Good morning, everybody. I can't tell if it's. Good morning, everybody. My name is Thomas Flaten, I'm a research analyst at Lake Street Capital Markets here with Josh Disbrow from Aytu. We had a bit of a slide snafu here, just a quick disclosure I have to read, you just can't flash it up. We do provide institutional research coverage on Aytu. What we're talking about here is not my personal recommendation on the stock. This is not a solicitation. We do have received investment banking revenues from the firm, we are a member of FINRA and SIPC. With that, Josh, I think there's a disclaimer there too, we can show that in a minute.
As we're doing that, maybe it'd be helpful, since we're about a year from a pretty transformational event for the company, if you wanted just to maybe give us the history ending with EXXUA, then we can take it from there.
Thanks, thanks, everybody, for being here. Again, Josh Disbrow, co-founder and CEO of Aytu. Aytu's a commercial stage pharma company. We're focused specifically in CNS conditions. Company's been around for about 11 years, listed on Nasdaq since 2017, really transformed, really beginning in 2022, 2023. Coming out of calendar year 2024, the company had fully transformed in that we were generating revenues in excess of $60 million on a franchise of ADHD medications, a small franchise of pediatric medications, all prescription. Had really modified the commercial infrastructure such that the team became squarely focused on psychiatry, we sell specifically to psychiatrists and psychiatric practices all over the U.S. Over the last year plus, had begun to think about what's next.
Had gotten the company consistently to EBITDA positive, on the brink of cash flowing, began to turn back on our business development engines, which was really the lifeblood of the company, looking for that opportunity for what is next, that's really what brings us to current, which is we in-licensed a very exciting product called EXXUA.
Maybe just a bit on where you found the asset, what about it made sense for you, just very briefly, and we can dig into some of the details as we go through.
Yeah, EXXUA. First of all, it's an antidepressant, and we'll talk specifically about what that market looks like and the unmet needs and how it fits into the landscape. We really were looking for that perfect plug-and-play asset. We've got a commercial infrastructure comprised of almost 50 sales representatives all over the country. They're naturally in these psychiatric practices, calling on psychiatrists all day, every day with our ADHD franchise. Admittedly, our ADHD franchise has gotten a little bit long in the tooth, coming up on loss of exclusivity and the potential for generics, which we've been very open about disclosing.
It really did make sense to pursue that next asset that really capitalizes on the infrastructure, the relationships we have in these psychiatric practices, and our experience in selling novel medications, as well as the way we sell and distribute our products through a distribution program that's quite unique. When we came to the asset, we went all in. We found it at the J.P. Morgan Healthcare Conference a year plus ago, really 18 months ago, and identified the profile, and we'll talk specifically about why we were excited about it.
It was from a strategic perspective and the fit in terms of exactly what it did, it enabled us to, again, tell the story of what's next, enter an even bigger market than the markets we were in in ADHD, stay within psychiatry, but really expand our impact in that we're able to go into a much bigger market, and it's been a phenomenal success so far.
I don't think it's a big secret, but the antidepressant market's very large, but also very crowded. When you look for a new asset, there's obviously some differentiation. Maybe you could walk through kind of the elements to that differentiation from what's out there and why that was attractive.
It was very attractive. I'll take a step back and just describe the Major Depressive Disorder, or MDD market specifically, and it's colloquially just referred to as depression, but the actual disease of depression is called Major Depressive Disorder. If you hear me say MDD, basically that's interchangeable with depression. Long story short, depression is massive in terms of the market. It's over $22 billion in gross revenues in just the U.S. That's just prescription therapeutics. That's not devices or procedures. Anywhere between 18 million-25 million Americans have depression. There's over 350 million prescriptions of antidepressants written in just the U.S. every year. Literally, there's one antidepressant for every American with some left over. It's massive. The market is largely dominated by these generic SSRIs. These are drugs that you've heard of, like ZOLOFT and Lexapro and Prozac.
