Aytu BioPharma, Inc. (AYTU) Q3 2026 Earnings Report, Transcript and Summary

Good day. Welcome to the Aytu Biopharma Fiscal 2026 Q3 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Robert Blum, Investor Relations. You may begin.

Great. Thank you very much, and good afternoon, everyone. As the operator indicated, during today's call, we will be discussing Aytu Biopharma's fiscal 2026 third quarter operational and financial results for the period ended March 31, 2026. Joining us on today's call is Aytu's Chief Executive Officer, Josh Disbrow; and Ryan Selhorn, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available by using the telephone numbers and conference ID provided in the press release issued earlier today or by utilizing the link on the company's website under Events and Presentations. Finally, I'd also like to call to your attention the customary safe harbor disclosure regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of Aytu Biopharma. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to, the factors set forth in the company's filings with the SEC. Aytu undertakes no obligation to update or revise any of these forward-looking statements except as required by law. With that said, let me turn the call over to Josh Disbrow, Chief Executive Officer of Aytu Biopharma. Josh, please proceed.

Thanks, Robert, and welcome, everyone. I'm very pleased to be speaking with you today following what has been an exciting first partial quarter of commercial launch activity for EXXUA. As we've discussed, EXXUA represents a significant new opportunity for Aytu. It's the first and only selective serotonin 5-HT1A receptor agonist ever approved by the FDA for the treatment of major depressive disorder in adults. And EXXUA is already demonstrating very solid growth trajectory within the MDD category. During our last call and during our Investor Day back in January, we spent meaningful time on the market opportunity, the clinical rationale, the unmet need in MDD and the strategy behind our commercial launch. Today, I want to focus more directly on execution and some of the things we're seeing with respect to early adoption. Simply said, while we are still very early in the launch, the fundamentals we are seeing are highly encouraging, and the launch is progressing very well. So let's dive in. As most of you are aware, we moved from initial commercial availability in our second fiscal quarter in December into a more formalized launch phase during our third fiscal quarter. EXXUA was made commercially available back in mid-December. The initial tranche of the sales organization completed training in January, while broader field deployment of the full 40-plus sales representatives didn't actually begin until late February, early March. That timing is important. While Q3 was our first meaningful commercial quarter, it was still only a partial quarter of full sales support and commercial deployment, with roughly 1/3 of the sales force only getting into the field in March. So we're just getting started. The most important point here, though, is that physicians are already writing EXXUA. Patients are beginning therapy and very early refill activity is already becoming evident. In Q3, more than 1,300 prescriptions were written for EXXUA. The monthly progression is particularly encouraging with prescriptions increasing from about 200 in January to about 400 in February to over 700 in March. That type of sequential growth is exactly what we hope we would see in the early stage of a launch as awareness builds, our representatives increase their reach and frequency and as physicians begin to identify patients who may be appropriate for EXXUA. Importantly, that momentum has continued. In April, we saw over 920 prescriptions written, up from the 700 in March. That's a 26% month-over-month sequential growth rate. Further, we shipped over 1,300 units shipped in April, which is 51% sequential growth, and that's more than the prescriptions generated in the entire first quarter. While it's early, and we will avoid over extrapolating from any short period term of data that continued month-over-month acceleration clearly demonstrates that physician interest is building and that the launch is getting traction. We're also encouraged by the breadth of early prescriber adoption. During the quarter, more than 450 unique prescribers wrote EXXUA prescriptions. That is meaningful because our initial focus call universe is approximately 3,500 to 4,000 highly targeted prescribers. So at this very early stage, already 10% to 13% of our target universe has written EXXUA. And yet again, we're just getting started in building a solid base of physician adoption. We believe this points to a substantial opportunity ahead as the sales force actively increases as our access initiatives mature and as peer-to-peer in rep-based education expands. As most of you know, unit sales and prescription counts are not the same measure. Units reflect product moving through the channel and into distribution networks and ultimately into pharmacies, while prescriptions reflect what physicians rather are writing for patients. In a launch, those numbers can move at different rates because of channel stocking, titration pack and full prescription ordering, refill