Intra-muscular injections
Intra-muscular (IM) testosterone has been used for years due to its effectiveness and low cost. Although Antares Pharma Inc (NASDAQ:ATRS)’s QS-T is also an injection, the route of administration will be different as the injection will be given subcutaneously. IM injection has the following disadvantages compared to QS-T: (1) They require a longer and larger needle, which results in deep painful injections and more inflammation, (2) they have to be given by medically trained professionals, which incurs costly office visits (average doctor office visit costs $125), (3) some patients may attempt self-administering an IM shot, but they risk death if the testosterone shot is given into the vein instead of the muscle, (4) the cost of an office visit can be minimized by giving higher doses at longer intervals, but, this practice produces wild fluctuations in circulating testosterone.
Peak sales expectation
According to CEO Wotton, there are 5.6 million testosterone prescriptions a year with 20% annual growth rate. Antares Pharma Inc (NASDAQ:ATRS) 10-K states that 70% of prescriptions are for gels and 30% are for IM injections. This gives us 1.68 million prescriptions for IM and 3.92 million prescriptions for gels. Translating the number of prescriptions into patients, I arrive at 0.14 million patients who receive IM testosterone injections and 0.327 million patients who use testosterone gels.
One needs to make an assumption on what portion of those patients will be switching to Antares’s QS-T. Noting that similar products captured 20% of market share elsewhere (e.g., Medac’s pre-filled MTX syringe in Europe), I project 0.093 million patients switching from existing products including Abbott’s Androgel and Auxilium’s Testim gel. After factoring in the 20% annual growth rate, one arrives at 0.193 million patients using Antares’s QS-T in 2017. Noting that QS-T will be a once weekly application, Antares will be selling 10.04 million units of SC testosterone injection in 2017.
How about the selling price of each injection? Noting that Antares Pharma Inc (NASDAQ:ATRS) is planning to price Otrexup around the cost of an office visit ($125) the selling price of QS-T should be around $125. Assuming 30% rebate to payers, Antares’s net revenue per dose would be $87.50. Finally, we have all the pieces to calculate the peak QS-T sales. 10.04 million units each at $87.50 would generate $878 million in net revenue.
Before concluding my article, I would like to point out that there are many factors which may cause serious deviations in our sales model, such as (1) regulatory delays or rejection, (2) a competitor entering the US market with a similar concept, (3) commercial launch problems, (4) possible resistance by healthcare providers, payers, or patients in adopting QS-T.
Luckily, Antares is not one of the typical one trick pony biotechs. Their pipeline lists 13 drugs, 3 of which are already marketed, and the remaining 10 are under development with world-class partners including Pfizer, Teva, Actavis, and Ferring. Their Teva partnership alone is developing drug-device combination products for markets worth $3 billion in US sales.
Furthermore, Antares Pharma Inc (NASDAQ:ATRS) is heavily progressing their in-house drug-device combination products while generating revenue that has been increasing year over year since 2008. In fact, the annual compounded rate of revenue increase is 49% since 2008. I am expecting Antares’s revenue to increase parabolically higher starting 2014, mainly driven by Otrexup launch. Indeed, Jack Howarth (VP of Antares Pharma Inc (NASDAQ:ATRS)), reportedly said “2014 will be our break out year.” As detailed in this article, I am further expecting this 2014 break-out to dramatically accelerate with QS-T hitting the market.
Ali Yasar owns shares of Antares Pharma. The Motley Fool has no position in any of the stocks mentioned.
The article Identifying the Biggest Gem in Antares’s Pipeline originally appeared on Fool.com.
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