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Edited Transcript of ATRS earnings conference call or presentation 5-Nov-19 1:30pm GMT

Q3 2019 Antares Pharma Inc Earnings Call

EWING Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Antares Pharma Inc earnings conference call or presentation Tuesday, November 5, 2019 at 1:30:00pm 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

* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* Elliot Henry Wilbur

Raymond James & Associates, Inc., Research Division - Senior Research Analyst

* Matthew Lee Kaplan

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

* Stacy Ku

Cowen and Company, LLC, Research Division - Equity Research Associate

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Antares Pharma Third Quarter 2019 Operating and Financial Results Conference Call.

(Operator Instructions)

I will now hand the conference call 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, Matt, and good morning, everyone. Earlier today we announced our third quarter 2019 financial results and operating achievements. A copy of the press release and slide presentation for today's conference call are available on the Investors section of the Antares website.

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. Examples of forward-looking statements include those related to our future financial and operating results, including 2019 financial guidance and catalysts; future growth in market share; new product approvals and launches; sales and prescription volumes; FDA actions and other regulatory activities; results of ongoing and future clinical trials; and other product development activities and corporate development efforts.

These forward-looking statements are subject to certain risks and uncertainties, and actual results could differ materially. They are identified and described in today's press release and the accompanying slide presentation and from time to time in the company's filings with the SEC on Form 10-K, and is updated on Antares' recent periodic filings on Form 10-Q and Form 8-K.

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 3. Bob will begin with a high-level review of our outstanding third quarter results and provide an update on our commercial business. Fred will go through the detailed financials and then Bob will answer your questions.

I'll now turn the call over to our CEO, 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. Today we reported a historic quarter of financial progress driven in large part by sales of our flagship product, XYOSTED, as well as strong demand and growth for Teva's generic EpiPen. Our diverse mix of proprietary and partnered products contributed to significant year-over-year revenue growth for Antares.

Today I'm also happy to report that the rapid growth in our top line has produced the company's first quarterly income from operations, as well as overall net income. The strong execution by our commercial team selling both XYOSTED and OTREXUP, coupled with the same strong execution by our operations team supplying our partners with devices and products, has us outperforming Street expectations in all aspects of our 2019 business forecast. As a result, we are once again raising our full year 2019 revenue guidance.

So let's talk about some of the highlights from the quarter and how our achievements over the past 9 months have helped pave the way for why we believe 2019 is a transformational year for the company. Please turn to Slide #4.

This morning we reported $34.3 million in total revenue, almost double the $17.9 million we reported in the third quarter of last year. Total revenue grew 21% sequentially from the second quarter. Product revenue grew 113% versus the same period last year, and importantly, grew 20% sequentially from the second quarter. This is very impressive growth. It was driven by our key proprietary and partnered products such as XYOSTED, OTREXUP and the generic EpiPen. Importantly, as a direct result of the increasing revenue reported from our partnered products, royalty revenue grew 126% compared to last year and sequentially grew 51% over the recent second quarter.

I'd like to now briefly review the 2 recently launched products which drove record growth in the third quarter before turning the call over to Fred.

XYOSTED, our once-weekly subcutaneous auto-injector of testosterone enanthate for men with testosterone deficiency, was launched in January of 2019 by the Antares specialty sales force of approximately 80 sales representatives. Over the first 9 months, our launch metrics have exceeded Street expectations. We believe that is a significant accomplishment, as new product launches historically are difficult, with payer and physician dynamics creating significant challenges on product update.

Further highlighting the success of the launch is that our sales team is also detailing OTREXUP, our legacy RA product, to a totally different audience of rheumatologists. Not only have they maintained the OTREXUP call plan, they've actually grown OTREXUP revenue while driving strong growth of XYOSTED.

As you can see on Slide #5, XYOSTED total prescriptions are growing nicely. More importantly, new patient starts are increasing and refills are growing, a great sign of patient persistence. Strong therapy persistence means good rates of refill, which we will believe will lead to continued revenue growth.

Since launch, XYOSTED has recorded double-digit month-over-month sequential percentage growth in both new and total prescriptions. In the third quarter alone, Symphony Health Solutions reported that approximately 20,000 XYOSTED prescriptions were filled, which was a 73% sequential increase over the second quarter of 2019. Through September, approximately 35,000 XYOSTED prescriptions have been filled since the beginning of the year, and that number does not account for multiple-month refills. It is important to note that sales of XYOSTED to the wholesale distributors continues to be higher than the number of prescriptions reported by IQVIA and Symphony. We believe much of this growth can be attributed to strong rep performance, solid messaging and the work we have done to obtain additional coverage for potential XYOSTED patients.

From a coverage standpoint, a significant milestone was reached on October 1 when we contracted with another large pharmacy benefits manager, increasing our managed care coverage to approximately 70% of all commercial lives. Our aggressive goal for 2019 was to achieve 2/3 of all commercial lives covered in the first year of launch, and we have exceeded this goal.

