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

________________

SCHEDULE 14A

________________

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.     )

Filed by the Registrant S

Filed by a party other than the Registrant £

Check the appropriate box:

£     Preliminary Proxy Statement

£     Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

S     Definitive Proxy Statement

£     Definitive Additional Materials

£     Soliciting Material Under §240.14a-12

Neos Therapeutics, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

S

 

No fee required

£

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   

(1)

 

Title of each class of securities to which the transaction applies:

       

 

   

(2)

 

Aggregate number of securities to which the transaction applies:

       

 

   

(3)

 

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

       

 

   

(4)

 

Proposed maximum aggregate value of the transaction:

       

 

   

(5)

 

Total fee paid:

       

 

£

 

Fee paid previously with preliminary materials.

£

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

   

(1)

 

Amount previously paid:

       

 

   

(2)

 

Form, Schedule or Registration Statement No.:

       

 

   

(3)

 

Filing party:

       

 

   

(4)

 

Date Filed:

       

 

     

 

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PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

Dear Aytu BioScience, Inc. Stockholders and Neos Therapeutics, Inc. Stockholders:

On behalf of the boards of directors of Aytu BioScience, Inc. (“Aytu”) and Neos Therapeutics, Inc. (“Neos”), we are pleased to enclose the joint proxy statement/prospectus relating to the merger of Neos with a wholly-owned subsidiary of Aytu, which is referred to herein as the merger, pursuant to the terms of the Agreement and Plan of Merger, dated as of December 10, 2020, as it may be amended from time to time (the “Merger Agreement”), among Aytu, Neutron Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Aytu (the “Merger Sub”), and Neos. The accompanying joint proxy statement/prospectus is dated February 8, 2021 and is first being mailed to Aytu stockholders and Neos stockholders on or about February 12, 2021.

If the merger is completed, Neos stockholders immediately prior to the completion of the merger will be entitled to receive for each share of Neos common stock (except certain excluded shares): (1) 0.1088 shares of Aytu common stock (the “Exchange Ratio”) (provided that the Exchange Ratio is subject to a downward adjustment based on amounts loaned to Neos by Aytu pursuant to the Bridge Note (as described below)) and (2) any cash in lieu of fractional shares of Aytu common stock, as described in more detail in the accompanying joint proxy statement/prospectus under the heading “The Merger Agreement — Merger Consideration.” Aytu stockholders will continue to own their existing shares of Aytu.

In connection with the merger, Neos issued a bridge note (the “Bridge Note”) pursuant to which Aytu agreed to provide financing to Neos in an aggregate amount of up to $5,000,000. In connection with the issuance of the Bridge Note, Aytu and Neos entered into a registration rights agreement whereby Neos agreed to register shares of Neos common stock issuable upon the conversion of the outstanding principal and interest on the Bridge Note. Aytu’s obligation to advance loans under the Bridge Note is subject to certain conditions, including no default under the Bridge Note and no default under certain other secured debt of Neos. Aytu’s rights under the Bridge Note, including rights to payment, are subordinated to the rights of Neos’ existing senior lenders. The maturity date of the Bridge Note is the earlier of the acceleration of the obligations evidenced thereby and November 7, 2022. In the event that Neos draws down on the Bridge Note, the Exchange Ratio will be adjusted downward by an amount equal to 0.00011 for every $100,000 of financing funded to Neos under the Bridge Note (the “Bridge Note Adjustment”). As of the date of the accompanying joint proxy statement/prospectus, Neos has not drawn down any funds under the Bridge Note, and as a result, the Exchange Ratio remains unadjusted. In the event Neos draws down on the Bridge Note prior to the closing of the merger, the Exchange Ratio will be adjusted in accordance with the Bridge Note Adjustment.

The Exchange Ratio is fixed (subject to the Bridge Note Adjustment) and will not be adjusted for changes in the market price of either Aytu common stock or Neos common stock between the date of signing of the Merger Agreement and the closing date of the merger (the “Closing Date”). Based on the number of shares of Aytu common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in Neos stock price leading to exercise of options not otherwise being assumed by Aytu or by additional issuances of Neos common stock that Aytu may consent to) and the number of shares of Aytu common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders are expected to own approximately 24% of the outstanding shares of Aytu common stock and existing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock. Aytu common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “Aytu.” Neos common stock is traded on the Nasdaq Global Market (“Nasdaq Global”), under the symbol “NEOS.” We encourage you to obtain current quotes for both the Aytu and Neos common stock before voting at the special meetings of stockholders described below.

 

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Because the Exchange Ratio is fixed (subject to the Bridge Note Adjustment), the market value of the merger consideration to Neos stockholders will fluctuate with the market price of Aytu common stock and will not be known at the time that Neos stockholders vote to adopt the Merger Agreement. Based on the Aytu common stock price of $6.83 per share on December 9, 2020, the last full trading day prior to execution of the Merger Agreement, the implied value of the merger consideration to Neos stockholders was approximately $37.8 million. On February 5, 2021, the latest practicable trading day before the date of this joint proxy statement/prospectus, the closing price of Aytu common stock on the Nasdaq was $8.16 per share, resulting in an implied value of the merger consideration to Neos stockholders of approximately $44.2 million.

In connection with the merger, Aytu stockholders are cordially invited to attend a virtual special meeting of the stockholders of Aytu on March 18, 2021, at 10:00 a.m., Mountain Time at www.virtualshareholdermeeting.com/AYTU2021, and Neos stockholders are cordially invited to attend a virtual special meeting of the stockholders of Neos on March 18, 2021, at 10:00 a.m., Eastern Time at www.virtualshareholdermeeting.com/NEOS2021SM.

Your vote is very important, regardless of the number of shares you own. We cannot complete the merger and the merger consideration will not be issued unless (i) Aytu stockholders approve the issuance of shares of Aytu common stock in connection with the merger (the “Common Stock Issuance”), and (ii) Neos stockholders approve the proposal to adopt the Merger Agreement (the “Merger Proposal”). Approval of the Common Stock Issuance by Aytu stockholders requires the affirmative vote of at least a majority of the votes cast by holders of outstanding shares of Aytu common stock represented at a duly called and held meeting of Aytu’s stockholders at which a quorum is present. Approval of the Merger Proposal by Neos stockholders requires the affirmative vote of holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon.

At the special meeting of the stockholders of Aytu, Aytu stockholders will be asked to vote on (i) a proposal to approve the Common Stock Issuance, (ii) a proposal to approve an amendment to Aytu’s certificate of incorporation changing Aytu’s name from “Aytu Bioscience, Inc.” to “Aytu Biopharma, Inc.” effective upon filing of the certificate of amendment to Aytu’s certificate of incorporation with the Secretary of State of the State of Delaware after consummation of the merger (the “Aytu Name Change Proposal”), and (iii) a proposal to approve the adjournment from time to time of the Aytu special meeting if necessary to solicit additional proxies if there are not sufficient votes at the time of the Aytu special meeting, or any adjournment or postponement thereof, to approve the various matters being submitted to stockholders in the special meeting.

Aytu’s board of directors determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger and the merger consideration, including the Common Stock Issuance, are advisable, fair to and in the best interests of Aytu and its stockholders and recommends that Aytu stockholders vote (i) “FOR” the approval of the Common Stock Issuance, (ii) “FOR” the approval of the Aytu Name Change Proposal and (iii) “FOR” the approval of the adjournment from time to time of the Aytu special meeting if necessary to solicit additional proxies if there are not sufficient votes at the time of the Aytu special meeting, or any adjournment or postponement thereof, to approve the various matters being submitted to stockholders in the special meeting.

At the special meeting of the stockholders of Neos, Neos stockholders will be asked to vote on (i) the Merger Proposal, (ii) a proposal to amend Neos’ certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20 if the Merger Proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason (with the exact ratio to be determined in the discretion of the Neos board of directors (the “Neos Board”) and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion), which, for the avoidance of doubt, is not a proposal in connection with the Merger Proposal and is referred to as the reverse stock split proposal and (iii) a proposal to approve the adjournment or postponement from time to time of the Neos special meeting if necessary to solicit additional proxies if there are not sufficient votes to approve the Merger Proposal and/or the reverse stock split proposal, which is referred to as the Neos adjournment proposal.

The Neos Board (1) approved the execution, delivery, and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the merger, (2) deemed it fair to, advisable and in the best interests of Neos and its stockholders to enter into the Merger Agreement, (3) directed that the Merger

 

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Agreement be submitted to Neos stockholders for adoption and (4) resolved to recommend that Neos stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the merger. Separately, if the Merger Proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason, Neos Board has deemed it advisable and in the best interests of Neos and its stockholders to amend Neos’ certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20, in an effort to regain compliance with the applicable continued listing standards of Nasdaq Global. The Neos Board recommends that Neos stockholders vote (i) “FOR” the Merger Proposal, (ii) “FOR” the reverse stock split proposal and (iii) “FOR” the Neos adjournment proposal.

The accompanying joint proxy statement/prospectus provides important information regarding the Aytu and Neos special meetings and a detailed description of the Merger Agreement, the merger, the Common Stock Issuance, the Aytu Name Change Proposal, the reverse stock split proposal and the adjournment proposals. We urge you to read carefully and in its entirety the accompanying joint proxy statement/prospectus (including the annexes and any documents incorporated by reference into the accompanying joint proxy statement/prospectus). Please pay particular attention to the section entitled “Risk Factors” beginning on page 31 of the accompanying joint proxy statement/prospectus. You can also obtain information about Aytu and Neos from documents that Aytu and Neos previously have filed with the U.S. Securities and Exchange Commission.

For a discussion of the material U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” of the accompanying joint proxy statement/prospectus.

For a discussion of the material U.S. federal income tax consequences of the reverse stock split, see the section entitled “Neos Proposal II: Approval of the Reverse Stock Split — Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” of the accompanying joint proxy statement/prospectus.

Whether or not you expect to attend your company’s special meeting, the details of which are described in the accompanying joint proxy statement/prospectus, please immediately submit your proxy by telephone, by the Internet or by completing, signing, dating and returning your signed proxy card(s) in the enclosed prepaid return envelope so that your shares may be represented at the applicable special meeting.

If Aytu stockholders have any questions or require assistance in voting their shares of Aytu common stock, they should contact Aytu’s proxy solicitor, The Proxy Advisory Group, LLC, by telephone at (212) 616-2180.

If Neos stockholders have any questions or require assistance in voting their shares of Neos common stock, they should contact Neos’ proxy solicitor, MacKenzie Partners, Inc., by telephone at (800) 322-2885.

We hope to see you at the applicable special meeting and look forward to the successful completion of the merger.

On behalf of the boards of directors of Aytu and Neos, thank you for your consideration and continued support.

Sincerely,

     

Sincerely,

         

/s/ Joshua R. Disbrow

     

/s/ Gerald McLaughlin

Joshua R. Disbrow

     

Gerald McLaughlin

Chairman and Chief Executive Officer of Aytu

     

President and Chief Executive Officer of Neos

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined that the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

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

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
AYTU BIOSCIENCE, INC.
TO BE HELD VIRTUALLY ON
March 18, 2021
10:00 A.M., MOUNTAIN TIME

To the Stockholders of Aytu BioScience, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Aytu BioScience, Inc., a Delaware corporation, which is referred to in this notice as Aytu, will be held will be held virtually on March 18, 2021, at 10:00 a.m., Mountain Time at www.virtualshareholdermeeting.com/AYTU2021 for the following purposes:

1.       to consider and vote on a proposal to approve, for the purposes of compliance with the Nasdaq rules, the consideration to be delivered by Aytu in connection with the merger, comprised of the (i) Common Stock Issuance and (ii) payment of cash in lieu of the issuance of fractional shares of Aytu common stock;

2.       to consider and vote on a proposal to approve an amendment to Aytu’s certificate of incorporation to change the corporate name of Aytu from “Aytu Bioscience, Inc.” to “Aytu Biopharma, Inc.” effective upon filing of the amendment to Aytu’s certificate of incorporation with the Secretary of State of the State of Delaware after consummation of the merger; and

3.       to consider and vote on a proposal to approve the adjournment from time to time of the special meeting of stockholders of Aytu, which is referred to in this notice as the Aytu special meeting, if necessary to solicit additional proxies if there are not sufficient votes at the time of the Aytu special meeting, or any adjournment or postponement thereof, to approve the various matters being submitted to stockholders in the special meeting.

Aytu’s board of directors has fixed the close of business on February 5, 2021 as the record date for the determination of the stockholders entitled to vote at the Aytu special meeting or any adjournment or postponement thereof. Only stockholders of record at the record date are entitled to notice of, and to vote at, the Aytu special meeting or any adjournment or postponement thereof. Aytu anticipates commencing its solicitation of proxies on or about February 12, 2021. All stockholders of record as of that date are cordially invited to attend the special meeting virtually.

Your vote is very important, regardless of the number of shares of Aytu common stock that you own. Approval of the merger consideration, including the Common Stock Issuance requires the affirmative vote of at least a majority of the votes cast by holders of outstanding shares of Aytu common stock at a duly called and held meeting of Aytu’s stockholders at which a quorum is present. Approval of the name change proposal requires the affirmative vote of holders of a majority of the issued and outstanding shares of Aytu’s common stock. Approval of the adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Aytu special meeting by holders of shares of Aytu common stock entitled to vote if a quorum is present or the affirmative vote of a majority of the votes present at the Aytu special meeting by holders of shares of Aytu common stock entitled to vote if a quorum is not present.

Aytu’s board of directors determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger and the payment of the merger consideration, including the Common Stock Issuance, in connection with the merger, are advisable, fair to and in the best interests of Aytu and its stockholders and recommends that Aytu stockholders vote (i) “FOR” the approval of the merger consideration, including the Common Stock Issuance, (ii) “FOR” the approval of the Aytu name change proposal and (iii) “FOR” the approval of the adjournment from time to time of the Aytu special meeting if necessary to solicit additional proxies if there are not sufficient votes at the time of the Aytu special meeting, or any adjournment or postponement thereof, to approve the various matters being submitted to stockholders in the special meeting.

By Order of the Board of Directors,

   
     

/s/ Joshua R. Disbrow

   

Joshua R. Disbrow
Chairman of the Board of Directors and
Chief Executive Officer
Englewood, Colorado
February
8, 2021

   

 

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YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE AYTU SPECIAL MEETING VIRTUALLY, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) VIA THE INTERNET, (2) BY TELEPHONE OR (3) BY COMPLETING, SIGNING AND DATING THE ENCLOSED AYTU PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE AYTU SPECIAL MEETING VIRTUALLY AND WISH TO VOTE YOUR SHARES OF AYTU COMMON STOCK AT THE AYTU SPECIAL MEETING, YOU MAY DO SO AT ANY TIME PRIOR TO THE CLOSING OF THE POLLS AT THE AYTU SPECIAL MEETING. You may revoke your proxy or change your vote for shares of Aytu common stock you hold directly in your name through Aytu’s transfer agent, Issuer Direct Corporation, by (i) signing another proxy card with a later date and delivering it to Aytu’s Corporate Secretary at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112 before the date of the Aytu special meeting, (ii) submitting revised votes over the Internet or by telephone before 11:59 p.m., Eastern Time, on March 17, 2021, or (iii) attending the Aytu special meeting virtually and voting your shares of Aytu common stock online at the Aytu special meeting. If your shares of Aytu common stock are held in the name of a bank, broker or other nominee holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

The accompanying joint proxy statement/prospectus contains a detailed description of the merger, the Merger Agreement and the other matters to be considered at the meeting. We urge you to read carefully the accompanying joint proxy statement/prospectus, including all documents incorporated by reference into the accompanying joint proxy statement/prospectus, and its annexes, in their entirety. If you have any questions concerning the Merger Agreement, the merger, the merger consideration, including the Common Stock Issuance, the adjournment proposal, the Aytu name change proposal, the Aytu special meeting or the accompanying joint proxy statement/prospectus (or any other information contained therein), would like additional copies of the accompanying joint proxy statement/prospectus or need help voting your shares of Aytu common stock, please contact David Green, Aytu’s Chief Financial Officer, at (720) 437-6580.

 

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NEOS THERAPEUTICS, INC.
2940 N. Hwy 360
Grand Prairie, TX 75050

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
NEOS THERAPEUTICS, INC.
TO BE HELD ON
March 18, 2021
10:00 A.M., EASTERN TIME

To the Stockholders of Neos Therapeutics, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Neos Therapeutics, Inc., a Delaware corporation, which is referred to in this notice as Neos, will be held on March 18, 2021, beginning at 10:00 a.m., Eastern Time, and will be a completely virtual meeting of stockholders, which is referred to in this notice as the Neos special meeting. Stockholders of Neos will be able to attend the Neos special meeting and vote online by visiting www.virtualshareholdermeeting.com/NEOS2021SM. We encourage you to allow reasonable time for online check-in, which begins at 9:45 a.m., Eastern Time on March 18, 2021. Please note that you will not be able to attend the Neos special meeting in person. Stockholders may only participate online. The Neos special meeting will be held for the purpose of allowing stockholders of Neos to consider and vote upon the following matters:

1.       a proposal to adopt the Agreement and Plan of Merger, dated as of December 10, 2020, as it may be amended from time to time (the “Merger Agreement”), among Aytu BioScience, Inc., Neutron Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Aytu (the “Merger Sub”), and Neos, pursuant to which Merger Sub will be merged with and into Neos, which is referred to as the merger, with Neos surviving the merger as a wholly-owned subsidiary of Aytu (a copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus), which is referred to in this notice as the merger proposal;

2.       a proposal to approve the amendment to the Neos certificate of incorporation to effect a reverse stock split of Neos common stock, at a ratio within the range of 1-for-2 to 1-for-20 (in the form attached as Annex E to the accompanying joint proxy statement/prospectus) if the Merger Proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is be completed for any other reason (with the exact ratio to be determined in the discretion of the Neos Board and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion), which, for the avoidance of doubt, is not a proposal in connection with the merger proposal and is referred to in this notice as the reverse stock split proposal; and

3.       a proposal to approve the adjournment or postponement from time to time of the Neos special meeting, if necessary to solicit additional proxies if there are not sufficient votes to approve the merger proposal and/or the reverse stock split proposal, which is referred to in this notice as the Neos adjournment proposal.

The holders of record of shares of Neos common stock, par value $0.001 per share, which are referred to in this notice as shares of Neos common stock, at the close of business on February 5, 2021 are entitled to notice of and to vote at the Neos special meeting or any adjournment or postponement thereof.

Assuming a quorum is present, the merger proposal and the reverse stock split proposal each requires the affirmative vote of the holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon, and the adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Neos special meeting by holders of shares of Neos common stock.

The Neos Board (1) approved the execution, delivery, and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the merger, (2) deemed it fair to, advisable and in the best interests of the Neos and its stockholders to enter into the Merger Agreement, (3) directed that the Merger Agreement be submitted to Neos stockholders for adoption and (4) resolved to recommend that Neos stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the merger. Separately, if the Merger Proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason, the Neos Board has deemed it advisable and in the best interests of Neos and its stockholders to amend Neos’ certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20, in an effort to regain compliance with the applicable continued listing standards of the Nasdaq Global Market. The Neos Board recommends that Neos stockholders vote (i) “FOR” the merger proposal, (ii) “FOR” the reverse stock split proposal and (iii) “FOR” the proposal to approve the Neos adjournment proposal.

By Order of the Board of Directors,

   
     

/s/ John M. Limongelli

   

John M. Limongelli
Corporate Secretary
February
8, 2021

   

 

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YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE NEOS SPECIAL MEETING VIRTUALLY, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) VIA THE INTERNET, (2) BY TELEPHONE OR (3) BY COMPLETING, SIGNING AND DATING THE ENCLOSED NEOS PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE NEOS SPECIAL MEETING VIRTUALLY AND WISH TO VOTE YOUR SHARES OF NEOS COMMON STOCK AT THE NEOS SPECIAL MEETING ONLINE, YOU MAY DO SO AT ANY TIME PRIOR TO THE CLOSING OF THE POLLS AT THE NEOS SPECIAL MEETING. You may revoke your proxy or change your vote for shares of Neos common stock you hold directly in your name through Neos’ transfer agent, American Stock Transfer & Trust Company, LLC, by (i) duly executing a later-dated proxy relating to the same shares and delivering it to Neos’ Corporate Secretary at Neos’ principal executive offices, located at 2940 N. Highway 360, Grand Prairie, TX 75050. Your new proxy card must be received by Neos’ Corporate Secretary before March 18, 2021, (ii) filing a written notice of revocation bearing a later date than the proxy with Neos’ Corporate Secretary at Neos’ principal executive offices, located at 2940 N. Highway 360, Grand Prairie, TX 75050 before March 18, 2021, (iii) if you voted by telephone or via the Internet, voting again by the same means prior to 11:59 p.m. Eastern Time on March 17, 2021 (your latest telephone or internet vote, as applicable, will be counted and all earlier votes will be disregarded), or (iv) attending the Neos special meeting virtually and voting your shares of Neos common stock online at the Neos special meeting. If your shares of Neos common stock are held in the name of a bank, broker or other nominee holder of record, you must contact your broker, bank or other nominee holder of record to change your vote or obtain a written legal proxy to vote your shares if you wish to cast your vote at the Neos special meeting virtually.

The accompanying joint proxy statement/prospectus contains, among other things, a detailed description of the merger, the Merger Agreement, the reverse stock split proposal and the Neos adjournment proposal. Neos cannot complete the merger and the merger consideration will not be issued unless its stockholders approve the merger proposal and the other closing conditions specified in the Merger Agreement are met or waived.

The merger proposal (i) requires the affirmative vote of the holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon and (ii) is considered a “non-discretionary” matter. Accordingly, a Neos stockholder’s abstention from voting, the failure of a Neos stockholder who holds his or her shares in “street name” through a broker, bank or other nominee holder of record to give voting instructions to that broker, bank or other nominee holder of record or any other failure of a Neos stockholder to vote will have the same effect as a vote “AGAINST” the merger proposal.

The reverse stock split proposal requires the affirmative vote of a majority of the outstanding shares of Neos common stock entitled to vote thereon. Accordingly, a Neos stockholder’s abstention from voting on the reverse stock split proposal will have the same effect as a vote “AGAINST” the approval of this proposal. This proposal is considered a “discretionary” matter. Therefore, a broker, bank or other nominee holder of record may vote Neos shares held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal.

The Neos adjournment proposal requires the affirmative vote of a majority of the votes properly cast on such matter at the Neos special meeting by holders of shares of Neos common stock. For purposes of the Neos adjournment proposal, “votes properly cast” on the proposal consist of votes “for” or “against” the proposal. Accordingly, a Neos stockholder’s abstention from voting on the Neos adjournment proposal will have no effect on the approval of the proposal. The Neos adjournment proposal is considered a “discretionary” matter. Therefore, a broker may vote shares of Neos common stock held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal.

We urge you to read carefully the accompanying joint proxy statement/prospectus, including all documents incorporated by reference into the accompanying joint proxy statement/prospectus, and its annexes, in their entirety. If you have any questions concerning the Merger Agreement, the merger, the merger proposal, the Neos adjournment proposal, the reverse stock split proposal, the Neos special meeting or the accompanying joint proxy statement/prospectus (or any other information contained therein), would like additional copies of the accompanying joint proxy statement/prospectus or need help voting your shares of Neos common stock, please contact Neos’ proxy solicitor, MacKenzie Partners, Inc., at (800) 322-2885.

 

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ADDITIONAL INFORMATION

This document incorporates by reference important business and financial information about Aytu from documents that are not included or delivered with this document. You can obtain documents incorporated by reference in this document, other than certain exhibits to those documents, free of charge through the Securities and Exchange Commission website www.sec.gov.

If you are an Aytu stockholder and have questions about the merger or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus, or need to obtain proxy cards or other information related to the proxy solicitation, please contact The Proxy Advisory Group, LLC, by telephone at (212) 616-2180. You will not be charged for any of these documents that you request.

If you are a Neos stockholder and have questions about the merger or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus, or need to obtain a proxy card or other information related to the proxy solicitation with respect to the Neos special meeting, please contact Neos’ proxy solicitor, MacKenzie Partners, Inc., by telephone at (800) 322-2885. You will not be charged for any of these documents that you request.

To obtain timely delivery of such requested documents, you must request them no later than five business days before the date of the applicable special meeting. Therefore, if you are an Aytu stockholder and would like to request documents from Aytu, please contact David Green, Aytu’s Chief Financial Officer, by March 11, 2021 in order to receive them before the Aytu special meeting. If you are a Neos stockholder and would like to request documents from Neos, please contact Richard Eisenstadt, Neos’ Chief Financial Officer, by March 11, 2021 in order to receive them before the Neos special meeting.

You should rely only on the information contained in or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated February 8, 2021, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document.

See the section entitled “Where You Can Find More Information” included in the accompanying joint proxy statement/prospectus.

 

Table of Contents

TABLE OF CONTENTS

 

Page

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

 

1

SUMMARY

 

19

RISK FACTORS

 

31

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AYTU

 

85

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NEOS

 

86

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE DATA

 

87

CERTAIN UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

89

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

93

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

 

97

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

98

SPECIAL MEETING OF STOCKHOLDERS OF AYTU

 

141

SPECIAL MEETING OF STOCKHOLDERS OF NEOS

 

146

NEOS PROPOSAL I: ADOPTION OF THE MERGER AGREEMENT AND AYTU PROPOSAL I: APPROVAL OF THE MERGER CONSIDERATION

 

151

THE MERGER AGREEMENT

 

207

INTERESTS OF NEOS’ DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

 

225

INTERESTS OF AYTU’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

 

233

NEOS PROPOSAL II: APPROVAL OF THE REVERSE STOCK SPLIT

 

235

NEOS PROPOSAL III: ADJOURNMENT OF THE NEOS SPECIAL MEETING

 

242

AYTU PROPOSAL II: THE AYTU NAME CHANGE PROPOSAL

 

243

AYTU PROPOSAL III: ADJOURNMENT OF THE AYTU SPECIAL MEETING

 

244

DESCRIPTION OF AYTU CAPITAL STOCK

 

245

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF AYTU

 

249

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NEOS

 

251

COMPARISON OF STOCKHOLDER RIGHTS

 

253

LEGAL MATTERS

 

260

EXPERTS

 

260

FUTURE STOCKHOLDER PROPOSALS

 

261

WHERE YOU CAN FIND MORE INFORMATION

 

262

ANNEX A — AGREEMENT AND PLAN OF MERGER

 

A-1

ANNEX B — OPINION OF COWEN AND COMPANY, LLC

 

B-1

ANNEX C — OPINION OF MTS SECURITIES, LLC

 

C-1

ANNEX D — CERTIFICATE OF INCORPORATION OF AYTU BIOSCIENCE, INC.

 

D-1

ANNEX E — AMENDED AND RESTATED BYLAWS OF AYTU BIOSCIENCE, INC.

 

E-1

ANNEX F — CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF AYTU BIOSCIENCE, INC.

 

F-1

ANNEX G — PROPOSED CERTIFICATE OF AMENDMENT OF FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NEOS THERAPEUTICS, INC.

 

G-1

ANNEX H — NEOS HISTORICAL FINANCIAL STATEMENTS

 

H-1

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following are some questions that you, as a stockholder of Aytu BioScience, Inc.,(“Aytu”), or a stockholder of Neos Therapeutics, Inc. (“Neos”), may have regarding the Merger Agreement, the merger, the merger consideration, including the issuance of shares of Aytu common stock in connection with the merger (the “Common Stock Issuance”), the reverse stock split proposal, the Aytu name change proposal, the Aytu adjournment proposal, the Neos adjournment proposal and the special meetings as well as brief answers to those questions. You are urged to read carefully this joint proxy statement/prospectus, including all documents incorporated by reference into this joint proxy statement/prospectus, and its annexes, in their entirety because this section may not provide all of the information that is important to you with respect to the Merger Agreement, the merger, the merger consideration, including the Common Stock Issuance, the reverse stock split proposal, the Aytu name change proposal, the Aytu adjournment proposal, the Neos adjournment proposal and the special meetings. Additional important information is contained in the annexes to this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”

Q:     Why am I receiving this document and why am I being asked to vote?

A:     Aytu and Neos have agreed to a merger (the “merger”), pursuant to which Neos will become a wholly-owned subsidiary of Aytu and will no longer be a publicly traded corporation. Following the merger, Neos common stock will be removed from the Nasdaq Global Market (“Nasdaq Global”), and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act,”) and Neos will no longer be required to file periodic reports with the U.S. Securities and Exchange Commission (the “SEC”), in respect of Neos common stock. In order to complete the merger, holders of Aytu common stock must approve the merger consideration, including the Common Stock Issuance, and Neos stockholders must vote to adopt the Agreement and Plan of Merger, dated as of December 10, 2020, among Aytu, Neos and Neutron Acquisition Sub, Inc., a wholly-owned subsidiary of Aytu (“Merger Sub”) (as it may be amended from time to time, the “Merger Agreement”).

If the merger proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason, Neos is separately seeking approval to amend its certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20, with the exact ratio to be determined in the discretion of the Neos Board and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion, in an effort to regain its compliance with the $1.00 bid price requirement as set forth in Nasdaq Listing Rule 5450(a)(1).

Aytu Stockholders

Aytu is holding a special meeting of stockholders(the “Aytu special meeting”), in order to obtain the stockholder approval necessary to approve the merger consideration, including the Common Stock Issuance. Approval of the merger consideration, including the Common Stock Issuance, requires the affirmative vote of at least a majority of the votes cast by holders of outstanding shares of Aytu common stock represented at a duly called and held meeting of Aytu’s stockholders at which a quorum is present. Aytu stockholders will also be asked to approve an amendment to Aytu’s certificate of incorporation to change the corporate name of Aytu from “Aytu Bioscience, Inc.” to “Aytu Biopharma, Inc.” effective upon filing of the amendment to Aytu’s certificate of incorporation with the Secretary of State of the State of Delaware after consummation of the merger. Approval of the Aytu name change proposal requires the affirmative vote of a majority of the votes of the issued and outstanding shares of Aytu’s common stock. Aytu stockholders will also be asked to approve the adjournment from time to time of the Aytu special meeting if necessary to solicit additional proxies if there are not sufficient votes at the time of the Aytu special meeting, or any adjournment or postponement thereof, to approve the various matters being submitted to stockholders (the “Aytu adjournment proposal”). Approval of the Aytu adjournment proposal requires the affirmative vote of a majority of the votes present at the Aytu special meeting by holders of shares of Aytu common stock entitled to vote (whether or not a quorum is present). A majority of the votes present means that the number of votes cast “FOR” the adjournment proposal must exceed the number of votes cast “AGAINST” and ABSTENTIONS. It is important that Aytu’s stockholders vote their shares of Aytu common stock on each of these matters, regardless of the number of shares owned.

