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Theratechnologies Inc
Symbol C : TH
Shares Issued 61,010,603
Close 2014-02-26 C$ 0.435
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Theratechnologies loses $4.05-million in fiscal 2013

2014-02-27 07:32 ET - News Release

Mr. Luc Tanguay reports

THERATECHNOLOGIES ANNOUNCES FINANCIAL RESULTS FOR FISCAL YEAR 2013

Theratechnologies Inc. has released its financial results for the year ended Nov. 30, 2013.

Fiscal 2013 highlights

  • Consolidated revenues of $7,553,000;
  • $3,299,000 in royalties;
  • Net loss decreased to $4,055,000 from $13.94-million in 2012;
  • $12,353,000 in liquidities at year-end.

"Decrease in royalties and revenue from sales of goods are a direct result of manufacturing issues and product shortage we experienced last year. Despite those unfortunate circumstances, other financial parameters were all going in the right direction with a net loss three times lower than the previous year, use of cash twice as low and cash on hands remaining at a sustainable level. Our overriding business strategy in 2013 was to focus on Egrifta in order to become cash flow neutral as soon as possible and these results show that we made solid progress," said Luc Tanguay, president and chief executive officer.

"Looking ahead, our biggest opportunity for value creation in 2014 lies in the U.S. market. After announcing that we will regain commercial rights for Egrifta in the U.S., we have started working on the implementation of our operational structure to commercialize Egrifta in the U.S. Of course, our priority will be to resolve recent supply issues in order to resume shipment to the U.S. as quickly as possible," added Mr. Tanguay.

Fiscal year 2013 financial results

The financial results presented in this press release are taken from the company's management's discussion and analysis, or MD&A, and audited consolidated financial statements for the 12-month period ended Nov. 30, 2013, which have been prepared in accordance with international financial reporting standards. The MD&A and audited consolidated financial statements can be found at the company's website and SEDAR. As used herein, Egrifta refers to tesamorelin for the reduction of excess abdominal fat in HIV-infected patients with lipodystrophy.

For the 12-month period ended Nov. 30, 2013:

Consolidated revenue for the year ended Nov. 30, 2013, amounted to $7,553,000 compared with $13,567,000 in 2012. The company's revenues in both years were mainly sales of Egrifta to EMD Serono for resale, royalties received from EMD Serono on U.S. sales to customers, and research services, which include milestone payments and the amortization of the initial payment received upon the closing of the agreement with EMD Serono.

Revenue generated from sale of goods amounted to $2,544,000 in the 12-month period ended Nov. 30, 2013, compared with $5,235,000 in fiscal 2012, reflecting lower shipments to EMD Serono and a lower selling price in fiscal 2013.

The lower level of shipments was largely due to reductions in EMD Serono's inventory as well as to the manufacturing problems encountered during the year. Having resumed shipments to EMD Serono early in the first quarter of fiscal 2014, future shipments are expected to track patient sales over the long term but they can vary significantly in the short term as a function of EMD Serono's procurement policies.

The lower selling price in 2013 was the result of the introduction of the new single-vial presentation of Egrifta in October, 2012. While the Egrifta selling price is now lower than in previous years, the company's markup in percentage terms remains unchanged.

Royalties, which are almost entirely derived from the sales of Egrifta, were $3,299,000 in fiscal 2013 compared with $4,255,000 in fiscal 2012. The royalties reported in fiscal 2012 are for the 14-month period from Oct. 1, 2011, to Nov. 30, 2012, as they include royalties actually received in the 12 months ended Sept. 30, 2012, as well as an amount of $699,000 based on management's estimate of the royalties earned on Egrifta sales in October and November, 2012. The supply shortages in the fourth quarter of fiscal 2013 also had a negative impact on royalties.

Revenue also includes the amortization of the initial payment of $27,097,000 received upon the closing of the EMD Serono agreement. For the 12-month period ended Nov. 30, 2013, $1.71-million was recognized as revenue related to the initial payment, compared with $4,077,000 in fiscal 2012. The amortization amounts are adjusted periodically to allow sufficient time for the development work required under the EMD Serono agreement that has yet to be completed. At Nov. 30, 2013, the remaining deferred revenue related to this transaction recorded on the consolidated statement of financial position amounted to $2,771,000.

For the 12 months ended Nov. 30, 2013, the cost of sales was $3,711,000 compared with $5,056,000 in fiscal 2012. The cost of sales is made up of cost of goods sold and unallocated production costs. The cost of goods sold component in 2013 amounted to $2,262,000 compared with $4,711,000 in the prior year, reflecting lower sale of goods in fiscal 2013 as described above. Unallocated production costs were $1,449,000 in fiscal 2013 compared with $345,000 in the prior year due largely to inventory writedowns and other costs associated with the manufacturing problems experienced in 2013.

R&D expenses, net of tax credits, amounted to $7,371,000 in the 12 months ended Nov. 30, 2013, compared with $6,341,000 in fiscal 2012. R&D expenses include the company's share of expenses for the two phase 4 clinical trials currently being conducted by EMD Serono. The company is responsible for all of the costs associated with the diabetic retinopathy study, which amounted to $3,005,000 in fiscal 2013 compared with $1,502,000 in the prior year. The company's 50-per-cent share of the long-term safety study was $654,000 in fiscal 2013 compared with $117,000 in the prior year. R&D expenses in 2013 also included costs associated with the company's project aimed at improving the manufacturing process for Egrifta, while those of 2012 included the development costs of TH1173 and a new formulation of Egrifta. The remaining R&D expenses in both years are mainly costs associated with helping the company's commercial partners to pursue regulatory approvals in their respective jurisdictions.

