Theratechnologies (NASDAQ:THTX) Inc. (TH.TO) reported a net profit of $3 million, or $0.06 per share, for the third quarter of 2024, marking a significant improvement in its financial performance. The company also raised its adjusted EBITDA guidance for the full year.
Key Takeaways:
- Q3 2024 net profit: $3 million ($0.06 per share)
- Revenue: $22.6 million, up 8% year-over-year
- Adjusted EBITDA: $7.2 million, up from $2.2 million in Q3 2023
- Full-year revenue guidance adjusted to $83-$85 million
- Adjusted EBITDA guidance increased to $17-$19 million
Company Outlook
- Plans to submit prior authorization supplement for EGRIFTA SV in early November
- Expects to resubmit F8 formulation of Tesamorelin by end of November
- Anticipates recovering Q4 2024 lost sales in early 2025
- Focuses on identifying new product opportunities and partnerships
Bearish Highlights
- Temporary supply constraint due to CDMO's voluntary manufacturing shutdown
- Trogarzo sales down to $5.9 million from $7.7 million
- Expects slower start to Q1 2025 sales due to inventory depletion
Bullish Highlights
- EGRIFTA SV sales up 27% year-over-year to $16.7 million
- Strong cash position of nearly $39 million
- Successful cost structure adaptation
- Exceeding loan covenant requirements with Marathon
Misses
- Adjusted revenue guidance due to supply constraints
Q&A Highlights
- Company expects to maintain EBITDA sustainability
- Anticipates Q1 2025 sales recovery as inventory levels normalize
- Trogarzo sales expected to stabilize in 2025
Theratechnologies reported strong financial results for the third quarter of 2024, with a net profit of $3 million and an adjusted EBITDA of $7.2 million. The company's revenue increased by 8% year-over-year to $22.6 million, primarily driven by a 27% rise in EGRIFTA SV sales.
Despite facing challenges, including a temporary supply constraint due to a CDMO's voluntary manufacturing shutdown, Theratechnologies remains optimistic about its future prospects. The company has adjusted its revenue guidance for 2024 to $83-$85 million and increased its adjusted EBITDA guidance to $17-$19 million for the full year.
Theratechnologies plans to submit a prior authorization supplement for EGRIFTA SV in early November and expects to resubmit the F8 formulation of Tesamorelin by the end of November. The company anticipates recovering sales lost in Q4 2024 in early 2025.
During the earnings call, management emphasized its focus on identifying new product opportunities and partnerships to enhance growth. The company's strong cash position of nearly $39 million supports these efforts.
While Trogarzo sales experienced a decline, Theratechnologies expects them to stabilize in 2025. The company also highlighted its successful cost structure adaptation and its ability to exceed loan covenant requirements with Marathon.
Looking ahead, Theratechnologies anticipates a slower start to Q1 2025 sales due to inventory depletion but expects recovery as inventory levels normalize. The company remains confident in its ability to maintain EBITDA sustainability and continue its growth trajectory.
InvestingPro Insights
Theratechnologies Inc. (TH.TO) has shown significant financial improvement in its recent quarterly report, but a closer look at InvestingPro data reveals some important nuances for investors to consider.
According to InvestingPro data, Theratechnologies has a market capitalization of $59.77 million USD, which is relatively small and may contribute to the stock's volatility. This aligns with one of the InvestingPro Tips, which notes that "stock price movements are quite volatile." This volatility could explain the company's varied price performance, with a 5.18% return over the past week but a -28.94% return over the past year.
Despite the recent positive quarterly results, InvestingPro Tips indicate that analysts do not anticipate the company will be profitable this year. This forecast suggests that while Theratechnologies is making progress, it may still face challenges in achieving consistent profitability. The company's P/E ratio of -15.68 further reflects this current unprofitability.
On a positive note, Theratechnologies has shown impressive revenue growth, with a 25.46% increase in quarterly revenue as of Q2 2024. This growth is consistent with the company's reported 8% year-over-year revenue increase in the article. Additionally, the EBITDA growth of 140.45% over the last twelve months as of Q2 2024 aligns well with the company's reported improvement in adjusted EBITDA.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Theratechnologies, providing a deeper understanding of the company's financial health and market position.
