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spk07: Good day, ladies and gentlemen, and welcome to the IntelligenX Technologies Corporation second quarter 2021 call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Abby Hardy. Ma'am, the floor is yours.
spk00: Thank you, Operator. Good afternoon, everyone, and thank you for joining us on today's call. With me on the line are Dr. Horst Zurb, IntelligenX CEO, and Andre Godin, our President and CFO. Before we begin, I would like to remind you that all amounts mentioned today are in U.S. dollars, unless otherwise mentioned, and today's call may contain forward-looking information that represents our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward-looking statements, except as may be required by U.S. and Canadian securities laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks and results may differ materially. Details on these risks and assumptions can be found in our filings with the U.S. and Canadian Securities Commission. I would now like to turn the call over to Dr. Zurb.
spk06: Thank you, Abby. Good afternoon, everyone, and thank you for joining us for the Intergenics second quarter 2021 conference call. On today's call, I will provide a corporate update and discuss the progress we've made on our key pipeline projects. Following that, André will review our Q2 2021 financial results. Then, and as always, we will open up the line for your questions. I'll begin with our Thai partnership. Our strategic partnership with our Thai life sciences expanded during the second quarter when we entered into a second feasibility agreement, this time for the development of a novel formulation for salvinorin A. Salvinorin A is a naturally that is being developed for the treatment of treatment-resistant depression and other indications. Under this agreement, Intergenics will conduct formulation development work and provide a prototype to Atai for further clinical investigation. If this work is successful, the parties would enter into an exclusive royalty-bearing commercialization license as contemplated in the agreement. This agreement represents another opportunity to integrate our film technology with Atai's existing pipeline while further establishing intergenics as a leader in the novel therapeutic field of psychedelics. We look forward to continuing to work exclusively with Atai on psychedelic and actogenic and or on neurophrenic compounds for the prevention or treatment of mental health disorders. Because the film application reduces and sometimes completely eliminates first-pass metabolism, Concomitant administration of monoamino oxidase inhibitors with psychedelics will likely not be necessary, which we believe can add significant value to Atai's development programs to the extent that they involve our film technology. Earlier today, we were pleased to announce the appointment of two Atai delegates to our Board of Directors. Dr. Srinivas Rao has over 19 years of professional experience in the pharmaceutical and biotechnology industries, and he currently serves as the co-founder and chief scientific officer at Atai. Frank Stegert is currently Atai's vice president of investment management and operations. On behalf of the board and of everyone at the company, I'm very pleased to welcome Srini and Frank to our team. We look forward to their contributions as we continue to execute on our growth strategy. Now, moving on to ResaPort, we continue to work with Exceltis, our ResaPort commercialization partner in 27 European Union countries, and LTS, our Germany-based contract manufacturing partner, to prepare for the commercial launch of ResaPort in Spain early in the third quarter. Consistent with Exceltis' right to commercialize the product in most other European countries, LTS has the potential and the capacity for other European markets. First, I'll read the report. In Spain, the first commercial batch has been successfully manufactured and was shipped to Exceltis for the Spanish launch. The second and third batch are being manufactured, as we speak. Now, since most businesses are closed in Spain during the month of August, as a matter of fact, Spain as a whole is practically closed. Exceltis has decided to launch the product in September when business activities resume. As far as U.S., the first resubmission batch was successfully completed and has been placed on stability. Batches two and three are being manufactured. And upon completion of six months accelerated civility testing, we plan to meet with FDA to agree on details of the resubmission. Moving on to Tadalafil, the revised protocol for the irritation study that FDA requested in the complete response letter was submitted to the agency and recently approved. Duration of the study will be eight months. On the BD front, partnering discussions are advancing, and our goal is to finalize a deal with our prospective commercialization partner in the third quarter of 2021. A term sheet was recently signed, and the parties are working on the definitive licensing and supply agreement. Now a few words on cannabis. We reported previously the manufacturing industry and shipment of product for the planned launch of our CBD film in Australia via our commercialization partner, Heritage. And to clarify, Heritage is not gonna commercialize itself in Australia. Rather, they do that through partnerships with two Australian companies. A short while ago, we received an order from Heritage for the manufacturing of launch quantities for the intended launch of the product in Canada. Manufacturing of those batches is ongoing. Now moving on to Montelukast. A little bit of introduction. We, over the past weeks and months, received a number of inquiries from shareholders and stakeholders regarding the resumption of our Buena study, which, as you know, had been put on hold mostly due to COVID. So we decided to look into resuming the study, and last week we announced that we received subscriptions from investors in the United States for 2.1 million U.S. principal amount of 8% convertible notes due July 31st, 2021. That money will be exclusively earmarked for the continuation and the completion of the UENASA. That was the sole purpose of raising that money. We plan to resume the study under the amended protocol with a higher daily dose and have submitted stability data for the high-dose film to Health Canada in order to obtain approval for shelf life extension, which is required to continue the study. We are also in discussions with the involved in the monitoring of the study to prepare for the resumption of the recruitment later in the fall. In the meantime, we continue to evaluate the trial's expansion to the United States via an IND filing, and we requested an IND number from the FDA. Now, on animal health, we entered into a Materials Transfer Agreement with an undisclosed global veterinary health company who will evaluate our VetaFilm platform in cats. If the evaluation is successful, we intend to enter into negotiations with this partner for a development agreement in the veterinary field. And this agreement represents another step toward establishing Betafilm as a new standard for pets and helps position Intelligenix at the forefront of the oral veterinary film field. With that, I would now like to turn the call over to André for a review of our financial results. André?
