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Edited Transcript of ATRS earnings conference call or presentation 2-May-19 12:30pm GMT

Q1 2019 Antares Pharma Inc Earnings Call

EWING May 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Antares Pharma Inc earnings conference call or presentation Thursday, May 2, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Fred M. Powell

Antares Pharma, Inc. - Executive VP & CFO

* John J. Howarth

Antares Pharma, Inc. - VP of Corporate Affairs

* Robert F. Apple

Antares Pharma, Inc. - CEO, President & Director

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Conference Call Participants

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* Anthony Charles Petrone

Jefferies LLC, Research Division - Equity Analyst

* Matthew Lee Kaplan

Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research

* Michael Elliot Ingerman

Piper Jaffray Companies, Research Division - Research Analyst

* William Patrick Maughan

Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Antares Pharma First Quarter 2019 Operating and Financial Results Conference Call. (Operator Instructions) I will now hand the conference over to Jack Howarth, Antares Vice President of Corporate Affairs, please go ahead, sir.

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John J. Howarth, Antares Pharma, Inc. - VP of Corporate Affairs [2]

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Thank you, Jennifer, and good morning, everyone. This morning, we announced our first quarter 2019 financial results and recent operating achievements, and a copy of the press release can be found on the Antares website at www.antarespharma.com under the For Investors section. In addition, this morning's teleconference also contains an interactive slide presentation. If you have dialed into the audio-only teleconference, you can follow along with the slides which can be found on our website under the Investor Information section. The conference call and slide presentation will be simultaneously webcast on the For Investors section of the Antares website under the Webcasts & Presentations tab. If you are currently unable to access our website, the slide presentation will be archived under the Webcasts & Presentations tab at the conclusion of today's call.

Before we begin, I'd like to remind you that some of our statements made during this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and actual results could differ materially from those projected in any forward-looking statements. Forward-looking statements provide Antares' current expectation or forecast of future events. Factors that could cause actual results to differ include but are not limited to market acceptance, adequate reimbursement, successful launch and future revenue from XYOSTED and Teva's generic EpiPen, market acceptance and future revenue from Makena, sumatriptan and OTREXUP, the timing and results of proprietary and partnered research, development and clinical trials including ATRS-1701, methotrexate for ectopic pregnancy and development projects with Teva and Pfizer. Statements about new product approvals and FDA action and the company's financial performance including achievement of the 2019 revenue guidance and other factors which are also identified in today's presentation and from time to time in the company's filings with the SEC on Form 10-K and as updated in Antares' recent periodic filings on Form 10-Q and 8-K and other filings made with the Securities and Exchange Commission.

Links to these documents are available on the Investor Information section of our website and we encourage you to review these materials. Antares is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances after the date hereof except as required by law or otherwise.

The company cautions investors not to place undue reliance on these forward-looking statements. Joining me on the call today are Bob Apple, President and Chief Executive Officer; and Fred Powell, Executive Vice President and Chief Financial Officer. Let's review the agenda for today's call on slide number 3. Bob will begin with a high-level review of our strong first quarter results. Fred will go through the detailed financials and then Bob will give you a XYOSTED launch update and review our pipeline of future catalysts. After our presentation, we will open up the lines for your questions.

I'll now turn the call over to Bob Apple. Bob?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [3]

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Thanks, Jack. And good morning to everyone on today's conference call and webcast. This morning's first quarter earnings release highlights record quarterly revenue which marks the beginning of what we believe will be a transformational year of top line growth for the company. It also serves as a solid beginning toward achieving our 2019 revenue guidance of $95 million to $105 million. We believe these quarterly results validate our strategy to focus on the development of a diversified commercial business consisting of both proprietary and partnered products.

Let's get started with some highlights from the quarter on slide number 4. First quarter revenue of $23.3 million, marked the 5th consecutive quarter of total revenue growth for the company and represented an 83% increase over the first quarter of 2018. The increase in total revenue was driven by $18.3 million of product revenue, representing a 67% increase over the prior year. As you can see from this slide, the product revenue was almost equally split between proprietary and partnered products, with our proprietary products, XYOSTED, OTREXUP and sumatriptan representing 45% of total product revenue.

