Expert Financial Analysis and Reporting

Overview

I tuned in to the Antares presentation at the Piper Jaffrey conference on December 2, 2014 to listen to what the new CEO Eamonn Hobbs emphasized to investors in a short 15 minute presentation. He spent a lot of the time talking about Quick Shot Testosterone (QST), the new once a week subcutaneous injectable testosterone product and also highlighted pipeline developments. He was upbeat on the current launch of Otrexup, but offered no new information from that given on the 3Q, 2014 conference call.

Quick Shot Testosterone (QST)

Before relating Mr. Hobbs’ comments, I thought it would be useful to review the design of the phase 3 study. I think that there will be a lot of information coming out about the trial in the next year and knowledge of the trial design will be necessary to put this information in perspective. I think that events related to QST will be a major driver of the stock over the next year.

The phase 3 study of Quick Shot Testosterone (QST) is a double blind, randomized study of three different doses of QST: 50, 75 and 100 mg. There is no placebo group. QST is administered subcutaneously once each week with possible titration to a higher or lower dose at scheduled intervals during the study. The trial is designed to determine efficacy and safety of QST in adult males with hypogonadism, a medical condition arising from diminished functionality of the testes in men that results in below normal blood levels of testosterone. Patients enrolled in this study must have testosterone deficiency which is defined as testosterone blood levels below 300 ng/dL. The purpose of the study is to see if QST can raise testosterone blood levels to within the normal range of 300-1100 ng/dL over a 12 week period.

The study includes a screening phase to measure blood levels of testosterone and determine if patients are eligible for enrollment. Patients then are given a starting dose that can be 50, 75 or 100 mg. once per week for six weeks. Titration of the dose, either up or down, can be made at week seven based on testosterone blood levels measured before the administration of the sixth dose. The efficacy of QST and dose adjustment to regulate testosterone levels will be evaluated after 12 weeks of treatment. Blood levels are then evaluated after 12 weeks which is the endpoint of the trial.

Patients can then elect to remain on the optimized dose for an additional 40 weeks. The plan is to enroll approximately 150 patients to one of the three possible doses. In addition, approximately 100 patients will need to complete 26 weeks of treatment and 50 patients will need to complete 52 weeks for the safety component of the trial.

The primary outcome measure is the percentage of patients with total testosterone serum concentrations within the normal range (300-1100 ng/dL) at the end of 12 weeks of treatment. One secondary outcome measure is the percentage of patients with total testosterone serum Cmax < 1500 ng/dL, Cmax 1800-2500 ng/dL and Cmax >2500 ng/ at any time in the 12 week time frame. Another is the maximum and minimum total testosterone serum concentrations following dose administration at week 12. The third is the number of patients with total testosterone serums concentrations > 1500 ng/dL and <300 ng/dl on days 1, 2, 3, 4 and 8 following dose administration at week 12. Patient satisfaction with sexual functioning will also be assessed during this 52 week study; this could be a very important point to watch.

The study started in July 2014 and was scheduled to complete in November 2014, but completed one month earlier in October 2014. The original date for final data collection on the primary outcome measure was originally estimated to be February 2015. The last patient based on 52 week follow-up will complete the trial in October 2015. The rapid enrollment suggests this should be moved up to January 2015. The Company has said that it will release topline results on the primary outcome measure in 2Q, 2015. I would think that some of the secondary endpoints could be announced then or shortly thereafter. Approval and commercialization are expected in 2017.

This study is designed to demonstrate that QST can provide precise control of testosterone levels which is expected to be the major advantage of QST over topical gel and intramuscular injections. QST also has the advantage of avoiding transference concerns associated with gels (they carry a black box warning for this), eliminating costly in-office procedures often required for intramuscular injections and reducing the peaks and troughs in testosterone levels associated with current intramuscular injections. In phase 2 using 50 and 100 mg doses, the peak to trough ratios were extremely tight and shown to be better than those demonstrated by topical gels or IM injection.

