ARXT - Expectorating dollars or just coughing up phlegm?

Cramer was raving about this company's mucus mascot and ability to make money from their product. This is from the 8/30/05 'Mad Money' Recap:

Cramer was bullish on Adams Respiratory Therapeutics (ARXT:Nasdaq - news - research - Cramer's Take). Adams, which became public last month, closed up nearly 9% Tuesday after Morgan Stanley initiated coverage of the stock with an overweight rating.

Cramer also spoke highly of the stock later in the afternoon on his "RealMoney" radio show. Even though the stock soared, Cramer still likes it because it's a "long-term winner." Adams, a specialty pharmaceutical company, excites Cramer because of the company's new variations of its Mucinex expectorant drug. The new variations, Cramer believes, will be granted marketing exclusivity over a number of competing drugs.

The result, he says, is that Mucinex will have the market to itself.

Cramer expects the Food and Drug Administration to grant marketing exclusivity for these new variations in the first half of 2006. If that occurs, he expects Adams' revenue to triple.

I'm concerned about a one-trick-pony drug stock. A press release dated 8/19 from the company announced a third-party request for reexamination before the USPTO. This is a concern, although more of a long-term one, as reexaminations take a considerable amount of time to play out. However, I am also concerned that Adams only has a patent on the Guaifenesin delivery system, not on the drug itself, as noted in one of the amazon.com comments. The drug is found in Robitussin and has been around for decades.

Buying ARXT is gambling on the fact that the FDA is going to clear a path for Mucinex to dominate the marketplace, while dodging patent challenges, and maintaining growth figures beyond Wall Street's expectations. That there is quite a bit of risk.

I'm concerned that it's too expensive after the recent IPO and the attention Cramer paid to it on Mad Money. I think the stock is significantly more speculative than Cramer let on. But that won't stop me from putting ARXT onto the WershovenistPig Stock Watch List. Doesn't cost a thing.

But before I move on, here are the IBD ratings for ARXT, and some choice, and I mean choice customer reviews of Mucinex from amazon.com:

IBD SmartSelect® Corporate Ratings
Adams Respiratory Therap (ARXT) Ratings as of 9/5/2005

Earnings Per Share (EPS) Rating - 36 - Adams Respiratory Therap has outperformed 36% of all publicly-traded companies based on its short and long term earnings growth rates.
Relative Price Strength (RS) Rating - 93 - Adams Respiratory Therap has outperformed 93% of all publicly-traded companies in terms of its stock price performance over the last 12 months.
Industry Group Relative Strength (Grp RS) Rating - A - Adams Respiratory Therap belongs to an industry group that has performed in the top 20% of the 197 industry groups tracked by Investor's Business Daily, measured over the last six months.
Sales + Profit Margins + ROE (SMR) Rating - N/A - The SMR Rating is not available for Adams Respiratory Therap. This is due to incomplete information available to compute this rating.
Accumulation/ Distribution (Acc/Dis) Rating - N/A - The Acc/Dis Rating is not available for Adams Respiratory Therap. This is due to incomplete information available to compute this rating.

There ARE other options!, May 22, 2004
Reviewer: A customer
I have been taking 1200 mg. of Guaifenesin daily to control asthma for
ten years. For those of us without medical insurance, the availability
of Guaifenesin OTC has been a Godsend. When I did have insurance I was
able to obtain it cheaply with a small co-pay. Not so now that I pay
for all doctor's appointments and prescriptions out of pocket.
Adams Labs is NOT the only source for generic Guaifenesin. They have a
patent on their "time release" formulation ONLY, not on the drug
itself.

A google search for "Guaifenesin" will yield many Online sources in a
myriad of strengths, from 200 to 600mg tablets, at a fraction of the
cost of Musinex. I'm taking two 400mg tablets of a "fast acting" OTC
generic Guaifenesen 3 times daily and found this works just as well as
Musinex at a cost of 24.00 for a 30 day supply.

If you want Musinex, however, Amazon's price can't be beat. Especially
if you order 2 and get free shipping.

guaifensin OTC = rip-off, April 14, 2004
Reviewer: "xny" (Layton, UT) - See all my reviews
Mucinex works well, but for those of us who need it daily, it is a
rip-off compared to the prescription generic drug! .
Prior to guaifenesin going OTC, I was able to obtain a 3 months supply
of 1200mg tablets for $16. Since I need 1200mgs twice a day, the
600mgs Mucinex is very expensive--40 tablets lasts just 10 days.

I am very unhappy about the change to OTC. With no competitors, Adams
Labs is making a bundle on this medication. With generic prescription
drugs, the consumer was the winner, but with only one patent for the
OTC drugs, the makers are the winners and the consumer suffers for
it!!

It has a very bad after-taste, which the generic guaifenesin did not have.

Mucinex OK, good Amazon price, bad deal all around, September 13, 2004
Reviewer: K. Dawson (Wichita, KS, USA) - See all my reviews

I have chronic sinus problems, and have recently been diagnosed with
the early stages of emphysema at the tender age of 25. Yikes. I
frequently took LA Guaifenesin tablets 1200mg and better for
lung/sinus congestion and find that for thinning my thick junk, accept
no substitutes. Then, the advent of the OTC guaifenesin. Nobody in my
town carries it regularly, there's only one variety of extended
release available on the market, and my health insurance does not
cover OTC medications (I could get a month of Guaifenesin LA for (
$5.00 USD.) I'm glad someone stepped up to the plate and made an OTC
guaifenesin so that people could have access to it, and it's a good
formulation, but all in all Mucinex is just another symptom of the
patent abuse common in pharmaceuticals. They didn't reinvent the
wheel, and there were people already manufacturing it in
extended-release form in over-the-counter strength, yet now we have to
wait a few years before there will be an affordable long-acting OTC. I
got sick of it and bought half a kilogram of pharmaceutical grade
Guaifenesin for about $42 shipped.