– 36% royalty income growth over prior year
period highlights successful portfolio growth strategy –
– Significant deployment capacity available
after follow-on offerings and credit facility increase –
TORONTO, Nov. 13,
2023 /CNW/ - DRI Healthcare Trust (TSX: DHT.UN) (TSX:
DHT.U) ("DRI" or the "Trust") is pleased to announce its financial
results for the quarter ended September 30, 2023. The Trust's
third quarter 2023 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.
"Our financial results mark another strong quarterly
performance, highlighted by royalty income growth of 36% compared
to the same period last year", said Behzad
Khosrowshahi, Chief Executive Officer of the Trust. "Our
portfolio continues to grow with US$391.2
million deployed this year in strategic acquisitions. We
have significantly enhanced our deployment capacity with our recent
follow-on offerings and credit facility increase. Coupled with a
high-quality pipeline, we are in a strong position to continue our
growth trajectory and create further value for our
unitholders."
Third Quarter Highlights
- Deployed US$196.0 million to
purchase additional royalty streams on Vonjo and Orserdu;
- Completed two follow-on public offerings totaling 18,653,000
Units for gross proceeds of US$151.5
million;
- Total Income of US$34.1
million;
- Normalized Total Cash Receipts of US$25.2 million1;
- Adjusted EBITDA of US$20.3
million1;
- Comprehensive Loss of US$3.1
million;
- Adjusted Cash Earnings per Unit (basic and diluted) of
US$0.461,2;
- Net Loss per Unit of US$0.08
(basic and diluted)2;
- Paid a special cash distribution of US$0.5334 per unit and a regular quarterly cash
distribution of US$0.075 per unit to
unitholders on July 20, 2023.
Subsequent to Quarter End
- Increased credit facility to US$500.0
million;
- Received Toronto Stock Exchange ("TSX") approval for normal
course issuer bid to allow the Trust to acquire up to 3,280,195 of
its Trust units between November 20,
2023 and November 19
2024;
- Declared a quarterly cash distribution of US$0.075 per unit for the fourth quarter of 2023,
payable on January 19, 2024 to
unitholders of record on December 31,
2023.
|
__________
|
|
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 three months ended
September 30, 2023 were 46,115,848 units and 46,205,568 units,
respectively.
|
Financial Highlights
|
Three months
ended
|
Nine months
ended
|
|
(thousands of US
dollars, except per unit amounts)
|
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|
Total
income
|
34,143
|
26,471
|
90,437
|
70,392
|
|
Management
fees
|
1,673
|
1,322
|
18,909
|
4,477
|
|
Performance
fees
|
—
|
—
|
18,616
|
—
|
|
Amortization
expenses
|
23,589
|
13,992
|
62,357
|
40,188
|
|
Other
expenses
|
12,812
|
3,543
|
30,182
|
9,322
|
|
Net gain from sale of
royalty asset
|
150
|
—
|
109,756
|
—
|
|
Net earnings
(loss)
|
(3,781)
|
7,614
|
70,129
|
16,405
|
|
Net unrealized gain on
derivative asset
|
652
|
—
|
652
|
—
|
|
Comprehensive earnings
(loss)
|
(3,129)
|
7,614
|
70,781
|
16,405
|
|
Net earnings (loss)
per unit – basic
|
(0.08)
|
0.20
|
1.73
|
0.42
|
|
Net earnings (loss)
per unit – diluted
|
(0.08)
|
0.20
|
1.73
|
0.42
|
|
Normalized Total Cash
Receipts1
|
25,249
|
18,844
|
78,928
|
65,082
|
|
Adjusted
EBITDA1
|
20,254
|
15,814
|
66,759
|
55,068
|
|
Adjusted EBITDA
Margin1
|
80 %
|
84 %
|
85 %
|
85 %
|
|
Adjusted Cash Earnings
per Unit – Basic1
|
0.46
|
0.57
|
1.35
|
1.48
|
|
Adjusted Cash Earnings
per Unit – Diluted1
|
0.46
|
0.57
|
1.35
|
1.48
|
|
Weighted average
number of Units – Basic
|
46,115,848
|
38,657,266
|
40,485,450
|
38,684,889
|
|
Weighted average
number of Units – Diluted
|
46,205,568
|
38,694,492
|
40,664,366
|
38,710,064
|
|
__________
|
|
1
|
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.
