Post-Effective amendments for registration statement

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As filed with the Securities a nd Exchange Commission on January 27, 2017

Registration No. 333-213738

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933



AYTU BIOSCIENCE, INC.

(Exact name of registrant as specified in its charter)



Delaware 2834 47-0883144
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)

373 Inverness Parkway
Suite 206
Englewood, Colorado 80112
(720) 437-6580

(Address, including zip code and telephone number, including
area code, of registrant’s principal executive offices)



Joshua R. Disbrow
Chief Executive Officer
373 Inverness Parkway
Suite 206
Englewood, Colorado 80112
Telephone: (720) 437-6580

(Name, address, including zip code and telephone number, including area code, of agent for service)



Copies to:

Michael J. Lerner, Esq.
Steven M. Skolnick, Esq.
Lowenstein Sandler, LLP
1251 Avenue of the Americas
New York, New York 10020
(646) 414-6947



If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x


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STATEMENT PURSUANT TO RULE 429

The registrant is filing a single prospectus in this registration statement, pursuant to Rule 429 under the Securities Act of 1933, as amended. The prospectus is a combined prospectus relating to the Registration Statement on Form S-1 (Registration No. 333-213738), which was previously declared effective by the Securities and Exchange Commission (“SEC”) on October 27, 2016 (the “October 2016 Registration Statement), and (ii) the Registration Statement on Form S-1 (Registration No. 333-210144), which was previously declared effective by the SEC on May 2, 2016 (the “May 2016 Registration Statement” and, together with the October 2016 Registration Statement, the “Prior Registration Statements”). Pursuant to Rule 429, this Post-Effective Amendment No. 1 (this “Post-Effective Amendment”) to the October 2016 Registration Statement also constitutes a post-effective amendment to the May 2016 Registration Statement. The post-effective amendment to the May 2016 Registration Statement will become effective concurrently with the effectiveness of this Post-Effective Amendment in accordance with Section 8(a) of the Securities Act.

EXPLANATORY NOTE

This Post-Effective Amendment is being filed to update both of the Prior Registration Statements. This Post-Effective Amendment concerns only (i) the exercise of warrants to purchase up to an aggregate of 6,020,245 shares of common stock, par value $0.0001 per share (“common stock”), of Aytu BioScience, Inc. (the “October 2016 Warrants”), which transaction was initially registered under the October 2016 Registration Statement, and (ii) the exercise of warrants to purchase up to an aggregate of 1,733,322 shares of common stock (the “May 2016 Warrants” and, together with the October 2016 Warrants, the “Original Warrants”), which transaction was initially registered under the May 2016 Registration Statement.

As of the date of filing of this Post-Effective Amendment, no further offering will be made of the October 2016 Warrants or the shares of common stock originally sold with the October 2016 Warrants under the October 2016 Registration Statement, or of the May 2016 Warrants or the shares of common stock initially sold with the May 2016 Warrants under the May 2016 Registration Statement. The initial offering and sale of such securities under the October 2016 Registration Statement was completed on November 2, 2016, and under the May 2016 Registration Statement was completed on May 6, 2016.

This Post-Effective Amendment relates to our temporary offer to all holders of the Original Warrants to exercise the warrants at a reduced exercise price of $0.75 per share of common stock, pursuant to the terms and subject to the conditions of the Offer to Amend and Exercise Warrants to Purchase Common Stock (the “Offer to Exercise”), filed as Exhibit (a)(1)(B) to our Schedule TO filed with the Securities and Exchange Commission on January 27, 2016.

All applicable registration fees were paid at the time of the original filing of the October 2016 Registration Statement on September 21, 2016 and the May 2016 Registration Statement on March 11, 2016.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JANUARY 27, 2017

Issuance of up to 7,753,567 Shares of Common Stock
upon Exercise of Warrants

[GRAPHIC MISSING]

Aytu BioScience, Inc.

We previously sold (i) an aggregate of 5,735,000 shares of our common stock, par value $0.0001 per share, together with warrants to purchase up to an aggregate of 6,020,245 shares of our common stock (including warrants for up to 285,245 shares issued pursuant to the exercise of an over-allotment option) (the “October 2016 Warrants), in our public offering consummated on November 2, 2016, and (ii) an aggregate of 1,562,500 shares of common stock together with warrants to purchase up to an aggregate of 1,733,322 shares of common stock (including warrants for up to 170,822 shares of common stock issued pursuant to the exercise of an over-allotment option) (the “May 2016 Warrants” and, together with the October 2016 Warrants, the “Original Warrants”) in our public offering consummated on May 6, 2016.

This prospectus relates to the issuance of up to 7,753,567 shares of common stock pursuant to the exercise of outstanding Original Warrants, including (i) October 2016 Warrants for up to an aggregate of 6,020,245 shares of common stock and (ii) May 2016 Warrants for up to an aggregate of 1,733,322 shares of common stock. The Original Warrants are exercisable for a five-year term following the issue date of the warrants, which was November 2, 2016 for the October 2016 Warrants and May 6, 2016 for the May 2016 Warrants.

The October 2016 Warrants have an exercise price of $1.86 per share and the May 2016 Warrants have an exercise price of $6.00 per share, provided that we are offering holders of the Original Warrants the temporary opportunity to exercise such Original Warrants at the reduced price of $0.75 per share pursuant to the terms and subject to the conditions of the Offer to Amend and Exercise Warrants to Purchase Common Stock, filed as Exhibit (a)(1)(B) to our Schedule TO filed with the Securities and Exchange Commission on January 27, 2017 (the “Offer to Exercise”). Pursuant to the Offer to Exercise, the temporary opportunity to exercise the warrants at the reduced exercise price will initially be available until February 27, 2017, subject to extension in our discretion.

All proceeds of this offering will be received by us, and all costs associated with this registration statement will be borne by us.

Our common stock is listed on the OTCQX Market operated by OTC Markets Group, Inc. (the “OTCQX”) under the ticker symbol “AYTU.” On January 26, 2017, the last reported sale price of our common stock on the OTCQX was $1.00. The October 2016 Warrants are approved for trading on the OTCQX under the ticker symbol “AYTUZ,” and the May 2016 Warrants are approved for trading on the OTCQX under the ticker symbol “AYTUW.”

We effected a reverse stock split, in which every 12 shares of our common stock issued and outstanding immediately prior to the effective time, which was 4:30 p.m. on June 30, 2016, were converted into one share of common stock. The number of shares of common stock subject to outstanding stock warrants and options, and the exercise prices and conversion ratios of those securities, were automatically proportionately adjusted for the 1-for-12 ratio provided for by the reverse stock split. All of the share and per share amounts discussed in this Post-Effective Amendment have been adjusted to reflect the effect of this reverse split.

Investing in our common stock involves substantial risks. See “Risk Factors” beginning on page 9 of this prospectus to read about important factors you should consider before purchasing our common stock.

We do not intend to sell any more shares of common stock or Original Warrants pursuant to the Prior Registration Statements, other than the shares of common stock underlying the Original Warrants.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is          , 2017



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You should rely only on the information contained in this prospectus, as supplemented and amended. We have not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus.

We urge you to read carefully this prospectus, as supplemented and amended, before deciding whether to invest in any of the common stock being offered.

Unless the context indicates otherwise, as used in this prospectus, the terms “Aytu,” “we,” “us,” “our,” “our company” and “our business” refer to Aytu BioScience, Inc.

We own or have rights to various U.S. federal trademark registrations and applications, and unregistered trademarks and servicemarks, including Natesto, ProstaScint, Primsol, MiOXSYS, RedoxSYS, and Luoxis. All other trade names, trademarks and service marks appearing in this prospectus are the property of their respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such terms, when first mentioned in this prospectus, appear with the trade name, trademark or service mark notice and then throughout the remainder of this prospectus without trade name, trademark or service mark notices for convenience only and should not be construed as being used in a descriptive or generic sense.

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PROSPECTUS SUMMARY

This summary highlights certain information about us and this offering contained elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. Before you decide to invest in our securities, you should read the entire prospectus carefully, including “Risk Factors” beginning on page 9 , and the financial statements and related notes included in this prospectus.

Company Overview

We are a commercial-stage specialty pharmaceutical company focused on acquiring, developing and commercializing novel products in the field of urology. We have multiple urology-focused products on the market, and we seek to build a portfolio of novel therapeutics that serve large medical needs in the field of urology. We are initially concentrating on hypogonadism, prostate cancer, urinary tract infections, and male infertility and plan to expand into other urological indications for which there are significant medical needs. Our fiscal year end is June 30.

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 United States with our direct sales force in July 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 $2.4 billion market. 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®.

We currently market ProstaScint® (capromab pendetide), the only radioimaging agent indicated to detect the prostate specific membrane antigen, or PSMA, in the assessment and staging of prostate cancer. ProstaScint is approved by the FDA for use in both newly diagnosed, high-risk prostate cancer patients and patients with recurrent prostate cancer. We also market Primsol® (trimethoprim hydrochloride) — the only FDA-approved trimethoprim-only oral solution for urinary tract infections.

We have a focused pipeline, including MiOXSYS TM , a novel in vitro diagnostic device that is currently CE marked (which generally enables it to be sold within the European Economic Area (see “Business —  Foreign Regulatory Approval”)) and for which we intend to initiate a final 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 is widely implicated in its pathophysiology. MiOXSYS was developed from our core oxidation-reduction potential research platform known as RedoxSYS®. We are advancing MiOXSYS toward FDA clearance and, as of the date of this prospectus, we will need to raise additional funding to complete the required clinical study.

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

Corporate Highlights

• Executed on our commercial-focused business strategy, acquiring three additional FDA-approved, revenue-generating urology products: ProstaScint®, Primsol®, and Natesto®;
• Acquired global rights to ProstaScint, the only FDA-approved radioimaging agent specific to Prostate Specific Membrane Antigen (PSMA) that is indicated for the assessment of prostate cancer in high-risk, newly diagnosed prostate cancer patients and patients with suspected recurrence

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Secured exclusive U.S. rights to Natesto, the only FDA-approved nasally-administered testosterone product and only topically applied testosterone product without a black box safety warning;

• Acquired global rights to Primsol®, the only FDA-approved trimethoprim-only oral solution for treating urinary tract infections;
• Built and expanded our commercial infrastructure, including proven commercial leadership and a nationwide specialty sales force;
• Secured CE Marking and approval by Health Canada for MiOXSYS®, our novel, proprietary device for the rapid assessment of male infertility; and

Published multiple peer-review publications on MiOXSYS demonstrating clinical utility inclusive of clinical cutpoints for evaluation of male infertility status and had multiple Natesto abstracts accepted at major scientific conferences planned for calendar year 2017

• Appointed three independent board directors and established the full spectrum of corporate governance policies and procedures in compliance with the listing requirements for both NYSE and NASDAQ.

Fiscal 2016 Financial Highlights

• Grew annual revenues nearly ten-fold from $262,000 in fiscal 2015 to $2.6 million in fiscal 2016 (recently licensed Natesto is not included in either of these revenue numbers, as it was launched in July 2016); Grew net product revenues to $698,000 in Q1 FY17, the company’s highest sales quarter ever
• Raised sufficient initial growth capital through convertible note and equity offerings to support our initial commercial infrastructure and three product launches; and
• Ended fiscal 2016 with $8.1 million in cash and cash equivalents and had $5.2 million in cash and cash equivalents as of December 31, 2016.

Natesto® (testosterone) nasal gel.

On April 22, 2016, we entered into an agreement to acquire the exclusive U.S. rights to Natesto (testosterone) nasal gel from Acerus Pharmaceuticals Corporation, or Acerus, which rights we acquired on July 1, 2016. Natesto is a patented, FDA-approved testosterone replacement therapy, or TRT, and is the only nasally-administered formulation of testosterone available in the United States. 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 are. Rather, it 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 July 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.

ProstaScint® (capromab pendetide).

We became a commercial stage company by virtue of our acquisition of ProstaScint in May 2015 and are generating sales of this FDA-approved prostate cancer imaging agent. As prostate cancer is a condition commonly diagnosed and treated by urologists, ProstaScint complements our urology-focused product portfolio and pipeline. Prostate cancer is the most common cancer among men in the United States, with an estimated 241,000 annual cases (as of 2012). Further, more than 2,200,000 men were alive in 2006 with some history of prostate cancer, and over 30,000 U.S. men die each year from the disease. The effect of prostate cancer on healthcare economics is substantial, which makes the need for accurate disease staging critical for treatment and management strategies. The U.S. market for the diagnosis and screening of prostate cancer is expected to total $17.4 billion by 2017, a compound annual growth rate, or CAGR, of 7.5% since 2012.

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Primsol® (trimethoprim solution).

In October 2015, we purchased Primsol from FSC Laboratories, Inc. Primsol is the only FDA-approved liquid formulation of trimethoprim, an antibiotic that is well established in current guidelines for treating uncomplicated urinary tract infections, or UTIs. This differentiated product is appropriate for UTI patients that have difficulty swallowing tablets, such as the elderly, and particularly for patients that experience adverse reactions to sulfamethoxazole (“sulfa”). It is estimated that 150 million cases of urinary tract infections occur annually worldwide, and the annual estimated incidence is 0.5 – 0.7/persons per year. Importantly, there are more than 1 million catheter-associated UTIs in the U.S. alone. As many of these patients are elderly and unable to swallow pills, an oral liquid formulation represents a convenient formulation for easier administration. The acquisition of Primsol added a second established brand to our product portfolio. We expect to benefit from and continue to grow Primsol’s established base of prescribers, which already includes a significant proportion of urologists despite the fact that it has not been previously marketed to these specialists. We can thus utilize the same sales channel as ProstaScint, leading to potential commercial synergies and product growth.

MiOXSYS®.

MiOXSYS is a rapid in vitro diagnostic semen analysis test used in the quantitative measurement of static oxidation reduction potential, or sORP, in human semen. MiOXSYS is a recently CE marked system and is an accurate, easy to use, and fast infertility assessment tool. It is estimated that 72.4 million couples worldwide experience infertility problems. In the United States, 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 levels of oxidative stress in the semen. As such, having a rapid, easy-to-use diagnostic platform to measure oxidative stress should 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 CAGR of nearly 5% from 2014 to 2020. Oxidative stress is broadly implicated in the pathophysiology of 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 the degree of oxidative stress, sperm motility and morphology, 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. We expect to advance MiOXSYS into clinical trials in the United States in order to enable 510(k) clearance.

In addition to the MiOXSYS system, we are continuing to develop the global market for the RedoxSYS System across a range of applications. Specifically, we have begun initial commercializing of the RedoxSYS System for research use through distribution partners, primarily outside the U.S. In 2014, we received ISO 13485 certification, demonstrating our compliance with global quality standards in medical device manufacturing.

The technology underpinning the RedoxSYS and MiOXSYS systems was developed by Luoxis Diagnostics, Inc. in the two years immediately preceding the merger between Luoxis, Vyrix Pharmaceuticals, Inc., and us (under our former name of Rosewind Corporation) in April 2015. Upon the consummation of the merger, the RedoxSYS System and MiOXSYS System became our assets.

Key elements of our business strategy include:

• Expand the commercialization of Natesto in the U.S. for the treatment of hypogonadism with our direct sales force. We launched Natesto in July 2016 and are targeting highprescribing TRT prescribers with a primary emphasis on urologists and male health practitioners.
• Expand the commercialization of FDA-approved ProstaScint for the staging of both newly diagnosed high-risk and recurrent prostate cancer patients. We have begun commercializing ProstaScint in the U.S. and in key markets around the world.

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• Expand the commercialization of FDA-approved Primsol for the treatment of uncomplicated urinary tract infections. We are re-launching Primsol to urologists in the U.S. and in key markets around the world where appropriate.
• Establish MiOXSYS as a leading in vitro diagnostic device in the assessment of male infertility.
• Acquire additional marketed products and late-stage development assets within our core urology focus that can be efficiently marketed through our growing commercial organization.
• Develop a pipeline of urology therapeutics, with a focus on identifying novel products with sufficient clinical proof of concept that require modest internal R&D expense.

We plan to augment our core in-development and commercial assets through efficient identification of complementary therapeutics, devices, and diagnostics related to urological disorders. 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 (co-promotions, co-marketing, etc.).

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 United States and abroad. Through an assertive product and business development approach, we expect that we will build a substantial portfolio of complementary urology products.

We previously were developing Zertane for the treatment of premature ejaculation, or PE. However, we determined to direct our resources to our commercial stage products. As a result, at the end of fiscal 2016, we determined that the Zertane asset has no value as we do not have the resources to complete the necessary clinical trials and bring it to market before the patents expire. We intend to sell or out-license Zertane although there can be no assurance that we will be successful in doing so or, if successful, the value, if any, we will receive for the asset.

Recent Developments

On October 27, 2016, we priced an underwritten public offering of 5,735,000 shares of our common stock and warrants to purchase up to an aggregate of 5,735,000 shares of our common stock at a combined public offering price of $1.50 per share and related warrant. The gross proceeds from the offering to Aytu were approximately $8.6 million, before deducting the underwriting discount and estimated offering expenses payable by Aytu, but excluding the exercise proceeds of any warrants. The company also granted the representative of the underwriters a 45-day option to purchase up to an additional 860,250 shares and/or 860,250 additional warrants. The shares of common stock were immediately separable from the warrants and were issued separately. The warrants are exercisable immediately upon issuance, expire five years after the date of issuance and have an exercise price of $1.86 per share. The offering closed on November 2, 2016. The representative exercised its over-allotment option with respect to 285,245 warrants.

Our U.S.-based sales force was expanded in late July 2016 and initiated promotion with a primary focus on Natesto. In the 5 months since our sales force began promoting Natesto to urologists, endocrinologists, and other high-prescribing TRT targets, new prescriptions have grown every month. We believe new prescriptions have grown during this time due to our distinct focus on Natesto and the product’s attractive clinical profile. Additionally, redemptions for our Natesto co-pay coupons have increased significantly since field promotion began the week of July 25, 2016. As such, the average number of weekly co-pay redemptions already exceed the previous 2016 weekly highs when Natesto was being promoted by the previous U.S. marketing partner, Endo Pharmaceuticals. Finally, we have implemented the Assure Rx program across all filled sales territories. This program has been developed to enable reduced co-pays and patient assistance with insurance reimbursement; prescriptions of Natesto have already been filled at Assure Rx partner pharmacies.

Corporate Information

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 MKT: AMPE), or Ampio,

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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, which 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 focused on initially 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, and 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, and we now solely pursue the specialty healthcare market, focusing on urological related conditions, including the business of Vyrix and Luoxis.

