Miami Beach, Apr 1, 2019 (Issuewire.com) - While patience is said to be a virtue, for investors in Aytu BioScience (NasdaqCM: AYTU), having the ability to focus long term may indeed prove to be a lucrative proposition. After all, the management team at AYTU has already proven themselves capable of building a billion-dollar company at Arbor Pharmaceuticals, and appear to be well on their way to implementing a similar formula to do the same at AYTU.
Since March, shares of AYTU have seen a considerable rise in value, with the stock settling higher by roughly 48% over the past 30-day period. And, if going back to the start of the year, the shares have surged by an impressive 114%. But, obviously, that value is coming from somewhere, and investors that are following this story are well aware that management has already been successful in acquiring three novels, FDA-approved drugs to boost its growing pipeline that brings with them a combined estimated $7 billion market opportunity.
But, it's within the backdrop of this rise in share price valuation that investors find the intrigue. And, with Josh and Jarret Disbrow leading AYTU forward, certain parallels may be starting to show that AYTU's formula for success may be based on a similar path to that of Arbor Pharmaceuticals, a family and friends startup pharmaceutical company that was ultimately sold for roughly one-billion-dollars. And, as they did at Arbor, the Disbrow's are strategically adding potentially best-in-class drugs to its product arsenal that may ultimately earn sizable market share and drive the long-term value of AYTU exponentially higher.
If History Repeats Itself, AYTU Is A Compelling Investment Opportunity
Aytu BioScience currently has three novel drugs in its pipeline that target a combined $7 billion market opportunity. Not only do the drugs offer substantial intrinsic value, but unlike development stage companies that have both regulatory and clinical uncertainty, AYTU is already monetizing their three lead drugs, Natesto®, ZolpiMist, and Tuzistra®XR. And, with AYTU apparently committed to expanding its pipeline, there is no indication that the company is content in stopping at three. In fact, by the time Arbor was sold to an investor group led by KKR & Co, LLC, it had grown from a garage start-up to a powerful product-rich company that had secured the rights to 16 products and puffed its valuation to more than a billion dollars.
At AYTU, the challenge to mimic that magic at Arbor is well underway, and management is taking deliberate and strategic steps to build a pipeline of drugs that target not only lucrative markets but also exhibit best-in-class properties that can also address unmet medical needs. And, if success can be measured by both revenue growth and new product acquisition, then AYTU is performing well. In fact, the results prove that point with AYTU having posted three consecutive record-breaking quarters in terms of both revenue and new prescription growth rates from its growing stable of products.
https://www.youtube.com/watch?v=SUQ1zh781p0&t=11s
Flagship Product, Natesto®, Drives Record Revenues For Three Consecutive Quarters
Natesto®, AYTU's flagship product, is proving that there is a considerable value from acquiring and marketing novel drugs. For its part, Natesto®, the company's testosterone replacement therapy drug has been driving the revenue growth for AYTU over the past nine months by delivering both record-quarterly revenues combined with record new prescription growth. Moreover, the returns getting generated from Natesto® are noteworthy, exemplified by the company's sales force gaining marketing momentum as more and more prescribing physicians are recognizing both the safety and efficacy profile of the drug. Supporting rapid adoption are the data points generated from Natesto®'s Spermatogenesis Study that is showing Natesto® to be a potential game-changer in the TRT market.
In fact, Natesto® has added fuel to the argument for being a best-in-class TRT drug and is widening the gap between itself and its competitive rivals for being the safest and most effective TRT drug on the market. From a safety perspective, no other TRT drug on the market can compare. To date, Natesto® stands as the only FDA-approved, nasally administered TRT on the market that is not required to have the most severe of FDA warnings, the Black-Box warning. That distinction is significant and is in direct contrast to the dangerous products marketed by large pharma companies that sell Androgel®, Testim®, and Axiron®. But, like any good news, that distinction should inevitably push the Natesto® brand to a higher level of preference among treating physicians as news of its superior profile grabs more headlines.
Proving A Narrative Through Its Spermatogenesis Study
Natesto® is progressing through its ongoing Spermatogenesis Study taking place at the University of Miami's Department Of Urology. The most recent data set shows Natesto® as an unmatched option for patients by proving its value as the only TRT drug either on the market or in a clinical trial that can maintain normal semen parameters in males without affecting fertility. In fact, the study may position Natesto® as the only TRT to have the ability to treat patients with all the benefits of testosterone while at the same time preserving male fertility.
To put the most recent Spermatogenesis Study data points into perspective, they are a first of its kind result and may offer the only known data that proves Natesto®, or any TRT for that matter, to be able to provide the benefits of testosterone replacement while at the same time preserving fertility. From a market perspective, the opportunity can be substantial and potentially position Natesto® as the only TRT product capable of serving the approximately 20% of men with Low T (2 million men or more) that are still in their 'family formation' years, but because of the effects that TRT can have on fertility, can't be treated with testosterone. And, for AYTU, if the results stay true to current form, the company may own exclusive ownership to this lucrative and selective market segment. That, in and of itself, can generate substantial interest in AYTU stock.
