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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended June 30, 2021

Commission File Number 001-38247

AYTU BIOPHARMA, INC.

(Exact Name of Registrant as Specified in Its Charter)

(Address of principal executive offices) (Zip Code)

(720) 437-6580

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol Name of each exchange on whichregistered

Common Stock, par value $0.0001 per share AYTU The NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻No⌧

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ◻No⌧

Indicate by a check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes⌧ No ◻

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer ◻ Accelerated filer ☐

Non-accelerated filer ⌧ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of common stock held by non-affiliates of the Registrant as of December 31, 2020 was $88.4 million based on the closing price of $5.98 as of that date.

As of September 10, 2021, there were 27,555,120 shares of common stock issued and outstanding.

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PAGE

PART I

Item 1 BUSINESS 6

Item 1A RISK FACTORS 44

Item 1B UNRESOLVED STAFF COMMENTS 92

Item 2 PROPERTIES 92

Item 3 LEGAL PROCEEDINGS 92

Item 4 MINE SAFETY DISCLOSURES 93

PART II

Item 6 RESERVED 95

Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 106

Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 106

Item 9A CONTROLS AND PROCEDURES 106

Item 9B OTHER INFORMATION 107

PART III

Item 10 DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 108

Item 11 EXECUTIVE COMPENSATION 111

Item 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES 120

PART IV

Item 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 121

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Forward-Looking Statements

This Annual Report on Form 10-K, or Annual Report, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our anticipated future clinical and regulatory events, future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “may,” “will,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” or similar words, or the negatives of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, without limitation, statements regarding the markets for our approved products and our plans for our approved products, the anticipated start dates, durations and completion dates, as well as the potential future results, of our ongoing and future clinical trials, the anticipated designs of our future clinical trials, anticipated future regulatory submissions and events, the potential future commercialization of our product candidates, 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 the risks described in “Risk Factors” in Part I, Item 1A of this Annual Report. These risks are not exhaustive. Other sections of this Annual Report include additional factors that could adversely impact our business and financial performance. 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.

Unless otherwise indicated or unless the context otherwise requires, references in this Form 10-K to the “Company,” “Aytu,” “we,” “us,” or “our” are to Aytu BioPharma, Inc.

This Annual Report on Form 10-K refers to trademarks, such as Adzenys, Aytu, Aytu BioPharma, Apeaz, Cotempla, Diabasens, FlutiCare, Innovus Pharma, Neos, OmepraCare, Poly-Vi-Flor, Regoxidine, Tri-Vi-Flor, Tuzistra, Urivarx, Zestra, and ZolpiMist which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. This Form 10-K also contains trademarks, service marks, copyrights and trade names of other companies which are the property of their respective owners. Solely for convenience, our trademarks and tradenames referred to in this Form 10-K may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

We obtained statistical data, market and product data, and forecasts used throughout this Form 10-K from market research, publicly available information and industry publications. While we believe that the statistical data, industry data and forecasts and market research are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of the information.

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Summary of Risk Factors

The following list summarizes what we believe to be the principal risks relevant to our company. The below summary is further elaborated on by the full text of the risk factors provided in the “Risk Factors” section of this Annual Report on Form 10-K for the year ended June 30, 2021. All capitalized terms in this section not defined herein shall have the meanings given to them elsewhere in this Annual Report. Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:

Risks Related to Our Financial Position and Capital Resources

Risks Related to COVID-19

Risks Related to Commercialization of Our Products

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Risks Related to Clinical Development and Regulatory Approval of AR101 for the Treatment of vascular Ehlers-Danlos Syndrome (“vEDS”), Healight for the Treatment for SARS-CoV-2 and Other Viral and Bacterial Respiratory Infections and Our Other Product Candidates

Risks Related to Our Reliance on Third Parties

Risks Related to Our Business Operations and Industry

Risks Related to Our Intellectual Property

Risks Related to Ownership of Our Common Stock

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AYTU BIOPHARMA, INC.

PART I

Item 1. Business

Company Overview

We are a commercial-stage specialty pharmaceutical company focused on commercializing novel products that address needs in both prescription and consumer health categories. Through our prescription business, and following our recent merger with Neos Therapeutics, Inc. (“Neos”), which closed on March 19, 2021, we market a portfolio of prescription products addressing large markets with a focus on general pediatric conditions, attention deficit/hyperactivity disorder (“ADHD”) and insomnia. We also market a portfolio of consumer health products also addressing large categories through our consumer health subsidiary, acquired in February 2020. Our goal is to become a leading specialty pharmaceutical company focused on large prescription and consumer health categories while building a late-stage development pipeline addressing significant medical needs.

Commercial Prescription Products

Our prescription ADHD portfolio (the “ADHD Portfolio”), which was acquired through the merger with Neos, includes branded products marketed in the United States using our internal commercial organization.

These commercial ADHD products are extended-release (“XR”) medications formulated in patient-friendly, orally disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize Neos’ microparticle modified-release drug delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for three ADHD products and were subsequently launched as displayed below.

Products containing amphetamine or methylphenidate are the most commonly prescribed medications in the United States for the treatment of ADHD. We believe Adzenys XR-ODT and Cotempla XR-ODT are the first amphetamine and methylphenidate extended-release, orally disintegrating tablets, respectively, marketed for the treatment of ADHD. In 2020, to facilitate improved patient access to our ADHD products, Neos deployed a Neos-sponsored patient support program, called Neos RxConnect. This program now operates through a network of approximately 1,200 pharmacies as of June 30, 2021. Following the Neos merger we rebranded the program as Aytu RxConnect, and we expect to integrate our legacy prescription products into this program with a focus on adding Poly-Vi-Flor, Tri-Vi-Flor, ZolpiMist and Karbinal ER to the program. We expect to have the legacy products incorporated into the program during the second half of calendar 2021, and for our patients and their health care providers to benefit from this state-of-the-art patient support program starting in the first half of calendar 2022.

Our legacy prescription pediatric portfolio includes Cefaclor, a second-generation cephalosporin antibiotic suspension, Karbinal® ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions and Poly-Vi-Flor® and Tri-Vi-Flor®, two complementary prescription fluoride-based multi-vitamin product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency (Cefaclor, Karbinal ER and Poly-Vi-Flor and Tri-Vi-Flor, collectively the “Pediatric Portfolio”). These products serve large pediatric markets and offer distinct clinical features and patient benefits.

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Our primary care portfolio includes ZolpiMist, the only FDA-approved oral spray prescription sleep aid and Tuzistra® XR, the only FDA-approved 12-hour codeine-based antitussive syrup (ZolpiMist and Tuzistra XR together are known as our “Primary Care Portfolio”). In addition to our legacy Primary Care Portfolio products, through the Neos merger we now sell our generic equivalent to the branded product Tussionex®, an extended-release oral suspension of hydrocodone and chlorpheniramine indicated for the relief of cough and upper respiratory symptoms of a cold (“generic Tussionex”).

Our Aytu RxConnect program (rebranded following the combining of Neos’ RxConnect program with our Pharmacy Partner Program) offers affordable and predictable copays to all commercially insured patients, regardless of their individual insurance plan and seeks to significantly reduce the challenges and frustrations that health care professionals and their office staff can face when prescribing branded medications, including our medications, for their patients.

Consumer Health Division

We acquired our consumer health division, Aytu Consumer Health, previously known as Innovus Pharmaceuticals, Inc. (“Innovus”), in February 2020. This division is an emerging over-the-counter (“OTC”) specialty pharmaceutical company engaged in the commercialization, licensing and development of safe and effective non-prescription medicine, consumer care products, supplements and medical devices to improve men’s and women’s health and vitality. The products focus in five core categories including diabetes management (with a concentration on neuropathy), pain management, digestive health, sexual and urological health and general wellness for men and women. All products are intended to be used by consumers on a regular basis and as such we offer a monthly subscription program to allow for continuous use.

The consumer health division is dedicated to being a leader in developing and marketing new OTC and branded Abbreviated New Drug Application (“ANDA”) products, supplements and medical devices. The division actively pursues opportunities where existing prescription drugs have recently, or are expected to, change from a prescription (or Rx) to OTC. These “Rx-to-OTC switches” required FDA approval through a process initiated by the New Drug Application (“NDA”) holder.

The division currently sells directly to consumers in both the United States and Canada through its proprietary Beyond Human Sales & Marketing platform which focuses direct mail marketing, which includes pamphlets, postcards, tear sheets and newspaper advertisements, allowing consumers to purchase directly through call centers with shipments to their residence. We currently issue over 17 million pieces of mail annually across the United States and Canada. Additionally, products are marketed on e-commerce platforms including the division’s website and the Amazon.com platform. Our consumer health marketing strategies focus on search engine optimization and search engine marketing and affiliate marketing. The division also sells to domestic and international distributors on both an exclusive and non-exclusive basis.

The overall strategy of the consumer health division focuses on two primary objectives:

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Development Portfolio

On April 12, 2021, we, acquired substantially all the assets of Rumpus Therapeutics, LLC through an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”). Upon closing the transaction, we hired Rumpus’ principal executive officers, Christopher Brooke and Nathaniel Massari, as employees. Pursuant to the Rumpus transaction, we acquired certain rights and other assets, including key commercial licenses, including a global license to enzastaurin (which we now refer to as AR101) for rare, inherited connective tissue disorders specifically inclusive of vascular Ehlers-Danlos Syndrome (“vEDS”).

AR101 is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types in trials previously conducted by Eli Lilly & Company. Dr. Hal Dietz developed the first preclinical model that mimics the human condition and recapitulates vEDS, and this model serves as the basis for the plausible clinical benefit and rationale for conducting a clinical trial with AR101 in vEDS. This knock-in model has the same genetic mutation most prevalent in vEDS patients and is representative of the human condition in both the timing and location of vascular events. The model has generated identical structural histology and mechanical characteristics, and unbiased findings demonstrated that vascular structure alone does not lead to vascular events. Objective comparative transcriptional profiling by high-throughput RNA sequencing of the aorta displayed a molecular signature for excessive PKC/ERK cell signaling that is the purported driver of disease. PKC inhibition proved efficacious in multiple pre-clinical and murine (mice) models and indeed prevented death due to vascular rupture.

Pivotal Phase 3 studies for both newly-diagnosed diffuse large B-cell lymphoma (“DLBCL”) and glioblastoma multiforme (“GBM”) are currently being conducted by Denovo Biopharma LLC (“Denovo”), enzastaurin's owner, following Denovo’s acquisition of enzastaurin from Eli Lilly & Company. Enzastaurin received orphan drug designation in DLBCL and GBM from the FDA and the European Medicines Agency (“EMA”). In July 2020, the FDA granted Fast Track qualification for enzastaurin as the first-line treatment of GBM. Through our transaction with Rumpus, we have secured exclusive global rights to enzastaurin/AR101 from Denovo in the fields of rare genetic pediatric onset or congenital disorders outside of oncology. We expect to receive Orphan Drug Designation by the first calendar quarter of 2022, allowing for seven years' marketing exclusivity in the United States and ten years in Europe and Japan. AR101 is protected by a suite of pending patents being pursued in major markets globally which have been licensed from The Johns Hopkins University (“Johns Hopkins”) and have an earliest priority date of March 2017. We expect to advance AR101 to a pivotal study in the first calendar quarter of 2022 following submission and FDA acceptance of an Investigational New Drug (“IND”) application.

Our other clinical-stage pharmaceutical asset, N-desethyloxybutynin (which we acquired through our merger with Neos and Neos historically referred to as NT0502), is an active metabolite of the active ingredient in Ditropan® (oxybutynin chloride), an FDA-approved medication for a urological condition. NT0502 is a new chemical entity (“NCE”) and selective anticholinergic agent that we are developing as an oral, once- or twice-daily treatment to reduce chronic sialorrhea in patients with neurological conditions associated with excessive salivation and drooling. Based on preclinical data, we believe that NT0502 is preferential for blocking muscarinic receptors in the salivary glands and may offer the potential for an improved tolerability profile and an easier-to-dose oral formulation compared to existing treatment options. We intend to utilize the regulatory pathway provided by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act for NT0502. In January 2020, we announced that we had completed dosing in a Phase 1 pilot pharmacokinetic study for NT0502. The Phase 1 trial was a single-dose open-label, randomized, parallel study to assess the systemic exposure and safety of four ion-resin, modified-release ODT formulations of NT0502 and oxybutynin in 30 healthy adults. The top-line results from this study confirmed a formulation for further clinical development. NT0502 entered our pipeline on October 23, 2018, when Neos entered into an Exclusive License Agreement with NeuRx Pharmaceuticals, LLC (“NeuRx”) pursuant to which NeuRx granted an exclusive, worldwide, royalty bearing license to us to develop, manufacture and commercialize certain pharmaceutical products containing NeuRx’s proprietary compound designated as NRX-101, now NT0502.

