With little remorse, the title line was intended to attract your inquisitive attention. And, with shameless prejudice, it was also meant to reiterate the idea that in the world of high-flying, institutionally touted large pharma stocks, there exists a small universe of emerging growth stock opportunities that may ultimately turn the tide of an industry.
Ironically, it’s these small-cap gems that often harness the greatest potential to bring treatments and products to market that no one else has been able to achieve. And, although the mega money managers won’t mention any of these emerging favorites until they fill their trough with as many shares as they can haul, the news eventually takes its footing, and the secret holds no more.
Take Aytu BioScience for instance. Aytu, despite its underappreciated $15 million market cap, is a company that is increasingly attracting the attention of many of the large market players within the testosterone replacement therapy market. How so, you ask? Well, the answer is relatively straightforward from a business perspective – Only Aytu can do what Aytu does, and only Aytu does what others can’t. If you read the previous sentence a few more times, the statement makes total sense.
Clue Me Into AYTU
AYTU, as emerging gem diggers know, is working to become a potential industry disruptor and has enjoyed a sizable amount of positive analyst coverage during the past few months, most recently highlighted by the show of financial commitment from institutional investors who participated in the company’s completed $11.8 million private placement. While the money came at the cost of expected dilution, the company is now positioned financially to unleash the pent-up potential from its rich portfolio of products. And, deliver results it may, with AYTU able to deploy its sizable cash resources toward an aggressive commercialization program for its novel products, enabling the company’s unique strategy to move forward without the financial distractions that hang over the head of most emerging growth companies.
Now, with cash in hand and investors acknowledging that AYTU may indeed be sitting in the catbird’s seat of opportunity in multiple markets, inclusive of the $2 billion testosterone replacement market (TRT), investors may still want reassurance as to why the investment proposition remains a compelling investment thesis. After all, investor psyche is still quite hypocritical. For instance, few get blamed for playing on the side of caution; however, most all get blamed when an apparent opportunity gets missed. It happens to big and small investment houses alike, with hedge funds closing the doors based on a single failed trade or from the impression that management has become too weak to pull the trigger on a compelling investment because they did not want to be early to the investment opportunity.
But, while some see risk, others find that being early to a market opportunity has its rewards, allowing investors to take advantage of low share prices and asset-rich product portfolios that can get purchased at stock prices that represent pennies on the dollar. To some investment professionals, such a condition appears to be at play for AYTU, whose substantial pipeline opportunities remain under-appreciated by the masses, leaving investors an opportunity to invest at prices that not only take advantage of undervalued assets but opens the door to significant near and long-term asset and stock price appreciation.
And, for those meandering upon the thought of investing into Aytu, it is likely that the window of opportunity at current price levels may soon be closing, leaving investors the choice to act quickly to maximize opportunity or to wait and pay significantly higher prices for shares. Investor action is warranted, and not only because I think so, but based on the company’s unique product potential in a market that is in dire need of better. Beyond delivering “better” though, AYTU is also targeting a market that is begging for quality therapeutic alternatives that may provide treatment value and symptom relief, while at the same time keeping patients safe from current products that carry the most severe of FDA safety warning labels.
But, delivering both safety and targeted treatment results is only part of the value proposition offered by Aytu BioScience.
Who Else Does What Aytu Does?
Who else does what Aytu does? Well, in theory, several companies do, but when looked at closely, none of them do it as well, or as efficiently as Aytu. The best way to consider Aytu right now is as a potential break-out star, where its lead product, Natesto, is slowly and methodically grabbing the attention of treating physicians who have written more prescriptions for Natesto in the past six months than ever before in the history of the product. The good news on that front is that while the over 300% gains in actual Natesto prescription rates are compounding on a sequential basis, the company is just now starting to market the product aggressively. It may have taken a little extra time to shore up the capital requirements necessary to attack the lucrative Low-T market, but AYTU did as required and is now positioned to orchestrate a full-scale blitz that may inevitably make Natesto a worthy market competitor. But, while Natesto may prove to be a best-in-class alternative treatment in the TRT market, it’s not the only Aytu product that may be destined to deliver significant shareholder appreciation to investors.