spk03: Thank you, Urs. Good afternoon, everyone. As Oris mentioned, I'll take a few minutes to discuss the company's financial performance for the second quarter of 2021. The total revenue for the 2021 second quarter amounted to $162,000 compared to $42,000 in the same period last year. A 286% increase in revenue is attributable to 120,000 increase in R&D revenues. Operating costs and expenses were 2.1 million for Q2 2021 versus 1.8 million for the corresponding three-month period of 2020. The increase is mainly attributable to 158,000 increase in manufacturing expenses $132,000 increase in SG&E expenses and increase of $23,000 in depreciation of tangible assets. Those amounts were partially offset by a $37,000 decrease in R&D expense. One of the factors for the increase in operating expenses was related to the COVID-19 or related to the COVID-19 government assistance programs received in 2020, but not in 2021. For Q2 2021, the company had an operating loss of 1.9 million compared to an operating loss of 1.8 million for the comparable period of 2020. Adjusted EBITDA was negative 1.7 million for Q2 2021, compared to negative 1.5 for the same period last year. The net comprehensive loss was 2.5 million or two cents on a basic and diluted per share basis for Q2 2021, compared to net comprehensive loss of 1.3 million or one cent per share for the comparable period 2020. As at June 30th, 2021, the company's cash and short-term investment total $12.1 million. This includes the total gross proceeds of approximately $12.3 million from a Thai initial purchase of 37.3 million shares of our common stock and $22.38 million in warrants. As a result of this investment, which closed in May, Atai now owns approximately 25% of Enzylgenics' issued and outstanding common stock. These funds will enable us to continue advancing our portfolio of innovative film products and product candidates. As Urs mentioned earlier, subsequent to the quarter end, we received subscription from U.S. investors for $2.1 million. in principle of an 8% convertible debenture, note due July 31st, 2025. We intend to use the proceeds to finance our Montelukas study, and the closing is now imminent. Last quarter, we submitted the listing application to the TSX, which is subject to Intelligenix meeting all of the listing requirements and obtaining the approval of the Toronto Stock Exchange. While the process has taken much longer than initially anticipated, we believe that the company should receive an answer shortly. That said, there is no assurance that the Toronto Stock Exchange will approve the listing application. If and when approved, we believe our graduation to the TSX will increase our visibility and is a necessary progression as we structure our company for the long term. I will now turn the call back to Dr. Zerbe.
spk06: Yeah, thanks, Andre. In closing, I'd like to once again recognize our team for continuing to execute on our long-term strategy and also our board and our shareholders for their continued support. With that, I will now turn the call over for questions. I'd like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Thank you.
spk07: Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. Questions will be taken in the order they were received. If at any time your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, if you do have a question, please press star 1 on your telephone keypad at this time. Please hold while you pull for questions. Okay, and our first question comes from . Please state your question.
spk09: Hi, good afternoon, Dr. Zerbe and Andre. So when do we actually start generating money? We have been proclaiming to use the 505 route, and yet in the last eight to nine years failed to bring any drug. other than the Velbo tricks, which was, again, not on the film technology. We've not met one milestone. We keep shifting our milestones all the time. If only if all the agreements earned a dollar per agreement, we would probably have more or a higher revenue than what we currently have. We goofed up on $10 film, riser port, and just wanted to understand, when are we actually going to start making money? Because the riser port deadlines in U.S. EU are not being met. They've been pushed like for four years now. What can you tell us about when shareholders will start making money except for funding your lifestyles? Thank you.
spk07: Okay. Our next question comes from Sam Linsen. Please state your question.
