Acerus Reports Fourth Quarter and Full Year 2020 Financial Results

TORONTO, March 11, 2021 (GLOBE NEWSWIRE) — Acerus Pharmaceuticals Corporation (“Acerus” or the “Company”) (TSX: ASP; OTCQB: ASPCF) today reported its financial results for the three and twelve-month period ended December 31, 2020. Unless otherwise noted, all amounts are in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).

Recent Highlights

• Significant growth in US NATESTO® total prescriptions during the fourth quarter of 2020 – driven by the specialist (urologist and endocrinologist) segment
• Rights offering completed in November 2020, strengthening the balance sheet
• Shipments of NATESTO® to South Korea and Taiwan resumed in the fourth quarter
• The Company entered into an agreement with Torreya Partners LLC to identify strategic options for product acquisition and growth capital
• NATESTO® expected to be available in Canada by mid-2021

“Fiscal 2020 was clearly a year of both challenge and opportunity for Acerus, putting us on solid footing for 2021 and beyond,” said Ed Gudaitis, President and Chief Executive Officer of Acerus. “While the global pandemic negatively impacted our ability to conduct business in North America and elsewhere, we laid the groundwork – even under such circumstances – for improved growth and bottom-line results going forward. I’m particularly pleased with the success of our NATESTO® rollout in the United States, where we saw prescription growth of 23% in the fourth quarter versus the third, and where we are encouraged by ongoing momentum thus far in the new year.

“With COVID-19 restrictions slowly subsiding around the globe, we feel even more optimistic about the quarters to come. We continue to execute on our strategy to bolster our presence in the US, return to the Canadian market, and expand our product offerings. Given improving demand dynamics and strengthened economic outlook, we believe Acerus is well positioned for higher returns in 2021.”

Summary of Results for the Three Months Ended December 31, 2020 (compared to the Three Months Ended December 31, 2019, unless otherwise noted)

• Total revenue in the quarter was $0.3 million compared to $0.5 million in the fourth quarter of 2019. While product revenue was comparable year-over-year, the 2019 quarter included revenue of $0.2 million from the licensing of NATESTO® to non-North American markets.
• Gross margin in the fourth quarter of 2020 was negative $0.6 million compared to $0.2 million in the prior-year period, reflecting a $0.5 million charge for spoilage of slow-moving raw materials in the current year quarter.
• Research and development (“R&D”) expense increased slightly to $0.7 million for the current quarter from $0.5 million in the prior-year period.
• Selling, general and administrative expenses (“SG&A”) increased by $2.5 million, to $5.6 million, from $3.1 million in the prior-year period. This increase in SG&A was principally due to (i) a non-cash charge of $1.6 million on the value of ESTRACE® intangible assets, as the rights were sold to a third party in the fourth quarter of 2020 (see below); and (ii) increased costs of $0.8 million related to the launch of the US operations in 2020.
• Earnings before interest, tax, depreciation and amortization (“EBITDA”)¹ was a loss of $6.5 million compared to a loss of $3.1 million for the prior-year period. Adjusted EBITDA¹ was a loss of $4.7 million for the quarter compared to a loss of $3.3 million in the prior-year period.
• The Company incurred a net loss of $7.1 million, or $(0.01) per share, for the quarter compared to a loss of $3.9 million, or $(0.01) per share, for the fourth quarter of 2019.

Summary of Results for the Year Ended December 31, 2020 (compared to the Year Ended December 31, 2019, unless otherwise noted)

