Is This New Rheumatoid Arthritis Treatment a Game Changer?

Shares of Antares Pharma (NASDAQ: ATRS  ) , a developer of auto injectors and topical gel treatments, rallied on Monday after the company announced that the Food and Drug Administration had approved its Otrexup self-administered injection for rheumatoid arthritis, psoriasis in adults, and polyarticular arthritis in children.

However, despite surging as much as 14% during intraday trading, the stock finished the day only up 3.5%, indicating that a lot of investors were selling on the news. Therefore, is there still room for Antares -- which is already up 35% over the past six months -- to keep climbing?

ATRS Chart

Source: YCharts.

Is Antares' oddball product a step forward or backward?
At first glance, Otrexup is an odd product. Whereas many companies are working to make orally administered versions of their injectable drugs, Antares has made an injectable version of a widely available generic pill, methotrexate, which is prescribed to roughly 70% of the 1.5 million rheumatoid arthritis patients in the United States.

A starting dose of methotrexate usually consists of three to four pills taken all together once per week, which is equivalent to 7.5 mg to 10 mg of the drug. That dosage can be increased to 20-25 mg per week as needed.

The injected version of methotrexate is prescribed to patients for which oral methotrexate is no longer effective. The injected version is more potent, since it delivers the dosage directly into the bloodstream, but much less convenient -- since it must be administered by a doctor once per week.

Therefore, Antares believes that there is a market for selling self-injectable methotrexate directly to patients to administer at home. The treatment should be competitively priced against doctor visits, although a final price won't be known until its launch next year. Antares estimates that Otrexup could generate $100 million to $200 million in annual peak sales -- which would be a nice jump for a company that only generated $5.8 million in revenue last quarter.

How does Otrexup fit into the current rheumatoid arthritis market?
Antares plans for Otrexup to become a second-line treatment for rheumatoid arthritis, for patients who possibly need more potent biologic rheumatoid arthritis treatments such as Johnson & Johnson's (NYSE: JNJ  ) Remicade, AbbVie's Humira, and Amgen's Enbrel.

Indeed, Otrexup would be a much cheaper alternative to try, after generic methotrexate, as seen in the following chart of second-line treatments -- where Remicade, which J&J co-markets with Merck, is the clear market leader.

Company

Treatment

Cost per patient per year (estimated)

2012 sales

J&J

Remicade

$20,000

$6.14 billion

AbbVie

Humira

$20,000

$4.38 billion

Amgen

Enbrel

$20,000

$4.24 billion

Sources: Company annual reports, industry websites.

By comparison, injectable methotrexate currently costs between $107 to $185 per week, depending on the dosage. If Otrexup is competitively priced, it should cost less than $10,000 per year at the highest dose. However, investors should expect initial resistance from insurers and rheumatologists, who are already accustomed to the doctor-administered version of the drug.

Is Otrexup Antares' only hope?
That leads to the final question -- just how much does Antares have riding on Otrexup's success?

Last quarter, Antares' revenue climbed 29% year over year, although it is still unprofitable. The company is highly dependent on product sales to generic giants Teva Pharmaceutical (NYSE: TEVA  ) , Actavis (NYSE: ACT  ) , and Ferring Pharmaceuticals.

Antares sells its Vibex auto-injector to Teva for the administration of generic epinephrine, a drug for extreme allergic reactions. With Actavis, it sells two topical gels for overactive bladders.

Ferring and Teva are Antares' primary customers for its needle-free injectors, which have attracted a lot of attention due to their ability to "blow" medicine through thin perforations in the skin. Ferring uses Antares' needle-free injectors to administer two types of endocrinology treatments, while Teva uses them to administer the growth hormone Tev-Tropin.

Of these three companies, Teva is the most important, and contributed $3.56 million to Antares' top line (61% of its total revenue) from initial sales of its Vibex injectors last quarter.

The Foolish takeaway
Otrexup is not Antares' only hope, but it is the company's best chance at making a name for itself and stepping out of the shadow of its larger partners. However, there are simply too many uncertainties for investors to make an informed decision at this time.

First and foremost, it's unclear if Otrexup will be competitively priced against the injectable methotrexate administered by doctors. Even if it is competitively priced, it is also unclear if insurers and doctors will lend any support.

Therefore, investors should wait and see how the product launch goes next year before making any decisions about Antares, which has limited near-term catalysts.

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Read/Post Comments (5) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2013, at 4:32 PM, sam10dog wrote:

    no mention of gastro-intestinal issues with ever increasing doses of mtx and no mention of the dozens of other orally administered drugs that atrs will ultimately get approved for their injector. A bit short sighted

  • Report this Comment On October 16, 2013, at 7:33 PM, BohicaJohn wrote:

    NO ONE on Motley "Fool" has ever been bullish on ATRS.....which is why I stay long & am optimist on its future.

  • Report this Comment On October 17, 2013, at 6:03 AM, bzambaz wrote:

    Comparing Mtx costs with Remicade, Humira and Enbrel is a non-sense. Just read about how rheumatoid arthritis is being treated. Plenty of literature about that disease and treatment algorithm are available. Mtx comes before TNF-alpha drugs (Remicade, Humira and Enbrel) in the course of the disease, in fact it is often the primary treatement of the disease and thereafter mtx is also used in combination with TNF-alpha... Some learning needed...

  • Report this Comment On October 17, 2013, at 7:14 AM, TMFSunLion wrote:

    @bzambaz -- I already stated that Mtx comes before TNF-alpha drugs, but Antares hopes that Otrexup serves as an "in between" option after oral Mtx (just like the doctor injected version) and before those treatments become necessary.

    The problem is that Antares' plan is a bit flimsy and depends completely on the expectation that patients will somehow prefer the self-injected version over the doctor-injected one.

  • Report this Comment On October 17, 2013, at 4:25 PM, tstevenc wrote:

    Can't believe people are willing to inject themselves at home, and still risk paying the same high prices to do so. Have you guys tried topical pain gels? That's what I use and it works wonders for my arthritis; pain free and pill free all day long. I wouldn't have it any other way, and I definitely wouldn't want to inject myself.

    If you want real solutions that you can have tomorrow, look up A&R Pharmacy in Liberty, Missouri.

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