Q1 2022 Aytu Biopharma Inc Earnings Call

Good afternoon, ladies and gentlemen, and thank you for your patience. The conference will begin shortly once again. Thank you for your patience Your conference will begin shortly.

[music].

Good afternoon, and thank you for joining us for the E. Two Biopharma first quarter fiscal 2022 financial results call with me. This afternoon are <unk>, Chairman and Chief Executive Officer, Josh Disbrow, and Chief Financial Officer, Richard Eisenstadt.

H Biopharma issued a press release earlier today with the details of the company's operational and financial results for the fiscal first quarter of 2022.

A copy of the press release is available on the news page of the company's website at eight two bio dot com.

I'd like to remind everyone that today's call is being recorded a replay of today's 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 the events and presentations at <unk> Dot com.

Finally, I'd also like to call to your attention 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 <unk> Biopharma.

Although management believes these statements are reasonable based on estimates assumptions and projections as of today November 15th 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 included but not limited to the factors set forth in the company's filings with the SEC Ato.

<unk> undertakes no obligation to update or revise any of these forward looking statements and I'd now like to turn the call over to <unk>, Chairman and CEO Josh Disbrow.

Thanks, Matt.

Good afternoon, everyone and thanks for joining us today, our fiscal Q1 was among our strongest quarters to date.

During which we continued our post merger integration activities operated our newly integrated sales force and made substantial headway advancing our pipeline programs from a commercial perspective I'm happy to report that we posted a very strong quarter growing revenue, 62% over the same period last year.

These net revenues of $21 9 million represent our second highest revenue quarter in history.

This growth is attributable to the realization of the newly combined product portfolio scale. Following our merger with nios, along with organic growth achieved over the same period last year across our Rx and consumer health businesses.

It's important to note that our Q Q1 falls in July August and September with a big chunk of that quarter falling during the ADHD market slow months of July and August and despite having just gone through that low point in the year, we posted a strong revenue number and have been have seen solid growth during the ADHD back to school season on our.

Last call, we projected that fiscal 'twenty, two will be a year of substantial progress and were off to an excellent start.

We successfully executed across our business and have many anticipated value driving milestones on the horizon, all of which I look forward to discussing in more detail throughout this call. We're.

We're excited about where <unk> pharma biopharma stands today.

As we continue to build momentum through growth in revenues from our prescription and consumer health product portfolios maximize our newly integrated commercial infrastructure and merger synergy plan and advance our exciting late stage therapeutics pipeline, including <unk> and rare disease asset a 101.

Let me start the highlights from this quarter with a review of our commercial businesses on the Rx side, our products compete in large therapeutic categories with approximately $24 billion in total addressable markets across five prescription therapeutic areas.

We operate in an efficient commercial model and again this quarter was the first full quarter during which we operated our fully integrated <unk> and Neo Salesforce with 50 sales specialists 40 of which are CNS aligned sales specialist promoting <unk> XR ODT, <unk>, XR, ODT and <unk> and.

And 10 of which are pediatric aligned sales specialists promoting our pediatric Rx products headlined by poly VI Flor and Tri VI Flor.

This recently completed sales force integration represents a significant part of the $15 million and merger synergy savings, we've discussed and expect to realize this fiscal year progresses.

Our prescription brands address large and growing markets, we expect incentives and <unk> to be the drivers of future growth for our CNS focus portfolio targeting the 70 plus million prescription ADHD market, while our prescription multivitamins poly VI Flor and Tri VI Flor are expected to be the primary growth drivers for the pediatric focused portfolio.

This quarter combined prescriptions for ADHD brands are Denis <unk> grew 12% compared to the same period last year <unk> prescriptions grew 15% compared to the same period last year.

Importantly, since the end of the first fiscal quarter, we began capturing even more momentum not only did we achieve an all time high in weekly prescriptions for <unk> XR. The week ended October 15th.

