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Expert Financial Analysis and Reporting

Antares: More On Paul Wotton’s Departures as CEO (ATRS, Buy, $2.77)

This is a follow-up on Paul Wotton’s decision to leave his position as CEO of Antares (ATRS) to become CEO of Advanced Cell Technology (ACTC). In an 8-K filing, Antares said that Mr. Wotton’s resignation was not because of any disagreement with Antares on any matter relating to operations, policies or practices. I have heard nothing that would suggest otherwise.

Advanced Cell is a stem cell company whose lead product is targeted at dry age related macular degeneration and the somewhat similar orphan disease Stargardt's macular dystrophy. It is in phase 1/2 trials to evaluate safety and tolerability and to perform exploratory evaluation of potential efficacy endpoints for future studies. This technology is paradigm changing but very high risk and is several years away from commercialization. If future clinical trials establish efficacy and safety, I would guess that the product might come to market in 2020 or so. It is obviously much earlier stage than Antares.

Mr. Wotton will receive an annual base salary of $575,000 and the target for incentive compensation is 55% of base salary or $315,000; this results in total annual cash compensation of about $900,000. He will receive 30,000,000 options at about $0.07 per share, all of which will vest within three years and 30,000,000 stock units also at $0.07 per share that will vest within three years.

The successor to Mr. Wotton at Antares is Eamonn Hobbs. He will receive a salary of $560,000 and a target annual bonus of 55% of base salary for total compensation of about $870,000. The cash package for Mr. Wotton at ACTC is comparable to what he could have received at Antares.

Mr. Hobbs will also receive several stock incentives: (1) a sign-on bonus in the form of a stock option to purchase 340,502 shares of Antares common stock, at an exercise price of $3.01 vesting over three years at the rate of 33-1/3% each year, (2) a stock option to purchase 159,498 shares of Antares common stock, at an exercise price of $3.01 vesting over three years at the rate of 33-1/3% each year, (3) 91,362 restricted stock units, vesting over three years at the rate of 33-1/3% each year; and 182,724 performance stock units, vesting based upon the achievement of certain performance-based criteria.  This is equivalent to roughly 775,000 shares of stock.

Both of these pay packages seem staggering. The cash compensation packages are almost identical. The difference in compensation ultimately will be determined by how the respective stocks perform. I think that ATCT is very high risk and if I were given the choice, I would prefer to have the equity incentives that were given Mr. Hobbs. I think that the chances of success for Antares are much, much higher than for Advanced Cell.

I think that like me, most investors put in Mr. Wotton’s place would not have made the same decision. In talking to people who know him, they offered some insight into his character. They point to his work experience in companies that are early stage or have floundered. For example, when he came to Antares the company was struggling with a market capitalization of $27 million without a clear strategic plan. He leaves a company with a market capitalization of $375 million and a crystal clear business plan.

It may also be the case that Mr. Wotton has not had that much experience in running a commercial operation. This may not be his best skillset. I think that he was and is an excellent CEO and I hate to see him go. I do think that the reason he left was that he wanted the challenge and opportunity to do at Advanced Cell what he achieved at Antares.

The initial reaction from subscribers to Mr. Hobbs from subscribers has been cautious and even cool. He was on the board of Delcath and stepped in as CEO. There was a lot of hope for approval of Delcath’ s proprietary system for chemosaturation that was designed to administer high dose chemotherapy and other therapeutic agents to diseased organs or regions of the body, while controlling the systemic exposure of those agents. Approval for this drug device was gained in Europe but not in the US and Mr. Hobbs has been beaten up pretty badly by investors as he took the blame for the failure. In sharp contrast, one of my oldest and valued colleagues who has covered medical devices for over 30 years knows Mr. Hobbs very well and holds him in very high regard. I put much more weight on the latter view than the former.

As I have previously written, I do not see the departure of Mr. Wotton as having any impact on the stock price after this intial unsettled reaction has passed.

Tagged as , , , , + Categorized as Smith On Stocks Blog


  1. TDPeterson123 says:

    Thanks, Larry, Your comments are highly respected and appreciated.

  2. I very much appreciate your input.

  3. TDPeterson123 says:


    Are you staying invested in Antares? If Medac’s NDA gets approved ATRS will probably get hammered. And, until the litigation is resolved ATRS will flounder. Would appreciate your thoughts.


  4. Please read the latest report on Antares in the reports section of the website that go into detail on this issue. Remember that the Medac product is not a generic equivalent to Otrexup. I think that the Medac price will be close to Otrexup if approved and they will then both try to create the market for sub cutaneous methotrexate. Both products can prosper.

