Aytu BioScience and Innovus Pharmaceuticals Announce Filing of Form S-4 Registration Statement Related to Proposed Acquisition of Innovus by Aytu BioScience

Aytu BioScience, Inc. (NASDAQ:AYTU), a specialty pharmaceutical company focused on commercializing novel products that address significant patient needs and Innovus Pharmaceuticals, Inc. (OTCQB:INNV), a specialty pharmaceutical company commercializing, licensing and developing safe and effective consumer health products, today announced that the companies have filed with the U.S. Securities and Exchange Commission a registration statement on Form S-4 containing a joint preliminary proxy statement/prospectus in connection with Aytu BioScience's proposed acquisition of Innovus Pharmaceuticals on December 23, 2019 after markets closed.

The registration statement containing the joint preliminary proxy statement/prospectus is available through the SEC's website at www.sec.gov and on each company's website on the respective company's Investor section.

As previously announced the companies signed a definitive merger agreement whereby Aytu will retire all outstanding common stock of Innovus for an aggregate of up to $8 million in shares of Aytu common stock, less certain deductions, at the time of closing, including amounts owed from Innovus to Aytu under a promissory note (currently $1.35 million principal amount), payments to be made to warrant holders, changes in Innovus liabilities and working capital, and other adjustments. This initial consideration to Innovus common shareholders is currently estimated to consist of approximately 3.9 million shares of Aytu stock. Each Innovus common shareholder will also receive contingent value rights ("CVRs"), representing the right to receive additional consideration of up to an aggregate of $16 million, paid for in cash or stock at Aytu's option, over the next five years if certain revenue and profitability milestones are achieved.

Innovus generated nearly $23 million in revenue during the twelve-month period ended September 30, 2019.

Through this combined entity, Aytu will expand into the $40 billion consumer healthcare market with a portfolio of over thirty-five consumer products competing in large therapeutic categories including diabetes, men's health, sexual wellness and respiratory health. This expanded product line broadens Aytu's portfolio beyond prescription therapeutics to enable wider revenue distribution, reduced seasonality associated with Aytu's seasonal antitussive product line, and higher revenue from an expanded base of proprietary products.

Combined, Aytu and Innovus generated approximately $43 million in revenue over the twelve-month period ended September 30, 2019. The companies believe this business combination will provide increased revenue scale and enable operational synergies that can be leveraged to accelerate the combined company's growth and path to profitability. Aytu will also take over the outstanding notes payable of Innovus which, at the time of signing, was approximately $2.8 million.

Upon closing, Aytu expects to operate the commercial aspects of the Innovus consumer business separately from Aytu's prescription business, while rationalizing general and administrative expenses through the removal of Innovus' public company costs and redundant administrative and operational processes, along with the reduction in overhead, administrative and facilities costs.

Aytu's prescription product portfolio will continue to be primarily commercialized through the existing Aytu sales force, while the consumer health products will continue to be primarily commercialized via Innovus' proprietary Beyond Human® marketing platform. However, both lines of business are expected to benefit from opportunistic cross-selling such that some consumer products may be marketed in the physician office setting by Aytu's sales force, while the marketing of the prescription products may be bolstered through various online and direct-to-consumer marketing initiatives.

The boards of directors of both companies have approved the terms of the merger transaction, which is subject to the approval of both companies' shareholders. At the time of signing the definitive agreement, Aytu had collected voting agreements supporting the merger transaction that represent approximately 35% of current shares outstanding. Innovus has thus far collected voting agreements supporting the transaction that represent approximately 24% of shares outstanding.

The transaction, which is expected to close on or around March 31, 2020, pending timing of review by the Securities and Exchange Commission and a shareholder vote, which would follow the effectiveness of the S-4/proxy statement. The merger is subject to customary closing conditions and regulatory approvals.

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