Antares Pharma: Just what the doctor ordered?
Known on Wall Street as Big Pharma, multibillion-dollar companies such as Pfizer Inc. (NYSE: PFE), Merck & Co., Inc. (NYSE: MRK) and Bristol-Myers Squibb Company (NYSE: BMY) dominate the prescription drug market. But a compelling argument can be made for investing in the biotechnology sector, since biotechs have consistently outperformed the pill companies for the past few years.
While Amgen Inc. (Nasdaq: AMGN) and Genentech Inc. (NYSE: DNA), biotech's biggest names, have fallen on hard times (Amgen's stock has plunged 26% from its January high while Genentech's shares are off 14%), some smaller biotech companies hold promise.
One such micro-cap is Antares Pharma, Inc. (AMEX: AIS), a $90 million specialized pharmaceutical company with patented drug delivery platforms including Advanced Transdermal Delivery gels (medications—hormones or other active ingredients—that are applied to the surface of the skin in gel form), reusable needle-free injection systems, disposable mini-needle injection systems and fast-melt oral tablets. In the face of direct competitive pressures from companies developing transdermal gels such as NexMed, Inc. (Nasdaq: NEXM), Bentley Pharmaceuticals, Inc. (NYSE: BNT) and Novavax, Inc. (Nasdaq: NVAX), and players like Bioject Medical Technologies Inc. (Nasdaq: BJCT), which produces needle-free injection systems, Antares has flourished.
Antares' stock has had impressive recent gains, with shares now trading about 40% higher than in late March. The company's shares closed Thursday at $1.64, down from the 52-week high of $2.15 established a month earlier. The average one-year target price among analysts is sitting at $3.38, double its current price.
The company seems to have the unanimous support of the thin posse of analysts that cover it: in April, Stephen M. Dunn, director of research at Dawson James Securities, reiterated his "Strong Buy" recommendation, setting a 12-18 month price target of $4.00; on March 8 the stock was rated a "buy" by analyst Matthew L. Kaplan of Punk, Ziegel & Company; on May 14, Oppenheimer analyst Kevin Degeeter rated it "buy;" and on May 24 analyst Robert H. Uhl of Friedman, Billings, Ramsey & Co. rated it "outperform."
Kaplan wrote that the Antares is "achieving a sustainable business" and is "well suited to enter into the biogenerics market that is likely to emerge in the next 3-5 years," eluding to what many industry analysts say is the next big frontier in the pharma business: creating off-patent versions of genetically engineered biotech drugs. Kaplan said Antares' success "heavily relies on their ability to continue to identify partners, sign collaboration agreements, and bring products to market that use their delivery devices and technologies."
On June 13, Bradley Pharmaceuticals Inc. (NYSE: BDY) announced the launch of Elestrin, a low dose estrogen therapy for the treatment of hot flashes in menopausal women that is delivered through Antares' proprietary Advanced Transdermal Delivery (ATD) system. The gel-based treatment, which is absorbed through the skin, was approved by the Food and Drug Administration in December. Bradley is the marketing partner for BioSante Pharmaceuticals, Inc. (Amex: BPA), which developed the drug through FDA approval. Bradley, which has exclusive U.S. rights for the treatment, is expected to increase its sales force to aggressively push the product to physicians and hospitals.
The U.S. transdermal market is estimated to be in the neighborhood of $300 million. And Antares is cashing in. In March, the company received a $1.75 million windfall from its licensing agreement with BioSante, and the firm is slated to receive an $875,000 milestone payment from Bradley in the fourth quarter of this year. Additionally Antares will also receive a portion of the royalties on third party sales, and further sales-based payments could amount to as much as $13 million.
Antares' revenues totaled $2.8 million in the first quarter ended March 31, a year-over-year increase of 347%. Product revenue increased in the first quarter by 58% to $626,000, compared with $395,000 a year earlier, due primarily to increased product sales to Antares' major European customer. The company's total revenues are expected to grow 31% this year; 72% next year.
On June 29, the drug delivery technology company proposed offering $15 million in new shares and warrants to institutional investors through a private secondary offering—the deal requires approval from the American Stock Exchange. The company plans to use proceeds to finance a late-stage clinical study of Anturol, a treatment for over-active bladder, and for new products in development.
“…we believe Antares represents an outstanding under-recognized and under-valued investment opportunity in the drug delivery space," said Punk, Ziegel & Company’s Kaplan in his report earlier this year. "Antares is fast approaching the key part of its business cycle, where it has a wide set of current deals that can drive the company towards profitability, and allow it to maintain a greater interest in future products."
That said, little Antares could be just what the doctor ordered.
