Expert Financial Analysis and Reporting

Investment Overview

Antares has hit a somewhat dis-settling stretch as Otrexup prescriptions have recently flattened and the FDA recommended that additional patients be enrolled in the safety evaluation of the QST phase 3 trial. I see these as typical of issues that always arise with biopharma companies and can be reasonably resolved. I remain confident in my Buy on the stock for reasons discussed in this note.

Otrexup Update

Otrexup prescriptions have flattened in recent weeks and new prescriptions actually dropped in the last weeks of December 2014. Management attributed this to the launch of Rasuvo and also issues relating to the sales force and reimbursement. The Company said that it was disappointed in the prescription trends, but has taken actions to correct them. Hence, the trends in Otrexup prescriptions will be watched even more quickly than before in coming months.

Otrexup was launched with a contract sales force of 25 reps put together by Quintiles. Antares has moved to make these reps employees of Antares rather than Quintiles and is letting about 8 of these reps go and will be replacing them. The number of territories requiring reps is being expanded from 25 to 32 which suggests that Antares will be hiring about 15 new reps. This can create some disruption, but should ultimately pay off.

Reimbursement as always with new product launches has presented challenges. Managed care has created hurdles that require substantial involvement of the physician and his office staff to initially gain reimbursement. Antares is implementing strategies that will reduce the burden on physician’s time appreciably. They will also give samples to new patients that will take the patient through the first month of usage and allow time for reimbursement to be established.

Like management, I am disappointed by the trends in Otrexup, but I recognize that managed care routinely erects barriers that make initial reimbursement difficult with the result that most new product launches slow, especially for small companies with limited reimbursement experience. This has become the norm.

I remain as optimistic as ever that sub-cutaneous methotrexate has a significant market potential. Even if Otrexup and Rasuvo were to split the market 50/50, I see this as a very significant opportunity and it looks like the launch curve of Rasuvo is less robust than Otrexup. Hence, I continue to see this as a major opportunity for Antares.

Quick Shot Testosterone

The phase 3 results of Quick Shot Testosterone are expected in 2Q, 2015. The primary endpoint is based on pharmacokinetics at 12 weeks. The objective is to determine the bioavailability of QST relative to other formulations. Phase 2 results suggested that bioavailability was improved.

The FDA recently recommended that Antares create a larger safety database that would include 350 total patients exposed to QST with 200 exposed for six months and 100 for one year. The data on the 100 patients is expected to be available by November 2016. Without giving specific details Antares anticipates that it will need to create data on 70 new patients to satisfy the request for six month exposure for 200 patients; this will require more enrollment.

The Company characterized this FDA action as a speed bump and hinted that this might not delay the timeline previously laid out for approval and introduction of QST. Investors are awaiting details.

Update on AB Rated Generic to EpiPen

Antares is shipping quantities of the injector to Teva in 1Q and 2Q, 2015 in anticipation that Teva will receive an AB rating for its injectable generic to EpiPen. Teva can launch after June 22, 2015 with or without an AB rating.

Teva submitted the last piece of information requested by the FDA in December 2014 in regard to the AB rating and we may hear in coming weeks or months if it is approved. Antares has signaled that the chances are excellent but until the FDA speaks there will be uncertainty. During the meeting management said that we should hear about the AB rating in coming weeks or months.

Details of New Product Were Announced

The Company said that it has filed an ANDA to Astra-Zeneca’s Byetta (exenatide) and that Astra Zeneca sued in December 2014 putting into effect a 30 month stay. This means that the Teva generic could be launched in May 2017. Byetta currently has US sales of $215 million and foreign sales of $120 million. By 2017, sales could increase to about $300 million in the US and foreign sales to $270 million.

The rule of thumb for launches of oral generics that I use is that the first generic that comes to market will get about 50% of the market with a 30% lower price. This would suggest that Teva could realize US sales of about $100 million. Antares through selling its injector and royalties might realize about 10% to 12% of Teva’s sales or $10 to $12 million in 2017. I throw this out just as a point of reference as the dynamics for injectables could be quite different.

Other New Products

The next of Antares’s proprietary products following QST and Otrexup is being referred to as QSM. No details on the product were provided.

There is also a deal with Teva for another undisclosed pen product.

Last September, Antares signed a deal with an undisclosed partner for an undisclosed product that represents a life extension strategy. Partners usually are very secretive and don’t allow Antares to give out details on product characteristics and timing.

An ANDA was filed for an injectable sumatriptan product in 2014. Antares owns the product and Teva will distribute it; profits will be split roughly 50/50. I am unclear on the timing and revenue potential of this product. I will clear this up.

There is a deal for a product for Pfizer that is an OTC gel that is in phase 3.