Greetings. Welcome to the Aytu BioPharma Analyst and Investor conference call EXXUA Opportunity and Commercialization Plan. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. The confirmation tone will indicate your line is in the question queue if you have a question during the Q&A portion of the call by pressing star one. You may press star two if you would like to remove your question from the queue. Please note this conference is being recorded. I will now turn the conference over to your host, Robert Blum, with Lytham Partners. You may begin.
Thank you very much, John. Good afternoon, and thank everyone for joining the Aytu BioPharma EXXUA Opportunity and Commercialization Plan Analyst and Investor conference call. Aytu BioPharma recently announced an agreement with Fabre-Kramer Pharmaceuticals to exclusively commercialize EXXUA in the United States. The purpose of this call is to provide investors and analysts an overview of the EXXUA opportunity, to describe the key terms of the agreement, and provide a high-level overview of the commercialization plan for EXXUA planned for later this calendar year. Joining us on today's call is Aytu's Chief Executive Officer, Josh Disbrow, and Ryan Selhorn, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we'll open the call for a question-and-answer session. I'd like to remind everyone that today's call is being recorded.
A replay of today's call will be available by using the telephone numbers and conference ID provided in the press release issued earlier on June 9th, 2025, or by utilizing the link on the Company's website under Events and Presentations. Finally, I'd also like to call to your attention the customary safe harbor disclosure regarding forward-looking information. The conference call today will contain certain forward-looking statements, including the statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of Aytu BioPharma. Although Management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay.
Actual results may differ materially as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the SEC. Aytu undertakes no obligation to update or revise any of these forward-looking statements. With that said, let me turn the call over to Josh Disbrow, Chief Executive Officer of Aytu BioPharma. Josh, please proceed.
Thank you, Robert, and thank you to everyone joining us on today's call. This is an exciting day and an incredibly exciting time in the history of Aytu BioPharma. It's exciting because of what we believe is a transformational opportunity. With EXXUA, Aytu is bringing to market a novel first-in-class treatment for Major Depressive Disorder, or MDD. It's also exciting because of the strong support and enthusiasm our existing and new shareholders have shown as we pursue this unique opportunity in the over $22 billion U.S. depression market. Understanding that we just closed an upsized at-the-market public offering with the full exercise of the overallotment, I'd like to extend our sincere thanks to Stone Pine Capital Management and the other healthcare-focused institutional investors that participated in that financing and their demonstrated enthusiasm for what we're building here at Aytu and the EXXUA opportunity.
I'd also like to thank our banking partners, Lake Street Capital Markets, our Sole Book Runner, Maxim Group, our Lead Manager, and Ascendiant Capital Markets, our Financial Advisor for the successful financing. The primary purpose of today's call is, as Robert said, to highlight the EXXUA opportunity in some detail, as well as provide listeners with the key deal terms and preview an early glimpse of our Commercial plans as we progress EXXUA towards commercialization. Before talking specifically about EXXUA, I think it's important to define and describe the current Major Depressive Disorder market here in the U.S. and highlight some of the current treatment challenges facing prescribers and patients today with the currently available therapies. First, the MDD market is very large, accounting for over 345 million prescriptions annually in the U.S. That's more than enough for one antidepressant prescription to be written for every single American each year.
It's an absolutely enormous market. To put the size of the MDD market into context, consider that the U.S. ADHD stimulant market registers about 95 million prescriptions annually, so the depression market is almost four-fold plus larger. Also, WAC, wholesale acquisition costs, which is the manufacturer's list price for a drug to wholesalers or direct purchasers before any discounts, rebates, or other price concessions for antidepressants, exceeds $22 billion annually, and there are more than 21 million patients in the U.S. diagnosed with depression. Further, the depression market continues to grow as there are increasingly greater levels of awareness and acceptance of mental health diseases in the U.S. The market only stands to grow from here. Selective Serotonin Reuptake Inhibitors, or SSRIs, and Serotonin Norepinephrine Reuptake Inhibitors, or SNRIs, are the standard of care in MDD and the two most widely prescribed classes of antidepressants.
These two classes alone represent approximately 220 million TRXs, or over 60% of all antidepressants prescribed in America. While generally effective for some patients in treating MDD, these agents are often problematic from a side effect perspective. Both SSRIs and SNRIs, and the vast majority of all other antidepressants for that matter, carry risks of sexual dysfunction and weight gain. These adverse events commonly lead to patient dissatisfaction with treatment and also, fairly commonly, discontinuation of treatment. These side effects are many times untenable for patients already struggling with their mental health. SSRIs and SNRIs, by their very nature, are broadly selective, and by that I mean they broadly inhibit the reuptake of serotonin and, in the case of SNRIs, norepinephrine neurotransmitters. This often results in off-target effects and therefore leads to side effects. This, in turn, often leads to patients seeking out and switching to alternative treatments.
Unlike the ADHD market, there is active patient switching in the MDD market. Thus, we believe a significant market need exists for targeted and specific therapies minimizing off-target effects and adverse events such as sexual side effects and weight gain while effectively also treating the symptoms of MDD. With that in mind, we are quite excited about EXXUA. First, let me give you some background on how the deal came to be. We have secured this exclusive U.S. commercialization agreement from our partner, Fabre-Kramer Pharmaceuticals. Fabre-Kramer is a privately held pharmaceutical company- based here in the U.S. that was formed to identify, develop, and commercialize psychotropic drugs with significant market potential. The Fabre-Kramer principals have over 40 years of experience in the clinical development of psychotropic drugs and have conducted pivotal studies of many drugs approved by the FDA in psychiatry.
