TORONTO--(BUSINESS WIRE)--Acerus Pharmaceuticals Corporation (TSX: ASP) (“Acerus” or the “Company”) today reported its financial results for the three months and six months ended June 30, 2018. Unless otherwise noted, all amounts are in U.S. dollars.
Second Quarter Operational and Financial Highlights
- Increased product revenue by 63% to $2.0 million versus $1.2 million in the same three-month period in the prior year;
- Received notice of approval of Natesto® in South Korea for the treatment of hypogonadism;
- Signed agreement granting marketing rights for Natesto® in 18 Central and Latin American countries and Mexico;
- In-licensed short acting lidocaine drug device combination, Shact™, from Pharmanest AB;
- Completed bought deal financing for gross proceeds of CDN$6.6 million;
- Received additional CDN$2.0 million tranche under Quantius loan facility; and
- Announced buyout of all obligations under license agreement with Mattern Pharma AG.
“We executed against a number of core strategic objectives during the second quarter as we obtained our first international marketing approval for Natesto® and concluded a marketing partnership for this core product spanning 18 Central and Latin American countries, and Mexico, further expanding its potential global reach,” said Ed Gudaitis, President and CEO of Acerus Pharmaceuticals. “During the quarter we also began to see growing revenue contribution from the recently launched, over-the-counter product UriVarx®, and added Shact™ to our growing pipeline of in-licensed products, for which we will be seeking Canadian marketing approval in the near-term.”
“During the quarter we took steps to strengthen our balance sheet, securing a further CDN$2.0 million from our loan facility with Quantius, and closing a bought deal equity financing for net cash proceeds of CDN$5.8 million,” said Ken Yoon, Chief Financial Officer of Acerus Pharmaceuticals. “Successfully closing a bought deal financing is an important first step towards broadening institutional holdings, increasing interest and awareness in the Company, as well as demonstrating our ability to access the equity market for funding.”
Financial Results for the Three and Six Months Ended June 30, 2018
Total revenue for the three- and six-month periods ended June 30, 2018 was $2.1 million and $3.7 million respectively, versus $1.8 million and $2.8 million for the same prior year periods.
Product revenues increased from $1.2 million for the three months ended June 30, 2017 to $2.0 million for the same period in 2018. Product revenue increased from $2.2 million for the six months ended June 30, 2017 to $3.6 million for the same 2018 period. The increases in product revenue for the three- and six-month periods are due to higher Natesto® sales in both the U.S. and Canada and the introduction of UriVarx® revenues in late Q1 2018. U.S. sales were mainly due to inventory shipments to the Company’s U.S. partner for Natesto®, Aytu BioScience (“Aytu”), in both the first and second quarters. Acerus also continues to see steady growth from Natesto® in the Canadian market as marketing initiatives come to fruition.
Licensing and other revenues were $0.2 million for the three and six months ended June 30, 2018 and $0.6 million for the same prior year periods. Licensing and other revenues are primarily dependent on the timing of out-licensing transactions and the achievement of regulatory and sales milestones. As such, the timing and amounts of revenue are not expected to be consistent period over period.
In Q2 2018, the Company reversed the $2.4 million net minimum royalty accrual on Natesto® sales and recorded a $6.7 million accrual to account for the Mattern Pharma buyout obligations. As a result, gross margins were negatively impacted by $4.3 million and $6.7 million in buyout obligation expense for the three and six months ended June 30, 2018, respectively.
Research and development (“R&D”) costs were $0.6 million in the second quarter of 2018 versus $0.4 million in the comparative quarter a year ago. The change is mainly due to a $0.1 million increase in salaries and benefits reflecting increased number of personnel and a $0.1 million increase in clinical trial expense related to Natesto®. R&D expenses for the six-month period remained fairly consistent year over year at $1.1 million. Decreases in product development and amortization of intangible assets were largely offset by increases in salaries and benefits associated with increased personnel, and in clinical trial costs associated with Natesto® studies. Product development costs in the prior year consisted mainly of regulatory and consulting fees related to the drug application filings for Gynoflor™ that were incurred in Q1 2017.
Selling, general and administrative (“SG&A”) expenses increased from $1.5 million in the second quarter ended June 30, 2017 to $2.2 million in the same period this year. SG&A expenses for the first six months of 2018 were $4.0 million, up from $3.1 million a year ago. The increases for both the three- and six-month periods were due to higher selling expenses associated with greater activity levels related to Natesto® and certain one-time and ongoing expenses related to UriVarx®, higher professional and business development fees, as well as increased salaries, benefits and share based compensation and other expenses associated with the adding of personnel and onboarding of a sales team.
Earnings before interest, tax, depreciation and amortization (“EBITDA”) (see “Non-IFRS Financial Measures” below) were losses of $5.8 million and $9.6 million for the three and six month periods ended June 30, 2018, versus losses of $1.6 million and $3.4 million for the same periods in 2017, respectively. Adjusted EBITDA (see “Non-IFRS Financial Measures” below) for three- and six-month periods ended June 30, 2018 were losses of $1.3 million and $2.4 million, versus losses of $0.7 million and $2.1 million for the same periods in 2017.
Basic and diluted loss per share for the three- and six-month periods ended June 30, 2018, were $0.03 and $0.05, versus losses of $0.01 and $0.02 for the same periods in 2017, respectively.
At June 30, 2018, the Company had cash of $6.0 million and working capital of $0.1 million. At December 31, 2017, the Company had cash of $3.2 million and working capital of $4.0 million.
