Antares Pharma (ATRS) CEO, Robert Apple on Q3 2018 Results - Earnings Call Transcript

|
About: Antares Pharma Inc. (ATRS)
by: SA Transcripts

Antares Pharma Inc. (NASDAQ:ATRS) Q3 2018 Earnings Conference Call November 6, 2018 8:30 AM ET

Executives

Robert Apple - President, Chief Executive Officer

Fred Powell - Executive Vice President, Chief Financial Officer

Jack Howarth - Vice President, Corporate Affairs

Analysts

Elliot Wilbur - Raymond James

Anthony Petrone - Jefferies

Mickey Ingerman - Piper Jaffray

Matt Kaplan - Ladenburg Thalmann

John Vandermosten - Zacks

Oren Livnat - Wainwright

Operator

Ladies and gentlemen, welcome to the Antares Pharma Third Quarter 2018 Operating and Financial Results conference call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions.


I will now hand the conference call over to Jack Howarth, Antares’ Vice President of Corporate Affairs. Please go ahead, sir.

Jack Howarth

Thank you, Cathy, and good morning everyone. This morning, we announced our third quarter 2018 financial results and recent operating achievements, and a copy of the press release can be found on the Antares website at www.antarespharma.com under the For Investors section. In addition, this morning’s teleconference also contains an interactive slide presentation. If you have dialed into the audio-only teleconference, you can follow along with the slides, which can be found on our website under the Investor Information section. The conference call and slide presentation will be simultaneously webcast on the For Investors section of the Antares website under the Webcasts and Presentations tab. If you are currently unable to access our website, the slide presentation will be archived under the Webcasts and Presentations tab at the conclusion of today’s call.

Before we begin, I’d like to remind you that some of our statements made during this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties, and actual results could differ materially from those projected in any forward-looking statements. Forward-looking statements provide Antares’ current expectation or forecast of future events. Factors that could cause actual results to differ include but are not limited to market acceptance, adequate reimbursement, successful launch and future revenue from Xyosted and Teva’s generic EpiPen, market acceptance and future revenue from Makena, Sumatriptan, and Otrexup, the timing and successful development and FDA approval of the rescue pen with Pfizer and future revenue from same, the timing and results of proprietary and partnered research, development and clinical trials, including development projects with Teva, statements about new product approvals and FDA action, and the company’s financial performance and other factors which are identified in today’s presentation and from time to time in the company’s filings with the SEC on Form 10-K and as updated in Antares’ recent periodic filings on Form 10-Q and 8-K, and other filings made with the Securities and Exchange Commission. Links to these documents are available on the Investor Information section of our website and we encourage you to review these materials.

Antares is providing this information as of the date of today’s conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements.

Joining me on the call today are Bob Apple, President and Chief Executive Officer, and Fred Powell, Executive Vice President and Chief Financial Officer.

Let’s review the agenda for today’s call on Slide No. 3. Bob will begin with a high level review of the third quarter and year-to-date achievements. Fred will present the detailed third quarter financial results, and then Bob will give you a commercial business update and a review of future catalysts. After our presentation, we will open the lines up for your questions.

Please turn to Slide No. 4. I will now turn the call over to Bob Apple. Bob?

Robert Apple

Thanks Jack, and good morning to everyone joining us on today’s call. This morning’s earnings release highlighted record quarterly revenues and significant progress against our 2018 goals. On the financial front, we continue to make great progress transitioning from unpredictable development revenue to more predictable product and royalty revenue from our commercial business. We have been building towards this for a number of years and we are now just starting to see the results of our efforts on both proprietary products and partner products.

We reported third quarter revenue increased 19% to $17.9 million, and year-to-date revenue increased 11% to $44.7 million compared to the same period last year. The revenue growth in this quarter and year-to-date was mostly driven by the recent launch of the Makena auto injector product sold by our partner, AMAG. A further boost to our revenue was provided by a $2 million milestone payment from Teva in connection with the FDA’s approval of the first and only authorized generic to Mylan’s EpiPen.

Moving down the P&L, total operating expenses were up 4% and 5% respectively for both the quarter and year-to-date period mostly due to increased investment in research and development as we continued to expand our internal pipeline of products. Overall, we narrowed our loss in the third quarter to $0.01. We ended the third quarter with cash of $28.2 million, which compares to $28.8 million at the end of the second quarter of 2018. Year-to-date, we have grown our business with little impact on our cash balance. Our nine-month cash burn was approximately $3.4 million. Fred will take you through the detailed financial results in just a few minutes.

