Trimel Reports Fourth Quarter and Full Year 2014 Financial Results and Provides Corporate Update

Trimel Pharmaceuticals Corporation (TSX:TRL) today reported financial results for the three and twelve month periods ended December 31, 2014, and provided an overview of its corporate highlights. Unless otherwise noted, all dollar amounts shown in this press release are in U.S. dollars.

“This past year was marked by a number of accomplishments for Trimel and tremendous progress made on many fronts. We licensed the U.S. rights for NATESTO™, the first product borne from our internal product development efforts, advanced our TEFINA™ clinical program, and acquired our first revenue generating asset in ESTRACE®. We also generated significant improvements in key financial metrics such as Adjusted EBITDA, and strengthened our balance sheet considerably,” said Tom Rossi, President and CEO of Trimel. “2015 will be another exciting year for the Company and its shareholders, as we shift our focus to revenue generation and growth.”

1 See “Non-IFRS Financial Measures” below.

Financial Results for the Three and Twelve Months Ended December 31, 2014

Fourth Quarter, 2014

Revenues for the fourth quarter of 2014 totaled $2.6 million, versus nil for the prior year comparable period. These revenues were derived from $2.4 million (CDN$2.7 million) of ESTRACE® sales in Canada and $0.2 million related to the amortization of a $25.0 million upfront payment received with respect to the NATESTO™ license agreement. Cost of sales for fourth quarter 2014 were $7.2 million, including a $4.5 million royalty payment to a technology partner (in connection with the $25.0 million upfront payment described above) and $2.5 million related to ESTRACE®, versus nil for fourth quarter 2013. The ESTRACE® cost of sales value of $2.5 million for the fourth quarter of 2014 reflects amortization expense associated with the ESTRACE® intangible asset ($0.4 million) and the sale of inventory that includes an adjustment to fair market value ($1.6 million) due to the ESTRACE® acquisition. In accordance with International Financial Reporting Standards (IFRS), ESTRACE® acquired inventory was recorded at fair value, which does not reflect the expected future cost to purchase inventory directly from the third party manufacturer. As such, the gross profit margin reported in our statements does not reflect what is anticipated to be experienced in the normal course of business for ESTRACE® until such time as the effect of the fair value adjustment to the acquired inventory is sold (see “Adjusted Gross Profit” under “Non-IFRS Financial Measures” below).

Research and Development (“R&D”) expenses were $1.2 million for fourth quarter 2014 versus $8.9 million for fourth quarter of 2013. This reduction in R&D expense is primarily due to the inclusion of $4.25 million in milestone expenses in fourth quarter 2013 and the completion of a TEFINATM clinical trial in second quarter 2014, which resulted in lower fourth quarter 2014 R&D expenses versus fourth quarter 2013.

Trimel incurred Selling, General and Administrative expenses of $1.2 million, for the three months ended December 31, 2014 and $2.3 million for the same 2013 period. This decrease in spending is primarily attributable to lower salaries, benefits, share-based compensation, and lower legal fees, partially offset by selling expenses associated with ESTRACE®.

Earnings before interest, tax, depreciation and amortization (EBITDA) for fourth quarter 2014 was negative $5.6 million versus negative $9.6 million for fourth quarter 2013. On an adjusted basis (see “EBITDA and Adjusted EBITDA” under “Non-IFRS Financial Measures” below), Adjusted EBITDA was negative $0.1 million for fourth quarter 2014 versus negative $6.2 million for fourth quarter 2013. The improvement in fourth quarter 2014 Adjusted EBITDA versus fourth quarter 2013 is primarily due to lower expense levels and the contribution from sales of ESTRACE®. For the three months ended December 31, 2014, the Company incurred a net loss of $0.04 per share as compared to a net loss of $0.07 per share for the comparable 2013 period.

The Company had positive cash flow from operations of $26.6 million, including $30.0 million of deferred revenue and customer deposits, for the three months ended December 31, 2014.

Full Year, 2014

Revenues for full year 2014 totaled $4.3 million versus nil for full year 2013. This increase was primarily driven by $4.2 million of revenue contribution due to the acquisition of ESTRACE® in July 2014.

Cost of sales for full year 2014 were $9.2 million, including a $4.5 million royalty payment to a technology partner (in connection with the $25.0 million upfront payment described above) and $4.5 million related to ESTRACE®, versus nil for full year 2013. The ESTRACE® cost of sales value of $4.5 million for full year 2014 reflects amortization expense associated with the ESTRACE® intangible asset ($0.8 million) and the sale of inventory that includes an adjustment to fair market value ($2.8 million) due to the ESTRACE® acquisition. In accordance with International Financial Reporting Standards (IFRS), ESTRACE® acquired inventory was recorded at fair value, which does not reflect the expected future cost to purchase inventory directly from the third party manufacturer. As such, the gross profit margin reported in our statements does not reflect what is anticipated to be experienced in the normal course of business for ESTRACE® until such time as the effect of the fair value adjustment to the acquired inventory is sold (see “Adjusted Gross Profit” under “Non-IFRS Financial Measures” below).

