CTX Crescita Therapeutics Inc

Record Annual Revenue of $23.5M, Up 40% Over F2021

F2022 Adjusted EBITDA1 of $2.2M, Up 138% Over F2021

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 fourth quarter and fiscal year ended December 31, 2022 (“Q4-F2022” and “F2022”). All amounts presented are in thousands of Canadian dollars (“CAD”) unless otherwise noted.

Financial Highlights

Q4-F2022 vs. Q4-F2021

• Revenue was $6,030 compared to $7,562, down $1,532;
• Gross profit was $3,885 compared to $4,651, down $766;
• Operating expenses were $3,313 compared to $3,536, down $223;
• Adjusted EBITDA1 was $997 compared to $1,585, down $588;

F2022 vs. F2021

• Revenue was $23,525 compared to $16,769, up $6,756;
• Gross profit was $13,182 compared to $10,014, up $3,168;
• Operating expenses were $12,653 compared to $10,733, up $1,920;
• Adjusted EBITDA1 was $2,221 compared to $932, up $1,289;
• Ending cash of $8,238 compared to $11,331, down $3,093.

“We continued to generate topline growth in 2022, closing with a strong fourth quarter and record revenue of $23.5 million for the year,” commented Serge Verreault, President and CEO of Crescita. “This growth was achieved solely from operations without the benefit of one-time royalty milestones which historically tend to be significant, but unpredictable from a timing point of view.

Our Manufacturing segment generated $13.7 million in 2022, a 2.6-fold increase over 2021, as we supported our CMO clients’ geographic and channel expansions. Commercial Skincare also grew, posting a 7.4% improvement over the prior year, responding well to targeted investments and innovative product launches, while Licensing revenue was lower due to the lumpiness of upfront and milestone payments.

We are very excited about our recent launch of Art Filler® in the first quarter of 2023 which enhances our position as an emerging player in the growing Canadian medical aesthetics market,” concluded Mr. Verreault.

F2022 Corporate Developments and Subsequent Events

For the quarter and year ended December 31, 2022, and up to the date of this press release:

The Launch of ART FILLER®

• In Q1-F2023, we launched the ART FILLER injectables (the “Fillers”) in the Canadian medical aesthetic market through our new dedicated sales force. The ART FILLER collection is an exclusive range of dermal fillers made of hyaluronic acid (“HA”), designed to smooth out and fill in wrinkles, and create/restore the volumes and contours of the face. We distribute the Fillers under an exclusive Canadian distribution and promotion agreement with Laboratoires FILLMED. The Fillers were approved by Health Canada in Q2-F2022.

Repurchases under the Normal Course Issuer Bid (“NCIB”)

• In Q4-F2022 and for the year ended December 31, 2022, we repurchased 107,590 and 646,520 common shares through our NCIB ending December 16, 2022 at an average price of $0.66 and aggregate cash consideration of $72 for the quarter, and at an average price of $0.66 and aggregate cash consideration of $429 for the year.

Repayment of Convertible Debentures

• In Q2-F2022, we repaid in full our outstanding convertible debenture financing with Bloom Burton Healthcare Lending Trust and Bloom Burton Healthcare Lending Trust II (the “Debentures”), significantly reducing our third-party borrowings. The total amount paid of principal and accrued interest to maturity was $1,010.

The Launch of Obagi Medical®

• In Q2-F2022, we launched the Obagi Medical® product line in the Canadian skincare market. Obagi Cosmeceuticals LLC (“Obagi”) designs products promoting skin health, including the Obagi Medical line. Our sales force is now promoting and selling the product line to new and existing clients. Our agreement with Obagi gives us the exclusive rights to promote, distribute and sell its products in Canada.

Q4-F2022 and F2022 Financial Results

Note: The Management’s Discussion and Analysis (“MD&A”), the Consolidated Audited Financial Statements and accompanying notes for the fiscal year ended December 31, 2022 are available at www.crescitatherapeutics.com/investors and have been filed with SEDAR at www.sedar.com.

Summary Financial Results

In thousands of CAD, except per share data and number of shares

Quarter ended December 31,

Year ended December 31,

 

2022

 

2021

 

2022

 

2021

 

$

$

$

$

Commercial Skincare

 

2,422

 

 

2,270

 

 

8,022

 

 

7,469

 

Licensing and Royalties

 

1,481

 

 

2,367

 

 

1,800

 

 

3,967

 

Manufacturing and Services

 

2,127

 

 

2,925

 

 

13,703

 

 

5,333

 

Revenues

 

6,030

 

 

7,562

 

 

23,525

 

 

16,769

 

Cost of goods sold

 

2,145

 

 

2,911

 

 

10,343

 

 

6,755

 

Gross profit

 

3,885

 

 

4,651

 

 

13,182

 

 

10,014

 

Gross margin (%)

 

64.4

%

 

61.5

%

 

56.0

%

 

59.7

%

Research and development

 

160

 

 

171

 

 

609

 

 

634

 

Selling, general and administrative (“SG&A”)

 

2,776

 

 

3,018

 

 

10,573

 

