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 and fiscal
year ended December 31, 2023 (“Q4-2023” and “F2023”). All amounts
presented are in thousands of Canadian dollars (“CAD”) unless
otherwise noted, and in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board.
Financial Highlights
Q4-2023 vs. Q4-2022
- Revenue was $4,725 compared to $6,030, down $1,305;
- Gross profit was $3,060 compared to $3,885, down $825;
- Operating expenses were $3,173 compared to $3,313, down
$140;
- Adjusted EBITDA1 was $245 compared to $997, down $752.
F2023 vs. F2022
- Revenue was $17,522 compared to $23,525, down $6,003;
- Gross profit was $10,364 compared to $13,182, down $2,818;
- Operating expenses were $12,320 compared to $12,653, down
$333;
- Adjusted EBITDA1 was $(368) compared to $2,221, down
$2,589;
- Ending cash of $9,385 compared to $8,238, up $1,147.
Commenting on the Company's results for the fourth quarter and
full year 2023, Crescita's President and Chief Executive Officer,
Serge Verreault, said:
“2023 was a challenging year for Crescita, marked by headwinds
in our manufacturing segment. We recorded a 26% decrease in total
revenue versus 2022, mainly due to a reduction in production
volumes for one key customer. We are in active discussions to
secure new manufacturing business and to diversify our customer
base. On the licensing front, we are seeking a new U.S. partner for
Pliaglis in this important market. We are also expecting existing
partners to launch Pliaglis in several European and Middle Eastern
countries in 2024.
Our skincare business grew 30% over 2022 and outperformed the
6%2 projected beauty industry growth rate. Twelve months
post-launch, ART FILLER is gaining traction in the Canadian
physician-dispensed market, as we open new accounts and observe
repeat orders.”
We are enthusiastic about our growing aesthetic market portfolio
and the overall prospects for our business segments. We have a
strong cash position, which allows us to continue investing
strategically in people, marketing and product innovation. M&A
continues to be a key part of our strategy as we pursue
opportunities in what we believe are conducive market
conditions.”
Operational and Corporate Developments
Termination of Agreement with Taro Pharmaceuticals
Inc.
- On October 25, 2023, Taro Pharmaceuticals Inc. (“Taro”)
delivered a notice to terminate the development and
commercialization license agreement for Pliaglis® in the U.S.
market. Our final entitlement to the annual guaranteed minimum
royalties in the amount of US$1.0 million was recognized in
Q4-2023, with payment expected in Q2-2024. We are in the process of
seeking a new partner to commercialize Pliaglis in the U.S.
market.
Update on Manufacturing Segment
- Certain manufacturing orders initially scheduled to be
delivered in the second half of fiscal 2023 were, in part, deferred
to 2024, and some cancelled, contributing to a material decrease in
our manufacturing segment revenue for Q4-2023 and fiscal 2023,
compared to the same periods of 2022. While our customer is
reassessing commercial options for their products in key markets,
we continue to have discussions regarding manufacturing
opportunities to support their growth plans going forward.
Normal Course Issuer Bid
- In Q3-2023, the Toronto Stock Exchange (the “TSX”) approved the
Company’s proposed normal course issuer bid (“NCIB”) to purchase up
to a maximum of 1,821,616 common shares (“Common Shares”) for
cancellation. The NCIB commenced on August 31, 2023 and is expected
to terminate on August 30, 2024 or such earlier date as the Company
completes its purchases pursuant to the NCIB or provides notice of
termination. The Company has also entered into an automatic
securities purchase plan in connection with its NCIB. During fiscal
2023, 719,203 Common Shares were repurchased for cancellation, at
an average price of $0.55 per share for total cash consideration of
$393.
Re-Launch of Alyria® as a Direct-to-Consumer Brand
- In Q1-2023, following rebranding and various product
reformulations, we relaunched Alyria as a direct-to-consumer
medical-grade dermocosmetic brand in the Canadian skincare market.
Alyria is primarily targeted at millennials and marketed and sold
online in Canada through Amazon.ca and alyriaskincare.com. In
Q2-2023, Alyria was also launched in retail outlets of Familiprix,
a Québec based chain of independently owned pharmacies. The
relaunch of Alyria strengthens our omnichannel expansion and
provides the opportunity to engage with a new consumer group.
