– 36% royalty income growth over prior year period highlights successful portfolio growth strategy –
– Significant deployment capacity available after follow-on offerings and credit facility increase –
"Our financial results mark another strong quarterly performance, highlighted by royalty income growth of 36% compared to the same period last year", said
Third Quarter Highlights
- Deployed
US$196.0 million to purchase additional royalty streams on Vonjo and Orserdu; - Completed two follow-on public offerings totaling 18,653,000 Units for gross proceeds of
US$151.5 million ; - Total Income of
US$34.1 million ; - Normalized Total Cash Receipts of
US$25.2 million 1; - Adjusted EBITDA of
US$20.3 million 1; - Comprehensive Loss of
US$3.1 million ; - Adjusted Cash Earnings per Unit (basic and diluted) of
US$0.46 1,2; - Net Loss per Unit of
US$0.08 (basic and diluted)2; - Paid a special cash distribution of
US$0.5334 per unit and a regular quarterly cash distribution ofUS$0.075 per unit to unitholders onJuly 20, 2023 .
Subsequent to Quarter End
- Increased credit facility to
US$500.0 million ; Received Toronto Stock Exchange ("TSX") approval for normal course issuer bid to allow the Trust to acquire up to 3,280,195 of its Trust units betweenNovember 20, 2023 andNovember 19 2024 ;- Declared a quarterly cash distribution of
US$0.075 per unit for the fourth quarter of 2023, payable onJanuary 19, 2024 to unitholders of record onDecember 31, 2023 .
__________ | |
1 | Normalized Total Cash Receipts and Adjusted EBITDA are non-GAAP financial measures. Adjusted Cash Earnings per Unit is a non-GAAP ratio. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
2 | The weighted average number of basic and diluted units for the three months ended |
Financial Highlights
Three months ended | Nine months ended | |||
(thousands of US dollars, except per unit amounts) | 2023 |
|
|
|
Total income | 34,143 | 26,471 | 90,437 | 70,392 |
Management fees | 1,673 | 1,322 | 18,909 | 4,477 |
Performance fees | — | — | 18,616 | — |
Amortization expenses | 23,589 | 13,992 | 62,357 | 40,188 |
Other expenses | 12,812 | 3,543 | 30,182 | 9,322 |
Net gain from sale of royalty asset | 150 | — | 109,756 | — |
Net earnings (loss) | (3,781) | 7,614 | 70,129 | 16,405 |
Net unrealized gain on derivative asset | 652 | — | 652 | — |
Comprehensive earnings (loss) | (3,129) | 7,614 | 70,781 | 16,405 |
Net earnings (loss) per unit – basic | (0.08) | 0.20 | 1.73 | 0.42 |
Net earnings (loss) per unit – diluted | (0.08) | 0.20 | 1.73 | 0.42 |
Normalized Total Cash Receipts1 | 25,249 | 18,844 | 78,928 | 65,082 |
Adjusted EBITDA1 | 20,254 | 15,814 | 66,759 | 55,068 |
Adjusted EBITDA Margin1 | 80 % | 84 % | 85 % | 85 % |
Adjusted Cash Earnings per Unit – Basic1 | 0.46 | 0.57 | 1.35 | 1.48 |
Adjusted Cash Earnings per Unit – Diluted1 | 0.46 | 0.57 | 1.35 | 1.48 |
Weighted average number of Units – Basic | 46,115,848 | 38,657,266 | 40,485,450 | 38,684,889 |
Weighted average number of Units – Diluted | 46,205,568 | 38,694,492 | 40,664,366 | 38,710,064 |
__________ | |
1 | Normalized Total Cash Receipts, Total Cash Royalty Receipts and Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA Margin and Adjusted Cash Earnings per Unit are non-GAAP ratios. These measures and ratios are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
Asset Performance
As at
Portfolio
(thousands of US dollars) | Cash Receipts | |||||||
Three months ended | Nine months ended | |||||||
Product | Therapeutic Area | Marketer(s) |
| 2022 |
| 2022 | ||
Empaveli/Syfovre1 | Hematology/Ophthalmology | Apellis, Sobi | — | — | 438 | — | ||
Eylea I | Ophthalmology | Regeneron, Bayer, | 1,331 | 1,318 | 4,055 | 4,109 | ||
