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Aytu BioPharma, Inc. (AYTU) Q2 2023 Earnings Call Transcript

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Aytu BioPharma, Inc. (NASDAQ:AYTU) Q2 2023 Earnings Conference Call February 21, 2023 4:30 PM ET

Company Participants

Roger Weiss - Lytham Partners

Josh Disbrow - Chief Executive Officer

Mark Oki - Chief Financial Officer

Conference Call Participants

Jennifer Kim - Cantor Fitzgerald

Vernon Bernardino - H.C. Wainwright

Operator

Greetings. Welcome to nan Aytu BioPharma Fiscal 2023 Q2 Results Conference Call. At this time, each participants are connected a listen-only mode. [Operator Instructions]. Please statement this convention is being recorded.

I’ll now move nan convention complete to your host, Roger Weiss. You whitethorn begin.

Roger Weiss

Good afternoon, everyone, and convey you for joining america for Aytu BioPharma's 2nd 4th fiscal twelvemonth 2023 financial results convention call.

Joining america coming connected nan telephone is Aytu's CEO, Josh Disbrow; and nan company's Chief Financial Officer, Mark Oki. At nan conclusion of today's prepared remarks, we will unfastened nan telephone for a question-and-answer session.

I'd for illustration to punctual everyone that today's telephone is being recorded. A replay of today's telephone will beryllium disposable by utilizing nan telephone numbers and convention ID provided successful nan net property merchandise issued earlier today.

Finally, I'd besides for illustration to telephone to your attraction nan customary Safe Harbor disclosure regarding future-looking information. The convention telephone coming will incorporate definite forward-looking statements, including statements regarding nan goals, strategies, beliefs, expectations, and early imaginable operating results of Aytu BioPharma. Although guidance believes these statements are reasonable based connected estimates, assumptions, and projections arsenic of today, these statements are not guarantees of early performance. Time-sensitive accusation whitethorn nary longer beryllium meticulous astatine nan clip of immoderate telephonic aliases webcast replay. Actual results whitethorn disagree materially arsenic a consequence of risks, uncertainties, and different factors including, but not constricted to, nan factors group distant successful nan company's filings pinch nan SEC. Aytu undertakes nary responsibility to update aliases revise immoderate of these forward-looking statements.

With that said, I'd for illustration to move nan arena complete to Josh Disbrow, Chief Executive Officer of Aytu BioPharma. Josh, please proceed.

Josh Disbrow

Thank you, Roger, and welcome, everyone. First off, I'd for illustration to stock really highly pleased I americium pinch the caller momentum nan business has gained arsenic we study our 2nd consecutive 4th of institution wide affirmative adjusted EBITDA and beardown gross growth. Achieving affirmative adjusted EBITDA for nan 2nd consecutive 4th is different cardinal milestone for Aytu and helps to positively alteration nan trajectory of Aytu successful nan years to come. And I'm very enthusiastic astir our continued momentum into this existent March quarter, peculiarly successful medicine trends astatine nan ADHD franchise posted each clip play Rx numbers present successful February. More connected that arsenic we get into specifics.

As outlined successful today's property release, quarterly nett gross accrued by 14%, compared to nan year-ago 4th to $26.3 million, driven by beardown capacity successful our Rx segments. The Rx conception knowledgeable 23% gross maturation to $18 million, owed to nan continuing execution of our income unit and nan leverage we're generating done Aytu RxConnect, our caller and proprietary diligent entree program, on pinch immoderate marketplace tailwinds associated pinch nan ADHD stimulant shortages, which we are capitalizing on.

Within nan Rx segment, pediatric portfolio nett gross accrued 95% while ADHD scripts for nan 4th roseate 8.1% sequentially, highlighting nan increasing request for products. Further our Rx conception had a affirmative adjusted EBITDA of $3.1 cardinal and betterment compared to nan antagonistic adjusted EBITDA reported successful nan year-ago play of $1.9 cardinal and was besides a sequential summation from our first fiscal 4th of 2023.

This is now nan 3rd consecutive quarter, successful which nan medicine conception has had affirmative adjusted EBITDA. I'll explicate much connected that business successful a bit.

On nan Consumer Health side, nan conception continues to execute connected our nonsubjective to amended conception profitability pinch a attraction connected much efficient, higher publication separator online income channels, resulting successful a important 30% betterment successful nan segment's antagonistic adjusted EBITDA.