Plainly stated, Aytu’s unique approach to taking advantage of the sexual medicine market is what separates Aytu from others that get mired in never-ending R&D costs and project delays. Banking on its leverage from recent accretive acquisitions, Aytu is eager to participate in a booming part of the sexual dysfunction (SD) industry where Big Pharma is mostly disinterested. That’s not to say that the market potential is not enormous, especially to a company like Aytu. But, it is fair to say that for the large-cap pharma players, markets that may account for roughly $100 million in revenue opportunity is more of a nuisance than an opportunity, thanks to bloated overhead and costly pass or fail research programs. Yet, to a company like Aytu, a $100 million market can deliver substantial rewards.
Take the female sexual wellness market, for instance. It’s a market expected to generate $9 billion in annual sales on a global scale. However, despite the multi-billion dollar market potential, much of that total comes in smaller pieces, with multiple niche products expected to generate $100 million or less in total sales making a fragmented market that favors the nimble competitor. For Aytu, their focus in targeting the potential in niche opportunities may deliver financial windfalls, and products like Fiera, its on-market product for female sexual wellness product may lead to a potentially lucrative market opportunity for the company.
Fiera is the first and only hands-free, drug-free solution for women suffering from sexual desire (SD) issues. Fiera has been referred to as a “Viagra” for females of sorts and comes to market at a time when the market is aggressively addressing the need for products that can treat unmet female SD issues. Using gentle suction, Fiera increases blood flow with the use of mild stimulation to enable engorgement and elicit readiness for sexual contact. The device is anything but a novelty, so users should not get confused by the description. Fiera has its supporters and is approaching the market with a respectable list of credentials, with the benefits of Fiera published and talked about by medical scholars at Stanford University, Indiana University, and with an additional endorsements from some of the “Who’s Who” of Sexual Medicine.
Fiera, like Natesto and Aytu’s other product MiOXSYS (for male infertility), is born from the same business model that has set the stage for success at Aytu. The company acquired Fiera in an all-stock transaction, eliminating clinical risk and bringing accretive potential to the company’s revenue potential.
The Fiera acquisition is an example of how the strategy at Aytu may prove profitable by commercializing products through the path of least resistance. In simplest terms, Aytu believes that they can find the right mixture of commercialization success through a combination and focus on licensing and acquisition of complementary product. And, rightly so. Aytu has amassed a promising portfolio of products, and each came to the company without the need for lengthy and costly research and development expense, allowing AYTU the opportunity to provide resources directly toward marketing and commercialization of the products acquired.
Natesto Gets Aggressive
Natesto, AYTU’s lead product, is intensifying its path toward mainstream commercialization and is expected to pack a powerful punch to a testosterone replacement industry that is plagued by FDA approved products that come with significant health risks and Black Box warnings. In fact, Natesto is notably different and is the only FDA approved topical TRT treatment that is not required to have a Black Box warning and in clinical studies is proven to be as effective as other currently marketed testosterone products. But, beyond established safety, the benefits get even better for Natesto users.
Natesto is the only nasally administered TRT treatment, which significantly reduces the opportunity for unintended testosterone transference as other TRTs do, and offers a safe and convenient 2-3 times daily dosing regimen. The Low-T market needs no introduction, and the airwaves are filled with millions of marketing dollars per day to drive home the point that men are in need of a product that works. Unfortunately, for many males, the use of treatments, other than Natesto, comes with significant health risk and severe potential side effects.
Natesto is in a market position to change the industry standard. Some practitioners already recognize the important advances in Natesto, acknowledging the product’s ease of use, its speed of symptom relief, and its ability to provide the highest and most effective testosterone blood concentration levels, with optimum benefit typically within forty minutes of dosing. Not only is Natesto proven effective, it’s easily administered through nasal passageways that allows for rapid uptake into the blood, and importantly also allows for fast clearance from the bloodstream as well.
