Aytu Biopharma Inc (AYTU) 2023 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the A2 Biopharma Fiscal 2023 Q1 Results Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Roger Wiese. Sir, the floor is yours.

Thank you very much. Good afternoon everyone and thank you for joining us for A2 Biopharma's First Quarter Fiscal Year 2023 Financial Results Conference Call. Joining us on today's call is A2's CEO, Josh Disbrow; and this company's Chief Financial Officer, Mark Oki. At the conclusion of today's prepared remarks, we'll open the call for a question-and-answer session. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available by using the telephone numbers and conference ID provided in the earnings press release issued earlier today. Finally, I'd also like to call to your attention the customary safe harbor disclosure regarding future-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of A2 Biopharma.

Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to, the factors set forth in the company's filings with the SEC. At undertakes no obligation to update or revise any of these forward-looking statements. With that said, I'd now like to turn the event over to Josh Disbrow, Chief Executive Officer of -- at Biopharma. Josh, please proceed.

Thank you, Roger, and welcome, everyone. I'm extremely excited to share with you the first quarter of fiscal '23 financial results today, which include the company's first ever quarter of positive adjusted EBITDA and record quarterly revenue. Clearly, achieving positive adjusted EBITDA is transformational for us and positively changes the trajectory of A2 in the years to come. As outlined in today's press release, the record quarterly net revenues of $27.7 million, which was an increase of 26% compared to the year ago quarter was driven by strong performances in both our Rx and Consumer Health segments. The Rx segment experienced 34% revenue growth due to the continuing execution of our sales force and the leverage we're continuing to gain through RX Connect, our novel proprietary patient access program. A2 Rxconnect. enables affordable, predictable hassle-free patient access to A2's prescription products. And along with our sales force and products is a cornerstone of our Rx business.

Further, our Rx segment had positive adjusted EBITDA of $2.7 million, understanding that virtually all corporate overhead and G&A is burdened to this segment. This is now the second consecutive quarter in which the Rx segment has had positive adjusted EBITDA. Please note that you can see the adjusted EBITDA reconciliation to GAAP net income in the press release we issued earlier this afternoon. As I mentioned back in September, our sales force is making significant strides with our physician and patient-centric messaging, and we witnessed that momentum once again in the first quarter. Additionally, we are experiencing tailwinds from the growth of the markets we serve, both in ADHD and in pediatrics. I'll dive into additional drivers within our Rx segment in a moment.

On the Consumer Health side, we posted strong 12% revenue growth compared to last year's first quarter and reduced our adjusted EBITDA loss in the segment to just $493,000. Importantly, we saw solid growth drivers coming up this fiscal year within Consumer Health, including the launch of additional OTC medicines and the Circle brand family, which I will talk more about here in a moment. All told, adjusted EBITDA for the company was a positive $1.4 million during the first quarter compared to a negative $4.2 million in last year's first quarter, a dramatic improvement to be sure. On October 13, we announced an important shift to the company's strategy, aimed at accelerating the growth of our commercial business and achieving profitability. As a result, we noted the indefinite suspension of our clinical development programs, including AR101 and Zoster for the treatment of vascular Ehlers-Danlos syndrome or EDS.

The suspension is expected to save the company over $20 million in projected future study costs and allow us to continue the positive trajectory we have with positive adjusted EBITDA as we center our efforts on growing revenue, maximizing synergies and driving down expenses, all of which will serve to accelerate our path to profitability. With our first adjusted EBITDA quarter now in hand, that path has become markedly clear. We understand that the suspension of our AR101 clinical development program is a disappointment to the EDS community, and we do not take that lightly. We intend to revisit the program at the appropriate time with the expectation of funding all future clinical development with internally generated cash flow or through partnering. In today's economic environment, we strongly believe it is in the best interest of all stakeholders for us to focus our efforts on accelerating the growth of the commercial businesses and generating positive cash flow to minimize our reliance on the capital markets.

