Aytu BioScience, Inc. (NASDAQ:AYTU) Q1 2020 Earnings Conference Call November 14, 2019 4:30 PM ET Company Participants Joshua Disbrow - Chairman & CEO David Green - CFO, Secretary & Treasurer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann & Co. Carl Byrnes - Northland Capital Markets Operator Good afternoon, everyone, and thank you for joining us for the Aytu BioScience First Quarter Fiscal 2020 Business Update Call. With me this afternoon are Aytu's Chairman and Chief Executive Officer, Jo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share AYTU The NASDAQ Stock Market LLC FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commis ...

Aytu BioScience, Inc. (NASDAQ:AYTU) Commercial Portfolio Acquisition Overview Conference Call October 14, 2019 4:30 PM ET Company Participants Josh Disbrow - Chairman and Chief Executive Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann Carl Byrnes - Northland Capital Markets Operator Good afternoon, everyone, and thank you for joining us for this Conference Call discussing Aytu BioScience’s Announced Acquisition of a Six Product Commercial Portfolio. With me this afternoon to discuss ...

Aytu BioScience, Inc. (NASDAQ:AYTU) Q4 2019 Earnings Conference Call September 26, 2019 4:30 PM ET Company Participants Josh Disbrow - Chairman & Chief Executive Officer David Green - Chief Financial Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann & Co. Inc. Carl Byrnes - Northland Capital Markets Operator Good morning, everyone. Thank you for joining us for the Aytu BioScience’s Year-End and Fourth Quarter Business Update Call for the Year-Ended June 30, 2019. With me this afternoon ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Aytu BioScience commercializes a portfolio of novel pharmaceutical and diagnostic products through a strategy of sales growth and asset acquisition [Company Overview and Strategy](index=5&type=section&id=Company%20Overview%20and%20Strategy) The company's business model focuses on acquiring and commercializing novel products, supported by a four-pronged growth strategy - The company's business model is to acquire and commercialize novel pharmaceutical products, with a current portfolio of **four FDA-approved products and one diagnostic system**[13](index=13&type=chunk)[14](index=14&type=chunk) - Aytu's four-pronged strategy includes growing U.S. product sales, expanding the MiOXSYS system ex-U.S, seeking FDA clearance for MiOXSYS, and acquiring new assets[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) [Products and Markets](index=6&type=section&id=Products%20and%20Markets) The product portfolio targets large U.S. and global markets for testosterone replacement, cough, insomnia, and male infertility diagnostics Key Products and Target Markets | Product | Indication | Market Size | Key Feature | | :--- | :--- | :--- | :--- | | **Natesto®** | Testosterone Replacement | $1.8 billion U.S. market | Only TRT delivered via nasal gel, no black box warning for transference | | **Tuzistra® XR** | Cough (Antitussive) | >$3 billion U.S. market | Only FDA-approved 12-hour codeine-based antitussive | | **ZolpiMist™** | Insomnia | $1.8 billion U.S. market | Only oral spray formulation of zolpidem tartrate | | **MiOXSYS®** | Male Infertility Diagnostic | Global market to exceed $4.7B by 2025 | Rapid, point-of-care system to measure oxidative stress in semen. CE marked, seeking U.S. FDA clearance | [Government Regulation and Intellectual Property](index=9&type=section&id=Government%20Regulation%20and%20Intellectual%20Property) Products are subject to extensive FDA and DEA regulation, with market exclusivity protected by licensed and owned patent portfolios - Natesto®, Tuzistra® XR, and ZolpiMist™ are regulated as **controlled substances by the DEA** (Schedule III and IV), requiring stringent compliance[48](index=48&type=chunk)[180](index=180&type=chunk) - The MiOXSYS® system is protected by a robust patent portfolio with **44 issued patents and 18 pending applications** in the U.S. and key foreign jurisdictions[60](index=60&type=chunk)[61](index=61&type=chunk) - The company has exclusive U.S. licenses for Natesto® (patents to 2024), Tuzistra® XR (patents to 2029), and ZolpiMist™[27](index=27&type=chunk)[56](index=56&type=chunk)[59](index=59&type=chunk) [Competition and Manufacturing](index=13&type=section&id=Competition%20and%20Manufacturing) The company faces intense competition from large pharmaceutical firms and outsources all product manufacturing to cGMP-compliant partners - The company competes against large, well-resourced pharmaceutical companies, including **AbbVie (AndroGel) for Natesto and generic manufacturers for ZolpiMist**[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk) - Aytu's