HLS Therapeutics Announces Q3 2024 Financial Results
TORONTO, Nov. 7, 2024 /CNW/ - HLS Therapeutics Inc. ("HLS" or the "Company") (TSX:HLS), a pharmaceutical company focused on addressing unmet needs in the treatment of psychiatric disorders and cardiovascular disease, announces its financial results for the three and nine months ended September 30, 2024. All amounts are in thousands of United States ("U.S.") dollars unless otherwise stated.
KEY HIGHLIGHTS
Q3 2024 revenue was $14.1 million, Adjusted EBITDA1 was $4.1 million and cash from operations was $1.5 million, compared to $16.0 million, $5.1 million and $5.4 million, respectively, in Q3 2023.
Canadian product sales of Vascepa and Clozaril grew 11% in Canadian dollars compared to Q3 2023.
Operating expenses decreased 15%, excluding cost of product sales, compared to Q3 2023.
Excluding the royalty portfolio, Q3 2024 Adjusted EBITDA increased 55% to $3.9 million, compared to $2.5 million in Q3 2023.
Paid down $15 million of the term loan, ending the quarter with net debt of $52.4 million compared to net debt of approximately $66.5 million at the end of Q4 2023.
Named John Hanna permanent CFO and promoted Brian Walsh to Chief Commercial Officer.
"Q3 saw the continued growth of our promoted products in Canada driven by the strongest quarterly growth of the year for Vascepa. In constant currency, our Q3 net sales in Canada grew 11% with Vascepa leading the way with 30% year-over-year growth," said Craig Millian, CEO at HLS. "At the same time, we significantly reduced our operating expenses in the quarter, and we made a substantial debt repayment to strengthen our balance sheet and increase our future cash flows and financial flexibility. These achievements put us in a much stronger financial and operating position entering 2025 than when we started this year."
Q3 2024 BRAND PERFORMANCE HIGHLIGHTS
Completed the transition of Vascepa primary care sales responsibilities from Pfizer back to HLS on August 31, 2024.
Vascepa revenue in Canada increased 30% in constant currency compared to Q3 2023 while the Q3 2024 loss attributed to Vascepa was $0.6 million, the lowest since product launch and a significant sequential decrease from a loss of $1.6 million in Q2 2024.
Vascepa unit demand increased by 45% compared to Q3 2023.
The number of consistent prescribers2 for Vascepa increased 66% compared to Q3 2023.
Clozaril revenue in Canada increased by 1% in constant currency compared to Q3 2023.
Clozaril patient growth in Canada was 2% compared to Q3 2023.
2024 and 2025 OUTLOOK With the release of its Q3 2024 results, the Company is updating its 2024 revenue and Adjusted EBITDA guidance.
HLS is now guiding to a lower revenue range of $56.5-57.2 million compared to the previous range of $58.5-59.7 million. The revised guidance is attributable to year-to-date U.S. Clozaril sales being behind plan and from the negative foreign exchange impact on the Company's Canadian business due to the persistent strength of the U.S. dollar relative to the Canadian dollar in 2024.
The underlying demand fundamentals for U.S. Clozaril remain sound. The decline in 2024 U.S. Clozaril net sales is largely due to higher-than-typical wholesaler inventory at the end of 2023, as previously disclosed. Management had anticipated that this impact would be mitigated through a modest mid-year price increase along with new business acquired through expansion of its specialty pharmacy program. However, the full implementation and impact of this program expansion will not be fully realized until 2025.
Based on the positive progress being made in reducing operating costs, the Company is raising the low end of its 2024 full year Adjusted EBITDA guidance to $16.0-16.7 million compared to the previous range of $15.5-16.7 million. HLS continues to expect that Vascepa will make a positive brand contribution to Adjusted EBITDA starting in Q4 2024.
Finally, the Company is providing a preliminary outlook for 2025. HLS expects that revenue growth from its promoted product portfolio will be in the high single-digit percentage range while consolidated Adjusted EBITDA growth will be in the mid-20's percentage range. The Company will update its 2025 financial outlook when it releases its 2024 year-end results in March next year.
Added Mr. Millian: "We are making progress in executing our plan, continuing to grow our promoted product portfolio while significantly reducing operating expenses and paying down debt. We believe the changes we are making this year will position HLS for top-line growth and increased profitability in 2025, while also creating greater flexibility for future capital allocation towards share buybacks and portfolio expansion opportunities."
