Announcement PDF ASX Release RESULTS ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2023 25 August 2023: Melbourne, Australia; Acrux Ltd (ASX:ACR) In accordance with ASX Listing Rule 4.3A, please find attached the following for immediate release to the market: • Appendix 4E; and • Annual Report for the financial year ended 30 June 2023, including; • Operating and Financial Review; • Directors’ Report including the Remuneration Report; • Financial Reports; and • Independent Auditor’s Report. Approved for release by the Board of Directors of Acrux Ltd. For more information, please contact: Michael Kotsanis Acrux Limited CEO & Managing Director P: + 61 3 8379 0100 E: michael.kotsanis@acrux.com.au About Acrux Acrux is a specialty pharma company with a successful track record of developing and commercialising a pipeline of topically applied pharmaceutical products. Drawing on 25 years of experience, Acrux has successfully marketed through licensees a number of products worldwide with emphasis on the United States. Acrux is formulating and developing a range of topical generic products by leveraging its highly skilled workforce, on-site laboratories, GMP manufacturing suite, technical, clinical and commercial experience to bring affordable products to market. Acrux encourages collaboration and is well positioned to discuss commercial partnering and product development opportunities. For further information on Acrux, visit www.acrux.com.au Appendix 4E -Preliminary Financial Report Results for announcement to the market Name of Entity ABN Financial Year Ended Previous Corresponding Reporting Period Acrux Limited 72 082 001 152 30 June 2023 30 June 2022 $A'000 Total Revenue UP 134% to 11,928 (Loss) from ordinary activities after tax attributable to members Down 92% to (764) Net (loss) for the period attributable to members Down 92% to (764) Acrux is a specialty pharma company with a successful track record of developing and commercialising a pipeline of topically applied pharmaceutical products. Drawing on 25 years of experience, Acrux has successfully marketed through licensees a number of products worldwide with emphasis on the United States. Acrux is formulating and developing a range of topical generic products by leveraging its skilled workforce, on-site laboratories, GMP manufacturing suite, technical, clinical and commercial experience to bring affordable products to market. Acrux continues to encourage collaboration, commercial partnering and product development opportunities. No dividends have been declared or paid for the year ending 30 June 2023, or for the prior corresponding period. Current period Previous corresponding period $0.03 $0.03 NTA Backing Net tangible asset backing per ordinary security Other Information There are no associates or joint ventures or other entities over which control has been gained or lost over the period. The financial report contains an independent audit report that is not subject to a modified opinion, emphasis of matter or other matter paragraph. Full financial details of the Group also contained in the attached audited financial report. Annual Report 2023 A Pivotal Year Acrux (ASX:ACR) is a specialty pharmaceutical company with a successful track record of developing and commercialising a pipeline of topically applied pharmaceutical products. Drawing on 25 years of experience, Acrux has successfully marketed a number of products worldwide, with an emphasis on the United States. Acrux Formulation Scientist, Kayla. Acrux is formulating and developing a range of topical generic products through leverage of its highly skilled workforce, on-site laboratories, GMP manufacturing suite, technical, clinical and commercial experience to bring affordable products to market. Acrux encourages collaboration and is well positioned to discuss commercial partnering and product development opportunities. CONTENTS 2 Operating and Financial Review 4 Product Portfolio and Pipeline 6 Chairman & CEO Report 10 Environment, Social and Governance 17 Directors' Report, including Remuneration Report 30 Auditor’s Independence Declaration 31 Consolidated Financial Statements 35 Notes to the Consolidated Financial Statements 54 Directors’ Declaration 55 Independent Auditor’s Report 60 Shareholder Information 62 Glossary 64 Corporate Directory ABOUT THIS REPORT This Annual Report combines Acrux’s financial and non-financial performance into a single document which links strategic priorities to our operational results. Forward looking statements are subject to risks and uncertainties and have been made throughout this report. Such statements involve known and unknown risk and important factors that may cause future actual results, performance or achievements of Acrux to differ from state-ments made in this report. Download here: www.acrux.com.au/annualreport Acrux Cover: Formulation Scientist, Kara. Acrux Annual Report 2023 1 Operating and Financial