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Expert Financial Analysis and Reporting

Comments on Antares, Kite Pharma and Northwest Biotherapeutics

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About the Mailbox:

My mailbox comments are brief articles on stocks in which I am involved. These can come from recent events or from subscribers’ questions. They are meant to address specific issues about these stocks and are not full and balanced reports. Please refer to the Reports section of my website for more complete analyses.

Antares Presentation at Deutsche Bank Conference (ATRS, $2.14, Buy)


Antares presented at the Deutsche Bank Conference on May 6. This note summarizes my key takeaways from the presentation. The style of the note assumes that the reader is familiar with the Company. If you lack familiarity, you can refer to prior notes on Antares archived on my website. The Company was upbeat in its comments on the potential for significant growth in Otrexup sales in 2015 and the approval of the AB rated generic to EpiPen in 2H, 2015. The Company is definitely signaling that the approval of the AB rated generic is going to be later this year than investors were expecting, but are confident in it being approved. QST looks to be on track for a commercial launch in early to mid-2017 and the pipeline is strong.

The delay in the AB rated generic to EpiPen probably was the reason for the abrupt equity financing which I will discuss shortly. My positive fundamental view of the Company is unchanged, but this is the year when we will see if my optimism is warranted.


The plateauing of prescriptions that began in October, 2014 was attributed to the entry of Medac’s Rasuvo into the market and the decision to end the arrangement with Quintiles to manage the Otrexup sales force and bring it under Antares’ direct control. The uncertainty as to which salesmen would be retained created disruption, but this appears to have ended.

Total prescriptions written for Otrexup were 2,140 in January and were flat to down in February and were up 7% in March. The national sales meeting was held in March and may have affected prescriptions written in each of those months. Presumably, the increase in March stemmed from impetus from the sales meeting. Management said that prescription growth in April was “very strong” although no numbers were provided.

Rheumatoid arthritis is a slowly progressing disease that is treated over a long period of time. Physicians do not make abrupt treatment changes and patients revisit doctors at several month intervals. This makes for a slow uptake for newly launched RA products, Otrexup included.

The biggest hurdle for the Otrexup launch has been managed care. Management talked about the “Catch 22” of dealing with managed care. A company needs volume to gain reimbursement coverage but can’t gain volume without coverage.

They are in tier 3 in most formularies. They are trying to get away from prior authorizations and step edits.

One of the major factors for the slow Otrexup uptake has been the requirement by many payors for prior authorization before physicians can prescribe Otrexup. This takes up a great deal of time for the physician’s office staff. As contracts are signed with managed care, this obviates the need for prior authorization. In cases in which there is no contract with managed care, Antares now has a service that will do all of the work if prior authorization is required making this effortless for the physician,

Antares buys down the co-pay for Otrexup so that the patient’s out of pocket expense is the same as for generic methotrexate, probably $10 to $15.

The list price of Otrexup is $548 for a monthly prescription of four injectors. The effective net price is about $470 after discounts, trade allowances, etc.

Medac has 28 reps selling Rasuvo and Antares has 32. The average Antares rep targets about 100 physicians. I was surprised to hear that there are only about 75 reps selling AbbVie’s Humira and Amgen’s Enbrel which have sales of over $1 billion in the US rheumatoid arthritis market. This validates that a small sales force can effectively cover the US market,

Antares believes that its device is better than Medac’s because it was specifically designed to make it easy for rheumatoid arthritis patients with impaired hands to self-inject. They also feel that there is less pain upon injection.

AB Rated Generic to EpiPen

Antares is now saying that the AB rated generic to EpiPen will be approved in 2H, 2015. I had been looking for approval in mid-2015 and for marketing to begin in 3Q, 2015 and Antares had not dissuaded this assumption.

Antares is highly confident that the product will be approved. Also, both Teva and Mylan have included the probability for approval in 2H, 2015 in their risk adjusted sales and profit guidance for 2015. No reason for the slower than expected approval was given, but I suspect it is just the speed with which the FDA moves.

Teva continues to order injectors in preparation for the launch later this year.

The EpiPen market is about $1.8 billion in the US according to Antares. I have been using an estimate of $1.2 billion, but I suspect that Mylan has aggressively raised the price of EpiPen before approval of the AB rated generic. This increases the opportunity for Teva/ Antares by 50%.

The key question is what the price discount for the AB rated product will be and what percentage of the market it will get. I am assuming a 40% price discount and 40% market share which leads to Teva sales of $430 million. I view the price discount assumption as conservative; it could be less.

