Q3 2015 Theratechnologies Inc Earnings Call
Oct 01, 2015 AM EDT
TH.TO - Theratechnologies Inc
Q3 2015 Theratechnologies Inc Earnings Call
Oct 01, 2015 / 12:30PM GMT
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Corporate Participants
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* Denis Boucher
Theratechnologies Inc. - IR
* Luc Tanguay
Theratechnologies Inc. - Pres & CEO
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Conference Call Participants
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* Doug Loe
Euro Pacific Canada - Analyst
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Theratechnologies earnings conference call for the third quarter of fiscal year 2015. At this time all participants are in a listen-only mode. (Operator Instructions)
I would like to remind everyone that this conference call is being recorded today, Thursday, October 1 at 8:30 AM Eastern Time. I would now like to turn the conference call to Denis Boucher. Mr. Boucher, please go ahead.
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Denis Boucher, Theratechnologies Inc. - IR [2]
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Thank you and welcome. Mr. Luc Tanguay, President and Chief Executive Officer of Theratechnologies, will be the speaker on today's call. A Q&A period open exclusively to financial analysts will follow his presentation.
Before Mr. Tanguay begins his remarks, I have been asked by Theratechnologies to read the following message regarding forward-looking statements.
I would like to remind everyone that Theratechnologies' remarks today may contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals, or achievements, or other future events or developments. In preparing these forward-looking statements, several assumptions were made by Theratechnologies and there are risks that results actually obtained by the Company will differ materially from those statements. As a consequence, Company the Company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them.
Theratechnologies refers current and potential investors to the forward-looking information section of its press release issued this morning and to its Annual Information Form dated February 25, 2015 and the Risk Factors section therein available at www.SEDAR.com under Theratechnologies' public filing. Forward-looking statements represent Theratechnologies' expectations as of October 1, 2015. Except as may be required by securities laws, Theratechnologies does not undertake any obligation to update any forward-looking statement whether as a result of new information, future events or otherwise.
I would now like to turn the conference over to Mr. Tanguay.
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Luc Tanguay, Theratechnologies Inc. - Pres & CEO [3]
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Okay, thank you, Denis, good morning everyone and thanks. Thank you for being with us today.
I think we have every reason to be proud of our third quarter. In a few words, we achieved sales growth, higher profits, and a more positive EBITDA. After reaching two historical milestones last quarter, we have continued to work on fundamentals in Q3 and results are there to show that it was the right approach.
This is very encouraging and stimulating, as we know there is room to still build the EGRIFTA franchise.
We made several important announcements that are all supporting our business objectives. Among them, the closing of [above] deal and the exercise of a greenshoe option, which allowed Theratechnologies to net more than CAD10 million. As announced, the proceeds from this public offering will be put towards supporting our growth.
As our sales progress, there is need for additional working capital and, moreover, a portion of the funds will be used towards general corporate purposes such as supporting the acceleration of commercial activities in the US. Our strategic thinking behind this is to give us the means to support our growth in the coming quarters.
But, before we discuss our future, let me go back on the last quarter into more details.
First of all, EGRIFTA sales are still growing at a very strong pace. Quarter over quarter, EGRIFTA sales grew by 30% in Q3 2015. Overall consolidated business amounted to CAD9.2 million in the third quarter compared to only CAD4,000 for the comparable period last year and to CAD7,280,000 for the second quarter of 2015.
For the three-month period ended August 31, 2015, cost of sales came to CAD1,304,000 or 14% of net sales. As I just mentioned, we have decided to accelerate our marketing efforts in the US. As a result, quarter-over-quarter sales and marketing expenses went up. We reached CAD3,525,000 in the third quarter compared to CAD2,537,000 in the second quarter of 2015. As for the same period last year, they amounted to CAD1,720,000.
Additional expenses in Q3 came from promotional activities and the addition of one sales representative. I think that it is still important to underline the fact that the sales and marketing expenses include the amortization of the intangible asset value for the commercialization rights of EGRIFTA, which was CAD483,000 in the third quarter.
As for research and development expenses, they reached CAD1,471,000 compared to CAD1,036,000 for the same quarter last year. We proceeded in the third quarter with the hiring of an additional medical science liaison, also known as MSL. MSLs provide medical education to key opinion leaders and other influencers, as well as representing Theratechnologies at healthcare conferences.
For the third quarter of 2015, general and administrative expenses stood at CAD865,000 in comparison of CAD914,000 for the same period last year.
As the sales went up, so did our profits. On that front, net profits reached CAD1,179,000 in Q3 compared to [800 and -- 18%] in the second quarter, which represents a 44% increase. Bear in mind that in the third quarter of 2014 we recorded a net loss of CAD4,394,000.
We also generate significant cash from our operations. In Q3, the EBITDA grew by 39% to reach CAD2,621,000 compared to CAD1,885,000 in Q2 2015 and a negative EBITDA of CAD3,[350],000 for the comparable period of last year. This means that in the last two quarters, we generate more than CAD4.5 million of cash from our activities.
