Matt Beck - The Trout Group, Investor Relations Rich Pascoe - Chief Executive Officer Barbara Troupin - Chief Medical Officer Cath Bovenizer - Chief Accounting Officer

Scott Henry - Roth Capital Juan Noble - Taglich

Greetings. And welcome to the Apricus Biosciences' Second Quarter 2015 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 be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Beck. Please go ahead.

Good afternoon. And thank you for joining us today. I'm Matt Beck with The Trout Group Investor Relations for Apricus Biosciences. With me today from Apricus is Chief Executive Officer, Rich Pascoe; Chief Medical Officer, Barbara Troupin; and Chief Accounting Officer, Cath Bovenizer. During today's call, Rich will provide a brief overview of the company's progress in the second quarter, as well as more recent events and goals for the remainder of 2015 and beyond. Barbara will discuss the products pipeline and Cath will provide an overview of the financials. We will then open up the line for questions. I'd like to remind everyone that certain financial 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 the commercial launch of products, the timing and outcomes of the clinical trial results and the regulatory approval process of Apricus product candidates, business development, plans and objectives such as out-licensing and acquiring products and product candidates, plans to raise capital, expected use of cash reserves, and the development of the company's products pipeline. Such statements are predictions based on current expectations and the actual results could differ materially. Please refer to Apricus most recent filings with the United States Securities and Exchange Commission, including Apricus annual report on Form 10-K and the quarterly report on Form 10-Q, which was filed earlier today for additional discussions regarding these and other risks that may affect Apricus business. These documents can also be found on the company website at www.apricusbio.com. Apricus' financial results press release for the quarter ended June 30, 2015, crossed the wire earlier today, and can also be accessed on the company's website. I will now turn the call over to Rich Pascoe. Rich?

Thank you, Matt, and good afternoon, and thank you all for joining us on the call today. Apricus continues to make progress towards our key corporate objectives, namely the advancement of our clinical pipeline, commercial growth of our flagship product Vitaros in Europe and improvement of our financial position. On the clinical front, during the second quarter Apricus completed enrollment in our Phase 2a proof-of-concept study of RayVa in patients with scleroderma who also suffer from Raynaud's phenomenon. Also during the second quarter, we announced the enrollment of the first patient in our Phase 2b proof-of-concept trial of Fispemifene in men with symptomatic secondary hypogonadism. Barbara will speak in greater depth about these programs later on in the call. On the Vitaros commercialization front, we continue to witness substantial progress in Europe. According to interim data obtained from IMS Midas, European unit sales of Vitaros in the second quarter were approximately 74,000 units. In comparison, European unit sales in the first quarter of this year were approximately 37,000 units, an increase of over 100% quarter-over-quarter. The primarily driver of this increase was a launch in France, coupled with continued growth in other markets. Please note that the numbers provided by IMS Midas do not include any interim unit information related to Recordati’s launch in Spain. But feedback from Recordati in regards to the launch has been very positive with initial demand far exceeding Recordati’s May and June launch forecast. While we are pleased with the level of commitment to Vitaros shown by all of our commercial partners, both Majorelle and Recordati have again shown that through thoughtful preparation and an aggressive marketing program, Vitaros can generate substantial revenue when physician as a first line choice for men suffering from erectile dysfunction. Looking forward, Bracco, our partner in Italy has indicated that they expect to launch later this year and as such have placed commercial product orders from our contract manufacturer, Therapex, to support that launch. I have personally met with the Bracco commercial team to review their launch plan for Italy and was very impressed with the scope and creativity of their campaign. Following the expected launch in Italy, Vitaros will have been launch in the major European markets and we believe will continue to generate meaningful revenue for Apricus. Finally, we continued to pursue additional partnerships for Vitaros in Latin America and Asia-Pacific. While we cannot predict the timing or the outcome of these efforts, we currently have indications of interest from several parties for these territories as we seek to make Vitaros available globally. We also continue to work with Mylan in Canada where Vitaros is approved, but not yet on the market and Allergan in United States with the goal of making Vitaros available to men suffering from erectile dysfunction in North America. Turning to our next-generation Vitaros Room Temperature Device development program, we reaffirm our previous target of an expected regulatory submission or approval in Europe in 2016. We continued to be pleased with the progress that we have made since the beginning of 2015 and especially in the second quarter. I believe the coming months will be even more exciting as we look forward to reporting topline data from the RayVa clinical trial, continue conducting clinical activities for our Fispemifene Phase 2b program and reporting continued Vitaros successes in Europe. I will now turn the call over to our Chief Medical Officer, Barbara Troupin, for a more in-dept update and discussion on our clinical programs. Barbara?

