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Expert Financial Analysis and Reporting

Antares Is Initated As A Buy Based On Broad, Promising Pipeline (AIS, $2.59)

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


Source: estimates


Antares’ Injection Technologies

The use of a needle to inject drugs through the skin is an old technology. The Irish physician Francis Rynd invented the hollow needle in 1844 and used it to make the first recorded subcutaneous injections, specifically a sedative to treat neuralgia. For over a century the technology changed little, but in the last two decades, there has been a significant amount of innovation led by companies like Antares.


Antares develops subcutaneous, self-administered injection devices based on three principal technology platforms: (1) Vision (called Tjet by Teva) reusable needle-free injectors, (2) Vibex disposable pressure-assisted auto-injectors, and (3) disposable multi-use pen injectors. The Vision and Vibex products are designed to administer a single dose of a particular drug while the pen injector can deliver multiple doses over a period of time. These devices are easy to use and are intended for self-administration by patients or untrained personnel.


The needle free and auto-injectors were initially designed to overcome the fear and hesitation associated with self-administration of needle-based drug delivery devices. However, they also offer advantages over the older needle and syringe devices because they can deliver a more precise dosage of drug to a more precise subcutaneous depth which improves efficacy.


From a commercial standpoint all three delivery systems can be of significant importance to a developer of injectable drugs. They can differentiate the product in the market place from competitive products. They can also extend the life cycle of injectable drugs because potential generic competitors must demonstrate equivalence to both the drug and the device in which it is delivered to gain regulatory approval. The Antares products are protected by patents that last well past 2020 so that when combined with a drug with limited patent protection or which has gone generic, they can extend patent life. Before a potential generic competitor can enter the market it must demonstrate to regulators that its device is equivalent to the Antares injectors.


Vision Reusable Needle-free Injectors

Vision is a spring powered device that allows patients to self-administer precise doses of medication without a needle. Drugs are delivered subcutaneously by propelling them at high speed which creates an opening in the skin about half the diameter of a standard 30-gauge needle. The administration is a less painful experience than using a needle and there is little or no blood. The users are also pushing a button rather than sticking themselves with a needle which helps overcome needle phobia.


Vials from drug manufacturers are packaged in disposable, plastic syringes which allow the patient to dial up a prescribed dose. He then applies the device to the injection site, unlocks the safety, and presses the injector button. After use the patient disposes of the plastic syringe, dials down to reset the injector button and stores the device for the next administration. The devices are reusable, can administer variable doses and are designed to last for two years. They can deliver products such as human growth hormone and other complex biologicals that are given in weekly or monthly patterns.

Vibex Disposable Pressure Assisted Auto-injectors

Vibex is a single use device that incorporates the same spring propulsion technology used in the Vision needle-free injector. The spring propels a hidden needle through the skin to a depth of 2.5 mm. The hidden needle significantly reduces patient apprehension and results in better tolerated injections. It can quickly inject even highly viscous drug products such as those often found with complex biologicals. After its single use, the device is designed to retract and hide the needle so that it can be disposed of without the typical sharps disposal concerns.


One of the major advantages of this system is that it accepts standard pre-filled glass syringes from manufacturers such as Becton-Dickinson, Schott and others. The gauge of the hidden needle can be changed to accommodate different types of drug characteristics such as depot formulations.


The Vibex system is applicable to drugs which are needed at unpredictable moments and require that the patients carry the drugs with them at all times. One example is epinephrine that is used to treat anaphylaxis resulting from an allergic reaction. Another is the drug sumatriptan which is used to treat acute episodes of migraine.


Disposable Pen Injectors

These needle-based devices are designed to deliver multiple injections from multi-dose drug cartridges which can hold up to 30 doses of a drug. The devices contain mechanisms that specify the dose to be delivered by defining the amount of movement by the stopper in the cartridge with each device activation. In contrast to the cartridges of the reusable needle-free injectors, the cartridge drug container is integral to the pen injector and after utilizing all the drug from the cartridge, the entire device is then thrown away.


The pen injectors address the need for a multi-dose device that offers portability and convenience for patients. They incorporate conventional pre-filled glass cartridges. They are well suited for chronic daily therapies and are particularly applicable to injectable biological products such as the human insulin products and GLP-1 drugs like Byetta and Victoza.