But, Aytu’s promise from Natesto is rooted in even deeper importance, being one of, if not the only, current TRT option that does not decrease male hormone levels to abnormally low and potentially dangerous levels. Not only does it control the consistency in FH and FSH hormone levels, but Natesto also does not cause the blood to thicken, which can lead to stroke or cardiovascular issues from use of competing products. Additionally, Natesto does not interfere with the normal function of the hypothalamus in the brain, where other products have been shown to fail, often leading to testicular shrinkage.
That’s Not All, Aytu Has More
While Natesto and Fiera both offer game-changing technology and market advantages, Aytu also is delivering on the commercialization of MiOXSYS, a male infertility innovation that may potentially disrupt the current infertility market landscape. Notably, MiOXSYS is making headlines as the first significant and beneficial change to the male infertility market during the past two decades, able to do in three minutes what currently takes hours to complete. And, the benefits of MiOXSYS need no specialized treatment center, a Ph.D. certified administrator, or a highly trained technician to complete the testing.
Like Fiera and Natesto, the market potential for MiOXSYS is enormous and similar to Natesto is positioned to immediately benefit an industry ideally focused on speed, accuracy, cost, time and quality of results. Different than most all competing male infertility tests, MiOXSYS provides results in about three minutes. Not only is speed a benefit, but the test can also get completed at a typical urologist’s office, and once the MiOXSYS equipment gets placed, offers Aytu the advantage of a residual revenue stream. Utilizing the razor-razorblade revenue model, Aytu will benefit from a recurring revenue stream, by replacing specific and patented testing sensors, while at the same time providing cost relief to both the patient and physician.
Currently, the Cleveland Clinic and others are using the MiOXSYS system and are publishing supporting studies highlighting its benefit. Additionally, MiOXSYS is expanding its market base and is now sold in 20 countries around the world and is made available in prestigious centers like Hamad Medical Corporation in Qatar, Dokkyo University in Japan, Singapore General Hospital, and Zech Clinic in Austria.
Currently, AYTU is targeting sales outside of the United States with MiOXSYS. However, Aytu expects to conduct FDA trials in the next 12-18 months for sales and marketing approval in the U.S.
The Aytu Advantage
Aytu BioScience has the product portfolio in place that can deliver long-standing revenue potential. But, just as important, AYTU also brings with it the management team that can produce results. The team, led by twin brothers, Josh and Jarret Disbrow, have a history of starting, building and maximizing substantial business valuation and opportunity. The team founded Arbor Pharmaceuticals, which grew in revenue to over $100 million in 2011, and later sold to the private equity firm KKR in 2015 with a valuation of over $1 billion. Fortified by Greg Gould, a CFO with multiple biotech exits under his belt, the combined team has built and sold ventures such as Atrix Laboratories for over $800 million, and all are deeply rooted in the urology field, where Atrix’s product was targeted to treat prostate cancer.
It’s not only the monetary and business building success that the team brings to Aytu, but it’s also the experience of understanding the sexual wellness industry that brings added and significant value opportunity to the company and its shareholders. Aytu, at its core, is not about promoting products that dictate a path toward life and death situations. Rather, the company is providing an opportunity for patients to enjoy a better quality of life, safely treat their conditions, and to enjoy proven symptom relief. And, in some cases, with the successful testing with MiOXSYS, provide a patient the ability to father a child in the case of infertility issues. Aytu, in other words, remains focused on creating life rather than just making a patient’s life better.
All told, investors in Aytu BioScience may finally be on the cusp of being in the “now,” instead of “if” or “when.” Despite some headwinds in an incredibly competitive market, Aytu has persevered the storm and is emerging as a potential niche leader in three potentially lucrative and growing market segments. The time for Aytu may be now, and although investor caution may have been a prudent strategy a year ago, that sentiment is now getting replaced with warranted optimism.
With a visible pathway toward near-term profitability and adequate cash in the bank, and with AYTU’s commitment to an aggressive and strategic initiative to drive Natesto market share, betting that AYTU will go lower at this point in its business cycle may very well be…an infertile point of view.