F2020 Adjusted EBITDA1 of $3.2M
Strong Ending Cash Position of
$14.3M
Crescita Therapeutics Inc. (TSX: CTX and OTC US: CRRTF)
(“Crescita” or the “Company”), a growth-oriented, innovation-driven
Canadian commercial dermatology company, today reported its
financial results for the fourth quarter (“Q4-F2020”) and fiscal
year ended December 31, 2020 (“F2020”). All amounts presented are
in thousands of Canadian dollars (“CAD”) unless otherwise
noted.
Financial Highlights
Q4-F2020 vs. Q4-F2019
- Revenue was $2,791 compared to $3,820, a decrease of
$1,029;
- Gross profit was $1,588 compared to $2,132, a decrease of
$544;
- Operating expenses were $2,316 compared to $2,718, a decrease
of $402;
- Adjusted EBITDA1 was $(446) compared to $6, a decrease of
$452.
F2020 vs. F2019
- Revenue was $15,640 compared to $22,337, a decrease of
$6,697;
- Royalty revenue from the U.S. sales of Pliaglis® under the Taro
contract were $1,934, a decrease of $692, with no royalties in each
of Q2 and Q4-F2020;
- Gross profit was $11,273 compared to $16,536, a decrease of
$5,263;
- Operating expenses were $9,718 compared to $11,568, a decrease
of $1,850;
- Adjusted EBITDA1 was $3,201 compared to $6,984, a decrease of
$3,783;
- Generated $5,013 in cash, resulting in a closing cash position
of $14,281 compared to $9,268;
- Recorded a non-cash impairment charge on intangible assets of
$1,918 to reflect the projected impact of the decrease in demand
for certain products and services due to COVID-19.
“Although fiscal 2020 was marked by challenges due to the
COVID-19 pandemic, we have shown resilience by adapting to an
evolving environment and focusing on the execution of our corporate
growth strategy. The amendment to our agreement with Taro allowed
us to solidify our liquidity position with a cash injection of
$5.2M. We also capitalized on licensing opportunities for Pliaglis
in Austria, Mexico and China, treading ahead to secure future
recurring revenue streams,” commented Serge Verreault, President
and CEO of Crescita. “With 2020 behind us, we are eager to pursue
our growth trajectory in 2021 by maximizing the licensing of
Pliaglis in untapped international markets, exploring strategic
acquisition targets to gain critical mass, increasing our customer
base, and strengthening our medical aesthetic business, starting
with the upcoming launch of NCTF®.”
F2020 Corporate Developments
COVID-19
- Restrictions imposed by various governments including customer
closures and the reduction in aesthetic treatments and procedures
in Canada and internationally negatively impacted our product sales
of premium skincare brands as well as our third-party manufacturing
services revenue during most of fiscal 2020. Despite these
challenges, we remained agile in executing initiatives to mitigate
some of the impacts of the pandemic:
- We engaged directly with consumers through various digital
media platforms as well as the launch of an e-commerce website for
Laboratoire Dr Renaud®, our lead aesthetic brand, to generate
incremental sales;
- We applied for and obtained a Natural Health Number from Health
Canada allowing us to produce and sell hand sanitizer in response
to COVID-19.
We Continued to Advance Pliaglis in the Rest-of-World
(“ROW”)
- China - We entered into an exclusive agreement with
Juyou-Bio-Technology Co. Ltd, for the commercialization and
development of Pliaglis in mainland China. In connection with the
agreement, we received an upfront payment of $165 (US$125). While
the regulatory approval of Pliaglis is pending in China, we are
eligible to receive potential regulatory milestones as well sales
milestones once the product is launched of up to US$1,000 and
US$1,800, respectively.
- Mexico - We entered into a commercialization license
agreement with LIV LABORATÓRIOS, granting them the exclusive rights
to distribute and sell Pliaglis in Mexico.
- Austria - We entered into a commercialization license
agreement with Pelpharma, granting them the exclusive rights to
distribute and sell Pliaglis in Austria.
- Spain Launch - Our European licensing partner, Cantabria
Labs Inc. (“Cantabria”), launched Pliaglis in Spain.
- Approval of Cantabria Manufacturing Facility - Cantabria
received approval for its manufacturing facility in Spain to be the
supplier of Pliaglis in Europe, which led to the recognition of
$413 of incremental revenue under the contract (the “Cantabria
Agreement”).
We Amended our Development and Commercialization License
Agreement with Taro
- We amended our agreement with Taro Pharmaceuticals Inc. (“Taro”
and the “Taro Amendment”) for Pliaglis in the U.S., resulting in a
one-time total payment of $5,151.