We continue to target all large writers of testosterone products; 3,500 different physicians have written prescriptions for more than 12,000 patients since launch. Urologists and endocrinologists are writing approximately half of all prescriptions, while general practitioners, nurse practitioners and all others are writing the balance. It's a good, diverse blend of prescribers, and we believe it forms a solid foundation on which to expand. The most recent IQVIA data shows that our prescriptions are being written for a variety of patients who are either new to testosterone therapy or patients who are switching from a gel or generic injectable. We believe the trends we are seeing in both the number and type of prescriber and the kind of patients using the product means that the XYOSTED product features and messaging are resonating with our target audience.

Please turn to Slide #6. On our last quarterly call, we disclosed plans for a new branded social media campaign which was designed to educate patients and encourage them to ask their doctors if XYOSTED is right for them. I'm pleased to report that since the launch of this digital patient campaign, we have seen new, nontargeted healthcare professionals prescribe XYOSTED. These were healthcare professionals that were not in our original call plan. We believe that our digital campaign is having a direct impact on driving patients to their doctors to ask for XYOSTED, which is a key performance indicator for judging the success of the social media campaign.

And while this campaign has continued to ramp up, we want to make sure we stay in touch with the physicians who write XYOSTED, so we have a number of marketing initiatives planned, including a full slate of clinical congresses to attend. In fact, we just returned from the 20th Annual Fall Scientific Meeting of the Sexual Medicine Society of North America, where we hosted a session of key opinion leaders who discussed physician and patient experiences using XYOSTED to treat testosterone deficiency. I personally heard from physicians that XYOSTED was having a meaningful and positive impact on their patients' lives, and they were impressed at how pain-free and easy it is to administer XYOSTED. This ongoing meeting activity and outreach underscores how important we believe it is to stay active in educating patients and healthcare professionals on the benefits of treating testosterone-deficient men with XYOSTED.

In summary, we remain very pleased with the progress made thus far, and we are off to a great start. XYOSTED remains the fastest-growing branded product in the testosterone replacement market.

Please turn to Slide #7. Shifting now to generic EpiPen, which remains the fastest growing of our partnered products, Teva launched the adult version of generic EpiPen late last year and just this past August launched the EpiPen Jr. When you look at the overall epinephrine and EpiPen market trends for the third quarter of this year, you can see a dramatic increase in prescriptions filled and an increased market share for Teva's generic EpiPen. Almost 237,000 prescriptions were filled with Teva's generic EpiPen in the third quarter for a 27% share in the EpiPen market.

The timing of the EpiPen Jr launch in August was important, as the third quarter is back-to-school and allergy season, which happens to be the strongest quarter for the epinephrine market. With Teva now in full commercial launch mode, they have filled almost 400,000 prescriptions of 2-Paks year-to-date, with just under 2/3 of those prescriptions filled in the third quarter alone.

We continue to track Teva's rapid progress toward their stated goal of a 50% share of the EpiPen market, with the most recent monthly Symphony prescription data reporting them owning a 31% market share. Through the first 9 months of this year, with the first 6 months being a limited commercial launch, combined product and royalty revenue from the sales of the generic EpiPen by Teva resulted in $23.4 million in revenue for us. We believe our partnership with Teva on the generic EpiPen continues to progress in a very positive direction.

On Slide #8, you can see that this has been another breakthrough quarter for Antares, and when you look at our revised revenue guidance of $115 million to $120 million for this year, we have the potential for almost 90% growth in our top line versus last year. We believe that Antares Pharma is one of the most compelling growth stories in our sector as a result of posting substantial increases in revenue, reductions in operating losses and the company's first quarterly income from operations and net income. Most importantly, we believe we have set a course of additional growth in future quarters.

Now I'll go ahead and turn the call over to Fred for the details on our outstanding third quarter. 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 #9. As Bob said, this was another tremendous quarter for Antares, with significant sequential and year-over-year revenue growth, and the company's first quarterly income from operations, as well as overall net income.

The third quarter was an important quarter for the company, with our employees focused on the commercial success of our proprietary products XYOSTED and OTREXUP, which on a combined basis grew 180% versus the third quarter of last year. In addition, our partnered products with Teva grew sequentially 38% during the third quarter compared to the second quarter of 2019, while our revenue from AMAG's Makena grew 27% during the same period.

As many of you know, our partner AMAG recently appeared before an FDA advisory committee to discuss the findings from a post-approval confirmatory trial for Makena called the PROLONG study, which failed to meet its co-primary endpoint. While the committee discussed multiple questions, on the key question, 7 committee members voted to leave the product on the market under accelerated approval and require a new confirmatory trial, and 9 members voted to recommend that the FDA pursue withdrawal of approval for Makena. It's important to remember that the advisory committee's vote is not binding, but the FDA will consider it in making their decision.