We believe that contributions from our products such as XYOSTED will grow over time as they gain traction and become the main driver of top line growth. The other significant contributor in the first quarter was royalty revenue, which grew to $4.1 million as compared to $500,000 in the first quarter of 2018, a 768% increase. Important to note is that the royalty revenue growth has yet to receive the full benefit of royalties from Teva's generic EpiPen, which was launched in limited commercial quantities in late 2018.

According to Teva, the full commercial launch should occur in the second half of this year. We've reported a net loss per share of $0.03, down from a net loss per share of $0.04 during the same quarter last year. This reduction in net loss occurred despite our heavy investment to support the January launch of XYOSTED.

With regard to the XYOSTED launch, I am pleased with the strong start, which shows month-over-month prescription growth. Our field sales force of approximately 83 sales representatives and 10 district managers are calling on the high-prescribing urologists, endocrinologists and primary care physicians who write testosterone replacement products.

The initial feedback from physicians and patients have been very positive. And we believe XYOSTED will be the significant growth driver we expected based on the positive product attributes. I will cover XYOSTED in more detail later in the call.

I'll now turn the call over to Fred for more details on our excellent first quarter results. Fred?

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Fred M. Powell, Antares Pharma, Inc. - Executive VP & CFO [4]

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Thanks, Bob. Please turn to Slide 5. This was a tremendous quarter for Antares with significant revenue growth and a reduction in net loss. Over the past year, we had several substantial revenue and operating expense changes. With regards to revenue, AMAG's Makena auto-injector and Tevas EpiPen were both approved and launched in 2018 and we are now recording device and royalty income for both of these products.

In addition, we completed a full launch of XYOSTED in January and we are now starting to see revenue from that product. To support our commercialization of XYOSTED, we increased the size of our commercial team and incurred launch costs, all of which are reflected in our increased operating expenses. So let me provide a breakdown of our revenues and operating expenses for the first quarter of 2019.

Total revenue was $23.3 million for the 3 months ended March 31, 2019 compared to $12.7 million for the comparable period in 2018. Product sales were $18.3 million for the 3 months ended March 31, 2019 compared to $10.9 million for the comparable period in 2018. Product sales for commercialized proprietary products totaled $8.2 million for the 3 months ended March 31, 2019 compared to $6.8 million for the comparable period in 2018 and consisted of OTREXUP, XYOSTED and sumatriptan. Product sales for partnered revenues totaled $10.1 million for the 3 months ended March 31, 2019 as compared to $4.2 million for the comparable period -- comparable quarter in 2018 and consisted of revenue from the generic Epi devices, Makena, teriparatide and needle-free devices. The increase in product revenue was primarily driven by sales of auto-injector devices fused with Teva's generic epinephrine product, needle-free devices, [such as] Ferring XYOSTED, sumatriptan injection and shipments of multi-dose pens for use in Teva's generic teriparatide product in anticipation of a potential 2019 launch offset by a decrease in pre-launch inventory stocking of Makena auto-injectors to AMAG.

Licensing and development revenue was $900,000 for the 3 months ended March 31, 2019 compared to $1.3 million for the comparable period in 2018. Licensing and development revenue includes license fees received from partners for the right to use our intellectual property and amounts earned in joint development arrangements with partners under which we perform development activities or develop new products on their behalf. The decrease in development revenue was primarily a result of a reduction in development activities with AMAG for the Makena auto-injector product, which was approved by the FDA in February 2018 and is now a marketed product.

First quarter 2019 development revenue was primarily related to Teva's teriparatide development program as well as development programs with Pfizer.

Royalty revenue was $4.1 million for the 3 months ended March 31, 2019 compared to $500,000 for the same period in 2018. Royalties are recognized based on in-market sales of products sold by our partners. The significant increase in royalties for the first quarter 2019 was attributable to increased royalties from AMAG's Makena auto-injector product, which was launched at the end of the first quarter of 2018 and Teva's generic epinephrine product, which was launched in limited quantities in the fourth quarter of 2018.

Operating expenses were $17.3 million for the first quarter of 2019 compared to $11.1 million in the comparable period of 2018. The increase in operating expenses in the first quarter of 2019 was primarily due to the 53 new sales representatives hired in the fourth quarter of 2018 and increased sales and marketing expenses associated with the launch of XYOSTED.

Net loss was $5.5 million for the first quarter of 2019 compared to $6.2 million in the comparable period in 2018, a decrease of 11%. Net loss per share was $0.03 for the quarter ended March 31, 2019 and $0.04 for the quarter ended March 31, 2018.

