Q4 2021 Aytu Biopharma Inc Earnings Call
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Good afternoon, and thank you for joining us for the E. Two biopharma fourth quarter and full year fiscal 2021 financial results call with me. This afternoon are a two's chairman and Chief Executive Officer, Josh Disbrow, and Chief Financial Officer, Richard Eisenstadt.
Two biopharma issued a press release earlier today with the details of the company's operational and financial results for the fiscal fourth quarter and full year 'twenty 'twenty. One a copy of the press release is available on the news page of the company's website at H, two bio dot com I'd like to remind everyone that today's call is being recorded a replay of today.
Call will be available by using the telephone numbers and conference I D provided in the earnings press release. In addition, a webcast will be accessible live and archived on <unk> website within the investors section under events and presentations at a two bio dot com.
Finally, I'd like to call your attention to the customary safe Harbor disclosure regarding forward looking information the 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 biopharma. Although management believes these statements are.
Based on estimates assumptions and projections as of today September 27th 2021. These statements are not guarantees of future performance time sensitive information may 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 limited to the factors set forth in the company's filings with the SEC a two undertakes no obligations to update or revise any of these forward looking statements I'd now like to turn the call over to a to C. E O Josh Disbrow, Sir the floor is yours.
Thank you Darren.
Good afternoon, everyone and thanks for joining us today.
In the past year and a half we embarked on a transformational journey to become a premier pediatric focused specialty pharmaceutical company. We successfully executed on several key milestones, which I look forward to discussing in more detail on these calls we're excited about highway to Biopharma is positioned today as we implement our growth plans and seek to drive future value which are growing.
Ascription portfolios have resized and integrated commercial infrastructure, a growing consumer health subsidiary and an exciting late stage therapeutics pipeline.
We have the products the people and the pipeline in place and we're prepared to execute well.
We are now operating as a fully integrated company following our merger with Neo Therapeutics, which closed just five months ago as well as an additional three transactions, including the purchase of our pipeline assets are 101 from Memphis Therapeutics.
Through both these strategic acquisitions and organic product growth, we have posted 138% year over year revenue growth and we're now on a $90 million pro forma revenue run rate.
Rich will discuss the financials in more detail shortly but I wanted to quickly touch on revenues and our cash position before turning to a review of our commercial business and product pipeline.
This quarter, we posted revenue of $28.0 million, an all time high for a two up from $18.0 million last quarter and $23.0 million in the same quarter of last year.
Included with this revenue number our consumer Health Division posted another all time high revenue quarter of $17.0 million.
Our revenue growth was primarily driven by the addition of the Nios Rx portfolio and the growth of our consumer health segment through our e-commerce and direct to consumer channels and new product introductions.
We ended the quarter with approximately $50 million in cash this cash gives us sufficient capital to reach operating breakeven.
Turning now to our commercial portfolio.
Our prescription products compete in large therapeutic markets with approximately 24 billion and total addressable market across five therapeutic categories. We have built an rx and consumer health product portfolio, consisting of five core prescription brands and over 20 consumer health brands, we operate an efficient commercial model model in this quarter, we successfully completed the re.
Sizing and integration of the <unk> and Neo sales forces, resulting in 40, CNS align sales specialists and 10 pediatric line sales specialists.
Specialists are promoting <unk> XR, ODT, <unk>, XR, ODT and supplements, while the pediatric align sales specialists are primarily promoting poly VI Flor Tri VI, Flor and carbon only or the Salesforce integration represents a significant part of the $15 million and merger synergy savings, we expect to realize in fish.
'twenty two.
Prescription brands address large growing markets with a focus on the 70 plus million annual prescriptions ADHD market, we expected <unk> to be the drivers of future growth for our CNS focused portfolio, while our prescription multi vitamins poly VI Flor and Tri VI Flor are expected to be the primary growth drivers for the pediatric focus portfolio.
The.
Tumor health Division contributes approximately a third of our revenue and posted $33 million for the fiscal year, the consumer Health Division markets, OTC medicines, dietary supplements and personal care products and commercialize the product portfolio through an efficient combination of direct to consumer outreach and ecommerce tactics.
This is an efficient model operated by a small number of employees a two consumer health directly excesses millions of health care consumers to deliver a broad range of consumer health products in diverse categories.
Consistent with the mindset of the Rx Division the consumer help also to consumer Health Division excuse me also targets large and growing categories.
On the Rx side in the fourth quarter, we launched our newly rebranded <unk> Rx connect pharmacy network and patient support program, which was formed through the consolidation of the <unk> and <unk> patient access programs. We have added the <unk> legacy products to the <unk> legacy program to now have all core brands on this growing nationwide pharmacy platform.
