Total consideration of up to $45.75 million, which consists of upfront cash, sales-based milestone payments and DRI Healthcare's assumption of future milestone payment obligations
HLS will use the upfront cash proceeds to pay down debt
2024 revenue and Adjusted EBITDA guidance is updated to reflect effective sale date of June 28, 2024
TORONTO, July 2, 2024 /CNW/ - HLS Therapeutics Inc. ("HLS" or the "Company") (TSX: HLS), a pharmaceutical company focused on addressing unmet needs in the treatment of psychiatric disorders and cardiovascular disease, announces that it has sold its royalty interest and milestone payment obligations in the global sales of XENPOZYME (olipudase alfa) to DRI Healthcare Trust ("DRI Healthcare"), effective June 28, 2024. All dollar amounts are in U.S. dollars, unless otherwise stated.
The transaction is valued at up to $45.75 million, which consists of $13.25 million paid upfront in cash, $14.0 million in potential sales-based milestone payments and DRI Healthcare's assumption of $18.5 million of potential future milestone payment obligations. HLS will recognize revenue from its royalty interest in XENPOZYME through June 30, 2024. The upfront proceeds from the sale will be used to reduce the principal outstanding on the Company's term loan. At current rates, the debt repayment is expected to reduce annual interest expense by more than $1.3 million.
"To strengthen our balance sheet and focus management efforts on the growth of our product portfolio, we are divesting a non-strategic asset," said Craig Millian, CEO of HLS. "With the expectation that HLS would have had to make a substantial milestone payment related to XENPOZYME in 2025, we believe this is an ideal time to monetize this royalty. This transaction generates significant value for the Company, enabling us to accelerate de-leveraging, reduce our interest expense, and enhance our future flexibility for the productive use of capital."
Following this transaction, HLS is lowering its 2024 royalty revenue guidance to a range of $1.5 to $1.7 million from the previous range of $3 to $4 million. HLS will have a remaining royalty interest in Takeda Pharmaceutical's OBIZUR, which is expected to contribute between $0.5 million and $0.7 million in 2024. Based on the change in outlook for royalty revenue, guidance for total revenue will be reduced to a range of $58.5 to $59.7 million from the previous range of $60 to $62 million. Accordingly, the Company is lowering its Adjusted EBITDA guidance to a range of $15.5 to $16.7 million from the previous range of $17 to $19 million.
During the second quarter, HLS also completed an amendment to its credit agreement to ensure operating flexibility during this transitional year. Based on financial covenants related to liquidity and coverage ratios, opportunities to repurchase stock under the NCIB program will be restricted in the near term.
ABOUT HLS THERAPEUTICS INC.
Formed in 2015, HLS is a pharmaceutical company focused on the acquisition and commercialization of late-stage development, commercial stage promoted and established branded pharmaceutical products in the North American markets. HLS's focus is on products targeting the central nervous system and cardiovascular therapeutic areas. HLS's management team is composed of seasoned pharmaceutical executives with a strong track record of success in these therapeutic areas and at managing products in each of these lifecycle stages. For more information visit: www.hlstherapeutics.com
FORWARD LOOKING INFORMATION
This release includes forward-looking statements regarding HLS, its business and the DRI Healthcare transaction. Such statements are based on the current expectations and views of future events of HLS's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements, including, among others, statements with respect to HLS's expectations regarding the transaction with DRI Healthcare and the potential benefits to the Company resulting from the transaction; the Company's use of the proceeds from the transaction, including the potential benefits resulting from a reduction in the principal outstanding on the Company's term loan; potential growth opportunities, options for the productive use of capital and HLS's expectations regarding future financial performance. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting HLS, including risks relating to the specialty pharmaceutical industry, risks related to the regulatory approval process, risks related to HLS' ability to realize the full value of the transaction with DRI Healthcare, economic factors and many other factors beyond the control of HLS. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause HLS's actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. A discussion of the material risks and assumptions associated with this release can be found in the Company's Annual Information Form dated March 13, 2024, and Management's Discussion and Analysis dated May 8, 2024, both of which have been filed on SEDAR and can be accessed at www.sedarplus.ca. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and HLS undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
