Continues to Improve Cash Utilization
LAVAL, QC, Aug. 10, 2018 /PRNewswire/ - Crescita
Therapeutics Inc. (TSX: CTX) (Crescita or the Company), a
commercial dermatology company with a portfolio of non-prescription
skincare 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, 2018.
Q2-F2018 Year-over-Year Financial Highlights
- Revenue of $2.3 million, versus
$4.9 million in Q2-17. The prior
year's revenue included the $2.7
million up-front payment related to the out-licensing of
Pliaglis in the U.S.;
- Operating expenses down $0.3
million versus Q2-17 and $1.3
million on a year-to-date basis compared to the prior year's
period;
- Adjusted EBITDA1 loss of $1.3 million, down $2.1
million versus Q2-17, but an improvement of $0.3 million on a year-to-date basis compared to
the prior year's period;
- Cash and cash equivalents were $9.1
million at the end of the quarter, compared to $4.1 million in Q2-17;
- Cash utilization of $0.4 million
during the quarter, an improvement of $0.7
million versus Q2-17;
- Other Income of $1.1 million
recognized during the quarter including a non-recurring gain on the
settlement of Other obligations related to a previous
acquisition;
"During the quarter, we made further headway in resolving
some of the remaining challenges inherited from the past by
concluding a settlement related to a historical liability of
$1.0 million. We are pleased
with the outcome of our negotiations on this matter which improves
our balance sheet and reduces future cash outflows,"
said Serge Verreault, President and Chief Executive Officer
of Crescita.
Mr. Verreault added "Our financial results for the first six
months of fiscal 2018 are encouraging as we remain focused on
fundamentals. We continue to see the benefits of our cost
rationalization and operational streamlining efforts which
ultimately resulted in SG&A savings of $1.8 million compared to the same six-month
period of fiscal 2017. We also recognized $1.6 million in royalty revenue from the U.S.
launch of Pliaglis by our licensee which contributed to improving
our bottom line. While we know that the first tranche of royalty
revenue was related to filling the distribution channel, we still
do not have visibility on the level of recurring revenue for future
quarters. We remain confident that all necessary resources will be
mobilized to make this product successful."
|
1Adjusted
EBITDA is a non-IFRS measure. Please refer to the Non-IFRS
Financial Measures and EBITDA and Adjusted EBITDA
Reconciliation sections of this press release.
|
Q2-F2018 Financial Results
Note: All figures are in Canadian dollars. The
second quarter 2018 MD&A, Condensed Consolidated Interim
Financial Statements and accompanying notes can be found on
www.crescitatherapeutics.com/investors and have been
filed with SEDAR.
In thousands of
CAD dollars except earnings per share
and number of shares
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
2018
|
2017
|
Change
|
|
2018
|
2017
|
Change
|
Revenues
|
2,311
|
4,858
|
(2,547)
|
|
5,960
|
6,938
|
(978)
|
Cost of goods
sold
|
1,025
|
930
|
95
|
|
2,331
|
1,961
|
370
|
Research &
Development
|
277
|
304
|
(27)
|
|
506
|
690
|
(184)
|
Selling, general
& administrative
|
2,625
|
3,068
|
(443)
|
|
5,020
|
6,779
|
(1,759)
|
Interest expense,
net
|
108
|
15
|
93
|
|
255
|
58
|
197
|
Total Operating
Expenses
|
4,035
|
4,317
|
(282)
|
|
8,112
|
9,488
|
(1,376)
|
Total Other Income
(Expenses)
|
1,088
|
(3)
|
1,091
|
|
1,092
|
(42)
|
1,134
|
Net (loss) income
from continuing operations
|
(636)
|
538
|
(1,174)
|
|
(1,060)
|
(2,592)
|
1,532
|
Net (loss) from
discontinued operations
|
(25)
|
(38)
|
13
|
|
(25)
|
(101)
|
76
|
Net (loss)
income
|
(661)
|
500
|
(1,161)
|
|
(1,085)
|
(2,693)
|
1,608
|
Net (loss) income
from continuing operations per share
|
$
(0.03)
|
$ 0.04
|
$ (0.07)
|
|
$
(0.06)
|
$ (0.19)
|
$ 0.13
|
Weighted Average
number of common shares outstanding
|
21,007
|
13,935
|
7,072
|
|
18,375
|
13,935
|
4,440
|
Selected Cash Flow
Information
