Theralase Technologies Inc. (TLTFF) Q4 2023 Earnings Call Transcript Conference Call Participants
Matthew Perraton - Chairman of the Board
Kristina Hachey - Chief Financial Officer
Roger Dumoulin-White - President and Chief Executive Officer
Matthew Perraton
Good morning, everyone. My name is Matthew Perraton and I will be hosting Theralase’s Investor Conference Call. Today's call will focus on the discussion of the company's 2023 annual audited financial statements.
Joining me today will be Kristina Hachey, Chief Financial Officer; and Roger Dumoulin-White, President and Chief Executive Officer. Before we begin, I would like to remind everyone that today's presentation may contain forward-looking statements defined within the meaning of applicable Canadian securities laws. Participants should not unduly rely on these forward-looking statements which are not a guarantee of future performance as there can be no assurance that these statements will prove to be accurate as they involve known and unknown risks, uncertainties and other factors, which may cause actual results or future events to differ materially from the forward-looking statements.
Although forward-looking statements contained in the call today are based upon what management currently believes to be reasonable assumptions, the company cannot assure prospective investors and the actual results, performance or achievements will be consistent with these forward-looking statements.
All forward-looking statements are made as of the date hereof and are subject to change. Except as required by law, the company assumes no obligation to update such statements. If you're aware of anyone who is not able to make the Investor Call live today, we will be posting it in our corporate website by next week.
Now that we've dispensed with all the legal disclosures, let me introduce CFO of the company Ms. Kristina Hachey.
Kristina Hachey
Thank you, Matt. Good morning, everyone. Let's start with an overview of the key highlights for the year ended December 31st 2023. Please note, I have rounded the numbers for ease of pronunciation. Please refer to the 2023 annual audited financial statements for the exact numbers.
In the income statement, sales decreased 6% year-over-year from $1.14 million to $1.07 million. The cost of sales was $510,000 or 47% of sales, resulting in a gross margin of $462,000 or 53% of sales. In comparison, the cost of sales for 2022 was $510,000 or 45% of sales, resulting in a gross margin of $628,000 or 55% of sales.
Therefore, year-over-year sales, the cost of sales and gross margin are predominantly flat supporting the company's focus on funding the Drug division versus the Device division.
Selling expenses decreased from $301,000 to $279,000, representing a 7% decrease in selling expenses and is a result of an 18% reduction in advertising and a 16% decrease in sales salaries.
Administrative expenses increased from $1.3 million to $1.9 million, representing a 48% increase from the previous year. The increase in administrative expenses is attributed to a 392% increase in stock-based compensation, a 150% increase in Investor Relations costs and an 80% increase in general and administrative expenses and a 34% increase in director and advisory fees.
Stock-based compensation increased due to the cumulative effect of accounting for the vesting of stock options granted in the current and previous years.
Research and development expense decreased from 30% from $4.28 million to $2.98 million and represents a decrease in the cost of running the bladder cancer clinical study, specifically, the manufacture of the study device and patient treatment.
Overall, the net loss for the company was $4.57 million, which included $934,000 of net non-cash expenses, specifically, amortization, stock-based compensation and foreign exchange.
This compares to a net loss in 2022 of $5.24 million, which included $554,000 of net non-cash expenses. Therefore, net loss decreased 13% year-over-year.
The Drug division represented $4.1 million or approximately 90% of this loss versus 10% for the Device division in 2023.
For the balance sheet, total current assets aggregated $1.49 million, compared with total current liabilities of $1.97 million, netting a working capital of $421,000 and a working capital ratio of approximately 1.4 to 1. Total assets decreased from $4.16 million to $3.28 million, a reduction of 21%. Total liabilities increased from $1.07 million to $1.37 million, an increase of 28%.
In 2023 and 2024, the company completed four non-brokered private placements. On June 30th, 2023, the company completed a $1.2 million financing at $0.25 per unit with a unit consisting of one common share and one warrant with a strike price of $0.35 for two years.
On September 7th, 2023, the company completed a $460,000 financing at $0.25 per unit with the unit, consisting of one common share and one warrant with a strike price of $0.35 for two years.
On November 29th, 2023, the company completed a $1.17 billion financing at $0.22 per unit with a unit consisting of one common share and one warrant with a strike price of $0.28 for five years. On February 5th, 2024, the company completed a $1.2 million financing at $0.18 per unit with a unit consisting of one common share and one warrant with a strike price of $0.23 for five years.
I will now take some time to address a few of the main questions that have been submitted by shareholders.
First question is, how does the company plan to fund the remainder of the Phase II bladder cancer clinical study?
The company estimates the cost to complete the clinical study to range between $15 million and $30 million depending on the length of time and addition of personnel required to successfully complete it. The company's primary focus is to secure funding to complete the clinical study by gaining approval from the Ontario Securities Commission to register a $100 million base shelf prospectus.
If granted, this would allow the company 25 months from date of approval to access funds from the base up to $100 million based on need.
