Trimel Announces Second Quarter 2015 Financial Results and Highlights

  • ESTRACE® Q2 2015 revenues of $2.1 million increased 17% versus Q1 2015
  • Adjusted EBITDA1 of ($0.4) million for Q2 2015 versus ($0.2) million in Q1 2015

TORONTO--()--Trimel Pharmaceuticals Corporation (TSX:TRL) today reported its financial results for the three month period ended June 30, 2015, and provided an overview of its corporate highlights. Unless otherwise noted, all dollar amounts shown in this press release are in U.S. dollars.

“In the second quarter of 2015, we made several important advances with respect to our product portfolio,” said Tom Rossi, President and Chief Executive Officer of Trimel. “We achieved strong growth for ESTRACE® as a result of our promotional efforts, we laid the groundwork for the NATESTOTM twice-daily (‘BID’) study, and we confirmed our next FDA meeting for TEFINATM. As we enter the second half of the year, we remain focused on expanding our portfolio through product acquisitions and in-licensing, as well as internal research and development efforts.”

Financial Results for the Three Months Ended June 30, 2015

Revenues for second quarter 2015 totalled $2.7 million versus nil for second quarter 2014 and $3.2 million for first quarter 2015. Revenues for second quarter 2015 were derived from sales of ESTRACE® in Canada, the revenue adjustment on sales (based on prescriptions filled) of NATESTOTM since launch of this product in the United States, and revenues related to the amortization of the $25 million upfront fee received from the NATESTOTM licensing deal with Endo. NATESTOTM product revenue for second quarter 2015 relates to additional revenue generated on dispensed prescriptions for product delivered to our marketing partner in the first quarter of 2015. As NATESTOTM is a new product without the requisite historical data on which to base estimates of returns and allowances, additional top-up revenue will be based on prescriptions filled until such time that estimates for product returns and allowances can be determined. ESTRACE® revenue on a Canadian dollar basis, increased by 18% for second quarter 2015 versus first quarter 2015, and by 12% for the first half of 2015 versus first half of 2014.

Cost of sales for second quarter 2015 were $0.9 million versus nil for second quarter 2014. Cost of sales for second quarter 2015 reflects amortization expense associated with the ESTRACE® intangible asset ($0.4 million) and the sale of inventory that includes the remaining adjustment to fair market value ($0.04 million) following the ESTRACE® acquisition. In accordance with International Financial Reporting Standards (“IFRS”), ESTRACE® acquired inventory was recorded at fair value, which does not reflect the expected future cost to purchase inventory directly from the third party manufacturer. As such, the gross profit margin reported in the Company’s statements does not reflect what is anticipated to be experienced in the normal course of business for ESTRACE® (see “Adjusted Gross Profit” under “Non-IFRS Financial Measures” below). As of June 30, 2015, all inventories with an acquisition fair value adjustment have been sold.

Research and Development (“R&D”) expenses were $0.7 million for second quarter 2015 versus $4.1 million for second quarter 2014. The quarter over quarter decrease in R&D expense is primarily due to the inclusion of expenses in second quarter 2014 related to a $2.5 million milestone expense, and expenses related to the TEFINATM Phase II clinical trial that was completed in April 2014.

Selling, general and administrative expense for the three month periods ended June 30, 2015 were $1.7 million versus $1.5 million for the three months ended June 30, 2014. The second quarter 2015 versus second quarter 2014 increase in selling expenses relates to the promotion of ESTRACE® and higher legal fees associated with ongoing intellectual property initiatives, partially offset by lower general and administrative expenses due to lower employment costs.

Earnings before interest, tax, depreciation and amortization (“EBITDA”) for second quarter 2015 was negative $0.9 million versus negative $6.8 million for second quarter 2014. On an adjusted basis (see “EBITDA and Adjusted EBITDA” under “Non-IFRS Financial Measures” below), Adjusted EBITDA was negative $0.4 million for second quarter 2015 versus negative $4.9 million for second quarter 2014. This decrease in second quarter 2015 versus first quarter 2015 on Adjusted EBITDA is primarily due to lower levels of contribution from the sales of NATESTOTM and higher selling, general and administrative expenses in the second quarter.

