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News

HLS Therapeutics Announces Q1 2019 Financial Results
  • Revenue of $13.2 million, Adjusted EBITDA of $8.3 million and Cash from Operations of $8.3 million
  • Granted priority review status for Vascepa™ by Health Canada, which could reduce the review period for the drug by up to four-and-a-half months. Announced the filing of the New Drug Submission ("NDS") for Vascepa with Health Canada on April 29, 2019
  • Announced the in-licensing of the exclusive Canadian rights for CSAN® Pronto™, a point-of-care medical device intended to simplify the blood monitoring process for patients that are prescribed Clozaril®
  • Subsequent to quarter-end, entered into a license for the Canadian rights to PERSERIS™, a novel long-acting injectable risperidone product for the treatment of schizophrenia

TORONTO, May 9, 2019 /CNW/ - HLS Therapeutics Inc. ("HLS" or the "Company") (TSX:HLS), a specialty pharmaceutical company focusing on central nervous system and cardiovascular markets, announces its financial results for the three-month period ended March 31, 2019 ("Q1 2019"). All amounts are in thousands of United States ("U.S.") dollars unless otherwise stated.

Q1 FISCAL 2019 HIGHLIGHTS

  • Revenue was $13.2 million compared to $13.2 million in Q1 2018;
  • Adjusted EBITDA was $8.3 million compared to $8.6 million in Q1 2018;
  • Cash from operations was $8.3 million compared to $13.5 million in Q1 2018;
  • Net loss of $(3.7) million, or $(0.14) per common share, compared to net loss of $(4.9) million, or $(0.19) per common share, in Q1 2018;
  • Granted priority review status for Vascepa by Health Canada, which could reduce the review period for the drug by up to four-and-a-half months. Announced the filing of the NDS for Vascepa with Health Canada on April 29, 2019;
  • Amarin released new data showing that Vascepa™ provided a statistically significant 30% risk reduction in total (first and subsequent) cardiovascular events compared to placebo in the statin-treated patient population studied in REDUCE-IT;
  • Announced the in-licensing of the exclusive Canadian rights for CSAN® Pronto™, a point-of-care medical device that may help to simplify the mandatory blood safety monitoring process for patients that are prescribed Clozaril®. The device was accepted for review by Health Canada on March 13, 2019;
  • Appointed experienced healthcare executive Laura A. Brege to the Board of Directors and Audit Committee;
  • Graduated to the Toronto Stock Exchange;
  • Paid a dividend of C$0.05 per outstanding common share on March 15, 2019, and declared a dividend of C$0.05 per outstanding common share on March 20, 2019, payable on June 14, 2019 to shareholders of record on April 30, 2019; and
  • Subsequent to quarter-end, acquired a license for the Canadian rights to PERSERIS™, a novel long-acting injectable risperidone product for the treatment of schizophrenia.

"Q1 was a solid start to the year with good financial performance from our foundational products, positive new developments with Vascepa and the promising expansion of our product portfolio," said Greg Gubitz, CEO of HLS. "Regarding Vascepa, we were granted priority review status by Health Canada, which could significantly reduce the timeline to bring this innovative therapy to Canadians. Subsequent to quarter-end, on April 29, 2019, we announced that we had filed our NDS for Vascepa with Health Canada."

"Also, during Q1, Amarin released new data from the REDUCE-IT™ trial, indicating that Vascepa reduced total major adverse cardiac events—first and subsequent—by 30% compared to placebo over a five-year period, which further demonstrates significant risk reduction with the product. In addition, in March, the American Diabetes Association issued updates to their Standards of Medical Care in Diabetes for 2019 stating that for patients with diabetes and atherosclerotic cardiovascular disease or other cardiac risk factors that are on a statin with controlled low-density cholesterol (LDL-C), but elevated triglycerides (135-499), the addition of icosapent ethyl (Vascepa) should be considered to reduce cardiovascular risk. We are excited with the prospects for Vascepa and we believe that, if approved, it could ultimately generate revenue in Canada in a range of CDN $150-250 million per year. We believe this a conservative view and these new developments give us greater confidence in our outlook."   

"While we are focused on execution and excited with the prospects for Vascepa, we continue to pursue opportunities to expand our product portfolio. In Q1 we in-licensed the exclusive Canadian rights for CSAN Pronto, which is designed to help simplify the mandatory safety blood-monitoring process for patients that are prescribed Clozaril, or clozapine. The conventional blood-monitoring process has been cited as a major barrier leading to the under-utilization of clozapine. By providing a less invasive safety monitoring procedure that uses just a single drop of blood from a finger prick at the point-of-care and that produces results on the spot, we believe the technology can benefit both patients and the medical practitioners who treat them and could improve access to a proven treatment."

"Today, we are also announcing that we have acquired a license for the Canadian rights to PERSERIS™, a novel long-acting injectable Risperidone product from Indivior PLC that is approved in the U.S. by the FDA for the treatment of schizophrenia. With PERSERIS, we see an opportunity to help improve treatment adherence for schizophrenia patients in Canada with a clinically meaningful registration-stage psychiatric product that would be complementary to Clozaril. In our view, this product could bring a treatment option to patients and practitioners contending with a very difficult disease state and extends our presence in CNS, one of our two core markets."