They have conducted studies in depression, anxiety, schizophrenia, bipolar disorder, social phobia, and sleep disorders. They also have over 40 years of experience with inpatient and outpatient psychiatry. They have intimate knowledge of the treatment of CNS disorders and have analyzed many potential psychotropic compounds from the standpoint of receptor activity, efficacy, tolerability, side effect-to-benefit ratio, formulation, ease of administration, cost, and production. We've gotten to know the principals at Fabre-Kramer quite well over the last many months, and we've been consistently impressed with the rigor they've employed over the many years of developing EXXUA, both through partnering initiatives and through their direct development efforts.
While the process to get EXXUA over the finish line and ultimately FDA-approved was lengthy, the tenacity and focus they maintained over the years for the purpose of getting this novel therapy into the hands of MDD patients paid off, and we could not be more excited to lock arms with the Fabre-Kramer team to commercialize this first-in-class treatment. We express our sincere thanks to Dr. Steve Kramer, Ed Koehler, and the entire Fabre-Kramer team for entrusting Aytu with this important asset, and we look forward to working closely with them throughout the life of EXXUA as we bring it to market here in the U.S. Now, let me spend a little time describing EXXUA in terms of its profile, mechanism of action, clinical trial results, and key areas of differentiation. First, of course, EXXUA is indicated for the treatment of Major Depressive Disorder in adults.
It was approved by the FDA in late 2023, and due to some contractual considerations Fabre-Kramer was working through with an upstream party, there was a bit of a lag between approval and the execution of our agreement. Negotiating our exclusive agreement also took some time given the required diligence we conducted and the back and forth between the negotiating parties that's inherent to these deals. To say we're excited to have gotten this deal done with Fabre-Kramer is a huge understatement. We couldn't be happier to get this opportunity and to now be working with the Fabre-Kramer team to bring EXXUA to the U.S. market. EXXUA is truly unique in that it represents a new class of MDD treatments. To be clear, it is not an SSRI, nor is it an SNRI. It does not inhibit neurotransmitter uptake.
It is in a new class of MDD treatments called 5-HT1A receptor agonists. It's a partial agonist of the 5-HT1A receptor, and it's long-acting. By upregulating the 5-HT1A receptor, EXXUA uniquely targets a receptor chiefly implicated in mood, notably depression and anxiety. Because EXXUA targets this specific receptor so selectively, it presents a new, more targeted approach and, as such, may benefit patients who haven't responded to traditional antidepressants like SSRIs. Further to the fact that EXXUA is highly targeted, off-target effects and side effects typically seen with SSRIs and SNRIs are generally not seen with EXXUA. Specifically, EXXUA does not carry a risk of sexual dysfunction and doesn't cause weight changes when compared to placebo.
As it relates specifically to sexual function, not only does it not appear to cause sexual-related side effects such as low libido, ejaculatory delay, etc., recently published work actually shows EXXUA improves sexual function and desire in MDD patients. While that is not a claim we can specifically make with clinicians, that data is peer-reviewed and published and now in the public domain. As I mentioned the data around sexual function, I should note that the nature of EXXUA's Orange Book-listed patent involves sexual function, which makes it particularly novel, especially for an antidepressant. Speaking of IP, we expect EXXUA's IP will extend to late 2030 or early 2031 through a combination of patent term extension currently being worked through along with new chemical entity designation granted by the FDA.
As we think about it, this is a nice runway from a patent/exclusivity perspective, or as I like to say, it's an eternity for Aytu given where we sit today. We'll, of course, look for ways to extend this IP, but for now, the end of 2030 to the beginning of 2031 is an adequate runway that we feel very good about. Back to some clinical aspects of EXXUA. Importantly, EXXUA has been studied over many years in over 5,000 patients, so the data supporting this product are robust and compelling. Of course, two pivotal studies were completed to gain FDA approval, but there are no less than 12 adequate and well-controlled studies completed, with the lion's share of those demonstrating strong efficacy in MDD, utilizing the validated and accepted tools such as the Hamilton D17, the MADRS, Clinical Global Impression, and others.
The data consistently point to efficacy in studies that were primarily made of moderately depressed patients. Well over half of the primary studies were, in fact, done with moderately depressed patients. Along with demonstrating efficacy when looking at the Hamilton Depression Rating Scale in aggregate, a key element is item 10 that specifically addresses MDD patients' anxiety. Impressively, at every time point throughout the eight-week study period, EXXUA demonstrated statistically significant improvement on item 10 psychic anxiety measures. This is notable for an antidepressant that potentially hits both elements, depression and anxiety. This one-two punch is potentially important as a key product differentiator for EXXUA, as 50%-75% of MDD patients meet the criteria, the DSM-5 criteria that is, for anxious depression. EXXUA may therefore help a significant portion of comorbid patients.
As you can appreciate, there are reams and reams of data across the 5,000+ patient study, so we continue to evaluate all relevant data in preparing for product positioning in this large and growing category. The more we learn and uncover, the more excited we become about EXXUA's prospects. As mentioned, the MDD market is absolutely massive, with over 345 million prescriptions written in the U.S. annually. While the category is largely genericized, there are numerous branded products that have entered relatively recently. I say that to say that this clearly demonstrates the ongoing unmet need in this category, as evidenced by the uptake of newer antidepressants like TRINTELLIX, AUVELITY, SPRAVATO, and others. These products have received strong physician uptake despite many of the same side effects older products present, particularly when looking at TRINTELLIX and AUVELITY.