They've been around since I was in junior high school, some of them. They work to some degree. They work to varying degrees, though. None of them work exquisitely well. They all are very problematic. To a product, these SSRIs universally cause some level of weight gain and often some high level of sexual dysfunction. Decreased libido, patients feel very dulled out. They feel disinterested in a lot of life's activities. While their depression scores might improve, they invariably experience these side effects. What results is a tremendous amount of switching from one SSRI to maybe another one that might be a little bit milder on the side effect piece, but none of them, and we can say legally, compliantly, et cetera, that quite literally none of them cause zero weight gain or zero sexual dysfunction. It's by virtue of how they work.
They work very broadly. Think of them as almost like broad-spectrum antibiotics, where they're hitting every serotonin receptor in the brain. You're essentially bathing the brain in serotonin when you're treating a patient with something like ZOLOFT or Lexapro. That's what results in all these off-target effects, most notably these side effects, weight gain, sexual dysfunction. What's really exciting about EXXUA is it is not an SSRI. It is in no way like an SSRI. It modulates serotonin, but it does it very specifically by up-regulating a single serotonin receptor, the 5-HT1A receptor, which is really notably. If there is an important receptor above all others, the 1A would be one, if not the only one that stands above the others.
When you activate the 5-HT1A, or more simply just the 1A, you are improving symptoms of depression while you are having zero impact on sexual function and zero impact on weight gain. You can see pretty clearly how this could be a huge opportunity in a market that's larger than most markets anywhere in the therapeutic space in the U.S. Again, 350 million prescriptions. You can see how, if you just got a small fraction of that with something that's truly unique and being truly the only antidepressant that doesn't cause two of the most frequently cited side effects, it's pretty exciting.
Taking this for granted the mechanistic differences, though, how are physicians thinking about, and more importantly, patients thinking about making the choice around those two particular adverse events when being prescribed or switching from one to another in that overall calculus they do?
It's a great question, and that's really the heart of the matter because, to some degree, every antidepressant works. By definition, they have to work because they're FDA-approved. The FDA would not approve anything that doesn't demonstrate efficacy in two well-controlled studies, and that's just fact. They all work to some degree. What differentiates them is really the side effect profile. When you interview doctors, whether you do it in formalized market research, and we've conducted our own market research. I know the Lake Street team has conducted their own market research. I'm active in calling on psychiatrists myself. I'm in the field, actually in Denver, where I live, calling on physicians just because we at the moment don't have a rep.
I can tell you that if you have a psychiatrist anywhere in America force rank for you their most problematic side effects, to a person within the top five, everyone will cite probably both, but at least one, sexual side effects or weight gain as a major reason for those patients either coming back saying, "I need to lower my dose," or, "I need to switch to something else," or in some cases, "I've stopped this. I haven't been taking it for the last six months, so what can you do for me?" They've gone back to baseline depression. When you go to a doctor, and it's a very simple exercise, and you can do this if you're at a cocktail party or have friends or colleagues that are in the psychiatric field.
Ask them, "What are some of your most problematic issues when you prescribe these medications?" You will be, I think you probably won't be surprised now hearing this, but perhaps you will be, that they will not leave out sexual side effects or weight gain if you ask them to rank their top handful. It's a big deal. This is not a once in a while type of thing. "Oh, I don't really see it," or, "I only see it with my elderly patients." It's universally, "Yes, I see a decent chunk." I'll give you an example. I was calling on a practice in the Denver suburbs just south of our office. Again, we don't have a Denver rep. I was a sales rep 1,000 years ago, very comfortable calling on psychiatrists. A previous life had been in psychiatry.
Anyway, go in, made an appointment with these doctors, immediately both lit up and said, "I've got the perfect patient in mind." It's a patient they'd been sharing for years, they tried this gentleman on everything. He's a 50-something-year-old guy, had been on literally every antidepressant they could think to throw at him, had even been on electroshock therapy, had been on ketamine therapy. A really severely distressed, treatment-resistant depression patient. They said, "We're going to give this a whirl." Because every single medication they tried the patient on, even at low doses, caused tremendous sexual side effects, horrible libido to the point that this guy had not been intimate with his wife for years, they said. For years.
