Acerus Reports Fiscal Third Quarter Financial Results
November 3, 2020TORONTO–(BUSINESS WIRE)–TORONTO – Acerus Pharmaceuticals Corporation (“Acerus” or the “Company”) (TSX:ASP; OTCQB:ASPCF) today reported its financial results for the three and nine-month period ended September 30, 2020. Unless otherwise noted, all amounts are in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).
Third Quarter Highlights
- Resumption of NATESTO® shipments to the US, resulting in revenue growth both sequentially and year-over-year
- Trends pointing to improving outlook for the remainder of 2020 based on deployment of Acerus’ specialty sales team and accelerating demand for NATESTO® in the US
- Strengthened the Company’s management team with appointment of Kevin Hickey as Senior Vice-President, US Commercial and Dr. Christopher Sorli as Chief Medical Officer
- Rights Offering announced to support further growth and innovation
“Acerus’ third quarter results point to the strength of our product offering and solid execution of the Company’s distribution strategy,” said Ed Gudaitis, President and Chief Executive Officer. “Our specialty sales organization in the US showed steady, increasing traction as the months progressed, leading to higher total prescriptions and revenue growth, particularly in September. We believe these trends bode well for future performance and expect to see continued demand growth in the fourth quarter.
“With a differentiated product and broad commercial insurance coverage, Acerus is well positioned for top line expansion as our US rollout continues. At the same time, we are working with our manufacturing partner, Haupt, to resume the supply of NATESTO® to other markets in as timely a manner as possible while managing costs in tandem. Kevin Hickey, our new senior vice president of US commercial operations, has a proven track record overseeing multiple product launches. His appointment – and our focus on business execution – leaves me confident in the future for Acerus, our patients, and our shareholders.”
Summary of Results for the Three Months Ended September 30, 2020 compared to the Three Months Ended September 30, 2019, unless otherwise noted
The Company reported revenue of $0. (Read more…)5 million for the third quarter of 2020 compared to negative $0.2 million in the comparable period of 2019, reflecting the impact of new shipments of NATESTO® to the US market in 2020. Revenue recognition under IFRS15 reflects the value of these shipments plus an estimate of the associated co-promotion revenue. The results for the third quarter of fiscal 2019, by contrast, reflect the impact of the previously-announced recall of NATESTO® and conservation measures taken for ESTRACE® within the Canadian market, combined with an accrual to reflect expected NATESTO® returns during that period.
The Company posted a negative gross margin of $0.3 million in the third quarter of 2020 compared to zero gross profit in the prior-year period. The negative gross margin in the current period reflects the impact of NATESTO® one-time start-up costs of $0.3 million combined with non-cash costs of $0.2 million related to the amortization of intangible assets and depreciation of property and equipment.
Third quarter research and development (“R&D”) expenses were $0.8 million compared to $0.6 million in 2019. This increase was principally due to increased product development costs of $0.2 million related to testing and to improvements made to the NATESTO® manufacturing process.
Selling, general and administrative expenses (“SG&A”) increased by $2.4 million to $5.6 million in the third quarter of 2020, versus $3.2 million in the comparable period last year. The increase relates to the launch of the US NATESTO® sales and distribution organization, with total US-based costs of $4.2 million in the third quarter of 2020.
Earnings before interest, tax, depreciation and amortization (“EBITDA”)1 was a loss of $6.5 million compared to an EBITDA loss of $3.7 million in 2019. Adjusted EBITDA1 was a loss of $6.2 million for the current quarter compared to a loss of $3.4 million in the prior-year period.
The Company posted a net loss of $7.0 million, or $(0.01) per share, for the quarter compared to a loss of $4.6 million, or $(0.02) per share, in the third quarter of 2019.
Cash as of September 30, 2020 was $4.8 million compared with $5.9 million as of December 31, 2019, reflecting the proceeds of an $18.0 million private placement on February 21, 2020, offset by cash used in operations (principally for launching the US based sales and distribution organization).
