5/25/09 - Titan Pharmaceuticals (TTNP.PK): Was Perfect and Still Potentially Is

Man, the perfect stocks have been hard to come by recently. I've mentioned to several people that I think a lot of it has to do with the market cooling a bit from its 30% bounce off the March 09 lows. Until further ammunition is disclosed to move the market higher, it looks like the theme of this blog will revolve around potentially perfect stocks. The stock that I believe has a strong potential to move higher in the near future is a stock that I considered posting about two weeks ago. I was hesitant to do so because it had already had a massive jump in price. After anticipating a sizable pull back, I've come to the conclusion that it's just not going to happen. In spite of an 85% move up since initially being on my radar, Titan Pharmaceuticals (TTNP.PK) is still potentially a perfect stock.

Titan Pharmaceuticals, Inc. is a bio pharmaceutical company developing proprietary therapeutics primarily for the treatment of central nervous system (CNS) disorders. The Company is focused on the clinical development of the following products: Probuphine for the treatment of opioid addiction and Iloperidone (also called Fanapt): for the treatment of schizophrenia and related psychotic disorders. Titan directly develops its products and utilizes corporate partnerships for marketing and distribution such as the one with Vanda Pharmaceuticals, Inc. for iloperidone.

News


Titan Pharmaceuticals was bordering on bankruptcy, had laid off the bulk of their employees, and shutdown much of their operations. However, the company's fortunes all changed on 5/7/09 when FDA granted approval to market Fanapt. Vanda plans to make Fanapt available in pharmacies later this year. Titan is entitled to receive royalties on global net sales of Fanapt equal to 8 percent on annual net sales up to $200 million, and 10 percent on annual net sales above $200 million. Titan incurs no ongoing expenses associated with this potential future income. Global sales from this class of drug exceeded $20 billion in 2007. In other words Titan will be getting paid millions and possibly billions of dollars over the next 5 to 10 years to do absolutely nothing. Talk about a cash cow!

Technicals

See chart for TTNP.PK:








As you can see from the chart above, Titan spiked after the FDA announcement. Then, for about a week and half it appears that the market was trying to weigh if the company's new valuation was justified. Over the past week the stock has begun to explode upward. So, it appears obvious that the market still believes the stock us undervalued.

Catalysts

There are several things that can take place to continue to push TTNP.PK's price higher:


- Vanda doesn't currently have enough money to move forward with the launch of Fanapt. As a result, anything that they can do to improve their position in making this happen will push TTNP.PK's stock up (ie. partnership with big pharma, buyout from big pharma, secondary offering to raise money, etc.).


- Titan could now be a buyout target. Companies with lots of cash should be willing to buy Titan at a premium for the strong possibility of huge future earnings at absolutely no expense.

- Probuphine is a bit of a wildcard. It appears that there are some patent issues keeping it from getting off the ground. If somehow this is resolved favorably, the stock could again see a sharp move higher.


- With Titan currently being on pink sheets, they could consider re-listing on one of the major exchanges. Several months ago, they were delisted from the American Stock Exchange. However, it is not likely they will do so because management still seems to be in cost cutting mode. I think Titan believes that they can achieve a significant increase in share price without it.


Conclusion


At Titan's closing price Friday 5/22/09 of $1.30/share, the company has a market cap of a little more than $75 million. When considering the potential revenue from Fanapt over the next 5 to 10 years, many believe the current valuation is still far too cheap. I believe the current momentum of the stock will push the share price to at least $1.70 in the next week or two. I highlight $1.70 as a price point because that is where TTNP.PK peaked the first day after the FDA approval was announced. Many investors blindly bought in around this price and it should act as a temporary level of support for the stock. I wouldn't expect the stock to move much beyond this point until one of the catalyst listed above take place. Only with these occurrences would I be confident in saying the stock will comfortably move beyond $2.00 a share. Because the stock has already had a nice run, you could gamble and hope for a pullback closer to a $1.00, but don't count on it. If such action does take place, expect it to be met with ferocious buying. Word continues to spread about this gem of a stock. I've failed you by not posting about it at $0.70/share when I had a chance. However, now is better late than never because I feel there is still excellent profit potential for investors. Titan Pharmaceuticals, potentially the next perfect stock.