Aytu Biopharma Inc (AYTU) 2015 Q4 法說會逐字稿

Good afternoon and welcome to the Aytu BioScience quarterly conference call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Josh Drumm with Investor Relations. Please go ahead, sir.

Thank you, Laura. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements.

All statements other than statements of historical facts contained in this presentation, including statements regarding our anticipated future clinical and regulatory events, future financial position, business strategy, and plans and objectives of management for future operations are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as may, will, should, forecast, could, expect, suggest, believe, estimate, continue, anticipate, intend, plan or similar words or the negative of such terms or other variations on such terms or comparable terminology.

Such forward-looking statements include, without limitation, statements regarding the intended use of proceeds of the recent offering, the potential future commercialization of our product candidates, the anticipated start dates, duration, and completion dates as well as the potential future results of our ongoing future clinical trials, the anticipated designs of our future clinical trials, anticipated future regulatory submissions and events, our cash -- our anticipated future cash position and future events under our current and potential future collaborations.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions including, without limitation, to the risks described in risk factors in the Company's Annual Report on Form 10-K filed today September 28, 2015 and in the other reports and documents we file with the Securities and Exchange Commission from time to time.

Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or to the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected by forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. We assume no obligation to update or supplement forward-looking statements.

At this time, it is now my pleasure to turn the call over to Mr. Josh Disbrow, Chief Executive Officer of Aytu BioScience. Josh, please go ahead.

Thank you, Josh. Good afternoon, everyone, and thanks for joining the call. We are pleased to host this, our first quarterly update conference call, now that we have fully established and now continue to build a promising and differentiated specialty company focused on urology.

This has been a very exciting and significant period for us, so I am looking forward to sharing some of the highlights.

However, prior to reviewing these highlights, I would like to ask Gregory Gould, our Chief Financial Officer, to review the key financials following today's filing of the 10-K. So Greg, please take it away.

Thanks, Josh. As the CFO of Aytu, I want to quickly review some of the key financial numbers of the Company as of June 30, 2015, and to give you an update on where we see some of these numbers going in the future.

As of June 30, 2015, we had $7.4 million in cash and current assets of $8.1 million. Total assets were $18.2 million.

As an offset to this, we had current liabilities of $1.5 million, total liabilities of $2.6 million and total equity of $15.6 million. As of June 30, the Company has a current ratio of over 5 to 1 and common stock outstanding of 14.3 million shares.

Turning to the statement of operations, for the year end June 30, 2015 we had revenue of $262,000. The majority of this was earned from the process and products during the last 1.5 months of the fiscal year. We expect that revenues will increase in fiscal 2016 with the hiring of a new commercialization team.

We had a gross margin on product and services revenues of 50% that we expect should increase in the future as we offset FDA product fees by changing the manufacturing source of this product. The R&D cost was $3.4 million for the fiscal year. We expect that these costs will increase in fiscal 2016 as we start the Phase III Zertane trials in the US.

G&A expenses were $4.4 million for fiscal 2015. We expect that these expenses will continue to grow, due to the topline growth of the Company and the hiring of the sales force. The Company ended fiscal 2015 with a net loss of $7.7 million.

We are a company that is very efficient with our resources. We have a core team of less than 15 people and bring in outside help to support us when expertise is needed in special areas. So, based upon our current structure, we have funding which includes the $7.4 million cash as of June 30, the $5.2 million private placement funds that we received in July and August of 2015, and the $5 million continuing commitment from Ampio to take the Company through calendar 2016 and into the beginning of 2017.

With that stated, per the strategy that Josh has laid out, we are focused on becoming a fast-growing commercial -- commercially oriented specialty biosciences company. And with that, we will focus on making strategic acquisitions on new products, so we will have to be opportunistic in our future funding -- fundraising to make the strategy happen.

Let me now give the floor back to Josh.

Okay, great. Thanks, Greg. Appreciate the update. So now for a review of the business and some highlights from the first quarter and a half of the Company. It really was only a quarter and a half, as Greg indicated that we got in under the first fiscal quarter with our -- in our truest existence.