Full transcript - Theratechnologies Inc (THTX) Q3 2024:
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Theratechnologies Third Quarter 2024 Earnings Call. We would like to remind everyone that all figures on this call are quoted in U.S. dollars. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session with analysts. Instructions will be provided at that time for you to queue up for questions. Following the analyst Q&A session, investors wishing to submit a question may do so by clicking the Ask a Question link on the webcast platform. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, October 10, 2024 at 8.30 a.m. Eastern Time. I will now turn the call over to Julie Schneiderman, Senior Director, Communications & Corporate Affairs at Theratechnologies. Julie, please go ahead.
Julie Schneiderman: Thank you, operator, and good morning, everyone. On the call today will be Theratechnologies’ President and Chief Executive Officer, Mr. Paul Levesque; and Senior Vice President and Chief Financial Officer, Mr. Philippe Dubuc. During the Q&A session, they'll be joined by Dr. Christian Marsolais, Senior Vice President and Chief Medical Officer, and John Leasure, the company's Global Commercial Officer. Before we begin, I'd like to remind everyone that remarks today contain forward-looking statements regarding the company's current and future plans, expectations, and intentions with respect to future events. Forward-looking statements are based on assumptions, and there are risks that results obtained by Theratechnologies may differ materially from those statements. As such, the company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them. The company refers current and potential investors to the forward-looking information section of Theratechnologies’ Management’s Discussion and Analysis, issued this morning and available on SEDAR+ at www. sedarplus.ca, and on EDGAR at www.sec.gov. Forward-looking statements represent Theratechnologies’ expectations as of this morning, October 10, 2024. Additionally, today the company is using the term adjusted EBITDA, which is not a financial measure under International Financial Reporting Standards, or U.S. Generally Accepted Accounting Principles. Adjusted EBITDA excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions rather than the results of day-to-day operations. Theratechnologies believes that this measure can be a useful indicator of its operational performance and financial condition from one period to another. The company uses this non-IFRS measures to make financial, strategic, and operating decisions. Reconciliation of adjusted EBITDA to net loss is found in our MD&A issued this morning, available on SEDAR+ and on EDGAR at the web addresses mentioned earlier. Investors can also follow the company on LinkedIn and X formally Twitter and sign up for alerts on Theratechnologies investor website at theratech.com. With that, I would now like to turn the conference over to our President and CEO, Paul Levesque.
Paul Levesque: Thank you, Judy. Hello, everyone, and good morning. I'm pleased to be reporting on Theratechnologies financial results for the third quarter ended August 31, 2024. As I explained during our second quarter call, we have embarked on the new chapter at Theratechnologies focused on commercializing innovative treatments. This strategic pivot coupled with the cost structure that is fit for purpose, has enabled the company to achieve profitability, and deliver on our commitment to shareholders to be adjusted EBITDA positive quarter-after-quarter. In fact, in a short period of time, the turnaround is nothing short of spectacular. As you have seen today, our third quarter did not disappoint, and we have continued to demonstrate strength on the bottom line with an adjusted EBITDA figure of $7.2 million and a net profit of $3 million. Revenues for the quarter are also trending positively, up 8% from the same period last year and driven by our engine of growth, EGRIFTA SV. Enrollments, unique patients and units sold of EGRIFTA SV reached double-digit growth year-to-date compared to the same period last year. In fact, in the last six months of EGRIFTA SV has recorded -- the drug has recorded its best performance in recent history, capturing patients and new prescribers at an unprecedented rate. By highlighting EGRIFTA SV's unique value proposition, we've been able to differentiate the therapy from weight loss drugs where the focus is on BMI. EGRIFTA SV reduces visceral abdominal fat which if left untreated can lead to serious medical conditions and is easily identifiable by measurement of waist circumference. Trogarzo remains one of the few options for the management of HIV multi-drug resistance. While it has been facing strong competition over the past year, new prescriptions and refills of Trogarzo have stabilized and we do not expect further declines next year. Now as previously announced