Item 1. Business

Overview

We are a commercial-stage specialty pharmaceutical company focused on global commercialization of novel products addressing significant medical needs. We have multiple approved products on the market, and we seek to build a portfolio of novel therapeutics that serve large medical needs, across a range of conditions, through our in-house commercial team. Our commercial infrastructure consists of a U.S.-based specialty sales force and an international distribution network with presence in approximately fifty countries. We are currently concentrating on hypogonadism, male infertility and, recently, insomnia and plan to expand into other indications for which we believe there are significant medical needs.

We acquired exclusive U.S. rights to Natesto ^® (testosterone) nasal gel, a novel formulation of testosterone delivered via a discreet, easy-to-use nasal gel, and we launched Natesto in the U.S. with our direct sales force in late summer 2016. Natesto is approved by the U.S. Food and Drug Administration, or FDA, for the treatment of hypogonadism (low testosterone) in men and is the only testosterone replacement therapy, or TRT, delivered via a nasal gel. Natesto offers multiple advantages over currently available TRTs and competes in a $1.8 billion market accounting for over 6.8 million prescriptions annually. Importantly, as Natesto is delivered via the nasal mucosa and not the skin, there is no risk of testosterone transference to others, a known potential side effect and black box warning associated with all other topically applied TRTs, including the market leader AndroGel ^® .

Outside the U.S. we market MiOXSYS ^® , a novel in vitro diagnostic system that is currently CE marked (which generally enables it to be sold within the European Economic Area), Health Canada cleared, and Australian TGA and Mexican COFEPRAS-approved, and for which we intend to initiate a clinical study to enable FDA clearance in the U.S.  Our MiOXSYS system is a novel, point-of-care semen analysis system with the potential to become a standard of care in the diagnosis and management of male infertility. Male infertility is a prevalent and underserved condition and oxidative stress (the core biological component measured by the MiOXSYS system) is widely implicated in its pathophysiology. MiOXSYS was developed from our previously developed oxidation-reduction potential research platform known as RedoxSYS ^® . We are advancing MiOXSYS toward FDA clearance as an aid in the assessment of male infertility.

In June 2018 we acquired an exclusive U.S. license to ZolpiMist™. ZolpiMist is an FDA-approved prescription product that is indicated for the short-term treatment of insomnia, and is the only oral spray formulation of zolpidem tartrate - the most widely prescribed prescription sleep aid in the U.S. ZolpiMist is commercially available and competes in the non-benzodiazepine prescription sleep aid category, a $1.8 billion prescription drug category with over 43 million prescriptions written annually. Thirty million prescriptions of zolpidem tartrate (Ambien®, Ambien® CR, Intermezzo®, Edluar®, ZolpiMist™, and generic forms of immediate-release, controlled release, and orally dissolving tablet formulations) are written each year in the U.S., representing almost 70% of the non-benzodiazepine sleep aid category. Approximately 2.5 million prescriptions are written for novel formulations of zolpidem tartrate products (controlled release and sublingual tablets). We intend to integrate ZolpiMist into our sales force’s promotional efforts as an adjunct product to Natesto as there is substantial overlap of physician prescribers of both testosterone and prescription sleep aids.

In the future we will look to acquire additional commercial-stage or near-market products, including existing products we believe can offer distinct commercial advantages. Our management team’s prior experience has involved identifying both clinical-stage and commercial-stage assets that can be launched or re-launched to increase value, with a focused commercial infrastructure specializing in novel, niche products.

Natesto® (testosterone) nasal gel

On April 22, 2016, we entered into an agreement to acquire the exclusive U.S. rights, which rights we acquired on July 1, 2016, to Natesto (testosterone) nasal gel, from Acerus Pharmaceuticals Corporation, or Acerus. Natesto is a patented, FDA-approved testosterone replacement therapy, or TRT, and is the only nasally-administered formulation of testosterone available in the U.S. Natesto is a discreet, easy-to-administer nasal gel that may be appropriate for men with active lifestyles as Natesto is small, portable, Transportation Security Administration, or TSA-compliant, and easy to use. Importantly, Natesto is not applied directly to the patient’s skin as other topically applied TRTs. Rather, Natesto is delivered directly into the nasal mucosa via a proprietary nasal applicator. Thus, Natesto does not carry a black box warning related to testosterone transference to a man’s female partner or children — as other topically (primarily gels and solutions) administered TRTs do by virtue of their delivery directly onto the skin.

We launched Natesto in the U.S. in late summer 2016 with our direct sales force, and we are positioning Natesto as the ideal treatment solution for men with active, busy lifestyles who suffer from hypogonadism. Natesto is also positioned for men who have previously been prescribed a TRT, including Androgel, and want a product with a different clinical profile available in a convenient, easy-to-use, effective therapeutic option.

MiOXSYS®

MiOXSYS is a rapid in vitro diagnostic system that performs a semen analysis test used to measure static oxidation-reduction potential, or sORP, in human semen. MiOXSYS is a CE marked system (that is also Health Canada, Australian TGA and Mexican COFEPRAS approved) and is an accurate, easy to use, and fast infertility assessment tool that directly measures oxidative stress in semen though the direct measurement of oxidation-reduction potential. It is estimated that 72.4 million couples worldwide experience infertility problems. In the U.S., approximately 10% of couples are defined as infertile. Male infertility is responsible for between 40 – 50% of all infertility cases and affects approximately 7% of all men. Male infertility is often unexplained (idiopathic), and this idiopathic infertility is frequently associated with increased levels of oxidative stress in the semen. As such, having a rapid, easy-to-use diagnostic platform to measure oxidative stress may provide a practical way for male infertility specialists to improve semen analysis and infertility assessments without having to refer patients to outside clinical laboratories.

Male infertility is prevalent and underserved, and oxidative stress is widely implicated in its pathophysiology. The global male infertility market is expected to grow to over $300 million by 2020 with a compound annual growth rate, or CAGR, of nearly 5% from 2014 to 2020. Oxidative stress is broadly implicated in the pathophysiology of idiopathic male infertility, yet very few diagnostic tools exist to effectively measure oxidative stress levels in men. However, antioxidants are widely available and recommended to infertile men without easy, accurate assessment methods available for initial evaluation and subsequent response to antioxidant intervention. With the introduction of the MiOXSYS System, we believe for the first time there will be an easy and effective diagnostic tool to assess the degree of oxidative stress and potentially enable the monitoring of patients’ responses to antioxidant therapy as a treatment regimen for infertility. The MiOXSYS System received CE marking in Europe in January 2016 and obtained Health Canada Class II Medical Device approval in March 2016. The product subsequently received Australian TGA approval in November of 2017 and clearance in Mexico in March of 2018. We expect to advance MiOXSYS into clinical trials in the U.S. in order to enable 510k de novo clearance.

ZolpiMist™ (zolpidem tartrate oral spray)

On June 11, 2018, the Company acquired an exclusive license for ZolpiMist from Magna Pharmaceuticals, Inc. This agreement allows for Aytu’s exclusive commercialization of ZolpiMist in the U.S. and Canada, and the ability to sublicense the product for commercialization in Canada. The ZolpiMist license adds another unique, commercial-stage product to the Company’s product portfolio and provides our U.S. sales force with another novel product to sell to their already-called-on primary care (family medicine, internal medicine, general practice) physician targets. More than half of our sales force’s Natesto physician targets are primary care physicians, so there is a significant overlap in targets and opportunity to enable them to efficiently sell both Natesto and ZolpiMist to these prevalent, high-prescribing clinicians. The Company expects to formally launch ZolpiMist through its U.S. sales force in late 2018.

ZolpiMist is an FDA-approved prescription product that is indicated for the short-term treatment of insomnia, and is the only oral spray formulation of zolpidem tartrate - the most widely prescribed prescription sleep aid in the U.S. ZolpiMist is commercially available and competes in the non-benzodiazepine prescription sleep aid category, a $1.8 billion prescription drug category with over 43 million prescriptions written annually. Thirty million prescriptions of zolpidem tartrate (Ambien®, Ambien® CR, Intermezzo®, Edluar®, ZolpiMist™, and generic forms of immediate-release, controlled release, and orally dissolving tablet formulations) are written each year in the U.S., representing almost 70% of the non-benzodiazepine sleep aid category. Approximately 2.5 million prescriptions are written for novel formulations of zolpidem tartrate products (controlled release and sublingual tablets).

ZolpiMist (5 mg per dose and available in both a 30-dose and 60-dose canister) was approved for marketing by the FDA in December of 2008 and was shown to be bioequivalent to Ambien® 5 mg and 10 mg tablets. ZolpiMist is indicated for the short-term treatment of insomnia characterized by difficulties with sleep initiation and is contraindicated in patients with a known hypersensitivity to zolpidem tartrate.

Key elements of our business strategy include:

We plan to augment our core in-development and commercial assets through efficient identification of complementary products. We intend to seek assets that are near commercial stage or already generating revenues. Further, we intend to seek to acquire products through asset purchases, licensing, co-development, or collaborative commercial arrangements (including co-promotions and co-marketing arrangements).

Our management team has extensive experience across a wide range of business development activities and have in-licensed or acquired products from large, mid-sized, and small enterprises in the U.S. and abroad. Through an assertive product and business development approach, we expect that we will build a substantial portfolio of complementary commercial and near-commercial-stage products.

Corporate History

We were incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado.

Vyrix Pharmaceuticals, Inc., or Vyrix, was incorporated under the laws of the State of Delaware on November 18, 2013 and was wholly-owned by Ampio Pharmaceuticals, Inc. (NYSE American: AMPE), or Ampio, immediately prior to the completion of the Merger (defined below). Vyrix was previously a carve-out of the sexual dysfunction therapeutics business, including the late-stage men’s health product candidates, Zertane and Zertane-ED, from Ampio, that carve out was announced in December 2013. Luoxis Diagnostics, Inc., or Luoxis, was incorporated under the laws of the State of Delaware on January 24, 2013 and was majority-owned by Ampio immediately prior to the completion of the Merger. Luoxis was initially focused on developing and advancing the RedoxSYS System. The MiOXSYS System was developed following the completed development of the RedoxSYS System.

On March 20, 2015, Rosewind formed Rosewind Merger Sub V, Inc. and Rosewind Merger Sub L, Inc., each a wholly-owned subsidiary formed for the purpose of the Merger. On April 16, 2015, Rosewind Merger Sub V, Inc. merged with and into Vyrix and Rosewind Merger Sub L, Inc. merged with and into Luoxis, and Vyrix and Luoxis became subsidiaries of Rosewind. Immediately thereafter, Vyrix and Luoxis merged with and into Rosewind with Rosewind as the surviving corporation (herein referred to as the Merger). Concurrent with the closing of the Merger, Rosewind abandoned its pre-merger business plans, solely to pursue the specialty pharmaceuticals, devices, and diagnostics markets, focusing on large areas of medical need, including the business of Vyrix and Luoxis. When we discuss our business in this Report, we include the pre-Merger business of Luoxis and Vyrix.

On June 8, 2015, we (i) reincorporated as a domestic Delaware corporation under Delaware General Corporate Law and changed our name from Rosewind Corporation to Aytu BioScience, Inc., and (ii) effected a reverse stock split in which each common stock holder received one share of common stock for each 12.174 shares outstanding. At our annual meeting of shareholders held on May 24, 2016, our shareholders approved (1) an amendment to our Certificate of Incorporation to reduce the number of authorized shares of common stock from 300.0 million to 100.0 million, which amendment was effective on June 1, 2016, and (2) an amendment to our Certificate of Incorporation to affect a reverse stock split at a ratio of 1-for-12 which became effective on June 30, 2016. At our special meeting of shareholders held on July 26, 2017, our shareholders approved an amendment to our Certificate of Incorporation to affect a reverse stock split at a ratio of 1-for-20 which became effective on August 25, 2017. At our annual meeting of shareholders held on June 27, 2018, our shareholders approved another reverse stock split at a ratio of 1-for-20 which became effective on August 10, 2018. All share and per share amounts in this report have been adjusted to reflect the effect of these reverse stock splits (hereafter referred to collectively as the “Reverse Stock Splits”).

Our Strategy

In the near-term, we expect to create value for shareholders by implementing a focused, four-pronged strategy. Our primary focus is on growing sales of Natesto in the U.S. and relaunching ZolpiMist through our sales force, expanding the MiOXSYS business both inside and outside the U.S., advancing MiOXSYS toward FDA clearance, and continuing to build a product pipeline through efficient business development. Upon achieving growth of our current, revenue-generating products, we intend to build a complementary portfolio of aligned assets that can be efficiently commercialized through our specialty sales force and, when appropriate, aligned distribution partners outside the U.S. In just over three years since our formation through the merger, we have acquired or in-licensed four FDA-approved, marketed assets (and have since divested one asset – Primsol® Solution and have discontinued another, ProstaScint®), launched a U.S.-based specialty sales force, advanced our lead diagnostic asset MiOXSYS to CE marking, Health Canada clearance, Australian TGA approval, and Mexican COFEPRAS clearance, engaged in asset purchase and licensing discussions for products aligned to our strategy, launched Natesto in the U.S. through our own sales force, licensed ZolpiMist in the U.S. and Canada, and are now preparing for ZolpiMist’s re-launch through our sales force.

Aytu BioScience’s Strategic Value Drivers 

The primary elements of our strategy are:

Natesto

Low testosterone is a condition affecting approximately 13 million U.S. men, with U.S. revenues reaching $1.8 billion for the twelve months ending December of 2017. The market is expected to grow, and we believe multiple factors are in place to position Natesto favorably in gaining market share in this large, growing market. By gaining less than a 5% share of the current U.S. market (assuming similar pricing and reimbursement), a novel TRT product could achieve annual gross revenues in excess of $90.0 million.

