– Highest Normalized Total Cash Receipts in a
single quarter since IPO, excluding milestones –
– Trust internal investigation
substantially complete with no impact to cash royalty
receipts –
– New executive leadership
in place and in-depth review of governance practices underway
–
TORONTO, Aug. 6, 2024
/CNW/ - DRI Healthcare Trust (TSX: DHT.UN) (TSX: DHT.U) ("DRI" or
the "Trust") today announced its financial results for the quarter
ended June 30, 2024. The Trust's second quarter 2024 financial
statements and Management's Discussion & Analysis ("MD&A")
have been filed on SEDAR+ (www.sedarplus.ca). All dollar amounts
are expressed in U.S. dollars unless otherwise indicated.
"As we begin a new chapter for the Trust, we do so with a
renewed sense of optimism and purpose," said Gary Collins, the Trust's Chairman and Chief
Executive Officer. "We have enacted changes to benefit our
unitholders, focusing on transparency and good governance. We began
by implementing strong new leadership to steward the Trust through
this transitional period and we will continue examining all aspects
of our governance structures and processes to focus on furthering
unitholder interests. We are supported by a strong and determined
team that has shown its ability to execute. The fundamentals of our
business are robust, as evidenced by impressive results through the
first half of the year. We plan to continue on that growth path to
deliver accretive value to our unitholders over the long term."
Second Quarter Highlights
- Deployed $13.3 million in a
second royalty interest in Xenpozyme;
- Total Income of $41.6
million;
- Normalized Total Cash Receipts of $43.0
million1;
- Adjusted EBITDA of $32.9
million1;
- Comprehensive Loss of $1.9
million;
- Adjusted Cash Earnings per Unit of $0.49 (basic and diluted)1,2;
- Net Loss per Unit of $0.04 (basic
and diluted)2;
- Paid a quarterly cash distribution of $0.085 per unit on July
19, 2024.
Subsequent to Quarter End
- Appointed Gary Collins as CEO
and Amit Kapur as CFO.
- Received $6.5 million from our
manager, DRI Healthcare, in reimbursement of alleged
consulting and other expenses incorrectly charged to the Trust,
either directly or indirectly by DRI Healthcare, as directed by the
former Chief Executive Officer.
- Repurchased 198,746 Units under its Normal Course Issuer Bid
("NCIB") at an average price of $8.72, totaling $1.7
million under the Automated Purchase Plan ("AUPP").
- Declared a quarterly cash distribution of $0.085 per unit for the third quarter of 2024,
payable on October 18, 2024 to
unitholders of record on September 30,
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 basic and diluted units for the purposes of
calculating Earnings per Unit for the three months ended June 30,
2024 were 56,426,259 units.
|
Investigation Update
On July 8, 2024, the Trust
announced that the Audit Committee of the Board of Trustees,
assisted by independent legal counsel and forensic accountants, had
launched an internal investigation into irregularities related to
certain alleged consulting and other expenses charged
to the Trust, either directly or indirectly by DRI Healthcare, the
manager of the Trust, as directed by the former Chief Executive
Officer.
The Trust today announces that the investigation, as it relates
to the charges affecting the Trust, is substantially complete.
Assisted by independent advisors, the Audit Committee undertook a
detailed forensic and documentary review of information relating to
transactions charged to the Trust (including bank statements,
invoices, contracts, supporting documentation and accounting
records and information). The Audit Committee's advisors also
reviewed documents and data from the physical offices of the
manager, company emails and other available data, and conducted
interviews with DRI Healthcare's personnel and related third
parties and consultants.
As of August 6, 2024, the
investigation has identified $6.510
million in consulting and other expenses that had been
incorrectly charged to the Trust. $5.501
million had been reimbursed by DRI Healthcare on
July 9, 2024, and the remaining
$1.009 million was reimbursed on
August 6, 2024. Based on the results
of the investigation to date, the Trust is satisfied that the
applicable consulting and other expenses that impacted the Trust
have been identified and quantified, and no further material
adjustments are anticipated. There has been no change to the amount
of cash royalties received from any of the assets in any previous
term nor has there been any change to the forecast of future
royalty receipts as a result of these findings.
As part of the investigation, the Trust is continuing to examine
all aspects of its governance structures and processes. The Trust
is coordinating with DRI Healthcare, the manager of the Trust, as
to a potential internal investigation into the affairs of DRI
Healthcare and its relationship with the Trust.
