ASP Acerus Pharmaceuticals Corporation

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

Q1 - 2021 Highlights

• Re-purchased all remaining NATESTO® rights from Aytu Biopharma, allowing Acerus to build and leverage its commercial business across North America
• Expanded NATESTO® access to 20 countries across Europe, Central Asia and the Middle East through an agreement with Maylen Farma (“Maylen”), a firm based in Lugano, Switzerland that specializes in bringing pharmaceutical products and healthcare services to patients in emerging markets
• Received notice of allowance on NATESTO® patent in the U.S. that will have an expiry date in 2034, protecting one of the Company’s proprietary medications into the foreseeable future
• Completed a US$15 million subordinated secured loan facility (the “Loan Facility”), providing needed capital to execute the Company’s many ongoing growth initiatives
• After the end of the quarter, Acerus announced a NATESTO® revenue share agreement with Amneal Pharmaceuticals, leveraging Amneal’s extensive relationships with Endocrinology healthcare providers in the U.S.

“We accomplished a great deal strategically in the first quarter, all of which should position us for higher growth going forward,” said Ed Gudaitis, President and Chief Executive Officer of Acerus. “Re-purchasing the remaining NATESTO® rights from Aytu – while necessitating a US$7.5 million termination fee paid over 30 months – allowed us to actively take control of our sales efforts in the U.S. and, in doing so, report all revenue from this very important market. Other decisions this quarter also strengthened the Company’s outlook – including our agreement with Maylen, bolstering our overseas expansion plans, and our entering into a new loan facility that provides capital for growth. Just as importantly, after the end of the quarter, our deal with Amneal paves the way for Acerus to more rapidly reach Endocrinology professionals in the U.S., opening up new avenues for customer interaction and acceptance. As we look out on 2021 and beyond, we believe these strategic moves provide the flexibility and opportunity for improved performance and bottom-line results.”

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

• Total revenue in the quarter was negative $6.0 million compared to $0.1 million in the first quarter of 2020, reflecting a $6.2 million termination fee in 2021 related to the Aytu buyback of product rights; this fee represents the present value of $7.5 million in total payments to be made to Aytu under the agreement. Going forward, Acerus gains full distribution rights and the reporting of sales for any transaction in the U.S.   
• Gross profit in the first quarter of 2021 was negative $6.2 million compared to negative $0.1 million in the prior-year period, reflecting the aforementioned termination fee of $6.2 million
• Research and development ("R&D") expense rose by $0.4 million, to $1.0 million, for the current quarter from $0.6 million in the prior-year period, reflecting increased expense for NATESTO® clinical trials in the U.S.
• Selling, general and administrative expenses (“SG&A”) increased by $1.7 million. to $5.3 million, from $3.6 million in the prior-year period, reflecting investment in the Company’s U.S. organization, launched in the second half of 2020
• EBITDA1 was a loss of $12.1 million compared to a loss of $3.8 million in the prior-year period; Adjusted EBITDA1 was a loss of $5.7 million for the quarter compared to a loss of $4.0 million in the prior-year period
• The Company incurred a net loss of $12.8 million, or $(0.01) per share, for the quarter compared to a loss of $4.7 million, or $(0.01) per share, in the first quarter of 2020

Balance Sheet

Cash as of March 31, 2021 was $5.2 million compared with $9.2 million as of December 31, 2020, reflecting cash used during the quarter.

On April 30, 2021, the Company announced that it had entered into a US$15 million subordinated secured loan facility made available to the Company by way of one or more 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.

COMPANY UPDATE AND OUTLOOK

NATESTO® The Company continues to execute on its strategy of focusing on the U.S. market for NATESTO®. During the quarter, the Company signed an agreement with Aytu BioPharma (f/k/a Aytu BioScience) (“Aytu”), whereby Acerus acquired all remaining rights to NATESTO® in the U.S. that were not already returned as part of the Company’s 2019 Amended and Restated Agreement with Aytu. By assuming full ownership of NATESTO and its U.S. distribution, the Company can leverage its commercial business unit to accelerate growth. In addition to Acerus selling to its existing specialty healthcare professionals, the Company gains full distribution rights and reporting of sales for any transaction in the U.S. market. Aytu has agreed to assist Acerus throughout a 120-day transition period from the effective date (March 31, 2021) and, during this period, will continue to provide distribution of NATESTO® under the terms of the existing License and Supply Agreement. NATESTO® sales will be recognized at the distributor level, which allows for better alignment of revenue to underlying prescription trends.

After the end of the quarter, in May 2021, Acerus announced a NATESTO® co-promotion agreement with Amneal Pharmaceuticals that leverages that company’s extensive relationships with Endocrinology healthcare providers in the U.S. market. Under the terms of the agreement, Amneal will sell NATESTO® to its existing Endocrinology targets through June 30, 2024. In compensation for such marketing efforts, Amneal will receive a commission for most of the net profits attributed to Endocrinology targets in the three active promotional years, with Acerus retaining a low double-digit percentage of such net profits during the active promotion period. Amneal will also receive a three-year trailing royalty following the active promotion period, with compensation to Amneal decreasing from a majority of the net profits to a minority of the net profits.

