Q3 2024 Aytu Biopharma Inc Earnings Call

Participants

Josh Disbrow; Chairman and CEO; Aytu Biopharma, Inc.

Mark Oki; CFO; Aytu Biopharma, Inc.

Roger Weiss; Moderator; Lytham Partners IR

Naz Rahman; Analyst; Maxim Group

Presentation

Operator

Good afternoon, everyone, and welcome to the Aytu Biopharma fiscal 2024 third-quarter earnings call. At this time, all participants have been placed in a listen-only mode. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Roger Weiss. Sir, the floor is yours.

Roger Weiss

Good afternoon, everyone, and thank you for joining us for Aytu Biopharma's fiscal 2024 third-quarter financial and operational results conference call for the period ended March 31, 2024. Joining us in today's call is Aytu's CEO, Josh Disbrow; and the company's Chief Financial Officer, Mark Oki. 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. Finally, I'd 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 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. 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. With that said, let me turn the call over to Josh Disbrow, Chief Executive Officer of Aytu Biopharma. Josh, the mic is yours.

Josh Disbrow

Thank you, Roger, and welcome, everyone. The positive operating momentum we've experienced over the past two years continued during the third-quarter of fiscal '24, as ADHD portfolio revenue continued its rapid growth, increasing 49% of the fiscal '23 third quarter. Further, we improved our adjusted EBITDA by $7 million compared to the year ago third quarter. On a trailing 12-month look back, our company-wide adjusted EBITDA is now in excess of $15 million, and our Rx business operating income over that same period is over $7 million, a significant achievement for the company as it continues to reinforce the strategic initiatives we've undertaken to reposition Aytu as a growing specialty pharmaceutical company focused on commercializing novel prescription therapeutics.
Recall that just two years ago, we had an annual net loss in excess of $100 million, so this has been quite a transformation of our operating profile. As a reminder, our repositioning started back in October of 2022 when we indefinitely suspended our clinical development programs and continue with that decision to wind down our consumer health segment, which we announced in mid-calendar '23. These two parts of our business were a drain on cash and masked the strength of our Rx segment. When you look back specifically at the Rx business, it has generated over $17 million in adjusted EBITDA over the last 4 quarters and has achieved positive adjusted EBITDA in seven of the last eight quarters.
Our goal is for the consumer health segment to be wound down and closed in mid-calendar 2024. And once completed, Aytu will solely be a specialty pharmaceutical business with our growing ADHD portfolio, as our lead products coupled with our pediatric portfolio focused on our multivitamin franchise in Karbinal ER. As we close the loop on the wind down of consumer business, we believe aforementioned operating highlights will be made clearly visible to the market, and those investors that screen for growth, margin expansion, and profitability, and this could lead to a re-rating of our corporate valuation as we go forward. Importantly, our financial wherewithal is solid, as seen by our cash balance holding steady at $19.8 million compared to $19.5 million at the end of the December quarter.
To expand on the financials in more detail, let me run through a few key points within both our ADHD and pediatric portfolios, starting first with ADHD. As I mentioned, our ADHD portfolio demonstrated a 49% year-over-year increase in net revenue during the third quarter to $12.3 million. The growth in net revenue was driven by strong sales force execution, along with the company continuing to leverage and adapt our innovative Aytu RxConnect platform, which we believe is a best-in-class patient support program. As a reminder, from a seasonality standpoint, our third fiscal quarter is where RxConnect's access and pricing guarantees provide the greatest benefit to patients and health care providers, as a result of the January deductible reset for many health insurance plans.