Some retrospective studies published in 2012 and 2013 suggested there was a link between testosterone supplementation and cardiovascular events while others concluded just the opposite. The FDA convened an advisory committee meeting in early 2014 for guidance on this issue but there was no consensus point of view. The FDA also raised questions about off-label use. These products are approved for hypogonadism but are used extensively off label for improving sexual performance and strength.

The FDA actions led to a free fall in prescriptions for topical gels. Prescriptions for injectable formulations had been growing at 40% per year and slowed to 6% in the first nine months of 2014. In 2013, there were 5.3 million prescriptions written for topical gels and 2.7 million for injectable formulations.

Otrexup

On Otrexup, Mr. Hobbs reported that as of the end of 3Q, 2014, 1000 physicians had prescribed Otrexup which is up from 600 at the end of the second quarter. There are about 3,500 rheumatologists and Antares is targeting 2,000 of these. There have been 9,000 prescriptions written since the launch. Sales reported to shareholders are based on the number of prescriptions written and filled in a quarter as opposed to shipments to wholesalers. Hence, the $2.6 million of sales in 3Q, 2014 was truly a measure of demand.

Mr. Hobbs emphasized that the needle is completely hidden from sight of the patient. He also said that in a test measuring pain during clinical trials in which 0 represents no pain and 100 intense unbearable pain, the Otrexup injection scored 3. He also said that it injects much more accurately when compared to a patient injecting with a vial and syringe, especially an arthritic patient. Overall, there was not a lot of new information relative to the third quarter conference call.

Pipeline

Mr. Hobbs spoke about the impressive number and growth of drugs in the pipeline being developed for both clients and as proprietary products for Antares. On licensing deals, Antares receives a transfer price for its devices and also a royalty. The combination usually equates to 10% to 12% of sales of the product.

He highlighted the relationship with Teva (TEVA) which began with the introduction of the 5 mg. needle free dose of TevTropin. Other new products being developed with Teva are as follows:

• The AB Epi Pen Vibex injector being developed with Teva will be the next prominent product. The final amendment to the ANDA will be made in December. Antares is optimistic that it will receive an AB rating and will be a material revenue generator. They will start filling the pipeline in early 2015. This is an important catalyst.
• The Vibex sumatriptan ANDA was accepted. This is expected to be an AB rated product.
• A new 10 mg. dose for TevTropin should be introduced in 2015.
• An ANDA has been filed for a product based on a pen injector. They have notified the innovator and once the innovator takes action by filing a lawsuit they will disclose the product. It is widely speculated that this could be Byetta (exenatide) for type 2 diabetes.
• PK work has also been completed for a branded product based on pen injectors that is being developed under the 505 (b) 2 pathway. The name of this product may be made public in 2015.
• Current sales of the two products being addressed by the two pen products is $1.5 billion. Just for the purpose of illustration, if Teva were able to garner $200 million of sales, it would equate to $20 to $24 million for Antares in the form of transfer pricing and royalties.

Antares recently consummated a product life extension strategy for an undisclosed product that is currently achieving sales of $300 million. They will receive a low double digit royalty. I believe that there is significant potential for Antares to expand far beyond the Teva relationship and working with innovator companies on product life extension strategies is a big opportunity.

Catalysts over the Next 18 Months

• Topline data on the primary endpoint of the phase 3 trial of QST will be announced in 2Q, 2015.
• Ongoing results in the Otrexup launch will be closely watched.
• They will complete the phase 3 for QST in October 2015, the NDA will be filed in 2016 and the launch could begin in 2017.
• They will ship pre-launch quantities of for the AB Epi Pen Vibex Auto injector in 1H, 2015 and the full launch will begin after June 22, 2015.
• They may make public the two multi-dose pen products being developed with Teva.
• Teva will introduce the 10 mg needle free dose of TevTropin
• The company has said that beginning in 2017 with QST that it will add one product per year for its own portfolio that is based on the 505 (b) 2 development pathway. We may hear what one or more of these products are in the next 18 months

Investment Thesis

I published an extensive update on my investment thinking and my sales and earnings projections on Antares in a report published on November 23, 2014.  I have been adding to my position in Antares. This is one of my favorite emerging biopharm companies.