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Edited Transcript of AYTU.OQ earnings conference call or presentation 6-Oct-20 8:30pm GMT

·28 mins read

Q4 2020 Aytu BioScience Inc Earnings Call ENGLEWOOD Oct 6, 2020 (Thomson StreetEvents) -- Edited Transcript of Aytu BioScience Inc earnings conference call or presentation Tuesday, October 6, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David A. Green Aytu BioScience, Inc. - CFO, Secretary & Treasurer * Joshua R. Disbrow Aytu BioScience, Inc. - Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * Jeffrey Scott Cohen Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research * Vernon Tolentino Bernardino H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining us for Aytu BioScience Fourth Quarter and Fiscal 2020 Business Update Call. With me this afternoon are Aytu's Chairman and Chief Executive Officer, Josh Disbrow; and Chief Financial Officer, Dave Green. Aytu BioScience issued a press release earlier this afternoon with details of the company's operational and financial results for the fiscal second quarter. A copy of the press release is available on the news page of the company's website at aytubio.com. I'd like to remind everybody that today's call is being recorded. A replay of today's call will be available by using the telephone numbers and the conference ID provided in the earnings press release. In addition, a webcast will be available live and archived Aytu's website within the Investors section under Events and Presentations at aytubio.com. Finally, I would also like to call your attention to 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 Aytu BioScience. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, October 6, 2020, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to, the factors set forth in the company's filings with the SEC. Aytu undertakes no obligation to update or revise any of these forward-looking statements. I would now like to turn the call over to Aytu's CEO, Josh Disbrow. -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [2] -------------------------------------------------------------------------------- Thank you, Sherry. Good afternoon, everyone. Thanks for joining today's call for the fourth quarter and fiscal year ended June 30, 2020. This last quarter of our fiscal 2020 was particularly notable for the company as we posted by far, our highest revenue quarter in history with $14.9 million. This quarter's revenue was 2x higher than all of fiscal '19's revenue combined. So the plan that started last summer to transition the company to a fully integrated Rx and Consumer Health specialty pharmaceutical company is taking form. Before getting into today's prepared comments, let me first acknowledge that we are filing a few days beyond the originally planned filing date for this 10-K, but it has been for good reason. Putting together 2 public companies, along with a significant asset purchase from Cerecor and bringing on a new COVID-19 rapid test product line was an extremely heavy lift, but I think you'll see with our results, that the effort has been more than worth it, and these transactions are paying off. The June quarter was the company's first full quarter of integrating the Aytu heritage and Cerecor Rx businesses, along with the recently acquired Innovus Consumer Health business. The integration of these 3 businesses has gone well. Not only did we post all-time high in revenue, this quarter, we also reported an adjusted EBITDA loss of just $1.7 million, as we grew revenues and rationalized overlapping areas and removed redundant expenses. Also, we ended the year with over $40 million -- $48 million in cash, restricted cash, cash equivalents so we believe we have adequate cash to operate going forward and reach profitability at current spending levels. Importantly, last quarter, we sold our first COVID-19 rapid tests, having received test kit inventory just prior to the beginning of the June quarter. We sold a substantial quantity of COVID tests in the quarter, and these test sales augmented our core Rx and Consumer Health businesses. That is to say, we had a core business before COVID that has continued to hold strong through COVID. And that core business has been augmented, not supplemented by test sales. And as we begin to come out of the COVID crisis and build the company going forward, we are expecting growth for the whole business. The whole business, not just COVID test sales. Those that followed the company prior to the March 2020 time frame will recall that last year, we undertook a plan to transform the company. We started on a plan to create an integrated Rx and Consumer Health specialty company. And that began with the announcement last September of our planned merger with Innovus Pharmaceuticals and followed with our announcement in October of the acquisition of the Cerecor Pediatric product portfolio. Both transactions are now closed and integrated and with today's revenue numbers, you can see, we're on an approximately $60 million revenue run rate across the combined business segments. Couple the core business growth with what we're developing with Healight and the COVID test kits, and we've never been better positioned. Importantly, in the June quarter, our core businesses actually grew over the same quarter last year. The business grew during the COVID-19 pandemic over the previous year. This fact demonstrates the strength of both Rx and Consumer Health franchises. This also demonstrates that we have established a firm foundation from which to grow as the world starts to get back to normal. Most importantly, perhaps, this growth establishes that we're not just a COVID test company, we're quite a bit more than that, with 7 core prescription products, and