Selling and market development expenses amounted to $250,000 for the 12 months ended Nov. 30, 2013, compared with $852,000 in fiscal 2012, reflecting cost savings from restructuring initiatives in fiscal 2012.

General and administrative expenses amounted to $3,815,000 in the 12 months ended Nov. 30, 2013, compared with $5,462,000 in fiscal 2012. The expenses in 2013 were lower largely as a result of the restructuring initiatives in 2012.

In fiscal 2013, the company recovered previously expensed restructuring costs in the amount of $3,111,000. This was largely as a result of the lease amendment agreement entered into in April, 2013, which eliminated the remaining $3,133,000 of an onerous lease provision. The onerous lease provision was originally established in the amount of $4,055,000 as part of the 2012 restructuring initiatives and was the principal element of the $6,176,000 in restructuring costs incurred in the first nine months of that year.

Taking into account the revenue and expense variations described above, the company recorded a net loss of $4,055,000 or seven cents per share in the 12 months ended Nov. 30, 2013, compared with a net loss of $13.94-million or 23 cents per share in fiscal 2012

The company's objective in managing capital is to ensure a sufficient liquidity position to finance its business activities. For the 12 months ended Nov. 30, 2013, the use of cash in operating activities was $7,744,000 compared with $15,634,000 in fiscal 2012.

As at Nov. 30, 2013, cash and bonds, and tax credits and grants receivable amounted to $12,353,000 compared with a liquidity position of $20,924,000 ($20,503,000 in cash and bonds, and tax credits and grants receivable of $421,000) at the end of fiscal 2012.

Fourth quarter 2013 financial results

Consolidated revenue for the three months ended Nov. 30, 2013, amounted to $1,246,000 compared with $3,899,000 for the comparable period of 2012.

Revenue generated from the sale of goods for the three months ended Nov. 30, 2013, was $311,000 compared with $1,375,000 in the comparable period in fiscal 2012. The decline reflects lower shipments to EMD Serono linked to the manufacturing problems encountered in fiscal 2013.

Royalties were $615,000 in the three months ended Nov. 30, 2013, compared with $1,656,000 in the comparable period of fiscal 2012. The royalties reported for the fourth quarter of fiscal 2012 included royalties received in the three months ended Sept. 30, 2012, as well as an amount of $699,000 based on management's estimate of the royalties earned on Egrifta sales in October and November, 2012. The supply shortage in the fourth quarter of fiscal 2013 had a negative impact on royalties in that year.

Revenue related to the amortization of the initial payment received upon the closing of the EMD Serono agreement was $320,000 for the three-month period ended Nov. 30, 2013, compared with $868,000 in the comparable period of fiscal 2012. The amortization amounts are adjusted periodically to allow sufficient time for the development work required under the EMD Serono agreement that has yet to be completed.

The cost of sales for the three months ended Nov. 30, 2013, was $1,155,000 compared with $1,323,000 in the comparable period of fiscal 2012. The cost of sales is made up of cost of goods sold and unallocated production costs. The cost of goods sold component for the three months ended Nov. 30, 2013, was $322,000 compared with $1,288,000 in the comparable period of fiscal 2012, reflecting lower sale of goods in 2013 as described above. Unallocated production costs were $833,000 in the three months ended Nov. 30, 2013, compared with $35,000 in the prior-year period, mainly due to inventory writedowns and other costs associated with the manufacturing problems experienced during the period.

R&D expenses, net of tax credits, amounted to $1,547,000 in the three months ended Nov. 30, 2013, compared with $1,894,000 in the comparable period of fiscal 2012. R&D expenses include the company's share of expenses for the two phase 4 clinical trials currently being conducted by EMD Serono. The company is responsible for all of the costs associated with the diabetic retinopathy study, which amounted to $893,000 in the three months ended Nov. 30, 2013, compared with $404,000 in the comparable period of 2012. The company's 50-per-cent share of the long-term safety study was $133,000 in the fourth quarter of fiscal 2013 compared with $82,000 in the prior-year period.

Selling and market development expenses amounted to $60,000 for the three months ended Nov. 30, 2013, compared with $116,000 for the comparable period of fiscal 2012, reflecting cost savings from restructuring initiatives in fiscal 2012.

General and administrative expenses amounted to $1,201,000 in the three months ended Nov. 30, 2013, compared with $556,000 in the comparable period of fiscal 2012. The 2013 expenses include costs associated with the EMD Serono termination agreement. The expenses in 2012 were lower as a result of the suspension of executive bonuses in that year.

There was a recovery of previously expensed restructuring costs amounting to $18,000 in the three months ended Nov. 30, 2013. The restructuring costs in the comparable period of fiscal 2012 were $4,526,000, which resulted from restructuring activities at that time.

Taking into account the revenue and expense variations described above, the company's recorded a net loss of $2,598,000 or four cents per share in the three months ended Nov. 30, 2013, compared with a net loss of $4,341,000 or seven cents per share in the comparable period of fiscal 2012.

In the three months ended Nov. 30, 2013, the use of cash in operating activities amounted to $1,404,000 compared with $3,756,000 in the comparable period of fiscal 2012.

Conference call details

A conference call will be held today at 8:30 a.m. Eastern Time to discuss the results. The call will be hosted by Luc Tanguay, president and chief executive officer. The conference call is open to questions from financial analysts. Media and other interested individuals are invited to participate in the call on a listen-only basis.

The conference call can be accessed by dialling 1-800-755-1805 (North America) or 1-416-981-9000 (international). The conference call will also be accessible via webcast. Audio replay of the conference call will be available until March 6, 2014, by dialling 1-800-558-5253 (North America) or 1-416-626-4100 (international) and by entering the playback code 21708367.

We seek Safe Harbor.

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