ACRUX LIMITED — AGM Information 2017

Oct 25, 2017

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Acrux (ASX: ACR) Annual General Meeting 26 October 2017

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Introduction: Ross Dobinson Non-Executive Chairman

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Operational review: Michael Kotsanis CEO & Managing Director

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Forward looking statements

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This presentation includes forward-looking statements that are subject to risks and uncertainties. Such statements involve known and unknown risks and important factors that may cause the actual results, performance or achievements of Acrux to be materially different from the statements in this presentation.

Actual results could differ materially depending on factors such as the availability of resources, the results of clinical studies, the timing and effects of regulatory actions, the strength of competition, the outcome of legal proceedings and the effectiveness of patent protection.

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Agenda

Axiron patent litigation and status FY2017 outcomes and milestones Full year P&L and Cashflow Acrux pipeline selection and progress Near term milestones

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Axiron® timeline and status

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May / November 2013 Lilly and Acrux sue Perrigo for August 2016 patent infringement in May and May 2015 US District Court Actavis in November following December 2014 Lilly and decision that formulation October 2017 initial Axiron generic Lilly and Acrux Acrux sue and axilla patents are Federal Circuit submissions with Paragraph IV sue Amneal for Lupin for invalid. Lilly and Acrux appeal heard in certification against Axiron IP in patent patent appeal District Court Washington DC. the United States infringement infringement decision Decision pending. 2013 2014 2015 2016 2017 March 2015 July / August 2017 September 2017 FDA release third Drug Safety Perrigo (July) and Axiron license Communication on testosterone. Teva/Actavis terminated; Lilly FDA outlined requirement for NDA (August) announce withdrawing product sponsors to conduct a long term launch of a generic in United States postmarketing (PMR) safety trial. of Axiron and ceasing sales Trial is expected to start late 2017. of Axiron in other markets by December

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® Axiron is a trademark of Eli Lilly and Company

Acrux outlook and priorities following Axiron license termination

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Cash reserves	At 30th June 2017: $34.0 million
Future royalties	• Axiron royalties cease in line with Axiron license termination • Acrux is pursuing a range of opportunities to realise the value of its intellectual property • Evamist and Lenzetto royalties continue
Onychomycosis (ACR065)	• FDA Pre-IND meeting in October supportive of Acrux proposed clinical program and ethics application submitted for Phase 1 program in Australia • Project will now be suspended to preserve and focus cash on nearer term opportunities in topical generic pipeline
Pipeline focus	• Acrux had 7 generic products in active development in its pipeline at end FY2017 • Acrux plans to have 12 products in its generic pipeline by end FY2018 and will expand this to 19 products by end FY2019 • Acrux plans to submit its first generic dossiers to the FDA mid CY2018

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FY2017 outcomes

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Cash reserves 2017: $34.0 million 2016: $29.4 million Net (Loss)/Profit 2017: $(0.2) million includes a non-cash impairment loss of $10.68 million After Tax 2016: $11.1 million Royalty revenue 2017: $23.3 million 2016: $25.4 million Pipeline progress At end June 2017, Acrux had 8 products in active development including 7 generic products and 1 specialty product for onychomycosis

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FY2017 milestones

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•
Scale up activities to manufacture exhibit batches for initial generic products ✓
•
Gedeon Richter to continue country specific launches of Lenzetto in the ✓
European Union
•
Draft and submit patent application for ACR065 for onychomycosis ✓
•
Contract manufacturing organisation to be engaged to manufacture multiple ✓
generic products
•
Commence first bioequivalence study Trial planning
on schedule
•
Portfolio of 7 topical generic products in development by end FY17 ✓
•
Axiron Appeal outcome Federal Circuit hearing
5 October 2017
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• *a number of products in the Acrux pipeline do not require a clinical study for product approval

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Finance review: Tim Bateman CFO & Company Secretary

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Full year profit and loss

	2017 2016 $'000 $'000 % Full Year Ending
Royalty revenue Milestone revenue Interest & Other Income Total revenue and other income R&D investment Operating costs Non operating costs Total expenses Operating profit before impairment loss and income tax Impairment loss Operating (loss)/profit before income tax Income tax expense Net (loss)/profit for the year Earnings per share Basic (loss)/earning per share	23,321 25,469 (8.4%) - 2,540 (100.0%) 613 548 11.9%
	23,934 28,557 (16.2%) (9,247) (5,536) 67.0% (2,198) (2,390) (8.0%) (1,903) (2,539) (25.0%)
	(13,348) (10,465) 27.5% 10,586 18,092 (41.5%) (10,680) - -
	(94) 18,092 (100.5%) (149) (5,111) (97.1%)
	(243) 12,981 (101.9%)
	(0.15) cents 7.80 cents (7.95) cents

