Melbourne-based testosterone manufacturer Acrux Limited (ASX: ACR) shocked the market this morning by revealing that its licensing agreement to distribute Axiron with U.S. big pharma partner Eli Lilly has been terminated effective immediately.
The shares shed 20% to sell for just 20 cents in early trade and are now down 94% over the past five years. The company's problems have only snowballed over the period and started with the U.S. healthcare regulator the FDA demanding stricter labeling on testosterone products to warn of the potential dangers of testosterone use.
Today, Acrux's management team disclosed that since 2014 it had been advised by the FDA that it would be required to submit "a well-designed Postmarketing Requirement clinical trial to more clearly address the question of whether an increased risk of heart attack or stroke exists among users of testosterone products".
This morning its management team disclosed the deadline for submission for the trial was September 5 2017 and having failed to meet it the company is now vulnerable to regulatory action. As such Acrux will request the FDA "to withdraw its NDA (new drug application) from the US market".
Acrux has also faced problems recently after a U.S. court ruled its Axiron patent was invalid which opened it up to generic competition that has already been launched into the U.S. market.
One of the key selling points of Axiron was that it could be applied as a topical solution on the underarm, rather than less comfortable ways such as injections for example.
It seems investors might want to avoid Acrux, given the rising competition, a toughening regulatory environment, and a management team open to criticism.
If you're looking to buy healthcare shares in the small-cap at end of the market, I'd suggest taking a look at Nanosonics Ltd (ASX: NAN) or CogState Ltd (ASX: CGS) as superior alternatives.
