Edward M. Cox - Vice President of Corporate Development & Investor Relations Richard W. Pascoe - Chief Executive Officer and Director Steve Martin - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer

Jason N. Butler - JMP Securities LLC, Research Division William Tanner - Lazard Capital Markets LLC, Research Division Scott R. Henry - Roth Capital Partners, LLC, Research Division

Greetings, and welcome to the Apricus Biosciences, Inc. First Quarter 2013 Financial Results and Highlights Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Edward Cox, Vice President of Corporate Development. Thank you, sir. You may now begin. Edward M. Cox: Good morning, and thank you for joining us today. I am Ed Cox, Vice President of Corporate Development here at Apricus Biosciences. With me at Apricus is our Chief Executive Officer, Rich Pascoe; along with Steve Martin, our Chief Financial Officer; and Randy Berholtz, our Executive Vice President and General Counsel. During today's call we will review recent corporate events, discuss first quarter 2013 financial results and recap the company's upcoming milestones, after which, we will open up the call for questions. Let me remind everyone that during today's conference call, the management team will be making forward-looking statements regarding future events or the future financial performance of the company. Please keep in mind that such statements are predictions based on current expectations and actual results could differ materially. You should refer to our most recent filings with the Securities and Exchange Commission for additional discussions on factors affecting our business. With that, I will turn the call over to Rich Pascoe. Rich? Richard W. Pascoe: Thank you, Ed, and good morning, and thank you, all, for joining us today. At the beginning of this year, we announced a more focused corporate strategy centered on the creation of long-term shareholder value through the continued development, regulatory approval and commercialization through strategic partnerships of our lead products, Vitaros and Femprox. The main tenets of our recalibrated corporate strategy are as follows: First, gaining regulatory approval in Europe for Vitaros in the first half of this year and supporting our strategic partners in their efforts to commercialize the product in their respective territories. Second, securing additional Vitaros partnerships in Europe, following approval. Third, advancing the Femprox development program with the goal of having a comprehensive product plan and confirming the Femprox regulatory pathway in 2013. And finally, the divestiture of our noncore assets. I would like to cover each of these items in more detail, starting with Vitaros. As you know, Vitaros is our lead product candidate for the treatment of erectile dysfunction, which utilizes alprostadil and our proprietary permeation enhancer, DDAIP, in a novel, topically applied formulation. Vitaros is approved as a first-line erectile dysfunction therapy in Canada and we are currently awaiting a decision regarding the approval of Vitaros in Europe via the European Decentralized Procedure with The Netherlands serving as the Reference Member State or RMS. In April of this year, Apricus Bio, in consultation with our European commercialization partners, submitted to the RMS a response to the Day 120 List of Questions. This week, which marked day 180 of the regulatory approval process, the RMS confirmed that the major nonclinical, clinical and clinical safety issues outlined in the Day 120 List of Questions have been resolved. And while the regulatory review process is ongoing, we remain in active dialogue with the RMS on remaining matters, including -- included in the Day 180 response. We believe that the marketing approval process for Vitaros in Europe remains on track for an approval decision on Day 210 of the process, assuming there are no other interruptions in that process. If Vitaros is approved by the RMS, our commercialization partners will commence with the national phase approvals in their respective territories. Once these approvals are secured on a country-by-country basis, marketing of Vitaros can then be initiated in each country by our partners. We have Vitaros partnerships established in key markets including the United Kingdom, Germany and Italy, with additional partnership discussions ongoing. In Europe, existing ED products generated over $1 billion in sales last year and Apricus believes that a significant portion of the market remains untreated or undertreated, which represents a significant commercial opportunity for Vitaros. As a result, interest in Vitaros remains strong in many of the unlicensed territories, and we intend to