The bottom line is that we want to avoid a large and highly dilutive financing. And given the steps we have taken and the trajectory of our commercial operations, coupled with our cash position, we believe we are positioned to avoid just that. Let's dive into the commercial business a bit more, beginning with our Rx segment. As a reminder, within the Rx segment, we operate primarily in 2 therapeutic areas, ADHD and pediatrics. We acquired our ADHD product portfolio in March of last year with the acquisition of Neos Therapeutics. The portfolio includes extended-release stimulant medications formulated in patient-friendly or early disintegrating tablets that utilize the proprietary microparticle modified-release drug delivery technology platform developed by Neos. Adzenys XR-ODT and Cotempla XR-ODT are the first and only FDA approved amphetamine and methylphenidate extended-release ODTs, respectively, for the treatment of ADHD.

And they are finding a well-earned position within this large and growing ADHD stimulant category, a category generating nearly 85 million prescriptions annually in the United States. Mark will hit more on the numbers, but across the board, we are seeing strong growth in the ADHD products, which contributed to $11.6 million in 2023 first quarter revenues, an increase of 24% compared to a year ago. The key drivers to growth can largely be attributable to 3 things: first, the overall growth in the ADHD market as we continue to come out of the pandemic and see an increase in diagnosis. Further, there are numerous Adderall generic manufacturers reporting ongoing manufacturing delays contributing to supply shortages of amphetamine, the most prescribed molecule in this category. While the supply disruptions associated with the Adderall XR generics has caused confusion and concern among the ADHD patients taking these medications, we've made it clear to our prescribers and clinician partners that Adzenys XR-ODT supply remains robust and uninterrupted.

Keep in mind that Adzenys is approved as bioequivalent to Adderall XR. So, the supply disruption could enable Adzenys to gain meaningful market and mind share. I expect that we will see some continued tailwinds for NS XR in the coming quarters as the supply disruptions are expected to continue intermittently for the foreseeable future. The second key driver to the ADHD growth has been our young, energized and highly motivated sales force that is getting better and making more consistent strides with overall targeting and improvement in sales execution and messaging. We have a great team in the field, one that is populated with mostly new to industry sales professionals who are motivated and hungry. They're getting their legs under them following the turnover of much of the sales force in favor of this lower cost, high upside profile, and we're excited about the traction they're getting with health care providers.

And finally, the leverage we're gaining through A2 RxConnect. -- as we continue to cultivate our roughly 1,000 network pharmacies in key markets across the country, our improved distribution channel drives growth for all our prescription products. Based on some recent data points, we've shown that compared to prescriptions filled by nonnetwork pharmacies, A2 RxConnect results in a nearly 50% reduction in patient out-of-pocket co-payments, a roughly 2x improvement in A2's net margin per Rx and more than a 40% increase in prescription refills. The platform truly does drive value for patients, for health care providers and for A2, which has been the purpose since the inception of the program. Further, A2 RxConnect can be leveraged more in the future with our current products and new products we may bring into the portfolio. We've already demonstrated significant growth of our A2 legacy products, [Polyviofluor] and carbonale since we included them in the A2 RxConnect platform. One of the keys to continued improvement on the bottom line to further accelerate the path to profitability is the planned tech transfers of both Adzenys and Cotempla.

As we reported back in September, the process is well underway with the contract manufacturer, including the conduct of bioequivalent studies and other FDA mandated work. It is our goal of having everything finalized in the CMO producing our ADHD products in calendar 2023. This outsourcing-stands to improve the gross profit margin of the ADHD products by 15% or more, a meaningful step change that, if achieved, will further improve our already improved P&L. On the pediatric side, our portfolio includes poly by floor and [Tribifloor], 2 complementary prescription fluoride-based multivitamin product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency. We also market carbonate ER, an extended-release carbinoxamine based antihistamine suspension indicated to treat numerous alerted conditions for patients 2 years and older. These products serve large, established pediatric markets and offer distinct clinical features and patient benefits over the branded and generic competitive products.

