Before the market opened on Tuesday, Aytu BioScience, Inc. (NASDAQ: AYTU), a specialty pharmaceutical company focused on commercializing novel products that address significant patient needs, announced that it has entered into an exclusive distribution agreement in the People’s Republic of China with Beijing Dahua Sanxin Technology Development Co., Ltd. to commercialize MiOXSYS®, the company’s first-in-class seminal oxidative stress test for the assessment of male infertility. AYTU added that, as part of the agreement, Beijing Dahua Sanxin Technology Development Co., Ltd. has made an initial MiOXSYS purchase to conduct the China-based clinical studies required for marketing approval.
It’s expected that Beijing Dahua Sanxin Technology Development Co., Ltd. will begin clinical studies and initiate communications with the China Food and Drug Administration (CFDA) within the next few months and work toward approval and completion of China-based studies by 2021.
China Offers Substantial Market Opportunity For MiOXSYS®
The People’s Republic of China can become a major market for the MiOXSYS® system. According to the National Health Commission, statistics indicate that the infertility rate in China rose from 2.5-3% in 1992 to a staggering 12-15% in 2018, with about 50 million infertile couples. To combat the rise in infertility, by the end of 2018, China had approved 497 IVF centers and 26 sperm banks. In recent years, the total number of cycles of IVF in China has exceeded 1 million per year, and the number of babies born has surpassed 0.3 million per year.
The IVF market in China is substantial, reaching 12.2 billion Chinese Yuan (USD $1.7 billion) in 2016, with the combined cost of IVF treatment reaching roughly 25,000 – 30,000 Chinese Yuan (USD $3,620-$4,345). Estimates put the potential of the China IVF market as high as 15.0 billion Chinese Yuan (USD $2.2 billion), making China one of the world’s largest fertility markets
Josh Disbrow, Chief Executive Officer of Aytu BioScience, noted in the release,
“We are pleased to be partnering with Beijing Dahua Sanxin Technology Development in China to begin the clinical and regulatory process that, if successful, will bring MiOXSYS to the 50 million Chinese couples struggling with infertility. Clinicians around the world understand very well that male factor infertility is a major factor in up to half of all infertility cases, so we’re hopeful that, upon approval, the MiOXSYS male infertility system will help address this significant, growing national issue in China.”
The China Agreement Follows Expansion Into The UK Markets
The expansion deal into the Chinese market follows recent market expansions into the United Kingdom and is riding a wave of recent endorsements worldwide. MiOXSYS® (the Male Infertility Oxidative System) is CE marked and cleared by Health Canada, Australia’s TGA, and Mexico’s COFEPRIS. Moreover, MiOXSYS® is the first-ever cleared advanced in-vitro diagnostic test that assesses seminal oxidative stress, a significant cause of male infertility.
As noted in prior AYTU releases, MiOXSYS® is already approved for sale and commercialized in more than 30 markets outside of the United States and has been taking advantage of its CE Mark to expand into new territories. Furthermore, in May, AYTU announced that additional commercialization will take place in the UK market who, like the Chinese, are embracing the benefits of the device to effectively treat a large population of men that become infertile due to levels associated with oxidative stress.
MiOXSYS® Proving As Best-In-Class To Measure Oxidative Stress
Key advantages of the MiOXSYS® device are speed and accuracy. However, the device also offers a practical solution compared to the expensive and sometimes bulky set-ups that have historically produced unreliable oxidative stress results. Unfortunately, patients are often misdiagnosed by antiquated systems that are not well maintained, calibrated, or amalgamated and also are subject to testing through unapproved equipment. The MiOXSYS® System, unlike other tests that measure infertility related to oxidative stress, is used in real time in conjunction with standard semen analysis parameters (ejaculate volume, total sperm count, sperm concentration, total motility, progressive motility, and morphology) as an aid to assessing semen quality. The system is targeting adult males between 21-45 years of age.
For practitioners, the MiOXSYS® device provides the latest and most efficient oxidative stress measuring device and is being marketed to help alleviate practice disruptions and to limit unreliable oxidative stress level test results associated with the lack of appropriate system maintenance on competitive machines. Speed is also a factor, and the MiOXSYS® system can provide complete oxidative stress testing quickly, a significant advantage to what has historically taken several hours to complete – and then another few days or weeks to get the final results.
It’s also important to note that the MiOXSYS® test requires no specialized training for administration, can go from box to patient in a matter of minutes, and provides a comprehensive set of results in less than five minutes. Furthermore, the test results provide a detailed analysis of semen by utilizing a reliable measurement for oxidative stress levels, an important distinction that allows the clinician to target specific treatments to lower oxidative stress and implement specific procedures to increase the chances of pregnancy.
The Impact Of A Successful Global Launch
For AYTU investors, the newly announced deal in China adds to the company’s strategy to place an estimated 200 MiOXSYS® systems worldwide by the end of 2020. Before the Tuesday announcement, 141 systems are in use, with 6 of them set by AYTU’s distribution partners. From a revenue perspective, management expects that each system may generate roughly of $20,000 per year each at maturity, totaling an estimated revenue run rate of more than $4 million in annual sales. In addition to the device sales, AYTU can utilize the razor-razorblades sales model, which allows AYTU, or its licensed partners, to sell the disposable components required for each test, allowing the MiOXSYS® system to continuously generate revenue with a low cost, high-margin business model.
On the heels of the UK and China expansion news, AYTU recently noted that they intend to seek marketing approval in the United States and are working toward a 510(k) medical device FDA approval. The approval is likely, and dozens of publications in peer-reviewed journals support the system’s value for providing a detailed, accurate, and reliable representation of infertility analysis.
For AYTU and their investors, the expansion into the Chinese market serves as yet another endorsement for the innovative device. The news compliments recent updates for Natesto®, Tuzistra® XR, and ZolpiMist™, which helped drive AYTU to its fourth consecutive quarter of record-setting revenue. Now, with MiOXSYS® gaining traction into large markets, the trend of higher revenue and ultimately stronger earnings is even more predictable.
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