Acerus Pharmaceuticals Corporation

Good morning, ladies and gentlemen, and welcome to the Q3 2021 conference call for Aceris Pharmaceuticals Corporation. At this time, all participants are in listen-only mode. A brief question and answer session will follow this discussion. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It will be available for replay until 2359 p.m. on Tuesday, November 16th, 2021 by dialing 905-694-9451 or 1-800-408-3053 using access code 8120716-POUND. I will now turn the call over to Mr. Bob Motz, Chief Financial Officer of the Saris Pharmaceuticals Corporation. Mr. Motz will moderate today's call. Mr. Motz, please proceed.

thank you very much melanie uh good morning to everyone and welcome to the aceris 2021 third quarter conference call i'm pleased to be joined today virtually by edgaditis our president and chief executive officer along with other senior members of the aceris team before we begin i'd like to comment on forward-looking statements in this call on behalf of the speakers who follow investors are cautioned that the presentations and responses to questions on this call may contain forward-looking statements. Such statements may contain forward-looking information within the meaning of applicable securities laws. Forward-looking statements are given as of the date of this call and may involve risk and uncertainty and may include but are not limited to the company's goals, targets, strategies, intentions, plans, beliefs, estimates, expectations, outlook, and other statements which contain language such as beliefs, anticipate, expect, intend, plan, will, may, and other similar expressions. Certain material factors or assumptions are applied in the formulation of forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about the statements, the material factors or assumptions underlying such statements and about the material factors or assumptions that may cause actual results to vary from those expressed or implied in such statements, please consult the press release issued today and the company's other filings, which are available on CDAR, at www.cdar.com. I would like to now turn the call over to Mr. Ed Gudaitis, President and Chief Executive Officer, for his remarks. Ed?

Thanks, Bob, and welcome everyone to our 2021 third quarter conference call. Today, I'll review our recent operational progress, after which Bob will provide a detailed overview of the financial results. I'm pleased to say that even in the face of a number of challenging conditions, the story of the third quarter was one of continued execution in the U.S. market. We once again saw solid year-over-year growth in total metastatic prescriptions, particularly in the urology sales channel. even as our expansion was not as fast as we were accustomed to, primarily due to the research and pandemic environment. Consistent with industry trends, Acera saw increased COVID-19-related HCP access restrictions this summer, tied to the Delta variant, which dampened our prescription growth rate compared to earlier this year. We were also negatively impacted by a tight labor market and some Salesforce vacancies, which affected our ability to generate prescription demand. Neither of these issues, though, is expected to greatly impact our results in the fourth quarter, and so we're optimistic about the business heading into 2022. We believe Aceros can accelerate top-line growth and attract further investment to reach its potential. Now let me talk about our products in greater detail, starting with the U.S. rollout of Metesto. The overall testosterone replacement therapy market saw soft growth in Q3, likely due to the Delta variant, as well as seasonal factors during the summer months. Total market prescriptions grew less than 4% year-over-year, significantly lower than the pre-pandemic growth rate of around 10%. Total intestinal prescriptions grew 31% in the third quarter versus the prior year period, driven by strong performance in the urology segment, where total intestinal prescriptions grew 39% year-over-year. In addition, new Natesto prescriptions rose by 27% versus 2020, again fueled by urology, where scripts were up 29% year-over-year. Healthcare practitioner awareness of Natesto and the prescribing intention is also increasing, with a number of healthcare professionals writing scripts rising 31% year-over-year. About 50% of all Natesto scripts are in the urology segment, but we anticipate improvement in the fourth quarter across both the endocrinology and primary care segments, thanks to our co-promotion agreement with annual pharmaceuticals, along with our own expanded sales team making inroads into primary care. Intestinal reimbursement coverage continued to improve in Q3, with a 29% sequential increase in intestinal prescriptions being pulled through commercial PBMs in Q3 alone, as well as an 82% increase in year-over-year prescription pull-through within commercial PBMs. 75% of intestinal scripts are now being written for commercially insured patients, with the remainder being paid in cash or through government programs such as Medicare and Medicaid. Overall, we remain very optimistic about the outlook for Netesto in the U.S. Everything is in place for the company to see higher growth going forward, and I believe we're laying the groundwork for a successful end of 2021, putting us on the path for even better performance next year. Turning to the Canadian market, I regret to say that we experienced some setbacks this quarter regarding our reentry into this market. The timing of Netesto being available in Canada is being impacted by supply chain disruptions and manufacturing delays, so we do not anticipate returning the product to market until the second quarter of 2022. Rest assured, we're working diligently with our manufacturing partners to ensure supply chain certainty as quickly as possible. We will continue to provide updates as they become available. We also saw some other unrelated setbacks with regard to the approval process for Evanafilch. In October of this year, the company was informed by Health Canada that its Evanafil new drug submission needs to be withdrawn due to the failure of Sanofi, the active pharmaceutical ingredient manufacturer, to address specific questions noted in the prior notice of deficiency. Health Canada had previously requested additional preclinical and toxicology related information related to Evanafil from Sanofi, but this data was not provided in the format requested for the timeline prescribed. This is very disappointing, and we're now working diligently with Petros Pharmaceuticals, the licensor of Avanafield to Aceris, along with Sanofi, to ensure that all information is provided in a timely manner. We're also discussing how to appropriate the additional regulatory costs incurred as a result of this failure to provide information to supply the information as requested. At this point, a resubmission is expected to be made to Health Canada during the first quarter of 2022, with an expected introduction of Evanafil to the Canadian market occurring in early 2023. Turning now to Estrays, much like last quarter, we continue to make progress with validating and ensuring the tech transfer of production to a new contract manufacturer is completed. Demonstration batches are being completed and analyzed, and once validation is successfully completed, we will move forward with our agreement to sell the Estrays rights to a Canadian pharmaceutical company. Let me add that I'm very pleased that our litigation against Resafarm regarding a prior shortage of esterage in Canada has come to an end. As previously announced, we accepted an offer to settle on August 12th for payment of 1.7 million British pounds, or about $2.3 million, which was received later in August. Subsequent to quarter end in October, the company was paid an additional $0.4 million to offset the majority of litigation costs. We're very glad to have this matter behind us, It shows that we will clearly defend the company when we feel that our partners are not delivering on their contractual obligations. Before I turn the call over to Bob, let me wrap up with a few comments regarding our ongoing business development initiatives. We continue to work closely with Terreya partners to analyze and assess various strategic options to acquire assets that would accelerate top-line revenue growth and possibly allow us to pursue additional complementary end markets. We will announce more information in due course. All things considered, we remain in great shape to leverage the opportunities ahead of us, particularly in the U.S. While certain issues have slowed our rate of growth last quarter, we're upbeat about the underlying trends as we close out 2021. With economic activity and consumer spending very high, the U.S. market is returning to near normal conditions. With more physicians prescribing the testo, and with continued improvements in commercial insurance coverage, I believe we're on track for a strong 2021, followed by even stronger performance in 2022. That concludes my review of the operational highlights for the quarter. I'd now like to turn the call over to Bob for the financial review. Bob?