TORONTO, May 11, 2023
/CNW/ - HLS Therapeutics Inc. ("HLS" or the "Company") (TSX: HLS),
a pharmaceutical company focusing on central nervous system ("CNS")
and cardiovascular markets, announces its financial results for the
three-month period ended March 31,
2023. All amounts are in thousands of United States ("U.S.") dollars unless
otherwise stated.
KEY HIGHLIGHTS
- Appointed Craig Millian as Chief
Executive Officer of the Company.
- The Board of Directors cancelled the Company's dividend policy
to focus on share buybacks through the Company's Normal Course
Issuer Bid (NCIB) as the preferred method for returning capital to
shareholders.
- Q1 2023 revenue was $14.8 million
and Adjusted EBITDA was $5.1 million,
compared to $14.6 million and
$6.3 million, respectively, in Q1
2022
"Q1 results reflect the steady revenue and cash flow
contribution from Clozaril and the royalty portfolio, as well as
the continued growth of Vascepa," said Craig Millian, CEO of HLS. "On a constant
currency basis, product sales in Canada were up 12% in Q1, led by Vascepa,
which grew 43%."
"Having just started as CEO on May
1, I have already had an opportunity to meet with many of my
HLS colleagues and have been impressed by their passion and
commitment along with the potential of our product portfolio. My
near-term goals are to accelerate the growth of Vascepa, maintain
the durability of our CNS business and focus on resource
optimization and efficiency."
Mr. Millian added: "After careful consideration, the board has
decided to cancel the Company's dividend policy. HLS is a
growth-oriented company, and this decision was made in the context
of our capital allocation strategy and the desire to, among other
things, return capital to shareholders via stock buybacks at a time
when we believe that the share price does not reflect the
underlying value of our business."
The final dividend will be paid on June
15, 2023, to shareholders of record on April 28, 2023, as was previously announced in
the Company's March 16, 2023, press
release.
VASCEPA 2023 OUTLOOK
The Company expects revenue growth for Vascepa to increase over
the course of the year. The positive impact from strong
prescription growth in Q1 2023 was partly offset by the payer mix
being more weighted to public plans than was expected. As a result
of the near-term impact of this payer mix, HLS is now guiding to
the low end of its previously issued C$22-28 million revenue range for Vascepa in
2023.
Q1 2023 FINANCIAL & OPERATIONAL HIGHLIGHTS
- Clozaril net revenue in Canada
in Q1 2023 was C$8.4 million, up 3%
from Q1 2022, which was just ahead of the patient growth rate.
- Q1 2023 Vascepa net revenue was C$3.5
million, up 43% compared to C$2.5
million in Q1 2022.
- Vascepa total prescriptions in Q1 2023 grew 94%
year-over-year.
- Vascepa total prescriptions written by general practitioners
grew 114% year-over-year and general practitioners now account for
half of all new prescriptions written.
- More than 3,700 physicians have prescribed Vascepa, up 85%
year-over-year.
Q1 FISCAL 2023 FINANCIAL REVIEW
The Company's Management's Discussion and Analysis and
Consolidated Financial Statements for the three-month period ended
March 31, 2023 are available at the
Company's website and at its profile at SEDAR.
Revenue
|
|
Three months
ended
March 31,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Product
sales
|
|
|
|
|
Canada
|
|
|
8,811
|
8,403
|
United
States
|
|
|
3,212
|
3,443
|
|
|
|
12,023
|
11,846
|
Royalty
revenue
|
|
|
2,734
|
2,710
|
|
|
|
14,757
|
14,556
|
Product sales
Q1 2023 revenue increased 1% compared to Q1 2022. Q1 2023
revenue increased 5% in constant currency terms, compared to Q1
2022, as the decline in the Canadian dollar had an impact on the
reported values, which are in U.S. dollars. Q1 2023 product sales
in Canada increased 5% compared to
Q1 2022. Q1 2023 product sales in Canada grew 12% in constant currency, compared
to Q1 2022, led by increased sales of Vascepa, which grew 43% in Q1
2023 in constant currency compared to Q1 2022. The Vascepa net
revenue growth rate trails the growth rate in prescriptions as net
pricing adjusts to increased public sector volume.
