Antares: A Compelling Long-Term Investment

| About: Antares Pharma (ATRS)

Antares Pharmaceuticals (NASDAQ:ATRS) is in my opinion one of the best long-term stocks that an investor can own. It has proven its ability to produce drugs that are ultimately brought to the market, and so far all of them have been through its marketing partners. However, this should change soon, as Antares is continuing preparations for its Otrexup injector. This injector is currently awaiting FDA approval. This drug is very important to the Antares pipeline, as it is the first device that it's marketing on its own, and consequently it will be able to keep all of the revenue from the device.

The fact that they are making preparations for a launch is what leads me to believe that Antares' quarter miss is not at all important. They beat on revenue; however, the EPS came in worse than expected. The important part of all the information is that for a company like ATRS to be even close to break even, with Antares being this close to having their main product approved is a great sign. Otrexup should drive their PPS growth for the next couple of years. In a few years when OTREXUP is on the market, no one will remember last quarter, or even likely the upcoming quarter. All that matters is that Antares is successful in marketing OTREXUP, and prove that it can develop a product in house and take the product all of the way out through commercial success.

Now sure some people will try to point as a negative to the fact that Antares is cash-flow negative or to its 5 million dollar per quarter burn rate last quarter, however, even if we use this 5 million dollar per quarter burn rate going forward (which is grossly inaccurate as there was a one-time expense associated with the costs of filing an NDA), Antares has 85.2 million dollars in cash, which means that it would take 17 quarters to drain through all of that cash. Antares is well able to weather the storm should the NDA not be approved, but I would consider this to be highly unlikely, as the Phase III results up to this point have been stellar. Also, the revenue of Antares is significant for a development stage company, as it provides a sort of cushion for Antares and substantially lessens its quarterly cash burn. The margins for OTREXUP are not clear, however; Antares consistently says that it has "strong margins" on device sales. The market opportunity of OTREXUP is huge, as there are over 5 million prescriptions written every year for MTX (per the presentation cited above). Obviously this would be huge news for a company with revenue like it has now. Market research even confirms that doctors believe that:"OTREXUP will address a significant need" as per its investor presentation.

OTREXUP could even later see its label expanded to include psoriasis, which is another avenue that the company is pursuing in clinical testing (please note that Psoriasis is not currently part of the NDA, the NDA is simply for Rheumatoid Arthritis). With all of these potential revenue bases for OTREXUP alone, the product represents a very substantial opportunity for Antares. As already addressed above, Antares has more than sufficient cash to wait out any sort of delays that the FDA could potentially throw at them.

As a quick recap of the Phase III results: the results found that people with moderate to severe hand function impairment were still able to safely inject the Antares injector. This is a huge plus, as normally these people would have to go to doctors' offices to receive the injections as their hands are not able to handle regular injectors. Furthermore, in another Phase III study the OTREXUP system showed an increase in, and a more consistent MTX systematic availability compared to Oral MTX. These positive studies help to show that Antares will very likely get the approval it seeks from the FDA, and if it doesn't, remember that Antares has enough cash to conduct more trials to likely get approval. Also of note about why approval should be easier for Antares is the fact that the drug MTX is by no means a new drug, it has been around for years and Antares is simply seeking approval for its OTREXUP device, which utilizes the MTX drug, not the drug itself.

However, Antares is not by any means a one-trick pony. Their research agreement with Pfizer (NYSE:PFE) for an undisclosed drug presents a very interesting opportunity. It is an opportunity, which seems to be essentially overlooked. This product could provide revenues at a very high margin for Antares, given that their agreement is for a royalty. This seems not to be taken into account by the market, and as we see the product advance, I would not be surprised to see the PPS increase based solely on speculation as to what this product is. We will hopefully know more soon. There was some speculation on the conference call that it could be an Advil gel type product, however, the CEO refused to confirm this suspicion.

Antares also has Vibex QS T, which is a treatment for low testosterone, which could provide outstanding value for Antares in the future. Should it be successful in laying a foundation in the injectibles market with OTREXUP, that would give me very high hopes as to the ability of Antares to successfully market QS T.

Finally, there is one other product, which I would like to highlight, and that is the gel being researched by Biosante Pharmaceuticals (BPAX). This is a beautiful agreement for Antares, as ATRS will benefit if it is ever marketed and has to pay none of the costs associated with the clinical trials. Recently BPAX announced that Libigel failed to beat placebo in Phase III trials, which was as you might imagine a huge shocker to BPAX shareholders. ATRS also took a small hit, so the asset of Libigel is essentially considered to be worth nothing. With the way that Antares' other gels have been working in the market though for their marketing partners, I would not be surprised if it is found that this gel ultimately works. BPAX seems to be gearing up for another go-around with Libigel after it completes its recently announced merger. Libigel presents an asset which is not at all valued by the market, but which could also provide substantial revenue for Antares over the long term.

Another substantial market opportunity is the generic Epipen that Antares and Teva (NASDAQ:TEVA) have been collaborating on, this product pursuant to recent litigation will be able to be launched on June 22nd, 2015 (pending ANDA approval). The market opportunity is important for Antares, as it will receive royalties on the product, which will help even more to change its cash burn rate.

With so many excellent products in Antares' pipeline, it is surprising that they have not been bought out in my opinion. They have strategic relationships with Teva, and have injectors, which could revolutionize the way in which we treat diseases all over the world, and ATRS has many different drugs, which could be adapted to these injectors. My message for longs is simply this, don't worry about the day-to-day price swings, or even about the missed earnings - it should not matter in a few years. Antares presents an excellent opportunity to get in on an innovative company, that is close to break-even (which helps to mitigate some of the downside) and has great depth in terms of its pipeline.

Disclosure: I am long ATRS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.