Wiser Choice – Antares Pharma (ATRS) or Aytu BioScience (AYTU)?

The battle is underway for market share in the $2 billion testosterone replacement therapy (TRT) market, and two of the companies that are working hard to secure their stake is Antares Pharma and Aytu BioScience. Although both companies have their own recipe for testosterone replacement success, which of them has the product that can pump up near-term investor rewards?

Playing the role of “wise choice” investor is an arduous task, and when faced with determining which company, Antares Pharma or Aytu BioScience, will likely attract market share from its innovative TRT product, even experienced investors may get blinded by some similarities between the two products. However, upon closer inspection, the distinctions between the two are vast, and only one product of the two is likely to emerge as the potential market disruptor in this multi-billion dollar market.

Let’s see what each has to offer.

Can Antares Pharma Get Xyosted™ Approved?

First, let’s look at Antares Pharma’s potential contribution to the TRT market. For its part, ATRS is planning to offer Xyosted™, a single use, fixed dose subcutaneous testosterone enanthate that gets delivered via auto-injection. The auto-injection is intended to allow for rapid subcutaneous delivery of a viscous testosterone solution through a single use, 27-gauge needle. For those paying close attention, the modifier “potential” was used to describe the treatment because Xyosted™ is not yet FDA approved for market, but according to Antares has a PDUFA review date set for October 20, 2017. If all goes well during the application process and FDA approval is earned, ATRS says that it expects to launch the product in December of 2017.

Antares is not alone in its attraction to this lucrative market, and several companies are currently working to take a bite out of the multi-billion dollar TRT pie. But, as many investors understand, the small window of opportunity may only exist for a company that can truly deliver a better product for TRT patients, replacing treatments that are littering the TRT landscape with Black Box warning safety labels.

Efficacy and safety will be the key measures of success, and Antares has touted that roughly 92.7% of Xyosted™ test subjects reached the trials primary endpoint after 12 weeks of treatment. That’s a good thing. Additionally, almost all of the patients reported the injection itself was relatively painless, which is also a welcome sign for Antares. However, and not to rain on the ATRS parade, while most patients did not report an extreme level of physical discomfort, the larger question remains as to whether clinicians consider the current generic injectables as overly painful, an important issue since over 4 million prescriptions were written last year for generic testosterone injectables. That’s a big problem facing ATRS and Xyosted™, and the company is hoping to influence doctors to prescribe a product that may hurt less, but not offer much more therapeutic benefit at a much higher cost to patients. Therein lay the struggle. And, even if Xyosted™ gets approved, ATRS may be fighting an uphill battle to gain favor with prescribers that work to keep the cost of medication down for their patients. The dilemma that clinicians may face if prescribing Xyosted™ is that it does not cost just pennies more, it will cost a patient hundreds more in monthly cost. And, despite the fact that the pharmaceutical industry is flush with cash and fills an office with catered meals and friendly sales reps, at the end of the day, cost matters.

Perhaps if Xyosted™ was the first and only injectable on the market, the relative ease of use might be alluring to patients. But, the truth of the matter is that the market is saturated with FDA approved generic injectables, and the cost difference between an approved Xyosted™ and a generic product is substantial. The patient cost estimates for Xyosted™ run high, with treatment prices expected to cost upwards of $400 per month, with some estimates hitting a higher monthly price tag of roughly $500 per month. Now, although men may be willing to pay any price to get the TRT they require, the current cost of generic injectable treatment is less than $100 per month, and reports of uncomfortable or painful injection sites are not causing a movement for change amongst users. Thus, if the current generic treatment is not all that painful and may deliver similar results for up to $5,000 a year less than Xyosted™, ATRS may have its hands full when trying to convince prescribers to offer their treatment.

But, the battle may not end there. Because of the cost, questions abound as to whether managed care and Medicare payors will give enough credence to Xyosted™ simply because of its relatively pain-free delivery method. And, not only that, ATRS may face additional pressure if an approved Xyosted™, even with its premium price, is not able to demonstrate superiority in efficacy or safety over currently available generic injectables. Another thing, if history serves as a guide, the likelihood for broad support of a high-priced medication that does not provide substantial benefit to the patient often finds its level of interest from insurers to be considerably and materially less responsive for reimbursable coverage.

Antares, by the way, is not oblivious to the potential challenge. They have acknowledged that only about 50% of the managed care accounts that they will be targeting upon approval will consider NOT blocking access to Xyosted™ during the first six months on the market. That may be a half glass-full scenario for ATRS, but, as that glass empties, they then face the potential that approximately 50% of the insurance companies will not even consider coverage. Simply put, if an approved Xyosted™ does not provide a substantial improvement in intended results, many patients may be hard pressed, and reluctant, to fork over $400-$500 per month, and likely opt for a treatment alternative which may cost less than a hundred bucks per month.

