– Highest quarterly Adjusted EBITDA since IPO
underscores continued execution of growth strategy –
– Omidria expansion transaction highlights
strong execution capabilities –
– Simplifying capital structure with preferred
securities refinancing optimizes cost of capital –
TORONTO, May 6, 2024
/CNW/ - DRI Healthcare Trust (TSX: DHT.UN) (TSX:DHT.U) ( the
"Trust") today announced its financial results for the quarter
ended March 31, 2024. The Trust's
first quarter 2024 financial statements and Management's Discussion
& Analysis ("MD&A") have been filed on SEDAR+
(www.sedarplus.ca).
"The Trust started the year with a successful quarter as the
growth assets we added to the portfolio over the last 18 months
began to generate significant returns," said Behzad Khosrowshahi, the Trust's Chief Executive
Officer. "Our second transaction with Omeros on Omidria shows how
we take a partnership rather than purely transactional approach and
are a preferred partner for repeat deals. This transaction helps
continue building the foundation for further portfolio growth by
increasing our exposure to an immediately cash flowing asset. Our
recent preferred securities refinancing increased clarity in our
capital structure and solved a substantial dilution overhang. We
believe we are set for continued success with an improved cost of
capital and a robust pipeline ahead of us."
First Quarter Highlights
- Deployed US$115 million in the
expansion of royalty entitlement on US net sales of Omidria;
- Total Income of US$42.1
million;
- Normalized Total Cash Receipts of US$63.5 million1;
- Adjusted EBITDA of US$55.1
million1;
- Comprehensive Loss of US$5.0
million;
- Adjusted Cash Earnings per Unit of US$0.47 (basic and diluted)1,2;
- Net Loss per Unit of US$0.11
(basic and diluted)2;
- Paid a quarterly cash distribution of US$0.085 per unit on April
19, 2024.
Subsequent to Quarter End
- Declared a quarterly cash distribution of US$0.085 per unit for the second quarter of 2024,
payable on July 19, 2024 to
unitholders of record on June 30,
2024.
- Completed preferred securities and warrants refinancing on
April 23, 2024.
|
______________________________
|
|
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 units for the purposes
of calculating Earnings per Unit for the three months ended March
31, 2024 were 56,358,240 for both basic and
diluted.
|
Financial Highlights
|
Three months
ended
|
|
(thousands of US
dollars, except per unit amounts)
|
March 31,
2024
|
March
31,2023
|
|
Total
income
|
42,067
|
28,236
|
|
Management
fees
|
4,164
|
1,676
|
|
Performance
fees
|
231
|
—
|
|
Amortization of
royalty assets
|
25,089
|
19,168
|
|
Impairment of royalty
assets
|
4,451
|
—
|
|
Other
expenses
|
14,329
|
8,515
|
|
Net earnings
(loss)
|
(6,197)
|
(1,123)
|
|
Net unrealized gain
(loss) on derivative instruments
|
1,197
|
—
|
|
Comprehensive earnings
(loss)
|
(5,000)
|
(1,123)
|
|
Net earnings (loss)
per unit – basic
|
(0.11)
|
(0.03)
|
|
Net earnings (loss)
per unit – diluted
|
(0.11)
|
(0.03)
|
|
Normalized Total Cash
Receipts3
|
63,517
|
24,991
|
|
Adjusted
EBITDA1
|
55,110
|
21,434
|
|
Adjusted EBITDA
Margin1
|
87 %
|
86 %
|
|
Adjusted Cash Earnings
per Unit – Basic1
|
0.47
|
0.49
|
|
Adjusted Cash Earnings
per Unit – Diluted1
|
0.47
|
0.49
|
|
Weighted average
number of Units – Basic
|
56,358,240
|
37,753,194
|
|
Weighted average
number of Units – Diluted
|
56,358,240
|
37,821,801
|
Asset Performance
As at March 31, 2024, the Trust's portfolio included 25
royalty streams on 19 products that address a variety of
therapeutic areas, such as oncology, neurology, ophthalmology,
endocrinology, hematology, dermatology, lysosomal storage
disorders, and immunology. On March 31, 2024, the royalty
asset portfolio had a book value, net of accumulated amortization,
of US$789.5 million, which during the
three months ended March 31, 2024
generated Total Cash Royalty Receipts1 of US$63.5 million and royalty income of
US$41.3 million.
|
________________________
|
|
3
|
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.