Launch of ART FILLER®
- In Q1-2023, we launched ART FILLER, an exclusive collection of
hyaluronic acid-based dermal fillers in the Canadian medical
aesthetic market through our new dedicated sales force. ART FILLER
is designed to smooth and fill in wrinkles and create or restore
the volumes and contours of the face. Crescita is the exclusive
Canadian distributor of ART FILLER and NCTF® Boost 135 HA (“NCTF”)
under its distribution and promotion agreement with Laboratoires
FILLMED.
Q4-2023 and F2023 Summary Financial Results
Note: Select financial information is outlined below and
should be read in conjunction with Crescita's Consolidated Audited
Financial Statements and related Management's Discussion and
Analysis (“MD&A”) for the fiscal year ended December 31, 2023,
which are available on SEDAR+ at www.sedarplus.ca and on Crescita’s
website at www.crescitatherapeutics.com.
In thousands of CAD, except per share data
and number of shares
Quarter ended December
31,
Year ended December
31,
2023
2022
2023
2022
$
$
$
$
Commercial Skincare
2,851
2,422
10,440
8,022
Licensing and Royalties
1,547
1,481
2,030
1,800
Manufacturing and Services
327
2,127
5,052
13,703
Revenues
4,725
6,030
17,522
23,525
Cost of goods sold
1,665
2,145
7,158
10,343
Gross profit
3,060
3,885
10,364
13,182
Gross margin (%)
64.8
%
64.4
%
59.1
%
56.0
%
Research and development (“R&D”)
218
160
699
609
Selling, general and administrative
(“SG&A”)
2,576
2,776
10,115
10,573
Depreciation and amortization
379
377
1,506
1,471
Total operating expenses
3,173
3,313
12,320
12,653
Operating profit (loss)
(113
)
572
(1,956
)
529
Interest income, net
(137
)
(68
)
(422
)
(102
)
Foreign exchange (gain) loss
(33
)
(131
)
(10
)
51
Share of (profit) loss of an associate
10
27
(16
)
57
Net loss on convertible note measured
at
fair value through profit or loss
-
24
22
119
Income (loss) before income
taxes
47
720
(1,530
)
404
Deferred income tax (recovery) expense
197
(458
)
456
(458
)
Net income (loss)
(150
)
1,178
(1,986
)
862
Adjusted EBITDA1
245
997
(368
)
2,221
Weighted average number of common
shares outstanding
Basic
19,987,774
20,392,231
20,255,285
20,690,875
Diluted
19,987,774
20,643,129
20,255,285
21,000,182
Earnings (loss) per share
Basic
$
(0.01
)
$
0.06
$
(0.10
)
$
0.04
Diluted
$
(0.01
)
$
0.06
$
(0.10
)
$
0.04
Selected Balance Sheet
Information
Cash and cash equivalents, end of
period
9,385
8,238
Selected Cash Flow Information
Cash provided by (used in) operating
activities
(261
)
(2,215
)
2,076
(1,020
)
Cash used in investing activities
(105
)
(74
)
(133
)
(290
)
Cash used in financing activities
(258
)
(221
)
(782
)
(1,846
)
Revenue
We have three reportable segments: 1) Commercial Skincare
(“Skincare”), which manufactures our branded non-prescription
skincare products for sale in Canada and certain international
markets, and also commercializes Pliaglis®, NCTF®, ART FILLER®, and
Obagi® Medical in Canada; 2) Licensing and Royalties (“Licensing”),
which primarily derives revenue from licensing our intellectual
property related to Pliaglis, or to a lesser extent, our
transdermal delivery technologies; and 3) Manufacturing and
Services (“Manufacturing”), which generates revenue from contract
manufacturing and product development services.
For the quarter ended December 31, 2023, total revenue was
$4,725 compared to $6,030 for the quarter ended December 31, 2022.
The year-over-year decrease of $1,305 was driven by the revenue
shortfall in our Manufacturing segment of $1,800, as a result of
the deferral by a large customer of purchase orders into fiscal
2024 and, to a lesser extent, by the difference in the level and
timing of orders year-over-year, partly offset by an increase of
$429 in our Skincare segment, mainly due to incremental sales of
ART FILLER launched in Q1-2023, and higher online sales from our
core brands.
