ACRUX LIMITED — AGM Information 2019

Nov 27, 2019

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ACRUX ANNUAL GENERAL MEETING (ASX: ACR)

28 November 2019

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ROSS DOBINSON CHAIRMAN

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MICHAEL KOTSANIS CEO

IMPORTANT NOTICE AND DISCLAIMERS

This presentation contains forward-looking statements which are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘expects’, or ‘intends’ and other similar words that involve risks and uncertainties.

These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this presentation, are expected to take place.

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

Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of our Company, the Directors and our management.

We cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forwardlooking statements contained in this presentation will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements.

We have no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this presentation, except where required by law and under our continuous disclosure obligations.

These forward looking statements are subject to various risk factors that could cause our actual results to differ materially from the results expressed or anticipated in these statements.

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ACRUX IS AN EXPERIENCED AND PROVEN DEVELOPER OF HIGH VALUE TOPICAL DRUGS

Acrux is a revenue generating pharmaceutical company with an advancing product pipeline of topical generic products nearing additional commercialisation and revenue milestones

Acrux products Acrux outcomes and expectation ▪ Acrux has invested A$34m in R&D from FY16-19 ▪ 1-3 product licensing deals in CY20 Acrux Pipeline and now has a drug development pipeline of 14 ▪ 3-5 product licensing deals in CY21 generic products ▪ Estradiol spray Commercialised as Lenzetto® in 33 countries with ▪ Royalties received on Lenzetto sales grew 77% Products royalties and milestones received from FY17 onwards. over prior year commercialised Commercialised as Evamist® in the United States. by Acrux ▪ Testosterone solution ▪ Royalties payable to Acrux are expected to further grow and exceed $800k in FY20 Commercialised in 6 countries with royalties and milestones received from FY10 – FY18

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INVESTMENT HIGHLIGHTS

Acrux is a revenue generating pharmaceutical company with an advancing product pipeline of topical generic products nearing additional commercialisation and revenue milestones

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▪ The topical generic market provides attractive returns with fast, low-risk development costs for
Focus on
highly specialised drug developers
specialised and ▪
The size of the topical generic market in the US is ~US$20bn
lucrative topical ▪ 14 products now in the pipeline of generic products, with an addressable market of ~US$1.5bn
generic market ▪ Multiple licensing deals with recurring revenue and potential milestones under negotiation
▪ Defined commercialisation strategy to repeatably bring products to market
Highly skilled ▪ Led by managing director Michael Kotsanis the Acrux team possesses unique development and
development commercialisation know-how and capabilities
team ▪ State of the art GMP facility and 25 specialised scientists create a substantial competitive advantage
in generic product selection, development and commercialisation
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▪ $34m invested in R&D since August 2015 with R&D costs largely invested for near term products R&D investment ▪ 3 products nearing FDA approval in product ▪ 1 – 3 product licensing deals to be executed in CY 2020 pipeline nears ▪ 3 – 5 additional product licensing deals to be executed in CY 2021 commercialisation ▪ Objective to be cash flow positive by end of 2021

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REVENUE GENERATING BUSINESS MODEL SUPPORTING LONG-TERM GROWTH

▪ With a State of the art GMP facility and 25 specialised scientists, Acrux possesses the capabilities for the development, regulatory submission and approval of generic topical and transdermal drugs

▪ Expertise extends to negotiating and dealing with commercial partners for the licensing and commercial launch of products on a global scale

▪ The core business model of drug development is supported by ongoing licensing opportunities for manufacturing and distribution

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1 2
Generic drug Development
identification and IP transfer
4 3
Product launch FDA review
via licensing deals and approval
Acrux has invested A$34m in R&D from FY16-19 and now
has a drug development pipeline of 14 generic products
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TOPICAL GENERICS: AN ATTRACTIVE US$20B MARKET