Our transparent drug pricing plan works directly through our 1,000-plus RxConnect partner pharmacies nationwide to deliver our products, ensuring predictability of out of pocket costs for the patients who need our treatments. Aytu remains committed to ensuring predictable and clear out of pocket costs around our branded portfolio. In addition to our strong operational execution, the trends we have talked about the past two years within the ADHD market have continued. The market continues to experience intermittent supply disruptions and accompanying patient access challenges for generic amphetamine and now lisdexamfetamine with vyvanse having gone generic, along, of course, with various methylphenidate products, which continue to experience shortages, and in some cases, discontinuations.
These access disruptions are negatively impacting the lives of too many ADHD patients and their families and continue to frustrate physicians and pharmacies alike. Having just been in the field visiting with customers, I can tell you that these disruptions are very real and the positive impact RxConnect and our products are having is notable as a real solution for these patients and providers. As these intermittent shortages and patient access challenges have continued, our team has done an exceptional job meeting the demands of patients, having maintained supply to meet the growing demand for Adzenys and Cotempla. As a reminder, Adzenys, the only approved extended-release ODT amphetamine for the treatment of ADHD, is approved as bioequivalent Adderall XR.
So our brand is well positioned to continue to capture additional market share, as amphetamine patient access remains unpredictable. Cotempla is the only approved extended-release ODT methylphenidate for the treatment of ADHD, which competes against the likes of Concerta and other long-acting methylphenidates, which are also in the midst of continuing channel uncertainties. We view the ongoing ADHD supply and patient access situation as one that will likely continue for the foreseeable future in some form or fashion. And perhaps, more importantly, this long-term disruption is causing and has caused undue uncertainty well into the future.
Even as some manufacturer stimulant products have returned to more normal levels, patients, parents, and physicians continue to question when the next shortage will pop up. And in many providers' minds, other shortages will occur as they have in the past. We just don't know when and we don't know what coverage may be at that time. So that's where RxConnect comes in, and that creates the opportunity for more and more patients and prescribers to get experience with Adzenys and Cotempla.
Not only do patients get effective, reliable ADHD brands at a pharmacy they know and trust, they get these products at a consistent price, and perhaps, more importantly, on a timely and predictable basis. With our products and our robust support services, we are filling a huge gap that continues to be pervasive across the pharmaceutical ecosystem, affecting both brands and generics and reaching beyond ADHD stimulants. We're solving this issue and our results speak to that. And as we look at prescription trends in April and into May, we're seeing growth in Rxs for the ADHD brands.
In fact, ADHD TRx is in the middle of May are trending to make this the highest month in a year, following what were consistent all-time highs last year. We're excited about finishing fiscal '24 with both a growing and strong stimulant franchise. Transitioning now to pediatrics, which represents about 12% of our third quarter Rx net revenue. Similar to what we discussed last quarter, our pediatric portfolio net revenue, which was down $3.5 million, was impacted primarily by payer changes that occurred in the September '23 quarter.
Now, we've seen the multivitamin business stabilized during the past quarter and have started to see some growth here almost halfway through the fourth quarter. We've implemented a number of tactics that give us comfort that we can get back to growth mode across the pediatric portfolio. Given the early signs of recovery and some recent coverage wins across the pediatric portfolio, we're reallocating resources in real time to the pediatric products to capitalize on numerous opportunities with respect to this improved coverage and patient access. The team has moved swiftly and those actions are beginning to show some positive early results.
I think it's important for everyone to note how well the overall operations of our business have progressed, in light of the current downdraft of the pids operations and the potential positive swing that can occur as the initiatives we have implemented come to fruition. I'm transitioning just here for a bit, one item I think is important to discuss, in context to our third quarter, was the widespread and widely reported cyber-attack that impacted UnitedHealthcare subsidiary Change Healthcare beginning back in February. For those not familiar, Change Healthcare, among many other things, enables branded manufacturers, co-pay programs, savings programs, buydowns, et cetera, to be processed through what is essentially a switchboard that interfaces with pharmacy dispensing and reimbursement systems. It also interacts with physician billing and reimbursement systems to get those physician offices paid for their services.
