AYTU BIOPHARMA, INC

Previous wording

The purpose of the Management’s Discussion and Analysis (the “MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the three months ended September 30, 2025, and our financial condition as of September 30, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and notes thereto.

Current wording

The purpose of the Management’s Discussion and Analysis (the “MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations for the three and six months ended December 31, 2025, our cash flows for the six months ended December 31, 2025, and our financial condition as of December 31, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and notes thereto.

Previous wording

We are a pharmaceutical company focused on advancing innovative medicines for complex CNS system diseases to improve the quality of life for patients. Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. In June 2025, we entered into the Commercialization Agreement with Fabre-Kramer to commercialize EXXUA in the United States. Gepirone is a new chemical entity, and we believe EXXUA to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the FDA for the treatment of MDD in adults.

Current wording

We are a pharmaceutical company focused on advancing innovative medicines for complex CNS system diseases to improve the quality of life for patients. Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. In June 2025, we entered into the Commercialization Agreement with Fabre-Kramer to commercialize EXXUA in the United States. Gepirone is a new chemical entity and EXXUA is a novel first-in-class selective serotonin 5HT1a receptor agonist and is approved by the FDA for the treatment of MDD in adults.

Previous wording

EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. We believe it can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a SSRI and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function. It is our expectation that EXXUA has the potential to serve as a major growth catalyst for us, and we anticipate launching EXXUA in the second quarter of fiscal 2026 as a centerpiece of our commercial efforts.

Current wording

EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. We believe EXXUA can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a Selective Serotonin Reuptake Inhibitors (“SSRI”) or a Serotonin-Norepinephrine Reuptake Inhibitors (“SNRI”) and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function. We successfully launched EXXUA in the second quarter of fiscal 2026 as the centerpiece of our commercial efforts. It is our expectation that EXXUA has the potential to serve as a major growth catalyst for us.

Previous wording

In addition, we will continue to focus on commercializing innovative prescription products that address other CNS conditions, including ADHD. We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations. In the first quarter of fiscal 2025 we completed the previously announced wind down and divestiture of our Consumer Health business and now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, our unaudited consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation.

Current wording

In addition, we will continue to commercialize innovative prescription products that address other CNS conditions, including ADHD. We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations. In the first quarter of fiscal 2025 we completed the previously announced wind down and divestiture of our Consumer Health business and now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, our unaudited consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation.

Previous wording

Our business from continuing operations is focused on the upcoming launch of EXXUA and on our current prescription pharmaceutical products sold primarily through third party wholesalers, distributors and pharmacies and which primarily consists of two product portfolios. The first, the ADHD Portfolio, consists of products for the treatment of ADHD and the second, the Pediatric Portfolio, consists of a line of legacy products. We contract with CMOs for the manufacture and testing of all of our products.

Current wording

Our business from continuing operations is focused on the commercialization of our prescription pharmaceutical products sold primarily through third party wholesalers, distributors and pharmacies and which primarily consists of three product portfolios. The first consists of EXXUA for the treatment of MDD; the second, the ADHD Portfolio, consists of products for the treatment of ADHD; and the third, the Pediatric Portfolio, consists of a line of legacy products. We contract with CMOs for the manufacture and testing of all of our products.

Previous wording

We have entered into two international exclusive collaboration, distribution and supply agreements to commercialize certain of our ADHD products. The first agreement is with Medomie, a privately owned pharmaceutical company, which will commercialize the ADHD products in Israel and the Palestinian Authority. The second agreement is with Lupin, a subsidiary of global pharmaceutical company Lupin Limited, which will commercialize the ADHD products in Canada. We will supply the ADHD products to Medomie and Lupin based on forecasts and provide various product commercialization, regulatory and quality assurance resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for the ADHD products, which is expected to occur over the next 24 months.

Current wording

We have entered into two international exclusive collaboration, distribution and supply agreements to commercialize certain of our ADHD products. The first agreement is with Medomie, a privately owned pharmaceutical company, which will commercialize the ADHD products in Israel and the Palestinian Authority. The second agreement is with Lupin, a subsidiary of global pharmaceutical company Lupin Limited, which will commercialize the ADHD products in Canada. We will supply the ADHD products to Medomie and Lupin based on forecasts and provide various product commercialization, regulatory and quality assurance resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for the ADHD products, which is expected to occur over the next 18 to 24 months.