Our clinical-stage medical device asset, an ultraviolet (UV)-A light endotracheal catheter we refer to as HealightTM, is being studied as a potential treatment for mechanically ventilated patients suffering from severe

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respiratory infections, including the infection caused by SARS-CoV-2 (the virus implicated in COVID-19). In April 2020 we licensed global rights to the Healight technology platform from Cedars-Sinai Medical Center (“Cedars-Sinai”). The research team at the Medically Associated Science and Technology (MAST) Program at Cedars-Sinai has been developing the patent-pending Healight platform since 2016 and has produced a growing body of scientific evidence demonstrating pre-clinical safety and effectiveness of the technology as a potential antiviral and antibacterial treatment. The Healight technology employs proprietary methods of administering intermittent ultraviolet (UV) A light via a novel endotracheal medical device that, when implemented clinically, is inserted through the patient’s endotracheal tube and illuminated intermittently over a period of multiple days. Pre-clinical findings indicate the technology's effects in eradicating a wide range of viruses and bacteria, inclusive of human coronavirus. Those data, along with recently published clinical data from a five patient study studying SARS-CoV-2, have been the basis of discussions with regulatory bodies as we consider an efficient path to enable human use for the potential treatment of coronavirus in intubated patients in the intensive care unit (ICU). Beyond the initial pursuit of a coronavirus indication, additional data suggest broader clinical applications for the technology across a range of viral and bacterial pathogens. This includes bacteria implicated in ventilator associated pneumonia (“VAP”). A randomized, controlled, sham-controlled study is currently being planned to further evaluate Healight in SARS-CoV-2, and additional clinical applications (including VAP) are being considered.

Our Strategy

Our goal is to become a leading specialty pharmaceutical company that improves the lives of patients and healthcare consumers. We will do this by employing a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics and consumer health products. Our primary focus is on commercializing innovative prescription products that address prevalent conditions frequently developed in childhood, including ADHD. We also commercialize consumer healthcare products through efficient direct-to-consumer and e-commerce platforms. Importantly, we are also focused on developing a late-stage pipeline of novel, promising therapeutics that address unmet medical needs, with a focus on pediatric-onset rare diseases. Our current development pipeline includes a pivotal study-ready therapeutic that, if proven safe and effective and ultimately approved, would be the world’s first and only approved treatment for vEDS.

Our strategic priorities are to continue to increase revenues from our prescription and consumer health portfolios, advance our late-stage product pipeline, expand our patient access programs for our prescription products and grow our commercial portfolio through additional in-licensing or acquisition. Specifically, we intend to:

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We believe our history of acquiring companies and in-licensing and acquiring products and pipeline assets, along with our success in building out commercial teams and successfully executing product launch and growth strategies, is a distinct competitive advantage. Our transactional adeptness and execution orientation enable us to continue to seek growth opportunities through both organic growth and opportunistic in-licensing or strategic acquisitions. Further, our commercial infrastructure is scalable and lends itself to additional on-market assets and future product candidates that fit within our core pediatric focus. As such, in the near term, we may seek to leverage our commercial model and infrastructure by expanding our commercial portfolio with external product opportunities as we have done since our inception. Near to longer term, we believe our prescription and consumer health businesses will provide resources to invest in and develop our pediatric and rare disease asset pipeline.

Corporate History

We were initially incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado.

Vyrix Pharmaceuticals, Inc., or Vyrix, was incorporated under the laws of the State of Delaware on November 18, 2013 and was wholly-owned by Ampio Pharmaceuticals, Inc. (NYSE American: AMPE), or Ampio, immediately prior to the completion of the Merger (defined below). Vyrix was previously a carve-out of the sexual dysfunction therapeutics business, including the late-stage men’s health product candidates, Zertane and Zertane-ED, from Ampio, which was announced in December 2013. Luoxis Diagnostics, Inc., or Luoxis, was incorporated under the laws of the State of Delaware on January 24, 2013 and was majority-owned by Ampio immediately prior to the completion of the Merger. Luoxis was initially focused on developing and advancing the RedoxSYS System. The MiOXSYS System was developed following the completed development of the RedoxSYS System.

On March 20, 2015, Rosewind formed Rosewind Merger Sub V, Inc. and Rosewind Merger Sub L, Inc., each a wholly-owned subsidiary formed for the purpose of the Merger. On April 16, 2015, Rosewind Merger Sub V, Inc. merged with and into Vyrix and Rosewind Merger Sub L, Inc. merged with and into Luoxis, and Vyrix and Luoxis became subsidiaries of Rosewind. Immediately thereafter, Vyrix and Luoxis merged with and into Rosewind with Rosewind as the surviving corporation (herein referred to as the Merger). Concurrent with the closing of the Merger, Rosewind abandoned its pre-merger business plans, solely to pursue products in the specialty pharmaceuticals, devices and diagnostics markets, focusing on large areas of medical need, including the business of Vyrix and Luoxis.

On June 8, 2015, we reincorporated as a domestic Delaware corporation under Delaware General Corporate Law and changed our name from Rosewind Corporation to Aytu BioScience, Inc.

On November 1, 2020, we acquired the established prescription pediatric portfolio of Cerecor, Inc. The acquired products include Cefaclor, a second-generation cephalosporin antibiotic suspension, Karbinal ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions and Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based multi-vitamin product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency.

In February 2020, we acquired Innovus, a specialty pharmaceutical company commercializing, licensing and developing safe and effective consumer healthcare products designed to improve people’s health and vitality. Innovus commercializes over 30 consumer health products competing in large healthcare categories including diabetes, pain management, digestive health, sexual and urological health and general wellness for men and women. The Innovus product portfolio is commercialized through both direct-to-consumer and e-commerce marketing channels utilizing our proprietary Beyond Human® marketing and sales platform.

On March 10, 2020, we announced the licensing of a COVID-19 IgG/IgM Rapid Test from L.B. Resources, Ltd. This agreement grants us the right to distribute the product in the United States for a period of three years, with additional three-year autorenewals thereafter. The COVID-19 IgG/IgM Rapid Test is a solid phase

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immunochromatographic assay used in the rapid, qualitative and differential detection of IgG and IgM antibodies to the 2019 Novel Coronavirus in human whole blood, serum or plasma. We also distributed a COVID-19 rapid antigen test as part of our effort to aid in the fight against COVID-19. In April 2020, we signed an exclusive worldwide licensing agreement with Cedars-Sinai for a medical device platform technology called HealightTM. This technology, which has been studied in the laboratory and clinical setting, is being investigated as a potential treatment for COVID-19 in hospitalized, intubated patients. In collaboration with researchers from the Medically Associated Science and Technology Program (MAST) at Cedars-Sinai Medical Center, we expect to advance the development of Healight in the near term.

Our Board of Directors approved a 1-for-10 reverse stock split of our common stock on December 7, 2020, which became effective on December 8, 2020. Our shares began trading on a split-adjusted basis on the Nasdaq Capital Market commencing upon market open on December 9, 2020. The reverse stock split was previously approved by shareholders at an Annual Meeting of Stockholders on April 23, 2020.

On December 10, 2020 we announced a definitive merger agreement with Neos Therapeutics whereby we agreed to acquire all outstanding shares of Neos stock in an all-stock transaction valued at $44.9 million. Through this merger transaction, which was completed on March 19, 2021, we increased our footprint in the prescription pediatric market through the acquisition of Neos’ established, growing multi-brand ADHD portfolio. We closed the Neos merger on March 19, 2021. Following the Neos merger, we changed our name to Aytu BioPharma, Inc.

On April 12, 2021, we entered into an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, Christopher Brooke and Nathaniel Massari pursuant to which we acquired certain rights and other assets, including key commercial global licenses, relating primarily to the pediatric-onset rare disease development asset enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied for the treatment of vascular Ehlers-Danlos Syndrome or vEDS. We acquired this asset for $1.5 million in cash and, upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at our option.

Our Products and Markets

Our prescription products are sold solely in the United States and are distributed through multiple channels, including sales to pharmaceutical wholesalers, on a sell-through basis using third-party logistics enterprises. Our consumer health products are sold primarily in the United States and Canada directly to consumers via traditional consumer channels, such as print advertising and direct mail, and e-commerce channels including various websites and consumer web commerce platforms such as Amazon,com in the United States and Amazon.ca in Canada.

Prescription Products

ADHD Portfolio (the Neos legacy product portfolio)

Through the merger with Neos, we acquired ADHD brands Adzenys XR-ODT, Adzenys ER, and Cotempla XR-ODT.

ADHD Market and Treatment Options

ADHD is a neurobehavioral disorder characterized by a persistent pattern of inattention and/or hyperactivity/impulsivity that interferes with functioning and/or development. ADHD can have a profound impact on an individual’s life, causing disruption at school, work and home and in relationships. It is one of the most common developmental disorders in children and often persists into adulthood. In 2011, an estimated 11% of children in the United States ages 4 to 17 had previously received an ADHD diagnosis. A 2006 study estimated 4.4% of adults in the United States experience ADHD symptoms. Current ADHD treatment guidelines recommend a multi-faceted approach that uses medications in conjunction with behavioral interventions.

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In 2020, approximately 75.1 million prescriptions for medications with ADHD labeling were written in the United States and generated approximately $8.5 billion in sales. Approximately 91% of these prescriptions were for stimulant medications, such as methylphenidate and amphetamine, which are and have been the standard of care for several decades. Methylphenidate and amphetamine prescriptions generated $2.6 billion and $5.6 billion in sales, respectively, in 2020 in the United States. A few non-stimulant medications are also available, but evidence of their efficacy for treating ADHD symptoms is less compelling. The market for ADHD medications outside of the United States is less developed, but we believe it will continue to grow as recognition and awareness of the disorder increase.

Extended-release, or long acting, dosage forms of stimulant medications are the standard of care for treating ADHD, making up approximately 54% of ADHD prescriptions. The most prescribed extended-release medications for ADHD, Concerta® and Adderall XR® (and each of their generic equivalents), are long-acting versions of previously short-acting methylphenidate and amphetamine medications, respectively. Most of these extended-release dosage forms allow for once-daily dosing in the morning, which eliminates the need to re-dose during the day. Our products, Adzenys XR-ODT and Cotempla XR-ODT, are extended-release orally disintegrating tablets that allow for once-daily dosing in the morning based upon the proprietary microparticle delivery technology developed by Neos.

There is significant competition in the ADHD market, including from well-established companies, many of whom have substantially greater financial, technical and commercial resources than we do, and entrenched existing ADHD products. For example:

Further, makers of branded drugs could also enhance their own formulations in a manner that competes with our enhancements of these drugs. We are also aware of efforts by several pharmaceutical companies with ADHD medications in clinical development, including Sunovion, NLS Pharma and Neurovance, a subsidiary of Otsuka Pharmaceutical Co., Ltd. A non-stimulant treatment QelbreeTM, a non-stimulant treatment for ADHD was recently approved by the FDA and commercially launched by Supernus in the U.S.

Our ADHDand Central Nervous System (CNS) Product Portfolio

Neos’ modified-release drug delivery technology platform has enabled Neos to create XR-ODT formulations of amphetamine and methylphenidate. This was achieved by developing an extended-release profile that allows for once daily dosing and an ODT formulation that allows for easier administration and ingestion and twelve-hour duration of action.

Adzenys XR-ODT and Cotempla XR-ODT are the first XR-ODT products for the treatment of ADHD. These XR-ODT products offer unique attributes to ADHD patients and caregivers, including:

● taste-masking of bitter ADHD medications, with flavoring options;

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● convenient single-unit blister-packaging, which is both portable and discrete.

Adzenys XR-ODT: Amphetamine XR-ODT for the treatment of ADHD

Neos received approval on January 27, 2016 from the FDA for Adzenys XR-ODT for the treatment of ADHD in patients six years and older. We believe Adzenys XR-ODT is the first amphetamine XR-ODT approved for the treatment of ADHD. The NDA for Adzenys XR-ODT relies on the efficacy and safety data that formed the basis of FDA approval for the listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability and aggregate safety data from the Adzenys XR-ODT clinical program. Adzenys XR-ODT contains amphetamine loaded onto a mixture of immediate-release and polymer-coated delayed-release resin particles, which are formulated and compressed into an ODT along with other typical tableting excipients using Neos’ patented rapidly disintegrating ionic masking (“RDIM”) technology. The result is amphetamine with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth without the need for water. Adzenys XR-ODT is available in 30-day supply, child-resistant blister packs.

The suite of composition-of-matter patents for Adzenys XR-ODT are scheduled to expire in 2026 and 2032. These patents are listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange Book”). In addition, Neos entered into a settlement agreement with Actavis Laboratories FL, Inc. (“Actavis”), which resolved all ongoing litigation involving Neos’ Adzenys XR-ODT patents and Actavis’ ANDA with the FDA for a generic version of Adzenys XR-ODT. Under the agreement with Actavis, Neos granted Actavis the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances.

Neos included a Paragraph IV certification in the NDA submission for Adzenys XR-ODT, which required a Paragraph IV certification notification to the producer of Adderall XR®, Shire Pharmaceuticals (“Shire”), in accordance with the Hatch-Waxman Amendments. In July 2014, Neos entered into a license agreement with Shire, pursuant to which Shire granted Neos a non-exclusive license to certain patents owned by Shire for certain activities with respect to Adzenys XR-ODT. Under the terms of the agreement, Neos paid a lump sum, non-refundable license fee of an amount less than $1.0 million in February 2016 and agreed to pay Shire a single digit royalty on net sales of Adzenys XR-ODT during the life of the patents. Additionally, the license agreement contains a covenant from Shire not to file a patent infringement suit against Neos alleging that Adzenys XR-ODT infringes the relevant Shire patents.

In conjunction with the approval of the Adzenys XR-ODT NDA, Neos committed to the FDA to conduct certain clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. Neos completed a pharmacokinetic study in this population in 2018, and, following the merger, we have engaged in discussions with the FDA to further clarify the design protocols required to conduct the remaining studies.

