Crescita Reports First Quarter 2020 Results

Positive Adjusted EBITDA(1) and Cash Flow

LAVAL, QC, May 27, 2020 /PRNewswire/ - Crescita Therapeutics Inc. (TSX: CTX) and (OTC US: CRRTF) ("Crescita" or "the Company"), a growth-oriented, innovation-driven Canadian commercial dermatology company with in-house research & development ("R&D") and manufacturing capabilities, today reported its financial results for the first quarter ended March 31, 2020 ("Q1-F2020").

All amounts are in thousands of Canadian dollars except for share and per share amounts, unless otherwise noted.

Financial Highlights

Q1-F2020 vs. Q1-F2019

    --  Revenue was $3,815, a decrease of $434 or 10.2%;
        --  Q1-F2020 revenue included $1,453 from Pliaglis(®) royalties, while
            Q1-F2019 included a sales milestone of $1,321 and $482 from
            royalties - See Revenue;
    --  Gross margin of $2,464 or 64.6% of revenue, a decrease of $558 or 6.5%
        of revenue;
    --  Operating expenses (excluding COGS) of $2,825, an increase of $270 or
    --  Adjusted EBITDA(1) of $112, a decrease of $844 or 88.3%;
    --  Generated $66 in cash during the quarter, resulting in an ending cash
        position of $9,334.

"The COVID-19 pandemic has created unprecedented business, social and economic conditions that have affected people and businesses globally. Our team has been both challenged and inspired to conceive new ways to conduct our business and to reach and engage with our customers," said Serge Verreault, President and CEO. "The Crescita team has shown its resilience and commitment by accelerating various commercial initiatives, including the launch of a new digital marketing campaign, and the manufacturing and commercialization of hand sanitizer, with the view to help mitigate the impact of COVID-19 on customer demand."

"We are progressively resuming our operations and have taken the necessary safety precautions to protect the health and wellness of our people, customers, suppliers and the community. As our clients in the aesthetic and medical aesthetic sectors approach the restart, we will continue to support them to succeed in a post-COVID-19 environment. We are cautiously optimistic about the future and are supported by a strong cash balance of $9.3 million and additional flexibility through our line of credit. We continue to advance business development discussions that are a critical part of our long-term growth strategy and focus on the fundamentals of our business," Mr. Verreault added.

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

Q1-F2020 and Subsequent Corporate Developments

    --  On May 11, the Company started progressively re-opening its
        manufacturing facility following authorization from the Québec
        government, and as at the date of this press release, had rehired
        approximately 60% of the employees that had been temporarily laid off.
    --  On May 5, the Company received a Natural Product Number ("NPN") from
        Health Canada for production of hand sanitizer.
    --  On March 31, the United States Patent and Trademark Office granted U.S.
        Patent No. 10,603,293 for Solid-Forming Anesthetic Formulations for Pain
        Control, with validity through January 14, 2031, which was listed in the
        FDA's Orange Book on April 14, 2020 for an enhanced formulation of
    --  On March 24, the Company announced the following measures in response to
        the COVID-19 pandemic:
        --  the temporary closure of its office and production facility in
            Laval, Québec, effective March 24, resulting in the temporary
            layoff of production, sales, and most office personnel, with others
            working remotely and with reduced hours;
        --  temporary base salary reductions for the executive team as well as
            fee reductions for all members of the Company's board of directors
            between 25% and 40%; and
        --  the termination of the Company's automatic securities purchase plan
            in connection with its normal course issuer bid.
    --  On February 11, the Company announced positive topline results from two
        pivotal Phase 3 clinical trials for CTX-101 (formerly MiCal 1), an
        ultra-potent topical corticosteroid product being developed in
        partnership, for the treatment of plaque psoriasis using the Company's
        patented MMPE((TM)) technology.
    --  On January 24, the Company announced that its wholly owned subsidiary,
        INTEGA Skin Sciences Inc. was awarded a cannabis research license by
        Health Canada, allowing the Company to possess cannabis for the purpose
        of R&D.
    --  On January 22, the Company announced that it had secured a $3,500
        revolving operating credit facility with the Royal Bank of Canada, which
        remains undrawn.
    --  On January 20, the Company announced that it had entered into a
        distribution agreement with Laboratoires FILLMED for the exclusive
        distribution of the ART-FILLER(®) range of injectables and the New
        Cellular Treatment Factor ("NCTF(®)") in Canada.