In order to be base shelf eligible, the company is required to demonstrate 12 months worth of cash flow, which according to our latest financial statements is approximately $4.5 million. Therefore, the company plans to raise approximately $5 million in debt and/or equity instruments this year to become base shelf eligible.
The next question is, how does the company plan to fund the brain cancer and lung cancer clinical studies?
A phase I b clinical study for both brain and lung cancer is estimated to cost approximately $5 million. Therefore, this money would be available through the base shelf prospectus I just mentioned.
The last question is, does the company plan to increase sales through its Device division to assist the burn rate of the Drug division?
The answer is yes. Once properly funded, the company plans to increase marketing for the Device division to increase annual sales to help minimize the burn rate of the Drug division.
I believe that addresses all the questions I have received about the company's financial statements. And I will now turn it back over to Matt.
Matthew Perraton
Thank you, Kristina for the detailed explanation of the company's annual financial statements and a strategy to fund the Drug division for both the lead asset bladder cancer and for the next upcoming assets brain cancer and lung cancer.
Thank you to all the shareholders who submitted questions for this call as we have a very engaged shareholder base and appreciate your ongoing interest and support of Theralase Technologies Inc.
We received many great questions and I've taken the liberty of combining similar questions into a single question to prevent duplication. If we do not get to your question during this call based on our allotted time, we apologize in advance. But feel free to contact me directly to address your question if it wasn't addressed in the call today.
Lastly, as I'm sure you're aware as a publicly traded company, we can only provide information that is already available to the market. So if you have asked a question that is not available in the public domain we will not be able to answer it.
I would now like to turn it over to our President and CEO, Roger Dumoulin-White to address some additional questions Theralase has received from its shareholder base.
Roger Dumoulin-White
Thank you, Matt. Good morning, everyone. Here are few of the questions that have been submitted by our shareholders. How long does the company expect to complete the study two?
The company plans to complete accruement into study two by enrolling and providing the primary study procedure to the remaining 37 patients by the end of 2024. If successful, this will allow us to achieve data lock on a majority of the clinical data by mid 2026 and hopefully position the company for FDA and Health Canada approval by the end of 2026.
How does Ruvidar stack up to the competition for bladder cancer? Great question. The interim clinical data of study II today has proven to be world-class and very competitive to big pharma’s clinical data who as you know are significantly bigger and much better financed than we are.
Theralase’s technology has demonstrated an ability to destroy urothelial cell carcinoma in a patient's bladder for a complete response of 64% and a total response of 75% at any point in time. The duration of this response for 450 days after the study procedure has been a complete response of 36% and a total response of 40%.
The primary benefits of the Theralase technology versus competitive technologies are the high efficacy rates as previously discussed, as patients achieve a complete response in approximately 60% of the cases after only one study procedure.
A high duration of that response up to 450 days and a very high safety margin as there have been no serious adverse events directly associated with either the study drug or study device as supported by a review by the Independent Data and Safety Monitoring Board.
Therefore the Theralase technology presents a safe, effective alternative therapy for patients who are at risk of having their bladder removed.
Third question. What is the status of breakthrough designation approval? Another good question. The company submitted a pre-breakthrough designation submission to the Food and Drug Administration in July 2023 and based on the FDA's feedback, the company is currently working with the clinical study sites, a central pathology laboratory, a biostatistics organization and a regulatory organization to update the pre-BTD with clinical data clarifications requested by the FDA.
The company plans to resubmit the pre-BTD submission to the FDA in the second quarter of 2024 for FDA review of these clarifications. Once the pre-BTD submission has been accepted by the FDA, the company will compile a BTD submission for review by the FDA in support of the grant of a BTD approval.
Fourth question. What is the status of any licensing, acquisition, partnering or distribution agreements? Based on the strong interim clinical data compiled to-date, the company will investigate meeting with various pharmaceutical organizations to partner our technology.
Five, any status as of yet? No, not yet. When deemed material by the Board, any licensing, acquisition, partnering or distribution agreements would be announced via press release.
Number six. Any updates on brain cancer or lung cancer clinical studies? Again, no, not yet. The company plans to be properly financed first and then after financing will complete a GLP or a Good Laboratory Practice toxicology analysis, which would allow commencement of a Phase I b clinical study for both indications pending regulatory approval.
Question number seven. Any updates on the COVID-19 vaccine?
The company is working with the University of Manitoba and the National Microbiology Laboratory to complete this work. All petri dish work has been completed by University of Manitoba and we are currently working with NML to complete a challenge animal model. [Indiscernible] we will be able to report out on the results in the second quarter or third quarter of this year.
In closing, I would like to state that the company remains focused on commercializing the next standard-of-care treatment for BCG, unresponsive, non-muscle invasive bladder cancer carcinoma in situ, which includes being properly capitalized using various equity and debt instruments; finishing the enrollment and provision of the primary study procedure by the end of this year; lastly achieving BTT status from the FDA.
Thank you, everyone for your time today. And I look forward to seeing everyone in person at the Annual General Meeting later this year.
End of Q&A