Both products carry warnings around sexual dysfunction, among others, and so we view EXXUA as having a potentially favorable profile compared to those given its unique MOA and high selectivity. Further, as it relates to AUVELITY, it is dosed twice daily, so EXXUA's once-daily dosing may offer a benefit in terms of patient convenience and compliance. TRINTELLIX, a product that generated over 2 million prescriptions in calendar 2024, has an exceedingly high rate of sexual side effects, 29%-34% at higher doses in men and women, respectively. Frankly, even if EXXUA was only to get the recipients of TRINTELLIX failures or TRINTELLIX dissatisfied patients, that would make EXXUA a significant success for Aytu. Obviously, we do not plan to and will not just target these two products' patient failures, as there are many millions more prescriptions to pull patients from across the category.
The MDD market is unlike the ADHD market in multiple ways, not the least of which is, of course, the enormous size of the market. As mentioned, there are over 345 million prescriptions written annually in the U.S. for antidepressants. Literally, again, enough written such that every American could have a prescription with still some left over. It's also distinct in that there is significant switching by patients, again, due to considerations like efficacy and some of these side effects. The MDD population is highly heterogeneous, so it makes sense that there simply is not a one-size-fits-all approach in MDD. As a result, new medications consistently find their way into treatment algorithms. Another unique and frankly very favorable aspect of the MDD market relates to pricing. Branded medications in the MDD category and in adjacent therapeutic categories like schizophrenia are priced quite high.
Newer medications have, again, wholesale acquisition costs well over $1,000 per 30-day supply. Several of the most recent brand launches are even higher than that. Further, the net selling price for these brands is materially higher too. Several notable brands, again, including AUVELITY by Axsome Therapeutics, have gross to nets above 40% and even approaching 50%. Thus, net pricing per R per month is solidly north of $500 for several of the leading brands. To complement that favorable pricing, reimbursement in the MDD category is also quite good. As MDD is among a handful of protected therapeutic classes, government payers are mandated to cover antidepressants. Commercial payers have higher rates of coverage too, and these brands are materially better covered than ADHD brands and often with lower rebates.
With EXXUA, given the market landscape around gross and net pricing, reimbursement, and the nature of this protected class, we expect pricing to be in line with or potentially priced at a premium to the most recently launched psychiatric brands. We believe that with a new chemical entity that has a novel MOA and a distinct clinical profile, premium pricing may be justified. That said, we've not dialed in pricing and will reserve finalizing pricing until we get closer to launch. We conducted diligence on the EXXUA opportunity as you would expect, and of course, Fabre-Kramer conducted extensive diligence and market research over many years throughout the product's development. What we both found is a high level of interest and enthusiasm for a product like EXXUA due to its unique profile.
A couple of notes from interviewed psychiatrists and a quote from the noted academic psychiatrist thought leader Steve Stahl help illuminate the potential interest. Two separate interviewed psychiatrists had these reactions to EXXUA during market research. One psychiatrist noted, "The side effect data is really encouraging and exciting, and I think probably in patients who are particularly concerned for weight gain or sexual dysfunction and are not good candidates for Wellbutrin since that would maybe be the alternative that we would think about." Another simply noted, "I do think novel medications that affect the serotonin pathways are certainly of interest." Dr. Stahl shared a similar thought, "EXXUA is the first truly selective agonist of the serotonin 1A receptor that has been consistently linked to mediation of mood disorders and suicide risk.
It is an important addition to the armamentarium to treat depression. I could go on, but hopefully this gives you a good sampling of feedback and enthusiasm from the physician community for something new like EXXUA. There is a real science around receptor pharmacology within psychiatry and a distinct interest from psychiatrists about novel approaches to regulating different receptors. In a conversation with the KOL just last week, he asserted again that this is a highly heterogeneous patient base where you need unique approaches like targeting the 5-HT1A receptor. Again, it simply is not a one-size-fits-all approach with depression, particularly when you are talking about patients that have failed first or second-line therapies. The more we engage with physicians and share EXXUA with them, the more excited we have gotten about this product. Now a little bit about our launch plans and timing of launch.
In short, we're going to do all we can to launch EXXUA quickly, but we need to do it right and in an efficient and targeted way. We will, of course, engage our existing psychiatry-centric 40-plus person salesforce and make EXXUA their promotional priority going forward. As it relates to our sales team, I think it is important to note that we already overlap with almost 70% of branded MDD categories in our current geographic footprint. Thus, this is really a plug-and-play opportunity that enables us to efficiently launch more or less with our current footprint, meaning we do not intend to significantly expand the sales team, at least not initially. We'll be smart about how we do expand, and we'll do this as EXXUA gets traction efficiently and where and when that makes sense.
Outside of the sales effort, we plan to implement a comprehensive promotional program whereby we establish a clear positioning for EXXUA based on its attributes, the competitive landscape, and ultimately where we believe we can win with the product. We'll complement our commercial approach with an efficient medical and scientific affairs program where we emphasize EXXUA's clinical profile, engage with key opinion leaders, and establish a publication plan to ensure the relevant data are being communicated and peer-reviewed in KOL-led scientific engagements. We'll be selective and smart about medical conferences to ensure we're at the right ones and being efficient while there. We've done this in the past and find surgically precise engagements in the form of advisory panels, and targeted engagements are highly effective. Our salesforce, of course, will be one of the keys to our success.
