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Profound Medical Announces Fourth Quarter and Full Year 2019 Financial Results

TORONTO, March 03, 2020 (GLOBE NEWSWIRE) -- Profound Medical Corp. (NASDAQ:PROF; TSX:PRN) (“Profound” or the “Company”), a commercial-stage medical device company focused on customizable, incision-free therapies which combine real-time Magnetic Resonance Imaging (“MRI”), thermal ultrasound and closed-loop temperature feedback control for the radiation-free ablation of diseased tissue, today reported financial results for the fourth quarter and full year ended December 31, 2019. All amounts, unless specified otherwise, are expressed in Canadian dollars and are presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Full Year 2019 and Recent Corporate Highlights

  • On April 4, 2019, Profound announced positive topline results from the TACT (TULSA-PRO® Ablation Clinical Trial) pivotal study designed to support its application to the U.S. Food and Drug Administration (“FDA”) for 510(k) clearance to market TULSA-PRO® in the United States. In the TACT trial, all primary efficacy and safety endpoints, as well as all key secondary endpoints, were achieved.
     
  • On April 8, 2019, Profound hosted its first Analyst & Investor Day in New York, NY. The program featured presentations on TULSA-PRO® from key opinion leaders in the United States who had gained first-hand experience with the technology as investigators for the TACT trial and from commercial users in Europe. In addition, leading global researchers and clinicians presented on both current and potential future applications for Sonalleve®.
     
  • On April 16, 2019, Profound announced that the first prostate cancer treatment using a first-of-its-kind installation combining its TULSA-PRO® system with Philips’ newest digital MR solution, the Ingenia Elition, was performed in Trier, Germany.
     
  • On July 9, 2019, Profound announced that it had sold its first TULSA-PRO® system in Japan to Hokuyu Hospital in Sapporo, via Japan's Pharmaceutical and Medical Device Act’s expanded access program.
     
  • On August 16, 2019, Profound announced that it received 510(k) clearance from the FDA to market TULSA-PRO® for ablation of prostate tissue.
     
  • On September 20, 2019, Profound announced the closing of a marketed offering of units, including the full exercise of the over-allotment option, for total gross proceeds of $11,500,001.
     
  • On October 16, 2019, Profound effected a 10:1 share consolidation in anticipation of its listing on the NASDAQ Stock Market LLC (“NASDAQ”). Profound's common shares commenced trading on NASDAQ under the symbol "PROF" on October 29, 2019.
  • On November 25, 2019, Profound announced that Health Canada approved the TULSA-PRO® system for the ablation of low-to-intermediate risk organ-confined prostate cancer.
  • On January 10, 2020, Profound signed its first-ever U.S. multi-site imaging center agreement for TULSA-PRO® with RadNet, Inc. (RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 340 owned and/or operated outpatient imaging centers.
  • On January 10, 2020, Profound announced that it had submitted its application for a Healthcare Common Procedure Coding System C-Code from the Centers for Medicare & Medicaid Services for the TULSA-PRO® procedure.
     
  • On January 27, 2020, the Company closed an underwritten offering (the “2020 Offering”) of common shares, including the full exercise of the over-allotment option, for gross proceeds of US$39,522,625.
     
  • On February 4, 2020, Profound announced that it had retired its $12.5 million in principal amount loan with Canadian Imperial Bank of Commerce (the “CIBC Loan”) approximately 30 months ahead of schedule, thereby extinguishing all of its long-term debt.

             
“From the positive TACT clinical trial results, to receipt of both FDA and Health Canada approval for TULSA-PRO®, 2019 was a momentous year for Profound,” said Arun Menawat, Profound’s CEO. “We are pleased that the increasing interest in TULSA-PRO® in international markets, combined with our ongoing roll-out of Sonalleve® in China, has resulted in a more than four-fold sequential increase in fourth quarter 2019 revenue. Looking ahead, our focus will be on continuing to execute the commercial launch of TULSA-PRO® in the U.S. by building on the momentum of our recent multi-site imaging center agreement with RadNet. We also intend to conduct additional trials that will enable TULSA-PRO® to qualify for a specific CPT code as part of our overall reimbursement strategy, with patient recruitment expected to begin in the first half of this year.”