|
Portfolio
|
(thousands of US
dollars)
|
|
Cash
Receipts
|
|
|
|
Three months
ended
|
|
Product
|
Therapeutic
Area
|
Marketer(s)
|
March 31,
2024
|
March 31,
2023
|
|
Empaveli/Syfovre1
|
Hematology/Ophthalmology
|
Apellis,
Sobi
|
23
|
187
|
|
Eylea I
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
1,407
|
1,374
|
|
Eylea II
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
305
|
1,124
|
|
FluMist
|
Influenza
|
AstraZeneca
|
—
|
1,445
|
|
Natpara
|
Endocrinology
|
Takeda
|
568
|
611
|
|
Omidria
|
Ophthalmology
|
Rayner
Surgical
|
8,560
|
3,250
|
|
Oracea
|
Dermatology
|
Galderma
|
2,450
|
2,021
|
|
Orserdu
I2
|
Oncology
|
Menarini
|
8,020
|
—
|
|
Orserdu
II2
|
Oncology
|
Menarini
|
23,538
|
—
|
|
Rydapt
|
Oncology
|
Novartis
|
2,223
|
2,803
|
|
Spinraza
|
Neurology
|
Biogen
|
3,843
|
4,106
|
|
Stelara, Simponi and
Ilaris3
|
Immunology
|
Johnson & Johnson,
Merck, Mitsubishi Tanabe, Novartis
|
244
|
451
|
|
Vonjo I
|
Hematology
|
Sobi
|
2,902
|
2,024
|
|
Vonjo
II2
|
Hematology
|
Sobi
|
5,605
|
—
|
|
Xenpozyme4
|
Lysosomal Storage
Disorder
|
Sanofi
|
—
|
—
|
|
Xolair
|
Immunology
|
Roche,
Novartis
|
2,446
|
2,538
|
|
Zejula
|
Oncology
|
GSK
|
962
|
742
|
|
Zytiga5
|
Oncology
|
Johnson &
Johnson
|
—
|
—
|
|
Other
Products6
|
Various
|
Various
|
421
|
682
|
|
Total Cash Royalty
Receipts7
|
|
63,517
|
23,358
|
|
Interest receipts from
loan receivable8
|
|
—
|
1,633
|
|
Total Cash Receipts
and Normalized Cash Receipts5
|
|
63,517
|
24,991
|
|
___________________________
|
|
1
|
Per the royalty agreement, Empaveli/Syfovre royalty
cash receipts are to be received on a three-quarter lag. During the
first quarter of 2024, a small portion of the royalty cash receipts
expected to be received on a three-lag were received on a
two-quarter lag. The remaining royalty receipts are expected to be
received on a three-quarter lag and are expected to be received in
the second quarter of 2024.
|
|
2
|
Includes milestone
royalty receipts of US$2,104 from Orserdu I, US$18,939 from Orserdu
II and US$5,000 from Vonjo II.
|
|
3
|
Stelara, Simponi and
Ilaris include two royalty streams on each product, for a total of
six royalty streams held directly and indirectly.
|
|
4
|
Cash royalities from
Xenpozyme are received on a semi-annual basis during the second
fourth quarter of each year.
|
|
5
|
Cash royalties from
Zytiga are received on a semi-annual basis during the second and
fourth quarters of each year.
|
|
6
|
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.
|
|
7
|
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.
|
|
8
|
Interest receipts
from loan receivable relates to the loan receivable, which was
repaid in full on June 26, 2023.
|
Liquidity and Capital
On March 31, 2024, the Trust had cash and cash equivalents
of US$66.6 million. The Trust's
credit facility had an outstanding principal balance of
US$239.5 million on March 31,
2024.
The Trust had 56,358,240 units issued and outstanding on
March 31, 2024.
Distributions
On February 28, 2024, the board of
trustees approved a quarterly cash distribution of US$0.0850 per unit to unitholders of record as of
March 31, 2024, which was paid on
April 19, 2024. The Trust also
announced today that its board of trustees has declared a quarterly
cash distribution in the amount of US$0.0850 per unit for the second quarter of
2024, payable on July 19, 2024, to
unitholders of record as of June 30,
2024.