Natesto is a novel, FDA-approved testosterone replacement therapy, or TRT, indicated for the treatment of hypogonadism in men. Natesto is the only nasal formulation of testosterone and is delivered via a proprietary nasal gel to enable simple, discreet application of testosterone into the nostrils. By virtue of applying Natesto to the nasal mucosa, and not to the man’s skin, there is no risk of transference to others. As such, Natesto is the only TRT that does not have a black box warning associated with this potential for transference. Additionally, Natesto is a convenient form of testosterone that does not require application to large areas of the man’s body (arms, shoulders, upper torso) as required with the market-leading product AndroGel and other topically-applied gels. A convenient form of TRT, applied two-to-three times a day in the nostrils, may be an appropriate option for men with hypogonadism who have active lifestyles, travel frequently, and value having a discreet way to treat their hypogonadism. Additionally, with Natesto’s unique pharmacokinetic profile including rapid time to C _max and clearance in 6-8 hours, we believe Natesto may present an improved safety profile over the currently marketed TRT formulations.

ZolpiMist

ZolpiMist is commercially available and competes in the non-benzodiazepine prescription sleep aid category, a $1.8 billion prescription drug category with over 43 million prescriptions written annually. Thirty million prescriptions of zolpidem tartrate (Ambien®, Ambien® CR, Intermezzo®, Edluar®, ZolpiMist™, and generic forms of immediate-release, controlled release, and orally dissolving tablet formulations) are written each year in the U.S., representing almost 70% of the non-benzodiazepine sleep aid category. Approximately 2.5 million prescriptions are written for novel formulations of zolpidem tartrate products (controlled release and sublingual tablets).

ZolpiMist is a novel, FDA-approved prescription product that is indicated for the short-term treatment of insomnia, and is the only oral spray formulation of zolpidem tartrate - the most widely prescribed prescription sleep aid in the U.S. Because of ZolpiMist’s oral spray delivery, patients achieve rapid increases in zolpidem tartrate blood levels with a low 5 mg dose per spray. Due to the rapid absorption through the mucosa and increase in blood levels, patients may achieve quicker sleep onset while avoiding first-pass liver metabolism.

We have launched a commercial infrastructure in the U.S. in order to support increased sales and distribution of Natesto, and now ZolpiMist. We have a highly experienced sales force including over thirty full-time sales representatives, and this team is distinctly focused on impacting the prescribing of physicians throughout the U.S. Through this efficient, dedicated sales channel we believe we will be able to increase prescribing of our unique commercial assets.

The MiOXSYS System is our proprietary in vitro diagnostic system that measures oxidation-reduction potential (ORP) in semen as an aid in the diagnosis of male infertility. MiOXSYS is CE Marked, Health Canada, Australian TGA and Mexico COFEPRIS approved. Through the measurement of oxidation-reduction potential, oxidative stress is directly assessed in that ORP incorporates all known and unknown oxidants and antioxidants in semen.

Male infertility is prevalent and underserved, and oxidative stress is widely implicated in its pathophysiology. As such, we have bolstered our research focus in this area with the MiOXSYS System to complement our focus on urologic conditions. The ex-US global male infertility market is estimated at over $800 million in diagnostics, therapeutics, and procedure costs. Oxidative stress is broadly implicated in the pathophysiology of idiopathic male infertility, yet very few diagnostic tools exist to effectively measure oxidative stress levels in men. However, antioxidants are widely available and recommended to infertile men. With the introduction of the MiOXSYS System, we believe for the first time there will be an easy and effective diagnostic tool to assess degree of oxidative stress, monitor patients’ responses to antioxidant therapy and improve diagnosis of male infertility.

Oxidative stress is recognized as a cause of DNA damage, which results in higher rates of sperm dysfunction and infertility. The MiOXSYS System is the only system that directly measures oxidation-reduction potential to provide a comprehensive measurement of oxidative stress, and multiple studies have demonstrated the predictive value of ORP as it relates to both predicting semen quality (sperm motility, sperm concentration, sperm morphology) and correlates to infertility rates.

MiOXSYS has now been sold into 29 countries around the world through a distribution network comprised of companies who are active in the infertility market. We support the commercialization of MiOXSYS through active development of clinical and scientific data, promotion to key opinion leaders in the field of infertility, and active work with our distributor partners to promote the benefits of MiOXSYS and its key diagnostic output, static oxidation-reduction potential (sORP). Prominent centers around the world have utilized MiOXSYS in both clinical and research environments, and these include Cleveland Clinic in Cleveland, Ohio, Tulane University in New Orleans, Louisiana, Hamad Medical Corporation in Doha, Qatar, Dokkyo University Hospital in Tokyo, Japan, Singapore General Hospital in Singapore, Invicta Clinic in Poland, Zech Clinic in Austria, and many others.

In November 2017, the European Society for Human Reproduction and Embryology (ESHRE) published clinical guidelines surrounding Recurrent Pregnancy Loss. This notable organization specifically recommended testing for DNA damage in sperm for men whose female partners have suffered recurrent pregnancy loss. The MiOXSYS System is capable of performing this test. Additionally, oxidative stress is implicated as a cause of DNA damage and testing and potential treatment to improve seminal oxidative stress levels is recommended. This publication highlights the growing base of support for advanced semen testing in the context of oxidative stress testing to further assess sperm damage and help further identify potential underlying causes of damage. We expect this guideline, along with the increasing body of evidence supporting oxidation-reduction potential as a strongly correlated marker in male infertility, to further drive awareness of the clinical utility of MiOXSYS and accelerate adoption for the MiOXSYS System.

With MiOXSYS now CE marked, Health Canada, Australian TGA and Mexican COFEPRAS approved, and available for sale in many markets outside the U.S., we believe we are positioned to initiate our clinical studies in the U.S. to enable 510k de novo clearance in the near future. We expect to receive guidance from the FDA on clinical study design and patient criteria and implement the required clinical program as soon as possible. If cleared in the U.S., MiOXSYS would be the first and only semen analysis diagnostic test cleared by the FDA for the detection of oxidative stress in infertility.

We have engaged with the FDA initially and submitted a pre-submission around the concept of oxidation-reduction potential measurement as an aid in the assessment of male infertility and believe that, with further development of a specific male infertility intended use, we can re-approach the FDA with a clinical study plan and specific protocol developed that would enable us to progress with a pivotal clinical trial, thus enabling 510k de novo clearance.

In order to diversify our product portfolio and create more value, we intend to seek to acquire complementary products or product candidates to develop and/or commercialize, including marketed assets. Initially, the focus will be on acquiring commercial stage products or near-commercial stage product candidates for large, underserved conditions. We will opportunistically consider products or product candidates based on their ability to create value and complement our infrastructure’s focus and expertise. We plan to pursue product acquisitions, inclusive of therapeutics, diagnostics, and devices, which we will evaluate for their strategic fit and potential for near-term and/or accretive value to us. In a little over two months from the Company’s merger in April 2015, we began generating revenue from the acquisition of ProstaScint, we later launched Natesto in July 2016, and will launch ZolpiMist through its U.S. sales force in late 2018. We expect to continue to identify and acquire additional, complementary assets in the future as part of our expansion plan.

Our FDA – Approved Products 

Our two primary therapeutic products have received FDA approval for marketing in the U.S.: Natesto and ZolpiMist.

Natesto for Testosterone Replacement 

On April 22, 2016, we entered into a license and supply agreement to acquire the exclusive U.S. rights, which rights we acquired on July 1, 2016, to Natesto ^® (testosterone) nasal gel from Acerus Pharmaceuticals Corporation, or Acerus. Natesto is a patented, FDA-approved testosterone replacement therapy, or TRT, and is the only nasally-administered formulation of testosterone available in the U.S. Natesto is a discreet, easy-to-administer nasal gel that may be appropriate for men with active lifestyles as Natesto is small, portable, TSA-compliant, and easy to use.

Importantly, Natesto is not applied directly to the patient’s skin as other topically applied TRTs are. Rather, it is delivered directly into the nasal mucosa via a patented nasal applicator. Thus, Natesto does not carry a black box warning related to testosterone transference to a man’s female partner or children — as other topically (primarily gels) administered TRTs do by virtue of their delivery directly onto the skin.

Image of Natesto (testosterone) nasal gel

The unique delivery of Natesto also enables simple, discreet use by a single application into each nostril three times daily and may improve compliance over topical forms that are applied to large sections of the arms, shoulders, and other large areas of the man’s upper torso. It also offers a more discreet method of TRT administration compared to films and patches (such as Androderm®) and doesn’t involve the pain, potential for site injection infections, and the administration inconvenience of the implantable and/or injectable TRTs such as Testopel® (pellets), Aveed® (injectable testosterone undecanoate) or testosterone cypionate injections.

A concern associated with the use of the currently marketed testosterone gels is the unintentional transfer of testosterone to women (or children) by skin contact with the man’s application site. In the event of a female partner receiving inadvertent testosterone exposure due to intimate contact with her male partner, she may develop hyperandrogenism, a condition characterized by excess levels of androgens. This condition may result in women developing acne, scalp hair loss, excessive facial or body hair, breast atrophy, and other symptoms. Natesto, as it is nasally administered, does not present this potential complication of ‘transference’ and thus does not have a black box warning as is associated with the topically applied testosterone supplements.

Natesto is a nasally-administered androgen indicated for replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone including:

The U.S. Testosterone Replacement Therapy (TRT) Market

We believe we have an opportunity to significantly increase revenue with Natesto in the U.S. as Natesto competes in a large, growing market. The U.S. TRT market is large, with annual revenues in the U.S. of $1.8 billion for the 12-month period ending December 2017. At the current market size of $1.8 billion, a product with 5% market penetration could achieve sales in excess of $90 million annually, assuming comparatively similar product pricing and reimbursement levels as seen with other TRTs.

The U.S. prescription testosterone market is comprised primarily of topically applied treatments in the form of gels, injections, and patches. Testopel, an implantable pellet implanted directly under the skin by a physician, is also FDA-approved and marketed by Endo International plc.

The FDA-approved TRTs include:

AndroGel®, marketed by AbbVie, is the leading TRT and had 2017 revenues of over $1.0 billion and over 1.3 million prescriptions.

Importantly, however, AndroGel is now facing generic competition with the expiration of key patents for its 1.0% formulation, and it is expected that generic equivalents to its 1.62% formulation will soon be introduced.

About Hypogonadism

Male hypogonadism is a condition in which the body does not produce enough testosterone — the hormone that plays a key role in masculine growth and development during puberty — or has an impaired ability to produce sperm, or both. Men can be born with male hypogonadism, or it can develop later in life from injury or infection.

Hypogonadism is formally defined as deficient or absent male gonadal function that results in insufficient testosterone secretion. Hypogonadism may be caused primarily by testicular failure, or secondarily by hypothalamic-pituitary axis dysfunction, resulting in the production or release of insufficient testosterone to maintain testosterone-dependent functions and systems. It can also result from a combination of testicular failure and hypothalamic-pituitary axis dysfunction.

Hypogonadism affects an estimated 13 million men in the U.S., and although it may occur in men at any age, low testosterone levels are especially common in older males. More than 60% of men over age 65 have free testosterone levels below the normal values of men aged 30 to 35. Studies suggest that hypogonadism in adult men is often underdiagnosed and undertreated.

Low testosterone, as male hypogonadism is also known, is associated with a number of signs and symptoms, most notably loss of libido and erectile dysfunction (ED). Other signs of low testosterone include depressive symptoms, a decrease in cognitive abilities, irritability and lethargy or loss of energy. Deficient endogenous testosterone also has negative effects on bone mass and is a significant risk factor for osteoporosis in men. Progressive decrease in muscle mass and muscle strength, and testicular dysfunction, often resulting in impaired sperm production, are also associated with low testosterone levels.

A younger patient may have pure hypogonadism as a primary event, whereas an older man may have an age-related decline in testosterone production that is a part of his ED profile. However, because both ED and loss of libido are hallmarks of hypogonadism, for a patient who presents with ED it is recommended that he have a basic hormone profile to determine if he has low testosterone. Treatments to normalize testosterone can not only improve libido, energy level and the potential to have normal erections, but can also improve the response to sildenafil, if that is deemed appropriate treatment.

Natesto Clinical Studies Demonstrating Safety and Efficacy

Natesto has been shown to be safe and effective in men with hypogonadism and was approved by the FDA in May 2014.The details of the U.S.-based pivotal trial are as follows:

In its pivotal clinical trial, Natesto was evaluated for efficacy in a 90-day, open-label, multicenter study of 306 hypogonadal men. Eligible patients were 18 years of age and older (mean age 54 years) and had morning serum total testosterone concentrations less than 300 ng/dL. Patients were Caucasian (89%), African-American (6%), Asian (5%), or of other ethnicities (less than 1%).

Patients were instructed to self-administer Natesto (11 mg of testosterone) intranasally either two or three times daily.

The primary endpoint was the percentage of patients with an average serum total testosterone concentration (C _avg ) within the normal range (300 to 1050 ng/dL) on Day 90.

The secondary endpoint was the percentage of patients with a maximum total testosterone concentration (C _max ) above three predetermined limits: greater than 1500 ng/dL, between 1800 and 2500 ng/dL, and greater than 2500 ng/dL.

A total of 78 hypogonadal men received Natesto (11 mg of testosterone) three times daily (33 mg of testosterone daily). Of these, a total of 73 hypogonadal men were included in the statistical evaluation of efficacy (total testosterone pharmacokinetics) on Day 90 based on the intent-to-treat (ITT) population with last observation carried forward (LOCF). Ninety percent of these 73 patients had a C _avg within the normal range (300 to 1050 ng/dL) on Day 90. The percentages of patients with C _avg below the normal range (less than 300 ng/dL) and above the normal range (greater than 1050 ng/dL) on Day 90 were 10% and 0%, respectively.

The table below (Table 3 from the Natesto Prescribing Information) summarizes the mean (SD) serum total testosterone concentrations on Day 90 in 69 patients who had a full pharmacokinetic sampling profile and were treated with Natesto (11 mg of testosterone) three times daily for 90 days.