Among other things, the cyber-attack created havoc across the health care ecosystem and resulted in many pharma companies coupon programs not working properly or in some cases, not working at all for extended periods of time. This, in turn, significantly impacted out-of-pocket pricing and patient access to branded products, and often resulted in prescriptions going unfilled in some cases, for long durations of time, in some cases, losing those prescriptions altogether. Fortunately, we at Aytu felt minimal impact due to the unique attributes of RxConnect and how we interface with pharmacy partner systems, along with the broader commercialization approach we take that doesn't rely on any single system of adjudication or any single switch. But it did have some very minimal and transient impact on us, but I'm happy to say we fully recovered and move past it very quickly.
Moving to our progress on the outsourcing of our ADHD brand manufacturing and overall operational improvements, we continue to do a great job on improving our gross margins. Rx gross margins during the quarter were 74% compared to 61% in Q3 of last year, an improvement of 1,300 basis points. We believe there will be continued, albeit smaller improvement, as we complete the transition of Adzenys and Cotempla manufacturing to our outsourcing partners. For those that may not be familiar, we will be shutting down our manufacturing operations in Texas, where we have a manufacturing facility as much larger than we need, and therefore is a source of large, fixed overhead expenses and a source of significantly elevated COGS.
Everything is on track in terms of the manufacturing transfer, and we expect to complete our final in-house production run by the end of June, and that remains very much on track. We will continue to incur some costs related to the manufacturing facility through the calendar year, as we close down the facility to return it to the landlord. An additional exciting change we've recently implemented is the onboarding of a new distributor to help further optimize the RxConnect platform. Integration of this new distributor into the program, along with some modifications around our pharmacy interfacing has been going well.
And with these changes, we expect to further improve the robustness of our pharmacy partner offerings to further add to the stickiness of the business overall. We view this change as an important one, and it's already showing positive signs for future growth. Quickly on the consumer health wind down now, our team has done an exceptional job effectively managing the wind down of our consumer health operations. The process is effect on our adjusted EBITDA was minimal, which is the negative $370,000 impact during the third quarter, more than a $1 million improvement from the third quarter a year ago.
We expect to have inventory write-downs and final shutdown expenses booked in the fourth quarter, and then, minimal revenue into the first quarter of fiscal '25. From that point forward, we don't expect to discuss the Consumer Health segment further, as we will be 100% focused on the prescription business. To wrap things up before I turn it over to Mark, it has been our objective to transition Aytu from a multipronged operation, which included not only our Rx segment but also our consumer health segment and pipeline development programs; both of which, generated negative cash flows. To a hyper-focused pharmaceutical company with management concentrated on growing sales, increasing margins, and adjusted EBITDA, and profitability.
The Rx business has been adjusted EBITDA positive for seven of the last eight quarters, witnessed by our trailing four quarter company-wide adjusted EBITDA of over $15 million and generating over $7 million in operating income for our Rx business. Our team's planning, coordination, and hard work have been all resulting in transitioning this business from a negative cash flow one with losses to now be on the cusp of free cash flow generation and net income as we move forward. Let me turn the call over now to Mark, and I will then come back to wrap things up briefly before turning over to questions. Mark?

