Will Big Changes At Apricus Biosciences Make It A Winning Stock?

| About: Apricus Biosciences, (APRI)

San Diego, California-based Apricus Biosciences, Inc. (NASDAQ:APRI) , is a pharmaceutical company that develops and commercializes products that are primarily in the field of sexual health. The $70M market cap company designs and develops pharmaceutical products based on its NexACT platform.

The company's products pipeline includes:

  • Vitaros for the treatment of erectile dysfunction (ED);
  • Femprox to treat female sexual arousal disorder (FSAD);
  • MycoVa for the treatment of onychomycosis; and
  • RayVa to treat Raynaud's Syndrome.

In December 2012, Apricus decided to divest its United States oncology supportive care products in order to focus its resources on Vitaros, Femprox and other drug candidates.

NexACT Multi-Route Drug Delivery Technology

Apricus Bio's NexACT drug delivery technology increases the delivery of an active drug to improve therapeutic outcomes and reduce systemic side effects that accompany existing medications.

This clinically validated multi-route drug delivery technology that utilizes patented "penetration enhancers" to improve absorption and bioavailability of drugs. When incorporated into drug formulations, NexACT technology utilizes biodegradable excipients, that help overcome the body's natural barrier properties and enable rapid penetration of high concentrations of active drug directly through the skin and major biological membranes, resulting in more effective therapies.

Apricus has incorporated NexACT technology in therapies indicated for a wide range of indications and across different classes of drugs. The company's most advanced enhancer, NexACT-88, is used in formulations containing various actives (small molecule, proteins, antibodies and RNAi therapeutics). NexACT-88 has been clinically evaluated in close to 5,000 subjects and over 150 pharmacological/toxicity studies.

NexACT technology facilitates compounds crossing the lipid bilayer and yet biodegrades in vivo to natural amino acids and natural fatty acids. This technology may be useful for:

  • Penetrating, proprietary, topical & transdermal formulations
  • Improving oral bioavailability of poorly soluble, poorly permeating compounds (BCS class 2-4)
  • Delivering siRNA therapeutics into the cells; in vivo validated
  • Development of more effective, penetrating cosmeceutic formulations
  • Preserving

NexACT technology has been used in multiple Apricus products, including Vitaros, Femprox and MycoVa, and has been administered to over 5,000 patients in clinical studies.


Vitaros is a topically-applied cream formulation of alprostadil, a vasodilator, combined with a proprietary permeation enhancer DDAIP, which directly increases blood flow to the penis, causing an erection. NexACT drug delivery technology enables rapid absorption of high concentrations of an active pharmaceutical ingredient directly at the target site and to enhance the delivery of an active drug to the patient.

Vitaros differs from oral medications as it is applied locally, directly to the penis as a cream, instead of being taken orally and absorbed systemically. Apricus claims that topical application helps reduce side effects and provides an alternative for men who cannot take oral medications. Clinical studies have shown that Vitaros works in approximately 15 minutes on average, compared to a reported onset time of 30 minutes, or longer, for oral medications.

Vitaros offers favorable safety profile, including patients with compromised cardiovascular system such as diabetics or patients not responding to Viagra after a prostatectomy.

On February 3, 2009, the company announced the sale of the U.S. rights for Vitaros to Warner Chilcott [which was acquired by Actavis (ACT) in May 2013]. Under the terms of the agreement, the company received gross proceeds of $2.5 million as an up-front payment. Apricus is also eligible to receive an additional payment of $2.5 million upon Warner Chilcott's receipt of an NDA approval from the FDA.

There are four major ED drugs on the market-Pfizer's (NYSE:PFE) Viagra (sildenafil), Eli Lilly's (NYSE:LLY) Cialis (vardenafil), GlaxoSmithKline's (NYSE:GSK) and Bayer AG's (OTCPK:BAYRY) Levitra (tadalafil), as well as Vivus Inc.'s (NASDAQ:VVUS) Stendra (avanafil). All of these drugs belong to the same family of drugs called phosphodiesterase inhibitors. These drugs function by relaxing the smooth muscle in the arteries of the penis, allowing it to fill with blood and an erection to occur.

