Aytu Biopharma, Inc 10-K for FY2025
Aytu Biopharma, Inc (AYTU)
About this 10-K
Aytu Biopharma, Inc filed this 10-K on September 23, 2025, covering the fiscal year ended June 30, 2025 (FY2025).
Headline figures
Fiscal year ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $66.38M
- up 1.8% from $65.18M a year earlier
- Net loss
- $13.56M
- compared with a net loss of $15.84M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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AYTU BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | Accelerated filer | ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of December 31, 2024, the aggregate market value of common stock held by non-affiliates of the registrant was $
As of September 15, 2025, there were
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Items 10, 11, 12, 13 and 14 of Part III of this report is incorporated by reference from portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to its 2026 annual meeting of stockholders, to be filed within 120 days after June 30, 2025.
AYTU BIOPHARMA, INC.
FORM 10-K
CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the year ended June 30, 2025, (“Form 10-K” or “Annual Report”), includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report, including statements regarding our anticipated regulatory events, future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “may,” “will,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “potential,” or similar words, or the negatives of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, without limitation, statements regarding the markets for our approved products and our plans for our approved products, the anticipated start dates, durations and completion dates, as well as the potential future results, of our ongoing and future clinical trials, the anticipated designs of our future clinical trials, anticipated future regulatory submissions and events, the potential future commercialization of our product candidates, our anticipated future cash position and future events under our current and potential future collaborations. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including without limitation the risks described in Part I, Item 1A, Risk Factors below and elsewhere in this Annual Report. These risks are not exhaustive. Other sections of this Annual Report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. We assume no obligation to update or supplement forward-looking statements.
Unless otherwise indicated or unless the context otherwise requires, references in this Form 10-K to the “Company,” “Aytu,” “we,” “us,” or “our” are to Aytu BioPharma, Inc. and its wholly owned subsidiaries.
This Form 10-K refers to registered trademarks that we currently own or license, such as Aytu, Aytu BioPharma, Aytu RxConnect, Neos Therapeutics, EXXUA, Adzenys, Adzenys ER, Adzenys XR-ODT, Cotempla, Cotempla XR-ODT, Karbinal, Poly-Vi-Flor and Tri-Vi-Flor, which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. This Form 10-K also contains trademarks, service marks, copyrights and trade names of other companies, which are the property of their respective owners. Solely for convenience, our trademarks and tradenames referred to in this Form 10-K may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames. We obtained statistical data, market and product data, and forecasts used throughout this Form 10-K from market research, publicly available information and industry publications.
The following list summarizes what we believe to be the principal risks relevant to our company. The following summary is further elaborated on by the full text of the risk factors provided in Part I, Item 1A, Risk Factors of this Annual Report. All capitalized terms in this section not defined herein shall have the meanings given to them elsewhere in this Annual Report. Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:
Risks Related to Our Business and Financial Position
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We have incurred losses to date and can give no assurance of profitability. |
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We have not established sources of ongoing net revenue sufficient to cover operating costs. |
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We may need to raise additional funding, which may not be available on acceptable terms, or at all. |
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We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due. |
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The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility. |
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We have been and, in the future, may become a defendant in one or more stockholder derivative, class-action, and other litigation, and any such lawsuits may adversely affect our business, financial condition, results of operations and cash flows. |
Risks Related to Commercialization
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We are heavily dependent on the commercial success of our commercial products. To date, we have not generated sufficient net revenue from the sales of these products to achieve companywide profitability and we may never achieve or maintain profitability. |
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We rely on third parties to manufacture our products, and third-party manufacturing risks and inefficiencies may result in costs and delays that prevent us from successfully commercializing products and adversely affect our ability to produce our products. |
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Government restrictions and future potential actions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate net revenue. |
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Our financial results will depend on the acceptance among clinicians, third-party payors and the medical community of our products. |
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If third-party payors do not reimburse our customers for the products we sell or if reimbursement levels are set too low for us to sell our products at a profit, our ability to sell those products and our results of operations will be harmed. |
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Adzenys and Cotempla contain controlled substances, and their manufacture, use, sale, importation, exportation, prescribing and distribution are subject to regulation by the DEA. |
Risks Related to Our Intellectual Property
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A dispute concerning the infringement or misappropriation of our proprietary rights, or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business. |
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We are dependent on our relationships and license and commercialization agreements, and we rely on the intellectual property rights granted to us pursuant to the license and commercialization agreements. |
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The expiration or loss of patent protection may adversely affect our future net revenue and operating results. |
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Our ability to compete may decline if we do not adequately protect or enforce our intellectual property rights. |
Risks Related to Our Organization, Structure and Operations
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Our efforts to expand and transform our businesses may require significant investments; if our strategies are unsuccessful, our business, results of operations and/or financial condition may be materially adversely affected. |
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We may have difficulties integrating acquired businesses or assets and such acquisitions may not result in the anticipated benefits, as a result, our business, results of operations and/or financial condition may be materially adversely affected. |
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In fiscal 2025, the great majority of our gross revenue and gross accounts receivable were due to four significant customers, the loss of which could materially and adversely affect our results of operations. |
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Our accounts receivable subjects us to credit risk. |
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Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. |
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Public concern over the abuse of medications that are controlled substances, including increased legislative, legal and regulatory action, could negatively affect our business. |
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Certain of our stockholders own a large percentage of our stock and their interests may conflict with yours. |
Company Overview
Aytu BioPharma, Inc. (“Aytu,” the “Company,” “we,” “us,” or “our”) is a pharmaceutical company focused on advancing innovative medicines for complex central nervous system diseases to improve the quality of life for patients. We were originally incorporated as Rosewind Corporation on August 9, 2002, in the state of Colorado and re-incorporated as Aytu BioScience, Inc. in the state of Delaware on June 8, 2015. In March 2021, we changed our name to Aytu BioPharma, Inc. Our common stock trades on the Nasdaq Capital Market LLC (the “Nasdaq”) under the ticker symbol “AYTU.” Our principal office is located at 7900 East Union Avenue, Suite 920, Denver, Colorado 80237, and our telephone number is (720) 437-6580.
Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. In June 2025, we entered into an Exclusive Commercialization Agreement (the “Commercialization Agreement”) with Fabre-Kramer Holdings, Inc. (“Fabre-Kramer”) to commercialize EXXUA (gepirone) extended-release tablets (“EXXUA”) in the United States. Gepirone is a new chemical entity, and we believe EXXUA to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the United States Food and Drug Administration (“FDA”) for the treatment of major depressive disorder (“MDD”) in adults.
EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. We believe it can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a selective serotonin reuptake inhibitor (“SSRI”) and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function. It is our expectation that EXXUA has the potential to serve as a major growth catalyst for us and we anticipate launching EXXUA in the fourth calendar quarter of 2025 as a centerpiece of our commercial efforts.
In addition, we will continue to focus on commercializing innovative prescription products that address conditions frequently developed or diagnosed in children, including attention deficit hyperactivity disorder (“ADHD”). We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations. In the first quarter of fiscal 2025 we completed the previously announced wind down and divestiture of our Consumer Health business and now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, our consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation.
Our business from continuing operations is focused on the upcoming launch of EXXUA and on our current prescription pharmaceutical products sold primarily through third party wholesalers and pharmacies and which primarily consists of two product portfolios. The first primarily consists of two products for the treatment of ADHD: Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets (“Adzenys”) and Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets (“Cotempla” and Adzenys together with Cotempla the “ADHD Portfolio”). The second primarily consists of Karbinal ER (carbinoxamine maleate extended-release oral suspension) (“Karbinal”), an extended-release first-generation antihistamine suspension containing carbinoxamine indicated to treat numerous allergic conditions, and Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency (the “Pediatric Portfolio”). During the fourth quarter of fiscal 2024, we successfully completed the transition of all manufacturing of our Adzenys and Cotempla products to a United States-based third-party contract manufacturer to improve the profitability of these products.
We have incurred significant losses in each year since inception. Our net loss was $13.6 million for the year ended June 30, 2025, and as of June 30, 2025, we had an accumulated deficit of $333.5 million. We expect to continue to incur significant expenses in connection with our ongoing activities, although we do expect to become profitable through the continued growth of our commercial business.
In light of our own business activities and external developments in the biotechnology and biopharmaceutical industries, Aytu management and our board of directors (the “Board” or the “Board of Directors”) regularly reviews our performance, prospects and risks such as the potential impact to our business resulting from our competitive landscape (i.e., entry of generic competitors, payor pressures, new branded entrants, etc.). These reviews have included consideration of potential partnerships, collaborations, and other strategic transactions such as acquisitions or divestitures of programs or technology to enhance stockholder value. Aytu management and our Board expect to continue to evaluate potential strategic transactions and business combinations.
Recent Business Development
As part of our ongoing strategic evaluation and go-forward operating plan, we continue to prioritize growing our prescription business given the opportunity for EXXUA in the MDD market and the current market trends supporting our products’ growth. We believe focusing resources on our most profitable, growing products provides the most effective pathway to achieve companywide profitability and continued growth. As part of our plan we completed the wind down of operations and divested our Consumer Health business in the first quarter of fiscal 2025.
For fiscal 2025, we recorded net revenue of $66.4 million. During the year, we were able to continue the production of our ADHD medications, Adzenys and Cotempla, without encountering any supply chain interruptions in order to provide patients receiving stimulant prescriptions for the treatment of ADHD with alternative solutions to products that have experienced supply interruptions. As a result, we recorded our second highest prescription levels for both Adzenys and Cotempla during fiscal 2025, even though the ADHD marketplace saw a decrease in supply chain interruptions and a stabilization of ADHD product supply, resulting in $57.6 million of net revenue for our ADHD Portfolio, the second highest achieved in our history. We also saw Pediatric Portfolio growth to $8.8 million, a 20% increase from fiscal 2024, which reflects the positive effects from our recently implemented return-to-growth plan for this portfolio.
To reduce the costs associated with the manufacture of Adzenys and Cotempla we transferred the manufacturing of these products to a United States-based third-party manufacturer in the fourth quarter of fiscal 2024. Prior to this, we manufactured these products in our now closed facility in Grand Prairie, Texas.
As an additional result of focusing on building our portfolio of revenue-generating products and generating profitability, in fiscal 2023 we terminated our license agreements relating to Healight and NT0502 (N-desethyloxybutynin), and we indefinitely suspended active development of our clinical development programs including AR101 (enzastaurin) (“AR101”). In connection with this suspension, we engaged in negotiations with EnzCo, LLC (“EnzCo”) and Rumpus VEDS LLC, (“Rumpus VEDS”), Rumpus Therapeutics LLC, (“Rumpus Therapeutics”) and Rumpus Vascular LLC, (“Rumpus Vascular” and, together with Rumpus VEDS and Rumpus Therapeutics, “Rumpus”) for the repurchase of AR101. On August 5, 2025, we reached terms with Rumpus and EnzCo whereby for mutual consideration and releases, we transferred all of ours and Rumpus’ rights, title and interest in AR101 to EnzCo, which extinguished and terminated all of our obligations and Rumpus’ obligations under the April 21, 2021, asset purchase agreement by and between us and Rumpus (the “Rumpus Asset Purchase Agreement”). There is no other relationship between us, EnzCo or Rumpus other than as contracting parties to terminate the Rumpus Asset Purchase Agreement, and there are no penalties or remaining obligations for us for terminating the Rumpus Asset Purchase Agreement.
We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors and tariffs and our industry is currently encountering supply chain disruptions related to the sourcing of raw materials, increased costs of materials as result of tariffs, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. While we do not have sales or operations in Russia or Ukraine and we do not have significant sales or operations in the Middle East, it is possible that conflicts and trade wars could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures, increased costs and supply chain disruptions could be significant across the business throughout fiscal 2026 and into fiscal 2027. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products, and the pediatric product supply has remained adequate to satisfy demand for the preceding four years.
In October 2024, we received a Paragraph IV Certification Notice Letter (the “Notice Letter”) from Granules Pharmaceuticals, Inc. (“Granules”), stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange Book”). The Notice Letter states that Granules’ New Drug Application (“NDA”) for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. We plan to vigorously enforce our intellectual property rights related to Adzenys.
Debt and Equity Financings
Equity Financings
In June 2025, we raised gross proceeds of $16.6 million from the issuance of (i) 2,806,688 shares of our common stock, at a public offering price of $1.50 and 8,233,332 prefunded warrants at a public offering price of $1.4999 to purchase 8,233,332 shares of our common stock at an exercise price of $0.0001 per share (the “June 2025 Prefunded Warrants”). We received $14.8 million in proceeds net of underwriting commissions and offering expenses and intend to use the net proceeds from the offering for working capital, general corporate purposes and to enable us to exclusively commercialize EXXUA.
In June 2024, certain warrants to purchase 2,173,912 shares of our common stock at an exercise price of $1.59 (the “Tranche B Warrants”) were exercised, generating proceeds of $3.5 million. The Tranche B Warrants were converted into 367,478 shares of our common stock and 1,806,434 prefunded warrants to purchase shares of our common stock with an exercise price of $0.0001 per share (the “Tranche B Prefunded Warrants”). We used a portion of these proceeds as part of the $15.0 million term loan repayment described below.
Eclipse Agreement
In June 2025, we and certain of our subsidiaries entered into an Amendment No. 6 to Loan and Security Agreement (the “Eclipse Amendment No. 6”) to the loan and security agreement dated October 2, 2019, as amended by Amendment No. 1, dated March 19, 2021; Amendment No. 2, dated January 26, 2022; Amendment No. 3, dated June 1, 2022; Amendment No. 4 dated March 24, 2023; and Amendment No. 5 dated June 12, 2024 (together the “Eclipse Agreement”), with Eclipse Business Capital LLC (“Eclipse”), as agent, and the lenders party thereto (agent and such lenders, collectively, the “Eclipse Lender”). Under the Eclipse Agreement, we have two loan agreements, a term loan (the “Eclipse Term Loan”) and a revolving credit facility (the “Eclipse Revolving Loan”).
The Eclipse Term Loan consists of an outstanding principal amount of $13.0 million on the closing date of the Eclipse Amendment No. 6, at an interest rate of the secured overnight financing rate as administered by the SOFR Administrator (the “SOFR”) plus 7.0%, with a four-year term and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on the June 12, 2029, maturity date, as amended. In June 2024, we used the initial proceeds from the Eclipse Term Loan and a portion of the proceeds from the warrant exercises described above to repay in full a $15.0 million term loan.
The Eclipse Revolving Loan has a potential maximum borrowing base of $14.5 million at an interest rate of the SOFR plus 4.5%, which was temporarily increased pursuant to a $1.5 million incremental advance at an interest rate of the SOFR plus 5.5% (the “Eclipse Incremental Advance”), with repayment and permanent reduction of the Eclipse Incremental Advance commencing on August 1, 2025, and continuing on the first day of each calendar month thereafter, in an amount equal to $125,000 per month, until the Eclipse Incremental Advance has been reduced to $0. In addition, we are required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of the Eclipse Revolving Loan remains subject to a borrowing base and reserve, and availability blockage requirements and the maturity date, as amended, is June 12, 2029.
Commercial Business Overview
We operate through one business segment consisting of various prescription pharmaceutical products sold through third parties. We generate net revenue by selling our products through third party intermediaries in our distribution channels as well as directly to our customers. Over the past two years, we have undergone a planned, strategic change to focus on our core prescription business while seeking to acquire differentiated, branded central nervous system (“CNS”) products that complement our portfolio and focus. With this focus, we recently signed an exclusive commercialization agreement for EXXUA, which we believe to be a novel first-in-class treatment for MDD that can become an important treatment for MDD in the United States. Further, we believe that EXXUA is a perfect strategic fit and will be a centerpiece of our commercial efforts going forward considering the significant commercial potential, uniqueness of the product, our sales force’s CNS focus and alignment with our proprietary Aytu RxConnect patient access platform. We transitioned the manufacturing of Adzenys and Cotempla to a third-party manufacturer during the fourth quarter of fiscal 2024 and continue to use third party manufacturers for all other products.
Our business consists of EXXUA, which we anticipate launching in the fourth calendar quarter of 2025, our ADHD Portfolio and our Pediatric Portfolio. Our prescription products are sold primarily in the United States and are distributed through multiple channels, including sales to pharmaceutical wholesalers, distributors and pharmacies, using third-party logistics enterprises.
EXXUA is an extended-release medication that is FDA-approved for the treatment of MDD with what we believe to be a novel first-in-class oral selective serotonin 5HT1a receptor agonist indicated for the treatment of MDD in adults. EXXUA has also been studied in other psychiatric disorders, including generalized anxiety disorder (“GAD”) and hypoactive sexual desire disorder (“HSDD”).
Our ADHD products are extended-release stimulant medications formulated in patient-friendly, orally disintegrating tablets (“ODT”) that utilize the internally developed microparticle modified-release drug delivery technology platform. Products containing amphetamine or methylphenidate are the most commonly prescribed medications in the United States for the treatment of ADHD. Adzenys (for patients six years of age and above) and Cotempla (for patients six to seventeen years of age) are the first and only FDA-approved amphetamine and methylphenidate extended-release, orally disintegrating tablets, respectively, for the treatment of ADHD.
Our prescription Pediatric Portfolio includes Karbinal, an extended-release carbinoxamine (a first-generation antihistamine) suspension indicated to treat numerous allergic conditions for patients two years of age and above and Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based multi-vitamin product lines containing combinations of fluoride and vitamins in liquid and chewable tablet form for infants and children with fluoride deficiency. These products serve established pediatric markets and offer distinct clinical features and patient benefits.
We commercialize our business through our internal commercial organization that includes approximately 40 sales territories for our ADHD Portfolio and approximately five sales territories for our Pediatric Portfolio.
Our Aytu RxConnect patient support program operates through a network of over 1,000 pharmacies to offer affordable, predictable copays and hassle-free availability to all commercially insured patients, regardless of their individual insurance plan. In addition, Aytu RxConnect seeks to significantly reduce the challenges and frustrations that health care professionals and their office staff can face when prescribing branded medications, including our medications, for their patients.
In July 2023, we entered into an exclusive collaboration, distribution and supply agreement with Medomie Pharma Ltd (“Medomie”), a privately owned pharmaceutical company, for Medomie to commercialize Adzenys and Cotempla in Israel and the Palestinian Authority. In September 2024, we entered into an exclusive collaboration, distribution and supply agreement with Lupin Pharma Canada Ltd (“Lupin”), a subsidiary of global pharmaceutical company Lupin Limited, for Lupin to commercialize Adzenys and Cotempla in Canada. We will supply Adzenys and Cotempla to Medomie and Lupin based on forecasts and provide various product commercialization, regulatory and quality assurance resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for both Adzenys and Cotempla, which is expected to occur over the next 24 months. The agreements with Medomie and Lupin represent our first and second international commercial agreements for Adzenys and Cotempla, respectively.
Strategy
We are a pharmaceutical company focused on advancing innovative medicines for complex CNS diseases to improve the quality of life for patients. We are committed to enhancing the lives of individuals affected by psychiatric conditions with our innovative treatments for MDD and ADHD and ensuring broad access for those who need them most.
Our strategic priorities are to continue to increase net revenue and enhance our financial performance through operational and manufacturing efficiencies and portfolio prioritization. Specifically, we intend to:
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successfully launch EXXUA in the fourth calendar quarter of 2025 as the centerpiece of our commercialization efforts; |
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continue to grow our commercial branded, revenue-generating products, by increasing product sales and improving patient access in order to drive net revenue growth of our products already in the marketplace, which consist primarily of Adzenys, Cotempla, Karbinal, Poly-Vi-Flor and Tri-Vi-Flor. We expect to increase market share using our internal commercial organization and leveraging our advanced analytics platform to increase prescribing of our medicines; |
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leverage our novel Aytu RxConnect patient support platform, which is designed to reduce access barriers to medicines facing patients and healthcare professionals (“HCPs”) by providing coverage for all commercially insured patients, regardless of their individual insurance plan, thus establishing an affordable and predictable monthly co-pay for patients, and eliminating many of the hassles facing HCPs and their staff by improving availability of Aytu products at participating pharmacies; and |
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improve gross margins for our ADHD product franchise through the manufacturing transfer of Adzenys and Cotempla to a contract manufacturing organization, a transition that was completed in the fourth quarter of fiscal 2024, along with additional margin improvement initiatives. |
We believe our history of acquiring companies and in-licensing and acquiring products, along with our success in building out commercial organizations and executing product growth strategies, is a distinct competitive advantage. Our transactional adeptness and execution orientation enable us to continue to seek growth opportunities through both organic growth and opportunistic in-licensing or strategic acquisitions. Further, our commercial infrastructure and advanced analytics capability is scalable and lends itself to additional on-market assets and future product candidates that fit within our commercial capabilities and infrastructure. As such, in the near term, we may seek to leverage our commercial model and infrastructure by expanding our commercial portfolio with external product opportunities as we have done since our inception.
Products and Markets
Prescription Products: EXXUA (Gepirone) Extended-Release for the Treatment of Major Depressive Disorder in Adults
MDD, also known as clinical depression, is a serious mood disorder characterized by persistent feelings of sadness, hopelessness, and loss of interest in activities that once brought pleasure. These symptoms must be present for at least two weeks to warrant a patient’s diagnosis. MDD can significantly impact an individual’s daily life, affecting their ability to work, socialize, engage in self-care and maintain relationships. It is considered one of the leading causes of disability globally. While the exact causes are not fully understood, factors like genetics, brain chemistry imbalances, stressful life events and certain medical conditions are believed to play a role. Various treatment options, including medication, psychotherapy and lifestyle changes are available and can be effective for many individuals with MDD. However, despite many available treatment options, significant unmet needs remain in MDD given both ineffectiveness of treatments for many patients as well as a high rate of adverse events that affect patient compliance and treatment satisfaction.
The United States MDD market opportunity is significant given the over 340 million prescriptions written annual and the high rate of patient dissatisfaction and resulting high rate of switching MDD medications often attributable to adverse events caused by these medications. The most commonly prescribed treatments for MDD are SSRIs such as Paxil®, Prozac®, Lexapro® and Zoloft® and serotonin-norepinephrine reuptake inhibitors (“SNRIs”) such as Cymbalta® and Effexor®, while sometimes effective in treating MDD symptoms, these classes of medications commonly cause adverse events in the form of sexual side effects and weight gain. Greater than 40% of MDD patients switch from these initial therapies, indicating a high level of treatment ineffectiveness and side effects. Up to 70% of MDD patients complain of treatment emergent sexual dysfunction and greater than 65% complain of weight gain. As the only FDA-approved antidepressant acting on serotonin that does not carry a label warning about the risk of sexual dysfunction, we believe EXXUA can serve an important role in MDD treatment for these patients.
EXXUA is a new chemical entity, and we believe it to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the FDA for the treatment of MDD in adults. EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a SSRI and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function.
Given the compelling and novel product profile of EXXUA and the unmet needs of MDD patients, we believe EXXUA can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. We are well positioned to realize the significant market potential of EXXUA while positively impacting the lives of MDD patients.
EXXUA has demonstrated efficacy in treating MDD in two well-controlled clinical trials (and five additional supportive studies) while avoiding sexual dysfunction seen with SSRIs and SNRIs, and no statistically significant weight changes. EXXUA was approved by the FDA in September 2023.
The two pivotal phase three trials established the efficacy and safety of EXXUA for MDD. The first was Study FK-GBE-007 (n = 248) (“Study FK-GBE-007”) and the second was Study 134001 (n ≈ 202, ITT population) (“Study 134001”). Both were randomized, double-blind, placebo-controlled and eight-week outpatient studies in adults meeting Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (“DSM-IV”) criteria for MDD. In Study FK-GBE-007, flexible-dose gepirone extended release (20–80 mg/day; mean ≈ 58 mg) produced a mean HAMD-17 reduction of –10.1 vs –7.8 for placebo, with an LS-mean difference of –2.4 (95% CI: –4.4 to –0.3; p = 0.023). In Study 134001, using a similar dosing schedule (mean dose ≈ 70 mg), showed a HAMD-17 change of –9.04 vs –6.75 for placebo (LS-mean difference –2.47; 95% CI: –4.41 to –0.53; p = 0.013).
Both trials demonstrated symptom improvement emerging by week 2–3. Safety findings were consistent across studies, with the most common adverse events being headache, mild-to-moderate dizziness, and nausea; discontinuation rates due to adverse events were low (~3% for dizziness). Importantly, EXXUA showed no significant sexual dysfunction, or weight gain, supporting a favorable tolerability profile.
Prescription Products: ADHD Portfolio
ADHD Market and Treatment Options
ADHD is a neurobehavioral disorder characterized by a persistent pattern of inattention and/or hyperactivity/impulsivity that interferes with functioning and/or development. ADHD can have a profound impact on an individual’s life, causing disruption at school, work, home and in relationships. It is one of the most common developmental disorders in children and often persists into adulthood. The Centers for Disease Control and Prevention (“CDC”) reported that six million children in the United States ages 3 to 17 had previously received an ADHD diagnosis between 2016-2019, up 36% since 2003. Current ADHD treatment guidelines recommend a multi-faceted approach that uses medications in conjunction with behavioral interventions.
In 2024, approximately 104 million prescriptions for medications with ADHD labeling were written in the United States, generating $28.6 billion in sales. Approximately 88% of these prescriptions were for stimulant medications, such as amphetamine and methylphenidate, which are and have remained the standard of care for several decades. The market for ADHD medications outside of the United States is less developed, but we believe it will continue to grow as recognition and awareness of the disorder increase.
Extended-release, or long-acting, dosage forms of stimulant medications are the standard of care for treating ADHD, making up approximately 59% of ADHD prescriptions. The most prescribed extended-release medications for ADHD, Adderall XR® and Concerta® (and each of their generic equivalents), are long-acting versions of previously short-acting amphetamine and methylphenidate medications, respectively. Most of these extended-release dosage forms allow for once-daily dosing in the morning, which eliminates the need to re-dose during the day. Our products, Adzenys and Cotempla, are extended-release orally disintegrating tablets that allow for once-daily dosing based upon our internally developed proprietary microparticle delivery technology and are the only approved extended-release orally disintegrating tablet formulations of amphetamine and methylphenidate for the treatment of ADHD.
ADHD Product Portfolio Overview
Our modified-release drug delivery technology platform has enabled us to create extended-release ODT formulations of amphetamine and methylphenidate. This was achieved by developing an extended-release profile that allows for once daily dosing and an ODT formulation that allows for easier administration and ingestion and twelve-hour duration of action.
Adzenys and Cotempla are the first and only XR-ODT products for the treatment of ADHD. These XR-ODT products offer unique attributes to ADHD patients and caregivers, including:
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ease of administration and ingestion because they disintegrate rapidly in the mouth and may be taken without water; |
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taste-masking of bitter ADHD medications, with pleasant-tasting flavor; and |
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prevention of “cheeking,” the practice of hiding medication in the mouth and later spitting it out rather than swallowing it. |
Adzenys XR-ODT: Amphetamine XR-ODT for the Treatment of ADHD
Adzenys is approved by the FDA for the treatment of ADHD in patients six years and older and is the first FDA-approved amphetamine XR-ODT for the treatment of ADHD. The NDA for Adzenys relies on the efficacy and safety data that formed the basis of FDA approval for the reference listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability, and aggregate safety data from the Adzenys clinical program. Adzenys contains amphetamine loaded onto a mixture of immediate-release and polymer-coated delayed-release resin particles, which are formulated and compressed into an ODT along with other tableting excipients using our patented Rapidly Disintegrating Ionic Masking (“RDIM”) technology. The result is amphetamine with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth without the need for water. Adzenys is available in 30-day supply, child-resistant blister packs.
The suite of composition-of-matter patents for Adzenys are scheduled to expire in 2026 and 2032. These patents are listed in the Orange Book. In addition, we entered into a settlement agreement with Actavis Laboratories FL, Inc. (“Actavis”) (which is now owned by Teva Pharmaceutical Industries Limited), which resolved all ongoing litigation involving Adzenys patents and Actavis’ ANDA with the FDA for a generic version of Adzenys. Under the agreement with Actavis, Actavis has the right to manufacture and market its approved generic version of Adzenys under the ANDA beginning on September 1, 2025.
In conjunction with the approval of the Adzenys NDA, the FDA has required us to conduct certain clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. A pharmacokinetic study in this population was completed in 2018, and we are in discussions with the FDA to further clarify the design protocols required to conduct the remaining studies.
Cotempla XR-ODT: Methylphenidate XR-ODT for the Treatment of ADHD
The FDA approved Cotempla for the treatment of ADHD in patients six to seventeen years old. The Cotempla NDA relies on the efficacy and safety data that formed the basis of FDA approval for the reference listed drug, Metadate CD®, together with bioavailability/bioequivalence data and efficacy/safety data from the Cotempla clinical program. The results of the Cotempla Phase 3 clinical efficacy and safety trial showed a statistically significant improvement in ADHD symptom control compared to placebo across the school day. Onset of effect was observed within one-hour post-dose and persisted through 12 hours. No serious adverse events were reported during the study, and the adverse event profile was consistent with the drug’s mechanism of action.
Cotempla contains methylphenidate loaded onto a mixture of immediate-release and polymer-coated delayed-release resin particles, which are formulated and compressed into an ODT along with other tableting excipients using our RDIM technology. The result is methylphenidate with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth. Cotempla is available in 30-day supply, child-resistant blister packs. Cotempla is the first FDA-approved methylphenidate XR-ODT for the treatment of ADHD.
We hold composition-of-matter patents in the United States which we expect will provide Cotempla intellectual property protection until 2032, and a method-of-use patent was issued which extends protection to 2038. These patents are listed in the Orange Book. In addition, we entered into a settlement agreement with Teva Pharmaceuticals USA, Inc. (“Teva”), which resolved all ongoing litigation involving the Cotempla patents and Teva’s ANDA with the FDA for a generic version of Cotempla. Under the agreement with Teva, we granted Teva the right to manufacture and market its approved generic version of Cotempla under the ANDA beginning on July 1, 2026, or earlier under certain circumstances.
In conjunction with the approval of the Cotempla NDA, the FDA required us to perform additional clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. A pharmacokinetic study in this population was completed in 2019. In light of a new draft guidance for industry that was published in May 2019, “Attention Deficit Hyperactivity Disorder: Developing Stimulant Drugs for Treatment Guidance for Industry,” we remain in discussions with the FDA to gain concurrence on the design of the protocols required to meet the remaining post-marketing requirements.
Prescription Products: Pediatric Portfolio
Karbinal: Extended Release Carbinoxamine Oral Suspension for the Treatment of Seasonal and Perennial Allergies
Karbinal ER (carbinoxamine maleate extended-release oral suspension) is an H1 receptor antagonist (antihistamine) indicated to treat seasonal and perennial allergic rhinitis, vasomotor rhinitis, allergic conjunctivitis due to inhalant allergens and food, mild, uncomplicated allergic skin manifestations of urticaria and angioedema, dermatographism, as therapy for anaphylactic reactions adjunctive to epinephrine and other standard measures after the acute manifestations have been controlled, and amelioration of the severity of allergic reactions to blood or plasma for patients two years of age and above.
More than 100 million people in the United States experience various types of allergies each year. Allergic conditions are one of the most common health issues affecting children in the United States. Numerous allergy treatments exist to address allergies and allergic symptoms depending upon the symptom(s). Oral antihistamines are considered a mainstay of allergy treatment, and the prescription antihistamine market is a large category with approximately 54 million antihistamine prescriptions written in 2024. The prescription antihistamine category is dominated by generic products and consists of first-generation and second-generation molecules. Generally, first-generation antihistamines block both histaminic and muscarinic receptors and pass the blood-brain barrier. Second-generation antihistamines mainly block histaminic receptors, but they do not pass the blood-brain barrier. First-generation antihistamines, which are generally characterized as more sedating, accounting for 6% of 2024 total prescriptions, while non-sedating, second-generation antihistamines accounted for 94% of total prescriptions.
Karbinal is the only FDA-approved, 12-hour carbinoxamine oral suspension and is an effective antihistamine with a broad range of indications. Karbinal is positioned as a second-line allergy treatment for patients who continue to suffer from allergic symptoms following initial treatment with a second-generation, non-sedating antihistamine. Further, as Karbinal is an oral suspension formulation, children are the primary target patient given their preference for liquid treatments and, in many cases, their inability to swallow tablets or capsules. Karbinal is indicated for children as young as two years of age. Karbinal is available in 480 mL bottles.
Through a supply and distribution agreement with Tris Pharma, Inc. (“Tris”), we own exclusive rights to commercialize Karbinal in the United States through August 2032, unless the agreement is terminated earlier pursuant to the termination provisions in the agreement. As part of the agreement, we pay sales-based royalties based on net revenue. Additionally, we were committed to making annual minimum payments to Tris through August 2025. Two core patents protect Karbinal in the United States, and both patents are listed in the FDA’s Orange Book, the latest of which expires in March 2029.
Poly-Vi-Flor and Tri-Vi-Flor: Our Fluoride-Based Multivitamin Prescription Supplement Product Line for Infants and Children
Poly-Vi-Flor and Tri-Vi-Flor are two complementary prescription fluoride-based supplement product lines containing combinations of vitamins and sodium fluoride in various oral formulations. These prescription supplements are prescribed for infants and children to treat or prevent fluoride deficiency due to poor diet or low levels of fluoride in drinking water and other sources while also providing multi-vitamin support and folic acid supplementation. Because these products contain at least .25 mg of sodium fluoride, Poly-Vi-Flor and Tri-Vi-Flor are classified as products that should be administered under the supervision of a licensed prescriber.
Fluoride supplementation has been proven to protect teeth from decay. Community water fluoridation prevents tooth decay by providing frequent and consistent contact with low levels of fluoride. By keeping the teeth strong and solid, fluoride stops cavities from forming and can rebuild the tooth’s surface. Community water fluoridation began in the United States in 1945 and as of 2016, more than 200 million people, or nearly 3 in 4 Americans who use public water supplies, drank water with enough fluoride to prevent tooth decay. However, Americans living in municipalities that do not fluoridate the water supply or in rural areas that rely on well water supplied drinking water frequently do not receive recommended levels of fluoride through fluoridation. Therefore, many children living in these areas often require daily fluoride supplementation as part of their mineral and vitamin intake. In many instances, physicians prescribe fluoride-based multi-vitamins (Vitamins A, B, C, D and folic acid) regularly to supplement their fluoride intake and enable convenient supplementation. Infants are prescribed easier-to-take multi-vitamin drops while older children are prescribed tablet formulations.
In 2024, 5.9 million multi-vitamin prescriptions were written in the United States. Of those prescriptions, multi-vitamins containing sodium fluoride accounted for 0.6 million total prescriptions. Common multi-vitamin combinations contain vitamins A, B, C, D and E, but no other prescription pediatric multi-vitamin products contain Metafolin or Arcofolin, both of which make the Poly-Vi-Flor and Tri-Vi-Flor product lines distinct, single-source brands with novel ingredients.
Poly-Vi-Flor is available in both chewable tablet and oral liquid suspension multivitamin formulations in six different product presentations: Poly-Vi-Flor Chewable Tablets .25 mg, .50 mg, and 1 mg tablets, Poly-Vi-Flor Chewable Tablets with Iron, Poly-Vi-Flor Oral Suspension and Poly-Vi-Flor Oral Suspension with Iron. Poly-Vi-Flor contains Vitamin A, Vitamins B1, B2, B3, and B6, Vitamin C, Sodium Fluoride in various doses and Metafolin, a proprietary, trademarked L-methylfolate form of folic acid developed by and licensed from Merck & Cie (“Merck”). Beginning in the second half of fiscal 2023, we introduced Poly-Vi-Flor and Tri-Vi-Flor containing Arcofolin, Arcofolin offers an improved profile over Metafolin as a body ready L-methylfolate. Arcofolin’s low water content and low molecular weight of the counterion yield higher levels of assayed folate than other forms of L-methylfolate currently available on the market. It also has an improved purity profile, enhanced water solubility and an excellent overall stability profile. The addition of Arcofolin also broadens the brands’ IP protection and extends the patent life and provides further differentiation with this novel ingredient.
Tri-Vi-Flor is available as an oral liquid suspension (.25 mg fluoride) containing Vitamin A, Vitamin C, Vitamin D3, Sodium Fluoride, Sodium Benzoate and L-methylfolate. By virtue of its L-methylfolate content, Tri-Vi-Flor offers a similar clinical profile: a fluoride-based multivitamin containing a proprietary, body-ready L-methylfolate.
Arcofolin, which we also licensed exclusively in our field of use, is Merck’s manufactured calcium salt of L-5-methyltetrahydrofolic or L-methylfolate. Arcofolin is a ‘body ready’ alternative to folic acid and offers good stability, solubility, and bioavailability. Folic acid supplementation is recommended in various patient groups, but a significant number of patients have difficulty metabolizing folate due to an enzymatic deficiency caused by a genetic mutation affecting the enzyme methylenetetrahydrofolate reductase, or MTHFR. MTHFR converts ingested folate (such as supplemented folic acid) into L-methylfolate, the body’s usable form. Clinical studies have demonstrated that 75% of patients may have at least one MTHFR genetic mutation while 40% may have two mutations. These mutations lead to impaired function of the enzyme and result in folate deficiency. Both Arcofolin and Metafolin are unaffected by the MTHFR mutation, thereby directly delivering bioavailable L-methylfolate, and offering a distinct clinical advantage over other folic acid supplements. The prescription multi-vitamin market is dominated by generic products, with brands accounting for 6% of the multivitamin plus fluoride market for the calendar year ending December 31, 2024.