Omidria Royalty Amendment
On February 1, 2024, the Trust
amended its existing royalty agreement with Omeros Corporation to
expand its royalty interest on the US net sales of Omidria for an
upfront purchase price of US$115.0
million. In accordance with the terms of the amended royalty
agreement, the royalty seller may be entitled to receive up to
US$55.0 million in potential
sales-based milestone payments. Accordingly, the Trust is now
entitled to receive a 30% royalty on US net sales of Omidria until
December 31, 2031, and all previously
agreed-upon annual royalty caps have been eliminated. As part of
the amendment, the Trust is no longer entitled to ex-US
royalties.
Omidria was approved by the US Food and Drug Administration
(FDA) in May 2014 and the European
Medicines Agency (EMA) in July 2015
for intracameral use during cataract surgery or intraocular lens
replacement to maintain pupil dilation and reduce postoperative
pain. Omidria was launched in the United
States in 2014 but has yet to be launched in the European
Union. Omidria is marketed by Rayner Surgical, one of the world's
leaders in the field of cataract surgery with operations in over 80
countries.
First Quarter 2024 Conference Call & Webcast
As previously announced, management will hold a conference call
on Tuesday, May 7, 2024, at
8:00 a.m. (ET) to review the Trust's
2024 first quarter results. You can join the call by dialing
1-888-664-6392 or 416-764-8659 approximately 15 minutes prior to
the call to secure a line.
A live webcast of the conference call, including a slide
presentation, will be available at
https://app.webinar.net/R08zEQyEgVn. 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
date. Investors should carefully review the factors, assumptions
and uncertainties included in such related presentation.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures and non-GAAP
ratios for the three months ended March 31,
2024 and 2023 to the most directly comparable measures
calculated in accordance with IFRS are presented below.
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
|
|
(thousands of US
dollars)
|
March 31,
2024
|
March 31,
2023
|
|
Total
income
|
42,067
|
28,236
|
|
[-] Other interest
income
|
(722)
|
(237)
|
|
[+] Royalties
receivable, beginning of period
|
64,082
|
27,748
|
|
[-] Royalties
receivable, end of period
|
(45,470)
|
(30,774)
|
|
[+] Acquired royalties
receivable1
|
3,560
|
96
|
|
[-] Non-cash royalty
income2
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable3
|
—
|
(74)
|
|
Total Cash Receipts
and Normalized Cash Receipts
|
63,517
|
24,991
|
|
[-] Interest and other
income on loan receivable
|
—
|
(1,707)
|
|
[+] Non-cash interest
and other income on loan receivable3
|
—
|
74
|
|
Total Cash Royalty
Receipts
|
63,517
|
23,358
|
|
___________________________
|
|
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 US$96 previously recognized for the Tzield
transaction were reversed during the second quarter of 2023 as the
royalty asset and its associated royalty interest was
sold.
|
|
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 of $nil was used to reduce the obligation during
three months ended March 31, 2024 (2023 – $4). Royalty income
earned in future periods related to other royalty assets will be
used to repay the remaining obligation of US$136.
|
|
3
|
As the loan
receivable was fully prepaid on June 26, 2023, there was no
non-cash interest and other income for the three months ended March
31, 2024. For the three months ended March 31, 2023, non-cash
interest and other income on loan receivable represents the
amortization of commitment fees of $25 and the accretion of exit
fees receivable of $49.
|
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.
|
Three months
ended
|
|
(thousands of US
dollars)
|
March 31,
2024
|
March 31,
2023
|
|
Comprehensive earnings
(loss)
|
(5,000)
|
(1,123)
|
|
[+] Amortization or
royalty assets
|
25,089
|
19,168
|
|
[+] Impairment of royalty assets
|
4,451
|
—
|
|
[+] Amortization of
other current assets[15]
|
—
|
143
|
|
[-] Other interest
income
|
(722)
|
(237)
|
|
[+] Interest
expense
|
8,398
|
6,166
|
|
EBITDA
|
32,216
|
24,117
|
|
[+] Royalties
receivable, beginning of period
|
64,082
|
27,748
|
|
[-] Royalties
receivable, end of period
|
(45,470)
|
(30,774)
|
|
[-] Performance fees
payable, beginning of period
|
(5,918)
|
—
|
|
[+] Performance fees
payable, end of period
|
4,916
|
—
|
|
[+] Acquired royalties
receivable[16]
|
3,560
|
96
|
|
[+] Unit-based
compensation[17]
|
2,567
|
243
|
|
[+] Board of trustees
unit-based compensation[18]
|
354
|
82
|
|
[-] Non-cash royalty
income[19]
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable[20]
|
—
|
(74)
|
|
[-] Net unrealized
gain on derivative instruments
|
(1,197)
|
—
|
|
Adjusted
EBITDA
|
55,110
|
21,434
|
|
[÷] Normalized Total
Cash Receipts
|
63,517
|
24,991
|
|
Adjusted EBITDA
Margin
|
87 %
|
86 %
|
|
_____________________________
|
|
1
|
In connection with
the Empaveli/Syfovre transaction completed in 2022, the Trust
acquired other current assets, as described under the
Financial Review: Results of Operations 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 US$96 previously recognized for the Tzield
transaction were reversed during the second quarter of 2023 as the
royalty asset and its associated royalty interest was
sold.