Deal with Teva for TevTropin Was Transformational

The partnering with Teva on the use of the Vision (called Tjet by Teva) reusable, needle-free injector to deliver Teva’s human growth hormone product, TevTropin, was transformational for Antares’s business model. It validated its technology platform, led to a broad range of additional partnering deals with Teva and put the company on the path to profitability.


While the business relationship with Antares is relatively small in the scope of Teva’s overall business, it has been rewarding for them as well. Teva entered the human growth hormone market in 2007 with a proprietary product. The FDA then (and now) had not determined how to assure bioavailability between two complex biological products that is necessary to develop a generic. Teva had to use the 505 (b) 2 regulatory pathway to gain regulatory approval. This process allowed Teva to draw on the pre-clinical and safety data base of existing products, but it also had to do clinical trials and file an NDA in order to gain approval. Because TevTropin was not considered a generic, it could not be interchanged with existing brands of human growth hormone made by Pfizer, Genentech, Eli Lilly and Serono.


Teva’s first version of TevTropin used a conventional needle and syringe. The strategy was to compete on the basis of price and TevTropin was launched at a price of $23,000 per year. This compared to a price at the time of $35,000 for Pfizer’s market leading product Genotropin and about $30,000 for other products. After two years in the market, Teva had garnered just 1% of the market. They just weren’t gaining traction and looked for a new approach to gain market share.


Teva came to the conclusion that they could gain an edge through overcoming a shortcoming of existing products. Parents and children disliked the needle and syringe. In the case of a severe disease like diabetes, it is easier to accept the discomfort associated with delivering multiple daily injections of insulin with a needle and syringe. With human growth hormone, taking three injections per week for three to eight years with the goal of adding two to eight inches of height is less acceptable. The threshold for discomfort and inconvenience is lower with human growth hormone patients than diabetics.


Teva set out to find a more user friendly injection system for TevTropin. In the course of doing so, they talked with the Danish company Ferring, their supplier of human growth hormone in the US. Ferring was in a situation similar in Europe to that of Teva in the US. It had entered the European market against the same cast of established competitors that Teva faced in the US. However, it had fared much better than Teva, having captured a market share of 13% in the $500 million European market for human growth hormone. Ferring had used a needle free injector developed by Antares with its product. Ferring concluded and Teva agreed that their success was attributable to the differentiation afforded by the Antares needle free injector. This led Teva to the licensing deal with Antares in the US.


TevTropin was doing $25 million of gross sales in 2009 when the needleless injector was first introduced. The current gross sales run rate is about $65 million (Teva does significant discounting so that net sales are less). Teva has been so pleased with the product that they have increased the number of reps promoting the product from 25 to 40. Ferring has European sales of $65 million in Europe; it has been increasing market share in a market in which prices have been coming down.


The current TevTropin is based on a needle-free injector that is reusable for two years. I estimate that Antares sells the device to Teva for $350 and realizes a 50% gross profit margin. In addition to the needle free injector Antares manufactures consumables associated with the three times a week administration of TevTropin. A needle free tip, a disposable syringe and an adapter are disposed of with each use. Teva gives away the injector and derives all of its revenues from the drug and consumables.


For Antares, the auto-injector essentially contributes annualized revenue of $175 per year and the consumables bring in about $10 per week or $520 per year. Hence, Antares derives about $700 of manufacturing revenues per each patient year of TevTropin. In addition, Antares receives a royalty that starts in mid-single digits and increases to high single digits as sales increase. The list price of TevTropin is about $23,000 per year, but after discounting the net price is probably closer to $20,000. I estimate that Antares is currently receiving a 7.5% royalty which would be $1,500 per patient year. Combined revenues from manufacturing and royalties amount to roughly $2,200 per patient year.


Teva currently has about 2,000 patients on TevTropin and approximately half use the needle free injector and the other half use the original needle and syringe system on which they started. All new patients are given the option of the needle free injector, but Teva didn’t try to change patients from the earlier device or dissuade new patients from using the older needle and syringe. Antares anticipates a steady ramp in sales. If TevTropin can drive TevTropin to achieve a 13% market share as it has in Europe, it could be a $130 million product (approximately 6,500 children at $20,000 per year) and a $14 million product for Antares 6,500 children at $2,200 per year).


