Medicure Inc.

Good morning and welcome to Medicare's Earnings Conference Call for the year ended December 31, 2021. My name is Chris and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Before we proceed, I would like to remind everyone that this presentation contains forward-looking statements relating 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 risks 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 20-F. Later, we will conduct a question-and-answer session. Please note that this conference call is being recorded, and today's date is April 28, 2022. I would now like to turn the conference call over to Dr. Albert Friesen, Chief Executive Officer of Medicare, Inc. Please go ahead, Dr. Friesen.

Thank you, Chris, and good morning to all on the call. We appreciate your interest and participation in today's call. Joining me today is Dr. Neil Owens, President and Chief Operating Officer, and Horace Uten, providing consultation for the preparation of this year's financial statements for 2021, which are the statements we will be discussing this morning. We're pleased with the positive trend of revenue and increased EBITDA quarter over quarter. Sales of Agristat have remained steady with some further growth over the previous year. We're pleased with the position of our December 2020 acquisition of Marley Drug which has helped accelerate the growth of Zypidemag sales. We're hopeful that the launch of our e-commerce platform will further enhance both sales of Zypidemag and other pharmaceuticals provided through home delivery. One of the reasons we acquired Marley Drug, a pharmacy uniquely positioned to dispense medications to Americans in all 50 states and territories through mail, was to expand our sales Reach for Zypidemag. This acquisition also gives us the opportunity to provide all FDA-approved medications at affordable prices. We believe the best way to do this is through a direct-to-consumer approach through an e-commerce platform coupled with our existing infrastructure. So far, it's working well. The goal of the platform is to bypass the traditional framework run by health insurers and pharmacy benefit managers that has made access to affordable medications too expensive for many Americans including both generic and branded drugs such as . More than 120 million uninsured and underinsured Americans struggle to access affordable medications and are looking for trusted and convenient source to fill their prescriptions. Marley Drug will offer industry-leading pricing on more than 100 of the most commonly prescribed generic chronic care medications with free nationwide delivery. Additional medications will also be on the platform. The platform will focus on ease of use and customer service, and it's differentiated by being able to ship to every state. That being said, the sales and marketing of Agristat franchise continues at as does our dedication to grow the Zypidemag business with our direct marketing to patients. Agristat continues to hold the majority of the patient market share in this class with the sales for 2021 of 11.6 million compared to 10.6 for the previous year. Sales of Zypidemag continue to increase to 3.2 million for 21 compared to less than half a million in the previous year. And together with Marley Drug revenue of 6.9 million results in an annual net revenue of 21.7 million compared to 11.6 million for the previous year. We believe the investments in the past several quarters in our programs and onboarding of new products has and will continue to provide the growth in revenue and profits for the coming quarters and years. It takes time and persistence. Medicare has a 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. I would now like to turn the call over to our financial consultant, Haris Hooden, to review and provide some color on the financial results for 2021.

Haris Hooden Thank you, Dr. Friesen. 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 will be able to obtain a complete copy of our financial statements for the year ended December 31st, 2021 by the end of date today along with previous versions of the financial statements on the investors page of our website. Alternatively, a copy of all financial statements and management discussion analysis can be obtained immediately from CDAR.com. I will now provide some key highlights of our financial performance for the year ended December 31, 2021. Total revenues for the year ended December 31, 2021 were $21.7 million compared to $11.6 million for the year ended December 31, 2020. Net revenues from Agristat for the year ended December 31, 2021 totaled $11.5 million, which is an increase in net revenues from Agristat for the year and December 31st, 2020 of $10.6 million. The increase in revenues when compared to the previous year is primarily a result of an increased volume of Agriseps sold in 2021 and a decrease in pricing pressure from generic Integra on competition. The company earned net revenues from Zipidimeg in 2021 of $3.2 million, which is a significant increase from the net revenues earned during 2020 of $453,000. The company continues to focus on Zepidimeg and expects revenues to continue to grow throughout the remainder of 2022 and beyond. The company earned $6.9 million of net revenue during 2021 from Marley Drug and 2021 also represented the company's first full year of operation of operating the entity. Turning to cost of goods sold. Agristat cost of goods sold for 2021 totaled $4.1 million compared to $3 million for 2020. Included within cost of goods sold for 2021 was a $1.1 million write-down of expired or unusable inventory and excluding the write-down of inventory in the current year, cost of goods sold was consistent between 2021 and 2020. Zepidemeg cost of goods sold for 2021 totaled $2.4 million and includes $311,000 relating to products sold to customers, $1.8 million from amortization of the Zepidemeg intangible asset, $165,000 relating to our write-down of inventory, and $62,000 related to royalties on the sale of Zepidemeg resulting from the acquisition of the product in September of 2019. As a result of the acquisition of Murley Drugs, the company recorded cost of goods sold of $2.4 million during 2021 pertaining to the cost of products sold by Murley Drugs in its store and mail order pharmaceutical business. Selling expenses totaled $10.3 million for 2021, up from $5.3 million for 2020. The increase in selling expenses when compared to the prior year is primarily due to the acquisition of Marley Drug and an increase in marketing spend. General and administrative expenses totaled $2.7 million for 2021, down from $4.6 million in the prior year. The decrease in general and administrative expenses is primarily related to lower legal costs associated with the company's patent challenge, which was settled in the fourth quarter of 2020, and cost reductions implemented by the company during 2021. During the year ended December 31st, 2021, the company recorded other income of $1.8 million as a result of the re-evaluation of the contingent consideration pertaining to the Merle drug acquisition from prior year. The re-evaluation of the contingent consideration was assessed by management using probability weight scenarios during the year ended December 31, 2021. Research and development expenses for 2021 totaled $1.7 million compared to $3.2 million for 2020. This decrease is primarily due to the timing of research and development expenditures relating to each development project and a declining research and development budget. In addition, the company recognized a recovery of $491,000 through research and development expenses in relation to the de-recognition of the license fee payable for Prexartan, which was reversed in the current year as the company's legal counsel determined that the counterpart to the original contract was in breach of the licensing agreement. The company recorded finance expense of $525,000 for 2021. This relates to accretion on the company's EGRSTAT royalty obligation and accretion on this epidemic acquisition payable. This compares to finance income for 2020 of $765,000 which primarily relate to the re-measurement of the company's royalty obligation partially offset by the accretion on this epidemic acquisition payable. The company recorded a foreign exchange gain during 2021 of $31,000 compared to a gain of $497,000 for 2020. The change relates to changes in the U.S. dollar exchange rate during the respective periods which led to a favorable foreign exchange during the current year. Adjusted EBITDA for 2021 was $2.1 million compared to adjusted EBITDA of negative $3.9 million in 2020. The change is primarily due to increased revenues as a result of the operations of Marley drugs being included for the full 2021 year compared to a two-week period in 2020. In addition to increased epitomeg revenue and reduced general and administrative expenses and also reduced research and development expenses. This is partially offset by higher cost of goods sold and selling expenses as a result of the full year of Marley drug operation. As of December 31, 2021, the company had cash totaling approximately $3.7 million and increased from $2.7 million as of December 31, 2020. As of December 31, 2021, the company had net working capital of $4 million compared to net working capital of $3.4 million at December 31, 2020. The company currently does not have any debt on its books. I want to remind you that there will be an opportunity at the end of today's call for you to ask questions regarding the financial results of 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.