Aequus Provides First Quarter 2019 Financial Highlights
VANCOUVER, May 30, 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 three months ended March 31, 2019 (“Q1 2019”) and associated Company developments. Unless otherwise noted, all figures are in Canadian currency.
“Aequus continues to drive its promotional efforts forward with Q1 2019 unit growth of 27% and 5.3% over Q1 2018 in our main revenue drivers, Vistitan and Tacrolimus, respectively,” said Doug Janzen, Chairman and CEO of Aequus. “We remain confident in resuming revenue growth over the long-term, with continued penetration of our marketed products, and consistent additions to the commercial product portfolio through national and international partnerships similar to our recently announced relationship with Medicom Healthcare Ltd.”
Q1 2019 Highlights
- Revenues in the first quarter 2019 were $328,996, a decrease of 12% over the same quarter in 2018. The decrease is attributable to a contractual step down in profit share for both Tacrolimus and PRVistitan™ (“Vistitan”). Given our current run rate we expect to offset that step down in the following quarters.
- On January 1, 2019 Aequus’ profit sharing royalty for Tacrolimus and Vistitan was reduced in accordance with a contractual tiered royalty structure with Sandoz. This change impacts the royalty revenue to Aequus from these products, which is the main factor in the decrease in revenue seen in Q1 compared to previous quarters. This was the final royalty adjustment of the agreement.
- During Q1 2019 Aequus signed a term sheet for an exclusive license with Medicom Healthcare Ltd (“Medicom”)., a United Kingdom based pharmaceutical company with a focus on preservative free therapies in ophthalmology. The proposed license agreement is for the Canadian commercial rights to 5 products within Medicom’s Evolve® line of preservative free dry eye products.
Subsequent to March 31, 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 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.
“When I reflect back on where we were this time last year, I’m delighted at the progress that we’ve made,” said Ian Ball, CCO of Aequus. “The sales team has averaged over 1,000 calls per representative, grown our volumes, and established relationships with a key customer base that sets us up well for future launches. We are excited about the addition of the Evolve line of products which leverages our existing infrastructure and expertise, bringing a broad and unique portfolio into the Canadian dry-eye market. These items, along with our ongoing discussions with potential partners to further grow our product portfolio, sets Aequus up for a strong year.”
Revenue for Q1 2019 was $328,996 compared to $375,000 earned in the three months ended March 31, 2018 (“Q1 2018”). The 12% revenue decrease for the Company was attributable to our tiered profit share outlined in the original Sandoz agreement which decreases our profit share in 2019 for both products.
In March of 2019 the Company signed a term sheet with Medicom Healthcare Ltd., a United Kingdom based pharmaceutical company with a focus on preservative free therapies in ophthalmology, for the exclusive Canadian license to their Evolve® line of preservative free dry eye products. 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.
“For the Evolve line of products, Aequus and its regulatory consultants are ready to submit product approval applications to Health Canada pending an audit of Medicom’s manufacturing facility, which is a requirement of Health Canada prior to submission,” said James Purdy, Director of Operations at Aequus. “Once this audit is complete, we will be able to submit the regulatory package and expect a 4 week review for approval. Based on the expected timelines we hope to launch 5 of the Evolve products in the second half of 2019.”
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.
Results for the three months ended March 31, 2019
The Company reported a Q1 2019 net loss of $730,215, a decrease of 10% from the $816,485 loss in Q1 2018.
Sales and marketing costs for Q1 2018 was $509,096, as compared to $338,983 in Q1 2018, an increase of $170,113 or 50%. The majority of the increase relates to an increase in sales force costs and related salesforce expenses. A $90,612 increase in salesforce human resource costs is due to no salesperson vacancies in Q1 2019 and the addition of a National Sales Manager in Ophthalmology. There were salesperson vacancies and no sales manager in Q1 2018. The Q1 2019 costs also include non-cash expenses of $81,519 related to amortization and share based payments expenses. Depreciation and amortization, and share-based payments for Q1 2019 were $47,400 and $34,119, respectively, compared to $46,453 and $10,711, respectively, in Q1 2018. The amortization costs were primarily related to the acquisition costs of TeOra.
The Company incurred research and development expenses of $69,078 in Q1 2019 as compared to $192,968 in Q1 2018. The decrease was primarily attributable to reduced regulatory consulting for AQS1301 and AQS1303 Pre-IND related work.
General administration expenses were $482,531 during Q1 2019 as compared to $658,834 in Q1 2018, a decrease of $176,303 or 26%. The decrease was primarily due to a one-time consulting expenses relating to corporate marketing and branding during Q1 2018 that was not required in Q1 2019.
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.
This release may contain forward-looking statements or forward-looking information under applicable Canadian securities legislation that may not be based on historical fact, including, without limitation, statements containing the words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “potential” and similar expressions. Forward- looking statements are necessarily based on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as the factors we believe are appropriate. Forward-looking statements include but are not limited to statements relating to: the implementation of our business model and strategic plans; the Company’s expected revenues; the continued revenue growth of its products; Given our current run rate we expect to offset that step down in the following quarters; the signing of an exclusive license with Medicom; the launch of the Evolve® product line in Canada; ongoing discussions with potential partners to further grow our product portfolio. Such statements reflect our current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Aequus, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements. In making the forward looking statements included in this release, the Company has made various material assumptions, including, but not limited to: obtaining positive results of clinical trials; obtaining regulatory approvals; general business and economic conditions; the Company’s ability to successfully out license or sell its current products and in-license and develop new products; the assumption that the Company’s current good relationships with its manufacturer and other third parties will be maintained; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and technology offered by the Company’s competitors; and the Company’s ability to protect patents and proprietary rights. In evaluating forward looking statements, current and prospective shareholders should specifically consider various factors set out herein and under the heading “Risk Factors” in the Company’s Annual Information Form dated April 24, 2019, a copy of which is available on Aequus’ profile on the SEDAR website at www.sedar.com, and as otherwise disclosed from time to time on Aequus’ SEDAR profile. Should one or more of these risks or uncertainties, or a risk that is not currently known to us materialize, or should assumptions underlying those forward-looking statements prove incorrect, actual results may vary materially from those described herein. These forward-looking statements are made as of the date of this release and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by applicable securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and are inherently uncertain. Accordingly, investors are cautioned not to put undue reliance on forward looking statements.
VistitanTM: Trademark owned or used under license by Sandoz Canada Inc.
Aequus Investor Relations