almost 2 dozen Consumer Health products that are shaping the growth -- the company's growth trajectory going forward. While the COVID test sales have and will continue to play an important role for the company, we're quite enthusiastic about our core businesses and their prospects for growth. We did sell test kits in our Q4 2020, and test kit sales were actually higher in the September quarter than in the June quarter. So we've sold more antibody kits this quarter than last, and we're now adding an antigen test kit to the portfolio as an additional COVID offering to our customers. The key takeaway here, quite simply is that our business is strong and it's growing. Before I detail the elements that led to our strong Q4 and some strategic updates, I'll hand it over to Dave now to provide an overview of our financials for the quarter and the last fiscal year. Dave? -------------------------------------------------------------------------------- David A. Green, Aytu BioScience, Inc. - CFO, Secretary & Treasurer [3] -------------------------------------------------------------------------------- Thank you, Josh, and thank you all for joining us. Today, I'll review our financial results for our fourth quarter and the fiscal year ended June 30, 2020. I'll begin today with an observation that despite the disruption our country has endured in the wake of the COVID-19 pandemic, Aytu has been focused on integrating the operations of 3 businesses and executing on new growth opportunities. In the past 2 quarters, we also quickly adapted our business processes and shifted staffing to enable the acquisition and distribution of test kits, advance the development of our promising Healight technology and launched new products this quarter from our Consumer Health platform. In terms of our business organization, following the Cerecor and Innovus transactions, we refer to the Innovus business as our Consumer Health segment. The Rx segment includes our primary care portfolio, the pediatric portfolio acquired from Cerecor and our medical devices and diagnostics. And now for our financial results. This has been our most productive period for Aytu and our results prove it out. Net revenue for the full fiscal year ended June 30, 2020, was $27.6 million compared to $7.3 million reported for the year ended June 30, 2019. Net revenue for Q4 was an all-time high of $14.9 million, which is nearly 2x the $8.2 million reported last quarter and close to 9x, the $1.7 million reported for the year ago fourth quarter. The substantial Q4 revenue growth was due to the inclusion for the first time, full quarters of revenue from both the Pediatric Portfolio and Innovus. As a reminder, both transactions were announced and closed during fiscal year 2020. With these transformational transactions now integrated, we are clearly a different company today. For the 2020 fiscal year, gross profit was $20.1 million, representing a 72.7% gross profit margin across all 4 quarters. Gross profit for Q4 was $10.3 million, representing a gross profit margin of 69.2%. Cost of sales for our fourth quarter was higher than normal, due to year-end inventory cleanup, which resulted in write-offs of approximately $1.3 million in our Rx segment. Operating expenses, excluding cost of sales, were $16.9 million for the fourth quarter compared to $11 million last quarter and $5.6 million in the year ago fourth quarter. The expansion from last quarter was largely due to recognizing a full quarter of Aytu Consumer Health operating expenses and $1.3 million of Healight development cost. We also recognized a few less significant cost increases related to the larger scale of the overall operations, costs such as insurance, regulatory and some personnel costs. Subtracting out noncash operating expenses of $2.8 million, the Healight investment of $1.3 million and approximately $800,000 of transaction costs, adjusted cash-based operating expenses were $12.1 million for Q4 2020. This level of adjusted cash-based operating expense is in the range of what we expect for the core operation going forward. This expense level excludes investment in the Healight development program and potential new business development opportunities. We make these adjustments to provide an apples-to-apples comparison of the financial performance of the core operations. Making these adjustments, removing noncash expenses and adding back transaction and Healight costs, the Q4 2020 income statement results and adjusted EBITDA loss of approximately $1.7 million. This Q4 performance compares favorably to the adjusted EBITDA loss of $2.8 million last quarter and $3.7 million for the year ago fourth quarter. Using the adjusted EBITDA metric allows us to show more clearly the progress has been made toward our goal of building a profitable operating company. You can see our adjusted EBITDA calculation in the earnings release with the wires within the past hour. For fiscal year 2020, our adjusted EBITDA loss was $11.1 million compared to $13.6 million in fiscal year 2019. We expect to make further progress in eliminating the adjusted EBITDA loss during our current fiscal year. Net loss for the fourth quarter was $3.1 million compared to $5.3 million last quarter and $14.5 million in the year ago quarter. Contributing to the $3.1 million net loss for Q4, we recognized a gain of $5 million due to the change in the fair value of contingent consideration, which was offset by $1.5 million of net interest expense. EPS for Q4 was a loss of $0.03 based on 113.4 million weighted average shares outstanding compared to a net loss of $1.04 for Q4 2019 based on 13.9 million shares outstanding. For the fiscal year, our net loss was $13.6 million, which was cut in half compared to our $27.1 million debt loss in