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Expert Financial Analysis and Reporting

Antares: Pipeline is Bursting with Late Stage Products (ATRS, $2.77, Buy)

Key Points:

  • Antares has an impressive portfolio of seven new products that could lead to explosive growth over the next four years.
  • I am projecting that revenues of five partnered products could increase from $17.0 million in 2016 to $142.0 million in 2021 (a nearly five fold increase) and that revenues from two wholly owned products could increase from $15.1 million in 2016 to $71.2 million in 2021 (an eight fold increase).
  • The company has not unveiled other potential new products, but I think that there will be others. In my analysis, I do not attempt to attribute any value to them.
  • My price target for 2017 is $4.10 to $5.75 and for 2018 is $5.50 to $7.60).

Stock Behavior over the Last Two Years

The year 2015 and the first part of 2016 was a nightmare for Antares investors as the stock crashed from $2.59 on January 2, 2015 to a low of $0.71 on March 22, 2016.This sharp decline was based on two significant disappointments. Otrexup sales consistently disappointed following its launch in February, 2014. Secondly, Teva had issued guidance that it would launch an AB rated generic to EpiPen in early 2017, but these plans were dashed as it received a complete response letter in early 2016. These two assets were the major drivers of the stock at the time. With these setbacks, investors lost interest and seemed to dismiss any meaningful potential for the pipeline.

Not surprisingly, confidence was also lost confidence in management. The Board of Directors named Robert Apple as the new CEO on January 24, 2016. While there was no immediate effect on the stock as it declined from $1.04 on the day that he was named CEO to $0.71 in March, he seems to have subsequently been instrumental in rebuilding investor confidence and other parts of the pipeline came into focus. Unlike before, the Company began to meet and exceed guidance as follows:

  • Approval in late 2015 and launch in 3Q, 2016 of an AB rated injectable generic to the migraine Imitrex,
  • In early 2016, Antares began unveiled its agreement with AMAG Pharmaceuticals to develop a subcutaneous dosage form of Makena which added a very promising new product to the pipeline
  • In September 2016, Antares announced that it had met the primary endpoint in the registration study for QST. The pharmacokinetic profile for this once a week injectable form of testosterone looks much better than current oral and injectable dosage forms. The Company filed the NDA in December 2016 and the FDA subsequently set a PDUFA date of October 20, 2017.

These events refocused investors on the pipeline. Gaining approval of the AB generic to Imitrex gave further validation to Antares’s injectable technology and the promise for receiving approval of other AB rated generics. Makena became a newly visible part of the pipeline and in looking at the economics promises to be a major product for Antares. With the strong clinical data, QST holds the promise of being best in class of the huge testosterone market. This strongly reversed the stock price direction so that by the end of 2016 it reached $2.20 and is now trading at about $2.77.

Antares Essentially Has Two Business Models

The first is partnered products in which Antares collaborates with another company to provide the injector device which will be used to deliver drugs that another company will market. It receives a royalty and also realizes sales from providing the injectors. Antares in partnership with Teva is developing AB rated generics to Imitrex (sumatriptan), EpiPen (epinephrine), Byetta (exenatide) and Forteo (teriparatide). It also has a partnership with AMAG Pharmaceuticals to develop a subcutaneous formulation of that company’s branded product Makena (progesterone).

At the same time. The Company is building a specialty pharmaceutical business in which Antares develops proprietary branded products for its own account. The strategy is to meaningful improve the characteristics of widely used injectable generics by incorporating them in Antares’ innovative injectors. The first product marketed is Otrexup (methotrexate) which was launched in February 2014. In 2018, ATRS will likely begin to market QST (testosterone). These products will be marketed by two separate sales forces.  The Otrexup sales force will target rheumatologists and the QST sales force will target high prescribing (for testosterone therapies) urologists, endocrinologists and primary care physicians. This specialty pharmaceutical part of the business in the startup stage and is creating significant losses that offset the profitable partnered products business.

