Release Date: November 13, 2024

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 first quarter with positive net income in the company's history.
• The company achieved its sixth consecutive quarter of positive adjusted EBITDA.
• ADHD script levels are above normalized trend lines, indicating growth in the ADHD portfolio.
• The pediatric portfolio saw its first sequential revenue growth in the last five quarters.
• Organizational changes are expected to reduce operating expenses by at least $2 million annually.

Negative Points

• Net revenue decreased to $16.6 million from $17.8 million in the year-ago quarter.
• Pediatric revenue was down to $1.3 million from $2.6 million compared to the previous year.
• Gross margin slightly decreased to 72% from 73% in the previous year.
• There is expected noise in gross margins for the next several quarters due to inventory costs.
• The company is still recovering from the impact of payer changes on its pediatric brands.

Q & A Highlights

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

Q: On the ADHD franchise, do you think there's a strategic opportunity to broaden promotional or extend your geographic reach for the franchise? A: Yes, we have already begun to expand our reach in multiple ways. We are evaluating territories for expansion and have aligned with unique distributors beyond traditional modes. We also leverage our RS Connect network pharmacies and employ nonpersonal promotion tactics to reach areas without direct sales presence. (Josh Disbrow, CEO)

Q: Can you provide additional color on how pediatric scripts are performing since your last call, and comment on the growth nets and pricing stability? A: Gross to nets have been steady and stabilizing, with a seasonal improvement as deductibles are met. Pediatric scripts have shown significant momentum, with a 54% sequential growth from the previous quarter and a further 16% increase from September to October. (Josh Disbrow, CEO)

Q: Can you expand on the initiatives to drive pediatric growth and the coverage expansion successes? A: We've shifted promotional priorities to include pediatric targets in existing territories and expanded into new areas with improved coverage. We've also pursued new distributors and optimized coverage, seeing improvements in state government plans and Medicaid coverage. (Josh Disbrow, CEO)

Q: When do you expect the noise in gross margin numbers to be resolved? A: We anticipate that Q2 and Q3 will still reflect lower margins, with improvements starting in Q4 and fully normalized margins by Q1 of fiscal '26. (Ryan Sehorn, CFO)

Q: Can you discuss product licensing opportunities from both out-licensing and in-licensing perspectives? A: We have out-licensed ADHD brands in Israel and Canada, expecting material royalties in 18-24 months. For in-licensing, we are actively pursuing commercial stage assets that fit our call points and Rx Connect infrastructure, with ongoing discussions for potential acquisitions. (Josh Disbrow, CEO)

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