Theratechnologies(THTX) - 2022 Q1 - Quarterly Report

Interim Consolidated Financial Statements Interim Consolidated Statements of Financial Position As of February 28, 2022, Theratechnologies Inc. reported total assets of $108.7 million, a decrease from $119.2 million at November 30, 2021, primarily driven by a reduction in cash, while total liabilities decreased slightly to $98.5 million and total equity saw a significant reduction from $17.8 million to $10.2 million due to the net loss for the period Financial Position (in thousands USD) | Financial Position (in thousands USD) | Feb 28, 2022 | Nov 30, 2021 | | :--- | :--- | :--- | | Total Current Assets | $83,490 | $91,908 | | Cash | $14,342 | $20,399 | | Total Non-current Assets | $25,180 | $27,304 | | Total Assets | $108,670 | $119,212 | | Total Current Liabilities | $41,782 | $45,076 | | Total Non-current Liabilities | $56,728 | $56,376 | | Total Liabilities | $98,510 | $101,452 | | Total Equity | $10,160 | $17,760 | Interim Consolidated Statements of Comprehensive Loss For the three months ended February 28, 2022, the company's revenue increased to $18.6 million from $15.4 million in the prior-year period, but a significant rise in operating expenses led to a larger loss from operating activities of $7.7 million compared to $4.6 million in 2021, widening the net loss for the period to $9.0 million, or $(0.09) per share, from $5.9 million, or $(0.07) per share Income Statement (in thousands USD) | Income Statement (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $18,557 | $15,430 | | Cost of sales | $6,099 | $5,411 | | R&D Expenses | $8,003 | $4,883 | | Selling Expenses | $7,807 | $6,158 | | General & Administrative Expenses | $4,368 | $3,562 | | Total Operating Expenses | $26,277 | $20,014 | | Loss from Operating Activities | ($7,720) | ($4,584) | | Net Loss for the period | ($9,032) | ($5,922) | | Basic and Diluted Loss per Share | ($0.09) | ($0.07) | Interim Consolidated Statements of Changes in Equity Total equity decreased from $17.8 million at the beginning of the period to $10.2 million as of February 28, 2022, primarily due to the net loss of $9.0 million and a minor other comprehensive loss, partially offset by $1.4 million in share-based compensation, contrasting with a significant increase in the prior-year period due to a $46.0 million public offering - Equity decreased by $7.6 million in Q1 2022, primarily due to a net loss of $9.0 million, partially offset by $1.4 million in share-based compensation[7] Equity Movement (in thousands USD) | Equity Movement (in thousands USD) | Q1 2022 | | :--- | :--- | | Balance as at Nov 30, 2021 | $17,760 | | Net loss for the period | ($9,032) | | Other comprehensive loss | ($6) | | Share-based compensation | $1,438 | | Balance as at Feb 28, 2022 | $10,160 | Interim Consolidated Statements of Cash Flows For the first quarter of 2022, the company experienced a net cash outflow of $6.1 million, reducing its cash position to $14.3 million, with cash used in operating activities at $4.1 million and financing activities at $2.0 million, a sharp contrast to the $36.4 million net cash inflow from a public offering in the same period of 2021 Cash Flow Summary (in thousands USD) | Cash Flow Summary (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Cash flows from Operating Activities | ($4,105) | ($5,228) | | Cash flows from Financing Activities | ($1,979) | $41,168 | | Cash flows from Investing Activities | $22 | $440 | | Net change in cash | ($6,062) | $36,380 | | Cash, beginning of period | $20,399 | $12,737 | | Cash, end of period | $14,342 | $49,116 | Notes to Interim Consolidated Financial Statements Note 1: Basis of Preparation The unaudited interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB, specifically following IAS 34, Interim Financial Reporting, presented in U.S. dollars, and should be read in conjunction with the annual financial statements for the year ended November 30, 2021 - The financial statements are prepared on a going concern and historical cost basis, with certain financial instruments measured at fair value[16] - The company's functional and presentation currency is the United States dollar (USD)[19] Note 2: Significant Accounting Policies The accounting policies applied