Crescita Therapeutics Inc. (TSX: CTX) intends to conduct a rights offering for gross proceeds of up to $3.7 million
Under the rights offering, eligible shareholders of record as of the close of business on February 7, 2018 will receive one right for each common share held, with two rights entitling the holder thereof to acquire one common share of Crescita at a subscription price of $0.53. If all of the rights are exercised, Crescita expects to raise gross proceeds of $3.7 million.
Knight Therapeutics Inc. (TSX: GUD) and funds advised by Bloom Burton & Co., directors and management of Crescita have committed to invest $2,060,000 under the offering.
Knight Therapeutics is Crescita’s largeset shareholder, controlling 17.2% of the issued and outstanding common shares outstanding of Crescita on partially diluted basis.
News Release
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Crescita Therapeutics Inc. Announces Rights Offering to Raise Up To $3.7 Million Commitments for $2,060,000 Obtained from Knight Therapeutics, Funds Advised by Bloom Burton & Co., Management and Board Members
Crescita Announces Growth Initiatives for 2018
MISSISSAUGA, Ontario, Canada – January 31, 2018 – Crescita Therapeutics Inc. (TSX: CTX) (“Crescita”) today announced that it is conducting a rights offering. Crescita also today issued a letter to shareholders (set out below) providing a summary of developments in 2017 and detailing planned growth initiatives for 2018.
Rights Offering
Under the rights offering, eligible shareholders of record as of the close of business on February 7, 2018 (the “Record Date”) will receive one right for each common share held, with two rights entitling the holder thereof to acquire one common share of Crescita at a subscription price of $0.53. If all of the rights are exercised, Crescita expects to raise gross proceeds of $3.7 million. Certain significant shareholders (including Knight Therapeutics Inc. and funds advised by Bloom Burton & Co.), directors and management of Crescita have committed to invest $2,060,000 under the offering.
The rights offering is being undertaken to raise additional working capital and to provide additional sources of financing for potential business development initiatives. As previously disclosed, Crescita is seeking to in-license or acquire commercial or late-stage topical OTC or prescription assets for skin conditions in either the aesthetic or medical dermatological market. While the rights offering is not being conducted to raise financing for any specific transaction, Crescita believes that it is in the best interests of Crescita and its shareholders for Crescita to have sources of capital available to capitalize on potential transactions that may arise as a result of Crescita’s ongoing evaluation.
Eligible shareholders are entitled to subscribe for one common share for every two rights held upon payment of a subscription price of $0.53 per share (the “Basic Subscription Privilege”) until 4:00 p.m. (Toronto time) on March 9, 2018 (the “Expiry Time”), after which time unexercised rights will be void and of no value.
Eligible shareholders that exercise their Basic Subscription Privilege in full will also be entitled to subscribe for additional common shares, if any, not purchased by other shareholders under their Basic Subscription Privilege (the “Additional Subscription Privilege”). The common shares available under the Additional Subscription Privilege will be those common shares issuable under the rights offering that have not been subscribed and paid for under the Basic Subscription Privilege by the Expiry Time.
The rights will trade on the Toronto Stock Exchange under the symbol CTX.RT commencing on February 6, 2018.
Holders of our outstanding common shares of record at the close of business on February 7, 2018 and who are resident in a province or territory of Canada are eligible to participate in the rights offering.
Details of the rights offering will be set out in a rights offering notice and rights offering circular available under Crescita’s profile at www.sedar.com. The rights offering notice and accompanying rights certificate will be mailed to each eligible shareholder of Crescita as at the record date. Registered shareholders who wish to exercise their rights must forward the completed rights certificate, together with the applicable funds, to the depositary, AST Trust Company (Canada), at or before the Expiry Time. Shareholders who own their common shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.
There are currently 14,003,206 common shares outstanding. If the rights offering is fully-subscribed, Crescita expects that there will be approximately 21,004,809 common shares outstanding (assuming that no options, warrants or convertible debentures are exercised or converted prior to expiry of the offering).
