Summary and Analysis of Key Points

Overview

• The company is a pharmaceutical company focused on commercializing novel therapeutics, with a primary focus on prescription products for conditions frequently developed or diagnosed in childhood, including ADHD.
• The company has two main product portfolios - the ADHD Portfolio and the Pediatric Portfolio. It has recently completed the wind-down and divestiture of its Consumer Health business.
• The company has entered into international commercial agreements for its ADHD products Adzenys and Cotempla in Israel/Palestinian Authority and Canada.
• The company regularly reviews its performance, prospects, and risks, and evaluates potential strategic transactions and business combinations.

Business Environment

• The company is experiencing inflationary pressure and supply chain disruptions, which it expects to continue throughout fiscal 2025.
• The company received a Paragraph IV Certification Notice Letter from Granules Pharmaceuticals, Inc. regarding a generic version of Adzenys and plans to vigorously enforce its intellectual property rights.
• The company’s Chief Financial Officer, Mark K. Oki, separated from the company, and Ryan J. Selhorn was appointed as the new Chief Financial Officer.

Financial Performance

• Net revenue decreased by 10% and 13% for the six-month and three-month periods, respectively, primarily due to decreases in the Pediatric Portfolio and ADHD Portfolio.
• Gross profit decreased by 18% and 26% for the six-month and three-month periods, respectively, due to increased cost of sales for the ADHD Portfolio inventory.
• Operating expenses were relatively flat, with decreases in general and administrative expenses offset by restructuring costs.
• The company recognized gains from the fair value adjustment of derivative warrant liabilities.
• The company’s effective tax rates were impacted by limitations on losses and the divestiture of the Consumer Health business.

Liquidity and Capital Resources

• The company finances its operations through a combination of sales of common stock and warrants, borrowings, and cash generated from operations.
• The company has a shelf registration statement on Form S-3 that allows it to offer up to $100 million of securities.
• The company has two loan agreements with Eclipse - a term loan and a revolving loan.
• Cash flows from operating activities were positive during the six-month period, primarily due to changes in working capital and non-cash charges.
• The company has various contractual obligations and commitments, including milestone payments related to its acquisitions and licensing agreements.

Outlook

• The company is focused on accelerating the growth of its commercial business and achieving positive operating cash flows.
• The company continues to evaluate potential strategic transactions and business combinations to enhance stockholder value, but there is no guarantee of success.
• The company expects inflationary pressures and supply chain disruptions to continue to be significant throughout fiscal 2025.

Overall, the company’s financial performance has been mixed, with decreases in revenue and gross profit, but positive cash flows from operations and gains from the fair value adjustment of derivative warrant liabilities. The company is focused on its commercial business and evaluating strategic options, while navigating ongoing business challenges.