Exhibit 99.1
Condensed Consolidated Interim Financial Statements of
(Unaudited)
BELLUS HEALTH INC.
Periods ended September 30, 2020 and 2019
(In thousands of United States dollars)
Bellus health INC.
Condensed Consolidated Interim Financial Statements
(Unaudited)
Periods ended September 30, 2020 and 2019
(In thousands of United States dollars)
Condensed Consolidated Interim Financial Statements | ||
Condensed Consolidated Interim Statements of Financial Position | 1 | |
Condensed Consolidated Interim Statements of Loss and Other Comprehensive Income | 2 | |
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity | 3 | |
Condensed Consolidated Interim Statements of Cash Flows | 4 | |
Notes to Condensed Consolidated Interim Financial Statements | 5 |
bellus health INC.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited)
September 30, 2020 and December 31, 2019 and January 1, 2019
(In thousands of United States dollars)
September 30, | December 31, | January 1, | ||||||||||
2020 | 2019 | 2019 | ||||||||||
(Recast – note 2 (c)) | (Recast – note 2 (c)) | |||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents (note 4) | $ | 53,564 | $ | 18,688 | $ | 10,950 | ||||||
Short-term investments (note 4) | 16,470 | 71,292 | 24,912 | |||||||||
Trade and other receivables | 287 | 241 | 113 | |||||||||
Research tax credit receivable | 543 | 1,036 | 480 | |||||||||
Prepaid expenses and other assets | 753 | 2,988 | 843 | |||||||||
Total current assets | 71,617 | 94,245 | 37,298 | |||||||||
Non-current assets: | ||||||||||||
Right-of-use asset (note 5) | 546 | 204 | 114 | |||||||||
Other assets | 163 | 107 | 56 | |||||||||
In-process research and development asset (note 6) | 50,100 | 1,816 | 1,730 | |||||||||
Total non-current assets | 50,809 | 2,127 | 1,900 | |||||||||
Total Assets | $ | 122,426 | $ | 96,372 | $ | 39,198 | ||||||
Liabilities and Shareholders' Equity | ||||||||||||
Current liabilities: | ||||||||||||
Trade and other payables | $ | 5,993 | $ | 7,445 | $ | 1,992 | ||||||
Lease liability (note 5) | 160 | 167 | 114 | |||||||||
Total current liabilities | 6,153 | 7,612 | 2,106 | |||||||||
Non-current liabilities: | ||||||||||||
Lease liability (note 5) | 375 | 21 | — | |||||||||
Total non-current liabilities | 375 | 21 | — | |||||||||
Total Liabilities | 6,528 | 7,633 | 2,106 | |||||||||
Shareholders' equity: | ||||||||||||
Share capital (note 7 (a)) | 535,036 | 486,401 | 405,626 | |||||||||
Other equity (notes 7 (b) (i) and (ii)) | 29,946 | 26,858 | 25,682 | |||||||||
Deficit | (458,382 | ) | (433,818 | ) | (401,087 | ) | ||||||
Accumulated other comprehensive income (note 2 (c)) | 9,298 | 9,298 | 6,871 | |||||||||
Total Shareholders’ Equity | 115,898 | 88,739 | 37,092 | |||||||||
Commitments (note 10) | ||||||||||||
Subsequent event (note 13) | ||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 122,426 | $ | 96,372 | $ | 39,198 |
See accompanying notes to unaudited condensed consolidated interim financial statements.
1 |
bellus health INC.
Condensed Consolidated Interim Statements of Loss and Other Comprehensive Income
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data)
Three-month periods ended | Nine-month periods ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(Recast – note 2(c)) | (Recast – note 2(c)) | |||||||||||||||
Revenues | $ | 3 | $ | 7 | $ | 11 | $ | 20 | ||||||||
Expenses: | ||||||||||||||||
Research and development | 5,926 | 5,725 | 18,498 | 12,412 | ||||||||||||
Research tax credits | (130 | ) | (125 | ) | (293 | ) | (282 | ) | ||||||||
5,796 | 5,600 | 18,205 | 12,130 | |||||||||||||
General and administrative | 456 | 1,666 | 6,657 | 4,493 | ||||||||||||
Total operating expenses | 6,252 | 7,266 | 24,862 | 16,623 | ||||||||||||
Loss from operating activities | (6,249 | ) | (7,259 | ) | (24,851 | ) | (16,603 | ) | ||||||||
Finance income | 547 | 744 | 949 | 691 | ||||||||||||
Finance costs | (7 | ) | (5 | ) | (361 | ) | (123 | ) | ||||||||
Net finance income (note 8) | 540 | 739 | 588 | 568 | ||||||||||||
Net loss for the period | $ | (5,709 | ) | $ | (6,520 | ) | $ | (24,263 | ) | $ | (16,035 | ) | ||||
Other comprehensive (loss) income: | ||||||||||||||||
Currency translation adjustment (note 2 (c)) | — | (658 | ) | — | 715 | |||||||||||
Other comprehensive (loss) income for the period | — | (658 | ) | — | 715 | |||||||||||
Total comprehensive loss for the period | $ | (5,709 | ) | $ | (7,178 | ) | $ | (24,263 | ) | $ | (15,320 | ) | ||||
Loss per share (note 9) | ||||||||||||||||
Basic and diluted | $ | (0.09 | ) | $ | (0.14 | ) | $ | (0.43 | ) | $ | (0.36 | ) |
See accompanying notes to unaudited condensed consolidated interim financial statements.