This expansion enables substantial leverage to the program with our core Rx brands on board and over 200 pharmacies plugged into the Rx connect program through.
Through innovative design and favorable economics and delivery Rx connect enables affordable predictable patient access when physicians prescribe <unk> brands for any commercially covered patients, they're hassles or dramatically reduced and their co pays are known.
This program gives us a unique advantage and we have the ability to continue to expand our pharmacy network bring on additional assets and drive prescription refills at a higher rate than might ordinarily be achieved.
Rx connect makes <unk> unique and quite simply is a game changer that separates us from our competitors Rx connect is a truly innovative way for patients and physicians to access our branded products and we're pleased with the continued growth of this platform.
Going forward, we expect to see increasing revenue across our prescription products in consumer health.
Through organic sales growth and new product introductions, which we anticipate will be driven by the OTC medicines ecommerce business.
Starting in the second half of this fiscal year, we anticipate launching various OTC medicine through our recently signed exclusive distribution agreement with an OTC manufacturer.
Turning now to our development pipeline <unk> is our first in class UV, a light based endotracheal catheter initially targeting the treatment of severe respiratory infections and mechanically ventilated hospitalized patients.
We acquired an exclusive global license to the technology from Cedars Sinai Medical center for all respiratory applications.
We recently announced the publication of data and two journals, which we believe points to the potentially groundbreaking efficacy of this platform.
In July 2021, we announced the publication of the manuscript with data demonstrating UV a light reduces cellular cytokine release from human endotracheal cells infected with the Corona virus in the peer reviewed journal photo diagnosis and Photodynamics therapy.
In June we announced the publication of clinical results from the <unk> pilot study in the peer reviewed journals advances in therapy. These data show that UV a light catheter therapy is associated with significant reduction in Sars COVID-19, two viral load and improvement in clinical outcomes for mechanically ventilated COVID-19 patients.
These milestones continue to demonstrate the profound commercial opportunity for <unk> with applications to disease areas outside of Covid, such as ventilator associated pneumonia severe influence of influenza and other difficult to treat infections. We are excited to continue exploring the depths of <unk> potential.
Looking ahead, we expect to initiate a randomized sham controlled study evaluating the safety and treatment effects of <unk> in patients with Sars Covid two that have been newly intubated on mechanical ventilation. This study will be conducted at a leading academic hospital in Barcelona, Spain, and led by a globally recognized expert in pulmonary and critical care medicine.
We expect to enroll 40 patients and are aiming to reach total enrollment in early calendar 'twenty two.
The primary endpoint of this study is the change in viral load an endotracheal tube aspirates between day zero and the last day of treatment between treated and untreated patients.
Following the completion of enrollment we expect to report topline data in the first half of calendar 'twenty two.
Our pipeline is also highlighted by a 101 or into storage a pivotal study ready new chemical entity that targets the treatment of pediatric onset rare disease vascular <unk> danlos syndrome or beds.
That is the vascular subtype of <unk> Danlos syndrome.
<unk> syndrome is a group of inherited connective tissue disorders affecting a range of tissues from the skin to the vasculature beds is the most severe subtype of ETS caused by mutation of the coal <unk>.
It's a devastating inherited disorder, specifically affecting the vasculature and causing catastrophic aortic events approximately half of <unk> patients die before the age of 50.
<unk> is relatively easily diagnosed with the genetic test confirming the KOL <unk> one mutation.
Proximately 6000 patients in the U S have beds, making the targeting of these patients straightforward as it relates to clinical trial enrollment and if approved ultimately identifying and treating these patients.
As a reminder, we acquired a 101 through our acquisition of substantially all the assets of <unk> Therapeutics, a privately held biopharmaceutical company focused on the treatment of pediatric onset rare and orphan diseases as part of that acquisition Rumpus founders Tober, Brooke and maintenance sorry joined the <unk> management team.
Earlier this month, we announced the formation of a scientific advisory board consisting of leading experts in rare genetic connective tissue disorders and chaired by Dr. <unk>, who has conducted the groundbreaking research to date supporting <unk> 101 in beds.
With the formation of the SAP and the appointments of tofu Nate The company is now well positioned to execute on the development of <unk> hundred one for the patients that desperately need. This treatment. There are no approved treatments for beds. So if approved <unk> would have the first such treatment.
We are currently working to secure orphan drug designation for the FDA and plan to submit an IND application in the second half of this year to start a pivotal study of <unk> hundred one in beds, which you were referring to as the prevent trial.
We plan to enroll approximately 260 coal three a positive <unk> hundred one positive beds patients and then randomized them one to one and a study studying.