Executive and Board Changes
The Trust also announced today the appointment of Gary Collins as Chief Executive Officer (CEO) of
the Trust, effective August 7, 2024, for a period of two
years. Mr. Collins is the Chair of the Board and was appointed as
Interim CEO of the Trust on July 8, 2024 further to the
resignation of the former CEO in connection with the investigation
of the Trust.
In connection with Mr. Collins' appointment as CEO and his
continued role as Chair of the Board, the Board has appointed
Tamara Vrooman as Lead Independent
Director, effective immediately, as an additional measure to ensure
that adequate processes and structures are in place for the Board
to function independently. Mr. Collins will step down from the
Governance, Compensation and Nominating Committee and will be
replaced by Paul Mussenden on the
Board's Audit Committee.
The Trust also announced today the appointment of Amit Kapur as Chief Financial Officer (CFO) of
the Trust effective September 16,
2024. Sandy Kwan will remain acting CFO of DRI
Healthcare, the manager of the Trust.
Mr. Kapur has more than fifteen years of leadership experience
in financial services, industrial automation, environmental
services, and technology, and was most recently Chief Financial
Officer at Enwave Energy Corporation. He holds a Masters degree in
Business Administration (MBA) from the Johnson School at
Cornell University and an Honours
Bachelor of Commerce degree from McMaster
University. He is also a Chartered Accountant (Canada), a Certified Public Accountant
(Illinois) and a Chartered
Financial Analyst.
Restatement of Previously Issued Consolidated Financial
Statements
Based on the information obtained to date from the
investigation, the Trust considered the resulting financial impact
on its prior financial statements, and the Trust has restated its
previously reported audited annual consolidated financial
statements as at and for the year ended December 31, 2023 and 2022, and related
management's discussion and analysis. The amended and restated
annual consolidated financial statements for the years ended
December 31, 2023 and 2022, together
with the related amended and restated management's discussion and
analysis, have been filed on SEDAR+. In addition, the Trust has
restated certain amounts previously reported in its condensed
consolidated financial statements for the three and six months
ended June 30, 2023. Such restated
amounts have been included in the Trust's condensed consolidated
financial statements for the three and six months ended
June 30, 2024 and 2023 which,
together with the related management's discussion and analysis,
have also been filed on SEDAR+. The restatements reflect the
removal of incorrectly charged consulting and other expenses from
the following items: royalty assets, net of accumulated
amortization and amortization of royalty assets, capitalized deal
costs included in other non-current assets and deal investigation
and research costs. See note 2 "Restatement of Previously Issued
Consolidated Financial Statements" to the amended and restated
annual consolidated financial statements of the Trust for the years
ended December 31, 2023 and 2022 and
note 2 "Restatement of Previously Issued Consolidated Financial
Statements" to the condensed consolidated financial statements for
the three and six months ended June 30,
2024 and 2023 for additional information.
In conjunction with the restatements described above, management
has identified material weaknesses in the Trust's internal control
over financial reporting as at December 31,
2023, as further described under "Disclosure Controls and
Procedures and Internal Control over Financial Reporting" in the
management's discussion and analysis referred to above. As a result
of the material weaknesses, the Trust's CEO and CFO have concluded
that the Trust's internal control over financial reporting was not
effective as at December 31, 2023.
DRI Healthcare and the Trust are implementing appropriate remedial
measures to strengthen corporate governance, compliance and control
processes. See "Disclosure Controls and Procedures and Internal
Control over Financial Reporting" in the management's discussion
and analysis referred to above.
