Theratechnologies(THTX) - 2023 Q4 - Annual Report

Financial Performance - The Corporation reported a net loss of $24 million for the fiscal year ended November 30, 2023, with no profit generated from operations [45]. - The Corporation experienced negative operating cash flows of $5.7 million for the fiscal year ended November 30, 2023 [49]. - Future financial performance is subject to prevailing economic conditions and the Corporation may not generate sufficient cash flows to service its debt obligations [48]. - The company revised its revenue guidance for the fiscal year ended November 30, 2023, to a range of $82 million to $85 million, down from the initial guidance of $90 million to $95 million [158]. - The Corporation's revenues and expenses may fluctuate significantly, impacting the share price if financial expectations are not met [178]. Liquidity and Debt Obligations - As of November 30, 2023, the Corporation had approximately $40.4 million in cash, bonds, and money market funds, while the principal of the loan to be reimbursed amounted to $60.6 million [39]. - The Marathon Credit Agreement imposes significant operating and financial restrictions, including maintaining a minimum liquidity level of between $15 million and $20 million [56]. - An event of default under the Marathon Credit Agreement could increase the interest rate on the loan by 300 basis points and allow the lender to declare all amounts due immediately [41]. - The interest rate under the Marathon Credit Agreement is based on the Secured Overnight Financing Rate (SOFR) plus 9.5%, which is subject to fluctuations [50]. - The Corporation has drawn $60 million from the Marathon Credit Agreement, which provides a credit facility of up to $100 million [198]. - The second tranche of $20 million from the Marathon Credit Agreement was drawn down on June 21, 2023, after amendments were made to remove certain conditions [200]. - As of October 31, 2023, the Corporation is required to maintain a liquidity level between $15,000,000 and $20,000,000 based on Marathon Adjusted EBITDA thresholds [204]. Product Commercialization and Market Risks - The Corporation's ability to achieve profitability depends on the successful commercialization of EGRIFTA SV® and Trogarzo® in the United States [45]. - The Corporation's commercial success is concentrated on the sales of EGRIFTA SV® and Trogarzo® in the United States, with reliance on third-party payors for reimbursement coverage [58]. - More than 95% of the company's revenues are derived from the sale of EGRIFTA SV® and Trogarzo® through McKesson, its exclusive distributor in the United States [63]. - The company is currently negotiating a new agreement with McKesson, and any failure to reach an agreement could materially adversely affect revenues [63]. - Sales of EGRIFTA SV® and Trogarzo® are highly dependent on patient reimbursement from third-party payors, including U.S. Medicare and Medicaid [81]. - Denial of coverage for EGRIFTA SV® and Trogarzo® under government-funded programs would materially adversely affect revenues [82]. - The company may face challenges in market acceptance of its products, which will depend on factors such as safety, effectiveness, and competition [83]. - Significant safety problems with EGRIFTA SV® and Trogarzo® could result in product recalls or restrictions, adversely affecting business prospects [79]. Regulatory and Compliance Risks - The company faces potential violations of applicable laws if it fails to meet FDA requirements, which could result in significant operational and financial repercussions [101]. - Regulatory compliance risks are heightened due to complex federal and state laws, which could lead to penalties and affect commercialization efforts [114]. - The company is exposed to potential product liability claims, which could result in costly litigation and significant liabilities [145]. - Non-compliance with regulatory requirements could lead to sanctions, including product recalls and fines, adversely affecting the company's reputation and financial condition [125]. - The company must comply with privacy laws in Canada and Europe, increasing its responsibility regarding data protection [151]. Research and Development - The research and development activities are costly and risky, with no assurance that new drug candidates will yield positive results [88]. - The Phase 1 clinical trial for sudocetaxel zendusortide has resumed, focusing on high-grade serous ovarian cancer, but is contingent on achieving positive Adjusted EBITDA [91]. - The FDA issued a Complete Response Letter (CRL) regarding the F8 Formulation, raising questions about chemistry, manufacturing, and controls, which could lead to additional expenses [95]. - The company must complete a Human Factors Study (HFS) for EGRIFTA SV® by September 15, 2024, or face potential sanctions and operational impacts [100]. - The development of sudocetaxel zendusortide is uncertain, and failure to find a partner could lead to cancellation of the program, adversely affecting the drug pipeline [89]. Intellectual Property and Competition - The patent protection for tesamorelin related to the reduction of excess abdominal fat in HIV-infected adult patients expired in August 2023, leading to potential competition from biosimilar versions of EGRIFTA SV® [126]. - The formulation of EGRIFTA SV® is not patent protected, which may result in reduced revenues due to competition from biosimilars [127]. - If a biosimilar version of EGRIFTA SV® is approved, it is expected to be priced lower, potentially necessitating a price reduction for EGRIFTA SV®, adversely affecting revenue [129]. - The biopharmaceutical industry is highly competitive, with significant competition for products like Trogarzo® and EGRIFTA SV® from other approved drugs and therapies [85]. Corporate Governance and Shareholder Matters - The Corporation's Common Shares may be delisted from Nasdaq if the minimum bid price remains below $1.00 for 30 consecutive trading days [174]. - The Corporation has never declared or paid cash dividends on its Common Shares and does not anticipate doing so in the foreseeable future [197]. - The liquidity of the Corporation's Common Shares is uneven, which may affect the ability of shareholders to buy or sell shares [172]. - The Corporation's shareholder rights plan could delay or deter a change of control [183]. - The dual listing on Nasdaq and TSX may increase share price volatility due to differing market conditions [171]. Strategic Initiatives - The Corporation initiated a reorganization of its research and development activities, expecting annualized savings of at least $5,500,000 for the fiscal year ending November 30, 2024 [208]. - The Corporation's business strategy focuses on growing revenues and Adjusted EBITDA from existing and potential future assets in North America [217]. - The Corporation intends to use the net proceeds from the 2023 Public Offering for general corporate purposes, including working capital and potential acquisitions [212].