At June 30, 2015, the Company had cash balances of $25.5 million and total assets of $67.1 million. The Company believes it has sufficient resources to fund its ongoing activities into 2016, depending on the timing of further clinical activities and barring unforeseen events.

1 See “Non-IFRS Financial Measures” below.

Corporate Highlights

ESTRACE® Responding to Promotion

At the end of last quarter, the Company announced its expansion of promotional reach and share of voice for ESTRACE® in key provinces across Canada. As of the second quarter, ESTRACE® has achieved growth in sales (as reported above) and also an increase in total prescriptions in promoted provinces of 4%.

NATESTO™ BID Study Preparation

The Company has now completed the protocol for a Phase III, open-label titration trial that will determine the efficacy of a BID starting dose of NATESTO™. In addition, the investigator sites for this trial have been selected and trained, and screening for patients that meet the inclusion-exclusion criteria has started. Dosing is expected to begin within the coming weeks, with study completion projected by the end of first quarter 2016.

TEFINA™ FDA Consultation Meeting

As previously communicated, the Company has scheduled a consultation meeting with the FDA to be held in August to discuss TEFINA™, a “use as required” nasal testosterone gel in development for female orgasmic disorder. Building on the FDA feedback received earlier this year, the objective will be to review and solicit comments on the draft protocol for a subsequent study in the TEFINA™ clinical program.

Conference Call

Shareholders are reminded of the conference call to discuss the Company’s second quarter results to be held on August 6, 2015 at 8:30 a.m. (Eastern Time). To access the call live, please dial 416-340-2219 or 1-866-225-2055. Listeners are encouraged to dial in 10 minutes before the call begins to avoid delays. A replay of the conference call will be available until 11:59 p.m. Eastern Time on Thursday, August 13, 2015 by dialing 905-694-9451 or 1-800-408-3053, using access code: 3388387#.

Non-IFRS Financial Measures

The non-IFRS measures included in this press release are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from our perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are non-IFRS measures that may have limits in their usefulness to investors.

We use non-IFRS measures, such as Adjusted Gross Profit, EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the valuation of issuers. We also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.

The definition and reconciliation of Adjusted Gross Profit, EBITDA and Adjusted EBITDA used and presented by the Company to the most directly comparable IFRS measures follows below:

Adjusted Gross Profit

Adjusted Gross Profit is defined as gross profit plus the following expenses which are part of cost of sales: (i) amortization of intangible assets; (ii) charges to cost of sales resulting from fair market value adjustments to inventory as a result of a business acquisition; and (iii) other one-time or non-cash items. We use Adjusted Gross Profit as a key performance measure to assess our core gross profit and as a supplemental measure to evaluate the overall operating performance of our cost of sales.

The table below provides the reconciliation of gross profit to Adjusted Gross Profit* (values are in thousands of U.S. dollars):

  For the three months ended June 30, 2015   For the six months ended June 30, 2015
ESTRACE®   NATESTOTM   Total   ESTRACE®   NATESTOTM   Total
 
Revenue
Product revenues $ 2,109 $ 23 $ 2,132 $ 3,887 $ 861 $ 4,748
Licensing and other fees   -   607     607     -   1,207     1,207  
2,109 630 2,739 3,887 2,068 5,955
Cost of sales   837   51     888     2,408   762     3,170  
Gross profit 1,272 579 1,851 1,479 1,306 2,785
Licensing and other fees - (607 ) (607 ) - (1,207 ) (1,207 )
Amortization of intangible asset 401 - 401 799 - 799
Inventory fair value adjustment   35   -     35     844   -     844  
Adjusted gross profit/(loss) (1) $ 1,708 $ (28 ) $ 1,680 $ 3,122 $ 99 $ 3,221
(1) Represents a non-IFRS measure. For the relevant definitions and reconciliation to reported results, see “Non-IFRS Financial Measures”

a)

 

We secured a licensing agreement with a third party pharmaceutical company (Endo) to manage the sales and marketing of NATESTO™ in the United States and Mexico. Under the terms of the agreement, we received an upfront fee of $25 million. This fee is amortized into income over the term of the agreement. For the three and six months ended June 30, 2015, $0.6 million and $1.2 million of this deferred licensing fee was recognized as revenue.

