Aytu BioPharma's Q1 2026 Earnings Call Contradictions: Sales Force Realignment, Payer Engagement, and Incentive Compensation Plans in Question

Date of Call: November 13, 2025

Financials Results

• Revenue: $13.9M, compared to $16.6M prior year (prior year included a $3.3M rebate; ex-rebate net revenue would have increased ~5% YOY)
• EPS: $0.21 basic net income per share, compared to $0.24 basic in the prior year (net income $2.0M vs $1.5M prior; both quarters impacted by derivative warrant liability gains)
• Gross Margin: 66%, compared to 72% in the prior year (prior year included rebate; on an equivalent basis prior-year gross margin would have been ~65%)

Guidance:

• EXXUA initial shipments on track for December 2025; formal commercial launch meeting in Jan 2026; minimal revenue expected in Dec quarter, initial ramp in Mar 2026, material ramp in Jun 2026 and beyond.
• EXXUA gross contribution margin ~69% (≈31% COGS); 28% royalty that drops to 24% after ~$1.3B in sales.
• Baseline OpEx ~ $10M/quarter plus ~$10M incremental EXXUA launch spend this fiscal year (total FY2026 OpEx ~ $50M).
• Quarterly breakeven ≈ $17.3M net revenue (cash breakeven $16.6M).

Business Commentary:

* Net Revenue Growth and ADHD Portfolio Performance: - Aytu Biopharma reported net revenue of $13.9 million for Q1, exceeding expectations and driven by a 10% increase in its ADHD portfolio compared to the year ago period, excluding a onetime commercial rebate. - The growth was attributed to the stickiness and positive economic benefits of the Aytu RxConnect platform and minimal impact from a generic launch threat due to 85% of prescriptions being dispensed through this platform.

• EXXUA Launch and Market Positioning:
• EXXUA launch is on track, with initial shipments planned for December 2025, and sales force training nearing completion.

• The strategic focus on aligning sales territories with strong market access, pricing at a premium, and integration within the RxConnect platform is expected to drive distribution and patient access.

• Operational Adjustments and Cost Efficiency:

• Operating expenses, excluding amortization and restructuring costs, decreased to $10.2 million, demonstrating improved operational efficiencies.

• Despite increased investments for the EXXUA launch, the company maintained a baseline operating expense level of $10 million per quarter, with an incremental $10 million investment planned for EXXUA this fiscal year.

• FDA Communications and Fluoride Product Impact:

• Aytu is monitoring the situation following the FDA's communication regarding fluoride-containing drugs, which could impact fluoride products, although currently contributing only $300,000 in revenue.

• The company emphasizes that any impact will be minimal, as infant drops represent only approximately $1.4 million in trailing 12-month revenue.

• EXXUA Launch Expectations and Financial Assumptions:

• EXXUA launch in December 2025 is expected to see significant revenue in Q2 and Q3 2026.
• Gross margins are expected to be in the mid to high 60% range, with breakeven at approximately $17.3 million in net revenue per quarter, inclusive of EXXUA spends.
  

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly stated EXXUA is "on track" for year-end 2025 launch and called it a "game-changing opportunity," highlighted ADHD revenue resilience (net revenue $13.9M above expectations) and emphasized launch investments and commercial readiness; CFO noted adequate cash ($32.6M) and defined breakeven targets, signaling confidence in execution.

Q&A:

• Question from Thomas Flaten (Lake Street Capital): Congrats on the quarter. Josh, I was wondering if you could comment on how significant or maybe how many territories were affected by the realignment? And then part 2 of that question is, how are you thinking about the incentive comp plan post EXXUA launch?
  Response: About one-third of territories were altered (some modest, some material); incentive compensation will heavily reward EXXUA activation—opening new psychiatrists and driving repeat prescribing, focused on psychiatry practices.

• Question from Thomas Flaten (Lake Street Capital): And then if I may, one more. What have you been doing prelaunch with respect to payer engagement? Is that something you've been doing? And what expectations do you have for coverage improving beyond the kind of protected Medicare component of it?
  Response: Performed light/comparative assessments but will be judicious on commercial contracting to avoid resetting government best price; expect strong government coverage (mandated antidepressant coverage ~30–40% of lives) and anticipate materially better commercial coverage, using RxConnect data to guide selective payer deals.

• Question from Nazibur Rahman (Maxim Group): Congrats on the progress. I understand you haven't initiated the full launch yet. But thus far, how much of your target prescriber market have you reached out to? And what kind of feedback have you gotten from that prescriber market thus far?
  Response: Reached a relatively small, highly targeted subset (psychiatrists already familiar with Aytu products and RxConnect); feedback has been nearly universally positive among those early targets.

• Question from Nazibur Rahman (Maxim Group): That was helpful. And based on the feedback you have gotten thus far from limited physicians. Have you been able to build out what a target patient profile might look like or what kind of patients that these physicians might initially treat or attempt to treat with EXXUA?
  Response: Target patients are younger adults (roughly 18–50) dissatisfied with side effects (sexual dysfunction, weight gain) on SSRIs/SNRIs—positioning EXXUA as a switch option in second-to-later lines for those seeking fewer sexual/weight side effects.

