On Monday, Aytu Bioscience (NasdaqCM: AYTU) provided shareholders with an enthusiastic message that reiterates the continued growth in its product portfolio with particular emphasis on the growing market adoption and new prescription levels of Natesto®, the company’s FDA-approved testosterone replacement therapy product.
In step with prior reports, Natesto® again produced record new prescription growth. But, perhaps, more importantly, the company announced that Natesto® is gaining increased interest from large insurers and payers, demonstrated by a sizable gain in patient reimbursement levels, prior authorization approvals, and notable additions in patients now enrolled in the company’s Natesto® Support Program.
Although it is well established that Natesto® is a best-in-class alternative to products like Androgel® and Fortesta®, a particular differentiating aspect is that Natesto® is the only TRT treatment of the group that does not have a Black Box warning on its label. And, that’s important, especially when Natesto®’s competitors are shown to cause an increased hematocrit level, shrinkage of testicles, and the need for the user to quarantine themselves during the time-consuming application process. Thus, with AYTU now taking on a much more targeted and revenue-generating marketing strategy, not only is the benefit going to inure to the patient, but shareholders may likely get rewarded as well. And, the momentum in place may prove to be a long-term proposition as management is building the path for substantial growth in the coming quarters.
Natesto® Support Program Hits Initial Stride
Since the last shareholder report, AYTU’s marketing push is showing results, making significant progress in both its execution in the field and with its newly developed patient reimbursement program, the Natesto® Support Program (NSP). Only about two months into the program, the NSP helped to generate significant growth in Natesto® sales with paid prescriptions reaching an all-time high level of 704 units in February. Not to be outperformed, the month of March posted a consecutive all-time high in unit sales with Natesto® scoring 890 total paid prescriptions.
Rolled out in February of this year, the Natesto® Support Program is intended to assist patients who have received a Natesto® prescription in assessing and understanding their payer coverage, helping them to navigate the payer’s requirements and to help secure prior authorizations where and when required. The goal of the program is to increase the initial prescription fill, secure refill authorizations, and to establish a requisite reimbursement rate for continued sales.
During the first nine weeks of the NSP, AYTU reports encouraging results. As of March, 63% of all patients enrolled and who have been previously treated with a topical testosterone replacement therapy product have been approved for Natesto® treatment by payers through the NSP. The approval is a significant step forward for Natesto®’s place in the market and establishes a framework for continued payer contracts that will formally cover Natesto® prescription sales. Incidentally, for commercially insured patients that have previously received treatment with TRT gel formulations, the percentage of allowed reimbursement rises to 69%.
And, the NSP is just getting started.
Multiple National Insurance Plans Eye Natesto® Reimbursement
Keeping in mind that the NSP is only in its beginning stages, it’s apparent that the growth and attention to Natesto® are getting taken seriously by the insurers and physicians alike. There is little debate as to the safety and dosing advantages of Natesto® for users, and before the implementation of the NSP, the main drag on new prescription growth rested squarely on the reimbursement process from insurers. However, the trend is changing in favor of Natesto®.
Multiple national plans that had previously been denying Natesto® coverage are now beginning to approve prescriptions when submitted through the NSP. More specifically, for patients who have had their prescription claim processed at one of the country’s largest insurers, more than 70% of patients have been approved for Natesto® treatment. Notably, that same payer is supporting an even higher number of prescriptions for patients previously treated with a TRT gel, having allowed the switch to Natesto® in 77% of current claims.
Most important from a business perspective, however, is that with the NSP now in place, AYTU realizes a significantly higher percentage of revenue-generating prescriptions, enabling AYTU to discontinue the use of free vouchers that were used primarily to create product awareness for Natesto®. Now, with the short term, zero-revenue generating program a past practice, the company is positioned to generate increasing revenue streams from a TRT product that is shown to offer substantially better and safer results than competitive products.
Natesto® Will Drive Revenues Higher
Now that the promotional vouchers are no longer an integral component of the marketing of Natesto®, the strategically realigned marketing plan is generating a substantially higher number of revenue-generating prescriptions, providing the company with an opportunity to realize significant revenue growth coupled with the likelihood of continued refill approval for patients.
The shift in marketing, along with the model to provide sustainable revenue growth is expected to drive Natesto® prescription growth to higher quality, commercially-insured patients to generate a higher prescription refill rate and to increase revenue per patient on a consistent basis. Although the shift in marketing may cause a reduction in total prescription rates in the short term, management believes that with more revenue-generating prescriptions and more refills per patient over time, that the near and long-term prospects for revenue growth outweigh the overarching copay-support provided to patients throughout 2017. And, based on the early returns of the NSP program, AYTU may indeed be on the path toward break-even status in the coming quarters, making the current market cap aggravatingly low at these levels.
Not only is the market cap not necessarily representative of AYTU’s progress, but with the growing support of domestic payers, the path toward profitability is also at hand.
AYTU Pushes Progress On The National Reimbursement Market
According to AYTU, the company’s progress with their payers, primarily targeting the largest, national payers, is allowing Aytu to reach a national audience with multiple pharmacy benefit managers and domestic insurers. For the first time in its marketing of Natesto®, Aytu is actively engaging the largest of insurers at a high level. And, despite Aytu being bound by confidentiality from discussing specific contract terms, the tone set is that the company is in advancing negotiations and has provided formally proposed contract terms with multiple payers. According to AYTU senior management, the company has received a favorable, initial response from one exceptionally large national payer. And, while there can be no assurance that Natesto® will gain formulary access, the company says that they are encouraged by the ongoing dialogue and receptivity during these early stages of the strategic shift in marketing Natesto®.
It’s important to point out, though, that with even just a single large payer in place, the likelihood to engage and secure additional contracting becomes more attainable and repeatable with other market payers.
The Natesto® Opportunity Is Heating Up
Now that the NSP is in place and results are tangible, Natesto® sits well positioned as the only marketed TRT product currently approved for sale in the low-T market that is not Black Box labeled. While its most dominant competitors, including AndroGel®, Testim®, and Fortesta® all have the most severe of FDA warnings associated with their TRT products, until recently AYTU was not strategically marketed to maximize substantial revenue-generating growth via reimbursed prescriptions. However, that has changed.
Moving forward with a growing reimbursement pool of payers, physicians prescribing any of the above products inherently add significant safety risk on their patients, with reports indicating a substantially heightened risk of accidental transference to both women and children if they are nearby during the application process. The complications have proven to be severe, by the way, and only a brief exposure to slight amounts of unprescribed testosterone can be extremely harmful. Beyond accidental transference, users of the Black Box products are at even higher safety risk with cases of increased hematocrit, testicular shrinkage, lowering of LH and FSH hormone levels and a sharp reduction in sperm count reported. Each of these side effects is severe, with some instances of life-threatening reactions to Black Box labeled TRT products recorded.
Although the clinical advantages in Natesto® are not new to the industry, the NSP may increase the prospects for Natesto® to earn an increased market share, building its marketing momentum and new prescription levels at the same time. From that point, Natesto® can be expected to proliferate its message as being the safest and most logical physician choice to treat low-T. And, most importantly, get covered by some of the markets largest reimbursement providers.
For investors, the most important take away from the recent activity is that the increase in prescriber levels for Natesto® is growing at a robust pace. And, as AYTU continues to implement its support program successfully, investors should further acknowledge that the company is currently well-funded to continue aggressive strategic marketing initiatives, a program that will likely extend the growth trend for Natesto®, and presumably take the share price higher as well.