Antares is a very complex company and it is difficult to understand what drives the Company by looking at its income statement. This report goes into extensive detail to make separate projections for the five partnered and the two proprietary products. The next table summarizes numerous projections for each of these seven product assets that are discussed in more detail later in this report. This is an effort to shine a spotlight on the major drivers of the Company. It shows the revenues projected for proprietary products and partnered products. You can see that the partnered product revenues (almost all of which goes to pretax income) is poised for dynamic growth while the proprietary products are in an earlier stage although ultimately they should be the major drivers of the business.

I also show my projections for pretax income, net income and EPS; the assumptions for these are detailed later in this report. My assumptions show that Antares becomes profitable in 2018 and then begins to grow profits rapidly. I show taxes based on a tax rate of 25% although in reality, net operating loss carryforwards will likely offset taxes in the years beyond 2018.  This is shown in the next table.

Price Target Thinking

Let’s start the discussion on price target by looking at the following table that summarizes my key projections for Antares over the period 2017 through 2021.

Key Projections for Antares 2016-2021
$ millions 2017 2018 2019 2020 2021
Otrexup 15.1 18.8 22.6 27.1 31.2
QST 0.0 0.0 10.0 22.5 40.0
Proprietary product revenues 15.1 18.8 32.6 49.6 71.2
Partnered Products
Royalties 16.5 49.4 74.8 96.0 114.1
Injector Sales 0.5 11.2 19.8 25.7 28.8
Partnered product revenues 17.0 60.6 94.6 121.7 142.9
Total Antares revenues 32.1 79.4 127.2 171.3 214.1
Pretax income (16.1) (4.2) 7.2 23.3 39.8
Taxes 0.0 0.0 1.8 5.8 10.0
Net income (16.1) (4.2) 5.4 17.5 29.9
EPS ($0.16) ($0.03) $0.03 $0.11 $0.19
Shares outstanding 154.9 155.1 156.7 158.2 159.8


If I am correct, Antares will emerge into profitability in 2018. I do not think that the market will value ATRS on the basis of putting an estimated P/E ratio to earnings in the 2018 or 2019 time frame. This is because the specialty pharmaceutical components will still be incurring start-up expenses so that EPS will not be reflective of the value of the Company. This P/Evaluation methodology is a better measure for mature companies. Oftentimes, the market will value a Company in Antares’ situation on the basis of estimated revenues. I estimate that Antares in 2017 could sell at five to seven time’s projected 2018 revenues, but there is no science to this. This would result in a price target of $4.10 to $5.75 in 2017.  Using the same methodology, my price target for 2018 would be $5.50 to $7.60.

I would emphasize that all stocks are commodities, even those of the largest and most stable of companies. There are company specific metrics that figure into the stock price such as sales, EBITDA and EPS, but like all commodities, raw investor emotion plays an important or critical role in determining price. My experience suggests that when sales and earnings accelerate investors are drawn to a stock and the price may exceed that which an analysis based on sale or earnings might predict. This is the exciting aspect of Antares. If my projections prove reasonably accurate, there will be tremendous acceleration in revenues for both proprietary and partnered products. For the period 2016 to 2021, my estimates show that proprietary product revenues increase nearly five times and partnered revenues eight times. It has been my experience that when revenues begin to accelerate, investor enthusiasm follows in lock step.

Like all models, there are serious issues with my model and price target thinking on Antares. I am estimating sales potential for seven different products and the chances for being correct on all seven is like predicting every game correctly in the NCAA men’s championship tournament. History would suggest that there will be problems that could cause my estimates to be too optimistic or perhaps one or more of these products might not even come to market. The investor should understand that this analysis is aimed at determining trend and magnitude and the projections should not be engraved in stone.

There are two positives to the potential valuation that my model does not address. Very importantly, I do not take into consideration new products that could emerge in the pipeline. Given the rapid turnaround time for product development that could be five or more new products announced in the next few years that could positively affect investor attitudes. I also think that ATRS could be a prime acquisition target and Teva comes to mind.

