Q1 2021 Aytu BioScience Inc Earnings Call

[music].

Good afternoon, and thank you for joining us for the <unk> Bio science.

<unk> first quarter fiscal Twentytwenty, one business update call for the quarter ended September Thirtyth Twentytwenty with me. This afternoon are Eightys, Chairman and Chief Executive Officer, Josh Disbro, and Chief Financial Officer Deep Green.

Two biosite.

Uh-huh issued a press release earlier this afternoon with details of the company's operational and financial results for the fiscal second quarter a.

A copy of the press release is available on the news page of the company's website at 82 bio Dot com.

I'd like to remind everyone that today's call is being recorded a replay of today's call will be.

The billable by using the telephone numbers and conference I'd provided in the earnings press release and it.

In addition, a webcast will be available live and archived on Eightys web site within the investors section under events and presentations at 18 bio Dot com.

Finally, I'd also like to call your attention to the customary safe Harbor disclosure.

Regarding forward looking information.

Conference call today will contain certain forward looking statements, including statements regarding the goals strategies beliefs expectations and future potential operating results of a two bio science.

Although management believes these statements are reasonable based on estimates assumptions and production projects.

And as of today October six 2020.

These statements are not guarantees of future performance time sensitive information made will no longer be accurate at the time of any telephonic or webcast replay.

Actual results may differ materially as a result of risks uncertainties and other factors, including but not.

Due to the factors set forth in the Companys filings with the FCC.

18 undertakes no obligation to update or revise any of these forward looking statements I'd now like to turn the call over to ATP CEO Josh Disbro.

Thank you Kate.

Good afternoon, thanks for joining todays Q1 fiscal point.

Let me 21 optical.

Three month period ended September Thirtyth was another strong quarter for the company in terms of financial performance and operational and strategic accomplishments. It was among the best quarters in company history on multiple fronts and one during which we made excellent progress importantly, this was just the second full quarter of reporting.

Porting the integrated businesses with the heritage eight two products the acquired Seroquel pediatric prescription portfolio and you know it was consumer health business.

Additionally, we added another COVID-19 offering through the signing of an agreement to distribute but rapid antigen test. We also advanced the Hewlett program and Hell now have that clinic.

20 study underway with an important update.

From a financial perspective, I'm very pleased with our quarterly results. We posted revenue of 13.5 million, our second highest quarterly revenue in history.

This represents growth of 839% over the same quarter last year, so our newly expanded Rx and.

Consumer health business is now on full display these last two quarters.

Importantly, this quarter, we reported all time high revenue from the consumer Health Division 7.8 million, which was up from 6.9 million last quarter.

For the Rx Division, we posted our second highest quarter in history in terms of revenue $5.8 million and up three.

314% from the same quarter last year.

Also this quarter, we posted our lowest adjusted EBITDA loss in history, we lost just $1.3 million on an adjusted basis, demonstrating a continued narrowing of cash burn and a combined operation that is improving in real time as we approach profitability.

We've taken revenue tuning.

Hardly new level from where we've been and commensurate with that we've narrowed our loss quite simply we are now operating at an entirely new level five.

Finally, we are well positioned from a cash perspective, we have a little under $40 million in cash restricted cash and cash equivalents keeping in mind that that cash balance is what remains after we paid off the 15 million.

Since our Deerfield balloon payments that had been owed as part of the asset purchase from CIRCOR last year.

So with that as the lead in and some highlights let me now hand, the call over to Dave to provide additional detail on our quarterly financial results Dave.

Thank you Josh and thank you all for joining us today.

Our first quarter of fiscal.

Here 2021 represents the second full fiscal quarter, we are reporting and the new way to which includes the Rx segment and the recently acquired Innovus consumer Health segment, and we are very happy with the first quarter results.

Topline that revenue for Q1 was 13.5.

Billion dollars, representing nearly 10 x. increase over the $1.4 million of net revenue reported for Q1 last year.

We also made strong progress towards profitability during the quarter with an adjusted EBITDA loss of only $1.3 million.

Compared to last year's Q1, adjusted EBITDA loss of nearly $3.6 million.

Q1, gross profit was $9.7 million compared to $1.1 million in the year ago quarter.

Our Q1 gross profit margin was approximately 72% compared to 70.