AMAG recently stated their belief in the safety and efficacy of Makena and has indicated that they are committed to exploring options on how to gather additional data that will be most informative to physicians and the FDA, and at the same time work to ensure that eligible patients continue to have access to Makena. The timing and the outcome of the FDA's decision regarding the ongoing availability of Makena is uncertain. During the FDA's decision period, we will continue to supply the Makena auto-injector to AMAG for the distribution to physicians and patients.

Let me start my financial overview by providing a detailed breakdown of our revenues and operating expenses for the third quarter of 2019. Total revenue was $34.3 million for the 3 months ended September 30, 2019, compared to $17.9 million in 2018, a 92% increase. The launch of XYOSTED continues to go as planned, as revenue from the product grew 52% sequentially versus the second quarter, while our second commercial product, OTREXUP, grew 8% in the third quarter over the third quarter of 2018. Total revenue from Teva's generic EpiPen was approximately $11.5 million, representing over 33% of our total revenue. The combined revenue from XYOSTED and Epi, while still in their respective launches, contributed $18.5 million, or more than half of the total third quarter revenue.

Product sales were $24.7 million for the third quarter, compared to $11.6 million in the third quarter of 2018, a 113% increase. Importantly, product revenue as a percentage of total revenue continues to grow and accounted for 72% of total third quarter revenue. Sales of our proprietary commercial products XYOSTED and OTREXUP totaled $11.5 million for the 3 months ended September 30, 2019, compared to $4.1 million in 2018. Partnered product sales totaled $13.2 million in the third quarter of 2019, as compared to $7.5 million in 2018. The increase in total product revenue was primarily driven by sales of Epi devices to Teva.

Licensing and development revenue for the third quarter was $1.2 million, as compared to $2.6 million for the same period in 2018, and was primarily driven from Teva's teriparatide pen and Pfizer rescue pen development programs.

Royalty revenue was $8.4 million for the third quarter, compared to $3.7 million for the same period in 2018, a 126% increase. With the entire generic EpiPen franchise now available in pharmacies following the August launch of the generic version of the EpiPen Jr, royalty revenue grew sequentially from the second quarter by 51%.

Operating expenses were $19.2 million for the third quarter of 2019, compared to $11.9 million in 2018. The increase in operating expenses in 2019 was primarily attributable to additional sales and marketing expenses associated with the launch of XYOSTED.

For the first time in the company's history, we generated quarterly operating income, which totaled $2 million, which compares favorably to the operating loss of $1.4 million for the same period in 2018. That income was $1 million for the third quarter of 2019, compared to a net loss of $1.9 million in 2018. Net earnings per share was $0.01 for the third quarter, as compared to a net loss per share of $0.01 for the quarter ended September 30, 2018.

At the end of the third quarter, cash and cash equivalents were $41.9 million, compared to $27.9 million at December 31, 2018, an increase of $1.7 million from the $40.2 million reported at the end of the second quarter of 2019. During the third quarter, we generated $1.7 million in cash from operations, as compared to a cash burn from operations of $80,000 for the same period in 2018.

In October, we received the final payment of $2.5 million from Ferring in connection with the sale of the needle-free product line. We previously recorded the gain on the sale of the needle-free product line in the fourth quarter of 2018. The sale of this legacy product brought in $15 million in cash over the past 2 years, which was used in growing our commercial business.

That concludes my prepared remarks. 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. Wrapping up on Slide 10. This is obviously an exciting time for Antares and for our shareholders. We had an outstanding quarter, and we believe that our third quarter and year-to-date results continue to show the progress we've made in focusing our future growth on increasing the diverse mix of our total revenue. We are outperforming Street expectations, and once again revised upward our 2019 revenue guidance to what could be a potential increase of almost 90% over 2018 full year revenue. And while we are laser-focused on driving commercial success, we also remain committed to advancing our internal pipeline and helping our partners complete development programs, which we believe will translate into future product revenue for our company over time. Operationally, we are investing in expanded office, laboratory, manufacturing and warehouse space in order to support our rapidly growing business and set the stage for long-term growth.

To date, 2019 has been a transformational year for Antares, and we are proud of the extraordinary efforts and results from our employees, which should provide an exciting future for our company and shareholders.

This concludes my prepared remarks for today.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Your first question will come from Elliot Wilbur with Raymond James.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [2]

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Congratulations to the team for crossing both the profitability and operating cash flow thresholds, in terms of reaching positive territory. I know that's something you guys have been striving towards for a long time, so good job.

