TORONTO--(BUSINESS WIRE)--Acerus Pharmaceuticals Corporation (TSX: ASP) (“Acerus” or the “Company”) today reported its financial results for the three and nine months ended September 30, 2018. Unless otherwise noted, all amounts are in U.S. dollars.
Recent Operational and Financial Highlights
- Increased product revenue by 16% to $1.6 million versus $1.4 million in the same three-month period in the prior year;
- Closed $11 million term loan credit facility with SWK Funding LLC (“SWK”);
- Repaid all amounts outstanding under, and retired, the Quantius credit facility;
- Retired the Endo promissory note through repayment of the note and outstanding accrued interest;
- Announced the publication of a positive clinical trial update in the journal European Urology Focus on the effects of NATESTO® on reproductive hormones and semen parameters;
- Completed first dosing of subjects in a Phase I clinical trial testing a proprietary intranasal formulation of tetrahydrocannabinol (“THC”)-rich cannabis oil in healthy volunteers;
- Signed an amendment to existing licensing and supply agreement with medac Gesellschaft fϋr Klinische Spezialprӓparate mbH (“medac”) expanding medac’s exclusive right to market NATESTO® in all 28 current European Union member countries as well as eight other countries; and
- Announced submission of a dossier by medac for NATESTO® in the first 21 European Member States under the Decentralized Procedure.
“The third quarter was highlighted by further progress against our core strategic priorities, including continued year over year growth in NATESTO® sales as total prescriptions increased in both Canada and the U.S.,” said Ed Gudaitis, President and CEO of Acerus Pharmaceuticals. “We also continue to make progress against key clinical milestones as data from a Phase IV study looking at NATESTO®’s impact on reproductive hormones and semen parameters was published, and we recently initiated a Phase I trial to assess the potential of our proprietary nasal delivery technology with cannabinoids.”
“Improving our financial flexibility has remained a strategic priority and subsequent to quarter-end we announced that we had entered into a secured term loan credit facility with SWK Funding LLC,” said Bob Motz, Chief Financial Officer of Acerus Pharmaceuticals. “The new arrangement with a sophisticated partner provides us improved access to capital, with longer term and at a lower rate than our previous lender. This has allowed us to extinguish some near-term obligations, freeing us up to focus on operating and growing the business over the longer term.”
Financial Results for the Three and Nine Months Ended September 30, 2018
Total revenue for the three- and nine-month periods ended September 30, 2018 was $1.6 million and $5.3 million respectively, versus $1.4 million and $4.2 million for the same prior year periods.
Product revenues increased from $1.4 million for the three months ended September 30, 2017 to $1.6 million for the same period in 2018. Product revenue increased from $3.6 million for the nine months ended September 30, 2017 to $5.2 million for the same 2018 period. The increases in product revenue for the three- and nine-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, however there was no such shipment for the third quarter. Acerus also continues to see steady growth from NATESTO® in the Canadian market as marketing initiatives come to fruition. There was a slight decline in ESTRACE® sales, which were $2.8 million for the nine months ended September 30, 2018 versus $3.2 million for the same prior year period.
Licensing and other revenues were $0.2 million for the nine months ended September 30, 2018 and $0.6 million for the same period in the prior year. 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.
Cost of goods sold for the three months ended September 30, 2018 was $0.8 million compared with $0.7 million for the same prior year period. Gross margins remain consistent with the level of sales. Cost of goods sold for the nine months ended September 30, 2018 was $2.8 million compared with $1.9 million in the same 2017 period. Gross margins were impacted by revenue from shipments of NATESTO® inventory, which is sold to Aytu at a contractual supply price with a small margin. When Aytu sells the product, Acerus then receives additional top-up revenue that has no related cost of goods. Management expects to continue to see fluctuations in the gross margin depending on the relative proportion of revenue from inventory shipment and top-up revenue. During Q2 2018 the Company expensed $6.7 million related to the Mattern Buyout.
Research and development (“R&D”) costs were $0.8 million in the third quarter of 2018 versus $0.4 million in the comparative quarter a year ago. The increase compared with the same prior year period was mainly due to product development expenses for NATESTO®, including the cardiovascular trial in the U.S., and cannabinoid trial set up costs, coupled with increased salaries and benefits costs due to additional personnel. R&D expenses increased by $0.3 million for the nine months ended September 30, 2018 up from $1.5 million from the same 2017 period. Clinical trial expense increased by $0.2 million mainly due to costs associated with the various NATESTO® studies, including the cardiovascular trial in the U.S., and cannabinoid trial set up costs, and there was a $0.2 million increase in salaries and benefits due to additional personnel hired. This was offset by a $0.1 million decrease in amortization of intangible assets due to the extension of the expected life of certain assets.