Cotempla XR-ODT: Methylphenidate XR-ODT for the treatment of ADHD

Neos received approval of Cotempla XR-ODT from the FDA for the treatment of ADHD in patients 6 to 17 years old, on June 19, 2017. The Cotempla XR-ODT NDA relies on the efficacy and safety data that formed the basis of FDA approval for the listed drug, Metadate CD®, together with bioavailability/bioequivalence data and efficacy/safety data from the Cotempla XR-ODT clinical program. The results of the Cotempla XR-ODT Phase 3 clinical efficacy and safety trial showed a statistically significant improvement in ADHD symptom control compared to placebo across the classroom day. Onset of effect was observed within one hour post-dose and persisted through 12 hours. No serious adverse events were reported during the study, and the adverse event profile was consistent with the drug’s mechanism of action.

Cotempla XR-ODT contains methylphenidate loaded onto a mixture of immediate-release and polymer-coated delayed-release resin particles, which are formulated and compressed into an ODT along with other typical tableting excipients using Neos’ RDIM technology. The result is methylphenidate with an in vivo extended-release profile

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delivered through a tablet that quickly disintegrates in the mouth. Cotempla XR-ODT is available in 30-day supply, child-resistant blister packs. We believe Cotempla XR-ODT is the first methylphenidate XR-ODT for the treatment of ADHD, providing onset-of-effect within one hour and a 12-hour duration.

We hold composition-of-matter patents in the U.S. which we expect will provide Cotempla XR-ODT intellectual property protection until 2032. These patents are listed in the Orange Book. In addition, Neos entered into the settlement agreement with Teva Pharmaceuticals USA, Inc. (“Teva”), which resolved all ongoing litigation involving the Cotempla XR-ODT patents and Teva’s ANDA with the FDA for a generic version of Cotempla XR-ODT. Under the agreement with Teva, Neos granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier under certain circumstances.

In conjunction with the approval of the Cotempla XR-ODT NDA, Neos committed to the FDA to perform additional clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. Neos completed a pharmacokinetic study in this population in 2019. In light of a new draft guidance for industry that was published in May 2019, “Attention Deficit Hyperactivity Disorder: Developing Stimulant Drugs for Treatment Guidance for Industry,” and following the merger, we have engaged in discussions with the FDA to gain concurrence on the design of the protocols required to meet the remaining post-marketing requirements.

Adzenys ER: Amphetamine XR liquid suspension for the treatment of ADHD

Neos received approval of Adzenys ER from the FDA for the treatment of ADHD in patients six years and older, on September 15, 2017. The NDA for Adzenys ER relies on the efficacy and safety data that formed the basis of FDA approval for the listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability and aggregate safety data from the Adzenys ER clinical program. There are no post-marketing requirements for this product. Adzenys ER contains amphetamine loaded onto a mixture of immediate-release and polymer coated delayed-release resin particles, and using Neos’ patented dynamic time release suspension (“DTRS”) technology, Neos created an amphetamine XR oral suspension. Adzenys ER is designed to be shelf stable for 36 months, without requiring refrigeration or reconstitution. The composition-of-matter patents for Adzenys ER are scheduled to expire in 2032. These patents are listed in the Orange Book.

Neos included a Paragraph IV certification in the NDA submission for Adzenys ER, which required a Paragraph IV certification notification to the producer of Adderall XR®, Shire Pharmaceuticals, in accordance with the Hatch Waxman-Amendments. On March 6, 2017, Neos entered into a license agreement with Shire, pursuant to which Shire granted Neos a non-exclusive license to certain patents owned by Shire for certain activities with respect to Adzenys ER. Under the terms of the agreement, Neos paid a lump sum, non-refundable license fee of an amount less than $1.0 million in October 2017 and has been paying a single digit royalty on net sales of the Adzenys ER during the life of the patents. Additionally, the license agreement contains a covenant from Shire not to file a patent infringement suit against us alleging that Adzenys ER infringes the relevant Shire patents.

Following the merger and in conjunction with the integration of the Aytu and Neos sales forces and product portfolios, we evaluated the market potential of Adzenys ER and made the decision to discontinue the product. We believe this discontinuation will enable a higher level of promotional focus on the core ADHD and pediatric brands while reducing the regulatory and commercial expenses associated with Adzenys ER. Revenue for Adzenys ER has been minimal since launching the product February 2018.

ZolpiMist: Oral spray zolpidem tartrate for the short-term treatment of insomnia

ZolpiMist is an FDA-approved prescription oral spray indicated for the short-term treatment of insomnia. We believe ZolpiMist is the only oral spray formulation of zolpidem tartrate, the most widely prescribed prescription sleep aid in the U.S. ZolpiMist competes in the non-barbituate prescription sleep aid category, a $5.2 billion prescription drug category with over 35 million prescriptions written in 2020. Over 70 percent of the prescriptions in this category were written for a branded or generic formulation of zolpidem tartrate. The zolpidem tartrate brands marketed in the U.S. include Ambien®, Ambien® CR, Intermezzo®, Edluar® and ZolpiMist®, but the vast majority of prescriptions written are filled with generic versions of zolpidem tartrate. Zolpidem tartrate is approved in multiple formulations including

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immediate-release, controlled release and orally dissolving tablet formulations, but immediate release tablets are most widely prescribed and dispensed.

Insomnia is among the most common conditions affecting Americans and patients around the world in general. Approximately 30 percent of adults experience insomnia, and it is estimated that ten percent or more suffer daytime consequences as a result of their poor sleep. Prescription sleep aids are prescribed to enable more rapid onset of sleep for patients experiencing short-term insomnia, and ZolpiMist’s oral spray formulation rapidly absorbs into the patient’s bloodstream to potentially enable faster sleep onset. In a randomized, controlled clinical trial, patients taking 5 mg and 10 mg of ZolpiMist achieved higher levels of blood plasma significantly faster than patients taking zolpidem tartrate oral tablets. Additionally, these patients experienced faster onset of sedation as measured by the validated Digital Symbol Substitution Test (DSST). By virtue of bypassing first-pass liver metabolism, the oral spray delivery afforded through ZolpiMist enables rapid absorption, fast sleep onset and may offer distinct patient benefits not afforded by oral tablets. Additionally, since ZolpiMist does not require swallowing, it may be appropriate for patients with dysphagia or who otherwise find tablets difficult to tolerate.

In June 2018, we acquired an exclusive license to ZolpiMist in the U.S. and Canada from Magna Pharmaceuticals. This agreement allows for our exclusive distribution throughout the U.S. and the ability to sublicense the product in Canada. The agreement can only be terminated for a material breach as defined in the agreement or by convenience by us upon sixty days’ written notice and payment of a $50,000 termination fee. Per the agreement, we pay a low double-digit royalty for the first seven years of the agreement, following which the license becomes a royalty-free perpetual license as long as the terms of the agreement remain satisfied. We do not have a signed supply agreement with the ZolpiMist contract manufacturer, but we have an ongoing relationship with the manufacturer and have received multiple product deliveries to date. ZolpiMist is not currently covered by any patents, but we maintain an active trademark in the United States.

Pediatric Portfolio

Prior to the closing of the Neos merger on March 19, 2021, we were focused on the commercialization of the Pediatric and Aytu legacy Portfolio inclusive of core products Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER, ZolpiMist and Natesto. Prior to November of 2019 we primarily commercialized Natesto, Tuzistra XR and ZolpiMist through our U.S. sales force, but upon the closing of the asset purchase of a portfolio of prescription pediatric products with Cerecor on November 1, 2019 (“Cerecor Asset Purchase”), we expanded our portfolio to include AcipHex® Sprinkle, Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER, Cefaclor and Flexichamber. We have since de-prioritized Cefaclor and Flexichamber, given that these products have contributed immaterial revenue. Further, we have discontinued AcipHex Sprinkle and returned rights to Natesto to the product’s licensor Acerus Pharmaceuticals. With respect to the Aytu legacy products, going forward we expect to focus our promotional efforts on Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER and ZolpiMist. ZolpiMist is now being promoted by the CNS-focused sales force in conjunction with the ADHD brands to take advantage of overlapping call points. Poly-Vi-Flor, Tri-Vi-Flor and Karbinal ER are being promoted by our pediatric-focused sales representatives.

Poly-Vi-Flor and Tri-Vi-Flor: Our fluoride-based multivitamin prescription supplement product line for infants and children

Poly-Vi-Flor and Tri-Vi-Flor are two complementary prescription fluoride-based supplement product lines containing combinations of vitamins and fluoride in various oral formulations. These prescription supplements are prescribed for infants and children to treat or prevent fluoride deficiency due to poor diet or low levels of fluoride in drinking water and other sources while also providing multi-vitamin support and folic acid supplementation. Because these products contain at least .25 mg of sodium fluoride, Poly-Vi-Flor and Tri-Vi-Flor are regulated as prescription products.

Fluoride supplementation has been proven to protect teeth from decay. Community water fluoridation prevents tooth decay by providing frequent and consistent contact with low levels of fluoride. By keeping the tooth strong and solid, fluoride stops cavities from forming and can rebuild the tooth’s surface. Community water fluoridation began in the United States in 1945 and is the process of adjusting the amount of fluoride in drinking water to a level

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recommended for preventing tooth decay. As of 2016, more than 200 million people, or nearly 3 in 4 Americans who use public water supplies, drank water with enough fluoride to prevent tooth decay. However, American children living in municipalities that do not fluoridate the water supply or in rural areas that rely on well water supplies do not receive recommended levels of fluoride through fluoridation. Therefore, these children often require daily fluoride supplementation as part of their mineral and vitamin intake. In many instances, physicians prescribe fluoride-based multi-vitamins (Vitamins A, B, C, D and folic acid) regularly to supplement their fluoride intake and enable convenient supplementation. Infants are prescribed multi-vitamin drops while older children are prescribed tablet formulations.

In 2020, 13.1 million multi-vitamin prescriptions were written in the U.S. Of those, prescription multi-vitamins containing sodium fluoride accounted for 1.6 million total prescriptions. Common multi-vitamin combinations contain vitamins A, B, C, D and E, but no other prescription pediatric multi-vitamin products contain Metafolin, which makes the Poly-Vi-Flor and Tri-Vi-Flor product lines distinct, single-source brands. While the multi-vitamin market is dominated by generic products, brands account for 3.4% of the multivitamin plus fluoride market. Poly-Vi-Flor and Tri-Vi-Flor collectively account for 2.4% of total prescriptions in the multi-vitamin plus fluoride market. Other brands include Tri-Vite (marketed by Method Pharmaceuticals), Floriva (marketed by BonGeo Pharmaceuticals) and Quflora (marketed by Carwin Pharmaceutical Associates).

Poly-Vi-Flor is available in both chewable tablet and oral liquid suspension multivitamin formulations in six different product presentations: Poly-Vi-Flor Chewable Tablets .25 MG, .50 MG, and 1 MG tablets, Poly-Vi-Flor Chewable Tablets with Iron, Poly-Vi-Flor Oral Suspension and Poly-Vi-Flor Oral Suspension with Iron. Poly-Vi-Flor contains Vitamin A, Vitamin B1, B2, B3, and B6, Vitamin C, Sodium Fluoride in various doses and Metafolin, a proprietary, trademarked L-methylfolate form of folic acid developed by Merck & Cie (“Merck”).

Tri-Flor is available as an oral liquid suspension in two different strengths (.25 MG and .50 MG fluoride) containing Vitamin A, Vitamin C, Vitamin D3, Sodium Fluoride, Sodium Benzoate and Metafolin. By virtue of its Metafolin content, Tri-Vi-Flor offers a similar clinical profile: a fluoride-based multivitamin containing body-ready Metafolin.

Metafolin® is Merck’s manufactured calcium salt of L-5-methyltetrahydrofolic or L-methylfolate. It is a ‘body ready’ alternative to folic acid and offers good stability, solubility and bioavailability. Folic acid supplementation is recommended in various patient groups, but a significant number of patients have difficulty metabolizing folate due to an enzymatic deficiency characterized by a genetic mutation affecting the enzyme methylenetetrahydrofolate reductase, or MTHFR. MTHFR converts ingested folate (such as supplemented folic acid) into L-methylfolate, the body’s usable form. Clinical studies have demonstrated that 75% of pediatric patients may have one MTHFR genetic mutation while 40% may have two mutations. These mutations lead to impaired function of the enzyme and cause folate deficiencies. Metafolin is unaffected by the MTHFR mutation, thereby directly delivering bioavailable L-methylfolate, and offering a distinct clinical advantage over other folic acid supplements.

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Poly-Vi-Flor and Tri-Flor Product Line Description

Product Name Ingredients Sodium Fluoride – Metafolin - Iron Dosage

We acquired Poly-Vi-Flor and Tri-Vi-Flor through the Cerecor Asset Purchase. Through the acquisition we acquired multiple licenses surrounding both brands. We own or exclusively license from Mead Johnson & Company, LLC to the trademarks Poly-Vi-Flor and Tri-Vi-Flor, and we pay a sales-based royalty for the use of these trademarks. We also pay a single-digit royalty to Merck & Cie through a commercial supply and license agreement for exclusive use of the proprietary ingredient Metafolin (and the follow-on L-methylfolate ingredient Arcofolin®). The commercial supply and license agreement was originally between Merck and Zylera Pharmaceuticals, which was subsequently acquired by Cerecor, and it was assigned to us upon closing of the Cerecor Asset Purchase. Subsequent to that assignment, we signed a new commercial supply and license agreement to include Arcofolin that was effective February 1, 2020. Arcofolin is an improved formulation of L-methylfolate, and, if granted, the core patent covering Arcofolin would expire in 2033. Through the supply and license agreement with Merck we have exclusive rights to Merck’s L-methylfolate in the pediatric field (birth to twelve years of age) in the United States. The term of the agreement extends through January 2025, with an automatic renewal for two years following the initial term unless either party terminates the agreement within one year of the then current term. The agreement requires, among other items, that we provide a rolling twelve-month forecast containing our requirements for either Metafolin or Arcofolin each quarter. The first six months forecast of each rolling forecast is binding.