|
Asset Performance
As at September 30, 2023, the Trust's portfolio included 26
royalty streams on 20 products that address a variety of
therapeutic areas, such as oncology, neurology, ophthalmology,
endocrinology, hematology, dermatology, lysosomal storage
disorders, immunology and influenza. On September 30, 2023,
the royalty asset portfolio had a book value, net of accumulated
amortization, of US$740.0 million,
which generated Total Cash Royalty Receipts1 of
US$25.2 million and US$75.7 million during the three and nine months
ended September 30, 2023,
respectively, and royalty income of US$34.0
million and US$83.5 million,
respectively.
Portfolio
|
(thousands of US
dollars)
|
|
Cash
Receipts
|
|
|
|
Three months
ended
|
Nine months
ended
|
|
|
Product
|
Therapeutic
Area
|
Marketer(s)
|
September
30,
2023
|
September 30,
2022
|
September
30,
2023
|
September 30,
2022
|
|
|
Empaveli/Syfovre1
|
Hematology/Ophthalmology
|
Apellis,
Sobi
|
—
|
—
|
438
|
—
|
|
|
Eylea I
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
1,331
|
1,318
|
4,055
|
4,109
|
|
|
Eylea II
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
289
|
1,444
|
1,705
|
4,474
|
|
|
FluMist
|
Influenza
|
AstraZeneca
|
4
|
—
|
1,479
|
2,218
|
|
|
Natpara
|
Endocrinology
|
Takeda
|
585
|
728
|
1,806
|
2,050
|
|
|
Omidria
|
Ophthalmology
|
Rayner
Surgical
|
3,250
|
—
|
9,750
|
—
|
|
|
Oracea
|
Dermatology
|
Galderma
|
2,770
|
2,109
|
6,052
|
5,817
|
|
|
Orserdu I
|
Oncology
|
Menarini
|
3,453
|
—
|
3,453
|
—
|
|
|
Orserdu
II2
|
Oncology
|
Menarini
|
—
|
—
|
—
|
—
|
|
|
Rydapt
|
Oncology
|
Novartis
|
1,694
|
2,578
|
6,544
|
7,876
|
|
|
Spinraza
|
Neurology
|
Biogen
|
4,319
|
3,736
|
12,358
|
12,587
|
|
|
Stelara,
Simponi
and
Ilaris3
|
Immunology
|
Johnson & Johnson,
Merck,
Mitsubishi Tanabe, Novartis
|
222
|
721
|
1,022
|
3,107
|
|
|
Vonjo
|
Hematology
|
Sobi
|
2,716
|
1,184
|
7,055
|
1,404
|
|
|
Vonjo II
|
Hematology
|
Sobi
|
396
|
—
|
396
|
—
|
|
|
Xenpozyme
|
Lysosomal Storage
Disorder
|
Sanofi
|
247
|
—
|
247
|
—
|
|
|
Xolair
|
Immunology
|
Roche,
Novartis
|
2,671
|
2,528
|
6,747
|
6,627
|
|
|
Zejula
|
Oncology
|
GSK
|
777
|
—
|
2,259
|
—
|
|
|
Zytiga4
|
Oncology
|
Johnson &
Johnson
|
—
|
—
|
8,543
|
8,958
|
|
|
Other
Products5
|
Various
|
Various
|
525
|
1,158
|
1,755
|
2,001
|
|
|
Total Cash Royalty
Receipts6
|
|
25,249
|
17,504
|
75,664
|
61,228
|
|
|
|
|
|
|
|
|
|
|
Interest receipts from
loan receivable7
|
|
—
|
1,340
|
3,264
|
3,854
|
|
|
Principal repayment of
loan receivable6,8
|
|
—
|
—
|
50,000
|
—
|
|
|
Exit fee received for
loan receivable6,7
|
|
—
|
—
|
1,000
|
—
|
|
|
Premiums for
prepayment6,7
|
|
—
|
—
|
2,140
|
—
|
|
|
Proceeds from sale of
royalty assets9
|
|
—
|
—
|
210,000
|
—
|
|
|
Total Cash
Receipts1
|
|
25,249
|
18,844
|
342,068
|
65,082
|
|
|
|
|
|
|
|
|
|
|
Principal repayment of
loan receivable6,7
|
|
—
|
—
|
(50,000)
|
—
|
|
|
Exit fee received for
loan receivable6,7
|
|
—
|
—
|
(1,000)
|
—
|
|
|
Premiums for
prepayment6,7
|
|
—
|
—
|
(2,140)
|
—
|
|
|
Proceeds from sale of
royalty assets8
|
|
—
|
—
|
(210,000)
|
—
|
|
|
Normalized Total
