Image Source: Health Journals
Antares Pharmaceuticals' (ATRS) XYOSTED may be one of the best testosterone therapies available when evaluated against competitors such as Aveed, Depo-Testosterone, Delatestryl, and Testopel. Considering the sector has decade-old generics priced at $25/mo., management should be praised for its efforts to grow XYOSTED scripts to over 7,000/mo., and its revenues by 100% Y/Y despite a $550/unit pricing. Overall, this results in the company trading for merely 2.5x FY 2020 EV/Sales in terms of valuation, making the stock a strong buy.
In its earnings report early November, ATRS saw its bottom line improve by 182% Y/Y and posted a profit of $0.01 per share. Its annual guidance increased by 10% to $115 million for FY 2019. Revenues were also up sharply, growing by over 100% Y/Y with 46.5% of its growth coming from the launch of XYOSTED (subcutaneous testosterone enanthate injection) indicated for testosterone replacement therapy in hypogonadal men.
Source: Bloomberg Terminal/Symphony HealthCare Solutions
Much of this organic growth can be directly attributed to XYOSTED's prescription count. Based on data from 2 leading competitors, TRX for TRT grew nearly 200% YTD. Nearly 58% of this increase can be attributed to XYOSTED, which saw its prescription count balloon to over 7,000 units/mo.
The drug is currently priced at ~$550/unit retail, and is largely in-line with ATRS's revenue figures when multiplied by monthly prescription count. Whilst a simple calculation, this is fantastic news for ATRS as a drug's list price is usually at a premium to its net price due to bulk discounts and negotiations with pharmacy benefit managers. A lack of pricing differential in the case of XYOSTED indicates and reiterates its significant value proposition for patients.
Currently, XYOSTED's major competitors in the TRT market include Aveed, Depo-Testosterone, Delatestryl, and Testopel. Each and every single one of these drugs possesses disadvantages which puts XYOSTED in the spotlight when competing against sector players.
For starters, 90% of hypogonadal patients taking XYOSTED saw their testosterone levels return to normal (300 to 1100 ng/dl) after 12 weeks. There were no abuse-related adverse events reported in its clinical trials, as no single patient had witnessed testosterone levels spike beyond 1500 ng/dl. Furthermore, while its label indicates XYOSTED may be linked to major adverse cardiovascular events, medical literature have debunked this hypothesis. While the FDA has cited 4 studies suggesting an increased risk of heart disease post TRT, over 100 studies have reported reduced CV risk with higher endogenous testosterone concentration.
All combined, this gives XYOSTED a definitive advantage against standard TRT, some of which are decades old and cost just $25 per month retail. One such competitor is Delatestryl, which only has a minimum efficacy of 72% in normalizing testosterone levels and is suffering from supply shortages.
Another generic, Testopel, is not performing so well either. The drug was approved in 1972, but saw various hurdles related to its pharmaceutical parameters and was not marketed until 2008. In follow-up studies, 100% of patients who took the drug saw their testosterone levels normalize after 4 weeks, but this metric dropped to just 31.8% after 16 weeks of treatment.
As for Aveed and Depo-Testosterone, these are currently the most prominent competitors to XYOSTED. However, even these drugs have their fair share of drawbacks. Patients taking Aveed and Depo-Testosterone have reported severe fluctuations in mood/libido, and serious risks of anaphylaxis respectively.
As shareholders should see, XYOSTED possesses one of the best clinical profiles out of all sector players. It's superb efficacy, low prevalence of serious adverse events, and negligible risks of abuse makes it a leading candidate in a total addressable market estimated to be worth $2.2 billion in FY2018.
On the other hand, there continues to be over 10 new cases of testosterone deficiency per 1000 persons per annum. It is now estimated 2.1% to 12.8% of middle aged men have this condition. As a result, the CAGR of the total addressable market for its treatment isn't likely to decline any time soon.
With an annual run rate of $46 million in XYOSTED revenues, the drug has captured approximately 2.1% of the TRT TAM 1 year after launch, and is growing at +100% annually. In a past article, the author was critical of management for paying themselves nearly $6.4 million in annual share-based compensation and salaries while revenues stagnated at the $40 million mark. However, ATRS's leadership should now be applauded for their ability to grow sales of XYOSTED in a hypercompetitive market filled with generic competition.
Currently, the company has an enterprise value of ~$600 million and possesses negligible debt. While the company is expensive in terms of backward-looking metrics, the future is rather bright for ATRS. In terms of valuation, the company is trading at 10x EV/TTM Sales, but is only priced at 5x FY 2019 EV/Sales, and is valued as little as 2.5x FY 2020 EV/Sales. 10x spot revenues is not an expensive premium to pay for a company growing its sales at 100%. Hence, Investors interested in small-cap biotech should consider ATRS as an enticing growth stock.
Disclosure: I am/we are long ATRS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Antares' Xyosted Is One Of The Best Testosterone Replacement Therapies Available - Seeking Alpha
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