At March 31, 2019, cash and cash equivalents were $23.2 million compared to $27.9 million at December 31, 2018. During the first quarter 2019, we generated $8.1 million in gross proceeds from the sale of common stock at an average price of $3.51 per share through the previously established at-the-market equity offering program or ATM.

During the quarter, accounts receivables increased by $10.8 million as a result of significant shipments to our partners towards the end of the quarter as well as an overall increase in revenue. We do not expect this will be repeated in future quarters and the cash burn should normalize over the next few quarters.

I'll now turn the call back to Bob. Bob?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [5]

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Thanks, Fred. Please turn to Slide 6 for an update on the XYOSTED launch. We officially launched XYOSTED in January of this year and our reps have been detailing the product in the field for a little over 4 months. To date, we have focused on and have reached almost half of our physician target population, which is comprised of the high writers of testosterone products. Over 1,200 of those physicians detailed thus far have already written at least one prescription for XYOSTED. And our reps are continuing to focus on those high decile writers. When looking at what type of patient physicians are writing XYOSTED for, 45% of XYOSTED business is coming from new patient starts with another 42% coming from patients switching from a generic injectable. So clearly, although still very early, we believe XYOSTED has broad application to all patients with testosterone deficiency. Critical to any successful launch is good coverage by insurance plans and PBMs. In that regard, by the end of the first quarter, we had better than 50% of commercial lives covered by insurance, which is well ahead of our goal for the end of the first quarter.

Effective April 1, additional insurance plans added XYOSTED to their formularies, increasing our covered lives to approximately 60% of all commercial lives. We are still targeting that better than 70% of all commercial lines will be covered for XYOSTED by the end of this year.

Turning now to Slide 7. You can see the monthly prescription trends for XYOSTED continuing to grow and trending in a very positive direction. More importantly, new prescriptions are increasing and refills are growing, which is a strong sign for the very important patient persistence. Since the product launched, XYOSTED has recorded double-digit month-over-month sequential growth in both new and total prescriptions.

From a product branding perspective, in addition, to the traditional physician detail pieces, we recently launched our branded social media consumer campaign designed to grow brand awareness and reach. The response to this campaign has been very positive.

In summary, I am very pleased with the progress of the XYOSTED launch.

Moving now to Slide 8 and an update on our pipeline. Focusing first on our partnership product development pipeline, the Teva programs for FORTEO, or teriparatide for osteoporosis and BYETTA, or exenatide for Type 2 diabetes are with the FDA following the ANDA pathway. We look forward to the potential approval of these combination products. And in the interim, we continue to fill purchase orders for the pre-launch quantities of generic FORTEO devices.

With respect to our Pfizer collaboration, we have initiated development work on modifying the QuickShot device for Pfizer's rescue pen. We have already begun feasibility testing as well as completed formative human factor studies. And although the drug is undisclosed, we remain excited about the potential for this combination product.

We are continuing development work on our next potential proprietary product, ATRS-1701, a combination drug device product in the neurology space. We have made solid progress on the device design, and we are working on optimizing the most recent formulation and look to move this product to a clinical trial.

We have also commenced initial development work for another potential proprietary product which focuses on an unmet need in the urology space, which we believe would fit strategically in our sales force bag.

And finally, we are pleased to announce another pipeline project with the receipt of orphan drug designation for the use of methotrexate to treat ectopic pregnancy. Our intention is to design a development program utilizing a proprietary auto-injector device with doses of methotrexate not commercially approved or available in an auto-injector. Approximately 128,000 ectopic pregnancies occur annually in the U.S. and despite improvements in diagnosis and management, ectopic pregnancy continues to be a significant cause of pregnancy-related morbidity and mortality.

Current treatment options include minimally invasive surgical techniques or the use of intramuscular methotrexate in an off-label fashion. Once we have finalized a development plan, we will be requesting a meeting with the FDA to determine the path forward.

Wrapping up on Slide 9 with our 2019 potential catalysts, we're off to a great start this year . And therefore, we are reiterating our 2019 revenue guidance of $95 million to $105 million. We believe XYOSTED continues to be a significant opportunity, and our number one priority right now is a successful launch in the U.S. market, where there were approximately 7.2 million prescriptions written last year.

We are working to make inroads in the managed care environment, which is critical to any new product launch. We believe we've made good progress thus far and remain excited about the potential for XYOSTED to become an important product in the treatment regimen for testosterone deficient patients.