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Neos Stockholders

Neos is holding a special meeting of stockholders (the “Neos special meeting”), in order to obtain the stockholder approval necessary to adopt the Merger Agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. The proposal to adopt the Merger Agreement (the “merger proposal”), requires the affirmative vote of holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon. Separately, Neos stockholders will also be asked to approve the amendment of Neos’ certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20 (in the form attached as Annex F to this joint proxy statement/prospectus) if the merger proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason (with the exact ratio to be determined in the discretion of the Neos Board and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion) (the “reverse stock split proposal”) which, for the avoidance of doubt, is not a proposal in connection with the merger proposal. Approval of the reverse stock split proposal requires the affirmative vote of the majority of the outstanding shares of Neos common stock entitled to vote thereon. Neos stockholders will also be asked to approve the adjournment or postponement from time to time of the Neos special meeting if necessary to solicit additional proxies if there are not sufficient votes at the time of the Neos special meeting, or any adjournment or postponement thereof, to approve the merger proposal and/or the reverse stock split proposal (the “Neos adjournment proposal”). Approval of the Neos adjournment proposal requires the affirmative vote of a majority of the votes properly cast on such matter at the Neos special meeting by holders of shares of Neos common stock (assuming a quorum is present). A majority of the votes cast means that the number of votes cast “FOR” the Neos adjournment proposal must exceed the number of votes cast “AGAINST.” It is important that Neos stockholders vote their shares of Neos common stock on each of these matters, regardless of the number of shares owned.

This document is being delivered to you as both a joint proxy statement of Aytu and Neos and a prospectus of Aytu in connection with the merger and the Common Stock Issuance. This document is the proxy statement by which the Aytu board of directors (the “Aytu Board”), is soliciting proxies from Aytu stockholders to vote at the Aytu special meeting, or at any adjournment or postponement of the Aytu special meeting, on the approval of the Common Stock Issuance, and the approval of the Aytu adjournment proposal. In addition, this document is the prospectus of Aytu pursuant to which Aytu will issue shares of Aytu common stock as the merger consideration, as described in the section entitled “The Merger Agreement — Merger Consideration.” This document is also the proxy statement by which the Neos Board is soliciting proxies from Neos stockholders to vote at the Neos special meeting, or at any adjournment or postponement of the Neos special meeting, on the approval of the merger proposal, the approval of the reverse stock split proposal and the approval of the Neos adjournment proposal.

Q:     Who is entitled to vote at the Neos special meeting?

A:     All holders of shares of Neos common stock who held shares at the record date for the Neos special meeting (the close of business on February 5, 2021) are entitled to receive notice of, and to vote at, the Neos special meeting. As of the close of business on February 5, 2021, there were 49,758,322 shares of Neos common stock outstanding. Each holder of shares of Neos common stock is entitled to one vote for each share of Neos common stock owned at the record date. In addition, the Neos stockholders list will be available for inspection during the Neos special meeting at www.virtualshareholdermeeting.com/NEOS2021SM.

Q:     Who is entitled to vote at the Aytu special meeting?

A:     All holders of shares of Aytu common stock who held shares at the record date for the Aytu special meeting (the close of business on February 5, 2021) are entitled to receive notice of, and to vote at, the Aytu special meeting. As of the close of business on February 5, 2021, there were 17,882,893 shares of Aytu common stock outstanding. Each holder of shares of Aytu common stock is entitled to one vote for each share of Aytu common stock owned at the record date.

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Q:     What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:     If your shares are registered directly in your name with Aytu’s or Neos’ transfer agent, you are considered, with respect to those shares, a “stockholder of record.” If you are a stockholder of record, you have the right to vote virtually at the Aytu and Neos special meetings.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name. In that case, these proxy materials have been forwarded to you by your broker, bank, or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares.

Brokerage firms and other intermediaries holding shares of Neos common stock and Aytu common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. When a broker, bank, or other nominee has discretion to vote on one or more proposals at a meeting but does not have discretion to vote on other matters at the meeting, the broker, bank, or other nominee will inform the inspector of election that it does not have the authority to vote on the “non-discretionary” matters with respect to shares held for beneficial owners which did not provide voting instructions with respect to the “non-discretionary” matters. This situation is commonly referred to as a “broker non-vote.” Broker non-votes will be counted for purposes of establishing a quorum to conduct business at the Aytu special meeting, but not for determining the number of shares voted “FOR,” “AGAINST,” or “ABSTAIN” with respect to any matters. Broker non-votes will not be counted for purposes of establishing a quorum to conduct business at the Neos special meeting.

In the absence of timely directions, your broker will have discretion to vote your shares on the approval of the Aytu name change proposal and approval of the Aytu adjournment proposal, in the case of holders of shares of Aytu common stock, or on the approval of the Neos reverse stock split proposal and of the Neos adjournment proposal, in the case of holders of shares of Neos common stock, which are “discretionary” matters. Your broker will not have discretion to vote on the merger proposal or the approval of the merger consideration, which are “non-discretionary” matters, absent direction from you.

Q:     Is my vote important?

A:     Yes, your vote is very important. If you do not submit a proxy or vote virtually at the Aytu or Neos special meetings, it will be more difficult for Aytu and Neos to obtain the necessary quorums to hold their respective meetings.

In addition, for Neos stockholders, because the merger proposal (i) requires the affirmative vote of the holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon and (ii) is considered a “non-discretionary” matter, a Neos stockholder’s abstention from voting, the failure of a Neos stockholder who holds his or her shares in “street name” through a broker, bank or other nominee holder of record to give voting instructions to that broker, bank or other nominee holder of record or any other failure of a Neos stockholder to vote will have the same effect as a vote “AGAINST” the merger proposal. The reverse stock split proposal requires the affirmative vote of a majority of the outstanding shares of Neos common stock entitled to vote thereon. Accordingly, a Neos stockholder’s abstention from voting on the reverse stock split proposal will have the same effect as a vote “AGAINST” the reverse stock split proposal. The reverse stock split proposal is considered a “discretionary” matter. Therefore, a broker may vote shares of Neos common stock held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal. The Neos adjournment proposal requires the affirmative vote of a majority of the votes properly cast on such matter at the Neos special meeting by holders of shares of Neos common stock. For purposes of the Neos adjournment proposal, “votes properly cast” on the proposal consist of votes “for” or “against” the proposal. Accordingly, a Neos stockholder’s abstention from voting on the Neos adjournment proposal will have no effect on the approval of the proposal. The Neos adjournment proposal is considered a “discretionary” matter. Therefore, a broker may vote shares of Neos common stock held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal.

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An Aytu stockholder’s abstention from voting on the merger consideration will have no effect on the approval of the proposal. Because the approval of the merger consideration is a “non-discretionary” matter, broker non-votes will have no effect on the approval of the stock issuance proposal because this failure to vote is not considered “votes cast.” An Aytu stockholder’s abstention from voting on the Aytu name change proposal or the Aytu adjournment proposal will have the same effect as a vote “AGAINST” the approval of those proposals. The approval of the Aytu name change proposal and the Aytu adjournment proposal are “discretionary” matters and, therefore, no broker non-votes are expected to exist with respect to those proposals.

The Neos Board recommends that Neos stockholders vote “FOR” the merger proposal, “FOR” the reverse stock split proposal and “FOR” the Neos adjournment proposal, and the Aytu Board recommends that Aytu stockholders vote “FOR” the approval of the Merger Agreement, “FOR” the approval of the Aytu name change proposal and “FOR” the approval of the Aytu adjournment proposal.

Q:     What will happen in the merger?

A:     At the effective time of the merger (the “Effective Time”), Merger Sub will be merged with and into Neos. Neos will be the surviving corporation in the merger and will be a wholly-owned subsidiary of Aytu following completion of the merger. Neos will no longer be a publicly traded corporation and Neos’ shares will be removed from Nasdaq Global and deregistered under the Exchange Act.

Q:     What will Neos stockholders receive in the merger?

A:     If the merger is completed, each share of Neos common stock issued and outstanding as of the Effective Time, other than Excluded Shares (as defined below), will automatically be cancelled and converted into the right to receive (1) 0.1088 shares of Aytu common stock (provided that the Exchange Ratio is subject to a downward adjustment based on the Bridge Note Adjustment) and (2) any cash, in lieu of fractional shares of Aytu common stock, as described in more detail in this joint proxy statement/prospectus in the section entitled “The Merger Agreement — Merger Consideration.” Shares of Neos common stock that are owned by Aytu or Neos (as treasury stock or otherwise) or any of their respective direct or indirect wholly-owned subsidiaries as of immediately prior to the Effective Time will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor (the “Excluded Shares”).

Q:     What is the value of the merger consideration?

A:     In the merger, each share of Neos common stock issued and outstanding at the Effective Time will be cancelled and converted into the right to receive, for each share of Neos common stock they own as of immediately prior to the completion of the merger, other than Excluded Shares, (1) 0.1088 shares of Aytu common stock (provided that the Exchange Ratio is subject to a downward adjustment based on the Bridge Note Adjustment) and (2) any cash, in lieu of fractional shares of Aytu common stock, as described in the section entitled “The Merger Agreement — Merger Consideration.”

The merger consideration will be reduced by certain deductions as described in the Merger Agreement, including the amount of outstanding indebtedness of Neos owed to Aytu pursuant to the Bridge Loan as of the Effective Time. Because the Exchange Ratio is fixed (subject to the Bridge Note Adjustment) and will not be adjusted for changes in the market price of either Aytu common stock or Neos common stock between the date of signing of the Merger Agreement and the Closing Date of the merger, the market value of the merger consideration to Neos stockholders will fluctuate with the market price of the Aytu common stock and will not be known at the time that Neos stockholders vote on the merger proposal. Based on the Aytu common stock price of $6.83 per share on December 9, 2020, the last full trading day prior to execution of the Merger Agreement, the implied value of the merger consideration to Neos stockholders was approximately $37.8 million. On February 5, 2021, the latest practicable trading day before the date of this joint proxy statement/prospectus, the closing price of Aytu common stock on the Nasdaq was $8.16 per share, resulting in an implied value of the merger consideration to Neos stockholders of approximately $44.2 million. See the section entitled “Risk Factors — Risks Related to the Merger.”

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Q:     What happens if Neos incurs indebtedness from Aytu under the Bridge Note?

A:     As described in this joint proxy statement/prospectus, in connection with the merger, Neos issued to Aytu the Bridge Note pursuant to which Aytu agreed to lend Neos up to $5,000,000 on the terms of the Bridge Note. In connection with the Bridge Note, Aytu and Neos entered into a registration rights agreement pursuant to which Neos agreed to register shares of its common stock issuable upon the conversion of any outstanding principal and interest owed on amounts drawn down from the Bridge Note. Aytu’s obligation to advance loans under the Bridge Note is subject to certain conditions, including no default under the Bridge Note and no default under certain other secured debt of Neos. In the event that Aytu makes advances to Neos under the Bridge Note, the Exchange Ratio shall be adjusted by reducing the Exchange Ratio downward by an amount equal to 0.00011 for every $100,000 of financing funded to Neos under the Bridge Note between the date of the Merger Agreement and such date. For example, if Neos receives bridge financing in the amount of $1 million from Aytu, the Exchange Ratio will be reduced by 0.0011 such that, if the merger is completed, each share of Neos common stock issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares) will automatically be converted into the right to receive (1) 0.1077 shares of Aytu common stock and (2) any cash in lieu of fractional shares of Aytu common stock. If the merger is not consummated and the Merger Agreement is terminated, at any time beginning 30 days following such termination, Aytu will have the right to elect to convert the aggregate amount of the outstanding principal of the Bridge Note, plus interest accrued on that principal, at a conversion price equal to the greater of $0.50 per share of Neos common stock and 90% of the then current share price of Neos common stock (calculated based on the arithmetic average of the volume weighted average price per share for the thirty (30) trading days immediately preceding the date of conversion, adjusted in the case of any stock split, stock combination, reclassification, stock dividend, recapitalization or similar transaction) in to shares of Neos common stock. If Aytu elects not to convert the principal and accrued interest outstanding under the Bridge Note, Aytu would continue to be an unsecured lender to Neos with rights that are subordinated to the prior payment in full and other rights of Neos’ existing senior lenders. See the section entitled “Summary — Bridge Financing.”

Q:     Will Aytu be entitled to receive merger consideration in the event that Neos receives bridge financing from Aytu pursuant to the Bridge Note and Aytu elects to convert the principal and accrued interest prior to the special meetings of the Aytu and Neos stockholders?

A:     No. In the event the merger is consummated, the Bridge Note will be terminated and any loans made under the Bridge Note will be cancelled. Aytu will not be entitled to convert its rights under the convertible note into merger consideration. See the section entitled “Summary — Bridge Financing.”

Q:     Are Neos stockholders entitled to exercise dissenters or appraisal rights instead of receiving merger consideration?

A:     No. The Merger Agreement provides that no dissenters’ or appraisal rights will be available with respect to the merger. Furthermore, under the appraisal rights provisions of the Delaware General Corporation Law (“DGCL”) Neos stockholders are not entitled to exercise the right of objecting stockholders to receive payment of the fair value of their shares because shares of Neos common stock are listed on a national securities exchange. See the section entitled “Summary — The Merger — No Appraisal Rights.”

Q:     Will my percentage share of the merger consideration be reduced if the Deerfield Lenders exercise their conversion rights?

A:     Yes. The lenders under the Facility Agreement, dated as of May 11, 2016 (as amended, the “Deerfield Facility Agreement”) by and among Neos and the lenders party thereto (the “Deerfield Lenders”), are existing senior secured lenders of Neos. Certain of the indebtedness of Neos the Deerfield Lenders hold contains conversion features whereby the Deerfield Lenders can convert the principal and accrued interest outstanding under the indebtedness into shares of Neos common stock. As of the date of this joint proxy/prospectus, the outstanding principal balance owed to the Deerfield Lenders is approximately $31.9 million. Although the conversion price under such indebtedness exceeds the current trading price of the Neos common stock, in the event the Deerfield Lenders elect to convert the indebtedness ($31.9 million) into shares of Neos common stock, they would receive approximately 9,229,388 shares of Neos common stock which would represent 15.6% of the merger consideration payable to all Neos stockholders.

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Q:     What will be the respective ownership percentages of former Neos stockholders and Aytu stockholders in the combined company?

A:     Based on the number of shares of Aytu common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in the Neos stock price leading to exercise of options not otherwise being assumed by Aytu or by additional issuances of Neos common stock that Aytu may consent to) and the number of shares of Aytu common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders are expected to own approximately 24% of the outstanding shares of Aytu common stock and existing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock.

Q:     Will the shares of Aytu common stock issued in the Common Stock Issuance be listed on Nasdaq?

A:     Aytu has applied to have the shares issued as merger consideration to be listed on Nasdaq.

Q:     Will the Issuance of the Common Stock Issuance be dilutive to existing Aytu stockholders?

A:     Yes. Aytu and Neos stockholders should be aware that their ultimate percentage ownership of Aytu could be diluted by other transactions relating to the merger, including the Common Stock Issuance. For example, shares of Aytu common stock will be reserved for issuance pursuant to the terms of certain employee stock awards currently held by Neos employees.

Q:     Will the merger consideration I receive in the merger increase if the results of operations of Neos improve or if the market price of Neos common stock increases before the Effective Time?

A:     No. At the Effective Time, each holder’s shares of Neos common stock issued and outstanding immediately prior to the completion of the merger, other than Excluded Shares, will be converted into the right to receive (1) 0.1088 shares of Aytu common stock (provided that the Exchange Ratio is subject to a downward adjustment based on the Bridge Note Adjustment) and (2) any cash in lieu of fractional shares of Aytu common stock, in exchange for each share of Neos common stock that such holder owns immediately prior to the completion of the merger. The consideration received at closing will not change based on the results of operations of Neos or the market price of Neos common stock. The total number of shares of Aytu common stock to be issued to Neos stockholders at closing will be determined pursuant to the Exchange Ratio. Under the Exchange Ratio, without taking into account the Bridge Note Adjustment, Aytu does not expect the total number of shares of Aytu common stock to be issued to exceed approximately 5,600,000.

Q:     What happens if the merger is not completed?

A:     If the merger proposal is not approved by Neos stockholders, the Common Stock Issuance is not approved by Aytu stockholders or if the merger is not completed for any other reason, Neos stockholders will not receive any payment for their shares of Neos common stock in connection with the merger. Instead, Neos will remain an independent public company, shares of Neos common stock will continue to be registered under the Exchange Act and Neos will continue to file periodic reports with the SEC. As previously disclosed, on December 29, 2020, Neos received a delisting notice from Nasdaq wherein Nasdaq indicated it intended to delist the Neos common stock from Nasdaq Global. As permitted by Nasdaq rules, Neos filed an appeal of this decision and requested a hearing to present its plans to regain compliance with the listing standards in the event the merger does not occur. On February 4, 2021, Neos conducted such hearing before a Nasdaq hearings panel. On February 5, 2021, the hearings panel granted Neos’ request to continue its listing on Nasdaq during the pendency of the merger or until June 28, 2021. To remain listed on Nasdaq beyond such date, Neos must demonstrate compliance with the applicable continued listing standard on or before such date. If Neos is unable to demonstrate compliance with such standard on or before such date, it could result in the Neos common stock being delisted from trading on Nasdaq Global. Therefore if the merger proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason, in an effort to avoid being delisted from trading on Nasdaq Global and to regain compliance with the applicable continued listing standards of Nasdaq Global,

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the Neos Board may elect to implement the reverse stock split of Neos common stock, at a ratio within the range of range of 1-for-2 to 1-for-20, with the exact ratio to be determined in the discretion of the Neos Board and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion. If the Merger Agreement is terminated under specified circumstances, Neos or Aytu, as applicable, may be required to pay to the other party a termination fee of $2,000,000 (the “termination fee”). See the section entitled “The Merger Agreement — Termination Fees” for a more detailed discussion of the termination fees. Additionally, Neos will have to repay any indebtedness it owes Aytu, which as of the date of this joint proxy statement/prospectus is $0 and has a maturity date which is the earlier of the acceleration of the obligations evidenced thereby and November 7, 2022.

The delisting of Neos common stock would result in an immediate event of default under the Deerfield Facility Agreement and the promissory notes issued under it (the “Deerfield Notes”), permitting Deerfield to accelerate the obligations thereunder (inclusive of all prepayment fees, make-whole interest and exit payments due thereunder). Additionally, upon delisting, Neos would be prohibited from satisfying the obligations owed to Deerfield under the Deerfield Facility Agreement and the Deerfield Notes via an issuance of common stock of Neos. The acceleration of the obligations under the Deerfield Facility Agreement and the Deerfield Notes would lead to a cross-default under the Loan and Security Agreement, dated as of October 2, 2019 (as amended, the “Encina Loan Agreement,” and together with the Deerfield Facility Agreement, the “Neos’ Loan Facilities”), by and among Neos, certain affiliates of Neos party thereto and Encina Business Credit, LLC (“Encina”), thereby permitting Encina to accelerate the obligations owed to it under the Encina Loan Agreement as well.

Q:     Will Aytu have any obligations under the Debt Facility Letters if the merger is not completed?

A:     No. If the merger is not completed, Aytu does not have any obligations under the Debt Facility Letters (as defined below), nor is Aytu obligated to join the Debt Facility Letters.

Q:     What risks should I consider in deciding whether to vote in favor of the merger proposal and/or the share issuance proposal?

A:     You should carefully review the risks and uncertainties discussed under the heading “Risk Factors,” which sets forth certain risks and uncertainties related to the merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Aytu and Neos, as an independent company, is subject.

Q:     What are Neos stockholders being asked to vote on?

A:     Neos stockholders are being asked to vote on the following three proposals:

•        to approve the merger proposal

•        to approve the reverse stock split proposal; and

•        to approve the Neos adjournment proposal.

The approval of the merger proposal by Neos stockholders is a condition to the obligations of Neos and Aytu to complete the merger. The approval of the reverse stock split proposal by Neos stockholders is not a condition to the obligations of Neos and Aytu to complete the merger. The approval of the Neos adjournment proposal is not a condition to the obligations of Neos or Aytu to complete the merger.

Neither the approval of the merger proposal nor the approval of the reverse stock split proposal by Neos stockholders is a condition for approval of the other or any of the other proposals being deliberated at the Neos special meeting. It is the intention of the Neos Board to consider the implementation of the reverse stock split proposal only if (a) the merger proposal is not approved by the Neos stockholders, (b) the merger consideration, including the Common Stock Issuance, is not approved by the Aytu stockholders or (c) the merger is ultimately not completed for any other reason, in an effort to regain compliance with the applicable continued listing standards of Nasdaq Global.

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Q:     What are Aytu stockholders being asked to vote on?

A:     Aytu stockholders are being asked to vote on the following three proposals:

•        to approve the merger consideration, including the Common Stock Issuance;

•        to approve the Aytu name change proposal; and

•        to approve the Aytu adjournment proposal.

The approval of the merger consideration, including the Common Stock Issuance, by Aytu stockholders is a condition to the obligations of Neos and Aytu to complete the merger. The approval of the Aytu name change proposal and the Aytu adjournment proposal are not conditions to the obligations of Neos or Aytu to complete the merger.

Q:     Does the Neos Board recommend that Neos stockholders approve the merger proposal?

A:     Yes. The Neos Board (1) approved the execution, delivery, and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the merger, (2) deemed it fair to, advisable and in the best interests of the Neos and its stockholders to enter into the Merger Agreement, (3) directed that the Merger Agreement be submitted to Neos stockholders for adoption and (4) resolved to recommend that Neos stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the merger. Neos Board recommends that Neos stockholders vote “FOR” the merger proposal. See the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Neos’ Reasons for the Merger; Recommendation of the Neos Board that Neos Stockholders Approve the Merger Proposal.”

Q:     Does the Neos Board recommend that Neos stockholders approve the reverse stock split proposal?

A:     Yes. The Neos Board recommends that Neos stockholders vote “FOR” the reverse stock split proposal. See the section entitled “Neos Proposal II: Approval of the Reverse Stock Split” of this joint proxy statement/prospectus.

Q:     Does the Neos Board recommend that Neos stockholders approve the Neos adjournment proposal?

A:     Yes. The Neos Board recommends that Neos stockholders vote “FOR” the Neos adjournment proposal. See the section entitled “Neos Proposal III: Adjournment of the Neos Special Meeting.”

Q:     Does the Aytu Board recommend that Aytu stockholders approve the Common Stock Issuance?

A:     Yes. The Aytu Board determined that the Common Stock Issuance is advisable, fair to and in the best interests of Aytu and its stockholders and recommends that Aytu stockholders vote “FOR” the approval of the merger consideration, including the Common Stock Issuance. See the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Aytu’s Reasons for the Merger; Recommendation of the Aytu Board that Aytu Stockholders Approve the Common Stock Issuance.”

Q:     Does the Aytu Board recommend that Aytu stockholders approve the Aytu name change proposal?

A:     Yes. The Aytu Board recommends that Aytu stockholders vote “FOR” the Aytu name change proposal. See the section entitled “Aytu Proposal II: The Aytu Name Change.”

Q:     Does the Aytu Board recommend that Aytu stockholders approve the Aytu adjournment proposal?

A:     Yes. The Aytu Board recommends that Aytu stockholders vote “FOR” the Aytu adjournment proposal. See the section entitled “Aytu Proposal III: Adjournment of the Aytu Special Meeting.”

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Q:     What Neos stockholder vote is required for the approval of each proposal?

A:     Assuming a quorum is present, the following are the vote requirements for the proposals at the Neos special meeting:

•        Approval of the Merger Proposal: The affirmative vote of holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon. This proposal is a “non-discretionary” matter. Accordingly, abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.

•        Approval of the Reverse Stock Split Proposal: The affirmative vote of a majority of the outstanding shares of Neos common stock entitled to vote thereon. Accordingly, a Neos stockholder’s abstention from voting on the reverse stock split proposal will have the same effect as a vote “AGAINST” the approval of this proposal. This proposal is considered a “discretionary” matter. Therefore, a broker may vote shares of Neos common stock held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal.

•        Approval of Neos Adjournment Proposal (if necessary): The affirmative vote of the holders of a majority of the votes properly cast at the Neos special meeting. For purposes of the Neos adjournment proposal, “votes properly cast” on the proposal consist of votes “for” or “against” the proposal. Accordingly, a Neos stockholder’s abstention from voting on the Neos adjournment proposal will have no effect on the approval of the proposal. This proposal is considered a “discretionary matter.” Therefore, a broker may vote shares of Neos common stock held in “street name” without receiving explicit voting instructions from the beneficial owners of such shares and broker non-votes are not expected on this proposal.

Q:     What Aytu stockholder vote is required for the approval of each proposal at the Aytu special meeting?

A:     The following are the vote requirements for the proposals at the Aytu special meeting:

•        Approval of the Merger Consideration: The affirmative vote of at least a majority of the votes cast by holders of outstanding shares of Aytu common stock at a duly called and held meeting of Aytu’s stockholders at which a quorum is present. An Aytu stockholder’s abstention from voting on the Common Stock Issuance will have no effect on the approval of the proposal. Broker non-votes will have no effect on the approval of the Common Stock Issuance proposal because these failures to vote are not considered “votes cast.”

•        Approval of the Aytu Name Change: The affirmative vote of a majority of the votes of the issued and outstanding shares of Aytu’s common stock.

•        Approval of the Aytu Adjournment Proposal (if necessary): The affirmative vote of a majority of the votes present at the Aytu special meeting by Aytu stockholders entitled to vote (whether or not a quorum, as defined under Delaware law, is present). For purposes of the Aytu adjournment proposal, “votes present” on the proposal consist of votes “for” or “against” as well as elections to abstain from voting on the proposal. As a result, an Aytu stockholder’s abstention from voting on the Aytu adjournment proposal will have the same effect as a vote “AGAINST” the approval of the proposal. The approval of the Aytu adjournment proposal is a “discretionary” matter and, therefore, no broker non-votes are expected to exist with respect to the Aytu adjournment proposal.

Q:     What constitutes a quorum for the Neos special meeting?

A:     A majority of the outstanding shares of Neos common stock entitled to vote, present virtually or represented by proxy, will constitute a quorum for the Neos special meeting. Shares of Neos common stock whose holder’s elect to abstain from voting will be deemed present at the Neos special meeting for the purpose of determining the presence of a quorum. Broker non-votes will not be counted for the purpose of determining the presence of a quorum at the Neos special meeting.

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Q:     What constitutes a quorum for the Aytu special meeting?

A:     The holders of a majority of the outstanding shares of Aytu common stock entitled to vote being present virtually or represented by proxy will constitute a quorum for the Aytu special meeting. Shares of Aytu common stock whose holders elect to abstain from voting will be deemed present at the Aytu special meeting for the purpose of determining the presence of a quorum. Broker non-votes will be counted for the purpose of determining the presence of a quorum.

Q:     What if I hold shares in both Neos and Aytu?

A:     If you are both a Neos stockholder and an Aytu stockholder, you will receive separate packages of proxy materials from each company. A vote as a Neos stockholder for the approval of the merger proposal, the reverse stock split proposal or the Neos adjournment proposal will not constitute a vote as an Aytu stockholder to approve the Common Stock Issuance (or any other proposal to be considered at the Aytu special meeting), and vice versa. Therefore, please complete, sign and date and return all proxy cards and/or voting instruction forms that you receive from Neos or Aytu, or submit your proxy or voting instructions for each set of voting materials over the Internet or by telephone in order to ensure that all of your shares are voted.

Q:     Have any stockholders committed to vote for the transactions contemplated by the Merger Agreement?

A:     The officers and directors of Neos and the officers and directors of Aytu have committed to vote for the certain proposals to be made at the Neos special meeting and Aytu special meeting, as applicable pursuant to certain voting agreements, as described in more detail in the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Voting Agreements.”

Q:     When and where is the Neos special meeting?

A:     The Neos special meeting will be held on March 18, 2021, at 10:00 a.m., Eastern Time, unless adjourned or postponed to a later date. In light of the COVID-19 pandemic and to support the well-being of Neos stockholders and partners, the Neos special meeting will be completely virtual. Stockholders of Neos will be able to attend the Neos special meeting and vote online by visiting www.virtualshareholdermeeting.com/NEOS2021SM. We encourage you to allow reasonable time for online check-in, which begins at 9:45 a.m., Eastern Time on March 18, 2021. Please note that you will not be able to attend the Neos special meeting in person. Stockholders may only participate online.

Q:     When and where is the Aytu special meeting?

A:     The Aytu special meeting will be held on March 18, 2021 at 10:00 a.m., Mountain Time at www.virtualshareholdermeeting.com/AYTU2021, unless adjourned or postponed to a later date. In light of the COVID-19 pandemic and to support the well-being of Aytu stockholders and partners, the special meeting will be completely virtual.

Q:     How can a Neos stockholders attend the Neos special meeting?

A:     Neos is hosting the Neos special meeting virtually via www.virtualshareholdermeeting.com/NEOS2021SM. Please note that you will not be able to attend the Neos special meeting in person. If you are a Neos stockholder of record, you will be asked to provide the 16-digit control number included in your proxy card in order to enter the Neos special meeting. If you own your shares of Neos common stock in “street name,” meaning through a broker, bank or other nominee holder of record, and you wish to vote at the Neos stockholder meeting, you must obtain a signed legal proxy from your bank, broker or other nominee of record giving you the right to vote the shares at the Neos special meeting. The Neos special meeting will begin online promptly at 10:00 a.m., Eastern Time on March 18, 2021. We encourage you to allow reasonable time for online check-in, which begins at 9:45 a.m. Eastern Time.

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Q:     Why is the Neos special meeting a virtual meeting?

A:     Neos has decided to hold the special meeting virtually due to the COVID-19 pandemic; Neos is sensitive to the public health and travel concerns of Neos stockholders and employees and the protocols that federal, state and local governments may impose. Neos believes that hosting a virtual meeting will enable greater stockholder attendance and participation from any location around the world.

Q:     What if during the Neos check-in time or during the Neos special meeting I have technical difficulties or trouble accessing the virtual meeting website?

A:     Technicians will be ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website log-in page at www.virtualshareholdermeeting.com/NEOS2021SM.

Q:     How do I vote my shares at the Neos special meeting?

A:     Via the Internet or by Telephone

If you hold shares of Neos common stock directly in your name as a stockholder of record, you may vote by accessing the website specified on your proxy card or by telephone by following the instructions on your proxy card. In order to vote your shares via the Internet or by telephone, you will need the 16-digit control number on your proxy card (which is unique to each Neos stockholder to ensure all voting instructions are genuine and to prevent duplicate voting). Votes may be submitted via the Internet or by telephone, 24 hours a day, seven days a week, and must be received by 11:59 p.m., Eastern Time, on March 17, 2021.