COMPANY UPDATE AND OUTLOOK
NATESTO®
The Company continues to execute on its strategy of focusing on the US market for NATESTO®. Acerus, in conjunction with its US commercial provider Syneos Health Inc. (“Syneos”), has deployed a 22-person specialty sales team for this purpose. The team has been equipped with digital tools and technologies to be able to conduct virtual meetings and customer engagements, resulting in increasing prescription volumes and accelerating revenue growth, which has continued into the fourth quarter.
With respect to additional markets outside the United States where NATESTO® has marketing authorization (i.e., Canada, South Korea and Taiwan), Acerus is continuing to work with its manufacturing partner, Haupt, to resume the supply of NATESTO in as timely a manner as possible.
ESTRACE®
The Company continues to work with a new contract manufacturer to return ESTRACE® to the Canadian market. The current expectation is that all doses (0.5mg, 1.0mg and 2.0mg) will be ready for distribution in early 2021.
On June 18, 2020, the Company announced that it was commencing litigation against its former contract manufacturer, Recipharm Limited (“Recipharm”). Acerus alleges that the suspension of Recipharm’s manufacturing license in August 2018, in violation of its contractual obligations to Acerus, led to a shortage of Estrace® in Canada. In 2018, Estrace® generated sales of $4.2 million; however, due to the shortage, Estrace® revenue and Acerus’ market share have both decreased substantially each year since the shortage began. Consequently, Acerus has sued Recipharm for, among other things, its loss of profit and market share caused by the shortage.
avanafil
On April 20, 2020, the Company announced that it had received a Notice of Deficiency from Health Canada related to its avanafil New Drug Submission (“NDS”). Health Canada requested the provision of additional quality information related to the avanafil drug substance in alignment with International Council for Harmonization (ICH) technical guidance adopted by Health Canada. Until this information is provided to Health Canada, the avanafil review process has been halted.
The Company has been working closely with Metuchen Pharmaceuticals LLC, the licensor of the product, and VIVUS Inc., the licensor of avanafil to Metuchen, to address the deficiency noted by Health Canada.
The deadline to respond to the Notice of Deficiency has been extended by Health Canada to November 13, 2020. Acerus is currently on track to meet this date. If Health Canada accepts its responses to the Notice of Deficiency, the NDS review process will restart and may take up to 360 days to complete.
RIGHTS OFFERING
On October 20, 2020, the Company announced a Rights Offering whereby it will be offering rights to holders of its common shares as of a record date of October 27, 2020. Pursuant to the Rights Offering, each holder of Common Shares will receive one transferable right (a “Right”) for each Common Share held. Every 1.91984064 Rights will entitle a holder to purchase one Common Share at a price of $0.025 per common share (the “Subscription Price”). The Rights Offering is expected to raise gross proceeds of approximately $13,165,000. The Rights Offering transaction is expected to close on November 24, 2020.
In connection with the Rights Offering, the Company has entered into a standby commitment agreement dated October 19, 2020 (the “Standby Commitment Agreement”) with First Generation Capital Inc. (the “Standby Purchaser”), the Company’s major shareholder. The Standby Purchaser has agreed, subject to certain terms, conditions and limitations, to purchase such number of Common Shares that are available to be purchased, but not otherwise subscribed for under the Rights Offering, that will result in 100% of the Common Shares being subscribed under the Rights Offering (the “Standby Commitment”). Pursuant to the Standby Commitment, the Company will, subject to the terms of the Standby Commitment Agreement, be guaranteed to issue at least 526,600,000 Common Shares in connection with the Rights Offering for aggregate gross proceeds of $13,165,000.
The Rights and Common Shares issuable upon exercise of the Rights have not been and will not be registered under the United States Securities Act of 1933 (the “U.S. Securities Act”), or applicable state securities laws and may not be exercised, offered or sold, as applicable, in the United States or to or for the account or benefit of a person in the Unities States or a U.S. Person (as defined in Regulation S of the U.S. Securities Act) absent registration or an applicable exemption from the registration requirements. This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. There shall be no offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification of such securities under the laws of any such jurisdiction.
Further details on the Rights Offering and the Standby Commitment Agreement are contained in the Rights Offering Circular and the October 20, 2020 press release, both of which are available on the Company’s website and on SEDAR.