timing, et cetera. With that said, during Q3, gross unit sales were 3,335 units, consisting of 1,807 30-count units or full 30-day prescriptions and 1,500 titration units. Since launch, total gross unit sales are 3,881 units, consisting of just under 2,030 count bottles at 1,991 and 1,890 titration units. So again, highly encouraging numbers at this very early stage. When we look at the combined picture, we see a launch that is doing what we expected it to do. Physicians are beginning to prescribe, patients are starting and staying on therapy, titration packs are being utilized, channel partners are ordering and they're already reordering product. Very importantly, refills are beginning to come through, and we're seeing momentum build month over month over month. Taking a step back, a key reason we're encouraged by the launch is that the elements of our launch plan are now moving into the market and functioning as they had been designed. We built this launch to be disciplined, efficient and scalable. Initially, we are not trying to outspend larger competitors. Instead, we're being very disciplined by focusing on the prescribers most likely to understand the unmet need, evaluate EXXUA's differentiated profile, value our access programs and become early adopters. Our sales organization is specifically prioritizing high-value, high-prescribing psychiatry practices. Our customer targeting has been informed by market data, branded therapy adoption behavior, existing Aytu relationships and insights gained from our RxConnect platform. We believe that this is the right approach for EXXUA at this stage. The product will not benefit from broad, unfocused promotion at this important time. Right now, it needs focused engagement with clinicians who treat high numbers of MDD patients every day and who understand the limitations of existing therapies and are looking for new treatment options. The phased deployment of the sales team has also been intentional. With only a partial quarter of full sales force support, the early prescription and prescriber numbers are even more encouraging. We believe there remains meaningful room for growth through increased reach and frequency and, of course, execution against the target universe that's already been identified. Again, this is just the beginning without a full quarter of promotion even in the books yet. Aytu RxConnect has been and will continue to be a core pillar of the EXXUA launch. Our objective is to remove friction for both prescribers and patients, particularly in the early months when coverage policies and payer processes are still developing. Through RxConnect, commercially insured patients have a predictable and supported pathway to access EXXUA, including a no-cost, 14-day titration pack and guaranteed access through the early treatment period for commercially insured patients specifically. That allows clinicians and patients to evaluate the medicine based on clinical response rather than on early administrative or payer-driven barriers. This is particularly important in major depressive disorder, where patients and physicians need confidence that therapy can be initiated and continued long enough to assess response and tolerability. By reducing uncertainty at the point of prescribing, RxConnect helps align our commercial model with real-world clinical needs. We're also seeing our channel partners execute well. The more than 3,300 units sold during the quarter demonstrates preparedness across the distribution network to support the current prescription demand along with the growth we're seeing. The early launch period is not only about demand generation, it is also about making sure that when a physician prescribes EXXUA and a patient is ready to begin therapy, that product is available and the process is smooth. The qualitative feedback from the field remains consistent with the launch thesis we had laid out previously. Physicians understand that many patients with MDD do not achieve adequate outcomes with existing therapies or struggle with tolerability issues that can affect adherence. EXXUA gives these patients and these clinicians a differentiated option with a novel mechanism of action, and that message is clearly resonating. As it relates to physician adoption, that will build methodically as it always does. Physicians often start by identifying specific patient types where they believe EXXUA may be especially relevant or in some cases, patients who have been through a long list of antidepressants already and they're simply searching for something new. Our job is to continue educating, supporting access and building confidence through clinical experience. The fact that hundreds of prescribers have already written EXXUA gives us confidence that this process is working well and that even very challenging patients, in fact, are reporting positive results. We're also highly encouraged by the early refill activity. Refills are an important proof point because they demonstrate that initial prescriptions are progressing into continued therapy. The base of patients is still relatively small, but the presence of refill activity, together with growth in titration utilization and sequential prescription increases clearly demonstrates that prescribing is picking up