The core family of patent covering Arcofolin has a priority date of March 31, 2017 and describes a crystalline sodium salt of 5-methyl-(6S)- tetrahydrofolic acid wherein the molar ratio of 5-methyl-(6S)-tetrahydrofolic acid to sodium is from 1:0.5 to 1:1.5 (in mol/mol) and/or hydrates and/or solvates thereof, as well as a process of obtaining the same. If issued, the standard 20-year exclusivity for this patent would expire in 2037.

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Karbinal ER: Extended release carbinoxamine oral suspension for the treatment of seasonal and perennial allergies

Karbinal® ER (carbinoxamine maleate extended-release oral suspension) is an H1 receptor antagonist (antihistamine) indicated to treat seasonal and perennial allergic rhinitis, vasomotor rhinitis, allergic conjunctivitis due to inhalant allergens and food, mild, uncomplicated allergic skin manifestations of urticaria and angioedema, dermatographism, as therapy for anaphylactic reactions adjunctive to epinephrine and other standard measures after the acute manifestations have been controlled, and amelioration of the severity of allergic reactions to blood or plasma.

Over 50 million Americans suffer from allergies in any given year, and allergies are the sixth leading cause of chronic illness in the U.S. Numerous allergy treatments exist to address allergies and allergic symptoms depending upon the symptom(s). Oral antihistamines are considered a mainstay of allergy treatment, and the prescription antihistamine market is a large category with over 50 million prescriptions written in 2020. The prescription antihistamine category is dominated by generic products and consists of first generation and second-generation molecules. Generally, first-generation antihistamines block both histaminic and muscarinic receptors and pass the blood-brain barrier. Second-generation antihistamines mainly block histaminic receptors, but they do not pass the blood-brain barrier. First generation antihistamines, which are generally characterized as more sedating, accounted for 16% of 2020 total prescriptions, while non-sedating, second generation antihistamines accounted for 84% of total prescriptions. The most widely prescribed oral, second-generation antihistamines are cetirizine (brand name Zyrtec®) and loratadine (brand name Claritin®). Diphenhydramine (brand name Benadryl®) is the most widely prescribed first-generation molecule.

Karbinal ER is the only FDA-approved, 12-hour carbinoxamine oral suspension and is an effective antihistamine with a broad range of indications. Karbinal ER is positioned as a second-line allergy treatment for patients who continue to suffer from allergic symptoms following initial treatment with a second-generation, non-sedating antihistamine. Further, as Karbinal ER is an oral suspension formulation, children are the primary target patient given their preference for liquid treatments and, in many cases, their inability to swallow tablets or capsules. Karbinal ER is indicated for children as young as two years of age. Karbinal has a pleasant strawberry-banana taste and is available in 480 mL bottles.

We acquired rights to Karbinal ER through the Cerecor Asset Purchase. Through the acquisition we assigned an exclusive supply and distribution agreement with Tris, the developer and manufacturer of the product. This agreement allows us to exclusively distribute Karbinal ER in the U.S. through the term of the agreement, which is through August 2032, unless the agreement is terminated earlier pursuant to the termination provisions in the agreement. Tris originally licensed Karbinal to FSC Laboratories. Prior to Cerecor’s acquisition of Karbinal through its acquisition of the pediatric assets of Avadel Pharmaceuticals (“Avadel”), through a transaction with FSC Laboratories, Flamel Technologies and Eclat Pharmaceuticals that formed Avadel, Avadel owned rights to the Karbinal ER supply and distribution agreement. As part of the agreement, we pay Tris sales-based royalties based on net revenue. Additionally, we are committed to make annual minimum payments to Tris through 2023. We provide Tris with a rolling 12-month forecast containing estimates of our product requirements for the upcoming year. The first three months of each forecast is binding.

Two core patents protect Karbinal ER in the U.S., and both parents are listed in the FDA’s Orange Book. The first patent describes a coated drug-ion exchange resin complex comprising a core composed of a drug complexed with a pharmaceutically acceptable ion-exchange resin. The priority date for this family is March 29, 2009, so the standard 20-year exclusivity for this patent will expire in 2029. The second patent describes an aqueous liquid suspension containing a coated drug-ion exchange resin complex comprising a core molecule complexed with a pharmaceutically acceptable ion-exchange resin and an uncoated ion exchange resin complex. The priority date for this family is June 15, 2007, so the standard 20-year exclusivity for this patent will expire in 2027.

Our Prescription Antitussive Products: Tuzistra® XR and Generic Tussionex®

Tuzistra® XR

In November 2018 we acquired U.S. rights to be supplied by and to market Tuzistra XR from Tris, the developer and manufacturer of the product. Tuzistra XR is the only FDA-approved 12-hour codeine-based antitussive.

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Tuzistra XR is a prescription antitussive consisting of codeine polistirex and chlorpheniramine polistirex in an extended-release oral suspension. Tuzistra XR is a patented combination of codeine, an opiate agonist antitussive, and chlorpheniramine, a histamine-1 receptor antagonist, indicated for relief of cough and symptoms associated with upper respiratory allergies or a common cold in adults aged 18 years and older. Tuzistra XR is protected by two Orange Book-listed patents extending to 2027 and 2029 both of which are owned by Tris.

According to MediMedia, the U.S. cough cold prescription market is worth in excess of $3 billion, with 30-35 million annual prescriptions. The antitussive market is dominated by short-acting treatments, which require dosing 4-6 times a day. Tuzistra XR was developed using Tris’ liquid sustained release technology, LiquiXR®, which allows for extended drug delivery throughout a 12-hour dosing period. On September 1, 2019, we entered into a co-promotion agreement for Tuzistra XR with Poly Pharmaceuticals (“Poly”) whereby Poly will promote Tuzistra XR in select geographies throughout the U.S. through their sales force. Poly receives a commission payment for each prescription generated according to the terms of the agreement. Poly is a privately-held specialty pharmaceutical company focused primarily on cough, allergy, and other respiratory conditions and has actively promoted prescription antitussives since its founding in 1980. The co-promotion agreement expires in September 2022 and can be extended beyond the initial term upon the companies’ mutual agreement. Poly will receive commission payments based on Tuzistra XR prescriptions generated from physician targets within Poly’s geographic footprint. Poly’s geographic footprint covers approximately 750,000 antitussive prescriptions annually. We revised the Poly co-promotion agreement in December 21, 2020 to expand their promotional rights.

Generic Tussionex

Through the merger with Neos in March 2021 we acquired their generic Tussionex product. Generic Tussionex is a hydrocodone polistirex and chlorpheniramine polistirex XR oral suspension that is a Schedule II narcotic, antitussive and antihistamine combination. This product is indicated for the relief of cough and upper respiratory symptoms associated with allergies or colds in adults and children six years of age and older.

Since its launch in September 2013, Neos has manufactured and utilized Neos’ DTRS technology in the production of the generic Tussionex product at the Neos facility in Grand Prairie, Texas. In August 2014, Neos acquired all commercialization and profit rights to this formulation of the generic Tussionex product from Cornerstone BioPharma, Inc. and Coating Place, Inc. In October 2014, the product was re-launched under Neos’ own label. We sell our product to drug wholesalers in the United States. We have also established indirect contracts with drug, food and mass retailers that order and receive our product through wholesalers. We have obtained required state licenses, set up distribution channels and established trade relations in order to commercialize our generic Tussionex.

Divested and Out-Licensed Products

Natesto®

In 2016, we acquired exclusive U.S. rights to Natesto® (testosterone) nasal gel, a novel formulation of testosterone delivered via a discreet, easy-to-use nasal gel, including a license to four Orange Book-listed patents. We exclusively commercialized Natesto in the U.S. beginning September 2016 through March 31, 2021, and Natesto was a key promotional priority through this timeframe.

On July 29, 2019, we agreed to amend and restate the License and Supply Agreement with Acerus. The effectiveness of the amended Agreement was conditioned upon Acerus obtaining new financing within six months of signing of the amended Agreement, which was achieved on December 1, 2019. Upon the execution of the Amendment, Aytu continued to serve as the exclusive U.S. supplier to purchasers of Natesto, and Acerus received performance-based commissions on prescriptions generated by urology and endocrinology specialties. Acerus assumed regulatory and clinical responsibilities and associated expenses and began serving a primary role in the development of key opinion leaders in urology and endocrinology. Aytu focused on commercial channel management, sales to wholesalers and other purchasing customers, and directs sales efforts in all other physician specialties. On December 1, 2019, we officially launched the co-promotion program and transferred five of our dedicated sales employees to Acerus until such time that

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they could establish their own dedicated sales force. In July 2020, Acerus launched its dedicated sales team to promote Natesto to urologists and endocrinologists across the United States.

In anticipation of the planned merger with Neos, and to enable an increased focus on ADHD, pediatrics and adjacent specialty areas, in late 2020 we negotiated an agreement with Acerus whereby we would return all rights to Natesto in exchange for cash consideration. Following the closing of the Neos merger, on March 31, 2021 we entered into a termination and transition agreement (the “Termination Agreement”) with Acerus, pursuant to which Aytu and Acerus agreed to terminate the Amended and Restated License and Supply Agreement. On April 1, 2021 we ceased all sale, marketing and promotion of Natesto. In exchange Acerus has agreed to pay us an aggregate amount equal to $7.5 million, payable in equal monthly installment payments for a period of 30 consecutive months. In addition, Acerus agreed to repurchase all Natesto inventory at cost. Finally, we agreed to perform all of our distribution related obligations under the License and Supply Agreement and to assist Acerus and book Acerus’ sales of Natesto to third parties from the Effective Date until such date that Acerus was able to book Natesto sales without Aytu’s assistance (but in no event later than July 31, 2021 and pay to Acerus an amount equal to gross sales less applicable deductions and direct costs attributable to sales made during the transition period.

MiOXSYS®

Upon the formation of Aytu in April 2015, the technology underpinning MiOXSYS (originally the RedoxSYS System) was a core commercial asset that aligned to our strategic priorities at that time. As we evolved and shifted focus to therapeutics, MiOXSYS became non-strategic. As we shifted focus to pediatrics and specialty pharmaceuticals, we pursued monetizing the asset. As such, and in anticipation of the closing of the Neos merger, on January 20, 2021 we signed an exclusive license agreement to license the intellectual property surrounding the use and commercialization of the MiOXSYS commercial system (“MiOXSYS Product”). The Agreement was entered into with Avrio Genetics, LLC (“Avrio”). Under this agreement, Avrio was obligated to purchase existing inventory, commercialize and market the MiOXSYS Product under a royalty on Product net sales with a minimum annual payment fee structure for a term of ten years, with the term continuing in perpetuity with a fixed royalty rate based on MiOXSYS sales, payable annually to us. Avrio did not perform under the terms of the agreement, and on July 1, 2021, we and Avrio mutually agreed to terminate the Avrio agreement, effective as of June 29, 2021. In connection with the termination of the agreement, we entered into a termination agreement with Avrio. Pursuant to the terms of this termination agreement, the original Avrio agreement and its amendments were terminated in their entirety, except for certain provisions that survived the termination as specified in such agreement.

Subsequent to the Avrio termination, on July 1, 2021 we signed an Asset Purchase Agreement with UAB “Caerus Biotechnologies” (“UAB”). Pursuant to the terms and conditions of the agreement, UAB has acquired all existing intellectual property rights, technical information and know-how related to MiOXSYS as well as all existing inventory and all rights attached and related to the product and manufacturing thereof. As consideration, UAB agreed to pay us approximately $0.5 million and make royalty payments to us of five percent of net global revenue of the MiOXSYS Product for five years from the closing date of the transactions contemplated in the Asset Purchase Agreement.

Accordingly, both Natesto and MiOXSYS have been divested and are no longer material aspects of our business.

Aytu Consumer Health Portfolio

We acquired our consumer health business through the acquisition of Innovus Pharmaceuticals, Inc. in February 2020. The consumer health business is focused on OTC and consumer health care products designed for in-home treatment of medical conditions and ailments to help customers take care of themselves and their families in order to lead healthy lives. Now marketed under the name Aytu Consumer Health, we commercialize over 30 products in the U.S. and Canada and more than seven products in other countries through two distinct marketing channels: direct-to-consumer

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marketing channels utilizing our proprietary Beyond Human marketing and sales platform and our e-commerce platforms.

We classify our products into three categories:

The following represents the core Aytu Consumer Health products:

● OmepraCareDR® - acid reducer to treat frequent heartburn.

We continue to grow this business through organic growth, acquisition of new products and exclusive distribution rights and introduction of new products developed internally. In our fiscal 2021, we launched 12 new

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products in our product line. In addition, in June 2021, we signed an exclusive agency supply and distribution agreement with Amman Pharmaceutical Industries to exclusively market and sell over 20 products in the U.S.

We own 267 trademarks for products in our consumer health portfolio and own or license patents covering 15 of these products.

Other Products

The COVID-19 IgG/IgM Rapid Test

In March 2020, we signed an agreement to distribute a COVID-19 IgG/IgM rapid test with L.B. Resources Limited. This test is a serology-based rapid test detecting IgG and IgM antibodies specific to the COVID-19 virus. This test is intended for professional use and delivers clinical results between 2 and 10 minutes. The COVID-19 IgG/IgM rapid test is a solid phase immunochromatographic assay used in the rapid, qualitative and differential detection of IgG and IgM antibodies to the COVID-19 virus in human whole blood, serum or plasma. The test has been clinically validated and can be distributed in the U.S. We actively commercialized the COVID-19 IgG/IgM rapid test in the U.S. through the first three quarters of our fiscal 2021. Aytu does not own or license any patents covering the COVID-19 IgG/IgM rapid test.

