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Expert Financial Analysis and Reporting

Antares Initiated As A Buy (AIS, $2.59)

Posted by Larry Smith on Dec 15, 2011 • (0)

Investment Opinion

I am recommending purchase of Antares (AIS) at the current level of $2.59. My 2015 price target is $6.70. Antares has a broad array of products based on its self-injection and gel formulation drug delivery technologies. Its partners are currently marketing four Antares products and there are eight more in development. I estimate that Antares sales could increase from $23 million in 2011 to $54 million in 2015 and that the EPS contribution could reach $.22 per share in 2015.

 

Antares has so far used a partnering strategy of its self-injection and gel formulation products which: (1) greatly reduces the risks of development and commercialization, (2) sharply reduces the cost of development and (3) increases the number of projects that it can move forward. However, this comes at the price of giving up the majority of operating profits to its partners. I think that because of the sheer number of product opportunities, Antares can build a good business in drug delivery. However, what really draws my attention is a potential home run product that can change the character of the company. I believe that the injectable methotrexate product that Antares is developing for its own account has that potential.

 

I am projecting approval and sales of injectable methotrexate of $15 million in 2014 with rapid growth to $50 million in 2015. I estimate that the addressable market for this product is about $650 and I think that in the 2015 to 2020 period that injectable methotrexate could dominate overall sales of Antares and be the primary driver of growth. If Antares decides to market this product on its own, the cost of building a commercial sales force would likely reduce EPS from the $0.22 attributable to the drug delivery business that I have projected for 2015.

 

My price target for 2015 is based on applying a 20x price earnings ratio to my $0.22 EPS estimate for the drug delivery business which results in a price target for that business of $4.40. I then value the injectable methotrexate product at 5x sales ($250 million) or $2.30 per share. This is based on a study of market capitalization to sales ratios for a representative group of biotechnology companies which indicates that the average company sells at about 3 to 4 times sales and fast growing ones sell at as much as 10 times. This leads me to a combined target price of $6.70 for 2015.

 

A summary of my sales and royalty projections is shown below.

Sales Projections for Antares Pharmaceuticals 2011-2015
All numbers are in ($000) 2011 2012 2013 2014 2015
Proprietary products
Injectable methotrexate 15,000 50,000
Self-injection product sales
Human Growth Hormone
Injector and consumables sales
     TevTropin 4,145 5,918 8,107 10,802 13,344
     Ferring HGH product 3,595 3,865 4,154 4,466 4,689
     RJR HGH product 381 410 440 473 497
   Sub-total 8,121 10,193 12,701 15,742 18,530
Vibex epinephrine injector 0 0 10,000 10,200 10,404
Vibex sumatriptan injector 0 0 2,493 2,543 2,542
Pen injector (ANDA) product sales 0 0 0 0 0
Pen injector 505 (b) 2 product 0 0 0 0 0
Sub-total 8,121 10,193 25,195 28,485 31,476
Royalties from self-injection products
Human Growth Hormone
     TevTropin 1,930 2,758 3,196 3,658 3,768
     Ferring HGH product 174 178 181 185 189
     RJR HGH product 23 24 26 28 30
   Sub-total 2,127 2,960 3,404 3,871 3,986
Vibex epinephrine 0 0 1,800 1,836 1,873
Vibex sumatriptan 0 0 792 792 776
Pen Injector (ANDA product) 0 0 0 0 0
Pen injector 505 (b) 2 product 0 0 0 0 0
Sub-total 2,127 2,960 5,996 6,499 6,635
Royalties from gel technology
Elestrin 450 488 512 537 564
Anturol 0 2,000 4,000 5,500 7,500
Libi-Gel 0 0 0 900 1,800
Sub-total 450 2,488 4,512 6,937 9,864
Overall sales summary
Self-injection and gel formulations
   Product sales 8,121 10,193 25,195 28,485 31,476
   Royalties 2,577 5,448 10,508 13,436 16,500
   Development revenue 3,626 3,500 3,500 3,500 3,500
   Licensing revenue 8,728 1,000 1,000 1,000 1,000
Sub-total 23,051 20,141 40,202 46,421 52,476
Injectable methotrexate 15,000 50,000
Total Revenues 23,051 20,141 40,202 61,421 102,476


 


Tagged as + Categorized as Investment Theses

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