Financial Highlights
|
Three months
ended
|
Six months
ended
|
|
(thousands of US
dollars, except per unit amounts)
|
June
30,
2024
|
June
30,
2023
|
June
30,
2024
|
June
30,
2023
|
|
Total
income
|
41,604
|
28,058
|
83,671
|
56,294
|
|
Management
fees
|
2,825
|
15,560
|
6,989
|
17,236
|
|
Performance
fees
|
—
|
18,616
|
231
|
18,616
|
|
Amortization of
royalty assets1
|
25,679
|
19,582
|
50,724
|
38,731
|
|
Impairment of royalty
assets
|
820
|
—
|
5,200
|
—
|
|
Other
expenses1
|
15,825
|
8,687
|
29,800
|
16,787
|
|
Net gain from sale of
royalty asset
|
—
|
109,972
|
—
|
109,972
|
|
Net gain on debt
refinancing
|
2,176
|
—
|
2,176
|
—
|
|
Other
loss1
|
(764)
|
(411)
|
(1,575)
|
(995)
|
|
Net earnings
(loss)1
|
(2,133)
|
75,174
|
(8,673)
|
73,901
|
|
Net unrealized gain
(loss) on derivative instruments
|
228
|
—
|
1,425
|
—
|
|
Comprehensive earnings
(loss)1
|
(1,905)
|
75,174
|
(7,248)
|
73,901
|
|
Net earnings (loss)
per unit – basic1
|
(0.04)
|
2.01
|
(0.15)
|
1.96
|
|
Net earnings (loss)
per unit – diluted1
|
(0.04)
|
2.00
|
(0.15)
|
1.96
|
|
Normalized Total Cash
Receipts2
|
42,955
|
28,688
|
106,472
|
53,679
|
|
Adjusted
EBITDA1,2
|
32,903
|
25,239
|
88,367
|
47,088
|
|
Adjusted EBITDA
Margin1,2
|
77 %
|
88 %
|
83 %
|
88 %
|
|
Adjusted Cash Earnings
per Unit – Basic1,2
|
0.49
|
0.40
|
0.97
|
0.90
|
|
Adjusted Cash Earnings
per Unit – Diluted1,2
|
0.49
|
0.40
|
0.97
|
0.90
|
|
Weighted average
number of Units – Basic
|
56,426,259
|
37,487,973
|
56,392,250
|
37,623,590
|
|
Weighted average
number of Units – Diluted
|
56,426,259
|
37,680,076
|
56,392,250
|
37,798,310
|
Asset Performance
As at June 30, 2024, the Trust's portfolio included 26
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 June 30, 2024, the royalty
asset portfolio had a book value, net of accumulated amortization,
of $774.8 million, which during the
three and six months ended June 30,
2024 generated Total Cash Royalty Receipts1 of
$43.0 million and $106.5 million, respectively, and royalty income
of $41.0 million and $82.4, respectively.
|
_______________________________
|
|
1 Comparative figures have been
restated as a result of a retrospective reclassification of certain
expenses and capitalized costs.
2 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
|
Six months
ended
|
|
Product
|
Therapeutic
Area
|
Marketer(s)
|
June 30,
2024
|
June 30,
2023
|
June 30,
2024
|
June 30,
2023
|
|
Empaveli/Syfovre
|
Hematology/Ophthalmology
|
Apellis,
Sobi
|
2,552
|
251
|
2,575
|
438
|
|
Eylea I
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
1,321
|
1,350
|
2,728
|
2,724
|
|
Eylea II
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
285
|
292
|
590
|
1,416
|
|
FluMist
|
Influenza
|
AstraZeneca
|
—
|
30
|
—
|
1,475
|
|
Natpara
|
Endocrinology
|
Takeda
|
695
|
610
|
1,263
|
1,221
|
|
Omidria
|
Ophthalmology
|
Rayner
Surgical
|
11,261
|
3,250
|
19,821
|
6,500
|
|
Oracea
|
Dermatology
|
Galderma
|
1,886
|
1,261
|
4,336
|
3,282
|
|
Orserdu
I1
|
Oncology
|
Menarini
|
5,315
|
—
|
13,335
|
—
|
|
Orserdu
II1
|
Oncology
|
Menarini
|
3,633
|
—
|
27,171
|
—
|
|
Rydapt
|
Oncology
|
Novartis
|
1,953
|
2,047
|
4,176
|
4,850
|
|
Spinraza
|
Neurology
|
Biogen
|
3,272
|
3,933
|
7,115
|
8,039
|
|
Stelara, Simponi and
Ilaris2
|
Immunology
|
Johnson & Johnson,
Merck, Mitsubishi Tanabe, Novartis
|
186
|
349
|
430
|
800
|
|
Vonjo I
|
Hematology
|
Sobi
|
2,887
|
2,315
|
5,789
|
4,339
|
|
Vonjo
II1
|
Hematology
|
Sobi
|
615
|
—
|
6,220
|
—
|
|
Xenpozyme
|
Lysosomal Storage
Disorder
|
Sanofi
|
662
|
—
|
662
|
—
|
|
Xolair
|
Immunology
|
Roche,
Novartis
|
1,666
|
1,538
|
4,112
|
4,076
|
|
Zejula
|
Oncology
|
GSK
|
932
|
740
|
1,894
|
1,482
|
|
Zytiga
|
Oncology
|
Johnson &
Johnson
|
3,546
|
8,543
|
3,546
|
8,543
|
|
Other