in September, our CDMO responsible for the manufacturing of EGRIFTA SV implemented a non-expected voluntary shutdown following an FDA inspection in order to implement corrective measures to their plant. As a result, the production of two batches of EGRIFTA SV were canceled, thus creating pressure on current inventory. It is important to note that the corrective measures have nothing to do with the manufacturing process of our medicine, but rather with the environment in which the product is manufactured. I want to be clear that the situation will have no impact at the patient level in 2024. However, we believe it will have an impact on ex-factory sales in the fourth quarter and in turn, total revenue for full year 2024. Given this and considering current trends for Trogarzo, we are changing top line revenue guidance to be between $83 million and $85 million. This change does not reflect demand for EGRIFTA SV, which in recent history has never been so strong across all metrics, new patients, to unique patients and unit sold. The new guidance reflects a constrained supply situation. Despite the circumstances affecting our top line, we're happy to firm up guidance for adjusted EBITDA, increasing it to $17 million to $19 million from $13 million to $15 million. This is a result of adapting our cost structure to our new strategic direction of refocusing efforts on commercial activities. With a cash position of close to $39 million and such a robust trajectory for adjusted EBITDA, we are in a strong position to take things to the next level. Looking to 2025, I want to share the latest information we have on the supply of EGRIFTA SV. Our CDMO has reconfirmed it will resume activities mid-October and a manufacturing slot for EGRIFTA SV scheduled for the week of October 21st. Theratechnologies will file a prior authorization supplement or PAS with the review division. The PAS will include the remediation plan implemented by our CDMO, and we expect to submit in early November. While we expect to have very limited supply of EGRIFTA SV in the latter part of November in terms of ex-factory sales, there will be still a six-week inventory held at the wholesaler and specialty pharmacy level. This will be enough drug to meet patient demand until mid-January. FDA has up to 120 days to approve the PAS and enable the batch to be released. As such, we took the precautionary step to modify or to notify rather the FDA drug shortage staff of the situation and also advise the market. We are working closely with all stakeholders and remain confident that any impact on patients in 2025 will be avoided. Moreover, we believe that in the first part of 2025, we will fully make up for sales not recorded in the fourth quarter of 2024. We will continue to update the market as things becomes available. Turning to the F8 formulation of Tesamorelin. I want to provide an update on our timelines for a resubmission to the FDA. Following our Type A meeting with the FDA, we believe we have addressed all of the agency's questions, including the ones related to immunogenicity and microbiology and I'm confident these pieces are behind us. We expect to have the file completed shortly and intend to submit by the end of November. The FDA has confirmed a four-month review. It is also important to note that our CDMO for the F8 is not the same as our manufacturer for the F4. Our team believes strongly in the benefits of tesamorelin as the only FDA approved treatment of its kind for people with HIV and lipodystrophy, and we are all hands on deck to bring this new formulation to market and to continue sharing our value proposition and new data. Next week, three Theratechnologies poster will be presented at IDWeek in Los Angeles. IDWeek is one of the formal scientific conferences in this field. One poster presents data linking excess visceral abdominal fat or EVAS, to increase cardiovascular risk in people with HIV. While a second poster documents how use of tesamorelin to reduce excess visceral abdominal fat can lower cardiovascular disease risk in people with HIV, and other posters of -- will report on the study design and baseline characteristics of the PROMISE U.S. trial, an observational real-world study of ibalizumab in heavily treatment experienced patients with multidrug resistance. We've also had the recent publications on ibalizumab data in the Journal of AIDS. As people live longer with HIV and with greater exposure to entire retroviral medicines, they may experience higher amounts of excess visceral abdominal fat and risk multi-drug resistance. We look forward to sharing our findings with HIV clinicians and researchers and to contributing to the scientific and treatment discourse on HIV. In keeping with our commitment to adding value through medical activities, I would like to provide an update on our ongoing Phase I clinical trial of sudocetaxel zendusortide, our lead investigational PDC