Next catalyst for 2019 is the successful launch by Teva of their generic to Mylan's EpiPen. Based upon Teva's forecast, and our 2019 revenue guidance assumes a full commercial launch by Teva in the second half of the year, we expect to receive larger royalty payments on Teva's in-market sales of the generic EpiPen as well as significant auto-injector product revenue associated with shipping additional devices. Given Teva's past comments on market share, this could potentially be a solid revenue driver in 2019 and beyond.

AMAG's subcutaneous auto-injector product continues to be a solid contributor to our revenue growth. AMAG is continuing to work hard to grow the subcutaneous auto-injector and defend the Makena franchise with a differentiated product. We believe they are expecting the auto-injector to maintain a significant share of the hydroxyprogesterone market.

We look forward to more details on our progress when they report first quarter results next week.

Another potential catalyst for 2019 is Teva's ANDA for a therapeutically equivalent generic to FORTEO. Lilly reported 2018 FORTEO global revenue of $1.5 billion with $758 million in revenue reported in the U.S. According to Teva, this ANDA is a high priority for them and guided the Street on their last earnings call for a potential launch of this product in the second half of 2019.

We believe this is potentially a big opportunity for both Antares and Teva.

In closing, this is an exciting time for Antares and our shareholders. Since assuming the role of CEO in 2016 and implementing a strategy to maintain laser-focus on driving the pipeline to regulatory approval and moving development assets forward to commercial products, we have recorded annual year-over-year revenue growth. We believe that our first quarter results continue to show the progress we've made in focusing our future growth on increasing the commercial product mix of our total revenue.

The balanced revenue growth from both proprietary and partnered products helped drive records sales, which we have placed -- which has placed us on a solid foundation toward achieving an extraordinary year for the company.

That concludes our prepared remarks for today. Operator, would you now open the lines up for the question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we'll go first to David Amsellem with Piper Jaffray.

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Michael Elliot Ingerman, Piper Jaffray Companies, Research Division - Research Analyst [2]

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This is Mickey Ingerman on for David. First on XYOSTED, can you provide some context on the number of unique prescribers? Are a significant number of the prescriptions coming from a select group of physicians? Or are volumes spread over -- spread out over a wider audience? And then secondly, if you could just comment on the nature of the step edits for XYOSTED thus far?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [3]

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Right. So as far as the writers, we've had over 1,200 physicians write XYOSTED since launch. And so what that shows is a pretty broad audience or a list of doctors who are writing XYOSTED. There are no -- I would say, there is no -- obviously, there's always the large writers, but they don't make up the large percentage of the scripts being written. It's pretty much across a large number of physicians, and interestingly, it's also across all 3 categories of doctors who write testosterone products. Urologists are writing it on a regular basis, endocrinologists, I think, and the message of steady states are really resonating well with the endocrinologists. And then general practitioners who write testosterone products are also writing and I think are our biggest writers at this point. So it's across all facets and we continue to see some of those physicians turning into big writers, but it's in the early stages of the launch and we're seeing very good utilization across all -- across all facets of the physicians.

As far as the step edits, I think that we're seeing pretty much the same step edits that all the other testosterone products have. Obviously, everyone has a prior authorization where you need to have 2 blood draws in the morning to prove that you have testosterone deficiency. If a patient is already on testosterone, they obviously don't have to go through that. And then some of the plans, depending on the plans, whether they're a high cost plan where they're trying to keep costs low, you may -- we may need to step through a generic, but fortunately 70% of the market are already on a generic and so that already counts. And so we're really not seeing a heavy step edit process for XYOSTED.

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Operator [4]

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We'll go next to Anthony Petrone with Jefferies.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [5]

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Congratulations on a good start to the year here. I have a couple on XYOSTED and then maybe shift to Epi. Just on the mix -- a little more detail here, Bob, just on the mix of physicians. Is that just urologists out of the gate? Or do you endocrinologists in there and GPs, just trying to get a sense of the mix?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [6]

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Yes. So I think I had mentioned on the last question, the mix is actually pretty solid. We're getting all 3 physicians writing: urologists, endocrinologists and general practitioners. And I'd say right now the general practitioners are probably our biggest writers, but overall, it's been well received by all 3 groups. And it's really -- I would say it's probably following a normal writing from any other testosterone product where the high-decile writers are becoming the bigger writers and then we're at, like I said earlier, over 1,200 physicians have written it and it's across all those 3 spectrums of physicians.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [7]