If you hold shares of Neos common stock in “street name,” meaning through a broker, bank or other nominee holder of record, you may submit voting instructions via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank or other nominee holder of record. Please follow the voting instructions provided by your broker, bank or other nominee holder of record with these materials.

By Mail

If you hold shares of Neos common stock directly in your name as a stockholder of record, in order to vote by mail, you may submit a proxy card. You will need to complete, sign and date your proxy card and return it using the postage-paid return envelope provided. Broadridge Financial Solutions, Inc. (“Broadridge”) must receive your proxy card by mail no later than 11:59 p.m., Eastern Time, on March 17, 2021.

If you hold shares of Neos common stock in “street name,” meaning through a broker, bank or other nominee holder of record, in order to provide voting instructions by mail you will need to complete, sign and date the voting instruction form provided by your broker, bank or other nominee holder of record with these materials and return it in the postage-paid return envelope provided. Your broker, bank or other nominee holder of record must receive your voting instruction form in sufficient time to vote your shares.

At the Neos Special Meeting

If you hold shares of Neos common stock directly in your name as a stockholder of record, you may vote your shares electronically during the Neos special meeting. Please note that you will not be able to attend the Neos special meeting in person. In order to attend the virtual-only meeting, you will need your 16-digit control number that is shown on your proxy card. Stockholders of record also may be represented by another person at the Neos special meeting by executing a legal proxy designating that person who may enter the Neos special meeting portal with the instructions on the legal proxy.

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If you hold shares of Neos common stock in “street name,” meaning through a broker, bank or other nominee holder of record, you must obtain a signed legal proxy from broker, bank or other nominee holder of record giving you the right to vote the shares of Neos common stock at the Neos special meeting and present such signed legal proxy at the Neos special meeting. To request a legal proxy, please contact your broker, bank or other nominee holder of record. Please note that even if you plan to attend the Neos special meeting online, Neos recommends that you vote using the enclosed Neos proxy card in advance, to ensure that your shares will be represented. If you wish to vote at the special meeting, you can participate in the virtual special meeting and vote your shares using the on-screen instructions provided by the host.

Please carefully consider the information contained in this joint proxy statement/prospectus. Whether or not you plan to participate in the Neos special meeting online, Neos encourages you to vote via the Internet, by telephone or by mail so that your shares will be voted in accordance with your wishes even if you later decide not to participate in the Neos special meeting.

If you attend the Neos special meeting and vote online, any votes that you previously submitted — whether via the Internet, by telephone or by mail — will be revoked and superseded by the vote that you cast at the Neos special meeting. Your attendance at the Neos special meeting alone will not revoke any proxy previously given.

Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the Neos special meeting, your shares will be voted at the Neos special meeting in the manner specified by you, except as otherwise set forth in this joint proxy statement/prospectus.

Q:     If I submit a proxy, how will my shares covered by the proxy be voted at the Neos special meeting?

A:     If you correctly submit your vote via the Internet, by telephone or by mail, the officers and directors of Neos named in your proxy card will vote your shares of Neos common stock in the manner you requested.

Q:     If I return a blank proxy, how will my shares be voted at the Neos special meeting?

A:     If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as the Neos Board recommends, which is:

•        “FOR” the merger proposal

•        “FOR” the reverse stock split proposal; and

•        “FOR” the Neos adjournment proposal.

However, if you indicate that you wish to vote against the merger proposal and leave the other proposals blank, your shares will be voted in favor of the other proposals for which you did not indicate how you would like to vote. If you indicate that you wish to vote against the reverse stock split proposal, or against the Neos adjournment proposal, and leave the other proposals blank, your shares will (1) not be voted in favor of the merger proposal (if you did not indicate how you would like to vote on the merger proposal) and (2) be voted in favor of the Neos adjournment proposal, or the reverse stock split proposal, as applicable (if you did not indicate how you would like to vote on such proposal).

Q:     How can Aytu stockholders attend the Aytu special meeting?

A:     Aytu is hosting the Aytu special meeting virtually www.virtualshareholdermeeting.com/AYTU2021. Please note that you will not be able to attend the Aytu special meeting in person. If you are a stockholder of record, you may vote your shares virtually at the Aytu special meeting. Stockholders may only participate online and must pre-register. In order to attend the virtual-only meeting, you will need to pre-register by 10:00 AM, Eastern Time on March 18, 2021. To pre-register for the Aytu special meeting, please follow these instructions:

•        If your shares are registered in your name with Aytu’s transfer agent and you wish to attend the Aytu special meeting, please go to www.virtualshareholdermeeting.com/AYTU2021, enter the control number you received on your Aytu proxy card to access the voting page, then click on the “Click here to pre-register for the online meeting” link at the top of the page.

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•        If you do not have your proxy card, you may pre-register to attend the Aytu special meeting by emailing your proof of ownership of shares of Aytu capital stock as of February 5, 2021 to Aytu. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the Aytu special meeting with instructions for attending the Aytu special meeting online.

•        If your shares are not registered in your name with Aytu’s transfer agent, but you are a beneficial owner and your shares are held by a broker, bank, financial institution or other nominee of record in “street name” as of February 5, 2021, you may pre-register to attend the Aytu special meeting by emailing Aytu and attaching evidence that you beneficially owned shares of Aytu capital stock as of February 5, 2021, which evidence may consist of a copy of the Voting Instruction Form (or Notice) provided by your broker, bank, financial institution or other nominee of record, an account statement, or a letter or legal proxy from such custodian. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the special meeting with instructions for attending the Aytu special meeting online.

•        If you hold your Aytu capital stock in “street name,” you must obtain the appropriate documents from your broker, bank, or other nominee holder of record, giving you the right to vote the shares at the Aytu special meeting. For beneficial owners of shares of Aytu capital stock held in “street name,” in addition to providing identification as outlined for record holders above, you will need a legal proxy from your broker or a recent brokerage statement or letter from your broker reflecting your stock ownership as of the record date. Please note, however, that unless you have a legal proxy from your bank, broker or other nominee, you will not be able to vote any shares held in street name virtually at the Aytu special meeting. Please note that even if you plan to attend the Aytu special meeting, Aytu recommends that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented.

Q:     Why is the Aytu special meeting a virtual meeting?

A:     Aytu has decided to hold the special meeting virtually due to the COVID-19 pandemic; Aytu is sensitive to the public health and travel concerns of Aytu stockholders and employees and the protocols that federal, state and local governments may impose. Aytu believes that hosting a virtual meeting will enable greater stockholder attendance and participation from any location around the world.

Q:     What if during the Aytu check-in time or during the Aytu special meeting I have technical difficulties or trouble accessing the virtual meeting website?

A:     If you encounter any difficulties accessing the Aytu virtual meeting during the pre-registration, check-in or meeting time, please call the technical support number that will be posted on the Aytu virtual stockholder meeting log in page.

Q:     How do I vote my shares at the Aytu special meeting?

A:     Via the Internet or by Telephone

If you hold shares of Aytu common stock directly in your name as a stockholder of record, you may vote via the Internet or by telephone by following the instructions on the enclosed proxy card. In order to vote your shares via the Internet or by telephone, you will need the control number on your proxy card (which is unique to each Aytu stockholder to ensure all voting instructions are genuine and to prevent duplicate voting). Votes may be submitted via the Internet or by telephone, 24 hours a day, seven days a week, and must be received by 11:59 p.m., Eastern Time, on March 17, 2021.

If you hold shares of Aytu common stock in “street name,” meaning through a broker, bank or other nominee holder of record, you may submit voting instructions via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank or other nominee holder of record. Please follow the voting instructions provided by your broker, bank or other nominee holder of record with these materials.

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By Mail

If you hold shares of Aytu common stock directly in your name as a stockholder of record, in order to vote by mail, you may submit a proxy card. You will need to complete, sign and date your proxy card and return it using the postage-paid return envelope provided. Broadridge must receive your proxy card by mail by 11:59 p.m., Eastern Time, on March 17, 2021.

If you hold shares of Aytu common stock in “street name,” meaning through a broker, bank or other nominee holder of record, in order to provide voting instructions by mail you will need to complete, sign and date the voting instruction form provided by your broker, bank or other nominee holder of record with these materials and return it in the postage-paid return envelope provided. Your broker, bank or other nominee holder of record must receive your voting instruction form in sufficient time to vote your shares.

At the Aytu Special Meeting

If you hold shares of Aytu common stock directly in your name as a stockholder of record, you may vote your shares electronically during the virtual Aytu special meeting. Please note that you will not be able to attend the Aytu special meeting in person. If you are a stockholder of record, you may vote your shares virtually at the Aytu special meeting. Stockholders may only participate online and must pre-register. In order to attend the virtual-only meeting, you will need to pre-register by 10:00 AM, Eastern Time on March 18, 2021. Stockholders of record also may be represented by another person at the Aytu special meeting by executing a proper proxy designating that person and having that proper proxy be presented to the judge of election with the applicable ballot at the Aytu special meeting.

If you hold shares of Aytu common stock in “street name,” meaning through a broker, bank or other nominee holder of record, you must obtain a written legal proxy from that institution and present it to the judge of election with your ballot to be able to vote at the Aytu special meeting online. To request a legal proxy, please contact your broker, bank or other nominee holder of record.

Please carefully consider the information contained in this joint proxy statement/prospectus. Whether or not you plan to attend the Aytu special meeting online, Aytu encourages you to vote via the Internet, by telephone or by mail so that your shares will be voted in accordance with your wishes even if you later decide not to attend the Aytu special meeting.

If you attend the Aytu special meeting and vote online, any votes that you previously submitted — whether via the Internet, by telephone or by mail — will be revoked and superseded by the vote that you cast at the Aytu special meeting. Your attendance at the Aytu special meeting alone will not revoke any proxy previously given.

Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the Aytu special meeting, your shares will be voted at the Aytu special meeting in the manner specified by you, except as otherwise set forth in this joint proxy statement/prospectus.

Q:     How will my shares be represented at the Aytu special meeting?

A:     If you correctly submit your proxy via the Internet, by telephone or by mail, the persons named in your proxy card will vote your shares in the manner you requested. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as the Aytu Board recommends, which is:

•        “FOR” the merger consideration proposal, including the Common Stock Issuance;

•        “FOR” the Aytu name change proposal; and

•        “FOR” the approval of the Aytu adjournment proposal.

However, if you indicate that you wish to vote against the Common Stock Issuance and leave the other proposals blank, your shares will not be voted in favor of the other proposals.

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Q:     Can I revoke my proxy or change my voting instructions for Aytu common stock?

A:     Yes. You may revoke your proxy or change your vote at any time before the closing of the polls at the Aytu special meeting.

If you are a stockholder of record at the record date for the Aytu special meeting (the close of business on February 5, 2021), you can revoke your proxy or change your vote by:

•        filing a written notice of revocation bearing a later date than the proxy with Aytu’s Corporate Secretary either before or at the Aytu special meeting at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112;

•        duly executing a later-dated proxy relating to the same shares and delivering it to Aytu’s Corporate Secretary either before or at the Aytu special meeting and before the taking of the vote, at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112;

•        attending the Aytu special meeting virtually and voting online (although attendance at the meeting will not in and of itself constitute a revocation of a proxy); or

•        if you voted by telephone or via the Internet, voting again by the same means prior to 11:59 p.m. Eastern Time on March 17, 2021 (your latest telephone or internet vote, as applicable, will be counted and all earlier votes will be disregarded).

If you hold your shares in “street name” through a broker, bank or other nominee holder of record, you must contact your broker, bank or other nominee holder of record to change your vote or obtain a written legal proxy to vote your shares if you wish to cast your vote at the Aytu special meeting online.

Q:     Can I revoke my proxy or change my voting instructions for Neos common stock?

A:     Yes. You may revoke your proxy or change your vote at any time before the closing of the polls at the Neos special meeting.

If you are a stockholder of record at the record date for the Neos special meeting (the close of business on February 5, 2021), you can revoke your proxy or change your vote by:

•        filing a written notice of revocation bearing a later date than the proxy with Neos’ Corporate Secretary at Neos’ principal executive offices, located at 2940 N. Highway 360, Grand Prairie, TX 75050. Your notice must be received by Neos’ Corporate Secretary before March 18, 2021;

•        duly executing a later-dated proxy relating to the same shares and delivering it to Neos’ Corporate Secretary at Neos’ principal executive offices, located at 2940 N. Highway 360, Grand Prairie, TX 75050. Your new proxy card must be received by Neos’ Corporate Secretary before March 18, 2021;

•        attending the Neos special meeting virtually, (or, if the Neos special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting online (which automatically will cancel any proxy previously given, although online attendance at the meeting will not in and of itself constitute a revocation of a proxy); or

•        if you voted by telephone or via the Internet, voting again by the same means prior to 11:59 p.m. Eastern Time on March 17, 2021 (your latest telephone or internet vote, as applicable, will be counted and all earlier votes will be disregarded).

If you hold your shares in “street name” through a broker, bank or other nominee holder of record, you must contact your broker, bank or other nominee holder of record to change your vote or obtain a written legal proxy to vote your shares if you wish to cast your vote at the Neos special meeting virtually.

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Q:     What happens if I sell my shares of Neos common stock after the record date but before the Neos special meeting?

A:     The record date for the Neos special meeting (the close of business on February 5, 2021) is earlier than the date of the Neos special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Neos common stock after the record date but before the date of the Neos special meeting, you will, unless the transferee obtains a proxy from you, retain your right to vote at the Neos special meeting. However, you will not have the right to receive the merger consideration to be received by Neos stockholders in the merger. In order to receive the merger consideration, you must hold your shares of Neos common stock immediately prior to completion of the merger.

Q:     What happens if I sell my shares of Aytu common stock after the record date but before the Aytu special meeting?

A:     The record date for the Aytu special meeting (the close of business on February 5, 2021) is earlier than the date of the Aytu special meeting. If you sell or otherwise transfer your shares of Aytu stock after the record date but before the date of the Aytu special meeting, you will, unless the transferee obtains a proxy from you, retain your right to vote at the Aytu special meeting.

Q:     Where can I find the voting results of the Neos special meeting?

A:     If available, Neos may announce preliminary voting results at the conclusion of the Neos special meeting. Neos intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Neos special meeting. All reports that Neos files with the SEC are publicly available when filed. For more information, please see the section entitled “Where You Can Find Additional Information.”

Q:     Where can I find the voting results of the Aytu special meeting?

A:     The preliminary voting results will be announced at the Aytu special meeting. In addition, within four business days following certification of the final voting results, Aytu intends to file the final voting results with the SEC on a Current Report on Form 8-K.

Q:     Is completion of the merger subject to any conditions?

A:     Yes. Completion of the merger is subject to customary closing conditions, including, among other conditions, (1) the approval of the merger proposal by a majority of the holders of the outstanding shares of Neos common stock entitled to vote thereon, (2) approval of the issuance of Aytu common stock by a majority of the votes cast by Aytu stockholders on the matter, (3) that the conditions to the Debt Facility Letters (as defined below), other than the closing, have been satisfied or shall be satisfied contemporaneously as of the time of closing, and that the lenders do not dispute the satisfaction thereof, (4) accuracy of each party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, (5) the absence of a material adverse effect of either party and (6) compliance in all material respects with each party’s obligations under the Merger Agreement.

Q:     When do you expect to complete the merger?

A:     As of the date of this joint proxy statement/prospectus, Neos and Aytu expect to complete the merger as early as the end of Aytu’s third fiscal quarter of 2021 (the quarter ending March 31, 2021), subject to the satisfaction or waiver of all conditions to closing prior to completion of the merger. However, no assurance can be given as to when, or if, the merger will be completed.

Q:     Is the merger intended to be taxable to Neos stockholders?

A:     It is intended that the transaction will not be taxable to Neos stockholders (except to the extent of cash received in lieu of fractional shares) because the merger is expected to qualify as a “reorganization” under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). For a discussion of the material U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

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Q:     What do I need to do now?

A:     Carefully read and consider the information contained in and incorporated by reference into this joint proxy statement/prospectus in its entirety, including its annexes. Then, please promptly vote your shares of Neos common stock and/or shares of Aytu common stock, as applicable, which you may do by:

•        completing, dating, signing and returning the enclosed proxy card for the applicable company in the accompanying postage-paid return envelope;

•        submitting your proxy via the Internet or by telephone by following the instructions included on your proxy card for such company; or

•        attending the applicable special meeting and voting online.

If you hold shares in “street name” through a broker, bank or other nominee holder of record, please instruct your broker, bank or other nominee holder of record to vote your shares by following the instructions that the broker, bank or other nominee holder of record provides to you with these materials.

Q:     Should I send in my Neos share certificates now?

A:     No. Neos stockholders should not send in their share certificates at this time. After completion of the merger, Aytu’s exchange agent will send you a letter of transmittal and instructions for exchanging your shares of Neos common stock for the merger consideration. The shares of Aytu common stock you receive in the merger will be issued in book-entry form and, unless otherwise requested, physical certificates will not be issued. See the section entitled “The Merger Agreement — Procedures for Surrendering Neos Stock Certificates.”

Q:     Who will solicit and pay the cost of soliciting proxies for the Aytu special meeting?

A:     Aytu will bear all costs and expenses in connection with the solicitation of proxies for the Aytu special meeting, including the costs of preparing, printing and mailing this joint proxy statement/prospectus. Aytu has engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies for the Aytu special meeting and provide related advice and informational support for a total cost to Aytu of up to $33,000. Aytu also agreed to indemnify The Proxy Advisory Group, LLC against certain losses, damages and expenses.

In addition to solicitation of proxies for the Aytu special meeting by mail, directors, officers and employees of Aytu or its subsidiaries may solicit proxies from Aytu stockholders by telephone, facsimile, email, personal interview or other means. Directors, officers and employees of Aytu will not receive additional compensation for their solicitation activities but may be reimbursed for reasonable out-of-pocket expenses incurred by them in connection with the solicitation of proxies for the Aytu special meeting. Brokers, dealers, commercial banks, trust companies, fiduciaries, custodians and other nominees have been requested to forward proxy solicitation materials to their customers, and such nominees will be reimbursed for their reasonable out-of-pocket expenses. Aytu will pay the costs associated with the Aytu special meeting and solicitation of proxies for the Aytu special meeting, including the costs of mailing the proxy materials.

Q:     Who will solicit and pay the cost of soliciting proxies for the Neos special meeting?

A:     Neos will bear all costs and expenses in connection with the solicitation of proxies for the Neos special meeting, including the costs of preparing, printing and mailing this joint proxy statement/prospectus. Neos has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the Neos special meeting and provide related advice and informational support for a total cost to Neos of approximately $12,500 plus the reimbursement of reasonable and customary expenses. Neos also agreed to indemnify MacKenzie Partners, Inc. against certain losses, damages and expenses.

In addition to solicitation of proxies for the Neos special meeting by mail, directors, officers and employees of Neos or its subsidiaries may solicit proxies from Neos stockholders by telephone, facsimile, email, personal interview or other means. Directors, officers and employees of Neos will not receive additional compensation for their solicitation activities but may be reimbursed for reasonable out-of-pocket expenses incurred by them in connection with the solicitation of proxies for the Neos special meeting. Brokers, dealers, commercial banks, trust companies, fiduciaries, custodians and other nominees have been requested to forward proxy

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solicitation materials to their customers, and such nominees will be reimbursed for their reasonable out-of-pocket expenses. Neos will pay the costs associated with the Neos special meeting and solicitation of proxies for the Neos special meeting, including the costs of mailing the proxy materials.

Q:     What do I do if I receive more than one set of Aytu voting materials?

A:     You may receive more than one set of voting materials for the Aytu special meeting, including multiple copies of this joint proxy statement/prospectus, proxy cards and/or voting instruction forms. This can occur if your shares of Aytu common stock are held in more than one account (e.g., through different brokers or nominees), if you hold shares directly as a record holder and also in “street name,” or otherwise through a nominee, and in certain other circumstances. Each proxy card or voting instruction form only covers those shares of Aytu common stock held in the applicable account. If you receive more than one set of voting materials, each should be voted and/or returned separately in order to ensure that all of your shares of Aytu common stock are voted.

Q:     What do I do if I receive more than one set of Neos voting materials?

A:     You may receive more than one set of voting materials for the Neos special meeting, including multiple copies of this joint proxy statement/prospectus, proxy cards and/or voting instruction forms. This can occur if your shares of Neos common stock are held in more than one account (e.g., through different brokers or nominees), if you hold shares directly as a record holder and also in “street name,” or otherwise through a nominee, and in certain other circumstances. Each proxy card or voting instruction form only covers those shares of Neos common stock held in the applicable account. If you receive more than one set of voting materials, each should be voted and/or returned separately in order to ensure that all of your shares of Neos common stock are voted.

Q:     If I am an Aytu stockholder, whom should I call with questions?

A:     If you have any questions about the Merger Agreement, the merger, the merger consideration, including the Common Stock Issuance, the proposal to approve the merger consideration, the Aytu adjournment proposal or the Aytu special meeting or this joint proxy statement/prospectus, desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms or need help voting your shares of Aytu stock, you should contact Aytu’s proxy solicitor, The Proxy Advisory Group, LLC, by telephone at (212) 616-2180.

Q:     If I am a Neos stockholder, whom should I call with questions?

A:     If you have any questions about the Merger Agreement, the merger, the merger proposal, the Neos adjournment proposal, the reverse stock split proposal, the Neos special meeting, or this joint proxy statement/prospectus, desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms or need help voting your shares of Neos common stock, you should contact Neos’ proxy solicitor, MacKenzie Partners, Inc., by telephone at (800) 322-2885.

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SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read carefully the entire joint proxy statement/prospectus and the other documents attached to or referred to in this joint proxy statement/prospectus in order to fully understand the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. See the section entitled “Where You Can Find More Information.”

The Companies

Aytu

Aytu was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado. Aytu was re-incorporated in the state of Delaware on June 8, 2015. Aytu is a commercial-stage specialty pharmaceutical company focused on commercializing novel products that address significant healthcare needs in both prescription and consumer health categories. Through Aytu’s heritage prescription business, Aytu markets a portfolio of prescription products addressing large primary care and pediatric markets. The primary care portfolio includes (i) Natesto®, the only FDA-approved nasal formulation of testosterone for men with hypogonadism (low testosterone, or “Low T”), (ii) ZolpiMist™, the only FDA-approved oral spray prescription sleep aid, and (iii) Tuzistra® XR, the only FDA-approved 12-hour codeine-based antitussive syrup.

Aytu’s prescription pediatric portfolio includes; (i) Cefaclor, a second-generation cephalosporin antibiotic suspension; (ii) Karbinal® ER, an extended release antihistamine suspension indicated to treat numerous allergic conditions; and (iii) Poly-Vi-Flor® and Tri-Vi-Flor®, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency.

Aytu leverages its internal commercial infrastructure and national sales force to sell its primary care and pediatric prescription portfolio.

In February 2020, Aytu acquired Innovus Pharmaceuticals (“Innovus”), a specialty pharmaceutical company commercializing, licensing and developing safe and effective consumer healthcare products designed to improve health and vitality. Innovus commercializes over twenty consumer health products competing in large healthcare categories including diabetes, men’s health, sexual wellness and respiratory health. The Innovus product portfolio is commercialized through direct-to-consumer and e-commerce marketing channels utilizing its proprietary Beyond Human® marketing platform.

Aytu common stock is listed on the Nasdaq Capital Market under the symbol “AYTU.” The principal executive offices of Aytu are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112; its telephone number is (720) 437-6580; and its website is www.aytubio.com. Information on Aytu’s Internet website is not incorporated by reference into or otherwise part of this joint proxy statement/prospectus. Additional information about Aytu is included in documents incorporated by reference in this document. See the section entitled “Where You Can Find More Information.

Neos

Neos’s predecessor company was incorporated in Texas on November 30, 1994 as PharmaFab, Inc. and subsequently changed its name to Neostx, Inc. On June 15, 2009, Neos completed a reorganization pursuant to which substantially all of the capital stock of Neostx, Inc. was acquired by a newly formed Delaware corporation, named Neos Therapeutics, Inc. The remaining capital stock of Neostx, Inc. was acquired by Neos on June 29, 2015, and Neostx, Inc. was merged with and into Neos Therapeutics, Inc.

Neos and its subsidiaries is a fully integrated pharmaceutical company. Neos has developed a broad, proprietary modified-release drug delivery technology that enables the manufacture of single and multiple ingredient extended-release (“XR”) pharmaceuticals in patient- and caregiver-friendly orally disintegrating tablet (“ODT”) and oral suspension dosage forms. Neos has a pipeline of extended-release pharmaceuticals including three products approved by the FDA for the treatment of attention deficit hyperactivity disorder (“ADHD”). Adzenys XR-ODT was approved by the FDA in January 2016 and launched commercially in May 2016. Neos received approval

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from the FDA for Cotempla XR-ODT, its methylphenidate XR-ODT for the treatment of ADHD in patients 6 to 17 years old, in June 2017, and commercially launched in September 2017. Also, Neos received approval from the FDA for Adzenys ER oral suspension (“Adzenys ER”) in September 2017 and commercially launched this product in February 2018. In addition, Neos manufactures and markets a generic Tussionex (hydrocodone and chlorpheniramine) (“generic Tussionex”), extended-release oral suspension for the treatment of cough and upper respiratory symptoms of a cold. In addition to its marketed products, Neos is developing NT0502, its product candidate for the treatment of sialorrhea.

Neos completed an initial public offering of common stock July 2015 and Neos common stock is listed on Nasdaq Global under the symbol “NEOS.” The principal executive offices of Neos are located at 2940 N. Highway 360, Grand Prairie, Texas, 75050; and its telephone number is (972) 408-1300; and its website address is www.neostx.com. See the section entitled “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.

Neutron Acquisition Sub, Inc.

Merger Sub was incorporated under the laws of the State of Delaware on December 4, 2020 and is a wholly-owned subsidiary of Aytu. Merger Sub was formed solely for the purpose of completing the merger. Merger Sub has not carried on any activities or operations to date, except for activities incidental to its formation and activities undertaken in connection with the merger. By operation of the merger, Merger Sub will be merged with and into Neos, with Neos surviving the merger as a wholly-owned subsidiary of Aytu.

The principal executive offices of Merger Sub are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112; its telephone number is (720) 437-6580.

The Merger

A copy of the Merger Agreement is attached as Annex A to this joint proxy statement/prospectus. You should read the Merger Agreement carefully and in its entirety because it is the legal document that governs the merger. The following provides a brief summary of certain aspects of the merger.

Interests of Neos Directors and Executive Officers in the Merger

In considering the recommendation of the Neos Board to adopt the Merger Agreement, Neos stockholders should be aware that Neos’ directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Neos stockholders generally. The Neos Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement (including the merger), and in recommending to Neos stockholders that the Merger Agreement be adopted. For more information, see the section entitled “Interests of Neos’ Directors and Executive Officers in the Merger.

Interests of Aytu Directors and Executive Officers in the Merger

In considering the recommendation of the Aytu Board to adopt the Merger Agreement, Aytu stockholders should be aware that Aytu’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Aytu stockholders generally. The Aytu Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement (including the merger), and in recommending to Aytu stockholders that the Merger Agreement be adopted.

Ownership Interests

As of December 30, 2020, Aytu’s directors and executive officers beneficially owned, in the aggregate, approximately 1.3% of the shares of common stock of Aytu. The Aytu Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement (including the merger consideration), and in recommending to Aytu stockholders that the merger consideration be approved.

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Interested Director

Ketan Mehta is a member of the Aytu Board and is the President, CEO and founder of Tris Pharma, Inc. (“Tris”). Tris is a competitor of Neos. As a result, Mr. Mehta has agreed to resign from the Aytu Board upon the closing of the merger. Mr. Mehta recused himself from certain discussions and board meetings related to Neos and the merger and abstained from all votes of the Aytu Board relating thereto.

Opinion of Aytu’s Financial Advisor

Aytu retained Cowen and Company, LLC (“Cowen”) to act as its exclusive financial advisor in connection with a proposed transaction with Neos, and to render an opinion to the Aytu Board as to the fairness, from a financial point of view, to Aytu, of the Exchange Ratio pursuant to the Merger Agreement. On December 9, 2020, Cowen delivered its opinion to the Aytu Board to the effect that, as of that date and subject to the various assumptions and limitations set forth therein, the Exchange Ratio pursuant to the Merger Agreement was fair, from a financial point of view, to Aytu.

The full text of the written opinion of Cowen, dated December 9, 2020, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. Aytu encourages Aytu stockholders to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Cowen. The summary of the written opinion of Cowen set forth herein is qualified in its entirety by reference to the full text of such opinion. Cowen’s analyses and opinion were prepared for and addressed to the Aytu Board and are directed only to the fairness, from a financial point of view, to Aytu of the Exchange Ratio pursuant to the Merger Agreement. Cowen’s opinion is not a recommendation to any stockholder or any other person as to whether such stockholder or such person should take any other action in connection with the merger or otherwise.

For a description of the opinion that the Aytu Board received from Cowen, see the section entitled “Neos Proposal 1: Adoption of the Merger Agreement and Aytu Proposal 1: Approval of the Merger Consideration — Opinion of Aytu’s Financial Advisor.”

Opinion of Neos’ Financial Advisor

On June 12, 2020, the Neos Board engaged MTS Health Partners, L.P. (“MTS”) to review and opine on certain matters related to the merger. The Neos Board reviewed and discussed the financial analyses of MTS Securities LLC (“MTS Securities”), as well as the oral opinion rendered to the Neos Board by MTS Securities on December 9, 2020 as to the fairness, from a financial point of view, of the Exchange Ratio, to the holders of the Neos common stock (other than the Excluded Shares) in the Merger. MTS subsequently confirmed its oral opinion by delivering its written opinion to the Neos Board, dated December 10, 2020 as to the fairness, from a financial point of view, of the Exchange Ratio, to the holders of the Neos common stock (other than the Excluded Shares) in the Merger.

The full text of the MTS Securities written opinion, dated December 10, 2020 which describes the assumptions made and limitations upon the review undertaken by MTS Securities in preparing its opinion, is attached hereto as Annex C and is incorporated by reference herein. You should read the opinion carefully in its entirety.

Regulatory Approvals

Aytu and Neos have both agreed to use their reasonable best efforts to obtain all regulatory approvals necessary or advisable in connection with the transactions contemplated by the Merger Agreement.

No Appraisal Rights

No appraisal, dissenters or similar rights will be available in connection with the merger or other transactions contemplated by the Merger Agreement.

Accounting Treatment of the Merger

In accordance with accounting principles generally accepted in the United States, Aytu will account for the merger using the acquisition method of accounting for business combinations. Under this method of accounting, Aytu

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will record the acquisition based on the fair value of the consideration given, which is the market value (based on the closing price of Aytu common stock on the Closing Date) of Aytu common stock issued in connection with the merger. Aytu will allocate the purchase price to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the merger. Any excess of the purchase price over those fair values will be recorded as goodwill.

