Aytu Bioscience Inc (OTCMKTS: AYTU)
Recently, the CNA Finance team had an opportunity to speak with Josh Disbrow, CEO of Aytu Bioscience. Josh Disbrow has been in the life sciences industry for over eighteen years across pharmaceuticals, diagnostics, and medical devices. Prior to forming Aytu BioScience, Josh was the Chief Operating Officer of Ampio Pharmaceuticals (NYSE MKT: AMPE) and led the Luoxis Diagnostics subsidiary. Luoxis was merged into Aytu in April 2015. Prior to joining Ampio in 2012, he served as Vice President of Commercial Operations at Arbor Pharmaceuticals.
Since 2015, Aytu has been advancing upon an aggressive and potentially lucrative strategy. CNA Finance wanted to see just what was behind the action, so we went straight to the source. The following is a transcript of our interview:
CNA: Aytu Bioscience is what many consider to be a hidden gem, especially for the treatment indications that the company is targeting within the urology space. Before we get deeper into the science, can you provide a brief synopsis of the relatively broad platform that Aytu is advancing?
JD: Absolutely, and I’m glad to spend this time with you to introduce Aytu to your readers.
In simplest terms, Aytu is a commercial stage, specialty pharmaceutical company focused on bringing innovative treatments and diagnostics to urologists around the world. The company has three commercialized, FDA-approved products that fill large needs within urology and have unique product profiles. These three products are commercialized in the U.S., and we have built a fully-integrated commercial infrastructure to support our sales efforts.
Natesto is our primary focus, as this represents the biggest opportunity to disrupt the market and improve patient care. Natesto is the only FDA-approved, nasally-administered testosterone, and it is indicated for the treatment of hypogonadism, or Low T. Natesto is entering the $2.4 billion testosterone replacement therapy (TRT) market, and it quite simply is a better product than any other therapy on the market.
Our second initiative is to advance ProstaScint. ProstaScint is an FDA-approved imaging agent that uniquely identifies prostate cancer cells in both newly diagnosed high-risk prostate cancer patients and patients suspected of recurrent disease. ProstaScint was acquired from Jazz Pharmaceuticals, and we believe ProstaScint will remain a mainstay of prostate cancer diagnostics.
Then we have Primsol, which is the company’s proprietary anti-infective indicated for the treatment of uncomplicated urinary tract infections. This is a product that we acquired global rights to from FSC Laboratories. Primsol is the only FDA-approved trimethoprim-only oral solution and offers a solution to patients who are either allergic to sulfa-containing antibiotics or have difficulty swallowing.
Finally, we are commercializing a diagnostic device called MiOXSYS® for male infertility, currently being marketed outside of the U.S. with its registered CE mark. MiOXSYS is a breakthrough medical device that assesses the health of semen through the detection of oxidative stress levels in men suspected of infertility. MiOXSYS does in three minutes what currently takes hours to perform – and it does it simply, conveniently, and more reliably than the current methods used around the world.
CNA: So, from a strategic and product standpoint, Aytu is not only well diversified, but also appears poised to be seizing upon opportunities within the urology space. Is there a reason for the intense focus in urology?
JD: Yes, and the question is very perceptive. Right now, the urology market remains largely untapped by “Big Pharma,” in that little attention is paid to many of the conditions urologists treat. At Aytu, we seek to build a strong presence in urology, as this represents a significant opportunity to bring attention to and serve the many significant conditions urologists treat. Also, from an execution standpoint, urology makes sense as a specialty that, if effectively deployed against, a company can command a leadership position with a relatively small commercial footprint. We don’t need thousands of sales people to be a substantial force within urology.
Additionally, urologists are forward-thinking innovators, and they remain open to collaborating with our industry. We believe we can efficiently deploy an impactful commercial infrastructure in urology given that urologists are concentrated in large metropolitan areas, often practice in large group practices, and treat significant conditions like Low T, prostate cancer, incontinence, UTIs, and male infertility. We believe urologists need a company dedicated to their needs, and Aytu seeks to build a broad partnership with urologists around the world.
CNA: Well, assuming that the urologists and others in the field do provide the support that Aytu expects, is there a certain strategy that the company has in place to take advantage of the attention?
JD: We do, and it’s relatively straight forward in design. Aytu’s core strategy is to focus on licensing and acquisition opportunities to build our pipeline. In a span of just 11 months, the company assembled our commercial-stage portfolio through efficient search and evaluation of unique products in urology. We don’t favor employing substantial in-house R&D. Rather, we seek opportunities that have largely been de-risked from both a clinical and regulatory perspective. Plenty of companies perform costly, time-intensive R&D, which presents significant enterprise risks that we seek to minimize. Instead, we take the commercial risk and seek to build products once they have achieved relevant clinical and regulatory milestones – most notably FDA approval.