For the year ended December 31, 2023, total revenue was $17,522,
compared to $23,525 for the year ended December 31, 2022,
representing a net decrease of $6,003. Manufacturing segment
revenue decreased by $8,651 mainly due to the deferral into 2024
and partial cancellation of purchase orders by a large customer, as
well as the difference in the timing and value of orders versus the
prior year. This decrease was partly offset by an increase of
$2,418 in our Skincare segment, mainly driven by higher product
sales from our core brands across all channels, as a result of
launches and promotions, including the launch of ART FILLER.
Gross Profit and Gross Margin
For the quarter ended December 31, 2023, gross profit was
$3,060, representing a gross margin of 64.8%, compared to $3,885
and 64.4%, respectively, for the quarter ended December 31, 2022.
The net decrease of $825 in gross profit was mainly due to lower
Manufacturing segment revenue.
For the year ended December 31, 2023, gross profit was $10,364,
representing a gross margin of 59.1%, compared to $13,182 and
56.0%, respectively, for the year ended December 31, 2022. The net
decrease in gross profit of $2,818 was mainly due to lower
Manufacturing segment revenue. The increase in gross margin of 3.1%
was mainly driven by favorable product and channel mix.
Operating Expenses
For the quarter and year ended December 31, 2023, total
operating expenses were $3,173 and $12,320, compared to $3,313 and
$12,653 for the quarter and year ended December 31, 2022. The net
decreases of $140 for the quarter and $333 for the year, were
driven by lower SG&A expenses, mainly reflecting lower
headcount-related and share-based compensation expenses, partly
offset by higher advertising and promotion and R&D spend.
Cash and Cash Equivalents
Cash and cash equivalents were $9,385 at December 31, 2023,
reflecting a net increase of $1,147, compared to $8,238 at December
31, 2022. Despite lower earnings year-over-year, the increase
mainly resulted from the favorable movement in non-cash working
capital items and the non-recurring $1,000 repayment of convertible
debentures in F2022.
Non-IFRS Financial Measures
We report our 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. 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 of property, plant and equipment, and amortization of
right-of-use asset and intangible assets.
- Adjusted EBITDA is defined as earnings before interest, income
taxes, depreciation of property, plant and equipment and
amortization of right-of-use asset and intangible assets, share of
(profit) losses of associates, fair value (gains) losses,
share-based compensation costs, goodwill and intangible asset
impairment, and foreign exchange (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. Below is a reconciliation of EBITDA and Adjusted
EBITDA to their closest IFRS measures.
In thousands of CAD dollars
Quarter ended
December 31,
Year ended
December 31,
2023
2022
2023
2022
$
$
$
$
Net income (loss)
(150
)
1,178
(1,986
)
862
Adjust for:
Depreciation and amortization
379
377
1,506
1,471
Interest income, net
(137
)
(68
)
(422
)
(102
)
Deferred income tax (recovery) expense
197
(458
)
456
(458
)
EBITDA
289
1,029
(446
)
1,773
Adjust for:
Share-based compensation
(21
)
48
82
221
Foreign exchange (gain) loss
(33
)
(131
)
(10
)
51
Share of (profit) loss of an associate
10
27
(16
)
57
Net loss on convertible note measured at
fair value through profit or loss
-
24
22
119
Adjusted EBITDA
245
997
(368
)
2,221
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 latest Annual Information Form (“AIF”), all
of which can be found on the Company’s profile on SEDAR+ at
www.sedarplus.ca.
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. We also own multiple proprietary transdermal delivery
platforms that support the development of patented formulations to
facilitate the delivery of active ingredients into or through the
skin. For more information visit, www.crescitatherapeutics.com.
Forward-looking Information
Certain statements in this press release constitute
forward-looking statements and/or forward-looking information
(collectively “forward-looking statements”) within the meaning of
applicable securities laws. All information in this press release,
other than statements of current and historical fact, represents
forward-looking information and is qualified by this cautionary
note.
Forward-looking statements may relate to the Company’s future
financial outlook and anticipated events or results and may include
information regarding the Company’s financial position, business
strategy, growth strategies, addressable markets, budgets,
operations, financial results, taxes, dividend policy, plans,
objectives, and expectations. Such statements are provided for the
purpose of presenting information about management’s current
expectations and plans relating to the future and allowing
investors and others to get a better understanding of the Company’s
anticipated financial position, results of operations and operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes.