ED is estimated to affect more than 150 million men worldwide and the number of men with ED is expected to double by the year 2030. Although most cases are not reported, it is estimated that more than 30 million men are affected in the United States. Research has found that that more than 50% of men older than age 40 report periodic episodes of ED.

Since the launch of Viagra in 1998, there has been a considerable increase in public awareness of ED due to extensive marketing by large drug manufacturers. As a result, the worldwide market for oral ED drugs has reached more than $4.2 billion.

The intelligence and information firm, Medtech Insight, found that the U.S. market for ED therapies is expected to continue stable, moderate growth. Valued at more than $1.9 billion in 2010, the market is expected to increase at a compound annual rate of 5.1%, with sales reaching more than $2.5 billion in 2015. The U.S. ED therapies market is expected to benefit not only from continued strong demand but from positive demographic trends, including a large, growing ED population, strong advertising/marketing, emerging next-generation ED therapies, launch of several lower cost generic drugs, and the continued adoption of improved penile implant systems.

Although phosphodiesterase inhibitors are effective in ED, these drugs can cause serious cardiovascular issues as well as significant side effects such as headache, muscle ache and impaired hearing and vision. Apricus believes that the availability of a safer and effective treatment would address an unmet medical need. The company claims only localized and transient side effects have been reported.

Although Vitaros is not approved in the United States, alprostadil, the active ingredient in Vitaros, has already approved by the FDA. Alprostadil is sold in the United States as urethral suppositories and in injectable form. The injectable forms are Auxilium Pharmaceuticals' (NASDAQ:AUXL) Edex and Pfizer's Caverject. Suppositories are sold under the brand name MUSE (Medicated Urethral System for Erection) by Meda Pharmaceuticals.

Vitaros has been studied in over 3,300 patients including difficult to treat populations (diabetes, cardiac issues, sildenafil failures, prostatectomies, patients on nitrates and alpha blockers.) Studies have found that Vitaros demonstrates clinical efficacy and an excellent safety profile versus currently approved oral medication. Vitaros was determined to be safe and effective by the European Health Authorities and Health Canada.

On June 10, 2013, Apricus announced that its marketing application for Vitaros, indicated for the treatment of patients with ED was approved through the European Decentralized Procedure (DCP).

Under the DCP, Apricus filed its application for marketing approval designating Netherlands as the Reference Member State (RMS) on behalf of nine other European Concerned Member States (CMS) participating in the procedure. The CMS include France, Germany, Italy, U.K., Ireland, Spain, Sweden, Belgium and Luxembourg. Apricus is working independently as well as with its commercialization partners, Sandoz, Takeda (OTCPK:TKPHF), and Bracco for the next step of obtaining national phase approvals in order to make Vitaros ready to launch in each of the included territories across Europe.

On January 9, 2012, Apricus announced that it had entered into an exclusive licensing agreement granting Abbott Laboratories (NYSE:ABT) exclusive rights to market Vitaros in Canada.

Under the agreement, Apricus is eligible to receive up to approximately $16 million in up-front, regulatory and sales milestone payments, plus tiered royalty payments based on Abbott's sales of the product in Canada.

According to IMS Health data, the annual ED market in Canada in 2010 was about $180 million.

On February 15, 2012, Apricus announced that its wholly-owned subsidiary NexMed (NYSE:USA), Inc. signed with Sandoz, a division of Novartis (NYSE:NVS), an exclusive collaboration for Germany to market Vitaros.

Sandoz will pay Apricus up to €21 million ($28 million) - divided into a fixed upfront payment and specific regulatory and commercial milestones - as well as, double digit royalties on net sales.

On September 13, 2012, Apricus entered into an exclusive license agreement with Takeda Pharmaceuticals International GmbH to market Vitaros, a treatment for erectile dysfunction, in the United Kingdom. According to IMS Health, the erectile dysfunction market in the United Kingdom was worth about €202 million in 2011.

Under the terms of the agreement, Takeda will pay Apricus an undisclosed upfront payment, and milestone payments of up to €35 million.

