TORONTO, May 9, 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 its financial results for the three-month period ended March 31, 2024. All amounts are in thousands of United States ("U.S.") dollars unless otherwise stated. KEY HIGHLIGHTS Q1 2024 revenue was $12.5 million, Adjusted EBITDA1 was $2.7 million and cash from operations was $0.8 million, compared to $14.8 million, $5.1 million and $4.0 million, respectively, in Q1 2023. Canadian product sales grew 4% from $8.8 million to $9.2 million, however, royalty revenues declined 75% from $2.7 million to $0.7 million. Completed a Product Listing Agreement ("PLA") with the province of British Columbia ("BC"), for the listing and public reimbursement of Vascepa.   On May 1, 2024, HLS provided Pfizer with a notice of termination of the promotional services agreement (the "Agreement") for the commercialization of Vascepa in primary care. "We made progress on several fronts in Q1, but financial results for Vascepa and Clozaril were below expectations as ex-factory orders typically placed at quarter end were pushed into April due to the early Easter holiday. As expected, the large decline in royalty related revenue had the greatest impact on revenue and Adjusted EBITDA," said Craig Millian, CEO of HLS. "Subsequent to quarter end, we saw a pick-up in activity as Canadian ex-factory sales for Vascepa and Clozaril grew 25% year-over-year in April as compared to March, which had a 3% year-over-year decline." Q1 2024 OTHER HIGHLIGHTS Vascepa unit demand increased by 54% compared to Q1 2023. The number of consistent prescribers2 for Vascepa increased 112% compared to Q1 2023. Vascepa net revenue was C$4.5 million, up 27% compared to C$3.5 million in Q1 2023.  The number of patients on Clozaril in Canada increased by 1.4% compared to Q1 2023. Mr. Millian added: "Following a solid start to the year for Vascepa in January and February, March unit demand and sales activity fell short of expectations. Although sales growth picked up in April, unit demand is still tracking below the 70% full-year target that is needed to get us back to plan.  While we are confident that several catalysts will help drive demand growth this year, including the public listing in BC, we have concluded that Vascepa is unlikely to achieve its full year sales goal. Therefore, bold action is required to meet our objective of getting Vascepa to profitability by year end." "We have been closely examining the performance of our go-to-market model in primary care. We have concluded that the ROI for this model remains unprofitable and, despite best efforts, there are not enough signs of improvement to justify continuing at our current level of investment. As a result, we have provided Pfizer with a notice of termination of the Agreement between the two companies. We are working with them on an orderly wind down and transition back to HLS of all primary care related activities which we expect will be completed during the second half of 2024. We thank Pfizer for the commitment and effort that they have made towards trying to make this go-to-market model successful." "We believe in the promise and long-term revenue potential of Vascepa and are confident we can effectively support both specialists and the growing base of primary care prescribers with our HLS sales team while retaining the flexibility to scale the team as demand grows. We are excited about this opportunity to bring both specialty and primary care in-house and to take an even greater role in ensuring this important medicine reaches its potential. Furthermore, the termination of the Agreement with Pfizer, once fully executed, could result in as much as $5 million in annual OPEX savings. Ultimately, we are committed to getting Vascepa to profitability by year-end and are confident we can continue to drive growth at a reasonable cost. Positioning Vascepa to be a positive contributor to Adjusted EBITDA by year end sets up well for long-term profitable growth given that its patent estate extends into the 2030s, with the last patent set to expire in 2039." 2024 UPDATED OUTLOOK For both Vascepa and Clozaril, HLS expects to positively impact demand for the remainder of the year with the actions it is taking. However, based on year-to-date trends for Vascepa and some potential adjustments from the sales force transition, the Company is lowering its full year consolidated revenue guidance to a range of $60-62 million from $63.5-66.5 million.  Vascepa revenue is now expected to be in a range of $17-18 million (C$22.5-24.5 million), compared to the prior range of $20.5-22.5 million (C$27.5-30 million). The revised 2024 Vascepa revenue guidance represents an increase of 27-38% over 2023. Clozaril demand trends are in line with expectations through April and it remains on track with its 2024 revenue outlook of about $40 million. The 2024 outlook for the royalty portfolio also remains unchanged with it expected to generate revenue of $3-4 million. Based on lower expected sales of Vascepa, and not including any potential benefits the Company may derive in 2024 from the termination of the Agreement described above, HLS is also lowering its full year Adjusted EBITDA target to $17-19 million from its prior expectation of $21 million. The Company will continue to identify expense reductions and still expects Vascepa to make a positive contribution to Adjusted EBITDA starting in the fourth quarter. Q1 2024 FINANCIAL REVIEW The Company's Management's Discussion and Analysis and Consolidated Financial Statements for the three-month period ended March 31, 2024, are available at the Company's website and at its profile at SEDAR+. Revenue Three months ended March 31, 2024 2023 Product sales    Canada 9,154 8,811  United States 2,642 3,212 11,796 12,023 Royalty revenue 677 2,734 12,473 14,757 Excluding royalties, revenue for the Company's marketed products (Vascepa, and Clozaril) in Q1 2024 was down 2% from Q1 2023. Lower than expected sales were driven in large part by the delayed timing of ex-factory orders for both Vascepa and Clozaril at the end of March and, in the case of US Clozaril, excess year-end inventory. Product sales – Canada 000's of CAD Three months ended March 31, 2024 2023 % change Clozaril 7,865 8,418 (6.6) % Vascepa 4,471 3,515 27.2 % Other 13 12,349 11,933 3.5 % Q1 2024 product sales in Canada increased 3.5% in Canadian dollars compared to Q1 2023. This was led by growth in Canadian dollar sales of Vascepa, which increased 27% in Q1 2024, while Q1 2024 Clozaril revenue in Canada declined 7% compared to Q1 2023. The last week of the quarter overlapped with the Easter holiday weekend, which resulted in certain orders typically placed during the final business days of Q1 2024 being pushed into the first week of April.  The timing of orders negatively impacted both Vascepa and Clozaril net sales by a combined total exceeding US$0.6 million. Reflecting strong underlying demand fundamentals, patient numbers for Clozaril Canada were up 1.4% in Q1 2024 compared to Q1 2023. Product Sales – United States In the U.S., Q1 2024 Clozaril sales declined 18% compared to Q1 2023. Key demand fundamentals remain in place with the variance to the prior year revenue largely due to wholesalers in the US ending 2023 with an unusually high level of inventory and subsequently working through that in Q1 2024. Royalty revenues Q1 2024 royalty revenues were down 75% from Q1 2023 as the term for what was the largest royalty in the portfolio came to an end midway through Q4 2023. Operating Expenses Three months ended March 31, 2024 2023 Cost of product sales 1,774 1,444 Selling and marketing 4,526 4,807 Medical, regulatory and patient support 1,265 1,076 General and administrative 2,201 2,351 9,766 9,678 Cost of product sales was up for the quarter due to the higher sales volumes of Vascepa. Excluding cost of product sales, Q1 2024 operating expenses were $8.0 million, down 3% from Q1 2023. Selling and marketing and general and administrative expenses were both down by 6% compared to Q1 2023, while medical, regulatory and patient support expenses increased 18% due to timing differences for expense recognition but is expected to be similar overall in 2024 to the prior year. For 2024, the Company will continue to focus on cost management and seeking expense reductions throughout the business. Adjusted EBITDA1 Three months ended March 31, 2024 2023 Net loss for the period (6,106) (5,792) Stock-based compensation 256 (55) Amortization and depreciation 5,919 8,319 Finance and related costs, net 2,667 2,434 Other costs — 213