As we discussed a spot past quarter, near-term gross from nan Consumer Health conception will apt beryllium impacted arsenic we shape retired nan nonstop message transmission and attraction connected nan much profitable OTC medicines and their e-commerce income channel. Further, arsenic we hole to motorboat our C'rcle Health branding inaugural later this year, we judge we are good positioned to build upon our caller gains and propel this conception guardant to generating affirmative adjusted EBITDA and thereafter to free rate flow. I'll grow much connected this successful a infinitesimal arsenic well.

All told, adjusted EBITDA for nan institution was a affirmative $0.7 cardinal during nan 2nd 4th of 2023, which compares to a antagonistic $7.6 cardinal successful past year's 2nd quarter, an betterment of much than $8 million. I would besides for illustration to statement that nan institution generated a affirmative $2 cardinal of adjusted EBITDA erstwhile you exclude nan residual expenditures associated pinch nan now suspended objective improvement programs. This pro forma adjusted EBITDA highlights nan operating spot that Aytu has going forward.

On October 13 of past year, we announced an important displacement of nan company's strategy aimed astatine accelerating nan maturation of our commercialized business and achieving profitability. We suspended our objective improvement programs, including AR101 aliases enzastaurin for nan curen of Vascular Ehlers-Danlos syndrome. The suspension is expected to prevention nan institution complete $20 cardinal successful projected early study costs, allowing america to proceed nan upward trajectory of our affirmative adjusted EBITDA.

We person refocused our efforts connected increasing revenue, maximizing synergies and driving down expenses, each of which will service to accelerate our way to profitability. With our 2nd adjusted EBITDA 4th now successful hand, that way has go markedly clear.

Let's dive into nan commercialized business a spot more, opening pinch our Rx segment. As a reminder, wrong nan Rx segment, we run chiefly successful 2 therapeutic areas, ADHD and pediatrics. Let's commencement pinch ADHD. This portfolio includes Adzenys XR-ODT and Cotempla XR-ODT, nan first and only FDA approved amphetamine and methylphenidate extended-release orally disintegrating tablets, respectively for nan curen of ADHD.

These extended merchandise stimulant medications are formulated successful patient-friendly oral disintegrating tablets that utilize our proprietary micro particle modified merchandise supplier transportation exertion platform. During nan quarter, our ADHD products contributed $11.1 cardinal successful nett revenue, an summation of 2% compared to a twelvemonth agone play and down 4% sequentially. There's a small spot of sound successful nan gross number, however, arsenic nan scripts were really up complete 8% sequentially. We judge nan book number is simply a amended characterization of prescriber and diligent request and nan gross effect during nan 4th is mostly owed to nan extremity of twelvemonth shipping issues resulting from sustained inclement upwind passim nan holidays.

Remember that location was a important wintertime large wind that impacted logistics successful nan US astatine nan extremity of almanac 2022. So that delayed immoderate of our shipments. We expect to spot nan timing of this rumor drawback up to itself successful nan existent quarter. The marketplace dynamics surrounding ADHD proceed to supply tailwinds for nan company. First, we proceed to spot wide maturation successful nan ADHD marketplace arsenic we spot an summation successful diagnosis.

According to nan wellness information company, Trilliant Health, Adderall prescriptions for adults roseate 15.1% during 2020, double nan 7.4% emergence seen nan twelvemonth before. Additionally, nan effect from nan various generic Adderall XR shaper delays and proviso disruptions I talked astir past 4th still remain. Just past week, a Bloomberg article reported erstwhile again discussing nan ongoing effect of these shortages. Fortunately, our proviso has remained robust and uninterrupted. We judge nan competitory proviso disruptions complete nan past fewer quarters person enabled Adzenys to summation marketplace stock and mind stock and successful fact, we're seeing grounds of that successful nan data.

As a reminder, Adzenys is approved arsenic bioequivalent to Adderall XR, truthful our marque is good positioned to proceed to seizure further stock arsenic nan remnants of nan extended-release amphetamine shortage remain.

To further item really we're continuing to leverage nan ongoing Adderall XR shortage and our execution, I'll statement that for nan week ending February 10th, Adzenys registered complete 7,200 full prescriptions. This is an all-time precocious and is up 26% from nan erstwhile week. This is by acold nan highest play TRx level ever registered for nan brand.

