Angeli Kolhatkar - Arecia Advisors Rich Pascoe - CEO Catherine Bovenizer - Chief Accounting Officer Barbara Troupin - Chief Medical Officer

Scott Henry - ROTH Capital Juan Noble - Taglich Brothers

Greetings, and welcome to the Apricus Biosciences' Fourth Quarter 2014 Financial Results and Corporate Update Teleconference and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Angeli Kolhatkar. Please go ahead, ma'am.

Good morning, and thank you for joining us today. I'm Angeli Kolhatkar with Arecia Advisors. With me today from Apricus is Chief Executive Officer, Rich Pascoe; Chief Accounting Officer, Catherine Bovenizer; and Chief Medical Officer, Barbara Troupin. During today's call, Rich will review the company's progress in the fourth quarter, and for the year ended December 31, 2014. Barbara will discuss our product pipeline, and Cath will provide an overview of the financials. We will then open up the line for question. I'd like to remind everyone that certain information discussed on today's conference call is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act, and that during today's conference call, management will be making certain forward-looking statements regarding future events or future financial performance of the company, including statements related to expectations around the timing for commercial launch of products, business development plans, and objectives such as out-licensing and acquiring products and product candidates, [indiscernible] raise capital, expected use of cash reserves, and the development of the company's product pipelines with second-generation products and other product candidates. Such statements are predictions based on current expectations, and actual results could differ materially. Please refer to our most recent filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K, which will be filed later today for additional discussions regarding these and other risk factors that may affect our business. These documents can be found on the company Web site at www.apricusbio.com. Apricus' earnings press release for the quarter and year ended December 31, 2014, crossed the wire earlier this morning, and can also be accessed on the company's Web site. I will now turn the call over to Rich Pascoe. Rich?

Thank you, Angeli, and good morning, and thank you all for joining us on the call today. When I joined Apricus Biosciences almost two years ago to the day, it was a much different company than the one we see today. We had only one value-creating asset, Vitaros, no prospective development candidates in our pipeline, a sub-$100 million market cap, and a host of legacy issues that we needed to overcome in order to properly grow. Fast-forward one year later and you will find that we have created meaningful shareholder value in several ways. Our flagship product, Vitaros is on the market and generating revenue in Europe. We are actively enrolling a Phase 2a clinical trial for patients with secondary Raynaud's phenomenon with RayVa, an internally developed product candidate. We are driving towards the start of a Phase 2b trial for men with secondary hypogonadism with fispemifene, a multi-indication men's health product candidate we in-licensed last October. We enhanced our Board and senior management team. We have increased institutional holders in Apricus with an $11 million financing, led by Sarissa Capital. And importantly, we have substantially increased our market cap to over $100 million. While we are still a relatively small company, over the past year, we believe we have established Apricus Biosciences as an emerging leader in the specialty markets of urology and rheumatology. And as such, we will continue to build upon these accomplishments in 2015 as we concentrate on increasing Vitaros revenue, advancing our development pipeline and creating shareholder value. Turning now to the business; Vitaros, our marketed treatment for erectile dysfunction is approved in major markets in Europe, as well as Canada. In 2014, Vitaros was launched in the United Kingdom, Sweden, Germany, and Belgium. We expect additional launches to follow into 2015 in the remaining countries, where Vitaros is approved. We partnered Vitaros with leading pharmaceutical companies, such as Abbot, Takeda, Sandoz, Recordati, and Majorelle. Moreover, we expanded our exclusive license agreement with Sandoz to cover certain countries in Asia, including Malaysia, Indonesia, and the Philippines. We are currently pursuing additional partnerships for Vitaros in Latin American, and Asia Pacific. While Vitaros is still early in the launch phase, the first launch was in June of last year, the initial sales figures are tracking well above our partner's forecast. Through December 31 of last year, we shipped over 450,000 individual doses to our partners in Europe in support of ongoing planned commercial launches. Even though we're still early in the process, we have seen a rapid uptake in the commercial acceptance of the product with reorders continuing to flow, and importantly, with conformation of product refills, which is one of the key early indications of patient satisfaction. We view these early trends as being very positive, and look forward to our partners' continued efforts to drive prescription and sales growth in 2015 and beyond. While we expect some unevenness in royalty and product revenues, as additional country launches occur throughout this year, we also expect those metrics to smooth out by the beginning of next year, as we anticipate that all countries in Europe where Vitaros is approved will have launched. On the manufacturing front, we have successfully brought on a second supply source for Vitaros at our contract manufacturer, Groupe Parima, located in Canada. They have successfully produced the initial validation batches, all of which met the required release specifications for Europe, and are currently producing multiple commercial product batches in support of additional planned launches by our partners. Turning to our next generation room temperature device development program, we reaffirm our previous target of an expected approval for our Vitaros Room Temperature Device in Europe in 2016. We are also evaluating room temperature device designs that can be used in our pivotal RayVa clinical trials. Our partners and we are very pleased with the launch of Vitaros, and we look forward to its continued success in coming years as a long-term revenue generator for Apricus. We are excited about the potential for RayVa and the kickoff of the fispemifene programs as well. With that, I'd like to now turn it over to our Chief Medical Officer, Barbara Troupin, to discuss those two programs in more detail. Barbara?

