High re­turns

Finweek English Edition - - INSIGHT - WHEN THE JSE-LISTED

phar­ma­ceu­ti­cal gi­ant Aspen an­nounced that i t had en­tered i nto a se­ries of agree­ments with Te­soRx Pharma (Te­soRx), a spe­cialty phar­ma­ceu­ti­cal company, mar­ket-watch­ers didn’t treat it as ma­jor news.

Yet the move, which will see Aspen Phar­ma­care ac­quire li­cens­ing rights to Te­soRx’s un­mod­i­fied oral testos­terone re­place­ment ther­apy, i s a clear in­di­ca­tion that the man­u­fac­turer sees am­ple op­por­tu­nity in testos­terone re­place­ment treat­ments.

Ac­cord­ing to re­ports, global sales of cur­rently avail­able testos­terone re­place­ment prod­ucts top $2.5bn, so i t i s un­doubt­edly shap­ing up to be big business, and Aspen i s well po­si­tioned to be the trend’s emerg­ing mar­kets cham­pion.

Although it re­mains con­tro­ver­sial, testos­terone re­place­ment ther­a­pies are be­com­ing in­creas­ingly popular with men as an anti-age­ing tonic and a way to boost mus­cle mass and sex­ual per­for­mance.

Dubbed the Low T move­ment, i t has be­come some­thing of a mar­ket­ing phe­nom­e­non in the US, with roughly 2.3m US pa­tients re­ceiv­ing a pre­scrip­tion for testos­terone last year – up 77% from 2010, ac­cord­ing to fig­ures from the US Food and Drug Ad­min­is­tra­tion (FDA). IMS Health has in­di­cated that sales of testos­terone drugs grew by 90% over five years, reach­ing $ 1 . 9bn i n 2011. By 2017, the en­tire testos­terone mar­ket is fore­casted to hit $5bn.

While the Aspen deal is small – the group will ac­quire a mi­nor stake in Te­soRx and will invest a to­tal of $15m in the spe­cialty company – it is surely a sign of things to come. (It is worth not­ing that the oral ther­apy in the spot­light, TSX- 002, has only been tested on 150 in­di­vid­u­als and tri­als are set to be­gin in 2015.)

Aspen will pay roy­al­ties to Te­soRx for sales on a coun­try-by-coun­try ba­sis and will be “re­spon­si­ble for de­vel­op­ing and com­mer­cial­is­ing TSX-002 in the emerg­ing mar­kets of Latin Amer­ica, Africa, Asia Pa­cific, Rus­sia and other coun­tries in the Com­mon­wealth of In­de­pen­dent States”.

“The trans­ac­tion adds con­sid­er­able sec­ondary syn­er­gies with the group’s man­u­fac­tur­ing ca­pa­bil­i­ties as a key global sup­plier of Testos­terone APIs,” stated Aspen in a press re­lease, adding that the deal bol­sters its pres­ence “in a key ther­a­peu­tic area for the group”.

As Bruce Main, of I vy As­set Man­age­ment points out, the Aspen board i s “renowned for shrewd moves in in­no­vat­ing and im­prov­ing its prod­uct pipe­lines”.

“The deal al­lows the group ac­cess to a grow­ing mar­ket which is also ex­pand­ing i n emerg­ing mar­kets where Aspen has great dis­tri­bu­tion,” ex­plains Main. “I think Aspen’s abil­ity to bring th­ese new prod­ucts through to its dis­tri­bu­tion chan­nels is very en­cour­ag­ing.”

“I f ap­proved, t hi s could be huge,” com­mented Ves­tact’s Sasha Naryshkine in a note to clients. “An eas­ily ad­min­is­tered ther­apy would go a long way to more peo­ple us­ing the ther­a­pies.”

He adds: “This does, how­ever, [to me at least] rep­re­sent a dif­fer­ent an­gle of business, get­ting in­volved in smaller busi­nesses ear­lier on, which only size and scale can of­ten af­ford you that lux­ury. We con­tinue to ac­cu­mu­late what is a fab­u­lous business op­er­at­ing in an ex­cit­ing sec­tor.”

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