	Total market	Oral drugs	Acrux focus: Topical drugs
Definition of market	Total US prescription pharma market	Drugs that are ingested orally	Drugs that are applied topically (including directly to the skin, eyes, ears and nose)
Market size1	>US$460bn	~US$200bn	~US$20bn2
Generic market share	~90%3	~91%3	47%4
Typical generic development complexity	Variable	Low	Greater complexity than oral generic drug development
Generic competition	Variable	Competition from many drug manufacturers	Limited generic competition given niche market and development complexity

Source:

1. US market by dosage form, IQVIA Q1, 2019 MAT, US market sales (US$)

2. Market size for topically applied drugs IQVIA Q1, 2019 MAT (US$)

3. IQVIA Global Generic and Biosimilars Trends and Insights – 2018

4. IQVIA, National Sales Perspectives, January 2019 – Unbranded generic share of dermatology, MAT

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GENERIC DRUG DEVELOPMENT IS FASTER AND LESS RISKY THAN NOVEL DRUG DEVELOPMENT

Acrux’s drug development strategy provides more certainty than novel drug development

Commercial Strategy

Development Process

Time, Cost and Value

Acrux’s portfolio strategy for topical generics

Portfolio Strategy

Sophisticated screening of generic drug candidates underpins Acrux’s de-risked portfolio strategy

• Acrux rigorously screens market data for drug candidates in attractive markets where Acrux can leverage its drug development and commercialisation track record

• Acrux is able to develop and commercialise a generic drug for ~AUD$3-4m within ~4 years

• Once a licensing deal is executed and a product launched royalty/profit share revenue is expected to grow strongly

Novel drug development

Single Drug Strategy Novel drug development will remain speculative given high costs and risks of development

▪ Less than 12% of novel drug candidates make it into Phase I clinical trials[1]

• Developing a novel drug takes 10+ years[1]

• Drug development involves multiple expensive long-term trials

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1. Pharmaceutical Research and Manufacturers of America (PhRMA 2015): https://www.phrma.org/graphic/the-biopharmaceutical-research-and-development-process

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ACRUX PRODUCT PIPELINE’S $1.5 BILLION ADDRESSABLE MARKET

Acrux’s $34m investment in R&D unlocks a $1.5bn market in topical drugs with limited generic competition

Addressable market value of pipeline[1] ($USm)

# of commercialised generic (ANDA)

competitors approved and on the market[2]

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5+ Generics
4 Generics $235m
3 Generics
2 Generics
1 Generic
No Generics $124m
$135m
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$987m
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Addressable market US$1.5 bn

Based on 14 products currently in the Acrux topical generic pipeline

Fewer generic products on the market creates favourable economics

• ✓ Capture higher market share for products with lower competition

• ✓ More than half of Acrux’s portfolio have no commercialised generic equivalents

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1. Addressable market for Acrux pipeline is based on twelve months sales to end March 2019 based on IQVIA (Quintiles and IMS Health) sales data

2. March 2019 based on IQVIA (Quintiles and IMS Health) sales data. As at August 2019 there are currently 10+ dossiers submitted to the FDA for a generic version of Jublia® with none commercialised

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EXPERIENCED MANAGEMENT TEAM WITH A PROVEN HISTORY OF COMMERCIALISING GENERIC DRUGS

CEO & MD Michael Kotsanis leads a team of highly credentialed experts in generic drugs

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Michael Kotsanis CEO &

Managing Director

• Experienced leader in the pharmaceuticals industry with demonstrated success commercialising generic products

• Formally CCO for Synthon Holding BV, an international pharmaceutical company and a leader in the field of generic medicines

• Prior to Synthon Michael was President, Europe for Hospira - the largest global generic injectable company, before its acquisition by Pfizer

• Michael holds a BSc and a MBus

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Felicia Colagrande, BSc(Hons), MBA Product Development and Technical Affairs Director

Significant pharmaceutical operations, dermal drug development, analytical development and production experience. Leads all technical aspects of pharmaceutical product development including R&D, analytical development, project management and CMC development