Thank you, Rich. The clinical development team at Apricus has been very active this year and the second quarter was no exception. We have an expanding pipeline with two highly differentiated clinical stage products, which we believe have significant clinical value and the potential to address unmet medical needs in novel way. We have met or exceeded several development milestones this quarter with more to come in the second half of the year. To begin with, in June, we announced completion of enrollments in the RayVa 2a proof-of-concept trial for Raynaud's phenomenon secondary to scleroderma. As you may recall, RayVa is our internally developed first-in-class product candidate for Raynaud's phenomenon. Raynaud's phenomenon is a circulatory disorder affecting primarily the hands and feet, which leads to pain and impairment in function during these episode and frequently occurs in patients with an underlying autoimmune disease like scleroderma. RayVa leverages our DDAIP Permeation Enhancer technology in combination with alprostadil, a vasodilator and a formulation that is topically applied to affected extremities. This Phase 2a trial was a randomized double-blind placebo-controlled trial in approximately 35 patients. Each patient was randomized to receive one application of placebo and a second application of one of three different doses of RayVa in a crossed over design with each patient serving as their own control. This dose ranging study evaluate blood flow and skin temperature changes at the site of application by laser Doppler and thermography following a standard cold challenge. Additional safety and tolerability endpoints were also assessed. Since that announcement in June, we have completed all clinical activities and are moving towards locking the database to be able to report this data by the end of Q3. So far, based on blinded review of the data, the compound exhibits a very well-tolerated profile with no significant safety concerns. After full review of the data we will prepare for and request guidance from the FDA by the end of 2015 to confirm the regulatory path for subsequent clinical trials so that we can move the RayVA development program forward as soon as it’s practical to do so in 2016. For the remainder of this year, we will need to complete clinical protocol development for at-home dosing finalized the RayVa formulation and delivery system, manufacture clinical trial materials, and complete other critical tasks necessary to initiate and complete the development program. 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 RayVa new drug application qualifies for priority review following its submission which could occurs early as 2017. Additionally, this past May, we began enrolment in our Phase 2b clinical trial for Fispemifene in men with symptomatic secondary hypogonadism or low testosterone. Fispemifene is the first tissue-specific selective estrogen receptor modulator or SERM design for use in men. We in license this novel compound in October of 2014 with solid early Phase 2 data, confirming mechanism of actions and the ability to increase serum testosterone levels. In this trial, we are assessing efficacy and safety in a randomized placebo controlled parallel ARM study of the fixed dose of fispemifene in approximately 160 hypogonadal men aged 18 to 65, who present with one or more sexual symptoms that are closely associated with secondary hypogonadism. Our primary objectives are to quantify and qualify the potential clinical benefit and response seen in sexual systems with fispemifine treatment. We will evaluate relevant pharmacodynamic and pharmacokinetic parameters to assess the ability of fispemifene to increase testosterone levels and will assess other related hormonal measures at secondary endpoints, in addition to continuing to characterize its safety and tolerability profile. At this point, all of our clinical sites are actively enrolling subjects. To date, enrollment is on track with greater than 50% of the subjects enrolled and we expect data to be reported out in the first quarter of 2016. This trial combines our internal strategy, expert clinician advice and clear FDA guidance to help identify appropriate patient population in the clinical endpoints to support regulatory filing and optimize commercial potential. In parallel, our non-clinical CMC activities continue to progress as expected. We believe this study, if successful, will provide us with a sound rationale and robust clinical benefit data from moving fispemifene into later stage clinical development in important areas of unmet medical need. Our strategy for fispemifene is to pursue a multi-indication approach, the mechanism of action in range of tissue specific effects, creates the opportunity for us to assess the potential clinical benefits of fispemifene in additional male urologic conditions. Non-clinical studies have demonstrated anti-inflammatory effects that may benefit patients with conditions such as lower urinary tract symptoms and chronic prostatitis. These indications represent large underserved markets and there are no approved therapies in the U.S. for non-bacterial chronic prostatitis. Given this potential, we have begun internal efforts to evaluate fispemifene’s use in follow-on indications. Our goal for this year is to work with our scientific advisors to better understand the unmet needs in these conditions and to initiate an exploratory clinical study to establish clinical proof-of-concept to guide further development strategies. We firmly believe that pursuing a multi-indication approach in this development program will further differentiate fispemifene from other SERMs, optimize its clinical utility and enhance its long-term strategic and commercial value. We believe this is a very efficient strategy since much of the non-clinical CMC work would translate across programs. A combined and overlapping safety dossier could cover multiple applications and it allows a closer working relationship with urology division at FDA. I’d now like to turn it over to our Chief Accounting Officer, Cath Bovenizer, to review our second quarter and year-to-date financial results. Cath?

