Aytu BioPharma, Inc.

Greetings. Welcome to the A2 Biopharma to report fiscal 2025 full year and fourth quarter and operational and financial results on September 23, 2025 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Please note, this conference is being recorded. I will now turn the conference over to your host, Robert Bloom, with Latham Partners. You may begin.

All right. Thank you very much, and good afternoon, everyone. As the operator indicated during today's call, we will be discussing A2 Biopharma's fiscal 2025 full-year program, and fourth quarter operational and financial results is for the period ended June 30th, 2025. Joining us on today's call is A2's Chief Executive Officer, Josh Disbrow, and Ryan Selhorn, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available by using the telephone numbers and conference ID provided. in the press release issued earlier today or by utilizing the link on the company's website under Events and Presentations. Finally, I'd also like to call to your attention the customary safe harbor disclosure regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of A2 Biopharma. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Action results may differ materially as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the SEC. A2 undertakes no obligation to update or revise any of these forward-looking statements. With that said, let me turn the call over to Josh Disbrow, Chief Executive Officer of A2 Biopharma. Josh, please proceed.

Thank you, Robert, and welcome, everyone. This is an extremely exciting time for A2, given the strong financial performance during the recent fiscal year, and perhaps more importantly, the upcoming launch of Exua, which we believe significantly transforms A2 for years to come. At a high level, fiscal year 2025, which as a reminder, we have a June 30 year end, saw stability within our existing ADHD and pediatric portfolios, as well as our focus on driving efficiencies across our operations to report our ninth consecutive quarter and third consecutive year of positive adjusted EBITDA. For the year, net revenue was $66.4 million, which was a slight increase from the previous year. On the adjusted EBITDA line, we came in at $9.2 million. Again, this is now three consecutive years of positive adjusted EBITDA as we really pivoted this company the past few years to focus on a prescription pharmaceutical business while we halted our development efforts, wound down and sold our consumer health business, and outsourced our ADHD manufacturing to a U.S.-based CMO. It should not be overstated how different we look today from just a few years ago. I give tremendous credit to the entire team for their efforts to unlock value in A2 and thank them for all they're doing to put us in this strong position. With all the heavy lifting completed over the last few years, we positioned ourselves to build upon the uniqueness of our Salesforce's psychiatry focus and alignment with the proprietary A2 RS Connect patient access platform to begin the next stage of focus, product acquisitions which can align with our psychiatry focus. To that end, in June of this year, we announced what we believe is a truly transformational opportunity for A2 by signing an exclusive agreement to commercialize Exua in the United States. With Exua, we are bringing to market a novel first-in-class treatment for major depressive disorder, or MDD, in over $2 billion U.S. market. The key word here is novel. Exua is not an SSRI, nor is it an SNRI. It does not inhibit neurotransmitter reuptake. It is in a new class of MDD treatment as a 5-HT1A receptor agonist. It is a partial agonist of the 5-HT1A receptor, and it's long-acting. By upregulating the 5-HT1 receptor, Exua uniquely targets a receptor chiefly implicated in mood, notably depression and anxiety. Because Exua targets this specific receptor so selectively, it does not carry the same risk of sexual dysfunction and doesn't cause weight changes when compared to placebo. which the SSRIs and SNRIs routinely do. As it relates specifically to sexual function, not only does it not cause sexual-related side effects such as low libido, ejaculatory delay, and erectile dysfunction, recently published work actually shows actual improved sexual function and desire in depressed patients. And while that isn't an approved claim, we will specifically make with clinicians that data is peer-reviewed and published and in the public domain. So while SSRIs and NRIs are generally effective for some patients in treating MDD, the problems associated from a side effect perspective, particularly as it relates to sexual dysfunction and weight gain, commonly lead to patient dissatisfaction with treatment. As you can imagine, these side effects are many times simply untenable for patients already struggling with their mental health, and thus many patients stop these treatments altogether or seek alternatives. Thus, we believe a significant market need exists for targeted and specific therapies minimizing off-target effects and adverse events such as sexual side effects and weight gain while effectively treating the symptoms of MDD. This is key to the market positioning for Exua. As I mentioned, this is an over $22 billion market in the U.S. with over 340 million prescriptions written annually in the U.S. for antidepressants. SSRIs and SNRIs represent approximately 220 million TRXs or over 60% of all antidepressants prescribed. While the category is largely genericized, there are numerous branded products that have entered the market relatively recently, including newer antidepressants like Trintelix, Albelity, and Spravato. These products have received strong physician uptake despite having some of the same side effects older products present, particularly Trintelix and Albelity. Both products list adverse events, specifically including sexual dysfunction, among others, so we view Exua as having a potentially favorable profile compared to those two, given its unique MOA and high receptor selectivity and lack of sexual dysfunction. Further, as it relates to alveolity, that's dosed twice daily, so Exua's once-daily dosing may offer a benefit in terms of patient convenience and compliance. Trintelix, a product that