 

8,720

 

Depreciation and amortization

 

377

 

 

347

 

 

1,471

 

 

1,379

 

Total operating expenses

 

3,313

 

 

3,536

 

 

12,653

 

 

10,733

 

Operating profit (loss)

 

572

 

 

1,115

 

 

529

 

 

(719

)

Interest (income) expense, net

 

(68

)

 

14

 

 

(102

)

 

54

 

Foreign exchange (gain) loss

 

(131

)

 

70

 

 

51

 

 

244

 

Share of (profit) loss of an associate

 

27

 

 

(8

)

 

57

 

 

(8

)

Net loss on convertible note measured at

fair value through profit or loss

 

24

 

 

-

 

 

119

 

 

-

 

Income (loss) before income taxes

 

720

 

 

1,039

 

 

404

 

 

(1,009

)

Deferred income tax (recovery) expense

 

(458

)

 

96

 

 

(458

)

 

96

 

Net income (loss)

 

1,178

 

 

943

 

 

862

 

 

(1,105

)

Adjusted EBITDA1

 

997

 

 

1,585

 

 

2,221

 

 

932

 

Earnings (loss) per share

Basic

Diluted

$

$

0.06

0.06

 

 

 

$

$

 

0.04

0.04

 

 

 

$

$

0.04

0.04

 

 

$

$

(0.05

(0.05

)

)

Weighted average number of common shares outstanding

 

Basic

Diluted

 

 

20,392,231

20,643,129

 

 

 

 

21,016,282

22,295,112

 

 

 

 

20,690,875

21,000,182

 

 

 

 

20,755,290

20,755,290

 

 

Selected Balance Sheet Information

 

 

 

 

Cash and cash equivalents, end of period

 

 

 

8,238

 

 

11,331

 

Selected Cash Flow Information

 

 

 

 

Cash used in operating activities

 

(2,215

)

 

(469

)

 

(1,020

)

 

(1,597

)

Cash used in investing activities

 

(74

)

 

(222

)

 

(290

)

 

(846

)

Cash used in financing activities

 

(221

)

 

(194

)

 

(1,846

)

 

(500

)

Revenue

We have three reportable segments: 1) Commercial Skincare (“Commercial”), which manufactures and sells branded non-prescription skincare products for the Canadian and international markets, and also commercializes Pliaglis®, NCTF®, and Obagi Medical 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 quarter ended December 31, 2022, total revenue was $6,030 compared to $7,562 for the comparable period of F2021, representing a decrease of $1,532. Our Licensing segment revenue decreased by $886, mainly due to an upfront of $932 (€650) recognized in Q4-F2021 in connection with our licensing agreement with Egis Pharmaceuticals PLC. During the same period, our Manufacturing segment revenue decreased by $798, mainly driven by the level and timing of orders from our clients year-over-year. Our Commercial Skincare segment posted an increase of $152, driven by higher export revenue in Asian markets and the ramp-up of the Obagi launch, partly offset by lower Alyria® sales.

For the year ended December 31, 2022, total revenue was $23,525, compared to $16,769 for the year ended December 31, 2021, representing an increase of $6,756. The most significant increase came from our Manufacturing segment in the amount of $8,370, reflecting the completion of the previously announced purchase orders totaling approximately $7,000 and additional production volumes awarded to us by new and existing clients. Our Commercial segment grew by $553 compared to F2021, reflecting higher product sales from our core brands across all channels, mainly driven by more promotions and the ramp-up of the NCTF and Obagi launches. These increases were partly offset by the $2,167 decrease in our Licensing segment, mainly due to $1,404 in upfront and milestone payments recognized under our various licensing agreements for Pliaglis in the rest-of-world (“ROW”), in F2021, and the timing of recognition of minimum guaranteed royalties under the Taro Agreement. Other than minimum guaranteed royalties, no royalties were recognized for Pliaglis in the U.S. during F2022 and F2021.

Gross Profit

For the quarter ended December 31, 2022, gross profit was $3,885, representing a gross margin of 64.4%, compared to $4,651 and 61.5%, respectively, for the quarter ended December 31, 2021. The decrease of $766 in gross profit was mainly driven by the decrease in full-margin licensing revenue, partly offset by cost efficiencies in the Manufacturing segment due to higher production volumes, while the increase in gross margin of 2.9% was mainly due to the benefit of higher production volumes and favourable product mix in the Manufacturing segment, partly offset by lower revenue and the end of government subsidies.

For the year ended December 31, 2022, gross profit was $13,182, representing a gross margin of 56.0%, compared to $10,014 and 59.7%, respectively, for the year ended December 31, 2021. The increase in gross profit of $3,168 was mainly due to revenue growth in our Commercial and Manufacturing segments, partly offset by the drop in high-margin licensing revenue year-over-year, and the end of our eligibility for government subsidies. The decrease in gross margin of 3.7% was mainly driven by the decrease in high-margin licensing revenue, the unfavourable revenue mix with higher Manufacturing segment revenue year-over-year, and to a lesser extent, the impact of higher promotions in the Commercial Skincare segment, offset in part by the benefit of higher manufacturing volumes.

