Exhibit 99.1
Interim Consolidated Financial Statements
(in thousands of United States dollars)
THERATECHNOLOGIES INC.
Three- and six-month periods ended
May 31, 2022 and 2021
(Unaudited)
THERATECHNOLOGIES INC.
Table of Contents
(Unaudited)
(in thousands of United States dollars)
Page | ||||
Interim Consolidated Statements of Financial Position | 1 | |||
Interim Consolidated Statements of Comprehensive Loss | 2 | |||
Interim Consolidated Statements of Changes in Equity | 3 | |||
Interim Consolidated Statements of Cash Flows | 4 | |||
Notes to Interim Consolidated Financial Statements | 5 -19 |
THERATECHNOLOGIES INC.
Interim Consolidated Statements of Financial Position
(Unaudited)
As at May 31, 2022 and November 30, 2021
(in thousands of United States dollars)
Note | May 31, $ | November 30, $ | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash | 13,200 | 20,399 | ||||||||||
Bonds and money market funds | 19,291 | 19,955 | ||||||||||
Trade and other receivables | 12,477 | 10,487 | ||||||||||
Tax credits and grants receivable | 376 | 441 | ||||||||||
Inventories | 5 | 24,976 | 29,141 | |||||||||
Prepaid expenses and deposits | 5 | 7,386 | 10,745 | |||||||||
Derivative financial assets | 596 | 740 | ||||||||||
Total current assets | 78,302 | 91,908 | ||||||||||
Non-current assets | ||||||||||||
Property and equipment | 1,082 | 743 | ||||||||||
Right-of-use assets | 1,837 | 2,111 | ||||||||||
Intangible assets | 6 | 13,491 | 21,388 | |||||||||
Deferred financing costs | 647 | 621 | ||||||||||
Other assets | - | 2,441 | ||||||||||
Total non-current assets | 17,057 | 27,304 | ||||||||||
Total assets | 95,359 | 119,212 | ||||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | 43,555 | 40,376 | ||||||||||
Provisions | 7 | 5,690 | 4,123 | |||||||||
Current portion of lease liabilities | 9 | 479 | 463 | |||||||||
Income taxes payable | 145 | 60 | ||||||||||
Deferred revenue | 54 | 54 | ||||||||||
Total current liabilities | 49,923 | 45,076 | ||||||||||
Non-current liabilities | ||||||||||||
Convertible unsecured senior notes | 8 | 55,203 | 54,227 | |||||||||
Lease liabilities | 9 | 1,769 | 2,055 | |||||||||
Other liabilities | 108 | 94 | ||||||||||
Total non-current liabilities | 57,080 | 56,376 | ||||||||||
Total liabilities | 107,003 | 101,452 | ||||||||||
(Deficiency) Equity | ||||||||||||
Share capital and warrants | 10 | 335,752 | 335,752 | |||||||||
Equity component of convertible unsecured senior notes | 4,457 | 4,457 | ||||||||||
Contributed surplus | 15,037 | 12,843 | ||||||||||
Deficit | (367,007) | (335,248) | ||||||||||
Accumulated other comprehensive income (loss) | 117 | (44) | ||||||||||
Total (deficiency) equity | (11,644) | 17,760 | ||||||||||
Subsequent events | 16 | |||||||||||
Total liabilities and equity | 95,359 | 119,212 |
The accompanying notes are an integral part of these consolidated financial statements.
(1)
THERATECHNOLOGIES INC.