Eylea II | Ophthalmology | Regeneron, Bayer, | 289 | 1,444 | 1,705 | 4,474 | ||
FluMist | Influenza | AstraZeneca | 4 | — | 1,479 | 2,218 | ||
Natpara | Endocrinology | Takeda | 585 | 728 | 1,806 | 2,050 | ||
Omidria | Ophthalmology | 3,250 | — | 9,750 | — | |||
Oracea | Dermatology | Galderma | 2,770 | 2,109 | 6,052 | 5,817 | ||
Orserdu I | Oncology | Menarini | 3,453 | — | 3,453 | — | ||
Orserdu II2 | Oncology | Menarini | — | — | — | — | ||
Rydapt | Oncology | Novartis | 1,694 | 2,578 | 6,544 | 7,876 | ||
Spinraza | Neurology | Biogen | 4,319 | 3,736 | 12,358 | 12,587 | ||
Stelara, Simponi and Ilaris3 | Immunology | Johnson & Johnson, Merck, | 222 | 721 | 1,022 | 3,107 | ||
Vonjo | Hematology | Sobi | 2,716 | 1,184 | 7,055 | 1,404 | ||
Vonjo II | Hematology | Sobi | 396 | — | 396 | — | ||
Xenpozyme | Lysosomal Storage Disorder | Sanofi | 247 | — | 247 | — | ||
Xolair | Immunology | Roche, Novartis | 2,671 | 2,528 | 6,747 | 6,627 | ||
Zejula | Oncology | GSK | 777 | — | 2,259 | — | ||
Zytiga4 | Oncology | Johnson & Johnson | — | — | 8,543 | 8,958 | ||
Other Products5 | Various | Various | 525 | 1,158 | 1,755 | 2,001 | ||
Total Cash Royalty Receipts6 | 25,249 | 17,504 | 75,664 | 61,228 | ||||
Interest receipts from loan receivable7 | — | 1,340 | 3,264 | 3,854 | ||||
Principal repayment of loan receivable6,8 | — | — | 50,000 | — | ||||
Exit fee received for loan receivable6,7 | — | — | 1,000 | — | ||||
Premiums for prepayment6,7 | — | — | 2,140 | — | ||||
Proceeds from sale of royalty assets9 | — | — | 210,000 | — | ||||
Total Cash Receipts1 | 25,249 | 18,844 | 342,068 | 65,082 | ||||
Principal repayment of loan receivable6,7 | — | — | (50,000) | — | ||||
Exit fee received for loan receivable6,7 | — | — | (1,000) | — | ||||
Premiums for prepayment6,7 | — | — | (2,140) | — | ||||
Proceeds from sale of royalty assets8 | — | — | (210,000) | — | ||||
Normalized Total Cash Receipts1 | 25,249 | 18,844 | 78,928 | 65,082 | ||||
__________ |
1 Empaveli/Syfovre royalties are generally received with a three-quarter lag. In the second quarter of 2023 we received the royalty early, on a two quarter lag and as such we expect the next royalty payment to be received in the fourth quarter of 2023. |
2 The Trust completed a transaction in respect of Orserdu II during the third quarter of 2023. In accordance with the terms of the royalty agreements, cash royalty receipts are collected on a one-quarter lag. |
3 Stelara, Simponi and Ilaris were previously referred to as the Autoimmune Portfolio. The royalty assets include two royalty streams on each product, for a total of six royalty streams. |
4 Cash royalties from Zytiga are received on a semi-annual basis during the second and fourth quarters of each year. |
5 Other Products includes royalty income from certain other royalty assets as well as royalty assets which are fully amortized and, where applicable, the entitlements to which have generally expired. |
6 Total Cash Receipts, Total Cash Royalty Receipts and Normalized Total Cash Receipts are non-GAAP financial measures. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
7 Interest receipts from loan receivable relates to the CTI loan, which was repaid in full on |
8This item represents cash received by the Trust that is not expected to recur in the normal course of our operations.. As such, this item is not included in Normalized Total Cash Receipts. |
9 The Trust completed a transaction in respect of Tzield during the first quarter of 2023. On |
Liquidity and Capital
On
On
On
Subsequent to the end of the quarter, on
The Trust intends to use the net proceeds of the follow-on offerings and increased available credit from its credit facility to fund its near-term pipeline of royalty transactions.