2 |
bellus health INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars)
Accumulated | ||||||||||||||||||||
other | ||||||||||||||||||||
Share | Other | comprehensive | ||||||||||||||||||
capital | equity | Deficit | income | Total | ||||||||||||||||
(note 7 (a)) | ||||||||||||||||||||
Balance, December 31, 2019 (Recast – note 2 (c)) | $ | 486,401 | $ | 26,858 | $ | (433,818 | ) | $ | 9,298 | $ | 88,739 | |||||||||
Total comprehensive loss for the period: | ||||||||||||||||||||
Net loss and comprehensive loss | — | — | (24,263 | ) | — | (24,263 | ) | |||||||||||||
Total comprehensive loss for the period | — | — | (24,263 | ) | — | (24,263 | ) | |||||||||||||
Transactions with shareholders, recorded directly in shareholders’ equity: | ||||||||||||||||||||
Issued in consideration for acquisition of remaining BLU-5937 Assets (note 6) | 47,749 | — | (301 | ) | — | 47,448 | ||||||||||||||
Stock-based compensation (note 7 (b) (i)) | — | 3,377 | — | — | 3,377 | |||||||||||||||
Issued upon stock options exercise (note 7 (b) (i)) | 334 | (158 | ) | — | — | 176 | ||||||||||||||
Issued upon broker warrants exercise (note 7 (b) (ii)) | 552 | (131 | ) | — | — | 421 | ||||||||||||||
Balance, September 30, 2020 | $ | 535,036 | $ | 29,946 | $ | 458,382 | $ | 9,298 | $ | 115,898 |
Accumulated | ||||||||||||||||||||
other | ||||||||||||||||||||
Share | Other | comprehensive | ||||||||||||||||||
capital | equity | Deficit | income | Total | ||||||||||||||||
(note 7 (a)) | ||||||||||||||||||||
Balance, December 31, 2018 and January 1, 2019 (Recast – note 2 (c)) | $ | 405,626 | $ | 25,682 | $ | (401,087 | ) | $ | 6,871 | $ | 37,092 | |||||||||
Total comprehensive loss for the period: | ||||||||||||||||||||
Net loss | — | — | (16,035 | ) | — | (16,035 | ) | |||||||||||||
Other comprehensive income | — | — | — | 715 | 715 | |||||||||||||||
Total comprehensive loss for the period | — | — | (16,035 | ) | 715 | (15,320 | ) | |||||||||||||
Transactions with shareholders, recorded directly in shareholders’ equity: | ||||||||||||||||||||
Issued in connection with the 2019 Offering (note 7 (a) (i)) | 79,374 | — | (6,723 | ) | — | 72,651 | ||||||||||||||
Issued upon stock option exercise (note 7 (b) (i)) | 103 | (47 | ) | — | — | 56 | ||||||||||||||
Issued upon broker warrants exercise (note 7 (b) (ii)) | 1,298 | (387 | ) | — | — | 911 | ||||||||||||||
Stock-based compensation (note 7 (b) (i)) | — | 1,062 | — | — | 1,062 | |||||||||||||||
Balance, September 30, 2019 | $ | 486,401 | $ | 26,310 | $ | (423,845 | ) | $ | 7,586 | $ | 96,452 |
See accompanying notes to unaudited condensed consolidated interim financial statements.
