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What changed in AYTU BIOPHARMA, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AYTU BIOPHARMA, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+501 added−570 removedSource: 10-K (2023-10-12) vs 10-K (2022-09-27)

Top changes in AYTU BIOPHARMA, INC's 2023 10-K

501 paragraphs added · 570 removed · 344 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

107 edited+48 added−73 removed40 unchanged
Biggest changePursuant to the Eclipse Loan Agreement, the Company, among other things, extended the maturity date of the Eclipse Loan Agreement to January 26, 2025 and reduced the maximum availability under the Eclipse Loan Agreement from $25.0 million to $12.5 million minus a $3.5 million availability block, In March 2022, upon closing of an underwritten public offering, we raised gross proceeds of $7.6 million from the issuance of (i) 3,030,000 shares of our common stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,030,000 shares of our common stock, and (iii) common stock purchase warrants (the “Common Warrants”) to purchase up to 6,666,000 shares of our common stock (the “March 2022 Offering”).
Biggest changePursuant to the Eclipse Loan Agreement, we, among other things, extended the maturity date of the Eclipse Loan Agreement to January 26, 2025 and reduced the maximum availability under the Eclipse Loan Agreement from $25.0 million to $12.5 million minus a $3.5 million availability block.
In connection with the Avenue Capital Agreement, we entered into a Consent, Waiver and Second Amendment to Eclipse Loan Agreement with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), dated as of January 26, 2022 (the “Eclipse Loan Agreement”).
Eclipse Loan Agreement In connection with the Avenue Capital Agreement, we entered into a Consent, Waiver and Second Amendment to Eclipse Loan Agreement with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), dated as of January 26, 2022 (the “Eclipse Loan Agreement”).
AR101 is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types in trials previously conducted by Eli Lilly & Company (“Hal”). Harry C.
AR101 is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types in trials previously conducted by Eli Lilly & Company. Harry “Hal” C.
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 XR-ODT treatment of ADHD in patients six to seventeen years old.
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 XR-ODT for the treatment of ADHD in patients six to seventeen years old.
No serious adverse events were reported during the study, and the adverse event profile was consistent with the drug’s mechanism of action. Cotempla XR-ODT 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 typical tableting excipients using our RDIM technology.
No serious adverse events were reported during the study, and the adverse event profile was consistent with the drug’s mechanism of action. Cotempla XR-ODT 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.
We hold composition-of-matter patents in the U.S. which we expect will provide Cotempla XR-ODT intellectual property protection until 2032, and a recent method-of-use patent was issued which will extend protection until 2038. These patents are listed in the Orange Book. In addition, Neos entered into a settlement agreement with Teva Pharmaceuticals USA, Inc.
We hold composition-of-matter patents in the U.S. which we expect will provide Cotempla XR-ODT intellectual property protection until 2032, and a method-of-use patent was issued which will extend protection until 2038. These patents are listed in the Orange Book. In addition, Neos entered into a settlement agreement with Teva Pharmaceuticals USA, Inc.
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 distribution capability is scalable and lends itself to additional on-market assets and future product candidates that fit within our core therapeutic focus.
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 distribution capability is scalable and lends itself to additional on-market assets and future product candidates that fit within our core therapeutic focus or within our commercial capabilities and infrastructure.
Our ADHD Product Portfolio Our modified-release drug delivery technology platform has enabled us to create XR-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.
Our ADHD Product Portfolio 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.
AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types. AR101 was originally developed by Eli Lilly and Company (“Lilly”), and worldwide rights were acquired by Denovo Biopharma (“Denovo”) in September 2014 following Lilly’s discontinuation of the enzastaurin development program.
AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types. AR101 was originally developed by Eli Lilly and Company (“Lilly”), and worldwide rights were acquired by Denovo Biopharma in September 2014 following Lilly’s discontinuation of the enzastaurin development program.
Phase 1 clinical trials generally are intended to evaluate the safety, metabolism and 21 Table of Contents pharmacologic actions of the drug, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. ● 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 AEs. ● 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.
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. 19 Table of Contents ● 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 AEs. ● 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.
We were incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado and were re-incorporated as Aytu BioScience, Inc in the state of Delaware on June 8, 2015. Following the acquisition of Neos Therapeutics, Inc. (“Neos”) in March 2021 (“Neos Acquisition”), we changed our name to Aytu BioPharma, Inc.
We were originally incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado and were re-incorporated as Aytu BioScience, Inc in the state of Delaware on June 8, 2015. Following the acquisition of Neos Therapeutics, Inc. (“Neos”) in March 2021 (the “Neos Acquisition”), we changed our name to Aytu BioPharma, Inc.
Adzenys XR-ODT 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 typical tableting excipients using our patented rapidly disintegrating ionic masking (“RDIM”) technology.
Adzenys XR-ODT 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.
Poly-Vi-Flor and Tri-Vi-Flor and ZolpiMist are not supplied under any contract. We have entered into the following key supply agreements for the commercial manufacture and supply of certain of these products: ● A supply agreement with Tris for the supply of Karbinal.
Poly-Vi-Flor and Tri-Vi-Flor are not supplied under any contract. We have entered into the following key supply agreements for the commercial manufacture and supply of certain of these products: ● A supply agreement with Tris for the supply of Karbinal.
The agreement with Cedars-Sinai grants us a license to all patent and development related technology rights for the intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications.
The licensing agreement with Cedars-Sinai grants us a license to all patent and development related technology rights for the intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications.
The Cotempla XR-ODT NDA relies on the efficacy and safety data that formed the basis of FDA approval for the listed drug, Metadate CD®, together with bioavailability/bioequivalence data and efficacy/safety data from the Cotempla XR-ODT clinical program.
The Cotempla XR-ODT 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 XR-ODT clinical program.
AR101 is protected by a suite of pending patents being pursued in major markets globally which have been licensed from Johns Hopkins and have an earliest priority date of March 2017.
AR101 is protected by a suite of five pending patents being pursued in major markets globally which have been licensed from Johns Hopkins and have an earliest priority date of March 2017.
We received $9.1 million in proceeds net of underwriting fees and other expenses. In August, the pre-funded warrants were exercised in full.
We received $9.1 million in proceeds net of underwriting fees and other expenses. In August 2022, the Pre-Funded Warrants were exercised in full.
Further, makers of branded drugs could also enhance their own formulations in a manner that competes with our enhancements of these drugs. We are also aware of efforts by several pharmaceutical companies with ADHD medications in clinical development, including Vallon Pharma, Cingulate Therapeutics, Sunovion, NLS Pharma and Neurovance, a subsidiary of Otsuka Pharmaceutical Co., Ltd.
Further, makers of branded drugs could also enhance their own formulations in a manner that competes with our enhancements of these drugs. We are also aware of efforts by several pharmaceutical companies with ADHD medications in clinical development, including Cingulate Therapeutics, NLS Pharma and Neurovance, a subsidiary of Otsuka Pharmaceutical Co., Ltd.
This novel knock-in model has the same genetic mutation most prevalent in VEDS patients and is representative of the human condition in both the timing and location of vascular events. The model has generated identical structural histology and mechanical characteristics, and unbiased findings demonstrated that vascular structure alone does not lead to vascular events.
This novel knock-in mouse model has the same genetic mutation most prevalent in VEDS patients and is representative of the human condition in both the timing and location of VEDS-related vascular events. The model has generated identical structural histology and mechanical characteristics, and unbiased findings demonstrated that vascular structure alone does not lead to vascular events.
The results of the Cotempla XR-ODT Phase 3 clinical efficacy and safety trial showed a statistically significant improvement in ADHD symptom control compared to placebo across the classroom day. Onset of effect was observed within one hour post-dose and persisted through 12 hours.
The results of the Cotempla XR-ODT 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.
We also received Fast Track designation for AR101 in VEDS by the FDA, allowing for an accelerated review timeline upon submission of the New Drug Application (NDA) and more frequent interaction with the FDA during the development process.
We also received Fast Track designation for AR101 in VEDS by the FDA, allowing for an accelerated review timeline upon submission of the New Drug Application (“NDA”) and more frequent interaction with the FDA during the development process.
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 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.
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 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 21 Table of Contents those reports electronically filed or furnished pursuant to Section 15(d) of the Exchange Act.
Our Products and Markets Prescription Products ADHD Portfolio ADHD M arket 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.
OUR PRODUCTS AND MARKETS 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.
The cornerstone of the intellectual property family surrounds enzastaurin initially targeting the treatment of VEDS focused on the U.S. and certain foreign jurisdictions which include Europe, Japan, China, Brazil, Mexico, Canada, Israel, Australia, New Zealand, and South Korea.
The cornerstone of the intellectual 18 Table of Contents property family surrounds enzastaurin initially targeting the treatment of VEDS focused on the U.S. and certain foreign jurisdictions which include Europe, Japan, China, Brazil, Mexico, Canada, Israel, Australia, New Zealand, and South Korea.
Poly-Vi-Flor contains Vitamin A, Vitamin 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 Merck & Cie (“Merck”).
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”).
These products serve established pediatric markets and offer distinct clinical features and patient benefits. We commercialize our Rx Portfolio through our internal commercial organization that includes approximately forty territories for our ADHD portfolio and approximately eight territories for our pediatric portfolio.
These products serve established pediatric markets and offer distinct clinical features and patient benefits. We commercialize our Rx Portfolio through our internal commercial organization that includes approximately forty sales territories for our ADHD Portfolio and approximately six sales territories for our Pediatric Portfolio.
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. Consumer Health Segment The Consumer Health segment maintains relationships with a number of manufacturers from which it obtains its products.
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. 17 Table of Contents Consumer Health Segment The Consumer Health Segment maintains relationships with a number of manufacturers and brokers from which it obtains its products.
These patents are listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange Book”). In addition, we entered into a settlement agreement with Actavis Laboratories FL, Inc. (“Actavis”), which resolved all ongoing litigation involving Adzenys XR-ODT patents and Actavis’ ANDA with the FDA for a generic version of Adzenys XR-ODT.
These patents are listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange Book”). In addition, we entered into a settlement agreement with Actavis Laboratories FL, Inc. (“Actavis”) (acquired by Teva Pharmaceutical Industries), which resolved all ongoing litigation involving Adzenys XR-ODT patents and Actavis’ ANDA with the FDA for a generic version of Adzenys XR-ODT.
As we rely on CMOs, we employ personnel with extensive technical, manufacturing, analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions.
As we rely on CMOs, we employ personnel with extensive technical, manufacturing, supply chain management, and analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions.
(“Tris”), under the brand names Dyanavel® XR, Dyanavel® XR tablets ; and ● methylphenidate XR is marketed in the United States by (i) Janssen Pharmaceuticals, Inc. under the brand name Concerta®, (ii) Tris under the brand names Quillivant XR® and QuilliChew ER®, (iii) Rhodes Pharmaceuticals LP under the brand name Aptensio XR®, (iv) Ironshore Pharmaceuticals Inc. under the brand name Jornay PM®, (v) Alora Pharmaceuticals under the name Methylphenidate HCl ER 72 mg Tablets, (vi) Novartis under the brand names Focalin XR® and Ritalin LA® and (vii) Azstarys ® , a product developed by KemPharm and sold by Corium. ● a non-stimulant treatment for ADHD was approved by the FDA and commercially launched by Supernus in the U.S in 2021 is sold under the brand name Qelbree®.
(“Tris”), under the brand names Dyanavel® XR, Dyanavel® XR tablets; ● Extended-release methylphenidate products are marketed in the United States by (i) Janssen Pharmaceuticals, Inc. under the brand name Concerta®, (ii) Tris under the brand names Quillivant XR® and QuilliChew ER®, (iii) Rhodes Pharmaceuticals LP under the brand name Aptensio XR®, (iv) Ironshore Pharmaceuticals Inc. under the brand name Jornay PM®, (v) Alora Pharmaceuticals under the name Methylphenidate HCl ER 72 mg Tablets, (vi) Novartis under the brand names Focalin XR® and Ritalin LA® and (vii) Azstarys ® , a product developed by KemPharm (now Zevra Therapeutics) and sold by Corium; and ● a non-stimulant treatment for ADHD was approved by the FDA and commercially launched by Supernus in the U.S in 2021 is being sold under the brand name Qelbree®.
Our prescription pediatric portfolio includes Karbinal® ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions for patients two years 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 various formulations for infants and children with fluoride deficiency (Karbinal ER, Poly-Vi-Flor and Tri-Vi-Flor are collectively the “Pediatric Portfolio”).
Our prescription Pediatric Portfolio includes Karbinal® ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions for patients two years 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 (Karbinal ER, Poly-Vi-Flor and Tri-Vi-Flor are collectively the “Pediatric Portfolio”).
BioPharma Segment Our BioPharma Segment consists of our ADHD Product and Pediatric Product portfolios. Our prescription products are sold solely in the United States and are distributed through multiple channels, including sales to pharmaceutical wholesalers, using third-party logistics enterprises. We acquired our ADHD product portfolio in March 2021 with the acquisition of Neos Therapeutics.
Rx Segment Our Rx Segment consists of our ADHD Portfolio and our Pediatric Portfolio. Our prescription products are sold solely in the United States and are distributed through multiple channels, including sales to pharmaceutical wholesalers and pharmacies, using third-party logistics enterprises. We acquired our ADHD Portfolio in March 2021 with the acquisition of Neos Therapeutics.
The manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel, and quality control. 23 Table of Contents We are in the process of a tech transfer to outsource the manufacturing of our ADHD products to a CMO.
The manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel, and quality control. We are in the process of a technology transfer to outsource the manufacturing of our ADHD products to a CMO.
In addition, 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 addition, RxConnect seeks to significantly reduce the challenges and 9 Table of Contents frustrations that health care professionals and their office staff can face when prescribing branded medications, including our medications, for their patients.
Adzenys XR-ODT (for patients six years of age and above) and Cotempla XR-ODT (for patients six to 17 years of age) are the first and only FDA-approved amphetamine and methylphenidate extended-release, orally disintegrating tablets, respectively, 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.
Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, and which govern record-keeping, manufacturing 18 Table of Contents processes and controls, personnel, quality control and quality assurance, among other activities.
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.
The transfer of the manufacturing of pharmaceutical products requires several steps including knowledge and method transfer, manufacturing of materials for feasibility study and confirmation batch materials, bioequivalence studies and regulatory filings.
The transfer of the manufacturing of pharmaceutical products requires several steps including knowledge and method transfer, manufacturing of materials for feasibility studies and confirmation batch materials, bioequivalence studies, inspections from regulatory agencies, and regulatory filings.
