– 82% royalty income growth over prior year
period underscores transformative year –
– Announcing 2024 royalty income guidance of
US$153 to US$155 million, excluding milestone income and
any new transactions –
– Increasing quarterly cash distribution
–
TORONTO, Feb. 28,
2024 /CNW/ - DRI Healthcare Trust (TSX: DHT.UN) (TSX:
DHT.U) ("DRI" or the "Trust"), a global leader in providing
financing to advance innovation in the life sciences industry,
today announced its financial results for the fourth quarter and
fiscal year ended December 31, 2023. The Trust's annual 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.
"2023 marked a significant step forward for the growth of the
Trust," said Behzad Khosrowshahi,
the Trust's Chief Executive Officer. "Our solid performance
resonated through all aspects of the business. We invested in
strong new assets to complement our existing portfolio, which
continues to perform at a high level; we expanded our shareholder
base with several new investors; and we rounded out our capital
structure to enhance our deployment capability moving forward. In
addition to our recently announced updated deployment and royalty
income CAGR guidance targets, we are excited to announce for the
first time our 2024 royalty income guidance of US$153 million to US$155
million, excluding any new transactions. This figure also
excludes milestone income, allowing for year-over-year
comparability. Having deployed US$500
million in the past twelve months coupled with these
recently updated guidance targets, we believe we have laid a strong
foundation upon which to continue delivering further accretive
value for our unitholders."
Fourth Quarter Highlights
- Total Income of US$75.8
million;
- Normalized Total Cash Receipts of US$52.3 million1;
- Adjusted EBITDA of US$46.5
million1;
- Comprehensive Earnings of US$20.4
million;
- Basic and diluted Adjusted Cash Earnings per Unit of
US$1.03 and US$1.02, respectively1,2;
- Net Earnings per Unit of US$0.39
(basic and diluted)2;
- Increased total credit available under our credit facility to
US$500.0 million; and
- Declared a special cash distribution of US$0.2662 per unit, a special unit distribution
of US$0.7640 per unit and a regular
quarterly cash distribution of US$0.075 per unit to unitholders of record as at
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
December 31, 2023 were 56,332,607 units and 56,464,102 units,
respectively.
|
Fiscal 2023 Highlights
- Deployed US$384.7 million in 5
royalty transactions;
- Completed two follow-on public offerings of 18,653,000 units at
US$8.123 per unit for
gross proceeds of US$151.5
million;
- Total Income of US$166.3
million;
- Normalized Total Cash Receipts of US$131.2 million1;
- Adjusted EBITDA of US$113.2
million1;
- Comprehensive Earnings of US$91.2
million;
- Basic and diluted Adjusted Cash Earnings per Unit of
US$2.53 and US$2.52, respectively1,4;
- Basic and diluted Net Earnings per Unit of US$2.08 and US$2.07, respectively4; and
- Declared total distributions of US$92.1
million, comprised of cash distributions of US$49.1 million and unit distributions of
US$43.0 million.
__________________________________________
|
3 Represents the weighted
average cost per unit issued.
|
4 The weighted average
number of basic and diluted units for the year ended December 31,
2023 were 44,479,802 units and 44,622,811 units,
respectively.
|
Subsequent to Quarter End
- Deployed US$115.0 million to
expand interest in Omidria royalties by replacing previously
agreed-upon annual royalty caps with a 30% royalty on all U.S. net
sales; and
- Declared a quarterly cash distribution of US$0.085 per unit for the first quarter of 2024,
payable on April 19, 2024 to
unitholders of record on March 31,
2024.