business strategy is to use **cGMP-compliant contract manufacturers** for all clinical and commercial supplies[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) Key risks include a history of net losses, need for capital, intense competition, and reliance on third-party manufacturers and licensors - The company has a history of losses, with a **net loss of $27.1 million for the year ended June 30, 2019**, and may need to raise additional funding[87](index=87&type=chunk)[90](index=90&type=chunk) - Natesto, Tuzistra XR, and ZolpiMist are **controlled substances subject to strict DEA regulation**, which could limit commercialization and impose significant compliance costs[179](index=179&type=chunk)[180](index=180&type=chunk) - The company faces substantial competition from larger companies with **greater financial and technical resources**, placing it at a significant disadvantage[69](index=69&type=chunk)[149](index=149&type=chunk) - **Armistice Capital holds a significant ownership percentage (up to 40% potential)** and has a board seat, giving it the ability to exert significant control[221](index=221&type=chunk)[222](index=222&type=chunk) - The company **relies on third-party manufacturers** for all its products, creating risks related to regulatory compliance and supply disruptions[167](index=167&type=chunk)[168](index=168&type=chunk) [Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from SEC staff - None[262](index=262&type=chunk) [Properties](index=46&type=section&id=Item%202.%20Properties) The company leases its principal executive offices in Englewood, Colorado and additional office space in Raleigh, North Carolina - The company maintains operating leases for its principal executive offices in Englewood, CO, and additional office space in Raleigh, NC[264](index=264&type=chunk)[265](index=265&type=chunk) [Legal Proceedings](index=46&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is currently not party to any material legal proceedings[267](index=267&type=chunk) [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[267](index=267&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'AYTU', and the company does not anticipate paying cash dividends - The company's common stock is listed on the **NASDAQ Capital Market under the symbol 'AYTU'**[269](index=269&type=chunk) Fiscal Year 2019 Common Stock Price Range ($) | Quarter | High | Low | | :--- | :--- | :--- | | Q1 (ended Sep 30, 2018) | $7.80 | $2.40 | | Q2 (ended Dec 31, 2018) | $3.23 | $0.68 | | Q3 (ended Mar 31, 2019) | $2.53 | $0.78 | | Q4 (ended Jun 30, 2019) | $2.61 | $1.50 | - The company has not paid cash dividends and does not intend to in the foreseeable future, planning to **retain earnings for operations**[274](index=274&type=chunk) [Selected Financial Data](index=48&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable as the company is a smaller reporting company - Not applicable[276](index=276&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2019 revenue doubled to $7.3M, but net loss widened to $27.1M, raising substantial doubt about its ability to continue as a going concern Results of Operations Comparison (Years ended June 30) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $7,320,357 | $3,660,120 | +$3,660,237 | | **Loss from Operations** | $(16,846,637) | $(19,700,234) | +$2,853,597 | | **Net Loss** | $(27,131,908) | $(10,187,863) | -$(16,944,045) | - The **100% increase in product revenue** in FY2019 was driven by higher Natesto sales and the launch of Tuzistra XR and ZolpiMist[285](index=285&type=chunk) - The significant increase in net loss was primarily due to a **non-cash loss from the change in fair value of contingent consideration of $9.8 million** in FY2019[283](index=283&type=chunk) Cash Flow Summary (Years ended June 30) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,831,377) | $(15,940,322) | | Net cash used in investing activities | $(1,061,985) | $(484,292) | | Net cash provided by financing activities | $19,075,062 | $22,659,599 | - The company has **substantial doubt about its ability to continue as a going concern** due to recurring losses and an accumulated deficit of $106.4 million[280](index=280&type=chunk)[399](index=399&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company is a smaller reporting company - Not applicable[298](index=298&type=chunk) [Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains audited financial statements, with the auditor's report highlighting substantial doubt about the company's going concern status - The Report of Independent Registered Public Accounting Firm expresses **substantial doubt about the Company's ability to continue as a going