LAVAL, Quebec--(BUSINESS WIRE)--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 first quarter ended March 31, 2022 (“Q1-F2022”). All amounts presented are in thousands of Canadian dollars (“CAD”) unless otherwise noted.
Financial Highlights
Q1-F2022 vs. Q1-F2021
- Revenue was $4,951 compared to $3,265, up $1,686;
- Gross profit was $2,712 compared to $2,116, up $596;
- Operating expenses were $3,088 compared to $2,413, up $675;
- Adjusted EBITDA1 was $66 compared to $87, down $21;
- Ending cash was $11,742 compared to $11,331 at the end of Q4-F2021, representing cash generation of $411 for the quarter.
“In the quarter, we achieved record revenue of $3.4M in our manufacturing segment, surpassing the previous mark of $2.9M set last quarter and significantly higher than the $0.7M recorded in Q1 last year. Manufacturing is an important part of our business. Its consistent revenue complements our licensing revenue which tends to be more variable,” commented Serge Verreault, President and CEO of Crescita. “Optimizing our plant capacity, growing our customer base and expanding volumes with existing clients are part of our strategy to increase recurring revenues and margins.
“We are working with our international partners to support the local regulatory approvals and/or launches of Pliaglis®. Based on our discussions, our partners expect that Pliaglis will be commercialized in 35 new countries through 2025. Our commercial teams are also preparing for the anticipated launch of ART FILLER®, subject to its approval by Health Canada. Finally, we continue to seek out product and business acquisition opportunities to enhance our growth,” concluded Mr. Verreault.
Q1-F2022 and Subsequent Corporate Developments
Launch of Obagi Medical® Product Line in Canada
- We launched the Obagi Medical product line in Canada under our exclusive distribution agreement with Obagi Cosmeceuticals LLC. With a history of over 30 years in science, innovation and clinical experience, Obagi is a category leader within the professional skincare segment. The Obagi Medical line includes skincare products designed to restore the skin’s natural radiance by improving skin tone and texture and diminishing the appearance of premature aging, photodamaged skin or acne. This new line enhances our medical skincare portfolio and strengthens our footing in the Canadian professional aesthetic market. The Obagi products complement our Pro-Derm® brand which is intended to optimize medical aesthetic procedures offered by doctors, dermatologists, and plastic surgeons. We will be promoting and selling the products nationwide through our existing network.
Q1-F2022 Financial Results
Note: The Management’s Discussion and Analysis (“MD&A”), Condensed Consolidated Interim Financial Statements and accompanying notes for the three months ended March 31, 2022 are available at www.crescitatherapeutics.com/financial-reporting and have been filed with SEDAR at www.sedar.com.
Summary Financial Results
|
Three months ended March 31, |
||||||||
In thousands of CAD, except per share data and number of shares |
|
2022 |
|
2021 |
Change |
||||
|
$ |
$ |
$ |
||||||
Commercial Skincare |
|
1,536 |
|
1,767 |
|
(231) |
|||
Licensing and Royalties |
|
- |
|
806 |
|
(806) |
|||
Manufacturing and Services |
|
3,415 |
|
692 |
|
2,723 |
|||
Revenues |
|
4,951 |
|
3,265 |
|
1,686 |
|||
Cost of goods sold |
|
2,239 |
|
1,149 |
|
1,090 |
|||
Gross profit |
|
2,712 |
|
2,116 |
|
596 |
|||
Gross margin (%) |
|
54.8% |
|
64.8% |
|
-10.0% |
|||
Research and development |
|
127 |
|
219 |
|
(92) |
|||
Selling, general and administrative |
|
2,595 |
|
1,863 |
|
732 |
|||
Depreciation and amortization |
|
366 |
|
331 |
|
35 |
|||
Total operating expenses |
|
3,088 |
|
2,413 |
|
675 |
|||
Operating loss |
|
(376) |
|
(297) |
|
(79) |
|||
Total other expenses |
|
86 |
|
139 |
|
(53) |
|||
Share of loss of an associate |
|
(12) |
|
- |
|
(12) |
|||
Net loss |
|
(474) |
|
(436) |
|
(38) |
|||
Adjusted EBITDA1 |
|
66 |
|
87 |
|
(21) |
|||
Earnings per share |
|
|
|
||||||
Basic and Diluted |
$ |
(0.02) |
$ |
(0.02) |
$ |
- |
|||
Weighted average number of common shares outstanding |
|
|
|
||||||
Basic and Diluted |
|
20,936,672 |
|
20,626,608 |
|
310,064 |
|||
Selected Balance Sheet Information |
|
|
|
||||||
Cash and cash equivalents, end of period |
|
11,742 |
|
13,944 |
|
(2,202) |
|||
Selected Cash Flow Information |
|
|
|
||||||
Cash provided by (used in) operating activities |
|
659 |
|
(196) |
|
855 |
|||
Cash used in investing activities |
|
(45) |
|
(4) |
|
(41) |
|||
Cash used in financing activities |
|
(168) |
|
(120) |
|
(48) |
|||
Revenue
We have three reportable segments: 1) Commercial Skincare (“Commercial”), which manufactures and sells branded non-prescription skincare products in the Canadian and international markets, and also commercializes Pliaglis, NCTF® Boost 135 HA, and the Obagi Medical product line 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 months ended March 31, 2022, total revenue was $4,951 compared to $3,265 for the three months ended March 31, 2021, representing an increase of $1,686. Our Manufacturing segment revenue increased by $2,723, which was mainly driven by the partial fulfillment of the approximately $7,000 in additional purchase orders previously announced. Commercial Skincare sales posted a decrease of $231 mainly due to lower year-over-year sales of hand sanitizer and personal protective equipment.