Cotempla besides registered among its highest play numbers pinch complete 3,200 TRxs that aforesaid week. This is up 16% complete nan erstwhile week. We're now proceeding of methylphenidate shortages and cognize of Johnson & Johnson's discontinuation of nan Concerta-authorized generic. So, now some of our ADHD brands person important marketplace factors providing tailwinds that we judge whitethorn persist for immoderate time.

For nan 4 weeks ending February 10th, our mixed ADHD scripts are up 20% complete nan preceding 4 weeks and again, astatine an all-time precocious level. And crossed nan full Rx portfolio, we're up 24% year-to-date complete past year. To opportunity nan very least, we person tremendous momentum connected our broadside pinch our medicine brands.

Beyond nan macro tailwinds, I judge our squad has done a tremendous occupation creating and delivering connected nan devices headlined by RxConnect and building a highly motivated and refreshed income squad to thrust growth.

I'll punctual you that pursuing nan acquisition of Neos astir 2 years ago, we began nan process of revamping nan salesforce. With nan penchant for newer-to-industry income representatives and a stronger salary for outsized capacity compensation model, we turned complete a ample information of nan erstwhile Neos income team. This modulation and alteration of mindset took time, but it has now begun paying dividends crossed nan still caller and highly motivated income team.

In conjunction pinch our commercialized team, a cardinal portion of our occurrence lies pinch Aytu RxConnect. With RxConnect, we person astir 1,000 web pharmacies successful cardinal markets crossed nan state connected nan platform. RxConnect creates existent worth for each stakeholders, truthful we activity to thrust our prescriptions done that platform.

Compared to prescriptions filled extracurricular nan platform, Aytu RxConnect results successful astir 50% simplification successful diligent out-of-pocket co-payments, a 2x betterment successful Aytu's nett separator per Rx, and a much than 40% summation successful medicine refills by patients. The level genuinely does thrust worth for patients, wellness attraction providers and Aytu, which, of course, has been nan intent since nan inception of nan program.

With Aytu RxConnect, nan maturation of this level tin mostly beryllium attributed to nan truth that galore prescriber hassles associated pinch dealing pinch payers are removed. Further, patients' co-pays stay accordant and predictable.

In nan friction, patients and clinicians often acquisition erstwhile penning and filling branded scripts mostly goes away. Going forward, RxConnect will proceed to leverage our existent products and nan caller products we are evaluating to bring into nan portfolio.

Again, we're pleased pinch wherever we are, but I'm astir excited astir wherever we're going pinch these awesome caller book trends. A batch of activity has gone into creating this momentum and I'm grateful for nan full squad for putting america successful specified a beardown position.

Before I modulation to nan Pediatric Portfolio, conscionable a speedy statement connected nan manufacturing transportation some astatine Adzenys and Cotempla that we person underway, which is expected to further amended our profitability.

As we reported backmost successful September, nan process is good underway pinch nan prospective statement manufacturer, including nan behaviour of bioequivalent studies and nan different required work.

It is our extremity of having everything finalized successful nan CMO producing our ADHD products successful almanac 2023. This outsourcing stands to amended nan gross profit separator of nan ADHD brands by 15% aliases more, a meaningful measurement alteration that, if achieved, will further amended our P&L. More to travel arsenic this process continues, but we are pleased pinch our advancement connected this front.

Let's now modulation to our Pediatric Portfolio, which includes Poly-Vi-Flor, Tri-Vi-Flor, 2 complementary prescription, fluoride-based multivitamin merchandise lines containing combinations of fluoride and vitamins successful various formulations for infants and children pinch fluoride deficiency.

We besides marketplace Karbinal ER, an extended released carbinoxamine based antihistamine suspension indicated to dainty galore allergic conditions for patients 2 years and older. These products service ample established pediatric markets and connection chopped objective features and diligent benefits complete some branded and generic competitory products.

During nan quarter, we achieved 95% maturation successful gross from a medicine pediatric statement pinch gross ramping to $6.3 million. This was successful summation to nan 73% year-over-year maturation successful gross from pediatric products that we achieved successful nan first quarter. So nan maturation conscionable continues.

Similar to our ADHD portfolio, nan cardinal drivers present are nan improved income unit execution arsenic good arsenic nan Aytu RxConnect level leverage. These improvements are providing tailwinds for nan merchandise medicine maturation trajectory. Since we added PVF and TVF to RxConnect platform, we person grown medicine important and proceed to show singular growth.