The CovID RAD Rapid Antigen Detection Test and Additional Rapid Antigen Test

In September 2020, we signed an agreement to distribute the Pinnacle CovID RAD Rapid Antigen Detection Test worldwide. The rapid antigen test, which delivers results in 15 minutes, tests for the presence of the SARS-CoV-2 virus antigen via a nasopharyngeal sample and can be conducted without the use of laboratory equipment. The CovID RAD Rapid Antigen Detection Test was developed by U.S.-based Pinnacle IVD Corporation. The Pinnacle CovID RAD Rapid Antigen Detection Test is a lateral flow immunoassay intended for the qualitative detection of nucleocapsid protein antigens from SARS-CoV-2 in nasopharyngeal swab specimens from individuals who are suspected of COVID-19 by their healthcare provider. Subsequent to the signing of this agreement, and due to the fact that Pinnacle did not receive Emergency Use Authorization for the CovID RAD Rapid Antigen Detection Test, we acquired a separate Emergency Use Authorized rapid antigen to meet the demand of customers requiring rapid antigen testing. We continued the sale of this antigen test through 2021.

With the Emergency Use Authorization and subsequent rollout of COVID-19 vaccines beginning in late calendar 2020, the demand for rapid COVID-19 testing diminished, negatively impacting demand across the rapid testing market. As such we are no longer actively commercializing the COVID-19 IgG/IgM Rapid Test or the rapid antigen test.

Our prescription portfolio commercialization efforts

We are commercializing our prescription products in the United States using our internal commercial infrastructure. We sell our products to drug wholesalers in the United States, the largest three of which accounted for approximately 55% of our total gross revenues in fiscal 2021.

We are using our own sales force of approximately 50 sales representatives who target approximately 10,000 physician targets. We focus the efforts of this sales force on the most profitable, high-volume prescribers of the medication classes treating our respective products' indications. The sales force is divided into six regions, each managed by a regional sales manager. There are five regions totaling 40 sales representatives dedicated to promoting the ADHD brands and ZolpiMist (the CNS sales team), given the fact that this sales team calls on psychiatrists for our ADHD brands. Psychiatrists commonly prescribe sleep aids, so this physician specialty affords an overlapping promotional opportunity in these adjacent neuro-psychiatric conditions. An additional region consisting of ten sales representatives and one regional sales manager is dedicated to promoting Poly-Vi-Flor, Tri-Vi-Flor, and Karbinal ER in focused geographies with high volumes of fluoride and/or antihistamine prescriptions.

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We align our sales territories geographically and resource areas with high prescription potential and favorable commercial dynamics, and we continuously evaluate reimbursement trends and other market factors to optimize sales efforts. We use multi-channel tactics to reach physicians, payers, patients and patient caregivers with the right frequency to drive clinician prescribing and patient adherence.

Our commercialization efforts are focused on delivering the right message for each of our products to the appropriate targeted clinician. With respect to our ADHD brands, our messaging focuses on the anticipated benefits of our XR-ODT dosage form with balancing important product safety information. With respect to the Aytu pediatric and legacy brands, our messaging focuses on the patient-friendly features of a pleasant tasting, effective antihistamine liquid (Karbinal ER) and the benefits of Metalofin® as a key, differentiating ingredient contained in Poly-Vi-Flor and Tri-Vi-Flor that provides a ‘body-ready’ L-methylfolate in a convenient, multi-strength multi-vitamin.

To expand distribution, in 2019, Neos launched and deployed Neos RxConnect, a best-in-class Neos-sponsored patient support program that operates through a network of pharmacies throughout the U.S. Neos created this program based upon research and feedback from HCPs centered on their frustration with the hassle associated with insurance restrictions, access and cost. Aytu developed a similar program to meet these challenges, so upon the closing of the merger we began integrating the programs to form the newly branded Aytu RxConnect program. The goal of RxConnect is to reduce barriers to access to medications facing patients and HCPs by providing coverage for all commercially insured patients, regardless of their individual insurance plan, establishing an affordable and predictable monthly co-pay for patients, and eliminating many of the hassles facing HCPs and their staffs by improving availability of our products at participating pharmacies. Since the inception of this program in early 2019, the number of pharmacies participating in the network has increased to approximately 1,200 as of June 30, 2021.

Competition

Prescription pharmaceuticals

The healthcare industry is highly competitive and subject to significant and rapid technological change as researchers learn more about diseases and develop new technologies and treatments. Our products compete, and our product candidates may in the future compete, with currently existing therapies, product candidates currently under development by others and/or future product candidates, including new chemical entities that may be safer, more effective or more convenient than our products. Any products that we develop may be commercialized in competitive markets, and our competitors, which include large global pharmaceutical companies and small research-based companies and institutions, may succeed in developing products that render our products obsolete or noncompetitive.

In particular, our products and most advanced product candidates face or may face competition as described below:

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Consumer health

The OTC pharmaceutical market is highly competitive with many established manufacturers, suppliers and distributors that are actively engaged in all phases of the business. We believe that competition in the sale of our products will be based primarily on efficacy, regulatory compliance, brand awareness, availability, product safety and price. Our brand name OTC monograph pharmaceutical products may be subject to competition from alternate therapies during the period of patent protection and thereafter from generic or other competitive products. All of our existing products compete with generic and other competitive branded products in the marketplace.

Competing in the branded products business requires us to identify and quickly bring to market new products embodying technological innovations and/or improved pricing. Successful marketing of branded products depends primarily on the ability to communicate the efficacy, safety and value to consumers. We anticipate that our branded product offerings will support our existing lines of therapeutic focus. Based upon business conditions and other factors, we regularly reexamine our business strategies and may from time to time reallocate our resources from one therapeutic area to another, withdraw from a therapeutic area or add an additional therapeutic area in order to maximize our overall growth opportunities.

Some of our existing products compete with one or more products marketed by very large pharmaceutical or consumer healthcare companies that have much greater financial resources for marketing, selling and developing their products. These competitors, as well as others, have been in business for a longer period of time, have a greater number of products on the market and have greater financial and other resources than we do. If we directly compete with them for the same markets and/or products, their financial and market strength could prevent us from capturing a meaningful share of those markets.

Manufacturing

We contract with third parties for the manufacture and testing of Karbinal, Tuzistra XR, Cefaclor, Poly-Vi-Flor and Tri-Vi-Flor and ZolpiMist. Cefaclor, Poly-Vi-Flor and Tri-Vi-Flor and ZolpiMist are not supplied under any contract. We have entered into the following key supply agreements for the commercial manufacture and supply of certain of these products:

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We believe our third-party manufacturers have adequate capacity to manufacture sufficient quantities of these products to meet anticipated commercial demands. Because we rely on CMOs, we employ personnel with extensive technical, manufacturing, analytical and quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions. Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, and which govern record-keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among other activities. Our systems and our contractors are required to comply with these regulations, and we assess this compliance regularly through monitoring of performance and a formal audit program.

For the production of our ADHD products and our generic Tussionex, we lease one manufacturing site in Grand Prairie, Texas. This facility has 77,112 square feet of manufacturing and laboratory space, and contains dedicated current Good Manufacturing Practices (“cGMP”) manufacturing suites for both XR-ODT and ER oral suspension. We hold DEA manufacturing and analytical licenses, and maintain storage and use of Schedule II through IV controlled substances. The manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control.

We have operated this facility dating back to when Neos and its predecessor corporation, PharmaFab, Inc., or PharmaFab operated as a contract manufacturer. In April 2007, the FDA announced entry of a Consent Decree of Permanent Injunction, or the Consent Decree, against PharmaFab, one of its subsidiaries and two of its officials. The Consent Decree arose out of several perceived cGMP deficiencies related to the manufacture of unapproved drugs or Drug Efficacy Study Implementation, or DESI, drugs that we no longer manufacture. In July 2019, Neos filed a motion with the U.S. District Court of North Texas to vacate the Consent Decree, which was unopposed by the Department of Justice and the FDA and was granted by the court on July 11, 2019. While the Consent Decree has been vacated, there can be no assurance that we will not become subject to similar orders in the future, which may result in us continuing to expend resources and attention to observe its terms, and there can be no assurance that we will be in compliance with its requirements.

We believe that our current facility has the manufacturing capacity for commercial production of our approved products in quantities sufficient to meet what we believe will be our commercial needs for our ADHD products.

We currently purchase the active pharmaceutical ingredients, or APIs, used in Adzenys XR-ODT and Adzenys ER (amphetamine), and Cotempla XR-ODT (methylphenidate), anionic resins, excipients and other materials from third-party providers on a purchase order basis from manufacturers based outside and within the U.S. We have entered into commercial supply agreements with several of these manufacturers and may enter into commercial supply agreements with additional manufacturers in the future.

Both amphetamine and methylphenidate are classified as controlled substances under U.S. federal law. All of our ADHD products are classified by the DEA as Schedule II controlled substances, meaning that these drug products

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have a high potential for abuse and dependence among drugs that are recognized as having an accepted medical use. Consequently, the procurement, manufacturing, shipping, dispensing and storing of our products, and potentially product candidates, will be subject to a high degree of regulations, as described in more detail under the captions “Governmental Regulation” and “DEA Regulation” included elsewhere in this Annual Report on Form 10-K.

In our experience, contract manufacturers are generally cost-efficient and reliable and therefore we have begun the process of outsourcing the manufacture of Adzenys XR-ODT and Cotempla XR-ODT to a CMO. We have selected a CMO, conducted pilot studies and continue to transfer analytical methods and evaluate engineering and validation of intermediates and tablets. We plan to conduct bioequivalence studies versus our internally manufactured products. The process to transfer the technology to make our ADHD ODT products is complex and requires compliance with both FDA and DEA regulations. This is time consuming, and there is no guarantee we will be successful in our efforts. Although we have entered into technology transfer contracts for each of the products, we still have to enter into a formal supply contracts as the process proceeds. There is no guarantee that we will reach terms that are affordable or cost effective.

The Aytu Consumer Health division maintains relationships with a number of manufacturers from which it obtains its products. With the exception of a settlement agreement with our manufacturer of FlutiCare which establishes a minimum number of batches which may be purchased, there are no manufacturing agreements in place and no annual minimum requirements. Aside from those products under the ANDA classification, most products may be manufactured by a variety of manufacturers and therefore we engage those who can produce product most cost efficiently and on a timely basis.

Research and Development

A key aspect of our growth strategy is our continued investment in our evolving and expanding research and development actives. We actively explore new option for patients including novel compounds and innovative medical device technologies.

Our Development Pipeline: AR101 (enzastaurin for the treatment of Vascular Ehlers-Danlos Syndrome (vEDS))

AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the protein kinase C (PKC) beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types. AR101 was originally developed by Eli Lilly and Company (“Lilly”), and worldwide rights were acquired by Denovo Biopharma (“Denovo”) in September 2014. Orphan drug designation in DLBCL and GBM has been granted by the FDA and the EMA. Fast Track qualification for the first-line treatment of GBM was also granted by the FDA in July 2020. Pivotal Phase 3 studies for both newly diagnosed DLBCL and GBM patients are currently being conducted by Denovo.

In April 2021, we announced the acquisition of substantially all the assets of Rumpus Therapeutics (“Rumpus”), which had executed an exclusive option agreement with Denovo to enzastaurin for use in specific clinical fields. Through the transaction we converted the Rumpus-Denovo option agreement into an exclusive license agreement and secured exclusive global rights to AR101 from Denovo in the fields of rare genetic pediatric onset or congenital disorders, and specifically including vEDS, outside the field of oncology. AR101 is a pivotal study-ready therapeutic candidate initially targeting the treatment of vEDS, and we are now planning the pivotal study and preparing the IND application.

vEDS is a rare genetic disorder typically diagnosed in childhood and characterized by arterial aneurysm, dissection and rupture, bowel rupture and rupture of the gravid uterus. vEDS is the severe subtype of Ehlers-Danlos Syndrome, affecting 1 in 50,000 people worldwide. vEDS results from pathogenic variants in the COL3A1 gene, which encodes the chains of type III procollagen, a major protein in vessel walls and hollow organs. Twenty-five percent of vEDS patients have a first complication by the age of 20 years, and more than 80 percent have at least one complication by the age of 40. vEDS is a devastating condition; patients have a median lifespan of 51 years. There are currently no FDA approved treatments for vEDS.

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The research underpinning the application of enzastaurin for the treatment of vEDS has been conducted by Dr. Hal Dietz. Dr. Dietz is the Victor A. McKusick Professor of Genetics in the departments of medicine, pediatrics, and molecular biology and genetics at The Johns Hopkins University School of Medicine and director of the William S. Smilow Center for Marfan Syndrome Research. He has also been an investigator at Howard Hughes Medical Institute since 1997. Dr. Dietz is a leading scientist in the field of genetic connective tissue disorders and developed the first preclinical model that mimics the human condition and recapitulates vEDS. Research findings were published in the Journal of Clinical Investigation in February 2020. The vEDS knock-in murine (mice) preclinical model from Dr. Dietz has the same genetic mutation most prevalent in vEDS patients and is representative of the human condition in both the timing and location of vascular events. The model has generated identical structural histology and mechanical characteristics, and unbiased findings demonstrated that structure alone does not lead to vascular events. Objective comparative transcriptional profiling by high-throughput RNA sequencing of the aorta displayed a molecular signature for excessive PKC/ERK cell signaling that is the driver of disease. Based on the scientific rationale for intervention along the PKC/ERK pathway, PKC inhibition and treatment with PKCβ inhibitors proved efficacious in multiple pre-clinical and murine studies and indeed prevented death due to vascular rupture.

