Could Anacor Pharmaceuticals Shares Pop Following a Key Analyst Upgrade?

What: Anacor Pharmaceuticals got a booster shot when Goldman Sachs analysts bumped up their rating earlier this week from "neutral" to "buy" and set a price target of $195, which is 30% higher than shares are currently trading at.

So what: Goldman Sachs' enthusiasm mirrors that of investors who have flocked to Anacor Pharmaceuticals shares this year.

Anacor Pharmaceuticals investors have been rewarded with an astonishing 363% return this year -- a return that trounces the S&P 500's 3.9% return and is due to optimism for sales growth for the company's Kerydin, a therapy for the treatment of toenail fungus, and for crisaborole, a topical ointment for atopic dermatitis that just put up seemingly approval-worthy phase 3 trial results.

Now what:Kerydin sales have been building steadily since marketing partner Novartis' Sandoz unit began pitching it last year. In the company's first-quarter conference call, CEO Paul Barnes reported prescription volume heading into May was running at 4,000 scripts, which "amounts to weekly net sales of approximately $2.1 million for each of those two weeks, which is an annualized run rate of just over $110 million."

Goldman thinks Kerydin's sales could eventually top out at $800 million, but analysts at the firm have even higher expectations for crisaborole, which Anacor Pharmaceuticals could conceivably have on the market in 2017. Based on conversations with dermatologists, Goldman Sachs thinks that crisaborole could rack up sales of $1.7 billion annually.

If Anacor Pharmaceuticals can deliver on that projection, then investor optimism is probably warranted; however, the company's $6.5 billion market cap would seem to reflect a lot of that potential, and for that reason I'm unwilling to chase this company higher. Regardless, this one is definitely worth keeping an eye on.

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Todd Campbellhas no position in any stocks mentioned. Todd owns the equity research firm E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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