UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13A-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of May 2019
COMMISSION FILE Number. 000-29338
CORREVIO PHARMA CORP.
(Translation of registrant’s name into English)
1441 Creekside Drive, 6th floor
Vancouver, British Columbia, V6J 4S7, CANADA
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
| Form 20-F ☐ | Form 40-F ☒ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
DOCUMENTS INCLUDED AS PART OF THIS REPORT
Exhibits 99.1, 99.2, 99.3, 99.4, and 99.5 of this report on Form 6-K are incorporated by reference into the Company’s registration statement on Form F-10 (File No. 333-225852) and registration statements on Form S-8 (File No. 333-225015 and File No. 333-225014).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CORREVIO PHARMA CORP. | ||
| (Registrant) | ||
| Date: May 8, 2019 | By: | /s/ Justin Renz |
| Name: Justin Renz | ||
| Title: President and Chief Financial Officer | ||
Exhibit 99.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This management discussion and analysis (“MD&A”) of Correvio Pharma Corp. (“Correvio”, “we”, “us” or “our”) for the three months ended March 31, 2019 is as of May 7, 2019. We have prepared this MD&A with reference to National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators. As a foreign private issuer that files its continuous reports under the U.S./Canada Multijurisdictional Disclosure System, Correvio is permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which are different from those of the United States. This MD&A should be read in conjunction with our unaudited interim consolidated financial statements for the three months ended March 31, 2019 and the related notes thereto. Our interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All amounts are expressed in U.S. dollars unless otherwise indicated.
This MD&A contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and applicable Canadian securities laws regarding expectations of our future performance, liquidity and capital resources, as well as marketing plans, future revenues from sales of branded products Aggrastat®, Brinavess®, Esmocard® and Esmocard Lyo®, Trevyent®, Xydalba™ and Zevtera®/Mabelio®, whether we will receive, and the timing and costs of obtaining regulatory approvals in the United States, Europe and other countries, the clinical development of our product candidates, including clinical trials for Brinavess® in China and publication of results from our observational study in the European Union, the anticipated timing of an NDA resubmission for Brinavess®, the anticipated milestone payments to Basilea Pharmaceutica International Ltd., the submission of regulatory filings for Trevyent®, the anticipated use of financial resources and net proceeds from financings, the availability of future proceeds under the CRG Term Loan (as defined herein), the recognition of additional operating liabilities and other non-historical statements, which are based on our current expectations and beliefs, including certain factors and assumptions, as described in our most recent Annual Information Form that is included in our Annual Report on Form 40-F, but are also subject to numerous risks and uncertainties, as described in the “Risk Factors” section of our Annual Information Form that is included on our Annual Report on Form 40-F. As a result of these risks and uncertainties, or other unknown risks and uncertainties, our actual results may differ materially from those contained in any forward-looking statements. The words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We undertake no obligation to update forward-looking statements, except as required by law. Additional information relating to Correvio, including our most recent Annual Report on Form 40-F filed with the United States Securities Exchange Commission (the “SEC”), and our most recent Annual Information Form, is available by accessing the SEC’s Electronic Document Gathering and Retrieval System (“EDGAR”) website at www.sec.gov or the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com.
EXPLANATORY NOTE
Correvio was incorporated on March 7, 2018, under the laws of the Canada Business Corporations Act, in connection with a reorganization of Cardiome Pharma Corp. (“Cardiome”) by way of a plan of arrangement (the “Arrangement”). On March 19, 2018, Correvio entered into a definitive arrangement agreement (the “Arrangement Agreement”) with Cipher Pharmaceuticals Inc. ("Cipher") and Cardiome. Under the terms of the agreement, Cipher acquired Cardiome’s Canadian business portfolio in exchange for cash consideration of C$25.5 million. As a result of the Arrangement, Correvio acquired, and currently holds, all of Cardiome’s pre-transaction assets and assumed liabilities, excluding the Canadian business portfolio. Pursuant to the Arrangement, Cardiome shareholders received common shares, on a one-for-one ratio, of Correvio. Correvio obtained a substitution listing on the Nasdaq Stock Market and on the Toronto Stock Exchange and has succeeded to Cardiome’s reporting obligations in Canada and the United States.
OVERVIEW
Correvio is a specialty pharmaceutical company dedicated to offering patients and healthcare providers innovative therapeutic options that effectively, safely, and conveniently manage acute medical conditions to improve health and quality of life. Correvio (formerly known as Cardiome Pharma Corp.) began as a research and development company based in Vancouver, British Columbia, Canada. In November 2013, we acquired Correvio LLC, a privately held pharmaceutical company headquartered in Geneva, Switzerland, and its subsidiaries, thereby acquiring the marketing rights to Aggrastat® outside of the United States. We then shifted our focus to become a specialty pharmaceutical company. We strive to find innovative, differentiated medicines that provide therapeutic and economic value to patients, physicians and healthcare systems. We currently have two marketed, in-hospital cardiology products, Aggrastat® (tirofiban hydrochloride) and Brinavess® (vernakalant IV). In addition, we have licensed the marketing rights to the following products: Esmocard® and Esmocard Lyo® (esmolol hydrochloride); a pre-registration drug/device combination product, Trevyent® (treprostinil sodium); a European-approved antibiotic, Xydalba™ (dalbavancin); and a cephalosporin antibiotic, Zevtera®/Mabelio® (ceftobiprole medocaril sodium).
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Aggrastat® is a reversible GP IIb/IIIa inhibitor (an intravenous anti-platelet drug) for use in patients with Acute Coronary Syndrome. Aggrastat® is commercially available in markets outside of the United States and is currently registered and approved in more than 60 countries worldwide.
Brinavess® is a novel, relatively atrial-selective antiarrhythmic agent, which was approved in the European Union in September 2010 and is currently registered and approved in over 40 countries (not including the United States) for the rapid conversion of recent onset atrial fibrillation (“AF”) to sinus rhythm in adults, for non-surgery patients with AF of seven days or less and for use in post-cardiac surgery patients with AF of three days or less. Brinavess® is mentioned as a first-line therapy in the European Society of Cardiology AF guidelines for the cardioversion of recent onset AF in patients with no, or minimal/moderate, structural heart disease.
Both Aggrastat® and Brinavess® are commercially available outside of the United States, through our own direct sales force within Europe as well as through our global distributor and partner network in the Middle East, Latin America, Asia and Africa. We have a comprehensive global distributor and partner network that allows our products to be commercialized in many countries worldwide.
Esmocard® and Esmocard Lyo® (“Esmocard®”), a short acting beta blocker, is indicated for the treatment of supraventricular tachycardia (except for pre-excitation syndromes) and for the rapid control of the ventricular rate in patients with atrial flutter in perioperative, postoperative, or other circumstances where short-term control of the ventricular rate with a short-acting agent is desirable. Esmocard® is also indicated for tachycardia and hypertension occurring in the perioperative phase and non-compensatory sinus tachycardia where, in the physician’s judgement, the rapid heart rate requires specific intervention. Esmocard® is not intended for use in chronic settings. We have launched Esmocard® in Italy and France.
Trevyent® is a development stage drug/device combination product that combines SteadyMed Ltd’s (“SteadyMed”) PatchPump™ technology, a drug delivery device, with treprostinil, a vasodilatory prostacyclin analogue to treat pulmonary arterial hypertension (“PAH”). PatchPump™ is a proprietary, disposable, parenteral drug administration platform that is prefilled and preprogrammed at the site of manufacture. SteadyMed was acquired by United Therapeutics Corporation on August 30, 2018.
Xydalba™ was approved by the European Medicines Agency (the “EMA”) in February 2015 as a treatment for Acute Bacterial Skin and Skin Structure Infections (“ABSSSI”) in adults. Dalbavancin is commercialized under the trade name Xydalba™ in certain countries outside the United States and Dalvance® in the United States. We have launched Xydalba™ commercially in Germany, the United Kingdom, France, Ireland, Finland, Luxembourg, Spain and Sweden, and we expect to commercialize it in Belgium, the Netherlands, and Switzerland.
Zevtera®/Mabelio® is a cephalosporin antibiotic for intravenous administration with rapid bactericidal activity against a wide range of Gram-positive and Gram-negative bacteria, including methicillin-susceptible and resistant Staphylococcus aureus (MSSA, MRSA) and susceptible Pseudomonas spp. Zevtera®/Mabelio® is currently approved for sale in 13 European countries and several non-European countries for the treatment of adult patients with community-acquired pneumonia (CAP) and hospital-acquired pneumonia (HAP), excluding ventilator-associated pneumonia (VAP). Zevtera®/Mabelio® is currently marketed in Germany, Italy, the United Kingdom, France, Austria, Spain and Switzerland.
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Aggrastat®
Aggrastat® contains tirofiban hydrochloride, which is a reversible GP IIb/IIIa inhibitor. Aggrastat® is indicated for the prevention of early myocardial infarction in adult patients presenting with acute coronary syndromes without ST elevation (“NSTE-ACS”) with the last episode of chest pain occurring within 12 hours and with electrocardiogram changes and/or elevated cardiac enzymes. Patients most likely to benefit from Aggrastat® treatment are those at high risk of developing myocardial infarction within the first three to four days after onset of acute angina symptoms including, for instance, those that are likely to undergo an early percutaneous coronary intervention (“PCI”). Aggrastat® is also indicated for the reduction of major cardiovascular events in patients with acute myocardial infarction (“STEMI”) intended for primary PCI. Aggrastat® is intended for use with acetylsalicylic acid (“ASA”) and unfractionated heparin. It works by preventing platelets, cells found in the blood, from forming into blood clots within the coronary arteries and obstructing blood flow to the heart muscle which can result in a heart attack. The medicine may also be used in patients whose heart vessels are dilated with a balloon (percutaneous coronary intervention), a procedure used to open up blocked or obstructed arteries in the heart in order to improve the blood flow to the heart muscle (myocardium) with or without the placement of a coronary stent. Aggrastat® is administered intravenously and has been on the market for many years.
In December 2017, we announced the signing of a license and distribution agreement with ZAO Firma Euroservice that will advance Aggrastat® towards registration and commercialization in Russia.
Applications for the extension of the indication statement for Aggrastat® are continuing worldwide. In January 2018, we announced a label expansion for Aggrastat® in China to include patients with STEMI. In addition, a high dose bolus regimen for Aggrastat® was approved in China.
Brinavess®
North America
In December 2006, our former partner, Astellas Pharma US, Inc. (“Astellas”), filed a New Drug Application (“NDA”) for vernakalant (IV) with the U.S. Food and Drug Administration (“FDA”). In August 2008, the FDA notified Astellas that the application was approvable. After discussions between the FDA and Astellas, a confirmatory Phase 3 clinical trial (“ACT 5”) was initiated in October 2009 under a Special Protocol Assessment. In October 2010, a clinical hold was placed on the vernakalant IV program following a single unexpected serious adverse event of cardiogenic shock experienced by a patient with AF who received vernakalant (IV). The ACT 5 study was terminated. In 2013, when sponsorship of the U.S. Investigational New Drugs (“INDs”) for vernakalant (IV) and vernakalant (oral) and the NDA for vernakalant (IV) were transferred to us from Merck Sharp & Dohme (“MSD”), we initiated discussions with the FDA to determine the next steps for the development of vernakalant (IV) in the United States. Following completion of additional nonclinical studies in 2017, we proposed resubmission of the NDA based on six years of accumulated safety data from sales of Brinavess® in 33 countries, augmented by interim results from over 1,100 patients enrolled in the post-authorization safety study (“PASS”) being conducted in Europe, SPECTRUM (PASS). In August 2017, we received the FDA’s Cardiorenal Division response indicating that they did not agree that the data supported NDA resubmission. In April 2018, we announced the completion of enrollment of the 2,000-patient PASS. Following a request for a Type A meeting with the FDA, in June 2018, we received a written response from the FDA regarding the regulatory path forward. The FDA informed us that it would be permissible to resubmit the Brinavess® NDA and agreed that we may schedule a Pre-NDA meeting. In October 2018, we met with the FDA to discuss the content and format of the NDA resubmission. Based on these discussions, we anticipate re-filing the NDA in the second quarter of 2019. We do not plan on pursuing any further development of the vernakalant (oral) program.
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On October 29, 2018, we announced that, pending approval of Brinavess® by the FDA, Brinavess® may qualify for up to a 5-year patent extension from the U.S. Patent and Trademark Office.
Rest of World (Outside North America)
In April 2009, we entered into two collaboration and license agreements (the “Collaboration Agreements”) with MSD for the development and commercialization of vernakalant. The Collaboration Agreements provided an affiliate of MSD with exclusive rights outside of North America to vernakalant (IV).
