Medexus Pharmaceuticals Inc.

Greetings. Welcome to the Medexis Pharmaceuticals fourth quarter and fiscal year-end 2025 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Victoria Rutherford, Investor Relations of Medexis. You may begin.

Thank you, and good morning, everyone. Welcome to the Medexis Pharmaceuticals fourth quarter and fiscal year 2025 earnings call. On the call this morning are Ken D'Entremont, Chief Executive Officer, and Brendan Bushman, 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 480- 625-5772. I would like to remind everyone that this discussion will include forward-looking information as defined in Canadian securities laws that is based on certain assumptions that Medexis believes to be reasonable in the circumstances but is subject to risks and uncertainties. Actual results may differ materially from historical results or results anticipated by the forward-looking information. In addition, the discussion will also include non-GAAP measures such as adjusted EBITDA, adjusted EBITDA margin, and adjusted gross margin, which do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. For more information about forward-looking information and non-GAAP measures, including reconciliations to net income and loss, please refer to the company's MD&A, which, along with the financial statements, are available on the company's website at www.medexis.com and on Cedar Plus at www.cedarplus.ca. As a reminder, Medexis reports on March 31st fiscal year basis. Medexis reports financial results in U.S. dollars and all references are to U.S. dollars unless otherwise specified. I would now like to turn the call over to Ken D'Entremont.

Thank you, Victoria, and thank you, everyone, for joining us on the call today. The last few months have been an exciting and dynamic time at Medex's as we have begun the commercialization efforts for Graphapex, the brand name for triosulfan in the United States. I'm pleased to report that Medex has achieved 0.6 million of product level revenue for Graphapex in fiscal Q4 25 after becoming commercially available late in February. Relative to 2.7 million of Graphapex personnel and infrastructure investments in the quarter, and our preliminary estimates indicate that we have already generated over 2.5 million of product level revenue in fiscal Q1 26. We continue to expect that Graphapex will be accretive to quarterly operating cash flows by fiscal Q4 26, that's calendar Q1 26. Although we continue to assess the strong market response and performance of key indicators for any updates to this expectation. We continue to expect that the annual product level adjusted gross margin of Graphapex will ultimately be approximately 80%, although as a preliminary estimate, product level adjusted gross margin will be slightly higher in the initial months after commercial launch, primarily due to the evolving reimbursement dynamics for the product. Our fiscal Q4 net revenue was 24.8 million, a decrease compared to 26 million for the same period last year. Our fiscal Q4-25 adjusted EBITDA was $2.3 million, a decrease compared to $4.4 million for the same period last year. This decrease was primarily due to $2.7 million of Grafitex personnel and infrastructure investments over the quarter to support our commercialization efforts for the product. Our net income of negative $0.6 million for the quarter increased is a decrease from the positive 0.8 million for the same period last year. And negative operating income of 1.2 million is a decrease of 2 million compared to positive 0.8 million for the same period last year. Again, the decreases in these metrics are primarily due to the investment we are making in Graphapex commercialization efforts at this time. We're also proud of the financial results we're reporting for our fiscal year 25. We achieved record adjusted EBITDA and record net income in fiscal year 25, both primarily due to effects of our ongoing financial discipline efforts and further supporting the stability of our base business-based portfolio. Our fiscal year 25 net revenue was 108.3 million, which compares to 113.1 million in fiscal 24. We reported adjusted EBITDA of 20.2 million for fiscal year 25, which compares to 19.5 million in fiscal year 24. We also produced a net income of 2.2 million compared to negative 0.2 million in the fiscal year 24. Turning to our specific products, the key business update for this quarter is the commercialization of Graphapex. We initiated the execution of a commercial launch of Grafitex in the first half of calendar year 25, with product commercially available in the United States in February. The launch, which was originally expected to occur in April of 25, followed swiftly on the FDA's approval of the product in January, allowing us to begin generating product-level revenue earlier than originally planned. We have seen a positive market response to Grafitex to date with the progress consistent with our expectations. Four large commercial players together covering an approximate 34 million patient lives and 12 individual healthcare institutions representing 7% of the 180 transplant centers in the United States have made positive formulary inclusion determinations. This is a promising indicator of the product's commercial potential. An additional 15 payers have added Graphopex on their prior authorization list. Wholesaler data shows that 34 of the 180 transplant centers have already ordered Graphopex for procedures in their institutions. We are very happy with Graphopex product performance to date. The response from the market and the attention of Triosulfan from the medical and scientific community has been excellent. In Canada, unit demand for Tricondo, the brand name for Triosulfan in Canada, grew by 70% over the trailing 12-month period ending March 31, 2025. To date, British Columbia, Ontario, and Quebec have executed listing agreements to reimburse Tricondo in those provinces following a positive PCPA decision in November of 24. Xfinity unit demand in the United States increased by 1% over the trailing 12-month period ending March 31st, 25. We expect that the unit demand will remain relatively stable, with only slight continued decreases in the near term. RuPaul unit demand in Canada increased by 14% over the trailing 12-month period ending March 31st, 25. Rupal's market exclusivity, granted by Health Canada, expired in January 25. Rupal has now begun to face generic competition in Canada, and we have initiated a strategy to support the product in this context. Presuvo unit demand in the United States and Mediject unit demand in Canada both remain strong during fiscal Q4-25, although the factors we have discussed in the past continue to affect product-level revenue. I will now turn the call over to Brendan, who will discuss our financial results in more detail.