3 |
bellus health INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars)
Nine-month periods ended | ||||||||
September 30, | ||||||||
2020 | 2019 | |||||||
(Recast – note 2 (c)) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss for the period | $ | (24,263 | ) | $ | (16,035 | ) | ||
Adjustments for: | ||||||||
Depreciation (note 5) | 134 | 81 | ||||||
Stock-based compensation | 3,377 | 1,062 | ||||||
Loss on lease modification | 4 | — | ||||||
Net finance income | (588 | ) | (568 | ) | ||||
Other items | 11 | (9 | ) | |||||
Changes in operating assets and liabilities | ||||||||
Trade and other receivables | (46 | ) | (83 | ) | ||||
Research tax credits receivable | 462 | (268 | ) | |||||
Prepaid expenses and other assets | 2,363 | 32 | ||||||
Trade and other payables | (1,378 | ) | 4,377 | |||||
(19,924 | ) | (11,411 | ) | |||||
Cash flows from financing activities: | ||||||||
Issuance of common shares through 2019 Offering, net of share issue costs | — | 73,576 | ||||||
Issuance of common shares through 2018 Offering, net of share issue costs | — | (303 | ) | |||||
Issuance of common shares upon stock options exercise | 176 | 56 | ||||||
Issuance of common shares upon broker warrants exercise | 421 | 911 | ||||||
Deferred financing costs | (136 | ) | — | |||||
Lease liability – principal repayments | (123 | ) | (85 | ) | ||||
Interest paid | (16 | ) | (5 | ) | ||||
322 | 74,150 | |||||||
Cash flows from investing activities: | ||||||||
Sales of short-term investments | 66,882 | 11,179 | ||||||
Purchases of short-term investments | (12,590 | ) | (60,769 | ) | ||||
Acquisition of in-process research and development asset, total contribution paid and transaction costs (note 6) | (836 | ) | — | |||||
Interest received | 1,234 | 342 | ||||||
54,690 | (49,248 | ) | ||||||
Net increase in cash and cash equivalents | 35,088 | 13,491 | ||||||
Cash and cash equivalents, beginning of period | 18,688 | 10,950 | ||||||
Effect of foreign exchange on cash and cash equivalents | (212 | ) | 162 | |||||
Cash and cash equivalents, end of period | $ | 53,564 | $ | 24,603 | ||||
Supplemental cashflow disclosure: | ||||||||
Non-cash transactions: | ||||||||
Initial recognition of right-of-use asset and lease liability (note 5) | $ | — | $ | 114 | ||||
Addition to right-of-use asset and lease liability – Lease modification | — | 110 | ||||||
Issuance of common shares in consideration for acquisition of remaining BLU-5937 Assets (note 6) | 47,749 | — | ||||||
Share issue costs related to equity offerings, in Trade and other payables | 50 | 975 | ||||||
Ascribed value related to issuance of common shares upon stock options exercise (note 7 (b) (i)) | 158 | 47 | ||||||
Ascribed value related to issuance of common shares upon broker warrants exercise (note 7 (b) (ii)) | 131 | 387 | ||||||
Value of DSUs in Prepaid expenses (note 7 (b) (iii)) | 121 | 120 |
See accompanying notes to unaudited condensed consolidated interim financial statements.
4 |
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
1. Reporting entity:
BELLUS Health Inc. (“BELLUS Health” or the “Company”) is a clinical-stage biopharmaceutical company developing novel therapeutics for the treatment of chronic cough and other hypersensitization-related disorders. The Company's product candidate, BLU-5937, is being developed for the treatment of chronic cough and chronic pruritus. The Company is domiciled in Canada. The address of the Company’s registered office is 275 Armand-Frappier Blvd., Laval, Quebec, H7V 4A7. BELLUS Health’s common shares trade on the Nasdaq Capital Market (“Nasdaq”) and on the Toronto Stock Exchange (“TSX”), both under the symbol BLU.
These condensed consolidated interim financial statements include the accounts of BELLUS Health Inc. and its subsidiaries.
The annual consolidated financial statements of the Company as at and for the year ended December 31, 2019 are available on our web site at www.bellushealth.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.
2. Basis of preparation:
(a) | Statement of compliance: |
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting of International Financial Reporting Standards (“IFRS”). The condensed consolidated interim financial statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the annual consolidated financial statements as at and for the year ended December 31, 2019. These condensed consolidated interim financial statements have not been reviewed by the Company’s auditors.
These condensed consolidated interim financial statements for the three and nine-month periods ended September 30, 2020 were approved by the Board of Directors on November 11, 2020.
(b) | Use of estimates and judgements: |
The preparation of the condensed consolidated interim financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The reported amounts and note disclosures reflect management’s best estimate of the most probable set of economic conditions and planned course of actions. Actual results may differ from these estimates.
5
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
2. Basis of preparation (continued):
(b) | Use of estimates and judgements (continued): |
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31, 2019, except for the addition of the following: the estimation of the cost of the in-process research and development (IPR&D) asset using the fair value of the issued share-based consideration related to the remaining BLU-5937 Assets the Company acquired in March 2020 (refer to note 6).
(c) | Functional and presentation currency: |
Effective January 1, 2020, the Company has adopted the United State dollar ("USD") as its functional and presentation currency. Prior to these condensed consolidated interim financial statements, the functional and presentation currency was the Canadian dollar ("CAD"). The change in the functional currency from the CAD to the USD reflects the primary economic environment in which the Company operates in. As a result of the advancement of the Company’s development programs, the Company anticipates higher research and development costs in future periods which will be denominated mainly in USD. In addition, these costs will be financed from proceeds received from the financing in USD that closed in September 2019. The Company also anticipates that potential future sales revenues and financings will be primarily denominated in USD.