concern**[376](index=376&type=chunk)[383](index=383&type=chunk) - As of June 30, 2019, the company had **cash and cash equivalents of $11.0 million** and an **accumulated deficit of $106.4 million**[386](index=386&type=chunk) - Subsequent to the fiscal year-end, the company signed a **definitive merger agreement with Innovus Pharmaceuticals, Inc**[533](index=533&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=51&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[299](index=299&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls, procedures, and internal control over financial reporting were effective as of June 30, 2019 - Management concluded that both disclosure controls and procedures and internal control over financial reporting were **effective as of June 30, 2019**[299](index=299&type=chunk)[301](index=301&type=chunk) [Other Information](index=52&type=section&id=Item%209B.%20Other%20Information) The company reports no other material information for this item - None[303](index=303&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's leadership team, board structure, and corporate governance policies, including its code of ethics - The Board of Directors is comprised of five members, and key executive officers include **Joshua R. Disbrow (CEO), Jarrett T. Disbrow (COO), and David A. Green (CFO)**[305](index=305&type=chunk)[306](index=306&type=chunk) - The Board has an Audit Committee, Compensation Committee, and Nominating and Governance Committee, with charters available on the company's website[320](index=320&type=chunk) - Director John A. Donofrio Jr. qualifies as an **audit committee financial expert**[321](index=321&type=chunk) [Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation combines cash and equity, with CEO total compensation of $1.04 million in FY2019 and severance provisions in place FY 2019 Named Executive Officer Compensation | Name and Principal Position | Salary ($) | Bonus ($) | Stock Award ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | **Joshua R. Disbrow**, CEO | 330,000 | 135,000 | 578,705 | 1,043,705 | | **Jarrett T. Disbrow**, COO | 250,000 | 105,000 | 438,413 | 793,413 | | **David A. Green**, CFO | 250,000 | 95,000 | 340,988 | 685,988 | - Non-employee director compensation includes an annual cash retainer (**$25,000 base, $40,000 for chair**) and stock awards (**initial grant of 65,000 restricted shares**)[325](index=325&type=chunk) - Executive employment agreements include a provision for a lump sum payment of **two times base salary** if terminated without cause or for good reason[339](index=339&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=63&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Armistice Capital, LLC is the largest beneficial owner with 57.06% of common stock as of August 31, 2019 Beneficial Ownership as of August 31, 2019 | Name | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | | :--- | :--- | :--- | | **Armistice Capital, LLC** | 16,504,008 | 57.06% | | **Joshua Disbrow** (CEO) | 492,830 | 2.81% | | **Jarrett Disbrow** (COO) | 377,256 | 2.15% | | **David Green** (CFO) | 274,580 | 1.57% | - Beneficial ownership is based on **17,688,071 shares of common stock outstanding** as of August 31, 2019[345](index=345&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=65&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses significant transactions with affiliate Armistice Capital and reports that six of seven directors are independent - **Armistice Capital is considered an affiliate and related party**, holding a potential ownership stake of up to 40% of the company's common stock[353](index=353&type=chunk) - The company had a master services agreement with TrialCard Incorporated, where director **John Donofrio was an executive officer** until February 2019[354](index=354&type=chunk) - **Six of the seven directors are independent** under NASDAQ rules; CEO Josh Disbrow is not independent[358](index=358&type=chunk) [Principal Accountant Fees and Services](index=66&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Total fees paid to the independent auditor, Plante Moran, PLLC, were $209,000 in FY2019 and $275,000 in FY2018 Accountant Fees | Fee Type | FY 2019 | FY 2018 | | :--- | :--- | :--- | | Audit fees | $154,000 | $223,000 | | Audit-related fees | $55,000 | $52,000 | | Tax fees | $0 | $0 | | **Total fees** | **$209,000** | **$275,000** | Part IV [Exhibits and Financial Statement Schedules](index=67&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and material contracts filed as part of the annual report - The report includes the company's consolidated financial statements and notes[364](index=364&type=chunk) - Key exhibits filed include the **License and Supply Agreements** for Natesto, ZolpiMist, and Tuzistra XR[368](index=368&type=chunk)[369](index=369&type=chunk) [Subsequent Events](index=102&type=section&id=Subsequent%20Events) Post-fiscal year, the company amended its Natesto agreement and signed a definitive merger agreement to acquire Innovus Pharmaceuticals - On July 29, 2019, the company amended its License and Supply Agreement for Natesto with Acerus, which will assume regulatory and clinical responsibilities[530](index=530&type=chunk) - On September 12, 2019, Aytu signed a definitive agreement to **merge with Innovus Pharmaceuticals, Inc.** for up to $8 million in stock and $16 million in CVRs[533](index=533&type=chunk)