Thank you, Ken. We are thrilled to be posting record adjusted EBITDA and record net income for fiscal year 2025 as we continue to realize the benefits from our ongoing financial discipline efforts and streamlined capital structure. Net revenue for fiscal Q4 2025 was $24.8 million, a decrease of $1.2 million compared to $26 million for the same period last year. Net revenue for the full year was $108.3 million, a $4.8 million decrease compared to $113.1 million for fiscal year 2024. The decrease in fourth quarter revenue is primarily due to the timing of customer buying patterns of Xenity, which we previously disclosed as having a $2 million beneficial impact in fiscal Q3 2025 and has had a proportionately negative impact in fiscal Q4 2025. This was offset by $0.6 million in revenue from Graphapex realized during fiscal Q4 2025. Gross profit was $12.4 million and $56.6 million for the three and 12-month periods ending March 25 compared to gross profit of $13.3 million and $59.5 million for the same periods in the previous year. Gross margin was 50.2 and 52.2% for the 3 and 12 month periods ending March 25, which are comparable to the 51.2 and 52.6% for the same periods in the previous year. Selling general and administrative expenses were 12.2M and 43.2M dollars for the 3 and 12 month periods ending March 25. compared to $10.4 million and $44.9 million for the same periods in the previous year. As Ken mentioned, we have begun making more significant investments in personnel and infrastructure for the commercialization of GRAPHIPEX, which are reflected in those SG&A expenses. These investments totaled $2.7 million and $5.2 million for the three and 12-month periods ending March 25 and are expected to stabilize at around $3 to $4 million for fiscal Q1 2026 and then around $4 million per quarter thereafter. Adjusted EBITDA for the 3- and 12-month periods ending March 31, 2025, was $2.3 million and $20.2 million, compared to $4.4 million and $19.5 million for the 3- and 12-month periods in the prior year. The $2.1 million decrease in quarterly adjusted EBITDA was primarily due to the $2.7 million of GRAPHIPEX personnel and infrastructure investments discussed earlier. Net income for the three and 12 month periods ended March 31st, 25 was negative 0.6 million and positive $2.2 million compared to net income of positive 0.8 million and negative 0.2 million for the same periods last year. Cash on hand of $24 million at March 31st, 2025 compared to 8.4 million at December 31st, 2024 and $5.3 million at March 31, 2024. The primary factor in this net increase in cash was Medex's completion of a public offering of common shares in January 2025. We continue to generate cash from our operating activities with operating cash flow of $2.3 million and $24 million for the three and 12-month periods ending March 25, compared to $1.6 million and $18.7 million for the three and 12-month periods in the prior year. As of March 31, 2025, we had a combined $37.6 million outstanding under our two BMO credit facilities, which consists of $3.5 million drawn under our revolving credit facility and the remainder outstanding under our term loan facility. In fiscal Q1, 2026, we entered into amendments with BMO allowing for partial principal repayments and adjustments under our term and revolving credit facilities, as well as adjustments to the interest rate and financial covenants. These actions lowered our quarterly principal payments from $3.3 million per quarter to $1.1 million per quarter and meaningfully reduces our interest expense. Looking forward to fiscal year 2026, we are in a great position to support our growth strategy while funding with cash on hand the $15 million remaining regulatory milestone that is payable under our Graphapex agreement, particularly given the favorable payment terms we negotiated in the Fourth Amendment we announced in December 2024. As always, there can be variability in quarter-to-quarter results, but we look forward to continuing to build the company and its portfolio in the coming quarters and beyond. Operator, we will now open the call to analyst questions.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Andre Uden with Research Capital.