Financial Highlights
|
Three months
ended
|
Year
ended
|
(thousands of US
dollars, except per unit amounts)
|
December 31,
2023
|
December 31,
2022
|
December 31,
2023
|
December 31,
2022
|
Total
income
|
75,842
|
22,642
|
166,279
|
93,034
|
Management
fees
|
3,426
|
2,055
|
22,335
|
6,532
|
Performance
fees
|
5,918
|
—
|
24,534
|
—
|
Amortization of
royalty assets
|
24,719
|
19,078
|
87,076
|
59,266
|
Impairment of royalty
assets
|
9,216
|
—
|
9,216
|
—
|
Other
expenses
|
10,388
|
6,316
|
40,570
|
15,638
|
Net gain from sale of
royalty asset
|
—
|
—
|
109,756
|
—
|
Net earnings
(loss)
|
22,175
|
(4,807)
|
92,304
|
11,598
|
Net unrealized gain
(loss) on derivative instruments
|
(1,741)
|
—
|
(1,089)
|
—
|
Comprehensive earnings
(loss)
|
20,434
|
(4,807)
|
91,215
|
11,598
|
Net earnings (loss)
per unit – basic
|
0.39
|
(0.13)
|
2.08
|
0.30
|
Net earnings (loss)
per unit – diluted
|
0.39
|
(0.13)
|
2.07
|
0.30
|
Normalized Total Cash
Receipts5
|
52,253
|
31,150
|
131,181
|
96,232
|
Adjusted
EBITDA1
|
46,450
|
27,371
|
113,209
|
82,439
|
Adjusted EBITDA
Margin1
|
89 %
|
88 %
|
86 %
|
86 %
|
Adjusted Cash Earnings
per Unit – Basic1
|
1.03
|
0.39
|
2.53
|
1.87
|
Adjusted Cash Earnings
per Unit – Diluted1
|
1.02
|
0.39
|
2.52
|
1.87
|
Weighted average
number of Units – Basic
|
56,332,607
|
38,231,059
|
44,479,802
|
38,570,499
|
Weighted average
number of Units – Diluted
|
56,464,102
|
38,270,508
|
44,622,811
|
38,591,392
|
Asset Performance
As at December 31, 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 December 31, 2023, the
royalty asset portfolio had a book value, net of accumulated
amortization, of US$$706.1 million, which generated Total Cash
Royalty Receipts1 of US$52.3
million and US$127.9 million
during the three months and year ended December 31, 2023, respectively, and royalty
income of US$75.4 million and
US$158.9 million during the three
months and year ended December 31,
2023, respectively.
_____________________________________
|
5 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.
|
Portfolio
(thousands of US
dollars)
|
|
Cash
Receipts
|
|
|
|
Three months
ended
|
Year
ended
|
Product
|
Therapeutic
Area
|
Marketer(s)
|
December 31,
2023
|
December 31,
2022
|
December 31,
2023
|
December 31,
2022
|
Empaveli/Syfovre1
|
Hematology/Ophthalmology
|
Apellis,
Sobi
|
1,438
|
269
|
1,876
|
269
|
Eylea I
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
1,456
|
1,290
|
5,511
|
5,399
|
Eylea II
|
Ophthalmology
|
Regeneron, Bayer,
Santen
|
317
|
1,407
|
2,022
|
5,881
|
FluMist
|
Influenza
|
AstraZeneca
|
944
|
734
|
2,423
|
2,952
|
Natpara
|
Endocrinology
|
Takeda
|
635
|
575
|
2,441
|
2,625
|
Omidria
|
Ophthalmology
|
Rayner
Surgical
|
3,250
|
1,670
|
13,000
|
1,670
|
Oracea
|
Dermatology
|
Galderma
|
2,267
|
1,845
|
8,319
|
7,662
|
Orserdu
I2
|
Oncology
|
Menarini
|
8,633
|
—
|
12,086
|
—
|
Orserdu
II2
|
Oncology
|
Menarini
|
14,521
|
—
|
14,521
|
—
|
Rydapt
|
Oncology
|
Novartis
|
1,698
|
2,226
|
8,242
|
10,102
|
Spinraza
|
Neurology
|
Biogen
|
4,426
|
3,879
|
16,784
|
16,466
|
Stelara,
Simponi
and
Ilaris3
|
Immunology
|
Johnson &
Johnson,
Merck, Mitsubishi
Tanabe, Novartis
|
278
|
597
|
1,300
|
3,704
|
Vonjo I
|
Hematology
|
Sobi
|
3,079
|
1,751
|
10,134
|
3,155
|
Vonjo II
|
Hematology
|
Sobi
|
642
|
—
|
1,038
|
—
|
Xenpozyme
|
Lysosomal Storage
Disorder
|
Sanofi
|
427
|
—
|
674
|
—
|
Xolair
|
Immunology
|
Roche,
Novartis
|
3,198
|
3,019
|
9,945
|
9,646
|
Zejula
|
Oncology
|
GSK
|
867
|
692
|
3,126
|
692
|
Zytiga
|
Oncology
|
Johnson &
Johnson
|
3,691
|
9,101
|
12,234
|
18,059
|
Other
Products4
|
Various
|
Various
|
486
|
562
|
2,241
|
2,563
|
Total Cash Royalty
Receipts5
|
|
52,253
|
29,617
|
127,917
|
90,845
|
|
|
|
|
|
|
|
Interest receipts from
loan receivable6
|
|
—
|
1,533
|
3,264
|
5,387
|
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 assets7,8
|
|
—
|
—
|
210,000
|
—
|
Total Cash
Receipts5
|
|
52,253
|
31,150
|
394,321
|
96,232
|
|
|
|
|
|
|
|
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 assets7,8
|
|
—
|
—
|
(210,000)
|
—
|
Normalized Total
Cash Receipts5
|
|
52,253
|
31,150
|
131,181
|
96,232
|
____________________________________
|
1 Per the royalty
agreement, Empaveli/Syfovre royalty cash receipts are to be
received on a three-quarter lag. During the fourth quarter of 2023,
the Trust received royalty cash receipts related to sales from the
first quarter of 2023, on a three-quarter lag. Prior to the fourth
quarter, royalties had been received on a two-quarter
lag.