spk05: Hi. I just had a question about the... the recent convertible notes that I believe Andre just mentioned. And I joined the call a little bit late. I'm sorry if I missed this earlier on. But I noticed that the notes are convertible to common stock at $0.40, which was about the price of the stock when the announcement was made. And so they seem to have all of the upside of owning the stock And at the same time, if the stock happens not to appreciate or depreciates or while you're waiting for the stock to appreciate, you get an 8% interest rate. So it seems like a terrific deal for the buyers of the notes, maybe not so much of a deal or not so much of a good deal for the company. And my question is, given the recent investment that we had from Atai, why are we not able to raise capital on more attractive terms, you know, than, you know, this convertible note offering? That's the question I had. Okay.
spk06: André, do you want to respond to that?
spk03: Yeah. Yeah, I will. I mean, a convertible note is an instrument that is often used in financing companies. I mean, if you look around, you'll see that it's also a privileged way to raise money. And 8% interest is really standard. I mean, there's no premium on the interest rate. And yes, I mean, right now the stock has appreciated since we announced that we had received the subscription. but there's no guarantee that, uh, you will actually, um, you know, make money with the conversion. So the stock, you know, was, um, lower than 40 cents. So we basically, the, the, the subscriptor, uh, they, they actually paid a premium, uh, to get the note. I mean, it's good to see the stock moving up, but that's good for everyone, not only for the note holder. And, um, And we also have a loan with Atai at the same interest rate. So basically, we're trying to diversify our source of financing. And when Atai invested initially the $12.3 million, that is for all our programs, including Atai's program. But Monte Lucas was not part of it. So we didn't want to use the proceeds from the Atai investment to fund the Montevuca study. And since, you know, we feel that there is a big upside with that study, we decided to go out and, you know, raise sufficient money to resume the trial, which we will do.
spk05: And that was going to be my next question. Thank you for that, as to why we needed the money. But okay, so thank you for the answer. It just seems to me that you're right. 8% maybe might be standard, or the stock appreciating is good for everyone. But If I own the stock, I don't get 8% while I'm waiting for it to appreciate, whereas the holders of the convertible notes do. I just felt that since we're giving that advantage, we should have been able to either get lower than 8% or a higher than $0.40 value. So I would just be fuddled as to why we were not able to get better terms. But I assume, obviously, it was competitively bid, right? And this was the best terms that we were able to get?
spk03: Yes. Let's not forget that when we raise equity, it rarely comes as a unit of one common stock. So there is often, if not, you know, almost every time, you know, warrant coverage. So either it's APA warrant, a full warrant. In the case of a tie, it was about 75% coverage with warrants. So, you know, the tricky part is, you know, when you issue stock and warrants, it's much more diluted than when you go via the... the convertible note route, because there's always a possibility for us to pay it back and not being converted. So no dilution to the shareholders. So it gives us the flexibility, which we don't add if we go for a standard public offering, which would be much more diluted. Okay. Thank you. You're welcome.
spk07: Our next question comes from Jeremy Lappin. Please state your question.
spk10: Yes, good afternoon. Just a quick question. I want to know if there's any kind of timeline you can give us on the VETA film study and what would be the next steps when that comes to a conclusion?
spk06: What I would like to do and to respond to that question is actually turn over to Dr. Mattson. Dana also happens to be on the call today. She is our VP of Business and Corporate Development, and she has been handling all the negotiations with that animal health company. So, Dana, can you respond to that?
spk01: Of course, yes. So we are, as Horst mentioned, we are expanding on our VETA film, and we are actually in discussion with several companies. So from a timeline perspective, I would imagine – that we can see some sort of announcement probably coming out in the next quarter. But, you know, with the company that is doing the study in cats, they're running the trial. They need to see how the platform performs in cats. Cats are very challenging animals to dose. And we would expect to see some outcome of that also in cats. in September, October, and then if it's successful, we would start the negotiations. So stay tuned, but at the moment, you know, NBD, nothing is done until we see signatures.
spk10: Absolutely. Thank you.
spk01: You're welcome.
spk07: Okay. Our next question comes from Colin Taylor. Please state your question.
spk12: Hi. Thanks for taking my call. been a long time investor and I have two questions. My first question is I've been confused over the years on what the company's objectives are as a business and maybe the 25% giving away shares kind of took me off as a surprise and What is the company's business objective? Is it to make a profit in the next year, two years, positive cash flow? Could you please help me on that?
