Aytu Bioscience Inc (OTCMKTS: AYTU) is in a strong position to take advantage of recent news that sent Acrux (ASX: ACR) plummeting. Last week, Eli Lilly (NYSE: LLY) announced that the company ended it's agreement with Acrux surrounding Axiron, a testosterone replacement therapy for men that is applied to the man’s armpits. This creates a massive opening that AYTU is likely to take advantage of. Below we'll talk about the termination of the agreement, what the news means for Aytu Bioscience, and what we'll be watching for ahead.
Eli Lilly Ends Agreement With AcruxAs mentioned above Acrux took a dive in the market last week as news broke that the company and Eli Lilly have agreed to terminate their license deal surrounding the testosterone replacement therapy, known as Axiron. The license deal was signed back in 2010, proving to be one of the largest, if not the largest licensing deal that has ever been signed by an Australian biotechnology company. Under the terms of the deal, Acrux would receive up to $335 million with the potential to earn royalties from Eli Lilly. In exchange, Eli Lilly obtained exclusive rights to commercialize the treatment. Nonetheless, the deal is now done. On September 6th, it was announced that both companies involved reached an agreement to terminate the license agreement.
Why This Is A Big Positive For AYTUWhile the news of the license agreement termination proved to be bad news for Acrux, one man's trash is another man's treasure, and as the saying suggests, this bad news for Acrux could turn out to be a goldmine for Aytu Bioscience. The reason is simple. At the end of the day, the termination of the licensing agreement is symbolic of a bellhop opening the door for AYTU's Natesto to enter a massive market with virtually no competition. When I say massive, I mean it. In fact, the termination of the license agreement means that approximately $140 million in Axiron net sales is up for grabs in the testosterone replacement market. Considering Natesto's unique product profile, it's highly likely that AYTU will be the company that gets their hands on those sales dollars! Think about it this way, considering the termination of the agreement between Eli Lilly and Acrux, there will be no further promotion of Axiron. Considering that this was one of the primary sources of competition for Aytu Bioscience's Natesto, Natesto is now virtually the only brand in the testosterone replacement therapy market that is being promoted. Considering the following, there's no reason Natesto won't be able to fill the void and gain market share as a result:
- At the moment, Natesto is the only testosterone gel on the market that comes with no black box warning from the United States Food and Drug Administration; adding an insinuation of safety among users that no other therapy in its class can match.
- Axiron was drippy solution, making a bit of a mess after application under the man’s arms – and subject to transferring that testosterone to the man’s female partner or young children living in the house. That is not the case with Natesto given its easy nasal administration, making it a far more user-friendly product.
- The pharmacokinetic profile of Natesto is quite a bit better than that of Axiron, with higher Cmax and pulsed dosing between 2 and 3 times per day. Axiron's single dose delivered the same steady-state of testosterone all day. This steady state of testosterone creates side effects that are both unhealthy and uncomfortable.
- When compared to Axiron, Natesto has a faster rate of improvement in patients with regard to both mood and erectile dysfunction, and Natesto gets to a higher Cmax than Axiron – and does it in less time.
- With Axiron now out of the way, and $140 million in market share up for grabs, AYTU has the unique opportunity to entice large insurance players to pay attention to Natesto as insurers want rebates on safe and effective branded drugs of the like.