CTX Crescita Therapeutics Inc

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 second quarter ended June 30, 2023 (“Q2-2023”). All amounts presented are in thousands of Canadian dollars (“CAD”) unless otherwise noted.

Financial Highlights

Q2-2023 vs. Q2-2022

• Revenue was $5,162 compared to $6,512, down $1,350;
• Gross profit was $3,069 compared to $3,647, down $578;
• Operating expenses were $3,295 compared to $3,447, down $152;
• Adjusted EBITDA1 was $214 compared to $646, down $432;
• Ending cash was $10,226, down $49 for the quarter.

“We are pleased that our targeted investments in the Commercial Skincare segment continue to yield higher demand for our products and have resulted in the highest quarterly revenue to date,” commented Serge Verreault, President and CEO of Crescita. “The decrease in Manufacturing revenue year-over-year was mainly from the fulfillment of large orders related to a new product launch by a major customer in 2022. Manufacturing segment revenue can vary significantly due to the quantity and timing of orders fulfilled in any quarter,” added Mr. Verreault. “Our team is working toward expanding and diversifying our CDMO customer base to reduce this volatility and is also actively evaluating accretive product and business acquisitions that are a strategic fit for our business.”

Q2-2023 Corporate Developments

Update on Manufacturing Segment

• Certain manufacturing orders previously scheduled to be delivered in the second half of fiscal 2023 are now expected to be delivered in fiscal 2024, and as a result, segment revenue is expected to be materially lower in the second half of 2023, versus the comparable periods of 2022.

Re-Launch of Alyria® as a Direct-to-Consumer Brand

• We relaunched Alyria® as a direct-to-consumer medical-grade dermocosmetic brand in the Canadian skincare market in Q1-2023, following a complete rebranding and various product reformulations. In Q2-2023, the brand was launched in retail outlets of Familiprix, a Québec based chain of independently owned pharmacies. Alyria is primarily targeted at millennials and also marketed and sold online in Canada through Amazon.ca and alyriaskincare.com. The relaunch of Alyria strengthens our omnichannel expansion and provides the opportunity to engage with a new consumer group.

The Launch of ART FILLER®

• We launched the ART FILLER injectables (the “Fillers”) in the Canadian medical aesthetic market through our new dedicated sales force. ART FILLER is an exclusive collection of dermal fillers made of hyaluronic acid (“HA”), designed to smooth and fill in wrinkles, and create or restore the volumes and contours of the face. We distribute the Fillers under an exclusive Canadian distribution and promotion agreement with Laboratoires FILLMED.

Q2-F2023 Summary Financial Results

Note: Select financial information is outlined below and should be read in conjunction with Crescita's Condensed Consolidated Interim Financial Statements and related Management's Discussion and Analysis (“MD&A”) as at and for the three and six months ended June 30, 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

Three months ended

June 30,

Six months ended

June 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

$

$

$

$

Commercial Skincare

 

2,685

 

 

2,392

 

 

5,177

 

 

3,928

 

Licensing and Royalties

 

299

 

 

227

 

 

320

 

 

227

 

Manufacturing and Services

 

2,178

 

 

3,893

 

 

4,267

 

 

7,308

 

Revenues

 

5,162

 

 

6,512

 

 

9,764

 

 

11,463

 

Cost of goods sold

 

2,093

 

 

2,865

 

 

3,959

 

 

5,104

 

Gross profit

 

3,069

 

 

3,647

 

 

5,805

 

 

6,359

 

Gross margin (%)

 

59.5

%

 

56.0

%

 

59.5

%

 

55.5

%

Research and development

 

178

 

 

161

 

 

338

 

 

288

 

Selling, general and administrative

 

2,742

 

 

2,916

 

 

5,179

 

 

5,511

 

Depreciation and amortization

 

375

 

 

370

 

 

750

 

 

736

 

Total operating expenses

 

3,295

 

 

3,447

 

 

6,267

 

 

6,535

 

Operating profit (loss)

 

(226

)

 

200

 

 

(462

)

 

(176

)

Interest expense

 

21

 

 

48

 

 

44

 

 

109

 

Interest income

 

(116

)

 

(41

)

 

(237

)

 

(87

)

Foreign exchange loss

 

57

 

 

118

 

 

21

 

 

189

 

Share of (profit) loss of an associate

 

(9

)

 

17

 

 

(17

)

 

29

 

Net loss on convertible note measured at

fair value through profit or loss

 

9

 

 

95

 

 

22

 

 

95

 

Loss before income taxes

Deferred income tax expense

 

 

(188

93

)

 

 

 

(37

-

)

 

 

 

(295

259

)

 

 

 

(511

-

)

 

Net loss

 

(281

)

 

(37

)

 

(554

)

 

(511

)

Adjusted EBITDA1

 

214

 

 

646

 

 

375

 

 

712

 

Loss per share

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.01

)

$

(0.00

)

$

(0.03

)

$

(0.02

)

Weighted average number of common shares outstanding

Basic and diluted

 

20,334,153

 

 

20,813,853

 

 

20,334,153

 

 

20,874,923

 

 

 

 

 

 

Selected Balance Sheet Information

 

 

 

 

Cash and cash equivalents, end of period

 

 

 

10,226

 

 

10,502

 

Selected Cash Flow Information

 

 

 

 

Cash provided by operating activities

 

81

 

 

80

 

 

2,212

 

 

739

 

Cash used in investing activities

 

-

 

 

(169

)

 

-

 

 

(214

)

Cash used in financing activities

 

(101

)

 

(1,185

)

 

(200

)

 

(1,353

)

1Please refer to the Non-IFRS Financial Measures section of this press release.