Specifically, a couple questions for yourself, Bob, around XYOSTED, not surprisingly. I guess just kind of up front, as the fixation on sort of the weekly Rx trends probably is only going to increase going forward, and Symphony and IQVIA seem to show a similar trend and pattern, but one of the services is quite a bit higher than the other, just wondering if you could maybe provide a little bit of color commentary on sort of how you guys look at those metrics internally, specifically thinking about points of distribution or sales channels that you know the product is moving through that just aren't simply captured by either of those services, and whether or not the difference between those two, based on at least what you see, may just be sampling error, or one picks up, perhaps, part of the channel that the other doesn't. But just anything you can shed light on with respect to sort of how to more accurately gauge kind of the weekly numbers would be helpful.

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

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Yes, thanks. Thanks for all your comments earlier, too, Elliot. As far as the Symphony and IQVIA weekly numbers, we really use those for trending. What's important to us is what gets shipped out of our distributor to our distribution partners, such as ABC, Cardinal, McKesson and so forth. And so what we're seeing are positive trends. Like I mentioned in my prepared remarks, our shipments are exceeding both of those services as far as weekly numbers. And I think it's a combination of -- we do sell direct to some large practices. We also, obviously, have some business that goes through the DOD, the Department of Defense, as well as the Medicare/Medicaid business, which typically doesn't get picked up well by prescription trends. And I think also, it's still in the early part of a launch, and both IQVIA and Symphony tend to take a bit more time to get the trends right, as the doctor base continues to change, and on smaller products, vis-a-vis the launch year, I think they have a little bit of a harder time tracking down exactly where all the scripts are coming from.

All that being said, we use them for trending. The trends are very positive both from a prescription standpoint as well as shipments, and it would be a good day for us when everyone stops looking at weekly numbers, because quite honestly, they're not very accurate. But again, they are trending in the right direction, and I think you can see that based on where our revenue is for the quarter for XYOSTED, it far exceeded Street expectations because the trends are better than what the script data is showing.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [4]

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Okay. Just wanted to ask a follow-up question regarding the current call pattern, detailing and source of prescriptions for XYOSTED. It looks about 50% of Rx's are coming from endocrines and urologists, I guess what we would expect with kind of a specialty product like this. I assume, though, that you're fairly active in terms of detailing a lot of the high-prescribing GPs, and I'm just wondering, would it be reasonable to assume that eventually this product kind of moves to more of a sort of a class pattern, where you've got 60% to 70% of prescriptions coming from GPs and only 30% to 40% from the specialists, or is it more likely that we're going to continue to see relatively high proportion from those 2 specialties? Just trying to figure out basically if those are leading indicators for what we may see eventually in GPs or if this is just going to be a product where we see a higher concentration of Rx's among the specialists.

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

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Yes. So from our call plan standpoint, we call on the high-prescribing testosterone writers whether they're endocrinologists, urologists or primary care docs. We call on all the top decile 7s through 10s, essentially. I think what we're seeing is the adoption early on is from the key opinion leaders, the urologists who really are the leaders in this area. They tend to write first. They're very comfortable with the product and moving forward with it.

Also, I think what's surprising is we are seeing a lot of endocrinologists writing, which -- a disproportionate share relative to the class. And I think that's really a function of -- and again, it's my opinion -- it's a function of that the levels that we achieved in the clinical studies are translating into the field, as from what we're hearing from physicians, and I think they like -- the endocrinologists really like that steady state. And so do the urologists, but I think endocrinologists focus heavily on hitting certain levels and targets.

So we're seeing a really strong uptake, more so than any other product in the space, from endocrinologists. And that could continue. I think going forward, we'll see the mix start to follow the marketplace, that the big primary care writers will stop -- will start to follow the key opinion leaders as to what they're writing, and I think overall we'll see the trend becoming more traditional with the general practitioners being a large piece of the writing. And again, we don't call on a lot of those general practitioners because they're in the lower deciles, but they will eventually write, potentially, based on what they're seeing in the marketplace and so forth.

So early on, it's a little bit different than the classic product in the testosterone space, but I think it will eventually gravitate towards being a heavier primary care, general practitioner, sexual-medicine-type doctor writing. But again, that remains to be seen.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [6]

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Fair. Last question. With respect to the pipeline, I think there's some belief out there that there's quite a bit of value accruing in the pipeline that you're not being credited for, and a lot of it is probably based on the fact that name, rank and serial number of a lot of the programs aren't really known. So as we think about 2020, any chance that we're going to get detail in terms of specific molecules with respect to either 1701, the urology product, or the Pfizer -- undisclosed Pfizer product, rescue agent?

