Catching emerging biotech stocks at their low’s isn’t necessarily difficult, but it does take a willingness to look at the derivatives that make up the whole when analyzing the opportunity. Those that are following Aytu BioScience (NasdaqCM: AYTU) are well aware of the company’s impressive growth in new prescription rates from Natesto®, the company’s nasally administered treatment to target low testosterone levels (hypogonadism) in men. Now, combined with the recently reported Advisory Committee setback of Lipocine Inc.’s, (NASDAQ: LPCN) TLANDO® and privately held Clarus Therapeutics, Jatenzo®, investors may be additionally bonused to find the prospects for Natesto® to be heightened significantly in potentially becoming the treatment of choice for both physician and patient. Here’s why:
Bad News For Lipocine Inc.’s TLANDO®
TLANDO® was expected to be an effective alternative to currently available products like AndroGel®, Axiron®, and Fortesta®, each of which carries a substantially inadequate safety profile and have been mandated by the FDA to include the most severe Black Box warning to its label. Yes, all three get stuck with that severe warning. And, yes, the FDA still allows them to sell the product. Go figure.
Now, as the potential newest testosterone treatment, even if TLANDO® makes it past a highly unlikely approval process, the chances that the product will make meaningful market headway is unlikely. But, let’s be about 99% clear. The opportunity for TLANDO® to gain FDA approval resides at a line of slim to none, and even if TLANDO® gets approved by some act of FDA bumbling, it will be highly improbable that the product would gain favor in the eyes of prescribers. In the opinion of many, especially the malpractice attorneys, prescribers are already taking a substantial risk in providing the products above to patients, knowing the considerable safety risks and associated events involved with each product.
Now aware that two late-stage TRT alternatives have all but fallen to the wayside, and with AndroGel®, Axiron®, and Fortesta® having their own set of significant safety risks, the big three in TRT may start to see their market grip evaporate toward Natesto®. From there, these major players can decide at what point they want to side with Natesto®, which may open a whole host of new options for AYTU management to consider. And, taking into account all the benefits and its best-in-class safety profile, Natesto® may likely become the belle of the TRT ball in relatively short order. After all, what Big Pharma can’t beat, they buy.
The news that LPCN provided to the market last week was terrible. On January 10th Lipocine Inc. announced that the Bone, Reproductive and Urologic Drugs Advisory Committee (“BRUDAC”) of the U.S. Food and Drug Administration (“FDA”) voted six in favor and thirteen against the benefit/risk profile of TLANDO®, the company’s oral product for testosterone replacement therapy in adults with hypogonadism. Notably, the role of BRUDAC is to provide recommendations to the FDA about whether or not a drug should get approved for market. And although the recommendations of BRUDAC are non-binding and the FDA makes the final decision, it is very uncommon for the FDA to approve products that the Advisory Committee does not recommend for approval. In fact, it is improbable, except for the most urgent of humanitarian need that the FDA does not follow the recommendation by an Advisory Committee.
And, although the negative sentiment for TLANDO® provided juice to Natesto®, AYTU received even more good news on the competitive TRT front.
Similar Bad News For Jatenzo®
Also early last week, the FDA held an Advisory Committee meeting to review privately-held Clarus Therapeutics’s oral testosterone candidate Jatenzo®. Sharing the similar fate, Jatenzo® was rebuked by the advisory Committee primarily over safety concerns and similarly sent a recommendation that the product not be approved for market.
Two issues stood out as the basis for not recommending either product. Both are serious. The first matter cited as a reason for the adverse Advisory Committee sentiment on both of these oral testosterone therapies is the cardiovascular risk. The second reason cited increasing hematocrit in the broader as a safety concern in the testosterone replacement category.
No need to explain cardiovascular risk. If your heart stops, it’s bad. But, the increase in the hematocrit levels is also a severe event, causing thicker blood within the user’s body, and is clinically shown to enhance the risk of stroke significantly. Although patients can try to compensate for the higher risk of stroke by reducing their TRT dosage or even quitting the therapy altogether, others turn to donating blood more frequently to thin it out. But, when push comes to shove, why should patients subject themselves to such extreme measures, especially when FDA-approved Natesto® is available as an alternative that is shown not to affect hematocrit levels, even after 360 days of continuous treatment? The quick answer is that they shouldn’t.