Turning now to the operations side of the business, we had a fantastic quarter, beginning with the August announcement of the addition of another partner product opportunity to our pipeline. We are working with Pfizer to develop a combination drug device rescue pen. This uniquely designed rescue pen will utilize the Antares QuickShot auto injector and be combined with a Pfizer drug, which Pfizer is keeping confidential due to competitive reasons. Important to note is that Pfizer has a wholly owned division with an auto injector platform, and we believe they decided to partner with Antares given our rescue pen expertise and our track record of getting drug device combination products approved at the FDA. Of course, we also believe our QuickShot device, the basis of two other FDA-approved combination products, is the best auto injector on the market.

Pfizer will pay for the design and development costs of the combination product and, assuming FDA approval, Antares will be responsible for providing fully packaged commercial product to Pfizer at cost plus margin. We will also receive royalties on net sales of the rescue pen. Needless to say, we are very excited to be working with such a prestigious company as Pfizer on this important program in what we believe to be a large and expanding market.

Within days of the Pfizer announcement, we received highly anticipated news from our partner, Teva, that their application for a generic EpiPen was approved by the FDA. Utilizing our Vibex device, which is also the basis of two other FDA-approved combination products, we designed an auto injector rescue pen for Teva containing epinephrine to treat severe allergic or anaphylactic reactions. This was the second approval of a partner product this year following the February approval of AMAG’s Makena auto injector. We worked very closely with Teva throughout the review process and demonstrated to the FDA that our device conformed to all the robust and very recent guidelines needed for approval of a lifesaving device. As a reminder, we manufacture the epinephrine devices for Teva at cost plus a margin and receive a mid to high single digit royalty on in-market sales of the product.

Capping off an already tremendous quarter, on September 28 we received FDA approval of Xyosted, a novel subcutaneous auto injector product utilizing the QuickShot device designed for once weekly at home, virtually painless self administration of testosterone. Xyosted is indicated for testosterone replacement therapy in adult males. This was a significant milestone for the company and the first new testosterone treatment approved by the FDA since 2014. We believe Xyosted significantly enhances the patient’s option for treatment and I’m proud of our team’s efforts in the successful development of this important new product.

After Fred finishes taking you through the third quarter and year-to-date financials, I will provide more detail about our Xyosted launch plans. I would now like to turn the call over to Fred. Fred?

Fred Powell

Thanks Bob. Let’s begin by looking at the financial results for the third quarter and nine months year-to-date through September 30 on Slide No. 5. Total revenue was $17.9 million for the three months ended September 30, 2018 compared to $15.1 million in 2017, an increase of 19%. Total revenue for the nine months ended September 30, 2018 increased by 11% to $44.7 million as compared to $40.5 million in 2017. Both the third quarter and nine month year-to-date revenue totals were the highest to date for the company.

Product sales were $11.6 million for the three months ended September 30, 2018 compared to $13.3 million in 2017, and were $33.6 million for the nine months ended September 30, 2018 compared to $30.7 million in 2017, a 10% increase. Product sales represent sales of our proprietary products and commercial product or device components to our partners. The decrease in product revenues for the three month period was primary attributable to lower Otrexup and Sumatriptan injection sales offset by an increase in sales of Makena auto injectors to AMAG. The increase in product sales for the nine-month period was primarily driven by sales of Makena auto injectors to AMAG.

Licensing and development revenue was $2.6 million and $1.5 million for the three months ended September 30, 2018 and 2017 respectively, and $5.6 million and $9 million for the nine months ended September 30, 2018 and 2017 respectively. The increase in licensing and development revenue for the three months ended September 30, 2018 as compared to the same periods in 2017 was principally the result of a milestone payment received in connection with the approval of Teva’s generic EpiPen. The decrease in licensing and development revenue for the nine-month period was primarily the result of reduction in development activities with AMAG for the Makena auto injector product, which was approved by the FDA in February 2018 and is now a marketed product.

Royalty revenue was $3.7 million for the three months ended September 30, 2018 compared to $200,000 for the same period in 2017, and totaled $5.5 million for the nine months ended September 30, 2018 compared to $800,000 for the first nine months of 2017. The increase in royalty revenue for the three and nine month periods of 2018 was driven by in-market sales of the Makena auto injector product by our partner, AMAG Pharmaceuticals.

Operating expenses were $11.9 million for the third quarter of 2018 compared to $11.5 million in the comparable period of 2017. Total operating expenses for the nine months ended September 30, 2018 were $34.2 million as compared to $32.5 million for the same period in 2017. The increase in operating expenses for the three and nine month periods of 2018 was primarily due to additional research and development spending associated with potential pipeline products and an increase in stock compensation expense due to achievement of long-term performance goals tied to the recent FDA approvals.

Net loss was $1.9 million for the third quarter of 2018 compared to $5.5 million in the same period of 2017, and $12.6 million for the nine months ended September 30, 2018 compared to $13 million in the same period in 2017. Net loss per share was $0.01 and $0.08 for the three and nine month periods ended September 30, 2018 respectively, and $0.03 and $0.08 for the comparable periods in 2017 respectively.