Agreements have also been signed with, Bracco in Italy, Elis Pharmaceuticals in certain Middle East, and Gulf countries, and Neopharm in Israel for marketing the ED therapy.

Apricus continues to search for an outlicensing partner for select European territories, Russia, Turkey, Latin America, Asia and Africa. The company estimates these markets to be worth $2.5 billion.


Femprox is the company's product candidate for the treatment of female sexual arousal disorder (FSAD) which contains a topically-applied cream formulation of alprostadil, a vasodilator, and the proprietary permeation enhancer, DDAIP.HCL.

It is estimated that approximately 47 million women in America suffer from FSAD. FSAD affects a woman's ability to become sexually aroused, maintain an aroused state, and to reach orgasm. It may include painful intercourse as well.

FSAD is the second most common sexual health concern, affecting 26% to 47% of adult women.

Although the FDA has not approved any product to treat FSAD, the pharmacological treatment of FSAD includes topical or systemic estrogen therapy, tibolone (a synthetic steroid with estrogen, progesterone), topical vaginal DHEA, and phosphodiesterase type 5 inhibitors (PDEs), but studies have shown mixed results on their effectiveness. Studies of phosphodiesterase inhibitors used in smaller populations of women with specific medical conditions, such as diabetes and multiple sclerosis have been more encouraging.

Femprox has successfully completed seven clinical trials, including one, 98-subject Phase II study in the United States and a Phase III study in China comprised of over 300 women.

On May 24, 2005, Apricus announced the preliminary results from a 400 patient "at home" study conducted in China. The patients, who were between the ages of 21 and 65, were randomly assigned to placebo or one of three strengths of Femprox. They were required to use one application of Femprox prior to engaging in sexual activity, up to ten times during two treatment evaluation periods. The primary efficacy end point was the arousal success rate determined by the internationally recognized Female Sexual Encounter Profile (FSEP) questionnaire. Secondary efficacy end points included changes in the Female Sexual Distress Scale (FSDS), as well as the Global Assessment Question (GAQ).

Researchers found that patients using Femprox showed demonstrable improvement in sexual arousal over the course of therapy. At the end of the first evaluation period, there was a 17% improvement in mean arousal success rate from baseline were reported for placebo and 38.7% improvement in mean arousal success rate from baseline were reported for those using the highest dose of Femprox. At the end of the second evaluation period, 28.6% of the placebo group and 51.5% of those using the highest dose of Femprox, reported improvement.

All of the secondary efficacy criteria showed a consistent trend in support of the primary efficacy results, including a demonstrated positive patient satisfaction by the GAQ. A total of 372 patients completed the study. The side effects reported were mostly mild or moderate in intensity, reversible and short in duration.


MycoVa (a topical 10% terbinafine hydrogen chloride formulation) is the company's proprietary topical nail composition in development for the treatment of onychomycosis (nail fungal infection). Apricus had previously licensed MycoVa rights to Novartis.

MycoVa combines an existing, approved drug for nail fungus, terbinafine, with Apricus' NexACT technology that enhances the absorption of the drug through the skin. Clinical trials on the drug started after 2005, when the company signed an agreement with Novartis, under which Novartis assumed responsibility to develop and commercialize the drug.

Fungal nail infections pose a global health threat, with over 50 million people suffering from the contagious condition last year. Between 35 million and 36 million people in the United States are estimated to have onychomycosis,.

According to C and M Research, the dermatophytic onychomycosis market was valued at $2.1 billion in 2010, and is forecast to grow at a compound annual growth rate (OTCPK:CAGR) of 7% over the next seven years, to reach $3.4 billion by 2017.

In July 2008, Novartis completed two Phase 3 clinical trials for MycoVa. These parallel studies were designed to assess the efficacy, safety and tolerability of MycoVa in patients with mild to moderate toenail onychomycosis. Approximately 1,000 patients completed testing in the two studies, which took place in the United States, Europe, Canada and Iceland. In August 2008, Apricus announced that based on the first interpretable results of these two Phase III studies, Novartis had decided not to submit an NDA for the approval of MycoVa.