generated over 2 million prescriptions in calendar 24, has an exceedingly high rate of sexual side effects, 29 to 34% at the highest approved doses in men and women, respectively. Sexual dysfunction is actually listed as a warning for Trintelix. So this is a very real problem with this product. So frankly, even if Exua was only the recipient of Trintelix failures or dissatisfied patients, that would make Exua a significant success for us. All this said, we obviously won't just target just one or two of those products' failures, as there are many millions more prescriptions to pull from across the spectrum of approved MBD treatments, particularly the SSRIs and SNRIs that dominate the MBD market, despite their shortcomings. Needless to say, our expectations for Exua are high, as we believe we can help patients that are dissatisfied or are dealing with side effects with current treatment options. And there are many, based on our market research and conversations with the psychiatry community. So let's turn to our key Exua launch activities that are underway. Since completing the transaction in June, we've been working rapidly to bring the product to market. As a reminder, Exua is already FDA approved. We are currently finalizing product manufacturing, packaging, validation, labeling, serialization, and delivery to our third-party logistics provider. This is the biggest gating factor at the moment with the current expectation that we will have product available by the end of the calendar year. On the medical affairs front, we have brought on Dr. Gerwin Westfield as our Senior Vice President of Scientific Affairs. Dr. Westfield is a distinguished leader in the medical and pharmaceutical fields whose work has contributed to a Nobel Prize. Dr. Westfield previously worked with us at A2 from 2015 to 2021 as our Director of Medical Affairs. Led by Dr. Westfield, we were focused on broadening Exua's clinical profile via peer-reviewed publications and key opinion leader engagement, as you need to do with any successful product launch. With this, we expect to employ an active education, publication, and presentation approach, highlighting actual sexual function and anxiety data in conjunction, of course, with the product's depression efficacy data and safety data over the thousands of patients studied. On the sales front, we have refined our sales territory alignment and physician targeting. It's important to note that our existing psychiatry-centric 40-plus person sales force will make actual their primary promotional responsibility going forward. Our sales team already overlaps with a significant majority of targeted writers in our current geography. And thus, this really is a plug and play opportunity, enabling us to efficiently launch with only a slightly modified footprint. And we'll be specifically aligned to high branded antidepressant prescribing psychiatrists and psychiatrists aligned nurse practitioners and PAs. So we don't intend to significantly expand the sales team initially. But realignment of territories is now essentially complete to ensure maximum reach while also aligning with where market access is expected to be strongest and, of course, prescribing potential is expected to be the highest. I'll remind you that for government payers, major depressive disorder has nearly universal coverage as this condition is a federally mandated protected class where MDD prescriptions must be covered. And importantly, the government pay segment represents approximately 30 plus percent of the MDD covered lives depending on the geography. So with 30 or even 40 percent of the antidepressant category depending on geography covered by virtue of this protected status, We are, of course, aligning sales territories appropriately to ensure optimal patient access with respect to both government and commercial payers. As it relates to the branding and promotional aspect, we continue to work internally and with our agency to optimize product positioning and messaging, prepare promotional materials, and refine our overall platform around Exua from a commercial perspective. We plan to implement a comprehensive promotional program whereby we establish a clear positioning for Exua based on its attributes, the competitive landscape, and ultimately where we believe we can win with this product. You'll see more on this in the months ahead as we formally make Exua commercially available and launch Exua through our sales force. From a payer and distribution perspective, we do plan to integrate Exua into our A2RX Connect access platform. We expect to drive distribution through and dispensing from our RxConnect network pharmacies, as we do now with our ADHD portfolio. This will enable us to gain strong insights on reimbursement and coverage rates to help guide selective and smart payer contract we will consider. As you know, with our current products, we're able to successfully navigate the payer landscape, even in a category like ADHD, for which brand reimbursement is spotty at best. And we've always been very judicious and selective in payer contracting. We will take contracting and rebating on a case-by-case basis as we do now, but our single biggest objective around reimbursement with Exua will be to minimize coverage barriers and to help get patients successfully on therapy. The payer landscape in MDD is materially better than in ADHD based on the class's protected status and other factors, so we're anticipating materially higher net pricing and better overall coverage and reimbursement rates. More to follow on pricing and reimbursement as this piece unfolds and as we get closer to and into the Exua launch. Finalization of manufacturing is the gating factor to launch, but today we feel comfortable that we are on track to have Exua available at the end of the calendar year. While efforts in the near future are on the Exua launch, a question that frequently comes up is around opportunities to efficiently extend Exua's life cycle, whether that's through considering the pursuit of additional intellectual property or exploring alternate formulations or one of Jeff Grone's active metabolites. As a reminder, Exua's IP will extend to late 2030 or early 31 through a combination of patent term extension being