Mr. Serge Verreault reports

CRESCITA REPORTS SECOND QUARTER 2023 RESULTS

Crescita Therapeutics Inc. has released its financial results for the second quarter ended June 30, 2023 (Q2 2023). All amounts presented are in thousands of Canadian dollars unless otherwise noted.

Financial highlights

Q2 2023 versus Q2 2022:

• Revenue was $5,162 compared with $6,512, down $1,350;
• Gross profit was $3,069 compared with $3,647, down $578;
• Operating expenses were $3,295 compared with $3,447, down $152;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $214 compared with $646, down $432;
• Ending cash was $10,226, down $49 for the quarter.

"We are pleased that our targeted investments in the commercial skin care segment continue to yield higher demand for our products and have resulted in the highest quarterly revenue to date," commented Serge Verreault, president and chief executive officer of Crescita. "The decrease in manufacturing revenue year-over-year was mainly from the fulfilment of large orders related to a new product launch by a major customer in 2022. Manufacturing segment revenue can vary significantly due to the quantity and timing of orders fulfilled in any quarter," added Mr. Verreault. "Our team is working toward expanding and diversifying our CDMO customer base to reduce this volatility and is also actively evaluating accretive product and business acquisitions that are a strategic fit for our business."

Q2 2023 corporate developments

Update on manufacturing segment:

• Certain manufacturing orders previously scheduled to be delivered in the second half of fiscal 2023 are now expected to be delivered in fiscal 2024, and as a result, segment revenue is expected to be materially lower in the second half of 2023, versus the comparable periods of 2022.

Relaunch of Alyria as a direct-to-consumer brand:

• The company relaunched Alyria as a direct-to-consumer medical-grade dermocosmetic brand in the Canadian skin care market in Q1 2023, following a complete rebranding and various product reformulations. In Q2 2023, the brand was launched in retail outlets of Familiprix, a Quebec-based chain of independently owned pharmacies. Alyria is primarily targeted at Millennials and also marketed and sold on-line in Canada through Amazon and the Alyria website. The relaunch of Alyria strengthens the company's omnichannel expansion and provides the opportunity to engage with a new consumer group.

The launch of Art Filler:

• Crescita launched the Art Filler injectables in the Canadian medical aesthetic market through its new dedicated sales force. Art Filler is an exclusive collection of dermal fillers made of hyaluronic acid (HA), designed to smooth and fill in wrinkles, and create or restore the volumes and contours of the face. The company distributes the fillers under an exclusive Canadian distribution and promotion agreement with Laboratoires Fillmed.

Q2 fiscal 2023 summary financial results

Note: Select financial information is outlined below and should be read in conjunction with Crescita's condensed consolidated interim financial statements and related management's discussion and analysis (MD&A) as at and for the three and six months ended June 30, 2023, which are available on SEDAR+ and on Crescita's website.

Revenue

Crescita has three reportable segments: 1) commercial skin care, which manufactures and sells the company's branded non-prescription skin care products for the Canadian and international markets, and also commercializes Pliaglis, NCTF, Art Filler and Obagi Medical in Canada; 2) licensing and royalties, which primarily generates revenue from licensing the company's intellectual property related to Pliaglis or its transdermal delivery technologies; and 3) manufacturing and services, which generates revenue from contract manufacturing and product development services.

For the three and six months ended June 30, 2023, total revenue was $5,162 and $9,764 compared with $6,512 and $11,463 for the three and six months ended June 30, 2022. The net year-over-year decreases of $1,350 and $1,699, were mainly from the manufacturing segment, resulting from the partial fulfilment and completion of a previously announced purchase order of approximately $7-million in 2022. The purchase order, related to the customer's expansion in new key markets, represented an initial order to adequately supply distribution channels and may not be reflective of future orders. During the same period, Crescita also experienced continued growth in commercial skin care from branded product sales across all channels, mainly driven by new product launches and promotions, including the launch of Alyria in select retail outlets in the province of Quebec.

Licensing revenue was $299 and $320 for the three and six months ended June 30, 2023, compared with $227 for the comparable three and six months of 2022, reflecting royalties above the annual contractual minimum royalties under the Cantabria agreement. The results for the quarter and year-to-date periods of 2023 also included a regulatory milestone under the company's licensing agreement with Croma Pharma GmbH.

Gross profit

For the three months ended June 30, 2023, gross profit was $3,069, representing a gross margin of 59.5 per cent, compared with $3,647 and 56 per cent, respectively, for the three months ended June 30, 2022. The net decrease in gross profit of $578 was mainly due to lower overall revenue year-over-year, primarily in the manufacturing segment, while the gross margin increase of 3.5 per cent was mainly the result of favourable product and channel mix, as well as, to a lesser extent, the favourable impact of cost savings.

For the six months ended June 30, 2023, gross profit was $5,805, representing a gross margin of 59.5 per cent, compared with $6,359 and 55.5 per cent, respectively, for the six months ended June 30, 2022. The net decrease in gross profit of $554 and the increase in gross margin of 4 per cent were mainly due to the same factors as for the quarter.

Operating expenses

For the three and six months ended June 30, 2023, total operating expenses were $3,295 and $6,267 compared with $3,447 and $6,535, respectively, for the three and six months ended June 30, 2022. Both the quarterly and year-to-date net decreases of $152 and $268 were mainly due to lower selling, general and administrative expenses as a result of lower head count-related expenses, share-based compensation and outsourcing expenses year-over-year.

Cash and cash equivalents

Cash and cash equivalents were $10,226 at June 30, 2023, reflecting a slight decrease of $49 for the quarter.

About Crescita Therapeutics Inc.

Crescita is a growth-oriented, innovation-driven Canadian commercial dermatology company with in-house research and development and manufacturing capabilities. The company offers a portfolio of high-quality, science-based non-prescription skin care products and early- to commercial-stage prescription products. It also owns multiple proprietary transdermal delivery platforms that support the development of patented formulations to facilitate the delivery of active ingredients into or through the skin.

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