fiscal year 2019. Loss per share was $0.30 for fiscal year 2020 based on 45.2 million weighted average shares outstanding. That compares to a loss of $3.48 per share in fiscal year 2019, which was based on a share count of $7.8 million. And the balance sheet, the picture has also improved substantially. As of June 30, we had total assets of $153 million against $58 million in liabilities and $95 million of stockholders' equity. It's more than 4x the $35 million asset value at the same time last year. During the fourth quarter, we paid down $15 million of debt that was assumed in the Cerecor transaction and extinguished an additional $1.9 million of assumed debt and liabilities. We had $48.3 million of cash on the balance sheet as of June 30, 2020, and the company is positioned better than ever. With that, I'll hand the call back over to Josh. -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [4] -------------------------------------------------------------------------------- Thanks, Dave. So as you just heard from Dave, our performance was strong in Q4 and for fiscal 2020. It was indeed our best quarter and best year yet. And the pieces from the 2 acquisitions these last few quarters have come together. We have more work to do to continue to optimize efficiencies, but we're clearly headed in the right direction with a dramatically reduced adjusted EBITDA and record revenue. Both of our revenue streams from the Consumer Health and Rx segments performed well, contributing to the strong Consumer Health results was organic growth within the core Consumer Health product lines of diabetes supportive care, sexual wellness and urinary and bladder health. Additionally, the e-commerce business for Consumer Health was stronger. Furthermore, our newly launched Consumer Health product, Regoxidine and over-the-counter minoxidil foam for hair growth is on track to contribute revenue in excess of 7 figures in its first 12 months from launch. That makes it a solid new contributor to our Consumer Health segment's growth. On the Rx side, revenue was $7.9 million, a significant increase compared to Q3's $4.7 million. Contributing to Rx revenue was solid contribution from the Pediatric franchise, the former Cerecor business. Additional value was created with Natesto, gaining preferred status on Express Scripts national formulary and the Natesto spermatogenesis study results published in the Journal of Urology. We expect both of these developments to drive Natesto prescription growth in the coming quarters. Rx growth was fueled by a relatively balanced contribution across our key products and improved sales execution. Despite the impact COVID has had on sales reps accessing physician offices, Q4 represented a record revenue quarter for the Rx business and showed significant growth over previous quarters. This is a testament to our ongoing execution and the clinical value of our products. Also, I'm pleased to see our sales rep call activity now picking back up to pre-COVID levels in the current quarter to further drive prescription growth across the portfolio. So that summarizes our operational performance. Now I'll shift to our new developments. From a COVID-19 standpoint, Q4 was extremely active. In April, we announced the global licensing of the Healight ultraviolet light technology platform from Cedars-Sinai Medical Center. As previously described, Healight is a novel endotracheal catheter emitting ultraviolet light that has demonstrated broad antimicrobial activity in published preclinical studies. We believe Healight has great potential as a first-in-class treatment for severely ill patients intubated in the ICU and in the near-term as a potential COVID-19 treatment for those most severely ill COVID patients. To be clear, we see broad potential application well beyond Healight's use in COVID and has the potential for significant use in other conditions, including ventilator associated pneumonia, severe influenza and other infections. As UV light is agnostic, so to speak, to the pathogens it kills, and is so different in the way it does it, the antimicrobial applications for Healight are broad. We and our partners moved quickly to interface with the FDA to advance Healight. And I'm happy to share an important update now. Today, I'm very pleased to share that the first ever Healight clinical study has been approved and is now underway. This first of its kind clinical study is a single site study initially, but we're already planning to extend the study to additional sites. Once the clinical data have been collected, which should occur fairly quickly, the development team will move forward with additional regulatory discussions and add in those additional clinical sites. We're thinking globally about the Healight opportunity, and we're already engaged with leading centers in Europe. We've also initiated discussions with prospective commercial partners. This is an exciting clinical program that I'm glad to say is now underway. For the benefit of our listeners, I want to make a point about our communications on Healight. You'll note that we have not provided up to the minute updates Healight, and that in no way means substantial progress is not being made, quite to the contrary. A lot has been done with Healight in a very short period of time. We're moving at a rapid pace, to say the least. But out of a strong sense of respect for our study partners and all of those involved, we are keeping the Healight updates to the most relevant milestones. This is important to preserve the integrity of the study and to ensure we keep the focus on making good steady progress. You'll be made aware of the relevant developments. So for now, just know that very good progress is being made. Moving on to other developments. Subsequent