As a result of net proceeds received from the public offering, and a growing EBITDA, our cash position has significantly improved. Even though we paid in Q3 a second installment of $1.5 million US to EMD Serono which is almost CAD2 million, liquidity is now amount to CAD15,178,000 compared to [CAD4,000 -- 572,000] [sic--see press release] at the end of the second quarter.
If we look ahead, besides the Q4 promotional campaigns and sales initiatives to support growth in the US market, other events that occurred during last quarter will eventually have an additional impact on the Company. The first one is the Mexican approval of EGRIFTA in its 2 milligrams vial presentation. As was done in Canada, our partner over there is taking the necessary steps to obtain authorization for the 1 milligram presentation. We hope to bring our product to market soon after receipt of a positive decision from the authorities for the 1 milligram.
The announcement we made in Q3 regarding the distribution agreement in South Korea is most definitely in line with our strategy to generate more revenue from EGRIFTA. At first, name patient sales will be the approach taken to generate revenue in South Korea while our partner over there works on obtaining regulatory approval for the marketing of EGRIFTA in that territory.
This leads me to talk about Canada and Europe, where we recorded our first sales in Q3. While those sales were modest, it shows that we structured our activities in those markets and that we are planning for growth in those territories in the coming quarters. All of this to say that things are going according to plan. We are seeing significant growth in sales, in EBITDA, and in profit quarter over quarter.
In addition, last quarter sales which amounted to CAD9.2 million, are comparable to sales levels before the stock out situation. This is certainly a demonstration of the validity of our pricing and cost structure strategy, as well as the success of our business model. All this makes us very proud and very optimistic about the future of this Company, and as we move forward, it remains important for us to stay focused on the task at hand, and to ensure that we bring our Company to new levels.
So thank you for joining us today, and I will now take questions from financial analysts.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Doug Loe, Euro Pacific.
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Doug Loe, Euro Pacific Canada - Analyst [2]
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Congratulations on a strong quarter. Just a couple of housekeeping items for me. I wonder if you would be willing to share what the total number of patients on drug was in the US at the end of Q3 and what sort of pace of growth on a patient on drug basis you anticipate by end of year. And then kind of part B to that question, I just wonder what sort of mix you have of legacy patients and new patients in that number.
And secondly, just on the European macro environment, I know you have the regional partnership with AOP Orphan, but I was just wondering on a broader perspective if you have had discussions with regulators on what sort of clinical initiatives might be required in order to garner a more expensive conventional approval within the EU and whether or not that would be an extension you would be willing to incur, and if indeed you have had a shot with regulators on what sort of clinical initiatives might you require in order to resurrect a more conventional EMA approval in Europe. And I will leave it there, thanks.
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Luc Tanguay, Theratechnologies Inc. - Pres & CEO [3]
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Okay, thanks, Doug. I took notes of your question. If I miss it, please just repeat it.
The first one for total patients on drug, as I said in the last conference call, it is difficult because we are talking about patients here to get the right number. But if you look on the Bloomberg which published the Symphony numbers, if you look at the number of patients we had before the stock out situation and the one we have today in the same database, what you can see today is that we are just slightly below 200 patients short of being at the same level that we were before the stock out situation.
So I think things are going pretty well and you can see it anyway by the dollar figures and sales, because we have not increased the price. And you see that we increased our sales by 30%. So it shows that it is still growing.
And by year end, to get the -- as I mentioned previously, what we want to be around the number we were before the stock out situation, so by being slightly below 200 patients short today, we still have three months to work and that is still our objective, to be close to that number by year end.
Your next question was the mix between new and old patients. Unfortunately, it is very difficult for us to know who are new and who are old. I suspect that a big part of that number is still patients that were on drug before. But what we are seeing today with the sales force in place since February, I think since that date or since let's say midyear, we start to have more and more new patients into our clientele, if you will.
As far as the EOP is concerned, we have not talked yet -- or they have not talked yet to regulators. We are having a meeting with them at the end of October to have an update on all the steps they are going to take in the future. But what we know is, as I said, we already have sent products to AOP. So we recorded sales in Europe and they have started to work on the name patient sales basis with patient there.
But as far as the regulatory file, there is no news since last quarter. We will have, as I say, a meeting by the end of October.
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Doug Loe, Euro Pacific Canada - Analyst [4]
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Okay, that's great feedback. Thanks a lot.
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Operator [5]
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(Operator Instructions) There are no further questions at this time. Mr. Boucher, I will turn the call back over to you.
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Denis Boucher, Theratechnologies Inc. - IR [6]
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Well, thank you very much. If there are no further questions, then we will conclude this morning's conference call. I would like to thank everyone for joining us today. Please have a very good day. Thank you.
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Operator [7]
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Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
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