worked on through along with the new chemical entity designation granted by the FDA. So as we think about it, this is a nice runway already from a patent or exclusivity perspective. Of course, there can be no guarantee we'll be able to execute on extensions to this late 30, early 31 timeline, but we're having early discussions with prospective partners on ways that we believe those could be accomplished to make an already attractive opportunity for A2, potentially even more so if we do, in fact, extend the IP. Our entire team is beyond thrilled to get things rolling on all things Exuo. As I said at the beginning, for us, the actual opportunity is quite simply transformational, and we look forward to executing on this opportunity in the quarters and years to come. Before I turn it over to Ryan to review the financials in more detail, just a few comments on our ADHD portfolio. As most of you know, there's been a long since negotiated paragraph four settlement agreement with Teva, whereby Nios allowed them to enter the market with a generic to Adzenis on September 1st, 2025. As we sit here today, three weeks into September, they have activated their ANDA in the Orange Book and thus have signaled their intent to at some point enter the market, but they have yet to officially launch. Importantly, we have also launched an authorized generic of Adzenis. In fact, we launched it on September 2nd, and this product's early trajectory in the early weeks is very encouraging, to say the least. This AG will serve as an important offensive tool, and we believe helping us maintain a material share of the Adzenis market irrespective of Teva's potential entry by having a truly equivalent product available that is now being sold as a generic. Through the first few weeks of the month of September, we have not seen any impact on script trends to our overall ADHD portfolio by virtue of the fact, as I just mentioned, Teva has not yet entered. So, of course, we're pleased with that. This may, of course, change in the future if and when Teva does enter the market. But I believe it bears reminding that we have optimism that the impact on our business will be far less than under normal circumstances when prescription brands are sold through broad retail distribution, including the large national retail pharmacy chains. There are a few reasons behind this that I always like to point out. First, approximately 85% of our ADHD scripts go through our RxConnect platform. This is important as we have very tight controls and highly specific insights into the vast majority of prescriptions running through the platform. We see the planned coverage and reimbursement rates realized by the pharmacies and ultimately the dispensing pharmacies margin on the scripts they dispense. And again, by virtue of how we manage this highly integrated system of analytics, business rules, and algorithms, we ensure margin any time a pharmacy is dispensing our brand and now our AG. Through our systems, we're able to price match or better in the face of in the face of pharmacies having an alternative option to dispense. This is critical as we look at blunting potential erosion from an ANDA. Second, the ADHD category is already a highly genericized market with minimal switching. Opportunities have existed for many years to prescribe and fill alternatives, yet we've held a consistent, albeit small, share of the market with both Adzenus and Cotempla. Importantly, Prescribers do prefer brands in the ADHD category, given the reliability and the consistency from a PK perspective. So with our brands having this unique copay backstop, we offer a commercially insured patients of paying no more than $50 out of pocket. We've been able to carve out a solid niche and a sea of cheap generics. Third, The gross-to-nets on our ADHD portfolio are already below what industry observers might expect when generics typically enter the market. This is to say that the substitution impact and transition to a generic market is not as high as you might see in other similar circumstances. While we don't publish our gross-to-nets, we do generally communicate that our net selling prices for both Azenis and Cotempla are materially lower than what industry observers associate with typical Rx brands. So the potential for price erosion beyond our current net selling price per unit is also materially lower. That said, we don't yet know what and how Teva will approach pricing or contracting. There are several other interrelated factors at play as well to give us comfort that the Adzenis franchise has good market share protections in place, but the three I just covered are really the key ones. More to follow if and when Teva enters, but for now, it remains business as usual for A2. One other small detail, every year we pay an annual what's called a PDUFA fee to the FDA of about $2 million for Adzenis. This is a standard fee all branded manufacturers pay, and the fee goes up for each SKU the product has. Importantly, by law, when an AB-rated generic is activated in the Orange Book, that fee goes away. So this savings, which by the way is within our COGS line, will offset some initial impact we might see. Additionally, starting in late fiscal 26, and then really as we start to get into fiscal 27 and beyond, we expect further COGS reductions through improvements in packaging configurations. So once we've fully moved both ADHD brands to a more compact and efficient packaging setup, we expect to realize additional savings, which we'll talk to you as we get closer to that implementation. That said, we expect those COGS improvements to be material if we maintain current volumes. Look, we know time will tell as it relates to the impact we might see within our ADHD portfolio from generics, and I don't want to come out and say we expect no impact. But again, given the uniqueness of RxConnect and the various other factors we've discussed, we don't believe this will be as much of an impact as what might be seen in other situations where products are distributed in the more traditional way. With that, let me turn the call over to Ryan to go into detail on the financials, and I'll make a few closing comments, and then we'll look to address any questions you might have. Ryan?