to quarter end, we signed a distribution agreement for another COVID rapid test and antigen test. This rapid test, developed by Pinnacle IVD Corporation, is a lateral flow immunoassay that delivers a result in 15 minutes. The test has strong clinical performance, and we're excited to have access to this much needed product. In a clinical validation study, the test demonstrated 100% specificity and 86.7% sensitivity when nasopharyngeal swab results were compared with RT-PCR. The test positive predictive value is 100% and negative predictive value is 97%. These results and other data have been included in an Emergency Use Authorization submission to the FDA and that process is moving along well, having just received an update today. Finally, with respect to our COVID efforts, in Q4, we sold a significant number of antibody rapid tests over the last 2 quarters. We sold to a wide range of customers, including global oil and gas companies, large and small municipalities, hospitals, clinics, a wide range of first responders and others. And as I noted earlier, we sold more antibody tests in the September quarter than we did in the June quarter. So we're doing our part to help in the COVID fight, and we're happy to be contributing. While the rapid test present an opportunity to help in the fight now, Healight represents an opportunity for the near and midterm, and we hope in the long-term and for years to come. With such a broad set of potential clinical applications, we envision Healight, if successful, to become an important tool in hospital ICUs around the world for years to come. Antimicrobial resistance is a global problem and attacking it in a nontraditional way may prove to be a better way to treat difficult infections and rely less on traditional antibiotic and antiviral therapy. So in conclusion, Q2 was an exceptional quarter, transformational in numerous ways. We generated $14.9 million in quarterly revenue, a company record by a wide margin. We posted a substantially narrowed adjusted EBITDA loss; we finished the quarter with over $48 million on the balance sheet after having paid off the $15 million Deerfield obligation; we advanced our efforts on the COVID-19 front, capped off with today's announcement that the Healight study is now underway. Also in Q4, we added to our public profile by being added to the Russell 2000 Index. In short, we have strong momentum to grow shareholder value in fiscal '21 and onward, and I could not be more pleased with our current position. So thanks for listening to our prepared remarks. I'll now ask our operator to open up the questions for analyst questions. Open up the call rather for analyst questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question is from Jeffrey Cohen with Ladenburg Thalmann. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [2] -------------------------------------------------------------------------------- So I'll keep it to a few questions. So I just wanted to confirm. So the antibody and antigen tests are and will be falling under the Rx portfolio, correct? -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [4] -------------------------------------------------------------------------------- Okay. Got it. And could you talk about the R&D expenditure for the quarter? Was that primarily or majority based from Healight, the $1.5 million? -------------------------------------------------------------------------------- David A. Green, Aytu BioScience, Inc. - CFO, Secretary & Treasurer [5] -------------------------------------------------------------------------------- Jeff, yes, it was almost all Healight. We had a little bit in our test kits, about $1.3 million was Healight. As I guess one thing you should note about that is it's -- none of it's -- we're not able to capitalize it. So these are -- these all have to be run through the P&L. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [6] -------------------------------------------------------------------------------- Got it. And it looks like there will be expected enrollment of 5 patients at Cedars-Sinai. Would you expect that to read out in the coming weeks or further along? -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- So that's part of my commentary around just how we'll update the public in general. We obviously want to give deference to our partners and the short answer is, it's not a long period of time to expect to have those results available. And we would expect to roll right into a larger multi-center study here in the relative near term, but not putting a specific time frame on it other than it's not going to take too terribly long to enroll a small number of patients like that. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [8] -------------------------------------------------------------------------------- Okay. Got it. Was there any antigen test kit revenue from Q4? -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [9] -------------------------------------------------------------------------------- No. We have not sold antigen tests in Q4. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [10] -------------------------------------------------------------------------------- Got it. And could you talk about, Dave, what was the cash used for the fourth quarter? I did catch the EBITDA loss, but I didn't catch the cash use for the quarter. -------------------------------------------------------------------------------- David A. Green, Aytu BioScience, Inc. - CFO, Secretary & Treasurer [11] -------------------------------------------------------------------------------- Yes. So Jeff, the cash uses, it's a little bit more complex this quarter. We did have some debt pay downs, the $15 million piece from Deerfield and then another couple of million that we inherited some from Innovus and then some liability paydown from the Cerecor transaction. So those together are about $17 million. And then the -- basically, the EBITDA loss, adjusted EBITDA loss of $1.7 million, if you add the 2 actual cash cost that we factor out of adjusted EBITDA, they were transaction costs and the Healight investment. You could add those to the $1.7 billion. And then on the balance sheet, and this is all operations. On the balance sheet, we did have some inventory stocking in the fourth quarter to the tune of about a net of $3.5 million. So -- and which is heavier than normal, but with putting the 2 companies together and making sure we've got the right products stocked up to sell. There were some transition lump sum inventory purchases in the fourth quarter. So that's about how the operating cash outflow works out. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [12] -------------------------------------------------------------------------------- Okay. Got it. The $2 million payment under the CVR was as a result of Cerecor hitting milestones on the revenue front, is that correct? -------------------------------------------------------------------------------- David A. Green, Aytu BioScience, Inc. - CFO, Secretary & Treasurer [13] -------------------------------------------------------------------------------- So they did earn the milestone. It was paid in equity. And... -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [14] -------------------------------------------------------------------------------- The Innovus milestone, yes. -------------------------------------------------------------------------------- David A. Green, Aytu BioScience, Inc. - CFO, Secretary & Treasurer [15] -------------------------------------------------------------------------------- Yes. Yes. Sorry, the Innovus milestone. Yes, they did -- that was achieved, yes. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [16] -------------------------------------------------------------------------------- Okay. Got it. I misspoke, it was Innovus. And then lastly, any commentary on the BD front as far as any specific areas of focus or specific areas of holes in your portfolio that you determined might be beneficial? -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [17] -------------------------------------------------------------------------------- The short answer is nothing to share specifically, Jeff, other than we continue to apply the same filters of products that fit, generally speaking, within the core areas on both the consumer and the Rx side. And it's going to be an ongoing part of how we grow going forward. We obviously have a good growing core business, but we'll continue to look at other things and be opportunistic. So looking both Rx and Consumer things that potentially have some area of overlap Rx products that could potentially be sold through the consumer platform and vice versa. So -- but nothing specific to share at the moment. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next question is from Vernon Bernardino with H.C. Wainwright. -------------------------------------------------------------------------------- Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [19] -------------------------------------------------------------------------------- Congrats on the strong results. Looking forward to the next fiscal year. I just had a few questions as far as Healight was concerned. Obviously, Healight is a different product from the rest of the portfolio. What are your preparations that you're undertaking to perhaps position the product as far as education is concerned upon its launches and approved products. -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [20] -------------------------------------------------------------------------------- Yes. Good question. So obviously, Healight is to some degree, a moonshot. It's a big opportunity and one that, frankly, you could build an entire company around. And so a fair amount of work has already been done at this early stage from a commercial development standpoint. So as I mentioned in my prepared remarks, we've already engaged with commercial or prospective commercial partners. To evaluate the opportunity. We've formed a scientific advisory board already. So some experts from around the world in infectious disease and pulmonary and critical care medicine. So that's well underway. We've begun to obviously scale the relatively small-scale but scale manufacturing from a pilot standpoint, identify suppliers. So we have request for proposal out and already bids back in so we can obviously assess what our costs are going to be. And then obviously, have begun to engage thought leaders from around the world, just in general. So a fair amount has been done already. And obviously, now that we are underway with the clinical study and soon to be, we think, underway with a larger scale study and then continuing discussions from a regulatory standpoint, we'll then start to build out the commercial development. So we obviously still need to understand everything that we have here with respect to the clinical profile of the product, but we're optimistic that it's going to prove out to be a product that has good clinical promise. And obviously, we'll build out a commercial plan and infrastructure accordingly. -------------------------------------------------------------------------------- Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [21] -------------------------------------------------------------------------------- Now regarding the work that had already been done, how are clinicians viewing the product? Do they see it as something they could readily just add to -- and I imagine it'd be