Human growth hormone competitors have been complacent and have not innovated on delivery with the exception of Serono that has introduced a needleless injector. The others are using pen injectors. In response to the Teva challenge, pricing has become more competitive as the market leader Pfizer has dropped its price from $35,000 to as low as $20,000 on certain large volume competitive contracts.


Ferring and Teva are conducting clinical trials to expand the label of their product. They are seeking to expand the indications beyond children with growth hormone deficiency to other indications that Pfizer’s Genotropin has received approval for: (1) children with idiopathic short stature, (2) children who are small for gestational age, (3) Turner’s syndrome, (4) Pradler-Willi syndrome and (5) adults with growth hormone deficiency.


Ferring and Teva are currently marketing 5mg needleless injector dosage forms of human growth hormone. Ferring has developed a 10 mg product which is applicable to older patients. As a young person ages and increases in size, they need more human growth hormone commensurate with their weight increase. Some patients are lost to therapy because they don’t want to use two 5 mg injections because of the pain involved. Hence, the 10 mg dose could have a modest impact on market growth.


Vibex Injector for Epinephrine

The next marketed product of the Teva-Antares collaboration is likely to be based on the use of Vibex auto-injector to deliver epinephrine. Teva hopes to introduce this product as a generic and was the first to file an ANDA in 2008 against Epi-Pen the innovator product that is marketed by King Pharmaceuticals (recently acquired by Pfizer). King sued Teva for patent infringement and litigation is ongoing. The court trial is scheduled to begin in February of 2012. If the trial goes in Teva’s favor, it could launch its generic in mid- 2012. However, there are other possibilities. Pfizer could prevail in the suit or Teva could (1) launch at risk before the court decision is made, (2) reach an agreement with Pfizer to launch an authorized generic or (3) reach a cash settlement in which it would agree not to market the product until a much later date. In the event of a settlement, Antares is entitled to a significant amount of the settlement.


The Vibex injector for epinephrine will be sold to Teva for about $5 and could provide Antares a 50% gross margin. The device is disposable after each use, but most epinephrine devices are never used. They are thrown away after their shelf life expires at about 16 months. If the product is launched as a generic, I would expect Teva to capture 40% of the unit market and at a price of about 60% of the current Epi-Pen price in the first year of introduction, consistent with other generic launches. Pfizer is estimated to sell 5 million devices per year which leads to about $250 million of sales so this would translate into 2 million units per year for Teva. At $5 per device this would create $10 million of manufacturing revenues. I also estimate that Antares will receive a royalty which I estimate to be in the 5% to 9% range. I estimate that Teva would price a generic at a 40% discount to Epi-Pen so that Teva’s first year sales would be about $60 million and Antares royalty would be about $4 million.


Potential Use of Vibex for Sumatriptan

In addition to the epinephrine product, there is a second product in development which was initially filed as an ANDA in 2008. The drug has never been disclosed, but there is a great deal of speculation that it is sumatriptan, an injectable product made currently by Glaxo for treating migraine headaches. Glaxo launched its disposable needle device in the 1990s and injectable Imitrex (sumatriptan) has sales of about $220 million per year. Teva might be able to capture 40% of the unit market at a 40% price discount or 25% of the dollar market or $53 million.


The FDA initially rejected Teva’s ANDA on the basis that the design of the injector was different from that of the innovator product. It used a button that had to be pushed for injection which the original Antares product did not duplicate. Because of this, the FDA said that Teva would have to file under a 505 (b) 2 application that would not allow generic substitution. Not wanting to do this, Teva and Antares went back and designed the device with a push button like the innovator product. The FDA has indicated that the product will now be judged on the basis on an ANDA. Economics for this product are comparable to that of epinephrine. Antares may sell its auto-injector to Teva at about $5 per device and receive a royalty of 5% to 9% of sales.


Pen Multi-dose Cartridge

This injection technology is based a multi-dose pen that can hold up to 30 doses of a drug. Antares has a deal with Teva to develop two undisclosed products that have current revenues of $1.5 billion. The economics for Antares is that it will receive royalties of high single digits to low double digits and will sell the devices to Teva on a cost plus basis.


The first product will be filed as an ANDA and launch will occur following a 30 month stay which may enable a launch in 2013. This first innovator product has sales of $700 million. The second is a 505 (b) 2 filing of a protein that will be produced through synthesis rather than by recombinant production technology. This product has sales of about $800 million. In addition to the normal 505 (b) 2 process the FDA will require a safety study for this product which will lengthen the development process. I don’t have a reasonable guess on when it might gain approval, but it is probably in the 2014 to 2015 time frame.