Revenue

We have three reportable segments: 1) Commercial Skincare (“Skincare”), which manufactures and sells our branded non-prescription skincare products for the Canadian and international markets, and also commercializes Pliaglis®, NCTF®, ART FILLER®, and Obagi® Medical in Canada; 2) Licensing and Royalties (“Licensing”), which primarily generates revenue from licensing our intellectual property related to Pliaglis or our transdermal delivery technologies; and 3) Manufacturing and Services (“Manufacturing”), which generates revenue from contract manufacturing and product development services.

For the three and six months ended June 30, 2023, total revenue was $5,162 and $9,764 compared to $6,512 and $11,463 for the three and six months ended June 30, 2022. The net year-over-year decreases of $1,350 and $1,699, were mainly from the Manufacturing segment, resulting from the partial fulfillment and completion of a previously announced purchase order of approximately $7.0 million in 2022. The purchase order related to our customer’s expansion in new key markets, represented an initial order to adequately supply distribution channels and may not be reflective of future orders. During the same period, we also experienced continued growth in Commercial Skincare from branded product sales across all channels, mainly driven by new product launches and promotions, including the launch of Alyria in select retail outlets in the province of Québec.

Licensing revenue was $299 and $320 for the three and six months ended June 30, 2023, compared to $227 for the comparable three and six months of 2022, reflecting royalties above the annual contractual minimum royalties under the Cantabria Agreement. The results for the quarter and year-to-date periods of 2023 also included a regulatory milestone under our licensing agreement with Croma Pharma GmbH.

Gross Profit

For the three months ended June 30, 2023, gross profit was $3,069, representing a gross margin of 59.5%, compared to $3,647 and 56.0%, respectively, for the three months ended June 30, 2022. The net decrease in gross profit of $578 was mainly due to lower overall revenue year-over-year, primarily in the Manufacturing segment, while the gross margin increase of 3.5% was mainly the result of favourable product and channel mix, as well as, to a lesser extent, the favorable impact of cost savings.

For the six months ended June 30, 2023, gross profit was $5,805, representing a gross margin of 59.5%, compared to $6,359 and 55.5%, respectively, for the six months ended June 30, 2022. The net decrease in gross profit of $554 and the increase in gross margin increase of 4.0% were mainly due to the same factors as for the quarter.

Operating Expenses

For the three and six months ended June 30, 2023, total operating expenses were $3,295 and $6,267 compared to $3,447 and $6,535, respectively for the three and six months ended June 30, 2022. Both the quarterly and year-to-date net decreases of $152 and $268 were mainly due to lower SG&A expenses as a result of lower headcount-related expenses, share-based compensation and outsourcing expenses year-over-year.

Cash and Cash Equivalents

Cash and cash equivalents were $10,226 at June 30, 2023, reflecting a slight decrease of $49 for the quarter.

Non-IFRS Financial Measures

We report our financial results in accordance with International Financial Reporting Standards (“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:

1. 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.
2. 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) loss 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

Three months ended

June 30,

Six months ended

June 30,

2023

 

2022

 

2023

 

2022

 

$

 

$

 

$

 

$

 

Net loss

(281

)

(37

)

(554

)

(511

)

Adjust for:

 

 

 

 

Depreciation and amortization

375

 

370

 

750

 

736

 

Interest expense, net

(95

)

7

 

(193

)

22

 

Deferred income tax expense

93

 

-

 

259

 

-

 

EBITDA

92

 

340

 

262

 

247

 

Adjust for:

 

 

 

 

Share-based compensation

65

 

76

 

87

 

152

 

Foreign exchange loss

57

 

118

 

21

 

189

 

Share of (profit) loss of an associate

(9

)

17

 

(17

)

29

 

Net loss on convertible note measured at fair value through profit or loss

9

 

95

 

22

 

95

 

Adjusted EBITDA

214

 

646

 

375

 

712

 

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”) 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

This press release contains “forward-looking information” 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. Often, but not always, forward-looking information can be identified by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”, “believe”, “aim”, “project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will” and similar references to future periods. Examples of forward-looking information include, but are not limited to, statements made in this press release under the heading “Financial Highlights”, and 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 information is neither historical fact nor an assurance of future performance. Instead, it based only on current beliefs, expectations, and assumptions regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.

Because forward-looking information relates to the future, it is 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 forward-looking information. Therefore, you should not unduly rely on any forward-looking information. Important factors that could cause Crescita’s actual results and financial condition to differ materially from those indicated in forward-looking information include, among others:

• economic and market conditions including the uncertainty in the global economy;
• the impact of inflation and rising interest rates together with the threats of stagflation and 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 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;
• the impact of the COVID-19 pandemic and the response thereto of governments and consumers;
• 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.

As a result of the foregoing and other factors, no assurance can be given that future results, levels of activity or achievements indicated in any forward-looking information will actually be achieved. Any forward-looking information in this press release is based only on information currently available to management and speaks only as of the date on which it is provided. Except as required by applicable securities laws, Crescita 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230809353669/en/

Investor Relations Linda Kisa, CPA, CA Email: lkisa@crescitatx.com