Q1-F2020 Financial Results

Note: All figures are in Canadian dollars. The Management's Discussion and Analysis ("MD&A"), Condensed Consolidated Interim Financial Statements and accompanying notes for the three months ended March 31, 2020 can be found at and have been filed with SEDAR at

The Company generates revenue from its three reportable segments: 1) Commercial Skincare ("Commercial"), which manufactures branded non-prescription skincare products for sale in both the Canadian and international markets; 2) Licensing and Royalties ("Licensing"), through the licensing of intellectual property related to Pliaglis or for the use of its transdermal delivery technologies; and 3) Manufacturing and Services, which includes contract manufacturing and product development services ("CDMO") offered to our clients.

Total revenue was $3,815 for the three months ended March 31, 2020, compared to $4,249 for the comparable period of 2019. The year-over-year decrease of $434 or 10.2% came primarily from: 1) our Licensing segment for $350, due to a $1,321 sales milestone recognized in Q1-F2019 under our out-licensing agreement for Pliaglis in the U.S. with Taro Pharmaceutical Industries Ltd. ("Taro"), partly offset by higher royalties on the U.S. product sales of Pliaglis of $971; 2) our Commercial segment for $179, driven by the impact of spa and medispa closures across Canada due to the pandemic, as well as the launch of Dermazulene((TM)) in China in Q1-F2019 which generated higher sales in that period; partly offset by 3) an increase in our Manufacturing and Services segment mainly due to the timing of CDMO shipments.

Cost of Goods Sold ("COGS") and Gross Profit
For the three months ended March 31, 2020, total COGS were $1,351, compared to $1,227 for the three months ended March 31, 2019, representing an increase of $124 or 10.1%. The year-over-year increase was mainly due to higher COGS related to the timing and mix of CDMO sales in our Manufacturing and Services segment, partly offset by the lower cost of earning Pliaglis royalties in the Licensing segment.

For the three months ended March 31, 2020, gross profit was $2,464, representing a margin of 64.6%, compared to $3,022 or 71.1%, respectively, for the comparable three-month period of 2019, a decrease of $558 or 6.5% of revenue. The decrease was mainly attributable to lower sales in the Commercial Skincare segment and lower royalty revenue from the Licensing segment.

Operating Expenses (excluding COGS)
Total operating expenses, for the three months ended March 31, 2020 were $2,825, compared to $2,555 for the three months ended March 31, 2019, representing a net year-over-year increase of $270 or 10.6%. The increase was mainly driven by: 1) higher selling, general and administrative ("SG&A") expenses of $251, mainly in connection with higher advertising and promotion expenses, headcount-related costs and consulting services; 2) higher amortization and depreciation charges of $58 due to the accelerated amortization of intangible assets; partly offset by 3) a decrease in R&D expenses of $39.

Income (Loss) before Income Taxes
For the three months ended March 31, 2020, the Company reported a loss before income taxes of $(314), compared to income of $278 reported for the three months ended March 31, 2019. The year-over-year decrease of $592 was mainly attributable to: 1) the reduction in gross margin of $558 across all segments; 2) the increase in SG&A costs of $251; 3) higher depreciation and amortization charges of $58, partly offset by 4) a reduction in R&D expenses of $39; 5) a reduction in net interest expense of $121, mainly as a result of the repayment in full of the Knight Loan in Q4-F2019 and the interest income accretion on contract assets; as well as 6) the favourable impact of foreign exchange gains year-over-year in the amount of $115.

Cash and Cash Equivalents
Cash and cash equivalents were $9,334 as at March 31, 2020, compared to $10,879 as at March 31, 2019, representing a year-over-year decrease of $1,545. In Q4-F2019, the Company repaid the Knight Loan in full in the amount of $3,570.

