Chronicle Journal: Finance

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

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 and on Aytu BioScience's website, within the Investors section under Events & Presentations, at, 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

Condensed Consolidated Statements of Operations

   Three Months Ended    Six Months Ended  
   December 31,    December 31, 
   2020    2019    2020    2019 
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)


Condensed Consolidated Balance Sheets

   December 31,    June 30, 
   2020    2020 
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 


Condensed Consolidated Balance Sheets, cont'd

   December 31,    June 30, 
   2020    2020 
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 


Consolidated Condensed Statements of Cash Flows

   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 

Consolidated Statements of Cash Flows, cont'd

   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 

Reconciliation of GAAP to Non-GAAP Financial Information

   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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