And then quick subpart to that question, is that program partnered with the Meridian platform? There was some disclosure in some recent filings that Mylan is negotiating to acquire that business, and just wanted to get some clarity on whether that asset is tied to another area within Pfizer or if in fact it is tied to the Meridian platform. Thanks, Bob.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [7]

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Yes. So I agree with everything you said, that our pipeline is undervalued, and I think a lot of it has to do with the fact that we don't disclose both proprietary and our partnered products. And it depends on the partnership. Obviously, with Teva, we have the Forteo product under an annual review, which is a substantial product. We're waiting for the FDA approval along with Teva. Teva drives that process; they hold the file. And so we're hoping that that gets approved soon and we can launch a very big, important product in the osteoporosis space.

As far as the Pfizer program, that will -- from what we understand and from everything we're hearing from Pfizer, that is not part of the Meridian transaction or the Upjohn transaction. It is a product that is within Pfizer's branded division, and that is going to stay there. There is no indication whatsoever that that's going with the merger or the spinout. And so as far as when we may see or when that may get disclosed, again, it's really a function of Pfizer's timing and desire to disclose that product into the marketplace. It could become apparent when they start doing some work, as far as accelerated work with the FDA and so forth, but until then, Pfizer's a very large organization, and they probably are in the middle of doing 100 programs, so whether or not they determine to disclose that one is really up to them.

And in our own internal program, our rescue pen in the neurology space, I fully expect that will become very apparent in the -- in 2020 as we move that product into clinical trials. We're doing a lot of really good work right now on the device, as well as formulation, and we expect to move that into an IND-type setting in 2020. So that'll become apparent.

And again, on the other pipeline products that we're working on, as we progress towards an IND is really when we'll disclose what those products are. So we do have a great pipeline; we also have another product with Teva, Exenatide; not a huge product, but still a meaningful one for people with diabetes, an important one that we're hoping to have approved soon with the FDA, again, as an ANDA. So that's our current pipeline, as well as, we look to continue to bring in other alliance deals in the near term to continue to bolster that pipeline. So hopefully there'll be some additional news in that area in the future, and we'll be able to get the pipeline further bolstered.

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Operator [8]

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And your next question will come from Anthony Petrone with Jefferies.

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

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Maybe just 2 from me and I can hop back in queue. There's just one on XYOSTED, just trying to get a sense of sort of penetration within physician accounts that are prescribing. How many patients are these physicians prescribing XYOSTED in lieu of a topical or an intramuscular injection? So that would be the first question.

And then anything you can provide just in terms of the AMAG FDA panel that you mentioned in your prepared remarks, just sort of how we should be thinking about that as it relates to auto-injector purchases going forward. Thanks.

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

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Sure. So thanks, Anthony. As far as your first question on prescribing habits of our writers, obviously it's mixed. We have some big writers that have adopted XYOSTED and it's probably their first-line therapy for most patients. What we see is that obviously they're offering it to new patients and we're seeing a really nice number of patients that are new to therapy. About 50% of our scripts are patients who have never been on another testosterone therapy. So that shows that the doctors view it as a strong first-line therapy, as well as when a patient's given the option between gels, IM injections or XYOSTED, they're picking XYOSTED. So we're seeing a good mix of patients.

And then other doctors are switching their IM patients. Again, what we've found is that most doctors will say, hey, if the patient doesn't complain, they're not going to offer it, but if they're complaining, they offer XYOSTED, and if they switch, they tend to be happy.

But a lot of it has to also do with coverage. We're really now at a nice percentage of lives covered for XYOSTED, but it took through October to get there, and with any product launch it takes anywhere from 6 months to a year to get relatively good coverage, if you get it at all, and we got 70% of all lives covered. So I think we'll start to see the patient demographics really changing based on their coverage. If they weren't covered, it was an expensive proposition to change from a generic IM or a generic gel to XYOSTED.

So we're seeing all kinds of doctors. We call them internally, like, dabblers, adopters and something else. I can't recall exactly what it is. But I think it's normal in that you have doctors who are aggressive in looking at new therapies and adopt them, and it becomes a big part of their practice, and then others who take time and they want to hear from other doctors, they want to hear from patients and so forth.

So I can't say that we have one particular doctor -- type of doctor that writes heavily and ones that don't. I think we're seeing a really nice mix of doctors. Like I said in my prepared script, 3,500 physicians have written XYOSTED. We call on about 12,000, probably 10,000 on a regular basis. And so that's a pretty good mix on a very early -- a very short period of time to get that number of doctors writing, and then also the number of patients that are using XYOSTED.

I think what's important is as we continue to get new patients, the persistence has been really strong, and so the refills become more and more important, and again, I think we're seeing better persistence than what you typically see in testosterone products, and if that trend continues, we think we'll continue to see really nice growth with the product.

Your second question -- yes, thanks. Your second question on AMAG. So I'm not really going to comment on AMAG's regulatory plan or process. What I can tell you is that it's November, so clearly in 2019, I don't think there'll be any impact whatsoever of the AdCom vote. In talking to Bill Heiden, the doctors are still writing Makena auto-injector. Our shipments are still strong. And so for 2019, I really don't see any impact.