Conference Call
Shareholders are reminded that the conference call to discuss the Company’s results for the three- and nine-month period ending September 30, 2020 will be held on Tuesday, November 3, 2020 at 10:00 a.m. Eastern Time.
To access the call live, please dial 416-406-0743 or 1-800-898-3989 and use access code 5998289#. 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 10, 2020 by dialing 905-694-9451 or 1-800-408-3053, using access code: 4330175#.
An updated version of the Company’s Corporate Deck will be made available on the Company’s website after the shareholders conference call.
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 the 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 and the impact of charges related to a product recall. 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 September 30, |
For the nine months ended September 30, |
|||||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
| Net (loss) |
$ |
(7,048 |
) |
$ |
(4,612 |
) |
$ |
(17,321 |
) |
$ |
(12,246 |
) |
|||
| Adjustments: | |||||||||||||||
| Amortization of intangible assets |
|
179 |
|
|
177 |
|
|
537 |
|
|
642 |
|
|||
| Depreciation of property and equipment |
|
57 |
|
|
64 |
|
|
185 |
|
|
191 |
|
|||
| Depreciation of right of use asset |
|
11 |
|
|
12 |
|
|
35 |
|
|
35 |
|
|||
| Interest expense and other financing costs |
|
385 |
|
|
702 |
|
|
1,613 |
|
|
1,868 |
|
|||
| Interest income |
|
(2 |
) |
|
(5 |
) |
|
(65 |
) |
|
(6 |
) |
|||
| Change in fair value of derivative |
|
(56 |
) |
|
(25 |
) |
|
(160 |
) |
|
(64 |
) |
|||
| EBITDA |
$ |
(6,474 |
) |
$ |
(3,687 |
) |
$ |
(15,176 |
) |
$ |
(9,580 |
) |
|||
| Share based compensation |
|
176 |
|
|
57 |
|
|
424 |
|
|
163 |
|
|||
| Foreign exchange (gain) |
|
77 |
|
|
91 |
|
|
(16 |
) |
|
(94 |
) |
|||
| Charges related to product recall |
|
– |
|
|
184 |
|
|
(71 |
) |
|
976 |
|
|||
| Impairment loss on intangible asset |
|
– |
|
|
– |
|
|
– |
|
|
2,536 |
|
|||
| Adjusted EBITDA |
$ |
(6,221 |
) |
$ |
(3,355 |
) |
$ |
(14,839 |
) |
$ |
(5,999 |
) |
|||
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 the impact of COVID-19 on such performance, and could differ materially from what is currently expected as set out above. In particular, these assumptions include but are not limited to, the following: the COVID-19 pandemic will not affect our business plan and that of our suppliers, the COVID-19 pandemic will not last many months and health care professionals will be available to hear about our products and to continue education programs related to them. For more exhaustive information on these risks and uncertainties you should refer to our annual information form dated March 3, 2020 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 Statements of Financial Position | ||||||||||
| As at September 30, 2020 and December 31, 2019 | ||||||||||
| Unaudited | ||||||||||
| (expressed in thousands of U.S. dollars) | ||||||||||
| September 30, 2020 |
December 31, 2019 |
|||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash |
$ |
4,757 |
|
$ |
5,860 |
|
||||
| Trade and other receivables |
|
512 |
|
|
171 |
|
||||
| Contract asset |
|
327 |
|
|
473 |
|
||||
| Inventory |
|
2,955 |
|
|
1,494 |
|
||||
| Prepaid and other assets |
|
1,286 |
|
|
1,237 |
