Aytu BioScience Announces Record Fiscal Q2 2021 Net Revenue of $15.1 Million, an Increase of 377% Year-Over-Year

Rhea-AI Summary

Aytu BioScience announced a definitive merger with Neos Therapeutics, creating a combined specialty pharmaceutical entity with projected revenues of $100 million. For Q2 2021, Aytu reported net revenues of $15.1 million, a significant increase from $13.5 million in Q1 2021, with the Consumer Health division achieving an all-time revenue high of $7.9 million. The Rx division revenue rose 24% sequentially to $7.2 million. Despite a net loss of $9.5 million, Aytu maintains a strong cash position of $62.3 million, indicating financial stability as they approach the merger's closing in Q2 2021.

Positive

• Merger agreement with Neos Therapeutics expected to create a $100 million revenue company.
• Q2 2021 net revenue increased to $15.1 million, a significant rise from Q1 2021.
• Consumer Health division achieved record revenue of $7.9 million.
• Rx division revenue increased by 24% sequentially, totaling $7.2 million.
• Strong cash position of $62.3 million supports financial stability.

Negative

• Net loss of $9.5 million in Q2 2021.
• Adjusted EBITDA loss of $1.8 million.

Announced definitive merger agreement with Neos Therapeutics, creating a combined $100 million revenue specialty pharmaceutical company

Q2 Consumer Health division revenue reaches an all-time high of $7.9 million

Q2 Rx division revenue up 24% sequentially

Ended the quarter with $62.3 million in cash, cash equivalents and restricted cash

Live conference call and webcast today at 4:30 PM EST

ENGLEWOOD, CO / ACCESSWIRE / February 11, 2021 / Aytu BioScience, Inc. (NASDAQ:AYTU) (the "Company"), a specialty pharmaceutical company focused on commercializing novel products that address significant patient needs today reported financial results for its fiscal second quarter 2021, for the three-month period ending December 31, 2020.

Second Quarter Fiscal 2021 Financial Highlights

• Q2 Net Revenue was an all-time high of $15.1 million, compared to $13.5 million in Q1 2021.
• Q2 Consumer Health division Net Revenue was an all-time high of $7.9 million, compared to $7.8 million in Q1 2021.
• Q2 Rx division Net Revenue was $7.2 million, compared to $5.8 million in Q1 2021.
• Q2 2021 Net Loss of $9.5 million and adjusted EBITDA loss of $1.8 million.
• Cash, cash equivalents and restricted cash totaled $62.3 million on December 31, 2020.

Definitive Merger Agreement

• On December 10, 2020, Aytu BioScience and Neos Therapeutics announced a definitive merger agreement, creating a combined $100 million revenue specialty pharmaceutical company.

Commenting on the second quarter of fiscal 2021, Josh Disbrow, Chief Executive Officer of Aytu BioScience, stated "Net revenue increased substantially in Q2 2021, to $15.1 million, compared to $3.2 million for Q2 2020. It is important to point out that this was only the third full quarter of revenue contribution from the combined Aytu and Innovus businesses, along with the acquired Cerecor pediatric assets. Turning to the bottom line, adjusted EBITDA loss was reduced to just $1.8 million for Q2 2021. On the balance sheet, we are in a strong position with approximately $62 million in cash. We are well positioned from an operational and financial standpoint as we move closer to our expected closing of the Neos merger by the second calendar quarter."

Mr. Disbrow continued, "Taking a closer look at the top line, on the Rx side, net revenue was $7.2 million, a 24% increase compared to last quarter, Q1 2021. Rx revenue growth was driven by growth of Poly-Vi-Flor®, our pediatric multivitamin and fluoride supplement product line, with revenue contribution across the prescription portfolio inclusive of Natesto®, Karbinal® ER, and COVID-19 test kits. For the Consumer Health division, we generated $7.9 million in net revenue, an all-time high and an increase compared to last quarter. Contributing to those results was a strengthened e-commerce business driven by OmepraCare®, our over-the-counter proton pump inhibitor for acid reflux, Regoxidine®, our over-the-counter foam formulation of minoxidil for hair loss, and FlutiCare®, our over-the-counter fluticasone propionate nasal spray indicated to treat nasal and allergy-related symptoms. Additionally, we announced the completion of the first clinical study evaluating the Healight™ ultraviolet A light catheter technology. This is an important milestone, and we look forward to continuing discussions with the FDA on the advancement of the Healight technology and reporting the results of the clinical study upon the upcoming publication."