in these interim financial statements are consistent with those disclosed in the company's annual consolidated financial statements for the year ended November 30, 2021 - There have been no changes to the significant accounting policies from the most recent annual report[20] Note 3: Revenue Total net sales for the first quarter of 2022 were $18.6 million, a 20.3% increase from $15.4 million in the prior-year period, primarily driven by a 34.7% increase in EGRIFTA® net sales, with the United States remaining the dominant market, accounting for over 97% of total revenue Net Sales by Product (in thousands USD) | Net Sales by Product (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | EGRIFTA® net sales | $11,704 | $8,688 | | Trogarzo® net sales | $6,853 | $6,742 | | Total | $18,557 | $15,430 | Net Sales by Geography (in thousands USD) | Net Sales by Geography (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | United States | $18,099 | $14,576 | | Europe | $313 | $715 | | Canada | $145 | $139 | | Total | $18,557 | $15,430 | Note 4: Finance Income and Finance Costs Net finance costs for the quarter were $1.29 million, slightly lower than the $1.33 million recorded in the same period of 2021, primarily consisting of interest and accretion expenses related to the convertible unsecured senior notes Finance Costs Breakdown (in thousands USD) | Finance Costs Breakdown (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Interest on convertible notes | ($802) | ($802) | | Accretion expense | ($517) | ($581) | | Other | ($25) | - | | Total Finance Costs | ($1,344) | ($1,383) | | Finance Income | $59 | $51 | | Net Finance Costs | ($1,285) | ($1,332) | Note 5: Provisions Provisions, mainly consisting of chargebacks, rebates, and returns, increased to $5.2 million as of February 28, 2022, from $4.1 million at the end of the previous fiscal year, with $4.0 million in new provisions made and $2.9 million used during the quarter Movement in Provisions (in thousands USD) | Movement in Provisions (in thousands USD) | Chargebacks and rebates | Returns | Total | | :--- | :--- | :--- | :--- | | Balance as at Nov 30, 2021 | $3,713 | $410 | $4,123 | | Provisions made | $3,843 | $196 | $4,039 | | Provisions used | ($2,762) | ($130) | ($2,892) | | Balance as at Feb 28, 2022 | $4,765 | $476 | $5,241 | Note 6: Convertible Unsecured Senior Notes The carrying value of the convertible unsecured senior notes increased to $54.7 million as of February 28, 2022, due to accretion expense of $0.5 million during the quarter, with these notes set to mature on June 30, 2023 - The carrying value of convertible notes increased from $54.2 million to $54.7 million due to accretion expense[24] - The convertible unsecured senior notes mature on June 30, 2023[24] Note 7: Lease Liabilities Total lease liabilities amounted to $2.4 million as of February 28, 2022, down from $2.5 million at the end of the previous fiscal year, with the non-current portion of these liabilities being $1.9 million Lease Liabilities (in thousands USD) | Lease Liabilities (in thousands USD) | Amount | | :--- | :--- | | Balance as at Nov 30, 2021 | $2,518 | | Accretion expense | $43 | | Lease payments | ($156) | | Balance as at Feb 28, 2022 | $2,405 | | Current portion | ($476) | | Non-current portion | $1,929 | Note 8: Share Capital and Warrants This note details the company's equity structure, including a public offering in 2021, the stock option plan, stock appreciation rights (SARs), and the calculation of loss per share, with over 2.3 million new stock options granted and a share-based compensation expense of $1.4 million recorded during Q1 2022 Public Offering In January 2021, the company completed a public offering of 16.7 million units at $2.75 per unit, raising gross cash proceeds of $46.0 million, with each unit consisting of one common share and one-half of a warrant, exercisable at US$3.18 until January 19, 2024 - Completed a public offering on January 19, 2021, raising gross proceeds of $46,002 thousand[27] - As of February 28, 2022, 8,130,550 warrants were outstanding, exercisable at US$3.18 per share until January 19, 2024[28] Stock Option Plan The company granted 2.1 million options denominated in CAD and 255,000 options in USD during the first quarter