The following below was taken from Seeking Alpha, I have(Scott Matusow) a large position in this stock. and I am considering adding even more to that position. Please take a read of all the information on this company below. then do your own research.
From Tappy on SA:
I appreciate your coverage of ANTARES PHARMA (AIS).
I have been successfully investing in small/ micro cap stocks for many years and AIS is currently my largest position (one of my
largest ever) and I belived I know the company extremely well.
AIS offers the best risk/ reward opportunity I have seen in many years.
I have prepared notes for interested investing friends, which I have
previously posted on Seeking Alpha and repeat here now for
anyone who may be interested.
ANTARES PHARMA (AIS)
NOTE: The following report was written in mid June 2011.
Since then:
1. The two largest institional holders (OrbiMed [I believe the
smartest investor in small pharma in the world] and Deerfield
Partners increased their positions by about 40%.
2. September 12th (this week) – favorable LibiGel PK clinical
trial results were released. This is important safety data for the NDA submission late next year.
3. On Monday, July 11, 2011 ANTARES announced they licensed
their Overactive Bladder drug ANTUROL (discussed below) to
WATSON PHARMACEUTICALS.
Immediately after the announcement two of the analysts covering
AIS issued a new report to discuss the deal.
Matt Kaplan of Ladenberg-Thalmann estimates that the peak annual
royalties to AIS from this deal will be $15 million.
Oppenheimer said ANTUROL sales could total $250 million annually
and the high estimate for a royalty percentage paid to AIS could be
22% – the math on this figures out to $55 million a year to ANTARES.
My estimate (before the Watson deal) was than AIS would receive
annual royalties from Anturol of around $10 million, with the possibility
of going to $15 million. Should numbers come anywhere near Oppenheimer’s
projections this would be an very major home run for AIS.
4. Additionally on July 28, 2011 – BioSante (AIS’ licensee for LibiGel -
the product and relationship described below) announced a secondary
sale of stock by BioSante of 15 million shares @ $3 a share, for
a total of $45 million. This is a direct investment in, and to the benefit
of, LibiGel. Accordingly, AIS will receive its proportionate benefit from
this offering without any dilution what-so-ever to AIS. A nice vote
of confidence for both FDA approval and market success of LibiGel.
To my AIS investing friends:
A prominent friend, here in Sarasota, has developed an interest in
Antares and asked me to send him my thoughts. I wrote this for
him last evening. I have sent you all such reports in the past, and it
won’t tell you anything you don’t already know- but for what ever
it’s worth- I am forwarding same to you— BOB
June 16, 2011
Dear Mark and John:
Thank you for your interest in ANTARES PHARMA (AIS).
I anticipate writing a long summary (there are few things I
enjoy discussing more than AIS) – but whatever I write here
I am sure will only scratch the surface, and I am available until
June 23 (when I leave for Phila. for most of the summer) to discuss
this further in person; or after that on the phone, if you wish.
I have been investing in micro/small cap with considerable success,
for many years and AIS is about the largest investment I have ever
made in a single stock.
To begin in general:
As an introduction:
AIS has excellent institutional support and (Deerfield Partners)
AIS’ second largest institutional holder – very recently increased
their position from about 3.5 million shares to just under 10 million
shares and are now number one. OrbiMed (thought by many to be
the smartest investor in small pharma) is now second largest
institutional holder with almost 6.5 million shares.
AIS has coverage from 3 respected analysts – all with buy ratings
and targets 50- 100% higher than current share prices. I expect
these targets to be raised significantly as near term catalysts
add value.
AIS management is excellent and can be reviewed on the AIS web
site. I am particularly impressed by CEO – Dr. Paul Wotton, who
I have met on several occasions. I attended a Roth Investor
Conference about 18 months ago, around the time when Dr. Wotton
was appointed CEO. The analyst (Edward Nash) said he had followed
AIS for several years waiting for AIS to become a “compelling
investment” and the time is now to begin to accumulate shares -
He said of Dr. Wotton- “He get’s it”; referring to his plan to
shed costly distractions, monetize some assets and focus the
company for both near term and sustained profit and disciplined
pipeline advancement.
