Expert Financial Analysis and Reporting

Introduction and Overview

I have obtained access to weekly prescription trends for Xyosted which I will publish periodically. Marketing began on December 14, 2018 and the data in this report runs through the week ending May 3, 2019. This audit data reports prescriptions as follows:

• NRx- the number of new prescriptions filled
• RRx-refilled prescriptions
• TRx- the sum of NRx and RRx is total prescriptions filled

The wholesale acquisition cost (WAC) of Xyosted is $475 for a prescription that has four injectors or a month’s supply. Managed care plans will demand rebates so that I estimate that the realized price to Antares will likely be in the $375 range although management has not issued guidance. This is roughly in line with the price of many injectable generics. However, it is important to understand that the first prescription or each NRx is being given away free so that Antares is only realizing revenues on RRx.

I have put together the table shown below as a format that investors can use to track the launch. This table has the following data:

• Weekly numbers for NRx, RRX and TRx,
• Week over prior week sequential increases in NRx, RRx and TRx,
• Estimated sales for NRx, RRX and TRx based on multiplying each by $375. This is incorrect because as I noted above, each NRx is being given away so only RRx are priced at this level. Still, I think it provides some insight into potential sales,
• I have calculated an annualized sales rate that = TRx X $375 x 52. Because the NRxs are being given away currently, this is incorrect. However, I think it does give some insight into the progress of the launch.
• I have similarly calculated an annualized sales run rate only for refills. In the immediate future, reported sales will be largely dictated by RRx.

Discussion

It will take some time to really gage the curve of the launch so I am hesitant to draw strong conclusions. That said, here are my early thoughts.

• There seems to be strong and consistent momentum to the launch. Do not put too much credence into data for any one week. These are only estimates and past experience teaches that prescription audit trends can be erratic from one week to the next. For example NRx for the week ended 4/19/2019 were down 16% only to be followed by 26% and 10% increases in the next two weeks.
• New product launches are generally slow and disappointing as companies have to negotiate for reimbursement, a slow and difficult process. Generally, the sales curve becomes stronger in the second and third year as these issues are put behind. From my viewpoint, the Xyosted launch is exceeding my expectations.
• Antares is not a well-known company and has a modest sized sales force as it has hired 60 new reps to focus on Xyosted and will also have 30 reps who are currently promoting Otrexup also detailing it. A larger, more well-known company might have several hundred or more reps detailing.
• The estimate for annualized sales number for the week ending May 3, 2019 of $15.6 million is pretty impressive. I want to emphasize that the weekly sales numbers are not reflective of what Antares is actually realizing. Remember that the NRxs are being given away for free. My annualized sales number includes both NRx and RRx so it significantly overstates revenues actually being received.
• There is uncertainty as to what the effect might be on new prescriptions if the Company eventually stops the practice of making the first prescription free. Solely on the basis of refills, the annualized run rate is $6.4 million, but I am not quite sure what this means other than being a proxy for reported sales.
• I think that 1Q, 2019 sales of Xyosted will be de minimis. The audit data indicates that there were about 3,155 NRx and 739 RRx. The actual sales for the NRx will be zero and the estimated sales for RRx could be around $277,000.

Price Target

There is reasonably broad consensus that Xyosted could reach peak sales of perhaps $200 million in a five to seven year period and I think this is a realistic expectation. The early launch data certainly doesn’t dissuade this view. I think that these peak sales might be capitalized at around five time revenues or more which would suggest that by itself Xyosted could account for a market capitalization of $1 billion or around $6.00 per share. Very importantly, Otrexup, the Makena subcu formulation and the AB rated generics to EpiPen and Forteo could add quite meaningfully to the stock price. And finally, the highly productive research program could turn out several other new products in this time frame, some of which could be commercialized. I obviously continue with my Buy recommendation.