During the quarter, we achieved 73% growth in revenues from our prescription pediatric lines. with revenues growing to $6.6 million and putting that portfolio on a $25-plus million revenue annualized run rate. Again, the key drivers here are: first, sales force execution; second, leveraging of ATR Connect; and third, a solid payer environment, particularly for the multivitamins in various geographies, which has provided some tailwinds for the products. Since we added PBF and TVF to RxConnect, we have grown prescriptions significantly and continue to demonstrate truly remarkable growth with those brands. The American Dental Association has stated that florid supplement should be prescribed for children 6 months to 16 years of age who are at high risk for tooth and whose primary drinking water contains low or no fluoride. While the majority of U.S. drinking water is, in fact, fluoridated, some major geographic areas, including much of New Jersey and New York's Long Island locket. Approximately 1 in 4 American children live in municipalities that do not fluoridate the water supply or are in rural areas that rely on well water do not receive recommended levels of fluoride through fluoridation.

We think that with the increased understanding of the risks, coupled with the well-documented support from the ADA, we will see continued growth in this business. We're continually evaluating expansion opportunities for the fluoride Multivitamin line as we look to additional areas in need of fluoride supplementation and growth across both new and existing geographies will serve as the basis from which we expect to grow [polybifloor] and [try-buysales]. Overall, we feel confident about the traction we are achieving in our Rx segment. As mentioned, we experienced 34% revenue growth in the first quarter and generated a positive $2.7 million in adjusted EBITDA. With continued growth, cost reductions and gross margin improvement measures in place, we expect positive EBITDA quarters going forward. Let's transition now to our Consumer Health segment. During the first quarter of 2023, net sales were $9 million for the Consumer Health segment, an increase of 12% over Q1 a year ago. For those listeners not familiar with our Consumer Health segment, our core product focus is on branded value-based products competing in large categories such as hair loss, digestive health, diabetes management and allergy, all competing with higher-priced national brands. At a time when consumers are looking for opportunities to save anywhere, they can, we believe these values and have a great opportunity for continued growth.

All products address chronic or recurring conditions and are largely intended to be used by consumers on a regular basis. As such, we offer a monthly subscription program, which allows for ongoing use and easy product reordering and use by customers, building strong annuity value for these brands and for the company. We sell directly to consumers through e-commerce platforms, including branded websites in the Amazon platform. Additionally, the consumer segment sells products through our proprietary sales and marketing platform, which focuses primarily on direct mail, allowing consumers to purchase directly through business reply or through call centers with shipment directly to their homes. The solid double-digit growth for the quarter within Consumer Health was primarily due to the growth in the Amazon channel, coupled with new product launches. Recall that we made a strategic decision in fiscal '22 to pivot our efforts to the more efficient, higher-margin online channel with the primary focus on improving our visibility on in sales of our value OTC medicines through Amazon and our website.

While we could have driven revenue by simply continuing to focus on the direct mail business, it was clear to us that the opportunity to scale this business and generate consistent profit late with driving growth of the online OTC medicines business. The shift to more e-commerce in these OTC brands has borne fruit, and this channel will be our primary focus going forward on the consumer side. Importantly, we are planning to further build out the OTC medicines line while establishing a value brand family we've branded Circle Health, Circle, which we are planning to roll out in calendar '23 will represent a brand family of value-based over-the-counter medicines addressing a range of common conditions. We believe showcasing and OTC products through a single recognized family brand will build collective brand equity, create a common one-stop shop for family seeking value brands addressing common everyday conditions and ultimately drive more repeat customer use in ordering, all yielding higher annuity value and higher overall margins.

As part of the buildout and launch of Circle, we are -- we expect to launch new products as well as rebrand existing products and integrate these all into the Circle brand family, more to follow as we approach the Circle launch. During the quarter, we posted a Consumer Health segment adjusted EBITDA of negative $493,000 compared to negative $934,000 a year ago, marking a significant improvement in this segment that is now getting very close to generating cash. In connection with the strategic decision to focus on our commercial business and the indefinite suspension of our clinical development programs, we announced a series of executive leadership changes aimed at aligning the skills of our leadership team members to the goals of driving revenue growth, further consolidating expenses, improving gross margins and driving long-term profitability.