Financial Data and Key Metrics Changes - The company achieved an all-time high net revenue of approximately $2.4 million for the quarter ending March 31, 2019, representing a sequential growth of 33% and nearly 300% year-over-year [5][6][12] - Gross profit for Q3 2019 was $1.76 million, a 39% sequential increase from $1.27 million in Q2 [13] - The operating loss for Q3 2019 was $4.3 million, lower than the $4.6 million reported in Q2 and 43% lower than the same quarter last year [13] - The company ended the quarter with a cash balance of $14.75 million, down from $17.9 million at the end of Q2 [14] Business Line Data and Key Metrics Changes - Natesto continued to be the primary revenue driver, with revenue growth exceeding 380% year-over-year, supported by increased prescriptions and units shipped [7][8] - Tuzistra XR was launched through the sales force, with expectations for improved performance in the upcoming cough season [9][10] - ZolpiMist contributed solid revenue in its first full quarter with the sales force, and the company plans to shift focus towards ZolpiMist as the cough season winds down [9][10] Market Data and Key Metrics Changes - The company is expanding its distribution network for MiOXSYS, which is now used in over 30 countries, with approvals in Canada, the EU, Australia, and Mexico [10][11] - The partnership with SUDA Pharmaceuticals for ZolpiMist allows the company to benefit from sales outside the U.S. and Canada, with sublicensing deals already established in major markets [21] Company Strategy and Development Direction - The company aims to double revenues year-over-year and is focused on maintaining momentum with its product portfolio, particularly Natesto, ZolpiMist, and Tuzistra [5][16] - The management is optimistic about the upcoming cough season and expects to leverage the advantages of Tuzistra being a Schedule III product [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's current momentum and the potential for continued growth, particularly with the upcoming cough season and the performance of Natesto [5][16] - The company anticipates a more balanced portfolio in the future, with significant contributions expected from ZolpiMist and Tuzistra alongside Natesto [28] Other Important Information - The company eliminated all outstanding interest-bearing debt through an exchange transaction with Armistice Capital, enhancing its financial position [14] - The Natesto Spermatogenesis Study is progressing well, with interim data published indicating no adverse effects on fertility, which could position Natesto uniquely in the testosterone treatment market [17][19] Q&A Session Summary Question: Can you talk about the schedule for Tuzistra and its advantages? - Management highlighted that Tuzistra XR is classified as Schedule III, providing a significant market advantage over Schedule II products, making it easier for physicians to prescribe [24][26] Question: Can you discuss the expected product mix over the next several quarters? - Management expects Natesto to remain a significant revenue contributor, but anticipates a more balanced portfolio with meaningful contributions from ZolpiMist and Tuzistra [28][29] Question: What are the expectations for sequential growth? - Management does not provide specific guidance but expects continued strong growth year-over-year, with seasonal factors influencing quarterly dynamics [31] Question: Can you comment on sequential total prescription growth for Natesto? - Management confirmed strong sequential growth in prescriptions for Natesto, indicating a positive trend in sustaining therapy among patients [35] Question: What is the timing for the top-line readout of the Spermatogenesis Study? - The study is expected to wrap up in June/July, with results likely to be presented at a high-impact scientific conference [38]