Table 3: Mean (SD) Serum Total Testosterone Concentrations on Day 90 Following
Administration of Natesto (11 mg of testosterone) Three Times Daily

In the same clinical trial studying, the safety and efficacy of Natesto, which was conducted at 39 U.S. outpatient sites, it was shown that 70% of the per protocol patients in the twice-daily ‘titration arm’ (n=141) achieved normal testosterone levels. Ninety-one percent of the per protocol patients in the thrice-daily group (n=77) achieved normal testosterone levels, demonstrating that the majority of men in both treatment groups achieved normalization of testosterone levels while taking Natesto. The efficacy of both B.I.D. (twice daily) and T.I.D. (three times daily) dosing of Natesto is demonstrated in the graphs below:

Recently Presented Natesto Safety and Efficacy Data

Secondary endpoints that were measured in the above-referenced pivotal trial included the impact on Natesto – over 90 days – on erectile function, as well as on mood. The 90-day clinical trial demonstrated that – within 30 days of initiating treatment with Natesto – subjects exhibited a statistically significant and clinically meaningful improvement in all five domains of erectile function. Specifically, at the end of the 90-day treatment period, improvement from baseline for each domain were as follows:

In addition to demonstrating a significant improvement in erectile function, Natesto also exhibits a substantial impact on mood as measured by the Positive Affect and Negative Affect Schedule (PANAS). As early as 30 days – and continuing up to day 90 – Natesto demonstrates a substantial increase in Positive Affect and a substantial decrease in Negative Affect.

In addition to efficacy parameters, safety parameters have also been examined and recently reported. Safety issues frequently associated with prolonged use of testosterone replacement therapies, most notably injectable agents, include the fact that gonadotropin levels (specifically luteinizing hormone (LH) and follicle stimulating hormone (FSH) levels) frequently decrease and result in diminished endogenous testosterone production (primarily through the reduction of LH) and reduced sperm production (primarily through the reduction of FSH), both of which have negative implications on reproductive health and overall male hormonal balance.

Natesto restores serum testosterone to normal levels while follicle stimulating hormone (FSH) and luteinizing hormone (LH) remained well within the reference range over 90 days of Natesto administration. Also, hematocrit (responsible for maintaining blood thickness) was not significantly impacted by Natesto over 360 days of treatment. It has been established that other testosterone replacement therapies alter levels of follicle stimulating hormone (FSH) and luteinizing hormone (LH) and increase hematocrit, so we believe Natesto’s clinical profile may offer distinct safety advantages for patients over the other currently available therapies.

Patients treated with Natesto for 90 days, restored serum testosterone levels while FSH and LH levels remained within the reference range as depicted in the figure below.

Similarly, these same patients maintained normal hematocrit levels over a 360-day extension period in the pivotal trial – as depicted in the figure below.

Natesto Product Features and Patient Benefits

We believe Natesto has a unique opportunity to gain market share in the more than $1.8 billion U.S. market given Natesto’s novel features and patient benefits, including:

Natesto has proven efficacy and a product profile well suited for men suffering from hypogonadism who have active, busy lifestyles who want a simple, discreet TRT option. We believe Natesto can play an important role in the treatment of hypogonadism, a condition affecting approximately 13 million U.S. men.

Recent Natesto Market Events

Recent market events involving prospective Natesto competitors may lead to an improved competitive position for Natesto in the U.S. as we continue to build awareness and expand market share in the TRT category. On January 10th, 2018 Lipocine Inc. (NASDAQ: LPCN) announced that the Bone, Reproductive and Urologic Drugs Advisory Committee (“BRUDAC” also known as “AdCom”) of the U.S. FDA voted six in favor and thirteen against the benefit/risk profile of Tlando, Lipocine’s oral testosterone product candidate for testosterone replacement therapy (“TRT”) in adult males with hypogonadism. Additionally, on January 9 ^th , 2018 the FDA held a separate Advisory Committee meeting to review privately-held Clarus Therapeutics’ oral testosterone candidate Jatenzo. The committee also voted against approving Clarus’ candidate primarily over safety concerns. Thus, it is highly unlikely that either product will be approved by FDA at this time, and the prospect of an FDA approval at any point in the future remains doubtful. In fact, Lipocine issued a press release in May 2018 confirming that Lipocine had received a Complete Response Letter (CRL) from the FDA informing the company that Tlando was not approvable in its current form.

We believe that the recommendations to not approve Tlando and Jatenzo and the subsequent Complete Response Letter on Tlando specifically, could yield important commercial benefits for Natesto and further bolsters Natesto’s unique market position as the only topical TRT without a BLACK BOX warning explicitly warning users of these agents against the risk of testosterone transference.

One of the issues cited as a reason for the negative AdCom sentiment, and subsequent CRL, on these oral testosterone therapies is related to the products’ cardiovascular risk profiles as presented in their New Drug Applications. Also, and more generally, an increase in hematocrit levels is broadly cited as a safety concern in the TRT category and has been noted to be an issue of potential focus for future TRT product candidates. Importantly (and in direct contrast to many agents in the TRT category), Natesto (over 360 days on treatment demonstrated) no significant increase in hematocrit levels and may, therefore, offer an improved safety profile over the established products in the TRT category.

Similarly, in October 2017, Antares Pharmaceuticals received a CRL from the FDA for its product candidate Xyosted®, an injectable testosterone replacement therapy. In its response, the FDA cited multiple safety concerns related and, we believe, the launch of this product may be substantially delayed – or may not occur at all. Antares has recently resubmitted the application for approval for Xyosted, and the FDA has issued a PDUFA date of September 29, 2018.

These CRLs point to the high burden of proof placed on developers of TRT product candidates and, we believe, further validates the value of Natesto as an-already-FDA-approved product in this $1.8 billion product category. With the prospects of future prospective competitive products in doubt, Natesto’s competitive position may be improved and even more sustainable for the foreseeable future.

ZolpiMist for the Short-Term Treatment of Insomnia

On June 11, 2018 the Company signed an exclusive license for ZolpiMist™ (Zolpidem Tartrate Oral Spray) with Magna Pharmaceuticals, Inc. This agreement allows for Aytu’s exclusive commercialization of ZolpiMist in the U.S. and the ability to sublicense the product for commercialization in Canada. The ZolpiMist license adds another unique, commercial-stage product to the Company’s product portfolio and provides our U.S. commercial team with another novel product to sell to their already-called-on physician targets. More than half of our sales force’s Natesto physician targets are primary care physicians (family medicine, internal medicine, general practice), so there is a significant overlap in targets and opportunity to enable them to efficiently sell both Natesto and ZolpiMist to these prevalent, high-prescribing clinicians. The Company expects to formally launch ZolpiMist through its U.S. sales force in late 2018.

ZolpiMist is an FDA-approved prescription product that is indicated for the short-term treatment of insomnia and is the only oral spray formulation of zolpidem tartrate - the most widely prescribed prescription sleep aid in the U.S. ZolpiMist is commercially available and competes in the non-benzodiazepine prescription sleep aid category, a $1.8 billion prescription drug category with over 43 million prescriptions written annually. Thirty million prescriptions of zolpidem tartrate (Ambien®, Ambien® CR, Intermezzo®, Edluar®, ZolpiMist™, and generic forms of immediate-release, controlled release, and orally dissolving tablet formulations) are written each year in the U.S., representing almost 70% of the non-benzodiazepine sleep aid category. Approximately 2.5 million prescriptions are written for novel formulations of zolpidem tartrate products (controlled release and sublingual tablets).

ZolpiMist (5 mg per dose and available in both a 30-dose and 60-dose canister) was approved for marketing by the FDA in December of 2008 and was shown to be bioequivalent to Ambien® 5 mg and 10 mg tablets. ZolpiMist is indicated for the short-term treatment of insomnia characterized by difficulties with sleep initiation and is contraindicated in patients with a known hypersensitivity to zolpidem tartrate.

Image of ZolpiMist in its Child-Resistant Container

Due to ZolpiMist’s unique oral spray delivery and the resulting rapid absorption through the oral mucosa, ZolpiMist has several clinical advantages over oral tablet formulations, most notably a rapid onset of action that quickly induces sleep. Additionally, and also due to the product’s oral spray formulation, ZolpiMist does not require swallowing and may therefore be easier and more convenient to take than tablets for patients who have difficulty swallowing or have an aversion to taking tablets.

Pharmacokinetic data as published in the ZolpiMist Clinical Study Report demonstrate multiple distinctions between ZolpiMist and oral zolpidem tartrate tablets in the study that led to the product’s approval. Specifically, more patients achieve high blood levels of zolpidem faster with oral spray delivery than with tablets – and this is expected to derive faster onset of sleep.

In a study of 46 insomnia patients, a significantly higher proportion of patients receiving 5 mg of zolpidem tartrate achieved plasma levels associated with sedation with the oral spray formulation than with the oral tablet formulation.

The figure below depicts the difference in plasma levels between patients taking ZolpiMist and patients taking Ambien oral tablets.

Additionally, 23% of patients demonstrated sedation-associated blood levels 10 minutes post taking ZolpiMist, while zero zolpidem tartrate tablet patients achieved those levels (20 ng/mL). Similarly, almost twice as many ZolpiMist patients (77%) achieved sedation-associated blood levels than zolpidem tartrate tablet patients (40%) at 20 minutes, a statistically significant difference.

Time to various sedation-associated blood levels are shown in the figure below.

While ZolpiMist offers patients the convenience and speed of onset available through an oral spray, this method of administration may also present a desirable option for patients who have difficulty swallowing. Estimates suggest that 15% of the elderly population is affected by dysphagia, with potentially higher incidence among stroke and dementia patients, as well as patients with neurological diseases, cancers of the head and neck, and esophagus. For these patients, many of whom are challenged with sleep difficulties, ZolpiMist may be an appropriate first option. For patients not affected by dysphagia, they may simply want a faster, more convenient way to take zolpidem tartrate.

The U.S. prescription sleep aid (non-benzodiazepine) category is large, and many primary care physicians prescribe these products routinely. Achieving even a modest 1% share of this 30 million prescription-a-year zolpidem tartrate category could achieve approximately $75 million in net revenues. While the Company has not made revenue projections for ZolpiMist, we do believe this product represents a substantial revenue opportunity for the Company given the product’s market potential and the unique product features and patient benefits of ZolpiMist.

MiOXSYS In Vitro Diagnostic System for Male Infertility 

Male infertility is a significant medical condition that urologists and infertility specialists treat frequently in the office setting or specialized fertility centers around the world. Of all sexually active couples, 8% to 12% are infertile and male infertility is the sole cause or contributing factor up to 50% of the time. The global male infertility market is large and growing. The market for male infertility diagnosis and treatments is expected to grow to more than $300 million globally by 2020, with a CAGR of nearly 5% from 2014 to 2020. Despite the prevalence of male infertility, difficulties remain in effectively diagnosing root causes. Oxidative stress assessment is considered a standard practice in complex andrology laboratories around the world, but due to various factors oxidative stress testing is not routinely employed in clinicians’ offices or standard laboratory settings.

Seminal oxidative stress has been well established throughout the peer-reviewed literature to play a substantial role in unexplained male infertility, and researchers and clinicians actively consider oxidative stress when conducting laboratory infertility assessment. While oxidative stress is well established as a leading contributing factor to male infertility, a significant proportion of male infertility remains unexplained in part because of the lack of standardized tests available to clinicians and researchers to assess oxidative stress in semen and plasma. This lack of standardization has resulted in poor implementation of semen and plasma analysis around the world. Further, current testing platforms are cost-prohibitive for small office settings or local medical laboratories and require extensive training and on-site expertise. Additionally, antioxidant supplementation is frequently recommended to patients by clinicians without an effective method of measuring treatment success. As such, we believe introducing the MiOXSYS System to assess oxidative stress levels in semen and seminal fluid represents a significant commercial opportunity and novel way for clinicians to assess male factor infertility and assess therapeutic responses of patients in a simple, reliable, and cost-effective way.

The MiOXSYS System was CE marked in January 2016, and we have started early commercialization efforts outside the U.S. Since CE marking, MiOXSYS has received Health Canada approval, approval by Australia’s TGA, and was most recently approved by Mexico’s COFEPRIS.

An attractive aspect of the reproductive health market relates to reimbursement as infertility treatments and the associated diagnostic tests are generally paid directly by patients. The current infertility treatments could cost in excess of $10,000 per treatment cycle, so the addition of a moderately priced oxidative stress test would consume nominal relative costs while providing specific, actionable information needed to improve the oxidative status of infertile patients. The current infertility treatments include antioxidant supplements and lifestyle modifications that lower oxidative stress (e.g., smoking cessation, exercise, dietary changes, etc.), so the measurements reported by the MiOXSYS System could effectively guide treatment in the infertile patients.

The global male infertility market is expected to grow to more than $300 million by 2020. With a substantial base of conditions for which the MiOXSYS System may present utility, we believe there is significant revenue potential from this first-in-class system.

As part of our strategy to develop future clinical applications of the RedoxSYS System (the MiOXSYS System’s predecessor product for plasma and whole blood detection), we have conducted initial studies in male reproductive health. Male infertility is a significant medical condition in which oxidative stress is well known to play a substantial role. As such, we believe developing a clinical application to assess oxidative stress levels with the uniquely designed and programmed MiOXSYS System for semen analysis represents a significant commercial opportunity. Oxidative stress is well established as a leading contributing factor to male infertility. Further, a significant proportion of male infertility remains unexplained in part because of the lack of standardized tests available to clinicians and researchers to assess oxidative stress in semen and seminal plasma. This lack of standardization has resulted in poor implementation of semen and plasma analysis around the world. Further, currently available tests are cumbersome, time consuming to perform, and costly.

We conducted initial proof-of-concept clinical studies in male infertility with a leading research center in the U.S., which demonstrated that oxidation-reduction potential effectively measures oxidative stress levels in semen and seminal plasma — and that these levels strongly correlate with established markers of infertility. Semen analysis studies are routinely conducted to assess causes of infertility, so we expect clinicians and oxidative stress researchers to readily integrate the MiOXSYS System into routine use upon the completion of more extensive studies and regulatory clearance for this use. Additional studies are now in the late planning stages that will evaluate the MiOXSYS System’s performance in the detection of oxidative stress levels and correlations with key semen parameters in both healthy and infertile males. The MiOXSYS System must receive 510k de novo clearance from the FDA before we can market it for clinical use in the U.S. Of the $300 million male infertility market projected for 2020, the North American, Middle Eastern, and Asia Pacific markets dominate due to prevalence, awareness of treatment, and availability of treatment resources. Thus, it is important that we have already established distribution relationships and direct access to major oxidative stress researchers in many of these important markets.

