Medexus Pharmaceuticals Inc.

Good morning, everyone, and welcome to the MedExus Pharmaceuticals First Quarter 2026 Conference Call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Victoria Rutherford, Investor Relations. Victoria, the floor is yours.

Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals' first fiscal quarter 2026 earnings call. On the call this morning are Ken John-Tremont, 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- 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, this 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, please refer to the company's MD&A, which, along with the financial statements, is available on the company's website at www.medexis.com and on Cedar Plus at www.cedarplus.ca. As a reminder, Medexus reports on March 31st fiscal year basis. Medexus 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 this call today. We are now over five months into the commercial launch of Graphapex, With fiscal Q1 26 being the first full quarter, we are recognizing product level net revenue from Grapepex in our total net revenues. We are extremely pleased with the progress we have achieved thus far. As of June 30th, nine large commercial pairs and 14 individual healthcare institutions have made positive formulary inclusion determinations and an additional 29 commercial payers have added Graphopex to their prior authorization list. Wholesaler data as of June 30th shows that 36 of 180 transplant centers representing an estimated 24% of total alloHSCT procedures performed in the United States annually have already ordered Graphopex. Earlier this month, we also secured approval from the Centers for Medicare and Medicaid Services, a new technology add-on payment, or NTAP. Reimbursement of Graphopex for CMS is fiscal 2026. Starting October 1st, 2025, eligible patients can receive up to $21,411 of additional NTAP reimbursement under Medicare. The initial adoption by major commercial payers and leading healthcare institutions has been highly encouraging, and early indicators of patient-level demand continue to validate the value proposition GRAPHIPEX delivers. To that end, product-level net revenue from GRAPHIPEX in fiscal Q126 totaled $3 million, relative to $3 million of GRAPHIPEX personnel and infrastructure investments. We anticipate that Graphopex will begin contributing positively to quarterly operating cash flows by fourth quarter 2025, which is our fiscal Q3 26, reinforcing its potential as a meaningful driver of long-term value. We expect that product level net revenue from Graphopex in fiscal Q2 26 will be three to $3.5 million. taking into account wholesaler purchasing patterns and expected summer slowdown in procedures. Overall, our fiscal Q1-26 results remain solid with positive net income, adjusted EBITDA, and operating cash flows. Our results also reflect changes we are seeing in the product lifecycle within our portfolio. The strong initial performance of Graphapex is particularly important as other products in our portfolio shift into the later stages of their product lifecycle. For instance, Rupal's revenues have experienced expected erosion after the loss of its exclusivity period in January 2025. We designed this portfolio approach to ensure Medexis' success over the long term. Our fiscal Q1 26 revenue was $24.6 million, a decrease compared to 27.3 million for the same period last year. Our fiscal Q126 adjusted EBITDA was 3.4 million, a decrease compared to 6.1 million for the same period last year. We continue to produce positive net income with 0.5 million for the quarter, a decrease compared to 2 million for the same period last year, and positive operating income of 0.9 million a decrease compared to $4 million for the same period last year. Turning to our other products, in Canada, unit demand for Tricondo, the brand name for Triosulfan in Canada, grew 38% over the trailing 12-month period ending June 30, 2025. To date, BC, Manitoba, Ontario, and Quebec have executed listing agreements to reimburse Tricondo following a positive PCPA decision in November of 24. Xfinity unit demand in the United States decreased by 1% over the trailing 12-month period ending June 30, 2025. We continue to expect that unit demand will remain relatively stable, with only slight continuing decreases in the near term. Rupel has now shifted to a later stage of its product life cycle, with the loss of the regulatory exclusivity period in January 2025. Ruppel now faces generic competition in Canada as a result. Unit demand over the six-month period ending June 30th has decreased 29% when compared to the corresponding prior year. This pattern is typical of products at this stage. So we anticipate this ship will have put typical, and we have put typical generic defense strategies in place. Pursuant unit demand in the United States and metal jack unit demand in Canada both decreased by 5% in fiscal Q1 26. Factors we have discussed in the past continue to affect product level revenue. In summary, we remain focused on delivering strong overall performance across our portfolio products in both the United States and Canada. Advancing graph effects in the United States and strategically positioning the company to capitalize on future revenue opportunities. I'll now turn the call over to Brendan, who will discuss our financial results in more detail. Brendan? Thank you, Ken.