spk06: Yeah, I think the answer to that is fairly simple. We, I think, are on a good way to turn the company around. We expect to launch several projects. I mean, I reported, you know, imminent launch activities that are ongoing for our migraine film and for the cannabis film. Those launch activities will continue. So in the two year timeframe we expect to see, um, to, to have the company turned around and, and, um, uh, post, uh, profits. Andre, if you want to add to that, uh, but, but that would be my response to that.
spk03: Yeah. Um, I mean, the, the only thing, um, I can add to that. You know, you were surprised by one of, you know, one of the things you mentioned is that you were surprised by the 25% investment. For us, we really see it as a strategic partnership. So a tie will bring in a pipeline of products in the short, mid, and long term. So And that will generate, you know, obviously revenue for us. I mean, development revenue to start with. And eventually when they go commercial, it would be, you know, probably a split of royalty and manufacturing margin. But also at the time when Atai made the investment, you know, the situation was bad. was difficult and the timing was perfect because they came in with money and they're willing to support us and work with us in the long term. So we really saw that as a turning point for the company for the best.
spk06: If I can just briefly add to that because it's really an important aspect of what we're doing here. For a drug delivery company like Intergenics, the purpose is not just making films and making them a little cheaper than the competition. The challenge for us has been to find a strategic niche that we occupy as the first company and where we can claim some, you know initial ownership and that through the Atai investment has become the The psychedelic space the partnership with Atai allows us to Play a significant and a leadership role in the psychedelic space and With that, moving forward, we have defined clear objectives and, as I mentioned before, plan to turn the company around.
spk07: Okay. Our next question comes from Robert Busby. Please state your question.
spk04: Yes, Dr. Hurst. Thank you for taking my question. A number of months ago, Intelligenix entered into a partnership with Cybin to produce psychedelics. And today, you mentioned you have an exclusive relationship with a tie to produce psychedelics. I find that a bit confusing. Do you still have that partnership with Cybin?
spk06: Yeah, thanks for that question, and I have to agree. At first glance, it sounds a little confusing, but here is the situation. The deal that we have with Cybin is limited to developing a formulation that they can use for initial clinical evaluation. There is no commitment or there are no commercial rights that Saibin would have down the line to our formulation and intellectual property. To that extent, the relationship that we have with Atai is an exclusive one. So did I make that clear enough?
spk04: Well, so that would eliminate the possibility of producing the strips for SIBIN?
spk06: Well, a condition for us to enter into the partnership with Atai was that we give them exclusivity for the psychedelic space. Unfortunately, the deal that we had previously entered into with SIBIN was was limited to this feasibility experiment that we're conducting.
spk04: Okay. Thank you very much.
spk06: You're welcome.
spk07: Our next question comes from Eric Herb. Please state your question.
spk02: Hi there. I had two questions. First, I was just curious, an update on the TSX uplisting. During the last call, you'd mentioned that it could be done in a shorter period of time. Has there been a holdup, or what's the outlook at this stage?
spk03: Yeah, there's no holdup, but we were initially told that the process would not take as long. And since we qualified, you know, there is obviously criteria that you need to meet in order to uplift. And we met those criteria, especially after the Atai investment. So we're told that, you know, it was going to take, you know, maybe four to six weeks. But I think right now they're a little bit overworked and, you know, it has just taken a little bit longer than we expected. But I think we're, really at the last stage now. Everything has been provided. They seem to be happy with everything that they have. And the process is they have to go in front of the committee, which will review the application, after which they give you the up list or they don't. But this process is very, very close. So it's within probably five to seven days. After that, if everything goes according to plan, then we could potentially start trading a few weeks after that. Hopefully, this time, the timeline would be respected based on what we know now. I have to admit that we were a little bit... surprised by the time it took. I mean, it came to us as a surprise because this is not what we were told initially. But that's life, and as long as we get there, I think that's going to be quite an accomplishment.
spk02: Well, that's great to hear that there weren't any issues and that it's still on track. And then the second question on the heritage, Dr. Zerbe, you mentioned a second order, and you said it was a large order. Are you able to indicate any more information on how large that order is?
spk06: Dana, I believe there is a confidentiality obligation, so I would not be very comfortable to disclose it, but it is significantly larger than the initial order that we manufactured and shipped.
spk02: And that first order was shipped at the end of March, and I've still not seen that on the market. Are those ones going to Australia? Is that what you had said?
spk06: Yes, at least for practically all of it. The reason why you haven't seen any of that is quite simple. The Australian commercialization partners are interacting with Australian companies to make sure that the product meets Australian requirements as far as GPP, GMP, and whatever other regulatory requirements. That process is now almost, I would think, practically completed. So we expect to see a product on the market pretty soon.