But also in multiple weeks throughout October we reached approximately 5000 prescriptions for that brand.

These numbers speak to the strength of the growth of the adult ADHD market as well as the execution, we're having in the field.

While the pediatric ADHD market is certainly up from last year. It has not come all the way back as the adult market has that said <unk> XR prescriptions have approached all time high levels as we head interim report card time, and the all important parent teacher conferences for kids simply put we're hitting our stride with the ADHD brands.

This quarter, we also reported year over year revenue growth of 8% for a prescription multivitamins, reaching an all time high in weekly prescriptions for poly VI Flor chewable tablets that product line has also hit its stride as we continue to focus a core team of our sales specialists on growing our multi vitamin franchise.

To further showcase our strong growth in this segment and are pediatric focused sales team carbinol ER prescription antihistamine grew 46% over the same period last year.

This quarter marked the first full quarter with our newly rebranded <unk> Rx connect patient access program, which was formed from our consolidation of the <unk> and <unk> patient access programs. We have added the <unk> legacy products to the nearest legacy Rx connect program to now have all core brands on this nationwide pharmacy and patient <unk>.

<unk> platform.

This expansion enables substantial leverage to a program with our Rx brands now integrated.

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 patient co pays are known and predictable.

This novel program gives us a distinct advantage in the marketplace and we have the ability to continue to refine our pharmacy network bring additional assets onto the platform and drive prescription refills at a higher rate than might ordinarily be achieved Rx connect quite simply is a game changer for us in an efficient way for patients and physicians to access our branded <unk>.

<unk> at.

At a time when patients co pays or anything but predictable the Rx connect program really stands out.

During this quarter, we saw growth of Rx connect as a percentage of prescriptions going through our network of pharmacies and we're and we're pleased with the quick progress we've made in integrating the full Rx connect excuse me Rx product portfolio into the program.

Going forward, we expect to see increasing revenue across our ADHD and pediatric prescription products and expect to grow the consumer health division to organic sales growth and new product introductions.

We anticipate much of that growth to be driven by the e-commerce business and the anticipated launch of various new OTC medicines through our recently signed exclusive distribution agreement with an OTC manufacturer.

For our consumer health brands, we saw revenues grow 3% over the same period last year to $8 million. This growth is notable as we grew year over year, even when last summers E. Commerce purchasing was transiently high due to the peak of the global pandemic when people were staying home and driving online shopping to levels not previously seen despite.

That large e-commerce uptick last summer, we still saw growth over that previous level. This year the.

The growth of the E. Commerce segment is important because this portion of the consumer business has lower relative consumer acquisition costs and as this thus quite scalable. We believe this platform should scale to profitability as we add additional products onto this platform and again. The addition of new consumer health products very much remains our plan for growth along with <unk>.

<unk> organic growth going forward.

Turning now to our development pipeline I'll start with your life. As a reminder, <unk> is a first in class Ultra Violet a light based endotracheal catheter initially targeting the treatment of severe respiratory infections and mechanically ventilated hospitalized patients we licensed global rights to the heel light technology platform last year from Cedar.

Sinai Medical center for all respiratory applications.

We announced published data from two journal publications that we believe points to the potentially groundbreaking efficacy of this anti infective platform.

These data demonstrated that UV, a light reduces cellular cytokine release from human endotracheal cells infected with coronavirus and at UV, a light catheter therapy is associated with a significant reduction in Sars COVID-19, two viral load and importantly improvement in clinical outcomes for mechanically ventilated COVID-19 patients.

We remain on track to initiate this quarter 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 hospitals in Barcelona, Spain and is expected to enroll 40 patients. 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 top line data in the first half of calendar year 2022.

The data we have reported continued to demonstrate the profound commercial opportunity for <unk> with potential applications to disease.

Areas outside of Covid, such as ventilator associated pneumonia severe influenza.