In Canada, Clozaril continues
to be the leading medication for treatment-resistant schizophrenia
with a growing number of patients and a growing market share.
Revenue declined 4% in Q1 2023, compared to Q1 2022, due to the
weaker Canadian dollar during the period. On a constant currency
basis, revenue in Q1 2023 increased 3% compared to Q1 2022.
In the U.S., Q1 2023 Clozaril net sales decreased 7% compared to
Q1 2022. An increase in units sold and a price increase implemented
mid-year 2022 resulted in higher gross revenues for Clozaril in the
U.S. in Q1 2023, however, this was more than offset by larger
one-time benefits realized in Q1 2022 related to expired product
returns.
Royalty revenues
Representing a steady contribution to Adjusted EBITDA and cash
flows, royalty revenues were $2.7
million in Q1 2023, which was a 1% increase from Q1 2022.
Operating
Expenses
|
|
Three months
ended
March 31,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Cost of product
sales
|
|
|
1,444
|
953
|
Selling and
marketing
|
|
|
4,807
|
3,829
|
Medical, regulatory and
patient support
|
|
|
1,076
|
1,276
|
General and
administrative
|
|
|
2,351
|
2,182
|
|
|
|
9,678
|
8,240
|
Q1 2023 operating expenses increased 17% compared to Q1 2022,
which was driven by a 52% increase in cost of sales due to the
growth in shipments and sales of Vascepa, and a 26% increase in
selling and marketing costs for Vascepa. Support costs and
strong gross margins remain stable across the Company's key
Clozaril franchises in Canada and
the United States.
Adjusted
EBITDA1
|
|
Three months
ended
March
31,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Net loss for the
period
|
|
|
(5,792)
|
(3,616)
|
Stock-based
compensation
|
|
|
(55)
|
815
|
Amortization and
depreciation
|
|
|
8,319
|
8,387
|
Finance and related
costs, net
|
|
|
2,434
|
320
|
Transaction and other
costs
|
|
|
213
|
345
|
Income tax expense
(recovery)
|
|
|
(40)
|
65
|
Adjusted
EBITDA
|
|
|
5,079
|
6,316
|
Q1 2023 Adjusted EBITDA was $5.1
million compared to $6.3
million in Q1 2022. The decrease is due primarily to
increased selling and marketing expenses and increased cost of
product sales related to the growth in sales of Vascepa. Clozaril
and royalty revenues continue to generate strong Adjusted EBITDA
and cash flow for the business.
1 See
"Cautionary Note Regarding Non-IFRS Measures" section of this press
release.
|
Net Loss
Net loss for Q1 2023 was ($5.8
million), or ($0.18) per
share, compared to a net loss of ($3.6
million), or ($0.11) per
share, in Q1 2022. Net loss increased as revenue growth was offset
by higher cost of product sales and selling and marketing expenses
related to the expansion of Vascepa, as well as more typical
finance and related costs in the current year.
Cash from Operations and Financial Position
Cash generated from operations was $4.0
million in Q1 2023, compared to $5.8
million in Q1 2022. Cash and cash equivalents were
$21.2 million at March 31, 2023 up from $20.7 million at December
31, 2022.
As at March 31, 2023, HLS has a
strong financial position with $21.2
million of cash and cash equivalents, $26.5 million of undrawn revolving facility, and
the Company may also request to be provided with incremental loans,
up to a maximum amount of $70.0
million, to support acquisitions and other growth
opportunities.
Q1 FISCAL 2023 CONFERENCE CALL
HLS will hold a conference call today at 8:30 am Eastern Time to discuss its Q1 2023
financial results. The call will be hosted by Mr. Craig Millian, CEO, and Mr. Tim Hendrickson, CFO. To view the slides that
accompany management's discussion, please use the webcast
link.
