Acerus Pharmaceuticals Corporation
(TSX: ASP)
(OTC: TRLPF)
CEO: Ed Gudaitis
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About: Founded in 2008, Acerus has quickly grown into a fully integrated company with expertise in all stages of the pharmaceutical product lifecycle, and focus in the therapeutic areas of Men’s Health (Urology) and Women’s Health (Hormone Replacement Therapy, Female Sexual Dysfunction). Acerus markets ESTRACE® in Canada, a product indicated for the symptomatic relief of menopausal symptoms. NATESTO®, a product utilizing our licensed nasal gel technology, is the first and only testosterone nasal gel approved in Canada, and available in the United States for replacement therapy in adult males diagnosed with hypogonadism. GYNOFLOR™, a product licensed to Acerus in Canada by Medinova AG and approved in 39 countries worldwide, is an ultra-low dose vaginal estrogen therapy with the addition of lactobacillus, for the treatment of atrophic vaginitis, certain vaginal infections and/or to restore a healthy vaginal environment. TEFINA™, a “use as required” testosterone nasal gel, is our drug development candidate aimed at addressing a significant unmet need for women with female sexual dysfunction. Acerus operates from a Mississauga-based office, and is listed on the Toronto Stock Exchange (TSX:ASP).
INTERVIEW TRANSCRIPTS:
WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with The Wall Street Analyzer. Joining us today is Ed Gudaitis, the CEO for Acerus Pharmaceuticals Corporation. The company trades on the Toronto Stock Exchange, ticker symbol, ASP and here in the US, over the counter, TRLPF. Thanks for joining us today Ed.
Ed Gudaitis: Thank you very much Juan, I appreciate the opportunity to talk to you today.
WSA: Yes, anytime, so starting off please give us a history and overview of the company.
Ed Gudaitis: Let me give you a quick overview of the company. Acerus is a small cap Specialty Pharma company based, just outside of Toronto, Ontario, Canada. The company has been in operation since 2008 – we are approaching our 10th anniversary this year. Our focus is twofold; We have both an active commercial presence and also an active R&D presence. On the commercial side, our focus is on our Women’s and Men’s health prescription products business. Our flagship asset is a product called NATESTO, which is a testosterone therapy product. Interestingly, for a small cap company, NATESTO is a global opportunity for us. We commercialize the product in Canada through our own commercial team and globally through various partners. We also have a Women’s health business that is focused on the Canadian market. On the R&D front, we’re actively pursuing a number of additional applications of our nasal gel technology that I’ll share with you over the course of the interview.
WSA: Great. Please bring us up to speed on some of the most recent news, including Q1 results.
Ed Gudaitis: We’ve had a number of recent news items that have been publicly announced. I’ll touch on these in inverse order of the timing of the announcements. We completed a licensing deal for NATESTO, our Testosterone Nasal Gel product, in 19 central and Latin American countries through a partnership with Carnot Labs. This now brings the total of markets that have NATESTO commercially available or partnered out to 50. This gives us a global presence including Canada, the US and 48 other territories around the world.
We’ve also announced recently that we’ve just secured an additional $2 million in financing under our secured term credit facility with Quantius Inc. This is the second tranche of a $5 million facility that we entered into late in 2017 and it was released conditional on us hitting certain commercial and financial milestones.
Most recently we’ve announced that we’ve bought out all of our obligations under the licensing agreement that we had in place with Mattern Pharma. This buy-out is beneficial to both parties with Acerus securing additional beneficial margin impact in the out years on NATESTO business.
We’ve been very busy and we continue to be active on the business development front, on the R&D front and obviously on the commercial front driving our NATESTO business forward.
WSA: Certainly. So what are some of the key trends that you’re seeing right now in the sector and how are you positioning the company with your products to capitalize?
Ed Gudaitis: We see two key trends. If you look at the testosterone therapy market, one of the things we’ve seen in North America is both a withdrawal from the marketplace of some competing products, particularly Axiron which was a product marketed by Eli Lilly, and also pending genericizations of other leading topical therapies. We feel that this is a unique opportunity for us to capitalize on our presence as a branded company in both Canada and the US. We can continue to drive our business forward based on the unique clinical advantages of NATESTO, and on our ability to operate with key incumbents pulling back or withdrawing from the market completely.
Looking at the R&D front, one of the interesting trends we see is that there is a continued need for new therapies in areas like neuroscience and CNS. We see the evolving use of cannabinoids as a means to address some of these unmet medical needs. If you look recently at GW Pharma and their product epidiolex, it just received a unanimous favorable vote from the FDA advisory committee, which is positive news regarding the potential for approval of cannabinoid-based therapies in areas like epilepsy.
Recently in our Q4 2017 earnings, we announced the launch of our own cannabinoid initiative. Interestingly enough, both cannabinoids and testosterone are similar in chemical structure. One area that we’re exploring is applying our competency with the nasal gel delivery technology into this space to see if we can solve some of the unmet medical needs that still exist.
