Aytu Biopharma Inc (AYTU) 2016 Q4 法說會逐字稿

Good afternoon and welcome to the Aytu BioScience fiscal fourth-quarter and fiscal year 2016 conference call. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Joshua Drumm of Tiberend Strategic Advisors. Please go ahead.

Thank you, Angie. 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 made during this call including statements regarding our anticipated future commercial activities, clinical and regulatory events, future financings and 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 unpredictability of the size of the market for and market acceptance of any of our products and product candidates, the potential future commercialization of our approved products and product candidates, our need to obtain additional funding and our ability to obtain future funding on acceptable terms, our anticipated capital expenditures and our estimates regarding our capital requirements, the ability to meet ongoing conditions of the Lincoln Park Capital agreement in order to access the financing under the agreement, the ability to have Aytu common stock listed on a national securities exchange, the anticipated start dates, durations and completion dates as well as the potential future results of our ongoing and future clinical trials, the anticipated design of future clinical trials, anticipated future regulatory submissions and events, obtaining reimbursement by third-party payers, 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 1, 2016, 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 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 in the 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.

Thanks, Josh. Good afternoon, everyone, and thanks for joining us for our fiscal fourth-quarter and full-year 2016 business update.

On this call we're going to recap some of our recent accomplishments and provide an update on the exciting progress we continue to make across our portfolio of urology focused commercial products.

Most notably, we are now just one month into our product launch on Natesto which as we highlighted on our prelaunch update call in July, we expect will be the primary value driver for Aytu in the near term. I look forward to discussing some positive insights from our early launch experience and to reiterating why we are so excited about this unique product and the large commercial opportunity it presents.

Since the merger to form Aytu just last year, we've grown the Company into what is now a rapidly maturing commercially driven specialty pharmaceutical company with sales that are growing substantially over the past three fiscal quarters. Our focus remains on delivering differentiated products that fulfill major medical needs in large markets primarily to urologists.

With the acquisition of US rights for Natesto, we achieved a critical mass of products and are now out there in the field in the US with three branded revenue-generating products that address major segments of the urology market.

To be sure, 2016 was a very good year for us as a Company. We had high aspirations as we set out to accomplish a range of activities having just become Aytu in June of last year. At that time we laid out our strategy to go out and acquire or license multiple urology products. We did that.

In fact in a span of less than 11 months, we acquired three products. First, ProstaScint then shortly thereafter, Primsol and most recently, Natesto.

We also said we would raise additional capital to spark our operation. We did that. With a strategic investment from Ampio Pharmaceuticals and a convertible note of over $5 million, we launched Aytu with enough capital to move us forward efficiently and in meaningful way.

We also said we would register the underlying shares from the convertible note offering via an S-1 registration statement. We did that in almost record time. And we filed multiple S-1s following that and converted all of the $5 million convertible note into equity resulting in a strong balance sheet for the Company at our early stage.

With the earlier acquisition of the initial product line of ProstaScint and Primsol, we said we would hire a startup salesforce and a commercial leadership team. We did that too. We hired our VP of Commercial Operations and a select group of seasoned pharmaceutical sales leaders back in November and grew ProstaScint and Primsol revenues over 40% in just their first two quarters in the field.

Subsequent to that, we expanded our sales team as we said we would within just 75 days of the signing of our Natesto licensing agreement.

We also said we would expand our Board of Directors and put in the necessary corporate government parameters required for listing our stock on a national exchange. Well, we've done that too as we built a Board that any Company would be proud of.

In short, we've done what we said we would do. We set a high bar for 2016 and not surprising to us at least, we exceeded some lofty goals and have executed successfully on our plans. I'm proud of the management team and the entire growing group of people here at Aytu as they have done great things in 2016.

2017 is now a year to grow and push ourselves farther and harder. It's a year to fully establish ourselves in the urology marketplace with a suite of unique marketed products and we're well on our way.

So now it comes down to execution and we are dedicated to executing and to achieving commercial success with a particular emphasis on Natesto. We're on track to achieve substantial revenue growth and ultimately profitability and our plan is to continue driving towards these milestones as efficiently as possible.

We're already on a strong growth trajectory, one that we expect to be further bolstered by the successful commercialization of Natesto. The proof of this rapid trajectory is the fact that we grew revenues nearly tenfold from fiscal 2015 to 2016 and we fully expect that revenues will grow by a large percentage for fiscal 2017 as we launch Natesto and continue to grow ProstaScint and Primsol as well as ex-US sales of our diagnostic platform, MiOXSYS.

In fiscal 2016, we booked revenues of almost $2.6 million, up from $262,000 in revenue a year earlier which was just over what we had projected. This $2.6 million figure represents consistent growth in net revenues quarter over quarter over quarter.

In Q2, we booked $474,000 in net revenue. In Q3, we booked $669,000 in net revenue and in Q4 that just ended on June 30, I'm very pleased to share that we booked our highest revenue ever in one quarter at just under $1 million in total net revenues, $937,000 to be exact. This is truly impressive growth by any measure and I'm proud of the job our team has done in both bringing in these revenue-generating products and demonstrating substantial growth of nearly 100% from Q2 to Q4.

Again, these revenues are pre-Natesto launch so we're looking forward to adding to this promising trajectory and building our book of business over time.

Before I go into detail on our strategy, I'd like to give you a snapshot of our product portfolio as well as to go over some corporate and financial highlights. I will also then hand it over to Greg Gould.

As I mentioned, we transformed the Company in late April when we secured the US rights to Natesto. As the only FDA approved nasally administered testosterone product, Natesto is a game changer for Aytu given the uniqueness of its product profile and the size of the US market opportunity. Approximately 13 million US men suffer from some form of hypogonadism or low T which represents a US market that exceeds $2 billion in annual prescription sales. We believe that this market will continue to grow and expect that Natesto will be well received by prescribers and patients based on its clear advantages over the current competition than any new potential near-term entrants.

While we're obviously very early into the product launch for Natesto, our confidence in this product has only grown stronger based on the positive response we are receiving from the field so far every day. I will go into more detail on this shortly.

We are already growing revenues for our other US marketed products, ProstaScint for prostate cancer detection and staging, and Primsol for urinary tract infections. While we are prioritizing Natesto to a very high degree going forward as it has real potential to become a major product in its category, we remain enthusiastic about the potential for these other products and will continue to market them to urologists through our existing sales channels and we will continue to support our relationship with Allegis Pharmaceuticals which I'll remind you has rights to the pediatric market for Primsol in the US.