I have not included any estimates for sales for these products in my model. However, the current sales levels of these products suggest that they could be significantly greater opportunities than the epinephrine and sumatriptan products.


Competitive Environment

The major auto-injector manufacturers are SHL, Ipso Medical and Owen Mumford. Their business models are different from Antares as they focus on developing “off the shelf” product that can be used by multiple drug companies. In contrast, Antares combines its injectors with the drug product of its client and the device is specific to that product. Competitor products are not exclusive to one product.


For a company like Teva, the lack of exclusivity was a big disincentive. They could do all the work on an ANDA and another generic company could step in and use the same injector technology to file an ANDA using TEVA’s data. Teva is focused on generic drugs that need exclusivity provided by the injection device.


Antares’ competitors are focused on innovative products in which the intellectual property surrounding the drug gives exclusivity as opposed to the technology and engineering of the injector. Hence most of Antares competitors are tied up with multiple innovative drug companies. They do not want to be exclusive.


Injectable Vibex Methotrexate

Methotrexate is a disease modifying drug that is considered gold standard therapy for moderately severe rheumatoid arthritis. Patients generally start on NSAIDs and then as the disease worsens progress to methotrexate. After methotrexate, physicians turn to the newer biologic agents like Enbrel and Humira. Methotrexate may be used alone or in combination with NSAIDs and biologics. In total, it is estimated that methotrexate is used in 70% of rheumatoid arthritis patients. It is also used in psoriasis and other autoimmune diseases.


Methotrexate was first developed as an anti-cancer agent in the late 1940s. In cancer its mode of action is like many chemotherapy drugs, it inhibits the synthesis of DNA in rapidly dividing cells. It has a different mode of action in autoimmune diseases like rheumatoid arthritis in which it blocks the proliferation of T-cells that play an active role in these diseases.


Methotrexate is a very effective agent but has some limiting side effects. For rheumatoid arthritis, it is most commonly given as oral tablets once a week. It is started at 7.5 mg/mm2/week and then titrated up to as much as 20 to 25 mg/mm2/week. At doses around or above 15 mg/mm2/week absorption and toxicity can become a problem for some patients. The most common side effect is nausea which is troublesome for around 50% of patients. In some patients the nausea from methotrexate disappears on its own or may be controlled by lowering the dose or spreading the dose out over the course of a day. Methotrexate is often taken on Saturday so that the nausea does not interfere with the work week. Injections can reduce this side effect in most patients and also improve absorption as compared to oral drugs.


Over the last five years, injectable methotrexate has increased its unit share of the US methotrexate market from 5% to 8%. Current products are only available in vials and must be given as intramuscular injections which require a longer time to administer and are deeper and more painful than subcutaneous injections. Patients usually have to go to the physician’s office once a week to be injected by a doctor or a nurse. Antares is developing a subcutaneous injection dosage form based on its Vibex pressure assisted auto-injector that would be less painful, could be self-administered and would offer a much better side effect profile as compared to orals, especially in regard to nausea.


The dose of oral methotrexate is often lowered to reduce side effect issues; injectables may allow dosing to be increased to a more effective level. This could appeal to both patients and physicians as it could allow greater use of methotrexate before moving on to biologics lie Humira and Enbrel. The biologics are expensive costing on the order of $20,000 per year and they also put the patient at risk for severe infections malignancies.


There is proof of concept for a subcutaneous dosage form of methotrexate. In Europe and Canada, Medac International and its licenses, market a prefilled syringe containing methotrexate. This is a once a week subcutaneous formulation that is viewed as being as effective as intra-muscular injections. It has captured 20% of the unit market and 80% of sales for all methotrexate formulations in Europe. Antares is developing a subcutaneous formulation using Vibex technology in the US and is using the 505 (b) 2 regulatory approval pathway followed with TevTropin. Medac is also looking to market in the US but is behind Antares in development timelines.


Meetings with the FDA have given Antares reasonably clear direction for developing its drug. It first conducted animal studies of pharmacokinetics and then preceded into human bioequivalence studies. In early August 2011, Antares reported results from a bioequivalence study that evaluated four dosage strengths ranging from 10.0 mg/mm2/week to 25.0 mg/mm2/week. Antares indicated that the subcutaneous injections produced a similar pharmacokinetic profile to intramuscular dosage forms and Antares believes that it has shown bioequivalence with the intramuscular dosage form.


