Theratechnologies : Q2 Interim Consolidated May 31, 2025vFINAL

Published: 2025-07-09 09:17:09 ET TH.TO

Published on 07/09/2025 at 09:17

Interim Consolidated Financial Statements (In thousands of United States dollars)

Three- and six-month periods ended May 31, 2025 and 2024

(Unaudited)

THERATECHNOLOGIES INC.

Table of Contents

(In thousands of United States dollars)

(Unaudited)

Page

Interim Consolidated Statements of Financial Position

Interim Consolidated Statements of Comprehensive Income (Loss)

Interim Consolidated Statements of Changes in Equity

Interim Consolidated Statements of Cash Flows

Notes to Interim Consolidated Financial Statements

5 - 23

Note

May 31,

2025

November 30,

2024

Assets

Current assets

Cash

9,459

5,899

Cash equivalent held in escrow

10,000

Bonds and money market funds

462

3,723

Trade and other receivables

11,002

15,218

Tax credits and grants receivable

221

234

Income taxes receivable

147

152

Inventories

7,616

5,281

Prepaid expenses and deposits

4,066

3,452

Derivative financial assets

Total current assets

33,017

43,980

Non-current assets

Bonds and money market funds

218

214

Property and equipment

222

Right-of-use assets

670

1,036

Intangible assets

16,952

7,568

Deferred tax assets

Deferred financing costs

165

271

Total non-current assets

18,252

9,360

Total assets

51,269

53,340

Liabilities

Current liabilities

Accounts payable and accrued liabilities

23,108

24,149

Provisions

9,700

7,817

Current portion of long-term debt

3,497

3,493

Current portion of lease liabilities

131

383

Marathon Warrants

10(a)

2,487

962

Income taxes payable

245

Deferred revenue

Total current liabilities

39,168

36,861

Non-current liabilities

Long-term debt

39,238

40,939

Lease liabilities

755

791

Other liabilities

Total non-current liabilities

40,023

41,751

Total liabilities

79,191

78,612

Equity

Share capital and warrants

363,927

Contributed surplus

28,407

26,790

Deficit

(421,196)

(416,887)

Accumulated other comprehensive income

940

898

Total equity

(27,922)

(25,272)

Total liabilities and equity

51,269

53,340

The accompanying notes are an integral part of these interim consolidated financial statements.

For the three-month

periods ended May 31,

For the six-month

periods ended May 31,

Note

2025

2024

2025

2024

Revenue

17,729

22,017

36,776

38,264

Operating expenses

Cost of sales

4,699

4,547

8,182

9,831

Research and development expenses,

net of tax credits of $95 and $289 (2024 - $33 and $65)

2,614

4,725

5,583

8,477

Selling expenses

6,840

6,367

13,310

12,068

General and administrative expenses

5,480

3,090

9,710

6,846

Total operating expenses

19,633

18,729

36,785

37,222

(Loss) profit from operating activities

(1,904)

3,288

(9)

1,042

Finance income

545

1,174

Finance costs

(2,369)

(2,728)

(3,878)

(5,482)

(2,312)

(2,183)

(3,783)

(4,308)

(Loss) profit before income taxes

(4,216)

1,105

(3,792)

(3,266)

Income tax expense

(246)

(118)

(553)

(228)

Net (loss) profit for the period

(4,462)

987

(4,345)

(3,494)

Other comprehensive income, net of tax

Items that may be reclassified to net profit

(loss) in the future

Net change in fair value of financial assets at fair value through other comprehensive income

("FVOCI") financial assets

120

Total comprehensive income (loss) for the period

(4,462)

1,047

(4,303)

(3,374)

Basic and diluted (loss) income per share

10(c)

(0.09)

0.02

(0.09)

(0.07)

The accompanying notes are an integral part of these interim consolidated financial statements.

For the six-month period ended May 31, 2024

Note

Share capital and Public Offering

Warrants

Accumulated

other

comprehensive

income

Number

of shares

Amount

Contributed

surplus

Deficit

Total

Balance as at November 30, 2023

45,980,019

363,927

23,178

(408,659)

684

(20,870)

Total comprehensive loss for the period

Net loss for the period

(3,494)

Other comprehensive income (loss):

Net change in fair value of FVOCI

financial assets, net of tax

120

Total comprehensive loss for the period

(3,494)

120

(3,374)