|
||||
| Total current assets |
|
9,837 |
|
|
9,235 |
|
||||
| Property and equipment, net |
|
866 |
|
|
1,051 |
|
||||
| Right of use asset |
|
228 |
|
|
263 |
|
||||
| Intangible assets, net |
|
4,354 |
|
|
4,891 |
|
||||
| Total assets |
$ |
15,285 |
|
$ |
15,440 |
|
||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued liabilities |
$ |
6,418 |
|
$ |
7,408 |
|
||||
| Current portion of long-term debt |
|
1,067 |
|
|
– |
|
||||
| Current portion of lease liability |
|
103 |
|
|
101 |
|
||||
| Total current liabilities |
|
7,588 |
|
|
7,509 |
|
||||
| Lease liability |
|
419 |
|
|
510 |
|
||||
| Long-term debt |
|
7,099 |
|
|
19,990 |
|
||||
| Derivative financial instruments |
|
155 |
|
|
262 |
|
||||
| Total liabilities |
|
15,261 |
|
|
28,271 |
|
||||
| Shareholders’ equity (deficiency) | ||||||||||
| Share capital |
$ |
188,154 |
|
$ |
158,402 |
|
||||
| Warrants |
|
– |
|
|
1,420 |
|
||||
| Contributed surplus |
|
13,205 |
|
|
11,361 |
|
||||
| Accumulated other comprehensive loss |
|
(13,949 |
) |
|
(13,949 |
) |
||||
| Deficit |
|
(187,386 |
) |
|
(170,065 |
) |
||||
| Total shareholders’ equity (deficiency) |
|
24 |
|
|
(12,831 |
) |
||||
| Total liabilities & shareholders’ equity (deficiency) |
$ |
15,285 |
|
$ |
15,440 |
|
||||
| Acerus Pharmaceuticals Corporation | ||||||||||||||||||
| Condensed Interim Consolidated Statements of Loss and Comprehensive Loss | ||||||||||||||||||
| For the three and nine months ended September 30, 2020 and 2019 | ||||||||||||||||||
| Unaudited | ||||||||||||||||||
| (expressed in thousands of U.S. dollars, except per share and share data) | ||||||||||||||||||
| For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|||||||
| Product revenue |
$ |
493 |
|
$ |
(167 |
) |
$ |
814 |
|
$ |
3,254 |
|
||||||
| Cost of goods sold |
|
743 |
|
|
(124 |
) |
|
1,168 |
|
|
1,847 |
|
||||||
| Gross margin (loss) |
|
(250 |
) |
|
(43 |
) |
|
(354 |
) |
|
1,407 |
|
||||||
| Expenses | ||||||||||||||||||
| Research and development |
|
760 |
|
|
622 |
|
|
1,782 |
|
|
2,307 |
|
||||||
| Selling, general and administrative |
|
5,634 |
|
|
3,184 |
|
|
13,813 |
|
|
9,642 |
|
||||||
| Total operating expenses |
|
6,394 |
|
|
3,806 |
|
|
15,595 |
|
|
11,949 |
|
||||||
| Operating loss |
|
(6,644 |
) |
|
(3,849 |
) |
|
(15,949 |
) |
|
(10,542 |
) |
||||||
| Other expenses/(income) | ||||||||||||||||||
| Interest expense and other financing costs |
|
385 |
|
|
702 |
|
|
1,613 |
|
|
1,868 |
|
||||||
| Interest income |
|
(2 |
) |
|
(5 |
) |
|
(65 |
) |
|
(6 |
) |
||||||
| Foreign exchange (gain)/loss |
|
77 |
|
|
91 |
|
|
(16 |
) |
|
(94 |
) |
||||||
| Change in fair value of derivative financial instruments |
|
(56 |
) |
|
(25 |
) |
|
(160 |
) |
|
(64 |
) |
||||||
| Total other expenses |
|
404 |
|
|
763 |
|
|
1,372 |
|
|
1,704 |
|
||||||
| Net loss for the period |
|
(7,048 |
) |
|
(4,612 |
) |
$ |
(17,321 |
) |
$ |
(12,246 |
) |
||||||
| Other comprehensive income, net of income tax | ||||||||||||||||||
| Foreign currency translation adjustment |
|
– |
|
|
11 |
|
|
– |
|
|
55 |
|
||||||
| Total comprehensive loss for the period |
|
(7,048 |
) |
|
(4,601 |
) |
$ |
(17,321 |
) |
$ |
(12,191 |
) |
||||||
| Loss per common share | ||||||||||||||||||
| Basic and diluted net loss per common share |
