MONTREAL, CANADA--(Marketwire - February 09, 2009) - Theratechnologies (TSX: TH)
- Completed Phase 3 clinical trials in lipodystrophy
- Entered into a collaboration and licensing agreement with EMD Serono
- Agreement with Massachusetts General Hospital for an exploratory Phase 2 clinical trial evaluating tesamorelin
- Balance sheet strengthened through two financial transactions
Theratechnologies (TSX: TH) today announced financial results for the year ended November 30, 2008 and reviewed the year's highlights.
"Marked by the completion of the lipodystrophy Phase 3 clinical trials and the signing of a collaboration and licensing agreement with EMD Serono, 2008 was a pivotal year for Theratechnologies", stated Mr. Yves Rosconi, President and Chief Executive Officer. "The achievements of 2008 have effectively lowered the risks associated with the pursuit of our business plan and have given us considerable financial flexibility, leaving us in an enviable position in the current economic environment," Mr. Rosconi added.
"Our priority for the coming months is to submit our New Drug Application to the Food and Drug Administration in the United States," Mr. Rosconi said. "At this moment, we are working with our commercial partner to finalize the regulatory filing, and include the results after 52 weeks of treatment from the confirmatory trial. By including these data, which became available at the end of 2008, we should be able to submit the best possible application and optimize tesamorelin's label," Mr. Rosconi concluded.
"With a pro forma cash position of $81 million and a significantly lower burn rate in 2009, we are capable of financing our current business plan beyond the commercialization of tesamorelin, said Mr. Luc Tanguay, Senior Executive Vice President and Chief Financial Officer.
Highlights
Completed the Phase 3 clinical trials in lipodystrophy
A major accomplishment of 2008 was the completion of the Phase 3 clinical trials evaluating tesamorelin in patients with HIV-associated lipodystrophy. The 26- and 52-week results of the confirmatory study, the final element of the Phase 3 program, were announced, as planned, in June and December of 2008. This confirmatory study, the objective of which was to confirm the results from the first study, met its primary endpoint (the reduction of visceral adipose tissue) as well as important secondary endpoints. In respect to the first Phase 3 study, its 52-week results were published in the September 2, 2008 edition of the Journal of the International AIDS Society. The combined 26-week results from the two studies were presented at two scientific conferences focused on AIDS during 2008: the International AIDS Conference, which took place in Mexico City in August, and the 10th International Workshop on Adverse Drug Reactions and Lipodystrophy in HIV, which was held in London in November.
Collaboration and licensing agreement with EMD Serono
October 29, 2008, Theratechnologies brought its strategic review process to a close with the announcement of a collaboration and licensing agreement with EMD Serono, Inc., an affiliate of Merck KGaA, of Darmstadt, Germany. The agreement grants EMD Serono exclusive commercialization rights to tesamorelin in the United States for the treatment of excess abdominal fat in HIV patients with lipodystrophy and stipulates that Theratechnologies may receive up to US$215 million (CAD$265 million) in total payments, including the upfront payment, and payments based on the achievement of certain development, regulatory and sales milestones. Theratechnologies will also be entitled to receive royalties on annual net sales and the Company retains all tesamorelin commercialization rights outside of the United States.
Agreement with Massachusetts General Hospital for an exploratory Phase 2 clinical trial evaluating tesamorelin
On May 15, 2008, Theratechnologies announced an agreement with the Massachusetts General Hospital ("MGH") and Dr. Steven Grinspoon to evaluate tesamorelin in the treatment of relative growth hormone deficient abdominally obese (GHDAO) subjects. Pursuant to the terms of the agreement, MGH, under the direction of Dr. Grinspoon, will sponsor and conduct a Phase 2 clinical trial with tesamorelin in subjects that have excess visceral adipose tissue (VAT) with a moderate growth hormone deficiency and who are abdominally obese. Dr. Grinspoon was awarded a grant by the National Institutes of Health to conduct the study. Theratechnologies is providing the tesamorelin and has no other obligations, financial or otherwise, in the execution of this study. However, Theratechnologies will be entitled to any benefits that may flow from the results generated in this trial.