(as a note- some years ago, Dr. Leonard Jacob, a highly respected
Philadelphia physician and businessman invented a much
improved colonoscopy prep and formed a company called InKine
Pharma (to develop and market same); which he ran and sold to
Salix Pharma and made many local investors a great deal of money.
Len Jacob was Chairman of the Board of InKine and Robert Apple
was CFO- they now hold the same respective positions at AIS).
After very significant due diligence; I see AIS, at this point as
risk-less (other than normal market fluctuations); and with the
probability of a return of 5 X the investment within 12 -18
months and (if it is not sooner acquired by TEVA; on a tax free
exchange of stock) having AIS trade in the $20+ range within
5 years.
I will try and demonstrate, later in this review, how AIS, in the
next approximately three years, will earn $100 million (or $1 a share)
and with a 20 X multiple – discounted for time and risk, I think the
stock today is worth $6-8. Also it is important to note that AIS
currently has a very small burn and will be profitable this year.
They have $35 million in cash, no debt and should report significant
up-front and milestone payments from licensing fees, discussed later.
NOT INCLUDED: In this share price or earnings estimate is probably
the most transforming event in AIS history which is the recent
announcement of development; shepherding thru clinical trials and
approvals in 2012 and launch in 2013; of an “in house” product which
is low risk (and relatively low cost) and high return (Methotrexate for
Rheumatoid Arthritis) which will take AIS from a company merely
earning (very lucrative) royalties and licensing fees – to one which
markets their own products for a much more significant piece of the
pie.
AIS was first brought to me about 5 years ago; by a childhood
friend and investing partner who is one of the leading cardiologists
in the Phila. area (my home town).
Back then (under a different CEO) AIS had very good science,
(developed over a ten year+ period at a cost of over $100 million)
and some very good relationships; but was a awkward company with
little focus, a large burn, and not close to monetizing any of their
assets.
We were aware of these shortcomings and thought they would be
remedied. They were, to our satisfaction – mainly thru a new and
excellent CEO – Dr. Paul Wotton. It was the under-performance
the past few years that enabled us to build a very large position
in the stock; and, to date, share price has worked to our benefit.
AIS now has two drug delivery platforms:
Advance Transdermal Gel and Injectable.
We initially bought the stock for the Gels- but now- while the Gels
hold excellent profit potential (see below) the Injectable’s have
overtaken the Gels as what will be the prime mover for AIS.
All that AIS does requires FDA approvals- but combining existing,
already approved drugs, with AIS delivery (and at this time AIS
has FDA approvals in both of their platforms (Gels and Injectable’s) -
The bar for approvals is very low and any regulatory risk is small.
The Transdermal Gel technology often provides a far better side
effect profile than oral medication with equal or better efficacy.
It can be thought of as the second generation of “The Patch” which
is has multi billion dollar sales, but often (due to humidity and
temperature, etc.) can deliver irregular doses (too much or too
little) and can cause significant skin irritation. The gels eliminate
these problems.
Also it is important to note- that while anyone familiar with Gels
recognized their medical benefit; but some may think is it a “messy”
delivery. To the contrary- AIS’ transdermal gel is not smeared
on as sun-screen is used- rather it is a small dab (measured dose),
usually applied to the shoulder, upper arm, abdomen, etc. from
an applicator.
It is almost instantly absorbed and leaves no residue on the skin.
It can not be accidentally rubbed or washed off. I have heard it
described as an “elegant delivery”.
AIS has 4 active Gel opportunities (and one on the shelf).
1. Is LIBI-GEL which will be the first U.S. approved drug to treat
Female Sexual Dysfunction (a patient population, at least, equal to
that of men with ED; and such a drug is often referred to as: Pink
Viagra).