Finally, we are continuing to develop MiOXSYS, our proprietary device for the assessment of male infertility. We've generated a significant body of clinical data from around the world that validates the potential clinical utility of the MiOXSYS system as an advanced tool for assessing oxidative stress in semen which is a key underlying cause of idiopathic male infertility.

We're close to initiating our US-based FDA sanctioned clinical study for MiOXSYS which is designed to support clearance of the diagnostic system through the de novo 510(k) pathway. While we are primarily focused on commercializing our currently FDA approved urology products in the US, MiOXSYS represents a significant global product opportunity that we're eager to continue to pursue in major markets around the world. Some small initial revenues are already coming in for MiOXSYS outside the US despite the deploying a relatively small commercial footprint and a focused distributor base against the product since the product's CE Marking just over six months ago.

As part of our overall growth strategy, we're also continuing to work towards uplisting our stock to a national stock exchange. Listing on a national exchange will help build and enhance long-term shareholder value by increasing our visibility and liquidity and driving additional interest among a more diverse shareholder base. We completed a significant step towards this goal when we executed a reverse stock split in June of 2016 which was required to meet the listing requirements for our target exchanges.

As I mentioned, we also recently added two independent members to our Board of Directors which is also a requirement for both NASDAQ and the New York Stock Exchange so we now have three fully independent directors and a professional experienced high-caliber Board of Directors.

We've also built out our corporate governance and established our audit, nominating and governance and compensation committees. We've additionally developed and adopted the full spectrum of corporate compliance policies relating to ethics, corporate governance, whistleblower policies and procedures and the like.

From the governance and corporate structure standpoint, we are now as well positioned as we believe we can be. We are looking to uplist as soon as possible and expect to move into the final phase of uplisting later this year.

With that anticipated uplisting, we expect to raise additional growth capital to continue to grow our product sales and ultimately to support the long-term growth of the Company. We have enough cash to get us sufficiently into the launch phase in Natesto but we want to be prudent to ensure adequate resourcing as we scale our efforts and increase sales.

Moving on to some financial highlights now. As you saw from the 10-K we filed today and included in the press release this morning as of June 30, 2016, we had $8.1 million in cash and cash equivalents which as I said is sufficient to execute on the early Natesto product launch which is now underway.

Though we are not giving specific detailed revenue guidance at this early stage in our commercialization, going forward we expect part of our operational burn to be offset by rent and revenues across our portfolio as we approach potential cash flow breakeven.

Additionally, and as you likely heard, in late July we entered into a $10.5 million stock purchase agreement with Lincoln Park Capital which provides us with additional balance sheet strength and flexibility to support our rapidly progressing commercial activities.

In terms of revenues as I said, we booked nearly $2.6 million in net revenues during fiscal 2016 which consisted primarily of combined sales of ProstaScint, Primsol and the beginnings of some very early ex-US MiOXSYS sales. Recall that at the beginning of 2016 we only had one product, ProstaScint in the bag with Primsol and MiOXSYS sales coming on board in the second and third fiscal quarters respectively. So this revenue again doesn't even represent a full year of combined sales for these products and again, it does not include Natesto yet.

This $2.6 million sales number represents huge revenue growth compared to fiscal 2015 when we booked $262,000 in revenues, a tenfold increase in net sales. Also very importantly, we have seen significant revenue growth in Q2 when we acquired Primsol to Q3 and then to Q4. All sales trends are up and to the right before we even launch Natesto. Again we booked sales of $469,000, $669,000 and $932,000 in quarters two, three and four respectively. We're excited about this trend and believe it's a sign of much more growth to come.

We're looking forward to continuing to grow these products and beginning this quarter we are already recognizing revenue for Natesto which as I've mentioned, we expect to be the primary driver of revenue growth going forward.

To reiterate, we fully expect to see a very significant revenue growth in fiscal 2016 to fiscal 2017. We are truly a growth oriented Company now and I'm extremely pleased with the rapid progress to date.

Despite our rapid growth and our buildout of our commercial infrastructure, we've maintained a healthy financial position for an emerging Company at our stage that allows us to continue executing on our strategy while holding the best interest of our shareholders. We take pride in how we've been able to grow the business and position Aytu for the creation of significant long-term value and we expect to continue operating under this strategy as we focus on meeting our commercial milestones.

Unlike many other growth stage companies, we haven't gone out and raised $50 million to $70 million to build out an oversized sales force with the hope that a product might take off. Rather we are taking a staged and efficient approach to our buildout. We will continue to seek the best terms available for our anticipated financing and ensure that we are bringing in only what we need to accomplish our goal of uplisting to a national exchange but more importantly, fueling our growth in the near term.

Our CFO, Greg, will provide a more detailed overview of our financial position shortly. But first I want to continue to highlight some of our recent progress.

On July 25, so just over one month ago, we launched Natesto in the US with our newly expanded sales team. Natesto is a very unique product and we're excited to now be in the field promoting it as our lead asset. In fact it's really our only asset at this point.

Natesto is the only FDA approved nasally administered testosterone replacement therapy or TRT and it does not carry a black box safety warning relating to the risk of unintended skin transference of testosterone to a female or a child. Current market leaders like AndroGel, Axiron and really all topical TRTs carry such black box safety warnings and require substantial precautions to be taken as part of a lengthy and cumbersome application process.

With this safety distinction and the remarkable speed and simplicity of use via inconspicuous nasal application, Natesto is an attractive solution for men with low T who are on the go and don't have time to undergo a laborious application routine or worry about potential adverse reactions caused by accidental transference to their loved ones.

Natesto is a low dose nasal gel formulation of testosterone that is discreetly applied directly onto the nasal mucosa where it is rapidly absorbed by the body. Over 90% of men taking Natesto over a 90-day period demonstrated normalization of serum testosterone levels which is in line with the efficacy seen with the other marketed products yet without all the hassles and the potential transference risks I just mentioned and without the inherent problems associated with in-office injectables or implantables.

No other TRT product currently marketed or near approval can claim this level of convenience and safety. So over time we believe Natesto has the potential to become a major product in this $2 billion plus category.

Additionally, the dosing regimen of Natesto closely mimics the natural pattern of testosterone production in the male body unlike other topical TRTs that are applied less frequently. They peak and then wane throughout the day or with injectables or implantables, they spike upon injection then wane over weeks or months.

We view this dosing as a key advantage for Natesto versus all other testosterone products on the market and this messaging has already been met with a very positive response from our prescribers.

As we mentioned on our launch call in July, Natesto inventory had already been shipped into the wholesaler and retail chain. We had identified small existing base of Natesto prescribers and on the reimbursement we had found that more than half the commercial payers in the US are already covering Natesto on their plans.