Natesto® Will Finally Get The Full Attention It Deserves
While AYTU may not openly rejoice in the apparent failure of both TLANDO® and Jatenzo®, the news is a shot-in-the-arm for AYTU and its lead product Natesto®, which is already FDA approved and has several clear advantages over other testosterone therapies. And, to be sure, Clarus and Lipocine’s seemingly failed attempts to enter the US market won’t interfere with AYTU’s ability to showcase Natesto® as the most advanced entrant in the enormous $2BN prescription testosterone market. In fact, the case for Natesto® is made even stronger.
Despite not benefiting from the Big Pharma’s massive marketing budgets, Natesto® is beginning to gain significant market traction based on the company’s most recent updates. The company’s latest presentation reports a 250% total prescription growth rate for the three months ending in November compared to the three months ending in February of 2017. Additionally, factory sales were reported as all-time highs as of December at an annual run-rate of almost $7 million and had increased 300% over the last four quarters.
For both AYTU and Natesto®, this momentum may be just the beginning of a stronger trend higher, considering that the US market for testosterone replacement therapies is more than $2 billion. And, as noted, Natesto® is the only topical product without a black box warning – the strictest of warnings that all other topical testosterone’s carry due to the risk of potential transference. Additionally, Natesto® is a lot easier to apply than testosterone gels and without any of the safety concerns that caused Lipocine and Clarus to get all but formally rejected by the FDA at last week’s Advisory Committees.
Natesto® Should Be The Market Leader
It’s sometimes difficult to understand why the FDA even permits products to remain on the market when safe alternatives are available. But, they do, and Natesto® may provide a call to action for change.
Competing products being prescribed by physicians include AndroGel®, Axiron®, and Fortesta®, and each carries the severe Black Box warning in its label. And, they should. All three bring a substantial risk of accidental transference of the topically applied testosterone to both women and children if they are nearby during the application process. Results can be severe, and noticeable unwanted effects from only a brief exposure have been reported from minimal accidental transference. For the users of Black Box products, the adverse events can be more severe with cases citing cases of testicular shrinkage, lowering of LH and FSH hormone levels and a sharp reduction in sperm count.
Thankfully, recent AYTU product updates indicate that physicians are placing more focus on the safe, well tolerated, and best-in-class performance of Natesto®, and it is becoming apparent that Natesto® is beginning to gain increasing attention from prescribing physicians. Notably, the word is spreading that by weighing the known benefits of Natesto® against the risk-enhanced results shown from every other marketed low-T product available on the market that Natesto is a better option for treatment. Most important, prescribing physicians are getting educated to the fact that Natesto® does not cause many of those unwanted or adverse events associated with products they may currently provide.
You probably already know, but if not, Natesto® is AYTU’s FDA-approved and clinically proven therapy prescribed to treat hypogonadism, also known as low testosterone. Different from both injectable and topically applied TRT treatments, Natesto® is the only nasally delivered low-T therapy on the market. The gel application gets administered similarly to that of nasal allergy sprays, which offers the patient quick, measured, and convenient dosing. Regarding efficacy, clinical trials showed that 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, about 90% of the patients had returned to normal testosterone levels. From a clinical perspective, the results indicate that Natesto® can potentially return low-T patients to baseline in roughly three months, and it can do so with fewer health risks than competing treatments in the market space.
Ironically, Natesto® is the only topical treatment not required to have a Black Box warning pinned to the product but is still fighting for market share. However, the product is gaining ground demonstrated by the month-over-month growth rate in new prescriptions written.
The Market Is Telling The Story
Although many in the industry find that the valuation of AYTU significantly underappreciates the potential and current growth trajectory of Natesto®, others appear to be taking advantage of the present low share price. Contrary to LPCN’s 50% plunge in share price last week, AYTU saw significant interest in its shares and on Friday closed out the week just over 20% higher on volume that exceeded 10X its recent average. On Tuesday, the interest in AYTU continued with shares closing higher by an additional 22% on extremely strong volume.
Rightfully, the sentiment is shifting, and many get the sense that Natesto® is on the verge of bringing an appropriate value to AYTU shares, thus playing a critical factor in driving shareholder value higher. AYTU share prices traded above $6 late last year and if anything, with the apparent failure of two of its competitor’s late-stage clinical stage products, the spike in stock price last week may be an indicator of things to come.
Perhaps the institutional investors that follow the multi-billion dollar TRT market finally realize that Natesto® may soon be the front man in the market after proving itself to be a best-in-class option for both its safety profile and treatment success rates. And, couple that reasoning with a yearly run-rate expected to eclipse $7 million that can ease cash concerns, then the 20% move last week may just be the beginning of something much bigger.
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