Mr. Serge Verreault reports

CRESCITA REPORTS Q4 AND FISCAL 2023 RESULTS

Crescita Therapeutics Inc. has released its financial results for the fourth quarter and fiscal year ended Dec. 31, 2023 (Q4 2023 and FY 2023). All amounts presented are in thousands of Canadian dollars unless otherwise noted, and in accordance with international financial reporting standards (IFRS) as issued by the International Accounting Standards Board.

Financial highlights

Q4 2023 versus Q4 2022:

• Revenue was $4,725 compared with $6,030, down $1,305;
• Gross profit was $3,060 compared with $3,885, down $825;
• Operating expenses were $3,173 compared with $3,313, down $140;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $245 compared with $997, down $752.

FY 2023 versus FY 2022:

• Revenue was $17,522 compared with $23,525, down $6,003;
• Gross profit was $10,364 compared with $13,182, down $2,818;
• Operating expenses were $12,320 compared with $12,653, down $333;
• Adjusted EBITDA was negative $368 compared with $2,221, down $2,589;
• Ending cash of $9,385 compared with $8,238, up $1,147.

Commenting on the company's results for the fourth quarter and full year 2023, Serge Verreault, Crescita's president and chief executive officer, said:

"Two thousand twenty-three was a challenging year for Crescita, marked by headwinds in our manufacturing segment. We recorded a 26-per-cent decrease in total revenue versus 2022, mainly due to a reduction in production volumes for one key customer. We are in active discussions to secure new manufacturing business and to diversify our customer base. On the licensing front, we are seeking a new U.S. partner for Pliaglis in this important market. We are also expecting existing partners to launch Pliaglis in several European and Middle Eastern countries in 2024.

"Our skin care business grew 30 per cent over 2022 and outperformed the 6-per-cent projected beauty industry growth rate. Twelve months postlaunch, Art Filler is gaining traction in the Canadian physician-dispensed market, as we open new accounts and observe repeat orders.

"We are enthusiastic about our growing aesthetic market portfolio and the overall prospects for our business segments. We have a strong cash position, which allows us to continue investing strategically in people, marketing and product innovation. M&A [mergers and acquisitions] continues to be a key part of our strategy as we pursue opportunities in what we believe are conducive market conditions."

Operational and corporate developments:

• Termination of agreement with Taro Pharmaceuticals Inc.:
  • On Oct. 25, 2023, Taro Pharmaceuticals delivered a notice to terminate the development and commercialization licence agreement for Pliaglis in the United States market. The company's final entitlement to the annual guaranteed minimum royalties in the amount of $1-million (U.S.) was recognized in Q4 2023, with payment expected in Q2 2024. Crescita is in the process of seeking a new partner to commercialize Pliaglis in the U.S. market.
• Update on manufacturing segment:
  • Certain manufacturing orders initially scheduled to be delivered in the second half of fiscal 2023 were, in part, deferred to 2024, and some cancelled, contributing to a material decrease in Crescita's manufacturing segment revenue for Q4 2023 and fiscal 2023, compared with the same periods of 2022. While the company's customer is reassessing commercial options for its products in key markets, Crescita continues to have discussions regarding manufacturing opportunities to support its growth plans going forward.
• Normal course issuer bid:
  • In Q3 2023, the Toronto Stock Exchange approved the company's proposed normal course issuer bid (NCIB) to purchase up to a maximum of 1,821,616 common shares for cancellation. The NCIB commenced on Aug. 31, 2023, and is expected to terminate on Aug. 30, 2024, or such earlier date as the company completes its purchases pursuant to the NCIB, or provides notice of termination. The company has also entered into an automatic securities purchase plan in connection with its NCIB. During fiscal 2023, 719,203 common shares were repurchased for cancellation, at an average price of 55 cents per share for total cash consideration of $393.
• Relaunch of Alyria as a direct-to-consumer brand:
  • In Q1 2023, following rebranding and various product reformulations, Crescita relaunched Alyria as a direct-to-consumer medical-grade dermocosmetic brand in the Canadian skin care market. Alyria is primarily targeted at millennials and marketed and sold on-line in Canada through Amazon and at alyriaskincare.com. In Q2 2023, Alyria was also launched in retail outlets of Familiprix, a Quebec-based chain of independently owned pharmacies. The relaunch of Alyria strengthens the company's omnichannel expansion and provides the opportunity to engage with a new consumer group.
• Launch of Art Filler:
  • In Q1 2023, Crescita launched Art Filler, an exclusive collection of hyaluronic-acid-based dermal fillers in the Canadian medical aesthetic market through the company's new dedicated sales force. Art Filler is designed to smooth and fill in wrinkles, and create or restore the volumes and contours of the face. Crescita is the exclusive Canadian distributor of Art Filler and NCTF Boost 135 HA under its distribution and promotion agreement with Laboratoires Fillmed.