pursue additional partnerships for Vitaros as our regulatory milestones unfold. Once launched, Vitaros will become the first new and novel erectile dysfunction product in nearly a decade. And similar to Viagra, Cialis and Levitra, we believe it is well positioned for commercial success. This is due to a product profile that addresses a large number of patients who cannot or do not respond well to existing medications are untreated or undertreated, or who are intolerant of the systemic effects of the PDE5 inhibitors, such as Viagra. As previously noted, Vitaros is approved in Canada, and Apricus has licensed the rights to Abbott Canada for commercialization of the product in that territory. Abbott remains fully committed to the successful launch of the Cold Chain version of Vitaros in Canada in the shortest timeframe possible. Abbott is working with our contract manufacturers to optimize the product's shelf-life period, which is driven by specifications that are applicable only to the product that will be sold in Canada, prior to launching the product in that market. As a result of these ongoing developments, Abbott has confirmed that a Vitaros launch in Canada in the first half of this year will not occur. Now I would like to turn our attention to Femprox. Femprox is our topical alprostadil and DDAIP cream for the treatment of female sexual arousal disorder, or FSAD. To date, we have completed 7 clinical studies with Femprox, including a 100-patient Phase II study in the United States, a 400-patient Phase III study in China. The data generated from these studies strongly suggest that Femprox has the potential to effectively treat FSAD across a broad patient population. Moreover, we believe that Femprox could be the first and only on-demand treatment approved for FSAD as there are currently no products approved for this condition and where estimates of the market size are on par with that found in the erectile dysfunction market. Femprox is unique among its competitors in that it has a direct and localized mechanism of action. The limitations for other company's products in this space have been largely related to the systemic presence of drug, almost always either hormone-based or SSRI inhibitors, or [ph] To very high placebo response rates. We believe that Femprox has distinct characteristics including its topical delivery and a mechanism of action, which is unique, separated from other development candidates on several levels, including those mentioned above. Looking forward, we will continue to advance the Femprox development program in close consultation with our clinical and regulatory advisors. Our near-term goal is to finalize our Femprox product plan and to see confirmatory regulatory guidance from the U.S. FDA in the form of an end-of-Phase II meeting. Finally, I'd like to make a few remarks about the disposition of our noncore assets. In March, we announced that we would cease financing our French subsidiaries, Finesco, Scomedica and Nexmed Pharma SAS. Since our acquisition of these subsidiaries changed -- excuse me. Since our acquisition of these subsidiaries, changes in the French drug reimbursement environment, which strongly favored generic pharmaceuticals, led to an unforeseen loss of contract revenue and a substantial reduction in the unit's value potential. After performing an in-depth cost benefit analysis and evaluating strategic options, the Apricus Board of Directors determined that it was in the best interest of the company and its shareholders to cease financing these subsidiaries, a process which resulted in the President of the French subsidiaries to initiate judicial bankruptcy reorganization of the French subsidiaries in March of 2013. In April of this year, 2 of those subsidiaries, Finesco and Scomedica, entered into a bankruptcy liquidation, which should last from 6 to 24 months. The remaining entity, Portalis, remains in the reorganization process. All 3 of these subsidiaries are being deconsolidated from the company's financials in the second quarter of this year. Following that, in April, we announced the sale of Totect to Biocodex U.S.A, for which we received an upfront payment and are eligible to receive royalties on net sales through 2016. At the same time, we also announced the divestiture to Mist Pharmaceuticals of NitroMist. We are pleased to be able to sell these products for an amount which was in line with their original cash cost. With the sale or discontinuation of these noncore assets and streamlining of our operations, Apricus is now fully focused on the development and commercialization of Vitaros and Femprox. I would now like to turn the call over to Steve to review the first quarter financials. Steve?