Interim Consolidated Statements of Comprehensive Loss
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars, except per share amounts)
For the three-month periods ended May 31, | For the six-month periods ended May 31, | |||||||||||||||||||
Note | 2022 $ | 2021 $ | 2022 $ | 2021 $ | ||||||||||||||||
Revenue | 3 | 19,268 | 17,787 | 37,825 | 33,217 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Cost of sales | ||||||||||||||||||||
Cost of goods sold | 7,759 | 4,714 | 12,637 | 8,904 | ||||||||||||||||
Amortization of other assets | 1,220 | 1,220 | 2,441 | 2,441 | ||||||||||||||||
Research and development expenses (net of tax credits of $66 and$153 (2021 – $92 and $117)) for the three and six-month periods | 11,056 | 6,417 | 19,059 | 11,300 | ||||||||||||||||
Selling expenses | 6 | 15,371 | 6,901 | 23,178 | 13,059 | |||||||||||||||
General and administrative expenses | 4,823 | 3,884 | 9,191 | 7,446 | ||||||||||||||||
Total operating expenses | 40,229 | 23,136 | 66,506 | 43,150 | ||||||||||||||||
Loss from operating activities | (20,961) | (5,349) | (28,681) | (9,933) | ||||||||||||||||
Finance income | 4 | 54 | 432 | 100 | 481 | |||||||||||||||
Finance costs | 4 | (1,698) | (1,455) | (3,029) | (2,836) | |||||||||||||||
(1,644) | (1,023) | (2,929) | (2,355) | |||||||||||||||||
Loss before income taxes | (22,605) | (6,372) | (31,610) | (12,288) | ||||||||||||||||
Income taxes | (122) | (20) | (149) | (26) | ||||||||||||||||
Net loss for the period | (22,727) | (6,392) | (31,759) | (12,314) | ||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||
Items that may be reclassified to net profit (loss) in the future: | ||||||||||||||||||||
Net change in fair value of FVOCI financial assets, net of tax | (223) | (59) | (326) | (61) | ||||||||||||||||
Exchange differences on translation of foreign operation | 390 | (165) | 487 | (267) | ||||||||||||||||
167 | (224) | 161 | (328) | |||||||||||||||||
Total comprehensive loss for the period | (22,560) | (6,616) | (31,598) | (12,642) | ||||||||||||||||
Basic and diluted loss per share | 10 | (c) | (0.24) | (0.07) | (0.33) | (0.14) |
The accompanying notes are an integral part of these consolidated financial statements.
(2)
THERATECHNOLOGIES INC.
Interim Consolidated Statements of Changes in Equity
(Unaudited)
For the six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars, except per share amounts)
For the six-month period ended May 31, 2022 | ||||||||||||||||||||||||||||||||
Note | Share capital | |||||||||||||||||||||||||||||||
Number | Amount | Equity | Contributed | Deficit | Accumulated | Total | ||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Balance as at November 30, 2021 | 95,121,639 | 335,752 | 4,457 | 12,843 | (335,248) | (44) | 17,760 | |||||||||||||||||||||||||
Total comprehensive loss | - | - | - | - | (31,759) | - | (31,759) | |||||||||||||||||||||||||
Net loss | ||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||
Net change in fair value of FVOCI financial assets, net of tax | - | - | - | - | - | (326) | (326) | |||||||||||||||||||||||||
Exchange differences on translation of foreign operation | - | - | - | - | - | 487 | 487 | |||||||||||||||||||||||||
Total comprehensive loss | - | - | - | - | (31,759) | 161 | (31,598) | |||||||||||||||||||||||||
Share-based compensation plan: | ||||||||||||||||||||||||||||||||
Share-based compensation for stock option | 10 | (b) | - | - | - | 2,194 | - | - | 2,194 | |||||||||||||||||||||||
Total contributions by owners | - | - | - | 2,194 | - | - | 2,194 | |||||||||||||||||||||||||
Balance as at May 31, 2022 | 95,121,639 | 335,752 | 4,457 | 15,037 | (367,007) | 117 | (11,644) | |||||||||||||||||||||||||
For the six-month period ended May 31, 2021 | ||||||||||||||||||||||||||||||||
Share capital | ||||||||||||||||||||||||||||||||
Number | Amount | Equity | Contributed | Deficit | Accumulated | Total | ||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Balance as at November 30, 2020 | 77,013,411 | 287,312 | 4,457 | 12,065 | (300,129) | (481) | 3,224 | |||||||||||||||||||||||||
Total comprehensive loss | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | (12,314) | - | (12,314) | |||||||||||||||||||||||||
Other comprehensive income: | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Net change in fair value of FVOCI financial assets, net of tax | - | - | - | - | - | (61) | (61) | |||||||||||||||||||||||||
Exchange differences on translation of foreign operation | - | - | - | - | - | (267) | (267) | |||||||||||||||||||||||||
Total comprehensive loss | - | - | - | - | (12,314) | (328) | (12,642) | |||||||||||||||||||||||||
Transactions with owners, recorded directly in equity | ||||||||||||||||||||||||||||||||
Public issue of common shares and warrants | 16,727,900 | 46,002 | - | - | - | - | 46,002 | |||||||||||||||||||||||||
Share issue costs | - | - | - | - | (3,390) | - | (3,390) | |||||||||||||||||||||||||
Exercise of warrants | 197,400 | 628 | - | - | - | - | 628 | |||||||||||||||||||||||||
Share issue – Oncology | 481,928 | 668 | - | (668) | - | - | - | |||||||||||||||||||||||||
Share-based compensation plan: | ||||||||||||||||||||||||||||||||
Share-based compensation for stock option plan | - | - | - | 1,099 | - | - | 1,099 | |||||||||||||||||||||||||
Exercise of stock options: | ||||||||||||||||||||||||||||||||
Monetary consideration | 400,000 | 241 | - | - | - | - | 241 | |||||||||||||||||||||||||
Attributed value | - | 160 | - | (160) | - | - | - | |||||||||||||||||||||||||
Total contributions by owners | 17,807,228 | 47,699 | - | 271 | (3,390) | - | 44,580 | |||||||||||||||||||||||||
Balance as at May 31, 2021 | 94,820,639 | 335,011 | 4,457 | 12,336 | (315,833) | (809) | 35,162 |
The accompanying notes are an integral part of these consolidated financial statements.