Summary Fourth Quarter 2019 Results

For the quarter ended December 31, 2019, the Company recorded revenue of $2,795,450, with $2,553,228 from the sale of products and $242,222 from installation, training and support of the multi-use system components. This was slightly higher than the Company’s preliminary unaudited revenue estimate announced on January 10, 2020 and represented revenue growth of 64% year-over-year and 310% sequentially over the previous quarter.

The Company recorded a net loss for the three months ended December 31, 2019 of $5,151,526, or $0.43 per common share, compared to a net loss of $4,858,209 or $0.45 per common share, for the three months ended December 31, 2018. The decrease in net loss was primarily attributed to an increase in R&D expense of $354,150, an increase in G&A expenses of $1,172,687 and an increase in selling and distribution expenses of $154,589. This was offset by a decrease in net finance costs of $273,786 an increase in gross profits of $1,077,613.  

Expenditures for R&D for the three months ended December 31, 2019 were higher by $354,150 compared to the three months ended December 31, 2018. Materials, consulting fees and share based compensation increased by $436,440, $48,896 and $115,376, respectively. The increases were due to increased spending and testing for R&D projects and options awarded to employees. Offsetting these amounts were decreases in clinical trial costs, rent and salaries and benefits by $151,618, $85,853 and $59,957, respectively, resulting from the completion of the TACT Pivotal Clinical Trial enrollment initiatives, the adoption of IFRS 16 resulting in the recognition of lower rental costs and decreased R&D personnel. Depreciation expenses increased by $26,328 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

G&A expenses for the fourth quarter of 2019 increased by $1,172,687 compared to the three months ended December 31, 2018. Share based compensation, consulting fees, bad debt and other expenses increased by $228,715, $230,058, $324,700 and $405,682, respectively, due to options awarded to employees and directors, increased costs associated with the NASDAQ listing, bad debt expenses associated with one customer and increased insurance costs associated with the NASDAQ listing. Offsetting these amounts was a decrease in salaries and benefits by $63,047, and rent by $21,579 due to the adoption of IFRS 16 resulting in the recognition of lower rental costs. Depreciation expenses increased by $53,047 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

Summary Full Year 2019 Results

For the year ended December 31, 2019, the Company recorded revenue of $5,527,571, with $4,895,427 from the sale of products and $632,144 from installation, training and support of the multi-use system components. This compares to $2,602,278 in the twelve months ended December 31, 2018.

The Company recorded a net loss for the year ended December 31, 2019 of $20,192,250 or $1.82 per common share, compared to a net loss of $20,762,989 or $2.07 per common share for the year ended December 31, 2018. The decrease in net loss was primarily attributed to a decrease in selling and distribution expenses of $1,302,305, a decrease in net finance cost of $112,245 and an increase in gross profits of $2,341,989. This was offset by an increase in R&D expenses of $2,200,761 and an increase in G&A expenses of $1,021,949.

Expenditures for R&D for the year ended December 31, 2019 were higher by $2,200,761 compared to the year ended December 31, 2018. Materials, consulting fees, travel, share based compensation, salaries and benefits and other expenses increased by $1,611,748, $140,213, $49,613, $288,037, $256,917 and $46,164, respectively. These costs were higher compared to the year ended December 31, 2018 due to increased spending and testing on R&D and FDA regulatory projects, options awarded and vested for employees, increased R&D personnel and investment tax credits decreasing by $192,228 because of lower eligibility for refundable tax credits. Offsetting these amounts was a decrease in clinical trial costs and rent by $199,356 and $289,055, respectively, resulting from the completion of the TACT Pivotal Clinical Trial enrollment initiatives and the adoption of IFRS 16 resulting in the recognition of lower rental costs. Depreciation expenses increased by $106,988 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

G&A expenses for the year ended December 31, 2019 were higher by $1,021,949 compared to the year ended December 31, 2018. Share based compensation, bad debt and other expenses increased by $561,944, $324,700 and $378,981, respectively, due to the issuance of options to employees and directors, bad debt expense associated with one customer and higher insurance costs associated with the NASDAQ listing. Offsetting these amounts was a decrease to salaries and benefits, consulting fees, rent, and travel by $254,829, $142,011, $48,808, and $32,714, respectively, due to no bonuses awarded to management, lower G&A project costs, adoption of IFRS 16 resulting in the recognition of lower rental costs and decreased travel to customer sites. Depreciation expenses increased by $228,383 due to the adoption of IFRS 16 with the depreciation of the right-of-use assets.

