Aytu BioPharma Inc (AYTU) Q3 2024 Earnings Report

- Revenue: QQ3 2024 net revenue of $18.0 million, down 21% YoY from $22.7 million in the prior-year period. QoQ not disclosed in the press materials.
- ADHD net revenue: $12.3 million in QQ3 2024, up 49% YoY from $8.3 million in QQ3 2023. This growth reflects sustained field execution and RxConnect support amid ADHD category shortages.
- Pediatric portfolio: $1.7 million in QQ3 2024, down from $5.3 million in QQ3 2023, driven by payer changes and ongoing reimbursement headwinds.
- Gross margins: Consolidated gross margin 65% in QQ3 2024 vs 56% in QQ3 2023, driven by higher ADHD mix and the Consumer Health wind-down. ADHD gross margin specifically 74% in the quarter, up from 61% a year earlier.
- Operating expenses: Excluding restructuring and amortization, operating expenses were $12.6 million in QQ3 2024 vs $20.8 million in QQ3 2023, a 39% reduction driven by wind-down of Consumer Health and cost discipline.
- EBITDA and profitability: Adjusted EBITDA improved to a positive $0.43 million in QQ3 2024 from a negative $6.5 million a year ago; trailing 12-month company-wide adjusted EBITDA exceeded $15 million, with Rx operating income greater than $7 million in the trailing period. Net loss: QQ3 2024 net loss of $2.89 million, or $0.52 per share.
- Cash and liquidity: Cash and cash equivalents of $19.8 million at March 31, 2024, essentially flat versus $19.5 million at 12/31/2023. Management notes a refinancing process for the term loan and that the company’s balance sheet provides a solid foundation to execute the game plan.
- Balance sheet and leverage: Total assets of $128.9 million; total liabilities of $98.1 million; total debt of $31.7 million; net debt of $11.9 million; current ratio 0.85x and quick ratio 0.69x, indicating tighter liquidity around period-end but with a viable runway given expected wind-down completion and financing actions.
- Cash flow: Net cash provided by operating activities of approximately -$0.254 million; free cash flow of -$0.254 million for the period; cash burn is modest as the company finalizes the manufacturing transition and wind-down.

Key takeaways from management discussions (theme-based):
- Strategy and transformation: Management reiterated a deliberate shift to a pure Rx business focused on ADHD and pediatric brands, with Consumer Health winding down. Josh Disbrow highlighted that the wind-down is targeted for mid-calendar 2024, and the company will be “100% focused on the prescription business” once complete. He framed the trajectory as a transition toward free cash flow generation and net income.
- ADHD momentum and RxConnect: The ADHD portfolio drove 49% YoY net revenue growth to $12.3 million in QQ3 2024, supported by a best-in-class RxConnect platform and a pricing/access framework that improves predictability for patients and prescribers. Management cited ongoing supply disruptions in the broader ADHD stimulant market as a catalyst for continued adoption of Adzenys and Cotempla, and emphasized no stockouts historically, with increasing DEA quota dialogues.
- Margin expansion and manufacturing shift: ADHD gross margins expanded to 74% in the quarter from 61% a year earlier, as the company moves toward outside contract manufacturing and away from a large Texas facility; the final in-house production run was expected by end of June 2024.
- Consumer Health wind-down and cost discipline: The wind-down reduced operating expenses materially (Q3 expenses excluding certain items were $12.6m vs $20.8m a year ago), contributing to the EBITDA improvement despite weaker pediatric revenue. The wind-down is expected to incur final shutdown costs and inventory write-downs in Q4 FY2024, after which the company will be 100% focused on Rx.
- Cyberattack impact and resilience: The Change Healthcare cyberattack caused temporary pricing and payout frictions across the industry, but Aytu experienced minimal and transient effects due to its RxConnect interface and diversified switch strategy, with management suggesting the incident was largely behind them and Q4 funding and revenue trajectories remain healthy.
- Near-term catalysts and guidance flavor: Management signaled ongoing improvements in gross-to-net dynamics (seasonality, deductible resets, and RxConnect pricing guarantees) and anticipated cost reductions from the Texas manufacturing exit and the outsourcing transition. They also signaled progress toward refinancing the term loan and exiting Grand Prairie, which should materially improve leverage and cost structure going into fiscal 2025.
- Outlook color: While formal forward guidance was not provided, the executives painted a constructive trajectory into fiscal 2025, characterized by continuing ADHD-driven growth, a rebound in pediatric revenue subject to payer improvements, and a disciplined cost base tied to the wind-down and contract manufacturing arrangements.

Bullish near-term on the ADHD-driven revenue growth and margin expansion, with a clear path to profitability through the wind-down of Consumer Health and outsourcing of ADHD manufacturing. The company’s strategic refocus on Rx aligns with higher EBITDA visibility and potential free cash flow generation in fiscal 2025, aided by improved payer dynamics for pediatric products and the integration of RxConnect capabilities. The refinancing of the term loan and exit from the Grand Prairie facility are critical catalysts that could materially improve liquidity and leverage. Investors should weigh the upside of continued organic growth in ADHD and rebound in pediatric revenue against execution risk linked to wind-down timing, ongoing payer negotiations, and the timing/terms of refinancing. Overall, AYTU presents a high-variance but potentially compelling long-duration investment for patients exposed to specialty pharma growth, conditional on successful completion of strategic initiatives and favorable financing outcomes.