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 every 12.174 shares outstanding. On June 1, 2016, we amended our Certificate of Incorporation to reduce the number of authorized shares of common stock from 300.0 million to 100.0 million. On June 30, 2016, we amended our Certificate of Incorporation to effect a reverse stock split at a ratio of 1-for-12. The June 8, 2015 and June 30, 2016 reverse stock splits are herein referred to collectively as the Reverse Stock Splits. All financial data and share amounts in this prospectus give effect to the Reverse Stock Splits.

Our principal executive office is located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112. Our telephone number at our principal executive office is (720) 437-6580. Our corporate website is http://aytubio.com. The information on our corporate website is not part of, and is not incorporated by reference into, this prospectus.

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THE OFFERING

Issuer
Aytu BioScience, Inc.
Securities offered by us
Up to 7,753,567 shares of common stock, including (i) up to 6,020,245 shares of common stock issuable upon the exercise of October 2016 Warrants, and (ii) up to 1,733,322 shares of common stock issuable upon the exercise of May 2016 Warrants.
Public offering price
The October 2016 Warrants have an exercise price of $1.86 per share, and the May 2016 Warrants have an exercise price of $6.00 per share; provided that we have approved an amendment to the warrant agreements that govern the Original Warrants in order to temporarily reduce the exercise price therefor to $0.75 per share. Accordingly, all holders of Original Warrants have the opportunity to exercise their Original Warrants at the temporarily reduced exercise price, pursuant to the terms and subject to the conditions of the Offer to Amend and Exercise Warrants to Purchase Common Stock, filed as Exhibit (a)(1)(B) to our Schedule TO filed with the Securities and Exchange Commission on January 27, 2017 (the “Offer to Exercise”). Pursuant to the Offer to Exercise, the temporary opportunity to exercise the warrants at the reduced exercise price will initially be available until February 27, 2017, subject to extension in our discretion.
Notwithstanding the foregoing, no Original Warrant will be exercisable and we will not be obligated to issue any shares issuable upon the exercise thereof unless (i) at the time the holder thereof seeks to exercise such Original Warrant, we have a registration statement under the Securities Act in effect covering the shares issuable upon the exercise of such Original Warrant and a current prospectus thereunder relating to our common stock, and (ii) the shares issuable upon such exercise have been registered or qualified or deemed to be exempt from registration under the securities laws of the state of residence of the holder of the Original Warrant.
The October 2016 Warrants are exercisable at any time prior to November 2, 2021, and the May 2016 Warrants are exercisable at any time prior to May 6, 2021. For a more complete description of the terms of the Original Warrants, see “Description of Capital Stock — Original Warrants.”
Use of proceeds
The proceeds of this offering consist solely of the payment by Original Warrant holders of the exercise price. We plan to use the net proceeds of this offering for working capital and for sales, marketing and general corporate purposes. For a more complete description of our intended use of proceeds from this offering, see “Use of Proceeds” on page 47 .
Risk factors
The exercise of the Original Warrants and the acquisition of our common stock involves a high degree of risk. You should read the description of risks set forth under “Risk Factors” beginning on page 9 of this prospectus for a discussion of factors to consider before deciding to purchase our securities.

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State Securities Law Matters
The issuance and exercise of the Original Warrants is subject to compliance with state securities laws and regulations. We reserve the right in some states to require stockholders, if they wish to exercise their Original Warrants, to state and agree upon exercise of their Original Warrants that they are acquiring the shares for investment purposes only, and that they have no present intention to resell or transfer any shares acquired. This offering is not being made and our securities are not being offered in any jurisdiction where the offer is not permitted under applicable local laws. We have the right, in our sole discretion, to not effect registration or qualification of the shares underlying the warrants in any state or other jurisdiction, or take any other action required by any state or other jurisdiction to allow the offer to take place in that state or jurisdiction. If you reside in a state or other jurisdiction in which registration, qualification or other action is necessary with which we choose not to comply, you will not be eligible to participate in the offering.
OTCQX Trading Symbol of Common Stock, October 2016 Warrants and May 2016 Warrants
“AYTU,” “AYTUZ” and “AYUTW” respectively.
Tender Offer
Our temporary reduction of the exercise price of the Original Warrants constitutes an issuer tender offer to acquire the Original Warrants (the “Tender Offer”). The terms of the Tender Offer, including an explanation of the procedure for tendering Warrants, are described in the Offer to Amend and Exercise Warrants to Purchase Common Stock, filed as Exhibit (a)(1)(B) to our Schedule TO filed with the Securities and Exchange Commission on January 27, 2017 (the “Offer to Exercise”).
Warrant Solicitation Agents
We retained Joseph Gunnar & Co., LLC and Fordham Financial Management, Inc. to act as warrant solicitation agents (the “Warrant Solicitation Agents”) for the Tender Offer, pursuant to an Advisory Agreement, dated January 20, 2017, which is filed as Exhibit 10.25 to the registration statement of which this prospectus forms a part. The Warrant Solicitation Agents, in accordance with the terms of the Advisory Agreement, shall use reasonable commercial efforts to contact holders of the Original Warrants by mail, telephone, facsimile, or other electronic means and solicit their participation in the Tender Offer and to amend and exercise their Original Warrants. The Warrant Solicitation Agents will receive a fee equal to 6% of the cash exercise prices paid by holders of the Original Warrants who participate in the Tender Offer and amend and exercise their Original Warrants. In addition, we have agreed to reimburse the Warrant Solicitation Agents for their reasonable out-of-pocket expenses, including reasonable attorney’s fees, up to $25,000. We have agreed to indemnify the Warrant Solicitation Agents against certain liabilities in connection with the Offer to Amend and Exercise, including certain liabilities under the federal securities laws.

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As of January 26, 2016, the Warrant Solicitation Agents and affiliates of the Warrant Solicitation Agents own an aggregate of approximately 0.2% of our outstanding common stock and on a beneficial ownership basis, inclusive of their warrants and options, approximately 4.7% of our common stock. The Warrant Solicitation Agents and affiliates of the Warrant Solicitation Agents own an aggregate of 510,825 Agent Warrants. The Company has agreed with the Warrant Solicitation Agents to reduce the exercise price of the warrants issued to the Warrant Solicitation Agents as part of the consideration in connection with services provided as underwriters in the public offerings consummated on May 6, 2016 and November 2, 2016 (the “Agent Warrants”), which are currently exercisable at exercise prices of $6.00 and $1.86, to $0.75 for the remaining exercise period under the Agent Warrants. The Agent Warrants are not included in the Tender Offer.

Unless otherwise indicated, the information in this prospectus reflects a 1-for-12 reverse split of our common stock, which was effective on June 30, 2016.

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RISK FACTORS

Investing in our securities includes a high degree of risk. Prior to making a decision about investing in our securities, you should consider carefully the specific factors discussed below, together with all of the other information contained in this prospectus. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects would likely be materially and adversely affected. This could cause the market price of our common stock to decline and could cause you to lose all or part of your investment.

Risks Related to Our Financial Condition and Capital Requirements

Our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern and may do so again in the future.

In their report accompanying our audited financial statements, our independent registered public accounting firm expressed substantial doubt as to our ability to continue as a going concern. A “going concern” opinion could impair our ability to finance our operations through the sale of debt or equity securities or through bank financing. We believe our entry into the Purchase Agreement with Lincoln Park, pursuant to which, if we meet the conditions, we can require Lincoln Park to purchase up to $10.0 million of our common stock, can provide us with available capital, provided we can meet those conditions, of which there can be no assurance. However, our ability to continue as a going concern will depend on our ability to obtain additional financing. Additional capital may not be available on reasonable terms, or at all. If adequate financing is not available, we would be required to terminate or significantly curtail our operations, or enter into arrangements with collaborative partners or others that may require us to relinquish rights to certain aspects of our products or product candidates, or potential markets that we would not otherwise relinquish. If we are unable to raise additional capital, our business would be jeopardized and we may not be able to continue operations.

We have a limited operating history, have incurred losses, and can give no assurance of profitability.

We are a commercial-stage healthcare company with a limited operating history. Prior to implementing our commercial strategy in the fourth calendar quarter of 2015, we did not have a focus on profitability. As a result, we have not generated substantial revenue to date and are not profitable, and have incurred losses in each year since our inception. Our net loss for the years ended June 30, 2016 and 2015 was $28.2 million and $7.7 million, respectively. We have not demonstrated the ability to be a profit-generating enterprise to date, and without significant financing, there is substantial doubt about our ability to continue as a going concern. We expect to incur substantial losses for the foreseeable future. Our ability to generate significant revenue is uncertain, and we may never achieve profitability. We have a very limited operating history on which investors can evaluate our potential for future success. Potential investors should evaluate us in light of the expenses, delays, uncertainties, and complications typically encountered by early-stage healthcare businesses, many of which will be beyond our control. These risks include the following:

• uncertain market acceptance of our products and product candidates;
• U.S. regulatory approval of our products and product candidates;
• foreign regulatory approval of our products and product candidates;
• lack of sufficient capital;
• unanticipated problems, delays, and expense relating to product development and implementation;
• lack of sufficient intellectual property;
• competition; and
• technological changes.

As a result of our limited operating history, and the increasingly competitive nature of the markets in which we compete, our historical financial data, which, prior to April 16, 2015, consists of allocations of expenses from Ampio, is of limited value in anticipating future operating expenses. Our planned expense levels will be based in part on our expectations concerning future operations, which is difficult to forecast accurately based

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on our limited operating history and the recentness of the acquisition of our products ProstaScint, Primsol and Natesto. We may be unable to adjust spending in a timely manner to compensate for any unexpected budgetary shortfall.

We have not received any substantial revenues from the commercialization of our current products to date and might not receive significant revenues from the commercialization of our current products or our product candidates in the near term. Even though ProstaScint and Primsol are each an approved drug that we are marketing, we only acquired ProstaScint in May 2015 and Primsol in October 2015 and have limited experience on which to base the revenue we could expect to receive from their sales. We acquired Natesto in April 2016 and launched it in July 2016 and consequently have no meaningful experience on which to base expected revenue from Natesto. To obtain revenues from our products and product candidates, we must succeed, either alone or with others, in a range of challenging activities, including expanding markets for our existing products and completing clinical trials of our product candidates, obtaining positive results from those clinical trials, achieving marketing approval for those product candidates, manufacturing, marketing and selling our existing products and those products for which we, or our collaborators, may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. We, and our collaborators, if any, may never succeed in these activities and, even if we do, or one of our collaborators does, we may never generate revenues that are sufficient enough for us to achieve profitability.

We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our product expansion and development efforts or other operations.

We are expending resources to expand the market for Natesto, ProstaScint and Primsol, none of which might be as successful as we anticipate or at all and all of which might take longer and be more expensive to market than we anticipate. We also are currently advancing our product candidates through clinical development. Developing product candidates is expensive, lengthy and risky, and we expect to incur research and development expenses in connection with our ongoing clinical development activities with the MiOXSYS System. As of September 30, 2016, our cash and cash equivalents were $2.7 million available to fund our operations offset by an aggregate $8.2 million in accounts payable and accrued liabilities and the Natesto payable. In November 2016, we conducted a public offering of our common stock and warrants from which we received net cash proceeds of approximately $7.6 million. Our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to continue the expansion of marketing efforts for Natesto, ProstaScint and Primsol and to obtain regulatory approval for, and to commercialize, our current product candidate, the MiOXSYS System. Raising funds in the current economic environment, as well our lack of operating history, may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. We intend to rely on the Tender Offer and the purchase agreement (the “Purchase Agreement”) we entered into with Lincoln Park Capital Fund, LLC in July 2016 for our capital needs, as well as the sale of the Acerus stock that we hold through a stock purchase agreement we entered in April 2016, including further commercialization of our currently approved products. If the Tender Offer is not successful and if we are unable to access a portion or the full amount of the Purchase Agreement and secure funds from the sale of Acerus stock, in the absence of any other financing sources, it would have a material adverse impact on our operations.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to expand any existing product or develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in

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increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

If we are unable to obtain funding on a timely basis, we may be unable to expand the market for Natesto, ProstaScint or Primsol and/or be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of our current product candidate, the MiOXSYS system, or any future product candidate or expand our operations generally or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

If we do not obtain the capital necessary to fund our operations, we will be unable to successfully expand the commercialization of Natesto, ProstaScint and Primsol and to develop, obtain regulatory approval of, and commercialize, our current product candidate, the MiOXSYS System.

The expansion of marketing and commercialization activities for our existing products and the development of pharmaceutical products, medical diagnostics and medical devices is capital-intensive. We anticipate we may require additional financing to continue to fund our operations. Our future capital requirements will depend on, and could increase significantly as a result of, many factors including:

• the costs, progress and timing of our efforts to expand the marketing of Natesto, ProstaScint and Primsol;
• progress in, and the costs of, our pre-clinical studies and clinical trials and other research and development programs;
• the costs of securing manufacturing arrangements for commercial production;
• the scope, prioritization and number of our research and development programs;
• the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we obtain;
• the costs of establishing, expanding or contracting for sales and marketing capabilities for any existing products and if we obtain regulatory clearances to market our current product candidate, the MiOXSYS system;
• the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any; and
• the costs involved in filing, prosecuting, enforcing and defending patent claims and other intellectual property rights.

If funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our commercialization efforts or our technologies, research or development programs.

We may not be able to access the full amounts available under the Lincoln Park Purchase Agreement, which could prevent us from accessing the capital we need to continue our operations, which could have an adverse effect on our business.

We intend to rely on the purchase agreement (the “Purchase Agreement”) we entered into with Lincoln Park Capital Fund, LLC (“Lincoln Park”) in July 2016 for our near-term capital needs, including further commercialization of our currently approved products. After selling $500,000 of common stock on the day we executed the Purchase Agreement, pursuant to the terms of the Purchase Agreement, we may direct Lincoln Park to purchase up to $10,000,000 worth of shares of our common stock over a 36-month period. Thereafter, on any trading day selected by us, we may sell shares of common stock to Lincoln Park in amounts up to 10,000 shares per regular sale (Regular Purchases), which may be increased to up to 20,000 shares depending

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on certain conditions as set forth in the Purchase Agreement, up to the aggregate commitment of $10,000,000. If the market price of our common stock is not below $7.00 per share on the purchase date, then the Regular Purchase amount may be increased to 15,000 shares. If the market price is not below $9.00 per share on the purchase date, then the Regular Purchase amount may be increased to 20,000 shares. Although there are no upper limits on the per share price Lincoln Park may pay to purchase our common stock, the Company may not sell more than $500,000 in shares of common stock to Lincoln Park per any individual Regular Purchase.

In addition to Regular Purchases, we may in our sole discretion direct Lincoln Park on each purchase date to make “accelerated purchases” on the following business day up to the lesser of (i) three times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on the accelerated purchase date at a purchase price equal to the lesser of (i) the closing sale price on the accelerated purchase date and (ii) 95% of the accelerated purchase date’s volume weighted average price. We cannot submit an accelerated purchase notice if the stock price is below $3.00.

The purchase price of the shares related to the Purchase Agreement will be based on the prevailing market prices of the Company’s shares of common stock, which shall be equal to the lesser of the lowest sale price of the common shares during the purchase date and the average of the three lowest closing sale prices of the common shares during the ten business days prior to the purchase date without any fixed discount.

Depending on the prevailing market price of our common stock, we may not be able to sell shares to Lincoln Park for the maximum $10,000,000 over the term of the Purchase Agreement. Our inability to access a portion or the full amount of the Purchase Agreement, in the absence of any other financing sources, would have a material adverse impact on our operations.

Our investment in Acerus Pharmaceuticals Corporation could decline in value.

On April 28, 2016, we purchased approximately $2.0 million worth of shares of common stock of Acerus Pharmaceutics Corporation as a condition to our licensing of Natesto. The per share purchase price was Cdn. $0.207. Acerus common stock is traded on the Toronto Stock Exchange under the symbol “ASP.” On January 26, 2017, the closing price per share was Cdn. $0.13. During the time that we own these shares, there can be no assurance that the value of that stock will not decline and we could lose our entire investment in that stock. We can sell some or all of these shares to help offset future operating expense.

We will incur increased costs associated with, and our management will need to devote substantial time and effort to, compliance with public company reporting and other requirements.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as private companies during the majority of fiscal 2015. In addition, the rules and regulations of the SEC and any national securities exchange to which we may be subject in the future impose numerous requirements on public companies, including requirements relating to our corporate governance practices, with which we will need to comply. Further, we will continue to be required to, among other things, file annual, quarterly and current reports with respect to our business and operating results. Based on currently available information and assumptions, we estimate that we will incur up to approximately $0.5 million in expenses on an annual basis as a direct result of the requirements of being a publicly traded company. Our management and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations, and our efforts and initiatives to comply with those requirements could be expensive.

If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to Section 404 of the Sarbanes-Oxley Act, our management conducted an assessment of the effectiveness of our internal control over financial reporting for the year ended June 30, 2016, and concluded that such control was effective.

However, if in the future we were to conclude that our internal control over financial reporting were not effective, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations because there is presently no precedent available by which to measure

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compliance adequacy. As a consequence, we may not be able to complete any necessary remediation process in time to meet our deadline for compliance with Section 404 of the Sarbanes-Oxley Act. Also, there can be no assurance that we will not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. The presence of material weaknesses could result in financial statement errors which, in turn, could require us to restate our operating results.

If we are unable to conclude that we have effective internal control over financial reporting or if our independent auditors are unwilling or unable to provide us, when required, with an attestation report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in our operating results, our stock price could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, we may not be able to obtain listing on a securities exchange such as the NYSE MKT.

Risks Related to Product Development, Regulatory Approval and Commercialization

Natesto, ProstaScint and Primsol may prove to be difficult to effectively commercialize as planned.

Various commercial, regulatory, and manufacturing factors may impact our ability to maintain or grow revenues from sales of Natesto, ProstaScint and Primsol. Specifically, we may encounter difficulty by virtue of:

• our inability to secure continuing prescribing of any of these products by current or previous users of the product;
• our inability to effectively transfer and scale manufacturing as needed to maintain an adequate commercial supply of these products;
• reimbursement and medical policy changes that may adversely affect the pricing, profitability or commercial appeal of Natesto, ProstaScint or Primsol; and
• our inability to effectively identify and align with commercial partners outside the United States, or the inability of those selected partners to gain the required regulatory, reimbursement, and other approvals needed to enable commercial success of ProstaScint or Primsol.

We have limited experience selling our current products as they have been acquired from another company or are newly approved for sale. As a result, we may be unable to successfully commercialize our products and product candidates.