For example: ● amphetamine XR is currently marketed in the United States by (i) Takeda Pharmaceutical Company Limited under the brand names Adderall XR®, Vyvanse® and Mydayis® and (ii) Tris Pharma, Inc.
For example: ● Extended-release amphetamine products are currently marketed in the United States by (i) Takeda Pharmaceutical Company Limited under the brand names Adderall XR®, Vyvanse® and Mydayis® and (ii) Tris Pharma, Inc.
Of those, prescription multi-vitamins containing sodium fluoride accounted for 1.5 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, which makes the Poly-Vi-Flor and Tri-Vi-Flor product lines distinct, single-source brands.
In 2022, 8 million multi-vitamin prescriptions were written in the U.S. Of those prescriptions, multi-vitamins containing sodium fluoride accounted for 1.1 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, which makes the Poly-Vi-Flor and Tri-Vi-Flor product lines distinct, single-source brands.
The priority date for this family is March 29, 2009, so the standard 20-year exclusivity for this patent will expire in 2029. The second patent describes an aqueous liquid suspension containing a coated drug-ion exchange resin complex comprising a core molecule complexed with a pharmaceutically acceptable ion-exchange resin and an uncoated ion exchange resin complex.
The second patent describes an aqueous liquid suspension containing a coated drug-ion exchange resin complex comprising a core molecule complexed with a pharmaceutically acceptable ion-exchange resin and an uncoated ion exchange resin complex. The priority date for this family is June 15, 2007, so the standard 20-year exclusivity for this patent will expire in 2027.
In light of a new draft guidance for industry that was 14 Table of Contents published in May 2019, “Attention Deficit Hyperactivity Disorder: Developing Stimulant Drugs for Treatment Guidance for Industry,” and we remain in discussions with the FDA to gain concurrence on the design of the protocols required to meet the remaining post-marketing requirements.
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.
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. The success of our business is fundamentally connected to the well-being of our employees.
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.
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://irdirect.net/AYTU/corporate_governance . 24 Table of Contents
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 .
Further, as Karbinal ER 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 ER is indicated for children as young as two years of age. Karbinal has a pleasant strawberry-banana taste and is available in 480 mL bottles.
Further, as Karbinal ER 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 ER is indicated for children as young as two years of age.
These XR-ODT products offer unique attributes to ADHD patients and caregivers, including: ● ease of administration and ingestion because they disintegrate rapidly in the mouth and may be taken without water; ● taste-masking of bitter ADHD medications, with flavoring options; ● prevention of “cheeking,” the practice of hiding medication in the mouth and later spitting it out rather than swallowing it; and ● convenient single-unit blister-packaging, which is both portable and discrete. 13 Table of Contents Adzenys XR-ODT: Amphetamine XR-ODT for the treatment of ADHD Adzenys XR-ODT is approved by the FDA for the treatment of ADHD in patients six years and older.
These XR-ODT products offer unique attributes to ADHD patients and caregivers, including: ● ease of administration and ingestion because they disintegrate rapidly in the mouth and may be taken without water; 12 Table of Contents ● taste-masking of bitter ADHD medications, with pleasant-tasting flavor; ● prevention of “cheeking,” the practice of hiding medication in the mouth and later spitting it out rather than swallowing it; and Adzenys XR-ODT: Amphetamine XR-ODT for the treatment of ADHD Adzenys XR-ODT 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.
We generate revenue by selling our products through third party intermediaries in our marketing channels as well as directly to our customers. We currently manufacture our products for the treatment of ADHD at our manufacturing facilities and use third party manufacturers for our other prescription and consumer health products.
We generate revenue by selling our products through third party intermediaries in our marketing channels as well as directly to our customers. We currently manufacture our ADHD products at our facility in Grand Prairie, Texas, and use third party manufacturers for our other prescription and consumer health products.
Tri-Vi-Flor is available as an oral liquid suspension in two different strengths (.25 MG and .50 MG fluoride) containing Vitamin A, Vitamin C, Vitamin D3, Sodium Fluoride, Sodium Benzoate and Metafolin. By virtue of its Metafolin content, Tri-Vi-Flor offers a similar clinical profile: a fluoride-based multivitamin containing body-ready Metafolin. Metafolin® is Merck’s manufactured calcium salt of L-5-methyltetrahydrofolic or L-methylfolate.
Tri-Vi-Flor is available as an oral liquid suspension in two different strengths (.25 mg and .50 mg fluoride) containing Vitamin A, Vitamin C, Vitamin D3, Sodium Fluoride, Sodium Benzoate and L-methylfolate. By virtue of its 14 Table of Contents L-methylfolate content, Tri-Vi-Flor offers a similar clinical profile: a fluoride-based multivitamin containing a proprietary, body-ready L-methylfolate.
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.
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.
If issued, the standard 20-year exclusivity for this patent would expire in 2037. The prescription multi-vitamin market is dominated by generic products, with brands accounting for 3.4% of the multivitamin plus fluoride market. Poly-Vi-Flor and Tri-Vi-Flor primarily compete in the generic prescription multi-vitamin fluoride market and with the brands of FLORIVA and QFLORA.
Upon issuance, the standard 20-year exclusivity for this patent would expire in 2037. The prescription multi-vitamin market is dominated by generic products, with brands accounting for 9.5% of the multivitamin plus fluoride market for the year ending December 31, 2022. Poly-Vi-Flor and Tri-Vi-Flor primarily compete in the generic prescription multi-vitamin fluoride market and with the branded products FLORIVA and QFLORA.
The result is methylphenidate with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth. Cotempla XR-ODT is available in 30-day supply, child-resistant blister packs. We believe Cotempla XR-ODT is the first methylphenidate XR-ODT for the treatment of ADHD, providing onset-of-effect within one hour and a 12-hour duration.
The result is methylphenidate with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth. Cotempla XR-ODT is available in 30-day supply, child-resistant blister packs. Cotempla XR-ODT is the first FDA-approved methylphenidate XR-ODT for the treatment of ADHD.
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 regulated as prescription products.
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.
The third pending patent provides methods and compositions for the diagnosis, treatment, and prevention of Marfan syndrome and related diseases, disorders and conditions and has a priority date of March 2, 2017, in select geographies.
This pending patent provides compositions and methods for treating VEDS and associated connective tissue disorders and has a priority date of October 2018. The second pending patent provides methods and compositions for the diagnosis, treatment, and prevention of Marfan syndrome and related diseases, disorders and conditions and has a priority date of March 2017, in select geographies.
We classify our products into three categories: ● ANDA/Device OTC products, which compete in large consumer health categories and are marketed via e-commerce strategies; ● OTC monograph products, which compete in large categories; and ● personal care products, which are proprietary products with strong scientific and clinical support.
We classify our products into three categories: ● ANDA/Medical Device OTC products, which compete in large consumer health categories and are marketed primarily through Amazon.com; ● OTC monograph products, which compete in large consumer health categories; and ● Dietary supplements and personal care products, which are proprietary products with strong scientific evidence and clinical support.
We will do this by employing a focused approach of in-licensing, acquiring, developing, and commercializing novel prescription therapeutics and consumer health products. Our primary focus is on commercializing innovative prescription products that address conditions frequently developed in childhood. We also commercialize consumer healthcare products through efficient e-commerce and direct-to-patient platforms.
We will do this by employing a focused approach of in-licensing, acquiring, developing, and commercializing novel prescription therapeutics and consumer health products. Our primary focus is on commercializing innovative prescription products that address conditions frequently developed or diagnosed in childhood, including ADHD.
Current ADHD treatment guidelines recommend a multi-faceted approach that uses medications in conjunction with behavioral interventions. In 2021, approximately 84.8 million prescriptions for medications with ADHD labeling were written in the United States and generated approximately $22.6 billion in sales.
Current ADHD treatment guidelines recommend a multi-faceted approach that uses medications in conjunction with behavioral interventions. In 2022, approximately 83.5 million prescriptions for medications with ADHD labeling were written in the United States generating $21.2 billion in sales.
We believe Adzenys XR-ODT is the first and only amphetamine XR-ODT approved for the treatment of ADHD. The NDA for Adzenys XR-ODT relies on the efficacy and safety data that formed the basis of FDA approval for the listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability, and aggregate safety data from the Adzenys XR-ODT clinical program.
The New Drug Application (“NDA”) for Adzenys XR-ODT 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 XR-ODT clinical program.
Our values – team-oriented, hard-working, relentlessly determined, integrity, visionary, entrepreneurial, and service-oriented - are built on the foundation that the colleagues we hire and the way we treat one another promote creativity, innovation, and productivity, which spur our success.
Of these colleagues, 45% are female and 55% are male. Our colleagues are not represented by a labor union. Our values – team-oriented, hard-working, relentlessly determined, integrity, visionary, entrepreneurial, and servant-minded - are built on the foundation that the colleagues we hire and the way we treat one another promote creativity, innovation, and productivity, which spur our success.
COMMERCIAL BUSINESS OVERVIEW We operate through two business segments (i) the BioPharma segment, consisting of various prescription pharmaceutical products sold through third parties the BioPharma segment, and (ii) the Consumer Health segment, which consists of various consumer health products sold directly to consumers.
We received approximately $3.4 million in proceeds net of underwriting fees and other expenses. COMMERCIAL BUSINESS OVERVIEW We operate through two business segments (i) the Rx Segment, consisting of various prescription pharmaceutical products sold through third parties, and (ii) the Consumer Health Segment, which consists of various consumer health products sold directly to consumers.
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.
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 core basis on which the FDA evaluates a drug’s safety and effectiveness when considering the product application.
Under the agreement with Actavis, Actavis (acquired by Teva Pharmaceutical Industries) has the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances. No tentative approval from the FDA has been received by Teva to date.
Under the agreement with Actavis, Actavis has the right to manufacture and market its approved generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances.
The 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.
GOVERNMENT REGULATION We are subject to extensive regulation by the FDA and other federal, state, and local regulatory agencies. The 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.
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. Near to longer term, we believe our prescription and consumer health businesses will provide resources to invest in and develop our pediatric-onset rare disease asset pipeline.
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.
This pending patent provides compositions and methods for treating VEDS and associated connective tissue disorders and has a priority date of October 16, 2018. Additional molecule intellectual property is afforded through the license with Denovo whose pending patent provides methods and compositions for the prediction of the activity of enzastaurin and has a priority date of September 1, 2016.
Additional molecule intellectual property is afforded through the license with Denovo whose pending patent provides methods and compositions for the prediction of the activity of enzastaurin and has a priority date of September 1, 2016. ​ INTELLECTUAL PROPERTY We seek trademark protection in the United States when appropriate.
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 multi-vitamin drops while older children are prescribed tablet formulations. In 2021, 9.5 million multi-vitamin prescriptions were written in the U.S.
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.
It 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 characterized by a genetic mutation affecting the enzyme methylenetetrahydrofolate reductase, or MTHFR.
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.
We expect to increase market share using our internal commercial organization and leveraging our advanced analytics platform to optimize sales force performance and increase both the breadth, or number of healthcare professionals (“HCPs”) prescribing our medicines, and the depth, or the number of appropriate patients per HCP for our products; ● leverage our RxConnect patient support program, which is designed to reduce access barriers to medicines facing patients and 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 11 Table of Contents eliminating many of the hassles facing HCPs and their staffs by improving availability of Aytu products at participating pharmacies; ● grow our consumer health business by driving growth of our current consumer health brands and introducing new products into our consumer marketing channels.
We expect to increase market share using our internal commercial organization and leveraging our advanced analytics platform to optimize sales force performance and increase both the breadth, or number of healthcare professionals (“HCPs”) prescribing our medicines, and the depth, or the number of appropriate patients per HCP for our products; ● leverage our novel Aytu RxConnect patient support platform, which is designed to reduce access barriers to medicines facing patients and 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 staffs by improving availability of Aytu products at participating pharmacies; ● improve gross margins for our ADHD product franchise through the manufacturing transfer of Adzenys and Cotempla to a contract manufacturing organization, a transition that is expected to occur in early calendar 2024; We believe our history of acquiring companies and in-licensing and acquiring products and pipeline assets, along with our success in building out commercial organizations and executing product launch and growth strategies, is a distinct competitive advantage.
Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the U.S., 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 U.S.
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 U.S., although there can be important differences.
We acquired our Consumer Health segment, previously known as Innovus Pharmaceuticals, Inc., in February 2020 (“Innovus Acquisition”). 9 Table of Contents The consumer health segment currently sells directly to consumers in both the United States and Canada through e-commerce platforms including branded websites and the Amazon.com platform which utilized marketing strategies focused on search engine optimization, search marketing, and affiliate marketing.
The Consumer Health Segment currently sells directly to consumers primarily in the United States through e-commerce platforms, including branded websites and Amazon.com which utilize marketing strategies focused on search engine optimization, search marketing and affiliate marketing.
We believe our third-party manufacturers have adequate capacity to manufacture sufficient quantities of these products to meet anticipated commercial demands. Because we rely on CMOs, we employ personnel with extensive technical, manufacturing, analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions.
Because we rely on CMOs, we employ personnel with extensive technical, manufacturing, supply chain management, and analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions.
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. 12 Table of Contents Extended-release, or long acting, dosage forms of stimulant medications are the standard of care for treating ADHD, making up approximately 44% of ADHD prescriptions.
Approximately 91% 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.
These mutations lead to impaired function of the enzyme and cause folate deficiencies. 15 Table of Contents Metafolin is unaffected by the MTHFR mutation, thereby directly delivering bioavailable L-methylfolate, and offering a distinct clinical advantage over other folic acid supplements.
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.
Through a supply and distribution agreement with Tris, we own exclusively rights to distribute Karbinal ER in the U.S. 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.
Karbinal has a pleasant strawberry-banana taste and is available in 480 mL bottles. 15 Table of Contents Through a supply and distribution agreement with Tris, we own exclusive rights to distribute Karbinal ER in the U.S. through August 2032, unless the agreement is terminated earlier pursuant to the termination provisions in the agreement.
Our core products focus in categories such as hair loss, digestive health, urological health, diabetes management (with a concentration on neuropathy), and allergy. All products are intended to be used by consumers on a regular basis, and as such, we offer a monthly subscription program to allow for ongoing use and to simplify product ordering and use by patients.
All products are intended to be used by consumers on a regular basis, and as such, we offer a monthly subscription program to allow for ongoing use and to simplify product ordering and use by patients. We acquired our Consumer Health Segment, previously known as Innovus Pharmaceuticals, Inc., in February 2020 (the “Innovus Acquisition”).