Liquidity and Outstanding Share Capital

As at December 31, 2019, Profound had cash of $19,222,195. Subsequent to year end, the Company completed the 2020 Offering for net proceeds of US$36,656,041 and repaid the total amount of the CIBC Loan, plus interest, for a total payment of $12,041,032.

As at March 3, 2020, Profound had 15,689,577 common shares issued and outstanding.

For complete financial results, please see Profound’s filings at www.sedar.com and the Company’s website at www.profoundmedical.com.

Conference Call Details

Profound Medical is pleased to invite all interested parties to participate in a conference call today, March 3, 2020, at 4:30 pm ET during which time the results will be discussed.

Live Call: 1-877-407-9210 (Canada and the United States)
  1-201-689-8049 (International)
   
Replay: 1-919-882-2331
Replay ID: 33148

The call will also be broadcast live and archived on the Company's website at www.profoundmedical.com under "Webcasts" in the Investors section.

About Profound Medical Corp.

Profound is a commercial-stage medical device company that develops and markets customizable, incision-free therapies for the ablation of diseased tissue.

Profound is commercializing TULSA-PRO®, a technology that combines real-time MRI, robotically-driven transurethral ultrasound and closed-loop temperature feedback control. TULSA-PRO® is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume while actively protecting the urethra and rectum to help preserve the patient’s natural functional abilities. TULSA-PRO® has the potential to be a flexible technology in customizable prostate ablation, including intermediate stage cancer, localized radio-recurrent cancer, retention and hematuria palliation in locally advanced prostate cancer, and the transition zone in large volume benign prostatic hyperplasia (BPH). TULSA-PRO® is CE marked, Health Canada approved, and 510(k) cleared by the U.S. Food and Drug Administration.

Profound is also commercializing Sonalleve®, an innovative therapeutic platform that is CE marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonalleve® has also been approved by the China National Medical Products Administration for the non-invasive treatment of uterine fibroids. The Company is in the early stages of exploring additional potential treatment markets for Sonalleve® where the technology has been shown to have clinical application, such as non-invasive ablation of abdominal cancers and hyperthermia for cancer therapy.

Forward-Looking Statements

This release includes forward-looking statements regarding Profound and its business which may include, but is not limited to, the expectations regarding its U.S. multi-center commercial agreement with RadNet; the efficacy of Profound’s technology in the treatment of prostate cancer, uterine fibroids and palliative pain treatment; the potential obtainment of a C-Code from CMS for TULSA-PRO®; and the success of Profound’s U.S. commercialization strategy and activities for TULSA-PRO®. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations of the management of Profound. The forward-looking events and circumstances discussed in this release, may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, including risks regarding the pharmaceutical industry, economic factors, the equity markets generally and risks associated with growth and competition. Please see the Company’s annual information form for a detailed discussion of the risk factors. Although Profound has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Profound undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, other than as required by law.

For further information, please contact:

Stephen Kilmer
Investor Relations
skilmer@profoundmedical.com
T: 647.872.4849


Profound Medical Corp.
Consolidated Balance Sheets
As at December 31, 2019 and 2018

    2019
$
    2018
$
 
         
Assets        
         
Current assets        
Cash   19,222,195     30,687,183  
Trade and other receivables   4,058,136     2,686,112  
Investment tax credits receivable   240,000     480,000  
Inventory   4,764,458     3,631,623  
Prepaid expenses and deposits   1,335,620     434,871  
Total current assets   29,620,409     37,919,789  
         
Property and equipment   684,718     1,207,357  
Intangible assets   3,128,820     4,013,561  
Right-of-use assets   2,199,381     -  
Goodwill   3,409,165     3,409,165  
         
Total assets   39,042,493     46,549,872  
         
Liabilities        
         
Current liabilities        
Accounts payable and accrued liabilities   3,933,114     3,912,350  
Deferred revenue   654,763     312,558  
Long-term debt   5,144,461     1,339,583  
Provisions   134,956     1,352,017  
Other liabilities   286,858     567,296  
Derivative financial instrument   254,769     98,203  
Lease liabilities   258,685     -  
Income taxes payable   15,763     297,353  
Total current liabilities   10,683,369     7,879,360  
         