and that EXXUA is beginning to establish a role in the treatment of MDD. Most importantly, the patient feedback we're hearing from our prescribers is nothing short of outstanding. Phrases from even difficult patients like "lifechanging" and a specific patient saying, "He has never felt this good in his entire life." are coming through at this point almost daily. Yet again, we're just getting started. We're highly confident we'll continue to hear more and more of these patient success stories. As we move ahead, our priorities are clear. First, we will continue increasing prescriber calls within the initial target prescriber universe. We are only again at the beginning of that process. And our current prescriber base represents a small, a tiny fraction of the opportunity we have identified and an even smaller fraction of who will ultimately be prescribing EXXUA. Second, we will continue leveraging RxConnect to support access and reduce friction. We expect access, reimbursement, gross-to-net and refill dynamics to all become clearer as the launch matures, and we'll remain disciplined in adapting our approach based on the data. By the way, the early signs on both coverage and reimbursement rates are extremely positive across both commercial and government payer channels, we're seeing solid and increasingly good coverage of EXXUA among commercial plans and Medicaid and Medicare scripts are making up an increasing portion of the overall script load. It remains early, but many of the positive payer dynamics we've spoken about prelaunch are, in fact, bearing out. Third, we will continue investing in scientific engagement, KOL development, peer-to-peer programs and publication and medical congress activity. We believe EXXUA has a differentiated profile and the more physicians understand where EXXUA fits into their prescribing, the more opportunity we have to grow. We had a significant presence at a major psychiatric conference last weekend, the Neuroscience Education Institute Spring Congress. And as expected, interest and feedback and follow-up from the conference attendees was excellent. Finally, we will maintain commercial discipline by aligning investment with performance and using cash flows from the legacy business to support the highest growth opportunity in the company, and that is clearly EXXUA. Turning now briefly to our legacy portfolios. ADHD net revenue was $9.1 million in the quarter compared to $15.4 million in the prior year period. As expected, the decrease was primarily driven by a strategic shift in sales force focus late last summer towards EXXUA and some impact from the introduction of generic competition for Adzenys as well. Despite the overall shift in promotional priorities, the ADHD portfolio remains a very important contributor to Aytu and given the lack of commercial support currently behind the brands, we continue to view the portfolio as profitable and durable on a stand-alone basis. The uptake of the third-party generic against Adzenys has been quite low, which has been encouraging with only achieving about 14% market share through 4-plus months of market availability. This tells us that the protective characteristics of the RxConnect program are proving protective given relatively little erosion as a percentage of the overall scripts written within the RxConnect ecosystem. The vast majority of decline due to the generic is coming from outside the RxConnect ecosystem. So things are working as we had expected and as we had designed. Our Pediatric Portfolio generated just under $1 million of net revenue in the quarter compared to $3.1 million in the prior year period. We continue to efficiently service our pediatric products and believe that while small, these mature products will continue to be durable sources of profitable revenue. Overall, the legacy business continues to provide an important foundation as we transition the company towards the larger CNS opportunity, clearly represented by EXXUA. Our goal is to balance disciplined investment in EXXUA with continued cash generation from the existing business and the existing base business does generate cash even at these levels and even at lower levels. In summary, we're very pleased with the first meaningful quarter of EXXUA launch activity. We generated $2.4 million of revenue specifically for EXXUA, saw more than 1,300 prescriptions written in the quarter, had more than 450 unique prescribers write the product, sold more than 3,300 units into the channel during the quarter and saw great momentum and continued growth into April with almost 1,000 prescriptions generated. Importantly, this was achieved with only a partial quarter of full sales force support and with only a small percentage of our initial target universe writing prescriptions. We're still very early. I can't emphasize that enough. There will be normal launch variability as market, payer access, prescribing and refill dynamics all settle out, but the proof points we have in hand are encouraging, and they reinforce our conviction that EXXUA can become a significant treatment option for patients living with major depressive disorder and a very meaningful growth driver for Aytu. With that, let me turn the call over to Ryan to review the financials in more detail. Ryan?

