Prior to the market open on Thursday, Aytu BioScience (NASDAQ: AYTU) released a quarterly Natesto commercial update for the period ending December 31, 2018. For anxious investors, (SPOILER ALERT) the news is all good and proves that the strategies in place to drive revenue, increase margins, and build shareholder value is working.
What AYTU Told Investors
The release from AYTU started strong and didn't slow down from providing investors information that will likely lead toward another record quarter when filed in February. The update also demonstrates management’s ability to acquire and market potentially lucrative assets in market segments that need better drugs. In point of fact, when the update is parsed, AYTU performed extraordinarily well on a number of fronts.
First, AYTU reported that prescriptions written for Natesto®, the company's testosterone replacement drug therapy, increased by 27% compared to the prior reporting period. Second, net revenue-per-prescription showed significant strength by increasing 97% over the previous report. And, finally, patient refills for Natesto, which is a key metric that AYTU is targeting, increased by more than 52% on a sequential basis for that same period. What about the other 48%? Well, my guess is that they have not yet finished their initial supply. Yes, I'm long the stock. And, if you need to see the video that validates my interest, please click here.
Keep in mind that although no hard numbers were delivered this morning, they will be public soon with AYTU set to release their formal quarterly report in February. In that filing, investors can expect to evaluate a full quarters worth of all product sales and perhaps get a glimpse of how Tuzistra XR is taking off in part of the managements commentary.
Optimism And Enthusiasm From CEO Commentary
I'm long, and I may appear bias, but this morning’s update provided some valuable information and gives investors more reason to look long-term in regard to their AYTU investment time horizon. Personally, I like the fact that AYTU's update is not filled with bloated hype. Instead, investors get transparent information that is easy to validate. But, even with that said, it's always prudent to read between the lines. And, by parsing the CEO's remarks, investors are provided reason to believe that AYTU is hitting milestones with all cylinders churning in unison. Commenting on the quarter as a whole, Josh Disbrow, Aytu BioScience Chief Executive Officer, said,
“We are pleased with the recent growth of Natesto, Aytu’s FDA-approved nasally-administered testosterone replacement therapy. During the quarter we demonstrated significant growth in Natesto prescriptions and have begun to realize the benefits of our recently implemented Natesto Direct patient support program.”
“Total Natesto prescriptions and refill prescriptions through Natesto Direct have increased significantly from quarter to quarter. Through Natesto Direct, prescriptions are growing, and patients are gaining improved access to Natesto. This improved access and reimbursement is evidenced, in part, by the large increase in patient refills since last quarter.”
Reading Into The Release
Clearly, AYTU did not over-promise and under-deliver on the numbers nor did they miss their intended product launch dates. In point of fact, sales of Natesto® did indeed ramp higher and posted sequential gains in both new prescriptions and revenue. For the period reported, total prescriptions increased 27% sequentially from the first quarter to 3,001 in the second quarter. AYTU is also gaining revenue traction from the success and growth of the company’s Natesto® Direct patient support program, which helped to drive net revenue-per-prescription to increase by roughly 97% over the same period. Hence, taking the update notes provided and sprinkling in a bit of optimism, investors should have faith in the guidance that for the quarter ending December 31, 2018, AYTU will likely report significant and sequential product revenue growth over the prior quarter. Quite candidly, investors should expect another record quarter of revenues. (Please click here for access to the PODCAST with Aytu BioScience CEO, Josh Disbrow)
Also noteworthy, especially to those that listened to the most recent AYTU conference call, is that AYTU is on point in executing their planned expansion strategy to increase revenue per prescription through its Natesto® Direct patient support program. That program, which started only a few months ago, led the expansion of patient use and helped to push patient refill rates upwards of 52% for Natesto® on a sequential basis. And, not only are the programs that are designed to attract patients to use Natesto, but the Natesto® Direct program also drove physician referral increases by 33% over the same period. Thus, just as management had stated, the strategic initiatives are taking root, and while some growing pains were evidently plaguing investors during the roll-out of Natesto early on, it now appears that this potential best-in-class TRT drug may push its way into the mainstream in the coming quarters.
Lastly, but certainly not least, is that commercial payors have continued to cover Natesto® prescriptions submitted through the AYTU patient support program with one large, notable pharmacy benefit manager fully covering approximately 65% Natesto® prescriptions – with these patients eligible to receive $0 co-payments. Hence, as more reimbursement comes online, the growth of Natesto can be exponential. But, as excited as investors should be about this developing opportunity, that program will take a bit of time to develop.
Heading Into The New Quarter
Although investors did not get precise revenue numbers, the enthusiasm and market penetration guidance within the update lead many to believe that AYTU will indeed be presenting record revenue numbers in the coming weeks. Beyond the Q report, management also stated that they plan on providing additional updates as commercialization efforts expand. One thing for certain, as a long time shareholder in AYTU, transparency is not something that this management team lacks. To the contrary, their consistent updates provide honest visibility that shareholders can use to adjust their investment positions.
On a scale of one to ten, investors should be pushing the range even higher from this update. Not only does AYTU now have three confirmed FDA-approved drugs on the market, each with best-in-class potential that serve multi-billion dollar markets, AYTU also reached several other milestones in its prior quarter. First, the quarter included the closing of more than $20 million in financing. Second, AYTU published positive interim results from the Natesto® Spermatogenesis Study. And, third, the company made a key acquisition of its third FDA-approved product, Tuzistra® XR. (Watch Video of pipeline here)
All in all, investors can't argue against the fact that management is working hard to increase shareholder value. As I have said many times over the years....fundamentals will always win in the long run, and news trumps all. Today, AYTU provided extremely good news.
Disclosure: Author is LONG Aytu BioScience stock and does not intend to sell any shares during the next 72 hours.
Disclosure: I am/we are long AYTU.