Manufacturing
We contract with contract manufacturing organizations (“CMOs”) for the manufacture and testing of our products. We have entered into the following key supply agreements for the commercial manufacture and supply of certain of these products:
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EXXUA is purchased through Fabre-Kramer through their manufacturing agreement with a CMO, as part of our exclusive commercialization agreement with Fabre-Kramer. We are obligated to the material terms of Fabre-Kramer’s manufacturing agreement in terms of supply prices, minimum order sizes, forecasting provisions and all regulatory and compliance provisions. Fabre-Kramer’s manufacturing agreement has an initial term ending in September 2028. |
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During fiscal 2024 we completed the process of transferring the manufacturing of our Adzenys and Cotempla products to a United States-based CMO who started manufacturing both Adzenys and Cotempla during the third quarter of fiscal 2024 and will manufacture all of our ADHD products going forward. Our CMO is responsible for manufacturing the products, conducting quality control, quality assurance, validation activities, stability testing, packaging and providing related services for the manufacture of the products. We are required to purchase all of our ADHD products from them, with certain exceptions. Our agreement with this CMO has an initial term beginning in November 2023, and ending in November 2028, and automatically renews after the initial term for successive terms of three years, with certain termination rights for both parties as outlined in the agreement. |
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Karbinal is purchased through a supply agreement with Tris. This agreement terminates in August 2033, subject to earlier termination or extension in accordance with the terms of the agreement. |
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Poly-Vi-Flor and Tri-Vi-Flor drops are purchased through supply agreements with CMOs based in the United States. Merck & Cie is responsible for providing Metafolin and Arcofolin to our designated CMO. |
We believe the third-party manufacturers have adequate capacity to manufacture sufficient quantities of our products to meet anticipated commercial demands. As we rely on CMOs, we continue to employ personnel with extensive technical, manufacturing, supply chain management, analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions. Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, and which govern record-keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among other activities. Our systems and our contractors are required to comply with these regulations, and we assess this compliance regularly through monitoring of performance and a formal audit program.
Research and Development
We have indefinitely suspended research and development activities in order to focus our resources on our commercialization efforts and as a result, research and development spending has significantly declined. Research and development spending primarily relate to required regulatory filings and maintenance of our intellectual property and regulatory filings.
Intellectual Property
We seek trademark protection in the United States when appropriate. We currently own or license registered trademarks for Aytu, Aytu BioPharma, Aytu RxConnect, Neos Therapeutics, EXXUA, Adzenys, Adzenys ER, Adzenys XR-ODT, Cotempla, Cotempla XR-ODT, Karbinal, Poly-Vi-Flor and Tri-Vi-Flor in the United States, as well as trademarks related to our DTRS technology. From time to time, we may find it necessary or prudent to obtain licenses from third party intellectual property holders.
Government Regulation
We are subject to extensive regulation by the FDA and other federal, state, and local regulatory agencies. The United States Federal Food, Drug, and Cosmetic Act (“FDCA”) and the FDA’s implementing regulations set forth, among other things, requirements for the testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record-keeping, reporting, distribution, import, export, sale, advertising and promotion of our products and product candidates. We may seek approval for, and market, our products in other countries in the future. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States, although there can be important differences.
Development and Approval
Under the FDCA, FDA approval of an NDA is required before any new drug can be marketed in the United States. NDAs in the case of new drugs may require extensive studies and submission of a large amount of data by the applicant, including the following:
Preclinical Testing
Preclinical testing generally includes laboratory evaluation of product chemistry and formulation, as well as toxicological and pharmacological studies in several animal species to assess the toxicity and dosing of the product.
Clinical Trials
Clinical trials involve the administration of a drug to healthy human volunteers or to patients, under the supervision of a qualified investigator.
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Phase 1 clinical trials involve the initial administration of the investigational drug to humans, typically to a small group of healthy human subjects, but occasionally to a group of patients with the targeted disease or disorder. Phase 1 clinical trials generally are intended to evaluate the safety, metabolism and pharmacologic actions of the drug, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. |
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Phase 2 clinical trials generally are controlled studies that involve a relatively small sample of the intended patient population and are designed to develop initial data regarding the product’s effectiveness, to determine dose response and the optimal dose range, and to gather additional information relating to safety and potential adverse effects (“AEs”). |
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Phase 3 clinical trials are conducted after preliminary evidence of effectiveness has been obtained and are intended to gather the additional information about safety and effectiveness necessary to evaluate the drug’s overall risk-benefit profile, and to provide a basis for physician labeling. Generally, Phase 3 clinical development programs consist of expanded, multi-site, large-scale studies of patients with the target disease or disorder to obtain statistical evidence of the efficacy and safety of the drug at the proposed dosing regimen. Phase 3 data often form the primary basis on which the FDA evaluates a drug’s safety and effectiveness when considering the product application. |
Post-Approval Regulation
Once approved, drug products are subject to continuing regulation by the FDA. If ongoing regulatory requirements are not met or if safety or manufacturing problems occur after the product reaches the market, the FDA may at any time withdraw product approval or take actions that would limit or suspend marketing. Additionally, the FDA may require post-marketing studies or clinical trials, changes to a product’s approved labeling, including the addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if there are new safety information developments.
DEA Regulation
Our ADHD products are each considered a “controlled substance” as defined in the Controlled Substances Act of 1970 (“CSA”), because Adzenys contains amphetamine and Cotempla contains methylphenidate. Because amphetamine and methylphenidate are Schedule II controlled substances, the DEA has Adzenys and Cotempla listed and regulated as Schedule II controlled substances. EXXUA and all of our pediatric products (Karbinal, Poly-Vi-Flor and Tri-Vi-Flor) are not considered “controlled substances.”
Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. As we no longer occupy a manufacturing facility, we no longer need a DEA facility registration.
The DEA establishes annually an aggregate quota for how much of a controlled substance may be produced in and/or imported into the United States-based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our manufacturer’s quotas of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay, limitation or refusal by the DEA in establishing our manufacturers’ quota for controlled substances could delay or stop our clinical trials or product launches, which could have a material adverse effect on our business, financial position and results of operations.
Individual states also independently regulate controlled substances. We and our manufacturers will be subject to state regulation on distribution of these products, including, for example, state requirements for licensures or registration. Additionally, we use third-party logistics firms to inventory and fill sales orders for our commercial portfolio.
Human Capital
As of June 30, 2025, we employed 83 employees, of which 82 were full-time employees. Of our 83 employees, 5 are involved in operations, 52 are involved in commercialization and 26 are involved in general and administrative activities. All of our colleagues are located in the United States. Of these colleagues, 49% are female and 51% are male. Our colleagues are not represented by a labor union.
Our values – team-oriented, hard-working, relentless determination, integrity, visionary, entrepreneurial, and servant-minded – are built on the foundation that the colleagues we hire and the way we treat one another promote innovation, and high productivity, which spur our success. This culture depends in large part on our ability to attract, retain and develop a diverse population of talents and high-performing employees at all levels of our organization. Providing market competitive pay and benefit programs, opportunities to participate in the success they help create, while engaging colleagues in important dialogue regarding organization performance, we create a culture of inclusion in which all colleagues have the opportunity to thrive.
Available Information
Our principal executive offices are located at 7900 East Union Avenue, Suite 920, Denver, Colorado 80237, and our phone number is (720) 437-6580.
We maintain a website on the internet at https://aytubio.com. We make available, free of charge, through our website, by way of a hyperlink to a third-party site that includes filings we make with the United States Securities and Exchange Commission (“SEC”) website (www.sec.gov), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports electronically filed or furnished pursuant to Section 15(d) of the Exchange Act. The information on our website is not, and shall not be deemed to be, a part of this Annual Report or incorporated into any other filings we make with the SEC. In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C., 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Code of Ethics
We have adopted a written code of ethics that applies to our officers, directors, and employees, including our principal executive officer and principal accounting officer. We intend to disclose any amendments to, or waivers from, our code of ethics that are required to be publicly disclosed pursuant to rules of the SEC by filing such amendment or waiver with the SEC. This code of ethics and business conduct can be found in the corporate governance section of our website, https://investors.aytubio.com/corporate-governance#CorporateGovernance.
Investing in our securities includes a high degree of risk. You should consider carefully the specific factors discussed below, together with all of the other information contained in this Annual Report. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects would likely be materially and adversely affected. This could cause the market price of our securities to decline and could cause you to lose all or part of your investment.
Risks Related to Our Business and Financial Position
We have incurred losses to date and can give no assurance of profitability.
We have incurred losses in each year since our inception. Our net loss for the years ended June 30, 2025, and 2024, was $13.6 million and $15.8 million, respectively. We have not demonstrated the ability to be a profit-generating enterprise to date. Even though we expect to have net revenue growth in the next several fiscal years, it is uncertain that the net revenue growth will be significant enough to offset our expenses and generate a profit in the future. Potential investors should evaluate us in light of the expenses, delays, uncertainties, and complications typically encountered by healthcare businesses, many of which will be beyond our control. These risks include the following:
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uncertain market acceptance of our products; |
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difficulties in maintaining coverage and reimbursement for our products; |
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lack of sufficient capital; |
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United States and foreign regulatory approval of our products; |
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unanticipated problems, delays, and expense relating to product development and implementation; |
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lack of sufficient intellectual property; |
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the ability to attract and retain qualified employees; |
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the introduction of generic competition; |
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competition; and |
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technological changes. |
As a result of the increasingly competitive nature of the markets in which we compete, our historical financial data is of limited value in anticipating future operating expenses. Our planned expense levels will be based in part on our expectations concerning future operations, which is difficult to forecast accurately based on our historical strategy of product and/or business acquisition to develop our product and business portfolio. We may be unable to adjust spending in a timely manner to compensate for any unexpected budgetary shortfall.
To obtain net revenue from our products, we must succeed, either alone or with others, in a range of challenging activities, including expanding markets for our existing products, manufacturing, marketing and selling our existing products, satisfying any post-marketing requirements, and obtaining reimbursement for our products from private insurance or government payors. We, and our collaborators, as applicable, may not be successful in these activities and, even if we or our collaborators do, we may never generate net revenue that is sufficient to achieve profitability.
We have not established sources of ongoing net revenue sufficient to cover operating costs.
Since our inception, we have had significant operating losses. As of June 30, 2025, we had accumulated deficit of $333.5 million. We may continue to incur net losses, and our ability to generate positive cash flows from operating activities is uncertain for the foreseeable future. We have not established an ongoing source of net revenue sufficient to consistently cover operating costs. Our ability to continue as a going concern is dependent on our continued operational improvements, refinancing, or obtaining adequate capital to fund operating losses until we become profitable. If we are unable to generate sufficient cash flows or obtain adequate capital, we may be unable to develop and commercialize our product offerings and we could be forced to cease operations.
We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our growth efforts or other operations. Further, future sales and issuances of our common stock or rights to purchase common stock will result in dilution of the percentage ownership of our existing stockholders and could cause our stock price to fall.
We are expending resources to commercialize our prescription products and to service our debt obligations. We may require additional funding through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. As of June 30, 2025, our cash and cash equivalents totaled $31.0 million. During the year ended June 30, 2025, we received $14.8 million of net proceeds from our June 2025 public offering and $3.2 million of net proceeds from the Eclipse Amendment No. 6 that was executed in June 2025.
Our operating plans may change as a result of many factors currently unknown to us, and we could need additional capital in the future to continue our operations and may need to seek additional funds sooner than planned. Raising funds in the current economic environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.
If we sell common stock, convertible securities or other equity securities in more than one transaction, any such sales may result in material dilution to our existing stockholders, and new investors could gain rights, preferences, and privileges senior to those of our existing common stockholders. Further, any future sales of our common stock by us or resales of our common stock by our existing stockholders could cause the market price of our common stock to decline. Any future grants of securities exercisable or convertible into our common stock, or the exercise or conversion of such shares, and any sales of such shares in the market, could also have an adverse effect on the market price of our common stock.
In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. The incurrence of additional indebtedness would result in increased fixed payment obligations, and we may be required to agree to additional restrictive covenants, such as further limitations on our ability to incur additional debt, additional limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be unable to expand the market for our products or expand our operations generally or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due.
As of June 30, 2025, we have a $13.0 million term loan and up to $16.0 million of secured revolving loans under the Eclipse Agreement, which includes the temporary Eclipse Incremental Advance of $1.5 million. As of June 30, 2025, $9.1 million was outstanding under the secured revolving loan. All obligations under our loans are secured by substantially all of our existing property and assets subject to certain exceptions. These debt financings and any future debt financings may create additional financial risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity.
As a result, we may not have sufficient funds, or may be unable to arrange for additional financing, to pay the amounts due on our outstanding indebtedness under our debt agreements. Further, funds from external sources may not be available on economically acceptable terms, if at all. For example, if we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our products or technologies, or to grant licenses on terms that are not favorable to us. If adequate funds are not available when and if needed, our ability to make interest or principal payments on our debt obligations, and finance our operations and other general corporate activities would be significantly limited and we may be required to delay, significantly curtail, or eliminate one or more of our programs.
Failure to satisfy our current and future debt obligations under our loan agreements with the Eclipse Lender could result in an event of default and, as a result, our lenders could accelerate all of the amounts due. In the event of an acceleration of amounts due under one or both of our debt agreements as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness. In addition, our lenders could seek to enforce their security interests in any collateral securing such indebtedness.
The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility.
The Eclipse Agreement subjects us to financial covenants and restrictions on our ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make asset sales without the prior written consent of the lenders. Failure to comply with such covenants could permit the lenders to declare our obligations under the loan agreements, together with accrued interest and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or termination.
These restrictive covenants could limit our flexibility in operating our business and our ability to pursue business opportunities that we or our stockholders may consider beneficial. Any declaration by the lenders of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay these outstanding obligations at the time any event of default occurs. Further, if we raise any additional capital through debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of June 30, 2025, we had federal net operating loss carryforwards of $516.7 million. The available net operating losses, if not utilized to offset taxable income in future periods, will continue to expire and, except for certain indefinite-lived net operating loss carryforwards, will completely expire in 2037. Under the Internal Revenue Code of 1986, as amended (the “IRC”) and the regulations promulgated thereunder, including, without limitation, the consolidated income tax return regulations, various corporate ownership changes limit our ability to use our net operating loss carryforwards and other tax attributes to offset our income.
Ownership changes have limited our ability to offset, post-change, United States federal taxable income. Section 382 of the IRC imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss carryforwards and certain recognized built-in losses. Previous acquisitions, financing transactions, and equity ownership changes in the past five years have caused a significant limitation on our ability to use all $516.7 million of pre-acquisition net operating loss carryovers. As a result, we expect $324.7 million of net operating losses to expire unused by 2037, at which point we will only retain indefinite-lived carryforwards. The ownership changes have resulted in increased future tax liability and are a driver of the change from a zero percent effective tax rate.
We have been and, in the future, may become a defendant in one or more stockholder derivative, class-action, and other litigation, and any such lawsuits may adversely affect our business, financial condition, results of operations and cash flows.
We and certain of our officers and directors have been and may in the future become defendants in one or more stockholder derivative actions or other class-action lawsuits. These lawsuits can divert our management’s attention and resources from our ordinary business operations, and we would likely incur significant expenses associated with their defense (including, without limitation, substantial attorneys’ fees and other fees of professional advisors and potential obligations to indemnify current and former officers and directors who are or may become parties to such actions). In connection with these lawsuits, we may be required to pay material damages, consent to injunctions on future conduct and/or suffer other penalties, remedies or sanctions, or issue additional shares upon the exercise of certain warrants, which may cause additional dilution. In addition, any such future lawsuits could adversely impact our reputation and/or ability to launch and commercialize our products, thereby harming our ability to generate net revenue. Accordingly, the ultimate resolution of these matters and any future matters could have a material adverse effect on our business, financial condition, results of operation and cash flows and, consequently, could negatively impact the trading price of our common stock.
Risks Related to Commercialization
We are heavily dependent on the commercial success of our commercial products. To date, we have not generated sufficient net revenue from the sales of these products to achieve companywide profitability and we may never achieve or maintain profitability.
Our ability to become profitable depends upon our ability to generate increased net revenue from sales of our prescription portfolios. While we have been selling pharmaceutical products for several years, we have limited commercial experience selling our current lineup of pharmaceutical products, having only generated net revenue from the sale of our pediatric products since acquiring that portfolio in November 2019 and from our ADHD products since acquiring that portfolio in March 2021 and we are currently launching EXXUA in the United States. None of our marketed prescription have thus far generated product revenue at levels sufficient for us to consistently attain profitability. We have not generated any revenue from product sales of any other product candidates and, to date, have incurred significant operating losses. Due to the completion of our wind down and divestiture of our Consumer Health business in the first quarter of fiscal 2025, we now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed. Accordingly, our consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation and we will not generate revenue from the Consumer Health business in the future.
We have incurred, and anticipate continuing to incur, significant costs associated with commercialization of our approved products and, if approved, any other product candidates that we may develop. It is possible that we will never attain sufficient product net revenue to achieve profitability.
If we are unable to differentiate our products from branded drugs or existing generic therapies for similar treatments, or if the FDA or other applicable regulatory authorities approve additional generic products that compete with any of our products, our ability to successfully commercialize such products would be adversely affected.
We expect to compete against branded drugs with distinct clinical attributes and to compete with their generic counterparts that will be sold for a lower price. Although we believe that our products are or will be differentiated from other branded drugs and their generic counterparts, if any, including through clinical efficacy or through improved patient compliance, ease of administration, and our patient support programs, it is possible that such differentiation will not impact our market position. If we are unable to achieve significant differentiation for our products and accompanying support services against other drugs, the opportunity for our products to achieve premium pricing and be commercialized successfully would be adversely affected.
After an NDA, including a 505(b)(2) application, is approved, the covered product becomes a “listed drug” that, in turn, can be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA. The FDCA, implementing regulations and other applicable laws provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, and conditions of use, or labeling as our product candidate and that the generic product is bioequivalent to ours, meaning it is absorbed in the body at the same rate and to the same extent as our product candidate. These generic equivalents, which must meet the same quality standards as the listed drugs, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices.
Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product can be lost to the generic version. Accordingly, competition from generic equivalents to our products could materially adversely impact our net revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in our products. For example, on July 25, 2016, we received a paragraph IV certification from Actavis advising us that Actavis filed an ANDA with the FDA for a generic version of Adzenys. On October 17, 2017, we entered into a Settlement Agreement and a Licensing Agreement with Actavis (which is now owned by Teva Pharmaceutical Industries Limited), pursuant to which we granted Actavis the right to manufacture and market its now approved generic version of Adzenys under the ANDA beginning on September 1, 2025. On October 31, 2017, we received a paragraph IV certification from Teva advising us that Teva filed an ANDA with the FDA for a generic version of Cotempla. On December 21, 2018, we entered into a Settlement Agreement and a Licensing Agreement with Teva, pursuant to which we have granted Teva the right to manufacture and market its now approved generic version of Cotempla under the ANDA beginning on July 1, 2026, or earlier under certain circumstances.
Our pharmaceutical products may prove to be difficult to effectively commercialize as planned or on the timeframes we announce and expect.
Various commercial, regulatory, and manufacturing factors may impact our ability to maintain or grow net revenue from sales of our pharmaceutical product offerings. Moreover, we have limited experience selling some of our current products given their acquisition from other companies or their recent approval. We sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory, and other product development objectives and, from time to time, we may publicly announce the expected timing of some of these milestones. The achievement of many of these milestones may be outside of our control and if we fail to achieve announced milestones in the timeframes we announce and expect, the commercialization of our products may be delayed and our business, prospects and results of operations may be harmed. Specifically, we may encounter difficulty by virtue of the following, each of which could be negatively impacted if expected timeframe goals are not achieved:
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our available capital resources; |
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our inability to have clear proprietary rights to the products; |
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our inability to manufacture or cost-effectively manufacture the products; |
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our inability to adequately market and increase sales of any of these products; |
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of adverse side effects that make using the products less desirable; |
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our inability to attract and retain a skilled support team, marketing staff and sales force necessary to increase the market for our approved products and to maintain market acceptance for our products; |
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our inability to secure continuous prescribing of any of these products by current or previous users of the product; |
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our inability to effectively transfer and scale manufacturing as needed to maintain an adequate commercial supply of these products; |
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reimbursement and medical policy changes that may adversely affect the pricing, profitability or commercial appeal of pharmaceutical products; and |
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our inability to effectively identify and align with commercial partners outside the United States, or the inability of those selected partners to gain the required regulatory, reimbursement, and other approvals needed to enable commercial success of our products. |
We rely on limited sources of supply for our products, and any disruption in the chain of supply may impact production and sales of our products, and cause delays in developing and commercializing our currently manufactured and commercialized products.
Some of our products are produced infrequently and by single-source suppliers, including but not limited to Halo Pharmaceutical, Inc. Due to the limited production quantities, production of these products may not be prioritized by the third-party manufacturer and may not be scheduled and produced at all. We are reliant on a limited number of suppliers for resin, drug compounds, coating and other component substances of our final products. If any of these single-source suppliers were to breach or terminate its supply agreement with us, or otherwise not supply us, we would need to identify an alternative source for the supply of component substances for our products. If we fail to procure supply of our products, or if the prices of the supply increases due to general economic conditions or tariffs, we could lose potential revenue and our business, financial condition, results of operation and reputation could be adversely affected.
Identifying an appropriately qualified source of alternative supply for any one or more of the component substances for our products could be time consuming, and we may not be able to do so without incurring material delays in the development and commercialization of our approved products or a decrease in sales of our approved products, which could harm our financial position and commercial potential for our products. Any alternative vendor would also need to be qualified through an FDA Prior Approval Supplement process which could result in further delay. The FDA, DEA, or other regulatory agencies outside of the United States may also require additional studies if we enter into agreements with new suppliers for the manufacture of our ADHD products that differ from the suppliers used for clinical development of such products.
These factors could cause a delay of commercialization of our products, cause us to incur higher costs and prevent us from commercializing them successfully. Furthermore, if our suppliers fail to deliver the required commercial quantities of components and active pharmaceutical ingredients (“APIs”) on a timely basis and at commercially reasonable prices, including if our suppliers did not receive adequate DEA quotas for the supply of certain scheduled components, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, commercialization of our ADHD products may be delayed or we could lose potential revenue and our business, financial condition, results of operation and reputation could be adversely affected.
We rely on third parties to manufacture certain products, and third-party manufacturing risks and inefficiencies may result in costs and delays that prevent us from successfully commercializing products and adversely affect our ability to produce our products.
We completed the process of outsourcing the manufacturing of our Adzenys and Cotempla products during fiscal 2024 to a third-party manufacturer based in the United States, to produce commercial quantities of these products. If the third-party is not successful or does not meet our expectations (for example, timeliness of production, quantity of production, maintenance of needed documentation or regulatory compliance), we may have to find a different manufacturer and incur expenses and delays in the process. Manufacturers of our FDA regulated products must comply with good manufacturing practice (“GMP”) requirements enforced by the FDA, NMPA, EMA and other comparable foreign health authorities through facilities inspection programs. These requirements include quality control, quality assurance, and the maintenance of records and documentation. Manufacturers of our FDA regulated products may be unable to comply with these GMP requirements and with other FDA, National Medical Products Administration (“NMPA”), European Medicines Agency (“EMA”), DEA, state, and foreign regulatory requirements. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any quantities supplied is compromised due to a manufacturer’s failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our drugs, which would seriously harm our business.
We do not expect to have our own manufacturing capabilities, thus for all other products and any future products, we expect to use third-party manufacturers. In determining the required quantities of any product and the manufacturing schedule, we must make significant judgments and estimates based on inventory levels, current market trends, and other related factors. Because of the inherent nature of estimates and our limited experience in marketing our current products, there could be significant differences between our estimates and the actual amounts of product we require. If we do not effectively maintain our supply agreements, we will face difficulty finding replacement suppliers, which could harm sales of those products. If we fail in similar endeavors for future products, we may not be successful in establishing or continuing the commercialization of our products.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured these components ourselves, including:
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reliance on third parties for regulatory compliance and quality assurance; |
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possible breaches of manufacturing agreements by the third parties because of factors beyond our control; |
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possible regulatory violations or manufacturing problems experienced by our suppliers; and |
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possible termination or non-renewal of agreements by third parties, based on their own business priorities, at times that are costly or inconvenient for us. |
We may not be able to meet the demand for our products if one or more of any third-party manufacturers is unable to supply us with the necessary components that meet our specifications. It may be difficult to find alternate suppliers for any of our products in a timely manner and on terms acceptable to us.
The manufacturing processes and facilities of third-party manufacturers we have engaged for our current approved products are, and any future third-party manufacturer will be, required to comply with the federal Quality System Regulation (“QSR”), which covers procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of devices. The FDA enforces the QSR through periodic unannounced inspections of manufacturing facilities. Any inspection by the FDA could lead to additional compliance requests that could cause delays in our product commercialization. Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with the manufacturing processes and facilities of third-party manufacturers we engage, including the failure to take satisfactory corrective actions in response to an adverse QSR inspection, can result in, among other things:
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administrative or judicially imposed sanctions; |
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injunctions or the imposition of civil penalties; |
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recall or seizure of the product in question; |
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total or partial suspension of production or distribution; |
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the FDA’s refusal to grant pending future clearance or pre-market approval; |
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withdrawal or suspension of marketing clearances or approvals; |
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clinical holds; |
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warning letters; |
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refusal to permit the export of the product in question; and |
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criminal prosecution. |
Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our products, and would likely harm our business.
In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe the FDA would request that we initiate a voluntary recall if a product was defective or presented a risk of injury or gross deception. Regulatory agencies in other countries have similar authority to recall drugs or devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert our management’s attention and financial resources, expose us to product liability or other claims, and harm our reputation with customers.
Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization of our products. While we believe that there are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.
We face substantial competition, including the introduction of generics, from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for, or commercializing products before or more successfully than us.
The biopharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We compete with companies that design, manufacture and market already-existing and new products. We anticipate that we will face increased competition in the future as new companies enter the market with new technologies and/or our competitors improve their current products, and companies introduce generic equivalents. One or more of our competitors may offer technology superior to ours and render our technology obsolete or uneconomical. Most of our current competitors, as well as many of our potential competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies, more substantial experience in product marketing and new product development, greater regulatory expertise, more extensive manufacturing capabilities and the distribution channels to deliver products to customers. Our competitors may be more successful in acquiring new products than we are. If we fail to acquire new products, implementation of our business plan would be delayed, which could have a negative adverse effect on our business and prospects. If we are not able to compete successfully against our current and future competitors, our business will not grow, we our financial condition and operations will suffer. Our ability to compete successfully will depend largely on our ability to:
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expand the market for our approved products, especially our pharmaceutical and devices regulated by the FDA; |
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successfully commercialize our products alone or with commercial partners; |
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discover and develop products that are superior to other products in the market; |
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obtain required regulatory approvals; |
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attract and retain qualified personnel; and |
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obtain patent and/or other proprietary protection for our products. |
Established pharmaceutical companies devote significant financial resources to discovering, developing or licensing novel compounds that could make our products obsolete. Our competitors may obtain patent protection, receive FDA approval, and commercialize medicines before us. Other companies are or may become engaged in the discovery of compounds that may compete with the products we are developing.
We compete with companies that design, manufacture and market treatments that compete with our products. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery technologies that are more effective or less costly than that of our products.
Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate net revenue.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care may adversely affect one or more of the following:
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our or our collaborators’ ability to set a price we believe is fair for our approved products; |
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our ability to generate net revenue from our approved products and achieve profitability; and |
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the availability of capital. |
The Patient Protection and Affordable Care Act (the “PPACA”) and the Health Care and Education Reconciliation Act (the “Health Care Reconciliation Act”) significantly impacted the provision of, and payment for, health care in the United States. Various provisions of these laws are designed to expand Medicaid eligibility, subsidize insurance premiums, provide incentives for businesses to provide health care benefits, prohibit denials of coverage due to pre-existing conditions, establish health insurance exchanges, and provide additional support for medical research. Amendments to the PPACA and/or the Health Care Reconciliation Act, as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could influence the purchase of medicines and medical devices and reduce demand and prices for our products, if approved. This could harm our or our collaborators’ ability to market any approved products and generate net revenue. As we expect to receive significant net revenue from reimbursement of our products by commercial third-party payors and government payors, cost containment measures that health care payors and providers are instituting and the effect of further health care reform could significantly reduce potential net revenue from the sale of any of our products approved in the future, and could cause an increase in our compliance, manufacturing or other operating expenses. In addition, in certain foreign markets, the pricing of prescription drugs and devices is subject to government control and reimbursement may in some cases be unavailable. We believe that pricing pressures at the federal and state level, as well as internationally, will continue and may increase, which may make it difficult for us to sell any approved product at a price acceptable to us or any of our future collaborators.
In addition, in some foreign countries, the proposed pricing for a drug or medical device must be approved before it may be lawfully marketed. The requirements governing pricing vary widely from country to country. For example, the European Union (the “EU”) provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. A member state may require that physicians prescribe the generic version of a drug instead of our approved branded product. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products or product candidates. Historically, pharmaceutical products launched in the EU do not follow price structures of the United States and generally tend to have significantly lower prices.
Our financial results will depend on the acceptance among clinicians, third-party payors and the medical community of our products.
Physicians may not choose to prescribe our products if we or any collaborator is unable to demonstrate that, based on experience, clinical data, side-effect profiles and other factors, our product is preferable to existing medicines or treatments. Our future success depends on the acceptance by our target customers, third-party payors, and the medical community that our products are reliable, safe, and cost-effective. We cannot predict the degree of market acceptance of any of our approved products. Many factors may affect the market acceptance and commercial success of our products, including:
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our ability to convince our potential customers of the advantages, safety and economic value our products and product candidates over existing technologies and products; |
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the approved labeling for the product and any required warnings; |
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the prevalence and severity of adverse events or publicity; |
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potential product liability claims; |
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the relative convenience and ease of our products over existing technologies and products; |
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the introduction of new technologies and competing products that may make our products less attractive for our target customers; |
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our success in training medical personnel on the proper use of our products; |
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the willingness of third-party payors to reimburse our target customers that adopt our products; |
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increases in rebate payments with payors; |
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the acceptance in the medical community of our products; |
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the extent and success of our manufacturing, marketing, and sales efforts; and |
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general economic conditions. |
If our future products fail to gain market access and acceptance, this will have a material adverse impact on our ability to generate net revenue to provide a satisfactory, or any, return on our investments. Even if some therapies achieve market access and acceptance, the market may prove not to be large enough to allow us to generate significant revenue.
If third-party payors do not reimburse our customers for the products we sell or if reimbursement levels are set too low for us to sell one or more of our products at a profit, our ability to sell those products and our results of operations will be harmed.
While our pharmaceutical products are approved and generating net revenue in the United States, they may not receive, or continue to receive, clinician or patient acceptance, or they may not maintain adequate reimbursement from third party payors. In the future, we might possibly sell other products to target customers substantially all of whom receive reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare, Medicaid, other domestic and foreign government programs, private insurance plans and managed care programs.
Reimbursement decisions by particular third-party payors depend upon a number of factors, including each third-party payor’s determination that use of a product is:
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a covered benefit under its health plan; |
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appropriate and medically necessary for the specific indication; |
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cost effective; and |
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neither experimental nor investigational. |
Third-party payors may deny reimbursement for covered products if they determine that a medical product was not used in accordance with cost-effective diagnosis methods, as determined by the third-party payor, or was used for an unapproved indication.
Obtaining coverage and reimbursement approval for a product from each government or third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our potential product to each government or third-party payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. In addition, eligibility for coverage does not imply that any product will be covered and reimbursed in all cases or reimbursed at a rate that allows our potential customers to make a profit or even cover their costs.
Third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for medical products and services. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and reimbursement available for any product or product candidate, which in turn, could negatively impact pricing. If our customers are not adequately reimbursed for our products, they may reduce or discontinue purchases of our products, which would result in a significant shortfall in achieving revenue expectations and negatively impact our business, prospects and financial condition.
Reporting and payment obligations under the Medicaid Drug Rebate Program and other governmental drug pricing programs are complex and may involve subjective decisions. Any failure to comply with those obligations could subject us to penalties and sanctions.
As a condition of reimbursement by various federal and state health insurance programs, pharmaceutical companies are required to calculate and report certain pricing information to federal and state agencies. The regulations governing the calculations, price reporting and payment obligations are complex and subject to interpretation by various government and regulatory agencies, as well as the courts. Reasonable assumptions have been made where there is a lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates. Pharmaceutical companies are required to report any revisions to their calculations, price reporting and payment obligations previously reported or paid. Such revisions could affect liability to federal and state payors and also adversely impact reported financial results of operations in the period of such restatement.
Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations related to our calculations, price reporting or payments obligations increases the chances of a legal challenge, restatement or investigation. If a company becomes subject to investigations, restatements, or other inquiries concerning compliance with price reporting laws and regulations, it could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on the business, financial condition and results of operations. In addition, it is possible that future healthcare reform measures could be adopted, which could result in increased pressure on pricing and reimbursement of products and thus have an adverse impact on financial position or business operations.
Further, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting in a lag between the time a sale is recorded and the time the rebate is paid. This results in a company having to carry a liability on its consolidated balance sheets for the estimate of rebate claims expected for Medicaid patients. If actual claims are higher than current estimates, the company’s financial position and results of operations could be adversely affected.
In addition to retroactive rebates and the potential for 340B Program refunds, if a pharmaceutical firm is found to have knowingly submitted any false price information related to the Medicaid Drug Rebate Program to the Centers for Medicare & Medicaid Services (“CMS”), it may be liable for civil monetary penalties. Such failure could also be grounds for CMS to terminate the Medicaid drug rebate agreement, pursuant to which companies participate in the Medicaid program. In the event that CMS terminates a rebate agreement, federal payments may not be available under government programs, including Medicaid or Medicare Part B, for covered outpatient drugs.
Additionally, if a pharmaceutical company overcharges the government in connection with the Federal Supply Schedule (“FSS”) program or Tricare Retail Pharmacy Program, whether due to a misstated Federal Ceiling Price or otherwise, it is required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against a company under the False Claims Act (“FCA”) and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our collaborators are also subject to similar requirements outside of the United States and thus the attendant risks and uncertainties. If our collaborators suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our net revenue.
Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future profitability may depend, in part, on our ability to commercialize our products in foreign markets for which we intend to primarily rely on collaboration with third parties such as the agreement we entered into with Medomie in July 2023 to commercialize Adzenys and Cotempla in Israel and the Palestinian Authority and the agreement we entered into with Lupin in September 2024 to commercialize Adzenys and Cotempla in Canada. If we commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including:
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our inability to directly control commercial activities because we are relying on third parties; |
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the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; |
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different medical practices and customs in foreign countries affecting acceptance in the marketplace; |
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import or export licensing requirements; |
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longer accounts receivable collection times; |
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longer lead times for shipping; |
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language barriers for technical training; |
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reduced protection of intellectual property rights in some foreign countries, and related prevalence of generic alternatives to our products; |
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foreign currency exchange rate fluctuations; |
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our customers’ ability to obtain reimbursement for our products in foreign markets; and |
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the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute. |
Foreign sales of our products could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.
We are subject to United States and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
We are subject to the United States Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the United States domestic bribery statute contained in 18 U.S.C. § 201, the United States Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. In addition, we may engage third party intermediaries to obtain necessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
We have adopted a Code of Business Conduct and Ethics that mandates compliance with the FCPA and other anti-corruption laws applicable to our business throughout the world. We cannot ensure, however, that our employees and third-party intermediaries will comply with this code or such anti-corruption laws. Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any such action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.
We are subject to various health care fraud and abuse and reimbursement laws pertaining to the marketing of our approved products.
We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on the offer of payment or acceptance of kickbacks or other remuneration for the purchase of our products, including inducements to potential patients to request our products and services. Additionally, any product promotion educational activities, support of continuing medical education programs, and other interactions with health-care professionals must be conducted in a manner consistent with the FDA regulations, Physician Payments Sunshine Act, and the Anti-Kickback Statute. The Anti-Kickback Statute prohibits persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Violations of the Anti-Kickback Statute can also carry potential federal False Claims Act liability. Additionally, many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare items or services reimbursed by any third-party payor, not only the Medicare and Medicaid programs, and do not contain identical safe harbors. These and any new regulations or requirements may be difficult and expensive for us to comply with, may adversely impact the marketing of our existing products or delay introduction of our products, which may have a material adverse effect on our business, operating results and financial condition.
Adzenys and Cotempla contain controlled substances, and their manufacture, use, sale, importation, exportation, prescribing and distribution are subject to regulation by the DEA.
Adzenys and Cotempla, (collectively, our “Controlled Substance Products”), which are approved by the FDA, are regulated by the DEA as Schedule II controlled substances. Before any commercialization of any product candidate that contains a controlled substance, the DEA determines the controlled substance schedule of a drug, taking into account the recommendation of the FDA. Our Controlled Substance Products are, and our other future products may be, if approved, be regulated as “controlled substances” as defined in the Controlled Substances Act of 1970, or CSA, and the implementing regulations of the DEA, which establish registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, quota and other requirements administered by the DEA. These requirements are applicable to us, to our third-party manufacturers and to distributors, prescribers, and dispensers of our products. For example, Schedule II controlled substances are subject to various restrictions, including, but not limited to, mandatory written prescriptions and the prohibition of refills. The DEA regulates the handling of controlled substances through a closed chain of distribution. This control extends to the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce. A number of states and foreign countries also independently regulate these drugs as controlled substances. State-controlled substance laws and regulations may have more extensive requirements than those determined by the DEA and FDA. Though state-controlled substances laws often mirror federal law because the states are separate jurisdictions, they may schedule products separately. While some states automatically schedule a drug when the DEA does so, other states require additional state rulemaking or legislative action, which could delay commercialization. Some state and local governments also require manufacturers to operate a drug stewardship program that collects, secures, transports, and safely disposes of unwanted drugs. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.
