A Return to Revenue Growth - Aequus Provides Second Quarter 2019 Financial Highlights

VANCOUVER, August 27, 2019 – Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) (“Aequus” or the “Company”), a specialty pharmaceutical company with a focus on developing, advancing and promoting differentiated products, today reported financial results for the six months ended June 30, 2019 (“Q2 2019”) and associated Company developments. Unless otherwise noted, all figures are in Canadian currency.

“We’re pleased to announce a return to revenue growth in the second quarter,” said Doug Janzen, Chairman and CEO of Aequus. “The commercial team has been successfully driving sales, with Vistitan growing in unit volume by 76% in Q2 2019 over the same quarter last year. Meanwhile, our strategic team has been executing on new collaborations to bring revenue-generating products into the territory. With the regulatory approval of the Evolve line of products expected in 2019 and continued strength in our currently marketed products, Aequus is poised to continue the trend in revenue growth over the coming quarters.”  

Q2 2019 Highlights

• Revenues in the first quarter 2019 were $397,263, a 5% increase over the same quarter in 2018 (“Q2 2018”) and a 20% increase over the three-month period ending March 31, 2019 (“Q1 2019”).
• On May 2, 2019, the Company issued convertible debenture units of the Company at a price of $1,000 per Convertible Debenture Unit for aggregate gross proceeds to the Company of $2,348,000. Each Convertible Debenture Unit consists of one 9.5% unsecured convertible debenture of the Company in the principal amount of $1,000 and 2,380 common share purchase warrants. Each Convertible Debenture will be convertible at the option of the holder into common shares of the Company (each, a “Debenture Share”) at a conversion price of $0.21 per Debenture Share, with interest payable semi-annually in arrears on June 30 and December 31 of each year and maturing May 2, 2022. The Company issued 5,588,240 common share purchase warrants pursuant to the debenture financing. Each Warrant entitles the holder thereof the right to purchase one common share of the Company at an exercise price of $0.22 per common share purchase warrant at any time up to May 2, 2022.  The Convertible Debentures and Warrants began trading on the TSXV on May 6, 2019.  

Planned Shelf Prospectus Filing to Replace Soon to Expire Existing Shelf Prospectus

• The Company’s financing strategy includes maintaining an active Shelf Prospectus to give the Company the ability and flexibility to efficiently raise money by way of a public offering when market conditions are favourable or to provide resale registration rights for investors. The current Shelf Prospectus expires on September 17, 2019.  The Company is currently drafting an updated Shelf Prospectus and expects to file the preliminary short form base shelf prospectus with the securities regulatory authorities in the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario this week, a copy of which will be available under the Company’s profile on SEDAR at www.sedar.com after it is filed. The terms of such future offerings, if any, will be established at the time of such offerings. At the time any securities covered by the Shelf Prospectus are offered for sale, a prospectus supplement containing specific information about the terms of any such offering will be filed with the applicable Canadian securities regulatory authorities.

“As a public company, it has been Aequus’ strategy to always have a Shelf Prospectus in place,” said Doug Janzen. “Our current Shelf Prospectus is approaching its expiry date and we plan to replace it in the coming days – this is a normal part of our business and should not be interpreted as us initiating a financing.”

Subsequent to June 30, 2019

• In July of 2019, Aequus signed an exclusive distribution agreement with Medicom Healthcare Ltd (“Medicom”)., a United Kingdom based pharmaceutical company with a focus on preservative free therapies in ophthalmology. Under the distribution agreement, Aequus will receive commercial rights to novel portions of Medicom’s portfolio of ophthalmology products including the Evolve® line of preservative free dry eye products which contains 5 commercial products and 2 products in development, an undisclosed preservative free ophthalmic medication, and the diagnostic eye drop Fluosine within Canada. This agreement adds 9 products to Aequus’ portfolio. Aequus will have first right of refusal in Canada on Medicom’s development pipeline products.

• Aequus continues to make progress in discussions to form a medically focused cannabis collaboration and expects further announcements this year.
  
  
• Aequus also had positive meetings with Supernus regarding the clinical advancement of the Trokendi program and expects activities and discussions to continue.

Commercial Update

“We are pleased to see such strong growth in our products over the first half of the year,” said Ian Ball, Chief Commercial Officer of Aequus. “As a newcomer to the intimate Canadian ophthalmology space in 2016, our team has been steadfast in building a brand through close relationships, conference sponsorships, physician webinars, and patient outreach. We are now seeing the benefit of this hard work, with Vistitan actively gaining market share from the brand leader. We are excited to continue the momentum within ophthalmology with our recently announced distribution agreement with Medicom. Medicom is currently preparing for a regulatory audit of their manufacturing facility required by Health Canada which is scheduled for October. This same facility has successfully passed audits by European regulators. Aequus and its regulatory consultants have completed the regulatory submissions for Health Canada and will be allowed to file for approval for the Evolve line as soon as the manufacturing audit is completed. This timeline of regulatory events allows for expected product approvals this year.”