Thank you, Rich. In October of last year, we in-licensed the U.S. rights to fispemifene, a novel Selective Estrogen Receptor Modulator or SERM, with solid Phase 2 clinical data, which allows us to build upon our focus of male urologic conditions. Since late last year, we have been active in preparing the clinical path for fispemifene in the United States for the symptomatic treatment of adult men with secondary hypogonadism or low testosterone. To-date, we have successfully transferred the New Drug Application or NDA from Forendo to Apricus, conducted our initial scientific advisory board meeting with leading national experts in the field to solicit their input on our development plans, selected a qualified Contract Research Organization or CRO to manage the trial, completed a thorough selection process to identify qualified clinical trial sites in the U.S., and drafted a clinical protocol, and started the IRB submission process. Additionally, we have consulted with the FDA in order to begin our initial work on the non-clinical program. And we have successfully manufactured the clinical trial materials for the upcoming Phase 2 study. Importantly, we recently met with the FDA and received clear, regulatory guidance as to the core requirements needed to support an approval in our lead indication. More specifically, the FDA provided clarity on clinical endpoints, target population, and safety parameters, all of which we are incorporating into our development program. The FDA also highlighted the areas of unmet medical need in this patient population, along with providing critical input on the selection of appropriate tools for assessing efficacy in men suffering from this condition. As such, we reiterate our previous guidance of initiating the fispemifene Phase 2b trial in the first half of this year, with results targeted for early 2016. In this trial, we will assess the efficacy in a randomized, placebo-controlled parallel arm study of a fixed dose of fispemifene in approximately 160 hypogonadal men, aged 18 to 65, presenting with one or more symptoms that are closely associated with secondary hypogonadism. We will also assess relevant pharmacokinetic and safety parameters to evaluate the effectiveness of fispemifene on increasing testosterone levels, and its safety and tolerability profile. We believe, if successful, this will provide us with a sound rationale for moving fispemifene into later-stage clinical development in this important area of unmet medical need. Given the potential to treat other male urologic conditions with fispemifene, we have begun internal efforts to evaluate its use in potential follow-on indications. The compound's anti-inflammatory effects in the prostate as seen in animal models may provide clinical benefit in conditions such as chronic prostatitis and/or Lower Urinary Tract Symptoms or LUTS. Our goal for this year is to work with our scientific advisors to better understand the unmet needs in these conditions, and to conduct one or more small exploratory studies to establish clinical proof-of-concept to better informed future development. Moreover, we firmly believe that pursuing a multi-indication approach in this development program will further differentiate fispemifene from other SERMs, but also enhance its long-term strategic and commercial value. Turning to RayVa; our internally developed first-in-class product candidate for Raynaud's phenomenon. In early December, we enrolled the first patient in a Phase 2a clinical trial. Raynaud’s phenomenon is a circulatory disorder affecting primarily the hands and feet, and our initial target population is patients with scleroderma, an underlying autoimmune disease. RayVa leverages our DDAIP Permeation Enhancer Platform Technology in combination with alprostadil, a vasodilator and a formulation that is topically applied to affected extremities. The Phase 2a trail is a randomized double-blind placebo-controlled trial in approximately 45 patients with Raynaud’s phenomenon, secondary to scleroderma. Each patient will be randomized to receive one application of placebo and a second application of one of three doses of RayVa in a crossed over design. This dose ranging study will evaluate blood flow and skin temperature changes at the site of application by laser Doppler and thermography following a standard cold challenge. Additional safety endpoints will be assessed as well. We expect to make a go, no-go decision in the middle of this year based on the advice of the data and safety monitoring committee. Assuming positive results, we expect to request a meeting with the FDA in the second half of 2015 with the goal of moving into pivotal trials as soon as possible. The FDA has indicated that RayVA may qualify for priority review, given the unmet medical need and lack of approved products in the U.S. to treat this condition. The FDA would determine if the ReyVa new drug application qualifies for priority review following its submission, which could occur as early as 2017. With that, I will turn the call over to Catherine to discuss fourth quarter and year end financials. Cath?

