HLS Therapeutics Announces Second Quarter Fiscal 2021 Financial Results

·14 min read
  • Q2 2021 revenue of $14.9 million and Adjusted EBITDA of $6.6 million, up 19% and 36%, respectively, from Q2 2020

  • Generated strong Vascepa® prescription growth - amid persistent COVID-19 disruptions - achieving 4,100 patients and 1,050 prescribers at end of Q2, which are increases of 41% and 44%, respectively, from the end of Q1 2021

  • Vascepa revenue increased 42% sequentially from Q1 2021

  • Generated cash from operations of $8.9 million year-to-date compared to $1.1 million in the same period last year

TORONTO, Aug. 5, 2021 /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, 2021. All amounts are in thousands of United States ("U.S.") dollars unless otherwise stated.

Q2 FISCAL 2021 HIGHLIGHTS

  • Q2 2021 revenue was $14.9 million compared to $12.6 million in Q2 2020.

  • Q2 2021 Adjusted EBITDA was $6.6 million compared to $4.8 million in Q2 2020.

  • Q2 2021 net loss was ($2.2) million, or ($0.07) per common share, compared to net loss of ($6.5) million, or $(0.20) per common share, in Q2 2020.

  • Q2 2021 cash generated from operations was $1.7 million compared to cash used in operations of ($4.2) million in Q2 2020.

  • Cash and cash equivalents were $21.3 million at June 30, 2021 compared to $20.6 million at December 31, 2020.

  • Clozaril increased its leading market share as its patient count in Canada increased 3% annually.

"Q2 was another solid quarter financially despite the ongoing challenges posed by the COVID-19 pandemic," said Gilbert Godin, CEO of HLS. "Q2 reflects the emerging contribution from Vascepa. Vascepa is delivering strong growth in its key operational metrics, despite the headwinds imposed on the rollout by the pandemic, which has made physician access a challenge since its launch. This reinforces both our confidence in Vascepa and our conviction in its peak year sales estimate of $275-325 million. Clozaril also continues to deliver strong and reliable performance and our patient count for the product increased in Canada by 3% annually driving the growth of the market in the process."

"As the larger provinces began to open-up, we saw an uptick in activity and if June is any indication of what is to follow, we believe the second half of the year will be an exciting time for Vascepa. We have previously spoken of 2021 being the year of the inflection point for the product driven by five primary catalysts. Of these catalysts, we have achieved reimbursement coverage for more than 90% of privately covered lives in Canada and Vascepa has been added to the treatment guidelines by the Canadian Cardiovascular Society, Thrombosis Canada and more recently, the Heart & Stroke Foundation's Canadian Stroke Best Practices. With vaccination rates amongst the highest of any nation in the world, we are now seeing the market in Canada open-up as many of the strict COVID-19 restrictions are lifted and we continue to prepare for our salesforce expansion later this year. The fifth catalyst is to gain public market access for Vascepa in Canada. On this front, negotiations are in progress, and we continue to expect access to the public market within the typical 18–24-month window post-launch that is generally associated with products like Vascepa given the endorsement by leading national and international medical societies and the priority review from Health Canada."

DIVIDEND
On August 4, 2021, the Company's Board of Directors declared a dividend of C$0.05 per outstanding common share to be paid on December 15, 2021, to shareholders of record as of October 29, 2021.

These dividends paid on the Company's common shares are designated to be "eligible dividends" for purposes of section 89(1) of the Income Tax Act (Canada).

Q2 & YEAR-TO-DATE FISCAL 2021 FINANCIAL REVIEW
The Company's Management's Discussion and Analysis and Consolidated Financial Statements for the three-and six-month periods ended June 30, 2021 are available at the Company's website and at its profile at SEDAR.

Revenue
The following table provides revenue segmentation by revenue type for the three- and six-month periods ended June 30, 2021:


Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






Product sales





Canada

8,912

6,875

16,745

14,354

United States

3,861

3,932

7,796

8,079


12,773

10,807

24,541

22,433

Royalty revenue

2,172

1,798

4,718

4,062


14,945

12,605

29,259

26,495

Product Sales
Product sales grew by 18% in Q2 2021 and 9% for the 2021 year-to-date period. The increases reflect growth in sales of Vascepa, growth in Clozaril's patient count in Canada and the strengthening of the Canadian dollar. Reflecting the 44% increase in Vascepa prescribers and 41% increase in Vascepa patients from Q1 2021, Vascepa product sales in Q2 2021 increased 42% sequentially, despite the ongoing challenges from the COVID-19 pandemic during the period.

Royalty revenues
On September 30, 2020, the Company acquired a diversified portfolio of royalty interests on global sales of four different products. HLS recorded royalty revenues of $2.2 million in Q2 2021 and $4.7 million for the 2021 year-to-date period from this royalty portfolio.

