August 29, 2016 – Toronto, Ontario – Delivra Corp. (TSXV: DVA – “Delivra” or the “Company”) is pleased to announce its financial results for the three and six months ended June 30, 2016.
Q2 2016 Developments
Significant areas of development included:
Continued Sales Growth
Q2 2016 brought record revenues, at $1,111,821, the highest quarterly sales ever for the Company, up 41% versus Q2 2015. This was driven by continued growth in the sales of the Company’s flagship pain products in Canada, building on the momentum established in 2015. In addition, during Q2 the Company allocated more marketing resources towards its Nerve Pain product, which has historically not been a promotional focus, and this resulted in significant growth during the quarter, with unit Nerve Pain sales doubling versus Q2 2015. As a result of these various activities, during the first half of the year, the Company solidified its position as having the #1 Selling Natural Pain Cream in Canada and the #1 Selling Nerve Pain Cream in Canada1. The Company believes that, given the tremendous efficacy of its products and in the presence of strong marketing and advertising programs, there is considerable room for further growth in the Canadian market.
US Market Entry Preparations
Efforts ramped up in Q2 2016, relating to the planning, preparation, and initial stages of execution of the entry of the Company’s leading Pain and Nerve Pain products into the US market. Initial entry through an aggressive digital strategy to build brand awareness and consumer engagement commenced in June 2016. This will be followed by a focus on retail channels once the Company has established the brand and built sufficient market momentum.
The United States market represents a very significant growth opportunity for the Company, with a total analgesic market size of USD$4.7 billion and topical analgesics at USD$650 million, being one of the fastest growing analgesic categories (source: Consumer Healthcare Products Association). Further, of the nearly 237 million U.S. adults, more than 74 million (31%) use external pain relief products, for conditions such as muscle pain, backache, arthritis, and sports pain (source: Fall 2015 Simmons National Consumer Study). Notably, the Company’s flagship pain products in Canada outperform the leading US brands in Canada, and the dominant OTC brand in Canada (VoltarenTM) is available by prescription only in the United States. The Company is therefore excited about the potential growth available from its US expansion and its product positioning in this marketplace. As such, US entry is a major strategic mandate for the Company through 2016 and 2017, and significant on-going effort and resources will be dedicated to this program.
New Product Development
The Company’s transdermal delivery system provides a broad and very efficient platform for the development of new OTC products, in order to drive continued revenue growth. Presently, the development pipeline is very robust, including products targeted towards conditions which represent significant market opportunities, such as osteoarthritis, sleep, psoriasis, migraines, and circulation. Introduction of additional products, whether directly under the Company’s LivReliefTM brand or via out-licensing to other companies, represents a potentially strong continuing source of growth for the Company.
Continued R&D Success
The very strong work of the Company’s team of scientists was, as always, a centerpiece of the activity in Q2. This included moving several additional projects further down the development curve, and filing two additional patents during the quarter. This brings the total number of patents pending to seven and the total number of permanent patent filings to three, all filed within the past year. Additional filings are in the pipeline, as the Company continues to showcase the prolific reach and broad applicability of its delivery system.
“This was another in a series of strong quarters for Delivra, with continued progress on multiple fronts. Our Canadian sales growth remains strong, our R&D program and product pipeline is robust, and we are excited about the potential of our entry into the United States market”, said Dr. Joseph Gabriele, CEO of Delivra.
Results of Operations
Revenue for the second quarter was $1,111,821, the highest ever quarterly sales for the Company, up 41% against the comparable prior year period at $790,230. Revenues for the first half of 2016 were $2,104,503, versus $1,626,404 in the first half of 2015. The main driver of this growth for the first half of 2016 was increased sales of the Company’s pain products in Canada, including repeat purchases and new customer acquisitions resulting from the Company’s on-going marketing and advertising efforts. The significant increase in sales during Q2 2016 versus the comparative period, which also contributed to the first half of 2016 increased sales, was doubling the amount of nerve product sales in Canada, as a result of a planned reallocation of marketing and advertising expenditures at the end of Q1 2016.
Gross Profit for the quarter was up 44% against the comparable prior year period, at $784,276 versus $543,916 in Q2 2015, as a result of increased revenues and gross margins (71% in Q2 2016 versus 69% in Q2 2015). Gross Profit for the first half of 2016 was up 33% against the comparable prior period, at $1,457,444 versus $1,094,753 in the first six months of 2015. Gross margin was 69% in the first six months of 2016 versus 67% in the first six months of 2015. The Company targets long-term gross margins between 65% and 70% for its business.
Operating expenses for the quarter were $2,044,629, up from $740,151 in the comparative quarter. Operating expenses for the first half of 2016 were $3,362,560, versus $1,776,802 in the first half of 2015. The increase is a result of the alignment of expenditures with the Company’s major strategic initiatives. Specifically, higher marketing and selling costs associated with successful growth and brand-building investments in Canada and initial US market entry costs. The increase in G&A expenses over the comparable period is mainly a result of compliance, investor relations and professional fees associated with 2016 being the Company’s first year listed on the TSX-V. Share-based compensation was relatively flat in Q2 2016 versus the comparable period, however, was higher for the first half of 2016 versus the first half of 2015. R&D expenses for the quarter versus the comparative quarter increased as a result of further research being done on various potential natural products and pharmaceutical applications. Commencing January 1, 2016, the Company began to capitalize certain projects, pursuant to IFRS requirements, as these projects are now nearer to commercialization. The amount of development costs capitalized during the first half of 2016 was $187,381.
The net loss and comprehensive loss for the quarter was $1,310,145 versus $216,650 in the comparative period. On a per share basis, the net loss was $0.03 for the quarter, versus $0.01 in the comparative quarter. The net loss and comprehensive loss for the first six months of 2016 was $1,994,984, versus $721,894 in the first six months of 2015. On a per share basis, the net loss for the first six months of 2016 was $0.05 versus $0.02 in the first six months of 2015. The increased loss results from the various factors discussed above, primarily the investments made in core growth, US expansion, share-based compensation and public company G&A costs.
ABOUT DELIVRA CORP.
Delivra Corp. is a developer of transdermal technologies for the delivery of pharmaceutical and natural molecules through the skin, rather than via pills. Delivra manufactures and sells a growing line of natural topical creams under the LivReliefTM brand, for conditions such as joint and muscle pain, nerve pain, varicose veins, wound healing, and sports performance. LivReliefTM products are available in pharmacies, grocery chains, and independent health food stores across Canada, and on-line at www.livrelief.com. LivReliefTM pain and nerve pain products are also available in the United States on Amazon and at www.livrelief.com/us. In parallel with its consumer products business, Delivra also has a mandate to license its unique, proven, and patent-pending delivery platform to global pharmaceutical companies for the transdermal delivery of third party active ingredients to treat a broad range of conditions. Delivra is headquartered in Burlington, Ontario and has a research and development laboratory in Charlottetown, PEI.
The TSX Venture Exchange has neither approved nor disapproved the contents of this press release. Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release. Certain information in this press release may constitute forward-looking information. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Corporation assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to the Corporation. Additional information identifying risks and uncertainties is contained in the Corporation’s filings with the Canadian securities regulators, which filings are available at www.sedar.com.
(1) Delivra Inc. calculation based in part on data reported by Nielsen through its MarketTrack Service for the Topical Analgesic category for the 52-week period ending April 2nd, 2016 for the National market and Grocery Banner plus Drug plus Mass Merchandizer channel, according to the Health Canada NPN Natural Health Product registration product hierarchy. Copyright © 2016, The Nielsen Company
For more information, please contact:
Chris Schnarr, President and CFO