The 4% for Q1 last year as a reminder, our gross profit margin as a combined business is expected to be in the 70% to 75% range depending on business mix. The combined gross margin is somewhat lower than legacy 82, Standalone Rx business is the consumer.

Health segment generate slightly lower gross profit margins than does the Rx segment.

Operating expenses, excluding cost of sales and non cash amortization expense for Q1 was $11.7 million compared to $5.2 million in the year ago quarter.

Umer.

Now while operating expenses were clearly higher this quarter wouldn't.

When we compare revenue to Opex, it's clear that we're not.

It's clear that we are operating today with greater scale and far more efficiently compared to last year.

As a measure of increasing efficiency.

The ratio of revenue to operating expense, excluding cost of sales and amortization for Q1. This year was approximately 1.1 fivex.

That is almost four times stronger than last year's ratio of revenue to operating expense of approximately 0.3 acts.

For another look at improved operating efficiency from a profitability perspective, adjusted EBITDA for Q1, and again was a loss of $1.3 million, which compares favorably to last quarter's 1.7 million adjusted EBITDA loss in last years $3.6 million adjusted.

EBITDA loss.

We were able to accomplish this narrowing of losses by removing duplicative costs from the acquired operations.

Using our greater scale to absorb proportionally less operating expense and continuing to run the business with a focus on growth and cost control.

Our bottom line loss for the quarter was $4.3 million or four cents per share compared to a loss of $4.9 million or 30 to 32 cents per share in Q1 last year.

Based on shares outstanding of $121.6 million and 15 point.

Point $3 million respectively.

And the balance sheet, we ended the quarter with assets of $141 million equity of $91 million and approximately $38.2 million of cash, while reducing liabilities by $7.6 million since.

Since.

The end of the prior quarter, our Q4 of 2020.

In summary for Q1 of this current fiscal year, we are reporting substantial revenue growth over the same quarter last year and at the same time meaningfully reducing our losses.

As we move forward, we do so with.

Clear focus had top line growth and the expectation for continued strides toward profitability.

With that let me turn the call back over to Josh for some additional commentary Josh Thanks, Dave.

So to reiterate we're pleased with our performance in the fact that we had numerous all time highs.

It's been an all time low EBITDA loss for the quarter profitability is clearly in sight now I'll turn to our operational updates for the quarter and there are many first the Rx business, perhaps most importantly for the Rx business in the September quarter, we saw our sales representative activity increased from the previous quarter when many areas had been shelved.

In place due to coated.

This quarter, we saw physician access start to open up and we got in more face to face cost this quarter than we had previously.

While still not back to pre pandemic levels the increase rep activity as of late is encouraging.

The quarter's Rx revenue was largely driven by COVID-19 test kit sales.

Kelly by floor, and the Tesco and Karbinal as had been the case in the previous quarter. We expect these core products to drive the bulk of the Rx revenue going forward and we are expecting growth across the portfolio.

We had numerous developments on the Rx side of the business first as it relates to our coated efforts we made substantial.

Annual progress with he'll light.

Our product development partner completed the development and pilot scale manufacturing of the Hilight investigational devices and these devices were delivered to our clinical sites in the U.S.

I'm happy to share today that clinical study used with few light is now officially underway.

Importantly, the first.

Patient has now been successfully treated with the Hilight device and we're excited about that development to say the least.

Im also pleased to share that we are expanding clinical study sites and planning the first European study for he allied.

Like in the US COVID-19 cases shot up in Europe, and we have significant interest from investigators there to participate in the study.

We'll keep you updated that study gets underway.

Also this quarter as it relates to our COVID-19 efforts, we announced the signing of a distribution agreement to distribute the pinnacle rapid antigen test for COVID-19. This rapid test, which delivers results in 15 minutes test for the presence of the COVID-19 virus antigen via a nasal fair NGL sales.

Okay and is done without the use of laboratory equipment.

Pinnacle's emergency use authorization submission has been sent to the USS da and that process is now well underway.

As it relates to the antibody test we distribute early in the quarter, we announced our agreement with Apollo met innovations to distribute the test to med spas anesthetics clinics nationwide.

If you followed that announcement with an announcement about the launch of Apollo's mobile testing initiative, which is now under way. So our COVID-19 initiatives are progressing well with the highlight that the first he'll like clinical study is underway and soon we expect to announce the start of our first European study.