Thank you, Barbara. We released our financial results for the fourth quarter and full year 2014 with a press release this morning, and we intend to file our annual report on Form 10-K with the SEC later today. Total revenues for the fourth quarter ended December 31, 2014, were $1.9 million compared with $362,000 in the same period in 2013. Revenues in the fourth quarter of 2014 were comprised of $1.5 million in license fee revenue, $371,000 in sales of product to our commercial partners, and $36,000 in royalty revenues. These royalties relate to our product sold by our partners, and are primarily related to the Takeda launch in the United Kingdom in the third quarter. The increase in revenues was primarily due to the recognition of previously deferred license and milestone revenues associated with the Sandoz agreement. Revenues in the fourth quarter of 2013 were primarily comprised of license fee revenues. Total revenues for 2014 were $9.3 million compared with $2.5 million for 2013. Revenues for the full year 2014 were comprised of $8.5 million in license fee revenues, $769,000 in product sales and $36,000 in royalty revenues. The increase in revenue was primarily due to the recognition of license fee revenues associated with the Majorelle, Sandoz, and Recordati agreements. Looking forward to 2015, as Rich previously mentioned, we announced the expansion of our licensing agreement with Sandoz to now incorporate certain Asia-Pacific territories. We will recognize the upfront license fee revenue related to this expansion in the first quarter of 2015. In addition, we expect revenues generated during 2015 will be from licensing, milestones, and royalty revenues received from commercial partners for Vitaros and from sales of Vitaros to license fee partners. The timing of these revenues is uncertain, and as such, our revenue can vary significantly between quarters. As a reminder, product sales of Vitaros are generally recognized in the period in which the product is shipped. Through year end, we've recognized all product sales with the exception of a $132,000 of sales for previously delivered product, for which we’re waiting confirmation from the licensor that the product [indiscernible]. As Rich previously mentioned, we have shipped over 450,000 individual units to our partners in Europe. We recognize royalty revenues one quarter after our partners sell those units to their customers. Royalties reported in 2014 reflects sales by our partners from their initiation in June 2014 through September 2014, and therefore the amount reported is nominal to-date. While there is a logical connection between our sales of Vitaros to our partners and future royalties from those partners, due to the relatively brief period during which the product has been launched, and due to our partner's control over their respective supply chains, we are unable at this time to provide guidance on future royalties. Having said that, we do expect Vitaros' royalties to be more meaningful in 2015, as sales expand in territories where the product has been launched, and as additional territories begin to market Vitaros. The net loss for the fourth quarter of 2014 was $17.3 million or $0.40 per share, compared to a net loss of $1.3 million or $0.04 per share in the fourth quarter of 2013. The net loss for the full year 2014 was $21.8 million or $0.55 per share, compared to a net loss of $16.9 million or $0.49 per share for the full year 2013. The increase was primarily due to the expense related to the in-licensing of fispemifene from Forendo in October 2014. Total expense related to that transaction was $13.6 million, which includes the value of the cash and shares given to Forendo, the $2.5 million payment due to Forendo in April 2015, and the transaction cost associated with the in-licensing agreement. We ended the year with $11.4 million in cash and cash equivalents, compared with $21.4 million as of December 31, 2013. With our existing cash on hand, the $11 million from proceeds from our recent registered direct equity offering plus the remaining $5 million loan facilities, we believe that we have an appropriate level of cash to support the current operating plans through 2015. We expect to have net cash outflows from operations during 2015 as we progress our Phase 2 development program for fispemifene, develop our Vitaros room temperature device, continue the Phase 2a development program for RayVa, and meet other operating expenses. I’ll now turn the call back over to Rich.