Studying beds related events arterial events, including ruptures dissections pseudo aneurysms, whether or not they are favorable we expect a steady patients taking standard background meds, such as beta blockers, and arbs with and without <unk> and image patients every six months over an expected 30 months treatment period will contemplate an interim analysis and <unk>.
Capture secondary endpoints inclusive of safety measures, we expect to start the study in early 'twenty, two and fully enroll the study by the end of 'twenty, two and with that I'll now turn the call over to rich for some additional financial highlights rich.
Thank you Josh.
Everybody for joining us today.
Revenue for the full fiscal year ended June 32021 was $71.0 million compared to $33.0 billion.
Reported for the year ended June 32020.
Net revenue for the fourth quarter was at an all time high of $28.0 million compared to $18.0 million reported last quarter and $23.0 million in the same quarter last year.
Revenue from the consumer Health Division as Josh mentioned was an all time high of $17.0 million up from $15.0 million in the same quarter last year consumer health growth was driven by multiple product launches and growth of the E Commerce channel.
Net revenue from the prescription division was $20.0 million as compared to $16.0 million in the same quarter last year.
The fourth quarter was the first quarter that our results reflect a full three months of revenue from the products we acquired in EMEA. This acquisition.
$16.0 million of ADHD net revenue.
Gross margin for the three months ended June 32021 was $14.0 million versus $10 million from the same quarter one year ago.
Gross margin was negatively impacted by a $3.0 million increase in cost of goods sold for the ADHD products, resulting from the full absorption of increased inventory cost of fair value at EMEA as therapeutics acquisition date.
<unk> zero margin for those products in the fourth quarter of fiscal 2021.
Our reported gross margin percentage for the quarter, 48% would've been a pro forma 57% FTE ADHD products, having cost manufacturing cost.
Up in inventory values will not affect the financial statements in future periods.
Research and development expense was $12.0 million for three months ended June 32021, approximately $6.0 million.
Versus $1.5 million from one year ago with.
For 2021 expenses included approximately $11.0 million in cost and fees associated with the acquisition of the <unk> hundred one assets licenses from the Ruckus transaction, they're all booked in the June quarter as required by GAAP.
For the 2021 fiscal year net loss was $61.0 million or a loss of $51.0 per share versus a loss of $19.0 million or $3 <unk> per share for the year ended June 32020.
Net loss for the three months ended June 32021 was $19 million or <unk> 81 per share versus a loss of $4.0 million or 28 cents per share for the three months ended June 32020.
For the quarter the loss included onetime costs and fees totaling approximately $18.0 million, which includes $13.0 million dollar impairment loss related to the write off from a licensed asset $11.0 million related to the rumpus transaction and a $3.0 million of inventory value right up to the <unk>.
With vision.
We ended the quarter with $58.0 million in cash cash equivalents and restricted cash.
Normalized burn for the quarter once we back out one time payments for deferred knee as deal costs and severance and rumpus transaction was approximately $5.0 million.
In April 2021, we announced the divestment of the Testa rights to <unk> Pharmaceuticals to continue our focus our commercial efforts the core pediatric centric business.
This transaction provided non dilutive cash of $12.0 million to the company in the form of $250000 monthly payments over 30 months, which began this past April.
We previously divested of rights of my answer is a product we were mostly selling outside the United States.
This regulatory commercial and head count expenses associated with this product.
COVID-19 antigen kits revenue was approximately $400000 for the quarter and we expect it to continue to decline. We had previously in the quarter ended March 31, 2021, written down almost $7 million remaining inventory related to these test kits.
Because in the tester divestiture and removal of Covid test kits myoclonus from our future plans. This puts our revenue run rate currently at approximately $90 million.
In May 2021, we announced the planned closure of the <unk> Grand Prairie, Texas manufacturing facility with the goal of improving gross profit margins and reduce manufacturing expenses associated with the ADHD products.
This transaction will occur over the next 18 months.
The transition to outsource manufacturing of these products is expected to result in 15% to 20% improvement in gross profit margins for the ADHD products and significant reduction of cash expenses and investment in inventory and.
In conjunction with the manufacturing transition, we will consolidate additional operational and administrative positions to further reduce headcount redundancies and associated expenses.
I'll now turn the call back over to Josh for some additional commentary Josh.
Thank you rich.
As you can see we've made significant headway towards value creation as a newly transformed pediatric focused specialty pharmaceutical company going forward, we are committed to focusing on our integrated and streamlined core Rx business supported by our consumer health business and building our pipeline led by our 101 and <unk> <unk>.