Balance sheet strengthened through two financial transactions
Over the course of 2008, two important transactions added CAD $66.8 million to Theratechnologies' balance sheet. In February, the Company completed a public offering of 3,500,000 common shares for gross proceeds of CAD $29.8 million. In December 2008, following approval of the collaboration and licensing agreement with EMD Serono by the American anti-trust authorities, Theratechnologies received a payment of US $30 million (CAD $37.0 million) which included an upfront payment of US $22 million (CAD $27.1 million) from EMD Serono and an equity investment by Merck KgaA in Theratechnologies common stock at a price of US$3.67 (CAD $4.52) per share for proceeds of US $8 million (CAD $9.9 million).
MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FOURTH QUARTER
Revenues
Consolidated revenues for the three-month period ended November 30, 2008 amounted to $616,000 compared to $1,294,000 in the same period of 2007. Theratechnologies' consolidated revenues for the year ended November 30, 2008 were $2,641,000 compared to $3,134,000 in 2007.
The revenues for the quarter and year are principally composed of interest on investments in governmental, municipal and paragovernmental bodies. Interest revenues in the fourth quarter of 2008 were lower than those of 2007, reflecting lower liquidities in 2008 as well as a general decline in market interest rates. For the year ended November 30, 2008, interest revenues are comparable to those of 2007, reflecting lower interest rates in 2008 compensated by higher average liquidity levels. The 2008 revenues from royalties, technologies and other include an amount of $193,000 attributable to a license agreement signed with PDC Biotech GmbH for a family of peptides aimed at programs in preterm labour and primary dysmenorrhea. The fourth quarter revenues of 2007 include $619,000 attributable to a license agreement by the Company through which OctoPlus N.V. acquired the worldwide rights to the development and commercialization of the Company's glucagon-like peptide-1 (GLP-1) portfolio of analogues for the treatment of diabetes and other potential indications.
R&D Activities
Consolidated research and development (R&D) expenditures, before tax credits, totalled $6,313,000 for the three-month period ended November 30, 2008, compared to $8,475,000 in the same period of 2007. The lower level of R&D expenses in the fourth quarter is due to the close of the confirmatory Phase 3 trial. For the year ended November 30, 2008, R&D expenditures, before tax credits, totalled $35,326,000 compared to $31,866,000 in 2007. The increase in R&D expenditures in 2008 is explained by increased activities related to completing the clinical program for tesamorelin in HIV-associated lipodystrophy as well as higher expenses related to the preparation of a New Drug Application for the Food and Drug Administration in the United States. Stock-based compensation attributable to R&D was lower, however, at $593,000 compared to $1,122,000 in 2007.
Other Expenses
For the fourth quarter of 2008, general and administrative expenses were $1,874,000, compared to $2,064,000 in 2007. For the year ended November 30, 2008, general and administrative expenses were $6,185,000, compared to $7,260,000 in 2007. The lower expense in 2008 is attributable to a reduction in stock-based compensation and a smaller exchange loss.
Selling and market development expenses for the fourth quarter of 2008 amounted to $1,124,000, compared to $689,000 for the same period in 2007. For the year ended November 30, 2008, selling and market development expenses were $3,811,000, compared to $2,351,000 in 2007. This increase in these charges is related to pre-commercialization expenses for tesamorelin in HIV-associated lipodystrophy. Following the collaboration and licensing agreement with EMD Serono, Inc., the growth in selling and market development expenses will be significantly lower.
Patents, amortization and write-off of other assets amounted to $5,022,000 for the three months ended November 30, 2008, compared to $240,000 for the corresponding period in 2007. For the year ended November 30, 2008, the charges amounted to $5,581,000, compared to $840,000 in 2007. In the fourth quarter of 2008, the Company wrote off $287,000 of patent costs following a review by management of its development strategy and choice of a specific molecule for the acute renal failure program. The Company also conducted an impairment test on the intellectual property of the ExoPep platform following a review of the development strategy by management for new products. As a consequence, the Company wrote off the carrying amount of this intellectual property in 2008. The write down of $4,571,000 is included in "Patents, amortization and write-off of other assets" in the consolidated statement of earnings.
The costs related to the strategic review and the collaboration and licensing agreement with EMD Serono, Inc. amounted to $2,224,000 for the year. These costs are essentially composed of fees paid to the various experts retained to help management and the board of directors. See note 9a of the attached consolidated financial statements of the Company for the periods ended November 30, 2008 and 2007.