At September 30, 2018, cash, cash equivalents and investments were $28.2 million compared to $31.6 million at December 31, 2017. Cash burn for the third quarter was $600,000. The first three quarters of this year have been transformational for Antares due in large part to the achievement of four significant operational milestones: the approvals of Makena subcu, generic EpiPen and Xyosted, as well as the Pfizer collaboration for a rescue pen. On the financial side, we were very pleased with the record revenue for the third quarter and first nine months of the year, and the continuing transition of our revenue from development to commercial.

If you analyze what we reported this quarter, total revenue from our current commercial business, which is comprised of revenue from Otrexup, Sumatriptan and Makena, was $13.4 million, which was approximately 75% of our total revenue. You will calculate the same split in our year-to-date revenue. We believe this trend of increasing more predictable commercial revenue on a quarterly and annual basis will continue and we’ll soon benefit from the Xyosted and generic EpiPen launches. As a result, for the first time we can provide revenue guidance and we expect that our full year 2018 total revenue will be in the range of $60 million to $65 million as compared to $54.5 million in 2017. This equates to a range of 10 to 20% year-over-year growth.

I’ll now turn the call back to Bob. Bob?

Robert Apple

Thanks Fred. Please turn to Slide 6.

As I mentioned earlier, the company received exciting news at the end of the third quarter with FDA approval of Xyosted. This approval adds another revenue generator to our portfolio of drug device combination products. We believe the subcutaneous dosing of Xyosted may eliminate both the transfer concerns commonly associated with testosterone gel products and the potentially painful injection associated with the intramuscular injection products. Additionally, Xyosted has been clinically shown to produce steady, physiologically normal levels of testosterone with a narrow peak-to-trough ratio. We believe this is a great treatment option for new patients as well as patients currently dissatisfied with their existing testosterone therapies.

Turning now to Slide No. 7, Xyosted has been approved in three dosage strengths: 50 milligrams, 75 milligrams, and 100 milligrams. The recommended starting dose is 75 milligrams weekly and is dispensed as a four-pack of auto injectors per box for four weeks of treatment. The auto injector is easy to use and can be stored at room temperature. The 27-gauge fine needle allows for rapid and virtually painless delivery of testosterone. Ninety-nine percent of the injections that were observed in the 52-week safety and efficacy study were reported as painless by the patient.

Moving to Slide No. 8, recently we began packaging Xyosted in preparation for a December launch. The majority of the new sales reps have been identified, offered positions, and are scheduled to begin onboarding late this month. Many of these reps are highly experienced pharmaceutical professionals and many possess a background in urology, testosterone replacement therapy, and new product launches. Our current plan is to have the Xyosted reps trained and ready to start detailing positions in December.

In addition, we will also leverage and cross-train the Otrexup reps on Xyosted. In many large group practices or university settings, there may be a Xyosted target, either a urologist, endocrinologist or primary care physician in close proximity to an Otrexup target. By cross-training Otrexup reps, we will effectively have approximately 90 sales professionals in the field detailing Xyosted.

We believe the key to a successful launch requires effective sales training materials, visual aids, physician targeting and territory mapping. Extensive research was done by our commercial team with healthcare professionals and payors to help ensure the proper strategies are in place for launch. We have also designed a comprehensive patient support program that will offer co-pay assistance to most commercially insured patients. In addition, we will provide benefits investigation and prior authorization support service for physician offices through an experienced and well known third party vendor.

The company has already had initial Xyosted meetings with insurance plans and pharmacy benefit managers. As a result of our pre-launch contracting work, we are targeting two-thirds of all covered lives to have access to Xyosted by the end of 2019. Importantly and based on market analysis and discussions with third party payors, we have settled on a wholesale acquisition cost of $475 per month. The brand leader, Androgel, has a price of $615 per month and a recently approved generic of that product has a price of approximately $559 per month. We believe that the combination of the excellent product profile of Xyosted and a reasonable price point will enhance market acceptance.

Please turn to Slide No. 9. According to Symphony Health Solutions, there were 6.5 million prescriptions filled in the retail testosterone replacement therapy market in 2017. As you can see from this slide, the TRT market is on a current run rate of approximately 7 million prescriptions this year. We initially plan to target roughly 12,000 physicians who are high writers of testosterone products. We believe this targeting strategy coupled with strategic territory mapping should help maximize our reach when we launch Xyosted.

I’d now like to talk more about the Makena auto injector on Slide No. 10. Revenue from Makena subcu continues to grow and we are very pleased with the physician and patient feedback we have received from our partner. Recognition of QuickShot’s attributes continue to be one of the biggest factors driving demand. Our third quarter Makena revenue totaled $5.3 million, bringing the year-to-date total to $12 million. The Makena auto injector has been on the market less than seven months through the third quarter, and we are excited about the tremendous progress AMAG has made switching patients to the auto injector product, and believe this will lead to continued revenue growth.