Previous wording

We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors and tariffs, and our industry is currently encountering supply chain disruptions related to the sourcing of raw materials, increased costs of materials as result of tariffs, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. It is possible that trade wars could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures, increased costs and supply chain disruptions could be significant across the business throughout fiscal 2026 and into fiscal 2027. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products.

Current wording

We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors, trade wars and tariffs, and our industry is currently encountering supply chain disruptions related to the sourcing of raw materials, increased costs of materials as result of tariffs, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. It is possible that trade wars and economic or political policies could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures, increased costs and supply chain disruptions could be significant across the business throughout fiscal 2026 and into fiscal 2027. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products.

Previous wording

In October 2024, we received the Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. On October 28, 2025, the case was reassigned to visiting judge, Judge Jennifer Choe-Groves of the United States Court of International Trade. This litigation is ongoing, and a trial has been rescheduled to begin on January 11, 2027. We plan to vigorously enforce our intellectual property rights related to Adzenys.

Current wording

In October 2024, we received the Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter stated that Granules’ ANDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules’ ANDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. On June 27, 2025, the Court entered a Stipulation And Order Regarding Infringement finding that the submission of Granules’ ANDA infringed multiple claims in each of our asserted patents. On October 28, 2025, the case was reassigned to visiting judge, Judge Jennifer Choe-Groves of the United States Court of International Trade. The case is ongoing. The trial date has been moved to January 11, 2027. We plan to continue vigorously enforcing our intellectual property rights related to Adzenys.

Previous wording

The results of operations for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

Current wording

The results of operations for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Previous wording

Net revenue disaggregated by product portfolios for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

Current wording

Net revenue disaggregated by product portfolios for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Previous wording

During the three months ended September 30, 2025, net revenue decreased by $2.7 million, or 16% compared to the same period ended September 30, 2024, primarily due to a $3.3 million one-time increase in our ADHD Portfolio net revenue in the first quarter of fiscal 2025 related to a change is estimated variable consideration that resulted from negotiations with a vendor that resulted in a reduction to the liability purportedly owed the vendor.

Current wording

During the six months ended December 31, 2025, net revenue decreased by $3.7 million, or 11%, compared to the same period ended December 31, 2024, primarily due to a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor.

Previous wording

Gross profit and gross profit percentage for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

Current wording

Gross profit and gross profit percentage for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Previous wording

During the three months ended September 30, 2025, gross profit decreased by $2.8 million, or 23% compared to the three months ended September 30, 2024. Gross profit percentage was 66% for the three months ended September 30, 2025, compared to 72% for the three months ended September 30, 2024. The decrease in gross profit and gross profit percentage is primarily related to a $3.3 million one-time increase in our ADHD Portfolio net revenue in the first quarter of fiscal 2025 related to a change is estimated variable consideration that resulted from negotiations with a vendor that resulted in a reduction to the liability purportedly owed the vendor.

Current wording

During the six months ended December 31, 2025, gross profit decreased by $4.0 million, or 17%, compared to the same period ended December 31, 2024. Gross profit percentage was 65% for the six months ended December 31, 2025, compared to 69% for the same period ended December 31, 2024. This decrease in gross profit percentage is primarily related to a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor as well as a $1.1 million inventory write-down recorded to cost of goods sold primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products.

Previous wording

During the three months ended September 30, 2025, selling and marketing expense decreased by $0.3 million, 6% compared to the same period ended September 30, 2024, primarily driven by reduced commission expense and variable commercial marketing program fees, partially offset by increases in labor, service costs and EXXUA launch costs.

Current wording

During the three and six months ended December 31, 2025, selling and marketing expense increased by $0.7 million, or 14% and $0.4 million, or 4% compared to the same periods ended December 31, 2024, primarily driven by increases in labor, service costs and EXXUA launch costs.