Thank you, Josh. Please note that our June full year and fourth quarter fiscal 2025 financial results are detailed in both our press release and fiscal 2025 Form 10-K that we filed today with the SEC. I'm going to focus my comments primarily on the annual results. If there are any questions on details pertaining to the fourth quarter, please let me know. Let's start with the revenue line. Net revenue for the full year of fiscal 2025 was $66.4 million compared to $65.2 million for the prior year. Breaking it down, the ADHD portfolio net revenue was $57.6 million compared to $57.8 million in the prior year period. The change was a result of a decrease in the number of scripts written offset by improvements in the growth to net through assertive management of our brand's economic as enabled through A2RX Connect platform. The pediatric portfolio was $8.8 million in the full year fiscal 2025 compared to $7.3 million. The pediatric portfolio growth reflects the positive effects from the company's recently implemented return to growth plan with an increase in the number of units sold during the fiscal year, slightly offset by a decrease in gross to net by virtue of some changes within RxConnect to regain prescription volumes. Gross margin was 69% in the full year fiscal 2025 compared to 75% last year. The decrease in gross profit percentage is primarily related to increased cost of sales in our ADHD inventory. We've talked about this in the past, but as a reminder, the inventory's higher cost resulted from the allocation of certain overhead costs associated with the now closed Grand Prairie, Texas manufacturing facility to a reduced amount of ADHD products that was produced there. This situation occurred as we ramped up production at our contract manufacturer and concurrently decreased production at the Grand Prairie, Texas facility. We expect the gross margins to improve in coming quarters as this inventory is fully liquidated. To add clarity in our fiscal 2025 gross margins, the contribution margin, which incorporates only the variable cost in our cost of goods sold, was 77.9%. Our fixed costs within cost of goods sold amounted to $4.5 million for the year, and the non-cash amortization costs amounted to $1.3 million. The PDUFA fee for a dentist that Josh referenced earlier, which did not continue after September 2025, represented $1.5 million of the $4.5 million within the fixed cost amount for the year. The pro forma aggregate gross margin would have been 71.3% without such a PDUFA fee in fiscal 2025. Turning to OPEX, operating expenses excluding amortization of intangible assets, restructuring costs, and impairment expense were $39.6 million in the full year of fiscal 2025 compared to $44.8 million in the prior year. The decrease primarily is a result of continued cost reduction efforts and improved operational efficiencies as part of the company's overall strategic alignment. With the shutdown of the Grand Prairie Manufacturing Facility and divestiture of the consumer health business in the first half of fiscal 2025, this is the second quarter in a row that we have been able to demonstrate the new cost structure, which projects a pro forma annual expense of $36.3 million. While we will certainly incur additional expenses related to the EXO launch in fiscal 2026, This new cost structure results in a break-even level of about $52.6 million annually or $13.2 million quarterly for our current-based business of ADHD and pediatric portfolios. We are excited that the hard work over the past three years to reduce expenses has positioned us well as we prepare for this new product launch. For the year, net loss was $13.6 million compared to a net loss of $15.8 million in the prior year. The full year fiscal 2025 results were impacted by an $8.3 million impairment expense on our pediatric portfolio, primarily the result of our shifted focus on our commercial efforts for Exua and our ADHD portfolio. $1.7 million of derivative warrant liabilities lost due to primarily an increase in the fair value of the $8.2 million liability classified pre-funded warrants from when they were issued in June 2025 until the end of fiscal 2025, partially offset by a decrease in the fair value of our other warrants and pre-funded warrants due to an overall decrease in our stock price during fiscal 2025, and a $2.1 million restructuring cost primarily related to the closure of our Grand Prairie, Texas manufacturing site. If you were to exclude these various impacts, net loss would have been about $1.5 million in fiscal 2025, compared equivalently with a $9.7 million loss in fiscal 2024. Finally, on adjusted EBITDA line, as Josh mentioned, we reported our third consecutive year of positive adjusted EBITDA coming in at $9.2 million in the full year of fiscal 2025, compared to $10.8 million in the prior