Thank you, Rich. The following is an overview of our first quarter financial results. For the period ending March 31, 2013, we had total revenues of $1 million, an increase of $0.2 million compared to $0.8 million for the same period in 2012. The increase is primarily due to new revenue from contract services related to our French subsidiaries of $0.9 million, which have been included in our statements of operations beginning in July 2012. The increase in contract services was partially offset by a $0.6 million decrease in license fee revenue. In the first 3 months of 2012, we recognized upfront fees from Sandoz in the amount of $0.7 million. We did not have any new license fee revenue during the first 3 months of 2013. As Rich indicated, we are pursuing additional license fee revenue for unlicensed Vitaros territories and expect that to be part of our cash inflows in the future. In April 2013, we will deconsolidate our French subsidiaries from our continuing financial results as a result of the entities' entering into a liquidation process. And as such, we do not expect to have significant revenues from contract services in the future. We expect our cash inflows during 2013 will be from licensing and milestone revenues received from commercial partners for our Vitaros products. The timing of these revenues are uncertain. As such, our revenue will vary significantly between periods. Research and development costs for the first quarter were $1.4 million, an increase of $0.2 million compared to $1.2 million for the same period in 2012. This increase is primarily attributable to an increase in costs associated with our regulatory filings in Europe and an increase in expenditures for our development pipeline, including Vitaros manufacturing and development activities. In 2013, we expect to see an increase in research and development spending and we continued to support regulatory filings across Europe for Vitaros, develop the next generation of Vitaros and enter into clinical development and clinical trials for Femprox. General and administrative expenses for the first quarter were $3.8 million, an increase of $0.6 million compared to $3.2 million for the same period in 2012. The increase was due to $0.9 million in general and administrative expenses associated with our French subsidiaries. This increase was partially offset by $0.3 million attributable to reduced operating -- reduced consulting services, reduced personnel costs and reduced depreciation expense. As a result of the deconsolidation of our French subsidiaries in April of 2013, we expect to see a reduction in our level of G&A going forward. We continue to reduce and closely monitor our operating costs as we move towards commercialization of Vitaros in Canada and Europe. Our net cash used in operating activities was $6 million of the 3 months ended March 31, 2013, which will be reduced substantially for the remainder of 2013, with the narrowing of our focus on the core development of opportunities of Vitaros and Femprox. As of March 31, 2013, we had cash and cash equivalents totaling $14.1 million compared to $15.1 million at December 31, 2012. In March of 2013, we completed the sale of our New Jersey -- New Jersey real estate facility, which provided net cash proceeds of $3.6 million. In addition, the sale of the Totect product to Biocodex realized $1.5 million in upfront cash. We believe we have sufficient capital and access to capital to achieve our current initiatives and growth plans. With that, I'll turn the call back over to Rich. Richard W. Pascoe: Thank you, Steve. With a focused strategy and a streamlined business, Apricus is well positioned to fulfill its vision of becoming a leader in the development and commercialization of innovative products that improve sexual health. We've made great progress in the recent months towards that goal. And we have a number of important milestones coming out throughout the year and beyond that we believe will help us to realize that vision and importantly, to build value for our shareholders. These include: an approval decision for Vitaros in Europe, which is a large market, roughly $1.2 billion and we expect that milestone to be achieved towards -- in the first half of this year; Clarity on the regulatory pathway for Femprox from the FDA and the completion of a comprehensive product plan for Femprox; the commercial launch of Vitaros by our existing strategic partners and the signing of additional partnerships for Vitaros, as well as other pipeline products in major global markets. With that, we'll now open the call up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Jason Butler with JMP Securities. Jason N. Butler - JMP Securities LLC, Research Division: First question on Vitaros in Europe. Could you maybe characterize what the remaining items are in the 180 day letter from the Reference Member State? And then are you currently in a clock-stop period for the EU review? Richard W. Pascoe: Jason, this is Rich. I'll answer the last part first. No, we are not in a clock-stop situation with the review. The review is ongoing and we anticipate that the approval decision will occur in the first half of this year. The remaining issues that are being discussed with the agency, I cannot provide any detail on that because it is an ongoing dialogue. But I will reiterate that the agency has confirmed with us that the major issues that relate to the clinical safety and nonclinical items, which are the key items that we believe give us confidence that we can see an approval decision on or around Day 210. And so at this point, we will continue to have an active dialogue with the agency, as you normally do in this type of situation, and we are optimistic that the approval decision is moving in the right direction. Jason N. Butler - JMP Securities LLC, Research Division: Okay, great. And then just on Abbott and Vitaros in Canada, you said there was something specific about the formulation in Canada Abbott were working on. Can you maybe just give us a little bit of color about that? Or, if not, at least give us some color why that is not applicable in Europe? Richard W. Pascoe: Certainly. First of all, there's not a difference in formulation, necessarily. The -- each country's regulatory authorities when they approve a product such as ours will set certain specifications and limits on manufacturing. And just to sort of oversimplify it, in this case, when the specifications for active ingredient or inactive ingredients are set on a very narrow range or the limits, in particular, the lower limits are set at a lower level that is potential higher than they might be somewhere in some other country, that relates directly to the amount of shelf life one can achieve with the product. So in Canada, their specifications are much more stringent than they are in other territories, such as Europe. And I think just to maybe put it into perspective, when you compare the specifications for the Canadian product to the specifications for the European product, you are able to achieve, roughly, a doubling in shelf life from what is available in Canada to what will be available in Europe. So this is a specification issue that Abbott is working with or working through. They're working with their contract manufacturing partner, and they continue to be focused on getting the product into the market as soon as possible. But they are also very cognizant and aware of the fact that they need to launch the product with confidence. And that's what they're working through right now. Jason N. Butler - JMP Securities LLC, Research Division: Okay, that's helpful. Just last question on Femprox then. Can you give us any more guidance in terms of the timing of an end-of-Phase II meeting? Or talk about the steps that you're going through now before filing or requesting that meeting with FDA? Richard W. Pascoe: Yes, I'll talk about the steps. We have been working very diligently over the last 6 months developing our Phase III strategy protocols and the like. This is an area of medicine where we're fortunate to have extraordinary relationships with the KOLs and their -- our advisory board. It's a bit of a Who's Who within the field. And so we're interacting and had been interacting with them at every level and every step along the way to ensure that the package we put in front of the FDA is a package that will achieve our goals. From a timing perspective, I would say we are down to the short strokes in terms of the request itself. Normally the request takes several months for the FDA to actually conduct the meeting. But in this case, I would say that we're close in terms of the timing of making that request to the FDA to have the end-of-Phase II meeting. Jason N. Butler - JMP Securities LLC, Research Division: Okay, great. Just one last question. This is for Steve, sorry. Does the delay in Canada impact your budgeting in any way for 2013 in terms of -- does it impact your expectations for royalty revenue coming in?