First, we appointed Co-Founder, Jared Disbrow, to the newly created role of Chief Business Officer and President, Consumer Health. Having cofounded A2 and leading the company with me since inception, Jared is poised to take his experience across both Rx and Consumer Brands to build our Consumer Health segment into a dynamic, high-growth consumer-centric enterprise. Jared has an exciting vision for this growing business segment and has begun implementing plans for continued expansion, new product launches and the rebranding of the Consumer Health business, specifically the OTC medicines as part of the Circle Health rollout I just discussed. We think this should bode well for continued growth and transition to segment profitability and cash flow in the coming quarters. Additionally, we announced the promotion of Tofebrook to Chief Operating Officer. Tower's executive leadership at both large global pharma companies and smaller biotech business units, coupled with his entrepreneurial orientation as the co-founder of pediatric-centric Biotech Rambus Therapeutics makes them especially well-suited to step into the newly reestablished role of Chief Operating Officer.

As COO, TOFA will be responsible for the Grande Prairie manufacturing transition as we move to significantly increase prescription margin by outsourcing the production of Adzenys and Cotempla to a global contract manufacturer. He will also lead regulatory and quality affairs, scientific and medical affairs and key aspects of strategy and corporate and business development going forward. Finally, we promoted Ryan Selhorn to the newly created role of Executive Vice President, Finance and Business Optimization. Ryan was previously Senior Vice President, Finance and Operations for the Consumer Health segment. Ryan's prior experience in public accounting and as a public company CFO in both Pharma and Consumer Health, coupled with his expertise and organizational improvement dovetails perfectly into our revised strategic plans. He will oversee the finance and accounting functions while also leading the ongoing consolidation and streamlining of internal processes and spearheading numerous financial projects expected to drive efficiencies and significant cost savings throughout the organization.

Greg Vizamuca will remain in his role as Chief Commercial Officer, overseeing all aspects of the Rx commercial business, which I'll repeat has grown 34% year-over-year. We've experienced strong growth, a significant upgrade in talent and a streamlining of our commercial operations under Greg's leadership and look forward to Greg and his team continuing our growth trajectory across the Rx portfolio. I'm thankful for these leaders in their leadership and enthusiasm in support of this next phase of the company's growth and this renewed focus. Before I turn it over to Mark, let me just say how incredibly proud I am of the entire organization. The team has rallied around the opportunity to build a truly great operating company, which has led to record quarterly revenue in our first ever quarter with positive adjusted EBITDA.

Importantly, there are future drivers that have the ability to enhance this performance even further, including continued sales growth in both segments, driving additional post NEO merger synergies and the implementation of cost-cutting activities such as the outsourced manufacturing and elimination of the expenses and cash flows tied to our R&D pipeline. We know there can be variations in any single quarter for any multitude of reasons, but it's clear to us that the trends are heading in the right direction as we execute on our goal of being self-sustaining in the near term. It goes without saying that becoming self-sustaining stands to dramatically change the way we think about funding on a go-forward basis. With that overview, let me turn it over to our CFO, Mark Oki, to add some additional color to the numbers. Mark?

Thank you, Josh, and welcome to everyone joining us on this call. Let me build upon the comments Josh has already provided starting with revenue. Net revenue for fiscal 2023 first quarter was $27.7 million compared to $21.9 million for the first for the fiscal 2022 first quarter, a 26% increase. Breaking down the quarter, net revenue from Rx product sales in the 2023 first quarter was $18.7 million compared to $13.9 million in the same quarter a year last year, an increase of 34%. As Josh noted, ADHD experienced 24% growth in net revenue to $11.6 million in the 2023 first quarter compared to $9.3 million during the 2022 first quarter. The prescription pediatric portfolio experienced 73% growth in net revenue to $6.6 million in our 2023 first quarter compared to $3.8 million in 2022. -- for the first quarter of 2023, net revenue from the Consumer Health franchise was $9 million compared to $8 million in the same quarter last year, an increase of 12%. We have a small amount of other revenue both this year and last. This other revenue pertains to COVID-related test kits and discontinued or deprioritized products.

