Aytu BioScience Finalizes Innovus Pharmaceuticals Merger, Expands into $40B Consumer Health Sector

Deal Unites Two Specialty Pharma Players to Create Diversified Commercial Platform with $43M in Annual Revenue

Aytu BioScience and Innovus Pharmaceuticals have officially closed their merger transaction as of February 18, 2020, marking a significant expansion into the consumer healthcare market. The combined entity now controls a product portfolio exceeding 35 consumer health offerings alongside its existing prescription therapeutic lineup, positioning the newly formed company as a more vertically integrated player across both Rx and OTC channels.

Transaction Structure and Financial Terms

The deal structure reflects a stock-and-debt-based consideration approach. Aytu acquired all outstanding Innovus shares through an issuance of approximately 3.8 million common shares and 2 million preferred shares (convertible 1:1 into common stock), while forgiving $1.35 million in prior debt obligations. The combined entity assumes $3.2 million in Innovus unsecured liabilities. Beyond immediate consideration, contingent value rights (CVRs) worth up to $16 million over five years were granted to Innovus shareholders, contingent on achieving specific annual revenue and profitability targets. An initial $2 million CVR payment is anticipated following audit completion, as Innovus delivered over $24 million in revenue during 2019.

Market Position and Revenue Impact

The merged company generated approximately $43 million in revenue across the four quarters ending December 31, 2019. Aytu’s pre-acquisition Rx portfolio was valued at roughly $20 million annually, while Innovus contributed $24 million from its consumer product segment. This combination substantially broadens revenue streams across therapeutic verticals including diabetes management, men’s health, sexual wellness, and respiratory health solutions.

Operational Integration Strategy

Rather than immediately consolidating operations, the management team plans to maintain separate commercial organizations initially. Innovus’ Beyond Human® proprietary marketing platform will continue driving consumer product distribution, while Aytu’s dedicated sales force remains focused on the Rx channel. However, selective cross-selling opportunities are expected to emerge—consumer products may gain access to professional medical channels through Aytu’s field team, while prescription drugs could benefit from direct-to-consumer and digital marketing initiatives inherited from Innovus.

The merger specifically targets operational redundancy removal, including the elimination of Innovus’ standalone public company infrastructure, duplicate administrative functions, and unnecessary overhead expenses. This rationalization is anticipated to create meaningful cost synergies that accelerate the path toward profitability.

Strategic Rationale

Josh Disbrow, Aytu BioScience’s Chief Executive Officer, noted that the combination addresses a key growth constraint: seasonality. Aytu’s historical revenue concentration in seasonal antitussive products created unpredictable cash flows. The Innovus portfolio introduces year-round demand drivers, smoothing quarterly results. Additionally, the $40 billion consumer healthcare market represents substantially larger addressable demand than the prescription-only segment.

The merger also provides scale advantages in manufacturing, procurement, and regulatory affairs. With nearly $43 million in combined LTM revenue, the entity achieves a platform size sufficient to support institutional-grade operational infrastructure and potentially attract investor interest in the specialty pharma space.

Product Portfolio Context

Aytu’s existing prescription slate includes Natesto®, an FDA-approved nasal testosterone formulation for hypogonadism; ZolpiMist™, an oral spray sleep aid; and Tuzistra® XR, a 12-hour codeine-based cough suppressant. The company additionally acquired pediatric prescription products from Cerecor. Innovus brings established consumer brands across non-prescription therapeutics targeting similar demographic segments.

The combined organization also continues developing MiOXSYS®, a rapid semen-analysis diagnostic device currently commercialized internationally, with plans for U.S. FDA 510(k) de novo clearance pursuit.

This transaction exemplifies consolidation dynamics within specialty pharma, where companies leverage M&A to achieve distribution diversification, margin expansion, and reduced dependence on any single product category.