Antares Pharma (ATRS) is one of the fastest-growing biotech stocks in the sector, with multiple collaboration agreements with large-cap pharmaceutical companies to supply it with pressure-assisted injector devices.
The wheel of fortune, however, has not been kind to Antares, as its shares are now down 40% year to date despite the company's record levels of revenue growth. Just what exactly could be keeping the company's stock at bay?
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Impressive growth figures
Antares's core business has been steaming as of late. For a start, it manufactures autoinjectors for Teva Pharmaceutical Industries' (TEVA -1.91%) generic EpiPen, which has captured about 43% of the overall EpiPen market from Mylan's (MYL) once blockbuster drug.
Recently, the company has another commercialization agreement lined up with Teva to supply pen injectors for generic Forteo for the treatment of osteoporosis. Last year, Eli Lilly's (LLY -1.17%) branded variant of this drug generated $1.4 billion in sales, including $646 million in the U.S. alone.
The company's flagship product is Xyosted, an injectable testosterone replacement therapy (TRT) that is 90% effective in clinical studies at normalizing testosterone levels in men with deficiency of the hormone. Efficacy aside, the drug is also very affordable, with a list price of $430 but affordable copay for most commercially insured patients. Since its launch last year, about 5,300 physicians have written over 100,000 prescriptions of the drug for nearly 19,000 patients. The injectable TRT market was estimated at $408.4 million last year.
Skeptics aren't impressed
For all its rosy tales of growth and promise of fortune, the company does have its share of critics. One common grievance among long-term shareholders seems to be an unfavorable view of management. A scan through the company's financial statements from 1995 to 2019 shows that Antares never had a profitable year during this period in terms of GAAP net income.
Its margins do not stand well against competitors', either. While Antares' gross margin of 60% is comparable to the industry's 66%, its operating and net margins indicate the company is struggling to break even. However, it is worth noting that last year, the company recognized more than $990,000 in operating income from $99.68 million in revenue -- its best year ever.
Furthermore, the company suspended its 2020 revenue guidance due to headwinds facing Xyosted. Although the product is effective, new patients must first proceed to a physician's office for a blood test before they can be administered Xyosted due to the drug's side effect of increasing blood pressure. This is obviously a difficult task to perform amid the current COVID-19 pandemic, and management forecasts the company's growth will be stunted for the time being.
Should I give the company a chance?
Rest assured, there are signs of relief coming for Antares. With the launch of Xyosted and a generic EpiPen partnership, Antares' revenue shattered records and grew by 42% in the past quarter compared to last year. The company's debt situation is also manageable, with about $50.3 million in cash and investments to offset $40.5 million in long-term debt.
All considered, Xyosted and Epipen are game-changers in Antares' path to attain profitability, and it shouldn't take long for the company to recognize profits once physician visits pick up again. I think Antares' 3.5 price-to-sales ratio is a good price for investors to pick up a growth company enduring a one-time hit from the novel coronavirus.