WSA: What are the main goals and milestones over the course of the next 6 to 12 months that you’re hoping to accomplish?
Ed Gudaitis: Great question. We’re looking at three things. One is that with NATESTO we must continue to drive growth through our global footprint. We continue to see positive uptake of the product in North America and as the ex-North American territories come online, we will receive regulatory, sales and supply milestone payments from these markets. We’ll see the NATESTO business continuing to grow and accelerate beyond 2019, providing us with a strong platform for future success.
Second, specific to our Canadian business, we’ve just licensed in avanafil, which is a PDE5 inhibitor, which will compete against the likes of Viagra® and Cialis® in the Canadian market. This product will give us another cornerstone pillar for our men’s health franchise. We are excited about submitting the product into the Health Canada review process with a filing planned before the end of 2018.
Finally, with respect to our R&D projects, as I noted earlier, we are actively looking at moving several projects forward whether through our own internal capabilities or through partnership opportunities that may present themselves. These are the three main areas that are high priority for us over this next 6 to 12-month period.
WSA: What are some of the key factors, Ed, that you feel make Acerus unique from some of the other players in the sector?
Ed Gudaitis: Four key factors that make Acerus unique come to mind. Number one, with NATESTO we have a proven ability to take a product through R&D, through regulatory approval, not only in Canada but also with the FDA and to commercialize it not only in North America but also through partnerships around the globe. We’ve shown that we can develop and commercialize a product as a global asset.
Another key driver for value will be the buyout deal with Mattern as it will improve our economics on NATESTO. It will give us more margin to operate with, which will help us to drive operations and to move shareholder value forward.
Another area of unique advantage for Acerus is our R&D platform, leveraging both the Nasal Gel technology through known regulatory and clinical pathways. We are looking at taking compounds with existing clinical profiles and known regulatory pathways and improving upon the delivery of these molecules. We certainly see this as an opportunity to lower the risk on our R&D, while still capturing value for us as we go forward.
Our final advantage is the quality of our management team. I’ve recently joined the organization after 20 plus years, both in the Canadian and US healthcare business with companies like Gilead Sciences, Hoffmann-La Roche and Allergan. My management team has a significant degree of experience with a mix of large or small company experience on the commercial, R&D and finance side.
It is a new team here at Acerus and I think we’re poised and ready to take this company to the next level. Our goal is to make this company a shining star of the specialty healthcare business. While we are Canadian-based, we have a global ambition and a global footprint. I think this is a good time as the stock is beginning to show a rebound off some lows over the last six months. Good momentum is building for us with a good future and a good investment thesis moving ahead.
WSA: Sure, and as far as investors and the financial community, what are some of the key drivers that you wish that perhaps they better understood about you guys?
Ed Gudaitis: As far as key drivers go, there still is a significant market potential for us on our core asset, NATESTO. We continue to make prudent investments into the brand and we are confident that we can deliver a strong and growing commercial opportunity. We compete in the topical testosterone therapy segment which is a $1.5 billion US dollar opportunity in the US and a $50 million US dollar opportunity in Canada.
On the R&D side of the business, we’re looking at opportunities where we can leverage our existing nasal gel technology and regulatory pathways that currently exist to improve on know molecules.
We hope to start showing EBITDA positive returns in the next 12 to 18 months and we hope to be able to show progress behind our R&D initiatives in coming months.
WSA: Certainly, so once again joining us today is Ed Gudaitis, the CEO for Acerus Pharmaceuticals, which as mentioned at the top trades on the Toronto Stock Exchange, ticker symbol, ASP and over the counter, TRLPF, currently trading at 28 cents a share US, market cap is about $60 million US. Before we conclude here, to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?
Ed Gudaitis: I believe in the fundamentals behind Acerus for a couple of reasons. First, I think the stock price is moving in the right direction. As I said earlier, we are now establishing ourselves as a global player in the testosterone therapy market. Some existing competitors have withdrawn from that market or some key brands have or are about to go generic. We think there’s opportunity for us to capture some significant market share in this market with NATESTO.
On the R&D front, we are leveraging our nasal gel technology to pursue concepts that follow a similar path to our approach to testosterone. We’ve announced in Q4 of last year the launch of a cannabinoid initiative to investigate if we can leverage our nasal gel technology to pursue cannabinoids in areas of unmet medical need.
Finally, I believe that we have a strong management team in place to lead Acerus going forward. I believe that the combination of all of these factors make Acerus worth a look as a potential investment opportunity.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress. I we’d like to thank you for taking the time to join us today Ed and update our investor audience on Acerus. It’s great having you on.
Ed Gudaitis: Thank you very much for the opportunity, looking forward to talking to you in the future.