Shifting now to another upcoming contributor to our commercial business on Slide 11, Teva’s recent approval of a therapeutically equivalent and fully substitutable generic to the branded EpiPen is yet another source of product and royalty revenue going forward. We believe there is a significant need for Teva’s generic product as EpiPen shortages have been an issue all across the United States for patients who need this life sparing product. You’ll recall that over the past two years, we shipped significant pre-launch quantities of Vibex devices to support their launch, and we already have received additional purchase orders to resupply devices for 2019. Teva has guided to a fourth quarter launch and we look forward to the much anticipated launch of the generic EpiPen.

Wrapping up on Slide No. 12, we have had a great year thus far in terms of significant achievements, and we are building momentum going into 2019. Xyosted is now approved, and we will be launching next month into the very large testosterone replacement market. We believe that given the favorable product profile of Xyosted, we can penetrate both the topical and injectable segments of the market, making this a potentially significant revenue driver for Antares going forward.

AMAG reported impressive third quarter results for the Makena auto injector product, and more importantly recently guided investors that the Makena auto injector should deliver to AMAG $40 million to $50 million in revenue per quarter in 2019. AMAG has indicated it’s very important to them to defend the Makena brand, and the Makena auto injector is a big part of that strategy.

Part of our growth the past two years was from the shipment of pre-launch quantities of Epi devices. We will now begin recording product revenue in the balance of 2018 and going forward as we fill new purchase orders for additional devices. We have yet to derive the benefit of royalties from in-market sales by Teva but will once the product is launched this quarter.

With respect to our Pfizer collaboration, we have initiated work on modifying the QuickShot device for Pfizer’s rescue pen. We believe this rescue pen will compete in a potentially large and growing market, assuming FDA approval.

On the internal R&D front, we have dosed the first healthy volunteers with drug from our next pipeline project and await the results. We plan to disclose our next proprietary drug device combination product in the coming months and look forward to progressing that potential product in the pivotal PK studies in late 2019.

The transaction with Ferring regarding the divestiture of the Zomajet device is nearing an end, and we expect to receive the final installment of $5 million when the closing conditions have been sized.

Finally turning to our pending development projects with our partner, Teva, they continue to file the ANDA pathway and are awaiting approval of teriparatide, a generic to Lilly’s Forteo. Lilly has indicated they expect a generic competitor sometime in the second half of next year. Teva is also continuing to work on a generic version of Byetta following the same ANDA pathway as teriparatide.

Once again, I believe we have made tremendous operational and financial progress this quarter and in the first nine months of 2018. I’m proud of our team’s commitment to develop a novel combination therapy designed to help improve patients’ treatment options. With the potential for continued growth in revenue resulting from the upcoming launch of the recently approved products and a continued focus on developing our pipeline, we believe the balance of 2018 and beyond can be an exciting time for Antares and our shareholders.

That concludes our prepared remarks for today. Operator, could you now open the lines for the question and answer session?

Question-and-Answer Session

Operator

[Operator instructions]

The first question comes from Elliot Wilbur of Raymond James.

Elliot Wilbur

Thanks, good morning. Several questions around the forthcoming Xyosted launch. Bob, I apologize - I may have missed this in your prepared commentary, but did you guys indicate when you actually expect trade shipments to begin, and any reason that you wouldn’t recognize revenue from the initial shipments, assuming that will in fact occur before year end?

Robert Apple

Sure, so we expect the trade shipments to happen sometime this month, towards the back end of this month, in November, with the reps being in the field starting in December, the first couple weeks of December detailing the position. We want to make sure the product is there for the physicians when they write it and also be able to provide samples to physicians once the reps are out in the field.

As far as the revenue, I’ll let Fred answer that question.

Fred Powell

Sure, Elliot. We certainly plan on recognizing revenue based upon the shipment to the distributors in the fourth quarter. We don’t see any issues there.

Elliot Wilbur

Okay, so fair to assume that you’re going to have feet on the street early to mid December, but when is the actual sales launch meeting scheduled?

Robert Apple

The sales launch meeting is scheduled for the first week of December, I believe--I guess the actual beginning of the second week. They’ll be doing in-house or at-home training for two weeks and then we have our sales training as a group, and then they’ll be out in the field right after that.

Elliot Wilbur

Okay. As we think about modeling the Xyosted ramp, at least from an external perspective, and as you guys benchmark the launch against historical drug launches, anything in terms of unique dynamics with respect to the product specifically or current market dynamics that you think might have a more pronounced impact on the shape of the launch curve versus some historical precedents? Obviously it just seems like payor restrictions seem to be much more heavy upfront and you kind of get maybe a more depressed launch curve in the first 12 months than what we’ve seen historically, but just any color commentary around that line of thinking about be helpful.