Following our initial proof of concept studies with a leading center in the U.S. with the MiOXSYS system, we conducted our CE mark-enabling study with over 300 infertile patients. The two key studies conducted with these leading centers are presented below.

U.S.-Based Proof-of-Concept Clinical Study 

Fifty-one (51) male patients were seen at the Cleveland Clinic’s andrology laboratory for suspected infertility. In addition to standard semen analyses (WHO 5 ^th Edition, 2010), samples were measured for oxidative stress using the MiOXSYS System. Raw sORP values were normalized to sperm concentration (mv/10 ⁶ sperm/mL) and compared across six semen parameters that are associated with fertility: ejaculate volume, concentration, total sperm number, total motility, progressive motility, and normal morphology. Higher sORP values are associated with a higher state of oxidative stress given that sORP is a direct measure of oxidative stress.

Patients with abnormally low ejaculate volume had similar sORP values as those with a normal volume. Those with an abnormally low sperm concentration or overall total number, have significantly higher sORP values than those in the normal range. Abnormally few motile sperm or few sperm with a progressive motility were also associated with significantly higher sORP values than those in the normal range. Lastly, semen samples that had fewer normal sperm had slightly, but not significantly, higher sORP values. Thus, most abnormal semen parameters appear to be associated with higher measures of oxidative stress.

When samples that achieve all six parameters associated with fertile semen are compared to samples that fail one or more of the parameters, the samples that meet the parameters have significantly lower sORP values than those that fail one or more. A cutoff value of 1.635 mv/10 ⁶ sperm/mL separated those that met fertility standards from those that did not. In the current study, 85.7% of samples that met standards fell below this cutoff value, whereas 71.8% of those that failed one or more parameters had sORP values above this cutoff. The probability that a semen sample with a measured sORP value higher than the cutoff is abnormal in at least one of the semen parameters, is 96.5%. Lastly, the more parameters that a semen sample falls within the abnormal range, the higher the sORP values, thus those that are abnormal on five or six parameters have higher sORP values than those that are abnormal on one or two.

Data derived from patients confirms the results obtained in an international fertility clinic. Overall, semen that falls into the abnormal range for concentration, total number, motility, and morphology have higher levels of oxidative stress as indicated by higher sORP values. These values are uniquely obtained using the MiOXSYS System for semen analysis.

In April 2016, we observed encouraging data from two additional prospective studies of the MiOXSYS System that demonstrated its clinical utility as a tool for measuring ORP to assess the degree of oxidative stress levels in human semen.

The first study measured sORP in the semen samples of infertile men that correlated well with the sperm concentration, motility, and morphology. The second study further suggests that sORP is an easy to determine one-step indicator of increased oxidative stress in semen samples of infertile men especially with leukocytospermia. The results are currently being validated in a larger cohort of infertile men.

International Pivotal Clinical Study 

Three-hundred sixty-six (366) male partners from couples seeking fertility advisement in Hamad Medical Corporation in Doha, Qatar were recruited. In addition to standard semen analyses (WHO 5 ^th Edition, 2010), samples were measured for oxidative stress using the MiOXSYS System. Raw sORP values were normalized to sperm concentration (mv/10 ⁶ sperm/mL) and compared across six semen parameters that are associated with fertility: ejaculate volume, concentration, total sperm number, total motility, progressive motility, and normal morphology. Higher sORP values are associated with a higher state of oxidative stress.

Patients with abnormally low ejaculate volume had similar sORP values as those with a normal volume. Those with an abnormally low sperm concentration or overall total number, have significantly higher sORP values than those in the normal range. Abnormally few motile sperm or few sperm with a progressive motility were also associated with significantly higher sORP values than those in the normal range. Lastly, semen samples that had fewer normal sperm had significantly higher sORP values than those that fell into the range of normal morphology. Thus, most abnormal semen parameters appear to be associated with higher measures of oxidative stress.

When samples that achieve all six parameters associated with fertile semen are compared to samples that fail one or more of the parameters, the samples that meet the parameters have significantly lower sORP values than those that fail one or more. A cutoff value of 1.635 mv/10 ⁶ sperm/mL separated those that met fertility standards from those that did not. In the current study, 91.43% of samples that met fertility standards fell below this cutoff value whereas 59.5% of those that failed one or more had sORP values above this cutoff. The probability that a semen sample with a measured sORP value higher than the cutoff is abnormal in at least one of the semen parameters, is 98.6%. Lastly, the more parameters that a semen samples falls within the abnormal range, the higher the sORP values, thus those that are abnormal on five or six parameters have higher sORP values than those that are abnormal on one or two.

Data derived from patients at the Hamad urology department clinic confirms the results obtained in the U.S. fertility clinic. Overall, semen that falls into the abnormal range for concentration, total number, motility, and morphology have higher levels of oxidative stress as indicated by higher sORP values. These values are obtained uniquely using the MiOXSYS System for semen analysis.

Additional clinical and scientific studies have been conducted at leading urology and andrology centers around the world, including seven recently presented studies at the 34 ^th annual meeting of European Society for Reproduction and Human Embryology (ESHRE), which was hosted in Barcelona, Spain July 1-4, 2018. The original abstracts from those presentations are included below.

Investigating the reproducibility and reliability of the ORP measurement as a marker of sperm quality across different fertility centers.

Investigators:

A. Agarwal ¹ , R. Chandrakumar ¹ , M. Arafa ² , H. Elbardisi ² , H. Okada ³ , K. Suzuki ³ , S. Homa ⁴ , A. Killeen ⁵ , B.

Balaban ⁶ , A. Ayaz ⁷ R. Saleh ⁸ , A. Armagan ⁹ , S. Roychoudhury ¹ , S. Sikka ⁷

1. The Cleveland Clinic Foundation, American Center for Reproductive Medicine- Department of Urology- Cleveland Clinic, Cleveland- Ohio, U.S.A.

2. Hamad Medical Corporation, Urology, Doha, Qatar.

3. Dokkyo Medical University, Urology, Koshigaya, Japan.

4. University of Kent, Andrology, London, United Kingdom.

5. The Doctor’s Laboratory, Andrology, London, United Kingdom.

6. American Hospital of Istanbul, Assisted Reproduction Unit, Istanbul, Turkey.

7. Tulane University, Urology, New Orleans, U.S.A.

8. Sohag University, Urology, Sohag, Egypt.

9. Bezmialem Vakif University, Urology, Istanbul, Turkey.

10. Assam University, Life Science and Bioinformatics, Silchar, India.

Study question:

Investigate the reproducibility and reliability of the ORP measurement as a marker of sperm quality across different fertility centers.

Summary answer:

ORP provided equal or less variability than the current semen analysis measures across 9 different fertility centers.

What is known already:

Discrete measures of free radicals, antioxidant activity, and oxidative damage suggest an ambiguous relationship between the redox system and male fertility. Static oxidation-reduction potential (sORP) measures the balance between all oxidants and antioxidants providing a comprehensive status of the redox system. In a previous study, ORP and semen analysis data were compared between two andrology laboratories, in which ORP remained consistent in both datasets individually or in combined data.

Study design, size, duration:

This prospective study was carried out jointly by nine participating fertility centers on 1,644 subjects. The study was approved by the institutional ethics committee and subjects were consented prior to participation. Subjects were grouped into those that had all normal semen parameters (concentration, total cell, total motility, progressive motility, and morphology) according to WHO 2010 guidelines and those who failed to meet one or more criteria. ANOVA/t-test measures were used to determine significant differences.

Participants/materials, setting, methods:

Exclusion criteria included azoospermia, presence of sexually transmitted disease or chronic disease, use of prescription, OTC medications or antioxidants. Samples were collected, and semen parameters assessed using the WHO 2010 guidelines. ORP was measured (mV) using the MiOXSYS system and normalized to sperm concentration (mV/10 ⁶ sperm/ml). For group comparisons, only those samples with a concentration > 0.999x 106 sperm/ml were included.

Main results and the role of chance:

The results of ORP reflects the oxidative relationship between the sperm cell and its environment - the expulsion of oxidants, a by-product of cellular metabolism, into the seminal environment and the deactivation of them by extracellular antioxidants. The resulting ORP measurement reflects the average of the final ten (10) seconds (or twenty readings) of the sample. Of the 1,644 samples, 138 were found to have normal semen parameters and 1,506 were found to have abnormal semen parameters. The mean ORP value (mV/10 6 sperm/ml) in the semen of the abnormal group was 5.07mV/10 6 sperm/ml whereas that of the normal group was 0.88 mV/106 sperm/ml (p = 0.001) . The SD for ORP was equal to or better than most measures, with exception to morphology. However, it should be noted that morphology is the parameter with the highest variability typically found between laboratories.

Limitations, reasons for caution:

Study enrollment of an even number of healthy controls with proven fertility was limited in comparison to the male infertility group.

Wider implications of the findings:

ORP remains stable even with measurable differences in sperm parameters, and it therefore can be used as a supplementary test to semen analysis to confirm oxidative stress and poor semen quality.

Investigating if ORP can reliably predict semen samples that meet normal reference range of WHO criteria from those that fail to meet across fertility centers

Investigators:

A. Agarwal ¹ , H. El bardisi ² , M. Arafa ² , H. Okada ³ , K. Suzuki ³ , S. Homa ⁴ , A. Kileen ⁵ , B. Balaban ⁶ , A. Ayaz ⁷ , R. Saleh ⁸ , A. Armagan ⁹ , C. Dorsey ¹⁰ , S. Roychoudhury ¹¹ , S. Sikka ⁷

1. American Center for Reproductive Medicine- Cleveland Clinic, Urology, Cleveland, U.S.A.

2. Hamad Medical Corporation, Urology, Doha, Qatar.

3. Dokkyo Medical University, Urology, Koshigaya, Japan.

4. University of Kent, Andrology, London, United Kingdom.

5. The Doctors Laboratory, Andrology, London, United Kingdom.

6. American Hospital of Istanbul, Assisted Reproductive Medicine Unit, Istanbul, Turkey.

7. Tulane University, Urology, New Orleans, U.S.A.

8. Sohag University, Urology, Sohag, Egypt.

9. Bezmialem Vakif University, Urology, Istanbul, Turkey.

10. Aytu BioScience, Englewood, U.S.A.

11. Assam University, Life Science and Bioinformatics, Silchar, India.

Study question:

Identify if ORP measure could reliably predict semen samples that meet normal reference range of WHO criteria from those that fail to meet across fertility centers.

Summary answer:

Of the 1,644 samples analyzed, the ORP measure provided the greatest predictability when distinguishing abnormal from normal semen quality among patients undergoing infertility evaluation.

What is known already:

Discrete measures of free radicals, antioxidant activity, and oxidative damage suggest an ambiguous relationship between the redox system and male fertility. Oxidation-reduction potential (ORP) measures the balance between all oxidants and antioxidants providing a comprehensive status of the redox system. In previous studies, ORP has been tested in semen samples using the MiOXSYS System as an alternative method for measuring oxidative stress and distinguishing normal controls from male factor infertility patients; thus, ORP levels may be used to clarify the relationship between the redox system and semen parameters associated with male infertility.

Study design, size, duration:

This prospective study was carried out jointly by nine participating fertility centers on 1,644 subjects. The study was approved by the institutional ethics committee and subjects were consented prior to participation. Subjects were grouped into those that had all normal semen parameters (concentration, total concentration, total motility, progressive motility, and morphology) according to WHO 2010 guidelines and those who failed to meet one or more criteria.

Participants/materials, setting, methods:

Exclusion criteria included azoospermia, presence of sexually transmitted disease or chronic diseases, use of prescription, OTC medications or antioxidants. Samples were collected and semen parameters assessed using the WHO 2010 guidelines. ORP was measured (mV) using the MiOXSYS system and normalized to concentration (mV/10 ⁶ sperm/ml). For group comparisons, only those samples with a concentration > 0.999xl 0 ⁶ sperm/ml were included.

Main results and the role of chance:

In the current study, using an ORP test in conjunction with the semen analysis measures resulted in the detection of abnormal semen quality with a 98.1% sensitivity, 40.6% specificity, 94.7% positive predictive value, and 66.6% negative predictive value. ORP provides a unique and statistically significant contribution in classifying semen quality into abnormal and normal status. A logistic regression performed on all measures (six semen analysis parameters and ORP measure) revealed the predictability of identifying abnormal/ normal semen quality within the samples. Measures were categorized according to overall contribution and significance. ORP ranked the highest (beta 2.88, p = 0.01) in terms of predicting abnormal/ normal semen quality, followed by progressive motility (beta 2.29, p= 0.001), and total motility (beta .494, p= 0.005). Utilizing ORP and semen analysis combined, the overall performance characteristics were 98.1 sensitivity, 40.6 specificity, 93.3% positive predictive value, and 66.7% negative predictive value.

Limitations, reasons for caution:

A number of healthy controls with proven fertility was limited in comparison to the male infertility group. While semen parameters are an important part of the assessment of the infertile male, the gold standard is the reproductive outcome. Pregnancy outcomes were not prospectively measured in the infertile group.

Wider implications of the findings:

Abnormal ORP levels will be especially useful in pinpointing the altered functional status of the sperm in patients with idiopathic male infertility and thereby directing those men toward accurate therapeutic management.

Does an electrochemical assay using the MiOXSYS CE-marked analyzer, consistently meet the requirements and specifications to reliably measure static oxidation reduction potential (sORP) in human semen?

