CA - Medexus Pharmaceuticals Inc. (MEDXF) Q3 2023 Earnings Call Transcript
Medexus Pharmaceuticals Inc
Q3 2023 Results Conference Call
February 09, 2023 08:00 AM ET
Company Participants
Victoria Rutherford - Investor Relations
Ken d’Entremont - Chief Executive Officer
Marcel Konrad - Chief Financial Officer
Conference Call Participants
Andre Uddin - Research Capital
Rahul Sarugaser - Raymond James
Prasath Pandurangan - Bloom Burton
Tania Armstrong-Whitworth - Canaccord Genuity
Julian Hung - Stifel
Presentation
Operator
Greetings. Welcome to the Medexus Pharmaceuticals Third Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]
I will now turn the conference over to your host, Victoria Rutherford, Investor Relations with Medexus. You may begin.
Victoria Rutherford
Thank you and good morning, everyone. Welcome to the Medexus Pharmaceuticals third fiscal quarter 2023 earnings call. On the call this morning are Ken d’Entremont, Chief Executive Officer; and Marcel Konrad, Chief Financial Officer. If you have any questions after the conference call or would like further information about the company, please contact Adelaide Capital at 480-625-5772.
I would like to remind everyone that this discussion will include Forward-Looking Information as defined in securities laws. Actual results may differ materially from historical results or results anticipated by the forward-looking information.
In addition, this discussion will also include non-GAAP measures, such as adjusted net loss and adjusted EBITDA, which do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies.
For more information about forward-looking information and non-GAAP measures, including a reconciliation of each adjusted net loss and adjusted EBITDA to net loss, please refer to the Company’s management discussion and analysis, which along with the financial statements is available on the Company’s website at www.medexus.com and on SEDAR at www.sedar.com.
As a reminder, Medexus’ reports on March 31 st , fiscal year basis for the quarter ended December 31, 2022 was the Company’s fiscal Q3 2023. Medexus reports financial results in U.S. dollars.
I would now like to turn the call over to Ken d’Entremont.
Ken d’Entremont
Thank you, Victoria. Good morning, everyone. Thanks for joining us on the call today. We are proud to announce another record quarter for Medexus. As one key indicator we achieved revenue of 28.7 million for fiscal Q3 2023. We saw growth across all of our leading prescription products this quarter, which was further complimented by the addition of Gleolan net sales in the U.S.
Our third quarter revenue of 28.7 million compares favorably to 21.3 million for the same period last year, or 35% growth year-over-year. The 7.4 million increase is mainly due to an increase in net sales across our portfolio and the contribution from Gleolan in the U.S.
Third quarter adjusted EBITDA increased to 5.2 million compared to 1.9 million for the same period last year. The 3.3 million year-over-year increase is mainly due to the increase in net sales I mentioned and the reduction in research and development costs.
I would like to highlight, this is our fifth consecutive quarter of positive adjusted EBITDA demonstrating strength and stability in our product portfolio as we close out fiscal 2023 and look ahead to fiscal 2024.
We produce a net loss of 1.5 million for Q3 compared to a net loss of 1.2 million for the same period last year. Our adjusted net loss, which adjusts for unrealized losses or gains related to our convertible to ventures that are included in that loss was 0.9 million compared to 3.4 million for the same period last year.
As at December 31, 2022, we had 9.3 million in cash and cash equivalents with 10.1 million in total available liquidity. We are actively evaluating options regarding our capital structure. Including as it relates to our debt financing arrangements with a view to preparing for plan future growth. I will let Marcel comment on this project later in this call.
Turning to our specific product lines. Our core business is still growing and we continue to work on potential additions to our product portfolio to generate additional growth momentum. IXINITY saw strong unit demand in the U.S. during the trailing 12-months at December 31, 2022.
This reflects new patient conversions on top of stable existing base of patients following the resumption of in-person selling earlier in the year. We continue to improve the IXINITY manufacturing process, which has had a positive impact on IXINITY’s manufacturing costs.
Rupall continued to see strong unit demand achieving 25% growth for the trailing 12-months ended December 31, 2022. This continues Rupall’s trend as one of the fastest growing antihistamines in the Canadian prescription market. This strong performance reflects successful execution of our sales and marketing initiatives over the five-years since launch.
Turning to Resuvo unit demand remains strong for the trailing 12-months ended December 31st, 2022, maintaining the product’s leading position in the moderately growing US branded methotrexate market with a limited sales force allocation. However, increasing competition in the U.S. branded methotrexate market continues to negatively affect the Resuvo product level revenue.
On Metoject, Metoject saw unit demand increase in the trailing 12-months ended December 31, 2022. This was despite the ongoing impacts from a generic entry into the Canadian methotrexate market in calendar 2020.
