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spk01: Thank you for standing by. This is the conference operator. Welcome to MedNow's Q1 2022 Financial Results and Corporate Update Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. Should you need assistance during the conference call, you may signal and operate it by pressing star and zero. I would now like to turn the conference over to Lucy Chotilian, Head of Investor Relations at MedNow. Lucy, please go ahead.
spk00: Thank you, operator, and welcome everyone to MedNow's first quarter 2021 financial results and near-end update conference call. Thank you for your time in attending, and we appreciate your interest. We will start today's call off with a company overview from our chief executive officer and co-founder, Kareem Nassar, who will then provide commentary on partnership strategies and outlook. Ben Ferdinand, MedNow's chief financial officer, will recap the company's first quarter financial results and our M&A landscape. This morning, MedNow released its audited financial statements and its management discussion and analysis, which is available on CDAR on the investor section of our website at mednow.ca and in our press release issued this morning, December 22nd at 7 a.m. All comments made on today's call should be taken with reference to and are qualified in their entirety by those documents. Please note that this call contains forward-looking statements or information and reflects the company's current expectations, estimates, projections, assumptions, and beliefs about future events and financial trends that they believe may affect the company's financial condition, result of operations, business strategy, and financial needs. By their nature, forward-looking statements involve known and unknown risk, uncertainties and other factors that may cause our actual results, performance or achievements or other future events to be materially different from any future events, performance or achievements expressed or implied by such forward-looking statements. With all that being said, it is now my pleasure to turn the call over to our CEO and co-founder, Kareem Nassar. Kareem, go ahead.
spk03: Thank you, Lucy, and thanks everyone for joining us today. It's exciting to see how far we've come over the last nine months since becoming a public company. I'll first start with commentary about what the industry is that we're in. There were a significant number of positive tailwinds for MedNow based on the macroeconomic landscape. The Canadian healthcare industry is a $264 billion Canadian industry. With our digital pharmacies and insulator services, the industry is not only attractive, but ripe for disruptions. In 2020, there was a 64% increase in demand for virtual care and consumer trends for on-demand pharmacy aligned with virtual healthcare and pharmacy solutions. The pandemic fueled the acceleration of the growing trend of accessing pharmacists and prescriptions virtually. According to a new report by Grandview Research Inc., the global e-pharmacy market has an expected compound annual growth rate of approximately 18.5% between 2021 and 2028. We believe MedNow is well positioned to take advantage of this situation. MedNow's vision is to connect all people residing in Canada with amazing care to help them live their healthiest lives. Our mission is to lead the digital health evolution, combining our people-first approach in a growing industry. We believe we're well on our way to make this possible. MedNow has positioned itself to be a leader in the virtual pharmacy space, providing great service to Canadians. Some competitive advantages include Further expansion of MedNow's service area expected in 2022. Management's extensive knowledge and expertise of pharmacy supply chain logistics, economics, operations, and regulatory requirements. And finally, our holistic approach to healthcare, which includes mental health assessments, genetic testing, and nutrition support. On the M&A front, MedNow has made two strategic acquisitions. and has a purchase agreement to acquire a third over the last few months. MedVisit enhances our doctor services by adding at-home visits to our telemedicine services for those patients with complex needs. Secondly, InfuserCare Canada provides services and can fill prescriptions to our patients that the average pharmacy is not qualified to provide and doesn't have the specialized equipment and storage necessary. MedNow has also signed an agreement to purchase liver specialty group, which also can fill prescriptions to our patients that average pharmacies are not qualified to provide. The combined revenue of these companies in their last fiscal year was an aggregate of approximately $33.6 million Canadian and an aggregate gross profit of $3.3 million Canadian. MedNow is currently positioned to grow in a high barrier to entry industry. When we think about MedNow's growth, we split it into two phases. Number one, the ignition phase for calendar year 2021, and in 2022, it will be the growth phase. In calendar 2021 ignition phase, we focus on building our digital infrastructure, acquiring pharmacy licenses, and building logistics with the goal of servicing Canadians nationwide, and building our patient acquisition engine. In 2022, we will pivot to the growth phase, which we expect will include scaling the patient acquisition engine in both business-to-consumer and business-to-business divisions, growing our organic revenue and also lowering our customer acquisition costs along the way. In the calendar year Q1 2021, MedNow listed on the TSX Venture Exchange on March 9th after an oversubscribed IPO raising $37 million. Since then, MedNow has achieved many important milestones which will lead the company towards its ultimate goal of providing amazing care through digital pharmacy with a holistic approach to every person living in Canada. In July 2021, MedNow received confirmation from the Depository Trust Company that its common shares became eligible for electronic trading through DTC in the United States on the OTCQB under the ticker MDNWF. This electronic method of cleaning securities speeds