A Review of the Business Model of Antares

I think it might be useful to review the business strategies that have allowed Antares to build an impressive pipeline of new products both for its own account and in partnership with other companies. This is based on using its proprietary, patented injection technology to improve the pharmaceutical properties of widely used injectable drugs that are or about to become generic. The path to US approval can be either an ANDA which is the generic rote or 505 (b) 2 which is a hybrid between an ANDA and an NDA. Europe has similar processes. In both cases, Antares and/ or its partners are dealing with well understood drug products. To gain approval, they generally must show that the drug being developed has bioequivalence and similar pharmaceutical properties to the innovator drug. It may only take three to five years from the time development is started until product approval is gained which is much quicker than the NDA process for new innovator drug. This is why Antares has such a burgeoning pipeline.

The downside of the strategy is that these products do not enjoy 20 years of patent protection afforded to new innovative drugs. In the case of the 505 (b) 2 pathway, there is normally only three years of patent protection. However, in the case of Antares, there is additional protection from patents on various aspects of the injectors, some of which extend into 2028. Other companies desiring to compete can develop a product through the same approval process and the product may essentially produce the same results. However, because there are differences in the injector devices, it makes it more difficult (possibly not possible to develop an AB rated generic that is substitutable to the Antares developed product. If the AB rating is not obtained, the competitive product must be promoted under a different brand name and the pharmacist cannot substitute. Investors well understand that generics can cause a quick meltdown in sales. However, in the process just described, the Antares developed product may suffer more limited loss of sales to competitive products.

Moreover, injectable drugs pose substantial barriers because of the rigorous quality control measures. In the case of bacterial or viral contamination, an injectable drug poses a much greater risk than an oral. The pathogen is injected into the blood and quickly spreads throughout the body. Needless to say the FDA requires stringent quality control over manufacturing. This makes it much more costly to build injectable manufacturing facilities.

In the case of generics, Antares and its partner Teva are only interested in developing AB rated generics that are substitutable. This means that if a pharmacist sees a prescription for an innovator product, they can substitute the Antares developed product for it unlike the situation described in the preceding paragraph. It is generally harder to develop an AB rated generic product than an oral so that the number of competitors is more limited and price erosion is less rapid. They also strive to gain first to file status that affords 180 days of exclusivity that give them a headstart in building the marketing infrastructure. No one situation is the same, but in general, sales literally explode in the first year or two as the product is substituted for the innovator drug. Then other generics enter the market and prices and sales begin to erode. However, this erosion historically has been measured as opposed to meltdowns in sales usually seen with oral drugs.


Key Assumptions on Partnered and Proprietary Products

Otrexup (methotrexate)

Sales of Otrexup in 2016 were $15.1 million, up 14% from 2015. As I previously noted, Otrexup has been a significant disappointment for investors. Nevertheless, I strongly believe that it has a major role to play in the treatment of rheumatoid arthritis by allowing patients to stay on methotrexate (the gold standard treatment) for a longer period of time and delaying the switch to biological agents like Humira, Enbrel and Remicade. This has therapeutic and cost advantages as Otrexup costs about $15,000 per year less than biologics.

I have been perplexed by the sales performance of Otrexup and can point to three reasons. First of all, rheumatologists are notoriously slow adopters of new products. Second, the private company Medac launched a similar injectable methotrexate product (Rasuvo) shortly after Otrexup and used an aggressive price discounting strategy to gain market share. Finally, payors get huge rebates on the biologicals so that perversely they are financially incentivized to emphasize biologic usage over the lower priced Otrexup.

Otrexup continues to make steady progress and I am looking for sales to increase to $19 million in 2018 and $23 million in 2019. The breakeven (for profits) sales level is somewhere in the $20 to 23 million range. I keep hoping for Otrexup to hit an inflection point and spike upwards as I feel very strongly to that it has a major role to play. At this time, I am not putting this into my projections. One potential benefit is that the Otrexup sales force could be used to market products acquired or developed internally to increase productivity and lead to profitability.

QST (testosterone)

Antares had originally guided to filing an NDA in 1Q, 2017 but was actually able to file in December 2016. The NDA was accepted as filed in February 2017 and the FDA has assigned an October 20, 2017 PDUFA date. Antares has begun negotiations with third party payors and pharmaceutical benefit managers; here the experience gained from Otrexup is very helpful. District managers will be brought on in the second half of 2017 and they will hire roughly 60 sales reps after QST is approved; many of these reps have already been identified. The QST sales force will be distinct from the Otrexup sales force but the managed care expertise gained with Otrexup will be used with QST.

