AYTU — FY2026 Annual Financial Report Analysis

EXXUA launched, but the older drugs are shrinking faster than it is growing

Aytu BioPharma sells prescription drugs in the US. For the fiscal year ended June 30, 2026, net revenue fell 13.3% to $57.6 million from $66.4 million. The year was built around launching EXXUA (gepirone), an antidepressant for major depressive disorder (MDD) that Aytu licensed from Fabre-Kramer in June 2025. EXXUA went on sale in December 2025, so it contributed about seven months of sales: $6.6 million. At the same time, revenue from Aytu's existing products fell by $15.4 million. The company's own explanation is "our commercial prioritization of EXXUA, the impact of generic competition in the ADHD portfolio, and reduced promotional emphasis on legacy products."

The net loss was $14.3 million, compared with $13.6 million a year earlier. Loss per share almost halved, from $2.16 to $1.16, but only because the average share count nearly doubled (6.3 million to 12.3 million) after the June 2025 stock and prefunded-warrant offering and later warrant exercises. The business itself did not improve.

Key figures

Figures from the consolidated statements of operations, balance sheet and MD&A in the FY2026 Form 10-K. Operating margin is loss from operations ($8.3M vs. $7.8M) divided by net revenue. The FY2025 net loss includes $0.6M of income from the Consumer Health business Aytu closed down in July 2024; the loss from continuing operations was $14.3M in FY2026 and $14.2M in FY2025.

The operating loss is worse than it looks next to last year

The operating loss (the loss from running the business, before interest, tax and one-time financing items) grew only slightly, from $7.8M to $8.3M. That comparison is misleading, because FY2025's loss included several costs that did not come back in FY2026:

• $8.3M of impairment charges. An impairment is a write-down of an asset's book value, and these were mostly on Pediatric Portfolio intangible assets after Aytu shifted its focus to EXXUA and ADHD.
• $2.1M of restructuring costs, mainly from closing the Grand Prairie, Texas manufacturing plant.
• $1.3M of R&D spending. R&D was zero in FY2026 because development programs are suspended.

Those three items add up to about $11.7M. Without them, FY2025 would have shown a small operating profit of roughly $3.9M. FY2026 had no comparable items, so the real change in operating results is a swing of about $12M for the worse. It came from two places:

1. Gross profit fell $9.0M. Gross profit is revenue minus the direct cost of making the product. Revenue fell $8.8M while cost of goods sold stayed flat at $20.8M, so gross margin (the share of revenue left after product costs) dropped from 69% to 64%. The 10-K gives three reasons: lower ADHD and Pediatric revenue; a $2.2M inventory write-down (vs. $0.3M in FY2025), "primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products"; and a $3.3M one-time benefit in FY2025 from a change in estimated rebates and discounts after negotiations with a vendor, which did not repeat.
2. Launch costs raised expenses. Selling and marketing rose $2.5M (+11.8%) to $23.4M, driven by "promotional materials, consulting services, our sales force, and advertising" for EXXUA. General and administrative costs rose $1.9M (+10.9%) to $19.3M, mostly for launch-related consulting.

Below the operating line: a large non-cash warrant charge

Of the $14.3M net loss, $4.7M was a non-cash loss on derivative warrant liabilities. Some of Aytu's warrants (rights to buy its shares at a set price) are recorded as liabilities and revalued every quarter. When the share price rises, that liability grows and the increase is booked as a loss. The 10-K says the charge was "primarily driven by an increase in our stock price." Warrant exercises then moved most of the liability into equity: it fell from $26.3M to $1.2M, and shareholders' equity rose from $19.0M to $35.3M. Without this charge, the pre-tax loss would have been about $9.5M. Interest expense fell by nearly half, to $1.9M from $3.7M, as Aytu paid down fixed payment obligations.

Cash: the business generated cash, but mostly by shrinking working capital

Operating cash flow was +$3.3M, up from -$1.9M. However, the 10-K says the underlying "cash earnings" (net loss adjusted for non-cash items) were negative $2.6M. The positive cash flow came from collecting receivables and running down inventory: accounts receivable fell from $31.2M to $22.8M and inventory from $11.4M to $6.9M. That kind of cash can only be released once, and some of it reflects the smaller legacy business. Aytu used $7.9M to pay down its revolving credit line, its term loan and fixed payment obligations, including a $3.1M settlement with Tris over Tuzistra. Cash ended the year at $26.3M. Borrowings totalled about $17.0M ($6.1M on the revolving credit line, plus $11.0M of term debt), down from about $21.8M. The 10-K contains no going-concern warning, and the full $100M shelf registration (pre-approved capacity to sell new securities) remains available, subject to SEC "baby shelf" limits for smaller companies.

EXXUA's economics: large royalties, and a payment due soon

A dollar of EXXUA revenue is worth much less to Aytu than a dollar of revenue from a drug it owns outright. Under the Fabre-Kramer agreement, Aytu pays a royalty of 28% of EXXUA net sales, rising to 39% if annual net sales pass $300M. Once net sales reach $100M, sales-based milestone payments also kick in. A second $3.0M payment falls due within 45 days of the first anniversary of launch, which puts it around December 2026 to January 2027. That payment rises to $5.0M if first-year EXXUA net sales reach $35M. With $6.6M booked in the first seven months, reaching $35M looks unlikely, so the $3.0M figure is the more likely one.

Takeaway: The ADHD and Pediatric portfolios lost $15.4M of revenue in FY2026, and EXXUA added $6.6M. EXXUA also costs Aytu a 28% royalty that the older drugs do not. Generic competition is growing: generic Adzenys from September 2025, an authorized generic of Cotempla (Teva's own-label version of the drug) from July 2026, and the Granules patent trial in January 2027. As a result, the legacy base is likely to keep shrinking in FY2027. EXXUA needs to grow several times over just to replace those losses, while management has already said sales and admin costs will rise.

Looking ahead

Aytu gives no revenue or earnings guidance. Its FY2027 cost outlook in the 10-K is:

• Selling and marketing will increase: more sales staff, promotion, and doctor and patient education for EXXUA.
• General and administrative costs will increase: more personnel, IT and compliance.
• Amortization will increase: the EXXUA rights are written off over time, and FY2027 carries a full year of that cost rather than a partial one.
• R&D will stay near zero, interest expense roughly steady, and no restructuring costs are expected.

Several risks are dated. Teva's right to sell an authorized generic of Cotempla started July 1, 2026, and Aytu says it is "unable to estimate the financial effect on future net revenue." The ADHD Portfolio is 80% of revenue. The Granules patent trial over a generic Adzenys has moved to January 12, 2027. Actavis (Teva) has been able to sell a generic Adzenys since September 1, 2025, and Aytu has moved part of its own Adzenys volume into generic form.

For FY2027, the numbers to watch are EXXUA's quarterly revenue run-rate and whether it outpaces the Cotempla decline. At a 28% royalty and with sales costs rising, EXXUA would need to become much larger than its first-year pace before Aytu can reach the company-wide profitability management is targeting.