Crescita Therapeutics(TM) Reports 2018 Third Quarter Results Strong Royalty Revenue and Achievement of First Pliaglis US Sales Milestone Positive Adjusted EBITDA of $0.8M

LAVAL, QC, Nov. 9, 2018 /PRNewswire/ - Crescita Therapeutics Inc. (TSX: CTX) (Crescita or the Company), a commercial dermatology company with a portfolio of non-prescription skincare and prescription drug products for the treatment and care of skin conditions, diseases and their symptoms, today reported its financial results for the third quarter ended September 30, 2018.

Q3-F2018 and Subsequent to Quarter-end Highlights

    --  Revenue of $4.5 million, including $1.1 million in royalty revenue on
        the net sales of Pliaglis and a $1.3 million (US$1.0 million) sales
        milestone, an increase of $1.7 million or 64.1% versus Q3-17;
    --  Operating expenses down $0.1 million versus Q3-17 and $1.5 million on a
        year-to-date basis;
    --  Adjusted EBITDA(1) of $0.8 million, up $1.8 million versus Q3-17, an
        improvement of $2.1 million on a year-to-date basis;
    --  Total cash utilized during the quarter was $0.9 million, resulting in an
        ending cash and cash equivalents balance of $8.2 million as at September
        30, 2018 compared to $9.1 million at June 30, 2018;
    --  Reported favourable results from a skin permeation study using our
        patented technologies, MMPE(TM) and DuraPeel(TM), demonstrating
        significantly increased transdermal permeation of Cannabidiol ("CBD")
        over the control formulation by up to 14 and 6-fold, respectively.
    --  Launched five product innovations on November 5 in our non-Rx business,
        leveraging our patented MMPE technology and Ecobiotys(®)(,)(2), a new
        award-winning prebiotic. Due to our expertise and product development
        speed, Crescita is one of the very first companies worldwide to release
        a product formulation using Ecobiotys(®)(,)(2).

"In Q3, we focused on our growth strategy and are proud to report our second EBITDA-positive quarter of 2018," said Serge Verreault, President and CEO of Crescita. "We generated $2.4 million of revenue from our lead prescription product, Pliaglis, and continued to drive down our SG&A costs. In addition, we launched five new product innovations under our Laboratoire Dr Renaud skincare line, harnessing innovation as the driving force behind the brand. We remain committed to paving the pathway to sustained growth through innovation, strategic acquisitions, as well as through the expansion of Pliaglis sales in the United States."



            ____________________________________________________________________________________________________________



            
              (1)Please refer to the Non-IFRS Financial Measures and EBITDA and Adjusted EBITDA Reconciliation sections of this press release.



            
              (2)ECOBIOTYS(R) by Silab is an innovative biomimetic ingredient developed to address skin complexion improvement. ECOBIOTYS(R) won
    the Gold Award of the Innovation Zone Best Active Ingredient at the in-cosmetics Asia show as well as the Best Active Ingredient Bronze
    Award at in-cosmetics Global 2018. To find out more, please visit https://www.silab.fr/produit-105-ecobiotys_usa.html.

Q3-F2018 Financial Results

Note: All figures are in Canadian dollars. The third quarter 2018 MD&A, Condensed Consolidated Interim Financial Statements and accompanying notes can be found on www.crescitatherapeutics.com/investors and have been filed with SEDAR.


                                           In thousands of CAD dollars except
                                            earnings per share                                   Three months ended                            Nine months ended
    and number of shares                                                                September 30,                                September 30,

    ---

                                                                              2018                             2017             
        Change                          2018          2017    
        Change




              
                Expenses                                                            4,464                     2,720         1,744                         10,424         9,658            766





              
                Total Operating                                                     4,081                     4,227         (146)                        12,193        13,715        (1,522)

    ---

                            Total Other (Expenses) Income                                        (14)                    1,050       (1,064)                         1,078         1,008             70

    ---

                            Net income (loss) from continuing
                             operations                                                           369                     (457)          826                          (691)      (3,049)         2,358

    ---

               Net (loss) from discontinued operations                                                                    (56)           56                           (25)        (157)           132

    ---

                            Net income (loss)                                                     369                     (513)          882                          (716)      (3,206)         2,490

    ===

                            Net income (loss)  from continuing
                             operations per share                                  $
     
              0.02               $
       (0.03)   $
        0.05                 $
      
       (0.04)  $
       (0.22)    $
        0.18

    ---

               Weighted Average number of common
                shares outstanding                                                             21,016                    14,003         7,013                         19,265        13,958          5,307

    ---

                            Selected Cash Flow Information

    ---

               Cash and cash equivalents, end of
                period                                                                          8,213                     8,755         (542)                         8,213         8,755          (542)


               Cash (used in) operating activities                                              (787)                  (1,237)          450                        (2,095)      (5,715)         3,620


               Cash (used in) provided by investing
                activities                                                                       (92)                    7,915       (8,007)                         (115)        7,844        (7,959)


               Cash (used in) provided by financing
                activities                                                                                             (2,035)        2,035                          3,426       (3,159)         6,585

    ---

Revenue
Total revenue, composed of product sales, out-licensing and services revenue, was $4.5 million for the three months ended September 30, 2018, compared to $2.7 million in the corresponding quarter of the prior year, representing an increase of $1.7 million or 64.1%. The increase came primarily from out-licensing activities almost exclusively related to the commercialization of Pliaglis in the U.S. During the quarter, the Company recognized a sales milestone of $1.3 million (US$1.0 million), as well as $1.1 million in royalty revenue. In the third quarter 2017, the Company had recognized a $0.6 million (US$0.5 million) milestone payment from Taro following the issuance of a patent by the United States Patent and Trademark Office in relation to the Flexicaine composition, which did not repeat this quarter.