The Trust had 56,318,936 units issued and outstanding on
Distributions
On
Normal Course Issuer Bid
The Trust also announced today the acceptance by the TSX of the Trust's Notice of Intention to make a normal course issuer bid (the "NCIB"). Pursuant to the NCIB, the Trust proposes to purchase, from time to time, if considered advisable, up to an aggregate of 3,280,195 of its trust units, being 10% of its 32,801,950 public float of units as of
Additional Vonjo Royalty Stream
On
Additional Orserdu Royalty Stream
On
Third Quarter 2023 Conference Call & Webcast
As previously announced, management will hold a conference call on
A live webcast of the conference call, including a slide presentation, will be available at http://bit.ly/DRIQ32023 Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on the Trust's website following the call.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures for the three and nine months ended
Total Cash Royalty Receipts, Total Cash Receipts and Normalized Total Cash Receipts
Total Cash Receipts refers to Total Cash Royalty Receipts plus cash receipts from all products. Total Cash Receipts includes cash receipts from interest as well as non-recurring cash receipts such as the principal payments related to the Trust's loan receivable, fees and premiums related thereto and proceeds from the sale of royalty assets which consist of the proceeds from the sale of the Tzield royalty. Total Cash Royalty Receipts refers to aggregate cash royalty receipts from the Trust's portfolio of royalty assets and forms part of Total Cash Receipts. Because of the lag between when the Trust records royalty income and receives the corresponding cash payments on its royalties, management believes Total Cash Receipts and Total Cash Royalty Receipts are useful measures when evaluating the Trust's operations, as they represent actual cash generated in respect of all royalty assets held during a period. The Trust also presents Normalized Total Cash Receipts, which refers to Total Cash Receipts adjusted to remove cash receipts that are not expected to recur in the normal course of its operations. Management believes that Normalized Total Cash Receipts will assist readers in evaluating the period over period performance of the Trust's royalty portfolio since Normalized Total Cash Receipts only includes cash receipts generated by royalties and other amounts payable pursuant to the terms of the Trust's royalty assets and interest on the Trust's loan receivable.
Three months ended | Nine months ended | |||
(thousands of US dollars) |
|
|
|
|
Total income | 34,143 | 26,471 | 90,437 | 70,392 |
[-] Other interest income | (179) | (28) | (468) | (33) |
[+] Royalties receivable, beginning of period | 29,110 | 27,498 | 27,748 | 30,148 |
[-] Royalties receivable, end of period | (40,886) | (36,386) | (40,886) | (36,386) |
[+] Acquired royalties receivable1 | 3,061 | 1,366 | 5,343 | 1,366 |
[-] Non-cash royalty income2 | — | (11) | (4) | (190) |
[-] Non-cash interest income on loan receivable3 | — | (66) | (1,102) | (215) |
[+] Principal repayment of loan receivable | — | — | 50,000 | — |
[+] Exit fee3 | — | — | 1,000 | — |
[+] Proceeds from sale of royalty assets | — | — | 210,000 | — |
Total Cash Receipts | 25,249 | 18,844 | 342,068 | 65,082 |
[-] Principal repayment of loan receivable4 | — | — | (50,000) | — |
[-] Exit fee received for loan receivable3,4 | — | — | (1,000) | — |
[-] Premiums for prepayment of loan receivable4 | — | — | (2,140) | — |
[-] Proceeds from sale of royalty assets4 | — | — | (210,000) | — |
Normalized Total Cash Receipts | 25,249 | 18,844 | 78,928 | 65,082 |
[-] Interest income on loan receivable | — | (1,406) | (6,506) | (4,069) |
[+] Non-cash interest and other income on loan receivable3 | — | 66 | 1,102 | 215 |
[+] Premiums for prepayment of loan receivable4 | — | — | 2,140 | |
Total Cash Royalty Receipts | 25,249 | 17,504 | 75,664 | 61,228 |
__________ | |
1 | Acquired royalties receivable represent the Trust's royalty entitlements prior to the completion of the royalty transactions they relate to, as described under the Transactions Completed section of the MD&A. Acquired royalties receivable of |
2 | Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three and nine months ended |
3 | For the three and nine months ended |
4 | This item represents cash received by the Trust in the quarter that is not expected to recur in the normal course of its operations. As such, this item is not included in Normalized Total Cash Receipts. |
Adjusted EBITDA and Adjusted EBITDA Margin
Management believes Adjusted EBITDA provides meaningful information about the Trust's operating cash flows as it eliminates the effects of other non-cash expenses and accruals and income and expenses that are not expected to recur, that have been recorded on the statement of net earnings (loss) and comprehensive earnings (loss). The Trust refers to EBITDA when reconciling its comprehensive earnings (loss) to Adjusted EBITDA but does not use EBITDA as a measure of its performance. Management believes that Adjusted EBITDA Margin is a useful supplemental measure to demonstrate the operating efficiency of the Trust's business on a cash basis. Due to a one-time charge, the Trust's Adjusted EBITDA margin for the quarter was below the historical average.