up the receipt of stock and cash, thus accelerating the settlement process for investors and brokers, enables MedNow stock to be traded over a much wider selection of brokerage funds. With DDC eligibility, we have increased the pool of investors that are able to join us in our quest to reimagine the way healthcare is delivered. MedNow has also created an institutional services business called MedNow for Business. Building a successful institutional business is critical to executing our long-term strategy. MedNow for Business allows us to add large groups of patients to our platform, lowering MedNow's cost of customer acquisition and accelerating our revenue growth. MedNow actively continues efforts to target large institutional contracts, such as the recently signed agreement with the Police Pensioners Association of Ontario and Sterling Capital Brokers Ltd. These large contracts are expected to result in a lower cost of customer acquisition than traditional retail consumers. In September 2021, MedNow launched its virtual care service, a proprietary platform providing virtual care and telemedicine services, facilitated through the MedNow web application and mobile application. MedNow Virtual Care combined with the acquisition of MedVisit, an at-home doctor services business, created our doctor services business. Doctor services is currently available in the province of Ontario, and MedNow expects to further expand its coverage across Canada in calendar year 2022. Additionally, in September, MedNow received regulatory approvals from the Nova Scotia College of Pharmacists and opened for business under the trade name MedNow Pharmacy. The pharmacy services the province of Nova Scotia and can fill orders from walk-in patients such as as well as online organ spondymy. MedNow Pharmacy provides same-day delivery services in Halifax and surrounding areas. I'll now turn my update to MedNow's strategic partnerships that we entered over the last few months. Life support. In July 2021, MedNow invested $500,000 for a 9% equity interest in life support and mental health and increased its investment to 12.3% as of October 31st, 2021. Life Support Mental Health is a medical technology company focused on bridging the gap between medical and mental health professionals through clinical support in the assessment and triage of mental health issues. Mental health services are a logical extension of MedNow's platform and are a step forward toward providing mental health solutions to our client base. Our investment will act as a catalyst to further develop its mental health check platform enhancing service offering and driving revenue growth. In November, Life Support entered a partnership with a major community pharmacy chain to provide its clients across the Life Support mental health check, reinforcing MedNow's position that offering holistic services provides greater avenues to assist patients. MedNow participated in two more partnerships in November. True Diagnostics. The first partnership was on November 12th, in which MedNow acquired the license and exclusive distribution rights of True Diagnostic for a two-year term and a cash payment of $150,000 USD in order to expand our holistic care offerings on our digital platform. This will enhance MedNow's strategy to develop a digital interdisciplinary model of care, having the exclusive distribution rights of True Diagnostic, In Canada, we'll enhance MedNow's approach to provide a full-spectrum healthcare ecosystem as we continue to build a holistic approach to patient care. True diagnostic, true age, complete collection is a comprehensive way for a patient to analyze biomarkers to quantify the process of aging. Aging is the number one risk factor for most chronic diseases and death, and with the ability to quantify this process, individuals can potentially predict future diseases and treat aging as a primary objective factor. In the first quarter of 2022, it is anticipated that MedNow's patients will be able to order tests on its website, have the blood specimen taken, and ship back to the lab for testing and diagnosis. This agreement between MedNow and True Diagnostic aligns with MedNow's approach to provide a wide array of services on our easy-to-use MedNow digital platform. We'll continually endeavor unique pharmacy and healthcare solutions as part of our patient-centric approach. We recognize Canadians are expanding their initiatives when it comes to preventative medicine, and by acquiring the exclusive distribution rights to treat agnostic, we can deliver a solution for epigenetic testing for patients to live their health-based lives. And finally, DoCo Medical, the second partnership took place on November 24th, when MedNow closed a $500,000 CAD investment in DoCo Medical Inc. by way of convertible debentures. If the convertible venture is converted equity, this would equate to a 2.8% equity interest at a 17.5 CAD million per money valuation, pre-money valuation, excuse me. DoCo Medical is a virtual healthcare provider operating across the United States, currently servicing 38 states. DoCo Medical has over 100 physicians and healthcare workers engaged over its platform, which specializes in urgent care, mental health, and erectile dysfunction. DOCO Medical's platform is used daily by physicians and patients. Patients can order prescriptions and send them directly to the pharmacy of their choice, resulting in a hassle-free patient experience. Mendel's initial investment in DOCO Medical aligns with our goals of investing in the provision of exceptional quality service and discreet, fast, and convenient support to patients through digital pharmacies. Further, given the sensitive and underserviced market to support patients with erectile dysfunction, Coupled with a lack of insurance coverage in the United States, we believe this investment will show our commitment to the importance of men's health and wellness. It also serves as a platform for MedNow to access the U.S. telemedicine market, which is worth approximately $64 billion USD. To complete this call, I'll now turn it over to Ben to discuss our M&A and first quarter results. Ben?