The next step was to meet with the FDA and confirm the requirements for approval. The additional requirement coming out of that meeting was that Antares will have to do a user study to make sure that the device can be safely self-administered by rheumatoid arthritics who suffer from joint inflammation and deformities that might interfere with self-injection. Antares may be able to file an NDA in 2012 and potentially receive approval in 2013.


Antares has a strategic alliance with a privately held Canadian company, Uman Pharmaceuticals, to jointly develop Vibex methotrexate in the US and Canada. Antares will be responsible for clinical development, regulatory submissions and manufacturing the Vibex injector while Uman will develop the formulation and provide prefilled syringes. Uman has rights for commercialization in Canada while Antares has US and rest of the world rights.


Generic dosage forms of methotrexate cost about $100 per year while biologicals like Humira and Enbrel cost around $20,000. Antares thinks that the potential price point of its product could be $50 per weekly injection or $2,600 per year. This is the price of the subcutaneous dose sold in Europe. Antares believes that 30 sales representatives could successfully target the 3,000 physicians who account for most of US methotrexate prescribing. The company might elect to form its own sales force and market the product on its own or might elect to form a partnering agreement. The addressable market for methotrexate is 4.3 million weekly administrations of the drug. Assuming that Antares’s injectable methotrexate can capture 10% (the current level for injectables) or 20% (the level in Europe) and using a price of $50 per injection, the addressable market is $200 to $400 million.




Overactive bladder (OAB) is a disease characterized by its symptoms: frequent urination, urinary urgency, urinary incontinence, incontinence and painful urination. The cause of OAB is not fully understood, but it is closely tied to over activity of the detrusor muscle that causes bladder contraction during urination. OAB is distinct from stress urinary incontinence, but the two conditions can occur together in a condition known as mixed incontinence.


Treatment for OAB usually begins with lifestyle modification such as reduction of fluid intake and avoidance of coffee. If this doesn’t work, patients usually progress to a class of drugs called anti-muscarinic agents which decrease detrusor muscle spasms of the bladder. Currently marketed drugs of this class are shown in the following table:

Drugs Available for Overactive Bladder in the US
Product Generic name Dosing Company Approved
Ditropan XL oxybutynin Oral tablet, once a day Johnson & Johnson (JNJ) 1999
Detrol LA tolteridone Oral tablet, once a day Pfizer (PFE) 2000
VESIcare solifenacin Oral tablet, once a day Glaxo/ Astellas (GSK) 2004
Enablex darifenacin Oral tablet, once a day Novartis (NVS) 2004
Sanctura trospium Oral capsule, once a day Allergan (AGN) 2007
Toviaz festoterodine Oral tablet, once a day Pfizer (PFE) 2008
Oxytrol oxybutynin Transdermal patch, twice a week Watson (WPI) 2004
Gelnique oxybutynin Transdermal gel sachet Watson   (WPI) 2009



The oral OAB drugs are comparably effective and have similar side effect profiles. Their principal drawback is that they have significant off-target activity that results in annoying cholinergic side effects such as dry mouth, dizziness, drowsiness, constipation and nausea. It is believed that the side effects of the anti-muscarinic agents are the result of metabolites produced as the drugs make their first pass through the liver. Surveys suggest that 40% of patients stop their prescriptions within six months because of the side effects.


Antares announced an exclusive licensing deal for Anturol in the US and Canada with Watson Pharmaceuticals, which has considerable experience with OAB drugs. It launched an effort aimed at matching the efficacy profile of the oral drugs while reducing side effects, development efforts have turned to formulations that are delivered directly across the skin and do not undergo first pass liver metabolism. Based on this, Watson introduced its oxybutynin patch Oxytrol, in 2004. It reduced the incidence of dry mouth to 4% from the 29% seen with Ditropan XL and the incidence of constipation to 3% from 13%. However, the patch brought with it new side effects such as inflammation at the application site (8%) and itchiness (14%). In addition, the patches were unsightly and the dosage schedule of twice a week could cause compliance problems.