Despite our management’s extensive experience in launching and managing commercial-stage healthcare companies, we have limited marketing, sales and distribution experience with our current products. Our ability to achieve profitability depends on attracting and retaining customers for our current products, and building brand loyalty for Natesto, ProstaScint and Primsol. To successfully perform sales, marketing, distribution and customer support functions, we will face a number of risks, including:

• our ability to attract and retain skilled support team, marketing staff and sales force necessary to increase the market for our approved products and to maintain market acceptance for our product candidates;
• the ability of our sales and marketing team to identify and penetrate the potential customer base; and
• the difficulty of establishing brand recognition and loyalty for our products.

In addition, we may seek to enlist one or more third parties to assist with sales, distribution and customer support globally or in certain regions of the world. If we do seek to enter into these arrangements, we may not be successful in attracting desirable sales and distribution partners, or we may not be able to enter into these arrangements on favorable terms, or at all. If our sales and marketing efforts, or those of any third-party sales and distribution partners, are not successful, our currently approved products may not achieve increased market acceptance and our product candidates may not gain market acceptance, which would materially impact our business and operations.

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We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, any of our current or future product candidates.

We may not be able to develop our current or any future product candidates. Our product candidates will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence commercialization. The clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through pre-clinical testing and clinical trials that the product candidate is safe and effective for use in each target indication. This process can take many years and may include post-marketing studies and surveillance, which will require the expenditure of substantial resources. Of the large number of drugs in development in the U.S., only a small percentage successfully completes the FDA regulatory approval process and is commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and clinical programs, we cannot assure you that any of our product candidates will be successfully developed or commercialized.

We are not permitted to market a product in the U.S. until we receive approval of a New Drug Application, or an NDA, for that product from the FDA, or in any foreign countries until we receive the requisite approval from such countries. Obtaining approval of an NDA is a complex, lengthy, expensive and uncertain process, and the FDA may delay, limit or deny approval of any product candidate for many reasons, including, among others:

• we may not be able to demonstrate that a product candidate is safe and effective to the satisfaction of the FDA;
• the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA for marketing approval;
• the FDA may disagree with the number, design, size, conduct or implementation of our clinical trials;
• the FDA may require that we conduct additional clinical trials;
• the FDA may not approve the formulation, labeling or specifications of any product candidate;
• the clinical research organizations, or CROs, that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;
• the FDA may find the data from pre-clinical studies and clinical trials insufficient to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks, such as the risk of drug abuse by patients or the public in general;
• the FDA may disagree with our interpretation of data from our pre-clinical studies and clinical trials;
• the FDA may not accept data generated at our clinical trial sites;
• if an NDA, if and when submitted, is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional pre-clinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;
• the FDA may require development of a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of approval or post-approval;
• the FDA may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or
• the FDA may change its approval policies or adopt new regulations.

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These same risks apply to applicable foreign regulatory agencies from which we may seek approval for any of our product candidates.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market any product candidate. Moreover, because a substantial portion of our business is or may be dependent upon our product candidates, any such setback in our pursuit of initial or additional regulatory approval would have a material adverse effect on our business and prospects.

If we fail to successfully acquire new products, we may lose market position.

Acquiring new products is an important factor in our planned sales growth, including products that already have been developed and found market acceptance. If we fail to identify existing or emerging consumer markets and trends and to acquire new products, we will not develop a strong revenue source to help pay for our development activities as well as possible acquisitions. This failure would delay implementation of our business plan, which could have a negative adverse effect on our business and prospects.

If we do not secure collaborations with strategic partners to test, commercialize and manufacture product candidates, we may not be able to successfully develop products and generate meaningful revenues.

We may enter into collaborations with third parties to conduct clinical testing, as well as to commercialize and manufacture our products and product candidates. If we are able to identify and reach an agreement with one or more collaborators, our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. Collaboration agreements typically call for milestone payments that depend on successful demonstration of efficacy and safety, obtaining regulatory approvals, and clinical trial results. Collaboration revenues are not guaranteed, even when efficacy and safety are demonstrated. The current economic environment may result in potential collaborators electing to reduce their external spending, which may prevent us from developing our product candidates.

Even if we succeed in securing collaborators, the collaborators may fail to develop or effectively commercialize our products or product candidates. Collaborations involving our product candidates pose a number of risks, including the following:

• collaborators may not have sufficient resources or may decide not to devote the necessary resources due to internal constraints such as budget limitations, lack of human resources, or a change in strategic focus;
• collaborators may believe our intellectual property is not valid or is unenforceable or the product candidate infringes on the intellectual property rights of others;
• collaborators may dispute their responsibility to conduct development and commercialization activities pursuant to the applicable collaboration, including the payment of related costs or the division of any revenues;
• collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement;
• collaborators may not be able to obtain, or believe they cannot obtain, the necessary regulatory approvals;
• collaborators may delay the development or commercialization of our product candidates in favor of developing or commercializing their own or another party’s product candidate; or
• collaborators may decide to terminate or not to renew the collaboration for these or other reasons.

As a result, collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. For example, our former collaborator that licensed Zertane conducted clinical trials which we believe demonstrated efficacy in treating PE, but the collaborator undertook a merger that we believe altered its strategic focus and thereafter terminated the collaboration agreement. The Merger also created a potential conflict with a principal customer of the acquired company, which sells a product to treat premature ejaculation in certain European markets.

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Collaboration agreements are generally terminable without cause on short notice. Once a collaboration agreement is signed, it may not lead to commercialization of a product candidate. We also face competition in seeking out collaborators. If we are unable to secure collaborations that achieve the collaborator’s objectives and meet our expectations, we may be unable to advance our products or product candidates and may not generate meaningful revenues.

We or our strategic partners may choose not to continue an existing product or choose not to develop a product candidate at any time during development, which would reduce or eliminate our potential return on investment for that product.

At any time and for any reason, we or our strategic partners may decide to discontinue the development or commercialization of a product or product candidate. If we terminate a program in which we have invested significant resources, we will reduce the return, or not receive any return, on our investment and we will have missed the opportunity to have allocated those resources to potentially more productive uses. If one of our strategic partners terminates a program, we will not receive any future milestone payments or royalties relating to that program under our agreement with that party.

Our pre-commercial product candidates are expected to undergo clinical trials that are time-consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we or our collaborators may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

Pre-clinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. It may take several years to complete the pre-clinical testing and clinical development necessary to commercialize a drug or biologic, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials even after promising results in earlier trials and we cannot be certain that we will not face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. An unfavorable outcome in one or more trials would be a major set-back for that product candidate and for us. Due to our limited financial resources, an unfavorable outcome in one or more trials may require us to delay, reduce the scope of, or eliminate one or more product development programs, which could have a material adverse effect on our business, prospects and financial condition and on the value of our common stock.

In connection with clinical testing and trials, we face a number of risks, including:

• a product candidate is ineffective, inferior to existing approved medicines, unacceptably toxic, or has unacceptable side effects;
• patients may die or suffer other adverse effects for reasons that may or may not be related to the product candidate being tested;
• the results may not confirm the positive results of earlier testing or trials; and
• the results may not meet the level of statistical significance required by the FDA or other regulatory agencies to establish the safety and efficacy of the product candidate.

If we do not successfully complete pre-clinical and clinical development, we will be unable to market and sell products derived from our product candidates and generate revenues. Even if we do successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before an NDA may be submitted to the FDA. Although there are a large number of drugs and biologics in development in the United States and other countries, only a small percentage result in the submission of an NDA to the FDA, even fewer are approved for commercialization, and only a small number achieve widespread physician and consumer acceptance following regulatory approval. If our clinical trials are

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substantially delayed or fail to prove the safety and effectiveness of our product candidates in development, we may not receive regulatory approval of any of these product candidates and our business, prospects and financial condition will be materially harmed.

Delays, suspensions and terminations in any clinical trial we undertake could result in increased costs to us and delay or prevent our ability to generate revenues.

Human clinical trials are very expensive, time-consuming, and difficult to design, implement and complete. Should we undertake the development of a pharmaceutical product candidate, we would expect the necessary clinical trials to take up to 24 months to complete, but the completion of trials for any product candidates may be delayed for a variety of reasons, including delays in:

• demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;
• reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
• validating test methods to support quality testing of the drug substance and drug product;
• obtaining sufficient quantities of the drug substance or device ports;
• manufacturing sufficient quantities of a product candidate;
• obtaining approval of an IND from the FDA;
• obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site;
• determining dosing and clinical design and making related adjustments; and
• patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial.

The commencement and completion of clinical trials for our product candidates may be delayed, suspended or terminated due to a number of factors, including:

• lack of effectiveness of product candidates during clinical trials;
• adverse events, safety issues or side effects relating to the product candidates or their formulation or design;
• inability to raise additional capital in sufficient amounts to continue clinical trials or development programs, which are very expensive;
• the need to sequence clinical trials as opposed to conducting them concomitantly in order to conserve resources;
• our inability to enter into collaborations relating to the development and commercialization of our product candidates;
• failure by us or our collaborators to conduct clinical trials in accordance with regulatory requirements;
• our inability or the inability of our collaborators to manufacture or obtain from third parties materials sufficient for use in pre-clinical studies and clinical trials;
• governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including mandated changes in the scope or design of clinical trials or requests for supplemental information with respect to clinical trial results;
• failure of our collaborators to advance our product candidates through clinical development;
• delays in patient enrollment, variability in the number and types of patients available for clinical trials, and lower-than anticipated retention rates for patients in clinical trials;

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• difficulty in patient monitoring and data collection due to failure of patients to maintain contact after treatment;
• a regional disturbance where we or our collaborative partners are enrolling patients in our clinical trials, such as a pandemic, terrorist activities or war, or a natural disaster; and
• varying interpretations of our data, and regulatory commitments and requirements by the FDA and similar foreign regulatory agencies.

Many of these factors may also ultimately lead to denial of an NDA for a product candidate. If we experience delay, suspensions or terminations in a clinical trial, the commercial prospects for the related product candidate will be harmed, and our ability to generate product revenues will be delayed.

In addition, we may encounter delays or product candidate rejections based on new governmental regulations, future legislative or administrative actions, or changes in FDA policy or interpretation during the period of product development. If we obtain required regulatory approvals, such approvals may later be withdrawn. Delays or failures in obtaining regulatory approvals may result in:

• varying interpretations of data and commitments by the FDA and similar foreign regulatory agencies; and
• diminishment of any competitive advantages that such product candidates may have or attain.

Furthermore, if we fail to comply with applicable FDA and other regulatory requirements at any stage during this regulatory process, we may encounter or be subject to:

• diminishment of any competitive advantages that such product candidates may have or attain;
• delays or termination in clinical trials or commercialization;
• refusal by the FDA or similar foreign regulatory agencies to review pending applications or supplements to approved applications;
• product recalls or seizures;
• suspension of manufacturing;
• withdrawals of previously approved marketing applications; and
• fines, civil penalties, and criminal prosecutions.

The medical device regulatory clearance or approval process is expensive, time consuming and uncertain, and the failure to obtain and maintain required clearances or approvals could prevent us from broadly commercializing the MiOXSYS System for clinical use.

The MiOXSYS System is subject to 510(k) clearance by the FDA prior to its marketing for commercial use in the United States, and to regulatory approvals beyond CE marking required by certain foreign governmental entities prior to its marketing outside the United States. In addition, any changes or modifications to a device that has received regulatory clearance or approval that could significantly affect its safety or effectiveness, or would constitute a major change in its intended use, may require the submission of a new application for 510(k) clearance, pre-market approval, or foreign regulatory approvals. The 510(k) clearance and pre-market approval processes, as well as the process of obtaining foreign approvals, can be expensive, time consuming and uncertain. It generally takes from four to twelve months from submission to obtain 510(k) clearance, and from one to three years from submission to obtain pre-market approval; however, it may take longer, and 510(k) clearance or pre-market approval may never be obtained. We have limited experience in filing FDA applications for 510(k) clearance and pre-market approval. In addition, we are required to continue to comply with applicable FDA and other regulatory requirements even after obtaining clearance or approval. There can be no assurance that we will obtain or maintain any required clearance or approval on a timely basis, or at all. Any failure to obtain or any material delay in obtaining FDA clearance or any failure to maintain compliance with FDA regulatory requirements could harm our business, financial condition and results of operations.

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The approval process for pharmaceutical and medical device products outside the United States varies among countries and may limit our ability to develop, manufacture and sell our products internationally. Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.

In order to market and sell our products in the European Union and many other jurisdictions, we, and our collaborators, must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and may involve additional testing. We may conduct clinical trials for, and seek regulatory approval to market, our product candidates in countries other than the United States. Depending on the results of clinical trials and the process for obtaining regulatory approvals in other countries, we may decide to first seek regulatory approvals of a product candidate in countries other than the United States, or we may simultaneously seek regulatory approvals in the United States and other countries. If we or our collaborators seek marketing approval for a product candidate outside the United States, we will be subject to the regulatory requirements of health authorities in each country in which we seek approval. With respect to marketing authorizations in Europe, we will be required to submit a European Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, which conducts a validation and scientific approval process in evaluating a product for safety and efficacy. The approval procedure varies among regions and countries and may involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

Obtaining regulatory approvals from health authorities in countries outside the United States is likely to subject us to all of the risks associated with obtaining FDA approval described above. In addition, marketing approval by the FDA does not ensure approval by the health authorities of any other country, and approval by foreign health authorities does not ensure marketing approval by the FDA.

Even if we, or our collaborators, obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we or they market our products, which could materially impair our ability to generate revenue.

Even if we receive regulatory approval for a product candidate, this approval may carry conditions that limit the market for the product or put the product at a competitive disadvantage relative to alternative therapies. For instance, a regulatory approval may limit the indicated uses for which we can market a product or the patient population that may utilize the product, or may be required to carry a warning in its labeling and on its packaging. Products with boxed warnings are subject to more restrictive advertising regulations than products without such warnings. These restrictions could make it more difficult to market any product candidate effectively. Accordingly, assuming we, or our collaborators, receive marketing approval for one or more of our product candidates, we, and our collaborators expect to continue to expend time, money and effort in all areas of regulatory compliance.

Any of our products and product candidates for which we, or our collaborators, obtain marketing approval in the future could be subject to post-marketing restrictions or withdrawal from the market and we, and our collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our products following approval.

Any of our approved products and product candidates for which we, or our collaborators, obtain marketing approval, as well as the manufacturing processes, post approval studies and measures, labeling, advertising and promotional activities for such products, among other things, are or will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the FDA requirement to implement a REMS to ensure that the benefits of a drug or biological product outweigh its risks.

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The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we, or our collaborators, do not market any of our product candidates for which we, or they, receive marketing approval for only their approved indications, we, or they, may be subject to warnings or enforcement action for off-label marketing. Violation of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer protection laws.

If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of our product candidates may be delayed, and our business will be harmed.

We sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the submission of regulatory filings, or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the initiation or completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval, or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of such milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including:

• our available capital resources or capital constraints we experience;
• the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators, and our ability to identify and enroll patients who meet clinical trial eligibility criteria;
• our receipt of approvals from the FDA and other regulatory agencies and the timing thereof;
• other actions, decisions or rules issued by regulators;
• our ability to access sufficient, reliable and affordable supplies of compounds used in the manufacture of our product candidates;
• the efforts of our collaborators with respect to the commercialization of our products; and
• the securing of, costs related to, and timing issues associated with, product manufacturing as well as sales and marketing activities.

If we fail to achieve announced milestones in the timeframes we announce and expect, the commercialization of our product candidates may be delayed and our business, prospects and results of operations may be harmed.

We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing product candidates.

We rely, and will rely in the future, on medical institutions, clinical investigators, contract research organizations, contract laboratories, and collaborators to perform data collection and analysis and others to carry out our clinical trials. Our development activities or clinical trials conducted in reliance on third parties may be delayed, suspended, or terminated if:

• the third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines;
• we replace a third party; or

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• the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols, regulatory requirements, or for other reasons.

Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization of our product candidates. While we believe that there are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.

Even if collaborators with which we contract in the future successfully complete clinical trials of our product candidates, those product candidates may not be commercialized successfully for other reasons.

Even if we contract with collaborators that successfully complete clinical trials for one or more of our product candidates, those candidates may not be commercialized for other reasons, including:

• failure to receive regulatory clearances required to market them as drugs;
• being subject to proprietary rights held by others;
• being difficult or expensive to manufacture on a commercial scale;
• having adverse side effects that make their use less desirable; or
• failing to compete effectively with products or treatments commercialized by competitors.

Any third-party manufacturers we engage are subject to various governmental regulations, and we may incur significant expenses to comply with, and experience delays in, our product commercialization as a result of these regulations.

The manufacturing processes and facilities of third-party manufacturers we have engaged for our current approved products are, and any future third-party manufacturer will be, required to comply with the federal Quality System Regulation, or QSR, which covers procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of devices. The FDA enforces the QSR through periodic unannounced inspections of manufacturing facilities. Any inspection by the FDA could lead to additional compliance requests that could cause delays in our product commercialization. Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with the manufacturing processes and facilities of third-party manufacturers we engage, including the failure to take satisfactory corrective actions in response to an adverse QSR inspection, can result in, among other things:

• administrative or judicially imposed sanctions;
• injunctions or the imposition of civil penalties;
• recall or seizure of the product in question;
• total or partial suspension of production or distribution;
• the FDA’s refusal to grant pending future clearance or pre-market approval;
• withdrawal or suspension of marketing clearances or approvals;
• clinical holds;
• warning letters;
• refusal to permit the export of the product in question; and
• criminal prosecution.

Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our products, and would likely harm our business.

In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe the FDA would request that we initiate a voluntary recall if a product was defective or presented a risk of injury or gross deception. Regulatory agencies in other countries have similar authority to

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recall drugs or devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert our management attention and financial resources, expose us to product liability or other claims, and harm our reputation with customers.

We face substantial competition from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for, or commercializing products before or more successfully than us.

We compete with companies that design, manufacture and market already-existing and new urology products. We anticipate that we will face increased competition in the future as new companies enter the market with new technologies and/or our competitors improve their current products. One or more of our competitors may offer technology superior to ours and render our technology obsolete or uneconomical. Most of our current competitors, as well as many of our potential competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies, more substantial experience in product marketing and new product development, greater regulatory expertise, more extensive manufacturing capabilities and the distribution channels to deliver products to customers. If we are not able to compete successfully, we may not generate sufficient revenue to become profitable. Our ability to compete successfully will depend largely on our ability to:

• expand the market for our approved products, especially Natesto, ProstaScint and Primsol;
• successfully commercialize our product candidates alone or with commercial partners;
• discover and develop product candidates that are superior to other products in the market;
• obtain required regulatory approvals;
• attract and retain qualified personnel; and
• obtain patent and/or other proprietary protection for our product candidates.

Established pharmaceutical companies devote significant financial resources to discovering, developing or licensing novel compounds that could make our products and product candidates obsolete. Our competitors may obtain patent protection, receive FDA approval, and commercialize medicines before us. Other companies are or may become engaged in the discovery of compounds that may compete with the product candidates we are developing.

