The following comment should not be considered presumptuous – It is likely that Aytu BioScience’s(NasdaqCM: AYTU), Natesto®, may soon be positioned to land a knockout blow to testosterone replacement therapy drug leader AndroGel®?
Admittedly, it may take several rounds of education before both users and physicians can fully appreciate and understand the growing list of benefits of Natesto®, and that’s okay. In the meantime, however, what is becoming abundantly clear to those that already follow Natesto® is that it is proving itself as the only FDA-approved TRT drug on the market that offers patients an exceptional safety profile that also provides all of the benefits of testosterone while at the same time preserving male fertility. Others don’t come close.
Investors that follow Aytu BioScience know full well that Natesto® is likely the catalyst for driving the price of the company’s shares higher by more than 150% since the beginning of the year. And, while Natesto® may be the workhorse, for now, AYTU has also been busy beefing up its product portfolio with a novel set of drugs that target unmet medical needs by adding Tuzistra® XR and ZolpiMist™ to its arsenal. However, even with those potential powerhouses now in the mix, few are questioning that Natesto® is taking the lead in driving investor interest by pushing AYTU to post four consecutive record-breaking quarters over the past 12-months. And, the water cooler conversations may take it a step further, with many investors excited to be at the AYTU share price-hike party early, believing that Natesto® may eventually emerge as the go-to TRT drug once physicians and users become thoroughly educated about its total package of benefits.
Even better… if you’re an AYTU fan and you want to make sure that portfolio property values are preserved, it’s good to know that the barriers to entry into the TRT drug market are incredibly high. And, as Natesto® takes its stance against TRT market leaders, it’s unlikely that any new players will find a niche in this multi-billion dollar market. Examples are plenty.
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Natesto® Targets Leaders, Others Fall To The Wayside
As Natesto® continues to generate significant and potentially transformative data from its ongoing Spermatogenesis Study, investors are taking a greater interest in the novel properties consistent only to Natesto®. After all, staying educated about one’s investment properties is key to maximizing profits or cutting losses. For AYTU investors, it’s the former, and the value in Natesto® is growing as the drug is showing clear signs of becoming the only FDA-approved TRT drug on the market proving the ability to maintain normal sperm parameters in men while at the same time preserving male fertility. And, it’s those results that are leading Dr. Ranjith Ramasamy, MD, the lead investigator of the Spermatogenesis Study at the University of Miami’s Department of Urology, to speculate that if the final data confirm what is already known from the more than 50 male study participants, Natesto® may cause a paradigm shift in how men with Low-T get treated. And, as it’s efficacy profile boosts its standing amongst TRT drug market leaders, investors should also take pause to look at recent drug failures, which exemplifies the market stability for Natesto®, which is already FDA-approved and clear from all regulatory uncertainty.
Few that follow the drug markets regulatory processes will argue against the fact that the testosterone replacement therapy drug market is met head-on with some significant barriers to entry. That truth was confirmed with two major setbacks for potential TRT drug newby, TLANDO®, an orally administered low-testosterone therapy from Lipocine, Inc. (NASDAQ: LPCN). TLANDO® hit the wall hard twice during the drug’s regulatory review process over the last few years and may never see the light of day.
From AYTU’s perspective, though, the news was welcome. And, with TLANDO unlikely to make it past the FDA approval process in current form, it adds fuel to Natesto®’s recent run of good news that sets the drug up well to battle the next big three TRT drugs in the sector, AndroGel®, Axiron®, and Fortesta®. And, when evaluating the competition, it’s fair to consider that each of them is already weakened by having an FDA Black-Box warning on its label that highlights the potentially severe side effects it can bring to its users. Moreover, with Natesto® already having a better safety profile than competing products and at the same time demonstrating as good or better results than the three mentioned, it’s a fair assumption to believe that Natesto® can eventually win the head-to-head battle in the long-term. And, to support that opinion, if the final results from the Spermatogenesis Study, expected this summer, confirm interim results, Natesto® will become the ONLY testosterone-replacement-therapy drug of the four to provide patients with all the benefits of testosterone, but also help to maintain healthy sperm parameters, and preserve male fertility. Yes, that event will be valuable if you are an AYTU investor.