Antares is pointing to a launch in late 2017 or early 2018. This sales force will focus on high prescribing urologists, endocrinologists and primary care physicians. I think that there is a good chance that they could bring in a co-promotion partner. As in the case of Otrexup, Antares will be looking to acquire other products that can be sold by QST sales forces.

The QST prescription will be a four pack of injectors that will allow for four weekly injections. There are about six million prescriptions per year written for testosterone of which roughly 60% are injectable and 40% are gel formulations. In the clinical trial program, 99.4% of the 1519 injections given were considered by patients to be painless. This indicates that QST can effectively compete against both gels and topical. I believe that QST will be priced equivalent to generic gels which is about $300 per prescription. However the realized price by Antares after taking into account rebates given to payors and PBMs may be more like $180. This indicates that the addressable market is about $1 billion.

Based on the pharmacokinetic profile shown in the registration trial, QST appears to have the best PK profile of any of the gel or injectable products. It appears to be best in class and also offers once a week dosing. Based on the product characteristics and the generic like pricing expected, there is a temptation to project a quick takeoff after launch, but I am not including this in my thinking. Managed care has erected barriers that allow it to control the launch phase even for breakthrough, innovative products. Hence, I am projecting a slow takeoff, but would not be very surprised if I prove to be conservative.

My expectation is that new patients when prescribed a testosterone product will start with a generic topical gel. However, patients tend to roll off of gels in about six months because of compliance issues or unacceptable pharmacokinetic performance. At that point, they would be eligible for a branded product like QST. I am projecting that QST will be launched on January 1, 2018 and will achieve first year sales of $10.0 million and 2019 sales of $22.5 million. Over time, I am thinking that it can be a meaningful player in the testosterone replacement marketplace. I note that at its expected manufacturers realized price (not list price) of $180 per prescription which total $2,160 per year that each 10% of market share translates into $100 million of sales.

AB Generic to Imitrex (sumatriptan)

A very significant milestone for Antares was the approval gained by its distribution partner Teva in 2Q, 2016 for an AB rated generic to Imitrex. This was the first of four AB rated generics that are known to be in development by Antares and Teva. There are likely to be more. It was also the second drug using an Antares injection device to be approved by the FDA. The first was human growth hormone which is marketed by Ferring as Zoma-Jet in the US. Because of poor economic terms negotiated long ago, this is not a meaningful product for Antares.

Teva introduced the AB rated generic sumatriptan commercially early in the third quarter of 2016. Teva was successful in gaining most of the business of Walgreen’s, the largest US pharmacy chain as well as some other smaller chains. This was a major factor in allowing it to gain 22% of the market which was better than my expectation of 15%. There is an opportunity to increase this market share by making a major inroad with CVS, the second largest chain. Management indicates that this could occur in the latter half of 2017.

The overall market has been about $200 million so that a 22% market share would lead to $44 million of sales. However, I suspect that Teva has done some price cutting to obtain this market share and I am guessing that the run rate of revenues is closer to $37 million. There are no selling costs and only minimal distribution costs so that the only major cost is that of the device which I estimate as about 30% of sales. Hence the pretax profit on $37 million of sales is about $26 million which is split evenly between Teva and Antares. In addition, Antares supplies injectors for the product at cost which are counted as revenues. I think this is a modest amount.

For 2016, Antares reported $9.1 million of revenues for this product. For 2017, I am assuming a fairly stable market share until 4Q, 2017 when I assume CVS comes on line. This leads to quarterly sales projections of $3.0 million or so for the first three quarters of 2017 and $5 million in 4Q, 2017. My full year estimate for 2017for Antares is $17 million. In 2018, I would project about $22 million of revenues.

AB Rated Generic to EpiPen (Epineprine)

Teva received a complete response letter from FDA in February of 2016 and Antares has been working with them to formulate responses.  Teva has now submitted their responses and is working with the FDA toward a potential approval. Teva's guidance is that they will be able to launch an AB rated version of EpiPen in late 2017 or early 2018.