Beyond 2019, what we said in the prepared script, it's really -- it's likely going to be an extracted or an extended period of time as the FDA gathers all their information that they need. AMAG's working with them, as they disclosed in their earnings just last week. They're working with the FDA to try to come up with another study to conduct while the product stays on the market. But the time that it takes and the outcome is really something I can't predict at this point, and we're going to continue to supply the Makena auto-injector product to AMAG, and like I said, it'll -- on a go-forward basis, we'll just keep doing what we've been doing in the past, which is supplying them a very nice product that they've been distributing to their physicians and patients.

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Operator [11]

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Next, we will hear from Stacy Ku with Cowen and Company.

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Stacy Ku, Cowen and Company, LLC, Research Division - Equity Research Associate [12]

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First on XYOSTED, can you remind us of plans for copay support for XYOSTED going into the next year? Maybe help us understand what might be the pushes and pulls we could expect for volume dynamics and gross to nets in 2020. And I have 2 follow-ups.

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

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Yes, so I'll let Fred answer the gross to net, but on the copay support, right now, our program is copay support of up to $125, I think, for patients who have commercial insurance. And we get really good utilization with the copay support. About 65% of our patients utilize a copay support. And as our coverage continues to grow, our copay systems will likely continue to grow.

Looking into 2020, we're looking at various changes that could be made. Likely the support will stay the same, but we're looking at if there's anything we can do in Q1, where with high-deductible plans taking hold in Q1 for all products, is there a way that we can minimize the effect of those high-deductible plans on the prescriptions in Q1? We haven't come to a conclusion on that, but clearly copay assistance is one of those areas that you can help a patient as they're going through that transition to cover their medications in that first couple months where it's a lot of out-of-pocket cost for them as an individual.

As far as the gross to net, I'll turn that over to Fred.

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

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Sure. Thanks, Bob. Good morning, Stacy. Regarding the gross to net, that percentage has been improving during the year. At the beginning of the year, we have discussed our first-fill-free program prior to us gaining the significant coverage that we have in the market now, and that actually brought down our gross-to-net percentage below where it is right now. When we take a look at the third quarter, we're in the mid- to upper 50% that remains in net, so therefore, about -- a little over -- between 40% and 45% deductions that we have, and the biggest ones being the copay, as well as the typical for distributors, as well as we have kept the first-fill-free program in place, and then the rebates. We expect that percentage to stay steady, as well as slightly increase as we go into the end of the year. And then as Bob said, we're currently looking at the programs for the first quarter of next year, as well as all of next year, as to the copay assistance programs. But as of now, we're looking in the mid- to upper 50% that remains in net in the gross-to-net calculation.

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Stacy Ku, Cowen and Company, LLC, Research Division - Equity Research Associate [15]

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That's really helpful. And also, so how should we think about the cadence of EpiPen-related revenue? In particular, how it might relate to Teva's market share goals and potential inventory building.

And then, how has your recent quarterly performance changed how you're looking at the end of 2019 and 2020 in terms of potential earnings guidance and potential continued profitability?

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

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Well, I mean, clearly, our increasing guidance, a big piece of that is around the EpiPen. I mean, we had an outstanding quarter in Q3, which is historically the best quarter for -- in the epinephrine market because of back to school and allergies and so forth. So we see Teva's market share being in the -- anywhere from 31% to 34% or higher depending on the week. We expect to see that trend continue to improve as they try to reach their stated goal of 50% market share of the overall EpiPen market. So I think going forward, we're being conservative in Q4, and because the Q3 is the strongest quarter for EpiPen, we don't know what's going to happen in Q4. It's unpredictable for us. We know our shipments are strong to Teva, but what's going out to the trade is really -- we don't know until the end of the quarter.

So we expect EpiPen to continue to grow. We expect it to be a meaningful part of our business going forward. And we've been very happy with how Teva's been producing or performing. To have over, I think I said, 400,000 prescriptions filled since launch -- to put it in perspective, we do -- we sell -- we make -- or in a pack, it's 3 auto-injectors. It's 2 with drug and 1 with -- 1 trainer. And so it's millions of pens that we produced, and we're really proud of that in that we continue to ship Teva, and we know that they're not building inventory. We know that they are supplying the market and that they are aggressively gaining market share and continue to sell almost everything that we ship. So we're really happy with that, where that program's going.

In 2020, I really can't predict at this point. It's too early to determine how quickly or if they hit their 50% market share goal. It's a goal, and right now the trends are strong, and we're really happy with where Epi is going. And we see that being a long-term meaningful product for both organizations.

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Operator [17]

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Your next question will come from David Amsellem with Piper Jaffray.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [18]

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So had a few, first on XYOSTED, and apologize if I missed this, but I wanted to get a sense of the mix -- the patient mix between those who have been on topicals versus those who have been on intramuscular injections versus those who are testosterone-naive, and how you're seeing that evolving. That's number one.