An intense, highly accountable sales training program will be a centerpiece of what we develop in the coming months. With respect to timing, it is our hope that we can have EXXUA launch no later than the end of the calendar year. Understanding that we just announced the deal last week, we have a lot of work to do across all functional areas. However, product has been produced, so a major rate limiter like manufacturing will be less rate limiting than if we'd been starting from scratch. We'll update the launch timeline as we get closer, but again, our current thinking is that we can have the product launch by the end of calendar year and potentially sooner. From a payer and distribution perspective, we do plan to integrate EXXUA into our Aytu RxConnect access program.
We will likely, at least initially, drive distribution through our RxConnect network pharmacies. This will enable us to gain strong insights on reimbursement and specific coverage rates to help guide any contracting we do with payers. As you know, with our current products, we're able to successfully navigate the payer landscape even in a category like ADHD for which brand reimbursement is spotty at best. We will take contracting and rebating on a case-by-case basis as we do now, but our single biggest objective around reimbursement with EXXUA will be to minimize coverage barriers and to help patients successfully get on therapy. As noted earlier, the payer landscape in MDD is materially better than in ADHD, so we're anticipating higher net pricing and better overall coverage given the protected nature of the MDD class. More to follow on reimbursement as this piece unfolds.
We have several critical success factors that we must achieve in order to have a successful launch, and these are as follows. First and foremost, we will work to establish clinical value and relevant brand positioning that focuses on EXXUA's unique MOA, clinical data, and safety profile. Further, we will need to broaden EXXUA's clinical profile via peer-reviewed publications and key opinion leader engagement, as you do with any successful product launch. With this, we expect to employ an active publication and presentation approach highlighting EXXUA's sexual function and anxiety data in conjunction, of course, with the product's strong depression endpoints data and safety data over the thousands of patients studied. There is also long-term data that we will likely work to get published or presented. Additionally, we must have a well-trained and well-incentivized salesforce, and we need to deploy that salesforce against the top decile, most prolific MDD prescriber targets.
That's clear, but we also need to ensure we're aligned with brand-centric MDD prescribers who are already writing brands and doing the accompanying prior authorizations and are willing to do the work for their patients. Importantly, we will have a strong focus on psychiatrists, as they are the most prolific writers of branded MDD treatments, along, of course, with their NP and PA extender associates. Focus will be absolutely key. We will also employ strategic payer contracting when and where needed, as we do now, but we'll more actively engage on the government payer side given the high level of coverage across Medicaid and Medicare for MDD therapies. Again, we'll integrate EXXUA within the Aytu RxConnect patient access program where we expect to ensure psychiatrists and their patients are getting a best-in-class access experience for EXXUA as they currently get with their ADHD brands.
Another critical success factor for us is, to the extent we're able, identify opportunities to efficiently extend EXXUA's lifecycle, whether that is through considering the pursuit of additional intellectual property or exploring alternate formulations or one of Jepron's active metabolites. Of course, there can be no guarantee that we'll be able to execute on this, but we will assess our options and work from there. I've said a lot on this call, so I'll step back just for a moment before we open the call up for questions, and I want to hand it over to Ryan now to share the high-level details of the EXXUA commercialization agreement. Ryan?
Thanks, Josh. As we've described in an 8-K we filed last Friday, the EXXUA agreement is characterized as an exclusive commercialization agreement in the United States. We made, as an initial consideration upon signing last week, an upfront cash payment of $3 million. As additional consideration and the only additional fixed obligation we have, we will make another $3 million payment to Fabre-Kramer within 45 days of the one-year anniversary of the first physical sale of EXXUA. As we are planning to launch EXXUA by the end of calendar 2025, we would anticipate making this second payment in late calendar 2026. This second payment may be increased to $5 million if first-year product net sales meet or exceed $35 million.
Additionally, we have agreed to pay Fabre-Kramer various one-time milestone payments ranging from $5 million to over $100 million per year based on sales milestones after a certain level of net sales are achieved, with the first potential milestone payment occurring upon hitting a threshold of $100 million in net sales. Also, if EXXUA is very successful, we will pay 10% on net sales exceeding $1 billion. In addition to the upfront payments and milestones, Aytu will pay royalty fees throughout the term of the agreement based on EXXUA net sales as follows. Initially, 28% of net sales and increasing to 39% if net sales exceed $300 million in any year during the term. That increased rate would continue until EXXUA net sales reach a reduced royalty trigger, essentially a threshold above which Fabre-Kramer's obligations to other parties have been paid.
After reaching the Royalty Trigger, royalty rates go down to 24.5% and then increase to 35.5% if net sales exceed $300 million in any year during the term. We also pay a supply price top-up royalty of 3% of net sales less its cost of goods sold, increasing to 4% of net sales if annual net sales exceed $300 million. Think of our Royalty as 28% + 3% or 31% all in from a royalty perspective. That is to say before milestone payments. Our agreement with Fabre-Kramer also contains customary clauses for commercialization agreements of this type in our industry, including, among other things, our assumption of post-marketing study commitments, our responsibility for all regulatory matters, and both parties have standard indemnifications to each other.
