This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Welcome to Medicare's earnings conference call for the quarter-ended March 31st, 2022. My name is Kelsey, and I will be your operator for today's call. At this time, all participants are in listen-only mode, and 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 present 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 as risk and uncertainties include, amongst 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 May 31st, 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.
spk05: Thank you, Kelsey, and good morning to all on the call. We appreciate your interest and the participation in today's call. Joining me in the call today is Dr. Neil Owens, President and Chief Operating Officer, Medicare and Harris-Uden, providing consultation for the preparation of Q1 financial statements for 2022, which are the statements we'll be discussing this morning. We're pleased to share that both the net income and EBITDA continue to increase. The acquisition of Marley Drug An innovative online pharmacy sales channel helped to drive sales of Zypidemag as did the general Medicare sales and marketing efforts. With the acquisition of Morley Drug, Medicare's business focus now is the following on growth and development. Number one, continued sales and profits of Agristat. Two, growing Zypidemag revenue and profit. developing the Marley online presence and for continuing the MC1 development for PMPO deficiency. The sales of Agristat have remained steady with a small growth over the previous year. We're hopeful that the launch of our e-commerce platform will further enhance both sales of Zypidemag and the 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 of Zypidemag. The 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. The goal of the platform is to bypass the traditional framework run by health insurers and pharmacy benefit managers that has been made access to affordable medications too expensive for many Americans, including both generic and branded products such as Zypidimed. The platform will focus on ease of use and customer service and is differentiated by being able to ship to every state. That being said, the sales and marketing of Agristat franchise continues as does our dedication to growing this Zypinim Ag business through more direct marketing to patients. Agristat continues to hold the majority of patient share with sales for Q1 of 5.7 million and compared to 4.9 for the previous year. Sales as an epitome continued to increase as $1 million for Q1 compared to $161,000 for Q1 the previous year. And together with Marley Drug, revenue of $1.9 million results in a Q1 net revenue compared to 2.1 the previous year's quarter one. 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. MediGear 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. Now I'll turn over the call to our financial consultant, Haris Uddin, to review and provide some color on the financials for Q122.
spk03: 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 a reminder, you will be able to obtain a complete copy of our financial statements for the quarter ended March 31, 2022, by the end of day today, along with previous financial statements on the investor's 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 quarter ended March 31st, 2022. Total revenues for the three-month period ended March 31st, 2022 were $5.7 million compared to $4.9 million for the three-month period ended March 31st, 2021. Net revenues from Agristat for the period ended March 31st, 2022 totaled 2.8 million, which is an increase in net revenues in comparison to the period ended March 31st, 2021, where the net revenue for Agristat was 2.6 million. The increase in revenues when compared to the same period in the prior year is primarily a result of an increased volume of Agristat sold in Q1 of 2022. The company earned net revenues from Zipidimeg in Q1 of 2022 of $1.1 million, which is a significant increase from the net revenues earned during the same period in the prior year of $161,000. The company continues to focus on Zipidimeg and expects revenues to continue to grow throughout the remainder of 2022 and beyond. The company earned net revenues from Marley Drug in Q1 of 2022 of $1.9 million, which is a decrease in the net revenues earned from Marley Drug during Q1 2021 of $2.1 million. The decrease in net revenue earned from Marley Drug is a result of the timing of promotional offers to customers, in addition to increased competition within the industry. The company did launch its e-commerce platform during Q1 of 2022 and as a result is expecting to see a growth in revenue for Marley Drug in subsequent quarters. Turning to cost of goods sold, Agristat cost of goods sold for the three-month period ended March 31, 2022, totaled $911,000. Cost of goods sold for Agristat consisted of finished products sold and delivered to customers. Zipidimeg cost of goods sold for the three-month period ended March 31, 2022, totaled $224,000 and included $41,000 relating to products for its customer, $143,000 from amortization of the Zipidimeg intangible assets, and $40,000 relating to royalties on the sale of Zipidimeg, which is resulting from the acquisition of the product in September of 2019. Marley Drugs cost of goods sold for the three-month period ended March 31st, 2022 was $556,000 and pertaining to the cost of products sold by Marley Drugs in-store and mail-order pharmaceutical business. Selling expenses totaled $1.7 million for the three-month period ended March 31st, 2022. Selling expenses decreased in the current period as a result of the company implementing cost-saving measures at Marley Drugs. in addition to the company reclassifying certain expenses as general and administrative based on their nature. General and administrative expenses totaled $1.3 million for the quarter ended March 31, 2022. The increase in general and administrative expenses is primarily related to professional fees incurred during the current period as the company continues to improve its e-commerce platform, which was launched during 2022, This is partially offset by lower legal costs and a reclassification of certain expenses from selling to general and administrative expenses based on the review of their nature. Research and development expenses for the three-month period ended March 31, 2022 totaled $345,000 compared to $581,000 during the three-month period ended March 31, 2021. The decrease during the current period is primarily due to the timing of research and development expenditures relating to each development project and a declining research and development budget. The company recorded finance expense of $19,000 during the three-month period ended March 31st, 2022. The finance expense recorded during the current period consisted primarily of accretion on this epitome acquisition payable, bank charges incurred, and finance expense on the company's lease obligations. These expenses were offset by interest income earned during the current period. The company recorded a foreign exchange loss during the three-month period ended March 31, 2022 of $133,000 compared to a gain of $2,000 during the three-month period ended March 31, 2021. The change relates to changes in the U.S. dollar exchange rate during respective periods which led to unfavorable exchange loss during the current period. Adjusted EBITDA for the three-month period ended March 31st, 2022 was $1.2 million compared to adjusted EBITDA of $31,000 during the three-month period ended March 31st, 2021. The change is primarily due to increased revenues as a result of increased epitomeg revenue and a decrease in selling and research and development expenses which is partially offset by higher cost of goods sold and general and administrative expenses during the current period. As at March 31, 2022, the company had cash totaling approximately $2.8 million, a decrease from the $3.7 million held at December 31, 2021. The decrease in cash is a result of the timing of sales, which is further corroborated by the 4.9 net working capital the company had at March 31, 2022, compared to the net working capital of $4 million the company had at December 31, 2021. The company 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. Thank you, Horace, and good morning, everyone.