Amphetamine and methylphenidate, which are the active ingredients in our Adzenys and Cotempla products, respectively, are listed by the DEA as a Schedule II controlled substance under the CSA. Scheduled controlled substances are subject to DEA regulations relating to supply, procurement, manufacturing, storage, distribution, and physician prescription procedures. Our United States-based contract manufacturer of our Controlled Substance Products is also registered with and inspected by the DEA.
Registered entities are subject to DEA inspection and also must follow specific labeling and packaging requirements, and provide appropriate security measures to control against diversion of controlled substances. Security requirements vary by controlled substance schedule with the most stringent requirements applying to Schedule I and Schedule II controlled substances. Required security measures include background checks on employees and physical control of inventory through measures such as vaults and inventory reconciliations. Failure to follow these requirements can lead to significant civil and/or criminal penalties and possibly even lead to a revocation of a DEA registration. The DEA also has a production and procurement quota system that controls and limits the availability and production of Schedule I or II controlled substances. If we or any of our suppliers of raw materials that are DEA classified as Schedule I or II controlled substances are unable to receive any quota or a sufficient quota to meet demand for our products, if any, our business would be negatively impacted.
Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule.
Because of their restrictive nature, these laws and regulations could limit commercialization of our products containing controlled substances. Failure to comply with these laws and regulations could also result in withdrawal of our DEA registrations, disruption in manufacturing and distribution activities, consent decrees, criminal and civil penalties, and state actions, among other consequences.
The design, development, manufacture, supply and distribution of our products are technically complex and require regulatory compliance.
Our third-party suppliers, must comply with all applicable regulatory requirements of the FDA and foreign authorities. For instance, because each of our ADHD products is a regulated drug product and subject to the DEA and state-level regulations, we have had to, and will continue to need to, secure state licenses from each required state in which we intend to sell such product allowing us to distribute a regulated drug product in such state.
If we fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or revocation of a pre-existing approval, or civil or criminal penalties. As a result, our business, financial condition and results of operations may be materially harmed.
There is a risk we may be unable to sell and distribute certain of our products if we cannot continue to comply with the serialization requirements of the Drug Quality and Security Act within the necessary time frames.
Title II of the Drug Quality and Security Act of 2013 provided increased FDA oversight over tracking and monitoring of the sale and distribution of prescription drugs. We are required to provide product identification information, or serialization, at the manufacturing batch, or lot level. In addition, we are required to track and verify wholesaler and pharmacy authentication and verification. We are required to conduct unit level tracking throughout the entire supply chain. We are now serializing our products and are compliant with the Drug Quality and Security Act, but there is no guarantee that we will be able to continue to satisfy each ever-stringent product identification requirements. Failing to do so could result in a delay or inability to sell our products within the United States.
Failure to comply with health and data protection laws and regulations could lead to United States federal and state government enforcement actions, including civil or criminal penalties, private litigation, and adverse publicity and could negatively affect our operating results and business.
We and any potential collaborators may be subject to United States federal and state data protection laws and regulations, such as laws and regulations that address privacy and data security. In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, we may obtain health information from third parties, including research institutions which are subject to privacy and security requirements under Health Insurance Portability and Accountability Act (“HIPAA”), as amended by Health Information Technology for Economic and Clinical Health (“HITECH”). To the extent that we act as a business associate to a healthcare provider engaging in electronic transactions, we may also be subject to the privacy and security provisions of HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-identifiable health information, mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the reporting of certain security breaches to healthcare provider customers, the federal government, and media outlets with respect to such information. Additionally, many states have enacted similar laws that may impose more stringent requirements on entities like ours. Depending on the facts and circumstances, we could be subject to significant civil, criminal, and administrative penalties if we obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
Compliance with United States and foreign privacy and data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal, and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
We may use hazardous chemicals and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time-consuming and costly.
Our research and development processes may involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed any insurance coverage and our total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters. Compliance with environmental laws and regulations may be expensive and may impair our research and development efforts. If we fail to comply with these requirements, we could incur substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, we cannot predict the impact on our business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.
Risks Related to Our Intellectual Property
A dispute concerning the infringement or misappropriation of our proprietary rights, or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business.
There is significant litigation in the pharmaceutical industry regarding patent and other intellectual property rights. As discussed in Part I, Item 3, Legal Proceedings of this Annual Report, we are currently subject to intellectual property litigation. It is possible that this litigation or future intellectual property litigation could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We may not be able to afford the costs of litigation. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our cash position and stock price. Any legal action against us or our collaborators could lead to:
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payment of damages, potentially treble damages, if we are found to have willfully infringed a party’s intellectual property rights; |
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injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell products; or |
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we or our collaborators having to enter into license arrangements that may not be available on commercially reasonable or acceptable terms, if at all, all of which could have a material adverse impact on our cash position and business, prospects and financial condition. As a result, we could be prevented from commercializing our products. |
We are dependent on our relationships and license agreements, and we rely on the intellectual property rights granted to us pursuant to the license agreements.
A number of our patent and trademark rights are derived from our license agreements with third parties. Pursuant to these license agreements, we have licensed rights to various patents, patent applications, trademarks and trademark applications within and outside of the United States. We may lose our rights to this intellectual property if we breach our obligations under such license agreements, including, without limitation, our financial obligations to the licensors. If we violate or fail to perform any term or covenant of the license agreements, the licensors may terminate the license agreements upon satisfaction of applicable notice requirements and expiration of any applicable cure periods. Additionally, any termination of license agreements, whether by us or the licensors may not relieve us of our obligation to pay any license fees owing at the time of such termination. If we fail to retain our rights under these license agreements, we will not be able to commercialize certain products subject to patent or patent application or trademark or trademark application, and our business, results of operations, financial condition and prospects would be materially adversely affected. In addition, the licensor may not be able to obtain valid and enforceable patents that protect the licensed products and may not be able to prevent third parties from infringing on those rights.
From time to time, we may renegotiate the terms of our existing licensing agreements or other material contracts. There can be no guarantee that the terms of the renegotiated license agreement will be viewed favorably by the market although the renegotiated terms might be advantageous to our business or that the other party would agree to material changes to benefit us. For example, in May 2022, we negotiated to terminate the License, Development, Manufacturing and Supply agreement with Tris. The negotiations resulted in reducing the future minimum payments we owed to Tris by approximately $8.0 million. If we were unable to renegotiate the terms of the agreement, it would have had a material negative impact on our cash flows and financial position.
The expiration or loss of patent protection may adversely affect our future net revenue and operating results.
The suite of composition-of-matter patents for Adzenys are scheduled to expire in 2026 and 2032. The composition-of-matter patents in the United States for Cotempla expire in 2032, and the method-of-use patent expires in 2038. There is no guarantee that we will be able to extend the life of these patents or to obtain additional patents, licenses, or other instruments that can provide us with a comparable level of exclusivity to the intellectual property underlying the expiring patents.
We rely on patent, trademark and other intellectual property protection in the discovery, development, manufacturing and sale of our products. In particular, patent protection is, in the aggregate, important in our marketing of products in the United States. Patents covering our products normally provide market exclusivity, which is important for the profitability of many of our products.
As patents for certain of our products expire, we may face competition from lower priced generic or bioequivalent products. In general, the expiration or loss of patent protection for a product may allow market entry by substitute products that could significantly reduce sales for the original product in a short amount of time. If our competitive position is compromised because of generic or bioequivalent products or otherwise, it could have a material adverse effect on our business and results of operations. In addition, proposals emerge from time to time for legislation to further encourage the early and rapid approval of generic or bioequivalent products. Any such proposals that are enacted into law could increase the negative effect of generic competition.
Our ability to compete may decline if we do not adequately protect or enforce our intellectual property rights.
Our success depends in part on our ability to manufacture, use, sell and offer to sell our products and in obtaining and maintaining intellectual property rights in our products, proprietary know-how and technology advances. We rely on patent protection, as well as a combination of trademark and trade secret laws to protect and prevent others from making, using and/or selling our compounds, processes, apparatuses and technology. While a presumption of validity exists with respect to patents issued to us in the United States, there can be no assurance that any of our patents will not be challenged, invalidated, circumvented or rendered unenforceable. Such means may afford only limited protection of our intellectual property and may not (i) prevent our competitors from duplicating our inventions; (ii) prevent our competitors from gaining access to our proprietary information and technology; or (iii) permit us to gain or maintain a competitive advantage. In addition, our competitors or other third parties may obtain patents that restrict or preclude our ability to lawfully practice, produce or sell our products in a competitive manner.
Obtaining and maintaining a patent portfolio entails significant expense and resources. We may or may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forgo patent protection or allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer. In addition, the patent scope can be limited in prosecution or by the courts after issuance.
In addition, we may face claims by third parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.
Legal actions to enforce our patent rights and administrative challenges at the United States Patent and Trademark Office can be expensive and may involve the diversion of significant management time. In addition, these actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or other actions against those that have infringed on our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our business, prospects, financial condition and results of operations.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to patent protection, because we operate in the highly technical field of development of therapies and medical devices, we rely in part on trade secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We expect to enter into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific and commercial collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us.
In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.
We may not be able to enforce our intellectual property rights throughout the world.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to pharmaceuticals and medical devices. This could make it difficult for us to stop the infringement of some of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. In addition, some countries allow patents to be challenged by third parties in administrative proceedings, which may result in a reduction in scope or cancelation of some or all of the claims. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.
Risks Related to Our Organization, Structure and Operation
Our efforts to expand and transform our businesses may require significant investments; if our strategies are unsuccessful, our business, results of operations and/or financial condition may be materially adversely affected.
We continuously evaluate opportunities for expansion and change. These initiatives may involve making acquisitions, entering into partnerships and joint ventures, divesting assets, restructuring our existing operations and assets, creating new financial structures and building new facilities—any of which could require a significant investment and subject us to new kinds of risks. We may incur additional indebtedness to finance these opportunities. If our strategies for growth and change are not successful, we could face increased financial pressure, such as increased cash flows demands, reduced liquidity and diminished access to financial markets, and the equity value of our businesses could be diluted.
The implementation of strategies for growth and change may create additional risks, including:
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diversion of management time and attention away from existing operations; |
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requiring capital investment that could otherwise be used for the operation and growth of our existing businesses; |
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disruptions to important business relationships; |
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increased operating costs; |
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limitations imposed by various governmental entities; and |
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difficulties due to lack of or limited prior experience in any new markets we may enter. |
Our inability to mitigate these risks or other problems encountered in connection with our strategies for growth and change could have a material adverse effect on our business, results of operations and financial condition. In addition, we may fail to fully achieve the savings or growth projected for current or future initiatives notwithstanding the expenditure of substantial resources in pursuit thereof.
We may have difficulties integrating acquired businesses or assets and such acquisitions may not result in the anticipated benefits, as a result, our business, results of operations and/or financial condition may be materially adversely affected.
We have completed a number of acquisitions, and we intend to continue to acquire additional products and businesses through mergers, asset purchases or in-licensing, businesses or products, or form strategic alliances as part of our business strategy. Such growth strategies involve risks, including:
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inability to efficiently operate new businesses or launch the sale of purchased assets or to integrate acquired products, assets and businesses; |
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inability to accurately predict delays in realizing the costs and benefits of acquisitions, partnerships, or joint ventures; |
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unexpected losses of customers or suppliers of an acquired or existing business; |
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difficulties in retaining key employees of acquired businesses; |
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difficulties in realizing projected synergies; |
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failure of the acquired business or assets to produce the expected value; and |
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exposure to unanticipated liabilities, including unexpected environmental exposures, litigation challenging a merger, product liability or illegal activities conducted by an acquired company or a joint venture partner. |
Our inability to address these risks in a timely manner or at all could cause us to fail to realize the anticipated benefits of such acquisitions or joint ventures and could have a material adverse effect on our business, results of operations and financial condition.
In fiscal 2025, the great majority of our gross revenue and gross accounts receivable were due to four significant customers, the loss of which could materially and adversely affect our results of operations.
Four customers contributed greater than 10% of our gross revenue during the year ended June 30, 2025. During the year ended June 30, 2025, these four customers accounted for 85% of our gross revenue. While all of these customers have been and continue to be consistently financially strong, the loss of one or more of our significant customers could have a material adverse effect on our business, operating results or financial condition. Any reduction, delay or cancellation of an order from these customers or the loss of any of these customers could cause our revenue to decline. If we are unable to diversify our customer base, we will continue to be susceptible to risks associated with customer concentration.
Our accounts receivable subjects us to credit risk.
We are also subject to credit risk from our accounts receivable related to our product sales. As of June 30, 2025, four customers accounted for 89% of our gross accounts receivable. Our profitability and cash flows are dependent on receipt of timely payments from customers. Any delay in payment by our customers may have an adverse effect on our profitability, working capital and cash flows. There is no assurance that we will be able to collect all or any of our accounts receivable in a timely matter. If any of our customers face unexpected situations such as financial difficulties, we may not be able to receive full or any payment of the uncollected sums or enforce any judgment debts against such clients, and our business, results of operations and financial condition could be materially and adversely affected.
We depend on key personnel and attracting qualified management personnel and our business could be harmed if we lose personnel and cannot attract new personnel.
Our success depends to a significant degree upon the technical and management skills of our directors, officers, and key personnel. Any of our directors could resign from our Board at any time and for any reason. The loss of the services of any of these individuals would likely have a material adverse effect on us. Our success also will depend upon our ability to attract and retain additional qualified management, marketing, technical, and sales executives and personnel. We do not maintain key person life insurance for any of our officers or key personnel.
We compete for such personnel, including directors, against numerous companies, including larger, more established companies with significantly greater financial resources than we possess. There can be no assurance that we will be successful in attracting or retaining such personnel, and the failure to do so could have a material adverse effect on our business, prospects, financial condition, and results of operations.
Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our products.
We will be exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing, and use of therapeutic candidates. Any failure of future therapeutic candidates by us and our corporate collaborators may expose us to liability claims as may the potential sale of any therapies approved in the future. These claims might be made by patients who use our therapies, healthcare providers, pharmaceutical companies, our corporate collaborators or other third parties that research or sell our therapies. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our future therapeutic candidates or any prospects for commercialization of our future therapeutic candidates.
The risk that we may be sued on product liability claims is inherent in the development and commercialization of pharmaceutical, medical device, dietary supplement and personal care products. Side effects of, or manufacturing defects in, products that we develop and commercialized could result in the deterioration of a patient’s condition, injury or even death. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits increases. Claims may be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of the affected products.
We may be subject to legal or administrative proceedings and litigation other than product liability lawsuits which may be costly to defend and could materially harm our business, financial condition and operations.
Although we maintain general liability and product liability insurance, this insurance may not fully cover potential liabilities. In addition, insurance coverage is increasingly expensive and difficult to obtain. For example, we have experienced increasing difficulty in procuring insurance coverage for our products, in particular, our ADHD products, due to their status as controlled substances. Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit the commercial production and sale of any of our products that receive regulatory approval, which could adversely affect our business. Product liability claims could also harm our reputation, which may adversely affect our collaborators’ ability to commercialize our products successfully. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws provide that:
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we may, in our discretion, indemnify other officers, employees and agents in those circumstances where indemnification is permitted by applicable law; |
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we are required to advance expenses, as incurred, to our directors and executive officers in connection with defending a proceeding, except that such directors or executive officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; |
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we will not be obligated pursuant to our bylaws to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by our Board of Directors, (iii) such indemnification is provided by us, in our sole discretion, pursuant to the powers vested in the corporation under applicable law or (iv) such indemnification is required to be made pursuant to our amended and restated bylaws; |
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the rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and |
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we may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. |
As a result, if we are required to indemnify one or more of our directors or executive officers, it may reduce our available funds to satisfy successful third-party claims against us, may reduce the amount of money available to us and may have a material adverse effect on our business and financial condition.
Public concern over the abuse of medications that are controlled substances, including increased legislative, legal and regulatory action, could negatively affect our business.
Products containing controlled substances may generate public controversy. Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of controlled substances such as opioids in the United States. State and local governmental agencies have commenced investigations into pharmaceutical companies and others in the supply chain in connection with the distribution of opioid medications. Certain cases in the industry have recently been settled, some for hundreds of millions of dollars. In the future, political pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict, the introduction and marketing of our products, the withdrawal of currently approved products from the market, or result in other legal action.
In addition, we are aware of other legislative, regulatory or industry measures to address the misuse of prescription opioid medications which could affect our business in ways that we may not be able to predict. Liabilities for taxes or assessments under any such laws will likely have an adverse impact on our results of operations, unless we are able to mitigate them through operational changes or commercial arrangements where permitted and may result in us ceasing to continue to sell our products in these jurisdictions.
Certain of our stockholders own a large percentage of our stock and their interests may conflict with yours.
As of June 30, 2025, Nantahala Capital Management, LLC (“Nantahala”), Stonepine Capital Management, LLC and Laurence W. Lytton hold approximately 12.1%, 10.1% and 5.6%, respectively, of our outstanding common stock and hold warrants and/or prefunded warrants which can be exercised to purchase additional shares of our common stock resulting in an ownership of 19.99% of our currently outstanding common stock, and for certain of our warrants and prefunded warrants in excess of 19.99% subject to stockholder approval. Accordingly, these stockholders may be able to exert influence over our management and affairs and over matters requiring security holder approval and their interests may conflict with yours.
In addition, in connection with our public offering of securities in June 2023, Nantahala was granted the right to designate an individual to join our Board of Directors, who has since joined the Board of Directors, and to nominate an additional candidate who is acceptable to us to be elected to the Board of Directors, subject to Nasdaq regulations. To date Nantahala only occupies one Board seat. The interests of this stockholder could conflict with the interests of our other stockholders.
Risk Related to Securities Markets and Investment in Our Securities
Our failure to meet the continued listing requirements of the Nasdaq could result in a delisting of our common stock.
If we fail to satisfy the continued listing requirements of the Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, the exchange may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting notification, we anticipate that we would take actions to restore our compliance with applicable exchange requirements, such as stabilize our market price, improve the liquidity of our common stock, prevent our common stock from dropping below such exchange’s minimum bid price requirement, or prevent future non-compliance with such exchange’s listing requirements.
Effecting a reverse stock split, if determined by the Board in its discretion, may not achieve one or more of our objectives.
We have effected five reverse stock splits since June 8, 2015, each of which has impacted the trading liquidity of the shares of our common stock. There can be no assurance that the market price per share of our common stock after a reverse stock split will remain unchanged or increase in proportion to the reduction in the number of shares of our common stock outstanding before the reverse stock split. The market price of our shares may fluctuate and potentially decline after a reverse stock split. Accordingly, the total market capitalization of our common stock after a reverse stock split may be lower than the total market capitalization before the reverse stock split. Moreover, the market price of our common stock following a reverse stock split may not exceed or remain higher than the market price prior to the reverse stock split.
Additionally, on October 11, 2024, the SEC approved a Nasdaq proposed rule change that changes how it views reverse stock splits. The new rule allows Nasdaq to initiate the delisting process for any company whose common stock bid price had closed below $1.00 per share for 30 consecutive business days (the “Minimum Bid Requirement”) if, within the prior year, the company conducted a reverse stock split, regardless of the ratio. Although we have not effectuated a reverse stock split since January 2023, given our history of effectuating reverse stock splits in order to comply with the Minimum Bid Requirement, there can be no assurance that our securities will continue to be listed on Nasdaq if we do not comply with the Minimum Bid Requirement.
There can be no assurance that a reverse stock split will result in a per-share market price that will attract institutional investors or investment funds or that such share price will satisfy investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve. Further, if a reverse stock split is effected and the market price of our common stock declines, the percentage decline may be greater than would occur in the absence of a reverse stock split.
Our share price is volatile and may be influenced by numerous factors, some of which are beyond our control.
The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:
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the success of products we acquire for development or commercialization relative to the success of our competitors; |
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product safety; |
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conditions or trends in the healthcare, biotechnology and pharmaceutical industries, including healthcare payment systems; |
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our ability to effectively manage operations, financial decisions, internal controls over financial reporting or disclosure controls, performance relative to projections, and attract and retain employees; |
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our dependence on third parties, including Contract Research Organizations (“CROs”) and scientific and medical advisors; |
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adverse regulatory decisions or changes in laws or regulations; |
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disputes or other developments relating to patents and other proprietary rights and our ability to obtain patent protection for our products; |
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general political and economic conditions and effects of natural or man-made catastrophic events; and |
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other events or factors, many of which are beyond our control. |
In addition, the stock market in general, and the stocks of small-cap healthcare, biotechnology, and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section and elsewhere in this Annual Report could have a dramatic and material adverse impact on the market price of our common stock. You might not be able to resell your shares at or above the price you paid for them.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and any trading volume could decline.
Any trading market for our common stock that may develop will depend in part on the research and reports that securities or industry analysts publish about us or our business. We cannot control the number of securities and industry analysts who publish research on us, the extent of their coverage or the content of their reports. Downgrades of our stock or publishing inaccurate or unfavorable research about our business, would likely lead to a decline in our stock price. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose market visibility and demand for our stock could decrease, which might cause our stock price and any trading volume to decline.
Some provisions of our charter documents and applicable Delaware law may discourage an acquisition of us by others, even if the acquisition may be beneficial to some of our stockholders.
Provisions in our Certificate of Incorporation, as amended, and our Amended and Restated Bylaws, as well as certain provisions of Delaware law, could make it more difficult for a third-party to acquire us, even if doing so may benefit some of our stockholders. These provisions include:
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the authorization of 50.0 million shares of “blank check” preferred stock, the rights, preferences and privileges of which may be established and shares of which may be issued by our Board of Directors at its discretion from time to time and without stockholder approval; |
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limiting the removal of directors by the stockholders; |
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allowing for the creation of a staggered Board of Directors; |
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eliminating the ability of stockholders to call a special meeting of stockholders; and |
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establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at stockholder meetings. |
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by the Board of Directors. This provision could have the effect of discouraging, delaying or preventing someone from acquiring us or merging with us, whether or not it is desired by or beneficial to our stockholders.
Any provision of our Certificate of Incorporation, as amended, or our Amended and Restated Bylaws, or of Delaware law that is applicable to us that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock in the event that a potentially beneficial acquisition is discouraged, and could also affect the price that some investors are willing to pay for our common stock.
We are and may continue to be subject to short selling strategies.
Short sellers of our stock may be manipulative and may attempt to drive down the market price of shares of our common stock. Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum and generate profits for themselves after selling a stock short. Although traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by blogging have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by large Wall Street firms and independent research analysts. These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base. Issuers who have limited trading volumes and are susceptible to higher volatility levels than large-cap stocks, can be particularly vulnerable to such short seller attacks. These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the United States, are not subject to certification requirements imposed by the SEC and, accordingly, the opinions they express may be based on distortions or omissions of actual facts or, in some cases, fabrications of facts. In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running a successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed short sellers will continue to issue such reports. Significant short selling of a company’s stock creates an incentive for market participants to reduce the value of that company’s common stock. Short selling may lead to the placement of sell orders by short sellers without commensurate buy orders because the shares borrowed by short sellers do not have to be returned by any fixed period of time. If a significant market for short selling our common stock develops, the market price of our common stock could be significantly depressed.
General Risk Factors
We are and may become involved in litigation or other proceedings from time to time relating to the enforcement or defense of patent and other intellectual property rights, which could cause us to divert our resources and could put our intellectual property at risk.
To prevent infringement or unauthorized use of our intellectual property, we have in the past, and may in the future, need to file infringement claims. For example, on December 11, 2024, we filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Granules Pharmaceuticals, Inc. (see Part I, Item 3, Legal Proceedings in this Annual Report for further detail of this matter). When we pursue litigation to stop another party from using the inventions claimed in any patents we own or control, that party has the right to ask the court to rule that such patents are invalid or should not be enforced against that third party. In addition to patent infringement lawsuits, we may decide to file interferences, oppositions, ex parte reexaminations, post-grant review, or inter partes review proceedings before the United States Patent and Trademark Office (the “USPTO”) and corresponding foreign patent offices. Litigation and other proceedings relating to intellectual property are unpredictable and expensive and may consume time and resources and divert the attention of managerial and scientific personnel. Such litigations and proceedings could substantially increase our operating losses and reduce the resources available for research, development and other activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings or may be required to divert such resources from our ongoing and planned research and development and other activities. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
There also is a risk that a court or patent office in such proceeding will decide that our patents or the patents of our licensors are not valid or are not enforceable, and that we do not have the right to stop the other party from using the inventions. Additionally, even if the validity of such patents is upheld, the court may refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents. If we are not successful in enforcing or defending our intellectual property, our competitors could develop and market products based on our discoveries and technologies, which may reduce the commercial viability of, and demand for, our product candidates and any future products.
Our business and operations would suffer in the event of system failures, cybersecurity attacks, data leakages or other security breaches.
We utilize information technology, or IT, and some of our vendors utilize artificial intelligence and similar systems and networks to process, transmit and store electronic information in connection with our business activities. As use of digital technologies has increased, cyber incidents, including deliberate cybersecurity attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigate their effects.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cybersecurity attacks, including computer viruses, unauthorized access, ransomware attacks, phishing expeditions, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could cause interruption of our operations. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation, or adverse regulatory action and the development of our products could be delayed.
Our sales force and other employees, third party logistics partners, CMOs, CROs, principal investigators, collaborators, independent contractors, consultants and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets may experience extreme volatility and disruptions (including as a result of actual or perceived changes in interest rates and economic inflation), which include severely diminished liquidity and credit availability, declines in consumer confidence, slower economic growth, high inflation, tariffs, trade wars, uncertainty about economic stability and swings in unemployment rates. The financial markets and the global economy may also be adversely affected by the impact of supply chain disruptions, labor shortages, fluctuations in currency exchange rates, changes in interest rates, military conflict, acts of terrorism or other geopolitical events. Sanctions imposed, and other actions taken, by the United States and other countries in response to geopolitical conflicts continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. There can be no assurance that a deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions, including our ability to purchase necessary supplies on acceptable terms, if at all. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to further delay or abandon clinical development plans, if we were to resume such development. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.
The United States government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. In addition, the United States government has initiated or is considering imposing tariffs on certain foreign goods. Related to this action, certain foreign governments, including China, have instituted or are considering imposing tariffs on certain United States goods. It remains unclear what the United States administration or foreign governments will or will not do with respect to tariffs or other international trade agreements and policies. A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to disrupt our research activities, affect our suppliers and/or the United States or global economy or certain sectors thereof and, thus, could adversely impact our businesses.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
Cybersecurity Risks
We rely on internal and -party information technology systems and networks to process, transmit and store electronic information in our operations, including our proprietary business information and that of our customers, suppliers and employees. We use various internal and third-party information technology systems and networks to manage our operations and maintain effective internal control over financial reporting. We also collect and store sensitive data, including intellectual property, proprietary business information and personal information of our customers, suppliers and employees, in our data centers and on our networks. The secure operation of these information technology systems and networks, and the processing and maintenance of this information, are critical to our business operations and strategy.
Despite our security measures, our internal and third-party information technology systems and networks may be subject to damage, disruption, or unauthorized access due to a variety of factors, including cyber-attacks by computer hackers, computer viruses, ransomware, phishing, denial-of-service attacks, physical or electronic break-ins, employee error or malfeasance, power outages, natural disasters, or other catastrophic events. Any such damage, disruption, or unauthorized access could compromise our internal and third-party networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations, damage to our reputation, loss of customers, potential harm to our competitive position and additional costs to remediate the issue.
Cybersecurity Practices
Cybersecurity Governance
Aytu adheres to the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework 2.0, which provides a set of standards, guidelines and best practices to manage cybersecurity-related risks. We have developed and documented our systems disaster recovery plan, which outlines the roles, responsibilities and procedures for restoring our critical systems and data in the event of a cyber incident. We have also crafted internal policies to help maintain a secure environment, such as our information security policy, our data classification policy, our incident response policy and our password policy. We regularly conduct phishing simulations, vulnerability scans and audits to test the effectiveness of our controls and backups, and to identify and remediate any gaps or weaknesses in our cybersecurity posture.
Cybersecurity Incidents
Despite our efforts to prevent and mitigate cybersecurity incidents, we cannot guarantee that we, or third-party providers that we rely on, will not experience any breaches, disruptions, or unauthorized access to our information technology systems and networks. During fiscal 2025, we did not experience any cybersecurity incidents that materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, however, there can be no assurance that the measures we have taken to address IT and cybersecurity risks will prove effective in the future. For additional discussion of the IT and cybersecurity risks facing our business, please refer to Part 1, Item 1A, Risk Factors of this Annual Report.
We prioritize investment in cybersecurity risk management and governance. We continually assess the adequacy of our resources and capabilities to address emerging threats, regulatory requirements and changes in technology. As cybersecurity threats evolve, we may need to further enhance our processes and technologies, which could require additional financial resources.
We lease various office buildings within the United States, which we continuously review and evaluate as a part of our strategy to optimize our business operations. The following table sets forth a list of our properties as of June 30, 2025:
| Location |
|
Leased/Owned |
Purpose |
|
| Denver, CO |
|
Leased |
Corporate headquarters |
|
| Berwyn, PA |
Leased |
Office |
From time to time, we become involved in or are threatened with legal disputes arising out of our business and operations in the normal course of business. Most of these disputes are not likely to have a material effect on our business, financial condition, or operations. As of the filing of this Annual Report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a materially adverse effect upon our financial condition, results of operations, or cash flows.
Granules Paragraph IV. On October 31, 2024, the Company received the Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. On December 11, 2024, the Company filed a patent infringement lawsuit against Granules which triggered a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. The Company plans to vigorously enforce its intellectual property rights related to Adzenys.
Revive Investing. The Company had been named as a nominal plaintiff in a lawsuit by two shareholders against Armistice Capital Master Fund, Ltd (“Armistice”), entitled Revive Investing, LLC. et al v. Armistice Master Fund, Ltd. et al, Case 1:20-cv-02849-CMA-TPO, in the United States District Court for the District of Colorado, contending that Armistice was liable for short swing trading profits in violation of Section 16(b) of the Exchange Act for certain trades it made in Company stock in 2019 and 2020 and must disgorge those profits to the Company. That matter proceeded to trial before a jury, which on January 29, 2025, returned a verdict finding no liability. On March 6, 2025, the plaintiffs filed an appeal in the United States Court of Appeals for the Tenth Circuit. As with the original case, regardless of the outcome, this case will not have a materially adverse effect upon the Company’s financial condition, results of operations, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has been listed on the Nasdaq under the symbol “AYTU” since October 20, 2017. As of September 15, 2025, the closing price as reported on the Nasdaq of our common stock was $2.33, and there were 183 holders of record of our common stock. A substantially greater number of holders of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Equity Compensation Plan Information
We have an equity compensation plan under which options and shares of our common stock are authorized for grant or issuance as compensation to eligible employees, consultants, and members of the Board of Directors. Our stockholders have approved this plan. Refer to Note 15 - Equity Incentive Plan in Part II, Item 8 of this Annual Report for further information about the material terms of our equity incentive plan. The following table displays equity compensation plan information as of June 30, 2025, relating to securities reserved for future issuance upon exercise:
| Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Remaining Available for Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column A) |
||||||||||
| Plan Category |
(Column A) |
(Column B) |
(Column C) |
|||||||||
| Equity compensation plans approved by security holders: |
||||||||||||
| 2023 Equity Incentive Plan (1) |
||||||||||||
| Outstanding stock options (2) |
211,618 | $ | 4.51 | |||||||||
| Unvested restricted stock (3) |
32,912 | N/A | ||||||||||
| Total from the 2023 Equity Incentive Plan |
244,530 | 397,409 | ||||||||||
| Equity compensation plans not approved by security holders (4) |
4 | N/A | — | |||||||||
| Total for all plans |
244,534 | 397,409 | ||||||||||
| (1) |
On May 18, 2023, our stockholders approved the adoption of the Aytu BioPharma, Inc. 2023 Equity Incentive Plan (the “2023 Equity Incentive Plan”), which replaced all previous plans. For the 2023 Equity Incentive Plan, the stockholders approved (a) 200,000 new shares; (b) 87,155 shares “rolled over” to the 2023 Equity Incentive Plan from plans replaced by the 2023 Equity Incentive Plan; and (c) any shares that are returned to us under plans replaced by the 2023 Equity Incentive Plan to be added to the 2023 Equity Incentive Plan. On May 21, 2025, our stockholders approved an amendment (the “Plan Amendment”) to the 2023 Equity Incentive Plan. The Plan Amendment increased the number of shares reserved for issuance under the 2023 Equity Incentive Plan by 300,000 shares to bring the total number of shares reserved for issuance under the 2023 Equity Incentive Plan to 500,000 shares, not including unissued shares from available awards under prior plans or any returned shares. The Plan Amendment became effective immediately upon approval by our stockholders and we plan to register the 300,000 shares pursuant to a registration statement on Form S-8 to be filed with the SEC in fiscal 2026. |
| (2) |
As of June 30, 2025, there were 100,195 exercisable stock options with a weighted-average exercise price of $7.44 (see Note 15 - Equity Incentive Plan in Part II, Item 8 of this Annual Report for further information). |
| (3) |
Unvested restricted stock does not have exercise prices associated with them, but rather a weighted-average per unit fair value, which is presented in order to provide additional information regarding the potential dilutive effect of the awards. The weighted-average grant date per unit fair value for unvested restricted stock granted under the 2023 Equity Incentive Plan as of June 30, 2025, was $69.81 (see Note 15 - Equity Incentive Plan in Part II, Item 8 of this Annual Report for further information). |
| (4) |
As of June 30, 2025, there were four shares of unvested restricted stock that were granted outside of equity compensation plans approved by security holders, which had less than $0.1 million of total unrecognized compensation costs and a remaining weighted-average vesting period of 1.0 years (see Note 15 - Equity Incentive Plan in Part II, Item 8 of this Annual Report for further information). |
Dividend Policy
We have never declared or paid any dividends on our capital stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our Board of Directors. Our ability to pay dividends on our common stock is limited by restrictions under the terms of our debt agreements. In addition, any future indebtedness that we may incur could preclude us from paying dividends. Investors should not purchase our common stock with the expectation of receiving cash dividends.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing strategy, includes forward-looking statements that involve risks and uncertainties. You should read Part 1, Item 1A, Risk Factors of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made. Therefore, no reader of this document should rely on these statements being current as of any time other than the time at which this document is filed with the SEC.
Objective
The purpose of the Management’s Discussion and Analysis (the “MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the year ended June 30, 2025, and our financial condition as of June 30, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto.
Overview
We are a pharmaceutical company focused on advancing innovative medicines for complex central nervous system diseases to improve the quality of life for patients. Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. In June 2025, we entered into the Commercialization Agreement with Fabre-Kramer to commercialize EXXUA in the United States. Gepirone is a new chemical entity, and we believe EXXUA to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the FDA for the treatment of MDD in adults.
EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. We believe it can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a SSRI and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function. It is our expectation that EXXUA has the potential to serve as a major growth catalyst for us and we anticipate launching EXXUA in the fourth calendar quarter of 2025 as a centerpiece of our commercial efforts.
In addition, we will continue to focus on commercializing innovative prescription products that address conditions frequently developed or diagnosed in children, including ADHD. We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations. In the first quarter of fiscal 2025 we completed the previously announced wind down and divestiture of our Consumer Health business and now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, our consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation.
Our business from continuing operations is focused on the upcoming launch of EXXUA and on our current prescription pharmaceutical products sold primarily through third party wholesalers and pharmacies and which primarily consists of two product portfolios. The first, the ADHD Portfolio, primarily consists of two products for the treatment of ADHD: Adzenys and Cotempla. The second, the Pediatric Portfolio, primarily consists of Karbinal, an extended-release first-generation antihistamine suspension containing carbinoxamine indicated to treat numerous allergic conditions, and Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency. During the fourth quarter of fiscal 2024, we successfully completed the transition of all manufacturing of our Adzenys and Cotempla products to a United States-based third-party contract manufacturer to improve the profitability of these products.
We have incurred significant losses in each year since inception. Our net loss was $13.6 million for the year ended June 30, 2025, and as of June 30, 2025, we had an accumulated deficit of $333.5 million. We expect to continue to incur significant expenses in connection with our ongoing activities, although we do expect to become profitable through the continued growth of our commercial business.
In light of our own business activities and external developments in the biotechnology and biopharmaceutical industries, Aytu management and our Board of Directors regularly reviews our performance, prospects and risks such as the potential impact to our business resulting from our competitive landscape (i.e., entry of generic competitors, payor pressures, new branded entrants, etc.). These reviews have included consideration of potential partnerships, collaborations, and other strategic transactions such as acquisitions or divestitures of programs or technology to enhance stockholder value. Aytu management and our Board expect to continue to evaluate potential strategic transactions and business combinations.
Significant Developments
Business Environment
We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors and tariffs and our industry is currently encountering supply chain disruptions related to the sourcing of raw materials, increased costs of materials as result of tariffs, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. While we do not have sales or operations in Russia or Ukraine and we do not have significant sales or operations in the Middle East, it is possible that conflicts and trade wars could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures, increased costs and supply chain disruptions could be significant across the business throughout fiscal 2026 and into fiscal 2027. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products, and the pediatric product supply has remained adequate to satisfy demand for the preceding four years.
In October 2024, we received the Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. We plan to vigorously enforce our intellectual property rights related to Adzenys.
