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, 2021. 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 20% year-over-year in the fourth quarter of 2021 and, for the full year, were up approximately 28% over fiscal 2020
  • The rollout and acceptance of Natesto® continues to grow in the US, now benefitting from nearly complete in-person sales interaction as the pandemic subsides
  • After the quarter, the Company announced it had increased its secured loan facility (the “Loan Facility”) from US$25 million to US$30.845 million, made possible by an advance under a secured grid promissory note with First Generation Capital Inc. (“First Generation”). The proceeds paid all remaining obligations under the former senior loan facility with SWK Funding LLC (“SWK”)
  • Most recently, Acerus completed the acquisition of Serenity Pharmaceuticals LLC (“Serenity”) on March 7, 2022, including the global rights to its Noctiva™ brand

“I’m pleased to announce a very successful start to 2022 that heralds a new phase of growth for Acerus,” said Edward Gudaitis, President and Chief Executive Officer of Acerus Pharmaceuticals. “With the pandemic largely under control, we ended the year with significant momentum behind Natesto® in the US, where we saw total prescriptions rise 28% over the prior-year period. Such growth was driven primarily by success in the Urology segment, where prescriptions rose 30% in the fourth quarter and were up over 40% for the full year. This trend has continued into 2022, as we’re benefitting from a return to in-person meetings with healthcare practitioners, strong economic trends, and overall increasing demand.

“At the same time, we recently announced two significant events that bolster the outlook for Acerus this year and beyond. We first increased our First Generation facility and paid off our existing SWK obligations, providing greater financial flexibility as well as reduced cash interest expense going forward. We then announced the transformational acquisition of Serenity – which we believe puts us on track for faster top line growth and improved long-term financial performance. The team and I look forward to the coming quarters and the re-launch of Noctiva™ in the US. Given our success with Natesto® and our expanded product portfolio, we anticipate that 2022 is on track to be our best year ever.”

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

Revenue was $0.7 million in 2021 compared to $0.3 million in the prior-year period. The improvement was primarily due to continued growth in product sales and the assumption of full Natesto® revenue recognition as a result of re-purchasing the rights from Aytu Biopharma on April 1, 2021, as previously reported. Revenue recognition in 2020, under IFRS15, reflected the value of shipments to Aytu Biopharma plus an estimate of the associated co-promotion revenue under the former licensing agreement.

The Company posted a gross profit of $0.3 million in the fourth quarter of 2021 compared to a gross loss of $0.6 million in the prior-year period. The 2020 fourth quarter reflects a $0.5 million charge for spoilage of slow-moving raw materials.   

Fourth quarter research and development (“R&D”) expenses were $3.3 million compared to $0.7 million in 2020. The 2021 results include a $1.7 million non-cash impairment charge to reduce the carrying value of the company’s TriVair intangible asset after the Company received notice in December 2021 that its TriVair patent application to extend patent protection from 2024 to 2037 for the US market was rejected. The remaining increase in R&D is attributable to an increase in clinical trial activities for Natesto® in the US related to an ambulatory blood pressure study that commenced in 2021 and is expected to be completed in 2022.

Selling, general and administrative expenses (“SG&A”) declined by $0.4 million to $5.2 million in the fourth quarter of 2021 versus $5.6 million in the comparable period last year. The 2020 fourth quarter included a $1.6 million non-cash charge on the sale of the Estrace® business. Excluding this, SG&A increased by $1.2 million year-over-year, of which $0.8 million reflects investment in the Company’s US sales operations and related staffing to support the Natesto® growth strategy.

Earnings before interest, tax, depreciation and amortization (“EBITDA”)1 was a loss of $8.1 million compared to an EBITDA loss of $6.5 million in 2020. Adjusted EBITDA1 was a loss of $6.2 million for the current quarter compared to a loss of $4.8 million in the prior-year period.

The Company posted a net loss of $9.0 million, or $(0.01) per share, for the quarter compared to a loss of $7.1 million, or $(0.01) per share, in the fourth quarter of 2020.

