- Commenced trading on the TSX Venture Exchange (Toronto Stock
Exchange)
- Revenue of $13.2M in Q1 2018
vs $15.6M in Q1 2017. Clozaril
generates year-over-year growth; Absorica royalties reflect
distributor destocking to bring supplies in-line with future
normalized demand
- As at the end of Q1, debt repaid since inception totaled
$40.8 million and debt outstanding
was $144.2 million
- Cash and cash equivalents $53.8
million at end of Q1
- Established Normal Course Issuer Bid post
quarter-end
TORONTO, May 16, 2018 /CNW/ - HLS Therapeutics Inc. ("HLS"
or the "Company") (TSX-V: HLS), a specialty pharmaceutical company
specializing in Central Nervous System ("CNS") and Cardiovascular
markets, announces financial results for the three-month period
ended March 31, 2018. Unless
otherwise noted, all financial results referenced are in
United States ("US") dollars.
Q1 2018 HIGHLIGHTS
- Revenue of $13.2 million,
compared to $15.6 million in Q1 2017,
was affected by the completion of the promotional campaign
conducted by the marketer of Absorica in 2017 and Q1 inventory
destocking
- Net loss was ($4.9) million, or
($0.19) per common share, compared to
a net loss of ($3.0) million, or
($0.12) per common share in Q1
2017
- Cash generated from operations was $13.5
million, compared to $3.3
million in Q1 2017
- Adjusted EBITDA was $8.6 million,
compared to $11.5 million in Q1
2017
- Repaid $7.1 million of debt,
reducing the debt balance outstanding to $144.2 million at March
31, 2018, and increasing the total amount of debt repaid
from inception to the end of Q1 to $40.8
million
- Cash and cash equivalents were $53.8
million at March 31, 2018,
compared to $36.2 million at
December 31, 2017
- Completed reverse take-over onto the TSX Venture Exchange and
commenced trading March 14, 2018
- On May 9, 2018, established a
Normal Course Issuer Bid ("NCIB") over the next 12 months, to
purchase for cancellation up to an aggregate of 1,371,495 of the
Company's issued and outstanding common shares, representing 5% of
the issued and outstanding Common Shares as of May 7, 2018.
"Q1 results were in-line with our expectations and demonstrate
how our two foundational assets – Clozaril and Absorica - combine
to generate reliable cash flows that we draw-on to pursue our
organic growth opportunities and pay down debt," said Greg Gubitz, CEO of HLS. "Clozaril's
year-over-year growth reflects our ability to acquire, invest in
and grow established products, while Absorica royalties, which
collectively have far exceeded our forecasts to-date, were lower in
Q1, but for the remainder of 2018 are expected to resume at
quarterly levels that are more in-line with our original outlook
for the product."
"In 2018, we expect important developments for Vascepa and
Trinomia, both pre-registration Cardiovascular products that are
strong performers internationally - Vascepa in the U.S. and
Trinomia in more than 30 countries. We believe these products have
transformative potential for HLS. They will establish
Cardiovascular as HLS' second key specialty area after CNS. In
addition, Vascepa's already strong market potential could expand
significantly depending on results from the REDUCE-IT clinical
trial. Top-line results from this trial, being conducted by Amarin
Corporation, are expected to be announced before the end of Q3
2018."
"HLS has a rich pipeline of business development opportunities
and we are making good progress on bringing transactions to
fruition. As always, it is difficult to predict the exact timing of
any transaction, but the breadth of opportunities we are seeing and
the receptivity of counterparties to HLS gives me great confidence
in our plan."
"From time to time the value of HLS' stock in the public market
may provide the opportunity to acquire our common shares at prices
that we do not believe reflect the true underlying value of the
business. We have established an NCIB to enable us to take
advantage of these opportunities."
FINANCIAL REVIEW
Revenue
Total revenue for the three-month period ended March 31, 2018 ("Q1 2018") was $13.2 million, compared to $15.6 million in the same period last year.
Product Sales, which is revenue related to Clozaril, for Q1 2018
was $11.6 million, compared to
$10.6 million in the same period last
year. Royalty Revenue, which is revenue related to Absorica, for Q1
2018 was $1.5 million, compared to
$4.9 million in the same period last
year.
