ATRS: Makena Maturing Quickly, Providing 1Q:18 Boost

By John Vandermosten, CFA


Antares Pharma, Inc. (NASDAQ:ATRS) reported first quarter 2018 results on May 8, 2018, posting 5.8% topline growth and a loss of ($0.04) per share. Revenue growth was slightly ahead of our 5.4% forecast and earnings matched our estimate. A strong showing by Makena auto-injectors in was behind the better than expected revenue increase. Recent successes include the regulatory approval of Makena, progress on the sale of Zomajet and continued interaction with the FDA to get Xyosted across the finish line.

Total revenues for 1Q:18 were $12.7 million, up from $12.0 million in 1Q:17. The Auto/Pen Injector Devices segment was the standout in the quarter due to contributions from Makena. While Otrexup sales were down 13% on a GAAP basis, the change was due to a 1Q:17 true-up of estimated deferred revenue which increased sales by $1.3 million. Absent this adjustment, Otrexup revenues increased 21%.

Antares’ market share increase continued for sumatriptan, rising sequentially from 30% to 32%. Despite this increase in share, total revenues declined year over year from $3.6 million in 1Q:17 to $2.8 million in 1Q:18 due to pricing and timing effects. Pricing has weakened somewhat in the sumatriptan space and there has been a response with Endo withdrawing its Sumavel DosePro from the market in the first quarter. We believe that Teva will be wise balancing price and market share in coming quarters.

Needle-free Injector device sales declined 0.9% in the first quarter to $1.4 million and sumatriptan fell by 22.3% on lower product shipments to Teva. The Auto/Pen Injector category (excluding sumatriptan) was up 450% for the quarter to $2.8 million. Total product sales, which is the combination of Otrexup, sumatriptan, Needle Free Injector devices and Auto/Pen Injectors, rose 9% in the first three months of the year. Development revenue was down on a shift away from Makena development as first sales were recognized for this new product. Royalties rose 42% in the period to $469,000 recognizing contributions from Makena.

Gross profit for 1Q:18 was $5.5 million which represents a margin of 43.4%. This compares to a 48.2% rate in 1Q:17 and 49.6% for the full year 2017. Lower GAAP net revenue for Otrexup, lower margin from Sumatriptan and contribution from lower margin Makena were cited as reasons for the change. Product sales margin was 40.3% in 1Q:18 vs. 45.7% in 1Q:17, while development revenue margin was 47.7% and 52.4% respectively, both showing about a 500 bp decline over the comparable period.

R&D rose by 8% versus the prior year period due to new product investment and post-CRL activities for Xyosted. SG&A was up 5% for the quarter on a year over year basis reflecting higher compensation and benefit expense offset by a reduction in legal expenses.

As of March 31, 2018, Antares held $28.1 million in cash on its balance sheet. This is a sequential reduction in cash of $3.4 million which is comprised of cash burn of ($6.1) million partially offset by funds received for the Zomajet deal of $2.7 million. Our R&D estimates reflect the new development initiatives that Antares will pursue in urology and neurology. SG&A is expected to see a slight rise in 2018; however, when the Xyosted launch timing becomes clear, the model be updated to reflect costs related to the sales force.

Makena Approval

On February 14, 2018 the FDA approved AMAG’s Makena, a subcutaneous injection for pre-term birth. Several benefits from the new method of administration are a faster injection with a less painful, concealed needle in the arm. The previous generation of Makena required a multi-step process involving a 21-gauge, 1.5 inch needle and a 60 second plus injection duration in the gluteus maximus. We expect that the simpler and less painful process for subcutaneous Makena, with no expected increase in price, will result in a rapid switch over to the new product and limited resistance from payors. First sales were recognized in the last week in March, with a rapid changeover expected to limit any losses to potential generic competitors.

On its first quarter call, AMAG disclosed that patient enrollments through their Makena Care Connection program were 47% four weeks into the launch. This promising data, consistent pricing between sub-q and IM versions, and the absence of any generic competition for the IM form of Makena, suggest AMAG will be able to achieve a substantial level of penetration over the next several months.

Sale of Zomajet

On October 10, 2017 Antares announced the sale of Zomajet to Ferring Pharmaceuticals for $14.5 million. As discussed in the release, Antares should continue to collect revenues from this product until year end 2018, and two payments totaling $4.75 million have already been received. This is a beneficial transaction for Antares as it divests a non-core business and provides capital to grow new products. Two additional payments of $4.75 and $5.0 million respectively are expected in the second and fourth quarter of 2018, at which time the transaction will be completed.

Xyosted Resubmits NDA with FDA

The FDA delivered a complete response letter (CRL) to Antares on October 20, 2017 for Xyosted. The FDA highlighted concerns that the injection could cause high blood pressure and be associated with depression and suicidality, adverse reactions listed on the label for other testosterone therapies. According to the release there was no mention of Chemistry, Manufacturing and Controls (CMC) concerns, which suggests the remedies required can be accomplished in-house.

During the Type A meeting on February 21, 2018 the company met with the FDA to discuss a resubmission plan in response to the CRL related to Xyosted. Notes were provided to the company in late March, after which the company prepared and submitted the necessary documents and information. The FDA considered the resubmission to be a complete, Class 2 response and determined a September 29, 2018 PDUFA date.

Based on background work performed in a previous report and our own experience with complete response letters, we estimate a 50/50 chance of eventual approval on the determined user fee goal date.


Despite the CRL issued to Antares last year, we continue to see upside from current levels. Success with Makena and accelerating growth for Otrexup combined with other anticipated launches this year create a confluence of positive factors that should drive topline and earnings growth. We update our model to reflect first sales of Makena in March. Estimates are reduced for the epinephrine pen, and exenatide revenue lines as we expect these to start a somewhat later in the year than originally anticipated, as there has been no indication from the FDA or firm guidance by Teva on approval or launch for these products. Our target price remains at $3.50.


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