Aytu Business
As part of our ongoing strategic evaluation and go-forward operating plan, we continue to prioritize growing our prescription business given the opportunity for EXXUA in the MDD market and the current market trends supporting our products’ growth such as the positive rebound of our Pediatric Portfolio in fiscal 2025. We believe focusing resources on our most profitable, growing products provides the most effective pathway to achieve companywide profitability and continued growth. As part of our plan we completed the wind down of operations and divested our Consumer Health business in the first quarter of fiscal 2025.
For fiscal 2025, we recorded net revenue of $66.4 million. During the year, we were able to continue the production of our ADHD medications, Adzenys and Cotempla, without encountering any supply chain interruptions in order to provide patients receiving stimulant prescriptions for the treatment of ADHD with alternative solutions to products that have experienced supply interruptions. As a result, we recorded our second highest prescription levels for both Adzenys and Cotempla during fiscal 2025, even though the ADHD marketplace saw a decrease in supply chain interruptions and a stabilization of ADHD product supply, resulting in $57.6 million of net revenue for our ADHD Portfolio, the second highest achieved in our history. We also saw Pediatric Portfolio net revenue growth to $8.8 million, a 20% increase from fiscal 2024, which reflects the positive effects from our recently implemented return-to-growth plan for this portfolio.
To reduce the costs associated with the manufacture of Adzenys and Cotempla, we transferred the manufacturing of these products to a United States-based third-party manufacturer in the fourth quarter of fiscal 2024. Prior to this, we manufactured these products in our now closed facility in Grand Prairie, Texas.
As an additional result of focusing on building our portfolio of revenue-generating products and generating profitability, in fiscal 2023 we terminated our license agreements relating to Healight and NT0502 (N-desethyloxybutynin), and we indefinitely suspended active development of our clinical development programs including AR101. In connection with this suspension, we engaged in negotiations with EnzCo and Rumpus for the repurchase of AR101. On August 5, 2025, we reached terms with Rumpus and EnzCo whereby for mutual consideration and releases, we transferred all of ours and Rumpus’ rights, title and interest in AR101 to EnzCo, which extinguished and terminated all of our obligations and Rumpus’ obligations under the Rumpus Asset Purchase Agreement. There is no other relationship between us, EnzCo or Rumpus other than as contracting parties to terminate the Rumpus Asset Purchase Agreement, and there are no penalties or remaining obligations for us for terminating the Rumpus Asset Purchase Agreement.
Debt and Equity Financings
Equity Financings
In June 2025, we raised gross proceeds of $16.6 million from the issuance of (i) 2,806,688 shares of our common stock, at a public offering price of $1.50 and 8,233,332 prefunded warrants at a public offering price of $1.4999 to purchase 8,233,332 shares of our common stock at an exercise price of $0.0001 per share. We received $14.8 million in proceeds net of underwriting commissions and offering expenses and intend to use the net proceeds from the offering for working capital, general corporate purposes and to enable us to exclusively commercialize EXXUA.
In June 2024, the Tranche B Warrants to purchase 2,173,912 shares of our common stock at an exercise price of $1.59 were exercised, generating proceeds of $3.5 million. The Tranche B Warrants were converted into 367,478 shares of our common stock and 1,806,434 prefunded warrants to purchase shares of our common stock with an exercise price of $0.0001 per share. We used a portion of these proceeds as part of the $15.0 million term loan repayment described below.
Eclipse Agreement
Under our Eclipse Agreement, we have two loan agreements, the Eclipse Term Loan and the Eclipse Revolving Loan. The Eclipse Term Loan consists of an outstanding principal amount of $13.0 million on the closing date of the Eclipse Amendment No. 6, at an interest rate of the SOFR plus 7.0%, with a four-year term and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on the June 12, 2029, maturity date, as amended. In June 2024, we used the initial proceeds from the Eclipse Term Loan and a portion of the proceeds from the warrant exercises described above to repay in full a $15.0 million term loan. The Eclipse Revolving Loan has a potential maximum borrowing base of $14.5 million at an interest rate of the SOFR plus 4.5%, which was temporarily increased pursuant to the $1.5 million Eclipse Incremental Advance, with repayment and permanent reduction of the Eclipse Incremental Advance commencing on August 1, 2025, and continuing on the first day of each calendar month thereafter, in an amount equal to $125,000 per month, until the Eclipse Incremental Advance has been reduced to $0. In addition, we are required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of the Eclipse Revolving Loan remains subject to a borrowing base and reserve, and availability blockage requirements and the maturity date, as amended, is June 12, 2029.
The One Big Beautiful Bill Act
The enactment of the One Big Beautiful Bill Act (the “OBBBA”) on July 4, 2025, may adversely affect our business, financial condition, results of operation and future plans. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act (the “TCJA”), allowing for accelerated tax deductions for qualified property and research expenditures, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in calendar year 2025 and others implemented through calendar year 2027. None of the provisions are expected to impact the realizability of our deferred tax assets and liabilities on the consolidated balance sheet as of June 30, 2025. However, because the OBBBA is a wide reaching law, we are currently assessing its potential impact on our business, financial condition, results of operations and future plans and we plan to provide an update in future SEC filings once this assessment is complete.
Results of Operations
The results of operations for the year ended June 30, 2025, compared to the year ended June 30, 2024, is as follows:
| Year Ended |
||||||||||||
| June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| (in thousands) |
||||||||||||
| Net revenue |
$ | 66,382 | $ | 65,183 | $ | 1,199 | ||||||
| Cost of goods sold |
20,551 | 16,129 | 4,422 | |||||||||
| Gross profit |
45,831 | 49,054 | (3,223 | ) | ||||||||
| Operating expenses: |
||||||||||||
| Selling and marketing |
20,906 | 22,083 | (1,177 | ) | ||||||||
| General and administrative |
17,379 | 19,954 | (2,575 | ) | ||||||||
| Research and development |
1,326 | 2,769 | (1,443 | ) | ||||||||
| Amortization of intangible assets |
3,683 | 3,683 | — | |||||||||
| Restructuring costs |
2,101 | 2,156 | (55 | ) | ||||||||
| Impairment expense |
8,263 | — | 8,263 | |||||||||
| Total operating expenses |
53,658 | 50,645 | 3,013 | |||||||||
| Loss from operations |
(7,827 | ) | (1,591 | ) | (6,236 | ) | ||||||
| Other (expense) income, net |
(512 | ) | 870 | (1,382 | ) | |||||||
| Interest expense |
(3,703 | ) | (5,059 | ) | 1,356 | |||||||
| Derivative warrant liabilities loss |
(1,703 | ) | (4,004 | ) | 2,301 | |||||||
| Loss on extinguishment of debt |
— | (594 | ) | 594 | ||||||||
| Loss from continuing operations before income tax expense |
(13,745 | ) | (10,378 | ) | (3,367 | ) | ||||||
| Income tax expense |
(437 | ) | (2,142 | ) | 1,705 | |||||||
| Net loss from continuing operations |
(14,182 | ) | (12,520 | ) | (1,662 | ) | ||||||
| Net income (loss) from discontinued operations, net of tax |
620 | (3,324 | ) | 3,944 | ||||||||
| Net loss |
$ | (13,562 | ) | $ | (15,844 | ) | $ | 2,282 | ||||
Net Revenue by Product Portfolio
Net revenue disaggregated by product portfolios for the year ended June 30, 2025, compared to the year ended June 30, 2024, is as follows:
| Year Ended |
||||||||||||
| June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| (in thousands) |
||||||||||||
| ADHD Portfolio |
$ | 57,576 | $ | 57,784 | $ | (208 | ) | |||||
| Pediatric Portfolio |
8,769 | 7,280 | 1,489 | |||||||||
| Other |
37 | 119 | (82 | ) | ||||||||
| Total net revenue |
$ | 66,382 | $ | 65,183 | $ | 1,199 | ||||||
During the year ended June 30, 2025, total net revenue increased by $1.2 million, or 2% compared to the year ended June 30, 2024, primarily due to a $1.5M increase in the Pediatric Portfolio, which reflects the positive effects from our recently implemented return-to-growth plan for that portfolio as well as a $3.3 million increase in ADHD Portfolio net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor offset primarily by increases in savings offers costs impacting net revenue.
Gross Profit
Gross profit and gross profit percentage for the year ended June 30, 2025, compared to the year ended June 30, 2024, were as follows:
| Year Ended |
||||||||||||
| June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| (in thousands, except gross profit percentage) | ||||||||||||
| Gross profit |
$ | 45,831 | $ | 49,054 | $ | (3,223 | ) | |||||
| Gross profit percentage |
69 | % | 75 | % | (6 | )% | ||||||
During the year ended June 30, 2025, gross profit decreased by $3.2 million, or 7% compared to the year ended June 30, 2024. Gross profit percentage decreased to 69% for the year ended June 30, 2025, compared to 75% for the year ended June 30, 2024. The decrease in gross profit percentage is primarily related to increased cost of goods sold for our ADHD Portfolio inventory as we sell through self-manufactured inventory burdened with certain fixed costs associated with its manufacture, which were capitalized into inventory costs in prior periods.
Selling and Marketing
During the year ended June 30, 2025, selling and marketing expense decreased by $1.2 million, or 5%, compared to the year ended June 30, 2024, primarily driven by reduced commission expense and variable commercial marketing program fees, partially offset by increases in labor and service costs. We expect selling and marketing expense to increase during fiscal 2026 related to increased commission expense and commercial marketing program fees from anticipated increases in prescription product sales related to our expected commercial launch of EXXUA.
General and Administrative
During the year ended June 30, 2025, general and administrative expense decreased by $2.6 million or 13%, compared to the year ended June 30, 2024. The decrease is primarily a result of continued cost reduction efforts and improved operational efficiencies. We expect general and administrative expense to increase during fiscal 2026 primarily from increased costs associated with the initial launch and ongoing support of EXXUA.
Research and Development
During the year ended June 30, 2025, research and development expense decreased by $1.4 million, or 52%, compared to the year ended June 30, 2024, primarily driven by the previously announced suspension of our development programs to focus on our commercial operations resulting in a decrease in research and development spending. We expect our research and development expenses to slightly decrease in the future as we continue to look for cost savings and focus on commercial operations while having minimum research and development expenses related to any required regulatory filings and maintenance of our intellectual property.
Amortization of Intangible Assets
During the year ended June 30, 2025, amortization of intangible assets, excluding amounts included in cost of goods sold, was relatively consistent compared to the year ended June 30, 2024, due to the regularly recurring straight-line amortization expense that was consistent for both fiscal years. However, we expect amortization of intangible assets to increase in the future as our intangible asset related to EXXUA will increase over time when contingent consideration is capitalized as certain contingencies are met, partially offset by a decrease in amortization expense related to impairments of certain intangible assets recorded in fiscal 2025. Refer to Note 7 - Intangible Assets in Part II, Item 8 of this Annual Report for further information.
Restructuring Costs
During the years ended June 30, 2025, and 2024, we recognized $2.1 million and $2.2 million, respectively, of restructuring costs, primarily related to the closure of our Grand Prairie, Texas manufacturing site. We do not anticipate any restructuring costs during fiscal 2026 as our restructuring activities were completed during fiscal 2025. See Note 17 - Restructuring Costs in Part II, Item 8 of this Annual Report for further information.
Impairment Expense
During the year ended June 30, 2025, we recognized total impairment expense of $8.3 million, which was primarily the result of our increased focus on our commercial efforts for EXXUA and our ADHD Portfolio. See Note 7 - Intangible Assets in Part II, Item 8 of this Annual Report for further information.
During the year ended June 30, 2024, there was no impairment expense recorded except for impairment expense related to exit and disposal activities recorded to the restructuring costs financial statement line item discussed above and the net income (loss) from discontinued operations, net of tax financial statement line item discussed below.
Other (Expense) Income, Net
During the year ended June 30, 2025, other (expense) income, net decreased by $1.4 million, compared to the year ended June 30, 2024, primarily due to $1.3 million of underwriting commissions and offering expenses from the issuance of the June 2025 Prefunded Warrants, partially offset by other income, net relatively consistent with the prior year. We expect other (expense) income, net to continue to be relatively consistent during fiscal 2026.
Interest Expense
During the year ended June 30, 2025, interest expense decreased by $1.4 million, or 27%, compared to the year ended June 30, 2024, primarily due to the extinguishment of our $15.0 million term loan while entering into the $13.0 million Eclipse Term Loan on more favorable terms during the fourth quarter of fiscal 2024, and the gradual paydown of the outstanding principal balance of the Eclipse Term Loan throughout the year as well as reductions in our fixed payment arrangement balance during the period. We expect interest expense to decrease during fiscal 2026 primarily due to the paydown of our fixed payment arrangements.
Derivative Warrant Liabilities Loss
The fair value of derivative warrant liabilities, which is calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model, are revalued at each reporting period and changes are reflected through income or expense. For the year ended June 30, 2025, we recognized an unrealized loss of $1.7 million from the fair value adjustment primarily driven by an increase in the fair value of the June 2025 Prefunded Warrants from the issuance date until year end, partially offset by a decrease in the fair value of our other warrants and prefunded warrants due to an overall decrease in our stock price during fiscal 2025. For the year ended June 30, 2024, we recognized an unrealized loss of $4.0 million from the fair value adjustment primarily driven by a decrease in our stock price during fiscal 2024.
Loss on Extinguishment of Debt
We recorded no loss on extinguishment of debt during the year ended June 30, 2025. During the year ended June 30, 2024, we recorded a $0.6 million loss on extinguishment of debt due to the extinguishment of our $15.0 million term loan.
Income Tax Expense
For the years ended June 30, 2025, and 2024, there was $0.4 million of income tax expense and $2.1 million of income tax expense from continuing operations, which was an effective tax rate of negative 3.2% and negative 20.6%, respectively. This income tax expense was primarily driven by the limitations on losses as a result of Section 382 of the IRC changes in ownership coupled with existing valuation allowances.
Net Income (Loss) from Discontinued Operations, Net of Tax
Net income (loss) from discontinued operations, net of tax is related to the wind down and divestiture of our Consumer Health business that was completed in the first quarter of fiscal 2025. See Note 20 - Discontinued Operations in Part II, Item 8 of this Annual Report for further information.
Liquidity and Capital Resources
Cash Flows
The following table sets forth the primary sources and uses of cash for the periods indicated:
| Year Ended |
||||||||||||
| June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| (in thousands) |
||||||||||||
| Net cash used in operating activities |
$ | (1,937 | ) | $ | (1,388 | ) | $ | (549 | ) | |||
| Net cash used in investing activities |
(2,560 | ) | (329 | ) | (2,231 | ) | ||||||
| Net cash provided by (used in) financing activities |
15,443 | (1,262 | ) | 16,705 | ||||||||
| Net change in cash and cash equivalents |
$ | 10,946 | $ | (2,979 | ) | $ | 13,925 | |||||
Net Cash Used in Operating Activities
Net cash used in operating activities during these periods primarily reflected our net losses, partially offset by changes in working capital and non-cash charges including impairment, stock-based compensation expense, gain or loss on derivative warrant liabilities, depreciation, amortization and accretion, adjustments from discontinued operations and other charges.
During the year ended June 30, 2025, net cash used in operating activities totaled $1.9 million, which was primarily the result of an increase in accounts receivable and prepaid expenses and other current assets, partially offset by positive cash earnings (net loss offset by non-cash items primarily from impairment expense, depreciation, amortization and accretion, stock-based compensation expense, derivative warrant liabilities adjustment, inventory write-down, adjustments from discontinued operations and other certain non-cash adjustments) and increases in inventories, accounts payable, accrued liabilities, other operating assets and liabilities, net, and changes in operating assets and liabilities from discontinued operations.
During the year ended June 30, 2024, net cash used in operating activities totaled $1.4 million. The use of cash was primarily the result of the decrease in accounts payable and accrued liabilities and an increase in inventories, partially offset by positive cash earnings (net loss offset by non-cash items primarily from depreciation, amortization and accretion, stock-based compensation expense, derivative warrant liabilities adjustment, inventory write-down, adjustments from discontinued operations and other certain non-cash adjustments). Additionally, these were partially offset by funds from the Employee Retention Credit program recorded in other operating liabilities and a decrease in accounts receivable, net and a net decrease in various other operating assets and liabilities.
Net Cash Used in Investing Activities
Net cash used in investing activities is generally related to our merger and acquisitions, cash payments for acquired intangible assets such as EXXUA, as well as purchases of assets to support our operations and disposal of assets related to exit and disposal costs.
Net cash used in investing activities of $2.6 million during the year ended June 30, 2025, was primarily from a $3.0 million cash payment for acquired intangible assets related to the EXXUA Commercialization Agreement and the purchase of various property and equipment, partially offset to cash received from the sale of fixed assets.
Net cash used in investing activities was $0.3 million during the year ended June 30, 2024, which was primarily used for the purchase of various property and equipment.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities of $15.4 million during the year ended June 30, 2025, was primarily from $14.8 million of net proceeds received from our public offering of common stock and prefunded warrants in June 2025, $6.7 million of net proceeds from our Eclipse Revolving Loan and $1.9 million of proceeds received from borrowings in June 2025 on our Eclipse Term Loan related to the Eclipse Amendment No. 6, partially offset by $6.0 million of payments for fixed payment arrangements and $1.9 million of payments made against the principal balance of our Eclipse Term Loan throughout fiscal 2025.
Net cash used in financing activities of $1.3 million during the year ended June 30, 2024, was primarily from $15.7 million of payments made related to the extinguishment of our term loan, $2.6 million for fixed payment arrangements and $0.3 million of payments for debt issuance costs. This financing cash used was partially offset by $13.0 million of proceeds from the Eclipse Term Loan, $3.5 million of net proceeds from the issuance of common stock and prefunded warrants and $0.9 million of proceeds from our Eclipse Revolving Loan.
Capital Resources
Sources of Liquidity
We have obligations related to our loan agreements, milestone payments for licensed products, and manufacturing purchase commitments. We finance our operations through a combination of sales of our common stock and warrants, borrowings under our revolving credit facility and from cash generated from operations.
Shelf Registrations
On September 26, 2024, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $100.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the “2024 Shelf”). Through the filing date of this Annual Report, $100.0 million remains available under the 2024 Shelf. This availability is subject to the SEC’s “baby shelf” limitation as set forth in SEC Instruction I.B.6 limitation to the Form S-3.
Equity Financings
We have engaged in several different types of equity financings throughout our history. Most recently in June 2025, we raised gross proceeds of $16.6 million from the issuance of (i) 2,806,688 shares of our common stock, at a public offering price of $1.50 and 8,233,332 prefunded warrants at a public offering price of $1.4999 to purchase 8,233,332 shares of our common stock at an exercise price of $0.0001 per share. We received $14.8 million in proceeds net of underwriting commissions and offering expenses and intend to use the net proceeds from the offering for working capital, general corporate purposes and to enable us to exclusively commercialize EXXUA.
In June 2024, the Tranche B Warrants to purchase 2,173,912 shares of our common stock at an exercise price of $1.59 were exercised, generating proceeds of $3.5 million. The Tranche B Warrants were converted into 367,478 shares of our common stock and 1,806,434 prefunded warrants to purchase shares of our common stock with an exercise price of $0.0001 per share. We used a portion of these proceeds as part of a $15.0 million term loan repayment made in June of 2024. For further information on our equity financings and related warrants outstanding, please refer to Note 14 - Stockholders’ Equity and Note 16 - Warrants in Part II, Item 8 of this Annual Report.
Eclipse Agreement
Under our Eclipse Agreement, we have two loan agreements, the Eclipse Term Loan and the Eclipse Revolving Loan. The Eclipse Term Loan consists of an outstanding principal amount of $13.0 million on the closing date of the Eclipse Amendment No. 6, at an interest rate of the SOFR plus 7.0%, with a four-year term and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on the June 12, 2029, maturity date, as amended. In June 2024, we used the initial proceeds from the Eclipse Term Loan and a portion of the proceeds from the warrant exercises described above to repay in full a $15.0 million term loan. The Eclipse Revolving Loan has a potential maximum borrowing base of $14.5 million at an interest rate of the SOFR plus 4.5%, which was temporarily increased pursuant to the $1.5 million Eclipse Incremental Advance, with repayment and permanent reduction of the Eclipse Incremental Advance commencing on August 1, 2025, and continuing on the first day of each calendar month thereafter, in an amount equal to $125,000 per month, until the Eclipse Incremental Advance has been reduced to $0. In addition, we are required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of the Eclipse Revolving Loan remains subject to a borrowing base and reserve, and availability blockage requirements and the maturity date, as amended, is June 12, 2029.
Contractual Obligations, Commitments and Contingencies
As a result of our acquisitions, exclusive commercialization agreement, and licensing agreements, we are contractually and contingently obliged to pay, when due, various fixed and contingent milestone payments. See Note 18 - Commitments and Contingencies in Part II, Item 8 of this Annual Report for further information.
In May 2022, we entered into an agreement with Tris to terminate the License, Development, Manufacturing and Supply Agreement dated November 2, 2018, related to Tuzistra (the “Tuzistra License Agreement”). Pursuant to such termination we accrued a settlement liability, which as of June 30, 2025, had a remaining balance of $3.1 million accrued in other current liabilities on the consolidated balance sheet payable to Tris, which was paid in full during the first quarter of fiscal 2026.
Upon closing of the acquisition of a line of prescription pediatric products from Cerecor, Inc. in October 2019, we assumed payment obligations that require us to make fixed and product milestone payments. As of June 30, 2025, we have an accrued fixed payment arrangement balance related to these payment obligations of $0.2 million recorded in other current liabilities on the consolidated balance sheet.
In connection with our suspension of active development of AR101, we engaged in negotiations with EnzCo and Rumpus for the repurchase of AR101. On August 5, 2025, we reached terms with Rumpus and EnzCo whereby for mutual consideration and releases, we transferred all of ours and Rumpus’ rights, title and interest in AR101 to EnzCo, which extinguished and terminated all of our obligations and Rumpus’ obligations under the Rumpus Asset Purchase Agreement. There is no other relationship between us, EnzCo or Rumpus other than as contracting parties to terminate the Rumpus Asset Purchase Agreement, and there are no penalties or remaining obligations for us for terminating the Rumpus Asset Purchase Agreement.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities at the date of the consolidated financial statements, as well as reported revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 - Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements later in this Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements and notes thereto.
Revenue Recognition
We generate net revenue from continuing operations from product sales through our ADHD Portfolio and our Pediatric Portfolio and we expect that we will generate net revenue from continuing operations from EXXUA after its launch, which is currently anticipated to occur in the fourth calendar quarter of 2025. We evaluate our contracts with customers to determine revenue recognition using the following five-step model: (1) identify the contract with the customer; (2) identify the performance obligations and if they are distinct; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) a performance obligation is satisfied.
Net product sales consist of sales of prescription pharmaceutical products, principally to a limited number of wholesale distributors and pharmacies in the United States. Prescription product revenue is recognized at the point in time that control of the product transfers to the customer in accordance with shipping terms (i.e., upon delivery), which is generally “free-on-board” destination when shipped domestically within the United States and “free-on-board” shipping point when shipped internationally consistent with the contractual terms.
We make estimates of the net sales price, including estimates of variable consideration to be incurred on the respective product sales (known as “Gross to Net” adjustments). Significant judgement is required in estimating Gross to Net adjustments considering legal interpretations of applicable laws and regulations, historical experience, payor channel mix, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel.
The Gross to Net adjustments includes:
| ● |
Savings offers. We offer savings programs for our patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. |
| ● |
Prompt payment discounts. Prompt payment discounts are based on standard provisions of wholesalers’ services. |
| ● |
Wholesale distribution fees. Wholesale distribution fees are based on definitive contractual agreements for the management of our products by wholesalers. |
| ● |
Rebates. Our products are subject to commercial managed care and government (e.g., Medicaid) programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Calculations related to rebate accruals are estimated based on historical information from third-party providers. |
| ● |
Wholesaler chargebacks. Our products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to us following the product purchases of the wholesalers’ end customers. |
| ● |
Returns. Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. We analyze return data available from sales since inception date to determine a reliable return rate. |
Savings offers, rebates and wholesaler chargebacks reflect the terms of underlying agreements, which may vary. Accordingly, actual amounts will depend on the mix of sales by product and contracting entity. Future returns may not follow historical trends. Our periodic adjustments of our estimates are subject to time delays between the initial product sale and ultimate reporting and settlement of deductions. We continually monitor these provisions and do not believe variances between actual and estimated amounts have been material.
Impairment of Long-Lived Assets
We assess impairment of long-lived assets annually and when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Long-lived assets consist of property and equipment, net and other intangible assets, net. Circumstances which could trigger a review include but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) changes in business plans; or (iv) expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. Such estimates involve projections of future sales and costs, which may vary from actual results. Declines in the outlook for the related products, particularly soon after fair-value measurement upon acquisition or prior impairment, can negatively impact our ability to recover the carrying value and can result in an impairment charge.
Our strategy is to continue building our portfolio of revenue-generating products by leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. During the year ended June 30, 2025, we incurred an impairment charge of $8.3 million, which was primarily the result of our shifted focus on our commercial efforts for EXXUA and our ADHD Portfolio.
During the years ended June 30, 2025, and 2024, we recorded restructuring costs totaling $2.1 million and $2.2 million, respectively, related to severance costs and the abandonment of our leased manufacturing facility, equipment and other assets as part of our closure of our Grand Prairie, Texas manufacturing facility. These costs have been recorded in the restructuring costs financial statement line item on the consolidated statements of operations.
Warrants
Equity classified warrants are valued using a Black-Scholes option pricing model at issuance and are not remeasured. Liability classified warrants are carried at fair value using either the Black-Scholes option pricing model or the Monte Carlo simulation model. Changes in the fair value of liability classified warrants in subsequent periods are recorded as a gain or loss on remeasurement and reported as a component of cash flows from operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide information under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | Page |
| Report of Independent Registered Public Accounting Firm (PCAOB ID | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Aytu BioPharma, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Aytu BioPharma, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2025, and 2024, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025, and 2024, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the United States federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Variable consideration related to certain gross to net adjustments
As described further in Note 2 to the consolidated financial statements, the Company estimates adjustments to the transaction price of certain product sales (“Gross to Net” adjustments). Certain Gross to Net adjustments involve the use of significant assumptions and judgments to develop the estimate. The most significant assumption used in the ADHD Portfolio savings offers Gross to Net adjustment is the inventory levels in the distribution channel as of the balance sheet date. We identified the ADHD Portfolio savings offerings Gross to Net adjustment as a critical audit matter.
The principal considerations for our determination that the ADHD Portfolio savings offerings Gross to Net adjustment is a critical audit matter are (a) the inherent limitations over management’s visibility and insight into the underlying details of the source data, which requires management to depend and rely on external data from multiple sources and (b) the extent to which the external data is used by management to develop the estimate of the ADHD Portfolio savings offerings Gross to Net adjustment.
Our audit procedures related to this critical audit matter included the following, among others:
| (i) | We evaluated the relevance and reliability of the external data used by management to develop the estimate of inventory levels in the distribution channel as of the balance sheet date. |
| (ii) | We evaluated the reasonableness of the identified significant assumption related to inventory levels in the distribution channel to determine the ADHD Portfolio savings offers Gross to Net adjustment by comparing to external data. |
| (iii) | We tested the overall reasonableness of the ADHD Portfolio savings offers Gross to Net adjustment as of the balance sheet date by developing an expectation for comparison to actual subsequent payments. |
/s/
We have served as the Company’s auditor since 2022.
September 23, 2025
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Other non-current assets | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Revolving credit facility | ||||||||
| Current portion of debt | ||||||||
| Other current liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Debt, net of current portion | ||||||||
| Derivative warrant liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Commitments and contingencies (note 18) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value ; shares authorized; shares issued or outstanding | ||||||||
| Common stock, par value ; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes to the consolidated financial statements are an integral part of this statement.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Amortization of intangible assets | ||||||||
| Restructuring costs | ||||||||
| Impairment expense | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expense) income, net | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Derivative warrant liabilities loss | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ||||||
| Loss from continuing operations before income tax expense | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Net income (loss) from discontinued operations, net of tax | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted-average common shares outstanding | ||||||||
| Net (loss) income per share: | ||||||||
| Basic and diluted - continuing operations | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted - discontinued operations, net of tax | $ | $ | ( | ) | ||||
| Basic and diluted - net loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes to the consolidated financial statements are an integral part of this statement.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balances, June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | — | — | ||||||||||||||||||
| Issuance of common stock from exercise of warrants | — | — | ||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2024 | ( | ) | ||||||||||||||||||
| Stock-based compensation expense | — | — | ||||||||||||||||||
| Issuance of common stock from exercise of warrants | ||||||||||||||||||||
| Issuance of common stock, net of $ issuance cost | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of this statement.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Impairment expense | ||||||||
| Depreciation, amortization and accretion | ||||||||
| Stock-based compensation expense | ||||||||
| Derivative warrant liabilities loss | ||||||||
| Amortization of debt discount and issuance costs | ||||||||
| Inventory write-down | ||||||||
| Non-cash loss on extinguishment of debt | ||||||||
| Other non-cash adjustments | ||||||||
| Non-cash adjustments from discontinued operations | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ||||||
| Other operating assets and liabilities, net | ||||||||
| Changes in operating assets and liabilities from discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash received from sales of fixed assets | ||||||||
| Cash payments for fixed asset purchases | ( | ) | ( | ) | ||||
| Cash payments for acquired intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from issuance of common stock and warrants | ||||||||
| Payments made to fixed payment arrangement | ( | ) | ( | ) | ||||
| Net proceeds from revolving credit facility | ||||||||
| Payments made to borrowings | ( | ) | ( | ) | ||||
| Proceeds from borrowings | ||||||||
| Payments for debt issuance costs | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flows information: | ||||||||
| Cash payments for interest | $ | $ | ||||||
| Cash payments for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Other non-cash investing and financing activities | $ | $ | ||||||
The accompanying notes to the consolidated financial statements are an integral part of this statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of Business and Financial Condition
Aytu BioPharma, Inc. (“Aytu,” the “Company,” “we,” “us,” or “our”), is a pharmaceutical company focused on advancing innovative medicines for complex central nervous system diseases to improve the quality of life for patients. The Company was originally incorporated as Rosewind Corporation on August 9, 2002, in the state of Colorado and was re-incorporated as Aytu BioScience, Inc. in the state of Delaware on June 8, 2015. In March 2021, the Company changed its name to Aytu BioPharma, Inc.
The Company’s strategy is to become a leading pharmaceutical company that improves the lives of patients. The Company uses a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building its portfolio of revenue-generating products and leveraging its commercial team’s expertise to build leading brands within large therapeutic markets. In June 2025, the Company entered into an Exclusive Commercialization Agreement (the “Commercialization Agreement”) with Fabre-Kramer Holdings, Inc. (“Fabre-Kramer”) to commercialize EXXUA (gepirone) extended-release tablets (“EXXUA”) in the United States. Gepirone is a new chemical entity, and the Company believes EXXUA to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the United States Food and Drug Administration (“FDA”) for the treatment of major depressive disorder (“MDD”) in adults. It is the Company’s expectation that EXXUA has the potential to serve as a major growth catalyst for the Company and anticipates launching EXXUA in the fourth calendar quarter of 2025 as a centerpiece of its commercial efforts.
In addition, the Company will continue to focus on commercializing innovative prescription products that address conditions frequently developed or diagnosed in children, including attention deficit hyperactivity disorder (“ADHD”). The Company is focusing its efforts on accelerating the growth of its commercial business and achieving positive operating cash flows. To achieve these goals, the Company indefinitely suspended active development of its clinical development programs and has wound down and divested unprofitable operations.
In the first quarter of fiscal 2025 the Company completed the previously announced wind down of its Consumer Health business and on July 31, 2024, the Company entered into a definitive agreement to divest its Consumer Health business to a private, e-commerce focused company affiliated with the Company’s former Vice President of Consumer Health, Jonathan Hughes. Pursuant to the definitive agreement, Mr. Hughes resigned from the Company effective July 31, 2024. The divested business encompassed the established e-commerce platform, certain inventory and associated consumer brands, intellectual property, contracts and liabilities and provided for the Company to receive up to $
The Company’s business from continuing operations is focused on the upcoming launch of EXXUA and on its current prescription pharmaceutical products sold primarily through third party wholesalers and pharmacies and which primarily consists of two product portfolios. The first primarily consists of two products for the treatment of ADHD: Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets (“Adzenys”) and Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets (“Cotempla” and Adzenys together with Cotempla the “ADHD Portfolio”). The second primarily consists of Karbinal ER (carbinoxamine maleate extended-release oral suspension) (“Karbinal”), an extended-release first-generation antihistamine suspension containing carbinoxamine indicated to treat numerous allergic conditions, and Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency (the “Pediatric Portfolio”). During the fourth quarter of fiscal 2024, the Company successfully completed the transition of all manufacturing of its Adzenys and Cotempla products to a United States-based third-party contract manufacturer to improve the profitability of these products.
In July 2023, the Company entered into an exclusive collaboration, distribution and supply agreement with Medomie Pharma Ltd (“Medomie”), a privately owned pharmaceutical company, for Medomie to commercialize Adzenys and Cotempla in Israel and the Palestinian Authority. In September 2024, the Company entered into an exclusive collaboration, distribution and supply agreement with Lupin Pharma Canada Ltd (“Lupin”), a subsidiary of global pharmaceutical company Lupin Limited, for Lupin to commercialize Adzenys and Cotempla in Canada. The Company will supply Adzenys and Cotempla to Medomie and Lupin based on forecasts and provide various product commercialization, regulatory and quality assurance resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for both Adzenys and Cotempla, which is expected to occur over the next 24 months. The agreements with Medomie and Lupin represent the Company’s first and second international commercial agreements for Adzenys and Cotempla, respectively.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The Company’s consolidated financial statements and notes thereto include the accounts of its wholly owned subsidiaries Aytu Therapeutics, LLC and Neos Therapeutics, Inc. (“Neos”) and their respective wholly owned subsidiaries, as well as Innovus Pharmaceuticals, Inc. (“Innovus”) and its wholly owned subsidiaries prior to the divestiture of Innovus on July 31, 2024. All significant inter-company balances and transactions have been eliminated in consolidation.
Basis of Presentation
The Company’s consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements and footnotes requires the use of management estimates, judgments and assumptions. Actual results may differ from estimates. In the accompanying consolidated financial statements and notes thereto, estimates are used for, but not limited to, stock-based compensation; revenue recognition, determination of variable consideration for accruals of chargebacks, administrative fees and rebates, government rebates, returns and other allowances; allowance for credit losses; inventory impairment; determination of right-of-use (“ROU”) assets and lease liabilities; valuation of financial instruments, warrants and derivative warrant liabilities, intangible assets, and long-lived assets; purchase price allocations and the depreciable lives of long-lived assets; accruals for contingent liabilities; and determination of the income tax provision, deferred taxes and valuation allowance. Because of the uncertainties inherent in such estimates, actual results may differ from those estimates. The Company periodically evaluates estimates used in the preparation of the financial statements for reasonableness.
Prior Period Reclassification.
Certain prior year amounts in the Company’s consolidated financial statements and the notes thereto have been reclassified to conform to the current year presentation. These reclassifications did not impact operating results or cash flows for the years ended June 30, 2025, and 2024, or the Company’s financial position as of June 30, 2025, or June 30, 2024.
Cash and Cash Equivalents
The Company’s primary objectives for investment of available cash are the preservation of capital and the maintenance of liquidity. The Company invests its available cash balances in bank deposits and money market funds. The cash balances in bank deposits are subject to the Federal Deposit Insurance Corporation (“FDIC”) insurance limits, and cash balances in the money market funds are not FDIC insured. The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable, Net
Accounts receivable, net represents amounts due from customers less allowances for credit losses, discounts and pricing chargebacks. An allowance for credit losses, when needed, is based on the best estimate of the amount of probable credit losses in existing accounts receivable, which is determined from the Company’s historical write-off experience and expected future default probabilities based on ongoing evaluations of Company’s customers’ financial condition; payment history; collections experience on other accounts; and economic factors or events expected to affect future collections. The Company has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. An allowance for credit losses, when needed, consists of an amount identified for specific customers and an amount based on overall estimated exposure. Accounts receivable are customer obligations due under normal trade terms. Recovery of bad debt amounts which were previously written off are recorded as a reduction of bad debt expense in the period the payment is collected. If the Company’s actual collection experience changes, revisions to the Company’s allowance for credit losses may be required. After attempts to collect a receivable have failed, the receivable is written off against the allowance for credit losses. The allowance for credit losses was
The table below presents the opening and closing balances of accounts receivable, gross from customers.
| Accounts | ||||
| Receivable, | ||||
| Gross | ||||
| (in thousands) | ||||
| Balance, June 30, 2023 | $ | |||
| Decrease in accounts receivable, gross | ( | ) | ||
| Balance, June 30, 2024 | ||||
| Increase in accounts receivable, gross | ||||
| Balance, June 30, 2025 | $ | |||
The table below details the change in allowance for discounts and allowance for chargebacks for the periods presented.
| Allowance for | Allowance for | Total | ||||||||||
| Discounts | Chargebacks | Allowance | ||||||||||
| (in thousands) | ||||||||||||
| Balances, June 30, 2023 | $ | $ | $ | |||||||||
| Reduction of net revenue | ||||||||||||
| Payments | ( | ) | ( | ) | ( | ) | ||||||
| Balances, June 30, 2024 | ||||||||||||
| Reduction of net revenue | ||||||||||||
| Payments | ( | ) | ( | ) | ( | ) | ||||||
| Balances, June 30, 2025 | $ | $ | $ | |||||||||
Inventories
Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Prior to regulatory approval, before economic benefit is probable, pre-launch inventories are expensed as research and development. The Company periodically reviews the composition of its inventories in order to identify obsolete, slow-moving or otherwise unsaleable items. In the event that such items are identified and there are no alternate uses for the inventory, the Company will record a charge to cost of goods sold to reduce the value of the inventory to net realizable value in the period the impairment is identified.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Furniture and equipment are depreciated on a straight-line basis over their estimated useful lives which are generally to years. Leasehold improvements are amortized over the shorter of the estimated useful life or remaining lease term. The Company begins depreciating assets when they are placed into service. Maintenance and repairs are expensed as incurred.