For the nine months ended September 30, 2018, total revenues were $10.4 million compared to $9.7 million in the corresponding nine-month period of the prior year, representing an increase of $0.8 million or 7.9%. The increase was mainly from out-licensing activities, as described above, while product sales were ahead of the prior year by $0.4 million, mainly driven by the incremental revenue from Alyria. The corresponding nine-month period of 2017 included $3.3 million of non-recurring revenue: the up-front payment of $2.7 million (US$2.0 million) related to the out-licensing of Pliaglis in the U.S, as well as the milestone payment of $0.6 million (US$0.5 million) as described above.

Operating Expenses ("OPEX")
Total operating expenses for the three and nine months ended September 30, 2018 were $4.1 million and $12.2 million, respectively, representing decreases of $0.1 million and $1.5 million when compared to the corresponding periods of the prior year. The improvements were mainly driven by savings in SG&A as a result of the reorganization of various corporate functions and the centralization of the Company's operations to its Laval facility; a reduction in professional and accounting fees in connection with regulatory matters involving the INTEGA Acquisition as well as savings in logistics costs.

Net (Loss) Income from Continuing Operations
Net income from continuing operations for the quarter ended September 30, 2018 was $0.4 million, compared to a net loss of $(0.5) million in the prior year's quarter. The year-over-year improved profitability was mainly due to the combined effect of: 1) the recognition of a $1.3 million sales milestone upon the achievement of the first tier of the cumulative U.S. sales of Pliaglis by our licensee; 2) the incremental royalty revenue on the U.S. net sales of Pliaglis of $0.9 million; 3) the reduction of $0.3 million in SG&A expenses, partly offset by these non-recurring benefits recorded in Q3-17: 4) the $0.6 million (US$0.5 million) milestone related to the Flexicaine composition and 5) the gain on the renegotiation of the Knight loan of $1.1 million.

For the nine-month periods ended September 30, 2018 and 2017, net loss from continuing operations was $(0.7) million and (3.0) million, respectively. The year-over-year improvement was primarily a result of 1) the incremental royalty revenue on the U.S. net sales of Pliaglis of $2.7 million; 2) the recognition of a $1.3 million sales milestone, as described above; 3) the non-recurring benefit of the gain on settlement and Other Income of $1.1 million recorded in Q2-18; 4) the reduction in operating expenses of $1.5 million versus the prior year, mainly SG&A, resulting from the Company's sustained efforts at rationalizing its cost structure; partly offset by the same non-recurring benefits recorded in 2017, as described for the quarter, as well as 5) the up-front payment of $2.7 million received upon the signing of the out-licensing agreement with Taro in Q2-17.

Cash and Cash Equivalents
Total cash utilized during the quarter was $0.9 million, resulting in an ending cash and cash equivalents balance of $8.2 million as at September 30, 2018 compared to $9.1 million at June 30, 2018 and $8.8 million at September 30, 2017. The current quarter's cash balance includes $3.5 million in net proceeds from the Company's Rights Offering concluded in March of 2018.

Non-IFRS Financial Measures
The Company reports its financial results in accordance with IFRS. However, we use certain non-IFRS financial measures to assess our Company's performance. We believe these to be useful to management, investors and other financial stakeholders in assessing Crescita's performance from both a financial and operational standpoint. The non-IFRS measures used in this press release do not have any standardized meaning prescribed by IFRS and are therefore not comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS.

The following are the Company's non-IFRS measures along with their respective definitions:

EBITDA is defined as earnings (loss) from continuing operations before interest, income taxes, depreciation and amortization.

Adjusted EBITDA is defined as earnings (loss) from continuing operations before interest, income taxes, depreciation and amortization, gain on settlement, other income, equity-settled stock-based compensation ("SBC"), gain on debt renegotiations, goodwill and intangible assets impairment, accretion on the fair value of inventory and foreign currency gains (losses), as applicable.

Management believes that Adjusted EBITDA is an important measure of operating performance and cash flow and provides useful information to investors as it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures.

A reconciliation of EBITDA and adjusted EBITDA to their closest IFRS measure can be found below.



