Trimel Announces First Quarter 2015 Financial Results and Highlights

- Total Q1 2015 revenues of $3.2 million increased 23% versus Q4 2014
- Adjusted EBITDA1 of ($0.2) million for Q1 2015 improved by 94% versus Q1 2014
- Commercial launch of NATESTO™ in U.S.

TORONTO--(BUSINESS WIRE)-- Trimel Pharmaceuticals Corporation (TSX: TRL) today reported its financial results for the three month period ended March 31, 2015, and provided an overview of its corporate highlights. Unless otherwise noted, all dollar amounts shown in this press release are in U.S. dollars.

“2015 is off to a strong start with several key accomplishments for the Company,” said Tom Rossi, President and CEO of Trimel. “NATESTOTM was launched in the U.S. within three months of closing the license agreement with Endo Pharmaceuticals, we filed NATESTOTM with Health Canada, and we ramped up our promotion of ESTRACE® in key provinces across the country. Continuing to grow our commercial business and advancing the clinical development for TEFINATM, remain our top priorities for the second quarter.”

1 See “Non-IFRS Financial Measures” below.

Financial Results for the Three Months Ended March 31, 2015

Revenues for first quarter 2015 totaled $3.2 million versus nil for first quarter 2014 and $2.6 million for fourth quarter 2014. Revenues for the first quarter of 2015 were derived from sales of ESTRACE® in Canada, the sale of NATESTOTM inventory to support the launch of this product in the United States, and revenues related to the amortization of the $25 million upfront fee received from the NATESTOTM licensing deal with Endo.

Cost of sales for first quarter 2015 were $2.3 million versus nil for first quarter 2014. Cost of sales for first quarter 2015 reflects amortization expense associated with the ESTRACE® intangible asset ($0.4 million) and the sale of inventory that includes an adjustment to fair market value ($0.8 million) following the ESTRACE® acquisition. In accordance with International Financial Reporting Standards (“IFRS”), ESTRACE® acquired inventory was recorded at fair value, which does not reflect the expected future cost to purchase inventory directly from the third party manufacturer. As such, the gross profit margin reported in the Company’s statements does not reflect what is anticipated to be experienced in the normal course of business for ESTRACE® (see “Adjusted Gross Profit” under “Non-IFRS Financial Measures” below).

Research and Development (“R&D”) expenses were $0.8 million for first quarter 2015 versus $2.7 million for first quarter 2014. The quarter over quarter decrease in R&D expense is primarily due to the inclusion of expenses in first quarter 2014 related to a TEFINATM Phase II clinical trial that was completed in April 2014.

Selling, general and administrative expense for the three month periods ended March 31, 2015 and 2014 were both approximately $1.3 million. Increased selling expenses in first quarter 2015 related to the promotion of ESTRACE® were offset by lower general and administrative expenses due to changes in headcount and associated lower employment costs.

Earnings before interest, tax, depreciation and amortization (“EBITDA”) for first quarter 2015 was $0.9 million versus negative $1.7 million for first quarter 2014. On an adjusted basis (see “EBITDA and Adjusted EBITDA” under “Non-IFRS Financial Measures” below), Adjusted EBITDA was negative $0.2 million for first quarter 2015 versus negative $3.2 million for first quarter 2014. This 94% improvement in first quarter 2015 versus first quarter 2014 Adjusted EBITDA is primarily due to lower expense levels and the contribution from sales of ESTRACE® and NATESTOTM.

At March 31, 2015, the Company had cash balances of $27.3 million and total assets of $67.8 million. The Company believes it has sufficient resources to fund its ongoing activities into 2016, depending on the timing of further clinical activities and barring unforeseen events.

Corporate Highlights

NATESTO™ U.S. Launch and Filing in Canada

NATESTO™ launched in the U.S. on March 16, 2015, marking the commercial availability of the first and only nasal testosterone gel for hypogonadism. As previously announced, the commercial rights to NATESTO™ in the United States and Mexico were licensed by Trimel to an affiliate of Endo International plc (NASDAQ: ENDP) (TSX: ENL) in November 2014.

Earlier this year, the Company indicated that it filed a New Drug Submission for NATESTO™ with Health Canada, with a goal of bringing the product to market in Canada in early 2016. The Company also furthered its work on a twice-daily (‘BID’) dose study, to be initiated in the second quarter of this year.

ESTRACE® Positioned for Growth

In the first quarter, the Company expanded its promotional reach and share of voice across Canada for ESTRACE®, a proven treatment for the relief of menopausal symptoms. The Company also submitted price increases in the majority of provinces, which have all been accepted and will take effect in the second quarter.