Leases
At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease. Lease classification, recognition and measurement are determined at the lease commencement date. Lease liabilities and ROU assets are recorded based on the present value of lease payments over the expected lease term, including options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. In determining the present value of the lease payments, the Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the lease commencement date.
Fixed lease payments, or in substance fixed, are recognized over the expected term of the lease using the effective interest method. Variable lease payments are expensed as incurred. Fixed and variable lease expenses on operating leases are recognized within cost of goods sold and operating expenses in the Company’s consolidated statements of operations. ROU asset amortization and interest costs on financing leases are recorded within cost of goods sold and interest expense, respectively, in the Company’s consolidated statements of operations. The Company has elected to account for payments on short-term leases as lease expense on a straight-line basis over lease terms of 12 months or less.
Operating leases are included in other liabilities in the Company’s consolidated balance sheets. Financing leases are included in property and equipment, net, current portion of debt and debt, net of current portion in the Company’s consolidated balance sheets.
Fair Value of Financial Instruments
Acquisitions
In an acquisition of a business or a group of assets, the Company uses the acquisition method of accounting which identifies, recognizes, and measures the identifiable assets acquired, liabilities assumed and any non-controlling interest at their acquisition date fair values. Any excess of the purchase consideration over the fair values of the net identifiable assets acquired is recorded as goodwill. If the Company determines the assets acquired do not meet the definition of a business, the transaction is accounted for as an acquisition of assets, which records the assets acquired at the purchase price and does not result in goodwill.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Liability and equity classified warrants are valued using a Black-Scholes option pricing model or Monte Carlo simulation model at issuance and for each reporting period when applicable.
Revenue Recognition
The Company generates net revenue from continuing operations from sales of prescription pharmaceutical products from the Company’s ADHD Portfolio and Pediatric Portfolio and the Company expects it will generate net revenue from continuing operations from EXXUA after the launch of EXXUA, which is currently anticipated to occur in the fourth calendar quarter of 2025. Sales are principally to a limited number of wholesale distributors and pharmacies in the United States. The Company evaluates its contracts with customers to determine revenue recognition using the following five-step model: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) a performance obligation is satisfied. There is not a recognized financing component related to product sales. Net revenue is recognized at the point in time that control of the product transfers to the customer, which typically aligns with shipping terms (i.e., upon delivery), generally “free-on-board” destination when shipped domestically within the United States, consistent with contractual terms. The Company expenses the incremental costs to obtain a contract as incurred, since they are satisfied within one year.
ADHD Portfolio and Pediatric Portfolio net revenue is recognized net of consideration paid to the Company’s customers and other adjustments to the transaction price (known as “Gross to Net” adjustments). Significant judgement is required in estimating Gross to Net adjustments considering legal interpretations of applicable laws and regulations, historical experience, payor channel mix, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel.
The Gross to Net adjustments include:
| ● | Savings offers. The Company offers savings programs for its patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. |
| ● | Prompt payment discounts. Prompt payment discounts are based on standard provisions of wholesalers’ services. |
| ● | Wholesale distribution fees. Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s products by wholesalers. |
| ● | Rebates. The Company’s products are subject to commercial managed care and government (e.g., Medicaid) programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Calculations related to rebate accruals are estimated based on historical information from third-party providers. |
| ● | Wholesaler chargebacks. The Company’s products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to the Company following the product purchases of the wholesalers’ end customers. |
| ● | Returns. Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. The Company analyzes return data available from sales since inception date to determine a reliable return rate. |
Savings offers, rebates and wholesaler chargebacks reflect the terms of underlying agreements, which may vary. Accordingly, actual amounts will depend on the mix of sales by product and contracting entity. Future returns may not follow historical trends. The Company’s periodic adjustments of its estimates are subject to time delays between the initial product sale and ultimate reporting and settlement of deductions. The Company continually monitors these provisions and does not believe variances between actual and estimated amounts have been material.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk concentrations consist of cash, cash equivalents and accounts receivable.
The Company maintains deposits in financial institutions in excess of federally insured limits. The Company periodically monitors the credit quality of the financial institutions with which it invests and believes that the Company is not exposed to significant credit risk due to the financial position of those institutions.
The Company is also subject to credit risk from accounts receivable related to product sales. The Company’s customers, sometimes referred to as partners or customers, are primarily large wholesale distributors that resell the Company’s products to retailers. The loss of one or more of these large customers could have a material adverse effect on the Company’s business, operating results or financial condition. The Company does not charge interest or require collateral related to its accounts receivable. Credit terms are generally to days.
The following table presents customers that contributed more than 10% of gross revenue and accounts receivable:
| Percentage of | Percentage of | |||||||||||||||
| Gross Revenue | Gross Accounts Receivable | |||||||||||||||
| Year Ended June 30, | June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Customer A | % | % | % | % | ||||||||||||
| Customer B | % | % | % | % | ||||||||||||
| Customer C | % | % | % | % | ||||||||||||
| Customer D | % | % | % | % | ||||||||||||
Cost of Goods Sold
Cost of goods sold from continuing operations primarily consists of manufactured product cost, products acquired from third-party manufacturers, freight, production, inventory write-downs, indirect manufacturing overhead costs and FDA fees for commercialized products. Certain of the Company’s sales activities depend on licensing and commercialization arrangements that may require royalty payments, which are also included in cost of goods sold. In addition, distribution, shipping and handling costs invoiced by the Company’s third-party logistics companies are included in cost of goods sold.
Stock-Based Compensation Expense
The Company accounts for stock-based payment compensation expense using a fair value based model. Restricted stock and restricted stock unit grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratably over the requisite service period. Stock option grants are valued using the Black-Scholes option pricing model and compensation costs are recognized ratably over the period of service using the graded method. The Black-Scholes option pricing model requires the Company to estimate the expected term of the award, the expected volatility, the risk-free interest rate, and the expected dividends. The expected term is determined using the “simplified method,” which is the midpoint between the vesting date and the end of the contractual term and is utilized by the Company as it does not have sufficient historical data to determine a more reliable expected term estimate. The risk-free interest rate is based on the United States Treasury yield in effect at the time of the grant for the expected term of the award. The Company does not anticipate paying any dividends in the near future. Forfeitures are recognized as they occur.
Employee Benefits Plan
The Company has a 401(k) plan (“Aytu 401(k) Plan”), which allows participants to contribute a portion of their salary, subject to eligibility requirements and annual Internal Revenue Service (“IRS”) limits. The Aytu 401(k) Plan matches
Research and Development
Research and development costs are expensed as incurred and include salaries and benefits; facilities costs; overhead costs; raw materials; laboratory and clinical supplies; clinical trial costs; contract services; milestone payments and fees paid to regulatory authorities for review and approval of the Company’s product candidates; and other related costs.
Intangible Assets
The Company records acquired intangible assets based on fair value on the date of acquisition. The Company capitalizes to the carrying value of intangible assets any contingent payments made that are considered a part of the total consideration paid for an asset acquisition and which are not within the scope of derivative guidance once the contingencies related to these payments are resolved and the Company adjusts the carrying value of the intangible asset on a cumulative catch-up basis as if the additional capitalized amount had been capitalized on the same date that the intangible asset was put to use. Finite-lived intangible assets are recorded at cost and amortized on a straight-line basis over the estimated lives of the assets.
Impairment of Long-lived Assets
The Company assesses impairment of asset groups, including intangible assets, when events or changes in circumstances indicate that their carrying amount may not be recoverable. Long-lived assets consist of property and equipment, net, right of use assets and other intangible assets, net. Circumstances which could trigger a review include, but are not limited to: (i) changes in Company plans; (ii) competition; (iii) significant adverse changes in the business climate or legal or regulatory factors; or (iv) expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than its carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date. A valuation allowance is recorded to reduce the net deferred tax asset when it is more likely than not that some portion or all of its deferred tax asset will not be utilized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained upon an examination. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the consolidated statements of operations.
Debt Discount and Issuance Costs
Debt issuance costs reflect fees paid to lenders and third parties directly related to issuing debt. Debt discount and issuance costs related to term loans are reported as direct deductions to the outstanding debt and amortized over the term of the debt using the effective interest method as an addition to interest expense. Debt issuance costs related to a revolving credit facility are classified as assets and subsequently amortized using the straight-line method over the term of the revolving credit facility as additional interest expense.
Segment Information
Operating segments are identified as components that engage in business activities from which it may earn revenues and incur expenses and for which discrete information is available and regularly reviewed by the Company’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess performance. Operating segments are aggregated for reporting purposes when the operating segments are identified as similar in accordance with the basic principles and aggregation criteria in the accounting standards. After the previously announced successful wind down and divestiture of the Consumer Health business in the first quarter of fiscal 2025, the Company determined that its continuing operations operate in a single operating and reportable segment. The Company’s CODM is its Chief Executive Officer, who manages operations and regularly reviews the financial information of the Company’s continuing operations as a single operating segment for the purposes of allocating resources and evaluating its financial performance. The results of the Consumer Health business have been reported as discontinued operations (see Note 20 - Discontinued Operations for further detail).
The CODM reviews net income or loss as a measure of segment profit or loss in assessing performance and allocating resources. Segment revenues, expenses and profit or loss is reported on the consolidated statements of operations, with particular emphasis on net revenue by product portfolio (see Note 3 - Revenue for net revenue disaggregated by product portfolio). Additionally, the measure of segment assets is reported on the Company’s balance sheet as total assets, with particular emphasis on the Company’s available liquidity and working capital, including its cash and cash equivalents, accounts receivables, net, inventories and current liabilities. As of June 30, 2025, and June 30, 2024, all long-lived assets were domiciled within the United States.
Paragraph IV Litigation Costs
Legal costs incurred by the Company in the enforcement of the Company’s intellectual property rights are charged to expense in the general and administrative financial statement line item in the consolidated statement of operations.
Business Combinations
The Company recognizes the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of purchase price over the aggregate fair values is recorded as goodwill. The Company calculates the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed to allocate the purchase price at the acquisition date.
Employee Retention Credit
On March 27, 2020, the United States government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable payroll tax credit against the employer share of Social Security tax equal to 70% of the qualified wages paid to employees after December 31, 2020, through September 30, 2021. The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic.
As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”). In accordance with IAS 20, the Company recorded a $
Earnings Per Share
Basic net income or loss per share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. Diluted net income or loss per share is calculated by dividing adjusted net income or loss by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist of warrants to purchase common stock that are either liability classified or equity classified (see Note 16 - Warrants); stock options (see Note 15 - Equity Incentive Plans); unvested restricted stock (see Note 15 - Equity Incentive Plans); and unvested restricted stock units (see Note 15 - Equity Incentive Plans). For the years ended June 30, 2025, and 2024, if the Company’s adjusted net loss from continuing operations divided by the diluted weighted-average number of common shares outstanding decreased the net loss from continuing operations per share, then the Company did not include common equivalent shares in the computation of diluted net loss from continuing operations per share; diluted net income (loss) from discontinued operations, net of tax; or diluted net loss per share because the effect would have been anti-dilutive.
The following table sets forth securities that could be considered anti-dilutive, and therefore are excluded from the calculation of diluted weighted-average common shares outstanding and related per share calculations:
| June 30, | |||||||||
| 2025 | 2024 | ||||||||
| Warrants to purchase common stock - liability classified | (Note 16) | ||||||||
| Warrants to purchase common stock - equity classified | (Note 16) | ||||||||
| Prefunded warrants to purchase common stock - liability classified | (Note 16) | ||||||||
| Outstanding stock options | (Note 15) | ||||||||
| Unvested restricted stock | (Note 15) | ||||||||
| Unvested restricted stock units | (Note 15) | ||||||||
| Total | |||||||||
Recently Adopted Accounting Pronouncements
Debt - Debt with Conversion and Other Options
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing major separation models currently required. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The Company adopted the guidance on July 1, 2024, and the adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
Segment Reporting
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 also requires all annual disclosures currently required by ASC Topic 280, Segment Reporting to be included in interim periods. The Company adopted ASU 2023-07 on June 30, 2025, on a retrospective basis and updated its disclosures to conform to the new segment disclosure requirements. Refer to the Segment Information section within Note 2 - Summary of Significant Accounting Policies for additional discussion.
Recent Accounting Pronouncements Not Yet Adopted
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 require public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s consolidated financial statements and disclosures.
There have been no significant changes to the Company’s significant accounting policies and there is no other accounting guidance has been issued and not yet adopted that is applicable to the Company and that the Company expects would have a material effect on the Company’s consolidated financial statements and related disclosures as of June 30, 2025, and through the filing of this report.
Note 3 - Revenue
The Company disaggregates its net revenue from continuing operations by product portfolio, which for the years ended June 30, 2025, and 2024, includes the ADHD Portfolio, comprised primarily of Adzenys and Cotempla; and the Pediatric Portfolio, comprised primarily of Karbinal, Poly-Vi-Flor and Tri-Vi-Flor. The Company’s disaggregation of revenue is consistent with its operating segment.
Net Revenue by Product Portfolio
Net revenue disaggregated by product portfolios for the years ended June 30, 2025, and 2024, were as follows:
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| ADHD Portfolio | $ | $ | ||||||
| Pediatric Portfolio | ||||||||
| Other | ||||||||
| Total net revenue | $ | $ | ||||||
Other includes net revenue from various discontinued or deprioritized products. The Consumer Health business was divested in the first quarter of fiscal 2025 and is reported within discontinued operations (see Note 20 - Discontinued Operations).
Net Revenue by Geographic Location
The Company’s net revenue is predominately within the United States, with insignificant international sales.
Note 4 - Inventories
Inventories consist of the following:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Inventories | $ | $ | ||||||
The Company incurred inventory write-downs from continuing operations of $
Note 5 - Property and Equipment
Property and equipment, net consist of the following:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Manufacturing and lab equipment | $ | $ | ||||||
| Office equipment, furniture and other | ||||||||
| Leasehold improvements | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense from continuing operations was $
Note 6 - Leases
The Company’s operating leases are for its offices and these leases have original lease periods expiring between 2029 and 2030. Most leases include option provisions under which the parties may extend the lease term. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. The Company had
In June 2024, the Company entered into a forward-starting operating lease agreement to lease office space in Berwyn, Pennsylvania from the owner of the office space that the Company was renting that same space under a sublease arrangement. The Company determined that it is an operating lease, and that lease commencement occurred in July 2024. The initial lease termination date is July 31, 2030, and under the lease agreement the Company has one -year renewal option to extend the lease through July 2035. The Company has elected to utilize the practical expedient to not separate lease and non-lease components upon recognition and variable lease payments will be expensed as incurred. The Company recorded an operating lease ROU asset of $
In May 2023, the Company entered into an operating lease agreement to relocate its principal office to Denver, Colorado. The initial lease termination date is March 31, 2029, and under the lease agreement the Company has one five-year renewal option to extend the lease through March 2034. Undiscounted minimum monthly rent payments average approximately $
During the fourth quarter of fiscal 2024, as part of the previously announced wind down of the Consumer Health business and the closure of the Grand Prairie, Texas manufacturing site, the Company ceased using its leased Oceanside, California warehouse and its Grand Prairie, Texas manufacturing facility. As a result, the Company wrote off the remaining related operating lease ROU assets in the fourth quarter of fiscal 2024. The lease for the Oceanside, California warehouse was set to expire on December 31, 2026, however, in March 2025, the Company terminated this lease with the landlord and recorded a net gain on lease termination of $
The components of lease costs for continuing operations are as follows:
| Year Ended | |||||||||
| June 30, | |||||||||
| 2025 | 2024 | Statement of Operations Classification | |||||||
| (in thousands) | |||||||||
| Lease cost: | |||||||||
| Operating lease cost | $ | $ | Operating expenses | ||||||
| Short-term lease cost | Operating expenses | ||||||||
| Finance lease cost: | |||||||||
| Amortization of leased assets | Cost of goods sold | ||||||||
| Interest on lease liabilities | Interest expense | ||||||||
| Total lease cost | $ | $ | |||||||
Supplemental balance sheet information related to leases is as follows:
| June 30, | |||||||||
| 2025 | 2024 | Balance Sheet Classification | |||||||
| (in thousands) | |||||||||
| Assets: | |||||||||
| Non-current: operating leases | $ | $ | Operating lease right-of-use assets | ||||||
| Liabilities: | |||||||||
| Current: | $ | $ | Other current liabilities | ||||||
| Non-current: | Other non-current liabilities | ||||||||
| Total lease liabilities | $ | $ | |||||||
The remaining weighted-average lease term and discount rate used are as follows:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Weighted-average remaining lease term (years): | ||||||||
| Operating lease right-of-use assets | ||||||||
| Weighted-average discount rate: | ||||||||
| Operating lease right-of-use assets | % | % | ||||||
Supplemental cash flows information related to leases is as follows:
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Cash flows classification of lease payments: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from finance leases | $ | $ | ||||||
| Financing cash flows from finance leases | $ | $ | ||||||
As of June 30, 2025, the Company’s estimated future minimum lease payments were as follows:
| Operating | ||||
| (in thousands) | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Less: tenant improvement allowance | ( | ) | ||
| Lease liabilities | $ | |||
Note 7 - Intangible Assets
A summary of the Company’s intangible assets, all of which are definite-lived intangible assets, as of June 30, 2025, and June 30, 2024, is as follows:
| June 30, 2025 | ||||||||||||||||
| Weighted- | ||||||||||||||||
| Gross | Net | Average | ||||||||||||||
| Carrying | Accumulated | Carrying | Remaining | |||||||||||||
| Amount | Amortization | Amount | Life (2) | |||||||||||||
| (in thousands) | (in years) | |||||||||||||||
| Product technology rights (1) | $ | $ | ( | ) | $ | |||||||||||
| Technology rights | ( | ) | ||||||||||||||
| Commercialization rights | N/A | |||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | |||||||||||
| (1) | In June 2025, the Company recorded an impairment to its product technology rights intangible asset of $ |
| (2) | The commercialization rights intangible asset will be considered placed in service upon the launch of EXXUA, which the Company currently anticipates launching in the fourth calendar quarter of 2025, and the initial estimated useful life of the commercialization rights is expected to be through September 2030. |
| June 30, 2024 | ||||||||||||||||
| Weighted- | ||||||||||||||||
| Gross | Net | Average | ||||||||||||||
| Carrying | Accumulated | Carrying | Remaining | |||||||||||||
| Amount | Amortization | Amount | Life | |||||||||||||
| (in thousands) | (in years) | |||||||||||||||
| Product technology rights | $ | $ | ( | ) | $ | |||||||||||
| Technology rights | ( | ) | ||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | |||||||||||
Gross carrying amounts are net of any impairment charges from prior periods. An intangible asset with zero net carrying amount at the end of a reporting period is not presented in the table of a future reporting period. Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the asset. Renewal periods generally range between approximately
Amortization expense of intangible assets from continuing operations included in the consolidated statements of operations for the years ended June 30, 2025, and 2024, are set forth in the below table:
| | Year Ended | |||||||
| | June 30, | |||||||
| | 2025 | 2024 | ||||||
| | (in thousands) | |||||||
| Statement of operations classification: | ||||||||
| Cost of goods sold | $ | $ | ||||||
| Operating expenses | ||||||||
| Total amortization of intangible assets expense | $ | $ | ||||||
The following table summarizes the estimated future amortization expense of intangible assets to be recognized over the next five years and periods thereafter:
| June 30, | ||||
| (in thousands) | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total estimated future amortization expense | $ | |||
Product Technology Rights
The product technology rights are related to the rights to production, supply and distribution agreements of various products.
Karbinal
The Company acquired and assumed all rights and obligations pursuant to the supply and distribution agreement, as amended, with Tris Pharma, Inc. (“Tris”) for the exclusive rights to commercialize Karbinal in the United States (the “Tris Karbinal Agreement”). The Tris Karbinal Agreement’s initial term terminates in August of 2033, with an optional initial
Poly-Vi-Flor and Tri-Vi-Flor
The Company acquired and assumed all rights and obligations pursuant to a supply and license agreement and various assignment and release agreements, including a previously agreed to settlement and license agreements (the “Poly-Tri Agreements”) for the exclusive rights to commercialize Poly-Vi-Flor and Tri-Vi-Flor in the United States. As a result of the Company’s shifted focus of its commercial efforts on EXXUA and its ADHD Portfolio the Company recorded a full impairment of these intangible assets in June 2025, resulting in impairment expense of $
ADHD Portfolio
The Company has developed product technology rights related to the production and sale of Adzenys and Cotempla. The formulations for the ADHD products are protected by patented technology. The estimated remaining economic life of these proprietary product technology rights is
Technology Rights
TRRP Proprietary Technology
The Company has time release resin particle (“TRRP”) proprietary technology, which is a proprietary drug delivery technology protected by the Company as a trade secret that allows the Company to modify the drug release characteristics of each of its respective products. The TRRP technology underlines each of the ADHD Portfolio core products and can potentially be used in future product development initiatives as well. The estimated remaining economic life of these proprietary technology rights is
Commercialization Rights
As part of the Commercialization Agreement for the exclusive commercialization rights of EXXUA in the United States, the Company capitalizes to the carrying value of intangible assets any contingent payments made that are considered a part of the Commercialization Agreement’s total consideration and which are not within the scope of derivative guidance once the contingencies related to these payments are resolved. Once the commercialization rights are considered placed in service on the launch date of EXXUA, the Company will amortize the commercialization rights on a straight-line basis over the estimated life of the asset and the Company will adjust the carrying value of the commercialization rights on a cumulative catch-up basis as if the additional capitalized amount had been capitalized on the same date that the intangible asset was placed in service. As of June 30, 2025, the commercialization rights were not placed in service and as a result,
Note 8 - Accrued Liabilities
Accrued liabilities consist of the following:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Accrued savings offers | $ | $ | ||||||
| Return reserve | ||||||||
| Accrued program liabilities | ||||||||
| Accrued customer and product related fees | ||||||||
| Accrued employee compensation | ||||||||
| Other accrued liabilities | ||||||||
| Total accrued liabilities | $ | $ | ||||||
Accrued savings offers represent programs for the Company’s patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The return reserve represents the Company’s accrual for estimated product returns. Accrued program liabilities include government and commercial rebates. Accrued customer and product related fees include accrued expenses and deductions for rebates, wholesaler chargebacks and fees, and other product-related fees and deductions such as royalties for Pediatric Portfolio products, accrued distributor fees, and Medicaid liabilities. Accrued employee compensation includes sales commissions, paid time off earned, accrued payroll and accrued bonus. Other accrued liabilities consist of various other accruals, none of which individually or in the aggregate represent greater than five percent of total liabilities.
The following table details the change in return reserve for the periods presented:
| Return Reserve | ||||
| (in thousands) | ||||
| Balance, June 30, 2023 | $ | |||
| Reduction of net revenue | ||||
| Payments | ( | ) | ||
| Balance, June 30, 2024 | ||||
| Reduction of net revenue | ||||
| Payments | ( | ) | ||
| Balance, June 30, 2025 | $ | |||
Note 9 - Other Liabilities
Other liabilities consist of the following:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Fixed payment arrangements | $ | $ | ||||||
| Employee retention credit | ||||||||
| Operating lease liabilities | ||||||||
| Other | ||||||||
| Total other liabilities | ||||||||
| Less: current portion of other liabilities | ( | ) | ( | ) | ||||
| Total other liabilities, non-current | $ | $ | ||||||
Fixed payment arrangements
Fixed payment arrangements represent obligations to an investor assumed as part of the acquisition of products from Cerecor, Inc. in 2019, including fixed and variable payments.
In May 2022, the Company entered into an agreement with Tris to terminate the license, development, manufacturing and supply agreement dated November 2, 2018, related to Tuzistra XR (the “Tuzistra License Agreement”). Pursuant to such termination the Company accrued a settlement liability, which as of June 30, 2025, had a remaining balance of $
The Tris Karbinal Agreement grants the Company exclusive right to distribute and sell Karbinal in the United States. The initial term of the agreement was
Employee Retention Credit
The $
Operating Lease Liabilities
The Company has entered into various operating lease agreements for certain of its offices. Please refer to Note 6 - Leases for further detail.
Other
Other consists of taxes payable, deferred cost, and various other accruals, none of which individually or in the aggregate represent greater than five percent of total liabilities.
Note 10 - Revolving Credit Facility
On June 20, 2025, the Company and certain of its subsidiaries entered into an Amendment No. 6 to Loan and Security Agreement (the “Eclipse Amendment No. 6”) to the loan and security agreement dated October 2, 2019, as amended by Amendment No. 1, dated March 19, 2021; Amendment No. 2, dated January 26, 2022; Amendment No. 3, dated June 1, 2022; Amendment No. 4 dated March 24, 2023; and Amendment No. 5 dated June 12, 2024 (together the “Eclipse Agreement”), with Eclipse Business Capital LLC (“Eclipse”), as agent, and the lenders party thereto (agent and such lenders, collectively, the “Eclipse Lender”). Under the Eclipse Agreement, the Company has two loan agreements, a term loan (the “Eclipse Term Loan”) and a revolving credit facility (the “Eclipse Revolving Loan”). The Eclipse Term Loan is described further in Note 11 - Debt.
The Eclipse Revolving Loan has a potential maximum borrowing base of $
In the event that, for any reason, all or any portion of the Eclipse Agreement is terminated prior to the scheduled maturity date, in addition to the payment of all outstanding principal and unpaid accrued interest, the Company is required to pay a fee equal to (i)
The Eclipse Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Eclipse Agreement, including covenants and restrictions that, among other things, require the Company to satisfy certain capital expenditure limitations and other financial covenants, and restrict the Company’s ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make asset sales without the prior written consent of Eclipse. A failure to comply with these covenants could permit Eclipse to declare the Company’s obligations under the Eclipse Agreement, together with accrued interest and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or termination, as described above. As of June 30, 2025, the Company was in compliance with the covenants under the Eclipse Agreement. The Company’s obligations under the Eclipse Agreement are secured by substantially all of the Company’s assets, as defined further in the Eclipse Agreement.
The Company allocated debt issuance costs of $
Note 11 - Debt
On June 20, 2025, the Company and certain of its subsidiaries entered into Eclipse Amendment No. 6, which provided for among other things, an increase in the Eclipse Term Loan principal amount of $
The Eclipse Term Loan incurs interest at a rate of the plus
In the event that, for any reason, all or any portion of the Eclipse Agreement is terminated prior to the scheduled maturity date, in addition to the payment of all outstanding principal and unpaid accrued interest, the Company is required to pay a fee equal to (i)
The Eclipse Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Eclipse Agreement, including covenants and restrictions that, among other things, require the Company to satisfy certain capital expenditure limitations and other financial covenants, and restricts the Company’s ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make certain asset sales without the prior written consent of the Eclipse Lender. A failure to comply with these covenants could permit the Eclipse Lender to declare the Company’s obligations under the agreement, together with accrued interest and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or termination, as described above. As of June 30, 2025, the Company was in compliance with the covenants under the Eclipse Agreement.
The Company recorded debt discount and allocated debt issuance costs of less than $
Debt consists of the following:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Term loan principal amount | $ | $ | ||||||
| Unamortized debt discount and issuance costs | ( | ) | ( | ) | ||||
| Total debt | ||||||||
| Less: current portion of debt | ( | ) | ( | ) | ||||
| Total debt, net of current portion | $ | $ | ||||||
Future principal payments of debt are as follows:
| June 30, | ||||
| (in thousands) | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future principal payments | ||||
| Less: unamortized debt discount and issuance costs | ( | ) | ||
| Less: current portion of debt | ( | ) | ||
| Total debt, net of current portion | $ | |||
Note 12 - Fair Value Measurements
The Company determines the fair value of financial and non-financial assets using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value as follows:
| Level 1: | Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities; |
| Level 2: | Inputs include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and |
| Level 3: | Unobservable inputs that are supported by little or no market activity. |
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative warrant liabilities, fixed payment arrangements, and current and non-current debt. The carrying amounts of certain short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. Current and non-current debt are reported at their amortized costs on the Company’s consolidated balance sheets. The remaining financial instruments are reported on the Company’s consolidated balance sheets at amounts that approximate current fair values. The Company’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.
Recurring Fair Value Measurement
The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2025, and 2024, by level within the fair value hierarchy:
| Fair Value at | Fair Value Measurements at June 30, 2025 | |||||||||||||||
| June 30, 2025 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative warrant liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Fair Value at | Fair Value Measurements at June 30, 2024 | |||||||||||||||
| June 30, 2024 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative warrant liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Cash and cash equivalents in the consolidated balance sheets include bank deposits and money market funds and reflect their fair value at Level 1 in the fair value hierarchy.
Non-Recurring Fair Value Measurement
The Company’s financial assets and liabilities that were accounted for at fair value on a non-recurring basis during the years ended June 30, 2025, and 2024, were fixed payment arrangements and intangible assets.
Fixed payment arrangements are recognized at their amortized cost basis using market appropriate discount rates and are accreted up to their notional face value over time. Significant assumptions used in valuing the fixed payment arrangements were discount rates from
Based on the Company’s impairment analyses for fiscal 2025 and 2024, the Company recorded an impairment charge of $
Summary of Level 3 Input Changes
The following table sets forth a summary of changes to those fair value measures using Level 3 inputs for the periods presented:
| Derivative | ||||
| Warrant Liabilities | ||||
| (in thousands) | ||||
| Balance as of June 30, 2023 | $ | |||
| Issued (1) | ||||
| Settlements (1) | ( | ) | ||
| Included in earnings | ||||
| Balance as of June 30, 2024 | ||||
| Issued (2) | ||||
| Settlements (3) | ( | ) | ||
| Included in earnings | ||||
| Balance as of June 30, 2025 | $ | |||
| (1) | Primarily relates to warrants to purchase |
| (2) | Relates to the June 2025 issuance of |
| (3) | Relates to the exercise of |
Level 3 Inputs
Significant assumptions as of June 30, 2025, used in valuing the derivative warrant liabilities, marked to market, were as follows:
| June 2023 Tranche A Warrants | Warrants Other (1) | |||||||
| Monte Carlo & Black-Scholes | Black-Scholes | |||||||
| Aytu closing stock price | $ | $ | ||||||
| Equivalent term (years) | ||||||||
| Expected volatility | % | |||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| (1) | Includes all liability classified warrants and prefunded warrants except the June 2023 Tranche A Warrants (see Note 16 - Warrants for further information). |
Note 13 - Income Taxes
For the years ended June 30, 2025, and 2024, there was $
Section 382 Limitation
Under the provisions of the IRC, substantial changes in the Company’s ownership have resulted in limitations on the amount of NOL carryforwards that can be utilized in future years. NOL carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized.
As part of the Company’s Section 382 analysis, an ownership change was determined to have occurred in March 2022 at a point in time when the Company had a net unrealized built-in gain. As such, the NOL generated during that period has been allocated and the post-change NOL (approximately $
The Company had federal net operating losses of $
As of June 30, 2025, the Company had various state NOL carryforwards. The determination of the state NOL carryforwards is dependent on apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards.
The Company notes there is diversity in practice regarding the treatment of deductions or loss carryforwards that are expected to expire unutilized. Generally, it is not appropriate to use zero as an applicable tax rate and rather, a DTA should be recorded at the applicable tax rate and a valuation of an equal amount would be provided. However, under certain circumstances it may be appropriate to follow an alternative approach and use a zero rate to write off the asset against the valuation allowance, reducing the valuation allowance and gross DTAs disclosed. The Company considered both accounting viewpoints and determined it would present its NOL carryforwards gross with a full valuation allowance and not apply a zero rate to NOL carryforwards expected to expire unutilized.
In review of the Company’s consolidated deferred position, excluding NOLs and other tax attributes, the Company is in a net DTA position and therefore all NOLs are being fully valued and not utilized against a net DTL.
The provision for income taxes consisted of the following:
| Year Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Current: | ||||||||
| Federal | $ | ( | ) | $ | ||||
| State | ||||||||
| Income tax expense | $ | $ | ||||||
Income tax expense resulting from applying statutory rates in jurisdictions in which the Company is taxed (federal and various states) differs from the income tax expense in the consolidated financial statements. A reconciliation of the United States federal statutory income tax rates to the Company’s effective tax rate is as follows.
| Year Ended June 30, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| (in thousands, except tax rate) | ||||||||||||||||
| Tax at statutory rate | $ | ( | ) | % | $ | ( | ) | % | ||||||||
| State income taxes, net of federal benefit | ( | )% | ( | ) | % | |||||||||||
| Stock-based compensation expense | ( | )% | ( | )% | ||||||||||||
| Change in valuation allowance | ( | )% | ( | )% | ||||||||||||
| Other | ( | )% | ( | )% | ||||||||||||
| Income tax expense | $ | ( | )% | $ | ( | )% | ||||||||||
Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and financial reporting purposes. The approximate tax effects of significant temporary differences, which comprise the deferred tax assets and liabilities, are as follows:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forward | $ | $ | ||||||
| Interest | ||||||||
| Accrued rebates | ||||||||
| Research and development credits | ||||||||
| Stock-based compensation expense | ||||||||
| Intangible assets | ||||||||
| Accrued expenses | ||||||||
| Section 174 capitalization | ||||||||
| Inventory | ||||||||
| Lease liability | ||||||||
| Fixed assets | ||||||||
| Warrant derivatives | ||||||||
| Other | ||||||||
| Total deferred tax assets | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net of valuation allowance | ||||||||
| Deferred tax liabilities: | ||||||||
| Intangibles | ( | ) | ||||||
| ROU asset | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax liabilities | $ | $ | ||||||
The Company has recorded a valuation allowance of $
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company has no accrued interest related to its uncertain tax positions as they all relate to timing differences that would adjust the Company’s NOL, interest expense carryover or research and development credit carryover and therefore do not require recognition. As a result of these timing differences, as of June 30, 2025, and 2024 the Company had gross unrecognized tax benefits related to uncertain tax positions of $
A tabular roll-forward of the Company’s gross unrecognized tax benefit related to uncertain tax positions is below.
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Beginning balances | $ | $ | ||||||
| Decrease resulting from current period tax positions | ( | ) | ( | ) | ||||
| Increase resulting from current period tax positions | ||||||||
| Ending balances | $ | $ | ||||||
The change in the Company’s gross unrecognized tax benefits relates to filed method changes with the IRS for the tax return year ending June 30, 2024. Additionally, certain of the Company’s acquired legal entities pre-acquisition tax years are subject to the same general statute of limitations, resulting in its tax years back to being subject to examination.
The income tax expense (benefit) allocated to continuing operations and discontinued operations for the years ended June 30, 2025, and 2024, were as follows:
| Year Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Continuing operations income tax expense | $ | $ | ||||||
| Discontinued operations income tax benefit | ( | ) | ( | ) | ||||
| Income tax expense | $ | $ | ||||||
See Note 20 - Discontinued Operations for further detail on the Company’s discontinued operations related to the wind down and divestiture of its Consumer Health business.
The One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the TCJA, allowing for accelerated tax deductions for qualified property and research expenditures, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in calendar year 2025 and others implemented through calendar year 2027. None of the provisions are expected to impact the realizability of the Company’s deferred tax assets and liabilities on the consolidated balance sheet as of June 30, 2025. However, because the OBBBA is a wide-reaching law, the Company is currently assessing its potential impact on its business, financial condition, results of operations and future plans and the Company plans to provide an update in future SEC filings once this assessment is complete. See Note 21 - Subsequent Events for further detail.