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Charles O’Sullivan, B. Pharm Portfolio Director

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Experienced healthcare executive with senior and international leadership roles in scientific affairs, medical affairs, health economics and government affairs. Previously Asia Pacific Director of Medical and Government Affairs for Hospira (now Pfizer)

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Deborah Ambrosini, CA CFO & Company Secretary

Over 20 years’ experience in accounting and business development spanning the biotechnology, mining, IT communications and financial services. Experience in senior management roles ASX listed PDFs

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PLATFORM FOR GROWTH ESTABLISHED

With $34m invested in the platform over the past 4 years Acrux has a competitive advantage in the identification, development, registration and launch of generic topical drugs

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Acrux Pipeline Status Description
Product Acrux expects a typical license agreement to
LAUNCH 1-3 licensing deals targetted for consist of an with the potential for milestone payments to annuity-style revenue stream ,
CY 2020 be included as well
Products The FDA has made a commitment to review 90%
accepted for of ANDAs within 10 months [1] . Following initial
APPROVE 3 FDA review in review there may be additional FDA questions to
CY 18/19 be answered prior to approval
R&D team with highly specific topical
Generic products expertise drive development. Acrux has
DEVELOP 14 in development unique capabilities for topical drug
development
Identified topical
Market screening to identify high potential
drugs, each with
176 prescription topical products
>US$10m in sales
IDENTIFY
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1. Under GDUFA II, the FDA has committed to review 90% of Abbreviated New Drug Applications (ANDA) applications within 10 months. ANDA approval will follow if the FDA is satisfied during the review process

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MILESTONES & 2020-21 STRATEGIC OBJECTIVES

Significant value expected over the next 24 months with multiple FDA approvals and licensing deals anticipated across the portfolio

Pipeline composition – CY19

Key upcoming milestones

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11
3
Development FDA review
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CY20 CY21	CY20 CY21	CY20 CY21
Pipeline objectives	▪4 products submitted to the FDA for review ▪maintain 11 products in development	▪4 products submitted to the FDA for review ▪maintain 11 products in development
Commercial objectives	▪1-3 product licensing deals executed	▪3-5 product licensing deals executed ▪Cash flow positive

Typical generic pharma licensing deals include an annuity style profit share or royalty arrangement and may also include milestone payments associated with deal execution, FDA approval and/or commercial launch

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CASE STUDY: TOPICAL GENERIC DRUG MARKET ENTRY

With modest development costs generic drugs represent a de-risked approach to drug development

• In September 2000 Allergan received FDA approval for its topical cream Tazarotene which is used for the treatment of psoriasis and acne

• On 4 April 2017, Taro Pharmaceuticals first generic version of Tazarotene was approved

• Sales as measured by IQVIA (Q1, 2017 MAT) were US$51 million

• Allergan’s sales of the branded drug fell from USD$12m in Q1 2017 to USD$7m in Q2 2017

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Branded vs Generic Sales per Quarter ($USD)
16
14
12
10
8
6
4
2
0
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
ALLERGAN/ALMIRALL G&W LABS TARO PHARMA
Source: IQVIA Q1, 2019 MAT, US market sales (US$)
$US million
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• Taro Pharma’s generic drug achieved aggregate sales of USD$14.4m in its first 6 quarters of sales

Since launch the generic version of Tazarotene has generated sales of USD$17m

• In Q3 2018 a second generic version of Tazarotene from G&W Labs entered the

• market

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CASE STUDY: SOL-GEL’S PROFIT SHARE FROM THE DEVELOPMENT OF ACYCLOVIR CREAM

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• A small clinical-stage dermatology company focused on identifying, developing and commercialising branded and generic topical drug products

• Announced FDA approval for first generic product in February 2019 , in a profit sharing partnership with Perrigo

• Acyclovir cream is used for herpes labialis (cold sores)