With our team of sales professionals in place now and out in the field actually a week earlier than anticipated, we are now out there calling on the most important and influential low T prescribers in the US and are taking advantage of the early prelaunch activity, stocking levels and reimbursement and we are of course augmenting these with our own programs and initiatives, one of which is a program we call Assure Rx which I will touch on shortly.

Augmenting these commercial efforts, we have continued to communicate the value of Natesto broadly within the academic and scientific community. In July, Dr. Alan Rogol from the University of Virginia on behalf of Acerus, our partner, presented a poster highlighting peer-reviewed clinical data for Natesto to urologists at the Canadian Urological Association annual meeting. The data confirmed the pharmacokinetic safety and efficacy of Natesto for restoring normal T levels in men even in patients suffering from seasonal allergies. Essentially this study showed that having a runny or stuffy nose doesn't adversely affect the testosterone absorption profile of our product which addresses the potential concern that a patient or doctor might have when considering a nasally administered product. Allergies simply don't affect the efficacy of Natesto.

So Natesto is appropriate even for low T patients with allergies. We will continue to build relationships with key opinion leaders in hypogonadism around the country and publish additional data supporting the efficacy and safety of Natesto and new potential applications which will help us establish its broad clinical utility as we market the product to additional potential prescribers. All of these efforts with KOLs around the country are well underway.

So in the first few weeks in the field with Natesto, we are very encouraged by the positive response we've seen from the field. We are currently calling on and targeting 5,500 of the highest prescribers of TRTs across the country primarily urologists and some endocrinologists and some other non-urologists TRT specialists. We're covering the waterfront.

Our sales team is reporting consistent and very positive feedback to our positioning of Natesto as well as strong indications that many of these physicians are already starting to write Natesto prescriptions for their patients.

We have seen strong week over week national prescription growth through our first four weeks of the launch based on IMS data and over the last two weeks in fact we started to see co-pay coupon redemptions through our co-pay buydown program and through Assure Rx that are really unmatched.

Prescriptions are up in each of the four weeks since our team hit the field July 25. In fact scripts have more than doubled in the four weeks since we formally hit the field. Further from the second to last data week which was the week of August 8 to the following week of August 15, scripts went up another 50%. Again, we are early in the launch process but we are very encouraged by what we're seeing.

The positive anecdotes from the field are translating into scripts which will of course soon translate into increasing factory sales which we're starting to see.

The pharmacy co-pay program trajectory is also very exciting to see. We put two primary pharmacy programs in place to ensure that patients are able to effectively access Natesto when his physician prescribes it.

First is a traditional point-of-sale coupon for patients with commercial insurance that lowers the patient's co-payment on each Natesto prescription. This would be for patients going to a traditional pharmacy and utilizing their prescription drug benefit or insurance card. Our co-pay card buys down his insurance co-payment or out-of-pocket expense whenever he has commercial insurance coverage.

We also have implemented a program we call Assure Rx whereby in each sales territory we have engaged with local innovative independent pharmacy partners who are willing to assist Natesto patients with any reimbursement questions or challenges that arise while helping to reduce a patient's out-of-pocket co-payment even if the patient has no insurance coverage.

The response to and utilization of both programs has been frankly exceptionally positive. These co-pay card redemptions are of course acting to a large degree as surrogate indicators of Natesto prescriptions and ultimately sales. So again, these sales trends -- as these emerge they give us enthusiasm for what lies ahead for both scripts and factory sales.

We are very encouraged to see that in our most recent two data weeks, these co-pay coupon redemptions are already on par with Endo's 2016 high-water mark for coupons. The week of August 19, we hit a 2016 weekly high for co-pay card redemptions and the following week so the week of August 26, we topped that number and hit another new 2016 weekly high.

We don't yet have script data for the week ending August 26 but we have high expectations for scripts that week. I will remind you that we've accomplished this growth trajectory within just one month of our launch and with one-third of the number of people that the previous marketer had promoting this product.

The difference is quite simple. We have a distinct primary P1 focus on this product focusing on the right targets and a sales force that is fully 100% dedicated to the success of Natesto. Natesto is and will be our number one priority and that prioritization is already starting to pay off.

This speaks well to our strategy and why we believe we are the best equipped Company to drive success for Natesto. Again, it's still very early on in the launch. Our new people are just getting out there meeting their customers, learning their territory dynamics and in most cases have only seen their targeted doctors once or twice. Historically as you likely know, it takes a salesperson at least six to seven calls to really start making a noticeable impact on their prescribers. So this early success after just one or two sales calls stands to only get better.

However at a national level, we've seen substantial prescription growth week over week over week over week with last week's prescriptions nearly doubling the first week's total. This is a very, very good start.

Another reason why we are encouraged by our early data is that we have already booked sales to the major wholesalers despite the fact that two of the three were very well-stocked prior to our field launch. We didn't anticipate any real sales through these channels until at least September or October so we are a little ahead of where we thought we would be from a wholesaler purchasing standpoint. Kudos to our channel management team for getting these initial orders placed and getting us some early WACC dollars in on Natesto.

So all signs on the factory sales front are positive as well.

It's also important to note that the TRT market in the US has grown considerably as well. Per IMS, at data we just looked at, in the last quarter alone the market for TRTs is up 5.5% so we're entering this large growing market at the right time.

Our VP of Commercial Ops, Jon McGreal, is dedicated to leading this commercial effort and Jon and I have been in lockstep with the rest of the management team and the commercial leadership team every day during this launch period. Jon is out of the office today and he's out driving performance so he won't be joining us on the call.

Our commercial organization and the whole Company is excited about this product and determined to make it a success. We can literally feel it taking off every day. Over the coming quarters we look forward to providing further updates on the Natesto launch and to gaining steady momentum for this product over the years to come.

To reiterate a point I made on our July Natesto call, we really won't have a reliable prescription trend until later this fiscal year, likely well into our fiscal Q2 or more likely in Q3. Thus on our next quarterly call, we expect to have more detailed sales and prescription data to share. At this point we can only provide directional data which currently leads us to believe we are heading in the right direction.

Irrespective of the level of data provided, things are on a positive trajectory on top of what has already been some explosive revenue growth quarter over quarter and certainly year over year.

I've discussed Natesto as the centerpiece in terms of near-term value for Aytu but we are also committed to continuing to build revenue for ProstaScint and Primsol. We will accomplish this by focusing strategically on the highest historical users of these products. We are still also early in the relaunch of these products but we are very pleased with our progress.