infectious, those who are specialized infectious disease treatment. And infections in general that this is something they could just add to the armamentarium they have in their clinical side or can these be stand-alone things, for example, that even our primary care physicians be able to add on someday? -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [22] -------------------------------------------------------------------------------- Yes. So a lot of potential in that -- and how I'll answer this, but -- and obviously, a lot sort of within that question. So the short answer is, we view this as a relatively straightforward and very cost-effective add-on for a patient that's intubated already in the ICU and very costly to the system. So if you think about the daily cost of an ICU patients, it's tremendous. And so the ability to add something as cost-effective as Healight on to improve outcomes, minimally reduce viral and bacterial load and potentially improve outcomes to the point of minimizing number of days within the ICU and getting patients to discharge faster. The value proposition there has the potential to be enormous. So just on the basis of simply adding it on to what is already a very expensive very resource-intensive patient is exciting. And then you think about build out applications in the outpatient setting and while this isn't anything that we have put sort of clinical protocols around and specific planning around. We have -- I keep -- I'll remind you, we have licensed global rights to not just esophageal and tracheal applications but also nasopharyngeal applications. So you think about patients that may present very early with a severe infection like COVID-19, the ability to potentially treat those patients with something other than something going down a breathing tube. Something going through the nasopharynx. That's very exciting to think about because that's a huge number of patients. And as you think about broad applications again and beyond the critical illness like COVID, which obviously the application for a patient presenting with a severe respiratory illness in the emergency room, that's a significant number of patients. By definition, many more patients are in the ER than end up in the ICU. So the funnel, so to speak, is much larger there. But then it gets even larger when you think about patients that have chronic infections, chronic rhinosinusitis, chronic bacterial infections, chronic bronchitis, and these are patients that have been through the gamut with respect to how they've been treated in the number of antibiotic courses that they've already been exposed to. So I get very excited when I think about the build-out applications beyond that. So it's very, very broad. But we're taking it one step at a time. We think there's a near-term opportunity to gain proof-of-concept here in the intubated inpatient setting and obviously expand out from there as appropriate. So a lot of potential to say the least. -------------------------------------------------------------------------------- Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [23] -------------------------------------------------------------------------------- That's very helpful. Second question I have is regarding COVID testing. Just wondering if you could make a general comment as to how you're seeing these days as far as the distribution, if you're able to -- in direction that antigen and antibody testing is going. -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [24] -------------------------------------------------------------------------------- I would say, in general, it continues to all be about turnaround times and decentralization. So there continues to be bottlenecks. We hear about it daily in the national and local news and right here in our own communities. So we see what we have with 2 rapid tests that can be deployed from virtually anywhere as very important in the fight. We don't see testing and the need for testing going away anytime soon. And right when it looks like we've got areas under control. We see areas spike back up and obviously, the need for testing to continue. And I think there's going to continue to be a balance between the need for diagnostic tests like the antigen test and PCR testing as well as surveillance serology testing as we have, obviously, with the antibody test. So there'll continue to be a role for both, even on the other side of a vaccine. We obviously don't expect broad distribution of the vaccine in the immediate term. In fact, that's very recent news over the last couple of days with the FDA stepping in and very clearly establishing that the rigor for approval is higher than potentially previously thought. So that's going to delay the time of having a vaccine out there. And even then, we know that it's going to take a while to get broad distribution. So there's going to be a continuing need for diagnosis, and there's going to be a continued need for surveillance. So but again, it's going to come down to turnaround time and rapid near-term -- near patient side of testing. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Thank you, we have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks. -------------------------------------------------------------------------------- Joshua R. Disbrow, Aytu BioScience, Inc. - Chairman & CEO [26] -------------------------------------------------------------------------------- Thanks very much. Thanks for the questions, and thanks to everyone for joining today's call. We appreciate your interest and continued support of Aytu, and we look forward to speaking with you again on our Q1 fiscal '21 call coming up in November. Thanks again. Have a good evening. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful evening.