Governance Matters Following Completion of the Merger

The composition of the Aytu Board, including the number of directors, will change following completion of the merger, and will include six current members of the Aytu Board and two members of the Neos Board.

The Merger Agreement

On December 10, 2020, Aytu, Merger Sub and Neos entered into the Merger Agreement attached as Annex A to this joint proxy statement/prospectus. The Aytu Board and the Neos Board have both approved the merger pursuant to the Merger Agreement. You are encouraged to read the entire Merger Agreement carefully because it is the principal legal document governing the merger. Below is a summary of certain terms of the Merger Agreement.

Structure

Subject to the terms and conditions of the Merger Agreement and in accordance with applicable law, in the merger, Merger Sub will be merged with and into Neos, with Neos continuing as the surviving corporation and a wholly-owned subsidiary of Aytu. Upon completion of the merger, shares of Neos common stock will no longer be publicly traded, will be delisted from Nasdaq Global and will be deregistered under the Exchange Act.

Merger Consideration

In the merger, each share of Neos common stock issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares) will automatically be converted into the right to receive (1) 0.1088 shares of Aytu common stock (provided that such Exchange Ratio is subject to a downward adjustment with respect to the Bridge Note Adjustment) and (2) any cash in lieu of fractional shares of Aytu common stock, as described in more detail in the section entitled “The Merger Agreement — Merger Consideration.”

The total number of shares of Aytu common stock to be issued to Neos stockholders at closing will be determined pursuant to the Exchange Ratio. Under the Exchange Ratio, without taking into account the Bridge Note Adjustment, Aytu does not expect the total number of shares of Aytu common stock to be issued to exceed approximately 5,600,000.

Based on the number of shares of Aytu common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in Neos stock price leading to exercise of options not otherwise being assumed by Aytu or by additional issuances of Neos common stock that Aytu may consent to) and the number of shares of Aytu common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders are expected to own approximately 24% of the outstanding shares of Aytu common stock and existing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock. Aytu stockholders and Neos stockholders should be aware however that their ultimate percentage ownership of Aytu could be diluted by other transactions relating to the merger. For example, shares of Aytu common stock will be reserved for issuance pursuant to certain employee stock awards currently held by Neos employees and executives.

Treatment of Neos Equity Awards

Neos Stock Options

As of the of the Effective Time, each unvested option to acquire shares of Neos common stock that is outstanding as of immediately prior to the Effective Time and that has an exercise price per share equal to or less than $0.95 shall be assumed by Aytu and converted into an option to acquire shares of Aytu common stock on the same terms and conditions (including, but not limited to, any vesting, acceleration or forfeiture provisions or repurchase rights) as were applicable to such option to acquire shares of Neos common stock immediately prior to the Effective Time,

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referred to in this joint proxy statement/prospectus as an assumed option, except that the number of shares of Aytu common stock subject to each such assumed option shall be equal to (i) the number of shares of Neos common stock subject to the corresponding assumed option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, rounded down, if necessary, to the nearest whole share of Aytu common stock, and such assumed option shall have an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of Neos common stock otherwise purchasable pursuant to the corresponding assumed option divided by (B) the Exchange Ratio; provided, that the exercise price, the number of shares of Aytu common stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner intended to be consistent with the requirements of Section 409A of the Code and, with respect to any assumed option intended to qualify as an “incentive stock option” under Section 422 of the Code, Section 424(a) of the Code.

Neos Restricted Stock Units

At the Effective Time, each share of Neos common stock subject to vesting, repurchase, or other lapse of restrictions that is outstanding under any equity incentive plan of Neos as of immediately prior to the Effective Time shall be assumed by Aytu and converted automatically, at the Effective Time, into a restricted stock unit denominated in Aytu common stock covering a number of shares of Aytu common stock equal to (i) the number of shares of Neos common stock subject to the corresponding Neos restricted stock unit immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, rounded, if necessary, to the nearest share of Aytu common stock, having substantially similar terms and conditions (including, but not limited to, any vesting, acceleration, forfeiture and settlement date provisions) as were applicable to such Neos restricted stock unit as of immediately prior to the Effective Time.

Listing of Aytu Common Stock; Removal and Deregistration of Shares of Neos Common Stock

The Merger Agreement obligates Aytu to use its reasonable best efforts to cause the Aytu common stock to be issued in the merger to be listed on Nasdaq, subject to official notice of issuance, prior to the completion of the merger. See the section entitled “The Merger Agreement — Listing of Aytu Common Stock.” Approval for listing on Nasdaq of the Aytu common stock, subject to official notice of issuance, is a condition to the obligations of Neos and Aytu to complete the merger as described in the section entitled “The Merger Agreement — Conditions to Closing of the Merger.” If the merger is completed, shares of Neos common stock will no longer be publicly traded, will be delisted from Nasdaq Global and will be deregistered under the Exchange Act.

Conditions to Closing of the Merger

Completion of the merger is subject to customary closing conditions, including, among other conditions, (1) the approval of the merger proposal by a majority of the holders of the outstanding shares of Neos common stock entitled to vote thereon, (2) approval of the issuance of Aytu common stock by a majority of the votes cast by Aytu stockholders on the matter, (3) that the conditions to the Debt Facility Letters (as defined below) (other than the closing of the merger) have been satisfied or shall be satisfied contemporaneously as of the time of closing, and that the lenders do not dispute the satisfaction thereof, (4) accuracy of each party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, (5) the absence of a material adverse effect of either party and (6) compliance in all material respects with each party’s obligations under the Merger Agreement.

We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed on the terms and conditions as provided in the Merger Agreement or at all.

No Solicitation

Neos and Aytu have agreed, from the date of the Merger Agreement until the Effective Time or, if earlier, the termination of the Merger Agreement, that each of them will not, and will cause their respective subsidiaries not to, and shall not authorize any of their respective representatives or their subsidiaries’ representatives to, solicit or knowingly facilitate any inquiry, proposal or offer with respect to any Company Acquisition Proposal or Parent Acquisition Proposal, respectively (each as defined in the Merger Agreement), or participate in any discussions or negotiations regarding, or otherwise cooperate with, any Company Acquisition Proposal or Parent Acquisition Proposal, respectively.

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However, if prior to the time that the applicable required stockholder approval is obtained, the Neos Board or Aytu Board determines in good faith that (after consultation with its respective outside counsel) the failure to do so would be inconsistent with its fiduciary duties, the Neos Board or Aytu Board, as applicable, may make an adverse recommendation change in response to certain superior proposals or intervening events, provided certain procedures and requirements are met, as described in the section entitled “The Merger Agreement — No Solicitation.”

Termination of the Merger Agreement

In the event of a termination of the Merger Agreement by Aytu or Neos under various specified circumstances, Aytu or Neos may be required to pay the other party a termination fee equal to $2,000,000.

Debt Facility Letters

In connection with the execution of the Merger Agreement, Aytu, Neos and the Deerfield Lenders under the Facility In connection with the execution of the Merger Agreement, Aytu, Neos and the Deerfield Lenders have entered into a Letter re: Consent and Modifications to Loan Documents (the “Deerfield Consent Letter”). Pursuant to the Deerfield Consent Letter, Deerfield Lenders have agreed to consent to the issuance of the Bridge Note described above, and if the merger is consummated, to permit the merger and waive certain defaults that would otherwise result after giving effect thereto and to waive permanently defaults related to “going concern” qualifications to Neos’ financial statements, which consents and agreements are conditioned upon, among other things, (i) Aytu and its subsidiaries providing a senior secured guarantee (including customary affirmative and negative covenants) in support of the repayment of the obligations owed by Neos under the Deerfield Facility Agreement on the Closing Date, (ii) entering into certain joinder documents and amendments to the Deerfield Facility Agreement on the Closing Date in order to effectuate such guaranties and grant of security interests, (iii) prepayment of $15,000,000 of the principal of the loan under the Deerfield Facility Agreement on the Closing Date in lieu of the payment of the same on May 11, 2021, and (iv) certain other modifications to the Deerfield Facility Agreement to reflect the consummation of the merger and the status of Neos as a wholly-owned subsidiary of Aytu. Such modifications also include the elimination of the right of the Deerfield Lenders to convert outstanding amounts of the loans into conversion shares and Neos’ rights to make payments to Deerfield Lenders in the form of shares of Neos common stock.

In connection with the execution of the Merger Agreement, Aytu, Neos and Encina have entered into a Commitment Letter (the “Encina Commitment Letter,” and together with the Deerfield Consent Letter, the “Debt Facility Letters”) in connection with the Encina Loan Agreement. Pursuant to the Encina Commitment Letter, Encina has agreed to consent to the merger and to the issuance of the Bridge Note described above and, if the merger is consummated, to waive permanently defaults related to “going concern” qualifications to Neos’ audited financial statements for the year ending December 31, 2020 and to waive certain defaults that would otherwise result after giving effect thereto and make certain other modifications to the Encina Loan Agreement to reflect the consummation of the merger and the status of Neos as a wholly-owned subsidiary of Aytu.

As previously disclosed by Neos, Neos’ financial statements for the periods ended June 30, 2020 and September 30, 2020 (the “Subject Fiscal Quarters”) were prepared on a going concern basis, as Neos’ has identified conditions and events that raise substantial doubt about Neos’s ability to continue as a going concern within one year after the date that the applicable financial statements were issued. Pursuant to the Deerfield Facility Agreement, no financial statements delivered by Neos may contain any explanatory paragraph expressing substantial doubt as to going concern status (a “Going Concern Exception,” and the requirement that there be no such Going Concern Exception, the “Going Concern Condition”). In August and November 2020, Neos and Neos’ subsidiary guarantors entered into a Limited Waiver with the lenders and the collateral agent, pursuant to which, such lenders and collateral agent waived the Going Concern Condition solely with respect to the Subject Fiscal Quarters and solely during the period commencing on the issuance dates of the applicable financial statements and ending on the earliest to occur of (i) the date on which the annual financial statements for the year ending December 31, 2020 are filed with the SEC, (ii) March 31, 2021, and (iii) the first date following the waiver on which an Event of Default, as defined in the Deerfield Facility Agreement, has occurred and is continuing (other than, for the avoidance of doubt, an Event of Default arising solely as a result of Neos’ failure to satisfy the Going Concern Condition with respect to the Subject Fiscal Quarter).

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In connection with the Merger Agreement and the transactions contemplated thereby, Neos entered into a limited waiver with the Deerfield Lenders and collateral agent under the Deerfield Facility Agreement (the “Deerfield Limited Waiver”). Under the Deerfield Limited Waiver, such lenders and collateral agent agreed to extend the duration of the waivers described above until the earlier of (A) the first date following the waiver on which an Event of Default, as defined in the Deerfield Facility Agreement, has occurred and is continuing (other than, for the avoidance of doubt, an Event of Default arising solely as a result of Neos’ failure to satisfy the Going Concern Condition with respect to the applicable Subject Fiscal Quarter) and (B) the earliest to occur of (i) the consummation of the merger, (ii) any termination of the Merger Agreement, and (iii) September 10, 2021 (such earliest date, the “Merger-Related Termination Date”) (such ending date, the “Waiver Period Ending Date”). In addition, if Neos’ financial statements for the periods ending December 31, 2020, March 31, 2021 or June 30, 2021 (the “Additional Subject Fiscal Quarters”) contain a Going Concern Exception, such lenders and collateral agent agreed to waive the Going Concern Condition with respect to any applicable Additional Subject Fiscal Quarters solely during the period commencing on the issuance dates of the applicable financial statements for such Additional Subject Fiscal Quarters and ending on the Waiver Period Ending Date.

In addition, Neos entered into a limited waiver with Encina and the agent under the Encina Loan Agreement (the “Encina Limited Waiver”). Pursuant to the Encina Limited Waiver, Encina and such agent agreed to irrevocably waive all breaches, defaults and events of default under the Encina Loan Agreement solely to the extent resulting from the inclusion of a going concern qualification in Neos’ financial statements for the fiscal year ending December 31, 2020. Such waiver will terminate and be of no further force and effect upon the termination of the Encina Commitment Letter.

Aytu Equity Financing

Following the signing of the Merger Agreement, Aytu successfully completed a common stock financing that closed on December 15, 2020 and raised approximately $26.1 million in net proceeds to Aytu.

Voting Agreements

In connection with the execution and delivery of the Merger Agreement, certain stockholders of Aytu and Neos holding approximately 2% and 1%, respectively, of the companies’ outstanding voting shares, as of the date of the execution of the Merger Agreement, entered into voting agreements with Neos and Aytu, as applicable (such agreements, the “Voting Agreements”).

Pursuant to the Voting Agreements, each of the stockholders of Aytu and Neos, as applicable, have agreed, among other things, to vote their shares of Aytu common stock, or Neos common stock, as applicable, that such stockholder owns in favor of the merger consideration proposal, including the Common Stock Issuance, or the merger proposal, as applicable.

Each Voting Agreement contains restrictions on transfer that, subject to limited exceptions, prevent each stockholder from transferring their shares of Aytu’s or Neos’ common stock, as applicable. Each Voting Agreement will terminate upon the earliest to occur of (1) the Effective Time, (2) the termination of the Merger Agreement in accordance with its terms and (3) such date and time as any amendment or change to the Merger Agreement is effected without such stockholder’s prior written consent that materially and adversely affects such stockholder.

Bridge Financing

In connection with the merger, Neos issued the Bridge Note to Aytu whereby Aytu agreed to provide financing to Neos up to $5,000,000 under the Bridge Note. In connection with the issuance of the Bridge Note, Aytu and Neos entered into a registration rights agreement pursuant to which Neos agreed to register shares of its common stock issuable upon the conversion of the outstanding principal and interest owed on amounts drawn down from the Bridge Note. Aytu’s obligation to advance loans under the Bridge Note is subject to certain conditions, including no default under the Bridge Note and no default under certain other secured debt of Neos. Interest accrues on the principal amount outstanding under the Bridge Note at a rate of 6.0% per annum, compounding monthly beginning in January 2021. If an event of default has occurred and is continuing, the interest rate then in effect will be increased by 2.0% per annum, and all overdue obligations under the Bridge Note will bear interest at the interest rate in effect at such time plus the additional 2.0% per annum. Aytu’s rights under the Bridge Note, including rights to payment, are subordinated to the rights of Neos’ existing senior lenders. The maturity date of the Bridge Note is the earlier of

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the acceleration of the obligations evidenced thereby and November 7, 2022. In the event that Neos draws down on the Bridge Note, the Exchange Ratio will be adjusted downward by an amount equal to 0.00011 for every $100,000 of financing funded to Neos under the Bridge Note based on the Bridge Note Adjustment. As of the date of this joint proxy statement/prospectus, Neos has not drawn down any funds under the Bridge Note, and as a result, the Exchange Ratio remains unadjusted. In the event Neos draws down funds under the Bridge Note prior to the closing, then the Exchange Ratio will be adjusted pursuant to the Bridge Note Adjustment.

In the event the merger is consummated, the Bridge Note will be terminated and any loans made under the Bridge Note will be cancelled. If the Merger is not consummated and the Merger Agreement is terminated, at any time beginning 30 days following such termination, Aytu will have the right to elect to convert the aggregate amount of the outstanding principal of the Bridge Note plus interest accrued on that principal at a conversion price equal to the greater of $0.50 per Neos share or 90% of Neos’ then current share price (calculated based on the arithmetic average of the volume weighted average price per share for the thirty (30) trading days immediately preceding the date of conversion, adjusted in the case of any stock split, stock combination, reclassification, stock dividend, recapitalization or similar transaction). Aytu’s ability to convert the Bridge Note is subject to a customary exchange cap, under which no shares may be issued by Neos to the extent such issuance (together with all previous issuances under the Bridge Note) would exceed 9,901,906 shares, which is 19.9% of Neos’ outstanding common stock as of the date the Bridge Note is issued. Alternatively, at its option, Aytu may acquire shares in excess of such exchange cap if Aytu elects to increase the conversion price with respect to any given conversion to $0.50, which represents the price at which Nasdaq would deem such conversion price to be at least the Minimum Price for purposes of Nasdaq listing Rule 5635(d). In addition, Aytu may not acquire common stock upon conversion of the Bridge Note to the extent such acquisition would result in Aytu’s beneficial ownership of Neos’ common stock to exceed 9.985% of Neos’ total outstanding shares of common stock at such time.

The issuance of the Bridge Note occurred, and the conversion of the shares of Neos’ common stock thereunder will occur, as a private placement of securities. As a result, the shares issuable upon conversion of the Bridge Note may be restricted from resale unless such shares have been registered for resale under the Securities Act or an exemption exists for such resale. Under the terms of the registration rights agreement, within 30 days from the termination of the Merger Agreement for any reason, Neos will use best efforts to register the conversion shares for resale and cause such registration statement to be declared effective by the SEC within 75 days following the filing of such registration statement. If the registration statement is not declared effective by such deadline or its effectiveness not maintained, Neos will pay Aytu an additional amount of its common stock (or cash if such issuance of common stock is not permitted under Nasdaq rules) equal to 3% of the common stock covered under the registration statement for each 30-day period the registration statement is not declared effective after the deadline. In addition, if the registration statement is not effective or available to use prior to such time that Aytu can sell all of the common stock covered by the registration statement under Rule 144 without regard to volume limitations, Neos will pay Aytu an additional amount of common stock (or cash if such issuance common stock is not permitted under Nasdaq rules) equal to 3% of the remaining unsold amount of common stock covered under the registration statement for each 30-day period that the registration statement is not available to use. The registration rights agreement will also include a covenant prohibiting Neos from issuing equity or convertible securities from the date the Bridge Note is issued until 30 days after the date the registration statement is declared effective, subject to certain exceptions.

Reverse Stock Split

On June 2, 2020, Neos received a letter (the “Letter”) from the Listing Qualifications Department (the “Staff”) of Nasdaq indicating that the closing bid price of Neos’s common stock had, for 30 consecutive business days preceding the date of the Letter, been below the $1.00 per share minimum required for continued listing on Nasdaq Global under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Neos was provided until December 28, 2020 to regain compliance, reflecting a 180-day compliance period and any temporary relief periods afforded by Nasdaq pursuant to its April 16, 2020 announcement.

On December 29, 2020, Neos received a notice (the “Notice”) from the Listing Qualifications Department of Nasdaq stating that Neos had failed to regain compliance with the minimum $1.00 closing bid price required by the Minimum Bid Price Rule prior to December 28, 2020 as required by Nasdaq’s letter of June 2, 2020. As a result, Nasdaq has determined to initiate procedures to delist Neos’s securities from Nasdaq.

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The Notice provided Neos until January 5, 2021 to request an appeal of Nasdaq’s determination to delist and request a hearing before a Hearings Panel. In the absence of such appeal and request, Neos’s securities would have been suspended at the opening of business on January 7, 2021, and a Form 25-NSE would have been filed with the Securities and Exchange Commission, resulting in Neos’ securities being removed from listing and registration on Nasdaq. Neos requested such a hearing before a Hearings Panel to appeal the determination, which stayed the suspension of Neos’ securities and the filing of the Form 25-NSE pending a decision by the Hearings Panel.

On February 4, 2021, Neos conducted such hearing before a Nasdaq Hearings Panel. On February 5, 2021, the Hearings Panel granted Neos’ request to continue its listing on Nasdaq during the pendency of the merger or until June 28, 2021. To remain listed on Nasdaq beyond such date, Neos must demonstrate compliance with the Minimum Bid Price Rule on or before such date.

If the merger proposal is not approved by Neos stockholders, the Common Stock Issuance is not approved by Aytu stockholders or if the merger is not completed for any other reason, Neos will remain an independent public company, shares of Neos common stock will continue to be registered under the Exchange Act and Neos will continue to file periodic reports with the SEC. In addition, if Neos is unable to demonstrate compliance with the Minimum Bid Price Rule on or before June 28, 2021, it could result in the Neos common stock being delisted from trading on Nasdaq Global.

As a result, upon approval by the Neos stockholders of the reverse stock split proposal to amend the Neos certificate of incorporation (in the form attached as Annex F to the accompanying joint proxy statement/prospectus), the board of directors of Neos may elect to implement the reverse stock split of Neos common stock, at a ratio within the range of range of 1-for-2 to 1-for-20 if the merger proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason (with the exact ratio to be determined in the discretion of the Neos Board and with such reverse stock split to be effected at such time and date as determined by the Neos Board in its sole discretion), to regain compliance with the Minimum Bid Price Rule and remain listed on Nasdaq Global.

For the avoidance of doubt, the approval of the reverse stock split proposal by Neos stockholders is not a condition to the obligations of Neos and Aytu to complete the merger. Neither the consummation of the merger nor the reverse stock split is a condition for approval or the occurrence of the other. It is the intention of the Neos Board to consider the implementation of the reverse stock split only if (a) the merger proposal is not approved by the Neos stockholders, (b) the merger consideration, including the Common Stock Issuance, is not approved by the Aytu stockholders or (c) the merger is not completed for any other reason, in order for Neos to regain compliance with the Minimum Bid Price Rule of Nasdaq.

Special Meeting of Stockholders of Aytu

At the Aytu special meeting, Aytu stockholders of record on February 5, 2021 will be asked to consider and vote on the following proposals:

•        to approve the merger consideration, including the Common Stock Issuance;

•        to approve the Aytu name change proposal;

•        to approve the Aytu adjournment proposal.

Approval of the merger consideration, including the Common Stock Issuance, is required for completion of the merger.

The affirmative vote of at least a majority of the votes cast by holders of outstanding shares of Aytu common stock at a duly called and held meeting of Aytu’s stockholders at which a quorum is present is required to approve the merger consideration, including the Common Stock Issuance. Approval of the Aytu name change proposal requires the affirmative vote of a majority of the votes of the issued and outstanding shares of Aytu’s common stock. Approval of the adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Aytu special meeting by holders of shares of Aytu common stock entitled to vote if a quorum is present or the affirmative vote of a majority of the votes present at the Aytu special meeting by holders of shares of Aytu common stock entitled to vote if a quorum is not present.

The Aytu Board recommends that Aytu stockholders vote “FOR” each of the proposals set forth above.

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Special Meeting of Stockholders of Neos

At the Neos special meeting, Neos stockholders will be asked to consider and vote on the following proposals:

•        to approve the merger proposal;

•        to approve the reverse stock split proposal; and

•        to approve the Neos adjournment proposal.

Approval of the Merger Agreement is required for completion of the merger.

Assuming a quorum is present, the merger proposal and the reverse stock split proposal each requires the affirmative vote of the holders of a majority of the outstanding shares of Neos common stock entitled to vote thereon, and the adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Neos special meeting by holders of shares of Neos common stock.

The Neos Board recommends that Neos stockholders vote “FOR” each of the proposals set forth above.

Recommendation of the Neos Board and Its Reasons for the Merger

The Neos Board (1) approved the execution, delivery, and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the merger, (2) deemed it fair to, advisable and in the best interests of the Neos and its stockholders to enter into the Merger Agreement, (3) directed that the Merger Agreement be submitted to Neos stockholders for adoption and (4) resolved to recommend that Neos stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the merger. The Neos Board recommends that Neos stockholders vote “FOR” the merger proposal. For the factors considered by the Neos Board in reaching this decision, see the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Neos’ Reasons for the Merger; Recommendation of the Neos Board that Neos Stockholders Approve the Merger Proposal.

Separately, the Neos Board has deemed it advisable and in the best interests of Neos and its stockholders to amend Neos’ certificate of incorporation to effect a reverse stock split at a ratio within the range of 1-for-2 to 1-for-20, should the merger proposal not be approved by the Neos stockholders, the merger consideration, including the Common Stock Issuance, not be approved by the Aytu stockholders or the merger is not completed for any other reason, in an effort to regain compliance with the applicable continued listing standards of Nasdaq. The Neos Board recommends that Neos stockholders vote “FOR” the reverse stock split proposal. See the section entitled “Neos Proposal II: Approval of the Reverse Stock Split.

The Neos Board recommends that Neos stockholders vote “FOR” the Neos adjournment proposal. See the section entitled “Neos Proposal III: Adjournment of the Neos Special Meeting.”

Recommendation of the Aytu Board and Its Reasons for the Merger

The Aytu Board determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger and the merger consideration, are advisable, fair to and in the best interests of Aytu and its stockholders. The Aytu Board recommends that Aytu stockholders vote “FOR” the Common Stock Issuance proposal. For the factors considered by the Aytu Board in reaching this decision, see the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Aytu’s Reasons for the Merger; Recommendation of the Aytu Board that Aytu Stockholders Approve the Common Stock Issuance.”

The Aytu Board recommends that Aytu stockholders vote “FOR” the Aytu adjournment proposal. See the section entitled “Aytu Proposal III: Adjournment of the Aytu Special Meeting.”

Ownership of Aytu Common Stock After the Merger

The total number of shares of Aytu common stock to be issued to Neos stockholders at closing is determined pursuant to the Exchange Ratio. Under the Exchange Ratio, without taking into account the Bridge Note Adjustment, Aytu does not expect the total number of shares of Aytu common stock to be issued to exceed

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approximately 5,600,000. Based on the number of shares of Aytu common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in Neos stock price leading to exercise of options not otherwise being assumed by Aytu or by additional issuances of Neos common stock that Aytu may consent to) and the number of shares of Aytu common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders are expected to own approximately 24% of the outstanding shares of Aytu common stock and existing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock. Aytu and Neos stockholders should be aware however that their ultimate percentage ownership of Aytu could be diluted by other transactions relating to the merger.

For example, shares of Aytu common stock will be reserved for issuance pursuant to certain employee stock awards currently held by Neos employees and executives.

Specific Performance; Remedies

Under the Merger Agreement, each of Aytu and Neos is entitled to an injunction or injunctions to prevent breaches or threatened breaches of the Merger Agreement and to specifically enforce the terms and provisions of the Merger Agreement.

Material U.S. Federal Income Tax Consequences of the Merger

The merger is intended to qualify as a “reorganization” under Section 368(a)(1) of the Code, and, therefore, the merger is not expected to be a taxable event for Neos stockholders (except to the extent of cash received in lieu of fractional shares).

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

Holders of Neos common stock should not recognize gain or loss upon the reverse stock split (except to the extent of cash received in lieu of fractional shares).

Rights of Neos Stockholders Will Change as a Result of the Merger

Neos stockholders will have different rights once they become Aytu stockholders following completion of the merger due to differences between the organizational documents of Aytu and Neos. These differences are described in more detail in the section entitled “Comparison of Stockholder Rights.

Litigation Relating to the Merger

On January 27, 2021, in connection with the merger, a complaint, Wang v. Neos Therapeutics, Inc., et al., 1:21-cv-00095, was filed by purported Neos stockholder Elaine Wang against Neos and its directors in the U.S. District Court for the District of Delaware. On January 29, 2021, in connection with the merger, a complaint, Dupree v. Neos Therapeutics, Inc., et al., 1:121-cv-00124, was filed by purported Neos stockholder Michael Dupree against Neos, its directors, the Merger Sub, and Aytu in the U.S. District Court for the District of Delaware. On February 1, 2021, in connection with the merger, a complaint, London v. Neos Therapeutics, Inc., et al., 1:21-cv-00874, was filed by purported Neos stockholder Jack London against Neos and its directors in the U.S. District Court for the Southern District of New York. On February 3, 2021, in connection with the merger, a complaint, Kates v. Neos Therapeutics, Inc., et al., 1:21-cv-00953, was filed by purported Neos stockholder Erin Kates against Neos and its directors in the U.S. District Court for the Southern District of New York. Also on February 3, 2021, in connection with the merger, a complaint, Smith v. Neos Therapeutics, Inc., et al., 1:21-cv-00940, was filed by purported Neos stockholder Hayley Smith against Neos, its directors, the Merger Sub, and Aytu in the U.S. District Court for the Southern District of New York.

The Wang, Dupree, London, Kates, and Smith cases are collectively referred to as the “merger actions.” The merger actions generally allege that the joint proxy statement/prospectus filed by Aytu with the SEC on January 26, 2021 misrepresents and/or omits certain purportedly material information relating to financial projections, the analysis performed by and the engagement of MTS, and the process leading up to the execution of the merger agreement. The merger actions assert violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against Neos and its directors and violations of Section 20(a) of the Exchange Act against Neos’ directors. The

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Kates merger action also asserts that the Neos directors breached their fiduciary duties in connection with the joint proxy statement/prospectus. The Dupree merger action also asserts violations of Section 20(a) of the Exchange Act against the Merger Sub and Aytu. The Smith action also asserts violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against the Merger Sub and Aytu. The merger actions seek, among other things: an injunction enjoining consummation of the merger, rescission of the merger agreement, damages, costs of the action, including plaintiff’s attorneys’ fees and experts’ fees and expenses, and any other relief the court may deem just and proper.

It is possible that additional similar complaints could be filed in connection with the merger.

Voting by Neos and Aytu Directors, Officers and Significant Stockholders

On the record date, directors of the Neos Board and Neos’ executive officers and their affiliates owned and were entitled to vote 534,378 shares of Neos common stock, or approximately 1.1% of the total voting power of the shares of Neos common stock outstanding on that date. On the record date, directors of the Aytu Board and Aytu’s executive officers and their affiliates owned and were entitled to vote approximately 223,000 shares of Aytu common stock, or approximately 1.25% of the total voting power of the shares of Aytu common stock outstanding on that date. It is anticipated that the directors of the Aytu Board and the Neos Board, the executive officers of Aytu and Neos, and their affiliates will vote in favor of the Common Stock Issuance proposal and the merger proposal, as applicable.

Risk Factors

You should also carefully consider the risks that are described in the section entitled “Risk Factors.”

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RISK FACTORS

In addition to the other information contained or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors in determining whether to vote to approve the merger proposal, the reverse stock split proposal or approval of the stock issuance. Descriptions of some risks can be also found in the Annual Report of Aytu on Form 10-K for the fiscal year ended June 30, 2020, and any amendments thereto, as such risks may be updated or supplemented in Aytu’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this joint proxy statement/prospectus. You should read carefully this entire joint proxy statement/prospectus and its annexes and exhibits and the other documents incorporated by reference into this joint proxy statement/prospectus. You also should read and consider the risk factors associated with Neos beginning on page 45 of this joint proxy statement/prospectus. See also the section entitled “Where You Can Find More Information.”

Risk Factor Summary

Risks Related to the Merger

•        Because the Exchange Ratio is fixed and the market price of Aytu common stock may fluctuate, Neos stockholders cannot be certain of the precise value of the stock consideration they may receive in the merger.

•        The market price of shares of Aytu common stock after the merger will continue to fluctuate and may be affected by factors different from those that are currently affecting or historically have affected the market price of shares of Neos common stock or Aytu common stock.

•        Current Aytu and Neos stockholders will have a reduced ownership and voting interest in Aytu after the merger.

•        Aytu and Neos are subject to restrictive interim operating covenants during the pendency of the merger.