CONFERENCE
ID:
|
63444923
|
DATE:
|
Thursday, May 11,
2023
|
TIME:
|
8:30 a.m. ET
|
WEBCAST
LINK:
|
https://app.webinar.net/r3gVAnoY2xo
|
TRADITIONAL DIAL-IN
NUMBER:
|
1-888-664-6392 or
416-764-8659
|
RAPIDCONNECT:
|
To instantly join the
conference call by phone, please use the following URL to easily
register and be connected into the conference call automatically:
https://emportal.ink/3Gg7EBw
|
TAPED
REPLAY:
|
1-888-390-0541 or
416-764-8677
|
REPLAY
CODE:
|
444923#
|
The taped replay will be available for 14 days and the archived
webcast will be available for 365 days.
A link to the live audio webcast of the conference call will
also be available on the events page of the investors section of
HLS Therapeutics' website at www.hlstherapeutics.com. Please
connect at least 15 minutes prior to the conference call to ensure
adequate time for any software download that may be required to
hear the webcast.
ABOUT HLS THERAPEUTICS INC.
Formed in 2015, HLS is a pharmaceutical company focused on the
acquisition and commercialization of late-stage development,
commercial stage promoted and established branded pharmaceutical
products in the North American markets. HLS's focus is on products
targeting the central nervous system and cardiovascular therapeutic
areas. HLS's management team is composed of seasoned pharmaceutical
executives with a strong track record of success in these
therapeutic areas and at managing products in each of these
lifecycle stages. For more information visit:
www.hlstherapeutics.com
1CAUTIONARY NOTE REGARDING NON-IFRS
MEASURES
This press release refers to certain non-IFRS measures. These
measures are not recognized measures under IFRS, do not have a
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement those IFRS measures by providing further understanding
of HLS's results of operations from management's perspective.
Accordingly, they should not be considered in isolation nor as a
substitute for analysis of HLS's financial information reported
under IFRS. HLS uses non-IFRS measures to provide investors with
supplemental measures of its operating performance and thus
highlight trends in its core business that may not otherwise be
apparent when relying solely on IFRS financial measures. HLS also
believes that securities analysts, investors and other interested
parties frequently use non-IFRS measures in the evaluation of
issuers. HLS's management also uses non-IFRS measures in order to
facilitate operating performance comparisons from period to period,
prepare annual operating budgets and assess HLS's ability to meet
its future debt service, capital expenditure and working capital
requirements.
In particular, management uses Adjusted EBITDA as a
measure of HLS's performance. To reconcile net income (loss)
for the period with Adjusted EBITDA, each of (i) "stock-based
compensation", (ii) "amortization and depreciation", (iii)
("finance and related costs", (iv) "transaction and other costs",
and (v) "income tax expense (recovery)" appearing in the
Consolidated Statement of Net Income (Loss) are added to net income
(loss) for the period to determine Adjusted EBITDA. Adjusted EBITDA
does not have any standardized meaning prescribed by IFRS and is
not necessarily comparable to similar measures presented by other
companies. Adjusted EBITDA should not be considered in
isolation or as a substitute for net income (loss) prepared in
accordance with IFRS as issued by the IASB.