As it relates to our core Rx business. It was an active coal.

Wow.

Cerus Pharmaceuticals, our US co promotion partner launched their U.S specialty sales team, calling on urologists and endocrinologists. They are now into their second full quarter of promotion and were beginning to see the impact of those efforts.

Their presence in the specialty offices enables our sales team to focus on primary care.

Well, we were able to detail our full rx portfolio and fully leverage the sales team.

As it relates to his optimists, we were pleased to announce that suit of pharmaceuticals gained Australian TJ approval for the product and is now preparing for commercialization.

This was ahead of the calendar Q4 approval deadline and suit is now able to engage with partners to commercialize.

I will Miss in Australia.

Ill remind you that suda is the licensee for result from this outside the U.S and we collect royalty and milestone payments from SUTA through any direct or sub licensing deals. They do around the world. This TJ approval will assist students current partners Teva, Mitsubishi Tanabe pharma, Singapore, and MTP Korea in there.

Our submissions and enable those parties to advance towards commercialization in their respective territories. These.

These in turn are expected to yield royalty and milestone payments to 82 as part of our agreement with Suda as the global licensee. So as I. Just described it was a productive quarter for the Rx Division.

Now turning to the consumer Health Division the.

You know this team is making very good progress highlighted again by the fact that they achieved all time high revenues in the September quarter.

Augmenting the growth from their established consumer brands. The team launched two new over the counter and Deejays through Novus is E commerce platform.

We launched regarding for Harold.

Loss and launched a Medicare for acid reflux, and both products are ahead of revenue expectations and competing in large consumer health categories redox sitting competes against Rogaine as a lower cost effective product alternative at all Medicare competes with prior SEC, both are large markets and the prospects for growth of these two brands is quite good.

Additional new product launches are planned and those launches coupled with organic growth from current portfolio from the current portfolio are expected to continue to drive continued growth for the consumer division.

I'll remind investors that per the terms of the merger agreement through which we acquired Innovus earlier. This year, we structure the agreement such that additional consideration will be paid out a contingent value.

[music] rights based on the achievement of sales milestones over the next several years $30 million up $75 million in annual revenue along.

Along with net income milestones that would be achieved each year we.

We see significant revenue potential for the consumer health business as we go forward. Although these milestones are not management guidance.

To summarize our first fiscal quarter of 2021.

It was strong it.

It was also an active quarter in that we moved here light into the clinic expanded our cobot portfolio through the signing of the distribution agreement for the Pinnacle test advanced the core Rx and consumer health businesses highlighted by each achieving either second highest or highest revenue numbers.

In history, and we reduced our adjusted EBITDA loss to the lowest level since the company's inception continued progress all around input.

I am proud of the work our team is doing doing and I congratulate them for an outstanding quarter obviously.

Im excited to have taken our revenue to entirely new levels. Finally, following the integration of the three businesses.

With that.

That.

I'll close out our comments and I'll open up two analysts questions and questions that we received through the investor page on our website.

Okay.

Thank you.

Our first question today from the Investor site.

Can you talk about E commerce strategy for the consumer.

Our business and any insight into what types of products perform best.

Yes, thank you for that question.

And very timely as I just talked about the launch of two of our new Anda over the counter medicines for the A's LTC.

LTC meds like for DOCSIS being in a member care those are among the strongest performers on.

Our E Commerce platform. They performed well both products are ahead of schedule in terms of internal revenue expectations.

And are progressing well this type of product sets up very well as they are easily sold online to consumers that seek low cost alternatives to some of the larger consumer brands. It's a very common play in the.

And E commerce space, and so to be able to price something.

Marginally lower than the leading national brands or even some of the store brands that you might see at Costco or.

Walmart, it's it's been a good strategy and one that certainly we think we'll continue to drive growth. So.

Again, they performed well other products like.

That other and da specifically are on the horizon for the company to enable expansion of that portfolio. So looking forward to seeing how we continue to build out that E commerce platform.

Thanks for that question.

Thank you our next question from the web two.

Ticketmaster is reportedly going to do covert testing.

Like our live events like concerts is it fair to then expect covert testing to be with us even after a vaccine.

Yes. Thanks, Thanks for that question so first of all.

It's many people's belief that a broadly distributed vaccine that is taken by a large number of people is still months away and so obviously, we are still very much.