In a nutshell, ATRS is likely to receive FDA approval for Xyosted™, but from an investor’s point of view, a determination must be made as to whether an approved Xyosted™ brings with it enough clinical evidence and real patient benefit to substantiate its high price. And, if investors can justify their reasoning in all things Xyosted™, then they must also hold onto the hope that the current 50% interest by insurers does not trend back toward zero.

Aytu BioScience Brings Natesto®

This is no exaggeration, Aytu BioScience may be the sleeping giant in the sector. They offer Natesto®, the only nasally administered, two to three doses per day TRT treatment on the market. Quietly compounding sales, the prescription rates for Natesto® have risen more than 300% in just the past four months and has gained sequential prescription writing momentum throughout all of 2017. Now, investors should not expect this potential giant to emerge as a leader overnight, but, if Natesto® continues to prove itself as the only NON-Black Box warning topical TRT product that can provide meaningful therapeutic benefit without the severe potential side effects, investors may indeed get treated to significant Natesto growth spurts in the months to come.

Contrary to Antares’ hope for 50% reimbursement levels, at Aytu, provider support is growing, and Natesto® is already receiving coverage from many managed care providers. Following the momentum, AYTU management has stated that they are actively pursuing additional coverage agreements during the next several months. Beyond just insurers, though, and proving a clear value proposition from a potentially approved Xyosted™, is that Natesto® ranges between $25 – $100 per month for treatment, and in no case will a patient ever pay more than $150 when using Aytu’s AssureRx patient co-pay program. Just considering price, the difference in cost between Xyosted™ and Natesto® may save a patient upwards of $475 per month in out-of-pocket expense unless Antares offers a similar program.

Natesto® loses no points in the convenience department, either. The product is easy to use and is painless. While both Xyosted™ and Natesto® offer minimal chance for accidental transmission of testosterone, Natesto® provides additional benefit. The treatment is nasally administered, offers discreet dosing, and provides a measured delivery of testosterone.

Other benefits press the case for Natesto®. The product requires no special diet, no injection site pain, and perhaps most importantly from a safety perspective is that it is the ONLY currently marketed topical TRT without the severe FDA administered Black Box warning applied to its label. Safety is critical but efficacy is what men demand, and Natesto® checks that box as well.

Natesto® has provided an improvement in mood, increased erectile function, and has shown minimal impact on luteinizing and follicle stimulating hormones, and hematocrit levels, which cannot be claimed by the currently marketed alternatives, especially the injectable testosterone products. Compared to others outside of Xyosted™, like AndroGel® and Axiron®, Natesto® may be positioned to earn substantial share based on its safety, its proven efficacy value, and its ability to do its job without interfering with critical human hormone levels.

While eliminating much of the concern for the accidental transference of testosterone, Natesto®, in clinical studies, demonstrated meaningful improvement in all areas of erectile function, showed improvement in over 90% of patients that used the product and is showing superiority on many product levels. With these advantages proven, Aytu’s Natesto® is well positioned to benefit from a market in need of a safe product that limits unintended use and provides substantially better benefit to patients.

Now that AYTU has shown what Natesto® can do, the company has built a dedicated sales-force to drive prescription rates higher, and institutional investors demonstrated their support by participating in a recent $11.8 million private placement. The level of interest in that deal shows a belief that the company can emerge as a contender in the TRT space. But, while the potential is vast, assuming that AYTU grabbed only a 5% share of the existing $2 billion market, recognizing revenue over $100 million would indeed serve as a means to drive the company value sharply higher. And, if a 5% initial market penetration gets earned, then investors may expect the significantly undervalued market cap of roughly $15 million to likely get replaced with a value more representative of their peers, representing a significant opportunity for investors at these levels.

Wiser Choice

While both stocks are low priced, the unexplainable market-cap variance between ATRS and AYTU may present an enormous opportunity to those that favor Aytu BioScience. Many investors enjoy the fact that regulatory uncertainties are already behind Aytu. They are further impressed that Natesto® is earning sequential traction in prescription rates over the past three-quarters. In addition to Natesto® ‘s growing strength in the TRT market, as mentioned, Aytu recently completed an $11.8 million private placement and has enough cash on hand to lead the company to break-even or EPS territory, a milestone that may occur within the next twelve months. With just over 4 million shares outstanding and a float that is small, any hint of continued good news may serve as a spring board to the upside for investors that are looking for both near and long-term growth opportunity.

In the analysis of Antares and Aytu, the “Wiser Choice” is Aytu BioScience. While ATRS may work its way higher if Xyosted™ gets approved, at current levels investors appear not to have too much promise in its market potential. An argument may get shared that Aytu’s stock price is indicative of its opportunities with Natesto®. However, I find that argument to be moot, and most every metric for potential success for Natesto® is lining up as it should. Many insurers are covering the product, Natesto® has proven to be the safest treatment in its class, and has a price tag that may be considerably less than an approved Xyosted™.

With a significant market opportunity, veteran management, and a solid balance sheet in place, the value in Aytu’s Natesto® is beginning to deliver results and strengthen the revenue stream, which should provide the juice necessary to drive shareholder value higher.

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