Review FY23 has been a pivotal year for Acrux which saw: —P  rilocaine 2.5% and Lidocaine 2.5%, Cream launched with superior market share achieved —D  apsone 5%, Gel approved by the FDA, to be launched in FY24 —N  itroglycerin 0.4%, Ointment submitted for FDA review —A  cyclovir 5%, Cream submitted for FDA review —  E  xecuted royalty buyout of Lenzetto® to release working capital to fund portfolio progression With 5 year CAGR of revenue of almost 30% and with 3 products currently under FDA evaluation including 1 planned for launch in FY24, Acrux is achieving sustainable revenue growth which is capable of funding future portfolio development. FY23 PORTFOLIO PROGRESSION Launched Prilocaine 2.5% and Lidocaine 2.5%, Cream PORTFOLIO PROGRESSION FY22–FY23 On market Approved Under FDA Review Under development 3 4 Approved Dapsone 5%, Gel Accepted by FDA for review Nitroglycerin 0.4%, Ointment 8 7 2 FY22 FY23 2 Accepted by FDA for review Acyclovir 5%, Cream 3 dossiers currently under FDA review 2 3 3 CASE STUDY Prilocaine 2.5% and Lidocaine 2.5%, Cream was launched in the US in December 2022 by our partner Padagis. This product is a generic version of EMLA® Cream, indicated as a topical anaesthetic for use on normal intact skin for local analgesia, genital mucous membranes for superficial minor surgery and as a pre-treatment for infiltration anaesthesia. IQVIA reported annual sales of this product of US$37.9 million for the 12 months to April 2023. Early in 2023 a key competitor filed for bankruptcy and withdrew from the market. Since then Padagis has achieved superior market share and Prilocaine 2.5% and Lidocaine 2.5%, Cream is exceeding expectations. Acrux Senior Formulation Scientist, Jean. Acrux Annual Report 2023 3 Product Development Pipeline Our key focus is to progress our products through the stages of formulation and development, to demonstrate bioequivalence, to be reviewed and approved by the regulatory agency and to commercialise. GENERIC DRUG, FDA DEFINITION A generic drug is identical to the brand name drug in dosage, safety, strength, how it is taken, quality, performance, and intended use. Before approving a generic drug product, the FDA requires many rigorous tests and procedures to be conducted to assure it can be safely substituted for the brand name drug. The FDA bases their evaluations of substitutability, or “therapeutic equivalence,” of generic drugs on scientific evaluations. By law, a generic drug product must contain the identical amounts of the same active ingredient(s) as the brand name product. Drug products evaluated as “therapeutically equivalent” can be expected to have equal effect when substituted for the brand name product. PRODUCT DEVELOPMENT PHASE The timeline presented on this page is not strictly sequential and there is overlap between project phases, eg. elements of Formulation Development and Process Development can be performed concurrently rather than sequentially. An average product development timeline is 4 to 5 years with 3 years being the perfect scenario for a simple formulation. TIMELINE FACTORS Complex generics such as topical, otic, and ophthalmic products which Acrux develops have a more challenging pathway to demonstrate therapeutic equivalence compared to simple generics (eg tablets taken orally).  FY23 Progress at end June  FY22 progress at end June Typical Duration 4 18 to 36 months 18 to 36 months FORMULATION DEVELOPMENT PROCESS DEVELOPMENT Activity Inhouse laboratory, determine characteristics of the formulation and interaction of ingredients Scale up to commercial manufacturing Outcome Determine the product formulation Making the formulation at commercial scale 10%, Topical Solution Dapsone 5%, Gel ON MARKET Dapsone 7.5%, Gel Acyclovir 5%, Cream Nitroglycerin 0.4%, Ointment APPROVED REGULATORY SUBMISSION BIOEQUIVALENCE PROCESS DEVELOPMENT FORMULATION DEVELOPMENT 4 to 12 months 12 to 24 months 3 to 6 months BIOEQUIVALENCE REGULATORY SUBMISSION APPROVAL/ LAUNCH ON MARKET Proof the product is therapeutically bioequivalent Submit dossier and data to support approval Review of dossier Launched by partner after approval Demonstrate equivalence to brand name product Review and approval by regulator (FDA) Approved Revenue Stream Annual Report 2023 Chairman & CEO Report Product launches, approvals and ANDA submissions drive strengthening of Acrux’s portfolio. Since 2017, Acrux has been pursuing a strategy of developing a product portfolio capable of generating broadly based and sustainable revenue. Our long term objective is to create a diversified portfolio capable of generating a consistent stream of regulatory submissions for pharmaceutical product approvals and launches. The Company’s strategy is beginning to bear fruit, with the recent regulatory submission of our seventh product to the FDA since 2017. Three of those products are currently under FDA review and our portfolio of products on market is continuing to