Number two is, I know you've commented on the gross to net, but I wanted to get a sense from you as to where you think that's going to head in 2020 or even longer-term.

And then lastly I had a question on capital deployment. I mean, you are profitable, and you're building your cash position, so I wanted to get a sense from you as to how you're thinking about the addition of assets where you can leverage your commercial infrastructure. Thanks.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [19]

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Sure. So David, on your first question about the mix of XYOSTED patients, about 50% or more of our patients are new to therapy, which I think, again, is an impressive percentage of our patients being naive to testosterone replacement therapy. It shows that the doctors are comfortable with XYOSTED being a first-line therapy. So 50% are new.

On the other side of it, I would say that the vast majority of the balance is from IM injections. It's hard for me to determine whether -- how much was gel versus IM, but clearly, I think, the vast majority are IM injection patients who want a better injection, want to get rid of those -- potentially get rid of those peaks and valleys that they see with IM injections. And so that's the second biggest component of our patient base. And then some on gels.

I think longer-term, we'll see more growth in the IM side of the business because I think as doctors move away from that, well, if the patient's not complaining I'm not going to offer anything, to if they see that XYOSTED is really working well for their other patients that potentially they'll start to offer it to their patients that are on IM and start to get them more -- get more switches going.

But again, our focus really is just giving -- having XYOSTED as a choice for patients, and so far it's been a pretty good mix of patients choosing to go with XYOSTED versus the generic options that are out there. So overall, we're happy with the patient reaction to XYOSTED.

As far as the gross to net, I'll turn that over to Fred again.

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Fred M. Powell, Antares Pharma, Inc. - Executive VP & CFO [20]

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Sure. Thanks, Bob. Yes, with the gross to net, as I was just mentioning, we were looking at the improvement of the percentage during the year. Third quarter and, we believe, fourth quarter, we should be in the mid- to upper 50% remaining on the nets, so looking at a gross-to-net discount in the 40% to 45%. We see that fairly stable in the third and fourth quarter. Going forward, we would like to boost that number up as we get into 2020 and beyond, but it's yet to be determined what programs we're going to be putting in place for the copay assistance, as well as the impact of total rebates for all of 2020. But I'd say right now we're comfortable in the mid-50% to 55% to 60% remaining on the net line or a 40% to 45% deduction.

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

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As far as your deployment of capital, I mean, it's a bit early to be discussing capital deployment when it's our first quarter of generating cash, but I would say that generally, because we have a very productive sales team of approximately 100 people overall, when you look at 80-some reps plus 10 district managers and so forth, yes, we are looking at other products to potentially acquire, but there's not many out there. But we are looking at assets because that's one area where we would definitely deploy our capital to bolster our revenue with what we think is a very effective resource with our sales force. They've done a really great job of XYOSTED and OTREXUP and we want to potentially give them another product.

And so that's where -- that's the area that we're really looking at from our capital standpoint. Everything else is really being funded by operations. Our internal R&D is being funded by operations. Our external R&D with our partners is being funded by them, which brings in additional revenue and profit for us. And so our cash and growth, hopefully, going forward, will be used to bring in other assets.

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Operator [22]

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(Operator Instructions)

Next, we will go 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 [23]

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Just wanted to dig in a little bit more into the XYOSTED. A couple things -- it seems to me your persistence rate should be pretty high given the level of nRx and refills comparatively. Can you talk a little bit about what your persistence rate is? I guess historically, given historically, persistence on TRT therapies has been pretty low past 6 months. And what's your -- or 12 months especially. What's your sense now, given, I guess, although it's early in the launch?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [24]

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Yes, I mean, I think that's -- it's clearly still early. The vast majority of our patients really start -- didn't start coming onto therapy until, like, March, April, when we started to see the trends moving up. But I will say the persistence looks pretty darn good at this point. We're seeing persistence 6, 7 months of the patients who started. The only one that may not -- some of the patients that we're not seeing persistence in is if they were first-fill-free and they don't have insurance coverage. And they, some of them don't, obviously, pay for it out of pocket. And so that's the one area where we see less persistence because of a financial decision, not because of a drug decision, for the most part.

