Santarus, Inc. (SNTS), Pharmacyclics, Inc. (PCYC), Ariad Pharmaceuticals, Inc. (ARIA): Should You Jump on This Biotech After Profit-Taking?

Next, let’s look at Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), a $4 billion company that markets Iclusig for a form of leukemia. Like Pharmacyclics, Inc. (NASDAQ:PCYC), Ariad is developing its drug to expand in use. The peak sales on this product vary because it has harsh side effects, including those of the liver and blood clots. The most generous of estimates are still near $1.5 billion if the drug is developed for other indications, however.

Therefore, Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) is trading at nearly 2.7 times peak sales. Now, the reason that Ariad’s valuation is significant is because Iclusig and Santarus’ Uceris began selling at the same time. The only difference was that Uceris did not have high expectations. Nonetheless, sales in the first two quarters of 2013 for Iclusig were $20.4 million, which was less than Uceris.

Looking at the two companies, Santarus’ Uceris is actually performing better. Santarus also has four other drugs along with being cheaper relative to peak sales. If we estimate that peak sales of Santarus’ five products will reach $900 million following the success of Uceris, then Santarus trades at just 1.55 times peak sales. Thus, Santarus is significantly cheaper than both Pharmacyclics, Inc. (NASDAQ:PCYC) or Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). Moreover, because Santarus is already producing large revenue and profits, there is reason to believe that it is presenting great upside.

Final thoughts

If three times peak sales is the standard for biotechnology companies — based on Pharmacyclics, Inc. (NASDAQ:PCYC) and Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) — then Santarus should trend higher until reaching a market capitalization of $2.7 billion. This would be a gain of almost 100% from this point forward. Therefore, I say that Santarus’ recent pullback is just a bump in the road and not a serious threat of long-term loss. With that said, investors should keep this company on their radar. With Uceris’ marketing success and Santarus’ five clinical programs in development, this is a company with a lot of promise regardless of its short-term trend.

The article Should You Jump on This Biotech After Profit-Taking? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols is long Santarus. The Motley Fool has no position in any of the stocks mentioned. 

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