Record Revenue of $9.4
Million and Adjusted EBITDA of $5.1
Million
LAVAL, QC, Aug. 8, 2019 /PRNewswire/ - Crescita Therapeutics
Inc. (TSX: CTX) (OTC US: CRRTF) (Crescita or the Company), a
Canadian commercial dermatology company with manufacturing
capabilities and a portfolio of non-prescription skincare products
and prescription drug products for the treatment and care of skin
conditions, diseases and their symptoms, today reported its
financial results for the second quarter ended June 30,
2019.
Q2-F2019 Year-over-Year Highlights and Subsequent
Events
- Record revenue of $9.4 million,
an increase of $7.1 million or 305.1%
vs Q2-2018. Q2-2019 revenue included $5.5
million in up-front payments and guaranteed future minimum
royalties, both related to the out-licensing agreement with
Cantabria Labs ("Cantabria");
- Operating expenses were $4.8
million, up $0.8 million or
21.0% versus Q2-2018;
- Adjusted EBITDA1 was $5.1 million, an improvement of $6.3 million versus Q2-2018;
- Generated $0.8 million in cash
during the quarter, resulting in an ending cash and cash
equivalents balance of $11.7 million
as at June 30, 2019, compared to
$10.9 million at the end of
Q1-2019;
- On April 25, the Company entered
into a commercialization license agreement with Cantabria, granting
them the exclusive rights to sell and distribute
Pliaglis® in Italy,
Portugal, France and Spain;
- On June 28, the Company commenced
a Normal Course Issuer Bid to repurchase up to 1.0 million common
shares for cancellation over a twelve-month period;
- On July 4, the Company announced
the collection of the second up-front payment from Cantabria of
$1.7 million following the first
commercial sale of Pliaglis by Cantabria in Italy;
- On July 16, the Company announced
that the United States Patent and Trademark Office granted U.S.
Patent No. 10,350,180 for an enhanced formulation of Pliaglis.
|
1 Please
refer to the Non-IFRS Financial Measures and the EBITDA and
Adjusted EBITDA Reconciliation sections of this press
release.
|
"I am pleased with the quarter's results demonstrating
continued revenue and profitability expansion," said Serge
Verreault President and Chief Executive Officer of Crescita. "We
continue to solidify our financial position by concluding accretive
deals and maximizing our core assets to create shareholder value.
In the second half of 2019, the Crescita team will focus on the
execution of our growth strategy through the geographic expansion
of Pliaglis in the rest-of-world and by further leveraging our
patented technologies."
Q2-F2019 Financial Results
Note: All figures are in thousands of
Canadian dollars, unless otherwise noted. The second quarter 2019
MD&A, condensed consolidated interim financial statements and
accompanying notes can be found on
www.crescitatherapeutics.com/investors and have been filed with
SEDAR at www.sedar.com.
In thousands of
CAD dollards except earnings per share and number of
shares
|
|
Three months ended
June 30,
|
|
|
Six months
ended June 30,
|
|
2019
|
|
2018
|
Change ($)
|
|
|
2019
|
|
2018
|
Change ($)
|
Product
Sales
|
|
2,657
|
|
1,977
|
680
|
|
|
5,022
|
|
4,244
|
778
|
Out-licensing
revenue
|
|
6,700
|
|
328
|
6,372
|
|
|
8,503
|
|
1,698
|
6,805
|
Services
revenue
|
|
5
|
|
6
|
(1)
|
|
|
86
|
|
18
|
68
|
Revenues
|
|
9,362
|
|
2,311
|
7,051
|
|
|
13,611
|
|
5,960
|
7,651
|
Total Operating
Expenses
|
|
4,753
|
|
3,927
|
826
|
|
|
8,535
|
|
7,857
|
678
|
Operating Profit
(Loss)
|
|
4,609
|
|
(1,616)
|
6,225
|
|
|
5,076
|
|
(1,897)
|
6,973
|
Total Other Expenses
(Income)
|
|
1,322
|
|
(980)
|
2,302
|
|
|
1,511
|
|
(837)
|
2,348
|
Income (loss) from
Continuing Operations before Income Taxes
|
|
3,287
|
|
(636)
|
3,923
|
|
|
3,565
|
|
(1,060)
|
4,625
|
Income tax
expense
|
|
1,079
|
|
-
|
1,079
|
|
|
1,315
|
|
-
|
1,315
|
Net income (loss)
from continuing operations
|
|
2,208
|
|
(636)
|
2,844
|
|
|
2,250
|
|
(1,060)
|
3,310
|
Net Loss from
Discontinued Operations
|
|
-
|
|
(25)
|
25
|
|
|
-
|
|
(25)
|
25
|
Net Income
(Loss)
|
|
2,208
|
|
(661)
|
2,869
|
|
|
2,250
|
|
(1,085)
|
3,335
|
Net Income (Loss)
per Share
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
$
|
0.11
|
$
|
(0.03)
|
0.14