Under the terms of the Collaboration Agreements, MSD paid us an initial fee of $60 million. In addition, we were eligible to receive up to an additional $200 million in payments, of which we received $45 million. In July 2009, MSD submitted a Marketing Authorization Application (“MAA”) to the EMA seeking marketing approval for vernakalant (IV) in the European Union. In September 2010, vernakalant (IV) received marketing approval under the trade name Brinavess® in the European Union, Iceland and Norway. After receipt of marketing approval, MSD began its commercial launch of Brinavess® in a number of European countries.
In September 2012, MSD gave notice to us of its termination of the Collaboration Agreements. In April 2013 we took responsibility for worldwide sales, marketing, and promotion of vernakalant (IV) and in September 2013 we completed the transfer of commercialization responsibility for Brinavess® in the European Union and of the responsibility to complete the post-marketing study for Brinavess®.
In December 2014, Eddingpharm (Asia) Macao Commercial Offshore Limited (“Eddingpharm”) acquired rights to develop and commercialize Brinavess® in China, Taiwan, Macau and Hong Kong. Eddingpharm is responsible for any clinical trials and regulatory approvals required to commercialize Brinavess® in the countries covered by the agreement. In May 2018, Eddingpharm enrolled its first patient in a Phase 3 clinical study evaluating Brinavess®. Approximately 240 patients are expected to be enrolled at an estimated 30 clinical trial sites in China. In August 2018, Brinavess® was selected by the China Food and Drug Administration’s Center for Drug Evaluation as one of 48 therapies assessed as “clinically urgently needed new drugs” and consequently, potentially eligible for priority review.
In January and March 2016, we filed MAAs with the Kingdom of Saudi Arabia’s Saudi Food and Drug Authority and the United Arab Emirates’ (“UAE”) Ministry of Health, respectively, seeking approval of Brinavess®. In 2018, the MAA was approved in the UAE.
In November 2017, we announced the launch of Brinavess® in South Africa. In February 2018, our partner ATCO Laboratories Ltd. filed an MAA in Pakistan seeking approval of Brinavess®.
In August 2018, we announced results from a clinical survey assessing patients with acute AF in Belgian hospitals demonstrating reduced hospitalization in patients treated with Brinavess®. As a result of these data, Brinavess® received reimbursement approval from the National Institute for Health and Disability Insurance in Belgium.
Clinical Development and Post-Approval Studies
We completed a post-authorization safety study in the European Union as part of our follow-up measures with the EMA. This 2,000-patient observational study has collected information about patients receiving Brinavess®, to characterize the normal use and dosing of the product, and to provide better estimates of the incidence of medically significant health outcomes of interest.
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In September 2018, we reported preliminary results of the study. Zero deaths were reported and safety outcomes of interest were observed in 0.8% (95% confidence interval: 0.5% - 1.4%) of cases. Over 70% (95% confidence interval: 68.1% - 72.2%) of AF episodes were successfully converted to sinus rhythm in a median time to conversion of 11 minutes. The full clinical study report has been completed. We plan to submit the study manuscript in the first half of 2019 and we anticipate that publication may occur as early as the second half of 2019.
Esmocard® and Esmocard Lyo®
In May 2015, we entered a commercialization agreement with AOP Orphan Pharma (“AOP”) to sell AOP’s cardiovascular products, Esmocard® and Esmocard Lyo® in Italy and France.
Esmocard® is indicated for the treatment of supraventricular tachycardia (except for pre-excitation syndromes) and for the rapid control of the ventricular rate in patients with AF in perioperative, postoperative, or other circumstances where short-term control of the ventricular rate with a short-acting agent is desirable. Esmocard® is also indicated for tachycardia and hypertension occurring in the perioperative phase and non-compensatory sinus tachycardia where, in the physician’s judgement the rapid heart rate requires specific intervention. Esmocard® is not intended for use in chronic settings.
Trevyent®
In June 2015, we entered into an exclusive license and supply agreement (the “License Agreement”) with SteadyMed to commercialize the development-stage product Trevyent® (treprostinil) in Europe and the Middle East. Pursuant to the License Agreement, SteadyMed granted us an exclusive royalty-bearing license to register and commercialize Trevyent® in Europe and the Middle East if Trevyent® is approved for the treatment of PAH. Under the License Agreement, SteadyMed will receive up to $12.3 million in connection with regulatory and sales milestones, including an upfront payment of $3 million.
PAH is a medical condition affecting the heart and lungs. People who have PAH develop high blood pressure (hypertension) in the arteries of their lungs (the pulmonary arteries). PAH worsens over time and is life-threatening because the pressure in a patient’s pulmonary arteries rises to dangerously high levels, putting a strain on the heart. There is no cure for PAH, but several medications are available to treat symptoms, such as Remodulin® (treprostinil sodium), the market-leading prostacyclin PAH therapy.
Trevyent® is a development stage drug/device combination product that combines SteadyMed’s PatchPump™ technology with treprostinil, a vasodilatory prostacyclin analogue to treat PAH. PatchPump™ is a proprietary, disposable, parenteral drug administration platform that is prefilled and preprogrammed at the site of manufacture.
In January 2016, we announced that the EMA approved our request to review Trevyent® under the Centralised Authorisation Procedure drug review process. This procedure results in a single marketing authorization that is valid in all 28 European Union countries and three European Economic Area countries.
In April 2017, we announced that SteadyMed completed a successful clinical study of Trevyent®. The study enrolled 60 healthy adult volunteers in an in-clinic setting designed to examine the performance of the PatchPump™ used by Trevyent®. The goals of the study were to evaluate the safety and performance functions of the PatchPump™ delivery system as well as the tolerability of the on-body application of the product. According to SteadyMed, the results indicated that the PatchPump™ devices performed as intended in all categories of evaluation, including dose accuracy and precision.
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In July 2017, we announced that SteadyMed submitted an NDA to the FDA for Trevyent® in the United States. On August 31, 2017, SteadyMed announced that they received a Refusal to File (“RTF”) letter from the FDA relating to the NDA. In December 2017, SteadyMed announced that they had reached agreement with the FDA on the work necessary to resubmit its NDA. SteadyMed has informed us that it expects the NDA submission to occur in the first half of 2019. We plan to submit regulatory filings for Trevyent® in Europe following SteadyMed’s NDA resubmission to the FDA.
Xydalba™
In May 2016, we announced the execution of an exclusive license agreement with Allergan plc (“Allergan”), for the rights to commercialize dalbavancin (branded Dalvance® in the United States, where it is marketed by Allergan, and XydalbaTM in the rest of the world) in the United Kingdom, Germany, France, Denmark, Iceland, Finland, Malta, Norway, Sweden, Belgium, the Netherlands, Luxemburg, Ireland and Switzerland. XydalbaTM fits our commercial footprint as a differentiated, specialty in-hospital drug. In December 2016, we initiated the launch of Xydalba™ in the United Kingdom and Germany, and in February 2017, we initiated the launch of Xydalba™ in France. In June 2017, we announced that we entered into a license and distribution agreement with Tzamal Medical Ltd. to advance the commercialization of XydalbaTM in Israel. In October 2017, we initiated the launch of Xydalba™ in Sweden, Finland and the Republic of Ireland.
Xydalba™ is a second generation, semi-synthetic lipoglycopeptide. Xydalba™ is the first and only IV antibiotic approved in Europe for the treatment of ABSSSI with a single dose regimen of 1500 mg administered over 30 minutes or a two-dose regimen of 1000 mg followed one week later by 500 mg, each administered over 30 minutes. This dosing regimen makes it possible to treat patients with ABSSSI in an outpatient setting with 100% compliance, avoiding hospitalization or potentially allowing earlier discharge, without compromising efficacy. Xydalba™ demonstrates bactericidal activity in vitro against a range of gram-positive bacteria, such as Staphylococcus aureus (including methicillin-resistant, also known as MRSA, strains) and Streptococcus pyogenes, as well as certain other staphylococcal and streptococcal species.
Zevtera®/Mabelio®
In September 2017, we entered into a distribution and license agreement with Basilea Pharmaceutica International Ltd. (“Basilea”), for the rights to commercialize Zevtera®/Mabelio® (ceftobiprole medocaril sodium) in 34 European countries and Israel. Zevtera®/Mabelio® is a cephalosporin antibiotic for intravenous administration with rapid bactericidal activity against a wide range of gram-positive and gram-negative bacteria, including methicillin-susceptible and resistant Staphylococcus aureus (MSSA, MRSA) and susceptible Pseudomonas spp. Zevtera®/Mabelio® is currently approved for sale in 13 European countries and several non-European countries for the treatment of adult patients with community-acquired pneumonia (CAP) and hospital-acquired pneumonia (HAP), excluding ventilator-associated pneumonia (VAP). As consideration for the rights and licenses granted, we made an upfront payment of CHF 5.0 million ($5.2 million) to Basilea. Additional payments may be due to Basilea upon the achievement of various milestones. Royalty payments may also be due to Basilea based on achievement of pre-determined levels of annual net sales.
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Product Portfolio
The following table summarizes our portfolio of products and product candidates:
|
Program |
Stage of Development |
|
Aggrastat® outside of the United States
|
Approved in more than 60 countries worldwide.
|
| Brinavess® outside of the United States | Approved in approximately 40 countries worldwide, including those in the European Union. |
| Brinavess™ United States |
On clinical hold. Pre-NDA meeting completed in October 2018. NDA resubmission planned for second quarter of 2019.
|
|
Esmocard® and Esmocard Lyo®
|
Approved in France and Italy.
|
| Trevyent® |
Pre-registration worldwide. NDA resubmission to the FDA by SteadyMed expected to occur during the first half of 2019.
|
| Xydalba™ |
Centrally approved in the European Union. MAA filed in Switzerland and pre-registration in the Middle East.
|
|
Zevtera®/Mabelio®
|
Approved in 13 European countries and several non-European countries. |
CORPORATE UPDATE
Changes to Senior Management Team and Board of Directors
On January 2, 2019, we announced several changes to our senior management team and Board of Directors. Mark Corrigan was appointed as our Chief Executive Officer on March 14, 2019. Our former Chief Executive Officer, William Hunter, resigned on March 13, 2019 and will remain on our Board of Directors. Our current Chief Financial Officer, Justin Renz, assumed the responsibilities of President of the Company, effective as of January 1, 2019. In addition, Vanda de Cian joined the Board of Directors, effective as of March 12, 2019. She serves as a member of both the governance and nominating committee and the compensation committee of our Board of Directors.
Arrangement Agreement
On March 19, 2018, we entered into the Arrangement Agreement with Cipher and Cardiome. Pursuant to the Arrangement, among other steps and procedures, the following transactions occurred:
| • | All of Cardiome’s outstanding common shares were assigned and transferred to us in exchange for our common shares. Following the completion of the share exchange, each of Cardiome’s shareholders holds the same pro rata interest in us as they held in Cardiome immediately prior to such share exchange. |
| • | All of Cardiome’s assets and liabilities, other than the Canadian business portfolio and Canadian income tax losses acquired by Cipher, were transferred to and assumed by us. |
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On May 9, 2018, we received shareholder approval in favor of the Arrangement. The consolidated financial statement information for all periods presented herein include the consolidated operations of Cardiome until May 15, 2018 and the operations of Correvio thereafter. For accounting purposes, the consolidated financial statement information includes the consolidated historical operations and changes in the consolidated financial position of Cardiome to May 15, 2018 and those of Correvio thereafter.
Amendment to the Term Loan Agreement with CRG-Managed Funds
On May 11, 2017, we amended the terms of our term loan agreement (the “first amendment”) with CRG-managed funds (the “CRG Term Loan”). Under the terms of the amended agreement, up to $50.0 million is available to us consisting of four tranches bearing interest at 13% per annum. The first tranche of $20.0 million was drawn on June 13, 2016 when we entered into the original term loan agreement and was used to extinguish long-term debt and for general corporate purposes. A second tranche of $10.0 million was drawn on the date of the first amendment. A third tranche of $10.0 million was drawn on August 8, 2017. The fourth tranche was never drawn. The loan matures on March 31, 2022. Under the terms of the agreement, an interest-only period is provided such that principal repayment begins in June 2020. If certain revenue milestones are met by us, the interest-only period may be extended such that there is only one principal payment at maturity.
Under the first amendment, interest is payable on a quarterly basis through the full term of the loan. Interest payments may be split, at our option, between 9% per annum cash interest and 4% per annum paid in-kind interest in the form of additional term loans until March 31, 2020. Subsequent to March 31, 2020, interest shall be payable entirely in cash. If certain revenue milestones are met by us, the period in which we, at our option, may split our interest payments between 9% per annum cash interest and 4% per annum paid in-kind interest in the form of additional term loans may be extended to March 31, 2022. On the maturity date, a back-end facility fee of 8% of the aggregate amount of the term loan, including any paid in-kind interest, will be payable to CRG. During the three months ended March 31, 2019, we accrued in-kind interest of $0.4 million.