Taken together, the pre-clinical efficacy model along with extensive previous pharmacokinetic, safety, and tolerability findings from Lilly’s IND and NDA provide significant support for once daily dosing of 500mg of enzastaurin in the potential treatment of patients with vEDS. Given the nature of this rare disease, the high unmet medical need, the well-characterized nature of AR101, and guidance from the FDA, we expect to advance AR101 to a pivotal safety and efficacy study in vEDS patients. The development plan includes a well-controlled global clinical trial designed to demonstrate that AR101 reduces arterial rupture, dissection or pseudoaneurysm patients in vEDS patients whose vEDS diagnoses have been confirmed with COL3A1 gene mutations. Additional data will also be collected to evaluate the effectiveness of AR101 in preventing intestinal rupture, uterine rupture, pneumothorax and any of the severe clinical events related to vEDS confirmed with COL3A1 gene mutations, as adjudicated by an independent event committee. During development, we expect to receive Orphan Drug Designation for AR101 in vEDS, allowing for seven years’ marketing exclusivity in the United States and ten years in other regions such as Europe and Japan.

As progress is achieved with AR101, certain milestones will be met that require accompanying payments. Under the terms of the transaction with Rumpus, Aytu will pay up to $22.5 million in milestone payments if certain regulatory milestones are met, including $15.0 million in milestone payments if AR101 receives approval by the FDA and another major market regulatory authority. Commercial milestones of up to an additional $45.0 million may be paid if a series of global commercial milestones are met over the life of the product. In addition, we received assignments of third-party licenses from Denovo and Johns Hopkins and took over royalty obligations and performance-based milestones under these licenses. As part of the license with Denovo, Aytu will pay up to $28.0 million in milestone payments if certain regulatory milestones are met, including $14.0 million in milestone payments if AR101 receives approval by the FDA and another major market regulatory authority. Commercial milestones of up to an additional $72.0 million may be paid if a series of global commercial milestones are met over the life of the product. As part of the license with Johns Hopkins, we will pay up to $1.6 million in milestone payments if certain regulatory milestones are met. Commercial milestones of up to an additional $1.65 million may be paid to Johns Hopkins if a series of global commercial milestones are met over the life of the product.

AR101 is protected by a suite of pending patents being pursued in major markets globally which have been licensed from Johns Hopkins and have an earliest priority date of March 2017. The cornerstone of the intellectual property family surrounds the therapeutic candidate (AR101) initially targeting the treatment of vEDS focused on the U.S. and certain foreign jurisdictions which include Europe, Japan, China, Brazil, Mexico, Canada, Israel, Australia, New Zealand and South Korea. This pending patent provides compositions and methods for treating vEDS and associated connective tissue disorders and has a priority date of October 16, 2018. Additional molecule intellectual property is afforded through the license with Denovo whose pending patent provides methods and compositions for the prediction of the activity of enzastaurin and has a priority date of September 1, 2016. The third pending patent provides methods and compositions for the diagnosis, treatment, and prevention of Marfan syndrome and related diseases, disorders and conditions and has a priority date of March 2, 2017, in select geographies. The fourth pending patent provides targeted epigenetic therapy for inherited aortic aneurysm conditions and has a priority date of September 1, 2017, also in select geographies.

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Healight Medical Device Platform Technology

In April 2020, we signed an exclusive worldwide license with Cedars-Sinai in Los Angeles, California, to develop and commercialize the Healight Platform Technology ("Healight" or the “Healight Platform”). This medical device technology platform currently envisioned as an endotracheal, UV-A light catheter, developed by scientists at Cedars-Sinai, is being studied as a potential first-in-class treatment for SARS-CoV-2 and other viral and bacterial respiratory infections. The Healight Platform has been in development since 2016 by the Medically Associated Science and Technology (MAST) team at Cedars-Sinai. We and our research collaborators are engaging in clinical and scientific research to establish the clinical utility of Healight as an intervention for critically ill, mechanically ventilated patients with an initial focus on SARS-CoV-2 infections. In conjunction with this research, we are evaluating regulatory pathways to potentially enable marketing clearance in the U.S. and other markets.

The agreement with Cedars-Sinai grants us a license to all patent and development related technology rights for the intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications. The term of the agreement is on a country-by-country basis and will expire on the latest of the date upon which the last to expire valid claim shall expire, ten years after the first bona fide commercial sale of such licensed product in a country, or the expiration of any market exclusivity period granted by a regulatory agency. Pursuant to the terms of the agreement, we paid an initial $250,000 license fee and approximately $140,000 in earlier patent prosecution fees. We are responsible for paying a low double-digit royalty in the U.S., which decreases as net sales increase, and a lower royalty for net sales outside of the U.S., as well as various product development and sales milestones throughout the life of the agreement.

As part of the Healight development plan we also entered into an agreement with Sterling Medical Devices ("Sterling") to support our product development efforts. This agreement with Sterling is a fee-for-service development agreement for which we pay Sterling on a project-by-project basis.

Severe acute respiratory syndrome coronavirus 2 (“SARS‐CoV‐2”) is the virus that causes COVID-19, the respiratory illness responsible for the COVID-19 pandemic. The World Health Organization (“WHO”) declared the outbreak a Public Health Emergency of International Concern on January 30, 2020, and a pandemic on March 11, 2020. SARS‐CoV‐2 is a positive-sense single-stranded RNA virus that is contagious in humans. As described by the U.S. National Institutes of Health, it is the successor to SARS-CoV-1, the virus that caused the 2002 to 2004 SARS outbreak. Over 600,000 Americans have died to date as a result of the COVID-19 pandemic, and very few treatment options have proven broadly effective against severe cases of SARS-CoV-2.

The Healight technology is being developed initially as an endotracheal catheter-based treatment for patients infected with SARS-CoV-2 who are mechanically ventilated in the intensive care unit. Numerous pre-clinical studies have been performed, and the first Healight clinical study was completed in January 2021. That study was an open-label single-center trial and was conducted at Cedars-Sinai in Los Angeles, California. The study’s objective was to establish safety and early signs of potential efficacy of the Healight device and was overseen by an independent data and safety monitoring board. A total of five critically ill, mechanically ventilated COVID-19 patients underwent UVA light therapy with the Healight device for five consecutive days. The UVA light catheter was inserted into an endotracheal tube and illuminated for 20 minutes during each treatment. The endotracheal (“ET”) treatment resulted in significant logarithmic reduction of the SARS-CoV-2 viral load of the ET aspirate, which was the study's primary endpoint. Average log changes from baseline to day five and day six were -2.41 (>99%, p=0.0018) and -3.2 (>99.9%, p=0.0005), respectively. WHO clinical severity scores improved by an average of 1.6 and 3.6 points on day 15 and day 30, respectively. Excluding one subject, who had undetectable viral load, WHO clinical severity scores improved by 4.75 points on day 30. Importantly, no serious adverse device effects were observed, and no early treatment discontinuation occurred.

A separate pre-clinical study titled, “Ultraviolet-A light increases mitochondrial anti-viral signaling protein via cell-cell communication”, established that UVA light increases the expression of mitochondrial antiviral-signaling (“MAVS”) protein within cells, and the results suggest that this transmission of an increase in intracellular MAVS involves cell-to-cell communication. An additional pre-clinical study, “Ultraviolet-A light reduces cellular cytokine release from human endotracheal cells infected with Coronavirus”, demonstrated that infected tracheal epithelial cells showed reduced cytokine release, including IL-6, TNF, IL-8, and MCP-1, following UVA exposure.

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A larger clinical study is planned to begin at leading medical center in Europe during fiscal 2022. The randomized, controlled (single blind) trial is planned to enroll a total of 40 critically ill, mechanically ventilated COVID-19 patients. Enrolled patients will be randomized (1:1) to receive treatment with the UVA device or a sham control device. Patients will be administered 20 minutes of therapy each day for five consecutive days. The study will primarily evaluate change in viral load in endotracheal tube aspirates from the beginning to end of therapy. Secondary endpoints will include overall reduction or change of bacterial load in patients’ upper airways, reduction in SARS-CoV-2 serum viral load, days to extubation, percentage of development of ventilator-associated pneumonia (VAP), days to discharge, mean ordinal scale days 15 and 30, change in inflammatory markers and COVID-19 prognostic markers.

Upon the readout of this larger clinical study, we will evaluate the data and determine an appropriate pathway toward gathering additional clinical data in COVID-19 and for other potential respiratory applications. In conjunction with that, we expect to explore various commercialization and regulatory options in key markets around the world.

Intellectual Property

We hold ownership, trademark rights and/or exclusivity to develop and commercialize our products and product candidates covered by patents and patent applications. Our portfolio of patents includes patents or patent applications with claims directed to compositions of matter, including compounds, pharmaceutical formulations, methods of use, methods of manufacturing the compounds, or a combination of these claims. Depending upon the timing, duration and specifics of FDA approval of the use of a compound for a specific indication, some of our U.S. patents may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. Patent life determination depends on the date of filing of the application and other factors as promulgated under the patent laws. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. Additional market exclusivity is available through various programs with the FDA, including its orphan drug designation program, which we expect to access for AR101, as further described below.

Patents Rights

Our ADHD and Neos technology intellectual property portfolio consists of 13 patents and 2 patent applications, which includes one on which a notice of allowance was received subsequent to fiscal year-end, in the United States, and 4 patents and 4 patent applications in foreign countries and regions. Our intellectual property strategy emphasizes specific drug products, product groups, and technology platforms. Our patents and patent applications covering specific drug products include claims to the drug products and to methods of using those products. Our patents and patent applications covering technology platforms include claims to methods of making products as well as claims to the products made by those methods. Certain of these patents and patent applications cover more than one product. We own all of the above patents and pending applications.

The Adzenys XR-ODT patent portfolio includes five granted U.S. patents and one pending U.S. non provisional applications. The issued patents contain pharmaceutical composition of matter claims covering controlled release direct compression ODT with drug resin particles and, among other things, composition of matter for Adzenys XR-ODT. The composition of matter patents are scheduled to expire in 2026 and 2032, respectively. These patents are listed in the Orange Book. Adzenys XR-ODT is protected in Europe by one granted patent scheduled to expire in 2032; however, Adzenys XR-ODT is not currently protected by patents outside of the United States and Europe. As such, competitors may be free to sell products that incorporate the same or similar technologies that are used in Adzenys XR-ODT in countries outside of the United States or Europe.

The Cotempla XR-ODT patent portfolio includes three granted U.S. patents, including pharmaceutical composition of matter claims covering controlled release direct compression ODT with drug resin particles and, among other things, composition of matter for Cotempla XR-ODT. These patents are scheduled to expire in 2026 and 2032, respectively. These patents are listed in the Orange Book. Cotempla XR-ODT also has an FDA marketing exclusivity period of three years which bars approval of an ANDA. The Cotempla XR-ODT portfolio also includes two other pending U.S. non provisional applications; a notice of allowance was received for one of these subsequent to year-end and pending patent applications in Australia, Europe, Japan and South Korea. As such, competitors may be free to sell

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products that incorporate the same or similar technologies that are used in Cotempla XR-ODT in countries outside of the United States, Australia, Europe, Japan or South Korea.

The Adzenys ER patent portfolio contains nine granted U.S. patents and one other pending U.S. non-provisional application. These patents contain claims directed to, among other things, compositions of matter, as well as methods of preparing liquid controlled-release formulations and for predicting bioequivalence for liquid suspension. The longest-term composition-of-matter patent is scheduled to expire in 2032, and the method patents are scheduled to expire in 2025, 2029 and 2031, respectively. The composition of matter patents are listed in the Orange Book. Adzenys ER is currently protected by patents only in the United States, Canada and Mexico. As such, competitors may be free to sell products that incorporate the same or similar technologies that are used in Adzenys ER in countries outside of the United States, Canada and Mexico.

Our generic Tussionex is covered by six of our granted U.S. patents which include claims directed to, among other things, a composition-of-matter, as well as methods-of-making, and for predicting bioequivalence for liquid suspension. Our generic Tussionex is also covered by one other pending non-provisional application. The composition-of-matter patent is scheduled to expire in 2031. We expect protection under certain other granted patents and/or a patent granted on the pending application to also extend until 2031. Our generic Tussionex is currently protected by patents only in the United States, Canada and Mexico. As such, competitors may be free to sell products that incorporate the same or similar technologies that are used in our product in countries outside of the United States, Canada and Mexico.

On July 25, 2016, we received a Paragraph IV certification from Actavis advising us that Actavis has filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. The certification notice alleges that the four U.S. patents listed in the FDA’s Orange Book for Adzenys XR-ODT, one with an expiration date in April 2026 and three with expiration dates in June 2032, will not be infringed by Actavis’s proposed product, are invalid and/or are unenforceable. On September 1, 2016, we filed a patent infringement lawsuit in federal district court in the District of Delaware against Actavis that automatically stayed, or barred, the FDA from approving Actavis’s ANDA for 30 months or until a district court decision that is adverse to the asserted patents is rendered, whichever is earlier. On October 17, 2017, we entered into a settlement and licensing agreement with Actavis (“Actavis Agreement”), which resolved all ongoing litigation involving our Adzenys XR-ODT patents and Actavis’s ANDA. Under the Actavis Agreement, we have granted Actavis the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of Delaware. The Actavis Agreement has been submitted to the applicable governmental agencies.

