Antares Delivers Then Hits A Hard Bump In The Road

| About: Antares Pharma (ATRS)

On Thursday, Antares (AIS) investors were treated to the good news that Watson had launched Antares-partnered Gelnique 3% for overactive bladder. This was good news and sent the share price spiking well above $3.25 just as SA author Matusow recently predicted. Congratulations to Mr. Matusow and to those fortunate investors among whom I am not numbered.

But today almost reminds me of the bittersweet FDA approval of then Anturol (now Gelnique 3%) -- its lower dose wasn't approved, and of course LibiGel hit the skids big time when the FDA rejected it. The share price plunged well below $2 and long-term investors took a deep breath.

So who could have imagined that the good news on Thursday would be followed by bad news within a few hours? 'Bad news?' you ask. 'Yes, bad news.'

The Teva (NYSE:TEVA) v Pfizer (NYSE:PFE) litigation was announced and it was bad news for Antares. Worse than I anticipated, but hats off to SA author Larry Smith for having the candor in his own article to raise the possibility of a less-than-desirable outcome.

First, the core component of this Thursday's less-than-desirable press release reads:

"According to the terms of the settlement, Teva may launch a generic epinephrine auto-injector covered by its ANDA on June 22, 2015 or earlier under certain circumstances, subject to receipt of approval from the U.S. Food and Drug Administration" (ibid).

I make two observations: (1) "earlier under certain circumstances" would seem to imply Teva has cut a deal with Pfizer which most likely will cut into Antares' royalty stream, and (2) the postponement to 2015 means the anticipated revenue coming into Antares isn't going to happen here in 2012, at least not in the amounts that Antares investors were hoping for in order to move to net positive.

Second, on the somewhat positive side the press release also stated:

"Under a separate agreement, Teva has agreed to provide Antares with device orders of an undisclosed amount in the years 2013 and 2014, to make a milestone payment to Antares upon FDA approval of epinephrine auto-injector, and to assume all litigation costs related to the patent litigation between Teva and Meridian Medical" (Ibid).

This may soothe some Antares investors and I'm certain the faithful will be quick to point this out. But also note it reads "years 2013 and 2014" so here again the revenue stream isn't coming in 2012 except for a minimal milestone payment that I don't expect to be much upon FDA approval of the epinephrine auto-injector.

Third, I expect to get chided by the Antares faithful because I stated my concern in a previous article about the potential delay of the Vibex epinephrine injector. Yet here we have the news and another example of Antares missing the mark. And more so because the injector side of the business is suppose to be this company's crown jewel. Yes, Antares upon FDA approval will receive a milestone payment from Teva, but that is nothing compared to being able to sell your product in the market. Meanwhile, Intelliject is off and running this year with their epinephrine injector full speed ahead.

So what is my issue? The good news is knowing Gelnique 3% is entering the market, but the bad news is Antares' revenue stream isn't going to be anywhere near what was hoped for in 2012. Which takes me back to another of my previous concerns: the revenue stream.

Q1 financials are expected anytime now. I can't see how investors can conclude its going to be net positive, but I'll leave it for the 'Comment' section for the Antares faithful to argue their case.

There is a view out there that Antares is immune to hitting bumps in the road... well, almost. In plain truth that has happened twice in the last five months: (1) LibiGel, now (2) Vibex epinephrine. I have come to the conclusion that while Antares is a great long-term growth stock, it's going to take much longer than I originally anticipated. And frankly, I think all the buy-out talk is gibberish and all the hype around NestraGel is yet to mean much of anything. Yes, I've been drinking a dose of reality recently.

Therefore, I still look for Antares to retrace below $2.50. Maybe not immediately, but I do think this litigation settlement hasn't helped Antares towards net positive. I'll look forward to other SA articles that will most likely represent an opposing viewpoint.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AIS, PFE, TEVA over the next 72 hours.

Additional disclosure: Investors buy and/or sell at their risk. As a private investor, I reserve my right to buy and/or sell at any time. I submit articles to SA as a freelance writer. My articles represent my opinion which is subject to change.