•        Aytu and Neos directors and officers have interests in the merger that may be different from, or in addition to, the interests of Aytu stockholders and Neos stockholders.

•        Certain officers and directors of Aytu and Neos, have agreed to vote in favor of the merger consideration and the Merger Agreement, as applicable, regardless of how other Aytu and Neos stockholders vote.

•        The Aytu Board and the Neos Board have not requested, and do not anticipate requesting, an updated opinion from their respective financial advisors reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement.

•        Failure to consummate the merger could negatively impact respective future stock prices, operations and financial results of Aytu and Neos.

•        The merger may disrupt the attention of Aytu’s management or Neos’ management from ongoing business operations.

•        Aytu and Neos stockholders will not be entitled to appraisal or dissenters’ rights in the merger.

•        The merger may not qualify as a “reorganization” for U.S. federal income tax purposes.

•        Aytu and Neos may have difficulty attracting, motivating and retaining executives and other key employees in light of the merger.

•        Completion of the merger is subject to a number of other conditions, and if these conditions are not satisfied or waived, the merger will not be completed.

•        Aytu will assume a significant amount of debt in the merger, which, together with Aytu’s other debt, could limit Aytu’s operational flexibility or otherwise adversely affect Aytu’s financial condition.

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•        Aytu and Neos may be targets of transaction related lawsuits which could result in substantial costs and may delay or prevent the merger from being completed. If the merger is completed, Aytu will also assume Neos’ risks arising from various legal proceedings.

•        Aytu will incur significant transaction and integration-related costs in connection with the merger. In addition, the merger may not be accretive, and may be dilutive, to Aytu’s earnings per share, which may negatively affect the market price of shares of Aytu’s common stock.

•        The unaudited pro forma combined financial information and prospective financial information included in this joint proxy statement/prospectus are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the combined company following completion of the merger or reflect the effect of any divestitures that may be required in connection with the merger.

Risk Factors Relating to Aytu

•        Risks Related to Aytu’s Financial Conditions and Capital Resources

•        Risks Related to Product Development, Regulatory Approval and Commercialization

•        Risks Related to COVID-19

•        Risks Related to the Healight Technology

•        Risks Related to Aytu’s Organization, Structure and Operation

•        Risks Related to Securities Markets and Investment in Aytu’s Securities

Risk Factors Relating to Neos

•        Neos does not have enough existing cash resources to fund its operations for the next twelve months and if Neos is unable to secure additional capital, Neos may be required to seek strategic alternatives, including but not limited to a potential business combination or a sale of Neos or its business, or reduce or cease its operations.

•        If the merger with Aytu does not close, Neos may need additional funding and may be unable to raise capital when needed, which would force Neos to delay, reduce or eliminate its product development programs or commercialization efforts.

•        If the merger with Aytu does not close, Neos may need to sell additional equity or incur debt to fund its operations and service its existing debt obligations, which may result in dilution to its stockholders and impose restrictions on its business.

•        If the merger with Aytu does not close on a timely basis, Neos may not have cash available in an amount sufficient to enable it to make interest or principal payments on its indebtedness when due, including the $15.0 million due to Deerfield in May 2021.

•        If Neos is unable to demonstrate compliance with the Nasdaq continued listing standard on or before June 28, 2021, such that Nasdaq issues a final determination to delist its common stock, the liquidity and market price of Neos’ common stock would be adversely impacted.

•        Neos’ future success depends on its ability to retain key executives and to attract, retain and motivate qualified personnel.

•        If Neos fails to maintain an effective system of internal control over financial reporting, Neos may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in its financial and other public reporting, which would harm its business and the trading price of its common stock.

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•        Neos relies on third parties to perform many essential services for its commercial products, including distribution, customer service, accounts receivable management, cash collection and adverse event reporting. If these third parties fail to perform as expected or to comply with legal and regulatory requirements, Neos’ ability to continue to commercialize its products will be significantly impacted and Neos may be subject to regulatory sanctions.

•        Neos is heavily dependent on the commercial success of its commercial products. Neos has not generated substantial revenues from the sales of these products, or any sales revenues from any of its product candidates, if approved, and Neos may never achieve or maintain profitability.

•        Neos’ business is subject to extensive regulatory requirements, and Neos’ approved products and any product candidates that obtain approval will be subject to ongoing and continued regulatory review, which may result in significant expense and limit its ability to commercialize such products.

•        The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm Neos’ research and development, manufacturing and commercialization efforts, increase its costs and expenses and have a material adverse effect on its business, financial condition and results of operations.

•        If Neos’ sole manufacturing facility becomes damaged or inoperable or it decides to or are required to vacate its facility, Neos’ ability to manufacture its Branded Products, its generic Tussionex or future potential product candidates for clinical development, may be jeopardized. Neos’ inability to continue manufacturing adequate supplies of its products could adversely affect its ability to generate revenues.

•        If Neos’ intellectual property related to its products or product candidates is not adequate, it may not be able to compete effectively in its market.

•        The market price of Neos’ common stock may be highly volatile and investors in its common stock could incur substantial losses.

•        Neos’ principal stockholders and management own a significant percentage of its shares and will be able to exert significant influence over matters subject to stockholder approval.

Risks Related to the Merger

Because the Exchange Ratio is fixed and the market price of Aytu common stock may fluctuate, Neos stockholders cannot be certain of the precise value of the stock consideration they may receive in the merger.

The Exchange Ratio is fixed and will only be adjusted in certain limited circumstances (including the Bridge Note Adjustment, recapitalizations, reclassifications, stock splits or combinations, exchanges, mergers, consolidations or readjustments of shares, or stock dividends or similar transactions involving Aytu or Neos) and the value of the stock consideration will depend on the market price of Aytu common stock at the time the transaction is completed. Time will elapse from the date of the Merger Agreement, when the Exchange Ratio was established, until each of the date of this joint proxy statement/prospectus, the date on which Neos stockholders vote to approve the Merger Agreement at the Neos special meeting, the date the Aytu stockholders approve the merger consideration, including the Common Stock Issuance, at the Aytu special meeting and the date on which Neos stockholders entitled to receive shares of Aytu common stock under the Merger Agreement actually receive such shares. The market value of Aytu common stock may fluctuate during these periods as a result of a variety of factors, including, among others, general market and economic conditions, changes in Aytu’s businesses, operations and prospects and regulatory considerations, federal, state and local legislation, governmental regulation and legal developments in the businesses in which Aytu operates, any potential stockholder litigation related to the merger, market assessments of the likelihood that the transaction will be completed, the timing of the transaction and the anticipated dilution to holders of Aytu common stock as a result of the issuance of the merger consideration. Many of these factors are outside of the control of Aytu and Neos. The closing trading price per share of Neos common stock as of December 9, 2020, the last trading date before the public announcement of the Merger Agreement, was $0.55, and the closing trading price per share has

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fluctuated as high as $0.93 and as low as $0.62 between that date and as of February 5, 2021. The closing trading price per share of Aytu common stock as of December 9, 2020, the last trading date before the public announcement of the Merger Agreement, was $6.83 and the closing trading price per share has fluctuated as high as $8.35 and as low as $5.98 between that date and February 5, 2021. Consequently, at the time Neos stockholders must decide whether to approve the Merger Agreement, they will not know the actual market value of the shares of Aytu common stock they may receive when the merger is completed. The actual value of the shares of Aytu common stock to be issued to Neos stockholders who receive stock consideration will depend on the market value of shares of Aytu common stock on the date of issuance. This value will not be known at the time of the Neos special meeting and may be more or less than the current price of Aytu common stock or the price of Aytu common stock at the time of the Neos special meeting. Neos stockholders should obtain current stock quotations for shares of Aytu common stock before voting their shares of Neos common stock. For additional information about the merger consideration, see the section entitled “The Merger Agreement — Merger Consideration.”

The market price of shares of Aytu common stock after the merger will continue to fluctuate and may be affected by factors different from those that are currently affecting or historically have affected the market price of shares of Neos common stock or Aytu common stock.

Upon completion of the merger, holders of shares of Neos common stock will become holders of shares of Aytu common stock. The market price of Aytu common stock may fluctuate significantly following completion of the merger, and holders of shares of Neos common stock could lose the value of their investment in Aytu common stock if, among other things, the combined company is unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of the Neos and Aytu business are not realized, or if the transaction costs relating to the merger are greater than expected. The market price also may decline if the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. The issuance of shares of Aytu common stock in the merger could on its own have the effect of depressing the market price for Aytu common stock. In addition, many Neos stockholders may decide not to hold the shares of Aytu common stock they receive as a result of the merger. Other Neos stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Aytu common stock they receive as a result of the merger. Any such sales of Aytu common stock could have the effect of depressing the market price for Aytu common stock.

In addition, in the future Aytu may issue additional securities to raise capital. Aytu may also acquire interests in other companies by issuing Aytu common stock to finance the acquisition, in whole or in part. Aytu may also issue securities convertible into Aytu common stock.

Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the Aytu common stock, regardless of Aytu’s actual operating performance.

The businesses of Aytu differ from those of Neos in important respects and, accordingly, the results of operations of the combined company after the merger, as well as the market price of shares of Aytu common stock, may be affected by factors different from those that are currently affecting, historically have affected or would in the future affect the results of operations of Neos and Aytu as stand-alone public companies, as well as the market price of shares of Neos common stock and Aytu common stock prior to completion of the merger.

Current Aytu and Neos stockholders will have a reduced ownership and voting interest in Aytu after the merger.

Upon the completion of the merger, each Neos stockholder who receives shares of Aytu common stock will become a stockholder of Aytu with a percentage ownership of Aytu that is substantially smaller than the stockholder’s current percentage ownership of Neos. Accordingly, the former Neos stockholders would exercise significantly less influence over Aytu after the merger relative to their influence over Neos prior to the merger, and thus would have a less significant impact on the approval or rejection of future Aytu proposals submitted to a stockholder vote. Immediately upon consummation of the merger, pre-closing Neos stockholders (other than Aytu and its subsidiaries) are expected to own approximately 24% of the outstanding shares of Aytu common stock and pre-closing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock.

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Aytu and Neos are subject to restrictive interim operating covenants during the pendency of the merger.

Until the merger is completed, the Merger Agreement restricts each of Aytu and Neos from taking specified actions without the consent of the other party, and requires each of Aytu and Neos to operate in the ordinary course of business consistent with past practice. Neos is subject to a number of customary interim operating covenants relating to, among other things, its capital expenditures, incurrence of indebtedness, entry into or amendment of certain types of agreements, issuances of securities and changes in director, officer, employee and independent contractor compensation. Although less restrictive than those imposed on Neos, the Merger Agreement also imposes certain restrictive interim operating covenants on Aytu. These restrictions may prevent Aytu and/or Neos from making appropriate changes to their respective businesses or pursuing financing transactions or attractive business opportunities that may arise prior to the completion of the merger. See the section entitled “The Merger Agreement — Conduct of Business Pending the Merger” for a description of the restrictive covenants applicable to Aytu and Neos, respectively.

Aytu and Neos directors and officers have interests in the merger that may be different from, or in addition to, the interests of Aytu stockholders and Neos stockholders.

Certain executive officers of Aytu participated in the negotiation of the terms of the Merger Agreement. The Aytu Board approved the Merger Agreement and the merger consideration, including the Common Stock Issuance, and determined that the Merger Agreement and the transactions contemplated thereby, including the merger consideration, are advisable and in the best interests of Aytu and its stockholders. The Neos Board approved the Merger Agreement and determined that the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Neos and its stockholders. In considering these facts and the other information contained in this joint proxy statement/prospectus, you should be aware that certain of Aytu’s directors and executive officers and certain of Neos’ directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Aytu’s or Neos’ stockholders. For example, some Neos directors will serve as Aytu directors. These interests are described in more detail in the sections entitled “Interests of Neos’ Directors and Executive Officers in the Merger.

Certain officers and directors of Aytu and Neos, have agreed to vote in favor of the merger consideration and the Merger Agreement, as applicable, regardless of how other Aytu and Neos stockholders vote.

Concurrently with the execution and delivery of the Merger Agreement, certain officers and directors of Aytu and Neos holding approximately 2% and 1%, respectively, of the companies’ outstanding voting shares entered into voting agreements with Neos and Aytu, as applicable (the “Voting Agreements”). Pursuant to the Voting Agreements, each of the stockholders of Aytu and Neos, as applicable, have agreed, among other things, to vote their shares of Aytu common stock, or Neos common stock, as applicable, that such stockholder owns in favor of the issuance of shares of Aytu common stock in connection with the merger, or the merger proposal, as applicable. These voting agreements are described in more detail in the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Voting Agreements.” Accordingly, the Voting Agreements make it more likely that the necessary Aytu and Neos stockholder approval will be received for the merger consideration and the Merger Agreement than would be the case in the absence of the voting agreements.

The Aytu Board and the Neos Board have not requested, and do not anticipate requesting, an updated opinion from their respective financial advisors reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement.

The opinions rendered to the respective boards of directors of Aytu and Neos by Cowen and MTS, respectively, were provided in connection with the Aytu Board’s and the Neos Board’s respective evaluation of the merger. Neither the Aytu Board nor the Neos Board has obtained an updated opinion from Cowen or MTS, respectively, as of the date of this joint proxy statement/prospectus or as of any other date, and the Aytu Board and the Neos Board have not requested, and do not anticipate requesting, an updated opinion from their respective financial advisors reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement. As a result, neither the Aytu Board nor the Neos Board will receive an updated, revised or reaffirmed opinion prior to the consummation of the merger. Changes in the operations and prospects of Aytu or Neos, general market and economic conditions and other factors that may be beyond the control of Aytu or Neos, including the social, political and economic

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impact of the COVID-19 pandemic, may significantly alter the value of Aytu or Neos or the prices of Aytu common stock or Neos common stock by the time the merger is consummated. The opinions of Cowen and MTS speak as of the date each opinion was rendered, and do not speak as of the time the merger will be consummated or as of any date other than the date of each such opinion. The opinions of Cowen and MTS do not address the fairness of the Exchange Ratio, from a financial point of view, at any time other than the time each such opinion was delivered. For a description of the opinion that the Aytu Board and the Neos Board received from Cowen and MTS, respectively, see the sections entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Opinion of Aytu’s Financial Advisor” and “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — Opinion of Neos’ Financial Advisor.”

Failure to consummate the merger could negatively impact respective future stock prices, operations and financial results of Aytu and Neos.

If the merger is not consummated for any reason, the ongoing businesses of Aytu and/or Neos may be adversely affected, and Aytu and Neos will be subject to a number of risks, including the following:

•        being required to pay a termination fee to the other party under certain circumstances provided in the Merger Agreement;

•        having to pay certain costs related to the merger, including, but not limited to, fees paid to legal, accounting and financial advisors, filing fees and printing costs;

•        declines in the stock prices of Aytu common stock and Neos common stock to the extent that the current market prices reflect a market assumption that the merger will be consummated; and

•        any negative impact of having the focus of management of each of Aytu and Neos on the merger, which may have the effect of diverting management’s attention and potentially causing Aytu or Neos, as applicable, not to pursue opportunities that could have been beneficial to Aytu or Neos, as applicable.

If the merger is not completed, Aytu and Neos cannot assure their stockholders that these risks will not materialize and will not materially adversely affect the business, financial results and stock prices of Aytu or Neos. In addition, if the merger with Aytu does not close, Neos may be required to seek other strategic alternatives, including but not limited to, strategic partnerships, a potential business combination or a sale of Neos or its business, or otherwise reduce its operations. There can be no assurance that Neos would be able to take any of these actions or that any effort to sell additional debt or equity securities would be successful or would raise sufficient funds to meet its financial obligations, including the May 2021 debt payment of $15.0 million due to Deerfield. If additional financing is not available when required or is not available on acceptable terms, Neos may need to curtail, delay, modify or abandon its commercialization plans for its marketed products, reduce its investment in the development of its product candidate and Neos may be unable to take advantage of business opportunities or respond to competitive pressures, which could have a material adverse effect on Neos’ revenue, results of operations and financial condition. To preserve Neos’ cash resources, it may be required to reorganize its operations, such as through a reduction in force with respect to one or more functions within Neos or across Neos. If Neos is unable to fund its operations without additional external financing and therefore cannot sustain future operations, it may be required to cease its operations and/or seek bankruptcy protection.

In addition, if the merger does not close, Neos may be required to effectuate a reverse stock split of its common stock to increase the per-share market price of Neos common stock to satisfy the Minimum Bid Price Rule under the Nasdaq rules so that Neos common stock, which will remain outstanding and registered under the Exchange Act, will be able to regain compliance with the applicable continued listing standards of Nasdaq and avoid being delisted from Nasdaq Global. However, there are risks related to effectuating such reverse stock split, which are described in more detail in the section entitled “— Risks Related to the Reverse Stock Split.”

The merger may disrupt the attention of Aytu’s management or Neos’ management from ongoing business operations.

Each of Aytu and Neos has expended, and expects to continue to expend, significant management resources to complete the merger. Their respective management’s attention may be diverted away from the day-to-day operations of their respective businesses, implementing initiatives to improve performance and executing existing business

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plans in an effort to complete the merger. This diversion of management resources could disrupt their respective operations and may have an adverse effect on their respective businesses, financial conditions and results of operations.

Aytu and Neos stockholders will not be entitled to appraisal or dissenters’ rights in the merger.

Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the DGCL. In the merger, because Neos common stock is listed on the Nasdaq, and because Neos stockholders are not required to accept in the merger any consideration in exchange for their shares of Neos common stock other than shares of Aytu common stock, which is listed on the Nasdaq, and cash in lieu of fractional shares (if applicable), holders of Neos common stock will not be entitled to any appraisal rights in connection with the merger with respect to their shares of Neos common stock. For a more detailed description of the relevant provisions of the DGCL, see the section entitled “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration — No Appraisal Rights for Neos Stockholders.”

Under Delaware law, Aytu stockholders are also not entitled to appraisal or dissenters’ rights in connection with the Aytu share issuance proposal.

The merger may not qualify as a “reorganization” for U.S. federal income tax purposes.

As of the date of this joint proxy statement/prospectus, it is intended that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In such case, a U.S. Holder (as defined in the section entitled “Material U.S. Federal Income Tax Consequences”) of Neos common stock that receives Aytu common stock in the merger generally would not recognize gain or loss on the exchange (other than in connection with the receipt of cash in lieu of fractional shares). However, the completion of the merger is not conditioned on the merger qualifying as a “reorganization” or upon the receipt of an opinion from counsel or an IRS ruling to that effect. Accordingly, the merger may be completed even if the merger does not qualify as a “reorganization.” If the merger does not qualify as a “reorganization” for U.S. federal income tax purposes, a U.S. Holder of Neos common stock generally would recognize gain or loss in an amount equal to the difference between (i) the fair market value of the shares of Aytu common stock received in the merger by such U.S. Holder and (ii) such U.S. Holder’s tax basis in the Neos common stock surrendered.

For a more complete description of the U.S. federal income tax consequences of the merger, see the section of this joint proxy statement/prospectus entitled “Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences of the merger to you will depend on your particular facts and circumstances. You should consult your own tax advisor as to the specific tax consequences of the merger to you in light of your particular circumstances.

Aytu and Neos may have difficulty attracting, motivating and retaining executives and other key employees in light of the merger.

Aytu’s success after the transaction will depend in part on the ability of Aytu to retain key executives and other employees of Neos. Uncertainty about the effect of the merger on Aytu and Neos employees may have an adverse effect on each of Aytu and Neos separately and consequently the combined business. This uncertainty may impair Aytu’s and/or Neos’ ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the merger, as employees of Aytu and Neos may experience uncertainty about their future roles in the combined business.

Furthermore, if key employees of Aytu or Neos depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined business, Aytu may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the combined company’s ability to realize the anticipated benefits of the merger may be materially and adversely affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that Neos has been able to attract or retain employees in the past.

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Completion of the merger is subject to a number of other conditions, and if these conditions are not satisfied or waived, the merger will not be completed.

The obligations of Aytu and Neos to complete the merger are subject to satisfaction or waiver of a number of conditions including (1) the approval of the merger proposal by a majority of the holders of the outstanding shares of Neos common stock, (2) approval of the issuance of Aytu common stock by a majority of the votes cast by Aytu stockholders on the matter, (3) that the conditions to the Debt Facility Letters have been satisfied as of the time of closing, and that the lenders do not dispute the satisfaction thereof, (4) accuracy of each party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, (5) the absence of a material adverse effect of either party and (6) compliance in all material respects with each party’s obligations under the Merger Agreement and certain other conditions. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled “The Merger Agreement — Conditions to Closing of the Merger.” There can be no assurance that the conditions to closing the merger will be satisfied or waived or that the merger will be completed within the expected time frame, or at all.

Aytu will assume a significant amount of debt in the merger, which, together with Aytu’s other debt, could limit Aytu’s operational flexibility or otherwise adversely affect Aytu’s financial condition.

If the merger closes, Aytu will indirectly assume approximately $30.6 million of term debt currently owed by Neos, of which $15.0 million will be due upon the closing of the merger, $0.6 will come due in April 2021, and $15.0 million which is due in May 2022. If Aytu fails to meet its obligations under the debt Aytu assumes in the merger, the lenders would be entitled to foreclose on all or some of the collateral securing such debt which could have a material adverse effect on Aytu and its ability to make expected distributions, and could threaten Aytu’s continued viability.

Aytu is subject to the risks normally associated with debt financing, including the following risks:

•        Aytu’s cash flow may be insufficient to meet required payments of principal and interest, or require Aytu to dedicate a substantial portion of its cash flow to pay its debt and the interest associated with its debt rather than to other areas of its business;

•        it may be more difficult for Aytu to obtain additional financing in the future for its operations, working capital requirements, capital expenditures, debt service or other general requirements;

•        Aytu may be more vulnerable in the event of adverse economic and industry conditions or a downturn in its business;

•        Aytu may be placed at a competitive disadvantage compared to its competitors that have less debt; and

•        Aytu may not be able to refinance at all or on favorable terms, as its debt matures.

If any of the above risks occurred, Aytu’s financial condition and results of operations could be materially adversely affected.

Aytu and Neos may be targets of transaction related lawsuits which could result in substantial costs and may delay or prevent the merger from being completed. If the merger is completed, Aytu will also assume Neos’ risks arising from various legal proceedings.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into Merger Agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Aytu’s and Neos’ respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, then that injunction may delay or prevent the merger from being completed, which may adversely affect Aytu’s and Neos’ respective business, financial position and results of operation. See the section entitled “Litigation Relating to the Merger” for more information about any litigation related to the merger. There can be no assurance that no complaints will be filed with respect to the merger, or that any additional complaints will be filed with respect

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to the Aytu’s acquisition of a portfolio of pediatric primary care products from Cerecor, Inc. (“Cerecor”) in 2019 (the “Cerecor Transaction”). Currently, with regard to the merger, Aytu and Neos are not aware of any securities class action lawsuits or derivative lawsuits being filed with respect to the merger.

Aytu and Neos have incurred, and will incur, substantial direct and indirect costs as a result of the merger.

Aytu and Neos have incurred and expect to incur additional material non-recurring expenses in connection with the merger and completion of the transactions contemplated by the Merger Agreement. Both parties have incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the merger. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of Neos and Aytu after completion of the merger.

Even if the merger is not completed, Aytu and Neos will each need to pay certain costs relating to the merger incurred prior to the date the merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant and could have an adverse effect on Aytu’s and Neos’ respective plans.

If the merger is completed, Aytu may fail to realize the anticipated benefits and cost savings of the merger, which could adversely affect the value of shares of Aytu common stock.

The success of the merger will depend, in part, on Aytu’s ability to realize the anticipated benefits and cost savings from combining the businesses of Aytu and Neos. Aytu’s ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others:

•        Aytu’s ability to successfully combine the businesses of Aytu and Neos;

•        the risk that the combined businesses will not perform as expected;

•        the extent to which Aytu will be able to realize the expected synergies, which include potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and value creation resulting from the combination of the businesses of Aytu and Neos;

•        the possibility that Aytu paid more for Neos than the value it will derive from the merger;

•        the assumption of known and unknown liabilities of Neos;

•        the possibility of a decline of the credit ratings of the combined company following the completion of the merger; and

•        the possibility of costly litigation challenging the merger.

If Aytu is not able to successfully combine the businesses of Aytu and Neos within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the merger may not be realized fully or may take longer to realize than expected, the combined businesses may not perform as expected and the value of the shares of Aytu common stock may be adversely affected.

Aytu and Neos have operated and, until completion of the merger will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Aytu or Neos employees, the disruption of either company’s or both companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of Neos and Aytu in order to realize the anticipated benefits of the merger so the combined business performs as expected include, among others:

•        combining the companies’ separate operational, financial, reporting and corporate functions;

•        integrating the companies’ technologies, products and services;

•        identifying and eliminating redundant and underperforming operations and assets;

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•        harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes;

•        addressing possible differences in corporate cultures and management philosophies;

•        maintaining employee morale and retaining key management and other employees;

•        attracting and recruiting prospective employees;

•        consolidating the companies’ corporate, administrative and information technology infrastructure;

•        coordinating sales, distribution and marketing efforts;

•        managing the movement of certain businesses and positions to different locations;

•        maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;

•        coordinating geographically dispersed organizations; and

•        effecting potential actions that may be required in connection with obtaining regulatory approvals.

In addition, at times, the attention of certain members of each company’s management and each company’s resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.

The Merger Agreement contains provisions that make it more difficult for Aytu and Neos to pursue alternatives to the merger and may discourage other companies from trying to acquire Neos for greater consideration than what Aytu has agreed to pay.

The Merger Agreement contains provisions that make it more difficult for Neos to sell its business to a party other than Aytu, or for Aytu to sell its business. These provisions include a general prohibition on each party soliciting any acquisition proposal. Further, there are only limited exceptions to each party’s agreement that its board of directors will not withdraw or modify in a manner adverse to the other party the recommendation of its board of directors in favor of the merger proposal, in the case of Neos, or the approval of the merger consideration, in the case of Aytu, and the other party generally has a right to match any acquisition proposal that may be made. However, at any time prior to the approval of the merger proposal by Neos stockholders, in the case of Neos, or the approval of the merger consideration by Aytu stockholders, in the case of Aytu, such party’s board of directors is permitted to make an adverse recommendation change if it determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law. In the event that either the Neos Board or the Aytu Board make an adverse recommendation change and the Merger Agreement is terminated, then such party may be required to pay a $2,000,000 termination fee. See the sections entitled “The Merger Agreement — No Solicitation” and “The Merger Agreement — Termination Fees.”

The parties believe these provisions are reasonable and not preclusive of other offers, but these restrictions might discourage a third party that has an interest in acquiring all or a significant part of either Neos or Aytu from considering or proposing an acquisition proposal, even if that party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration, in the case of Neos, or that party were prepared to enter into an agreement that may be favorable to Aytu or its stockholders, in the case of Aytu. Furthermore, the termination fees described above may result in a potential competing acquirer proposing to pay a lower per-share price to acquire the applicable party than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable by such party in certain circumstances.

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The indebtedness of the combined company following completion of the merger will be greater than Aytu’s indebtedness on a stand-alone basis. This increased level of indebtedness could adversely affect the combined company’s business flexibility, and increase its borrowing costs. Any resulting downgrades in Aytu’s credit ratings could adversely affect Aytu’s and/or the combined company’s respective businesses, cash flows, financial condition and operating results.

As of February 4, 2021, the current outstanding indebtedness of Neos is approximately $42.0 million, which is subject to change between then and the closing. As a result of the merger, Aytu will assume the outstanding indebtedness of Neos at the closing. The amount of cash required to service Aytu’s increased indebtedness levels and thus the demands on Aytu’s cash resources will be greater than the amount of cash flows required to service the indebtedness of Aytu individually prior to the merger. The increased levels of indebtedness could also reduce funds available to fund Aytu’s efforts to combine its business with Neos and realize expected benefits of the merger and/or engage in investments in product development, capital expenditures, and other activities and may create competitive disadvantages for Aytu relative to other companies with lower debt levels. While Aytu successfully raised net proceeds of $26.1 million in a common stock financing after announcement of the merger in December 2020, Aytu may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes. Aytu’s ability to arrange additional financing or refinancing will depend on, among other factors, Aytu’s financial position and performance, as well as prevailing market conditions and other factors beyond Aytu’s control. Aytu cannot assure you that it will be able to obtain additional financing or refinancing on terms acceptable to Aytu or at all.

Aytu may not be able to service all of the combined company’s indebtedness and may be forced to take other actions to satisfy Aytu’s obligations under Aytu’s indebtedness, which may not be successful. Aytu’s failure to meet its debt service obligations could have a material adverse effect on the combined company’s business, financial condition and results of operations.

Aytu depends on cash on hand and revenue from operations to make scheduled debt payments. Aytu expects to be able to meet the estimated cash interest payments on the combined company’s debt following the merger through the expected revenue from operations of the combined company. However, Aytu’s ability to generate sufficient revenue from operations of the combined company and to utilize other methods to make scheduled payments will depend on a range of economic, competitive and business factors, many of which are outside of Aytu’s control. There can be no assurance that these sources will be adequate. If Aytu is unable to service Aytu’s indebtedness and fund Aytu’s operations, Aytu will be forced to reduce or delay capital expenditures, seek additional capital, sell assets or refinance Aytu’s indebtedness. Any such action may not be successful and Aytu may be unable to service Aytu’s indebtedness and fund Aytu’s operations, which could have a material adverse effect on the combined company’s business, financial condition or results of operations.

Aytu will incur significant transaction and integration-related costs in connection with the merger. In addition, the merger may not be accretive, and may be dilutive, to Aytu’s earnings per share, which may negatively affect the market price of shares of Aytu’s common stock.

Aytu expects to incur a number of non-recurring costs associated with the merger and combining the operations of the two companies. Aytu will incur significant transaction costs related to the merger. Aytu also will incur significant integration-related fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Aytu continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses. While Aytu has assumed that a certain level of transaction expenses will be incurred, factors beyond Aytu’s control, such as certain of Neos’ expenses, could affect the total amount or the timing of these expenses. Although Aytu expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Aytu to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

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Following the closing of the merger, there is a risk that a significant amount of the combined company’s total assets will be related to acquired intangible assets and goodwill, which are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate that the carrying value may not be recoverable. Because of the significance of these assets, any charges for impairment as well as amortization of intangible assets could have a material adverse effect on the combined company’s results of operations and financial condition.

The combined company will be subject to the risks that Neos faces, in addition to the risks faced by Aytu. In particular, the success of the combined company will depend on its ability to obtain, commercialize and protect intellectual property.