Pursuant to the termination agreement, Apricus received worldwide rights for MycoVa and Apricus agreed that to pay Novartis 15% of any upfront and/or milestone payments that it received from any future third party licensee of MycoVa, as well as a royalty fee ranging from 2.8% to 6.5% of annual net sales of products developed from MycoVa. In the event that Apricus, or a substantial part of its assets, are sold, Apricus agreed to pay to Novartis 15% of any upfront and/or milestone payments received by Apricus or its successor relating to MycoVa, as well as a royalty fee ranging from 3% to 6.5% of annual net sales of MycoVa, with such royalty fee varying based on volume of such annual net sales. If the acquirer makes no upfront or milestone payments, the royalty fees payable to Novartis will range from 4% to 6.5% of annual net sales of MycoVa.

On January 19, 2011, Apricus announced that an additional analysis found that MycoVa successfully demonstrated 'non-inferiority' for the treatment of onychomycosis commonly referred to as nail fungus), compared to the current standard of care in Europe for topical therapy, Galderma's Loceryl (5% amorolfine nail lacquer).

'Non-inferiority' means that the experimental treatment worked well enough, compared to the effective existing drug, to support the conclusion that the new test drug is also effective. With this new analysis, Apricus intends to request regulatory guidance from certain European agencies for the continued development of MycoVa and hopes to eventually file for approval in certain European countries to market the drug for onychomycosis.

Based on this data and based on the feedback from regulatory agencies, Apricus believes additional clinical trials will be necessary for FDA approval in the United States. Health Canada has indicated that Apricus would be allowed to file directly for approval based on the secondary endpoints, although the agency gave no indication on the likelihood of approval. Apricus intends to request guidance from the European health agencies as to whether the superiority trial against Loceryl can instead be submitted as a non-inferiority trial. If Apricus receives positive feedback from the European health agencies, the company may expend additional resources to seek approval of MycoVa in high-value European territories.

In January 2012, Apricus announced the signing of an exclusive license agreement with Stellar Pharmaceuticals, Inc (OTC:SLXCF). to sell MycoVa in Canada for the treatment of onychomycosis, subject to receipt of Canadian regulatory approval for such product. [Stellar Pharmaceuticals changed its name to Tribute Pharmaceuticals Canada Inc. (TBUFF) in January 2013].

The exclusive license agreement provides for up to $8.0 million in payments, regulatory approval milestones, sales achievement milestones and double-digit royalty payments on sales of the product, if approved.

In January 2012, Apricus announced the signing of an exclusive license agreement with Elis Pharmaceuticals Limited to sell MycoVa for the treatment of onychomycosis in the Gulf countries and certain countries in the Middle East for the treatment of onychomycosis. Under the terms of the agreement, Elis has exclusive rights in part of the Middle East, including Saudi Arabia, Kuwait, Lebanon, Syria, Jordan, Iraq and Yemen, and in the Gulf Countries (United Arab Emirates, Oman, Bahrain, Qatar), excluding Israel, to commercialize and market MycoVa. Apricus has the right to receive up to $2.1 million in payments for regulatory and sales milestones, and receive tiered double-digit royalties based on Elis' sales of the product, if approved.


Apricus is also developing RayVa (alprostadil) for the treatment of Raynaud's Syndrome secondary to scleroderma.

Raynaud's syndrome refers to a disorder in which the fingers or toes suddenly experience decreased blood circulation, and is characterized by color changes of the skin of the digits upon exposure to cold or emotional stress. The prevalence of Reynaud's syndrome in the United States is estimated to vary from 3% to 10%.

Scleroderma affects about 75,000 to 100,000 people in the United States. Raynaud's affects about 90% of Scleroderma patients. Women are seven times more likely to develop the condition than men.

Apricus Bio has significant experience developing stable alprostadil products. In pre-clinical testing, RayVa showed significant improvement in blood flow over the placebo cream. Apricus Bio believes RayVa can be a very useful alternative to currently available prostanoids and other medications used to treat Raynaud's Syndrome Secondary to Scleroderma.