(3) |
THERATECHNOLOGIES INC.
Interim Consolidated Statement of Cash Flows
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
For the three-month periods ended May 31, | For the six-month periods ended May 31, | |||||||||||||||||||
Note | 2022 $ | 2021 $ | 2022 $ | 2021 $ | ||||||||||||||||
Cash flows from (used in) | ||||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net loss | (22,727) | (6,392) | (31,759) | (12,314) | ||||||||||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation of property and equipment | 61 | 57 | 119 | 113 | ||||||||||||||||
Amortization of intangible assets and other assets | 8,322 | 2,015 | 10,338 | 4,031 | ||||||||||||||||
Amortization of right-of-use assets | 108 | 113 | 218 | 226 | ||||||||||||||||
Share-based compensation for stock option plan and stock appreciation rights | 766 | 548 | 2,208 | 1,126 | ||||||||||||||||
Write-down of inventories | 5 | 170 | - | 170 | - | |||||||||||||||
Change in fair value of derivative financial assets | 33 | (34) | 151 | (224) | ||||||||||||||||
Change in fair value of liability related to deferred stock unit plan | (31) | 35 | (146) | 223 | ||||||||||||||||
Interest on convertible unsecured senior notes | 4 | 833 | 833 | 1,635 | 1,635 | |||||||||||||||
Interest income | (54) | (54) | (100) | (79) | ||||||||||||||||
Foreign exchange | 239 | (541) | 195 | (634) | ||||||||||||||||
Accretion expense | 4 | 544 | 608 | 1,061 | 1,189 | |||||||||||||||
(11,736) | (2,812) | (15,910) | (4,708) | |||||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||
Trade and other receivables | 1,077 | 451 | (2,085) | 2,100 | ||||||||||||||||
Tax credit and grants receivable | (66) | (8) | 56 | 317 | ||||||||||||||||
Inventories | 760 | (1,187) | 3,708 | (3,335) | ||||||||||||||||
Prepaid expenses and deposits | 1,097 | 320 | 3,342 | (330) | ||||||||||||||||
Accounts payable and accrued liabilities | 7,095 | 1,968 | 3,837 | (2,016) | ||||||||||||||||
Income taxes payable | 58 | - | 85 | 6 | ||||||||||||||||
Provisions | 568 | 574 | 1,715 | 2,044 | ||||||||||||||||
Deferred revenue | - | (22) | - | (22) | ||||||||||||||||
10,589 | 2,096 | 10,658 | (1,236) | |||||||||||||||||
Cash flows used in operating activities | (1,147) | (716) | (5,252) | (5,944) | ||||||||||||||||
Financing activities | ||||||||||||||||||||
Proceeds from issue of common shares and warrants | - | - | - | 46,002 | ||||||||||||||||
Share issue costs | - | (305) | - | (3,358) | ||||||||||||||||
Proceeds from exercise of stock options | - | 211 | - | 241 | ||||||||||||||||
Proceeds from exercise of warrants | - | 628 | - | 628 | ||||||||||||||||
Payments of lease liabilities | (154) | (160) | (310) | (318) | ||||||||||||||||
Deferred financing costs | (30) | - | (200) | - | ||||||||||||||||
Interest paid on convertible unsecured senior notes | - | - | (1,653) | (1,653) | ||||||||||||||||
Cash flows from (used in) financing activities | (184) | 374 | (2,163) | 41,542 | ||||||||||||||||
Investing activities | ||||||||||||||||||||
Acquisition of bonds and money market funds | (4) | (10,432) | (6) | (10,434) | ||||||||||||||||
Proceeds from sale of bonds and money market funds | 406 | 203 | 406 | 640 | ||||||||||||||||
Interest received | 103 | (352) | 171 | (320) | ||||||||||||||||
Acquisition of intangible assets | - | (39) | - | (39) | ||||||||||||||||
Acquisition of property and equipment | (305) | (19) | (349) | (46) | ||||||||||||||||
Cash flows from (used in) investing activities | 200 | (10,639) | 222 | (10,199) | ||||||||||||||||
Net change in cash during the period | (1,131) | (10,981) | (7,193) | 25,399 | ||||||||||||||||
Cash, beginning of period | 14,342 | 49,116 | 20,399 | 12,737 | ||||||||||||||||
Effect of foreign exchange on cash | (11) | 100 | (6) | 99 | ||||||||||||||||
Cash, end of period | 13,200 | 38,235 | 13,200 | 38,235 | ||||||||||||||||
Supplemental cash flow disclosures | 11 |
The accompanying notes are an integral part of these consolidated financial statements.
