Interim Consolidated Financial Statements
(in thousands of United States dollars)
THERATECHNOLOGIES INC.
Three- and six-month periods ended
May 31, 2021 and 2020
(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 - 17 |
THERATECHNOLOGIES INC.
Interim Consolidated Statements of Financial Position
(Unaudited)
As at May 31, 2021 and November 30, 2020
(in thousands of United States dollars)
Note |
May 31, 2021 |
November 30, 2020 | ||||||||||
$ | $ | |||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash | 38,235 | 12,737 | ||||||||||
Bonds and money market funds | 18,479 | 8,031 | ||||||||||
Trade and other receivables | 10,352 | 12,430 | ||||||||||
Tax credits and grants receivable | 475 | 755 | ||||||||||
Inventories | 28,578 | 25,145 | ||||||||||
Prepaid expenses and deposits | 5,524 | 5,189 | ||||||||||
Derivative financial assets | 796 | 520 | ||||||||||
Total current assets | 102,439 | 64,807 | ||||||||||
Non-current assets | ||||||||||||
Property and equipment | 800 | 865 | ||||||||||
Right-of-use assets | 2,424 | 2,618 | ||||||||||
Intangible assets | 22,978 | 24,529 | ||||||||||
Other assets | 4,882 | 7,323 | ||||||||||
Total non-current assets | 31,084 | 35,335 | ||||||||||
Total assets | 133,523 | 100,142 | ||||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | 33,180 | 34,815 | ||||||||||
Provisions | 5 | 3,991 | 1,947 | |||||||||
Other obligations | 6 | 4,863 | 4,666 | |||||||||
Current portion of lease liabilities | 8 | 471 | 425 | |||||||||
Income taxes payable | 22 | 16 | ||||||||||
Deferred revenue | 28 | 50 | ||||||||||
Total current liabilities | 42,555 | 41,919 | ||||||||||
Non-current liabilities | ||||||||||||
Convertible unsecured senior notes | 7 | 53,291 | 52,403 | |||||||||
Lease liabilities | 8 | 2,447 | 2,555 | |||||||||
Other liabilities | 68 | 41 | ||||||||||
Total non-current liabilities | 55,806 | 54,999 | ||||||||||
Total liabilities | 98,361 | 96,918 | ||||||||||
Equity | ||||||||||||
Share capital and warrants | 9 | 335,011 | 287,312 | |||||||||
Equity component of convertible unsecured senior notes | 4,457 | 4,457 | ||||||||||
Contributed surplus | 12,336 | 12,065 | ||||||||||
Deficit | (315,833 | ) | (300,129 | ) | ||||||||
Accumulated other comprehensive loss | (809 | ) | (481 | ) | ||||||||
Total equity | 35,162 | 3,224 | ||||||||||
Subsequent event | 14 | |||||||||||
Total liabilities and equity | 133,523 | 100,142 |
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, 2021 and 2020
(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 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Revenue | 3 | 17,787 | 17,162 | 33,217 | 32,881 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Cost of sales | ||||||||||||||||||||
Cost of goods sold | 4,714 | 5,769 | 8,904 | 11,169 | ||||||||||||||||
Other production-related costs | - | 391 | - | 531 | ||||||||||||||||
Amortization of other assets | 1,220 | 1,220 | 2,441 | 2,441 | ||||||||||||||||
Research and development expenses | ||||||||||||||||||||
(net of tax credits of $64 (2020 - nil)) | 6,417 | 3,622 | 11,300 | 7,041 | ||||||||||||||||
Selling expenses | 6,901 | 6,941 | 13,059 | 13,302 | ||||||||||||||||
General and administrative expenses | 3,884 | 3,706 | 7,446 | 6,276 | ||||||||||||||||
Total operating expenses | 23,136 | 21,649 | 43,150 | 40,760 | ||||||||||||||||
Loss from operating activities | (5,349 | ) | (4,487 | ) | (9,933 | ) | (7,879 | ) | ||||||||||||
Finance income | 4 | 432 | 80 | 481 | 246 | |||||||||||||||
Finance costs | 4 | (1,455 | ) | (1,399 | ) | (2,836 | ) | (2,717 | ) | |||||||||||
(1,023 | ) | (1,319 | ) | (2,355 | ) | (2,471 | ) | |||||||||||||
Loss before income taxes | (6,372 | ) | (5,806 | ) | (12,288 | ) | (10,350 | ) | ||||||||||||
Income taxes | 20 | - | 26 | - | ||||||||||||||||
Net loss | (6,392 | ) | (5,806 | ) | (12,314 | ) | (10,350 | ) | ||||||||||||