Note 14 - Stockholders’ Equity
The Company has
On September 26, 2024, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. This shelf registration statement covers the offering, issuance and sale by the Company of up to an aggregate of $
In June 2025, the Company raised gross proceeds of $
Note 15 - Equity Incentive Plan
2023 Equity Incentive Plan
On May 18, 2023, the Company’s stockholders approved the adoption of the Aytu BioPharma, Inc. 2023 Equity Incentive Plan (the “2023 Equity Incentive Plan”), which replaced all previous plans. For the 2023 Equity Incentive Plan, the stockholders approved (a)
Stock options granted under the 2023 Equity Incentive Plan and previous plans typically have contractual terms of
Stock Options
During the year ended June 30, 2025,
During the year ended June 30, 2024,
Stock option activity during the year ended June 30, 2025, is as follows:
| Weighted- | ||||||||||||
| Average | ||||||||||||
| Weighted- | Remaining | |||||||||||
| Number of | Average | Contractual | ||||||||||
| Options | Exercise Price | Life in Years | ||||||||||
| Outstanding at June 30, 2024 | $ | |||||||||||
| Granted | $ | |||||||||||
| Forfeited/cancelled | ( | ) | $ | — | ||||||||
| Expired | ( | ) | $ | — | ||||||||
| Outstanding at June 30, 2025 | $ | |||||||||||
| Exercisable at June 30, 2025 | $ | |||||||||||
The following table details the options outstanding as of June 30, 2025, by range of exercise prices:
| Weighted- | |||||||||||||||||||||
| Average | |||||||||||||||||||||
| Remaining | |||||||||||||||||||||
| Weighted- | Contractual | ||||||||||||||||||||
| Range of | Number of | Average | Life of | Number of | Weighted- | ||||||||||||||||
| Exercise | Options | Exercise | Options | Options | Average | ||||||||||||||||
| Prices | Outstanding | Price | Outstanding | Exercisable | Exercise Price | ||||||||||||||||
| $1.69 | $ | $ | |||||||||||||||||||
| $1.73 | $ | $ | |||||||||||||||||||
| $1.84 | $ | $ | |||||||||||||||||||
| $2.53 - $290.00 | $ | $ | |||||||||||||||||||
| $ | $ | ||||||||||||||||||||
Restricted Stock
During the year ended June 30, 2025, the Company granted a total of
During the year ended June 30, 2024, the Company granted a total of
Restricted stock activity under the 2023 Equity Incentive Plan is as follows:
| Weighted- | ||||||||
| Average Grant | ||||||||
| Number of | Date Fair | |||||||
| Shares | Value | |||||||
| Unvested at June 30, 2024 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Unvested at June 30, 2025 | $ | |||||||
As of June 30, 2025, there were
Restricted Stock Units
For the years ended June 30, 2025, and 2024, the Company did grant any restricted stock units and there were
| Weighted- | ||||||||
| Average Grant | ||||||||
| Number of | Date Fair | |||||||
| Shares | Value | |||||||
| Unvested at June 30, 2024 | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited/cancelled | ( | ) | $ | |||||
| Unvested at June 30, 2025 | $ | |||||||
Stock-based compensation expense related to the fair value of stock options, restricted stock and restricted stock units were included in the consolidated statements of operations as set forth in the below table:
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Cost of goods sold | $ | $ | ||||||
| Research and development | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Net income (loss) from discontinued operations, net of tax | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
Note 16 - Warrants
The Company has engaged in several different types of equity financings throughout its history, some of which have resulted in the Company issuing warrants and prefunded warrants. Equity classified warrants are valued using a Black-Scholes option pricing model at issuance and are not remeasured. Liability classified warrants are carried at fair value using either the Black-Scholes option pricing model or the Monte Carlo simulation model. Changes in the fair value of liability classified warrants in subsequent periods are recorded as a gain or loss on remeasurement and reported as a component of cash flows from operations.
The number of warrants and prefunded warrants outstanding as of June 30, 2025, is as follows:
| Remaining | |||||||||||||||
| Number | Contractual | ||||||||||||||
| Description | Outstanding | Exercise Price | Life in Years (7) | Type | Classification | ||||||||||
| December 2020 Warrants (1) | $ | Warrant | Equity | ||||||||||||
| January 2022 Warrants (1) | $ | Warrant | Liability | ||||||||||||
| March 2022 Warrants (1) | $ | Warrant | Liability | ||||||||||||
| August 2022 Warrants (1) | $ | Warrant | Liability | ||||||||||||
| June 2023 Tranche A Warrants (2) | $ | Warrant | Liability | ||||||||||||
| June 2023 Tranche B Prefunded Warrants (3) | $ | N/A | Prefunded Warrant | Liability | |||||||||||
| June 2023 Prefunded Warrants (4) | $ | N/A | Prefunded Warrant | Liability | |||||||||||
| June 2025 Prefunded Warrants (5)(6) | $ | N/A | Prefunded Warrant | Liability | |||||||||||
| Total outstanding June 30, 2025 (6) | |||||||||||||||
| (1) | Each of these warrants is exercisable at any time for |
| (2) | In June 2023, the Company issued these tranche A warrants to purchase |
| (3) | In June 2024, certain warrants were exercised, generating proceeds of $ |
| (4) | Each of these prefunded warrants is exercisable at any time for |
| (5) | In June 2025, the Company raised gross proceeds of $ |
| (6) | From July 2025 through the filing of this report, a total of |
| (7) | All of the Company’s prefunded warrants do not have an expiration date. |
Outstanding warrants that are classified as derivative warrant liabilities in the consolidated balance sheets are marked to market at each reporting period (see Note 12 - Fair Value Measurements for further detail).
A summary of warrant activity, excluding prefunded warrants, during the year ended June 30, 2025, is as follows:
| Weighted- | ||||||||||||
| Average | ||||||||||||
| Weighted- | Remaining | |||||||||||
| Number of | Average | Contractual | ||||||||||
| Warrants | Exercise Price | Life in Years | ||||||||||
| Outstanding June 30, 2024 (1) | $ | |||||||||||
| Warrants expired | ( | ) | N/A | N/A | ||||||||
| Outstanding June 30, 2025 (2) | $ | |||||||||||
| (1) | The number of warrants, excluding prefunded warrants, outstanding as of June 30, 2024, is comprised of |
| (2) | The number of warrants, excluding prefunded warrants, outstanding as of June 30, 2025, is comprised of |
A summary of prefunded warrant activity during the year ended June 30, 2025, is as follows:
| Number of | Weighted- | |||||||
| Prefunded | Average | |||||||
| Warrants | Exercise Price | |||||||
| Outstanding June 30, 2024 | $ | |||||||
| Prefunded warrants issued (1)(2) | $ | |||||||
| Prefunded warrants exercised | ( | ) | $ | |||||
| Outstanding June 30, 2025 (2) | $ | |||||||
| (1) | Relates to the issuance of the June 2025 prefunded warrants. |
| (2) | From July 2025 through the filing of this report, a total of |
Note 17 - Restructuring Costs
As part of the Company’s previously announced restructuring activities related to the wind down and divestiture of the Consumer Health business and the closure of the Grand Prairie, Texas manufacturing site, the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs as well as other direct separation benefit costs, right of use asset impairment charges, fixed asset and other asset impairment charges, accelerated depreciation of fixed assets, contract termination costs, and inventory write-downs. Severance and employee benefit costs primarily relate to cash severance. Restructuring costs associated with the Consumer Health business are recorded within the net income (loss) from discontinued operations, net of tax in the consolidated financial statement of operations (see Note 20 - Discontinued Operations).
The expense associated with the closure of the Grand Prairie, Texas manufacturing site such as severance and employee benefits and exit and disposal activities are included in restructuring costs in the consolidated statements of operations. There have been no inventory write-downs associated with this closure. During the years ended June 30, 2025, and 2024, the Company incurred $
Note 18 - Commitments and Contingencies
EXXUA Exclusive Commercialization Agreement
On June 5, 2025, the Company, entered into the Commercialization Agreement with Fabre-Kramer, pursuant to which the Company acquired certain rights and obligations in connection with the commercialization of EXXUA in the United States. As consideration for the Commercialization Agreement, the Company made an upfront cash payment of $
The Commercialization Agreement can be terminated at any time upon mutual agreement between the Company and Fabre-Kramer. Either party can terminate the Commercialization Agreement at any time upon written notice for a material default or breach if the material default or breach is not cured within (1)
Pediatric Portfolio
The Tris Karbinal Agreement grants the Company exclusive right to distribute and sell Karbinal in the United States. The initial term of the agreement was
Operating Leases
In June 2024, the Company entered into a forward-starting operating lease agreement to lease office space in Berwyn, Pennsylvania from the owner of the office space that the Company was renting that same space under a sublease arrangement. The Company determined that it is an operating lease, and that lease commencement occurred in July 2024. The initial lease termination date is July 31, 2030, and under the lease agreement the Company has -year renewal option to extend the lease through July 2035. Undiscounted minimum monthly rent payments average approximately $
In May 2023, the Company entered into an operating lease agreement to relocate its principal office to Denver, Colorado. The initial lease termination date is March 31, 2029, and under the lease agreement the Company has -year renewal option to extend the lease through March 2034. Undiscounted minimum monthly rent payments average approximately $
Legal Matters
Granules Paragraph IV
On October 31, 2024, the Company received a Paragraph IV Certification Notice Letter (the “Notice Letter”) from Granules Pharmaceuticals, Inc. (“Granules”), stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange Book”). The Notice Letter states that Granules’ NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. On December 11, 2024, the Company filed a patent infringement lawsuit against Granules which triggered a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. The Company plans to vigorously enforce its intellectual property rights related to Adzenys.
Revive Investing
The Company had been named as a nominal plaintiff in a lawsuit by two shareholders against Armistice Capital Master Fund, Ltd (“Armistice”), entitled Revive Investing, LLC. et al v. Armistice Master Fund, Ltd. et al, Case 1:20-cv-02849-CMA-TPO, in the United States District Court for the District of Colorado, contending that Armistice was liable for short swing trading profits in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, for certain trades it made in Company stock in 2019 and 2020 and must disgorge those profits to the Company. That matter proceeded to trial before a jury, which on January 29, 2025, returned a verdict finding no liability. On March 6, 2025, the plaintiffs filed an appeal in the United States Court of Appeals for the Tenth Circuit. As with the original case, regardless of the outcome, this case will not have a materially adverse effect upon the Company’s financial condition, results of operations, or cash flows.
Note 19 - License Agreements
Teva
On December 21, 2018, the Company and Teva Pharmaceuticals USA, Inc. (“Teva”) entered into an agreement granting Teva a non-exclusive license to certain patents owned by Neos by which Teva has the right to manufacture and market its generic version of Cotempla under an abbreviated new drug application (“ANDA”) filed by Teva beginning on July 1, 2026, or earlier under certain circumstances. The ANDA was approved by the FDA on June 19, 2020.
Actavis
On October 17, 2017, the Company entered into an agreement granting Actavis Laboratories FL, Inc. (“Actavis”) (which is now owned by Teva Pharmaceutical Industries Limited) a non-exclusive license to certain patents owned by the Company by which Actavis has the right to manufacture and market its generic version of Adzenys under its ANDA beginning on September 1, 2025. The ANDA was approved by the FDA on June 22, 2023.
Note 20 - Discontinued Operations
On July 31, 2024, after the wind down of operations, the Company entered into a definitive agreement to divest its Consumer Health business to a private, e-commerce focused company. The divested business encompassed the established e-commerce platform, certain inventory and associated consumer brands, intellectual property, external workforce and contracts, and provided for the Company to receive contingent consideration payments on certain future sales of former Consumer Health business products.
The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as a discontinued operation and certain assets and liabilities of discontinued operations have been reclassified to the current assets of discontinued operations; non-current assets of discontinued operations; and current liabilities of discontinued operations financial statement line items on the accompanying consolidated balance sheets as of June 30, 2025, and 2024. The Company elected to record the contingent consideration portion of the arrangement when the consideration is determined to be realizable and, therefore, the Company did not record a contingent consideration asset at the transaction date and any subsequent proceeds will not be recognized until the contingent consideration asset is realizable, at which point the Company will recognize it to income (loss) from discontinued operations.
The key components of income (loss) from discontinued operations, net of tax for the years ended June 30, 2025, and 2024, were as follows:
| Year Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Net revenue | $ | $ | ||||||
| Cost of goods sold | ( | ) | ( | ) | ||||
| Selling and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Research and development | ( | ) | ||||||
| Amortization of intangible assets | ( | ) | ||||||
| Restructuring costs | ( | ) | ||||||
| Non-operating other expense, net | ( | ) | ||||||
| Recognized contingent consideration | ||||||||
| Loss on divestiture | ( | ) | ||||||
| Income (loss) from discontinued operations before income taxes | ( | ) | ||||||
| Income tax benefit | ||||||||
| Net income (loss) from discontinued operations, net of tax | $ | $ | ( | ) | ||||
The key components of assets and liabilities of discontinued operations as of June 30, 2025, and 2024, were as follows:
| June 30, 2024 | ||||
| (in thousands) | ||||
| ASSETS | ||||
| Current assets of discontinued operations: | ||||
| Accounts receivable, net | $ | |||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Total current assets of discontinued operations | ||||
| Non-current assets of discontinued operations: | ||||
| Other non-current assets | ||||
| Total current assets of discontinued operations | ||||
| Total current and non-current assets of discontinued operations | $ | |||
| LIABILITIES | ||||
| Current liabilities of discontinued operations: | ||||
| Accounts payable | $ | |||
| Accrued liabilities | ||||
| Total current liabilities of discontinued operations | $ | |||
Note 21 - Subsequent Events
The One Big Beautiful Bill Act
The enactment of the OBBBA on July 4, 2025, may adversely affect the Company’s business, financial condition, results of operation and future plans. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the TCJA, allowing for accelerated tax deductions for qualified property and research expenditures, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in calendar year 2025 and others implemented through calendar year 2027. None of the provisions are expected to impact the realizability of the Company’s deferred tax assets and liabilities on the consolidated balance sheet as of June 30, 2025. However, because the OBBBA is a wide-reaching law, the Company is currently assessing its potential impact on its business, financial condition, results of operations and future plans and the Company plans to provide an update in future SEC filings once this assessment is complete. See Note 13 - Income Taxes for further detail.
Termination of AR101 Rumpus Asset Purchase Agreement
As previously disclosed in its SEC filings, the Company suspended its clinical development of AR101 (enzastaurin) (“AR101”). In connection with this suspension, the Company has been engaged in negotiations with EnzCo, LLC (“EnzCo”) and Rumpus VEDS LLC, (“Rumpus VEDS”), Rumpus Therapeutics LLC, (“Rumpus Therapeutics”) and Rumpus Vascular LLC, (“Rumpus Vascular” and, together with Rumpus VEDS and Rumpus Therapeutics, “Rumpus”) for the repurchase of AR101. On August 5, 2025, the Company, Rumpus and EnzCo reached terms whereby for mutual consideration and releases, the Company transferred all of its and Rumpus’ rights, title and interest in AR101 to EnzCo, which extinguished and terminated all obligations of the Company and Rumpus under the April 21, 2021, asset purchase agreement by and between the Company and Rumpus (the “Rumpus Asset Purchase Agreement”). There is no other relationship between the Company, EnzCo or Rumpus other than as contracting parties to terminate the Rumpus Asset Purchase Agreement, and there are no penalties or remaining obligations to the Company for terminating the Rumpus Asset Purchase Agreement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2025, at reasonable assurance levels, in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Accordingly, we believe that the financial statements presented in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented herein.
Inherent Limitations on Effectiveness of Internal Controls over Financial Reporting
Our management team, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple errors or mistakes. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
| ● |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| ● |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. |
Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework).
Based on management’s assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of June 30, 2025.
Grant Thornton LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report, was not required to issue an attestation report on the Company’s internal control over financial reporting.
Rule 10b5-1 Trading Plans
During the quarter ended June 30, 2025, of our directors or executive officers (as defined in Rule 16a-1 under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Item is to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2026 annual meeting of stockholders, to be filed within 120 days from June 30, 2025.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2026 annual meeting of stockholders, to be filed within 120 days from June 30, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2026 annual meeting of stockholders, to be filed within 120 days from June 30, 2025.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2026 annual meeting of stockholders, to be filed within 120 days from June 30, 2025.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2026 annual meeting of stockholders, to be filed within 120 days from June 30, 2025.
ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(a)(1) and (a)(2) Financial Statements
The following documents are filed as part of this Annual Report:
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Report of Independent Registered Public Accounting Firm (PCAOB ID 248) |
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(b) Exhibits
| Exhibit No. |
Description |
Registrant’s |
Date Filed |
Exhibit |
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| 2.1 |
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8-K |
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09/18/19 |
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2.1 |
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8-K |
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10/15/19 |
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2.1 |
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8-K |
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12/10/20 |
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2.1 |
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8-K |
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06/09/15 |
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3.1 |
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Certificate of Amendment of Certificate of Incorporation, effective June 1, 2016. |
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8-K |
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06/02/16 |
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3.1 |
| 3.3 |
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Certificate of Amendment of Certificate of Incorporation, effective June 30, 2016. |
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8-K |
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07/01/16 |
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3.1 |
| 3.4 |
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Certificate of Amendment of Certificate of Incorporation, effective August 25, 2017. |
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8-K |
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08/29/17 |
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3.1 |
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| 3.5 |
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Certificate of Amendment to the Restated of Certificate of Incorporation, effective August 10, 2018. |
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8-K |
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08/10/18 |
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3.1 |
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| 3.6 | Certificate of Amendment to the Restated Certificate of Incorporation, effective May 20, 2020. | 10-K | 09/26/24 | 3.6 |
| 3.7 |
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Certificate of Amendment to the Restated Certificate of Incorporation, effective December 8, 2020. |
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8-K |
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12/08/20 |
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3.1 |
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| 3.8 |
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Certificate of Amendment of Certificate of Incorporation, effective March 22, 2021. |
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8-K |
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03/22/21 |
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3.1 |
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| 3.9 |
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Certificate of Amendment of Certificate of Incorporation, effective January 6, 2023. |
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8-K |
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01/25/23 |
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3.1 |
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8-K |
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05/09/22 |
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3.1 |
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8-K |
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03/04/22 |
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4.1 |
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8-K |
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03/04/22 |
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4.2 |
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8-K |
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08/10/22 |
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4.1 |
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8-K |
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08/10/22 |
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4.2 |
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S-1/A |
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06/05/23 |
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4.10 |
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S-1/A |
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06/05/23 |
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4.11 |
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10-K |
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09/27/22 |
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4.9 |
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| 4.8 | Form of Prefunded Warrant. | S-1 | 06/02/25 | 4.13 | ||||
| 10.1 |
8-K |
10/03/19 |
10.1 |
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| 10.2 |
8-K |
12/10/20 |
10.3 |
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| 10.3 |
8-K |
03/22/21 |
10.3 |
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| 10.4& |
10-Q |
02/14/22 |
10.3 |
| 10.5 |
10-Q |
05/11/23 |
10.1 |
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| 10.6& |
8-K |
06/18/24 |
10.1 |
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| 10.7 |
8-K |
06/18/24 |
10.2 |
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| 10.8 |
Second Amended and Restated Revolving Note dated June 12, 2024. |
8-K |
06/18/24 |
10.3 |
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| 10.9& | Amendment No. 6 to Loan and Security Agreement dated June 20, 2025, between the Borrowers and lenders party thereto and Eclipse Business Capital LLC as agent. | 8-K | 06/23/25 | 10.1 | ||||
| 10.10& |
10-Q |
02/14/22 |
10.3 |
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| 10.11 |
10-Q |
05/11/23 |
10.2 |
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| 10.12 |
Registration Rights Agreement dated January 26, 2022 between Aytu and each of the warrant holders. |
10-Q |
02/14/22 |
10.5 |
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10-Q |
02/14/22 |
10.6 |
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S-1/A |
06/05/23 |
10.42 |
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| 10.15 |
S-1/A |
06/05/23 |
10.43 |
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| 10.16 |
10-K |
09/06/18 |
10.31 |
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| 10.17& |
License, Development, Manufacturing and Supply Agreement, dated November 2, 2018. |
10-Q |
02/07/19 |
10.2 |
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| 10.18 |
First Amendment to Asset Purchase Agreement with Cerecor, Inc., dated November 1, 2019. |
8-K |
11/04/19 |
10.1 |
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| 10.19 |
8-K |
12/02/19 |
10.1 |
| 19.1 | Statement of Insider Trading Policy. | 10-K | 09/26/25 | 19.1 | ||||
| 21.1* |
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| 23.1* |
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Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm. |
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| 97.1† | Executive Compensation Clawback Policy. | 10-K | 09/26/25 | 97.1 | ||||
| 101 INS* |
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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| 101 SCH* |
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Inline XBRL Taxonomy Schema Linkbase Document. |
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| 101 CAL* |
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Inline XBRL Taxonomy Calculation Linkbase Document. |
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| 101 DEF* |
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Inline XBRL Taxonomy Definition Linkbase Document. |
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| 101 LAB* |
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Inline XBRL Taxonomy Labels Linkbase Document. |
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| 101 PRE* |
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Inline XBRL Taxonomy Presentation Linkbase Document. |
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| 104* |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| † |
Indicates a management contract or compensatory plan or arrangement. |
| # |
The Company has received confidential treatment of certain portions of this agreement. These portions have been omitted and filed separately with the SEC pursuant to a confidential treatment request. |
| & |
Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has determined that (1) the omitted information is not material and (2) the omitted information would likely cause competitive harm to the registrant if publicly disclosed. |
| * |
Filed herewith. |
| ** |
Furnished herewith. |
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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AYTU BIOPHARMA, INC. |
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| Date: September 23, 2025 |
By: |
/s/ Joshua R. Disbrow |
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Joshua R. Disbrow |
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Chief Executive Officer |
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(Principal Executive Officer) |
We the undersigned directors and officers of Aytu BioPharma, Inc., hereby severally constitute and appoint Joshua R. Disbrow and Ryan J. Selhorn, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, to file any and all amendments to this Annual Report on Form 10‑K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys‑in‑fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys‑in‑fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, on September 23, 2025.
| Signature |
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Title |
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| /s/ Joshua R. Disbrow |
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Chief Executive Officer and Director |
| Joshua R. Disbrow |
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(Principal Executive Officer) |
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| /s/ Ryan J. Selhorn |
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Chief Financial Officer |
| Ryan J. Selhorn |
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(Principal Financial and Accounting Officer) |
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| /s/ John A. Donofrio, Jr. |
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Chairman |
| John A. Donofrio, Jr. |
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| /s/ Carl C. Dockery |
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Director |
| Carl C. Dockery |
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| /s/ Abhinav Jain |
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Director |
| Abhinav Jain |
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| /s/ Vivian H. Liu |
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Director |
| Vivian H. Liu |
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Exhibit 10.24
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH
(I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS
AS PRIVATE AND CONFIDENTIAL.
EXCLUSIVE COMMERCIALIZATION AGREEMENT
This EXCLUSIVE COMMERCIALIZATION AGREEMENT (this “Agreement”) is made and effective as of June 5, 2025 (the “Effective Date”) by and between Fabre-Kramer Holdings, Inc. (“Fabre-Kramer”), a Delaware corporation, doing business as Fabre-Kramer Pharmaceuticals and having its principal office at 5847 San Felipe St., Suite 2000, Houston, TX 77057, and Aytu BioPharma, Inc. (“Aytu”), a Delaware corporation having its principal office at Denver Corporate Center III, 7900 East Union Avenue, Suite 920, Denver, CO 80237 (each of Fabre-Kramer and Aytu being a “Party,” and collectively, the “Parties”).
WHEREAS, Fabre-Kramer is in the business of developing pharmaceutical products, including the Product;
WHEREAS, Aytu is a specialty pharmaceutical company focused on commercializing novel therapeutics, including a portfolio of products to address central nervous system disorders; and
WHEREAS, the Parties desire to enter into a definitive agreement setting forth the Parties’ respective rights and obligations with respect to Aytu’s exclusive commercialization of the Product in the Territory.
NOW THEREFORE, in consideration of the mutual promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms, whether used in the singular or the plural, shall have the meanings designated to them under this ARTICLE 1 unless otherwise specifically indicated.
1.1 “Active Ingredient” means gepirone hydrochloride.
1.2 “Acquirer” means, with respect to a Party, a Third Party that controls such Party (within the meaning set forth in the definition of Affiliate) as a result of a Change of Control.
1.3 “Affiliate” means any company or entity controlled by, controlling, or under common control with a Party. For purposes of the definition of “Affiliate,” “control” and, with corresponding meanings, the terms “controlled by,” “controlling,” and “under common control with” means (a) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities, participating profit interest, or other ownership interests of a legal entity, or (b) the possession, directly or indirectly, of the power to direct the management or policies of a legal entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance.
1.4 “ANDA” means an Abbreviated New Drug Application as defined in the FD&C Act and applicable regulations promulgated thereunder by the FDA.
1.5 “Annual Net Sales” means, in relation to Product, the total Net Sales of Product by Aytu, its Affiliates and sublicensees during a calendar year.
1.6 “API Suppliers” means [***].
1.7 “API Supply Agreement” means that certain API Supply Agreement dated [***] between Fabre-Kramer and the API Suppliers.
1.8 “Applicable Laws” means the laws, statutes, rules or regulations applicable to a Party’s activities to be performed under this Agreement including the federal FD&C Act, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the federal Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), the criminal Health Care Fraud laws (18 U.S.C. §§ 286, 287, 1347, 1349), the PDMA, the Patient Protection and Affordable Care Act of 2010 (42 U.S.C. § 18001 et seq.), the Federal Sunshine Law (42 U.S.C. § 1320a-7h), as amended, the Generic Drug Enforcement Act of 1992 (21 U.S.C. §335a et seq.), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§1320d et seq.) as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. §§ 17921 et seq.), the exclusion laws (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), state and federal licensure laws, the regulations promulgated pursuant to such laws, the U.S. Foreign Corrupt Practices Act (15 U.S.C. §78dd-1, et seq.), as amended and other laws related to fraud, waste and abuse, anti-corruption and bribery, racketeering, money laundering or terrorism, and any other state or federal law similar to the foregoing.
1.9 “Applicable Senior Officers” means the Chief Executive Officer and/or the Chief Financial Officer of Aytu or his or her designee, and the Chief Executive Officer, Chief Operating Officer and/or Chief Financial Officer of Fabre-Kramer or his or her designee.
1.10 “Aytu COGS” [***].
1.11 “Aytu Fiscal Year” shall be the yearly period starting July 1 and ending June 30, or the respective period if adjusted with the Securities and Exchange Commission in the form of a fiscal year change.
1.12 “Aytu Intellectual Property” means the Aytu Patents and Aytu Know-How.
1.13 “Aytu Know-How” means any and all Know-How other than Developed Technology assigned to Fabre-Kramer hereunder that (a) is Controlled by Aytu and (b) is related to the Product.
1.14 “Aytu Patents” means any patent rights other than Developed Technology assigned to Fabre-Kramer hereunder that is Controlled by Aytu and covers the Product or the manufacture, use or sale of the Product or that otherwise covers Aytu Know-How.
1.15 “Aytu Trademarks” means the relevant Product trademarks for Commercialization of the Product, whether registered or unregistered, that are owned or Controlled by Aytu following the Effective Date.
1.16 “Authorized Generic” means any product that is authorized to be marketed under the Product NDA under a generic product label.
1.17 “Bankruptcy Laws” means Title 11 of the United States Code, 11 U.S.C. §§ 101 1330, as it may be amended from time to time, any successor statute or any applicable state laws relating to bankruptcy, dissolution, liquidation, winding up or reorganization.
1.18 “Business Day(s)” means any day except (a) Saturday, (b) Sunday, or (c) a day that is a federal legal holiday in the U.S.
1.19 “Change of Control” means, with respect to a Person, (a) the acquisition by a Third Party, in one transaction or a series of related transactions, of direct or indirect beneficial ownership of more than fifty percent (50%) of the voting securities, participating profit interest, or other ownership interests of a Person; or (b) a merger or consolidation involving a Person, as a result of which a Third Party acquires direct or indirect beneficial ownership of more than fifty percent (50%) of the voting securities of, or the direct or indirect power, whether through contract relating to voting rights or corporate governance, to direct the management or policies of the surviving Person immediately after such merger, reorganization or consolidation.
1.20 “Clinical Trial” means any clinical testing of Product in human subjects.
1.21 “Commercial Pricing Strategy” has the meaning set forth in Section 2.1(c)(6).
1.22 “Commercialization” or “Commercialize” means, with respect to the Product, activities directed to the preparation for sale of, offering for sale of, or sale of the Product in the Territory, including activities related to Commercial Pricing Strategy, market access, marketing, advertising or Promoting the Product.
1.23 “Commercialization Plan” means the Parties’ commercialization plan for the Product in the Territory provided to the JSC.
1.24 “Commercially Reasonable Efforts” means, with respect to a Party’s obligations under this Agreement, the carrying out of such obligations with a level of effort and resources consistent with the commercially reasonable practices of a similarly situated company in the pharmaceutical industry that would be applied to the commercialization of a pharmaceutical product comparable to the Product at a similar stage of commercialization.
1.25 “Controlled” means, with respect to any item of Know-How or any intellectual property right, that a Party owns or has a license to such item or right and has the ability to grant to the other Party a license or sublicense under such item or right as provided for in this Agreement without violating the terms of any agreement or other arrangement with any Third Party in existence, as applicable.
1.26 “Detail” means a face-to-face contact by a Sales Representative of a Party with a target Healthcare Provider and during which the indicated uses, safety, effectiveness, contraindications, side effects, warnings and other relevant characteristics of the Product are described by the Sales Representative in a fair and balanced manner consistent with the FD&C Act and all Applicable Laws. When used as a verb, “Detail” shall mean to engage in a Detail.
1.27 “Existing Supply Agreements” has the meaning set forth in Section 5.1.
1.28 “Fabre-Kramer Intellectual Property” means the Fabre-Kramer Patents and Fabre-Kramer Know-How.
1.29 “Fabre-Kramer Know-How” means any and all Know-How Controlled by Fabre-Kramer at the Effective Date that is reasonably necessary to make, use, sell, offer for sale, import, market, Promote, develop or Commercialize the Product together with any Developed Technology in which Fabre-Kramer has an ownership interest, but, in each case excluding the Fabre-Kramer Patents.
1.30 “Fabre-Kramer Patent” means any issued patent or pending patent application in the Territory that is Controlled, in full or in part, by Fabre-Kramer at any time during the Term, any patent issuing therefrom, and any continuation, divisional, continuation in part, substitution, reissue, renewal, reexamination, or extension of any of the foregoing patents, that claims or would otherwise be infringed by the Product or the manufacture or use of the Product.
1.31 “Fabre-Kramer Trademarks” means the relevant Product trademarks for Commercialization of the Product, whether registered or unregistered, that are owned or Controlled by Fabre-Kramer as of or following the Effective Date, including the Product trademarks and trademark applications.
1.32 “FD&C Act” means the U.S. Federal Food, Drug, and Cosmetics Act (21 U.S.C. § 301 et seq.), as amended.
1.33 “FDA” means the U.S. Food and Drug Administration.
1.34 “Field” means the treatment of major depressive disorder in adults and any future indication(s) for the Product.
1.35 “Follow On License” has the meaning set forth in Section 8.3.
1.36 “Follow On Product” means a drug product comprising a follow-on compound ([***]) formulated as a pharmaceutical product.
1.37 “Follow On ROFN Period” has the meaning set forth in Section 8.3.
1.38 “Full Royalty Term” means the period commencing on the Product Commercial Launch and ending upon the day following the latest of: (a) expiration (or invalidation) of the last Valid Claim of a Fabre-Kramer Patent covering the Product or the manufacture, use or sale of the Product and for which a good faith claim of infringement could be asserted against an actual or reasonably foreseeable ANDA filer; (b) expiration of all applicable regulatory exclusivity periods, including data exclusivity, with respect to the Product; or (c) Generic Product Commercial Launch.
1.39 “GAAP” means the U.S. generally accepted accounting principles, consistently applied.
1.40 “Generic Product” means an AB-rated pharmaceutical product approved under an ANDA and substitutable for the Product. “Generic Product” excludes any Authorized Generic.
1.41 “Generic Product Commercial Launch” means a commercial launch and the subsequent physical sale of Generic Product in the Territory through commercial channels typically used for broadly distributed generic products, including through at least one national wholesaler, for the purpose of fulfilling Generic Product prescription demand and subsequent dispensing (e.g., at retail pharmacies).
1.42 “[***]” means that certain License Agreement entered into as of [***], by and between Fabre-Kramer and Gepirone Pharmaceutical Partners, L.P., as amended.
1.43 “Healthcare Providers” means physicians and other paraprofessional staff authorized to provide healthcare services, such as nurse practitioners, physician assistants, or another staff member who, under Applicable Law, has the authority to write a prescription.
1.44 “Know-How” means and includes conceptions, ideas, reductions-to-practice, innovations, inventions, patent applications, processes, machines, equipment, compositions of matter, compounds, formulations, products, genetic material, improvements, enhancements, modifications, technological developments, know-how, methods, treatments, techniques, systems, designs, artwork, drawings, plans, specifications, blueprints, works, mask works, software, documentation, data and information (irrespective of whether in human or machine-readable form), works of authorship, and products, in each case whether or not patentable, copyrightable, or susceptible to any other form of legal protection.
1.45 “[***]” means [***].
1.46 “[***]” means Fabre-Kramer’s agreement with [***](“[***]”), a [***], for the manufacture and supply of the Product, dated [***], as amended from time to time.
1.47 “NDA” means a New Drug Application as defined in the FD&C Act and applicable regulations promulgated thereunder by the FDA.
1.48 “Negotiation Period” has the meaning set forth in Section 8.3.
1.49 “Net Sales” means the gross amount invoiced by Aytu, its Affiliates, or sublicensees for the sale of Product to Third Parties, less the following deductions actually allowed or incurred and properly taken and determined in accordance with GAAP, for: (a) normal and customary trade, cash and quantity discounts, credits, price adjustments or allowances for damaged Products, returns, defects, recalls or rejections of Products or retroactive price reductions specifically identifiable to the Product; (b) chargebacks and rebates (or the equivalent thereof, inclusive of patient co-pay coupons, cards or other co-pay assistance program deductions through point-of-care discounting or physical rebate couponing) granted to group purchasing organizations, managed health care organizations or to federal, state/provincial, local and other governments, including their agencies, or to trade customers and other amounts paid on sale or dispensing of the Product or to wholesalers for inventory management programs, or to patients directly; (c) required distribution fees, i.e. for services (such as fees related to services provided pursuant to distribution service agreements with wholesalers and distributors) payable to Third Part(ies) providing distribution services to Aytu, so long as such fees are consistent with the distribution fees payable in respect to other branded prescription products commercialized by Aytu; (d) sales, value-added, excise taxes, tariffs and duties, and other taxes and government charges directly related to the sale, to the extent such items are included in the gross invoice price and actually borne by Aytu, its Affiliates, or sublicensees without reimbursement from any Third Party (but not including taxes assessed against the income derived from such sales); and (e) uncollectible amounts actually written off during the applicable accounting period; provided that such amounts will be re-included in Net Sales when collected if subsequently collected.
1.50 “[***]” means that certain Agreement entered into as of [***], by and between Fabre-Kramer and [***], as amended.
1.51 “OTC Version” shall mean any version of the Product for use in the Field that has been approved by the FDA for sale to customers or patients in the Territory without a prescription.
1.52 “Person” means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.
1.53 “Product” means a drug product containing the Active Ingredient as its sole active pharmaceutical ingredient in any formulation and any dosage strength for all current and future indications at any time before or during the Term, including EXXUA and any other drug product under NDA #021164 or supplements thereof (the “Product NDA”), any Authorized Generic or any OTC Version.
1.54 “Product Commercial Launch” means the physical sale of Product in the Territory through a bona fide, arm’s length transaction to distribute Product into the commercial channel for the purpose of fulfilling Product prescription demand and subsequent dispensing (e.g., at a pharmacy).
1.55 “Product NDA” has the meaning in Section 1.53.
1.56 “Promotion” or “Promote” means (a) those activities customarily undertaken by Sales Representatives in the Territory to encourage the approved use of, increase awareness, improve access to, or encourage the use of the Product, including Detailing, and (b) any other activities customarily undertaken to encourage the approved use of a particular prescription pharmaceutical product, including without limitation, communications to healthcare professionals, healthcare professional peer-to-peer communications, communications to direct customers, consumers, patients, patient families, employers, employees, payors, stakeholders, and group purchasing organizations, communications of product benefits to integrated healthcare delivery networks, the creation and use of Promotional Materials, marketing, meetings and events , trade shows, advocacy activities, including with respect to guideline organizations, and sponsorships, in each case (a) and (b), as set forth in the Commercialization Plan.
1.57 “Promotional Materials” means any and all written, printed, graphic, electronic, audio, video or other materials to be used in connection with any Promotion activities.
1.58 “Reduced Royalty Trigger” has the meaning set forth in Section 7.4(a)(1).
1.59 “Regulatory Approval” means, for the Product, all permissions, approvals, licenses, registrations, authorizations, or clearances of any Regulatory Authority that are necessary for the sale of such Product in the Territory.
1.60 “Regulatory Authority” means the FDA and the authority(ies) that are responsible for granting any FDA approval for the Commercialization of the Product in the Territory.
1.61 “Regulatory Requirements” means (a) all specifications, methods of manufacture, and other information in the Product NDA and thereafter related in any way to Product, and (b) all laws, rules, regulations, applicable regulatory guidance documents, and other requirements of any Regulatory Authority that govern Product, including its manufacture, including but not limited to the requirements set forth in the FD&C Act, the quality system regulation rules set forth in 21 C.F.R. Part 820, and the current good manufacturing practices regulations set forth in 21 C.F.R. § 210 et seq. and 21 C.F.R. §§ 600-610, and in each case, as any of the foregoing may be amended from time to time.
1.62 “Regulatory Submissions” means all applications, filings, dossiers and the like submitted to the FDA and associated with the Product NDA, including any internal records, minutes or informal communications (e-mails and letters) related to discussions with the FDA.
1.63 “ROFN” has the meaning set forth in Section 8.3.
1.64 “Royalty Threshold” has the meaning set forth in Section 7.4(a)(1).
1.65 “Sales Representative” means a Field sales representative who is employed by Aytu or a subcontractor to conduct Promotion and other Commercialization activities with respect to the Product in the Territory pursuant to this Agreement.
1.66 “Supply Price” means an amount, calculated on a quarterly basis, equal to: (a) three percent (3.0%) (subject to the final sentence of this definition below, the “Supply Price Rate”) of Product Net Sales less (b) Aytu COGS in such quarter. If Net Sales of Product exceed Three Hundred Million Dollars ($300,000,000) in an Aytu Fiscal Year, the Supply Price Rate will increase to four percent (4.0%) applied to all Product Net Sales during such Aytu Fiscal Year (and Aytu shall retroactively make a true-up Supply Price payment to Fabre-Kramer as needed so that the increased Supply Price Rate during such Aytu Fiscal Year is applied to all Product Net Sales during such Aytu Fiscal Year). Notwithstanding the foregoing, the Supply Price may not be less than [***].
1.67 “Tax Action” has the meaning set forth in Section 7.6.