<unk> across our core Rx products has been solid as Dennis has grown 25% year over year co tempo has grown 18% year over year in the ADHD market continued to grow even through the COVID-19 pandemic demonstrating the strength of this market.
Prescription multi vitamin line has experienced tremendous growth. These last five quarters, posting nearly 50% trs growth over year over year.
This growth and the growth of our core brands can largely be attributed to our consistent field efforts market growth as well as the growing strength of our pharmacy network and patient access program <unk> Rx connect.
We expect to continue to expand our <unk> connect to maximize our portfolio of pharmacy pull through and grow. These core products. We also anticipate multiple new product launches in the consumer health segment in the first half calendar 2022 and to drive organic product growth through the e-commerce and direct to consumer channels.
As we continue on our trajectory, we expect to continue to identify and potentially bring in accretive complementary products to add into Rx connect while also considering late stage pipeline opportunities and further develop our pipeline for <unk> hundred one we are seeking orphan drug designation in IND acceptance from the FDA and we expect to get to prevent <unk>.
<unk> started in the first half of calendar year 'twenty two through July we expect to initiate a study in Spain shortly with topline data in the first half also of calendar 'twenty two.
We look forward to updating you on our progress I'll now turn it back over to the operator Taryn for Q&A Taryn. Thank you. The floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time, if youre using a speaker phone, we ask that while posing your question you pick up your handset to provide the best.
Allen quality again, ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone keypad at this time.
We will take our first question from Jennifer <unk> with Cantor Fitzgerald. Please go ahead.
Alright, thanks, so much for taking my questions. A couple here maybe to start off on the ADHD revenues for the partner.
He said that this quarter to be around $16.0 million is there any color you can give so far in back to school season trends you've seen in the coming quarter.
How you think.
I'm, sorry, Jon I'll ask me last year.
Oh can you hear me.
We lost just the back half of that question you got cut off after.
Back to school and any color and then you kind of faded out.
Oh, Yeah any color you can give on the back to school season trends are and I have a couple of more questions, but I'll wait until after you respond.
I'm happy to happy to take that and Richard you want to jump in.
I can say we're certainly.
We're trending according to our plan generally speaking certainly understanding that the market really starts to pick back up.
About this time of year. So certainly the market is beginning to move in the direction that you would expect and we're happy with with progress we don't guide to any specific numbers.
And other than to say, we're on generally speaking, where we expect it to be obviously revenues are ultimately what matters matters and thats that continues to be monitored on a week by week day by day, and certainly quarter by quarter basis, and what I mean by that is our gross to net gross to nets continue to fluctuate to get they do certainly have some pressure that having been said we're working on.
The day to make sure that we can do with those gross to net to improve the revenue per prescription, but all in all were happy with the script trends in the market and with our brand's rich anything you'd add to that.
Yes, the only thing I'll add Jennifer as you probably know ADHD is seasonal and the worst months of the year is generally July so quarter over quarter.
Even though we're seeing really.
Nice rebound with the back to school it tends not to when compared to the previous quarter. It is not necessarily a step up from that.
Previous quarter.
Okay helpful.
And then on the non ADHD Rx portfolio.
I think you said.
400, K came from the Covid test kits and is the run rate for those Rx products are we sort of.
Taking out that 400 U K is that is that sort of the base, we should be coming off of it.
The de identified but go ahead rich, but yes go on Josh.
I think generally again, we don't we don't guide from a revenue perspective, but obviously, we took out the Tesco revenue. We took out my offices. So now then you could essentially consider as you said test kits to be removed. So really focused in the other prescription products with an eye towards poly VI Flor Carbinol tribe.
<unk> and <unk> to some degree of two <unk>.
And so generally speaking it is probably a decent base to work off of understanding that those products just got added into the Rx connect platform and so we do expect growth from this baseline.
Yes, the one thing I'll add Jennifer is the $750000 quarterly we get from the test or it doesn't show in the revenue line. It's below the line. So we continue that drops straight to the bottom line.
It doesn't show up on the revenue line. So that's one of the reasons we.
Our guidance to our actual annualized run rate.
Okay, and then I have a two parter I think you talked about the normalized cash burn what is your normalized cash burn again.
The one time adjustments and team.
Do you have an idea on when you would expect it to get to that normalized cash flow.
Yes, so in the quarter, our normalized cash burn was $5.0 million. So again that was backing out the deal cost associated with the <unk>.
And the Lumpiness acquisitions, Jennifer So we backed out the DLP said there was some lagging severance.
All the deal costs associated with.
<unk>, which was at the end of March that leak over into our quarter and reflective of our cash flow I think this current quarter.
The third.
