- Revenue was $75.1
million, a 39% increase
year-over-year
- Cash generated from operations was $27.2 million, a 25% increase
year-over-year
- Reverse Take-Over and listing on TSX-V completed post
year end
- CDN $25.0 million in
capital added with Reverse Take-Over
TORONTO, March 29, 2018 /CNW/ - HLS Therapeutics Inc.
("HLS" or the "Company") (TSXV: HLS) an emerging specialty
pharmaceutical company announces the financial results for the
three-month and twelve-month periods ended December 31, 2017 for the pre-amalgamation HLS
Therapeutics Inc. Unless otherwise noted, all financial results
referenced are in United States
("US") dollars.
FISCAL 2017 HIGHLIGHTS
- Revenue was $75.1 million, an
increase of 39%
- Net loss was $6.1 million, or
$0.24 per share
- Adjusted EBITDA was $55.9
million, an increase of 45%
- Cash generated from operations was $27.2
million, an increase of 25%
- Repaid $13.1 million of debt in
2017; repaid an additional $7.1
million of debt subsequent to year end bringing the total
debt repaid since the Company's inception to $40.8 million
- Entered into a license agreement in Q3 to register,
commercialize and distribute in Canada, Vascepa®, a product for the treatment
of cardiovascular disease
- Entered into a license agreement in Q4 to commercialize and
distribute in Canada, Trinomia®, a
second product for the treatment of cardiovascular disease
- Announced plans for a reverse take-over onto the TSX Venture
Exchange, which was completed subsequent to year end on
March 12, 2018
"2017 was a year of strong financial and operational execution
for HLS," said Greg Gubitz, CEO of
HLS. "With our foundational products, we benefited from a full year
of royalty revenue from Absorica and we generated growth for
Clozaril in Canada, where we have
a dedicated team providing value-add services to our patients and
their care-givers. Our prudent management of expenses and our
ability to generate significant cash from operations enabled us to
support our growth and to continue to pay-down debt."
"Perhaps most importantly, in 2017 we planted the seeds for the
future by in-licensing two pre-registration stage products –
Vascepa and Trinomia – for the Canadian market that we believe have
transformative growth potential. Both products are currently on
track to file with Health Canada in 2018, and they both target
cardiovascular indications, which is an area that we believe has
great potential for our expansion. In addition to these two
agreements, we have built a rich pipeline of opportunities to
further expand our product portfolio, and subsequent to year-end,
we completed our listing on the TSX-V exchange gaining CDN
$25.0 million of capital and
opening-up a new channel to access future growth capital."
FINANCIAL REVIEW
Revenue
Total revenue for the three-month period ended December 31, 2017 ("Q4 2017") and the
twelve-month period ended December 31,
2017 ("F2017") was $20.4
million and $75.1 million,
compared to $15.8 million and
$54.0 million in the same periods
last year. Product revenue for Q4 2017 and F2017 was $11.7 million and $47.4
million, compared to $12.3
million and $46.3 million in
the same periods last year. Royalty revenue for Q4 2017 and F2017
was $8.7 million and $27.6 million, compared to $3.5 million and $7.7
million in the same periods last year.
For the full year period, product revenue increased 4% in
Canada where Clozaril is a
commercial stage promoted product. In the U.S. market Clozaril is
an established non-promoted product. Product sales for the U.S.
market increased 1% as a result of the initial sale of product
under an authorized generic supply agreement. Royalty revenue
increased year-over-year as 2017 had a full year contribution of
Absorica, whose rights were acquired in Q3 2016. Absorica royalty
revenue also benefited by approximately $10.0 million in 2017 as a result of 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 year-end.
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
$19.2 million in F2017, compared to
$15.5 million in F2016.
Cost of product sales were $4.1
million in F2017, compared to $1.9
million in F2016. The increase was due primarily to the
additional product supplies made under an authorized generic supply
agreement and the one-time costs associated with the tech-transfer
of manufacturing responsibilities for the U.S. market to the HLS
contract manufacturing supply chain, which is expected to result in
lower manufacturing costs over time.
General and administrative costs were $7.6 million in F2017, compared to $6.7 million in F2016. The increase was due
primarily to the adjustment of management compensation following
the achievement of pre-defined business development objectives in
July 2016 and building-out the
Company's administrative infrastructure, including the introduction
of an employee benefit plan.
