Petros Pharmaceuticals Announces First Quarter Financial Results and Provides Corporate Update; Reports 300% increase in Year-Over-Year STENDRA Net Sales

NEW YORK, May 17, 2021 /PRNewswire/ -- Petros Pharmaceuticals, Inc. (Petros or the Company) (Nasdaq: PTPI), a leading provider of therapeutics for men's health, today announced financial results for the first quarter ended March 31, 2021.

First Quarter Highlights:

• 300% increase in STENDRA® net sales during the first quarter of 2021 vs. first quarter of 2020
• STENDRA® tablet prescriptions increased 23% year-over-year and 6% over the prior quarter, achieving an all-time high in prescription tablets since Petros began marketing STENDRA®
• Petros's gross margins expanded to 84% in the first quarter of 2021, up from 56% in the same period of 2020
• Reduced operating expenses (excluding depreciation and amortization) to $3.9 million, down from $5 million in the first quarter of 2020, an improvement of 22%
• Positive quarterly net income was $3.0 million versus negative $6.1 million for the year ago period due to increased net sales and margins, lower operating expenses and a change in fair value of a derivative liability
• Reduced quarterly Adjusted EBITDA loss to $0.5 million versus $4.0 million for the year-ago period
• Featured published preliminary research on investigational use of STENDRA® for endothelial function
• Formed a steering committee to develop expanded patient access initiatives, including non-prescription and/or over the counter (OTC) status strategies, for its STENDRA® (avanafil) product.

"Petros's performance during the first quarter of 2021 significantly outpaced the same period from 2020, a pre-COVID comparator that provides us reason for optimism going into the rest of 2021 after a significant sector-wide downturn during the majority of 2020.  The Company enjoyed a 300% increase in STENDRA net sales year-over-year and prescriptions increased both year-over-year and over Q4 2020 - an all-time high since Petros began marketing STENDRA.  We believe this, in part, results from our streamlining of internal processes and cost-cutting measures, combined with implementing improved sales and marketing initiatives.  In addition, the Company enjoyed an emerging post-COVID optimism from prescribers, consumers and distribution channels, which created a favorable environment for increased prescriptions," stated Fady Boctor, Petros Pharmaceuticals' President and Chief Commercial Officer.

"The Company continues to follow multiple tracks to achieve success, including the pursuit of a possible approval for over-the-counter usage for STENDRA®, as well as new and expanded labeling, which will provide increased flexibility in patient access.  We are also exploring several new opportunities from a sales and marketing perspective that we believe will result in improving awareness and demand for the product. In the meantime, we continue to explore additional opportunities to expand our product offering, focusing on the overall men's health market." 

Q1 2021 Financial Results

Net sales for the first quarter ended March 31, 2021 were $4.1 million, composed of $3.2 million of net sales from Prescription Medicines and net sales of $0.9 million from Medical Devices.  This compares to net sales for the quarter ended March 31, 2020, which were $1.8 million composed of $0.8 million of net sales from Prescription Medicines and net sales of $1.0 million from Medical Devices.  Prescription Medicines consists primarily of STENDRA®, which is indicated for male erectile dysfunction and Medical Devices includes Vacuum Erection Devices ("VEDs") and associated accessories and products.  The Prescription Medicines segment net sales increased 301% year-over-year in the first quarter, driven by higher wholesaler and prescription demand coupled with sales allowance efficiencies and reductions as described below.  The Medical Device segment declined 12% year-over-year due to a strategic shift in Direct to Consumer promotion, opening international markets and Business to Business distributor partnerships.

Net sales improved significantly to 55.4% of gross sales in the first quarter of 2021, up from 32.9% in the year-ago period.  This increase was driven primarily by an improvement in product returns and lower contract rebates as well as lower distribution service fees and coupon redemptions, slightly offset by higher chargebacks and cash discounts.

Gross profit for the first quarter of 2021 was $3.4 million, composed of $2.8 million of gross profit from Prescription Medicines and $0.6 million from Medical Devices. Gross profit for the first quarter of 2020 was $1 million, composed of $0.3 million of gross profit from Prescription Medicines and $0.7 million from Medical Devices. Overall gross margins increased to 84.2%, up from 56.2% in the prior-year period, an increase of 2800 basis points.  This increase was driven by gross margins from prescription medicines increasing to 87.8%, up from 37.2% in the prior-year period.  Gross margins from the medical devices segment was flat from the prior year at approximately 71%.  Gross margins also benefited from the mix shift of a higher portion of revenues coming from its higher margin medical device segment, which increased from 44.5% in the first quarter of 2020 to 78.5% in the first quarter of 2021.

Selling, general and administrative expenses for the first quarter of 2021 were $3.9 million, composed of $1.7 million of selling, general and administrative expenses of the Prescription Medicines segment, $0.6 million of selling, general and administrative expenses of the Medical Devices segment and $1.6 million of general corporate expenses.

In contrast, selling, general and administrative expenses for the first quarter of 2020 were $4.8 million, composed of $3.1 million of selling, general and administrative expenses of the Prescription Medicines segment, $0.7 million of selling, general and administrative expenses of the Medical Devices segment and $0.9 million of general corporate expenses.