Antares has given guidance that through sales of the auto-injector to Teva and royalties that it will achieve sales equivalent to roughly 10% to 12% of Teva’s sales or roughly $47 million if Teva’s sales reach $430 million. Antares has not given guidance, but I estimate that 60% of these revenues or roughly $28 million will be due to product sales and 40% or $19 million will come from royalties. Assuming a gross margin of 50% on product sales, this would result in a gross profit of $14 million. The combination of $14 million of gross profits and $19 million of royalties would produce $33 million of annualized pretax profits for Antares. Because of prior losses, current earnings are untaxed so that $25 million amounts to $0.21 per share per year based on 153.5 million fully diluted shares.


Antares expects approval in 2015 of an ANDA for an injectable sumatriptan. This product is the first generic that Antares developed on its own. The product will be distributed by Teva and profits will be split 50/50.

The generic injectable sumatriptan market is about $70 to $100 million with two major players. Antares believes that Teva’s strong relationship with payors and distribution will allow this product to capture a meaningful share of the market.

This is not a big opportunity. Let’s say that the Antares product gets $10 to $20 million of sales. There is no sales expense, the gross margin is about 50% and Teva gets half of profits. Hence at this sales level, Antares would get $2.5 to $5.0 million of pretax profits per year.


The FDA notified Antares in January that the agency would require more patients (Antares says 70) for safety purposes. The protocol for doing this has been submitted and the Company is waiting for FDA approval. Once the approval is gained, it will take about nine months to complete the trial. Let’s say that approval of the protocol is gained on July 1, 2015. The study could be completed April 1, 2016 and submitted in perhaps May of 2016. The FDA would probably take a year to approve the application so this points to an introduction in mid-2017.

Antares: Analysis of Recent Public Offering (ATRS, $2.14, Buy

Terms of Offering

Antares has just completed an equity offering in which they issued 20 million shares at a price of $2.00. In addition, the underwriters have the Green shoe option to sell an additional 3 million shares at this price during the next 30 days. This will net the Company about $43 million if the Green shoe is exercised as seems highly likely.

The New Share Count

Antares reported fully diluted shares of 130.5 million at the end of 2014. This included 4.9 million options that are exercisable, but not an additional 3.0 million that are non-exercisable. There are no warrants outstanding. With the addition of the 23 million shares (I assume the Green Shoe will be exercised), the fully diluted share count increases from 130.5 million to 153.5 million.

Effect on Cash Balances

Antares ended 2014 with $40 million of cash. This brings the pro forma cash position at year end 2014 to $83 million. I have updated my model to allow for the launch of AB rated generic to EpiPen on October 1, 2015 (it could be earlier) as opposed to an earlier assumption of July. I am projecting the following cash outflows by quarter in 2015: 1Q ($7.1 million), 2Q ($6.3 million), 3Q ($5.7 million) and 4Q ($4.7 million). With this equity offering the Company could end the year with $59 million of cash. Without the equity offering, the year end cash balance projection would be $17 million. I project positive cash flow beginning in 1Q, 2016.

Reaction to the Deal

I am shocked at the $2.00 offering price given the assets and potential of the Company. This reflects unlucky timing on the part of the Company and what appears to be very poor execution by the underwriters. As recently as April 13, the stock traded at $2.96. This is a very unfortunate deal, but what is done is done. Let’s look at the implications for shareholders.

The Company now is in a very strong cash position. Without the offering, the projected cash balance of $17 million at yearend 2015 would have left the Company perilously exposed to setbacks which we know are not infrequent with emerging biotechnology stocks. As for the impact to shareholders, let me direct you to my price target thinking in my April 23 report. Antares: Teva Offer to Buy Mylan Should Have No Effect on Launch of AB Rated Generic to EpiPen (ATRS, $2.76, Buy)

Price Target Thinking

I compared Antares in that report to what I felt might be a comparable company, Avanir. The latter recently was acquired at a multiple of 20 times sales. I suggested that Antares might be valued at 7 to 10 times 2016 sales which I estimate at $105 million. This was revised up from $93 million due to an increase in expecations for sales of the AB rated generic to EpiPen. This would produce a market capitalization of $700 million to $1 billion. I had assumed that Antares would issue more shares in 2015 and 2016 so that the share count would rise to 150 million shares. With this offering the current share count is 153.5 million, not much different. Using 153.5 million shares, my target price range for 2016 is about $4.50 to $6.50 which is essentially the same as my previous price target.