On October 31, 2017, we received a Paragraph IV certification from Teva advising us that Teva has filed an ANDA with the FDA for a generic version of Cotempla XR-ODT, in connection with seeking to market its product prior to the expiration of patents covering Cotempla XR-ODT. On December 13, 2017, we filed a patent infringement lawsuit in federal district court in the District of Delaware against Teva. This case alleged that Teva infringed our Cotempla XR-ODT patents by submitting to the FDA an ANDA seeking to market a generic version of Cotempla XR-ODT prior to the expiration of our patents. This lawsuit automatically stayed, or barred, the FDA from approving Teva’s ANDA for 30 months or until a district court decision that is adverse to the asserted patents is rendered, whichever is earlier. On December 21, 2018, we entered into a settlement and licensing agreement with Teva (“Teva Agreement”), which resolved all ongoing litigation involving our Cotempla XR-ODT patents and Teva’s ANDA. Under the Teva Agreement, we have granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of Delaware. The Teva Agreement has been submitted to the applicable governmental agencies.

On October 23, 2018, we signed a licensing agreement with NeuRx Pharmaceuticals, LLC (“NeuRx”) for NRX 101, now known as NT0502, a selective muscarinic receptor antagonist drug candidate for the treatment of sialorrhea. Under the terms of this licensing agreement, we have assumed responsibility for the NeuRx intellectual property portfolio protecting NT0502, currently consisting of one granted U.S. patent and one U.S. non provisional patent application. The granted patent includes claims directed to, among other things, methods of treatment with NT0502. The granted patent would be expected to expire in 2032.

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Adzenys XR-ODT is not currently protected by patents or patent applications outside of the United States and Europe, and Cotempla XR-ODT is not currently protected by patents or patent applications outside of the United States, Australia, Europe, Japan and South Korea. Our generic Tussionex and Adzenys ER are currently protected by patents only in the United States, Canada and Mexico. As such, competitors may be free to sell products that incorporate the same or similar technologies that used in our products in countries in which the relevant product does not have patent protection.

License Rights

There are two FDA Orange Book-listed patents protecting Tuzistra XR. Through our exclusive commercialization agreement with Tris, we are the FDA-recognized New Drug Application holder and thus the designated holder of these patents. The first patent describes a coated ion-exchange resin complex delivering an extended-release formulation and methods therein. The standard 20-year exclusivity for this patent expires in 2029. The second patent covers an aqueous liquid suspension containing a drug-ion exchange resin complex and methods therein. The standard 20-year exclusivity for this patent expires in 2027.

We have exclusive license rights with third parties to develop, commercialize and promote our Primary Care Portfolio and Pediatric Portfolio products within the United States of America, including but not limited to, Poly-Vi-Flor and Tri-Vi-Flor, Karbinal ER, ZolpiMist and Tuzistra XR. Each of these agreements come with royalties ranging from 0% to 23.5% based on net product revenue or gross profit (as defined by each agreement). In addition, certain licensing agreements include forms of contingent consideration, make-whole payments or both.

Consumer Health

We currently hold 8 patents in the U.S. and 12 patents registered outside the U.S. We currently have 12 patent applications pending in the U.S. and 17 patent applications pending in countries other than the U.S.

We own or license 93 trademark registrations in the U.S. and have 42 trademark applications pending in the U.S. We also own or license 124 trademarks registered outside of the U.S. (including 21 Madrid Protocol registrations), with 58 applications currently pending.

AR101

Among the assets of Rumpus which we acquired are license agreements which provide access to four patent applications. The cornerstone of the intellectual property family is a pivotal study-ready therapeutic candidate initially targeting the treatment of vEDS focused on the U.S. and certain foreign jurisdictions which include Europe, Japan, China, Brazil, Mexico, Canada, Israel, Australia, New Zealand and Korea. This pending patent provides compositions and methods for treating vEDS and associated connective tissue disorders and has a priority date of October 16, 2018. Additional molecule intellectual property is afforded through a license with Denovo whose pending patent provides methods and compositions for the prediction of the activity of enzastaurin and has a priority date of September 1, 2016.

The third pending patent provides methods and compositions for the diagnosis, treatment, and prevention of Marfan syndrome and related diseases, disorders and conditions and has a priority date of March 2, 2017 in select geographies. The fourth pending patent provides targeted epigenetic therapy for inherited aortic aneurysm conditions and has a priority date of September 1, 2017, also in select geographies.

Healight

The licensed patent portfolio surrounding Healight currently includes four patent families at various stages of prosecution. The first family discloses the use of ultraviolet-A light for internal therapeutic treatment, including through an endotracheal tube. This application is filed in the U.S. and in 14 other countries. The 20-year patent term for this family expires in 2037. The second family discloses a preferred ultraviolet wavelength range within the UV-A range for internal therapeutic treatment, including endotracheal and nasopharyngeal applications. This application is filed in the United States and internationally as a PCT application with a first national phase filing deadline in April 2022. The 20-

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year patent term for this family expires in 2040. The third family discloses pre-clinical data developed in support of the Healight technology and details of the structure of the Healight device. This application is filed as a PCT application with a first national phase filing deadline of September 2022. The 20-year patent term for this family expires in 2041. The fourth patent family is directed to methods of increasing expression of mitochondrial antiviral-signaling protein in epithelial cells to mediate innate antiviral responses for use in treatment of viral conditions. The methods include exposure of tissue to ultraviolet-A light.

Trade secret and other protection

In addition to patented intellectual property, we also rely on trade secrets and proprietary know how to protect our technology and maintain our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. Our policy is to require each of our employees, consultants and advisors to execute a confidentiality and inventions assignment agreement before beginning their employment, consulting or advisory relationship with us. The agreements generally provide that the individual must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during the course of the individual’s relationship with us except in limited circumstances. These agreements generally also provide that we shall own all inventions conceived by the individual in the course of rendering services to us.

Other intellectual property rights

We seek trademark protection in the United States when appropriate. We currently have registered trademarks for Aytu, Neos Therapeutics, Innovus Pharma, Beyond Human, Supplement Hunt, Delta Prime Club, Healight, Poly-Vi-Flor, Adzenys, Adzenys XR-ODT, Adzenys ER and Cotempla XR-ODT in the United States, as well as for a number of our consumer health products and two for our DTRS technology.

From time to time, we may find it necessary or prudent to obtain licenses from third party intellectual property holders.

U.S. Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and other specific aspects of the FDA approval of our drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, if any of our NDAs are approved, we intend to apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond the current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

Other Regulatory Exclusivities

The Hatch-Waxman Act provides periods of regulatory exclusivity for products that would serve as reference listed drugs (“RLDs”) for an ANDA or 505(b)(2) application. If a product is a "new chemical entity," or NCE, generally meaning that the active moiety has never before been approved in any drug, there is a period of five years from the product's approval during which the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety. An ANDA or 505(b)(2) application may be submitted after four years, however, if the sponsor of the application makes a Paragraph IV certification.

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A product that is not an NCE may qualify for a three-year period of exclusivity if the NDA contains new clinical data, (other than bioavailability studies) derived from studies conducted by or for the sponsor, that were necessary for approval. In that instance, the exclusivity period does not preclude filing or review of an ANDA or 505(b)(2) application; rather, the FDA is precluded from granting final approval to the ANDA or 505(b)(2) application until three years after approval of the RLD. Additionally, the exclusivity applies only to the conditions of approval that required submission of the clinical data.

Once the FDA accepts for filing an ANDA or 505(b)(2) application containing a Paragraph IV certification, the applicant must within 20 days provide notice to the RLD or listed drug NDA holder and patent owner that the application has been submitted, and provide the factual and legal basis for the applicant's assertion that the patent is invalid or not infringed. If the NDA holder or patent owner files suit against the ANDA or 505(b)(2) applicant for patent infringement within 45 days of receiving the Paragraph IV notice, the FDA is prohibited from approving the ANDA or 505(b)(2) application for a period of 30 months or the resolution of the underlying suit, whichever is earlier. If the RLD has NCE exclusivity and the notice is given and suit filed during the fifth year of exclusivity, the regulatory stay does extends until 7.5 years after the RLD approval. The FDA may approve the proposed product before the expiration of the regulatory stay if a court finds the patent invalid or not infringed or if the court shortens the period because the parties have failed to cooperate in expediting the litigation.

If the RLD has NCE exclusivity and the notice is given and suit filed during the fifth year of exclusivity, the regulatory stay extends until 7.5 years after the RLD approval. The FDA may approve the proposed product before the expiration of the regulatory stay if a court finds the patent invalid or not infringed or if the court shortens the period because the parties have failed to cooperate in expediting the litigation.

Pediatric Exclusivity. Section 505A of the Federal Food, Drug and Cosmetic Act (“FDCA”) provides for six months of additional exclusivity or patent protection if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data does not need to show that the product is effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA's request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or Orange Book listed patent protection that cover the drug are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve an ANDA or 505(b)(2) application owing to regulatory exclusivity or listed patents. When any product is approved, we will evaluate seeking pediatric exclusivity as appropriate.

Orphan Drug Exclusivity. The Orphan Drug Act provides incentives for the development of drugs intended to treat rare diseases or conditions, which generally are diseases or conditions affecting less than 200,000 individuals in the U.S. If a sponsor demonstrates that a drug product qualifies for orphan drug designation, the FDA grants orphan drug designation to the product for that use. The benefits of orphan drug designation include research and development tax credits and exemption from user fees. A drug that is approved for the orphan drug designated indication generally is granted seven years of orphan drug exclusivity. During that period, the FDA generally may not approve any other application for the same product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically superior to the product with exclusivity. The FDA can revoke a product’s orphan drug exclusivity under certain circumstances, including when the product sponsor is unable to assure the availability of sufficient quantities of the product to meet patient needs. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.

Government Regulation

We are subject to extensive regulation by the FDA and other federal, state and local regulatory agencies. The FDCA and the FDA's implementing regulations set forth, among other things, requirements for the testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record-keeping, reporting, distribution, import, export, sale, advertising and promotion of our products and product candidates. Although the discussion below focuses on regulation in the U.S., we may seek approval for, and market, our products in other countries in the future. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the U.S., although there can be important differences.

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Development and Approval

Under the FDCA, FDA approval of an NDA is required before any new drug can be marketed in the U.S. NDAs in the case of new drugs, or PMAs or 510(k)s in the case of medical devices, may require extensive studies and submission of a large amount of data by the applicant.

Pharmaceutical Regulations

Preclinical Testing. Before testing any compound in human patients in the U.S., a company must generate extensive preclinical data. Preclinical testing generally includes laboratory evaluation of product chemistry and formulation, as well as toxicological and pharmacological studies in several animal species to assess the toxicity and dosing of the product. Certain animal studies must be performed in compliance with the FDA's Good Laboratory Practice (“GLP”) regulations and the U.S. Department of Agriculture's Animal Welfare Act.

IND Application. Human clinical trials in the U.S. cannot commence until an investigational new drug or IND application is submitted and becomes effective. A company must submit preclinical testing results to the FDA as part of the IND, and the FDA must evaluate whether there is an adequate basis for testing the drug in initial clinical studies in human volunteers. Unless the FDA raises concerns, the IND becomes effective 30 days following its receipt by the FDA, and the clinical trial proposed in the IND may begin. Once human clinical trials have commenced, the FDA may stop a clinical trial by placing it on "clinical hold" because of concerns about the safety of the product being tested, or for other reasons.

Clinical Trials. Clinical trials involve the administration of a drug to healthy human volunteers or to patients, under the supervision of a qualified investigator. The conduct of clinical trials is subject to extensive regulation, including compliance with the FDA's bioresearch monitoring regulations and Good Clinical Practice (“GCP”) requirements, which establish standards for conducting, recording data from, and reporting the results of, clinical trials, and are intended to assure that the data and reported results are credible and accurate, and that the rights, safety, and well-being of study participants are protected. Clinical trials must be conducted under protocols that detail the study objectives, parameters for monitoring safety, and the efficacy criteria, if any, to be evaluated. Each protocol is reviewed by the FDA as part of the IND. In addition, each clinical trial must be reviewed and approved by, and conducted under the auspices of, an Institutional Review Board (“IRB”) for each clinical site. Companies sponsoring the clinical trials, investigators, and IRBs also must comply with, as applicable, regulations and guidelines for obtaining informed consent from the study patients, following the protocol and investigational plan, adequately monitoring the clinical trial, and timely reporting of adverse events (“AEs”). Foreign studies conducted under an IND must meet the same requirements that apply to studies being conducted in the U.S. Data from a foreign study not conducted under an IND may be submitted in support of an NDA if the study was conducted in accordance with GCP and the FDA is able to validate the data.

A study sponsor is required to publicly post specified details about certain clinical trials and clinical trial results on government or independent websites (e.g., http://clinicaltrials.gov). Human clinical trials typically are conducted in three sequential phases, although the phases may overlap, be combined, or be subdivided in some cases:

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The sponsoring company, the FDA, or the IRB may suspend or terminate a clinical trial at any time on various grounds, including a finding that the patients are being exposed to an unacceptable health risk. Further, success in early-stage clinical trials does not assure success in later-stage clinical trials. Data obtained from clinical activities are not always conclusive and may be subject to alternative interpretations that could delay, limit or prevent regulatory approval.