Cash Receipts1
|
|
25,249
|
18,844
|
78,928
|
65,082
|
|
|
|
|
|
|
|
|
|
|
|
__________
|
|
1 Empaveli/Syfovre royalties are generally
received with a three-quarter lag. In the second quarter of 2023 we
received the royalty early, on a two quarter lag and as such we
expect the next royalty payment to be received in the fourth
quarter of 2023.
|
|
2 The Trust
completed a transaction in respect of Orserdu II during the third
quarter of 2023. In accordance with the terms of the royalty
agreements, cash royalty receipts are collected on a one-quarter
lag.
|
|
3 Stelara, Simponi and
Ilaris were previously referred to as the Autoimmune Portfolio. The
royalty assets include two royalty streams on each product, for a
total of six royalty streams.
|
|
4 Cash
royalties from Zytiga are received on a semi-annual basis during
the second and fourth quarters of each year.
|
|
5 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.
|
|
6 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.
|
|
7 Interest
receipts from loan receivable relates to the CTI loan, 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.
|
|
8 This item
represents cash received by the Trust that is not expected to recur
in the normal course of our operations.. As such, this
item is not included in Normalized Total Cash
Receipts.
|
|
9 The Trust
completed a transaction in respect of Tzield during the first
quarter of 2023. On April 27, 2023, the Trust sold the Tzield
royalty asset.
|
Liquidity and Capital
On September 30, 2023, the Trust had cash and cash
equivalents of US$28.2 million. The
Trust's credit facility had an outstanding principal balance of
US$148.3 million on
September 30, 2023.
On July 19, 2023, the Trust issued
9,223,000 units pursuant to a follow-on equity offering for gross
proceeds of US$74.1 million. The
9,223,000 units included units issued pursuant to the exercise by
the underwriters of their over-allotment option.
On September 20, 2023, the Trust
issued an additional 9,430,000 units pursuant to another follow-on
equity offering, for gross proceeds of US$77.4 million. The 9,430,000 units included
units issued pursuant to the exercise by the underwriters of their
over-allotment option.
Subsequent to the end of the quarter, on October 31, 2023, the Trust increased the total
credit available under its credit facility from US$338.8 million to US$500.0 million and extended the maturity date
of the credit facility from March 26,
2026 to October 31, 2026.
The Trust intends to use the net proceeds of the follow-on
offerings and increased available credit from its credit facility
to fund its near-term pipeline of royalty transactions.
The Trust had 56,318,936 units issued and outstanding on
September 30, 2023.
Distributions
On August 14, 2023, the board of
trustees approved a quarterly cash distribution of US$0.075 per unit to unitholders of record as of
September 30, 2023, which was paid on
October 20, 2023. 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 2023,
payable on January 19, 2024, to
unitholders of record on December 31,
2023.