Investment Opinion

As shocking as the share price on the equity offering was, it doesn’t change the investment scenario or price potential in my opinion if the assumptions and projections presented in my April 23 report come to pass.

Kite Pharmaceuticals: Plans for Pivotal Phase 1/2 Trial (KITE, No investment rating, $55.95)


I am extremely interested in the CAR-T companies Kite and Juno (JUNO). I am cautious on the stocks at the current valuations, but very interested in the technology and I am closely following the clinical progress of Kite and Juno. During recent presentations, Kite has laid out its clinical trial plans for its lead product KTE-C19.

The design of the phase 1/2 trial which is planned to be the basis for filing a BLA in 2H, 2016 is also interesting from another standpoint. It could give some indication on the strategy that Northwest Biotherapeutics might use for its soon to start two or more phase 2 trials in inoperable tumors. Using the Kite strategy, Northwest might be able to file for regulatory approval in 2016 or 2017 assuming, of course, that the trial data is supportive.

Acronyms Used in This Report

DLBCL: Diffuse large B cell lymphoma, an aggressive form of non-Hodgkin’s lymphoma.

PMBCL: Primary mediastinal B cell lymphoma, an aggressive form of non-Hodgkin’s lymphoma.

TFL: transformed follicular lymphoma, an aggressive form of non-Hodgkin’s lymphoma.

MCL: Mantle cell lymphoma, an aggressive form of non-Hodgkin’s lymphoma.

CLL: Chronic lymphocytic leukemia

ALL: Acute lymphocytic leukemia

ORR: Objective response rate. A complete response (CR) is when the tumor is not observable or shrinks to scar tissue after therapy. A partial response is when the tumor shrinks 50% of more. ORR is the sum of PRs plus CRs.

mOS: Median overall survival is the time at which half of the patients are alive and the other half have died.

Kite’s Corporate Strategy

In the roadshow presentation for its initial public offering in 2014, management laid out its key corporate objectives. These are shown below along with what Kite has achieved when measured against these promises.

  1. Work with NCI to determine the dosing and dosing regimen for a trial of its lead product, KTE-C19 in DCBCL. This has been completed and the technology has been transferred to Kite.
  2. Establish manufacturing facilities outside of NCI to supply clinical trials. Initial clinical supplies will be supplied by the PST subsidiary of Neostem that can supply about 300 patients. In addition, Kite is building a commercial facility that can supply 5000 patients.
  3. File an IND for KTE-C19. The IND was approved by the FDA.
  4. Initiate a potentially pivotal trial of KTE-C19 in 1H, 2015. This is about to start.
  5. Generate data in 2016 from this trial that could be the basis for approval, and
  6. Receive FDA approval in 2017

Phase 1/2 Trial

Kite has begun the IRB approval process for the phase 1/2 trial at City of Hope, Moffitt, Washington University and M.D. Anderson. The trial will start in 2Q, 2015 with a phase 1 that has two purposes. First, it has to show that the cells produced by Kite’s contract manufacturer PST, are comparable to those manufactured at NCI and that the clinical results are comparable to those seen at NCI. It also needs to show that there are 2 or less grade 3 adverse events of the 6 patients to order to proceed to phase 2.

The phase 2 portion is intended to be a pivotal trial that will be the basis for approval for KTE-C19. The enrollment is expected to take place at about 25 sites. Cohort 1 will enroll 72 patients diagnosed with DLBCL and cohort 2 will enroll 40 patients with PMBCL and TFL. The primary endpoint of the trial is objective response rate (ORR). The first 50 patients of the DCBCL cohort are expected to provide the basis for a regulatory filing in 2H, 2016.

There will be no control group for this study. Kite will rely on historical data that suggests that in this relapsed/ refractory population that the ORR would be less than 20% and median overall survival would be in the range of 4 to 5 months.  Kite believes that an ORR of 40% or more and median overall survival of 6 months or more would be approvable. Kite expects to file for a BLA by yearend 2016. As a result, approval for KTE-C19 in DLBCL could come in 2017.

Other Trials

Kite also expects to begin pivotal trials of KTE-C19 in MCL, ALL, and CLL during 2015.

