Introduction to Management’s Discussion and Analysis
This Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”) comments on our business operations, performance, financial
position and other matters for the nine-month period ended
and 2021.
Unless otherwise indicated, all financial and statistical information included
herein relates to continuing operations of the Company. Unless otherwise
indicated or the context otherwise requires, the words, “
“we”, “us”, and “our” refer to
subsidiaries, including
This MD&A should be read in conjunction with the accompanying unaudited
Consolidated Interim Financial Statements and Notes thereto. We also encourage
you to refer to the Company’s MD&A for the year ended
preparing this MD&A, we have taken into account information available to us up
to
Additional information relating to the Company, including our Annual Report on
Form 10-K for the fiscal year ended
available on SEDAR at www.sedar.com and on the
Commission
All dollar amounts are expressed in
Cautionary Statement Concerning Forward-Looking Statements
Certain statements included or incorporated by reference in this MD&A constitute
forward-looking statements within the meaning of applicable securities laws. All
statements contained in this MD&A that are not clearly historical in nature are
forward-looking, and the words “anticipate”, “believe”, “continue”, “expect”,
“estimate”, “intend”, “may”, “plan”, “will”, “shall” and other similar
expressions are generally intended to identify forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All forward-looking statements are based on our
beliefs and assumptions based on information available at the time the
assumption was made. These forward-looking statements are not based on
historical facts but on management’s expectations regarding future growth,
results of operations, performance, future capital and other expenditures
(including the amount, nature and sources of funding thereof), competitive
advantages, business prospects and opportunities. Forward-looking statements
involve significant known and unknown risks, uncertainties, assumptions and
other factors that may cause our actual results, levels of activity, performance
or achievements to differ materially from those implied by forward-looking
statements. These factors should be considered carefully and you should not
place undue reliance on the forward-looking statements. Although the
forward-looking statements contained in this MD&A or incorporated by reference
herein are based upon what management believes to be reasonable assumptions,
there is no assurance that actual results will be consistent with these
forward-looking statements. These forward-looking statements are made as of the
date of this MD&A or as of the date specified in the documents incorporated by
reference herein, as the case may be. We undertake no obligation to update any
forward looking statements to reflect events or circumstances after the date on
which such statements were made or to reflect the occurrence of unanticipated
events, except as may be required by applicable securities laws. The factors set
forth in Item 1A., “Risk Factors” of the 2021 Form 10-K, as well as any
cautionary language in this MD&A, provide examples of risks, uncertainties and
events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Before you invest in
the common stock, you should be aware that the occurrence of the events
described as risk factors and elsewhere in this report could have a material
adverse effect on our business, operating results and financial condition.
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Company Background
We are a drug delivery company established in 2003 and headquartered in
manufacturing of novel oral thin film products for the pharmaceutical market.
More recently, we have made the strategic decision to enter the Canadian
cannabis market with non-prescription cannabis infused oral film that launched
in early 2021 and in 2020 we made the decision to enter the psychedelic market.
As a full service CDMO, we are offering partners a comprehensive portfolio of
pharmaceutical services, including pharmaceutical R&D, clinical monitoring,
regulatory support, tech transfer, manufacturing scale-up and commercial
manufacturing.
Our business strategy is to leverage our proprietary drug delivery technologies
and develop pharmaceutical products with tangible benefits for patients, for our
partners and, once a developed product launches, retain the exclusive
manufacturing rights.
Our primary growth strategy is based on providing CDMO services to the
pharmaceutical industry by focusing on three key strategic areas: (1)
psychedelics, (2) cannabis, and (3) animal health.
We have established a state-of-the-art manufacturing facility for the future
manufacture of our VersaFilm™ and VetaFilm™ products. We believe that this (1)
represents a profitable business opportunity, (2) will reduce our dependency
upon third-party contract manufacturers, thereby protecting our manufacturing
process know-how and intellectual property, and (3) allows us to offer our
development partners a full service from product conception through to supply of
the finished product.