Thanks, operator. Hi, Ken and Brendan. Just looking at the initial launch of graph effects, it looks decent so far. Can you discuss some of the physician feedback that you've received so far, and has there been any pushback relative to using busulfan? Thanks.

Thanks, Andre. Yeah, so the physician-level feedback to date has been very positive. The initial uses that we saw in Q1 were primarily pediatric patients, which was expected. That's where there is the greatest need for Grafopex. And now that formulary inclusions are happening. We're beginning to see the adult patients as well, which is also expected. I would say that, you know, as expected, you know, triosulfan is a significant advancement in this space where there's been little advancement over decades, and so there's keen interest in the drug, and I think we're experiencing that with the uptake and the revenue that's beginning to be generated.

That's great. And so, can you also just, looking at your business development pipeline, in terms of progression, do you have anything that you think could possibly fill in for Gliolin and Turbinefine? Or is the sole focus right now the Graphopex launch?

Yeah, by far, Graphopex is the you know, best opportunity we have in front of us. I mean, it's potential of over $100 million in revenue when the two products that you referenced, you know, had no chance of, you know, being anywhere close to that and have, you know, a margin profile that's not nearly as good as Grapple Packs. You know, the margin profile on Glee Relief, you know, which we gave back last quarter, it was 50%. whereas Graphapex is 80%, and as we mentioned in the comments here today, it's coming in above that. So, no, absolutely, the focus is and ought to be on Graphapex and the rest of our base business, which is obviously performing very well.

Thanks, Ken.

Your next question for today is from Michael Freeman with Raymond James.

Hey, good morning, Ken and Brendan. Congratulations on this strong early launch. This is really encouraging. These are encouraging numbers. I wonder if we could talk a little bit more about the launch. If you could, as much as you can, share the ordering patterns that you're seeing now, like perhaps rates of reordering. And another question related to coverage is, You mentioned that there are 15 payers that are now covering the drug under prior authorization. What will it take, what generally does it take to move payers like that from prior auth to full indirect coverage?

Yeah, thanks Michael, two good questions. So let's start with the ordering patterns. Ordering patterns are kind of as we expected. As you know, we launched this drug in Canada some years ago, and, you know, we saw pediatric patients being the first. That's where there is the greatest need for many reasons. And then adults follow. And so that is what we're seeing. So the first couple of months, you know, remember, we're still first quarter, really, of launching this drug. So first couple months largely was pediatric patients on prior authorizations because there was great need. Now we're seeing adult hospitals ordering as they include it on their P&T committee. And so those are obviously bigger volume patients and bigger volume hospitals typically. So we're seeing strong sales come out of those hospitals that are adding it to the P&T committee. And so we would expect that trend to continue, more adults as we go forward. because, you know, now we're seeing P&T decisions being made. You know, it takes, you know, one to six months to get a decision from a P&T committee within an institution. So, you know, we would expect significant numbers of those happening, you know, in the coming weeks and months. And so we would expect to see, you know, revenue continue to accelerate as we go through that. With respect to the prior authorizations, their 15 have it on their prior authorization list. That just facilitates and enables these one-offs. Clearly, we are talking to all of them and working at having it listed as a fully paid benefit. That just takes time. I think really the PA listing is really just a matter of facilitating what can be a cumbersome process. And then as we go forward, you know, a full listing just makes access that much easier.

Excellent. Thanks, Ken. On the ordering patterns, you suggested that, or I guess you mentioned in the press release, that 34 of 180 transplant centers have already ordered Graphoped. do you have the numbers on the number of centers that have reordered the drug?

We do. I don't have them off the top of my head, but it is significant. So most of the orders, each month, the number of orders have accelerated. And therefore, we are seeing more and more reorders also. So It seems to be that a hospital that places a first order tends to accelerate their order pattern as we go forward.

Okay, thank you. And then just briefly on Xcinity, I wonder if you could speak to your view on the durability of Xcinity sales. You guys have done very well on improving the cogs. for this drug and this, you know, appears to be looking more durable than we had originally expected. I wonder if you could just provide an outlook there.