Watson next sought to improve on the patch with a gel formulation of oxybutynin called Gelnique which was launched in 2009. This product matched the efficacy and reduced side effect profile of Oxytrol, but was designed to avoid its application site side effects, aesthetic drawbacks and dosing schedule uncertainty. However, Gelnique fell short on other key issues. Delivery of the drug requires squeezing it from a sachet which was cumbersome. Importantly, there was no way to titrate the dosage which is important in OAB. The oral drugs come in a low dose and high dose formulations. Physicians like to start with a high dose to achieve quick efficacy and then titrate the dose downward. The high dose might be also employed for a long trip or going to a movie, situations in which going to the bathroom are inconvenient. The higher dose brings with it a higher incidence of side effects so that a low dose is preferred in more normal life situations.


Anturol was developed through the 505 (b) 2 regulatory pathway. This allowed Antares to draw on the data from past studies of toxicology and not have to repeat them. Also, the company only had to show that the product was effective and safe. This is much less rigorous than the pathway for a new molecular entity. Two randomized phase III trials were conducted in 600 patients with OAB in which the primary endpoint was reduction of the number of urinary episodes. A 56 mg and 84 mg dose were tested and were statistically significant at p=0.028 and p=0.033 respectively. Anti-cholinergic side effects occurred at the same low incidence as Gelnique.


Anturol is a once day gel formulation that is provided in a gel dispenser. The low 56 mg dose is given as two squirts from the dispenser and the high 84 dose is given as three squirts delivered from the same container. Anturol has a rapid onset of action that is attributable to the permeation enhancer used. The recent clinical studies showed an effect on incontinence at week 1 that was durable and continued through the conclusion of the study at week 13.


Physicians will likely start patients on the high dose of Anturol and then titrate down. A prescription will consist of a dispenser that will last for 30 days. The dispenser will have enough material to deliver the high dose (three squirts) on each day of the month with a little overage. Anturol will likely be priced at parity with other brand name drugs or roughly $150 for the one month prescription. The initial marketing program is likely to use a sample that would be a one week supply.


Watson will take Gelnique off the market following the approval of Anturol; the name will probably be changed to something more like Gelnique. I understand that the deal with Watson gives Antares a royalty rate on both Anturol and Gelnique sales so that there is no incentive for Watson to try to maintain current sales of Gelnique. I would expect Watson to switch patients to Anturol as quickly as possible.


Watson is a power house in third party reimbursement. Gelnique is generally available as a tier 2 product on formularies while most of the branded products are on tier 3. Watson obtained this tier 2 status as a result of its marketing prowess with managed care and the superior side effect profile of Gelnique. Watson should be able to substitute Anturol for Gelnique on formularies. The involvement of Watson suggests that the uptake of Anturol could be quite rapid and much better than what we have been seeing with most biotechnology launches of late. Anturol might be able to get to peak sales in three to four years.


Antares will receive a milestone upon approval of Anturol and a I estimate that it will receive a royalty that starts in the mid-single digits and escalates to the mid-teens as sales increase. Gelnique’s current run rate is on the order of $25 to $30 million. Peak sales of $100 million seem reasonable by 2015 and at a royalty rate of 15% could produce royalties to Antares of $15 million. They will receive a milestone payment from Watson upon approval on or following the PDUFA date of December 8, 2011. This is likely to be on the order of $5 to $8 million.




Libi-Gel is the only product in phase III development for Hypoactive Sexual Desire Disorder (HSDD), the most common condition leading to female sexual dysfunction. Antares developed a low dose testosterone gel and licensed it to BioSante for the North American, Israel and China markets; BioSante branded the product as Libi-Gel. Antares has rights to all of the clinical data created by BioSante and retains commercialization rights for the rest of the world. Antares will receive a 4.5% royalty on sales of LibiGel and also 25% of any partnering milestones that BioSante receives. BioSante will almost certainly partner the product as it lacks commercial infrastructure; Antares has indicated that it would prefer a worldwide partnership that would include its territories. Some of the obvious potential partners would be Pfizer, Eli Lilly and Warner-Chilcott.


The introduction of Viagra changed the way that society looked at sexual dysfunction from an embarrassing condition that was not spoken about to recognition that it is a condition that can seriously impair quality of life and which can and should be treated. With this arose a large commercial market opportunity for treating male sexual dysfunction. However, there are no FDA approved counterpart products for females even though studies suggest that sexual dysfunction affects a greater percentage of women than men.