As such, these condensed consolidated interim financial statements are presented in USD. On January 1, 2020, the change in functional currency resulted in the assets and liabilities as of December 31, 2019 being translated in USD using the exchange rate in effect on that date, and equity transactions were translated at historical rates. The change in functional currency is applied prospectively.
The change in presentation currency was applied retrospectively and therefore, these condensed consolidated interim financial statements are presented in USD, together with the comparative information as at December 31, 2019, for the three and nine-month periods ended September 30, 2019, and on the consolidated statement of financial position as at January 1, 2019. For comparative purposes, historical consolidated financial statements were recast in USD by translating assets and liabilities at the closing rate in effect at the end of the respective period, revenues, expenses and cash flows at the average rate in effect for the respective period and equity transactions at historical rates. Any exchange difference resulting from the translation was included in Accumulated other comprehensive income presented in shareholders’ equity.
6
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
3. Significant accounting policies and basis of measurement:
The accounting policies and basis of measurement applied in these condensed consolidated interim financial statements are the same as those applied by BELLUS Health in its consolidated financial statements for the year ended December 31, 2019.
4. Cash, cash equivalents and short-term investments:
Cash, cash equivalents and short-term investments consist of cash balances with banks and short-term investments:
September 30, | December 31, | January 1, | ||||||||||
2020 | 2019 | 2019 | ||||||||||
Cash balances with banks | $ | 12,155 | $ | 5,494 | $ | 1,073 | ||||||
Short-term investments with initial maturities of less than three months or that can be withdrawn on demand: | ||||||||||||
High interest savings accounts and term deposits, yielding interest at 0.20% to 0.38% as at September 30, 2020 (December 31, 2019 – 1.28% to 1.85%) | 41,409 | 13,194 | 9,877 | |||||||||
Cash and cash equivalents | 53,564 | 18,688 | 10,950 | |||||||||
Short-term investments with initial maturities greater than three months and less than one year: | ||||||||||||
Term deposits issued in USD, yielding interest as at 0.46% to 0.55% as at September 30, 2020 (December 31, 2019 – 1.80% to 2.15%) | 8,502 | 36,701 | 10,510 | |||||||||
Term deposits issued in CAD (CAD $15,700), yielding interest at 0.85% to 2.60% as at September 30, 2020 (December 31, 2019 – (CAD $15,555), 1.92% to 2.60%) | 7,968 | 11,975 | 14,402 | |||||||||
Bearer deposit notes issued in USD, yielding interest at 1.76% to 1.80% as at September 30, 2020 (December 31, 2019 – yielding interest at 1.76% to 1.83%) | — | 22,616 | — | |||||||||
Short-term investments | 16,470 | 71,292 | 24,912 | |||||||||
Cash, cash equivalents and short-term investments | $ | 70,034 | $ | 89,980 | $ | 35,862 |
5. Right-of-use asset and lease liability:
BELLUS Health Inc. leases office space in Laval, Quebec, Canada. The Company’s main property lease was amended in September 2020 to lease new office space at the same location, effective October 1, 2020 and expiring on September 30, 2023. The amendment caused the previous lease to expire on September 30, 2020 (initial expiry date of January 31, 2021).
In November 2019, the Company had entered into a new property lease for additional office space at the same location, the expiry of which was modified to September 30, 2020 (initial expiry date of January 31, 2021) by a lease amendment dated April 2020.
7
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
5. Right-of-use asset and lease liability (continued):
Right-of-use asset:
Carrying | ||||
value | ||||
Cost: | ||||
Balance as at January 1, 2019 | $ | 114 | ||
Additions to right-of-use asset | 204 | |||
Currency translation adjustment (note 2 (c)) | 8 | |||
Balance as at December 31, 2019 | 326 | |||
Additions to right-of-use asset | 535 | |||
Derecognition due to lease modification | (59 | ) | ||
Balance as at September 30, 2020 | $ | 802 | ||
Accumulated amortization: | ||||
Balance as at January 1, 2019 | $ | |||
Depreciation | (120 | ) | ||
Currency translation adjustment (note 2 (c)) | (2 | ) | ||
Balance as at December 31, 2019 | (122 | ) | ||
Depreciation | (134 | ) | ||
Balance as at September 30, 2020 | $ | (256 | ) | |
Net carrying value: | ||||
Balance as at January 1, 2019 | $ | 114 | ||
Balance as at December 31, 2019 | 204 | |||
Balance as at September 30, 2020 | 546 |
8
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
5. Right-of-use asset and lease liability (continued):
Lease liability:
Carrying | ||||
value | ||||
Balance as at January 1, 2019 | $ | 114 | ||
Additions to lease liability | 204 | |||
Interest expense | 12 | |||
Principal repayment | (146 | ) | ||
Currency translation adjustment (note 2 (c)) | 4 | |||
Balance as at December 31, 2019 | $ | 188 | ||
Addition to lease liability | 535 | |||
Derecognition due to lease modification | (55 | ) | ||
Interest expense | 8 | |||
Principal repayment | (123 | ) | ||
Foreign exchange gain | (18 | ) | ||
Balance as at September 30, 2020 | $ | 535 | ||
Current portion of lease liability | 160 | |||
Non-current portion of lease liability | $ | 375 |
The remaining weighted average life of the Company’s property lease as of September 30, 2020 is 3 years.