Robert Apple

Yes Elliot, I think unfortunately any launch today is really--it’s predicated by the payor uptake, and the way that it works is you have to be on formulary and certain plans will provide access right out of the gate if you give them an access rebate, and other plans just will not do that. We don’t see our launch being any different than the vast majority of all of the products in the market in that there will be--you know, the first quarter we anticipate having a number of plans already having the product on formulary and covered, likely Tier 3 access, and then as you move along the quarters, as more and more plans and more and more covered lives will be available to us and for Xyosted coverage.

I don’t think there’s really much you can do beyond the restraints that exist in the market today based on the payor coverage. We’re going to obviously provide co-pay support, we’re going to provide samples, some free product while patients are getting through the adjudication process for their claims, but I think that you’re going to see a typical launch ramp where it’s a sloping curve up as you go out towards the end of the year. There’s really no precedent or any other product in the market that would suggest otherwise, particularly in testosterone replacement therapy. There are a number of products out there, patients will likely switch from their current therapy to our product if the doctors see it to be the right product for them, and then as new patients come onboard - fortunately in this market, there’s quite a lot of new patients that happen on a regular basis - they’ll be given Xyosted as an option for treatment.

I think for us, it’s going to be a matter of making sure we have the coverage as soon as possible, providing co-pay support and adjudication help to the physicians and to the offices, and I think we’ll see the traditional slope. Hopefully it will be one that meets our expectations, but right now we feel really good about the product’s profile, the reaction we’ve heard and have seen from the physicians and the payors regarding Xyosted, so we feel very good about the opportunity and look forward to getting into the marketplace next month.

Elliot Wilbur

All right, thank you.

Operator

Our next question comes from Anthony Petrone of Jefferies.

Anthony Petrone

Thank you and congrats on good progress here on a number of fronts. Maybe to just piggyback off of Xyosted and insurance, as we look at prior authorization hurdles, you mentioned Tier 3 coverage, but maybe a little bit on what you think prior authorization will be like, just considering the label around blood pressure monitoring and the like. Anything that you can share on that front?

Then the follow-up would be on EpiPen. As we know, there’s a shortage in the marketplace, Teva is talking about a fourth quarter launch. Maybe just how the shortage out there potentially serves as a headwind as Teva gets on market? Thanks.

Robert Apple

Sure. On Xyosted, what I can tell you is that fortunately, and it’s just a reality of the market, all testosterone products have a prior authorization, and essentially that prior authorization is two blood draws to show that you have hypogonadism or testosterone deficiency. We don’t see that being any different for our product. We also don’t see any additional prior authorizations because of our label around blood pressure because there isn’t any specific criteria other than you shouldn’t have uncontrolled hypertension if you go onto our product. The doctors will determine if it’s the right patient for Xyosted, but we believe that the prior authorizations will be similar to other products on the market.

Now, some of those products have been on the market a long time so it’s a little bit easier process, and so what we’re going to do to minimize that is use a third party vendor, Cover My Meds, which is well known particularly in this space to do the adjudication process. They’ll help physician offices with the prior authorizations and then if the claim is--if the product is not covered, they will help to try to get that coverage for that particular prescription. We intend to lean on that quite a bit in the early part of the launch as we’re getting the coverage up and running, but generally we don’t see any significant obstacles on a go-forward basis beyond what other products see in this space. I think that for Xyosted, again we’re putting the vast majority of our marketing resources - co-pay support, free samples, free drug, and again adjudication services like Cover My Meds.

Anthony Petrone

Got it, that’s helpful.

Robert Apple

What was your question on Epi?

Anthony Petrone

On Epi, out there, there’s talk of a shortage and Teva is getting ready to launch in the fourth quarter, so just wondering what you’re hearing in terms of supply capacity in the marketplace and how potentially this serves as a tailwind.

Robert Apple

We’re both very excited about the launch, both Teva and Antares, and we believe that we will be able to provide a significant amount of devices to satisfy that demand that exists today. There continues to be issues with supply shortages for both EpiPen and another branded product, Adrenaclick, which is not substitutable to the EpiPen but still does about 25% of the market. We feel that we are coming in at the right time for sure to help solve for those issues. Teva has been gearing up since the approval. Unfortunately with a combination product such as Epi, you can’t have a stockpile already manufactured and waiting to go at approval. You’ve got to wait for the labeling comments, which are literally the last day of the approval, then you’ve got to run that through the label and then you have to manufacture the drug, and the devices were already ready to go so now they’re in the process of releasing that product. Hopefully you will be announcing a launch very soon.