grow following approvals granted by the FDA Prilocaine 2.5% and Lidocaine 2.5%, Cream was launched late in 2022. This product is indicated for use as a local anaesthetic and it is directly substitutable into an existing market for a widely used product. Over 230,000 tubes of this product are currently used on patients each month in the United States, based on twelve months of IQVIA data. Following our product’s commercial launch, the major supplier for that market announced in February 2023 that they were immediately ceasing operations due to their unfortunate bankruptcy. As a result, Acrux together with its commercial, manufacturing and raw materials partners have been focussed on procurement, manufacturing and supply of this product to the United States market. The increased product demand and supply generated following these developments are considerably above Acrux’s expectations when the product was initially launched. Early in 2023 Acrux monetised its royalty stream for Lenzetto®, its Estradiol Spray product that is sold in Europe and a number of countries outside Europe. That transaction optimised this product’s value to Acrux and provided Working Capital to be invested into product development and regulatory activities supporting the progression of the commercialisation of several products for the United States market. In June 2023, the FDA’s approval of the Company’s generic Dapsone 5%, Gel product for the treatment of acne was announced and launch preparations are well underway for this product. In early July 2023, Acrux announced that its seventh Abbreviated New Drug Application (ANDA) was accepted for review by the FDA. The product is a generic of Nitroglycerin 0.4%, Ointment which is used for moderate to severe pain as a result of chronic anal fissure. The Company relaunched Testosterone Topical Solution, 30mg/1.5mL as a generic in August 2021, with modest expectations at the time, as the market had been significantly eroded by generic competition which began in July 2017 when the first generic of Axiron® (Testosterone Topical Solution) was launched and which lead to withdrawal of the product by Acrux’s licensee. The US market for testosterone replacement therapies has been in decline on a year on year basis since 2014 and with significant levels of generic competition evident for Testosterone Solution and other transdermal versions of testosterone the commercial viability of this market is diminished. FINANCIAL PERFORMANCE Acrux’s reported revenue totalled $11.928 million which was up by $6.825 million or 134%, over the prior financial year. Monetisation of the Lenzetto® royalty stream added $6.337 million. After excluding this transaction, the underlying annual growth of Acrux’s total revenue was 10%. The 5 year Compound Annual Growth Rate (CAGR) of revenue from licensing arrangements for the period FY18 to FY23 is 26% and for total revenue the 5 year CAGR is 28%. With the strong opportunity for Prilocaine 2.5% and Lidocaine 2.5%, Cream and with launch plans well under way for Dapsone 5%, Gel we expect revenue from licensing arrangements to continue to grow through FY24. Strong revenue growth achieved in FY23 was the key driver behind the material reduction of Acrux’s reported Loss after tax. The Net loss for the year for FY23 totalled $0.764 million, which represents an improvement of $9.070 million over the prior financial year. Cash and cash equivalents on hand at year end totalled $6.232 million, representing an increase of $0.401 million over the prior year end, without needing to draw on either external debt or equity funding. 6 Annual FY22 6 months to December 2022 6 months to June 2023 Annual FY23 Revenue 5,103 3,249 8,679 11,928 Profit/(loss) before tax (9,582) (3,083) 2,871 (212) Cash reserves 5,831 4,350 6,232 6,232 Increase/(Decrease) in Cash reserves (8,819) (1,481) 1,882 401 Seven topical generic products have been submitted to the FDA for review since 2017. A comparison of the annual and half year operating financials shows Acrux’s achievement of strong progress and growth particularly in the second half of FY23 with significantly higher revenue resulting in a profitable second half which in turn supported the generation of positive cashflows for the 6 month period as well as increased cash on hand for the year ended 30 June 2023. THE PRODUCT DEVELOPMENT PIPELINE Acrux has three products currently under FDA review and an additional two products which have been approved but which have not yet launched. Our product pipeline is progressing through varying stages of development, both at Acrux and with our contract manufacturing partners. We are working on both later-stage products that are expected to reach commercialisation in the short term and are progressing the development of earlier-stage products to ensure breadth of our product pipeline. The Company continues to have 16 products in its portfolio. This includes 6 approved products