of 2022, resulting in 5.3 million CAD options and 0.3 million USD options outstanding as of February 28, 2022, and a share-based compensation expense of $1.4 million for the quarter - Share-based compensation expense for the stock option plan was $1,438 thousand for the three months ended February 28, 2022, compared to $557 thousand in the prior year period[32] Options Outstanding | Options Outstanding | As at Feb 28, 2022 | As at Feb 28, 2021 | | :--- | :--- | :--- | | Options in CA$ | 5,304,673 | 4,113,024 | | Options in US$ | 335,733 | 93,593 | Stock Appreciation Rights (SARs) The company has a cash-settled Stock Appreciation Rights (SARs) plan for consultants, recording a share-based compensation expense of $4 thousand for the three-month period ended February 28, 2022, down from $21 thousand in the prior year, with no new SARs granted during the quarter - Share-based compensation expense for the SARs plan was $4 thousand for Q1 2022, down from $21 thousand in Q1 2021[38] Loss Per Share The basic and diluted loss per share for the quarter was $(0.09), based on a net loss of $9.0 million and a weighted average of 95.1 million common shares outstanding, with potentially dilutive securities excluded as their effect would have been anti-dilutive Loss Per Share Calculation | Loss Per Share Calculation | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Loss (in thousands USD) | ($9,032) | ($5,922) | | Weighted Average Shares | 95,121,639 | 84,692,788 | | Loss Per Share | ($0.09) | ($0.07) | - A total of 5,640,406 share options, 8,130,550 warrants, and 3,872,053 potential shares from convertible notes were excluded from the diluted EPS calculation as they were anti-dilutive[41] Note 11: Capital Management and Liquidity Risk The company manages its capital to ensure sufficient liquidity, holding $34.3 million in cash, bonds, and money market funds as of February 28, 2022, which management believes is sufficient to finance operations for at least the next 12 months, while actively evaluating options for its convertible senior notes due in June 2023 and for funding late-stage development programs - The company is evaluating its options regarding the convertible senior notes which become due in June 2023[45] - As of February 28, 2022, cash, bonds and money market funds amounted to $34,283 thousand[47] - Management believes its current cash position and future operating cash flows are sufficient to finance operations for at least the next 12 months[47] Note 12: Determination of Fair Values This note outlines the methodology for determining the fair value of financial instruments using a three-level hierarchy, classifying bonds, money market funds, and derivative assets as Level 2 based on broker quotes, while the fair value of convertible notes is determined by Level 1 market quotes and employee stock options are valued using the Black-Scholes model - The fair value of the convertible unsecured senior notes was approximately $50,313 thousand as at February 28, 2022, based on Level 1 market quotes[52] - Bonds, money market funds, and derivative financial assets are stated at fair value determined by Level 2 inputs (broker quotes)[52] Note 13: Operating Segments The company operates as a single operating segment with significant customer concentration, generating over 97% of its revenues from one customer, RxCrossroads, located in the United States, while the majority of its non-current assets are located in Canada and Ireland - The company has a single operating segment[55] - Over 97% of revenues are generated from a single customer, RxCrossroads, which accounted for $18.1 million in sales in Q1 2022[55][56] Note 14: Subsequent Event In March 2022, subsequent to the quarter-end, the company paused activities related to the initiation of its Phase 3 trial in NASH due to uncertainty created by a global shortage of bacteriostatic water for injection, which may result in a write-down of research supplies currently included in prepaid expenses - In March 2022, the company paused the initiation of its Phase 3 trial in NASH due to a global shortage of bacteriostatic water for injection[57] - The company may need to write-down research supplies included in prepaid expenses and deposits as a result of the trial pause[57]