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• Royalty revenue largely comprises Axiron revenue of $22.8m which is 10% down on prior year

• Prior financial year milestone income reflects multiple marketing approvals of Lenzetto in the European Union by our licensee Gedeon Richter

• R&D investment was $9.2m up 67% prior year due to the increase in expenditure on our generics and specialty product pipeline

• Impairment loss is a result of a reassessment of the estimated future discounted cashflows from Axiron®. The assessment included consideration of the current market data for the Testosterone market in the United States and generic market penetration since 6 July 2017

• Income tax expense is $0.1m being 97.1% lower than prior year due to reversal of the deferred tax liability associated with the impaired portion of Axiron® capitalised development costs

• Loss after tax was $0.2m down $13.2m from prior year

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Full year cash flow

	2017 2016 $'000 $'000 % Full Year Ending
Cash flow from operating activities Receipts from product agreements Payments to suppliers and employees Interest received Income tax paid Net cash provided by operating activities Cash flow from investing activities Payment for property, plant and equipment Net cash used in investing activities Cash flow from financing activities Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Cash at beginning of year Foreign exchange differences on cash holdings Cash and at end of the year	21,822 28,208 (22.6%) (10,748) (7,923) 35.7% 637 515 23.7% (6,335) (4,294) 47.5%
	5,376 16,506 (67.4)%
	(629) (236) 166.5%
	(629) (236) 166.5%
	- (9,992) (100.0%)
	- (9,992) (100.0)%
	4,747 6,278 (24.4)% 29,360 23,068 27.3% (133) 14 (1050.0)%
	33,974 29,360 15.7%

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• Cash received from product agreements was $21.8m, down 22.6% on prior year due to: ‐ lower Axiron royalty receipts

• ‐ non recurrence of Lenzetto European approval milestones

• • Payments to suppliers & employees was $10.7m up 35.7% due to increased investment in R&D pipeline.

• Interest received is up 23.7% on prior year due to higher average cash reserves held during year

• Tax payments for the financial year were $6.3m or 47.5% higher than prior year reflecting the timing of tax payments

• • Capital expenditure was $0.6m up 166.5% on prior year

• • Cash reserves at year end were $34.0m up 15.7% or $4.6m on prior year

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Operational Report continued: Michael Kotsanis CEO & Managing Director

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Generic pharmaceuticals…

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According to the FDA:

“Generic drugs…are just as safe and just as effective as their brand-name counterparts, and they are a cost effective way of achieving substantial savings.” “A generic drug is identical or bioequivalent to a brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.”

According to the American Medical Association (AMA):

“One of the primary ways physicians can practice cost-effective prescribing is by offering patients a generic medicine when one is available.”

What is a generic medicine?

Generic drugs contain the same active ingredients, in the very same strength, as brand-name drugs. When a medicine is first developed, the pharmaceutical company that discovers and markets it receives a patent on its new drug. The patent usually lasts for 20 years, to give the originating company a chance to recoup its research investment. After the patent expires, a generic version of the drug may become available. Generics are marketed under the drug's chemical, or "generic," name and meet the same FDA quality and effectiveness standards as the original.

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Source: http://www.gphaonline.org/about/generic-medicines

…dominate the United States market

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Ten years of quarterly prescription trends – United States

9 out of 10 scripts dispensed are generic

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Source: QuintilesIMS, Morgan Stanley Pharma Rx chart, Oct, 2017

The value of generic medicines to patients and the economy…

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INCREASED PATIENT ACCESS PATIENT-RELATED VALUE

OVERALL ECONOMIC VALUE

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• IMPROVED MEDICATION ADHERENCE
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• BETTER PATIENT HEALTH OUTCOMES
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HYPERTENSION
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MORE PATIENTS TREATED
with
SAME EXPENDITURE
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BREAST CANCER
SAME NUMBER OF PATIENTS TREATED
with
LESS EXPENDITURE
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DEPRESSION
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MORE PATIENTS TREATED
with
SMALL EXPENDITURE INCREASE
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Source: European Generics Medicines Association / Medicines For Europe, Health Economics Study, October 2015

…will grow as more products face patent expiry

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Small molecule patent expiry exposure in the United States ($ Billion)

