Board of Directors with heavyweights from the healthcare banking, insurance, and health services industries. They've completed several important milestones in their pain patch development. And they are – to use their phrase – "aggressively pursuing" completion of the non-branded version. The stars are aligned on this one. ALQA could be one of the best performing stocks this year, based on these developments. Savvy investors are getting on board ALQA now. To Your Investing Success, Your StockProphets Team P.S. Keep a close watch on your email inbox for more ALQA updates.