Thank you, Josh. Let's jump right into it. Let's start on the revenue line. Net revenue for the third quarter of fiscal 2026 was $12.4 million compared to $18.5 million for the prior year period. That represents a decrease of $6 million or 33% year-over-year. Breaking net revenue down by portfolio, EXXUA contributed $2.4 million in the quarter. As Josh mentioned, EXXUA was made commercially available in mid-December and more formally launched in mid-January after completion of sales force training with full sales force deployment occurring late in February, early March. So while we remain very early in the launch curve, we view the initial contribution as highly encouraging, particularly given that the quarter included only a partial period of full sales force support. Further, remember that net revenue is based on gross unit sales, not scripts. During the quarter, there were 3,335 units consisting of 1,807 30-count units and 1,528 titration units sold. This equates to more than $700 per script. I want to caution that this is better than our initial expectations, and we will wait to see how the dust settles before making any changes to our long-term assumptions around net selling price of EXXUA. The ADHD portfolio generated net revenue of $9.1 million in the third quarter compared to $15.4 million in the prior year period. The decrease is primarily attributable to lower total prescriptions as we have deliberately shifted commercial focus and sales force prioritization toward EXXUA, which is now the centerpiece of our commercial efforts as well as the launch of a generic version of one of our ADHD products late in the second quarter of fiscal 2026. The Pediatric Portfolio generated net revenue of $0.9 million for the third quarter compared to $3.1 million in the prior year period. The Pediatric Portfolio was negatively impacted during the quarter by payer mix, which resulted in higher rebates as well as an increase in returns. Overall, the revenue story this quarter is very much about transition. We are seeing the expected impact on the legacy portfolios as we navigate payer changes. But again, I'll remind you that the legacy portfolios do generate cash even at these levels. Gross profit margin was 61% in the third quarter of fiscal 2026 compared to 69% in the same quarter last year. The decrease in gross profit percentage was impacted by a $700,000 inventory write-down recorded to cost of goods sold, primarily resulting from the shift from our Adzenys branded products to our Adzenys authorized generic. Excluding that write-down, gross margin for the third quarter would have been approximately 67%. From an EXXUA perspective, the expected unit economics remain attractive. As discussed previously, EXXUA includes a 28% royalty in addition to a true-up on cost of goods sold. We continue to think about the products as having approximately 31% cost of goods sold or roughly a 69% gross contribution margin before certain fixed costs. As EXXUA scales, we expect these economics to become increasingly important to the overall model. Turning to OpEx. Operating expenses, excluding amortization of intangible assets, were $10.9 million in the third quarter compared to $9.5 million in the prior year period. Total operating expenses were $11.7 million compared to $10.4 million last year. The increase is primarily a result of planned EXXUA launch investments, partially offset by improved operational efficiencies such as reduced facilities expense, I'll touch more on the outlook in a moment. Interest expense decreased $0.5 million or 52% during the quarter and by $1.5 million for the year-to-date compared with the prior year, primarily due to the paydown of our fixed payment arrangements we've previously discussed. For the quarter, we reported a net loss of $5.6 million or $0.53 net loss per share basic compared to a net income of $4 million or $0.65 net income per share basic in the prior year period. The fiscal 2026 third quarter results included a $1.3 million noncash derivative warrant liability loss compared to a $2.3 million noncash derivative warrant liability gain in the prior year period. As a reminder, these changes in noncash derivative warrant liabilities are primarily related to changes in the company's stock price. When our stock price increases, we generally incur a noncash loss on those liabilities and when the stock price decreases, we generally recognize a noncash gain. The losses recognized during the third quarter were primarily driven by increases in our stock price. On April 2, 2026, we filed a Form 8-K detailing warrant amendments that resolve the ambiguity of that previously required certain warrants to be classified as liabilities rather than equity. As a result, we reduced our warrant liability and increased stockholders' equity by $26.4 million on March 31, 2026. We believe this should significantly reduce future noncash earnings volatility associated with warrant liability gains and losses. As of March 31, 2026, stockholders' equity was $35.1 million compared to $14.2 million at December 31, 2025. Finally, adjusted EBITDA was negative $2.8 million for the third quarter of fiscal 2026 compared to a positive $3.9 million in the year ago period. The change primarily relates to the planned