and 3 dossiers which are currently being reviewed by the FDA and over time intends to maintain 10–12 products in development. The product development pipeline is shown in an infographic on pages 4 and 5, and FY23 progress is expanded on in the Operating and Financial Review on pages 2 to 3. Our corporate strategy is reflected in our operational structure and the processes in place to deal efficiently and effectively to meet our revenue generation objectives. Acrux Analytical Development Scientist, Ebenezer. Acrux Annual Report 2023 7 Chairman and CEO Report (continued) The Company has invested to secure and maintain the necessary blend of skills, knowledge and experience to deliver on our strategic priorities. STRATEGY Acrux’s strategy focuses on the development and commercialisation of topically applied pharmaceutical products Within our strategy there are three key priorities: 1. Revenue realisation 2. Operational effectiveness 3. Optimal portfolio management Revenue realisation is the transformation driver for the Company to be self-funding and consistently profitable. In FY23 we reported a 134% increase in total revenue, which is reflected an increase on cash and cash equivalents of $0.401 million. The number of commercialised products will continue to expand following the launch of Prilocaine 2.5% and Lidocaine 2.5%, Cream, with Dapsone 5%, Gel launch activities underway following its approval in June 2023 and ANDAs of a further 3 products currently being reviewed by the FDA. Operational effectiveness is supported by project management, resource and cost management to enabling Acrux to continue to submit ANDA’s for FDA review and commercialise our diversified portfolio of topically applied pharmaceutical products. Portfolio management to maximise commercial returns based on strategic product selection of commercially attractive products and for which we have the technical capability to develop. Ongoing market intelligence gathering and assessment in a rapidly changing product and market landscape is a key component of successful portfolio management. The Company has invested to secure and maintain the necessary blend of skills, knowledge and experience to deliver on our strategic priorities. Acrux Analytical Development Scientist, Amal. 8 Through FY24 we plan: FY23 OBJECTIVES —  ontinued revenue growth of Prilocaine 2.5% C and Lidocaine 2.5%, Cream Our key objectives in FY23 were: — To launch Dapsone 5%, Gel —  o obtain FDA approval to support the future T launches of products which are currently progressing through the FDA review process; specifically — • Dapsone 7.5%, Gel • Acyclovir 5%, Cream and • Nitroglycerin 0.4%, Ointment —  aunch two additional topical generic L products. • —  o continue eligibility of product development T expenditure for the research and development tax incentive rebate.  eceive approval from the FDA for two R products to facilitate product launches in FY23 and FY24. Each product is already licensed on the basis of a quarterly profit share to Acrux. • BOARD AND CORPORATE GOVERNANCE During the year, the Board has reviewed and where necessary updated all Corporate Governance policies as part of the routine review cycle. Current Corporate Governance policies can be viewed on the Acrux website under the Corporate Governance tab. The Board has also reviewed the skills that each Director brings to the Board through the Board Skills Matrix in order to ensure Directors with appropriate skills and experience are in place to lead the Company and to identify potential gaps in skill sets, areas for improvement and to plan for future skill requirements. The Directors consider that Acrux has complied with all applicable laws and regulations throughout the year ended 30 June 2023 and no related issues have arisen between the end of the financial year and the date of this report. The detailed Environment, Social and Governance (ESG) Report can be found on page 10. Acrux Annual Report 2023 —  crux launched one product in A December 2022. Approval for the second product was achieved in June 2023 and launch preparations are now well underway.  crux received regulatory approval A for one product (Dapsone 5%, Gel) in June 2023 and currently has three further products under evaluation by the FDA. $6.232m Cash on hand Increased by $0.401m Ross Dobinson Chairman (l) Michael Kotsanis CEO & MD (r)  ubmit one further product for FDA approval S in the second half of FY23. •  crux submitted its ANDA for A Nitroglycerin 0.4%, Ointment in June 2023 and this dossier was formally accepted for review by the FDA in July 2023. We would like to personally thank the Acrux team and the Board for their valuable contributions through FY23 with the progression of ANDAs through the FDA review process to commercialisation and focus on the Company’s revenue growth objectives. We believe the 2023 financial year was a pivotal period for Acrux and we would like to thank our shareholders for maintaining faith in our progress. This is an exciting time for Acrux. We thank you for your support. 