$ |
(0.01 |
) |
$ |
(0.02 |
) |
$ |
(0.02 |
) |
$ |
(0.05 |
) |
||||||
| Weighted average common shares outstanding | ||||||||||||||||||
| Basic and diluted |
|
1,010,646,898 |
|
|
261,225,290 |
|
|
892,940,129 |
|
|
252,905,143 |
|
||||||
| Diluted |
|
1,010,646,898 |
|
|
261,225,290 |
|
|
892,940,129 |
|
|
252,905,143 |
|
||||||
| Acerus Pharmaceuticals Corporation | |||||||||||
| Condensed Interim Consolidated Statements of Cash Flows | |||||||||||
| For the nine months ended September 30, 2020 and 2019 | |||||||||||
| Unaudited | |||||||||||
| (expressed in thousands of U.S. dollars) | |||||||||||
| September 30, 2020 |
September 30, 2019 |
||||||||||
| Operating activities: | |||||||||||
| Net loss for the period |
$ |
(17,321 |
) |
$ |
(12,246 |
) |
|||||
| Items not affecting cash: | |||||||||||
| Adjustment for unrealized foreign exchange (gain) |
|
(5 |
) |
|
(190 |
) |
|||||
| Amortization of intangible assets |
|
537 |
|
|
642 |
|
|||||
| Depreciation of property and equipment |
|
185 |
|
|
191 |
|
|||||
| Depreciation of right of use asset |
|
35 |
|
|
35 |
|
|||||
| Interest expense and other financing costs |
|
1,613 |
|
|
1,868 |
|
|||||
| Change in fair value of derivative financial instruments |
|
(160 |
) |
|
(64 |
) |
|||||
| Share based compensation |
|
424 |
|
|
163 |
|
|||||
| Gain on disposal of property and equipment |
|
– |
|
|
(5 |
) |
|||||
| Impairment on intangible asset |
|
– |
|
|
2,536 |
|
|||||
| Inventory impairment |
|
– |
|
|
316 |
|
|||||
| Net changes in non-cash working capital items related to operating activities: | |||||||||||
| Trade and other receivables |
|
(341 |
) |
|
994 |
|
|||||
| Contract asset |
|
146 |
|
|
(694 |
) |
|||||
| Inventory |
|
(1,461 |
) |
|
638 |
|
|||||
| Prepaids and other assets |
|
(49 |
) |
|
(611 |
) |
|||||
| Accounts payable and accrued liabilities |
|
(694 |
) |
|
(478 |
) |
|||||
| Net cash used in operating activities |
|
(17,091 |
) |
|
(6,905 |
) |
|||||
| Financing activities | |||||||||||
| Interest and financing fees paid |
|
(1,165 |
) |
|
(1,127 |
) |
|||||
| Proceeds from issuance of common shares, net of financing costs |
|
17,820 |
|
|
3,350 |
|
|||||
| Financing costs from debt conversion |
|
(94 |
) |
|
– |
|
|||||
| Payment of long-term debt |
|
(500 |
) |
|
– |
|
|||||
| Principal elements of lease payments |
|
(73 |
) |
|
(59 |
) |
|||||
| Proceeds from issuance of long-term debt |
|
– |
|
|
5,000 |
|
|||||
| Net cash from financing activities |
|
15,988 |
|
|
7,164 |
|
|||||
| Investing activities | |||||||||||
| Proceeds from disposition of property and equipment |
|
– |
|
|
5 |
|
|||||
| Acquisition of property and equipment, net of deposits |
|
– |
|
|
(13 |
) |
|||||
| Acquisition of product rights |
|
– |
|
|
(100 |
) |
|||||
| Net cash used in investing activities |
|
– |
|
|
(108 |
) |
|||||
| Net (decrease) increase in cash for the period |
|
(1,103 |
) |
|
151 |
|
|||||
| Exchange gain on cash |
|
– |
|
|
114 |
|
|||||
| Cash, beginning of period |
|
5,860 |
|
|
3,829 |
|
|||||
| Cash, end of period |
$ |
4,757 |
|
$ |
4,094 |
|
|||||
Contacts
Robert Motz
Chief Financial Officer
Acerus Pharmaceuticals Corporation
[email protected]
(416) 679-0771
Chris Witty
Acerus Investor Relations
(646) 438-9385
[email protected]