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

For the MiOXSYS System and ProstaScint, we compete with companies that design, manufacture and market already existing and new in-vitro diagnostics and diagnostic imaging systems and radio-imaging agents for cancer detection. Additionally, with respect to Primsol, we compete with numerous companies who produce antimicrobial treatments for various pathogens inclusive of products containing trimethoprim as contained in Primsol. There are any number of antibiotics available on the market that could compete with Primsol. Even though Primsol is the only FDA-approved liquid formulation of trimethoprim, an antibiotic that is well established in current guidelines for treating UTIs, we may not be able to effectively compete with these existing antibiotics.

We anticipate that we will face increased competition in the future as new companies enter the market with new technologies and our competitors improve their current products. One or more of our competitors may offer technology superior to ours and render our technology obsolete or uneconomical. Most of our current competitors, as well as many of our potential competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies, more substantial experience in new product development, greater regulatory expertise, more extensive manufacturing capabilities and the distribution channels to deliver products to customers. If we are not able to compete successfully, we may not generate sufficient revenue to become profitable.

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Any new product we develop or commercialize that competes with a currently-approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and/or safety in order to address price competition and be commercially successful. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care may adversely affect one or more of the following:

• our or our collaborators’ ability to set a price we believe is fair for our approved products;
• our ability to generate revenue from our approved products and achieve profitability; and
• the availability of capital.

The 2010 enactments of the Patient Protection and Affordable Care Act, or PPACA, and the Health Care and Education Reconciliation Act, or the Health Care Reconciliation Act, are expected to significantly impact the provision of, and payment for, health care in the United States. Various provisions of these laws have only recently taken effect or have yet to take effect, and are designed to expand Medicaid eligibility, subsidize insurance premiums, provide incentives for businesses to provide health care benefits, prohibit denials of coverage due to pre-existing conditions, establish health insurance exchanges, and provide additional support for medical research. Amendments to the PPACA and/or the Health Care Reconciliation Act, as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could influence the purchase of medicines and medical devices and reduce demand and prices for our products and product candidates, if approved. This could harm our or our collaborators’ ability to market any approved products and generate revenues. As we expect to receive significant revenues from reimbursement of our Natesto, ProstaScint and Primsol products by commercial third-party payors and government payors, cost containment measures that health care payors and providers are instituting and the effect of further health care reform could significantly reduce potential revenues from the sale of any of our products and product candidates approved in the future, and could cause an increase in our compliance, manufacturing, or other operating expenses. In addition, in certain foreign markets, the pricing of prescription drugs and devices is subject to government control and reimbursement may in some cases be unavailable. We believe that pricing pressures at the federal and state level, as well as internationally, will continue and may increase, which may make it difficult for us to sell any approved product at a price acceptable to us or any of our future collaborators.

In addition, in some foreign countries, the proposed pricing for a drug or medical device must be approved before it may be lawfully marketed. The requirements governing 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. A member state may require that physicians prescribe the generic version of a drug instead of our approved branded product. 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 or product candidates. Historically, pharmaceutical products launched in the European Union do not follow price structures of the United States and generally tend to have significantly lower prices.

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Our financial results will depend on the acceptance among hospitals, third-party payors and the medical community of our products and product candidates.

Our future success depends on the acceptance by our target customers, third-party payors and the medical community that our products and product candidates are reliable, safe and cost-effective. Many factors may affect the market acceptance and commercial success of our products and product candidates, including:

• our ability to convince our potential customers of the advantages and economic value our products and product candidates over existing technologies and products;
• the relative convenience and ease of our products and product candidates over existing technologies and products;
• the introduction of new technologies and competing products that may make our products and product candidates less attractive for our target customers;
• our success in training medical personnel on the proper use of our products and product candidates;
• the willingness of third-party payors to reimburse our target customers that adopt our products and product candidates;
• the acceptance in the medical community of our products and product candidates;
• the extent and success of our marketing and sales efforts; and
• general economic conditions.

If third-party payors do not reimburse our customers for the products we sell or if reimbursement levels are set too low for us to sell one or more of our products at a profit, our ability to sell those products and our results of operations will be harmed.

While Natesto, ProstaScint and Primsol are already FDA-approved and generating revenues in the U.S., they may not receive, or continue to receive, physician or hospital acceptance, or they may not maintain adequate reimbursement from third party payors. Additionally, even if one of our product candidates is approved and reaches the market, the product may not achieve physician or hospital acceptance, or it may not obtain adequate reimbursement from third party payors. We expect to sell our Primsol products and possibly other product candidates to target customers substantially all of whom receive reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare, Medicaid, other domestic and foreign government programs, private insurance plans and managed care programs. Reimbursement decisions by particular third-party payors depend upon a number of factors, including each third-party payor’s determination that use of a product is:

• a covered benefit under its health plan;
• appropriate and medically necessary for the specific indication;
• cost effective; and
• neither experimental nor investigational.

Third-party payors may deny reimbursement for covered products if they determine that a medical product was not used in accordance with cost-effective diagnosis methods, as determined by the third-party payor, or was used for an unapproved indication. Third-party payors also may refuse to reimburse for procedures and devices deemed to be experimental.

Obtaining coverage and reimbursement approval for a product from each government or third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our potential product to each government or third-party payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. In addition, eligibility for coverage does not imply that any product will be covered and reimbursed in all cases or reimbursed at a rate that allows our potential customers to make a profit or even cover their costs.

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Third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for medical products and services. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and reimbursement available for any product or product candidate, which in turn, could negatively impact pricing. If our customers are not adequately reimbursed for our products, they may reduce or discontinue purchases of our products, which would result in a significant shortfall in achieving revenue expectations and negatively impact our business, prospects and financial condition.

Manufacturing risks and inefficiencies may adversely affect our ability to produce our products.

As part of the acquisition of ProstaScint from Jazz Pharmaceuticals, we terminated the relationship with the third-party manufacturer of ProstaScint. We have initiated the process of transferring the manufacturing to Biovest International, which we believe is a qualified manufacturer and with whom we have entered into a Master Services Agreement. In the event that this manufacturing transfer does not occur by the time our current inventory expires, we may not be able to supply sufficient quantities and on a timely basis, while maintaining product quality, acceptable manufacturing costs and complying with regulatory requirements, such as quality system regulations. In addition, we expect to engage third parties to manufacture components of the MiOXSYS and RedoxSYS systems. We have an agreement for supplies of Natesto with Acerus, from whom we license Natesto, and have entered into a supply agreement for Primsol with the same manufacturer used by FSC Laboratories, from whom we purchased Primsol. For any future product, we expect to use third-party manufacturers because we do not have our own manufacturing capabilities. In determining the required quantities of any product and the manufacturing schedule, we must make significant judgments and estimates based on inventory levels, current market trends and other related factors. Because of the inherent nature of estimates and our limited experience in marketing our current products, there could be significant differences between our estimates and the actual amounts of product we require. If we do not effectively maintain our supply agreements for Natesto and Primsol, we will face difficulty finding replacement suppliers, which could harm sales of those products. If we do not effectively transition sites with our manufacturing and development partners to enable to production scale of ProstaScint, or if we do not secure collaborations with manufacturing and development partners to enable production to scale of the MiOXSYS system, we may not be successful in selling ProstaScint or in commercializing the MiOXSYS system in the event we receive regulatory approval of the MiOXSYS System. If we fail in similar endeavors for future products, we may not be successful in establishing or continuing the commercialization of our products and product candidates.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured these components ourselves, including:

• reliance on third parties for regulatory compliance and quality assurance;
• possible breaches of manufacturing agreements by the third parties because of factors beyond our control;
• possible regulatory violations or manufacturing problems experienced by our suppliers; and
• possible termination or non-renewal of agreements by third parties, based on their own business priorities, at times that are costly or inconvenient for us.

Further, if we are unable to secure the needed financing to fund our internal operations, we may not have adequate resources required to effectively and rapidly transition our third party manufacturing. We may not be able to meet the demand for our products if one or more of any third-party manufacturers is unable to supply us with the necessary components that meet our specifications. It may be difficult to find alternate suppliers for any of our products or product candidates in a timely manner and on terms acceptable to us.

Any third-party manufacturers we engage are subject to various governmental regulations, and we may incur significant expenses to comply with, and experience delays in, our product commercialization as a result of these regulations.

The manufacturing processes and facilities of third-party manufacturers we engage are required to comply with the federal Quality System Regulation, or QSR, which covers procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping

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of devices. The FDA enforces the QSR through periodic unannounced inspections of manufacturing facilities. Any inspection by the FDA could lead to additional compliance requests that could cause delays in our product commercialization. Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with the manufacturing processes and facilities of third-party manufacturers we engage, including the failure to take satisfactory corrective actions in response to an adverse QSR inspection, can result in, among other things:

• administrative or judicially imposed sanctions;
• injunctions or the imposition of civil penalties;
• recall or seizure of the product in question;
• total or partial suspension of production or distribution;
• the FDA’s refusal to grant pending future clearance or pre-market approval;
• withdrawal or suspension of marketing clearances or approvals;
• clinical holds;
• warning letters;
• refusal to permit the export of the product in question; and
• criminal prosecution.

Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our products, and would likely harm our business.

In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe the FDA would request that we initiate a voluntary recall if a product was defective or presented a risk of injury or gross deception. Regulatory agencies in other countries have similar authority to recall drugs or devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert our management attention and financial resources, expose us to product liability or other claims, and harm our reputation with customers.

Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to commercialize our products and product candidates in foreign markets for which we intend to primarily rely on collaboration with third parties. If we commercialize our products or product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

• our inability to directly control commercial activities because we are relying on third parties;
• the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;
• different medical practices and customs in foreign countries affecting acceptance in the marketplace;
• import or export licensing requirements;
• longer accounts receivable collection times;
• longer lead times for shipping;
• language barriers for technical training;
• reduced protection of intellectual property rights in some foreign countries, and related prevalence of generic alternatives to our products;
• foreign currency exchange rate fluctuations;

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• our customers’ ability to obtain reimbursement for our products in foreign markets; and
• the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of our products or product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

We are subject to various regulations pertaining to the marketing of our approved products.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on the offer of payment or acceptance of kickbacks or other remuneration for the purchase of our products, including inducements to potential patients to request our products and services. Additionally, any product promotion educational activities, support of continuing medical education programs, and other interactions with health-care professionals must be conducted in a manner consistent with the FDA regulations and the Anti-Kickback Statute. The Anti-Kickback Statute prohibits persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Violations of the Anti-Kickback Statute can also carry potential federal False Claims Act liability. Additionally, many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare items or services reimbursed by any third party payer, not only the Medicare and Medicaid programs, and do not contain identical safe harbors. These and any new regulations or requirements may be difficult and expensive for us to comply with, may adversely impact the marketing of our existing products or delay introduction of our product candidates, which may have a material adverse effect on our business, operating results and financial condition.

Our products and product candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities.

Further, if a product candidate receives marketing approval and we or others identify undesirable side effects caused by the product after the approval, or if drug abuse is determined to be a significant problem with an approved product, a number of potentially significant negative consequences could result, including:

• regulatory authorities may withdraw or limit their approval of the product;
• regulatory authorities may require the addition of labeling statements, such as a “Black Box warning” or a contraindication;
• we may be required to change the way the product is distributed or administered, conduct additional clinical trials or change the labeling of the product;
• we may decide to remove the product from the marketplace;
• we could be sued and held liable for injury caused to individuals exposed to or taking the product; and
• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing an affected product or product candidates and significantly impact our ability to successfully commercialize or maintain sales of our product or product candidates and generate revenues.

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Natesto contains, and future our other product candidates may contain, controlled substances, the manufacture, use, sale, importation, exportation, prescribing and distribution of which are subject to regulation by the DEA.

Natesto, which is approved by the FDA, is regulated by the DEA as a Schedule III controlled substance. Before any commercialization of any product candidate that contains a controlled substance, the DEA will need to determine the controlled substance schedule, taking into account the recommendation of the FDA. This may be a lengthy process that could delay our marketing of a product candidate and could potentially diminish any regulatory exclusivity periods for which we may be eligible. Natesto is, and our other product candidates may, if approved, be regulated as “controlled substances” as defined in the Controlled Substances Act of 1970, or CSA, and the implementing regulations of the DEA, which establish registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, quota and other requirements administered by the DEA. These requirements are applicable to us, to our third-party manufacturers and to distributors, prescribers and dispensers of our product candidates. The DEA regulates the handling of controlled substances through a closed chain of distribution. This control extends to the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce. A number of states and foreign countries also independently regulate these drugs as controlled substances.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.

Natesto is regulated by the DEA as a Schedule III controlled substance. Consequently, the manufacturing, shipping, storing, selling and using of the products will be subject to a high degree of regulation. Also, distribution, prescribing and dispensing of these drugs are highly regulated.

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.

Because of their restrictive nature, these laws and regulations could limit commercialization of our product candidates containing controlled substances. Failure to comply with these laws and regulations could also result in withdrawal of our DEA registrations, disruption in manufacturing and distribution activities, consent decrees, criminal and civil penalties and state actions, among other consequences.

If testosterone replacement therapies are found, or are perceived, to create health risks, our ability to sell Natesto could be materially adversely affected and our business could be harmed.

Recent publications have suggested potential health risks associated with testosterone replacement therapy, such as increased cardiovascular disease risk, including increased risk of heart attack or stroke, fluid retention, sleep apnea, breast tenderness or enlargement, increased red blood cells, development of clinical prostate disease, including prostate cancer, and the suppression of sperm production. Prompted by these events, the FDA held a T-class Advisory Committee meeting on September 17, 2014 to discuss this topic further. The FDA has also asked health care professionals and patients to report side effects involving prescription testosterone products to the agency.

At the T-class Advisory Committee meeting held on September 17, 2014, the Advisory Committee discussed (i) the identification of the appropriate patient population for whom testosterone replacement therapy should be indicated and (ii) the potential risk of major adverse cardiovascular events, defined as non-fatal stroke, non-fatal myocardial infarction and cardiovascular death associated with testosterone replacement therapy.

At the meeting, the Advisory Committee voted that the FDA should require sponsors of testosterone products to conduct a post marketing study (e.g. observational study or controlled clinical trial) to further assess the potential cardiovascular risk.

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It is possible that the FDA’s evaluation of this topic and further studies on the effects of testosterone replacement therapies could demonstrate the risk of major adverse cardiovascular events or other health risks or could impose requirements that impact the marketing and sale of Natesto, including:

• mandate that certain warnings or precautions be included in our product labeling;
• require that our product carry a “black box warning”; and
• limit use of Natesto to certain populations, such as men without specified conditions.

Demonstrated testosterone replacement therapy safety risks, as well as negative publicity about the risks of hormone replacement therapy, including testosterone replacement, could hurt sales of and impair our ability to successfully relaunch Natesto, which could have a materially adverse impact on our business.

FDA action regarding testosterone replacement therapies could add to the cost of producing and marketing Natesto.

The FDA is requiring post-marketing safety studies for all testosterone replacement therapies approved in the U.S. to assess long-term cardiovascular events related to testosterone use. Depending on the total cost and structure of the FDA’s proposed safety studies there may be a substantial cost associated with conducting these studies. Pursuant to our license agreement with Acerus Pharmaceuticals is, Acerus is obligated to reimburse us for the entire cost of any studies required for Natesto by the FDA. However, in the event that Acerus is not able to reimburse us for the cost of any required safety studies, we may be forced to incur this cost, which could have a material adverse impact on our business and results of operations.

Our approved products may not be accepted by physicians, patients, or the medical community in general.

Even if the medical community accepts a product as safe and efficacious for its indicated use, physicians may choose to restrict the use of the product if we or any collaborator is unable to demonstrate that, based on experience, clinical data, side-effect profiles and other factors, our product is preferable to any existing medicines or treatments. We cannot predict the degree of market acceptance of any of our approved products, which will depend on a number of factors, including, but not limited to:

• the efficacy and safety of the product;
• the approved labeling for the product and any required warnings;
• the advantages and disadvantages of the product compared to alternative treatments;
• our and any collaborator’s ability to educate the medical community about the safety and effectiveness of the product;
• the reimbursement policies of government and third-party payors pertaining to the product; and
• the market price of our product relative to competing treatments.

We may use hazardous chemicals and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our research and development processes may involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed any insurance coverage and our total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters. Compliance with environmental laws and regulations may be expensive and may impair our research and development efforts. If we fail to comply with these requirements, we could incur substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, we cannot predict the impact on our business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.

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Intellectual Property Risks Related to Our Business

Our ability to compete may decline if we do not adequately protect our proprietary rights or if we are barred by the patent rights of others.

Our commercial success depends on obtaining and maintaining proprietary rights to our products and product candidates as well as successfully defending these rights against third-party challenges. We will only be able to protect our products and product candidates from unauthorized use by third parties to the extent that valid and enforceable patents, or effectively protected trade secrets, cover them. Our ability to obtain patent protection for our products and product candidates is uncertain due to a number of factors, including that:

• we may not have been the first to make the inventions covered by pending patent applications or issued patents;
• we may not have been the first to file patent applications for our products and product candidates;
• others may independently develop identical, similar or alternative products, compositions or devices and uses thereof;
• our disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;
• any or all of our pending patent applications may not result in issued patents;
• we may not seek or obtain patent protection in countries that may eventually provide us a significant business opportunity;
• any patents issued to us may not provide a basis for commercially viable products, may not provide any competitive advantages, or may be successfully challenged by third parties;
• our compositions, devices and methods may not be patentable;
• others may design around our patent claims to produce competitive products which fall outside of the scope of our patents; or
• others may identify prior art or other bases which could invalidate our patents.

Even if we have or obtain patents covering our products and product candidates, we may still be barred from making, using and selling them because of the patent rights of others. Others may have filed, and in the future may file, patent applications covering products that are similar or identical to ours. There are many issued U.S. and foreign patents relating to chemical compounds, therapeutic products, diagnostic devices, and some of these relate to our products and product candidates. These could materially affect our ability to sell our products and develop our product candidates. Because patent applications can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our products and product candidates may infringe. These patent applications may have priority over patent applications filed by us.

Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous procedural provisions during the patent application process. We may or may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forgo patent protection or allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer.

Legal actions to enforce our patent rights can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or other actions against those that have infringed on our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to

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enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our business, prospects, financial condition and results of operations.

Pharmaceutical and medical device patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position.

The patent positions of pharmaceutical and medical device companies can be highly uncertain and involve complex legal and factual questions. The interpretation and breadth of claims allowed in some patents covering pharmaceutical compositions may be uncertain and difficult to determine, and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims. The standards of the United States Patent and Trademark Office, or USPTO, are sometimes uncertain and could change in the future. Consequently, the issuance and scope of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to re-examination proceedings, post-grant review and/or inter partes review in the USPTO. Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, re-examination, post-grant review, inter partes review and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes.