 

b)

Upon completion of the acquisition of the Canadian rights to ESTRACE®, we capitalized acquired intangible assets at fair market value. These intangible assets are amortized over their useful life and we recognize the amortization as a non-cash cost of sales. We adjusted for amortization of $0.4 million and $0.8 million for the three and six months ended June 30, 2015, as we believe the exclusion facilitates investors’ ability to more accurately compare our operating results to those of our peer companies and is reflective of how we internally manage the business.

 

c)

Had the inventories acquired as part of the ESTRACE® acquisition been purchased directly from the third party manufacturer, the costs ascribed to it would have been lower by less than $0.1 million and $0.8 million for the three and six months ended June 30, 2015, respectively. Included in cost of sales for the reporting period are charges in respect of a fair value adjustment on the inventory acquired from the seller of the Canadian rights of ESTRACE® in accordance with IFRS standards. Upon the acquisition, we took assignment of the third party manufacturing agreement and will be able, on a go forward basis, to purchase goods directly from the manufacturer at a lower cost than that included in unadjusted cost of sales for the reporting period in respect of the inventory acquired from the seller of the Canadian rights to ESTRACE®. As of June 30, 2015 all inventories with an acquisition fair value adjustment has been sold.

EBITDA and Adjusted EBITDA

EBITDA is defined as net income adjusted for income tax, depreciation of property and equipment, amortization of intangible assets, interest on long-term debt and other financing costs, interest income, deferred licensing revenue and changes in fair values of derivative financial instruments. Management uses EBITDA to assess the Company’s operating performance. A reconciliation of net income to EBITDA (and Adjusted EBITDA) is set out below.

Adjusted EBITDA is defined as EBITDA adjusted for, as applicable, inventory fair value and other adjustments, acquisition costs, infrequent royalty expenses associated with triggering events, milestones, share based compensation, impairment of intangible asset, impairment of property and equipment and foreign exchange (gain)/loss. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts and prior years. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the business that may not otherwise be apparent when relying solely on IFRS measures, and eliminates items that have less bearing on operating performance and cash flow. It is an alternative to measuring business performance on net income and operating income, and management believes Adjusted EBITDA is a better alternative measure of cash flow generation than, for example, cash flow from operations, particularly because it removes cash flow fluctuations caused by extraordinary changes in working capital. The values in the table below are in thousands of U.S. dollars:

  For the three months ended,

June 30,

  For the six months ended

June 30,

2015   2014 2015   2014
Net loss $ (1,627) $ (7,460) $ (1,665) $ (10,038)
Adjustments:
Income tax (recovery) - - (90) -
Deferred licensing revenue (607) - (1,207) -
Amortization of intangible assets 475 74 947 148
Depreciation of property and equipment 123 443 287 1,078
Interest on long-term debt and other financing costs (1) 996 180 1,909 356
Interest income (32) (29) (64) (49)
Change in fair value of derivative   (243)   7   (100)   28
EBITDA   (915)   (6,785)   17   (8,477)
 
Inventory fair value and other adjustment (2) 35 - 844 -
Share based compensation 152 227 291 298
Foreign exchange loss/(gain)   351   1,632   (1,756)   48
Adjusted EBITDA   (377)   (4,926)   (604)   (8,131)

(1) This figure includes interest expense and the amortization of deferred financing costs and accretion expense related to our outstanding debts.

(2) See note (c) to the table under “Adjusted Gross Profit” above.

About Trimel

Trimel is a Canadian pharmaceutical company focused on the development, manufacture, marketing and distribution of innovative, branded products that improve the patient experience.