investments we've made towards the launch of EXXUA, combined with the broader deemphasis in marketing towards the ADHD portfolio and the impact of payer changes affecting the Pediatric Portfolio, both of which impacted net revenue and gross profit. Turning now to the balance sheet. Cash and cash equivalents were $26.7 million at March 31, 2026. This compares to $30 million at December 31, 2025, and $31 million at June 30, 2025. The change in cash during the quarter primarily reflects the planned investments behind the EXXUA launch, along with normal working capital movements. As of March 31, 2026, our revolving line of credit balance was $10.4 million. And total debt, including the current and noncurrent portions, was approximately $11.4 million. As noted earlier, the warrant amendment completed at quarter end also had a meaningful positive impact on the balance sheet presentation, reducing derivative warrant liabilities and increasing stockholders' equity. As of March 31, 2026, combining both equity-classified prefunded warrants and the issued and outstanding common shares, there were 19.5 million shares utilized for calculating the basic weighted average shares outstanding for earnings per share purposes. Before I turn it back over to Josh, I want to spend a few minutes on how we are thinking about EXXUA from a financial perspective now that we have the first meaningful quarter of launch activity behind us. First, EXXUA net revenue of $2.4 million in the quarter was a strong initial result and ahead of our internal expectations. This revenue reflects a combination of prescriptions written and filled during the quarter as well as inventory channel stocking to meet prescription growth expectations from channel partners and pharmacies. Said differently, prescriptions are the clearest measure of physician-written demand, while unit sales represent product moving into the channel. In the early stages of a launch, these 2 measures will not always move in lockstep, but both are important. Second, gross-to-net dynamics are still settling. During the quarter, gross-to-net came in materially higher than our initial launch assumption, but again, it is still very early. We will continue to refine our assumptions as payer mix, RxConnect utilization, pharmacy ordering patterns and patient access programs mature. The first few months of any launch include noise, and that is especially true for a product like EXXUA, where our strategy is intentionally designed to remove early access barriers for patients and prescribers. As we discussed last quarter, through RxConnect, we have deliberately reduced early access friction by offering a no-cost 14-day titration pack. For commercially insured patients, we are also guaranteeing coverage of both month 1 and month 2 of therapy regardless of the insurance outcome, which is intended to ensure patients can remain on treatment through dose optimization without interruption. That strategy is important clinically and commercially, but it also means that scripts can grow ahead of net revenue in the early going. As patients transition into month 3 refills and beyond, we expect the revenue model to begin normalizing more closely with ongoing utilization, although we will continue to see some variability as the launch matures. Third, the launch investment framework remains disciplined. We made planned investments during the quarter across sales and marketing, service costs and launch infrastructure, but we continue to manage those investments carefully and align the incremental spend with launch performance and cash flow. Our objective is to support the EXXUA opportunity appropriately without losing the operating discipline that has been central to the company's progress. In the fourth quarter of this fiscal year, we are launching our online promotional campaigns, including paid search, programmatic displays and social media advertising to drive awareness, and incremental adoption and should result in an increase in overall sales and marketing spend by $1 million to $2 million, depending on their breadth and overall impact. Additionally, we have increased our speaker program event spending, medical education content and conferences involvement, which will likely increase our G&A spending by $200,000 to $300,000 in the upcoming quarter. Depending on the success of these programs, we currently anticipate ongoing sales and marketing quarterly spend to range from $6 million to $7 million and G&A to range from $5 million to $5.3 million going forward. Finally, the financial model continues to be straightforward. We expect EXXUA to have attractive gross contribution margin. We expect launch-related expenses to be managed against demand and return on investment, and we expect the legacy portfolios to continue providing an important foundation as EXXUA scales. While we are not providing formal guidance today, the general framework we've discussed previously remains the right way to think about the business, mid- to high 60% gross margins over time, a disciplined operating expense base and the near-term path to profitability as EXXUA revenue builds on top of the existing platform. As always, I'm happy to go over any details during Q&A. And with that, let me turn it back over to you, Josh.