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:

    1. EBITDA is defined as earnings (loss) from continuing operations before
       interest, income taxes, depreciation, and amortization.
    2. Adjusted EBITDA is defined as earnings (loss) from continuing operations
       before interest, income tax expense (recovery), depreciation and
       amortization, gain on settlement, other income, equity-settled
       stock-based compensation ("SBC"), gain on debt renegotiations, goodwill
       and intangible assets impairment, termination and other costs, 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.

                      dollars                      Three months ended March 31,


            2020  2019 
         Change $                        Change %


         (loss)                       (494)   42    (536)                       -1,276.2%



         amortization                   414   356       58                            16.3%

         net                              3   124    (121)                          -97.6%

         expense                        180   236     (56)                          -23.7%

                     EBITDA             103   758    (655)                          -86.4%


         compensation                    59   133     (74)                          -55.6%

         loss                                 65     (65)                         -100.0%



         gain                            50            50                   

                      EBITDA            112   956    (844)                          -88.3%


                Summary Financial Results

                     In thousands of CAD
                      dollars except earnings
                      per share and number of
       Three months ended March 31,


                2020  2019             
              Change ($)                
       Change (%)


                     Revenues                                     3,815                      4,249                 (434)       -10.2%

        Cost of goods sold                                        1,351                      1,227                   124         10.1%


                     Gross Profit                                 2,464                      3,022                 (558)       -18.5%

                     Gross margin as a
                      percentage of total
                      revenue                                     64.6%                     71.1%  
               n/a        -6.5%


        Research & development                                      228                        267                  (39)       -14.6%

        Selling, general &
         administrative                                           2,183                      1,932                   251         13.0%

        Amortization and
         depreciation                                               414                        356                    58         16.3%


                     Total operating expenses
                      (excl. COGS)                                2,825                      2,555                   270         10.6%


                     Operating profit (loss)                      (361)                       467                 (828)      -177.3%

        Total other (income)
         expenses                                                  (47)                       189                 (236)      -124.9%


                     Income (loss) before
                      income taxes                                (314)                       278                 (592)      -212.9%

        Deferred income tax
         expense                                                    180                        236                  (56)       -23.7%


                     Net income (loss)                            (494)                        42                 (536)    -1,276.2%


                     Net (loss) per share

       - Basic                                     $
              $                          (0.02)   

       - Diluted                                   $
              $                          (0.02)   


        Weighted average number
         of common shares

       - Basic                                              20,700,133                 21,016,059             (315,926)        -1.5%

       - Diluted                                            22,288,869                 21,016,059             1,272,810          6.1%


                     Selected Balance Sheet


        Cash and cash
         equivalents, end of
         period                                                   9,334                     10,879               (1,545)       -14.2%

       Long-term debt                                                                      3,552               (3,552)      -100.0%


                     Selected Cash Flow


        Cash provided by
         operating activities                                       266                      2,398               (2,132)       -88.9%

        Cash used in investing
         activities                                                (24)                      (34)                   10        -29.4%

        Cash used in financing
         activities                                               (203)                      (75)                (128)       170.7%


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 Audited Financial Statements and notes thereto, MD&A and Annual Information Form ("AIF").

About Crescita Therapeutics Inc.
Crescita (TSX: CTX and OTC US: CRRTF) is a growth-oriented, innovation-driven Canadian commercial dermatology company with in-house R&D and manufacturing capabilities. The Company offers a portfolio of non-prescription skincare products and early to commercial stage prescription drug products and owns multiple proprietary drug delivery platforms that support the development of patented formulations that can facilitate the delivery of active ingredients into or through the skin.

Supported by a sales force covering Canada and executing a business to business to consumer marketing approach, Crescita sells its non-prescription skincare products domestically through spas, medispas, and medical clinics, as well as internationally, through distributors.

Crescita's portfolio also includes a prescription product called Pliaglis(®), that utilizes the Company's proprietary phase-changing topical cream Peel technology, a part of the DuraPeel((TM)) family, which are self-occluding, film-forming cream/gel formulations, that provide extended release delivery of the active ingredients to the site of application. Pliaglis is a topical local anaesthetic cream that provides safe and effective local dermal analgesia on intact skin prior to superficial dermatological procedures. The product is currently approved in over 25 different countries and sold by commercial partners in the U.S., Italy, and Brazil, and sold in Canada by the Company.