Three months ended | Nine months ended | |||
(thousands of US dollars) |
|
|
|
|
Comprehensive earnings (loss) | (3,129) | 7,614 | 70,781 | 16,405 |
[+] Amortization or royalty assets | 23,589 | 13,992 | 62,357 | 40,188 |
[+] Amortization of other current assets1 | — | 114 | 240 | 114 |
[-] Other interest income | (179) | (28) | (468) | (33) |
[+] Interest expense | 7,717 | 1,351 | 20,167 | 2,617 |
EBITDA | 27,998 | 23,043 | 153,077 | 59,291 |
[+] Royalties receivable, beginning of period | 29,110 | 27,498 | 27,748 | 30,148 |
[-] Royalties receivable, end of period | (40,886) | (36,386) | (40,886) | (36,386) |
[+] Acquired royalties receivable2 | 3,061 | 1,366 | 5,343 | 1,366 |
[+] Unit-based compensation3 | 1,637 | 298 | 2,352 | 849 |
[+] Board of trustees unit-based compensation4 | 136 | 72 | 513 | 205 |
[-] Non-cash royalty income5 | — | (11) | (4) | (190) |
[-] Non-cash interest and other income on loan receivable6 | — | (66) | (1,102) | (215) |
[-] Premiums for prepayment of loan receivable7 | — | — | (2,140) | — |
[-] Net gain on sale of royalty asset8 | (150) | — | (109,756) | — |
[-] Net unrealized gain on derivative asset | (652) | — | (652) | — |
[+] Management fees on sale of royalty asset9 | — | — | 13,650 | — |
[+] Performance fees on sale of royalty asset9 | — | — | 18,616 | — |
Adjusted EBITDA | 20,254 | 15,814 | 66,759 | 55,068 |
[÷] Normalized Total Cash Receipts | 25,249 | 18,844 | 78,928 | 65,082 |
Adjusted EBITDA Margin | 80 % | 84 % | 85 % | 85 % |
___________ | |
1 | In connection with the Empaveli/Syfovre transaction completed in 2022, the Trust acquired other current assets, as described under the Empaveli Transaction section of the MD&A. The related amortization expense is recorded in other operating expenses. |
2 | Acquired royalties receivable represent the Trust's royalty entitlements prior to the completion of the royalty transactions they relate to, as described under the Transactions Completed section of the MD&A. Acquired royalties receivable of |
3 | For the three and nine months ended |
4 | Certain members of the board of trustees elected to be compensated fully or partially in deferred units ("DUs") under the Trust's Omnibus Equity Incentive Plan. |
5 | Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three and nine months ended |
6 | For the three and nine months ended |
7 | The Trust received a prepayment premium for prepayment of the loan receivable, as described under the Loan receivable section of the MD&A. |
8 | During the second quarter of 2023, the Trust sold its royalty interest in the worldwide sales of Tzield, as described under the Tzield Transactions section of the MD&A. |
9 | During the nine months ended |
Adjusted Cash Earnings per Unit
Management believes that Adjusted Cash Earnings per Unit provides meaningful information about the Trust's performance as it provides a measure of the cash generated by the Trust's assets on a per unit basis, excluding cash earnings that are not expected to recur.