Revenue for Q2 2019 was $397,263 compared to $377,855 earned in Q2 2018 and $328,996 earned in Q1 2019. The 5% and 20% revenue increases, respectively, can be primarily attributable to strategically directed promotional activities focused in markets with positive market access and reimbursement listings.  

The signing of the distribution agreement with Medicom had terms consistent with the term sheet that was previously announced in March 2019. The agreement grants Aequus commercial rights to novel portions of Medicom’s portfolio of ophthalmology products including the Evolve® line of preservative free dry eye products, which contains 5 commercial products and 2 products in development, an undisclosed preservative free ophthalmic medication, and the diagnostic eye drop Fluosine within Canada. This agreement adds 9 products to Aequus’ portfolio.

Launched in 2015 in Europe, the Evolve® brand has grown to 5 products across 35 countries with 2 products in development. With an array of products, the brand can address the various symptoms involved with dry eye disease and blepharitis including discomfort, stinging, burning, and dryness. Currently in Canada, the dry eye market is estimated at over $90M, which includes both prescription and over-the-counter products. Aequus and Medicom are currently working with Health Canada to review Medicom’s manufacturing facility prior to submitting the regulatory package for the Evolve® line of products. Aequus expects to detail these products with our existing commercial infrastructure, allowing for effective and efficient use of resources, and a seamless launch into the Canadian marketplace.

“We are very excited about the developing relationship with Medicom” said Ian Ball, CCO of Aequus. “Not only is the fit between the two businesses ideal, but Aequus’ access to Medicom’s development pipeline will give the Company the ability to address unmet clinical and patient needs in Canada. Evolve will be launched in Canada by our existing sales infrastructure, bringing the broadest range of preservative free dry eye products to the market. Finally, the companies have discussed the possibility of expanding the agreement to cover other territories in the future which would greatly enhance the value of the partnership to both companies.”

The Company looks to continue leveraging its existing core capabilities and commercial infrastructure to expand its presence and product offerings within ophthalmology. Aequus has positioned itself as a key partner for international companies looking to access the Canadian marketplace. The Company will continue its strategy of adding to its existing product portfolio through promotional partnership agreements, asset acquisitions, in-licenses, and internal development programs.

VistitanTM: Trademark owned or used under license by Sandoz Canada Inc.

Operating expenses for the three months ended June 30, 2019

The Company reported a Q2 2019 net loss of $678,006, an increase of 2% from the $666,243 loss in Q2 2018. The loss for the six months ended June 30, 2019 was $1,408,218 (June 2018 - $1,482,727).

Sales and marketing costs for Q2 2019 was $451,185, as compared to $363,846 in Q2 2018, an increase of $87,339 or 24%. The majority of the second quarter increase related to the addition of new sales reps and higher related salesforce expenses relative to the Q2 2018.  Q2 2019 also included the addition of a National Sales Manager in Ophthalmology, a new position created after June 30, 2018.  Non-cash expenses for depreciation and amortization, and share-based payments for Q2 2019 were $47,400 and $15,362, respectively, compared to $47,279 and $11,767, respectively, in Q2 2018.

The Company incurred research and development project maintenance expense of $52,493 in Q2 2019 compared to $179,963 in Q2 2018 when the company was actively working with FDA regulatory consultants for the AQS1303 Pre-IND related work.

General administration expenses were $575,841 during Q2 2019 as compared to $502,971 in Q2 2018, an increase of $72,870 or 14%. The increase was primarily due to $84,827 in costs related to interest and accretion expense related to the convertible debt issued during the quarter in May 2019.   Costs also include consulting expenses relating to corporate marketing during Q2 2019 that was not required in Q2 2018.  

ABOUT AEQUUS PHARMACEUTICALS INC.

Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) is a growing specialty pharmaceutical company focused on developing and commercializing high quality, differentiated products. Aequus has grown its pipeline to include several commercial products in ophthalmology and transplant, and a development stage pipeline in neurology and psychiatry with a goal of addressing the need for improved medication adherence through enhanced delivery systems. As a complement to its focus in neurology, our most recent addition to the development pipeline was a long-acting form of medical cannabis, where there is a high need for a consistent, predictable and pharmaceutical-grade delivery of products for patients. Aequus intends to commercialize its internal programs in Canada alongside its current portfolio of marketed established medicines and will look to form strategic partnerships that would maximize the reach of its product candidates worldwide. Aequus plans to build on its Canadian commercial platform through the launch of additional products that are either created internally or brought in through an acquisition or license; remaining focused on highly specialized therapeutic areas. For further information, please visit www.aequuspharma.ca.

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