Crescita's expertise in product formulation and development can be leveraged in combination with its patented transdermal delivery technologies to develop and manufacture creams, liquids, gels, ointments and serums under its contract development and manufacturing organization ("CDMO") infrastructure. The Company operates out of a 50,000 square-foot facility located in Laval, Québec, which produces the majority of its non-prescription skincare products, such as LDR, Pro-Derm, Dermazulene and Alyria. Formulations manufactured by or for Crescita include cosmetics, natural health products ("NHP") and products with Drug Identification Numbers ("DIN"). For additional information, please visit

About Pliaglis(®
Pliaglis is a topical local anaesthetic cream that provides safe and effective local dermal analgesia on intact skin prior to superficial dermatological procedures. The formulation contains a eutectic mixture of 7% lidocaine and 7% tetracaine that utilizes the Company's proprietary phase-changing topical cream Peel technology. The Peel technology consists of a drug-containing cream which, once applied to a patient's skin, dries to form a pliable layer that releases drug into the skin. Pliaglis is applied to intact skin for 20 to 30 minutes prior to superficial dermatological procedures such as dermal filler injections, non-ablative laser facial resurfacing, or pulsed-dye laser therapy and 60 minutes prior to procedures such as laser-assisted tattoo removal. Following the application period, the pliable layer is easily removed from the skin allowing the procedure to be performed with minimal to no pain. In clinical studies, the mean duration of anesthesia has been shown to be in the range of 7 to 9 hours after the application of Pliaglis.

About Dermazulene(®
Dermazulene is a skincare brand developed specifically to address the skincare needs of Asian consumers. The brand differentiates itself through effective anti-aging, whitening and anti-pollution formulas, while offering novel packaging such as encapsulated products. The brand was launched in China in the first quarter of 2019 through NetEase Kaola, an e-commerce platform of Alibaba Group Holding Limited. Crescita owns the trademark rights to Dermazulene in Canada, China, and the United States.

About MMPE((TM)
The MMPE(TM) technology uses synergistic combinations of certain specific pharmaceutical excipients included on the FDA's Inactive Ingredient Guide for improved topical delivery of active ingredients 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. Applications are pending in Australia, Canada, Europe, Mexico, New Zealand and the United States, with the latest expiry date in 2036.

About Peel and DuraPeel((TM)
The Peel and DuraPeel technologies are self-occluding, film-forming cream/gel formulations that provide extended release delivery of the active ingredients 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(TM) 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 U.S., with the latest expiring in 2031. Patent applications are pending in 2 countries. DuraPeel(TM) patents have been issued in Australia, Canada, Japan and the U.S. with the latest expiry in 2027. The European patent application is pending.

Forward-Looking Statements
This press release contains "forward-looking information" as defined under Canadian securities laws (collectively, "forward-looking statements"). The words "plans", "expects", "does not expect", "goals", "seek", "strategy", "future", "estimates", "intends", "anticipates", "does not anticipate", "projected", "believes" or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "should", "might", "likely", "occur", "be achieved" "continue" or "temporary" and similar expressions identify forward-looking statements and include statements regarding the Company's plans, objectives and responses to the COVID-19 pandemic. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking statements.

Forward-looking statements are not historical facts but instead represent management's expectations, estimates, projections and assumptions regarding future events or circumstances. Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and many of which are beyond the control of the Company. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management of the Company as of the date of this press release, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Material factors and assumptions used to develop the forward-looking statements, and material risk factors that could cause actual results to differ materially from the forward-looking statements, include but are not limited to the risks of, and future impacts related to, COVID-19, including the response of domestic and international governments to the virus; the impact of COVID-19 on the Company's operations, personnel, supply chain, product sales, royalties, customer demand and financial flexibility; changes in the business or affairs of Crescita; the ability of Crescita's licensees to successfully market its products; competitive factors in the industries in which Crescita operates; relationships with customers, suppliers and licensees; changes in legal and regulatory requirements; foreign exchange and interest rates; prevailing economic conditions; and other factors, many of which are beyond the control of Crescita.

Additional factors that could cause Crescita's actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors included in Crescita's most recent Annual Information Form 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 authorities and commissions. These and other factors should be considered carefully, and readers should not place undue reliance on Crescita's forward-looking statements when making decisions, as forward-looking statements involve significant risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved.

All forward-looking statements are based only on information currently available to the Company and are made as of the date of this press release. Except as expressly required by applicable Canadian securities law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All forward-looking statements in this press release are qualified by these cautionary statements.

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