We view this deal as a fair one, a very fair one, particularly when we consider the comparatively low upfront commitments for an FDA-approved novel medication with five-plus years of runway and a product that we believe clearly has significant potential. This deal was crafted as a win-win for both parties, and I should note that this all-in royalty fully covers Fabre-Kramer's upstream obligations, meaning that we owe nothing beyond what I've described here. Again, the only fixed obligation is $6 million for the upfront and year-one anniversary payment combined unless year-one sales meet or exceed $35 million. I'm happy to provide more details, and I'll also note that we plan to file the commercialization agreement with our Form 10-K in September. With that, I'll hand it back over to Josh for closing remarks.
Thanks, Ryan. As you can likely imagine, we are quite excited about EXXUA and the opportunity it presents. We're equally excited about what a Novel Therapeutic like this could mean for the 21-plus million patients suffering from depression. We will do the very best we can to efficiently get EXXUA into the U.S. market, and we'll keep our shareholders updated as we progress with our launch plans. Our entire team is thrilled to have gotten things rolling on all things EXXUA. For us, the EXXUA opportunity is quite simply transformational. From a revenue possibility perspective, I can only say that it isn't hard to understand the potential, even on a small scale. If you just consider, for example, that EXXUA can gain just 10% of the AUVELITY share, that's approximately 50,000 prescriptions annually.
Assuming pricing in line or at a slight premium to some current branded therapies, so something like $500 per month net, that's $25 million net product revenue, which would make EXXUA among our largest revenue-producing products, even at that very small scale. Another way to look at it, understanding that I'm not guiding here, is to look at our current product run rates. In fiscal 2024, for example, we generated over 430,000 TRxs for ADHD brands, over 430,000 prescriptions of products, I might add, that are, let's face it, modestly differentiated in a highly genericized, price-sensitive, and highly undifferentiated market with minimal switching.
If in theory we could generate less than one-fourth, just less than one-fourth of the ADHD product volume, so call that something like 100,000 EXXUA TRxs annually, that alone is a $50 million net revenue product for a new chemical entity with a distinct mechanism of action in a market close to 4x the size of the ADHD market. Can EXXUA get to that level in the relative near term? We're excited to find out. With all of that said, let me close out my comments with a summary of what we think we have with EXXUA. We've gotten our hands on a product that has a distinct clinical profile and a new mechanism of action for an exceedingly low upfront with big upside potential.
We've got a large market opportunity in a category that generates over 340 million prescriptions annually with strong pricing power from both a gross and a net perspective. Getting just less than one-fourth of our current ADHD product runways gets us to a year-one revenue number that likely gets Aytu well beyond the one-year milestone Ryan was talking about at $35 million in year-one sales. I'll remind you that EXXUA represents a new class of drug, a new class that addresses the two biggest side effects of existing treatments: sexual side effects and weight gain. Also, we'll be able to launch this product by leveraging our existing CNS salesforce. Thus, we won't have a need for significant sales infrastructure build-out. It really is plug and play.
Additionally, and I think importantly, this transformational deal provides clarity on and an answer to many investors' question of what's next for Aytu beyond ADHD, given the potential generic threat that could face Exena and COTEMPLA. We now have a firm and conclusive answer to what's next. EXXUA becomes our centerpiece, with legacy revenue serving as an additional funding mechanism as we expect those products can kick off cash in their twilight years, given that there'll be significantly less burden with expenses as those shift to EXXUA. I don't think I'm overstating it to say that EXXUA and this financing completely changes the outlook for Aytu, and we believe investors are starting to see that in just these few days since the announcement last week.
One final thing to reiterate as we close out: as has been released, we accompanied the EXXUA agreement with a highly successful financing last week, led by our current and some new healthcare-focused institutional investors. We greatly appreciate the ongoing support of Nautical Capital Management, Stone Pine Capital Management, and the new investors that came alongside with this at-the-market financing. We view this as strong support from long-term life science-focused investors as further validation of the EXXUA deal and the opportunity it presents Aytu. Nautical Capital specifically helped vet this EXXUA deal, and again, we're grateful to them for their support. Our thanks also go out to our Banking colleagues, again, Book Runner Lake Street Capital Markets, Lead Manager at Maxim Group, and Financial Advisor Ascendiant Capital Markets, as our partners in getting this deal done.
Getting a deal done with no discount to market with this caliber of investors is clearly a testament to the enthusiasm around EXXUA and how Aytu, rather, is positioned today. Again, we thank everyone involved for the partnership. Thanks for attending the call today. With that, I'll open the call up for questions.
Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. First question comes from Naz Rahman with Maxim Group. Please proceed.
Hi everyone. Congratulations on the transaction. Highly transformative. Thanks for taking my questions. I have a few, if I may. EXXUA seems very interesting as an asset, but MDD as a space is a very complex space, and a lot of patients tend to fail a lot of therapies and go through multiple lines of therapies. Could you talk a little bit about where you expect EXXUA to be used in the treatment paradigm? I guess you expect it to be used as a monotherapy or a drug therapy? How do you sort of see EXXUA being used and prescribed?
Great. Thanks, Naz. Appreciate the question. It is, in fact, a very complex disease, highly heterogeneous, as I've noted a couple of times, and a tremendous amount of failure and patients obviously switching to therapies. Many different classes obviously exist, headlined, of course, by SSRIs and SNRIs. Initially, and we're still obviously working through this, we need to align, obviously, with our colleagues at Fabre-Kramer and our advisors as we build out the brand plan. This is likely a second or third-line therapy, and frankly, even if it were a later-line therapy than that, the opportunity is massive. We do not expect, realistically, at least at the outset, for this to be a first-line therapy. We do expect that it's going to be patients that are experiencing side effects from the SSRIs or SNRIs or whatever they might be on.