Investors should avoid the temptation to think of Libi-Gel as a female Viagra. Viagra and its competitors treat a distinct physiological condition in which the male is unable to obtain an erection. This can usually be corrected by increasing blood flow to the penis which is what Viagra does. Female sexual dysfunction is more complex and results from the interplay of a number of physical and psychological disorders. HSDD is probably the most common cause of female sexual dysfunction, but there are other prominent causes. The FDA defines HSDD as the persistent or recurrent deficiency or absence of sexual thoughts, fantasies, and/or desire for sexual activity, which causes marked distress or interpersonal difficulty.


Testosterone is involved in signaling the brain which leads to sexual arousal in women and also increases vaginal lubrication. Testosterone replacement can potentially restore sex drive in testosterone deficient women. However, there is a narrow therapeutic window so that too much testosterone can lead to side effects such as hair growth, deepening of the voice and clitoral enlargement. The dose of Libi-Gel is about one tenth that of Androgel, the leading male testosterone replacement product. The Libi-Gel formulation produces less of a therapeutic spike in blood levels following application relative to patch and other dosage forms and also smoothes peaks and valleys of testosterone levels in the blood. Recent studies suggest that LibiGel raises testosterone in the blood to the same level seen in pre-menopausal women.


There is strong evidence that testosterone replacement in women who have below normal levels can favorably impact HSDD. Proctor & Gamble developed a testosterone patch called Intrinsa whose NDA was considered by an FDA advisory committee meeting in December of 2004. The committee voted 11 to 3 that the drug was effective. However, theoretical but unanswered concerns about the potential for long term cardiovascular safety and increased cancer risk resulted in a unanimous vote to not approve Intrinsa in the US. European regulatory authorities did not share this safety concern and Intrinsa was approved and is marketed in Europe.


The FDA requested a long term safety study for approval of Intrinsa in the US. Proctor & Gamble decided not to do this study, probably because management had decided to get out of the pharmaceutical business. BioSante saw an opportunity and decided to launch the safety study requested by the FDA at the same time as the phase III efficacy studies.


BioSante should report the results of the pivotal phase III BLOOM trials in December 2011. Based on the Intrinsa experience and the considerable off-label use of testosterone in HSDD, there are strong reasons to believe that these trials will show that LibiGel is effective and that short term side effects will not be an issue that will bar approval. The two phase III BLOOM trials are identical in design, with 500 patients in each trial, randomized 1:1 to drug and placebo. The enrollment criteria specify surgically menopausal women (hysterectomy and bilateral oophorectomy) between the ages of 30 and 65. These trials are covered by an SPA.


The primary efficacy measure is the number of sexually satisfying results. The patient records the number of satisfactory sexual events (SSEs) each week in a diary. Satisfaction can only be judged on a yes or no basis. These diaries are submitted each week. The weekly results are then averaged to calculate the monthly frequency for sexually satisfying results. An eight week period before the beginning of therapy is used to establish the baseline of SSEs. After this, the patients are assigned to either Libi-Gel or placebo. The patients submit diaries weekly and there is a monthly medical visit to check on side effects. Patient enrollment is for six months. The SPA states that to meet the primary endpoint the SSEs in the last month of the trial has to show a statistically significant increase over the level established during the eight week run in period. While the SPA doesn’t state what numerical increase in SSEs would be considered clinically meaningful, BioSante believes that an increase in one event on a monthly average basis would be considered clinically significant which is in line with the data for P&G’s Intrinsa.


Based on the results with Intrinsa and the considerable off label use of low dose testosterone, there is very good reason to think that the phase III trials will be successful. However, the gating factor for approval is success in the long term safety study for which I anticipate results in 2H, 2012. A Data Monitoring Committee has already taken five interim looks at data and in each case has recommended that the trial continue. This is an encouraging indication that the safety trial will be successful and result in an NDA filing in late 2012 or early 2013. If the efficacy and safety trials are successful, Libi-Gel will be approved in late 2013 or early 2014.


Libi-Gel is targeted at women who have below normal levels of testosterone production. This condition naturally occurs as women age and especially as they enter menopause. Surgically induced menopause through removal of the uterus and ovaries also reduces testosterone production as the ovaries account for about 60% of testosterone production so that women with oophorectomies experience a decline.