Transactions with owners, recorded directly in equity

Share-based compensation for

stock option plan

1,036

Total contributions by owners

1,036

Balance as at May 31, 2024

45,980,019

363,927

24,214

(412,153)

r the six-m

804

th period ended Ma

(23,208)

y 31, 2025

of shares

Amount

surplus

Deficit

income

Total

Balance as at November 30, 2024 45,980,019

363,927

26,790

(416,887)

898

(25,272)

Total comprehensive loss for the

period

Net loss for the period -

Other comprehensive income:

(4,345)

Net change in fair value of FVOCI

financial assets, net of tax -

Total comprehensive income for the

period -

(4,345)

(4,303)

Share-based compensation for

stock option plan

Change in unrecognized tax assets

relating to share issue costs

10(b)

1,617

Total contributions by owners

1,617

1,653

Balance as at May 31, 2025

45,980,019 $

363,927 $

28,407 $ (421,196) $

940 $

(27,922)

The accompanying notes are an integral part of these interim consolidated financial statements.

For the three-month periods ended May 31,

For the six-month periods ended May 31,

Note

2025

2024

2025

2024

Cash flows from (used in)

Operating

Net (loss) profit for the period

(4,462)

987

(4,345)

(3,494)

Adjustments for

Depreciation of property and equipment

819

892

Amortization of intangible assets and

other assets

361

360

722

720

Amortization of right-of-use assets

154

167

Share-based compensation for stock option

plan and stock appreciation rights

978

340

1,626

967

Gain on lease termination

(29)

Change in fair value of derivative

financial assets

(15)

(23)

Change in fair value of liability related to

deferred stock unit plan

Interest expense on long-term debt

995

2,313

2,001

4,587

Interest paid on long-term debt

(1,002)

(2,256)

(1,583)

(4,581)

Interest income

(57)

(342)

(66)

(762)

Interest received

359

108

789

Income tax expense

246

118

553

228

Federal investment tax credits

(77)

(262)

Income taxes paid

(402)

Foreign exchange

(12)

Change in fair value of Marathon Warrants

1,075

(212)

1,525

(425)

Accretion expense and amortization of deferred

financing costs

112

382

231

756

(1,679)

2,616

778

(513)

Change in operating assets and liabilities

Trade and other receivables

10,989

(2,858)

4,216

169

Tax credit and grants receivable

(17)

(33)

(9)

Inventories

(755)

769

(2,335)

532

Prepaid expenses and deposits

190

473

(614)

1,040

Accounts payable and accrued liabilities

2,700

(1,781)

(1,248)

(359)

Provisions

1,013

524

1,883

(2,858)

Deferred revenue

(38)

14,082

(2,906)

1,881

(1,485)

Cash flows from (used in) operating activities

12,403

(290)

2,659

(1,998)

Financing activities

Proceeds from issuance of long-term debt

5,000

Repayment of long-term debt

(6,786)

Share issue costs

(352)

(505)

Costs related to issuance of long-term debt

(144)

Costs related to repayment of long-term debt

(95)

Payments of lease liabilities

(99)

(122)

(195)

(244)

Deferred financing costs

(165)

Cash flows used in financing activities

(6,885)

(639)

(2,220)

(914)

Investing activities

Proceeds from sale of bonds and money market funds

1,363

3,202

1,497

Acquisition of intangible assets

(1,500)

(10,101)

(1,500)

Acquisition of property and equipment

(8)

(11)

Cash flows used in investing activities

(8)

(137)

(6,910)

(3)

Net change in cash and cash equivalent during the period

5,510

(1,066)

(6,471)

(2,915)

Cash and cash equivalent, beginning of period

3,905

32,240

15,899

34,097

Effect of foreign exchange on cash

(8)

(16)

Cash and cash equivalent, end of period

9,459

31,166

9,459

31,166

Refer to Note 12 for supplemental cash flow disclosures.

The accompanying notes are an integral part of these interim consolidated financial statements.

Theratechnologies Inc. is a specialty biopharmaceutical company focused on the commercialization of innovative therapies that have the potential to redefine standards of care.

The consolidated financial statements ("Financial Statements") include the accounts of Theratechnologies Inc. and its wholly-owned subsidiaries (together referred to as the "Company" and individually as the "subsidiaries of the Company").

The Company has one material wholly-owned subsidiary:

Theratechnologies U.S., Inc., a company governed by the Delaware General Corporation Law (Delaware). Theratechnologies U.S., Inc. provides the services of personnel to Theratechnologies Inc. for its activities in the United States.

