Aytu Bioscience (AYTU) Stock: Gets A Boost On Delays For Antares Pharma’s, Xyosted™

For Aytu Bioscience and its leading low-T product, Natesto®, the good news keeps coming. Since the beginning of the year, two of Natesto®’s most advanced clinical stage competitors got handed significant FDA Advisory Committee setbacks, with both Lipocine’s (NASDAQ: LPCN) TLANDO® and privately held Clarus Therapeutics’ Jatenzo®, getting tagged with negative panel reviews and a recommendation that the FDA reject the new drug applications.

Now, just two weeks later, an update from Antares Pharma (NASDAQ: ATRS) indicates that a third promising clinical-stage product looking to compete against Natesto® may share a similar fate. On January 16th, ATRS said that the company has received a Complete Response Letter from the FDA regarding the NDA for Xyosted™, ATRS’s investigational new drug for the treatment of testosterone deficiency (hypogonadism). Subsequently, in a response, Antares said that they intend to provide an update on the outcome of the Type A meeting following receipt of the FDA minutes, which are generally issued within thirty days of the meeting.

Problems With Xyosted™

Antares Pharma first disclosed the receipt of the CRL in October of 2017 and told the markets that the

CRL identified two deficiencies related to clinical data of Xyosted™. The FDA made clear that based on findings in clinical studies QST-13-003 and QST-15-005, the agency is concerned that Xyosted™ could cause a clinically meaningful increase in blood pressure. Additionally, the FDA raised a concern regarding the occurrence of depression and suicidality.

Now, roughly three months later, ATRS appears only slightly closer to addressing the issues raised by the FDA in a meeting scheduled for February 21, 2018. In the meantime, ATRS is fending off several threats of class action lawsuits alleging that ATRS issued materially false and misleading statements and/or failed to disclose that: (1) Antares had provided insufficient data to the U.S. Food and Drug Administration in connection with its New Drug Application (“NDA”) for Xyosted™; (2) accordingly, Antares had overstated the approval prospects for Xyosted™; and (3) consequently, Antares’ public statements were materially false and misleading at all relevant times.

The update last week from ATRS reiterates the significant regulatory hurdles faced by companies attempting to bring new low-T treatments to market to take advantage of the more than $2 billion in revenue opportunities.

TLANDO and Jatenzo Fare No Better

Two weeks ago, Lipocine Inc. announced that the Bone, Reproductive and Urologic Drugs Advisory Committee (“BRUDAC”) of the U.S. Food and Drug Administration (“FDA”) voted two-to-one against the benefit/risk profile of TLANDO®, the company’s oral product for testosterone replacement therapy in adults with hypogonadism. While not obligated to follow the recommendation from BRUDAC, the FDA generally follows the panel’s recommendation making the likelihood for TLANDO® approval a considerable long shot.

Also earlier this month, an FDA Advisory Committee met to review privately-held Clarus Therapeutics’ oral testosterone candidate Jatenzo®. Like TLANDO®, Jatenzo® met stiff resistance toward a recommendation for final approval over safety concerns that cited both a heightened risk of adverse cardiovascular events and an increasing level of hematocrit within the testosterone replacement category.

Natesto®’s Position Jumps Rank

Now, with all three of the most advanced low-T clinical candidates essentially facing certain regulatory obstacles, AYTU’s Natesto® is positioned to be the eventual winner in the testosterone replacement therapy market and now sits as the only currently available topical treatment not required to carry the severe FDA Black Box warning on its label.

Already on the market, Natesto® is AYTU’s FDA-approved and clinically proven therapy prescribed to treat hypogonadism (low testosterone). Different from both injectable and topically applied TRT treatments, Natesto® is the only nasally delivered low-T therapy on the market. Natesto®’s gel application gets administered similarly to that of traditional nasal allergy sprays, offering the patient quick, precise, and convenient dosing.

With proven best-in-class results, clinical trials showed that both sexual function and overall mood of male patients using Natesto® had improved significantly in as little as 30 days. And, after 90 days of Natesto® use, roughly 90% of the patients had returned to normal testosterone levels. Importantly, the results indicate that Natesto® can potentially return low-T patients to normal levels in approximately three months, and it can do so with fewer health risks than competing treatments in the market space.

But, while investors may have long understood that the benefits from Natesto® offer proven best-in-class results, a considerable takeaway from the apparent failures of TLANDO®, Jatenzo®, and Xyosted™ is that the product has all but eliminated regulatory risk and should become a driver toward a leading market position. Already on the market, and with new prescription rates rising to record levels, the trajectory for Natesto® is positive and sits well positioned to become the most advanced entrant in the enormous $2BN prescription testosterone market.  The new prescription rates for Natesto® reiterate the growing interest in the product.

The company’s most recent publicly available information reports a 250% total prescription growth rate for the three months ending in November compared to the three months ending in February of 2017. Factory sales reached all-time highs as well, showing that as of December the product is performing at an annual run-rate of roughly $7 million, an increase of 300% over the last four quarters.

Even Greater Distinction And Opportunity For Natesto®

Other products currently approved for sale in the low-T market include AndroGel®, Testim®, and Fortesta®. While Natesto® is not required to have a Black Box warning on the label, each of the above must. And, physicians should pay attention to the risk that they are unnecessarily placing on their patients. All of the topically applied testosterone treatments bring a heightened risk of accidental transference to both women and children if they are nearby during the application process. Even from only a brief exposure to slight amounts of unprescribed testosterone, the effects can be harmful. But, even for prescribed users of the Black Box products, the adverse events can be more severe with cases of increased hematocrit, testicular shrinkage, lowering of LH and FSH hormone levels and a sharp reduction in sperm count reported.

Now, with Natesto® getting an even more apparent path toward being the logical choice to treat low-T, investor attention is mounting. Based on the recent appreciation of AYTU’s share price, an acknowledgment of the potential impact from the Natesto® new prescription trend may be getting the attention it deserves. The stock price has increased by more than 30% in January but still sits short of the $6 price tag it held late last year. But, with the third apparent failure of leading clinical stage products, the share price may still be lagging an appropriate multiple.

Both the retail trading class and the institutional investors that follow the more than $2 billion TRT opportunity should realize that ATRS’s troubles will act as yet another market catalyst for Natesto®. And, because Natesto® offers a best-in-class option for both its safety profile and treatment success rates, the trends already in place for Natesto® should continue. Hence, the share price should follow, providing investors with a risk/reward profile that is very compelling to the upside.

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