As the media tends to focus on the activities played out by Big Pharma, it can be easy for investors to overlook the exciting and often revolutionary developments that are happening at niche pharmaceutical companies. Small pharmaceutical companies can be a lucrative prospect for investors, as the niche markets they target usually allow for their novel and innovative properties to take hold of the market space and provide a revolutionary approach to treatment for those who need it most. A prime example of one of these emerging companies is one that has been a feature focus for several quarters and a stock that many investors believe is set up exceptionally well to capitalize on the accomplishments made in the prior year: Aytu BioScience.
Over just a few years, CEO Josh Disbrow has taken what began as a small operation in a basement office and transformed it into a multi-million dollar venture. Rather than spending considerable time, money and effort in clinical stage studies, AYTU’s strategy is to build a revenue-generating asset base of products that address select market needs and offer transformative methods of treatment. The plan is proving itself successful in eliminating years of R&D cost and effort and at the same time providing the means to sidestep much of the regulatory hurdles associated with bringing a new drug or therapy to market. In doing so, AYTU is delivering specialized products to market through licensing and acquisition, now Aytu appears to be heading into 2018 with a rising level of market momentum that may ultimately provide a proper and well-earned appreciation to its share price multiple.
Natesto® New Prescription Rates On The Rise
Positioned as both the leading product and top revenue-generating asset for AYTU is Natesto®, the FDA approved low-testosterone therapy that is clinically proven to effectively treat hypogonadism, also known as low testosterone. Natesto® offers a distinct approach to treatment, separating itself significantly from anything else on the market by virtue of its proprietary nasal administration. Given the benefits of being the only nasally administered low-T treatment on the market, Natesto® sits as the sole marketed testosterone replacement therapy that the FDA allows to be marketed without a Black Box Warning on the label. The Black Box Warning, for those not familiar with the term, is the most severe of FDA consumer warnings that users should consider before using a product. And, while Natesto® is not stigmatized by the harsh warning label, all of its topically-applied competitors are not as fortunate.
The warnings for AndroGel®, Axiron®, and Fortesta®, for instance, indicates the high risk of accidental transference of topically applied testosterone to the patient’s female partner or children, which can cause noticeable unwanted effects from only a brief exposure. Other adverse events have been shown to cause testicular shrinkage, lowering of LH and FSH hormone levels and lowering of sperm count.
However, Natesto®’s nasal application eliminates the potential of unwanted transference, distancing the treatment from a host of negative responses shown by patients that use alternative products. Along with the lack of side effects, being the only nasally administered method of treatment provides numerous advantages in Natesto®’s favor.
The gel application works similar to a nasal allergy spray, which allows for a quick, easy and convenient dosing application. Not only is Natesto® easier to use than its competitors, but it is proven to be as good or better than competing products justified by data from multiple clinical studies. The trials showed that sexual function and overall mood of male patients using Natesto® had improved significantly in about 30 days, and after 90 days of Natesto® use, roughly 90% of the patients had returned to normal testosterone levels. In effect, this means that Natesto® can potentially bring low-T patients back to baseline in only three months, and with fewer health risks than competing treatments in the market space.
Natesto® has A Stake In A $2 Billion Market
Now, investors may ask, “But what about the sales?” Well, on that critical front, Aytu is consistently reporting robust prescription growth and increasing traction with prescribers month-over-month and quarter-over-quarter. Prescription rates increased 20% from April to May 2016, which then rose another 20% from May to June. During 2017, the momentum grew even stronger with product sales increasing 300% between the quarter ending March and June. Keep in mind, Natesto® is still a relatively new product to the market, and the known benefits of its use are only in the early stages of attracting increased attention by prescribing physicians. Based on noted trends, Aytu management expects the sales to continue to rise as more physicians and patients learn about the benefits offered by Natesto®. And, from an investors perspective, it’s important to note that the TRT market potential is estimated at more than $2 billion – meaning that if Natesto® can capture just 5% of the market share, that product alone could generate over $100 million in revenues for AYTU. And with the growing and targeted product portfolio already in place at AYTU, which also enjoy FDA marketing approval, Natesto® isn’t the only product that could bring both recognition and consistent sources of revenue to the company.