Drug Enforcement Administration (“DEA”) manufacturing and analytical licenses and maintain storage and use of Schedule II through IV controlled substances. The manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control.
The manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control. We are in the process of transferring the manufacturing of our ADHD products to a contract manufacturing organization (“CMO”).
Now marketed under the name Aytu Consumer Health, we commercialize over 20 products in the U.S. and Canada through two distinct marketing channels: e-commerce platforms such as our website and Amazon.com and direct-to-consumer marketing channels utilizing our proprietary Beyond Human marketing and sales platform.
Now doing business as Aytu Consumer Health, we commercialize numerous products in the U.S. and Canada through two distinct marketing channels: e-commerce platforms including our websites and Amazon.com and via direct mail campaigns.
In December 2021, the FDA granted ODD to AR101 for the treatment of EDS, inclusive of VEDS, allowing for seven years of marketing exclusivity in the United States. The FDA has cleared the IND application for AR101, enabling us to proceed with initiating a pivotal clinical trial for AR101.
In December 2021, the FDA granted Orphan Drug Designation (“ODD”) to AR101 for the treatment of EDS, inclusive of VEDS, allowing for seven years of marketing exclusivity in the United States.
(“Teva”), which resolved all ongoing litigation involving the Cotempla XR-ODT patents and Teva’s ANDA with the FDA for a generic version of Cotempla XR-ODT. Under the agreement with Teva, Neos granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier under certain circumstances.
(“Teva”), which resolved all ongoing litigation involving the Cotempla XR-ODT patents and Teva’s ANDA with the FDA for a generic version of Cotempla XR-ODT.
The most prescribed extended-release medications for ADHD, Concerta® and Adderall XR® (and each of their generic equivalents), are long-acting versions of previously short-acting methylphenidate and amphetamine 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.
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.
We are in the process of a technical transfer to outsource the manufacturing of our ADHD products to a CMO. The transfer of the manufacturing of pharmaceutical products requires several steps including knowledge and method transfer, manufacturing of materials for feasibility study and confirmation batch materials, bioequivalence studies, inspections from regulatory agencies, and regulatory filings.
The transfer of the manufacturing of pharmaceutical products requires several steps including knowledge and method transfer, manufacturing of materials for feasibility study and confirmation batch materials, bioequivalence studies and regulatory filings. We have completed the required activities, including the successful completion of bioequivalence studies, which are required in order to enable the transfer of both Adzenys XR-ODT and Cotempla XR-ODT.
Our products, Adzenys XR-ODT and Cotempla XR-ODT, are extended-release orally disintegrating tablets that allow for once-daily dosing in the morning based upon an internally developed proprietary microparticle delivery technology. There is significant competition in the ADHD market, including from well-established companies, many of whom have substantially greater financial, technical and commercial resources than we do, and entrenched existing ADHD products.
There is significant competition in the ADHD market, including from well-established companies, many of whom have substantially greater financial, technical and commercial resources than we do, and entrenched existing ADHD products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur development activities or clinical trials conducted in reliance on third parties may be delayed, suspended, or terminated if: ​ ● the third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines; ​ ● we replace a third party; ​ ● the third party has relationships with our competitors that interfere with their work on our project; or ​ ● the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols, regulatory requirements, or for other reasons. ​ 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, or QSR, which covers procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of devices.
Biggest changeIt 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, or QSR, which covers procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of devices.
Our competitors may succeed in developing, acquiring or licensing on an 34 Table of Contents exclusive basis drug products or drug delivery technologies that are more effective or less costly than that of our products or any product candidate that we are currently developing or that we may develop. ​ We anticipate that we will face increased competition in the future as new companies enter the market with new technologies and our competitors improve their current products.
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 or any product candidate that we are currently developing or that we may develop. ​ 34 Table of Contents We anticipate that we will face increased competition in the future as new companies enter the market with new technologies and our competitors improve their current products.
Many factors may affect the market acceptance and commercial success of our products and product candidates, including: ​ ● our ability to convince our potential customers of the advantages, safety and economic value our products and product candidates over existing technologies and products; ​ ● the approved labeling for the product and any required warnings; ​ ● the prevalence and severity of adverse events or publicity; ​ ● potential product liability claims ​ ● the relative convenience and ease of our products and product candidates over existing technologies and products; ​ ● the introduction of new technologies and competing products that may make our products and product candidates less attractive for our target customers; ​ ● our success in training medical personnel on the proper use of our products and product candidates; ​ ● the willingness of third-party payors to reimburse our target customers that adopt our products and product candidates; ​ ● increases in rebate payments with payors; ​ ● the acceptance in the medical community of our products and product candidates; ​ ● the extent and success of our manufacturing, marketing, and sales efforts; and ​ ● general economic conditions. ​ If our future therapeutic candidates fail to gain market access and acceptance, this will have a material adverse impact on our ability to generate revenue to provide a satisfactory, or any, return on our investments.
Many factors may affect the market acceptance and commercial success of our products, including: ​ ● our ability to convince our potential customers of the advantages, safety and economic value our products and product candidates over existing technologies and products; ​ ● the approved labeling for the product and any required warnings; ​ ● the prevalence and severity of adverse events or publicity; ​ ● potential product liability claims ​ ● the relative convenience and ease of our products over existing technologies and products; ​ ● the introduction of new technologies and competing products that may make our products less attractive for our target customers; ​ ● our success in training medical personnel on the proper use of our products; ​ ● the willingness of third-party payors to reimburse our target customers that adopt our products; ​ ● increases in rebate payments with payors; ​ ● the acceptance in the medical community of our products; ​ ● the extent and success of our manufacturing, marketing, and sales efforts; and ​ ● 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 revenue to provide a satisfactory, or any, return on our investments.
If we commercialize our products or product candidates in foreign markets, we would be subject to additional risks and uncertainties, including: ​ ● our inability to directly control commercial activities because we are relying on third parties; ​ ● the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; ​ ● different medical practices and customs in foreign countries affecting acceptance in the marketplace; ​ ● import or export licensing requirements; ​ ● longer accounts receivable collection times; ​ ● longer lead times for shipping; ​ ● language barriers for technical training; ​ ● reduced protection of intellectual property rights in some foreign countries, and related prevalence of generic alternatives to our products; 38 Table of Contents ​ ● foreign currency exchange rate fluctuations; ​ ● our customers’ ability to obtain reimbursement for our products in foreign markets; and ​ ● the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute. ​ Foreign sales of our products or product candidates 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 U.S. 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 U.S.
If we commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including: ​ ● our inability to directly control commercial activities because we are relying on third parties; ​ ● the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; ​ ● different medical practices and customs in foreign countries affecting acceptance in the marketplace; ​ ● import or export licensing requirements; ​ ● longer accounts receivable collection times; ​ ● longer lead times for shipping; ​ ● language barriers for technical training; ​ ● reduced protection of intellectual property rights in some foreign countries, and related prevalence of generic alternatives to our products; ​ ● foreign currency exchange rate fluctuations; ​ ● our customers’ ability to obtain reimbursement for our products in foreign markets; and ​ ● 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. ​ 38 Table of Contents We are subject to U.S. 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 U.S.
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 product candidates. ​ 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.
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.
Such growth strategies involve risks, including: ​ ● inability to efficiently operate new businesses or to integrate acquired products and businesses; ​ ● inability to accurately predict delays in realizing the costs and benefits of acquisitions, partnerships, or joint ventures; ​ ● unexpected losses of customers or suppliers of an acquired or existing business; ​ ● difficulties in retaining key employees of acquired businesses; ​ ● difficulties in realizing projected synergies; ​ ● failure of the acquired business to produce the expected value; ​ ● 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 2022, the great majority of our gross revenue and gross accounts receivable were due to three significant customers, the loss of which could materially and adversely affect our results of operations. ​ Three customers contributed greater than 10% of our gross revenue during the years ended June 30, 2022 and 2021.
Such growth strategies involve risks, including: ​ ● inability to efficiently operate new businesses or to integrate acquired products and businesses; ​ ● inability to accurately predict delays in realizing the costs and benefits of acquisitions, partnerships, or joint ventures; ​ ● unexpected losses of customers or suppliers of an acquired or existing business; ​ ● difficulties in retaining key employees of acquired businesses; ​ ● difficulties in realizing projected synergies; ​ ● failure of the acquired business to produce the expected value; ​ ● 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 2023, the great majority of our gross revenue and gross accounts receivable were due to three significant customers, the loss of which could materially and adversely affect our results of operations. ​ Three customers contributed greater than 10% of our gross revenue during the years ended June 30, 2023 and 2022.
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 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.
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.
Collaborations involving our product candidates pose a number of risks, including the following: ​ ● collaborators may not have sufficient resources or may decide not to devote the necessary resources due to internal constraints such as budget limitations, lack of human resources, or a change in strategic focus; ​ ● collaborators may believe our intellectual property is not valid or is unenforceable or the product candidate infringes on the intellectual property rights of others; ​ ● collaborators may dispute their responsibility to conduct development and commercialization activities pursuant to the applicable collaboration, including the payment of related costs or the division of any revenues; ​ ● collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement; ​ ● collaborators may not be able to obtain, or believe they cannot obtain, the necessary regulatory approvals; ​ ● collaborators may delay the development or commercialization of our product candidates in favor of developing or commercializing their own or another party’s product candidate; or ​ ● collaborators may decide to terminate or not to renew the collaboration for these or other reasons. ​ 33 Table of Contents As a result, collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. ​ Collaboration agreements are generally terminable without cause on short notice.
Collaborations involving our products pose a number of risks, including the following: ​ ● collaborators may not have sufficient resources or may decide not to devote the necessary resources due to internal constraints such as budget limitations, lack of human resources, or a change in strategic focus; ​ ● collaborators may believe our intellectual property is not valid or is unenforceable or the product candidate infringes on the intellectual property rights of others; ​ ● collaborators may dispute their responsibility to conduct development and commercialization activities pursuant to the applicable collaboration, including the payment of related costs or the division of any revenues; ​ ● collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement; ​ ● collaborators may not be able to obtain, or believe they cannot obtain, the necessary regulatory approvals; ​ ● collaborators may delay the development or commercialization of our products in favor of developing or commercializing their own or another party’s products; or ​ ● collaborators may decide to terminate or not to renew the collaboration for these or other reasons. ​ As a result, collaboration agreements may not lead to development or commercialization of our products in the most efficient manner or at all. 33 Table of Contents ​ Collaboration agreements are generally terminable without cause on short notice.
Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, damage to our reputation and potential for product liability claims. ​ If our sole manufacturing facility becomes damaged or inoperable or we decide to or are required to vacate our facility, our ability to manufacture our ADHD products may be jeopardized.
Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, damage to our reputation and potential for product liability claims. ​ If our manufacturing facility becomes damaged or inoperable or we decide to or are required to vacate our facility, our ability to manufacture our ADHD products may be jeopardized.
There can be no assurance that we will be successful in preventing cyber attacks or successfully mitigating 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 cyber attacks, including computer viruses, unauthorized access, ransomware attacks, phishing expeditions, natural disasters, terrorism, war and telecommunication and electrical failures.
There can be no assurance that we will be successful in preventing cyber attacks or successfully mitigating 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.
If our strategies for growth and change are not successful, we could face increased financial pressure, such as increased cash flow 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: ​ ● diversion of management time and attention away from existing operations; ​ ● requiring capital investment that could otherwise be used for the operation and growth of our existing businesses; ​ ● disruptions to important business relationships; ​ 51 Table of Contents ● increased operating costs; ​ ● limitations imposed by various governmental entities; and ​ ● 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.
If our strategies for growth and change are not successful, we could face increased financial pressure, such as increased cash flow 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: ​ ● diversion of management time and attention away from existing operations; ​ ● requiring capital investment that could otherwise be used for the operation and growth of our existing businesses; ​ ● disruptions to important business relationships; ​ ● increased operating costs; ​ ● limitations imposed by various governmental entities; and ​ ● difficulties due to lack of or limited prior experience in any new markets we may enter. ​ 45 Table of Contents 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.
A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances are 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 XR-ODT and Cotempla XR-ODT products, are listed by the DEA as a Schedule II controlled substance under the CSA.
A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances are 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 XR-ODT and Cotempla XR-ODT products, respectively, are listed by the DEA as a Schedule II controlled substance under the CSA.
The ownership change scenario could result in increased future tax liability to us. ​ If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. ​ Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
The ownership change scenario could result in an increased future tax liability to us. ​ If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. ​ Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
If we are not able to compete effectively against our current and future competitors, our business will not grow, and our financial condition and operations will suffer. ​ Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues. ​ 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: ​ ● our or our collaborators’ ability to set a price we believe is fair for our approved products; ​ ● our ability to generate revenue from our approved products and achieve profitability; and ​ ● the availability of capital. ​ The 2010 enactments of the Patient Protection and Affordable Care Act, or PPACA, and the Health Care and Education Reconciliation Act, or the Health Care Reconciliation Act, significantly impacted the provision of, and payment for, health care in the U.S.
If we are not able to compete effectively against our current and future competitors, our business will not grow, and our financial condition and operations will suffer. ​ Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues. ​ 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: ​ ● our or our collaborators’ ability to set a price we believe is fair for our approved products; ​ ● our ability to generate revenue from our approved products and achieve profitability; and ​ ● the availability of capital. ​ The Patient Protection and Affordable Care Act, or PPACA, and the Health Care and Education Reconciliation Act, or the Health Care Reconciliation Act, significantly impacted the provision of, and payment for, health care in the U.S.
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 state in which we intend to sell such product allowing us to distribute a regulated drug product in such state. ​ Regulatory authorities also may audit our manufacturing facilities.
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. ​ Regulatory authorities also may audit our manufacturing facilities.
If we fail in similar endeavors for future products, we may not be successful in establishing or continuing the commercialization of our products and product candidates. ​ Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured these components ourselves, including: ​ ● reliance on third parties for regulatory compliance and quality assurance; ​ ● possible breaches of manufacturing agreements by the third parties because of factors beyond our control; ​ ● possible regulatory violations or manufacturing problems experienced by our suppliers; and ​ ● 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. ​ Further, if we are unable to secure the needed financing to fund our internal operations, we may not have adequate resources required to effectively and rapidly transition to a third-party CMO for our ADHD 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: ​ ● reliance on third parties for regulatory compliance and quality assurance; ​ ● possible breaches of manufacturing agreements by the third parties because of factors beyond our control; ​ ● possible regulatory violations or manufacturing problems experienced by our suppliers; and ​ ● 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. ​ Further, if we are unable to secure the needed financing to fund our internal operations, we may not have adequate resources required to effectively and rapidly transition to a third-party CMO for our ADHD products.