We are pleased with our results for Q1 2026, which reflect the natural transitional changes of an evolving product portfolio. We are very pleased with the early performance of Graphapex, which, as Ken mentioned, generated $3 million of product-level revenue in our fiscal Q1-26 and is expected to be contributing positively to operating cash flow by the fourth calendar quarter of 2025, which is our fiscal Q3-2026. Turning to the full quarterly results, total net revenue for fiscal Q1-26 was $24.6 million and This represents a decrease of $2.7 million compared to $27.3 million for the same period last year. This $2.7 million year-over-year revenue decrease was attributable in part to reduced net sales of Rupal and Glioland in the United States, or Rupal in Canada, Glioland in the United States, partially offset by product-level net revenue from Grapepex. Gross profit was $13.8 million for Q1-26, compared to $14.8 million for the same period last year. Gross margin was 56.0% for fiscal Q1-26, which is an improvement on the 54.4% we achieved in the same period last year. We expect an increasing amount of product level revenue from Graphapex, together with the absence of product level net revenue from Glioland after fiscal year 25, to have a positive effect on company-level gross margin. These resulting changes in gross margin are expected to continue to emerge over fiscal year 2026. Selling, general, and administrative expenses were $12.2 million for Q1 26 compared to $10.3 million for the same period last year. The $1.9 million year-over-year increase in selling general and administrative expenses was primarily due to the $3 million of Graphopex personnel and infrastructure investments we incurred in fiscal Q1-26. We expect these investments to stabilize at approximately $4 million per quarter, although individual future quarters could exceed this estimate. Adjusted EBITDA was $3.4 million for fiscal Q126, a decrease of $2.7 million compared to $6.1 million for the same period last year. The decrease was early due to the effects of generic competition on product level revenue from Rupal. Net income was $0.5 million for fiscal Q126, a decrease of $1.5 million compared to net income of $2 million for fiscal Q125, Despite the decrease, this marks our fifth consecutive quarter of positive net income, and we look forward to striving for positive net income in the quarters to come. We continue to generate cash from our operating activities, with quarterly operating cash flow of $3.9 million compared to $8.2 million for fiscal Q1-25. Cash on hand of $9.3 million at June 30, 2025, compares to $24 million at March 31, 2025. The primary factor in this net decrease in cash was a payment of $15.5 million under our senior secured credit agreement, substantially reducing our outstanding principal amount and go-forward principal payments, which are now $1.1 million per quarter. As of June 30, 2025, our net debt was $12.6 million, a decrease of $0.6 million compared to $13.2 million as of March 31, 2025. I will conclude with a brief mention of recent tariff announcements. Based on our preliminary assessment, which remains ongoing pending new information, we anticipate a 15% tariff to be applied on branded pharmaceutical products from the EU into the United States. which will apply to our imports of Graphapex and Resubo. We do not currently expect these tariffs to have a material impact on product level performance. As always, there can be variability in quarter to quarter results and the operating environment also remains variable. 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.

Thank you very much. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now. Confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Thank you. Our first question is coming from Andre Udin of Research Capital. Andre, your line is live.

Thanks, operator. Hi, Ken and Brendan. It looks like Graphifex is off to a nice launch. Just looking ahead, you must be eyeing some new product opportunities, and just was wondering, what's the current environment for business development? What does that look like in terms of both prices and opportunities? Thanks.