On May 10, 2013, Apricus announced financial results for the quarter ending March 31, 2013.

The company had total revenues of $1 million, an increase of $0.2 million compared to $0.8 million for the same period in 2012. The increase was primarily due to new revenue from contract services related to its French subsidiaries of $0.9 million, which have been included in our statements of operations beginning in July 2012. The increase in contract services was partially offset by a $0.6 million decrease in license fee revenue.

In April 2013, Apricus deconsolidated its French subsidiaries from the company's continuing financial results as a result of the entities' entering into a liquidation process. Apricus does not expect to have significant revenues from contract services in the future. The company expects its cash inflows during 2013 will be from licensing and milestone revenues received from commercial partners for Vitaros products. The timing of these revenues are uncertain. As such, revenue will vary significantly between periods.

Research and development costs for the first quarter were $1.4 million, an increase of $0.2 million compared to $1.2 million for the same period in 2012. This increase was primarily attributable to an increase in costs associated with regulatory filings in Europe and an increase in expenditures for its development pipeline, including Vitaros manufacturing and development activities. In 2013, Apricus expects to see an increase in research and development spending and the company continued to support regulatory filings across Europe for Vitaros, as well as develop the next generation of Vitaros and enter into clinical development and clinical trials for Femprox.

General and administrative expenses for the first quarter were $3.8 million, an increase of $0.6 million compared to $3.2 million for the same period in 2012. The increase was due to $0.9 million in general and administrative expenses associated with the company's former French subsidiaries. This increase was partially offset by $0.3 million attributable to reduced operating -- reduced consulting services, reduced personnel costs and reduced depreciation expense.

As a result of the deconsolidation of its French subsidiaries in April 2013, Apricus expects to see a reduction in G&A going forward.

Net cash used in operating activities was $6 million for the three months ended March 31, 2013, which will be reduced substantially for the remainder of 2013, due to the company's "narrowing of focus on the core development of opportunities of Vitaros and Femprox."

As of March 31, 2013, Apricus had cash and cash equivalents totaling $14.1 million compared to $15.1 million at December 31, 2012. In March 2013, the company completed the sale of its New Jersey facility, which provided net cash proceeds of $3.6 million. In addition, the sale of its Totect product to Biocodex realized $1.5 million in upfront cash. Apricus believes it has sufficient capital and access to capital to achieve our current initiatives and growth plans.

On May 23, 2013, Apricus announced that it had priced an underwritten public offering of an aggregate of 6 million shares of common stock at a price to the public of $2.85 per share, and warrants to purchase up to an aggregate of 3,000,000 shares of common stock for gross offering proceeds of $17.1 million. The shares of common stock and warrants are immediately separable and will be issued separately. The warrants are exercisable immediately upon issuance, have a five-year term and an exercise price of $3.40 per share.

In addition, Apricus granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of common stock and warrants to purchase up to an additional 450,000 shares of common stock to cover over-allotments, if any. The net offering proceeds to Apricus from this offering are expected to be approximately $15.8 million, after deducting underwriting discounts and commissions and other estimated offering expenses, but excluding the exercise of any warrants and any exercise of the underwriters' over-allotment option.

Apricus Bio intends to use the net proceeds of this offering for general corporate purposes, including working capital, capital expenditures, research and development expenditures, clinical trial expenditures and additional approval efforts related to Vitaros and Femprox.

Major Stockholders

Only 5% of Apricus stock is owned by institutions or mutual funds. There are 23 institutions that have invested in Apricus. The three largest are the Vanguard Group (2.29%), the California Public Employees Retirement System ((CALPERS)) (.85%), and Geode Capital Management, LLC (9.29%).


Apricus gets mixed reviews from analysts covering the company.

Motley Fool readers gave Apricus a paltry two star rating. The Street gave a D rating or Sell recommendation.

On July 28, 2013, Zacks had a 4 or Sell rank for Apricus.

On July 27, 2012, Lazard Capital gave Apricus a Buy rating and set an $8 price target for the stock.

On July 23, 2013, Ascendiant Capital Markets initiated coverage of Apricus with a Strong Buy rating and a $6 price target.