In the Fray with respect to cases of Kobe, We all know the kite cases are spiking all over the country and all over the world. So it's a while before unfortunately, the pandemic, it's under control, but the short answer to the question is yes. Most people believe that testing will continue well into the next year and depending on the number of people who get vaccinated.

Perhaps even beyond that.

So for us to have access to an antibody test as well as an antigen test both that can be deployed very rapidly without the use of laboratory equipment. We think we'll be very well positioned to continue to offer those well well into the next calendar year. Obviously, we hope that a vaccine has proven to be as effective as we think it will be.

And broadly distributed and used that's likely not to be the case anytime soon and even in the context of things opening back up we have heard specifically that Ticketmaster. For example, we require concert goer to demonstrate proof of the vaccine and or proof of no positive cobot test in the preceding 48 hours prior to entering the concert so.

So in in People's interest of getting back to normal and getting back to doing what they what they enjoy like going to concerts theres going to have to be obviously, some concessions one of which will be to get tested before and so that obviously represents a substantial continuing opportunity for us with our rapid test kits.

Thank you our next question from the web can.

Can you provide any additional updates on he'll lights process and uses for covered and non covered applications.

So very simply he'll lights progressing well, it's progressing very much on schedule. We've said on the last call that we wouldnt be providing up to the SEC.

Second updates for.

Out of respect for the process, our clinical trial sites and in our and our partners that having been said a lot has happened and a lot of promise really.

Really is presenting itself with the device.

As I mentioned in my prepared comments the first ever clinical study is underway.

It's currently undergoing a us based site study at U.S. site, a single center that is doing safety studies and.

We're very pleased with how it's going so far while we're not liberty to give any specifics I can simply say that the patient has been treated and is has recovered so with respect to.

That.

We couldn't be happier and obviously with respect to expanding clinical study sites Theres. Obviously continued interest very broad interest around the world in getting and becoming a site thats not surprising given the recent uptick in cases, so being on it and we're in a good position to expand in Europe begin those studies and obviously get patients enrolled as.

As quickly as we as we practically can.

I've said this before as well with respect to other.

Related applications.

For Hilight Noncovered specifically there is there is there is a wide open playing field in terms of potential clinical applications for the device.

Consider the very large now.

Number of cases around the world of ventilator associated pneumonia. This is something I've spoken to in the past ventilator associated pneumonia. Its many many thousands of Americans every year die of VIP, It's a consequence of.

Being intubated, hence the name ventilator associated pneumonia, it's the leading cause of death from.

Nosocomial infections, there are no treatments effective treatments for for VIP.

It's a common consequence of being Intubated and with respect to you'd like to say what eradicate essentially every pathogen. This opportunity is quite large to really go after VIP. There similarly large opportunities and other intubated patients whether.

In short there for severe influenza and pneumonia.

And particularly when you think about outside the hospital setting your you really get excited about the potential applications. The less sick population you think about patients that present with severe respiratory infections that have a lot of risk factors the ability to treat them and an output.

Patient setting with you the light via potentially a nasal.

Can you love that would certainly be a potential application one that we have full rights to chronic sinusitis patients obviously would be potential benefit.

Beneficiaries of this type of application again, we have full commercial rights to that application as well so we.

We definitely recognize that he'll like could be a game changer for applications.

Way beyond COVID-19, cobot, Nineteens, where it's starting its where its we expect it to be obviously, the most promising in the near term we jumped in this obviously, hoping to do as much as we could in the fight against COVID-19 were doing that but as.

As COVID-19 gets underway and we hope obviously a vaccine enables it to go entirely away the applications beyond that are even bigger.

So that said, we're still focused on COVID-19 in the near term, that's what's going to enable it to get the most clinical data behind it to support support submissions and so forth again, we're in the late stages of planning.

European study first patients recover doing well and so we have that well underway and.

And we think honestly the opportunity for applications just go far far beyond this so with that very very excited about the applications.

So with that let me wrap up thank you for these questions that came in through the web thanks to.

And all of our shareholders. Thanks for everyone listening today, we look forward to updating you further as things develop and speaking to you on our next earnings call, which will hold in February until then have a good evening and thanks again for your time.

Thank you ladies and gentlemen, this does conclude today's conference call.

You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.