|
2 Includes milestone
royalty receipts of US$4,013 from Orserdu I and US$11,364 from
Orserdu II.
|
3 Stelara, Simponi and
Ilaris include two royalty streams on each product, for a total of
six royalty streams.
|
4 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.
|
5 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.
|
6 Interest receipts from
loan receivable relates to the loan receivable, 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.
|
7 This item represents cash
received by the Trust in the quarter 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.
|
8 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 December 31, 2023, the Trust had cash and cash
equivalents of US$62.8 million. The
Trust's credit facility had an outstanding principal balance of
US$148.3 million on December 31,
2023.
The Trust had 56,358,240 units issued and outstanding on
December 31, 2023.
Distributions
On November 13, 2023, the board of
trustees approved a quarterly cash distribution of US$0.075 per unit to unitholders of record as of
December 31, 2023, which was paid on
January 19, 2024. On December 20, 2023, the board of trustees approved
a special cash distribution of US$0.2662 per unit and a special unit
distribution of US$0.7640 per unit to
unitholders of record as of December 31,
2023. The special cash distribution was paid on January 19, 2024. The special unit distribution
was issued to unitholders of record on December 31, 2023 and the units were immediately
consolidated such that the total number of units outstanding did
not change.
The Trust also announced today that its board of trustees has
declared an increased quarterly cash distribution in the amount of
US$0.085 per unit for the first
quarter of 2024, payable on April 19,
2024, to unitholders of record as of March 31, 2024.
Normal Course Issuer Bid
During the year, the Trust repurchased and cancelled 325,653 of
its own units under its normal course issuer bid ("NCIB") for an
aggregate amount of US$1.8 million at
a weighted average price of C$7.44
per unit (US$5.43). As previously
announced, the Trust received approval on November 13, 2023 from the Toronto Stock Exchange
("TSX") to acquire, from time to time, if considered advisable, up
to an aggregate of 3,280,195 of its units for cancellation.
Purchases will conclude on the earlier of the date on which the
Trust has purchased the maximum number of units permitted under the
NCIB and November 19, 2024.
Omidria Royalty Amendment
On February 1, 2024, the Trust
amended its existing royalty agreement with Omeros Corporation to
expand its royalty interest on the U.S. net sales of Omidria for an
upfront purchase price of US$115.0
million. In accordance with the terms of the amended royalty
agreement, Omeros Corporation may also be entitled to additional
consideration of up to US$55.0
million in the event that Omidria sales exceed certain
thresholds within a predefined period of time. As a result of the
amendment, the Trust will now be entitled to receive a 30% royalty
on all U.S. net sales of Omidria until December 31, 2031, and all previously agreed-upon
annual royalty caps have been eliminated. As part of the amendment,
the Trust is no longer entitled to ex-U.S. royalties.
Omidria was approved by the U.S. Food and Drug Administration
("FDA") in May 2014 and the European
Medicines Agency ("EMA") in July 2015
for intracameral use during cataract surgery or intraocular lens
replacement to maintain pupil dilation and reduce postoperative
pain. Omidria was launched in the United
States in 2014 but has yet to be launched in the European
Union. Omidria is marketed by Rayner Surgical, one of the world's
leaders in the field of cataract surgery with operations in over 80
countries worldwide.