The astir caller CDC information shows that only 63% of nan US organization has entree to fluoride successful their h2o and successful immoderate states for illustration New Jersey that percent is successful nan mid-teens aliases moreover less. We're continually evaluating geographic description opportunities for nan fluoride multivitamin statement arsenic we look to further areas successful request of fluoride supplementation. We judge that maturation crossed some caller and existing geographies will service arsenic nan ground from, which we will proceed to turn Poly-Vi-Flor, Tri-Vi-Flor sales.

To supply further caller discourse connected nan maturation of our pediatric brands, I'll statement nan tremendous maturation they're besides experiencing. Again, utilizing nan week ending February 10th, erstwhile we look astatine nan year-to-date medicine maturation complete nan aforesaid play past year, Combined Poly-Vi-Flor and Tri-Vi-Flor scripts are up complete 120% while Karbinal scripts are up complete 33%.

Overall, I'm pleased pinch nan traction we're achieving crossed our RX segment. As mentioned, we knowledgeable 23% gross maturation successful nan 2nd 4th and generated a affirmative $3.1 cardinal successful adjusted EBITDA, our 3rd consecutive 4th pinch affirmative RX conception adjusted EBITDA. With continued growth, costs reductions and gross separator betterment measures successful place, we expect to proceed nan affirmative EBITDA quarters going forward.

Let's modulation to our Consumer Health conception now. As a reminder, wrong Consumer Health, our halfway merchandise attraction is connected branded value-based products competing successful ample categories specified arsenic hairsbreadth loss, digestive health, glucosuria guidance and allergy, each competing pinch ample nationalist brands.

We waste straight to consumers done e-commerce platforms, including branded websites and connected nan Amazon platform. Additionally, nan user conception sells products done our proprietary income and trading platform, which focuses chiefly connected nonstop mail.

As we touched connected past quarter, our nonsubjective has been to amended Consumer Health conception profitability pinch a attraction connected much efficient, higher publication separator online income channels. As a result, we are phasing retired nan nonstop message transmission successful bid to attraction connected higher profitability OTC medicines and specifically done our e-commerce channel. This conscionable whitethorn negatively effect revenues successful nan near-term, but will thrust improved EBITDA wrong nan Consumer Health segment.

Focusing our efforts connected a much profitable OTC e-commerce portfolio, which I'll constituent retired were 70% complete nan twelvemonth agone quarter, resulted successful adjusted EBITDA for this conception improving by 30% aliases astir $500,000. This betterment was achieved contempt nan conception experiencing a 3% year-over-year alteration successful full conception revenues to $8.3 million. Our efforts to thrust sustainable profitable maturation successful this conception are opening to salary off.

As we person alluded to successful nan past and a large portion of Consumer Health maturation plan, we are establishing a worth marque called C'rcle Health, which we expect to officially motorboat later this year. C'rcle Health will correspond a marque family of worth based complete nan antagonistic medicines addressing a scope of conditions. Showcasing our OTC medicine products done a azygous recognized family marque will build much corporate marque equity. This marque inaugural is expected to create a communal one-stop shop for families seeking worth brands addressing common, mundane conditions yet driving much repetition customer sales, frankincense yielding higher wide margins and creating annuity value.

As portion of nan statement of nan C'rcle brand, we expect to rebrand existing products, adhd caller products and merge each those into nan C'rcle marque family. More to travel arsenic we attack nan C'rcle Launch.

Before I move it complete to Mark, fto maine conscionable say, really incredibly proud I americium of nan full organization. The squad continues to rally astir nan opportunity to build a genuinely awesome execution-oriented company, which has led to beardown gross maturation and our 2nd consecutive 4th pinch affirmative company-wide adjusted EBITDA.

And again, nan medicine trends done nan mediate of February are very encouraging to further adhd to our beardown position. With initiatives successful spot for further growth, coupled pinch operational improvements and further costs reductions and separator improvements during nan remainder of nan fiscal year, we are successful a overmuch stronger financial position to thrust semipermanent shareholder value.

With that overview now complete, fto maine move it complete to our CFO, Mark Oki for immoderate further colour to nan numbers. Mark?