We are very proud to have completed the merger between Luoxis Diagnostics, Vyrix Pharmaceuticals and Rosewind Corporation to ultimately form Aytu BioScience. Just weeks after the completion of this merger, we changed the Company's name from Rosewind Corporation to Aytu BioScience, reflective of the Company's focus on specialty therapeutics, and subsequently changed the ticker symbol to AYTU, which is now trading on the OTC QB.

We decided to form Aytu around the promising late stage assets of the predecessor healthcare companies, Luoxis and Vyrix, where we believe having greater access to the capital market through Rosewind would accelerate development of these products towards profitability and commercialization. Specifically, the merger incorporated Zertane, a first-in-class treatment for premature ejaculation that is nearing commercial stage based on strong efficacy data to date, and the RedoxSYS system, which has CE Marking in Europe and medical device approval by Health Canada, along with its product line extension that is under development now for male infertility that we call MiOXSYS.

A primary focus of ours is to continue building a robust pipeline with additional late stage or commercial assets that fit within our commercial and current focus of urology and related conditions. To that end, shortly after completing the merger, we announced the acquisition of ProstaScint from Jazz Pharmaceuticals. ProstaScint is a biologic imaging agent used to detect the extent and spread of prostate cancer, which is an established brand, that is FDA approved and marketed in the United States.

This acquisition, therefore, marks the Company's first commercial stage product, and allows us to begin building immediate value for Aytu based on an attractive acquisition cost that enables the Company to now launch the sales force and relaunch ProstaScint properly to urologists in the United States. In fact, we've already generated our first sales of ProstaScint and we anticipate booking approximately $1.5 million in revenue in our fiscal 2016. This means we are now officially a revenue-generating Company with a product that positions Aytu for significant growth in 2016 and beyond. Importantly, revenue from ProstaScint will cover the cost of our sales organization and offset some of our late stage development costs as we advance Zertane and MiOXSYS towards commercialization.

To further accelerate Aytu's growth, we recently raised $5.175 million in the form of a convertible note. We will use proceeds from this capital raise to initiate the first Phase III clinical trial for Zertane, advance the MiOXSYS system through FDA clinical trials for male infertility, begin building out our commercial infrastructure and potentially acquiring our licensing other on market urology assets.

We were also pleased to have registered more than 2 million common shares owned by existing stockholders and issuable to certain warrant holders in Aytu's predecessor companies, most notably Luoxis Diagnostics and Rosewind. While we are proud to honor our commitment to existing shareholders before the merger, having these shares trading in the open market also enables some initial stock liquidity.

To further enhance our stock liquidity and broaden our shareholder base, we are following through on our strategy to list Aytu on a national stock exchange. We have met recently with both NASDAQ and the New York Stock Exchange to initiate the process and we expect to pursue an up listing of our stock when practical, and when it is in line with our overall growth strategy.

Another key part of that commercial growth strategy was the launch of a commercial infrastructure, which is why we are excited to announce the appointment of Jonathan McGreal, as our Vice President of Sales, just two weeks ago. Jonathan joins us now and he is officially in place as a key member of the management team. Jon, Jarrett and I worked together previously at Arbor Pharmaceuticals where most recently Jon operated as the director of sales. Under his leadership, the sales organization grew from 10 sales representatives to our 400 and he played a significant role in Arbor's explosive revenue growth over a five-year period. Jon joined Arbor as the Company's 14th employee and served in leadership from the very beginning across most commercial functions, including direct sales management, sales training operations, leadership development, marketing, new product development and, of course, executive leadership of the sales team.

So as we plan to establish our initial sales force for Aytu, hiring four to six people in the US in the coming quarter, we expect Jon's expertise to really be invaluable.

To complement the hiring of Jon, we have added several other key people that will help the Company as we develop our therapeutic and diagnostic pipeline and expand our commercial capabilities. In the last several months, we have hired a team of highly experienced people in international business development, sales and marketing, clinical development, regulatory and quality affairs and financing among others. In short, we've now become a fully integrated specialty pharmaceutical company.

So as you can hear, we are poised for significant growth and expect to reach several milestones over the coming quarters. In fiscal 2016, we plan to submit an investigational new drug application or IND for Zertane which will be followed by the initiation of our first pivotal Zertane study in the US. We have hired an experienced clinical trial manager who will manage all day-to-day operations and coordinate our trial for Zertane. We look forward to giving additional guidance on the timing of this study after the FDA accepts our IND.