Frankly, if, again, we just got relegated to second or third-line therapy, that's an absolutely massive opportunity for us. We'll obviously work to refine the positioning to really identify the ideal patient type, not just any failure. We want to be specific in what we're asking the psychiatrist to look for in terms of the exact patient profile. In terms of how it'll be used, first of all, it is adults. It's obviously indicated for adult patients only. We would expect Monotherapy and, in some cases, Adjunctive Therapy. I think there will be an opportunity to add it on.
I think it will have the opportunity for broad use, but again, we want to be specific in what we're asking for as we get initial trial because, really, the best way to get off to a good start is to give the psychiatrist a very specific idea of a patient type or two that they see a lot of, and you're not asking them to do all things for all people. First of all, the payers do not permit really first-line treatment for brands just because they're going to require failure on a generic, and we understand that. We deal with that every single day. Given the unique profile and the high differentiation with EXXUA, we think there's an opportunity to get a great number of these patients that get switched, again, in the context of Mono or potentially Adjunctive Therapy.
That was helpful. On that second and third-line failures, do you know, I guess, in terms of numbers or percentages, do you know how many patients that roughly represents, or I guess how many patients, what percent of patients failed first, second, third line
Yeah, that's a good question. It's significant. It is 40% of patients typically relapse after the first treatment. It actually gets worse as you move sort of down the line. For example, again, 40% after first line will fail or relapse. 55% after second line goes up all the way up to 65% after third line, and then 71% after fourth line. Patients really start to spiral. This is really why you see products like AUVELITY and SPRAVATO, which is specifically indicated for treatment-resistant depression, of course. These patients are absolutely desperate, obviously, to the point of sitting for hours on end at a ketamine clinic, not really obviously being able to function given the nature of esketamine. It really is a unique market that, frankly, the farther down you go, almost the worse you get and the more active switching it becomes.
In terms of absolute number of patients, when you look at just the number of prescriptions of 345 million, again, understanding 220-so million of those are SSRIs or SNRIs, you would frankly consider kind of the balance the opportunity here. I mean, you're well over 130, 110, 120 million prescriptions because, essentially, anybody once they're past second line is really sort of into the almost refractory type of stage such that they would be appropriate for certainly a treatment like this. It's just massive and, again, sort of surprising and somewhat counterintuitive that patients kind of the further line they further they go down the line, the kind of the worse they are.
Got it. That was helpful. On the reimbursement and contracting side, you mentioned that government payers are required to essentially reimburse NAD therapies. I guess going into calendar year 2026, is the thought process for Aytu to focus more on getting contracts for government payers instead of commercial payers, or does that just kind of go hand in hand? How are you sort of thinking about that?
It will go hand- in- hand. By virtue of the fact that this is more heavily skewed towards government pay, it's sort of 60/40 in favor of commercial, and then of that 40%, about half of it's Medicaid, half of it's Medicare. Again, the market is relatively evenly split, which is quite distinct from our current business. We are heavily indexed to commercial. We do have some Medicaid. We have no Medicare, but we do have some Medicaid, a little bit higher on our methylphenidate product than it is for Exena or amphetamine. We will work hand in hand, and we will be very surgically precise. We'll be very prescriptive in terms of how we think about contracting.
Yes, in the context of the government payers, by virtue of some of the recent federal legislation, there are protected categories, and Major Depressive Disorder is one, schizophrenia is one. Essentially, you can require a prior authorization or some sort of a step edit, but at the end of the day, it is essentially full coverage. You can evidence that if you look at AUVELITY and Axsome Therapeutics' most recent filings and the most recent release following their Q1 calendar results where they literally have 100% coverage in their press release. Obviously, by definition, this product would fall very much in line with the type of coverage we'd expect with AUVELITY. We'll pursue both, but obviously, we'll be opportunistic.
I think you in particular, Naz, being somewhat familiar with our business more so than others, we do not view having contracts as an absolute necessity because sometimes you are signing up for things that, frankly, you are not actually getting in terms of real value at the planned pull-through level. We will be obviously prudent in how we think about contracting. We will, of course, run EXXUA into and through the Aytu RxConnect platform as we do the other medications. Again, we will be opportunistic and selective, but we will pursue both government and commercial patients sort of hand- in- hand. That may not necessarily mean a full-out assault on contracting. That may be, again, opportunistic and very, very targeted approaches as it relates to the payers.
Got it. My next question is kind of like a two-in-one, if anything. So your most recent raise is basically north of $16 million gross, which obviously far exceeds the upfront payment and the payment that would be due next year, the additional $3 million. You mentioned that you're also increasing your medical affairs effort. Could you kind of talk a little bit about how much additional operating expense you're expecting to assume, I guess, in calendar year 2026 for the promotional efforts? Also, what are your thoughts on the capital deployment for all the additional capital raised?
Ryan, do you want to touch on that?