"During the quarter we also announced the definitive merger agreement with Neos Therapeutics, creating a combined $100 million revenue specialty pharmaceutical company. The merger accelerates the company's transformation, and, upon closing, we expect to begin realizing estimated annualized cost synergies of $15 million in FY 2022. With this transaction we will add Neos' established, multi-brand ADHD portfolio, enhancing our footprint in pediatrics and expanding Aytu's presence in adjacent specialty care segments. Furthermore, the transaction creates the opportunity to leverage and further enhance Neos RxConnect, a best-in-class patient support program, for our product portfolio of best-in-class prescription therapeutics and consumer health products. We reiterate our expectation for the merger to close by the second calendar quarter of 2021."

Mr. Disbrow concluded, "With record financial results and a transformational merger agreement executed and moving toward completion, we have created substantial scale and momentum to drive shareholder value."

Conference Call Information
The company will host a live conference call at 4:30 p.m. ET today. The conference call can be accessed by dialing either:

877-407-9124 (toll-free)
201-689-8584 (international)

The webcast will be accessible live and archived at the following link https://www.webcaster4.com/Webcast/Page/2142/39877 and on Aytu BioScience's website, within the Investors section under Events & Presentations, at aytubio.com, for 90 days.

A replay of the call will be available for fourteen days. Access the replay by calling 1-877-481-4010 (toll-free) or 919-882-2331 (international) and using the replay access code 39877.

Forward-Looking Statement
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. All statements other than statements of historical facts contained in this press release, are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as ''may,'' ''will,'' ''should,'' ''forecast,'' ''could,'' ''expect,'' ''suggest,'' ''believe,'' ''estimate,'' ''continue,'' ''anticipate,'' ''intend,'' ''plan,'' or similar words, or the negatives of such terms or other variations on such terms or comparable terminology. All statements other than statements of historical facts contained in this presentation, are forward-looking statements, including but not limited to any statements regarding the potential merger with Neos Therapeutics and any economic benefits of such potential merger, any cost savings or synergies that may result from any potential merger with Neos Therapeutics, the potential growth of the combined company in the event the potential merger with Neos Therapeutics is approved, the ability of Aytu and Neos Therapeutics to close the potential merger, the results of the Healight clinical studies, the outcomes of discussions relating to Healight with regulators including the Food & Drug Administration (FDA), the commercial potential of Healight, and other forward-looking aspects related to the Healight program. These statements are just predictions and are subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include, among others: our future financial results, the results of the Healight clinical program and outcomes of regulatory discussions, , failure to obtain the required votes of Neos' shareholders or Aytu's shareholders to approve the recently announced Neos merger transaction and related matters, the risk that a condition to closing of the proposed transaction may not be satisfied, that either party may terminate the merger agreement or that the closing of the proposed transaction might be delayed or not occur at all, potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction, the diversion of management time on transaction-related issues, the ultimate timing, outcome and results of integrating the operations of Aytu and Neos, the effects of the business combination of Aytu and Neos, including the combined company's future financial condition, results of operations, strategy and plans, the ability of the combined company to realize anticipated synergies in the timeframe expected or at all, changes in capital markets and the ability of the combined company to finance operations in the manner expected, regulatory approval of the transaction, risks relating to gaining market acceptance of our products, obtaining reimbursement by third-party payors, the potential future commercialization of the combined company's product candidates, the anticipated start dates, durations and completion dates, as well as the potential future results, of the combined company's ongoing and future clinical trials, the anticipated designs of the combined company's future clinical trials, anticipated future regulatory submissions and events, the combined company's anticipated future cash position and future events under current and potential future collaboration, the regulatory and commercial risks associated with introducing the Company's distributed COVID-19 rapid tests, the accuracy of the COVID-19 rapid tests as compared to other COVID-19 tests, market acceptance of the tests, the ability to obtain FDA approval or authorization for the tests, our ability to obtain sufficient tests to meet consumer demand, if any, the manufacturers' ability to scale up manufacturing to meet customer demand, if any, reputation risks if the tests are not as effective as anticipated, and that the current regulatory environment continues to permit the sale of the tests.