spk02: Thanks, Kareem. I will discuss the Q1 quarterly results for the three-month period ended October 31, 2021, highlight key strategic acquisitions, discuss M&A strategy and valuation relative to peers. And I'll discuss MedNow's Q1 2021 results. We are very excited about the progress of our business. Quarterly revenue increased year-over-year by over 13.5 times and quarter-over-quarter by over 4.5 times. We are very happy with our growth trajectory. The movement in revenue and expenses are as follows. Revenue increased by $529,000 to $570,000 during the three months ended October 31, 2021, primarily driven by $433,000 of revenue from the company's doctor services, including virtual care, telemedicine services, and doctor home visits. under the MedVisit business. MedVisit was acquired on August 5, 2021, and sales from the date of acquisition to October 31, 2021 were recorded in the statement of loss and comprehensive gain. The company also generated $120,000 of revenue from its technology and marketing support services pursuant to the pharmacy agreement. In the prior year, the company generated approximately $41,000 of revenue pursuant to the pharmacy agreement. The company did not offer doctor services in the prior year. Now we'll talk a little bit about the cost. The cost of sales increased by $309,000 during the three months ended October 31, 2021, driven primarily by $286,000 of consulting fees paid for doctor services and $22,000 of the cost of goods sold at company-owned retail pharmacies. The company started offering doctor services during the period ended October 31st, 2021, and this line of business was not operating in the prior year. The company has entered into consulting agreements with doctors to pay doctors a fixed percentage of gross billings based on each doctor and patient consultation. Next, I'll talk about marketing and sales expenses. Marketing and sales expenses increased by approximately $394,000 to $491,000 during the three months ended October 31, 2021, as the company continued to focus on core branding and online marketing activities to acquire patients and users of MedNow's web and mobile application, as well as its doctor services. General and administrative expenses increased by $2.5 million to $2.97 million during the three months ended October 31, 2021. The increase in expenses is primarily related to the acquisition costs for the company's completed and pending acquisitions, investor relations, legal, professional fees, and other public company costs, and increased expenses as it relates to increased headcount. The share-based compensation expense of $1.1 million was also expensed in connection with the company's stock option plan as compared to zero in the previous year. The total loss for the three-month end of October 31, 2021 was $4.4 million compared to a loss of $509,000 for the three-month end of October 31, 2020. Next, I will discuss merger and acquisition highlights. I'll start with MedVisit. On August 5th, MedNow acquired MedVisit, a business that provides in-home doctor and patient consultations in Ontario for $1.32 million in cash. In the latest fiscal year, MedVisit earned revenue of approximately $3 million and gross profit of approximately $790,000. Patients that are unable to leave their home rely on over 100 doctors in the MedVisit network for the treatment of acute and episodic illness and injury. In the last fiscal year, MedVisit doctors made approximately 30,000 patient home visits and has had over 400,000 patients serviced since inception. MedVisit generated revenue of $426,000 for MedNow during Q1 2022. Through the MedVisit patient network, MedNow is well positioned to offer a full platform of services to a large subset of patients that can benefit greatly from a full suite of digital healthcare and digital services. Combined with our virtual care business, we can now send a physician to a patient's home when a virtual visit is not adequate to meet the patient needs in the GTA. Our fully digital pharmacy, unique medication adherence solutions, and telemedicine offering are ideal complements for MedVisit's client base that have limitations on mobility. The MedVisit acquisition also highlights our continuing approach to accelerating our strategy through both organic development and mergers and acquisitions. Next, I'll talk about Infusicare. On December 10th, MedNow completed the acquisition of Infusicare Canada, a London, Ontario-based retail specialty pharmacy for an aggregate cash payment of approximately $1.85 million. In its latest fiscal year, Infusicare generated approximately $9.3 million in revenue and $400,000 in gross profit from selling prescription medication and support services to its patients. This acquisition is expected to bolster MedNow's expertise in biologic drugs the fastest growing class of drugs in the pharmaceutical industry. It will also allow MedNow to offer same day delivery in London, Ontario and the surrounding areas. Infusicare's wholly owned subsidiary is a specialty pharmacy based in London, Ontario operating out of the ARVA clinic. The ARVA clinic offers comprehensive support for patients receiving biologic drugs for rheumatoid arthritis and other specialty medications in addition to regular pharmacy services. The ARVA clinic team is composed of a group of well-respected healthcare professionals, including board-certified specialists, physicians, advanced practice allied health