And other difficult to treat infections. We are excited to continue exploring the depth of <unk> potential and are already planning. Our first study outside of COVID-19, exploring ventilator associated pneumonia, we expect that proof of concept study also to get underway this quarter.

Our pipeline is also highlighted by <unk> 101 or into storm, a pivotal study ready new chemical entity that targets the treatment of pediatric onset rare disease vascular <unk> danlos syndrome for beds.

<unk> is a rare genetic disorder typically diagnosed in childhood and characterized by arterial aneurysm dissection and rupture bow rupture in the rupture of the graduate uterus. There are currently no FDA approved treatments for beds.

<unk> is easily diagnosed with a genetic test confirming the coal <unk>, one mutation and approximately 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 locating and treating those patients.

In September we announced the formation of a scientific advisory board, consisting of leading experts and rare genetic pediatric diseases and chaired by Dr. How deeds of Johns Hopkins, who has conducted the groundbreaking research to date supporting <unk> hundred one in beds.

With the formation of an frequent interaction with the.

The company is well positioned to execute on the development of <unk> hundred one for the patients that desperately need this treatment.

We have held numerous meetings as we continue to develop the protocol and study plans as well as identify prospective study sites.

We are currently pursuing orphan drug designation from each of the FDA and EMA with the goal of receiving this status in the first half of calendar year 2022.

We plan to launch a pivotal study referred to as the prevent trial of <unk> hundred one in patients with beds with an enrollment of approximately 260 coal three eight <unk> positive patients and then randomize those patients one to one.

The primary endpoint of this study is the reduction of fatal or non-fatal arterial a bench such as ruptures dissections and pseudo aneurysms, we expect to study patients taking standard background meds like beta blockers, and arps with and without into storage and imaging those patients every six months over a 30 month treatment period.

We're planning on an interim analysis and also capturing secondary endpoints inclusive of safety measures. We expect to initiate the study in the first half of 2022 and fully enroll the study in.

In Q1 of 2023.

We have also helped numerous patient and advocacy group events around beds in support of Balers demos, specifically, including the dealers downloads society. The vets movement beds and Annabel challenge all of these organizations are highly engaged with us have been instrumental in assisting with patient site patient and site identification and.

Are constantly instrumental on their support.

And their support of beds patients of the overall beds community and with that I'll now turn the call over to rich for some additional financial highlights rich.

Thank you Josh and thank you everyone for joining us. This afternoon at September 30 of 2021, we had $46 million in cash cash equivalents and restricted cash or borrowing on the revolver at the end of September was only <unk> 5 million versus $7 9 million at June 30 of 2021.

Net revenue for the fiscal quarter ended September 32021 was $21 $9 million compared to $13 $5 million in the same quarter in 2020, a year over year increase of 62%.

Net revenue from the consumer Health Division for the three months ended September 32021 was $8 million compared to $7 $8 million in the same quarter last year, a growth of over 3% year over year.

Third calendar quarter is historically, a low quarter for the consumer health business and as <unk> mentioned, we're pleased to continue growing this business over a transient spike last year, owing to the pandemic.

Net revenue for the prescription division for the three months ended September.

32021 was $13 9 billion from $5 $8 million in the same quarter last year.

This concludes our second full quarter of ADHD revenue as Josh mentioned July is historically, the slowest months of the year for ADHD prescriptions before rebounding in August and particularly September with the start of the back to school season.

The market did see a slightly slower return to the back to school prescriptions as compared to prior years, particularly in the methylphenidate market as the number of schools have delayed reopening will continue to promote learning.

Gross profit for the three months ended September 32021 was $12 $5 million versus $9 $5 million for the three months ended September 32020. This was the highest quarterly gross profit posted in the history of the company.

Gross margin rebounded to 57% as previously projected following a full expensing last quarter of the ADHD EBIT up inventory costs following the <unk> acquisition.

For the first fiscal quarter of 2022, net loss was $27 9 million or a one.