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
9,094
|
4,112
|
4,982
|
|
9,094
|
4,112
|
4,982
|
Cash (used in)
operating activities
|
(238)
|
(962)
|
724
|
|
(1,308)
|
(4,478)
|
3,170
|
Cash (used in)
investing activities
|
(23)
|
(28)
|
5
|
|
(23)
|
(71)
|
48
|
Cash (used in)
provided by financing activities
|
(94)
|
(124)
|
30
|
|
3,426
|
(1,124)
|
4,550
|
Cash and Cash Equivalents
Cash and cash
equivalents were $9.1 million as at
June 30, 2018 compared to
$4.1 million at June 30, 2017. As at June
30, 2017, the Company had $8.6
million of restricted short-term investments held as
collateral for the Company's letter of credit. The restriction
on these funds was lifted as part of the Knight Loan amendment in
the third quarter of 2017. The current quarter's cash balance
includes $3.5 million in net proceeds
from the Company's Rights Offering concluded in March of 2018. By
adjusting each quarter's cash balance for these non-recurring
items, the respective total cash balances, on a comparable basis,
would have been $5.6 million in Q2-18
and $12.7 million in Q2-17.
Revenue
Total revenue, composed of product
sales, out-licensing and services revenue, was $2.3 million for the three months ended
June 30, 2018, compared to
$4.9 million in the corresponding
quarter of the prior year, representing a decrease of $2.5 million. This decrease was primarily a
result of the up-front payment of $2.7
million (US$2.0 million)
received under the Pliaglis U.S. out-licensing agreement with Taro
Pharmaceuticals Inc. ("Taro") in Q2-17, pursuant to which Taro has
the exclusive rights to sell and distribute Pliaglis in the U.S.
For the six months ended June 30,
2018, total revenues were $6.0
million compared to $6.9
million in the corresponding six-month period of the prior
year, representing a decrease of $1.0
million. The decrease was mainly a result of the same factor
as for the quarter, partly offset by the year-to-date royalty
revenue from the launch of Pliaglis in the U.S. market of
$1.6 million.
In both the quarterly and year-to-date periods, product sales
were softer than anticipated without the incremental product sales
from Alyria, acquired in August 2017.
The aesthetic spa business is extremely competitive and renders
gaining market share challenging. The Company is planning to launch
product innovations before the end of the year to bolster sales in
this market.
Operating Expenses ("OPEX")
Total operating
expenses for the three months ended June 30,
2018 were $4.0 million,
representing a decrease of $0.3
million when compared to the $4.3
million reported for the three months ended June 30, 2017. For the six months ended
June 30, 2018, total OPEX was
$8.1 million, down $1.4 million from the $9.5
million incurred in the six months ended June 30, 2017. The year-over-year improvements in
both periods were mainly driven by savings in SG&A as a result
of the reorganization of various corporate functions and the
centralization of the Company's operations to its Laval facility; a reduction in professional
and accounting fees in connection with regulatory matters involving
the INTEGA Acquisition as well as savings in logistics costs.
Other Income
During the quarter, the Company
recorded Other Income of $1.1 million
consisting of the following:
- Gain on Settlement of $0.7
million: the Company entered into an agreement relating to a
$1.0 million historical liability
owing under a previous acquisition concluded in 2016. Pursuant to
the terms of the agreement, in consideration for INTEGA releasing
the counterparty from any potential future claims under the
agreement, INTEGA no longer has to pay a portion of that liability
equal to $0.7 million.
- Other Income of $0.4 million
related to the following:
- consideration received relating to planned facility upgrades
pursuant to deficiency claims under the aforementioned previous
acquisition and a reimbursement of previously rendered contract
manufacturing services, and
- 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.