Previous wording

During the three months ended September 30, 2025, general and administrative expense decreased by $0.2 million, or 4% compared to the same period ended September 30, 2024. The decrease is primarily a result of continued cost reduction efforts and improved operational efficiencies such as reduced facilities expense, partially offset by increases in labor and service costs.

Current wording

During the three and six months ended December 31, 2025, general and administrative expense increased by $0.6 million, or 14% and $0.4 million, or 4% compared to the same periods ended December 31, 2024, primarily driven by increases in labor, service costs and EXXUA launch costs, partially offset by improved operational efficiencies such as reduced facilities expense.

Previous wording

During the three months ended September 30, 2025, there was no research and development expense compared to $0.4 million for the same period ended September 30, 2024, primarily driven by our previously announced suspension of our development programs to focus on our commercial operations resulting in a decrease in research and development spending.

Current wording

During the three and six months ended December 31, 2025, there was no research and development expense compared to $0.5 million and $0.9 million for the same periods ended December 31, 2024, respectively, primarily driven by our previously announced suspension of our development programs to focus on our commercial operations resulting in a decrease in research and development spending.

Previous wording

During the three months ended September 30, 2025, amortization expense of intangible assets, excluding amounts included in cost of goods sold, decreased by $0.5 million, or 52% compared to the same period ended September 30, 2024, primarily due to impairments of certain intangible assets recorded in fiscal 2025.

Current wording

During the three and six months ended December 31, 2025, amortization expense of intangible assets, excluding amounts included in cost of goods sold, decreased by $0.4 million, or 43% and $0.9 million, or 47% compared to the same periods ended December 31, 2024, respectively, primarily due to impairments of certain intangible assets recorded in fiscal 2025, partially offset by increased amortization expense from new intangible assets placed into service upon the launch of EXXUA in the second quarter of fiscal 2026.

Previous wording

During the three months ended September 30, 2025, we incurred zero restructuring costs compared to $0.8 million during same period ended September 30, 2024. Restructuring costs during the first quarter of fiscal 2025 related to our previously announced operational realignment and related costs, which was completed during fiscal 2025.

Current wording

During the three and six months ended December 31, 2025, we incurred zero restructuring costs compared to $1.3 million and $2.1 million during the same periods ended December 31, 2024, respectively. Restructuring costs during the first half of fiscal 2025 related to our previously announced operational realignment and related costs, which was completed during fiscal 2025.

Previous wording

During the three months ended September 30, 2025, other income, net was relatively consistent compared to the same periods ended September 30, 2024.

Current wording

During the three and six months ended December 31, 2025, other income, net was relatively consistent compared to the same periods ended December 31, 2024.

Previous wording

During the three months ended September 30, 2025, interest expense decreased by $0.5 million, or 48% compared to the same period ended September 30, 2024, primarily due to the paydown of our fixed payment arrangements.

Current wording

During the three and six months ended December 31, 2025, interest expense decreased by $0.5 million, or 48% and $1.0 million, or 48% compared to the same periods ended December 31, 2024, respectively, primarily due to the paydown of our fixed payment arrangements.

Previous wording

The fair value of derivative warrant liabilities is calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model and is revalued at each reporting period, and changes are reflected through income or expense. For the three months ended September 30, 2025, and 2024, we recognized a gain of $3.8 million and $2.9 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three months ended September 30, 2025, and 2024.

Current wording

The fair value of derivative warrant liabilities is calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model and is revalued at each reporting period, and changes are reflected through income or expense. For the three and six months ended December 31, 2025, we recognized a loss of $8.2 million and $4.5 million, respectively, from the fair value adjustment primarily driven by an increase in our stock price during the three and six months ended December 31, 2025, partially offset by gains from the exercise of liability classified warrants. For the three and six months ended December 31, 2024, we recognized a gain of $3.0 million and $5.9 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three and six months ended December 31, 2024.

Previous wording

For the three months ended September 30, 2025, and 2024, there was zero and $0.4 million of income tax expense from continuing operations, which was an effective tax rate of zero and negative 27.0%, respectively. This income tax expense was primarily driven by Section 382 limitation of the Internal Revenue Code of 1986, as amended (the “IRC”) on pre-TCJA and post-TCJA net operating loss (“NOL”) utilization, coupled with existing valuation allowances.