Trimel markets ESTRACE® in Canada, a product indicated for the symptomatic relief of menopausal symptoms. NATESTO™, a product utilizing Trimel's licensed nasal gel technology, is the first and only testosterone nasal gel approved and launched in the United States for replacement therapy in adult males diagnosed with hypogonadism, and is currently filed for approval in Canada. The commercial rights to NATESTO™ in the United States and Mexico have been licensed by Trimel to an affiliate of Endo International plc. TEFINA™, a “use as required” nasal testosterone gel, is Trimel’s drug development candidate aimed at addressing a significant unmet need for women with female orgasmic disorder.

For more information, please visit www.trimelpharmaceuticals.com.

Notice regarding forward-looking statements:

Information in this press release that is not current or historical factual information may constitute forward looking information within the meaning of securities laws. Implicit in this information are assumptions regarding our future operational results. These assumptions, although considered reasonable by the company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual performance of the company is subject to a number of risks and uncertainties and could differ materially from what is currently expected as set out above. For more exhaustive information on these risks and uncertainties you should refer to our annual information form dated March 4, 2015 which is available at www.sedar.com. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time, whether as a result of new information, future events or otherwise, except as required by applicable securities law.

TRIMEL PHARMACEUTICALS CORPORATION

    CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 2015 AND DECEMBER 31, 2014
UNAUDITED
(expressed in thousands of U.S. Dollars)
 
 
 
ASSETS
June 30, December 31,
2015 2014
 
CURRENT
Cash $ 25,529 $ 31,017
Trade and other receivables 2,046 1,807
Inventory 3,935 4,791
Prepaids and other assets 250 107
Assets classified as held for sale   21     95  
31,781 37,817
 
NON-CURRENT ASSETS
Property and equipment, net 2,424 1,940
Intangible assets   32,919     36,187  
TOTAL ASSETS $ 67,124   $ 75,944  
 
 
LIABILITIES
 
CURRENT
Accounts payable and accrued liabilities $ 2,308 $ 4,485
Current portion of long-term debt 2,399 -
Current portion of deferred revenue and customer deposits   7,084     7,434  
11,791 11,919
 
LONG-TERM
Deferred lease inducement 484 -
Long-term debt 22,024 23,770
Derivative financial instruments 1,174 1,375
Deferred revenue and customer deposits   21,206     22,419  
TOTAL LIABILITIES $ 56,679   $ 59,483  
 
 
SHAREHOLDERS' EQUITY
 
Share capital $ 149,766 $ 149,766
Warrants 37 1,040
Contributed surplus 9,873 8,690
Accumulated other comprehensive loss (11,367 ) (6,836 )
Deficit   (137,864 )   (136,199 )
TOTAL SHAREHOLDERS' EQUITY   10,445     16,461  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 67,124   $ 75,944  
TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
UNAUDITED
(expressed in thousands of U.S. Dollars, except per share and share data)
           
For the three months ended

June 30,

For the six months ended

June 30,

2015 2014 2015 2014
 
REVENUE
Product revenues $ 2,132 $ - $ 4,748 $ -
Licensing and other fees   607     -     1,207     -  
  2,739     -     5,955     -  
 
EXPENSES
Cost of sales 888 - 3,170 -
Research and development 716 4,139 1,511 6,849
Selling, general and administrative   1,690     1,531     3,040     2,806  
Total operating expenses   3,294     5,670     7,721     9,655  
 
FINANCE COSTS, NET
Interest on long-term debt and other financing costs 996 180 1,909 356
Interest income (32 ) (29 ) (64 ) (49 )
Foreign exchange (gain)/loss 351 1,632 (1,756 ) 48
Change in fair value of derivative financial instruments   (243 )   7     (100 )   28  
  1,072     1,790     (11 )   383  
TOTAL EXPENSES   4,366     7,460     7,710     10,038  
LOSS BEFORE INCOME TAXES (1,627 ) (7,460 ) (1,755 ) (10,038 )
 