LibiGel should be a “blockbuster” drug (which commonly means
annual sales of $1+ billion).
AIS owns, and has licensed LibiGel, to BioSante Pharma for sales in
N. America and a few very minor markets. BioSante has stated they
intend to sub-license LibiGel in 2011 or early 2012. (AIS will
receive 25% of all up-front and milestones and a 5.5% royalty on
sales. BioSante receives 75% of up-front and milestones- but when
you net out BioSante’s 75% [after deducting the $90 million cost of
clinical trials] – against AIS’ 25% — the up-front money to each
company should be about equal). BioSante’s domestic royalty will be
more than AIS’ 5.5% but when you add AIS’ international opportunities,
royalty income could be near equal).
BioSante has little more than LibiGel, but as a pure play speculative
stock, their market cap is about $100 million more than that of AIS
(indicating AIS is being given no value for LibiGel – I think a very good
case could be made that, based on the market cap of BioSante- AIS
stock should [today] be $3 higher than it is– based on LibiGel alone).
AIS has retained the rights to the rest of the world. BioSante is spending
an estimated $90 million to conduct clinical trials; and they have
completed enrollment in the phase 3 trial, and expect an NDA submission
to the FDA in very early 2012 and approval later that year. I am confident
LibiGel will receive FDA approval for the following reasons.
1. They are operating under an FDA “special assessment protocol”
which effectively means the end points are previously agreed upon
and, if the drug meets these end points, it will be approved so
much of the subjectivity removed. 2. The FDA has publicly stated
that Female Sexual Dysfunction is an “unmet medical need”. 3. The
FDA division which rules on approval is the “Urological and
Reproductive Division” of the FDA and they have previously approved
“Elestrin” (which is an AIS female hormone replacement gel drug
licensed to BioSante). 4. Trial results to date have been excellent as
to both safety and efficacy. 5. LibiGel is low dose testosterone and
there are currently over 4 million “off label” prescriptions written
each year in the U.S. for this use; and an approval drug would give
the FDA control over a product for which they now have little control.
6. A Low Dose testosterone gel product developed by P & G “Intrinsa”
to treat women’s sexual dysfunction is approved and selling in Europe
with good results and no adverse effects.
AIS retains all rights to LibiGel outside of BioSante’s area and
AIS has the right to use BioSante date for international approval;
with no cost to AIS.
I will get into the economics of LibiGel later in my earnings paragraph.
2. ELESTRIN: is an “approved and launched” AIS female hormone
replacement gel drug; used to replace the natural depletion of estrogen,
lost as a woman ages. Symptoms of this problem range from
manageable to uncontrollable “hot flashes” and a greatly diminished
quality of life. The problem affects a great majority of mature women.
Elestrin was licensed to BioSante (who in error sub-licensed it to
Bradley Pharmaceuticals, who was in a takeover battle, and never
launched the product).
BioSante re-acquired rights from Bradley and sub-licensed to Azur
Pharma who successfully launched the product.
About a year ago Azur offered AIS and BioSante approximately
$4+ million (each) as an advanced/discounted royalty payment to
buy out future royalty payment obligations. BioSante took the offer
as they were funding expensive LibiGel trials. AIS refused, as they
wanted the recurring and growing income stream. This has worked
out well for AIS.
Female hormone replacement is associated; in rare instances,
with heart attacks, strokes and blood clots. This is because oral
hormones are metabolized in the liver, which also plays a part in
the blood clotting process. Elestrin passes the liver and these risk
factors are eliminated. Also hormone replacement has been associated
with breast cancer and Elestrin was FDA approved as the “lowest
effective dose” and the lower the dose the less chance for breast
cancer. Elestrin has been a reasonably successful product, that has
the capability to really catch fire and be an excellent revenue producer.
3. ANTUROL is an AIS gel drug to treat overactive bladder, which affects
a great majority of older people (mostly women); and is characterized
by urgent, frequent, or uncontrolled urination; causing accidents and/or
runs to the bathroom – which is highly inconvenient and embarrassing.