In addition, changes in or different interpretations of patent laws in the United States and foreign countries may permit others to use our discoveries or to develop and commercialize our technology and products and product candidates without providing any compensation to us, or may limit the number of patents or claims we can obtain. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws and those countries may lack adequate rules and procedures for defending our intellectual property rights.

If we fail to obtain and maintain patent protection and trade secret protection of our products and product candidates, we could lose our competitive advantage and competition we face would increase, reducing any potential revenues and adversely affecting our ability to attain or maintain profitability.

Developments in patent law could have a negative impact on our business.

From time to time, the United States Supreme Court, other federal courts, the United States Congress or the USPTO may change the standards of patentability and any such changes could have a negative impact on our business.

In addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a “first-to-invent” system to a “first-to-file” system, changes the way issued patents are challenged, and changes the way patent applications are disputed during the examination process. These changes may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. The USPTO has developed regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first-to-file provisions, became effective on March 16, 2013. Substantive changes to patent law associated with the America Invents Act may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will ultimately have on the cost of prosecuting our patent applications, our ability to obtain patents based on our discoveries and our ability to enforce or defend any patents that may issue from our patent applications, all of which could have a material adverse effect on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to patent protection, because we operate in the highly technical field of discovery and development of therapies and medical devices, we rely in part on trade secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We expect to enter into confidentiality and intellectual property assignment agreements with our employees, consultants, outside

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scientific and commercial collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to pharmaceuticals and medical devices. This could make it difficult for us to stop the infringement of some of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

Third parties may assert ownership or commercial rights to inventions we develop.

Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. We have or expect to have written agreements with collaborators that provide for the ownership of intellectual property arising from our collaborations. These agreements provide that we must negotiate certain commercial rights with collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the collaboration. In some instances, there may not be adequate written provisions to address clearly the resolution of intellectual property rights that may arise from a collaboration. If we cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-party collaborator’s materials where required, or if disputes otherwise arise with respect to the intellectual property developed with the use of a collaborator’s samples, we may be limited in our ability to capitalize on the market potential of these inventions. In addition, we may face claims by third parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions. Litigation may be necessary

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to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

We might employ individuals who were previously employed at universities or other biopharmaceutical or medical device companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly, and an unfavorable outcome could harm our business.

There is significant litigation in the pharmaceutical and medical device industries regarding patent and other intellectual property rights. While we are not currently subject to any pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on claims that our products or product candidates infringe the intellectual property rights of others. If our development and commercialization activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such patents. A patentee could prevent us from using the patented drugs, compositions or devices. We may need to resort to litigation to enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of third-party proprietary rights. From time to time, we may hire scientific personnel or consultants formerly employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of prior affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We may not be able to afford the costs of litigation. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our cash position and stock price. Any legal action against us or our collaborators could lead to:

• payment of damages, potentially treble damages, if we are found to have willfully infringed a party’s patent rights;
• injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell products; or
• we or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms, if at all, all of which could have a material adverse impact on our cash position and business, prospects and financial condition. As a result, we could be prevented from commercializing our products and product candidates.

Risks Related to Our Organization, Structure and Operation

We intend to acquire, through asset purchases or in-licensing, businesses or products, or form strategic alliances, in the future, and we may not realize the intended benefits of such acquisitions or alliances.

We intend to acquire, through asset purchases or in-licensing, additional businesses or products, form strategic alliances and/or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses or assets with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses or assets if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition

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that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition or alliance, we will achieve the expected synergies to justify the transaction. These risks apply to our acquisition of ProstaScint in May 2015, Primsol in October 2015 and Natesto in April 2016.

In fiscal 2016 and 2015, the great majority of our net revenue and gross accounts receivable were due to one significant customer, the loss of which could materially and adversely affect our results of operations.

During fiscal 2016 and fiscal 2015, one customer accounted for 86% and 83%, respectively, of our net revenue. At June 30, 2016 and 2015, this same customer accounted for 69% and 99%, respectively, of our gross accounts receivable. Although we expect to increase revenue and not be as reliant on this one customer, at least for fiscal 2017, and perhaps beyond, the loss of this customer could have a material adverse effect on our results of operations.

Our ability to operate our business effectively may suffer if we or Ampio terminate our services agreement, or if we are unable to establish on a cost-effective basis our own administrative and other support functions in order to operate as a stand-alone company after the expiration or termination of our services agreement with Ampio.

Prior to the Merger, we relied on administrative and other resources of Ampio to operate our business. We have entered into a services agreement to retain the ability for specified periods to use certain Ampio resources. We may elect to continue this agreement for an indefinite period of time. Any decision by us to terminate this agreement would be approved by disinterested members of our management and board of directors under our procedures regarding related party transactions. After the termination of this agreement, we will need to create our own administrative and other support systems or contract with third parties to replace Ampio’s services. These services may not be provided at the same level, and we may not be able to obtain the same benefits that we received prior to the separation. These services may not be sufficient to meet our needs, and if our agreement with Ampio is terminated, we may not be able to replace these services at all or obtain these services at prices and on terms as favorable as we currently have with Ampio. Any failure or significant downtime in our own administrative systems or in Ampio’s administrative systems during the transitional period could result in unexpected costs, impact our results or prevent us from paying our suppliers or employees and performing other administrative services on a timely basis.

We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

As of December 31, 2016, we had 49 full-time employees, and in connection with being a public company, we expect to continue to increase our number of employees and the scope of our operations. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the planned expanded commercialization of our approved products and the development of our product candidates. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to expand the market for our approved products and develop our product candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

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We depend on key personnel and attracting qualified management personnel and our business could be harmed if we lose personnel and cannot attract new personnel.

Our success depends to a significant degree upon the technical and management skills of our officers and key personnel. Although our executive officers Joshua and Jarrett Disbrow and Jonathan McGrael have employment agreements, the existence of an employment agreement does not guarantee the retention of the executive officer for any period of time, and each agreement obligates us to pay the officer lump sum severance (two years’ for Messrs. Disbrow and six months’ for Mr. McGrael) if we terminate him without cause, as defined in the agreement, which could hurt our liquidity. The loss of the services of any of these individuals would likely have a material adverse effect on us. Our success also will depend upon our ability to attract and retain additional qualified management, marketing, technical, and sales executives and personnel. We do not maintain key person life insurance for any of our officers or key personnel. The loss of any of our key executives, or the failure to attract, integrate, motivate, and retain additional key personnel could have a material adverse effect on our business.

We compete for such personnel against numerous companies, including larger, more established companies with significantly greater financial resources than we possess. There can be no assurance that we will be successful in attracting or retaining such personnel, and the failure to do so could have a material adverse effect on our business, prospects, financial condition, and results of operations.

Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our product candidates.

The risk that we may be sued on product liability claims is inherent in the development and commercialization of pharmaceutical and medical device products. Side effects of, or manufacturing defects in, products that we develop and commercialized could result in the deterioration of a patient’s condition, injury or even death. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits increases. Claims may be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of the affected products.

We may be subject to legal or administrative proceedings and litigation other than product liability lawsuits which may be costly to defend and could materially harm our business, financial condition and operations.

Although we maintain general liability, clinical trial liability and product liability insurance, this insurance may not fully cover potential liabilities. In addition, inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit the commercial production and sale of any of our products and product candidates that receive regulatory approval, which could adversely affect our business. Product liability claims could also harm our reputation, which may adversely affect our collaborators’ ability to commercialize our products successfully.

In order to satisfy our obligations as a public company, we may need to hire additional qualified accounting and financial personnel with appropriate public company experience in the event that we no longer utilize the finance and administrative functions of Ampio.

As a public company, we must establish and maintain effective disclosure and financial controls. We may need to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and maintain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts.

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Our internal computer systems, or those of our third-party contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite the implementation of security measures, our internal computer systems and those of our third-party contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we do not believe that we have experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a loss of clinical trial data for our product candidates which could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.

We are upgrading our enterprise resource planning system and may experience difficulties with the upgrade or after its full implementation.

As a result of the growth of our business, we needed to upgrade our enterprise resource planning, or ERP, system, which upgrade we began in July 2016. Our ERP system is critical to our ability to accurately maintain books and records, keep track of product inventory, marketing and sales, and prepare our financial statements. The implementation of the new ERP system will require additional investment of significant financial and human resources. In addition, we may not be able to successfully complete the full implementation of the ERP system without experiencing difficulties. Any disruptions, delays or deficiencies in the design and implementation of the new ERP system could adversely affect our ability to monitor our business and prepare our financial statements on an accurate and timely basis.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of June 30, 2016, we had federal net operating loss carryforwards of approximately $24.8 million. The available net operating losses, if not utilized to offset taxable income in future periods, will begin to expire in 2032 and will completely expire in 2035. Under the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder, including, without limitation, the consolidated income tax return regulations, various corporate changes could limit our ability to use our net operating loss carryforwards and other tax attributes (such as research tax credits) to offset our income. Because Ampio’s equity ownership interest in our company fell to below 80% in January 2016, we will be deconsolidated from Ampio’s consolidated federal income tax group. As a result, certain of our net operating loss carryforwards may not be available to us and we may not be able to use them to offset our U.S. federal taxable income. As a consequence of the deconsolidation, it is possible that certain other tax attributes and benefits resulting from U.S. federal income tax consolidation may no longer be available to us. Our company and Ampio do not have a tax sharing agreement that could mitigate the loss of net operating losses and other tax attributes resulting from the deconsolidation or our incurrence of liability for the taxes of other members of the consolidated group by reason of the joint and several liability of group members. In addition to the deconsolidation risk, an “ownership change” (generally a 50% change (by value) in equity ownership over a three-year period) under Section 382 of the Code could limit our ability to offset, post-change, our U.S. federal taxable income. Section 382 of the Code imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss carryforwards and certain recognized built-in losses. Either the deconsolidation or the ownership change scenario could result in increased future tax liability to us.

Our historical financial information as a business conducted by Ampio may not be representative of our results as an independent public company.

The historical financial information included herein does not necessarily reflect what our financial position, operating results or cash flows would have been had we been an independent entity during the year ended June 30, 2015. The historical costs and expenses reflected in our financial statements include amounts for certain corporate functions historically provided by Ampio, including costs of finance and other administrative services, and income taxes. These expense allocations were developed on the basis of what we and Ampio considered to be reasonable prices for the utilization of services provided or the benefits received by us.

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The historical financial information in our audited financial statements may not be indicative of what our results of operations, financial position, changes in equity and cash flows would have been had we been a separate stand-alone entity during the periods presented or will be in the future. We have not made adjustments to reflect many significant changes that will occur in our cost structure, funding and operations as a result of our separation from Ampio, including changes in our employee base, changes in our tax structure, potential increased costs associated with reduced economies of scale and increased costs associated with being a publicly traded, stand-alone company, such as compliance costs, nor have we made offsetting adjustments to reflect the benefits of this offering, as these factors are presently difficult to quantify. These same risks will apply to the financial information of any business we acquire when it is included in our financial statements.

Risks Related to Securities Markets and Investment in our Securities

There is a limited trading market for our common stock, which could make it difficult to liquidate an investment in our common stock, in a timely manner.

Our common stock is currently traded on the OTCQX. Because there is a limited public market for our common stock, investors may not be able to liquidate their investment whenever desired. We cannot assure that we will maintain an active trading market for our common stock and the lack of an active public trading market could mean that investors may be exposed to increased risk. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity.

Our ability to uplist our common stock to the NYSE MKT or NASDAQ is subject to us meeting applicable listing criteria.

We intend to apply for our common stock to be listed on the NYSE MKT or NASDAQ, each a national securities exchange. Each exchange requires companies desiring to list their common stock to meet certain listing criteria including total number of stockholders; minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could prevent us from listing our common stock on either exchange. In the event we are unable to uplist our common stock, our common stock will continue to trade on the OTCQX market, which is generally considered less liquid and more volatile than the either exchange. Our failure to uplist our common stock could make it more difficult for you to trade our common stock shares, could prevent our common stock trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were able to uplist.

If we apply and our common stock is accepted for uplisting on the NYSE MKT or NASDAQ, our failure to meet the continued listing requirements of such exchange could result in a delisting of our common stock.

If our common stock were to be uplisted on the NYSE MKT or NASDAQ, and thereafter we fail to satisfy the continued listing requirements of such exchange, such as the corporate governance requirements or the minimum closing bid price requirement, the exchange may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we anticipate that we would take actions to restore our compliance with applicable exchange requirements, such as stabilize our market price, improve the liquidity of our common stock, prevent our common stock from dropping below such exchange’s minimum bid price requirement, or prevent future non-compliance with such exchange’s listing requirements.

If we fail to comply with the continued trading standards of the OTCQX U.S. Premier tier, it may result in our common stock moving tiers in the OTC Markets.

Our common stock is currently quoted for trading on the OTCQX U.S. Premier tier, and the continued quotation of our common stock on the OTCQX U.S. Premier tier is subject to our compliance with a number of standards. These standards include the requirement of our common stock to have a minimum bid price of $1.00 per share as of the close of business for at least one of every thirty consecutive calendar days.

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Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

At December 31, 2016, our executive officers, directors and entities affiliated with certain of our directors beneficially owned approximately 19% of our outstanding shares of common stock. Therefore, these stockholders have the ability to influence us through their ownership position. These stockholders may be able to determine the outcome of all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

The sale of shares of our common stock to Lincoln Park under the Purchase Agreement may cause substantial dilution to our existing stockholders and could cause the price of our common stock to decline.

Under the Purchase Agreement with Lincoln Park, we may sell to Lincoln Park, from time to time and under certain circumstances, up to $10,500,000 of our common stock over approximately 36 months subsequent to the effective date of the registration statement that covers the resale by Lincoln Park of up to 1,155,136 shares of our common stock issuable under the Purchase Agreement. As required under the Purchase Agreement and related registration rights agreement, we filed and had declared effective a registration statement for the resale by Lincoln Park of additional shares of our common stock that we may sell and issue to Lincoln Park. We may be required to file and have declared effective additional registration statements in connection with our Purchase Agreement with Lincoln Park. Generally, with respect to the Purchase Agreement, we have the right, but no obligation, to direct Lincoln Park to periodically purchase up to $10,500,000 of our common stock in specific amounts under certain conditions, which periodic purchase amounts can be increased under specified circumstances.

Depending upon market liquidity at the time, sales of shares of our common stock to Lincoln Park may cause the trading price of our common stock to decline. Lincoln Park may ultimately purchase all, some or none of the $10,500,000 of common stock under the Purchase Agreement, and after it has acquired shares, Lincoln Park may sell all, some or none of those shares. Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to Lincoln Park, and the Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.

We sold $500,000 of common stock to Lincoln Park in July 2016 when we executed the Purchase Agreement. We sold 40,000 shares to Lincoln Park in the first quarter for $107,000 net of expenses. As a result, as of the date of this prospectus we may sell an aggregate of $9,869,000 pursuant to the Purchase Agreement, assuming we continue to meet the conditions required for sale.

Future sales and issuances of our equity securities or rights to purchase our equity securities, including pursuant to equity incentive plans, would result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

To the extent we raise additional capital by issuing equity securities, including pursuant to the Purchase Agreement with Lincoln Park, our stockholders may experience substantial dilution. We may, as we have in the past, sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be further diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to existing stockholders.

Pursuant to our 2015 Stock Plan, following stockholder approval of an increase in the shares authorized for issuance thereunder at our annual meeting on November 15, 2016, our Board of Directors is currently authorized to award up to a total of 2,000,000 shares of common stock or options to purchase shares of

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common stock to our officers, directors, employees and non-employee consultants. As of December 31, 2016, options to purchase 746,655 shares of common stock issued under our 2015 Stock Plan at a weighted average exercise price of $3.52 per share were outstanding. In addition, at December 31, 2016, there were outstanding warrants to purchase an aggregate of 8,711,354 shares of our common stock at a weighted average exercise price of $2.98, excluding the effects of any reduction in the exercise price of the Original Warrants pursuant to the Tender Offer. Stockholders will experience dilution in the event that additional shares of common stock are issued under our 2015 Stock Plan, or options issued under our 2015 Stock Plan are exercised, or any warrants are exercised for shares of our common stock.

Our share price is volatile and may be influenced by numerous factors, some of which are beyond our control.

The trading price of our common stock is likely to be highly volatile, and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

• the products or product candidates we acquire for commercialization;
• the product candidates we seek to pursue, and our ability to obtain rights to develop, commercialize and market those product candidates;
• our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
• actual or anticipated adverse results or delays in our clinical trials;
• our failure to expand the market for our currently approved products or commercialize our product candidates, if approved;
• unanticipated serious safety concerns related to the use of any of our product candidates;
• overall performance of the equity markets and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies;
• conditions or trends in the healthcare, biotechnology and pharmaceutical industries;
• introduction of new products offered by us or our competitors;
• announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
• our ability to maintain an adequate rate of growth and manage such growth;
• issuances of debt or equity securities;
• sales of our common stock by us or our stockholders in the future, or the perception that such sales could occur;
• trading volume of our common stock;
• ineffectiveness of our internal control over financial reporting or disclosure controls and procedures;
• general political and economic conditions;
• effects of natural or man-made catastrophic events; and
• other events or factors, many of which are beyond our control.
• adverse regulatory decisions;
• additions or departures of key scientific or management personnel;
• changes in laws or regulations applicable to our product candidates, including without limitation clinical trial requirements for approvals;

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• disputes or other developments relating to patents and other proprietary rights and our ability to obtain patent protection for our product candidates;
• our dependence on third parties, including CROs and scientific and medical advisors;
• our ability to uplist our common stock to a national securities exchange;
• failure to meet or exceed any financial guidance or expectations regarding development milestones that we may provide to the public;
• actual or anticipated variations in quarterly operating results;
• failure to meet or exceed the estimates and projections of the investment community;

In addition, the stock market in general, and the stocks of small-cap healthcare, biotechnology and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our common stock.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. Because these FINRA requirements are applicable to our common stock, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and any trading volume could decline.

Any trading market for our common stock that may develop will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on us or our business. If no securities or industry analysts commence coverage of our company, the trading price for our stock could be negatively affected. If securities or industry analysts initiate coverage, and one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and any trading volume to decline.

We have a substantial number of shares of authorized but unissued capital stock, and if we issue additional shares of our capital stock in the future, our existing stockholders will be diluted.