Thank you, Cath. In closing, I want to take just a moment to reflect on the fact that 2014 was truly a transformative year for Apricus, and to acknowledge the tremendous contributions of each member of the Apricus team. I'm proud to work with a group of professionals that is committed to developing products to meet the needs of so many patients. And I'm confident in our team's ability to execute on our growth strategy, and move Apricus to the next stage of clinical and commercial success. With our recent progress, we have seen increased investor interest and confidence in Apricus, which we will continue to build upon as we move forward in 2015. We are off to a fast start this year having already accomplished several key milestones, including the expansion of our Vitaros license agreement with Sandoz into select Asia-Pacific countries, and the $11 million private financing. Looking forward, we anticipate several other value creating milestones this year and beyond, including additional Vitaros European launches, the steady ramping up of Vitaros royalty and milestone revenues, compiling the required stability data for our Vitaros room temperature device, enrollment of patients in, and the completion of the RayVa 2a clinical trial, and the initiation of the Phase 2b clinical trial for fispemifene in the first half of this year; for which we expect top line data early next year. With the achievement of each of these milestones, our goal is to further strengthen our long-term strategic value for the benefit of our shareholders with multiple assets that address significant unmet needs in large and growing markets. Moreover, as we have built a stronger and more investment worthy company, we will continue to operate Apricus with the same level of discipline, creativity, and strategic decision-making that allowed us to truly transform the company last year. As always, we appreciate the support and feedback we receive from our shareholders. And with that, we will now open the call up for questions. Operator?

Thank you. [Operator Instructions] And your first question comes from Scott Henry from ROTH Capital. Your line is now open, please go ahead. Q - Scott Henry: Thank you, and good morning. I guess, just a couple of questions, largely modeling questions; for starters, Vitaros in Canada, any kind of latest thoughts on when that may launch? I mean, is that in middle of 2015, or -- I don't know, nothing hugely material, but it does help for modeling.

Yes, thanks, Scott, it's a good question. So I think as we've expressed before, our strong desire is for our partner there, now Mylan, to launch that product in the shortest timeframe possible. As we've discussed previously as well, Abbott, Canada, which was subject to part of the acquisition that Mylan undertook and closed just recently now has control of that product, and we are not in a position to give any guidance as to when that product may launch. What I do know in talking with them, with the folks in Canada here more recently is that they're going to begin their transitioning process here in the month of April. So, in about two weeks time, they're going to begin to make whatever changes, and affect whatever issues that need to be affected there for all their people and products, and I would expect that out of that discussion and out of that activity, we would learn more. So unfortunately, I don’t have an update for anyone today on Canada, but we'd expect to learn more next month. Q - Scott Henry: Okay, thank you. That's helpful. And keeping on the revenue line, I guess Vitaros, should we expect an inflection point at some point or just steady growth? I'm just trying to think of how we should think about the trajectory. I mean, it clearly sounds like things are going in line to ahead of forecast, so just wondering where we should expect a notable uptake. And also, when I see 360 or 36,000 in royalties, can I just divide that by whatever I think the royalty number is for end user sales?

Well, just a couple of questions there, a couple of things to think about; first is, obviously with additional launches and more products going into Europe with new launches that we expect this year, that will certainly help to grow the product revenue and the associated royalty income that we receive. Reminder to everyone on the call, we are on a one-quarter lag in terms of royalty reporting. So the 36,000 that we reported here today only relate to those sales that were made in the June to September timeframe, and that was predominantly out of one country, that being the United Kingdom, given that Takeda was the first to launch. So over time, we do expect revenues as well as associated royalties to grow. We have already made note that with additional launches coming on board this year that should move up into the right [ph] as you would expect. I think importantly, as Catherine made a note, there is a logical connection between product sales, royalties and the like, but given the different time periods in which we recognize relative to when the sales and royalties are reported, I would caution folks from trying to do too much back-of-the-envelope math at this point. At the end of the day, we are very pleased with what our partners are accomplishing in Europe. Although the products were only launched in four countries, we believe that will continue to grow both in terms of exposure, our product sales, associated royalty revenue. And as also noted, we will continue to look for additional licensing opportunities to add to that revenue stream this year and beyond. I would say that as you think about Vitaros' royalties and revenues going forward, really '15 is where we will see the product we believe fully launched in the countries where its approved, and as we move into next year, that's where we can start to predict with more clarity and more certainty as to what that trajectory looks like. Q - Scott Henry: Okay, fair enough. I guess just final question; looking out to 2015, any thoughts on SG&A and R&D? I imagine SG&A will just kind of slowly drift up, but R&D perhaps, should we expect that to start really ramping in second quarter or just any kind of trajectory there?