Mark Oki

Thank you, Josh, and invited to everyone joining america connected nan call. Earlier today, you whitethorn person seen that we revenge a Form 10-Q/A to restate our first 4th earnings. During nan 2nd quarter, we evaluated nan accounting for antecedently granted warrants included in-debt and equity transactions. With this, nan institution concluded that definite warrants should person been accounted for arsenic a liability alternatively than arsenic equity.

The changes resulted successful a equilibrium expanse reclassification of nan worth of these warrants from further paid successful superior to a liability and a summation connected derivative warranty liabilities. The institution will worth these warrants connected a quarterly basis, which could consequence successful further gains aliases losses connected derivative warranty liabilities.

Please statement that, nan reclassification and these gains aliases losses person nary effect connected cash, moving capital, nonaccomplishment from operations, rate flows from operations aliases adjusted EBITDA. I will now build upon nan comments Josh has already provided regarding our quarterly results, starting pinch revenue. Net gross for nan fiscal 2023 2nd 4th was $26.3 cardinal compared to $23.1 cardinal for nan fiscal 2022 2nd quarter, a 14% increase.

Looking astatine nan constituent parts, nett gross from medicine merchandise income successful nan fiscal 2023 2nd 4th was $18 cardinal compared to $14.6 cardinal successful nan aforesaid 4th past year, an summation of 23%.

As Josh noted, ADHD knowledgeable 2% maturation successful nett gross to $11.1 cardinal successful nan fiscal 2023 2nd 4th against $10.9 cardinal during nan fiscal 2022 2nd quarter. The medicine Pediatric Portfolio knowledgeable 95% maturation successful nett gross to $6.3 cardinal successful our fiscal 2023 2nd 4th compared to $3.2 cardinal successful 2022. And again, this maturation was somewhat muted owed to nan extremity of almanac twelvemonth shipping delays that pushed gross into nan pursuing quarter.

For nan 2nd 4th of 2023, nett gross from nan Consumer Health conception was $8.3 cardinal compared to $8.5 cardinal successful nan aforesaid 4th past year. A alteration of 3% attributed to nan transmission strategy displacement Josh described. We proceed to person a mini magnitude of different medicine gross some this twelvemonth and last. This different pertains to discontinued aliases de-prioritized medicine products.

During this year's 2nd quarter, it totaled $581,000 successful nett gross and past year's 2nd 4th had $545,000 of nett revenue. In general, we expect different gross to alteration going forward.

Gross margins improved powerfully to 66% successful nan 2023 2nd 4th compared to 53% of nett revenues successful nan twelvemonth agone for illustration quarter. This betterment successful gross separator percent was chiefly driven by merchandise mix, improvements successful nan ADHD and Pediatric Product lines, a consequence of costs simplification efforts and greater volumes. Gross separator percentages tin alteration from play to play for various reasons. This betterment does not yet relationship for immoderate improvements we expect from nan manufacturing transportation we've discussed. So we are optimistic that nan margins will further amended upon nan completion of nan ADHD manufacturing transfer.

On nan OpEx side, for nan 2nd 4th of 2023, excluding impairment disbursal and amortization of intangible assets, operating expenses were $20.3 cardinal compared to $22.1 cardinal nan aforesaid play a twelvemonth ago, a alteration of astir $1.8 million. Research and improvement expenses were $1.7 cardinal successful nan 2nd 4th of 2023 compared to $4.5 cardinal successful nan 2022 2nd quarter. Of this $1.7 million, $1.3 cardinal was disbursal associated pinch nan precocious suspended pipeline programs.

This quarter's nett nonaccomplishment was impacted by an intangible plus impairment complaint of $2.6 cardinal related to our now erstwhile supplier candidate, NT-502, a consequence of our announced suspension of supplier development. There were nary impairments during nan 2nd 4th of fiscal 2022. The nett nonaccomplishment for nan 2nd 4th of fiscal 2023 was $6.7million aliases $2.15 per stock compared to $11.5 cardinal aliases $8.74 per stock for nan aforesaid 4th past year.

Adjusted EBITDA for nan 2nd 4th was a affirmative $727,000 compared to a antagonistic $7.6 cardinal a twelvemonth ago. When you look astatine nan breakdown by segment, adjusted EBITDA for our Prescription conception during nan 2nd 4th of fiscal 2023 was a affirmative $3.1 cardinal compared to a antagonistic $1.9 cardinal successful nan twelvemonth agone quarter. In nan Consumer Health segment, quarterly adjusted EBITDA was a antagonistic $1.1 cardinal compared to a antagonistic $1.5 cardinal successful nan twelvemonth agone period, a 30% betterment year-over-year.

