- Continued strong performance of core royalty
assets -
- Demonstrated growth strategy execution
through two transactions valued at up to $185 million –
- Quarterly distribution doubled to
US$0.075 per unit -
TORONTO, Nov. 8, 2021 /CNW/ - DRI Healthcare Trust (TSX:
DHT.UN) (TSX: DHT.U) ("DRI" or "the Trust") today announced its
results for the quarter ended September 30,
2021. The Trust's third quarter 2021 financial statements
and Management's Discussion & Analysis have been filed on SEDAR
(www.sedar.com). This news release is not in any way a substitute
for reading the Trust's financial statements, including notes to
the financial statements and the Trust Management's Discussion
& Analysis.
"We had a very active third quarter, executing multiple
transactions and demonstrating our commitment and ability to build
our cash flows and asset base," said Behzad
Khosrowshahi, Chief Executive Officer of DRI Healthcare
Trust. "Our existing assets continued to perform well during the
quarter, and our recent transactions contribute meaningfully to our
objective of generating sustainable growth in cash flow. We are
pleased that this has allowed us to increase our quarterly
distribution to unitholders."
Third Quarter Highlights
- Financial results demonstrate strong performance,
-
- Royalty Income of $22.9
million,
- Earnings per Unit of US$0.19.2
- Non-IFRS measures show continued strong momentum,
-
- Adjusted EBITDA of US$12.4
million,1,5
- Adjusted Cash Earnings per Unit of US$0.48.1,2
- Innovative pacritinib royalty transaction demonstrates the
Trust's value to the biopharma industry
- Highly accretive Oracea deal contributes material cash flows
to the Trust in the near to medium term
Subsequent to Quarter End
- A subsidiary of the Trust entered into a credit agreement with
a syndicate of banks for a $200
million credit facility, with an initial draw used to repay
the existing secured notes.
- The Trust's board of trustees declared a cash distribution of
US$0.075 per unit for the fourth
quarter of 2021 payable on January 20,
2022.
Results of
Operations (thousands of U.S. dollars, except per unit
amounts)
|
Three months
ended
September 30, 2021
|
Nine months
ended
September 30, 20213
|
Royalty
Income
|
22,861
|
59,000
|
Interest income on
loan receivable
|
544
|
544
|
Other interest
income
|
4
|
7
|
Amortization
expenses
|
11,125
|
28,923
|
Management
fees
|
1,113
|
4,163
|
Unit-based
compensation
|
25
|
25
|
Other
expenses
|
3,511
|
8,239
|
Net earnings and
other comprehensive earnings
|
7,635
|
18,201
|
Earnings per
unit2
|
0.19
|
0.55
|
Pro Forma Total Cash
Royalty Receipts1,4,5,6
|
15,447
|
79,366
|
Pro Forma Adjusted
EBITDA1, 5,6
|
12,413
|
69,202
|
Pro Forma Adjusted
EBITDA Margin1,5,6
|
80%
|
87%
|
Adjusted Cash
Earnings per Unit1,2,5
|
0.48
|
1.44
|
Asset Performance
During the third quarter, the Trust's portfolio included 17
royalty streams on 13 products that address medically necessary
therapeutic areas, such as oncology, rare diseases, ophthalmology,
endocrinology, autoimmune and vaccines. On September 30, 2021, the royalty asset portfolio
had a book value, net of accumulated amortization, of US$306.6 million and generated Total Cash Royalty
Receipts of US$15.4
million1 in the third quarter, on a pro forma
basis. In addition, the Trust held a loan receivable with an
outstanding gross principal balance of US$50.0 million at September 30, 2021.
