Mr. Craig Millian reports

HLS THERAPEUTICS ANNOUNCES Q1 FISCAL 2023 FINANCIAL RESULTS

HLS Therapeutics Inc. has released its financial results for the three-month period ended March 31, 2023. All amounts are in thousands of United States dollars unless otherwise stated.

Key highlights

• Appointed Craig Millian as chief executive officer of the company.
• The board of directors cancelled the company's dividend policy to focus on share buybacks through the company's normal course issuer bid (NCIB) as the preferred method for returning capital to shareholders.
• Q1 2023 revenue was $14.8-million and adjusted EBITDA was $5.1-million, compared with $14.6-million and $6.3-million, respectively, in Q1 2022

"Q1 results reflect the steady revenue and cash flow contribution from Clozaril and the royalty portfolio, as well as the continued growth of Vascepa," said Craig Millian, chief executive officer of HLS. "On a constant currency basis, product sales in Canada were up 12 per cent in Q1, led by Vascepa, which grew 43 per cent.

"Having just started as CEO on May 1, I have already had an opportunity to meet with many of my HLS colleagues and have been impressed by their passion and commitment along with the potential of our product portfolio. My near-term goals are to accelerate the growth of Vascepa, maintain the durability of our CNS business and focus on resource optimization and efficiency."

Mr. Millian added: "After careful consideration, the board has decided to cancel the company's dividend policy. HLS is a growth-oriented company, and this decision was made in the context of our capital allocation strategy and the desire to, among other things, return capital to shareholders via stock buybacks at a time when we believe that the share price does not reflect the underlying value of our business."

The final dividend will be paid on June 15, 2023, to shareholders of record on April 28, 2023, as was previously announced in the company's March 16, 2023, press release.

Vascepa 2023 outlook

The company expects revenue growth for Vascepa to increase over the course of the year. The positive impact from strong prescription growth in Q1 2023 was partly offset by the payer mix being more weighted to public plans than was expected. As a result of the near-term impact of this payer mix, HLS is now guiding to the low end of its previously issued $22-million (Canadian) to $28-million (Canadian) revenue range for Vascepa in 2023.

Q1 2023 financial and operational highlights

• Clozaril net revenue in Canada in Q1 2023 was $8.4-million (Canadian), up 3 per cent from Q1 2022, which was just ahead of the patient growth rate.
• Q1 2023 Vascepa net revenue was $3.5-million (Canadian), up 43 per cent compared with $2.5-million (Canadian) in Q1 2022.
• Vascepa total prescriptions in Q1 2023 grew 94 per cent year over year.
• Vascepa total prescriptions written by general practitioners grew 114 per cent year over year and general practitioners now account for half of all new prescriptions written.
• More than 3,700 physicians have prescribed Vascepa, up 85 per cent year over year.

Q1 fiscal 2023 financial review

The company's management's discussion and analysis and consolidated financial statements for the three-month period ended March 31, 2023, are available at the company's website and at its profile at SEDAR.

Product sales

Q1 2023 revenue increased 1 per cent compared with Q1 2022. Q1 2023 revenue increased 5 per cent in constant currency terms, compared with Q1 2022, as the decline in the Canadian dollar had an impact on the reported values, which are in United States dollars. Q1 2023 product sales in Canada increased 5 per cent compared with Q1 2022. Q1 2023 product sales in Canada grew 12 per cent in constant currency, compared with Q1 2022, led by increased sales of Vascepa, which grew 43 per cent in Q1 2023 in constant currency compared with Q1 2022. The Vascepa net revenue growth rate trails the growth rate in prescriptions as net pricing adjusts to increased public sector volume.

In Canada, Clozaril continues to be the leading medication for treatment-resistant schizophrenia with a growing number of patients and a growing market share. Revenue declined 4 per cent in Q1 2023, compared with Q1 2022, due to the weaker Canadian dollar during the period. On a constant currency basis, revenue in Q1 2023 increased 3 per cent compared with Q1 2022.

In the U.S., Q1 2023 Clozaril net sales decreased 7 per cent compared with Q1 2022. An increase in units sold and a price increase implemented mid-year 2022 resulted in higher gross revenues for Clozaril in the U.S. in Q1 2023, however, this was more than offset by larger one-time benefits realized in Q1 2022 related to expired product returns.

Royalty revenues

Representing a steady contribution to adjusted EBITDA and cash flows, royalty revenues were $2.7-million in Q1 2023, which was a 1-per-cent increase from Q1 2022.

Q1 2023 operating expenses increased 17 per cent compared with Q1 2022, which was driven by a 52-per-cent increase in cost of sales due to the growth in shipments and sales of Vascepa, and a 26-per-cent increase in selling and marketing costs for Vascepa. Support costs and strong gross margins remain stable across the company's key Clozaril franchises in Canada and the United States.

Q1 2023 adjusted EBITDA was $5.1-million compared with $6.3-million in Q1 2022. The decrease is due primarily to increased selling and marketing expenses and increased cost of product sales related to the growth in sales of Vascepa. Clozaril and royalty revenues continue to generate strong adjusted EBITDA and cash flow for the business.

Net loss

Net loss for Q1 2023 was ($5.8-million), or (18 cents) per share, compared with a net loss of ($3.6-million), or (11 cents) per share, in Q1 2022. Net loss increased as revenue growth was offset by higher cost of product sales and selling and marketing expenses related to the expansion of Vascepa, as well as more typical finance and related costs in the current year.

Cash from operations and financial position

Cash generated from operations was $4.0-million in Q1 2023, compared with $5.8-million in Q1 2022. Cash and cash equivalents were $21.2-million at March 31, 2023, up from $20.7-million at Dec. 31, 2022.

As at March 31, 2023, HLS has a strong financial position with $21.2-million of cash and cash equivalents, $26.5-million of undrawn revolving facility, 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.

Q1 fiscal 2023 conference call

HLS will hold a conference call today at 8:30 a.m. Eastern Time to discuss its Q1 2023 financial results. The call will be hosted by Craig Millian, chief executive officer, and Tim Hendrickson, chief financial officer.

Conference ID:  63444923

Date:  Thursday, May 11, 2023

Time:  8:30 a.m. ET

Traditional dial-in number:  1-888-664-6392 or 416-764-8659

Taped replay:  1-888-390-0541 or 416-764-8677

Replay code:  444923 followed by the pound key

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. 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 record of success in these therapeutic areas and at managing products in each of these life cycle stages.

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