• Question from Edward Woo (Ascendant Capital): My question specifically is on your supply chain. How quickly and flexible are you to ramp up if demand is greater than you expect? And what is your leverage opportunity -- margin opportunity to get if you do get to a certain scale in terms of your margin expansion?
  Response: Company has ample bulk supply and API on hand to scale well beyond 24-month forecast; margin profile limited by a 28% royalty (drops to 24% after ~$1.3B sales) while product COGS is low (~2% of net revenue), so scale yields limited manufacturing cost gains but meaningful net margin due to pricing/coverage.

Contradiction Point 1

Sales Force Distribution and Realignment

It involves the company's sales strategy and distribution of resources, which can directly impact product adoption and market penetration.

How many territories were affected by the realignment? How will the incentive comp plan be adjusted post EXXUA launch? - Thomas Flaten(Lake Street Capital)

20251114-2026 Q1: About 1/3 of the territories have been altered or reshaped. We have gone denser in areas where there's substantially better coverage for EXXUA. - Joshua Disbrow(CEO)

If you're loading the channel in Q4, does that imply a national launch in Q1? Or how are you sequencing these two events? - Thomas Flaten(Lake Street Capital Markets, LLC, Research Division)

2025Q4: We would expect to load in kind of by or kind of near the end of 2025 calendar with a sales force get together launch meeting and then full out launch immediately thereafter. - Joshua Disbrow(CEO)

Contradiction Point 2

Payer Engagement Strategy

It involves the company's strategic approach to payer engagement, which can impact product adoption, sales, and overall financial performance.

What are your pre-launch payer engagement efforts? What are your expectations for coverage beyond Medicare? - Thomas Flaten(Lake Street Capital)

20251114-2026 Q1: We're not doing any proactive contracting with commercial payers to preserve best price. We expect better coverage than for ADHD meds due to EXXUA's MDD treatment status. - Joshua Disbrow(CEO)

Have you not engaged in prelaunch discussions with payers? What triggers a case-by-case review with payers? - Thomas Flaten(Lake Street Capital Markets, LLC, Research Division)

2025Q4: It really all comes down to plan pull-through. And even if you've got a contract with the PBM, if plans aren't putting product on formulary or aren't removing some of the mechanisms with through utilization management, you may not be getting what you're paying for. - Joshua Disbrow(CEO)

Contradiction Point 3

Sales Team and Market Reach

It highlights a potential inconsistency in the company's approach to market reach and sales team strategy, which could impact revenue growth and market penetration.

How many territories were affected by the realignment? How is the incentive comp plan evolving post-EXXUA launch? - Thomas Flaten(Lake Street Capital)

20251114-2026 Q1: With EXXUA, we've initiated the first significant reshaping of our sales team since the company's inception, focusing on psychiatrists now. - Joshua Disbrow(CEO)

Will ADHD franchise growth continue? - Nazibur Rahman(Maxim Group)

2025Q3: On the ADHD side, we had five sales reps that were focused on ADHD and then one on pediatric and antihistamines. And we've been able to optimize that and reduce the headcount a bit, but retain the effectiveness. - Josh Disbrow(CEO)

Contradiction Point 4

Payer Engagement and Commercial Coverage Expectations

It impacts expectations regarding payer engagement and commercial coverage for the new product, which are critical for market penetration and patient access.

What steps have you taken for payer engagement prelaunch? And what expectations do you have for coverage expansion beyond Medicare’s protected components? - Thomas Flaten(Lake Street Capital)

20251114-2026 Q1: We're not doing any proactive contracting with commercial payers to preserve best price. We expect better coverage than for ADHD meds due to EXXUA's MDD treatment status. Precedent products like Auvelity have high government coverage, suggesting a similar high commercial coverage for EXXUA. - Joshua Disbrow(CEO)

What pre-launch payer engagement efforts have been undertaken, and what coverage expectations exist beyond Medicare? - Thomas Flaten(Lake Street Capital Markets, LLC, Research Division)

2026Q1: Initial engagement with commercial payers is minimal, focusing on maintaining the best pricing from the government mandates. EXXUA is expected to have better coverage than ADHD meds, possibly near 70% on the commercial side, using Auvelity as a precedent. - Joshua Disbrow(CEO & Director)

Contradiction Point 5

Territory Realignment and Incentive Compensation Plan

It involves changes in the strategy for territory realignment and incentive compensation plans, which are crucial for the successful launch and adoption of a new product.

How many territories were affected by the realignment? How are you thinking about the incentive comp plan post-EXXUA launch? - Thomas Flaten(Lake Street Capital)

20251114-2026 Q1: About 1/3 of the territories have been altered or reshaped. We have gone denser in areas where there's substantially better coverage for EXXUA. Incentive compensation plan is still being finalized but will heavily incentivize around EXXUA, activating new psychiatrists, and getting new offices set up. - Joshua Disbrow(CEO)

How significant were the territory realignments for EXXUA, and how will the post-launch incentive compensation plan work? - Thomas Flaten(Lake Street Capital Markets, LLC, Research Division)

2026Q1: About one-third of the territories were affected by the realignment. The incentive compensation plan will focus on activating new psychiatrists and rewarding repeat prescribing. EXXUA will be a strict psychiatry play, targeting offices with psychiatrists. - Joshua Disbrow(CEO & Director)