TEFINA™ Regulatory Status

As previously communicated, the Company met with the FDA at the end of January to discuss the TEFINA™ Phase II results and next steps for advancing the clinical development program for the product. With the feedback received from the FDA to date, the Company has begun work on a TEFINA™ Phase III protocol. A meeting with the FDA will be requested in the coming weeks, which will be necessary to solicit additional feedback on the Phase III protocol before moving forward.

Conference Call

Shareholders are reminded of the conference call to discuss the Company’s first quarter results to be held on May 7, 2015 at 8:30 a.m. (Eastern Time). To access the call live, please dial 416-340-2219 or 1-866-225-2055. Listeners are encouraged to dial in 10 minutes before the call begins to avoid delays. A replay of the conference call will be available until 11:59 p.m. Eastern Time on May 14, 2015 by dialing 905-694-9451 or 1-800-408-3053, using access code: 2408317#.

Non-IFRS Financial Measures

The non-IFRS measures included in this press release are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from our perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are non-IFRS measures that may have limits in their usefulness to investors.

We use non-IFRS measures, such as Adjusted Gross Profit, EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the valuation of issuers. We also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.

The definition and reconciliation of Adjusted Gross Profit, EBITDA and Adjusted EBITDA used and presented by the Company to the most directly comparable IFRS measures follows below:

Adjusted Gross Profit

Adjusted Gross Profit is defined as gross profit plus the following expenses which are part of cost of sales: (i) amortization of intangible assets; (ii) charges to cost of sales resulting from fair market value adjustments to inventory as a result of a business acquisition; and (iii) other one-time or non-cash items. We use Adjusted Gross Profit as a key performance measure to assess our core gross profit and as a supplemental measure to evaluate the overall operating performance of our cost of sales.

The table below provides the reconciliation of gross profit to Adjusted Gross Profit (values are in thousands of U.S. dollars):

		ESTRACE®			NATESTOTM			Total
Three months ended March 31, 2015
Revenue
Product revenues		$	1,778		$	838		$	2,616
Licensing and other fees			-			600			600
			1,778			1,438			3,216
Cost of sales			1,571			711			2,282
Gross profit			207			727			934
Licensing and other fees (a)			-			(600)			(600)
Amortization of intangible asset (b)			398			-			398
Inventory fair value adjustment (c)			809			-			809
Adjusted gross profit		$	1,414		$	127		$	1,541

Note: All 2014 comparable period figures are $nil

a) We secured a licensing agreement with a third party pharmaceutical company (Endo) to manage the sales and marketing of NATESTOTM in the United States and Mexico. Under the terms of the agreement, we received an upfront fee of $25 million. This fee is amortized into income over the term of the agreement. For the three months ended March 31, 2015 $0.6 million of this deferred licensing fee was recognized as revenue.

b) Upon completion of the acquisition of the Canadian rights to ESTRACE®, we capitalized acquired intangible assets at fair market value. These intangible assets are amortized over their useful life and we recognize the amortization as a non-cash cost of sales. We adjusted for amortization of $0.4 million for the three months ended March 31, 2015, as we believe the exclusion facilitates investors’ ability to more accurately compare our operating results to those of our peer companies and is reflective of how we internally manage the business.

c) Had the inventories acquired as part of the ESTRACE® acquisition been purchased directly from the third party manufacturer, the costs ascribed to it would have been lower by $0.8 million for the three months ended March 31, 2015. Included in cost of sales for the reporting period are charges in respect of a fair value adjustment on the inventory acquired from the seller of the Canadian rights of ESTRACE® in accordance with IFRS standards. Upon the acquisition, we took assignment of the third party manufacturing agreement and will be able, on a go forward basis, to purchase goods directly from the manufacturer at a lower cost than that included in unadjusted cost of sales for the reporting period in respect of the inventory acquired from the seller of the Canadian rights to ESTRACE®. The remaining inventories with a fair value adjustment were sold in April 2015.

EBITDA and Adjusted EBITDA

EBITDA is defined as net income adjusted for income tax, depreciation of property and equipment, amortization of intangible assets, interest on long-term debt and other financing costs, interest income, deferred licensing revenue and changes in fair values of derivative financial instruments. Management uses EBITDA to assess the Company’s operating performance. A reconciliation of net income to EBITDA (and Adjusted EBITDA) is set out below.