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That's helpful. And maybe the follow-up, to stay on XYOSTED for a moment, would just be on coverage. 60% of covered lives as of the end of April is ahead of expectations as you mentioned. And so maybe just a little bit on the terms there, is it Tier 2, Tier 3 coverage? And it seems like you're well on your way to hitting that 70% target. Do you think there is a potential to sort of exceed that by the end of the year? And I'll just have one more on Epi. Thanks again.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [8]

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Sure. So we 100% have targeted Tier 3 coverage. We don't -- we think that with our copay support that we provide the patients, up to $125 of copay support, that, that would cover pretty much any plan in Tier 3 coverage. And so to get to Tier 2, we think it's too costly as far as from a rebate standpoint. When we look at the mix of the plans, we have a lot of plans that are covering it to Tier 3 with no rebate, and then obviously, the larger plans and the large PBMs, we are providing a rebate to have that access to those plans. So we feel pretty good about where we are. And as far as where we'll be at the end of the year, we gave guidance of 70% of the lives that will be covered. Clearly, we feel pretty confident we're going to hit that number. Whether or not we exceed that, it's really a function of the some of the smaller plans that we haven't even had discussions with yet. And so probably Q2, we'll probably have a better update as to where we are. And if you saw in the prepared remarks, we had 50% of the lives covered in Q1, and effective April 1, really the start of Q2, we were up to 60%, and that's the way the plans typically work. They will start the coverage on a quarter. And so we're hoping that, come July 1, we'll see more plans come on board and with good coverage and we expect to see that. But as far as guiding more than 70%, I just don't know if that's going to happen right now, but I think I'll have a better sense come the end of Q2.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [9]

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And very quickly just on Epi, the numbers there on the auto-injector side, obviously, you're also ahead. And so I'm just wondering, is there stocking in there on the side of Teva? Or should we just be looking at that as a better-than-expected launch?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [10]

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Yes I think that the launch is going well. And I think that where Teva is, is exactly where they had disclosed last quarter, which was they're still doing a limited launch. They expect to be able to bring the Epi Junior onto the market in back end of the second quarter, early third quarter. And I think that's when they're going to do the full commercial launch. And so we are seeing week-over-week growth of them supplying the markets, which is obviously in need of EpiPens, but they still haven't done their full launch. As far as our device sales to them, we're trying to stay ahead of that full commercial launch. And so there is some stocking of devices, but it's in the normal course of their forecast. We're basically producing to their forecast. And so we expect a pretty significant increase in their sales of the product in the second half of the year, but as far as our devices, we are consistently going to continue to supply at this rate, and hopefully, we'll see a growth in that as well. So it's been really -- it's been a good start for us and Teva and once both products are available and they do the full commercial launch, we see it as a very big opportunity for both of us.

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Operator [11]

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We'll go next to Matt Kaplan with Ladenburg Thalmann.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [12]

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Hi. Good morning, and congrats on the quarter. Just wanted to drill down a little bit more into XYOSTED, if we could. I guess with your it's now -- with a quarter of sales under your belt, with your existing sales force out there and the messaging that you're out there with, do you see any modifications that you need to make in terms of the size of the sales force or messaging based on feedback that you've gotten from the marketplace that could even further enhance your -- the launch of XYOSTED?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [13]

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Okay. So as far as the messaging, we actually had our national sales meeting just a few weeks ago. We had planned to bring them back really after 3 months in the field to assess what they're hearing from the physicians and to see if our message is resonating. And from a very positive standpoint, the message is resonating. It's a really easy story to show the PK. The doctors get it and their next question is coverage. And coverage is a big deal because, when you launch a product, you don't have it all lined up. And making it easy for the physician and the patient to get the -- to get XYOSTED is the most important aspect. And so we keep hammering it home to the reps to get that -- not only to get that prescription written but to see it get filled. And so that's where we're spending a lot of our time. That's why we only got to about 50% of our targets because we're focusing on making sure that those high-decile writers get comfortable that when they write it, it gets get filled. So the message of steady state, painless, all those positive attributes of the product are absolutely resonating with the physicians and the patients. We're getting a lot of emails from physicians, physicians' assistants and patients saying that the experience with XYOSTED has been extremely positive. So that part, I would say that we really don't have to alter our message much. As far as the second part of your question, which was -- I'm sorry what was it?