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 | (59 | ) | 9 | (61 | ) | 19 | ||||||||||||||
Exchange differences on translation | (165 | ) | (42 | ) | (267 | ) | (44 | ) | ||||||||||||
(224 | ) | (33 | ) | (328 | ) | (25 | ) | |||||||||||||
Total comprehensive loss | (6,616 | ) | (5,839 | ) | (12,642 | ) | (10,375 | ) | ||||||||||||
Basic and diluted loss | 9 | (e) | (0.07 | ) | (0.08 | ) | (0.14 | ) | (0.13 | ) |
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, 2021 and 2020
(in thousands of United States dollars, except per share amounts)
For the six-month period ended May 31, 2021 | ||||||||||||||||||||||||||||||||
Note |
Share capital and warrants | |||||||||||||||||||||||||||||||
Number of shares | Amount |
Equity component of convertible notes |
Contributed surplus | Deficit |
Accumulated other comprehensive loss | 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 | 9 | (a) | 16,727,900 | 46,002 | - | - | - | - | 46,002 | |||||||||||||||||||||||
Share issue costs | - | - | - | - | (3,390 | ) | - | (3,390 | ) | |||||||||||||||||||||||
Exercise of warrants | 197,400 | 628 | - | - | - | - | 628 | |||||||||||||||||||||||||
Share issue - Oncology | 9 | (b) | 481,928 | 668 | - | (668 | ) | - | - | - | ||||||||||||||||||||||
Share-based compensation plan: | ||||||||||||||||||||||||||||||||
Share-based compensation for stock option plan | 9 | (c) | - | - | - | 1,099 | - | - | 1,099 | |||||||||||||||||||||||
Exercise of stock options: | ||||||||||||||||||||||||||||||||
Monetary consideration | 9 | (c) | 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 | |||||||||||||||||||||||
For the six-month period ended May 31, 2020 | ||||||||||||||||||||||||||||||||
Share capital and warrants | ||||||||||||||||||||||||||||||||
Number of shares | Amount |
Equity component of convertible notes |
Contributed surplus | Deficit |
Accumulated other comprehensive loss | Total | ||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Balance as at November 30, 2019 | 76,953,411 | 287,035 | 4,457 | 10,783 | (277,462 | ) | 21 | 24,834 | ||||||||||||||||||||||||
Total comprehensive loss | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | (10,350 | ) | - | (10,350 | ) | |||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||
Net change in fair value of financial assets at fair value through other comprehensive income, net of tax | - | - | - | - | - | 19 | 19 | |||||||||||||||||||||||||
Exchange differences on translation of foreign operation | - | - | - | - | - | (44 | ) | (44 | ) | |||||||||||||||||||||||
Total comprehensive loss | - | - | - | - | (10,350 | ) | (25 | ) | (10,375 | ) | ||||||||||||||||||||||
Transactions with owners, recorded directly in equity | ||||||||||||||||||||||||||||||||
Share based compensation plan: | ||||||||||||||||||||||||||||||||
Share based compensation for stock option plan | - | - | - | 818 | - | - | 818 | |||||||||||||||||||||||||
Exercise of stock options: | ||||||||||||||||||||||||||||||||
Monetary consideration | 60,000 | 145 | - | - | - | - | 145 | |||||||||||||||||||||||||
Attributed value | - | 132 | - | (132 | ) | - | - | - | ||||||||||||||||||||||||
Total contributions by owners | 60,000 | 277 | - | 686 | - | - | 963 | |||||||||||||||||||||||||
Balance as at May 31, 2020 | 77,013,411 | 287,312 | 4,457 | 11,469 | (287,812 | ) | (4 | ) | 15,422 |
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, 2021 and 2020
(in thousands of United States dollars)
For the three-month periods ended May 31, | For the six-month periods ended May 31, | |||||||||||||||||||
Note | 2021 $ | 2020 $ | 2021 $ | 2020 $ | ||||||||||||||||
Cash flows from (used in) | ||||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net loss | (6,392 | ) | (5,806 | ) | (12,314 | ) | (10,350 | ) | ||||||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation of property and equipment | 57 | 61 | 113 | 121 | ||||||||||||||||