Royalty revenues in the respective periods of the prior year were $1.8 million and $4.1 million and were based on sales of Absorica in the U.S. market. As intended from the outset of that agreement, HLS terminated its ownership of those marketing rights effective December 31, 2020.

Operating Expenses

Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






Cost of product sales

896

671

1,670

1,490

Selling and marketing

3,731

3,177

6,899

6,793

Medical, regulatory and patient support

1,501

1,699

2,834

2,945

General and administrative

2,256

2,244

4,627

4,384


8,384

7,791

16,030

15,612

Operating expenses in Q2 2021 were $8.4 million, an increase of 8% from Q2 2020, and for the 2021 year-to-date period were $16.0 million, an increase of 3% from the same period last year. Operating expenses increased year-over-year due primarily to higher cost of product sales related to the sale of Vascepa and the deployment of CSAN Pronto as well as higher sales and marketing expenses related to Vascepa, offset in part by lower medical, regulatory and patient support costs.

Adjusted EBITDA1

Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






Net loss for the period

(2,197)

(6,474)

(6,950)

(6,320)

Stock-based compensation

(409)

918

1,938

754

Amortization and depreciation

7,480

8,198

14,847

16,757

Acquisition and transaction costs

234

84

323

Finance and related costs, net

1,510

2,636

2,859

1,146

Income tax expense (recovery)

177

(698)

451

(1,777)

Adjusted EBITDA

6,561

4,814

13,229

10,883

Adjusted EBITDA in Q2 2021 was $6.6 million, an increase of 36% from Q2 2020, and for the 2021 year-to-date period was $13.2 million, an increase of 22% from the same period last year. The increases were due primarily to higher sales of Vascepa and higher royalty revenues from royalty interests, which were partially offset by the increase in Vascepa selling and marketing activities and the increase in cost of product sales related to higher sales volumes.

(1) See "Cautionary Note Regarding Non-IFRS Measures" section of this press release.

Net Loss
Net loss for Q2 2021 was ($2.2) million, or ($0.07) per share, compared to a net loss of ($6.5) million, or ($0.20) per share, in Q2 2020. Net loss for the 2021 year-to-date period was ($7.0) million, or ($0.22) per share, compared to a net loss of ($6.3) million, or ($0.20) per share, in the same period last year. Net loss improved in Q2 2021 due primarily to reduced stock compensation expense, reduced amortization following the termination of the Absorica agreement and higher revenues from Vascepa and royalty interests, offset, in part, by increased investment in sales and marketing for Vascepa.

Cash from Operations and Financial Position
Cash generated from operations was $1.7 million in Q2 2021, compared to cash used in operations of ($4.2) million in Q2 2020. For the 2021 year-to-date period, cash from operations is $8.9 million compared to $1.1 million in the same period last year. As at June 30, 2021, the Company had cash and cash equivalents of $21.3 million compared to $20.6 million at December 31, 2020.

HLS has a strong financial position with $21.3 million of cash and cash equivalents, a $35.0 million revolving facility that was undrawn at June 30, 2021, 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. In addition, in fiscal 2020, the Company filed a preliminary short-form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, other than Quebec, to raise up to C$250.0 million over a period of 25 months should an appropriate strategic opportunity emerge.

Q2 FISCAL 2021 CONFERENCE CALL
HLS will hold a conference call today at 8:30 am Eastern Time to discuss its Q2 2021 financial results. The call will be hosted by Mr. Gilbert Godin, Chief Executive Officer and Mr. Tim Hendrickson, Chief Financial Officer. To view the slides that accompany management's discussion, please use the webcast link.

CONFERENCE ID:

49535873

DATE:

Thursday, August 5, 2021

TIME:

8:30 a.m. Eastern Daylight Time

DIAL-IN NUMBER:

1-888-664-6392 or 416-764-8659

WEBCAST LINK:

https://produceredition.webcasts.com/starthere.jsp?ei=1479846&tp_key=5870717b9b

TAPED REPLAY:

1-888-390-0541 or 416-764-8677

REPLAY CODE:

535873

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) "acquisition and transaction costs", (iv) "finance and related 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.

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 17, 2021 and Management's Discussion and Analysis dated August 4, 2021, both of which have 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.

