Medicure Inc.

earnings conference call for the year ended December 31st 2020 and quarter ended March 31st 2021 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 risks and uncertainties include, among others, those described in the company's most recent annual information form and Form 20F. Later, we'll conduct a question and answer session Please note that this conference call is being recorded and today's date is May 11th, 2021. I would now like to turn the conference over to Dr. Albert Friesen, Chief Executive Officer of Medicare Inc. Please go ahead, Dr. Friesen.

Thank you, Colin, and good morning to all of you on the call. We appreciate your interest and participation in today's call. Joining me today in the call is our Chief Financial Officer, James Kinley, and President and Chief Operating Officer, Dr. Neal Owens. This morning we'll be discussing the year ending December 31st, 2020 and the first quarter of 2021. The release of the financial statements for the year ending 2020 and the first quarter of 2021 were so close that we decided to present them at the same call. COVID has provided challenges to a lot of businesses, including Medicare. Despite the challenges, we are delighted with the positive trend of revenue and net income over the past few quarters. We experienced a modest but positive EBITDA for the first quarter of 2021, a positive change from the losses that had been reported in 2019 and the first half of 2020. The sales of Agristat have stabilized and we're pleased with the early stage performance of our December 2020 acquisition, Marley Drug. One of the reasons we acquired Marley Drug, a mail order pharmacy, was to expand our sales reach for Zypidemag. The focus of our business is the sales and marketing of Agristat franchise and growing the Zypidemag business with more direct marketing to patients. with the help of Marley Drug, as well as continuing the marketing to healthcare providers. The revenue for the first quarter of 2021 was $4.9 million, which is up substantially from the previous quarters due mainly to the added revenue from Marley Drug. Agristat revenue of $2.63 million is similar to previous quarters. Marley was $2.1 million and Zypinemag $161,000. Medi-Cure has transitioned away from the sales and marketing of the REDS device, which reduced significantly our operating expenses and associated losses, while retaining value in our sensible medical investment. As mentioned, the main focus at present is on the sales and marketing of Agristat, Zypinemag, and further leveraging Marley Drug Pharmacy, which combined provide great margins and potential. We believe the past several quarters investments in our programs and onboarding of products will provide their growth, revenue and profits for the coming quarters and years. It takes time and persistence to make this a reality. Medicare has good cardiovascular product portfolio, a track record of growing sales and a great team with energy, talent and experience to build a strong growing company. Now, before turning the call over to our Chief Financial Officer, James Kinley, as we've reported, he is taking new opportunity. I would like to express a special thank you for the hard work and many contributions to Medicare. James.

