In Q2 2012, Antares Pharma (NASDAQ:ATRS) was granted a very significant patent that has received little to no attention. Companies often do not publish these accomplishments for various reasons. For example, they may want to keep their intellectual property activities below their competitors' radar, or they simply may not advertise a patent because some corporate managers view it as disingenuous pumping.
Nevertheless, looking at a patent can often help an investor get the edge on what may be coming next. However, I often find that many investors are turned off or feel they don't adequately understand the scientific language of a patent. In the case of Antares, however, I was fascinated to discover the very opposite because the patent's language is quite simple, yet profound.
As my goal is often to educate investors, as well as promote why I'm invested in a specific biotech stock, my objective in this article to present why United States Patent 8162886 Intradermal Injector is a potential revenue goldmine for both the near- and long-term investor. (Note: "intradermal" means just beneath the skin.)
Timing Is Everything
Patents are like intellectual property windows into the heart and soul of a firm. They become the battle ground and the line in the sand when firms end up in court over intellectual property rights that translate to, "So, who gets the revenue?" Patents are essential and necessary in a highly competitive world.
They also tell you what your favorite biotech company has been up to. From an investor's perspective, it is both a revelation of your firm's highly secretive activities and where their research projects may be from a time standpoint. For example, Antares filed this patent on August 11, 2004, which tells you that the project was something that they were working on prior to that date, and most likely continued to work on afterwards.
As a side note, this was around the time that Antares formed its partnership with Teva (NYSE:TEVA). I believe this little fact will become even more interesting later in this article.
When a patent is granted -- like Antares' was on April 24, 2012 -- this means the company has arrived at a place where its corporate growth strategy has come to fruition. After all, companies want patent protection for as long as they can get it. Therefore, timing is everything.
Given the recent internal growth signs at Antares, it does seem logical that this particular patent is about to play a very significant role in the company's direction. Let me explain...
What The Patent Reveals
An invention must explain why it is novel or unique. To do that, the easiest, and often the most informative part of a patent begins with the Background of the Present Invention and moves into a Summary of the Invention.
In the present case, Antares' "Intradermal Injector" patent begins with an explanation about the need to inject certain medications beneath the shallow layer of the skin. However, this is where the invention's necessity becomes apparent. For example, if one uses a traditional syringe, allowing for the skill (and variability) of the person doing the injection, there is the potential of injecting too deep (into the muscle) or too shallow (spilling onto the surface of the skin that may cause an adverse reaction on the skin). In another example, other auto-injectors face another challenge: overcoming the necessary pressure to penetrate the skin, but then not penetrating the muscle at the same time. This is like pushing on a window that's stuck closed, and then having it fly up and break the glass.
Therefore, Antares's "Intradermal Injector" addresses the above need: How to inject medication just beneath the surface of the skin and mitigate the previously unaddressed variables that make it so difficult to do. Or, put another way: Antares has invented an auto-injector for intradermal penetration, which in usability studies, will hopefully demonstrate it consistently fulfills a recognized need.
Reading A Patent For Its Marketing Value
Typically, a patent doesn't provide an assessment of the marketing potential for its invention. That is a closely guarded secret. However, it is also where researchers and marketers decide whether the invention is a value driver. Scientists and engineers like to invent things, but marketing analysts are there to steer the firm's research dollars into projects that will make a significant return on investment.
In Antare's "Intradermal Injector" case, it is apparent that the company has not only identified why consumers (e.g. hospitals, practitioners, patients) would want to buy this subcutaneous auto-injector, but the range of opportunity is substantial enough to justify the research dollars that went into developing the invention. According to the patent, "It has been found that intradermal delivery of certain substances and vaccines is more effective than when it is delivered intramuscularly."
Right here, it's clear why Antares identified the "Intradermal Injector" as a potential revenue-generator. To be specific, it is contained in the words "certain substances and vaccines."
Although Antares doesn't declare in the patent what those "certain substances and vaccines" are, that doesn't mean they don't know, because otherwise it wouldn't be worth the time and expense. Instead, the ingenuity here is recognizing -- and I think even a novice investor with limited scientific knowledge can appreciate this -- that there are probably a wide range of medications that need to be delivered just beneath the surface of the skin.