Research and Development (“R&D”) expenses were $9.1 million for full year 2014 versus $22.7 million for full year 2013. The reduction in R&D expense is primarily due to the inclusion of $8.5 million in milestone expenses in full year 2013 and the completion of a TEFINATM clinical trial in the first half 2014 which resulted in lower R&D expenses in the second half of 2014 versus 2013.

Trimel incurred Selling, General and Administrative expenses of $5.5 million for full year 2014 versus $9.9 million for full year 2013. The decrease in spending is primarily attributable to lower salaries, benefits, share-based compensation, and lower legal fees, partially offset by selling expenses associated with ESTRACE®.

EBITDA for full year 2014 was negative $17.5 million versus negative $30.3 million for full year 2013. On an adjusted basis (see “EBITDA and Adjusted EBITDA” under “Non-IFRS Financial Measures” below), Adjusted EBITDA was negative $6.4 million for full year 2014 versus negative $21.3 million for full year 2013. The 70% improvement in full year 2014 Adjusted EBITDA versus full year 2013 is primarily due to lower expense levels and the contribution from sales of ESTRACE®.

Full year 2014, the Company incurred a net loss of $0.13 per share as compared to a net loss of $0.25 per share for the comparable 2013 period.

At December 31, 2014, the Company had cash balances of $31.0 million and total assets of $75.9 million, as compared to total assets of $28.1 million at December 31, 2013 and total liabilities of $59.5 million at December 31, 2014, as compared to total liabilities of $14.5 million at December 31, 2013. The Company had positive cash flow from operations of $8.4 million for the year ended December 31, 2014. The Company believes it has sufficient resources to fund its ongoing activities into 2016, depending on the timing of further clinical activities and barring unforeseen events.

Corporate Highlights

ESTRACE® Update

On July 16, 2014, the Company announced that it acquired from affiliates of Shire plc the Canadian rights for ESTRACE® (17-beta estradiol), a product indicated for the symptomatic relief of menopausal symptoms. ESTRACE® has been available in Canada for almost 40 years.

In 2015, we will expand our promotional reach for ESTRACE® to healthcare professionals in key provinces across Canada. This increased share of voice will allow us to grow ESTRACE® sales and capture additional market share in the estrogen replacement therapy market.

NATESTO™ Update

In May 2014, Trimel announced the FDA approval of NATESTO™, the first and only testosterone nasal gel for replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone. In November 2014, the Company announced the signing of an agreement by its subsidiary, Trimel BioPharma SRL, providing an affiliate of Endo International plc (NASDAQ:ENDP) (TSX: ENL) with the exclusive rights to market NATESTO™ in the United States and Mexico. The transaction subsequently closed in December 2014.

Endo is an established leader in the U.S. men’s health care and urology segments, making them the ideal partner to commercialize NATESTO™ in that market. Endo is on track to launch the product in the U.S., through its Endo Pharmaceuticals subsidiary, in March 2015.

In January 2015, we announced our filing of a New Drug Submission with Health Canada for NATESTO™, the first testosterone nasal gel filed in Canada for marketing approval. This represents another significant milestone for Trimel and the many patients this therapy aims to address.

TEFINA™ Update

In May 2014, the Company announced the results of a double-blind, placebo-controlled Phase II study which enrolled 253 pre- and post-menopausal women experiencing acquired Female Orgasmic Disorder in the United States, Canada and Australia. The primary endpoint of the study was to compare the effects of the three dose strengths of TEFINA™ nasal testosterone gel to placebo on the occurrence of orgasm. TEFINA™ 0.6 mg led to a statistically significant increase in the average number of orgasms during the 84-day treatment period. TEFINA™ 0.6 mg also showed a statistically significant reduction in distress related to the condition.

In late January 2015, Trimel met with the FDA in a Type C Guidance Meeting to discuss next steps in the development of TEFINA™. We have recently received the FDA minutes, which build upon our meeting in January and provide additional guidance that will be useful in developing further study protocols necessary for the advancement of TEFINA™.

Drug Establishment License

In early 2015, Trimel was granted a Drug Establishment License (DEL) from Health Canada. A DEL permits a company to fabricate, package, label, distribute, import, wholesale, or test a drug product in Canada. It solidifies a further step in building a more robust commercial presence for Trimel in Canada, while allowing the Company to be better situated to acquire additional products in the future.

Non-IFRS Financial Measures

The non-IFRS measures included in this release are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are non-IFRS measures that may have limits in their usefulness to investors.

We use non-IFRS measures, such as Adjusted Gross Profit, EBITDA and Adjusted EBITDA below to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the valuation of issuers. We also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.

The definition and reconciliation of Adjusted Gross Profit, EBITDA and Adjusted EBITDA used and presented by the Company to the most directly comparable IFRS measures follows below:

Adjusted Gross Profit

Adjusted Gross Profit is defined as gross profit plus the following expenses which are part of cost of sales: (i) amortization of intangible assets; (ii) charges to cost of sales resulting from fair market value adjustments to inventory as a result of a business acquisition; and (iii) other one-time or non-cash items. We use Adjusted Gross Profit as a key performance measure to assess our core gross profit and as a supplemental measure to evaluate the overall operating performance of our cost of sales.