We Improved our Access to Liquidity through a Credit Facility
with the Royal Bank of Canada
- We secured a $3,500 revolving operating credit facility with
the Royal Bank of Canada (subject to margin requirements). The
credit facility remains undrawn.
We Signed an Exclusive Distribution Agreement to Bolster our
Medical Aesthetic Business
- We entered into an exclusive distribution and promotion
agreement with Laboratoires FILLMED for the distribution of the
ART-FILLER® injectables range and the New Cellular Treatment Factor
(“NCTF®”) in Canada. In January 2021, FILLMED submitted the
application to Health Canada for a new Medical Device License for
ART-FILLER as a Class III medical device. We are expecting to
launch NCTF in the first half of 2021, and ART-FILLER in early
2022, subject to regulatory approval by Health Canada.
Q4-F2020 and F2020 Financial Results
Note: The Management’s Discussion and Analysis
(“MD&A”), Consolidated Audited Financial Statements and
accompanying notes for the fiscal year ended December 31, 2020 can
be found at www.crescitatherapeutics.com/investors and have been
filed with SEDAR at www.sedar.com.
Summary Financial Results
In thousands of CAD, except per share data
and number of shares
Three months ended December
31,
Twelve months ended December
31,
2020
2019
2020
2019
$
$
$
$
Commercial skincare
2,079
2,210
6,704
7,600
Licensing and royalties
359
1,022
7,224
12,059
Manufacturing and services
353
588
1,712
2,678
Revenues
2,791
3,820
15,640
22,337
Cost of goods sold
1,203
1,688
4,367
5,801
Gross Profit
1,588
2,132
11,273
16,536
Gross Margin (%)
56.9%
55.8%
72.1%
74.0%
Research and development
325
38
1,101
1,376
Selling, general and administrative
1,743
2,128
7,126
8,463
Depreciation and amortization
248
552
1,491
1,729
Total operating expenses
2,316
2,718
9,718
11,568
Operating profit (loss)
(728)
(586)
1,555
4,968
Total other expenses (income)
(40)
131
1,035
1,788
Income (loss) before income
taxes
(688)
(717)
520
3,180
Deferred income tax expense (recovery)
(96)
(234)
483
1,325
Net income (loss)
(592)
(483)
37
1,855
Adjusted EBITDA1
(446)
6
3,201
6,984
Earnings (loss) per share
Basic
$
(0.03)
$
(0.02)
$
-
$
0.09
Diluted
$
(0.03)
$
(0.02)
$
-
$
0.09
Weighted average number of common
shares outstanding
Basic
20,648,448
20,766,565
20,661,477
20,941,690
Diluted
20,648,448
22,540,834
20,969,205
22,496,719
Selected Balance Sheet
Information
Cash and cash equivalents, end of
period
14,281
9,268
14,281
9,268
Selected Cash Flow Information
Cash provided by operating activities
568
52
5,608
5,306
Cash used in investing activities
-
(46)
(59)
(215)
Cash used in financing activities
(94)
(3,728)
(476)
(4,394)
1Please refer to the Non-IFRS Financial
Measures section of this press release.
Revenue
The Company has three reportable segments: 1) Commercial
Skincare (“Commercial”), which manufactures branded
non-prescription skincare products for sale to the Canadian and
international markets and commercializes Pliaglis in Canada; 2)
Licensing and Royalties (“Licensing”), which includes revenue from
licensing the intellectual property related to Pliaglis, or to our
transdermal delivery technologies; and 3) Manufacturing and
Services (“Manufacturing”), which includes revenue from contract
manufacturing and product development services.
For the three months ended December 31, 2020, total revenue was
$2,791 compared to $3,820 for the three months ended December 31,
2019. The decrease of $1,029 came primarily from the Licensing
segment, representing $663. In Q4-F2019, we recognized the
remaining regulatory milestone under the original agreement with
Taro (the “Original Taro Agreement”) in connection with the FDA
approval of an enhanced formulation of Pliaglis for the U.S. market
in the amount of $988 (US$750). Commercial and Manufacturing
revenue also decreased by $131 and $235, respectively from lower
export sales due to the timing of shipments and a reduction in work
volumes from our contract manufacturing clients due to
pandemic-driven decreases in demand.
For the year ended December 31, 2020, total revenue was $15,640
compared to $22,337 for the year ended December 31, 2019,
representing a decrease of $6,697, which was primarily driven by
the decrease of $4,835 in the Licensing segment. The segment’s
performance was impacted by the following non-recurring amounts
from 2019: 1) the aggregate amount of $5,459 in connection with the
Cantabria Agreement; 2) sales and regulatory milestones of $3,633
under the Original Taro Agreement, as well as lower royalties on
global Pliaglis sales of $898, partly offset by the $4,483 received
from the Taro Amendment in the current year. Also contributing to
the overall revenue shortfall were the Commercial and Manufacturing
segments, posting decreases of $896 and $966, respectively, mainly
because of lower demand for our products and services as a result
of temporary shutdowns of spas and medispas throughout most of
Q2-F2020 due to COVID-19.