year period. For the fourth quarter, adjusted EBITDA was $2 million, which was flat with the year-ago quarter. Turning now to the balance sheet, cash and cash equivalents were $31 million at June 30, 2025. This compares to $18.2 million at March 31, 2025. As a reminder, in June 2025, we accompanied the extra agreement with a highly successful, upsized, at-the-market public offering of common stock with full exercise of the over allotment totaling $16.6 million growth and just under $15 million net after fees and expenses, led by our current and some new healthcare-focused institutional investors. We greatly appreciate the ongoing support of Nantahala Capital, Stone Pine Capital, and the new investors that came alongside with this at the time at the market financing. We view this strong support from long-term life science-focused investors as further validation of the Exua deal and the opportunity it presents aid to. Our thanks also go out to our banking colleagues at book runner Lake Street Capital Markets, lead manager Maxim Group, and financial advisor at Sendian Capital Markets as our partners in getting this deal done. A couple other small notes on the balance sheet. We topped off our loan with Eclipse from $11.1 million to $13 million and extended maturity to June of 2029. We also temporarily increased our maximum revolving line of credit by $1.5 million. We continue to pay down some higher interest liabilities during the quarter, namely the TRIS fixed payment arrangement by another $1.2 million. The remaining balance of this arrangement of $3.1 million was paid off in full in July 2025 using the funds obtained from the Eclipse loan refinancing. You will see this as a reduction in other current liabilities on the balance sheet. With this liability eliminated, we anticipate a reduction in our interest expense of almost $1.5 million in fiscal 2026. As I mentioned a moment ago, we incurred $8.3 million of impairment expense on our pediatric portfolio, primarily as a result of our shifted focus on commercial efforts for Exua and our ADHD portfolio, as well as the reduced net revenue compared with previous years. and expectations going forward for the portfolio. You will see this as a reduction in intangible assets. Finally, the offering we conducted was basically a straight common deal with pre-funded warrants as ownership percentage blockers. Due to the accounting for the pre-funded warrants as liabilities, a portion of the issuance costs were recorded in other expenses in the amount of $1.3 million as opposed to in APIC as is traditionally done in common stock capital raises. Before I turn it back over to Josh, let me spend a few minutes walking through some of the investments we plan to make in the EXOA launch and ensure everyone has a good understanding of the modeling moving forward. First off, we plan to launch EXOA in the fourth quarter of calendar 2025, which is our second fiscal quarter of 2026, or the December 2025 quarter ending. This will be the initial product load in. We would not expect there to be any significant revenue to report during the second fiscal quarter. The launch will continue into the March ending quarter, where we expect to see some small initial ramp in revenue, but the real story is expected to occur in June 2026 quarter and beyond. From a gross margin perspective, as a reminder, we have a 28% royalty on Exua in addition to a true up on COGS. Think about it in essence as about a 31% cost of goods sold or 69% gross contribution margins. We do anticipate some fixed expenses to be incurred in the cost of goods sold following the launch as well. The upfront fee, the post-launch fee, and any milestone payments will be reported as intangible assets and amortized in operating expenses initiating once we launch the product. From an OPEX perspective, we expect to invest approximately $10 million in the initial launch of Exua here in fiscal 2026. This was well-defined in the plan heading into the product acquisition and financing we conducted, and we expect this puts us in a good cash position as Expo begins to ramp as we exit fiscal 2026. To reiterate Josh's sentiment, we are thrilled with the opportunity ahead of us. The work we have done over the past three years to focus on our prescription pharmaceutical business by way of halting our development efforts, winding down and selling our consumer health business, and outsourcing our manufacturing to a U.S.-based CMO has put us in the position to make all of this happen. With a base business driven by our ADHD and pediatric portfolio lines, and then the layering in of Exua, we have the ability to transform the outlook of A2 for years to come. We are intent on executing efficiently on the opportunity. Again, happy to go over any details during Q&A. With that, Josh, let me turn it back over to you.