Our Certificate of Incorporation authorize the issuance of up to 100,000,000 shares of our common stock and up to 50,000,000 shares of preferred stock with the rights, preferences and privileges that our Board of Directors may determine from time to time. As of December 31, 2016, we had 10,845,566 shares of our common stock issued and outstanding, which represents approximately 10.8% of our total authorized shares of common stock. In addition to capital raising activities, which we expect to continue to pursue in order to raise the funding we will need in order to continue our operations, other possible business and financial uses for our authorized capital stock include, without limitation, future stock splits, acquiring other companies, businesses or products in exchange for shares of our capital stock, issuing shares of our capital stock to partners or other collaborators in connection with strategic alliances, attracting and retaining employees by the issuance of additional securities under our equity compensation plans, or other transactions and corporate

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purposes that our Board of Directors deems are in the best interest of our company. Additionally, shares of our capital stock could be used for anti-takeover purposes or to delay or prevent changes in control or our management. Any future issuances of shares of our capital stock may not be made on favorable terms or at all, they may not enhance stockholder value, they may have rights, preferences and privileges that are superior to those of our common stock, and they may have an adverse effect on our business or the trading price of our common stock. The issuance of any additional shares of our common stock will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. Additionally, any such issuance will reduce the proportionate ownership and voting power of all of our current stockholders.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan or otherwise, could result in dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that we will need significant additional capital in the future to continue our planned operations. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors in a prior transaction may be materially diluted by subsequent sales. Additionally, any such sales may result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock. Further, any future sales of our common stock by us or resales of our common stock by our existing stockholders could cause the market price of our common stock to decline. Any future grants of options, warrants or other securities exercisable or convertible into our common stock, or the exercise or conversion of such shares, and any sales of such shares in the market, could have an adverse effect on the market price of our common stock.

Some provisions of our charter documents and applicable Delaware law may discourage an acquisition of us by others, even if the acquisition may be beneficial to some of our stockholders.

Provisions in our Certificate of Incorporation and Amended and Restated Bylaws, as well as certain provisions of Delaware law, could make it more difficult for a third-party to acquire us, even if doing so may benefit some of our stockholders. These provisions include:

• the authorization of 50,000,000 shares of “blank check” preferred stock, the rights, preferences and privileges of which may be established and shares of which may be issued by our Board of Directors at its discretion from time to time and without stockholder approval;
• limiting the removal of directors by the stockholders;
• allowing for the creation of a staggered board of directors;
• eliminating the ability of stockholders to call a special meeting of stockholders; and
• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by the board of directors. This provision could have the effect of discouraging, delaying or preventing someone from acquiring us or merging with us, whether or not it is desired by or beneficial to our stockholders.

Any provision of our Certificate of Incorporation or Bylaws or of Delaware law that is applicable to us that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock in the event that a potentially beneficial acquisition is discouraged, and could also affect the price that some investors are willing to pay for our common stock.

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The elimination of personal liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses.

Our Certificate of Incorporation and our Bylaws eliminate the personal liability of our directors and officers to us and our stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under Delaware law. Further, our Certificate of Incorporation and our Bylaws and individual indemnification agreements we intend to enter with each of our directors and executive officers provide that we are obligated to indemnify each of our directors or officers to the fullest extent authorized by the Delaware law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, even if such actions might otherwise benefit our stockholders.

We do not intend to pay cash dividends on our capital stock in the foreseeable future.

We have never declared or paid any dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. Any future payment of cash dividends in the future would depend on our financial condition, contractual restrictions, solvency tests imposed by applicable corporate laws, results of operations, anticipated cash requirements and other factors and will be at the discretion of our Board of Directors. Our stockholders should not expect that we will ever pay cash or other dividends on our outstanding capital stock.

In the event we are unable to maintain an effective registration statement with respect to all of the shares issuable pursuant to the Purchase Agreement, we may not be able to access the full amount available under the Purchase Agreement.

The registration statement we have filed with the SEC for the resale of shares issuable pursuant to the Purchase Agreement with Lincoln Park, does not register all of the shares issuable pursuant to the Purchase Agreement with Lincoln Park. In order to access the Purchase Agreement beyond the shares offered thereunder, we must have an effective registration statement on file for any amount of shares in excess of the 1,155,136 shares registered and offered thereby. For us to issue additional shares pursuant to the Purchase Agreement, we will have to file one or more registration statements for those additional shares. However, we cannot assure you that we will be able to do so, or that the SEC will declare effective any registration statement that we may file. If we do not file and maintain an effective registration statement for the resale of additional shares issuable pursuant to the Purchase Agreement, we will be unable to access any additional funds that may be available under the Purchase Agreement. If we were unable to access a portion or the full remaining amount available to us under the Purchase Agreement, in the absence of any other financing sources, it would have a material adverse impact on our operations.

Risks Related to this Offering

Investors in this offering will experience immediate and substantial dilution in net tangible book value.

The exercise price of the October 2016 Warrants and the May 2016 Warrants, including as temporarily reduced to $0.75 in the Tender Offer, will be substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, based upon the assumptions set forth in “Dilution,” investors purchasing shares in this offering will incur immediate dilution of $0.39 per share to Outstanding Warrants exercised in this offering, assuming that all Outstanding Warrants were exercised to acquire 7,753,567 shares of our common stock at a reduced exercise price of $0.75 per share in this offering. If all of the October 2016 Warrants were exercised to acquire 6,020,245 shares of our common stock at an exercise price of $1.86, and all of the May 2016 Warrants that remained outstanding as of September 30, 2016 were exercised to acquire 1,733,322 shares of our common stock at an exercise price of $6.00 per share, based upon the assumptions set forth in “Dilution,” holders of October 2016 Warrants exercising such warrants for common stock in this offering will incur immediate dilution of approximately $0.62 per share, and holders of our May 2016 Warrants exercising such warrants for common stock in this offering will incur immediate

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dilution of approximately $4.76 per share. See “Dilution” for a more complete description of how the value of your investment in our common stock will be diluted upon the completion of this offering.

We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.

Our management will have considerable discretion in the application of the proceeds received in connection with this offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our profitability or increase our share price. The net proceeds from this offering may be placed in investments that do not produce income or lose value. See “Use of Proceeds” for a more complete description of the anticipated application of the proceeds received in connection with this offering.

Sales of a substantial number of shares of our common stock following this offering may adversely affect the market price of our common stock and the issuance of additional shares will dilute all other stockholders.

Sales of a substantial number of shares of our common stock in the public market or otherwise following this offering, or the perception that such sales could occur, could adversely affect the market price of our common stock. After completion of this offering, assuming that all Outstanding Warrants were exercised to acquire 7,753,567 shares of our common stock at a reduced exercise price of $0.75 per share in this offering, there will be approximately 18,599,133 shares of our common stock outstanding. In addition, our Certificate of Incorporation permits the issuance of up to approximately 81,400,867 additional shares of common stock after the completion of this offering, as well as up to 50,000,000 shares of preferred stock. Thus, we have the ability to issue substantial amounts of common stock in the future, which would dilute the percentage ownership held by the investors who purchase shares of our common stock in this offering.

In the event we are unable to maintain an effective registration statement with respect to the shares issuable upon exercise of the Outstanding Warrants, holders of the Outstanding Warrants may be unable to exercise such warrants.

No Outstanding Warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of such warrants is current and the common stock has been registered or qualified or deemed to be exempt under the federal securities laws and the securities laws of the state of residence of the holder of such warrants. Under the terms of the warrant agent agreement, we have agreed to meet these conditions and use our reasonable and best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the Outstanding Warrants until the exercise or expiration of such warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the Outstanding Warrants, holders may be unable to exercise such warrants. If the prospectus relating to the common stock issuable upon the exercise of the Outstanding Warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of such warrants reside, such warrants will only be exercisable on a cashless basis, as described in the warrant agent agreement.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:

• the commercial success and market acceptance of any of our products and product candidates that are approved for marketing in the United States or other countries;
• the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our products and product candidates;
• our ability to manufacture sufficient amounts of our product candidates for clinical trials and our products for commercialization activities;
• our need for, and ability to raise, additional capital;
• the number, designs, results and timing of our clinical trials;
• the regulatory review process and any regulatory approvals that may be issued or denied by the U.S. Food and Drug Administration or other regulatory agencies;
• our need to secure collaborators to license, manufacture, market and sell any products for which we receive regulatory approval in the future;
• our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
• the medical benefits, effectiveness and safety of our products and product candidates;
• the safety and efficacy of medicines or treatments introduced by competitors that are targeted to indications which our products and product candidates have been developed to treat;
• our current or prospective collaborators’ compliance or non-compliance with their obligations under our agreements with them; and
• other factors discussed elsewhere in this prospectus.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this prospectus. Actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus, and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

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The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

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PURPOSE OF THE TENDER OFFER

The Company is engaging in the Tender Offer to encourage the exercise of the Warrants by temporarily reducing the exercise price.

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USE OF PROCEEDS

We received cash proceeds from the offer and sale of common stock and October 2016 Warrants, net of discounts, commissions and expenses, of approximately $7.6 million. In addition, we received cash proceeds from the offer and sale of common stock and May 2016 Warrants, net of discounts, commissions and expenses, of approximately $6.6 million. As of January 27, 2017, there have not been any exercises of the October 2016 Warrants or the May 2016 Warrants.

Assuming full exercise of all of the October 2016 Warrants that remain outstanding on January 27, 2017 at $1.86 per share, we will receive additional net proceeds of approximately $11.2 million. Assuming full exercise of all of the May 2016 Warrants that remain outstanding on January 27, 2017 at $6.00 per share, we will receive additional net proceeds of approximately $10.4 million.

Assuming full exercise of all of the Original Warrants that remain outstanding on January 27, 2017 at the temporarily reduced exercise price of $0.75 per share, we will receive additional net proceeds of approximately $5.4 million and will not receive any of the proceeds described above.

The actual exercise of any of the Original Warrants, however, is beyond our control and depends on a number of factors, including the market price of our common stock. On January 26, 2017, the last reported sale price of our common stock on the OTCQX was $1.00. There can be no assurance that any of the Original Warrants will be exercised.

While we have no specific plan for the proceeds, we expect to use the net proceeds of the Tender Offer to further develop our products, for working capital, and for general corporate purposes. The amounts and timing of our use of the net proceeds from this offering will depend on a number of factors, such as the timing and progress of our research and development efforts, the timing and progress of any collaborative or strategic partnering efforts, and the competitive environment for our planned products. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. Accordingly, our management will have broad discretion in the timing and application of these proceeds. Pending application of the net proceeds as described above, we intend to temporarily invest the proceeds in short-term, interest-bearing instruments.

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DETERMINATION OF OFFERING PRICE

Neither the exercise price of $1.86 for the October 2016 Warrants, the exercise price of $6.00 for the May 2016 Warrants, nor the temporarily reduced exercise price of $0.75 pursuant to the terms of the Offer to Exercise, were based on the market price of our common stock or any discount to the market price. The exercise price is not necessarily related to our book value, net worth or any other established criteria of value and may or may not be considered the fair value of our common stock underlying the Original Warrants. After the date of this prospectus, our common stock may trade at prices above or below the exercise prices or the temporarily reduced exercise price of the Original Warrants. You should not consider the exercise prices or the temporarily reduced exercise price of the Original Warrants as an indication of value of our company or our common stock. You should not assume or expect that our shares of common stock will trade at or above the exercise prices or the temporarily reduced exercise price of the Original Warrants in any given time period. The market price of our common stock may decline during or after the Tender Offer or this offering, and you may not be able to exercise or sell the shares of our common stock. You should obtain a current quote for our common stock before exercising and make your own assessment of our business and financial condition, our prospects for the future, and the terms of the Outstanding Warrants. On January 26, 2017, the closing price of our common stock on the OTCQX was $1.00.

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MARKET FOR COMMON STOCK

Our common stock is quoted on the OTCQX under the symbol “AYTU.” Prior to December 14, 2015, our common stock was quoted on the OTCQB Market. The following table sets forth the range of high and low closing quotations for our common stock on the OTCQX or OTCQB, for the periods shown. The quotations represent inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions.

Year Ended
June 30, 2015
High Low
First Quarter $ 29.40 $ 24.12
Second Quarter $ 27.72 $ 27.72
Third Quarter $ 36.48 $ 23.40
Fourth Quarter $ 141.72 $ 29.16

Year Ending
June 30, 2016
High Low
First Quarter $ 57.00 $ 55.56
Second Quarter $ 57.00 $ 37.68
Third Quarter $ 42.00 $ 6.72
Fourth Quarter $ 7.32 $ 3.60

Year Ended
June 30, 2017
High Low
First Quarter $ 5.00 $ 3.26
Second Quarter $ 3.20 $ 1.05
Third Quarter (through January 26, 2017) $ 1.23 $ 1.00

On January 26, 2017, the closing price as reported on the OTCQX of our common stock was $1.00. As of January 26, 2017, there were 469 holders of record of our common stock.

We intend to apply to list our common stock on the NYSE MKT or NASDAQ under the symbol “AYTU” once we meet applicable listing standards. We believe that we will qualify, and we intend to list our common stock and warrants on an exchange, upon achieving a per share closing price of $3.00 (NYSE MKT) or $4.00 (NASDAQ) or greater for our stock for 30 out of 60 trading days while also achieving $15 million in value of our non-affiliated common shares among other applicable listing criteria. In case our stock price does not reach this level otherwise, we sought and received stockholder approval in November 2016 for a reverse stock split to help us meet the stock price listing standard. However, it is not clear when, or if, we will meet the NYSE MKT or NASDAQ listing standards.

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Equity Compensation Plan Information

In June 2015, our shareholders approved the adoption of a stock and option award plan (the “2015 Plan”), under which 833,334 shares were reserved for future issuance under restricted stock awards, options, and other equity awards. The 2015 Plan permits grants of equity awards to employees, directors and consultants. The following table displays equity compensation plan information as of June 30, 2016.

Plan Category Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options,
Warrants and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available
for Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)
Equity compensation plans approved by security holders 322,302 $ 18.01 511,032
Equity compensation plans not approved by security holders 162,746 4.49 —
Total 485,048 $ 13.47 511,032

The above table excludes all grants of equity awards to employees, directors and consultants after June 30, 2016. In connection with our private placement of approximately $4.7 million of common stock in 2013, we were obligated to issue to the placement agent warrants to purchase 8,553 shares of our common stock. The placement agent warrants have a term of five years from the date of issuance and an exercise price of $54.36.

In connection with our private placement of approximately $5.2 million of convertible notes in July and August 2015, we were obligated to issue to the placement agents’ warrants for an amount of shares equal to 8% of the number of shares of our common stock issued upon conversion of the notes and any accrued interest. The placement agents’ warrants have a term of five years from the date of issuance of the related notes in July and August 2015, an exercise price equal to 100% of the price per share at which equity securities were sold in our next equity financing, and provide for cashless exercise. Those warrants were not approved by our stockholders. In connection with the conversions of the notes in February 2016 and May 2016, which were triggered by an equity financing in January 2016 and our public offering of common stock and warrants in May 2016, respectively, we issued warrants to the placement agents to purchase an aggregate of 22,254 shares of our common stock at an exercise price of $7.80 per share, and an aggregate of 22,564 shares of our common stock at an exercise price of $4.80 per share. In connection with our public offering consummated May 6, 2016, we issued warrants to purchase an aggregate of 109,375 shares of common stock at an exercise price of $6.00 to the underwriters of the public offering. In connection with our public offering consummated November 2, 2016, we issued warrants to purchase an aggregate of 401,450 shares of common stock at an exercise price of $1.86 to the underwriters of the public offering. In connection with the Tender Offer, the exercise prices of the underwriters’ warrants issued in such public offerings will be permanently reduced to $0.75 per share.

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DIVIDEND POLICY

We have not paid any cash dividends on our common stock and our Board of Directors presently intends to continue a policy of retaining earnings, if any, for use in our operations. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined by the Board of Directors in light of conditions then existing, including earnings, financial condition, capital requirements and other factors. Delaware law prohibits us from declaring dividends where, if after giving effect to the distribution of the dividend:

• we would not be able to pay our debts as they become due in the usual course of business; or
• our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

Except as set forth above, there are no restrictions that currently materially limit our ability to pay dividends or which we reasonably believe are likely to limit materially the future payment of dividends on common stock.

Our Board of Directors has the right to authorize the issuance of preferred stock, without further stockholder approval, the holders of which may have preferences over the holders of our common stock as to payment of dividends.

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DILUTION

Our net tangible book value as of September 30, 2016 was approximately $(6.2) million or approximately $(1.20) per share. After giving effect to our public offering, consummated on November 2, 2016, of an aggregate of 5,735,000 shares of common stock together with the initial issuance of the October 2016 Warrants to purchase up to an aggregate of 6,020,245 shares of common stock, our net tangible book value as of September 30, 2016 would have been approximately $1.5 million or approximately $0.13 per share. Net tangible book value per share represents the amount of our total tangible assets, less our total liabilities divided by the number of outstanding shares of common stock. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchaser of shares of common stock upon the exercise of warrants and the net tangible book value per share of common stock immediately after the exercise of warrants.

If all of the October 2016 Warrants were exercised to acquire 6,020,245 shares of our common stock at an exercise price of $1.86, and all of the May 2016 Warrants that remained outstanding as of September 30, 2016 were exercised to acquire 1,733,322 shares of our common stock at an exercise price of $6.00 per share, our pro forma net tangible book value as of September 30, 2016 (after giving effect to our public offering consummated November 2, 2016) would have been approximately $23.1 million or approximately $1.24 per share. This would represent an immediate increase in net tangible book value of approximately $1.11 per share to existing stockholders and an immediate dilution in net tangible book value of approximately $0.62 per share to October 2016 Warrants and approximately $4.76 per share to May 2016 Warrants exercised from this offering.

If all of the October 2016 Warrants were exercised to acquire 6,020,245 shares of our common stock, and all of the May 2016 Warrants that remained outstanding as of September 30, 2016 were exercised to acquire 7,753,567 shares of our common stock, each at a reduced exercise price of $0.75 per share, our pro forma net tangible book value as of September 30, 2016 (after giving effect to our public offering consummated November 2, 2016) would have been approximately $6.8 million or approximately $0.36 per share. This represents an immediate increase in net tangible book value of approximately $0.23 per share to existing stockholders and an immediate dilution in net tangible book value of approximately $0.39 per share to Outstanding Warrants exercised from this offering.