Often, but not always, forward-looking statements can be
identified by the use of forward-looking terminology such as:
“outlook”, “objective”, “anticipate”, “intend”, “plan”, “goal”,
“seek”, “believe”, “aim”, “project”, “estimate”, “expect”,
“strategy”, “future”, “likely”, “may”, “should”, “will”, “growth
strategy”, “future”, “prospects”, “continue”, and similar
references to future periods or suggesting future outcomes or
events. In addition, any statements that refer to expectations,
intentions, projections or other characterizations of future events
or circumstances contain forward-looking statements.
Examples of forward-looking information include, but are not
limited to, statements made in this press release under the heading
“Financial Highlights”, including statements regarding the
Company’s objectives, plans, goals, strategies, growth,
performance, operating results, financial condition, business
prospects, opportunities and industry trends, and similar
statements concerning anticipated future events, results,
circumstances, performance or expectations.
Forward-looking statements are neither historical fact nor
assurances of future performance. Instead, they reflect
management’s current beliefs, expectations and assumptions and are
based only on information currently available to us.
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 that are difficult to
predict and many of which are outside of our control.
The Company’s estimates, beliefs and assumptions, which may
prove to be incorrect, include various assumptions regarding, among
other things: the Company’s future growth potential, results of
operations, future prospects and opportunities; the Company’s
ability to retain and recruit, as applicable, customers, members of
management and key personnel; industry trends; legislative or
regulatory matters, including expected changes to laws and
regulations and the effects of such changes; future levels of
indebtedness; availability of capital; the Company’s ability to
secure additional capital and source and complete acquisitions; the
Company’s ability to maintain and expand its market presence and
geographic scope; current economic conditions; the impact of
currency exchange and interest rates; the Company’s ability to
maintain existing financing and insurance on acceptable terms; the
Company’s ability to execute on, and the impact of, its
environmental, social and governance initiatives; the impact of
competition; and the Company’s ability to respond to changes to its
industry and the global economy.
Forward-looking statements involve risks and uncertainties that
could cause Crescita’s actual results and financial condition to
differ materially from those contemplated by such forward-looking
statements. Important factors that could cause such differences
include, among others:
- economic and market conditions, including factors impacting
global supply chains such as pandemics and geopolitical conflicts
and tensions, including the uncertainty created by the war in
Ukraine and the Israel-Hamas war;
- the impact of inflation and rising interest rates together with
the threats of stagflation or recession;
- the Company’s ability to execute its growth strategies;
- the degree or lack of market acceptance of the Company’s
products;
- reliance on third parties for marketing, distribution and
commercialization, and clinical trials;
- the impact of variations in the values of the Canadian dollar
in relation to the U.S. dollar and Euro;
- the impact of the volatility in financial markets;
- the Company’s ability to retain members of its management team
and key personnel;
- 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 contractual obligations;
- the impact of 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;
- developments and changes in applicable laws and regulations,
and;
- other risk factors described from time to time in the reports
and disclosure documents filed by Crescita with Canadian securities
regulatory agencies and commissions, including the sections
entitled “Risk Factors” in the Company’s most recent annual
MD&A and AIF.
If any risks or uncertainties with respect to the above
materialize, or if the opinions, estimates or assumptions
underlying the forward-looking statements prove incorrect, actual
results or future events might vary materially from those
anticipated in the forward-looking statements. This list is not
exhaustive of the factors that may impact the Company’s
forward-looking statements. Although management has attempted to
identify important risk factors that could cause actual results to
differ materially from those contained in forward-looking
statements, there may be other risk factors not presently known or
that management believes are not material that could also cause
actual results or future events to differ materially from those
expressed in such forward-looking statements. There can be no
assurance that such information will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such information. Accordingly, investors should not
place undue reliance on forward-looking statements, which speak
only as of the date made, and are subject to change after such
date. Except as required by applicable securities laws, the Company
undertakes no obligation to publicly update any forward-looking
information, whether written or oral, that may be provided from
time to time, whether as a result of new information, future
developments or otherwise.
1Please refer to the Non-IFRS Financial Measures section of this
press release. 2McKinsey & Company, The beauty market in 2023:
A special State of Fashion report
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240313349473/en/
FOR MORE INFORMATION, PLEASE CONTACT: Linda Kisa, CPA, CA
Vice-President, Reporting and Corporate Affairs Email:
lkisa@crescitatx.com
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