Cash as of December 31, 2021 was $2.2 million compared with $9.2 million as of December 31, 2020, reflecting proceeds of $20 million drawn on the First Generation subordinated loan facility and the $2.3 million Recipharm settlement received in the third quarter of 2021, offset by cash used in operations as well as principal and interest repayments totaling $3.2 million on the senior debt with SWK.

COMPANY UPDATE AND OUTLOOK

Natesto®

The Company continues to execute its commercial strategy focused on expanding in the US market. Total Natesto® prescriptions rose 20% compared to the fourth quarter of 2020.

Commercial preparations also continue regarding the reintroduction of Natesto® into the Canadian market. The timing of the Company’s return to Canada is still delayed due to manufacturing and supply chain disruptions, although the rollout is expected to commence in the second half of 2022.

avanafil

In October, 2021, the Company received a Notice of Deficiency from Health Canada related to its avanafil New Drug Submission (“NDS”). Health Canada had previously requested the provision of additional pre-clinical and toxicology data related to the avanafil active pharmaceutical ingredient (API) from the API manufacturer, Sanofi. Sanofi did not provide the available data in a format requested by Health Canada as per the timeline prescribed. As a result, Acerus had to withdraw the avanafil dossier from the review process.

Acerus has been working with Petros Pharmaceuticals, the licensor of avanafil to Acerus, and Sanofi to update the regulatory dossier for resubmission. Such resubmission is expected to be made to Health Canada in the near future, with the anticipated introduction of avanafil to the Canadian market occurring in 2023.

Recent Transaction / Capital Requirements

As announced on February 28, 2022, Acerus entered into a definitive agreement to acquire Serenity and the global rights to Noctiva™. This transaction closed on March 7, 2022. In order to fund the up-front fee, required sales force expansion, marketing investment (including direct to consumer), growth of the existing Natesto® business, and resumption of Noctiva™ production, Acerus expects to raise an estimated US$60 million in additional capital over the next two years. As of March 15, 2022, the Company has fully drawn on the existing First Generation facility and will need to raise the first tranche of the $60 million in capital within the second quarter of 2022 to execute on the aforementioned strategy.

Conference Call Shareholders are reminded that the conference call to discuss the Company’s results for the fourth quarter and year ended December 31, 2021 will be held on March 15, 2022 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 1133647#. 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, March 22, 2022 by dialing 905-694-9451 or 1-800-408-3053, using access code: 6591972#.

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 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 EBITDAThe 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).

               
      For the three months endedDecember 31,     For the year endedDecember 31,  
        2021       2020       2021       2020  
Net loss   $ (9,023 )   $ (7,103 )   $ (33,817 )   $ (24,424 )
Adjustments:            
  Amortization of intangible assets     38       180       150       717  
  Depreciation of property and equipment   34       60       513       245  
  Depreciation of right of use asset     8       13       18       48  
  Interest expense and other financing costs*   863       362       2,570       1,975  
  Interest income     (3 )     (2 )     (8 )     (67 )
  Change in fair value of derivative   (43 )     (22 )     (84 )     (182 )
  Loss on modification of debt     -       -       64       -  
EBITDA   $ (8,126 )   $ (6,512 )   $ (30,594 )   $ (21,688 )
               
Termination Fees     -       -       6,254       -  
Litigation settlement proceeds     -       -       (2,328 )     -  
Share based compensation     295       230       1,095       654  
Foreign exchange (gain) loss     8       (96 )     (63 )     (112 )
Gain on remeasurement of lease liability   -       (75 )     -       (75 )
Charges related to product recall     -       71       -       -  
Impairment loss on intangible asset     1,656       -       1,656       -  
Gain from sale of property and equipment   -       -       56       -  
Loss on sale of intangible asset     -       1,629       -       1,629  
Adjusted EBITDA   $ (6,167 )   $ (4,753 )   $ (23,924 )   $ (19,592 )
* This figure includes interest expense, amortization of deferred financing costs and accretion expense related to our outstanding debts.  
   

