Aequus Provides General Update and 2019 Financial Highlights
VANCOUVER, April 29, 2020 – Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) (“Aequus” or the “Company”), a specialty pharmaceutical company with a focus on developing, advancing and promoting differentiated products, today reported financial results for the year ended December 31, 2019 (“Fiscal 2019”) and associated Company developments. Unless otherwise noted, all figures are in Canadian currency.
“We had a strong end to 2019 and set new records for both quarterly and annual revenue,” said Doug Janzen, Chairman and CEO of Aequus. “Q4 2019 revenues of $535,466 were 44% higher than the same period last year and we continue to drive this momentum forward into 2020, with preliminary revenue numbers in Q1 looking positive. This, in combination with efforts to streamline operations in response to the changing world around us, we are aiming to reach operational breakeven in 2020.
This past year, we were very pleased to add several new ophthalmology products to the commercial pipeline through our partnership with Medicom, and expect additional product announcements between Aequus and Medicom in the near term. We are working diligently on the preparations for a successful launch of Evolve® (the dry eye products from Medicom) in the coming months. With our focus turned to the launch of Evolve® and the continued growth of our glaucoma prescription product, we have made the decision to permanently discontinue the Zepto program. We previously announced having halted sales of Zepto in Q3 of 2019 while Mynosis worked through modifications of the product.
Finally, we would like to thank Damien King for his contributions and guidance while being a director and wish him well as he resigned from our board to focus on a new business venture.”
Key 2019 Financial Highlights
- Highest annual revenue to date, with Fiscal 2019 total revenue of $1.6 million, resulted in an increase of 16% over the $1.4 million in revenue during the year ended December 31, 2018 (“Fiscal 2018”)
- The three months ended December 31, 2019 (“Fourth Quarter 2019”) revenues of $535,466, is a 44% increase over the same period last year
- Fiscal 2019 net loss of $3.1 million, an increase of 11% from the $2.8 million loss in 2018, mainly due to debenture related expenses
- Fourth Quarter 2019 operating loss of $557,873, before other expenses, was 27% less compared to the same quarter in 2018. The Fourth Quarter 2019 net loss of $1,037,354 was a $368,047 increase when compared to $669,307 net loss in the fourth quarter of 2018. The change was primarily due to interest and accretion expenses from the debentures issued in the year as well as the $478,940 non-cash accounting impairment recognized in the period.
- The Company issued convertible debenture units for gross proceeds of $2,348,000. Each convertible debenture unit consists of one 9.5% unsecured convertible debenture of the Company in the principal amount of $1,000 and 2,380 common share purchase warrants.
Key 2019 Operational Highlights
- On December 13, 2019, Aequus announced the signing of a term sheet to co-commercialize a portfolio of products in the USA with Medicom Healthcare. Under the proposed agreement, Aequus and Medicom will jointly commercialize Medicom’s range of preservative free ophthalmics in the United States of America. The companies will be working together for the first part of 2020, prioritizing programs and developing commercialization plans for the selected programs.
- As of November 4, 2019, a major health authority in the province of British Columbia announced a change to their dispensing formulary for tacrolimus mandating that Sandoz tacrolimus, co-promoted by Aequus, is to be dispensed for all new patients requiring tacrolimus for prophylaxis of organ rejection in the province of British Columbia.
- On July 29, 2019, the Company signed an exclusive distribution agreement with Medicom with terms consistent to the term sheet that was previously announced in March 2019. Under the distribution agreement, Aequus will receive commercial rights to novel portions of Medicom’s portfolio of ophthalmology products including the Evolve® line of preservative free dry eye products which contains 5 commercial stage products and 2 products in development, an undisclosed preservative free ophthalmic medication, and the diagnostic eye drop Fluosine for Canada.
- The Company has taken the decision to terminate the agreement with Mynosys for further promotion of the Zepto Capsulotomy System, while modifications to the handpieces are being made by the manufacturer and while we focus on launching the higher value Evolve(R) products. This decision regarding Zepto does not have a material impact on our current 2020 revenue forecast.
- On May 2, 2020, the Company issued Convertible Debenture units for gross proceeds of $2,348,000. Each Convertible Debenture Unit consists of one 9.5% unsecured convertible debenture of the Company in the principal amount of $1,000 (each, a “Convertible Debenture”) and 2,380 common share purchase warrants (each, a “Warrant”). Each Convertible Debenture will be convertible at the option of the holder into common shares of the Company (each, a “Debenture Share”) at a conversion price of $0.21 per Debenture Share, with interest payable semi-annually in arrears on June 30 and December 31 of each year and maturing May 2, 2022. Each Warrant entitles the holder thereof the right to purchase one common share of the Company (a “Warrant Share”) at an exercise price of $0.22 per Warrant Share at any time up to May 2, 2022.
2020 HIGHLIGHTS - Subsequent to December 31, 2019
- On April 21, 2020, Aequus announced a positive update on the regulatory and launch advancement for the Evolve® line of preservative free dry eye products into Canada. Medicom Healthcare, the UK manufacturer of Evolve® products, received a positive outcome of the Audit to meet standards for the Canadian Medical Device Single Audit Program (MDSAP). The MDSAP, fully implemented by Health Canada in January 2019, establishes a new audit standard for all medical device manufacturers who distribute in Canada, including those with existing marketed products. As a result, there has been a large demand for the completion of audits and delays have been experienced across the industry. Aequus is pleased that the Medicom audit met the Canadian regulatory standards and we are excited to have this important regulatory step achieved for these new-to-the Canadian market medical devices.