Mylan disclosed in its 2016 10-K that sales of EpiPen in the US were about $1.0 billion in both 2015 and 2016. However, it is common practice in the US industry to give significant rebates to managed care. Mylan hasn’t disclosed the extent of these rebates, but I have seen estimates that they could account for 40% so that actual manufacturers’ realized revenues were probably closer to $600 million. The brouhaha over Mylan aggressively raising prices caused a lot of public relations embarrassment for Mylan, but it didn’t cause a decline in sales

In December 2016. Mylan announced that it was introducing an authorized generic to Epi-Pen at half the listed price of brand name EpiPen which is over $600 for two injectors packaged together. However, realized revenues per twin pack for Mylan are more like $275. I understand that the authorized generic is shipped direct to accounts and the realized price is around $300. If this information is correct, the market that Teva’s AB rated product is addressing is still $600 million inclusive of Mylan’s authorized generic.

I am assuming that the AB rated generic to EpiPen will be launched in early 2018 and that EpiPen sales in 2017 will be $600 million as in 2016. I assume that Teva will launch at a 35% discount and will capture 40% of EpiPen units sold. This would amount to $156 million of peak sales for Teva. I assume royalties to Antares of 8% of sales and injector revenues of 4% of sales. This would amount to $12 million of royalties and $6 million of injector sales. This level of sales and royalties in not likely to be reached until mid-2018 as it will take time for Teva to build its sales network; also Antares lags reporting of its results by one quarter.

AB Rated Generic to Byetta (exenatide)

Teva announced early last year a settlement of their patent litigation with AstraZeneca relating to Byetta, an injectable product for type 2 diabetes. As a result of this settlement Teva will be able to commercialize a generic version of Byetta in the U.S. beginning October 15, 2017 assuming FDA approval. The ANDA is under active review at the FDA and Teva could potentially launch the product in late 2017 or early 2018.

US sales of Byetta were $164 million in 2016, which were down 22% from 2015. Astra Zeneca is trying to switch Byetta (exenatide) sales to Bydureon (exenatide) which requires an injection once per week as opposed to twice per day for Byetta. In 2016, US sales of Bydureon were $463 million, down 4% from 2015. The relatively small and declining sales base of Byetta presents a limited opportunity as the AB rated generic will be substitutable for Byetta but not Bydureon. However, some managed care plans may require that patients prescribed Bydureon must first be given generic Byetta. This could significantly increase the potential of the Teva/ Antares AB rated Byetta.

I am assuming that the AB rated generic to Byetta will be launched in the US in early 2018. At that time, I would project that sales of Byetta will approximate $125 million. In line with historical situations, I think that the AB rated product could capture 40% of the unit market at a 30% price discount to Byetta’s price. This would result in Teva sales of $35 million. Teva is believed to have first to file status that would give it generic exclusivity for 180 days.

In line with rough guidance of Antares, I assume that Antares will receive royalties of 9% or more of sales and injector revenues that are 2% of product sales. This would result in royalties of $3 million and injector sales of $0.8 million on an annual basis once Teva’s distribution is fully in place which may not be until mid-year of 2018. Hence 2018 revenues could be less than $3.2 million of royalties and $0.8 million of injector sales, but rise to this level in 2019. Also, Antares’ accounting approach lags reporting its result by one quarter behind sales actually realized by Teva.

AB Rated Generic to Forteo (teriparatide)

The fourth product in the Teva collaboration is Forteo (teriparatide). Teva submitted an ANDA for Eli Lilly’s Forteo (teriparatide) and Eli Lilly then filed a paragraph IV certification on March 16, 2016. This triggered the 30 month stay under Waxman Hatch before AB Forteo can be approved. However, there remain other patents that last until August 2019. There is a device patent that lasts until 2015, but Lilly has not elected to sue for patent infringement on that patent. Historical experience would suggest that a settlement could be reached that would allow Teva to potentially market the AB generic in 1H, 2019. However, I am estimating that it will come to market in 2020. Teva believes that it has first to file status and that there may be no other current filings.

