Medicure Inc.

Welcome to Medicare's earnings conference call for the quarter ended September 30, 2020. My name is Colin, and I'll be your conference operator for today's call. At this time, all participants are in listen-only mode. Before we proceed, I would like to remind everyone that this presentation contains forward-looking statements related to future results, events, and expectations, which are made pursuant to the safe harbor provisions of the U.S. Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risk and uncertainties, which could cause the company's actual results to differ materially from those in the forward-looking statements. Such risk and uncertainties include, among others, those described in the company's most recent annual information form and Form 20F. Later we will conduct a question and answer session. Please note that this conference call is being recorded and today's date is November 12th, 2020. I would now like to turn the conference over to Dr. Albert Friesen, Chief Executive Officer of Medicare Incorporated. Please go ahead, Dr. Friesen.

Thank you, Colin, and good morning to all on the call. We appreciate your interest and participation in today's call. Joining me today is CFO James Kinley and our Dr. Neil Owens, President and Chief Operating Officer. Net income has stabilized and we experienced a modest but positive EBITDA for the quarter despite the decline in business due to COVID-19. This is good news. A positive change from the losses that had been reported in previous quarters before Q2. Medicare still has a strong balance sheet with over $11 million in cash and no debt. The sales of Agristat were down substantially this quarter because of reduced surgical procedures due to COVID, but we are starting to see some stabilization from a significant dip. The focus of the business has shifted strongly to the Agristat franchise and growing the Zypidemag business. with more directed marketing to patients as well as healthcare providers. The revenue for the quarter was $3.5 million, which is up from the previous quarter of $2.7 million. Agrista was the vast majority of that at $3.4 million. The balance from Zypidemeg and SNP. Medicare has transitioned away from the sales and marketing of the REDS device with the goal of reducing operating expenses while retaining value in the sensible medical investment. As mentioned, the main focus at the present is on the sales and marketing of Agristat and Zypinime, which continues to have great margins and potential. We believe the past two quarters' investments in our programs and new products will provide the growth in revenue and profits for the coming quarters and years. It takes time and persistence to make this a reality. Our shareholders have been patient in the past and we believe the substantial issuer bid was a good way to provide a near-term value as we build an even stronger future. Medicare has a good cardiovascular product portfolio, a track record of growing sales and great team with energy, talent, experience to build a strong growing company. I'd now like to turn the call over to the CFO, James Kinley, to review and provide some colour on the financial results for third quarter 2020.