candidate. At this time, recruitments for both cohorts in advanced ovarian cancer has been completed. We've had no reports of DLTs, including neuropathy and eye toxicities. One patient remains in the trial at the higher dose of 2.5 milligram per kilogram and we plan to share results once the last patient has completed treatment and the overall data analysis is finalized. Our strengthened financial positioning, in particular, our bottom line performance and cash position has changed many things for us, opening the door to new possibilities and collaboration. We have doubled down on our efforts to find new products to market and to enter into partnerships. To this end, we've made significant progress in our search for new products, both in the U.S. and in Canada. Based on our experience with EGRIFTA and Trogarzo as well as the commercial capabilities we have built, we are uniquely positioned to in-license and bring to market innovative therapies that challenge the standard of care in rare or niche markets. This requires a specialized set of skills and experience managing regulatory and market access requirements and specialized patient support initiatives. We are confident that Theratechnologies has a compelling value proposition to offer. Our North American focused strategy is very clear and we are confident we can achieve our long-term objective of delivering sustained top and bottom line growth and value for shareholders. With this, I'd like to turn the call over to Philippe, who will go over the period's financials in details. Philippe?
Philippe Dubuc: Thank you, Paul, and good morning, everyone. I'm pleased to report that we've recorded another strong quarter both on the top and bottom lines with net sales of $22.6 million or 8.4% growth versus the same quarter last year. Furthermore, I want to highlight that the efforts to reorganize the cost structure of the company are continuing to pay off with $7.2 million of adjusted EBITDA or close to 30% of revenues, and we recorded a net profit of about $3 million for the quarter or $0.06 per share. I can now say that we've built a high performing organization that can take on additional challenges, as just mentioned by Paul. For the third quarter of fiscal 2024, net sales of EGRIFTA SV reached $16.7 million compared to $13.2 million in Q3 of last year, which represents a 27% increase year-over-year. As mentioned previously, inventory levels have reverted to normal levels, and we should continue to see that going forward. For the nine-month period ended August 31, EGRIFTA revenues have grown 16% which is supported by our key performance indicators such as new enrollments and total unique patients. Trogarzo net sales in the third quarter amounted to $5.9 million compared to $7.7 million for the same quarter last year. The decrease was mainly due to lower unit sales in the quarter as compared to last year, mostly as a result of competitive pressures in the multi-drug resistant segment of the HIV-1 market. This impact is stabilizing as sales of Trogarzo units to pharmacies have grown slightly in Q3 compared to Q2 of this year. In the third quarter of 2024, cost of sales came in at $4.5 million, down from $5 million in the same quarter of last year. EGRIFTA gross margins for EGRIFTA were 91%, which is in line with the historical values and Trogarzo margins were 48%, consistent with the terms of the time and agreement. Again, in the third quarter of 2024, the rigorous management of spending in R&D, selling and G&A expense helped us achieve our fifth straight quarter of strong adjusted EBITDA, as established as an objective early in 2023. Adjusted EBITDA for the past four quarters was $17.4 million, which is why we increased our guidance this morning to $17 million to $19 million for 2024. We expect adjusted EBITDA to be flat to slightly positive in the fourth quarter compared to Q4 of last year, mainly because of the shortfall anticipated to the supply constraints discussed earlier. Although, this shortfall will affect our revenues in Q4, patient supply will not be affected until mid-January, if at all, as there is inventory both at McKesson (NYSE:MCK), our distributor and at the specialty pharmacy level. R&D expenses again decreased substantially in the third quarter of 2024 compared to the same period last year mostly due to lower spending on our oncology program, as well as lower expenses following the near completion of our life cycle management projects for both EGRIFTA SV and Trogarzo. R&D expenses came in at $2.6 million versus $5.4 million last year for a 52% decrease. Selling expenses came in at $6.3 million for Q3 compared to $6.7 million for the same period last year. Selling expenses have stabilized in the past few quarters, and should continue at roughly the same level in the next few quarters as the focus on top and bottom line growth remains our main objective. G&A expenses in the third quarter of 2024 