Selling, general and administrative (“SG&A”) expenses increased by $0.4 million for the three months ended September 30, 2018 up from $1.8 million in the prior year period. Selling expenses increased by $0.1 million due to the increased activities related to NATESTO® and the launch of URIVARX®. Business development costs increased by $0.1 million due to additional activities and consulting fees. Salaries, benefits, share based compensation and other expenses increased by $0.2 million over the prior year mainly due to the additional personnel, including the onboarding of the sales team. SG&A expenses increased by $1.3 million for the nine months ended September 30, 2018 up from $4.9 million in the prior year period. Salaries and benefits increased by $0.4 million and shared-based compensation increased by $0.1 million over the prior year mainly due to the additional personnel, including the onboarding of the sales team in Q4 2017. Selling expenses increased by $0.2 million due to the increased activities related to NATESTO® and the launch of URIVARX®. Professional fees and business development fees increased by $0.1 million and $0.3 million, respectively, over the prior year due to increased consulting fees related to additional business activities and vacant personnel positions. Office and sundry expenses have increased by $0.2 million and over the prior year mainly due to the increase in personnel and related recruiting fees.
Earnings before interest, tax, depreciation and amortization (“EBITDA”) (see “Non-IFRS Financial Measures” below) were losses of $1.6 million and $11.1 million for the three and nine month periods ended September 30, 2018, versus losses of $2.3 million and $5.0 million for the same periods in 2017, respectively. Adjusted EBITDA (see “Non-IFRS Financial Measures” below) for three- and nine-month periods ended September 30, 2018 were losses of $1.5 million and $3.8 million, versus losses of $0.8 million and $3.0 million for the same periods in 2017.
Basic and diluted loss per share for the three- and nine-month periods ended September 30, 2018, were $0.01 and $0.06, versus losses of $0.01 and $0.03 for the same periods in 2017, respectively.
At September 30, 2018, the Company had cash of $1.2 million compared to cash of $3.2 million on December 31, 2017. Subsequent to the end of the third quarter of 2018, the Company closed on an $11 million loan facility with SWK Funding LLC. $9 million of the $11 million was immediately advanced and used to settle the Endo promissory note of $0.9 million as well as the Quantius debt facility of $4.2 million, with the balance being used for general corporate purposes. The remaining $2 million will be advanced once certain future conditions are met.
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 seek 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 in the early clinical stages, designed to leverage the Company’s proprietary nasal delivery technology platform.
In October 2018, Acerus signed an amendment to its existing licensing and supply agreement with medac expanding their exclusive right to market NATESTO® in the totality of the 28 current European Union member countries (including the United Kingdom) as well as Norway, Liechtenstein, Iceland, Turkey (including Turkish Cyprus), Australia, New Zealand, Israel and South Africa. In addition, medac submitted a dossier for NATESTO® in the first 21 European Member States under the Decentralized Procedure on September 28th, 2018.
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 38% share of all prescriptions for oral estradiol across Canada despite more than 26 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.
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 make a New Drug Submission (“NDS”) to Health Canada late in the fourth quarter of 2018.
LIDBREE™ (formerly referred to as SHACT™)
On May 29, 2018 Acerus entered into an exclusive agreement with Palette Life Science (formerly Pharmanest AB) to commercialize a short acting lidocaine product, to be developed under the name LIDBREE™, a pain relief drug device combination, in Canada. Acerus currently expects to submit a dossier 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 currently expects to submit a dossier to Health Canada in the second half of 2019.
In 2018, the Company elected to pursue an initiative to study the intranasal delivery of cannabinoids (whether synthetic or naturally-derived), which may have multiple possible therapeutic applications (the “Cannabinoids Initiative”). To date, Acerus has filed patent applications on the Cannabinoids Initiative, announced first dosing of subjects in a Phase I clinical trial testing a proprietary intranasal formulation of tetrahydrocannabinol (“THC”)-rich cannabis oil in health volunteers, and is working to initiate other pharmacokinetic clinical trials, in addition to evaluating potential commercialization pathways including partnering transactions or 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 third quarter 2018 results to be held on Tuesday November 6, 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 Tuesday, November 13, 2018 by dialing 905-694-9451 or 1-800-408-3053, using access code: 9812622#.
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.