Theratechnologies Inc. is governed by the Business Corporations Act (Québec) and is domiciled in Québec, Canada. The Company is located at 2015 Peel Street, Suite 1100, Montréal, Québec, H3A 1T8, Canada.

Accounting framework

These unaudited interim consolidated financial statements ("interim financial statements"), including comparative information, have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Certain information, in particular the accompanying notes normally included in the annual consolidated financial statements prepared in accordance with IFRS, has been omitted or condensed. These interim financial statements do not include all disclosures required under IFRS and, accordingly, should be read in conjunction with the annual consolidated financial statements for the year ended November 30, 2024 and the notes thereto.

These interim financial statements have been authorized for issue by the Company's Audit Committee on July 8, 2025.

Future operations

As part of the preparation of these interim financial statements, management is responsible for identifying any event or situation that may cast doubt on the Company's ability to continue as a going concern.

As of the issuance date of these interim financial statements, the Company expects that its existing cash and cash equivalents as of May 31, 2025, together with cash generated from its existing operations will be sufficient to fund its operating expenses and debt obligations requirements for at least the next 12 months from the issuance date of these interim financial statements. Considering the recent actions of the Company, material uncertainty that raised substantial doubt about the Company's ability to continue as a going concern was alleviated effective from the first quarter interim financial statements.

For the six-month period ended May 31, 2025, the Company generated a net loss of $4,345 (2024- $3,494) and had positive cash flows from operating activities of $2,659 (2024- $(1,998)). As at May 31, 2025, cash amounted to $9,459, and the accumulated deficit was $421,196. The Company's ability to continue as a going concern requires the Company to continue to achieve positive cash flows through revenues generation and managing expenses, and meet the covenants of the TD Credit Agreement (as defined in Note 8) and the IQ Credit Agreement (as defined in Note 8) at all times, which require testing on a quarterly basis.

Future operations (continued)

On January 9, 2025, the Company announced a temporary supply disruption for EGRIFTA SV®caused by an unexpected voluntary shutdown of the Company's contract manufacturer's facility in the third quarter of 2024 following an inspection by the US Food and Drug Administration ("FDA"). The manufacturer has resumed manufacturing of EGRIFTA SV®, in November 2024. In order to resume distribution of EGRIFTA SV®, the Company was required to file a Prior Approval Supplement ("PAS") with the FDA describing the changes made by its manufacturer. The Company filed the PAS on December 18, 2024. On April 7, 2025, the FDA approved the PAS, allowing the Company to continue releasing EGRIFTA SV®to the market without further authorization from the FDA.

The Company's ability to continue as a going concern for a period of at least, but not limited to, 12 months from May 31, 2025 involves significant judgement and is dependent on continued generation of revenues including a successful transition from EGRIFTA SV®to EGRIFTA WR™ in order to be able to meet the Adjusted EBITDA covenants.

These interim financial statements have been prepared assuming the Company will continue as a going concern, which assumes the Company will continue its operations in the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Basis of measurement

The Company's interim financial statements have been prepared on going concern and historical cost bases, except for bonds and money market funds, derivative financial assets, liabilities related to cash-settled share-based arrangements and warrant liabilities, which are measured at fair value. Equity-classified shared-based payment arrangements are measured at fair value at grant date pursuant to IFRS 2, Share-based Payment.

The methods used to measure fair value are discussed further in Note 14.

Use of estimates and judgments

The preparation of the Company's interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Information about critical judgments in applying accounting policies and assumptions and estimation uncertainties that have the most significant effect on the amounts recognized in the interim financial statements are disclosed in Note 1 of the annual audited consolidated financial statements as at November 30, 2024. Critical judgements were made in concluding that there are no material uncertainties related to events or conditions that cast substantial doubt on the entity's ability to continue as a going concern.

Functional and presentation currency

The Company's functional currency is the United States dollar ("USD").

All financial information presented in USD has been rounded to the nearest thousand.

The material accounting policies as disclosed in the Company's annual audited consolidated financial statements for the

year ended November 30, 2024 have been applied consistently in the preparation of these interim financial statements.

Standards issued but not yet effective.

A number of new standards are effective for annual periods beginning after December 1, 2024 and earlier application is permitted; however, the Company has not early adopted the new or amended standards in preparing these interim financial statements. Refer to Note 1 of the annual audited consolidated financial statements as at November 30, 2024 for a description of those standards.