1.68 “Term” has the meaning set forth in Section 13.1.
1.69 “Territory” means the United States of America, its commonwealths, territories, and possessions.
1.70 “Third Party” means any Person other than Fabre-Kramer, Aytu and their respective Affiliates.
1.71 “Third Party License Payment” has the meaning set forth in Section 7.4(c).
1.72 “Training Materials” means the materials (which may include written or other recorded, videotaped or Web-based training materials or online training programs) to be used in training Sales Representatives and other personnel, as applicable, regarding the Product, including (i) the scientific basis and indications for the Product, (ii) competitive product knowledge, (iii) permissible communications regarding safety and efficacy claims relating to the Product, (iv) permissible communications related to the Product in accordance with the Product labeling, (v) reporting of adverse events (vi) use of Promotional Materials and (vii) other appropriate topics relevant to the Promotion and Commercialization of the Product.
1.73 “Upstream Agreements” means each of (a) the [***] License Agreement, (b) the [***] Agreement and (c) the [***] Agreement.
1.74 “Valid Claim” means a claim of an issued and unexpired patent or a pending patent application that has not been (a) rejected, revoked or held to be invalid, unenforceable or unpatentable by a court or other authority of competent jurisdiction, from which decision no appeal can be further taken, or (b) finally abandoned, disclaimed or admitted to be invalid, unenforceable or unpatentable, including through reissue or disclaimer; provided that, a claim of a pending patent application shall cease to qualify as a Valid Claim [***] years after the earliest date from which such claim derives priority unless and until such claim issues in a granted patent and such claim otherwise satisfies this definition.
1.75 “Withholding Taxes” has the meaning set forth in Section 7.6.
1.76 “[***] Agreement” means that certain License and Supply Agreement entered into as of [***], by and between Fabre-Kramer and [***], as may be amended from time to time.
ARTICLE 2
GOVERNANCE
2.1 Joint Steering Committee. The Parties’ continuing development of Product (if any) and Commercialization of the Product in the Territory under this Agreement shall be overseen by a Joint Steering Committee (the “JSC”) constituted within [***] days after the Effective Date with responsibilities as described in this ARTICLE 2 and as set forth below.
(a) Membership. The JSC shall include two (2) representatives from each Party. Promptly following the Effective Date, each Party shall appoint its initial representatives to the JSC. Each Party may replace its JSC representatives at any time by providing [***] days’ notice to the other Party. Aytu will designate one of its representatives as the chairperson of the JSC. The chairperson shall not have powers or authority beyond those of any other member of the JSC, but will be responsible for scheduling meetings, preparing and circulating an agenda in advance of each meeting (provided that either Party may request to include a specific item on any such agenda).
(b) Meetings. The JSC shall meet a minimum of once per calendar quarter, and any additional ad hoc meetings may be called by either Party on at least [***] Business Days’ written notice, as determined by the Party in good faith to be reasonably necessary. The Parties shall endeavor to schedule meetings of the JSC at least [***] days in advance. All meetings of the JSC may be by telephone or videoconference, as determined by the Parties. Either Party may invite subject matter experts or other relevant personnel to attend any meeting of the JSC, provided such individuals are subject to obligations of confidentiality and non-use with respect to the other Party’s Confidential Information that are no less stringent than those set forth in ARTICLE 10.
(c) Responsibilities. The JSC shall:
(1) Review the Commercialization Plan for the Product and review any subsequent changes to the Commercialization Plan on a semi-annual basis;
(2) Review any additional development to the Product for the Territory, including the pursuit of any Regulatory Approval of any future indication, new formulation or new dosage strength for the Product;
(3) Facilitate the exchange of Regulatory Submissions and other regulatory information between the Parties;
(4) Discuss the state of the markets for Product in the Territory and opportunities and issues concerning the Commercialization of Product in the Territory, including consideration of marketing and Promotional strategy, marketing and market research plans, payer strategies and tactics, labeling, Product-related and competitive issues;
(5) Coordinate and monitor post-Regulatory Approval activities in the Territory, if any;
(6) To the extent permitted by Applicable Laws, discuss strategy for Product pricing, rebates, discounts, and commercial and government contracting (“Commercial Pricing Strategy”); and
(7) Perform such other functions as appropriate to further the purposes of this Agreement and as allocated to it in writing by the Parties.
2.2 Decision Making; Authority. The JSC shall make its decisions by consensus, with each Party’s representatives collectively having one vote. If the JSC is unable to reach consensus regarding a matter before it within [***] days, the issue shall be discussed among the Parties’ executive officers, for attempted resolution by good faith negotiations during a period of [***] days. In the event that the Applicable Senior Officers are unable to reach a final determination within such [***] day period, then Aytu shall have the final decision-making authority over such disputed matters.
2.3 General Principles.
(a) The JSC has no authority beyond the specific responsibilities of the JSC set forth in this Agreement with respect thereto. In particular, and without limiting the generality of the foregoing, the JSC may not amend or modify the terms or provisions of this Agreement, waive compliance with this Agreement or resolve disputes beyond the scope of the JSC’s authority.
(b) In no event shall the JSC or either Party alone have the power or authority to (i) determine whether a Party has fulfilled or breached its obligations under this Agreement; (ii) impose any requirements on either Party to undertake obligations beyond those for which it is responsible, or to forgo any of its rights, under this Agreement; (iii) make a decision that is expressly stated under this Agreement to require the mutual agreement of the Parties; (iv) make a decision that could reasonably be expected to cause Fabre-Kramer to breach an Upstream Agreement; or (v) require a Party to perform any act that it reasonably believes to be inconsistent with Applicable Law.
(c) Each Party shall ensure that its representatives to the JSC have appropriate expertise and authority to serve as members of such committee. Meetings of the JSC shall be effective only if at least one representative of each Party is present or participating. Each Party shall be responsible for all of its own expenses of participating in JSC meetings. Each Party shall use good faith and cooperative efforts to facilitate and assist the efforts of the JSC.
ARTICLE 3
POST MARKETING TRIALS AND OBLIGATIONS
3.1 Required Clinical Trials. As between the Parties, Aytu shall have the sole right, but not the obligation, to negotiate, design, modify, initiate and conduct all Clinical Trials if required by the applicable Regulatory Authorities to maintain the Regulatory Approval for the Product in the Territory (collectively the “Required Clinical Trials”). For clarity, nothing in this agreement shall require Aytu to initiate and/or conduct any Required Clinical Trials solely on the basis of the current listing of post marketing requirements listed in the Product NDA approval letter from the FDA.
3.2 Development. As between the Parties, Aytu shall have the right, but not the obligation, to initiate and conduct Clinical Trials in the Territory to pursue a future indication, new formulation or new dosage strength for the Product and will keep Fabre-Kramer reasonably informed, through the JSC, with respect to such Clinical Trials.
ARTICLE 4
REGULATORY MATTERS
4.1 Actions Regarding the Product NDA and Related FDA Regulatory Submissions. As soon as practicable following the Effective Date, (a) Fabre-Kramer shall provide to Aytu (and cause any Third Party in possession thereof to provide to Aytu) copies of the Product NDA and all Regulatory Submissions as of the Effective Date for the Product in the Territory; and (b) the Parties shall execute such documents and take all such further actions (including Fabre-Kramer and Aytu submitting letters to FDA delegating and assuming such responsibilities, respectively) as are necessary for Fabre-Kramer to appoint Aytu as Fabre-Kramer’s exclusive regulatory agent with the FDA for maintaining and servicing the Product NDA and whereby Aytu agrees to undertake all duties associated with such maintenance and servicing of the Product NDA, subject to Section 11.6(c) and Section 13.3(c). Each Party shall provide the FDA with any documents necessary to effectuate the foregoing. Notwithstanding the foregoing, Aytu shall provide Fabre-Kramer (or its licensees) with access to and the right to cross reference the Product NDA for any Products Fabre-Kramer (or its licensees) develops or Commercializes outside of the Territory and Fabre-Kramer shall provide Aytu with access to and the right to cross reference any regulatory filings in any application filed by Fabre-Kramer (or its licensees) outside the Territory for Products Aytu develops or Commercializes in the Territory. At Fabre-Kramer’s request, Aytu shall notify the FDA of Fabre-Kramer’s right to reference the Product NDA in any regulatory filings in any application filed by Fabre-Kramer outside the Territory. At Aytu’s request, Fabre-Kramer shall notify the applicable regulatory authority outside of the Territory of Aytu’s right to reference any such regulatory filings in any application filed by Aytu in the Territory.
4.2 Regulatory Responsibilities. From and after the Effective Date, Aytu shall be solely responsible at its own cost for all regulatory matters regarding the Product in the Territory, including paying annual Prescription Drug User Fee Act (PDUFA) product fees as invoiced by the FDA which shall not be considered Aytu COGS or otherwise deducted in the calculation of the Supply Price, preparing, filing, prosecuting and maintaining all submissions to Regulatory Authorities for the Product, adverse event reporting, post-marketing requirements, label and packaging updates, and serialization costs. For clarity, Aytu shall be solely responsible at its own cost for all regulatory matters pursuant to a future indication, new formulation or new dosage strength for the Product. Fabre-Kramer shall not, without Aytu’s prior written consent (unless so required by Applicable Laws), correspond or communicate with the FDA or with any other Regulatory Authority concerning the Product in the Territory, or otherwise take any action concerning any Regulatory Approval under which the Product is marketed in the Territory, provided that the foregoing shall not restrict Fabre-Kramer from responding to a request from the FDA or any other Regulatory Authority concerning the Product in the Territory or otherwise complying with Applicable Laws. Fabre-Kramer shall provide to Aytu, promptly upon receipt, copies of any communication from the FDA, or other Regulatory Authority, related to the Product in the Territory, and Aytu shall provide to Fabre-Kramer, promptly upon receipt, copies of any communication from the FDA or other Regulatory Authority relevant to Fabre-Kramer’s rights or obligations under this Agreement or Fabre-Kramer’s development or Commercialization of Products outside the Territory. Upon Aytu’s request, Fabre-Kramer shall cooperate fully with, and provide assistance to, Aytu in connection with Aytu’s Regulatory Requirements arising from Promotion or distribution activities under this Agreement (including adverse event reporting) for the Product. If Fabre-Kramer believes it is required by Applicable Laws to communicate with the FDA or other Regulatory Authority regarding any matter relating to the Product or Fabre-Kramer’s activities hereunder, then Fabre-Kramer shall, unless and to the extent prohibited by Applicable Laws, so advise Aytu promptly and provide Aytu in advance with a copy of any proposed communication (including the text of any oral communication) with the FDA or such other Regulatory Authority prior to such communication, and shall comply with any and all reasonable direction of Aytu, to the extent consistent with Applicable Laws, concerning any meeting or written or oral communication with the FDA or any other Regulatory Authority or governmental authority.
4.3 Follow On Products. As it relates to any Follow On Product(s), should Aytu exercise its ROFN in accordance with Section 8.3 and the Parties enter into a Follow On License, Aytu shall be solely responsible at its own cost for all regulatory matters regarding such Follow On Products in the Territory. As requested by Aytu, Fabre-Kramer will assist Aytu in preparing Regulatory Submissions and will make information Controlled by Fabre-Kramer available to Aytu to the extent necessary or useful in connection with such Regulatory Submissions in the Territory.
4.4 Safety Matters.
(a) From and after the Effective Date, Aytu shall be responsible for establishing and maintaining a safety database for the Product in the Territory and the Parties shall, within [***] days after the Effective Date, enter into a pharmacovigilance and safety data exchange agreement (the “Safety Agreement”), in customary form and consistent with customary practices in the pharmaceutical industry, which the Parties shall maintain, as may be amended by the Parties, in force throughout the Term. The Safety Agreement shall describe the coordination of collection, investigation, reporting, and exchange of information concerning adverse events or any other safety problem of any significance, and Product complaints involving adverse events in the Territory, sufficient to permit each Party to comply with Applicable Laws and for Fabre-Kramer to have access to such safety database (on behalf of itself or its licensees) and to otherwise comply with the terms of any similar safety agreements relating to the development or Commercialization of Products by any of its licensees outside of the Territory. The Safety Agreement will be promptly updated if required by changes in Applicable Laws. In the event of any conflict or inconsistency between this Agreement and the Safety Agreement with respect to: (i) safety-related matters, the Safety Agreement shall prevail; and (ii) any other matter, this Agreement shall prevail.
(b) Each Party shall notify the other Party as promptly as reasonably possible, but in no event more than [***] hours of becoming aware of a serious adverse event in the Territory (with respect to Aytu as the notifying Party) or outside the Territory (with respect to Fabre-Kramer as the notifying Party) relating to the Product or the Active Ingredient, which reporting requirements shall be set forth in further detail in the Safety Agreement. All other adverse events and Product complaints will be reported to the other Party upon reasonable request, but no less frequently than annually.
4.5 Inspections. In the event that Mission’s or the API Supplier’s facility will be inspected by representatives of any Regulatory Authority and such inspection relates to the Product, Fabre-Kramer shall notify Aytu promptly after learning of such inspection and, to the extent permissible, shall supply Aytu with copies of any correspondence or portions of correspondence which are relevant to Aytu’s rights or obligations under this Agreement. Following any such inspection, Fabre-Kramer shall provide Aytu with a written summary of that portion of the inspection that was relevant to Product within [***] Business Days of such inspection.
4.6 Product Recalls and Withdrawals.
(a) Aytu shall be responsible for determining whether any recall or withdrawal of the Product in the Territory is necessary, and, promptly upon such determination, Aytu shall notify Fabre-Kramer of such recall or withdrawal. If Fabre-Kramer or [***] becomes aware that the Product may not comply with Applicable Law or a recall or withdrawal of the Product may be necessary or desirable in the Territory, Fabre-Kramer shall provide Aytu with prompt written notice thereof (within [***] hours of becoming aware). Thereafter, Aytu shall determine whether the Product should be recalled or withdrawn in the Territory. In all cases, each Party shall use Commercially Reasonable Efforts to implement any applicable recall of Product.
(b) Without limiting Fabre-Kramer’s indemnity obligations in Section 12.2 and without limiting Section 5.2, Aytu shall bear all Third Party costs and expenses actually incurred and associated with conducting such recall in accordance with such recall plan.
ARTICLE 5
MANUFACTURE AND SUPPLY OF PRODUCT
5.1 Supply and Purchase of Product. As of the Effective Date, Fabre-Kramer has the ability to order the Active Ingredient from the API Suppliers pursuant to the API Supply Agreement and to order the Product from [***] pursuant to the [***] Agreement (together with the API Supply Agreement, the “Existing Supply Agreements”). Subject to Aytu notifying Fabre-Kramer in advance of the applicable forecasts and otherwise complying with the terms of the Existing Supply Agreements, Fabre-Kramer shall: (i) place orders for the Active Ingredient for delivery to [***] facility on behalf of Aytu pursuant to the API Supply Agreement; and (ii) place orders for the Product on behalf of Aytu pursuant to the [***] Agreement. Fabre-Kramer shall invoice Aytu for the cost of such orders, including any tariffs incurred in connection with obtaining the Active Ingredient under the API Supply Agreement, and Aytu shall pay such invoices within [***] days of receipt of Product.
5.2 Warranties; Liability. Fabre-Kramer hereby passes through, and agrees to pass through to Aytu all representations and warranties granted by (a) the API Suppliers to Fabre-Kramer pursuant to the API Supply Agreement with respect to Active Ingredient supplied to Fabre-Kramer thereunder and (b) [***] to Fabre-Kramer pursuant to the [***] Agreement with respect to Product supplied to Fabre-Kramer thereunder, in each case ((a) or (b)), solely to the extent such representations and warranties are transferable. To the extent such warranties are not transferable, Fabre-Kramer shall, at Aytu’s request and expense, seek to enforce such warranties for Aytu’s benefit. Notwithstanding anything to the contrary in this Agreement, in no event shall Fabre-Kramer be liable to Aytu for any loss or liabilities resulting from any action or inaction of the API Suppliers or [***], as applicable, in excess of the recoveries from the API Suppliers or Mission, as applicable, that Fabre-Kramer is able to realize net of enforcement costs under the applicable Existing Supply Agreement for such action or inaction.
5.3 Supply and Purchase of Product Outside the Territory. Fabre-Kramer may manufacture or have manufactured the Active Ingredient or Product in the Territory for the purpose of its or any of its licensees’ development, commercialization or other exploitation of the Active Ingredient or Product outside the Territory.
ARTICLE 6
COMMERCIALIZATION
6.1 Commercialization. From and after the Effective Date, Aytu will pursue Commercialization of the Product under this Agreement pursuant to a Commercialization Plan. The Commercialization Plan shall set forth the Commercialization strategy and describe tactics for the coming [***] months, including physician targeting, resourcing, and key marketing messages for the Product. The initial Commercialization Plan is attached hereto as Exhibit A. Aytu will use Commercially Reasonable Efforts to carry out the obligations set forth in the Commercialization Plan.
6.2 Product Promotional Position. As set forth in the initial Commercialization Plan (and as amended in subsequent Commercialization Plans), Aytu shall use Commercially Reasonable Efforts to Commercialize the Product and will devote financial, operational and personnel resources to commercialization consistent with such effort. Without limiting the foregoing, Aytu shall for at least [***] months after Product Commercial Launch (a) market the Product in a primary Promotional (“P1”) position with its sales force and (b) not amend the Commercialization Plan in any manner that would reduce the level of efforts required by the initial Commercialization Plan, except if an event outside of the reasonable control of Aytu materially and adversely impacts the market for the Product.
ARTICLE 7
PAYMENTS
7.1 Upfront Payments. Aytu shall make an initial three million dollar ($3,000,000) upfront payment to Fabre-Kramer upon the Effective Date. Aytu shall make a second three million dollar ($3,000,000) upfront payment to Fabre-Kramer within forty-five (45) days of the one-year anniversary of Product Commercial Launch; however, the second upfront payment shall be increased to five million dollars ($5,000,000) if Product Net Sales for the first twelve (12) months post-Product Commercial Launch equal or exceed thirty-five million dollars ($35,000,000).
7.2 Supply Price Payments. In consideration of the rights and licenses granted under this Agreement, Aytu will pay Fabre-Kramer the Supply Price on a [***] basis commencing on the Product Commercial Launch and continuing for the Term of the Agreement. If Aytu has reimbursed Fabre-Kramer for any tariff in connection with obtaining the Active Ingredient under the API Supply Agreement, such cost shall be reflected in Aytu COGS and deducted on a per unit Product basis in the calculation of Supply Price hereunder.
7.3 Milestone Payments. Aytu shall pay Fabre-Kramer the following one-time sales milestone payments within [***] days of reaching the applicable sales milestone. Each sales milestone payment shall be paid once only for reaching the respective sales milestone (it being understood that Milestone Number 10 below comprises multiple milestones), but multiple milestones could potentially be achieved and paid within the same calendar year.
|
Milestone Number |
Milestone Event |
Milestone Payment |
||
|
1 |
Achieving $100 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$5,000,000 |
||
|
2 |
Achieving $150 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$5,000,000 |
||
|
3 |
Achieving $200 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$14,000,000 |
||
|
4 |
Achieving $250 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$15,000,000 |
||
|
5 |
Achieving $300 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$20,000,000 |
||
|
6 |
Achieving $400 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$25,000,000 |
||
|
7 |
Achieving $500 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$30,000,000 |
||
|
8 |
Achieving $600 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$40,000,000 |
||
|
9 |
Achieving $750 million in four (4) consecutive calendar quarters of Net Sales of the Product |
$50,000,000 |
||
|
10 |
Achieving $1 billion in four (4) consecutive calendar quarters of Net Sales of the Product |
$100,000,000 |
||
|
11 |
For Net Sales at each $250 million increment level above $1 billion. (For example, if Net Sales of $1.25 billion in four (4) consecutive calendar quarters is achieved, a $125 million milestone would be payable; if Net Sales of $1.5 billion in four (4) consecutive calendar quarters is achieved, a $150 million milestone would be payable, etc.) |
10% of Net Sales |
7.4 Royalty Payments. Aytu will pay [***] royalty payments to Fabre-Kramer during the Term, as follows.
(a) During the Full Royalty Term.
(1) During the Full Royalty Term and until such time that cumulative Net Sales of the Product equals $1,315.79 million dollars (the “Reduced Royalty Trigger”), Aytu shall pay: (A) a twenty eight percent (28%) royalty on Annual Net Sales less than $300 million dollars (the “Royalty Threshold”) and (B) a thirty-nine percent (39%) royalty on Annual Net Sales greater than the Royalty Threshold.
(2) During the Full Royalty Term and following achievement of cumulative Net Sales greater than the Reduced Royalty Trigger, Aytu shall pay: (A) a twenty-four and a half percent (24.5%) royalty on Annual Net Sales less than the Royalty Threshold and (B) a thirty-five and a half percent (35.5%) royalty on Annual Net Sales greater than the Royalty Threshold.
(b) Reduction following Expiration of the Full Royalty Term. Following the expiration of the Full Royalty Term, the royalty owed under Section 7.4(a) for the remainder of the Term shall be reduced to (1) [***] percent [***] of the royalty set forth in Section 7.4(a) plus (2) [***] percent [***] of the royalties owed by Fabre-Kramer pursuant to the [***] Agreement that become payable based on sales of the Product following such expiration of the Full Royalty Term.
(c) Reduction Third Party License Payments. If, during the Full Royalty Term, Aytu is required to make any payment to one or more Third Parties to obtain a license under any such Third Party’s patent rights that cover the Product that are necessary to develop (to the extent required for Aytu fulfill its obligations hereunder), make, have made, use, offer for sale, sell, or import Product in the Territory in the Field, but excluding any payment made directly or indirectly to a contract manufacturer of the Product (such payments, “Third Party License Payment”), Aytu shall have the right to offset, against Aytu’s royalty payment obligations to Fabre-Kramer under Section 7.4(a), [***] percent [***] of any such Third Party License Payments paid to a Third Party.
(d) Payment Floor. The aggregate payment reductions set forth in Sections 7.4(b) and 7.4(c) may not exceed [***] percent [***] of the amount that would otherwise be payable to Fabre-Kramer under Section 7.4(a).
7.5 Reporting and Payment. Aytu will be responsible for tracking Net Sales and will deliver to Fabre-Kramer a report on a quarterly basis setting forth (a) Net Sales in the relevant calendar quarter; (b) royalties payable on such Net Sales; and (c) the Supply Price and Aytu COGS included in the calculation of the Supply Price, and calculations supportive thereof. Except as otherwise stated in this ARTICLE 7, all payments will be due and payable within [***] days after the end of each calendar quarter, excepting for Aytu’s fiscal fourth quarter for which payments will be due and payable within [***] days after the end of such quarter. All payments due under this Agreement to Fabre-Kramer shall be made by bank transfer in immediately available funds to an account designated by Fabre-Kramer.
7.6 Taxes. The Parties will each be solely responsible for their own compliance with governmental jurisdictional tax regimes, if applicable, to any transaction contemplated in this agreement. Any upfront payments, Supply Price payments, milestone payments or royalties required to be paid hereunder are exclusive of any value added tax or other sales taxes or customs or other duty in respect to such payments which, where applicable, shall be payable by Aytu in addition to, and not out of, upfront payments, Supply Price payments, milestone payments and royalties. Any tax that a Party is required to pay or withhold with respect to payments to be made hereunder shall be paid by the Party owing such taxes. The Parties shall cooperate and shall take all reasonable and lawful steps to avoid double taxation of payments made to Fabre-Kramer hereunder. If Aytu takes any action, including re-domiciliation or assignment of its rights or obligations under this Agreement (such action, a “Tax Action”) or otherwise determines that it is required by any change or application of Applicable Laws to withhold any taxes from any payment made to Fabre-Kramer pursuant to this Agreement (“Withholding Taxes”) and the amount of tax required to be withheld under this Section 7.6 with respect to a payment to Fabre-Kramer is greater than the amount of such tax that would have been required to have been withheld absent such Tax Action or application of Applicable Law, then any such amount payable to Fabre-Kramer shall be adjusted to take into account such Withholding Taxes as may be necessary so that, after making all required Withholding Tax payments or credits, Fabre-Kramer receives an amount equal to the sum it would have received had no such Tax Action occurred. Without limiting the foregoing, Aytu shall (a) withhold the required amount and pay it to the appropriate governmental authority; and (b) provide to Fabre-Kramer all documentation evidencing the payment of such Withholding Taxes to the appropriate governmental authority and the calculation of the amount of such Withholding Taxes. The Parties will reasonably cooperate in completing and filing documents required under the provisions of any Applicable Laws in connection with the making of any required Withholding Taxes, or in connection with any claim to a refund of or credit for any such payment. Notwithstanding any of the foregoing, neither Party currently expects any Withholding Taxes to apply to the payments from Aytu to Fabre-Kramer pursuant to this Agreement. In the event such Withholding Taxes apply in the future, the Parties agree to negotiate an amendment to this Agreement to structure the relationship in a way that does not trigger Withholding Taxes for Fabre-Kramer and both Parties will collaborate in good faith to give effect to such an amendment.
7.7 Records. Aytu shall keep for at least [***] years following the end of the calendar year to which they pertain complete records of Net Sales of Product in the Territory. Such record keeping obligation shall survive any expiration or termination of this Agreement for the time provided herein.
7.8 Audit Right. Fabre-Kramer may audit the records of Aytu subject to the limitations herein. Such audit shall be conducted after at least [***] days prior written notice from Fabre-Kramer, at the facility(ies) where the applicable records are maintained, on Business Days during normal business hours and without disruption to Aytu’s operations (to the extent reasonably practicable, such examination shall be completed within [***] Business Days), and no more frequently than once in any calendar year and not more than once with respect to any particular records. The audit shall be conducted by an internationally recognized independent certified public accounting firm not objected to by Aytu. The auditor will execute a customary written confidentiality agreement with Aytu limiting the disclosure and use of information obtained from such audit to authorized representatives of the Parties and the purposes germane to this Section 7.8. The auditor will disclose to Fabre-Kramer only the amount and accuracy of costs or payments, as applicable, reported and actually paid or otherwise payable under this Agreement. The auditor will send a copy of the report to both Parties at the same time. Fabre-Kramer shall be responsible for expenses for the audit, except that Aytu shall reimburse Fabre-Kramer for the costs of such independent accountant documented services if the independent accountant determines that payments made by Aytu are less than [***] percent [***] of the amount actually owed for the period of the audit. All inspections made hereunder shall be made no later than [***] years after the records subject to the investigation were due, and all records not so audited within [***] years will be deemed accurate and in accordance with the terms of this Agreement. The determination of the auditor shall be final and unappealable absent obvious error. Any underpayment shall be paid within [***] days after the date on which the auditor’s report is sent.
7.9 Additional Consideration. Concurrently with the execution of this Agreement, Aytu is entering into two [***] consulting agreements with each of Dr. Stephen Kramer and Mr. Edward Koehler, under which they will provide ongoing advisory services to Aytu related to the Product and Follow On Products. The terms of such agreements will include monthly payments of [***] to each of Dr. Kramer and Mr. Koehler.
ARTICLE 8
LICENSE RIGHTS AND LIMITATIONS, RESTRICTIONS AND OWNERSHIP
8.1 License to Aytu.
(a) Subject to the terms and conditions of this Agreement, Fabre-Kramer hereby grants to Aytu, commencing on the Effective Date and for the duration of the Term, a royalty-bearing, exclusive (including with respect to Fabre-Kramer except as to Fabre-Kramer’s performance of its obligations under this Agreement) license (with the right to sublicense solely in accordance with Section 8.9), under the Fabre-Kramer Patents, to develop (to the extent required for Aytu to fulfill its obligations hereunder) and Commercialize Product in the Territory in the Field. The foregoing license shall be subject to Fabre-Kramer’s retained rights under the Fabre-Kramer Patents to meet its supply obligations hereunder and to develop, manufacture and otherwise support its (or its licensees’) exploitation of Products outside the Territory.
(b) Subject to Section 8.1(a), Fabre-Kramer hereby grants to Aytu, commencing on the Effective Date and for the duration of the Term, a royalty-bearing, non-exclusive license (with the right to sublicense solely in accordance with Section 8.9), under any other Fabre-Kramer Intellectual Property to the extent necessary for Aytu to Commercialize the Product under this Agreement.
8.2 License to Fabre-Kramer. Subject to the terms and conditions of this Agreement, Aytu hereby grants to Fabre-Kramer, commencing on the Effective Date, (a) an exclusive (including as to Aytu and its Affiliates), royalty-free, fully-paid, perpetual, irrevocable, freely transferrable, freely sublicensable (through multiple tiers) license under the Aytu Intellectual Property to make, have made, use, offer for sale, sell, import, market, distribute, and otherwise commercialize the Product (a)(i) outside of the Territory during the Term and (ii) worldwide following any expiration or termination of this Agreement, and (b) a non-exclusive, royalty-free, fully-paid, perpetual, irrevocable, freely transferrable, freely sublicensable (through multiple tiers) license under the Aytu Intellectual Property to make, have made and develop the Product worldwide.
8.3 Right of First Negotiation. Subject to timelines in this Section 8.3, Fabre-Kramer hereby grants to Aytu a right of first negotiation (“ROFN”) for an exclusive license to Follow On Products in the Territory (“Follow On License”). If at any time prior to [***] years after Product Commercial Launch (the “Follow On ROFN Period”), Aytu desires to negotiate a Follow On License, Aytu shall provide notice of such desire to Fabre-Kramer. If, during the Follow On ROFN Period, Fabre-Kramer receives an expression of interest from a Third Party with respect to a Follow On License, Fabre-Kramer will provide notice thereof to Aytu and Aytu will confirm whether it desires to negotiate a Follow On License within [***] days of such notice. Upon notice or confirmation by Aytu as set forth above, the Parties will negotiate in good faith to enter into a Follow On License for a period of [***] days (which period may be extended by mutual agreement of the Parties) (such period, the “Negotiation Period”). If the Parties fail to enter into a Follow On License prior to the expiration of the Negotiation Period, then such ROFN shall expire and Fabre-Kramer shall be free to enter into a Follow On License with a Third Party.
8.4 Alternate Agreement Construct. During the Term, in the event that Aytu desires to amend this Agreement to obtain ownership of the Product NDA, the Parties will negotiate in good faith to amend this Agreement to include such term, provided however that no additional consideration will be required to effectuate such amendment and, notwithstanding such amendment, upon termination or expiration of this Agreement, the Product NDA and all Regulatory Submissions shall be transferred to Fabre-Kramer in accordance with Section 13.3(c).
8.5 Upstream Agreements. Aytu acknowledges and agrees that the rights, licenses, and sublicenses granted by Fabre-Kramer to Aytu in this Agreement (and any sublicense rights granted by Aytu) are subject to the terms of the Upstream Agreements and the rights granted to the Third Party counterparties thereunder, the scope of the licenses granted to Fabre-Kramer thereunder, and the rights retained by such Third Party counterparties and any other Third Parties (including governmental authorities) set forth therein. Without limiting any of the foregoing in this Section 8.5, Aytu agrees to be bound by the terms and conditions of the provisions of the Upstream Agreements to the extent applicable to the sublicenses granted by Fabre-Kramer to Aytu under Upstream Agreements pursuant to Section 8.1, provided that the Parties agree and acknowledge that, (a) Aytu is not a party to any of the Upstream Agreements, (b) Aytu’s only payment obligations as Fabre-Kramer’s exclusive commercialization partner are the payment obligations set forth in this Agreement, and (c) Fabre-Kramer is responsible for all payment obligations under the Upstream Agreements.
8.6 Non-Competition. For the duration of the Term, Fabre-Kramer shall not, and shall cause its Affiliates not to, on behalf of themselves or on behalf of a Third Party, directly or indirectly develop, license, manufacture, sell, offer for sale, distribute, or otherwise make available (a) the Product; or (b) a Generic Product, in each case ((a) or (b)), in or for the Territory.
8.7 Trademarks.
(a) Grant of License. Subject to the terms and conditions of this Agreement, Fabre-Kramer hereby grants to Aytu, commencing on the Effective Date and for the duration of the Term, an exclusive, royalty-free license (with the right to sublicense in accordance with Section 8.9) to use the Fabre-Kramer Trademarks solely in connection with Commercialization of the Product in the Territory, in accordance with the terms of the license granted in Section 8.1. Aytu may use the Fabre-Kramer Trademarks on Product subject in all respects to all Applicable Laws and Regulatory Requirements.
(b) Additional Trademark Terms. Aytu shall not take any action inconsistent with Fabre-Kramer’s ownership of the Fabre-Kramer Trademarks. Any benefits (including good will) accruing from Aytu’s use of the Fabre-Kramer Trademarks shall automatically vest in Fabre-Kramer. Aytu shall not form any combination trademarks or trade names with the Fabre-Kramer Trademarks without the prior written consent of Fabre-Kramer, such consent to not be unreasonably withheld, delayed or conditioned. Aytu shall grant Fabre-Kramer reasonable access to Aytu’s records pertaining to the Product, including those pertaining to packaging, promotional activities and quality assurance. In the event Fabre-Kramer’s review of such records identifies a deficiency that is inconsistent with Fabre-Kramer’s internal trademark standards, Fabre-Kramer may require Aytu to correct such deficiency.
(c) Trademark Prosecution and Maintenance. Fabre-Kramer shall have the sole right and obligation to prosecute and maintain the Fabre-Kramer Trademarks in the Territory, to the extent it has the rights to do so. Aytu shall have the sole right and obligation to prosecute and maintain the Aytu Trademarks in the Territory, to the extent it has the rights to do so. On the reasonable request of Fabre-Kramer, Aytu shall cooperate, in all reasonable ways, in connection with the prosecution of the Fabre-Kramer Trademarks. To the extent that any submissions (e.g., to the U.S. Patent and Trademark Office) are required or useful to prosecute any Fabre-Kramer Trademarks after Product Commercial Launch, or otherwise on the reasonable request of Aytu, Fabre-Kramer will use Commercially Reasonable Efforts to timely submit such submission.
8.8 Ownership of Materials. As between the Parties, Aytu shall own all right, title and interest in and to any Promotional Materials, Training Materials, advertising and labeling developed by Aytu for the Product in the Territory, in each case including all original content contained therein and all applicable copyrights and trademark rights (but excluding any rights in Fabre-Kramer Trademarks).
8.9 Sublicensing; Subcontracting.
(a) Neither Party may sublicense its rights or obligations under this Agreement to another company without the prior written consent of the other Party, such consent to not be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, Fabre-Kramer may sublicense any of its rights under this Agreement to any Third Party licensee to which it has granted rights to the Product outside the Territory.
(b) Subject in all respects to the restrictions contained in Section 8.9(a), each Party shall have the right to subcontract to Affiliates and Third Parties (“Subcontractors”) its responsibilities under this Agreement, without obtaining the consent of the other Party; provided that the applicable Party shall at all times remain responsible for the activities of its Subcontractors. Aytu may engage independent sales representatives and contract sales organizations to perform Commercialization activities without the prior written consent of Fabre-Kramer.
(c) Each Party shall enter into agreements with its Subcontractors that contain confidentiality terms at least as strict as those set forth in ARTICLE 10 hereof.
ARTICLE 9
INTELLECTUAL PROPERTY
9.1 Background Intellectual Property. Except as expressly set forth herein, as between the Parties, each Party is and shall remain the owner of or shall retain control over all intellectual property, including without limitation, patents, patent applications, Know-How, trade secrets, trademarks, copyrights and Confidential Information that it owns or controls as of the Effective Date or that it develops or acquires thereafter pursuant to activities independent of this Agreement (“Background Intellectual Property”). No rights in any such Background Intellectual Property are transferred to the other Party unless expressly provided for herein.
9.2 Developed Technology. All Know-How and patent rights related to the Product that is conceived or reduced to practice by either Party during the Term (“Developed Technology”), and any intellectual property rights appurtenant thereto (including any patents and patent applications claiming such Know-How), shall be the property of Fabre-Kramer, shall be considered Fabre-Kramer Intellectual Property, and shall be automatically licensed to Aytu in accordance with Section 8.1(a) or 8.1(b), as appropriate, for no additional consideration. Aytu agrees to assign and hereby assigns to Fabre-Kramer any of Aytu’s rights to Developed Technology.
9.3 Patent Prosecution and Maintenance. Except as provided below, Fabre-Kramer shall have the sole right and obligation to prosecute and maintain the Fabre-Kramer Patents in the Territory, to the extent it has the rights to do so. On the reasonable request of Fabre-Kramer, Aytu shall cooperate, in all reasonable ways, in connection with the prosecution of the Fabre-Kramer Patents. Should Fabre-Kramer decide that it is no longer interested in maintaining or prosecuting a particular Fabre-Kramer Patent in the Territory in respect of which it has the rights to so maintain and prosecute, Aytu may assume such prosecution and maintenance in the Territory at its sole expense. If Aytu assumes prosecution or maintenance of any Fabre-Kramer Patent in respect of which Fabre-Kramer has the right to prosecute or maintain pursuant to the immediately preceding sentence, then: (a) Fabre-Kramer shall not so abandon or fail to prosecute or maintain such Fabre-Kramer Patent if Aytu advises Fabre-Kramer within [***] Business Days of notice of Fabre-Kramer’s intention to abandon or not prosecute or maintain the applicable Fabre-Kramer Patent, that Aytu desires to assume prosecution or maintenance of the applicable Fabre-Kramer Patent in Fabre-Kramer’s name at Aytu’s expense, in which case Aytu shall have the right, but not the obligation to do so (and, for greater certainty, Fabre-Kramer shall be under no obligation to assign the applicable Fabre-Kramer Patent to Aytu), (b) to the extent that Aytu so assumes prosecution or maintenance of such Patent in the Territory and to the extent required or useful for Aytu to initiate or maintain a lawsuit or dispute with respect thereto, Fabre-Kramer agrees (at Aytu’s cost and expense for Fabre-Kramer’s reasonable out of pocket costs and expenses agreed to in advance by Aytu) to (i) be named as a party to any lawsuit or other dispute with any Person regarding such Patent, (ii) exercise on behalf of Aytu Fabre-Kramer’s rights under any applicable agreement regarding the applicable Fabre-Kramer Patent, and (c) it shall not exercise any rights in relation to (including any rights to assert or defend) such Fabre-Kramer Patent without Aytu’s prior written consent, such consent to be granted or withheld in Aytu’s sole discretion.