Dollars nine per share as compared to $4 $3 million or <unk> 35 per share the same period last year.

Net loss reflects an impairment charge of $19 $5 million, resulting from an assessment of the carrying value of the company's assets in light of the recent decline in stock price.

Nothing out for the impairment charge and the related tax effect. The net loss for the quarter would otherwise have been approximately $8 5 million or <unk> 33 per share.

I will now turn the call back over to Josh for some additional commentary Josh.

Thank you rich so as you can see we've made significant headway towards value creation as a leading specialty pharmaceutical company with a growing development pipeline going forward. We are committed to focusing on growing revenues from our core Rx business supported by revenues from our consumer health business and building our pipeline led by our 101 and <unk>.

As we carry on with our trajectory, we expect to continue to identify and potentially bring in accretive complementary products in late stage pipeline opportunities and to further expand our business.

For here.

We remain on track to initiate a study in Spain, shortly with topline data expected in the first half of 2022 and are initiating a proof of concept study and ventilator associated pneumonia.

For <unk> hundred one IND.

IND submission preparations and study site identification and qualifications are underway for the planned pivotal clinical trial and we expect to start that trial in 2022.

As I previously stated we believe we have the right products to drive our growth we have a driven team and a highly focused sales force and we have a therapeutic pipeline with real potential we have strong momentum at the moment, we're really proud of where we stand today and look forward to updating you on our progress I will now turn the call back over to the operator for Q&A Matt.

Certainly.

First question is coming from Jennifer Kim from Cantor Fitzgerald. Your line is live.

Hey, everyone. Thanks for taking my questions.

With you Chris just on R&D I think you mentioned for Huguely, you're also exploring.

Study outside of Covid.

Yeah.

Can you can you just clarify if that's the case that there will be two studies.

And then how we should think about the cost of that going into R&D modeling.

And then my second question is for the quarter the ADHD product.

How much of the revenue came from those products.

Thanks.

Thank you Jennifer I'll take the first one and thanks for your thanks for your questions. So with respect to R&D and heal light. Yes, we are anticipating starting a study in ventilator associated pneumonia, Jennifer to preclinical animal study.

At the same hospital that will be conducting expect to kick that off shortly that's relatively nominal in terms of the overall cost and that will truly just established proof of concept in terms of the UV a light catheter is ability to to eradicate the pathogens that are most typically.

Associated with ventilator assisted pneumonia, so thats a relatively low cost relatively straightforward study to get done so it'll be really be exploratory.

So it does from a timeline perspective again expect to kick that off here this quarter.

And until we get it underway and understand the relative ease with which we can get the animals.

Dose so to speak we won't necessarily report out exactly when but I would expect it's it's a study that will take us less than less than five to six months. So realistically first half of calendar 'twenty. Two we would expect to see results from that.

Jennifer the ADHD portfolio generated approximately $9 $7 million in the quarter.

Okay, great Thanks, and historically.

Sort of all of the ADHD.

What does the quarter over quarter growth look like as you get into that.

Back to school season historically.

Yes, so normally the two lowest quarters of the year.

The.

June quarter and September quarter, So the June quarter was $10 six.

Like I just mentioned the September quarter nine six this normally fairly significant growth in the fourth fiscal quarter. Because we've had the back to school October is usually a big as Josh had mentioned report cards first parent teacher conference. So it's usually a second spike for ADHD.

So it's usually tremendous growth I don't have the exact percentage there is usually a 30%, 35% what I call peak to trough. So between May and July of.

A reduction in revenue about 35%.

Okay. That's helpful. Thanks, guys.

Thank you.

Thank you there are no further questions in the queue I will now hand, the conference back to Josh Disbrow for closing remarks. Please go ahead.

Thank you, Matt and thanks, everyone for joining us today on the call.

Really pleased with the progress we've made to date and we'll look forward to updating you on our progress here in the next one so until then have a good evening. Thanks again.