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Written by Scott Matusow. Scott has a long position in the featured company in this article.

At Stockmatusow, we've spent a lot of time in the past two years focusing on Antares Pharma (ATRS) and what they are working on. The company's consistent royalty based income stream as well as its robust pipeline makes it a unique pharmaceutical company and therefore, a stock worth watching. Antares focuses on self-administered parenteral pharmaceutical products and topical gel-based medicines. The company's main focus this month is an FDA decision regarding Otrexup due on October 14th.

Otrexup uses methotrexate, which is the gold standard therapy for moderate-to-severe rheumatoid arthritis, and offers efficacy advantages over oral methotrexate. Otrexup was developed for easy subcutaneous administration once-per-week and is virtually pain free. Antares ran a study in which patients were asked to evaluate the pain of injection on a scale of 0-100 where zero represented no pain and 100 represented maximum pain. The Vibex Medi-Jet device used with Otrexup was ranked between two and three. In a usability study conducted by Antares, 98% of RA patients were able to effectively use it in a home setting which is very important considering rheumatoid arthritis can create deformities and extreme pain in the hands.

At Antares, October 14th will most likely be a day the management team remembers well as it can signal the beginning of a big transformation for the company. Historically, the company has relied on partners to move its products while they collect a royalty and enjoy reduced risk. In this case, Antares decided to complete a stock offering late last year which would provide it with the necessary cash to feel comfortable going at this product launch on its own and have a much greater ownership and interest in the results. Of course, companies generally need some sort of outside help in making a product successful. In this case, Antares has established a relationship with Quintiles, the world's largest provider of biopharmaceutical development and commercial outsourcing services. Quintiles has played a major role in developing or commercializing the top fifty selling drugs. Also in anticipation of a successful FDA decision, Antares has brought in a team of eight account managers with extensive big pharma backgrounds including product launches of drugs such as Enbrel and Prozac.

In addition to the sales associates, Antares also has new board members that show extensive preparation of an Otrexup launch by the management team at Antares. Marvin Samson is an expert in injectable manufacturing and delivery systems. He was formerly Group Vice President - Worldwide Injectables of Teva (TEVA). He is also the founder and CEO of Samson Medical Technologies, a privately held company providing hospital and alternate site pharmacists with injectable drug delivery systems and programs.

In July, Antares added Robert Roche Jr. Mr. Roche has served as principal of Robert Roche Associates LLC, a consulting firm providing guidance to the pharmaceutical and healthcare industries.

From January 1995 through February of 2010, Mr. Roche led commercial operations at Cephalon, Inc., a global biopharmaceutical company acquired by Teva in October, 2011. Prior to his retirement from Cephalon, Mr. Roche held the position of Executive Vice President, Worldwide Pharmaceutical Operations,where he oversaw several successful new product launches.

In addition to Otrexup, Antares's management team has expressed a lot of excitement over its VIBEX QST product for testosterone deficient males. Recently, the company issued a press release confirming it had dosed the first patients in a clinical study evaluating testosterone enanthate administered weekly by subcutaneous injection at doses of 50 mg and 100 mg via the VIBEX QuickShot auto injector device.

Paul K. Wotton, Ph.D., President and Chief Executive Officer, stated,

We are very excited about the QuickShot™ testosterone (QS T) opportunity because we believe it will fill a real need in the growing testosterone replacement market for a convenient self-administered injectable product." Our proprietary QuickShot™ device is designed to discreetly administer a fixed dose of testosterone subcutaneously in a matter of seconds. We believe the self-contained QuickShot™ technology could potentially eliminate transference issues currently seen in the market leading topical testosterone products. The QS T is another example of continued execution of our combination product strategy where we expect to create added value for physicians, patients and shareholders alike.

Considering the increasing market opportunity and awareness of testosterone deficiency, Antares may be attacking this segment at the right time. According to one report, the expectation for the testosterone market is to exceed five billion dollars by the year 2017. By this time, Antares should be in the second year of commercializing its related product as it expects to bring the product to market in 2016.

We have changed our opinion on QS T a few times over the last year or so. At first, we were bearish on the product, due to the fact that gels dominate the market and are cheap to both produce and sell. We felt that insurance companies might not be swayed to cover QS T because of this. However, our understanding of QS T might have been lacking. The product is designed to be taken once-a-week versus once-a-day, as the gels are applied. We believe this may prove to be a more efficient and cost productive solution -- one that the insurance companies would welcome. If Antares can demonstrate the QS T design to work as advertised, the product could end up dominating the testosterone therapy market.

  • Intellectual Property

Antares has been very active in gaining intellectual property. In the past eighteen months, the company has applied for forty-three patents and received nine. In June, the company announced a key new patent that provides seventeen years of patent protection for Otrexup.

In August, Antares had confirmed patents related to the use of Scopolamine to treat depression and anxiety. With nothing on the company website listed pipeline addressing this, it will be interesting to see what direction Antares takes with Scopolamine.

Additionally this year, Antares received a patent protecting its quick shot device. The VIBEX QS device offers a dose capacity up to 1 mL and the design can be scaled for larger volumes. The device design emphasizes enhanced performance on the attributes most critical to patient success - speed, comfort and discretion.

