MCUJF - Medicure Inc. (MCUJF) Q1 2023 Earnings Call Transcript

2023-05-29 09:44:04 ET

Medicure Inc. (MCUJF)

Q1 2023 Earnings Conference Call

May 29, 2023 08:30 AM ET

Company Participants

Albert Friesen - CEO

Haaris Uddin - CFO

Neil Owens - President & Chief Operating Officer

Conference Call Participants

Presentation

Operator

Welcome to Medicure's Earnings Conference Call for the Quarter-Ended March 31, 2023. My name is Holly, and I will be your operator for today's call. At this time, all participants are in listen-only mode.

Before we proceed, I would like to remind everyone that this presentation contains forward-looking statements relating to future results, events and expectations, which are made pursuant to the Safe Harbor provisions of the U.S. Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks and uncertainties, which could cause the company's actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, those described in the company's most recent Annual Information Form and Form 20-F.

Later, we will conduct a question-and-answer session. Please note that this conference call is being recorded, and today's date is May 29, 2023.

I would now like to turn the conference call over to Dr. Albert Friesen, Chief Executive Officer of Medicure Inc. Please go ahead, Dr. Friesen.

Albert Friesen

Thank you, Holly, and good morning to everyone on the call. We appreciate your interest and participation in today's call. Joining me today on this Q1 2023 financial statement call is Dr. Neil Owens, President and Chief Operating Officer; and Haaris Uddin, Medicure's Chief Financial Officer.

We're pleased to report that revenue of $5.6 million for Q1 2023 remained steady from the previous quarters with net income of $290,000, EBITDA of $867,000 [indiscernible] and $0.03 per share of earnings, all showing consistent good financial returns. AGGRASTAT sales, ZYPITAMAG sales and Marley Drug income all provide net in earnings and net earnings are on top of their R&D investment of $526,000 this past quarter.

The four focuses of business, just reminding you are the sales and profits from AGGRASTAT, growing ZYPITAMAG revenue and profit, growing the Marley Drug online pharmacy business and the development of MC-1 for the PNPO deficiency application. The acquisition of Marley, the online pharmacy delivering to homes in all 50 states and other territories through mail was to expand our sales reach for ZYPITAMAG and is growing a contributor to Medicure's business. We believe the investments and the experience of the past 25 years positions Medicure on a steady path of continued success.

I'd now like to turn the call over to our Chief Financial Officer, Haaris Uddin, to review and provide some color on the financial results.

Haaris Uddin

Thank you, Dr. Friesen. A couple of quick items to note before I start. All dollar figures are in Canadian dollars unless otherwise noted by each presenter. And as a reminder, we will be able to obtain a complete copy of our financial statements for the quarter ended March 31, 2023 by the end of day today, along with previous financial statements on the Investors page of our website. Alternatively, a copy of all financial statements and management discussion and analysis can be obtained immediately from sedar.com.

I will now provide some key highlights of our financial performance for the quarter ended March 31, 2023. Total revenues for the period ended March 31, 2023 were $5.6 million compared to $5.7 million for the period ended March 31, 2022. Net revenues earned from AGGRASTAT during the current quarter totaled $2.7 million, a slight decrease from the prior year, where net revenue from AGGRASTAT was $2.8 million. The decrease in AGGRASTAT revenue during the current quarter is the result of fluctuating foreign exchange rates and higher wholesaler fees on units of product sold.

Net revenues earned from ZYPITAMAG during the current quarter totaled $640,000 which has decreased from the $1 million of net revenue earned during the prior year. The decrease can be attributed to coverage GAAP rebates paid during the current period in addition to higher wholesaler fees. The company continues to focus on ZYPITAMAG and to focus and hopes to see a growth in sales of ZYPITAMAG throughout 2023 and beyond.

Moving on to Marley Drug. Net revenues from Marley Drug during the current quarter totaled $2.3 million. This is an increase from the $1.9 million earned from Marley Drug during the same period in the prior year. The increase in Marley Drug sales during the current year is due to an increased volume of sales, which is partially attributable to the launch of the Marley Drug e-commerce platform, which was launched during the beginning of 2022.

Moving on to cost of goods sold. AGGRASTAT cost of goods sold for the quarter ended March 31, 2023 totaled $770,000, a decrease from the prior year where cost of goods sold totaled $911,000. The decrease in cost of goods sold for AGGRASTAT is the result of better inventory management during the current year in addition to a lower volume of AGGRASTAT sold.

ZYPITAMAG cost of goods sold for the quarter ended March 31, 2023, totaled $317,000, an increase from the prior year where cost of goods sold for ZYPITAMAG was $224,000. Included within cost of goods sold for ZYPITAMAG is $117,000 relating to products sold to customers, $153,000 of amortization of the ZYPITAMAG intangible asset, and $47,000 relating to royalties on the sale of ZYPITAMAG, resulted from the acquisition of the product in September of 2019. The increase in cost of goods sold noted during the current year is due to a higher volume of ZYPITAMAG sold during the current quarter ended March 31, 2023.

Marley Drug’s cost of goods sold totaled $745,000 during the quarter ended March 31, 2023. This is an increase from the prior year where cost of goods sold totaled $556,000. The increase in cost of goods sold during the current year is a result of a higher volume of products sold through Marley Drug during the current period.