Gross Profit
For the three months ended December 31, 2020, gross profit was
$1,588, representing a gross margin of 56.9%, compared to $2,132
and 55.8%, respectively for the three months ended December 31,
2019. The year-over-year decrease in gross profit of $544 was
primarily due to the decrease in high margin licensing revenue,
while the improvement in gross margin of 1.1% was largely due to
our product mix and to the benefit of wage subsidies under the
Canada Emergency Wage Subsidy (“CEWS”) program.
For the year ended December 31, 2020, gross profit was $11,273,
representing a gross margin of 72.1%, compared to $16,536 and
74.0%, respectively for the year ended December 31, 2019. The
decreases of $5,263 and 1.9%, respectively, were mainly due to the
decrease in high margin licensing revenue and the business and
product demand disruptions due to COVID-19, partly offset by wage
subsidies under the CEWS program, and lower costs associated to
earning royalties on Pliaglis year-over- year.
Operating Expenses
For the three months and year ended December 31, 2020, operating
expenses were $2,316 and $9,718, compared to $2,718 and $11,568,
for the three months and year ended December 31, 2019. The
year-over-year decreases of $402 and $1,850, respectively, were
mainly driven by lower selling, general and administrative
(“SG&A”) expenses. Late in Q1-F2020, we initiated cash
conservation measures in response to the COVID-19 pandemic which
contributed significantly to the year-over-year decrease. In
addition, we had the benefit of wage subsidies under the CEWS
program of $165 and $722, respectively, for the three months and
the year ended December 31, 2020, as well as savings from certain
vacant positions versus the prior year, lower share-based
compensation, and lower travel expenses due to shelter-in-place
rules.
Other Expenses (Income)
During the year ended December
31, 2020, we recognized an impairment on intangible assets of
$1,918 mainly to reflect the projected impact on long-term
forecasts of the decrease in demand for our non-prescription
skincare products and contract manufacturing and development
services due to COVID-19. In addition, as part of the Taro
Amendment, we recognized $668 as Other Income in connection with
the termination of a non-financial clause regarding the supply of
Pliaglis outside the U.S.
In the prior year, we recorded Other Expense of $1,274 including
the costs to reacquire the Pliaglis ROW rights from Galderma S.A.,
as well as other transaction-related costs.
Income (Loss) Before Income Taxes
For the three months ended
December 31, 2020, the Company reported a loss before income taxes
of $688 compared to a loss before income taxes of $717 for the
three months ended December 31, 2019. The year-over-year decrease
of $29 was mainly attributable to: 1) savings in SG&A expenses
of $385, a decrease in depreciation and amortization expense of
$304, and a favourable variance in net interest of $154; partly
offset by 2) lower gross profit across our segments of $544,
largely as a result of the non-recurring regulatory milestone under
the Original Taro Agreement in the amount of $988 (US$750)
recognized in Q4-F2019, and 3) an increase in research and
development (“R&D”) expenses of $287.
For the year ended December 31, 2020, the Company reported
income before income taxes of $520 compared to $3,180 for the year
ended December 31, 2019. The year-over-year decrease of $2,660 was
mainly attributable to: 1) the reduction in gross profit of $4,700
across all segments, excluding the impacts of both the Cantabria
Agreement as well as the Taro Amendment; 2) the net year-over-year
benefit of the upfront payment and guaranteed minimum royalties
under the Cantabria Agreement of $3,772, net of the non-recurring
contract termination fees recognized in Q2-F2019; 3) the impairment
charge of $1,918 taken in Q2-F2020; partly offset by 1) the
aggregate impact of the Taro Amendment of $5,151; 2) the decrease
in SG&A and R&D expenses of $1,337 and $275, respectively;
3) the reduction in net interest expense of $442; and 4) the
favourable impact of a net foreign exchange gain in the amount of
$287 year-over-year.
Cash and Cash Equivalents
Cash and cash equivalents were $14,281 at December 31, 2020
compared to $9,268 at December 31, 2019, representing an increase
of $5,013, mainly due to the cash received from the Taro Amendment.
In addition, during Q4-F2019, we repaid the outstanding balance of
the loan with Knight Therapeutics Inc. in the amount of $3,570.
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 before interest, income taxes,
depreciation, and amortization.
- Adjusted EBITDA is defined as earnings before interest, income
taxes, depreciation and amortization, other expenses (income),
share-based compensation costs, impairment of goodwill and
intangible assets, and foreign exchange (gains) losses.