Product Sales in Canada
increased 7% year-over-year benefiting from the Company's active
promotion and support of Clozaril as well as favorable currency
exchange fluctuations in the quarter. Excluding the impact of
currency fluctuations, Product Sales in Canada would have increased 2%. Product Sales
in the U.S. market increased 14% year-over-year due to Q1 2018
sales under an authorized generic supply agreement that was not in
place in Q1 2017, as well as lighter than usual Clozaril sales in
Q1 2017 resulting from trade inventory stocking at the end of
2016.
A year-over-year difference for Royalty Revenue was expected and
resulted from: 1) as previously communicated, Royalty Revenue in
2017 benefited by approximately $10.0
to $11.0 million due to certain
competitive disruptions and the positive impact of a promotional
campaign undertaken by the marketer of Absorica in the U.S., which
ran from early 2017 until November
2017; and, 2) due to the higher sales volumes in 2017, trade
inventory levels expanded by the end of the promotional period,
resulting in a period of trade inventory destocking in Q1 2018.
Within Q1 itself, results for the month of March had already begun
to show a return to levels that would be consistent with the period
before the start of the 2017 promotional campaign.
Operating Expenses
Operating expenses, which consist of cost of product sales,
selling and marketing expense, medical, regulatory and patient
support expense, and general and administrative expense, were
$4.6 million in Q1 2018, compared to
$4.0 million in the same period last
year.
Cost of product sales were $0.6
million in Q1 2018, compared to $0.4
million in the same period last year. The increase was due
primarily to the additional product supplies made under an
authorized generic supply agreement. Other expense items
experienced modest increases as the Company enhances its team and
promotional efforts in support of existing foundational products
and upcoming growth-oriented products, as well as to support its
transition to a public company.
Adjusted EBITDA
Adjusted EBITDA for Q1 2018 was $8.6
million, compared to $11.5
million in the same period last year. The year-over-year
change in Adjusted EBITDA is due to lower Royalty Revenue from
Absorica as described above, which was partially offset by the
increase in Clozaril Product Sales (also described above). Adjusted
EBITDA is a non-IFRS measure and is defined below.
|
Three months
ended
|
|
|
March 31,
2018
|
March 31,
2017
|
|
|
|
|
Net loss for the
period
|
|
(4,876)
|
(3,032)
|
Stock-based
compensation
|
|
94
|
76
|
Amortization and
depreciation
|
|
8,141
|
7,931
|
Acquisition and
transaction costs
|
|
435
|
—
|
Finance and related
costs
|
|
5,567
|
5,705
|
Provision for
(recovery of) income taxes
|
|
(769)
|
868
|
Adjusted
EBITDA
|
|
8,592
|
11,548
|
Interest Expense and Debt
Interest on the senior secured term loan was $4.1 million in Q1 2018, compared to $4.2 million in the same period last year. The
decrease in interest expense is due to the Company's debt
reduction.
A total of $7.1 million of debt
was repaid in Q1 2018 bringing the total amount of debt repaid up
to March 31, 2018, to $40.8 million. As at March
31, 2018, total outstanding principal on the senior secured
term loan stood at $144.2 million,
down from $185.0 million at the
Company's inception.
Cash from Operations and Financial Position
Cash generated from operations was $13.5
million in Q1 2018, compared to $3.3
million in the same period last year. The increase is due
primarily to the timing of collection of Royalty Revenue generated
from Absorica in Q4 2017 as well as stable cash generation from the
Clozaril business.
As at March 31, 2018, the Company
has cash and cash equivalents of $53.8
million, up from $36.2 million
at December 31, 2017.
Going-Public Transaction and TSX Venture Exchange
Listing
On December 21, 2017, HLS entered
into a definitive agreement providing for the amalgamation of the
Company and Automodular Corporation ("AMD") by way of a plan of
arrangement (the "Arrangement") in accordance with Section 183 of
the Business Corporations Act (Ontario). On March 8,
2018, the Company announced that shareholders of both
companies had voted in favor of the Arrangement, which was then
completed on March 12, 2018. The cash
position at March 31, 2018 includes
CDN $25.0 million acquired in the
amalgamation transaction with AMD. The common shares of HLS
commenced trading on the Exchange under the ticker symbol 'HLS' on
March 14, 2018.