|
|
$
|
0.11
|
$
|
(0.06)
|
0.17
|
- Diluted
|
$
|
0.10
|
$
|
(0.03)
|
0.13
|
|
$
|
0.10
|
$
|
(0.06)
|
0.16
|
Weighted Average
Number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
-
|
- Basic
|
|
21,016,059
|
|
21,006,664
|
9,395
|
|
|
21,016,059
|
|
18,375,305
|
2,640,754
|
- Diluted
|
|
22,486,406
|
|
21,006,664
|
1,479,742
|
|
|
22,305,542
|
|
18,375,305
|
3,930,237
|
Selected Cash Flow
Information
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
|
11,689
|
|
9,094
|
2,595
|
|
|
11,689
|
|
9,094
|
2,595
|
Cash provided by
(used in) operating activities
|
|
1,224
|
|
(238)
|
1,462
|
|
|
3,622
|
|
(1,308)
|
4,930
|
Cash (used in)
investing activities
|
|
(80)
|
|
(23)
|
(57)
|
|
|
(114)
|
|
(23)
|
(91)
|
Cash (used in)
provided by financing activities
|
|
(328)
|
|
(94)
|
(234)
|
|
|
(403)
|
|
3,426
|
(3,829)
|
Cash and Cash Equivalents
Cash and cash equivalents
were $11,689 as at June 30, 2019 compared to $9,094 as at June 30,
2018. For the three months ended June
30, 2019, the Company generated $1,224 in cash from its operations, an
improvement of $1,462 from the cash
utilized of $(238) in the comparative
quarter of 2018.
Revenue
Total revenue, consisting of product sales,
out-licensing and services revenue, was $9,362 for the quarter ended June 30, 2019, compared to $2,311 for the three months ended June 30, 2018, representing an increase of
$7,051 or 305.1%. The increase came
primarily from our out-licensing business, contributing
$6,372 in incremental revenue
year-over-year. The current quarter's out-licensing
revenue included $3,721 in
up-front payments, as well as guaranteed minimum royalties of
$1,738, both related to the Pliaglis
out-licensing agreement with Cantabria, as well as incremental
royalties on the global net sales of Pliaglis from our licensees.
Product sales grew by $680 or 34.4%
year-over-year, mainly as a result of higher volumes in our
contract development and manufacturing business, as well as the
launch of Dermazulene™ in China.
For the six months ended June 30,
2019, total revenues were $13,611 compared to $5,960 for the six months ended June 30, 2018. The year-over-year increase of
$7,651 or 128.4% was primarily
attributable to the same factors as described above for the
quarter.
Operating Expenses
Total operating expenses for the
three months ended June 30, 2019 were
$4,753, compared to $3,927 for the three months ended June 30, 2018, representing a year-over-year
increase of $826 or 21.0%. The
increase was primarily driven by higher cost of goods sold of
$451 associated with incremental
sales, higher research and development expenses of $332 primarily related to the Company's
proportionate funding of the Phase 3 clinical development of
MiCal 1, one of its pipeline products, partly offset by a reduction
in selling, general and administrative ("SG&A") expenses of
$78 when compared to the three months
of the prior year.
For the six months ended June 30,
2019, total operating expenses were $8,535, compared to $7,857 for the six months ended June 30, 2018, representing a year-over-year
increase of $678 or 8.6%. The
increase was mainly driven by the same factors as identified for
the three-month period above.
Other Expenses (Income)
Effective April 1, 2019, the Company terminated its
licensing agreement with Galderma S.A. for the rest-of-world
("ROW") rights for Pliaglis. The termination fees include the costs
incurred to reacquire the Pliaglis ROW rights and other
transaction-related costs.
For the three and six-month periods of 2018, the Company
recorded total other income of $1,095, composed of a gain on settlement of
$650 related to a historical
liability owing under a previous acquisition, and $445, mainly related to: 1) consideration
received relating to planned facility upgrades pursuant to
deficiency claims under a previous acquisition and a reimbursement
with respect to previously rendered contract manufacturing
services, and 2) a gain related to a contingent consideration
receivable from another previous acquisition, under the terms of
which the Company is entitled to be compensated if certain sales
targets and levels of inventory consumption are not achieved.
