HITK also posted strong results for its consumer healthcare division, which also increased by 44% to $3.3M, thanks to newly launched brands which include Zostrix Neuropathy and Nasal Ease.

As expected with a multitude of new product launches during 2Q09, HITK experienced increases across the board from the year-ago period for the following:

- cost of sales (up 28.4% to $13.1M, but down 12% as a percentage of sales to 52%)
- research and product development (R&D) (up 20% to $1.8M)
- selling, general, and administrative (SG&A) (up 31.6% to $7.5M)

The sharp increase in sales and higher margins for new products resulted in net income for the quarter of $1.1M, reversing a $1M loss in the year-ago period for diluted EPS of $0.09 versus a loss of ($0.08) last year.

The ongoing saga and recently extended $7.75 per share tender offer (until 1/30/09) for Taro Pharma (TAROF) by India's largest generic drug maker by market cap, Sun Pharma (524715), offers a relative valuation comparison for a small-cap generic drug company. The $7.75 per share tender offer values Taro at about 0.9X sales or $283M; although the Company is currently trading almost $2 above the tender offer price at $9.55 per share.

HITK enjoys a stronger balance sheet than Taro, with the latter holding $66M in cash and net debt of $123M, which makes the actual purchase price for Sun Pharma even higher at an EV of about $400M and an EV to revenue ratio of 1.3X. On a relative valuation basis, HITK has about 2X upside from current levels to nine bucks, which would result in a similar EV to revenue ratio. Also, CPD would yield similar upside potential on a relative valuation basis and I own both of these stocks as my favorite value plays in the generic drug industry.