Mark Oki

Thank you, Josh, and thank you to everyone joining this call. Let's look at the third quarter results in a bit more detail. Net revenue in the third quarter of 2024 declined 21% to $18 million from $22.7 million in the prior year period, as we continued our ongoing wind-down of our Consumer Health segment. As a reminder, in October 2022, we initiated a strategic mandate to focus our efforts solely on the existing Rx business.
This process continues with the Consumer Health segment's revenue declining from $8.9 million in the third quarter of 2023 to $4 million in the current quarter, which primarily consists of selling off existing inventory. The other component of our consolidated revenue is Rx segment sales, which rose to $14 million from last year's like quarter of $13.8 million. Breaking down the Rx revenue shows that our core ADHD franchise increased 49% to $12.3 million from $8.3 million in 2023. And the pediatric portfolio declined to $1.7 million from $5.3 million in 2023.
As we've discussed previously, the decline in our pediatric portfolio resulted from some ongoing reimbursement issues. As Josh mentioned, we are implementing several initiatives in real time to improve the demand for pediatric portfolio products and are seeing solid signs of improved reimbursement across the portfolio. Gross margins increased to 65% in 2024's third-quarter from 56% in 2023, driven by increasing ADHD revenue and the decline in consumer product sales. This improvement was adversely impacted by the previously noted decline in sales of our pediatric products, our historically highest margin product group.
As a reminder to any new listeners today, Aytu's top line and margins are impacted by the seasonal nature of our business. On the demand side, many patients take a summer scale back from the ADHD meds, which primarily affects our first fiscal quarter and to a lesser extent, our fourth fiscal quarter. During the third fiscal quarter, most insurance plans reset deductible amounts beginning January 1. From January through March, we generally experienced a greater use of our RxConnect price protection program, which historically has lowered our gross to net margins.
Please remember that this is part of our normal seasonality and those gross to net adjustments historically improved throughout the calendar year. Our operating expenses, excluding restructuring costs, changes in contingent consideration and amortization of intangible assets, were $12.6 million in the third quarter of 2024 compared to $20.8 million in the same period a year ago. This 39% decrease reflects our continued focus on cost reduction and the winding down of the consumer health segment. Research and development expenses were $619,000 in the third quarter of 2024 compared to $856,000 in the corresponding 2023 quarter.
Reflecting a normalized base level and highlighting the essence of any substantive drug development expenses, consistent with our prior announcements. We recorded a $2.9 million net loss or $0.52 per share versus last year's $7.2 million net loss or $1.93 per share. Please note that due to the difference between US GAAP and tax accounting, almost $250,000 of net losses from an income tax expense. Adjusted EBITDA expanded by $7 million to a positive $425,000 from a negative $6.5 million on a year-over-year basis.
Cash and cash equivalents on March 31, 2024, were $19.8 million compared to $19.5 million on December 31, 2023. We are comfortable with this capital level and believe that our balance sheet provides us with a continuing solid foundation to execute our corporate game plan. I should point out that the biggest change in the balance sheet is the classification shift of our $15 million term note from long-term to short-term as it matures in January 2025. In our 10-Q filed earlier today, we continue to include going concern language in the footnotes to our financial statements.
Given our success in restructuring the company's operations, financials, and outlook, we are quite pleased with where we sit regarding our borrowings. We have begun the refinancing process of our term loan and believe that a new facility can be obtained at equal or better terms versus the maturing one. We will reevaluate the requirement to include going concern language in our financial statements, if and when, we complete this refinancing. Again, as we finish up our fiscal 2024 and look into fiscal 2025, we anticipate the exit from our Consumer Health segment, a completed ADHD projection shift to our outside contract manufacturer and related exit Texas manufacturing facility, a steady rebound in our pediatric portfolio revenue, and the refinancing of our term loan.
These ongoing shifts in improvements should bolster our top line while lowering our cost structure and allowing us to focus on free cash flow and net income aspiration. With that, let me turn it back over to Josh.

Josh Disbrow

Thanks, Mark. As you might imagine, I can continue to be extremely pleased with the continued progress in our business, as it is better positioned today than at any point in our history, with over $15 million in company-wide trailing 12-month adjusted EBITDA and nearly $12 million of cash at the end of March. And while there is still work to be done with our pediatric portfolio, given the strength of our ADHD portfolio, the pending benefits from the wind down of the consumer health business, as well as the outsourcing of the manufacturing, we're excited about the overall trajectory of the business as we finish fiscal '24 on a high note. I want to thank the entire team at Aytu for their hard work and dedication to delivering for both patients and stockholders. Thank you to everyone participating on today's call. I'll now be happy to answer any questions.

Question and Answer Session

Operator

(Operator Instructions) Naz Rahman, Maxim.