|
|
3
|
For the three months
ended March 31, 2024, unit-based compensation expense was $2,567
(2023 – $288, which includes $45 paid in cash).
|
|
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 of $nil was used to reduce the obligation during
three months ended March 31, 2024 (2023 – $4). Royalty income
earned in future periods related to other royalty assets will be
used to repay the remaining obligation of US$136.
|
|
6
|
As the loan
receivable was fully prepaid on June 26, 2023, there was no
non-cash interest and other income for the three months ended March
31, 2024. For the three months ended March 31, 2023, non-cash
interest and other income on loan receivable represents the
amortization of commitment fees of $25 and the accretion of exit
fees receivable of $49.
|
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
|
|
(thousands of US
dollars, except per unit amounts)
|
March 31,
2024
|
March 31,
2023
|
|
Comprehensive earnings
(loss)
|
(5,000)
|
(1,123)
|
|
[+] Amortization or
royalty assets
|
25,089
|
19,168
|
|
[+] Impairment of
royalty assets
|
4,451
|
—
|
|
[+] Amortization of
other current assets[21]
|
—
|
143
|
|
[+] Unit-based
compensation[22]
|
2,567
|
243
|
|
[+] Board of trustees
unit-based compensation[23]
|
354
|
82
|
|
[-] Non-cash royalty
income[24]
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable[25]
|
—
|
(74)
|
|
[-] Net unrealized
gain on derivative instruments
|
(1,197)
|
—
|
|
Adjusted Cash
Earnings
|
26,264
|
18,435
|
|
Adjusted Cash
Earnings per Basic Unit
|
0.47
|
0.49
|
|
Adjusted Cash
Earnings per Fully Diluted Unit
|
0.47
|
0.49
|
|
Weighted average
number of Units – Basic
|
56,358,240
|
37,753,194
|
|
Weighted average
number of Units – Diluted
|
56,358,240
|
37,821,801
|
|
______________________________
|
|
1
|
In connection with
the Empaveli/Syfovre transaction completed in 2022, the Trust
acquired other current assets, as described under the
Financial Review: Results of Operations section of the
MD&A. The related amortization expense is recorded in other
operating expenses.
|
|
2
|
For the three months
ended March 31, 2024, unit-based compensation expense was $2,567
(2023 – $288, which includes $45 paid in cash).
|
|
3
|
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.
|
|
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 of $nil were used to reduce the obligation during
the three months ended March 31, 2024 (2023 – $4). Royalty income
earned in future periods related to other royalty assets will be
used to repay the remaining obligation of $136.
|
|
5
|
As the loan
receivable was fully prepaid on June 26, 2023, there was no
non-cash interest and other income for the three months ended March
31, 2024. For the three months ended March 31, 2023, non-cash
interest and other income on loan receivable represents the
amortization of commitment fees of $25 and the accretion of exit
fees receivable of $49.
|
About DRI Healthcare Trust
DRI Healthcare Trust is managed by DRI Capital Inc. ("DRI
Healthcare"), the pioneer in global pharmaceutical royalty
monetization with a 35-year history of accelerating innovation by
providing capital to inventors, academic institutions and biopharma
companies. Since its founding in 1989, DRI Healthcare has deployed
more than US$3.0 billion, acquiring
more than 70 royalties on 45-plus drugs, including Eylea, Keytruda,
Orserdu, Spinraza, Stelara, Vonjo, Zejula and Zytiga. DRI
Healthcare Trust's units are listed and traded on the Toronto Stock
Exchange in Canadian dollars under the symbol "DHT.UN" and in US
dollars under the symbol "DHT.U". To learn more, visit
drihealthcare.com or follow us on LinkedIn.
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 MD&A. These filings are also available on
the Trust's website at drihealthcare.com.
SOURCE DRI Healthcare Trust
