Antares Rallies Quickly & Confidently On Newest Developments Print E-mail
By Brian Wilson, Lead Contributor   
Thursday, 10 January 2013 01:21
Recent developments are sending Antares Pharma (NASDAQ: ATRS) rocketing higher this year.

YTD gains on ATRS have already surpassed 30%, and the trading volume suggests that the bullish momentum is not quite over. Is it still worth it to buy into ATRS at this point, or has the train already left the station?

To answer that question, we have to first determine why the market has suddenly become so bullish on Antares. One of the drivers of the company’s performance is the recent NDA submission of one of their pipeline drugs OTREXUP. Otrexup is an auto-injecting system of methotrexate, which is used for rheumatoid arthritis and some other autoimmune diseases like psoriasis. The advantage that Antares is leveraging with Otrexup is that methotrexate, taken orally under most circumstances, has been linked to gastrointestinal side effects. Since these are undesirable and potentially dangerous, it appears that Antares has a good case for approval due to the inherent superiority of injectable methotrexate.

More optimistic Antares investors are probably hoping for a quick entry of Otrexup into the rheumatoid arthritis market, but I think the drug looks destined for a 2014 launch under the assumption that the drug does indeed receive its FDA approval. The rheumatoid arthritis treatment market is enormous, but contains ferocious competition supported by the marketing budgets of larger pharmaceutical companies – something that Antares is probably aware of. Unless Antares has the right preparation to attack this market, we could see a very difficult launch for Otrexup. This is why I don’t think a rushed launched would be necessarily bullish if it were to occur.

An alternative strategy would be to develop a partnership for the marketing of Otrexup with a big pharma brand. It’s unclear whether or not the company received any viable offers about this, but it seems unlikely. Antares seems to like these partnerships quite a lot, and would have little reason to turn down an offer. Still, investors are generally bullish on Otrexup and ATRS anyway.

Another factor that has been encouraging recent bullishness is the company’s slowly improving financial situation. Their most recent quarterly report from November 7, 2012 shows enormous top-line growth (45% for Q1 2013 relative to Q1 2012) and an appreciable milestone payment of $750,000 from Pfizer (NYSE: PFE) due to progress in the development of their undisclosed consumer healthcare product.

Also interesting was the company’s progress with the expansion of indications for its marketed products. This was seen with the sNDA submission for the needle-free Tev-Tropin human growth hormone injector, which could expand sales to an extent. Somewhat discouraging was the widening gap between the company’s income and the company’s expenses, although this seems negligible and temporary at this point.

Investors also noted that the company raised an incredible $46.7 million with share dilution through a public offering of common stock (specifically 12.5 million shares worth of it). This offering was made in early October 2012, and caused a natural drop in the share price that was only recently recovered.
While I will not suggest that ATRS investors should get “comfortable” with the stock, there are a few things that could either continue the upward momentum or prevent any overly painful corrections in the stock.

The company’s cash pile, which was last stated to be $33 million on September 30th (and is closer to $90 million after you add share dilution revenue), is enough to keep the company in operation for more than a few years. This should alleviate any fear that the company will run low on money anytime soon, which means no share dilutions for now. Another is pipeline development regarding Otrexup, the mystery drug being developed with Pfizer, and late-stage indication expansions for Vibex and Tev-Tropin. While I don’t see Antares going into the stratosphere in the near future, the stock should have a hard time going below $4.00/share without something that would shake the bulls’ confidence. I think this makes the stock somewhat buyable even at $4.30, and especially interesting for options traders who enjoy selling covered calls.

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