Thanks, Ryan. So as we look ahead, I want to reemphasize again what we're seeing with EXXUA. While we're still in the very early stages of product launch, the initial traction has been highly encouraging. With more than 1,300 prescriptions written during the quarter by over 450 unique prescribers and continued growth in titration packs and early refill activity, we believe prescribers are increasingly recognizing EXXUA's differentiated role in the treatment of major depressive disorder. And again, with April posting over 900 prescriptions and over 1,300 unit shipments, we're seeing continued month, over month, over month increases in prescription and unit demand. Importantly, this momentum was achieved with only a partial quarter of full sales force support, which reinforces our confidence in both the market opportunity and the disciplined efficient commercial strategy we've put in place. EXXUA gives Aytu access to a very large MDD market with meaningful unmet need, attractive unit economics and a clear opportunity to build long-term value. We remain extremely excited about the path ahead and look forward to updating you as the launch continues to scale. As always, I want to thank everyone participating on today's call. We'll now be happy to answer any questions. Operator?

Thank you. And with that we will now be conducting a question-and-answer session. [Operator Instructions] First question today is coming from Thomas Flaten from Lake Street.

Hey Ryan, just doing some back of the envelope math, I kind of figured about $1.5 million in "stocking revenue" in the EXXUA number for the quarter. Is that a reasonable assumption?

Yes, that is a pretty accurate calculation.

Okay. And then, Josh, you mentioned some efficacy anecdotes in the prepared remarks, but I was curious what you've heard back specifically related to weight gain and sexual side effects that the physicians have provided you with any feedback on that?

Yes. I'll take weight gain first, which is -- that will be -- that will always be quite a while before that develops just because of the time it takes for someone to gain weight. What I will say is we're certainly not hearing anything unexpected there. But again, you wouldn't necessarily expect in the first 2 weeks much weight gain one way or the other. On the sexual side effects, I will say that's where things like life-changing and never felt so good in my life, those anecdotes sort of come from, even having heard from them personally from some select physicians in my area where I've had conversations, one gentleman who had been on "everything under the sun" was switched to EXXUA and immediately restored his libido. So we're hearing very, very good positive anecdotes, way more than just those handful. That's just a couple that I put into the prepared remarks. And again, one I experienced myself directly from a prescriber here in Colorado.

And then just one last one if I might. You mentioned something like 10-ish percent of your customers have written EXXUA, but what's been the writing activity of noncustomers, so to speak, people that you haven't called on? Is there any of that?

Yes, highly encouraging as well. When you look at the amount of white space we have around the lower 48, it's fairly significant as any of those who follow us closely know, we really cover the Eastern Seaboard, call it, from Connecticut down to Miami out to Florida and then some dots kind of in flyover country. We have gotten significant prescribing from states where we have no physical presence. It's been extremely encouraging, finding their ways to the product without any promotion. We've had inbound calls. We've had significant prescribing in places where, again, there has been no presence at all. So it's been highly encouraging. I want to say we've had prescriptions in 41 or 42 states at this point. Obviously, we don't physically have presence in nearly that many. So it's been very encouraging.

The next question will be from Naz Rahman from Maxim Group.