In 2008, the Company incurred an impairment of $578,000 related to a decline in value that is other than temporary for stock options held in OctoPlus N.V.
Net Results
The Company recorded a net loss in the three-month period ended November 30, 2008 of $15,440,000, compared to $10,279,000 for the same period in 2007. The 2008 net loss includes the previously described impairment charges totalling $5,436,000.
For the year ended November 30, 2008, the net loss was $48,953,000 compared to $37,588,000 in 2007, reflecting the changes in revenues and expenses described above.
Quarterly Financial Information
The selected financial information provided below is derived from the Company's unaudited quarterly financial statements for each of the last eight quarters.
(in thousands of Canadian dollars, except per share amounts)
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2008
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Q4 Q3 Q2 Q1
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Revenues $616 $710 $716 $599
Net loss $(15 440) $(11,224) $(11,398) $(10,891)
Basic and diluted loss per share $(0.27) $(0.19) $(0.20) $(0.20)
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(in thousands of Canadian dollars, except per share amounts)
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2007
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Q4 Q3 Q2 Q1
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Revenues $1,294 $748 $805 $287
Net loss $(10,279) $(9,781) $(8,089) $(9,439)
Basic and diluted loss per share $(0.19) $(0.18) $(0.15) $(0.20)
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Financial Position
Theratechnologies maintained a sound liquidity position in 2008. At November 30, 2008, cash and bonds were $46,337,000 and tax credits receivable were $1,784,000, for a total amount of $48,121,000.
On a pro forma basis, including the funds received at the closing of the collaboration and licensing agreement with EMD Serono, Inc. (see "Subsequent events"), liquidities and tax credits receivable at the end of the year would have been $80,812,000.
The Company invests its available cash in highly liquid fixed income instruments from governmental, municipal and paragovernmental bodies ($43,795,000 at November 30, 2008) and corporations with high credit ratings ($2,409,000 at November 30, 2008).
During the first quarter of 2008, the Company completed a public offering for the sale and issuance of 3,500,000 common shares for cash proceeds of $29,750,000. Issue costs totalled $1,938,000, resulting in net proceeds of $27,812,000. In the year ended November 30, 2008, the Company issued 119,666 common shares following the exercise of stock options, for cash proceeds of $397,000. The Company also received share subscriptions amounting to $149,000 for the issuance of 64,291 common shares to employees in connection with its share purchase plan.
In the three months ended November 30, 2008, the burn rate from operating activities, excluding changes in operating assets and liabilities, was $9,527,000 compared to $9,958,000 in 2007, reflecting the level of activities previously described. For the year ended November 30, 2008, the burn rate, represented by cash flow from operating activities, excluding changes in operating assets and liabilities was $41,493,000 compared to $34,698,000 in 2007. The increase in the burn rate in 2008 reflects the planned increase in activities related to completion of the tesamorelin Phase 3 program, the strategic review process and concluding the collaboration and licensing agreement with EMD Serono, Inc.
Based on the current business plan, the burn rate for 2009 is expected to decline over the course of the year to reach a level that will be approximately 30% lower than that of 2008. Considering the liquidity level and the decline in the burn rate, the Company is capable of fully financing its current business plan beyond the commercialization of tesamorelin for its first indication in the United States.
Subsequent events
On October 28, 2008, the Company entered into a collaboration and licensing agreement with EMD Serono, Inc., an affiliate of Merck KGaA, regarding the exclusive commercialization rights of tesamorelin in the United States for the treatment of excess abdominal fat in HIV patients with lipodystrophy. Theratechnologies retains all tesamorelin commercialization rights outside of the United States.
At the closing of the agreement, on December 15, 2008, the Company received US $30,000,000 (CAD $36,951,000) which includes an initial payment of US $22,000,000 (CAD $27,097,000) and a subscription totaling US $8,000,000 (CAD $9,854,000) for common shares in the Company by Merck KGaA at a price of US $3.67 (CAD $4.52) per share. Theratechnologies may receive up to US $215,000,000 (CAD $265,000,000) in total payments. See note 9a) to the financial statements.