Net (Loss) Income from Continuing
Operations
Net loss from continuing operations for the
quarter ended June 30, 2018 was
$(0.6) million, compared to net
income of $0.5 million in the prior
year's quarter. The year-over-year decrease in profitability of
$1.1 million was mainly due to the
combined effect of: 1) the shortfall in revenue of $2.5 million driven in large part by the up-front
payment related to the out-licensing of the U.S. right to Pliaglis
for $2.7 million received in Q2-17,
partially offset by 2) the non-recurring benefit of Other income
and the gain on settlement of $1.1
million recognized during the quarter, and 3) a decrease in
operating expenses of $0.3
million.
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.
The following are the Company's non-IFRS measures along with
their respective definitions:
EBITDA is defined as earnings (loss) from continuing operations
before interest, income taxes, depreciation and amortization.
Adjusted EBITDA is defined as earnings (loss) from continuing
operations before interest, income taxes, depreciation and
amortization, gain on settlement, other income, equity-settled
stock-based compensation ("SBC"), gain on debt renegotiations,
goodwill and intangible assets impairment, accretion on the fair
value of inventory and foreign currency gains (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,
|
2018
|
2017
|
Change
|
|
2018
|
2017
|
Change
|
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
(636)
|
538
|
(1,174)
|
|
(1,060)
|
(2,592)
|
1,532
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
289
|
275
|
14
|
|
579
|
556
|
23
|
interest expense,
net
|
108
|
15
|
93
|
|
255
|
58
|
197
|
EBITDA
|
(239)
|
828
|
(1,067)
|
|
(226)
|
(1,978)
|
1,752
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
Equity-settled
stock-based compensation
|
62
|
37
|
25
|
|
144
|
114
|
30
|
Accretion on fair
value of inventory
|
-
|
-
|
-
|
|
-
|
371
|
(371)
|
Foreign currency
loss
|
7
|
3
|
4
|
|
3
|
42
|
(39)
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
Other income and Gain
on settlement
|
1,095
|
-
|
1,095
|
|
1,095
|
-
|
1,095
|
Adjusted
EBITDA
|
(1,265)
|
868
|
(2,133)
|
|
(1,174)
|
(1,451)
|
277
|
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 consolidated
financial statements, notes thereto, MD&A and Annual
Information Form ("AIF") reports.
About Crescita Therapeutics
Inc.
Crescita (TSX: CTX) is a publicly traded, Canadian
commercial dermatology company with a portfolio of non-prescription
skincare products for the treatment and care of skin conditions and
diseases and their symptoms and prescription drug products for the
treatment of pain. 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. For additional information, please visit
www.crescitatherapeutics.com.
Forward-Looking Statements
This Press Release
contains "forward-looking statements" within the meaning of
applicable securities laws. Forward-looking statements can be
identified by words such as: "anticipate," "intend," "plan,"
"goal," "seek," "believe," "project," "estimate," "expect,"
"strategy," "future," "likely," "may," "should," "will" and similar
references to future periods. Forward-looking statements are
neither historical facts nor assurances of future performance.
Instead, they are based only on the Company's current beliefs,
expectations and assumptions, the future of its business, future
plans and strategies, projections, anticipated events and trends,
the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict and many of which are outside of the Company's
control. Crescita's actual results and financial condition may
differ materially from those indicated in the forward-looking
statements. Therefore, readers should not rely on any of these
forward-looking statements. Important factors that could cause
Crescita's actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, the risk factors included in Crescita's most recent Annual
Information Form dated March 27, 2018
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 a result of the foregoing and other factors, no assurance can be
given as to any such future results, levels of activity or
achievements and none of Crescita or any other person assumes
responsibility for the accuracy and completeness of these
forward-looking statements. Any forward-looking statement
made by the Company in this Press Release is based only on
information currently available to it and speaks only as of the
date on which it is made. Except as required by applicable
securities laws, Crescita undertakes no obligation to publicly
update any forward-looking statement, whether written or oral, that
may be made from time to time, whether as a result of new
information, future developments or otherwise.
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SOURCE Crescita Therapeutics Inc.