We’re really excited. We continue to get orders for the resupply for 2019 and beyond, so we’re very comfortable with our capacity for providing those devices. For Epi, it’s one of the products that we have where all we do is provide the devices to Teva. We don’t package it and we don’t provide the drug, whereas with other products like Sumatriptan we do everything, with AMAG we do everything. Here, we just provide devices, and we feel very comfortable where we are with that, and we believe that Teva is in the right position for a very successful launch and being able to supply the market, given that they’re probably the largest generic company in the world. This is really an area where they excel, going into these markets for the first generic in something like EpiPen, which is a very large opportunity for both of us.

Anthony Petrone

Thanks again.

Operator

Our next question comes from David Amsellem of Piper Jaffray.

Mickey Ingerman

Hi, good morning. This is Mickey Ingerman on for David. On the list price for Xyosted, which translates into $475 a month, can you guys discuss the extent to which you’re planning to contract with payors, and then to the extent that you do contract, can you provide any color on the expected gross to net spread? I have one follow-up.

Robert Apple

I’ll cover the first part of the question. For the $475 WAC, we are going to obviously target the major insurance plans as well as the PBMs. Again like I mentioned earlier in my prepared comments, we want to focus on the larger plans, try to get access, early access, so pay a reasonable rebate in order to have coverage from day one, and we believe we’re going down the path to that with some pretty large opportunities. On a go-forward basis, we’re looking at Tier 3 coverage. We’re really not looking for a preferred position. You tend to have to give too much of a rebate in order to be a preferred product. With Xyosted, we believe the features and benefits of the product will be a driving force of demand and with a Tier 3, you’re looking at a $50 to $75 co-pay on average and we’ll help patients with co-pay support up to a certain amount.

We feel pretty strongly that it will be the right price for the patient, right price for the payors, and as far as gross to net, I’ll turn that over to Fred.

Fred Powell

That’s something that we do not disclose and we are not planning on disclosing. As Bob said, we will provide a reasonable rebate. There will be the typical distribution discounts that we have, but we will not be disclosing our gross to net calculation.

Robert Apple

I think to try to do it at this point is premature because we really haven’t been in front of a large number of the payors, and obviously we have a target in mind which we obviously want to keep as low as possible, but until you meet with those plans and see where they’re--what they’re thinking, it’s really when you decide whether or not you’re actually going to give them a rebate or just have that plan not be one where you’re under contract. It still could be covered, just not contracted, and we’ll look at those as they come along; but at this point, we’re targeting Tier 3, as little rebate as possible, but we do know you have to give some access rebate in order to get coverage. But again, we think that our product profile is such that it’s a compelling story for both the payors and the patients, so we’ll see how that goes in the next few months as we meet in force with the different plans.

Mickey Ingerman

Got it. AMAG [indiscernible] suggests that given the increased demand for the Makena auto injector, there could be supply constraints. Have you guys discussed the extent to which there are or may be supply constraints on the auto injector?

Robert Apple

Their earnings call, they were specifically talking about their branded IM product as having supply constraints. I think that clearly the demand for the auto injector has outpaced everyone’s expectations, both AMAG and ours, and I think that we and AMAG have effectively handled that demand so we don’t see any supply shortages, clearly not on the device end, from our side, what we control. We don’t control the drug side, but AMAG provides the prefilled syringe for the product for our auto injector, so we’ve been working hand in glove with AMAG over the last six months in order to manage the supply out there, and we believe that will continue to be successful and a very positive joint partnership there on getting this product to the market.

But again, their constraints have been really around their intramuscular brand, because they still sell it. They’re still competing against a generic in that market. The auto injector is what really they're focusing on, though, is switching all their patients over to that product, and they’ve been doing a great job to this point.

Mickey Ingerman

Okay, thanks.

Operator

Our next question comes from Matt Kaplan of Ladenburg Thalmann.

Matt Kaplan

Good morning guys. Congrats on all the progress. Wanted to focus on Xyosted a little bit more. As you mentioned, typically in launches the reimbursement component is the major headwind to uptake. When do you think--can you help understand the path forward here, when do you think that reimbursement and coverage will not be an issue or cease to be an issue looking into next year as you get the plans contracted and PBMs and other things in place?

Robert Apple

Like I mentioned earlier, we expect a certain number of lives in the first quarter, which we believe is a substantial number of lives. Testosterone fortunately is a covered product across the board, so payors tend to have it on formulary. For us, it’s going to be every quarter we’re going to add more and more lives, and again I think our target is by the end of the year to have at least 66% of all covered lives be able to get Xyosted. Obviously we’d like it to be higher if possible, but it’s really a function of the thousands of plans that you have to deal with in order to get that type of coverage.

