CA - Medicure Inc. (MCUJF) Q2 2023 Earnings Call Transcript

2023-07-31 09:54:04 ET

Medicure Inc. (MCUJF)

Q2 2023 Earnings Conference Call

July 31, 2023 08:30 AM ET

Company Participants

Albert Friesen - Chief Executive Officer

Haaris Uddin - Chief Financial Officer

Neil Owens - President & Chief Operating Officer

Conference Call Participants

Kurt Caramanidis - Carl M Hennig, Inc.

Presentation

Operator

Welcome to Medicure's Earnings Conference Call for the Quarter-Ended June 30, 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 US 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 and today's date is July 31, 2023.

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

Albert Friesen

Thank you, Holly. And good morning to all on the call. We appreciate your interest and participation in today's call. Joining me are today for the Q2 2023 financial statements are Dr. Neil Owens, President and Chief Operating Officer; and Haaris Uddin, Medicare's Chief Financial Officer. We are pleased to report that net revenue of 6.0 million for Q2, which continues the steady growth from previous quarters.

Net income was CAD 253,000 or CAD 0.02 per share and EBITDA was CAD 948,000, all showing consistent good financial returns. AGGRASTAT sales, ZYPITAMAG sales and Marley Drug income all providing net earnings. The forward focus of business continue as the number one the sales and profits of AGGRASTAT growing at ZYPITAMAG revenue and profit, three growing Marley Drug online pharmacy business; and the fourth, the development of MC-1 for the PNPO deficiency indication and pediatric voucher.

The acquisition of Marley Drug, the online pharmacy delivering homes to all 50 states and other territories through mail, was to expand our sales reach for ZYPITAMAG and growing our business. That has worked out for us. We believe the investments and experience over the last 25 years positions Medicure on a steady path to continued success.

Now I'll turn it over to our CFO, Haaris Uddin, to review and provide the color on financial results for the Q2 financial statements.

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 you will be able to obtain a complete copy of our financial statements for the quarter ended June 30, 2023 by the end of day to day, 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 June 30, 2023. Total revenues for the three-month period ended June 30, 2022.

Net revenues earned from AGGRASTAT during the current quarter totaled CAD 2.6 million a slight decrease from the prior year where net revenue from AGGRASTAT was CAD 2.9 million. The decrease in AGGRASTAT revenue during the current quarter is a result of a fluctuation of foreign exchange rates higher and higher costal fees on units of products sold.

Net revenues earned from ZYPITAMAG during the current quarter totaled CAD 722,000 which is a decrease from the CAD 1.1 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 see the growth of sales through both the traditional insurer channels and Marley drug.

Moving on to Marley Drugs. Net revenues from Marley drug during the current quarter totaled CAD 2.7 million. This is an increase from the CAD 1.8 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 including an increase in ZYPITAMAG sales through the Marley drug platform, which is also included within this figure.

With respect to cost of goods sold AGGRASTAT cost of goods sold during the quarter ended June 30, 2023 totaled CAD 659,000 a decrease in the prior year where cost of goods sold totaled CAD 1.1 million. The decrease in cost of goods sold for AGGRASTAT as a result of better inventory management during the current year in addition to a lower volume of AGGRASTAT.

ZYPITAMAG cost of goods sold for the quarter ended June 30, 2023 totaled CAD 298,000 a decreased from the prior year where cost of goods sold to ZYPITAMAG was CAD 325,000. Included within cost of goods sold first to ZYPITAMAG is CAD 147,000 relating to products sold to customers and CAD 153,000 from amortization of the ZYPITAMAG intangible assets.

The increase, the -- pardon me, the decrease in cost of goods sold during the quarter is due to the decrease -- due to lower volume of products sold during the current period. Marley drug cost totaled CAD 848,000 during the quarter ended June 30, 2023. This is an increase from the prior year or cost of good sold totaled CAD 456,000. The increase in cost of goods sold during the current year as a result of a higher volume of products sold through the Marley Drug platform.

Selling expenses totaled CAD 2.1 million for the quarter ended June 30, 2023 in comparison to CAD 1.7 million during the prior year. Selling expenses increased in the current year due to the company reporting a higher volume of products sold in addition to inflationary increases the company has been subject to during the current year.

General and administrative expenses totaled CAD 1.1 million during the current period in comparison to CAD 1.6 million during the same period in the prior year. The decrease in general and administrative expenses is primarily related to a 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 e-commerce platform launching during Q1 of 2022.

Research and development expenses for the current period totaled CAD 668,000 compared to CAD 1.3 million during the prior year. The decrease during the current year is primarily due to the timing of research and development expenditures going to each development project the company is currently undertaking.

The company recorded finance income of CAD 22,000 during the current period ended June 30, 2023 compared to finance expense of CAD 38,000 during the period mid June 30, 2022.

The finance income recorded during the current period consisted primarily of a recovery on the accretion of the AGGRASTAT royalty obligation in addition to interest income offset by the company's lease obligations and bank charges.

The company recorded a foreign exchange loss during the period ended June 30, 2023 of CAD 30,000 compared to a foreign exchange loss of CAD 98,000 during the prior year. The change relates to changes in the US dollar exchange rate during the respective years, which led to an unfavorable foreign exchange loss during the current period.

Adjusted EBITDA for the quarter ended June 30, 2023 was CAD 948,000 compared to an adjusted EBITDA of negative CAD 210,000 during the quarter ended June 30, 2022. The increase in adjusted EBITDA during the current year is due to an increase in operating income, which primarily is done from an increase in overall net revenue in addition to reduced research and development expenses and reduced general and administrative expenses. Offset by higher expenses -- higher selling expenses during the current quarter.