(4) |
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
Theratechnologies Inc. is a biopharmaceutical company focused on the development and commercialization of innovative therapies addressing unmet medical needs.
The interim consolidated financial statements include the accounts of Theratechnologies Inc. and its wholly-owned subsidiaries (together referred to as the “Company” and individually as the “subsidiaries of the Company”).
Theratechnologies Inc. is governed by the Business Corporations Act (Québec) and is domiciled in Québec, Canada. The Company is located at 2015 Peel Street, Suite 1100, Montréal, Québec, Canada, H3A 1T8.
1 | Basis of preparation |
a) | Accounting framework |
These unaudited interim consolidated financial statements (interim financial statements), including comparative information, have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting.
Certain information, in particular the accompanying notes normally included in the annual consolidated financial statements prepared in accordance with IFRS, has been omitted or condensed. These interim financial statements do not include all disclosures required under IFRS and, accordingly, should be read in conjunction with the annual consolidated financial statements for the year ended November 30, 2021, and the notes thereto.
These interim consolidated financial statements have been authorized for issue by the Company’s Audit Committee on July 13, 2022.
b) | Basis of measurement |
The Company’s interim consolidated financial statements have been prepared on going concern and historical cost bases, except for bonds and money market funds, derivative financial assets, liabilities related to cash-settled share-based arrangements and derivative financial assets, which are measured at fair value. Equity-classified shared-based payment arrangements are measured at fair value at grant date pursuant to IFRS 2, Share-based Payment.
The methods used to measure fair value are discussed further in Note 14.
(5)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
c) | Use of estimates and judgments |
The preparation of the Company’s interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, and the reported amounts of revenues and expenses during the reporting periods.
Information about critical judgments in applying accounting policies and assumptions and estimation uncertainties that have the most significant effect on the amounts recognized in the interim financial statements is disclosed in Note 1 of the annual consolidated financial statements as at November 30, 2021 and updated as follows:
Judgement was applied in concluding that there are no material uncertainties related to events or conditions that cast substantial doubt on the Company’s ability to continue as a going concern as a result of the Company’s convertible note in the amount of $57,500 coming due on June 30, 2023. Judgement was applied in assessing the likelihood of meeting the conditions to receive the funding discussed in note 16, Subsequent events.
Prior to receipt of each Tranche Loan, including Tranche Loan 1, a customary number of conditions must be met by the Company. In the event these conditions are not met and the Company does not receive the financing from Tranche Loan 1, and does not obtain alternative financing, events or conditions that cast significant doubt on the Company’s ability to continue as a going concern would exist as the Company would be unable to repay the convertible debt liability by June 30, 2023. In the event the Company receives the Tranche Loan 1 but does not meet the conditions to receive the Tranche Loan 2, and does not obtain alternative financing, the Company would need to manage its existing cash and short-term investments in order to repay the balance of the convertible notes.
d) | Functional and presentation currency |
The Company’s functional currency is the United States dollar (USD).
All financial information presented in USD has been rounded to the nearest thousand.
2 | Significant accounting policies |
The significant accounting policies as disclosed in the Company’s annual consolidated financial statements for the year ended November 30, 2021 have been applied consistently in the preparation of these interim financial statements.
