Many people follow the age-old adage to forget half of what you read and most of what you hear. And, no matter what side of that spectrum that you reside on, there can be little dispute that the media will report on stories that best fit their customer demographic. Well, likewise - when it comes to financial news, the reporting and analyst coverage gets similarly presented with bias, arrogance and deliberate misleading attempts to distort the truth behind the real momentum or lack of from a particular stock. And, in some cases, promising companies get overlooked despite the fact that many of their financial backers are well aware of the company promise.

Take Aytu BioScience (NasdaqCM: AYTU), for instance. Here sits a company that is most likely the best positioned to take advantage of the continued growth in several lucrative markets- testosterone replacement therapy, male infertility, and female sexual dysfunction. Each market, in their own right, offers substantial revenue opportunity to Aytu BioScience, with the TRT market expected to generate beyond $2 billion in the next year alone. Then, add in the combined potentials from the estimated $4.7 billion male infertility market and the projected $9 billion from the female sexual wellness market, and AYTU, at current price levels may easily be one of the most undervalued biotech stocks in the sector. Beyond the multi-billion dollar market potential, though, when the value of having three products already on the market gets added into the equation, the AYTU market cap at current levels is almost comical.

Breaking Open The Value Proposition

The primary revenue driver in the near term is the company's TRT product, Natesto®, which has posted impressive cumulative growth during the year. Evidence of the product’s ability to penetrate the lucrative market is supported by AYTU's announcement two weeks sgo that this TRT product has again recorded record prescriptions and sales, adding to its recent nine-month stretch of all-time high prescription and revenue run rates. But, despite the record sales and product driven momentum, the AYTU share price has declined by over 30% since the final week of October, leaving many investors scratching their heads as to why the lack of respect.

On the surface, investors may believe that there is a lack of confidence in the portfolio potential. However, for savvy investors that look beyond the headlines and keep apprised of SEC filings, the real story for the recent weakness emerges, and it provide be a brief opportunity for investors to grab shares at current price levels. To those investors that understand the intricacies of the public markets, especially in regard to financing, they acknowledge that the recent decline in share price may have far more to do with those short-sighted, profit-minded institutional investors than it does about the promise of the company.

Reviewing AYTU's most recent SEC filings, notably the S-1, the current price weakness may be the result of the company's ascent into the NASDAQ Capital Markets. Sure, such a contradictory premise presents quite the paradox, primarily when the move to the NASDAQ market was a significant catalyst for AYTU. However, by reading between the lines, it becomes relatively apparent that share price weakness may have been inevitable, primarily caused by those same institutional promoters that made the most important move in the company's history possible. But, by understanding the short-term effect that is likely playing itself out, investors may be wise to look closely at this investment opportunity. After all, instead of remaining a bystander to the actions of those that bought low and are selling high, investors can instead take advantage of the market at hand and potentially profit handsomely from the situation. Thus, for investors who feel as though they are caught in a downward trend on the AYTU trade, they need to think again.

In fact, now that these short-term institutional partners have apparently sold off a good portion of their cheaply acquired shares that are now registered and freely trading, AYTU might again be positioned to resume the share price momentum experienced while riding the appreciable wave from securing an up-listing to a major trading exchange. And, with that single catalyst alone, the opportunities are strengthened significantly for AYTU, taking advantage of institutional coverage, mainstream financing options, and a departure from the wild-west trading patterns of the OTCBB markets. Beyond just the upgrade, though, AYTU can again rise on merit-based momentum and consistent product penetration. Here's how:

Natesto® Has No "Black Box" Warning

The testosterone replacement market is huge and very few investors, if any, are willing to make a case that the size of the market will shrink anytime soon. To the contrary, the current and estimated $2 billion TRT market is starting to look like it has the legs to reach significantly higher levels. And, with Natesto® generating robust growth, primarily driven by the product’s best-in-class results, the future for AYTU stands bright, highlighted by the emerging visibility of multiple pipeline products that are each capitalizing upon the strategic market and sales growth opportunity.

Focusing on Natesto®, the benefits can deliver near-term value. And, with the product being already FDA approved and available for sale, it provides AYTU with the most aggressive path forward to secure meaningful revenue, with the anticipation that the product will lead the company to near-term cash breakeven or potential EPS levels in the coming months. The FDA, if it followed its mandate, could make the path even more lucrative for the company by stepping in and reviewing the competitive landscape in the TRT market. If they did, the growth for Natesto® could be enormous from the effects of the FDA restricting sales of several TRT products that bring with them serious and adverse side effects. But, until the FDA acts responsibly, Natesto® will need to capture the market organically.

