Acerus Reports Third Quarter 2022 Financial Results

TORONTO, Nov. 15, 2022 (GLOBE NEWSWIRE) —  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, 2022. Unless otherwise noted, all amounts are in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).

Recent Highlights

  • Total Natesto® prescriptions in the US rose 69% year-over-year in the third quarter of 2022 and were up approximately 10% sequentially over the fiscal 2022 second quarter
  • Natesto® returns to the Canadian market with shipments resuming late in the third quarter
  • The Company continues its preparations for the re-launch of Noctiva™ in the US
  • Additional non-dilutive financing of US$10.0 million from First Generation Capital during the third quarter to support the Company’s operations
  • Strategic review launched in the quarter supported by Ernst & Young Orenda Corporate Finance
  • Naveed Manzoor appointed as interim Chief Financial Officer effective November 15, 2022

“I’m pleased to report that Acerus continues to show positive momentum this quarter,” said Edward Gudaitis, President and Chief Executive Officer of Acerus Pharmaceuticals. “Revenue rose significantly when compared to the prior year quarter. While the total market for testosterone therapy grew by 6% in the third quarter of 2022 compared to the prior year period, total Natesto® prescriptions in the US climbed 69% year-over-year. In addition, prescriptions in the third quarter grew by 10% over the second quarter, driven by our highly-effective sales staff as well as general growing interest in the efficacy of our products. In fact, Natesto® was the fastest-growing branded testosterone therapy in the market for the last two quarters.”

“At the same time, we recognize that ongoing access to capital to allow us to continue to grow our business remains a challenge in the current economic environment. As a result, a committee of independent directors of our Board has been formed to undertake a strategic review of our operations. We have also engaged Ernst & Young Orenda Corporate Finance to act as financial advisors during this review process. We expect to report on the results of that review later in the fourth quarter.”

Summary of Results for the Three Months Ended September 30, 2022 (Q3-2022) compared to the Three Months Ended September 30, 2021 (Q3-2021), unless otherwise noted

Total revenue for the quarter was $0.77 million compared to $0.59 million in the prior-year period, reflecting the impact of prescription growth in the US, partially offset by increased rebates to carriers and pharmacy benefit managers.

Gross profit for Q3-2022 was $0.6 million compared to $0.1 million in the Q3-2021. The Q3-2021 cost of goods sold included a charge of $0.3 million to write off a manufacturing batch of Natesto® produced by our contract manufacturer that did not meet manufacturing specifications.

Research and development (“R&D”) expense rose by $0.6 million, to $1.9 million, in Q3-2022 from $1.3 million in Q3-2021, reflecting increased expense for NATESTO® clinical trials in the US. As previously noted in prior earnings releases, this higher level of R&D is expected to continue for the next few quarters, after which the clinical trials should be complete. In addition, current quarter R&D included $0.3 million of expense to return Noctiva™ to active production.

Second quarter selling, general and administrative expense (“SG&A”) declined by $0.7 million, to $4.3 million, from $5.0 million in Q2-2021. Approximately $0.7 million of the decline reflects the reversal of bonuses previously accrued for 2021 and 2022 that the Company determined will no longer be paid. In addition, expenses incurred in our US sales and marketing operations were lower than in the prior year. Offsetting these declines was a charge of $0.7 million to business development expenses for costs associated with an unsuccessful debt financing facility application.

Included in Q3-2022 other income and expenses was a gain of $3.0 million related to the restructuring of the promissory note due to former shareholders of Serenity. As repayment of this note is now tied to the reintroduction of Noctiva™ to the US market, much of the note was de-recognized as a liability under IFRS.

EBITDA1 was a loss of $5.6 million in the third quarter of 2022 compared to a loss of $3.9 million in the prior-year period; Adjusted EBITDA1 was a loss of $5.5 million in 2022 compared to a loss of $5.9 million in 2021.

The Company incurred a net loss of $4.2 million, or $(0.54) per share, for Q3-2022 compared to a loss of $4.9 million, or $(0.64) per share, in Q3-2021.

Cash as of September 30, 2022 was $3.0 million compared with $2.2 million as of December 31, 2021, reflecting $27.9 million of 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 (“First Generation”), offset by (i) $6.5 million to settle the prior senior secured loan facility with SWK, (ii) $18.6 million of cash used in operations; and (iii) $1.8 million for the acquisition of Serenity.

Given the current economic environment and the associated challenges in raising capital, the Company announced in the quarter that it had engaged a committee of independent directors to undertake a strategic review of the Company. Ernst & Young Orenda Corporate Finance has been retained as financial advisors to assist in this process. The Company’s capital requirements over the next two years will be informed by the outcome of this strategic review process and may differ from the $45-50 million capital requirement that was previously noted in prior press releases.

COMPANY UPDATE AND OUTLOOK

NoctivaTM
Acerus, along with its contract manufacturer, continue to execute on the resumption of manufacturing of Noctiva™ for the US market, where it already has FDA approval. The rollout strategy for Noctiva™ – including all related marketing, distribution and production – has slowed due to working capital constraints and will be dependent on the result of the strategic review process.

Natesto®
The Company has been successful growing Natesto® as prescriptions rose 69% year-over-year in the third quarter. 

The Canadian reintroduction of Natesto® occurred late in the third quarter of 2022 and the Company has begun recognizing revenues as prescriptions resume.

avanafil
Acerus has been working with Petros Pharmaceuticals, the licensor of avanafil to Acerus, and Sanofi to update the regulatory dossier for resubmission to Health Canada. As part of the Strategic Review Process, the company is evaluating options for avanafil that may affect the timing and/or probability of a resubmission to Health Canada.

