SEELOS THERAPEUTICS, INC. (SEEL)·Q1 2018 Earnings Summary

Executive Summary

• Apricus Biosciences reported Q1 2018 net loss of $2.271M and total EPS of -$0.14; prior-year quarter benefited from an $11.8M gain on sale of ex-U.S. Vitaros rights, driving net income of $8.073M and EPS of $1.04 .
• Post April FDA end-of-review meeting for Vitaros, management is pursuing U.S. Vitaros partnership discussions and evaluating strategic alternatives, engaging Canaccord Genuity to maximize shareholder value .
• Cash was $5.678M at March 31, 2018; management reiterated cash runway through end of 2018 and noted ~$2.9M equity proceeds closed April 2, 2018, which are excluded from the March balance .
• The quarter’s narrative pivoted from regulatory remediation to monetization options (partnership, sale, merger/reverse merger, or license) following FDA concerns on DDAIP safety at 2.5% concentration; this process is a key potential stock catalyst .

What Went Well and What Went Wrong

What Went Well

• Strategic pathway clarified: “Since our recent end-of-review meeting… we have been focused on pursuing U.S. Vitaros partnership… In parallel, the Company is evaluating strategic alternatives… [and] engaged Canaccord Genuity LLC to assist in that process,” said CEO Richard Pascoe .
• Operating discipline: R&D expense decreased year over year to $0.217M from $0.412M, reflecting tighter spend while navigating regulatory and strategic priorities .
• Liquidity visibility: Management reiterated runway through end-2018 and highlighted post-quarter equity financing (~$2.9M net proceeds), bolstering flexibility for FDA follow-up and transactions .

What Went Wrong

• Significant YoY decline: Q1 2018 net loss of $2.271M versus Q1 2017 net income of $8.073M reflects absence of prior-year gain on sale of ex-U.S. Vitaros rights (the $11.8M gain drove that result) .
• Regulatory overhang: FDA continues to question DDAIP 2.5% safety (tumor promotion, STI transmission) and raised two new CMC issues; management sees these as addressable but gating approval timing .
• Higher G&A: General & administrative rose to $2.135M from $1.441M YoY, as the company managed regulatory interactions and strategic efforts, pressuring operating loss from continuing operations .

Financial Results

Quarterly Trend

Notes: Q4 2017 press release provided total net loss and EPS, not a discontinued/continuing breakout for the quarter .

Year-over-Year (Q1)

Operating Expenses and Other Items

Cash Position

Revenue and margin comparisons are not applicable; the company reported no revenue line items in the selected financial information, and margin metrics are not meaningful for a pre-commercial profile .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our objective is to enable continued development and potential approval of the Vitaros product and receive financial terms commensurate with this development stage asset in exchange for a sublicense or assignment of our U.S. development and/or commercialization rights. In parallel, the Company is evaluating strategic alternatives… [and] has engaged Canaccord Genuity LLC to assist in that process.” — Richard Pascoe, CEO .
• “The FDA continues to question whether the overall risk benefit profile of Vitaros outweighs the safety concerns… the safety of the permeation enhancer DDAIP… as a tumor promoter and its potential to enhance the transmission of sexually transmitted infections… [plus] two new CMC issues… we believe are addressable.” — Richard Pascoe .
• “One potential pathway… is lowering the concentration of the DDAIP… or… additional nonclinical studies… if we had to reformulate… we would have to run at a minimum some type of bridging study.” — Kelly Deck .

Q&A Highlights

• DDAIP strategy: Management outlined two potential routes—reduce DDAIP concentration with bridging efficacy study or undertake additional nonclinical work—to address FDA’s safety concerns .
• Safety signals ex-U.S.: Company noted its prior ex-U.S. safety database did not show signals of tumor promotion or STI enhancement; issue appears specific to FDA’s U.S. review .
• Cash runway and spend: No substantial near-term R&D on Vitaros until after FDA meeting; reiteration of cash runway through 2018 with continued expense reductions .
• Allergan’s role: Allergan remains engaged; has opt-in rights post-approval; Apricus retains development responsibility and is exploring alternatives if it cannot proceed alone .

Estimates Context

• Wall Street consensus EPS and revenue estimates via S&P Global were unavailable for SEEL for Q1 2018 due to missing CIQ mapping in the system; no estimate comparisons can be made at this time [SpgiEstimatesError].
• Given the company’s pre-commercial profile and absence of reported revenue line items, meaningful sell-side revenue/EPS estimate frameworks may be limited in this period .

Key Takeaways for Investors

• The narrative pivot to U.S. Vitaros partnership and strategic alternatives is the principal stock catalyst; a transaction could crystallize value irrespective of FDA’s stance on DDAIP at 2.5% .
• Regulatory risk persists: FDA’s safety concerns and added CMC issues create uncertainty on timing and feasibility of a standalone approval path; partnership may be the more efficient route .
• Liquidity is adequate near term: Cash of $5.678M at 3/31/18 plus ~$2.9M raised on 4/2 supports operations through 2018, allowing time to execute on partnering or strategic transactions .
• Operating discipline is visible in lower R&D; however, elevated G&A in Q1 2018 reflects regulatory and strategic activity—monitor for normalization post-strategic decision .
• Allergan’s opt-in remains a potential upside lever but is contingent on approval; management is prudently broadening partner discussions to de-risk commercialization options .
• Year-over-year comparisons are distorted by the 2017 asset sale gain; focus on cash runway, regulatory milestones, and transaction execution rather than GAAP EPS trends in the near term .
• Absence of Q1 2018 call suggests communications are via press release; watch for future 8-Ks updating strategic alternatives and any partner agreements .

Appendix: Additional Quantitative Details

Select Income Statement Items (Quarterly)

Note: Q4 2017 quarterly R&D/G&A detail was not disclosed in the press release; only total net loss and EPS were provided .