Lease payments were discounted using an incremental borrowing rate of 5%.
Minimum annual payments under the non-cancelable leases, undiscounted, are as follows:
Years ending December 31, | ||||
2020 (remainder of the year) | $ | 48 | ||
2021 | 192 | |||
2022 | 197 | |||
2023 and after | 154 | |||
$ | 591 |
9
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
6. In-process research and development asset:
On March 25, 2020, the Company closed an asset purchase and sale agreement to acquire all of the remaining BLU-5937 and related P2X3 antagonists intellectual property assets (the “BLU-5937 Assets”) from adMare BioInnovations’ NEOMED Institute (“adMare”) , which is accounted for as an acquisition of assets.
In consideration of the foregoing, the Company issued to adMare and AstraZeneca AB (“AstraZeneca”) an aggregate of 4,770,000 BELLUS Health common shares from treasury, having an aggregate fair value of $47,749 at the date of the closing of the transaction, calculated using the average of the BELLUS Health’s March 25, 2020 opening and closing share price, plus a cash consideration paid to adMare of $352 (CAD $500). AstraZeneca assigned the BLU-5937 Assets to adMare in 2012.
The total consideration paid for the in-process research and development (“IPR&D") asset related to the remaining BLU-5937 Assets was $48,284, consisting of the shares issued and cash paid referred to above, as well as transaction costs in relation to the acquisition of $183. Transactions costs in relation to the share issuance amounted to $301 and have been charged to the deficit. This acquisition was accounted for as a non-employee share-based payment transaction and measured using the consideration transferred by the Company.
The Company no longer has any obligations to adMare, or any other third party, in respect to tiered royalty obligations and revenue share that would have been otherwise owed to adMare under and subject to the February 2017 license agreement, pursuant to which the Company had exclusive rights to develop and commercialize the BLU-5937 Assets, and which license agreement was terminated as part of this transaction. No amount was payable under this agreement prior to its termination.
As at September 30, 2020, the aggregate carrying value of the IPR&D asset related to BLU-5937 amounted to $50,100 ($1,816 as at December 31, 2019).
The Company assesses at each reporting date whether there is an indication that the asset may be impaired. Due to the topline results of its Phase 2 RELIEF trial of BLU-5937 in refractory chronic cough, the Company performed an impairment review of the IPR&D asset as at June 30, 2020. The carrying amount of the IPR&D asset did not exceed its estimated recoverable amount. The IPR&D asset related to BLU-5937 is accounted for as an indefinite-lived intangible asset until the project, currently in its clinical phase, is completed or abandoned, at which point it will be amortized or impaired, respectively.
10
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity:
(a) | Share capital: |
Changes in issued and outstanding common shares for the nine-month periods ended September 30, 2020 and 2019 were as follows:
Number | Dollars | |||||||
Balance, December 31, 2019 | 55,378,660 | $ | 486,401 | |||||
Issued in consideration for acquisition of remaining BLU-5937 Assets (note 7 (a) (i)) | 4,770,000 | 47,749 | ||||||
Issued upon stock options exercise (note 7 (b) (i)) | 128,222 | 334 | ||||||
Issued upon broker warrants exercise (note 7 (b) (ii)) | 171,590 | 552 | ||||||
Balance, September 30, 2020 | 60,448,472 | $ | 535,036 |
Number | Dollars | |||||||
Balance, December 31, 2018 | 43,622,136 | $ | 405,626 | |||||
Issued in connection with the 2019 Offering (note 7 (a) (ii)) | 11,179,451 | 79,374 | ||||||
Issued upon stock options exercise (note 7 (b) (i)) | 41,667 | 103 | ||||||
Issued upon broker warrants exercise (note 7 (b) (ii)) | 535,406 | 1,298 | ||||||
Balance, September 30, 2019 | 55,378,660 | $ | 486,401 |
(i) | On March 25, 2020, the Company issued 4,770,000 common shares from treasury in consideration for the acquisition of the remaining BLU-5937 Assets (refer to note 6). |