In consideration for the first amendment, 700,000 warrants with a strike price of $4.00 per common share were issued to CRG as of the date of the first amendment. The warrants may also be exercised on a “net” or “cashless” basis and have a term of 5 years.
We are required to meet certain annual revenue covenants, starting with the year ending December 31, 2016. If the revenue covenants are not met, we may exercise a cure right within 90 days of year-end by issuing additional common shares in exchange for cash or by borrowing subordinated debt in an amount equal to two times the difference between the minimum required revenue and our revenue. The cash received from the cure right would be used to repay the principal.
On March 27, 2018, we entered into an agreement with CRG to amend the terms of the loan to adjust the annual revenue covenants (the “second amendment”). In consideration for the second amendment, we issued 800,000 warrants with a strike price of $2.50 per common share to CRG as of the date of the second amendment. The warrants may also be exercised on a “net” or “cashless” basis and have a term of 5 years.
On May 15, 2018, the CRG Term Loan was amended in connection with the Arrangement; the borrower named in the CRG Term Loan was amended from Cardiome to Correvio.
We were in compliance with the amended annual revenue covenants for the years ended December 31, 2018 and 2017. We are also required to meet an ongoing minimum liquidity covenant. As of the date of this MD&A, we are in compliance with this minimum liquidity covenant.
On March 11, 2019, we announced that CRG provided us with an additional credit facility of $10.0 million, to be drawn at our discretion, in increments of $2.5 million through September 30, 2019, subject to the achievement of certain revenue and market capitalization requirements. The facility will bear interest at 13% per annum and will carry the same terms and conditions as the CRG Term Loan.
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Base Shelf Prospectus
On July 5, 2018, we filed a short form base shelf prospectus with the securities regulatory authorities in Canada, other than Quebec, and with the SEC under a registration statement on Form F-10 (together, the “Base Shelf Prospectuses”). The Base Shelf Prospectuses provide for the potential offering in Canada and the United States of up to an aggregate of $250.0 million of our common shares, preferred shares, debt securities, warrants, subscription receipts and units from time to time over a 25-month period.
At Market Issuance Sales Agreement with B. Riley FBR, Inc.
On July 10, 2018, we filed a prospectus supplement pertaining to sales under an at market issuance sales agreement (the “BRFBR Sales Agreement”) with B. Riley FBR, Inc. (“BRFBR”). Under the terms of the BRFBR Sales Agreement, we could offer and sell, from time to time, through at-the-market offerings, our common shares having an aggregate offering price of up to $30.0 million, subject to an aggregate maximum of $13.0 million that could be offered and sold under the prospectus supplement. During the three months ended March 31, 2019, we sold 2,970,781 common shares under the BRFBR Sales Agreement for gross proceeds of $6.3 million. We completed the sale of all common shares qualified under this prospectus supplement. The BRFBR Sales Agreement was terminated on March 1, 2019.
At Market Issuance Sales Agreement with Cantor Fitzgerald & Co.
On March 13, 2019, we filed a prospectus supplement pertaining to sales under an at market issuance sales agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”). In accordance with the terms of the Cantor Sales Agreement, we may offer and sell, from time to time, through at-the-market offerings, our common shares having an aggregate offering price of up to $50.0 million, subject to an aggregate maximum of $12.0 million that may be offered and sold under the prospectus supplement. During the three months ended March 31, 2019, we sold 625,000 common shares under the Cantor Sales Agreement for gross proceeds of $2.0 million. We intend to use net proceeds for preparations for future product launches, including the anticipated NDA re-filing for Brinavess®, business development opportunities and general corporate purposes. As of the date of this MD&A, $10.0 million remains available for issuance under this prospectus supplement.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated data for the three months ended March 31, 2019 and 2018 and as at March 31, 2019 and December 31, 2018 as follows:
| (In thousands of U.S. dollars, except per share amounts) | Three months ended March 31 | ||||||
| 2019 | 2018 | ||||||
| Statement of operations data: | |||||||
| Revenue | $ | 7,251 | $ | 6,543 | |||
| Operating loss | (7,165) | (7,615) | |||||
| Net loss | (8,996) | (8,460) | |||||
Loss per share - basic and diluted | $ | (0.23) | $ | (0.24) | |||
| As at | |||||||
| March 31, 2019 | December 31, 2018 | ||||||
| Balance sheet data: | |||||||
| Cash and cash equivalents | $ | 15,962 | $ | 15,596 | |||
| Total assets | 63,307 | 59,637 | |||||
| Long-term debt, net of unamortized debt issuance costs | 42,315 | 41,517 | |||||
RESULTS OF OPERATIONS
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
We recorded a net loss of $9.0 million (basic loss per share of $0.23) for the three months ended March 31, 2019 compared to a net loss of $8.5 million (basic loss per share of $0.24) for the three months ended March 31, 2018. The increase in net loss was due primarily to an increase in interest expense and foreign exchange losses, partially offset by an increase in revenue.
Revenue
Revenue is earned through the sale of our commercialized products. Revenue may fluctuate between periods based on the timing of large and infrequent distributor orders. These distributor orders may impact both quarterly and annual revenue figures, and the related variance compared to prior periods, because a large order may comprise a relatively large proportion of the period’s total revenue. As a result, changes in revenues on a period-to-period basis may not provide a clear indication of actual sales trends.
Revenue for the three months ended March 31, 2019 was $7.3 million compared to $6.5 million for the three months ended March 31, 2018. The increase in revenue was primarily attributable to an increase in sales of our antibiotic products (XydalbaTM and Zevtera®/Mabelio®). For the three months ended March 31, 2019, revenue from our cardiology products (Aggrastat®, Brinavess® and Esmocard®) was $4.7 million and revenue from our antibiotic products (XydalbaTM and Zevtera®/Mabelio®) was $2.6 million. For the three months ended March 31, 2018, revenue from our cardiology products (Aggrastat®, Brinavess® and Esmocard®) was $5.2 million and revenue from our antibiotic products (XydalbaTM and Zevtera®/Mabelio®) was $1.3 million.
| 10 |
Gross Margin
Gross margin for the three months ended March 31, 2019 was 69.1%, compared to 64.8% for the three months ended March 31, 2018. The fluctuation in gross margin is primarily due to changes in customer mix.
Selling, General & Administration Expense
Selling, general and administration (“SG&A”) expense for the three months ended March 31, 2019 was $11.2 million compared to $10.9 million for the three months ended March 31, 2018. The increase in SG&A expense was due to an increase in stock-based compensation expense.
Interest Expense
Interest expense was $1.7 million for the three months ended March 31, 2019 compared to $1.1 million for the three months ended March 31, 2018. The increase was due to interest being accrued on a higher long-term debt principal amount under the CRG Term Loan during the three months ended March 31, 2019 as well as an increase in the accretion of our long-term debt under the effective interest method which is recorded as interest expense.
QUARTERLY FINANCIAL INFORMATION
The following table highlights selected unaudited consolidated financial data for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2018. The selected financial information presented below reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. These results are not necessarily indicative of results for any future period and you should not rely on these results to predict future performance.
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| Three months ended | ||||||||||||||||
| (In thousands of U.S. dollars except per share amounts) | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | ||||||||||||
| Revenue | $ | 7,251 | $ | 8,946 | $ | 7,007 | $ | 6,178 | ||||||||
| Cost of goods sold | 2,241 | 1,896 | 2,135 | 1,962 | ||||||||||||
| Selling, general and administration | 11,191 | 9,859 | 9,186 | 12,631 | ||||||||||||
| Interest expense | 1,690 | 1,561 | 1,686 | 1,667 | ||||||||||||
| Gain on disposal of Canadian Operations | — | — | — | 18,489 | ||||||||||||
| Net income (loss) | (8,996) | (6,442) | (7,105) | 5,428 | ||||||||||||
| Earnings (loss) per share - basic and diluted | (0.23) | (0.18) | (0.20) | 0.16 | ||||||||||||
| Three months ended | ||||||||||||||||
| (In thousands of U.S. dollars except per share amounts) | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||
| Revenue | $ | 6,543 | $ | 7,034 | $ | 6,021 | $ | 5,754 | ||||||||
| Cost of goods sold | 2,301 | 1,931 | 1,488 | 1,721 | ||||||||||||
| Selling, general and administration | 10,902 | 10,417 | 8,481 | 9,576 | ||||||||||||
| Interest expense | 1,063 | 1,899 | 1,762 | 1,247 | ||||||||||||
| Other expense on modification of long-term debt | — | — | 29 | 1,422 | ||||||||||||
| Net loss | (8,460) | (8,343) | (6,623) | (8,512) | ||||||||||||
| Loss per share - basic and diluted | (0.24) | (0.24) | (0.20) | (0.26) | ||||||||||||
Variations in our revenue, expense and net loss for the periods above resulted primarily from the following factors:
In the third quarter of 2017, our net loss decreased by approximately $1.9 million to $6.6 million, or a basic loss per share of $0.20. The decrease in net loss from the prior quarter was primarily due to one-time expenses we incurred in the prior quarter on the modification of the CRG Term Loan. In addition, our revenues and gross margin increased and our SG&A expense decreased from the prior quarter. The decrease in SG&A expense was due to a decrease in stock-based compensation expense from the prior quarter.
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In the fourth quarter of 2017, our net loss increased by approximately $1.7 million to $8.3 million, or a basic loss per share of $0.24. The increase in net loss from the prior quarter was due to an increase in our SG&A expense. The increase in SG&A was due to non-recurring compensation related to severance payments made to former employees, an increase in fees associated with business development activities and costs associated with the expansion of Zevtera®/Mabelio®, which we acquired in September 2017.
In the first quarter of 2018, our net loss increased by approximately $0.2 million to $8.5 million, or a basic loss per share of $0.24. The slight increase in net loss from the prior quarter was due to a decrease in our gross margin as well as an increase in SG&A due to transaction costs associated with the Arrangement.
In the second quarter of 2018, we had a net income of $5.4 million, or a basic earnings per share of $0.16. The net income was due to a gain of $18.5 million that we recognized on the disposition of our Canadian business portfolio to Cipher pursuant to the Arrangement. This gain was offset by an increase in SG&A due to business development and transaction costs associated with the Arrangement of approximately $1.8 million.
In the third quarter of 2018, we had a net loss of $7.1 million, or a basic loss per share of $0.20. The $12.5 million decrease in net income from the prior quarter was due to the one-time gain on disposition of our Canadian business portfolio that we recognized in the second quarter of 2018. This was offset by an increase in revenues and a decrease in SG&A in the third quarter of 2018 due to non-recurring business development and transaction costs associated with the Arrangement incurred in the second quarter of 2018.
In the fourth quarter of 2018, our net loss decreased by approximately $0.7 million to $6.4 million, or a basic loss per share of $0.18. The decrease in net loss from the prior quarter was primarily due to higher revenues and higher gross margin. We recognized $1.5 million of deferred licensing revenue upon the termination of a distributor agreement in December 2018.
In the first quarter of 2019, our net loss increased by approximately by $2.6 million to $9.0 million, or a basic loss per share of $0.23. The increase in net loss from the prior quarter was due to lower revenues and an increase in SG&A. Our revenues were lower in the first quarter of 2019 due to a one-time $1.5 million amount of deferred licensing revenue recognized in the prior quarter. Additionally, our SG&A was higher due to an increase in stock-based compensation expense and higher regulatory expenses.
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LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations through cash flow generated from sales of our products, the issuance of common shares, and debt financing.
Cash Flows
Sources and Uses of Cash
| (in thousands of U.S. dollars) | For the three months ended March 31 | |||||
| 2019 | 2018 | |||||
| Cash used in operating activities | $ | (7,611 | ) | $ | (8,528 | ) |
| Cash provided by (used in) investing activities | 110 | (202 | ) | |||
| Cash provided by financing activities | 7,942 | 216 | ||||
| Effect of foreign exchange rate on cash, cash equivalents, and restricted cash | (110 | ) | 91 | |||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 331 | $ | (8,423 | ) | |
At March 31, 2019, we had $17.9 million in cash, cash equivalents and restricted cash, compared to $17.6 million at December 31, 2018. The increase in cash, cash equivalents, and restricted cash for the three months ended March 31, 2019 was mainly attributable to $7.9 million in cash provided by financing activities offset by $7.6 million of cash used in operating activities.
Cash used in operating activities for the three months ended March 31, 2019 was $7.6 million, a decrease of $0.9 million from $8.5 million for the three months ended March 31, 2018. The decrease in cash used was due to the timing of accounts payable and accrued liabilities, partially offset by an increase in inventory levels.