Long-term debt   6,719,924     10,615,662  
Deferred revenue   829,784     379,044  
Provisions   19,005     49,319  
Other liabilities   -     1,000,153  
Lease liabilities   2,125,873     -  
         
Total liabilities   20,377,955     19,923,538  
         
Shareholders’ Equity        
         
Share capital   130,266,880     120,932,404  
Contributed surplus   19,580,338     16,756,294  
Accumulated other comprehensive loss   (117,188 )   (28,703 )
Deficit   (131,065,492 )   (111,033,661 )
         
Total Shareholders’ Equity   18,664,538     26,626,334  
         
Total Liabilities and Shareholders’ Equity   39,042,493     46,549,872  


Profound Medical Corp.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended December 31, 2019 and 2018

    2019
$
  2018
$
 
       
Revenue      
Products   4,895,427   2,421,331  
Services   632,144   180,947  
    5,527,571   2,602,278  
Cost of sales   2,361,805   1,778,501  
Gross profit   3,165,766   823,777  
       
Operating expenses      
Research and development - net of investment tax credits of $nil (2018 – $240,000)   12,466,149   10,265,388  
General and administrative   7,678,672   6,656,723  
Selling and distribution   2,789,042   4,091,347  
Total operating expenses   22,933,863   21,013,458  
       
Operating Loss   19,768,097   20,189,681  
       
Other income and expense      
Finance costs   711,588   826,312  
Finance income   (481,309 ) (483,788 )
    230,279   342,524  
Loss before taxes   19,998,376   20,532,205  
       
Income taxes   193,874   230,784  
       
Net loss attributed to shareholders for the year   20,192,250   20,762,989  
       
Other comprehensive loss (income)      
Item that may be reclassified to profit or loss      
Foreign currency translation adjustment - net of tax   (88,485 ) 29,226  
       
Net loss and comprehensive loss for the year   20,103,765   20,792,215  
       
Loss per share      
Basic and diluted loss per common share   1.82   2.07  



Profound Medical Corp.
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018

  2019
$
  2018
$
 
     
Operating activities    
Net loss for the year (20,192,250 ) (20,762,989 )
Adjustments to reconcile net loss to net cash flows from operating activities:    
Depreciation of property and equipment 472,685   546,001  
Amortization of intangible assets 1,134,741   1,128,437  
Depreciation of right-of-use assets 406,397   -  
Share-based compensation 1,676,844   1,086,199  
Interest and accretion expense 1,369,928   1,028,843  
Change in deferred rent -   7,108  
Deferred revenue 792,945   450,286  
Change in fair value of derivative financial instrument 156,566   (96,619 )
Change in fair value of contingent consideration (968,883 ) (325,253 )
Changes in non-cash working capital balances    
Investment tax credits receivable 240,000   (240,000 )
Trade and other receivables (1,372,024 ) 1,565,546  
Prepaid expenses and deposits (1,110,749 ) 141,157  
Inventory (1,132,835 ) (2,200,466 )
Accounts payable and accrued liabilities (24,162 ) (1,167,336 )
Provisions (1,198,056 ) 319,875  
Income taxes payable (281,590 ) 224,574  
Net cash flow used in operating activities (20,030,444 ) (18,294,637 )
     
Investing activities    
Purchase of intangible assets (250,000 ) -  
Total cash used in investing activities (250,000 ) -  
     
Financing activities    
Issuance of common shares 11,500,001   34,500,000  
Transaction costs paid (1,023,724 ) (2,472,498 )
Proceeds from bank loan -   12,500,000  
Bank loan costs paid -   (735,698 )
Payment of other liabilities (16,203 ) (5,851,489 )
Payment of long-term debt and interest (1,331,771 ) (166,975 )
Proceeds from share options exercised 5,399   105,257  
Payment of lease liabilities (318,245 ) -  
Total cash from financing activities 8,815,455   37,878,597  
     
Net change in cash during the year (11,464,988 ) 19,583,960  
Cash – Beginning of year 30,687,183   11,103,223  
Cash End of year 19,222,195   30,687,183