The costs related to the strategic review and the collaboration and licensing agreement with EMD Serono, Inc. amounted to $2,224,000 for the year in 2008 and the transaction costs at closing are estimated at $4,260,000 for 2009.
On December 18, 2008, the Company issued 590,500 stock options at a strike price of $1.80 per share in connection with its compensation program.
New accounting policies
See note 2 to the financial statements. The adoption of new accounting standards referred to therein had no effect on the Company's financial results.
Outstanding share data
At February 8, 2009, the number of shares issued and outstanding was 60,394,927, while outstanding options granted under the stock option plan were 2,748,800.
Contractual Obligations
There were no material changes in contractual obligations during the quarter, other than in the ordinary course of business.
Economic and Industry Factors
Over the past year, the capital markets were characterized by significant stock market volatility and a notable decline in access to capital across all sectors and particularly in biotechnology. In parallel, an economic slowdown occurred in almost all sectors.
The general decline of capital markets has had a negative effect on the cost of capital for companies.
The Company does not envisage raising money because its liquidity level is sufficient to meet the operating needs of the current business plan. Furthermore, the milestone payments and future royalties make it possible for the Company to fully finance its current business plan beyond the commercialization of tesamorelin for its first indication in the United States.
The Company's investment policy is conservative. The Company invests its funds in highly liquid, low-risk instruments as described under the heading "Financial position". The Company holds no commercial paper.
The Company relies on third parties to manufacture and supply its tesamorelin. The Company is not aware of any information suggesting that its principal suppliers will not be able to meet their obligations.
About Theratechnologies
Theratechnologies (TSX: TH) is a Canadian biopharmaceutical company that discovers innovative drug candidates in order to develop them and bring them to market. The Company targets unmet medical needs in financially attractive specialty markets. Its most advanced compound, tesamorelin, is an analogue of the growth hormone releasing factor. Theratechnologies recently concluded a confirmatory Phase 3 clinical trial evaluating tesamorelin in HIV-associated lipodystrophy, serious metabolic disorder associated with excess abdominal fat. The Company also has other projects at earlier stages of development.
Further information on Theratechnologies
Further information on Theratechnologies can be found at www.theratech.com. Additional documents, including the Company's Annual Information Form, are available through SEDAR at www.sedar.com.
Forward-Looking Information
This press release and the management's discussion and analysis for the fourth quarter incorporated therein contain certain statements that are considered "forward-looking information" within the meaning of applicable securities legislation. This forward-looking information includes, in particular, information on the preparation of a New Drug Application ("NDA") for submission to the Food and Drug Administration ("FDA") in the United States, the commercialization of tesamorelin for the treatment of HIV-associated lipodystrophy and the financial autonomy of the Company. Words such as "will", "may", "could", "should", "outlook", "believe", "plan", "envisage", "anticipate", "expect" and "estimate", or the negatives of these terms or variations of them and the use of the future or conditional tense as well as similar expressions denote forward-looking information.
Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, in particular, difficulties, regulatory or otherwise, which the Company may face for submission of an NDA to the FDA, the risk that the Company may not obtain all required approvals from the FDA to market its products, the risk that the Company's products may not be accepted by the market, delays or cost overruns that could result from the use of third-party suppliers and a change in the Company's business plan that requires additional funds.
Although the forward-looking information contained herein is based upon what the Company believes are reasonable assumptions, investors are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking information. Certain assumptions used in these forward looking statements, and the Company's anticipated objectives, take into consideration that the administration of tesamorelin to patients will not have any significant adverse side-effects, that the Company will have access to all the data and necessary resources to submit a NDA to the FDA, that the Company will continue to have a good business relationship with its third party suppliers and that the Company's business plan will not be substantially modified, such that it could necessitate a need for additional funds.
Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences or effects on the Company, its business, its financial condition or its results of operation. Furthermore, the forward-looking information reflects current expectations regarding future events only as of the date of release of this press release and represents the Company's expectations as of that date.
Investors are referred to the Company's public filings available at www.sedar.com. In particular, further details and descriptions of these risks and other factors are disclosed in the "Risk and Uncertainties" section of the Company's Annual Information Form, dated January 29, 2008, for the year ended November 30, 2007. The Company does not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.
THERATECHNOLOGIES INC.