Normal Course Issuer Bid
The Trust also announced today the acceptance by the TSX of the
Trust's Notice of Intention to make a normal course issuer bid (the
"NCIB"). Pursuant to the NCIB, the Trust proposes to purchase, from
time to time, if considered advisable, up to an aggregate of
3,280,195 of its trust units, being 10% of its 32,801,950
public float of units as of November 6,
2023, through the facilities of the TSX and/or through
various eligible alternative Canadian trading systems at the market
price at the time of purchase. Purchases may commence on
November 20, 2023 and will conclude
on the earlier of the date on which the Trust has purchased the
maximum number of trust units permitted under the NCIB and
November 19, 2024. The average daily
trading volume of the units over the most recently completed six
calendar months was 59,137 units. Accordingly, for purposes of the
TSX rules, the Trust is entitled to purchase, on any trading day,
up to 14,784 units and to make block purchases of its units
which exceed such daily limit no more frequently than once per
calendar week. Under the Trust's prior normal course issuer bid
that commenced on November 14, 2022
and concluded on November 13, 2023
(the "Prior NCIB"), the Trust obtained approval from the TSX to
purchase 2,493,280 units. The Trust purchased
1,236,113 units under the Prior NCIB through the facilities of
the TSX and alternative Canadian trading systems at a volume
weighted average price of $5.28 per unit. The Trust remains
focused on its primary strategy of acquiring new pharmaceutical
royalty streams, and using its capital for that purpose. DRI
Capital Inc., the manager of the Trust ("DRI Capital"), believes
that there is a robust and growing pipeline of royalty stream
acquisitions opportunities and is active in reviewing a number of
potential transactions. However, it is also the opinion of DRI
Capital that, from time to time, the market price of the Trust's
units may not adequately reflect the value of the underlying assets
of the Trust, and the Trust wishes to take advantage of the market
trading prices of its units in those instances. The board of
trustees of the Trust believes that at such times the proposed
purchases would be in the best interests of the Trust and would
constitute an appropriate use of available funds. All units
purchased by the Trust pursuant to the NCIB will be cancelled. In
connection with the NCIB, the Trust has established an automatic
purchase plan with its designated broker (the "Plan") to allow for
purchases of units during self-imposed blackout periods, subject to
certain parameters as to price and number of units. Outside of
these pre-determined black-out periods, units will be repurchased
in accordance with management's discretion, subject to applicable
law. The Plan constitutes an automatic plan for purposes of
applicable Canadian securities legislation and has been pre-cleared
by the TSX.
Additional Vonjo Royalty Stream
On July 7, 2023, the Trust bought
an additional royalty interest in the worldwide sales of Vonjo for
US$66.0 million ("Vonjo II") from
S*Bio Pte Ltd. The transaction entitles the Trust to a tiered
royalty on worldwide net sales of Vonjo. The Trust is entitled to
receive quarterly royalty payments on a one-quarter lag based on
sales beginning April 1, 2023, with the first payment received
in Q3 2023. The Trust is also entitled to receive up to
US$107.5 million in milestone
payments.
Additional Orserdu Royalty Stream
On August 14, 2023, the Trust
purchased an additional royalty interest on the sales of Orserdu
for US$130.0 million ("Orserdu II")
from Radius Pharmaceuticals, Inc., a wholly-owned subsidiary of
Radius Health, Inc. A milestone payment of US$10.0 million will be paid upon the occurrence
of certain pre-specified events. The transaction entitles the Trust
to a net low to high single digit tiered royalty on the worldwide
net sales of Orserdu. The Trust is entitled to receive quarterly
royalty payments on a one-quarter lag based on sales beginning
July 1, 2023, with its first payment
expected to be received in Q4 2023. The Trust is also entitled to
receive milestone payments of up to US$40.0
million on the achievement of sales performance
thresholds.