With our current manufacturing equipment, we are only able to manufacture
products that do not contain flammable organic solvents. We initiated a project
to expand the existing manufacturing facility, the timing of which will be
dictated in part by the completion of agreements with our commercial partners.
This expansion became necessary following requests by commercial partners to
increase manufacturing capacity and provide solvent film manufacturing
capabilities. The new facility should create a fivefold increase of our
production capacity in addition to offering a one-stop shopping opportunity to
our partners and provide better protection of our Intellectual Property.
Product Opportunities that provide Tangible Patient Benefits
In addition to our three key strategic areas we will offer our services to
develop oral film products leveraging our VersaFilm™ technology that provide
tangible patient benefits versus existing drug delivery forms. Patients with
difficulties swallowing medication, pediatrics or geriatrics may benefit from
oral films due to the ease of use. Similarly, we are working on oral films to
improve bio-availability and/or response time versus existing drugs and thereby
reducing side effects.
Development of New Drug Delivery Technologies
The rapidly disintegrating film technology contained in our VersaFilm™, and our
AdVersa® mucosal adhesive tablet, are two examples of our efforts to develop
alternate technology platforms. As we work with various partners on different
products, we seek opportunities to develop new proprietary technologies.
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COVID-19
Our operations and financial condition have been affected by the COVID-19
pandemic. Though we were granted an exemption by local authorities which
permitted us to continue operations during the COVID-19 pandemic, we
nevertheless faced multiple operational and financial challenges. Despite these
challenges, we have continually been able to minimize the impact on our overall
performance.
In response to the COVID-19 pandemic, we partially reorganized our operations
and adopted a remote work policy for employees and management. In the year ended
well as the
landlord.
Throughout the COVID-19 pandemic, we have been, and remain, in compliance with
all federal, provincial, and municipal regulations that have been put in place
since the beginning of the pandemic. We will continue to monitor any further
developments in this regard, with the health and safety of our employees and
management as the primary concern.
Most recent key developments
On
2022
Debentures (as defined below), as supplemented, it has issued (i) 19,381,223
shares of common stock of the Company (“Shares”) at a deemed price of
in payment of the outstanding
Company’s convertible unsecured subordinated debentures due
(ii) 573,684 Shares at a deemed price of
aggregate of
Convertible Debentures, listed on the
IGX.DB, was delisted from trading as of the close of business on
On
ongoing Montelukast VersaFilm® Phase 2a BUENA clinical trial in patients with
mild to moderate Alzheimer’s Disease had reached the halfway mark. This
proof-of-concept study currently includes six clinical research sites with the
potential of adding three more sites in the coming month, all of which are
expected to enroll a total of approximately 70 patients.
Following the end of the quarter, on
update on its collaboration with its strategic partner, atai Life Sciences, for
the development of novel formulations of pharmaceutical-grade psychedelics based
on
current feasibility agreements between the companies,
pre-development, formulation development work and clinical supply manufacturing
to provide a product prototype to atai for further clinical investigation. That
previously undisclosed candidate, buccal VLS-01, is a buccal film containing a
synthetic form of N,N-dimethyltryptamine. atai is developing the product as a
novel therapy for treatment-resistant depression in combination with atai’s
digital therapeutic designed to provide contextual “(mind)set-and-setting”
support to patients prior to dosing.
Following the end of the quarter, on
that it had responded to the Complete Response Letter for its 505(b)(2) New Drug
Application for RIZAFILM® (owned by
Food and Drug Administration
On
Trademark Office issued
modulating drug absorption in oral film dosage form designed for sublingual
administration of various pharmaceuticals, including some cannabinoids. This,
the latest in a series of patents recently granted to
remain in force at least until 2038, not including any potential patent term
extensions. The ‘406 patent issuance adds to the formidable intellectual
property estate the Company has been building for its VersaFilm® oral film
technology. This patent will enable development of a wide variety of protected
product designed for improved drug delivery. While this novel proprietary
technology covered by both
cannabis-containing oral films, especially for THC oral film dosage forms, the
‘406 patent specifically covers an oral film dosage form designed for modulating
absorption profile of sublingually administered actives.