Thanks, Ryan. And before I turn it over to your question, let me just share some personal experience I've had while being in the field with a couple of our sales representatives over the past month or so as it relates to Exua, which reaffirms mine and really our overall excitement for the product. I've traveled with a couple of our top sales specialists visiting with doctors in Texas as we began the process of presenting Exua to the market. And over a two-and-a-half-day period, we met with more than 30 psychiatrists and psychiatric nurse practitioners and PAs. every single one of them indicated that they have at least one patient for whom they'd be willing to try Exua when it became available. It was highly positive feedback. And I will tell you, it is this positive feedback that reconfirms an independent market research study that we had conducted also, also indicating that virtually every physician and specifically psychiatrists, psychiatric PAs and NPs, every one interviewed saw a role for Exua in their treatment of depression. And finally, it reconfirms the survey that Lake Street conducted, which similarly asked 20 respondents, all psychiatrists, would you prescribe Jepro and ER for your patients with MED, for which all 20 indicated yes. Three different surveys from three different sources essentially all indicated that they would prescribe Exua. This reconfirms everything that we've thought about the long-term opportunity for this unique product. And as we said, while we don't expect revenue in the immediate or near-term, given ramp expectations around any branded product launch, As we exit our fiscal 26, so again, late spring and into early summer of next year, we believe the signs of trajectory and momentum will start to appear. Okay, so we went a little longer than we might normally go, but we thought it was important to provide a little added color, given the excitement surrounding the actual launch and some discussion around our ADHD portfolio. As you can hopefully hear, our excitement really is at an all-time high. As I stated in the press release, as we ramp up our commercial focus on Exua, it is our expectation that we will exit fiscal 26 on a trajectory that positions A2 as one of the fastest growing CNS-focused companies in the industry. This is certainly an exciting time for all of us here at A2 and for everyone involved. As always, I want to thank everyone participating on today's call. We'll now be happy to answer some questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, please press star 1 if you have a question or a comment. And our first question comes from Thomas Flatton with Lake Street. Please proceed.

