speaker
Marie
Conference Call Operator

Enter your conference passcode. Welcome to the Assyria Pharmaceuticals Corporation conference call held on Tuesday, August 9, 2022, at 10 o'clock a.m. Eastern Time, hosted by Mr. Edward Gudaitis. You may press 2 at any time during this conference to have a detailed help menu. Good morning, ladies and gentlemen. Welcome to the Q2 2022 earnings call for Esseris Pharmaceuticals Corporation. At this time, all participants are in a listen-only mode. A brief question and answer session will be followed by 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 PM on August 16th, 2022 by dialing 905-694-9451 or 1-800-408-3053 using access code four, three, six, nine, nine, eight, nine followed by the pound sign. I will now turn the call over to Mr. Bob Motz, Chief Financial Officer of SRS Pharmaceuticals Corporation. Mr. Motz will moderate today's call. Mr. Motz, please proceed.

speaker
Bob Motz
Chief Financial Officer and Call Moderator

Thank you very much, Marie. Good morning to everyone and welcome to the ACERIS 2022 Second Quarter Conference Call. I'm pleased to be joined today virtually by Ed Gudaitis, our President and Chief Executive Officer, along with other senior members of the ACERIS team. Before we begin, I would 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, 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 believe, 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 Godaitis, President and Chief Executive Officer, for his remarks.

speaker
Ed Gudaitis
President and Chief Executive Officer

Ed? Thanks, Bob, and welcome, everyone, to our 2022 second quarter conference call. Today, I'll review our recent operational progress, after which Bob will provide a detailed overview of the financial results. Our performance this quarter once again showed that the company remains on track for accelerated top-line growth and improved results going forward as we leverage our sales force to drive Netesto prescriptions across the U.S., product revenue rose substantially year over year, as Bob will review in a moment, reflecting continued strong demand, increased prescription bills, and higher ex-factory shipments. Now let me review some of the operational details regarding our products and ongoing market developments in the second quarter of 2022, starting with Netesto. I'm pleased to report that total Netesto prescriptions in the United States grew 47% year over year, and we're up approximately 23% sequentially over the first quarter of 2022. We're now the fastest growing branded testosterone product in the U.S. market, according to data from Symphony Health, positioning us for significant growth this year. We saw new prescriptions rise 65% year over year and grow 31% sequentially from the first quarter. This is simply quite phenomenal, reflecting the passion and dedication of our highly motivated and effective sales staff, whose activity levels remain at an all-time high based on calls to doctors, pharmacies, and other targeted professionals. Our rapid expansion year-over-year was again driven by the family practice segment, where total prescriptions rose 71% year-over-year, with new prescriptions up 94%. The urology segment also posted solid growth, with total scripts up 48% and new prescriptions climbing 66%. The breadth of overall prescribing activity continues to increase, with the number of healthcare professionals writing to testo prescriptions increasing 39% year-over-year. As a reminder, over 75% of Netesto scripts are written for commercially insured patients, and roughly 35% of prescriptions are now being dispensed through our pharmacy partner program, a group of local independent pharmacies dedicated to improving patient care and product adherence. So we've been on track for a very strong year on a significant growth in keeping with our strategic plan. It's an exciting time for Netesto in the U.S., and we thank our sales force for their pivotal role in driving the execution of our growth and underlying operations. In addition, as announced previously, the company and Amnial Pharmaceuticals agreed to end the Natesto co-promotion agreement effective June 30, 2022. Given our success in other HCP segments, this approach allows us to take full responsibility of our growth going forward. As such, the company has actively been reconnecting with high-prescribing endocrinology segment, and we anticipate this market segment to contribute meaningfully to our sales in the second half of 2022. As previously discussed, Netesto's reintroduction in Canada has been negatively impacted by supply chain disruptions and delays. But I'm very pleased to say that we now anticipate having the product to sell in Canada in Q3, meaning very soon. We look forward to having this back on the market and available to the numerous customers ready and eager, waiting for its return. Netesto interest in South Korea and Taiwan also continues to be sprung, with additional product orders anticipated in the second half of 2022. In addition, we remain excited about the future of our latest brand, Noctiva, since acquiring Serenity Pharmaceuticals LLC in March. We continue to work closely with our contract manufacturer, Renaissance Liquid, to restart production and to introduce Noctiva back into the U.S. market where it already has FDA approval. The resumption of commercial manufacturing is underway and is expected to take until the end of this year. We're currently planning for commercial availability of Noctiva in the U.S. in the first quarter of 2023, with expectations that the brand's efficacy and prior demand will drive rapid acceptance next year. Significant overlap in position call points for Noctiva and Intesto should provide for synergies that should result in both increased sales as well as better productivity from new and existing sales staff alike. Everyone at Aceris is excited to get this product off the ground again. With regard to Avanafil, we continue to work with Petro's Pharmaceuticals, the licensor, and Sanopi to update the regulatory dossier for resubmission. It's expected to be provided to Health Canada by the end of the year, with an anticipated introduction of Avanafil to the Canadian marketplace taking place sometime in 2023. Before turning the call over to Bob, I'd like to say, once again, thanks to our hard-working and dedicated workforce, particularly our U.S. sales organization, without which we would not be where we are today. transformation of this company has been nothing short of amazing, and the momentum we're experiencing makes us very confident in our growth strategy, which is driven by the growth of Natesto and Noctiva. With prescriptions for Natesto rapidly rising and our introduction of Noctiva being planned for the near future, the company remains on track for strong top-line growth and improved operating performance. I'd also like to take the time right now to thank our investors for their ongoing interest and support. which drives our commitment to achieve success in the quarters to come. That concludes my review of the operational highlights for the quarter. I'd like to now turn the call over to Bob for the financial review. Bob?

