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Acerus Reports First Quarter 2021 Financial Results

05/13/2021

TORONTO, May 13, 2021 (GLOBE NEWSWIRE) -- Acerus Pharmaceuticals Corporation (“Acerus” or the “Company”) (TSX: ASP; OTCQB: ASPCF) today reported its financial results for the three-month period ended March 31, 2021. Unless otherwise noted, all amounts are in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).

Q1 - 2021 Highlights

  • Re-purchased all remaining NATESTO® rights from Aytu Biopharma, allowing Acerus to build and leverage its commercial business across North America
  • Expanded NATESTO® access to 20 countries across Europe, Central Asia and the Middle East through an agreement with Maylen Farma (“Maylen”), a firm based in Lugano, Switzerland that specializes in bringing pharmaceutical products and healthcare services to patients in emerging markets
  • Received notice of allowance on NATESTO® patent in the U.S. that will have an expiry date in 2034, protecting one of the Company’s proprietary medications into the foreseeable future
  • Completed a US$15 million subordinated secured loan facility (the “Loan Facility”), providing needed capital to execute the Company’s many ongoing growth initiatives
  • After the end of the quarter, Acerus announced a NATESTO® revenue share agreement with Amneal Pharmaceuticals, leveraging Amneal’s extensive relationships with Endocrinology healthcare providers in the U.S.

“We accomplished a great deal strategically in the first quarter, all of which should position us for higher growth going forward,” said Ed Gudaitis, President and Chief Executive Officer of Acerus. “Re-purchasing the remaining NATESTO® rights from Aytu – while necessitating a US$7.5 million termination fee paid over 30 months – allowed us to actively take control of our sales efforts in the U.S. and, in doing so, report all revenue from this very important market. Other decisions this quarter also strengthened the Company’s outlook – including our agreement with Maylen, bolstering our overseas expansion plans, and our entering into a new loan facility that provides capital for growth. Just as importantly, after the end of the quarter, our deal with Amneal paves the way for Acerus to more rapidly reach Endocrinology professionals in the U.S., opening up new avenues for customer interaction and acceptance. As we look out on 2021 and beyond, we believe these strategic moves provide the flexibility and opportunity for improved performance and bottom-line results.”

Summary of Results for the Three Months Ended March 31, 2021 (compared to the Three Months Ended March 31, 2020 unless otherwise noted)

  • Total revenue in the quarter was negative $6.0 million compared to $0.1 million in the first quarter of 2020, reflecting a $6.2 million termination fee in 2021 related to the Aytu buyback of product rights; this fee represents the present value of $7.5 million in total payments to be made to Aytu under the agreement. Going forward, Acerus gains full distribution rights and the reporting of sales for any transaction in the U.S.   
  • Gross profit in the first quarter of 2021 was negative $6.2 million compared to negative $0.1 million in the prior-year period, reflecting the aforementioned termination fee of $6.2 million
  • Research and development ("R&D") expense rose by $0.4 million, to $1.0 million, for the current quarter from $0.6 million in the prior-year period, reflecting increased expense for NATESTO® clinical trials in the U.S.
  • Selling, general and administrative expenses (“SG&A”) increased by $1.7 million. to $5.3 million, from $3.6 million in the prior-year period, reflecting investment in the Company’s U.S. organization, launched in the second half of 2020
  • EBITDA1 was a loss of $12.1 million compared to a loss of $3.8 million in the prior-year period; Adjusted EBITDA1 was a loss of $5.7 million for the quarter compared to a loss of $4.0 million in the prior-year period
  • The Company incurred a net loss of $12.8 million, or $(0.01) per share, for the quarter compared to a loss of $4.7 million, or $(0.01) per share, in the first quarter of 2020

Balance Sheet

Cash as of March 31, 2021 was $5.2 million compared with $9.2 million as of December 31, 2020, reflecting cash used during the quarter.

On April 30, 2021, the Company announced that it had entered into a US$15 million subordinated secured loan facility made available to the Company by way of one or more advances under a secured grid promissory note with First Generation Capital Inc., a company affiliated with the Chairman of the Board of Directors of Acerus.