spk02: Excellent. And then I had read a news release from Heritage Cannabis about the release of the CBD film in August. Are you manufacturing for that release that they've announced?
spk06: Can you please repeat your question? You broke off partially, so I didn't really get the question.
spk02: On the Heritage Cannabis website, there was a news release about the impending or imminent release of CBD film in August. Is that what we're manufacturing for now?
spk06: Dana, I'm not aware of that. Can you respond to that? Do you know anything about that? I'm not aware of any such note yet. On the Heritage website, I'm sure there is, but I'm just not familiar with that. Do you know anything about that?
spk01: So Heritage had a note out about the business update, and I think they mentioned the launch, and I think the brand, they have already a brand name for our product. It's called Chill. So, yes, you are correct in mentioning it. I haven't checked it recently, but they have been announcing that they're launching this brand soon. Yes, and we are manufacturing for that launch right now. So Heritage only has the CBD swim with us.
spk02: Thank you very much. It's very exciting. And good luck with this quarter. Yes, it is. Thank you. Thank you. Yep, thank you.
spk07: Okay, our next question comes from Hugh. Kylie, please state your question.
spk08: Yes, good afternoon. Thank you for taking my call. A couple quick questions. Dr. Zerbe, in the last earnings call, You talked about potential follow-up discussions with Tilray. Anything to report on that?
spk06: I can't talk about that. The, let me say, conversation with Tilray is ongoing, but I cannot disclose anything about that. That's an ongoing proceeding.
spk08: Okay, I appreciate that. Two other quick questions on the partnership with INSUD. Initially, there was a couple or four products on your pipeline chart, and I think we're down to the migraine and one other. Is there any chance they'll be coming back to the table with additional requests for development projects?
spk06: I mean, that is quite possible, but right now the focus is really on getting the migraine film out, which, as I mentioned before, is imminent. We expect the product in early September to be on the market in Spain. And then we have a development ongoing with a U.S. subsidiary, which is also progressing quite well. That's the focus right now. I don't think – I think it would be very premature to – discuss any potential follow-ups.
spk08: Okay. My last question, I appreciate your answer there, Dr. Gibby. The Veriderm, any potential partners on that, you know, that product? I'm sorry, which one? You know, the patch you have, you know, the arm patch for the transdermal patch?
spk06: Yeah, yeah. Okay. That is ongoing. Dana, again, you are directly involved in the negotiations on that. If you want to comment on the current status, go ahead.
spk01: Yeah, at this moment we are in negotiations, but it would be too early to announce or to give any further indications who we're talking to. So it's still all in the works. But we're working on it here.
spk08: Okay, thank you, Dan. And real quick, going back to the other gentleman's question inside, Ben, if they're, you know, Phase 2A and 2B are successful using the IntelliJetix versus film, is there any chance that you would go into a production agreement with them, or is that locked up by a tie?
spk06: At this point, first of all, to correct you, the material that we're making is not for a Phase 2 production. It's not on what I can see and what we had contractually agreed upon for such a study. It's for an earlier study.
spk12: Okay.
spk06: But frankly, at this point, you never know what's going to happen in the future. But as the situation stands right now, I think that is a very unlikely scenario.
spk08: Okay. that's a clear and concise answer. Thank you, and to my questions.
spk06: You're welcome.
spk07: Okay, our next question comes from Brent Gaethje. Please state your question.
spk11: Good afternoon, Dr. Zerbe and Andre. I was just wondering how confident you are that Rizaport is going to launch in September. It seems like The target date keeps getting moved back. Earlier this year, it was the end of, or sometime in June, I think, and then it was early third quarter, and now we're into September. Can you just tell us your confidence level that that's actually going to happen?
spk06: I can give a very clear answer. It's as high as you can possibly think. The one and only reason the launch moved to September really is, and I mentioned that in my introductory remarks, that Spain is closed in August. There are virtually no business activities whatsoever. Everybody in Spain is on vacation, and so it simply doesn't make any sense to launch a product in August. That is why the launch, that is the one and only reason, at least as far as we know, But we're certain that that is correct. That's the one and only reason as to why the launch is occurring in September. So at this point, I repeat myself, our confidence level is as high as you can possibly think. Great. Thank you. You're welcome.
spk07: Okay. That was our final question. I would like to turn it back over to Horst for closing remarks.
spk06: Yeah, so again, thanks to everybody on the call and all our shareholders and stakeholders for your continued support. And with that, I would like to conclude our Q2 2021 call. Thanks to everybody.
spk07: Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time and have a great day.
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