Products3
|
Various
|
Various
|
288
|
548
|
709
|
1,230
|
|
Total Cash Royalty
Receipts4
|
|
42,955
|
27,057
|
106,472
|
50,415
|
|
Interest receipts from
loan receivable5
|
|
—
|
1,631
|
—
|
3,264
|
|
Principal repayment of
loan receivable5,6
|
|
—
|
50,000
|
—
|
50,000
|
|
Exit fee received for
loan receivable5,6
|
|
—
|
1,000
|
—
|
1,000
|
|
Premiums for
prepayment5,6
|
|
—
|
2,140
|
—
|
2,140
|
|
Proceeds from sale
of royalty assets6,7
|
|
—
|
210,000
|
—
|
210,000
|
|
Total Cash
Receipts4
|
|
42,955
|
291,828
|
106,472
|
316,819
|
|
Principal repayment of
loan receivable6,
|
|
—
|
(50,000)
|
—
|
(50,000)
|
|
Exit fee received for
loan receivable6,
|
|
—
|
(1,000)
|
—
|
(1,000)
|
|
Premiums for
prepayment6,
|
|
—
|
(2,140)
|
—
|
(2,140)
|
|
Proceeds from sale of
royalty assets6,7
|
|
—
|
(210,000)
|
—
|
(210,000)
|
|
Normalized Total
Cash Receipts4
|
|
42,955
|
28,688
|
106,472
|
53,679
|
|
|
|
|
|
|
|
|
____________________________________
|
|
1 Cash receipts for the six months
ended June 30, 2024 includes milestone royalty receipts of $2,104
from Orserdu I, $18,939 from Orserdu II and $5,000 from Vonjo
II.
|
|
2 Stelara, Simponi and Ilaris
includes two royalty streams on each product, for a total of six
royalty streams held directly and indirectly.
|
|
3 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.
|
|
4 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.
|
|
5 Interest receipts from loan
receivable relates to the loan receivable, which was repaid in full
on June 26, 2023. In accordance with the loan agreement, the Trust
was also entitled to receive an exit fee and prepayment premiums
upon prepayment of the loan, which were received in the second
quarter of 2023.
|
|
6 This item represents cash received
by the Trust in the quarter that is not expected to recur in the
normal course of our operations. As such, these items are not
included in Normalized Total Cash Receipts.
|
|
7 On April 27, 2023, the Trust sold
the Tzield royalty asset.
|
Liquidity and Capital
On June 30, 2024, the Trust had cash and cash equivalents
of $53.9 million. The Trust's credit
facility had an outstanding principal balance of $225.4 million and $260.8
million in available credit on June 30, 2024.
The Trust had 56,385,882 units issued and outstanding on
June 30, 2024.
Distributions
On May 6, 2024, the board of
trustees approved a quarterly cash distribution of $0.0850 per unit to unitholders of record as of
June 30, 2024, which was paid on
July 19, 2024. The Trust also
announced today that its board of trustees has declared a quarterly
cash distribution in the amount of $0.0850 per unit for the third quarter of 2024,
payable on October 18, 2024, to
unitholders of record as of September 30,
2024.
Normal Course Issuer Bid
During the quarter, the Trust repurchased and cancelled 207,600
of its own units under its NCIB for an aggregate amount of
$2.2 million at a weighted average
price of C$14.35 per unit
($10.52). As previously announced,
the Trust received approval on November 13,
2023 from the Toronto Stock Exchange to acquire, from time
to time, if considered advisable, up to an aggregate of 3,280,195
of its units for cancellation. Purchases will conclude on the
earlier of the date on which the Trust has purchased the maximum
number of units permitted under the NCIB and November 19, 2024. In connection with the NCIB,
the Trust established an AUPP whereby units of the Trust may be
repurchased at the discretion of a dealer to the AUPP using
commercially reasonable efforts and subject to trading parameters
defined in the AUPP.
Under the AUPP, subsequent to June 30, 2024, the Trust
repurchased an additional 198,746 units at an average price of
C$11.92 ($8.72), totaling $1.7
million.
