Acerus Pharmaceuticals (TSX:ASP | OTCQB:ASPCF): Building a sustainable, value-driven company
A TSX-listed commercial-stage pharmaceutical company, Acerus Pharmaceuticals has a vision to become a leading specialty pharmaceutical company focused on urology and Men’s Health with its nasal testosterone treatment, Natesto.
Founded in 2009 and listed on the TSX (ASP) and the OTCQB (ASPCF), Acerus Pharmaceuticals is a micro-cap with a market cap of $50m CAD as of August 25th 2020. Company President and CEO Ed Gudaitis has held numerous senior positions in multi-national pharmaceutical companies, working in both Canada and the United States, and has been responsible throughout his career for launching and building billion-dollar pharmaceutical product franchises and country operations. Mr Gudaitis discusses Natesto, the firm’s disruptive technology that can potentially secure significant share in a more than $1 billion USD global market, the unique opportunity available to potential investors in the company, and Acerus’ vision to become a leading specialty pharmaceutical company in urology and Men’s Health.
“Acerus is a commercial-stage specialty pharmaceutical company,” Mr Gudaitis explains. “We have an approved product on the market that we are commercializing, and our focus of effort is on specialists, not primary care physicians.”
Although the company is based in Ontario, Canada, its business is global. The company manufacturers and commercializes its core product, Natesto, in a number of global markets, including the US, Canada, South Korea, and Taiwan, with plans to move into Europe in the next eighteen months.
“In the US and Canada we commercialize the product directly through our own sales and marketing efforts, while in South Korea and Taiwan, and eventually in Europe, we commercialize through partnerships with local operating companies.”
Unlike some other companies in the specialty pharma space, Acerus is not built on licensing in other people’s assets. Acerus’ focus is on manufacturing and commercializing its core product in-house, making it a unique proposition as a company.
“We’ve been around for a while. Formed in 2009, the company has gone through a couple of iterations of strategy. It was previously called the Trimel Pharmaceuticals company, and it was structured to capitalize on a core technology, our nasal gel technology, which enables us to deliver products in a unique, patient-friendly manner.”
The problem that the company looks to solve is a very unique. Our primary market opportunity is the treatment of low testosterone, otherwise known as male hypogonadism. Around 14 million US males potentially have low testosterone, making a sizeable possible market.
“It’s about a $1bn USD prescription product market opportunity in the United States, with about 7 million prescriptions written per year. There are products that exist today, however there is no truly ideal product in the market place. There are a number of products with challenges in terms of how they’re delivered.”
The main options in the market for low testosterone currently are testosterone injections, deep and painful injections with a large needle, presenting challenges with self-injection. There are also topical gels, which act like a skin lotion that you rub in each day.
“With the topical gels, you have to worry about potentially transferring the product to your spouse or your children,” Mr Gudaitis explains. “After you apply the product to your body, you have to let it dry for twenty minutes, it can absorb differentially and not evenly all the time. As a result, there are several challenges with existing products in this market.”
It is estimated that up to 70% of patients on prescription treatments for low testosterone will switch therapy at least once to look for better options, as patients and their physicians are unsatisfied with the current treatments available.
“Prescription treatment of low testosterone is a very large market that has been well established. Physicians know how to diagnose, treat and prescribe low testosterone treatments. However, there is no single ideal product in the market. We think we can solve a number of problems within this large market, providing a patient-friendly, safer, effective alternative in a very large and growing market opportunity.”
Acerus’ unique technology creates a different product than any other in the market for testosterone treatment, an intra-nasal gel application of testosterone applied with a small dispenser three times a day on the inside of your nostril.
“It’s a little bit like a topical hand lotion that you would put on your hand. It’s a gel, not a spray, applied with our dispenser on the inside of your nasal cavity. The product is rapidly absorbed, highly effective, with low side effects.”
The uniqueness of this nasal testosterone technology offers investors an exciting opportunity to invest in a company with a highly differentiated, unique product offering. The technology is an Acerus propriety technology, which was licensed in by Acerus, protected by a strong patent strategy.
“The Intellectual Property in the US, Canada and Europe is very long-ranging. We have a current suite of patents that would take us into the mid-2020s. We have new patent filings and strategies that we’re actively working that would take patent protection into the early and potentially the late-2030s. We have a unique technology and a solid IP platform to work from.”
This means the company has a ten or twelve year run in front of it with a very large, unsatisfied market opportunity to be capitalized on. This opportunity is primarily in the United States, but there is also significant market opportunity in the Canadian and European markets.
“If investors are looking for an opportunity,” Mr Gudaitis says, “we’ve got all the pieces in place, we now need to execute and deliver on the opportunity that’s there. We’ve got a better product, in a large market that’s unsatisfied – let’s go and make it happen.”