Third calendar quarter first fiscal quarter of 2022 should be a pretty normalized quarter as far as all the operating results as far as cash and.
<unk> expenses as well so there's nothing unusual that we're forecasting in there.
Okay, Great and then my last question sorry.
With your current cash runway I think you said that you have sufficient cash to get the operating breakeven.
Could you remind us of what I guess, what goes into those numbers.
What your assumptions are.
In terms of getting.
Thank you Ben.
Yes, So we don't guide as far as when we're.
<unk> breakeven Jennifer but.
The operating line is just the operating expenses the gross margin minus the.
Our.
<unk>, R&D and sales and marketing costs.
So we don't go below the line on that end to end.
<unk> expenses of course, thank you.
Remember that we do have a debt payment that is due in may 2022, we've been exploring opportunities to refinance.
Refinance that and Theres been a lot of interest in.
We don't have anything to announce today regarding that.
Okay. That's super helpful. That's it for me guys. Thanks again.
Thank you Jennifer.
We will take our next question from Vernon Bernardino with H C. Wainwright. Please go ahead.
Hi, guys.
Congrats on the progress.
Especially the.
Nice results.
Pediatric portfolio.
Regarding our pediatric portfolio just wondering if the products are doing well ADHD.
What can you say as far as what's driving.
The growth in the market or is it.
What you were thinking of specifically comments is just your.
Portfolios.
The product portfolio is growth.
The HD market.
Yes.
Yes, Thank you Vernon.
I'll start this and then rich can fill in generally speaking we are seeing growth across the portfolio as I mentioned and it's largely a consequence of salesforce efforts out in the field the market growth, particularly with respect to the ADHD market, which is really showing nice rebound and while the pediatric segment has been slower to recover both the pediatric and the adult segment are showing nice growth and bounce from.
From Covid era level, so that certainly helped driving things and then what I'm. Most excited about is I know rich's as Rx connect because we get these products fully integrated onto the <unk> platform.
That's helping to drive significant prescription volume and we've got a lot of plans with respect to how to further.
<unk> connect how to get additional pharmacies onboard and how to make sure that we're maximizing pull through across the portfolio to maximize obviously not just revenue per prescription refills and ultimately continuing just to pull more of that through so it's a great tool for the team certainly the sales force is excited to have it expanded to now have the entire portfolio in tow.
And so I think really those are the key factors that are driving the most growth in all of these markets, particularly the ADHD market really set up for continuing growth as the world starts to normalize adults getting back to work kids getting back into the classroom, we expect to see that market continuing to grow and there is there remains a significant unmet need these products to that as a good template that the.
The only orally disintegrating tablets, certainly have found a nice position in the marketplace. So as the market grows. We certainly think we'll continue to be able to maintain and potentially grow share and grow those products. So I think thats whats really driving most of the growth.
Would you say then ask connect.
<unk> is it a mix of that in.
Products.
Differentiation.
I'd give it I'd give it.
<unk>.
Top billing for both really sales force execution and driving through prescriptions at the end of the day physician demand is what will drive a lot of this but you really can't have one without the other you've got to have the hand in glove, a physician demand coupled with good pharmacy access and so I think they both work well together and now that we've got the sales team right sized its a good size.
Salesforce with 40 folks on the CNS side and in turn that are very focused in very directly on the pediatric side, they're in the right places where they need to be we've really gotten ourselves geographically in the right spots.
And I think we're working now to optimize the mix of prescriptions with respect to what flows into <unk> connect and ultimately to enable the greatest pull through there. So I'd say, it's a combination of those those two key factors and presuming the market continues to grow at the rate that it will that will just I think serve as a baseline buoy too to continue to bring bring sales up as we as we move forward.
And.
Follow up I was wondering if you could tell me.
What kind of expectations you have as far as a timeline for completion of the heat study.
Spain.
Yes, we haven't we haven't given a specific timeline on that other than to say, we expect to read out the results in the first calendar half of 'twenty two Vernon so.
We're working feverishly to get that study set up and underway and certainly expect to be in a position to share that news as it's as it's up and running and as patients get enrolled but generally speaking what we said is first half of calendar 'twenty two.
Yeah.
Okay. Thanks, I'll follow up another time with the gross margin question.
Probably team volunteered thank you for taking my questions.
Thanks, Tom Thanks, very much.
And that's all the questions we have at this time.
Okay.
Great. Thanks, very much. Thank you Karen thanks to everyone for joining us today, so that will conclude our call. We look forward to providing our Q1 fiscal 'twenty two update coming up here in November thanks, very much.
This does conclude today's teleconference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.
Thanks.
Yes.
Okay.
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Uh huh.
Yes.
Okay.
Okay.