amounted to $3 million as compared to $3.7 million for the third quarter of 2023 or a 19% decrease. The decrease in G&A expenses is largely due to our decision to focus on our U.S. commercial operations and on controlling expenses. Again, these expenses are expected to stabilize going forward as evidenced by the similar level of expenses in Q2 of this year. As you can see from our reduction of expenses in R&D and G&A in the past six quarters, we have now right-sized the organization to ensure that we are well on our way in our journey towards showing strong growth in adjusted EBITDA. As a result of this, we are pleased to report adjusted EBITDA in the third quarter of $7.2 million versus $2.2 million in the same period last year, a significant improvement of $5 million, a combination of top line growth and realignment of spending. Net finance costs in the third quarter amounted to $2.4 million and include interest of $2.3 million on the Marathon Loan Facility. As per the credit agreement, we have initiated the reimbursement of the principal in August 2024 and the loan will be amortized over a 36-month period. Our strong operations generate solid cash flow, enabling us to repay the facility in the contracted amounts of $5 million per quarter, even considering the first monthly repayment of the credit facility, we ended the third quarter on solid financial footing with cash, bonds and money market funds at the end of the quarter, amounting to $39 million, an increase of close to $3 million over Q2 of 2024 and we ended the quarter with $58.9 million drawn on the Marathon facility for a net debt position of $20 million. I'm also happy to report that we recorded a net profit of $3 million or $0.06 per share in the third quarter of 2024. As Paul briefly alluded to in his remarks, we are revising our guidance this morning for revenues of $83 million to $85 million for fiscal 2024, and increasing our guidance for adjusted EBITDA to between $17 million and $19 million even as we include the spending on our oncology program this year, pointing to the continued strong performance of our commercial operations for the remainder of the year. As previously mentioned, any additional spending on oncology after the completion of the Phase I trial will be carried out through partnerships. So this program will no longer affect our adjusted EBITDA in 2025 and beyond. With that, Paul will be back for final comments. But first, we will now open the call to take your questions. We will start by taking questions from analysts. Operator?
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Justin Walsh with JonesTrading. Please go ahead.
Justin Walsh: All right. Thanks for taking the questions. I was wondering, if you can provide any color on the remediation efforts being undertaken by the manufacturer and maybe outline some potential contingency plans if EGRIFTA SV manufacturing does not resume in mid-October?
Paul Levesque: Thank you, Justin for the question. So it is a complex situation, but we are in discussion almost every day with the manufacturers so that we can confirm the sequence of event that I have highlighted in my speech. And it comes down to making a submission of the PAS filing that will be comprehensive, which will come from the full appreciation of the collective measures. And as soon as we hear back from our CDMO and their interaction with their compliance division, that will give us all ammunition needed to go back to the review division and work with the drug shortage staff to engage with our review division so that they expedite the review. And quite frankly, they don't need to do it in 15 days. They don't need to do it even in 30 days, we have enough supply at the patient level up the way until mid-January. So we are confident that, that period of time is long enough for the agency to approve the releasing of the batch that will be produced the week of October 21st. So John, when it comes down to handling of the stock that we currently have, what do you have lining up?
John Leasure: Well, this is why we're managing inventory more closely in the fourth quarter just to ensure that we have equal distribution amongst all our specialty pharmacy partners. And we're working with our patient support program then to ensure we get product to the right location for the right patients. So I think that's how we're managing that Justin.
Paul Levesque: Okay. And just maybe to add just, we do have another slot that is reserved after the one -- in the week of October 21st. So we actually have multiple slots coming up. So if that one doesn't happen, there's more in the back of it.
Justin Walsh: Got it.
Paul Levesque: Thank you, Justin. [Multiple Speakers]
Justin Walsh: Yeah. I was wondering, if you can -- if there's any sort of comment you can have on color for the timing expectations for the BD activity and potentially accretive assets there? And that's it for me. Thanks.