Net sales by product were as follows:

For the three-month periods ended May 31,

2025

2024

EGRIFTA SV®

11,131

16,200

Trogarzo®

6,598

5,817

17,729

22,017

For the six-month periods ended May 31,

2025

2024

EGRIFTA SV®

25,011

25,786

Trogarzo®

11,765

12,478

36,776

38,264

Net sales by geography were as follows:

For the three-month periods ended May 31,

2025

2024

United States

17,729

22,017

17,729

22,017

For the six-month periods ended May 31,

2025

2024

United States

36,776

38,186

Europe

36,776

38,264

Note

For the three-month periods ended May 31,

2025

2024

Net gain on financial instruments carried at fair value

203

Interest income

342

Finance income

545

Accretion expense, write-off and amortization of deferred financing costs

8 and 9

(112)

(382)

Interest expense on long-term debt

(995)

(2,313)

Loss on financial instruments carried at fair value

(1,074)

Bank charges

(1)

Net foreign currency loss

(233)

(37)

Other

(2)

Finance costs

(2,369)

(2,728)

Net finance costs recognized in net profit or loss

(2,312)

(2,183)

Note

For the six-month periods ended May 31,

2025

2024

Net gain on financial instruments carried at fair value

412

Gain on lease termination

Interest income

762

Finance income

1,174

Accretion expense, write-off and amortization of deferred financing costs

8 and 9

(231)

(756)

Interest expense on long-term debt

(2,001)

(4,587)

Loss on financial instruments carried at fair value

(1,524)

Bank charges

(8)

Net foreign currency loss

(205)

(39)

Other

(100)

Finance costs

(3,878)

(5,482)

Net finance costs recognized in net profit or loss

(3,783)

(4,308)

On March 27, 2025, the FDA approved the Company's supplemental Biologics Licence Application (sBLA) for the F8 formulation of tesamorelin for injection. As such, an inventory provision of $713 was reversed in the first quarter of 2025 (which provision was recorded in the fourth quarter of fiscal 2024), consistent with the Company's accounting policy for pre-launch inventory. In six-months ended May 31, 2024, a provision of $1,088 was recognized for unusable inventory pending marketing approval of the F8 formulation of tesamorelin and recorded in cost of goods sold.

On December 3, 2024, the Company has entered into an agreement with Ionis Pharmaceuticals, Inc. ("Ionis") to in-license (Ionis) two investigational RNA-targeted medicines developed by Ionis. Under the agreement, the Company receives exclusive rights in Canada to commercialize olezarsen, which is being evaluated for familial chylomicronemia syndrome (FCS) and severe hypertriglyceridemia (sHTG), and donidalorsen, which is being evaluated for the treatment of hereditary angioedema (HAE).

The Company paid $10,000 on December 5, 2024 upon execution of the agreement, which cash equivalent was held in escrow at November 30, 2024 from Investissement Québec ("IQ"). The Company also agreed to cash milestone payments based on the achievement of receipt of regulatory approval milestone and receipt of public reimbursement approval milestone (up to $5,750), annual sales targets at three different tiers (up to $7,000) for donidalorsen only. In addition, Ionis will also be entitled to receive tiered double digit royalties on annual net sales of each medicine. Royalties on annual net sales of both medicines will be owed for a period of up to 12 years.

The Company will be responsible for filing, obtaining and maintaining regulatory approval for olezarsen and donidalorsen in Canada. Ionis will be manufacturing and supplying both products to Theratechnologies and has granted the Company a right to manufacture both products in certain limited circumstances.

The term of the license agreement with Ionis will continue until the Company permanently ceases commercializing all licensed products in Canada, or unless earlier terminated in accordance with customary termination provisions for transactions of this like-nature.

Chargebacks

Rebates

Returns

Restructuring

Total

Balance as at November

30, 2023

1596

5,505

2,262

240

9,603

Provisions made

10,355

8,148

666

486

19,655

Provisions used

(10,119)

(9,878)

(693)

(726)

(21,416)

Effect of change in

exchange rate

(25)

Balance as at November

30, 2024

1,832

3,750

2,235

7,817

Provisions made

5,332

5,949

274

11,555

Provisions used

(5,090)

(3,485)

(1,097)

(9,672)

Balance as at May 31,

2025

2,074

6,214

1,412

9,700

In March, 2024, the Company announced that it would phase down its oncology research activities. As such, for the year ended November 30, 2024, $486 was recorded in charges related to severance and other expenses.