Amortization of intangible assets and other assets | 2,015 | 1,939 | 4,031 | 3,800 | ||||||||||||||||
Amortization of right-of-use assets | 113 | 109 | 226 | 218 | ||||||||||||||||
Share-based compensation for stock option plan and stock appreciation rights | 548 | 454 | 1,126 | 819 | ||||||||||||||||
Write-down of inventories | - | 391 | - | 394 | ||||||||||||||||
Change in fair value of derivative financial assets | (34 | ) | 102 | (224 | ) | 249 | ||||||||||||||
Change in fair value of liability related to deferred stock unit plan | 35 | (95 | ) | 223 | (240 | ) | ||||||||||||||
Interest on convertible unsecured senior notes | 833 | 842 | 1,635 | 1,644 | ||||||||||||||||
Interest income | (54 | ) | (80 | ) | (79 | ) | (246 | ) | ||||||||||||
Foreign exchange | (541 | ) | 23 | (634 | ) | 36 | ||||||||||||||
Accretion expense | 608 | 521 | 1,189 | 1,023 | ||||||||||||||||
(2,812 | ) | (1,539 | ) | (4,708 | ) | (2,532 | ) | |||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||
Trade and other receivables | 451 | (2,301 | ) | 2,100 | (2,071 | ) | ||||||||||||||
Tax credit and grants receivable | (8 | ) | - | 317 | - | |||||||||||||||
Inventories | (1,187 | ) | (4,424 | ) | (3,335 | ) | (4,168 | ) | ||||||||||||
Prepaid expenses and deposits | 320 | (31 | ) | (330 | ) | 669 | ||||||||||||||
Accounts payable and accrued liabilities | 1,968 | 5,040 | (2,016 | ) | (351 | ) | ||||||||||||||
Income taxes payable | - | - | 6 | - | ||||||||||||||||
Provisions | 574 | 164 | 2,044 | 570 | ||||||||||||||||
Deferred revenue | (22 | ) | (9 | ) | (22 | ) | (42 | ) | ||||||||||||
2,096 | (1,561 | ) | (1,236 | ) | (5,393 | ) | ||||||||||||||
Cash flows used in operating activities | (716 | ) | (3,100 | ) | (5,944 | ) | (7,925 | ) | ||||||||||||
Financing activities | ||||||||||||||||||||
Proceeds from issue of common shares and warrants | 9 | (a) | - | - | 46,002 | - | ||||||||||||||
Share issue costs | 9 | (a) | (305 | ) | - | (3,358 | ) | - | ||||||||||||
Proceeds from exercise of stock options | 211 | 145 | 241 | 145 | ||||||||||||||||
Proceeds from exercise of warrants | 628 | - | 628 | - | ||||||||||||||||
Payments of lease liabilities | (160 | ) | (135 | ) | (318 | ) | (276 | ) | ||||||||||||
Interest paid on convertible unsecured senior notes | - | - | (1,653 | ) | (1,653 | ) | ||||||||||||||
Cash flows from (used in) financing activities | 374 | 10 | 41,542 | (1,784 | ) | |||||||||||||||
Investing activities | ||||||||||||||||||||
Acquisition of bonds and money market funds | (10,432 | ) | (21 | ) | (10,434 | ) | (51 | ) | ||||||||||||
Proceeds from sale of bonds and money market funds | 203 | 859 | 640 | 2,258 | ||||||||||||||||
Interest received | (352 | ) | 107 | (320 | ) | 298 | ||||||||||||||
Acquisition of intangible assets | (39 | ) | - | (39 | ) | - | ||||||||||||||
Acquisition of derivative financial assets | - | (17 | ) | - | (17 | ) | ||||||||||||||
Acquisition of property and equipment | (19 | ) | (10 | ) | (46 | ) | (13 | ) | ||||||||||||
Cash flows from (used in) investing activities | (10,639 | ) | 918 | (10,199 | ) | 2,475 | ||||||||||||||
Net change in cash | (10,981 | ) | (2,172 | ) | 25,399 | (7,234 | ) | |||||||||||||
Cash, beginning of period | 49,116 | 23,600 | 12,737 | 28,661 | ||||||||||||||||
Effect of foreign exchange on cash | 100 | 12 | 99 | 13 | ||||||||||||||||
Cash, end of period | 38,235 | 21,440 | 38,235 | 21,440 | ||||||||||||||||
Supplemental cash flow disclosures | 10 |
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, 2021 and 2020
(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, 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, 2020 and the notes thereto.
These interim consolidated financial statements have been authorized for issue by the Company's Audit Committee on July 14, 2021.
