TORONTO, Aug. 10,
2023 /CNW/ - HLS Therapeutics Inc. ("HLS" or the
"Company") (TSX: HLS), a pharmaceutical company focusing on central
nervous system ("CNS") and cardiovascular markets, announces its
financial results for the three- and six-month periods ended
June 30, 2023. All amounts are in
thousands of United States
("U.S.") dollars unless otherwise stated.
KEY HIGHLIGHTS
- Q2 2023 revenue was $16.4 million
and Adjusted EBITDA1 was $5.5
million, compared to $15.5
million and $6.2 million,
respectively, in Q2 2022.
- New leadership with the appointment of Craig Millian as CEO and Brian Walsh as Senior Vice President,
Commercial.
- Board changes with John Welborn
named Chair; Christian Roy,
Craig Millian and John Hanna joining the board; and a reduction in
the size of the board from ten to eight members.
"Q2 revenue and Adjusted EBITDA results were largely in line
with expectations with topline growth driven by the increase in
Canadian product revenue and strong royalty revenue," said
Craig Millian, CEO of HLS. "The
quarter was one of significant transition for HLS. We made
important structural and leadership changes to drive our company
forward and ensure strong alignment with shareholders. We are
making necessary adjustments to our operating model to build a
solid foundation for sustainable and profitable growth moving
forward."
Q2 & YEAR-TO-DATE ("YTD") 2023 FINANCIAL &
OPERATIONAL HIGHLIGHTS
- Q2 2023 Vascepa net revenue was C$4.5
million, up 49% compared to C$3.0
million in Q2 2022.
- Vascepa total prescriptions in Q2 2023 increased by 91%
year-over-year from Q2 2022.
- Vascepa prescribers in Q2 2023 increased by 20% sequentially
from Q1 2023 and 96% year-over-year from Q2 2022.
- Vascepa consistent prescribers2 in Q2 2023 increased
by 30% sequentially from Q1 2023 and 139% year-over-year from Q2
2022.
- Clozaril YTD 2023 Canadian net revenue was C$17.1 million, down 1.5% compared to
C$17.3 million in the same period
last year.
- Clozaril's YTD 2023 patient growth rate was 1%.
"Vascepa generated 49% year-over-year net sales growth in Q2
with 91% growth in prescribing driven by increases in new
prescribers, new patients, and more prescribing by current
writers," Millian added. "We are excited about the continued
adoption of Vascepa and opportunities for future growth, while also
acknowledging that the current growth trajectory is not as rapid as
originally projected. Our goal moving forward is to invest where we
can drive continued growth but with an accelerated timeframe to
brand profitability."
Due to payer mix dynamics, public plan reimbursement delays, and
slower than expected uptake with general practitioners, HLS is
guiding to a 2023 Vascepa revenue range of C$18-20 million compared to the low end of its
previously issued C$22-28 million
revenue range. The Company remains confident in the potential for
Vascepa and is putting plans in place so that Vascepa begins to
make a positive contribution to Adjusted EBITDA in the second half
of 2024.
Q2 & YTD 2023 FINANCIAL REVIEW
The Company's Management's Discussion and Analysis and
Consolidated Financial Statements for the three- and six-month
periods ended June 30, 2023 are
available at the Company's website and at its profile at
SEDAR+.
Revenue
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Product
sales
|
|
|
|
|
Canada
|
9,791
|
9,527
|
18,602
|
17,930
|
United
States
|
3,179
|
3,718
|
6,391
|
7,161
|
|
12,970
|
13,245
|
24,993
|
25,091
|
Royalty
revenue
|
3,447
|
2,287
|
6,181
|
4,997
|
|
16,417
|
15,532
|
31,174
|
30,088
|
Q2 2023 revenue increased 6% compared to Q2 2022. Q2 2023
revenue increased 9% in constant currency terms, compared to Q2
2022, as the decline in the Canadian dollar had an impact on the
reported values, which are in U.S. dollars.
Q2 2023 product sales in Canada
increased 3% compared to Q2 2022. Q2 2023 product sales in
Canada grew 8% in constant
currency, compared to Q2 2022, led by increased sales of Vascepa,
which grew 49% in Q2 2023 in constant currency compared to Q2 2022,
and grew by C$1.0 million, or 28%
sequentially, from Q1 2023. The Vascepa net revenue growth rate
trails the growth rate in prescriptions as net pricing adjusts to
increased public sector volumes.
