Theratechnologies inc.
TSX : TH

Theratechnologies inc.

March 29, 2006 12:15 ET

Theratechnologies: First Quarter 2006 Financial Results and Recent Highlights

MONTREAL, QUEBEC--(CCNMatthews - March 29, 2006) - Theratechnologies (TSX:TH)



- Patient enrollment completed for first TH9507 Phase 3 trial
- $20.5 million financing
- Strategic Initiatives to maximize shareholder value
- New independent study using TH9507
- Appointment to the Board of Directors


Theratechnologies (TSX:TH) announced today its financial results for the first quarter ended February 28, 2006 and reviewed recent highlights.

"We achieved a key objective in March 2006, and right on schedule, when we completed the patient enrollment for our first Phase 3 trial using TH9507 to treat HIV-associated lipodystrophy," said Yves Rosconi, the Company's President and Chief Executive Officer. "The rapid enrollment for this study reflects the interest for our product in the medical community and among lipodystrophy patients. That's very encouraging for us. The Phase 3 program, in which we are investing more than $17 million in 2006, is the cornerstone of our strategy to build value for our shareholders," he added. "In this regard, 2006 will be pivotal because we expect to announce the results before the end of the year."

"On the financial side, we have just completed a $20.5 million financing. The additional funds make it possible for us to plan for steady progress through the second Phase 3 trial with TH9507, the last trial before commercialization, and above all to maintain the pace of our development program," Mr. Rosconi concluded.

Theratechnologies' Annual Meeting of Shareholders will be held on Thursday, March 30, at 10:00 a.m., in the Salon Mont-Royal II of the Centre Mont-Royal, 2200 Mansfield Street (at Sherbrooke), Montreal.

Recent highlights:

Patient enrollment completed for TH9507 Phase 3 trial

On March 23, 2006, the Company announced the end of patient enrollment in the first Phase 3 study with TH9507 in HIV-associated lipodystrophy. The enrollment for this study was completed in just nine months. The study results should be available before the year-end. Assuming the results are positive, the Company expects to launch the second Phase 3 lipodystrophy trial in early 2007.

Financing

On March 21, 2006, the Company completed a $20,475,000 financing, made up of 10,500,000 common shares of Theratechnologies at a price of $1.95 per share. The Company has also granted the underwriters an option to acquire up to 1,575,000 additional common shares at the offering price for purposes of covering over-allotments, exercisable at any time up to 30 days after the date of closing.

Strategic Initiatives to maximize shareholder value

In December 2005, the Company adopted value-creation criteria for future development projects. The rapid development of TH9507 was designated top priority. THG213.29 in acute renal failure, TH9507 in wasting associated with cystic fibrosis, and TH9507 in adult growth hormone deficiency are projects that meet the value-creation criteria. These projects are being further analyzed in 2006 as potential candidates for a clinical development program in 2007.

New independent study using Th9507

On March 28, 2006, the Company announced that the University of Washington at Seattle, supported by a US$2.6 million grant for the National Institutes of Health (NIH), is conducting a clinical trial investigating the effects of Theratechnologies' TH9507 on cognitive function in healthy older adults and older adults with mild cognitive impairment (MCI). According to a recently published scientific article in Neurobiology of Aging, daily treatments using another analogue of the growth hormone releasing factor in this population resulted in significantly improved cognitive function when compared to placebo. The data also suggest that such treatment might partially ameliorate cognitive declines in individuals with impaired cognitive function, i.e. mild cognitive impairment and Alzheimer's disease. Through this study, TH9507 will become better characterized in a new therapeutic area.

Appointment to the Board of Directors

In February 2006, Theratechnologies welcomed Mr. Gerald A. Lacoste to its Board of Directors. Mr. Lacoste is a lawyer with extensive experience in the fields of securities regulation, financing and corporate governance. He was previously President of the Quebec Securities Commission (now known as the Autorite des marches financiers) and was also President and CEO of the Montreal Stock Exchange. Mr. Lacoste fills a seat left vacant by the death of Mr. Andre Delambre, a member of the Board dating back to 1999.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FIRST QUARTER

Revenues

Consolidated revenues for the three-month period ended February 28, 2006 amounted to $475,000, compared to $15,102,000 in 2005. The exceptionally high revenues in 2005 included an amount of $14,640,000 received for terminating three co-development projects with ALZA Corporation.

R&D activities

Consolidated research and development (R&D) expenditures, before tax credits and grants, were $4,285,000 for the first quarter of 2006, compared to $3,220,000 in 2005. The increase in R&D expenditures in 2006 is essentially due to activities related to the TH9507 Phase 3 clinical program. For 2006, the rapid development of TH9507 is the Company's top priority.