So overall, I think we're ahead of where we thought we would be from a persistence standpoint. Clearly, like you mentioned earlier, this therapy is one generally that's wrought with low persistence, but we seem to be bucking that trend early on. But again, it's very early, but right now, things are looking pretty strong in that area.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [25]

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Okay, good. And in terms of your current payer coverage, you said you're 70% ahead of schedule with respect to the coverage. Where do you think you could drive that? Is that where you kind of plateau now, or do you see that continuing to grow going forward?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [26]

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Yes, I think that we're at a very nice level. I think 70% for any branded product is a pretty strong coverage percentage. And we're going to have ins and outs. We're going to have some plans that decide not to cover, others that'll add on based on their -- what their customers are saying. And so I would say that I don't see a significant increase from this point on, but we'll see ins and outs, and hopefully, we'll get a little bit more regional coverage. A lot of the PBMs, we're on their national formulary, but when you go -- when you peel that onion back, there's some plans that are in there that don't cover, that we may win over time. That'll increase that number. And again, there'll be plans that say, hey, I'm just not covering any testosterone products, and they drop out of the universe. But overall, I think that's -- it's a pretty successful high number as far as coverage is concerned, and we'll continue to work on improving that, but I wouldn't expect a large increase of coverage from this point on.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [27]

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Okay, that's helpful. And then in terms of the EpiPen, you talked a little bit about the seasonality, which is absolutely expected, kind of back to school in the third quarter. Can you give us a little bit more detail in terms of the level of that seasonality versus second quarter and first quarter?

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [28]

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Yes, I don't have any of those numbers in front of me. And again, with it really being a launch year for us and Teva, and more so for Teva, I can't even predict what Q4 will be relative to their market penetration at this point. We know that the weekly trends have been good, but if you look at the overall market in Q4, it's been down relative to Q3. Not dramatically, but it's been down. And Teva could buck that trend a little bit by just getting more market share, but I think overall the market is going to see a Q4 market, which is historically lower than Q3. I don't know the exact numbers off the top of my head as far as what percentage of -- how many scripts were written in Q1 through Q4 overall, but clearly we did look at Q3, and it is the strongest quarter for the epinephrine market. And hopefully Teva will continue to grow their market share and we'll see continued growth with the EpiPen product.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [29]

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Okay, good. And then last question, kind of a little bit of a follow-up to Elliot's in terms of your pipeline, you don't disclose what the products are, but maybe one thing that could be helpful for us is if you could help us understand the different products and the current market sizes that you're going after, and I guess specifically, for your internal product, for Pfizer, and then more specifically, we know about teriparatide, but what -- help us understand what the teriparatide opportunity is for Antares specifically.

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Robert F. Apple, Antares Pharma, Inc. - CEO, President & Director [30]

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Well, so, that's a really tough question to answer. It's a lot of different products, and so we're not prepared at this point to give you a market estimation on the overall -- all the other products, especially Pfizer, when it's an undisclosed product. I think you'd be able to narrow it down pretty quickly as to what the product is, and that would kind of defeat the purpose of what Pfizer's trying to do. Same thing with our other internal program. Again, I said earlier that we'll be probably disclosing that product in 2020 as we move into an IND and the clinical trials. So it's not like we're asking -- we're not -- it's not going to be that much longer before it's disclosed on a couple of the programs.

On the one that is disclosed, Forteo, I think last year Lilly's product did about $750 million in the U.S., about the equivalent amount globally. So for Teva, it's a large market opportunity. It's obviously bigger than epinephrine. And hopefully when they get the approval, the product's substitutable, and if it's substitutable, I think we could see potentially the same substitution rate that we're seeing with EpiPen.

So it's a meaningful product because we get -- we sell them the devices. It's clearly not the volume of devices like epinephrine; it's a much lower-volume product but a much higher dollar value. I think the -- don't quote me on this, but I think the Forteo pen's about $3,500 a pen. And so the dollar value is very high, and we get a royalty on that dollar value. We get a high royalty relative to Epi because of that kind of change or mix, the change in dynamics between price and volume. So we get a -- we start out at a high-single-digit royalty to a mid-teen royalty on Forteo, which obviously could be very meaningful for us as an organization depending on the penetration that Teva gets.

And so again, I think -- and globally, the rest of the market, we get the same economics for Teva with Forteo on the rest of the world, but the rest of the world, pricing is much lower than in the U.S. But overall it's still a meaningful amount of potential opportunity for Teva and for us.

So I would say that that's the only other one I could characterize. Exenatide, which is also disclosed, that's a smaller product. I think overall the brand's doing around $100 million. It's not a big opportunity, but for us and Teva, it's important because it would be one of the first generic products available for people with diabetes. And so it's still a viable and important product for both of us, so hopefully that will get approved. And that's the exact same economics, from our standpoint, as Forteo -- high-single-digit royalties to the mid-teens, and we sell the devices. Again, not a ton of devices being sold in that market, so it's more on the dollar value.

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Operator [31]

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And ladies and gentlemen, that does conclude the question-and-answer session for today. I would now like to turn the call back over to Jack Howarth for any additional or closing remarks.

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John J. Howarth, Antares Pharma, Inc. - VP of Corporate Affairs [32]

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Thanks, Matt, 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 concludes today's call.

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Operator [33]

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Once again, that does conclude the call for today. Thank you for your participation; you may now disconnect.