Aytu BioScience (Nasdaq:CM AYTU) Gets Huge Deal With Acerus For Natesto® Expansion

Although investors initially drove the price of Aytu BioScience AYTU higher by more than 16% on Tuesday, the stock settled back to close modestly higher on the day despite significant news about the expansion potential for its flagship product, Natesto®.

On Tuesday, AYTU announced announced the expansion of the company’s partnership with Acerus Pharmaceuticals in a deal that will accelerate the growth of Natesto® in the United States. The terms of the deal swing wildly in AYTU’s favor and call for Acerus to fund and launch a U.S.-based specialty sales force which will promote Natesto® to urologists and endocrinologists. Even better for AYTU, they will continue to book all Natesto® revenue and promote Natesto to all other specialties including internal medicine and family practice.

The revised deal will allow Acerus to launch a complementary U.S. commercial team and hire at least twenty-five U.S-based specialty sales representatives, in a move that will nearly double the size of the Natesto field force. The co-promotion will significantly increase the sales force coverage of targeted U.S. prescribers, puts a higher promotional focus on urologists and endocrinologists, and enables Aytu to increase its promotional efforts in primary care and other specialties.

Specific terms of the deal announced on July 29, 2019, call for the two to expand their commercial partnership and amend and restate the original 2016 Natesto exclusive U.S. license agreement. Notably, under the revised agreement, Aytu will remain the exclusive U.S. supplier of Natesto and retain all rights to revenues generated. In addition, Aytu and Acerus will continue to operate a joint commercialization committee in support of Natesto and will now more closely collaborate on U.S. brand strategy and commercial initiatives. Natesto total prescriptions grew 30% from fiscal 2018 to 2019, and this partnership is expected to drive accelerated growth of the brand through joint promotional efforts and a significantly expanded U.S. Presence.

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A Deal That Can Impact Natesto sales Tremendously

The deal should provide significant returns for what is proving to be a best-in-class testosterone replacement product. Josh Disbrow, Aytu BioScience Chief Executive Officer, commented, “We are thrilled to be expanding our partnership with Acerus and increasing the U.S. commercial footprint to such a large extent. With a coordinated promotional approach, this nearly doubling of the Natesto commercial team stands to substantially increase Natesto awareness and accelerate prescription growth. Acerus’ increased commitment to Natesto, as evidenced by their significant investment in launching a U.S. commercial team, is an important step in the evolution of the Natesto growth story.”

Mr. Disbrow added, “We’re pleased to be working together with Acerus to significantly increase our reach to physicians around the country. Additionally, with the recent expansion of Aytu’s therapeutic portfolio, that now includes ZolpiMist™ and Tuzistra® XR, this revised commercial arrangement enables us to employ a more distinct focus on primary care physicians to grow the entire product portfolio, while Acerus increases the promotional focus on Natesto with key specialists.”

Also a part of the deal, Aytu will continue to serve as the exclusive U.S. supplier to purchasers of Natesto, and Acerus will receive performance-based commissions on prescriptions generated by urology and endocrinology specialties. Acerus will assume regulatory and clinical responsibilities and associated expenses and will serve a primary role in the development of key opinion leaders in urology and endocrinology. Aytu will focus on commercial channel management, sales to wholesalers and other purchasing customers, and will direct sales efforts in all other physician specialties.

The payment structure currently in place will be replaced with a pay-for-performance commission incentive structure intended to drive Natesto prescription growth across all physician specialties. All previously agreed upon milestone payments payable by Aytu have been removed. Additionally, Acerus will now pay all annual FDA fees, current and future clinical trial costs, and all regulatory and pharmacovigilance expenses.

Natesto® Adds Another Milestone

Last week, AYTU served up another milestone for both AYTU and Natesto® that can also add additional firepower for Natesto to continue to provide record-breaking growth into the coming quarters In that announcement, AYTU said that Natesto is now a formulary and covered nationwide by a leading national pharmacy benefits manager (PBM). The PBM contract provides for unrestricted patient access to Natesto® across the PBM’s national open formularies and plans that service government clients. More than six million U.S. lives are covered by these prescription plans. That news followed another announcement earlier in the month that a new manuscript had been accepted for publication by the Journal of the Endocrine Society that provides the definitive evidence that Natesto® has even more advantages over most every marketed TRT drug that previously reported.

Included in that publication into the recent Journal of Endocrinology is data that shows new and distinguishing benefits of Natesto® that support its ability to achieve similar symptom improvement, even in the more severe Low T patients. Along with this efficacy, the study demonstrated the continuing function of the Hypothalamic-Pituitary-Gonadal (HPG) axis in hypogonadal men, which is diminished or altogether stopped with other TRTs. The publication highlights that beyond safety, Natesto® is proving to have a minimal to no effect on fertility, as well as being the only nasally administered TRT drug on the market whose benefits can be realized by men whose baseline testosterone levels measure significantly lower than normal levels.