James Kinley Thank you, Bert, and good morning, everyone. A couple of quick items to note before I start. All dollar figures are in Canadian dollars unless otherwise noted by each presenter. And as a reminder, you can obtain a complete copy of our financial statements for the three and nine months ended September 30th, 2020. along with previous financial statements on the investors page of our website. And a copy of the financial statements and management's discussion and analysis can be obtained from CDAR.com. I will now take you through the key highlights of financial performance for the third quarter ended September 30th, 2020. Total revenues for Q3 2020 were $3.5 million compared to $5.5 million for Q3 of 2019. Net revenues from Agristat for the quarter ended September 30, 2020 totaled $3.4 million, a decrease from net revenues from Agristat for the same quarter of 2019 of $5.3 million, but an increase from Q2 2020 of $2.6 million. The decrease in revenues from Agristat is due to a decrease in procedures performed in the quarter primarily due to COVID-19 as well as higher discounted selling prices of the product due to increased pricing pressures from generic versions of Integralin when compared to Q3 2019. The company earned net revenues from Zipidimeg for Q3 2020 of 105,000 compared to 78,000 from Q3 2019. The company will continue to focus on Zipidimeg and expects revenues to grow through the remainder of 2020 and beyond. There were no revenues recorded from REDS during Q3 2020 compared to 117,000 in the same quarter of 2019. and the company earned $5,000 of revenue from sodium nitroprusside or SMP during Q3 2020. Turning to cost of goods sold, Agristat cost of goods sold for Q3 2020 totaled $733,000 compared to $662,000 for Q2 2019. This resulted in gross margins for the quarter of approximately 79%, a decrease from approximately 88% for the same quarter in the prior year. Zepidemag cost of goods sold for Q3 2020 totaled $625,000 and includes $19,000 related to product sold to customers, $603,000 from amortization of the Zepidemag intangible assets, and $3,000 relating to royalties on the sale of Zepidemag, resulting from the acquisition of the product in September of 2019. Removal of the amortization would result in a strong gross margin from the product of approximately 80%. REDS cost of goods sold for the prior year Q3 2019 totaled $174,000 and pertained to the amortization of the REDS license prior to its impairment recorded over those intangible assets in Q4 of 2019. And additionally, S&P cost of goods sold during the quarter totaled $5,000. Selling expenses totaled $923,000 for Q3 2020, down significantly from $3.3 million for Q3 2019. The reduction in selling expenses when compared to the same quarter in the prior year is due to significant reductions in spending pertaining to travel and conference attendance as a result of COVID-19, as well as cost reductions primarily pertaining to red selling costs, including headcount reductions implemented by the company during 2020. Additionally, during Q3 2020, the company recorded a recovery of salary expenditures of $311,000, through government assistance resulting from the Canadian emergency wage subsidy recorded within selling expenses. General and administrative expenses totaled $1.3 million for Q3 2020, higher than Q3 2019, the G&A costs of $1 million. During Q3 2020, the company recorded a recovery of salary expenditures of $52,000 through government assistance resulting from the Canadian emergency wage subsidy within G&A expenses. This as well as other cost savings were offset by higher legal expenses resulting from the company's defense of a challenge against its patent for Agristat. Research and development expenses for Q3 2020 totaled $737,000 compared to $976,000 for Q3 2019. Timing of various development projects which were underway resulted in this decrease. During Q3 of 2020, the company recorded recovery of salary expenditures of $41,000 through the government assistance described earlier through R&D expenses. Medicare is in the process of developing additional cardiovascular products with the development costs being approximately $2 million each, consistent with our research and development strategy to focus on low-cost projects with higher probabilities for success. And we don't expect our research and development costs to increase relative to this. The company recorded finance expense of $99,000 for Q3 2020. This relates to accretion on the company's Agristat royalty and the acquisition payable pertaining to the Zipidemag acquisition from September of 2019. This compares the finance income for Q3 of 2019 of $116,000, which related to interest on cash held by the company, which was significantly higher during 2019 and partially offset by the accretion on the company's royalty obligation. The company recorded a foreign exchange loss of $210,000 for Q3 2020 compared to a gain of $601,000 for Q3 2019. The change relates to changes in the U.S. dollar exchange rate during the respective periods, which led to foreign exchange gains and losses as it applies to the significant U.S. cash balances held by the company as at the end of both periods. This results in net loss for the quarter of $1 million or 10 cents per share compared to 599,000 or 4 cents per share for Q3 2019. The change in the net loss is due to the reduction in operating expenses offset by decreased revenues and foreign exchange loss for the quarter. Adjusted EBITDA for Q3 was $4,000 compared to adjusted EBITDA of negative 319,000 for Q3 2019. The change is primarily due to the lower operating expenses, again, partially offset by lower revenues experienced in 2020. As of September 30, 2020, the company had cash totaling approximately $11.9 million compared to $13 million as of December 31, 2019. As of September 30, 2020, the company had working capital of $17.9 million, a decrease from net working capital at December 31, 2019 of $19.7 million. Additionally, after the end of the quarter in October, we purchased 211,000 common shares for cancellation under our existing normal course issuer bid for a cost of just over $200,000. And as of September 30, 2020, the company did not have any debt recorded on its statement of financial position. I want to remind you there will be an opportunity at the end of today's call for you to ask questions regarding the financial results and the company as a whole. And with that, I would like to turn the call over to our President and Chief Operating Officer, Dr. Neil Owens, for some additional commentary regarding our operations.