• The FDA Orange Book formulation patent expired in 2007

• Sol-Gel’s licensee launched mid Q1, 2019 following FDA approval

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7.8
6.4
Sol-Gel revenue
from profit share
agreement
($USD)
0.04 0.00
30-Sep-18 31-Dec-18 31-Mar-19 30-Jun-19
# Products
0 0 1 1
commercialised
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In the first 2 quarters since launch the generic version of acyclovir cream has generated revenue for Sol-Gel of USD$14.2m

• Sales as measured by IQVIA (Q1, 2019 MAT) were US$89 million

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DEBORAH AMBROSINI CFO

FULL YEAR PROFIT AND LOSS

	Full Year Ending 30 June 2019 30 June 2018 $'000 $'000 %
Royalty revenue Interest & other income Grant revenue Other income Total R&D investment Other operating costs Non operating costs Total expenses Operating loss before impairment loss and income tax Impairment loss Operating loss before income tax Income tax (expense) / benefit Net loss for the year Loss per share Basic loss per share Cash reserves	631 2,687 (76.5)% 579 671 (13.8)% 4,072 0 - 4 74 (94.6)%
	5,286 3,432 54.0% (10,917) (10,624) 2.8% (2,189) (2,705) (19.1)% (515) (581) (11.4)%
	(13,621) (13,910) (2.1)% (8,335) (10,478) (20.5)% - (5,647)
	(8,335) (16,125) (48.3)% 10 1,943 (99.5)%
	(8,325) (14,182) (41.3)%
	(5.00) cents (8.52) cents 18,152 28,470 (36.2)%

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FULL YEAR CASHFLOW

	Full Year Ending 30 June 2019 30 June 2018 $'000 $'000 %
Cash flow from operating activities Receipts from product agreements Payments to suppliers and employees Interest received Income tax refunded / (paid) Grant income Net cash used in operating activities Cash flow from investing activities Payment for property, plant and equipment Net cash used in investing activities Net decrease in cash and cash equivalents Cash at beginning of year Foreign exchange differences on cash holdings Cash and cash equivalents at end of the year	576 7,872 (92.7)% (13,233) (12,731) 3.9% 611 610 0.2% 51 (1,033) (104.9)% 2,057 -
	(9,938) (5,282) 88.1%
	(380) (296) 28.4%
	(380) (296) 28.4%
	(10,318) (5,578) 85.0% 28,470 33,974 (16.2)% - 74 -
	18,152 28,470 (36.2)%

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FUTURE CATALYSTS

The success of Acrux’s strategy and management’s execution will be driven and measured by:

• ACRUX Commercial launch and cash flow generation from new generic drugs

• STRATEGY • FDA approvals for new products • • FDA acceptances for review of new topical generic drugs

• • Continued revenue growth of existing on market products

• CY 2020 • 4 additional products under FDA review

• OBJECTIVES • 11 products in development

• Commercial launch and cash flow generation from new generic drugs

• Licensing and profit share agreements with generic pharmaceutical companies

• 1 – 3 product licensing deals executed

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• Continued revenue growth of existing on market products

• • Cash flow positive by the end of 2021

• CY 2021 • 11 products in development

• OBJECTIVES • 3 – 7 products under FDA review • 3 – 5 additional product licensing deals executed

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BENEFITS OF A POOLED DEVELOPMENT FUND

1 Companies with PDF status are taxed at 15% on their income and capital gains received from their investments 2

Australian resident shareholders are exempt from capital gains tax after selling their shares 3 Unfranked dividends received by an Australian resident shareholder from the Company will be exempt from tax in the hands of the shareholder 4

Franked dividends will also be exempt from tax unless the shareholder elects to treat the franked dividend as taxable

Shareholders should seek professional advice from their tax advisor regarding Pooled Development Funds and the benefits specifically available to their situation

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THANK YOU

Michael Kotsanis Acrux Limited CEO & Managing Director P: + 61 3 8379 0100 E: michael.kotsanis@acrux.com.au Visit our website: http://www.acrux.com.au/ Follow us on LinkedIn:

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