Investigators:

S. Homa ¹ , A. Vassiliou ² , C. Martin ³ , A. Killeen ³ , A. Dawkins ³ , T. Yap ⁴ .

1. Andrology Solutions, Andrology, London, United Kingdom.

2. University of Kent, Department of Biosciences, Canterbury, United Kingdom.

3. The Doctors Laboratory, Department of Andrology, London, United Kingdom.

4. Guy’s Hospital, The Urology Centre, London, United Kingdom.

Study question:

Does an electrochemical assay using the MiOXSYS CE-marked analyzer, consistently meet the requirements and specifications to reliably measure static oxidation reduction potential (sORP) in human semen?

Summary answer:

The MiOXSYS assay is robust, performing according to expectations and has been standardized and validated to reliably and accurately measure sORP in human semen.

What is known already:

Low levels of reactive oxygen species (ROS) are prerequisite for sperm function. Physiological levels of ROS are maintained by antioxidants (reductants) in the local environment. A disturbance in the balance between oxidants and antioxidants leads to oxidative stress (OS), impairing sperm function and genetic integrity. A novel method for assessing OS in semen involves measuring sORP using the MiOXSYS galvanostat-based technology analyzer. ORP measures levels of oxidants and reductants, providing a more comprehensive measure of OS than measurement of ROS alone. Although the MiOXSYS assay effectively measures sORP in semen, it has yet to be fully validated.

Study design, size, duration:

This study was a technical validation of an assay for measuring sORP using the MiOXSYS CE-marked analyzer. It included 40 replicate measurements of control samples on different days and on two separate analyzers. Intra- and inter-technician variability was determined from 40 replicates. The characteristics of sORP in semen and the effects of independent variables were measured in 6 replicate samples from 19 men. Variables included time from ejaculation, temperature, mechanical agitation and freeze-thaw action.

Participants/materials, setting, methods:

The assay requires applying 30µ1 sample onto a disposable sensor which is inserted into the MiOXSYS analyzer and a current is applied. sORP is displayed in mV after 2-4 min. Values were recorded for different operators, days and analyzers using multipurpose handling medium (Irvine Scientific, CA, USA) as a control. Semen samples were obtained from consenting men attending for routine semen analysis to determine the stability of seminal ORP under different conditions.

Main results and the role of chance:

Measurement of sORP (mV) using the CE-marked MiOXSYS platform (Aytu BioScience, CO, USA) demonstrated repeatability between 40 replicates of the same control sample with no significant difference between measurements (mean sORP (mV) ± SEM= 281.5 ± 4.8; CV= 0.1). Readings remained consistent across multiple operators (p= 0.67), separate analyzers (p= 0.95) and on different days (p= 0.09).

Additionally, there was no significant difference between sORP values for 40 replicates of a single semen sample (mean sORP (mV) ± SEM= 45.1 ± 1.0; CV= 0.1). Although readings remain relatively stable in semen up to 45 min post ejaculation (p=0.06), there are significant variations in seminal sORP values across all samples by 60 min post ejaculation (p < 0.005). sORP in semen remains stable after freezing and thawing as values do not change significantly (p= 0.47). This was demonstrated across biological replicates (n= 6).

There was a significant difference between sORP in semen after mechanical agitation using a bench-top vortex (p=0.005) and between samples incubated at different temperatures (2 -6°C, 20-24° (and 36 + 1 °C; p=0.003).

Limitations, reasons for caution:

The validation of the MiOXSYS platform was carried out in one laboratory only. A multicenter validation would assist in confirming the reproducibility and reliability of the test.

Wider implications of the findings:

This simple to use, cost effective assay could be implemented in conjunction with semen analysis providing a welcomed addition to routine diagnostic testing for male infertility. It may be particularly relevant to men with unexplained infertility, whose partners experience a delay in conception, multiple assisted conception failures or miscarriages.

Can sperm oxidative stress, measured as static oxidation-reduction potential (sORP), predict high levels of sperm DNA damage?

Investigators:

A. Lee ¹ , B. Yeel ² , A. Qu1 ³ , S. Shahani ¹ , S. Moskovtsevl ⁴ , C. Librach ^4,5,6

1. cReATe Fertility Center, Andrology, Toronto, Canada.

2. University of Toronto, Physiology, Toronto, Canada.

3. University of Toronto, Medicine, Toronto, Canada.

4. University of Toronto, Obstetrics and Gynaecology, Toronto, Canada.

5. CReATe Fertility Center, Reproductive Endrocrinology, Toronto, Canada.

6. Women’s College Hospital, Gynaecology, Toronto, Canada.

Study question:

Can sperm oxidative stress, measured as static oxidation-reduction potential (sORP), predict high levels of sperm DNA damage?

Summary answer:

sORP was positively correlated (p= 0.002) to DNA damage and a sORP cut-off of 2.37 mV/10 ⁶ sperm/ml was predictive of high levels of DNA damage.

What is known already:

High levels of sperm DNA damage have been associated with decreased pregnancy rates and an increased risk of miscarriage. While the causes are multifactorial, sperm oxidative stress has been shown to play a key role in the etiology of DNA damage. The MiOXSYS system uses sORP, a global measure of the balance between oxidants and reductants, to determine oxidative stress.

Study design, size, duration:

This prospective, institutional REB approved cross-sectional study was performed on 52 male, infertile patients presenting to the Andrology laboratory for routine semen analysis after 2-5 days of abstinence at the CReATe Fertility Center between July 2017 and January 2018.

Participants/materials, setting, methods:

Male infertility patients with leukocytospermia or sperm concentration <1 million/ml were excluded. Semen analysis was conducted as per WHO 2010 guidelines. sORP was measured using the MiOXSYS system. DNA damage was evaluated by standard flow cytometric acridine orange-based assay as DNA Fragmentation Index (DFI). sORP was compared between a high DFI (30%) and low DFI (<30%) group and correlated to semen parameters. Receiver Operator Curve (ROC) analysis determined the sORP cut-off predictive of high DFI.

Main results and the role of chance:

The mean paternal age was 39.2±6.1 years (age range: 28 - 54 years). The mean sperm concentration was 43.0±37.2 M/ml, total motility was 55.2±14.5 %, morphology was 6.5±4.2 %, and DFI was 21.7±10.1 %. A significant positive correlation was found between sORP and DFI (r=0.43, p= 0.002). A significant negative correlation was found between sORP and concentration (r=-0.46, p= 0.0006) and between sORP and morphology (r=-0.33, p=0.02). Mean sORP was significantly higher (p=0.03) in the high DFI group (4.29±2.52mV/10 ⁶ sperm/ml) compared to the low DFI group (1.87±2.17 mV/106 sperm/ml). ROC analysis indicated that a sORP cut-off of 2.37 mV/10 ⁶ sperm/ml had a sensitivity of 75.0%, a specificity of 77.2%, a positive predictive value (PPV) of 37.5% and a negative predictive value (NPV) 94.5%. The area under the ROC (AUROC) was 0.84 (95% Cl: 0.72 - 0.96, p=0.003) and the diagnostic accuracy was 76.9%.

Limitations, reasons for caution:

No additional confirmatory DNA damage methodologies were assessed. The DNA damage assay used in this study is generally considered the gold standard, however several alternatives are also routinely used. Larger standardized studies are needed to confirm the performance characteristics of sORP in predicting high DFI.

Wider implications of the findings:

Requiring as little as 5 minutes to complete and a drop (30 ul) of semen, the MiOXSYS system provides a rapid, cost-effective measure of global oxidative stress easily integrated into clinical workflows. It can be used to specifically identify patients with oxidative stress induced DNA damage for anti-oxidant therapy.

Does evaluation of static oxidation-reduction potential (sORP) with MiOXSYS System relate with WHO 2010 (World Health Organization) sperm parameters and DNA fragmentation in infertile patients?

Investigators:

F. Scarselli ¹ , S. Gatti ¹ , E. Cursio ¹ , A. Pristera ¹ , V. Zazzaro ¹ , M. Minasi ¹ , A. Ruberti ¹ , S. Muzzi ¹ , M. Varricchio ¹ , A. Caragia ¹ , P. Greco ¹ , E. lovine ¹ , V. Casciani ¹ , E. Greco ¹

1. European Hospital, Reproductive Medicine, Rome, Italy.

Study question:

Does evaluation of static oxidation-reduction potential (sORP) with MiOXSYS System relate with WHO 2010 (World Health Organization) sperm parameters and DNA fragmentation in infertile patients?

Summary answer:

There is association between sORP and sperm parameters: sORP levels are higher in patients with lower concentration, motility and morphology and with higher DNA fragmentation.

What is known already:

Spermatozoa have a physiological equilibrium between ROS (Reactive Oxygen Species) and anti - oxidants. This equilibrium assures ordinary functions such as chromatin compaction, lipid membrane modification and sperm-oocyte fusion. When ROS are overproduced this equilibrium is lost, generating oxidative stress (OS), possible cause of lipid peroxidation, apoptosis and DNA damages or fragmentation. Seminal plasma contains anti-oxidant factors (enzymatic and non-enzymatic) to prevent post-ejaculation OS, however many studies demonstrate that in infertile men anti-oxidant levels are low and ROS are high; these concentrations may be influenced by both exogenous and endogenous factors: smoking, alcohol assumption, infection and inflammation of male um-genital tract.

Study design, size, duration:

Semen from 84 infertile men were evaluated, according to WHO 2010, during June and July 2017. On their first visit at Reproductive Medicine Unit, patients underwent semen analysis and sORP evaluation and divided in two groups according to semen morphology. Group A (N=45) included patients with morphology 3 or 4 and group B (N=39) patients with morphology <4. Men with ejaculatory dysfunction, varicocele, sexually transmitted diseases and exposed to radiation or chemotherapeutic agents were excluded.

Participants/materials, setting, methods:

Semen samples were produced after 72 -120 hours of sexual abstinence and analyzed after complete liquefaction, evaluating semen parameters and DNA fragmentation with TUNEL (Terminal deoxynucleotidyl transferase UTP-driven Nick End Labeling) test. MiOXSYS was used to evaluate sORP (expressed in millivolt/sperm concentration 10 ⁶ /ml), a ’snapshot’ of the current balance of the redox system. A higher sORP level indicates an imbalance in the activity of all available oxidants relative to all available antioxidants in ejaculates.

Main results and the role of chance:

Mean male age was 42.1±6.3 in group A and 38.2±6.5 in group B (p<0.05). Semen volume was 3.2±2.3 ml in group A and 3.0±2.0 in group B (NS). Sperm concentration was 47.2±18.0 mil/ml in group A and 24.7±19.0 mil/ml in group B (p< 0.05). Sperm motility (progressive plus not progressive) was 66.7± 7.4 and 44.3± 20.0 in group A and B respectively (p< 0.05). Morphology was 4.2± 0.5 in group A and 2.1± 0.7 in group B (NS). Round cells concentration was 2.3±2.0 and 2.7±2.0 mil/ml in group A and B respectively (NS). DNA fragmentation measure with TUNEL test resulted to be 7.5±6.4 in group A and 11.0±8.1 in group B (p<0.05).

Does varicocelectomy improve Oxidation Reduction Potential (ORP) as an independent measure of oxidative stress (OS) in infertile men?

Investigators:

H. Elbardisi ¹ , A. Majzoub ¹ , S. AISaid ¹ , A. Agarwal ² , R. Henkel ³ , H. Shehadeh ¹ , K. Alrumaihi ¹ , M. Arafa ¹

1. Hamad Medical Corporation, Urology, Doha, Qatar.

2. Cleveland clinic, Urology, Ohio, U.S.A.

3. University of the Western Cape, Medical Bioscience, Bellville, South Africa.

Study question:

Does varicocelectomy improve Oxidation Reduction Potential (ORP) as an independent measure of oxidative stress (OS) in infertile men?

Summary answer:

Elevated oxidative stress is related with poor semen quality in men with varicocele. Varicocele surgery reduces the ORP levels and improves sperm count.

What is known already:

Patients with varicocele tend to have poor sperm quality and are at higher risk of being infertile. Although the pathophysiology of infertility in males with varicocele has been extensively studied, the underlying mechanism remains unclear. Many reports have shown that oxidative stress is one of the underlying mechanisms of poor semen quality in infertile men with varicocele. ORP has been validated as a diagnostic marker of poor semen quality and oxidative stress in men with infertility.

Study design, size, duration:

Prospective, case control study of 43 infertile patients with clinical grade 2-3 varicocele attending a male infertility clinic during January to November 2017.

Participants/materials, setting, methods:

All patients underwent microsurgical subinguinal varicocelectomy. Full medical history and clinical examination was collected. Semen samples were done using WHO Fifth edition criteria and ORP levels were measured by MiOXSYS analyzer before surgery and 3 months post-varicocelectomy. The results were compared by Wilcoxon rank sum test and Spearman’s correlation test and a P value < 0.05 was considered significant.

Main results and the role of chance:

All semen parameters (concentration, total motility and normal sperm form) showed an improvement post- surgery but it was not statistically significant. However, the ORP level was significantly reduced after the surgery (10.4 ± 3.3 vs. 4.6 ± 1.1, p value <0.001). All semen parameters (concentration, total motility and normal form) were negatively correlated with ORP pre-operatively. However, only sperm count maintained this significant negative correlation post operatively.

Limitations, reasons for caution:

The small sample size of this study may be a limitation. However, we report on a pilot study describing the effect of varicocelectomy on oxidative stress measures using the ORP system.

Wider implications of the findings:

ORP can be used as a prognostic factor for counselling patients before varicocelectomy.

Is oxidative stress a clinical indicator for testicular function in infertile men?

Investigators:

M. Arafa ¹ , A. Majzoub ² , A. Agarwal ³ , R. Henkel ⁴ , J. Eliwa ⁵ , S. AISaid ² , A. AIAnsari ¹ , H. Elbardisi ¹

1. Hamad Medical Corporation, Urology/Surgery, Doha, Qatar

2. Hamad General Corporation, Urology, Doha, Qatar

3. Cleveland Clinic, American Center for Reproductive Medicine, Cleveland, U.S.A.

4. University of the Western Cape, Department of Medical Bioscience, Bellville, South Africa

5. University of Kuwait, Faculty of Medicine, Kuwait, Kuwait

Study question:

Is oxidative stress a clinical indicator for testicular function in infertile men?