Royalty Portfolio (for the three months ended
September 30th)
(thousands of U.S. dollars)
|
|
|
Pro Forma Cash
Royalty Receipts1,4
|
Product
|
Therapeutic Area
|
Marketer(s)
|
Sept. 30,
2021
|
Sept. 30,
2020
|
Core Products
|
|
|
|
|
Eylea I5
|
Ophthalmology
|
Regeneron, Bayer, Santen
|
-
|
-
|
Eylea II5
|
Ophthalmology
|
Regeneron, Bayer, Santen
|
-
|
-
|
FluMist
|
Vaccine
|
AstraZeneca
|
7
|
-
|
Natpara
|
Endocrinology
|
Takeda
|
551
|
355
|
Oracea6
|
Dermatology
|
Galderma
Laboratories
|
3,711
|
-
|
Rydapt
|
Oncology
|
Novartis
|
2,313
|
1,873
|
Spinraza
|
Rare Diseases
|
Biogen
|
4,326
|
5,030
|
Xolair
|
Respiratory
|
Roche, Novartis
|
2,358
|
2,904
|
Zytiga7
|
Oncology
|
Johnson & Johnson
|
-
|
-
|
Total Core Products
|
|
|
13,266
|
10,162
|
Mature Products
|
|
|
|
|
Autoimmune Portfolio8
|
Autoimmune
|
Johnson &
Johnson, Merck, Novartis
|
1,493
|
2,935
|
Rilpivirine Portfolio9
|
HIV
|
Johnson &
Johnson, Gilead, ViiV
|
-
|
8,179
|
Total Mature Products
|
|
|
1,493
|
11,114
|
Other Products6,10
|
|
|
688
|
354
|
Total
|
|
15,447
|
21,630
|
1.
|
Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Cash Earnings per Unit, and Total
Cash Royalty Receipts are non-IFRS measures for the three
and nine months ended September 30, 2021. These non-IFRS
measures do not have a standardized meaning prescribed
by IFRS and are therefore unlikely to be comparable to similar
measures presented by other issuers. Adjusted EBITDA represents net
earnings and other comprehensive earnings plus (i) amortization of
royalty assets, plus (ii) interest expense, plus (iii)
royalties receivable at the beginning of the period, less (iv)
royalties receivable at the end of the period, plus (v) acquired
royalties receivable, plus (vi) acquired cash royalties received,
and reversing the impact of the following: plus (vii) impairment of
royalty assets, less (viii) reversal of impairment of royalty
assets, less (ix) net gain on interest rate derivatives, less * net
gain on foreign exchange derivatives. Adjusted EBITDA Margin is
calculated as Adjusted EBITDA / Total Cash Royalty Receipts.
Adjusted Cash Earnings per Unit represents net earnings and
other comprehensive earnings plus: (i) amortization of royalty
assets, plus (ii) impairment of royalty asset, less (iii) reversal
of impairment of royalty assets, less (iv) net gain on interest
rate derivatives, less (v) net gain on foreign exchange
derivatives; divided by weighted average units outstanding. The
reconciliation of non-IFRS measures to IFRS can be found in the
Trust's MD&A.
|
2.
|
The weighted
average number of units for the three months ended September 30,
2021, was 40,107,407 units and for the nine months ended September
30, 2021, was 32,908,642 units.
|
3.
|
The Trust
completed its initial public offering ("IPO") on February 19, 2021.
The Trust had no active operations prior to February 19,
2021.
|
4.
|
Total Cash Royalty
Receipts and cash royalty receipts by product are presented on a
pro forma basis. For the for the three and nine months ended
September 30, 2021 and for the three months ended September 30,
2020, include cash that was received by the Trust's current
subsidiaries prior to completion of the Trust's acquisition of
those subsidiaries on February 19, 2021, and cash received as part
of Oracea transaction related to royalties earned prior to the
closing of the acquisition.
|
5.
|
Third quarter cash
royalties related to Eylea of $4.7 million and $3.5 million were
received subsequent to September 30, 2021 and 2020, respectively.
Including those amounts for the three and nine months ended
September 30, 2021, Pro Forma Cash Royalty Receipts would have been
$20.2 million and $84.1 million, respectively, Pro Forma Adjusted
EBITDA would have been $17.1 million and $73.9 million,
respectively and the Pro Forma Adjusted EBITDA Margin would have
been 85% and 88%, respectively.
|
6.
|
Cash flows from
Oracea and certain cash flows in Other Products represent the
royalties earned from April 1 to June 30, 2021 and were used to
offset the purchase price paid in the Oracea acquisition
transaction.
|
7.
|
Cash royalties
from Zytiga are received on a semi-annual basis during the second
and fourth quarters of the year.
|
8.
|
The Autoimmune
portfolio consists of agreements to receive two royalties streams
on sales of each of Stelara, Simponi and Ilaris, for a total of six
royalty streams held directly and indirectly.
|
9.
|
The Rilpivirine
Portfolio consists of an agreement to receive royalties on sales of
Complera, Edurant, Odefsey and Juluca. The Trust's
entitlement to royalties ended during the quarter ended June 30,
2021, in accordance with the terms of the royalty
agreement.
|
10.
|
Other Products
includes royalty income from royalty assets that are not
individually material, as well as royalty assets that are fully
amortized and, where applicable, the entitlements to which have
substantially expired.
|
Liquidity and Capital
On September 30, 2021, the Trust
had cash on hand of US$33.8 million
and an additional US$7.4 million
funds held in trust. The Trust's secured notes had an outstanding
balance of US$47.1 million on
September 30, 2021, which was
subsequently reduced with a principal payment of US$4.2 million made on October 15, 2021 from the funds held in trust,
following which the remaining balance in funds held in trust was
released to the Trust. On October 22,
2021 the remaining secured notes were fully retired using
proceeds of a new credit facility as described below.