Clozaril revenue in Canada
declined 5% in Q2 2023 in constant currency, compared to Q2 2022,
impacted by the timing of wholesaler ordering. For the six-month
period ended June 30, 2023, the
number of patients taking Clozaril increased 1% while revenue
decreased 1.5% compared to the same period in the prior year. The
variance between the increase in patients and decrease in revenue
is due to the order timing issues mentioned above. Clozaril
continues to be the leading medication for treatment-resistant
schizophrenia in Canada.
In the U.S., Q2 2023 Clozaril net sales decreased $0.5 million compared to Q2 2022. While gross
sales remain steady year-over-year, the decrease was primarily due
to a $0.5 million benefit in Q2 2022
related to expired product returns while public rebates and co-pay
assistance programs have increased moderately in the current
year.
Royalty revenues
Royalty revenues were $3.4 million
in Q2 2023, up 51% from Q2 2022, reflecting contribution from all
four products in the portfolio. $0.5
million of the year-over-year increase is due to receipt of
a one-time milestone payment related to the approval of
Xenpozyme.
Operating Expenses
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Cost of product
sales
|
1,777
|
1,154
|
3,221
|
2,107
|
Selling and
marketing
|
5,325
|
4,542
|
10,132
|
8,371
|
Medical, regulatory and
patient support
|
1,437
|
1,347
|
2,513
|
2,623
|
General and
administrative
|
2,373
|
2,331
|
4,724
|
4,513
|
|
10,912
|
9,374
|
20,590
|
17,614
|
Q2 2023 operating expenses increased 16% compared to Q2 2022,
which was driven by an increase in cost of sales due to the growth
in shipments and sales of Vascepa, and an increase in selling
and marketing costs for Vascepa related to increased selling
activity in primary care. Selling and marketing costs are expected
to remain steady for the remainder of 2023 and then to decrease in
2024 as we drive towards profitability for Vascepa in the second
half of 2024.
Support costs and strong gross margins remain stable across the
Company's key Clozaril franchises in Canada and the
United States.
Adjusted EBITDA1
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
Net loss for the
period
|
(9,437)
|
(9,143)
|
(15,229)
|
(12,759)
|
Stock-based
compensation
|
137
|
1,230
|
82
|
2,045
|
Amortization and
depreciation
|
8,366
|
8,489
|
16,685
|
16,876
|
Finance and related
costs, net
|
2,471
|
1,043
|
4,905
|
1,363
|
Other
costs
|
3,851
|
4,542
|
4,064
|
4,887
|
Income tax expense
(recovery)
|
117
|
(3)
|
77
|
62
|
Adjusted
EBITDA
|
5,505
|
6,158
|
10,584
|
12,474
|
Q2 2023 Adjusted EBITDA was $5.5
million compared to $6.2
million in Q2 2022. The decrease is due primarily to the
increase in operating expenses for Vascepa. Clozaril and
royalty revenues continue to generate strong Adjusted EBITDA and
cash flow for the business.
For the six-month period ended June 30,
2023, the direct contribution to Adjusted EBITDA from the
Clozaril franchise was $14.4 million,
while the direct contribution of Vascepa and other products was a
loss of $4.7 million and $0.4 million, respectively.
1 See
"Cautionary Note Regarding Non-IFRS Measures" section of this press
release.
|
Net Loss
Net loss for Q2 2023 was ($9.4)
million, or ($0.29) per share,
compared to a net loss of ($9.1)
million, or ($0.28) per share,
in Q2 2022. Net loss increased as revenue growth was offset by
higher cost of product sales and selling and marketing expenses
related to the expansion of Vascepa, and Q2 2023 had Other costs of
$3.9 million which included
$2.4 million related to the
discontinuation of PERSERIS and $1.5
million of reorganization costs.
Cash from Operations and Financial Position
Cash generated from operations was $2.7
million in Q2 2023, compared to $3.5
million in Q2 2022. Cash was $20.9
million at June 30, 2023 up
from $20.7 million at December 31, 2022.
As at June 30, 2023, HLS has a
strong financial position with $20.9
million of cash, $26.5 million
of undrawn revolving facility, and the Company may also request to
be provided with incremental loans, up to a maximum amount of
$70.0 million, to support
acquisitions and other growth opportunities.
Q2 FISCAL 2023 CONFERENCE CALL
HLS will hold a conference call today at 8:30 am Eastern Time to discuss its Q2 2023
financial results. The call will be hosted by Mr. Craig Millian, CEO, and Mr. Tim Hendrickson, CFO. To view the slides that
accompany management's discussion, please use the webcast
link.