During this year's first quarter, it was $509,000 and last year's first quarter had $758,000. In general, we expect other revenue to decrease going forward. Gross margins improved nicely to 65% in the 2023 first quarter compared to 50% of net revenue in the year ago first quarter. This improvement in gross margin percentage was primarily driven by improvements in the ADHD and pediatric product lines, a result of cost-reduction efforts and greater volume. Gross margin percentages can vary from period to period for various reasons. This improvement does not yet account for any improvements we expect from the tech transfer we've discussed. So we are optimistic that the margins will improve further upon the completion of the ADHD brands transfer.

On the OpEx side, for the first quarter of 2023, excluding impairment expense and amortization of intangible assets, operating expenses were $18.5 million compared to $19.2 million in the same period a year ago, a decrease of about $700,000. Research and development expenses were $1.1 million in the first quarter of 2023 compared to $1.7 million in the 2022 first quarter. Of this $1.1 million, $875,000 was related to the pipeline R&D, which we recently suspended. Net loss for the first quarter of fiscal 2023 was $2.9 million or $0.06 per share compared to $27.9 million or $1.09 per share for the same quarter last year. Net loss from operations for the first quarter of fiscal 2023 was $1.7 million. For the quarter, adjusted EBITDA was a positive $1.4 million compared to a negative $4.2 million, an improvement of $5.6 million. When you look at the breakdown by segment, adjusted EBITDA for our RX segment during the first quarter of fiscal 2023 was a positive $2.7 million compared to a negative $2.2 million a year ago.

In the Consumer Health segment, quarterly adjusted EBITDA was a negative $493,000 compared to a negative $934,000 in the year ago period, a 47% improvement year-over-year. Finally, adjusted EBITDA tied to our now suspended R&D pipeline was a negative $866,000 during the first quarter of fiscal 2023 compared to a negative $1.1 million in the first quarter of fiscal 2022. We -- going forward, there will be some costs related to the wind down of the AR101 efforts and as we complete the Helitporcine study. But generally, we expect pipeline R&D spend to be minimal until such time that we can fund R&D from operations or engage a partner. Full reconciliations from net income to adjusted EBITDA are provided in the tables included in today's press release. Finally, on the balance sheet. Cash and cash equivalents at September 30, 2022, were $23.8 million.

One final item I want to point out that subsequent to the end of the quarter, we announced an agreement with Avenue Venture Opportunities Fund LP, to extend the interest-only period of our existing senior secured loan facility with them. This amendment to the original secured loan agreement, which was executed in January 2022, which is our first principal payment into January of 2024. The maturity date of the Avenue secured loan is January 2025 and remains subject to additional interest-only period extension upon the achievement of certain milestones by the company. The extension of the interest-only period will conserve cash and save the company over $3 million in calendar 2023 principal payments by deferring those payments into calendar 2024 and 2025.

In exchange for this extension, the company and Avenue agreed to reset the exercise price of the awards issued in conjunction with the original loan agreement to $0.43, corresponding to the warrant exercise price associated with the company's latest equity financing. We appreciate the ongoing support of Avenue and extending the interest-only period to help us preserve near-term cash and execute on our operational plan. They have been an exceptional partner and have been supportive of the company as we focus on growing our commercial business and advancing our objectives. With that, let me turn it back over to Josh.

Thanks, Mark. Let me just conclude with where I started. This was truly a transformational quarter for A2 as we reported record quarterly net revenue and our first ever company-wide positive adjusted EBITDA quarter. The strategic initiatives we put in place to drive growth and efficiency across our entire organization, coupled with the positive market drivers and the leverage we're achieving through our proprietary RxConnect platform positions us to positively change the trajectory of A2 in the years to come. I'm incredibly proud of the hard work by the entire organization to achieve the important milestones this quarter, and I look forward to a tremendous fiscal '23. I appreciate everyone's participation on today's call, and we'll now be happy to answer any questions. Operator?

Thank you. Ladies and gentlemen, the floor is now open for questions. (Operator Instructions) Please hold while we poll for questions. Thank you. Our first question is coming from Jennifer Kim with Cantor Fitzgerald. Please go ahead.