Q1 2018 CONFERENCE CALL
HLS will hold a conference call Wednesday, May 16, at 8:30
am Eastern Time hosted by Mr. Greg
Gubitz, Chief Executive Officer, Mr. Gilbert Godin, President and Chief Operating
Officer and Mr. Tim Hendrickson, VP
Finance and Administration. A question and answer session will
follow the corporate update.
DATE:
|
Wednesday, May 16,
2018
|
|
TIME:
|
8:30 am ET
|
|
DIAL-IN
NUMBER:
|
(888) 231-8191 or
(647) 427-7450
|
|
TAPED
REPLAY:
|
(855) 859-2056 or
(416) 849-0833
|
|
REFERENCE
NUMBER:
|
8591149
|
|
A link to the live audio webcast of the conference call will
also be available on the events page of the investors section of
the HLS 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. An
archived webcast will be available for one year.
ABOUT HLS THERAPEUTICS INC.
Formed in 2015, HLS is a specialty 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.
CAUTIONARY 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 loss for the
year with Adjusted EBITDA, each of (i) "stock-based compensation",
(ii) "amortization and depreciation", (iii) "acquisition costs",
(iv) "finance and related costs", and (v) "provision for (recovery
of) income taxes" appearing in the Consolidated Statement of Net
Loss are added to net loss for the year 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 and expectations regarding financial
performance. 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 joint information circular of HLS
and AMD dated February 5, 2018 in
respect of the Arrangement, which has 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.
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
As
at
|
As
at
|
|
|
March 31,
2018
|
December 31,
2017
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
|
53,825
|
36,219
|
Accounts
receivable
|
|
13,057
|
25,846
|
Inventories
|
|
1,088
|
1,354
|
Prepaid expenses and
other current assets
|
|
1,563
|
1,617
|
Total current
assets
|
|
69,533
|
65,036
|
Property, plant and
equipment
|
|
421
|
441
|
Intangible
assets
|
|
300,396
|
312,659
|
Restricted
assets
|
|
14,635
|
5,555
|
Deferred tax
asset
|
|
862
|
955
|
Total
assets
|
|
385,847
|
384,646
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
|
11,029
|
12,596
|
Provisions
|
|
5,697
|
6,976
|
Other financial
liabilities
|
|
12,724
|
14,160
|
Income taxes
payable
|
|
153
|
870
|
Total current
liabilities
|
|
29,603
|
34,602
|
Other financial
liabilities
|
|
156,768
|
158,114
|
Deferred tax
liability
|
|
9,757
|
11,548
|
Total
liabilities
|
|
196,128
|
204,264
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Share
capital
|
|
211,482
|
192,743
|
Contributed
surplus
|
|
12,424
|
12,330
|
Accumulated other
comprehensive income
|
|
1,321
|
5,941
|
Deficit
|
|
(35,508)
|
(30,632)
|
Total shareholders'
equity
|
|
189,719
|
180,382
|
Total liabilities and
shareholders' equity
|
385,847
|
384,646
|
|
|
|
|
HLS THERAPEUTICS
INC.
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF LOSS
|
Unaudited
|
[in thousands of U.S.
dollars, except per share amounts]
|
|
Three months
ended
|
|
March 31,
2018
|
March 31,
2017
|
|
|
|
Revenues
|
13,166
|
15,553
|
|
|
|
Expenses
|
|
|
Cost of product
sales
|
580
|
425
|
Selling and
marketing
|
964
|
786
|
Medical, regulatory
and patient support
|
977
|
906
|
General and
administrative
|
2,053
|
1,888
|
Stock-based
compensation
|
94
|
76
|
Amortization and
depreciation
|
8,141
|
7,931
|
Operating
income
|
357
|
3,541
|
Acquisition and
transaction costs
|
435
|
—
|
Finance and related
costs, net
|
5,567
|
5,705
|
Loss before income
taxes
|
(5,645)
|
(2,164)
|
Income tax expense
(recovery)
|
(769)
|
868
|
Net loss for the
period
|
(4,876)
|
(3,032)
|
|
|
|
Net loss per
share:
|
|
|
Basic and
diluted
|
$(0.19)
|
$(0.12)
|
|
|
|
|
|
HLS THERAPEUTICS
INC.