Hey, guys. Good afternoon. Thanks for taking the questions. Hey, Josh, if you guys are loading the channel in the fourth calendar quarter, should we just assume then that you're having a national sales meeting kind of full launch in the first calendar quarter? How are you thinking of sequencing those two events?

Yeah, good question, Thomas. That's exactly right. We would expect a load-in kind of by or kind of near the end of 2021. five calendar with a Salesforce get together launch meeting and then full out launch immediately thereafter. So I'd be thinking kind of, you know, initial physician detailing happening in the Q1 calendar timeframe. That's exactly right.

Got it. And then just related to that timing with the, with the recent warning letters that came in is, is it your plan to pre-clear promotional materials or will you forego that?

No, we, um, And good question about the warning letters and just sort of the general environment. We do not plan to pre-clear. We've got, we think, a very solid, very compliant promotional platform, having actually just reviewed a good deal of it yesterday, myself and some of the other members of the management team. So given, frankly, the time that would be involved in pre-clearing with the FDA, given their current staffing issues, And again, given our strong sense that we've got a highly compliant message, we don't feel a need to do that. So we will do the traditional 2253 submission process. So, yeah, good question.

Got it. And then just one final one for me, if I could. So you mentioned that your intent is to engage with payers on a case-by-case basis. So do we read into that one that you haven't been out doing any kind of pre-launch discussions with payers? And what is it that would trigger a case-by-case basis review process? with the payers. I know there's two questions in there, but if you get where I'm going with it.

Yeah, exactly. So, you know, as we do with the current business, Thomas, as you're probably aware, we are highly selective because based on just some of the structures of some of these rebates, you end up putting yourself really in a bit of an upside down circumstance from a margin perspective. If you're not careful, it really all comes down to plan pull through. And even if you've got a contract with the PBM, if plans aren't putting product on formula or aren't removing some of the mechanisms with through utilization management, you may not be getting what you're paying for. Furthermore, in this category, because the government pay scenario is so positive, given that it's essentially near universal coverage, really universal coverage, and that there is this mandate to have products for both depression and schizophrenia covered under both Medicare and Medicaid plans. It doesn't make a lot of sense to proactively contract on the commercial side so as not to trip best price, understanding that the government's going to get a flat 23.1% rebate, and we want to preserve the margin on that side of the ledger. So that really is what will drive the very selective contracting, first and foremost, getting a sense for where we are from a government perspective in terms of distribution of prescriptions across the geographies that have favorable government requirements. pay schemes, and then layer in only as appropriate, very selective and only really favorable contracting on the commercial side. But again, it's really critical that we pay attention to both both sides of the ledger on the left side, the commercial side, again, being selective to make sure that we're getting what we're paying for in the context of rebates that actually result in pull through. And on the right side of the ledger and the government side, making sure we're not doing anything that would undermine that 23.1 flat discount that you give the payers, because the second you contract at a rate higher than that, um, You reset the price lower, as I'm sure you're aware. So we'll be very judicious. But importantly, as I said, we will run these prescriptions preferentially through the RxConnect platform. And as we do now, we think we'll be very good in navigating just the overall flow of these prescriptions, making sure we're identifying exactly where scripts are covered and obviously maximizing those prescriptions. And obviously still backstopping patients to the degree that it makes sense to ensure that patients are still able to get the product. So, again, not to sum up what we're doing now. We're just going to be smart and really take it one by one. We're not going to go out and blast. blast press releases that suggest we've picked up 30 or 40 or 50 million American lives, when in reality that might actually net us something negative in terms of our ultimate margin, and it still might actually not improve patient access. So sorry for the long-winded question, but hopefully that covers it.

Yeah, it's great. Appreciate you guys taking the questions. Thank you. Thank you.

The next question comes from Naz Rahman with Maxim Group. Please proceed.

Hi, everyone. Thanks for taking my questions. I only have a couple. The first one is on the base, let's just call it the ADHD and pediatric franchise. So, obviously, the focus is entirely on Exua, but ADHD has obviously been very volatile over, let's call it, the last eight quarters in terms of sales, and P's obviously had that reimbursement impact. I guess at this point, while pulling Salesforce efforts, where do you sort of see these two businesses sort of leveling out in terms of potential annual sales and contributions.

So, I'll answer it from a general perspective, and then, Ryan, maybe you can layer in in terms of really what the base business kind of needs to be to kind of, you know, operate at breakeven and then going forward. You know, we are, as we said during our prepared remarks, NAS, shifting promotional resources, you know, almost entirely to Exua, understanding that The base business has some relative stickiness from a volume perspective, and we see in both covered and non-covered geographies that these products do have some level of stick. And so while we might expect some level of drift from a volume perspective just as time goes on, with the launch of the AG, particularly as it relates to Adzenis, we actually may see some improvement in terms of net selling price. Further to that, though, as you think about a standalone P&L as it relates to the base business, obviously we'll be shifting expenses off of that business such that it should cash flow even at a lower level. So we're not necessarily in a position to guide to what we think top line will be, but I'm comfortable in saying that that business will be margin positive, just, again, given the fact that the expenses will be largely removed from that business. Um, but Ryan, maybe you can speak to kind of where that base business needs to be in order for us to, you know, essentially contribute cash or at the very least break even, you know, as it stands with just the ADHD and pediatric portfolio.