Yes, so obviously on the G&A side, we've taken great efforts to try to reduce G&A wherever possible, and I think if you look on a year-over-year basis, we've been able to do that substantially as we were able to move away from some of the past challenges the company had, and really focus in on this strategy of developing assets in the clinic as well as of course tending to Vitaros. R&D, you're correct; we'll continue to grow as we get fully into the fispemifene Phase 2b study, here, first half of the year, evaluate what our needs are for RayVa moving forward, continuing to work on the room temperature development program, and I think as Barbara noted, we'll be initiating some small exploratory studies with fispemifene and other indications. So as we move forward this year and into next year, expect the R&D expenses to go up, but in proportion to the programs that we are running. So we believe with all of that being said, with the cash we have on hand and the access to the loan facility, we have sufficient capital to fund all of that this year. Q - Scott Henry: Excellent. Okay, great. Thank you for taking the questions.

Thank you, Scott.

Thank you. And your next question comes from Juan Noble from Taglich Brothers. Your line is now open. Please go ahead.

Yes. Hi, morning. Just a question on your product sales for the quarter; it looks like if you ship 460 K for the year in doses, you shipped about 280,000 for the fourth quarter, which is a nice sequential step-up. I was just wondering if you can give us some color on this. How many of these doses are consisted of initial stocking of product as opposed to replenishment? [Indiscernible] is also -- I was just wondering, if your transfer price to your partners was stabilized, it look like it was lower in the fourth quarter than it was in the prior one.

Yes. So, thanks for the question, Juan; we appreciate the support. On product sales as noted in the comments, there is some unevenness, I would say that will continue to persist here as countries launch. And so, what you're seeing in 2014, primarily are product sales to our partners who are actually promoting the product, commercializing the product; that being Takeda and Sandoz. And then of course towards the tail end of the year, we saw additional product manufactured and shipped in the countries where there are pending launches. I would say that the majority of the sales that occurred in 2014 went towards the stocking of those launches, but we also have multiple reorders that have been placed and some of which have been fulfilled in those countries where product has actually been marketed and successfully marketed. So it’s a combination of the two, but primarily it's the initial launch quantities. One thing to bear in mind, because of the refrigeration requirements for Vitaros, this is very much adjusting time sort of supply chain in the sense that partners are not able to stock product and have it sitting around on their warehouse shelves for months on end [ph], because of the 18-month shelf life, they have to be very thoughtful about how they manage the supply chain. So we’re not seeing and nor would we expect to see or want to see our partners bringing excessive product into the country. It’s what they’re ordering and what’s being shipped has been moved into the market. And so, we’re seeing a healthy pipeline flow, if you will, from our manufacturers into the European countries, where the product is either marketed or soon to be marketed.

Okay. Now, on the transfer price, Rich has stated -- when will that stabilize? It looks like a drop towards the end of the year.

Yes, there is -- obviously when one is in a launch phase with any product, there is situations that will arise where we have to make certain concessions or considerations to partners on the transfer price. I think as we move forward and we see the volume increase across the board as more countries are launched and as that manufacturing facility or facilities are utilized at their full capacity, then that will smooth out, if you will. And so, on average we're still looking at a very healthy margin on the product, and I would expect as you would imagine as more volume flows through for that to stabilize or even potentially improve.

Okay, that’s very helpful, Rich. Thanks very much.

Thank you, Juan.

Thank you. [Operator Instructions] And I’m not showing any further questions at this time. I would now like to turn the call back to Chief Executive Officer, Rich Pascoe for any further remarks.

Thank you, operator, and thank you all for joining us today on the call. Based on the foundation we put in place in 2014, we look forward to updating you on our commercial progress with Vitaros and clinical progress with fispemifene and RayVa throughout this year. We also hope to see many of you at the Taglich Brothers Conference in the first week of May in New York City. And one additional note, our partners, Recordati, Majorelle, Sandoz, and Takeda, along with representatives from Apricus will be holding a satellite symposium entitled, "A new approach for the patient with erectile dysfunction," on March 21, at the 30th Annual European Association of Urology Congress in Madrid, Spain. The use of Vitaros as the first new topical treatment for erectile dysfunction will be the focus of this symposium, to include a panel discussion with prominent urologists from across Europe. We expect that this will further raise visibility of Vitaros within this medical community. With that, again, I thank you all for your time and attention. Operator, you may now disconnect.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.