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-settledshare-based arrangements and derivative financial liabilities, which are measured at fair value. Effective December 1, 2019, lease liabilities are measured at the present value of lease payments not paid at commencement date. Equity-classifiedshared-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 12.
(5)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(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 are disclosed in Note 1 of the annual consolidated financial statements as at November 30, 2020.
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, 2020 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 periods ended May 31, | ||||||||
2021 $ | 2020 $ | |||||||
EGRIFTA® and EGRIFTA SVTM net sales | 10,344 | 9,269 | ||||||
Trogarzo® net sales | 7,443 | 7,893 | ||||||
17,787 | 17,162 |
(6)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
For the six-month periods ended May 31, | ||||||||
2021 $ | 2020 $ | |||||||
EGRIFTA® and EGRIFTA SVTM net sales | 19,032 | 17,784 | ||||||
Trogarzo® net sales | 14,185 | 15,097 | ||||||
33,217 | 32,881 | |||||||
Net sales by geography were as follows: | ||||||||
For the three-month periods ended May 31, | ||||||||
2021 $ | 2020 $ | |||||||
Canada | 148 | 122 | ||||||
United States | 16,893 | 17,040 | ||||||
Europe | 746 | - | ||||||
17,787 | 17,162 | |||||||
For the six-month periods ended May 31, | ||||||||
2021 $ | 2020 $ | |||||||
Canada | 287 | 231 | ||||||
United States | 31,469 | 32,650 | ||||||
Europe | 1,461 | - | ||||||
33,217 | 32,881 |
(7)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
4 | Finance income and finance costs |
Note |
For the three-month periods ended May 31, | |||||||||||
2021 $ | 2020 $ | |||||||||||
Net foreign currency gain | 378 | - | ||||||||||
Interest income | 54 | 80 | ||||||||||
Finance income | 432 | 80 | ||||||||||
Accretion expense | 6, 7, 8 | (608 | ) | (521 | ) | |||||||
Interest on convertible unsecured senior notes | (833 | ) | (842 | ) | ||||||||
Bank charges | (13 | ) | (16 | ) | ||||||||
Net foreign currency loss | - | (13 | ) | |||||||||
Loss on financial instruments carried at fair value | (1 | ) | (7 | ) | ||||||||
Finance costs | (1,455 | ) | (1,399 | ) | ||||||||
Net finance costs recognized in net profit or loss | (1,023 | ) | (1,319 | ) | ||||||||
Note |
For the six-month periods ended May 31, | |||||||||||
2021 $ | 2020 $ | |||||||||||
Net foreign currency gain | 402 | - | ||||||||||
Interest income | 79 | 246 | ||||||||||
Finance income | 481 | 246 | ||||||||||
Accretion expense | 6, 7, 8 | (1,189 | ) | (1,023 | ) | |||||||
Interest on convertible unsecured senior notes | (1,635 | ) | (1,644 | ) | ||||||||
Bank charges | (13 | ) | (16 | ) | ||||||||
Net foreign currency loss | - | (25 | ) | |||||||||
Gain (loss) on financial instruments carried at fair value | 1 | (9 | ) | |||||||||
Finance costs | (2,836 | ) | (2,717 | ) | ||||||||
Net finance costs recognized in net profit or loss | (2,355 | ) | (2,471 | ) |
(8)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
5 | Provisions |
Chargebacks $ | Returns $ | Other $ | Total $ | |||||||||||||
Balance as at November 30, 2019 | 2,182 | 247 | 55 | 2,484 | ||||||||||||
Provisions made | 10,314 | 948 | 2,973 | 14,235 | ||||||||||||
Provisions used | (10,818 | ) | (935 | ) | (3,019 | ) | (14,772 | ) | ||||||||
Balance as at November 30, 2020 | 1,678 | 260 | 9 | 1,947 | ||||||||||||
Provisions made | 4,634 | 293 | 1,660 | 6,587 | ||||||||||||
Provisions used | (3,931 | ) | (206 | ) | (406 | ) | (4,543 | ) | ||||||||
Balance as at May 31, 2021 | 2,381 | 347 | 1,263 | 3,991 |
6 | Other obligations |
The movement in the other obligations is as follows:
Commercialization $ |
Commercialization $ | Total $ | ||||||||||
Balance as at November 30, 2019 | 3,417 | 4,570 | 7,987 | |||||||||
Payment | (3,500 | ) | - | (3,500 | ) | |||||||
Accretion expense | 83 | 96 | 179 | |||||||||
Balance as at November 30, 2020 | - | 4,666 | 4,666 | |||||||||
Accretion expense | - | 197 | 197 | |||||||||
Balance as at May 31, 2021, all current | - | 4,863 | 4,863 |
(9)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
7 | 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, 2019 | 50,741 | |||
Accretion expense | 1,662 | |||
Convertible unsecured senior notes as at November 30, 2020 | 52,403 | |||
Accretion expense | 888 | |||
Convertible unsecured senior notes as at May 31, 2021 | 53,291 |
8 | Lease liabilities |
Carrying value $ | ||||
Balance as at December 1, 2019 | 3,192 | |||
Accretion expense | 215 | |||
Lease payments | (568 | ) | ||
Effect on change in exchange rates | 141 | |||
Balance as at November 30, 2020 | 2,980 | |||
Accretion expense | 104 | |||
Lease payments | (318 | ) | ||
Effect on change in exchange rates | 152 | |||
Balance as at May 31, 2021 | 2,918 | |||
Current portion | 471 | |||
Non-current portion | 2,447 |
(10)
THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
9 | 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. As at May 31, 2021, 197,400 Warrants were exercised and there were 8,166,550 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.