2023 Highlights
In addition to the strong performance of the asset portfolio
during the year, the Trust took a number of steps to execute on the
strategy outlined to its unitholders since its initial public
offering.
On March 8, 2023, the Trust bought
royalties on the sales of Tzield for US$100.0 million from MacroGenics, Inc. The
transaction entitled the Trust to a single digit royalty on
worldwide net sales of Tzield. On April 27,
2023, the Trust sold its interest and milestone obligations
in the worldwide sales of Tzield to a subsidiary of Sanofi S.A. for
US$210.0 million. In connection with
the sale, the Trust announced a special cash distribution of
US$20.0 million to unitholders of
record as of June 30, 2023. The
proceeds were partially used to fund the special cash distribution,
and partially used to pay down the amount outstanding under the
Trust's revolving acquisition credit facility and pay management
and performance fees to the Trust's manager.
On June 29, 2023, the Trust bought
royalties on the sales of Orserdu for US$85.0 million from Eisai Co., Ltd ("Orserdu
I"). The transaction entitles the Trust to a mid-single digit
tiered royalty on the worldwide net sales of Orserdu. In addition
to the running royalties, the Trust is also entitled to receive
milestones based on the achievement of regulatory approvals and
sales performance thresholds. During the year ended December 31, 2023, the Trust recorded milestone
royalty income of US$6.1 million upon
EMA approval of Orserdu and the achievement of certain sale
performance thresholds.
On July 7, 2023, the Trust bought
an additional royalty interest in the worldwide sales of Vonjo for
US$66.0 million from S*Bio Pte Ltd
("Vonjo II"). 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. The Trust received its first
payment in Q3 2023. The Trust is also entitled to receive milestone
payments based on the achievement of regulatory approvals and sales
performance thresholds. During the year ended December 31, 2023, the Trust recorded milestone
royalty income of US$5.0 million upon
the achievement of certain sales performance thresholds.
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.
On August 14, 2023, the Trust
bought an additional royalty interest on the sales of Orserdu for
US$130.0 million from Radius Health,
Inc ("Orserdu II"). 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. In addition, the Trust is also entitled to
receive milestone royalty payments on the achievement of sales
performance thresholds. During the year ended December 31, 2023, the Trust recorded milestone
royalty income of US$30.3 million
upon the achievement of certain sales performance thresholds.
Our manager is entitled to performance fees determined on a
portfolio-by-portfolio basis pursuant to the terms of a management
agreement. As a result of the Trust selling its royalty interest in
Tzield for US$210.0 million and
overall strong asset performance including significant milestone
royalty income earned, the conditions for performance fee payments
to the manager have been met. For the year ended December 31,
2023, the Trust recorded total performance fees of US$24.5 million.
Throughout 2023, the Trust declared and subsequently paid cash
distributions totaling US$1.10 per
unit, for aggregate cash distributions of US$49.1 million.
Fourth Quarter and Fiscal 2023 Conference Call &
Webcast
As previously announced, management will hold a conference call
on Thursday, February 29, 2024, at
8:00 a.m. (ET) to review the Trust's
2023 annual 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
https://app.webinar.net/09MwQ3j7DLE. 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
date.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures and non-GAAP
ratios for the three months and years ended December 31, 2023 and 2022 to the most directly
comparable measures calculated in accordance with IFRS 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
|
Year
ended
|
(thousands of US
dollars)
|
December 31,
2023
|
December 31,
2022
|
December 31,
2023
|
December 31,
2022
|
Total
income
|
75,842
|
22,642
|
166,279
|
93,034
|
[-] Other interest
income
|
(393)
|
(50)
|
(861)
|
(83)
|
[+] Royalties
receivable, beginning of period
|
40,886
|
36,386
|
27,748
|
30,148
|
[-] Royalties
receivable, end of period
|
(64,082)
|
(27,748)
|
(64,082)
|
(27,748)
|
[+] Acquired royalties
receivable1
|
—
|
—
|
5,343
|
1,366
|
[-] Non-cash royalty
income2
|
—
|
(4)
|
(4)
|
(194)
|
[-] Non-cash interest
and other income on loan receivable3
|
—
|
(76)
|
(1,102)
|
(291)
|
[+] Principal
repayment of loan receivable
|
—
|
—
|
50,000
|
—
|
[+] Exit
fee3
|
—
|
—
|
1,000
|
—
|
[+] Proceeds from sale
of royalty assets
|
—
|
—
|
210,000
|
—
|
Total Cash
Receipts
|
52,253
|
31,150
|
394,321
|
96,232
|
[-] 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
|
52,253
|
31,150
|
131,181
|
96,232
|
[-] Interest and other
income on loan receivable
|
—
|
(1,609)
|
(6,506)
|
(5,678)
|
[+] Non-cash interest
and other income on loan receivable3
|
—
|
76
|
1,102
|
291
|
[+] Premiums for
prepayment of loan receivable4
|
—
|
—
|
2,140
|
—
|
Total Cash Royalty
Receipts
|
52,253
|
29,617
|
127,917
|
90,845
|
___________________________________
|
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 months and year ended December 31, 2022 of nil
and US$334, respectively, were used to reduce the obligation for
excess royalty payments received in connection with Ilaris. There
is no remaining obligation as at December 31, 2023 (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 months and year ended December 31,
2023 (2022 – US$4 and US$15, respectively). 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 months and
year ended December 31, 2023, non-cash interest and other income on
loan receivable represents the amortization of commitment fees of
nil and US$368, respectively (2022 – US25 and US$97, respectively)
and the accretion of exit fees receivable of nil and US$734,
respectively (2022 – US$51 and US$194). 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 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 and comprehensive earnings. 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.