Northwest Biotherapeutics: Implications of Kite’s Strategy for KTE-C19 Development on the Potential Development Strategy for DCVax Direct (NWBO, $7.88, Buy)

Takeaways from Kite

Kite is dealing with relapsed/ refractory hematological tumors and Northwest is dealing with inoperable solid tumors. While the types of tumors are quite different, the commonality is that patients have exhausted all (almost all) treatment options. My presumption is that Kite has had feedback from the FDA that supports their strategy and this provides a possible insight into NWBO’s strategy.

Northwest’s Clinical Trial Plans for DCVax Direct

The Company has only said that it will start two phase 2 trials of DCVax Direct in two different tumor types in 1H, 2015. They haven’t disclosed what the tumor types will be, but I would judge that sarcoma will be one. The other will likely be pancreatic or colorectal. It was mentioned that these trials could conclude at about the same time as the DCVax-L trial in newly diagnosed glioblastoma which I take to be 1Q or 2Q, 2016.

There has been no detailed information on the design of the trials. I had earlier speculated that the trials might have a control arm, but I am rethinking that based on what Kite is doing. To review, the Kite strategy is as follows:

  • File for a BLA on the basis of 50 DLBCL patients,
  • Results will be judged against historical controls, not a control arm,
  • The trials could be started in 2Q, 2015 and we could see topline results in 2H, 2016,
  • If the data is supportive, BLAs could be filed in 2016 or 2017.

Some of these issues are applicable to DCVax Direct and others aren’t. The biggest difference is that the effect on the tumor burden in some hematological cancers are much easier to measure than in solid tumors. A drug’s efficacy against hematological cancers like multiple myeloma and ALL can be tracked by using biomarkers and measurements of circulating tumor cells. Efficacy against solid tumors is more difficult and relies on imaging scans over a period of time. DLBCL which is the target for Kite’s lead product is somewhere in beteen as the tumors can be bulky like a solid tumor.

I think that we can on a preliminary basis think that the phase 2 trials for DCVax Direct will involve a small number of patients, perhaps 50 to 75. There will likely be no control arm, Given the lack of effective therapy, enrollment should be quick. It might take longer to complete the trial as imaging over a long period of time that would show the progression status of the cancer would be required. However, the bottom line os that if the data from the trials is positve that approval might possible for DCVax Direct in 2017

Some Upcoming Events to Put on Your Calendar

Agenus: R&D Day May 14, 4:30 PM EST

Antares: 1Q conference call, May 11 8:30 Am EST

Alimera: 1Q, conference call, May 7, 4:30 PM

Chimerix: 1Q conference call, May 11, 8:30 AM EST

Cytokinetics: R&D day, May 12, 8:00 AM EST

Derma Sciences: 1Q conference call, May 11, 11 AM EST

Discovery Laboratories: Phase 2a enrollment is completed, could see results in May. The key to look for are signals of efficacy

ImmunoCellular Therapeutics: 1Q, Conference call, May 12. 5 PM EST

ImmunoCellular: Annual Meeting

Inovio: 1Q conference call, May 11, 8:30 AM EST

Kite R&D Day June 23, 2015

Kite: Presentation at Bank of America, May 12, 10:40 AM EST

Kite: Presentation at UBS, May 18, 8:30 Am EST

NeoStem Presentation at Marcum Conference, May 28, 8:30 Am EST

Neuralstem Annual Meeting June 19

OncoSec Medical Presentation at Marcum Conference May 27, 1:00 PM

pSivida: 3Q Conference Call May 8, 8:30 AM EST

Repligen: 1Q, conference call, May 7, 8:30 AM EST

ZS Pharma: Presentation at Bank of America, May 13, 10:40 AM EST


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  1. Larry, thanks for your additional thoughts on the phase II direct trial(s) designs.

  2. I think that they will not be controlled trials in contrast to my earlier thinking. These patients really have no effective therapies to turn to. Note that the phase 2 trials of the CAR-T companies are uncontrolled trials; they are stating that these are potential registration trials if successful.

  3. Hello Larry
    I noticed that at ASCO 2015, NWBO does not have a poster, but they do have a presentation. What do you make of it?

    Saturday, May 30
    Time: 3:00 PM–4:00 PM
    Company: Northwest Biotherapeutics
    Presentation Title: Dendritic Cell-Based Immunotherapy, DCVax®, for Resectable and Non-Resectable Solid Tumors
    Presenter: Marnix L. Bosch, MBA, PhD, Chief Technical Officer, Northwest Biotherapeutics

  4. I think that this is more a forum in which investigators and potential licensees look at the data of small companies. I am not sure that this is a forum in which updated data from the phase 1 trial of DCVax Direct would be introduced.


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