Adjusted EBITDA
Adjusted EBITDA for Q4 2017 and F2017 was $15.5 million and $55.9
million, compared to $11.4
million and $38.5 million in
the same periods last year. The year-over-year increases were due
primarily to a full year contribution of Absorica royalties,
favorable market conditions related to Absorica and growth in
Clozaril revenue, partially offset by higher cost of product sales
and general and administrative expenses. (Adjusted EBITDA is a
non-IFRS measure and is defined below)
Interest Expense and Debt
Interest on the senior secured term loan was $16.6 million in F2017, compared to $17.9 million in F2016. The decrease in interest
expense is due to the Company's repayment of debt. As at
December 31, 2017, total outstanding
principal on the senior secured term loan stood at $151.3 million, down $13.1
million from $164.4 million at
the end of F2016 and from $185.0
million at the Company's inception. Subsequent to year end,
an additional $7.1 million of debt
has been repaid, bringing the total amount of debt repaid since
inception to $40.8 million.
Cash from Operations and Financial Position
Cash generated from operations was $27.2
million in F2017, compared to $21.8
million in F2016. The increase is due to the increase in
royalty receipts resulting from a full year contribution from
Absorica as well as stable cash generation from the Clozaril
business. As at December 31, 2017,
the Company has cash and cash equivalents of $36.2 million and a working capital balance of
$30.4 million.
SUBSEQUENT EVENTS
Going-Public Transaction and TSX Venture Exchange
Listing
On December 21, 2017, the Company
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). Pursuant to the Arrangement, the
Company and AMD would amalgamate to form a new entity named "HLS
Therapeutics Inc.", operating in the life sciences industry. The
completion of the Arrangement would result in a reverse takeover of
AMD as defined in the policies of the TSX Venture Exchange (the
"Exchange").
A joint information circular dated February 5, 2018 was filed with the Exchange and
is available on SEDAR.
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 resulting issuer, named HLS
Therapeutics Inc., gained CDN $25.0
million in capital in connection with the Arrangement and
the common shares of HLS commenced trading on the Exchange under
the ticker symbol 'HLS' on March 14,
2018.
Financial statements and MD&A for AMD for the year ended
December 31, 2017 have been filed on
SEDAR and can be found under the HLS issuer profile.
FISCAL 2017 CONFERENCE CALL
HLS will hold a conference call Thursday,
March 29, 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:
|
Thursday, March 29,
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:
|
2483038
|
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
HLS (TSXV: 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 comprised 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.
|
Year
ended
|
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
Net loss for the
year
|
|
(6,097)
|
(14,893)
|
Stock-based
compensation
|
|
363
|
294
|
Amortization and
depreciation
|
|
32,233
|
26,722
|
Acquisition
costs
|
|
166
|
4,057
|
Finance and related
costs
|
|
24,264
|
23,882
|
Provision for
(recovery of) income taxes
|
|
4,952
|
(1,526)
|
Adjusted
EBITDA
|
|
55,881
|
38,536
|
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 speciality
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.
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
HLS THERAPEUTICS
INC.
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
As
at
|
As
at
|
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
|
36,219
|
37,763
|
Accounts
receivable
|
|
25,846
|
14,038
|
Inventories
|
|
1,354
|
1,200
|
Foreign currency
forward contract
|
|
—
|
199
|
Prepaid expenses and
other current assets
|
|
1,617
|
872
|
Total current
assets
|
|
65,036
|
54,072
|
Property, plant and
equipment
|
|
441
|
410
|
Intangible
assets
|
|
312,659
|
327,983
|
Restricted
cash
|
|
5,555
|
955
|
Deferred tax
asset
|
|
955
|
1,208
|
Total
assets
|
|
384,646
|
384,628
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
|
12,596
|
8,950
|
Provisions
|
|
6,976
|
7,234
|
Other financial
liabilities
|
|
14,160
|
10,078
|
Income taxes
payable
|
|
870
|
306
|
Total current
liabilities
|
|
34,602
|
26,568
|
Other financial
liabilities
|
|
158,114
|
173,265
|
Deferred tax
liability
|
|
11,548
|
9,231
|
Total
liabilities
|
|
204,264
|
209,064
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Share
capital
|
|
192,743
|
192,743
|
Contributed
surplus
|
|
12,330
|
11,967
|
Accumulated other
comprehensive income (loss)
|
|
5,941
|
(4,611)
|
Deficit
|
|
(30,632)
|
(24,535)
|
Total shareholders'
equity
|
|
180,382
|
175,564
|
Total liabilities and
shareholders' equity
|
384,646
|
384,628
|
HLS THERAPEUTICS
INC.
|
CONSOLIDATED
STATEMENTS OF NET LOSS
|
[in thousands of U.S.