Fast-forward to the week after they started this guy on this medication, EXXUA, the female psychiatrist, the wife came in and smiling, was all smiles saying, "All I can say it's life-changing." I said, "What do you mean life-changing?" She said, "Well, remember the patient we told you about a couple weeks ago? He is thriving on EXXUA, has no sexual side effects. I asked him if he wanted to titrate to the highest dose. He said, 'Absolutely. By the way, doctor, been intimate with my wife for the first time in years.'" It was a light switch moment. Needless to say, they've written dozens and dozens of prescriptions since that time. It's a very real difference, and we're making significant inroads with patients that have experienced those side effects that are exceedingly common.
Using that particular anecdote as a bit of a segue, though, so wanting to adopt a product and being allowed to do so by the payers and the need to use generics first, how is it happening in practice? I know that's a very specific example.
Yeah.
If you were to, and I know it's really early in the launch, what have you heard from your reps? What are you hearing from physicians yourself about how they're integrating into their practice? Is it by definition third line because the payers say it has to be so?
Yeah, that's a good question. Anybody that knows pharma in this room would know that the PBMs obviously control a lot of the prescribing behaviors. They're going to require generics to be used first, second, third in many categories, whether that's in pain management, whether that's in asthma, whether that's in this case, depression. By definition, we call on psychiatrists. Keep in mind that when you're calling on a psychiatrist and when you're going to see a psychiatrist, chances are you have already seen your primary care physician or if you're a female, your OBGYN. You've probably been on something like a ZOLOFT, and maybe he or she switched you to something like a Lexapro. If you're still not responding or you're still experiencing side effects, typically at that point you'll get referred to a psychiatrist. That's where we come in.
Our sales reps are only calling in psychiatry practices, we can go in and present EXXUA and say, "Well, these patients have probably already been, by the time they've seen you, on two or three or four medications. Now would be a good time to offer them truly something different." For all these reasons, again, no sexual side effects, very specific in how it works on only the 1A receptor. They are able to prescribe it because even if you look at some of the more restrictive states like Colorado, where I live, where Colorado Medicaid requires for a patient to be able to get a branded non-preferred medication, that patient has to have failed two of the generic products, again, like a generic Lexapro or a generic ZOLOFT. Almost universally, those patients have already fit that bill, they can get it.
We've taken it a step further in that, for any patient, because the biggest pushback any company will get anytime they're launching a new therapeutic in the U.S. is the physician will say, "I like it. I'd love to write new products. I'd love to write branded medications, but I can't because the PBMs make it so difficult. I have to exhaust all of my generic options." Well, again, that's where we come in. We have a program that we call Aytu RxConnect, it is second to none. A program that we developed in-house. It is not something that we've licensed and sort of pulled off the shelf from someone else.
This is a truly one of one type of program whereby we have partnered with about 1,000 pharmacies around the country, even in places like Las Vegas where we don't have a sales representative, we have a partner pharmacy. We essentially go to the psychiatrist and say, "If you want to be able to step through all of the mess that is the prior authorizations and stepping through generic therapies and demonstrating failures and so forth, we can cut through all of that. If you will send it to one of these partner pharmacies, we essentially will backstop that as a company." Meaning if a commercially insured patient has a prescription sent to one of these partner pharmacies that we specifically work with, we have orchestrated a system whereby that patient will not have to pay full price.
We will cap their copay if they're commercially insured at $50. It really minimizes any of the pushback, any of the negative friction that happens. If it's covered, by the way, by the plan, that patient, if it goes through one of our network pharmacies, will pay $0. There's an incentive for the psychiatrist to send it to a partner pharmacy to get the best shot at a $0 copay. Even in the event that it's not covered, we'll eat that.
We do that to drive value with the physician and with the patient and, of course, with the pharmacy to know that the physician's going to be able to prescribe the product, get it, and guarantee that patient does not pay more than $50, doesn't get the dreaded callback saying either we don't have it because all these pharmacies have it in stock or can get it within the next day. They will get it at a copay not to exceed $50, so there's never an issue of a bait and switch, which so many companies have, where you're starting off for the first couple of months where it's $0 or $50, then next thing you know it's $5 or $6 or $800. None of that. When we say $50, we mean $50. The catch is, send it to one of these partner pharmacies.