Congrats on the progress. I only have 2. The first one is on reimbursement. I understand it's very early in the launch process. But in terms of like those prior authorizations, could you provide some color on, I guess, how many of those or what percentage of those prior auths are getting approved on the first pass versus how many or what percentage you have to have like a back and forth through prior to getting reimbursed?

Yes. Good question. So I'll sort of separate it into commercial as well as CMS, Medicaid, Medicare. Medicaid, Medicare is highly variable down to the individual patient and down to the individual state. What I'll say is what we're seeing early on is it fits well -- prescribing EXXUA fits well within what they currently do, which is to say, in the state of Colorado, you need to demonstrate that you failed 2 preferred agents, which are really nothing more than just generic established therapies like SSRIs and then the prior authorization goes through. We've seen that already in real-time happening in numerous states. And so that's going through smoothly and as expected. In some places where there are mandates to allow for psychiatric prescribers specifically to essentially be waived of any PA requirement, that's happening also in the states that we expected it to. So that's all encouraging. Medicare, relatively small numbers on Medicare, but those prescriptions are going through as well, highly variable from plan to plan in terms of what is required. Most patients will have to meet a deductible and then the benefit from the Medicare provider, for example, like AARP will start to kick in. On the commercial side, because we've got this unique setup, and I'll bifurcate that a bit as well because we certainly have prescriptions going through the RxConnect network, and that is the vast majority. But to Tom with the previous question around prescriptions that are being dispensed and prescribers outside of our footprint, those 2 are going through. And so they're completing any prior authorizations, and we're actually seeing a relatively high rate of well-covered claims in places, again, where we have no coverage. And within the RxConnect network, we are seeing prior authorizations go through with good success, we're seeing, of the numbers that we're doing, and it's still relatively small, over 70% of those are getting approved. And so we're seeing a very high rate. Obviously, approved claims means better for everyone, a lower co-pay for the patient and a higher net selling price to us. And so that's highly encouraging. But even, I'll remind you, even in cases when prior authorizations either aren't done or aren't going through, that -- in the initial going for that first trial period, we're essentially covering those prescriptions for either $0 or potentially $50. But I'll say just as an overarching statement as it relates to reimbursement and coverage, the approval rates continue to improve month-on-month. And the dollars in terms of net selling price when you aggregate government and commercial are materially higher than we initially budgeted. But to reiterate what Ryan said, we'll caution of extrapolating that out too far because things are still settling out. But I'm extremely pleased, and I think we all are, collectively here on the team, with what we're seeing with respect to reimbursement and frankly, the relative ease some of these prescriptions are going through with. So very pleased.

That was very helpful. And just kind of on that point, these patients, do you know, I guess, what line they are on by the time they get to? It sounds like in Colorado, these are like third-line patients. Do you have an idea of like how many of these patients are like second line versus third or fourth?

Yes, that's a good question. And it's still very early, and it's very heterogeneous. We have everything from second line all the way to very late line, kind of tried everything, so to speak. What I'll say is we have good data that we know in the 60-plus percent range, those patients are being switched, which suggests minimally those patients have been on one therapy. Really, when you speak with doctors in real terms, these are patients that in the early goings have been on -- had been on multiple. So if I had to put a number, it's somewhere between probably third and fifth line realistically, but very encouraging that you've got patients that are being prescribed second line. I know of a specific patient, I don't know anything other than the patient's demographics based on a prescription that was generated just last week, it was second line. It was a young patient. I believe the patient is 22 years of age, had been on a therapy and was experience sexual side effects and was immediately switched to EXXUA. Still very early to know how that patient is doing. So I'll say, generally speaking, I'm encouraged that we appear to be getting a little bit earlier in therapy, but certainly, there are the "train wreck" patients that are being started. But very encouragingly, those patients, in many cases, are responding quite well when other things have failed. So it's been quite encouraging.

[Operator Instructions] Next question is coming from Ed Woo from Ascendiant Capital.

