Both Aytu BioScience (AYTUD) and Lipocine Inc. (NASDAQ:LPCN) are advancing novel testosterone replacement therapies, but when placed side by side, which stock may make investors pumped for joy?
The testosterone replacement therapy market is a hot sector with companies focused on grabbing as much of the estimated $2 billion market as they can. Two emerging companies, in particular, are focused on delivering shareholders both near- and long-term value propositions by advancing their unique TRT products, one of which has recently hit the market. While several large pharmaceuticals are well entrenched in the TRT market already, their products, like AbbVie's (NYSE:ABBV) AndroGel, Eli Lilly's (NYSE:LLY) Axiron and Endo International's (NASDAQ:ENDP) Fortesta, are plagued with the most severe of Food and Drug Administration (FDA) warnings the dreaded Black Box warning. Thus, with the market opportunity open to treatments that may provide a better solution without the known risks of currently marketed TRT products, let's place two peer competitors side by side to determine the chances of either taking a bite out of the current market potential.
Is Aytu BioScience the 'wise choice?'
Although Aytu BioScience experienced a tough month in August, likely attributable to the recent capital raise, the company has never been stronger from a clinical and marketing perspective. Now that the split is old news and with shares trading above $3.70, the distractions of the past month may soon get replaced with investor optimism about the company's lead TRT product, Natesto.
Natesto has the potential to become a game changer in the TRT market. Although Aytu is marketing with a much smaller budget than those with already approved therapies on the market, at some point investors believe that wisdom will soon replace big pharma muscle, making Natesto the TRT of choice for prescribing physicians. And, when looking at published clinical data, the case for a market-leading Natesto should not be cast off as pure fodder. In fact, when comparing Natesto to Lipocine's pipeline TRT, Tlando, as well as to a host of other big-name drugs, Natesto has demonstrated statistically better efficacy and appears to be a safer and more effective treatment than most TRT products currently on the market.
Keeping the focus only on both companies' TRT products, other promising Aytu pipeline products won't get considered. Investors should not discount the value inherent to the Aytu pipeline consisting of a male infertility product MiOXSYS and a female sexual wellness product Fiera that like Natesto may offer significant and compelling market advantages. OK, so what about Natesto's bid to be best in class?
First off, Natesto is the only nasally administered TRT on the market. And, while some investors may not understand the significance of that issue, users of the product will. Being nasally administered helps to alleviate inadvertent transfer of testosterone, provides consistent and efficient dosing and offers significant convenience over topically applied products. Because of these advantages, Natesto is the only currently marketed FDA-approved topical TRT product not labeled with the severe FDA-required Black Box warning. Those safety and convenience issues are just the tip of the iceberg in the advantages column; there is more to Natesto to justify its place in the $2 billion TRT market.
It's no accident that Natesto has been called the potential best-in-class therapy on the market. Coming off its recent spike of over 300% in new prescription volume, Natesto is grabbing the attention of physicians due to the proven effectiveness of the product, which also leaves behind the severe side effects for patients. The differentiating factors are apparent; Natesto reduces or eliminates the potential for accidental transfer and does not require a man taking the product to quarantine himself from a female or child while the product is applied.
Additionally, being a hands-free application, Natesto offers consistent dosing in a measured treatment, and that's an important issue since excessive intake of testosterone is not necessarily a good thing for patients. Of perhaps greater importance, though, is that Natesto does not significantly reduce levels of LH and FSH hormones in the body, which has caused side effects in patients (including reducing sperm count and decreasing testicle size) who use products like AndroGel, Axiron, Fortesta and injectable products. Not only does Natesto maintain proper hormone levels in patients, but it also eliminates the potential for users getting hooked on testosterone treatments to maintain healthy testosterone levels. Natesto excels in other areas of concern as well, demonstrating a better safety profile over long-acting gels and injections that have been shown to increase hematocrit concentrations in the patient. That is, the treatments make the patient's blood thicker, which may lead to stroke and cardiac-related complications in patients. From a safety perspective, Natesto is best in class, but what about the efficacy?