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 and product candidates that receive regulatory approval, which could adversely affect our business.
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.
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 lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates.
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.
Manufacturers of our FDA regulated products may be unable to comply with these GMP requirements and with other FDA, NMPA, EMA, 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.
Manufacturers of our FDA regulated products may be unable to comply with these GMP requirements and with other FDA, NMPA, 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.
Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with the manufacturing processes and 46 Table of Contents 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: ​ ● administrative or judicially imposed sanctions; ​ ● injunctions or the imposition of civil penalties; ​ ● recall or seizure of the product in question; ​ ● total or partial suspension of production or distribution; ​ ● the FDA’s refusal to grant pending future clearance or pre-market approval; ​ ● withdrawal or suspension of marketing clearances or approvals; ​ ● clinical holds; ​ ● warning letters; ​ ● refusal to permit the export of the product in question; and ​ ● 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.
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: ​ ● administrative or judicially imposed sanctions; ​ ● injunctions or the imposition of civil penalties; ​ ● recall or seizure of the product in question; ​ ● total or partial suspension of production or distribution; ​ ● the FDA’s refusal to grant pending future clearance or pre-market approval; ​ ● withdrawal or suspension of marketing clearances or approvals; ​ ● clinical holds; ​ ● warning letters; ​ ● refusal to permit the export of the product in question; and ​ ● 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.
These risks include the following: ​ ● uncertain market acceptance of our products and product candidates; ​ ● difficulties in maintaining coverage and reimbursement for our products; ​ ● lack of sufficient capital; ​ ● U.S. and foreign regulatory approval of our products and product candidates; ​ ● unanticipated problems, delays, and expense relating to product development and implementation; ​ ● lack of sufficient intellectual property; ​ ● the ability to attract and retain qualified employees; ​ ● competition; and ​ ● technological changes. ​ As a result of our limited operating history and the increasingly competitive nature of the markets in which we compete, our historical financial data is of limited value in anticipating future operating expenses.
These risks include the following: ​ ● uncertain market acceptance of our products; ​ ● difficulties in maintaining coverage and reimbursement for our products; ​ ● lack of sufficient capital; ​ ● U.S. and foreign regulatory approval of our products; ​ ● unanticipated problems, delays, and expense relating to product development and implementation; ​ ● lack of sufficient intellectual property; ​ ● the ability to attract and retain qualified employees; ​ ● competition; and ​ ● 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.
Failing to do so could result in a delay or inability to sell our products within the United States of America. ​ Failure to comply with health and data protection laws and regulations could lead to U.S. 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 U.S. federal and state data protection laws and regulations, such as laws and regulations that address privacy and data security.
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 U.S. 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 U.S. federal and state data protection laws and regulations, such as laws and regulations that address privacy and data security.
Our ability to compete successfully will depend largely on our ability to: ​ ​ ● expand the market for our approved products, especially our pharmaceutical and devices regulated by the FDA; ​ ● successfully commercialize our product candidates alone or with commercial partners; ​ ● discover and develop product candidates that are superior to other products in the market; ​ ● obtain required regulatory approvals; ​ ● attract and retain qualified personnel; and ​ ● obtain patent and/or other proprietary protection for our product candidates. ​ Established pharmaceutical companies devote significant financial resources to discovering, developing or licensing novel compounds that could make our products and product candidates obsolete.
Our ability to compete successfully will depend largely on our ability to: ​ ● expand the market for our approved products, especially our pharmaceutical and devices regulated by the FDA; ​ ● successfully commercialize our products alone or with commercial partners; ​ ● discover and develop products that are superior to other products in the market; ​ ● obtain required regulatory approvals; ​ ● attract and retain qualified personnel; and ​ ● 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.
If we fail to procure supply of our products, 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 product candidates or 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 product candidates or a decrease in sales of our approved products, which could harm our financial position and commercial potential for our product candidates and products.
If we fail to procure supply of our products, 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.
If we are unable to secure collaborations that achieve the collaborator’s objectives and meet our expectations, we may be unable to advance our products or product candidates and may not generate meaningful revenues. ​ We face substantial competition 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.
If we are unable to secure collaborations that achieve the collaborator’s objectives and meet our expectations, we may be unable to advance our products and may not generate meaningful revenues. ​ We face substantial competition 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.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include: ​ ● the success of products or product candidates we acquire for development or commercialization relative to the success of our competitors; ​ ● clinical trial outcomes; ​ ● product safety; ​ ● conditions or trends in the healthcare, biotechnology and pharmaceutical industries, including healthcare payment systems; ​ ● 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; ​ ● our dependence on third parties, including CROs and scientific and medical advisors; ​ ● adverse regulatory decisions or changes in laws or regulations; ​ ● disputes or other developments relating to patents and other proprietary rights and our ability to obtain patent protection for our product candidates; ​ ● general political and economic conditions and effects of natural or man-made catastrophic events; and ​ ● 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.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include: ​ ● the success of products we acquire for development or commercialization relative to the success of our competitors; ​ ● product safety; ​ ● conditions or trends in the healthcare, biotechnology and pharmaceutical industries, including healthcare payment systems; ​ ● 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; ​ ● our dependence on third parties, including CROs and scientific and medical advisors; ​ ● adverse regulatory decisions or changes in laws or regulations; ​ ● disputes or other developments relating to patents and other proprietary rights and our ability to obtain patent protection for our products; ​ ● general political and economic conditions and effects of natural or man-made catastrophic events; and ​ ● 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.
If we are unable to source the required raw materials from our suppliers, or if we do not obtain DEA quotas or receive inadequate DEA quotas, we may experience delays in manufacturing our ADHD products, and may not be able to meet customer demand for our products. ​ In addition, we must comply with federal, state, and foreign regulations, including cGMP requirements enforced by the FDA through its facilities inspection program.
If we are unable to source the required raw materials from our suppliers, or if we do not obtain DEA quotas or receive inadequate DEA quotas, we may experience delays in manufacturing our ADHD products, and may not be able to meet customer demand for our products. ​ In addition, we and our contract manufacturer must comply with federal, state, and foreign regulations, including cGMP requirements enforced by the FDA through its facilities inspection program.
As we expect to receive significant revenues from reimbursement of our Rx Portfolio 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 revenues from the sale of any of our products and product candidates approved in the future, and could cause an increase in our compliance, manufacturing or other operating expenses.
As we expect to receive significant revenues from reimbursement of our Rx Portfolio 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 revenues 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.
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 and product candidates are highly regulated processes and technically complex. ​ We are subject to extensive regulation of the preparation and manufacture of our products for commercial sale.
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 highly regulated processes and technically complex. ​ We are subject to extensive regulation of the preparation and manufacture of our products for commercial sale.
It would be difficult, time consuming and expensive to rebuild our facility or repair or replace our equipment or to 32 Table of Contents complete the transfer of our proprietary technology to a third party, particularly in light of the requirements for a DEA registered manufacturing and storage facility like ours and FDA site change requirements. ​ We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.
It would be difficult, time consuming and expensive to rebuild our facility or repair or replace our equipment or to complete the transfer of our proprietary technology to a third party, particularly in light of the requirements for a DEA registered manufacturing and storage facility like ours and FDA site change requirements. ​ We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.
If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we may be required to take remedial measures that may be costly and/or time consuming for us to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of our facility.
If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we may be required to take remedial measures that may be costly and/or time consuming for us to implement and that may include the temporary or permanent suspension of commercial sales or the temporary or permanent closure of our facility.
As a result, we could be prevented from commercializing our products and product candidates. ​ 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.
As a result, we could be prevented from commercializing our products. ​ 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.
The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, 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.
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.
Our facility and equipment could be harmed or rendered inoperable by natural or manmade disasters, including war, fire, tornado, power loss, communications failure or terrorism, any of which may render it difficult or impossible for us to operate our drug delivery technology platform and manufacture our product candidates or products for some period of time.
Our facility and equipment could be harmed or rendered inoperable by natural or manmade disasters, including war, fire, tornado, power loss, communications failure or terrorism, any of which may render it difficult or impossible for us to operate our drug delivery technology platform and manufacture our products for some period of time.
Once a collaboration agreement is signed, it may not lead to commercialization of a product candidate. We also face competition in seeking out collaborators.
Once a collaboration agreement is signed, it may not lead to commercialization of a product. We also face competition in seeking out collaborators.
If adequate funds are not available when and if needed, our ability to make interest or principal payments on our debt obligations, finance our operations, our research and development efforts 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 Avenue Capital or Eclipse could result in an event of default and, as a result, our lenders could accelerate all of the amounts due.
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 Avenue Capital or Eclipse could result in an event of default and, as a result, our lenders could accelerate all of the amounts due.
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 U.S., could influence the purchase of medicines and medical devices and reduce demand and prices for our products and product candidates, if approved.
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 U.S., could influence the purchase of medicines and medical devices and reduce demand and prices for our products, if approved.
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: ​ ● a covered benefit under its health plan; ​ ● appropriate and medically necessary for the specific indication; ​ ● cost effective; and ​ ● 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.
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: ​ ● a covered benefit under its health plan; ​ 36 Table of Contents ● appropriate and medically necessary for the specific indication; ​ ● cost effective; and ​ ● 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.
If the safety of any of our products or product candidates is compromised due to failure to adhere to applicable laws or for other reasons, we may not be able to obtain, or to maintain once obtained, regulatory approval for such products or product candidates or successfully commercialize such products or product candidates, and we may be held liable for any injuries sustained as a result.
If the safety of any of our products is compromised due to failure to adhere to applicable laws or for other reasons, we may not be able to obtain, or to maintain once obtained, regulatory approval for such products or successfully commercialize such products, and we may be held liable for any injuries sustained as a result.
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.
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. ​ 46 Table of Contents 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.
In addition, the licensor may not be able to obtain valid and enforceable patents that protect the licensed products or product candidates 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.
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.
Under the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder, including, without limitation, the consolidated income tax return regulations, various corporate ownership changes could limit our ability to use our net operating loss carryforwards and other tax attributes to offset our income. ​ 27 Table of Contents An “ownership change” (generally a 50% change in equity ownership over a three-year period) under Section 382 of the Code could limit our ability to offset, post-change, our U.S. federal taxable income.
Under the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder, including, without limitation, the consolidated income tax return regulations, various corporate ownership changes could limit our ability to use our net operating loss carryforwards and other tax attributes to offset our income. ​ An “ownership change” (generally a 50% change in equity ownership over a three-year period) under Section 382 of the Code could limit our ability to offset, post-change, our U.S. federal taxable income.
If we are unable to achieve significant differentiation for our products and product candidates against other drugs, the opportunity for our products and, if approved, product candidates to achieve premium pricing and be commercialized successfully would be adversely affected. ​ After an New Drug Application (“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.
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 a New Drug Application (“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.
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. ​ Even if we succeed in securing collaborators, the collaborators may fail to develop or effectively commercialize our products or product candidates.
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. ​ Even if we succeed in securing collaborators, the collaborators may fail to develop or effectively commercialize our products.
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.
If actual claims are higher than current estimates, the company’s financial position and results of operations could be adversely affected. ​ 37 Table of Contents 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.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we would lose market visibility and demand for our stock could decrease, which might cause our stock price and any trading volume to decline. ​ 56 Table of Contents 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 and 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.
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 and 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.
If we are unable to demonstrate stability in accordance with commercial requirements, or if our raw material manufacturers were to encounter difficulties or otherwise fail to comply with their obligations to us, our ability to obtain FDA approval and market our products and product candidates would be jeopardized.
If we are unable to demonstrate stability in accordance with commercial requirements, or if our raw material manufacturers were to encounter difficulties or otherwise fail to comply with their obligations to us, our ability to obtain FDA approval and market our products would be jeopardized.
The development, manufacture, supply, and distribution of our approved products as well as any of our future potential product candidates, are highly regulated processes and technically complex. We, along with our third party suppliers, must comply with all applicable regulatory requirements of the FDA and foreign authorities.
The development, manufacture, supply, and distribution of our approved products as well as any of our future potential products, are highly regulated processes and technically complex. We, along with our third-party suppliers, must comply with all applicable regulatory requirements of the FDA and foreign authorities.
Although our executive officers Joshua Disbrow and Mark Oki have employment agreements, the existence of an employment agreement does not guarantee the retention of the executive officer for any period of time, and each agreement obligates us to pay the officer lump sum severance of two years and one year, respectively, of salary if we terminate him without cause, as defined in the agreement, which could hurt our liquidity.
Although our named executive officers Joshua Disbrow and Mark Oki have employment agreements, the existence of an employment agreement does not guarantee the retention of the executive officer for any period of time, and each agreement obligates us to pay the officer lump sum severance of two and a half years and one year, respectively, of salary if we terminate him without cause, as defined in the agreement, which could hurt our liquidity.
The inability to manufacture our products and product candidates if our facility or our equipment is inoperable, for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future.
The inability to manufacture our products if our facility or our equipment is inoperable, for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future.
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. ​ 45 Table of Contents Compliance with U.S. 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.
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 U.S. 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.
Our future success depends on the acceptance by our target customers, third-party payors, and the medical community that our products and product candidates are reliable, safe, and cost-effective. We cannot predict the degree of market acceptance of any of our approved products.
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.
In addition, we may obtain health information from third parties, including research institutions from which we obtain clinical trial data, which are subject to privacy and security requirements under HIPAA, as amended by Health Information Technology for Economic and Clinical Health (“HITECH”).
In addition, we may obtain health information from third parties, including research institutions which are subject to privacy and security requirements under HIPAA, as amended by Health Information Technology for Economic and Clinical Health (“HITECH”).
Specifically, we may encounter difficulty by virtue of the following, each of which could be negatively impacted if expected timeframe goals are not achieved: ​ ● our available capital resources; ​ ● our inability to receive regulatory clearances required to market them as drugs; ​ ● our inability to have clear proprietary rights to the products; ​ ● our inability to manufacture or cost-effectively manufacture the products; ​ ● our inability to adequately market and increase sales of any of these products; ​ ● existence of adverse side effects that make using the products less desirable; ​ ● our inability to adequately market and increase sales of any of these products; ​ ● 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 product candidates; ​ ● our inability to secure continuing prescribing of any of these products by current or previous users of the product; ​ ● our inability to effectively transfer and scale manufacturing as needed to maintain an adequate commercial supply of these products; ​ ● reimbursement and medical policy changes that may adversely affect the pricing, profitability or commercial appeal of pharmaceutical products; and ​ ● our inability to effectively identify and align with commercial partners outside the U.S., or the inability of those selected partners to gain the required regulatory, reimbursement, and other approvals needed to enable commercial success of the Healight Platform. ​ 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 product candidates and currently manufactured and commercialized products. ​ Many of our products are produced in single annual production lots by single-source suppliers.