Long-term debt, net of transaction costs is as follows:

Face

value

Actual interest

rate

Maturity

Current

2025

Non-

current

Current

2024

Non-

current

TD Term Loan

25,000

7.18%

November 27, 2027

3,497

19,548

3,493

21,298

TD Revolver

10,000

7.18%

November 27, 2027

4,895

4,874

IQ Subordinated Loan

15,000

11.45%

May 27, 2028

14,795

14,767

Total long-term debt

3,497

39,238

3,493

40,939

On November 27, 2024, the Company entered into a credit agreement (the "TD Credit Agreement") with The Toronto-Dominion Bank (the "TD Bank") for the establishment of a revolving credit facility totaling $15,000 ("TD Revolver") and a term facility totaling $25,000 ("TD Term Loan"). The new credit facilities also include a $20,000 accordion feature. On that same date, the Company also entered into a credit agreement (the "IQ Credit Agreement") with IQ providing for a subordinated loan of $15,000 ("IQ Term Loan"). In the first quarter of 2025, the Company drew $5,000 on the TD Revolver to fund working capital and repaid the $5000 in the second quarter of 2025.

On November 27, 2024, the Company repaid all obligations, including prepayment premium amounts under its previous

credit agreement with affiliates of Marathon (the "Marathon Credit Agreement"). TD Term Loan and TD Revolver

The salient conditions of the amounts drawn under the TD Term Loan and the TD Revolver are as follows:

The TD Term Loan and the TD Revolver bear interest at the Company's choice of Canadian prime, CORRA, US base rate and SOFR plus spread based on the chosen rate and where the Company's total debt to EBITDA ratio falls on a pricing grid of the TD Credit Agreement.

The TD Term Loan is payable in fixed quarterly equal payments based on a 7-year amortization period, and the balance is payable on November 27, 2027. Voluntary prepayments are permitted at any time, without penalty;

Thera will prepay outstanding borrowings when it generates net proceeds on: (i) certain sales/issuances of capital stock or debt securities; (ii) certain net indemnity payables under a policy of insurance, and; (iii) net cash proceeds on any sale/disposition of certain assets;

The TD Term Loan and TD Revolver provide fixed charge coverage ratio, senior debt to EBITDA ratio and total debt to EBITDA ratio targets (as defined in the TD Credit Agreement) at all times. The financial covenants must be calculated and tested as at the end of each fiscal quarter or fiscal year end, as applicable, on a rolling four-quarter basis;

The TD Credit Agreement restricts the ability to incur additional debt and to make acquisitions, dispositions, in-licensing and out-licensing of products or assets, except in very limited circumstances;

The TD Credit Agreement grants TD Bank with a first-ranking security interest on all of the Company's assets.

IQ Term Loan

The salient conditions of the amounts drawn under the IQ Term Loan are as follows:

The IQ Term Loan bears interest at the rate of 11.45%, plus/less any increments as set out in the debt to EBITDA ratio

pricing grid in the IQ Credit Agreement.

The IQ Term Loan is repayable on May 27, 2028. The Company may at any time prepay the principal of the loan in minimal increments of $1,500. For any such prepayment made, the Company must pay a fee computed on the prepayment amount being the higher of: three months' interest, based on the current interest rate of the loan and the difference between (1) discounted cash flows and (2) remaining unpaid principal; the discount rate to be used is the US Treasury rate + initial spread - 1%. In addition, the Company can prepay 15% of the outstanding loaned amount on an annual basis without penalty;

The IQ Term Loan provides fixed charge coverage ratio, senior debt to EBITDA ratio and total debt to EBITDA ratio targets (as defined in the IQ Credit Agreement) at all times. The financial covenants must be calculated and tested as at the end of each fiscal quarter or fiscal year end, as applicable, on a rolling four-quarter basis;

The IQ Credit Agreement restricts the ability to incur additional debt and to make acquisitions, dispositions, in-licensing and out-licensing of products or assets, except in very limited circumstances;

The IQ Term Loan is subordinated to the TD Term Loan and TD Revolver;

The IQ Credit Agreement grants IQ with a second-ranking security interest on all of the Company's assets.

The movement in the carrying value of the Long-term debt as follows:

Marathon Term Loan

TD Term

Loan

TD Revolver

IQ Term

Loan

Term loan as at November 30, 2023

57,974

Issuance

25,000

5,000

15,000

Costs related to issuance

(4,403)

(209)

(126)

(233)

Accretion expense

1,131

Cash paid on repayment

(60,600)

Loss on repayment

5,898

Term loan as at November 30, 2024

24,791

4,874

14,767

Accretion expense

Issuance

5,000

Cash paid on repayment

(1,786)

(5,000)

Long-term debt as at May 31, 2025

23,045

4,895

14,795

The Company's TD Term Loan, TD Revolver and IQ Term Loan include provisions providing for acceleration of payment or earlier termination in the event the Company were to default thereunder. As at May 31, 2025, the Company was in compliance with all of its financial covenants.

