Acerus Pharma has huge upside, Mackie Research says

Analyst André Uddin of Mackie Research Capital says the market dynamics in the United States for testosterone replacement therapy are favourable to Acerus Pharmaceuticals’ (TSX:ASP) product, Natesto.

In a client update on Monday, Uddin has reiterated his “Speculative Buy” rating and 12-month target price of $0.65 for ASP, implying a return of 225 per cent at the time of publication.

This morning, Acerus reported its financial results for the three-month and six-month periods ended June 30, 2018, posting a revenue increase of 63 per cent compared to the same three-month period last year.

“We executed against a number of core strategic objectives during the second quarter as we obtained our first international marketing approval for Natesto and concluded a marketing partnership for this core product spanning 18 Central and Latin American countries and Mexico, further expanding its potential global reach,” said CEO Ed Gudaitis said. “During the quarter we also began to see growing revenue contribution from the recently launched, over-the-counter product UriVarx, and added Shact to our growing pipeline of in-licensed products, for which we will be seeking Canadian marketing approval in the near-term.”

Uddin says the company’s total quarterly revenue of $2.1 million bested his expectation of $1.9 million, as did Acerus’ Adj. EBITDA of negative $1.3 million, compared to Uddin’s negative $5.6 million. The company reported a net income loss of $6.4 million, compared to $1.9 million last year and Uddin’s $6.3 million estimate.

“Acerus’ partner Aytu Bioscience is marketing Natesto in the US,” says Uddin. “Aytu has launched a support program to increase the fill and refill rates of Natesto, as well as to facilitate reimbursement by payors. Aytu is also looking to improve gross-to-net sales of Natesto.”

“Aytu is conducting a post-market study to assess Natesto’s safety on sperm production and endogenous testosterone – positive outcomes (interim readout expected in Oct./Nov. 2018) should stimulate the adoption of Natesto. The testosterone replacement therapy (TRT) market dynamics are favorable to Natesto – the FDA advisory committee recently rejected Clarus’ Jatenzo and Lipocine’s Tlando (both are oral TRT competitors to Natesto),” he says.

The analyst says that a number of potential revenue drivers exist for Acerus, including the increased supply price from Aytu for Natesto (at 25 per cent for Q3, up from 16 per cent), additional international launches of Natesto, other product launches and acquisitions in Canada and the potential announcement of developments with its medical marijuana nasal delivery formulation.