Acerus Pharmaceuticals has licensed to Aytu BioScience exclusive U.S. commercial rights for the approved testosterone nasal gel NATESTO®, in a deal that could generate up to $45.5 million-plus for Acerus, the companies said today.

The deal takes effect once an entity of Endo International returns the product to Acerus in June.

Back in January, Acerus disclosed that Endo entity Endo Ventures Bermuda planned to end their agreement to commercialize NATESTO in the U.S. and Mexico, effective June 30. At the time, Endo said the termination reflected a decision to shift U.S. resources from retail urology drugs to its pain franchise, while Acerus said it would find a new partner for NATESTO.

NATESTO was approved by the FDA in May 2014 and remains the only marketed testosterone nasal gel indicated for replacement therapy in adult males diagnosed with hypogonadism.

The deal with Acerus marks Aytu’s exclusive licensing of its third commercial-stage urology product in 11 months, since Aytu was formed from the merger of Luoxis Diagnostics, Vyrix Pharmaceuticals, and Rosewind Corp.

Aytu acquired ProstaScint®, a commercial-stage imaging agent used to detect the extent and spread of prostate cancer, from Jazz Pharmaceuticals in May 2015. In October, Aytu snapped up rights to Primsol® (trimethoprim hydrochloride) oral solution from FSC Laboratories for $1.75 million, plus inventory valued at about $200,000.

“The agreement with Acerus to commercialize NATESTO in the U.S. represents Aytu’s most significant transaction to date,” Aytu CEO Josh Disbrow said in a statement. “NATESTO complements our portfolio of unique urology assets, and we expect the product to be a key value driver for Aytu going forward.

Aytu reasons that NATESTO will enable it to effectively tap into the $2 billion U.S. testosterone replacement market, which it said numbered approximately 13 million men.

NATESTO offers simple administration via a nasal gel applicator within seconds and without the risk of testosterone transference associated with other topical products such as AndroGel® and Axiron®, whose labels carry “black box” warnings.

“We believe that Natesto has significant potential to satisfy the needs of many men that are not satisfied with current low T treatment options,” Disbrow said.

Added Acerus President and CEO Tom Rossi: “Management’s proven track record of launching and scaling successful commercial operations within the specialty pharmaceutical industry, and the fact that Aytu is building a significant U.S. presence in men’s health, were instrumental in reaching this decision.”

Aytu agreed to pay Acerus $8 million upfront—2 million at signing, and the rest in September 2016 and January 2017. Acerus is also eligible to receive from Aytu up to $37.5 million in payments tied to achieving sales milestones.

Acerus will oversee the manufacturing of NATESTO® and receive a tiered supply price for the product.

In addition, Aytu agreed to purchase 12,245,411 common shares of Acerus on a private-placement basis at a per-share price of C$0.207 (16 cents), for total gross proceeds of C$2,534,800 (approximately $2 million).

The share price represents a 20% premium to the volume weighted average price of Acerus common shares in the 5 days preceding the deal. The private placement is expected to close on or about April 28, 2016, subject to conditions that include regulatory approvals.

Acerus said it intends to use $3 million of the proceeds from the immediate upfront payment and stock purchase to retire a portion of its existing senior secured debt with MidCap Funding V Trust.

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