Naz Rahman

Hi, everyone, congrats on the progress. I'd like to start on the ADHD business. Can you tell how the sales continue to grow and the franchise is seemingly growing larger and larger every day. How has your conversations with the DEA involved, have they achieved at all? Has the frequency changed? Or has there been any concerns or anything regarding getting additional quota?

Josh Disbrow

Yeah, hi, Naz, great question. The short answer is the communications with the DEA, I would say, have been extremely productive. Our team that interfaces with the DEA in a regular basis has had significant conversations. DEA has increased the frequency of quotas.
Their dialogue with the industry has really picked up, so I would say we stand to benefit. The rest of the industry does of course, as well with that. That having been said, very comfortable with our ability to get quota as we move forward. We've again increased the frequency of dialogue with them.
The transparency that from the DEA, I'd suggest it's at the highest level ever in terms of what they look at when they're allocating, when they are granting quotas, the data sources that they're referencing. And I think we continue to do a better and better job as an industry of making sure that we're giving the DEA what they need and understanding what it is that they look at when they're allocating and granting quota. So that is all to say. These products, Adzenys and Cotempla never had a stock out.
We continue to have solid levels of supply, always seeking to increase our supply, but more or less at their threshold that we'd like to be in terms of our days on hand. So comfortable with where we are. Comfortable as we move into the outsourcing setup with our manufacturer halo that we can continue to get access. It's really all about communication and DEA has been exceptional as of late and picking up their level of communication with the industry, and notably, with us.

Naz Rahman

Got it, that's helpful. And in terms of your promotional strategy, can you just comment on what the current strategy is now with prescribers? Are you trying to get your existing prescribers to write more scripts? Or are you also more focused on getting more prescribers, probably combination there. But could you also comment what that dynamic is right now, too?

Josh Disbrow

Yeah, happy to. So we're always focused on both breadth and debt to prescribing. We obviously want to get new prescribers on board. The shortages of note will be brought on a significant number of new prescribers. And the objective is always to get them to keep Adzenys, Cotempla top of mind and keep them prescribing that among their chosen stimulants.
Particularly in the face of the continued uncertainty, we can go to them with, obviously, the fact that we've never had a stock out with these products, with the fact that we've been consistent on our pricing programs. RxConnect is a huge benefit to their patients, understanding that we backstopped the prescription, they pay no more than $50 for commercially insured patient. Or if they're commercially insured, that's irrespective of whether it's on that formula or not. So we cut out any of the guess work in terms of whether it's available or not.
We cut out the guesswork in terms of where they can get it because they know they can get it at one of the RxConnect partner pharmacies. And we cut out the guesswork around how much they can get it for, which, again, is capped. So that all comes together to present sort of a holistic solution for these physicians. And we've continued to grow prescriptions by virtue of not just the fact that they are good products that patients improve their symptoms on.
They are products that, again, they can get consistently at a consistent price at a neighborhood pharmacy that they know and trust, and it has continued to resonate with prescribers. Because even as we enter a period where perhaps they're able to get access to what they used to be writing more routinely, even as Adderall XR, for example, and the generics come back into more of a normal level of inventory and its availability, they've been strong. And they've continued to linger with physicians. It really continues to linger with patients and their parents and caregivers, and I wonder when it's going to happen again.
So to go and say, look, it's never happened to these products. We continue to meet all the demand that we're able to drive here as these products continue to grow. And it's enabled us to get physicians more actively prescribing our products, and that's been encouraging to see.

Naz Rahman

That was helpful. Thank you. On the pediatric multivitamin business, obviously, you said you were engaged in a lot of initiatives and you're starting to sort of see a return to normalization. Can you elaborate more on that? How much of the prior business do you think you can get back like revenue-wise? And what do you think a new normal might look like for that pids business?