Carrying

value

Balance as at November 30, 2023

994

Accretion expense

Lease payments

(485)

Lease expense

Effect of change in exchange rates

(23)

New lease

603

Balance as at November 30, 2024

1,174

Accretion expense

Lease payments

(195)

Lease expense

Termination

(241)

Effect of change in exchange rates

Balance as at May 31, 2025

886

Current portion

(131)

Non-current portion

755

In December 2024, the Company terminated its lease in Ireland. Accordingly, the Company reduced its right-of-use assets by $212, the lease liabilities by $241 and recorded a gain on lease termination of $29. The gain is presented in finance income (Note 4).

Marathon Warrants

On February 27, 2023, the Company issued to Marathon an aggregate of 5,000,000 Common Shares purchase warrants (the "Marathon Warrants") exercisable into 1,250,000 Common Shares, at an exercise price of $5.80. The Marathon Warrants are exercisable for a period of seven years. The Marathon Warrants are not traded on any stock exchange, are transferable only to affiliates of Marathon and may be exercised on a cashless basis. Accordingly, the Marathon Warrants are derivative financial liabilities measured at fair value through profit or loss

The fair value of the Marathon Warrants was treated as a cash outflow in testing whether the debt modification was a substantial modification and it was concluded that the modification was not substantial. At the issuance, $2,650 was recorded as a loss on debt modification using the Black-Sholes model using the assumptions set forth in the table below. An amount of $350 was recorded reflecting the increase of fair value of Marathon Warrants for the repricing upon entering into an amendment to the Marathon Credit Agreement. The derivative financial liability relating to the Marathon Warrants is recorded as a liability on the consolidated statement of financial position and resulted in a loss on fair value remeasurement of $1,525 for the six-month period ended May 31, 2025 (2024 - gain of $425).

Measurement date

as at May 31, 2025

Measurement date

as at May 31, 2024

Risk-free interest rate

4.40%

4.50%

Expected volatility

95.72%

91.37%

Average option life in years

4.75 years

5.75 years

Share price

2.65

1.25

Exercise price

2.30

Stock option plan

The Company has established a stock option plan (the "Option Plan") under which it can grant its directors, officers, employees, researchers and consultants non-transferable options (the "Option") for the purchase of Common Shares. The exercise date of an Option may not be later than 10 years after the grant date.. Generally, the Options vest on the grant date or over a period of up to three years and the vesting of Options can be accelerated upon a change of control. All options are to be settled by the physical delivery of Common Shares.

(b) Stock option plan (continued)

On April 29, 2025, the Board adopted an omnibus incentive plan (the "Omnibus Incentive Plan") for directors, officers, employees and consultants providing ongoing services to the Company for the purpose of creating a long-term equity incentive compensation program that is aligned with the Company's long-term objectives. Under the Omnibus Incentive Plan, the Company will be able to grant to eligible participants stock options, stock appreciation rights, deferred share units, restricted share units and performance share units. No awards have been granted to date under the Omnibus Incentive Plan. On May 29, 2025, shareholders of the Company have approved the Omnibus Incentive Plan which replaces all equity incentive plans that were in force as at that date in relation to the grant of future equity-linked securities.

As at May 31, 2025, 3,568,438 equity-linked securities could still be granted by the Company under the Omnibus

Incentive Plan (2024 - 5,777,941 under the Option Plan).

Changes in the number of options outstanding during the past two years were as follows:

Weighted average

exercise price per option

Number

of options

CAD

USD

Options outstanding in CA$

Options as at November 30, 2023 - CA$

1,774,559

11.51

8.48

Forfeited and expired - CA$

(6,859)

9.48

6.94

Options outstanding as at May 31, 2024 - CA$

1,767,700

11.52

8.45

Options as at November 30, 2024 - CA$

5,026,208

4.98

3.55

Forfeited and expired - CA$

(58,164)

11.44

8.07

Options outstanding as at May 31, 2025 - CA$

4,968,044

4.90

3.56

Options exercisable as at May 31, 2025 - CA$

2,605,025

7.47

5.43

Options exercisable as at May 31, 2024 - CA$

1,200,468

13.35

9.79

(b) Stock option plan (continued)