|
Three months
ended
|
Year
ended
|
(thousands of US
dollars)
|
December 31,
2023
|
December 31,
2022
|
December 31,
2023
|
December 31,
2022
|
Comprehensive earnings
(loss)
|
20,434
|
(4,807)
|
91,215
|
11,598
|
[+] Amortization or
royalty assets
|
24,719
|
19,078
|
87,076
|
59,266
|
[+] Amortization of
other current assets1
|
—
|
146
|
240
|
260
|
[+] Impairment of
royalty assets
|
9,216
|
—
|
9,216
|
—
|
[-] Other interest
income
|
(393)
|
(50)
|
(861)
|
(83)
|
[+] Interest
expense
|
6,336
|
4,013
|
26,503
|
6,630
|
EBITDA
|
60,312
|
18,380
|
213,389
|
77,671
|
[+] Royalties
receivable, beginning of period
|
40,886
|
36,386
|
27,748
|
30,148
|
[-] Royalties
receivable, end of period
|
(64,082)
|
(27,748)
|
(64,082)
|
(27,748)
|
[-] Performance fees
payable, beginning of period
|
—
|
—
|
—
|
—
|
[+] Performance fees
payable, end of period
|
5,918
|
—
|
5,918
|
—
|
[+] Acquired royalties
receivable2
|
—
|
—
|
5,343
|
1,366
|
[+] Unit-based
compensation3
|
1,379
|
342
|
3,731
|
1,191
|
[+] Board of trustees
unit-based compensation4
|
296
|
91
|
809
|
296
|
[-] Non-cash royalty
income5
|
—
|
(4)
|
(4)
|
(194)
|
[-] Non-cash interest
and other income on loan receivable6
|
—
|
(76)
|
(1,102)
|
(291)
|
[-] Premiums for
prepayment of loan receivable7
|
—
|
—
|
(2,140)
|
—
|
[-] Net gain on sale
of royalty asset8
|
—
|
—
|
(109,756)
|
—
|
[-] Net unrealized
gain on derivative instruments
|
1,741
|
—
|
1,089
|
—
|
[+] Management fees on
sale of royalty asset9
|
—
|
—
|
13,650
|
—
|
[+] Performance fees
on sale of royalty asset9
|
—
|
—
|
18,616
|
—
|
Adjusted
EBITDA
|
46,450
|
27,371
|
113,209
|
82,439
|
[÷] Normalized Total
Cash Receipts
|
52,253
|
31,150
|
131,181
|
96,232
|
Adjusted EBITDA
Margin
|
89 %
|
88 %
|
86 %
|
86 %
|
______________________________________
|
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 year ended
December 31, 2023, unit-based compensation expense was US$5,079
(2022 – US$1,191), which includes US$1,348 paid in cash in the
third quarter of 2023 (2022 – nil).