  5. TDPeterson123 says:

    Thanks Larry. Your “grounded” perspective helps keep me grounded. I think it will take some time before before the market becomes convinced that both products can prosper (if or when both actually start competing). I think we are still 2 to 3 quarters of earnings away before the market develops a strong positive conviction for Otrexup.

  6. TDPeterson123 says:

    Hi Larry,

    Hope all is going well. Just a comment and a question – in your writings about Antares and Otrexup you seem somewhat indifferent about Medac. In fact, you conclude their market entrance yet this year and don’t really seem phased about it. Do you agree?

  7. I have written that I think that if Medac enters the market, that they will not compete on a price basis, but at a price comparable to Otrexup. I think that the market for Otrexup and the Medac product is in the hudreds of millions of dollars. I think that the worst case for Otrexup is a 50/50 split. Otrexup can reach prfitability at a little over $20 million. Hence if it were to get to say $100 million, it would be an enormous profit contributor. I think some people mistakenly think that Nedac will enter the market as a generic that is interchangeable with Otrexup. However, this is not the case. It has the same active infredient and uses the same injector technology, but the products are not intercahngeable as would be the case if the Medac product were a generic.

  8. I think it is factored into the stock and I think that Rasuvo and Otrexup can both do well.

  9. TDPeterson123 says:

    Thanks for responding, Larry.

    As you’re probably aware, the Medac drug was approved and Medac is planning on launching this year. A number of things jump out at me regarding this situation:

    I am bothered by the fact that Antares patents couldn’t keep Medac from entering the market. I understand how the dots connect and why Medac was able to avoid the now-listed orange book patents surrounding Otrexup (by submitting their NDA before Otrexup was approved), but it still is a major point of concern for me. Did Antares move to slowly in the Vibex MTX/Otrexup development program due to their own IP concerns, only to allow an open door for a competitive threat like Medac to emerge? This may be a difficult question to answer, but I believe it’s a legitimate question none the less and has strong implications for future pipeline products.

    I will follow somewhat closely the progress of the litigation. Perhaps a settlement will be reached (I’ve been told by litigation lawyers that 95%+ of the time cases like this never make it to court). If not, Antares will test the metal of their patents in litigation. If a settlement is reached, it MUST provide patent protection for other non-MTX products or they’ll go to trial (IMHO).

    That Medac’s product is a 505b(2) drug does put it at a competitive disadvantage to Otrexup, IMHO. First to market products have a first mover/top of mind market advantage. In my experience as a business person, being first is a very powerful position to leverage. And, that the Medac product is not an ANDA product (e.g. it can’t be sub’d by the pharmacist) will make it even tougher for it to make competitive inroads. It, like Otrexup, must be specifically prescribed. Even if there is a price difference, that aspect is only relevant for patients who are not insured. The large majority of users will be insured patients, and their co-pay amount is really all that matters. Antares can take extra steps (as needed) to mute any differences in co-pay of co-pay assistance programs that Medac may bring to the table. I doubt there’s much difference in usability/ease of use. I could be wrong, and I’m hoping I am (for Otrexup’s sake). Hence, the “top of mind” product will have the greatest market share and Antares has a significant advantage in that area. Worst case, come year end 2015, I’d expect the split in the RA market to be 70 Otrexup/30% Medac do to first product mover advantage. Over time that may change – TBD. In the psoriasis market, I’m not sure who may compete against Leo. That one may be tougher for Medac to overcome due to Leo’s strong market presence in that nitch and the potential difficulty for Medac to find a similar partner of that caliber.

    As for timing, I don’t see Medac’s market presence as a hindrance for Antares to achieve profitability in Q4 2014 or Q1 2015. Just like Antares, it will take them time to ramp up. They’ll also need to give RA docs a reason to switch from Otrexup. I’m sure LaRoux is well versed in competiting and plans are in process for the Antares sales force to do so.

    I absolutely do believe that having two competing products will, in fact, accelerate the acceptance for this type of product and expand the potential market size for both.

    All said, I don’t see this situation as being horrid for Antares. Less than desirable, yes. Horrid, no. The market is big enough for two – it’s just more fun to have it all to yourself. What concerns me the most is the IP situation. What is the value of Antares IP, is it being properly managed, and can they effectively protect it?

    Keep the good DD coming. I appreciate it.

  10. Having followed ACTC for 5 years, watched the Patents gained over that time, followed the amazing results of their Embryonic Stem cells treating and curing (proof to soon be published in a major journal) AMD and Stargardts, you may be surprised by the overnight success of ACT.

    I think Paul was made aware of the successes (those yet to be published), and of the additional successes coming, that made him realize that ACT will impact the health Industry taking it from health care to Health Cure, using their Embryonic Stem Cells to cure 100’s of diseases.


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