How Getting Under The Skin Equates To Potential Revenue Drivers
Antares is currently marketing or is working on a variety of medications using its proprietary injectors: human growth hormone, methotrexate, epinephrine, and testosterone -- these are the ones we know about. Of course, there are many more in development, as illustrated by the company's multiple projects with Teva and Antares' gel chemistry products with Jazz (NASDAQ:JAZZ), Watson (WPI), Daewoong, Ferring, and the "mystery drug" with Pfizer (NYSE:PFE).
In the present case, the "Intradermal Injector" patent exposes a revenue stream of medications from which Antares and its partners may select under the skin revenue drivers. There's a long list of under the skin medications, including vaccines.
We don't have to speculate how such an invention, as explained above, would have a global marketing application. For example, Antares could go it alone as it's currently doing with its Vibex MTX and Vibex QST. Additionally, Teva, or any number of pharmaceuticals firms, could contract with Antares for an entire line of vaccines intended to be delivered just beneath the surface of the skin. This is not the kind of invention that will be limited to one drug, but no doubt will be designed to address the challenges of medication viscosity and the penetration issues without hurting the patient.
So What Drug? Or Drugs?
I have long believed that because Antares is working so closely with Teva, that Teva's flagship drug, Copaxone, has long been on the drawing board for an Antares auto-injector. I also think that it is what their pipeline chart identifies as Vibex 2. I also know some investors will disagree with me, but I ask them to consider: (1) the original timing of the Antares-Teva partnership and its close link to the patent's dating, (2) that Vibex 2 is already on file with the FDA as an "ANDA" (Abbreviated New Drug Application) which fits with Copaxone, and (3) my argument below that Copaxone's necessity is directly addressed by the "Intradermal Injector" patent.
Yes, there may be other drugs under consideration, but here's why Copaxone should be taken seriously as a candidate: "Copaxone® (glatiramer acetate injection) is a disease-modifying medication for the treatment of multiple sclerosis ((NYSE:MS)). It is administered once-a-day by subcutaneous (SC) injection just beneath the skin."
Through hours of reading this year, I discovered that one of the serious side effects of Copaxone that traditional needles do not addressis what happens when the drugs gets on your skin, versus under it. This frequently happens because manually administering a traditional needle requires not only a high degree of skill, but is an inferior delivery method that would be surpassed by Antares' "Intradermal Injector."
Yes, I recognize that without company affirmation, my suggestion is speculative. However, I would counter that Copaxone also fits an identified medical need that is not currently addressed by traditional needles and/or other auto-injectors on the market.
Copaxone is frequently self-injected by multiple sclerosis sufferers. Just read up on the injection side effects ("bubbling or blistering of the skin" -- the same side effects mentioned in the Intradermal Injector patent! -- and you have all the evidence you need to conclude that there is a high probability that Antares and Teva are working on an auto-injector for Copaxone and/or a Copaxone combination. The clinical trials website is flush with examples.
While "Which drug?" Antares' "Intradermal Injector" will ultimately administer remains open to speculation, more likely it will be, "How many drugs?" since Antares' list of subcutaneously administered medications includes a variety of possibilities, including vaccines. I maintain it is Vibex 2 (Copaxone) for all the reasons I've presented, including this important "Intradermal Injector" patent that has flown beneath the market's radar.
This article has been narrowly focused on a particular issue (understanding how the value of a patent can be translated into potential revenue drivers), but more specifically in Antares' case, how the company must on the verge of adding even more value that has recently driven the pps above $5/share. While biotech investing is always risky and investors should make their own decisions, I found this recent patent (especially since Antares didn't advertise it to its shareholders) to be an early trumpet blast, and I believe it is is going to further excite Antares investors and bring increased institutional investment. Translated into dollars, a Vibex CPX would be worth millions of revenue dollars to Antares, as well as another strategy for Teva to extend its patent protection by having it entered into the FDA's Orange Book.
Despite today's volatility, I remain very bullish on this stock because I sincerely think this present patent is about the blow the lid off of a closely guarded secret Antares and Teva have kept thus far. However, I strongly encourage investors to draw their own conclusions.
Disclosure: I am long ATRS.
Additional disclosure: Investors buy and/or sell at their own risk. For me "long" is until I sell. I do not "short" stocks. I declare that I may day-trade any stock mentioned in this article at any time.