As it relates to ProstaScint, our Canadian research partner, Hybridyne Imaging Technologies, recently initiated enrollment in patient dosing in an open label prostate cancer study that may potentially expand the utility and application of our imaging agent ProstaScint. Using Hybridyne's ProxiScan transrectal camera in conjunction with ProstaScint may result in enhanced detection of local prostate cancer which could improve patient outcomes.

We're excited about this collaboration because if we are able to generate additional clinical data that supports the use of ProstaScint, we may be able to leverage it around the world and at some point potentially supplement our product information here in the US.

This is also our first clinical collaboration for ProstaScint outside the US and we are excited about the prospect of partnering ProstaScint in other key markets outside the US where efforts are already underway.

We are also looking to maximize the opportunity for Primsol which is the only FDA approved liquid oral formulation of the gold standard antibiotic trimethoprim used for treating uncomplicated urinary tract infections or UTIs. This is another product that has a differentiated profile but with well-characterized efficacy as a guideline-backed therapy.

As discussed on our last quarterly call, we are supplementing our urology sales through a strategic co-promotion agreement with Allegis Pharmaceuticals which is focused on marketing Primsol for the pediatric indication of acute otitis media.

I will also highlight our progress with our late stage development asset MiOXSYS, a breakthrough diagnostic device for male infertility that offers rapid and convenient oxidative stress testing in semen. In parallel with our ex-US commercial efforts, we have continued our work with the Cleveland Clinic to develop MiOXSYS for the US fertility market. I'm pleased to say that we have generated a robust and growing body of clinical data supporting this product and have actually begun to generate some initial product sales outside the US.

In July, MiOXSYS academic and clinical collaborators presented three posters demonstrating the potential of MiOXSYS to be used as an aid in the diagnosis of infertility in men during a very successful week spent in Helsinki, Finland at the European Society of Human Reproduction and Embryology annual meetings. Studies like these which highlighted the clinical utility and unique advantage of MiOXSYS are key to its ultimate adoption by urologists and andrology laboratories around the world and ultimately in the US following potential clearance by the FDA.

Currently there is no easily accessible rapid option to measure oxidative stress in semen and Aytu is committed to conducting research to potentially validate the ability of the MiOXSYS system to fill this gap. This research has yielded some very exciting results and the early ex-US revenues demonstrate a real market demand for an innovative tool like MiOXSYS.

We expect to initiate the FDA process for MiOXSYS and begin formal clinical studies by the end of this calendar year. Right now we are finalizing a study protocol in conjunction with the FDA under the 510(k) de novo process and are in active communication with the agency. We will provide an update as soon as our plans are finalized and the study is ready to start.

Perhaps most significantly for MiOXSYS, we published our clinical findings in the high-profile peer-reviewed medical journal, Fertility and Sterility. It's really a Who's Who of journals in the infertility world. We expect that this initial publication will help generate interest around the MiOXSYS platform as a highly convenient powerful testing platform for retained use.

We believe the value proposition of MiOXSYS is highlighted brilliantly in this article and is based on its ability to distinguish men with good semen quality from those with poor semen quality in a much simpler and cost-efficient manner than what is in use today.

MiOXSYS was also featured recently in another high-profile publication, in this case in a dedicated chapter in an andrology textbook focused on male infertility which was authored by the renowned Dr. Ashok Agarwal of the Cleveland Clinic. This textbook presents the basic and advanced approaches to evaluating male infertility and may soon be regarded as the best in the field.

Having MiOXSYS featured in its own chapter in this textbook is fantastic exposure for the product and may further support our commercial efforts upon FDA clearance.

Finally, we have advanced our efforts to monetize MiOXSYS outside the US where it is a CE Marked product. This quarter we entered into agreements with five leading European specialty medical distributors that were chosen for their experience in the commercialization of reproductive health products and their strong presence in countries with a significant market opportunity for male infertility products.

We will continue to build our distribution network for MiOXSYS in parallel to our clinical developments here in the US and we will update you as these develop.

So before I continue and we open it up for questions, I will hand it over to Greg Gould, our CFO, who will now address a few financial details relevant to the quarter and specifically to the fiscal year ended June 30, 2016. Greg?

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, 2016 and to give you an update on where we see some of these numbers going in the future.

As of June 30, 2016, we had $8.1 million of cash and cash equivalents on the books. And total current assets of $10.1 million and total assets of $24.3 million offset by our current liabilities of $10.1 million which has increased over the prior quarters due to the $5.4 million related to the Natesto payable.

Total liabilities as of June 30, 2016 was $14.3 million and total equities was $10.1 million. As of June 30, the Company has a current ratio of 1 to 1 and common stock outstanding of 3.7 million shares.

Turning to the statement of operations for the year end June 30, 2016, we had total revenue of $2.6 million with the majority of the revenues coming from our ProstaScint and Primsol products as well as an uptick in our licensing revenues due to the accounting treatment related to Zertane. Total revenues increased by nearly 900% over fiscal 2015 while product revenues increased over 1000%. We expect that revenues will continue to increase in fiscal 2017 with the launch of the Natesto product and the hiring of an expanded commercialization team.

During the year, we had a gross margin of 53% which we expect should increase in the future as we offset certain set period cost over a larger revenue stream. The R&D cost for the year was $6.3 million which was driven by the manufacturing tech transfer of ProstaScint which is now nearing its completion. We expect that R&D costs will decrease as we focus more on our commercialization operations in fiscal 2017.

Sales and G&A expenses were $8.8 million for the year. We expect these expenses will continue to grow due to the top-line growth of the Company and the expansion of our salesforce.

We had non-cash impairment and amortization expenses of $8.2 million during fiscal 2016 which were mainly driven by the $7.5 million impairment of the intangible Zertane asset.

Interest expense and other for the year was $6.5 million of which $4.9 million related to the non-cash beneficial conversion feature of the derivative related to the $5.2 million convertible debt that converted into stock in February and May of 2016. The Company ended fiscal 2016 with a net loss of $28.2 million of which $15.7 million related to non-cash items. During the year ended June 30, 2016, we used $10.7 million in net cash from operating activities. We expect this burn to start to decrease in the second half of fiscal 2017 as our revenues start to ramp and offset the Company's expenses.

As Josh has stated, subsequent to year-end, we had entered into a stock purchase agreement with Lincoln Park which they have agreed to purchase up to an additional $10.5 million of our stock during the next three years. Based upon our current cash on hand, we have adequate capital to continue operations into the second quarter of fiscal 2017 and we will need to raise additional capital to continue our operational growth. As of today, we have 5.1 million shares outstanding so based upon today's closing price of $3.90, we have a market cap of just under $20 million which we consider to be low for a Company with three marketed pharmaceutical products in the US.

