MCUJF - Medicure Inc. (MCUJF) Q4 2022 Earnings Call Transcript

2023-04-10 10:05:02 ET

Medicure Inc. (MCUJF)

Q4 2022 Earnings Conference Call

April 10, 2023, 08:30 AM ET

Company Participants

Albert Friesen - Chief Executive Officer

Haaris Uddin - Chief Financial Officer

Neil Owens - President and Chief Operating Officer

Conference Call Participants

Presentation

Operator

Welcome to Medicure's Earnings Conference Call for the Year Ended December 31, 2022. My name is Paul, and I will be your operator for today's call. At this time, all participants are in a 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, this conference is being recorded, and today's date is April 10, 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, Paul, and good morning to everyone on the call. We appreciate your interest and participation in today's call.

Joining me today for this 2022 financial statements call is Dr. Neil Owens, President and Chief Operating Officer; and Haaris Uddin, Medicure's Chief Financial Officer.

We are pleased to report that net revenue for the year 2022 increased from the previous year with a significant increase in net income, a very good year of growth and profitability. Net revenue was $23.1 million compared to $21.7 million for the previous year, and net income for the year was $1.4 million or $0.13 per share compared to a net loss of $727,000 or $0.07 a share for the previous year.

Adjusted earnings before interest, taxes, depreciation and amortization for the year was $3.3 million compared to adjusted EBITDA of $2.1 million for the previous year.

AGGRASTAT sales, ZYPITAMAG sales, Marley Drug income, all increased from the previous year with significant increase in net income. Just a reminder that the four focuses of our business are the sales and profits of AGGRASTAT, sales and growth of ZYPITAMAG, growing the Marley Drug online pharmacy, and the development of MC-1 for a PNPO deficiency.

The acquisition of Marley Drug, the online pharmacy delivering to homes to all in -- to homes in all 50 states in the U.S. and their territories through mail, was to expand our sales reach for ZYPITAMAG and its growing -- as a growing contributor to the Medicure business. Our goal of the platform is to bypass traditional framework run by health insurers and pharmacy benefit managers that has made access to affordable medications too expensive for many Americans, including generic and branded products such as ZYPITAMAG.

This past year, Medicure celebrated 25th anniversary. For 25 years, our mission has been to serve patients by delivering safe and efficacious life-changing medicines. Capitalization on our strength -- capitalizing on our strength and -- in cardiovascular therapies, knowledge of the ever-changing U.S. market, we are excited to continue towards our mission over the next 25 years. We believe the investments and experience over the 25 years positions Medicure on a steady path to continued success; it takes time and persistence, and we've demonstrated both.

I would now like to turn the call over to our CFO, Haaris Uddin, to review and provide some color on the financial statements for 2022.

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 year ended December 31, 2022 by the end of day today, in addition to any 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 year ended December 31, 2022.

Total revenues for the year ended December 31, 2022 were $23.1 million compared to $21.7 million for the prior year.

Net revenues earned from AGGRASTAT during the current year totaled $11.7 million, a slight increase from the prior year where net revenue from AGGRASTAT was $11.6 million. The increase in AGGRASTAT revenue during the current year is a result of a higher volume of units sold.

Net revenue earned from ZYPITAMAG during the current year totaled $3.6 million, which is an increase from the $3.2 million earned during the prior year. The company continues to focus on ZYPITAMAG and hopes to see the growth in sales of ZYPITAMAG continue into 2023 and beyond.

Moving on to Marley Drug. Net revenues from Marley Drug during the current year totaled $7.8 million, which is an increase from the $6.9 million earned during 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.

With respect to cost of goods sold, AGGRASTAT cost of goods sold for the year ended December 31, 2022 totaled $3.4 million, a decrease from the prior year where cost of goods sold totaled $4.2 million. The decrease in cost of goods sold during the current year is a result of better inventory management, leading to less written-off inventory. This is offset by a higher volume of AGGRASTAT sold during the current year.

ZYPITAMAG cost of goods sold for the year ended December 31, 2022, totaled $1.2 million, a decrease from the prior year where our cost of goods sold for ZYPITAMAG was $2.4 million. Included within cost of goods sold for ZYPITAMAG during the current year is $441,000 relating to products sold to customers, $589,000 from amortization of ZYPITAMAG intangibles asset, and $151,000 relating to royalty on the sale of the ZYPITAMAG resulting from the acquisition of the product in September of 2019. The decrease in cost of goods sold during the current year is due to a prospective change in the amortization of the ZYPITAMAG intangible assets, which was initially applied in Q4 of 2021. This is offset by a higher volume of products sold during the current year.

Marley Drug cost of goods sold totaled $2.38 million during the year ended December 31, 2022. This is a slight decrease from the prior year where cost of goods sold totaled $2.4 million. The decrease in cost of goods sold during the current year is the result of the company negotiating better shipping and delivery of its products to customers, offset by a higher volume of products sold during the current year.

Selling expenses totaled $8 million for the year ended December 31, 2022 in comparison to $10.3 million for the year ended December 31, 2021. Selling expenses decreased in the current year due to the company decreasing travel expenditures and the restructuring of company sales team within the United States. This has led to better staff utilization of its sales force and additional cost savings.

General and administrative expenses totaled $4.2 million for the year ended December 31, 2022 in comparison to $2.7 million during the year ended December 31, 2021. The increase in general and administrative expenses is primarily related to the company increasing its employee headcount during the current year to improve the control and processes within various departments. In addition, it also includes non-capitalized expenditures incurred during the current year related to improvements made to the Marley Drug e-commerce platform.