3 | Revenue |
Net sales by product were as follows:
For the three-month | ||||||||
2022 $ | 2021 $ | |||||||
EGRIFTA SV®net sales | 11,416 | 10,344 | ||||||
Trogarzo® net sales | 7,852 | 7,443 | ||||||
19,268 | 17,787 |
(6)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
For the six-month | ||||||||
2022 $ | �� 2021 $ | |||||||
EGRIFTA SV® net sales | 23,120 | 19,032 | ||||||
Trogarzo® net sales | 14,705 | 14,185 | ||||||
37,825 | 33,217 |
Net sales by geography were as follows:
For the three-month | ||||||||
2022 $ | 2021 $ | |||||||
Canada | - | 148 | ||||||
United States | 19,070 | 16,893 | ||||||
Europe | 198 | 746 | ||||||
19,268 | 17,787 |
For the six-month | ||||||||
2022 $ | 2021 $ | |||||||
Canada | 145 | 287 | ||||||
United States | 37,169 | 31,469 | ||||||
Europe | 511 | 1,461 | ||||||
37,825 | 33,217 |
(7)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
4 | Finance income and finance costs |
Note | For the three-month | |||||||||||
2022 $ | 2021 $ | |||||||||||
Net foreign currency gain | - | 378 | ||||||||||
Interest income | 54 | 54 | ||||||||||
Finance income | 54 | 432 | ||||||||||
Accretion expense | 8 and 9 | (544) | (608) | |||||||||
Interest on convertible unsecured senior notes | (833) | (833) | ||||||||||
Bank charges | (14) | (13) | ||||||||||
Net foreign currency loss | (305) | - | ||||||||||
Loss on financial instruments carried at fair value | (2) | (1) | ||||||||||
Finance costs | (1,698) | (1,455) | ||||||||||
Net finance costs recognized in net profit or loss | (1,644) | (1,023) | ||||||||||
Note | For the six-month | |||||||||||
2022 $ | 2021 $ | |||||||||||
Net foreign currency gain | - | 402 | ||||||||||
Interest income | 100 | 79 | ||||||||||
Finance income | 100 | 481 | ||||||||||
Accretion expense | 8 and 9 | (1,061) | (1,189) | |||||||||
Interest on convertible unsecured senior notes | (1,635) | (1,635) | ||||||||||
Bank charges | (36) | (13) | ||||||||||
Net foreign currency loss | (292) | - | ||||||||||
(Loss) gain on financial instruments carried at fair value | (5) | 1 | ||||||||||
Finance costs | (3,029) | (2,836) | ||||||||||
Net finance costs recognized in net profit or loss | (2,929) | (2,355) |
(8)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
5 | Inventories, prepaid expenses, and deposits |
Inventories were written down in 2022 to net realizable value by an amount of $170 in the three- and six-month periods ended May 31, 2022, which is recorded in cost of sales.
In addition to the above, a charge of $2,300 was recorded relating to the non-production of scheduled batches of EGRIFTA SV® that were cancelled due to the planned transition to the F8 formulation of Tesamorelin in the three- and six-month periods ended May 31, 2022, which is recorded in cost of sales.
As a result of the Company’s decision to pause its activities related to the preparation of its NASH trial, the Company wrote-down research supplies included in prepaid expenses and deposits for an amount of $914 in the three-and six-month periods ended May 31, 2022, which is recorded in cost of sales.
6 | Commercial operations in Europe |
On April 27, 2022, the Company announced that it would focus its commercial operations on the North American territory only and, as a result, would cease its Trogarzo® commercial operations in Europe. The Company has sent a notice of termination to TaiMed Biologics Inc. (TaiMed) as per the contractual obligations and will return the European commercialization rights for Trogarzo® to TaiMed within the next 180 days.
Consequently, $6,356 have been recognized as part of selling expenses, to accelerate and fully amortize the Commercialization rights-Trogarzo® European Territory.
This decison is expected to result in approximately $1,500 in charges related to severance and other expenses associated with the termination of the agreement. The Company expects these charges to be fully recorded during 2022. As at May 31, 2022, no provision was recorded.
(9)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
7 | Provisions |
Chargebacks and rebates $ | Returns $ | Other $ | Total $ | |||||||||||||
Balance as at November 30, 2020 | 1,678 | 260 | 9 | 1,947 | ||||||||||||
Provisions made | 10,655 | 1,074 | - | 11,729 | ||||||||||||
Provisions used | (8,570) | (924) | (9) | (9,503) | ||||||||||||
Effect of change in exchange rate | (50) | - | - | (50) | ||||||||||||
Balance as at November 30, 2021 | 3,713 | 410 | - | 4,123 | ||||||||||||
Provisions made | 7,308 | 1,331 | - | 8,639 | ||||||||||||
Provisions used | (5,730) | (1,194) | - | (6,924) | ||||||||||||
Effect of change in exchange rate | (148) | - | - | (148) | ||||||||||||
Balance as at May 31, 2022 | 5,143 | 547 | - | 5,690 |
8 | Convertible unsecured senior notes |
The movement in the carrying value of the convertible unsecured senior notes is as follows:
$ | ||||
Convertible unsecured senior notes as at November 30, 2020 | 52,403 | |||
Accretion expense | 1,824 | |||
Convertible unsecured senior notes as at November 30, 2021 | 54,227 | |||
Accretion expense | 976 | |||
Convertible unsecured senior notes as at May 31, 2022 | 55,203 |
The convertible unsecured senior notes mature on June 30, 2023 (notes 13 and 16).