The safety profile is significant, but it's how Natesto performs that is the real story. Marketed as "testosterone in seconds," Natesto is now the first and only FDA-approved intranasal TRT on the market. In a clinical trial, the majority of patients achieved statistically significant improvement in each of the five domains of erectile function. In most cases, the effect on normalizing erectile function occurred within the first 30 days of treatment. In addition to the benefits mentioned, 70% of men in the Natesto pivotal trial said they would switch from their current TRT to treatment with Natesto. Thus, no surprise that Natesto has seen a sharp trend higher in new prescription rates, with new authorizations for the product doubling since May. Also, 90% of men taking Natesto get their testosterone levels back to "normal," which is higher than other TRTs. And most men taking Natesto see their moods improve as soon as 30 days from starting treatment. The market is estimated to stand at approximately $2 billion currently, and if Aytu maintains the current trend, even a 10% market penetration can return over $200 million in new revenues.
Now that Aytu has roughly only 4 million shares outstanding, a revenue spike of that magnitude would most likely cause a disproportionate rise in company market cap, which currently reflects anemic value considering this potentially game-changing product. Adding in the potential of Aytu's other marketed products, the company may be a very wise choice for investors seeking long-term value and probability for share price appreciation.
Is Lipocine the 'wise choice?'
Lipocince is developing a testosterone product called Tlando. Although the product is not yet on the market, Lipocine is the closest peer to Aytu from a market perspective. Lipocine is taking a different approach for Tlando, testing an orally administered dose of testosterone, which the company plans to submit to the FDA for approval in the coming months. Investors need to know that the FDA has already denied the application for Tlando once, but Lipocine is preparing to try for approval once again, relying on similar data from the original rejected application.
A potential drawback for the oral administration of Tlando is that patients will be required to keep a consistent diet, maintaining certain fat content and calorie intake. And this is the case for each dosing. If patients fail to adhere to specific dietary requirements, patients are unlikely to see a meaningful rise in testosterone levels, which would be a huge problem and a potential marketing nightmare for the product. A significantly more adverse scenario is that during the company's FDA studies, a handful of men reached testosterone levels of over 2500 ng/dl, which is both extremely high and dangerous.
In addition to potential FDA problems looming for Tlando, the company itself said in a press release that LPCN 1021 (Tlando) only "generally met" the prespecified per dose secondary endpoints for twice daily oral administration. In layman's terms, the product either meets the endpoint or it doesn't, and when the company itself publishes mixed messages, investors should pay close attention. Also important to note is that the FDA will be highly unappeased if men being treated by Tlando exceed the 2500 ng/dl level, making the chances for approval unlikely. And to add insult to potential misery, as far as the FDA is concerned, when endpoints are "generally met," product support is unlikely. The FDA's words, not mine.
The biggest issue for Tlando compared to Natesto, though, is that when placed side by side, Tlando does not get as many men to normal testosterone levels. Company-sponsored studies demonstrate a significant edge in benefit from Natesto with 90% of males reaching normal testosterone levels, compared to just 70% of patients reaching normal testosterone levels when using Tlando. The FDA has made it known that at least 75% of men taking the testosterone product must reach normal T levels so it is difficult to understand how the FDA would even approve Tlando. Additionally, with Tlando known to produce dangerously high testosterone concentrations in some men, the road to approval may be far tougher than even the most optimistic investor may be willing to admit.
The 'wisest choice?'
Comparing the two, Aytu emerges as a clear "wise choice" for investors wanting exposure to the multibillion-dollar TRT market. Interestingly, Lipocine has a current market cap of roughly $75 million compared to Aytu's approximately $15 million market cap. From both a product and valuation standpoint, the opportunity for growth is substantial in the Aytu BioScience camp, particularly when you consider that there is no regulatory risk for Aytu. The product is already on the market and growing rapidly. Although a slim chance exists for approval for Tlando, the product would most likely be met with considerable marketing difficulties. Conversely, with Aytu's Natesto already approved and marketed, the promise again lay squarely in the Aytu potential.
Now that the TRT comparisons are noted, it's fair to factor in both Aytu's and Lipocine's additional pipeline opportunities. While a slight opportunity may have existed for Lipocine to present itself in a better light, the company is yet to produce an impressive clinical statistic. Thus, the clear advantages still weigh heavily in Aytu's favor, solidifying its position as the better of the two. With a pipeline focused on making use of a combined market opportunity of more than $11 million in the bank following its recent capital raise, in this case, Aytu BioScience is the superior choice for investors looking to "choose wisely."
This article was originally featured on CNA Finance.
Disclosure: The author has no positions in any stock mentioned in this article.
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