Yes, congratulations on all the progress. I just had a mechanical question. In terms of patient and prescriptions, is it normally prescribed for 30 days? And then after the 30 days, they would have to either go back to the physician or they will get automatic refills and it will show up as the refill count?

Yes. Good question, Ed. So we start patients off in an optimal world, the prescriber would prescribe the 14-day titration pack. So by definition, that's 2 weeks. And that patient would then get moved to one of the top 2 doses in most cases, either the 54.5 milligram or the 72.6 milligram. And those -- either of those, the 54.5 and the 72.6 would be prescribed for 30 days. And typically, they'll either be seen back to either stay optimized on the 54.5 or move up to the 72.6. And from that point forward, they would probably get a prescription for something like 3 months or 6 months. In some cases, we already have pharmacies dispensing 90 days or 3 full months right after they get titrated to the 54.5 or in some cases, doctors are more aggressive when we go to the 72.6. But again, they'll get the full 90 days. So I'll say that obviously it's variable, but generally speaking, they're getting 30 days and then they're typically going to get moved to a -- every 3-month check-in with a 3-month prescription or a 6-month check-in with a 6-month prescription. And so we're just now at the very early stages of even starting some of those sort of call that maintenance therapy on the 54.5 and the 72.6.

Okay. So it's not clearly 30 days and then you see the refill. So you might actually -- based on your data without disclosing much information, you're happy with the refill rate so far that you're seeing at this point in time?

Very. When we look at patients, the percentage of patients that are moving just from titration to a full 30-day supply, which that demonstrates tolerability. It may not necessarily demonstrate that they're getting clinical benefit yet, although I will say we're hearing very consistent anecdotes that patients are feeling better quickly. That having been said, we're still so early. We'd hesitate to put a number on what we would expect sort of conversion to be longer term, but it's very, very solid, and we expect it to improve over time. So again, these numbers that we're posting are really without any material annuity value baked in, in terms of repeat use, and refills and so forth. So just getting started.

That sounds good. And then my last question is just on geography. I know you mentioned that you guys are aiming for the coast, for the big markets. But are you seeing -- is that your continued plan going forward is just to target the big metro markets first and then move to the smaller markets?

What I'll say already, Ed, is we're actively contemplating in select markets moving into some of those potentially a little bit quicker than we'd initially anticipated. We'll be judicious, as Ryan said, we'll certainly be cost efficient. But in areas where we've already identified sort of a groundswell of physicians that have found themselves prescribing the product or in places where we have access, whether that be from a commercial or government perspective, places that we think we can optimize. So we are already looking. And certainly, I mentioned a few dotted territories kind of in flyover country, so to speak. We are actively looking at north to south, east to west. And even -- that's all -- all that having been said, with the territories we have in place to have sort of this type of momentum already, understanding that a full third or more of our sales force just got out there, call it, the first full week of March. And of course, we all know it takes a while for anybody new in the geography and of course, new physicians to start getting on board with anything that we would fully expect to expand into other markets and see that same type of uptake.

And there were no other questions at this time. I would now like to hand the call back to Josh Disbrow for closing remarks.

Thank you, Paul. And again, thanks, everyone. We could not be more excited with the progress that we're seeing in real time here. And I've got the unique benefit of not just leading the team, but in some cases, having conversations with my own. And the real-world feedback is really nothing short of amazing. We continue to hear positive feedback across the board with patients that have tried really many -- a lot of therapies and in some cases, "everything" according to the psychiatrists, and to hear the feedback that's coming back is nothing short of inspiring. So we'll continue to keep the pedal down and obviously drive higher and higher adoption. But until we report our fiscal Q4 and full years in September, we'll be sure to be present at conferences to make sure folks are aware of what's happening and continue to update prescription trends as we move along. Thanks for listening to today's call. Appreciate your support, and I wish you a good afternoon and good evening until next time. Thanks very much.

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.