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On
development candidate, Buprenorphine Buccal Film, for which an abbreviated new
drug application has been filed by Chemo Research SL through its agent and
affiliate
Drug User Fee Act (“GDUFA”) date of
is a generic version of Belbuca®, an opioid that is used to manage pain severe
enough to require daily, around-the-clock, long-term treatment with an opioid,
when other pain treatments are inadequate. Approved by the FDA in 2015, Belbuca®
is applied to the oral or buccal mucosa every 12 hours and comes in seven
strengths ranging from 0.075 mg to 0.9 mg.
of the
technology in a novel formulation. The companies co-developed the candidate’s
ANDA that is currently under review by the FDA. According to
leading healthcare data and analytics provider, global annual sales of Belbuca®
amounted to
All amounts are expressed in thousands of
Currency rate fluctuations
Our operating currency is Canadian dollars, while our reporting currency is
dollars. Accordingly, our results of operations and balance sheet position have
been affected by currency rate fluctuations. In summary, our financial
statements for the nine-month period ended
accumulated other comprehensive loss due to foreign currency translation
adjustments and changes in fair value of
fluctuations in the rates and fair values used to prepare our financial
statements,
nine-month period ended
and Analysis takes this into consideration whenever material.
Reconciliation of Comprehensive Loss to Adjusted Earnings (Loss) before
Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA (Loss))
Adjusted EBITDA is a non-US GAAP financial measure. A reconciliation of the
Adjusted EBITDA is presented in the table below. The Company uses adjusted
financial measures to assess its operating performance. Securities regulations
require that companies caution readers that earnings and other measures adjusted
to a basis other than US-GAAP do not have standardized meanings and are unlikely
to be comparable to similar measures used by other companies. Accordingly, they
should not be considered in isolation. The Company uses Adjusted EBITDA to
measure its performance from one period to the next without the variation caused
by certain adjustments that could potentially distort the analysis of trends in
our operating performance, and because the Company believes it provides
meaningful information on the Company’s financial condition and operating
results.
comprehensive loss, finance income and costs, depreciation and amortization,
income taxes and foreign currency translation adjustment incurred during the
period.
recorded, such as share-based compensation, for its Adjusted EBITDA calculation.
The Company believes it is useful to exclude these items as they are either
non-cash expenses, items that cannot be influenced by management in the short
term, or items that do not impact core operating performance. Excluding these
items does not imply they are necessarily nonrecurring. Share-based compensation
costs are a component of employee and consultant’s remuneration and can vary
significantly with changes in the market price of the Company’s shares. Foreign
currency translation adjustments are a component of other comprehensive income
and can vary significantly with currency fluctuations from one period to
another. In addition, other items that do not impact core operating performance
of the Company may vary significantly from one period to another. As such,
Adjusted EBITDA provides improved continuity with respect to the comparison of
the Company’s operating results over a period of time. Our method for
calculating Adjusted EBITDA may differ from that used by other corporations.
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Reconciliation of Non-US GAAP Financial Information
Three-month period Nine-month period
ended November 30 ended November 30
ended September 30, ended September 30,
2022 2021 2022 2021
$ $ $ $
Comprehensive loss (2,975 ) (2,173 ) (9,239 ) (6,970 )
Add (deduct):
Depreciation 196 199 587 589
Finance costs 286 365 1,063 1,134
Finance income (1 ) (1 ) (2 ) (152 )
Share-based compensation 31 25 94 81
Deferred income tax - (3 ) - (3 )
Other comprehensive loss (income) 299 171 1,293 516
Adjusted EBITDA Loss (2,164 ) (1,417 ) (6,204 ) (4,805 )
Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA (Loss))
Adjusted EBITDA (Loss) increased by
ended
three-month period ended
increase in SG&A expenses of
compensation, and a decrease in revenues of
expenses of
in manufacturing expenses of
compensation.