9.4 Infringement by Third Parties.
(a) Each of Aytu and Fabre-Kramer shall promptly notify the other Party in writing of any alleged or threatened infringement of any Fabre-Kramer Patent or the Fabre-Kramer Trademarks by a Third Party product, of which the Party becomes aware.
(b) Fabre-Kramer shall have the first right, on behalf of itself and in its name, to bring and control any action or proceeding with respect to any alleged or threatened infringement of any Fabre-Kramer Patent pertaining to Product in the Territory. If Fabre-Kramer declines to initiate any action or proceeding against an infringer of any Fabre-Kramer Patent pertaining to Product in the Territory within [***] days of becoming aware of any alleged or threatened infringement, Aytu will have the right, but not the obligation, to bring and control any action or proceeding with respect to such alleged or threatened infringement of any Fabre-Kramer Patent pertaining to Product in the Territory.
(c) For any action or proceeding brought by Aytu or Fabre-Kramer under this Section 9.4, the other party shall cooperate reasonably in any such effort, all at the initiating Party’s expense, and the Parties shall reasonably cooperate to address new facts or circumstances that come to light during the course of any such action or proceeding that may affect the need for one Party or the other to participate in such action. Both Parties agree to be joined as a party plaintiff, at the initiating Party’s expense, in any such action if needed for the initiating Party to bring or continue an infringement action hereunder. The non-initiating Party shall, at its own expense and with its own counsel, have the right to advise and provide comments with respect to any action brought under this Section 9.4. The Party prosecuting and controlling any such proceeding will not enter into a settlement, consent judgment or other voluntary final disposition of an action that has an adverse effect on the other Party’s rights hereunder without the other Party’s prior written consent, not to be unreasonably withheld, conditioned or delayed.
(d) Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement, any recovery realized as a result of any litigation under this Section 9.4 (including, for greater certainty, the proceeds of any settlement relating to such litigation), after reimbursement of any litigation expenses of Aytu and Fabre-Kramer, as applicable, shall be retained by the Party bringing such action.
(e) Each Party shall promptly notify the other in writing of any potential or actual allegation, claim or suit that the Commercialization of the Product or any component thereof, or any other activities that are undertaken pursuant to this Agreement, infringes or misappropriates a Third Party’s patent or other proprietary rights.
ARTICLE 10
CONFIDENTIALITY
10.1 Definition of Confidential Information. During the Term, either Party (the “Disclosing Party”) may from time to time furnish the other Party (the “Receiving Party”) with scientific, technical, trade or business information or materials which are treated by the Disclosing Party as confidential or proprietary, including, without limitation, information and materials related to, the Product, processes, formulae, procedures, tests, equipment, data, batch records, reports, know-how, sources of supply, patent positioning, relationships with consultants and employees, business plans and business developments, and information concerning the existence, scope or activities of any research, design, development, Commercialization or other projects. All such disclosed information shall be referred to herein as “Confidential Information” irrespective of whether or not it is designated or otherwise identified as “Confidential” at the time of disclosure. “Fabre-Kramer Confidential Information” means any and all Confidential Information for which Fabre-Kramer is the Disclosing Party and Aytu the Receiving Party hereunder. “Aytu Confidential Information” means any and all Confidential Information for which Aytu is the Disclosing Party and Fabre-Kramer the Receiving Party hereunder.
10.2 Confidentiality. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, the Parties agree that for the Term and for [***] years thereafter, the Receiving Party shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose any Confidential Information furnished to it by the Disclosing Party pursuant to this Agreement.
10.3 Exclusions. Notwithstanding anything herein to the contrary, the obligations of confidentiality and nonuse under this ARTICLE 10 applicable to Confidential Information hereunder shall not apply to information that:
(a) at the time of disclosure, is known publicly or thereafter becomes known publicly through no fault of the Receiving Party, its Affiliates or agents;
(b) is disclosed to the Receiving Party on a non-confidential basis by a Third Party that is not subject to any confidentiality obligations to the Disclosing Party with respect to such information;
(c) was developed by the Receiving Party independently of information obtained from the Disclosing Party, as shown by the Receiving Party’s prior written records;
(d) was already known to the Receiving Party before receipt from the Disclosing Party, as shown by the Receiving Party’s prior written records; or
(e) is released with the prior written consent of the Disclosing Party (subject to the terms and conditions, if any, set out in the applicable consent).
10.4 Permitted Disclosures.
(a) Notwithstanding the foregoing, each Receiving Party may disclose the Disclosing Party’s Confidential Information (i) to the Receiving Party’s employees, consultants (including, for greater certainty, financial advisors), Affiliates, agents, contractors, licensees or sublicensees who are bound by obligations relating to confidentiality at least as restrictive of those contained herein and who have a need to know such information in connection with the Receiving Party’s performance of its obligations or practice of its rights under this Agreement, (ii) to Regulatory Authorities in connection with any Regulatory Submissions required for development of the Product or in compliance with Regulatory Requirements, or (iii) pursuant to Sections 10.5 and 10.6. Fabre-Kramer, in its capacity as Receiving Party, may disclose Confidential Information of Aytu as required under the Upstream Agreements or to any potential Acquirer or other Third Party with a bona fide interest in entering into a transaction pursuant to which Fabre-Kramer would assign its financial and related rights obligations under this Agreement, provided such potential Acquirer or Third Party is bound by confidentiality obligations consistent with this ARTICLE 10. The foregoing shall not preclude either Party from issuing a press release regarding a regulatory filing (including where not mandatory or required) or its general condition, operations and activities; provided that the issuing Party promptly notifies the other Party prior to disclosing such Confidential Information.
(b) Fabre-Kramer acknowledges and agrees that Aytu shall have the sole right to participate in and produce scientific presentations or publish scientific publications in the Territory with respect to Aytu’s pre-clinical and clinical development of the Product. Prior to any such proposed presentation or publication, Aytu shall, as soon as reasonably practicable prior to the presentation or publication date, as the case may be, provide the Fabre-Kramer with the text of the applicable presentation or publication.
10.5 Terms of Agreement. The Parties agree that the terms of this Agreement will be considered Confidential Information of both Parties. Subject to Section 10.6, no Party shall, without the prior written consent of the other Party, disclose in any manner to any Third Party the terms and conditions of this Agreement, except for terms or subject matter which has been the subject of prior public disclosure or has been mutually approved for such disclosure and except as set forth below. Each Party acknowledges that Aytu may be legally required to file this Agreement as an exhibit to its filings with the U.S. Securities and Exchange Commission. In such event, the Parties will coordinate in advance in connection with the redaction of certain provisions of this Agreement prior to such filing. In addition: (a) either Party may disclose such terms as are required to be disclosed in its publicly-filed financial statements or other public statements, pursuant to Applicable Laws, provided, such Party shall provide the other Party with a copy of the proposed text of such statements or disclosure (including any exhibits containing this Agreement) sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text (including redacted versions of this Agreement), (b) either Party shall have the further right to disclose the material financial terms of this Agreement under a confidentiality obligation no less protective than those set forth in this Agreement, to any actual or potential licensor, licensee, sublicensee, acquirer, merger partner, royalty buyer or potential providers of financing and their advisors or, in the case of Fabre-Kramer, to the owner of any Fabre-Kramer Patents Controlled by Fabre-Kramer, (c) each Party shall have the right to disclose information regarding the development or Commercialization status of Product in the Territory to the extent such disclosure is deemed reasonably necessary or desirable by such Party in order to develop or Commercialize the Product consistent with its rights (including retained rights) hereunder, and (d) Fabre-Kramer and Aytu shall have the right to disclose information regarding the development or Commercialization status of Product in the Territory to the extent such disclosure by Fabre-Kramer or Aytu, as applicable, is required by Applicable Laws.
10.6 Mandatory Disclosure.
(a) Notification and Consultation. In the event that the Receiving Party is required by applicable law, including without limitation disclosure obligations imposed under federal securities laws, or by court order or judicial or administrative process to disclose any part of the Disclosing Party’s Confidential Information (including material terms or conditions of this Agreement), the Receiving Party shall (i) promptly notify the Disclosing Party of each such requirement and identify the documents so required thereby, so that the Disclosing Party may seek or request the Receiving Party to seek an appropriate protective order, confidential treatment or other remedy and/or waive compliance by the Receiving Party with the provisions of this Agreement and (ii) consult with the Disclosing Party on the advisability of taking legally available steps to resist or narrow the scope of such requirement.
(b) Limited Disclosure. If, in the absence of such a protective order, confidential treatment request, other remedy or waiver by the Disclosing Party, the Receiving Party is nonetheless required to disclose any part of the Disclosing Party’s Confidential Information or any material terms or conditions of this Agreement, the Receiving Party may disclose such Confidential Information or material terms or conditions without liability under this Agreement, except that the Receiving Party shall furnish only that portion of the Confidential Information or material terms or conditions that is legally required.
10.7 Public Announcements. The Parties agree that each Party’s public announcement of the execution of this Agreement shall be approved by the other Party, with such approval not to be unreasonably withheld, conditioned, or delayed, and the Parties will cooperate in drafting their respective press releases therefor as soon as practicable after the signature of this Agreement by the Parties. Neither Party shall make any other statement to the public regarding the execution and/or any other aspect of the subject matter of this Agreement, except: (i) where a Party reasonably believes disclosure is required under Applicable Laws, and (ii) either Party may use the text of a statement previously approved by the other Party. This provision shall not apply to the matters covered by Sections 10.5 or 10.6.
ARTICLE 11
REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Mutual Representations and Warranties of Fabre-Kramer and Aytu. Each of Fabre-Kramer and Aytu hereby represents and warrants to the other Party as of the Effective Date as follows:
(a) It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable. It has the requisite corporate power and authority to conduct its business as presently being conducted and as proposed to be conducted by it.
(b) It has the requisite corporate power and authority to enter into this Agreement and to perform the services contemplated hereunder. All corporate actions on its part, necessary for (i) the authorization, execution, delivery and performance by it of this Agreement, and (ii) the consummation of the transactions contemplated hereby, have been duly taken.
(c) Assuming the due authorization, execution and delivery by the other Party, this Agreement is its legally valid and binding obligation, enforceable against it in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court or other tribunal before which any proceeding may be brought).
(d) There is no contractual restriction or obligation binding on either Party which would be materially contravened by execution and delivery of this Agreement or by the performance or observance of its terms.
(e) to each Party’s knowledge, no representation or warranty made by it in this Agreement, nor any statement contained in any schedule hereto furnished by it, contains any untrue statement of a material fact or omits any material fact necessary to make the statements contained herein or therein not misleading.
(f) Neither Party, nor any of its Affiliates, nor any of their respective officers, employees, agents, representatives or other Persons used in the performance of its obligations under this Agreement has been debarred or suspended under 21 U.S.C. §335(a) or (b), excluded from a federal health care program, debarred from federal contracting, or convicted of or pled nolo contendere to any felony, or to any federal or state legal violation (including misdemeanors) relating to prescription drug products or fraud (“Debarred/Excluded”).
11.2 Additional Representations and Warranties of Fabre-Kramer. Fabre-Kramer hereby further represents and warrants to Aytu as of the Effective Date as follows:
(a) Fabre-Kramer is the sole and exclusive owner of, or has valid license rights (which rights are exclusive as to Fabre-Kramer Patents) to, all of the Fabre-Kramer Intellectual Property in existence on the Effective Date, and the issued Fabre-Kramer Patents are in full force and effect and have been maintained to date. Fabre-Kramer has the right to grant the rights granted under this Agreement commencing on the Effective Date. Fabre-Kramer has not received any claims or notice of any challenges from any Third Party disputing the validity and enforceability of the issued Fabre-Kramer Patents in existence on the Effective Date.
(b) To the knowledge of Fabre-Kramer, the manufacture, use and sale of the Product in accordance with the terms of this Agreement will not infringe the intellectual property rights of any Third Party.
(c) There is no pending or, to the knowledge of Fabre-Kramer, threatened claim, interference, opposition or demand of any Third Party challenging the ownership, validity or scope of any Fabre-Kramer Intellectual Property or Fabre-Kramer Trademarks in existence as of the Effective Date.
(d) Fabre-Kramer has not been served with any action or proceeding nor, to the knowledge of Fabre-Kramer, is there any threat of an action or proceeding, in each case, that could materially and adversely affect the rights granted to Aytu herein.
(e) Fabre-Kramer has not granted to any Third Party any rights with respect to the Fabre-Kramer Trademarks in the Territory. The Fabre-Kramer Trademarks are in full force and effect, are subsisting and valid, and have been maintained to date, and are not subject to any opposition proceedings. To Fabre-Kramer’s knowledge, its use or its Affiliates’ use of the Fabre-Kramer Trademarks does not infringe, misappropriate, or otherwise violate any rights of any Person in the Territory and, to the knowledge of Fabre-Kramer, no Person is infringing, misappropriating or otherwise violating the Fabre-Kramer Trademarks in the Territory.
(f) Fabre-Kramer, or, to Fabre-Kramer’s knowledge, its contract manufacturers have not received any Form 483 observations, warning letters or other communications from a Regulatory Authority which would reasonably be expected to adversely impact the Commercialization of the Product.
(g) No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority, or any Third Party, on the part of Fabre-Kramer or any Affiliate thereof is required in connection with the execution, delivery and performance of this Agreement.
(h) No research or development of the Fabre-Kramer Intellectual Property, manufacture of Products or research leading to the inventions covered by the Fabre-Kramer Intellectual Property was supported in whole or part by funding or grants by any governmental agency or philanthropic or charitable organization.
(i) Fabre-Kramer and its Affiliates have taken all reasonable actions necessary or appropriate to preserve the confidentiality of all trade secrets, proprietary and other Confidential Information material to the Product and Fabre-Kramer Intellectual Property.
(j) The Fabre-Kramer Intellectual Property and Fabre-Kramer Trademarks are wholly owned by or licensed to Fabre-Kramer, free and clear of all mortgages, pledges, charges, liens, equities, security interests, or other encumbrances or similar agreements, or any other obligation as at the Effective Date.
(k) Neither Fabre-Kramer nor any Affiliate thereof is aware of any Third Party activities which would constitute misappropriation or infringement of any Fabre-Kramer Intellectual Property.
(l) [***] has no rights to enforce any of Fabre-Kramer’s payment obligations to [***] upon any Fabre-Kramer licensee, including Aytu.
11.3 Additional Representations and Warranties of Aytu. Aytu hereby further represents and warrants to Fabre-Kramer as of the Effective Date as follows:
(a) To Aytu’s knowledge, as of the Effective Date, neither it nor any of its Affiliates (1) is being investigated, and there are no ongoing investigations, by any Regulatory Authority or other government authority in the Territory specifically or primarily relating to the promotion of any product in the Territory, nor (2) has it or any of its Affiliates received written notice that any Regulatory Authority or other government authority in the Territory intends to conduct any such investigation. Neither Aytu nor any of its Affiliates (x) is a party or the subject of any action, suit or other proceeding that is pending as of the Effective Date or was pending or filed at any time during the [***] year period prior to the Effective Date, that alleges that it or any of its Affiliates have violated any Applicable Laws in the Territory in connection with the promotion of any product in the Territory, nor (y) has it or any of its Affiliates received any threats in writing of any such action, suit or other proceeding as of the Effective Date or at any time during the [***] year period prior to the Effective Date.
(b) There is no action, suit, proceeding or investigation pending or, to its knowledge, threatened before any court or administrative agency against Aytu or its Affiliates which could, if there were an unfavorable decision, directly or indirectly, reasonably be expected to materially adversely affect its ability to perform its obligations hereunder.
11.4 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
11.5 Covenants of the Parties.
(a) Each Party will at all times during the Term comply with all Applicable Laws in performing its obligations under this Agreement.
(b) Each Party shall promptly notify the other Party if it becomes aware that it, any of its Affiliates, or any officer, employee, agent, representative or other Person who is performing any activities under this Agreement is or becomes Debarred/Excluded.
11.6 Covenants of Aytu.
(a) Aytu has adopted and will at all times during the Term maintain a corporate compliance program that is intended to assist each Aytu to be in compliance with Applicable Laws, standards and guidelines relevant to its business, addressing: (1) label Promotion; (2) fraud and abuse; (3) a code of conduct and other applicable policies and procedures; (4) training on the code of conduct, policies and procedures; (5) an auditing and monitoring function, and (6) designation of a compliance officer.
(b) Following delivery to Aytu, Aytu shall not cause or permit the Products to be adulterated or misbranded within the meaning of the FD&C Act.
(c) Aytu shall not transfer, assign, divest, encumber or otherwise dispose of, its rights to the Product NDA or Regulatory Submissions during the Term unless such action is in connection with the acquisition of Aytu or the sale of all or substantially all of the assets of Aytu that is permitted under Section 14.3 and the acquiring Third Party assumes all of Aytu’s obligations under this Agreement.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification by Aytu. Subject to Sections 12.3 and 12.4, Aytu shall indemnify, defend and hold Fabre-Kramer, its Affiliates, and their respective directors, officers, employees consultants, contractors, licensees, sublicensees and agents (collectively, the “Fabre-Kramer Indemnitees”) harmless from and against any and all claims, suits, proceedings or causes of action (including, without limitation, in connection with any claim of property damage, bodily injury or death) (“Claims”) brought by a Third Party against such Fabre-Kramer Indemnitee, including any damages or other amounts payable to such Third Party, as well as any reasonable attorneys’ fees and costs of litigation incurred as to any such Claim until the indemnifying Party has acknowledged that it will provide indemnification hereunder with respect to such Claim as provided below (collectively, “Damages”), in each case resulting from or based on: (a) any Promotion, sale, use, importation, storage, handling, distribution or offer for sale or sale of the Product by Aytu or any of its Affiliates, licensees or sublicensees; (b) Aytu’s breach of this Agreement; (c) the gross negligence or willful misconduct of, or violation of Applicable Law by Aytu, its Affiliates, licensees or sublicensees, or their respective employees, contractors or agents in the performance of this Agreement; and/or (d) breach of a contractual or fiduciary obligation owed by Aytu to a Third Party. The foregoing indemnity obligation shall not apply to the extent such Claims or Damages result from any matter for which Fabre-Kramer is required to indemnify Aytu pursuant to this Agreement.
12.2 Indemnification by Fabre-Kramer. Subject to Sections 12.3 and 12.4, Fabre-Kramer shall indemnify, defend and hold Aytu, its Affiliates, and their respective directors, officers, employees consultants, contractors, licensees, sublicensees and agents (collectively, the “Aytu Indemnitees”) harmless from and against any and all Claims brought by a Third Party against such Aytu Indemnitee, including any Damages resulting therefrom, in each case to the extent resulting from or based on: (a) any Commercialization or development work (including pre-clinical, clinical, manufacturing, or quality-related) done by Fabre-Kramer for the Product; (b) Fabre-Kramer’s breach of this Agreement or (to the extent such breach does not result from any breach by Aytu of its obligations under this Agreement), the Existing Supply Agreements, the [***] License Agreement or the [***] Agreement; (c) the gross negligence or willful misconduct of, or violation of Applicable Law by, Fabre-Kramer, its Affiliates, licensees or sublicensees, or their respective employees, contractors or agents in the performance of this Agreement; (d) breach of a contractual or fiduciary obligation owed by Fabre-Kramer to a Third Party; or (e) any defect in the Product caused by Fabre-Kramer while the Product was in Fabre-Kramer’s physical possession. The foregoing indemnity obligation shall not apply to any Damages to the extent such Damages result from any matter for which Aytu is required to indemnify Fabre-Kramer pursuant to this Agreement.
12.3 Indemnification Procedures. A Party seeking indemnification under Section 12.1 or 12.2 hereof (the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) in writing of any claim, lawsuit or other action in respect of which the Indemnitee, its Affiliates, or any of their respective directors, officers, employees and agents intend to claim such indemnification. The Indemnitee shall permit, and shall cause its Affiliates and their respective directors, officers, employees and agents to permit the Indemnitor to have complete control of such defense (except as set forth below) so long as it promptly assumes the defense and prosecutes the defense with appropriate diligence and care. The Party controlling the defense hereunder (the “Defending Party”) shall have the authority, at its discretion, to settle any such claim, lawsuit or other action only with the prior written consent of the Party who is not controlling the defense (the “Non-Defending Party”); provided, however, that such consent shall not be unreasonably withheld, delayed or conditioned so long as such settlement does not adversely affect the Non-Defending Party’s rights hereunder or impose any obligations on the Non-Defending Party in addition to those set forth herein. The Defending Party and the Non- Defending Party, and their respective Affiliates, and their respective directors, officers, employees and agents shall cooperate fully with each other and their respective legal representatives in the investigation and defense of any claim, lawsuit or other action covered by this indemnification. The Defending Party shall keep the Non-Defending Party reasonably informed of the progress of the action and shall consider the comments and observations of the Non-Defending Party timely given in the course of the proceedings. If the Indemnitor is the Defending Party, the Indemnitee shall have the right, but not the obligation, to be represented by counsel of its own selection and expense. Notwithstanding the foregoing, the Indemnitee may be represented by separate counsel at the expense of the Indemnitor if a conflict of interest exists between the interests of the Indemnitor and Indemnitee so that a single counsel representing Indemnitor cannot adequately defend the rights of the Indemnitee.
12.4 Survival of Indemnification Obligations. The provisions of this ARTICLE 12 shall survive the termination or expiration of this Agreement.
12.5 Insurance. Each Party shall maintain insurance with creditworthy insurance companies in accordance with Applicable Law against such risks and in such amounts as are usually maintained or insured against by other companies of established repute engaged in the same or a similar business. Throughout the Term and (1) for a period of [***] months thereafter, or (2) until the expiry date of the last lot of the Product delivered to a Third Party under this Agreement, whichever is later, each Party shall maintain in full force and effect, at its own cost and expense, comprehensive general liability insurance, including product liability and contractual liability insurance, of not less than [***] in the aggregate, naming the other Party and its Affiliates as additional insureds thereon, and providing that the insurer shall give such Party at least [***] days prior written notice of cancellation in coverage. Such Party’s insurance coverage shall be provided by an insurer or insurers (having a minimum AM Best rating of A or otherwise acceptable to the other Party, in its sole discretion) licensed to do business in the Territory and will be primary and non-contributing to any liability insurance carried by the other Party (only insofar as the coverage relates to claims arising from each Party’s operations). Fabre-Kramer shall deliver to Aytu, promptly upon request, a certificate of insurance evidencing the foregoing. Aytu shall deliver to Fabre-Kramer, promptly upon request, a certificate of insurance evidencing the foregoing.
ARTICLE 13
TERM AND TERMINATION
13.1 Term. The term of this Agreement (the “Term”) shall commence on the Effective Date and shall expire [***], unless earlier terminated in accordance with Section 13.2.
13.2 Termination.
(a) Mutual Agreement. This Agreement may be terminated in its entirety at any time upon mutual written agreement between the Parties.
(b) Material Breach. Either Party may terminate this Agreement at any time upon written notice to the other Party if the other Party is in material default or breach of this Agreement and such material default or breach is not cured within (1) [***] days after written notice thereof is delivered to the defaulting or breaching Party, or (2) in the case of a breach that cannot be cured within [***] days, within a reasonable period not exceeding [***] days after written notice thereof is delivered to the defaulting or breaching Party, so long as the breaching Party is making a good faith effort to cure such default. Termination shall not be the sole remedy for material breach of this Agreement, and a Party may choose to continue to perform hereunder and in response to any material breach may bring a claim for damages ([***]) and other available remedies under Section 14.11 and injunctive relief under Section 14.12, and bringing such a claim in good faith shall not constitute a breach of this Agreement.
(c) Insolvency. If either Party shall (1) become bankrupt or insolvent, (2) file for a petition therefor, (3) make an assignment for the benefit of creditors, or (4) have a receiver appointed for its assets, which appointment shall not be vacated within [***] days after the filing, then the other Party shall be entitled to terminate this Agreement forthwith by written notice to such Party.
(d) Safety Reasons. Either Party may terminate this Agreement at any time upon written notice to the other Party if (1) either Party withdraws the Product from the market in the Territory for a safety reason, or (2) (i) the FDA materially restricts the indications for the Product or (ii) federal or state pricing controls are imposed that, in either case, would result in obvious and substantial loss of sales for the Product.
(e) Challenge. If at any time during the Term, Aytu brings a proceeding or action challenging the validity, scope, enforceability or ownership of any of the Fabre-Kramer Patents or Fabre-Kramer Trademarks licensed to Aytu under this Agreement, Fabre-Kramer shall have, at its sole option, the right to terminate this Agreement upon notice to Aytu, such termination to be effective only if Aytu does not withdraw such challenge within [***] days after such notice.
13.3 Effects of Termination.
(a) Termination of Rights. Upon expiration or termination of this Agreement for any reason, all licenses granted to Aytu under this Agreement shall immediately terminate, except as necessary to permit Aytu to sell off existing inventory under Section 13.3(b), and, except as set forth in this Section 13.3, the rights and obligations of the Parties under this Agreement shall terminate as of the date of such termination or expiration and Aytu shall make any payments to Fabre-Kramer required to be made on account of activities that occurred prior to the termination or expiration of the Agreement; provided, that any payments contemplated to survive termination in accordance with Section 13.3(b) shall remain payable.
(b) Sell Off of Product. Upon expiration of the Term or termination of this Agreement pursuant to Section 13.2, the rights granted to Aytu under this Agreement shall survive such expiration or termination only such that Aytu shall have the right to sell off Product then in Aytu’s inventory or on order on the date on which the applicable notice of termination is provided or this Agreement otherwise expires; provided that (i) such right shall continue solely for a period of [***] months after such date of expiration or termination and (ii) Aytu pays to Fabre-Kramer any payments due in accordance with ARTICLE 7. Any other license provided for by Fabre-Kramer to Aytu in this Agreement shall, upon any such termination or expiration, immediately and automatically terminate.
(c) Transfer of Rights to Product NDA. Promptly after the earlier of (i) the date [***] months after the expiration of the Term or termination of this Agreement pursuant to Section 13.2 or (ii) completion of the sale of any remaining inventory in accordance with Section 13.3(b), Aytu shall transfer any of its rights to the Product NDA and all Regulatory Submissions to Fabre-Kramer. Each Party shall provide the FDA with any documents necessary to effectuate the forgoing transfer.
(d) Trademark and Promotional Material Assignments. Promptly following any expiration of the Term or termination of this Agreement pursuant to Section 13.2, and complying with Applicable Laws, Aytu shall assign and hereby does assign to Fabre-Kramer all trademarks and Promotional Material used in the Commercialization of the Product in the Territory (to the extent not already owned by Fabre-Kramer), and Fabre-Kramer agrees to reimburse Aytu for reasonable costs associated with the production or transfer of such materials. On the reasonable request of Fabre-Kramer, Aytu shall cooperate, in all reasonable ways, in connection with the transfer, at Fabre-Kramer’s sole expense.
(e) Return of Confidential Information. Upon expiration or termination of this Agreement in its entirety, unless otherwise directed by Fabre-Kramer, Aytu shall promptly return all Fabre-Kramer Confidential Information to Fabre-Kramer, except for a single copy or sample to be retained for documentation purposes only.
(f) Accrued Obligations. Except as set forth herein, any termination or expiration of this Agreement shall not relieve either Party of any obligation which has accrued prior to the effective date of such termination or expiration, which obligations shall remain in full force and effect for the period provided therein.
(g) Survival. The payment obligations in Sections 7.1 through 7.4 (to the extent accrued and payable), Section 7.7 (for the time period set forth therein), Section 7.8, Section 8.2, Section 9.1, Section 9.2, Section 13.3, ARTICLE 10, ARTICLE 12 and ARTICLE 14 shall survive [***].
13.4 Remedies. Termination of this Agreement in accordance with and fulfillment of all obligations set forth in this ARTICLE 13 shall not affect any other rights or remedies that may be available to a Party in law or equity, all remedies being cumulative and not exclusive.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted to be given to any Party shall be in writing and shall be deemed given only (a) when delivered to the Party personally, (b) [***] days after sent to the Party by registered mail, return receipt requested, postage prepaid, (c) the second Business Day after sent by a nationally recognized courier service guaranteeing next-day or second-day delivery, charges prepaid, in each case addressed to the Party at its address set forth below, or (d) when transmitted as a PDF attachment to an e-mail (with response e-mail confirming receipt) and followed with a copy by first class certified or registered mail, postage prepaid, return receipt requested, or at such other address as such Party may from time to time specify by notice given in the manner provided herein to the Party entitled to receive notice hereunder:
For Fabre-Kramer:
Fabre Kramer Holdings, Inc.
5847 San Felipe, Suite 2000
Houston, Texas 77057
Attn: Executive Vice President
With a copy (which shall not constitute notice) to:
[***]
For Aytu:
Aytu BioPharma, Inc.
Attn: Chief Executive Officer
7900 East Union Avenue, Suite 920
Denver, Colorado 80237
With a copy (which shall not constitute notice) to:
[***]
14.2 Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and no oral or written statement may be used to interpret or vary the meaning of the terms and conditions hereof. This Agreement supersedes any prior or contemporaneous agreements and understandings, whether written or oral, between the Parties with respect to the subject matter hereof, including the non-binding term sheet for exclusive agreement between Fabre-Kramer and Aytu dated [***], and the confidentiality agreement between Fabre-Kramer and Aytu dated [***] (together, the “Existing Agreements”). All information disclosed by Fabre-Kramer pursuant to the Existing Agreements shall be deemed Fabre-Kramer Confidential Information for the purposes of this Agreement, and all information disclosed by Aytu pursuant to the Existing Agreements shall be deemed Aytu Confidential Information for the purposes of this Agreement.
14.3 Assignment.
(a) In General. Neither Party may assign or otherwise transfer this Agreement without the prior written consent of the other Party; provided that either Party may assign this Agreement without the consent of the other Party to any Affiliate or in connection with the acquisition of such Party or the sale of all or substantially all of the assets of such Party. Any assignment of this Agreement in violation of this Section 14.3 shall be null and void. Assignment of this Agreement by either Party shall not relieve the assignor of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
(b) Right of First Negotiation. If Fabre-Kramer determines it will explore sale or other disposition of Fabre-Kramer Intellectual Property licensed to Aytu for the Product in the Territory during the period in which the ROFN in Section 8.3 remains in effect, any such sale or other disposition would be subject to the ROFN in Section 8.3.
14.4 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to minimize the effect of and overcome or remove the cause or condition causing such force majeure. For purposes of this Agreement, force majeure shall include conditions beyond the control of the Parties, including, without limitation, an act of God, war, civil commotion, terrorist act, labor strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). Notwithstanding the foregoing, a Party shall not be excused from making payments owed hereunder because of a force majeure affecting such Party.
14.5 Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
14.6 Independent Contractor. Each Party shall be acting as an independent contractor in performing under this Agreement and shall not be considered or deemed to be an agent, employee, joint venturer or partner of the other Party.
14.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party.
14.8 No Third Party Beneficiaries. Except as provided in ARTICLE 12 in respect to Fabre-Kramer Indemnitees and Aytu Indemnitees, nothing in this Agreement, either express or implied, is intended to or shall confer upon any Third Party any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
14.9 Amendment. This Agreement may not be amended or modified except by an instrument in writing signed by authorized representatives of Aytu and Fabre-Kramer.
14.10 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without giving effect to principles of conflicts of laws that would require the application of any other law) and the federal laws of the U.S., in each case without reference to choice of law rules. The Parties agree that any action arising out of this Agreement shall be commenced in the federal or state courts of Delaware, as appropriate.
14.11 Dispute Escalation. In the event of any dispute under this Agreement, the Parties shall refer such dispute to the Applicable Senior Officers for attempted resolution by good faith negotiations within [***] days after such referral is made. If the Applicable Senior Officers are unable to resolve the dispute within the time allotted, either Party may propose mediation or arbitration for resolution.
14.12 Injunctive Relief. Each Party shall be entitled to seek injunctive relief to enforce the respective covenants and agreements of the Parties in this Agreement.
14.13 Nature of Licenses. All rights and licenses granted pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of 11 U.S.C. § 365(n), licenses of rights to “intellectual property” as defined under 11 U.S.C. § 101(35A). The Parties agree that each Party, in its capacity as a licensee of the applicable rights under this Agreement, shall retain and may fully exercise all of its rights, including any right to enforce any exclusivity provision of this Agreement, remedies, and elections under Bankruptcy Laws. To the fullest extent permitted by Applicable Law, the Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the Bankruptcy Laws, the other Party shall be entitled to all applicable rights under 11 U.S.C. § 365(n), including copies and access to, as appropriate, any such intellectual property and all embodiments of such intellectual property upon written request therefor by a Party to the other Party, and such, if not already in its possession, shall be promptly delivered to such requesting Party.
14.14 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.
14.15 Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER ANY CAUSE OF ACTION AND ARISING IN ANY WAY OUT OF THIS AGREEMENT. THE FOREGOING LIMITATION WILL NOT LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS TO THE OTHER PARTY IN RESPECT OF ANY THIRD PARTY CLAIM UNDER ARTICLE 12 OR OF EITHER PARTY’s OBLIGATIONS UNDER ARTICLE 10.
14.16 No Waiver. The failure of either Party to enforce at any time for any period the provisions of or any rights deriving from this Agreement shall not be construed to be a waiver of such provisions or rights or the right of such Party thereafter to enforce such provisions.
14.17 Counterparts. This Agreement may be executed in one or more counterparts, and by the respective Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
14.18 Further Assurances. Each Party shall perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Agreement.
[SIGNATURES FOLLOW ON NEXT PAGE]
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above by their respective duly authorized officers.
| Fabre-Kramer Holdings, Inc. | Aytu BioPharma, Inc. | ||||
| By: | /s/ Stephen J. Kramer, M.D. | By: | /s/ Joshua R. Disbrow | ||
| Name: | Stephen J. Kramer, M.D. | Name: | Joshua R. Disbrow | ||
| Title: | Chief Executive Officer | Title: | Chief Executive Officer | ||
Exhibit A
[***]
Exhibit 21.1
SUBSIDIARIES OF AYTU BIOPHARMA, INC.
|
Name of Subsidiary |
State Jurisdiction |
|
|
1. |
Aytu Therapeutics LLC |
Delaware |
|
2. |
Cherry Creek Therapeutics, Inc. |
Delaware |
|
3. |
Neos Therapeutics, Inc. |
Delaware |
|
4. |
Neos Therapeutics Brands, LLC |
Delaware |
|
5. |
Neos Therapeutics, LP |
Texas |
|
6. |
PharmaFab Texas, LLC |
Texas |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated September 23, 2025, with respect to the consolidated financial statements included in the Annual Report of Aytu BioPharma, Inc. on Form 10-K for the year ended June 30, 2025. We consent to the incorporation by reference of said report in the Registration Statements of Aytu BioPharma, Inc. on Forms S-1 (File Nos. 333-271556, 333-287728 and 333-287825), on Forms S-3 (File Nos. 333-235548, 333-236599, 333-239010, 333-259862, 333-265479 and 333-282347) and on Forms S-8 (File Nos. 333-205462, 333-236598, 333-255325 and 333-272897).
/s/ GRANT THORNTON LLP
Denver, Colorado
Exhibit 31.1
AYTU BIOPHARMA, INC.
Certification by Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Joshua R. Disbrow, certify that:
|
1. |
I have reviewed this report on Form 10-K for the year ended June 30, 2025, of Aytu BioPharma, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: September 23, 2025 |
||
|
By: |
/s/ Joshua R. Disbrow |
|
|
Joshua R. Disbrow |
||
|
Chief Executive Officer |
||
|
(Principal Executive Officer) |
Exhibit 31.2
AYTU BIOPHARMA, INC.
Certification by Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Ryan J. Selhorn, certify that:
|
1. |
I have reviewed this report on Form 10-K for the year ended June 30, 2025, of Aytu BioPharma, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: September 23, 2025 |
||
|
By: |
/s/ Ryan J. Selhorn |
|
|
Ryan J. Selhorn |
||
|
Chief Financial Officer |
||
|
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I Joshua R. Disbrow, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that, to my knowledge, the Annual Report on Form 10‑K of Aytu BioPharma, Inc. for the fiscal year ended June 30, 2025, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10‑K fairly presents, in all material respects, the financial condition and results of operations of Aytu BioPharma, Inc.
|
Date: September 23, 2025 |
||
|
By: |
/s/ Joshua R. Disbrow |
|
|
Joshua R. Disbrow |
||
|
Chief Executive Officer |
||
|
(Principal Executive Officer) |
I Ryan J. Selhorn, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that, to my knowledge, the Annual Report on Form 10‑K of Aytu BioPharma, Inc. for the fiscal year ended June 30, 2025, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10‑K fairly presents, in all material respects, the financial condition and results of operations of Aytu BioPharma, Inc.
|
Date: September 23, 2025 |
||
|
By: |
/s/ Ryan J. Selhorn |
|
|
Ryan J. Selhorn |
||
|
Chief Financial Officer |
||
|
(Principal Financial and Accounting Officer) |