For our RidoxSYS system, we are currently working with researchers at the very prestigious Cleveland Clinic in male infertility, specifically on MiOXSYS, the new line extension for male infertility. We are scheduled to present initial clinical data on infertility at the upcoming American Society for Reproductive Medicines annual meeting. We will present results from two key studies utilizing MiOXSYS in the form of poster presentations.

Later this year, we expect to initiate the FDA process for MiOXSYS and to begin formal clinical studies in calendar 2016 under the FDA's 510-K de novo process. Both the Zertane and MiOXSYS programs are progressing very nicely and we?ll provide guidance on both as they continue to advance.

Finally, we plan to recruit a top life scientific advisory board comprised of seasoned experts who will serve as strategic resources to Aytu as we continue to develop our robust pipeline focused on urology and reproductive health. Ultimately our goal is to become a leading specialty healthcare company with a strong footprint in high-value areas of urology and related conditions.

There will be much more to share as we progress through 2016 and we look forward to providing you with updates as things develop. We are excited about what lies ahead for Aytu and we are proud of the rapid progress we've already made today. So, thanks for your interest in Aytu.

So that concludes our prepared remarks for today. I would now like to return the call to Laura so we can take any questions that may have come up along the way. Happy to take any questions.

(Operator Instructions) Sherry Grisewood, Dawson James.

Congratulations on much progress in the last few months and executing terrifically on your business plan. You -- I believe there was an earlier comment when you went through your financials about offsetting the FDA product fees by using a different source of manufacturing for ProstaScint. Did I hear that correctly?

Yes, you did. This is Greg. We are actively going out and finding a new supplier of the ProstaScint product. And with that, the former owner of the product put the entire FDAP against this one product, which was about $727,000 per year. And basically going forward, we see that we should be able to lay that over several different products with our new manufacturer.

Okay. And how many procedures last year actually involved ProstaScint?

How many procedures? Well, as you understand, Sherry, and it is good to talk to you by the way, and thanks for your kind words, obviously as you know, ProstaScint is an imaging agent.

Right.

That performed as a way to stage the relative spread of the prostate cancer itself. And so what we are excited about is, given the huge number of prostate cancer patients around the world, this is a very, very small number of ProstaScint procedures or scans that are done on an annual basis. The number -- ultimately, there are about 20 to 22 scans done per week. It has been at that level for the last six or so months prior to the acquisition, and we have actually already seen a tiny little update without even having brought Jon's team fully on board yet.

In fact, Jon is just at the point now of extending offers and so forth. So we expect that to start to grow here in the relative near term.

So if you put it in the context of 223,000 men diagnosed annually, the number of essentially 52 -- of 80 units a month that are being sold, 80 tests that are being done on a monthly basis, it is not even scratching the surface. So we think there is huge opportunity.

Jazz did not focus on this product at all. I think it is important to note that when Jazz acquired the company that owned ProstaScint, that was done in June 2012, almost immediately they shelved all promotion and the product sales dwindled. It was doing about 10 times what it is now with relatively little promotion even before that. So we think there is big upside with ProstaScint.

That's great. Thank you.

(Operator Instructions) And showing no further questions, I'd like to turn the call back over to management for any closing remarks.

Thank you, Laura. I'd like to thank you all for joining us on today's call, relatively short and sweet with our first one out of the gates here, but happy to have a lot of great things already behind us, and frankly, we think a lot of even better things ahead of us. So we've got some exciting momentum since establishing the Company just a few short months ago, if you recall. So as we move forward with the launch of our commercial infrastructure, we will continue to pursue and even potentially acquire additional assets we believe will add significant value for the Company, as well as explore relationships with potential commercial partners.

Additionally, now that the Company is established with a public float of shares, we are active pursuing ways to introduce the Aytu story to new investors and to deliver additional liquidity and shareholder value, including an uplisting of Aytu stock in 2016 as I mentioned.

So with all that said, thanks very much for your support. Thanks for joining the call today. We look forward to updating you here in the very near future. Thanks, everyone. Have a good evening. We will talk to you soon. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.