Interim CFO Appointment
Today the Company appointed Naveed Manzoor as Interim Chief Financial officer. Mr. Manzoor is managing director at FAAN Advisors, a consulting practice providing, among other things, Interim CFO Services. Mr. Manzoor is a Chartered Professional Accountant

About Acerus
Acerus Pharmaceuticals Corporation is a specialty pharmaceutical company focused on the commercialization and development of innovative prescription products that improve patient experience, with a primary focus in the fields of Urology and 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.

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, 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 September 30,   For the nine months ended September 30,  
        2022     2021       2022     2021    
Net loss   $ (4,173 ) $ (4,898 )   $ (19,058 ) $ (24,794 )  
Adjustments:              
  Amortization of intangible assets     10     37       30     112    
  Depreciation of property and equipment   39     36       117     479    
  Depreciation of right of use asset     8     7       23     10    
  Interest expense and other financing costs*   1,529     1,007       4,257     1,707    
  Interest income     (9 )   2       (12 )   (5 )  
  Change in fair value of derivative   (14 )   (53 )     (45 )   (41 )  
  (Gain) loss on modification of debt   (2,958 )         (2,958 )   64    
EBITDA   $ (5,568 ) $ (3,862 )   $ (17,646 ) $ (22,468 )  
                 
Termination Fees                   6,254    
Litigation settlement proceeds         (2,328 )         (2,328 )  
Share based compensation     96     333       513     800    
Foreign exchange gain     (63 )   (31 )     (85 )   (71 )  
Gain from sale of property and equipment                 56    
Adjusted EBITDA   $ (5,535 ) $ (5,888 )   $ (17,218 ) $ (17,757 )  
                 

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® and Noctiva 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 14, 2022 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
Naveed Manzoor
Chief Financial Officer
[email protected]

 

Acerus Pharmaceuticals Corporation        
Condensed Interim Consolidated Statements of Financial Position        
As at September 30, 2022 and December 31, 2021        
Unaudited            
(expressed in thousands of U.S. dollars)          
               
          September 30, 2022 December 31, 2021  
               
ASSETS            
               
Current assets            
  Cash       $ 3,020   $ 2,159    
  Trade and other receivables         1,131     422    
  Inventory         5,120     4,605    
  Prepaid and other assets         1,145     1,463    
Total current assets         10,416     8,649    
               
Property and equipment         338     365    
Right of use asset         279     302    
Intangible assets         36,637     336    
Total assets       $ 47,670   $ 9,652    
               
LIABILITIES AND SHAREHOLDERS’ DEFICIT        
               
Current liabilities            
  Accounts payable and accrued liabilities     $ 8,559   $ 7,448    
  Provisions         2,118        
  Deferred cash consideration         750        
  Termination fee payable         4,002     2,456    
  Current portion of long-term debt           2,153    
  Current portion of lease liability       23     16    
Total current liabilities         15,452     12,073    
               
Termination fee payable             2,101    
Lease liability         286     300    
Long-term debt         43,872     21,137    
Promissory note         1,950        
Derivative financial instrument         5     55    
Total liabilities         61,565     35,666    
               
Shareholders’ deficit            
  Share capital       $ 198,346   $ 198,163    
  Contributed surplus         49,072     18,078    
  Accumulated other comprehensive loss       (13,949 )   (13,949 )  
  Deficit         (247,364 )   (228,306 )  
Total shareholders’ deficit         (13,895 )   (26,014 )  
Total liabilities & shareholders’ deficit     $ 47,670   $ 9,652    
               
Acerus Pharmaceuticals Corporation                  
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss          
For the three and nine months ended September 30, 2022 and 2021              
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,  
          2022       2021       2022       2021    
                       
Revenue                    
Product revenue     $ 770     $ 587     $ 2,300     $ 1,383    
Termination Fees                         (6,254 )  
          770     587     2,300     (4,871 )  
Cost of goods sold   202       489       934       725    
Gross margin (loss)       568       98       1,366       (5,596 )  
                       
Expenses                    
  Research and development       1,936       1,353       5,460       3,254    
  Selling, general and administrative       4,320       5,046       13,807       16,618    
Total operating expenses       6,256       6,399       19,267       19,872    
Operating loss       (5,688 )     (6,301 )     (17,901 )     (25,468 )  
                       
Other expenses (income)                    
  Interest on long-term debt and other financing costs       1,529       1,007       4,257       1,707    
  Litigation settlement proceeds             (2,328 )           (2,328 )  
  Interest income       (9 )     2       (12 )     (5 )  
  Foreign exchange gain       (63 )     (31 )     (85 )     (71 )  
  Change in fair value of derivative financial instruments       (14 )     (53 )     (45 )     (41 )  
  (Gain) loss on debt modification       (2,958 )           (2,958 )     64    
Total other expenses (income)       (1,515 )     (1,403 )     1,157       (674 )  
Loss for the year before income taxes       (4,173 )     (4,898 )     (19,058 )     (24,794 )  
                       
Income tax expense                            
Net loss and comprehensive loss for the period   $ (4,173 )   $ (4,898 )   $ (19,058 )   $ (24,794 )  
                       
Loss per common share                    
  Basic and diluted net loss per common share   $ (0.54 )   $ (0.64 )   $ (2.47 )   $ (3.23 )  
                       
Weighted average common shares outstanding                  
  Basic and diluted       7,702,297       7,687,940       7,702,297       7,687,940    
                       

 


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