Neos and Aytu currently have a limited number of products and the combined company may not be successful in marketing and commercializing these products. In addition, following the merger Aytu may seek to develop current or new product candidates of both Aytu and Neos. The testing, manufacturing and marketing of these product candidates would require regulatory approvals, including approval from the FDA and similar bodies in other countries. To the extent the combined company seeks to develop product candidates, the future growth of the combined company would be negatively affected if Aytu, Neos or the combined company fails to obtain requisite regulatory approvals within the expected time frames, or at all, in the United States and internationally for products in development and approvals for Aytu’s existing products for additional indications.

The unaudited pro forma combined financial information and prospective financial information included in this joint proxy statement/prospectus are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the combined company following completion of the merger or reflect the effect of any divestitures that may be required in connection with the merger.

The unaudited pro forma combined financial information and prospective financial information contained in this joint proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of Aytu and Neos prior to the merger or that of the combined company following the merger for several reasons. Among other things, the unaudited pro forma combined financial information does not reflect the effect of any potential divestitures that may occur prior to or subsequent to completion of the merger, the projected realization of cost savings following completion of the merger or any changes in applicable law (including applicable tax law) after the date of this joint proxy statement/prospectus. See the sections entitled “Certain Unaudited Pro Forma Condensed Combined Financial Statements,” “Neos Proposal I: Adoption of the Merger Agreement and Aytu Proposal I: Approval of the Merger Consideration” and “Comparative Historical and Unaudited Pro Forma Combined Per Share Data.” The actual financial positions and results of operations of Neos and Aytu prior to the merger and that of the combined company following the merger may not be consistent with, or evident from, the unaudited pro forma combined financial information or prospective financial information included in this joint proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma combined financial information and/or the prospective financial information included in this joint proxy statement/prospectus may not be realized and may be affected by other factors, which could lead to material changes to the combined company’s business that are not reflected in the unaudited pro forma combined financial information. Any significant changes in the market price of shares of Aytu common stock may cause a significant change in the purchase price used for Aytu’s accounting purposes and the pro forma combined financial information contained in this joint proxy statement/prospectus.

Certain Neos agreements may contain change of control provisions that may be triggered by the merger that, if acted upon or not waived, could cause the combined company to lose the benefit of such agreement and incur liabilities or replacement costs, which could have a material adverse effect on the combined company.

Neos is party to, or may become party to after the date hereof, various agreements with third parties that may contain change of control provisions that may be triggered upon the completion of the merger. Agreements with change of control provisions typically provide for or permit the termination of the agreement upon the occurrence of a change of control of one of the parties which can be waived by the relevant counterparties. In the event that there is such a

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contract or arrangement requiring a consent or waiver in relation to the merger or the Merger Agreement, for which such consent or waiver was not obtained, the combined company could lose the benefit of the underlying agreement and incur liabilities or replacement costs, which could have an adverse effect on the operations of the combined company.

The future results of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following completion of the merger.

Following completion of the merger, the size of the combined company’s business will be significantly larger than the current size of either Aytu’s or Neos’ respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to implement an effective integration of the two companies and its ability to manage a combined business with significantly larger size and scope with the associated increased costs and complexity. There can be no assurances that the management of the combined company will be successful or that the combined company will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

Risks Related to the Reverse Stock Split

The reverse stock split may not increase the Neos stock price over the long-term.

The principal purpose of the reverse stock split is to increase the per-share market price of Neos common stock above the minimum bid price requirement under the Nasdaq rules so that, if the merger proposal is not approved by the Neos stockholders, the Common Stock Issuance is not approved by the Aytu stockholders or if the merger is not completed for any other reason, Neos common stock, which will remain outstanding and registered under the Exchange Act, will be able to regain compliance with the applicable continued listing standards of Nasdaq. It cannot be assured, however, that the reverse stock split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Neos common stock, it cannot be assured that the reverse stock split will increase the market price of Neos common stock by a multiple of the reverse stock split ratio, or result in any permanent or sustained increase in the market price of Neos common stock, which is dependent upon many factors, including Neos’ business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of Neos common stock might meet the continued listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

The reverse stock split may decrease the liquidity of Neos common stock.

Although the Neos Board believes that the anticipated increase in the market price of Neos common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Neos common stock.

The reverse stock split may lead to a decrease in Neos’ overall market capitalization.

Should the market price of Neos common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in Neos’ overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of Neos, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Neos common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on Neos’ stock price due to the reduced number of shares outstanding after the reverse stock split.

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RISK FACTORS RELATING TO AYTU

Other Risk Factors of Aytu.

Aytu’s business is and will be subject to the risks described above. In addition, Aytu is, and will continue to be, subject to the risks described in Aytu’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and are incorporated by reference into this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” for instructions on how to obtain the information incorporated by reference into this joint proxy statement/prospectus and any other materials Aytu files with the SEC.

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RISK FACTORS RELATING TO NEos

Within this “Risk Factors Relating to Neos” section, references to “Neos,” “the Company,” or like terms, refer to Neos Therapeutics, Inc.

Risks Related to Neos’ Business and Financial Position

Neos does not have enough existing cash resources to fund its operations for the next twelve months and if Neos is unable to secure additional capital, Neos may be required to seek strategic alternatives, including but not limited to a potential business combination or a sale of Neos or its business, or reduce or cease its operations.

Neos has incurred significant losses in each year since its reorganization in 2009. Neos’ net losses were $18.4 million and $16.9 million for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, Neos had accumulated deficits of approximately $352.3 million and $333.9 million, respectively. Neos anticipates incurring substantial additional losses and may never achieve profitability.

Neos has devoted substantially all of its resources to funding its manufacturing operations and to its commercial products and product candidates which consist of implementation of its commercialization strategies, research and development activities, clinical trials for its product candidates, the general and administrative support of these operations and intellectual property protection and maintenance. Neos expects to continue to incur significant expenses and increasing operating losses as Neos operates commercial infrastructure to support sales and marketing for Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER (which Neos collectively refers to as its “Branded Products”), continue research and development activities for NT0502 and new product candidates, conduct post-marketing approval research activities for its approved products, manufacture supplies for its preclinical studies and clinical trials, continue to enforce its intellectual property rights, operate as a public company and service its outstanding indebtedness to its current lenders. Failure to satisfy its current and future debt obligations under its credit facilities with its lenders could result in an event of default and, as a result, its lenders could accelerate all of the amounts due. In the event of an acceleration of amounts due under one or both of its debt agreements as a result of an event of default, Neos may not have sufficient funds or may be unable to arrange for additional financing to repay its indebtedness. In addition, Neos’ lenders could seek to enforce their security interests in any collateral securing such indebtedness.

As of September 30, 2020, Neos had approximately $12.7 million in cash and cash equivalents. Based on its estimates, Neos expects that its current cash position will not be sufficient to fund its operations and continue as a going concern for at least the next twelve months. Neos has no additional committed external sources of funds and additional financing may not be available when it needs it or may not be available on terms that are favorable to Neos. If Neos is unable to generate additional funds in the future through financings, sales of its products, loans or from other sources or transactions, Neos will exhaust its resources and will be unable to maintain its currently planned operations. Additionally, even if Neos raises sufficient capital through equity or debt financing or transactions, there can be no assurances that the capital raised will be sufficient to enable it to develop its business to a level where it will be profitable or generate positive cash flow.

In light of Neos’ cash position, Neos sought strategic alternatives and ultimately determined to enter into the Merger Agreement with Aytu. If the merger with Aytu does not close, Neos may be required to seek other strategic alternatives, including but not limited to, strategic partnerships, a potential business combination or a sale of its company or its business, or otherwise reduce its operations. Neos cannot assure you that it would be able to take any of these actions or that any effort to sell additional debt or equity securities would be successful or would raise sufficient funds to meet its financial obligations, including the May 2021 debt payment of $15.0 million due to Deerfield. If additional financing is not available when required or is not available on acceptable terms, Neos may need to curtail, delay, modify or abandon its commercialization plans for its marketed products, reduce its investment in the development of its product candidate and it may be unable to take advantage of business opportunities or respond to competitive pressures, which could have a material adverse effect on its revenue, results of operations and financial condition. To preserve its cash resources, Neos may be required to reorganize its operations, such as through a reduction in force with respect to one or more functions within Neos or across Neos. If Neos is unable to fund its operations without additional external financing and therefore cannot sustain future operations, Neos may be required to cease its operations and/or seek bankruptcy protection.

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If the merger with Aytu does not close, Neos may need additional funding and may be unable to raise capital when needed, which would force Neos to delay, reduce or eliminate its product development programs or commercialization efforts.

Developing future potential product candidates, conducting clinical trials, establishing raw material supplier relationships and manufacturing, and selling and marketing drugs are expensive and uncertain processes. Neos may need to obtain additional capital through equity offerings, debt financing, payments under new or existing licensing and research and development collaboration agreements, or any combination thereof, in order to become cash flow positive and to develop and commercialize additional product candidates. If sufficient funds on acceptable terms are not available when needed, Neos could be required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs, which may have a material adverse effect on its business, results of operations and financial condition.

In addition, unforeseen circumstances may arise, or its strategic imperatives could change, causing it to consume capital significantly faster than Neos currently anticipates, requiring it to seek to raise additional funds sooner than expected. Neos has no committed external sources of funds.

The amount and timing of Neos’ future funding requirements will depend on many factors, including, but not limited to:

•        the expenses associated with its sales, marketing, distribution and commercial manufacturing efforts for its Branded Products and any other potential product candidates;

•        Neos’ ability to successfully commercialize its Branded Products, and to continue to increase the level of sales in the marketplace;

•        the rate of progress and cost of its trials and other product development programs for its other product candidates;

•        the costs and timing of in-licensing additional product candidates or acquiring other complementary technologies, assets or companies;

•        the actions of Neos’ competitors and their success in selling competitive product offerings; and

•        the status, terms and timing of any collaborative, licensing, co-promotion or other arrangements.

Additional financing may not be available when needed or may not be available on terms that are favorable to Neos. In addition, Neos may seek additional capital due to favorable market conditions or strategic considerations, even if Neos believes it has sufficient funds for its current or future operating plans. If adequate funds are not available to Neos on a timely basis, or at all, Neos may be required to delay, reduce the scope of or eliminate commercialization efforts for one or more of its products or development programs for future potential product candidates.

If the merger with Aytu does not close, Neos may need to sell additional equity or incur debt to fund its operations and service its existing debt obligations, which may result in dilution to its stockholders and impose restrictions on its business.

To raise additional funds to support its operations, Neos may sell additional equity or incur additional debt, which could adversely impact its stockholders, as well as its business. The sale of additional equity or convertible debt securities would result in the issuance of additional shares of its capital stock and dilution to all of its stockholders. The incurrence of additional indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business. Neos may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay its existing and future indebtedness at the time any such repayment is required (causing a default under such indebtedness), which could have a material adverse effect on its business, financial condition and results of operations.

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If the merger with Aytu does not close on a timely basis, Neos may not have cash available in an amount sufficient to enable it to make interest or principal payments on its indebtedness when due, including the $15.0 million due to Deerfield in May 2021.

On May 11, 2016, Neos entered into a senior secured credit facility with Deerfield as lender of which $34.4 million of senior secured credit is outstanding as of September 30, 2020. Under this agreement, as amended, Neos is required to make payments of $5.0 million in equal monthly installments of $625,000 which began in September 2020 and end in April 2021, $15.0 million in May 2021, and a final payment of principal, interest and all other obligations under the facility due on May 11, 2022. Interest is due quarterly at a rate of 12.95% per year. On October 2, 2019, Neos entered into a loan agreement with Encina pursuant to which Encina will extend up to $25.0 million in secured revolving loans to Neos for general corporate purposes. Any loans under this agreement bear variable interest through maturity at the one-month LIBOR, plus an applicable margin of 4.50%. In addition, Neos is required to pay an unused line fee of 0.50% of the average unused portion of the maximum revolving facility amount during the immediately preceding month. As of September 30, 2020, Neos had $7.3 million borrowing outstanding under this facility. All obligations under Neos’ credit facilities are secured by substantially all of its existing property and assets subject to certain exceptions. These debt financings and any future debt financings may create additional financial risk for Neos, particularly if its business or prevailing financial market conditions are not conducive to paying off or refinancing its outstanding debt obligations at maturity. Since Neos’ inception, Neos has had significant operating losses. As of September 30, 2020 and December 31, 2019, Neos had accumulated deficit of $352.3 million and $333.9 million, respectively. Although Neos has strategies and plans to achieve profitability through revenue growth, Neos expects to continue to incur net losses and have negative cash flow from operating activities for the foreseeable future as Neos continues to market its approved products and continue to develop and seek marketing approval for its product candidates.

As a result, Neos may not have sufficient funds, or may be unable to arrange for additional financing, to pay the amounts due on its outstanding indebtedness under its debt agreements. Further, funds from external sources may not be available on economically acceptable terms, if at all. For example, if Neos raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to its product candidates or technologies, or to grant licenses on terms that are not favorable to Neos. If adequate funds are not available when and if needed, its ability to make interest or principal payments on its debt obligations, finance its operations, its research and development efforts and other general corporate activities would be significantly limited and Neos may be required to delay, significantly curtail or eliminate one or more of its programs.

Failure to satisfy its current and future debt obligations under its credit facilities with Deerfield or Encina could result in an event of default and, as a result, its lenders could accelerate all of the amounts due. In the event of an acceleration of amounts due under one or both of its debt agreements as a result of an event of default, Neos may not have sufficient funds or may be unable to arrange for additional financing to repay its indebtedness. In addition, Neos’ lenders could seek to enforce their security interests in any collateral securing such indebtedness. In connection with the facility with Encina, Neos amended the credit facility with Deerfield to, among other things, restate the representations and warranties of Neos in favor of Deerfield and made additional representations and warranties consistent with those that Neos made in the Encina facility. In addition, the affirmative covenants, negative covenants and events of default in the Deerfield facility were expanded to conform to applicable provisions in the Encina facility.

Neos’ quarterly operating results may fluctuate significantly.

Neos expects its operating results to be subject to quarterly and annual fluctuations. Based on the historical data from its currently marketed products, Neos expects that any revenues it generates will fluctuate from quarter to quarter and year to year as a result of the timing of its commercialization efforts and seasonal trends with respect to ADHD diagnosis and use of medicinal products in the management of this disorder. Neos’ net loss and other operating results will be affected by numerous factors, including:

•        Neos’ ability to establish and maintain an effective sales and marketing infrastructure;

•        variations in the level of expenses related to commercialization efforts and the development of additional clinical programs;

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•        competition from existing products or new products that may emerge;

•        the level of market acceptance for any approved product candidates and underlying demand for that product, seasonality in the use of that product by end-users and wholesalers’ buying patterns;

•        regulatory developments affecting Neos’ products and product candidates;

•        its dependency on third-party manufacturers to supply components of Neos’ product candidates;

•        potential side effects of its future products that could delay or prevent commercialization or cause an approved drug to be taken off the market;

•        any delays in regulatory review and approval of Neos’ product candidates;

•        any intellectual property infringement lawsuit in which Neos may become involved; and

•        Neos’ execution of any collaborative, licensing or similar arrangements, and the timing of payments Neos may make or receive under these arrangements.

Due to the various factors mentioned above, and others, the results of any prior quarterly period should not be relied upon as an indication of its future operating performance. If Neos’ quarterly operating results fall below the expectations of investors or securities analysts, the price of its common stock could decline substantially. Furthermore, any quarterly fluctuations in its operating results may, in turn, cause the price of Neos’ stock to fluctuate substantially.

If Neos is unable to demonstrate compliance with the Nasdaq continued listing standard on or before June 28, 2021, such that Nasdaq issues a final determination to delist its common stock, the liquidity and market price of Neos’ common stock would be adversely impacted.

Neos’ common stock is currently listed on Nasdaq Global, which has qualitative and quantitative continued listing requirements, including corporate governance requirements, public float requirements and the $1.00 minimum closing bid price requirement. Since April 17, 2020, Neos’ common stock has traded at closing bid prices below $1.00. On June 2, 2020, Neos received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, for the last 30 consecutive business days, the bid price for its common stock had closed below the minimum $1.00 per share required for continued inclusion on Nasdaq Global under Nasdaq Listing Rule 5450(a)(1). On April 17, 2020, in light of market conditions resulting from the impact of the COVID-19 pandemic, Nasdaq announced temporary relief from certain of its listing requirements, including the $1.00 minimum closing bid price requirement, through June 30, 2020. As a result of these changes, while Nasdaq will continue to notify companies about new instances of non-compliance through such date, compliance periods for such new instances will not begin until July 1, 2020. Therefore, since Neos’ common stock remained below the minimum closing bid price threshold during the prescribed time, Neos’ 180-day initial compliance period commenced on July 1, 2020 and ended on December 28, 2020. At the conclusion of Neos’ initial compliance period, Neos did not meet the minimum requirements to transfer its listing to the Nasdaq Capital Market, including not having sufficient stockholders’ equity. As a result, Neos was not afforded an additional 180-day compliance period and, on December 29, 2020, Nasdaq notified Neos that it intended to take steps to delist Neos’ common stock. On December 30, 2020, Neos requested a hearing to appeal Nasdaq’s decision, which stayed the delisting proceedings pending a decision by the hearings panel. This appeal included a description of Neos’ plans to regain compliance with the applicable continued listing standards, including through the pursuit of a reverse stock split to restore compliance with the $1.00 minimum closing bid price requirement. On February 4, 2021, Neos conducted such hearing before a Nasdaq hearings panel. On February 5, 2021, the hearings panel granted Neos’ request to continue its listing on Nasdaq during the pendency of the merger or until June 28, 2021. To remain listed on Nasdaq beyond such date, Neos must demonstrate compliance with the applicable continued listing standard on or before such date. If Neos is unable to regain compliance with the applicable continued listing standard on or before June 28, 2021, Nasdaq could issue a final determination to delist its common stock. Such delisting of its common stock would adversely affect the market liquidity of its common stock, decrease the market price of its common stock and adversely affect its ability to obtain financing for the continuation of its operations.

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If Neos is unable to regain compliance with the applicable continued listing standard in time and its common stock is not eligible for continued listing on another national securities exchange, trading of Neos’ common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, Neos’ common stock, and there would likely also be a reduction in Neos’ coverage by security analysts and the news media, which could cause the price of Neos’ common stock to decline further. Also, it may be difficult for Neos to raise additional capital if Neos is not listed on a major exchange.

Neos’ future success depends on its ability to retain key executives and to attract, retain and motivate qualified personnel.

Neos is highly dependent on the principal members of its executive team, the loss of whose services may adversely impact the achievement of its objectives. Any of Neos’ executive officers could leave its employment at any time, as all of its executive officers are “at will” employees. Recruiting and retaining other qualified employees for Neos’ business, including scientific and technical personnel, will also be critical to its success. There is currently a shortage of skilled executives in Neos’ industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. Neos may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in clinical trials or to receive regulatory approval for its product candidates may make it more challenging to recruit and retain qualified personnel. The inability to recruit key executives or the loss of the services of any executive or key employee might impede the progress of Neos’ development and commercialization objectives.

If Neos fails to maintain an effective system of internal control over financial reporting, Neos may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in its financial and other public reporting, which would harm its business and the trading price of its common stock.

Effective internal controls over financial reporting are necessary for Neos to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause Neos to fail to meet its reporting obligations. Neos has established an annual SOX Risk Assessment and Control Effectiveness Test Cycle that is designed to timely identify deficiencies to management for remediation to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (or the “SOX Act”). Neos may discover additional deficiencies in its internal controls over financial reporting, including those identified through testing conducted by Neos in connection with Section 404 of the SOX Act.

Such deficiencies may be deemed to be significant deficiencies or material weaknesses that may require prospective or retroactive changes to Neos’ consolidated financial statements or identify other areas for further remedial action. In connection with the preparation of its financial statements for the period ended June 30, 2020, Neos concluded that it had a material weakness in internal control over financial reporting related to accounting for debt issuance costs and discounts in connection with the Fifth Amendment to its credit facility. In response, Neos has taken a number of actions designed to improve the operating effectiveness of its internal control over financial reporting to remediate this material weakness. These efforts include establishing mechanisms and processes to allow for the testing of conclusions for non-routine complex transactions, testing of adherence to its policies and procedures and increasing the level of involvement of its third-party provider for technical accounting expertise when there are any such transactions during the period. Although Neos believes the material weakness has been remediated, given that there were no such transactions during the period ended September 30, 2020, Neos did not have the availability to test the operating effectiveness of its control.

Such measures were implemented as of September 30, 2020 and management believes that the enhanced controls are operating effectively and the deficiencies that contributed to the material weakness have been remediated. Neos expects to continue its efforts to maintain and improve its control processes, though there can be no assurance that Neos will avoid potential future material weaknesses, and Neos expects to continue incurring additional costs as a result of these efforts. Management remains committed to the maintenance of such remediation efforts to address the above material weakness. If Neos is unable to successfully remediate any future material weaknesses in its internal

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control over financial reporting, or if Neos identifies any additional material weaknesses in the future, the accuracy and timing of its financial reporting may be adversely affected, Neos may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in its financial reporting, and its stock price may decline as a result. Neos also could become subject to investigations by Nasdaq, the SEC or other regulatory authorities.

Neos’ business and operations would suffer in the event of system failures.

Neos utilizes information technology, or IT, systems and networks to process, transmit and store electronic information in connection with its business activities. As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of Neos’ systems and networks and the confidentiality, availability and integrity of its data. There can be no assurance that Neos will be successful in preventing cyber-attacks or successfully mitigating their effects.

Despite the implementation of security measures, Neos’ internal computer systems and those of its contractors and consultants are vulnerable to damage from such cyber attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could cause interruption of its operations. For example, the loss of data from completed clinical trials for its product candidates could result in delays in its regulatory approval efforts and significantly increase its costs. To the extent that any disruption or security breach were to result in a loss of or damage to its data, or inappropriate disclosure of confidential or proprietary information, Neos could suffer reputational harm or face litigation or adverse regulatory action and the development of its product candidates could be delayed.

Neos relies on third parties to perform many essential services for its commercial products, including distribution, customer service, accounts receivable management, cash collection and adverse event reporting. If these third parties fail to perform as expected or to comply with legal and regulatory requirements, Neos’ ability to continue to commercialize its products will be significantly impacted and Neos may be subject to regulatory sanctions.

Neos has retained third-party service providers to perform a variety of functions related to the sale and distribution of its products, key aspects of which will be out of its direct control. These service providers may provide key services related to, among other things, distribution, customer service, accounts receivable management and cash collection. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to Neos, Neos’ ability to deliver product to meet commercial demand may be significantly impaired. In addition, Neos may engage third parties to perform various other services for Neos relating to adverse event reporting, safety database management, fulfillment of requests for medical information regarding its product candidates and related services. If the quality or accuracy of the data maintained by these service providers is insufficient or if they fail to comply with various requirements, Neos could be subject to regulatory sanctions.

Risks Related to Commercialization

Neos is heavily dependent on the commercial success of its commercial products. Neos has not generated substantial revenues from the sales of these products, or any sales revenues from any of its product candidates, if approved, and Neos may never achieve or maintain profitability.

Neos’ ability to become profitable depends upon its ability to generate revenues from sales of its Branded Products for the treatment of attention deficit hyperactivity disorder, or ADHD, and, if approved, any other product candidates that Neos may develop. Neos has limited commercial experience, having only generated revenues from the sale of its generic Tussionex since Neos acquired it in 2014, and Adzenys XR-ODT, Cotempla XR-ODT, and Adzenys ER, which Neos commenced commercializing in May 2016, September 2017 and February 2018, respectively. None of Neos’ marketed products have thus far generated product sales revenues at levels sufficient for Neos to attain profitability. Neos has not generated any revenues from product sales of any other product candidates and, to date, has incurred significant operating losses.

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Neos’ ability to generate product revenues is dependent on its ability to successfully commercialize its Branded Products, and any other product candidates that Neos may identify and develop or for which Neos may obtain approval. Neos’ ability to successfully commercialize its products and product candidates depends on, among other things, its ability to:

•        manufacture commercial quantities of Neos’ Branded Products and, if approved, any other product candidates that Neos may develop at acceptable cost levels; and

•        successfully establish and/or maintain sales and marketing capabilities to commercialize Neos’ Branded Products and, if approved, any other product candidates that Neos may develop.

Neos has incurred, and anticipate continuing to incur, significant costs associated with commercialization of its approved products and, if approved, any other product candidates that Neos may develop. It is possible that Neos will never attain sufficient product sales revenues to achieve profitability.

If Neos’ sales and marketing efforts for its Branded Products are not successful, and if Neos is unable to establish and maintain sales and marketing capabilities or enter into agreements with third parties to market, distribute and sell its other product candidates, if approved, Neos may be unable to generate significant revenue.

While Neos has established internal and external capabilities for the sale, marketing and distribution of its Branded Products, there is no guarantee that Neos will be successful in the commercialization of its products. Neos currently has a limited sales history for its Branded Products. Although Neos has established a focused, specialty sales and marketing organization of approximately 45 representatives to promote its approved products in the United States, these commercialization capabilities have only been recently established, and Neos may need to expand its sales force if Neos decides to undertake additional commercialization activities on its own, which will be costly and time-consuming. Neos cannot be certain that it will reap the benefits of its commercialization efforts of its Branded Products compared to the cost of such efforts. Neos’ prior experience in the marketing, sale and distribution of pharmaceutical products is limited to its generic Tussionex product and, before the commercial launch of Adzenys XR-ODT, Neos had no prior experience, as a company, in the marketing, sale and distribution of branded pharmaceutical products. There are significant risks involved in building and managing a sales organization, including Neos’ ability to successfully hire, retain and incentivize qualified individuals, generate sufficient and appropriate customer targets, provide adequate training to sales and marketing personnel, effectively manage a geographically dispersed sales and marketing team and successfully negotiate with managed care and third-party payors. Any failures associated with the operation or expansion of Neos’ internal and external sales, marketing and distribution capabilities could adversely impact the commercialization of these products.

In addition, while Neos realigned its commercial operations in November 2018 and again in May 2020 to deploy its resources to what Neos believes are the most appropriate regions and physician targets, there can be no assurances that Neos will realize the intended benefits of these realignments or that the strategy will improve its operating results. As part of both realignments, Neos reduced the size of its commercialization organization resulting in severance and employee related costs. Following the realignment in 2018, there were fewer prescriptions written for its marketed products in 2019. It is possible that the May 2020 realignment may also result in fewer prescriptions written for Neos’ marketed products. In the future, Neos may determine to increase or decrease the extent of its commercial operations.

Neos also may enter into strategic partnerships with third parties to commercialize its Branded Products and its other product candidates, if approved, outside of the United States and intend to also enter into strategic partnerships with third parties for certain aspects of its commercialization efforts within the United States. Neos may have difficulty establishing relationships with third parties on terms that are acceptable to it, or in all of the regions where Neos wish to commercialize its products, or at all. If Neos is unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, Neos may not be able to generate sufficient product revenue and may not become profitable. Neos will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Even though Neos has established an internal marketing and sales team, Neos may be unable to compete successfully against these more established companies.

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Neos’ business is subject to extensive regulatory requirements, and Neos’ approved products and any product candidates that obtain approval will be subject to ongoing and continued regulatory review, which may result in significant expense and limit its ability to commercialize such products.

Even after a product is approved, Neos remains subject to ongoing FDA, and other regulatory requirements governing, among other things, the production, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, import, export, record-keeping and reporting of safety and other post-market information. The holder of an approved new drug application (“NDA”) is obligated to monitor and report adverse events, or AEs, and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. In addition, the FDA may impose significant restrictions on the approved indicated uses for which the product may be marketed or on the conditions of approval. For example, a product’s approval may contain requirements for potentially costly post-approval trials and surveillance to monitor the safety and efficacy of the product or the imposition of a Risk Evaluation and Mitigation Strategy, or REMS, program.

Prescription drug advertising, marketing and promotion are subject to federal, state and foreign regulations that include requirements for direct-to-consumer advertising and promotional activities involving the Internet and social media. In the United States, prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure they are marketed only for their approved indications and in accordance with the provisions of the approved label. Any promotion for uses or in patient populations not described in the approved labeling, known as “off-label” promotion, is impermissible and could subject Neos to enforcement actions and significant penalties for off-label marketing. The FDA has also provided guidance on industry-sponsored scientific and educational activities to ensure such activities are not promotional.

In addition, manufacturers and their facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices (“cGMPs”). These cGMP regulations cover all aspects of manufacturing relating to Neos’ generic Tussionex and its Branded Products. As such, Neos is subject to continual review and periodic inspections to assess compliance with cGMP and must continue to expend time, money and resources in all areas of regulatory compliance, including manufacturing, production and quality control.

The facilities used by Neos to manufacture its products and any product candidates that Neos may develop are subject to inspections, including pre-approval inspections following its submission of any NDAs to the FDA for any product candidates that Neos may develop. For example, in connection with a general cGMP and pre-approval inspection for Adzenys ER in July 2017, Neos received a Form FDA 483 with one observation related to complaint records failing to document the reason and the individual making the decision not to conduct a complaint investigation. Neos implemented corrective action related to this observation and responded to the FDA. The FDA’s most recent inspections in 2018 did not result in a Form FDA 483.

If Neos cannot successfully manufacture material that conforms to its specifications and the strict regulatory requirements of the FDA, Neos will not be able to secure and/or maintain regulatory approval for its product candidates. If the FDA finds deficiencies at Neos’ manufacturing facility and does not approve its NDA for any of its future product candidates or if the FDA withdraws any such approval in the future for Neos’ products, Neos’ ability to develop or market any of its products or any product candidates that Neos may develop will be significantly impacted.

Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMPs and adherence to commitments made in the NDA. If Neos or a regulatory agency discovers previously unknown problems with a product, such as AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including notice to physicians, withdrawal of the product from the market or suspension of manufacturing. Manufacturers are also subject to annual prescription drug product program fee. If Neos is unable to generate sales of its product candidates, the user fee requirements could be difficult to pay.

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If Neos fails to comply with applicable regulatory requirements, the FDA may, for example:

•        issue untitled or warning letters asserting that it is in violation of the Federal Food, Drug and Cosmetic Act (the “FDCA”);

•        impose restrictions on the marketing or manufacturing of any product or product candidate that Neos may develop;

•        seek an injunction or impose civil, criminal and/or administrative penalties, damages, assess monetary fines, or require disgorgement;

•        suspend or withdraw regulatory approval;

•        suspend any ongoing clinical trials;

•        refuse to approve a pending NDA or supplements to an NDA submitted by Neos with respect to any product candidate that Neos may develop; or

•        seize the product.

Moreover, any violation of these and other laws and regulations could result in exclusion from participation in federal healthcare programs, such as Medicare and Medicaid, require curtailment or restructuring of its operations and prohibit Neos from entering into government contracts.

Similar requirements may apply in foreign jurisdictions in which Neos may seek approval of its products. Any government investigation of alleged violations of law could require Neos to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit Neos’ ability to commercialize its products and generate revenues.