Specifically, we may encounter difficulty by virtue of the following, each of which could be negatively impacted if expected timeframe goals are not achieved: ​ ● our available capital resources; ​ ● our inability to have clear proprietary rights to the products; ​ ● our inability to manufacture or cost-effectively manufacture the products; ​ ● our inability to adequately market and increase sales of any of these products; ​ ● existence of adverse side effects that make using the products less desirable; ​ ● 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; ​ ● our inability to secure continuing prescribing of any of these products by current or previous users of the product; ​ ● our inability to effectively transfer and scale manufacturing as needed to maintain an adequate commercial supply of these products; ​ ● reimbursement and medical policy changes that may adversely affect the pricing, profitability or commercial appeal of pharmaceutical products; and ​ ● our inability to effectively identify and align with commercial partners outside the U.S., 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 in single annual production lots by single-source suppliers.
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 product candidates or technologies, or to grant licenses on terms that are not favorable to us.
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.
In the future, we might possibly sell other product candidates 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.
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.
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 37 Table of Contents condition and results of operations.
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.
Our Controlled Substance Products are, and our other product candidates may, 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.
Our Controlled Substance Products are, and our other future products may, 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 product candidates. 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.
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.
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 discovery and development of therapies and medical devices, we rely in part on trade secret protection in order to protect our proprietary technology and processes.
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. 43 Table of Contents ​ 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.
While we seek to maintain finished goods inventory of our products outside of this facility, it is unlikely that the level of such inventory would be sufficient if we were to sustain anything other than a short-term disruption in our ability to manufacture our products and product candidates at our Grand Prairie, Texas facility.
While we seek to maintain finished goods inventory of our products outside of this facility, it is unlikely that the level of such inventory would be sufficient if we were to sustain anything other than a short-term disruption in our ability to manufacture our products at our Grand Prairie, Texas facility.
Historically, pharmaceutical products launched in the EU do not follow price structures of the U.S. and generally tend to have significantly lower prices. ​ Our financial results will depend on the acceptance among clinicians, hospitals, third-party payors and the medical community of our products and product candidates. ​ 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.
Historically, pharmaceutical products launched in the EU do not follow price structures of the U.S. and generally tend to have significantly lower prices. ​ 35 Table of Contents 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.
It is possible that we will never attain sufficient product sales revenues to achieve profitability. ​ If we are unable to differentiate our products or product candidates from branded drugs or existing generic therapies for similar treatments, or if the FDA or other applicable regulatory authorities approve generic products that compete with any of our products or product candidates, our ability to successfully commercialize such products or product candidates 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.
It is possible that we will never attain sufficient product sales revenues to achieve profitability. ​ 27 Table of Contents 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.
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.
You might not be able to resell your shares at or above the price you paid for them. 50 Table of Contents ​ 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.
Further, the economic environment at any given time may result in potential collaborators electing to reduce their external spending, which may prevent us from developing our product candidates. ​ Collaboration agreements typically provide for the ownership of intellectual property.
Further, the economic environment at any given time may result in potential collaborators electing to reduce their external spending, which may prevent us from developing our products. ​ Collaboration agreements typically provide for the ownership of intellectual property.
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. ​ 53 Table of Contents Although we maintain general liability, clinical trial liability and product liability insurance, this insurance may not fully cover potential liabilities.
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.
We have not generated any revenues from product sales of any other product candidates and, to date, have incurred significant operating losses. 28 Table of Contents ​ 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.
We have not generated any revenues from product sales of any other product candidates and, to date, have incurred significant operating losses. ​ 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.
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 product or product candidates, 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.
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. ​ 48 Table of Contents 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.
Moreover, clinical trial subjects, 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.
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.
Failure to obtain necessary capital when needed may force us to delay, limit or terminate our product expansion and development efforts or other operations.
Failure to obtain necessary capital when needed may force us to delay, limit or terminate our product expansion efforts or other operations.
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.
We may 30 Table of Contents 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.
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 product candidates may be delayed and our business, prospects and results of operations may be harmed.
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.
Furthermore, our facility and the equipment we use to manufacture our products and product candidates could become damaged and time consuming to repair or replace.
Furthermore, our facility and the equipment we use to manufacture our products could become damaged and time consuming to repair or replace.
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 revenues in the U.S., they may not receive, or continue to receive, physician or hospital acceptance, or they may not maintain adequate reimbursement from third party 36 Table of Contents payors.
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 revenues in the U.S., they may not receive, or continue to receive, clinician or patient acceptance, or they may not maintain adequate reimbursement from third party payors.
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 opioid based products, due to their status as controlled substances.
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.
As use of digital technologies has increased, cyber incidents, including deliberate 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.
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 52 Table of Contents the confidentiality, availability, and integrity of our data.
We also believe that the financing transactions in fiscal 2022 may have caused, together with equity ownership changes in the past five years, an ownership change resulting in a limitation of our ability to use our pre-acquisition net operating loss carryovers.
We also believe that the financing transactions in fiscal 2022 and 2023 may have caused, together with equity ownership changes in the past three years, an ownership change resulting in a limitation of our ability to use our pre-acquisition net operating loss carryovers.
There can be no 35 Table of Contents 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.
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.
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 product candidates we are developing. For our approved products, we compete with companies that design, manufacture and market treatments that compete with our products.
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.
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 product candidates containing controlled substances.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth a list of our properties as of June 30, 2022. ​ ​ ​ ​ ​ Location ​ Leased/Owned ​ Purpose Englewood, CO ​ Leased ​ Corporate headquarters Grand Prairie, TX ​ Leased ​ Administrative offices, Laboratory and Manufacturing facilities Berwyn, PA ​ Leased ​ Office Oceanside, CA ​ Leased ​ Warehouse Carlsbad, CA ​ Leased ​ Warehouse ​ ​
Biggest changeThe following table sets forth a list of our properties as of June 30, 2023. ​ ​ ​ ​ ​ Location ​ Leased/Owned ​ Purpose Englewood, CO ​ Leased ​ Corporate headquarters Grand Prairie, TX ​ Leased ​ Administrative offices, Laboratory and Manufacturing facilities Berwyn, PA ​ Leased ​ Office Oceanside, CA ​ Leased ​ Warehouse ​ ​
ITEM 2. PROPERTIES We lease various properties, including office buildings, manufacturing, research and development facilities and sales offices within the U.S. We continuously review and evaluate our facilities as a part of our strategy to optimize our business operations.
ITEM 2. PROPERTIES We lease or sublease various properties, including office buildings, manufacturing, research and development facilities and sales offices within the U.S. We continuously review and evaluate our facilities as a part of our strategy to optimize our business operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Complaint seeks unspecified damages, equitable relief, restitution, disgorgement of profits, enhanced governance and internal procedures, and attorneys’ fees.
Biggest changeThe Amended Complaint seeks unspecified damages, equitable relief, restitution, disgorgement of profits, enhanced governance and internal procedures, and attorneys’ fees. While we believe that this lawsuit is without merit and have vigorously defended against it, we have agreed to settle the matter for various corporate governance modifications and the payment of plaintiff’s attorneys’ fees. ​ Sabby Litigation.
A shareholder derivative suit was filed on September 12, 2022 in the Delaware Chancery Court by Paul Witmer derivatively and on behalf of all Aytu stockholders against Armistice Capital, LLC, Armistice Capital Master Fund, Ltd., Steve Boyd (Armistice’s Chief Investment Officer and Managing Partner, and a former director of Aytu), and certain other current and former directors of Aytu, Joshua Disbrow, Gary Cantrell, John Donofrio, Jr., Michael Macaluso, Carl Dockery and Ketan B.
A shareholder derivative suit was filed on September 12, 2022 in the Delaware Chancery Court by Paul Witmer, derivatively and on behalf of all Aytu stockholders, against Armistice Capital, LLC, Armistice Capital Master Fund, Ltd., Steve Boyd (Armistice’s Chief Investment Officer and Managing Partner, and a former director of Aytu), and certain other current and former directors of Aytu, Joshua Disbrow, Gary 53 Table of Contents Cantrell, John Donofrio, Jr., Michael Macaluso, Carl Dockery and Ketan B.
The complaint alleges that (i) Armistice facilitated the sale of assets of Cerecor in 2019 and Innovus in 2020 to Aytu in exchange for convertible securities which it subsequently converted and sold at a profit on the open market; (ii) the Armistice defendants breached their fiduciary duties, were unjustly enrichment and wasted corporate assets in connection with these acquisitions; (iii) the Armistice defendants breached their fiduciary duties by engaging in as insider trading; and (iv) the other directors breached their fiduciary duties, aided and abetted the Armistice defendants breaches of fiduciary duties, and wasted corporate assets in connection with these acquisitions.
Macaluso as a defendant and alleges that (i) Armistice facilitated the sale of assets of Cerecor in 2019 and Innovus in 2020 to Aytu in exchange for convertible securities which it subsequently converted and sold at a profit on the open market; (ii) the Armistice defendants breached their fiduciary duties, were unjustly enrichment and wasted corporate assets in connection with these acquisitions; (iii) the Armistice defendants breached their fiduciary duties by engaging in as insider trading; and (iv) the other directors breached their fiduciary duties, and aided and abetted the Armistice defendants breaches of fiduciary duties, in connection with these acquisitions.
While we believe that this lawsuit is without merit and we intend to vigorously defend against it, we are not able to predict at this time whether this proceeding will have a material impact on our financial condition or results of operations. ​ ​
While we believe that this lawsuit is without merit and we intend to vigorously defend against it, we are not able to predict at this time whether this proceeding will have a material impact on our financial condition or results of operations. ​ Stein Litigation.
While we believe that these lawsuits are without merit and we intend to vigorously defend 59 Table of Contents against them, we are not able to predict at this time whether these proceedings will have a material impact on our financial condition or results of operations. Aponowicz and Paguia Class-Action Securities Litigations .
Due to the early stage of litigation, we are not able to predict at this time whether this proceeding will have a material impact on our financial condition or results of operations, and intend to vigorously defend this case in the event it is not dismissed. ​
Removed
ITEM 3. LEGAL PROCEEDINGS Harris and Walker County.
Added
ITEM 3. LEGAL PROCEEDINGS Witmer Class-Action Securities Litigation.
Removed
On March 7, 2018 and April 18, 2019, we received citations advising us that the County of Harris Texas (“Harris County”) and the County of Walker Texas (“Walker County”) filed lawsuits on December 13, 2017 and January 11, 2019, respectively, against our Neos subsidiary and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products.
Added
Mehta. Plaintiff amended the complaint on April 5, 2023. The Amended Complaint drops Mr.
Removed
Through these lawsuits, each of Harris County and Walker County seek to recoup as damages some of the expenses they allegedly have incurred to combat opioid use and addiction. Each of Harris County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’ fees.
Added
A complaint was filed on February 22, 2023 in the Supreme Court of the State of New York by Sabby Volatility Warrant Master Fund LTD (“Sabby”) and Walleye Opportunities Master Fund Ltd (“Walleye”), holders of certain warrants to purchase common stock, against the Company.
Removed
A putative class action was filed on February 9, 2022 in the Delaware Chancery Court by Rafal Aponowicz derivatively and on behalf of all Aytu stockholders, challenging the grant in 2021 of certain stock option awards to directors and officers.
Added
The complaint alleges that the Company improperly adjusted the exercise price of the warrants and miscalculated the number of shares the warrantholders may receive, and that the Company failed to provide prompt notice to the warrantholders of such adjustment.
Removed
The stockholder contends those awards were in amounts exceeding the shares available under the Company’s 2015 equity incentive plan and that the directors therefore breached their fiduciary duties and breached a purported contract between them and stockholders. The Complaint seeks rescission of the awards, unspecified damages to stockholders as a result of the awards, and attorneys’ fees.
Added
The complaint seeks a declaratory judgment of the warrant share calculation, that 575,000 warrant shares be due to Sabby on exercise of its warrants rather than 312,908 shares, and that 100,000 warrant shares be due to Walleye on exercise of its warrants rather than 54,146 shares.
Removed
A second such action was filed by Paul John M. Paguia on March 7, 2022; Mr. Paguia asserts the same claims and seeks the same relief. The two actions have been assigned to the Vice Chancellor McCormick, who will hear a partial motion to dismiss in December 2022.
Added
Cielo Stein (“Stein”), a former sales specialist, filed a complaint on February 1, 2023 in Jefferson County Circuit Court in Kentucky against the Company and its wholly-owned subsidiary Neos Therapeutics. The complaint alleges that Aytu retaliated against Stein in violation of the Kentucky Civil Rights Act after she opposed what she contends was unwelcome behavior by her supervisor.
Removed
The Company does not believe there are any damages attributable to the awards. ​ Witmer Class-Action Securities Litigation .
Added
The complaint also alleges that the Company’s response to Stein’s subsequent complaint to human resources was inadequate. The complaint seeks an award of unspecified compensatory damages, emotional-distress damages, and attorneys’ fees and costs.
Added
The Company removed the lawsuit to the United States District Court for the Western District of Kentucky and filed a motion to dismiss the complaint, which is pending.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has been listed on the NASDAQ Capital Market under the symbol “AYTU” since October 20, 2017. ​ On September 19, 2022, the closing price as reported on the NASDAQ of our common stock was $0.20, and there were 1,094 holders of record of our common stock.
Biggest changeITEM 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 Capital Market under the symbol “AYTU” since October 20, 2017. On January 6, 2023, we effected a 1-for-20 reverse stock split of our outstanding shares of common stock.
Restricted stocks and restricted stock units (RSUs) do not have exercise prices (see Note 16 - Equity Incentive Plan). (2) It reflects the equity plan we assumed pursuant to the Neos Acquisition and restricted stock previously issued outside of the Aytu 2015 Plan (see Note 16 - Equity Incentive Plan).
Restricted stocks and restricted stock units (RSUs) do not have exercise prices (see Note 15 - Equity Incentive Plan). (2) It reflects the equity plan we assumed pursuant to the Neos Acquisition and restricted stock previously issued outside of the Aytu 2015 Plan (see Note 15 - Equity Incentive Plan).