Unlike the other AB rated generics, Antares is pointing to the potential approval of AB teriparatide in Europe as having significant potential as this is a global (not just US) deal. Marketing authorizations are being gained on a country by country basis in Europe. Antares believes that the majority of the countries that have been filed in could be approved by mid-2017. In 2016, Forteo’s worldwide sales were $1.5 billion (up 11%), US sales were $771 million (up 26%) and foreign sales were $729 million (down 1%). I would guess that European sales were about $550 million. Obviously, this is a huge opportunity for Antares.

It is possible that Teva could realize sales in the US and Europe in 2019. However, because of the uncertainties on the patent situation, I am assuming that in both geographic areas the launches will occur in early 2020. I am assuming that US sales of Forteo will approximate $933 million in 2019 and that the AB rated version will be priced at a 25% discount and will capture 40% of the unit market. This would result in US sales of $280 million. I assume that Antares will receive a royalty of 9% of sales which would be $25 million and injector of sales of 2% of sales or $6 million. Again, there will be a lag of one quarter for Antares reporting.

I am assuming that the European situation will be similar to the US, but I don’t have the historical experience that indicates this is a reasonable expectation. Nevertheless, I assume that Teva’s European sales will be $165 million in 2019. This would result in peak Antares royalties of $15 million and injector sales of $3 million.

Partnering with AMAG Pharmaceuticals on Makena SC (progesterone)

Makena is an injectable progesterone product that is indicated for the prevention of pre-term birth for women who in an earlier pregnancy delivered prematurely. It is given as a deep intramuscular injection that can be quite painful. Antares is collaborating with AMAG to develop a subcutaneous dosage based on the same device used with QST. This device was specifically engineered to deliver highly viscous solutions like testosterone and progesterone using a fine gauge needle.

AMAG’s objective is to switch all patients from a weekly intramuscular injection to a subcutaneous injection. The Orphan drug exclusivity on the intramuscular dosed product expires in February 2018 and it is possible that a generic might be approved not long after. However, I think it is likely to be later than this. Makena SC will be protected by Antares patents on the injector that could be quite effective in fending off generic competition. This is a complex situation and I would refer you to my initiation report on AMAG on June 16, 2016 for more details on my thinking.

AMAG initiated a definitive PK study in the fourth quarter of last year and reported positive top line results in the first quarter 2017. It expects to file a sNDA in the second quarter of this year and anticipates a six months review. This could result in approval in 4Q, 2017 and a launch in late 2017 or early 2018.

In general terms, the deal with AMAG is quite similar to the Teva transactions. Antares has disclosed that it will get a high single digit to low double digit royalty (I assume 10%) on sales of the .In addition, Antares is making the device and will package the product to provide a fully commercial product. This will be done at cost plus a markup which I estimate will amount to 3% of Makena sales.

I think that the simpler administration involved with Makena SC will reduce costs and time involved in administering the drug and that it will be priced at the same level as the intramuscular Makena. Hence, there will be an economic incentive for physicians to use the product. From the patient’s standpoint, the considerably less pain associated with the subcutaneous dosage is also a strong incentive. As long as there is no generic available, payors will also be indifferent. The question is when a generic to the intramuscular will be available and how hard will managed care push physicians to use a generic. My guess is that because this is a small market in terms of sales that managed care will not push hard to make pregnant women go through the greater pain associated with the intramuscular injection. My sales projections for 2018 assume no generic competition and a fairly rapid conversion of physicians to Makena SC. There is more than a little guesswork in my 2018 sales assumption for Makena SC of $175 million and $350 million in 2019.

Building a Royalty and Sales Model for Partnered Products

I am including the spreadsheet that I used to build my sales model for the partnered products. I know that at first glance it appears confusing so let me explain what each of the segments are.