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Fred M. Powell, Antares Pharma, Inc. - Executive VP & CFO [14]

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Modification.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [15]

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Any modification to the sales force.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [16]

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So the modification of the XYOSTED sales force. Yes, we're very comfortable where we are. We have about 83 territories all calling on urologists, endocrinologists and primary care docs -- and I say primary care docs, they're really not primary care physicians. They're men's health physicians, they are men's -- are primary care physicians that have a heavy focus on testosterone. And so it's not as large of an audience as you would expect. So the 83 territories I think that they're the right size, it lowers the windshield time of the rep, and right now, it feels like it's the right size. Obviously, if we see a potentially large impact on adding a few more reps, we would do that. But right now, we assessed our territories, but until we get all the coverage from the insurance plans in place, we really -- we'll start looking at viable territories and/or expanding of territories. But right now, we feel really confident with the number we're at.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [17]

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All right, that's very helpful. And just shifting gears a little bit in terms of the pipeline. You mentioned a 1701, a neurology product. Could you give us little bit more color on that in terms of market opportunity, maybe indication, anything that you can add to the 1701? And then you also mentioned a urology product that's moving into development as well. Any color on that?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [18]

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Yes. I mean, on the neurology product, it's the one we've been working on for the last year or so. The one thing is it is a rescue pen, it's in our area where we think we have very strong capabilities of developing rescue pens as given by the Epi results. We have an Epi -- we have a rescue pen with Pfizer. And so the neurology one is a rescue pen. We really don't want to give much more detail until we get into clinical trials and really are able to lay out the clinical program for that product, but we do think it's a meaningful proprietary asset for us. And so we're excited about it. Clearly, we focus on unmet needs, and that's an area of an unmet need for the patient population that we're targeting.

On the other product, the urology one, that's early stage, but we're not going to give much detail. It's not a rescue pen, but it is in an area for urology where there is an unmet need, where the patients aren't satisfied with what they currently are using. And so we see it as an opportunity. And again, as we formalize the development, meet with the FDA, start the clinical program, we're going to keep that under wraps until that time.

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Operator [19]

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We'll go next to Bill Maughan with Cowen & Company.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [20]

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Good morning and congrats on the progress. My first question is, at this point, what percent of XYOSTED prescriptions have been paid prescriptions? And can you remind us of the program or the programs that you have in place at this point to get XYOSTED into patients' hands in terms of sampling and copay assistance?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [21]

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I mean, I can handle the second part of that question, and I'll turn the other one over to Fred. As far as the program that we have from a copay assistance, from sampling and so forth, from a sampling standpoint, we want all the physicians to use a first sample in the office in their new patients, so that they experience the injection, they see how easy it is to use, how painless it is, and that gives that patient 1 week of therapy at the doctor's office. And it also helps us with -- if the physician is new, they also see how easy it is to use and how painless and positive the response typically is with the patients. We then ask that physician to also provide another sample to the patient, so they essentially have 2 weeks of therapy when they walk out the door of the office.

And in that process, the physician has probably written an e-script, it's electronically submitted to the pharmacy. And if there is any type of adjudication time to get it approved for that patient, we hope that, that 2 weeks is sufficient to get that through the process. And we use a nationally recognized adjudication company called CoverMyMeds and they help with the adjudication process. So if the person has commercial insurance and they need prior authorizations that the physician hasn't provided yet, they'll help get that information from the physician office. If there is commercial insurance and there is initially a rejection because it's not covered, we then provide 1 month free of drug. And the reason why we do that is, during that month, that same company CoverMyMeds will then appeal that rejection. And we've had pretty good success of reversing that appeal. And so that's all part of the process, again, of making it easy for the physician and the patient to get XYOSTED. If, at the end, a patient doesn't have any insurance, then we can't support that patient anymore, but if they have commercial insurance then obviously, hopefully, it turns into a paid script.

And then the second part of your question as far as what percentage of our scripts to date have been paid versus free product, I'll turn that over to Fred.