(ii) | On September 9, 2019, the Company closed an equity offering, issuing 9,859,155 common shares from treasury at a price of $7.10 per share for gross proceeds of $70,000, and on September 17, 2019, the underwriters of the equity offering partially exercised their option to purchase additional common shares (over-allotment option) to purchase common shares of the Company, resulting in the issuance of an additional 1,320,296 common shares from treasury at a price of $7.10 per share, for additional gross proceeds of $9,374 (together, the “2019 Offering”). Share issue costs of $6,723, comprised mainly of agents’ commission, legal, professional and filing fees, have been charged to the deficit. |
11
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity (continued):
(b) Share-based payment arrangements:
(i) | Stock option plan: |
Changes in outstanding stock options issued under the stock option plan for the nine-month periods ended September 30, 2020 and 2019 were as follows:
Number | Weighted average exercise price (5) | |||||||
Balance, December 31, 2019 | 4,726,943 | $2.16 (CAD $2.88) | ||||||
Granted (1) (2) (3) | 1,160,000 | $9.91 (CAD $13.20) | ||||||
Exercised | (128,222 | ) | $1.44 (CAD $1.92) | |||||
Cancelled | (88,055 | ) | $4.87 (CAD $6.49) | |||||
Balance, September 30, 2020 | 5,670,666 | $3.72 (CAD $4.96) |
Number | Weighted average exercise price (5) | |||||||
Balance, December 31, 2018 | 3,220,280 | $1.11 (CAD $1.47) | ||||||
Granted (4) (5) | 1,036,108 | $3.40 (CAD $4.50) | ||||||
Exercised | (41,667 | ) | $1.36 (CAD $1.80) | |||||
Balance, September 30, 2019 | 4,214,721 | $1.67 (CAD $2.21) |
(1) | 1,010,000 stock options were granted on April 1, 2020, having an exercise price of $10.44 (CAD $13.91); 750,000 stock options granted to key management personnel and 260,000 granted to other employees. |
(2) | 65,000 stock options were granted to other employees on May 14, 2020, having an exercise price of $11.05 (CAD $14.72). |
(3) | 85,000 stock options were granted to other employees on August 12, 2020, having an exercise price of $2.69 (CAD $3.58). |
(4) | 1,015,275 stock options were granted on February 20, 2019, having an exercise price of $3.29 (CAD $4.36); 895,830 stock options granted to key management personnel and 119,445 granted to other employees. |
(5) | 20,833 stock options were granted to other employees on August 7, 2019, having an exercise price of $8.62 (CAD $11.41). |
(6) | USD equivalent is presented at the closing rate of the corresponding period. |
12
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity (continued):
(b) | Share-based payment arrangements (continued): |
(i) | Stock option plan (continued): |
The following table summarizes information about stock options outstanding and exercisable as at September 30, 2020:
Options outstanding | Options exercisable | |||||||||||
Weighted | ||||||||||||
average years | ||||||||||||
Exercise price/share (1) | Number | To expiration | Number | |||||||||
$0.81 (CAD $1.08) | 719,445 | 6.8 | 432,223 | |||||||||
$0.95 (CAD $1.26) | 1,127,779 | 7.4 | 441,111 | |||||||||
$1.13 (CAD $1.51) | 41,667 | 7.1 | 16,667 | |||||||||
$1.35 (CAD $1.80) | 1,077,777 | 1.9 | 1,077,777 | |||||||||
$1.54 (CAD $2.05) | 41,667 | 7.8 | 16,667 | |||||||||
$2.69 (CAD $3.58) | 70,000 | 9.9 | — | |||||||||
$2.84 (CAD $3.78) | 5,667 | 1.9 | 5,667 | |||||||||
$3.03 (CAD $4.03) | 28,611 | 5.4 | 22,889 | |||||||||
$3.27 (CAD $4.36) | 974,998 | 8.4 | 190,556 | |||||||||
$6.30 (CAD $8.39) | 512,222 | 9.1 | — | |||||||||
$8.57 (CAD $11.41) | 20,833 | 8.9 | 4,167 | |||||||||
$10.44 (CAD $13.91) | 985,000 | 9.5 | — | |||||||||
$11.05 (CAD $14.72) | 65,000 | 9.6 | — | |||||||||
5,670,666 | 6.9 | 2,207,724 |
(1) USD equivalent is presented at the closing rate.
Stock-based compensation
For the three and nine-month periods ended September 30, 2020, the Company recorded a stock-based compensation expense related to the stock option plan (excluding compensation under the DSU plans) in the amount of $1,432 and $3,377, respectively in the condensed consolidated interim statement of loss and other comprehensive income; from these amounts, $570 and $1,432, respectively, is presented in Research and development expenses and $862 and $1,945, respectively, is presented in General and administrative expenses ($401 and $1,062 for the corresponding periods of the previous year, $74 and $188 respectively presented in Research and development and $328 and $874 respectively presented in General and administrative expenses).