I don’t think it will be an issue for any of our expectations or internal projections. It’s always been contemplated in our numbers internally as to you have to get this coverage over a period of time, but I would say that we’ll be probably in good shape by the end of 2019 as far as having the vast majority of lives covered for Xyosted. It will definitely be on a quarter to quarter basis and I’m not sure we’re going to provide an update on where we are, but I think that generally we’ll be able to guide the street as to how things are going from a coverage standpoint when we have our earnings calls.

Matt Kaplan

Very good. Then you mentioned the guidance that AMAG provided with respect to Makena auto injector, $40 million to $50 million per quarter in 2019. If you think about the low end of that, $160 million for the year, what would that translate to Antares?

Robert Apple

There’s a combination of the product sales and nice margin, and then we also obviously get a royalty. What we’ve disclosed to the street is that we get a high single digit to low double digit royalty on their in-sell, and I think that if you wanted to spend the time, you probably could figure out that royalty based on what they said they did last quarter and what we did in our royalties. It’s kind of a calculation that’s not that complicated.

Going forward, we don’t really give guidance yet for next year, but we think that on the low end if they achieve their guidance of $160 million, it’s a meaningful product for us, and the good news is that royalty is all margin and it drops right to the bottom line, so it’s a significant amount of money for us.

What we don’t know in that guidance is what type of price erosion they have, if any, if generics come on the market, so we could be delivering more devices than we are currently delivering as far as on a run rate in order to achieve those numbers. We just don’t know, and I know that AMAG has indicated that there’s one generic on the market and they do expect more before the end of the year, if not into early ’19. We don’t know the impact of what more generics would have. Right now, the generic has not had a big impact whatsoever on the AMAG brand, which includes our product as well as their IM. It’s a difficult market to access because it’s a lot of direct bill to physicians, so I think that there’s clearly an opportunity to maintain more of the market share than typically happens when you have a generic.

Then you move onto our auto injector, there is no generic to that auto injector, and it’s a very compelling product for patients and for physicians. Quite honestly, I think that the fact that AMAG kept it the same price as the IM with all the positive attributes that the patients and the doctors feel the auto injector provides, I think that was a very smart marketing move on their end to make an easy transition to our product. So far, it’s really yielded some really nice results for AMAG and for us, and I think it’s going to continue assuming there isn’t any significant change in the marketplace.

We feel really good about the guidance that they gave, and we are in the process of manufacturing those devices in order to meet those demands and we look forward to continuing to supply the market in 2019.

Matt Kaplan

Right. Last question in terms of focusing on your pipeline, you mentioned your next pipeline project could enter pivotal studies later next year. Can you give us a sense in terms of that market opportunity associated with that project?

Robert Apple

The only thing we really said is it’s a neurology product, a rescue pen type product, and so I think that to try to establish the market size is pretty difficult. It really depends on the product attributes, what you wind up seeing in the studies as far as the value proposition. Our goal is to get it through the early studies that we’re conducting right now, to show that we can actually deliver the product effectively, meet the PK requirements, and then move it into the pivotal PK studies. We think it’s a great product concept, hopefully we’ll be able to disclose what that is by the end of this year depending on the results of these early studies, and then I think that once the actual product and the market it’s going into is established, I think the analysts will have a better opportunity to really view what the market landscape is and what the potential opportunity is for the product. But until we have success in dosing, it’s really premature for us to talk about the market opportunity here.

Matt Kaplan

Great, thanks for taking the questions.

Operator

Our next question comes from John Vandermosten of Zacks Small Cap.

John Vandermosten

Good morning. I wanted to follow on one of the other questions from one of the other callers on the Makena IM product. I guess there was some hold-ups there for that side of the business. Is that a win for Antares as perhaps docs move over to the subcu option, or is that something that benefits generic competitors more?

Robert Apple

That’s a question for AMAG. The switch to the auto injector has been successful and strong. The fact that they have a potential supply constraint with the IM, it’s really hard to predict from my end as to whether or not that’s a positive or a negative for Makena auto injector. I think that from the time that the product’s been approved, they’ve been effectively trying to switch the vast majority of their patients to the auto injector. I just really can’t answer that - I don’t know their internal marketing mindset in that area. You’d have to ask AMAG.

John Vandermosten

Okay. Next question is just on the Pfizer deal. Are first deliveries there a 2019 event or a 2020 event? And when I say first deliveries, I mean of the product to get ready, not an approved product.