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. Below is a reconciliation of EBITDA and Adjusted
EBITDA to their closest IFRS measures.
In thousands of CAD dollars
Three months ended December
31,
Twelve months ended December
31,
2020
2019
2020
2019
Net income (loss)
(592)
(483)
37
1,855
Adjust for:
Depreciation and amortization
248
552
1,491
1,729
Interest expense (income), net
(29)
125
(39)
403
Deferred income tax expense (recovery)
(96)
(234)
483
1,325
EBITDA
(469)
(40)
1,972
5,312
Adjust for:
Share-based compensation
34
40
155
287
Foreign exchange (gain) loss
(11)
6
(176)
111
Other expenses (income)
-
-
(668)
1,274
Impairment of intangible assets
-
-
1,918
-
Adjusted EBITDA
(446)
6
3,201
6,984
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 and notes
thereto, MD&A and Annual Information Form (“AIF”).
About Crescita Therapeutics Inc.
Crescita (TSX: CTX and OTC US: CRRTF) is a growth-oriented,
innovation-driven Canadian commercial dermatology company with
in-house R&D and manufacturing capabilities. The Company offers
a portfolio of high-quality, science-based non-prescription
skincare products and early to commercial stage prescription
products. In addition, we own multiple proprietary transdermal
delivery platforms that support the development of patented
formulations that facilitate the delivery of active ingredients
into or through the skin.
Our non-prescription portfolio includes a wide variety of
premium quality dermocosmetic products which include facial creams,
cleansers, exfoliants, masks, serums and suncare, that each serve a
different and personalized consumer need. The portfolio is designed
to address preventive care to combating the first signs of aging,
as well as all primary aesthetic skin concerns. Our dermocosmetic
products address two sub-sets of the skincare market: aesthetics
and medical aesthetics. Our national sales force calls on aesthetic
practitioners and medical aesthetic clinics and medispas across
Canada. In addition, our skincare brands are sold in certain Asian
markets, such as Malaysia, South Korea and China through
international distributors and various e-commerce platforms.
Crescita’s portfolio also includes Pliaglis, our lead
prescription product, that utilizes our proprietary phase-changing
topical cream Peel technology. Pliaglis is a topical local
anesthetic cream that provides safe and effective local dermal
analgesia on intact skin prior to superficial dermatological
procedures. The product is currently approved in over 25 different
countries, is sold by commercial partners in the U.S., Italy, Spain
and Brazil, and was most recently licensed to commercial partners
in Austria, Mexico and China. We also market Pliaglis in the
Canadian physician-dispensed skincare market through our existing
sales force.
Our expertise in topical product formulation and development can
be leveraged in combination with our patented transdermal delivery
technologies to develop and manufacture creams, liquids, gels,
ointments and serums under our contract development and
manufacturing organization infrastructure. We run our operations
from our head office located in the heart of the Biotech City in
Laval, Québec, where we also manufacture the majority of our
non-prescription skincare products in our 50,000 square-foot
facility.
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. Examples of
forward-looking statements include, but are not limited to,
statements regarding the Company’s objectives, plans, goals,
strategies, growth, performance, operating results, financial
condition, our belief that we have sufficient liquidity to fund our
business operations during the upcoming fiscal year, strategy for
customer retention, growth, product development, market position,
financial results and reserves, strategy for risk management,
business prospects, opportunities and industry trends, the expected
impact of, and responses taken by the Company with respect to, the
COVID-19 pandemic, and similar statements concerning anticipated
future events, results, circumstances, performance or expectations.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our 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, you should
not unduly 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, among others: economic and
market conditions, the impact of the COVID-19 pandemic and the
response thereto of governments and consumers, the Company’s
ability to execute its growth strategies, reliance on third parties
for clinical trials, marketing, distribution and commercialization,
the impact of changing conditions in the regulatory environment and
product development processes, manufacturing and supply risks,
increasing competition in the industries in which the Company
operates, the Company’s ability to meet its debt commitments, the
impact of unexpected product liability matters, the impact of
litigation involving the Company and/or its products, the impact of
changes in relationships with customers and suppliers, the degree
of intellectual property protection of the Company’s products, the
degree of market acceptance of the Company’s products, developments
and changes in applicable laws and regulations, as well as other
risk factors discussed in the “Risk Factors” sections of our annual
management’s discussion and analysis for the year ended December
31, 2020 and the Company’s annual information form dated March 24,
2021. Any forward-looking statement made by the Company in this
press release is based only on information currently available to
management 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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version on businesswire.com: https://www.businesswire.com/news/home/20210324005332/en/
Investor Relations Linda Kisa, CPA, CA ir@crescitatx.com
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