TORONTO--(BUSINESS WIRE)--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.
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.
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|
|Licensing and other fees||-||607||607||-||1,207||1,207|
|Cost of sales||837||51||888||2,408||762||3,170|
|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”|
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.
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.
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,
For the six months ended
|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|
|Change in fair value of derivative||(243)||7||(100)||28|
|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|
(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.
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|
|(expressed in thousands of U.S. Dollars)|
|June 30,||December 31,|
|Trade and other receivables||2,046||1,807|
|Prepaids and other assets||250||107|
|Assets classified as held for sale||21||95|
|Property and equipment, net||2,424||1,940|
|Accounts payable and accrued liabilities||$||2,308||$||4,485|
|Current portion of long-term debt||2,399||-|
|Current portion of deferred revenue and customer deposits||7,084||7,434|
|Deferred lease inducement||484||-|
|Derivative financial instruments||1,174||1,375|
|Deferred revenue and customer deposits||21,206||22,419|
|Accumulated other comprehensive loss||(11,367||)||(6,836||)|
|TOTAL SHAREHOLDERS' EQUITY||10,445||16,461|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$||67,124||$||75,944|
|TRIMEL PHARMACEUTICALS CORPORATION|
|CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS|
|FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014|
|(expressed in thousands of U.S. Dollars, except per share and share data)|
For the three months ended
For the six months ended
|Licensing and other fees||607||-||1,207||-|
|Cost of sales||888||-||3,170||-|
|Research and development||716||4,139||1,511||6,849|
|Selling, general and administrative||1,690||1,531||3,040||2,806|
|Total operating expenses||3,294||5,670||7,721||9,655|
|FINANCE COSTS, NET|
|Interest on long-term debt and other financing costs||996||180||1,909||356|
|Foreign exchange (gain)/loss||351||1,632||(1,756||)||48|
|Change in fair value of derivative financial instruments||(243||)||7||(100||)||28|
|LOSS BEFORE INCOME TAXES||(1,627||)||(7,460||)||(1,755||)||(10,038||)|
|Basic and diluted weighted average shares outstanding||200,873,234||163,126,438||200,873,234||158,947,911|
|Basic and diluted net loss per common share||$||(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||)||$||(9,938||)|
|TRIMEL PHARMACEUTICALS CORPORATION|
|CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY|
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(expressed in thousands of U.S. Dollars)
|Share capital||Warrants||Contributed surplus||Accumulated other comprehensive income (loss)||Deficit||Total|
|Balance, January 1, 2014||$||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||)||$||10,445|
|TRIMEL PHARMACEUTICALS CORPORATION|
|CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS|
|FOR THE SIX MONTHS ENDED JUNE 30, 2015|
|(expressed in thousands of U.S. Dollars)|
|CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES|
|Net loss for the period||$||(1,665||)||$||(10,038||)|
|Items not requiring an outlay of cash:|
|Adjustment for foreign exchange gain||73||223|
|Deferred licensing revenue||(1,207||)||-|
|Derivative adjustment to product sales||(9||)||-|
|Amortization of intangible assets||947||148|
|Depreciation of property and equipment||287||1,078|
|Interest on long-term debt and other financing costs||1,909||356|
|Change in fair value of derivative financial instruments||(100||)||28|
|Share based compensation||291||298|
|(Gain)/loss on disposal of property and equipment||(2||)||45|
|Recovery of deferred income tax||(111||)||-|
|Net changes in non-cash working capital items related to operating activities:|
|Trade and other receivables||(312||)||-|
|Prepaids and other assets||(130||)||(117||)|
|Accounts payable and accrued liabilities||(1,478||)||(4,580||)|
|Deferred lease inducement||484||-|
|Deferred revenue and customer deposits||(356||)||-|
|CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES|
|Proceeds from issuance of common shares, net of financing costs||-||9,470|
|Financing costs, long-term debt||-||(71||)|
|Payment of long-term debt obligations||-||(1,500||)|
|Interest and financing fees paid||(1,553||)||(180||)|
|CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES|
|Acquisition of property and equipment, net of deposits||(224||)||(59||)|
|Proceeds from sale of property and equipment||73||-|
|NET DECREASE IN CASH FOR THE PERIOD||(3,377||)||(5,714||)|
|Exchange loss on cash||(2,111||)||(107||)|
|CASH BEGINNING OF PERIOD||31,017||18,111|
|CASH END OF PERIOD||$||25,529||$||12,290|