Adjusted EBITDA is defined as EBITDA adjusted for, as applicable, inventory fair value and other adjustments, acquisition costs, infrequent royalty expenses associated with triggering events, milestones, share based compensation, impairment of intangible asset, impairment of property and equipment and foreign exchange (gain)/loss. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts and prior years. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the business that may not otherwise be apparent when relying solely on IFRS measures, and eliminates items that have less bearing on operating performance and cash flow. It is an alternative to measuring business performance on net income and operating income, and management believes Adjusted EBITDA is a better alternative measure of cash flow generation than, for example, cash flow from operations, particularly because it removes cash flow fluctuations caused by extraordinary changes in working capital. The values in the table below are in thousands of U.S. dollars:

		For the three months ended March 31,
			2015			2014
Net income		$	(38)		$	(2,579)
Adjustments:
Income tax (recovery)			(90)			-
Deferred licensing revenue			(600)			-
Amortization of intangible assets			472			74
Depreciation of property and equipment			164			635
Interest on long-term debt and other financing costs (1)			913			177
Interest income			(32)			(20)
Change in fair value of derivative			143			21
EBITDA			932			(1,692)
Inventory fair value and other adjustment (2)			809			-
Share based compensation			139			71
Foreign exchange (gain)/loss			(2,107)			(1,584)
Adjusted EBITDA			(227)			(3,205)

(1) This figure includes interest expense and the amortization of deferred financing costs and accretion expense related to our outstanding debts.

(2) See note (c) to the table under “Adjusted Gross Profit” above.

About Trimel

Trimel is a Canadian pharmaceutical company focused on the development and marketing of innovative products that improve the patient experience and produce strong investor returns.

Trimel markets ESTRACE® in Canada, a product indicated for the symptomatic relief of menopausal symptoms. NATESTO™, a product utilizing Trimel's licensed nasal gel technology, is the first testosterone nasal gel filed in Canada for approval, and is the first and only testosterone nasal gel approved and launched in the United States for replacement therapy in adult males diagnosed with hypogonadism. The commercial rights to NATESTO™ in the United States and Mexico have been licensed by Trimel to an affiliate of Endo International plc. TEFINA™, a “use as required” nasal testosterone gel, is Trimel’s drug development candidate aimed at addressing a significant unmet need for women with anorgasmia.

For more information, please visit www.trimelpharmaceuticals.com.

Notice regarding forward-looking statements:

Information in this press release that is not current or historical factual information may constitute forward looking information within the meaning of securities laws. Implicit in this information are assumptions regarding our future operational results. These assumptions, although considered reasonable by the company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual performance of the company is subject to a number of risks and uncertainties and could differ materially from what is currently expected as set out above. For more exhaustive information on these risks and uncertainties you should refer to our annual information form dated March 4, 2015 which is available at www.sedar.com. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time, whether as a result of new information, future events or otherwise, except as required by applicable securities law.

TRIMEL PHARMACEUTICALS CORPORATION
		CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT MARCH 31, 2015 AND DECEMBER 31, 2014
UNAUDITED
(expressed in thousands of U.S. Dollars)
ASSETS
				March 31,					December 31,
					2015					2014
	CURRENT
		Cash		$	27,342				$	31,017
		Trade and other receivables			1,948					1,807
		Inventory			3,691					4,791
		Prepaids and other assets			107					107
		Assets classified as held for sale			69					95
					33,157					37,817
	NON-CURRENT ASSETS
		Property and equipment, net			1,717					1,940
		Intangible assets			32,886					36,187
	TOTAL ASSETS			$	67,760				$	75,944
LIABILITIES
	CURRENT
		Accounts payable and accrued liabilities		$	2,373				$	4,485
		Current portion of long-term debt, net of issuance costs			343					-
		Current portion of deferred revenue and customer deposits			7,097					7,434
					9,813					11,919
	LONG-TERM
		Long-term debt, net of issuance costs			23,809					23,770
		Derivative financial instruments			1,393					1,375
		Deferred revenue and customer deposits			21,812					22,419
	TOTAL LIABILITIES			$	56,827				$	59,483
SHAREHOLDERS' EQUITY
	Share capital			$	149,766				$	149,766
	Warrants				37					1,040
	Contributed surplus				9,721					8,690
	Accumulated other comprehensive loss				(12,354)					(6,836)
	Deficit				(136,237)					(136,199)
	TOTAL SHAREHOLDERS' EQUITY				10,933					16,461
	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	67,760				$	75,944

TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
UNAUDITED
(expressed in thousands of U.S. Dollars)
		March 31,
			2015			2014
REVENUE
Product revenues		$	2,616		$	-
Licensing and other fees			600			-
			3,216			-
EXPENSES
Cost of sales			2,282			-
Research and development			795			2,710
Selling, general and administrative			1,350			1,275
Total operating expenses			4,427			3,985
FINANCE COSTS, NET
Interest on long-term debt and other financing costs			913			177
Interest income			(32)			(20)
Foreign exchange gain			(2,107)			(1,584)
Change in fair value of derivative financial instruments			143			21
			(1,083)			(1,406)
TOTAL EXPENSES			3,344			2,579
LOSS BEFORE INCOME TAXES			(128)			(2,579)
INCOME TAXES
Current			21			-
Deferred			(111)			-
			(90)			-
NET LOSS		$	(38)		$	(2,579)
OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustment			(5,518)			(1,806)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD		$	(5,556)		$	(4,385)
Basic and diluted weighted average shares outstanding			200,873,234			154,722,955
Basic and diluted net loss per comon share		$	(0.00)		$	(0.02)

TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
UNAUDITED
(expressed in thousands of U.S. Dollars)
			Share capital			Warrants			Contributed surplus				Accumulated other comprehensive income (loss)				Deficit			Total
Balance, January 1, 2014			$	119,741		$	1,040		$	7,987			$	(1,640)			$	(113,554)		$	13,574
Net loss for the period				-			-			-				-				(2,579)			(2,579)
Cumulative translation adjustment				-			-			-				(1,806)				-			(1,806)
Total comprehensive loss for the period				-			-			-				(1,806)				(2,579)			(4,385)
Common shares, net of share issuance costs				9,470			-			-				-				-			9,470
Share based compensation				-			-			71				-				-			71
Balance as at March 31, 2014			$	129,211		$	1,040		$	8,058			$	(3,446)			$	(116,133)		$	18,730
Balance, January 1, 2015			$	149,766		$	1,040		$	8,690			$	(6,836)			$	(136,199)		$	16,461
Net loss for the period				-			-			-				-				(38)			(38)
Cumulative translation adjustment				-			-			-				(5,518)				-			(5,518)
Total comprehensive loss for the period				-			-			-				(5,518)				(38)			(5,556)
Warrant expiry, net of tax							(1,003)			892				-				-			(111)
Share based compensation				-			-			139				-				-			139
Balance as at March 31, 2015			$	149,766		$	37		$	9,721			$	(12,354)			$	(136,237)		$	10,933

TRIMEL PHARMACEUTICALS CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
UNAUDITED
(expressed in thousands of U.S. Dollars)
								2015			2014
CASH FLOWS USED IN OPERATING ACTIVITIES
	Net income for the period						$	(38)		$	(2,579)
	Items not requiring an outlay of cash:
		Adjustment for foreign exchange gain						48			(1,250)
		Deferred licensing revenue						(600)			-
		Derivative adjustment to product sales						(9)			-
		Amortization of intangible assets						472			74
		Depreciation of property and equipment						164			635
		Interest on long-term debt and other financing costs						913			177
		Change in fair value of derivative financial instruments						143			21
		Share based compensation						139			71
		Impairment of intangible asset						-			-
		Gain on disposal of property and equipment						(12)			-
		Recovery of deferred income tax						(111)			-
	Net changes in non-cash working capital items related to operating activities:
		Trade and other receivables						(286)			-
		Inventory						676			(264)
		Prepaids and other assets						(11)			(138)
		Accounts payable and accrued liabilities						(1,617)			(5,405)
		Deferred revenue and customer deposits						(343)			-
	Provisions							-			-
	Income taxes received (paid)							-			-
								(472)			(8,658)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Proceeds from issuance of common shares, net of financing costs							-			9,470
	Financing costs, long-term debt							-			(35)
	Proceeds from exercise of warrants							-
	Proceeds from exercise of options							-
	Payment of long-term debt obligations							-			(750)
	Payment of capital lease obligations							-			-
	Interest and financing fees paid							(656)			(79)
								(656)			8,606
CASH FLOWS USED IN INVESTING ACTIVITIES
	Acquisition of property and equipment, net of deposits							(10)			(27)
	Acquisition of business							-			-
	Proceeds from sale of property and equipment							51			-
	Restricted cash							-			-
								41			(27)
NET (DECREASE) IN CASH FOR THE PERIOD								(1,087)			(79)
Exchange (loss) on cash								(2,588)			(524)
CASH BEGINNING OF PERIOD								31,017			18,111
CASH END OF PERIOD							$	27,342		$	17,508

Trimel Pharmaceuticals
Tiana DiMichele, 416-679-0822
[email protected]

Source: Trimel Pharmaceuticals Corporation

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