Thank you, Barbara. Total revenues for the quarter ended June 30, 2015, were $462,000. Revenues in the second quarter of 2015 were comprised of $387,000 in sales of product to our commercial partners and $75,000 in royalty revenues Total revenues for the six months ended June 30, 2015 were $937,000. Year-to-date revenues were comprised of $350,000 in license fee revenue, a $163,000 in royalty revenue and $424,000 in product sale revenues. For the remainder of 2015, we expect revenues generated will come from licensing, milestones and royalties received from our commercial partners for Vitaros and from sales of Vitaros to our licensee partners. The timing of these revenues is uncertain and as such, our revenue can vary significantly between quarters. As a reminder, we recognize royalty revenues one quarter after our partner sell product to their customers. Royalties reported in the second quarter of 2015 reflect our partners' Vitaros sales in the first quarter of 2015 and therefore, do not include any royalties on sales and territories where product sales have only recently commenced such as in France and Spain. With that in mind, we expect Vitaros royalties to increase in the latter half of 2015, as sales increase in territories where product has been launched and as our products conduct additional commercial launches. Regarding product sales, we continue to transition our commercial partners to a direct relationship with our manufacturers. In particular, Majorelle, our partner in France works directly with our manufacturer to obtain Vitaros. As such, those products sales and cost of product sales do not flow through our P&L. The net loss for the second quarter of 2015 was $5.2 million, or $0.10 per share compared to net income of $1.9 million, or $0.05 per share in the second quarter of 2014. The increase in the net loss was primarily due to the recognition in 2014 of $5.5 million of license fee revenue and increased spending in 2015 on the company’s development programs, largely attributable to the company’s fispemifene and RayVa clinical trials. We ended the quarter with $7.4 million in cash and cash equivalents compared with $11.4 million as of December 31, 2014. Importantly, in July, we pulled down the second $5 million tranche of our existing debt facility with Oxford and Silicon Valley Bank. As a reminder, this $5 million is not included in the June 30th cash numbers. With our cash on hand, access to additional capital under the existing committed equity facility with Aspire Capital and ongoing cash flows from Vitaros, we believe that we have an appropriate level of cash to support our current operating plans into 2016. We expect to have net cash outflows from operations during 2015 and 2016, as we progress our Phase 2b development program for fispemifene, develop our Vitaros room temperature device, continue the development program for RayVa and meet other operating expenses. With that, I'll turn the call back over to Rich for his closing remarks. Rich?

Thank you, Cath. In closing, I want to reiterate how excited we are about the prospects for Apricus in 2015 and beyond. We continue to meet or exceed our key corporate goals and we are well on our way to bringing clinically and commercially relevant products to the market. For the remainder of the year, we look forward to potential value-creating milestones, including releasing data for the RayVa proof-of-concept trial and completing enrollment in fispemifene Phase 2b study in secondary hypogonadism and symptomatic men for which we expect to have data in the first quarter of 2016. Additionally, we expect to provide updates on our exploration of other indications for which fispemifene may be applicable. And on the Vitaros front, we look forward to Bracco’s launch in Italy later this year and to see the results of the commercial efforts by all of our European partners reflected in our third and fourth quarter revenue. 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?

[Operator Instructions] Our first question comes from the line of Scott Henry with Roth Capital. Your line is open. Please go ahead.

Thank you. And good afternoon. I am going to start with a few modeling questions. First, I guess, the product sales number of 387. Is that sort of a bogus supply, or how should we think about that product sales line? Is it just going to be chunky from here, from quarter-to-quarter?

Hi, Scott. It’s Cath. Yes, it’s going to be chunky.

Yes. Scott, I think as we described last quarter, as we sort of transitioned away from this, what I’ll call middleman position in terms of supplying product on behalf of our partners with either Parima, Therapex doing the work. In the future, we expect that our partners will continue to fully transition over to a direct relationship. So for example, all of the batches that were produced to support the launch in France, the Majorelle which were substantial I think something on the order of about 20 batches. There have been shift into the country there. None of that flowed through our revenue or in this Q.