The market for OAB drugs in the U.S. is around $3+ billion and
Oxybutynin is the gold standard treatment for OAB; but orally
it causes dry eye, dry mouth and constipation. Anturol is an
Oxybutynin gel and, in this form, the above side effects are eliminated.
Clinical trials have been completed and there is an FDA decision
due (on or before) December 12th. Clinical trial results were
excellent and I believe approval is almost assured.
AIS expects to license this drug this year; and the up-front
payments should be several million dollars; with continuing royalties
on product sales in the mid to high teens and could run to 20+ %.
4. NESTERGEL: AIS owns, and is working with The Population Council
on this novel Gel contraceptive product which has distinct advantages
over other forms of birth control. They are now in phase 2 clinical
trials with excellent results to date. AIS has stated that the Population
Council expects to license NesterGel (to a third party drug company)
in the near to mid term. The market opportunity is extremely large,
but I don’t have a real handle on anticipated up-front money or
licensing revenue. So NesterGel is not included in my revenue
estimates.
5. Ripioirole is an AIS product for restless leg syndrome. It was
licensed to Jazz Pharmaceuticals but due to problems at Jazz it
was put on hold, where it remains.
In order to concentrate on a greater opportunity in the Injectable
side of their business, and to reduce a significant cash drain- AIS
sold future gel development to their European partner – Ferring
for a few million dollars and (perhaps) future milestone payments.
AIS received a $1/2 million milestone about a year ago from Ferring
in this matter. AIS retains all the benefits of their existing gel
drugs (above) and has all rights in Europe, S. America and Asia;
which are now uncommitted, and AIS expect will make a reasonable
contribution to future earnings, but is not figured into my financial
projections.
Injectable Division:
In this area AIS’ products are compatible with drugs in the Bio-
Equivalent and Bio-Better market which is dominated by generic drug
companies and is current at $25 billion; slated to grow to $125 billion
by 2015. TEVA is the dominant player in this field as the largest
generic drug company in the world; and TEVA has four licensing deals
with AIS covering five products.
The first TEVA/ AIS licensing agreement is for HUMAN GROWTH
HORMONE and the product is named Tev-Tropin. It is fully FDA “approved
and launched”. Teva recently paid AIS a $1/2 million milestone payment
for Tev-Tropin meeting (or exceeding) sales projections.
The second and third TEVA/ AIS product is for (2) Epinephrine for
Anaphylaxis which is a severe systemic allergic reaction resulting from
exposure to allergens that is rapid in onset and can cause death. The
(3rd) is for a yet undisclosed product (widely thought to be Sumatriptan
for treatment of migraine). Both products have NDA’s pending before
the FDA and approval and launch is expected this year.
(note: TEVA/AIS epinephrine is currently in litigation for patent
infringement claimed by King Pharmaceuticals. All of my sources advise
the TEVA is the clear winner and to expect a settlement. If not
TEVA should launch “at risk” and there should be no negative impact to
AIS).
TEVA/ AIS 4 and 5 are in mid stage clinical trials. The products
have not been identified; but it has been publicly disclosed that the
combined markets for these two products is $1.6 Billion and the
Royalty percentage to be paid by TEVA to AIS in in the mid teens.
This is not included in my revenue estimate; as it is some years away:
(However to look at the projected numbers: TEVA targets. and almost
always captures. at least 10% of a market. With a $1.6 Billion market;
TEVA should develop sales of $160 million and a royalty revenue
stream to AIS (at the low end of announced revenue percentages of
15%) — that would mean annual income to AIS of $24 million).
Recent reassurance of the strength of the TEVA/ AIS relationship
was receipt about 18 months ago of a $4 million payment from TEVA
to AIS which was earmarked for “future product development”. The
$1/2 million milestone payment (mentioned above) for the success of
Tev-Tropin. Dr. Leonard Jacob Chairman of the Board of AIS) and
Wm. Marth (CEO of TEVA) were recently appointed to the board of
the Institute for Scientific Research in Philadelphia. And in the last
quarterly conference call Dr. Wotton (CEO of AIS) described the
TEVA relationship as “Phenomenal” – which is of particular note; as
Dr. Wotton is very understated.
