Kelly Deck - Executive Director, Finance Richard Pascoe - CEO, Principal Accounting Officer, Secretary and Director Matthew Beck - VP, The Trout Group

Welcome to the Apricus Biosciences First Quarter 2017 Financial Results and Corporate Update Teleconference and Webcast. [Operator Instructions]. It is now my pleasure to introduce your host, Matt 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; and Executive Director of Finance, Kelly Deck. During today's call, Rich will provide a brief overview of the company's progress in the first quarter and review the corporate roadmap for the remainder of 2017. Kelly will briefly review the 2017 first quarter financial results. We will then open the line for questions. I'd like to remind everyone that certain information discussed on today's conference call is 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 of 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 transition its ex-U.S. assets and rights related to Vitaros to Ferring; and to receive the transition services payments from Ferring; expected uses of cash reserves and the development of the company's product 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 Security and Exchange Commission, including Apricus' quarterly report on Form 10-Q which was filed earlier today and Apricus' Annual Report on Form 10-K 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' financial results press release for the quarter ended March 31, 2017, 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. In the first quarter of this year, we continued to execute on our growth strategy to advance the resubmission of our U.S. Vitaros new drug application, strengthen our financial outlook and prepare our Raynaud's treatment candidate, RayVa, for further clinical development. On March 8th of this year, 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; up to an additional $700,000 in exchange for certain product inventory; and an amount equal to $500,000 payable over 2 calendar quarters for transition assistance subject to certain limitations. To date, we have received the upfront payment as well as the inventory payment, totaling approximately $12.2 million. Apricus retained its Vitaros rights in the United States which are in-licensed from Allergan, as well as global rights to our product candidate, RayVa, for the treatment of Raynaud's phenomenon. Apricus also retained certain interest in the proprietary permeation enhancer, DDAIP, in the United States. We have significantly improved our balance sheet and financial outlook by accomplishing the following, first, we've reduced our monthly cash burn to approximately $500,000, in line with our goal of a 30% monthly burn reduction in 2017 as compared to 2016; we closed an underwritten public offering of common stock and warrants in April of this year for gross proceeds of approximately $7 million; we paid $6.6 million to retire our remaining venture debt with Oxford Finance and Silicon Valley Bank; and finally, we regained compliance with all criteria for continued listing on the NASDAQ Capital Market, including the minimum stockholder equity requirement. Today, we've reaffirmed that we have sufficient cash to fund our operations through the third quarter of 2018, based upon our current operating plan. Looking forward, we must focus on the following targeted objectives in an effort to continue to increase shareholder value. First, we will continue implementation of the U.S. regulatory approval strategy to address issues raised by the FDA in the original Vitaros New Drug Application submission. Specifically, all safety, chemistry, manufacturing and control or CMC-related issues raised in the original nonapprovable letter will be addressed in the resubmission. In addition, the FDA has determined that the Vitaros product will be considered a drug-device combination product and as such, Apricus has determined the necessary device engineering and compliance requirements, including human factor testing. And those studies are currently underway in accordance with the applicable FDA guidance. Second, we will continue to support the transfer of our ex-U.S. Vitaros assets and rights to Ferring and complete a smooth transition of our Vitaros interest in an effort to ensure that Vitaros continues to grow as a global brand. We will finalize the RayVa clinical trial protocol and clinical trial material formulation work needed to initiate a Phase IIb study and pursue a RayVa development partnership prior to initiating that Phase IIb study. We're currently in active dialogue with multiple parties interested in partnering with us on RayVa. Importantly, we remain on schedule to resubmit our Vitaros New Drug Application to the FDA by the end of the third quarter of this year. Additionally, we have extended our cash runway to fund our operations through the third quarter of next year based upon our current operating plan which covers well beyond the anticipated FDA review period following our Vitaros NDA resubmission. With that, I'd like to turn the call over to Kelly to review our 2017 first quarter financial results. Kelly?

Thank you, Rich. Net income for the quarter ended March 31, 2017, was $8.1 million or a basic earnings per share of $1.04 compared to a net loss of $2.5 million or basic loss per share of $0.46 for the first quarter of 2016. Net income during the first quarter of 2017 was primarily due to the $11.8 million gain recorded in Q1 2017 for the sale of our ex-U.S. Vitaros rights and assets to Ferring. For both periods presented, financial statement activity related to our ex-U.S. Vitaros business has been presented as discontinued operation. As of April 26, 2017, the company's cash totaled $10.6 million compared to $2.1 million as of December 31, 2016. 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'm excited to lead a financially healthier Apricus forward as we focus our resources on the single most important growth driver in 2017, obtaining U.S. regulatory approval for Vitaros. I am confident that we will meet our goal of an NDA resubmission in the third quarter of this year which will lead to a potential U.S. Vitaros approval in early 2018. Finally, I just want to thank our shareholders for their continued support. And with that, we will now open the call up for questions. Operator?

Thank you, operator. And again, thank you for joining us on the call today. As a reminder, we will hold our 2017 Annual Meeting of Stockholders at 8:00 a.m. Pacific Daylight Time on May 17. Please refer to our 2017 proxy which is on file or contact Matt Beck at Trout for further details. Operator, you may now disconnect.

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