Thus, from a medical, safety, and family planning perspective, those results could be a game-changer in the industry. And, it can’t be understated that others have tried, and many have failed in trying to build a TRT drug that has a profile similar to that of Natesto®.
TLANDO Was First To Falter, Hurdles Are High
For all intents and purposes, TLANDO® was expected to be an effective alternative to currently available products like AndroGel®, Axiron®, and Fortesta®. TLANDO was trying to exploit a niche that could target the weakness that each of their three targeted TRT drugs carries – a substantial risk of adverse side effects that caused the FDA to order the inclusion of the most severe Black Box warning to its label. TLANDO® was banking on better safety and performance, but, so far, they have fallen short on impressing the evaluators.
Now, although TLANDO® isn’t entirely eliminated from final marketing approval, it’s a long shot for FDA approval at best. And, even if it did get final approval, the likelihood that the drug will make significant market headway as a viable alternative treatment to any of the major’s is unlikely.
Ultimately, the majors may have taken a sigh of relief on the TLANDO® setback, thinking that their only competitors that remained were also marked with the Black Box warning, thus making the battle more about marketing dollars than about safety and performance. What Big Pharma may have underestimated, though, is that this up-and-comer TRT drug, Natesto®, has been generating a significant amount of new press that is educating prescribing physicians and users about its potential best-in-class characteristics.
What is now becoming more familiar amongst users, investors, and physicians is that Natesto® has several real advantages. First, it is void of the severe Black-Box warning. Second, its ease of use as a nasally administered gel offers less risk of accidental transfer. And, third, Natesto® is the only TRT drug proving the ability to provide the benefits of testosterone and at the same time preserve male fertility. These three things, on their own, should allow Natesto® to land the first market blow to leading competitors. But, investors need to keep in mind that that list shows just three advantages. People must also realize that the Spermatogenesis Study is not yet complete, and there is optimism that the list of Natesto® benefits over other marketed TRT drugs will grow even longer.
Jumping back, the markets have not heard much about TLANDO® since January of 2018, and it may be a sign that they are evaluating the drug’s market potential if they indeed elect to move forward with the drug. On January 10th Lipocine Inc. announced that the Bone, Reproductive and Urologic Drugs Advisory Committee (“BRUDAC”) of the U.S. Food and Drug Administration (“FDA”) voted six in favor, and thirteen against the benefit/risk profile of TLANDO®, the company’s oral testosterone product for testosterone replacement therapy in adult males with hypogonadism. Increased blood pressure and the accompanying cardiovascular risk was cited, among other things, as a major reason for BRUDAC coming out against TLANDO®. Notably, the role of BRUDAC is to provide recommendations to the FDA about whether or not a drug should be approved for market, and although the recommendations of BRUDAC are non-binding and the final decision is made by the FDA, it is uncommon for the FDA to endorse products that the Advisory Committee recommends against. Thus, while investors in LPCN still cling to hope, others may look toward AYTU and Natesto® as a better place to find opportunity in the lucrative TRT drug market. But, as comparisons go, maybe TLANDO® was a weak competitor, anyway.
Surprisingly, cardiovascular risk is not unique to currently marketed FDA-approved TRT drugs, with the exception being Natesto®, which has no Black-Box warning and shows no signs of causing cardiovascular events. And, obviously, that’s an essential factor to consider. Included in the Black Box warning label of marketed TRT products, several of the top TRT drugs in the market has shown a tendency to generate an increase in the hematocrit levels, a significant issue that causes blood to become thicker within the user’s body and is clinically associated with enhancing the risk of stroke significantly. Although patients often try to compensate for the higher risk of stroke by reducing their TRT dosage or even quitting the therapy altogether, others go to extreme measures by donating blood more frequently to thin it out, which is a radical way of dealing with an issue that can be fixed by changing a prescription. The question for them- Why haven’t they switched to Natesto®?