THIS IS HOW I EXPECT AIS TO REACH SALES OF $100 MILLION:
(AND THIS IS ROYALTY INCOME WITH NO COST OF GOODS SOLD
SO EXCEPT FOR SG & A – AND- R & D MOST OF THIS REVENUE
WILL COME TO THE BOTTOM LINE) AND THIS INCOME IS BOTH
RECURRING AND GROWING:
How do we get to earn $100 million.
1. LibiGel should easily be a $1 billion “blockbuster” drug-
and our royalty is 5.5% or $55 million a year of recurring and
growing income to AIS. That is on domestic sales: AIS owns all
international rights to LibiGel and it is currently uncommitted.
2. Anturol should be licensed this year for several million dollars
up-front and a royalty of probably mid teens- On Anturol sales
of $60 million AIS’ royalty income would be nearly $10 million
(and Anturol could easily produce $100 million in sales and generate
$15+ Million to AIS). OAB is a multi-billion $ market and Anturol
has one of the best side effect profiles of any existing drug.
3. Elestrin should earn AIS $3 -5+ million a year.
4. Tev-Tropin (first launched AIS/TEVA product) HGH is a $1.3
Billion market – TEVA should easily capture 10%+ of the market
or sales of $100+ million. AIS’ royalty plus device sales should
average 10%, or $10 million a year to AIS.
5. TEVA/AIS Epinephrine: the market is $250 million – TEVA should
capture 20% and AIS receives an 8% royalty or $4 million a year.
6. TEVA/AIS # 3 product is undisclosed but thought to be Sumatriptan:
Similar opportunity for AIS as with Epinephrine – $4 million a year to
AIS.
7. Current revenue for AIS – mostly from Ferring sales in Europe
around $14 million a year
THE ABOVE TOTAL $101 MILLION IN ROYALTY INCOME
TO AIS: With 100 million shares outstanding this is (more
of less) income of $1 a share..
It does not take into consideration:
1. TEVA 4 & 5 (which will sell into a $1.6 billion market – TEVA targets
and traditionally captures at least 10% of any market they enter for
sales of $160 million and AIS will receive a mid teens royalty (say 15%)
for income of $24 million).
2. Any monetizing of AIS’ gel opportunities outside of N. America.
3. Any up-front and milestone payments from licensing of LibiGel;
Anturol and NesterGel which could easily be in the tens of millions of
dollars.
4. The very significant opportunity with Methotrexate.
5. And any new licensing deals which I think are inevitable: and at
least one new deal is projected this year by the Ladenburg-Thalmann
analyst, Matthew Kaplan; who I think is the smartest, small Pharma
analyst on Wall Street.
AIS formerly had little, or no, Investor or Public Relations, as
they felt the story was not ready to be told. Several months ago they
engaged Westwicke Partners to represent AIS with IR/PR (mostly
in dealing with institutional clients). They are first rate and I suggest
you visit the Westwicke web site to see their qualifications.
For me to write here about some of the technical aspects of the
Injectable platform and/or to discuss financial’s would be to merely
parrot information that is readily available on the AIS web site:
www.antarespharma.com . Plus as a company now successfully
transitioning from an R & D company (not expected to generate much
revenue and lose money): To one which is successfully commercializing
their products – historical revenue data is of little use.
The AIS web site, while not spectacular, contains good information.
If you are interested, and if they are still archived, I suggest you
listen to the most recent quarterly conference call and any web-
casts from institutional health care conferences. Also, to learn
more about LibiGel you might want to visit the BioSante web site
and bring up any presentations made by them recently.
Again, thanks for your interest and I wish you good luck if you decide
to build a position in AIS stock.