FORWARD LOOKING INFORMATION
This release includes forward-looking statements regarding
HLS and its business. Such statements are based on the current
expectations and views of future events of HLS's management. In
some cases the forward-looking statements can be identified by
words or phrases such as "may", "will", "expect", "plan",
"anticipate", "intend", "potential", "estimate", "believe" or the
negative of these terms, or other similar expressions intended to
identify forward-looking statements, including, among others,
statements with respect to HLS's pursuit of additional product and
pipeline opportunities in certain therapeutic markets, statements
regarding growth opportunities, expectations regarding financial
performance, and the NCIB and ASPP. The forward-looking events and
circumstances discussed in this release may not occur and could
differ materially as a result of known and unknown risk factors and
uncertainties affecting HLS, including risks relating to the
specialty pharmaceutical industry, risks related to the regulatory
approval process, economic factors and many other factors beyond
the control of HLS. Forward-looking statements and information by
their nature are based on assumptions and involve known and unknown
risks, uncertainties and other factors which may cause HLS's actual
results, performance or achievements, or industry results, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statement
or information. Accordingly, readers should not place undue
reliance on any forward-looking statements or information. A
discussion of the material risks and assumptions associated with
this release can be found in the Company's Annual Information Form
dated March 15, 2023, and
Management's Discussion and Analysis dated May 10, 2023, both of which have been filed on
SEDAR and can be accessed at www.sedar.com. Accordingly, readers
should not place undue reliance on any forward-looking statements
or information. Except as required by applicable securities laws,
forward-looking statements speak only as of the date on which they
are made and HLS undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
As at
|
As at
|
|
|
March 31,
2023
|
December 31,
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash
|
|
21,214
|
20,723
|
Accounts
receivable
|
|
10,096
|
10,999
|
Inventories
|
|
10,709
|
8,902
|
Income taxes
recoverable
|
|
58
|
195
|
Other current
assets
|
|
2,966
|
3,555
|
Total current
assets
|
|
45,043
|
44,374
|
Property, plant and
equipment
|
|
936
|
1,127
|
Intangible
assets
|
|
186,984
|
195,018
|
Deferred tax
asset
|
|
537
|
465
|
Other non-current
assets
|
|
655
|
668
|
Total assets
|
|
234,155
|
241,652
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
|
14,433
|
12,785
|
Provisions
|
|
3,167
|
2,934
|
Debt and other
liabilities
|
|
12,798
|
15,471
|
Total current
liabilities
|
|
30,398
|
31,190
|
Debt and other
liabilities
|
|
84,405
|
84,578
|
Deferred tax
liability
|
|
461
|
566
|
Total
liabilities
|
|
115,264
|
116,334
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Share
capital
|
|
265,165
|
265,206
|
Contributed
surplus
|
|
14,281
|
13,821
|
Accumulated other
comprehensive loss
|
|
(5,167)
|
(5,260)
|
Deficit
|
|
(155,388)
|
(148,449)
|
Total shareholders'
equity
|
|
118,891
|
125,318
|
Total liabilities and
shareholders' equity
|
234,155
|
241,652
|
|
|
|
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF LOSS
|
Unaudited
|
[in thousands of U.S.
dollars, except per share amounts]
|
|
|
|
|
Three months
ended
March
31,
|
|
|
|
|
2023
|
2022
|
|
|
|
|
|
|
Revenue
|
|
|
|
14,757
|
14,556
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Cost of product
sales
|
|
|
|
1,444
|
953
|