COMPANY UPDATE AND OUTLOOK

NATESTO®
The Company continues to execute on its strategy of focusing on the U.S. market for NATESTO®. During the quarter, the Company signed an agreement with Aytu BioPharma (f/k/a Aytu BioScience) (“Aytu”), whereby Acerus acquired all remaining rights to NATESTO® in the U.S. that were not already returned as part of the Company’s 2019 Amended and Restated Agreement with Aytu. By assuming full ownership of NATESTO and its U.S. distribution, the Company can leverage its commercial business unit to accelerate growth. In addition to Acerus selling to its existing specialty healthcare professionals, the Company gains full distribution rights and reporting of sales for any transaction in the U.S. market. Aytu has agreed to assist Acerus throughout a 120-day transition period from the effective date (March 31, 2021) and, during this period, will continue to provide distribution of NATESTO® under the terms of the existing License and Supply Agreement. NATESTO® sales will be recognized at the distributor level, which allows for better alignment of revenue to underlying prescription trends.

After the end of the quarter, in May 2021, Acerus announced a NATESTO® co-promotion agreement with Amneal Pharmaceuticals that leverages that company’s extensive relationships with Endocrinology healthcare providers in the U.S. market. Under the terms of the agreement, Amneal will sell NATESTO® to its existing Endocrinology targets through June 30, 2024. In compensation for such marketing efforts, Amneal will receive a commission for most of the net profits attributed to Endocrinology targets in the three active promotional years, with Acerus retaining a low double-digit percentage of such net profits during the active promotion period. Amneal will also receive a three-year trailing royalty following the active promotion period, with compensation to Amneal decreasing from a majority of the net profits to a minority of the net profits.

Also subsequent to the end of the quarter, the Company received a Notice of Allowance for a U.S. patent covering NATESTO®. When granted, Acerus expects this patent to be listed in the Orange Book, which will extend patent coverage through 2034.

Outside of the United States, the Maylen Farma agreement announced in the quarter expands the reach of NATESTO® to 20 countries across Europe, Central Asia, and the Middle East. Nations covered by the agreement include Belarus, Georgia, and Ukraine; Azerbaijan, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan; Albania, Kosovo, North Macedonia, Serbia, and Bosnia and Herzegovina; the United Arab Emirates, Kingdom of Saudi Arabia, Kuwait, Qatar, Bahrain, Jordan, and Lebanon. The Company currently expects first orders under his agreement in the second quarter, with deliveries in the fourth quarter of 2021 and early 2022.

The Company also remains optimistic about a return of NATESTO® to Canada during 2021. The first batch of NATESTO® for this market has already been manufactured and is undergoing stability studies. At the same time, Acerus has begun the regulatory work and commercial preparations required to support the reintroduction of NATESTO® in Canada.

avanafil Health Canada Approval Status
The review of the avanafil New Drug Submission (“NDS”) is underway, and the Company is responding to questions and clarification requests from Health Canada. As disclosed in the Company’s 2020 fourth quarter earnings report, the review process can take up to a year from receipt of the NDS (December 2020).

Conference Call
Shareholders are reminded that the conference call to discuss the Company’s results for the first quarter will be held on May 13, 2021 at 10:00 a.m. Eastern Time.

To access the call live, please dial 416-406-0743 or 1-800-952-5114 and use access code 1930457#. 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 10:00 a.m. Eastern Time on Thursday, May 20, 2021 by dialing 905-694-9451 or 1-800-408-3053, using access code: 8998151#.

About Acerus
Acerus Pharmaceuticals Corporation is a Canadian-based specialty pharmaceutical company focused on the commercialization and development of innovative prescription products that improve patient experience, with a primary focus in the field of men’s health. The Company commercializes its products via its own salesforce in the United States and Canada, and through a global network of licensed distributors in other territories. Acerus’ shares trade on TSX under the symbol ASP and on OTCQB under the symbol ASPCF. For more information, visit www.aceruspharma.com and follow us on Twitter and LinkedIn.

1 Non-IFRS Financial Measures - EBITDA and Adjusted EBITDA
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 follows below:

EBITDA is defined as net (loss)/income adjusted for income tax, depreciation of property and equipment, amortization of intangible assets, interest on long-term debt and other financing costs, interest income, licensing revenue and changes in fair values of derivative financial instruments. Management uses EBITDA to assess the Company’s operating performance.