Xenpozyme Royalty Transaction
On June 28, 2024, the Trust purchased an additional royalty
stream on Xenpozyme for $13.3
million. This royalty is in addition to its existing
Xenpozyme royalty purchased in 2022. The transaction entitles the
Trust to an additional approximately 1.0% of worldwide net sales of
Xenpozyme. The Trust is entitled to receive semi-annual royalty
payments in respect of net sales of Xenpozyme commencing from
July 1, 2024 on a two quarter lag
from the respective half-year period.
In accordance with the royalty agreement, additional milestone
payments totaling up to $32.5 million
may be paid by the Trust upon achievement of certain
performance-based thresholds.
Xenpozyme is the only product developed and approved for the
treatment of non-central nervous system manifestations of acid
sphingomyelinase deficiency ("ASMD"), also known as Niemann-Pick
disease types A, A/B and B, in pediatric and adult patients. ASMD
is an extremely rare, progressive genetic disease with significant
morbidity and mortality, especially among infants and children.
Signs and symptoms of ASMD may include enlarged spleen or liver,
difficulty breathing, lung infections and unusual bruising or
bleeding, among other disease manifestations. Current management of
the disease includes palliative and supportive care to manage the
symptoms. Xenpozyme was approved in Japan in March
2022, by the European Commission in June 2022 and by the FDA in August 2022. Xenpozyme is marketed worldwide by
Sanofi.
Second Quarter 2024 Conference Call & Webcast
As previously announced, management will hold a conference call
on Wednesday, August 7, 2024, at
8:00 a.m. (ET) to review the Trust's
2024 second 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/MAxX169nQNb. 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.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures and non-GAAP
ratios for the three months and six months ended June 30, 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
|
Six months
ended
|
|
(thousands of US
dollars)
|
June 30,
2024
|
June 30,
2023
|
June 30,
2024
|
June 30,
2023
|
|
Total
income
|
41,604
|
28,058
|
83,671
|
56,294
|
|
[-] Other interest
income
|
(577)
|
(52)
|
(1,299)
|
(289)
|
|
[+] Royalties
receivable, beginning of period
|
45,470
|
30,774
|
64,082
|
58,522
|
|
[-] Royalties
receivable, end of period
|
(43,542)
|
(29,110)
|
(43,542)
|
(59,884)
|
|
[+] Acquired royalties
receivable1
|
—
|
2,186
|
3,560
|
2,282
|
|
[-] Non-cash royalty
income2
|
—
|
—
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable3
|
—
|
(1,028)
|
—
|
(1,102)
|
|
[+] Principal
repayment of loan receivable
|
—
|
50,000
|
—
|
50,000
|
|
[+] Exit
fee3
|
—
|
1,000
|
—
|
1,000
|
|
[+] Proceeds from sale
of royalty assets
|
—
|
210,000
|
—
|
210,000
|
|
Total Cash
Receipts
|
42,955
|
291,828
|
106,472
|
316,819
|
|
[-] Principal
repayment of loan receivable4
|
—
|
(50,000)
|
—
|
(50,000)
|
|
[-] Exit fee received
for loan receivable3,4
|
—
|
(1,000)
|
—
|
(1,000)
|
|
[-] Premiums for
prepayment of loan receivable4
|
—
|
(2,140)
|
—
|
(2,140)
|
|
[-] Proceeds from sale
of royalty assets4
|
—
|
(210,000)
|
—
|
(210,000)
|
|
Normalized Total
Cash Receipts
|
42,955
|
28,688
|
106,472
|
53,679
|
|
[-] Interest and other
income on loan receivable
|
—
|
(4,799)
|
—
|
(6,506)
|
|
[+] Non-cash interest
and other income on loan receivable3
|
—
|
1,028
|
—
|
1,102
|
|
[+] Premiums for
prepayment of loan receivable4
|
—
|
2,140
|
—
|
2,140
|
|
Total Cash Royalty
Receipts
|
42,955
|
27,057
|
106,472
|
50,415
|
|
_________________________________
|
|
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 $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 and nil,
respectively, was used to reduce the obligation during three and
six months ended June 30, 2024 (2023 – nil and $4, respectively).
Royalty income earned in future periods related to other royalty
assets will be used to repay the remaining obligation of
$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 and six months ended June 30, 2024. For the three and
six months ended June 30, 2023, non-cash interest and other income
on loan receivable represents the amortization of commitment fees
of $343 and $368, respectively, and the accretion of exit fees
receivable of $685 and $734, respectively.