In addition, the FDA’s regulations or policies may change and new or additional statutes or government regulations in the United States and other jurisdictions may be enacted that could prevent or delay regulatory approval of its product candidates or further restrict or regulate post-approval activities. Neos cannot predict the likelihood, nature or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either in the United States or abroad. If Neos is not able to achieve and maintain regulatory compliance, Neos may not be permitted to market its products and/or product candidates, which would adversely affect its ability to generate revenue and achieve or maintain profitability.

The commercial success of Neos’ Branded Products depends upon attaining market acceptance by physicians, patients, third-party payors and the medical community.

To date, Neos has expended significant time, resources, and effort on the development of its Branded Products, and a substantial majority of its resources are now focused on the commercialization of these products in the United States. Accordingly, Neos’ ability to generate significant product revenue and ultimately to attain profitability will depend almost entirely on its ability to successfully commercialize its Branded Products.

Neos’ ability to successfully commercialize its Branded Products will depend on, among other things, its ability to:

•        establish and maintain relationships with third-party suppliers for the active pharmaceutical ingredient (“API”), in Neos’ Branded Products;

•        manufacture and produce, through a validated process, sufficiently large quantities and inventory of Neos’ Branded Products to permit successful commercialization;

•        establish and/or build and maintain a wide variety of internal and external sales, distribution and marketing capabilities sufficient to support commercial sales of Neos’ products;

•        establish collaborations with third parties for the commercialization of Neos’ products in countries outside the United States, and such collaborators’ ability to obtain regulatory and reimbursement approvals in such countries;

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•        secure widespread acceptance of Neos’ products by physicians, health care payors, patients and the medical community;

•        properly price and obtain adequate coverage and reimbursement of the product by governmental authorities, private health insurers, managed care organizations and other third-party payors;

•        maintain compliance with ongoing FDA labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; and

•        manage Neos’ spending related to its commercialization efforts.

There are no guarantees that Neos will be successful in completing these tasks. Successful commercialization will also depend on whether Neos can adequately protect against and effectively respond to any claims by holders of patents and other intellectual property rights that its products infringe their rights, whether any unanticipated adverse effects or unfavorable publicity develops in respect of its products, as well as the emergence of new or existing products as competition, which may be proven to be more clinically effective and cost-effective. If Neos is unable to successfully complete these tasks, Neos may not be able to continue to commercialize its Branded Products, in which case Neos may be unable to generate sufficient revenues to sustain and grow its business.

In addition, Neos will need to continue investing substantial financial and management resources to maintain and optimize its commercial infrastructure and to recruit, retain, and train qualified marketing, sales and other personnel to support the ongoing commercialization of its Branded Products. In addition, Neos has certain internal revenue expectations with respect to the sale of its Branded Products. If Neos cannot successfully commercialize and achieve those revenue expectations with respect to its Branded Products, Neos’ anticipated revenues and liquidity will be materially adversely impacted.

Moreover, even if Neos is able to successfully commercialize its Branded Products, their continued commercial success may be largely dependent on the capability of its third-party collaborators. Such third-party collaborators may not deploy the resources Neos would like them to, and Neos’ revenue would then suffer. In addition, Neos could become embroiled in disputes with these parties regarding the terms of any agreements, their performance or intellectual property rights. Any dispute could disrupt the sales of Neos’ products and adversely affect its reputation and revenue. In addition, if any of Neos’ manufacturing or collaboration partners fail to effectively perform under the arrangements for any reason, Neos may not be able to find a suitable replacement partner on a timely basis, on acceptable terms, or at all.

Neos faces significant competition from other biotechnology and pharmaceutical companies, and Neos’ operating results will suffer if Neos fails to compete effectively.

The biopharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Neos faces significant existing competition in the United States and, if approved, would face significant competition in markets outside the United States, from major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. For example:

•        amphetamine XR is currently marketed in the United States by (i) Takeda Pharmaceutical Company Limited under the brand names Adderall XR®, Vyvanse®, and Mydayis® and (ii) Tris Pharma, Inc. (“Tris”), under the brand name Dyanavel XR®; and

•        methylphenidate is marketed in the United States by (i) Janssen Pharmaceuticals, Inc. under the brand name Concerta®, (ii) Tris under the brand names Quillivant XR® and QuilliChew ER®, (iii) Rhodes Pharmaceuticals LP under the brand name Aptensio XR®, (iv) Ironshore Pharmaceuticals Inc. under the brand name Jornay PM®, (v) Osomotica Pharmaceuticals plc under the name Methylphenidate HCl ER 72 mg Tablets, (vi) Novartis under the brand names Focalin XR® and Ritalin LA® and (vii) Adlon Therapeutics L.P., a subsidiary of Purdue Pharma L.P., under the name Adhansia XR®.

Further, makers of branded drugs could also enhance their own formulations in a manner that competes with Neos’ enhancements of these drugs. Neos is also aware of efforts by several pharmaceutical companies with ADHD medications in clinical development, including Sunovion, Supernus, KemPharm and Neurovance.

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Many of Neos’ competitors have substantially greater financial, technical and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in Neos’ competitors. As a result, these companies may obtain regulatory approval more rapidly than Neos is able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Neos’ competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery technologies that are more effective or less costly than Neos’ XR-ODT or XR oral suspension, or any product candidate that Neos is currently developing or that Neos may develop. In addition, Neos’ competitors may file citizens’ petitions with the FDA in an attempt to persuade the FDA that its products, or the nonclinical studies or clinical trials that support their approval, contain deficiencies or that new regulatory requirements be placed on the product candidate or drug class of the product candidate. Such actions by Neos’ competitors could delay or even prevent the FDA from approving any NDA that Neos submits under Section 505(b)(2).

Neos believes that its ability to successfully compete will depend on, among other things:

•        the ability to commercialize and market any of its products and product candidates that receive regulatory approval;

•        the price paid by customers for Neos’ products and product candidates that receive regulatory approval, including in comparison to branded or generic competitors;

•        the efficacy and safety of Neos’ products and product candidates, including as relative to marketed products and product candidates in development by third parties;

•        the ability to manufacture on a cost-effective basis and sell commercial quantities of Neos’ products and product candidates that receive regulatory approval;

•        acceptance of any of Neos’ products and product candidates that receive regulatory approval by physicians and other healthcare providers;

•        the time it takes for Neos’ product candidates to complete clinical development and receive marketing approval;

•        the ability to maintain a good relationship with regulatory authorities;

•        whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicaid and Medicare; and

•        the ability to protect intellectual property rights related to Neos’ product and product candidates.

If Neos’ competitors market products that are more effective, safer or less expensive than Neos’ products or that reach the market sooner than Neos’ products, Neos may enter the market too late in the cycle and may not achieve commercial success, or Neos may have to reduce its price, which would impact Neos’ ability to generate revenue and obtain profitability. In addition, the biopharmaceutical industry is characterized by rapid technological change. Because Neos has limited research and development capabilities, it may be difficult for Neos to stay abreast of the rapid changes in each technology. If Neos fails to stay at the forefront of technological change, Neos may be unable to compete effectively. Technological advances or products developed by Neos’ competitors may render Neos’ technologies or product candidates obsolete, less competitive or not economical.

If Neos is unable to differentiate its products or product candidates from branded drugs or existing generic therapies for similar treatments, or if the FDA or other applicable regulatory authorities approve generic products that compete with any of Neos’ products or product candidates, Neos’ ability to successfully commercialize such products or product candidates would be adversely affected.

Neos expects to compete against branded drugs and to compete with their generic counterparts that will be sold for a lower price. Although Neos believes that its Branded Products and product candidates are or will be differentiated from branded drugs and their generic counterparts, if any, including through clinical efficacy or through improved

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patient compliance and ease of administration, it is possible that such differentiation will not impact Neos’ market position. If Neos is unable to achieve significant differentiation for its products and product candidates against other drugs, the opportunity for its products and, if approved, product candidates to achieve premium pricing and be commercialized successfully would be adversely affected.

After an NDA, including a 505(b)(2) application, is approved, the covered product becomes a “listed drug” that, in turn, can be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA. The FDCA, implementing regulations and other applicable laws provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, and conditions of use, or labeling as Neos’ product candidate and that the generic product is bioequivalent to Neos’, meaning it is absorbed in the body at the same rate and to the same extent as Neos’ product candidate. These generic equivalents, which must meet the same quality standards as the listed drugs, would be significantly less costly than Neos’ to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices.

Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product, such as Neos’ Branded Products, can be lost to the generic version. Accordingly, competition from generic equivalents to Neos’ product candidates would materially adversely impact its revenues, profitability and cash flows and substantially limit its ability to obtain a return on the investments Neos has made in its product candidates. For example, on July 25, 2016, Neos received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”) advising Neos that Actavis filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. On October 17, 2017, Neos entered into a Settlement Agreement and a Licensing Agreement with Actavis, pursuant to which Neos has granted Actavis the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances. On October 31, 2017, Neos received a paragraph IV certification from Teva Pharmaceuticals USA, Inc. (“Teva”) advising Neos that Teva filed an ANDA with the FDA for a generic version of Cotempla XR-ODT. On December 21, 2018, Neos entered into a Settlement Agreement and a Licensing Agreement with Teva, pursuant to which Neos has granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier under certain circumstances.

The design, development, manufacture, supply and distribution of Neos’ products and product candidates are highly regulated processes and technically complex.

Neos is subject to extensive regulation in connection with the preparation and manufacture of its products for commercial sale, and its product candidates and potential product candidates for clinical trials and commercial sale. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMPs and equivalent foreign standards. These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of Neos’ products and product candidates that may not be detectable in final product testing. The development, manufacture, supply and distribution of its approved products as well as any of its future potential product candidates, are highly regulated processes and technically complex. Neos, along with its third-party suppliers, must comply with all applicable regulatory requirements of the FDA and foreign authorities. For instance, because each of its Branded Products is a regulated drug product and subject to the U.S. Drug Enforcement Administration (“DEA”) regulation, Neos has had to, and will continue to need to, secure state licenses from each state in which it intends to sell such product allowing it to distribute a regulated drug product in such state.

Neos must supply all necessary documentation in support of its regulatory filings for its product candidates on a timely basis and must adhere to applicable parts of the FDA’s Good Laboratory Practices and cGMP requirements enforced by the FDA through its facilities inspection program, and the equivalent standards of the regulatory authorities in other countries. Any failure to comply with cGMP requirements or failure to scale-up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of its product candidates. Neos’ facilities and quality systems must also pass a pre-approval inspection for compliance with the applicable regulations as a condition of

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regulatory approval of its product candidates or any of its other potential products. For example, in connection with a general cGMP and pre-approval inspection for Adzenys ER in July 2017, Neos received a Form FDA 483 with one observation related to complaint records failing to document the reason and the individual making the decision not to conduct a complaint investigation. Neos implemented corrective action related to this observation and responded to the FDA. The FDA has conducted additional inspections in 2018 that have not resulted in Form FDA 483s. In addition, the regulatory authorities in any country may, at any time, audit or inspect a manufacturing facility involved with the preparation of Neos’ product candidates or its other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities and quality systems do not pass a pre-approval plant inspection, FDA approval of its product candidates, or the equivalent approvals in other jurisdictions, will not be granted.

Regulatory authorities also may, at any time following approval of a product for sale, audit Neos’ manufacturing facilities. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of its product specifications or applicable regulations occurs independent of such an inspection or audit, Neos or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for Neos to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of its facility. Any such remedial measures imposed upon Neos could materially harm its business. If Neos fails to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or revocation of a pre-existing approval. As a result, Neos’ business, financial condition and results of operations may be materially harmed.

For Neos’ approved products, it must comply with the requirements of the Drug Supply Chain Security Act (the “DSCSA”), which outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.

For Neos’ approved drugs, it must comply with the requirements of the DSCSA, including those related to product tracing, verification, and authorized trading partners. Signed into law on November 27, 2013, the DSCSA amended the FSCA and is being implemented over a ten-year period. The law’s requirements include the ability to quarantine and promptly investigate suspect product, such as potentially counterfeit, diverted or stolen product, to determine if it is illegitimate, and notify Neos’ trading partners and the FDA of any illegitimate product. As required by the DSCSA, Neos now places on each prescription drug package a unique product identifier consisting of the National Drug Code, serial number, lot number and expiration date, in the form of a 2-dimensional data matrix barcode that can be easily read electronically. If at any point Neos’ drug products fail to bear this unique product identifier, they would be misbranded under the FDCA, its drug products may not be accepted into the supply chain, and Neos may be subject to an enforcement action. In addition, the DSCSA imposes additional requirements on manufacturers and others in the supply chain that must be implemented by certain dates over the next several years. Neos is working to meet these new requirements in the time frames required. If Neos is unsuccessful in these efforts, it may be subject to enforcement, including the removal of its approved product from the market.

Neos relies on limited sources of supply for its Branded Products and its generic Tussionex, and any disruption in the chain of supply may impact production and sales of its Branded Products and its generic Tussionex, and cause delays in developing and commercializing its product candidates and currently manufactured and commercialized products.

Neos’s approved NDAs for its Branded Products, include its proposed manufacturing process for each product. Any change to Neos’ manufacturing process, facilities or suppliers could require that it supplement its approved NDA. Also, because of its proprietary processes for manufacturing its product candidates, Neos cannot immediately transfer manufacturing activities for its Branded Products or its generic Tussionex to an alternate supplier, and a change of facilities would be a time-consuming and costly endeavor.

Any changes to Neos’ manufacturing process would involve substantial cost and could result in a delay in its desired clinical and commercial timelines. Neos is also reliant on a limited number of suppliers for resin, drug compounds, coating and other component substances of its final product candidates and products. If any of these single-source suppliers were to breach or terminate its supply agreement, if any, with Neos or otherwise not supply Neos, Neos would need to identify an alternative source for the supply of component substances for its product candidates and products. Identifying an appropriately qualified source of alternative supply for any one or more of the component

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substances for its product candidates or products could be time consuming, and Neos may not be able to do so without incurring material delays in the development and commercialization of its approved products or product candidates or a decrease in sales of its approved products, which could harm its financial position and commercial potential for its product candidates and products. Any alternative vendor would also need to be qualified through an NDA supplement, which could result in further delay, including delays related to additional clinical trials. The FDA, DEA, or other regulatory agencies outside of the United States may also require additional studies if Neos enters into agreements with new suppliers for the manufacture of its Branded Products and its generic Tussionex that differ from the suppliers used for clinical development of such product candidates.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of its products and product candidates, cause Neos to incur higher costs and prevent Neos from commercializing them successfully. Furthermore, if Neos’ suppliers fail to deliver the required commercial quantities of components and APIs on a timely basis and at commercially reasonable prices, including if its suppliers did not receive adequate DEA quotas for the supply of certain scheduled components, and Neos is unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, commercialization of its Branded Products, its generic Tussionex and clinical trials of future potential product candidates, may be delayed or Neos could lose potential revenue and its business, financial condition, results of operation and reputation could be adversely affected.

If Neos fails to produce its products or product candidates in the volumes that are required on a timely basis, it may face penalties from wholesalers and contracted retailers of its products and delays in the development and commercialization of its product candidates.

Neos currently depends on third-party suppliers for the supply of the APIs for its products and product candidates, including drug substance for nonclinical research, clinical trials and commercialization. For its Branded Products, its generic Tussionex and NT0502, its product candidate for sialorrhea, Neos currently relies on single suppliers for raw materials including APIs, which it uses to manufacture, produce and package final dosage forms. In particular, it has an exclusive supply agreement with Coating Place, Inc. (“CPI”), pursuant to which CPI (i) is the exclusive supplier of the active ingredient complexes in its generic Tussionex and (ii) has agreed to not supply anyone else engaged in the production of generic Tussionex with such active ingredient complexes. Any future curtailment in the availability of raw materials could result in production or other delays with consequent adverse effects on Neos. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may result in production delays or higher raw material costs. Neos is subject to penalties from wholesalers and contracted retailers if it does not deliver its generic Tussionex and Branded Products in quantities that meet their demand. Any such delays could trigger these penalty provisions, which would have a negative impact on Neos’ business.

If Neos fails to manufacture its Branded Products or product candidates in sufficient quantities and at acceptable quality and pricing levels, or fails to obtain adequate DEA quotas for controlled substances, or to fully comply with cGMP regulations, it may face delays in the commercialization of these products or its product candidates, if approved, or be unable to meet market demand, and may be unable to generate potential revenues.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls, and the use of specialized processing equipment. Pharmaceutical companies often encounter difficulties in manufacturing, particularly in scaling up production of their products. These problems include manufacturing difficulties relating to production costs and yields, quality control, including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. If Neos is unable to demonstrate stability in accordance with commercial requirements, or if its raw material manufacturers were to encounter difficulties or otherwise fail to comply with their obligations to Neos, its ability to obtain FDA approval and market its products and product candidates would be jeopardized. In addition, any delay or interruption in the supply of clinical trial supplies could delay or prohibit the completion of its clinical trials, increase the costs associated with conducting its clinical trials and, depending upon the period of delay, require Neos to commence new trials at significant additional expense or to terminate a trial. Neos purchases raw materials and components from various suppliers in order to manufacture its Branded Products. If Neos is unable to source the required raw materials from its suppliers, or if Neos does not obtain DEA quotas or receive inadequate DEA quotas, it may experience delays in manufacturing its Branded Products, and may not be able to meet its customers’ demands for its products.

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In addition, Neos must comply with federal, state and foreign regulations, including cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Neos may be unable to comply with these cGMP requirements and with other FDA and foreign regulatory requirements. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or voluntary recall, or withdrawal of product approval. If the safety of any of its products or product candidates is compromised due to failure to adhere to applicable laws or for other reasons, Neos may not be able to obtain, or to maintain once obtained, regulatory approval for such products or product candidates or successfully commercialize such products or product candidates, and it may be held liable for any injuries sustained as a result. Any of these factors could cause a delay in clinical development, regulatory submissions, approvals or commercialization of its products or product candidates, entail higher costs or result in it being unable to effectively commercialize its products or product candidates. Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, damage to Neos’ reputation and potential for product liability claims.

Neos’ Grand Prairie facility was formerly operated by its predecessor, PharmaFab, Inc. (“PharmaFab”). In April 2007, the FDA announced entry of a Consent Decree of Permanent Injunction (the “Consent Decree”), against PharmaFab, one of its subsidiaries and two of its officials. The Consent Decree arose out of several perceived cGMP deficiencies related to the manufacture of unapproved drugs or Drug Efficacy Study Implementation drugs that Neos no longer manufactures. In July 2019, Neos filed a motion with the U.S. District Court of North Texas to vacate the Consent Decree, which was unopposed by the Department of Justice and the FDA and was granted by the court on July 11, 2019. While the Consent Decree has been vacated, there can be no assurance that Neos will not become subject to similar orders in the future, which may result in it continuing to expend resources and attention to observe its terms, and there can be no assurance that it will be in compliance with its requirements.

If Neos is unable to support demand for its Branded Products and any future product candidates, including ensuring that it has adequate capacity to meet any future increase in demand, or it is unable to successfully manage the evolution of its drug delivery technology platform, its business could suffer.

If sales of Neos’ approved products grow, it will need to continue to increase its workflow capacity for customer service, improve its billing and general process, expand its internal quality assurance program and extend its platform to support product production at a larger scale within expected turnaround times. News may need additional certified laboratory scientists and other scientific and technical personnel to process higher volumes of its Branded Products. Portions of its process are not automated and will require additional personnel to scale. Neos may also need to purchase additional equipment, some of which can take several months or more to procure, set up and validate, and increase its software and computing capacity to meet increased demand. Alternatively, Neos may need to identify third party contract manufacturers to ensure it has adequate capacity to meet any future demand. There is no assurance that any of these increases in scale, expansion of personnel, equipment, software and computing capacities, or process enhancements will be successfully implemented, or that Neos will have adequate space in its facilities to accommodate such required expansion.

As additional product candidates, if approved, are commercialized, Neos will need to incorporate new equipment, implement new technology systems and laboratory processes and hire new personnel with different qualifications, or identify third party contract manufacturers. Failure to manage this growth or transition could result in turnaround time delays, higher product costs, declining product quality, deteriorating customer service and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for Neos to meet market expectations for its products and could damage its reputation and the prospects for its business.

The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm Neos’ research and development, manufacturing and commercialization efforts, increase its costs and expenses and have a material adverse effect on its business, financial condition and results of operations.

Broad-based business or economic disruptions could adversely affect Neos’ ongoing or planned research and development activities, its manufacturing operations and its commercialization efforts. For example, in December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread globally. To date, the COVID-19 pandemic has caused significant disruptions to the U.S. and global economies and

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has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Certain states and cities, including where Neos or the third parties with whom Neos engages operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. However, these government policies and directives are subject to change and many companies, including Neos, maintain a work-from-home policy for office employees, and have implemented policies for their researchers and manufacturing workers designed to provide for a safe environment while maintaining progress on important laboratory research and commercial product supply.

The extent to which the COVID-19 pandemic, or the future outbreak of any other highly infectious or contagious diseases, impacts Neos’ product development, manufacturing capabilities, sales and marketing operations, future nonclinical studies and clinical trials and commercialization efforts will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic may adversely affect Neos’ business, financial condition and results of operations, and it may have the effect of heightening many of the risks described herein, including the below.

•        Effective March 30, 2020, Neos’ organization, with the exception of a limited number of essential roles, operated under a reduction in hours or, in certain cases, furlough for approximately six weeks. On May 11, 2020, Neos reopened its manufacturing facilities and its sales representatives began to again visit provider offices in addition to engaging in remote selling where necessary. Although much of the organization has since been brought back to full hours, in the future, it may be necessary to return to work-from-home arrangements for Neos’ employees because of restrictions related to COVID-19 and, as a result, Neos may again determine to reduce hours or, in certain cases, furlough employees. In such a case, Neos’ employees could find alternative employment and leave Neos, and Neos cannot provide assurance that its staff, when it returns from any such reduction in hours, will operate at the same level of effectiveness as before the reduction of hours. In addition, adoption of work-from-home requirements could increase Neos’ cyber security risk, create data accessibility concerns, and make it more susceptible to communication disruptions, any of which could adversely impact its business operations.

•        Neos believes that revenue for the quarter ended September 30, 2020 may have been negatively affected by decreased utilization of its products as a result of the COVID-19 pandemic. Although the potential impact of the COVID-19 pandemic on its product revenue is unclear, Neos expects net product sales may continue to be negatively impacted by the COVID-19 pandemic during the fourth quarter of 2020 and potentially into 2021, depending on its duration.

•        Given the economic downturn and increased unemployment in the U.S. related to COVID-19, millions of individuals have lost or may lose their employer-based insurance coverage, which may adversely affect Neos’ ability to commercialize its products. In addition, market disruption and rising unemployment caused by the COVID-19 pandemic may lead to delays in obtaining insurance coverage and reimbursement of products as well as an increase in the numbers of uninsured patients and patients who may no longer be able to afford their co-insurance or co-pay obligations.

•        Neos is currently evaluating its product candidate NT0502 as a potential treatment for chronic sialorrhea in patients with neurological conditions associated with excessive salivation or drooling. In the first half of 2021, Neos plans to initiate a Phase 1 single ascending dose/multiple ascending dose study (“SAD/MAD study”) of NT0502. Neos is aware that some trial sponsors have encountered challenges in conducting clinical activities during the ongoing COVID-19 pandemic that have impacted the timing of trials, including delays in site initiation, site closures and restrictions on site visits, and Neos may similarly experience such challenges in its planned clinical trial.

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•        Neos currently relies on third parties to, among other things, manufacture raw materials and active pharmaceutical ingredients, perform quality testing and supply other goods and services to run its business. If any such third parties in its supply chain for materials are adversely impacted by restrictions resulting from the COVID-19 pandemic, including staffing shortages, production slowdowns and disruptions in delivery systems, Neos’ supply chain may be disrupted.

•        Health regulatory agencies globally may experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor Neos’ clinical trials and, as a result, review, inspection, and other timelines may be materially delayed. For example, in April 2020, the FDA stated that its New Drug Program was continuing to meet program user fee performance goals, but due to many agency staff working on COVID-19 activities, it was possible that the FDA would not be able to sustain that level of performance indefinitely. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of its clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of Neos’ product candidates, including NT0502.

•        The trading prices for Neos’ common stock and other specialty pharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, Neos may face difficulties raising capital through sales of its common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the COVID-19 pandemic could materially and adversely affect its business and the value of its common stock.

While some states and jurisdictions have started to rollback stay-at-home and quarantine orders and reopened in phases, it is difficult to predict what the lasting impact of the pandemic will be, and if Neos or any of the third parties with whom Neos engages were to experience additional shutdowns or other prolonged business disruptions, its ability to conduct its business in the manner and on the timelines presently planned could have a material adverse impact on its business, results of operation and financial condition. In addition, a recurrence or “second wave” of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest.

As a result of the COVID-19 pandemic, Neos’ commercial activities, manufacturing operations and clinical development progress, data and timelines, and general business operations, could be delayed or materially harmed, and its business, prospects, financial condition, and results of operations would suffer as a result. Neos will continue to monitor developments as it deals with the disruptions and uncertainties relating to the COVID-19 pandemic.

If Neos’ sole manufacturing facility becomes damaged or inoperable or it decides to or are required to vacate its facility, Neos’ ability to manufacture its Branded Products, its generic Tussionex or future potential product candidates for clinical development, may be jeopardized. Neos’ inability to continue manufacturing adequate supplies of its products could adversely affect its ability to generate revenues.

All of Neos’ manufacturing capabilities are housed in its sole manufacturing facility located in Grand Prairie, Texas. Neos’ facility and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, tornado, power loss, communications failure or terrorism, any of which may render it difficult or impossible for Neos to operate its drug delivery technology platform and manufacture its product candidates or products for some period of time. While Neos seeks to maintain finished goods inventory of its products outside of this facility, it is unlikely that the level of such inventory would be sufficient if Neos were to sustain anything other than a short-term disruption in its ability to manufacture its products and product candidates at its Grand Prairie, Texas facility. The inability to manufacture its products and product candidates if Neos’ facility or its equipment is inoperable, for even a short period of time, may result in the loss of customers or harm to its reputation, and it may be unable to regain those customers or repair its reputation in the future. Furthermore, its facility and the equipment it uses to manufacture its products and product candidates could become damaged and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild Neos’ facility or repair or replace its equipment or license or transfer its proprietary technology to a third-party, particularly in light of the requirements for a DEA-registered manufacturing and storage facility like Neos’. If Neos decides to or are required to change or add a new manufacturer or supplier, the process would likely require prior FDA, DEA and/or equivalent foreign

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regulatory authority approval, and would be time consuming and costly. Even in the event Neos is able to find a third party with such qualifications to enable Neos to manufacture its products or product candidates, Neos may be unable to negotiate commercially reasonable terms.

Neos carries insurance for damage to its property and the disruption of its business, but this insurance may not cover all of the risks associated with damage or disruption to its business, may not provide coverage in amounts sufficient to cover its potential losses and may not continue to be available to it on acceptable terms, if at all. An inability to continue manufacturing adequate supplies of its Branded Products or its generic Tussionex at its Grand Prairie, Texas facility could result in a disruption in the supply of its products to physicians and pharmacies, which would adversely affect its ability to generate revenues.

If other forms of Neos’ product candidates are approved and successfully commercialized by other third parties, especially if approved before Neos can successfully commercialize its products and product candidates, its business would be materially harmed.

Other third parties may seek approval to manufacture and market their own versions of product candidates in Neos’ product pipeline in the United States. If any of these parties obtain FDA approval of such a competitive product before Neos does, they may be entitled to three years of marketing exclusivity. Such exclusivity would, for example, delay the commercialization of Neos’ product candidates and, as a result, Neos may never achieve significant market share for these products. Consequently, revenues from product sales of these products would be similarly delayed and Neos’ business, including its development programs, and growth prospects would suffer. Even if any of Neos’ product candidates are approved before a competitor’s product candidate, it may not be entitled to any marketing exclusivity and, other than under circumstances in which third parties may infringe or are infringing its patents, Neos may not be able to prevent the submission or approval of another full NDA for any competitor’s product candidate.

Amphetamine, methylphenidate and hydrocodone are Schedule II controlled substances under the Controlled Substances Act, and any failure to comply with this Act or its state equivalents would have a negative impact on Neos’ business.

Amphetamine, methylphenidate and hydrocodone, which are the active ingredients in Neos’ Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and generic Tussionex products, are listed by the DEA as a Schedule II controlled substance under the Controlled Substances Act (“CSA”). The DEA classifies substances as Schedule I, II, III, IV or V controlled substances, with Schedule I controlled substances considered to present the highest risk of substance abuse and Schedule V controlled substances the lowest risk. Scheduled controlled substances are subject to DEA regulations relating to supply, procurement, manufacturing, storage, distribution and physician prescription procedures. For example, Schedule II controlled substances are subject to various restrictions, including, but not limited to, mandatory written prescriptions and the prohibition of refills. In addition to federal scheduling, some drugs may be subject to state-controlled substance laws and regulations and more extensive requirements than those determined by the DEA and FDA. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may schedule products separately. While some states automatically schedule a drug when the DEA does so, other states require additional state rulemaking or legislative action, which could delay commercialization. Some state and local governments also require manufacturers to operate a drug stewardship program that collects, secures, transports and safely disposes of unwanted drugs.

Entities must register annually with the DEA to manufacture, distribute, dispense, import, export and conduct research using controlled substances. In addition, the DEA requires entities handling controlled substances to maintain records and file reports, including those for thefts or losses of any controlled substances, and to obtain authorization to destroy any controlled substances.

Registered entities are subject to DEA inspection and also must follow specific labeling and packaging requirements, and provide appropriate security measures to control against diversion of controlled substances. Security requirements vary by controlled substance schedule with the most stringent requirements applying to Schedule I and Schedule II controlled substances. Required security measures include background checks on employees and physical control of inventory through measures such as vaults and inventory reconciliations. Failure to follow these requirements can lead to significant civil and/or criminal penalties and possibly even lead to a

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revocation of a DEA registration. The DEA also has a production and procurement quota system that controls and limits the availability and production of Schedule I or II controlled substances. If Neos or any of its suppliers of raw materials that are DEA-classified as Schedule I or II controlled substances are unable to receive any quota or a sufficient quota to meet demand for its products, if any, its business would be negatively impacted.

Public concern over the abuse of medications that are controlled substances, including increased legislative, legal and regulatory action, could negatively affect Neos’ business.