Adjusted EBITDA is defined as EBITDA adjusted for, as applicable, royalty expenses associated with triggering events, milestones, share based compensation, impairment of intangible asset, foreign exchange (gain)/loss, charges related to product recall and gain on extinguishment of payables. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts and prior years. Management believes Adjusted EBITDA is an alternative measure of cash flow generation than, for example, cash flow from operations, particularly because it removes cash flow fluctuations caused by extraordinary changes in working capital. A reconciliation of net (loss)/income to EBITDA (and Adjusted EBITDA) is set out below.

      For the three months ended
March 31,
        2021     2020  
Net loss     $ (12,826 ) $ (4,663 )
Adjustments:      
  Amortization of intangible assets     37     179  
  Depreciation of property and equipment     222     64  
  Depreciation of right of use asset     -     12  
  Interest expense and other financing costs     292     846  
  Interest income     (5 )   (31 )
  Change in fair value of derivative     69     (163 )
  Loss on modification of debt     64     -  
EBITDA     $ (12,147 ) $ (3,756 )
         
Termination Fee     6,204     -  
Share based compensation     291     45  
Foreign exchange gain     (15 )   (244 )
Adjusted EBITDA   $ (5,667 ) $ (3,955 )

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, including with respect to the commercial performance of NATESTO® globally and in the U.S., 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 10, 2021 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.

Company Contact
ir@aceruspharma.com

Investor Relations Contact
Chris Witty
Acerus Investor Relations
(646) 438-9385
cwitty@darrowir.com 

Acerus Pharmaceuticals Corporation    
Condensed Interim Consolidated Statements of Financial Position  
As at March 31, 2021 and December 31, 2020    
Unaudited    
(expressed in thousands of U.S. dollars)    
    March 31,
2021
  December 31,
2020
 
       
ASSETS    
       
Current assets    
  Cash $ 5,167   $ 9,153  
  Trade and other receivables   380     528  
  Contract asset   691     936  
  Inventory   2,445     2,313  
  Prepaid and other assets   1,157     1,104  
Total current assets   9,840     14,034  
       
Property and equipment, net   584     806  
Intangible assets, net   2,105     2,142  
Total assets $ 12,529   $ 16,982  
       
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)  
       
Current liabilities    
  Accounts payable and accrued liabilities $ 7,171   $ 5,435  
  Termination fee payable   2,776     -  
  Current portion of long-term debt   2,602     1,439  
  Current portion of lease liability   205     229  
Total current liabilities   12,754     7,103  
       
Termination fee payable   3,428     -  
Long-term debt   5,514     6,580  
Derivative financial instruments   208     139  
Total liabilities   21,904     13,822  
       
Shareholders' equity (deficit)    
  Share capital $ 198,163   $ 198,163  
  Contributed surplus   13,726     13,435  
  Accumulated other comprehensive loss   (13,949 )   (13,949 )
  Deficit   (207,315 )   (194,489 )
Total shareholders' equity (deficit)   (9,375 )   3,160  
Total liabilities & shareholders' equity (deficit) $ 12,529   $ 16,982  



Acerus Pharmaceuticals Corporation      
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss    
For the three months ended March 31, 2021 and 2020      
Unaudited          
(expressed in thousands of U.S. dollars, except per share and share data)    
        For the three months ended March 31,
          2021       2020  
             
Revenue          
Product revenue     $ 234     $ 145  
Termination Fee       (6,204 )     -  
          (5,970 )     145  
Cost of goods sold   191       201  
          -       -  
Gross margin (loss)       (6,161 )     (56 )
             
Expenses          
  Research and development       973       622  
  Selling, general and administrative     5,287       3,577  
Total operating expenses       6,260       4,199  
Operating loss       (12,421 )     (4,255 )
             
Other expenses(income)          
  Interest on long-term debt and other financing costs   292       846  
  Interest income       (5 )     (31 )
  Foreign exchange gain       (15 )     (244 )
  Change in fair value of derivative financial instruments   69       (163 )
  Loss on modification of debt       64       -  
Total other expenses       405       408  
Loss for the period before income taxes     (12,826 )     (4,663 )
             
Income tax expense       -       -  
Net loss and comprehensive loss for the period $ (12,826 )   $ (4,663 )
             
Loss per common share          
  Basic and diluted net loss per common share $ (0.01 )   $ (0.01 )
             
Weighted average common shares outstanding        
  Basic and diluted       1,537,588,081       656,423,941  

 



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Source: Acerus Pharmaceuticals Corporation