Paul Levesque: Yeah. Well, I mean we've been active for a certain period of time, and I cannot tell you what I cannot tell you. However, I just want to tell you again that this new situation that we're in, when it comes down to being stronger on the bottom line of the firm with a strong cash position and you see the rhythm of the numbers now when it comes down to generating EBITDA. So we are in a much, much -- in a much better position than we used to be. We believe in the capabilities that John and his team have built in the U.S. You've seen how robust the performance of EGRIFTA is turning to be in an environment that was unsure a year ago. So we're going to build on all of this. And quite frankly, it hasn't gone unnoticed by some of the biotechs in the U.S. that might need a partner to advance their science. And I just want to stress again that this organization has a track record for establishing the science. So we do have medical activities on the ground. We're capable of conducting medical to medical session so that we can establish new medicines. And there are many firms of our size in the U.S. that actually specialize in 505(b)s. We sell innovation, and we’re proud of that, and that’s the type of products that we’re after. So stay tuned for the next phases of announcement, okay.
Operator: The next question comes from Andre Uddin with Research Capital. Please go ahead.
Andre Uddin: Thank you. Hi, Paul, Philippe, Christian and John. Just in terms of looking at innovative products that you would add to your portfolio, are you only looking at commercially available assets and with those drugs be in-licensed or acquired, and would you also build the Canadian sales force?
Paul Levesque: So, we are looking -- a couple of things. We're looking at the territories we master the most. So obviously, the U.S. and Canada. We have capabilities in Canada, as you can imagine, being located here. If we need to actually set up a field force either in the U.S. or Canada, we will. Obviously, the value proposition coming from an in-license or acquisition has to be compelling. So we'll look at this very closely. And we wanted to be accretive as fast as possible. So that doesn't mean that there's not going to be any period of time to ramp up to get access and reimbursement. But to answer your question again, what is most important to us is the value proposition. We want to challenge standard of care and if there are some drugs in the U.S. that are deprioritized by big pharma or small pharma companies, we are interested in making acquisition of that, too. So it could be a mix of what you just mentioned.
Andre Uddin: Okay. That's great. Thanks, Paul. And just in terms of EGRIFTA, do you plan on setting up a backup facility going forward?
Paul Levesque: Philippe, do you want to take that question?
Philippe Dubuc: No. I don't think we'll need to. First of all, we're hoping to launch the F8 next year. We have another manufacturer and what we'll do is build up a solid inventory so that we have one or two years of material. So -- it's so expensive to set up these manufacturers that it's much cheaper to keep more inventory than less.
Andre Uddin: Okay. And just to clarify, if you file your PAS in early November, would the review actually take up to four months or is based on the FDA shortage office? Do you think it's going to be shorter than that?
Paul Levesque: Well, we absolutely believe, Andre, that we have and we will have the information needed to accelerate the review. Unfortunately, they have not confirmed that to us, and it's not a surprise, quite frankly, because they have to hear back from the compliance division first. And the compliance division is working with our CDMO, and they need to see the finalization, the final report of their corrective measures. So this is a stepwise approach. What makes me believe that we're not going to face drug shortage at the patient level is that they have sufficient time to review our PAS submission until we actually run out of medicine mid-January. I would not understand why they would, in that case, knowing that we could face drug shortage. I would not understand why they would actually take up their 120 days. That's specifically why the drug shortage staff exist and all the divisions have to work together. So I'm absolutely confident that we'll find all the information needed to convince them to review our PAS filing in a period of time that will not actually lead to drug shortage.
Andre Uddin: Okay. That's good. And just in terms of TH1902, can we get an approximate time line on when the final data would be? Is that going to be in 2024 calendar year or 2025, do you think?
Paul Levesque: Christian, do you want to provide an update?
Christian Marsolais: Yeah. Absolutely, Andre. First of all, it's progressing well. As you know, we had some AEs when we're administering the drug every three weeks now that it is the new regimen on a weekly basis with when we break three weeks of treatment, followed by one week break at the highest dose, which is the 2.5 milligram per kg, which was similar, you remember the 300 milligram per meter square of the three weeks. We don’t see any VLT, which is a very good sign. It shows that eventually we can probably give more drug. And in terms of the overall analysis, it would probably come towards the later part of this year.
