Now that Aytu BioScience’s Natesto®, a nasally administered testosterone replacement therapy, is beginning to tap into the market share of sector leaders like Androgel® and Axiron®, the question remains as to how long will it take for the proven and perhaps best-in-class treatment to gain sales traction.
The story behind the growth curve is not typically well known to the retail investor, as the time required for a sales force to break into a market does cause some start-up related delays. However, with much of the sales force’s training, territory routing, and physician access credentialing obstacles now cleared, Natesto® is beginning to bear the fruits of a sales team that is now fully operational. Additionally, while it may be hard to believe, some of the best-known alternatives to current treatments and therapies still get overlooked by medical professionals that have come to know that the simplest route to prescribing medication is to offer the one that is the most convenient or most covered by insurers. Unfortunately, such a practice can lead to a sad state of affairs for patients, and the convenience enjoyed by a prescribing physician, especially in the TRT market comes with potentially significant side effects and a host of unintended consequences.
A Refocused AYTU
Now that AYTU has its sales force totally dedicated to Natesto®, the recent ramp up in prescription volume may be a telling indicator of the future trend. Recent prescribing data shows that Natesto® is not only gaining favor with physicians but now that Aytu’s sales-force has cleared much of the many hospital system’s six-month credentialing process, doors to doctors’ offices are beginning to open. It’s not only the credential process that slowed the pace of Natesto® growth, by the way. Other factors include the fact that doctors don’t want to mess with the time required to facilitate payer reimbursement processes for their patients. In other words, until Natesto® gets reimbursement allowances from several major insurance carriers, the ramp up period may be slow. Good news for investors, though, major insurers are beginning to understand that the benefits provided by Natesto® far outweigh the known complications and risk from current market leaders, inclusive of Androgel® and Axiron®. And once Natesto® gets its share of payer agreements in place, Natesto® may very likely grab a significant portion of the current $2 billion market.
Even without the lion’s share of the potential market, if Natesto® can simply earn a 5% piece of that market, AYTU may be put on the track to deliver tremendous earnings potential. Assuming Aytu can climb up toward the mid single-digit market share for Natesto®, investors may be looking at a $100 million revenue stream for Natesto® alone. And, the product deserves the share, and here’s why.
Is Natesto® The Best-In-Class TRT?
Natesto® is notable because it has differentiated itself from any other testosterone replacement therapy currently on the market, being the only nasally administered treatment available to patients. The nasal application of Natesto® has significant advantages in comparison to the topical application employed by other TRT products. Every topical TRT product, such as AndroGel®, Axiron®, and Fortesta®, carries a Black Box warning on the label, informing users of the dangers of an accidental transmission of the product to women or children. Users of these medications must physically “quarantine” themselves during the application process, or else they risk accidentally dosing their wives or children with the treatment through physical contact. Natesto®, on the other hand, is free of these issues due to its unique application method, making it the only TRT product on the market that doesn’t carry the Black Box warning. This alone is a huge selling point for the treatment and has grabbed the attention of physicians and patients alike.
Not only does Natesto®’s nasal administration eliminate the risk of accidental transference, but it has also been clinically proven to be both safer and more effective than its topically-applied competitors. Take AndroGel for example. Androgel is a TRT product that works by releasing a relatively constant amount of testosterone into the user throughout the day. However, because of this new influx of testosterone flowing through the user’s body, the brain begins to believe that the body’s testosterone levels are sufficient and slows the natural production of the necessary hormones LH and FSH. And, lowering those two hormones is not a good thing.
Reduced levels of LH and FSH can have extremely undesirable effects on the user’s body, including a dramatically lowered sperm count and even testicular shrinkage. Additionally, a deficit of LH and FSH hormones can cause the brain to slow natural testosterone production as well, potentially making the patient dependent on artificial treatments to maintain proper T levels. None of these symptoms have been experienced within Natesto®’s clinical trials. In fact, in a press release from January 18th, Aytu released details of a trial in which LH and FSH remained at normal levels after 90 days of treatment with Natesto®. Since Natesto® doesn’t affect LH and FSH levels, it wouldn’t be expected to cause the adverse side effects associated with other treatments, giving Natesto® a distinct safety advantage over its competition.
Another issue faced by the TRT market is that all long-acting gel preparations and injections are likely to cause increased hematocrit levels in the patient. This increase causes thicker blood within the user’s body, which significantly enhances the risk of stroke. To compensate for their higher risk of stroke, patients often need to lower their dosage or even quit their TRT medication; some also turn to the undesirable route of donating blood more often to thin it out, which is not exactly an easy solution to the problem at hand. Again, Natesto® has been clinically shown to outperform other products in this area – in fact, Natesto® has been shown to have virtually no effect on hematocrit levels. This benefit eliminates the potential roadblocks faced by other medications, and once again shows how Natesto® is quickly becoming the best choice among TRT options.
Natesto® Prescriptions Spike Higher
So, by now it should be obvious that Natesto® has serious advantages over its competitors – but investors may ask, why isn’t this already the top choice of treatment among physicians? Here’s the answer – it’s well on its way. Natesto® has seen a sharp increase in prescription counts throughout 2017, presumably due to the known and significant benefits over other TRT options. Amassing just 270 total prescriptions in March, that number has since risen to 593 new prescriptions in June, more than a 100% increase in prescription count. This figure continues to rise higher as more and more physicians become aware of the many advantages offered by Natesto®. Natesto®’s unique application method and safety benefits are more than enough to make it deserving of doctor and patient attention, and when it’s rising share in the market is brought into the equation, investors owe it to themselves to keep an eye on AYTU and their Natesto® product.
With Natesto® now bringing well-deserved revenue into the company, in addition to revenue expected from the pipeline products, AYTU is extremely well positioned moving forward. Then, factoring in the recent $11.5 million private placement, and it’s not too difficult to understand why investors have decided to fund the company with high hopes for continued trends higher in prescription volume. While it has taken AYTU a some time to turn the corner toward profitability, now that the traction appears to be sustainable it would make little sense to bet against the potential that Aytu BioScience has to offer.
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