Contact for Media and Investors:
James Carbonara
Hayden IR
(646) 755-7412
james@haydenir.com

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2020				2019				2020				2019
Revenues
Product revenue, net		$	15,147,034			$	3,175,236			$	28,667,280			$	4,615,062
Operating expenses
Cost of sales			5,998,389				606,046				9,817,545				981,766
Research and development			286,572				66,675				469,437				144,695
Selling, general and administrative			12,852,614				6,516,160				24,342,983				11,662,603
Amortization of intangible assets			1,584,580				953,450				3,169,161				1,528,567
Total operating expenses			20,722,155				8,142,331				37,799,126				14,317,631
Loss from operations			(5,575,121	)			(4,967,095	)			(9,131,846	)			(9,702,569	)
Other (expense) income
Other (expense), net			(378,958	)			(446,958	)			(1,130,499	)			(642,344	)
Loss from change in fair value of contingent consideration			(3,313,656	)			-				(3,311,320	)			-
Gain from derecognition of contingent consideration			-				5,199,806				-				5,199,806
Gain from warrant derivative liability			-				-				-				1,830
Loss on debt exchange			(257,559	)			-				(257,559	)			-
Total other (expense) income			(3,950,173	)			4,752,848				(4,699,378	)			4,559,292
Net loss		$	(9,525,294	)		$	(214,247	)		$	(13,831,224	)		$	(5,143,277	)
Weighted average number of common shares outstanding			13,281,904				1,753,815				12,717,180				1,642,599
Basic and diluted net loss per common share		$	(0.72	)		$	(0.12	)		$	(1.09	)		$	(3.13	)

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

		December 31,				June 30,
		2020				2020
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	62,032,642			$	48,081,715
Restricted cash			251,964				251,592
Accounts receivable, net			7,001,068				5,175,924
Inventory, net			6,571,254				9,999,441
Prepaid expenses and other			6,081,766				5,715,089
Other current assets			10,598,771				5,742,011
Total current assets			92,537,465				74,965,772
Fixed assets, net			89,663				258,516
Right-of-use asset			310,479				634,093
Licensed assets, net			15,449,281				16,586,847
Patents and tradenames, net			10,197,112				11,081,048
Product technology rights, net			20,051,666				21,186,666
Deposits			16,023				32,981
Goodwill			28,090,407				28,090,407
Total long-term assets			74,204,631				77,870,558
Total assets		$	166,742,096			$	152,836,330

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, cont'd

		December 31,				June 30,
		2020				2020
		(Unaudited)
Liabilities
Current liabilities
Accounts payable and other		$	7,157,208			$	11,824,560
Accrued liabilities			8,877,715				7,849,855
Accrued compensation			2,540,353				3,117,177
Debt			41,318				982,076
Contract liability			475,680				339,336
Current lease liability			100,263				300,426
Current portion of fixed payment arrangements			1,937,476				2,340,166
Current portion of CVR liabilities			977,475				839,734
Current portion of contingent consideration			3,705,931				713,251
Total current liabilities			25,813,419				28,306,581
Long-term contingent consideration, net of current portion			12,573,916				12,874,351
Long-term lease liability, net of current portion			211,056				725,374
Long-term fixed payment arrangements, net of current portion			9,945,554				11,171,491
Long-term CVR liabilities, net of current portion			5,494,112				4,731,866
Other long-term liabilities			11,371				11,371
Total liabilities			54,049,428				57,821,034
Commitments and contingencies
Stockholders' equity
Preferred Stock, par value $.0001; 50,000,000 shares authorized; shares issued and outstanding 0 and 0, respectively as of December 31, 2020 and June 30, 2020, respectively.			-				-
Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding 17,882,893 and 12,583,736, respectively as of December 31, 2020 and June 30, 2020.			1,788				1,259
Additional paid-in capital			246,532,284				215,024,216
Accumulated deficit			(133,841,404	)			(120,010,179	)
Total stockholders' equity			112,692,668				95,015,296
Total liabilities and stockholders' equity		$	166,742,096			$	152,836,330

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)