- On January 10, 2020, the Company advanced the filings for provincial reimbursement in both Quebec and British Columbia for its lead product, PRVistitanTM (bimatoprost 0.03%). If successful, this additional coverage would advance sales in the second and third largest markets in Canada and would trigger an increase in the percentage of total revenue that Aequus receives from its partner.
Revenues in Fourth Quarter 2019 were $535,466, an increase of 44% compared to the quarter ended September 30, 2019 and a $298,239 increase over the same period last year. Revenue for the year ended December 31, 2019 was $1,632,524 (2018 - $1,410,240), a 16% increase over the year ended December 31, 2018. The increases seen can be attributed to a strong Q4 2019 and increased product acceptance in certain provinces toward the end of the year.
“Over the past three years, our national sales coverage and strategies have matured significantly. The sales force were able to increase sales volumes in 2019 to achieve revenue growth despite the decrease in the profit share split last year,” said Anne Stevens, Chief Operating Officer and Director of Aequus. “With the anticipated launch of the Evolve® and continued expansion efforts for our ophthalmology franchise, Aequus has positioned itself as a key partner for international companies looking to access the Canadian marketplace.”
The Company expects to continue to grow product sales for both Tacrolimus and Vistitan and expects promotional marketing services revenue to increase over the duration of the contract.
The Company looks to continue leveraging its existing core capabilities and commercial infrastructure to expand its presence and product offerings within ophthalmology. The Company will continue its strategy of adding to its existing product portfolio through promotional partnership agreements, asset acquisitions, in-licenses, and internal development programs.
The Company reported an operating loss before other income (loss) of $2,636,560 for Fiscal 2019, a decrease of 6% from the loss before other income (loss) of $2,808,029 in Fiscal 2018. The lower loss was primarily due higher sales and a decrease in research and development expenses. The improvement in loss was offset by higher sales and marketing expenses and new interest and accretion expenses recognized in general administration expenses which related to the debenture issued during Fiscal 2019.
Sales and marketing costs in Fiscal 2019 were $1,857,478 when compared to $1,646,076 in Fiscal 2018, an increase of 13% or $211,402. The majority of the increase related to an increase in the number of outside-sales representatives and the costs related to their activities. Non-cash expenses for depreciation and amortization and share-based payments in Fiscal 2019 were $189,309 and $82,241 respectively, compared to $187,793 and $108,046 respectively in Fiscal 2018.
Research and development project maintenance expenses in Fiscal 2019 were $210,827 when compared to $526,935 in Fiscal 2018, a decrease of 60% or $316,108. The majority of the decrease was attributable to the decrease in consulting costs and patent and intellectual property protection costs and is a result of our focus on revenue generating third-party commercial products as opposed to development programs.
General administration expenses in Fiscal 2019 were $2,200,779 when compared to $2,045,258 in Fiscal 2018, an increase of 8% or $155,521. In May 2019, the Company issued a convertible debenture resulting in interest and accretion expenses relating to the debenture of $195,241 and $223,428 respectively, whereas no similar debt was existed in Fiscal 2018. The Company recognized cost reductions in consulting, travel, and share-based payments in Fiscal 2019 which were offset by the increased expenses related to the convertible debenture.
ABOUT AEQUUS PHARMACEUTICALS INC.
Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) is a growing specialty pharmaceutical company focused on developing and commercializing high quality, differentiated products. Aequus has grown its sales and marketing efforts to include several commercial products in ophthalmology and transplant. Aequus plans to build on its Canadian commercial platform through the launch of additional products that are either created internally or brought in through an acquisition or license; remaining focused on highly specialized therapeutic areas. For further information, please visit www.aequuspharma.ca.
This release may contain forward-looking statements or forward-looking information under applicable Canadian securities legislation that may not be based on historical fact, including, without limitation, statements containing the words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “potential” and similar expressions. Forward- looking statements are necessarily based on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as the factors we believe are appropriate. Forward-looking statements include but are not limited to statements relating to: the continuation of supply of our partnered products, the expected launch date of our dry-eye products, the impact of the novel coronavirus (COVID-19) on our ongoing business operations. Such statements reflect our current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Aequus, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements. In making the forward looking statements included in this release, the Company has made various material assumptions, including, but not limited to: obtaining regulatory approvals; general business and economic conditions; the ability of its manufacturer and other third party manufacturers to continue supplying Vistitan and tacrolimus without interruption; the Company’s ability to attract and retain skilled staff; market competition; and the products and technology offered by the Company’s competitors. In evaluating forward looking statements, current and prospective shareholders should specifically consider various factors set out herein and under the heading “Risk Factors” in the Company’s Annual Information Form dated April 30, 2018, a copy of which is available on Aequus’ profile on the SEDAR website at www.sedar.com, and as otherwise disclosed from time to time on Aequus’ SEDAR profile. Should one or more of these risks or uncertainties, or a risk that is not currently known to us materialize, or should assumptions underlying those forward-looking statements prove incorrect, actual results may vary materially from those described herein. These forward-looking statements are made as of the date of this release and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by applicable securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and are inherently uncertain. Accordingly, investors are cautioned not to put undue reliance on forward looking statements.
Aequus Contact Information:
Aequus Investor Relations