dollars, except per share amounts]
|
|
|
|
Year
ended
|
Year
ended
|
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
Revenues
|
|
75,082
|
54,031
|
|
|
|
|
Expenses
|
|
|
|
Cost of product
sales
|
|
4,136
|
1,891
|
Selling and
marketing
|
|
3,551
|
3,201
|
Medical, regulatory
and patient support
|
|
3,875
|
3,740
|
General and
administrative
|
|
7,639
|
6,663
|
Stock-based
compensation
|
|
363
|
294
|
Amortization and
depreciation
|
|
32,233
|
26,722
|
Operating
income
|
|
23,285
|
11,520
|
Acquisition and
transaction costs
|
|
166
|
4,057
|
Finance and related
costs, net
|
|
24,264
|
23,882
|
Loss before income
taxes
|
|
(1,145)
|
(16,419)
|
Income tax expense
(recovery)
|
|
4,952
|
(1,526)
|
Net loss for the
year
|
|
(6,097)
|
(14,893)
|
|
|
|
|
Net loss per
share:
|
|
|
|
Basic and
diluted
|
|
$(0.24)
|
$(0.60)
|
HLS THERAPEUTICS
INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
[in thousands of U.S.
dollars]
|
|
|
|
Year
ended
|
Year
ended
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
Net loss for the
year
|
(6,097)
|
(14,893)
|
|
|
|
Item that may be
reclassified subsequently to net loss
|
|
|
|
Unrealized foreign
currency translation adjustment
|
10,552
|
(4,611)
|
Comprehensive
income (loss) for the year
|
4,455
|
(19,504)
|
HLS THERAPEUTICS
INC.
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
|
|
Share
capital
|
Contributed
surplus
|
Accumulated
other
comprehensive
income
(loss)
|
Deficit
|
Total
|
|
|
|
|
|
|
|
Balance, December
31, 2015
|
|
192,743
|
11,673
|
—
|
(9,642)
|
194,774
|
Stock-based
compensation
|
|
—
|
294
|
—
|
—
|
294
|
Net loss for the
year
|
|
—
|
—
|
—
|
(14,893)
|
(14,893)
|
Unrealized foreign
currency translation adjustment
|
|
—
|
—
|
(4,611)
|
—
|
(4,611)
|
Balance, December
31, 2016
|
|
192,743
|
11,967
|
(4,611)
|
(24,535)
|
175,564
|
Stock-based
compensation
|
|
—
|
363
|
—
|
—
|
363
|
Net loss for the
year
|
|
—
|
—
|
—
|
(6,097)
|
(6,097)
|
Unrealized foreign
currency translation adjustment
|
|
—
|
—
|
10,552
|
—
|
10,552
|
Balance, December
31, 2017
|
|
192,743
|
12,330
|
5,941
|
(30,632)
|
180,382
|
HLS THERAPEUTICS
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
[in thousands of U.S.
dollars]
|
|
|
|
|
Year
ended
|
Year
ended
|
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net loss for the
year
|
|
(6,097)
|
(14,893)
|
Add (deduct) items
not involving cash
|
|
|
|
|
Stock-based
compensation
|
|
363
|
294
|
|
Amortization and
depreciation
|
|
32,233
|
26,722
|
|
Accreted
interest
|
|
6,770
|
5,509
|
|
Fair value adjustment
on financial assets and liabilities
|
|
770
|
667
|
|
Deferred income
taxes
|
|
1,570
|
(3,806)
|
|
Net change in
non-cash working capital balances
|
|
(8,443)
|
7,265
|
Cash provided by
operating activities
|
|
27,166
|
21,758
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
Additions to
property, plant and equipment
|
|
(179)
|
(318)
|
Acquisitions
|
|
(10,354)
|
(19,375)
|
Cash used in
investing activities
|
|
(10,533)
|
(19,693)
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
Repayment of senior
secured term loan
|
|
(13,132)
|
(20,596)
|
Increase in
restricted cash
|
|
(4,600)
|
(955)
|
Lender royalty
payment
|
|
(478)
|
(187)
|
Cash used in
financing activities
|
|
(18,210)
|
(21,738)
|
|
|
|
|
Net decrease in cash
and cash equivalents during the year
|
|
(1,577)
|
(19,673)
|
Foreign
exchange
|
|
33
|
324
|
Cash and cash
equivalents, beginning of year
|
|
37,763
|
57,112
|
Cash and cash
equivalents, end of year
|
|
36,219
|
37,763
|
SOURCE HLS Therapeutics Inc.