Crescita Therapeutics Reports Fourth Quarter and Fiscal 2018 Results Record Annual Revenue of $16.6M and Adjusted EBITDA of $1.5M Strong Royalties and Sales Milestones
LAVAL, QC, March 21, 2019 /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 fourth quarter and fiscal year ended December 31, 2018.
- Revenue of $6.2 million, up $3.8 million or 163.3% versus Q4-F2017;
- Revenue includes $1.4 million of royalties on the U.S. net sales of Pliaglis and $2.0 million in sales and development milestones;
- Adjusted EBITDA1 of $1.8 million, up $3.8 million versus Q4-F2017;
- Ending cash position of $8.6 million versus $7.0 million as at December 31, 2017;
- Revenue of $16.6 million, up $4.6 million or 38.4% versus F2017;
- Revenue includes $4.1 million of royalties on the U.S. net sales of Pliaglis and $3.3 million in sales and development milestones;
- Operating expenses of $16.7 million, down $1.6 million or 8.6% versus F2017;
- Adjusted EBITDA1 of $1.5 million, an improvement of $5.9 million versus F2017;
Operational and Corporate Developments of F2018
- Announced the U.S. launch of Pliaglis in Q1, by our partner Taro Pharmaceutical Inc. ("Taro");
- Recognized two out of four sales milestones, totaling $2.6 million (US$2.0 million) following the achievement by Taro of cumulative sales targets;
- Announced the U.S. FDA's approval to remove the "Not for Home Use" label restriction on Pliaglis, triggering a $0.7 million (US$0.5 million) milestone;
- Successfully completed a Rights Offering on March 9, 2018, raising $3.5 million in net equity financing;
- Reported favourable results from a skin permeation study using our patented technologies, MMPE™ and DuraPeel™, demonstrating significantly increased transdermal permeation of CBD over the control formulation by up to 14- and 6-fold, respectively;
- Launched five product innovations in our non-Rx business, leveraging our MMPE technology;
- On February 4, 2019, the Company entered into an agreement with Tetra Natural Health ("Tetra"), a subsidiary of Tetra Bio-Pharma, a leader in cannabinoid-derived drug discovery and development, to develop an enhanced version of Tetra's dermatology portfolio using Crescita's patented transdermal delivery technologies: MMPE and DuraPeel.
"Our Q4 results were extremely positive as we reported record revenues and Adjusted EBITDA, fueled not only by milestone and royalty revenue but by our delivery of significant operational improvements in our business," said Serge Verreault, President and CEO of Crescita. "As we look ahead to 2019, the quarterly revenues will continue to vary depending on the timing of milestones and royalty revenues. We are committed to continued growth and improvements in all of our revenue channels and we are well positioned, strategically and financially, to continue to build Crescita into a strong, profitable dermatology company."
Please refer to the Non-IFRS Financial Measures and EBITDA and Adjusted EBITDA Reconciliation sections of this press release.
Q4-F2018 and F2018 Financial Results
Note: All figures are in Canadian dollars. The fiscal 2018 MD&A, Consolidated Audited Financial Statements and accompanying notes can be found on www.crescitatherapeutics.com/investors and have been filed with SEDAR.
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Cash and cash equivalents, end of period
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Total revenue, composed of product sales, out-licensing and services revenue, was $16.6 million for the twelve months ended December 31, 2018, compared to $12.0 million for the twelve months ended December 31, 2017, representing an increase of $4.6 million or 38.4%. The increase came primarily from our out-licensing business, accounting for $3.9 million of the increase, and was almost exclusively from milestone and royalty revenue related to the commercialization of Pliaglis in the U.S by Taro. To a lesser extent, revenue from product sales also grew by $0.6 million, mainly as a result of our contract development and manufacturing business and medical aesthetic brands.
Total operating expenses for the twelve months ended December 31, 2018 were $16.7 million, compared to $18.2 million for the twelve months ended December 31, 2017, representing a decrease of $1.6 million or 8.6%. The decrease was primarily driven by savings in selling, general and administrative ("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, partly offset by higher cost of goods sold as a result of incremental sales over fiscal 2017.
Net Income (Loss) from Continuing Operations before Income Taxes
Net income from continuing operations before income tax recovery was $0.6 million for the twelve months ended December 31, 2018, compared to a net loss of $(11.3) million, reported for the twelve months ended December 31, 2017. The year-over-year improvement of $11.9 million was mainly attributable to: 1) the incremental gross margin on out-licensing revenue of $3.4 million; 2) the incremental gross margin on product sales of $0.9 million; 3) the benefit of the gain on settlement and other income of $1.1 million recognized during the current year; 4) the benefit of the reduction in SG&A of $2.1 million versus the prior year; as well as the 5) the non-cash goodwill and intangible asset impairment charge of $5.7 million incurred at the end of fiscal 2017, which did not repeat in the current year, partly offset by; 6) the gain on debt renegotiations of $1.1 million in the prior year.
Income Tax Recovery
The Company recognized an income tax asset of $1.8 million primarily in respect of Canadian non-capital loss carry-forwards and deductible temporary differences between the asset carrying amounts used for accounting purposes and the amounts used for tax purposes. The recognition of the income tax recovery was supported by a high probability, based on management's best estimate, that future taxable income against which to deduct the loss carry-forwards and temporary differences will be available.
Cash and Cash Equivalents
Total cash generated during the year was $1.6 million, resulting in an ending cash and cash equivalents balance of $8.6 million as at December 31, 2018, compared to $7.0 million at December 31, 2017. The year-end cash balance included $3.5 million in net proceeds from the Company's Rights Offering concluded in March of 2018.
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.
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Net Income (loss) from continuing operations
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Income tax recovery
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 Audited 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.
The MMPE technology uses synergistic combinations of 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. U.S. and Patent Treaty Cooperation ("PCT") applications are pending with the latest expiry date in 2036.
About Peel and DuraPeel™
The Peel and DuraPeel technologies are self-occluding, film-forming cream/gel formulations that provide extended release delivery to the site of application. The cream/gel contains a drug, that when applied to a patient's skin, forms a pliable layer that releases the active ingredient into the skin for up to 12 hours. The benefits of the Peel and DuraPeel technologies 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. While the Peel technology typically involves a single solvent that dries to form a pliable film, the DuraPeel technology involves a two-solvent system which includes: 1) a volatile solvent component that dries to form a self-occluding film and 2) a non-volatile solvent component that remains in the formulation to facilitate prolonged release of the active from the formulation into the skin. Peel technology patents have been issued in 21 countries including the US, with the latest expiring in 2031. Patent applications are pending in 3 countries. DuraPeel patents have been issued in Australia, Canada, Japan and the U.S. with the latest expiry in 2027. The European patent application is pending.
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 Management's Discussion and Analysis for the year ended December 31, 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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