Other expenses

For the first quarter, general and administrative expenses, selling and market development expenses, patents and amortization of other assets (SG&A) were $1,813,000, compared to $1,696,000 for the same period in 2005. SG&A amounted to 29.7% of costs and expenses, compared to 34.5% for the same period in 2005. The Company expects that these expenses will be lower in the next quarter.

Net results

Consequently, the Company recorded an operating loss, for the three-month period ended February 28, 2006, of $5,447,000 (before proportionate share in loss of companies under significant influence), compared to an operating profit of $10,418,000 for the same period in 2005. The net loss for the first quarter of 2006 was $5,447,000, compared to a net profit of $9,271,000 in 2005.

Quarterly financial information

The selected financial information provided below is derived from the Company's unaudited quarterly financial statements for each of the last eight quarters. This information includes Celmed's results until July 2, 2004.



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2006 2005
---------------------------------------------------------------------
Q1 Q4 Q3 Q2 Q1
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Revenues $475 $319 $409 $631 $15,102
Operating earnings
(loss) (1) $(5,447) $(5,580) $(5,065) $(4,784) $10,418
Earnings (loss)
from continuing
operations (2) $(5,447) $(5,651) $(5,218) $(12,745) $9,271
Net earnings (loss) $(5,447) $(5,651) $(5,218) $(12,745) $9,271
Basic and diluted
earnings (loss)
per share :
Continuing
activities (2) $(0.15) $(0.16) $(0.15) $(0.36) $0.26
Net earnings (loss) $(0.15) $(0.16) $(0.15) $(0.36) $0.26
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2004
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Q4 Q3 Q2
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Revenues $503 $585 $782
Operating earnings (loss) (1) $(4,655) $(4,289) $(6,832)
Earnings (loss) from continuing
operations (2) $(10,873) $(4,137) $(6,139)
Net earnings (loss) $(10,873) $(4,150) $(5,910)
Basic and diluted earnings (loss)
per share :
Continuing activities (2) $(0.31) $(0.12) $(0.17)
Net earnings (loss) $(0.31) $(0.12) $(0.17)
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(1) Before restructuring costs, proportionate share in loss of
companies under significant influence, gains on investments in
companies and gains on dilution, discontinued operations and
non-controlling interest
(2) Net of non-controlling interest


Financial position

Theratechnologies continues to be in a sound cash position. At February 28, 2006, liquidities, namely cash and bonds, amounted to $32,889,000 and tax credits receivable amounted to $1,154,000, for a total of $34,043,000.

For the three-month period ended February 28, 2006, the burn rate from operating activities, excluding changes in operating assets and liabilities, was $4,733,000, compared to cash generated from operating activities of $10,708,000 in 2005, reflecting the payment received from ALZA Corporation.

Subsequent event

On March 21, 2006, the Company completed a public offering of 10,500,000 common shares for gross proceeds of $20,475,000. The offering expenses are estimated to be $1,376,000. On a pro forma basis the Company's liquidity position would have been $53,142,000 on February 28, 2006, if the public offering had been completed on that date. The Company has also granted the underwriters an option to acquire up to 1,575,000 additional common shares at the offering price of $1.95 per share, for purposes of covering over-allotments, exercisable at any time up to 30 days after the date of closing.

Outstanding share data

On March 28, 2006, the number of shares issued and outstanding was 46,052,985, while outstanding options granted under the stock option plan were 2,811,500. In addition, 1,080,000 warrants were outstanding.

Contractual obligations

During the quarter, there were no material changes in contractual obligations, other than in the ordinary course of business.

Economic and industry factors

Economic and industry factors were substantially unchanged from those reported in the Company's 2005 annual report.

About Theratechnologies

Theratechnologies (TSX:TH) is a Canadian biopharmaceutical company that discovers or acquires novel therapeutic products for development and commercialization. These products target unmet medical needs in commercially attractive specialty markets. The most advanced program is in Phase 3 clinical development in HIV-associated lipodystrophy, a serious metabolic complication. The Company also has other promising projects at various stages of development.

Additional information about Theratechnologies

Further information about Theratechnologies is available on the Company's website at www.theratech.com. Additional information, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

Forward-looking statements

This press release contains forward-looking statements reflecting the Company's current expectations regarding the TH9507 Phase 3 clinical program including, among others, the nature of the results and their timing, and regarding future development projects. By their very nature, these statements involve uncertainties and inherent risks, both general and specific, which give rise to the possibility that predictions will not materialize. We therefore caution investors against placing undue reliance on these statements. We refer you to pages 16 and 17 of the 2005 annual report, which contain a more exhaustive analysis of the risks and uncertainties connected to the business of the Company. We have no obligation what so ever to update forward-looking statements and we do not undertake to do so.