Options outstanding in US$

Options as at November 30, 2023 - US$

279,369

6.02

Forfeited and expired - US$

(8,418)

4.22

Options outstanding as at May 31, 2024 - US$

270,951

6.90

Options as at November 30, 2024 - US$

661,978

3.35

Forfeited and expired - US$

(2,457)

4.52

Options outstanding as at May 31, 2025 - US$

659,521

3.34

Options exercisable as at May 31, 2025 - US$

358,812

4.56

Options exercisable as at May 31, 2024 - US$

131,264

8.30

Stock option plan (continued)

During the three and six-month periods ended May 31, 2025, aggregate amounts of $971 and $1,617 (2024 -$347 and

$1,036) was recorded as share-based compensation expense under the Option Plan. No Options were granted during the six-month period ended May 31, 2025 because of black-out periods. The Company expects to grant the equivalent fair value of $2,131 in Options. The fair value of these Options was estimated at the service commencement date and is remeasured at each period end until grant date is achieved. Compensation expense is recorded for the planned issuance of options because service commencement has occurred. Stock compensation expense for the three and six-month periods ended May 31, 2025 related to these options was $621 and $792 respectively. As at May 31, 2025, 2,654,522 options remain unvested representing $1,343 of unrecognized compensation cost and the unissued options have unrecognized compensation cost of $1,339, for which both amounts would be accelerated and expensed upon a change of control. In addition, as at May 31, 2025, there is $1,565 of cash-based long-term incentive payments that would be accelerated and expensed upon a change of control.

Net (loss) profit per share

The calculation of basic (loss) profit per share was based on the net (loss) profit attributable to common shareholders of the Company of $(4,462) (2024 - profit of $987 for the three-month period and of $(4,345) (2024 - $(3,494)) for the six-month periods) and a weighted average number of common shares outstanding calculated as follows:

For the three and six-month periods ended

May 31,

2025

May 31,

2024

Issued common shares as at December 1

45,980,019

Effect of subscription receipts issue

3,381,816

Weighted average number of common shares, basic

49,361,835

The calculation of diluted earnings per share was based on a weighted average number of diluted common shares

calculated as follows:

For the three-month periods ended

May 31,

2025

May 31,

2024

Weighted average number of common shares

49,361,835

Effect of potential dilutive Options

6,980

Weighted average number of common shares, diluted

49,361,835

49,368,815

For the six-month period ended May 31, 2025, 5,627,565 (2024 - 2,038,651) Options and 5,000,000 Marathon Warrants were excluded from the weighted average number of diluted common shares calculation as their effect would have been anti-dilutive. The Public Offering Warrants were also excluded from the weighted average number of diluted common share calculation for the periods they were outstanding.

Income tax expense is recognized at an amount determined by multiplying the profit (loss) before tax for the period by management's best estimate of the weighted-average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognized in full in the period. As such, the effective tax rate in the interim financial statements may differ from management's estimate of the effective tax rate for the annual financial statements. The change in effective tax rate in the current period was caused mainly by management's current expectation of generating taxable income in fiscal 2025.

The Company benefits from non-refundable federal tax credits on eligible research and development expenses and expects to use those tax credits to reduce its federal income taxes payable. As such, the Company has recorded non-refundable tax credits of $77 and $262 respectively in the three and six-months periods ended May 31, 2025 against research and development expenses ($nil - 2024), sufficient to offset expected fiscal 2025 Canadian federal income tax payable. The non-refundable federal tax credits were previously unrecorded.

Total refundable and non-refundable research and developments tax credits recorded against research and development expenses for the three and six months periods ended May 31, 2025 were $95 and $289 respectively ($33 and $65 - 2024).

The Company entered into the following transactions which had no impact on its cash flows:

May 31,

2025

May 31,

2024

Additions to property and equipment included in accounts payable and accrued liabilities

The nature and extent of the Company's exposure to risks arising from financial instruments are consistent with the disclosure in the annual consolidated financial statements as at November 30, 2024, considering the update below.

Certain of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Financial assets and financial liabilities measured at fair value

In establishing fair value, the Company uses a fair value hierarchy based on levels as defined below:

Level 1: Defined as observable inputs such as quoted prices in active markets.

Level 2: Defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3: Defined as inputs that are based on little or no observable market data, therefore requiring entities to develop

their own assumptions.