They'll help work the prior authorizations, they'll navigate the insurance piece of it's working very well. That enables a lot of power. That enables stickiness, a high level of patient stickiness, such that they're continuing to get their prescriptions filled month after month because the price is predictable. It's, by the way, it's less about the out-of-pocket price. It's more about knowing what it's going to be month after month after month. They don't want it to be $25 one month, $150 the next, $75 the next. They want to be able to budget to, all right, $50 means $50, which is what it is, isn't it? It keeps a high level of stickiness, keeps the physicians highly engaged because they're now excited to write a product that they can actually write without having to worry about jumping through all of the insurance hoops.
The pharmacy likes it because that's a patient that they're getting that otherwise might have gone to Walgreens or CVS or Walmart . We're helping an independent pharmacy build their business. They're now potentially attracting more prescriptions from that patient's family or from the patient him or herself. They've built that business. By the way, we guarantee those pharmacies never lose money, which for anybody that knows the pharmaceutical value chain knows that pharmacies do lose money on a lot of prescriptions when the PBMs put them underwater. We backstop that too to ensure that those prescriptions get filled, that everybody in the value chain, the patient, the physician, and the pharmacy are all benefiting from the economics around this.
I think we should probably also share that RxConnect wasn't developed specifically for the launch of Aytu. You've had a lot of experience with it on your legacy business. Maybe you can kind of walk through some of the history there and kind of the positive experiences you've had historically which give you comfort that it's also going to work in the EXXUA launch.
That's a great question. We know it's going to work because history is a really good predictor of the future. We've seen over the history of the 10 years that these products have been on the market and the 7+ years that this RxConnect program has been in place, remembering that we acquired a company that had an established base of ADHD-branded business. By virtue of just the lay of the land with respect to how those products were reimbursed by the PBMs, the company we acquired out of necessity had to develop that program to ensure that they compete from a pricing and reimbursement perspective with generic products like generic Adderall, generic Ritalin, products that have been generic, again, since I've been in high school.
That program ultimately was run the same way. It was rolled out very much what I just described. "Hey, doctor, if you will prescribe our medications and send them to this particular pharmacy," in the case of Denver, there's one specifically that we refer them to, "you'll essentially be able to get a branded medication, which is predictable, which is effective, which is in many ways is better than Adderall," in the case of our ADHD meds, "in that it's smoother through the day. The biggest thing is the pharmacy's going to have it. The pharmacy's going to have it at a predictable price, and the patient's going to pay a predictable copay." I'll say historically, that has built over time in terms of how much of our business runs through that network.
RxConnect accounts for about 85% of our dispensed prescriptions on our historical business. That is hugely powerful. By that I mean 85% ± of all patient prescriptions come through a protected, controlled ecosystem of prescriptions whereby those pharmacies continue to fill these prescriptions month after month, year after year because, A, they're getting a guaranteed reimbursement from the company, and the patients are getting a guaranteed copay, and there's a high level of predictability, so physicians like it. We know very much that EXXUA is going to benefit from the same type of dynamics. If you could tell a physician to practice medicine like it's 1999, to borrow a phrase from Minnesota's own Prince, they would like to do that.
Every single physician in America will tell you the biggest challenge they face is I can't practice medicine the way I want to because of the PBMs and the insurance companies. We've gone back to them and said, "You can now. When you write our medications, if you send it to one of these pharmacies, you can absolutely practice medicine like you want to. You can prescribe a brand. Even if there's prior authorizations required, we can help with that." Even in the event that they say, "I don't want to do the prior authorization, it's too much hassle," then we'll eat that, and ultimately we will enable that prescription to get filled and the patient to walk away happy.
How much does that mean? If you're backstop.
It's a good question. We have lower than industry standard margins when you look at what we call our gross to net. If you look at ultimately, our gross margins are in the mid-60% range, all-in, inclusive of this. We still have good margins from a gross margin perspective. By the way, EXXUA was margin neutral in that 65%-68% gross margin is going to be kind of where the company stays, we think for the-
that's with this
that's even with this.