Cash provided by and used in investing activities for the three months ended March 31, 2019 and 2018 was not material.
Cash provided by financing activities for the three months ended March 31, 2019 was $7.9 million, of which $5.9 million related to net proceeds received from shares issued under the BRFBR Sales Agreement and $2.0 million related to net proceeds received from shares issued under the Cantor Sales Agreement. Cash provided by financing activities for the three months ended March 31, 2018 was $0.2 million, comprised of stock option exercises.
Funding Requirements
We expect to devote financial resources to our operations, sales and commercialization efforts, regulatory approvals and business development. We will require cash to fund operations, pay interest and make principal payments on the CRG Term Loan.
Our future funding requirements will depend on many factors including:
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| • | the cost and extent to which we will be successful in obtaining reimbursement for our products in additional countries where they are currently approved; |
| • | the cost and outcomes of regulatory submissions and reviews for approval of our products in additional countries; |
| • | the extent to which our products will be commercially successful globally; |
| • | the extent to which Aggrastat® sales will remain stable as it faces generic competition in certain markets; |
| • | the future development plans for our products in development; |
| • | the consummation of suitable business development opportunities; |
| • | the extent to which we elect to develop, acquire or license new technologies, products or businesses; |
| • | the size, cost and effectiveness of our sales and marketing programs; and |
| • | the consummation, continuation or termination of third-party manufacturing, distribution and sales and marketing arrangements. |
As of March 31, 2019, we had $16.0 million in unrestricted cash and cash equivalents, compared to $15.6 million at December 31, 2018. We have a history of incurring operating losses and negative cash flows from operations. Based on current projections, we may not have sufficient capital to fund our current planned operations during the next twelve-month period. We are dependent on our ability to raise additional debt or equity financing or monetize intellectual property rights through strategic partnerships or sublicensing arrangements and to meet revenue covenants in order to meet our current planned operations during the next twelve-month period. There can be no assurance that we will be able to raise such additional financing. These factors raise substantial doubt about our ability to continue as a going concern within one year from the interim consolidated financial statements issuance date. However, we believe that the consolidated entity will be successful in the above matters and are currently pursuing multiple opportunities and strategies to ensure that sufficient cash resources are available to meet our current planned operations.
Contractual Obligations
As of March 31, 2019, and in the normal course of business, we have the following obligations to make future payments, representing contracts and other commitments that are known and committed.
| Contractual Obligations | Payment due by period | |||||||||||||||||||||||||||
(In thousands of U.S. dollars) | 2019 | 2020 | 2021 | 2022 | 2023 | There-after | Total | |||||||||||||||||||||
| Commitments for clinical and other agreements | $ | 1,102 | $ | 233 | — | — | — | — | $ | 1,335 | ||||||||||||||||||
| Supplier purchase commitment | 94 | 156 | — | — | — | — | 250 | |||||||||||||||||||||
CRG Term Loan (1) Interest expense on CRG Term Loan (2) | — 4,258 | 16,081 5,134 | 21,441 2,466 | 8,790 174 | — — | — — | 46,312 12,032 | |||||||||||||||||||||
| Operating lease obligations | 850 | 871 | 416 | 206 | 189 | 173 | 2,705 | |||||||||||||||||||||
| Total | $ | 6,304 | $ | 22,475 | $ | 24,323 | $ | 9,170 | $ | 189 | $ | 173 | $ | 62,634 | ||||||||||||||
(1) Based on draws as of the date of this MD&A and assuming continued compliance with all covenants.
(2) Based on draws as of the date of this MD&A and does not include interest expense on other amounts that can be drawn. Based on the assumption that all interest is paid in cash.
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Outstanding Share Capital
As of May 7, 2019, there were 39,854,667 common shares issued and outstanding, and 4,562,374 common shares issuable upon the exercise of outstanding stock options (of which 2,989,861 were exercisable) at a weighted average exercise price of CAD $5.10 per share, and 128,402 restricted share units outstanding.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
We prepare our consolidated financial statements in accordance with U.S. GAAP. The accounting policies and methods of computation applied in the consolidated interim financial statements as at and for the three months ended March 31, 2019 are the same as those applied in the audited annual financial statements as at and for the year ended December 31, 2018, except as described below.
On January 1, 2019, we adopted Accounting Standards Update No. (“ASU”) 2016-02, “Leases”, which requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet, for the rights and obligations created by those leases. In July 2018, the FASB issued ASU 2018-11, “Leases”, which offered a transition option where companies could elect to apply the guidance using a modified retrospective approach at the beginning of the year of adoption rather than to the earliest comparative period presented in the financial statements. We adopted the new leasing standard on January 1, 2019 using the modified retrospective approach and used the effective date as our date of initial application. A cumulative catch-up adjustment was not required on the date of adoption. We elected the package of practical expedients which permits us to not reassess under our prior conclusions about lease identification, lease classification and initial direct costs. For leases with an initial term of less than 12 months, we have elected not to recognize right-of-use assets and liabilities for any class of asset. We have elected a policy to account for lease and non-lease components as a single component for all asset classes. In general, we account for the underlying leased asset and apply a discount rate at the lease level. However, for vehicle leases, we utilize the portfolio method by aggregating similar leased assets based on the underlying lease term.
We make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, impairment of long-lived assets, amortization, stock-based compensation and other stock-based payments. We base our estimates on historical experience, anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from our estimates. The discussion on the accounting policies and estimates that require management’s most difficult, subjective and complex judgments, and which are subject to a degree of measurement uncertainty, can be found on pages 18 to 19 of our annual MD&A for the year ended December 31, 2018, a copy of which is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Recent Accounting Pronouncements
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”. ASU 2017-04 eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure the goodwill impairment. The goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are evaluating the revised guidance to determine if there will be any impact on our consolidated financial statements.
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RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2019 and 2018, we incurred expenses for consulting services provided by a company owned by one of our officers. The amounts charged were recorded at their exchange amounts and were subject to normal trade terms. For the three months ended March 31, 2019 and 2018, we incurred expenses of $0.1 million and $0.1 million, respectively, for services provided by the consulting company relating to general corporate matters. Included in accounts payable and accrued liabilities at March 31, 2019 and 2018 was $0.1 million owing to the consulting company. There are ongoing contractual obligations as we have a contract in place with the consulting company in which we are committed to pay the consulting company $0.2 million annually in exchange for consulting services relating to general corporate matters.
OFF-BALANCE SHEET ARRANGEMENTS
We have no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have, a current or future effect on our results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources that is material to investors.
INTERNAL CONTROL OVER FINANCIAL REPORTING
We did not make any changes in our internal control over financial reporting during the three months ended March 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events occurring. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
FINANCIAL INSTRUMENTS AND RISKS
We are exposed to credit risks and market risks related to changes in interest rates and foreign currency exchange rates, each of which could affect the value of our current assets and liabilities. We invest our cash reserves in fixed rate, highly liquid and highly rated financial instruments such as treasury bills, commercial papers and banker’s acceptances. At March 31, 2019, our cash and cash equivalents were primarily held as cash, the majority of which was denominated in Canadian dollars. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio, due to the relative short-term nature of the investments and our current ability to hold fixed income investments to maturity. We have not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risk. We are subject to foreign exchange rate fluctuations that could have a material effect on our future operating results or cash flows. We are exposed to interest rate cash flow risk on our cash and cash equivalents as these instruments bear interest based on current market rates.
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Exhibit 99.2
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Financial Statements
Three months ended March 31, 2019 and 2018
(Unaudited)
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Balance Sheets
(In thousands of U.S. dollars, except share amounts)
| March 31, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 15,962 | $ | 15,596 | ||||
| Restricted cash (note 5) | 1,939 | 1,974 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $95 (2018 - $102) | 7,988 | 7,723 | ||||||
| Inventories (note 6) | 4,460 | 4,158 | ||||||
| Prepaid expenses and other assets | 2,723 | 841 | ||||||
| 33,072 | 30,292 | |||||||
| Property and equipment (note 7) | 539 | 512 | ||||||
| Right-of-use assets from operating leases (note 10) | 2,294 | – | ||||||
| Intangible assets (note 8) | 25,047 | 26,469 | ||||||
| Long-term inventories (note 6) | 1,668 | 1,663 | ||||||
| Goodwill | 318 | 318 | ||||||
| Deferred income tax assets | 369 | 383 | ||||||
| $ | 63,307 | $ | 59,637 | |||||
Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities (note 9) | $ | 11,093 | $ | 9,403 | ||||
| Current operating lease liabilities (note 10) | 726 | – | ||||||
| 11,819 | 9,403 | |||||||
| Long-term debt, net of unamortized debt issuance costs (note 11) | 42,315 | 41,517 | ||||||
| Deferred revenue | 1,228 | 1,252 | ||||||
| Long-term operating lease liabilities (note 10) | 1,816 | – | ||||||
| Other long-term liabilities | 4 | 555 | ||||||
| 57,182 | 52,727 | |||||||
| Stockholders’ equity: | ||||||||
| Common stock | 367,350 | 359,295 | ||||||
| Authorized - unlimited number without par value | ||||||||
| Issued and outstanding - 39,854,169 (2018 - 36,233,162) (note 12) | ||||||||
| Additional paid-in capital (note 13) | 40,952 | 40,456 | ||||||
| Deficit | (418,740 | ) | (409,744 | ) | ||||
| Accumulated other comprehensive income | 16,563 | 16,903 | ||||||
| 6,125 | 6,910 | |||||||
| $ | 63,307 | $ | 59,637 | |||||
Contingencies (note 14)
See accompanying notes to the interim consolidated financial statements.
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Statements of Operations and Comprehensive Loss
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars, except share and per share amounts)
| (Unaudited) |
| March 31, 2019 | March 31, 2018 | |||||||
| Revenue: | ||||||||
| Product and royalty revenues | $ | 7,251 | $ | 6,518 | ||||
| Licensing and other fees | – | 25 | ||||||
| 7,251 | 6,543 | |||||||
| Cost of goods sold | 2,241 | 2,301 | ||||||
| Gross margin | 5,010 | 4,242 | ||||||
| Expenses: | ||||||||
| Selling, general and administration | 11,191 | 10,902 | ||||||
| Amortization and depreciation (notes 7 and 8) | 984 | 955 | ||||||
| 12,175 | 11,857 | |||||||
| Operating loss | (7,165 | ) | (7,615 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (1,690 | ) | (1,063 | ) | ||||
| Other expense | (98 | ) | (113 | ) | ||||
| Foreign exchange (loss) gain | (16 | ) | 386 | |||||
| (1,804 | ) | (790 | ) | |||||
| Loss before income taxes | (8,969 | ) | (8,405 | ) | ||||
| Income tax expense | (27 | ) | (55 | ) | ||||
| Net loss | $ | (8,996 | ) | $ | (8,460 | ) | ||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustments | (340 | ) | 145 | |||||
| Comprehensive loss | $ | (9,336 | ) | $ | (8,315 | ) | ||
| Loss per common share | ||||||||
| Basic and diluted | $ | (0.23 | ) | $ | (0.24 | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic and diluted | 38,819,002 | 34,653,514 | ||||||
See accompanying notes to the interim consolidated financial statements.