Josh Disbrow

Yes. Good question, Naz. We haven't guided, as you know, historically. And so as not to guide, I would suggest. We think we can get a significant percentage of our business back across the portfolio. Without giving a specific number, what I can say is, look, we've recently done some work and have really started to put some things into place to capitalize on some of the positive payer changes that we've observed in some major areas.
And if things go as we're sort of projecting, I think we can get both Karbinal and the multivitamin line back to a substantial level. Is that to suggest we bring it all the way back? Perhaps not. But I think over the long term, with all the things that we have in place and being able to manage some of these new coverage aspects, particularly some of the state plans that have begun covering both sets of products, both portfolios, if you will, feel very good that we can get these back to a reasonable level. And obviously, coupled with that is what we expect to be continuing growth on the ADHD side.
And so imagine, if you will, for a company that still even in our lowest quarter, which is seasonally consistently our lowest revenue quarter, and that's our lowest margin quarter for us to have generated almost $0.5 million in positive EBITDA despite the fact that pids really has significantly declined. If we can bring those products back to any degree, 20%, 30%, 40% or even more, that obviously starts to translate immediately into not just operating income but net income and free cash flow. So we don't need to see a tremendous amount of growth back from the bottom, which we think we're at, at this point. We think we've actually sort of started to move up from the bottom as we really see the business stabilize again on both Karbinal as well as the multivit.
So encouraged with the early work that's been done. Our commercial team has done an exceptional job of moving very quickly, being very, very nimble and responsive to some of these payer changes and excited to see how these favors as we move forward. We'll take some time to get it back to a significant level but encouraged with the momentum, and we're really looking solid here as we enter our fiscal '25 here in the next month and a half.

Naz Rahman

Got it. That was very helpful. And then last question is actually just on the changed payer impact. I know you said it was nimble, but was it possible for you to quantify the potential sales impact? And did that change health care situation impact all the different business lines or just a couple of them or a few of them?

Josh Disbrow

Yeah. Good question. So we have not and won't quantify anything specific in terms of potential revenue impact, understanding that it was transient, and we did solve for relatively quickly. That having been said, there is some probably indeterminate relatively small amount of revenue impact that we did have. I'd hesitate to put a number on it. I know some companies have, but we'd resist that just by virtue of the fact that we moved past it.
We were able to really respond effectively. We have multiple switches that our customers can utilize. And so, we were really able to sort of delever from change. That having been said, we know for a fact that several of our competitors and even some competitors within the ADHD category did experience far more than just transient impact, some have significant downdrafts in their prescriptions.
Our programs, our co-pay cards across the portfolio. So across the entire prescription line continue to work, continue to work very effectively. It was a handful of days that I would say there was some level of things having to get sort of rewired, but really more than anything else. As a backbone, we're not reliant upon any single vendor that really affects us from a switch perspective, so positive with that.
That having been said, not a huge impact for us. It's in the rearview mirror. Our Q4 looking healthy and really, it's an afterthought for us. It's not an afterthought for many. So I would say it's an opportunity for us to potentially go back and gain leverage to some of our customers to say, look, the nightmare that you had been living through.
And in some cases, providers are still living through, we can say, look, we weren't affected by that. Our programs do not leverage that. So in the event that this lingers, there's more than rumors reports, in fact, that there were additional ransom requests. There were some knock-on effects. Andrew Witty, UHG's CEO has said specifically that they haven't solved for all of it. They certainly haven't gotten their physicians and pharmacies caught up.
So for us to be able to potentially be a solution and say, look, when you think about ADHD, multivitamins or antihistamine, we certainly have a robust platform that doesn't rely on any single switch. So to put a finer point on it, again, a relatively small amount, certainly less than 10% of our revenues, Naz, were affected and again, very transient. So it shows a couple of things. Despite the downdraft in the peds, despite this disruption, which I don't want to suggest it wasn't disrupting at all.
There was some short period of time where there were certainly some disruptions. Despite all of that, we posted positive EBITDA. And obviously, now we're coming out of the time of the year when the deductibles are largely getting fulfilled. And so, our gross to net will improve as we move throughout the calendar year. And Q4 for us, our quarter ending June 30 is always a strong one for us. But yeah, that is definitely in the rearview mirror.