Research and development expenses for the year ended December 31, 2022 totaled $2.8 million compared to $1.8 million during the prior year. The increase during the current year is primarily due to the timing of research and development expenditures related to each development project the company is currently undertaking.

The company recorded finance expense of $206,000 during the year ended December 31, 2022. The finance expense recorded during the current period consisted primarily of accretion on the ZYPITAMAG acquisition payable, bank charges incurred, and finance expense on the company's lease obligation. This is partially offset by interest income earned during the current year.

The company recorded a foreign exchange gain during the current year of $52,000 compared to a foreign exchange gain of $31,000 during the prior year. The increase incurred relates to changes in the U.S. dollar exchange rate during the respective years, which led to a favorable foreign exchange during the current year.

Adjusted EBITDA for the year ended December 31, 2022 was $3.3 million compared to an adjusted EBITDA of $2.1 million during the year ended December 31, 2021. The increase in adjusted EBITDA during the current year is due to an increase in operating income, which primarily stem from increased revenues from the sale of AGGRASTAT, ZYPITAMAG and through Marley Drug. In addition, as indicated earlier, the prospective change to the amortization of the ZYPITAMAG intangible asset during the fourth quarter of 2021, which resulted in lower cost of goods sold during the current year. Offsetting these increases was an increase in R&D expenses during the current year.

As at December 31, 2022, company had cash totaling approximately $4.9 million, an increase from the $3.7 million of cash held as of December 31, 2021. 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 call for you to ask questions regarding the financial results of the company as a whole.

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

Neil Owens

Thank you, Haaris, and good morning to everyone.

We are pleased to report on the progress made in 2022. AGGRASTAT product volumes sold increased by 3.9% in 2022 compared to the previous year, along with 2% higher net revenue. Our goal is to be as efficient as possible with marketing and account support to reinforce our brand into 2023.

Two licensed generics of AGGRASTAT were granted for November 2022 and January 2023, respectively. However, to our knowledge, neither has yet been launched and made commercially available.

Also of note is that there has been less pricing pressure from generic eptifibatide competition in 2022 compared to previous years. In 2022, there was also a notable improvement in inventory management, leading to lower costs due to loss from product expiring.

Regarding ZYPITAMAG, we continue to see consistent growth in prescriptions filled through Marley Drug, including a 253% increase in units dispensed in 2022 compared to 2021. Net revenue through insured channels grew by 12% year-over-year.

We continue to build brand awareness through efforts of our sales and marketing team. In 2022, we added over 4,000 new ZYPITAMAG customers through Marley Drug, with an average of 300 to 400 per month. We are focused on customer retention and maintaining a high refill rate. We doubled the number of website visitors and had a six-fold increase in visibility through online search results.

We did implement a 15% price increase in 2022 as well, which did not lead to any notable decrease in demand. Some of the challenges we faced are having physicians continue to add more patients, and a relatively small sales and marketing footprint.

Overall, ZYPITAMAG sales through Marley Drug continues to demonstrate growth, lower returns and fees to wholesalers and reduced fees to pharmacy benefit managers. This is why we've been receiving attention from other manufacturers who are interested in our approach. And Medicure plans to provide, through a fee-based approach, other innovative branded medications that have a clear clinical advantage at a cash price through Marley Drug.

In 2022, net revenue from the Marley Drug pharmacy business increased 12% compared to the previous year. Over the course of the year, through our sales and -- sales team and marketing efforts, we've seen increased sales of generic and branded medications, website traffic and sales through our e-commerce platform.

We are seeing success through all of the media channels we use, including TV, paid search, social media ads and SEO improvements. In 2022, we also implemented free shipping across the U.S. on all orders, which also -- while also lowering our overall shipping costs through improvements in our shipping agreements. We hired two PR firms to help spread the word through media about our story and innovative approach.

Overall, the pharmacy provides consistent revenue and an opportunity to better market ZYPITAMAG and other branded medications, and the company does plan to further invest in this area through 2023 to expand our customer base and brand across the U.S.

Some of the challenges we face include competition from other online and retail pharmacies, the fact that many customers want to use their insurance and building trust with prospective customers.

Turning to our development projects. We faced some separate challenges. Our ANDA injectable product has not yet been approved due to issues at the contracted manufacturing facility. And as a result, that project will need to be moved to another facility. We are currently in the process of negotiating with transfer and adjusting timelines.

Also, Sodium Nitroprusside did not contribute any revenue during 2022. This was due to a combination of manufacturing and market factors. And as a result, we have put up marketing hold on this product to focus our efforts on more profitable areas for the company.

Our Phase 3 study to find 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. And we expect to share an update on enrollments very shortly. Clinicians and patients are very keen to begin the study, and we thank them for their patience. 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. This study currently represents the major R&D investment for the company.

Due to improvements in our revenue and controlling spending, we are pleased to report a positive adjusted EBITDA in 2022 of $3.3 million as well as net income of $1.4 million or $0.13 per share. The company has demonstrated consistent improvements over the past several years, and we are working to continue that trend through smart decision making.

Our team wants our investors to know that we are driven and dedicated to growing revenue, controlling our costs and making Medicure 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.

2022 was a good year, continuing the growth of the last three years. With the acquisition of ZYPITAMAG and Marley Drug, we also diversified our revenue and continued growing opportunities. We're thankful for continued strength in AGGRASTAT market share and a strong balance sheet. We continue to focus on growing the business with acquisitions and in-house developments, further diversifying our revenue and asset base, carefully investing to grow our 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 shareholders. And as always, I want to express my appreciation to the outstanding team of employees we've been blessed with. Thank you, our shareholders for continued support and your interest.

And now, I'll turn it back to the moderator for questions and answer.

Question-and-Answer Session

Operator

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