Antares's New RA Treatment Method Has Large Market Potential

Jan.30.12 | About: Antares Pharma (ATRS)

VIBEX MTX is currently being developed by Antares Pharma (AIS), which plans to bring the product to market by 2014 (possibly earlier). MTX is short for Methotrexate, which is a treatment for Rheumatoid Arthritis and several other autoimmune diseases.

On October 4th, 2011, Antares was granted patent number 8,021,335 by United States Patent and Trademark Office, covering the technology used in the Company's VIBEX platform of needle-assisted jet injection devices. The patent provides protection for the VIBEX technology until 2027.

The VIBEX system is designed to economically provide highly reliable subcutaneous injections comfortably and conveniently in conjunction with the enhanced safety of an integrated shielded needle. VIBEX employs a proprietary coil-spring power source to rapidly deliver the prescribed medication. This spring is combined with a tiny hidden needle in a disposable, single-use injection system compatible with conventional syringes. After use, the device can be disposed of without the typical "sharps" disposal concerns. Antares and its development partners have successfully tested the device in patient preference and clinical bioavailability studies. Antares continues to explore product extensions including multiple dose and variable dose applications as well as integrated reconstitution systems for lyophilized drugs.

About Methotrexate:

Used in an estimated 70% of patients alone and in combination with biological therapies, MTX is a foundational disease-modifying anti-rheumatic drug for RA. Generally initiated orally at lower doses and titrated up, published studies have reported as many as 30% to 60% of patients experience gastrointestinal side effects with oral MTX. This can prevent further dose escalation or require discontinuation in some patients, which can be avoided by subcutaneous administration.

The extent of oral absorption of MTX varies considerably between patients and has been shown to decline with increasing doses. Studies have also reported that switching patients from oral to parenteral MTX improves absorption, providing superior therapeutic response, resulting in longer duration of use. The VIBEX MTX system is designed for rapid subcutaneous self-administration of MTX in three simple steps.

Market research to date shows MTX which can be self injected is preferred by patients and caretakers. As a promising pre-biologic treatment, it is anticipated that the VIBEX MTX system could play an important role in lowering healthcare costs in RA by delaying the use of biologic agents and expanding the use of MTX. The availability of the VIBEX MTX system would give patients and physicians a new option before making the jump to expensive biologics, which are associated with serious and increased safety risks for RA patients.

In other words, insurance companies are likely to support VIBEX MTX over newer and more expensive drugs to treat RA, like Pfizer's (NYSE:PFE) recently approved Tofacitinib. Why is this important when considering an Antares stock purchase for the long term?

It comes down to earnings:

While many bio-pharma companies have very important experimental drugs they are currently working on, the greatest factor in determining whether or not any of these drugs will ever make substantial money is the subsequent support from insurance companies. Simply having a cure for a serious ailment often times is not enough. Insurance companies are in the business of making money, and they have to be mindful of their bottom line, just like any other profitable capitalist venture. In other words, they want to keep costs as low as possible while maintaining the health and safety of their clients.

Tofacitinib will only be prescribed to those who show little to no benefit from oral pill form MTX. The Phase 3 clinical trials were only open to patients who did not respond well to oral MTX, and Tofacitinib is indicated for such patients. It is not meant to replace MTX, let alone compete with it.

The exact cost impact to insurance companies for Tofacitinib is not entirely know at this time. Insurance companies want to know these things before considering supporting new drugs for wider distribution. Dendreon's (NASDAQ:DNDN) Provenge sales suffered in part because many Insurance companies did not know the cost impact involved.

Hopefully Tofacitinib will be well received by the market and insurance companies, as it has been shown to help people suffering from RA. There also remains the possibility that Tofacitinib will eventually be available as a self-injectable, using the Antares VIBEX platform.

Getting down to the numbers

According to the 12/14/11 Oppenheimer presentation, there are about 2 million RA patients, of whom 30% to 60% do not tolerate oral methotrexate well, yet only 6% to 8% are being prescribed an injectable form of the drug. One of the reasons for this disparity is that RA patients must receive their injections by their rheumatologist.

According to an independent survey of more than 200 rheumatologists, the physicians reported they would double or triple their prescriptions of an injectable form of this drug if something like VIBEX MTX was currently available.