Per the strategy that Josh has laid out, we are confident in our ability to raise additional capital in fiscal 2017 and we will be opportunistic in our future fund-raising activities.

Let me now give the floor back to Josh.

All right, thank you, Greg. So to conclude, we remain very focused on building momentum for our revenue generating portfolio of products and we are pleased with the progress we have made in a very short amount of time since our founding in mid-2015.

The key elements of our growth strategy include launching Natesto in the US for the treatment of low T with our direct sales force and then further expanding the commercialization of ProstaScint for the staging of both newly diagnosed high risk and recurrent prostate cancer patients, further expanding the commercialization of Primsol for the treatment of uncomplicated UTIs and establishing MiOXSYS as a leading in vitro diagnostic device for the assessment of male infertility.

We also plan to be opportunistic in evaluating additional marketed products and late stage development assets within our core urology focus that can be efficiently marketed through our growing commercial organization.

Our management team has extensive experience across a wide range of business development activities and have in-licensed or acquired products from large, midsize and small enterprises in the US and abroad. Through an assertive product and business development approach, we expect that we will build a substantial portfolio of complementary products.

But in the immediate term, I reiterate that we remain focused on really driving the sales of our current book of business with a distinct focus on Natesto. Again we are pleased with the year that was 2016 and we are now well positioned for continued growth and success across multiple fronts for Aytu in 2017.

So that concludes our prepared remarks. I would now like to turn the call over to Angie to take any questions we might have. Angie?

(Operator Instructions). Stephen Dunn, LifeTech Capital.

Good afternoon Josh and Greg. Thanks for taking my questions. Can you hear me okay?

Hi Steve. Thank you. Thanks for your call.

It's a shame Jon is not on the call. He should be on these calls.

I guess on the sales, the sales effort, again the market is dominated by AndroGel versus Natesto. Is the primary thrust against non-AndroGel or is it just going at any position that's prescribing testosterone replacement therapy?

Yes, good question and the strategy is to go after the entire TRT market. What you'll find quite frankly is there is not despite the large market share of AndroGel, there is not an overwhelming preference for AndroGel frankly. They have just been the incumbent for so long. So doctors are pretty quick to put the topicals all together and really modestly differentiate between the two and it comes down to things like physician preference, if there is a co-pay card they like, if there is a pharmacy program or reimbursement situations that are different or better for one versus the other. We are not distinctly targeting AndroGel but by virtue of the fact that it is primarily a topical market that is obviously the key benefits and features of the product that we present stack up very well most notably against the topicals by virtue of the fact that it doesn't have a risk of transference.

That having been said, there is a distinct patient disdain for the injectable, the inconvenience, frankly the pain and just the fact that you really don't get any sustained duration of effect. So both are open markets for us. AndroGel is not necessarily the first word out of our mouth but by virtue of the fact that it's the market leader it is something that we expect would get fairly easily converted with the right message, the right number of times to the right customer.

What's the primary push back that you're getting overall if you can answer this, it's more of a Jon question. But is it pricing they don't -- just don't want to change or existing relationships with the reps even? What's the number one push back?

There's not really any overwhelming push back. It's very simply just the inertia that exists in pharmaceutical marketplace. There are products that they are used to prescribing, products that they are comfortable prescribing. There's not a product that they are necessarily married to. It's just the fact that this is what they have done for the better part of 20 years.

So we are very encouraged that when we present the data, present the product to physicians they are quite open to it and really are intrigued by the fact that you've now got a better option that is as effective as anything else out there with the ability to truly mimic a man's physical production of testosterone which does peak and valley during the day and that's well-established for many, many years.

Doctors like that fact so there is not any ready push back other than just the fact that it's a relatively new product and it's a concept that just needs to be introduced. The nice thing is we have a lot of products like Flonase and Nasacort that are now over-the-counter. Nasal administration is not something that is perceived as totally off the reservation. It has become readily accepted as a very efficient, very effective mode of administration and we feel very good about the early feedback we are getting from the field.

I guess because it's a complicated deal that Acerus and doing all of that, I want to look forward over the next 12 months not so much on sales but on inventory. I guess can you tell us without giving a sales forecast, is your existing inventory enough to supply your needs for the next 12 months?

I think you're asking our inventory that we have currently at our warehouse or that stage in the channel -- let me make sure I understand your question, Steve.

In other words, what's showing up -- how about this, maybe it's more for Greg. What's on your balance sheet for inventory. It doesn't show on June 30 but what's there right now, is that enough to fulfill everything for 12 months or --

Yes, we have adequate

Yes, for the next 12 months, yes, we do have adequate inventory.

One of the reasons that we are being very clear to not guide on revenue is because there was a fair amount of inventory loaded into the channel by Endo. That's something we've established and have reiterated. That's not to make excuses or to set any low bar necessarily but there is a reality that every single distribution center from McKesson, AmerisourceBergen and Cardinal were stocked and in some cases stocked to the hilt. And so there will be some required burn off if you will.

That having been said, we're very encouraged that we've already gotten initial demand-based orders in some DCs and that's we think evidence and common sense will tell you evidence of the fact that the product is in fact being prescribed. It is being pulled through but it will take some time to really fully burn down the inventory levels that were there and we understood that and Tom and his team were obviously very understanding of that fact and Acerus and we certainly recognize it will take a little while.

So that having been said, as long as prescriptions start to go up we know in time that the inventory depletion will follow.

What's the shelf life on Natesto?

It is a three-year shelf life.

So if I can put words in your mouth, in essence your cash requirements for inventory notwithstanding the final payment to Acerus but is minimal for inventory. You have what you need for the next 12 months already there.

Yes, that's correct.

Okay, that's where I was going. On the DEA requirements on the constraints if any, in order to grow sales this is going out even further than 12 months, do you have any quantity or import restrictions that you are going to bump up against with the DEA in the next few years?

No, we don't. It's a C3 so it's certainly not as arduous as a C2 or certainly a C1 so as a controlled 3 on a schedule it is not particularly arduous. So import requirements and we've got by the way all the pieces of information we need to have in place at the DEA. So of course we work through a 3PL and that third-party logistics provider is fully covered in terms of having the appropriate certifications and licensure. So we're good there from and import perspective.

Okay. And how many sales reps and rep managers do you have on the payroll right now?

We have in excess of 40 people in the field today which I think should give everyone very good perspective that this is a very important product. We expanded tremendously and obviously we've got a fairly substantial payroll particularly for a Company at our stage but we recognize that Natesto is going to be a rousing success and will certainly more than justify that expense.