Yeah, thanks for the question, Andre. I think the environment's quite positive for us in that we've established ourselves As a significant player, we've got a good track record of successful product launches, so we've become an attractive partner for products that might be available. As you well know, the environment to fund some of these things is really challenging, so a company like ours is an attractive option. We definitely are expecting to have some opportunities come into our portfolio. You look at the three therapeutic areas where we participate, We have one already in autoimmune disease that is in our pipeline. We've got one that we think will come into the allergy derm portfolio, and clearly we're working on follow-up products for Grafifex in the transplant area. So, yeah, we would expect that we'll have additional products as we go forward.

And are there any higher margin drugs out there? I know those are usually harder to find. Are there any out there? that you're seeing?

Yeah, I mean, there certainly are. I mean, you just look at graph effects and it's a much better margin than, you know, the rest of our portfolio. So they are out there. It's a challenge to find the right fit. And so clearly, you know, we're very selective as to what we put into our portfolio because what we, you know, put our effort behind and spend money on we want to make sure that it becomes a significant success.

Okay. And can you also discuss how your debt refinancing plans are progressing? And I know that would also tie into future business development. So maybe you could just elaborate a little bit on how that's going.

I'll turn that over to Brendan.

Yeah. Yeah, no, thanks, Andre. So our leverage right now is just a little over one times adjusted EBITDA. I think on a net debt basis, it's well below one. So very reasonable, very comfortable. We don't see any refinancing risk. We are just in the discussions right now with our current lender and some additional partners to just try to find the right facility that will sort of allow us to build on the graph of X growth, but more specifically to your point and what Ken was saying to execute on that BD strategy. So We see those two things as very intertwined, so we're making good progress on that.

That's great. That's it for me.

Thank you very much. Our next question is coming from Michael Freeman of Raymond James. Michael, your line is live.

Hey, good morning, Ken, Brendan, Victoria. Congratulations on a strong quarter. This is a great-looking launch. I wanted to talk about graph specs. I wonder, you provided some good information on your commercial payer coverage and institutional formulary conclusions. I wonder if you could provide us an update on how your conversations have been going, you know, after the quarter, how, you know, how we should expect, I guess, like, coverage total coverage to trend over the next couple of quarters and formulary inclusion and just give us a sense of, I guess, overall traction in that arena?

Yeah, great question, Michael. Thank you. So it's been very positive. You know, as you saw, we put out the number of inclusions that we've already gotten, which was a little bit surprising that it happened so fast. And so those ones, I think we said 14 at the end of the quarter. It's obviously grown since then. And there are many multiples of that that are under formulary review currently. So we would expect that those determinations will end up being positive. We haven't had a negative one yet for any clinical reasons. And so, you know, as those things become positive, we certainly clearly see that those hospitals become significant purchasers of Grapapex following a formulary inclusion. Remember, as we said before, that the early going was a lot of pediatric one-offs because the need in that category is so great. Now, as we're getting formulary approvals in adult hospitals, the volume grows fairly significantly. So you know, we're fairly bullish as we look forward. We think, you know, Grapepex is off to a great launch and is performing, you know, at or beyond our expectations.

Thank you, Ken. And I wonder, with the NTAP reimbursement announcement, I wonder if you could provide any feedback so far from institutions. Like, how should we expect your inclusion in this program and this top-up payment to influence uptake by docs and ultimately sales volumes?

Yeah, it's a great question. So just to remind everyone that an NTAP approval reimbursement is for inpatient. We already have a J-code, which is for outpatient. 85% of these patients are treated inpatient, and the NTAP applies to the Medicare folks, which is, you know, we estimate 20%, 25% of total inpatient business. So it is significant. What it does is it allows the adoption of a new technology over the period of time that the DRG or the case cost will grow. And so it allows hospitals to adopt a new technology much more quickly because they have confidence that they're going to be reimbursed. So obviously it helps for the CMS patients, but also helps for commercial payers because, you know, they see, hey, you know, this product has received NTAP. It must be, you know, available, you know, addition to, treatment and patterns of care. So it's a very positive thing. There were only 13 applications for an NTAP. Only five were approved. We were one of the five. So it's kind of a rare thing, but a very positive thing because it really validates our value proposition and the clinical benefit of our drug.