Adjusted EBITDA (Loss) increased by
ended
the nine-month period ended
increase in SG&A expenses pf
consideration of stock-based compensation and a decrease in revenues of
offset by a decrease in Manufacturing expenses of
stock-based compensation.
Results of operations for the three-month and nine-month periods ended
30, 2022
30, 2021
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Three-month period Nine-month period ended
ended September 30, September 30,
2022 2021 2022 2021
Revenue $ 142 $ 593 $ 777 1,041
Research and Development
Expenses 704 874 2,289 1,910
Manufacturing expenses 429 499 1,381 1,598
Selling, General and
Administrative Expenses 1,204 662 3,405 2,419
Depreciation of tangible assets 196 199 587 589
Operating loss (2,391 ) (1,641 ) (6,885 ) (5,475 )
Net loss (2,676 ) (2,002 ) (7,946 ) (6,454 )
Comprehensive loss (2,975 ) (2,173 ) (9,239 ) (6,970 )
Revenue
Total revenues for the three-month period ended
three-month period ended
period ended
2021
to the last year’s corresponding period is mainly attributable to decreases in
Sales Milestone Revenues of
in Product Revenues of
the nine-month period ended
corresponding period is mainly attributable to decreases in Sale Milestone
Revenues of
Revenues of
Research and development (“R&D”) expenses
R&D expenses for the three-month period ended
three-month period ended
period ended
2021
The decrease in R&D expenses for the three-month period ended
is mainly attributable to decreases in R&D batch development expenses of
salary expense of
supplies of
the 20% credit of
consulting fees of
increase in R&D expenses for the nine-month period ended
mainly attributable to increases in study costs of
20% credit of
consulting fees of
maintenance of
by decreases in R&D batch development expenses of
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In the three-month period ended
Research and Development Tax Credits of
in the same period of the previous year. In the nine-month period ended
year.
Manufacturing expenses
Manufacturing expenses for the three-month period ended
amounted to
the three-month period ended
nine-month period ended
decrease of
The decrease in Manufacturing expenses for the three-month period ended
consumables of
and maintenance of
nine-month period ended
in supplies and consumables of
maintenance of
expenses of
Selling, general and administrative (“SG&A”) expenses
SG&A expenses for the three-month period ended
three-month period ended
period ended
2021
The increase in SG&A expenses for the three-month period ended
2022
depreciation of the CA dollar vs US currency in the amount of
in insurance expense of
new hires, investor relations expenses of
by a decrease in professional fees of
nine-month period ended
variation of the foreign exchange due to the depreciation of the CA dollar vs US
currency in the amount of
insurance expense of
expenses of
attributable to the revaluation of previously issued DSUs which was caused by
the decrease in the Company’s share price during the nine-month period ended
Depreciation of tangible assets
In the three-month period ended
for the same period of the previous year. In the nine-month period ended
tangible assets, compared with an expense of
previous year.
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Share-based compensation expense, warrants and stock-based payments
Share-based compensation warrants and share-based payments expense for the
three-month period ended
the three-month period ended
warrants and share-based payments expense for the nine-month period ended
ended
We expensed approximately
for options granted to our employees in 2021 and 2022 under the 2016 Stock
Option Plan and
$Nil, respectively that was expensed in the same period of the previous year.
We expensed approximately
for options granted to our employees in 2021 and 2022 under the 2016 Stock
Option Plan and
year.
There remains approximately
fiscal 2022 and 2023, of which
consultant during 2021. We anticipate the issuance of additional options and
warrants in the future, which will continue to result in stock-based
compensation expense.
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