Finally, adjusted EBITDA tied to our now suspended R&D pipeline was a antagonistic $1.3 cardinal during nan 2nd 4th of fiscal 2023, compared to a antagonistic $4.1 cardinal successful nan 2nd 4th of fiscal 2022. Going forward, we expect pipeline R&D walk to beryllium minimal until specified clip that we tin money R&D from operations aliases prosecute a partner. Full reconciliations from nett income to adjusted EBITDA are provided successful nan tables included successful today's property release.

Finally, connected nan equilibrium sheet, rate and rate equivalents astatine December 31, 2022, were $19.5 cardinal compared to $23.8 cardinal connected September 30, 2022. During nan 2nd quarter, we announced an statement pinch Avenue Venture Opportunities Fund to widen nan interest-only play of our existing elder secured indebtedness installation to January of 2024. We discussed this hold successful immoderate item during our erstwhile quarterly convention call. Please mention to today's property merchandise for a recap of nan details.

Let maine statement that we implemented a 1-for-20 reverse banal divided effective January 6, 2023. This action enabled nan institution to regain afloat compliance pinch NASDAQ's listing requirements effective January 20 of this year.

With that, fto maine move it backmost complete to Josh.

Josh Disbrow

Thank you, Mark. So fto maine conscionable reason pinch wherever I started. I'm highly pleased pinch nan caller momentum nan business has gained arsenic we study our 2nd consecutive 4th of company-wide affirmative adjusted EBITDA.

The strategical decisions backmost successful October of 2022 to accelerate nan maturation of our commercialized businesses and indefinitely suspend our objective improvement programs person put america connected nan way to profitability, evidenced by 2 consecutive quarters now of affirmative adjusted EBITDA.

With merchandise tailwinds successful some ADHD and our pediatric Rx business, coupled pinch nan displacement wrong our user wellness business toward much profitable e-commerce income and nan upcoming motorboat of our C'rcle family of brands, I judge we are poised to proceed nan caller trends passim nan 2nd half of nan year.

I admit everyone's information connected nan telephone coming and we'll now beryllium happy to reply immoderate questions you mightiness have.

Question-and-Answer Session

Operator

At this time, we will beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility comes from Jennifer Kim pinch Cantor Fitzgerald. Please proceed.

Jennifer Kim

Hi. Thanks for taking my questions and congrats connected nan quarter. I person a fewer questions here. The first one, I whitethorn person missed this, but nan extremity of nan twelvemonth shipping delays connected nan ADHD portfolio, tin you quantify really overmuch was pushed into nan 3rd quarter?

And past my 2nd mobility is, could you springiness immoderate much colour connected nan effect to user wellness expected complete nan adjacent fewer quarters successful position of nan gross impact, comparative to, I guess, nan betterment successful gross margins you'd expect? And past my past mobility is, manufacturing transfer, it seems for illustration that's still connected track. Do you still expect a 15% betterment successful margins from that? Thanks.

Mark Oki

Hi, Jennifer. This is Mark. We person not quantified aliases disclosed what that push into nan adjacent 4th was.

Josh Disbrow

Yes. It's a worldly amount, but it's -- gross to nets, obviously, are benignant of unsocial successful our industry, arsenic you know, Jennifer. So timing and things for illustration that person a small spot of a lagging effect, truthful we've not quantified it astatine this point.

Revenue effect connected user wellness shift. Yes, a bully question, Jennifer. Generally speaking, our mindset is precisely for illustration you said, and for illustration we said here, we're going to attraction overmuch much connected nan bottommost statement for that conception than we are nan apical line. It's not to propose that income are going to illness successful immoderate meaningful way.

We deliberation that they will beryllium level to down-ish, not massively, but we do expect to spot a bully betterment complete nan adjacent fistful of quarters successful EBITDA pinch nan dream that that business originates rate flowing.

And then, pinch respect to nan tech transfer, it does stay connected track. And, yes, we do expect an incremental betterment connected apical of wherever we are coming erstwhile we are yet retired of nan Grand Prairie installation and into nan caller statement manufacturing facility. So immoderate improvements would beryllium successful summation to what we've already gained conscionable done immoderate of nan normal improvements that had happened present complete nan past twelvemonth aliases so.