Jason, as you know, in the first year of a launch, the sales are nominal, then they grow from there. So we are going to be receiving royalties on revenues from Abbott, as well as all of our other partners in a trailing quarter basis. So it has a very minor impact in 2013. Of course, the sooner Abbott is on the market, the better for them, of course, for us. But it has a minor impact in '13.

Our next question comes from the line of Bill Tanner with Lazard Capital Markets. William Tanner - Lazard Capital Markets LLC, Research Division: Rich, just on the Vitaros with Abbott. How much of the specification was that a surprise to Abbott relative to what they're contemplating, at least on the outside. Richard W. Pascoe: Well, the specification, Bill, is set by Health Canada. And so from that perspective, the specifications are known. The issue here is not whether this product can be manufactured successfully. It can. We know that. We've, as I think you know, we've received milestone payments from Abbott related to that activity. This is about Abbott's decision to optimize the shelf life for a Cold Chain product in a way that they believe is appropriate for their launch. And so they're working within those specifications to achieve their goal. The other entities that are available to them would obviously be to petition the Health Canada to expand those specifications or maybe align them with the rest of the world, which is something that is potentially under consideration. So this is more about them making decisions on launch that relate to their own criteria. And as we've noted several times in the past, this is Abbott's launch, it's their decision, it's their product. We can assist them with advice. But at the end of the day, they're in complete control of that decision. William Tanner - Lazard Capital Markets LLC, Research Division: Right. I mean, I guess the point my question is, if this was not -- I mean, if this was something that they've contemplated potentially happening, it's not a surprise. So one would think that they're still committed to commercializing the product. But this is a wrinkle that was unforeseen. Richard W. Pascoe: Yes, I can state unequivocally, they're committed to commercializing this Cold Chain version of the product. We've had a very good relationship with Abbott over the course of our partnership. They've been very, very forthcoming with us here with what their plans are for the product and their commitment to the product. And they have confirmed that commitment to us repeatedly. And so I have no doubt that they are working through this at a very brisk pace and they're looking for solutions and they have to, again, satisfy their own internal requirements for this product to be launched. William Tanner - Lazard Capital Markets LLC, Research Division: Sure. And then, so what is the expectation, I guess, on Apricus' part of the communication with Abbott? And then, what should our expectation be on the street in terms of how Apricus is going to be relaying that? And I'm sure on a real-time basis. I'm sure some things are more material, but just what's the -- how should we be thinking about the tempo of updates? Richard W. Pascoe: Well, it's been my practice, since coming into this position roughly 2 months ago, to not make any forward-looking statements regarding the timing of launch. But to report to the market what we know and to do that in a timely fashion. And so this is what we know today. I have committed to all of our partners, including Abbott, that we will take their cue from the perspective of reporting out any developments on this or anything else related to Vitaros or our other products, even to include Femprox. William Tanner - Lazard Capital Markets LLC, Research Division: Okay. And then on Vitaros in Europe, the 210 day, what is the date of that roughly? Richard W. Pascoe: We haven't specified dates. But it's fair to say that Day 180 occurred earlier this week. And so roughly 30 days from there. I'm always reluctant to quote a specific date because the agencies don't always meet those dates. Having said that, The Netherlands, which is the Reference Member State here, has been pretty consistent coming in, in or around the time lines that are provided. And I guess, that's one of the benefits of working with Europe is that there's a little more certainty around it. Again, I'll come back to the Day 180 response we received, which, just as a reminder to everyone, is a response to the questions that are presented to the company on Day 120, which is a key set of questions to address. In this response, they acknowledged that the key functional areas of clinical safety and nonclinical, which are sort of the big 3, have all been resolved. And again, we are confident that the procedure will stay on track and that we'll have an approval decision here in the first half of the year. William Tanner - Lazard Capital Markets LLC, Research Division: And then as it relates to the other partnerships with other countries in Europe, is it fair to say that once the drug has received some European approval that the pace of the partnership discussions would pickup. Is that fair or not? And then, can you give us a sense what the other partners in -- or the partners in other countries, would they be new partners or expanding existing partnerships? Richard W. Pascoe: Yes, that's a great question. And there are really 2 work streams that are ongoing right now as it relates to Vitaros in Europe. Obviously, the approval process, which involves our existing partners, Takeda in the U.K., Sandoz in Germany, Bracco in Italy. And I'll say all 3 have been superb in terms of working with us very closely on these responses that I just referred to and deserve credit for the progress we've made so far. We will be obviously working very closely with them on the regulatory front once, assuming the product is approved on Day 210, to move forward in their efforts to push the national phase approvals and ultimately, see the drugs approved in their respective territories. The other work stream, which you're referring to, is the -- our partnering efforts. We are poised to accelerate that process with the approval decision and thus, suffice it to say that there's interest from parties that we are not licensed -- have not licensed a product to and we expect that interest will grow.