9 Environment, Social and Governance Acrux is developing a range of topically applied generic medicines that improve affordability for patients and which conform with the highest possible product safety and regulatory requirements. The Company is committed to operating in a socially responsible manner, which we consider in three key operational tenets: TENETS TENETS Environmental Tenet – includes preservation of our natural environment. At the heart of Acrux’s Environment, Social and Governance (ESG) framework is our commitment to long term economic and environmental sustainability and to conducting business in a responsible and ethical manner. We consider this commitment to be important to the way we develop and commercialise our range of topically applied generic medicines which are both affordable and meet the highest possible product safety and regulatory standards. Our purpose is closely aligned with our culture, values, behaviours and strategy. This report outlines Acrux’s ongoing commitment to ESG objectives and to the enhancement of the economic, social and environmental wellbeing in and of our community. Social Tenet – consideration of the safety and wellbeing of patients and our employees. Acrux’s commitment to operating in a socially responsible manner is considered through three key operational tenets: 1. Environmental Tenet – includes preservation of our natural environment through minimising the use of energy and the discharge of waste, 2.  Social Tenet – includes consideration of Acrux’s relationships in its community such as employee diversity, equity, equality and inclusion priorities and care for the safety and wellbeing of our employees and other stakeholders, and Governance Tenet – practising good corporate governance. We are responsible to the communities in which we operate as well as our stakeholders. 10 3. Governance Tenet – practising good corporate governance and conducting business in an ethical and socially accountable manner. Through our Code of Conduct, corporate values and policies our ESG framework is embedded throughout our operations and we prioritise activities and initiatives to achieve high standards in each of these tenets. Environmental Tenet Acrux is committed to conducting operations in an environmentally responsible manner and we adopt practices to guide our actions to lead to sustainable outcomes through the minimisation of energy usage and reduction of emissions which are associated with our building operations, laboratory and office equipment. Social Tenet Acrux deeply values its highly skilled team and is committed to providing a healthy and safe work environment for all employees as well as our contractors and visitors. Health, safety and wellbeing is a key priority as is ensuring our employees have the necessary skills and resources to perform their roles to a high standard. Acrux applies strategies to minimise general office waste such as the use of consumables, avoiding single use vessels, reusing office supplies where practical and maximising the use of digital document management and shareholder communication strategies to reduce our use of paper based products. Across our laboratory, office and staff kitchen recycling bins collect common recyclables to facilitate the recycling of waste which could otherwise become landfill. Together with practicing safer systems of work, occupational health and safety is deeply ingrained into Acrux’s company culture and we have proactive and well developed processes of capturing safety data, including near misses. In the event that a near miss incident is reported it is thoroughly investigated and corrective measures are put in place where necessary. We have not recorded a Lost Time Injury since 2016. Acrux’s employees are trained in standard operating procedures to manage the types of laboratory waste which are generated in our laboratory and we have documented procedures to ensure all hazardous, controlled and non-hazardous waste is disposed of strictly in accordance with relevant environmental regulations, standards and codes. Acrux holds licences to store and use hazardous and controlled substances and an agreement is in place with City West Water under the Water Industry Act 1994 and Water Industry Regulations 2006, to ensure our trade water waste is managed effectively and responsibly. All waste, including laboratory waste, is safely collected, transported and disposed of and is recycled where possible. To ensure compliance with the Environment Protection Act 1970 an external waste management consultant with ISO 14001:2015 Certification for Environmental Management is used and an EPA Transport Certificate is issued for each hazardous or controlled waste collection. The Directors consider Acrux has complied with all applicable environmental laws and regulations