The MiOXSYS® System May Disrupt The Industry
MiOXSYS® is another new and potentially transformative product under Aytu ownership. The MiOXSYS® device is a male infertility diagnostic testing system which offers a cutting-edge “in-vitro” diagnostic test, allowing for an accurate and much quicker in-office male infertility screening than other currently available methods. And the term quicker is not an overstatement – the device can make a diagnosis that would typically take hours in only three minutes. Not only does MiOXSYS® offer a more rapid diagnosis, but it can also do so more thoroughly and more cost-effectively than competitive alternatives. Additionally, while the current standard of care often requires expensive machinery and specially trained professionals to carry out the procedure and analyze results, MiOXSYS® can be easily administered by either a general physician or an office technician and provides a comprehensive set of results often within minutes. The device is currently being sold and marketed in twenty countries, with AYTU aiming to place over 200 MiOXSYS® systems worldwide before the end of 2018. The device has the potential to generate significant revenue for Aytu, operating under a razor-razorblade sales model – with AYTU providing the disposable components required for each test. The strategy allows for continuous income streams even after the devices themselves get placed into physician offices and infertility clinics. MiOXSYS® has steadily seen expansion in the global market, most recently experiencing a successful launch in Australia. Focused on the U.S market, AYTU management is working towards receiving a 510(k) medical device FDA clearance, which would allow the device to be sold in the United States. Clinical studies have proven both the safety profile and efficacy of the device, and a successful launch in the United States could revolutionize the way male infertility is diagnosed in the country, bringing considerable revenue to Aytu and, of course, increased value for its investors.
Fiera® Provides Leverage Into The Female SD Market
Finally, Aytu’s most recent addition to their portfolio is Fiera®, a device designed to increase sexual arousal and desire in women. The focus on female sexual dysfunction is yet another underserved market with substantial earning potential, estimated at over $9 billion in annual revenues. Studies have shown that over 53 million women in the United States are currently struggling with sexual dysfunction, and Fiera® has been clinically shown to help women who are experiencing issues with libido and sexual arousal. Fiera® is a hands-free, personal care device that works to increase blood flow to the genitals through precise and gentle stimulation, which in turn enhances the user’s overall readiness for sexual activity. In a recent study of women aged 25-75, both pre and post-menopausal, 97% of the participants reported that Fiera® helped them feel noticeably more ready and excited about sexual intimacy. Most important to consider is the fact that Fiera® is a drug-free alternative to conventional treatments, meaning that it is free from the irritating and often debilitating side effects that can come with those medications. Instead, Fiera®’s external method of action produces results in as little as five minutes and doesn’t require a doctor’s prescription. To capitalize on the many benefits offered by this newly developed product, Aytu plans on launching a targeted marketing campaign to increase the product’s awareness with physicians and women and to capture a niche share of this potentially lucrative market.
Existing Products And Potential Acquisitions May Reward Investors
With three innovative products under their belt and on the market – led by potential blockbuster, Natesto, Aytu is in the enviable position to quickly capitalize on their strengths and become a leading player in targeted markets. Following a focused strategy, AYTU has built themselves up through careful product acquisitions with clinically proven and revolutionary potential. Now, with each product beginning to get an increasing amount of market attention, Aytu now has the chance to emerge as a player in the specialty pharmaceutical space. The company’s accretive strategy eliminates the requirement of lengthy research trials and instead allows them to focus on driving revenue growth of cutting-edge products that are already on the market. With the arrival of 2018, Aytu expects to expand the market share of its existing products and remain on the lookout for additional complementary products that could further bolster the company’s portfolio. Investors who seek undervalued or underappreciated opportunities may find AYTU to be the emerging company with evidence-backed potential to revolutionize multiple large markets. And, with 2018 milestones expected, investors need to look no further than AYTU to real potentially capitalize on numerous market opportunities.
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