CONFERENCE ID: 52567994
DATE: Thursday, August 10, 2023
TIME: 8:30 a.m. ET
WEBCAST
LINK: https://app.webinar.net/Yd576N3ZzeW
TRADITIONAL DIAL-IN NUMBER: 1-888-664-6392 or
416-764-8659
RAPIDCONNECT: To instantly join the conference call
by phone, please use the following URL to easily register and be
connected into the conference call automatically:
https://emportal.ink/3ND4vyc
TAPED REPLAY: 1-888-390-0541 or 416-764-8677
REPLAY CODE: 567994#
The taped replay will be available for 14 days and the archived
webcast will be available for 365 days.
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.
ABOUT HLS THERAPEUTICS INC.
Formed in 2015, HLS is a 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. For more information visit:
www.hlstherapeutics.com
1CAUTIONARY 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 income (loss) for the period
with Adjusted EBITDA, each of (i) "stock-based compensation", (ii)
"amortization and depreciation", (iii) ("finance and related
costs", (iv) "other costs", and (v) "income tax expense (recovery)"
appearing in the Consolidated Statement of Net Income (Loss) are
added to net income (loss) for the period 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.
2CONSISTENT PRESCRIBER
A consistent prescriber is a physician that has prescribed
Vascepa in at least 4 of the past 5 weeks.
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, expectations regarding financial
performance, and the NCIB and ASPP. 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 March 15, 2023, and
Management's Discussion and Analysis dated August 9, 2023, both of which have been filed on
SEDAR and can be accessed at www.sedarplus.ca. 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.
|
INTERIM CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
|
|
As at
|
As at
|
|
|
June 30,
2023
|
December 31,
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash
|
|
20,932
|
20,723
|
Accounts
receivable
|
|
11,950
|
10,999
|
Inventories
|
|
9,965
|
8,902
|
Income taxes
recoverable
|
|
118
|
195
|
Other current
assets
|
|
2,700
|
3,555
|
Total current
assets
|
|
45,665
|
44,374
|
Property, plant and
equipment
|
|
1,059
|
1,127
|
Intangible
assets
|
|
178,802
|
195,018
|
Deferred tax
asset
|
|
624
|
465
|
Other non-current
assets
|
|
668
|
668
|
Total assets
|
|
226,818
|
241,652
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
|
12,925
|
12,785
|
Provisions
|
|
5,367
|
2,934
|
Debt and other
liabilities
|
|
13,009
|
15,471
|
Income taxes
payable
|
|
232
|
—
|
Total current
liabilities
|
|
31,533
|
31,190
|
Debt and other
liabilities
|
|
83,386
|
84,578
|
Deferred tax
liability
|
|
463
|
566
|
Total
liabilities
|
|
115,382
|
116,334
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Share
capital
|
|
264,761
|
265,206
|
Contributed
surplus
|
|
14,151
|
13,821
|
Accumulated other
comprehensive loss
|
|
(2,870)
|
(5,260)
|
Deficit
|
|
(164,606)
|
(148,449)
|
Total shareholders'
equity
|
|
111,436
|
125,318
|
Total liabilities and
shareholders' equity
|
226,818
|
241,652
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF LOSS
|
Unaudited
|
[in thousands of U.S.
dollars, except per share amounts]
|
|
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
|
Revenue
|
|
16,417
|
15,532
|
31,174
|
30,088
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Cost of product
sales
|
|
1,777
|
1,154
|
3,221
|
2,107
|
Selling and
marketing
|
|
5,325
|
4,542
|
10,132
|
8,371
|
Medical, regulatory and
patient support
|
|
1,437
|
1,347
|
2,513
|
2,623
|
General and
administrative
|
|
2,373
|
2,331
|
4,724
|
4,513
|
Stock-based
compensation
|
|
137
|
1,230
|
82
|
2,045
|
Amortization and
depreciation
|
|
8,366
|
8,489
|
16,685
|
16,876
|
Finance and related
costs, net
|
|
2,471
|
1,043
|
4,905
|
1,363
|
Other costs
|
|
3,851
|
4,542
|
4,064
|
4,887
|
Loss before income
taxes
|
|
(9,320)
|
(9,146)
|
(15,152)
|
(12,697)
|
Income tax expense
(recovery)
|
|
117
|
(3)
|
77
|
62
|
Net loss for the
period
|
|
(9,437)
|
(9,143)
|
(15,229)
|
(12,759)
|
|
|
|
|
Net loss per
share:
|
|
|
|
Basic and
diluted
|
|
$(0.29)
|
$(0.28)
|
$(0.47)
|
$(0.39)
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
Net loss for the
period
|
(9,437)
|
(9,143)
|
(15,229)
|
(12,759)
|
|
|
|
|
|
Item that may be
reclassified subsequently to net loss
|
|
|
|
|
Unrealized
foreign currency translation adjustment
|
2,297
|
(4,424)
|
2,390
|
(1,986)
|
Comprehensive loss
for the period
|
(7,140)
|
(13,567)
|
(12,839)
|
(14,745)
|
HLS THERAPEUTICS
INC.