Except as otherwise expressly indicated above, the shares outstanding as of September 30, 2016 used to calculate the information in this section:

• assumes no exercise of options to purchase an aggregate of 254,131 shares of common stock issued under our 2015 Stock Plan and outstanding and exercisable on September 30, 2016;
• assumes no exercise of warrants to purchase 8,553 shares of common stock with an exercise price of $54.36 per share issued by Luoxis and assumed by us in April 2015, and outstanding on September 30, 2016;
• assumes no exercise of warrants to purchase 22,254 shares of our common stock that were issued in February 2016 to the placement agents in our private placement of convertible notes that we conducted in July and August 2015. These placement agents’ warrants have a term of five years from the date of issuance of the related notes in July and August 2015, have an exercise price of $7.80, and provide for cashless exercise;
• assumes no exercise of warrants to purchase 22,564 shares of our common stock that were issued in May 2016 to the placement agents in our private placement of convertible notes that we conducted in July and August 2015. These placement agents’ warrants have a term of five years from the date of issuance of the related notes in July and August 2015, have an exercise price of $4.80, and provide for cashless exercise;
• assumes no exercise of warrants to purchase 305,559 shares of our common stock that were issued in May 2016 to convertible note holders who converted into the registered offering. These warrants have a term of five years from the date of issuance of the related notes in July and August 2015, have an exercise price of $6.00, and provide for cashless exercise;

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• assumes no exercise of warrants to purchase 109,375 shares of common stock issued to the underwriters of our May 2016 public offering. These warrants are exercisable beginning May 2, 2017 until May 2, 2021 and were originally issued with an exercise price equal to $6.00 (after giving effect to our 1-for-12 reverse stock split); provided that such exercise price will be permanently reduced to $0.75 per share in connection with the Tender Offer;
• assumes no exercise of warrants to purchase 88,032 shares of our common stock that were issued in July 2016 to investors. These warrants have a term of five years from the date of issuance and have an exercise price of $4.00, and provide for cashless exercise; and
• assumes exclusion of all activity after September 30, 2016, except our public offering consummated on November 2, 2016, as indicated above.

Unless otherwise indicated, the information in this prospectus reflects a 1-for-12 reverse split of our common stock, which was effective on June 30, 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a commercial-stage specialty pharmaceutical company focused on global commercialization of novel products in the field of urology. We are currently focused on addressing significant medical needs in the areas of hypogonadism, urological cancers, urinary tract infections and male infertility.

Through a multi-step reverse triangular merger, on April 16, 2015, Vyrix Pharmaceuticals, Inc. (“Vyrix”) and Luoxis Diagnostics, Inc. (“Luoxis”) merged with and into our Company (herein referred to as the Merger) and we abandoned our pre-merger business plans to solely pursue the specialty healthcare market, including the business of Vyrix and Luoxis. In the Merger, we acquired the RedoxSYS, MiOXSYS and Zertane products. On June 8, 2015, we reincorporated as a domestic Delaware corporation under Delaware General Corporate Law and changed our name from Rosewind Corporation to Aytu BioScience, Inc., and effected a reverse stock split in which each common stock holder received one share of common stock for every 12.174 shares outstanding. On June 30, 2016, we effected another reverse stock split in which each common stock holder received one share of common stock for each 12 shares. All share and per share amounts in this prospectus have been adjusted to reflect the effect of these two reverse stock splits (herein referred to collectively as the Reverse Stock Splits).

In May 2015, we entered into an asset purchase agreement with Jazz Pharmaceuticals, Inc., pursuant to which we purchased assets related to Jazz Pharmaceuticals’ product known as ProstaScint (capromab pendetide), including certain intellectual property and contracts, and the product approvals, inventory and work in progress (together, the “ProstaScint Business”), and assumed certain of Jazz Pharmaceuticals’ liabilities, including those related to product approvals and the sale and marketing of ProstaScint. The purchase price consisted of the upfront payment of $1.0 million. We also paid an additional $500,000 within five days after transfer for the ProstaScint-related product inventory and $227,000 was paid on September 30, 2015 (which represents a portion of certain FDA fees). We also will pay 8% on net sales made after October 31, 2017, payable up to a maximum aggregate payment of an additional $2.5 million.

In October 2015, we entered into an asset purchase agreement with FSC Laboratories, Inc., or FSC. Pursuant to the agreement, we purchased assets related to FSC’s product known as Primsol (trimethoprim solution), including certain intellectual property and contracts, inventory, work in progress and all marketing and sales assets and materials related solely to Primsol (together, the “Primsol Business”), and assumed certain of FSC’s liabilities, including those related to the sale and marketing of Primsol arising after the closing. We paid $500,000 at closing for the Primsol Business and we paid an additional $142,000, of which $102,000 went to inventory and $40,000 towards the Primsol Business, for the transfer of the Primsol-related product inventory. We also paid $500,000 in April of 2016, $500,000 in July of 2016, and $250,000 in November of 2016, for a total purchase price of $1,892,000.

In October 2015, we and Biovest International, Inc., or Biovest, (whose contract manufacturing business is now known as Cell Culture Company, or C3) entered into a Master Services Agreement, pursuant to which Biovest is to provide manufacturing services to us for our product ProstaScint. The agreement provides that we may engage Biovest from time to time to provide services in accordance with mutually agreed upon project addendums and purchase orders for ProstaScint. We expect to use the agreement from time to time for manufacturing services, including without limitation, the manufacturing, processing, quality control testing, release or storage of ProstaScint. The agreement provides customary terms and conditions, including those for performance of services by Biovest in compliance with project addendums, industry standards, regulatory standards and all applicable laws. Biovest will be responsible for obtaining and maintaining all governmental approvals, at our expense, during the term of the agreement. The agreement has a term of four years, provided that either party may terminate the agreement or any project addendum under the agreement on 30 days written notice of a material breach under the agreement. In addition, we may terminate the agreement or any project addendum under the agreement upon 180 days written notice for any reason.

In April 2016, we entered into a license and supply agreement to acquire the exclusive U.S. rights to Natesto nasal gel from Acerus Pharmaceuticals Corporation, or Acerus, which rights we received on July 1, 2016. We paid Acerus an upfront fee of $2.0 million upon execution of the agreement. In October 2016 we paid an

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additional $2.0 million. In January of 2017, we will pay an additional $4.0 million. We also purchased on April 28, 2016, an aggregate of 12,245,411 shares of Acerus common stock for Cdn. $2,534,800 (approximately US $2.0 million), with a purchase price per share equal to Cdn. $0.207 or approximately US $0.16 per share. We could not dispose of these shares until after August 29, 2016 and still hold these shares as of the date of this prospectus. We also agreed to make various payments up to an aggregate of $37.5 million based on net sales of Natesto. During the term of the agreement, we will purchase all of our Natesto product needs from Acerus at a designated price.

In May 2016, we sold in an underwritten public offering 1,562,500 shares of our common stock, and warrants to purchase up to an aggregate 1,562,500 shares of common stock at a combined public offering price of $4.80 per share and related warrant. Each warrant is exercisable for five years from issuance and has an exercise price equal to $6.00. In addition, we granted the underwriters a 45-day option to purchase up to an additional 234,375 shares of common stock and/or 234,375 additional warrants. The underwriters elected a partial exercise of their over-allotment option to purchase 170,822 warrants. The net cash proceeds from the sale of the shares and warrants was approximately $6.6 million, after deducting underwriting discounts and commissions and estimated offering expenses.

In July 2016, we issued 1,000,000 shares of restricted stock as compensation to certain executive officers and directors, which vest on July 7, 2026.

In July 2016, we entered into a purchase agreement (the “Purchase Agreement”), together with a registration rights agreement (the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an Illinois limited liability company. Upon signing the Purchase Agreement, Lincoln Park agreed to purchase 133,690 shares of our common stock for $500,000 as an initial purchase under the agreement. We also issued as a commitment fee to Lincoln Park of 52,500 shares of common stock. In September 2016, Lincoln Park purchased an additional 40,000 shares for $131,000.

Under the terms and subject to the conditions of the Purchase Agreement, we have the right to sell to and Lincoln Park is obligated to purchase up to an additional $10.0 million in amounts of shares of our common stock, subject to certain limitations, from time to time, over the 36-month period commencing on September 20, 2016 (the date that the registration statement that we filed with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, was declared effective by the SEC and a final prospectus in connection therewith was filed. As part of the registered offering that we completed in October 2016, we agreed not to sell any shares under this agreement for a period of 90 days from October 28, 2016.

In September 2016, we entered into a Commercial Supply Agreement with Grand River Aseptic Manufacturing, Inc. (“GRAM”). The agreement provides that we may engage GRAM from time to time to provide services in accordance with mutually agreed upon work orders. We expect to use the agreement from time to time for the filling, labeling, and packaging of its ProstaScint product. We are obligated to pay GRAM approximately $1.7 million for process development and production services used to fill, package, inspect, label, and test ProstaScint for distribution. As of September 30, 2016, We have not made any payments to GRAM.

On October 27, 2016, we priced an underwritten public offering of 5,735,000 shares of common stock and warrants to purchase up to an aggregate of 5,735,000 shares of common stock at a combined public offering price of $1.50 per share and related warrant. The gross proceeds from the offering to us were approximately $8.6 million, including the exercise of the underwriters’ over-allotment option, before deducting the underwriting discount and estimated offering expenses payable by us, but excluding the exercise of any warrants. The shares of common stock were immediately separable from the warrants and were issued separately. The warrants are exercisable immediately upon issuance, expire five years after the date of issuance and have an exercise price of $1.86 per share.

As of the date of this prospectus, we have financed operations through a combination of private and public debt and equity financings including net proceeds from the private placements of stock and convertible notes. Although it is difficult to predict our liquidity requirements, based upon our current operating plan, as of the

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date of this prospectus, we believe we will have sufficient cash to meet our projected operating requirements for fiscal 2017. See “Liquidity and Capital Resources.”

We have only begun to generate revenues from the commercialization of our product candidates in the last fiscal year. We recognized approximately $2.1 million in revenue from ProstaScint, Primsol and RedoxSYS sales during fiscal 2016 and $698,000 during the three months ended September 30, 2016. We have incurred accumulated net losses since our inception, and at September 30, 2016, we had an accumulated deficit of $52.3 million. Our net loss was $5.7 million for the three months ended September 30, 2016 and we used $5.3 million in cash from operations during the three months ended September 30, 2016. Our net loss was $28.2 million for fiscal 2016 and we used $10.7 million in cash from operations during that year.

Significant Accounting Policies and Estimates

Information regarding our Significant Accounting Policies and Estimates is contained in Note 2 to our audited annual financial statements.

Newly Issued Accounting Pronouncements

Information regarding the recently issued accounting standards (adopted and not adopted as of June 30, 2016) is contained in Note 2 to our audited annual financial statements.

Results of Operations — September 30, 2016 Compared to September 30, 2015

Results of operations for the three months ended September 30, 2016 and the three months ended September 30, 2015 reflected losses of approximately $5.7 million and $2.3 million, respectively. These losses include in part non-cash charges related to stock-based compensation, depreciation, amortization and accretion, compensation through issuance of stock, warrant derivative expense, unrealized gain on investment, issuance of warrants to initial investors, and amortization of prepaid research and development — related party offset by the unrealized gain on investment in the amount of $2.4 million for the three months ended September 30, 2016 and $228,000 for the three months ended September 30, 2015. The non-cash charges increased in the three months ended 2016 primarily due to the increase in stock-compensation expense, the amortization of intangible assets, derivative expense, compensation through issuance of common stock and issuance of warrants.

Revenue

Product and service revenue

We recognized $698,000 and $466,000 for the three months ended September 30, 2016 and 2015, respectively, related to the sale of our products Natesto, ProstaScint, and Primsol, as well as the MiOXSYS System due to our acquisitions and expended marketing of our products.

As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. Provisions for these deductions are recorded concurrently with the recognition of gross product sales revenue and include discounts, chargebacks, distributor fees, processing fees, as well as allowances for returns and Medicaid rebates. Provision balances relating to estimated amounts payable to direct customers are netted against accounts receivable and balances relating to indirect customers are included in accounts payable and accrued liabilities. The provisions recorded to reduce gross product sales and net product sales are as follows:

Three Months Ended
September 30,
2016 2015
Gross product and service revenue $ 925,000 $ 471,000
Provisions to reduce gross product sales to net product and service sales (227,000 ) (5,000 )
Net product and service revenue $ 698,000 $ 466,000
Percentage of provisions to gross sales 24.5 % 1.1 %

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License revenue

The license revenue of $0 and $21,000 recognized in the three months ended September 30, 2016 and 2015, respectively, represents the amortization of the upfront payments received from the Company’s license agreements. In 2012, we received a payment of $500,000 under our out-license agreement for Zertane with a Korean pharmaceutical company. This payment was deferred and was being recognized over 10 years. In 2014, we received a payment of $250,000 under our out-license agreement for Zertane with a Canadian-based supplier. This payment was deferred and was being recognized over seven years. At June 30, 2016, we determined that the Zertane asset has no value as we do not have the resources to complete the necessary clinical trials and bring it to market before the patents expire. Therefore, the remaining unamortized deferred revenue of $426,000 which was outstanding as of the date it was determined not to proceed with the clinical trials was recognized as of June 30, 2016.

Expenses

Cost of Sales

The cost of sales of $192,000 and $37,000 recognized for the three months ended September 30, 2016 and 2015, respectively, are related to the Natesto, ProstaScint and Primsol products and the MiOXSYS Systems. We expect to see cost of sales continue to increase in fiscal 2017 as we expect our sales to continue to grow.

Research and Development

Research and development costs consist of clinical trials and sponsored research, manufacturing transfer expense, labor, stock-based compensation, sponsored research — related party and consultants and other. These costs relate solely to research and development without an allocation of general and administrative expenses and are summarized as follows:

Three Months Ended
September 30,
2016 2015
Manufacturing tech transfer $ 75,000 $ —
Clinical trials and sponsored research 156,000 727,000
Labor — 115,000
Stock-based compensation — 5,000
Sponsored research – related party 48,000 48,000
Consultants and other 1,000 9,000
$ 280,000 $ 904,000

Comparison of Three Months Ended September 30, 2016 and 2015

Research and development expenses decreased $624,000, or 69.0%, for the three months ended September 30, 2016 compared to the three months ended September 30, 2015. This was due primarily to switching our focus towards our commercial products and eliminating expenses related to Zertane. We anticipate additional research and development expense during fiscal 2017 as we expect we will be completing a clinical trial for the MiOXSYS System as well as completing the manufacturing tech transfer for our ProstaScint product.

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Selling, General and Administrative

General and administrative expenses consist of labor costs including personnel costs for employees in executive, commercial, business development and operational functions; stock-based compensation; patents and intellectual property; professional fees including legal, auditing, accounting, investor relations, shareholder expense and printing and filing of SEC reports; occupancy, travel and other including rent, governmental and regulatory compliance, insurance, and professional subscriptions; directors fees; and management fee — related party. These costs are summarized as follows:

Three Months Ended
September 30,
2016 2015
Labor $ 2,255,000 $ 818,000
Stock-based compensation 1,119,000 63,000
Patent costs 26,000 98,000
Professional fees 262,000 384,000
Occupancy, travel and other 2,003,000 200,000
Directors Fees 40,000 —
Management fee – related party 51,000 89,000
$ 5,756,000 $ 1,652,000

Comparison of Three Months Ended September 30, 2016 and 2015

General and administrative costs increased $4.1 million, or 248.4%, for the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The increase in labor costs, stock-based compensation, and occupancy, travel and other primarily relates to increased costs related to the increase in professional staffing due to our commercialization efforts for our Natesto, ProstaScint and Primsol products. We expect general and administrative expenses to increase in fiscal 2017 due to the expected overall growth of our company.

Amortization of Intangible Assets

Amortization of intangible assets was $437,000 and $57,000 for the three months ended September 30, 2016 compared to the three months ended September 30, 2015, respectively. This expense increased due to the acquisition of the Natesto, ProstaScint and Primsol businesses in late fiscal 2015 and fiscal 2016, respectively, and the corresponding amortization of their finite-lived intangible assets. As we continue to license and purchase additional assets as part of our business strategy we would expect this non-cash expense to continue to grow.

Net Cash Used in Operating Activities

During the three months ended September 30, 2016, our operating activities used $5.3 million in cash which was slightly less than the net loss of $5.7 million, primarily as a result of the non-cash depreciation, amortization and accretion and stock-based compensation offset by the unrealized gain on investment, accounts payable and accrued liabilities, and accrued compensation.

During the three months ended September 30, 2015, our operating activities used $2.2 million in cash which was slightly less than the net loss of $2.3 million, primarily as a result of the non-cash depreciation, amortization and accretion and the increase in accrued compensation offset by inventory and accounts payable.

Net Cash Used in Investing Activities

During the three months ended September 30, 2016, we used cash in investing activities of $505,000, $5,000 of which was used to purchase fixed assets and $500,000 of which was paid as the second installment towards the Primsol asset.

During the three months ended September 30, 2015, cash of $4,000 was used to purchase fixed assets.

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Net Cash from Financing Activities

Net cash provided by financing activities in the three months ended September 30, 2016 of $607,000 was primarily related to the common stock issuance of $631,000 offset by the issuance costs of $24,000 to Lincoln Park.

Net cash provided by financing activities in the three months ended September 30, 2015 of $4.9 million was primarily related to the convertible promissory notes which reflects gross proceeds of $5.2 million offset by the cash portion of the debt issuance costs related to the Notes of $298,000.

Results of Operations — June 30, 2016 Compared to June 30, 2015

Results of operations for the year ended June 30, 2016 (“fiscal 2016”) and the year ended June 30, 2015 (“fiscal 2015”) reflected losses of approximately $28.2 million and $7.7 million, respectively.

Revenue

Product and service revenue

The total product and service revenue recognized during 2016 was $2.1 million, related to the sale of our products ProstaScint and Primsol, as well as the RedoxSYS and MiOXSYS Systems. The product and service revenue in fiscal 2015 was $176,000 which was from the ProstaScint product and the RedoxSYS System. The increase in product revenue of over 1000% from fiscal 2015 to 2016 is due to our acquisitions of those products, which occurred late in fiscal 2015 and early fiscal 2016, respectively, and expanded marketing of those products.

As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. Provisions for these deductions are recorded concurrently with the recognition of gross product sales revenue and include discounts, chargebacks, distributor fees, processing fees, as well as allowances for returns and Medicaid rebates. Provision balances relating to estimated amounts payable to direct customers are netted against accounts receivable and balances relating to indirect customers are included in accounts payable and accrued liabilities. The provisions recorded to reduce gross product sales and net product sales are as follows:

Year Ended
June 30,
2016 2015
Gross product and service revenue $ 2,657,000 $ 178,000
Provisions to reduce gross product sales to net product and service sales (606,000 ) (2,000 )
Net product and service revenue $ 2,051,000 $ 176,000
Percentage of provisions to gross sales 22.8 % 1.1 %

License revenue

During fiscal 2016 and fiscal 2015, we recognized $512,000 and $86,000, respectively, in license revenue. In 2012, we received a payment of $500,000 for our license agreement of Zertane with a Korean pharmaceutical company. This payment was deferred and was being recognized over 10 years. In 2014, we received a payment of $250,000 for our license agreement of Zertane with a Canadian-based supplier. This payment was deferred and was being recognized over seven years. At June 30, 2016, we determined that the Zertane asset has no value as we do not have the resources to complete the necessary clinical trials and bring it to market before the patents expire. Therefore, the remaining unamortized deferred revenue of $426,000 which was outstanding as of the date it was determined not to proceed with the clinical trials was recognized as of June 30, 2016.