DIVIDEND

On May 8, 2019, the Company's Board of Directors declared a dividend of C$0.05 per outstanding common share to be paid on September 13, 2019, to shareholders of record as of July 31, 2019.

These dividends paid on the Company's common shares are designated to be "eligible dividends" for purposes of section 89(1) of the Income Tax Act (Canada).

FINANCIAL REVIEW

Revenue

The following table provides revenue segmentation by revenue type and geography for the three-month period ended March 31, 2019:



Three months ended
March 31,




2019

2018






Product sales





Canada



6,387

6,759

United States



4,275

4,872




10,662

11,631

Royalty revenue



2,510

1,535




13,172

13,166

 

In the Canadian market, Clozaril is actively managed by a team of HLS employees who support a growing number of patients. The first quarter tends to be a seasonally slow quarter for Clozaril. Clozaril results in Q1 2019 were in-line with expectations following a very strong Q4 2018 and essentially flat compared to a year ago in Canadian dollar terms. As a result of fluctuations in exchange rates, Clozaril product sales decreased by 5.5% for the quarter when the results were translated to U.S. dollars.

Clozaril continued to experience modest volume declines in the U.S. market, mitigated by a nominal price increase, resulting in a modest increase in Clozaril gross revenues in Q1 2019 compared to Q1 2018. However, overall product sales in the U.S. market decreased in Q1 2019, as the comparison period benefitted from an adjustment to government rebate accruals and there were no authorized generic supplies in the current period; this was partially off-set by lower than projected returns for expired products.

Royalty revenues increased by $1.0 million in Q1 2019 compared to Q1 2018. This increase reflects the inventory drawdown that occurred in early 2018 following the end of the 2017 promotional campaign undertaken by the distributor of Absorica in the U.S. 

Operating Expenses



Three months ended
March 31,




2019

2018






Cost of product sales



387

580

Selling and marketing



1,193

964

Medical, regulatory and patient support



1,213

977

General and administrative



2,122

2,053




4,915

4,574

 

Cost of product sales decreased in the first quarter of 2019 in-line with reduced authorized generic supplies and improved manufacturing costs as a result of the completion of the manufacturing transition for the U.S. market.

The year-over-year increase in other operating expenses was driven primarily by higher patient registry program costs, following a temporary reduction in these costs in the earlier period, additional commercial activity to prepare and support the planned introductions of Vascepa and CSAN Pronto to the Canadian market, and additional public company costs.

Adjusted EBITDA



Three months ended
March 31,




2019

2018






Net loss for the period



(3,703)

(4,876)

Stock-based compensation



597

94

Amortization and depreciation



8,118

8,141

Acquisition and transaction costs



421

435

Finance and related costs



3,217

5,567

Income tax recovery



(393)

(769)

Adjusted EBITDA



8,257

8,592

 

The year-over-year decrease in Adjusted EBITDA is due to higher selling and marketing, and medical, regulatory and patient-support costs related primarily to the Company's growth initiatives, partially off-set by lower cost of product sales. Adjusted EBITDA is a non-IFRS measure and is defined below.

Interest Expense and Debt

Interest on the senior secured term loan was $1.6 million compared to $4.1 million in Q1 2018. The decrease in interest is primarily due to the refinancing of the Company's debt in August 2018. The Company's current debt structure has both a lower principal amount outstanding and a lower interest rate than its original debt facility. 

As at March 31, 2019, the principal debt balance outstanding under the new senior secured term facility was $97.5 million compared to $98.75 million at December 31, 2018. This compares with the original senior secured loan borrowing of $185.0 million at the Company's inception and the $137.9 million original loan balance at the end of Q2 2018 just prior to the Company restructuring its debt.

Net Loss

Net loss in Q1 2019 was $(3.7) million, or $(0.14) per share, compared to a net loss of $(4.9) million, or $(0.19) per share in Q1 2018. Net loss improved year-over-year due primarily to the $2.5 million decrease in interest expense resulting from the debt refinancing completed in August 2018, offset in part by an increase in operating expenses related primarily to the Company's growth initiatives.

Cash from Operations and Financial Position

Cash generated from operations was $8.3 million in Q1 2019, compared to $13.5 million in Q1 2018. Cash generated from operations in Q1 2018 benefited from collections related to Absorica royalty revenue generated in Q4 2017 during the distributor-led promotional campaign for the product. The promotional campaign was completed in 2017.

As at March 31, 2019, the Company had cash and cash equivalents of $12.8 million, up from $10.9 million at December 31, 2018.

Q1 FISCAL 2019 CONFERENCE CALL

HLS will hold a conference call today at 8:30 am Eastern Time to discuss their Q1 2019 financial results. The call will be hosted by Mr. Greg Gubitz, Chief Executive Officer, Mr. Gilbert Godin, President and Chief Operating Officer and Mr. Tim Hendrickson, Chief Financial Officer.