Third Quarter 2023 Conference Call & Webcast
As previously announced, management will hold a conference call
on Tuesday, November 14, 2023, at
8:00 a.m. (ET) to review the Trust's
2023 third 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 http://bit.ly/DRIQ32023 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.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures for the three
and nine months ended September 30,
2023 and 2022 to the most directly comparable measures
calculated in accordance with IFRS and calculation of non-GAAP
ratios 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
|
Nine months
ended
|
|
(thousands of US
dollars)
|
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|
Total
income
|
34,143
|
26,471
|
90,437
|
70,392
|
|
[-] Other interest
income
|
(179)
|
(28)
|
(468)
|
(33)
|
|
[+] Royalties
receivable, beginning of period
|
29,110
|
27,498
|
27,748
|
30,148
|
|
[-] Royalties
receivable, end of period
|
(40,886)
|
(36,386)
|
(40,886)
|
(36,386)
|
|
[+] Acquired royalties
receivable1
|
3,061
|
1,366
|
5,343
|
1,366
|
|
[-] Non-cash royalty
income2
|
—
|
(11)
|
(4)
|
(190)
|
|
[-] Non-cash interest
income on loan receivable3
|
—
|
(66)
|
(1,102)
|
(215)
|
|
[+] Principal
repayment of loan receivable
|
—
|
—
|
50,000
|
—
|
|
[+] Exit
fee3
|
—
|
—
|
1,000
|
—
|
|
[+] Proceeds from sale
of royalty assets
|
—
|
—
|
210,000
|
—
|
|
Total Cash
Receipts
|
25,249
|
18,844
|
342,068
|
65,082
|
|
[-] Principal
repayment of loan receivable4
|
—
|
—
|
(50,000)
|
—
|
|
[-] Exit fee received
for loan receivable3,4
|
—
|
—
|
(1,000)
|
—
|
|
[-] Premiums for
prepayment of loan receivable4
|
—
|
—
|
(2,140)
|
—
|
|
[-] Proceeds from sale
of royalty assets4
|
—
|
—
|
(210,000)
|
—
|
|
Normalized Total
Cash Receipts
|
25,249
|
18,844
|
78,928
|
65,082
|
|
[-] Interest income on
loan receivable
|
—
|
(1,406)
|
(6,506)
|
(4,069)
|
|
[+] Non-cash interest
and other income on loan receivable3
|
—
|
66
|
1,102
|
215
|
|
[+] Premiums for
prepayment of loan receivable4
|
—
|
—
|
2,140
|
|
|
Total Cash Royalty
Receipts
|
25,249
|
17,504
|
75,664
|
61,228
|
|
__________
|
|
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 for the three and
nine months ended September 30, 2022 of nil and US$334,
respectively, was used to reduce the obligation for excess royalty
payments received in connection with Ilaris. There is no
remaining obligation as at September 30, 2023
(December 31, 2022 – nil) related to Ilaris. In the second
quarter of 2022, the Trust recorded other current liabilities and a
corresponding deduction to royalty income of US$155 to reflect an
additional obligation for excess royalty payments received related
to other royalty assets. Royalty income of nil and US$4,
respectively, were used to reduce the obligation during the three
and nine months ended September 30, 2023 (2022 – nil). Royalty
income earned in future periods related to other royalty assets
will be used to repay the remaining obligation of
US$136.
|
|
3
|
For the three and nine months ended September 30,
2023, non-cash interest income on loan receivable represents the
amortization of commitment fees of nil and US$368, respectively
(2022 – US$22 and US$72, respectively) and the accretion of exit
fees receivable of nil and US$734, respectively (2022 – US$44 and
US$143). In accordance with the loan agreement, the Trust received
an exit fee of US$1,000 as the loan was fully repaid in the second
quarter of 2023.
|
|
4
|
This item represents cash received by the Trust in
the quarter 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. Due to a one-time charge, the Trust's Adjusted EBITDA
margin for the quarter was below the historical average.