Robert Apple

I think clearly there’s no scenario where it’s ready to go in 2019. It was just signed in August and developing combination products is a complex process, which is much faster than a traditional NCE route but still you have to do your development work around the device, around the user studies for the patients, and then generally just the same C-section itself is usually an area that requires time. I think what I can tell you is that we’re working on the device as we speak, we’re having numerous joint meetings with Pfizer on a regular basis and it’s a high priority for them, and they’re working on the CMC. We’ll be going into some user studies earlier next year, but really the vast majority of the development will be in 2019, 2020, and so until Pfizer decides that it’s the right time to disclose what that product is, it’s really hard for me to give any guidance as to the timing of the product moving into approval, a filing or an approval. I think you’ll see development revenue next year, you’ll get a sense as to how it’s moving along based on that, and then it’s really a function of whether or not Pfizer decides it’s the right time to disclose what that product is, whether it’s through clin trials or some other format. That’s their call, and we’re going to respect that.

John Vandermosten

Okay, that actually is very helpful. Last question is a financial one. You provided some guidance for this year, between $60 million and $65 million. If you look at that exit rate at the end of the year and then we also take into account an increase in the sales force, what does that mean for cash burn for 2019?

Fred Powell

That’s a great question, John. You’re right - taking a look at where we’re at for the end of this year and projecting going into next year, we have a number of variables in what you would expect our budget would be. We’re deep in the budget process for 2019 now, and we know we are launching Xyosted and that’s a variable for us. Any time you have the initial year of launch of a product, you would expect the ramp that Bob has discussed earlier on the call, that it may take a while for us to get coverage before we start to see that ramp take place for significant revenue. We could be looking at a cash burn in 2019 for the Xyosted product.

In addition with Epi, that has not even launched yet, so again it’s very difficult for us to model what the revenue is going to be there as well as the potential royalties we would have on the Epi device until after it launches. It’s a bit premature right now to say where we will be in terms of the cash requirements for 2019, but where we sit right now, we’re in a good cash position as of right now and we’ll continue to monitor that going forward.

John Vandermosten

All right, thank you.

Operator

Our final question comes from Oren Livnat of Wainwright.

Oren Livnat

Hi, thanks for taking the question. I almost had my thunder stolen on that last one. I did want to follow up on guidance. I appreciate getting first time guidance now - obviously that’s a dividend of having more predictable revenue streams, and heading into next year, as you said, there are a lot of variables. I guess big picture, do you anticipate earlier in the year giving any 2019 revenue projections, or are we going to have to wait until we’re well into the year, like this year, or might you even split out base business and say hey, for the AMAG and Sumatriptan and Otrexup businesses, we do have visibility there, we can give some sort of floor guidance on that part of the business, while leaving obviously a lot of wiggle room on the Xyosted launch and EpiPen, depending on where that is timing-wise? Thanks.

Fred Powell

I think, Oren, that we will be looking at giving guidance at the beginning of next year for the full year, but since we do have so many different components in our revenue make-up with product, with development, as well with royalty, I don’t see us splitting it out at the beginning of the year. As we go during the year, as we get greater visibility, we may do that, but I would just see us giving overall guidance at the beginning of 2019.

Oren Livnat

Okay, so presumably you’re going to have to be conservative though, right, given that the Xyosted launch, you’re going to learn a lot in the early days and as you move through the year.

Robert Apple

I think conservative is maybe not the right word. I think any time you’re giving new guidance, particularly around the growth that we’re expecting, it’s never conservative in our mind, right, because it’s pretty much we’ve had accelerated growth for the last few years and we’re going to continue to do that. I think what gives us comfort in being able to give guidance, like we said in the prepared remarks, is that our revenue is becoming more predictable and we’re able to do that guidance based on POs that we have for the devices, for Epi, for Makena, and then obviously you have to assume a launch quantity for Xyosted and what your penetration rate is going to be. There is risk in the forecast particularly when there is two major products, being Xyosted and Epi, that you don’t have the comfort of history. We have now some historical reference on AMAG, we have a sense as to where that’s going because what we’ve been delivering for AMAG as well as what their guidance is, assuming their guidance is accurate. What we don’t have any real visibility is in that selling price for Epi, we don’t know how many units they’re going to take, how fast their penetration rates are going to be because it’s very different in the generic market than it is on a branded market. Again with Xyosted, obviously we believe it’s got all the right attributes to be a successful product, but until we see the coverage you have, until you see if there are any barriers that the payors put up, which again we’re not really anticipating anything different than what the market is or where the other products are in the market, but any guidance at this level is--I wouldn’t call it conservative, I would just say generally it’s a bit more risky than a more established business that has recurring revenues for the past five or 10 years. But we’re going to give guidance because we think we’re at the point where we can effectively manage the operations from a product standpoint. What we can’t really gauge really now are some of the royalty elements of Epi as well as Xyosted.

Oren Livnat

All right, appreciate it. Thanks.

Operator

At this time, I would like to turn it back over to Mr. Jack Howarth.

Jack Howarth

Thanks Cathy, and thanks again for joining us on today’s conference call. If you have any follow-up questions, you can reach me at 609-359-3016. That completes today’s call.

Operator

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may now disconnect.