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 year ended December 31st, 2020, and the quarter ended March 31st, 2021, along with previous financial statements on the investors page of our website. And a copy of all financial statements and management's discussion and analysis can be obtained from CDAR.com. Starting with the 2020 annual results, revenues for 2020 totaled $11.6 million compared to $20.2 million from 2019. The decrease in revenues between the two years was primarily a result of decreased Agristat revenues from $19.4 million in 2019 to $10.6 million in 2020. as a result of further genericizing of the Integralin market, which has created pricing pressures on Agristat, combined with lower hospital demand for the product, including a reduction in procedures being performed as a result of COVID-19. Zypidemag revenues increased to 453,000 for 2020, compared to 183,000 in 2019. The increase in revenues from Zepidimeg resulted from increased demand and usage of the product experienced during 2020 as a result of the company's sales and marketing initiatives implemented since acquiring control of the product. As a result of the acquisition of Marley Drug, which was completed on December 17, 2020, the company recorded revenue of $340,000 during the year ended December 31, 2020, pertaining to the Marley Drug in-store and mail-order pharmaceutical business. Cost of goods sold decreased from $7.3 million in 2019 to $6.5 million in 2020. Selling expenses for 2020 totaled $5.4 million compared to $13.4 million for 2019 as a result of cost reductions implemented during late 2019 and throughout 2020, particularly as it relates to the sales and marketing costs associated with REDS, as well as decreases in costs as a result of limitations to conference and travel-related costs due to COVID-19. Beginning with the acquisition of Marley Drug, which again was completed in December 2020, costs associated with the Marley Drug business are included in selling costs for the year ended December 31, 2020. General and administrative expenses for 2020 increased to $4.6 million from $3.4 million in 2019. The increase in G&A expenses during 2020 when compared to 2019 primarily relate to higher legal costs associated with the company's patent challenge, which was settled in the fourth quarter of 2020, partially offset by cost reductions implemented by the company during late 2019 and throughout 2020. Research and development expenses totaled $3.3 million for 2020 compared to $4.3 million for 2019. The decreased experience during 2020 is primarily a result of FDA refunds obtained by the company during 2020 resulting in a recovery of expenses of $677,000 pertaining to previously paid FDA fees as well as reducing the quarterly expense going forward and in addition to the timing of research and development expenditures resulting in timing of each development project. During 2019, the company recorded a loss of $3.6 million as a result of the revaluation of the holdback receivable from the APICOR transaction, as well as an impairment loss on the intangible assets pertaining to REDS of $6.3 million. There were no similar losses recorded during 2020. The company recorded finance income of $765,000 in 2020, compared to $1.1 million in 2019, and a foreign exchange gain of $497,000 in 2020 compared to a loss of $2.6 million in 2019. This resulted in a net loss for 2020 of $6.8 million or $0.64 per share compared to $19.8 million or $1.32 per share for 2019 due to the factors previously described. Adjusted EBITDA for 2020 was negative 3.9 million compared to adjusted EBITDA of negative 3.8 million for 2019. The change is primarily due to the decrease in revenues and increased G&A expenses partially offset by decreases in selling expenses when compared to 2019. As at December 31st, 2020, the company had cash totaling 2.7 million compared to 13 million as of December 31st, 2019. The decline primarily related to cash spent to acquire the Marley Drug business in December 2020. As at December 31st, 2020, the company had net working capital of $3.2 million compared to net working capital at December 31st, 2019 of $19.7 million. Turning to the quarter ended March 31st, 2021. Total revenue for Q1 2021 was $4.9 million compared to $3 million for Q1 2020. Net revenues from Agristat for the quarter ended March 31st, totaled $2.6 million, consistent with net revenues from Agristat for the same quarter of 2020 of $2.7 million. The company earned net revenues from Zepidemag for Q1 2021 of $161,000, Again, consistent with revenues from Q1 2020 of $163,000. The company continues to focus on Zepidemag and expects revenue to grow through the remainder of 2021 and beyond. The company recorded revenue of $2.1 million during the three months ended March 31st, 2021 pertaining to the Marley Drug in-store and mail-order pharmaceutical business. There were no revenues recorded from REDS during Q1 2021 compared to $89,000 in the same quarter of 2020 and the company earned $49,000 of revenue from Sodium Nitro Precide or S&P during Q1 2021 compared to $31,000 for the same quarter in 2020. Turning to cost of goods sold, Agristat cost of goods sold for Q1 2021 totaled $670,000 compared to $666,000 for Q1 2020, and this resulted in gross margins for the quarter of approximately 74%, a slight decrease from the approximately 76% margin for the same quarter in the prior year. Zepidemag cost of goods sold for Q1 2021 totaled $605,000 and included $28,000 related to products sold to customers, $573,000 from amortization of the Zepidemag intangible assets, and $5,000 relating to royalties on the sale of Zepeda Mag 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%. As a result of the acquisition of Marley Drug, the company recorded cost of goods sold of $602,000 during Q1 2021 pertaining to the cost of products sold by Marley Drug. And additionally, S&P cost of goods sold during the quarter totaled $50,000. Selling expenses totaled $2.7 million for Q1 2021, up from $2.1 million for Q1 of 2020. And the increase in selling expenses when compared to the same quarter in the prior year were primarily due to the acquisition of Marley Drug. General and administrative expenses totaled $585,000 for Q1 2021, down from $800,000 from the same quarter in the prior year. The decrease in G&A expenses is primarily related to lower legal costs associated with the company's patent challenge, which was settled in the fourth quarter of 2020, as well as cost reductions implemented by the company during 2020. Research and development expenses for Q1 2021 totaled $581,000, compared to $858,000 for Q1 of 2020. The decrease is primarily a result of FDA fees expensed during Q1 2020, which were subsequently refunded after the company obtained a waiver of these fees, as well as timing of research and development expenditures resulting from the timing of each development project. Medicare is in the process of developing additional cardiovascular products 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 $121,000 for Q1 2021. This relates to accretion on the company's Agristat royalty obligation, the Zepidemag acquisition payable and on the company's contingent consideration associated with the Marley drug acquisition. as well as finance expense related to the company's lease obligations and bank charges. This compares the finance expense for Q1 2020 of $73,000, which primarily related to accretion on the company's royalty obligation and acquisition payable, the lease obligations and bank charges, partially offset by interest on cash held by the company. The company recorded a nominal foreign exchange loss during Q1 2021 compared to a gain of $868,000 for Q1 2020. 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 well as a significant decrease in U.S. dollar cash balances held by the company. This results in a net loss for the quarter of $1 million or $0.10 per share compared to $1.5 million or $0.14 per share for Q1 2020. The change in net loss is due to increased revenue and reduced general and administrative and research and development expenses partially offset by increased selling expenses and a reduction in foreign exchange gains experienced during the three months ended March 31, 2021. Adjusted EBITDA for Q1 2021 was $31,000 compared to adjusted EBITDA of negative $1.3 million for Q1 2020. The change is primarily due to the increase in revenues and decreased G&A and R&D expenses. Again, partially offset by increases in selling expenses. As of March 31, 2021, the company had cash totaling approximately $2.9 million and compared to $2.7 million as of December 31, 2020. As of March 31, 2021, the company had net working capital of $3.1 million compared to net working capital of December 31, 2020 of $3.2 million. The company does not have any debt recorded on its statement of financial position. However, we are in the process of finalizing a loan with a commercial bank to replenish the cash expended through the Marley acquisition. 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'd like to turn the call over to our President and Chief Operating Officer, Dr. Neil Owens, for some additional commentary regarding our operations.