		Six Months Ended
		December 31,
		2020				2019
Operating Activities
Net loss		$	(13,831,224	)		$	(5,143,277	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation, amortization and accretion			4,012,909				2,157,540
Stock-based compensation expense			962,977				327,435
Loss from change in fair value of contingent consideration			2,411,333				-
(Gain) from derecognition of contingent consideration			-				(5,199,806	)
Loss on sale of equipment			112,110				-
(Gain) on termination of lease			(343,185	)			-
Loss on debt exchange			257,559				-
Changes in allowance for bad debt			147,627				-
Loss from change in fair value of CVR			899,987				-
Derivative income							(1,830	)
Changes in operating assets and liabilities:
Increase in accounts receivable			(1,965,271	)			(3,456,364	)
Increase in inventory			(3,615,662	)			(132,199	)
Increase in prepaid expenses and other			(379,337	)			(171,430	)
Decrease (increase) in other current assets			2,295,055				(136,694	)
(Decrease) increase in accounts payable and other			(3,136,163	)			2,806,973
Increase in accrued liabilities			1,711,466				145,467
Decrease in accrued compensation			(576,824	)			(62,729	)
Decrease in fixed payment arrangements			-				(216,150	)
Increase in contract liability			136,344				-
Decrease in deferred rent			-				(3,990	)
Net cash used in operating activities			(10,900,299	)			(9,087,054	)
Investing Activities
Deposit			(3,923	)			-
Contingent consideration payment			(42,760	)			(104,635	)
Note receivable			-				(1,350,000	)
Purchase of assets			-				(4,500,000	)
Net cash used in investing activities			(46,683	)			(5,954,635	)
Financing Activities
Issuance of preferred, common stock and warrants			32,249,652				10,000,000
Issuance cost related to registered offering			(4,292,781	)			(741,650	)
Payments made to borrowings			(272,727	)			-
Payments made to fixed payment arrangements			(2,785,863	)			-
Net cash provided by financing activities			24,898,281				9,258,350
Net change in cash, restricted cash and cash equivalents			13,951,299				(5,783,339	)
Cash, restricted cash and cash equivalents at beginning of period			48,333,307				11,294,227
Cash, restricted cash and cash equivalents at end of period		$	62,284,606			$	5,510,888

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, cont'd
(unaudited)

		Six Months Ended
		December 31,
Supplemental disclosures of cash and non-cash investing and financing transactions		2020				2019
Warrants issued to underwriters		$	356,139			$	-
Cash paid for interest			306,752				3,390
Fair value of right-to-use asset and related lease liability			43,082				412,691
Contingent consideration included in accounts payable			-				3,430
Debt exchange			1,057,559				-
Fixed payment arrangements included in accrued liabilities			1,050,000				-
Inventory swap			7,043,849				-
Acquisition costs included in accounts payable			-				59,014
Exchange of convertible preferred stock into common stock		$	-			$	44

AYTU BIOSCIENCE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Information
(Unaudited)

		Three Months Ended								Six Months Ended
		December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
Adjusted EBITDA
Net Loss		$	(9,525,294	)		$	(214,247	)		$	(13,831,224	)		$	(5,143,277	)
Amortization expense			1,584,580				953,450				3,169,161				1,528,567
Depreciation expense			17,657				15,835				51,578				31,669
Other expense, net			378,958				446,958				1,130,499				642,344
Stock-based compensation			508,059				162,264				962,977				327,435
(Gain)/Loss on change in fair value of contingent consideration			3,313,656				(5,199,806	)			3,311,320				(5,199,806	)
Gain/loss on exchange of debt			257,559				-				257,559				-
(Gain)/Loss on change in fair value of derivative warrant liability			-				-				-				(1,830	)
Bad debt expense			146,863				-				147,052				-
Impairment of intangible assets			-				-				-				50,000
Development costs			238,455				-				437,721				-
Transaction costs			1,312,238				912,202				1,324,870				1,222,639
Furniture & equipment write-off			-				-				119,610				-
Lease termination			-				-				(194,761	)			-
Adjusted EBITDA		$	(1,767,269)			$	(2,923,344)			$	(3,113,638)			$	(6,542,259)

SOURCE: Aytu BioScience, Inc.

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FAQ

What were Aytu's Q2 2021 revenues?

Aytu reported Q2 2021 net revenues of $15.1 million, up from $13.5 million in Q1 2021.

How did the merger with Neos Therapeutics impact Aytu?

The merger is expected to create a combined specialty pharmaceutical company with projected revenues of $100 million.

What was the cash position of Aytu after Q2 2021?

As of December 31, 2020, Aytu had cash, cash equivalents, and restricted cash totaling $62.3 million.

When is the expected closing date for the Neos merger?

The merging is anticipated to close by the second calendar quarter of 2021.

What were the key revenue drivers for Aytu's Rx division?

The Rx division's growth was driven by products such as Poly-Vi-Flor, Natesto, Karbinal ER, and COVID-19 test kits.