The quickest response would be to assume that they were unaware of their options. The good news is, however, is that prescribing physicians are catching on to the benefits and safety profile of FDA-approved Natesto® and are paying specific attention to its lack of cardiovascular effect and to its ability to preserve fertility. And, the track record is reliable when it comes to showing no impact on hematocrit levels, which it proved in studies when it showed no effect on hematocrit levels after 360 days of continuous treatment.
Okay, obviously, TLANDO® was a wannabe challenger that didn’t make the cut. With no need to acknowledge the losers, Natesto® instead should focus upward in competitive class and battle against the heavyweights and top contenders in the ruling class of TRT drugs. And, with the data showing potential dominance when it comes to safety, efficacy, maintaining of male fertility, and ease of use, Natesto® may actually get considered a favorite in side by side comparisons.
Natesto® Should Be The Market Leader
For some TRT drug users, they are sometimes willing to sacrifice safety for the desired result. But, that poor decision should fall on the FDA, who permits products to remain on the market when safer alternatives are available. It’s one thing to allow patients to use a drug for compassionate reasons, however, when there is an approved safe and marketed drug already available, the FDA should have some sensibility to intervene. Many drug markets have just one of two primary drug treatments, so, having the FDA step in to protect patients in the TRT market is not necessarily a bad idea. After all, Natesto® can do what these proven unsafe drugs can do, and at the relative same cost and availability. And, since Natesto® is in the same class, is proven safe, provides as good or better results, and can potentially preserve fertility, how does it make sense for the FDA to allow these harmful TRT drugs to remain on the market? But, as they ignore the obvious, Natesto® is getting strong enough to fight its own battles.
Natesto® is squaring off against competing products being prescribed by physicians that include AndroGel®, Axiron®, and Fortesta®, and each carries the severe Black Box warning on its box. And, they should. All three bring a substantial risk of accidental transference of the topically applied testosterone to both women and children, especially if they are close by during the application process. Results can be severe, and serious unwanted effects from only a brief and accidental exposure have been shown. It doesn’t get better for the patient, either. For the intended users of Black Box products, the adverse events can be much more severe with physicians reporting cases of testicular shrinkage, lowering of LH and FSH hormone levels and a sharp reduction in sperm count. Thus, if educating the markets is the primary hurdle for Natesto® to clear, then perhaps it’s only a short matter of time before Natesto® gains a broader level of attention and support from prescribing physicians that are weighing the known benefits of Natesto® against the results shown from every other FDA-approved low-T product available on the market.
Investors, Analysts, Patients, And Physicians Recognizing Natesto®’s Benefits
Physicians and patients are not the only ones recognizing Natesto®’s strengths. Analysts are also building models around the value of Natesto®, citing its clinically proven therapy prescribed to treat hypogonadism (Low-T). They also increase value metrics in Natesto® by being different from both oral and topically applied TRT treatments, and for being the only nasally administered gel-based low-T therapy on the market. The gel application is delivered similarly to that of nasal allergy sprays, which offers the patient quick, measured, and convenient dosing. Regarding efficacy, clinical trials showed that sexual function and overall mood of male patients using Natesto® had improved significantly in as little as 30 days, and after 90 days of Natesto® use, about 90% of the patients had returned to healthy testosterone levels. From a clinical perspective, the results indicate that Natesto® can potentially return low-T patients back to baseline in roughly three months, and it can do so with fewer health risks than competing treatments in the market space.
Ironically, Natesto®, despite being the only treatment not required to have a Black Box warning pinned to the product is still fighting for market share. But, notably, Natesto® is gaining ground demonstrated by the four past quarters of consecutive, quarter-over-quarter record-breaking growth for both revenues and for new prescriptions written. And, the story is only getting better and more persuasive in a way that may help to generate widespread adoption.
