Year-over-Year Revenue Growth of 16.4%Positive Adjusted EBITDA for Third Consecutive Quarter And Generates $2.3 Million in Cash
Crescita Therapeutics Inc. (TSX:CTX.TO) (OTC US: CRRTF) (Crescita or the Company), a Canadian commercial dermatology company with 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 first quarter ended March 31, 2019.
Q1-F2019 Year-over-Year Financial Highlights
-- Revenue of $4.2 million, an increase of $0.6 million or 16.4% vs Q1-2018; -- Received a $1.3 million (US$1.0 million) sales milestone from Taro on the achievement of the 3(rd) cumulative sales target (included in revenue above); -- Operating expenses of $3.8 million, down $0.2 million or 4.0% versus Q1-2018; -- Adjusted EBITDA(1) of $1.0 million, an improvement of $0.9 million versus Q1-2018; -- Generated $2.3 million in cash during the quarter, resulting in an ending cash and cash equivalents balance of $10.9 million as at March 31, 2019, compared to $8.6 million at the end of Q4-2018; -- Launched Dermazuleneâ?¢ in China, a product specifically designed and created for the Chinese market, which is distributed through the leading cross-border e-commerce platform in China. -- Entered into an agreement with Tetra Natural Health ("Tetra") on February 4, 2019, to develop an enhanced version of Tetra's dermatology portfolio using Crescita's patented transdermal delivery technologies: MMPEâ?¢ and DuraPeelâ?¢.
“I am pleased with the positive momentum our team has generated in the first quarter of fiscal 2019, as demonstrated by our revenue and Adjusted EBITDA growth, as well as our strong cash position,” said Serge Verreault President and Chief Executive Officer of Crescita. “Our results underscore the strength of our four-pillar growth strategy. We will remain focused on the fundamentals of our business to drive sustainable profitable growth in 2019.”
Subsequent EventsEffective April 1, 2019, Crescita reacquired the rest-of-world development and marketing rights for Pliaglis(®) from its licensee, Galderma S.A., and on April 25, 2019, announced that it has entered into a commercialization license agreement with Cantabria Labs, granting Cantabria Labs the exclusive rights to sell and distribute Pliaglis in Italy, Portugal, France and Spain. Cantabria Labs is a leading prescription dermatology company in Europe with a presence in over 80 countries.
___________________________________________________________________________ (1) Please refer to the Non-IFRS Financial Measures and EBITDA and Adjusted EBITDA Reconciliation sections of this press release.
Q1-F2019 Financial Results Note: All figures are in Canadian dollars. The first 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 except earnings per share and number of shares Three months ended March 31, --- 2019 2018 Change Revenues 4,249 3,649 600 --- Cost of goods sold 1,321 1,330 (9) Research & Development 267 229 38 Selling, general & administrative 2,194 2,379 (185) --- Total operating expenses 3,782 3,938 (156) --- Operating profit (loss) 467 (289) 756 --- Total other expenses 189 135 54 --- Net income (loss) before income taxes 278 (424) 702 Deferred income tax expense 236 236 --- Net income (loss) 42 (424) 466 --- Net income (loss) per share $ 0.00 $ (0.03) 0.03 --- Weighted Average number of common shares 21,016 15,715 5,301 --- Selected Cash Flow Information --- Cash and cash equivalents, end of period 10,879 9,455 1,424 Cash provided by (used in) operating activities 2,398 (1,070) 3,468 Cash (used in) investing activities (34) (34) Cash (used in) provided by financing activities (75) 3,520 (3,595) ---
Cash and Cash EquivalentsCash and cash equivalents were $10.9 million as at March 31, 2019 compared to $9.5 million as at March 31, 2018. For the three months ended March 31, 2019, the Company generated cash from its operations of $2.4 million, an increase of $3.5 million from the cash utilized of $(1.1) million in the comparative quarter of 2018.
RevenueTotal revenue, consisting of product sales, out-licensing and services revenue, was $4.2 million for the quarter ended March 31, 2019, compared to $3.6 million for the three months ended March 31, 2018, representing an increase of $0.6 million or 16.4%. The increase came primarily from our out-licensing business activities which contributed $0.4 million year-over-year, mainly as a result of a sales milestone of $1.3 million (US$1.0 million) triggered by our licensee, Taro Pharmaceuticals Inc., reaching the third contractual cumulative sales target, partly offset by lower royalties versus Q1-2018. In the first quarter of 2018, Pliaglis was launched in the U.S, which resulted in significant royalties from sales to fill the distribution channel in that period. Product sales and services also grew, representing $0.2 million in incremental revenue, mainly as a result of growth in contract manufacturing and work performed under product and formulation development agreements.
Operating ExpensesTotal operating expenses for the three months ended March 31, 2019 were $3.8 million, compared to $3.9 million for the three months ended March 31, 2018, representing a decrease of $0.2 million or 4.0%. The decrease was mainly due to savings in SG&A, partly offset by an increase in R&D expenses. The improvement in SG&A was mainly driven by a reduction in consulting fees related to professional and accounting services, while the increase in R&D costs was mainly driven by incremental headcount-related costs incurred in connection with a higher number of product and formulation development projects, and to a lesser extent, to higher third-party laboratory testing costs.
Net Income (Loss) before Income TaxesNet income before income taxes was $0.3 million for the three months ended March 31, 2019, compared to a net loss of $(0.4) million, reported for the three months ended March 31, 2018. The year-over-year improvement of $0.7 million was mainly attributable to the incremental gross margin on out-licensing revenue of $0.6 million, and the benefit of the reduction in SG&A of $0.2 million.
Non-IFRS Financial MeasuresThe 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, 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 March 31, === 2019 2018 Change === Net income (loss) 42 (424) 466 Add: --- Depreciation and amortization 356 290 66 Interest expense, net 124 139 (15) Deferred income tax expense 236 236 --- EBITDA 758 5 753 --- Equity-settled stock-based compensation 133 82 51 Foreign currency loss 65 65 Less: --- Foreign currency gain 4 (4) --- Adjusted EBITDA 956 83 873 ---
Caution Concerning Limitations of Summary Financial Results Press ReleaseThis 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 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 Tetra Natural HealthTetra Natural Health Inc. is a subsidiary of Tetra Bio-Pharma Inc. and focuses on the identification, development and marketing of hemp or cannabis-based natural health products, or cannabinoid-derived products authorized for sale by Health Canada.
About Tetra Bio-PharmaTetra Bio-Pharma (TSXV:TBP.VN) (OTCQB:TBPMF) a biopharmaceutical leader in cannabinoid-derived drug discovery and development with a Health Canada approved and FDA reviewed clinical program aimed at bringing novel prescription drugs and treatments to patients and their healthcare providers. Tetra Bio-Pharma has subsidiaries engaged in the development of an advanced and growing pipeline of Bio Pharmaceuticals, Natural Health and Veterinary Products containing cannabis and other medicinal plant-based elements. With patients at the core of its mission, Tetra Bio-Pharma is focused on providing rigorous scientific validation and safety data required for inclusion into the existing bio pharma industry by regulators, physicians and insurance companies. For more information visit: www.tetrabiopharma.com.
About MMPETMThe 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.
About DuraPeelTMThe 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 29 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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