What percentage of your sales calls if you know have the physician was never even addressed by when Endo had it? In other words, Endo had it and never even mentioned it to the physician. Do you have a feel for that at all?

I don't have -- we're just now starting to get data. We will have about a six-week delay and for logistical reasons we don't have every single sales call back to us at the home office. What I will say is it is a substantial number of sales calls whereby we're hearing they got maybe one or two calls on the high side on Natesto. That makes sense because Endo was in the field for really about nine or 10 months in earnest. There are certainly ample examples where physicians had not been detailed at all. This is being presented truly as a novel first-time product.

Okay great. Just some housekeeping questions and I will jump back in the queue. Greg, you wrote off $7.5 million of Zertane. Is Zertane now completely off your balance sheet now?

Yes, we've taken off all the patents as well as any of the initial Zertane product that we had related to in process R&D.

Now on the licensing revenue, this was all written up into the income statement for Q4 so should licensing revenue go to zero now going forward?

Correct.

All right, thanks guys and good job getting this thing launched on time and best of luck. I will jump back in the queue.

[Yi Chen], Rodman & Renshaw.

Thank you for taking my questions. First question is can you provide a rough breakdown of the revenue between ProstaScint and Primsol?

The majority of the revenues, a significant majority of the revenues is ProstaScint. We haven't given a specific breakdown but given that Primsol didn't come on until really our Q3 in earnest, ultimately most -- certainly most of it was ProstaScint. What I will also point out is that Primsol is highly seasonal from the fact that two-thirds to three-quarters of the prescription to this day are still prescribed for acute otitis media and so Primsol drops off fairly substantially and it did drop off fairly quite substantially in Q4 because it's summertime late spring or early summer and we would expect really Q1 to be similarly low.

So that's something to keep in mind going forward. ProstaScint is less seasonal. I will tell you guys are less excited about getting their prostate workup in the summer than they are during the rest of the time of the year so there's a bit of a drop off in the summer which we view as been more encouraging and more reason for excitement when despite there were two key factors at play we had some seasonal aspects, most notably affecting Primsol to a lesser degree affecting ProstaScint.

Keep in mind that every one of our people that were in the field originally selling ProstaScint, they have all since been elevated to management positions and they spent almost the entire quarter doing nothing but hiring, interviewing, recruiting, training the whole deal getting ready for a Natesto. So with that, a fair amount of effort was diverted away from ProstaScint and Primsol. Despite that we were able to really hold our own on ProstaScint. Primsol did drop off a bit and obviously the number, the $2.6 million that we had anticipated was fully anticipated with respect to the write-down with Zertane and pulling those licensing revenues forward.

So a long way of saying the bulk of our 2016 revenue is on ProstaScint

Thank you. Second question is maybe you already mentioned it but do you schedule the US trial of MiOXSYS to be initiated by the end of this year?

We do. We expect by the end of this -- optimistic but by the end of this calendar year so by the end of our Q2 that we would be fully approved by the FDA to start the study with the protocol signed off on. And I will say that the study sites are already selected. Almost all of those are entirely contracted and so I would fully expect that we are in a position to have patients enrolling by the end of the December.

What is the total cost for this trial?

We can get the study completed for about $0.5 million.

Okay, got it. Can you also give us some color on the commercialization plans for MiOXSYS outside the US within this calendar year?

Yes, so it's a very efficient effort at the moment. We really have I would say 2.5 to 3 full-time employees dedicated almost solely to MiOXSYS. We have hired as I mentioned in the past a gentleman by the name of David Yakich 25 years in international BD. He is our Managing Director of International Operations. His primary job is identifying and working with and getting distributors for MiOXSYS outside the US lined up. He has done an exceptional job, has gotten a very, very good number of distribution agreements signed and some of which we've announced some of which we will be announcing.

So the effort will be primarily David orienting our distributor network. We do have a Director of Commercial Innovations, a gentleman by the name of Dorsey who runs really all aspects of the MiOXSYS program from a clinical to a commercial standpoint. He is also with David flying all over the world getting these distributors lined up.

So it is primarily distributor based, very efficient, very cost effective. We don't have a huge infrastructure. As we start to build things out, we can envision that we might build that out slightly but it will be primarily a distribution model and I really commend the two guys for the number of KOLs and the quality and caliber of KOLs and institutions with whom we're working. We quite literally are working with the cream of the crop in places like Tokyo University in Japan, like some of the leading (technical difficulty) in Asia, some significant KOLs that are already starting to utilize this and minimum in research. Some have begun to use it clinically actually billing their patients. So off to a good start there.

Okay, thanks. Final question for Natesto, I know it's still in the early stage of launch but do you have any information regarding the patients currently receiving Natesto, what percentage of them are new patients and what percentage of them are converted patients from using gels or patches or injections?

We don't have that at the ready. It would really just be anecdotal but I can say from the feedback we're getting from the field, it's across the board. There are certainly clinics and one large clinic in particular that have done a chart review and has many, many patients that are on current on topical therapy that he is switching actively. There are certainly a smattering of new, a little bit of a tougher one to get at just because the injection data is a little bit tougher to track.

And some of the feedback I am getting from the field is that also very good alternative for those that are tired of the injections. So we would expect to get conversion from both the topicals and to some degree the injections and obviously (inaudible) of a patient that doesn't know any better, we firmly believe Natesto will be presented as if not the top option one of the top options for a patient that's de novo to hypogonadism.

Okay, thank you.

Ben Haynor, Feltl & Company.

Good afternoon, gentlemen. Thanks for taking the questions. I know it's pretty early but any commentary that you can share on what you've heard from -- on the Natesto front from prescribers?

Yes, very generally a good question, kind of a wide-open question. But what I will say is one of the things that I think was difficult to quantify and even Acerus would acknowledge, the level of concern around transference was difficult to quantify in market research in some of the of early going. It was even difficult for us to uncover in our diligence as we were in discussions with Acerus.

What I will say is unequivocally physicians are concerned about transference and the hassle and the questions that that presents when it comes to presenting this option to their patients. So that has played very well. That has been very, very well received. The recognition that you have patients thinking about this that you have sort of this toxic, quote unquote exposure to children and potentially to female partners, that's a real issue.

One of the things we're also hearing is really with the advent of high deductible plans, patients are increasingly paying in excess of $300 and $400 and $500 per month for a prescription of AndroGel. And even in the face of quote generic AndroGel which is a bit of a misnomer because it's a BX-rated generic, there are very, very high co-pays.

So some patients are really left looking for alternatives and for us with the Assure Rx program whereby patients are subjected to no more than $150 monthly out-of-pocket expense, very, very attractive. While we'll never sell on price and won't position this on the basis of price, we will sell it on the basis of value and comparison to a product that is in excess of $400, $500 in some cases $600. So that's been positive.