(10)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
9 | Lease liabilities |
Carrying Value $ | ||||
Balance as at November 30, 2020 | 2,980 | |||
Accretion expense | 200 | |||
Lease payments | (635) | |||
Effect on change in exchange rates | (27) | |||
Balance as at November 30, 2021 | 2,518 | |||
Accretion expense | 85 | |||
Lease payments | (310) | |||
Effect on change in exchange rates | (45) | |||
Balance as at May 31, 2022 | 2,248 | |||
Current portion | 479 | |||
Non-current portion | 1,769 |
10 | Share capital and warrants |
a) | Public offering |
On January 19, 2021, the Company completed a public offering for the sale and issuance of 16,727,900 units at a price of $2.75 per unit for a gross cash consideration of $46,002, including the full exercise of the over-allotment option.
Each unit comprises one common share of the Company and one-half of one common share purchase warrant of the Company (each whole warrant, a Warrant) and is classified in Share Capital and Warrants within equity. During the six-month period ended May 31, 2022, no Warrants were exercised and there were 8,130,550 Warrants outstanding. Each Warrant entitles the holder thereof to purchase one common share at an exercise price of US$3.18 at any time until January 19, 2024.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
b) | Stock option plan |
The Company has established a stock option plan (Plan) under which it can grant its directors, officers, employees, researchers and consultants non-transferable options for the purchase of common shares. The exercise date of an option may not be later than 10 years after the grant date. On March 3, 2022, the Company’s Board of Directors amended the Plan to convert it from a “fixed plan” to a “rolling plan”, whereby the maximum number of Common Shares which may be issued under the Plan (and under any other security-based compensation arrangements of the Company) will be changed from a fixed number of Common Shares to a number of Common Shares equal to 10% of all Common Shares issued and outstanding from time to time, on a non-diluted basis, and including a “reloading” or “evergreen” feature, so that when options are exercised, the number of Common Shares issuable will be replenished and exercised options will be available to be regranted in the future. Shareholders ratified this amendment on May 10, 2022. On May 31, 2022, a maximum number of 9,512,163 options can be granted under the Plan. Generally, the options vest at the grant date or over a period of up to three years. As at May 31, 2022, 3,852,964 options could still be granted by the Company (2021 – 3,888,536) under the Plan.
All options are to be settled by the physical delivery of common shares.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
Changes in the number of options outstanding during the past two years were as follows:
Weighted average exercise price per option | ||||||||||||
Number of options | CAD | USD | ||||||||||
Options oustanding in CA$ | ||||||||||||
Options as at November 30, 2020 – CA$ | 3,203,693 | $3.59 | $2.76 | |||||||||
Granted – CA$ | 1,019,331 | 3.93 | 3.09 | |||||||||
Forfeited – CA$ | (17,732) | 3.59 | 2.80 | |||||||||
Exercised (share price: CA$3.77 (US$3.27)) | (400,000) | 0.75 | 0.60 | |||||||||
Options outstanding as at May 31, 2021 – CA$ | 3,805,292 | 3.98 | 3.30 | |||||||||
Options as at November 30, 2021 – CA$ | 3,190,284 | 3.83 | 3.00 | |||||||||
Granted – CA$ | 2,144,389 | 4.20 | 3.28 | |||||||||
Forfeited – CA$ | (112,879) | 4.06 | 3.17 | |||||||||
Options outstanding as at May 31, 2022 – CA$ | 5,221,794 | $3.98 | $3.15 | |||||||||
Options exercisable as at May 31, 2022 – CA$ | 2,328,989 | $3.97 | $3.13 | |||||||||
Options oustanding in US$ | ||||||||||||
Options as at November 30, 2020 – US$ | 12,500 | - | 2.35 | |||||||||
Granted – US$ | 81,093 | - | 3.10 | |||||||||
Options outstanding as at May 31, 2021 – US$ | 93,593 | - | 3.00 | |||||||||
Options as at November 30, 2021 – US$ | 80,733 | - | 3.09 | |||||||||
Granted – US$ | 356,672 | - | 2.40 | |||||||||
Options outstanding as at May 31, 2022 – US$ | 437,405 | - | $2.53 | |||||||||
Options exercisable as at May 31, 2022 – US$ | 26,909 | - | $3.09 |
During the six-month period ended May 31, 2022, $2,194 (2021 – $1,099) were recorded as share-based compensation expense for the Plan. The fair value of options granted during the period was estimated at the grant date using the Black-Scholes model and the following weighted average assumptions:
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
2022 | 2021 | |||||||
Options granted in CA$ | ||||||||
Risk-free interest rate | 2.99% | 1.36% | ||||||
Expected volatility | 58.4% | 71% | ||||||
Average option life in years | 8.5 years | 8.5 years | ||||||
Grant-date share price | $2.67 (CA$3.38) | $3.10 (CA$3.93) | ||||||
Option exercise price | $2.67 (CA$3.38) | $3.10 (CA$3.93) |
2022 | 2021 | |||||||
Options granted in US$ | ||||||||
Risk-free interest rate | 2.9% | 1.40% | ||||||
Expected volatility | 58% | 73% | ||||||
Average option life in years | 8.5 years | 8.5 years | ||||||
Grant-date share price | $2.59 | $3.10 | ||||||
Option exercise price | $2.59 | $3.10 |
The risk-free interest rate is based on the implied yield on a Canadian government or U.S. zero-coupon issue, with a remaining term equal to the expected term of the option. The volatility is based on weighted average historical volatility adjusted for a period equal to the expected life. The life of the options is estimated taking into consideration the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past. The dividend yield was excluded from the calculation, since it is the present policy of the Company to retain all earnings to finance operations and future growth.
The following table summarizes the measurement date weighted average fair value of stock options granted during the following periods:
Number of options | Weighted average grant date fair value | |||||||
Options granted in CA$ | ||||||||
For the three and six-month periods ended | 2,144,389 | $ | 3.32 (CA$4.20) | |||||
For the three-month period ended | 1,019,331 | $ | 2.41 (CA$2.72) |
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
Number of options | Weighted average grant date fair value | |||||||
Options granted in US$ | ||||||||
For the three and six-month periods ended | 356,672 | $2.03 | ||||||
For the three and six-month periods ended | 81,093 | $2.19 |
There were 30,000 options granted in CA$ and 101,672 in US$ options granted for the three-month period ended May 31, 2021. The Black-Scholes model used by the Company to calculate option values was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. This model also requires four highly subjective assumptions, including future stock price volatility and average option life, which greatly affect the calculated values.
c) | Loss per share |
For the three and six-month periods May 31, 2022 and 2021, the weighted average number of common shares outstanding was calculated as follows:
For the three-month periods ended May 31, | ||||||||
2022 | 2021 | |||||||
Issued common shares as at March 1 | 95,121,639 | 93,841,311 | ||||||
Effect of share options exercised | - | 153,261 | ||||||
Effect of public issue of common shares | - | 366,684 | ||||||
Effect of broker warrants | - | 140,252 | ||||||
Weighted average number of common shares, basic and diluted | 95,121,639 | 94,501,508 |
For the six-month periods ended May 31, | ||||||||
2022 | 2021 | |||||||
Issued common shares as at December 1 | 95,121,639 | 77,013,411 | ||||||
Effect of share options exercised | - | 157,143 | ||||||
Effect of public issue of common shares | - | 12,409,592 | ||||||
Effect of broker warrants | - | 70,897 | ||||||
Weighted average number of common shares, basic and diluted | 95,121,639 | 89,651,043 |
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
For the six-month period ended May 31, 2022, 5,659,199 (2021 – 3,898,885) share options, 8,130,550 Warrants and 3,872,053 common shares potentially issuable from the conversion of the $57,500 aggregate principal amount of notes, that may potentially dilute loss per share in the future, were excluded from the weighted average number of diluted common shares calculation as their effect would have been anti-dilutive.
11 | Supplemental cash flow disclosures |
The Company entered into the following transactions which had no impact on its cash flows:
May 31, 2022 $ | May 31, 2021 $ | |||||||
Additions to property and equipment included in accounts payable and accrued liabilities | 109 | 14 | ||||||
Share issue costs included in accounts payable and accrued liabilities
|
| -
|
|
| 32
|
|
12 | Financial instruments |
The nature and extent of the Company’s exposure to risks arising from financial instruments are consistent with the disclosure in the annual consolidated financial statements as at November 30, 2021, considering the update below.