Benefits Of Natesto® Mounting; Case For Bullish Momentum

The case for a shift toward prescribing Natesto® over competing TRT drugs is growing. Compared against other marketed TRT drugs, the data published in the Journal of Endocrinology were supportive of expanded market potential for the drug. The analysis showed a unique achievement in favor of Natesto® that resulted in a short-term return of testosterone to the upper normal range (800 ng/dL; 28 nmol/L) irrespective of how low the patient’s baseline testosterone was prior to the study. Moreover, in the patient group with the lowest baseline testosterone level, a mean average serum testosterone level of 295 ng/dL (10.2 ng/dL) was achieved after Natesto® exposure, bringing that difficult to treat subset of patients back up to healthy testosterone levels.

Also, the data also showed that Natesto® provided statistically significant improvements in symptom relief (erectile function, mood, and lean body mass) in these patients, as well as showing an indication that in-between Natesto® doses, all patients in the phase 3 study maintained their natural testosterone at the same levels they had before entering into the study. That result is important in demonstrating that unlike competing TRT drugs, Natesto® does not suppress endogenous testosterone production due to its lack of effect on the HPG axis. At the same time Natesto® shows a unique mechanism of action whereby the peaks in testosterone generated by Natesto® dosing provide efficacy and improvement of symptoms, while the time between doses (4-8 hours) allows for recovery of the HPG axis that does not inhibit LH and FSH secretion, which is essential to stimulate sperm production.

Spermatogenesis Study Final Expected This Summer

Investors are also looking forward to the final data readout from the company’s sponsored Natesto® Spermatogenesis Study, which is expected to be released later this summer. To date, the interim data from the study is compelling, and the final report may serve to help clinch Natesto®’s ability to serve a much broader patient base in the billion-dollar TRT market, especially for men who need the benefits of testosterone but at the same time want to maintain their fertility.

The new data demonstrate substantial evidence to support a potential paradigm shift in how patients with Low-T get treated. To date, AYTU’s nearly completed phase 4 prospective Spermatogenesis Study enrolled 56 men aged between 18 and 55 years who had low levels of testosterone (baseline mean, 233.97 ng/dL), with the median age at 37 years old. According to the lead investigator of the trial, Dr. Ranjith Ramasamy, Director of Reproductive Urology at the University of Miami, the interim results of the Spermatogenesis Study appear to mimic the findings in the recent Journal of Endocrinology publication, when he noted that, “the levels of testosterone in men rise about an hour or 2 after administration [of Natesto®] and seem to drop off about 2 to 4 hours after the peak.” He added, “that is closer to normal physiology than other delivery systems in which the levels of testosterone are pretty high during the day and therefore could lead to some of the side effects that we see with testosterone.”

Moreover, data from both the publication and the study thus far have generated a first of its kind result and provide the only known data that positions Natesto® as the only TRT drug able to deliver the benefits of testosterone replacement while at the same time preserving fertility. For Natesto®, a positive final readout can allow AYTU to seize upon an exclusive market opportunity to target 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, until now couldn’t be treated with testosterone.

Now, with at least two sets of data showing the benefits of Natesto®, AYTU can likely serve an even bigger market and may be the best choice for treating physicians to prescribe as an overall best-in-class TRT option. Already making its name known amongst prescribing physicians because of its superior treatment results, Natesto® is bringing other advantages that show it to be safer, has a shorter duration of effect, and can be dosed conveniently throughout the day. Now, with the final data release from the Spermatogenesis Study expected in roughly two months, AYTU, and its investors could be in store for a catalyst of significant proportion.

Taking Advantage Of A Soft Biotech Market

Although the share price of AYTU didn’t hold its gains on Tuesday, the company is well-positioned to continue to increase revenues and to drive the shareholder value higher. At some point, the valuation becomes so ridiculously low that investors will jump on the opportunity Two analysts already have price targets that range from between $4.00 – $10.00 per share, representing potential growth of up to 500% from current levels.

Also, AYTU is now providing significant and recent updates for MiOXSYS®, ZolpiMist™, and Natesto®, making it clear that AYTU is executing well on advancing each of its portfolio of products. The company is on track to deliver another quarter of record-breaking revenue, and with the expected announcement of final data from the Spermatogenesis Study expected in the coming weeks, AYTU investors may be in store for a near-term catalyst that can clear a path back toward 52-week highs. And, while a return toward $7.80 could bring a more than 375% return from current price levels, it would still be roughly 30% below the price target set by LadenburgThalmann.

If that’s the case, the quiet summer months may soon heat up for Aytu BioScience.

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