Although product revenue was negatively impacted due to a decrease in effective unit level prices, the trial for the patent litigation we launched against the generic competitor in 2020 completed in January 2023.We anticipate that the federal court which is the court overseeing this trial will issue its decision later in calendar year 2023.
In March of 2022, we acquired the exclusive of right to commercialize Gleolan in the U.S. As I mentioned, September 2022 was the first full month, and December 31 2022 was the first full fiscal quarter where we recognize 100% of Gleolan net sales.
Sales have continued to be in line with expectations. This reflects our successful execution of a seamless transition to full U.S. commercial responsibility and puts us in a position to continue executing on our commercial plan.
We also actively pursue opportunities to build our product portfolio by licensing and acquiring new products and by exploring additional indications within our current product portfolio. The advancement of any one of these pipeline opportunities would provide significant step up in our growth profile.
We are also pleased to welcome Harmony Gardes, Chief Medical Officer for Veev Healthcare and Manasi [indiscernible] previously a senior executive at Pfizer and Vietris to the Medexus Board of Directors.
Harmony’s significant experience leading medical affairs and medical regulatory matters, and Manasi’s strong management experience and expertise in corporate finance will undoubtedly the assets as we grow our business.
In particular, I would like to highlight Harmony’s medical leadership for over a dozen new drug applications and new product launches and Manasi’s 26-years of experience leading large commercial and cross-functional organizations.
I will now turn the call over to Marcel. Who will discuss our financial results in more detail. Marcel.
Marcel Konrad
Thank you. Thank you, Ken. Total revenue for the three-month period ended December 31, 2022 was 28.7 million, an increase of 7.4 million compared to revenue of 21.3 million for a three month period ended December 31, 2021 and a one million increase versus prior quarter.
The year-over-year increase of 7.4 million was mainly due to an increase in net sales across our portfolio and the contribution from Gleolan. As a reminder, the three-months period ended December 31, 2022, is the first full fiscal quarter in which we recognized 100% of Gleolan revenues.
Gross profit was $15.9 million for the three-months period ended December 31, 2022 compared to gross profit of $11.5 million for the same period last year. The gross margin was 55.4% for the three-months period ended December 31, 2022 compared to 54.1% for the three-months period ended December 31, 2021. The increase in gross margin is a result of product mix and ongoing improvements to the IXINITY manufacturing process, which has had a positive impact on IXINITY manufacturing costs.
Selling and administrative expenses were 11.9 million for the three-months period ended December 31, 2022, compared to 10.7 million for the three-months period ended December 31, 2021. Research and development was $0.70 million for the three-months period ended December 31, 2022.
This compares to one million for the three-months period ended December 31, 2021. The decrease was primarily due to reductions in investments in the IXINITY Phase 4 clinical trial as it approaches its analysis and clinical study report stage.
As a result, adjusted EBITDA for the three-months period ended December 31, 2022 was positive 5.2 million compared to 1.9 million for the three-months period ended December 31, 2021. This is another all time high quarterly adjusted EBITDA and the fifth sequential quarter of positive EBITDA, which we view as a significant achievement for our company, demonstrating the durability of our operations.
The net loss for the three-months ended December 31, 2022 was 1.5 million to a net loss of 1.2 million for the same period last year. We believe that adjusted net income or loss provides a better representation of performance of our operations, because it excludes non-cash federal adjustments on liabilities, which may be set for shares.
Our adjusted net loss for the three-months period ended December 31, 2022 was 0.9 million compared to 3.4 million for the three-months period ended December 31, 2021. Cash and cash equivalents was 9.3 million at December 31, 2022 versus 9.6 million at September 30, 2022.
Our available liquidity hasn’t changed versus prior quarter and was 10.1 million at December 31, 2022, which consisted of 9.3 million in cash and cash equivalents and an undrawn credit of 0.8 million available under our ABL facility.
We saw an increase of our accounts receivable and inventory positions versus prior quarter and the beginning of the fiscal year and we anticipate seeing the benefit in our cash flow in the coming quarters.
We are also actively continuing to evaluate options with respect to our capital structure. We are making very good progress on securing options to manage our near-term liabilities and are in advanced stages of a competitive process that has involved a number of highly interested capital providers.
We have been consistent in executing our plan quarter-after-quarter, with sequential revenue growth and improving profitability. Again, this is the fifth consecutive quarter, demonstrating positive adjusted EBITDA and we are looking forward to continuing to build that momentum in quarter to come.
Victoria Rutherford
Operator, we will now open the call to questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And the first question today is coming from Andre Uddin from Research Capital. Andre your line is live.