As at June 30, 2023 the company had cash totaling approximately CAD 5.4 million, an increase from the CAD 4.9 million of cash held as of 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. I'll start with some further details on the AGGRASTAT business. Net revenue was impacted by higher wholesaler fees and a decrease in product volumes sold, leading to a 3% decrease in Q2 and compared to the previous quarter.

We continue to support our more than 1,200 US hospital accounts and promote the brand. We found that post COVID there has been a high staff turnover in hospital cathlab staff, which requires reintroduction and education of AGGRASTAT on some staff. We have not yet seen any generic entries at this point.

As mentioned at the last quarter the update, Medicure's royalty obligation 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 13% increase in units dispensed in Q2 2023 compared to the previous quarter.

Sales through insured channels also increased by 9% in the quarter. However, net revenue through insurer channels was impacted significantly from increased wholesaler fees 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.

We are focused on lowering our customer acquisition cost and on customer retention. The market opportunity remains very large and we are reinvesting profits into sales and marketing of ZYPITAMAG.

In Q2, net revenue from the Marley Drug Pharmacy business increased by 16% compared to the previous quarter. Medicare still plans to leverage Marley Drugs fulfillment and distribution capabilities in more business partnerships. The company is still focused on growing brand awareness through multiple media channels and through PR publicity.

Overall, we continue to look for ways to rapidly expand the pharmacy business. There was a 31% increase in new customers in Q2 compared to Q1. And there are plans for further improvements to the e-commerce website to improve customer experience.

Medicare's R&D focus is primarily on its Phase 3 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 3 clinical study Medicure is conducting several non-clinical studies to support the approval of MC-1 as requested by the FDA. If successful use of Medicare's legacy product MC-1 could lead to a priority review voucher, which can be redeemed or sold and provides significant value.

The issue that the company is addressing before the start of the study is that some patients may need to crush their tablets. And the FDA has requested additional data on the impact of crushing on product quality. The crushed tablet study is currently underway.

For Q2, we are pleased to report a positive adjusted EBITDA of CAD 948,000 as well as net income of CAD 253,000 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. Medicure's business including the sales and marketing of ZYPITAMAG continues to grow. We're thankful for the continued strength in AGGRASTAT market share and a strong balance sheet. We are 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 generating value for our shareholders. And as always I want to express my sincere appreciation to the outstanding team of employees we are blessed with.

Thank you our shareholders for your continued support and interest. And now moderator I'll turn it back to you to lead the question and answer.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question for today is coming from Kurt Caramanidis at Carl M Hennig, Inc.

Kurt Caramanidis

Good morning guys. Just wondering what the first I think later this -- late this year and the year was kind of a thought on the last call on when the PNPO trial would have some initial data. Is that not the case now with the crushed pill study?

Albert Friesen

Yes, that's correct. Yes. We were on hold waiting and the release the hold, but have asked us to provide additional information on crush those patients that would take crush tablets. So we could start but we felt that because of -- we wanted to make sure that all patients whether they require crush or not are eligible so we've decided to hold until we get the clear on their crush talent.

Kurt Caramanidis

So when are you thinking how we would have some data?

Neil Owens

I'll just add that it's quite a short study. This is a lab study doesn't involve any patients. So I don't think we have a start date in mind, but I think it's still possible to launch the study in Q4. We won't have any data per se to release any investors during that time, but we'll start the study.

Kurt Caramanidis

Okay. So, is it like six months after that that we could have some data, or I'm just trying to get my head around it.

Albert Friesen

Yes, probably a bit more than that because I think our first analysis will be at six months. So, we have to analyze the data and enrollment of the 10 patients won't happen instantly. So, I would say it's more like closer to 12 months.

Kurt Caramanidis

Okay. What rate are you getting on your cash? Interest rate?

Albert Friesen

Yes, Haaris do you know?

Haaris Uddin

Yes, in terms of -- so we basically have -- it's basically be a prime plus a minor percentage of that. So, again, we are sort of reevaluating our sort of cash management strategy in terms of investing in more short-term investments given the rates have improved quite significantly over the past year? So, it's definitely something we're looking to further improve our finance income from and something we look forward to sort of tackling going forward.

Albert Friesen

Yes, I think the last time it was more like 3%, but we could do better.

Neil Owens

You should be able to get in the 5%, I would think. So, otherwise you're happy with some things generally prescription-wise are trending better. Are there any other products that biosimilar, or has that been shelved or what other things are in the pipeline from what we were talking about a couple of few years ago?

Albert Friesen

Yes, Kurt we're still looking at a number of different options. We're -- I would say we're almost continually negotiating on one, two or three items, but we haven't closed on anything. It's been a challenge to get particular cardiovascular drugs because they're still asking for too much. And there's usually something we have to put in more capital for marketing. So, we've been very careful not to take any risk.

And so that's what's delayed the -- but we are looking -- I think we publicly stated looking at additional pharmacies expanding that business and we were looking at that as well and some improving our profitability and the products that we're selling through the pharmacy.

Kurt Caramanidis

Okay, great. Very smart to be prudent for sure. Thanks a lot.

Albert Friesen

Okay Kurt, thanks.

Haaris Uddin

Thank you.

Operator

[Operator Instructions] We have reached the end of the question-and-answer session and I will now turn the call over to Dr. Albert Friesen for closing remarks.

Albert Friesen

Thanks. Again my thanks and our thanks for those that are on the call and for your support and the shares and look forward to our next call. Thank you again.

Operator

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

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