4 This item represents cash received by the Trust
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.
|
Three months
ended
|
Six months
ended
|
|
(thousands of US
dollars)
|
June 30,
2024
|
June 30,
2023
|
June 30,
2024
|
June 30,
2023
|
|
Comprehensive earnings
(loss)1
|
(1,905)
|
75,174
|
(7,248)
|
73,901
|
|
[+] Amortization or
royalty assets1
|
25,680
|
19,582
|
50,725
|
38,731
|
|
[+] Impairment of
royalty assets1
|
820
|
—
|
5,200
|
—
|
|
[+] Amortization of
other current assets2
|
—
|
97
|
—
|
240
|
|
[-] Other interest
income
|
(577)
|
(52)
|
(1,299)
|
(289)
|
|
[+] Interest
expense
|
8,641
|
6,284
|
17,039
|
12,450
|
|
EBITDA
|
32,658
|
101,085
|
64,417
|
125,033
|
|
[+] Royalties
receivable, beginning of period
|
45,470
|
30,774
|
64,082
|
27,748
|
|
[-] Royalties
receivable, end of period
|
(43,542)
|
(29,110)
|
(43,542)
|
(29,110)
|
|
[-] Performance fees
payable, beginning of period
|
(4,916)
|
—
|
(5,918)
|
—
|
|
[+] Performance fees
payable, end of period
|
—
|
—
|
—
|
—
|
|
[+] Acquired royalties
receivable3
|
—
|
2,186
|
3,560
|
2,282
|
|
[+] Unit-based
compensation4
|
4,675
|
472
|
7,242
|
715
|
|
[+] Board of trustees
unit-based compensation5
|
198
|
295
|
552
|
377
|
|
[-] Non-cash royalty
income6
|
—
|
—
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable7
|
—
|
(1,028)
|
—
|
(1,102)
|
|
[-] Premiums for
prepayment of loan receivable8
|
—
|
(2,140)
|
—
|
(2,140)
|
|
[-] Net gain on sale
of royalty asset1,9
|
—
|
(109,972)
|
—
|
(109,972)
|
|
[+] Management fees on
sale of royalty asset10
|
—
|
13,650
|
—
|
13,650
|
|
[+] Performance fees
on sale of royalty asset10
|
—
|
18,616
|
—
|
18,616
|
|
[-] Net gain on debt
refinancing11
|
(2,176)
|
—
|
(2,176)
|
—
|
|
[-] Other
loss1
|
764
|
411
|
1,575
|
995
|
|
[-] Net unrealized
gain on derivative instruments
|
(228)
|
—
|
(1,425)
|
—
|
|
Adjusted
EBITDA1
|
32,903
|
25,239
|
88,367
|
47,088
|
|
[÷] Normalized Total
Cash Receipts
|
42,955
|
28,688
|
106,472
|
53,679
|
|
Adjusted EBITDA
Margin1
|
77 %
|
88 %
|
83 %
|
88 %
|
|
__________________________________
|
|
1 Comparative figures have been
restated as a result of a retrospective reclassification of certain
expenses and capitalized costs.
2 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.
3 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
$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.
4 For the three and six months ended June 30,
2024, unit-based compensation expense were $4,675 and $7,242,
respectively (2023 – $569 and $857, respectively, which includes
$97 and $142, respectively, paid in cash).
5 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.
6 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 and nil,
respectively, was used to reduce the obligation during three and
six months ended June 30, 2024 (2023 – nil and $4, respectively).
Royalty income earned in future periods related to other royalty
assets will be used to repay the remaining obligation of
$136.
7 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 June 30, 2024. For the three and six
months ended June 30, 2023, non-cash interest and other income on
loan receivable represents the amortization of commitment fees of
$343 and $368, respectively, and the accretion of exit fees
receivable of $685 and $734, respectively.
8 The Trust received a prepayment premium for
prepayment of the loan receivable, as described under the Loan
receivable section of the MD&A.
9 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.
10 During the six months ended June 30, 2024, the
Trust paid management fees of $13,650 and performance fees of
$18,616 related to the sale of the Tzield royalty asset, pursuant
to the investment management agreement, as described in note 2(n)
to the Trust's 2023 amended and restated annual consolidated
financial statements.