Selling and
marketing
|
|
|
|
4,807
|
3,829
|
Medical, regulatory and
patient support
|
|
|
|
1,076
|
1,276
|
General and
administrative
|
|
|
|
2,351
|
2,182
|
Stock-based
compensation
|
|
|
|
(55)
|
815
|
Amortization and
depreciation
|
|
|
|
8,319
|
8,387
|
Finance and related
costs, net
|
|
|
|
2,434
|
320
|
Transaction and other
costs
|
|
|
|
213
|
345
|
Loss before income
taxes
|
|
|
|
(5,832)
|
(3,551)
|
Income tax expense
(recovery)
|
|
|
|
(40)
|
65
|
Net loss for the
period
|
|
|
|
(5,792)
|
(3,616)
|
|
|
|
|
Net loss per
share:
|
|
|
|
Basic and
diluted
|
|
|
|
$(0.18)
|
$(0.11)
|
|
|
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
Three months
ended
March
31,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Net loss for the
period
|
|
|
(5,792)
|
(3,616)
|
|
|
|
|
|
Item that may be
reclassified subsequently to net loss
|
|
|
|
|
Unrealized
foreign currency translation adjustment
|
|
|
93
|
2,438
|
Comprehensive loss
for the period
|
|
|
(5,699)
|
(1,178)
|
|
|
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
|
|
Share
capital
|
Contributed
surplus
|
Accumulated
other
comprehensive
income (loss)
|
Deficit
|
Total
|
|
|
|
|
|
|
|
Balance, December
31, 2022
|
|
265,206
|
13,821
|
(5,260)
|
(148,449)
|
125,318
|
Stock options
exercised
|
|
178
|
(44)
|
—
|
—
|
134
|
Shares
repurchased
|
|
(219)
|
—
|
—
|
35
|
(184)
|
Share purchase
obligation
|
|
—
|
185
|
—
|
—
|
185
|
Stock option
expense
|
|
—
|
319
|
—
|
—
|
319
|
Net loss for the
period
|
|
—
|
—
|
—
|
(5,792)
|
(5,792)
|
Dividends
declared
|
|
—
|
—
|
—
|
(1,182)
|
(1,182)
|
Unrealized foreign
currency
translation adjustment
|
|
—
|
—
|
93
|
—
|
93
|
Balance, March 31,
2023
|
|
265,165
|
14,281
|
(5,167)
|
(155,388)
|
118,891
|
|
|
|
|
|
|
|
Balance, December
31, 2021
|
|
265,917
|
11,717
|
2,959
|
(119,857)
|
160,736
|
Stock options
exercised
|
|
227
|
(62)
|
—
|
—
|
165
|
Shares
repurchased
|
|
(15)
|
—
|
—
|
(6)
|
(21)
|
Stock option
expense
|
|
—
|
609
|
—
|
—
|
609
|
Net loss for the
period
|
|
—
|
—
|
—
|
(3,616)
|
(3,616)
|
Dividends
declared
|
|
—
|
—
|
—
|
(1,282)
|
(1,282)
|
Unrealized foreign
currency translation adjustment
|
|
—
|
—
|
2,438
|
—
|
2,438
|
Balance, March 31,
2022
|
|
266,129
|
12,264
|
5,397
|
(124,761)
|
159,029
|
|
|
|
|
|
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
Three months
ended
March
31,
|
|
|
2023
|
2022
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net loss for the
period
|
|
(5,792)
|
(3,616)
|
Adjustments to
reconcile net loss to cash provided
by operating
activities
|
|
|
Stock-based
compensation
|
|
(55)
|
815
|
Amortization and
depreciation
|
|
8,319
|
8,387
|
Accreted
interest
|
|
191
|
207
|
Fair value adjustment
on financial assets and liabilities
|
|
551
|
(1,474)
|
Deferred income
taxes
|
|
(177)
|
409
|
Net change in non-cash
working capital balances related to operations
|
|
983
|
1,030
|
Cash provided by
operating activities
|
|
4,020
|
5,758
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
Additions to property,
plant and equipment
|
|
—
|
(9)
|
Additions to intangible
assets
|
|
—
|
(26)
|
Cash used in
investing activities
|
|
—
|
(35)
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
Stock options
exercised
|
|
134
|
165
|
Shares
repurchased
|
|
(184)
|
(21)
|
Dividends
paid
|
|
(1,182)
|
(1,282)
|
Repayment of credit
agreement borrowing
|
|
(2,121)
|
(3,000)
|
Lease
payments
|
|
(161)
|
(159)
|
Cash used in
financing activities
|
|
(3,514)
|
(4,297)
|
|
|
|
|
Net increase in cash
during the period
|
|
506
|
1,426
|
Foreign currency
translation
|
|
(15)
|
59
|
Cash, beginning of
period
|
|
20,723
|
21,179
|
Cash, end of
period
|
|
21,214
|
22,664
|
|
|
|
SOURCE HLS Therapeutics Inc.