That's great, and then one last follow-up. I think I know the answer by the amount of the NTAP top-up, but how would you describe how your target pricing for Graphitex is holding in?

Yeah, excellent. We try to pick a price where we would get universal access, and that seems to be working. We also picked the price, you know, at which we would qualify for NTAP. There is a certain floor that you have to be above in order to qualify. Otherwise, you know, why bother? So, you know, it looks like we've picked a really good price that is being borne out. And, you know, as we've said before on these calls, the value that Grapapex brings to the cost of treating these patients is a really positive thing. So having the reimbursement go in place gives the institution even more confidence, you know, as they're looking at our, you know, cost comparisons and the various data that we provide to the P&T committee. So it's a very positive, you know, outcome for us. And so we would expect that, you know, over time, we will, you know, get very broad coverage for graph effects. And obviously that will drive revenues.

Excellent. Thanks. That's all for me. I'll pass along.

Thank you very much. Our next question is coming from Scott Henry of AGP. Scott, your line is live.

Thank you. Good morning and congratulations on the Graphopex launch. I know it's been quite a journey to get to here, so it's good to see it going well for you all. Just one quick follow-up on the NTAP program. is that a 12-month program or is that something that you can renew after a year? Just trying to get a sense of how that works and what the duration of that is.

Yeah, I'll have to check on that for you, Scott. What I have seen so far, it's temporary. I'm not sure if we can renew. I think the intent of it is to cover the drug Well, the DRG catches up, you know, and as you know, you know, that takes 12, 18 months, sometimes 24. And so it's for a specific period of time. I'm not sure if you can renew it, but I will check on that for you.

And what is the specific period of time? Does it go for 12 hours?

Brendan, you chime in if you've got different information, but I think ours is a period of 12 months, 12 or 18 months, something like that. I believe it's 12 months. Okay, great.

Thank you for that clarity. Just taking a step back, in general terms, I wanted to understand how exactly do you define product level revenue? Meaning when is the revenue booked? Is it when the product is purchased by the hospital or is it when it's used by the patient? When does that delivery convert to a sale?

Yeah, our way of recognizing revenue in this case is when it is sold to the wholesaler. So there will often be differences between the pace at which the wholesaler purchases it from us versus when the hospitals will purchase it from the wholesaler. And then there can be further gaps between where the hospital purchases it from the wholesaler and when it's ultimately used in a procedure. But for our purposes, it's from a revenue recognition standpoint, it's when the sale is made to the wholesaler.

Just to add to that, Scott, so when we say demand, what we're referring to is movement from the wholesaler to the hospital. We obviously don't book those sales, but that's what we're referring to as demand. That's our indication of how much is being used in the territory.

Okay, in the $3 to $3.5 million range, that's what you're going to sell into the wholesaler, correct? That's correct. Okay. So my experience with drug launches is the second quarter of the launch often can be flattish if you're selling into the wholesaler because you sell a bolus right away. And then by the third quarter, you start to see the true demand trend as opposed to just wholesaler trends. which should signal faster or accelerating growth after the next quarter. Is that the right way to look at it?

I'll just jump in here, Brendan, and if you've got more, please add. In our case, we've only got one wholesaler with two sites, and so they're not carrying a lot of inventory. Inventory has been building as demand has been building So there's not a big disjoint between ex-factory and patient demand. Obviously, as our volume goes up, the amount of inventory that they'll hold on to will increase because, you know, let's say they hold on to a month of inventory as our revenue is going up, a month becomes a bigger and bigger number. But, yeah, there's not a big disjoint between ex-factory and patient demand.

