Medexus Pharmaceuticals Inc.

Good day, ladies and gentlemen, and welcome to the Medexus Pharmaceuticals first quarter fiscal 2022 earnings 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, Tina Byers.

Ma'am, the floor is yours. Thank you and good morning, everyone. Welcome to the Medexus Pharmaceuticals first quarter fiscal 2022 earnings call. On the call this morning are Ken D'Entremont, Chief Executive Officer, and Marcel Conrad, 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 905-330-3275. I would like to remind everyone that this discussion will include forward-looking information that is based on certain assumptions with which Medexus believes to be reasonable in the circumstances, but is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided in this call speaks only of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions, and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place undue reliance on forward-looking information. MEDEXIS exclaims any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. In addition, during the course of this call, there may be references to certain non-IFRS financial measures, including references to 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 information about both forward-looking information and non-IFRS financial measures, including a reconciliation of each of 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 are available on the company's website at www.medexas.com. and on the company's corporate filings on CDAR at www.cdar.com. I would also like to remind everyone that during the year end, March 31st, 2021, the company changed its presentation currency to U.S. dollars from Canadian dollars. This change was applied retroactively, and the company has restated the comparative financial information in its unaudited condensed interim consolidated financial statements for the three-month period ended June 30th, 2021, as if the presentation currency had always been in U.S. dollars. I would now like to turn the call over to Ken D'Entremont to discuss the first quarter.