|
Three months
ended
|
Nine months
ended
|
|
(thousands of US
dollars)
|
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|
Comprehensive earnings
(loss)
|
(3,129)
|
7,614
|
70,781
|
16,405
|
|
[+] Amortization or
royalty assets
|
23,589
|
13,992
|
62,357
|
40,188
|
|
[+] Amortization of
other current assets1
|
—
|
114
|
240
|
114
|
|
[-] Other interest
income
|
(179)
|
(28)
|
(468)
|
(33)
|
|
[+] Interest
expense
|
7,717
|
1,351
|
20,167
|
2,617
|
|
EBITDA
|
27,998
|
23,043
|
153,077
|
59,291
|
|
[+] Royalties
receivable, beginning of period
|
29,110
|
27,498
|
27,748
|
30,148
|
|
[-] Royalties
receivable, end of period
|
(40,886)
|
(36,386)
|
(40,886)
|
(36,386)
|
|
[+] Acquired royalties
receivable2
|
3,061
|
1,366
|
5,343
|
1,366
|
|
[+] Unit-based
compensation3
|
1,637
|
298
|
2,352
|
849
|
|
[+] Board of trustees
unit-based compensation4
|
136
|
72
|
513
|
205
|
|
[-] Non-cash royalty
income5
|
—
|
(11)
|
(4)
|
(190)
|
|
[-] Non-cash interest
and other income on loan receivable6
|
—
|
(66)
|
(1,102)
|
(215)
|
|
[-] Premiums for
prepayment of loan receivable7
|
—
|
—
|
(2,140)
|
—
|
|
[-] Net gain on sale
of royalty asset8
|
(150)
|
—
|
(109,756)
|
—
|
|
[-] Net unrealized
gain on derivative asset
|
(652)
|
—
|
(652)
|
—
|
|
[+] Management fees on
sale of royalty asset9
|
—
|
—
|
13,650
|
—
|
|
[+] Performance fees
on sale of royalty asset9
|
—
|
—
|
18,616
|
—
|
|
Adjusted
EBITDA
|
20,254
|
15,814
|
66,759
|
55,068
|
|
[÷] Normalized Total
Cash Receipts
|
25,249
|
18,844
|
78,928
|
65,082
|
|
Adjusted EBITDA
Margin
|
80 %
|
84 %
|
85 %
|
85 %
|
|
___________
|
|
1
|
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.
|
|
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 and nine
months ended September 30, 2023, the unit-based compensation
expense was US$2,843 and US$3,700, respectively, (2022 – US$298 and
US$849, respectively) of which US$1,206 and US$1,348, respectively,
(2022 – nil and nil, respectively) were 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 for the three and nine months ended September 30, 2022 of
nil and US$334, respectively, was used to reduce the obligation for
excess royalty payments received in connection with Ilaris.
There is no remaining obligation as at September 30, 2023
(December 31, 2022 – nil) related to Ilaris. In the second
quarter of 2022, the Trust recorded other current liabilities and a
corresponding deduction to royalty income of US$155 to reflect an
additional obligation for excess royalty payments received related
to other royalty assets. Royalty income of nil and US$4 were used
to reduce the obligation during the three and nine months ended
September 30, 2023, respectively (2022 – US$11 and US$11,
respectively). Royalty income earned in future periods related to
other royalty assets will be used to repay the remaining obligation
of US$136.
|
|
6
|
For the three and nine
months ended September 30, 2023, non-cash interest and other income
on loan receivable represents the amortization of commitment fees
of nil and US$368, respectively (2022 – US$22 and US$72,
respectively) and the accretion of exit fees receivable of nil and
US$734, respectively (2022 – US$44 and US$143,
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 nine months
ended September 30, 2023, the Trust paid management fees of
US$13,650 and performance fees of US$18,616 related to the sale of
the Tzield royalty asset, pursuant to the management
agreement, as described in note 2(n) to the Trust's 2022 annual
consolidated financial statements.