|
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, 2022
|
|
265,206
|
13,821
|
(5,260)
|
(148,449)
|
125,318
|
Stock options
exercised
|
|
178
|
(44)
|
—
|
—
|
134
|
Shares
repurchased
|
|
(623)
|
—
|
—
|
254
|
(369)
|
Share purchase
obligation
|
|
—
|
(305)
|
—
|
—
|
(305)
|
Stock option
expense
|
|
—
|
679
|
—
|
—
|
679
|
Net loss for the
period
|
|
—
|
—
|
—
|
(15,229)
|
(15,229)
|
Dividends
declared
|
|
—
|
—
|
—
|
(1,182)
|
(1,182)
|
Unrealized foreign
currency
translation adjustment
|
|
—
|
—
|
2,390
|
—
|
2,390
|
Balance, June 30,
2023
|
|
264,761
|
14,151
|
(2,870)
|
(164,606)
|
111,436
|
|
|
|
|
|
|
|
Balance, December
31, 2021
|
|
265,917
|
11,717
|
2,959
|
(119,857)
|
160,736
|
Stock options
exercised
|
|
236
|
(64)
|
—
|
—
|
172
|
Shares
repurchased
|
|
(146)
|
(191)
|
—
|
(41)
|
(378)
|
Share purchase
obligation
|
|
—
|
(272)
|
—
|
—
|
(272)
|
Stock option
expense
|
|
—
|
1,435
|
—
|
—
|
1,435
|
Net loss for the
period
|
|
—
|
—
|
—
|
(12,759)
|
(12,759)
|
Dividends
declared
|
|
—
|
—
|
—
|
(2,549)
|
(2,549)
|
Unrealized foreign
currency
translation adjustment
|
|
—
|
—
|
(1,986)
|
—
|
(1,986)
|
Balance, June 30,
2022
|
|
266,007
|
12,625
|
973
|
(135,206)
|
144,399
|
HLS THERAPEUTICS
INC.
|
INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Unaudited
|
[in thousands of U.S.
dollars]
|
|
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
(9,437)
|
(9,143)
|
(15,229)
|
(12,759)
|
Net loss for the
period
|
|
|
|
|
Adjustments to
reconcile net loss to cash provided
by operating
activities
|
|
|
Stock-based
compensation
|
137
|
1,230
|
82
|
2,045
|
Amortization and
depreciation
|
8,366
|
8,489
|
16,685
|
16,876
|
Impairment
|
2,352
|
3,051
|
2,352
|
3,051
|
Accreted
interest
|
190
|
205
|
381
|
412
|
Fair value adjustment
on financial assets and liabilities
|
570
|
(696)
|
1,121
|
(2,170)
|
Deferred income
taxes
|
(85)
|
20
|
(262)
|
429
|
Net change in non-cash
working capital balances related to operations
|
575
|
356
|
1,558
|
1,386
|
Cash provided by
operating activities
|
2,668
|
3,512
|
6,688
|
9,270
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Additions to property,
plant and equipment
|
(27)
|
(15)
|
(27)
|
(24)
|
Additions to intangible
assets
|
(108)
|
(66)
|
(108)
|
(92)
|
Cash used in
investing activities
|
(135)
|
(81)
|
(135)
|
(116)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Stock options
exercised
|
—
|
7
|
134
|
172
|
Shares
repurchased
|
(185)
|
(357)
|
(369)
|
(378)
|
Dividends
paid
|
(1,216)
|
(1,267)
|
(2,398)
|
(2,549)
|
Repayment of credit
agreement borrowing
|
(1,389)
|
(3,000)
|
(3,510)
|
(6,000)
|
Lease
payments
|
(158)
|
(180)
|
(319)
|
(339)
|
Cash used in
financing activities
|
(2,948)
|
(4,797)
|
(6,462)
|
(9,094)
|
|
|
|
|
|
Net increase
(decrease) in cash during the period
|
(415)
|
(1,366)
|
91
|
60
|
Foreign currency
translation
|
133
|
(138)
|
118
|
(79)
|
Cash, beginning of
period
|
21,214
|
22,664
|
20,723
|
21,179
|
Cash, end of
period
|
20,932
|
21,160
|
20,932
|
21,160
|
SOURCE HLS Therapeutics Inc.