NDA Submission and Review. The FDCA provides two pathways for the approval of new drugs through an NDA. An NDA under Section 505(b)(1) of the FDCA is a comprehensive application to support approval of a product candidate that includes, among other things, data and information to demonstrate that the proposed drug is safe and effective for its proposed uses, that production methods are adequate to ensure its identity, strength, quality, and purity of the drug, and that proposed labeling is appropriate and contains all necessary information. A 505(b)(1) NDA contains results of the full set of preclinical studies and clinical trials conducted by or on behalf of the applicant to characterize and evaluate the product candidate. We intend to seek FDA approval of AR101 through the Section 505(b)(1) regulatory approval pathway.

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to obtain FDA approval that permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely to some extent upon the FDA's findings of safety and effectiveness for an approved product that acts as the reference drug and submit its own product-specific data — which may include data from preclinical studies or clinical trials conducted by or on behalf of the applicant — to address differences between the product candidate and the reference drug. We obtained FDA approval of our ADHD products through the Section 505(b)(2) regulatory approval pathway, with in the case of Adzenys XR-ODT and Adzenys ER, Adderall XR® and in the case of Cotempla XR-ODT, Metadate CD® as the reference drugs. Adderall XR contains amphetamine, and Metadate CD contains methylphenidate, which are also the active ingredients in our Adzenys products and Cotempla XR-ODT, respectively.

The submission of an NDA under either Section 505(b)(1) or Section 505(b)(2) generally requires payment of a substantial user fee to the FDA. The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product's identity, strength, quality, and purity. For some NDAs, the FDA may convene an advisory committee to seek insights and recommendations on issues relevant to approval of the application. Although the FDA is not bound by the recommendation of an advisory committee, the agency considers such recommendations carefully when making decisions.

The FDA may determine that a Risk Evaluation and Mitigation Strategy (“REMS”) is necessary to ensure that the benefits of a new product outweigh its risks, and the product can therefore be approved. A REMS may include various elements, ranging from a medication guide or patient package insert to limitations on who may prescribe or dispense the drug, depending on what the FDA considers necessary for the safe use of the drug. Under the Pediatric Research Equity Act (“PREA”), certain applications for approval must also include an assessment, generally based on clinical study data, of the safety and effectiveness of the subject drug in relevant pediatric populations. We are currently conducting programs for both Adzenys XR-ODT and Cotempla XR-ODT under PREA guidelines. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

Once the FDA accepts an NDA submission — which occurs, if at all, within 60 days after submission of the NDA — the FDA's goal for a non-priority review of an NDA is ten months. In the case of product candidates for orphan indications which receive priority review, as further discussed below, the FDA’s goal for review of an NDA is six months. The review process can be and often is significantly extended, however, by FDA requests for additional

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information, studies, or clarification. After review of an NDA and the facilities where the product is manufactured, the FDA either issues an approval letter or a complete response letter (“CRL”) outlining the deficiencies in the submission. The CRL may require additional testing or information, including additional preclinical or clinical data or additional work relating to Chemistry, Manufacturing, and Controls (CMC) requirements. Even if such additional information and data are submitted, the FDA may decide that the NDA still does not meet the standards for approval. Data from clinical trials are not always conclusive, and the FDA may interpret data differently than the sponsor.

Obtaining regulatory approval often takes a number of years, involves the expenditure of substantial resources, and depends on a number of factors, including the severity of the disease in question, the availability of alternative treatments, and the risks and benefits demonstrated in clinical trials. Additionally, as a condition of approval, the FDA may impose restrictions that could affect the commercial success of a drug or require post-approval commitments, including the completion within a specified time period of additional clinical studies, which often are referred to as "Phase 4" or "post-marketing" studies.

Post-approval modifications to the drug, such as changes in indications, labeling, or manufacturing processes or facilities, may require a sponsor to develop additional data or conduct additional preclinical studies or clinical trials, to be submitted in a new or supplemental NDA, which would require FDA approval.

Medical Device Regulations

Our Healight product candidate is classified as an investigational medical device and is subject to restrictions under domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders, including, but not limited to, FDCA. The FDCA requires these products, when sold in the United States, to be safe and effective for their intended uses and to comply with the regulations administered by the FDA. The FDA regulates the design, development, research, preclinical and clinical testing, introduction, manufacture, advertising, labeling, packaging, marketing, distribution, import and export and record keeping for such products. Many medical device products are also regulated by comparable agencies in non-U.S. countries in which they are produced or sold.

Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new indication for use of an existing medical device obtain either a Section 510(k) premarket notification clearance or a premarket approval (“PMA”) before introducing it into the U.S. market. The type of marketing authorization is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness.

The process of obtaining a Section 510(k) clearance generally requires the submission of performance data and clinical data, which in some cases can be extensive, to demonstrate that the device is “substantially equivalent” to another legally U.S. marketed device. A predecessor device is referred to as “predicate device.” As a result, FDA clearance requirements may extend the development process for a considerable length of time.. Substantial equivalence means that the new device is as safe and effective as the predicate. A device is substantially equivalent if, in comparison to a predicate it:

● has the same intended use as the predicate; and

● has the same technological characteristics as the predicate; or

● has the same intended use as the predicate; and

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A claim of substantial equivalence does not mean the new and predicate devices needs to be identical. FDA first establishes that the new and predicate devices have the same intended use and any differences in technological characteristics do not raise different questions of safety and effectiveness. FDA then determines whether the device is as safe and effective as the predicate device by reviewing the scientific methods used to evaluate differences in technological characteristics and performance data. This performance data can include clinical data and non-clinical bench performance data, including engineering performance testing, sterility, electromagnetic compatibility, software validation, biocompatibility evaluation, among other data.

Unless specifically exempt from requiring pre-market clearance, a device may not be marketed in the U.S. until the submitter receives a letter finding the device substantially equivalent. If FDA determines that a device is not substantially equivalent, the applicant may:

● resubmit another 510(k) with new data;

● file a reclassification petition, or

● submit a premarket approval application (PMA).

Medical devices can be marketed only for the indications for which they are cleared or approved. After a device has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a new 510(k) clearance or PMA approval and payment of an FDA user fee. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained.

Any medical devices we may manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and non-U.S. agencies. These include product listing and establishment registration requirements, which help facilitate inspections and other regulatory actions. The manufacturing facilities for any medical devices we market are subject to inspection on a routine basis by the FDA and are required to adhere to GMP requirements, as set forth in the Quality Systems Regulation (“QSR”), which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and manufacturing process.

We must also comply with post-market surveillance regulations, including medical device reporting (“MDR”) requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.

Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

In the European Union (“EU”), our product candidate would be subject to the medical device and in vitro medical device laws of the various member states, which for many years were based on Directives of the European Commission (“Directives”). However, in May 2017, the EU adopted new, formal regulations to replace such Directives; specifically, the EU Medical Device Regulation (the “EU MDR”) and In Vitro Diagnostic Regulation (the “EU IVDR”), each of which imposes stricter requirements for the marketing and sale of medical devices and in vitro devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance. The EU regulations were

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adopted with staggered transitional periods that have since been updated. The full application of the EU MDR was implemented May 2021, while the EU IVDR will be fully applicable in May 2022.

Post-Approval Regulation

Once approved, drug products are subject to continuing regulation by the FDA. If ongoing regulatory requirements are not met or if safety or manufacturing problems occur after the product reaches the market, the FDA may at any time withdraw product approval or take actions that would limit or suspend marketing. Additionally, the FDA may require post-marketing studies or clinical trials, changes to a product’s approved labeling, including the addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if there are new safety information developments.

Good Manufacturing Practices. Companies engaged in manufacturing drug products or their components must comply with applicable cGMP requirements and product-specific regulations enforced by the FDA and other regulatory agencies. Compliance with cGMP includes adhering to requirements relating to organization and training of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, quality control and quality assurance, packaging and labeling controls, holding and distribution, laboratory controls, and records and reports. The FDA regulates and inspects equipment, facilities, and processes used in manufacturing pharmaceutical products prior to approval. If, after receiving approval, a company makes a material change in manufacturing equipment, location, or process (all of which are, to some degree, incorporated in the NDA), additional regulatory review and approval may be required. The FDA also conducts regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval of a product. Failure to comply with applicable cGMP requirements and conditions of product approval may lead the FDA to take enforcement action or seek sanctions, including fines, issuance of warning letters, civil penalties, injunctions, suspension of manufacturing operations, operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution.

Advertising and Promotion. The FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among other things, standards and regulations for direct-to-consumer advertising, advertising and promotion to healthcare professionals, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet. A product cannot be commercially promoted before it is approved. After approval, product promotion can include only those claims relating to safety and effectiveness that are consistent with the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs for "off-label" uses — that is, uses not approved by the FDA and not described in the product's labeling — because the FDA does not regulate the practice of medicine. However, FDA regulations impose restrictions on manufacturers' communications regarding off-label uses. Broadly speaking, a manufacturer may not promote a drug for off-label use, but under certain conditions may engage in non-promotional, balanced, scientific communication regarding off-label use. In addition to FDA restrictions on marketing of pharmaceutical products, state and federal fraud and abuse laws have been applied to restrict certain marketing practices in the pharmaceutical industry.

Failure to comply with applicable FDA requirements and restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes a drug.

Other Requirements. NDA holders must comply with other regulatory requirements, including submitting annual reports, reporting information about adverse drug experiences and maintaining certain records.

Hatch-Waxman Act

The Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) establishes two abbreviated approval pathways for pharmaceutical products that are in some way follow-on versions of already approved products.

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Generic Drugs. A generic version of an approved drug is approved by means of an ANDA, by which the sponsor demonstrates that the proposed product is the same as the approved, brand-name drug, which is referred to as the RLD. Generally, an ANDA must contain data and information showing that the proposed generic product and RLD (i) have the same active ingredient, in the same strength and dosage form, to be delivered via the same route of administration, (ii) are intended for the same uses, and (iii) are bioequivalent. This is instead of independently demonstrating the proposed product's safety and effectiveness, which are inferred from the fact that the product is the same as the RLD, which the FDA previously found to be safe and effective.

505 (b)(2) NDAs. As discussed above, if a product is similar, but not identical, to an already approved product, it may be submitted for approval via an NDA under section 505(b)(2) of the FDCA. Unlike an ANDA, this does not excuse the sponsor from demonstrating the proposed product's safety and effectiveness. Rather, the sponsor is permitted to rely to some degree on information from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference, and must submit its own product- specific data of safety and effectiveness to an extent necessary because of the differences between the products. An NDA approved under 505(b)(2) may in turn serve as an RLD for subsequent applications from other sponsors.

RLD Patents. In an NDA, a sponsor must identify patents that claim the drug substance or drug product or a method of using the drug. When the drug is approved, those patents are among the information about the product that is listed in the FDA publication, Approved Drug Products with Therapeutic Equivalence Evaluations, which is referred to as the Orange Book. The sponsor of an ANDA or 505(b)(2) application seeking to rely on an approved product as the RLD must make one of several certifications regarding each listed patent. A “Paragraph I” certification is the sponsor’s statement that patent information has not been filed for the RLD. A “Paragraph II” certification is the sponsor’s statement that the RLD’s patents have expired. A "Paragraph III" certification is the sponsor's statement that it will wait for the patent to expire before obtaining approval for its product. A "Paragraph IV" certification is an assertion that the patent does not block approval of the later product, either because the patent is invalid or unenforceable or because the patent, even if valid, is not infringed by the new product.

U.S. Healthcare Reform

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, which we refer to together as the Affordable Care Act, is a sweeping measure intended to expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. This law substantially changed the way healthcare is financed by both governmental and private insurers and significantly impacts the pharmaceutical industry.

Changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, benefits for patients within a coverage gap in the Medicare Part D prescription drug program (commonly known as the "donut hole"), rules regarding prescription drug benefits under the health insurance exchanges, changes to the Medicaid Drug Rebate program, expansion of the Public Health Service Act's 340B drug pricing program (340B Program), fraud and abuse, and enforcement. These changes impact existing government healthcare programs and have resulted in the development of new programs, including Medicare payment for performance initiatives.

Some states have elected not to expand their Medicaid programs to individuals with an income of up to 133% of the federal poverty level, as is permitted under the Affordable Care Act. For each state that does not choose to expand its Medicaid program, there may be fewer insured patients overall, which could impact our sales of products and product candidates for which we receive regulatory approval, and our business and financial condition. Where new patients receive insurance coverage under any of the new Medicaid options made available through the Affordable Care Act, the possibility exists that manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, a decision that could impact manufacturer revenues.

Certain provisions of the Affordable Care Act have been subject to judicial challenges, as well as efforts to repeal or replace, or otherwise modify them or to alter their interpretation and implementation. For example, on December 22, 2017, the U.S. government signed into law comprehensive tax legislation, referred to as the Tax Cuts and Jobs Act (the Tax Act), which includes a provision repealing, effective January 1, 2019, the tax-based shared

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responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Further, the Bipartisan Budget Act of 2018, among other things, amended the Medicare statute to reduce the coverage gap in most Medicare drug plans, commonly known as the “donut hole,” by raising the required manufacturer point-of-sale discount from 50% to 70% off the negotiated price effective as of January 1, 2019. On November 10, 2020, the Supreme Court heard oral argument over the constitutionality of the individual mandate. Although on June 17, 2021, the Supreme Court rejected the challenge on the basis that the plaintiffs lacked legal standing, it is unclear how other efforts to repeal, replace or otherwise modify, or invalidate, the Affordable Care Act or its implementing regulations, or portions thereof, will affect the Affordable Care Act or our business.

AYTU US Equity

AYTU · 10-K · period ended 2021-06-30

Item 1. Business

AYTU US Equity☆

AYTU · 10-K · period ended 2021-06-30

Item 1. Business

AYTU US Equity