Andre Uddin
Thank you. Hi, Ken and Marcel, just looking at your IXINITY pediatric trial, when should that approximately read out. If we could have a bit of color on that, and if that data is positive, when would you expect to file a supplementary BLA? Thanks.
Ken d’Entremont
H Andre and thanks for the question. The IXINITY trial, we would expect to file it first half of calendar 2023, and that would hopefully end up with a decision later end of the year.
Andre Uddin
And when should we expect that data around? Is that this quarter or next quarter?
Ken d’Entremont
We haven’t decided what to do in terms of releasing the data. We do believe it is sufficient to support an application. So, we haven’t really contemplated putting the data out.
Andre Uddin
Okay, thanks Ken. That is it, that my all question. Thank you.
Ken d’Entremont
Thanks Andre.
Operator
Thank you. [Operator Instructions] The next question is coming from Rahul Sarugaser from Raymond James. Rahul your line is live.
Rahul Sarugaser
Good morning Ken and Marcel. Thanks so much for taking our questions and congratulations on the revenue this quarter. So in your pre-announced earnings you talked about Trio the timelines are on Trio, which sort of push it out minimum about a year. And you had talked previously about the cost structure associated with which that Salesforce, which is obviously applicable to different parts of the business. So we see that the SG&A did come down by million dollars, which net netted out as a positive contribution to your EBITDA, which is great. So how should we be thinking about your SG&A going forward and sort of right sizing of that cost structure?
Ken d’Entremont
Yes good question Rahul, thanks for that. The IXINITY expenses are all completely allocated elsewhere now. So there is no spending associated with Trio - excuse me, may have said IXINITY.
So there is no Trio spending, so everything is allocated. The restructure that we did in October took out anything that was applied to Trio and the rest of the infrastructure got applied to the new Gleolan product. Obviously, it is the same institutional cell. So going forward we would expect the SG&A to be basically what you saw this quarter.
Rahul Sarugaser
Great, that is very helpful. And then just is a housekeeping question, you noted that the improving gross margins on IXINITY is helping with the bottom line. However, we did see sort of a net increase in cost of goods. So, you know, can you give us a little more color on that and how should we be thinking about, you know, cost of goods going forward and total gross margin?
Ken d’Entremont
Yes, I will make a bit of a comment and then turn it over to Marcel for a more detailed answer. So it is really got to do with product mix, remember we brought Gleolan in without really deploying any capital and in exchange for that, we, you know, gave a higher royalty than we might normally. So that is part of it and so it is mainly product mix. And so I will turn it over to Marcel to give a little more detail.
Marcel Konrad
Yes, that is really what, at the end, that is what’s mainly driving, we have got multiple sort of forces that are coming to COGS and go through COGS. One of the upside forces is the IXINITY continuous improvement project that we talked about a few quarters ago, which we had in the inventory.
Now we see the benefit in COGS, for example this quarter, this is counted by the IXINITY acquisition, so to speak, from the license perspective where we set this product is a, as a reminder, very low upfront, but we are having about a 50%, 50% hit into COGS for this product. So bit of counter effect there, but bottom line, very accretive very quickly as an investment.
And then there is been, and then there is other elements in COGS that usually flow there where we monitor ups and downs. On the margin side this is going to continue, be driven by these forces, but again, going forward mainly on the product mix, we will keep an eye on that and we will see these ups and downs.
Rahul Sarugaser
Perfect. That is really helpful. And one, just one quick last question. You made very specific mention about, you know, continuously looking for new products and expanding the product portfolio and as a result, the top line. Could you give us a sense for your pipeline, how should we be looking at your new product acquisitions in this year?
Ken d’Entremont
Yeah, great question. So the way we are looking at it, and we have two things. We do have a pipeline of products already built including Treosulfan, IXINITY Pediatric, Gleolan Meningioma, and [Transitional Hexacyanide] (Ph) U.S.
So we do have a pipeline, and then we are looking to build that obviously. And so the licensing options are always good options, when we don’t have a ton of capital to deploy. So that is primarily what we are looking at. And there is good opportunities there, we are very active and we hope we have got something to announce soon.
Rahul Sarugaser
Great. Thanks. Thanks again for taking our questions. We will get back in the queue.
Operator
Thank you. And the next question is coming from Prasath Pandurangan - Bloom Burton. Prasath your line is live.
Prasath Pandurangan
Hi, good morning Ken and Marcel, thanks for taking my question. I have just one, in terms of the options for capital providers that you are looking at, you know, given those how do you look at interest costs going forward?
Ken d’Entremont
Hi, Prasath. Yes. Good question. So I will start to answer that question and turn over to Marcel, see if you have got anything more to add. And I think you need to start with the background, you know, clearly, midcaps been a fantastic debt provider for us.
