Aytu BioScience (NasdaqCM: AYTU), on Tuesday, reported its fourth consecutive record-breaking quarter and posted an increase in revenue of 291% for its Q3 FY 2019 report. On a sequential basis, revenues increased by 33% to reach an all-time high mark of $2.38 million for the quarter.

Investors reacted well to the news, sending the stock higher by more than 14% intraday on Tuesday with shares topping at $2.61. Interest was driven not only by the better-than-expected performance from its FDA-approved drug pipeline but also by the news from its balance sheet that showed that AYTU is reducing its cash-burn rate and has a healthy cash balance of $15 million as of March 31, 2019. Notably, operating expenses were reduced by 17%, or $6.7 million, compared to the same period last year.

Cash used in operations was reported at $3.3 million, also lower on a sequential basis by 23%. Operating expenses were also reduced by 17% compared to the same period last year.

Natesto®, Tuzistra® XR, ZolpiMist™, and MiOXSYS® Contribute To Gains

While Natesto® remains the flagship product for AYTU, the company reported that meaningful revenue contributions also came from Tuzistra® XR, ZolpiMist™, and MiOXSYS®. This quarter represents the first revenue contribution from Tuzistra® XR, which launched in January. Additionally, AYTU is expected to benefit from the recently announced global initiative to expand ZolpiMist™ into a worldwide market through a licensing agreement with SUDA Pharmaceuticals. That deal is expected to generate numerous sublicense agreements through SUDA, who has already announced that they are in advanced negotiations to expand the market presence of ZolpiMist™ into Europe, Asia, Australia, and Latin America.

Commenting on the quarter, CEO Josh Disbrow said, “Fiscal Q3 2019 was another record quarter for Aytu and our fourth sequential quarter of significant revenue growth. Revenue grew nearly 300%, over Q3 2018, to the highest level in company history. Importantly, we saw increased contribution across our newly diversified portfolio following the recent additions of ZolpiMist™ and Tuzistra® XR while continuing to drive Natesto® prescriptions and revenue. The balanced product performance has de-risked Aytu from a single product company, morphing to four products and growing, with a combined total addressable market of more than $7 billion. While Natesto® continues to be the biggest percentage of revenue, with another increase in revenue this quarter, we are excited by Tuzistra® XR getting off to a good start, and the growing contribution from ZolpiMist™ and MiOXSYS®.”

Additional notes from the quarter show that AYTU added several value drivers to the mix, including its announced partnership with SUDA Pharmaceuticals that grants sublicensing and global distribution rights to ZolpiMist™, and the filing for regulatory approval in Australia. Additionally, continued positive results from the company’s ongoing Spermatogenesis Study continues to gain attention by showing Natesto® to potentially and exclusively serve the roughly two-million men who need the benefits of testosterone but also want to maintain their fertility. An analyst note from Ladenburg Thalmann in May suggested that that market segment alone may represent a more than $350 million opportunity.

Video Link: http://www.youtube.com/embed/SUQ1zh781p0

Natesto® Spermatogenesis Study Continues To Post Encouraging Data

For the past two quarters, AYTU has continued to generate good news from its Natesto® Spermatogenesis Study. The study, which is being conducted at the University of Miami’s Department of Urology, is investigating the impact of Natesto®, the only FDA approved, nasally-administered testosterone treatment, on sperm production. To date, the phase 4 prospective 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. Targeting a specific market opportunity, the Spermatogenesis Study is evaluating mostly younger men that have one or two hypogonadal complaints, with the typical issues they face being lack of energy, fatigue, and some level of erectile dysfunction.

Importantly, if already published results get confirmed, it may position Natesto® as the only FDA-approved testosterone replacement therapy drug on the market to provide the benefits of testosterone and at the same time allow men to remain fertile. Investors must keep in mind, though, that while Natesto® may earn an exclusive position to treat that specific market, its best-in-class efficacy profile combined with its benefits from being a nasally-administered formulation further positions the drug for all patients seeking TRT treatment.

Moreover, Natesto® is 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. It’s closest competitors can’t say the same, with market leaders like Androgel®, Testim®, and Axiron®, each mandated by the FDA to include the severe Black-Box warning on its packaging that highlight the severe side effects associated with each drug.

In a commentary from the lead investigator of the Spermatogenesis Study, Ranjith Ramasamy, MD, said that he believes that if the final data confirm what is already published from the trial, “Natesto® can cause a paradigm shift in how men who need testosterone get treated.” The study has led to analysts at Northland Capital and Ladenburg Thalmann to place 12-month price targets for AYTU stock at between $4.00 and $10.00 per share. However, the recent note by Ladenburg indicates that if the previous Natesto® results are confirmed, the valuation models may be significantly enhanced by the news.

AYTU Stock Reacts Positively

Investors embraced the report, pushing the surge in AYTU stock by more than 14% in early trading. Volume was more than 5X its average pace with more than five million shares trading hands. Year to date, AYTU stock has increased by more than 160%, and average daily volume has been growing. Now, with four products contributing to the revenue stream, AYTU is more de-risked than ever on the product front, but at the same time is generating potential best-in-class characteristics from each of its drugs. Tuzistra® XR, for instance, is positioned as the only FDA-approved 12-hour codeine based antitussive on the market. And, ZolpiMist™ is the only oral-spray dose of zolpidem, the active ingredient in the market-leading sleep-aid drug, Ambien.

Combining the record-breaking quarter with the string of positive events for AYTU, including analyst upgrades and the potential revenue generating impact from its recent SUDA deal, AYTU may be in the best shape in its operating history. What is undoubtedly a positive note from the report is that the cash balance remains at healthy levels, and may be enough to deliver the company to break-even or earnings status without the need to dilute the outstanding share count.

What investors should take from this report, without hesitation, is that by AYTU delivering its fourth consecutive quarter of record-breaking growth, it’s an accomplishment that is helping to separate the company from most emerging biotech company peers. Moreover, it’s an achievement that demonstrates that the long-term strategy to build shareholder value through accretive acquisition, licensing, and strategic marketing is working.

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