Yeah, I think you're right. You know, we've been cautious with Xfinity because we've seen some ups and downs over the quarter, quarters. And now we're seeing, you know, good, durable demand, which obviously is the key driver for the drug. And, you know, it's, plus or minus a percent or two quarter to quarter. So it has been quite steady and durable. The pediatric indication, I think, has helped to some degree. So that's been good news. And, you know, I think just going forward, yeah, we just see a steady kind of durable product for us. And, you know, the team has done a great job, even with fewer resources. You know, they continue to do a really good job.

All right. Thanks very much. I'll pass it on now.

Your next question for today is from David Martin with Bloomberg.

Good morning. First question, for the payers that require prior authorization, what are the conditions that must be met for the reimbursement of the drug and how quickly are the authorizations being turned around?

Good question. So we're not seeing any limitations and so no limitation of dose. Some of the full listings have stuck to the label, which was fully expected. But the prior authorizations, we're not seeing any real limitations. Price is not being an issue. So they're happening relatively quickly. I do recall most of these are with pediatric patients where there's a great need.

You mentioned price. Are you getting a full wholesale acquisition cost or are there adjustments to net price?

Yeah, that's a great question. So price is coming in above expectations. So we had expected a certain gross to net and we're actually doing significantly better than expectation.

Okay. And then lastly, are you tracking performance at the call point level For instance, how many doctors and treatment centers have been called on and what percent of them are using Grafipex or have said they will? And if they do start using it, say, for pediatric patients, initially, is it all pediatric patients or a subset of them? And how do they decide which ones they will treat or won't treat?

Yeah, great question. So the REACH, first question I think was REACH. It's been excellent. We have access to these hospitals has been very good, which was expected. This is an innovative product and they do want to know about it and have access to it. So access has been really quite good. Your second question, just remind me, please.

So, you know, how many centers and how many doctors have you called on and what percent of them are using Graphopex or have said they will?

Yeah, so the number of called on, remember there's 180 transplant centers. 70 of them do 80% of the transplants. And so we've reached, I think it's something like 134 of the 180. So obviously it's a very high percentage of the 70 that do most of these transplants. So we have access to most of them. there are a large number of hospitals that have got it under P&T review. So that review has started, and the number that we just released today are the ones that have finished with a positive decision. I don't believe we've had any that have been negative. So it's being added to formularies as we go forward.

And then will they... pick and choose patients who they treat with it, or will it be all patients? How do you see that?

Yeah, we expect to get a share of patients. And so I think we've said historically that our share in Canada of pediatric patients is currently about 60%, 6-0. And we would expect that our share of adult patients should end up being 25% to 35%. So that's kind of the number. And so, yes, they will stratify the patients based on their condition and their comorbidity index primarily. And, you know, there are some patients that can tolerate busulfan. So I wouldn't be surprised to see busulfan continue to be used in certain patients. There are other patients that cannot. And therefore, triosulfan fills a very important void.

And you can determine before you give the patient either of the drugs, whether they can tolerate it just based on comorbidities?

Yeah, correct. So the, you know, the pivotal study and other studies that have been done since, you know, looked at comorbidity index of these patients. Remember, these are, obviously these are quite ill patients. They have leukemia in most cases and they also have other conditions. And so, If their comorbidity index is high, that means that their organs may not be able to tolerate a more toxic conditioning agent like busulfan. Therefore, there's a need for a less toxic but equally effective drug like triosulfan. It's expected that those patients would do better

on the reduced toxicity condition agent which is triosulfan got it thanks that's helpful your next question is from scott henry with adp thank you and good morning uh i guess just for starters you know two and a half billion in first quarter Twenty six is an impressive number. I just want to make sure I'm thinking about this right. That would seem to imply a 10 million run rate already. And assuming sequential growth quarter over quarter, an even better number than that for 2026. Just in general, you know, is that the right way to think about how this launch is progressing?

Yeah, thanks, Scott. Exactly. I mean, that is how we're beginning to think about it, that the run rate is faster than we had anticipated. And so, yes, as we go forward, we would expect acceleration of the revenue due to better access by P&T committee approvals. And so, yes, if you just straight line where we are today, Yeah, we do 10 million in this year. But clearly, we, you know, we're in the very early stages of a launch. And so you would expect that each quarter will be sequentially better. That's why we're, you know, we've stated at the very beginning that, you know, we would think by our fiscal Q4, triosulfan or graphopex in the US will be accretive. And we still very strongly believe that. Clearly, you can see the trend is very positive in that regard.