Current wording

For both the three and six months ended December 31, 2025, there was zero income tax expense from continuing operations, which was an effective tax rate of zero. This was primarily driven by operating losses and favorable deductions from tax law changes coupled with existing valuation allowances.

Previous wording

Net income from discontinued operations, net of tax is related to the wind down and divestiture of our Consumer Health business that was completed in the first quarter of fiscal 2025. SeePart I, Item 1, Note 20 – Discontinued Operationsin this Form 10-Q for further detail.

Current wording

Net income from discontinued operations, net of tax is related to the wind down and divestiture of our Consumer Health business that was completed in the first quarter of fiscal 2025. SeePart I, Item 1, Note 20 – Discontinued Operationsof this Form 10-Q for further detail.

Previous wording

The following table shows cash flows for the three months ended September 30, 2025, and 2024:

Current wording

The following table shows cash flows for the six months ended December 31, 2025, and 2024:

Previous wording

During the three months ended September 30, 2025, net cash used in operating activities totaled $0.6 million, which was primarily the result of an increase in accounts receivable, net and a decrease in accrued liabilities as well as negative cash earnings (derivative warrant liabilities adjustment partially offset by net income of $2.0 million, non-cash depreciation and amortization, stock-based compensation expense, and inventory write-down), partially offset by a decrease in inventories and an increase in accounts payable.

Current wording

During the six months ended December 31, 2025, net cash provided by operating activities totaled $3.1 million, which was primarily the result of an increase in accounts payable and accrued liabilities and a decrease in inventories, partially offset by negative cash earnings (net loss of $8.6 million partially offset by non-cash derivative warrant liabilities adjustment, depreciation and amortization, stock-based compensation expense, and inventory write-down) and a decrease in prepaid expenses and other current assets.

Previous wording

During the three months ended September 30, 2024, net cash used in operating activities totaled $1.2 million. The use of cash was primarily the result of the decrease in accounts receivable, net; inventories; prepaid expenses and other assets; other accrued liabilities; and accrued liabilities, partially offset by positive cash earnings (net income of $1.5 million offset by non-cash depreciation and amortization, derivative warrant liabilities adjustment, and stock compensation expense). Additionally, these were partially offset by an increase in accounts payable.

Current wording

During the six months ended December 31, 2024, net cash provided by operating activities totaled $1.7 million, which was primarily the result of an increase in accounts payable and accrued liabilities and a decrease in inventories, partially offset by increases in accounts receivable, prepaid expenses and other current assets and cash used in operations (net income of $2.3 million offset primarily by non-cash depreciation, amortization and accretion, stock compensation expense and derivative warrant liabilities adjustment).

Previous wording

Net Cash Provided by Investing Activities

Current wording

Net Cash (Used in) Provided by Investing Activities

Previous wording

There was no net cash provided by or used in investing activities during the three months ended September 30, 2025. Net cash provided by investing activities for the three months ended September 30, 2024, were driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases.

Current wording

Net cash used in investing activities was nominal during the six months ended December 31, 2025. Net cash provided by investing activities for the six months ended December 31, 2024, was driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases.

Previous wording

Net cash provided by financing activities of $2.3 million during the three months ended September 30, 2025, was primarily from $5.8 million of net proceeds from our Eclipse Revolving Loan, partially offset by $3.1 million of payments for fixed payment arrangements and $0.5 million of payments made against the principal balance of our Eclipse Term Loan.

Current wording

Net cash used in financing activities of $4.0 million during the six months ended December 31, 2025, was primarily due to $3.1 million of payments for fixed payment arrangements and $0.9 million of payments made against the principal balance of our Eclipse Term Loan.

Previous wording

Net cash provided by financing activities of $0.9 million during the three months ended September 30, 2024, was primarily from net proceeds received from our Eclipse Revolving Loan, partially offset by payments made to fixed payment arrangements and payments made against borrowings.

Current wording

Net cash used in financing activities of $1.8 million during the six months ended December 31, 2024, was primarily due to payments made to fixed payment arrangements and payments made on borrowings, partially offset by net proceeds received from our Eclipse Revolving Loan.