Notice Regarding Forward-Looking StatementsInformation 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 Contactir@aceruspharma.com

Investor Relations Contact

Chris WittyAcerus Investor Relations (646) 438-9385cwitty@darrowir.com

     
     
Acerus Pharmaceuticals Corporation
Consolidated Statements of Financial Position
As at December 31, 2021 and December 31, 2020
(expressed in thousands of U.S. dollars)
       
    December 31, 2021     December 31, 2020  
       
ASSETS    
       
Current assets    
  Cash $ 2,159     $ 9,153  
  Trade and other receivables   422       528  
  Contract asset   -       936  
  Inventory   4,605       2,313  
  Prepaid and other assets   1,463       1,104  
Total current assets   8,649       14,034  
       
Property and equipment, net   365       806  
Right of use asset   302       -  
Intangible assets, net   336       2,142  
Total assets $ 9,652     $ 16,982  
       
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)  
       
Current liabilities    
  Accounts payable and accrued liabilities $ 7,448     $ 5,435  
  Termination fee payable   2,456       -  
  Current portion of long-term debt   2,153       1,439  
  Current portion of lease liability   16       229  
Total current liabilities   12,073       7,103  
       
Termination fee payable   2,101       -  
Lease liability   300       -  
Long-term debt   21,137       6,580  
Derivative financial instruments   55       139  
Total liabilities   35,666       13,822  
       
Shareholders' equity (deficit)    
  Share capital $ 198,163     $ 198,163  
  Contributed surplus   18,078       13,435  
  Accumulated other comprehensive loss   (13,949 )     (13,949 )
  Deficit   (228,306 )     (194,489 )
Total shareholders' equity (deficit)   (26,014 )     3,160  
Total liabilities & shareholders' equity (deficit) $ 9,652     $ 16,982  
       
Acerus Pharmaceuticals Corporation
Consolidated Statements of Loss and Comprehensive Loss
For the years ended December 31, 2021 and 2020
(expressed in thousands of U.S. dollars, except per share and share data)
 
      For the three months endedDecember 31,     For the year endedDecember 31,  
        2021       2020       2021       2020  
                   
Revenue                
Product revenue   $ 738     $ 271     $ 2,121     $ 1,085  
Termination Fees     -       -       (6,254 )     -  
        738       271       (4,133 )     1,085  
Cost of goods sold   393       846       1,118       2,014  
Gross profit/(loss)     345       (575 )     (5,251 )     (929 )
                   
Expenses                
  Research and development     3,309       744       6,563       2,526  
  Selling, general and administrative     5,234       5,617       21,852       19,430  
Total operating expenses     8,543       6,361       28,415       21,956  
Operating loss     (8,198 )     (6,936 )     (33,666 )     (22,885 )
                   
Other expenses (income)                
  Interest on long-term debt and other financing costs   863       362       2,570       1,975  
  Litigation settlement proceeds     0       -       (2,328 )     -  
  Interest income     (3 )     (2 )     (8 )     (67 )
  Foreign exchange (gain) loss     8       (96 )     (63 )     (112 )
  Change in fair value of derivative financial instruments   (43 )     (22 )     (84 )     (182 )
  Gain on remeasurement of lease liability     -       (75 )     -       (75 )
  Loss on modification of debt     -       -       64       -  
Total other expenses (income)     825       167       151       1,539  
Loss for the year before income taxes     (9,023 )     (7,103 )     (33,817 )     (24,424 )
                   
Income tax expense     -       -       -       -  
Net loss and comprehensive loss for the year     (9,023 )     (7,103 )   $ (33,817 )   $ (24,424 )
                   
Loss per common share                
  Basic and diluted net loss per common share $ (0.01 )   $ (0.01 )   $ (0.02 )   $ (0.03 )
                   
Weighted average common shares outstanding                
  Basic and diluted     1,537,588,081       1,010,646,898       1,537,588,081       975,848,903  
                   
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