The Company’s near-term focus remains on driving increased revenue from its portfolio of commercialized prescription and natural health products in men’s and women’s health. Acerus markets its products through its own sales force in Canada and through a growing, global network of licensed distribution partners in the U.S. and internationally. In parallel, the Company continues to in-license complementary products that can be submitted for marketing approval in Canada and marketed by Acerus’ own salesforce. Acerus also has a pipeline of early stage clinical and pre-clinical development programs, including a cannabinoids initiative, designed to leverage the Company’s proprietary nasal delivery technology platform.
On April 13, 2018 Acerus announced the signing of an agreement granting Producto Científicos, S.A. de C.V (“Carnot Laboratorios”) the exclusive right to market NATESTO® in Mexico and 18 Central and Latin American countries (Argentina, Columbia, Peru, Chile, Ecuador, Guatemala, El Salvador, Nicaragua, Honduras, Panama, Costa Rica, Cuba, Dominican Republic, Venezuela, Bolivia, Uruguay, Paraguay and Haiti). Carnot Laboratorios has more than 1,000 employees including nearly 500 sales representatives. Acerus is actively targeting additional opportunities to out-license marketing of Natesto® internationally.
On June 14, 2018, Acerus announced that its licensee, Hyundai Pharm Co., Ltd. (Hyundai), was notified that South Korea’s Ministry of Food and Drug Safety had approved Natesto® for the treatment of hypogonadism. Hyundai has more than 420 employees and plans on deploying a sales team of more than 100 to promote Natesto®. Approximately two-thirds of Hyundai’s revenue comes from prescription drug sales. Acerus expects to deliver its first inventory shipment to Hyundai in the fourth quarter of 2018. The Company expects to receive notification of regulatory approval in other jurisdictions starting in the second half of 2018 and through 2019 and beyond.
On November 16, 2015, Health Canada granted a Notice of Compliance for a third party generic version of Estrace®. The generic is now commercially available in Canada with public reimbursement across major provinces as of July 2016. As of June 30, 2018, Estrace® had maintained approximately 40% share of all prescriptions for oral estradiol across Canada despite more than 24 months of generic competition.
UriVarx® is approved by Health Canada as a natural health product to manage the symptoms of overactive bladder. It was launched as an over-the-counter product in the Canadian market in March of 2018. UriVarx® almost immediately began generating revenue.
Selected Pipeline Review
On February 28, 2017, Acerus submitted a New Drug Submission to Health Canada to obtain marketing approval for the product in Canada. Currently, there are no approved estriol + lactobacillus products on the Canadian market. On December 24, 2017, the Company received a Notice of Deficiency (“NOD”). In its notice, Health Canada requested additional technical information on Gynoflor™ in order to complete its assessment of the product. Acerus officially responded to the NOD on April 11, 2018, focusing only on the vaginal atrophy indication and currently expects to receive a final decision on approval in the first half of 2019.
Avanafil is a new chemical entity PDE5 inhibitor for the treatment of erectile dysfunction, which has been approved by the U.S. Food and Drug Administration and the European Medicines Agency and is commercialized in the U.S. under the trade name Stendra® and in the European Union under the trade name Spedra®. Acerus expects to submit a New Drug Submission (“NDS”) to Health Canada in the fourth quarter of 2018.
On May 29, 2018 Acerus entered into an exclusive agreement to commercialize Pharmanest AB’s Shact™, a short acting lidocaine drug device combination, in Canada. Acerus currently expects to submit a NDS to Health Canada in the first half of 2019.
On December 20, 2017, the Company entered into a license, development and supply agreement with Viramal Limited, a London-based specialty pharmaceutical company, that grants Acerus exclusive rights to commercialize the Elegant™ franchise of over-the-counter women’s health products in Canada.
Acerus has filed patent applications on a cannabinoids initiative that would leverage its novel nasal delivery technology and is currently working on setting up a series of pharmacokinetic clinical trials. The Company is currently evaluating potential commercialization pathways, including partnering transactions and Acerus-led approaches.
Financial Statements and MD&A
The above information is in summary form and readers are encouraged to consult the documents noted below for further details at the links indicated or on SEDAR at www.sedar.com.
Shareholders are reminded of the conference call to discuss the Company’s second quarter 2018 results to be held on Monday, August 13, 2018 at 8:30 a.m. Eastern Time. To access the call live, please dial 416-340-2216 or 1-800-377-0758. Listeners are encouraged to dial in 10 minutes before the call begins to avoid delays.
A replay of the conference call will be available until 11:59 p.m. Eastern Time on Monday, August 20, 2018 by dialing 905-694-9451 or 1-800-408-3053, using access code: 6983647#.
Acerus Pharmaceuticals Corporation is a Canadian-based specialty pharmaceutical company focused on the development, manufacture, marketing and distribution of innovative, branded products that improve patient experience, with a primary focus in the field of men’s and women’s health. The Company commercializes its products via its own salesforce in Canada, and through a global network of licensed distributors in the U.S. and other territories.
Non-IFRS Financial Measures
The non-IFRS measures included in this press release are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from our perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are non-IFRS measures that may have limits in their usefulness to investors.
We use non-IFRS measures, such as EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the valuation of issuers. We also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.
The definition and reconciliation of EBITDA and Adjusted EBITDA used and presented by the Company to the most directly comparable IFRS measures refer to the section “Non-IFRS Financial Measures” in our 2017 Annual MD&A available on SEDAR at www.sedar.com.
Notice Regarding Forward-Looking Statements
Information in this press release that is not current or historical factual information may constitute forward looking information within the meaning of securities laws. Implicit in this information are assumptions regarding our future operational results. These assumptions, although considered reasonable by the company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual performance of the company is subject to a number of risks and uncertainties and could differ materially from what is currently expected as set out above. For more exhaustive information on these risks and uncertainties you should refer to our annual information form dated March 20, 2018 which is available at www.sedar.com. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time, whether as a result of new information, future events or otherwise, except as required by applicable securities law.