Paul K. Wotton stated,

The size and scope of our intellectual property portfolio continues to grow as we develop device technologies that will enhance the product performance of established drugs as well as new drugs in development." Dr. Wotton continued, "We believe that many injectable drugs currently under development will be administered by self-injection once they reach the market. Our advancing technology will therefore be important for the growing number of chronic care products that can only be given by injection.

  • Future expectations

The future for Antares and its shareholders should be very bright whether the company remains on its own or is taken over at some point. It is already pulling in respectable revenue which offsets most all of its overhead costs. This lack of debt obligation for a developmental pharmaceutical company gives the confidence it will be able to grow exponentially once profitable. One company we recently wrote about and referred to as our "best small-cap investment pick of this year," is Halozyme (HALO). We believe the business model for Antares mirrors both Halozyme and Jazz Pharmaceuticals (JAZZ) in its early stages. This model consists of developing a cash flow from royalty based partnerships one product at-a-time, ultimately working towards a go-it-alone approach for proprietary high monetary potential products.

In Halozyme's case, it now has several advanced proprietary products in its pipeline including PEGPH20. If ultimately successful, this could net the company billions in the years ahead as well as being the new standard of care in terms of platform technology. The company's Enhaze technology, a recombinant (synthetic) enzyme called Hylenex (rHuPH20) is partnered with 5 larger pharmas, which help the company fund its top propreitary product, PEGPH20.

In addition to making the transition to a full-fledged pharma quickly, Jazz was adamant about protecting its intellectual property similar to Antares. Looking back to Jazz's 10-K filed in March of 2009, this is clear:

We own eight issued U.S. patents and have rights to four other U.S. issued patents. In addition to the issued U.S. patents, we own or have rights to 17 pending U.S. patent applications and more than 100 issued and pending foreign patents and patent applications. Our owned and licensed patents and patent applications cover formulations of our products and product candidates, uses of our products and product candidates to treat particular conditions, drug delivery technologies and delivery profiles relating to our products and product candidates and methods for producing our products and product candidates.

When the general market started to recover in the months following its 10-K, Jazz was trading around $4/share in the middle of 2009, and now trades for a little over $90 only four years later. This is mainly because of its lead product, Xyrem. Xyrem is designed to treat cataplexy and excessive daytime sleepiness in patients with narcolepsy. The recent large upside price move for Jazz has come in part because generic drug makers could have a very difficult time getting a generic version of Xyrem approved, as the FDA would likely require these generic drug makers to pass stringent safety requirements to show their versions are safe. Jazz management has been very smart with its patent protection profile, and we feel Antares is engaging in a likewise manner.

The process in moving Antares towards a full-fledged pharma has been a bit more deliberate than Jazz, but is coming along nicely. Antares started its royalty deals with a gel based platform, one being a royalty deal with Actavis, Inc. (ACT) (formely Watson Pharma) for topical oxybutynin gel. Oxybutynin gel is designed to treat overactive bladder, a condition that affects more than 30 million Americans.

Additionally, the company's multiple deals with Teva Pharma have also helped move Antares along. One such deal with Teva is for Tev-Tropin® Tjet® reusable hGH, launched August 2009, in which Antares receives strong margins on device sales, and mid-to-high single digit % royalty on overall product sales.

Also, Antares has deals with Teva for Two Vibex auto injector single shot disposable products. One is Epinephrine (North American rights) and the second is an undisclosed product (U.S rights) in which Antares receives margins on device sales along with mid to high single digit % royalty on overall product sales.

We feel if the Antares and Halozyme management teams execute their respective plans properly, both companies have a good chance to become full-fledged pharmas within five years, as Jazz was able to achieve.

  • Conclusion

Antares has a product line of injectors that can be used with several types of medication which makes it very versatile as they can look to improve the delivery of virtually any huge drug already on the market. The company has partnerships with very accomplished companies such as Pfizer (PFE) and Teva who continue to provide Antares with insight on how to become very successful. In the second quarter conference call, CEO Wotton hinted at providing additional light on its exciting progress with its Teva partnership and said the relationship has never been better. Beyond the five current products, there is a long list of drugs that Teva and Antares can eventually team up on including drugs for hepatitis C and multiple sclerosis. High on Teva's list is likely to be a formulation of Copaxone that will provide a life extension to that product. Other product categories and key drugs that might eventually be targeted are diabetes (Humalog, Novalog), rheumatoid arthritis (Enbrel, Humira), multiple sclerosis (Avonex), hepatitis C (PEG-Intron, Pegasys) and anemia (Epogen, Aranesp and Neulasta). We will look forward to hearing further updates from Antares. We also would like to see confirmation of the Pfizer product still listed as "undisclosed" in the pipeline. At Stockmatusow.com, we have continued to speculate a possible takeover of Antares at some point in the near future provided the company receives the much anticipated FDA approval of Otrexup. With the advanced intellectual property portfolio, commercially marketed drugs, and advanced pipeline, Antares has the leverage to make a potential takeover advantageous to its shareholders. In addition, it has a very strong balance sheet and very sufficient cash for well beyond the Otrexup launch as addressed by Robert Apple in the second quarter conference call. Because we believe the FDA approval likelihood of Otrexup is over 90% and with peak sales potential over $200M, we feel Antares should be valued at least $800M, or over $6/share.

Disclosure: Written by Scott Matusow. I am long ATRS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Important Upcoming Catalyst For Antares - FDA Decision Expected October 14

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.