professionals, specialty trained nurses, and pharmacists. This acquisition is right in our wheelhouse and is expected to leverage MedNow's expertise in pharmacy. Upon the expected closing and integration of Impusicare's operations, The ARVA clinic's patient base is expected to benefit from MedNow's digital customer service infrastructure. MedNow is also acquiring a company with proven revenue, which is expected to help MedNow add additional specialty pharmacy services and expand its logical infrastructure in the southwestern Ontario region with its wide range of digital healthcare services. About one in every hundred adults in Canada has rheumatoid arthritis, or approximately 300,000 Canadians. While there is no cure for rheumatoid arthritis, early treatment through biologic drugs can avoid pain and damage to their joints. The high cost of biologic drugs, with treatment costs ranging from thousands to tens of thousands of dollars per year per patient, as well as their continued growth and usage, have contributed to a significant increase in pharmaceutical expenditure. There's been a significant shift in pharmaceutical sales towards biologic drugs over the last decade. Whereas only one biologic drug made the list of the top 10 selling patented pharmaceutical products in 2006, biologic drugs accounted for seven products in this list in 2017, representing 42% of patented medicine sales in Canada. Next, I'll talk about liver care. Yesterday, December 20th, MedNow entered into a share purchase agreement with LiverCare Canada and London PharmaCare, which we will refer to as Liver Specialty Group, for an aggregate initial cash payment of $650,000. In its last fiscal year, Liver Specialty Group generated approximately $21.3 million in revenue and $2.1 million in gross profits from selling prescription medications and diagnostic services to its patients. A successful acquisition of liver specialty group is expected to expand MedNow's offering of specialty pharmacy and clinical services in addition to those now offered by Infusicare. Liver Care Canada services over 20,000 patient visits per year virtually and in person and boasts a history of treating over 5,000 hepatitis C patients with curative treatments. Liver Specialty Group provides a holistic approach to liver disease management, starting with early detection and diagnostic services to detect access to treatments and supportive therapies such as weight loss and nutrition counseling. Liver Specialty Group's patient care team serves as a patient care concierge, connecting patients to care based on individual needs and care plans. Its mobile clinics also travel across Canada to help patients with liver diseases. The specialty group's patient base is expected to benefit from MedNow's diverse product and service offerings and holistic approach to healthcare, which complements LiverCare Group's holistic approach to liver disease management and digital customer service infrastructure, providing same-day delivery services to London, Ontario and the surrounding areas. The transaction is expected to expand MedNow's expertise into hepatology drugs and liver disease management. The recent acquisition of Infusicare Canada, also located in London, Ontario, offers immediate synergies to MedNow specialized assets, which now include rheumatology and hepatology. The combination of liver specialty group, Infusicare, and MedVisit's aggregate revenue in their last fiscal years was approximately $33.6 million in revenue and $3.3 million in gross profits. Now we'll talk a little bit about our acquisition strategy. MedNow's acquisition strategy is tightly focused on a disciplined allocation of capital with acquisition targets only accelerating our core strategy. Lastly, I wanted to leave you with some thoughts on our relative valuation. As per our latest investor presentation located on the MedNow website, we feel MedNow is trading at a large discount to its peers. the average 12-month trailing revenue multiple of select peers is 5.6 times. This compares to MedNow's multiple of approximately 0.6 times, assuming the successful acquisition of Liberty Specialty Group based on MedNow's current market capitalization and the 12-month trailing revenue from the fiscal year ends of Liver Specialty Group and Fusicare and MedVisit acquisitions. In addition to the strong revenue profile, We are very well capitalized with the cash balance of $23 million and no debt on the balance sheet as of October 31st, 2021. Next, I wanted to talk a little bit about what we're seeing in the next 12 months. During the next 12 months, the company is on course to build and open pharmacies in the provinces of Manitoba, Alberta, and Quebec, in addition to our presence in BC and Ontario and Nova Scotia. MedNow expects to own and operate licensed pharmacy fulfillment centers in these provinces across Canada. This will allow the company to further develop its brand presence and expand our patient care. In summary, MedNow is positioned to grow and implement our strategic plan to be a leader in the digital pharmacy market. We have acquired strategic assets and demonstrated our ability to grow revenue over the past year. We are excited for our continued execution to bring high-class service to every person living in Canada. Operator, back to you.
spk01: Thank you, Ben. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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