Q3 2024 FINANCIAL REVIEW
The Company's Management's Discussion and Analysis and Consolidated Financial Statements for the three and nine months ended September 30, 2024, are available at the Company's website and at its profile at SEDAR+.
Revenue
Three months ended
September 30,
Nine months ended
September 30,
2024
2023
2024
2023
Product sales
Canada
11,087
10,153
30,878
28,755
United States
2,803
3,289
8,907
9,680
13,890
13,442
39,785
38,435
Royalty revenue
195
2,595
1,292
8,776
14,085
16,037
41,077
47,211
Revenue for the three and nine months ended September 30, 2024, decreased 12% and 13%, respectively, due to lower royalty revenues and was offset, in part, by growth of the Company's marketed products. Excluding royalties, revenue for the Company's marketed products (Vascepa, and Clozaril) for the three and nine months ended September 30, 2024, increased 3% and 4%, respectively, from the prior year periods.
Product sales, Canada
000's of CAD
Three months ended
September 30,
Nine months ended
September 30,
2024
2023
% change
2024
2023
% change
Clozaril
9,013
8,946
0.7 %
26,009
26,029
(0.1) %
Vascepa
6,077
4,665
30.3 %
15,955
12,661
26.0 %
Other
27
16
54
16
15,117
13,627
10.9 %
42,018
38,706
8.6 %
Canadian product sales of Vascepa and Clozaril in Q3 2024 increased 11% in local currency, compared to Q3 2023, driven primarily by the 30% growth of Vascepa. For the nine months ended September 30, 2024, Canadian product sales of Vascepa and Clozaril increased 9% in local currency, compared to the same period in 2023.
Product Sales, United States In the U.S. market, Clozaril revenue for the three and nine months ended September 30, 2024, decreased 15% and 8%, respectively, compared to the same periods in 2023. Results have been impacted by wholesaler purchasing patterns including a high level of wholesaler inventory at the start of the year and a key customer wholesaler transition that took place during Q3.
Royalty revenues Royalty revenues for the three and nine months ended September 30, 2024, were down 92% and 85%, respectively, compared to the prior year periods as the term for Emblem, the largest royalty in the portfolio, came to an end midway through Q4 2023. Following the sale of the Xenpozyme royalty interest in Q2 2024, HLS has one remaining royalty interest which generated $0.2 million in revenue in Q3 2024.
Operating Expenses
Three months ended
September 30,
Nine months ended
September 30,
2024
2023
2024
2023
Cost of product sales
2,235
1,870
6,312
5,091
Selling and marketing
4,208
5,048
13,295
15,180
Medical, regulatory and patient support
1,439
1,675
4,124
4,188
General and administrative
2,077
2,316
6,255
7,040
9,959
10,909
29,986
31,499
Cost of product sales was up for the three and nine months ended September 30, 2024, due primarily to higher Vascepa sales volumes.
Excluding cost of product sales, operational expenses for the three and nine months ended September 30, 2024, decreased 15% and 10%, respectively, compared to the prior year periods. This was due to the Company's focus on cost management while continuing to support the growth potential of its marketed products. Sales and marketing expenses were lower in Q3 2024 in large part due to the discontinuation of co-promotional activities with the Company's marketing partner at the end of August 2024.
Adjusted EBITDA1
Three months ended
September 30,
Nine months ended
September 30,
2024
2023
2024
2023
Net loss for the period
(4,844)
(6,901)
(16,632)
(22,130)
Stock-based compensation
511
(19)
1,194
63
Amortization and depreciation
5,508
8,207
17,283
24,892
Finance and related costs, net
2,389
4,223
7,998
9,128
Other costs (income)
621
42
(2,740)
4,106
Income tax expense (recovery)
(59)
(424)
3,988
(347)
Adjusted EBITDA
4,126
5,128
11,091
15,712
Adjusted EBITDA for the three and nine months ended September 30, 2024, decreased due to the decline in royalty revenue and was offset in part by growth in the Company's marketed products. Excluding royalty revenue, Adjusted EBITDA for the three and nine months ended September 30, 2024, would have been approximately $3.9 million and $9.8 million, respectively, compared to $2.5 million and $6.9 million in the prior year periods, representing increases of 55% and 41%.
The Company recorded Other Costs in Q3 2024 of approximately $0.6 ...