The 19% decrease in selling, general and administrative expenses in the first quarter of 2021 compared to the year-ago period were primarily driven by lower payroll expenses and direct marketing expenses as management sought to optimize spend and reduce expenses due to an evolving COVID-19 marketplace; partially offset by increased accounting and legal fees associated with the Metuchen acquisition.

Research and development expenses for the first quarter of 2021 were $19,000 versus $139,000 in the prior-year period.

Operating loss for the first quarter of 2021 was $2.2 million versus $5.6 million in the year-ago period.  The improvement in operating loss was driven by higher gross profit and lower operating expenses, primarily selling, general and administrative expenses.

The Company generated net income for the current fiscal quarter versus a net loss for the comparable year ago period. Net Income for the first quarter of 2021 was $3.0 million, up from a net loss of $6.1 million in the first quarter of 2020.  The improvement in net income was primarily due to increased net sales and margins, lower operating expenses and a change in the fair value of derivative liability of positive $5.4 million, which represents the earnout related to the Metuchen acquisition.

Adjusted EBITDA was a loss of $0.5 million in the first quarter of 2021 versus a loss of $4.0 million in the first quarter of 2020.  The improvement in the first quarter of 2021 adjusted EBITDA loss resulted from net sales improvements and operating efficiencies as noted above.

Cash totaled $14.6 million at March 31, 2021, compared to $17.1 million at December 31, 2020.

About Petros Pharmaceuticals

Petros Pharmaceuticals is committed to the goal of becoming a world-leading specialized men's health company by identifying, developing, acquiring, and commercializing innovative therapeutics for men's health issues including, but not limited to erectile dysfunction, endothelial dysfunction, psychosexual and psychosocial ailments, Peyronie's disease, hormone health and substance use disorders.

Cautionary Note Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based upon Petros Pharmaceuticals, Inc.'s ("Petros," "we," "our," "us" or the "Company") management's assumptions, expectations, projections, intentions and beliefs about future events. In some cases, predictive, future-tense or forward-looking words such as "intend," "develop," "goal," "plan," "may," "will," "project," "estimate," "anticipate," "believe," "expect," "continue," "potential," "opportunity," "forecast," "should" and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of risks and uncertainties, including, without limitation, Petros' ability to execute on its business strategy, including its plans to develop and commercialize its product candidates;  the ability of Petros to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; the risk that the financial performance of Petros may not be as anticipated by the merger transactions that resulted in the Company's creation; risks resulting from Petros' status as an emerging growth company, including that reduced disclosure requirements may make shares of Petros common stock less attractive to investors; risks related to Petros' ability to continue as a going concern; risks related to Petros' dependence on the commercialization of a single product, Stendra®, and on a single distributor thereof; risks related to Petros' commercial supply agreement with Vivus; and risks related to Petros' ability to obtain regulatory approvals for, or market acceptance of, any of its products or product candidates. Additional factors that could cause actual results to differ materially from the results anticipated in these forward-looking statements are contained in the Company's periodic reports and in other filings that the Company has filed, or may file, with the U.S. Securities and Exchange Commission (the "SEC") under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere. The Company cautions readers that the forward-looking statements included in this press release represent our beliefs, expectations, estimates and assumptions only as of the date of hereof and are not intended to give any assurance as to future results. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, the Company cannot assess the effect of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. Accordingly, you should not unduly rely on any forward-looking statements.

The Company undertakes no obligation to update or revise any forward-looking statements contained in this press release, whether as a result of new information, future events, a change in our views or expectations or otherwise, except as required by federal securities laws.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP financial measure utilized by management to evaluate the Company's performance on a comparable basis. The Company believes that Adjusted EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company's business as Adjusted EBITDA may enhance investors' ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization and to evaluate the Company's ability to service debt. In addition, Adjusted EBITDA is a financial measurement that management and the Company's Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA is a non-GAAP financial measure commonly used in the Company's industry and should not be construed as an alternative to net income as an indicator of operating performance (as determined in accordance with GAAP). The Company's presentation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Adjusted EBITDA is adjusted to exclude certain items that affect comparability. The adjustments are itemized in the tables below. You are encouraged to evaluate these adjustments and the reason the Company considers them appropriate for supplemental analysis. In evaluating adjustments, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments set forth below. The presentation of these adjustments should not be construed as an inference that future results will be unaffected by unusual or recurring items.

The Company defines Adjusted EBITDA as net income (loss) adjusted to exclude (i) interest expense, net, (ii) depreciation and amortization and (iii) income taxes, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing operating performance or that are non-recurring in nature. For example, Adjusted EBITDA:

• does not reflect the Company's capital expenditures, future requirements for capital expenditures or contractual commitments;
• does not reflect changes in, or cash requirements for, the Company's working capital needs;
• does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt; and
• does not reflect payments related to income taxes, if applicable.

The following table presents a reconciliation of Net income (loss) to Adjusted EBITDA for the three months ended March 31, 2021 and 2020.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company's results as reported under GAAP.

SOURCE Petros Pharmaceuticals, Inc.