Naz Rahman

Thank you. That was very helpful. Thanks for taking all my questions. And once again, congrats on the progress.

Josh Disbrow

Thanks, Naz.

Operator

(Operator Instructions)

Roger Weiss

Operator, while we're waiting to see if there are any other questions, let me relay a couple that I have been sent in off-line. Josh, this quarter showed very strong ADHD revenue growth again. How much of the up 49% do you think is growth from the ongoing disruptions in the category versus organic execution base growth? And then, the other question was, I know you don't give forward guidance, but how do you think about next year, fiscal 2025?

Josh Disbrow

Yeah, thanks, Roger, for passing those on. We are really in a situation where the shortages have come and go. But what I would say is the macro environment around ADHD is starting to normalize. So this growth is largely and almost entirely organic.
Its execution based. It's a sales force that's out there, continuing to execute well. We've actually entered some new areas, so we're seeing growth in areas where the historic neos had been, but we hadn't been really in quite a few years. So it's good to see some of that uptake in some new territories around the country.
And we are continuing to leverage RxConnect. And certainly, the pain continues to be felt from the historical shortages. But even again, as that normalizes, I would say, remember, what that was like. And remember the fact that we have two very reliable products that are effective, that are obviously unique in the delivery and patients obviously respond well to them.
So I've got to really commend the team. They've executed well across the board and really continue to demonstrate solid growth. Territory by territory and then even in areas where we don't have sales force presence, we're continuing to see growth. So largely organic and on the backs of the execution the team is having.
As we think about 2025, we're excited about the future outlook. As we look out just a few months from now, we look to exit our fiscal '24 and June really strong. Understanding, obviously, the seasonality of ADHD has an effect, but our gross to nets, again, we really expect to continue to improve. There's lots of things that are being done and have been done around the scenes to improve.
Profitability on a per prescription basis. Bringing on this new distributor has been exciting, and it's been great in many ways, seamless. Nothing is ever perfect, but it really has been a very seamless transition as we begin to integrate this new distributor. And so as we look out, particularly exiting this calendar year, into the new calendar year, you're going to look at a company that is significantly streamlined from where it's been.
We're going to be focused squarely on the Rx business. Obviously, the ADHD and pediatric portfolios, we're going to be out of the Grand Prairie, Texas facility. Understanding the lease expires at the end of this calendar year, so by definition, we will be entirely out physically there. Obviously, R&D has been wound down to a de minimis amount.
We expect to continue to have that low level of spending. We expect to refire our debt here. And as Mark alluded to, we would certainly expect more favorable terms. So a lot of things to really further improve the health of the company as we get into '25.
And we think we'll be in a position to obviously continue to post positive EBITDA, significantly grow revenues and obviously continue to manage expenses. So this quarter, I think, is a pretty good look at what the expense base will look like, although it's actually going to come down probably even more as we get fully out of Grand Prairie, get fully out of consumer. And of course, we would expect gross margins to tick up a little bit, once we're fully transitioned out of the facility to the contract manufacturer and packagers. So all positive signs, still a little bit of work to do.
I'd say, use the baseball analogy now that we're in baseball. We're certainly rounding third base heading for Home in terms of completing the major initiatives. I think you give us another quarter or two, and we're going to be sliding in the home and really having completed the transformation of really what's been a couple of years in the making.

Roger Weiss

Josh, thank you. Operator, are there any other questions?

Operator

There are no further questions in the queue. I'll now hand the conference back to management for closing remarks. Please go ahead.

Josh Disbrow

Well, thanks, everyone, for joining. Thanks to those who are asking questions, and we look forward to finishing this quarter, our Q4 very strong. And equally look forward to sharing our full year and quarterly results in September upon the filing of our 10-K. So thanks very much to all of you. Appreciate your ongoing support and have a good afternoon and a good evening wherever you may be. Thanks.

Operator

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.