Products containing controlled substances may generate public controversy. Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of controlled substances such as opioids in the United States. State and local governmental agencies have commenced investigations into pharmaceutical companies and others in the supply chain in connection with the distribution of opioid medications. For example, on March 7, 2018 and April 18, 2019, Neos received citations advising it that the County of Harris Texas and the County of Walker Texas filed lawsuits on December 13, 2017 and January 11, 2019, respectively, against Neos and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. Through these lawsuits, each of Harris County and Walker County seek to recoup as damages some of the expenses they allegedly have incurred to combat opioid use and addiction. Each of Harris County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’ fees. In addition, multiple lawsuits have been filed against pharmaceutical companies alleging, among other claims, failures to provide effective controls and procedures to guard against the diversion of controlled substances, negligence by distributing controlled substances to pharmacies that serve individuals who abuse controlled substances, and failures to report suspicious orders of controlled substances in accordance with regulations. Certain of these cases have recently been settled, some for hundreds of millions of dollars. In the future, political pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict, the introduction and marketing of its product or product candidates, the withdrawal of currently approved products from the market, or result in other legal action.

In addition, Neos is aware of other legislative, regulatory or industry measures to address the misuse of prescription opioid medications which could affect its business in ways that it may not be able to predict. For example, the State of New York has undertaken efforts to create an annual surcharge on all manufacturers and distributors licensed to sell or distribute opioids in New York, as well as a tax on sales of opioids in the state. Other states have implemented and are also considering legislation that could require Neos to pay taxes, licensing fees, or assessments on the distribution of opioid medications in those states. These laws and proposed bills vary in the amounts and the means of calculation. Liabilities for taxes or assessments under any such laws will likely have an adverse impact on Neos’ results of operations, unless it is able to mitigate them through operational changes or commercial arrangements where permitted, and may result in it ceasing to continue to sell its products in these jurisdictions.

If Neos fails to comply with environmental, health and safety laws and regulations, it could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

Neos is subject to numerous environmental, health and safety laws and regulations. Neos’ operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Its operations also produce hazardous waste products. Neos generally contracts with third parties for the disposal of these materials and wastes. Neos cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from its use of hazardous materials, Neos could be held liable for any resulting damages, and any liability could exceed its resources. Neos also could incur significant costs associated with civil or criminal fines and penalties.

Although Neos maintains workers’ compensation insurance to cover it for costs and expenses it may incur due to injuries to its employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, Neos may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair its research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

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If Neos is unable to achieve and maintain adequate levels of coverage and reimbursement for its products or, if approved, product candidates their commercial success may be severely hindered.

Successful sales of Neos’ products and any product candidates that receive regulatory approval depend on the availability of adequate coverage and reimbursement from third-party payors. Patients who are prescribed medications for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming Neos obtains coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use Neos’ products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of its products.

In addition, the market for Neos’ Branded Products will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access through formulary controls or otherwise to a branded drug when a less costly generic equivalent or other alternative is available.

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Many pharmaceutical manufacturers must also calculate and report certain price reporting metrics to the government, such as average sales price, or ASP, and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely.

In addition, in the United States, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require Neos to provide scientific and clinical support for the use of its products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Further, Neos believes that future coverage and reimbursement will likely be subject to increased restrictions both in the United States and in international markets. Third party coverage and reimbursement for Neos’ product candidates for which it may receive regulatory approval may not be available or adequate in either the United States or international markets, which could have a material adverse effect on its business, results of operations, financial condition and prospects.

Neos’ relationships with customers, healthcare providers and third-party payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose it to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

For Neos’ products and any product candidates that obtain regulatory approval and are marketed in the United States, its arrangements with third-party payors, healthcare providers, and customers may expose it to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which it markets, sells and distributes any products for which it obtains marketing approval. In addition, Neos may be subject to health information privacy and security regulation by U.S. federal

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and state governments and foreign jurisdictions in which it conducts its business. In the United States, these laws include, without limitation, state and federal anti-kickback, false claims, physician transparency, and patient data privacy and security laws and regulations, including but not limited to those described below:

•        The federal Anti-Kickback Statute, makes it illegal for any person, including a prescription drug or biologic manufacturer (or a party on its behalf) to knowingly and willfully solicit, receive, offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, that is intended to induce or reward referrals, either the referral of an individual, or the purchase, recommendation, order or prescription of a particular item, drug or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. Violations of this law are punishable by prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers, among others, on the other. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or federal civil money penalties statute.

•        The federal civil and criminal false claims laws, including the False Claims Act, and federal civil monetary penalties imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing to be presented false, fraudulent or fictitious claims for payment by a federal healthcare program or knowingly making a false statement or record material to payment of a false claim or obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. Penalties for a False Claims Act violation include mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal healthcare programs and the potential implication of various federal criminal statutes. The government may deem manufacturers to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Claims which include items or services resulting from a violation of the federal Anti-Kickback Statute are false or fraudulent claims for purposes of the False Claims Act. Neos’ future marketing and activities relating to the reporting of wholesaler or estimated retail prices for Neos’ products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for Neos’ products, and the sale and marketing of Neos’ products and any future product candidates, are subject to scrutiny under this law.

•        Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and falsifying, concealing or covering up by any trick and trade a material fact, or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items, or services in relation to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it.

•        HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which impose, among other things, specified requirements on covered entities and their business associates, relating to the privacy, and security of individually identifiable health information, including mandatory contractual terms and required implementation of technical safeguards of such information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties applicable to business associates, and gave state attorneys general new authority to file civil actions for damage or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

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•        The Physician Payments Sunshine Act, enacted as part of the ACA which imposed new annual reporting requirements for certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program for certain payments and other “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners.

•        Analogous state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply regardless of payor. Such laws are enforced by various state agencies and through private actions. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance guidance, require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, and restrict marketing practices or require disclosure of marketing expenditures and pricing information. Some states mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation, and other remuneration to physicians. State and foreign laws also govern the privacy and security of health information in certain circumstances. Such data privacy and security laws may differ from one another in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Neos is subject to complex laws and regulations that address privacy and data security. The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. For example, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which came into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which may increase Neos’ compliance costs and potential liability. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA may impact certain of Neos’ business activities. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA could mark the beginning of a trend toward more stringent state and/or federal privacy legislation in the U.S., which could increase Neos’ potential liability and adversely affect its business.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude that Neos’ business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If Neos’ operations are found to be in violation of any of these laws or any other related governmental regulations that may apply to it, Neos may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, disgorgement, reputation harm, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight and reporting obligations if it becomes subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of its operations. If any of the physicians or other healthcare providers or entities with whom Neos expects to do business is found to be not in compliance with applicable laws, they may be subject to similar actions, penalties and sanctions. Efforts to ensure that Neos’ business arrangements comply with applicable healthcare laws and regulations, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.

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Product liability lawsuits could divert its resources, result in substantial liabilities and reduce the commercial potential of Neos’ products.

The risk that Neos may be sued on product liability claims is inherent in the development of pharmaceutical products. Neos faces a risk of product liability exposure related to the testing of its product candidates in clinical trials and faces even greater risks related to the commercialization of its products and upon any commercialization by it of its future products and, if approved, its product candidates, such as claims related to opioid abuse. For example, on March 7, 2018, Neos received a citation advising it that the County of Harris Texas filed a lawsuit on December 13, 2017 against it and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. On April 18, 2019, Neos received a citation advising it that the County of Walker Texas filed a lawsuit on January 11, 2019 against it and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. These lawsuits may divert Neos’ management from pursuing its business strategy and may be costly to defend. In addition, if Neos is held liable in any of these lawsuits, it may incur substantial liabilities and may be forced to limit or forego further commercialization of one or more of its products.

Neos’ product liability insurance coverage may not be adequate to cover any and all liabilities that it may incur.

Neos currently has $10.0 million in product liability insurance coverage in the aggregate, which may not be adequate to cover any and all liabilities that it may incur. Insurance coverage is increasingly expensive and difficult to obtain. Neos may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against Neos, particularly if judgments exceed its insurance coverage, could decrease its cash and adversely affect its business. In addition, Neos may not be able to obtain or maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims, which could prevent or inhibit the commercial production and sale of its products. For example, Neos has experienced increasing difficulty in procuring insurance coverage for its products, in particular, its opioid-based products, due to their status as controlled substances.

Risks Related to the Clinical Development, Regulatory Review and Approval of Neos’ Product Candidates

Neos’ failure to successfully identify, develop and market additional product candidates could impair its ability to grow.

As part of Neos’ strategy, it intends to identify, develop and market additional product candidates. Neos is exploring various therapeutic opportunities for its pipeline and proprietary technologies. Neos may spend several years completing its development of any particular current or future internal product candidates, and failure can occur at any stage. The product candidates to which Neos may allocate its resources may not end up being successful. In addition, because its internal research capabilities are limited, Neos may be dependent upon pharmaceutical companies, academic scientists and other researchers to sell or license product candidates, approved products or the underlying technology to it. The success of this strategy depends partly upon its ability to identify, select, discover and acquire promising product candidates and products.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with Neos for the license or acquisition of product candidates and approved products. Neos has limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into its current infrastructure. Moreover, Neos may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or Neos may fail to realize the anticipated benefits of such efforts. For example, it may fail to realize the anticipated benefits of the license of NT0502, its in-licensed product candidate, and there is no assurance that it will be able to maintain the license for NT0502 on commercially reasonable terms or at all. Neos may not be able to acquire the rights to additional product candidates on terms that it finds acceptable, or at all.

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In addition, future acquisitions may entail numerous operational and financial risks, including:

•        exposure to unknown liabilities;

•        disruption of its business and diversion of its management’s time and attention to develop acquired products or technologies;

•        incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;

•        higher than expected acquisition and integration costs;

•        difficulty in combining the operations and personnel of any acquired businesses with its operations and personnel;

•        increased amortization expenses;

•        impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

•        inability to motivate key employees of any acquired businesses.

Further, any product candidate that Neos acquires may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and other regulatory authorities.

Premarket review of Neos’ product candidates by the FDA or other regulatory authorities is a lengthy and uncertain process and approval may be delayed, limited or denied, any of which would adversely affect its ability to generate future operating revenues.

The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. For example, the FDA:

•        could determine that Neos cannot rely on the 505(b)(2) regulatory approval pathway for any future product candidate that it may identify and develop;

•        could determine that the information provided by Neos was inadequate, contained clinical deficiencies or otherwise failed to demonstrate safety and effectiveness of any of its product candidates for any indication;

•        may not find the data from bioequivalence studies and/or clinical trials sufficient to support the submission of an NDA or to obtain marketing approval in the United States, including any findings that the safety risks outweigh clinical and other benefits of Neos’ product candidates;

•        may require Neos to conduct additional bioequivalence studies to demonstrate that the proposed commercial product is bioequivalent to the batch used in clinical trials;

•        may disagree with Neos’ trial design or its interpretation of data from nonclinical studies, bioequivalence studies and/or clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for its trials;

•        may determine that Neos inappropriately relied on a certain listed drug or drugs for its 505(b)(2) NDA or that approval of its applications for any future product candidate is blocked by patent or non-patent exclusivity of the listed drug or drugs;

•        may identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which Neos enters into agreements for the supply of the API used in its product candidates;

•        may identify deficiencies in Neos’ manufacturing processes or its proposed scale-up of the manufacturing processes or facilities for the production of its product candidates;

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•        may approve Neos’ product candidates for fewer or more limited indications than it requests, or may grant approval contingent on the performance of costly post-approval clinical trials;

•        may change its approval policies or adopt new regulations; or

•        may not approve the labeling claims that Neos believes are necessary or desirable for the successful commercialization of its product candidates.

Notwithstanding the approval of many products by the FDA pursuant to 505(b)(2) over the last few years, some pharmaceutical companies and others have objected to the FDA’s interpretation of 505(b)(2). If the FDA changes its interpretation of 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any 505(b)(2) application that Neos submits. Any failure to obtain regulatory approval of Neos’ product candidates would significantly limit its ability to generate revenues, and any failure to obtain such approval for all of the indications and labeling claims Neos deems desirable could reduce its potential revenues.

If the FDA does not conclude that Neos’ product candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of any of Neos’ product candidates under Section 505(b)(2) are not as it expects, the approval pathway for Neos’ product candidates will likely take significantly longer, cost significantly more and encounter significantly greater complications and risks than anticipated, and in any case may not be successful.

Neos intends to seek FDA approval through the 505(b)(2) regulatory approval pathway for each of its future product candidates in its product pipeline. The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Amendments, added 505(b)(2) to the FDCA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from trials that were not conducted by or for the applicant and for which the applicant does not have a right of reference.

If Neos cannot pursue the 505(b)(2) regulatory approval pathway for its product candidates as it intends, it may need to conduct additional nonclinical studies or clinical trials, provide additional data and information and meet additional requirements for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for its product candidates likely would increase substantially and could result in its inability to continue development of its product candidates. Moreover, the inability to pursue the 505(b)(2) regulatory approval pathway could result in new competitive products reaching the market before Neos’ product candidates, which could materially adversely impact its competitive position and prospects. Even if Neos is allowed to pursue the 505(b)(2) regulatory approval pathway for a product candidate, it cannot assure you that it will receive the requisite or timely approvals for commercialization of such product candidate.

In addition, Neos’ competitors may file citizen petitions with the FDA in an attempt to persuade the FDA that Neos’ product candidates, or the clinical trials that support their approval, contain deficiencies or that new regulatory requirements be placed on the product candidate or drug class of the product candidate. Such actions by Neos’ competitors could delay or even prevent the FDA from approving any NDA that Neos submits under 505(b)(2).

An NDA submitted under 505(b)(2) may subject Neos to a patent infringement lawsuit that would delay or prevent the review or approval of its product candidates.

Neos plans to submit its product candidates to the FDA for approval under 505(b)(2) of the FDCA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from trials that were not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference. An NDA under 505(b)(2) would enable Neos to reference published literature and/or the FDA’s previous findings of safety and effectiveness for the previously approved drug.

For NDAs submitted under 505(b)(2), the patent certification and related provisions of the Hatch-Waxman Amendments apply. Accordingly, Neos may be required to include certifications, known as Paragraph IV certifications, that certify that any patents listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the “Orange Book”), with respect to any product referenced in the 505(b)(2) application, are invalid, unenforceable or will not be infringed by the manufacture, use or sale of the product that is the subject of the 505(b)(2) NDA.

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Under the Hatch-Waxman Amendments, the holder of patents that the 505(b)(2) application references may file a patent infringement lawsuit after receiving notice of the Paragraph IV certification. Filing of a patent infringement lawsuit against the filer of the 505(b)(2) applicant within 45 days of the patent owner’s receipt of notice triggers a one-time, automatic, 30-month stay of the FDA’s ability to approve the 505(b)(2) NDA, unless patent litigation is resolved in favor of the Paragraph IV filer or the patent expires before that time. Accordingly, Neos may invest a significant amount of time and expense in the development of one or more product candidates only to be subject to significant delay and patent litigation before such product candidates may be commercialized, if at all.

In addition, a 505(b)(2) application will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity (“NCE”) listed in the Orange Book for the listed drug has expired. The FDA also may require Neos to perform one or more additional clinical trials or measurements to support the change from the listed drug, which could be time consuming and could substantially delay its achievement of regulatory approval. The FDA also may reject any future 505(b)(2) submissions and require Neos to submit traditional NDAs under 505(b)(1), which would require extensive data to establish safety and effectiveness of the drug for the proposed use and could cause delay and additional costs. These factors, among others, may limit Neos’ ability to commercialize its product candidates successfully.

Neos’ approved products and product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance, or result in significant negative consequences following marketing approval, if any.

As with many pharmaceutical products, treatment with Neos’ products or product candidates may produce undesirable side effects or adverse reactions or events. Although Neos’ products and product candidates contain active ingredients that have already been approved, meaning that the side effects arising from the use of the active ingredient or class of drug in Neos’ product candidates is generally known, its products or product candidates still may cause undesirable side effects. These could be attributed to the active ingredient or class of drug or to its unique formulation of such products or product candidates, or other potentially harmful characteristics. Such characteristics could cause Neos, institutional review boards (“IRBs”), clinical trial sites, the FDA or other regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label, if the product candidate is approved, or the delay, denial or withdrawal of regulatory approval, which may harm Neos’ business, financial condition and prospects significantly.

Further, if any of Neos’ products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative consequences could result, including:

•        regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution;

•        the FDA may require implementation of a REMS;

•        regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

•        Neos may be required to change the way the product is administered or conduct additional clinical trials;

•        Neos may need to voluntarily recall its products

•        Neos could be sued and held liable for harm caused to patients; or

•        Neos’ reputation may suffer.

Any of these events could prevent Neos from achieving or maintaining market acceptance of the affected product or product candidate and could substantially increase the costs of commercializing its products and product candidates.

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Neos will need to obtain FDA approval of any proposed names for its product candidates that gain marketing approval, and any failure or delay associated with such naming approval may adversely impact its business.

Any name Neos intends to use for its product candidates will require approval from the FDA, regardless of whether Neos has secured a formal trademark registration from the U.S. Patent and Trademark Office (“USPTO”). The FDA typically conducts a review of proposed product names, including an evaluation of whether proposed names may be confused with other product names. In addition, the FDA may object to any product name Neos submits if it believes the name inappropriately implies medical claims.

If the FDA objects to any of Neos’ proposed product names, it may be required to adopt an alternative name for its product candidates, which could result in further evaluation of proposed names with the potential for additional delays and costs.

Obtaining and maintaining regulatory approval of Neos’ product candidates in one jurisdiction does not mean that it will be successful in obtaining regulatory approval of its product candidates in other jurisdictions.

Even if Neos obtains and maintain regulatory approval of its product candidates in one jurisdiction, such approval does not guarantee that it will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional nonclinical studies or clinical trials as investigations conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that Neos intends to charge for its products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for Neos and could delay or prevent the introduction of its products in certain countries. If Neos fails to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, its target market will be reduced and its ability to realize the full market potential of its product candidates will be harmed.

Neos is heavily dependent on the success of its product candidates. Neos cannot give any assurance that it will receive regulatory approval for its product candidates, which is necessary before they can be commercialized.

Neos’ business and future success are substantially dependent on its ability to timely obtain regulatory approval for and commercialize any product candidates that it may identify and pursue. Neos is not permitted to market any of its product candidates in the United States until it receives approval of an NDA from the FDA, or in any foreign jurisdiction until it receives the requisite approvals from such jurisdiction. Satisfaction of regulatory requirements can be protracted, is dependent upon the type, complexity and novelty of the product candidate and requires the expenditure of substantial resources. Neos cannot predict whether it will obtain regulatory approval to commercialize its product candidates, and it cannot, therefore, predict the timing of any future revenues from these product candidates, if any. Any delay or setback in the regulatory approval or commercialization of any of these product candidates could adversely affect Neos’ business.

The commencement and completion of clinical trials can be delayed or prevented for a number of reasons.

Neos intends to identify, develop and market additional product candidates if it completes IND-enabling activities; however, it may not be able to commence or complete the clinical trials, including those with respect to NT0502, that

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would support the submission of an NDA to the FDA. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of Neos’ clinical trials. Clinical trials can be delayed or prevented for a number of reasons, including:

•        difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial;

•        delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) contract manufacturing organizations (“CMOs”) and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•        delays due to backlogs of trials at limited numbers of study centers;

•        failure of third-party contractors, such as CROs and CMOs, or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner;

•        insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct clinical trials;

•        difficulties obtaining IRB approval to conduct a clinical trial at a prospective site;

•        the FDA requiring alterations to any study designs, nonclinical strategy or manufacturing plans;

•        challenges recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including size and nature of subject population, proximity of subjects to clinical sites, eligibility criteria for the trial, nature of trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

•        difficulties maintaining contact with subjects after treatment, which results in incomplete data;

•        receipt by a competitor of marketing approval for a product targeting an indication that Neos’ product targets;

•        governmental or regulatory delays and changes in regulatory requirements, policy and guidelines; and

•        varying interpretations of data by the FDA and similar foreign regulatory agencies.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by Neos, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:

•        failure to conduct the clinical trial in accordance with regulatory requirements or its clinical protocols;

•        inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;

•        unforeseen safety issues, including serious adverse events associated with a product candidate, or lack of effectiveness; and

•        lack of adequate funding to continue the clinical trial.

Positive results in previous nonclinical studies and clinical trials of any of Neos’ product candidates may not be replicated in future clinical trials of the same product candidates, which could result in development delays or a failure to obtain marketing approval.

Positive results in nonclinical studies and clinical trials of any of Neos’ product candidates may not be predictive of similar results in future clinical trials. Also, interim results during a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from any completed nonclinical studies and clinical trials for any of Neos’ product candidates may not be

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predictive of the results it may obtain in later stage trials. Neos’ clinical trials may produce negative or inconclusive results, and Neos may decide, or regulators may require it, to conduct additional clinical trials. Moreover, clinical data is often susceptible to varying interpretations and analyses.

Risks Related to Neos’ Intellectual Property

If Neos’ intellectual property related to its products or product candidates is not adequate, it may not be able to compete effectively in its market.

Neos relies upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to its products, product candidates and technology. Any disclosure to or misappropriation by third parties of its confidential or proprietary information could enable competitors to duplicate or surpass its technological achievements, thus eroding its competitive position in its market.

Due to legal standards relating to patentability, validity, enforceability and scope of claim, patents covering pharmaceutical and biotechnology inventions involve complex legal, scientific and factual questions. Formulation of drug products such as Neos’ with complex release profiles is an area of intense research, publishing and patenting, which limits the scope of any new patent applications. As a result, Neos’ ability to obtain, maintain and enforce patents is uncertain and any rights under any existing patents, or any patents it might obtain or license, may not provide it with sufficient protection for its products and product candidates to afford a commercial advantage against competitive products or processes. The patent applications that Neos owns or licenses may fail to result in issued patents in the United States or in foreign countries. Even if patents do successfully issue, third parties may challenge their patentability, validity (e.g., by discovering previously unidentified prior art, or a patent-barring event such as a prior public disclosure, use, sale or offer for sale of the invention), enforceability or scope, which may result in such patents being narrowed, invalidated or held unenforceable. In addition, U.S. patents may be challenged by third parties via inter partes review, post grant review, derivation or interference proceedings at the USPTO, and European patents may be challenged via an opposition proceeding at the European Patent Office. Furthermore, if Neos were to assert its patent rights against a competitor, the competitor could challenge the validity and/or enforceability of the asserted patent rights. Although a granted U.S. patent is entitled to a statutory presumption of validity, its issuance is not conclusive as to its validity or its enforceability, and it may not provide Neos with adequate proprietary protection or competitive advantages against competitors with similar products.

If the breadth or strength of protection provided by the patents and patent applications Neos holds or pursues with respect to its products and product candidates is successfully challenged, it may face unexpected competition that could have a material adverse impact on its business. Even if they are unchallenged, its patents and patent applications may not adequately protect its intellectual property or prevent others from designing around its claims. For example, a third party may develop a competitive product that provides therapeutic benefits similar to its products or product candidates, but is sufficiently different to fall outside the scope of its patent protection.

Furthermore, if Neos encounters delays in its clinical trials or entry onto the market in a particular jurisdiction, the period of time during which it could market a particular product under patent protection would be reduced.

Even where laws provide protection, costly and time-consuming litigation could be necessary to enforce and determine the scope of its proprietary rights, and the outcome of such litigation would be uncertain. If Neos or one of its future collaborators were to initiate legal proceedings against a third party to enforce a patent covering a product or ITS technology, the defendant could counterclaim that its patent is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of written description, non-enablement or a patent-barring event, such as a public disclosure, use or sale of the invention more than a year before the filing date of the application. Grounds for an unenforceability assertion could, for example, be an allegation that someone connected with prosecution of the patent withheld material information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, Neos cannot be certain that there is no invalidating prior art, of which Neos and the patent examiner were unaware during prosecution, or that a third party challenging one of its patents would not assert that a patent-barring event had occurred. If a plaintiff or a defendant were to prevail on a legal assertion of invalidity and/or unenforceability against one or more of its patents, Neos would lose at least part, and perhaps all, of the

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patent protection for one or more of its products or product candidates. Such a loss of patent protection could have a material adverse impact on its business. For example, on July 25, 2016, Neos received a paragraph IV certification from Actavis advising Neos that Actavis filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. On September 1, 2016, Neos filed a patent infringement lawsuit in federal district court in the District of Delaware against Actavis, Inc. This case alleged that Actavis infringed Neos’ Adzenys XR-ODT patents by submitting to the FDA an ANDA seeking to market a generic version of Adzenys XR-ODT prior to the expiration of Neos’ patents. On October 17, 2017, Neos entered into a Settlement Agreement and a Licensing Agreement (collectively, the “Actavis Agreement”) with Actavis, which resolved all ongoing litigation involving its Adzenys XR-ODT patents and Actavis’s ANDA. Under the Actavis Agreement, Neos has granted Actavis the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of Delaware. The Actavis Agreement has been submitted to the applicable governmental agencies. On October 31, 2017, Neos received a paragraph IV certification from Teva advising it that Teva filed an ANDA with the FDA for a generic version of Cotempla XR-ODT. On December 13, 2017, Neos filed a patent infringement lawsuit in federal district court in the District of Delaware against Teva. This case alleged that Teva infringed its Cotempla XR-ODT patents by submitting to the FDA an ANDA seeking to market a generic version of Cotempla XR-ODT prior to the expiration of its patents. On December 21, 2018, Neos entered into a Settlement Agreement and a Licensing Agreement (collectively, the “Teva Agreement”) with Teva, which resolved all ongoing litigation involving its Cotempla XR-ODT patents and Teva’s ANDA. Under the Teva Agreement, Neos has granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of Delaware. The Teva Agreement has been submitted to the applicable governmental agencies.

There can be no assurance that the Actavis Agreement or Teva Agreement will be approved by such agencies. In addition, there can be no assurance that Neos would not face future litigation regarding its Branded Products or any future product candidates.

Such litigation is often time-consuming and costly and its outcome would be unpredictable; however, Neos intends to vigorously enforce its intellectual property rights relating to its products. Neos would expect to face generic competition for its products if such patents are not upheld or if a filer of a Paragraph IV certification is found not to infringe such patents. The resulting loss of exclusivity would impact pricing and its sales of its products, which could have a material adverse impact on its business.

Moreover, Neos may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in reexamination, inter partes review, or interference proceedings challenging its patent rights. Patents based on applications that Neos files in the future may also be subject to derivation and/or post-grant review proceedings. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, its patent rights and allow third parties to commercialize its technology or products and compete directly with Neos. In addition, if the breadth or strength of protection provided by its patents and patent applications is threatened, it could dissuade companies from collaborating with it to license, develop or commercialize current or future product candidates.

Neos may not seek to protect its intellectual property rights in all jurisdictions throughout the world, and it may not be able to adequately enforce its intellectual property rights even in the jurisdictions where it seeks protection.

Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and Neos’ intellectual property rights in some countries outside the United States are less extensive than in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, even where Neos does elect to pursue patent rights outside the United States, it may not be able to obtain relevant claims and/or it may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions.

Competitors may use Neos’ technologies in jurisdictions where Neos does not pursue and obtain patent protection to develop their own products and further, may possibly export otherwise infringing products to territories where Neos has patent protection, but enforcement is not as strong as that in the United States. These products may compete with

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Neos’ products and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if Neos pursues and obtains issued patents in particular jurisdictions, its patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from competing with Neos.

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. This could make it difficult for Neos to stop the infringement of its patents, if obtained, or the misappropriation of its 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, Neos has, and may in the future, choose not to seek patent protection in certain countries. Furthermore, while Neos intends to protect its intellectual property rights in certain markets for its products, it cannot ensure that it will be able to initiate or maintain similar efforts in all jurisdictions in which it may wish to market its products. Accordingly, Neos’ efforts to protect its intellectual property rights in such countries may be inadequate.

Obtaining and maintaining Neos’ patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance 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. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

If Neos is sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on its business.

Neos’ commercial success depends upon its ability and the ability of its collaborators to develop, manufacture, market and sell its and their approved products and use its proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which Neos is developing product candidates. As the pharmaceutical industry expands and more patents are issued, the risk increases that its products and product candidates may give rise to claims of infringement of the patent rights of others. There may, for example, be issued patents of third parties of which Neos is currently unaware, that may be infringed by its products or product candidates, which could prevent Neos from being able to commercialize its products or product candidates, respectively. Because patent applications can take many years to issue, there may be currently pending applications which may later result in issued patents that Neos’ products or product candidates may infringe.

The pharmaceutical industry is rife with patent litigation between patent holders and producers of follow-on drug products. The possibility of blocking FDA approval of a competitor’s product for up to 30 months provides added incentive to litigate over Orange Book patents, but suits involving non-Orange Book patents are also common in the ADHD space. There have been multiple patent litigations involving nearly all of the medications for treatment of ADHD. This trend may continue and, as a result, Neos may become party to legal matters and claims arising in the ordinary course of business.

Neos may be exposed to, or threatened with, future litigation by third parties alleging that its products or product candidates infringe their intellectual property rights. If one of its products or product candidates is found to infringe the intellectual property rights of a third party, Neos or its collaborators could be enjoined by a court and required to pay damages and could be unable to commercialize the applicable approved products and product candidates unless it obtains a license to the patent. A license may not be available to Neos on acceptable terms, if at all. In addition,

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during litigation, the patent holder could obtain a preliminary injunction or other equitable relief which could prohibit Neos from making, using or selling its approved products, pending a trial on the merits, which may not occur for several years.

There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. If a third party claims that Neos or its collaborators infringe its intellectual property rights, Neos may face a number of issues, including, but not limited to:

•        infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert its management’s attention from its core business;

•        third parties bringing claims against it may have more resources than it to litigate claims against it;

•        substantial damages for infringement, which it may have to pay if a court decides that the product at issue infringes on or violates the third party’s rights, and, if the court finds that the infringement was willful, it could be ordered to pay treble damages and the patent owner’s attorneys’ fees;

•        a court prohibiting it from selling its product or any product candidate approved in the future, if any, unless the third party licenses its rights to it, which it is not required to do;

•        if a license is available from a third party, it may have to pay substantial royalties, fees or grant cross-licenses to its intellectual property rights; and

•        redesigning any of its products and product candidates so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.

Neos’ drug development strategy relies heavily upon the 505(b)(2) regulatory approval pathway, which requires it to certify that it does not infringe upon third-party patents covering approved drugs. Such certifications typically result in third-party claims of intellectual property infringement, the defense of which would be costly and time consuming, and an unfavorable outcome in any litigation may prevent or delay its development and commercialization efforts which would harm its business.

Neos’ commercial success depends in large part on its avoiding infringement of the patents and proprietary rights of third parties for existing approved drug products. Because it utilizes the 505(b)(2) regulatory approval pathway for the approval of its products and product candidates, it relies in whole or in part on studies conducted by third parties related to those approved drug products. As a result, upon filing with the FDA for approval of its product candidates, Neos will be required to certify to the FDA that either: (1) there is no patent information listed in the FDA’s Orange Book with respect to its NDA; (2) the patents listed in the Orange Book have expired; (3) the listed patents have not expired, but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patents are invalid or will not be infringed by the manufacture, use or sale of it