Investors should not purchase our common stock with the expectation of receiving cash dividends. ​ 61 Table of Contents
Investors should not purchase our common stock with the expectation of receiving cash dividends. ​ 56 Table of Contents
The following table displays equity compensation plan information as of June 30, 2022 relating to securities reserved for future issuance upon exercise. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ Securities ​ ​ ​ ​ ​ ​ ​ Remaining ​ Number of ​ ​ Available for ​ Securities to Weighted- Issuance under ​ be Issued Average Equity ​ upon Exercise Compensation ​ Exercise of Price of Plans ​ Outstanding Outstanding (Column C - ​ Options, ​ Options, Excluding ​ ​ Warrants ​ Warrants Securities ​ ​ and Rights ​ and Rights Reflected in Plan Category ​ (Column A) ​ (Column B) (1) (Column (A)) Equity compensation plans approved by security holders ​ 1,819,701 ​ $ 25.90 ​ 2,383,061 Equity compensation plans not approved by security holders (2) ​ 138,406 ​ $ 6.38 ​ 45,294 Total ​ 1,958,107 ​ $ 16.61 ​ 2,428,355 (1) It reflects the weighted-average exercise prices of options outstanding.
The following table displays equity compensation plan information as of June 30, 2023 relating to securities reserved for future issuance upon exercise. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ Securities ​ ​ ​ ​ ​ ​ ​ Remaining ​ Number of ​ ​ Available for ​ Securities to Weighted- Issuance under ​ be Issued Average Equity ​ upon Exercise Compensation ​ Exercise of Price of Plans ​ Outstanding Outstanding (Column C - ​ Options, ​ Options, Excluding ​ ​ Warrants ​ Warrants Securities ​ ​ and Rights ​ and Rights Reflected in Plan Category ​ (Column A) ​ (Column B) (1) (Column (A)) Equity compensation plans approved by security holders ​ 94,302 ​ $ 15.17 ​ 84,560 Equity compensation plans not approved by security holders (2) ​ 4,419 ​ $ 127.77 ​ 2,595 Total ​ 98,721 ​ $ 18.37 ​ 87,155 (1) It reflects the weighted-average exercise prices of options outstanding.
Removed
Equity Compensation Plan Information In June 2015, our stockholders approved the adoption of a stock and option award plan (the “Aytu 2015 Plan”). At the special meeting of stockholders on July 26, 2017, our stockholders voted to increase the plan to 3.0 million shares. The Aytu 2015 Plan permits grants of equity awards to employees, directors, and consultants.
Added
Unless specifically provided otherwise herein, the share and per share information that follows in this Annual Report on Form 10-K other than in the historical financial statements and related notes included elsewhere in this Form 10-K, assumes the effect of the reverse stock split.
Removed
At the Special meeting of the stockholders on January 24, 2020, our Stockholders voted to increase the plan to 5.0 million shares.
Added
On September 20, 2023, the closing price as reported on the Nasdaq of our common stock was $1.585, and there were 190 holders of record of our common stock. 55 Table of Contents Equity Compensation Plan Information On May 18, 2023, our stockholders approved the adoption of the Aytu BioPharma, Inc. 2023 Equity Incentive Plan (the "2023 Equity Incentive Plan”).
Added
Prior to our adoption of the 2023 Equity Incentive Plan, we awarded equity incentive grants to our directors and employees under the Aytu BioScience, Inc. 2015 Stock Option and Incentive Plan (“Aytu 2015 Plan”) and the Neos Therapeutics, Inc. 2015 Stock Options and Incentive Plan (“the Neos 2015 Plan”) (collectively the “2015 Plans”).
Added
For the 2023 Equity Incentive Plan, the stockholders approved (a) 200,000 new shares, (b) 87,155 shares available for grant under the 2015 Plans be “rolled over” to the 2023 Equity Incentive Plan and (c) any shares that are returned to the company under the 2015 Plans be added to the 2023 Equity Incentive Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese products, collectively, contributed $2.2 million in net revenue and $0.7 million in gross loss during the year ended June 30, 2022. 64 Table of Contents RESULTS OF OPERATIONS Comparison of the years ended June 30, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ June 30, ​ 2022 2021 Change ​ ​ (In thousands) Product revenue, net ​ $ 96,669 ​ $ 65,632 ​ $ 31,037 Cost of sales ​ ​ 44,386 ​ ​ 36,432 ​ ​ 7,954 Gross profit ​ ​ 52,283 ​ ​ 29,200 ​ ​ 23,083 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ Research and development ​ 14,439 ​ 5,623 ​ 8,816 Advertising and direct marketing ​ ​ 19,589 ​ ​ 20,568 ​ ​ (979) Other selling and marketing ​ ​ 19,124 ​ ​ 9,740 ​ ​ 9,384 General and administrative ​ ​ 31,167 ​ ​ 25,500 ​ ​ 5,667 Acquisition related costs ​ ​ — ​ 2,919 ​ ​ (2,919) Restructuring costs ​ ​ — ​ 4,886 ​ ​ (4,886) Impairment expense ​ 75,458 ​ 12,825 ​ 62,633 Amortization of intangible assets ​ 4,067 ​ 6,009 ​ (1,942) Total operating expenses ​ 163,844 ​ 88,070 ​ 75,774 Loss from operations ​ (111,561) ​ (58,870) ​ (52,691) Other income (expense) ​ ​ ​ Other (expense), net ​ ​ (862) ​ ​ (2,050) ​ ​ 1,188 Gain (loss) from contingent consideration ​ 1,760 ​ ​ 4,459 ​ ​ (2,699) Gain (loss) on extinguishment of debt ​ ​ 169 ​ ​ (1,569) ​ ​ 1,738 Gain on derivative warrant liability ​ 211 ​ ​ — ​ ​ 211 Total other income ​ 1,278 ​ 840 ​ 438 Loss before income tax ​ (110,283) ​ (58,030) ​ (52,253) Income tax (benefit) expense ​ (110) ​ ​ 259 ​ (369) Net loss ​ $ (110,173) ​ $ (58,289) ​ $ (51,884) ​ Product revenue . ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ June 30, ​ 2022 2021 Change ​ ​ (In thousands) Net Revenue by product portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ADHD Product Line ​ $ 42,855 ​ $ 10,883 ​ $ 31,972 Pediatric Product Line ​ ​ 16,084 ​ ​ 12,437 ​ ​ 3,647 Consumer Health Division ​ ​ 35,548 ​ ​ 32,954 ​ ​ 2,594 Others ​ ​ 2,182 ​ ​ 9,358 ​ ​ (7,176) Total net revenue ​ $ 96,669 ​ $ 65,632 ​ $ 31,037 ​ During the year ended June 30, 2022, net product revenue increased by $31.0 million, or 47%, compared to the year ended June 30, 2021.
Biggest changeRESULTS OF OPERATIONS Comparison of the years ended June 30, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ June 30, ​ 2023 2022 Change ​ ​ (In thousands) Product revenue, net ​ $ 107,399 ​ $ 96,669 ​ $ 10,730 Cost of sales ​ ​ 40,767 ​ ​ 44,386 ​ ​ (3,619) Gross profit ​ ​ 66,632 ​ ​ 52,283 ​ ​ 14,349 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ Advertising and direct marketing ​ ​ 17,217 ​ ​ 19,589 ​ ​ (2,372) Other selling and marketing ​ ​ 24,231 ​ ​ 19,124 ​ ​ 5,107 General and administrative ​ ​ 28,630 ​ ​ 31,167 ​ ​ (2,537) Research and development ​ 4,095 ​ 12,662 ​ (8,567) Goodwill impairment expense ​ — ​ 65,802 ​ (65,802) Other impairment expense ​ ​ 5,705 ​ 9,656 ​ (3,951) Amortization of intangible assets ​ 4,788 ​ 5,844 ​ (1,056) Gain from contingent consideration ​ ​ (969) ​ (1,655) ​ 686 Total operating expenses ​ 83,697 ​ 162,189 ​ (78,492) Loss from operations ​ (17,065) ​ (109,906) ​ 92,841 Other income (expense) ​ ​ ​ Other expense, net ​ ​ (4,779) ​ ​ (757) ​ ​ (4,022) Gain on extinguishment of debt ​ ​ — ​ ​ 169 ​ ​ (169) Gain on derivative warrant liability ​ 4,793 ​ ​ 1,605 ​ ​ 3,188 Total other income, net ​ 14 ​ 1,017 ​ (1,003) Loss before income tax ​ (17,051) ​ (108,889) ​ 91,838 Income tax (benefit) expense ​ — ​ ​ (110) ​ 110 Net loss ​ $ (17,051) ​ $ (108,779) ​ $ 91,728 ​ Revenue by segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ June 30, ​ 2023 2022 Change ​ ​ (In thousands) Net revenue by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Rx Segment ​ $ 73,799 ​ $ 61,121 ​ $ 12,678 Consumer Health Segment ​ ​ 33,600 ​ ​ 35,548 ​ ​ (1,948) Total net revenue ​ $ 107,399 ​ $ 96,669 ​ $ 10,730 ​ 60 Table of Contents During the year ended June 30, 2023, net product revenue increased b y $10.7 million, or 11% compared to the year ended June 30, 2022.
Impairment expense During the year ended June 30, 2022, we recognized total impairment expense of $75.5 million, consisting of (i) $65.8 million in goodwill, (ii) $7.1 million intangible assets, (iii) $2.0 million inventory, (iv) $0.4 million other assets and (v) $0.2 million property and equipment.
During the year ended June 30, 2022, we recognized total impairment expense of $75.5 million, consisting of (i) $65.8 million in goodwill, (ii) $7.1 million intangible assets, (iii) $2.0 million inventory, (iv) $0.4 million other assets and (v) $0.2 million property and equipment.
Net Cash from Financing Activities Net cash provided by financing activities of $1.5 million during the year ended June 30, 2022, was primarily from $15.0 million proceeds from long-term debt and $11.7 million net proceeds from issuance of our common stock, partially offset by $16.1 million full repayment of long-term debt, $4.1 million net reduction in our revolving loan, $4.4 million in payments of fixed payment arrangements and $0.5 million payment of debt issuance costs.
Net cash provided by financing activities of $1.5 million during the year ended June 30, 2022, was primarily from $15.0 million proceeds from long-term debt and $11.7 million net proceeds from issuance of our common stock, partially offset by $16.1 million full repayment of long-term debt, $4.1 million net reduction in our revolving loan, $4.4 million in payments of fixed payment arrangements and $0.5 million payment of debt issuance costs.
Under the licensing agreement with Denovo Biopharma LLC (“Denovo”), we are required to make a payment of $0.6 for a license fee in April 2022 and upon achievement of regulatory and commercial milestones, up to $101.7 million.
Under the licensing agreement with Denovo Biopharma LLC (“Denovo”), we are required to make a payment of $0.6 million for a license fee in April 2022 and upon achievement of regulatory and commercial milestones, up to $101.7 million.
We operate through two business segments (i) the BioPharma segment, consisting of various prescription pharmaceutical products sold through third party wholesalers (the Rx Portfolio”), and (ii) the Consumer Health segment, which consists of various consumer health products sold directly to consumers.
We operate through two business segments (i) the Rx Segment, consisting of various prescription pharmaceutical products sold through third party wholesalers (the Rx Portfolio”), and (ii) the Consumer Health Segment, which consists of various consumer health products sold directly to consumers.
Net product sales in the BioPharma segment consist of sales of prescription pharmaceutical products under the Rx Portfolio, principally to a limited number of wholesale distributors and pharmacies in the United States.
Net product sales in the Rx Segment consist of sales of prescription pharmaceutical products under the Rx Portfolio, principally to a limited number of wholesale distributors and pharmacies in the United States.
Eclipse Loan Agreement The Eclipse Loan Agreement, as amended, provides us with up to $12.5 million in Revolving Loans, of which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bore interest at Secure Overnight Financing Rate (“SOFR”), plus 4.50% through April 2022.
Eclipse Loan Agreement The Eclipse Loan Agreement, as amended, provides us with up to $14.5 million in Revolving Loans, of which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bore interest at Secure Overnight Financing Rate (“SOFR”), plus 4.50% through April 2022.
During the year ended June 30, 2022, in connection with the decision to discontinue commercializing or divesting certain products within the BioPharma segment that have minimal revenue and gross margin contribution, the Company recorded $4.9 million impairment expense for the write-down of intangible assets consisting of (i) $2.6 million for AcipHex, (ii) $1.4 million for ZolpiMist, (iii) $0.5 million for Tussionex, (iv) $0.2 million for Cefaclor and (v) $0.2 million for the Neos tradename.
During the year ended June 30, 2022, in connection with the decision to discontinue commercializing or divesting certain products within the Rx Segment that have minimal revenue and gross margin contribution, the Company recorded $4.9 million impairment expense for the write-down of intangible assets consisting of (i) $2.6 million for AcipHex Sprinkle, (ii) $1.4 million for ZolpiMist, (iii) $0.5 million for Tussionex, (iv) $0.2 million for Cefaclor and (v) $0.2 million for the Neos tradename.
As described in footnote 2 Summary of Significant Accounting Policies to our financial statements, Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.
As described in Note 2 – Summary of Significant Accounting Policies to our financial statements, Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.
OBJECTIVE The purpose of the Management 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 fiscal year ended June 30, 2022 and our financial condition as of June 30, 2022.
OBJECTIVE The purpose of the Management 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 fiscal year ended June 30, 2023 and our financial condition as of June 30, 2023.
The impairment expense related to write-down of assets was due to the discontinuation of commercializing certain products and products not marketed. See Note 8 – Goodwill and Other Intangible Assets in the accompanying consolidated financial statements for further information.
The impairment expense related to write-down of assets was due to the discontinuation of commercializing certain products and products not marketed. See Note 7 – Goodwill and Other Intangible Assets in the accompanying consolidated financial statements for further information.
Patent Number 11,179,575, titled "Internal Ultraviolet Therapy," which is the first issued patent protecting the Healight investigational device and covers methods of treating a patient for an 63 Table of Contents infectious condition inside the patient's body through the insertion of a UV-light-emitting delivery tube inside a respiratory cavity of the patient at specific UV-A light wavelengths.
Patent Number 11,179,575, titled "Internal Ultraviolet Therapy," which is the first issued patent protecting the Healight investigational device and covers methods of treating a patient for an infectious condition inside the patient's body through the insertion of a UV-light-emitting delivery tube inside a respiratory cavity of the patient at specific UV-A light wavelengths.
On June 2, 2021, we terminated our “at-the-market” sales agreement with a sales agent, and on June 4, 2021, we entered into a Controlled Equity Offering SM Sales Agreement (the “ATM Sales Agreement”) with a sales agent, pursuant to which we agreed to sell up to $30.0 million of our common stock from time to time in “at-the-market” offerings.