Operating Expenses

For the quarter ended December 31, 2022, total operating expenses were $3,313 compared to $3,536 for the quarter ended December 31, 2021, representing a net decrease of $223. The decrease was primarily driven by lower SG&A expenses of $242, mainly reflecting lower investments in advertising and promotion and share-based compensation in the quarter.

For the year ended December 31, 2022, total operating expenses were $12,653 compared to $10,733 for the year ended December 31, 2021, representing a net increase of $1,920. The increase was mainly driven by higher headcount-related costs, in part to support higher manufacturing volumes, higher associated travel and entertainment expenses and higher depreciation and amortization charges of $92. Also contributing to the increase in SG&A was the end of our eligibility for CEWS, which amounted to $777 in F2021. These increases were partly offset by lower R&D spend of $25 and lower warehousing and distribution costs following the in-housing of the distribution function during the year.

Deferred Income Tax (Recovery) Expense

Deferred income tax recovery for the quarter and the year ended December 31, 2022 was $458, primarily in respect of Canadian non-capital loss carry forwards and deductible temporary differences between the asset carrying amounts used for accounting purposes and the amounts used for tax purposes. The recognition of the income tax recovery was supported by a high probability, based on management’s best estimate, that future taxable income against which to deduct the loss carry forwards and temporary differences will be available. Deferred income tax expense for the quarter and year ended December 31, 2021 was $96.

Cash and Cash Equivalents

Cash and cash equivalents were $8,238 at December 31 2022, reflecting a net decrease of $3,093, compared to 11,331 at December 31, 2021. Despite growth earnings year-over-year, the decrease mainly reflected the timing of non-cash working capital items that will be collected in the first half of fiscal 2023, the repayment of the Debentures, and the repurchase of shares under our NCIB.

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:

1. EBITDA is defined as earnings before interest, income taxes, depreciation of property, plant and equipment, and amortization of right-of-use asset and intangible assets.
2. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation of property, plant and equipment and amortization of right-of-use asset and intangible assets, share of (profit) losses of associates, fair value (gains) losses, 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

Quarter ended

December 31,

Year ended

December 31,

2022

2021

2022

2021

$

$

$

$

Net income (loss)

1,178

943

862

(1,105)

Adjust for:

 

 

 

 

Depreciation and amortization

377

347

1,471

1,379

Interest (income) expense, net

(68)

14

(102)

54

Deferred income tax (recovery) expense

(458)

96

(458)

96

EBITDA

1,029

1,400

1,773

424

Adjust for:

 

 

 

 

Share-based compensation

48

123

221

272

Foreign exchange (gain) loss

(131)

70

51

244

Share of (profit) loss of an associate

27

(8)

57

(8)

Net loss on convertible note measured at

fair value through profit or loss

24

-

119

-

Adjusted EBITDA

997

1,585

2,221

932

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 our latest Annual Information Form (“AIF”).

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 Information

This press release contains “forward-looking information” within the meaning of applicable securities laws. All information in this press release, other than statements of current and historical fact, represents forward-looking information and is qualified by this cautionary note. Often, but not always, forward-looking information can be identified by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”, “believe”, “aim”, “project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will” and similar references to future periods. Examples of forward-looking information include, but are not limited to, statements made in this press release under the heading “Financial Highlights”, and regarding the Company’s objectives, plans, goals, strategies, growth, performance, operating results, financial condition, business prospects, opportunities and industry trends, and similar statements concerning anticipated future events, results, circumstances, performance or expectations.

Forward-looking information is neither historical fact nor an assurance of future performance. Instead, it 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 information relates to the future, it is 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 forward-looking information. Therefore, you should not unduly rely on any forward-looking information. Important factors that could cause Crescita’s actual results and financial condition to differ materially from those indicated in forward-looking information include, among others:

• economic and market conditions including the uncertainty in the global economy created by the war in Ukraine;
• the impact of inflation and rising interest rates together with the threats of stagflation and recession;
• 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 contractual obligations;
• the impact of 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 or lack of market acceptance of the Company’s products;
• the impact of the COVID-19 pandemic and the response thereto of governments and consumers;
• developments and changes in applicable laws and regulations; and
• other risk factors described from time to time in the reports and disclosure documents filed by Crescita with Canadian securities regulatory agencies and commissions, including the sections entitled “Risk Factors” in the Company’s most recent annual MD&A and AIF.

As a result of the foregoing and other factors, no assurance can be given that future results, levels of activity or achievements indicated in any forward-looking information will actually be achieved. Any forward-looking information in this press release is based only on information currently available to management and speaks only as of the date on which it is provided. Except as required by applicable securities laws, Crescita undertakes no obligation to publicly update any forward-looking information, whether written or oral, that may be provided from time to time, whether as a result of new information, future developments or otherwise.

1Please refer to the Non-IFRS Financial Measures section of this press release.

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FOR MORE INFORMATION: Investor Relations Linda Kisa, CPA, CA Email: lkisa@crescitatx.com Source: Crescita Therapeutics