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Antares (AIS) is in a very enviable takeover position. Not just due to what is expected to happen with Anturol and Libigel...

Before year-end, Antares has two short-term pps-spikers in Anturol and Libigel.

  • Anturol's PDUFA date: 8 December 2011
  • Libigel's efficacy report: December (per BioSante (BPAX))

But there is much more going on, and speculation could really fuel a lot of volume action, as it has in the last two days. It unfolds in eight observations:

  1. Anturol's oxybutynin chemistry has a long established history. The gel formulation is novel, met all safety profiles, achieved efficacy, but more importantly, offers overactive bladder sufferers a titratable dosage. Watson (WPI) licensed Anturol for the U.S. and already has its own product Gelnique in the market, I observe that Watson's own scientists embraced the Anturol solution at a recent scientific symposium. The point is, while FDA approval is unknown, the odds of approval are unusually high. Antares investors who have studied the risk, know this. But is the current licensing deal all Watson will want after FDA approval?
  2. The odds that Libigel's efficacy is not proven is the most unlikely result. From all the reading one can do on the clinical studies and safety data, my conclusion is that there is an overwhelming market consensus that Libigel will achieve its efficacy targets. The advantage to Antares investors is, they get a free ride of BioSante's research pocket minus development costs, will be paid a handsome bounty for any further licensing deals (e.g. Antares owns the licensing rights to Europe and other global markets) as well as future royalties. Why? Because Antares is the inventor of the novel gel formulation. Who in big pharma would benefit the most?
  3. The business side to Antares continues to draw attention to this microcap. Even the most novice investor can see that the company has been on a three year path to net positive by 2012. In Q3, the company recorded a one penny per share loss, remains debt free, and increased its cash reserves to $32M. Also observe Antares's cash burn is around $1.4M/Q, as their business team is bullish about turning the company net positive. I cannot over-emphasize how this minimizes the investor's risk. But it also achieves something else: a balance sheet big companies like to take-over.
  4. The company already has two marketed drugs (HGH injection and Elestrin), but a very marketable concept in Nestragel, a gel birth control formulation in partnership with the Population Council. Already into phase 2, Antares has quietly been at work on what would be a very lucrative medicament were it ever to make it to market. Given the success of Elestrin and anticipated success of Anturol, Antares has a very valuable patented and proprietary gel chemistry. Will big pharma let this get away?
  5. Licensing opportunities. As with Anturol and Libigel, Antares has a wide range of licensing opportunities yet to be revealed. While BioSante's CEO harps on how they will seek a global partnership for Libigel, just keep in mind that Antares will benefit in ace of spades. The same could be said for Anturol as Watson has only licensed the U.S. market and it was recently discovered that Antares has been very active on the patent front for the global market. With about 100 million shares, Antares would be an easy acquisition for companies like TEVA or Watson that have the deep pockets.
  6. Injectables. By the time you get to injectables, you may begin to understand why the microcap risk of investing in Antares is unusually low. Antares, with multiple value drivers, is mainly technology focused upon its injector business that includes multiple projects with TEVA (NYSE:TEVA). Investors know that the VIBEX-Epinephrine injector is nearing market release assuming it clears a legal hedge that looks more like a stall tactic from TEVA's competitor. Likewise there are many views of what other medicaments TEVA is moving forward, but my read is one of them is Copaxone, TEVA's trophy drug. Yet despite multiple partnership projects with TEVA, Ferring, and others, Antares is also moving forward its own injectable, VIBEX MTX, methotrexate for rheumatoid arthritis. Observe here that between 2012-13, Antares could have one to as many as five products entering the market. And there is talk by the CEO of another project in the offing. But why would TEVA sit on this?
  7. A comment about the management team. Investors who get in here will be treated to a management team that holds quarterly conference calls with Q&A covered by two or more analysts. They always announce their earnings date one week in advance. It is a professionally run firm that is responsive to its investors. CEO Wotton is executing on a clear business plan and in my opinion should be awarded the 'Best Microcap CEO' for 2011. I am very impressed by what I hear, read, and see. But I see more: I see a credentialed management and board team that are well-suited for the task at hand because I venture more than one big pharma will want Antares.
  8. Buy-out possibility or major restructuring. For numerous reasons I view this as a real possibility and a much larger unnamed buyer who has taken a position in Antares agrees with me. The NJ headquarters lease expires January 2012 and the relatively recent hiring of VP Pavan Handa has specialized experience in selling off the firm he works for. The company leases R&D space in Minneapolis which was renewed, but this could be the hub of a restructuring deal if Antares retained the injector side of the business. Furthermore, BioSante's CEO has already stated he's open to selling the firm which given Antares's stake in Libigel, increases the probability of much larger take-over scenario - Libigel upon success is going to be worth billions. CEO Wotton's approach has been 'let's wait for the phase 3 data' as he knows it will put Antares in the driver's seat with BioSante and more importantly a prospective buyer. I wouldn't be surprised if Wotton pulls off a major deal as he did with gel business with Ferring in Switzerland. VP Handa's hiring may serve that purpose.

This is why Antares is in a very enviable position because investors have multiple near-term value drivers to mitigate against risk. It is a very rare opportunity.

As for the current share price, the company is already under-valued at any price below $3-4/share before news. I agree with many investors who think Antares could go into the $4-6/share range on positive news before year-end, but if not by then, shortly thereafter in 2012. With $32M cash assets and no debt, on the approval of Anturol and Libigel efficacy, any major pharma would not have a hard time explaining to their investors why they bought this firm.

Disclosure: I am LONG AIS until I achieve my undisclosed target and I am free to trade on any stock in this article after 72 hours per SA policy. Investors buy/sell at their own risk.

Source: Antares In A Very Enviable Takeover Position