11 During the second quarter of 2024, the Trust
refinanced its 2023 Preferred Securities and 2023 Warrants, as
result of the refinancing an accounting gain was
recorded.
|
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
|
Six months
ended
|
|
(thousands of US
dollars, except per unit amounts)
|
June
30,
2024
|
June
30,
2023
|
June
30,
2024
|
June
30,
2023
|
|
Comprehensive earnings
(loss)1
|
(1,905)
|
75,174
|
(7,248)
|
73,901
|
|
[+] Amortization or
royalty assets1
|
25,679
|
19,582
|
50,725
|
38,731
|
|
[+] Impairment of
royalty assets1
|
820
|
—
|
5,200
|
—
|
|
[+] Amortization of
other current assets2
|
—
|
97
|
—
|
240
|
|
[+] Unit-based
compensation3
|
4,675
|
472
|
7,242
|
715
|
|
[+] Board of trustees
unit-based compensation4
|
198
|
295
|
552
|
377
|
|
[-] Non-cash royalty
income5
|
—
|
—
|
—
|
(4)
|
|
[-] Non-cash interest
and other income on loan receivable6
|
—
|
(1,028)
|
—
|
(1,102)
|
|
[-] Premiums for
prepayment of loan receivable7
|
—
|
(2,140)
|
—
|
(2,140)
|
|
[-] Net gain on sale
of royalty assets8
|
—
|
(109,972)
|
—
|
(109,972)
|
|
[+] Management fee on
sale of royalty asset9
|
—
|
13,650
|
—
|
13,650
|
|
[+] Performance fee on
sale of royalty asset9
|
—
|
18,616
|
—
|
18,616
|
|
[-] Net gain on debt
refinancing10
|
(2,176)
|
—
|
(2,176)
|
—
|
|
[-] Other
loss1
|
764
|
411
|
1,575
|
995
|
|
[-] Net unrealized
gain on derivative instruments
|
(228)
|
—
|
(1,425)
|
—
|
|
Adjusted Cash
Earnings1
|
27,827
|
15,157
|
54,445
|
34,007
|
|
Adjusted Cash
Earnings per Basic Unit1
|
0.49
|
0.40
|
0.97
|
0.90
|
|
Adjusted Cash
Earnings per Fully Diluted Unit
|
0.49
|
0.40
|
0.97
|
0.90
|
|
Weighted average
number of Units – Basic
|
56,426,259
|
37,487,973
|
56,392,250
|
37,623,590
|
|
Weighted average
number of Units – Diluted
|
56,426,259
|
37,680,076
|
56,392,250
|
37,798,310
|
|
___________________________________
|
|
1 Comparative figures have
been restated as a result of a retrospective reclassification of
certain expenses and capitalized costs.
2 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.
3 For the
three and six months ended June 30, 2024, unit-based compensation
expense were $4,675 and $7,242, respectively (2023 – $569 and $857,
respectively, which includes $97 and $142, respectively, paid in
cash).
4 Certain
members of the board of trustees elected to be compensated fully or
partially in 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 and nil, respectively, was used to
reduce the obligation during three and six months ended June 30,
2024 (2023 – nil and $4, respectively). Royalty income earned in
future periods related to other royalty assets will be used to
repay the remaining obligation of $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 June
30, 2024. For the three and six months ended June 30, 2023,
non-cash interest and other income on loan receivable represents
the amortization of commitment fees of $343 and $368, respectively,
and the accretion of exit fees receivable of $685 and $734,
respectively.
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
six months ended June 30, 2024, the Trust paid management fees of
$13,650 and performance fees of $18,616 related to the sale of the
Tzield royalty asset, pursuant to the investment management
agreement, as described in note 2(n) to the Trust's 2023 annual
consolidated financial statements.
10 During the
second quarter of 2024, the Trust refinanced its 2023 Preferred
Securities and 2023 Warrants, as result of the refinancing an
accounting gain was recorded.
|
About DRI Healthcare Trust
DRI Healthcare Trust is managed by DRI Capital Inc. ("DRI
Capital" or "DRI Healthcare") 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, the value to be provided to
unitholders, timing of royalty payments, the ongoing internal
investigation being conducted by the Board's Audit Committee and
the Trust's remediation plan relating to the material weaknesses in
respect of its internal control over financial reporting.
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 and under "Risk
Factors" in the Trust's MD&A. 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 DRI Healthcare Trust