Acerus first quarter 2019 revenue 33% up from last year’s same period

May 13, 2019 Off By BusinessWire

TORONTO–(BUSINESS WIRE)–Acerus Pharmaceuticals Corporation (“Acerus” or the “Company”) (TSX:ASP;
OTCQB:ASPCF) today reported its financial results for the three-month
period ended March 31, 2019 (“Q1-2019). Unless otherwise noted, all
amounts are in US dollars and are prepared in accordance with
International Financial Reporting Standards (“IFRS”).

Q1-2019 Highlights

- Total revenues in Q1-2019 of $2.2 million, an increase of $0.5 million
  or 33% compared to the first quarter of 2018 (“Q1-2018”).

- Natesto^®revenue growth to $1.4 million representing
  increased sales traction in both Canadian and U.S. markets.

- Filing of New Drug Submission (“NDS”) for avanafil with
  Health Canada.

- C$4.5 million private placement in quarter to strengthen balance sheet.

“We continue to see positive growth in the Natesto^® business
as we and our US partner, Aytu Bioscience, expand our programs to reach
more US and Canadian physicians and patients”, said Ed Gudaitis,
President and Chief Executive Officer of Acerus. “At the same time, we
look forward to being able to leverage our existing Men’s Health sales
force in Canada to effectively launch avanafil once it is approved by
Health Canada.”

Summary of Results for the Three Months Ended March 31, 2019
(compared to the Three Months Ended March 31, 2018 unless otherwise
noted)

Total Q1-2019 revenue was $2.2 million compared with $1.6 million of
revenue in Q1-2018. Revenue comprised the following products:

- A $0.7 million increase in Natesto^® revenue to $1.4 million
  reflecting both increased Canadian and US Natesto^®revenues
  as well as a one-time top-up of Tier 2 revenue on Natesto^®
  units held in inventory by our US partner Aytu Bioscience;

- A $0.3 million decline in Estrace^® revenue to $0.6 million
  reflecting the impact of the anticipated shortage and the resulting
  allocation of product to preserve availability (see Estrace^®
  update below); and

- Urivarx revenues in Q1-2019 of $0.2 million compared with less than
  $0.1 million in Q1-2018 reflecting the fact that Urivarx was first
  introduced in Q1-2018.

Q1-2019 gross margin was $1.5 million compared with negative $1.8
million in Q1-2018. The prior year quarter reflecting a $2.4 million
royalty buyout charge for the nasal gel dispenser technology. When
comparing direct cost of sales, the prior year quarter’s gross margin
was $0.6 million. The improved gross margin reflects the Tier 2 revenue
on Natesto US shipments as non-inventory revenue has no cost of sales
associated with such product.

Research and development (“R&D”) expenses increased by $0.6 million to
$1.0 million for the current quarter compared to Q1-2018 reflecting a
$0.3 million accrual for the filing fee to Health Canada for the
avanafil New Drug Submission and increased clinical trial costs for
Natesto^®, principally in the US.

Selling, general and administrative expenses (“SG&A”) increased by $2.5
million to $4.2 million in the first quarter of 2019. This increase in
expenses is principally due to a non-cash impairment charge of $2.5
million on the value of the Estrace^® intangible asset. This
charge reflects management’s estimate of the impact of the potential
shortage of Estrace^® on the carrying value of the underlying
asset (see additional discussion below).

Q1-2019 Earnings before interest, tax, depreciation and amortization
(“EBITDA”)¹ was a loss of $3.3 million compared to a loss of
$3.8 million for the prior year quarter. Adjusted EBITDA¹,
was a loss of $0.8 million for the quarter compared to a loss of $1.0
million for the prior year period.

The Company incurred a net loss of $4.4 million or $(0.02) per share for
the quarter compared to a loss of $4.5 million or $(0.02) per share for
the first quarter of 2018.