• Total revenue for the twelve months ended December 31, 2020 and 2019 were $1.1 million and $3.8 million, respectively, reflecting the decline in ESTRACE® revenue due to previously-announced manufacturing issues at the Company’s contract manufacturer, the voluntary recall of NATESTO® in the third quarter of 2019, the impact of COVID-19 on expansion in the US, and the end of the Company’s Urivarx^TM distribution agreement in the second quarter of 2019.
• The Company reported a gross loss of $1.0 million in 2020 compared with a gross profit of $1.6 million in 2019, reflecting the fourth quarter adjustments noted above and the impact of fixed costs on overall gross margin.
• R&D expenses were $2.5 million in 2020, a decline of $0.3 million from the $2.8 million in 2019. The decrease was attributable to delays in ongoing and new clinical trials and other research due to COVID-19 restrictions.
• SG&A was $19.4 million in 2020, or $6.6 million higher than the $12.8 million reported in 2019. This increase was principally due to a $7.5 million rise in costs associated with the launch and operation of the Company’s US organization in partnership with Syneos Health, partially offset by a $0.9 million decline in non-cash disposal and impairment charges on intangible assets.  
• EBITDA¹ loss was $21.7 million for the year compared with an EBITDA¹ loss of $12.7 million for 2019, reflecting the items noted above. Adjusted EBITDA¹ was a loss of $19.6 million for the year ended December 31, 2020 compared to a loss of $9.3 million in 2019.
• The Company incurred a 2020 net loss of $24.4 million, or $(0.03) per share, compared to $16.1 million, or $(0.06) per share, in the prior year.

Strengthening the Balance Sheet

Cash as of December 31, 2020 was $9.2 million compared with $4.8 million on September 30, 2020 and $5.9 million as of December 31, 2019.

The increase in the fourth quarter reflects the closing of the previously-announced rights offering in November 2020 that raised C$13.2 million, partially offset by cash used in operations. Please refer to the Company’s press releases dated November 25 and 27, 2020 regarding details of the rights offering.

COMPANY UPDATE AND OUTLOOK

The Company has engaged Torreya Partners LLC to assist it in identifying and financing strategic opportunities to leverage its US infrastructure and ultimately provide additional revenue-generating assets to further grow the Company’s US-based organization.

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 team of 32 personnel based in the United States, who conduct a substantial majority of the Corporation’s commercial operations in the United States. Total fourth quarter 2020 prescription growth in the specialty physician segment (urology, endocrinology) was significant, up approximately 23% sequentially over the third quarter of 2020 and the Company is confident that this momentum – even in the face of COVID-19 restrictions limiting in-person physician visits, positions the Company for stronger top line growth in 2021.

The Company remains optimistic about a return of NATESTO® to the Canadian market in the first half of 2021. Manufacturing is ongoing on a new batch of NATESTO® for this market in anticipation of the return to the Canadian market.

Shipments to South Korea and Taiwan resumed in the fourth quarter of 2020, and further shipments are expected in the first quarter of 2021.

avanafil Health Canada Approval Status
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. The Company worked 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.

In November of 2020, additional information was provided to Health Canada and, on December 11, 2020, Health Canada confirmed that the submission had passed screening and was accepted into review, which may take up to a year to complete.

ESTRACE® Update
In January of 2019, the Company announced that it had reported an anticipated shortage of ESTRACE® on the “Drug Shortages Canada” website in relation to supply issues arising from the Company’s contract manufacturer.

Since that time, the Company has been working with another contract manufacturer to transfer production of ESTRACE®; this transfer is ongoing and expected to be completed in the second quarter of 2021. The Company also made the decision to find a partner with a presence in Women’s Health to drive the return of ESTRACE® in Canada and, as such, entered into an agreement in the fourth quarter to sell the rights to ESTRACE® to an established Canadian pharmaceutical company. This entity will assume the marketing authorization for ESTRACE® in Canada and will be responsible for all commercial activities. Acerus will receive a five-year royalty stream based on gross sales of the drug in Canada; the agreement will come into full effect in 2021 pending the completion of the aforementioned transfer of ESTRACE® to the new contract manufacturer.

The Company’s legal action against Recipharm Ltd., the original UK contract manufacturer remains active and additional court proceedings in the UK are expected in the first half of 2021.

Conference Call
Shareholders are reminded that the conference call to discuss the Company’s results for the fourth quarter and year ended December 31, 2020 will be held on Thursday, March 11, 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 4028136#. 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 Thursday March 18, 2021 by dialing 905-694-9451 or 1-800-408-3053, using access code: 1138760#.

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 (in USD’000s).

* This figure includes interest expense, amortization of deferred financing costs and accretion expense related to our outstanding debts.

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