13
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity (continued):
(b) | Share-based payment arrangements (continued): |
(i) | Stock option plan (continued): |
The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes pricing model. Expected volatility is estimated by considering historic average share price volatility for a period commensurate with the expected life. The weighted average assumptions for stock options granted during the nine-month periods ended September 30, 2020 and 2019 were as follows:
2020 (1) (3) | 2019 (2) (3) | |||||||
Weighted average fair value of stock options at grant date | $7.46 (CAD $10.56) | $2.93 (CAD $3.86) | ||||||
Weighted average share price | $9.32 (CAD $13.20) | $3.41 (CAD $4.50) | ||||||
Weighted average exercise price | $9.32 (CAD $13.20) | $3.41 (CAD $4.50) | ||||||
Risk-free interest rate | 0.56 | % | 1.82 | % | ||||
Expected volatility | 100 | % | 100 | % | ||||
Expected life in years | 7 | 7 | ||||||
Expected dividend yield | Nil | Nil |
(1) Stock options were granted on April 1, 2020, May 14, 2020 and August 12, 2020.
(2) All stock options were granted on February 20, 2019 and August 7, 2019.
(3) USD equivalent is presented at the historical rate.
Dividend yield was excluded from the calculation since it is the present policy of the Company to retain all earnings to finance operations and future growth.
(ii) | Broker warrants: |
Changes in outstanding broker warrants for the nine-month periods ended September 30, 2020 and 2019 were as follows:
Number | Dollars | |||||||
Balance, December 31, 2019 | 171,590 | $ | 131 | |||||
Exercised – from the 2018 Offering (1) | (171,590 | ) | (131 | ) | ||||
Balance, September 30, 2020 | — | $ | — |
14
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity (continued):
(b) | Share-based payment arrangements (continued): |
(ii) | Broker warrants (continued): |
Number | Dollars | |||||||
Balance, December 31, 2018 | 710,278 | $ | 521 | |||||
Exercised – from the 2018 Offering (2) | (231,261 | ) | (166 | ) | ||||
Exercised – from the 2017 Offering (3) | (304,145 | ) | (221 | ) | ||||
Expired – from the 2017 Offering | (3,282 | ) | (3 | ) | ||||
Balance, September 30, 2019 | 171,590 | $ | 131 |
(1) | During the nine-month period ended September 30, 2020, the Company issued a total of 171,590 common shares from treasury upon the exercise of a total of 171,590 broker warrants issued in connection with the Company’s equity offering in December 2018 (the “2018 Offering”). Each broker warrant entitled the holders to buy one common share at a price of $2.57 (CAD $3.42) per share for a period of 18 months from the closing of the 2018 Offering. As a result of their exercise, the aggregate carrying value of the broker warrants of $131, initially allocated to Other equity pending the issuance of common shares, was reclassified to Share capital. |
(2) | During the nine-month period ended September 30, 2019, the Company issued a total of 231,261 common shares from treasury upon the exercise of a total of 231,261 broker warrants issued in connection with the 2018 Offering. As a result of their exercise, the aggregate carrying value of the broker warrants of $166, initially allocated to Other equity pending the issuance of common shares, was reclassified to Share capital. |
(3) | During the nine-month period ended September 30, 2019, the Company issued a total of 304,145 common shares from treasury upon the exercise of a total of 304,145 broker warrants issued in connection with the Company’s equity offering in December 2017 (the “2017 Offering”). Each broker warrant entitled the holders to buy one common share at a price of $1.03 (CAD $1.37) per share for a period of 18 months from the closing of the 2017 Offering. As a result of their exercise, the aggregate carrying value of the broker warrants of $221, initially allocated to Other equity pending the issuance of common shares, was reclassified to Share capital. |
15
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
7. Shareholders’ equity (continued):
(b) | Share-based payment arrangements (continued): |
(iii) | Deferred share unit (“DSU”) plan: |
Changes in the number of units outstanding for the nine-month periods ended September 30, 2020 and 2019 were as follows:
Number of units | 2020 | 2019 | ||||||
Balance, beginning of period | 234,633 | 181,352 | ||||||
Units granted (1) | 18,395 | 53,281 | ||||||
Balance, end of period | 253,028 | 234,633 | ||||||
Balance of DSU liability, included in Trade and other payables (2) | $ | 577 | $ | 1,508 |
(1) All DSUs were granted to key management personnel.
(2) Balance of DSU liability as at December 31, 2019 amounted to $1,772, and as at January 1, 2019, to $488.
The stock-based compensation net (recovery) expense related to DSU plan recorded in the condensed consolidated interim statement of loss and other comprehensive income for the three and nine-month periods ended September 30, 2020 amounted to $(2,016) and $(1,194), respectively; from these amount, $(2) and nil, respectively, is presented in Research and development expenses and $(2,014) and $(1,194), respectively, is presented in General and administrative expenses ($(231) and $930 for the corresponding periods of the previous year, $(1) and $1 presented in Research and development expenses and $(230) and $929 presented in General and administrative expenses). During the nine-month period ended September 30, 2020, the Company granted 18,395 DSUs having a fair value per unit of $10.89 (CAD $14.51) (53,281 DSUs having an average fair value per unit of $3.87 (CAD $5.12) were granted during the nine-month period ended September 30, 2019).