Our strategy is to acquire or license undiscovered products that fill significant needs and can be efficiently commercialized through our urology-centric sales team, and in our short history we have been successful in building a critical mass of products and are now ready to scale.
CNA: Earlier, you mentioned four of the most promising opportunities for Aytu. Which products in that group do you think will provide the most near-term catalyst for Aytu?
JD: Well, I would definitely point to Natesto and MiOXSYS as two of our leading candidates. While all four of our products have unique, compelling attributes, Natesto and MiOXSYS are game changers in their respective categories.
Natesto is the only nasally-administered testosterone replacement therapy (TRT) in the world, and it is just now launching into the $2.4 billion U.S. TRT market through our U.S. sales force. Natesto is truly unique in that other TRT products are applied topically to the skin or via painful subcutaneous or intramuscular injections. Thus, a nasally-administered testosterone like Natesto represents a huge advance over the current state of the art. Topically applied testosterone products carry a substantial risk of skin transference, as they are applied directly to the man’s skin. In the event of casual contact with a female partner or child, there is a concern that the man could transfer this testosterone to his loved one. This is problematic. as testosterone can cause many unwanted male-trait-enhancing effects in women and children. For this reason, the FDA has assigned a black box warning to all topically applied TRTs. Natesto, as it is not applied to the skin by virtue of its nasal administration, does not have a black box warning. This alleviates a major safety concern while also dramatically improving the way testosterone is administered.
Another significant advantage for Natesto is that it is administered 2-3 times daily (1 pump in each nostril) and achieves maximum concentration within 40 minutes of the first administration. This is dramatically quicker than other methods, and because of the relatively short duration of action, patients have flexibility in achieving their optimal “T” levels throughout the day.
From an intellectual property perspective, Natesto is patented into the year 2024 with multiple strong patent families protecting it, and we have an exclusive license to the U.S. market for at least that long. Natesto stands to change the way urologists and Low T clinicians treat hypogonadism, and our prescription trends are already exceeding our expectations.
The second product that we are also excited about is MiOXSYS, which is now beginning to post revenues overseas. MiOXSYS is a CE Marked diagnostic device that will improve male infertility assessment. Quite literally, this small, portable system does in 3 minutes what takes a professional andrology laboratory 2-3 hours to do currently.
MiOXSYS puts male infertility assessment into the hands of the treating physician to get real-time results reporting a man’s oxidative status, which is the overall amount of oxidative stress in his semen – a leading cause of idiopathic male infertility.
Additionally, MiOXSYS has been shown to correlate with a man’s fertility status in peer-reviewed publications around the world, and we’re now building an ex-US distribution network and introducing the system to leading centers in andrology and urology. In parallel, we are pursuing regulatory clearance in the U.S. and are excited about the prospects for MiOXSYS to change the way semen analysis and infertility assessments are performed around the world.
CNA: Smart Investors want to be given a compelling reason to buy a stock, with many investors wanting to invest during the most opportune times. What would you tell potential investors that would cause them to consider an investment in Aytu stock?
JD: I can give quite a compelling argument to buy our shares. With three FDA-approved, commercialized products now launching through our U.S. sales force – along with a CE Marked medical device with sales ramping overseas, we believe we are tremendously undervalued and under the radar.
Very few companies that were just formed less than 18 months ago can boast a commercial portfolio of four products, a sales force that is now off and running, and patents that protect our lead assets for many years to come. We have all three, and we have a management team that has built and exited specialty pharmaceutical companies before. All of this said, we are just getting started with very early revenues just beginning to ramp. We believe Aytu is poised for substantial growth in the near term, with Natesto expected to drive the most revenue growth for the company.
CNA: Given that the company is expecting to ramp revenues, are there any near-term milestones that investors can look for in the coming months?
JD: Yes, on both fronts. We expect to report Natesto prescription sales in the coming two quarters as we get our sales force established and driving sales. The very early prescription trends are encouraging, and we expect to see sales ramping well beyond current levels. That would be the first potential catalyst.
Secondly, we also expect to expand our distribution for MiOXSYS outside the U.S. and expect to continue our dialogue with the FDA to enable a clinical study here in the U.S. and potential U.S. regulatory clearance. We would expect that the announcement on that front will drive additional shareholder value in the relative near term.
CNA Finance works hard to uncover the next gems of investment opportunity. Although AYTU is a relative unknown stock flying well under the radar, the information provided by Mr. Disbrow does offer a compelling case to consider purchasing the stock as part of an emerging growth portfolio.
With four shots on goal for Aytu, and with two of them expected in the near-term time frame, the current share price may provide investors a nice opportunity to catch AYTU during its infancy, and may offer substantial upside. With the company already generating revenue, investors are provided some risk support as the company continues to push forward on expanding their markets and reach.
Although all investments come with associated risk, AYTU appears to be in a comfortable position moving forward. As always, though, perform your due diligence before making any aggressive investment decision.