The company’s management team is made up of Mr Gudaitis, who has been in the pharmaceutical business for over 25 years, and new additions who bring relevant expertise within the US pharmaceutical market – Chief Medical Officer Dr Chris Sorli and US Commercial Leader Kevin Hickey.
“I spent about eleven years with Gilead Sciences as part of my career journey, some of that here in Canada building the Canadian operation from scratch to about a $1.2bn CAD business, but also in the US, where I was Senior Director for HIV marketing for a number of years, launching several large HIV products in the US.”
Dr Sorli is a board certified US-based endocrinologist and is responsible for the company’s medical affairs and R&D activities. His background is in diabetes, metabolism and Men’s Health. He has previously organized and set-up a large men’s and women’s health practice in his home state of Montana.
“[Dr Sorli] has direct clinical experience treating the type of patients we would be treating with Natesto, but he’s also very much been on the forefront of metabolic disease and diabetes, which is an area that we’re interested in looking at with respect to Natesto, and he’ll be actively driving the strategic development of the clinical profile of Natesto.”
Based out of Philadelphia, Mr Hickey brings fifteen years of direct commercial experience in the US and will be responsible for leading the Natesto business in the US as the company moves forward.
“From a management perspective, we’ve got people with direct experience in the U.S. marketplace, and relevant experience to our business, to our therapeutic area and to what we’re trying to achieve onboard at Acerus.”
The company’s board has also seen some recent additions, complimenting a number of long-standing members, including Chairman Ian Ihnatowycz, who has served as a Director since September 2013.
“[Ian] is our leading shareholder; he owns about 84% of the company, and he’s been a long-time board member. He’s a long-time investor and has been a core visionary for the company over that period of time.”
Other long-time board members include entrepreneur Stephen Gregory, and Borys Chabursky who is the founder and Chairman of Shift Health, a healthcare consultancy in Toronto, plugging him in to the start-up, Venture Capital and healthcare consulting spaces.
“We’ve added two new board members recently – a fellow by the name of Scott Leckie, who’s our Audit Committee Chair, he’s a CFA and has significant investment experience. He used to run a private investment company, so he brings that capital markets/investment side to the table.”
“We also recently added Geoff Cotton, a US-based commercial and medical affairs pharmaceutical expert. He is an MD by training, has worked in medical affairs, and he’s also launched products in the US and has run various US businesses, at one point for Gilead, that range up to about $8-9bn USD in sales.”
Block and tackle
With this mix of long-standing team members and new faces, Mr Gudaitis is confident that the team has the relevant experience and skills to make the business a success with Natesto, which he identifies as the company’s short-term goal.
“I usually describe our strategy in three phases – phase one is the here and now phase, and really the goal is to get Natesto moving and get it commercialized successfully in the US. That’s the core platform for the company, that’s the foundation for the business, and we will build the company around that success, and that’s really what we’re focused on right now.”
The second phase is to leverage the commercial infrastructure the company has built in the US by adding more products to its portfolio through business development opportunities that will complement and leverage the investment already made.
“The third phase of the growth strategy for us would be to circle back to our pipeline and bring in some additional products, whether they are something that we can build into the nasal gel technology, or even something that complements our focus on urology and endocrinology from an R&D perspective.”
The end goal is to have a growing and maturing business with Natesto that becomes the engine of the company, with a couple of complimentary assets added around the product in order to leverage the commercial infrastructure and investment, and then something in the pipeline to give the company continuity into the future.
“So that we have a late-stage mature product, we have a growth product, and we have some new products,” Mr Gudaitis says. “That would be the ultimate goal in what we’re trying to achieve in terms of the short, medium and long-term to build a sustainable, value-driving company for investors.”
Over his 25 years in the business, Mr Gudaitis believes he has learned some important lessons, many of which came during his time working at Gilead Sciences, a company that was run on the premise of being lean, hands-on and focused on outcomes.
“For a small company like Acerus, I look through that lens every day. We have undergone some significant reorganization and streamlining of the operations. The biggest lessons for me have been – focus on what you can control, keep the business lean, and keep focused on the result and the outcome. That’s one of my key takeaways from my Gilead experience.”
Another key lesson learned has been to embrace good old fashioned blocking and tackling, a strategy that the management and board are well set-up to execute in the case of Natesto to make the business a success.
“If you go in and do the basic executional elements well – build good key opinion leader support, make people aware of the product, have reimbursement in place, have the support systems for physicians and practices to get product to people when they need it, and have patients activated to ask for the product – you will be successful in this category.”
With a full product life cycle in front of it, Acerus’ patent strategy presents a unique opportunity for success for the company and potential investors. Find out more about Acerus Pharmaceuticals Corporation by visiting www.aceruspharma.com.