The Trust had units outstanding of 40,107,407 on September 30, 2021, all of which were issued in
connection with the IPO and concurrent private placement on
February 19, 2021.
On September 30, 2021, the Trust
was granted approval by the Toronto Stock Exchange for the proposal
to acquire, from time to time, if considered advisable, up to
1,500,000 units of the Trust for cancellation between October 5, 2021 and October 4, 2022. As at November 1, 2021, the Trust had acquired 70,152
units at an average unit price of US$6.64.
Distributions
A distribution to unitholders of US$0.0375 per trust unit was paid on October 20, 2021. The Trust also announced today
that its board of trustees has declared a quarterly cash
distribution in the amount of US$0.075 per unit for the fourth quarter of 2021.
The distribution will be payable on January
20, 2022, to unitholders of record at the close of business
on December 31, 2021. The Trust also
intends to pay an additional special cash distribution, in an
amount to be determined prior to year end.
Year-to-Date Highlights
In addition to the strong performance of the asset portfolio,
the Trust has continued to execute on the strategy outlined to its
unitholders since its initial public offering in February.
On August 25, 2021, a subsidiary
of the Trust entered transactions with CTI BioPharma Corp. ("CTI"),
comprised of secured debt and, upon product approval of pacritinib
by the FDA, the purchase of a tiered royalty on sales of
pacrinitib. CTI will use the proceeds of the transaction to fund
the launch and commercialization of pacritinib for the treatment of
myelofibrosis with severe thrombocytopenia.
On September 30, 2021, a
subsidiary of the Trust acquired a royalty interest on the
worldwide sales of Oracea (doxycycline), which has been approved by
the U.S. Food and Drug Administration ("FDA") for the treatment of
inflammatory lesions of rosacea in adult patients. Oracea is
marketed by Galderma Laboratories, Inc., a subsidiary of Galderma
SA. As part of the transaction, DRI also acquired royalty interests
in two additional products, neither of which are expected to make a
material contribution to DRI's royalty income.
On October 22, 2021, a subsidiary
of the Trust entered into a credit agreement with a syndicate of
banks, providing for US$200 million
of credit facilities. An initial draw was made on the
facility to repay the existing secured notes and associated fees
and expenses, with the balance of the facilities being available to
fund future acquisitions of royalty assets.
During the third quarter, the Trust also received approval from
the Toronto Stock Exchange regarding a normal course issuer bid and
established an employee stock ownership program through issuance of
restricted units in accordance with its Omnibus Equity Incentive
Plan.
2021 Third Quarter Conference Call & Webcast
As previously announced, management will hold a conference call
on Tuesday, November 9, 2021, at
8:30 a.m. (ET) to review the Trust's
2021 third quarter results. You can join the call by dialling
1-888-664-6392 or 416-764-8659.
A live webcast of the conference call, including a slide
presentation, will be available through https://bit.ly/DRI2021Q3.
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.
About DRI Healthcare Trust
DRI Healthcare Trust provides unitholders with differentiated
exposure to the anticipated growth in the global pharmaceuticals
and biotechnology markets. Our business model is focused on
managing and growing a diversified portfolio of pharmaceutical
royalties with the aim to deliver attractive growth in cash royalty
receipts over the long term. DRI Healthcare Trust is an
unincorporated open-ended trust governed by the laws of the
Province of Ontario, externally
managed by its manager, DRI Capital Inc. DRI Healthcare Trust's
units are listed and trade on the Toronto Stock Exchange in
Canadian dollars under the symbol "DHT.UN" and in U.S. dollars
under the symbol "DHT.U".
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
forward-looking 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 our belief that pharmaceutical
royalties will continue to play an important role in funding
critical innovation, and that the Trust will continue to be the
partner of choice to those innovators our development and
acquisition opportunities. 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.
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
dricapital.com.
SOURCE DRI Healthcare Trust