Okay. Thank you for the color on that. As well, one just clarification, and it's my understanding this to be correct, but I just wanted to clarify. When we talk about a 15% tariff on Graphapex, we're talking about a 15% on the cost of goods sold. I mean, I assume that's or the transfer price, which you delivered in. So, you know, the 15% will be on a much lower number than the end user sales. Is that how we should think about that tariff?

Yes, that's correct. So the 15% that we are anticipating would be applied on the cost of goods as it crosses the border, not on the revenue or anything else.

Okay, great. And final question, you estimate that it looks like about 24% of procedures have already utilized Graphapex or ordered it. or I believe procedures performed, you know, where do you think that number could get to in, say, 12 months? Is that a number where you could get to 80% of the procedures to have access? Or, you know, what is the target? Could you get to 100%? Just trying to get an idea of, you know, how to track that number and, you know, what's a realistic target for it. Thank you.

It's a great question. I probably don't have a great answer. It's all dependent on the speed at which formulary inclusion happens. Remember, 80% of the procedures are done in 70 hospitals, not the 180. That's why we've got a higher percentage of procedures because we're selling more to the top 70 than we are to the smaller hospitals. No, we're not going to get to 100%. I don't see that. But I think we'll get a very significant share of you know, our a hundred million, uh, guidance, uh, that's a 20 or 25%, uh, share of procedures. Um, that's kind of at the low end of the scale, uh, internationally, you know, when you look at what, uh, Tril Solfan has done in Western Europe, uh, in many countries, it's significantly higher than that. It could be as high as 60%. Uh, so, uh, We do expect significant uptake this year, next year, the following year, and then it will start to plateau. We've always said we think peak sales in three to five years, and that certainly seems to be playing out.

Okay, great. Thank you for taking the questions.

Thank you very much. Just a reminder, if there are any remaining questions in the audience, you can join the queue now by pressing star 1 on your phone keypad. Our next question is coming from David Martin of Bloombergton. David, your line is live.

Good morning, Ken and Brendan. This is Gaurish on for David. We had a question just about the Canadian portfolio. Do you feel the full impact of the RuPaul generics have been felt yet? And do you think there's any chance of a rebound on seasonality or stabilization in the Canadian portfolio?

Yeah, great question. it's, it's early going in the repel generic genericization. Um, so yeah, we would expect to be some further erosion. We don't think it's, you know, hit, hit the bottom yet. Um, but what we do see is the molecule continues to grow, which obviously is a very positive thing. Uh, we are holding onto a significant share. So again, really positive thing. Uh, but yeah, I think over time you've got to expect that, uh, Rupel is going to erode, as you would expect with a generic. We're doing everything we can to maintain, as much as possible, various programs to keep people on Rupel rather than generic. In many cases, it's working. We fully expect and we have forecasted that Rupel will erode, but Rupel is our fourth largest product. And, you know, the upside on Graphapex is many multiples of that. So, you know, I think our focus is appropriately, you know, on Graphapex because that's clearly where our opportunity is and then trying to maintain the best we can the rest of the portfolio.

Okay, thanks. And just to follow up on the 15% tariff question, you mentioned or Brendan mentioned that the 15% will be applied to the COGS. Will any of the additional costs be passed on downstream, or is this going to directly impact your gross margins on the product?

Yeah, the impact on the gross margin, because in the case of both Graphopex, which we have called out specifically in this last quarter as having 85% gross margin, so 15%, uh cost of goods roughly and there's some royalties in there as well so the the impact of a 15 tariff is not going to be material um we don't see or expect to have a a tariff specific price increase as a result that's it from us thanks thank you very much well we appear to have reached the end of our question and answer session i will now hand back over to ken for any final comments

I just want to thank everyone for participating in the call today. We're obviously very pleased with the performance this quarter, which underscores the strategic value of our product portfolio approach. The Solve Foundation positions Med-X as well as we enter the next phase of growth driven by the continued rollout of Graphopex. We look forward to the opportunities that are ahead of us in fiscal year 26 and beyond and look forward to keeping you posted in future quarters.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.