They were there to support the acquisition of IXINITY and in 2020, they expanded that facility by five million. I guess that was September 2022. So they’ve been a great partner. Our debt, our debenture holders are - many of the big blocks are long-term Medexus investors, so we know them well. So those two groups have been great support for us growing our business.
Now as we go forward, as Marcel mentioned, we have had five quarters of strong revenue growth, strong positive EBITDA that opens the door to other debt providers. And we are in discussions with Tier 1 institutional lender that we think will help us with our growth plans into the future.
Prasath Pandurangan
Thank you. That is very helpful.
Operator
Thank you and there were no other questions in queue at this time. I would now like to hand the call back to Ken d’Entremont for some closing remarks. Ken, actually we did get a couple more questions and are you okay to take few more?
Ken d’Entremont
Yes, absolutely. Go ahead.
Operator
Okay. The next question is coming from Tania Armstrong-Whitworth from Canaccord Genuity. Tania, your line is live.
Tania Armstrong-Whitworth
Thank you. Good morning, gentlemen. Firstly, I’m wondering if you can speak to the investment in working capital this quarter. Frankly receivables were up pretty meaningfully. What exactly does that - like why is this the investment that you have chosen and what are you doing for your free cash flow in future quarters?
Ken d’Entremont
Hi, Tania. I will turn that over to Marcel.
Marcel Konrad
Yes. Hi, Tania. I can take that. So as we have said in previous quarters, as we have grown the business. Now this particular quarter, we have seen our cash position relatively stable quarter-over-quarter because we are growing revenue.
Obviously our accounts receivables has grown with it. We have been invested, so to speak, on the inventory side, specifically in our truly - products. And you have also seen the top of our payables came down quarter-over-quarter and since the beginning of the year.
So one of the effects of bringing new products on board is obviously that we are collecting these receivables as a bit of an administrative process to collect those. So we are monitoring our receivables very closely.
We had a very good quarter for Gleolan for example. So we are monitoring our cash position going forward, as we always do, but expect some of the benefits as I said in my prepared remarks in the future quarters, as we collect those receivables, just for example.
Tania Armstrong-Whitworth
Okay, excellent. And then if I’m not mistaken, I believe Gleolan loses or connects connectivity in 2024. Could you just remind me what kind of IP protection you have for that asset and how long that is going to provide protection for?
Marcel Konrad
You are correct. The IP runs out in that time frame as you described. There are no generic competitors worldwide. So the LA API is managed tightly by our partner. And so, we don’t really expect generic competitor. There are actions on foot that we will provide. We hope some additional protection. But I can’t talk about those right now.
Tania Armstrong-Whitworth
Okay, excellent. And then lastly here, if for any reason the outcome of the - litigation is not in your favor, do you have any plans for that product different than current for example, would you perhaps reduce your sales force allocation to it?
Ken d’Entremont
Yes. We have already done that. So it is getting a pretty minor allocation at this stage. We have got Blue Lion, a Trio - in Canada. So that is where the allocation has gone. In spite of that, the unit volume of metal jet continues to grow even with the generic direct competitor in the market. So, we are really pleased with the performance of the product.
Should we lose? We wouldn’t change anything. Should we win? We would be in line for pretty substantial recovery of losses and we probably would put some sales force allocation back on the product.
Tania Armstrong-Whitworth
Okay, excellent. Thank you that is all for me.
Operator
Thank you. And the next question is coming from Julian Hung from Stifel. Julian your line is live.
Julian Hung
Hi thanks for taking my question, this is Julian speaking on behalf of Justin today. Ken I was wondering if you could provide an update on the milestone payments regarding Trio soften whether there is any discussions on extending or perhaps adjusting these adjustments and what is the most likely outcome?
Ken d’Entremont
Hi Julian, good question. There are none due. So, we owe nothing unless it gets approved or until it gets approved. There is a contractual obligation to renegotiate the financial terms of the agreement in April of this year, should the product not be approved by that point in time. And we obviously don’t think it will be approved by that point in time. So, those discussions are ongoing, can’t really comment on the outcome.
Julian Hung
Great. Thank you so much for taking question.
Operator
Thank you. And there are no other questions in queue. I’d like to turn the call back to Ken d’Entremont for closing remarks.
Ken d’Entremont
Thank you everyone for joining the call today. This was an excellent quarter for Medexus, demonstrating both the strength and stability of our product portfolio and our ability to generate consistent revenue growth and positive adjusted EBITDA.
We remain excited about all the opportunities within our product pipeline, and we will continue to work in advancing these projects. We look forward to a strong full fiscal 2023 and continue our momentum into fiscal 2024. Thanks for your time.
Operator
Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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Medexus Pharmaceuticals Inc. (MEDXF) Q3 2023 Earnings Call Transcript