|
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 months and year ended December 31, 2022 of nil
and US$334, respectively, were used to reduce the obligation for
excess royalty payments received in connection with Ilaris. There
is no remaining obligation as at December 31, 2023 (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 months and year ended December 31,
2023 (2022 – US$4 and US$15, 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 months and
year ended December 31, 2023, non-cash interest and other income on
loan receivable represents the amortization of commitment fees of
nil and US$368, respectively (2022 – US25 and US$97, respectively)
and the accretion of exit fees receivable of nil and US$734,
respectively (2022 – US$51 and US$194).
|
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 year ended December 31, 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
investment management agreement, as described in note 2(n) to the
Trust's 2023 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
|
Year
ended
|
(thousands of US
dollars, except per unit amounts)
|
December 31,
2023
|
December 31,
2022
|
December 31,
2023
|
December 31,
2022
|
Comprehensive earnings
(loss)
|
20,434
|
(4,807)
|
91,215
|
11,598
|
[+] Amortization or
royalty assets
|
24,719
|
19,078
|
87,076
|
59,266
|
[+] Amortization of
other current assets1
|
—
|
146
|
240
|
260
|
[+] Impairment of
royalty assets
|
9,216
|
—
|
9,216
|
—
|
[+] Unit-based
compensation2
|
1,379
|
342
|
3,731
|
1,191
|
[+] Board of trustees
unit-based compensation3
|
296
|
91
|
809
|
296
|
[-] Non-cash royalty
income4
|
—
|
(4)
|
(4)
|
(194)
|
[-] Non-cash interest
and other income on loan receivable5
|
—
|
(76)
|
(1,102)
|
(291)
|
[-] Premiums for
prepayment of loan receivable6
|
—
|
—
|
(2,140)
|
—
|
[-] Net gain on sale
of royalty assets7
|
—
|
—
|
(109,756)
|
—
|
[-] Net unrealized
gain on derivative instruments
|
1,741
|
—
|
1,089
|
—
|
[+] Management fee on
sale of royalty asset8
|
—
|
—
|
13,650
|
—
|
[+] Performance fee on
sale of royalty asset8
|
—
|
—
|
18,616
|
—
|
Adjusted Cash
Earnings
|
57,785
|
14,770
|
112,640
|
72,126
|
Adjusted Cash
Earnings per Basic Unit
|
1.03
|
0.39
|
2.53
|
1.87
|
Adjusted Cash
Earnings per Fully Diluted Unit
|
1.02
|
0.39
|
2.52
|
1.87
|
Weighted average
number of Units – Basic
|
56,332,607
|
38,231,059
|
44,479,802
|
38,570,499
|
Weighted average
number of Units – Diluted
|
56,464,102
|
38,270,508
|
44,622,811
|
38,591,392
|
__________________________________
|
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 year ended
December 31, 2023, unit-based compensation expense was US$5,079
(2022 – US$1,191), which includes US$1,348 paid in cash in the
third quarter of 2023 (2022 – nil).
|
3 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.
|
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 months and year
ended December 31, 2022 of nil and US$334, respectively, were used
to reduce the obligation for excess royalty payments received in
connection with Ilaris. There is no remaining obligation as at
December 31, 2023 (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 months and year ended December 31, 2023 (2022 –
US$4 and US$15, 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 months and
year ended December 31, 2023, non-cash interest and other income on
loan receivable represents the amortization of commitment fees of
nil and US$368, respectively (2022 – US$25 and US$97, respectively)
and the accretion of exit fees receivable of nil and US$734,
respectively (2022 – US$51 and US$194).
|
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 year ended
December 31, 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 investment management agreement, as
described in note 2(n) to the Trust's 2023 annual consolidated
financial statements.
|
About DRI Healthcare Trust
DRI Healthcare Trust is managed by DRI Capital Inc. ("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$3.0
billion, acquiring more than 70 royalties on 45-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", "guidance" 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 our deployment target and capacity available for
deployment, portfolio, royalty cash receipts, the timing of royalty
payments, growth in royalty income, anticipated royalty income,
anticipated sales of the products underlying our royalties and our
ability to execute on our strategy and reach our targets.
Forward-looking information is based on a number of assumptions,
including, but not limited to: statements regarding potential
royalty transactions which we reasonably expect to complete are
based on our historical track record, statements regarding the
terms and conditions of our transactions are based on the
transaction documentation, statements with respect to royalty
income, total income and future sales of the products underlying
our existing royalties are based on assumptions with respect to
timing of generic drugs entering the market, competitor drugs
receiving approval and entering the market, and regulatory measures
under the Inflation Reduction Act. 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. 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