Yeah, I could take that. Yeah, good question, Naz. As Josh mentioned in kind of his remarks, the positive aspect of launching EXXUA is that we already have an established structure or infrastructure of sales reps who are covering about a significant number of these prescribers focused on MDD. With that, we're going to end up spending money on marketing materials, compliance documentation, training programs, initial inventory, among many other areas. Right now, we're kind of projecting about a spend of about $8 million-$10 million additional in the sales and marketing space for the upcoming year with this launch. That spend will probably be a little bit more heavily weighted in the first half of the fiscal 2026. That's the anticipation of where some of this capital is going to be allocated.
Got it. Thanks. I have one more question, if I may. I know you're not giving guidance, but I guess in terms of your thought process, how quickly do you think this may be accretive to Aytu?
We think relatively quickly, Naz. Go ahead. Go ahead, Ryan.
Go ahead, Josh.
Yeah. Again, we're targeting sort of end of calendar year, and that's, I think, realistic. I mean, obviously, we'd like to push it up earlier if we can, and we're going to do everything we can depending on sort of supply and just getting everything set up programmatically. I mean, we would expect certainly some meaningful level of contribution late fiscal 2026, which, of course, for us, ends sort of next June, with obviously the most pronounced impact really kind of happening as we enter our fiscal 2027, which would be obviously next July. I do think we would attribute some decent revenue, particularly in our Q4.
Q2 and Q3 will be stocking revenue initially, and then there'll be initial pull-through, and then I think start to sort of meaningfully recognize revenue kind of as we exit the middle of calendar 2026 into, obviously, our fiscal 2027.
Got it. Thanks for taking my questions. Once again, congrats on the transaction.
Thanks, Naz.
The next question comes from Ed Woo with Ascendiant Capital . Please proceed.
Yeah. I also like to congratulate you guys on this deal. My question is, so the rights that you have is only in the U.S. Has EXXUA been launched worldwide, and is there any possible opportunities for you to get contracts in other regions?
Yeah. Good question. Thanks, Ed. Yes. We do have just exclusive rights to the United States and did not really pursue EXXUA's opportunities. Fabre-Kramer, as we understand it, is efforting partnering in other markets. They have partnered in Canada and I know are pursuing other markets as well. That would not be something that we would look at as an opportunity for us, given the fact that we really are U.S.-centric. To answer the other question, Ed, it has not launched in any of their markets yet, understanding that it has only been partnered, again, to our understanding, in just Canada and has not yet been approved to our knowledge. This will be the first market launch, which is actually really exciting.
I mean, when you think about just the leadership, the position that the U.S. has always had, particularly in this type of a market, to be able to get out of the gates in the U.S. first is exciting, and then some other markets potentially could follow the lead of the success we have here.
Thank you. The other question is, it's only indicated for adults. Has there been any work to possibly expand it into adolescents or kids?
Yes, correct. It is indicated for adults, so 18 and above. There has been some work on pediatrics. It's been relatively limited. TBD in the context of how we think about that piece. Obviously, understanding that would be a separate indication that would require a supplemental NDA. Data aren't robust enough at this point to do a submission. That having been said, with respect to adolescent patients, obviously, we will have that as something around the medical affairs piece just in the event that physicians have—excuse me—have questions about specific patients. That'll be a med affairs type of role to characterize the data in adolescent patients, which, again, there is some when you look at the clinical study report.
Great. Then my last question is, obviously, you guys are going to—it looks like you guys are probably going to have your hands full with the launch of EXXUA. Is there any possible opportunities for you guys to bring in other products, or will it pretty much be focused on this for the near and intermediate term versus getting other new products?
Yeah. Good question. Near and intermediate term is we're all in on EXXUA. That having been said, we're always sort of evaluating things. I mean, this opportunity is so significant, it will not be supplanted by anything else anytime soon. I mean, we're committing to this as our number one priority corporately. And frankly, it should be that way because of, again, the opportunity that it presents. That having been said, as we think about sort of life beyond EXXUA, we'll take sort of a two-pronged approach. We are, as I said, going to put in a legitimate effort around evaluating life cycle management, potentially in the context of additional IP to extend the life or pursue one of the metabolites that we have potential rights to. We have a right of first negotiation on follow-on compounds.
In conjunction with that, obviously, we'll think about other psychiatric-centric assets that we can bring in, but certainly nothing imminent on the BD front because we are all in on EXXUA, as I said.
Great. Thank you for answering my questions, and I wish you guys good luck. Thank you.
Thanks, Ed.
Once again, if you have a question or a comment, please indicate so by pressing star one on your touch-tone phone.
All right, John. This is Robert here. While we wait to see if there are any additional questions, Josh, Ryan, we have just a couple of questions that maybe you have not yet touched on that came in offline here. You mentioned that there is an existing sales team already overlaps with about, I think you mentioned, 70% of MDD writers in sort of the current geographies. Talk about some of the plans to address the other 30%.
Yeah, exactly right. Currently in the 70% range of our current geography, so sort of the ground that we cover with our current reps. When you look at branded MDD therapies like AUVELITY, particularly within psychiatry, that's actually pretty high overlap. We will index heavily to MDD targets. I mean, obviously, as I said, we're indexing heavily to EXXUA, all in on it, so to speak. There will be some incremental shifting. Still TBD. I mean, we're still obviously extremely early in the planning process. We need to acquire the data, which we're in the process of doing. That will really inform kind of how much more indexing. I would expect that 70% sort of geographic overlap to increase fairly materially. Again, still in the planning stages and acquiring data, sizing territories, all that stuff still has to happen yet.
