Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Aytu BioPharma Inc (NASDAQ:AYTU) reported its seventh consecutive quarter of positive adjusted EBITDA and second consecutive quarter of net income.
• The company successfully returned both its ADHD and pediatric portfolios to positive sequential prescription growth.
• Aytu BioPharma Inc (NASDAQ:AYTU) achieved $2 million in future annual cost savings through corporate optimization initiatives.
• The company has a strong cash position with a balance of $20.4 million at the end of December 2024.
• Aytu BioPharma Inc (NASDAQ:AYTU) is leveraging its A2RX Connect platform to improve patient access and differentiate its products in the market.

Negative Points

• ADHD net revenue decreased 17% year-over-year due to normalization of the ADHD stimulant supply chain.
• Gross margin for the second quarter was 66%, down from 78% in the same quarter last year, due to higher costs from transitioning manufacturing.
• The company is still working through higher-cost ADHD inventory, which is impacting gross margins.
• Operating expenses remain a concern, although there have been reductions, further optimization is needed.
• The company faces challenges in returning ADHD franchise revenue to previous levels of $16-17 million per quarter.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with AYTU.

Q: With the stimulant shortages easing, do you think the ADHD franchise could return to generating $16-17 million per quarter? A: (Josh Disbrow, CEO) We anticipate growth and believe reaching $16-17 million per quarter is feasible. As the market normalizes, maintaining market growth and gaining share should help us achieve this target.

Q: Were there any one-time effects in the second quarter for the pediatric business, and which product had the largest impact? A: (Josh Disbrow, CEO) There were no one-time effects; the growth was organic. The antihistamine franchise, particularly Karbinal, was the largest driver of growth, reaching its highest prescription levels since Q2 2024.

Q: Can you elaborate on the dynamics of Medicaid coverage in different states and any challenges faced? A: (Josh Disbrow, CEO) We've expanded coverage broadly, including state payers. Each state decides on coverage independently, but we've achieved broad-based coverage without supplemental rebates, maintaining healthy margins. We've diversified coverage across more states, reducing reliance on any single state.

Q: Could you clarify the additional $2 million in cost savings mentioned? A: (Josh Disbrow, CEO) The $2 million in savings is expected on top of what's been realized, starting this quarter. It's primarily from G&A reductions, equating to about $500,000 per quarter.

Q: Can you provide more details on potential business development or acquisitions? A: (Josh Disbrow, CEO) We are in active discussions for potential acquisitions, focusing on CNS/psychiatry and pediatrics. We're looking for opportunities with small or no upfront costs and good upside potential, though nothing is imminent.

Q: Are there any updates on the legal issues mentioned in earlier calls? A: (Josh Disbrow, CEO) All shareholder litigation from previous years is now resolved. The Whitmer class action and Revive Investing case have been settled or found in favor of the defendants, with no expected appeals.

Q: What does the go-forward expense level look like after the recent cost savings? A: (Ryan Cellhorn, CFO) We've completed material restructuring costs, and with recent headcount reductions, we expect to see benefits in Q3 and Q4. The optimized expense level should support top-line growth without significant incremental costs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.