Backstop.
We don't have 82% or 92% margins like big pharma would have, but that's implicit within that buy down is essentially, again, kind of call that a 65%+ margin. It does hit it, but we've budgeted for it. Ryan, our CFO, is here. We've lived in that 65%-72% margin range forever, and EXXUA is not going to be any different. That's how we account for it.
Okay.
Can we talk a little bit about the legacy business, the ADHD portfolio facing loss of exclusivity, so generics coming to market. Just give us a quick status update on that.
Yeah. The legacy business, think of it as a $55 million- $60 million annual revenue business, if you look at sort of the trailing 12-month period. Most of it is that ADHD, those ADHD products. Of that, think of it as about $50 million of it is ADHD, five-ish million is pediatric. That business, again, largely runs through Aytu RxConnect. What we've seen, and by the way, our ADHD meds have or will be going generic, despite the fact that they've been in generic categories their entire existence. Adderall's been generic forever. While it's facing a new generic competitor, it's really nothing new. Because of this backstop and the way that we basically price them like generics, it doesn't have much of an impact. Teva, we had a Paragraph IV settlement with Teva years and years ago. It's been disclosed forever.
They launched in early calendar 2026, and Teva has only been able to achieve between 13% and 16% of the market share. We've essentially thwarted them to the tune of we've retained 85% of the market between our brand, and we launched our own authorized generic. It's because of this built-in buffer that is Aytu RxConnect and because of the financial incentives built in specifically to the pharmacies. We know for a fact those pharmacies are making more on our products than they are on the Teva generic, and it's because of how these economics are wired on the back end.
Have you guys ever thought about going out and developing this Aytu RxConnect for these big pharma companies to try to license it?
We have been approached. It's not really been our business model, but yeah. People have certainly seen the value of this, particularly when we're seven months into Teva having a generic on the market, and they are stuck at basically 800 prescriptions a week. Our generic does the same amount that theirs does. They have had minimal penetration. If you would've told a consultant, and believe me, we've had consultants for years tell us, "You're going to lose 80% of your market overnight." We've told them we disagree, and they think that we're idiots, and here we are seven months in demonstrating very clearly that they have been stuck at between 750 and 810 prescriptions a week, and this is Teva, the biggest generic player in the world. They cannot penetrate our RxConnect network.
Let me just end on one question, which I'm guessing people have done the math. You've got a legacy business that's declining. You've got a very early assets that's on the incline. The question is, do you have enough cash to get to the point where those two curves cross and you can kind of sustain the business on what you have today?
Short answer is yes. We did a financing through Lake Street that's been disclosed. We did a $16.6 million gross financing last June. We did it with the express purpose of every investor wants to know that we have enough runway to get us all the way through to sort of mitigate this, all right, what if you do continue to decline a little bit on the base business, what if EXXUA is a little bit slow? Bottom line is EXXUA is not slow. It's already on a $10+ million annualized run rate. The ADHD business is holding on to the tune of it's going to do somewhere between probably $12 million, $14 million quarterly.
Even if it declined materially, frankly, EXXUA doesn't need to do very much more than it's doing for us to be able to bridge the gap and not have to raise any more capital.
I'll just hand it back to you, Josh, if you have any concluding comments. We'll see if there's any Q&A. We'll wrap it up.
I know we're down to our last 30 seconds or so, just as a reminder, this is the promise of EXXUA. EXXUA is, unlike any other product on the market, truly unique. It's one of one. It is not an SSRI, and it doesn't do any of the things that the SSRIs do in terms of side effects. That's really important. The proof is what you see on the right-hand side. Month-over-month, we're building prescriptions, we're building momentum. We're seeing shipments go to the pharmacies at a higher and higher rate, and this, we think, can catapult the company to the next inflection point. This is a product that can be many multiples in terms of revenues annually, compared to what we have today. Excited to be on this journey with EXXUA and see the patient results that we're getting.
I think we can probably close out with that. Happy to answer any questions. We've got no time left, we can maybe squeeze in a couple.
We are unfortunately maxed out at our time. We do thank you, Aytu BioPharma, for joining us.
Thank you.