Summary answer:

Oxidative stress measured by oxidation reduction potential (ORP) can be considered a clinical indicator of spermatogenic and not endocrine function of the testis.

What is known already:

Oxidative stress plays a major role in the pathogenesis of male infertility. ORP is a new marker of oxidative stress that has been shown to correlate inversely with important semen parameters in infertile men. ORP levels can be used to discriminate normal fertile men from infertile males. Besides semen parameters, testicular size and FSH are considered as prognostic markers of spermatogenesis.

Study design, size, duration:

Cross sectional, retrospective study on 660 patients attending a male infertility clinic during January to March 2017.

Participants/materials, setting, methods:

Medical records of recruited patients were reviewed. The data extracted included medical history, clinical examination, semen analysis (WHO 5 ^th edition), ORP (using the MiOXSYS system), hormonal assay including FSH, LH, prolactin, testosterone and estradiol as well as testicular size assessment by scrotal ultrasound. After checking for normal distribution of the data by the Chi-squared test, Spearman rank test was used to detect correlations between different parameters. Statistical significance was defined as p<0.05.

Main results and the role of chance:

ORP showed negative correlation with sperm count (r= -0.793, P< 0.0001), motile sperm count (r= -0.579; P< 0.0001), progressive motility (r= -0.431; P<0.0001) and normal sperm morphology (r= -0.458; P< 0.0001). ORP also correlated with sperm DNA fragmentation (r= 0.264, P< 0.0001). ORP levels showed significant correlation with the testicular size (r= -0.386; P< 0.0001), serum FSH (r= 0.273; P<0.0001) and serum LH concentrations (r= 0.182; P=0.0002), but not with testosterone, estradiol and prolactin.

Limitations, reasons for caution:

The main limitation is the lack of fertile controls in this study.

Wider implications of the findings:

ORP can be used as a marker of spermatogenesis in infertile men. Further studies should be carried out to demonstrate the effect of treating OS on spermatogenesis. Since varicocele patients show seminal oxidative stress, smaller testes and higher FSH values, ORP could possibly be used as adjunct indicator of varicocele.

RedoxSYS System for Research Use & Background of the Development of MiOXSYS

We completed the development of the RedoxSYS System (MiOXSYS’ predecessor product) during the two years preceding the April 2015 Merger. In 2014, we received ISO 13485 certification, demonstrating our compliance with global quality standards in medical device manufacturing. This enabled the launch of the RedoxSYS System into the research market around the world. We also received a CE marking in Europe in January 2016 and Health Canada clearance in March 2016 to begin the market development of the RedoxSYS System as a clinical diagnostic in Europe, Canada, and elsewhere around the world where CE marking is recognized. We launched sales efforts into the research market in late 2014 and since that time have placed the RedoxSYS System at a number of prominent research centers around the world. We expect to leverage these research relationships and build numerous applications in areas where researchers are studying oxidative stress. Currently, there are no available research or clinical platforms that measure oxidation-reduction potential in biologic fluids (i.e., blood, plasma, serum, semen, seminal fluid, cerebrospinal fluid, tissue, and cells). While oxidative stress is commonly studied in research settings around the world (both academia and industry), the current assessment methods are incomplete, time consuming, and often impractical for assessing oxidative stress completely. To position the RedoxSYS System effectively in the research market, we have placed key personnel in the U.S., Europe, and Asia to develop direct relationships with researchers and distributors of research products. Through these relationships we have conducted various proof of concept studies and clinical exploratory studies. Most notably through these collaborations utilizing the RedoxSYS System, we identified the application of oxidation-reduction potential in male infertility assessment while measuring oxidation-reduction potential in semen and seminal plasma. As such, the MiOXSYS System was developed specifically for assessing semen and seminal plasma ORP levels in a clinical setting for a rapid, reliable oxidative stress assessment. While we expect additional clinical applications to be developed through our research and distributor relationships, our near-term focus is on continuing the development of MiOXSYS for use in semen analysis for male infertility assessment.

Background on the MiOXSYS System 

MiOXSYS is a novel, portable device that measures oxidation-reduction potential, or ORP, a global measure of oxidative stress. MiOXSYS is the first and only system that measures ORP in biologic specimens to provide a complete measure of redox balance, which is broadly implicated across a wide range of both acute and chronic conditions.

Oxidation-Reduction Potential’s Role in Assessing Male Infertility 

Oxidation-reduction potential is defined in the published literature as follows:

“ORP in a biological system is an integrated measure of the balance between total oxidants and reductants. In plasma, many constituents contribute to the ORP. Reactive oxygen species (ROS), such as the superoxide ion, hydroxyl radical, hydrogen peroxide, nitric oxide, peroxynitrite, transition metal ions, and hypochlorous acid, contribute to the oxidative potential. Plasma reductants include thiols, vitamin C, tocopherol, β-carotene, lycopene, uric acid, bilirubin, and flavonoids. Enzymes such as superoxide dismutase, or SOD, catalase, and glutathione peroxidase, are involved in the conversion of ROS into less reactive species. ORP monitoring of plasma represents a single measurement that integrates the overall quantitative balance among the oxidants and reductants of the system.”

Given that ORP represents a single, global measure of oxidative stress in a biological system, we believe the potential for ORP to serve as a standardized marker in semen analysis and other aspects of infertility assessment is significant. A major limitation of oxidative stress assays relates to the fact that there is poor standardization in testing. As many factors contribute to oxidative stress (e.g., free radical proliferation, antioxidant depletion, DNA damage, etc.), it is important to have an integrated measure that combines all known and unknown oxidants and reductants in the respective system into one measurement. We believe ORP is an integrated measure of oxidative stress that can be easily and quickly measured with the MiOXSYS System.

In the context of infertility, having an integrated value representing all relevant biologic constituents contributing to oxidative stress will enable simple, robust analysis in a three-minute test. There are various techniques in use to assess semen in cases of male infertility. The most commonly implemented techniques involve DNA fragmentation, oxidative stress analysis, microscopic examination, sperm penetration assays, sperm agglutination, computer assisted semen analysis, and others. The currently available oxidative stress analysis tools are widely considered expensive and cumbersome to use in routine clinical practice. In both developed countries as well as in the developing world, expensive analysis tools and recurring reagent expenses make routine testing nearly impossible to implement with regularity.

The MiOXSYS System Overview 

The MiOXSYS System is comprised of two distinct, patented components that enable a system capable of measuring the ORP and antioxidant capacity of a biological fluid: an analyzer and sensor strips. In mechanical terms, ORP is defined as the potential between a working electrode, and a reference electrode at equilibrium. The RedoxSYS System has been specifically studied in human whole blood, serum, semen, seminal plasma, blood plasma, and other biological fluids.

The MiOXSYS System measures a distinct element to determine a patient’s oxidation reduction potential, which we call Static ORP. Static ORP is defined as the standard potential between a working electrode and a reference electrode with no driving current (or extremely small current). This is proportional to the balance of redox agents and is what is classically defined as ORP. Low ORP values mean that the biological sample is in the normal range of oxidative stress. Higher than normal ORP values means that the biological sample is in a higher oxidation state. Higher levels of seminal oxidative stress (and sORP levels correspondingly) correlate closely with infertility rates in men.

The MiOXSYS Analyzer 

The MiOXSYS analyzer is a portable, lightweight desktop platform that may be used in a clinical or research laboratory or near a patient care area. The analyzer is a small device that accepts an inserted sensor that has collected a small specimen as obtained by traditional specimen collection procedures. The analyzer is battery powered and equipped with a custom 5 lead strip connector. The reader consists of a Galvanostat analog circuit with greater than 1012 MHz input impedance.

The analyzer contains a 10 MHz external crystal (internal 4X PLL for 40 MHz operation), and a programming/serial header is externally accessible. The device has internal power/heart-beat indicator LED, primary storage of 128Mbit (16Mbyte) SPI Flash (3.3V) (Bulk data storage), and secondary storage of 2Mbit (256Kbyte) SPI FRAM (3.3V) (Hi-Speed Storage).

The MiOXSYS analyzer contains a user-friendly interface that is flexibly designed to accommodate multiple endpoints depending upon the specific clinical condition being considered. The interface is LCD, 16x2, with a white backlight, variable delay auto-off time-out. Two status LED indicators are visible through front panel mounted lenses. Further, the reader contains three DPDT push-button switches (Left, Center, Right), power on button(s) for battery mode operation, switch usage switch, audible alerts, strip detection, and test completion signals.

Further, the MiOXSYS analyzer enables data transfer, has USB serial communication, and is configured for data download to a connected PC.

The MiOXSYS analyzer’s power management consists of an external 5VDC power jack with input capacitance and filtering, a boost converter supplied by external 5VDC power or internal Li-Ion battery, and provides main 5VDC digital board supply. The reader functions with or without the battery connected. The battery lasts in excess of 24 hours with continuous operation to enable prolonged use outside of a laboratory setting.

Image of the MiOXSYS Analyzer 

The MiOXSYS Disposable Sensors

The MiOXSYS disposable sensors, via standard biological specimen collection techniques, receive 20 – 40 microliters of a specimen from which the ORP clinical analysis is performed. The ORP sensor strips are small, disposable, and biocompatible and consist of a ceramic substrate and a five-lead configuration. Significant intellectual property surrounds the design, construct, and electrochemical algorithms associated with the sensors.

Image of the MiOXSYS Disposable Sensors 

Regulatory Pathway 

We achieved ISO 13485: 2003 in late 2013 following the successful development of an ISO-compliant medical device quality system. Following the issuance of our ISO certification, we obtained CE marking for the RedoxSYS System, which has enabled initial market development in Europe and markets that accept a CE marking. In December 2015, we obtained CE marking for MiOXSYS following technical validation and clinical study completion in male infertility assessment. In March 2016, we obtained Health Canada Class II Medical approvals for MiOXSYS and have subsequently received Australian TGA approval and Mexican COFEPRIS approval in 2018.

In the U.S., we intend to pursue 510k de novo clearance with the FDA for the MiOXSYS System. We have engaged with the FDA and have received confirmation that MiOXSYS is likely appropriate for the 510k de novo pathway, and we are pursuing regulatory clearance accordingly.

U.S. Commercial Strategy 

If cleared for the infertility intended use, we intend to seek to commercialize the MiOXSYS System as a new tool for the assessment of oxidative stress in infertility in men. We envision pursuing allocating our direct sales effort to high priority urology/andrology laboratories, infertility clinics and reference centers across the U.S. We have identified the primary, influential centers in the U.S. and believe our commercial deployment will be efficient through a focused sales and marketing effort. We intend to seek to sell the MiOXSYS System into individual centers and laboratories but will focus our revenue model on the repeat ordering of the disposable, single use MiOXSYS sensors. We expect to realize a favorable gross margin on the basis of estimated low cost of goods sold on both components of the system. We envision an average selling price for the disposable sensors of approximately $25, but we have not finalized pricing at this point. We envision selling the MiOXSYS analyzers for approximately $2,500 (pricing not final) but may also pursue an instrument rental agreement model with minimum disposable sensor purchase requirements.

We also intend to leverage our current Natesto commercialization efforts in urology target offices, with a distinct focus on urologists and andrologists who treat and manage male infertility.

ROW Commercial Strategy 

Outside the U.S., we have commenced commercialization of the RedoxSYS and MiOXSYS Systems. To efficiently execute our strategy of introducing MiOXSYS to urologists and andrologists around the world, we utilize a network of established distributors in the target markets in Europe and Asia. We have established distribution arrangements with multiple distributors in multiple countries, and through these distributors, we have sold MiOXSYS in over 29 countries around the world. We employ a razor-razorblade revenue model outside the U.S., relying on the initial sale of the MiOXSYS System and repeat purchases of the disposable MiOXSYS sensors by distributors for sale to their direct customers. We also have direct selling relationships with end users and service these accounts directly.

Our Business Development Strategy — Identifying & Acquiring Complementary Assets 

A key growth and value driver for our Company is the ongoing identification and acquisition of novel products for commercialization through our commercial infrastructure. We seek to identify unique products serving large areas of unmet needs that may be non-strategic, undervalued or under-resourced by the company that currently markets the product. We believe that we can continue to acquire strategically aligned products at an appropriate valuation and grow those products via our focused sales and marketing efforts. We will also consider acquiring novel, late-stage development products that represent unique commercial opportunities and can be efficiently developed and subsequently commercialized.

We will continue to look to identify unique product assets to acquire based on specific attributes including but not limited to: therapeutic area/indication; growth potential; intellectual property position (patents, regulatory, manufacturing or development technicalities, etc.); valuation; strategic fit; commercial orientation and other factors. However, during fiscal 2019, our primary focus will be on growing our current core assets, advancing the commercialization and U.S. regulatory development of MiOXSYS, and working towards cash-flow breakeven.

Government Regulation

While we do not have any pharmaceutical product candidates that we are actively developing as of the date of this Report, we may in the future acquire such products. Currently, we are developing one medical device candidate, the MiOXSYS System, for which regulatory approval must be received before we can market this within the U.S. Regulatory approval processes for our current and any future product candidates are discussed below.

Approval Process for Pharmaceutical Products 

In the U.S., pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications, NDAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Pharmaceutical product development in the U.S. typically involves the performance of satisfactory nonclinical, also referred to as pre-clinical, laboratory and animal studies under the FDA’s Good Laboratory Practice, or GLP, regulation, the development and demonstration of manufacturing processes, which conform to FDA mandated current good manufacturing requirements, or cGMP, including a quality system regulating manufacturing, the submission and acceptance of an Investigational New Drug Application (“IND”), which must become effective before human clinical trials may begin in the U.S., obtaining the approval of Institutional Review Boards, or IRBs, at each site where we plan to conduct a clinical trial to protect the welfare and rights of human subjects in clinical trials, adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought, and the submission to the FDA for review and approval of an NDA. Satisfaction of FDA requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

Pre-clinical tests generally include laboratory evaluation of a product candidate, its chemistry, formulation, stability and toxicity, as well as certain animal studies to assess its potential safety and efficacy. Results of these pre-clinical tests, together with chemistry, manufacturing controls and analytical data and the clinical trial protocol, which details the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, along with other requirements must be submitted to the FDA as part of an IND, which must become effective before human clinical trials can begin. The entire clinical trial and its protocol must be in compliance with what are referred to as good clinical practice, or GCP, requirements. The term, GCP, is used to refer to various FDA laws and regulations, as well as international scientific standards intended to protect the rights, health and safety of patients, define the roles of clinical trial sponsors and assure the integrity of clinical trial data.