Consolidated Financial Statements (Unaudited)
Periods ended November 30, 2008 and 2007
THERATECHNOLOGIES INC.
Consolidated Balance Sheets
November 30, 2008 and 2007
(in thousands of dollars)
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2008 2007
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(Audited) (Audited)
Assets
Current assets:
Cash $133 $2,578
Bonds 10,955 27,466
Accounts receivable 610 451
Tax credits receivable 1,784 1,418
Research supplies 301 2,110
Prepaid expenses 397 414
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14,180 34,437
Bonds 35,249 30,324
Investments in public companies 41 635
Property and equipment 1,299 1,722
Other assets (note 3) 3,375 7,472
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$54,144 $74,590
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $7,198 $8,613
Shareholders' equity:
Capital stock (note 4) 269,219 238,842
Contributed surplus 5,585 4,807
Accumulated other comprehensive (loss) income 372 (333)
Deficit (228,230) (177,339)
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(227,858) (177,672)
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Total shareholders' equity 46,946 65,977
Subsequent events (note 9)
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$54,144 $74,590
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See accompanying notes to unaudited consolidated financial statements.
THERATECHNOLOGIES INC.
Consolidated Statements of Earnings
Periods ended November 30, 2008 and 2007
(in thousands of dollars, except per share amounts)
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Fourth quarter Year
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2008 2007 2008 2007
(Unaudited) (Audited)
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Revenues:
Royalties, technologies
and other $98 $624 $214 $638
Interest 518 670 2,427 2,496
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616 1,294 2,641 3,134
Operating costs and expenses:
Research and development 6,313 8,475 35,326 31,866
Tax credits (334) (294) (2,111) (1,652)
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5,979 8,181 33,215 30,214
General and administrative 1,874 2,064 6,185 7,260
Selling and market development 1,124 689 3,811 2,351
Patents, amortization and
write-off of other assets 5,022 240 5,581 840
Fees associated with the
strategic review process
and collaboration and
licensing agreement
(note 9 (a)) 1,479 - 2,224 -
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15,478 11,174 51,016 40,665
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Operating loss before
undernoted item (14,862) (9,880) (48,375) (37,531)
Realized loss on disposal and
impairment of investments
in public companies (578) (399) (578) (57)
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Net loss $(15,440) $(10,279) $(48,953) $(37,588)
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Basic and diluted loss
per share (note 4 (c)) $(0.27) $(0.19) $(0.85) $(0.71)
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Weighted average number of
common shares outstanding 58,165,795 54,506,446 57,415,468 52,581,559
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See accompanying notes to unaudited consolidated financial statements.
THERATECHNOLOGIES INC.
Consolidated Statements of Comprehensive Loss
Periods ended November 30, 2008 and 2007
(in thousands of dollars)
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Fourth quarter Year
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2008 2007 2008 2007
(Unaudited) (Audited)
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Net loss $(15,440) $(10,279) $(48,953) $(37,588)
Unrealized gains (losses)
on available-for-sale
financial assets 71 228 133 (496)
Reclassification adjustment
for gains and losses on
available
for-sale financial
assets (note 5 (b)) 572 400 572 84
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Comprehensive loss $(14,797) $(9,651) $(48,248) $(38,000)
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See accompanying notes to unaudited consolidated financial statements.
THERATECHNOLOGIES INC.
Consolidated Statement of Shareholders' Equity
Period ended November 30, 2008
(in thousands of dollars)
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Accu-
mulated
other
compre-
Capital stock Con- hensive
---------------- tributed income
Number Dollars surplus (loss) Deficit Total
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Balance,
November 30,
2007 54,531,133 $238,842 $4,807 $(333) $(177,339) $65,977
Issuance of
share capital
(note 4) 3,564,291 29,899 - - - 29,899
Share issue
costs - - - - (1,938) (1,938)
Exercise of
stock options:
Cash proceeds 119,666 397 - - - 397
Ascribed value - 81 (81) - - -
Stock-based
compensation - - 859 - - 859
Net loss - - - - (48,953) (48,953)
Unrealized
gains on
available-
for sale
financial
assets - - - 705 - 705
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Balance,
November 30,
2008 58,215,090 $269,219 $5,585 $372 $(228,230) $46,946
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