Income (Loss) from Continuing Operations before Income
Taxes
Income from continuing operations before income taxes
was $3,287 for the three months ended
June 30, 2019, compared to a net loss
of $(636) reported for the three
months ended June 30, 2018. The
year-over-year improvement of $3,923
was mainly attributable to: 1) the incremental gross margin on
out-licensing revenue of $813
(excluding the impact of the Cantabria out-licensing agreement); 2)
the incremental gross margin on product sales of $330; 3) the benefit of the up-front payment and
guaranteed minimum royalties under the Cantabria out-licensing
agreement of $4,184, net of the
Galderma contract termination fees; 4) the benefit of the reduction
in SG&A expenses of $78; partly
offset by 1) the non-recurring benefit of other income and the gain
on settlement of $1,095 recognized
during the second quarter of 2018 which did not repeat; and 2)
higher R&D expenses of $332 in
the current quarter.
Income from continuing operations before income taxes was
$3,565 for the six months ended
June 30, 2019, compared to a net loss
of $(1,060), reported for the six
months ended June 30, 2018. The
year-over-year improvement of $4,625
was mainly attributable to: 1) the incremental gross margin on
out-licensing revenue of $1,402
(excluding the impact of the Cantabria out-licensing agreement); 2)
the incremental gross margin on product sales of $282; 3) the benefit of the up-front payment and
guaranteed minimum royalties under the Cantabria out-licensing
agreement of $4,184, net of the
Galderma contract termination fees; and 4) the benefit of the
reduction in SG&A costs of $320,
partly offset by 1) the non-recurring benefit of other income and
the gain on settlement of $1,095
recognized during the second quarter of 2018 which did not repeat;
and 2) higher R&D expenses of $370 in the current year-to-date period.
Non-IFRS Financial Measures
The Company reports its
financial results in accordance with IFRS. However, we use certain
non-IFRS financial measures to assess our Company's performance. We
believe these to be useful to management, investors and other
financial stakeholders in assessing Crescita's performance from
both a financial and operational standpoint. The non-IFRS measures
used in this press release do not have any standardized meaning
prescribed by IFRS and are therefore not comparable to similar
measures presented by other issuers. These measures should be
considered as supplemental in nature and not as a substitute for
the related financial information prepared in accordance with
IFRS.
Adjusted EBITDA is a non-IFRS measure. This term is defined as
earnings (loss) from continuing operations before interest, income
taxes, depreciation and amortization, gain on settlement, other
income or expenses, equity-settled stock-based compensation, gain
on debt renegotiations, goodwill and intangible assets impairment,
accretion on the fair value of inventory, and foreign currency
gains and (losses), as applicable.
Management believes that Adjusted EBITDA is an important measure
of operating performance and cash flow and provides useful
information to investors as it highlights trends in the underlying
business that may not otherwise be apparent when relying solely on
IFRS measures. A reconciliation of EBITDA and adjusted EBITDA
to their closest IFRS measure can be found below.
EBITDA and Adjusted EBITDA Reconciliation
In thousands of
CAD dollars
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Net income (loss)
from continuing operations
|
2,208
|
|
(636)
|
|
2,844
|
|
2,250
|
|
(1,060)
|
|
3,310
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
410
|
|
289
|
|
121
|
|
766
|
|
579
|
|
187
|
Interest expense,
net
|
85
|
|
108
|
|
(23)
|
|
209
|
|
255
|
|
(46)
|
Income tax
expense
|
1,079
|
|
-
|
|
1,079
|
|
1,315
|
|
-
|
|
1,315
|
EBITDA
|
3,782
|
|
(239)
|
|
4,021
|
|
4,540
|
|
(226)
|
|
4,766
|
Equity-settled
stock-based compensation
|
64
|
|
62
|
|
2
|
|
197
|
|
144
|
|
53
|
Termination fees and
other costs
|
1,274
|
|
-
|
|
1,274
|
|
1,274
|
|
-
|
|
1,274
|
Foreign currency
loss
|
-
|
|
7
|
|
(7)
|
|
28
|
|
3
|
|
25
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
-
|
|
1,095
|
|
(1,095)
|
|
-
|
|
1,095
|
|
(1,095)
|
Foreign exchange
gain
|
37
|
|
-
|
|
37
|
|
-
|
|
-
|
|
-
|
Adjusted
EBITDA
|
5,083
|
|
(1,265)
|
|
6,348
|
|
6,039
|
|
(1,174)
|
|
7,213
|
Adjusted EBITDA for the quarter ended June 30, 2019 was $5,083, compared to an EBITDA loss of
$(1,265) for the quarter ended
June 30, 2018, representing a
year-over-year improvement of $6,348.
Adjusted EBITDA for the six months ended June 30, 2019 was $6,039, compared to an EBITDA loss of
$(1,174) for the six months ended
June 30, 2018, representing a
year-over-year improvement of $7,213.
Caution Concerning Limitations of Summary Financial Results
Press Release
This summary earnings press release contains
limited information meant to assist the reader in assessing
Crescita's performance but it is not a suitable source of
information for readers who are unfamiliar with Crescita and is not
in any way a substitute for the Company's condensed consolidated
interim financial statements, notes to the financial statements,
MD&A and Annual Information Form ("AIF").