b) | Milestone oncology |
In March 2021, the Company issued 481,928 common shares under the terms of the acquisition agreement entered into with all of the shareholders of Katana Biopharma Inc. (Katana) for Katana's in-licensed oncology platform. The purchase price for the oncology platform provided for share-based consideration to be issued upon attainment of two milestones. The first milestone consisted in initiating a Phase 1 clinical trial evaluating TH1902 for the treatment of sortilin positive solid tumors. This milestone was achieved in March 2021. The estimated fair value of the share-based consideration of $668 initially recorded in contributed surplus on the date of the acquisition was reclassified to share capital in the second quarter.
c) | Stock option plan |
The Company has established a stock option plan (Plan) under which it can grant its directors, officers, employees, researchers and consultants non-transferable options for the purchase of common shares. The exercise date of an option may not be later than 10 years after the grant date. A maximum number of 7,700,000 options can be granted under the Plan. Generally, the options vest at the grant date or over a period of up to three years. As at May 31, 2021, 3,888,536 options could still be granted by the Company (2020 - 1,172,697) under the Plan.
All options are to be settled by the physical delivery of common shares.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
Changes in the number of options outstanding during the past two years were as follows:
Weighted average exercise price per option | ||||||||||||
Number of options | CAD | USD | ||||||||||
Options exercisable in CA$ | ||||||||||||
Options as at November 30, 2019 - CA$ | 2,415,784 | $ | 3.93 | $ | 2.96 | |||||||
Granted - CA$ | 1,077,721 | 3.06 | 2.25 | |||||||||
Forfeited - CA$ | (130,146 | ) | 5.08 | 3.63 | ||||||||
Exercised (share price: CA$3.77 (US$2.68)) | (60,000 | ) | 3.38 | 2.40 | ||||||||
Options outstanding as at May 31, 2020 - CA$ | 3,303,359 | 3.61 | 2.62 | |||||||||
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$4.07 (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 exercisable as at May 31, 2021 - CA$ | 2,164,924 | $ | 4.17 | $ | 3.45 | |||||||
Options exercisable 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 exercisable as at May 31, 2021 - US$ | - | - | - |
During the six-month period ended May 31, 2021, $1,099 (2020 - $818) was recorded as share-based compensation expense for the Plan. The fair value of options granted during the period was estimated at the grant date using the Black-Scholes model and the following weighted average assumptions:
2021 | 2020 | |||||||
Options exercisable in CA$ | ||||||||
Risk-free interest rate | 1.36% | 0.95% | ||||||
Expected volatility | 71% | 70% | ||||||
Average option life in years | 8.5 years | 8.5 years | ||||||
Grant-date share price | $3.10 (CA$3.93) | $2.22 (CA$3.06) | ||||||
Option exercise price | $3.10 (CA$3.93) | $2.22 (CA$3.06) |
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
2021 | ||||
Options exercisable in US$ | ||||
Risk-free interest rate | 1.40% | |||
Expected volatility | 73% | |||
Average option life in years | 8.5 years | |||
Grant-date share price | $ | 3.10 | ||
Option exercise price | $ | 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 exercisable in CA$ | ||||||||
For the three and six-month periods ended | 1,019,331 | $ | 2.41 (CA$2.72) | |||||
For the six-month period ended | 1,077,721 | $ | 1.51 (CA$2.08) | |||||
For the three-month period ended | 499,921 | $ | 1.30 (CA$1.79) |
Number of options |
Weighted average grant date fair value | |||||||
Options exercisable in US$ | ||||||||
For the three and six-month periods ended | 81,093 | $ | 2.19 |
There were no options granted in CA$ and US$ 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.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
d) | Stock appreciation rights (SARs) |
On October 4, 2018, the Company's Board of Directors approved a SARs plan for its consultants that entitles the grantee to a cash payment based on the increase in the stock price of the Company's common shares from the grant date to the settlement date. The exercise date of an SAR may not be later than 10 years after the grant date. Generally, the SARs vest over a period of three years.