On June 2, 2021, we terminated our “at-the-market” sales agreement with a sales agent, and on June 4, 2021, we entered into a Controlled Equity Offering SM Sales Agreement (the “ATM Sales Agreement”) with a sales agent, pursuant to which we agreed to sell up to $30.0 million of our common stock from time to time in “at-the-market” offerings under the 2020 Shelf.
In the event we prepay the outstanding principal prior to the maturity date, we will pay Avenue Capital a fee equal to (i) 3.0% of the loan if such event occurs on or before January 26 2023, (ii) 2.0% of the loan if such event occurs after January 26, 2023 but on or before January 26, 2024, and (iii) 1.0% of the loan if such event occurs after January 26, 70 Table of Contents 2024 but before January 26, 2025.
In the event we prepay the outstanding principal prior to the maturity date, we will pay Avenue Capital a fee equal to (i) 3.0% of the loan if such event occurs on or before January 26 2023, (ii) 2.0% of the loan if such event occurs after January 26, 2023 but on or before January 26, 2024, and (iii) 1.0% of the loan if such event occurs after January 26, 2024 but before January 26, 2025.
Contractual Obligations, Commitments and Contingencies As a result of our acquisitions and licensing agreements, we are contractually and contingently obliged to pay, when due, various fixed and contingent milestone payments. See Note 19 – Commitments and Contingencies in the accompanying unaudited consolidated financial statements for further information.
Contractual Obligations, Commitments and Contingencies As a result of our acquisitions 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 the accompanying consolidated financial statements for further information.
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.
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.
In addition, upon the payment in full of the obligations, we shall pay to Avenue Capital a non-refundable fee in the amount of $0.6 million (“Final Payment”). See Note 12 – Long-term Debt in the accompanying unaudited consolidated financial statements for further information.
In addition, upon the payment in full of the obligations, we shall pay to Avenue Capital a non-refundable fee in the amount of $0.6 million (“Final Payment”). See Note 11 – Long-term Debt in the accompanying consolidated financial statements for further information.
During fiscal 2022, net cash used in operating activities totaled $28.8 million. The use of cash was approximately $81.4 million less than the net loss primarily due to non-cash charges of depreciation, amortization and accretion, impairment of goodwill and intangible assets, stock-based compensation, inventory and other assets write-downs and loss on debt extinguishment.
During the fiscal year ended June 30, 2022, net cash used in operating activities totaled $28.8 million. The use of cash was approximately $81.4 million less than the net loss primarily due to non-cash charges of depreciation, amortization and accretion, impairment of goodwill and intangible assets, stock-based compensation, inventory and other assets write-downs and loss on debt extinguishment.
The received gross proceeds of $10.0 million and net proceeds of approximately $9.1 million, after deducting underwriting discounts and commissions and estimated offering expenses.
The Company received gross proceeds of $10.0 million and net proceeds were approximately $9.1 million, after deducting underwriting discounts and commissions and estimated offering expenses.
This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”). As of June 30, 2022, approximately $92.4 million remains available under the 2021 Shelf.
This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”). As of June 30, 2023, approximately $82.4 million remains available under the 2021 Shelf.
Teva Pharmaceuticals USA, Inc. has the right to manufacture and market its generic version of Cotempla XR-ODT under its ANDA beginning on July 1, 2026, or earlier under certain circumstances.
Teva Pharmaceuticals USA, Inc. has the right to manufacture and 57 Table of Contents market its generic version of Cotempla XR-ODT under its ANDA beginning on July 1, 2026, or earlier under certain circumstances.
We may permanently terminate the Eclipse Loan Agreement with at least five business days prior notice. See Note 11 – Line of Credit in the accompanying unaudited consolidated financial statements for further information.
We may permanently terminate the Eclipse Loan Agreement with at least five business days prior notice. See Note 10 – Line of Credit in the accompanying consolidated financial statements for further information.
We generate revenue by selling our products through third party intermediaries in our marketing channels as well as directly to our customers. We currently manufacture our products for the treatment of ADHD at our manufacturing facilities and use third party manufacturers for our other prescription and consumer health products.
We generate revenue by selling our products through third party intermediaries in our marketing channels as well as directly to our customers. We currently manufacture our products for the treatment of ADHD at our manufacturing facility in Grand Prairie, Texas and use third party manufacturers for our other prescription and consumer health products.
In the study, administration of the Healight UV-A endotracheal catheter resulted in a 46% reduction in multidrug-resistant Pseudomonas aeruginosa (PA C1-17) versus controls following two separate 20-minute treatments. Based on these positive data, Hospital Clinic de Barcelona and we have initiated a second, larger porcine VAP study to guide the future development of Healight for patients with VAP.
In the study, administration of the Healight UV-A endotracheal catheter resulted in a 46% reduction in multidrug-resistant Pseudomonas aeruginosa (“PA C1-17”) versus controls following two separate 20-minute treatments. Based on these positive data, Hospital Clinic de Barcelona and we conducted a second, larger porcine VAP study to guide the future development of Healight for patients with VAP.
The shares of common stock (or Pre-Funded Warrants) and the accompanying Common Warrants were issued separately but could only be purchased together in this Offering.
The shares of common stock (or pre-funded warrants) and the accompanying common warrants were issued separately but could only be purchased together.
Under the licensing agreement with Johns Hopkins University (“JHU”), upon achievement of regulatory and commercial milestone, we may 71 Table of Contents be required to pay up to $1.6 million to JHU. In fiscal 2022, two milestones payable to Rumpus were achieved totaling $4.0 million, which were paid in 2,188,940 shares of common stock and $2.6 million in cash.
Under the licensing agreement with Johns Hopkins University (“JHU”), upon achievement of regulatory and commercial milestone, we may be required to pay up to $1.6 million to JHU. In fiscal 2022, two milestones payable to Rumpus were achieved totaling $4.0 million, which were paid in 109,447 shares of common stock and $2.6 million in cash.
Revenue recognition We generate revenue from product sales through our BioPharma segment and Consumer Health segment.
Revenue recognition We generate revenue from product sales through our Rx Segment and Consumer Health Segment.
On May 12, 2022, the Company entered into an agreement with Tris to terminate the License, Development, Manufacturing and Supply Agreement dated November 2, 2018 (the “License Agreement”).
On May 12, 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 (the “Tuzistra License Agreement”).
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. ● 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.
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. 67 Table of Contents ● 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.
Development Products AR101 On December 7, 2021, the FDA granted ODD to AR101 for the treatment of Ehlers-Danlos Syndrome, a group of rare inherited connective tissue disorders that includes the severe subtype VEDS.
Development Products AR101 On December 7, 2021, the FDA granted Orphan Drug Designation (“ODD”) to AR101 for the treatment of Ehlers-Danlos Syndrome, a group of rare inherited connective tissue disorders that includes the severe subtype VEDS.
The Pre-Funded Warrants have an exercise price of $0.0001 per share of common stock and were exercised in full in April 2022. The Common Warrants have an exercise price of $1.30 per share of common stock and are exercisable six months after the date of issuance and have a term of five years from the date of exercisability.
The pre-funded warrants have an exercise price of $0.002 per share of common stock and were exercised in full in April 2022. The common warrants have an exercise price of $26.00 per share of common stock and are exercisable six months after the date of issuance and have a term of five years from the date of exercisability.
The combined public offering price for each share of common stock and accompanying Common Warrant was $0.43, and the combined offering price for each Pre-Funded Warrant and accompanying Common Warrant is $0.429, which equals the public offering price per share of the common stock and accompanying Common Warrant, less the $0.001 per share exercise price of each Pre-Funded Warrant.
The combined public offering price for each share of common stock and accompanying common warrant was $8.60, and the combined offering price for each pre-funded warrant and accompanying common warrant is $8.58, which equals the public offering price per share of the common stock and accompanying common warrant, less the $0.001 per share exercise price of each pre-funded warrant.
Beginning in May 2022 through maturity, the Revolving Loans bear interest at the Secured Overnight Financing Rate plus 4.50%. In addition, we are required to pay an unused line fee of 0.50% of the average unused portion of the maximum Revolving Loans amount during the immediately preceding month. Interest is payable monthly in arrears.
Beginning in May 2022 through maturity, the Revolving Loans bear interest at the SOFR plus 4.50%. In addition, we are 65 Table of Contents required to pay an unused line fee of 0.50% of the average unused portion of the maximum Revolving Loans amount during the immediately preceding month. Interest is payable monthly in arrears.
In connection with our Innovus Acquisition, we assumed a contingent obligation which required us to make milestone payment of $0.5 million, between fiscal year 2026 through fiscal year 2033 to Novalere, if and when certain levels of FlutiCare sales are achieved.
These CVR milestone payments expire on December 31, 2023. In connection with our Innovus Acquisition, we assumed a contingent obligation which required us to make milestone payment of $0.5 million, between fiscal year 2026 through fiscal year 2033 to Novalere, if and when certain levels of FlutiCare sales are achieved.
We have continued to experience significant inflationary pressure and supply chain disruptions related to the sourcing of raw materials, energy, logistics and labor during fiscal 2022.
SIGNIFICANT DEVELOPMENTS Business Environment We have continued to experience significant inflationary pressure and supply chain disruptions related to the sourcing of raw materials, energy, logistics and labor during fiscal 2023.
The principal estimates and assumptions that we use include prospective financial information (revenue growth, operating margins, and capital expenditures), future market conditions, weighted average costs of capital, a terminal growth rate, comparable multiples of publicly traded companies in our industry, and the 74 Table of Contents earnings metrics and multiples utilized.
The principal estimates and assumptions that we use include prospective financial information (revenue growth, operating margins, and capital expenditures), future market conditions, weighted average costs of capital, a terminal growth rate, comparable multiples of publicly traded companies in our industry, and the earnings metrics and multiples utilized. We believe that the estimates and assumptions used in impairment assessments are reasonable.
The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes. OVERVIEW We are a commercial-stage pharmaceutical company focused on commercializing novel therapeutics and consumer healthcare products and developing therapeutics for rare pediatric-onset or difficult-to-treat diseases.
The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes. OVERVIEW We are a commercial-stage pharmaceutical company focused on commercializing novel therapeutics and consumer healthcare products.
In August 2022, the pre-funded warrants were exercised in full. Discontinued Products As part of our realization of post-acquisition synergies and product prioritization, we have implemented a portfolio rationalization plan whereby we will discontinue or divest five non-core products in our BioPharma segment: Cefaclor Oral Suspension, Flexichamber, Tussionex, Tuzistra XR, and ZolpiMist.
Discontinued Products As part of our realization of post-acquisition synergies and product prioritization, we have implemented a portfolio rationalization plan whereby we will discontinue or divest five non-core products in our Rx Segment: Cefaclor Oral Suspension, Flexichamber, Tussionex, Tuzistra XR, and ZolpiMist.
The preparation of our 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 financial statements, as well as reported revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments.
The preparation of our financial statements requires us to make estimates and judgments 66 Table of Contents that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities at the date of the financial statements, as well as reported revenue and expenses during the reporting periods.
(the “Innovus Acquisition”), all of Innovus’s shares were converted to our common stock and CVRs, which represents contingent additional consideration of up to $16.0 million payable to satisfy future performance milestones. As of June 30, 2022, up to $5.0 million of potential CVR milestone payments remain.
(the “Innovus Acquisition”), all of Innovus’s shares were converted to our common stock and contingent value rights (“CVRs”), which represents contingent additional consideration of up to $16.0 million payable to satisfy future performance milestones. As of June 30, 2023, up to $5.0 million of potential CVR milestone payments remain, which we do not expect to pay.
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 programs with wholesalers. ● Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s products by wholesalers. ● Rebates The Rx Portfolio products are subject to commercial managed care and government managed Medicare and Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments.
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 Rx Portfolio products are subject to commercial managed care and government (i.e.
Avenue Capital Agreement On January 26, 2022, we entered into the Avenue Capital Agreement, pursuant to which the Company received $15.0 million loan. The interest rate on the loan is the greater of the prime rate and 3.25%, plus 7.4%, payable monthly in arrears. The maturity date of the loan is January 26, 2025.
We raised gross proceeds of $7.6 million before commission and other costs of $0.8 million. Avenue Capital Agreement On January 26, 2022, we entered into the Avenue Capital Agreement, pursuant to which the Company received $15.0 million loan. The interest rate on the loan is the greater of the prime rate and 3.25%, plus 7.4%, payable monthly in arrears.
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, ​ Increase ​ 2022 2021 (Decrease) ​ ​ (In thousands) Net cash used in operating activities ​ $ (28,823) ​ $ (25,964) ​ $ (2,859) Net cash used in investing activities ​ $ (3,248) ​ $ (2,782) ​ $ (466) Net cash provided by financing activities ​ $ 1,530 ​ $ 30,314 ​ $ (28,784) ​ 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 goodwill and intangible asset write-down, inventory, changes in fair values of various liabilities, stock-based compensation expense, depreciation, amortization and accretion and other charges.
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, ​ ​ ​ 2023 2022 Change ​ ​ (In thousands) Net cash used in operating activities ​ $ (5,129) ​ $ (28,823) ​ $ 23,694 Net cash used in investing activities ​ $ (117) ​ $ (3,248) ​ $ 3,131 Net cash provided by financing activities ​ $ 8,871 ​ $ 1,530 ​ $ 7,341 ​ 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 goodwill and intangible asset impairment, inventory write-down, changes in fair values of various liabilities, stock-based compensation expense, depreciation, amortization and accretion, and other charges.
As of June 30, 2022 and 2021, we had an accumulated deficit of approximately $288.5 million and $178.3 million, respectively. We expect to continue to incur significant expenses in connection with our ongoing activities, including the integration of our acquisitions and development of our product pipeline.
As of June 30, 2023 and 2022, we had an accumulated deficit of approximately $304.1 million and $287.1 million, respectively. We expect to continue to incur significant expenses in connection with our ongoing activities, including the integration of our acquisitions and the commercialization of our product pipeline.
On March 7, 2022, upon closing of an underwritten public offering, we raised gross proceeds of $7.6 million from the issuance of (i) 3,030,000 shares of our common stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,030,000 shares of common stock, and (iii) common stock purchase warrants (the “Common Warrants”) to purchase up to 6,666,000 shares of common stock (the “March 2022 Offering”).
On March 7, 2022, upon closing of an underwritten public offering, we raised gross proceeds of $7.6 million from the issuance of (i) 151,500 shares of our common stock, (ii) pre-funded warrants to purchase up to 151,500 shares of common stock, and (iii) common stock purchase warrants to purchase up to 333,300 shares of common stock.