On June 13, 2012, JMP Securities began coverage of Apricus with a Market Outperform rating and a $6 price target.

On June 6, 2012, Roth Capital initiated coverage of Apricus with a Buy rating.

Apricus Biosciences has made significant corporate changes since its former President and CEO Bassam Damaj, Ph.D, left the company in November 2012.

On January 3, 2013, Apricus announced its corporate goals for 2013. The company would focus its corporate strategy on its high value assets, Vitaros for ED and Femprox for FSAD, and would seek a buyer for its oncology supportive care products, which consisted of two FDA-approved products sold in the United States.

In March 2013, Apricus ceased financing its French subsidiaries, Finesco SAS, its French holding company, Scomedica SAS, its French sales company and NexMed Pharma SAS, its marketing company, because changes in the French drug reimbursement environment now strongly favor generic pharmaceuticals which the company claims led to an unforeseen loss of contract revenue and a substantial reduction in the unit's value potential. As a result, the company recorded one-time, non-cash, impairment charges totaling approximately $8.8 million in the fourth quarter of 2012.

On March 18, 2013, Richard W. Pascoe was named Chief Executive Officer of the company. Pascoe came to Apricus from Somaxon Pharmaceuticals, Inc., where he was Chief Executive Officer since August 2008. At Somaxon, Pascoe was responsible for the FDA approval and successful commercialization of its lead drug Silenor (doxepin), as well as its sale to Pernix Therapeutics (NYSEMKT:PTX). Prior to Somaxon, Mr. Pascoe was with Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), where he was most recently Senior Vice President and Chief Operating Officer after serving as the company's Chief Commercial Officer. Prior to joining Ariad in 2005,. Pascoe held a series of senior management roles at King Pharmaceuticals, Inc., a specialty pharmaceutical company that was acquired by Pfizer, including Senior Vice President positions in both marketing and sales, as well as Vice President positions in both international sales and marketing and hospital sales. Pascoe served as a Commissioned Officer with the U.S. Army 24th Infantry Division, including as an advisor to the Brigade Commander during Operation Desert Storm. Pascoe received his B.S. degree in Leadership Studies from the United States Military Academy at West Point.

On April 1, 2012, Apricus announced the sale of Totect (dexrazoxane HCl), a marketed, injectable treatment for anthracycline extravasation, and NitroMist (nitroglycerin sublingual aerosol), an FDA-approved nitrate vasodilator indicated for acute relief of an attack or acute prophylaxis of angina pectoris due to coronary artery disease in order to focus its resources on commercializing Vitaros, and developing Femprox.

Vitaros is now partnered in key markets around the world, including the United States, Canada, Germany, the United Kingdom, Italy, the Gulf countries, certain other countries in the Middle East and Israel. In France, a significant ED market, Apricus Bio is preparing to commercialize the product directly through its European sales subsidiary. The Company is looking to secure partnerships in the remaining international territories, particularly in the emerging markets. In Europe, existing ED products currently generate over $1 billion dollar in sales and Apricus Bio believes a significant portion of the market remains untreated or undertreated. With a market affecting nearly 150 million men worldwide and representing approximately $1 billion in revenue in Europe, Vitaros represents a major market opportunity, particularly as a distinct product that addresses a significant underserved population.

Femprox could also prove to be a lucrative asset for Apricus. Femprox is different from other drugs in development for FSAD because it has a direct and localized mode of action. Virtually all other FSAD product candidates are either hormone-based or are SSRI inhibitors that act systemically and have high placebo response rates. Apricus holds worldwide rights for Femprox. The company has estimated this market to be worth $2 billion to $4 billion.

The company also has commercial partnerships with multiple large pharmaceutical companies including Novartis, Takeda, Abbott Laboratories, Sandoz, Warner Chilcott and Bracco.

With the completion of a $17.1 million financing, the divestiture of multiple non-core assets, and streamlining of its global operations, Apricus Bio has taken the steps necessary to advance its lead assets, Vitaros and Femprox, which should significantly increase long-term shareholder value.

Disclosure: I am long ARIA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.