Cash as of March 31, 2019 was $5.0 million compared with $3.8 million on
December 31, 2018, reflecting a C$4.5 million private placement that
closed in March of 2019.

ESTRACE^® UPDATE

On January 11, 2019, the Company announced that it had reported an
anticipated shortage of certain dosages of Estrace^® on the
Drug Shortages Canada website in relation to supply issues arising from
the GMP compliance issues at the Company’s contract manufacturer. The
Company had met with the contract manufacturer as well as health
authorities in Canada and the UK regarding the anticipated restart of
Estrace^® production.

At that time, the manufacturer expected to be in a position to deliver
Estrace^® to Acerus by September 2019. As a result of the
possible shortage and the potential impact on the future revenue stream
of Estrace^®, the Company recorded a $2.6 million non-cash
impairment charge against the carrying value of the Estrace^®
intangible asset in Q4 of 2018.

The manufacturer has now revised their anticipated next delivery date to
the end of 2019. In addition, the Company was advised by Health Canada
that the contract manufacturer should be removed from the Company’s Drug
Establishment License, requiring a resubmission for ultimate approval.
Accordingly, it does not appear that the Company will receive a shipment
of Estrace^® until mid-2020. As a result, the Company recorded
a further $2.5 million non-cash impairment charge in Q1 of 2019.

The Company is currently looking at various strategies to accelerate
delivery timelines, one of which includes contracting with an
alternative manufacturer. A potential manufacturer has been identified
and the Company is working towards a final agreement.

Conference Call

Shareholders are reminded that the conference call to discuss the
Company’s results for the three months ended March 31, 2019 will be held
on Monday, May 13, 2019 at 8:30 a.m. Eastern Time. To access the call
live, please dial 647-484-0475 or 1-888-882-4478. 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, May 21, 2019 by dialing 905-694-9451 or
1-800-408-3053, using access code: 7327615#.

About Acerus

Acerus Pharmaceuticals Corporation is a Canadian-based specialty
pharmaceutical company focused on the commercialization and development
of innovative, branded products, with a primary focus in the fields of
urology (men’s health) and andrology. 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.

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.

¹Non-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 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,
		2019	2018
Net (loss)		$ (4,431)	$ (4,454)
Adjustments:
	Amortization of intangible assets	289	425
	Depreciation of property and equipment	64	65
	Depreciation of right of use asset	12	–
	Interest on long-term debt and other financing costs	647	191
	Interest income	(1)	(5)
	Change in fair value of derivative	132	(39)
EBITDA		$ (3,288)	$ (3,817)

Royalty expense/Buyout		–	2,414
Share based compensation		80	141
Foreign exchange loss/(gain)		(90)	235
Impairment loss on intangible asset		2,471	–
Adjusted EBITDA		$ (827)	$ (1,027)

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 ability of Acerus to obtain
regulatory approval for Avanafil, Lidbree^™, Elegant^™
and Gynoflor^™, to continue to successfully commercialize
Natesto^®, UriVarx^® and Estrace^®, and to
be successful in its early stage R&D initiatives (including its
cannabinoid initiative), 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 (“AIF”) dated March 4, 2019 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.

Acerus Pharmaceuticals Corporation
Condensed Interim Consolidated Statement of Financial Position
As at March 31, 2019 and December 31, 2018
Unaudited
(expressed in thousands of U.S. dollars)

		March 31, 2019	December 31, 2018

ASSETS

Current assets
	Cash	$ 4,991	$ 3,829
	Trade and other receivables	1,097	1,113
	Contract asset	694	–
	Inventory	2,296	2,506
	Prepaid and other assets	248	176
Total current assets		9,326	7,624

Property and equipment, net		1,219	1,267
Right of use asset		291	–
Intangible assets, net		5,397	7,933
Total assets		$ 16,233	$ 16,824

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities
	Accounts payable and accrued liabilities	$ 7,926	$ 5,619
	Current portion of deferred lease inducement	–	46
	Current portion of lease liability	83	–
Total current liabilities		8,009	5,665

