Follow Us GraphicFacebook IconTwitter IconLinkedIn Icon
Search Graphic

Expert Financial Analysis and Reporting

Collaboration with Teva on Self-Injected Drugs Is the Major Driver of the Investment Thesis (AIS, $2.68)

Investment Thesis

In my initial report on Antares, I recommended purchase based importantly on the potential for its self-injection technology. One of the mega-trends in the world pharmaceutical industry is the increasing importance of injectable drugs. Antares cites projections that injectable drugs (largely biologic agents) will account for 50% of the top selling drugs in the US by 2014. There will be significant opportunities to develop both generic and biosimilar versions of many of these products. Antares is well positioned to benefit from this trend.


Antares is a small company with limited financial and commercial resources. It entered into a transforming business relationship with Teva Pharmaceuticals (TEVA) in 2008 to build a strong pipeline of drugs. These use Antares’ self-injection technologies and the regulatory and commercial skills and financial power that have made Teva the leading generic company in the world and also a strong competitor in the proprietary drug arena.


This report describes the three basic types of self-injection devices that Antares has developed. It also analyzes the collaboration on TevTropin, the human growth hormone product, to give some insight into how the companies work together. Antares has a broad and growing pipeline of self-injection products which is impressive for a company of its market capitalization. In this report, I focus on the first drug in the Teva collaboration, TevTropin. I intend to discuss four others that are also in development in an upcoming report and to also consider possible product candidates beyond these four.


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.

Disclosure: The author of this article owned shares of Antares at the time this note was written. 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.


Tagged as + Categorized as Company Reports


You must be logged in, or you must subscribe to post a comment.