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Statements of Stockholders’ Equity
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars, except number of common shares)
| (Unaudited) |
| Number of common shares | Common shares | Additional paid-in capital | Deficit | Accumulated other comprehensive income | Total stockholders’ equity | |||||||||||||||||||
| Balance at December 31, 2018 | 36,233,162 | $ | 359,295 | $ | 40,456 | $ | (409,744 | ) | $ | 16,903 | $ | 6,910 | ||||||||||||
| Net loss | – | – | – | (8,996 | ) | – | (8,996 | ) | ||||||||||||||||
| Issuance of common stock (note 12) | 3,595,781 | 8,347 | – | – | – | 8,347 | ||||||||||||||||||
| Share issue costs | – | (405 | ) | – | – | – | (405 | ) | ||||||||||||||||
| Common stock issued upon exercise of options in cashless transaction (note 12) | 15,654 | – | – | – | – | – | ||||||||||||||||||
| Reallocation of additional paid in capital arising from stock-based compensation related to exercise of options | – | 90 | (90 | ) | – | – | – | |||||||||||||||||
| Issuance of common shares on vesting of restricted share units (note 12) | 9,572 | 23 | (23 | ) | – | – | – | |||||||||||||||||
| Stock-based compensation expense (note 13) | – | – | 609 | – | – | 609 | ||||||||||||||||||
| Foreign currency translation adjustments | – | – | – | – | (340 | ) | (340 | ) | ||||||||||||||||
| Balance at March 31, 2019 | 39,854,169 | $ | 367,350 | $ | 40,952 | $ | (418,740 | ) | $ | 16,563 | $ | 6,125 | ||||||||||||
| Number of common shares | Common shares | Additional paid-in capital | Deficit | Accumulated other comprehensive income | Total stockholders’ equity | |||||||||||||||||||
| Balance at December 31, 2017 | 34,637,312 | $ | 353,483 | $ | 38,443 | $ | (392,865 | ) | $ | 17,129 | $ | 16,190 | ||||||||||||
| Adoption of accounting standard ASC 606 | – | – | – | (300 | ) | – | (300 | ) | ||||||||||||||||
| (393,165 | ) | 15,890 | ||||||||||||||||||||||
| Net loss | – | – | – | (8,460 | ) | – | (8,460 | ) | ||||||||||||||||
| Common stock issued upon exercise of options | 219,749 | 258 | – | – | – | 258 | ||||||||||||||||||
| Reallocation of additional paid in capital arising from stock-based compensation related to exercise of options | – | 226 | (226 | ) | – | – | – | |||||||||||||||||
| Issuance of common shares on vesting of restricted share units, net of tax | 11,901 | 145 | (166 | ) | – | – | (21 | ) | ||||||||||||||||
| Issuance of warrants (note 11) | – | – | 936 | – | – | 936 | ||||||||||||||||||
| Stock-based compensation expense | – | – | 343 | – | – | 343 | ||||||||||||||||||
| Foreign currency translation adjustments | – | – | – | – | 145 | 145 | ||||||||||||||||||
| Balance at March 31, 2018 | 34,868,962 | $ | 354,112 | $ | 39,330 | $ | (401,625 | ) | $ | 17,274 | $ | 9,091 | ||||||||||||
See accompanying notes to the interim consolidated financial statements.
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars)
(Unaudited)
| March 31, 2019 | March 31, 2018 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (8,996 | ) | $ | (8,460 | ) | ||
| Items not affecting cash: | ||||||||
| Amortization and depreciation (notes 7 and 8) | 984 | 955 | ||||||
| Accretion of long-term debt (note 11) | 373 | (241 | ) | |||||
| Interest paid in-kind on long-term debt (note 11) | 425 | 408 | ||||||
| Stock-based compensation expense (note 13) | 618 | 395 | ||||||
| Write-down of inventory (note 6) | 50 | 118 | ||||||
| Unrealized foreign exchange loss (gain) | 317 | (528 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (595 | ) | (890 | ) | ||||
| Inventories | (419 | ) | 312 | |||||
| Prepaid expenses and other assets | (1,882 | ) | (177 | ) | ||||
| Deferred revenue | – | (25 | ) | |||||
| Accounts payable and accrued liabilities | 1,534 | (387 | ) | |||||
| Other long-term liabilities | (20 | ) | (8 | ) | ||||
| Net cash used in operating activities | (7,611 | ) | (8,528 | ) | ||||
| Investing activities: | ||||||||
| Proceeds of disposal of Canadian Operations (note 1) | 190 | – | ||||||
| Purchase of property and equipment | (68 | ) | (202 | ) | ||||
| Purchase of intangible assets | (12 | ) | – | |||||
| Net cash provided by (used in) investing activities | 110 | (202 | ) | |||||
| Financing activities: | ||||||||
| Issuance of common stock (note 12) | 8,347 | – | ||||||
| Share issue costs | (405 | ) | – | |||||
| Issuance of common stock upon exercise of stock options | – | 258 | ||||||
| Income tax withholdings on vesting of restricted share units | – | (21 | ) | |||||
| Financing fees on issuance of long-term debt | – | (21 | ) | |||||
| Net cash provided by financing activities | 7,942 | 216 | ||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash during the period | 441 | (8,514 | ) | |||||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | (110 | ) | 91 | |||||
| Cash, cash equivalents, and restricted cash, beginning of period | 17,570 | 24,181 | ||||||
| Cash, cash equivalents, and restricted cash, end of period (note 5) | $ | 17,901 | $ | 15,758 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 892 | $ | 897 | ||||
| Cash paid for income taxes | – | 16 | ||||||
See accompanying notes to the interim consolidated financial statements.
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
1. Basis of presentation:
Correvio Pharma Corp. (the “Company” or “Correvio”) was incorporated on March 7, 2018 under the laws of the Canada Business Corporations Act as part of a court approved Plan of Arrangement (the “Arrangement”) to reorganize Cardiome Pharma Corp. (“Cardiome”). The Company’s head office is located at 1441 Creekside Drive, Vancouver, BC, V4S 4J7.
Pursuant to the Arrangement effective May 15, 2018, substantially all of the assets and liabilities of Cardiome excluding its Canadian business portfolio were transferred to Correvio and the shareholders of Cardiome received common shares, on a one-for-one basis, of Correvio. Immediately following the reorganization of Cardiome, Cipher Pharmaceuticals Inc. (“Cipher”) acquired the Canadian business portfolio of Cardiome on May 15, 2018 by way of the acquisition of all of the issued and outstanding commons shares of Cardiome for an aggregate cash consideration in Canadian dollars (C$) of C$25,500. The Canadian income tax losses and other Canadian tax pools of Cardiome remained with Cardiome and were sold to Cipher. Cardiome’s management team and employees became employees of the Company and assumed the same positions they occupied in Cardiome. As a result of the Arrangement, the Company holds all of Cardiome’s pre-transaction assets and assumed liabilities, excluding the Canadian business portfolio acquired by Cipher effective May 15, 2018. In the second quarter of 2018, the Company recorded a gain of $18,489, from its disposition of the Canadian business portfolio and the related tax balances.
The consolidated financial statements for all periods presented herein include the consolidated operations of Cardiome until May 15, 2018 and the operations of the Company thereafter. As a non-recurring related party transaction between companies under common control at the time of the Arrangement, the assets and liabilities were transferred at their carrying values using the continuity-of-interests method of accounting. For accounting purposes, the Company is considered to have continued Cardiome’s pharmaceutical business that was transferred; accordingly, these consolidated financial statements include the consolidated historical operations and changes in the consolidated financial position of Cardiome to May 15, 2018 and those of the Company thereafter. Reference in these consolidated financial statements to “the Company” refers to “Cardiome” prior to May 15, 2018.
Correvio (including its former parent Cardiome until May 15, 2018) is a specialty pharmaceutical company dedicated to offering patients and healthcare providers innovative therapeutic options that effectively and conveniently manage acute medical conditions to improve health and quality of life. Correvio strives to find innovative, differentiated medicines that provide therapeutic and economic value to patients, physicians and healthcare systems. Correvio currently has two marketed, in-hospital cardiology products, Brinavess® (vernakalant IV), for the rapid conversion of recent onset atrial fibrillation to sinus rhythm in adults, and Aggrastat® (tirofiban HCl), a reversible GP IIb/IIIa inhibitor indicated for use in patients with acute coronary syndrome, which are commercially available in markets outside of the United States. Correvio has licensed a European-approved antibiotic, Xydalba™ (dalbavancin), a second generation, semi-synthetic
| 2 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
1. Basis of presentation (continued):
lipoglycopeptide for the treatment of acute bacterial skin and skin structure infections in adults. Correvio has also licensed Zevtera®/Mabelio® (ceftobiprole medocaril sodium), a cephalosporin antibiotic for the treatment of community-acquired and hospital-acquired pneumonia. In addition, Correvio has also licensed commercialization rights to a pre-registration drug/device combination product, Trevyent®, for the treatment of pulmonary arterial hypertension in certain regions outside the United States and commercialization rights to cardiology products Esmocard® and Esmocard Lyo® (esmolol hydrochloride), a short-acting beta-blocker used to control rapid heart rate in a number of cardiovascular indications, in certain European countries.
As of March 31, 2019, the Company had $15,962 in cash and cash equivalents, compared to $15,596 at December 31, 2018. The Company has a history of incurring operating losses and negative cash flows from operations. Based on current projections, the Company may not have sufficient capital to fund its current planned operations during the twelve-month period subsequent to the issuance of these consolidated financial statements. The Company is dependent on its ability to raise additional debt or equity financing or monetize intellectual property rights through strategic partnerships or sublicensing arrangements and to meet revenue covenants in order to meet its current planned operations during the twelve-month period subsequent to the issuance of these consolidated financial statements. There can be no assurance that the Company will be able to raise such additional financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the consolidated financial statements issuance date. The accompanying financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Summary of significant accounting policies:
The accounting policies and methods of computation applied by the Company in these interim consolidated financial statements are the same as those applied in the Company’s annual financial statements as at and for the year ended December 31, 2018, except as described below.
On January 1, 2019, the Company adopted Accounting Standards Update No. (“ASU”) 2016-02, “Leases”, which requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet, for the rights and obligations created by those leases. In July 2018, the FASB issued ASU 2018-11, “Leases”, which offered a transition option where companies could elect to apply the guidance using a modified retrospective approach at the beginning of the year of adoption rather than to the earliest comparative period presented in the financial statements. The Company adopted the new leasing standard on January 1, 2019 using the modified retrospective approach and used the effective date as its date of initial application. A cumulative catch-up adjustment was not required on the date of adoption. The Company elected the package of practical expedients which permits the Company to not reassess under its prior conclusions about lease identification, lease classification and initial direct costs. For leases with
| 3 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
2. Summary of significant accounting policies (continued):
an initial term of less than 12 months, the Company has elected not to recognize right-of-use assets and liabilities for any class of asset. The Company has elected a policy to account for lease and non-lease components as a single component for all asset classes. In general, the Company accounts for the underlying leased asset and applies a discount rate at the lease level. However, for vehicle leases, the Company utilizes the portfolio method by aggregating similar leased assets based on the underlying lease term (note 10).
3. Recent accounting pronouncements:
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”. ASU 2017-04 eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure the goodwill impairment. The goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the revised guidance to determine whether there will be any impact on its consolidated financial statements.
4. Financial instruments:
Financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, and long-term debt. The fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate carrying values because of their short-term nature. The Company’s long-term debt is recorded under the effective interest method (note 11). The fair value of long-term debt approximates its carrying value because there have been no significant changes in interest rates or the creditworthiness of the Company since the debt was last amended in March 2018. The long-term debt is classified as Level 2 of the fair value hierarchy.
The Company’s financial instruments are exposed to certain financial risks, including credit risk and market risk.
(a) Credit risk:
Credit risk is the risk of financial loss to the Company if a partner or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s cash and cash equivalents and accounts receivable. The carrying amount of the financial assets represents the maximum credit exposure.
The Company limits its exposure to credit risk on cash and cash equivalents by placing these financial instruments with high-credit quality financial institutions.
The Company is subject to credit risk related to its accounts receivable. The majority of the Company’s accounts receivable arise from product sales which are primarily due from drug
| 4 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
4. Financial instruments (continued):
distributors and hospitals. The Company monitors the creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile.
(b) Market risk:
Market risk is the risk that changes in market prices, such as foreign currency exchange rates and interest rates will affect the Company’s income or the value of the financial instruments held.
(i) Foreign currency risk:
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk as a portion of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, revenue, and operating expenses are denominated in other than U.S. dollars. The Company manages foreign currency risk by holding cash and cash equivalents in foreign currencies to support forecasted foreign currency cash outflows. The Company has not entered into any forward foreign exchange contracts.
(ii) Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial instruments that potentially subject the Company to interest rate risk include cash and cash equivalents.
The Company is exposed to interest rate cash flow risk on its cash and cash equivalents as these instruments bear interest based on current market rates.
| 5 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
5. Restricted cash:
At March 31, 2019, the Company held restricted cash relating to deposits which are pledged as collateral for bank guarantees for sales contracts with various hospitals and health authorities of $1,706 (December 31, 2018 - $1,739) and for operating lease arrangements of $233 (December 31, 2018 - $235).