Yeah, absolutely. So, um, as I kind of mentioned, our, our ADHD, uh, portfolio kind of hit the 57 and 0.6 million, uh, this year and our P's at 8.8 million. Um, You know, going forward, like Josh said, if you look at all the sales and marketing, the majority of that will get shifted to Exua. So the ADHD MPs will basically be covering our G&A going forward. Just on the core base business, like I mentioned, with our current expense run rate, we really only need to hit about 13, a little over 13 million a quarter to break even. So we're kind of leveraging this new cost structure. You know, expectation that, yes, ADHD may slip a little bit, especially depending on, you know, the TEVA entrance. But we think we're in a good position kind of to be now that we're launching Exua.

Got it. Thanks. And on top of the Salesforce effort, could you kind of talk a little bit about what the medical affairs effort right now is for Exua? Are you guys planning on presenting at any conference, doing more physician education, publications, etc.? ?

Yeah, an extensive effort underway in the medical affairs, scientific affairs arena. Obviously, as I mentioned, we hired back Dr. Gerwin Westfield, and he's already made tremendous progress in aligning with several key opinion leaders. With that, we certainly do expect to have presence at medical conferences. We do conferences more surgically precise than I would say large companies, whereby we don't go with big fanfare, large expensive booths, and sort of a high marketing spend. It really tends to be very oriented around one-on-one engagements with really the The key opinion leaders we've already engaged with with multiple. We also, from an education perspective, aligning with really one of the one of the absolute leaders in the field have already begun to outline educational programs to ensure that we're getting the word out on actual on both the branded as well as an unbranded program. perspective. And so obviously just getting psychiatrists familiar with the mechanism of action, review of this class of medications, which, you know, again, this is the first time this class has been approved in MDD. We will plan subsequent to that as we go through various data review access and potentially implement initiator And investigator-initiated trials, we would expect publications and presentations, abstracts being developed as an output of a lot of those efforts. So, yeah, fulsome effort underway. Understanding will be, again, very surgically precise, very specific. We won't be everywhere all at once. We'll be very disciplined in how we deploy that. But Gerwin and his team are already well underway with that effort. So, yeah, a lot happening there behind the scenes.

Got it. Thanks for taking my questions.

Thank you.

Once again, if you have a question or comment, please press star one. The next question comes from Ed Wu with Ascendant Capital. Please proceed.

Yeah, congratulations on all the progress. My question is a clarifying question for Ryan. Did you say that it was $39 million in operating expenses on kind of a pro forma basis? And then you mentioned that it was going to be $10 million in

uh extra investments for the launch of actual uh is there a distribution pattern for the year how we should we figure out when that will be spent yeah um just just to clarify And in terms of the expense, there's a decent amount of expense starting in Q2, so our December quarter. So that's where I would start the expense, and then we'll ramp up from there. And, you know, a good amount of the expense is sales reps as well as doing marketing materials. So I'd say a good chunk of – probably about 50% would be in Q2. and then the other 50% in Q3 and Q4.

Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

Thank you.

We have no further questions in queue. I'd like to turn the floor back to management for our closing remarks.

Thank you, John, and thanks, everyone. Thanks to the analysts who asked the questions. I really appreciate everyone's interest and time today. Really continue just to express our appreciation extreme enthusiasm for what we have in front of us here with Exua. We know we still have a lot of work to do and obviously Still some time until we are out there in the field and certainly a little bit more time than that to make impact. What we really do think that coming out of 26 and then heading into our fiscal 27, so into the middle of the calendar year is when we'll start to see really meaningful results. And I think folks will start to share our enthusiasm. But until that time, it's time to put our heads down, go back to work and ensure readiness for the actual launch here late this year and as we get out into early 2026. Thanks very much for your time. Thanks for your support of A2 Biopharma, and we'll talk to you at next quarter's earnings. Thanks very much. Have a good afternoon and evening.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.