Okay, great. Well, congratulations on that. That's an impressive start. When I look at some of the metrics you give, 34 of 180 transplant centers, how would you expect that to increase through the year? And, you know, at peak, would you expect to be in almost every transplant center? Just trying to get an idea of You know, is that a metric you'll give us on a regular basis and how we should expect to see that grow?

Yeah, so the metrics we put out today, we expect to repeat until they're no longer relevant. So we will continue to update on those metrics. The number of hospitals ordering, obviously, is really important. We've shown, you know, total number of total hospitals that do transplants. The really important ones, obviously, are the top 70 hospitals. where we, you know, obviously have a better percentage of those hospitals who are already ordering. And so we'll keep putting that data out because I think that really will, you know, give an indication of the uptake of the drug and how the future ought to unfold. You know, and I think in our view, it's still very early going. So we feel really good about this fiscal year and the uptake for graphapaxin versus expectations. It also gives us a good and high degree of confidence, you know, in the peak sales target and that, you know, it's launching the way we had expected, if not better. And therefore, you know, we feel confident that, you know, eventually it will become, you know, a really important standard of care in the U.S. as it has in every other territory where it's been launched.

Okay, great. And just the MEDAC agreement, are those terms final? I know there was some... question about a couple of the terms.

Yeah, correct. So we've always been guiding that we thought that the label earned them the $15 million milestone payment, and they have now agreed with that. And so we are in the process of making those payments over the schedule that Brendan described.

Okay, great. Final question, just on some of the other base franchises. Resuvo and Xenity in the U.S. and then RuPaul. My expectations for 2026 are slight declines in those franchises, maybe 5% to 10%. Is that the right way to think about those kind of base franchises or anything that perhaps I should be factoring in? Thank you.

Yeah, no, I think that's the right way to think about them. We consider those franchises as mature at this stage, so they're getting some support, but we're not attempting to grow them aggressively. We're looking to defend them and maintain them. So, yeah, flat to slightly declining, I think, is the way to think about them. Obviously, we pointed out the generic competition has arrived for Rupel, so the team is working hard. to defend our position, and they're doing a good job of that. And we are seeing the molecule continue to grow. So the molecule keeps growing, but our share, obviously, we're going to start to split it with the genera.

Okay, great. Thank you for taking the questions.

Your next question is a follow-up question from David Martin. David, your line is live.

Yeah, just a quick one. The 0.6 million... Excuse me, the 0.6 million in Q4 and the 2.5 in Q1, does that reflect use of the drug at the patient level or is any of that inventory built?

Yeah, David, both. So the 0.6 and all those numbers are X factory. So those aren't demand numbers that we gave you. They're X factory numbers. So the 0.6, yes, was the pipeline load. Uh, but it also, there were two orders in that, in that quarter. So, uh, they pulled through the inventory quite quickly. Um, and then the 2.5, again, it's, it's, it's, um, ex factory. Uh, but we are seeing that, uh, demand and ex factory are tracking, uh, very nicely together. So there's, uh, there's no, no kind of a load, uh, in, in the channel.

Okay, great. And then I do have one other one related to the last question you had. Five to 10% declines, including for RuPaul, with generics hitting the market, usually wouldn't you expect a much greater decline in that situation? And if not, what are the steps that are being taken to defend it?

Yeah, typically, you know, in this generic situation, we only have private reimbursement. So that actually benefits us in this situation because there's not as many forced substitution situations. So there is no strong push to substitute brand with generic. The other factor I think here is that the pricing isn't that different between brand and generic. The discount is not great. So there's not a strong financial drive to do that. And therefore, our commercial effort is to continue to support the product and grow the molecule. And we still get a pretty strong share of the molecule and thus far that That strategy has worked.

Great. Thanks.

We have reached the end of the question and answer session, and I will now turn the call over to Ken for closing remarks.

Just want to thank everyone for joining us on the call today. We look forward to building upon and advancing Graphapex over the coming months and quarters and continue to deliver strong performance as we look forward to in 2026 and beyond. Thanks very much for joining us.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.