Consolidated Financial Statements of
(Unaudited)

THERATECHNOLOGIES INC.

Three-month periods ended February 28, 2006 and 2005



THERATECHNOLOGIES INC.
Consolidated Balance Sheets
(Unaudited)

February 28, 2006, with comparative figures as at November 30, 2005
(in thousands of dollars)

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February 28, November 30,
2006 2005
---------------------------------------------------------------------
(Audited)

Assets

Current assets:
Cash $70 $1,087
Bonds 12,203 12,515
Accounts receivable 360 258
Tax credits receivable 1,154 978
Research supplies 2,033 1,929
Prepaid expenses 503 425
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16,323 17,192

Bonds 20,616 25,424
Investments in public companies (market value:
$1,546 in 2006; $1,424 in 2005) 836 836
Property and equipment 1,959 2,072
Other assets (note 2) 9,425 8,121

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$49,159 $53,645
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $5,151 $4,639

Shareholders' equity:
Capital stock (note 3) 155,659 155,659
Contributed surplus 3,036 2,587
Deficit (114,687) (109,240)
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44,008 49,006

Subsequent event (note 7)

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$49,159 $53,645
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See accompanying notes to unaudited consolidated financial
statements.



THERATECHNOLOGIES INC.
Consolidated Statements of Earnings
(Unaudited)

Three-month periods ended February 28, 2006 and 2005
(in thousands of dollars, except per share amounts)

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First quarter
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2006 2005
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Revenues:
Royalties, technologies and other (note 4) $178 $14,672
Interest 297 430
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475 15,102

Operating costs and expenses:
Research and development 4,285 3,220
Tax credits (176) (232)
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4,109 2,988
General and administrative 1,458 1,323
Selling and market development 204 222
Patents and amortization of other assets 151 151
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5,922 4,684

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Operating (loss) earnings before undernoted
item (5,447) 10,418

Proportionate share in loss of companies under
significant influence - (1,147)

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Net (loss) earnings $(5,447) $9,271
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Basic and diluted (loss) earnings per share
(note 3 (C)) $(0.15) $0.26
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Weighted average number of common shares
outstanding 35,552,985 35,513,549
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See accompanying notes to unaudited consolidated financial
statements.



THERATECHNOLOGIES INC.
Consolidated Statements of Deficit
(Unaudited)

Three-month periods ended February 28, 2006 and 2005
(in thousands of dollars)

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First quarter
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2006 2005
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Deficit, beginning of period $(109,240) $(94,897)

Net (loss) earnings (5,447) 9,271

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Deficit, end of period $(114,687) $(85,626)
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See accompanying notes to unaudited consolidated financial statements.



THERATECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(Unaudited)

Three-month periods ended February 28, 2006 and 2005
(in thousands of dollars)

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First quarter
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2006 2005
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Cash flows from operating activities:
Net (loss) earnings $(5,447) $9,271
Adjustments for:
Depreciation of property and equipment 142 136
Amortization of other assets 123 120
Stock-based compensation 449 34
Proportionate share in loss of companies
under significant influence - 1,147
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(4,733) 10,708
Changes in operating assets and liabilities:
Interest receivable on bonds 245 (221)
Accounts receivable (177) (40)
Tax credits receivable (176) (232)
Research supplies (1,414) (1,763)
Prepaid expenses (78) (84)
Accounts payable and accrued liabilities 585 915
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(1,015) (1,425)

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(5,748) 9,283

Cash flows from investing activities:
Addition to property and equipment (77) (279)
Addition to other assets (67) (124)
Acquisition of bonds - (7,389)
Disposal of bonds 4,875 3,625
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4,731 (4,167)

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Net (decrease) increase in cash (1,017) 5,116

Cash, beginning of period 1,087 436

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Cash, end of period $70 $5,552
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See note 6 (a) for supplemental cash flow information.

See accompanying notes to unaudited consolidated financial
statements.



THERATECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Unaudited)

Three-month periods ended February 28, 2006 and 2005
(in thousands of dollars, except per share amounts)


1. Basis of presentation:

The financial statements included in this report are unaudited and reflect normal and recurring adjustments which are, in the opinion of the Company, considered necessary for a fair presentation. These financial statements have been prepared in conformity with Canadian generally accepted accounting principles. The same accounting policies as described in the Company's latest annual report have been used. However, these financial statements do not include all disclosures required under generally accepted accounting principles and, accordingly, should be read in connection with the financial statements and the notes thereto included in the Company's latest annual report. These interim financial statements have not been reviewed by auditors.