|
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
Unaudited
|
|
[in thousands of U.S.
dollars]
|
|
|
Three months
ended
|
|
March 31,
2018
|
March 31,
2017
|
|
|
|
Net loss for the
period
|
(4,876)
|
(3,032)
|
|
|
|
Item that may be
reclassified subsequently to net loss
|
|
|
|
Unrealized foreign
currency translation adjustment
|
(4,620)
|
1,362
|
Comprehensive loss
for the period
|
(9,496)
|
(1,670)
|
|
|
|
HLS THERAPEUTICS
INC.
|
CONDENSED 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, 2017
|
|
192,743
|
12,330
|
5,941
|
(30,632)
|
180,382
|
Common shares
issued
|
|
19,905
|
—
|
—
|
—
|
19,905
|
Share issuance
costs
|
|
(1,166)
|
—
|
—
|
—
|
(1,166)
|
Stock-based
compensation
|
|
—
|
94
|
—
|
—
|
94
|
Net loss for the
period
|
|
—
|
—
|
—
|
(4,876)
|
(4,876)
|
Unrealized foreign
currency
|
|
|
|
|
|
|
|
translation
adjustment
|
|
—
|
—
|
(4,620)
|
—
|
(4,620)
|
Balance, March 31,
2018
|
|
211,482
|
12,424
|
1,321
|
(35,508)
|
189,719
|
|
|
|
|
|
|
|
Balance, December
31, 2016
|
|
192,743
|
11,967
|
(4,611)
|
(24,535)
|
175,564
|
Stock-based
compensation
|
|
—
|
76
|
—
|
—
|
76
|
Net loss for the
period
|
|
—
|
—
|
—
|
(3,032)
|
(3,032)
|
Unrealized foreign
currency
|
|
|
|
|
|
|
|
translation
adjustment
|
|
—
|
—
|
1,362
|
—
|
1,362
|
Balance, March 31,
2017
|
|
192,743
|
12,043
|
(3,249)
|
(27,567)
|
173,970
|
|
|
|
|
|
|
HLS THERAPEUTICS
INC.
|
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
Three months
ended
|
|
|
March 31,
2018
|
March 31,
2017
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net loss for the
period
|
|
(4,876)
|
(3,032)
|
Add (deduct) items
not involving cash
|
|
|
|
|
Stock-based
compensation
|
|
94
|
76
|
|
Amortization and
depreciation
|
|
8,141
|
7,931
|
|
Accreted
interest
|
|
1,629
|
1,728
|
|
Fair value adjustment
on financial assets
|
|
|
|
|
|
and
liabilities
|
|
(450)
|
10
|
|
Listing
expense
|
|
435
|
—
|
|
Deferred income
taxes
|
|
(889)
|
2
|
Net change in
non-cash working capital balances
|
|
9,416
|
(3,379)
|
Cash provided by
operating activities
|
|
13,500
|
3,336
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
Additions to
property, plant and equipment
|
|
(24)
|
—
|
Acquisitions
|
|
(4,325)
|
(1,825)
|
Cash used in
investing activities
|
|
(4,349)
|
(1,825)
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
Common shares
issued
|
|
19,470
|
—
|
Share issuance
costs
|
|
(1,576)
|
—
|
Repayment of senior
secured term loan
|
|
(7,104)
|
(3,870)
|
Increase in
restricted cash
|
|
(2,000)
|
(700)
|
Lender royalty
payment
|
|
(112)
|
(105)
|
Cash provided by
(used in) financing activities
|
|
8,678
|
(4,675)
|
|
|
|
|
Net increase
(decrease) in cash and cash
|
|
|
|
|
equivalents during
the period
|
|
17,829
|
(3,164)
|
Foreign
exchange
|
|
(223)
|
(72)
|
Cash and cash
equivalents, beginning of period
|
|
36,219
|
37,763
|
Cash and cash
equivalents, end of period
|
|
53,825
|
34,527
|
SOURCE HLS Therapeutics Inc.