speaker
Bob Motz
Chief Financial Officer and Call Moderator

Thanks, Ed, and good morning, everyone. In the comments that follow, please note that all dollar amounts are expressed in U.S. dollars unless otherwise stated. The results are reported under both standard IFRS and certain non-IFRS measures. Such non-IFRS measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are provided as additional information to supplement those IFRS measures set out in the financial statements. They provide further understanding of the company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the company's financial information reported under IFRS. Management believes that securities analysts, investors, and other interested parties frequently use these non-IFRS metrics to value issuers. We use non-IFRS measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets, and to assess our ability to service any current and future debt obligations capital expenditures, and working capital requirements. Now, moving on to the results. We reported product revenue of almost $750,000 for the three months ended June 30, 2022, compared with approximately $560,000 in the prior year period. As Ed mentioned, product demand continues to meet our expectations, hence the growth in shipments year over year. We anticipate product sales to remain robust for the remainder of 2022, putting us on track for very strong results going forward. Cost of goods sold for the three-month end of June 30, 2022 was approximately $481,000 versus $45,000 in the prior year period, with the increase year-over-year largely reflecting the impact of a one-time charge of approximately $300,000 in the second quarter of 2022, to write off all remaining raw material inventory related to S-Trace. The company posted a gross profit of $267,000 in the second quarter of 2022 compared to $467,000 in 2021. Product gross margin excluding the S-Trace charges was approximately 76% in the fiscal 2022 second quarter versus a comparable margin of approximately 83% last year with the decline reflecting increased rebates paid to payers and pharmacy benefit managers, along with the increased distribution charges. Research and development costs in the second quarter were approximately $2.2 million versus $0.9 million in the comparable quarter a year ago, reflecting increased expenses for Natesto clinical trials in the U.S., as previously discussed. This higher level of R&D is expected to continue over the next few quarters, after which the clinical trials should be completed and R&D expenditures are anticipated to return to historical levels. In addition, current quarter R&D included $0.2 million of expense to return Noctiva to active production. Selling general and administrative expenses were $4.9 million in the year's second quarter, compared to $6.3 million in the prior year period. Approximately $0.7 million of the decline reflects the write-off of accrued receivables related to Estrace in the prior year period, with the remaining decrease largely due to higher-than-normal expenses in 2021, tied to the terminated A2 co-promotion agreement and subsequent launch of the company's U.S. growth strategy for Natesto. We posted a net loss of $7.9 million, or $1.03 per share, for the three months ended June 30, 2022. compared to a net loss of $7.1 million or $0.92 per share for the same period in 2021. All per share amounts now reflect the share consolidation completed earlier in the quarter. Adjusted EBITDA, a key metric we used to assess our business performance for the second quarter of 2022, was a loss of $6.6 million compared to $6.2 million in the second quarter of 2021. Calculations of EBITDA and adjusted EBITDA are in our MD&A and in the press release issued earlier today. On June 30, 2022, the company had cash of $1.3 million compared to cash of $2.2 million as of December 31, 2021. This change reflects $17.9 million of advances under a secured grid promissory note with first-generation capital and offset by $6.5 million to settle the prior senior secured loan facility with SWK, $10.7 million of cash used in operations, and $1.5 million of costs related to the acquisition of Serenity. Subsequent to the end of the quarter, a further $10 million was advanced by first generation, increasing the total balance on this facility to $47.9 million. As previously announced, Asseris will need to raise approximately $45 to $50 million over the next two years to fund the Serenity upfront fee, expand the Salesforce and marketing initiatives, grow the Netesto business, and resume Netesto production. The $45 to $50 million reflects advances that First Generation has made to the company since the end of the quarter. Before turning the call over to questions, Please note the financial information provided on today's call and in the press release issued this morning are in summary form. Interested parties are encouraged to review the company's quarterly and year-end CDER filings as they will include the financial statements, the accompanying notes, and management discussion and analysis, as well as the annual information form dated March 14, 2022. You can also find these comments posted on the investor page of our corporate website as well as on CDER. This concludes my prepared comments. We'd like to now turn the call over to the operator and open it up for questions. Marie, can we open it up for Q&A, please?

speaker
Marie
Conference Call Operator

Thank you, Mr. Motz. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift the handset before making your selection. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while the participant register for question. Thank you for your patience. Once again, please press star one on your telephone keypad if you have a question or comment. There are no questions registered at this time. I would like to turn back the meeting over to Mr. Moots.

speaker
Bob Motz
Chief Financial Officer and Call Moderator

Thanks very much, Marie. This concludes today's call. Thank you very much for attending the call. We look forward to speaking to you again for our third quarter conference call, which is tentatively scheduled for Tuesday, November the 8th. Thank you very much, and have a great day. Take care. Bye-bye.

speaker
Marie
Conference Call Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation. Welcome to the Instant Reply System. Pour continuer en français, appuyez sur étoile.

Disclaimer

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