Mark Oki

And we're still targeting that 15 percent points for nan ADHD products, Jennifer.

Jennifer Kim

Okay, great. Maybe, if I could compression successful 1 much question. R&D expense, do you still expect that to spell down successful nan coming quarters, arsenic you benignant of move distant from nan costs associated pinch nan pipeline program? Thanks.

Mark Oki

Yes, successful nan successful nan 4th quarter, aliases I'm sorry, this almanac fiscal 2nd quarter, excuse me. We had a fewer expenses related to wrapping up nan AR101 trial. We'll person a fewer mini ones going forward, but location should beryllium a important alteration adjacent quarter.

Jennifer Kim

All right, acknowledgment again.

Josh Disbrow

Thank you.

Operator

[Operator Instructions] The adjacent mobility comes from Vernon Bernardino pinch H.C. Wainwright. Please proceed.

Vernon Bernardino

Hi, guys. Thanks for taking nan mobility and congrats connected nan awesome momentum. Just wanted to travel up connected nan erstwhile questions. As acold arsenic nan ADHD products are concerned, understand nan taking advantage of nan problems pinch nan generics retired there. But is location thing circumstantial you could constituent to that thief return up of, for example, Adzenys XR-ODT that you mightiness beryllium capable to capitalize connected that whitethorn further accelerate income successful that regard.

And then, you said you couldn't quantify, but conscionable wondering really overmuch of those are – do you expect those income that were deferred because of shipping issues successful nan almanac 4th fourth of 2022 mightiness we spot existent soon aliases we'll beryllium down nan road?

Josh Disbrow

Yes. So for nan past question, Vernon, yes, we should spot it successful nan adjacent quarter. Again, it's a mates of days of gross and arsenic you know, it's conscionable a timing point pinch nan shipments. We admit shipments based connected erstwhile we present a merchandise to nan wholesalers. And truthful you cognize it – a batch of it conscionable depends connected which time they orders and what person you. But location were immoderate delays because of nan travel, some products that were successful transit and nan timing of erstwhile they – they near our dock. So they – that each sewage arrived successful nan adjacent – nan adjacent week.

Mark Oki

In position of your first question, Vernon, what gives america benignant of comfortableness successful nan discourse of possibly continuing realization of these tailwinds. And what I'll constituent retired is, it was interesting, erstwhile you looked astatine benignant of nan precocious summer, early portion of nan fall, nan astir contiguous effect was really pinch nan contiguous merchandise to Adderall, conscionable regular Adderall, IR and past you would spot benignant of an effect benignant of down nan line, of people this transmission is, is 1 whereby it starts obviously, astatine nan manufacturer, nan shaper ships successful nan wholesaler, nan wholesaler ships successful nan retail, and past ultimately, nan diligent picks up nan prescriptions. That each takes a adjacent magnitude of clip to activity done specified that erstwhile nan statement -- erstwhile nan nationalist is benignant of being noticed of nan shortage, there's a lagging effect successful position of erstwhile that yet affects nan patient's expertise to prime that up.

There was a hold moreover further astir nan extended merchandise formulations of nan Adderall generics, specified that I would moreover opportunity conscionable now, we're starting to get into nan heavy of that realization, meaning really conscionable now to nan constituent that patients and physicians are starting to consciousness it connected a accordant ground pinch nan -- specifically pinch nan extended alleviation specified that we started to spot -- and I tin stock this because really prescriptions are each nationalist mostly speaking. The effect that we're starting to spot conscionable started to rear its caput really benignant of successful February.

So, you tin spot nan delayed quality of this effect, whereby precocious fall, we had news releases. We moreover put retired benignant of communications and property releases indicating that our product, Adzenys was still successful bully supply.

It really took moreover done nan holidays earlier we were comfortable that, that was starting to beryllium realized astatine nan expert and diligent level, specified that for that week ending February 10th, prescriptions of Adzenys were up 26% sequentially. So, from that preceding week, they jumped up 26%, which is evidently a important increase.

No measurement to show precisely really agelong we would expect this to continue. But I will opportunity there's continuing to beryllium a batch of chat astir that we -- conscionable past week, Bloomberg published yet different articles acold and wide astir this continuing shortage and nan issues and nan pinch that it's really putting connected patients.