During the quarter, no royalties were recognized above the previously recognized minimum guaranteed royalties under our licensing agreements with Cantabria Labs Inc. and Taro Pharmaceuticals Inc. (“Taro”). In Q1-F2021 we had recorded minimum guaranteed royalties of $806 (US$637) under our licensing agreement with Taro for Pliaglis in the United States.
Gross Profit
For the three months ended March 31, 2022, gross profit was $2,712, representing a gross margin of 54.8%, compared to $2,116 and 64.8%, respectively, for the three months ended March 31, 2021. The increase in gross profit of $596 was mainly due to the increase in our Manufacturing revenue year-over-year, while the decrease in gross margin of 10.0% was mainly driven by the drop in full-margin Licensing segment revenue, offset in part by the benefit of higher manufacturing volumes. Gross profit and gross margin were also negatively impacted by a lower benefit from wage and rent subsidies under the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency Rent (“CERS”) Subsidy programs year-over-year.
Operating Expenses
For the three months ended March 31, 2022, total operating expenses were $3,088 compared to $2,413 for the three months ended March 31, 2021, representing a net increase of $675. The increase was primarily driven by higher selling, general and administrative (“SG&A”) expenses of $732, mainly reflecting a lower year-over-year benefit from wage subsidies under the CEWS program, as well as higher headcount-related and advertising and promotion costs as we invest in our business. These additional costs were partly offset by a decrease in research and development (“R&D”) spend of $92 mainly driven by lower expenses pertaining to our product candidate in co-development, CTX-101.
Cash and Cash Equivalents
Cash and cash equivalents were $11,742 at March 31 2022, reflecting a net increase of $411 for the quarter, mainly due to the favorable movement in non-cash working capital items.
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:
- EBITDA is defined as earnings before interest, income taxes, depreciation, and amortization.
- Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, share of (profit) losses of associates, other (income) expenses, 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 March 31, |
|||||
2022 |
2021 |
Change |
||||
$ |
$ |
$ |
||||
Net loss |
(474) |
(436) |
(38) |
|||
Adjust for: |
|
|
|
|||
Depreciation and amortization |
366 |
331 |
35 |
|||
Interest (income) expense, net |
15 |
(12) |
27 |
|||
EBITDA |
(93) |
(117) |
24 |
|||
Adjust for: |
|
|
|
|||
Share of loss of an associate |
12 |
- |
12 |
|||
Share-based compensation |
76 |
53 |
23 |
|||
Foreign exchange loss |
71 |
151 |
(80) |
|||
Adjusted EBITDA |
66 |
87 |
(21) |
|||
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.sedar.com.
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 Statements
This press release contains “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking statements”). 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. Examples of forward-looking statements include, but are not limited to, statements regarding the Company’s objectives, plans, goals, strategies, growth, performance, operating results, strategy for customer retention, product development, market position, business prospects, opportunities and industry trends and similar statements concerning anticipated future events, results, circumstances, performance or expectations. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are 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 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, you should not unduly 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, among others: economic and market conditions, the impact of the COVID-19 pandemic and the response thereto of governments and consumers, the Company’s ability to execute its growth strategies, reliance on third parties for clinical trials, marketing, distribution and commercialization, 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 debt commitments, the impact of unexpected 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 degree of market acceptance of the Company’s products, developments and changes in applicable laws and regulations, as well as other risk factors discussed in the “Risk Factors” sections of the Company’s most recent annual MD&A for the year ended December 31, 2021 and the Company’s AIF dated March 22, 2022. Any forward-looking statement made in this press release is based only on information currently available 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.
______________________
1 Please refer to the Non-IFRS Financial Measures section of this press release.