Other financial assets and financial liabilities

The Company has determined that the carrying values of its short-term financial assets and financial liabilities, including cash, trade and other receivables and accounts payable and accrued liabilities, approximate their fair value because of their relatively short period to maturity.

Bonds and money market funds and derivative financial assets and liabilities are stated at fair value, determined by inputs that are primarily based on broker quotes at the reporting date (Level 2).

The Company has determined that the carrying value of its Long-term debt approximates its fair value because it has a variable interest rate and was issued near the 2024 fiscal year-end.

Share-based payment transactions

The fair value of the Share Options is measured based on the Black-Scholes valuation model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historical volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions, if any, are not taken into account in determining fair value.

The fair value of the deferred share units is determined using the quoted price of the Common Shares of the Company and

considered Level 2 in the fair value hierarchy.

Marathon Warrants

The Marathon Warrants are recognized at fair value and considered Level 3 in the fair value hierarchy.

The Company has a single operating segment. Over 99% of the Company's revenues are generated from one customer,

RxCrossroads (see note 3 of the annual consolidated financial statements), which is domiciled in the United States.

For the three-month periods ended

May 31,

2025

2024

RxCrossroads

17,729

22,017

Others

17,729

22,017

For the six-month periods ended

May 31,

2025

2024

RxCrossroads

36,776

38,186

Others

36,776

38,264

As at May 31, 2025, the Company's non-current assets of $18,252, $18,208 are located in Canada and $44 in the United States.

On July 2, 2025, the Company entered into a binding arrangement agreement with CB Biotechnology, LLC (the "Purchaser"), an affiliate of Future Pak, LLC ("Future Pak"), a privately held contract manufacturer, packager and distributor of pharmaceutical and nutraceutical products, whereby the Purchaser will acquire all the issued and outstanding common shares of the Company for $3.01 per share in cash plus one contingent value right ("CVR") per share which will entitle the holder thereof to additional cash payments of up to $1.19 per CVR if the Company achieves certain milestones to a maximum aggregate payment of $65 million to all holders of CVRs (the "Transaction"). The holders of exchangeable subscription receipts and DSUs will receive the cash consideration per share plus one CVR for each subscription receipt or DSU held.

The Transaction will be implemented by way of a plan of arrangement under the Business Corporations Act (Québec) and is expected to close during the Company's fourth quarter ending November 30, 2025, subject to customary closing conditions, including the receipt of required shareholder approval and the approval of the Superior Court of Québec.

Required shareholder approval for the Transaction will consist of (i) at least 66⅔% of the votes cast on the Transaction by holders of common shares at a special meeting of shareholders of the Company, and (ii) at least a majority of the votes cast on the Transaction by holders of common shares, excluding shares held by shareholders required to be excluded pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), at such meeting.

The arrangement agreement contains non-solicitation covenants on the part of the Company, subject to customary "fiduciary out" and "right to match" provisions. A termination fee of $6 million would be payable by the Company to the Purchaser in certain circumstances, including in the context of a superior proposal supported by the Company. The Company would also be entitled to a reverse termination fee of $12 million payable by the Purchaser to the Company if the Transaction is not completed in certain circumstances.

The Long-term debt will be fully repaid at the closing of the Transaction.

Under the arrangement agreement, each unvested Option will be deemed to be vested as of the effective date of the arrangement and subsequently transferred in exchange for the purchase price less the applicable exercise price. As such, the Company expects to record share-based compensation expense related to the accelerated vesting of all stock options in 2025.

The estimated fees and costs of the Company in connection with the Transaction contemplated including, without limitation, financial advisors' fees, legal and accounting fees, long-term incentive plans which are generally recorded as employee service is performed that are subject to vesting acceleration (including the fair value of unissued Options), director and officers run off assurance fees, filing fees, proxy solicitation fees and printing and mailing costs, long-term debt prepayment fee, but excluding any severances (and voluntary resignation change of control) payments and payments made by the Company pursuant to the arrangement agreement in respect of outstanding stock options, SARs, warrants and DSUs, are anticipated to be between $15 to $16.5 million of which $1,359 have been included in general and administrative expense as transaction costs incurred in the three-month period ended May 31, 2025. This is a preliminary estimate that is subject to change.

As of the date of these financial statements, the Transaction has not yet been completed. These financial statements do not include the impact of the Transaction or related implications because the likelihood thresholds have not been met as at May 31, 2025.

Disclaimer

Theratechnologies Inc. published this content on July 09, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on July 09, 2025 at 13:16 UTC.