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Expenses

Cost of Sales

The cost of sales of $957,000 and $88,000 recognized for fiscal 2016 and fiscal 2015, respectively, are related to the ProstaScint and Primsol products and the RedoxSYS and MiOXSYS Systems. We expect to see cost of sales to continue to increase in the year ending June 30, 2017 (“fiscal 2017”) as we expect our sales to continue to grow.

Research and Development

Research and development costs consist of clinical trials and sponsored research, manufacture transfer expense, labor, stock-based compensation, sponsored research — related party and consultants and other. These costs relate solely to research and development without an allocation of general and administrative expenses and are summarized as follows:

Year Ended
June 30,
2016 2015
Manufacturing tech transfer $ 3,304,000 $ —
Clinical trials and sponsored research 2,278,000 2,244,000
Labor 427,000 411,000
Stock-based compensation 89,000 517,000
Sponsored research – related party 192,000 204,000
Consultants and other 30,000 47,000
$ 6,320,000 $ 3,423,000

Comparison of Years Ended June 30, 2016 and 2015

Research and development expenses increased $2.9 million, or 84.6%, in fiscal 2016 over fiscal 2015. This was due primarily to switching our manufacturing process for our ProstaScint product to a new manufacturer, which is still in progress as of June 30, 2016 offset by a $428,000 reduction in stock-based compensation. We expect that the research and development expenses will decrease in fiscal 2017 as compared to fiscal 2016 since the transfer of the ProstaScint manufacturing is almost complete and since we should have no more clinical cost related to Zertane.

General and Administrative

General and administrative expenses consist of personnel costs for employees in executive, business development and operational functions and director fees; stock-based compensation; patents and intellectual property; professional fees including legal, auditing, accounting, investor relations, shareholder expense and printing and filing of SEC reports; occupancy, travel and other including rent, governmental and regulatory compliance, insurance, and professional subscriptions. These costs are summarized as follows:

Year Ended
June 30,
2016 2015
Labor $ 3,684,000 $ 979,000
Stock-based compensation 814,000 500,000
Patent costs 303,000 488,000
Professional fees 1,630,000 1,440,000
Occupancy, travel and other 2,086,000 619,000
Management fee – related party 308,000 311,000
$ 8,825,000 $ 4,337,000

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Comparison of Years Ended June 30, 2016 and 2015

General and administrative costs increased $4.5 million, or 103.5%, in fiscal 2016 over fiscal 2015. The increase in labor costs, stock-based compensation, and occupancy, travel and other primarily relates to increased costs related to the increase in professional staffing during fiscal 2016 as compared to fiscal 2015, bonuses earned, increased travel expense and stock options granted as well as the continuing vesting of stock option awards granted in previous years. We expect general and administrative expenses to increase in fiscal 2017 due to the expected overall growth of our company.

Impairment of Intangible Assets

Impairment of intangible assets was $7.5 million for fiscal 2016 related to the impairment of the Zertane in process research and development (IPRD) (see Note 2 to our audited annual financial statements). We did not recognize any impairment expense in fiscal 2015.

Amortization of Intangible Assets

Amortization of intangible assets was $665,000 and $45,000 for fiscal 2016 and fiscal 2015, respectively. This expense increased due to the acquisition of the ProstaScint and Primsol businesses in late fiscal 2015 and early fiscal 2016, respectively, and the corresponding amortization of their finite-lived intangible assets. As we continue to license and purchase additional assets as part of our business strategy we would expect this non-cash expense to continue to grow.

Net Cash Used in Operating Activities

During fiscal 2016, our operating activities used $10.7 million in cash. The use of cash was approximately $17.5 million lower than the net loss due primarily to non-cash charges for asset impairment, amortization of the beneficial conversion feature, stock-based compensation, depreciation, amortization and accretion, unrecognized loss on investment, noncash interest expense, amortization of prepaid research and development related party, an increase in accounts payable and accrued liabilities and an increase accrued compensation offset by an increase to inventory and a decrease to deferred revenue.

During fiscal 2015, our operating activities used $6.6 million in cash. The use of cash was approximately $1.1 million lower than the net loss due primarily to non-cash charges for stock-based compensation, depreciation and amortization, amortization of prepaid research and development-related party, an increase in accounts payable and an increase in contingent consideration related to the ProstaScint asset purchase. Cash used in operating activities also included a $24,000 deferred tax benefit and a $607,000 decrease in payable to Ampio.

Net Cash Used in Investing Activities

During fiscal 2016, cash was used to acquire Natesto, Primsol, our investment in Acerus, the purchase of fixed assets as well as the refund of a deposit for office space.

During fiscal 2015, cash was used to acquire ProstaScint as well as deposits for office space.

Net Cash from Financing Activities

Net cash of $16.7 million provided by financing activities during fiscal 2016 was primarily related to our registered public offering of $7.5 million of common stock and warrants offset by issuance costs of $905,000, the issuance of convertible promissory notes which reflects gross proceeds of $5.2 million offset by the cash portion of the debt issuance costs of $298,000, as well as the $5.0 million stock subscription payment from Ampio and $200,000 for a sale of stock subscriptions in January 2016 as well as the issuance costs of $30,000 related to the debt conversion.

Net cash provided by financing activities in fiscal 2015 was $12.4 million which reflects a $7.4 million loan from Ampio which was later converted to stock, a $5.0 million stock subscription payment from Ampio, $27,000 paid out to Luoxis option holders pursuant to the Merger and $20,000 paid out for liabilities pursuant to the Merger.

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Contractual Obligations and Commitments

Information regarding our Contractual Obligations and Commitments is contained in Note 7 to our audited annual financial statements and Note 6 to our unaudited interim financial statements.

Liquidity and Capital Resources

We are a relatively young company and we have not yet generated substantial revenue as our primary activities are focused on commercializing our approved products, acquiring products and developing our product candidates, and raising capital. As of September 30, 2016, we had cash and cash equivalents totaling $2.7 million available to fund our operations offset by an aggregate of $8.2 million in accounts payable and accrued liabilities and the Natesto payables. In October 2016, we spent $2.0 million for the second installment payment of our Natesto licensing agreement. We had a remaining commitment of $4.0 million which was paid in January 2017. In October 2016, we completed a registered public offering of common stock and warrants for $7.6 million in proceeds, net of expenses. Based upon our resources at September 30, 2016 as well as the additional funding we received in October and our ability to sell additional capital to Lincoln Park and funds we will receive if we sell the investment in Acerus, we believe we have adequate capital to continue operations through fiscal 2017. We will evaluate the capital markets from time to time to determine when to raise additional capital in the form of equity, convertible debt or other financing instruments, depending on market conditions relative to our need for funds at such time. We will seek to raise additional capital at such time as we conclude that such capital is available on terms that we consider to be in the best interests of our Company and our stockholders.

We have prepared a budget for fiscal 2017 which reflects cash requirements from operations of approximately $3.0 million per quarter with the cash burn being higher in the first half of the year as compared to the second half due to our projected increase in revenues during the second half of the fiscal year. Depending on the availability of capital, we may expend additional funds for the purchase of assets and commercialization of products. Accordingly, it may be necessary to raise additional capital and/or enter into licensing or collaboration agreements. At this time, we expect to satisfy our future cash needs through private or public sales of our securities or debt financings. We cannot be certain that financing will be available to us on acceptable terms, or at all. Over the last three years, including recently, volatility in the financial markets has adversely affected the market capitalizations of many bioscience companies and generally made equity and debt financing more difficult to obtain. This volatility, coupled with other factors, may limit our access to additional financing.

If we cannot raise adequate additional capital in the future when we require it, we could be required to delay, reduce the scope of, or eliminate one or more of our commercialization efforts or our research and development programs. We also may be required to relinquish greater or all rights to product candidates at less favorable terms than we would otherwise choose. This may lead to impairment or other charges, which could materially affect our balance sheet and operating results.

Going Concern

The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations in our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain additional financing through private placements and/or bank financing or other means necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. These conditions raise substantial doubt about our ability to continue as a going concern.

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Off Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “variable interest entities.”

Impact of Inflation

In general, we believe that our operating expenses can be negatively impacted by increases in the cost of clinical trials due to inflation and rising health care costs.

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BUSINESS

Overview

We are a commercial-stage specialty pharmaceutical company focused on acquiring, developing and commercializing novel products in the field of urology. We have multiple urological products on the market, and we seek to build a portfolio of novel therapeutics that serve large medical needs in the field of urology. We are initially concentrating on hypogonadism, prostate cancer, urinary tract infections, and male infertility and plan to expand into other urological indications for which there are significant medical needs.

We acquired exclusive U.S. rights to Natesto® (testosterone), a novel formulation of testosterone delivered via a discreet, easy-to-use nasal gel, and we launched Natesto in the United States with our direct sales force in late July 2016 and have recently ramped up our sales efforts having just completed our sales force’ first full quarter in the field. 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 $2 billion market. 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®.

We currently market ProstaScint® (capromab pendetide), the only radioimaging agent indicated to detect the prostate specific membrane antigen, or PSMA, in the assessment and staging of prostate cancer. ProstaScint is approved by the FDA for use in both newly diagnosed, high-risk prostate cancer patients and patients with recurrent prostate cancer. We also market Primsol® (trimethoprim hydrochloride) — the only FDA-approved trimethoprim-only oral solution for urinary tract infections.

We have a focused pipeline, including primarily MiOXSYS, a novel in vitro diagnostic device that is currently CE marked (which generally enables it to be sold within the European Economic Area (see “Business —  Foreign Regulatory Approval”)) and for which we intend to initiate a final 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 is widely implicated in its pathophysiology. MiOXSYS was developed from our core oxidation-reduction potential (a global measure of oxidative stress) research platform known as RedoxSYS®. We are advancing MiOXSYS toward FDA clearance.

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

Natesto® (testosterone).

On April 22, 2016, we entered into an agreement to acquire the exclusive U.S. rights to Natesto® (testosterone) nasal gel from Acerus Pharmaceuticals Corporation, or Acerus, which rights we acquired on July 1, 2016. Natesto is a patented, FDA-approved testosterone replacement therapy, or TRT, and is the only nasally-administered formulation of testosterone available in the United States. 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 are. Rather, it 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 July 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.

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ProstaScint® (capromab pendetide).

We became a commercial stage company by virtue of our acquisition of ProstaScint in May 2015 and are generating sales of this FDA-approved prostate cancer imaging agent. As prostate cancer is a condition commonly diagnosed and treated by urologists, ProstaScint complements our urology-focused product portfolio and pipeline. Prostate cancer is the most common cancer among men in the United States, with an estimated 241,000 annual cases (as of 2012). Further, more than 2,200,000 men were alive in 2006 with some history of prostate cancer, and over 30,000 U.S. men die each year from the disease. The effect of prostate cancer on healthcare economics is substantial, which makes the need for accurate disease staging critical for treatment and management strategies. The U.S. market for the diagnosis and screening of prostate cancer is expected to total $17.4 billion by 2017, a compound annual growth rate, or CAGR, of 7.5% since 2012.

Primsol® (trimethoprim solution).

On October 5, 2015, we purchased Primsol from FSC Laboratories, Inc. Primsol is the only FDA-approved liquid formulation of trimethoprim, an antibiotic that is well established in current guidelines for treating uncomplicated urinary tract infections, or UTIs. This differentiated product is appropriate for UTI patients that have difficulty swallowing tablets, such as the elderly, and particularly for patients that experience adverse reactions to sulfamethoxazole (“sulfa”). It is estimated that 150 million cases of urinary tract infections occur annually worldwide, and the annual estimated incidence is 0.5 – 0.7/persons per year. Importantly, there are more than 1 million catheter-associated UTIs in the U.S. alone. As many of these patients are elderly and unable to swallow pills, an oral liquid formulation represents a convenient formulation for easier administration. The acquisition of Primsol added a second established brand to our product portfolio. We expect to benefit from and continue to grow Primsol’s established base of prescribers, which already includes a significant proportion of urologists despite the fact that it has not been previously marketed to these specialists. We can thus utilize the same sales channel as ProstaScint, leading to potential commercial synergies and product growth.

MiOXSYS®

MiOXSYS is a rapid in vitro diagnostic semen analysis test used in the quantitative measurement of static oxidation-reduction potential, or sORP, in human semen. MiOXSYS is a recently CE marked system and is an accurate, easy to use, and fast infertility assessment tool. It is estimated that 72.4 million couples worldwide experience infertility problems. In the United States, 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 levels of oxidative stress in the semen. As such, having a rapid, easy-to-use diagnostic platform to measure oxidative stress should 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 CAGR of nearly 5% from 2014 to 2020. Oxidative stress is broadly implicated in the pathophysiology of 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 the degree of oxidative stress, sperm motility and morphology, 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. We expect to advance MiOXSYS into clinical trials in the United States in order to enable 510(k) clearance.

In addition to the MiOXSYS System, we are continuing to develop the global market for the RedoxSYS System across a range of applications. Specifically, we have begun initial commercializing of the RedoxSYS System for research use through distribution partners, primarily outside the U.S. In 2014, we received ISO 13485 certification, demonstrating our compliance with global quality standards in medical device manufacturing.

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The technology underpinning the RedoxSYS and MiOXSYS systems was developed by Luoxis Diagnostics, Inc. in the two years immediately preceding the merger between Luoxis, Vyrix Pharmaceuticals, Inc., and us (under our former name of Rosewind Corporation) in April 2015. Upon the consummation of the merger, the RedoxSYS System and MiOXSYS System became our assets.

Key elements of our business strategy include:

• Expand the commercialization of Natesto in the U.S. for the treatment of hypogonadism with our direct sales force. We launched Natesto in July 2016 and are targeting high-prescribing TRT prescribers with a primary emphasis on urologists and male health practitioners.
• Expand the commercialization of FDA-approved ProstaScint for the staging of both newly diagnosed high-risk and recurrent prostate cancer patients. We have begun commercializing ProstaScint in the U.S. and in key markets around the world.
• Expand the commercialization of FDA-approved Primsol for the treatment of uncomplicated urinary tract infections. We are re-launching Primsol to urologists in the U.S. and in key markets around the world where appropriate.
• Establish MiOXSYS as a leading in vitro diagnostic device in the assessment of male infertility.
• Acquire additional marketed products and late-stage development assets within our core urology focus that can be efficiently marketed through our growing commercial organization.
• Develop a pipeline of urology therapeutics, with a focus on identifying novel products with sufficient clinical proof of concept that require modest internal R&D expense.

We plan to augment our core in-development and commercial assets through efficient identification of complementary therapeutics, devices, and diagnostics related to urological disorders. 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 (co-promotions, co-marketing, etc.).

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 United States and abroad. Through an assertive product and business development approach, we expect that we will build a substantial portfolio of complementary urology products.

We previously were developing Zertane for the treatment of premature ejaculation, or PE. However, we determined to direct our resources to our commercial-stage products. As a result, at the end of fiscal 2016, we determined that the Zertane asset has no value as we do not plan to allocate the resources to complete the necessary clinical trials and bring it to market before the patents expire. We intend to sell or out-license Zertane although there can be no assurance that we will be successful in doing so or, if successful, the value, if any, we might receive for the asset.

Our Strategy

We expect to create value by implementing a focused, three-pronged strategy. Our primary focus is on expanding the commercialization of the recently acquired Natesto in the U.S, growing our current, revenue-generating products, and building a complementary portfolio of aligned urology assets. In just over one year since our merger we have acquired or in-licensed three FDA-approved, marketed assets, launched a specialty urology sales force, initiated ex-U.S. partnering discussions for our commercial products ProstaScint and Primsol, advanced our lead diagnostic asset MiOXSYS to CE marking, engaged in asset purchase and licensing discussions for products aligned to our strategy, and launched Natesto in the U.S. through our own sales force.

We believe the strategy of focusing on commercializing assets prescribed by urologists makes sense for several reasons. First, urology is a large yet concentrated specialty practice area that can be efficiently targeted. There are approximately 10,000 active urologists in the U.S., and we believe that this audience can be efficiently reached with a relatively small, focused sales force. Additionally, 90% of urologists practice in metropolitan areas where concentrated sales targeting can be achieved and “windshield” representative driving

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time between targets can be minimized. Importantly, 81% of urologists practice in group practices, and over 60% are in practices of four or more physicians. Further, and important in building a balanced yet focused product portfolio, sub-specialization within large urology clinics is common whereby there is frequently individual clinical focus on specific areas within urology including prostate cancer and conditions, infertility, sexual dysfunction, urinary incontinence, hypogonadism, etc. This enables a company to offer multiple products to the various sub-specialties within these focused, concentrated customer targets.

Further, urologists treat a wide range of conditions and are thus appropriate targets across a broad range of clinical assets (Natesto — hypogonadism; ProstaScint — prostate cancer; Primsol — urinary tract infections; MiOXSYS — male infertility). Importantly, in urology, direct physician office purchasing of drugs, devices, and diagnostics is common. Along with this, a significant proportion of urology groups are privately-owned and often own and operate their own outpatient surgery centers and in-office laboratories. Further, large urology group practices have substantial payer influence and can have the ability to negotiate as large groups to achieve better reimbursement and coverage for favored treatments and procedures. Perhaps as important as these other factors, urologists are exposed to relatively limited promotional focus by “Big Pharma” and we believe can therefore be accessed and impacted more readily by an emerging company, such as Aytu, over time.

Aytu BioScience’s Strategic Value Drivers

[GRAPHIC MISSING]

The primary elements of our strategy are:

• Expanding the commercialization of Natesto, ProstaScint and Primsol, our revenue-generating, FDA-approved products in the United States via a direct commercial infrastructure. Launching ProstaScint, Primsol, and MiOXSYS outside the United States via a developing distribution network.

Natesto is a novel, recently 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 use 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

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

General form for registration of securities under the Securities Act of 1933 - Sept. 25, 2017
General form for registration of securities under the Securities Act of 1933 - Sept. 22, 2017
General form for registration of securities under the Securities Act of 1933 - Sept. 5, 2017
Rosewind: Aytu Bioscience Provides Fiscal Fourth Quarter And Year-End 2017 Business Update - Aug. 31, 2017
Rosewind CORP Just Filed Its Annual Report: Note 14 – Subsequ... - Aug. 31, 2017

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