Financial Performance - Aytu BioScience reported a net revenue of $2.4 million for the three months ended March 31, 2019, compared to $607,000 for the same period in 2018, representing a significant increase [109]. - For the nine months ended March 31, 2019, net revenue reached $5.6 million, up from $2.7 million in the prior year, indicating a growth of 106% [109]. - The company experienced a net loss of approximately $12.6 million for the nine months ended March 31, 2019, compared to a loss of $10.7 million for the same period in 2018 [107]. - Aytu BioScience's accumulated deficit stood at $91.9 million as of March 31, 2019 [99]. - The cost of sales for the three months ended March 31, 2019, was $617,000, down from $1.1 million in the same period in 2018 [113]. - Aytu BioScience's gross product revenue for the three months ended March 31, 2019, was $3.36 million, with net product revenue of $2.37 million after deductions [111]. Expenses and Cash Flow - Research and development expenses increased by $436,000, or 1,981.8%, for the nine months ended March 31, 2019, compared to the same period in 2018 [114]. - Selling, general and administrative costs increased by $738,000, or 15.9%, for the three months ended March 31, 2019, compared to the same period in 2018 [116]. - The company used $10.4 million in cash for operating activities during the nine months ended March 31, 2019, which was less than the reported net loss of $12.6 million [118]. - Cash used in investing activities was $860,000 during the nine months ended March 31, 2019, for purchasing fixed and operating assets [120]. - Cash use in operating activities during the nine months ended March 31, 2018, was $11.4 million [119]. Financing Activities - The company raised gross proceeds of $15.2 million from a public offering completed on October 9, 2018 [95]. - Net cash provided by financing activities was $19.0 million for the nine months ended March 31, 2019, primarily due to a public offering of $15.2 million [122]. - The company received proceeds of $259,000 from warrant exercises during the nine months ended March 31, 2019 [122]. Strategic Plans - The company plans to expand into other therapeutic areas as part of its growth strategy [94]. - The company expects selling, general and administrative expenses to increase slightly in the remainder of fiscal 2019 due to expanding the sales team and launching Tuzistra XR [116]. Asset Management - Amortization of intangible assets increased to $575,000 for the three months ended March 31, 2019, compared to $388,000 for the same period in 2018 [117]. - The impairment expense recognized in the three and nine months ended March 31, 2018, was $1,856,000 related to Aytu Women's Health assets [116]. - The company does not have off-balance sheet arrangements or material market risk exposure from financial instruments [124]. Product Portfolio - Aytu BioScience's product portfolio includes Natesto, Tuzistra XR, ZolpiMist, and MiOXSYS, with Natesto being the primary revenue driver [109].

Financial Data and Key Metrics Changes - The company reported record revenue of $1.8 million for Q2 2019, representing a 71% increase year-over-year and a 25% increase sequentially from Q1 2019 [6][18][19] - Year-to-date revenue reached $3.2 million, which is 52% higher than the same period last year [19] - Gross profit for Q2 was approximately $1.3 million, nearly double the gross profit reported for Q2 last year [19] - The net loss for the year-to-date period was $8.1 million, compared to a loss of $7.9 million for the same period last year [22] Business Line Data and Key Metrics Changes - Natesto was the primary revenue contributor, with total prescriptions increasing by 27% sequentially and achieving all-time weekly highs in December [11][19] - ZolpiMist launched into its first full quarter, with expectations for meaningful revenue growth going forward [12] - Tuzistra XR was launched through the sales force, showing rapid script growth in the early weeks of promotion [13][15] Market Data and Key Metrics Changes - The company is expanding its commercial portfolio in the $3 billion prescription cough suppressant market with Tuzistra XR [7][14] - MiOXSYS, the diagnostic platform for male infertility, is gaining traction in over 30 countries and is supported by reputable fertility thought leaders [16] Company Strategy and Development Direction - The company aims to leverage its diversified product portfolio to drive revenue growth, focusing on Natesto, ZolpiMist, and Tuzistra XR [15][30] - Aytu BioScience is not actively seeking new acquisitions but remains open to opportunities that align with its current product mix [42][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth and operational efficiency, expecting to maintain a stable operating expense structure [40][50] - The company anticipates a strong flu season, which may positively