Investors Chattering About A Natesto® Push For Value
Although there is tremendous chatter that AYTU trades at a significantly undervalued level based not only on the growth from Natesto® but also because of the revenue contributions now getting generated from Tuzistra XR® and ZolpiMist™, some appear to be taking opportunistic action to take advantage of the current $2.00 share price. In fact, not only is AYTU stock higher by more than 150% YTD, its April rise in value amounts to roughly 25% in gains. Institutional ownership has also seen a sharp spike, with institutional ownership now surpassing 41%. Thus, for a company with a low share count, roughly 15 million share O/S, and growing investor interest in the stock and its pipeline of FDA-approved drugs, many speculate that only a single catalyst could generate significant price movement. But, AYTU may have several in the queue.
Clearly, the sentiment is shifting, and many get the sense that Natesto® is only the first act in helping to create a substantially higher market cap for AYTU. Ultimately, when investors increase their revenue model to include contributions from Tuzistra® XR and ZolpiMist™ , it’s not unreasonable to think that AYTU may return to more normalized prices that ranged as high as $11.80 on a split-adjusted basis during the past 52-weeks. And, with Northland Capital analysts placing a 12-month price target for the stock at $10.00, investor expectations appear to be in line with forecast models.
The unwritten rule of the markets says that investors should “follow the money.” Perhaps the institutional investors that have substantially increased their positions in AYTU understand that not only can the pipeline deliver lucrative long-term rewards, but also that Natesto® may be on the verge of disrupting the multi-billion dollar TRT market and provide a well-timed knockout punch to current market leaders. Although that blow won’t happen in the next few weeks, AYTU has positioned itself to capitalize when the time is right by strengthening its membership on the BOD to include the founding partner of Armistice Capital, who brings a wealth of knowledge and experience in taking emerging companies and transforming them into large companies. Steven Boyd, the Armistice Capital founder, who now sits on the AYTU Board, notably took Cerecor, Inc. (NasdaqCM: CERC) from a $1.00 stock price to over $7.00. Many investors believe that he came to AYTU to do the same thing.
And, don’t forget, AYTU’s CEO and COO, Josh and Jarrett Disbrow, respectively, also are no strangers to building successful companies. They took a garage start-up drug company, Arbor Pharmaceuticals, and made it into a drug company valued at more than $1 billion when KKR & Co, LLP took an interest back in 2014. If there are any doubters to the management team’s ability, Google is a great place to find reasons to justify changing one’s perspective.
Where to Now For AYTU?
Many investors think that the waiting game is getting nearer to the end than the beginning. Natesto® is about to publish final results from its Spermatogenesis Study later this summer, Tuzistra XR was launched as a novel codeine-based 12-hour antitussive in January, and ZolpiMist™ was recently featured in colossal news that is positioning that drug to push sales on a global stage through a licensing deal with SUDA Pharmaceuticals.
For the near-term, though, Natesto® should be the driving force to generate shareholder value. The product is well on its way to proving itself a best-in-class TRT drug, and the ONLY one that can provide the benefits of testosterone while at the same time preserving male fertility. The drug has also led to AYTU generating four consecutive quarters of record-setting revenue and has also driven record prescription rate growth during each of those quarters as well.
Can Natesto® provide the knockout blow to competing TRT drugs? Absolutely.
And, despite AYTU not having a $100 million marketing budget to keep Natesto® in the spotlight, the drug’s organic growth is undoubtedly an indication that AYTU’s strategy to educate and grow it’s market share is working. Moreover, at roughly $2.00 per share, there is at least one known place that investors should probably stay away from – the short side of the stock. After all, with three drugs that each have best-in-class potential, and one that may be THE BEST drug option for TRT patients (Natesto®), paying more attention to the facts and less to the FUD may be a wiser choice of action when considering a position in Aytu BioScience stock.
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