MISSISSAUGA, ON, March 28, 2018 /CNW/ - Crescita Therapeutics Inc. (TSX: CTX) (Crescita or the Company), a commercial dermatology company with a portfolio of non-prescription skincare and prescription drug products for the treatment and care of skin conditions, diseases and their symptoms, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2017.
F2017 Year-over-Year Financial Highlights
Revenue1 of $12.0 million, up $8.5 million versus F2016, including $3.3 million of up-front and milestone payments;
Adjusted EBITDA1,2 of $(4.4) million, an improvement of $9.0 million versus F2016;
Net loss of $(11.5)1,3 million, a reduction of $5.4 million versus F2016;
Net loss per share from continuing operations1,3 of $(0.81) a $0.38 improvement versus F2016;
Non-cash goodwill and intangible assets impairment of $5.7 million recorded in connection to the INTEGA Acquisition;
Cash position of $7.0 million after paying down long-term debt and other obligations by $4.2 million.
Q4-F2017 Year-over-Year Financial Highlights
Revenue of $2.3 million versus $2.2 million in Q4-F2016;
Adjusted EBITDA2 of $(2.0), improved by $2.0 million versus Q4-F2016;
Net loss per share from continuing operations3 of $(0.59), versus $(0.33) in Q4-F2016;
Cash position of $7.0 million.
"Fiscal 2017 was a year of many operational and financial challenges for Crescita. We are proud of the progress we have made over the last year. We have refocused our corporate strategy, realigned our resources and have signed certain strategic agreements, such as the acquisition of the Alyria® product line and the out-licensing of the Pliaglis® U.S. rights to Taro, all of which will be pivotal to securing Crescita's future," said Serge Verreault, President of Crescita.
Mr. Verreault added, "While still in a loss position, we have improved our Adjusted EBITDA by $9.0 million year-over-year, we have paid down our long-term debt and other obligations by $4.2 million, and, most recently, we have completed our Rights Offering, raising gross proceeds of approximately $3.7 million. This additional cash now affords us the flexibility and agility to successfully execute our strategic growth plan and deliver shareholder value going forward as we work towards making Crescita a leading North-American skincare company."
1 The F2017 results reflect the full year's impact of the INTEGA acquisition, versus only four months in F2016 due to the timing of the acquisition. 2Adjusted EBITDA is a non-IFRS measure. This term is defined as earnings (loss) from continuing operations before interest, income taxes (recovery), depreciation and amortization, gain on debt renegotiations, net, equity-settled stock-based compensation (SBC), goodwill and intangible assets impairment, accretion on the fair value of inventory, and foreign currency (gains) and losses. Please refer to the Non-IFRS Financial Measures and Adjusted EBITDA Reconciliation sections of this press release. 3Net loss and net loss per share from continuing operations for F2017 and Q4-F2017 included a non-cash goodwill and intangible assets impairment of $5.7 million.
Key Operational Highlights of F2017 and Subsequent Event
Successfully completed a Rights Offering on March 9, 2018, raising approximately $3.7 million in gross equity financing to support our growth;
Received a total of US$2.5 million (CAD $3.3 million) in up-front and milestone payments from Taro Pharmaceuticals Inc. (Taro) upon the sale of the license for the exclusive U.S. rights to Pliaglis and the issuance of the Flexicaine composition patent;
Amended the Knight loan, freeing up $8.6 million of previously restricted cash;
Completed a convertible debenture financing with Bloom Burton Funds for proceeds of $1.0 million;
Completed the acquisition of Alyria from Sanofi Consumer Health Inc. - a skincare line using scientific research;
Received positive topline results from a Phase 2 clinical trial (The Trial) studying the efficacy of the MiCal1 formulation in patients with plaque psoriasis. The Trial was conducted by our partner, Ferndale Laboratories, Inc., in conjunction with a leading U.S. Contract Research Organization.
Q4-F2017 and F2017 Financial Results
Note: All figures are in Canadian dollars. The fiscal 2017 MD&A, audited consolidated financial statements and accompanying notes can be found on www.crescitatherapeutics.com/investors and have been filed with SEDAR.
In thousands of CAD dollars except earnings per share
Three months ended December 31,
Years ended December 31,
Total Operating Expenses
Goodwill and intangible assets impairment
Gain on debt renegotiations, net
Forreign currency loss (gain)
Other expenses (income)
Loss from continuing operations before income taxes
Income taxes (recovery)
Net loss from continuing operations
Net loss from discontinued operations
Net loss from continuing operations per share
Weighted Average number of common shares
Selected Cash Flow Information
Cash and cash equivalents, end of period
Cash used in operating activities
Cash used in investing activities
Cash (used in) provided by financing activities
Cash and Cash Equivalents Cash and cash equivalents were $7.0 million as at December 31, 2017 compared to $9.8 million as at December 31, 2016. In the prior year, the Company had $8.6 million of restricted short-term investments held as collateral for the Company's letter of credit. Including these restricted amounts, the Company's total cash balance would have been $18.4 million on a comparable basis in the prior year. The restriction on these funds was lifted as part of the Knight Loan amendment. Our cash utilization was $11.4 million during the fiscal year, of which $7.4 million was used for operating activities and $3.2 million was used for financing activities, mainly to pay down our debt.
