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

Yi Chen - HC Wainwright

Greeting and welcome to the Apricus Biosciences Second 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 second quarter and year-to-date 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 and outcomes of the U.S. regulatory approval process for Vitaros; business development plans and objectives, such as out-licensing for RayVa; the company's ability to transition its ex-U.S. assets and rights related to Vitaros to Ferring; and to receive the second 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 second quarter ended June 30, 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. Since the beginning of the second quarter, our focus has been to create a more stable financially healthy organization with an operational focus on the resubmission of the Vitaros new drug application. Since then we have worked diligently to extend our cash runway through a combination of fundraising and expense reduction, reestablishing compliance with NASDAQ and completing the work required to resubmit the Vitaros NDA in the third quarter of this year. Today I am pleased to announce that the Vitaros NDA final draft has been completed and that we expect to file the NDA this quarter upon the completion of an ongoing final quality review. The NDA submission contains data that we believe addresses all of the issues raised by the FDA in the original Vitaros complete response letter. The results of our successful human factor studies, as well as a significant amount of supportive data from the Vitaros global safety database, which we believe enhances the Vitaros risk benefit profile. While we're excited to be ahead of our NDA submission timeline, we still have much work to do to ensure that Vitaros can be successfully commercialized in the US, if it is approved. Although, we no longer have an active role in Vitaros outside of the United States, we are encouraged by its potential for continued growth and we will seek to leverage our experiences over the past three years for the benefit of the Vitaros U.S. commercial opportunity. With respect to the US market, we are currently refining our Vitaros market analysis with patients, prescribers and payers with an emphasis in confirming, positioning, and pricing. In addition, we will continue to maintain a healthy dialogue with Allergan to ensure that they are well prepared to make a commercialization decision upon a positive Vitaros approval decision. And finally, we will continue to lay the necessary groundwork in United States to ensure that Vitaros is commercially available upon approval which could occur as early as the first quarter of 2018. With that I'd like to turn the call over to Kelly Deck to review our 2017 second quarter financial results. Kelly?

Thank you, Rich. Our net loss for the quarter ended June 30, 2017 was $1.5 million or loss per share of $0.13 compared to a net loss of $3.3 million or a loss per share of $0.54 for the second quarter of 2016. Net loss during the second quarter or 2017 was primarily due to expenses related to the preparation of our resubmission of the Vitaros NDA and other G&A expenses. Net income for the 6 months ended June 30, 2017 was $6.6 million or income per share of $0.69. That was compared to a net loss of $5.8 million or loss per share of $1 for the second quarter of 2016. Net income during the 6 months ended June 30, 2017 was primarily due to the $12.1 million gain recorded for the sale of our ex-U.S. Vitaros rights and assets to Ferring. For all periods presented financial statement activity related to our ex-U.S. Vitaros business has been presented as discontinued operations. As of June 30, 2017 the company's cash totaled $7.8 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 reiterate our excitement regarding the imminent filing of the Vitaros new drug application and to reaffirm our commitment to building shareholder value through the development of gaining regulatory approval for and the successful commercialization of our pipeline assets. With that, we will now open the call up for questions.

Thank you. And our first question comes from the line of Yi Chen with HC Wainwright. Your line is now open.

Hi, thank you for taking my question. And congratulations for completing the human factor study and the final draft for Vitaros NDA package. So just a couple of questions on the resubmission, so before the official resubmission of the NDA is there going to be another meeting with the FDA, so that just to make sure that everything is in-line with FDA expectation?

Yes. Yi, thanks for the question. Thanks for being on the call. So the answer is no. There will not be a meeting with the FDA prior to the re-submission. And the reason for that of course is that we had a very substantive interaction with the FDA late last year to reconfirm what was required for the submission itself. As you recall that was when this human factors study requirement was put on the table for us to address and so we did that successfully and we have the results from that particular study or series of studies that are now part of the NDA resubmission. I think moreover, we have continued to have a very healthy dialogue with the FDA along the way and with the division that we will be making this resubmission to and so with that as noted in my comments and in the press release issued earlier today our goal is to up finalize our review which is on underway. All the components that are required to be put into the NDA have already been done so and as soon as that review process is completed then we will resubmit. So short answer is no additional interactions with the FDA required, nor needed, and we will be filing that submission in the quarter as previously disclosed.

Thank you. So your projection that the FDA approval could be in the first quarter of 2018 is based on a 6 month review period is that correct?

That's correct. And as the emission classification for this given that it's a resubmission and response to a previous not approval letter a complete response mandates that it's a 6 month review, and we have confirmed that again with the FDA. So assuming an imminent submission in this quarter 6 month forward we would have a PDUFA date. So yes, first quarter is the target for that decision.

Okay. Thank you. So after you resubmit at the end Vitaros NDA and before FDA's final approval potential final approval shall we expect any further news release regarding elegance position on Vitaros or we should expect some after FDA's approval?

Yes, it's a great question and just to reacquaint everyone on the phone with that the construct of that relationship, we license the U.S. right back from Allergan in 2015 with that relationship it includes a commercialization option that Allergan holds and that option is exercisable upon approval. We of course have been in dialogue with Allergan along the way pre-submission as we have rapidly approached that date as part of our relationship and contractual obligation to them we've kept them in the loop and kept them informed. We will certainly continue to do that over the course of the next few months. And as I noted in my comments, our work is not finished once the submission goes in parallel we continue to do all right things for the benefit of the product and potentially for the benefit of Allergan whoever commercializes that product, such that when it is approved, assuming it's approved by the FDA that we have the necessary pieces in place to ensure its commercial success. Now I will again come back to a comment that I made in my remarks, we have a tremendous amount of experience through our partnerships that were established outside of the U.S. with Vitaros and we're building upon that. So we're not starting out sort of flat footed. But to answer your question, we will be in discussions with Allergan along the way with respect to their decision it's not required until after the approval itself.

Thank you. So regarding RayVa in what timeframe can we expect a partner to be announced?

Yes. So we've continued to work towards identifying a development partner for RayVa and I'll come back to some their previous guidance that we've given before which is that given the importance of the Vitaros NDA, the resubmission and resources that we have available and wanting to ensure that we're good stewards of those resources, we've made the decision not to invest in the actual development of RayVa until such time our development partner can be found. There is an active process there's interest in that, I can't comment specifically on timing but it is a priority of the company and an objective corporately for the company this year and as soon as we have something to announce, if we have something to announce we'll certainly do that.

Okay. Thank you and also after you submit the NDA package and shall we expect the G&A and R&D expenses to be lower compared to the second quarter?

Well, it's been our mission in life to continue to reduce expenses where ever possible and of course with the R&D efforts related to Vitaros essentially behind us, I think what you'll see there is essentially sort of a leveling out of our expenditures there. There will be some ongoing work as I noted earlier from a commercial standpoint and some work that we'll have to finish up with respect to ensuring that if the product is approved in the first quarter that we're ready to go to market with it. But having said that, I think overall you can see what happened in this past quarter, second quarter reflects what we expect to be the case moved forward. Fairly steady, no significant changes.

Okay. Thank you very much.

Thank you, Yi. Thanks for the questions.

And I'm showing no further questions at this time. So with that, I'd like to turn the call back over to Chief Executive Officer, Secretary and Director Mr. Richard Pasco.

Well, it's a lot. Thank you operator for that and I again want to just say how pleased we are with the progress that the company has made to date with respect to the Vitaros resubmission. We are excited about what lays ahead for the company. We thank you all for joining us today on this call and operator you may now disconnect.

Ladies and gentlemen thank you for participating on teleconference this does conclude the program and you may all disconnect. Everyone have a wonderful day.