Three months ended | Nine months ended | |||
(thousands of US dollars, except per unit amounts) |
|
|
|
|
Comprehensive earnings (loss) | (3,129) | 7,614 | 70,781 | 16,405 |
[+] Amortization or royalty assets | 23,589 | 13,992 | 62,357 | 40,188 |
[+] Amortization of other current assets1 | — | 114 | 240 | 114 |
[+] Unit-based compensation2 | 1,637 | 298 | 2,352 | 849 |
[+] Board of trustees unit-based compensation3 | 136 | 72 | 513 | 205 |
[-] Non-cash royalty income4 | — | (11) | (4) | (190) |
[-] Non-cash interest and other income on loan receivable5 | — | (66) | (1,102) | (215) |
[-] Premiums for prepayment of loan receivable6 | — | — | (2,140) | — |
[-] Net gain on sale of royalty assets7 | (150) | — | (109,756) | — |
[-] Net unrealized gain on derivative asset | (652) | — | (652) | — |
[+] Management fee on sale of royalty asset8 | — | — | 13,650 | — |
[+] Performance fee on sale of royalty asset8 | — | — | 18,616 | — |
Adjusted Cash Earnings | 21,431 | 22,013 | 54,855 | 57,356 |
Adjusted Cash Earnings per Basic Unit | 0.46 | 0.57 | 1.35 | 1.48 |
Adjusted Cash Earnings per Fully Diluted Unit | 0.46 | 0.57 | 1.35 | 1.48 |
Weighted average number of Units – Basic | 46,115,848 | 38,657,266 | 40,485,450 | 38,684,889 |
Weighted average number of Units – Diluted | 46,205,568 | 38,694,492 | 40,664,366 | 38,710,064 |
__________ | |
1 | In connection with the Empaveli/Syfovre transaction completed in 2022, the Trust acquired other current assets, as described under the Empaveli Transaction section of the MD&A. The related amortization expense is recorded in other operating expenses. |
2 | For the three and nine months ended |
3 | Certain members of the board of trustees elected to be compensated fully or partially in DUs under the Trust's Omnibus Equity Incentive Plan. |
4 | Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three and nine months ended |
5 | For the three and nine months ended |
6 | The Trust received a prepayment premium for prepayment of the loan receivable, as described under the Loan receivable section of the MD&A. |
7 | During the second quarter of 2023, the Trust sold its royalty interest in the worldwide sales of Tzield, as described under the Tzield Transactions section of the MD&A. |
8 | During the nine months ended |
Caution concerning forward-looking statements
This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of words such as "expect", "continue", "anticipate", "intend", "aim", "plan", "believe", "budget", "estimate", "forecast", "foresee", "close to", "target" or negative versions thereof and similar expressions. Some of the specific forward-looking information in this news release may include, among other things, statements regarding the Trust's ability to execute on its strategy and the value to be provided to unitholders and timing of royalty payments. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Trust's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, those that are disclosed in the Trust's most recent annual information form. The anticipated royalty terms for products in our portfolio may be shorter than the period of patent protection for the applicable product, depending on many factors, including the entry of generic drugs into the marketplace and competition, all of which are outside our control. No assurance can be given that these are all the factors that could cause actual results to vary materially from the forward-looking statements in this press release. You should not put undue reliance on forward-looking statements. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, the actual results, performance or achievements of the Trust could differ materially from the results expressed in, or implied by, any forward-looking statements. Certain assumptions underlying the forward-looking information in this news release include: the Trust's assumptions regarding demand and growth in pharmaceutical sales, R&D and opportunities for royalty investing; the competitive environment in which the Trust operates; the performance of the Trust's manager; the Trust's ability to implement its growth strategies; the Trust's ability to obtain financing and maintain its existing financing on acceptable terms; the Trust's ability to maintain good business relationships with marketers and other industry partners; timely receipt of cash royalty receipts; expectations regarding the duration of royalties; the Trust's ability to keep pace with changing consumer preferences; the absence of material adverse changes in the Trust's industry or the global economy; currency exchange and interest rates; the impact of competition; the changes and trends in the Trust's industry or the global economy; and stability in laws, rules, regulations and global standards in the pharmaceutical industry. All forward-looking information in this news release speaks as of the date of this news release. The Trust does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and risks and uncertainties is contained in the Trust's filings with securities regulators, including its latest annual information form and Management's Discussion and Analysis. These filings are also available at the Trust's website at drihealthcare.com.
SOURCE
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