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Fred M. Powell, Antares Pharma, Inc. - Executive VP & CFO [22]

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Sure. What happened is, as you'd expect, at the beginning of the launch, when the coverage was less than where it's currently at, it was a higher percentage. And so while I can't give you a percentage as of right now, we have seen the percentage of paid prescriptions increase. We had a target in mind and that we hoped we would be below for free strips, and we're below that. We've seen that percentage continue to decrease over the first quarter and going into the second quarter. I can tell you, it is certainly below the 40%, it's much -- it is lower than that percentage for the entire time.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [23]

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And I think it follows suit, too, that, as our coverage improves, which we're already at 60%, the need for that program diminishes. So we feel, so far, everything is going as planned, and we're really happy with the response. I would think that most physicians, when I think there was some surveys being done by some of the analysts and those surveys came back, that the physicians found that it was relatively easy to get the product and it was covered. And so that's what we want to hear. And that's what's happening out in the field and there's always room for improvement so that when a patient gets a script, they get it 100% of the time, but that's not the real world and especially at a launch. But we're really focused on making that as seamless and as easy as possible for both the patient and the physician. And more importantly, believe it or not, it's the physician. They want to know that when they write it, it gets filled, and so that's what we've been doing.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [24]

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Okay. And then I was hoping to get a little bit more color on the ectopic pregnancy market, what can -- anything you can do to help us size it in terms of maybe how many ectopic pregnancies get methotrexate as it is? Ad what's the current understanding of the efficacy of methotrexate for these patients?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [25]

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So as far as what percentage of patients get methotrexate versus a surgical procedure, I think the majority of the patients get methotrexate. It's obviously less invasive for the patient, tends to be better outcomes for the patient. If they do surgery, if there was any scarring, it can lead to more difficulties in getting pregnant again. And so I think that the standard of care, if provided a good option of an easy-to-use auto-injector in the office with the physician, I think that could help move more of it towards -- even more of it towards methotrexate. But again, it really is a function of the product we develop, the success of that clinical plan and so forth. As far as the number, there's about 128,000 ectopic pregnancies a year. And we think that having an auto-injector with a labeled indication for ectopic pregnancy would be a benefit for both physicians and patients. And I'm not sure if I missed another part of the question, I think I hit your questions.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [26]

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Yes, you covered it.

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Operator [27]

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(Operator Instructions) We'll go next to Elliot Wilbur with Raymond James.

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Unidentified Analyst, [28]

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This is (inaudible) on for Elliot. Just have 2 here. The first one is on if you have any read on the refill rates for XYOSTED? And if you know if that's coming mostly from those that step through a generic? Or if they were new patient starts?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [29]

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Yes. I mean, the refill rates have been very high. Our refill rate is in excess of 75%. And I don't think we've really determined whether or not it's patients that are new to therapy or switches. We know that, overall, the refills are becoming more and more meaningful on a weekly basis. And so we're seeing that persistence that you want to see, and the refill rate is pretty high. Testosterone is an area where patient persistence is an issue. And we are very pleased at where we are right now, and if those persistency rates continue, we'll be very happy with the launch. We expect it to continue because of the product attributes. But I think that we need some more time to see where those -- where the persistence is coming from, whether or not a switched patient is more likely to stay on therapy longer versus a new patient. We don't know that yet. But we know that, overall, the refills have been quite strong.

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Unidentified Analyst, [30]

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And then second, just wondering if you had any thoughts on the failure of AMAG's hydroxyprogesterone trial to reach its endpoints and any concerns that Makena might be removed from the market?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [31]

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No, I mean, obviously, Q1 was a very strong quarter for us with Makena. And we haven't seen any change in Q2, the volume of auto-injectors going out is very strong. As far as the results of the studies and so forth, that's really a question for AMAG. What we know is that the physicians are still writing, they're still using Makena. I'm not sure where AMAG is with the FDA, but we see this as a long-term product. And until AMAG has further dialogue with the FDA, it's really inappropriate for me to give any commentary other than what we're seeing in the marketplace, which is still very strong. So all I can say -- the other thing I would say is factual, which is Makena was approved on a very robust clinical study with very strong efficacy, and I think that, that will help continue to have that product being meaningful program for both us and AMAG.

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Operator [32]

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And at this time, there are no further questions. I will turn the call back to Jack Howarth for closing remarks.

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John J. Howarth, Antares Pharma, Inc. - VP of Corporate Affairs [33]

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Thanks, Jennifer. And thanks again for joining us on today's conference call. If you have any follow-up questions, you can reach me at 609-359-3016. That completes today's call.

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Operator [34]

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That concludes today's conference. We thank you for your participation.