Here's why Acrux Limited has soared 63% over the last month

This business still looks an attractive proposition for those prepared to take on extra risk.

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Testosterone-therapy manufacturer Acrux Limited (ASX: ACR) has soared more than 63% over the last month to be trading at $1.60 today, as investors cheer positive quarterly sales numbers for its Axiron product.

The product's U.S Licensee and distributor, Eil Lilly, reported sales of US$47.1 million for the quarter ending June 2014, up more than 19% on the prior quarter. Testosterone therapy is an underdeveloped prescriptive medicine market with growth potential worldwide.

If the sales jump is repeated for the quarter ending September 2014, Axiron will be delivering record revenues and Acrux's share price will likely run hard from current levels. Strong sales would also increase the prospect of a US$50 million milestone payment being received in the current financial year, another event with potential to set a rocket under the share price.

Of course the risk remains that the U.S. Food and Drug Administration (FDA) announces that it has changed its mind as to the safety of testosterone therapies, although in my opinion this is highly unlikely. More likely is that the FDA may require Axiron to have additional warnings of potential health side effects attached to the labelling, much like with most other prescription medicines. Axiron already has heavy and prominent warnings attached to it about potential health side effects and has done since it was launched into the U.S. market.

The product is popular because it is an underarm therapy spray that increases testosterone levels to treat low sex drives or energy levels amongst mainly middle aged or older men. Testosterone therapy is also popular amongst some young men who enjoy bodybuilding at the gym. This is not an intended use for it, but any internet search would suggest there is a prominent underground use of testosterone therapy in this capacity.

Acrux has also launched Axiron in Canada, Brazil, Australia and Germany with other large markets in its sights. Ex-U.S sales were US$1.21 million in Q1 2014, up 75% on the prior quarter, and with potential to expand rapidly. However, the U.S. market remains key and it is one in which Axiron currently has about 14% of total market share.

Acrux also has several other products in development stage to interest long-term investors, including an antifungal topical solution to treat nail infections, as well as a proposed treatment for non-melanoma skin cancers.

Selling for $1.60 Acrux still looks cheap on conventional measures, trading on less than eight times FY 14's estimated earnings, although it may be cheaper depending on what final earnings per share come in at. It also has a trailing dividend yield of 5% based on a payout of 8 cents per share in the last financial year. If you include special payouts (12 cents in the last financial year) the trailing yield goes up to 12.5%.

Perhaps, of most interest to long-term investors though is the fact that as a government approved and statutorily incorporated Pooled Development Fund, Acrux is able to offer shareholders dividends and capital gains exempt from tax.

Motley Fool contributor owns shares in Acrux. You can provide feedback on Twitter @tommyr345

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