13 | Capital management and liquidity risk |
The Company’s objective in managing its capital is to ensure a liquidity position sufficient to finance its business activities which meets its financial obligations as they become due. The Company depends primarily on revenue generated from sales of EGRIFTA SV® as well as sales of Trogarzo® in the United States and, from time to time, on offerings of securities in North America to finance its activities as well as debt financing. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may issue or repay long-term debt, issue shares, repurchase shares, pay dividends or undertake other activities as deemed appropriate under the specific circumstances. The Company has also announced that it will evaluate its options in funding late stage development programs, which may include seeking a potential partner or additional financing. In 2021, the Company entered into an ATM program under which it may sell, from time to time, up to $50 million of its common shares.
The capital management objectives remain the same as for the previous year.
As at May 31, 2022, cash, bonds and money market funds amounted to $32,491. The Company believes that its cash position and future operating cash flows will be sufficient to finance its operations and capital needs for at least the next
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
12 months from the consolidated statement of financial position date. Furthermore, subsequent to May 31, 2022 (refer to Note 16), the Company secured a new financing.
Currently, the Company’s general policy on dividends is to retain cash to keep funds available to finance its growth.
The Company defines capital to include total equity and convertible unsecured senior notes and other long-term debt.
The Company is not subject to any externally imposed capital requirements.
14 | Determination of fair values |
Certain of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Financial assets and financial liabilities measured at fair value
In establishing fair value, the Company uses a fair value hierarchy based on levels as defined below:
Level 1: | Defined as observable inputs such as quoted prices in active markets. |
Level 2: | Defined as inputs other than quoted prices in active markets that are either directly or indirectly observable. |
Level 3: | Defined as inputs that are based on little or no observable market data, therefore requiring entities to develop their own assumptions. |
Other financial assets and financial liabilities
The Company has determined that the carrying values of its short-term financial assets and financial liabilities, including cash, trade and other receivables and accounts payable and accrued liabilities, approximate their fair value because of their relatively short period to maturity.
Bonds and money market funds and derivative financial assets and liabilities are stated at fair value, determined by inputs that are primarily based on broker quotes at the reporting date (Level 2).
The fair value of the convertible unsecured senior notes, including the equity portion, as at May 31, 2022, was approximately $47,725 (Level 2) based on market quotes.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
15 | Operating segments |
The Company has a single operating segment. Over 98% (2021 – 94%) of the Company’s revenues are generated from one customer, RxCrossroads, which is domiciled in the United States.
For the three-month periods ended May 31, | ||||||||
2022 $ | 2021 $ | |||||||
RxCrossroads | 19,070 | 16,893 | ||||||
Others | 198 | 894 | ||||||
19,268 | 17,787 |
For the six-month periods ended May 31, | ||||||||
2022 $ | 2021 $ | |||||||
RxCrossroads | 37,169 | 31,368 | ||||||
Others | 656 | 1,849 | ||||||
37,825 | 33,217 |
All of the Company’s non-current assets are located in Canada and Ireland, as is the Company’s head office. Of the Company’s non-current assets of $17,057, $16,104 as at May 31, 2022 are located in Canada and $953 are located in Ireland (November 30, 2020: $35,335, of which $34,006 were in Canada and $1,329 were in Ireland).
16 | Subsequent events |
On July 13, 2022, the Company announced a binding commitment for a non-dilutive term loan for up to $100,000 (the “Loan Facility”) with Marathon Asset Management.
The salient features of the Loan Facility are as follows:
● | Senior secured term loan of up to $100,000 across four tranches; |
● | $40,000 is expected to be funded on or before July 29, 2022 (“Tranche 1 Loan”); |
● | $20,000 to be made available by no later than June 30, 2023 if the Company has filed with the FDA its sBLA for the EGRIFTA SV® human factor study and has had net revenues of at least $75,000 (“Tranche 2 Loan”); |
● | $15,000 to be made available by no later than March 2024 if the Company has in the 12 month period preceding the funding of the tranche obtained approval from the FDA for its F8 formulation of tesamorelin and has had net revenues of at least $90,000 in the 12 month period preceding the funding of the tranche. (“Tranche 3 Loan”); |
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2022 and 2021
(in thousands of United States dollars)
● | Up to an additional $25,000 to be made available if the Company has had at least $110,000 in net revenues in the 12 month period preceding the funding of the tranche and at least $20,000 in EBITDA (as defined in the Loan Facility document until December 31, 2024) (“Tranche 4 Loan”); |
● | The facility will have an initial term of five years (six years if Tranche 3 is drawn), provide for an interest-only period of 24 months (36 months if Tranche 3 is drawn), and bear interest at the Secured Overnight Financing Rate (SOFR) plus 9.5%; |
The Company also announced the signing of purchase agreements with a number of convertible US noteholders aggregating $30,000 principal amount of Convertible Notes. The purchase of these Convertible Notes will be made on or before July 29, 2022.
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