As of June 30, 2022, approximately $43.0 million remains available under the 2020 Shelf. In June 2020, we initiated an at-the-market offering program ("ATM"), which allow us to sell and issue shares of our common stock from time-to-time.
In June 2020, under the 2020 Shelf, we initiated an at-the-market offering program ("ATM"), which allows us to sell and issue shares of our common stock from time-to-time.
Once a drug receives Fast Track designation, early and frequent communication between the FDA and the sponsor is encouraged throughout the entire drug development and review process. Healight In November 2021, we received U.S.
Once a drug receives Fast Track designation, early and frequent communication between the FDA and the sponsor is encouraged throughout the entire drug development and review process. In October 2022, we announced the indefinite suspension of the development of AR101 to focus on our commercial operations. Healight In November 2021, we received U.S.
Pursuant to such termination, the Company agreed to pay Tris a total of approximately $6 million to $9 million, which reduced our total liability for minimum payments by approximately $8.0 million from the original License Agreement. The settlement payment will be paid in three installments from December 2022 through July 2024.
Pursuant to such termination, the Company agreed to pay Tris a total of approximately $6 million to $9 million, which reduced our total liability for minimum payments by approximately $8.0 million from the original License Agreement.
On June 8, 2020, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on June 17, 2020. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2020 Shelf”).
This availability is subject to SEC 1.B.6 limitations of Form S-3. On June 8, 2020, the Company filed a shelf registration statement (the “2020 Shelf”), which was declared effective by the SEC on June 17, 2020, covering up to $100.0 million of its common stock, preferred stock, debt securities, warrants, rights, and units. The 2020 Shelf expired in June 2023.
Warrants Equity classified warrants are valued using a Black-Scholes model at issuance and are not remeasured. Liability classified warrants are carried at fair value using lattice valuation 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.
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. ​
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, 2022, up to $6.3 million of fixed and product milestone payments remain. In connection with the February 2020 acquisition of Innovus Pharmaceuticals, Inc.
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.
On March 7, 2022, we closed on the March 2022 Offering, pursuant to which, we sold (i) 3,030,000 shares of our common stock, (ii) Pre-Funded Warrants to purchase up to 3,030,000 shares of common stock, and (iii) Common Warrants to purchase up to 6,666,000 shares of common stock.
On March 7, 2022, we closed on an underwritten public offering, pursuant to which, we sold (i) 151,500 shares of our common stock, (ii) pre-funded warrants to purchase up to 151,500 shares of common stock, and (iii) common warrants to purchase up to 333,300 shares of common stock.
Calculations related to rebate accruals are estimated based on historical information from third-party providers. 72 Table of Contents ● Wholesaler chargeback The Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities.
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 Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities.
We continually monitor these provisions and do not believe variances between actual and estimated amounts have been material. A 10% increase or decrease in these estimates impacts net sales by a corresponding increase or decrease of approximately $17.0 million.
We continually monitor these provisions and do not believe variances between actual and estimated amounts have been material. A 10% increase or decrease in these estimates impacts net sales by a corresponding increase or decrease of approximately $3.3 million. We generate Consumer Health Segment product revenue from sales of various consumer health products through e-commerce platforms and direct mail.
In August 2022, upon the closing of an underwritten public offering, we raised proceeds of $10.0 million from the issuance of (i) 21,505,814 shares of our common stock, and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 1,750,000 shares of our common stock, and (ii) accompanying warrants (the "Common Warrants") to purchase 23,255,814 shares of our common stock (the "Offering") We received $9.1 million in proceeds net of underwriting fees and other expenses.
On August 11, 2022, upon the closing of an underwritten public offering, we raised proceeds of $10.0 million from the issuance of (i) 1,075,290 shares of our common stock, and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 87,500 shares of our common stock, and (ii) accompanying warrants to purchase 1,265,547 shares of our common stock.
Advertising and direct marketing expenses include direct-to-consumer marketing, advertising, sales and customer support and processing fees related to our Consumer Health segment. The reduction was primarily due to our emphasis on the e-commerce business from the direct-to-consumer business.
Advertising and direct marketing expense include direct-to-consumer marketing, advertising, sales, and customer support and processing fees related to our Consumer Health Segment. The reduction in advertising and direct marketing costs were due to our focus on our e-commerce business during fiscal 2023.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by us from a customer are excluded from revenue.
Revenue is generally recognized “free-on-board” shipping point, as those are the agreed-upon contractual terms. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by us from a customer are excluded from revenue.
Amortization of intangible assets During the year ended June 30, 2022, amortization expense of intangible assets, excluding amounts included in cost of sales, decreased by $1.9 million, or 32%, compared to the year ended June 30, 2021.
Amortization of intangible assets During the year ended June 30, 2023, amortization expense of intangible assets, excluding amounts included in cost of sales, decreased by $1.1 million, or 18%, compared to the year ended June 30, 2022. The decreases were primarily related to the smaller intangible asset base due to the impairments of certain intangible assets during fiscal year 2022.
The maturity date of the loan is January 26, 2025. The proceeds from the Avenue Capital Agreement were used towards the repayment of the Deerfield Facility , which was otherwise due and payable on May 11, 2022. In connection with the Avenue Capital Agreement, we entered into an amendment to the Eclipse Loan Agreement.
The interest rate on the loan is the greater of the prime rate and 3.25%, plus 7.4%, payable monthly in arrears. The maturity date of the loan is January 26, 2025. The proceeds from the Avenue Capital Agreement were used towards the repayment of the Deerfield Facility , which was otherwise due and payable on May 11, 2022.
Net Cash Used in Investing Activities Net cash used in investing activities is generally related to our merger and acquisitions as well as purchase of assets to support our operations.
Net Cash Used in Investing Activities Net cash used in investing activities is generally related to our merger and acquisitions as well as purchase of assets to support our operations. 63 Table of Contents Net cash used in investing activities was $0.1 million during the year ended June 30, 2023.
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.
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.
See Note 13 – Fair Value Considerations in the accompanying consolidated financial statements for further information. Income tax benefit The impairment of the BioPharma segment book goodwill decreased the net deferred tax liability by $0.1 million resulting in an income tax benefit of $0.1 million during the year ended June 30, 2022.
For the fiscal year ended 2022, the impairment of the Rx Segment book goodwill decreased the net deferred tax liability by $0.1 million resulting in an income tax benefit of $0.1 million.
We finance our operations through a combination of sales of our common stock and warrants, borrowings under our line of credit facility and cash generated from operations. Shelf Registrations On September 28, 2021, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 7, 2021.
Shelf Registrations On September 28, 2021, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 7, 2021.
Additionally, our Consumer Health segment recorded an impairment of $2.2 million related to products no longer being marketed and products that have been underperforming.
Additionally, our Consumer Health Segment recorded an impairment of $2.2 million related to products no longer being marketed and products that have been underperforming. 68 Table of Contents Goodwill Goodwill is recorded as the difference between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible assets acquired.
We also have two product candidates in development, AR101 (enzastaurin) for the treatment of VEDS and Healight (endotracheal light catheter) for the treatment the treatment of severe, difficult-to-treat respiratory infections. We have incurred significant losses in each year since inception. Our net losses were $110.2 million and $58.3 million for the years ended June 30, 2022 and 2021, respectively.
We also have a product candidate in development, AR101 (enzastaurin) for the treatment of VEDS, for which the development has been indefinitely suspended. We have incurred significant losses in each year since inception. Our net losses were $17.1 million and $108.8 million for the years ended June 30, 2023 and 2022, respectively.
Debt and Equity Financings On January 26, 2022, we entered into the Avenue Capital Agreement with the Avenue Capital, pursuant to which Avenue Capital provided the Company and certain of its subsidiaries with a secured $15.0 million loan. The interest rate on the loan is the greater of the prime rate and 3.25%, plus 7.4%, payable monthly in arrears.
We have since terminated the license agreement with Cedars-Sinai Medical Center (“CSMC”) and have discontinued development of Healight. 58 Table of Contents Debt and Equity Financings On January 26, 2022, we entered into the Avenue Capital Agreement with the Avenue Capital, pursuant to which Avenue Capital provided the Company and certain of its subsidiaries with a secured $15.0 million loan.
As of June 30, 2022, approximately $12.2 million of our common stock remained available to be sold pursuant to the ATM Sales Agreement. 69 Table of Contents Underwriting Agreements On August 11, 2022, we closed on underwritten public offering, pursuant to which we sold an aggregate of (i) 21,505,814 shares of its common stock, (ii), pre-funded warrants to purchase 1,750,000 shares of its common stock, and (ii) accompanying warrants to purchase 23,255,814 shares of our common stock.
On August 11, 2022, we closed an underwritten public offering, pursuant to which we sold an aggregate of (i) 1,075,290 shares of its common stock, (ii), pre-funded warrants to purchase 87,500 shares of its common stock, and (ii) accompanying warrants to purchase 1,265,547 shares of our common stock.
We believe that the estimates and assumptions used in impairment assessments are reasonable. We have determined that we have two reporting units that require periodic review for goodwill impairment, the BioPharma segment, and the Consumer Health segment. During fiscal 2022, the Company’s market capitalization significantly declined.
We have determined that we have two reporting units that require periodic review for goodwill impairment, the Rx Segment, and the Consumer Health Segment. During the fiscal year 2022, our market capitalization significantly declined. The decline was considered a qualitative factor that led us to assess whether an impairment had occurred.
Net cash used in investing activities of $3.2 million during the year ended June 30, 2022, was primarily due to $3.2 million payment of contingent consideration. 68 Table of Contents Net cash used in investing activities of $2.8 million during the year ended June 30, 2021, was primarily due to $15.5 million principally for the pay down of debt of Neos as part of the Neos Acquisition, $2.3 million for the Rumpus asset acquisition and $0.7 million payment of contingent considerations, partially offset by $15.7 million cash acquired due to the Neos Acquisition.
Net cash used in investing activities of $3.2 million during the year ended June 30, 2022, was primarily due to $3.2 million payment of contingent consideration.
The decline was considered a qualitative factor that led management to assess whether an impairment had occurred. Management’s evaluation indicated that the goodwill related to one of its reporting units within the BioPharma segment and Consumer Health segment was potentially impaired and performed a quantitative impairment test.
The evaluation indicated that the goodwill related to one of the reporting units within the Rx Segment and Consumer Health Segment was potentially impaired. We performed a quantitative impairment test. As a result, we recorded an impairment charge of $65.8 million for the year ended June 30, 2022.
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 goodwill and other intangible assets, net.
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales . ​ 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.
Net cash provided by financing activities of $30.3 million during the year ended June 30, 2021, was primarily from $28.8 million gross proceeds from public offering of our shares in December 2021, offset by $2.6 million in related offering costs and $16.3 million gross proceeds from issuance of our common stock under the ATM, offset by $2.3 million in related offering costs.
Net Cash from Financing Activities Net cash provided by financing activities of $8.9 million during the year ended June 30, 2023, was primarily from $3.4 million of net proceeds from our securities purchase agreement in June 2023, $9.1 million of net proceeds from our August 2022 equity raise, and $2.9 million net proceeds from our sales under the ATM Sales Agreement; partially offset by $2.3 million of net payments made under our short-term line of credit, and fixed payment arrangements totaling $4.3 million.
The increases were primarily driven by the addition of the ADHD product portfolio and associated sales and marketing efforts in March 2021. General and administrative During the year ended June 30, 2022, general and administrative expense increased by $5.7 million or 22%, compared to the year ended June 30, 2021, respectively.
General and administrative During the year ended June 30, 2023, general and administrative expense decreased by $2.5 million or 8%, compared to the year ended June 30, 2022.
We are underway with preparation activities for our PREVEnt Trial, a randomized, double-blind, placebo-controlled clinical study evaluating once daily enzastaurin in the treatment of VEDS. The trial is expected to begin enrolling patients by early 2023. On March 2, 2022, the European Commission granted orphan designation to AR101 (enzastaurin) for the treatment of Ehlers-Danlos Syndrome.
On March 2, 2022, the European Commission granted orphan designation to AR101 (enzastaurin) for the treatment of Ehlers-Danlos Syndrome.
These increases were partially offset by $6.1 million in payments of fixed payment arrangements, $2.7 million paydown on the revolving loan and $1.0 million repayment of term loans. Capital Resources Sources of Liquidity We have obligations related to our loan agreements, contingent considerations related to our acquisitions, milestone payments for licensed products and manufacturing purchase commitments.
Capital Resources Sources of Liquidity We have obligations related to our loan agreements, contingent considerations related to our acquisitions, 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 line of credit facility and cash generated from operations.
Gain (loss) from contingent consideration During the year ended June 30, 2022, net gain from contingent consideration decreased by $2.7 million, or 61%, compared to the year ended June 30, 2021. The gain from contingent consideration included a $1.4 million gain from the reversal of contingent consideration liability related to Tuzistra and ZolpiMist.
Gain or loss from contingent consideration We fair value our acquisition-related contingent considerations based on our projected results, any changes are reflected through income or expense. During the year ended June 30, 2023, the gain from contingent considerations decreased by $0.7 million, or 41%, compared to the year ended June 30, 2022.
The decrease was primarily related to licensed intangible assets that were being amortized during the year ended June 30, 2021 but have subsequently been divested or discontinued. Other income/(expense), net During the year ended June 30, 2022, other expense, net decreased by $1.2 million, or 58%, compared to the year ended June 30, 2021.
The decrease was primarily due to the contingent considerations (including CVRs) expiring or winding down during the fiscal year of 2023. Other (expense) income, net During the year ended June 30, 2023, other expense, net increased by $4.0 million compared to the year ended June 30, 2022.
We expect spending will be subject to material fluctuations between periods based on the timing of activities, including clinical and pre-clinical trials, of each program. Advertising and direct marketing During the year ended June 30, 2022, advertising and direct marketing expenses decreased by $1.0 million, or 5%, compared to the year ended June 30, 2021.
In addition, we recorded an inventory impairment write-off of $2.1 million in the Consumer Health Segment. Advertising and direct marketing (Consumer Health Segment) During the year ended June 30, 2023, advertising and direct marketing expenses decreased by $2.4 million, or 12%, compared to the year ended June 30, 2022.
Removed
SIGNIFICANT DEVELOPMENTS Business Environment The ongoing COVID-19 pandemic continues to impact the global economy and create economic uncertainties. We believe COVID-19 has negatively impacted the market for prescription products, disrupted the reliability of the supply chain, and impacted the ability and efficiency of conducting clinical trials.
Added
In connection with the Avenue Capital Agreement, we entered into an amendment to the Eclipse Loan Agreement.

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