Okay. And I guess maybe the [indiscernible] I guess the royalties, I mean it sounds like the volume is doubling quarter-over-quarter, but Vitaros royalty line actually went down slightly in 2Q. Should we expect that to normalize and start to see upward trend in third quarter?

This is Cath. Yes, we would expect to see an increase in what we report in Q3 for those Q2 sales, and then we would expect in Q4 that we would see knockdown with a further increase once Spain and France are fully launched for the fourth quarters.

And Scott, just as a follow-up on that. For example, the second quarter numbers we reported here the over 100% increase quarter-over-quarter that included just one month of sales in France, that’s the June numbers in France. So it is not inclusive of anything that happened in the quarter prior to for France. And then, as noted in our comments, the numbers in Spain had not been accurately collected by IMS and we are relying upon the IMS data. We do know anecdotally from our conversations with Recordati that their May and June numbers from their own internally reported sales were quite impressive. So we would expect that as we continue through this year and into next, as we described before, that we will see an increase quarter-over-quarter in Vitaros sales and the royalties reflected in those numbers.

Okay. And just final income statement question. License fee milestone revenue, should we see that surface again in the second half? And as well the $578,000 other income, is there something going on there, or how come that jumped up?

Say the $578,000 other income, that’s related to the mark-to-market adjustment on the warrants, the outstanding warrants that we have. So depending on, that will move in relation with the stock price. So could not tell you, if that’s going to be expense or net income.

And on the milestone question, we’ll continue to monitor performance. We certainly expect milestones for sales marks being achieved throughout the course of the time the products on the market certainly more so next year than this. And as we’ve also mentioned on in the comments today, we’re still very active on the licensing front. And so, we expect that there is the potential for some additional non-diluted capital that come into the company through those efforts.

Okay. And then just one question on the pipeline. With regards to the RayVa data in Q3 and obviously, we’re in Q3 and we’re already pretty well into it. Do you expect that in September or August? Just trying to fine-tune when we should look for that data?

Yes. Our prediction, we’re still working on the processes getting all of that close down into a format that we get unblinded data, but you’ll hear about that later in the quarter.

Okay. Thank you for that color. And I think that’s all for me right now. Thank you for taking the question.

Thank you, Scott.

Thank you. [Operator Instructions] Our next question comes from the line of Juan Noble with Taglich. Your line is open. Please go ahead.

Yes, hi. Good afternoon. Nice quarter, guys. Good progress on Vitaros. Most of my questions are actually being answered. But I was curious about your cost of product sales number, 509, seems a little odd. I was wondering if you could give me some color on what that consisted of.

We had some lumpiness in the batches that went out during the quarter, so it’s the cost of manufacturing. There is a small amount of manufacturing overhead that rolls in there and there is some product samples that roll in there as well.

And Juan, this is Rich. I think to --- similar to the royalty discussion that we had, there is not a perfect alignment in terms of timing, when product is manufactured, shipped and then it is -- the possession of that, the ownership of that is taken by the partner. And so what you may see manufactured and reported on one quarter may actually not be reflected in terms of the actual product sales until the next quarter. So, we’re continuing to update that. In over time, I think you’ll see it smooth out but with the product launches that we’ve been providing product, for example the Recordati, this past quarter for their launch in Spain for the ongoing efforts by Takeda and Sandoz in other territories. You’ll see that there is not always a perfect alignment between the activity, the manufacturing and the cost of that relative to the time that we get paid for it.

Okay. So basically, some of the costs are showing up on the P&L before the revenue hits.

In some circumstances and others as Cath pointed out, there were samples and other things that….

Okay.

….that create that dynamic.

Okay. Got you. Thank you.

Thank you. And that does conclude the Q&A portion of today’s conference. I’d like to turn the call back over to Richard Pascoe, Chief Executive Officer, Secretary and Director for any closing remarks.

Thank you, Operator. And thanks to everyone on the call today for listening-in. We hope to see some of you in Boston, when we present at the Canaccord 35th Annual Growth Conference, which will occur on August of 12. And likewise, we also hope to see some if not all of you in New York, when we present at the Rodman & Renshaw Annual Global Investment Conference later in September. Thank you. And Operator, you may now disconnect.

Thank you, ladies and gentlemen for participating in the conference today. It does conclude today's program. You may all disconnect. Everyone have a great day.