Our next question comes from the line of Scott Henry with Roth Capital. Scott R. Henry - Roth Capital Partners, LLC, Research Division: I think a lot of my questions have been asked. Well, for starters, is your 10-Q available yet? I just went on your website and I haven't located it.

Scott, it will be up this morning. We reversed the order of it today because of the idea that be on the call early with investors. So we'll have the 10-Q out shortly. Scott R. Henry - Roth Capital Partners, LLC, Research Division: It does make it a little more challenging to have the call without the 10-Q.

[indiscernible] sort of give you the key financials information. But we'll have it to you shortly. Scott R. Henry - Roth Capital Partners, LLC, Research Division: Shifting gears, in terms of the end-of-Phase II meeting on Femprox, do you think you could have that done in the third quarter? Or is that a fourth quarter event? Richard W. Pascoe: Scott, it's our goal to move that process forward as -- in the shortest timeframe available to us. It will clearly be done we -- in 2013. And the earlier in '13, the better. We are at the mercy of the agency, as you are well aware, so that when we make the request, it's really their time line and schedule that we have to work through and work around. As soon as we've made the request to the agency and we have a date that's been secured, then we can come back and update folks shortly thereafter. Scott R. Henry - Roth Capital Partners, LLC, Research Division: Okay, that's actually helpful. And then if I recall and I know some of these questions have been asked and maybe I'm just asking it in a little in a little different way, but there had been a target of out-licensing Vitaros to other partners in Europe in some of the countries that are not already accounted for. Could you give any thoughts on to the timing of when you may construct additional partnerships? I guess, at this point it will probably be post approval. Is that fair to say? Richard W. Pascoe: Yes, Scott, and that is a great question, a great nuance in that we firmly believe that the opportunity to successfully license the product in these unlicensed territories, not just in Europe, but outside of Europe, potentially Latin America and Asia Pac and the like, is enhanced or will be enhanced with a European approval in hand. And so we are ready to launch that process and the activities surrounding the partnering will be essentially working in parallel with the regulatory milestones being achieved. Scott R. Henry - Roth Capital Partners, LLC, Research Division: Okay, that certainly makes sense. Final question, and again this may have been asked in different ways as well. But I guess I'm just trying to look for a big picture view in terms of the launch of Vitaros in Canada. When Abbott comes to you and says they're going to delay the launch, do you look at these as short-term issues or longer-term issues? I mean, are these specifications anything that will have to be resubmitted to the Canadian agencies? How should we try to at least get a ballpark idea of what kind of timeline delays we're thinking about here? Richard W. Pascoe: Yes, Scott. I think there are 2 approaches here that one can take and I'll just sort of speak generically, not just about this situation, but generically. That is you can work within what the regulatory authorities give you or you can seek to change those specifications in a way that benefits you. Abbott has been, I think, very thoughtful in what they have -- the position that they've taken thus far in working within the specifications. And should they choose to petition Health Canada for any changes of those specifications and, of course, that brings along with it a regulatory timeline that could extend that. So it really comes down to what Abbott's intentions are. We will share what we can share when Abbott tells us what their intentions are. But up until that point, we can only support them and reaffirm what we've said today, which is that no matter which direction they choose to take, the product will not launch in the first half of this year.

[Operator Instructions] It appears there are no further questions at this time. I would like to turn the floor back over to Mr. Pascoe for any concluding remarks. Richard W. Pascoe: Thank you, operator, and I'd like to thank the entire Apricus team for their ongoing efforts in streamlining our strategic focus and achieving our corporate goals. This team is highly committed to seeing Apricus become a market leader in male and female sexual health. I want to thank you all, on the phone, for joining us. And as always, if you have any questions, please do not hesitate to contact the company directly. And again, thank you for your time today.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.