I will tell you that the dose and the fact that the two to three times dosing that is available with Natesto is very attractive. When you remind physicians that men -- we go up and down during the day. You've got at least a couple of spikes of testosterone in any given 24-hour period and so for the first time to have a product that truly mimics that natural diurnal rhythm of testosterone production is very attractive. It's novel and it really turns a potential objection of more frequent dosing on its head and really turns it into an advantage and I would say that has been very well received as well.

So I think those three pieces really stand out as among the more solid feedback we're getting and I would say consistently it's been very, very good and again we're just getting started. With one to two calls really on the high side, some physicians haven't even been contacted yet because you've got a schedule a launch or some sort of an appointment and so just beginning to scratch the surface we feel like we'll already starting to generate some real tailwinds.

So in terms of the co-pay cards that you mentioned earlier and your commentary here, it sounds like that's a pretty important part of going after this market or am I misunderstanding?

I think in 2016 reimbursement is going to be one of the chief challenges any branded pharmaceutical launch encounters. I would say it is no different for us. It certainly no worse, certainly no better. It's a scenario whereby physicians want to know that they've got a safety net and they know what a patient should be expected to pay out-of-pocket.

A new product is often perceived as having poor reimbursement. I will actually say in the case of Natesto it is not poor reimbursement. Our reimbursement is I would say on par with the other products in the class. And so by putting a program like Assure Rx in place you really go a step further than frankly maybe even have to and you can go in and say look, if there's any concern at all if we can get you sold on the clinical benefits of this product, we can take any doubt around reimbursement or any patient walk away factor at the pharmacy away, totally disarm that objection by saying it's pay no more than $150 for three full barrels of therapy. And by the way, that stacks up very well.

So it's not -- we certainly don't lead with Assure Rx. We certainly don't lead with the reimbursement story. We lead with the efficacy primarily on the basis of the unique delivery of the nasal formulation, the fact that it tracks the normal diurnal rhythms of the low T or normal male and the discrete use and the fact that you don't have to worry about the transference. We lead with that and say oh by the way we've got a co-pay card if they want to use a traditional pharmacy and we've got Assure Rx if they want to go to a partner pharmacy to ensure that if there's a prior authorization needed which many drugs in the class do require, we will have the pharmacy partner handle that for you, take the burden off your staff off you yourself so you can focus on getting your patients the drugs they need without the back end and back office hassle.

Great. That makes a lot of sense. And then in terms of the sales force that you have, you mentioned 40 odd people. Where do you see that call it a year from now? Does it depend on what Natesto is doing or what is kind of the game plan there?

Good question. So it will largely depend on how Natesto is doing. We have committed to Acerus and frankly we will commit to our shareholders as well that if the product does as we think it will, there will be a path towards expansion of that salesforce to enable deeper penetration into the target list and more efficient coverage.

So I would say it is going to depend on how it goes but even on our most modest assumptions, we think there is a plan towards expansion here in the near term. But we don't want to go out and launch a 120 person salesforce as some companies would and burn four times the dollars. We would rather get it established and really grow this thing as dictated by the demand which as we're seeing at this early stage is quite good.

Okay, perfect. Lastly for me, anything we should be looking out for the remainder of the year, early next year or early calendar year on the clinical data front, MiOXSYS and otherwise?

Good question. So I would expect obviously on the clinical data front we would expect to be in a position to tell you when we are moving forward with the FDA trial. That is something that we would expect to have again this first half of our fiscal year so by the end of this calendar year.

We do have some very interesting clinical data in the works that would be presented, a couple of very large conferences in the reproductive health realm and with that we think that will largely help expand our distributor footprint outside the US.

And then on the Natesto front, it will largely be commercial. We expect that on our next quarterly call we will be able to give you some very good anecdotes and potentially some more hard data or some hard data around prescription trends understanding that it takes a solid three to four quarters to really get out of the gates with the product on any scale.

And one thing I think will be important for you to keep an eye on is the fact that our goal in the near term is to uplist to a national exchange and with that raise some capital and really put further fuel in the tank. And while that's not a clinical milestone, from a business standpoint we view that as a very, very key sort of a critical path item to grow the Company. It's not an absolute must-have but certainly we do view getting onto the New York Stock Exchange and the NASDAQ as a way to really increase our visibility and ultimately enable us to continue to execute on our plans.

Great, thank you very much gentlemen. That's all I have.

Laura Engel, Stonegate Capital Partners.

Good afternoon. Thanks for all the good information and the impressive start for Natesto. I wondered if you could tell me as far as just touching base on the income statement, the R&D, there have been some questions asked but you mentioned the estimates for the MiOXSYS trial and then some of the R&D costs dropping off going forward. What else really made up that $6 million in this past year that we're going to see continue going forward as well?

The biggest thing that made up the R&D during this year was actually the tech transfer that we did for our process and product and then we also did have some Zertane R&D during the first half of this year which basically we see going away going into 2017 and then some of that though will be replaced with the MiOXSYS where basically we had -- we predict that right now it will be roughly $0.5 million to run that trial.

Right, okay. And then what was the trigger for the Zertane impairment? How did the write-off come to be in Q4?

Yes, it came to be during Q4 because basically when we were going out doing our fundraising and when we had the opportunity to buy the Natesto product, right then we really decided to take our resources and redirect them fully into our salesforce and fully into trying to commercialize Natesto because we see that as a lot better opportunity. And once we did that, we pulled back in June, decided to pull back all of our funding related to Zertane and that created a situation where we needed to write off those patents and write off the in process R&D.

Okay. And then related to the MiOXSYS, you mentioned it's now into the clinics abroad and you are seeing some early results from that. As far as I think Josh mentioned or I guess characterized it as routine, is that something you're seeing as routine as say on a female's part walking in and getting blood work if having issues. Is that how routine this product is for the prospective male counterpart walking in and having fertility issues? Or what are you seeing as far as where it plays into the significant size of this market of couples facing infertility?

Good question, Laura. So what we would say it would not be to the level of a standard semen analysis whereby any guy that comes in to get screened for infertility would get this test. It would come in immediately thereafter and so as soon as really it's determined that he has a normal or something suspect with respect to his normal sperm parameters and when I say parameters, I'm really primarily talking about the big three parameters of concentration, motility and morphology. Many times those are inconclusive so you've got a case of idiopathic infertility so a guy that's seemingly infertile without any sort of apparent reason you would then go to a next level of sort of battery of tests.