The table below provides the reconciliation of gross profit to Adjusted Gross Profit:

a) We secured a licensing agreement with a third party pharmaceutical company to manage the sales and marketing of NATESTOTM in the United States and Mexico. Under the terms of the agreement, we received an upfront fee of $25.0 million. This fee is amortized into income over the term of the agreement. For the three and twelve months ended December 31, 2014, $0.2 million of this deferred licensing fee was recognized as revenue. Related to this transaction was the recognition of $4.5 million in cost of sales for royalty payments made to a technology partner.

b) We reviewed our current manufacturing process and determined that certain inventory items amounting to $0.2 million would likely not be suitable for future use. As such those items were expensed to cost of sales.

c) Upon completion of the acquisition of the Canadian rights to ESTRACE®, we capitalized the acquired intangible asset at fair market value. The intangible asset is amortized over its useful life and we recognize the amortization as a non-cash cost of sales. We adjusted for amortization of $0.4 million and $0.8 million for the three and twelve months ended December 31, 2014, as we believe the exclusion facilitates investors’ ability to more accurately compare our operating results to those of our peer companies and is reflective of how we internally manage the business.

Had the inventories acquired as part of the ESTRACE® acquisition been purchased directly from the third party manufacturer, the costs ascribed to it would have been lower by $1.6 million and $2.8 million for the three and twelve months ended December 31, 2014. Included in cost of sales for the reporting period are charges in respect of a fair value adjustment on inventory acquired from the seller of the Canadian rights of ESTRACE® in accordance with IFRS standards. Upon the acquisition, we took assignment of the third party manufacturing agreement and will be able, on a go-forward basis, to purchase goods directly from the manufacturer at a lower cost than that included in unadjusted cost of sales for the reporting period in respect of the inventory acquired from the seller of the Canadian rights to ESTRACE®.

EBITDA and Adjusted EBITDA

EBITDA is defined as net income adjusted for income tax expense, depreciation of property and equipment, amortization of intangible assets, interest on long-term debt and other financing costs, interest income, deferred licensing revenue and changes in fair values of derivative financial instruments and income tax recovery. Management uses EBITDA to assess the Company’s operating performance. A reconciliation of net income to EBITDA (and Adjusted EBITDA) is set out below.

Adjusted EBITDA is defined as EBITDA adjusted for inventory fair value and other adjustments, acquisition costs, royalty expense, milestone expense, share based compensation, impairment of intangible asset, impairment of property and equipment and foreign exchange (gain)/loss. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts and prior years. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the business that may not otherwise be apparent when relying solely on IFRS measures, and eliminates items that have less bearing on operating performance and cash flow. It is an alternative to measure business performance to net income and operating income, and management believes Adjusted EBITDA is a better alternative measure of cash flow generation than, for example, cash flow from operations, particularly because it removes cash flow fluctuations caused by extraordinary changes in working capital.

(1) This figure includes interest expense and the amortization of deferred financing costs and accretion expense related to our outstanding debts.

(2) See note (c) to the table under “Adjusted Gross Profit” above.

The information set out above is in summary form. Readers are encouraged to review the Company’s annual information form, financial statements (and accompanying notes), together with management’s discussion and analysis available on SEDAR at www.sedar.com and on the Company’s website at www.trimelpharmaceuticals.com.

Conference Call Details

Shareholders are reminded of the conference call to discuss the Company’s fourth quarter and full year 2014 results to be held on Friday, March 6, 2015 at 8:30 a.m. Eastern Time. To access the call live, please dial 416-340-8527 or 1-800-355-4959. Listeners are encouraged to dial in 10 minutes before the call begins to avoid delays. A replay of the conference call will be available until 7:00 p.m. Eastern Time on Friday, March 13, 2015 by dialing 905-694-9451 or 1-800-408-3053, using access code: 9028061#.

About Trimel

Trimel is a specialty pharmaceutical company involved in the sale, distribution and development of products with a focus in men's and women’s health.

Trimel markets ESTRACE® in Canada, a product indicated for the symptomatic relief of menopausal symptoms. NATESTO™, a product utilizing Trimel's licensed nasal gel technology, is the first testosterone nasal gel filed in Canada for approval, and is the first and only approved testosterone nasal gel in the United States for replacement therapy in adult males diagnosed with hypogonadism. The commercial rights to NATESTO™ in the United States and Mexico have been licensed by Trimel to an affiliate of Endo International plc.

For more information, please visit www.trimelpharmaceuticals.com.

Notice regarding forward-looking statements:

Information in this press release that is not current or historical factual information may constitute forward looking information within the meaning of securities laws. Implicit in this information are assumptions regarding our future operational results. These assumptions, although considered reasonable by the company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual performance of the company is subject to a number of risks and uncertainties and could differ materially from what is currently expected as set out above. For more exhaustive information on these risks and uncertainties you should refer to our annual information form dated March 4, 2015 which is available at www.sedar.com. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time, whether as a result of new information, future events or otherwise, except as required by applicable securities law.