So, it's not going to beryllium thing that lasts intelligibly forever, but it does look for illustration it is -- we're still very overmuch successful nan comparative early to mediate innings of this rumor specified that we should beryllium capable to use from this for nan foreseeable future. So, much to spot there, but book trends are really encouraging erstwhile you look astatine nan February scripts.

Vernon Bernardino

Just to follow-up connected that, though. Would you see this -- I mean, it seems for illustration request is growing. And truthful it would not look to beryllium a zero-sum game, but do you expect possibly that you're -- Adzenys from taking advantage of those needs and shortfalls, for example, could beryllium maintained. What efforts could you spot that could accelerate that? And past possibly long-term, support that benignant of -- if you could qualify arsenic marketplace share.

Josh Disbrow

Yes, it's a bully question. And 1 point that's important to statement astir ADHD, of course, is that it's chronic. And truthful erstwhile you get a diligent converted from a merchandise for illustration Adderall XR, you would expect to support that patient. And so, you're going to spot a measurement usability and 1 that would prolong itself.

You're not going to -- and you would not expect that a diligent gets 1 medicine of Adzenys and past Adderall comes backmost into proviso and past they move disconnected of Adzenys and spell backmost to Adderall, rather nan opposite.

In fact, erstwhile patients are connected a merchandise pinch which they're satisfied, they'll enactment connected it, and truthful that annuity worth is now coming disconnected of an moreover higher base. And truthful if you look astatine caller prescriptions, which mostly speaking, each of these prescriptions successful nan stimulant people are considered new, but erstwhile you triangulate nan information and look astatine caller starts versus refills, you would intelligibly expect nan refills to now beryllium capable to pivot disconnected of a overmuch higher baseline of caller starts. And that is what we're seeing, and that's 1 of nan things that is breathtaking to america from a business perspective.

And of course, from a humanistic perspective, we're capable to deterioration nan achromatic hat, truthful to speak, and travel successful and beryllium a existent thief to these patients and their families. And obviously, from a gross perspective, we are going to run disconnected of, we think, a higher baseline from which to summation refills, and truthful it's breathtaking for us.

We decidedly are seeing signs that patients are starting connected Adzenys. They're continuing connected to Adzenys. And of course, we person nan RxConnect level that enables them to proceed to person a bully acquisition to get refills astatine a predictable co-pay, moreover astatine times of nan twelvemonth for illustration January, February, March, erstwhile they person a higher co-pay owed to their deductible still needing to beryllium worked down.

We've sewage nan expertise to support these patients connected specified that arsenic we get into nan 2nd half aliases moreover 2nd benignant of two-thirds of nan year, these patients' co-pays will support nan aforesaid and we'll evidently recognize a higher nett trading value by kindness of a little bargain down. So nan nett use for this is tremendous for america arsenic we deliberation astir nan comparative adjacent word and past arsenic we spell guardant pinch higher refill rates and conscionable much patients wide connected therapy.

And conscionable to put a capstone connected it. For america to deed 7,200 prescriptions successful a week is by acold nan highest nan marque has knowledgeable successful its history, that goes each nan measurement backmost to erstwhile Neos had a marque and had almost 130 income representatives trading it. We now person thing successful nan vicinity of 40 income representatives trading it, and we've deed that all-time high. So things are intelligibly working, and it's a operation of these tailwinds that are brought astir by nan shortages, but it's really complemented by nan income unit execution, this young, quiet income force, coupled pinch nan powerfulness and nan leveragability of Aytu RxConnect. And truthful each 3 of those things are moving together correct now to really thrust prescriptions and we're excited astir wherever we are.

Vernon Bernardino

Great. Thanks for taking my questions. I'm looking guardant to those tailwinds being realized successful nan accelerated revenue. Thank you.

Josh Disbrow

Thanks, Vernon.

Operator

We person reached nan extremity of nan question-and-answer session. I will now move nan telephone complete to guidance for closing remarks.

Josh Disbrow

Thanks very much, John. Thanks to everyone for joining nan telephone today. We admit everyone's participation. Looking guardant to updating you connected our adjacent quarterly net call, which is scheduled for May. So pinch that, convey you for your liking successful Aytu. Thanks for attending, and everyone, person a awesome day aliases evening. Thanks very much. Take care.

Operator

This concludes today's conference. And you whitethorn disconnect your telephone lines astatine this time. Thank you for your participation.

Editor: Naga



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