The following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the amounts shown in the interim consolidated statement of cash flows:
| March 31, 2019 | December 31, 2018 | |||||||
Cash and cash equivalents | $ | 15,962 | $ | 15,596 | ||||
| Restricted cash | 1,939 | 1,974 | ||||||
| Cash, cash equivalents, and restricted cash | $ | 17,901 | $ | 17,570 | ||||
6. Inventories:
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Finished goods | $ | 3,513 | $ | 3,288 | ||||
| Work in process | 524 | 586 | ||||||
| Raw materials | 2,091 | 1,947 | ||||||
| Inventories | $ | 6,128 | $ | 5,821 | ||||
| Less: current | (4,460 | ) | (4,158 | ) | ||||
| Long-term inventories | $ | 1,668 | $ | 1,663 | ||||
During the three months ended March 31, 2019, the Company had a write-down of inventory of $50 (three months ended March 31, 2018 - $118).
| 6 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
7. Property and equipment:
| March 31, 2019 | Cost | Accumulated amortization | Net book value | |||||||||
| Production equipment | $ | 67 | $ | 46 | $ | 21 | ||||||
| Software | 55 | 55 | – | |||||||||
| Computer equipment | 229 | 144 | 85 | |||||||||
| Leasehold improvements | 639 | 228 | 411 | |||||||||
| Furniture and office equipment | 177 | 155 | 22 | |||||||||
| $ | 1,167 | $ | 628 | $ | 539 | |||||||
| December 31, 2018 | Cost | Accumulated amortization | Net book value | |||||||||
| Production equipment | $ | 67 | $ | 42 | $ | 25 | ||||||
| Software | 55 | 55 | – | |||||||||
| Computer equipment | 231 | 138 | 93 | |||||||||
| Leasehold improvements | 574 | 209 | 365 | |||||||||
| Furniture and office equipment | 177 | 148 | 29 | |||||||||
| $ | 1,104 | $ | 592 | $ | 512 | |||||||
Amortization and depreciation expense for the three months ended March 31, 2019 amounted to $36 (three months ended March 31, 2018 - $27).
| 7 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
8. Intangible assets:
| Accumulated | Net book | |||||||||||
| March 31, 2019 | Cost | amortization | value | |||||||||
| Licenses | $ | 22,115 | $ | 4,797 | $ | 17,318 | ||||||
| Marketing rights | 14,746 | 7,883 | 6,863 | |||||||||
| Trade name | 1,054 | 579 | 475 | |||||||||
| Patents | 4,061 | 3,670 | 391 | |||||||||
| $ | 41,976 | $ | 16,929 | $ | 25,047 | |||||||
| Accumulated | Net book | |||||||||||
| December 31, 2018 | Cost | amortization | value | |||||||||
| Licenses | $ | 22,538 | $ | 4,360 | $ | 18,178 | ||||||
| Marketing rights | 15,028 | 7,667 | 7,361 | |||||||||
| Trade name | 1,074 | 564 | 510 | |||||||||
| Patents | 4,126 | 3,706 | 420 | |||||||||
| $ | 42,766 | $ | 16,297 | $ | 26,469 | |||||||
In September 2017, the Company announced the execution of a distribution and license agreement with Basilea Pharmaceutica International Ltd. (“Basilea”), for the rights to commercialize Zevtera®/Mabelio® (ceftobiprole medocaril sodium) in 34 European countries and Israel. As consideration for the rights and licenses granted, the Company made a non-refundable payment to Basilea of CHF 5,000 ($5,200). During the year ended December 31, 2018, the Company accrued $281 for a milestone payment as the Company assessed that it was probable that a pre-determined level of annual net sales for future years would be achieved. The milestone payment has been recorded in accrued liabilities. Additional non-refundable milestone payments may be due to Basilea upon the Company’s achievement of various milestones. Additional milestone payments may also be due to Basilea based on achievement of pre-determined levels of annual net sales. The license is being amortized over the life of the agreement of 15 years.
As part of the Arrangement (note 1), the Company divested its Canadian business portfolio, which included $1,349 in licenses, to Cipher. A gain on disposal of this Canadian business portfolio of $18,489 was recognized in the second quarter of 2018.
Amortization and depreciation expense for the three months year ended March 31, 2019 amounted to $948 (three months ended March 31, 2018 - $ 928).
| 8 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
| 9. | Accounts payable and accrued liabilities: |
| March 31, 2019 | December 31, 2018 | |||||||
| Trade accounts payable | $ | 5,234 | $ | 4,213 | ||||
| Employee-related accruals | 2,404 | 3,249 | ||||||
| Other accrued liabilities | 3,455 | 1,941 | ||||||
| $ | 11,093 | $ | 9,403 | |||||
10. Leases:
The Company leases office space, vehicles, and certain equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
| For the three months ended March 31, 2019 | ||||
| Operating lease cost | $ | 226 | ||
| Variable lease cost | $ | 122 | ||
| Cash paid for amounts included in the measurement of operating lease liabilities: | ||||
| Operating cash flows from operating leases | $ | (232 | ) | |
| Leases | March 31, 2019 | |||
| Right-of-use assets from operating leases | $ | 2,294 | ||
| Current operating lease liabilities | $ | 726 | ||
| Long-term operating lease liabilities | $ | 1,816 | ||
| Weighted average remaining operating lease term (years) | 4.3 years | |||
| Weighted average operating lease discount rate | 6.1 | % | ||
| 9 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
10. Leases (continued):
Future annual minimum lease payments as of March 31, 2019 are as follows:
| Operating leases | ||||
| 2019 (excluding the three months ended March 31, 2019) | $ | 682 | ||
| 2020 | 799 | |||
| 2021 | 637 | |||
| 2022 | 434 | |||
| 2023 | 206 | |||
| Thereafter | 185 | |||
| Total minimum lease payments | 2,943 | |||
| Less imputed interest | (401 | ) | ||
| Total lease liability | $ | 2,542 | ||
As at December 31, 2018, future annual minimum lease payments were as follows:
| 2019 | $ | 937 | ||
| 2020 | 754 | |||
| 2021 | 347 | |||
| 2022 | 199 | |||
| 2023 | 185 | |||
| Thereafter | 170 | |||
| Total minimum lease payments | $ | 2,592 |
| 10 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
11. Long term debt:
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Long-term debt, net of unamortized debt issuance costs | $ | 42,315 | $ | 41,517 | ||||
| Less: current portion | – | – | ||||||
| Long-term debt, net of unamortized debt issuance costs | $ | 42,315 | $ | 41,517 | ||||
On June 13, 2016, the Company entered into a term loan agreement with CRG-managed funds (“CRG”) for up to $30,000 consisting of three tranches bearing interest at 14% per annum. The first tranche of $20,000 was drawn at closing and was used to extinguish long-term debt for general corporate purposes. The second and third tranches of $5,000 each were never drawn.
On May 11, 2017, the Company amended the terms of its term loan agreement (the “first amendment”). Under the terms of the amended agreement, up to $50,000 was available to the Company consisting of four tranches bearing interest at 13% per annum. The first tranche of $20,000 was drawn on June 13, 2016 when the Company entered into the original term loan agreement, and a second tranche of $10,000 was drawn on the date of the first amendment. A third tranche of $10,000 was drawn on August 8, 2017. The fourth tranche of up to $10,000 was never drawn. The loan matures on March 31, 2022 and is secured by substantially all of the assets of the Company. Under the terms of the amended agreement, an interest-only period is provided such that principal repayment begins in June 2020. If certain revenue milestones are met by the Company, the interest-only period may be extended such that there is only one principal payment at maturity.
Interest is payable on a quarterly basis through the full term of the loan. Interest payments may be split, at the Company’s option, between 9% per annum cash interest and 4% per annum paid in-kind interest in the form of additional term loans until March 31, 2020. Subsequent to March 31, 2020, interest shall be payable entirely in cash. If certain revenue milestones are met by the Company, the period in which the Company, at its option, may split its interest payments between 9% per annum cash interest and 4% per annum paid in-kind interest in the form of additional term loans may be extended to March 31, 2022. During the three months ended March 31, 2019, the Company accrued in-kind interest of $425 (three months ended March 31, 2018 - $408). The face value of the Company’s long-term debt at March 31, 2019 is $42,882 (December 31, 2018 - $42,457). On the maturity date, a back-end facility fee of 8% of the aggregate amount of the term loan will be payable to CRG, including the impact of any amounts accrued as paid in-kind interest. As a result, the Company is accruing the amount up to $46,312 under the effective interest method which will be the amount payable at maturity. The effective interest rate of the long-term debt is 17%.
| 11 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
11. Long term debt (continued):
The Company is required to meet certain annual revenue covenants. If the revenue covenants are not met, the Company may exercise a cure right within 90 days of year-end by issuing additional common shares in exchange for cash or by borrowing subordinated debt in an amount equal to two times the difference between the minimum required revenue and the Company’s revenue. The cash received from the cure right would be used to repay the principal. On March 27, 2018, the Company entered into an agreement with CRG to amend the terms of the loan to adjust the annual revenue covenants (the “second amendment”). In consideration for the second amendment, the Company issued 800,000 warrants with a strike price of $2.50 per common share to CRG as of the date of the second amendment. The warrants have a term of 5 years and are classified as equity. The warrants were fair valued at $936 using the Black-Scholes model and are being accounted for as a discount to the long-term debt on a proportionate basis to the fair value of the entire long-term debt as of the date of the amended agreement. The discount is being amortized to interest expense over the life of the amended agreement under the effective interest method. The Company was in compliance with the amended annual revenue covenants for the years ended December 31, 2018 and 2017.
On March 11, 2019, the Company further amended its term loan agreement with CRG for an additional credit facility of $10,000, to be drawn at the discretion of the Company, in increments of $2,500 through September 30, 2019, subject to the achievement of certain revenue and market capitalization requirements. The facility will bear interest at 13% per annum and will carry the same terms and conditions as the term loan agreement. As consideration for this credit facility, the Company made a one-time payment of $250 to CRG.
| 12 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
12. Share capital:
Issued and outstanding:
Common shares | Number of shares | |||
Balance, December 31, 2018 | 36,233,162 | |||
| Issued through at-the-market offering(i) | 2,970,781 | |||
| Issued through at-the-market offering(ii) | 625,000 | |||
| Issued upon exercise of options in cashless transaction | 15,654 | |||
| Issued upon vesting of restricted share units | 9,572 | |||
| Balance, March 31, 2019 | 39,854,169 | |||
| (i) | On July 5, 2018, the Company filed a short form base shelf prospectus with the securities regulatory authorities in Canada, other than Quebec, and the United States Securities and Exchange Commission under a registration statement on Form F-10 (together, the “Base Shelf Prospectuses”). The Base Shelf Prospectuses provide for the potential offering in Canada and the United States of up to an aggregate of $250,000 of the Company’s common shares, preferred shares, debt securities, warrants, subscription receipts and units from time to time over a 25-month period. |
On July 10, 2018, the Company filed a prospectus supplement pertaining to sales under an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B. Riley FBR, Inc. (“BRFBR”). Under the terms of the ATM Sales Agreement, the Company could sell through at-the-market offerings, with BRFBR as agent, such common shares as would have an aggregate offer price of up to $30,000, subject to an aggregate maximum of $13,000 that may be offered and sold under the prospectus supplement. During the three months ended March 31, 2019, the Company sold 2,970,781 common shares for gross proceeds of $6,347. The ATM Sales Agreement with BRFBR was terminated on March 1, 2019.
| (ii) | On March 13, 2019, the Company filed a prospectus supplement pertaining to sales under an ATM Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”). Under the terms of the ATM Sales Agreement, the Company could sell through at-the-market offerings, with Cantor as agent, such common shares as would have an aggregate offer price of up to $50,000, subject to an aggregate maximum of $12,000 that may be offered and sold under the prospectus supplement. During the three months ended March 31, 2019, the Company sold 625,000 common shares for gross proceeds of $2,000. As at March 31, 2019, $10,000 remains available for issuance under this prospectus supplement. |
| 13 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
13. Share-based compensation:
(a) Stock options:
Details of the stock option transactions for the three months ended March 31, 2019 are summarized as follows:
| Number | Weighted average exercise price (CAD$) | Weighted average remaining contractual life (years) | Aggregate intrinsic value (CAD$) | |||||||||||||
| Outstanding as at December 31, 2018 | 3,519,874 | 5.04 | 3.07 | 820 | ||||||||||||
| Options granted | 1,105,000 | 5.22 | ||||||||||||||
| Options exercised | (62,500 | ) | 4.01 | |||||||||||||
| Outstanding as at March 31, 2019 | 4,562,374 | 5.08 | 2.97 | 1,937 | ||||||||||||
| Exercisable as at March 31, 2019 | 2,914,829 | 5.34 | 2.13 | 1,331 | ||||||||||||
The outstanding options expire at various dates ranging from August 13, 2019 to March 15, 2024. During the three months ended March 31, 2019, 400,000 stock options were conditionally granted and are subject to shareholder approval. If shareholder approval is not obtained, these stock options will be deemed null and void.
| 14 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
13. Share-based compensation (continued):
At March 31, 2019, stock options to executive officers and directors, employees and consultants were outstanding as follows:
| Options outstanding | Options exercisable | |||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||
| average | average | average | ||||||||||||||||||
| remaining | exercise | exercise | ||||||||||||||||||
| Range of | contractual | price | price | |||||||||||||||||
| exercise prices (CAD$) | Number | life (years) | (CAD$) | Number | (CAD$) | |||||||||||||||
| $2.49 to $3.28 | 975,000 | 3.04 | 2.51 | 639,566 | 2.50 | |||||||||||||||
| $3.29 to $4.88 | 1,222,000 | 2.56 | 4.23 | 1,006,234 | 4.20 | |||||||||||||||
| $4.89 to $5.69 | 1,237,500 | 4.83 | 5.20 | 168,358 | 5.08 | |||||||||||||||
| $5.70 to $12.99 | 1,127,874 | 1.32 | 8.09 | 1,100,671 | 8.09 | |||||||||||||||
| 4,562,374 | 2.97 | 5.08 | 2,914,829 | 5.34 | ||||||||||||||||
At March 31, 2019, there was $2,359 (December 31, 2018 - $536) of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 1.5 years (December 31, 2018 - 1.1 years).