Anywhere between 25% to 40% of the time is when you would potentially go to that next level. So while it wouldn't be 100% of the time, potentially 25% to 40% of the time the MiOXSYS device and the ORP parameter would be utilized which makes up a very, very large market still.

We are still finding our way and obviously with some of the things we are doing with some of these researchers overseas is really understanding to what degree and to what level of frequency they will use this. We have one very large clinic in the Middle East that uses this almost routinely and when I say that I truly do mean almost to the degree of doing the big three sperm parameters.

In other places it's really more reserved for that 25% or so of men that they have questions remaining.

But it certainly, we don't view this as a one and 100 type of thing and we will have to obviously determine as we go forward exactly how frequently this is used and I think we're going to learn that it's going to be different probably per market potentially even different per prescriber just on the basis of how they view the role of oxidative stress and the need for these extended parameters.

Great. Well, I appreciate you taking my questions and look forward to these upcoming weeks and getting some more of those steps disclosed and seeing how the launch progresses. So again thanks and congrats on a great launch.

Thanks, Laura. Appreciate it.

Sherry Grisewood, Dawson James Securities.

Hi guys. Congratulations on a really productive year. Amazing.

I have a couple of questions that haven't been asked around Natesto to better understand the marketing program. First of all, what's the percentage of scripts for Natesto that are using either the co-pay buydown or the Assure Rx incentives?

It's relatively high right now Sherry, what you would expect. It is in the -- let's call it in the 40% range on average of all prescriptions that are filled and again low-volume prescription so that tends to skew very high in the very, very early going. You would expect that percentage redemption count to go down. As a small company, it's hard to really predict in a traditional world, a larger pharma type of brand. You would expect to see point-of-sale coupons redeemed at the rate of 4% to 5% of total prescriptions. We wouldn't expect to get our redemptions down to that level. We would expect it to be certainly south of 40% or 50%. We would be probably quite happy to have it down into the mid-or low teens. We would be satisfied if it were in the 20% range.

So right now it's higher than it will be which is in that 40% range.

Okay. And what's the average co-pay buydown that you're experiencing?

I don't have the number on the tip of my tongue. It's actually not huge. We are finding most men are covered to a large degree with or without a PA and we're seeing co-pays that are generally speaking less than $70 or $80 and so obviously if it goes through on the co-pay we don't have to buy down very much of that because it's a pay no more than $25 at the moment. And so we're just paying the delta between essentially that $70 co-pay and $25.

A smattering of cash onlys have come through but frankly we're still in the early goings. The Assure Rx pharmacies are just getting set up so not a lot of data there. But in terms of them flipping to cash, one of the things you sometimes see and have to keep an eye out is these pharmacies often want to flip every prescription straight to cash just to make it easier. We're not seeing that fortunately. We are seeing a lot of prescriptions run through on their traditional insurance plans.

And we've heard co-pays as low as $15 to $20. On the high side there are again $70 to $80 and so the buy downs are in this sub-$70 range.

Okay. Can you give us a little more color on how the Assure Rx program is set up and working or perhaps an example of how it's worked?

Sure, be happy to. So this is a program that is -- I wish I could say we invented it. It's something that's frankly gotten pretty well-established amongst smaller and specialty pharmaceutical companies. So typically what is done is a pharmacy really or two or three in every major geography so really every territory and subset of every territory for example you'd have a pharmacy here in Denver and perhaps one in Colorado Springs just to pick a local geography. And it tends to be an independent pharmacy that it's very entrepreneurial. They are full service in that they truly will help patients cover their prior authorizations, will help the physician set that up so they are independent pharmacies that they are trying to gain market share in the face of competition from the big players like Walgreens, Walmart and CVS.

They typically do delivery to the local area and will do front door delivery so it works very simply. A physician in the area and these tend to be fairly prominent pharmacies that are well known to their physician customers. they tend to aggressively market. They tend to have salespeople that will ask for referrals for compounding services and so forth and so on.

So they are used to this and so newer products particularly products that are in classes where there is typically high co-pays like the TRT market, they are used to working through the prior authorization process.

So you get the prescriber committed to prescribe the product. If they have a concern that it would say only if they have a concern around reimbursement you introduce the idea that well, all you need to do is simply fax your prescription to this pharmacy, they will take care of the rest. They will call the patient, they will set them up, they will get all their information. They will run their prior authorization through if that's required. In some cases, over half the time that's not required they simply run it through the delivery to the patient and then they will also many times re-prior authorize on behalf of the physician because they will collect a patient history.

And they make it very turnkey for the patient. Quite literally will deliver it to their door if that's what the patient requires. This is not something that's going to be 75% or 80% of our prescriptions. This is what will be put in place as an objection handler in the event that a physician says I don't want to have to worry about figuring out which formulary this product is or isn't on. We can very quickly pivot and say if you work with this partner pharmacy they will take it out of your hands for you and I will tell you the response has been very, very good. And I don't know if that answers your question but ultimately that's how it works.

Okay. So that's really marketed to the physician to ease the script writing and the patient/physician interface?

Exactly. And it doesn't take the place of a traditional co-pay card. They still are salespeople and they go back to the sample closet and the salespeople will obviously deliver traditional point-of-sale coupons. If the physician is used to that and by the way every physician in America is used to that now because most branded products have some sort of a co-pay buydown program, they simply hand the coupon to the Walgreens, Walmart or CVS runs it through. That is still a viable option. Many times those patients are covered but in the unlikely event that a patient doesn't have a prescription benefit that covers TRTs, which does happen, it's not the majority, but there are certainly plans that don't cover what they consider lifestyle medicines without a prior authorization similar to Viagra or something like that.

And so it's just an extra way to take an objection away that quite frankly we find is often a smokescreen. Physicians want to write the better medicine for their patient. They want a better mousetrap and something that alleviates the concerns of transference and alleviates the hassles of AndroGel and the thick goopy gels. We think this is a great way of really taking away as many potential excuses whether expressed or implied as we can.

Okay, great, thanks so much.

This concludes our question-and-answer session. I would like to turn the conference back over to Josh Disbrow for any closing remarks.

Great, thank you, Angie. So thanks to everyone for joining the call here and thanks to those of you who asked questions as well. It's been a year of very significant growth for us. We're excited about it. We're excited about the years to come and believe they hold even greater promise for us now that we have three revenue-generating products in the US and we've got a lean focused very energetic urology-centric salesforce. They are dedicated to selling our products with passion for the patients we ultimately serve and we're very excited about the future that lies ahead.

So thanks again. We look forward to talking to on our next quarterly update. Have a great evening and we really thank you for your interest in Aytu BioScience. Take care. Thanks.

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