Congrats on a very impressive quarter. I have a few questions here on the commercial business. The first one is ADHD you gave sort of color around those tailwinds that have been going on. And I've seen online, various player-generic players think supply mortgages lasting into early 2023. And I'm wondering, is that how you're seeing the market play out? And once those shortages are addressed -- do you think, given the increased mind share that the patients who switched to your products will stay on those products, and we can start there.

Yes, that's great. Thank you, Jennifer. I appreciate the questions. We are beginning to see, we believe, some early signs of this issue related to the Adderall and it's mostly almost entirely with the generics, which, of course, dominates the market. And so, we're seeing -- I think it's gone from sort of sporadic anecdotal to a little bit more of a consistent memer in the field. So, we are starting to see some movement. We have posted near or at all-time highs for Adzenys XR-ODT on a weekly prescription basis, and the momentum kind of continues through the end of the year. And we do -- exactly, as you said, we expect these to continue into the early part of the year. And what that means exactly, I guess, remains to be seen. But certainly, calendar Q1 is what we're thinking. And we will expect, certainly, once a patient gets switched if they do, in fact, get switched from Adderall XR to Adzenys XR-ODT that they would stay on it. We, of course, believe it has a more patient-friendly presentation. It's got the ODT format, of course, which makes it easy to take. It's very convenient. It is bioequivalent to Adderall, of course. So, it's going to have potentially a similar experience, although I think some patients may get an improved experience on the basis of it's easier to use format. So very, very confident that we're going to see some nice uptake from this market disruption going forward.

Okay. Great. And for your pediatric products, I think one thing you talked about was a solid peer environment. Is that expected to remain favorable as we head into the new calendar year?

Yes, I think so. So, the multi-item market is one that's largely unmanaged by payers. So that's really favorable for us. And we've picked up some state Medicaid plans that enable some broadened utilization outside of the commercial environment. So, that stands to I think, give us further tailwinds in favor of [poly-buy-for] and in the case of some of the state payers [try by floor], which were -- is undergoing a bit of a renaissance, a little bit of a relaunch for us. So, I would expect the payer environment, particularly as it relates to the multivitamins to continue to be solid. And look, we've taken an approach on the commercial side of the business with respect to the ADHD to not actively contract.

We'll be opportunistic, and we certainly will evaluate opportunities in the future to consider commercial contracting. But because of the leverage that we have with RX Connect, we can really, in many ways, serve as the underwriter. And so, some of the year-to-year fluctuations with formulary changes were largely exempt from because we really haven't been playing actively with the mindset that we're going to do deep discounting through the payers. We'd rather underwrite those prescriptions ourselves and control our own destiny, so to speak.

Okay. Great. And my last question, this might be more for Mark. Mark, you said that there might be some costs related to the wind-down efforts and [Healight] in R&D. But I think you said that like around $900,000 of the $1.1 million this quarter is from the suspended pipeline programs. So, I'm just wondering, is that remaining point mill related to the post-marketing studies required for ADHD products? And is that a reasonable run rate as we think about future quarters?

Yes. As we move forward, it should stay in that range. They're not related to the PMRs. They're related to the ongoing support of the products. we have not kicked off the PMRs at this point in time.

Okay. Do you know when you would anticipate in evolve?

We're still evaluating that. We're still working with the FDA on getting final protocol approval. So, I don't have a good time for you.

We don't have anything modeled in the near term for that, Jennifer. And if we do kick off -- if and when we do kick out the PMRs, we'll do them in-house really kind of do it on a shoestring budget and obviously seek to stretch those out as far as we can. Obviously, Neos never kick those off and we'll continue to work with the FDA in ways to reduce the size and reduce any potential financial burden as it relates to those PMRs but nothing modeled in the near term. Okay.

That's helpful. Congrats again on a great quarter.

Thank you, Jennifer...

Thanks, Jennifer.

Thank you. Once again (Operator Instructions).

Josh. Well, we're waiting for any other further questions, I'll ask one real-quick. When you think about RxConnect and the ability to leverage that program, can you more fully describe how you think about truly gaining that leverage and whether that comes with the need for additional headcount, for example, if you bring on additional assets?