The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2019 was $63 (three months ended March 31, 2018 - $98).
The aggregate fair value of vested options during the three months ended March 31, 2019 was $826 (three months ended March 31, 2018 - $293).
For the three months ended March 31, 2019, $601 was recorded as stock-based compensation expense with $9 being recorded against liability and $592 being recorded against additional paid-in capital (three months ended March 31, 2018 - $323 was recorded as stock-based compensation expense with $52 being recorded against liability and $271 being recorded against additional paid-in capital).
The weighted average fair value of stock options granted during the three months ended March 31, 2019 was $2.12 (three months ended March 31, 2018 - $0.94). The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:
| 15 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
13. Share-based compensation (continued):
| Three months ended March 31 | 2019 | 2018 | ||||||
Dividend yield | – | – | ||||||
| Expected volatility | 71.0 | % | 61.8 | % | ||||
| Risk-free interest rate | 2.3 | % | 2.1 | % | ||||
| Expected average life of the options | 4.0 years | 4.0 years | ||||||
| Estimated forfeiture rate | – | – | ||||||
There is no dividend yield as the Company has not paid, and does not plan to pay, dividends on its common shares. The expected volatility is based on the historical share price volatility of the Company’s daily share closing prices over a period equal to the expected life of each option grant. The risk-free interest rate is based on yields from Canadian government bond yields with a term equal to the expected term of the options being valued. The expected life of options represents the period of time that the options are expected to be outstanding based on the contractual term of the options and on historical data of option holder exercise and post-vesting employment termination behaviour. Forfeitures are estimated at the time of grant and, if necessary, management revises that estimate if actual forfeitures differ and adjusts stock-based compensation expense accordingly.
(b) Restricted share unit plan:
Details of RSU transactions for the three months ended March 31, 2019 are summarized as follows:
| Number | Weighted average grant date fair value (USD$) | Weighted average remaining contractual life (years) | Aggregate intrinsic value (USD$) | |||||||||||||
| Outstanding as at December 31, 2018 | 48,488 | $ | 2.63 | 2.50 | $ | 119 | ||||||||||
| RSUs granted | 88,751 | 3.78 | 336 | |||||||||||||
| RSUs vested | (9,572 | ) | 2.34 | 38 | ||||||||||||
| RSUs forfeited | (434 | ) | 2.39 | |||||||||||||
| Outstanding as at March 31, 2019 | 127,233 | $ | 3.45 | 2.74 | $ | 403 | ||||||||||
At March 31, 2019, there was $284 (December 31, 2018 - $76) of total unrecognized compensation cost related to non-vested RSUs. That cost is expected to be recognized over a weighted average period of 2.8 years (December 31, 2018 - 2.4 years).
| 16 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
13. Share-based compensation (continued):
RSUs are valued at the market price of the underlying securities on the grant date and the compensation expense, based on the estimated number of awards expected to vest, is recognized on a straight-line basis over the three-year vesting period. For the three months ended March 31, 2019, stock-based compensation expense related to RSUs of $17 (three months ended March 31, 2018 - $72) was recorded in selling, general and administration expenses and recorded against additional paid-in capital.
14. Contingencies:
| (a) | The Company may, from time to time, be subject to claims and legal proceedings brought against it in the normal course of business. Such matters are subject to many uncertainties. Management believes that adequate provisions have been made in the accounts where required and the ultimate resolution of such contingencies will not have a material adverse effect on the consolidated financial position of the Company. |
| (b) | The Company entered into indemnification agreements with all officers and directors. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains appropriate liability insurance that limits the exposure and enables the Company to recover any future amounts paid, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material. |
| (c) | The Company has entered into license and research agreements with third parties that include indemnification provisions that are customary in the industry. These indemnification provisions generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party claims or damages arising from these transactions. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions is unlimited. These indemnification provisions may survive termination of the underlying agreement. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations. |
| 17 |
CORREVIO PHARMA CORP. (formerly Cardiome Pharma Corp.) Notes to Interim Consolidated Financial Statements (In thousands of U.S. dollars except share and per share amounts and where otherwise indicated) (Unaudited)
As at March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018 |
15. Segmented information:
Revenue is earned through the sale of the Company’s commercialized products. The Company recognizes segmentation based on geography as follows:
| Three months ended March 31, 2019 | Europe | Rest of World | Total | |||||||||
Revenue | $ | 5,298 | $ | 1,953 | $ | 7,251 | ||||||
| Cost of goods sold | 1,789 | 452 | 2,241 | |||||||||
| Gross margin | 3,509 | 1,501 | 5,010 | |||||||||
| Three months ended March 31, 2018 | Europe | Rest of World | Total | |||||||||
Revenue | $ | 4,073 | $ | 2,470 | $ | 6,543 | ||||||
| Cost of goods sold | 1,510 | 791 | 2,301 | |||||||||
| Gross margin | 2,563 | 1,679 | 4,242 | |||||||||
The following table presents the Company’s revenues disaggregated by revenue source:
| For the three months ended March 31 | 2019 | 2018 | ||||||
| Cardiology | $ | 4,677 | $ | 5,253 | ||||
| Antibiotic | $ | 2,574 | 1,290 | |||||
| $ | 7,251 | $ | 6,543 | |||||
During the three months ended March 31, 2019, two customers individually accounted for more than 10% of total revenue. In 2019, these two customers accounted for 13% and 10% of total revenue. During the three months ended March 31, 2018, two customers individually accounted for more than 10% of total revenue. In 2018, these two customers each accounted for 15% of total revenue.
| 18 |
Exhibit 99.3
Form 51-102F3
MATERIAL CHANGE REPORT
| Item 1. | Name and Address of Reporting Issuer |
|
Correvio Pharma Corp. (“Correvio” or the “Corporation”, formerly known as Cardiome Pharma Corp.) 1441 Creekside Drive, 6th floor Vancouver, BC V6J 4S7 | |
| Item 2. | Date of Material Change |
| May 8, 2019. | |
| Item 3. | News Release |
| Correvio issued a news release with respect to the material change on May 8, 2019. The news release was disseminated via PR Newsire and subsequently filed on Correvio’s SEDAR profile. | |
| Item 4. | Summary of Material Change |
| Correvio reported financial results for its first quarter ended March 31, 2019. Amounts, unless specified otherwise, are expressed in U.S. dollars and in accordance with generally accepted accounting principles used in the United States of America (U.S. GAAP). | |
| Item 5. | 5.1 - Full Description of Material Change |
| See attached press release. | |
| 5.2 - Disclosure for Restructuring Transactions | |
| Not applicable. | |
| Item 6. | Reliance on subsection 7.1(2) of National Instrument 51-102 |
| Not applicable. | |
| Item 7. | Omitted Information |
| Not applicable. | |
| Item 8. | Executive Officer |
|
Justin Renz, President and Chief Financial Officer Telephone: 604-677-6905. | |
| Item 9. | Date of Report |
| This Material Change Report is dated May 8, 2019. |
NASDAQ: CORV TSX: CORV
Correvio Reports FIRST Quarter 2019 FINANCIAL Results
Mark H.N. Corrigan, MD Commences Role as CEO, effective March 14, 2019
Company on Track to Resubmit Brinavess NDA in Q2 2019
Management to Host Conference Call and Webcast Today,
May 8, 2019 at 8:30 a.m. Eastern (5:30 a.m. Pacific)
Vancouver, Canada, May 8, 2019 - Correvio Pharma Corp. (NASDAQ: CORV / TSX: CORV), a specialty pharmaceutical company focused on commercializing hospital drugs, today reported financial results for its first quarter ended March 31, 2019 and commented on recent accomplishments and plans.
“2019 is off to a strong start with first quarter revenues up 16% year-over-year in local currencies,” commented Mark H.N. Corrigan, MD, CEO of Correvio. “Our first quarter revenues from Xydalba and Zevtera doubled year-over-year. Looking ahead, we remain on track to resubmit the New Drug Application seeking approval in the U.S. for BrinavessTM as a new treatment for adult patients with recent onset atrial fibrillation during the second quarter of 2019.”
First Quarter 2019 and Recent Highlights
Zevtera®/Mabelio® and Xydalba™
| • | Twenty-two abstracts were presented at the 29th European Congress of Clinical Microbiology and Infectious Disease (ECCMID) highlighting clinical, preclinical and surveillance data for Correvio’s marketed anti-infective assets, Xydalba (dalbavancin hydrochloride) and Zevtera/Mabelio (ceftobiprole). For Xydalba, the presentations highlighted areas of unmet need and preliminary data in treatment areas of interest beyond acute bacterial skin and skin structure infections (ABSSSI), the indication Xydalba is currently marketed for in France, Germany, the UK, the Republic of Ireland, the Netherlands, Belgium, Finland and Sweden. Key Zevtera/Mabelio (ceftobiprole) presentations featured important preclinical research conducted in new treatment areas of interest, including in resistant bloodstream infections. Correvio currently markets ceftobiprole under the brand name Mabelio in Italy and France and under the brand name Zevtera in the UK, Germany, Spain, Austria and Switzerland. |
Brinavess®
| • | New Brinavess (vernakalant hydrochloride, IV) data were presented at the American College of Cardiology 2019 Annual Meeting. This poster presentation highlighted reduced hospitalization in patients treated with Brinavess, Correvio’s antiarrhythmic drug for the rapid conversion of recent onset atrial fibrillation (AF), from a clinical survey assessing patients with acute AF at the Hillel Yaffe Medical Center located in Hadera, Israel. The data demonstrated that treatment with Brinavess had an overall conversion rate to sinus rhythm of 74% (75 out of 101 patients). These data were also presented at the 23rd Israeli Congress for Emergency Medicine in Tel Aviv, Israel. |
| • | Clinical data highlighting the low rate of hospitalization in patients treated with Brinavess (vernakalant hydrochloride, IV), its antiarrhythmic drug for the rapid conversion of recent onset AF, were presented at the Belgian Society of Cardiology 2019 Annual Congress in Brussels, Belgium. The presentation included data from a clinical survey assessing patients with acute AF treated with Brinavess in Belgian hospitals. The data demonstrated that treatment with Brinavess successfully avoided hospitalization for 85.4% of all treated patients. Treatment with Brinavess also significantly decreased the use of electric cardioversion, with 84.1% of patients avoiding electric cardioversion. |
Corporate and Financial
| • | Mark H.N. Corrigan, MD, took over as Chief Executive Officer, effective March 14, 2019. Dr. Corrigan has served on the Company’s Board of Directors since 2015. He brings more than 25 years of pharmaceutical research, development and regulatory experience in both the U.S. and international markets and has been involved in the successful development and approval of numerous branded drugs during his career, including Zyvox®, Rescriptor®, Corvert®, Mirapex®, Lunesta®, Camptosar®, Xalatan® and Xopenex®, among others. After a successful 6-year tenure as President and Chief Executive Officer, William Hunter, MD, transitioned out of that role at the end of the first quarter of 2019, but will remain a member of the Company’s Board of Directors. |
| • | Justin Renz, Chief Financial Officer, assumed the responsibilities of President and Vanda De Cian, MD, joined the Board of Directors. Dr. De Cian was also appointed as a member of the Governance and Nominating Committee and Compensation Committee. |
| • | Correvio entered into an At the Market Sales Issuance Agreement with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may, from time to time sell, through “at-the-market” offerings on the Nasdaq Capital Market, or another existing trading market in the United States with Cantor as agent, such number of common shares as would have an aggregate offer price of up to $50.0 million (USD) subject to an initial limit of $12.0 million (USD). |
| • | Correvio amended its agreement with CRG Servicing LLC ("CRG") managed funds dated May 11, 2017 (the “Amending Agreement”), providing for up to an additional $10 million in capital available on similar terms as the pre-amendment agreement. The additional funding may be drawn at Correvio’s discretion in increments of $2.5 million through September 30, 2019 and there will be prepayment premium associated with any such draw-down. |
First Quarter 2019 Financial Results
Amounts, unless specified otherwise, are expressed in U.S. dollars and in accordance with generally accepted accounting principles used in the United States of America (U.S. GAAP).