An estimate of market size for Libi-Gel is very difficult because there are no approved products for HSDD that give an insight into market size. It is made still more difficult because HSDD is not well defined or broadly recognized as a disease condition. I have looked at four studies which suggest that the incidence of HSDD in surgically and naturally menopausal women ranges from 7% to 26%. In the 2006 Journal of Menopause, Dr. Sandra Leiblum estimated that 14% to 26% of surgically menopausal women and 9% of naturally menopausal women suffer from HSDD. BioSante points to this paper as being the best researched article.


There are roughly 500,000 oopherectomies per year in the US performed in women between 30 and 65 years of age. This suggests that the prevalence may be on the order of 17 million women in this category. There also around 30 million post-menopausal women in the US. In this report, I am assuming that the incidence of HDSS is 7% in surgically menopausal and 4% in naturally menopausal women. Other than for conservatism, I have no strong reason for doing so. These assumptions would result in an addressable market of 700,000 surgically menopausal women and 1,200,000 naturally menopausal women with HSDD.


Another way of looking at market potential is to look at off-label use of testosterone products. In the US, there is a significant amount of off label usage of male testosterone products in women. Also, specialty pharmaceutical compounding of generic testosterone products for use in women is a widespread practice.


IMS estimates that there are 4 million prescriptions each year for off-label use of testosterone. As a rule of thumb, a specialty pharmacy compounded prescription costs about $75. Applying this to 4,000,000 prescriptions suggests that the sales value of off-label prescribing would be $300 million. Male testosterone products cost about $360 per prescription and a pharmacist might be able to get five female doses per one male dose suggesting a cost of $72 per effective prescription for a woman prescribed he male product. At this point the addressable market might be $288 million.

Both of these support the estimate that current spending on off label use of testosterone is around $300 million.


BioSante has not indicated its pricing strategy, but its public comments indicate that it will price Libi-Gel at a discount to the male testosterone and erectile dysfunction products. Viagra sells at $15 to $18 per tablet and monthly usage is estimated at 4 to 8 times. This suggests a monthly price of $60 to $144 for Libi-Gel. Male testosterone products are priced at $12 per day or $360 per month. BioSante has publicly stated that based on its market research with payors and physicians that it believes that LibiGel can be priced at $7 to $10 per day or $210 to $300 per monthly prescription.


Based on these estimates, I am estimating that the addressable market for LibiGel in surgically menopausal women is 7% of 17 million or 1.2 million women and in naturally menopausal women it is 4% of 30 million or 1.2 million. Using a monthly prescription price of $210 and assuming that the average woman will use the prescription for eight months of the year, I estimate that the addressable market for surgically menopausal women is $2 billion and for naturally menopausal women is also $2 billion.


To gain approval in Europe, it is probable that LibiGel will have to do a head to head trial against Intrinsa. This could put European approval in the 2016 or so time frame. The label for Intrinsa in Europe is complicated. Patients have to have had a hysterectomy and then assure their doctors that their sex drive has dropped following the hysterectomy.



Antares has operated as a low burn rate company and it is impressive that they have gotten to where they are. For the first nine months of 2011, the operating cash burn was $4.3 million and I project an operating cash burn of $1.3 million in 4Q, 2011. If Anturol is approved I believe that Antares will receive about $5 to $8 million as a milestone from Watson.

The company raised $21 million in an equity offering in 2Q, 2011 and this resulted in a cash position at the end of the year of 3Q, 2011 of $26 million. If Anturol is approved, the yearend cash position could approximate $30 million. I am estimating that the company will burn $4 million in 2012 and generate $8million of positive cash flow in 2013.


My projections suggest that the company won’t need any more equity raises to fund its business. If the stock price were to rise sharply, I think that the company could be opportunistic and raise a war chest to build the company with product and company acquisitions.



Disclosure: The author of this article did not own shares of Antares at the time this note was written, but has the intention to buy stock 72 hours or later after publication of this report. This should be taken into account as it may introduce bias into the conclusions and interpretations that are made. In reading this note, you acknowledge that you have not used it as the sole basis of your decision making and that all investment decisions are based on your own analysis. An investment in Antares carries substantial risk and investors could potentially lose much of their investment. The reader acknowledges that he/she has carefully read the Investment Approach, Terms/Conditions and Disclosures sections in the About Us section of the website. The reader acknowledges that he/she will not hold SmithOnStocks accountable for any investment loss that may be incurred if a decision is made to invest in Antares.





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