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35 >$50 billion
29.2
30
25.2
25
20.6
20
15.4
15 14
12.8
11
9.3
10
5
0
2013 2014 2015 2016 2017 2018 2019 2020
$ Billion
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Over $50 billion of branded sales facing loss of exclusivity in the United States in coming years

Source: QuintilesIMS, National Sales Perspectives, Sep 2016, US$ Sales in year prior to expiry used for years 2013-16; sales in MAT Sep 2016 used for years 2017-20

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The Acrux pipeline…

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Technology
Attracts
partners Regulatory
NCE
Ointments,
creams, gels,
solutions
Generics (ANDA),
505(b)(2)
ACRUX CORE
CAPABILITY Discovery,
Therapeutic Dermatology, Development and Generics or Drug
area drugs on skin approval of reformulation discovery Research or
topically applied Development
pharmaceuticals
US, EU
Duration and
quality of IP
Emerging markets
Geography Intellectual
property
Opportunity value
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– United States market sales by dosage form

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Dosage proportion based on sales
16
14
Oral
Injectable 12
Liquids 10
Topical $200 billion
8
$130 billion
Aerosol
6
Powders
4
Other
2
0
Market size for topically applied
drugs
$ Billion
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Generic
Brands
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Topically applied drugs generate almost $18 billion in sales in the United States Acrux pipeline is focussed on the development of generic topical/transdermal products

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Source: US market by dosage form, IMS Q2, 2015 MAT. US market sales. US$. Market size for topically applied drugs IMS Q1, 2017 MAT US$

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Selecting a topical generic portfolio

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472 molecules
applied
165
topically
molecules
generate sales
>$10 million
80 molecules
in sales
>$50 million
in sales
15 molecules
with >20%
growth and
sales >$20
million
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• Acrux is targeting molecules with low to modest competition

• often have more than one

• Drugs presentation (including creams, gels, ointments, solutions, lotions, patches)

• Competition, pricing and sales of relevant skus are considered in business case

• Complexity and cost and any clinical is a factor considered in all

• program business cases

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Significant number of topical opportunities for Acrux to target

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Source: Acrux analysis. IMS March 2017 MAT. US transdermal and topical generic and branded market segments. US$

The Acrux market opportunity

Acrux generic pipeline addressable market value

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18 addressable market value
1200
16
14 Generic 1000
12
800
10
600
8
Brands
6
400
4
200
2
0
0
Pipeline of generics - June 2017
Market size for topically applied
drugs
$ Billion $ Million
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Acrux had 7 generic products in active development at end FY2017 Acrux currently has 9 generic products in active development Acrux plans to increase this to 12 generic products in active development by end FY18

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Source: IMS Q1, 2017 MAT. US market sales. US$

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Addressable market for Acrux generic pipeline

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Acrux generic pipeline
addressable market value
1200
1000
800
600
400
200
0
Pipeline of generics - June 2017
$ Million
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Acrux generic pipeline by number of generic competitors

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1200
1100
1000
900
800
700
600
500
400
300
200
100
0
0 Gx 2 Gx 3 Gx 4 Gx 5+ Gx
$ Million
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Source: IMS Q1, 2017 MAT. US market sales. US$

Addressable market for Acrux generic pipeline

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Acrux generic pipeline by
number of generic competitors
hormones
1200 (testosterone, acne
estradiol)
1100
1000
900
800
700
Example
600 therapeutic anti-rheumatic analgesic
500
areas
400
300
200
100
0 corticosteroids antifungal
0 Gx 2 Gx 3 Gx 4 Gx 5+ Gx
$ Million
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Source: IMS Q1, 2017 MAT. US market sales. US$

Advancing our generic pipeline to create value

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MID-2018
Formulation Process Bioequivalence Regulatory Approved/
Development Development / Clinical Submission Launched
MID-2017
3
Formulation Process Bioequivalence Regulatory Approved/ Products
Development Development / Clinical Submission Launched
2
3 Products
Products
7
4 Products
Products
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*based on FDA Guidance, a number of products in the Acrux generic pipeline do not require a clinical study for product approval

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Future milestones

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• Plans to submit first generic dossiers to FDA for review mid CY2018

• Axiron Appeal outcome

• Initial revenue from generic pipeline expected CY2019

• Portfolio of 12 topical generic products in development by end FY2018

• Portfolio of 19 topical generic products in development by end FY2019

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Acrux (ASX: ACR) Annual General Meeting 26 October 2017

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