INCOME TAXES
Current - - 21 -
Deferred   -     -     (111 )   -  
  -     -     (90 )   -  
NET LOSS $ (1,627 ) $ (7,460 ) $ (1,665 ) $ (10,038 )
Basic and diluted weighted average shares outstanding 200,873,234 163,126,438 200,873,234 158,947,911
 
Basic and diluted net loss per common share $ (0.01 ) $ (0.05 ) $ (0.01 ) $ (0.06 )
 
OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustment   987     1,906     (4,531 )   100  
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD $ (640 ) $ (5,554 ) $ (6,196 ) $ (9,938 )
TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

UNAUDITED

(expressed in thousands of U.S. Dollars)

             
Share capital Warrants Contributed surplus Accumulated other comprehensive income (loss) Deficit Total
 
Balance, January 1, 2014 $ 119,741 $ 1,040 $ 7,987 $ (1,640 ) $ (113,554 ) $ 13,574
 
Net loss for the period - - - - (10,038 ) (10,038 )
 
Cumulative translation adjustment - - - 100 - 100
                         
 
Total comprehensive loss for the period - - - 100 (10,038 ) (9,938 )
 
Common shares, net of share issuance costs 9,470 - - - - 9,470
 
Share based compensation     -     -       298     -       -       298  
Balance as at June 30, 2014   $ 129,211   $ 1,040     $ 8,285   $ (1,540 )   $ (123,592 )   $ 13,404  
 
Balance, January 1, 2015 $ 149,766 $ 1,040 $ 8,690 $ (6,836 ) $ (136,199 ) $ 16,461
 
Net loss for the period - - - - (1,665 ) (1,665 )
 
Cumulative translation adjustment - - - (4,531 ) - (4,531 )
                         
 
Total comprehensive loss for the period - - - (4,531 ) (1,665 ) (6,196 )
 
Warrant expiry, net of tax (1,003 ) 892 - - (111 )
 
Share based compensation     -     -       291     -       -       291  
Balance as at June 30, 2015   $ 149,766   $ 37     $ 9,873   $ (11,367 )   $ (137,864 )   $ 10,445  
TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
UNAUDITED
(expressed in thousands of U.S. Dollars)
       
2015 2014
 
CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES
Net loss for the period $ (1,665 ) $ (10,038 )
Items not requiring an outlay of cash:
Adjustment for foreign exchange gain 73 223
Deferred licensing revenue (1,207 ) -
Derivative adjustment to product sales (9 ) -
Amortization of intangible assets 947 148
Depreciation of property and equipment 287 1,078
Interest on long-term debt and other financing costs 1,909 356
Change in fair value of derivative financial instruments (100 ) 28
Share based compensation 291 298
(Gain)/loss on disposal of property and equipment (2 ) 45
Recovery of deferred income tax (111 ) -
Net changes in non-cash working capital items related to operating activities:
Trade and other receivables (312 ) -
Inventory (294 ) (815 )
Prepaids and other assets (130 ) (117 )
Accounts payable and accrued liabilities (1,478 ) (4,580 )
Deferred lease inducement 484 -
Deferred revenue and customer deposits   (356 )   -  
  (1,673 )   (13,374 )
 
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares, net of financing costs - 9,470
Financing costs, long-term debt - (71 )
Payment of long-term debt obligations - (1,500 )
Interest and financing fees paid   (1,553 )   (180 )
  (1,553 )   7,719  
 
CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES
Acquisition of property and equipment, net of deposits (224 ) (59 )
Proceeds from sale of property and equipment   73     -  
  (151 )   (59 )
 
 
NET DECREASE IN CASH FOR THE PERIOD (3,377 ) (5,714 )
 
Exchange loss on cash (2,111 ) (107 )
 
CASH BEGINNING OF PERIOD   31,017     18,111  
 
CASH END OF PERIOD $ 25,529   $ 12,290  

Contacts

Trimel Pharmaceuticals
Tiana DiMichele, 416-679-0822
tdimichele@trimelpharmaceuticals.com

Contacts

Trimel Pharmaceuticals
Tiana DiMichele, 416-679-0822
tdimichele@trimelpharmaceuticals.com