Correvio recorded a net loss of $9.0 million (basic loss per share of $0.23) for the three months ended March 31, 2019, compared to a net loss of $8.5 million (basic loss per share of $0.24) for the three months ended March 31, 2018. The increase in net loss was due primarily to an increase in interest expense and foreign exchange losses, partially offset by an increase in revenue.
Revenue for the three months ended March 31, 2019 was $7.3 million, compared to revenue of $6.5 million for the three months ended March 31, 2018. The 11% increase in revenue was primarily due to increased antibiotic product sales. Xydalba and Zevtera combined for approximately $2.6 million in revenue in the first quarter of 2019, compared to approximately $1.3 million in the first quarter of 2018. Direct market sales for the three months ended March 31, 2019, increased by approximately 17% year-over-year from $3.8 million to $4.4 million. Distributor sales for the three months ended March 31, 2019, increased by approximately 2% year-over-year.
Cost of goods sold (“COGS”) for the three months ended March 31, 2019 was $2.2 million, compared to COGS of $2.3 million for the three months ended March 31, 2018.
SG&A expense for the three months ended March 31, 2019 was $11.2 million, compared to $10.9 million for the three months ended March 31, 2018. The increase in SG&A expense was due to an increase in stock-based compensation expense.
Interest expense was $1.7 million for the three months ended March 31, 2019, compared to $1.1 million for the three months ended March 31, 2018. The increase was due to interest being accrued on a higher long-term debt principal amount under the CRG Term Loan during the three months ended March 31, 2019 as well as an increase in the accretion of our long-term debt under the effective interest method which is recorded as interest expense.
Liquidity and Outstanding Share Capital
At March 31, 2019, the Company had cash and cash equivalents of $16.0 million. As of May 7, 2019, there were 39,854,667 common shares issued and outstanding, and 4,562,374 common shares issuable upon the exercise of outstanding stock options (of which 2,989,861 were exercisable) at a weighted average exercise price of CAD $5.10 per share, and 128,402 restricted share units outstanding.
Conference Call
Correvio will hold a teleconference and webcast on May 8, 2019 at 8:30 a.m. Eastern (5:30 a.m. Pacific). To access the conference call, please dial 416-764-8688 or 888-390-0546 and use conference ID 06912690. The webcast can be accessed through the following link:
https://event.on24.com/wcc/r/1990156/ED2B6FC2DB221FB04C9C654C8CA75B2B
Webcast and telephone replays of the conference call will be available approximately two hours after the completion of the call through May 22, 2019. Please dial 416-764-8677 or 888-390-0541 and enter code 912690 # to access the replay.
About Correvio Pharma Corp.
Correvio Pharma Corp. is a specialty pharmaceutical company focused on providing innovative, high quality brands that meet the needs of acute care physicians and patients. With a commercial presence and distribution network covering over 60 countries worldwide, Correvio develops, acquires and commercializes brands for the in-hospital, acute care market segment. The Company’s portfolio of approved and marketed brands includes: Xydalba™ (dalbavancin hydrochloride), for the treatment of acute bacterial skin and skin structure infections (ABSSSI); Zevtera®/Mabelio® (ceftobiprole medocaril sodium), a cephalosporin antibiotic for the treatment of community- and hospital-acquired pneumonia (CAP, HAP, excluding ventilator-associated pneumonia, VAP); Brinavess®™ (vernakalant IV) for the rapid conversion of recent onset atrial fibrillation to sinus rhythm; Aggrastat® (tirofiban hydrochloride) for the reduction of thrombotic cardiovascular events in patients with acute coronary syndrome, and Esmocard® and Esmocard Lyo® (esmolol hydrochloride), a short-acting betablocker used to control rapid heart rate in a number of cardiovascular indications. Correvio’s pipeline of product candidates includes Trevyent®, a drug device combination that is designed to deliver treprostinil, the world’s leading treatment for pulmonary arterial hypertension.
Correvio is traded on the NASDAQ Capital Market (CORV) and the Toronto Stock Exchange (CORV). For more information, please visit our web site www.correvio.com.
Forward-Looking Statement Disclaimer
Certain statements in this news release contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 or “forward-looking information” under applicable Canadian securities legislation (collectively, "forward-looking statements"). Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs and other information that may not be based on historical fact. Forward-looking statements can often be identified by the use of terminology such as "believe", "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect", “look forward to” and similar expressions. Forward-looking statements are necessarily based on estimates and assumptions made by us based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate.
By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. These forward-looking statements include, but are not limited to, our possible regulatory path forward with Brinavess in the U.S., including the resubmission of a New Drug Application and the timing of such resubmission. A detailed discussion of the risks and uncertainties facing Correvio are discussed in the annual report and detailed from time to time in our other filings with the Securities and Exchange Commission ("SEC") available at www.sec.gov and the Canadian securities regulatory authorities at www.sedar.com. In particular, we direct your attention to Correvio's Annual Report on Form 40-F for the year ended December 31, 2018. All of the risks and certainties disclosed in those filings are hereby incorporated by reference in their entirety into this news release.
While Correvio makes these forward-looking statements in good faith, given these risks, uncertainties and factors, you are cautioned not to place undue reliance on any forward-looking statements made in this press release. All forward-looking statements made herein are based on our current expectations and we undertake no obligation to revise or update such forward-looking statements to reflect subsequent events or circumstances, except as required by law. Investors are cautioned that forward-looking statements are not guarantees of future performance and accordingly investors are cautioned not to put undue reliance on forward-looking statements due to their inherent uncertainty.
Correvio® and the Correvio Logo are the proprietary trademarks of Correvio Pharma Corp.
Aggrastat® and Brinavess®™ are trademarks owned by Correvio and its affiliates worldwide.
Xydalba™ is a trademark of Allergan Pharmaceuticals International Limited, and used under license.
Zevtera® and Mabelio® are trademarks owned by Basilea Pharmaceutica Ltd. and its affiliates, and used under license.
Esmocard® and Esmocard Lyo® are trademarks owned by Orpha-Devel Handels und Vertriebs GmbH, and used under license.
Trevyent® is a trademark of SteadyMed Ltd. and used under license.
All other trademarks are the property of their respective owners.
Contact:
Justin Renz
President & CFO
Correvio Pharma Corp.
604.677.6905 ext. 128
800.330.9928
jrenz@correvio.com
Argot Partners
Michelle Carroll/Claudia Styslinger
212.600.1902
michelle@argotpartners.com
claudia@argotpartners.com
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Balance Sheets
(In thousands of U.S. dollars, except share amounts)
| March 31, 2019 | December 31, 2018 | |||||||
Assets
| ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 15,962 | $ | 15,596 | ||||
| Restricted cash | 1,939 | 1,974 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $95 (2018 - $102) | 7,988 | 7,723 | ||||||
| Inventories | 4,460 | 4,158 | ||||||
| Prepaid expenses and other assets | 2,723 | 841 | ||||||
| 33,072 | 30,292 | |||||||
| Property and equipment | 539 | 512 | ||||||
| Right-of-use assets from operating leases | 2,294 | — | ||||||
| Intangible assets | 25,047 | 26,469 | ||||||
| Long-term inventories | 1,668 | 1,663 | ||||||
| Goodwill | 318 | 318 | ||||||
| Deferred income tax assets | 369 | 383 | ||||||
| $ | 63,307 | $ | 59,637 | |||||
Liabilities and Stockholders’ Equity
| ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 11,093 | $ | 9,403 | ||||
| Current operating lease liabilities | 726 | — | ||||||
| 11,819 | 9,403 | |||||||
| Long-term debt, net of unamortized debt issuance costs | 42,315 | 41,517 | ||||||
| Deferred revenue | 1,228 | 1,252 | ||||||
| Long-term operating lease liabilities | 1,816 | — | ||||||
| Other long-term liabilities | 4 | 555 | ||||||
| 57,182 | 52,727 | |||||||
| Stockholders’ equity: | ||||||||
| Common stock | 367,350 | 359,295 | ||||||
| Authorized - unlimited number without par value | ||||||||
| Issued and outstanding - 39,854,169 (2018 - 36,233,162) | ||||||||
| Additional paid-in capital | 40,952 | 40,456 | ||||||
| Deficit | (418,740 | ) | (409,744 | ) | ||||
| Accumulated other comprehensive income | 16,563 | 16,903 | ||||||
| 6,125 | 6,910 | |||||||
| $ | 63,307 | $ | 59,637 | |||||
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Statements of Operations and Comprehensive Loss
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
| March 31, 2019 | March 31, 2018 | |||||||
| Revenue: | ||||||||
| Product and royalty revenues | $ | 7,251 | $ | 6,518 | ||||
| Licensing and other fees | — | 25 | ||||||
| 7,251 | 6,543 | |||||||
| Cost of goods sold | 2,241 | 2,301 | ||||||
| Gross margin | 5,010 | 4,242 | ||||||
| Expenses: | ||||||||
| Selling, general and administration | 11,191 | 10,902 | ||||||
| Amortization and depreciation | 984 | 955 | ||||||
| 12,175 | 11,857 | |||||||
| Operating loss | (7,165 | ) | (7,615 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (1,690 | ) | (1,063 | ) | ||||
| Other expense | (98 | ) | (113 | ) | ||||
| Foreign exchange (loss) gain | (16 | ) | 386 | |||||
| (1,804 | ) | (790 | ) | |||||
| Loss before income taxes | (8,969 | ) | (8,405 | ) | ||||
| Income tax expense | (27 | ) | (55 | ) | ||||
| Net loss | $ | (8,996 | ) | $ | (8,460 | ) | ||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustments | (340 | ) | 145 | |||||
| Comprehensive loss | $ | (9,336 | ) | $ | (8,315 | ) | ||
| Loss per common share | ||||||||
| Basic and diluted | $ | (0.23 | ) | $ | (0.24 | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic and diluted | 38,819,002 | 34,653,514 | ||||||
CORREVIO PHARMA CORP.
(formerly Cardiome Pharma Corp.)
Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars)
(Unaudited)
| March 31, 2019 | March 31, 2018 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (8,996 | ) | $ | (8,460 | ) | ||
| Items not affecting cash: | ||||||||
| Amortization and depreciation | 984 | 955 | ||||||
| Accretion of long-term debt | 373 | (241 | ) | |||||
| Interest paid in-kind on long-term debt | 425 | 408 | ||||||
| Stock-based compensation expense | 618 | 395 | ||||||
| Write-down of inventory | 50 | 118 | ||||||
| Unrealized foreign exchange loss (gain) | 317 | (528 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (595 | ) | (890 | ) | ||||
| Inventories | (419 | ) | 312 | |||||
| Prepaid expenses and other assets | (1,882 | ) | (177 | ) | ||||
| Deferred revenue | — | (25 | ) | |||||
| Accounts payable and accrued liabilities | 1,534 | (387 | ) | |||||
| Other long-term liabilities | (20 | ) | (8 | ) | ||||
| Net cash used in operating activities | (7,611 | ) | (8,528 | ) | ||||
| Investing activities: | ||||||||
| Proceeds of disposal of Canadian Operations | 190 | — | ||||||
| Purchase of property and equipment | (68 | ) | (202 | ) | ||||
| Purchase of intangible assets | (12 | ) | — | |||||
| Net cash provided by (used in) investing activities | 110 | (202 | ) | |||||
| Financing activities: | ||||||||
| Issuance of common stock | 8,347 | — | ||||||
| Share issue costs | (405 | ) | — | |||||
| Issuance of common stock upon exercise of stock options | — | 258 | ||||||
| Income tax withholdings on vesting of restricted share units | — | (21 | ) | |||||
| Financing fees on issuance of long-term debt | — | (21 | ) | |||||
| Net cash provided by financing activities | 7,942 | 216 | ||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash during the period | 441 | (8,514 | ) | |||||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | (110 | ) | 91 | |||||
| Cash, cash equivalents, and restricted cash, beginning of period | 17,570 | 24,181 | ||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 17,901 | $ | 15,758 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 892 | $ | 897 | ||||
| Cash paid for income taxes | — | 16 | ||||||
Exhibit 99.4
Form 52-109F2
Certification of interim filings - full certificate
I, Mark Corrigan, Chief Executive Officer of Correvio Pharma Corp., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Correvio Pharma Corp. (the “issuer”) for the interim period ended March 31, 2019. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework (2013). |
| 5.2 | ICFR - material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 8, 2019
Mark Corrigan
Mark Corrigan
Chief Executive Officer
Exhibit 99.5
Form 52-109F2
Certification of interim filings - full certificate
I, Justin Renz, President and Chief Financial Officer of Correvio Pharma Corp., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Correvio Pharma Corp. (the “issuer”) for the interim period ended March 31, 2019. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework (2013). |
| 5.2 | ICFR - material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 8, 2019
Justin Renz
Justin Renz
President and Chief Financial Officer