throughout the year ended 30 June 2023 and no issues have arisen since the end of the financial year to the date of this report. Acrux Annual Report 2023 Our culture is supportive, equitable and inclusive. Diversity is embraced and celebrated as we believe this not only promotes safety, productivity and wellbeing but also enhances our ability to attract and retain skilled employees. We seek to attract and retain a workforce that represents our broader community and to remove unconscious biases from all of our behaviours, policies and processes. Acrux’s Diversity and Inclusion Policy can be viewed in the Investor Relations section of our website, https://investors.acrux.com.au/investor-centre and this policy is integral to our talent management and recruitment strategies. Diversity is broadly defined to include gender, nationality, ethnicity, disability, sexual orientation, gender identity, age, socioeconomic status, family status, religious beliefs and language. Our Diversity and Inclusion objectives support our employees to be valued and respected in the workplace and to experience fair treatment and merit based access to opportunities. Our Diversity and Inclusion priorities include fostering an inclusive culture as well as building the skills and confidence of our leaders to manage diverse teams to improve diversity amongst our leadership and to ensure our workplace is safe for and attractive to a diverse range of people. 11 Environment, Social and Governance (continued) Governance Tenet Acrux is committed to good corporate governance, including ethical conduct. Acrux’s corporate governance policies are published on the Company’s website, https://www.acrux.com.au and the Company’s RIOS – Together Anything is Possible model articulates our Company Values and the core behaviours expected of all employees. These core Company Values are: Round the clock, Innovation, Openness and Standout. Commitment to these Company Values underpins how our employees work together to solve problems and make decisions and must be demonstrated in order for an employee to be invited to participate in short and long term incentive programs. GOVERNANCE STRUCTURE be viewed in the Investor Relations section of our website, https://investors.acrux.com.au/investor-centre. It is important that Acrux’s employees and other stakeholders feel safe and empowered to report concerns about behaviour which may appear to be inconsistent with our Code of Conduct or other corporate policies. Our Whistleblower Policy ensures such reports can be made in good faith and with the confidence they will be investigated fairly and confidentially whilst the person who made the report is protected. Our Whistleblower Policy can be viewed in the Investor Relations section of our website, https://investors.acrux.com.au/investor-centre. No breaches of the Code of Conduct, Whistleblower or the Antibribery, Corruption and Fraud Policies have been reported. Ethics and Values Acrux has a well established governance program. All Directors, employees and other parties representing the Company are required to follow the Company’s principles, moral, legal and ethical standards as consistent ethical behaviour promotes both inclusion and trust. Structure of the Board and Board Committees Acrux’s corporate governance and risk and compliance framework reflects and supports the Company’s values and culture and stands alongside the legislative requirements of the Corporations Act 2001 and the guidance in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition). Our Code of Conduct documents and communicates the framework for the way Acrux conducts business and relates to its stakeholders, including shareholders, employees, business partners, customers and suppliers as well as the wider community and the environment in which the Company operates. We expect third parties with which we work to comply with the principles outlined in our Code of Conduct which can All governance practices as recommended by the ASX have been implemented by Acrux, unless otherwise stated in the Corporate Governance Statement. Our Corporate Governance Statement is considered and approved by the Board annually and it can be viewed in the Investor Relations section of our website, https://investors.acrux.com.au/investor-centre. 12 The Board Charter is central to Acrux’s corporate governance framework as it lays out the principles under which the Board of Directors operates and this document can be viewed in the Investor Relations section of our website, https://investors.acrux.com.au/investor-centre. In summary, the Board of Directors is responsible for overseeing management, providing strategic direction, capital planning, risk management, monitoring performance, strategic human resource matters and approval of budgets and business plans. Day-to-day management as well as the implementation of approved strategies and business plans, is delegated to th