The pricing of VIBEX MTX looks to be right for insurance companies. Patients will no longer be required to have their injections at their rheumatologist's office. This will save time and money for insurance companies, doctors, and patients, allowing doctors to see more patients per day (meaning more money for doctors) and allowing patients to spend less time at the doctor's office. It is a winning situation for all parties involved.

Antares intends to price VIBEX MTX competitively and obtain very strong margins while locking in a range of 14-15% or higher of the U.S. methotrexate market. Therefore, in collaboration with a fellow Antares investor, our Vibex MTX U.S. market earnings formula is as follows:

  • 2 Million patients in U.S.+
  • 10-15% market share +
  • $50 per injection +
  • 52 weeks +
  • 52% margin +
  • May 2014 commercial launch (possibly earlier).

Our equation produced the following high/low MTX earnings projections for 2014 and 2015:

2014 - $203M ($1.70 eps)/$135M ($1.13 eps)
2015 - $405M ($3.24 eps)/$270M ($2.16 eps)

We are assuming 120M shares outstanding in 2014 and 125M in 2015, the increase in shares based solely on share-based compensation. In my opinion, Antares will not need to conduct additional share dilution based on its current cash position and estimated profitability in 1H 2012.

The above numbers only represent the potential United States VIBEX MTX market. They do not take into account the global market which Antares has expressed a desire to tap into as well. The numbers also do not take into account off-label prescriptions.

Click here for more information about the global arthritis market and its major players, which include:

  • Johnson & Johnson (NYSE:JNJ): Remicade
  • Amgen (NASDAQ:AMGN): Enbrel
  • Pfizer (PFE): Celebrex, Tofacitini
  • Roche Holding AG (OTCQX:RHHBY): Rituxan
  • Bristol-Myers Squibb (NYSE:BMY): Orencia
  • Merck (NYSE:MRK): Arcoxia

Each and every one of these companies and their arthritis drugs could benefit by the Antares VIBEX platform. Antares also has a lot more going for it as a company beside the massive USA and global market potential for VIBEX MTX. A deal with a big pharma for NestraGel is certain to come very soon, in my opinion. Antares is expanding the royalty base for its bladder gel in partnership with Watson Pharma (WPI), and Daewoong Pharma (Korean pharma), and I expect more partnerships to come with this product.

Antares is currently developing other VIBEX products, like VIBEX QS. At this time it is unknown what the drug associated with VIBEX QS is, as Antares is keeping this a secret for obvious reasons.

VIBEX MTX is a major reason I have a large position in Antares. I am willing to wait for the huge returns down the road, provided a mega-pharma like Teva Pharma (NASDAQ:TEVA), or Pfizer do not acquire Antares first. Personally, I prefer Antares is not bought out, because I think the long term pps will be a lot higher than any current offer that might come its way. Antares is also well positioned for entry into the eventual lucrative biosimilar market.

I like The Antares management quite a bit, especially Dr. Paul Wotton, the current Antares CEO. Do the due diligence on Dr. Paul Wotton; in fact, always do total and complete due diligence before making any substantial investment in any company, especially concerning management. Management's competency and ability is the biggest factor in a company's success. Ask Apple (NASDAQ:AAPL) investors just how important the late, great Steve Jobs leadership was.

According to my due diligence, by 2018 Antares could be selling for over $75 a share. I am more than willing to hold for that long to realize this type of return. I cannot stress enough that Antares is a long-term buy and hold, not a buy and get rich quick stock. While again, it is possible they may be acquired by a mega-pharma, you should not invest in Antares for this reason.

For biopharmas I think could be bought out soon, and could see runs-ups this year, take a look at Ariad Pharma (NASDAQ:ARIA), Spectrum Pharma (NASDAQ:SPPI), AEterna Zentaris (NASDAQ:AEZS), Zalicus Pharma (ZLCS), Keryx pharma (NASDAQ:KERX), and Human Genome Sciences (HGSI). In my strong opinion, Ariad, HGSI, and Spectrum are the better long-term holds, while the others are purely speculative stocks. If you want to buy and hold for the long term, Antares Pharma might be for you. Do the due diligence on Antares and see if the company fits your long term investment goals.

Disclosure: I am long ARIA, AIS.