  • The first part called branded sales represents sales of the branded products that Teva and Antares are targeting for AB generic competition before the entry of the AB products. Obviously, the entry of the AB generic will drive the sales down sharply.
  • The second part is called Teva peak sales. This is my projection of the sales that Teva will realize based on my estimate of the price discount to the branded product that they will offer and the unit market share they will obtain. I assume that peak sales occur in the second year following the introduction of the AB generic and then flatten or decline after that; this is typical for a generic.
  • I then calculate the potential royalties that Antares will achieve by multiplying Teva sales by my estimate of the royalty Antares will receive. The royalty in each case is in the high single digit to low single digit range (8% to 10%) in accordance with Antares guidance.
  • The next calculation is for injector sales of Antares. These generally are in the 2% to 4% range.
  • Finally, I sum up the royalties paid and because there are no expenses associated with these revenues, they are the same as pretax profits. In the case of injector sales I assume that cost of goods sold is 50% and there are no other costs. Hence pretax profits of injector sales are 50% of sales.

Let me walk you through the calculation for sales of AB EpiPen to illustrate this.

  • I am assuming that this AB generic is launched in early 2018. In 2017, the sales of branded EpiPen are estimated to be $600 million.
  • Based on assumptions laid out earlier, I assume that Teva will discount the price by 35% and capture 40% of the unit market. This would lead to peak sales for the AB generic of $156 million. Because, it will take Teva some time to establish distribution, I assume that peak sales occur in 2019, the year following the introduction of the product.
  • I am estimating a royalty rate to Antares of 8% and that injection sales are 4% of revenues.

The calculation for Makena SC is a little different as this is a branded drug, not an AB generic. I estimate the royalty rate is 10% and that injector (includes packaging) revenues are 3% of Makena SC sales. The following table summarizes my projections.

Partnered Product Profit Contributions
2017 2018 2019 2020 2021
Branded Peak Sales
EpiPen 600
Byetta 125
Makena IM 410 276 124 75 25
Makena SC 175 350 375 375
Forteo US 771 858 993
Forteo Europe 550 563 584
Teva Peak Sales
EpiPen 156 156 150
Byetta 35 27 22
Forteo US 280
Forteo Europe 165
Imitrex 16.5 21.2 21.0 20.0 19.0
EpiPen 7.5 12.5 12.5 12.0
Byetta (exenatide) 1.5 2.8 2.2 1.8
Forteo US 13.0 25.2
Forteo Europe 7.0 14.9
Makena SC 19.3 38.5 41.3 41.3
Sub-total 16.5 49.4 74.8 96.0 114.1
Injector Sales
Imitrex 0.5 0.8 0.8 0.7 0.6
EpiPen 4.7 7.8 7.8 7.5
Byetta (exenatide) 0.4 0.7 0.6 0.6
Forteo US 3.4 5.6
Forteo Europe 2.0 3.3
Makena SC 5.3 10.5 11.3 11.3
Sub-total 0.5 11.2 19.8 25.7 28.8
Pretax income
Royalties 16.5 49.4 74.8 96.0 114.1
Injector sales 0.3 5.6 9.9 12.9 14.4
Total 16.8 55.0 84.7 108.9 128.5


Specialty Pharmaceutical Business Based on Wholly Owned Products

Antares essentially has two business models. The first is the partnered products which the previous section went into in detail. The projection for the pretax income stream suggests very impressive growth. At the same time it is building a specialty pharmaceutical business that is currently built around Otrexup and will be expanding to include QST. Each has a separate and distinct sales force. The Otrexup sales force will target rheumatologists and the QST sales force will target high prescribing primary care physicians. The specialty pharmaceutical part of the business is in the startup stage and is creating significant losses that offset the profitable partnered products business.

To bring into focus the specialty pharmaceutical business, I have prepared the following chart. It shows the projected sales for Otrexup and QST and my estimates of gross margins that results in estimated gross profits. I then attribute all S, G & A to this business segment and this give me an estimate of the profit contribution to Antares before any allocation for corporate R&D.

