Brian Korb - The Trout Group, Investor Relations for Apricus Biosciences Richard Pascoe - CEO Kelly Deck - Director of SEC Reporting

Greetings, and welcome to the Apricus Biosciences Fourth Quarter and Full Year 2016 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, Brian Korb. Please go ahead.

Good afternoon and thank you for joining us today. I’m Brian Korb with The Trout Group, Investor Relations for Apricus Biosciences. With me today from Apricus is Chief Executive Officer, Rich Pascoe and Director of SEC Reporting Kelly Deck. During today’s call, Rich will provide a few brief review of the Company’s progress in the fourth quarter and to review the corporate roadmap for the remainder of 2017. Kelly will briefly review our 2016 financial results. We’ll then open the line for questions. I'd like to remind everyone that certain information discussed on today's call is being covered under the Safe Harbor provisions 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 relating to the timing and outcomes of the U.S. regulatory approval process for Vitaros, business development plans and objectives such as out-licensing for RayVa outside of the U.S., the company’s commitment provides transition services to Ferring, expected uses of cash reserves, and the development of the company's products pipeline. Such statements are predictions based on current expectations and actual results could differ materially. Please refer to the company's most recent filings with the Securities and Exchange Commission, including Apricus's Annual Report on Form 10-K which was filed earlier today for additional discussions regarding these and other risks that may affect our business. These documents can also be found on the company's website at www.apricusbio.com. Apricus's financial results press release for the quarter ended December 31, 2016 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, Brian. Good afternoon and thank you all for joining us on the call today. On March 8, 2017 we announced the sale of the ex-U.S. assets and rights related to Vitaros, our on-demand topical erectile dysfunction product. Under the terms of the agreement, Ferring agreed to pay Apricus an upfront payment of $11.5 million due upon closing which has been paid upto an additional $700,000 with respect to certain product inventory and an amount equal to $500,000 payable over two calendar quarters for transition assistance, subject to certain limitations. Apricus will retain its Vitaros rights in the U.S. which are in licensed from Allergan as well as global rights to our pipeline asset RayVa for the treatment of Raynaud’s phenomenon. Apricus will also retain certain interest in proprietary permease enhancer, DDAIP in the United States. This transaction clearly has a positive impact on our financial outlook and we believe that under Ferring’s leadership and control Vitaros will continue to thrive as a global brand which in turn will increase the value of the Vitaros opportunity in the U.S. once approved by the FDA. Therefore with the closing of this transaction, we must focus on the following targeted objectives in an effort to continue to increase shareholder value. First, we will continue to implement the implementation of the U.S. Regulatory Approval strategy to address the safety issues related and raised by the FDA in the original Vitaros NDA submission. Apricus anticipates a meeting with the FDA’s office of product quality in the second quarter of this year to confirm the necessary device engineering and compliance requirements following which the company intends to re-submit the Vitaros NDA. An FDA approval decision is expected after six month review period. We will continue to support the Ferring knowledge transfer to ensure a smooth transition of our Vitaros interest in an effort to ensure that Vitaros continues to grow as a global brand. We will finalise the RayVa clinical trial protocol and clinical trial material formulation work needed to initiate a Phase 2b study. We will continue to pursue a RayVa development partnership prior to initiating that Phase 2b study and we are currently in active dialogue with multiple parties interested in partnering with us on RayVa. We will reduce operating expenses by approximately 30% in 2017 as compared to 2016 operating expenses and will work to regain compliance with the minimum 2.5 million shareholder equity requirement as required for continued listing on the NASDAQ capital markets on or before May 30th of this year. With that, I’d like to turn the call over to Kelly to review our 2016 fourth quarter and full year financial results. Kelly.

