Testosterone drug maker Acrux will refocus on eight new drugs after US pharma Eli Lilly pulled out of a licence deal for its existing product, sending shares into freefall.

Acrux (ASX:ACR) saw its shares drop 30 per cent after announcing Eli Lilly would no longer distribute its only product — testosterone armpit applicator Axiron.

Axiron is used to treat adult males who have low or no testosterone.

Announced back in 2010, the deal was said to be the biggest ever Australian biotech licensing arrangement, worth up to $US335 million ($419m) plus royalties.

The company said on Wednesday that its deal to license Axiron to Eli Lilly had been scrapped after regulatory changes in the US for testosterone products.

Acrux shares were trading at 18.5c in lunchtime trade — down more than 30 per cent.

The regulatory changes stemmed from concerns over whether testosterone products could lead to an increased risk of heart attack or stroke.

In 2014, the US FDA introduced a requirement for long-term safety trials over concerns that testosterone drugs could increase risk of heart attack or stroke.

Acrux and Eli Lily missed a deadline yesterday to submit a plan for the trial — which would have taken five years and cost potentially hundreds of millions of dollars, Acrux chief Michael Kotsanis told Stockhead.

“The cost would have been bigger than our market cap,” Mr Kotsanis said.

“It’s certainly a big commitment and when you’ve got generic competition with an uncertain revenue line going forward for us it’s impossible — it would have bankrupted the company.”

Acrux had previously lost patent court cases in the US, opening up the market to generic competitors — two of whom launched in July and August.

Acrux would continue to pursue an appeal (scheduled for October 5) in the hope of claiming damages from the generic companies, Mr Kotsanis said.

Meanwhile, safety concerns dented demand for testosterone products in the US.

“The market share of Axiron had dropped dramatically, so [Eli Lilly] chose not go ahead,” Mr Kotsanis said.

European regulators had no such concerns about testosterone drugs, noted Mr Kotsanis, who joined Acrux at the end of 2014.

“We would have liked Axiron to be around for another ten years and it’s not. [But] we identified two years ago the company had a limited pipeline, so we actively embarked on building a pipeline to offset the reliance on one product.”

“We now have eight product in our pipeline — and that will grow this year.

The new products were all topical drugs applied to the skin. Ironically, seven of the eight were generic products, though Mr Kotsanis would not reveal details.

“We don’t disclose the products, but the market value and sales of those products currently generate over $1 billion in sales.

Acrux hoped to have trials running in mid-2018 and US FDA approval a year later.

Acrux would again look for partners to bring the new drugs to market.

Mr Kotsanis said Acrux had plenty of cash — $34 million at the end of June and several million more in receivables — to see it through.