Thank you, Tina, and thanks, everyone, for joining us on this call today. Let me start by saying we're encouraged by the demand we're seeing for our key products, and despite some setbacks we have recently faced, we feel confident we are making progress in implementing the right strategy to return to significant growth. In the first quarter of fiscal 2022, we achieved revenue of $17.3 million for the three-month period ending June 30, 2021, compared to $20 million for the three-month period ending June 30, 2020. The decrease in net sales was due to a temporary decline in the ex-factory sales of Xfinity. As pharmacy and wholesaler customers continue to work through inventory on hand, However, it is important to note that patient unit demand for Xfinity increased by 25.3% to 7.6 million international units compared to the three-month period ending June 30, 2020, which we believe reflects the success of our commercial efforts and should be more apparent in both ex-factory sales and gross margin in our future results. Our adjusted EBITDA decreased to negative 4.9 million compared to 3.6 million for the same period last year due primarily to the decrease in net sales, the impact of the manufacturing expense related to Xfinity, an increase in research and development costs over the comparative period due to the ramp up in the Xfinity pediatric trial, and the investments we made related to the commercialization of Creosultan, which we will discuss later on the call. Cash used by operations was $6.8 million compared to cash provided by operating activities of $3 million for the same period last year. Our net loss was $6.6 million compared to $3.2 million for the same period last year. Cash used by operating activities are due to lower revenue, reduction in our accounts payable balances, and spend related to the launch of Triasultan in the U.S. This period also included a $5 million milestone payment to MED Act for the Triasultan license. There are no additional milestone payments until approval of the drug by the FDA. Our adjusted net loss, which adjusts for such unrealized losses or gains on the fairer value of derivatives was $9.8 million compared to $0.8 million for the same period last year. As of June 30, 2021, we had $10.7 million of available liquidity. Turning to our specific product lines, we continue to see strong demand for our core portfolio products. Our commercial hematology product, Xfinity, is an FDA-approved intravenous recombinant factor IX therapeutic for use in patients 12 years of age or older with hemophilia B, a hereditary bleeding disorder characterized by a deficiency in quality factor IX in the blood, which is necessary to control bleeding. The hemophilia B market size in the United States alone is estimated to be in excess of $1 billion and continues to grow. As I mentioned earlier, we continue to see pressure on Xfinity X factory sales due to a high level of product in the distribution channel. We believe we are making progress in normalizing the distribution channel and are quite encouraged by the growing demand. In fact, unit demand for Xfinity increased 25% during the quarter, and we saw the strongest demand ever during the month of June. We believe that in the longer term, this will have a significant net benefit in our revenues and margins as we implement supply chain improvements. We expect full implementation of these changes will take another quarter or two. We also continue to enroll patients in the ongoing phase four clinical trial to evaluate the safety and efficacy of Xfinity in previously treated patients under 12 years of age with hemophilia B. We were pleased to announce last week that enrollment is now complete. We expect the trial to be complete in June of 2022, with the full data set to be submitted to the FDA by the end of 2022. Once completed, the study may support a significant expansion of the indicated patient population for Xfinity, as approximately one in three patients treated for hemophilia B in the United States are 12 years of age or older. or younger, excuse me. Further to this, we would expect the completion of the trial to significantly decrease our research and development costs, which have been higher than normal over the last few quarters, primarily due to this trial. Turning to RESUVO, a once-weekly subcutaneous single-dose auto-ejector of methotrexate indicated for the treatment of rheumatoid arthritis, psoriasis, and juvenile idiopathic arthritis. Unit demand in the United States has remained steady in the trailing 12 months, end of June 30th, 2021, and continues to reflect strong payer, prescriber, and patient acceptance. We believe we will maintain a strong position with the methotrexate auto ejector segment. Metoject unit market demand in Canada also remained steady in the trailing 12 months, end of June 30th, 2021. MediJect is a pre-filled syringe of methotrexate, which is indicated for the treatment of rheumatoid arthritis and psoriasis. MediJect is a highly effective and cost-effective treatment for these debilitating diseases. Public reimbursement creates access for a large group of patients who previously could not get the product. In the past year, we responded to a competitive threat to MediJect from a generic entry with a commercial response to protect its market share and a legal action to prevent the product IP. On August 28, 2020, with MedAct GmbH, we jointly filed a statement of claim against Accord Healthcare Inc. regarding the launch of BioAccord, a generic version of MedOcheck in the Canadian market. The trial date has been set for the beginning of 2023. Rupal saw unit demand growth of 44% for the trailing 12 months ended June 30, 2021. which reflects further acceleration compared to unit demand growth of 35.7% seen for the trailing 12 months ended March 31st, 2021. This was partially due to a strong allergy season across Canada and further market share gains by the brand. Lupal is one of the fastest growing antihistamines in the Canadian prescription market. We expect Rupal to be a leading prescription antihistamine in a total market valued at approximately $135 million, including $68.7 million from the prescription market, which is growing at an annual rate of 20.9%. During the trailing 12-month period ended June 3, 2021, Rupal was one of the fastest-growing antihistamines in the Canadian prescription market. During the year ending, March 31, 2021, the company entered into an exclusive license to commercialize Triosulfan in the United States. Triosulfan is an innovative orphan-designated agent developed for use as part of a conditioning treatment in combination with Luverabine as a preparative regimen for patients undergoing allogenetic hematopoietic stem cell transplantation, or ALLO-HSCT. On August 2, 2021, the company received notice from Medec, Medec's licensor for triosulfan, that it had received a complete response letter, or CRL, from the U.S. Food and Drug Administration with respect to the new drug application, or NDA, for the use of triosulfan in the United States. Via the CRL, the FDA has determined that it cannot approve the NDA in its present form. The FDA has, however, provided recommendations for how to address what they see as the outstanding issues, primarily around the provision of additional clinical and statistical analysis pertaining to the primary endpoint of the completed pivotal Phase III study. These recommendations are already covered by MED-AC's existing development plan for Triosulfan, which MED-AC is contractually responsible to execute and fund. The company, together with MedAct, will move forward with the FDA to meet the agency's request. It is our belief that the CRL provides a path to review and approve and does not require additional clinical studies, provided we can satisfy the FDA's data requirements and post-marketing commitments, which we are hopeful can be done with the already available data from the existing completed Phase III study and the current development plan. The window for the CRL response is 12 months, and we believe we can submit well within that window. While we have not yet had any direct discussions with the FDA fall into the seat of the CRL, we are in dialogue with MED Act, and we continue to have a high degree of confidence that Triosolfen will ultimately be approved for distribution in the United States, albeit on a delayed timeline. In fact, no regulatory authority thus far has denied approval of Triosulfan. Additionally, the fact that the FDA had granted Med-Act orphan drug designation in 2015 highlights a significant need for this drug in the United States. We continue to believe Triosulfan could eventually overtake the current market-leading product Busulfan, which realized $126 million in U.S. sales prior to genericization. We believe the investments we have made in this product to date will support the eventual launch of the product. In the meantime, because of the way we structured the agreement, most of the consideration for the U.S. license is based on future milestones, and we are not required to make any additional milestone payments to MEDAC until we have received FDA approval. I also want to point out that we had not yet hired additional sales representatives for Triosulfan, and we reallocated certain new hires to help drive Xfinity growth. On August the 5th, 2021, we held a webinar to discuss the complete response letter in full detail, and I would encourage anyone that has not already done so to take a moment and listen to the webinar, which can be viewed on the media site of our website. We remain highly encouraged by the prospects for Triosulfan and are fully committed to working with the FDA to bring this product to market in as short a time frame as possible, and we will be informing investors of our progress along the way. On a related note, on June 28, 2021, we received a notice of compliance from Health Canada to commercialize Triosulfan in Canada under the trained name Tricondyph. And on July 12, 2021, we entered into an exclusive license with MEDAC to commercialize triosulfan in Canada. Previously, we had been distributing triosulfan in Canada only under the special access program pursuant to the authorization received in March of 2019. In addition to our current product portfolio, we also have a right of first refusal on certain specified products of Med-Act that Med-Act wishes to commercialize for use in the United States or Canada during the term of the Med-Act's U.S. supply agreement. We believe there are several of these products that represent an attractive commercial opportunity in North America, and we are in the process of assessing and licensing the licensing of these drugs. We are also in discussions with several partners regarding other licensing agreements, and we believe that those products will have the potential to materially contribute to revenue within the next few years. We believe that a key aspect of our growth strategy will be to continue to leverage and grow our infrastructure through the acquisition and partnership of new products. We are exploring a large number of opportunities. including several products in negotiation phase in both the U.S. and Canada. We will continue to look at optimizing our product portfolio and leveraging our resources with the goal of executing near-term creative transactions to achieve our sales growth targets over the coming years. As we continue to build out our U.S. platform, we are pleased to appoint Marcel Conrad as our new Chief Financial Officer. Arsal brings over 20 years of experience in accounting, finance, and business across various global markets, including the United States. He joins us from CareDx, Inc., a NASDAQ-listed precision medicine solutions company, where he served as a senior vice president of finance and accounting and vice president, corporate controller since 2018, including a period acting as CFO in early 2021. Our sales experience will undoubtedly be valuable for our company as the U.S. becomes an increasingly larger focus for our business. In summary, we believe we have built a highly scalable business model, which should provide significant incremental earnings potential. We remain focused on resuming and accelerating our strong historic revenue growth, leveraging our North American sales force across products, realizing synergies of the combined entities, and maintaining strict financial disciplines. With the available liquidity at the end of the first quarter, we're in a good position to execute our business plan, including the launch of several new products. I will now turn the call over to Marcel, who will discuss the financial results in more detail. Marcel?