Thanks, Rich. Total revenues for the quarter and for the year ended December 31, 2016 were $400,000 and $5.8 million, respectively, as compared to $2.6 million and $4.8 million for the quarter and year ended December 31, 2015, respectively. The decrease during the fourth quarter comparison was primarily due to license fee revenue of $2.25 million recognized in the fourth quarter of 2015 associated with the Company’s former partner, Ferring. The increase during the full year comparison was primarily due to increased license fee revenue and royalty revenue in the current year. Net loss for the quarter ended December 31, 2016 was approximately $300,000, or a loss of $0.04, compared to a net loss of $2.3 million, or $0.05 per share for the fourth quarter of 2015. Net loss for the year ended December 31, 2016 was $7.4 million, or a loss per share of $1.14, compared to a net loss of $19.0 million, or a loss per share of $3.83 for the year ended December 31, 2015. The reduction in the net loss during the current year periods as compared to the prior year periods is a result of decreased research and development expenses as well as decreased G&A expenses. Also reducing the net loss for the quarter and year ended December 31, 2016 was a non-cash change in the fair value of the Company’s warrant liabilities in the amount of $2.4 million for the quarter and $7.5 million for the year. As of March 8, 2017, the Company’s cash totaled $5.4 million, compared to $2.1 million as of the end of the year. I will now turn the call back over to Rich for his closing remarks. Rich?

Thank you, Kelly. In closing, I want to say that I am excited to lead Apricus forward with a compelling development pipeline, significant near term potential milestones, a stronger debt free balance sheet, the elimination of certain substantial ex-U.S. Vitaros future liabilities and lower quarterly operating expenses as we focus our financial resources on the single most important growth driver obtaining U.S. regulatory approval for Vitaros for which we have NDA re-submission slated for the third quarter of this year. I want to recognize the tremendous effort that the Apricus team put forth to close this transaction as well as the support and feedback we received from our shareholders and with that, we’ll now open the call up for questions. Operator?

Thank you.[Operator Instructions] And our first question comes from line of [Indiscernible]. Your line is open.

Hi, thanks for taking my questions. Have you already received the $11.5 million from Ferring Pharmaceuticals and do you expect any additional payments in the near term and milestones in the long run?

Thanks for the question. This is Rich. Yes, we have received the $11.5 million for the asset purchase and as noted in our remarks, there’s an additional approximately $1.2 million we expect to receive that’s broken down as follows. $700,000 approximately for inventory that Ferring will be purchasing from us as well as a pre-negotiated $500,000 in transition services. As it relates to other milestones related to this deal there are none, however as you think already know we are pursuing the U.S. NDA re-submission for Vitaros here in the third quarter of this year and once that product is approved our agreement with Allergan should they opt into commercialize that product there would be a $20 million payment that would be made by Allergan to us for that commercialization right.

Okay. Do you anticipate any kind of hurdle or difficulty in the meeting with the FDAs office of product quality?

Well you know it’s always interesting to have meetings with the FDA and I think the ones that we’ve had to date had been fruitful and had been informative. As you recall, we met with the full FDA distribution I should say back in November of last year. We got very clear and concise instructions from them in terms of what needs to be done in order to be able to re submit the NDA and we are in the process of working through those issues. More importantly, I think the required work that is necessary to put in front of the office of product quality is under way and we expect to be able to meet with them, confirm that we have a complete submissions to make that as we’ve noted previously in the third quarter.

Okay. And when is the Phase 2b trial for RayVa likely to be initiated, and how much would the trial cost?

We’re not giving any guidance on timing as I noted in my remarks. Our first objective is to finalize the clinical development protocol to finalize the clinical trial material to obtain or seek a partnership for this product ideally ex-U.S., but we had entertained other types of structures and we are in conversations with different parties about that. And then we would look to start the clinical trial, certainly not in vision for this year, most likely sometime in 2018 if we can get all of those things accomplished.

Okay, thank you.

Okay, thank you.

Thank you. And at this time I’m showing no further questions. I would like to turn the call back to Rich Pascoe for any closing remarks.

Thank you operator and thank you all for joining us on the call today. Operator, you may now disconnect.