Crescita has appointed AST Trust Company (Canada) as its depositary to receive subscriptions and payments from holders of rights and to perform the services relating to the exercise and transfer of the rights.
The foregoing summary of the rights offering is qualified in its entirety by the terms of the rights offering that will be set forth in Crescita’s rights offering notice and rights offering circular, as well as the definitive rights certificates.
The rights and the common shares issuable upon exercise of the rights have not been, and will not be, registered under the United States Securities Act of 1933, as amended, and accordingly, the rights and the common shares are not being publicly offered for sale in the “United States” or to “U.S. persons” (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended). This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. There shall be no sale of the securities in any jurisdiction in which an offer to sell, a solicitation of an offer to buy or a sale would be unlawful.
“We are excited about Crescita’s opportunities for growth in 2018 and we believe a rights offering is an ideal way to ensure that Crescita is best positioned to capitalize on those opportunities as they arise, while minimizing dilution to existing shareholders”, said Daniel Chicoine, Executive Chairman & Interim Chief Executive Officer of Crescita. Mr. Chicoine continued: “The commitments of our significant shareholders, management and our board to subscribe for at least $2 million under the offering demonstrates our conviction regarding Crescita’s prospects and will help to ensure that the rights offering is a success”.
Letter to Shareholders
“Last year was an extremely busy year for Crescita as we advanced both our prescription and non-prescription businesses. At the beginning of 2017 we were in a stabilizing mode, making a point of bringing top quality service, attention to detail and appropriate inventory to our non-prescription business. At the start of 2017, we had significant back orders and were aggressively replenishing our inventory of finished products. This used up a significant amount of cash as we invested in the business. As a result, we have been able to stabilize our inventory levels and the backorder situation is now under control. We also had deficiencies in our manufacturing, marketing and sales activities, all of which needed attention and time. We spent considerable time “fixing” the business and in the process made several improvements and completed a plan to turn around the company, which is well underway. While the non-prescription part of our business was challenging in 2017, we had a positive contrast to that in our prescription business. Having done the heavy lifting in 2017, we have confirmed our growth strategy.
We identified four pillars for our growth strategy:
Organic growth of existing products
Increase in our international out licensing for both Prescription and Non-Prescription Business
Growth of our Contract Manufacturing services business (CMO)
Acquisitions, in licensing and internal development of new products or product lines
Non- Prescription Business
Our sales force was equipped with new CRM software to better manage their activities and monitor our effectiveness in the field. We have made some changes to the sales staff and our customer support team to strengthen our sales activities.
We have refocused our sales and marketing activities towards the spa and medical clinics markets and away from the mass retail channels until we can dedicate the appropriate resources to such an initiative. Our evolved strategy is to gain market awareness for our ISDIN line of products through the spa channel and to consider a potential re-introduction of the product line in the retail space in the future.
We made many changes at the senior management level, appointing a new President, a new CFO and senior managers in the Sales, Marketing and Quality departments.
We made a concerted effort to increase our contract manufacturing business and have secured significant new orders for 2018. We are in active and on-going discussions with potential partners to produce their non-prescription products in our Laval facilities.
We acquired the Alyria product line from Sanofi, which allowed us to expand our medi spa product offerings and will also provide us with further opportunities for international out licensing.
Many contacts were made in U.S. and Asia to out license our non-prescription products and we are optimistic that we will be able to grow our international business.
Prescription Business
Significant advances were made with our prescription products. The most important development was the out licensing of Pliaglis U.S. rights to Taro Pharmaceuticals. This provided significant up front and milestone payments in 2017. We are anticipating a U.S. launch in early 2018 which will hopefully provide Crescita with further cash payments from royalties, sales milestones and regulatory milestones.
We also started the necessary commercial steps to launch Pliaglis in Canada in 2018. This will allow us to better leverage our sales force and increase Canadian sales.
MiCal 1 announced positive results from its Phase II study and we are anticipating further advancing this product in 2018 either through the MiCal partnership or by way of a licensing agreement with a third party which could result in additional milestone payments to Crescita.
MiCal 2 continues to advance and we expect the product to enter clinical studies in 2018.