During the six-month period ended May 31, 2021, $27 (2020 - $1) was recorded as share-based compensation expense for the SARs plan. Since these awards will be cash-settled, the fair value of SARs granted is estimated at each reporting period using the Black-Scholes model and the following weighted average assumptions. No SARs were granted during the six-month period ended May 31, 2021.
Measurement date as at May 31, 2021 | ||||
Risk-free interest rate | 1.49% | |||
Expected volatility | 65% | |||
Average option life in years | 5.7 years | |||
Period-end share price | $ | 3.54 (CA$4.28) | ||
SAR exercise price | $ | 3.54 (CA$4.28) |
The risk-free interest rate is based on the implied yield on a Canadian government zero-coupon issue, with a remaining term equal to the expected term of the SAR. The volatility is based on weighted average historical volatility adjusted for a period equal to the expected life. The life of the SARs is estimated taking into consideration the vesting period at the grant date, the life of the SARs 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.
e) | Loss per share |
For the three and six-month periods May 31, 2021 and 2020, the weighted average number of common shares outstanding was calculated as follows:
For the three-month periods ended May 31, | ||||||||
2021 | 2020 | |||||||
Issued common shares as at March 1 | 93,841,311 | 76,953,411 | ||||||
Effect of share options exercised | 153,261 | 32,366 | ||||||
Effect of public issue of common shares | 366,684 | - | ||||||
Effect of broker warrants | 140,252 | - | ||||||
Weighted average number of common shares, basic and diluted | 94,501,508 | 76,985,777 |
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
For the six-month periods ended May 31, | ||||||||
2021 | 2020 | |||||||
Issued common shares as at December 1 | 77,013,411 | 76,953,411 | ||||||
Effect of share options exercised | 157,143 | 16,448 | ||||||
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 | 89,651,043 | 76,969,859 |
For the six-month period ended May 31, 2021, 3,898,885 (2020 - 3,303,359) share options, 8,166,550 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.
10 | Supplemental cash flow disclosures |
The Company entered into the following transactions which had no impact on its cash flows:
May 31, $ |
May 31, $ | |||||||
Additions to property and equipment included in accounts payable and accrued liabilities | 14 | 2 | ||||||
Share issue costs included in accounts payable and accrued liabilities | 32 | - | ||||||
Initial recognition of right-of-use assets and lease liabilities | - | 3,192 | ||||||
Reclassification of other liabilities to right-ofuse-assets | - | 238 |
11 | 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, 2020.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
12 | 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, 2021, was approximately $52,325 (Level 1) based on market quotes.
Share-based payment transactions
The fair value of the employee stock options are measured based on the Black-Scholes valuation model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historical volatility adjusted for a period equal to the expected life, weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions, if any, are not taken into account in determining fair value.
The deferred stock units liability is recognized at fair value and considered Level 2 in the fair value hierarchy for financial instruments. The fair value is determined using the quoted price of the common shares of the Company.
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THERATECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three- and six-month periods ended May 31, 2021 and 2020
(in thousands of United States dollars)
13 | Operating segments |
The Company has a single operating segment. Over 94% (2020 - 97%) of the Company's revenues are generated from one customer, RxCrossroads, which is domiciled in the United States.
For the six-month periods ended May 31, | ||||||||
2021 $ | 2020 $ | |||||||
RxCrossroads | 31,368 | 31,826 | ||||||
Others | 1,849 | 1,055 | ||||||
33,217 | 32,881 |
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 $31,084, $29,810 as at May 31, 2021 are located in Canada and $1,274 are located in Ireland (November 30, 2020: $35,335, of which $34,006 were in Canada and $1,329 were in Ireland).
14 | Subsequent event |
Stock options
Between June 1, 2021 and July 13, 2021, 100,000 options were exercised and 100,000 common shares were issued for a cash consideration of $92.
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Theratechnologies Inc. published this content on 15 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 July 2021 11:38:01 UTC.