Andre Uddin: Okay. That’s great. Thanks. That’s it for me.
Operator: [Operator Instructions] The next question comes from Louise Chen with Cantor. Please go ahead.
Carvey Leung: Good morning, everyone. This is Carvey on for Louise from Cantor. Thank you for taking our questions. First, can you discuss your strategy to ensure the sustainability of your EBITDA and bottom line performance that you've been able to generate the last few quarters? Secondly, given the current status on EGRIFTA supply from a growth perspective, how might EGRIFTA sales growth look like in 2025 versus this year? Thank you.
Paul Levesque: So second question, I'm going to ask John in a moment. But Philippe, for the first part, do you want to go ahead, please?
Philippe Dubuc: Sure. So as I said in my speech, Carvey, the structure, the operating structure that we have right now is really ideal for both Trogarzo and EGRIFTA. So it's not that we've been cutting costs and to the detriment of generating new scripts and top line, we're really ideally positioned. So we see any growth in top line in the next year or two will flow straight to the bottom line. We're not going to have to spend a lot more the cuts that we took did not affect any of our operating performance. So we're in a really good position.
Paul Levesque: John?
John Leasure: Yeah. So in terms of performance for next year, we do anticipate that sales would be a little bit lighter early in Q1, but we think that would just completely reverse so -- later in the quarter. So we have roughly 2.5 weeks at our wholesaler. We have 30 days roughly in the -- at the specialty pharmacy level. So that’s 6.5 weeks of inventory. When that gets depleted down to very low levels, we'll just see very large orders later in the quarter. So assuming things go as Paul laid out, then Q1 should be basically a wash.
Paul Levesque: So this is important to stress again, ex-factory sales will be affected in the fourth quarter which is not related to demand. And as soon as we actually have the release of that batch, we will make up for sales. And we have enough in the distribution pipeline for six weeks so we have until mid-January to be able to serve our patients.
Carvey Leung: Got it. Thanks helpful. Thanks so much.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul Levesque.
Philippe Dubuc: Before we turn over to Paul, there's a few questions on the webcast. So one is on the -- on Trogarzo, John. please give us more color on why you expect Trogarzo sales to stabilize in 2025?
John Leasure: Well, as we look at unique patients and where they are trending. It has sort of stabilized in the last four to five months. Plus, you see sort of, as we had more patients earlier on as more patients drop off and we're getting more patients dropping off than we are coming in, you see a more rapid decline. But as that begins to stabilize moving forward, then we see things leveling off. So our -- what we anticipate in terms of enrollments, we're right there. So we're not seeing any further decline in enrollments. And so we anticipate going forward that things have sort of leveled out where they are.
Philippe Dubuc: And there's a question also, how would you characterize your ability to meet the loan covenants with Marathon? So right now, there's two main covenants, the liquidity covenant, which is at $17.5 million, and we have $40 million in the bank. So we're fine there. We're also building quite a cushion on the adjusted EBITDA line covenant because this is a rolling 12-month covenant and as we continuously beat our own expectations, we're building more of a cushion. And there's a second part to this question, if you had discussions on waivers, we haven't because we don't need them. Obviously, if the EGRIFTA shortage goes into 2025 deeper in the year, we'll definitely have to talk to them, but that's really not the plan right now. So we're in a very good position with the Marathon credit facility. And that's it, Paul, for questions. So you can.
Paul Levesque: Well, thank you, everyone for attending the call today. Our bottom line is strong as demonstrated by nearly $12 million of adjusted EBITDA year-to-date and the increase in our guidance. No doubt, we will continue to maximize our profitability through the sustained growth of EGRIFTA SV and the planned expansion of our product portfolio. We are seizing every opportunity to leverage our commercial experience and expertise across North America, and I look forward to updating you on key developments. Again, thank you for your support and have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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