Selling expenses totaled $2 million for the quarter ended March 31, 2023, in comparison to $1.7 million during the prior year. Selling expenses increased in the current year due to the company recording a higher volume of products sold during the current period, in addition to inflationary increases the company has been subject to during the current year.

General and administrative expenses totaled $906,000 during the current period in comparison to $1.3 million during the same period in the prior year. The decrease in general and administrative expenses is primarily related to the decrease in professional fees paid by the company during the current period. The company incurred additional professional fees in the prior year, as a result of the launch of the e-commerce platform during Q1 of 2022.

Research and development expenses for the current period totaled $526,000 compared to $345,000 during the prior year. The increase during the current year is primarily due to the timing of research and development expenditures, relating to each development project the company is currently undertaking. The company recorded $5,000 during the current period ended March 31, 2023 of finance expense. The finance expense recorded during the current period consisted primarily of bank charges, finance expense on the company's lease obligations, and these were both offset by interest income earned during the current period.

The company recorded a foreign exchange loss during the period ended March 31, 2023, of $24,000 compared to a foreign exchange loss of $133,000 during the prior year. The change relates to the change in the U.S. dollar exchange rate during the respective years, which led to a favorable foreign exchange – or sorry, partly (ph) an unfavorable foreign exchange loss during the current period.

Adjusted EBITDA for the period ended March 31, 2023 was $916,000 compared to an adjusted EBITDA of $1.2 million during the period ended March 31, 2022. The decrease in adjusted EBITDA during the current year is due to a decrease in operating income, which primarily stemmed from a decreased net revenue from the sale of AGGRASTAT and ZYPITAMAG, an increase in R&D expenses offset by an increase in net revenue through Marley Drug.

As at March 31, 2023, the company had cash totaling approximately $4.92 million, a slight increase from the $4.86 million held at December 31, 2022. The company does not have any debt on its books. I want to remind you that there will be an opportunity at the end of today's call for you to ask questions regarding the financial results of the company as a whole.

And with that, I would like to turn the call over to our President and Chief Operating Officer, Dr. Neil Owens for some additional commentary regarding our operations.

Neil Owens

Thank you, Haaris, and good morning, everyone. Starting with some further details on the AGGRASTAT business. Product volume decreased by 5% in Q1 compared to the previous quarter, which did translate to a lower net revenue for the quarter. Net revenue was also impacted by higher wholesaler fees for AGGRASTAT products sold. The company did decide to strategically increase the selling price of some product formats along with the price increases on certain contract agreements.

We continue to provide support to our more than 1,200 hospital accounts in the U.S. and promote the brand. We have not yet seen any generic entries at this point. Medicure's royalty obligations for AGGRASTAT have also now come to an end. Regarding ZYPITAMAG, we continue to see consistent growth in prescriptions filled through Marley Drug, including a 20% increase in units dispensed in Q1 2023, compared to the previous quarter.

Net revenue through insured channels was, was impacted significantly from increased wholesaler and coverage gap fees, which is another reason why selling ZYPITAMAG through Marley Drug is an effective approach. We continue to build brand awareness through efforts of our sales and marketing team, and we are focused on customer retention and maintaining a high refill rates.

In Q1, net revenue from the Marley Drug Pharmacy business was on par with the previous quarter. Through a fee based approach, Medicure still plans to provide other innovative branded medications that have a clear, clinical advantage at a cash price through Marley Drug. This also includes leveraging Marley Drug's capabilities and other business partnerships.

The company is still focused on branding -- growing brand awareness through multiple media channels and through PR publicity. Overall, we continue to look for ways to rapidly expand the pharmacy business.

Medicure's R&D focus is primarily on its Phase III study to seek approval of MC-1 as the first FDA approved therapy for patients with PNPO deficiency, which is a rare pediatric disease leading to seizures and is ultimately fatal, if untreated.

In parallel to the Phase III clinical study, Medicure is conducting several non-clinical studies to support the approval of MC-1 as requested by the FDA. We expect to share an update on enrollment very shortly. The clinicians and patients are very keen to begin the study, and we thank them for their patients. If successful, use of Medicure's legacy product MC-1 could lead to a priority review voucher, which can be redeemed or sold and provides significant value.

For Q1, we are pleased to report a positive adjusted EBITDA of $916,000 as well as net income of $290,000. Our goal is to continue growing revenue, controlling our costs and making Medicare a long-term success.

With that, I'd like to turn the call back to Dr. Friesen for final comments.

Albert Friesen

Thank you, Neil. The four focuses of Medicure's business is providing net income and significant growth potential. We're thankful for continued strength in AGGRASTAT market and a strong balance sheet. We're still focused on growing the business with a pipeline of cardiovascular products that will further diversify our revenue and asset base, carefully investing to grow our future profitability.

My goal and that of our Board, management and staff is to continue to build this business with a stable long-term outlook to generating value for our shareholders. And as always, I want to express my appreciation to the outstanding team of employees we've been blessed with -- that we've been blessed with. Thank you, our shareholders, for your continued support and interest.

Now moderator, I'll turn back to you for the question-and-answer portion.

Question-and-Answer Session

Operator

Albert Friesen

Then, thank you, moderator. Thanks, those shareholders on the call. This concludes our conference and thank you for your participation. .

Operator

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

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