Sales and Gross Profit Projections of Wholly Owned Antares Products
$ millions 2016 2017 2018 2019 2021
Otrexup 15.1 18.8 22.6 27.1 31.2
QST 10.0 22.5 40.0
 Total 15.1 18.8 32.6 49.6 71.2
Gross Profits
Otrexup 9.8 13.2 16.4 20.3 23.4
QST 6.0 15.8 30.0
 Total 9.8 13.2 22.4 36.1 53.4
Gross Profit Margin
Otrexup 65.0% 70.0% 72.5% 75.0% 75.0%
QST 60.0% 70.0% 75.0%
S,G & A 26.4 28.5 35.0 38.5 42.4
Profits before R&D (16.6) (15.3) (12.6) (2.4) 11.0


As in all models, there are some drawbacks. Most importantly, it does not include projections for new products which could come into focus in 2018 or later and have an effect on sales and cost projections. Also some part of S, G & A is attributable to partnered activities as well as specialty pharmaceuticals. Nevertheless, this gives a view into the dynamics of this business segment.

Projected Income Statement for Antares

Having broken out the two business segments, the next step I have taken is to project profits and EPS for Antares as a whole. To do this, I add the pretax profits of the partnered business and the profits of the specialty pharmaceutical business to get operating profits before R&D and taxes, which I then estimate. This allows me to build the following sales and profits model for Antares as a whole.

Antares 2016-2017 Income Statement Projections
2016 2017 2018 2019 2021
Partnered Products
Royalties 16.5 49.4 74.8 96.0 114.1
Injectors 0.5 11.2 19.8 25.7 28.8
Wholly Owned Products
Profits before R&D (16.6) (15.3) (12.6) (2.4) 11.0
R & D 21.1 21.0 23.1 25.4 28.0
Pretax income (16.1) (4.2) 7.2 23.3 39.8
Taxes 1.8 5.8 10.0
Net Income (16.1) (4.2) 5.4 17.5 29.9
EPS ($0.16) ($0.03) $0.03 $0.11 $0.19
Shares Outstanding 154.9 155.1 156.7 158.2 159.8






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  1. Hi Larry,

    I cannot see any PR/News/announcement for the EpiPen CRL NDA approval for review from the FDA. Would you have that date, or is it simply not accepted for review yet?

    The Adamis EpiPen suffered a similar CRL, but they were accepted for review back in January:

    “SAN DIEGO, Jan. 19, 2017 (GLOBE NEWSWIRE) — Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) (“Company” or “Adamis”) today announced that the U.S. Food and Drug Administration (“FDA”) has accepted for review the Company’s New Drug Application (“NDA”) for its Epinephrine Pre-filled Syringe (“PFS”) product candidate for the emergency treatment of anaphylaxis. Filed on December 15, 2016, the resubmission was intended to address the issues raised by the FDA in the agency’s June 2016 Complete Response Letter (“CRL”). The FDA indicated that it considered the resubmission to be a complete response to the CRL.”

    Which may place ADMS ahead of ATRS for the EpiPen. IF TEVA thinks it may commercialize ATRS’s EpiPen late 2017, early 2018, the FDA acceptance would have to be at least in pretty soon if not already.

    If ADMS gets approved before ATRS, how does that change your projections?

    Many thanks Larry!
    Kind regards

  2. The Adamis product is not AB rated as is the Teva product. The AB rating is extremely important because it means that when the pharmacist is given a prescription for Mylan’s EpiPen, at their own discretion they can fill the prescription with the Teva product. This is not the case with Adamis which has to generate a prescription for its product in order for the pharmacist to fill it. Also, the product has to go through all the perils of gaining reimbursement. Having another competitor in the market is obviously never a positive, but it doesn’t really change my view of the sales potential for Teva’s AB generic to EpiPen in a meaningful way.

  3. Larry, in the recent 10K the company stated:

    “At December 31, 2016, we had cash and cash equivalents of $27,714,588 and no debt obligations. We believe the combination of our current cash and projected product sales, product development fees, license revenues, milestone payments and royalties should provide us with sufficient funds to meet our obligations and support operations through at least the first quarter of 2018.”

    Additionally, (and I can’t find the actual text, so this is from memory) the company stated that its cash burn in the coming quarters will continue at the present level as increasing revenue is offset by increased spending in preparation for the QST launch sometime after October 20, 2017.

    All this makes me think that Antares will raise more money before the QST PDUFA. Based on your projected share count it seems you think they won’t do another raise. Why do you think this?



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