It makes one wonder, then, that since Natesto® is the ONLY topical testosterone replacement therapy on the market that DOES NOT have the most serious FDA mandated Black Box warning on its label, then why isn't the FDA putting a moratorium on sales of Natesto®'s competitive products? After all, Natesto® is a safe and alternative option, proven both safe and beneficial to patients. Natesto® is clinically shown to provide best-in-class results when compared to most every competitive TRT product available in the market. Comparisons to FDA-approved products like AndroGel® and Axiron®, demonstrate in no uncertain terms that Natesto® is just as good, or better, in providing sustained patient benefit without the need to risk serious health consequences. The potential detriment from other products is no secret. If investors looked at the lawsuits piling up against AbbVie and Eli Lilly, patients would understand that they are unnecessarily playing with fire when an entirely safe and alternative product is already available. Ultimately, though, it's up to the prescribing physicians to keep abreast of the newest developments in the field, and stop turning a blind eye to the potentially harmful effects of the drugs they are prescribing to their patients.

Even if physicians paid closer attention to the alternatives, investors should remain patient and understand that the growth in Natesto® prescription rates is rising sharply despite the far lower marketing budgets and much smaller sales force. Regardless of the more moderate marketing budgets, the impressive growth in both new prescription levels and revenue run rates is not slowing down. According to the most recent sales data reported in late October, Natesto® sales have again reached all-time highs, increasing double-digit percentages between September and October alone. For the year, the spike in Natesto® orders is more impressive with compound growth rates rising by more than 70%. And, sales are spiking because of the known benefit and safety from Natesto®, which is proven to be a superior choice in treating and improving erectile dysfunction on all five of the measured domains. Beyond the efficacy demonstrated in the erectile dysfunction front, Natesto® also shows dramatic and sustainable improvement in the desire for sexual activity beginning in as little as thirty days from initial use.

The Multi-Billion Dollar Opportunity

Classified as the only nasally administered testosterone replacement therapy, the safety and efficacy profile for Natesto® is remarkable. In clinical trials, approximately 91% of patients were reported to have normal testosterone levels within ninety days of starting treatment. Substantiating those results, clinical trial patients that were part of the twice-daily dosing also reported reaching normal levels within the ninety-day window as well. But, while being nasally administered may be convenient, it is also proven to be a critically important aspect in limiting the exposure of accidental and unintentional dosing of testosterone to women and children, a concern raised by a significant portion of the user population of competing products.

Natesto® is serving a $2 billion market. And, rather than have ambitions of grandeur to conquer the entire market in one fell swoop, AYTU management appears more than willing to focus slowly and methodically on securing perhaps 10% of the potential market in the next several years. If they are successful in doing so, the rewards will be staggering. Assuming the market opportunity sits at $2 billion, AYTU can bring in over $200 million in revenue. Apply that revenue to the small O/S count of fewer than five million shares, and investors can expect an explosion in the market cap multiple. If such a case transpires, AYTU may benefit from similar peer multiples, potentially powering the share price to return to levels exceeding $17.00 per share, pre-split levels seen earlier in the year.

For those that are following the story, the market battle lines are drawn, and AYTU is executing well on their strategy. The company showed investors an increase in Factory Sales Units of over 300% between the Q2 and Q4 in the company’s fiscal year 2017, providing substance behind the claim that Natesto® is on its way to securing a respecting market position. To put that sales number in unit terms, real product demand and production show an increase in sales and orders from 1,764 units sold in Q3 of 2017 to 4,248 units produced for sale by the end of the company's 2017 fiscal year, an over 140% gain over the prior quarter alone. Thus, AYTU management is delivering on their goals, and as the actual numbers continue to replace the estimates, the news of record sales and prescription volume provides the real impetus for why investors should consider getting in front of the AYTU trade.

Capitalizing On The Aytu Catalysts

The current market cap of roughly $14 million borders on being comical for a company that has three products commercially available and essentially de-risked from regulatory approval uncertainties. And, with only 4.2 million shares currently outstanding, Aytu has capital leverage and availability to add to their strategic acquisition geared portfolio that has been successful in bringing into the company pipeline three other drug and treatment candidates also positioned to deliver explosive revenue growth in the next few quarters and years.

The elements of success are in place for AYTU, and the product portfolio is fortified with growth-oriented potential that delivers best-in-class market value to patients looking for an alternative treatment product that is safe and effective for daily use. Yes, the markets are volatile, and AYTU has been in the cross-hairs of being in-between a market uplisting and the sale of cheaply acquired shares by early investors. The AYTU insiders, though, are not selling shares, which is a critical indicator that their belief in the growth of the company is only in the first inning of a much longer market game. Investors should act with interest and take a look at the investment proposition presented by AYTU, recognizing strong sales growth, a portfolio of disruptive products, and a balance sheet that has been fortified with sustainable cash balances expected to last into breakeven or EPS status as a reason for investment consideration.

An investment into AYTU at these levels is more de-risked than ever, and once the S-1 sellers move on, expectations should be set for a sharp and quick move to the upside, to levels that can quickly double, triple, or even quadruple from current share price levels. 

This article was originally featured on CNA Finance. 

The author has no positions in any stock mentioned herein.