impact Tuzistra XR's launch [48] Other Important Information - The company successfully closed a $15 million equity offering and a $5 million strategic investment, significantly strengthening its balance sheet [8][22][24] - The Natesto Spermatogenesis Study is showing promising interim results, with potential implications for testosterone replacement therapy [27][29] Q&A Session Summary Question: Can you provide more details about the other cough suppressant filing? - The company is cautious about disclosing details but confirmed it is a complementary antitussive product currently under FDA review, with a near-term opportunity expected [33] Question: What is the expected severity of the new cough suppressant compared to Tuzistra? - The new product is expected to address slightly more severe cases but will not significantly change its position in the treatment paradigm [36] Question: What is the outlook for operating expenses relative to revenue growth? - Management expects to continue leveraging operating expenses effectively, maintaining a stable cost structure while growing revenue [40] Question: Any updates on M&A activity? - The company is satisfied with its current portfolio and is not actively seeking new acquisitions but remains open to opportunities that do not require significant upfront costs [42][43] Question: What is the expected cash burn for the second half of the year? - The company anticipates a decrease in cash burn as revenue grows, with a stable operating expense base [48][50]

Financial Performance - Aytu BioScience reported a net revenue of $1.8 million for the three months ended December 31, 2018, compared to $1.1 million for the same period in 2017, reflecting a growth of 63.6%[101] - The company achieved a net revenue of $3.2 million for the six months ended December 31, 2018, up from $2.1 million in the prior year, representing a growth of 52.4%[101] - Aytu incurred a net loss of approximately $4.7 million for the three months ended December 31, 2018, compared to a loss of $3.7 million for the same period in 2017[98] - The accumulated deficit as of December 31, 2018, was $87.4 million, indicating ongoing financial challenges since inception[92] - Aytu's gross product revenue for the three months ended December 31, 2018, was $3.37 million, with a net product revenue of $1.8 million after deductions[103] Expenses and Costs - Research and development expenses increased by $426,000, or 153.8%, for the three months ended December 31, 2018, compared to the same period in 2017[105] - The company anticipates an increase in operating expenses due to start-up costs related to the launch of Tuzistra XR and expansion of its sales team[95] - Selling, general and administrative costs increased by $585,000, or 12.8%, for the three months ended December 31, 2018, compared to the same period in 2017[107] - Selling, general and administrative costs decreased by $204,000, or 2.2%, for the six months ended December 31, 2018, compared to the same period in 2017[107] - The company expects selling, general and administrative expenses to increase slightly in the remainder of fiscal 2019 due to expanding the sales team and launching Tuzistra XR[107] - Professional fees decreased due to reduced use of outside accounting firms, contributing to the overall decrease in selling, general and administrative costs[107] Cash Flow and Financing - Net cash used in operating activities during the six months ended December 31, 2018 was $7.0 million, lower than the reported net loss of $8.1 million[109] - Net cash provided by financing activities in the six months ended December 31, 2018 was $18.7 million, primarily from a public offering of $15.2 million[113] - The company raised gross proceeds of $15.2 million from a public offering in October 2018, which is expected to support its operational needs[88] - The company closed on a debt agreement for $5.0 million during the six months ended December 31, 2018[113] Cash Position - Aytu's cash, cash equivalents, and restricted cash totaled $17.9 million as of December 31, 2018, providing a buffer for operational expenses[92] - Cash used for investing activities during the six months ended December 31, 2018 was $860,000, primarily for purchasing fixed and operating assets[111] Other Information - The company does not have off-balance sheet arrangements or material market risk exposure from financial instruments[115][116] - Amortization of intangible assets increased to $534,000 for the three months ended December 31, 2018, compared to $384,000 for the same period in 2017[108] - The company plans to expand into other therapeutic areas as part of its growth strategy, focusing on significant patient needs[87]