ZolpiMist Strengthens The Thesis Of Aytu's Billion-Dollar Quest
If a formula of building success through strategic acquisition is indeed in the works, then managements choice to add ZolpiMist to the pipeline may prove to be an excellent decision. After all, having a second billion-dollar market opportunity certainly substantiates that premise. Also bringing to market a unique profile, ZolpiMistis the only FDA-approved oral spray prescription sleep aid available on the market and is prescribed for use in patients with insomnia characterized by difficulties initiating sleep - and for patients that don't get to sleep quick enough with tablets.
In a move that caught investors by surprise, AYTU seized an opportunity to put ZolpiMist, which is an oral spray formulation of zolpidem tartrate (marketed in the U.S. under the brand name Ambien®) onto the global stage. Expanding into what is now a global opportunity for ZolpiMist, AYTU announced in March that they had entered into a licensing agreement with SUDA Pharmaceuticals to lead commercial development and sublicensing efforts for ZolpiMist in major territories outside the United States and Canada, including Europe, Asia, and Latin America. The agreement will allow SUDA to taget specific opportunity in the global sleep aid market that is currently estimated at almost $50 billion in annual revenue. By 2022, the market is expected to grow to nearly $80 billion.
SUDA Pharmaceuticals Making Deals
To expedite their role as an ambitious licensee, SUDA announced that they have already signed sublicensing agreements in key markets with large, multi-national pharmaceutical companies and has agreements in place in China, Chile, Brazil, and throughout Southeast Asia. Also, SUDA said that additional sublicensing discussions are ongoing and intended to increase distribution with additional prospective sublicensees for Mexico and other geographies.
But, just how quickly can ZolpiMist contribute to the billion-dollar proposition? Well, consider that if ZolpiMist can succeed in earning only 1% of an estimated $2 billion market opportunity, revenues of roughly $50 million can make it to AYTU's accounts. But, some analysts and investors like to speculate for larger penetration, and they believe that with SUDA now on board, it is possible that ZolpiMist can earn between 2% to 5 % of the market, making the near-term revenue contribution from ZolpiMist a driving factor in the overall growth at AYTU. But, as noted earlier, no one has committed to believing that management is content with just three products.
Completing A Trifecta Of Novel Billion-Dollar Drug Opportunities
The third and most recent addition to Aytu's portfolio is Tuzistra®XR. AYTU acquired an exclusive license to Tuzistra®XR in November of 2018 and it is the only FDA-approved 12-hour codeine-based antitussive. The drug comes with an impressive track record, by the way, noted by the roughly 40,000 prescriptions written for the drug in 2017.
Looking to capitalize on its market recognition, Tuzistra®XR launched in time to serve the demand in what has been an active cold and flu season. Although the recent sales data of Tuzistra®XR won't be provided until the upcoming quarterly earnings report, investors are enthused by the confidence that Armistice Capital showed in the drug, noting their investment of $5 million in cash to accelerate the AYTU launch of the product. As a potential bonus to the Tuzistra®XR license, AYTU announced during its recent LD Micro call that a complementary product to Tuzistra®XR is winding its way through the FDA approval process, likely adding a fourth FDA-approved product to the AYTU portfolio.
Tuzistra®XR is a prescription-only drug that is a patented combination of opiate-based antitussive codeine and chlorpheniramine, a histamine-1 receptor and is intended to treat coughing and other upper respiratory symptoms in adult patients. Offering what many believe to be a superior drug option, Tuzistra®XR differentiates itself from similar suppressants in its field by being the only codeine-based antitussive product to offer a 12-hour delivery duration, relative to the short-acting 4 to 6-hour dosing duration of other available treatments.
And, not only is Tuzistra®XR addressing the multi-billion dollar market with best-in-class potential, but it is also doing so with a financially fortified tailwind from the Armistice investment. Moreover, with its expedited launch and already for sale in large markets, investors are looking forward to first updates to see if the product can extend its popularity from doctors who prescribed the drug in 2017. Not only is the long-term market opportunity substantial, but initial sales may also benefit from an extended cough and cold season as freezing temperatures continue to plague the United States into April.
Is Another Arbor Pharmaceuticals On The Way?
Although investors could not follow the step by step growth at privately-held Arbor Pharmaceuticals, investors should be excited to know that the same management team at AYTU is likely advancing a similar strategy to achieve a common result. For long-term investors, understanding that AYTU's current pipeline of products may only be an opening salvo to match Arbor's subsequent pipeline of 16 products, it may not be presumptuous to assume that AYTU may be in for an extended period of product acquisition and revenue growth. And, while the unrecognized value is noticeable in the current share price, many investors believe that a cumulative effect will emerge as multiple products contribute to the revenue stream.
Perhaps it's for that reason that many investors believe that AYTU's market cap of roughly $21 million is blatantly ignoring both the near-term catalysts and the intrinsic value of its growing pipeline. And, the big question remains...Can AYTU follow in the steps of Arbor Pharmaceuticals and continue to acquire and market novel drugs that will ultimately serve as a powerful pipeline of revenue generating drugs?
The smart money may want to vote yes. After all, history does have a way of repeating itself.
Appeared on Soulstring Report
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