Q4 2023 and FY 2023 summary financial results

Note: Select financial information is outlined herein and should be read in conjunction with Crescita's consolidated audited financial statements, and related management's discussion and analysis (MD&A) for the fiscal year ended Dec. 31, 2023, which are available on SEDAR+ and on Crescita's website.

Revenue

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

For the quarter ended Dec. 31, 2023, total revenue was $4,725 compared with $6,030 for the quarter ended Dec. 31, 2022. The year-over-year decrease of $1,305 was driven by the revenue shortfall in the company's manufacturing segment of $1,800, as a result of the deferral by a large customer of purchase orders into fiscal 2024 and, to a lesser extent, by the difference in the level and timing of orders year-over-year, partly offset by an increase of $429 in Crescita's skin care segment, mainly due to incremental sales of Art Filler launched in Q1 2023, and higher on-line sales from the company's core brands.

For the year ended Dec. 31, 2023, total revenue was $17,522, compared with $23,525 for the year ended Dec. 31, 2022, representing a net decrease of $6,003. Manufacturing segment revenue decreased by $8,651, mainly due to the deferral into 2024 and partial cancellation of purchase orders by a large customer, as well as the difference in the timing and value of orders versus the prior year. This decrease was partly offset by an increase of $2,418 in the company's skin care segment, mainly driven by higher product sales from Crescita's core brands across all channels, as a result of launches and promotions, including the launch of Art Filler.

Gross profit and gross margin

For the quarter ended Dec. 31, 2023, gross profit was $3,060, representing a gross margin of 64.8 per cent, compared with $3,885 and 64.4 per cent, respectively, for the quarter ended Dec. 31, 2022. The net decrease of $825 in gross profit was mainly due to lower manufacturing segment revenue.

For the year ended Dec. 31, 2023, gross profit was $10,364, representing a gross margin of 59.1 per cent, compared with $13,182 and 56 per cent, respectively, for the year ended Dec. 31, 2022. The net decrease in gross profit of $2,818 was mainly due to lower manufacturing segment revenue. The increase in gross margin of 3.1 per cent was mainly driven by favourable product and channel mix.

Operating expenses

For the quarter and year ended Dec. 31, 2023, total operating expenses were $3,173 and $12,320, compared with $3,313 and $12,653 for the quarter and year ended Dec. 31, 2022. The net decreases of $140 for the quarter and $333 for the year, were driven by lower SG&A (selling, general and administrative) expenses, mainly reflecting lower headcount-related and share-based compensation expenses, partly offset by higher advertising and promotion, and R&D (research and development) spend.

Cash and cash equivalents

Cash and cash equivalents were $9,385 at Dec. 31, 2023, reflecting a net increase of $1,147, compared with $8,238 at Dec. 31, 2022. Despite lower earnings year-over-year, the increase mainly resulted from the favourable movement in non-cash working capital items and the non-recurring $1,000 repayment of convertible debentures in FY 2022.

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 latest annual information form (AIF), all of which can be found on the company's profile on SEDAR+.

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 skincare 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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