An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the intended conduct of the trials and imposes what is referred to as a clinical hold. Pre-clinical studies generally take several years to complete, and there is no guarantee that an IND based on those studies will become effective, allowing clinical testing to begin. In addition to FDA review of an IND, each medical site that desires to participate in a proposed clinical trial must have the protocol reviewed and approved by an independent IRB or Ethics Committee, or EC. The IRB considers, among other things, ethical factors, and the selection and safety of human subjects. Clinical trials must be conducted in accordance with the FDA’s GCP requirements. The FDA and/or IRB may order the temporary, or permanent, discontinuation of a clinical trial or that a specific clinical trial site be halted at any time or impose other sanctions for failure to comply with requirements under the appropriate entity jurisdiction.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1 clinical trials, a product candidate is typically introduced either into healthy human subjects or patients with the medical condition for which the new drug is intended to be used.

The main purpose of the trial is to assess a product candidate’s safety and the ability of the human body to tolerate the product candidate. Phase 1 clinical trials generally include less than 50 subjects or patients. During Phase 2 trials, a product candidate is studied in an exploratory trial or trials in a limited number of patients with the disease or medical condition for which it is intended to be used in order to: (i) further identify any possible adverse side effects and safety risks, (ii) assess the preliminary or potential efficacy of the product candidate for specific target diseases or medical conditions, and (iii) assess dosage tolerance and determine the optimal dose for Phase 3 trials. Phase 3 trials are generally undertaken to demonstrate clinical efficacy and to further test for safety in an expanded patient population with the goal of evaluating the overall risk-benefit relationship of the product candidate. Phase 3 trials are generally designed to reach a specific goal or endpoint, the achievement of which is intended to demonstrate the candidate product’s clinical efficacy and adequate information for labeling of the approved drug.

There are three main types of NDAs, which are covered by Section 505 of the FDC Act: (1) an application that contains full reports of investigations of safety and efficacy (Section 505(b)(1)); (2) an application that contains full reports of investigations of safety and effectiveness but where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the application has not obtained a right of reference (Section 505(b)(2)); and (3) an application that contains information to show that the proposed product is identical in active ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics, and intended use, among other things, to a previously approved product (Section 505(j)). Section 505(b)(2) expressly permits the FDA to rely, for approval of an NDA, on data not developed by the applicant.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the U.S. The NDA must include the results of all pre-clinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the FDA’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drug products are reviewed within ten months; most applications for priority review drugs are reviewed in six months. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA may also refer applications for novel drug products, or drug products which present difficult questions of safety or efficacy, to an advisory committee — typically a panel that includes clinicians and other experts — for review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with cGMP is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks.

REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

The Hatch-Waxman Act 

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book that: 1) the required patent information has not been filed; 2) the listed patent has expired; 3) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or 4) the listed patent is invalid or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any non-patent exclusivity listed in the Orange Book for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing no previously approved active ingredients during which ANDAs for generic versions of those drugs cannot be submitted, unless the submission contains a Paragraph IV challenge to a listed patent — in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity during which FDA cannot grant effective approval of an ANDA based on the approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use; the approval of which was required to be supported by new clinical trials conducted by, or for, the applicant.

Post-Approval Regulation 

Even if a product candidate receives regulatory approval, the approval is typically limited to specific clinical indications. Further, even after regulatory approval is obtained, subsequent discovery of previously unknown problems with a product may result in restrictions on its use or even complete withdrawal of the product from the market. Any FDA-approved products manufactured or distributed by us are subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse events or experiences. Further, drug manufacturers, and their subcontractors, are required to register their establishments with the FDA and state agencies. They are subject to periodic inspections by the FDA and state agencies for compliance with cGMP, which impose rigorous procedural and documentation requirements upon us and our contract manufacturers. We cannot be certain that we or our present or future contract manufacturers or suppliers will be able to comply with cGMP regulations and other FDA regulatory requirements. Failure to comply with these requirements may result in, among other things, total or partial suspension of production activities, failure of the FDA to grant approval for marketing, and withdrawal, suspension, or revocation of marketing approvals.

If the FDA approves one or more of our product candidates, we and the contract manufacturers we use for manufacture of clinical supplies and commercial supplies must provide certain updated safety and efficacy information. Product changes, as well as certain changes in the manufacturing process or facilities where the manufacturing occurs, or other post-approval changes may necessitate additional FDA review and approval. The labeling, advertising, promotion, marketing and distribution of a drug or biologic product or medical devices, also must be in compliance with FDA and Federal Trade Commission, or FTC, requirements which include, among others, standards and regulations for direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The FDA and FTC have very broad enforcement authority, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing us to correct deviations from regulatory standards and enforcement actions that can include seizures, fines, injunctions and criminal prosecution.

Approval Process for Medical Devices 

In the U.S., the FDCA, FDA regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. The FDA regulates the design, manufacturing, servicing, sale and distribution of medical devices, including molecular diagnostic test kits and instrumentation systems. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Unless an exemption applies, each medical device we wish to distribute commercially in the U.S. will require marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing authorization applicable to a device are premarket notification, also called 510k de novo clearance, and premarket approval, also called PMA approval. The type of marketing authorization is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements for device labeling, premarket notification and adherence to the FDA’s current Good Manufacturing Practices, or cGMP, known as the Quality System Regulations, or QSR. Class II devices are intermediate risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness solely through general or special controls and include life sustaining, life-supporting or implantable devices, devices of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury.

Most Class I devices and some Class II devices are exempted by regulation from the 510k de novo clearance requirement and can be marketed without prior authorization from the FDA. Some Class I devices that have not been so exempted and Class II devices are eligible for marketing through the 510k de novo clearance pathway. By contrast, devices placed in Class III require PMA approval prior to commercial marketing. The PMA approval process is more stringent, time-consuming and expensive than the 510k de novo clearance process, however, the 510k de novo clearance process has also become increasingly stringent and expensive. The FDA has provided initial guidance to us that the MiOXSYS System is likely appropriate for the 510k de novo clearance process.

510k de novo Clearance. To obtain 510k de novo clearance for a medical device, an applicant must submit a premarket notification to the FDA demonstrating that the device is “substantially equivalent” to a device legally marketed in the U.S. that is not subject to PMA approval, commonly known as the “predicate device.” A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics or (ii) different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. A showing of substantial equivalence sometimes, but not always, requires clinical data. Generally, the 510k de novo clearance process can exceed 90 days and may extend to a year or more.

After a device has received 510k de novo clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a new 510k de novo clearance or PMA approval and payment of an FDA user fee. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510k de novo clearance or PMA approval is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

Before we can submit a medical device for 510k de novo clearance, we may have to perform a series of generally short studies over a period of months, including method comparison, reproducibility, interference and stability studies to ensure that users can perform the test successfully. Some of these studies may take place in clinical environments but are not usually considered clinical trials. For PMA submissions, we would generally be required to conduct a longer clinical trial over a period of years that supports the clinical utility of the device and how the device will be used.

Although clinical investigations of most devices are subject to the investigational device exemption, or IDE, requirements, clinical investigations of diagnostic tests, including our products and products under development, are generally exempt from the IDE requirements. Thus, clinical investigations by intended users for intended uses of our products generally do not require the FDA’s prior approval but may require approval of an Institutional Review Board, or IRB, and written informed consent by the patient, provided the clinical evaluation testing is non-invasive, does not require an invasive sampling procedure that presents a significant risk, does not intentionally introduce energy into the subject and is not used as a diagnostic procedure without confirmation by another medically established test or procedure. In addition, our products must be labeled per FDA regulations “for research use only-RUO” or “for investigational use only-IUO,” and distribution controls must be established to assure that our products distributed for research, method comparisons or clinical evaluation studies are used only for those purposes.

Regulation after FDA Clearance or Approval 

Any devices we manufacture or distribute pursuant to clearance or approval by the FDA are subject to pervasive and continuing regulation by the FDA and certain state agencies. We are required to adhere to applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which include, among other things, testing, control and documentation requirements. Noncompliance with these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510k de novo clearance or PMA approval of devices, withdrawal of marketing approvals and criminal prosecutions, fines and imprisonment. Our contract manufacturers’ facilities operate under the FDA’s cGMP requirements.

Foreign Regulatory Approval 

Outside of the U.S., our ability to market our product candidates will be contingent also upon our receiving marketing authorizations from the appropriate foreign regulatory authorities, whether or not FDA approval has been obtained. The foreign regulatory approval process in most industrialized countries generally encompasses risks similar to those we will encounter in the FDA approval process. The requirements governing conduct of clinical trials and marketing authorizations, and the time required to obtain requisite approvals, may vary widely from country to country and differ from those required for FDA approval.

In the European Union, we are required under the European Medical Device Directive (Council Directive 93/42/EEC) to affix the CE mark to certain of our products in order to sell the products in member countries of the European Union. The CE mark is an international symbol that represents adherence to certain essential principles of safety and effectiveness mandated in the European Medical Device Directive, which are referred to as the “essential requirements”. Once affixed, the CE mark enables a product to be sold within the European Economic Area, or EEA, which is composed of the 28-member states of the EU plus Norway, Iceland and Liechtenstein as well as other countries that accept the CE mark.

To demonstrate compliance with the essential requirements, we must undergo a conformity assessment procedure which varies according to the type of medical device and its classification. Except for low risk medical devices (Class I with no measuring function and which are not sterile) where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the essential requirements of the Medical Devices Directive, a conformity assessment procedure requires the intervention of an organization accredited by a member state of the EEA to conduct conformity assessments, or a notified body. Depending on the relevant conformity assessment procedure, the notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. The notified body issues a CE certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements. This certificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.

If we modify our devices, we may need to apply for permission to affix the CE mark to the modified product. Additionally, we may need to apply for a CE mark for any new products that we may develop in the future. Certain products regulated as medical devices according to EC-Directives are subject to vigilance requirements for reporting of adverse events.

We will be subject to additional regulations in other countries in which we market, sell and import our products, including Canada. We or our distributors must receive all necessary approvals or clearance prior to marketing and/or importing our products in those markets.

The International Standards Organization, or ISO, promulgates internationally recognized standards, including those for the requirements of quality systems. To support ISO certifications, surveillance audits are conducted by a notified body yearly and recertification audits every three years that assess continued compliance with the relevant ISO standards.

Other Regulatory Matters 

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the U.S., the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments. In the U.S., sales, marketing and scientific/educational programs must also comply with state and federal fraud and abuse laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the Health Care Reform Law, as amended by the Health Care and Education Affordability Reconciliation Act, or ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. The handling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive recordkeeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The failure to comply with regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines, imprisonment or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government contracts. In addition, even if a firm complies with FDA and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

U.S. Patent Term Restoration and Marketing Exclusivity 

Depending upon the timing, duration and other specific aspects of the FDA approval of our drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, if any of our NDA’s are approved, we intend to apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond the current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to obtain approval of an NDA for a new chemical entity, or NCE. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. Recently, the FDA stated that it may change its interpretation of 5-year NCE exclusivity determinations to apply to each drug substance in a fixed-combination drug product, not for the drug product as a whole. If this change is implemented, for example, a fixed-combination drug product that contains a drug substance with a single, new active moiety would be eligible for 5-year NCE exclusivity, even if the fixed-combination also contains a drug substance with a previously approved active moiety. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a Section 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. The FDCA also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances. Pediatric exclusivity is another type of regulatory market exclusivity in the U.S.. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

Reimbursement for our Products in the U.S. 

Natesto and ZolpiMist are covered by many commercial insurance providers and pharmacy benefit management companies and are largely dependent upon reimbursement for continued use in the U.S. market. Natesto and ZolpiMist are also covered under a Rebate Agreement between us and Centers for Medicare and Medicaid Services. This, in turn, enables states to offer public payer coverage of Natesto and ZolpiMist through their separate Medicare and public assistance programs. Additionally, privately managed Medicare Part D plans may choose to cover Natesto and ZolpiMist prescriptions through their plans’ pharmacy benefits. We do not anticipate that the sales of the MiOXSYS System, if approved for sale in the U.S., will be heavily dependent upon reimbursement by third-party payors in the U.S. given that infertility testing and treatment is infrequently covered by commercial insurers or public payors. Traditionally, sales of pharmaceuticals, diagnostics, ad devices that are not “lifestyle” indications depend, in part, on the extent to which products will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products and services.

Lack of third-party reimbursement for our product candidate or a decision by a third-party payor to not cover our product candidates could reduce physician usage of the product candidate and have a material adverse effect on our sales, results of operations and financial condition.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the U.S. and generally tend to be significantly lower.

DEA Regulation 

Natesto and ZolpiMist, already approved by the FDA, are both a “controlled substance” as defined in the Controlled Substances Act of 1970, or CSA, because Natesto contains testosterone and ZolpiMist contains zolpidem tartrate. As a result, the U.S. Drug Enforcement Agencies, or DEA, have Natesto listed and regulated as a Schedule III substance and have ZolpiMist listed and regulated as a Schedule IV substance.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. Similarly, separate registrations are also required for separate facilities.

The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a periodic basis. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance. In addition, special permits and notification requirements apply to imports and exports of narcotic drugs.