About Crescita
Therapeutics Inc.
Crescita (TSX: CTX and OTC
US: CRRTF) is a publicly traded, Canadian commercial dermatology
company with manufacturing capabilities and a portfolio of
non-prescription skincare products and prescription drug products
for the treatment and care of skin conditions and diseases and
their symptoms. Crescita owns multiple proprietary drug
delivery platforms that support the development of patented
formulations that can facilitate the delivery of active drugs into
or through the skin. Please visit www.crescitatherapeutics.com
for additional information.
About MMPE™
The MMPE technology uses synergistic
combinations of certain specific pharmaceutical excipients included
on the FDA's Inactive Ingredient Guide for improved topical
delivery of active pharmaceutical ingredients (APIs) into or
through the skin. The benefits of this technology include the
potential for increased penetration of APIs with the possibility of
improved efficacy, lower API concentration and/or reduced dosing.
Issued U.S. patents provide intellectual property protection
through March 6, 2027.
About DuraPeel™
The DuraPeel technology is a
self-occluding, film-forming cream/gel formulation that provides
extended release delivery to the site of application. The cream/gel
contains a drug applied to a patient's skin forming a pliable layer
that releases drug into the skin for up to 12 hours. The benefits
of the DuraPeel technology include proven compatibility with a
variety of active pharmaceutical ingredients ("APIs"). A
self-occluding film reduces product transference risk, provides
fast drying time, facilitates easy application and removal, and
enables application to large and irregular skin surfaces. Patents
have been issued
in Australia, Canada, Japan and the U.S. with
the latest expiry in 2027. The European patent application is still
pending.
About Pliaglis®
Pliaglis,
a lidocaine and tetracaine (7%/7%) formulation, is a prescription
topical local anesthetic cream approved in over 25 countries that
provides safe and effective local dermal anesthesia on intact skin
prior to superficial dermatological procedures such as dermal
filler injections, pulsed dye laser therapy, facial laser
resurfacing and laser-assisted tattoo removal. This product
utilizes the Company's proprietary phase-changing topical cream
Peel technology. The Peel technology consists of a drug containing
cream which, once applied to a patient's skin, dries to form a
pliable layer that releases drug into the skin. Following the
application period, Pliaglis forms a pliable layer that is removed
from the skin allowing the dermatological procedure to be performed
with minimal to no pain.
Forward-Looking Statements
This press release
contains "forward-looking information" as defined under Canadian
securities laws (collectively, "forward-looking statements"). The
words "plans", "expects", "does not expect", "goals", "seek",
"strategy", "future", "estimates", "intends", "anticipates", "does
not anticipate", "projected", "believes" or variations of such
words and phrases or statements to the effect that certain actions,
events or results "may", "will", "could", "would", "should",
"might", "likely", "occur", "be achieved" or "continue" and similar
expressions identify forward-looking statements. In addition, any
statements that refer to expectations, intentions, projections or
other characterizations of future events or circumstances contain
forward-looking statements.
Forward-looking statements are not historical facts but instead
represent management's expectations, estimates, projections and
assumptions regarding future events or circumstances. Such
forward-looking statements are qualified in their entirety by the
inherent risks, uncertainties and changes in circumstances
surrounding future expectations which are difficult to predict and
many of which are beyond the control of the Company.
Forward-looking statements are necessarily based on a number of
estimates and assumptions that, while considered reasonable by
management of the Company as of the date of this press release, are
inherently subject to significant business, economic and
competitive uncertainties and contingencies. Material factors and
assumptions used to develop the forward-looking statements, and
material risk factors that could cause actual results to differ
materially from the forward-looking statements, include but are not
limited to changes in the business or affairs of Crescita; the
ability of Crescita's licensees to successfully market its
products; competitive factors in the industries in which Crescita
operates; relationships with customers, suppliers and licensees;
changes in legal and regulatory requirements; foreign exchange and
interest rates; prevailing economic conditions; and other factors,
many of which are beyond the control of Crescita.
Additional factors that could cause Crescita's actual results
and financial condition to differ materially from those indicated
in the forward-looking statements include, among others, the risk
factors included in Crescita's most recent Annual Information Form
dated March 18, 2019 under the
heading "Risks Factors", and as described from time to time in the
reports and disclosure documents filed by Crescita with Canadian
securities regulatory agencies and commissions. These and other
factors should be considered carefully, and readers should not
place undue reliance on Crescita's forward-looking statements, as
forward-looking statements involve significant risks and
uncertainties. Forward-looking statements should not be read as
guarantees of future performance or results and will not
necessarily be accurate indications of whether or not the times at
or by which such performance or results will be achieved.
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SOURCE Crescita Therapeutics Inc.