HLS THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Unaudited

[in thousands of U.S. dollars]



As at

As at


June 30, 2021

December 31, 2020




ASSETS



Current



Cash and cash equivalents

21,347

20,612

Accounts receivable

12,867

12,497

Inventories

10,063

10,630

Prepaid expenses and other current assets

3,010

2,172

Total current assets

47,287

45,911

Property, plant and equipment

1,172

1,384

Intangible assets

246,737

253,404

Restricted assets

2,034

Deferred income tax asset

908

1,173

Total assets

296,104

303,906







Current



Accounts payable and accrued liabilities

15,321

14,223

Provisions

4,123

4,516

Debt and other liabilities

14,078

16,358

Income taxes payable

112

545

Total current liabilities

33,634

35,642

Debt and other liabilities

92,640

99,015

Total liabilities

126,274

134,657




Shareholders' equity



Share capital

263,275

257,411

Contributed surplus

11,474

11,393

Accumulated other comprehensive income

6,200

2,020

Deficit

(111,119)

(101,575)

Total shareholders' equity

169,830

169,249

Total liabilities and shareholders' equity

296,104

303,906


HLS THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Unaudited

[in thousands of U.S. dollars, except per share amounts]



Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






Revenue

14,945

12,605

29,259

26,495






Expenses





Cost of product sales

896

671

1,670

1,490

Selling and marketing

3,731

3,177

6,899

6,793

Medical, regulatory and patient support

1,501

1,699

2,834

2,945

General and administrative

2,256

2,244

4,627

4,384

Stock-based compensation

(409)

918

1,938

754

Amortization and depreciation

7,480

8,198

14,847

16,757

Operating loss

(510)

(4,302)

(3,556)

(6,628)

Acquisition and transaction costs

234

84

323

Finance and related costs, net

1,510

2,636

2,859

1,146

Loss before income taxes

(2,020)

(7,172)

(6,499)

(8,097)

Income tax expense (recovery)

177

(698)

451

(1,777)

Net loss for the period

(2,197)

(6,474)

(6,950)

(6,320)




Net loss per share:



Basic and diluted

$(0.07)

$(0.20)

$(0.22)

$(0.20)

HLS THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

[in thousands of U.S. dollars]







Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






Net loss for the period

(2,197)

(6,474)

(6,950)

(6,320)






Item that may be reclassified subsequently to net loss





Unrealized foreign currency translation adjustment

2,737

6,306

4,180

(7,738)

Comprehensive income (loss) for the period

540

(168)

(2,770)

(14,058)

HLS THERAPEUTICS INC.

CONDENSED 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, 2020

257,411

11,393

2,020

(101,575)

169,249

Warrants exercised

2,963

(192)

2,771

Stock options exercised

2,901

(770)

2,131

Stock option expense

1,043

1,043

Net loss for the period

(6,950)

(6,950)

Dividends declared

(2,594)

(2,594)

Unrealized foreign currency






translation adjustment

4,180

4,180

Balance, June 30, 2021

263,275

11,474

6,200

(111,119)

169,830







Balance, December 31, 2019

248,687

11,517

(537)

(81,468)

178,199

Warrants exercised

7,544

(1,652)

5,892

Stock options exercised

52

(14)

38

Stock option expense

839

839

Net loss for the period

(6,320)

(6,320)

Dividends declared

(2,334)

(2,334)

Unrealized foreign currency






translation adjustment

(7,738)

(7,738)

Balance, June 30, 2020

256,283

10,690

(8,275)

(90,122)

168,576

HLS THERAPEUTICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

[in thousands of U.S. dollars]







Three months ended

June 30,

Six months ended

June 30,


2021

2020

2021

2020






OPERATING ACTIVITIES





Net loss for the period

(2,197)

(6,474)

(6,950)

(6,320)

Adjustments to reconcile net loss to cash provided by
operating activities





Stock-based compensation

(409)

918

1,938

754

Amortization and depreciation

7,480

8,198

14,847

16,757

Accreted interest

182

312

368

668

Fair value adjustment on financial assets and liabilities

(384)

1,372

(695)

(2,099)

Foreign exchange

176

Deferred income taxes

59

(927)

265

(2,338)

Net change in non-cash working capital balances related to
operations

(3,016)

(7,615)

(873)

(6,465)

Cash provided (used in) by operating activities

1,715

(4,216)

8,900

1,133






INVESTING ACTIVITIES





Additions to property, plant and equipment

(9)

(1)

(15)

(27)

Rights acquisitions

(2,500)

(1,825)

(3,820)

(8,400)

Other additions to intangible assets

(23)

(311)

(51)

(759)

Cash used in investing activities

(2,532)

(2,137)

(3,886)

(9,186)






FINANCING ACTIVITIES





Stock options exercised

1,724

24

2,131

38

Warrants exercised

915

920

1,590

Dividends paid

(1,310)

(1,169)

(2,577)

(2,310)

Repayment of senior secured term loan

(2,250)

(1,250)

(4,500)

(2,632)

Debt costs

(176)

(176)

Lease payments

(162)

(123)

(317)

(244)

Cash used in financing activities

(1,083)

(2,694)

(4,343)

(3,734)






Net increase (decrease) in cash and cash equivalents during





the period

(1,900)

(9,047)

671

(11,787)

Foreign currency translation

44

1,060

64

(1,629)

Cash and cash equivalents, beginning of period

23,203

41,649

20,612

47,078

Cash and cash equivalents, end of period

21,347

33,662

21,347

33,662

SOURCE HLS Therapeutics Inc.

Cision
Cision

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