16
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
8. | Net finance income: |
Finance income and Finance costs for three and nine-month periods ended September 30, 2020 and 2019 were attributed as follows:
Three-month periods ended | Nine-month periods ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Interest income | $ | 250 | $ | 262 | $ | 949 | $ | 691 | ||||||||
Foreign exchange gain | 297 | 482 | — | — | ||||||||||||
Finance income | 547 | 744 | 949 | 691 | ||||||||||||
Interest expense on lease liability (note 5) | (1 | ) | (3 | ) | (8 | ) | (7) | |||||||||
Interest and bank charges | (6 | ) | (2 | ) | (16 | ) | (5) | |||||||||
Foreign exchange loss | — | — | (337 | ) | (111) | |||||||||||
Finance costs | (7 | ) | (5 | ) | (361 | ) | (123) | |||||||||
Net finance income | $ | 540 | $ | 739 | $ | 588 | $ | 568 |
9. | Loss per share: |
Three-month periods ended | Nine-month periods ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Basic and diluted weighted average number of common shares outstanding | 60,446,443 | 46,575,019 | 56,858,543 | 44,751,623 | ||||||||||||
Basic and diluted loss per share | $ | (0.09 | ) | $ | (0.14 | ) | $ | (0.43 | ) | $ | (0.36 | ) |
Excluded from the calculation of the diluted loss per share for the three and nine-month periods ended September 30, 2020 is the impact of all stock options granted under the stock option plan, as it would be anti-dilutive.
Excluded from the calculation of the diluted loss per share for the three and nine-month periods ended September 30, 2019 is the impact of all stock options granted under the stock option plan and broker warrants, as it would be anti-dilutive.
Stock options granted under the stock option plan could potentially be dilutive in the future.
17
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
10. | Commitments: |
Contracts in the normal course of business:
The Company enters into contracts in the normal course of business, including for research and development activities, consulting and other services.
As at September 30, 2020, the Company has commitments for expenditures related to contracts for research and development activities of approximately $6,527 (approximately $8,724 as at December 31, 2019), of which $1,895 is expected to be paid in 2020 and $4,632 in 2021.
11. | Related party transactions: |
(a) | There is no single ultimate controlling party. |
(b) | Dr. Francesco Bellini, Chairman of the Board of Directors, provides ongoing advisory services to the Company under the terms of a consulting and services agreement between the Company and Picchio International, wholly-owned by Dr. Francesco Bellini and his spouse. The agreement has a one-year term and shall renew for successive one-year terms. The Company recorded fees and expenses of $71 and $212 (CAD $96 and $286) and $73 and $216 (CAD $96 and $286) under the consulting and services agreement for the three and nine-month periods ended September 30, 2020 and 2019, respectively. |
(c) | Key management personnel: |
The Chief Executive Officer, Chief Medical Officer, Vice-Presidents and Directors of BELLUS Health are considered key management personnel of the Company.
The aggregate compensation for the three and nine-month periods ended September 30, 2020 and 2019 to key management personnel of the Company is set out below:
Three-month periods ended | Nine-month periods ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Short term benefits | $ | 559 | $ | 491 | $ | 1,622 | $ | 1,212 | ||||||||
DSU plan (recovery) expense | (2,016 | ) | (231 | ) | (1,194 | ) | 930 | |||||||||
Stock option plan expense | 1,096 | 350 | 2,680 | 931 | ||||||||||||
$ | (361 | ) | $ | 610 | $ | 3,108 | $ | 3,073 |
18
bellus health INC.
Notes to Condensed Consolidated Interim Financial Statements (Continued)
(Unaudited)
Periods ended September 30, 2020 and 2019
(in thousands of United States dollars, except per share data, unless otherwise noted)
12. | Financial instruments: |
Carrying values and fair values:
Fair value estimates are made as of a specific point in time, using available information about the financial instrument. These estimates are subjective in nature and may not be determined with precision. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value.
There was no financial asset or liability fair valued on a recurring basis as at September 30, 2020 and December 31, 2019.
For its financial assets and liabilities measured at amortized cost as at September 30, 2020, the Company has determined that the carrying value of its short-term financial assets and liabilities approximates their fair value because of the relatively short periods to maturity of these instruments.
13. | Subsequent event: |
On October 22, 2020, the Company closed an equity offering, issuing a total of 17,888,889 common shares from treasury at a price of $2.25 per share for gross proceeds of $40,250, including the exercise in full of the underwriters’ option to purchase 2,333,333 common shares. Share issue costs of approximately $3 million, comprised mainly of agents’ commission, legal, professional and filing fees, will be charged to the deficit.
19