The DEA establishes annually an aggregate quota for how much of a controlled substance may be produced in total in the U.S. based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our or our manufacturers’ quotas of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay, limitation or refusal by the DEA in establishing our or our manufacturers’ quota for controlled substances could delay or stop our clinical trials or product launches, which could have a material adverse effect on our business, financial position and results of operations.

To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in administrative, civil or criminal enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could result in criminal proceedings.

Individual states also independently regulate controlled substances. We and our manufacturers will be subject to state regulation on distribution of these products, including, for example, state requirements for licensures or registration.

Intellectual Property 

Aytu has an exclusive license from Acerus Pharmaceuticals Corporation for the U.S. rights to intellectual property related to a nasal gel drug product containing testosterone to treat hypogonadism in males, including the FDA approved product Natesto®, as well as an authorized generic version and OTC versions thereof. The license includes sublicense rights to intellectual property owned by Mattern Pharmaceuticals and exclusively licensed to Acerus by Mattern Pharmaceuticals. The sublicensed intellectual property includes four Orange Book listed patents directed at nasal gel formulations containing testosterone or methods of testosterone replacement therapy by nasal administration of the same. It further includes three patents that are not listed in the Orange Book directed at a testosterone formulation, a method of making a testosterone formulation and a method for reducing physical or chemical interactions between a nasal testosterone formulation and a plastic container.

The Acerus license also grants rights to intellectual property owned by Acerus which includes nine nonprovisional patent applications, some of which may be abandoned. These patent applications include at least four pending applications directed to testosterone titration methods, intranasal testosterone bio-adhesive gel formulations, and controlled release testosterone formulations.

We have an extensive range of intellectual property for MiOXSYS and RedoxSYS. We have patent protection in the U.S. and several other large markets worldwide for MiOXSYS and the oxidation-reduction potential platform. Specifically, we have numerous patents issued and pending for the RedoxSYS/MiOXSYS systems, the sensors, and their clinical and scientific use in the U.S., Europe, Canada, Israel, Japan, and China.

Our patent portfolio related to RedoxSYS/MiOXSYS is focused on the U.S. and core foreign jurisdictions which include Europe, Canada, Israel, Japan and China. The portfolio is supported in the U.S. and core foreign jurisdictions and consists of 43 issued patents and 23 pending applications.

The portfolio primarily consists of eight families filed in the U.S. and in core foreign jurisdictions. The first family includes seventeen issued patents and one pending application with claims directed to the measurement of the ORP of a patient sample to evaluate various conditions. The standard 20-year expiration for patents in this family is in 2028. The second family includes two pending U.S. applications, two issued U.S. patents, two pending applications in core foreign jurisdictions and four issued patents in core foreign jurisdictions with claims directed to the measurement of the ORP capacity of a patient sample to evaluate various conditions. The standard 20-year expiration for patents in this family is in 2033. The third family includes sixteen issued patents and two pending applications with claims directed to devices and methods for the measurement of ORP and ORP capacity. The standard 20-year expiration for patents in this family is in 2032. The fourth family includes one pending U.S. application, one issued U.S. patent, two issued patents in core foreign jurisdictions and four pending applications in core foreign jurisdictions with claims directed to multiple layer gel test strip measurement devices and methods of making for use in measuring ORP and ORP capacity. The standard 20-year expiration for patents in this family is in 2033. The fifth family includes one pending U.S. application and seven pending applications in core foreign jurisdictions with claims directed to methods for determining fertility characteristics from the ORP of a biological sample. The standard 20-year expiration for patents in this family is in 2035. The sixth family includes one pending U.S. application with claims directed to methods for evaluating stroke patients from the ORP characteristics of a biological sample. The standard 20-year expiration for patents in this family is in 2036. The seventh family includes one pending application filed under the Patent Cooperation Treaty with claims directed to methods for embryo selection from the ORP characteristics of a biological sample. The standard 20-year expiration for patents in this family is in 2038. The eighth family includes one pending U.S. provisional application with disclosure directed to methods for determining fertility characteristics from the ORP of a biological sample.

We also maintain trade secrets and proprietary know-how that we seek to protect through confidentiality and nondisclosure agreements. These agreements may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of confidential and proprietary information. If we do not adequately protect our trade secrets and proprietary know-how, our competitive position and business prospects could be materially harmed.

We expect to seek U.S. and foreign patent protection for drug and device products we discover, as well as therapeutic and device products and processes. We expect also to seek patent protection or rely upon trade secret rights to protect certain other technologies which may be used to discover and characterize drugs and device products and processes, and which may be used to develop novel therapeutic and diagnostic products and processes.

The patent positions of companies such as ours involve complex legal and factual questions and, therefore, their enforceability cannot be predicted with any certainty. Our issued and licensed patents, and those that may be issued to us in the future, may be challenged, invalidated or circumvented, and the rights granted under the patents or licenses may not provide us with meaningful protection or competitive advantages. Our competitors may independently develop similar technologies or duplicate any technology developed by us, which could offset any advantages we might otherwise realize from our intellectual property. Furthermore, even if our product candidates receive regulatory approval, the time required for development, testing, and regulatory review could mean that protection afforded us by our patents may only remain in effect for a short period after commercialization. The expiration of patents or license rights we hold could adversely affect our ability to successfully commercialize our pharmaceutical drugs or diagnostics, thus harming our operating results and financial position.

We will be able to protect our proprietary intellectual property rights from unauthorized use by third parties primarily to the extent that such rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. If we must litigate to protect our intellectual property from infringement, we may incur substantial costs and our officers may be forced to devote significant time to litigation-related matters. The laws of certain foreign countries do not protect intellectual property rights to the same extent as do the laws of the U.S. Our pending patent applications, or those we may file or license from third parties in the future, may not result in patents being issued. Until a patent is issued, the claims covered by an application for patent may be narrowed or removed entirely, thus depriving us of adequate protection. As a result, we may face unanticipated competition, or conclude that without patent rights the risk of bringing product candidates to market exceeds the returns we are likely to obtain. We are generally aware of the scientific research being conducted in the areas in which we focus our research and development efforts, but patent applications filed by others are maintained in secrecy for at least 18 months and, in some cases in the U.S., until the patent is issued. The publication of discoveries in scientific literature often occurs substantially later than the date on which the underlying discoveries were made. As a result, it is possible that patent applications for products similar to our drug or diagnostic products and product candidates may have already been filed by others without our knowledge.

The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights, and it is possible that our development of products and product candidates could be challenged by other pharmaceutical or biotechnology companies. If we become involved in litigation concerning the enforceability, scope and validity of the proprietary rights of others, we may incur significant litigation or licensing expenses, be prevented from further developing or commercializing a product or product candidate, be required to seek licenses that may not be available from third parties on commercially acceptable terms, if at all, or subject us to compensatory or punitive damage awards. Any of these consequences could materially harm our business.

Competition 

The healthcare industry is highly competitive and subject to significant and rapid technological change as researchers learn more about diseases and develop new technologies and treatments. Significant competitive factors in our industry include product efficacy and safety; quality and breadth of an organization’s technology; skill of an organization’s employees and its ability to recruit and retain key employees; timing and scope of regulatory approvals; government reimbursement rates for, and the average selling price of, products; the availability of raw materials and qualified manufacturing capacity; manufacturing costs; intellectual property and patent rights and their protection; and sales and marketing capabilities. Market acceptance of our current products and product candidates will depend on a number of factors, including: (i) potential advantages over existing or alternative therapies or tests, (ii) the actual or perceived safety of similar classes of products, (iii) the effectiveness of sales, marketing, and distribution capabilities, and (iv) the scope of any approval provided by the FDA or foreign regulatory authorities.

We are a very small specialty pharmaceuticals company compared to other companies that we are competing against. Our current and potential competitors include large pharmaceutical, biotechnology, diagnostic, and medical device companies, as well as specialty pharmaceutical and generic drug companies. Many of our current and potential competitors have substantially greater financial, technical and human resources than we do and significantly more experience in the marketing, commercialization, discovery, development and regulatory approvals of products, which could place us at a significant competitive disadvantage or deny us marketing exclusivity rights. Specifically, our competitors will most likely have larger sales teams and have more capital resources to support their products then we do.

Accordingly, our competitors may be more successful than we may be in achieving widespread market acceptance and obtaining FDA approval for product candidates. We anticipate that we will face intense and increasing competition as new products enter the market, as advanced technologies become available and as generic forms of currently branded products become available. Finally, the development of new treatment methods for the diseases we are targeting could render our products non-competitive or obsolete.

We cannot assure you that any of our products that we acquire or successfully develop will be clinically superior or scientifically preferable to products developed or introduced by our competitors.

Our current approved products compete in highly competitive fields whereby there are numerous options available to clinicians including generics. These generic treatment options are frequently less expensive and more widely available.

Natesto

Natesto competes in a growing market. The U.S. TRT market is large, with annual revenues in the U.S. in 2017 of approximately $1.8 billion. At the current market size of approximately $1.8 billion, a product with 5% market penetration could achieve sales of approximately $90 million annually, assuming comparatively similar product pricing and reimbursement levels as seen with other TRTs.

The U.S. prescription testosterone market is comprised primarily of topically applied treatments in the form of gels, solutions, and patches. Testopel®, an injectable pellet typically implanted directly under the skin by a physician, is also FDA-approved. AndroGel is the market-leading TRT and is marketed by AbbVie.

ZolpiMist

ZolpiMist competes in a large prescription category with over 43 million prescriptions written annually and generating $1.8 billion in wholesale sales. The non-benzodiazepine prescription sleep aid market is dominated by zolpidem tartrate (brand name Ambien), which accounts for approximately 30 million prescriptions annually. Various forms of zolpidem tartrate are commercially available, including both immediate release and controlled release tablets as well as orally dissolving tablets. ZolpiMist is the only oral spray formulation of zolpidem tartrate and, if only achieving 1% of the ‘zolpidem market’ this product could generate 300,000 prescriptions annually in the U.S. No zolpidem tartrate products are actively marketed in the U.S., so we believe our sales force will have the ability to effectively influence physician prescribing and grow ZolpiMist prescriptions.

MiOXSYS 

With respect to MiOXSYS competitive offerings, there are other oxidative stress diagnostic tests available throughout the world, although none are approved in the U.S. for clinical use, and none are used specifically in semen analysis. ‘General use’ oxidative stress diagnostic systems that are marketed for clinical use outside the U.S. include the FRAS 4 system (H&D srl), FREE Carpe Diem (Diacron International), and the FORM and FORMPlus systems (Callegari srl). These systems are used in both research and clinical settings but do not generate significant sales in the clinical setting and, again, are not used specifically in semen analysis for infertility testing. These potentially competitive oxidative stress systems’ testing parameters differ significantly from MiOXSYS and would need to demonstrate clinical superiority to MiOXSYS in order to substantially detract from MiOXSYS prescribing and sales. Additionally, to our knowledge, these systems have not demonstrated clinical feasibility in human semen or seminal plasma. These tests are used for research use, but they do not measure oxidation-reduction potential and, we believe, are not directly competitive to the MiOXSYS System in the context of research use.

Research and Development 

Our strategy is to minimize our research and development activities. When we do conduct research and development, we intend to utilize consultants with domain experience for research, development and regulatory guidance.

Our MiOXSYS System has been developed in conjunction with numerous medical device and diagnostic development consultants. Further, we have relationships with regulatory consultants who are actively assisting in the development of our regulatory strategy with the FDA as MiOXSYS advances to this stage. To complement our internal clinical research efforts with the MiOXSYS System, we have engaged with numerous academic and private researchers around the world to identify and develop research and clinical applications for the MiOXSYS System. Through these engagements we have access to data and analyses that, we believe, will enable us to develop new uses for the MiOXSYS and RedoxSYS systems.

Manufacturing 

Our business strategy is to use cGMP compliant contract manufacturers for the manufacture of clinical supplies as well as for commercial supplies if required by our commercialization plans, and to transfer manufacturing responsibility to our collaboration partners when possible.

Natesto

On April 22, 2016, we entered into a license and supply agreement with Acerus pursuant to which we will pay Acerus a supply price per unit of the greater of (i) a fixed percentage of Acerus’ cost of goods sold for Natesto, not to exceed a fixed ceiling price and (ii) a moderate double digit percentage of net sales for the first year of the agreement, that increased in each of the second and third years and remains constant after that.

MiOXSYS/RedoxSYS 

We secured supply and quality agreements with manufacturers for both the RedoxSYS and MiOXSYS instruments as well as the RedoxSYS and MiOXSYS sensor strips. Both manufacturers hold long-standing ISO 13485:2003 certifications and are established medical device manufacturers. Both manufacturers have high volume manufacturing capacity such that production volumes can be easily scaled. Both manufacturers have been audited by our quality engineers and are fully compliant.

ZolpiMist

On June 11, 2018 we entered into a licensing agreement with Magna Pharmaceuticals, Inc. pursuant to which we assumed a manufacturing agreement with a cGMP compliant contract manufacturer. We expect to continue manufacturing through that third-party and have made an initial purchase of product the we expect to supply us for the foreseeable future.

Employees 

As of August 31, 2018, we had 57 full-time employees and utilized the services of a number of consultants on a temporary basis. Overall, we have not experienced any work stoppage and do not anticipate any work stoppage in the foreseeable future. None of our employees is subject to a collective bargaining agreement. Management believes that relations with our employees are good.

Available Information

Our principal executive offices are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112 USA, and our phone number is (720) 437-6580.

We maintain a website on the internet at http://www.aytubio.com . We make available, free of charge, through our website, by way of a hyperlink to a third-party site that includes filings we make with the SEC website ( www.sec.gov) , our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports electronically filed or furnished pursuant to Section 15(d) of the Exchange Act. The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC. In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C., 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Code of Ethics

We have adopted a written code of ethics that applies to our officers, directors and employees, including our principal executive officer and principal accounting officer. We intend to disclose any amendments to, or waivers from, our code of ethics that are required to be publicly disclosed pursuant to rules of the SEC by filing such amendment or waiver with the SEC. This code of ethics and business conduct can be found in the corporate governance section of our website, http://www.aytubio.com .