2. Other assets:



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February 28,
2006
---------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
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Intellectual property $7,670 $2,037 $5,633
Patent costs 1,637 790 847
Research supplies 2,870 - 2,870
Long-term accounts receivable 75 - 75

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$12,252 $2,827 $9,425
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November 30,
2005
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Accumulated Net book
Cost depreciation value
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Intellectual property $7,670 $1,941 $5,729
Patent costs 1,754 922 832
Research supplies 1,560 - 1,560
Deferred development costs 70 70 -

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$11,054 $2,933 $8,121
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3. Capital stock:

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February 28, November 30,
2006 2005
---------------------------------------------------------------------
(Audited)

Authorized in unlimited number and without
par value:
Common shares
Preferred shares issuable in one or more
series

Issued:
35,552,985 common shares $155,659 $155,659
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(a) Share option plan:

Changes in outstanding options granted under the Company's stock
option plan for the year ended November 30, 2005 and the three-month
period ended February 28, 2006 were as follows:

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Weighted
average
Number exercise price
---------------------------------------------------------------------

Options as at November 30, 2004 (audited) 2,781,500 $7.28
Granted 535,000 1.59
Cancelled (1,015,836) 8.33

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Options as at November 30, 2005 (audited) 2,300,664 5.50

Granted 650,000 1.66
Cancelled (139,164) 8.50

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Options as at February 28, 2006 2,811,500 $4.46
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(b) Stock-based compensation and other stock-based payments:

The fair value of the options granted was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions:

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2006 2005
---------------------------------------------------------------------
Risk-free interest rate 4.03% 3.63%
Expected volatility 50% 52%
Expected average option life in years 6 6
Expected dividend yield Nil Nil
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Dividend yield was excluded from the calculation, since it is the
present policy of the Company to retain all earnings to finance
operations and future growth.

The following table summarizes the weighted average fair value of
stock options granted during the periods ended February 28, 2006 and
2005:

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Weighted
average
grant-date
Number fair value
---------------------------------------------------------------------

2006 650,000 $0.86
2005 5,000 1.08
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(C) Diluted loss per share:

Diluted loss per share was not presented as the effect of options and
warrants would have been anti-dilutive. Furthermore, the exercise of
options and warrants would not have been considered in such
computation since their exercise prices were higher than the average
market price during the reporting periods of 2006 and 2005.

4. Royalties, technologies and other:

In December 2004, the Company signed an agreement to terminate three
co-development projects using ALZA Corporation's Macroflux®
transdermal technology. The Company retains the rights to develop
its molecules with all other delivery systems and ALZA retains the
commercialization rights to Macroflux® with other molecules. In
this regard, the Company received a payment of $14,640 (US$12,000).

5. Segmented information:

In 2006, the Company is conducting its activities in one segment,
therapeutic peptides. Pursuant to the sale of Celmed BioSciences
Inc. on June 20, 2005, the Company no longer conducts activities in
cellular therapy. Segmented information for 2005 is as follows:

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2005
---------------------------------------------------------------------
Intersegment
adjustments
Therapeutic Cellular Other and
peptides therapy segments eliminations Total
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Revenues from
external
customers $14,660 $- $- $- $14,660
Revenues from
companies
under
significant
influence 12 - - - 12
Net earnings
(net loss) 10,418 (998) (149) - 9,271
Total assets 66,437 10,369 1,213 (144) 77,875

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6. Supplemental information:

(a) The following transactions were conducted by the Company and did
not impact cash flow.

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2006 2005
---------------------------------------------------------------------

Additions to property and equipment and other assets
financed by accounts payable and accrued liabilities $90 $163
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(b) General and administrative expenses include a gain on exchange of
$49 for the first quarter of 2006 (a loss of $50 for the same
period in 2005).


7. Subsequent event:

On March 21, 2006, the Company concluded a public offering for the sale and issue of 10,500,000 common shares for cash proceeds of $20,475. The issuance costs total approximately $1,376. On a pro forma basis, the Company's liquidities (cash, bonds and tax credits receivable) would have amounted to $53,142 at February 28, 2006, assuming that the public offering was concluded on that date. The Company has also granted an over-allotment option to the underwriters to purchase up to 1,575,000 additional shares at an issue price of $1.95 per share, exercisable at any time until 30 days following the date of closing.

Contact Information

  • Theratechnologies
    Luc Tanguay, Senior Executive Vice President and
    Chief Financial Officer
    (514) 336-4804, ext. 204
    ltanguay@theratech.com
    or
    Theratechnologies
    Marie-Noel Colussi
    Vice President, Finance
    (514) 336-4804, ext. 237
    mncolussi@theratech.com
    or
    Theratechnologies
    Tobie Trudel, Director,
    Investor Relations and Communications
    (514) 336-4804, poste 229
    ttrudel@theratech.com