Also subsequent to the end of the quarter, the Company received a Notice of Allowance for a U.S. patent covering NATESTO®. When granted, Acerus expects this patent to be listed in the Orange Book, which will extend patent coverage through 2034.

Outside of the United States, the Maylen Farma agreement announced in the quarter expands the reach of NATESTO® to 20 countries across Europe, Central Asia, and the Middle East. Nations covered by the agreement include Belarus, Georgia, and Ukraine; Azerbaijan, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan; Albania, Kosovo, North Macedonia, Serbia, and Bosnia and Herzegovina; the United Arab Emirates, Kingdom of Saudi Arabia, Kuwait, Qatar, Bahrain, Jordan, and Lebanon. The Company currently expects first orders under his agreement in the second quarter, with deliveries in the fourth quarter of 2021 and early 2022.

The Company also remains optimistic about a return of NATESTO® to Canada during 2021. The first batch of NATESTO® for this market has already been manufactured and is undergoing stability studies. At the same time, Acerus has begun the regulatory work and commercial preparations required to support the reintroduction of NATESTO® in Canada.

avanafil Health Canada Approval StatusThe review of the avanafil New Drug Submission (“NDS”) is underway, and the Company is responding to questions and clarification requests from Health Canada. As disclosed in the Company’s 2020 fourth quarter earnings report, the review process can take up to a year from receipt of the NDS (December 2020).

Conference Call Shareholders are reminded that the conference call to discuss the Company’s results for the first quarter will be held on May 13, 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 1930457#. 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 10:00 a.m. Eastern Time on Thursday, May 20, 2021 by dialing 905-694-9451 or 1-800-408-3053, using access code: 8998151#.

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 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.

			For the three months ended March 31,
				2021			2020
Net loss			$	(12,826	)	$	(4,663	)
Adjustments:
	Amortization of intangible assets			37			179
	Depreciation of property and equipment			222			64
	Depreciation of right of use asset			-			12
	Interest expense and other financing costs			292			846
	Interest income			(5	)		(31	)
	Change in fair value of derivative			69			(163	)
	Loss on modification of debt			64			-
EBITDA			$	(12,147	)	$	(3,756	)
Termination Fee				6,204			-
Share based compensation				291			45
Foreign exchange gain				(15	)		(244	)
Adjusted EBITDA			$	(5,667	)	$	(3,955	)

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 Contactir@aceruspharma.com

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

Acerus Pharmaceuticals Corporation
Condensed Interim Consolidated Statements of Financial Position
As at March 31, 2021 and December 31, 2020
Unaudited
(expressed in thousands of U.S. dollars)
		March 31, 2021			December 31, 2020
ASSETS
Current assets
	Cash	$	5,167		$	9,153
	Trade and other receivables		380			528
	Contract asset		691			936
	Inventory		2,445			2,313
	Prepaid and other assets		1,157			1,104
Total current assets			9,840			14,034
Property and equipment, net			584			806
Intangible assets, net			2,105			2,142
Total assets		$	12,529		$	16,982
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
	Accounts payable and accrued liabilities	$	7,171		$	5,435
	Termination fee payable		2,776			-
	Current portion of long-term debt		2,602			1,439
	Current portion of lease liability		205			229
Total current liabilities			12,754			7,103
Termination fee payable			3,428			-
Long-term debt			5,514			6,580
Derivative financial instruments			208			139
Total liabilities			21,904			13,822
Shareholders' equity (deficit)
	Share capital	$	198,163		$	198,163
	Contributed surplus		13,726			13,435
	Accumulated other comprehensive loss		(13,949	)		(13,949	)
	Deficit		(207,315	)		(194,489	)
Total shareholders' equity (deficit)			(9,375	)		3,160
Total liabilities & shareholders' equity (deficit)		$	12,529		$	16,982

Acerus Pharmaceuticals Corporation
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
For the three months ended March 31, 2021 and 2020
Unaudited
(expressed in thousands of U.S. dollars, except per share and share data)
				For the three months ended March 31,
					2021				2020
Revenue
Product revenue				$	234			$	145
Termination Fee					(6,204	)			-
					(5,970	)			145
Cost of goods sold					191				201
					-				-
Gross margin (loss)					(6,161	)			(56	)
Expenses
	Research and development				973				622
	Selling, general and administrative				5,287				3,577
Total operating expenses					6,260				4,199
Operating loss					(12,421	)			(4,255	)
Other expenses(income)
	Interest on long-term debt and other financing costs				292				846
	Interest income				(5	)			(31	)
	Foreign exchange gain				(15	)			(244	)
	Change in fair value of derivative financial instruments				69				(163	)
	Loss on modification of debt				64				-
Total other expenses					405				408
Loss for the period before income taxes					(12,826	)			(4,663	)
Income tax expense					-				-
Net loss and comprehensive loss for the period				$	(12,826	)		$	(4,663	)
Loss per common share
	Basic and diluted net loss per common share			$	(0.01	)		$	(0.01	)
Weighted average common shares outstanding
	Basic and diluted				1,537,588,081				656,423,941