Yes. Thanks, Roger. And the short answer is no. We would not anticipate the advent of any additional commercial assets to necessitate any material headcount really very simply because we have a group of pharmacies around the country that are largely working on our behalf. And when you have categories -- even in categories like ADHD, where you've got controlled Schedule 2 products, -- they have the ability to influence prescriptions and influence the prescribers. In many cases, if they have a product that they view as more favorable for the patient, something that potentially is at an easier-to-use format or formulations such as the ODTs, the place a phone call to the physician office and the clinician and get them to switch that prescription actively, and there's economics there to support the patient and in many cases, to help the pharmacy as well. And so, we can gain that additional leverage to really by them, continuing to work on our behalf.

We have a small team of what we call regional account managers that interface directly and are responsible for cultivating the relationships with the pharmacies, and they do an outstanding job of making sure that we understand the economics at the prescription level, each individual prescription, how it's adjudicated and how it's ultimately paid for making sure that the patient is getting the lowest cost alternative that the co-pays are in line with what we expect. And so, we can continue to work through multiple different products as we identify additional pediatric-centric and ADHD product line. So, we've got the ability to scale revenues of our current products. We've got the ability to bring in additional products and really have that 1,000 or so pharmacy network go to work for us. And it's a huge boom for the company. There's a fair amount of secret sauce in there, which we don't talk a lot about, but that's by design.

There's a lot that goes on beyond the scenes behind the scenes rather to really drive that leverage and it continues to show proof positive that you can -- when you put product on this platform and drive it through the network, they grow and a testament to that is the [polybutylene]. -- Carbonyl, and of course, ADHD, which has been on the original Neos RxConnect platform, and all are showing tremendous growth. So, it's great to see that we're getting that leverage.

Very good. And real quick, you talked about the pharmaceutical side. On the consumer health side, obviously, we've seen great advances there, but kind of what changes need to be made to enable it to generate positive adjusted EBITDA.

Yes, great question. And I'd say really not a lot of changes. It's just more time continuing to shift the business as we're doing. As I mentioned in my prepared comments, we made a strategic shift from the direct mail campaign and the products like the supplements that we sell through direct mail in favor of the OTC medicines that are almost entirely sold through Amazon and our online platform. While that is a lower gross margin product line, that is a much higher net contribution margin product line, and that's by design. You have much more efficient market sales and marketing spend on that segment than you do in the direct mail segment. There's really not as much human touch. We don't involve call centers. We don't do any direct mailings that cause high variable spend on the sales and marketing line. We really let -- let the Amazon platform do its job, and we're continuing to refine how we work through the Amazon platform while we continue to build out our own websites.

And of course, with the advent of the Circle health line, we will have a concerted very significant effort to rebrand the products under the Circle Health family name and ultimately drive more and more through that. And that will drive significant annuity value as we're able to capture more consumer information, capture the consumers direct contact information, such we're able to drive higher levels of adherence, higher levels of pull-through and ultimately a higher annuity value for those OTC medicines. And so that's been a tremendous growth engine for the company. And if we can just continue to shift more and more to that side of the house, it will drive a positive EBITDA margin that will be much more predictable and we think can scale. We think that's a really solid growth engine for the company. We do think that consumer health can become EBITDA positive in the relative near term. It's just we need a little bit more time to continue that shift over time.

Okay. Thank you... Sir, there appear to be no further questions in the queue. So, I will hand it back to Mr. Disbrow for any closing comments you may have.

Great. Thanks very much. I appreciate the questions. And again, just want to reiterate the fact that I am just so incredibly proud of this team, how hard everyone has worked. The entire organization has put a lot of thought, a lot of diligence and a lot of great effort into achieving these important milestones. Super proud to be reporting our first ever positive EBITDA quarter, super proud to be reporting yet again an all-time high in revenue. Obviously, the Rx business continues to really grow, continues to really be healthy solid positive EBITDA margin on that side of the business and consumers not too far behind. So, thanks to everyone. I appreciate everyone's participation in the call today. Looking forward to updating you next quarter on the December quarter, which will be in February. So, until then, thanks very much, and have a great afternoon and rest of your day.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.