|
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
|
Nine months
ended
|
|
(thousands of US
dollars, except per unit amounts)
|
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|
Comprehensive earnings
(loss)
|
(3,129)
|
7,614
|
70,781
|
16,405
|
|
[+] Amortization or
royalty assets
|
23,589
|
13,992
|
62,357
|
40,188
|
|
[+] Amortization of
other current assets1
|
—
|
114
|
240
|
114
|
|
[+] Unit-based
compensation2
|
1,637
|
298
|
2,352
|
849
|
|
[+] Board of trustees
unit-based compensation3
|
136
|
72
|
513
|
205
|
|
[-] Non-cash royalty
income4
|
—
|
(11)
|
(4)
|
(190)
|
|
[-] Non-cash interest
and other income on loan receivable5
|
—
|
(66)
|
(1,102)
|
(215)
|
|
[-] Premiums for
prepayment of loan receivable6
|
—
|
—
|
(2,140)
|
—
|
|
[-] Net gain on sale
of royalty assets7
|
(150)
|
—
|
(109,756)
|
—
|
|
[-] Net unrealized
gain on derivative asset
|
(652)
|
—
|
(652)
|
—
|
|
[+] Management fee on
sale of royalty asset8
|
—
|
—
|
13,650
|
—
|
|
[+] Performance fee on
sale of royalty asset8
|
—
|
—
|
18,616
|
—
|
|
Adjusted Cash
Earnings
|
21,431
|
22,013
|
54,855
|
57,356
|
|
Adjusted Cash
Earnings per Basic Unit
|
0.46
|
0.57
|
1.35
|
1.48
|
|
Adjusted Cash
Earnings per Fully Diluted Unit
|
0.46
|
0.57
|
1.35
|
1.48
|
|
Weighted average
number of Units – Basic
|
46,115,848
|
38,657,266
|
40,485,450
|
38,684,889
|
|
Weighted average
number of Units – Diluted
|
46,205,568
|
38,694,492
|
40,664,366
|
38,710,064
|
|
__________
|
|
1
|
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.
|
|
2
|
For the three and nine
months ended September 30, 2023, the unit-based compensation
expense was US$2,843 and US$3,700, respectively, (2022 – US$298 and
US$849, respectively) of which US$1,206 and US$1,348, respectively,
(2022 – nil and nil, respectively) were paid in cash.
|
|
3
|
Certain members of the
board of trustees elected to be compensated fully or partially
in 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 for the three and nine months ended September 30, 2022 of
nil and US$334, respectively, was used to reduce the obligation for
excess royalty payments received in connection with Ilaris.
There is no remaining obligation as at September 30, 2023
(December 31, 2022 – nil) related to Ilaris. In the second
quarter of 2022, the Trust recorded other current liabilities and a
corresponding deduction to royalty income of US$155 to reflect an
additional obligation for excess royalty payments received related
to other royalty assets. Royalty income of nil and US$4 were used
to reduce the obligation during the three and nine months ended
September 30, 2023, respectively (2022 – US$11 and US$11,
respectively). Royalty income earned in future periods related to
other royalty assets will be used to repay the remaining obligation
of US$136.
|
|
5
|
For the three and
nine months ended September 30, 2023, non-cash interest and other
income on loan receivable represents the amortization of commitment
fees of nil and US$368, respectively (2022 – US$22 and US$72,
respectively) and the accretion of exit fees receivable of nil and
US$734, respectively (2022 – US$44 and US$143,
respectively).
|
|
6
|
The Trust received a
prepayment premium for prepayment of the loan receivable, as
described under the Loan receivable section of the
MD&A.
|
|
7
|
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.
|
|
8
|
During the
nine months ended September 30, 2023, the Trust paid management
fees of US$13,650 and performance fees of US$18,616 related to the
sale of the Tzield royalty asset, pursuant to the management
agreement, as described in note 2(n) to the Trust's 2022 annual
consolidated financial statements.
|
About DRI Healthcare
Trust
DRI Healthcare Trust is managed by DRI Capital, the pioneer in
global pharmaceutical royalty monetization with a more than 30-year
history of accelerating innovation by providing capital to
inventors, academic institutions and biopharma companies. Since its
founding in 1989, DRI Capital has deployed more than US$2.5 billion, acquiring more than 70 royalties
on 40-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 Management's Discussion and Analysis. These
filings are also available at the Trust's website at
drihealthcare.com.
SOURCE DRI Healthcare Trust