We were able to renegotiate our existing loans with Knight Therapeutics and obtain new financing by way of a convertible debt issued to funds advised by Bloom Burton & Co. This significantly improved our cash resources.
We have transferred all operations activities from Mississauga to our Laval office and the lease in Mississauga is ending in January 2018. Much was accomplished in 2017.
2018 Outlook
There are many exciting potential developments anticipated for 2018 as we continue to make progress toward increasing our revenues and moving closer to profitability.
Prescription Business
The biggest opportunity surrounds the launch of Pliaglis in the U.S. Taro is optimistic about the sales potential for Pliaglis and we look forward to monitoring their progress. We anticipate Taro filing for the label change of Pliaglis to remove the “Not for Home Use”, which would trigger a milestone payment and potentially increase sales. Taro is also expected to advance the studies to obtain approval for Flexicaine – the next generation Pliaglis – which would also result in a milestone payment and potentially increase sales. Taro is currently in the process of transferring the manufacturing site for Pliaglis and expects to have completed the transfer in 2018.
We expect to be able to launch Pliaglis in Canada with our own sales force in the second half of the year.
MiCal 1 out licensing discussions could begin in 2018, and if an agreement is reached it could result in milestone payments that would be shared by the partners in the MiCal joint venture. We also expect MiCal 2 to advance in its development process, which will be funded by our partners in the MiCal joint venture.
Non- Prescription Business
We are anticipating continued growth in sales for our non-prescription product lines. We have improved our sales team and the management of our marketing and sales activities and we are also planning to introduce some new products developed by our in-house R&D team in 2018.
We expect our CMO sales to grow in 2018 as we continue to market our in-house R&D and production capabilities. We continue to pursue out licensing and distributorship opportunities as well as strategic acquisitions of product lines.
We want to thank our employees for their hard work and our shareholders for their continued support.
Sincerely,
Serge Verreault
President
Crescita Therapeutics Inc.”
About Crescita
Crescita (TSX:CTX) is a publicly traded, Canadian commercial dermatology company with a portfolio of non-prescription skincare products for the treatment and care of skin conditions and diseases and their symptoms and prescription drug products for the treatment of pain. Crescita owns multiple proprietary drug delivery platforms that support the development of patented formulations that can facilitate the delivery of active drugs into or through the skin. For additional information, please visit www.crescitatherapeutics.com.
Forward-Looking Statements
This news release contains “forward-looking information” within the meaning of applicable securities laws. Forward-looking information can be identified by words such as: “expect”, “intend,” “plan,” “seek,” “believe,” “estimate,” “future,” “likely,” “may,” “should,” “will” and similar forward-looking language. The forward-looking information contained in this news release is based on a number of assumptions which we believe to be reasonable, including assumptions relating to the completion of the rights offering and the timing thereof, the completion of the backstop commitments in accordance with their terms, the amount of proceeds raised and the expected use of proceeds. Forward-looking information entails various risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking information. Risks that could cause actual results to differ materially from those expressed or implied in the forward-looking information contained in this press release include, but are not limited to, that shareholders will not exercise all or any portion of the rights, that Crescita may not have sufficient additional sources of capital following completion of the offering, that Crescita may not be able to find a suitable use of the proceeds of the rights offering, the level of dilution that will be experienced by shareholders who do not exercise all or a portion of their rights, failure of the backstop purchasers to fulfill their obligations under the rights offering, failure to complete or a delay in the rights offering for any other reason, the lack of a trading market for the rights developing and the trading price of the common shares following completion of the offering. In addition, general risks relating to capital markets, economic conditions, regulatory changes, as well as the operations of our business may also cause actual results to differ materially from those expressed or implied in such forward-looking information. Forward-looking information is not a guarantee of future performance, and management’s assumptions upon which such forward-looking information are based may prove to be incorrect. Investors are cautioned not to place undue reliance on any forward-looking information contained herein. Crescita disclaims any obligation to update or revise any forwardlooking information contained in this news release, whether as a result of new information, future events or otherwise, except to the extent required by law.
Investor Relations:
Email: ir@crescitatx.com