DATE:

Thursday, May 9, 2019

TIME:

8:30 am ET

DIAL-IN NUMBER:

(888) 231-8191 or (647) 427-7450

WEBCAST LINK:           

https://event.on24.com/wcc/r/1987816/76C621B2E222AE96A4EE50B4350FECB5

TAPED REPLAY:

(855) 859-2056 or (416) 849-0833

REPLAY PASSCODE:

1739143

 

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. The taped replay will be available for 14 days and the archived webcast will be available for 90 days.

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) "income tax recovery" 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 Company's Annual Information Form dated April 1, 2019, 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, 2019

December 31, 2018





ASSETS




Current




Cash and cash equivalents


12,812

10,930

Accounts receivable


13,344

17,509

Inventories


1,560

1,505

Foreign currency forward contract


401

755

Prepaid expenses and other current assets


856

919

Total current assets


28,973

31,618

Property, plant and equipment


1,288

363

Intangible assets


266,343

271,153

Restricted assets


2,258

2,290

Deferred tax asset


958

1,001

Total assets


299,820

306,425






Current




Accounts payable and accrued liabilities


10,591

12,405

Provisions


6,739

6,574

Debt and other financial liabilities


19,190

18,920

Income taxes payable


251

369

Total current liabilities


36,771

38,268

Debt and other financial liabilities


101,476

104,459

Deferred tax liability


4,617

5,209

Total liabilities


142,864

147,936





Shareholders' equity




Share capital


210,360

210,360

Contributed surplus


13,207

12,973

Accumulated other comprehensive loss


(4,497)

(7,455)

Deficit


(62,114)

(57,389)

Total shareholders' equity


156,956

158,489

Total liabilities and shareholders' equity

299,820

306,425







 

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, 2019

March 31, 2018





Revenues


13,172

13,166





Expenses




Cost of product sales


387

580

Selling and marketing


1,193

964

Medical, regulatory and patient support


1,213

977

General and administrative


2,122

2,053

Stock-based compensation


597

94

Amortization and depreciation


8,118

8,141

Operating income (loss)


(458)

357

Acquisition and transaction costs


421

435

Finance and related costs, net


3,217

5,567

Loss before income taxes


(4,096)

(5,645)

Income tax recovery


(393)

(769)

Net loss for the period


(3,703)

(4,876)





Net loss per share:




Basic and diluted


$(0.14)

$(0.19)





 

HLS THERAPEUTICS INC

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Unaudited

[in thousands of U.S. dollars]




Three months ended


March 31, 2019

March 31, 2018




Net loss for the period

(3,703)

(4,876)




Item that may be reclassified subsequently to net loss



Unrealized foreign currency translation adjustment

2,958

(4,620)

Comprehensive loss for the period

(745)

(9,496)





 

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, 2018


210,360

12,973

(7,455)

(57,389)

158,489

Stock option expense


234

234

Net loss for the period


(3,703)

(3,703)

Dividends declared


(1,022)

(1,022)

Unrealized foreign currency


2,958

2,958

translation adjustment

Balance, March 31, 2019


210,360

13,207

(4,497)

(62,114)

156,956








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 option expense


94

94

Net loss for the period


(4,876)

(4,876)

Unrealized foreign currency


(4,620)

(4,620)

translation adjustment

Balance, March 31, 2018


211,482

12,424

1,321

(35,508)

189,719








 

HLS THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

[in thousands of U.S. dollars]





Three months ended March 31,



2019

2018





OPERATING ACTIVITIES




Net loss for the period


(3,703)

(4,876)

Adjustments to reconcile net loss to cash provided by operating activities




Stock option expense


234

94

Amortization and depreciation


8,118

8,141

Accreted interest


568

1,629

Fair value adjustment on financial assets and liabilities


1,273

(450)

Listing expense


435

Deferred income taxes


(655)

(889)

Net change in non-cash working capital balances related to operations


2,447

9,416

Cash provided by operating activities


8,282

13,500





INVESTING ACTIVITIES




Additions to property, plant and equipment


(37)

(24)

Acquisitions


(2,825)

(4,325)

Other additions to intangible assets


(213)

Cash used in investing activities


(3,075)

(4,349)





FINANCING ACTIVITIES




Common shares issued


19,470

Share issuance costs


(1,576)

Dividends paid


(1,001)

Repayment of senior secured term loan


(1,250)

(7,104)

Cash portion of debt refinancing costs


(1,000)

Increase in restricted cash


(2,000)

Lease payments


(113)

Lender royalty payment


(112)

Cash provided by (used in) financing activities


(3,364)

8,678





Net increase in cash and cash equivalents during the period


1,843

17,829

Foreign exchange


39

(223)

Cash and cash equivalents, beginning of period


10,930

36,219

Cash and cash equivalents, end of period


12,812

53,825





 

SOURCE HLS Therapeutics Inc.

For further information: HLS CONTACT INFORMATION: Dave Mason, Investor Relations, HLS Therapeutics Inc., (416) 247-9652, dave.mason@loderockadvisors.com; Gilbert Godin, President and Chief Operating Officer, HLS Therapeutics Inc., (484) 232-3400 ext101, g.godin@hlstherapeutics.com