Revenue Total revenue, consisting of product sales, out-licensing and services revenue, for the year ended December 31, 2017 was $12.0 million compared to $3.5 million in the prior year, representing an increase of $8.5 million. The year-over-year increase was mainly a result of the full year's impact of product sales from the INTEGA Acquisition, as well as revenue received from Taro in connection with our Pliaglis out-licensing agreement with them. The prior year figures include only product sales for the four months between the date of the INTEGA Acquisition - September 1st, 2016 – and year end.
Operating Expenses Total operating expenses for the year ended December 31, 2017 were $18.6 million, compared to $18.2 million in the prior year ended December 31, 2016. While overall operating expenses showed a modest increase of $0.4 million or 2.1%, the level of selling, general and administrative (SG&A) and research and development (R&D) expenses decreased by $1.6 million and $0.9 million, respectively, mainly due to the consolidation of certain corporate functions to our Laval facility, as well as due to non-recurring acquisition and transaction-related costs incurred in the prior year. These were offset by the full year's cost of goods sold impact from INTEGA's commercial operations. The Company continues its focus on rationalizing its cost structure.
Other Expenses (Income)
Gain on Debt Renegotiations, net During the third quarter, the Company renegotiated the terms of the original Knight loan. The difference in the fair value of the amended loan and the carrying value of the original loan resulted in the reported non-recurring, non-cash gain of $1.1 million, net of transaction costs.
Goodwill and Intangible Assets Impairment For the year ended December 31, 2017, the Company recorded a goodwill impairment charge of $5.2 million to fully impair the carrying value of goodwill recorded on the INTEGA Acquisition. The goodwill impairment was primarily driven by changes to the Company's forecasted performance which resulted in a lower fair value for the INTEGA business. In addition, as a result of its decision to discontinue any future investments in ISDIN and Premiology, the Company wrote-off intangible assets in the amount of $0.5 million related to these non-performing product lines.
Net Loss from Continuing Operations Net loss from continuing operations for the year ended December 31, 2017 was $11.3 million, compared to $14.6 million in the comparative fiscal year. The year-over-year improvement of $3.4 million was primarily driven by the positive impact of the aggregate of: the up-front payment and milestone revenue received from Taro in the second and third quarters, the incremental gross margin on INTEGA's operations reflecting a full year of commercial operations in the current year, the reduction in SG&A and R&D costs, and to a lesser extent, the non-recurring non-cash gain on the renegotiation of the Knight loan. In the fourth quarter, following its annual impairment assessment, the Company recognized a goodwill and intangible asset impairment related to the INTEGA Acquisition of $5.7 million. Without this adjustment, the net loss from continuing operations would have been $5.6 million, representing a year-over-year improvement of $9.1 million.
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.
Adjusted EBITDA is a non-IFRS measure. This term is defined as earnings (loss) from continuing operations before interest, income taxes (recovery), depreciation and amortization, gain on debt renegotiations, net, equity-settled stock-based compensation (SBC), goodwill and intangible assets impairment, accretion on the fair value of inventory, and foreign currency (gains) and 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. A reconciliation of the adjusted EBITDA to its closest IFRS measure can be found below.
In thousands of CAD dollars
Three months ended December 31,
Years ended December 31,
Net loss from continuing operations
Depreciation and amortization
Goodwill and intangible asset impairment
Equity-settled stock-based compensation
Accretion on fair value of inventory
Foreign currency loss
Gain on debt renegotiations, net
Foreign currency gain
Income tax recovery
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 audited consolidated financial statements, notes to the financial statements, MD&A and Annual Information Form ("AIF") reports.
AboutCrescita Therapeutics Inc. Crescita (TSX:CTX) is a publicly traded, Canadian commercial dermatology company with a portfolio of non-prescription skincare products for the treatment and care of skin conditions and diseases and their symptoms and prescription drug products for the treatment of pain. 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. For additional information, please visit www.crescitatherapeutics.com.
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. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company's current beliefs, expectations and assumptions, the future of its 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, readers should not 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, the risk factors included in Crescita's most recent Annual Information Form dated March 28, 2018 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 a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and none of Crescita or any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Any forward-looking statement made by the Company in this Press Release is based only on information currently available to it 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.