Again, I think indexing more heavily to MDD targets. And then we will employ some level of non-personal promotion to obviously make sure we're covering areas where perhaps we don't have boots on the ground. Again, I think we'd expect that number to get materially higher than, say, 70% of, call it, AUVELITY-type prescribers, which is these more brand-centric psychiatrists that we view as probably the most appropriate place to start, given their propensity to prescribe brands and so forth.
Okay. Very good. Another question here. You discussed sort of integration with the RxConnect platform. Do you expect to sort of see the same percentages of EXXUA scripts running through RxConnect as you have with your ADHD? And if so, how do you expect that to maybe progress over time?
Yeah. Good question. Fully expect to integrate it within our Rx Connect platform. Obviously, that's one of our calling cards. We think it's a critical element in any brand strategy. Certainly, that'll help enable improved access in this category. Obviously, there already is better coverage than what we're experiencing, so we think we can really optimize RxConnect, particularly when you consider, again, the enormity of the market. A subtlety that people may not appreciate, the fact that this is not a scheduled product, so it just gives you a heightened level of flexibility in terms of how you're dealing with those products. Yes, definitely plan this to be heavily indexed into RxConnect, particularly early on. We'd probably expect some broader retail utilization as we get the product more out there.
One of the things we hear universally is physicians really, really like RxConnect because it helps cut through so much of the hassle. In terms of sort of how much, I would expect the majority. I'd hesitate to put a number in terms of % of scripts that will run through RxConnect, but I would expect it to be the majority. Time will tell in terms of where the % settles in, just given, again, differences in payer landscape versus ADHD, difference in the government piece, and so forth and so on. There will be some non-network, but again, we're going to index pretty heavily to the network just because we just view that as a real value driver for the brand.
All right. Very good. Next question here sort of talks about the transition of the sales team and the focus, I think, to EXXUA here. What sort of an impact do you expect that to see on the rest of the portfolio?
Yeah. Again, we do expect to be heavily, heavily indexed to EXXUA. I mean, it will be our priority product. Could there be some impact on the rest of the portfolio? I think there could be. I think it's really important to point out that, again, with RxConnect, the ADHD brands, they're quite sticky. Really, the ADHD category, there's minimal switching. It's almost like the opposite effect that you see in MDD. Patients tend to stay on therapy. Of course, with RxConnect, it's even stickier. Look, we can point to even in areas where we do not have sales representatives, we see stable prescribing month after month after month. Barring any generic entry, which I guess is a possibility, of course, that could have some impact on sales.
Barring that, we feel good that we'll be able to maintain a very good chunk of our ADHD sales. We'll be able to manage those brands as you do with mature brands, right? There obviously will be less spend on them, but there are things you can do to ensure that you keep them moving and keep some reasonable trajectory. In the real world, yes, we'll lose some revenues, but that's fully baked into how we think about just the future of the company. We fully expect, obviously, EXXUA to more than offset any potential declines as we sort of let those products mature, so to speak. On the pediatric side, I mean, look, we currently promote the multivitamins very lightly. I mean, it really is a light effort.
We will look at some sort of non-personal things, some sampling programs, and some efficient ways to keep that going, recognizing that as time goes on, the percentage contribution of the pediatric products will be a very, very small piece of the pie if EXXUA does even close to what we think it can.
Okay. Very good. Maybe this will be the last question, Ryan. It was just, I think, Naz hit on a couple of the modeling questions. But just sort of when you think about it on a reported gross margin basis, sort of walk us through how margins are going to be reported given the milestones, given the royalties, etc.
Yeah. Absolutely. I think we're currently anticipating that our margins should maintain around the high 60% range for the consolidated company. When calculating this percentage, that includes the anticipated royalties paid to Fabre-Kramer, but doesn't include the fixed payments of the $3 million upfront and the $3 million-$5 million on the one-year anniversary, nor the milestone payments. Just think of it as our cost of goods plus our royalty piece. Although from the milestone and the upfront, we're still working on some of the appropriate accounting treatment to make sure it's in compliance with U.S. GAAP on the fixed payments and milestones.
Our initial assessment is that these costs would be amortized over the expected term of the agreement, with the fixed payments being recognized as assets initially and then the milestones being recognized upon the likelihood of hitting such milestones reaches a probable level. Once we finalize the accounting treatment, we'll be sure to document that in our Form 10-K to be able to help project out the accounting for that. Additionally, we do anticipate seeing some improvement from the non-EXXUA product gross margins, assuming that sales levels maintain. That should help improve the overall margins.
All right. Very good. Josh, Ryan, I'm not showing any additional questions here. With that, maybe, Josh, I'll turn it over to you for some closing remarks.
Yeah. Thank you, Robert. And thanks to everyone who joined the call here. Thanks for the questions from both Naz and Ed. Appreciate everyone's support. Again, can't overstate the enthusiasm and gratitude we have, obviously, around this opportunity. Thanks, of course, again, to our investors, the folks that came into this last deal on what we view as very favorable terms. Of course, thank you to our colleagues at Fabre-Kramer for entrusting us with this really exciting, we think, sort of once-in-a-career type of opportunity. Thanks for the ongoing support for the entire investment community. We obviously will be committed to keeping folks updated. In the meantime, we really have a lot of work to do to get prepped for commercialization of EXXUA.
It won't certainly be very frequent updates, but as we get closer to launch, we'll obviously let folks know, and we'll look forward to updating along the way. With that, thanks everyone for joining the call, and have a good evening.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.