Accrued liabilities		–	2,462
Deferred lease inducement		–	254
Lease liability		570	–
Long-term debt		8,369	8,287
Derivative financial instruments		364	227
Total liabilities		17,312	16,895

Shareholders’ equity (deficit)
	Share capital	$ 158,083	$ 154,737
	Warrants	1,420	1,420
	Contributed surplus	11,580	11,500
	Accumulated other comprehensive loss	(13,795)	(13,851)
	Deficit	(158,367)	(153,877)
Total shareholders’ equity (deficit)		(1,079)	(71)
Total liabilities & shareholders’ equity (deficit)		$ 16,233	$ 16,824

Acerus Pharmaceuticals Corporation
Condensed Interim Consolidated Statement of Loss and Comprehensive Loss
For the three months ended March 31, 2019 and 2018
Unaudited
(expressed in thousands of U.S. dollars, except per share and share data)
		March 31,	March 31,
		2019	2018

Revenue
	Product revenue	$ 2,165	$ 1,624
		2,165	1,624
Cost of goods sold		632	1,027
Royalty buyout		–	2,414
Gross margin		1,533	(1,817)

Expenses
	Research and development	1,038	472
	Selling, general and administrative	4,238	1,783
Total operating expenses		5,276	2,255
Operating loss		(3,743)	(4,072)

Other expenses/(income)
	Interest on long-term debt and other financing costs	647	191
	Interest income	(1)	(5)
	Foreign exchange (gain)/loss	(90)	235
	Change in fair value of derivative financial instruments	132	(39)
Total other expenses		688	382

Net loss for the period		$ (4,431)	$ (4,454)

Other comprehensive income, net of income tax
	Foreign currency translation adjustment	56	90
Total comprehensive loss for the period		$ (4,375)	$ (4,364)

Loss per common share
	Basic and diluted net loss per common share	$ (0.02)	$ (0.02)

Weighted average common shares outstanding
	Basic	235,900,501	213,125,705
	Diluted	235,900,501	213,125,705

Acerus Pharmaceuticals Corporation
Condensed Interim Consolidated Statement of Cash Flows
For the three months ended March 31, 2019 and 2018
Unaudited
(expressed in thousands of U.S. dollars)

		March 31, 2019	March 31, 2018

Operating activities:
Net loss for the period		$ (4,431)	$ (4,454)
Items not affecting cash:
	Adjustment for unrealized foreign exchange (loss)/gain	(134)	214
	Amortization of intangible assets	289	425
	Depreciation of property and equipment	64	65
	Depreciation of right of use asset	12	–
	Amortization of deferred leasehold inducement	–	(12)
	Interest on long-term debt and other financing costs	647	191
	Change in fair value of derivative financial instruments	132	(39)
	Share based compensation	80	141
	Impairment on intangible asset	2,471	–
Net changes in non-cash working capital items related to operating activities:
	Trade and other receivables	40	263
	Contract asset	(694)	–
	Inventory	229	(25)
	Prepaids and other assets	(67)	81
	Accounts payable and accrued liabilities	(436)	2,582
	Licensing fee receivable	–	300
Net cash used in operating activities		(1,798)	(268)

Financing activities
	Interest and financing fees paid	(336)	(148)
	Proceeds from issuance of common shares, net of financing costs	3,346	–
	Proceeds from exercise of stock options	–	6
	Principal elements of lease payments	(20)	–
Net cash from/(used in) financing activities		2,990	(142)

Investing activities
	Acquisition of property and equipment, net of deposits	(4)	(53)
	Acquisition of product rights	(100)	(79)
Net cash used in investing activities		(104)	(132)

Net increase/(decrease) in cash for the period		1,088	(542)
Exchange gain/(loss) on cash		74	(66)
Cash, beginning of period		3,829	3,156
Cash, end of period		$ 4,991	$ 2,548