       
                
                  EBITDA and Adjusted EBITDA Reconciliation




                                    In thousands of CAD
                                     dollars                                       Three months ended                     Nine months ended
                                                                          September 30,                          September 30,

    ===

                           
              
                2018                                          2017 
     Change                                2018  2017 
     Change

                                                    ===





        Net (loss) income
         from continuing
         operations                                                                               369      (457)                         826       (691)      (3,049)   2,358




                                    Add:

    ---

        Depreciation and
         amortization                                                                             285        297                         (12)        864           853       11


        Interest expense,
         net                                                                                      125        148                         (23)        380           206      174

    ---

                     EBITDA                                                                       779       (12)                         791         553       (1,990)   2,543

    ---



                                    Add:

    ---

        Equity-settled
         stock-based
         compensation                                                                              53         88                         (35)        197           202      (5)


        Accretion on fair
         value of inventory                                                                                                                                     371    (371)


        Foreign currency
         loss                                                                                      21         29                          (8)         24            71     (47)





                                    Less:

    ---

        Total Other income,
         net                                                                                        7      1,079                      (1,072)      1,102         1,079       23

    ---

                     Adjusted EBITDA                                                              846      (974)                       1,820       (328)      (2,425)   2,097

    ---

Caution Concerning Limitations of Summary Financial Results Press Release
This summary earnings press release contains limited information meant to assist the reader in assessing Crescita's performance, but it is not a suitable source of information for readers who are unfamiliar with Crescita and is not in any way a substitute for the Company's consolidated financial statements, notes thereto, MD&A and Annual Information Form ("AIF") reports.

About Crescita Therapeutics Inc.
Crescita (TSX: CTX) is a publicly traded, Canadian commercial dermatology company with a portfolio of non-prescription skincare products for the treatment and care of skin conditions and diseases and their symptoms and prescription drug products for the treatment of pain. Crescita owns multiple proprietary drug delivery platforms that support the development of patented formulations that can facilitate the delivery of active drugs into or through the skin. For additional information, please visit www.crescitatherapeutics.com.

About MMPE(TM)
The MMPE technology uses synergistic combinations of pharmaceutical excipients included on the FDA's Inactive Ingredient Guide for improved topical delivery of active pharmaceutical ingredients (APIs) into or through the skin. The benefits of this technology include the potential for increased penetration of APIs with the possibility of improved efficacy, lower API concentration and/or reduced dosing. Issued U.S. patents provide intellectual property protection through March 6, 2027.

About Peel and DuraPeel(TM)
The Peel and DuraPeel technologies are self-occluding, film-forming cream/gel formulations that provide extended release delivery to the site of application. The cream/gel contains a drug, that when applied to a patient's skin, forms a pliable layer that releases the active ingredient into the skin for up to 12 hours. The benefits of the Peel and DuraPeel technologies include proven compatibility with a variety of active pharmaceutical ingredients ("APIs"). A self-occluding film reduces product transference risk, provides fast drying time, facilitates easy application and removal, and enables application to large and irregular skin surfaces. While the Peel technology typically involves a single solvent that dries to form a pliable film, the DuraPeel technology involves a two-solvent system which includes: 1) a volatile solvent component that dries to form a self-occluding film and 2) a non-volatile solvent component that remains in the formulation to facilitate prolonged release of the active from the formulation into the skin. Peel technology patents have been issued in 21 countries including the US, with the latest expiring in 2031. Patent applications are pending in 3 countries. DuraPeel patents have been issued in Australia, Canada, Japan and the U.S. with the latest expiry in 2027. The European patent application is pending.

About ECOBIOTYS(®
)
ECOBIOTYS(®) by Silab is an innovative biomimetic ingredient developed to address skin complexion improvement. Obtained from the yeast Metschnikowia reukaufii, isolated from the nectar of the porcelain flower Hoya carnosa, ECOBIOTYS(®) specifically rebalances the microbiota of mature skin by reinforcing the immune and mechanical barriers of the skin and acting on the distribution of bacterial communities. The quality of the skin barrier is thereby improved, and the complexion is enhanced. Only a few months after having received the Bronze Award at in-cosmetics Global, ECOBIOTYS(®) won the Gold Award of the Innovation Zone Best Active Ingredient at in-cosmetics Asia (Bangkok, Thaïland). The honor was awarded by a panel of worldwide experts from the cosmetic industry, this prize distinguishes the development of a new active principle that combines innovation and substantial benefits for the end-users. To find out more, please visit https://www.silab.fr/produit-105-ecobiotys_usa.html.

Forward-Looking Statements
This Press Release contains "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company's current beliefs, expectations and assumptions, the future of its business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company's control. Crescita's actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, readers should not rely on any of these forward-looking statements. Important factors that could cause Crescita's actual results and financial condition to differ materially from those indicated in the forward-looking statements include, the risk factors included in Crescita's most recent Annual Information Form dated March 27, 2018 under the heading "Risks Factors", and as described from time to time in the reports and disclosure documents filed by Crescita with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully, and readers should not place undue reliance on Crescita's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and none of Crescita or any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Any forward-looking statement made by the Company in this Press Release is based only on information currently available to it and speaks only as of the date on which it is made. Except as required by applicable securities laws, Crescita undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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