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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