spk04: A few updates I can provide. First, we are pleased to report that Agristat continues to see consistent demand, with a 4% increase in units sold in Q1 compared to Q4 2021. Of note, there's been less market pressure on pricing from generic appetite. Knowing that we will have the first licensed generic of Agristat in November for one format, we continue to take strategic steps to protect our market share through contracting and by strengthening our brand. Regarding Zabitimag, we continue to see consistent growth in prescriptions filled through Marley Drug, including a 40% increase in units dispensed in Q1 compared to Q4 2021. The reaction from customers and prescribers continues to be very positive. And as a result, we have expanded our sales team to increase our sales reach even further. It should be noted that we see new prescribers added through efforts of both our sales team and our marketing campaigns. The improvement in net revenue is also attributed to lower returns and fees to wholesalers, reduced fees to pharmacy benefit managers, and importantly, an improvement in fill conversion rate by Marley Drug. Medicare was also able to diversify its product portfolio with revenues from the Marley Drug business of $1.9 million in Q1, which is an increase over Q4 2021 of $1.4 million. Our team cross-sells Marley Drug with Zuccatamag, and despite a decrease in sales year-over-year from $2.1 million due to increased competition, we are focusing our marketing to differentiate and gain customers. Also, as national name recognition grows for Marley Drug, we are seeing more competitive attention focused on us. Earlier this year, we announced the launch of an e-commerce platform to fill generic and branded medications in all 50 states and a partnership as an exclusive mail order fulfillment pharmacy. Our goal is to provide best-in-class experience for customers and meet the demand for home delivery of medications. We continue to evaluate branded products and products with high market share potential to add to Medicare's portfolio and those that would align well with our focus on contacts in the US market, especially those that can be sold through Marley Drug. We are pleased to report a positive adjusted EBITDA in Q1 of $1.2 million compared to an adjusted EBITDA of $31,000 in Q1 of 2021, as well as a net income of $482,000 in Q1 compared to a net loss of $1 million in Q1 2021. Our team wants our investors to know that we are driven and dedicated to growing revenue controlling our costs and making Medicare a long-term success. With that, I'd like to turn the call back to Dr. Preece for final comments.
spk05: Thank you, Neil. First, I'd like to apologize for I misstated the Agristat sales for Q1. I actually used the total sales for Medicare in the previous comments. So the Agristat sales were increased to $2.8 billion for Q1 versus $2.6 for the Q1 previously, but the total sales for Medicare for the quarter are $5.6 compared to $4.9 in the previous quarter. So I wanted to correct an error I made in the comments. Having said that, there were increased sales. We continue to see steady growth over the last number of quarters and we believe there's considerable learning from the 20 and 21 years which we now apply it to not only the continued sales in Agristat but with the acquisition of Marley, strengthening sales of Cypidemag. We're thankful for the continued strength of Agristat's market share and the strong balance sheet. So we're continuing to focus on growing this pipeline of cardiovascular products, further diversifying our revenue and asset base. My goal and that of our board management staff is to continue to build this business with a stable long-term outlook to generating value for our shareholders. And I want to express my sincere appreciation to the outstanding team of employees we've been blessed with. Thank you to all the shareholders for your continued support and interest. And now I'll turn it over to Kelsey to handle the Q&A. So we welcome your questions.
spk00: Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request and your questions will be pulled in the order that they are received. Should you wish to decline from the pulling process, please press the star followed by the two. And if you are using a speakerphone, please lift a handset before pressing any keys. One moment, please, for your first question. And your first question comes from Alan Passink from Passink Asset Management. Please go ahead.
spk02: Morning. Could you explain in some detail why the sales revenues of Zypidibank declined sequentially quarter over quarter?
spk05: I'm not sure where you saw that, but our statements show that there's been steady increase in Zypidemeg sales.
spk02: Where was Zypidemeg sales revenues last quarter? The quarter ended December 31st.
spk05: Do you have that? I don't have the numbers in front of me. It says, sometimes we report sales of Zypidemag through Marley Drugs separately from the sales through our insured coverage marketing. And that may be the reason, but the total net sales of Zypidemag through the combination of Marley Drugs sales and through insurance have gone up steadily quarter over quarter over the last year.
spk04: What I can add as well is because we sell many times not just through Marley Drug but through wholesaler channels, sometimes there are larger purchases by the wholesalers that are a little bit cyclical. So depending on when we actually had a purchase or a large purchase, it might have happened at the end of the last quarter. So there's a bit of a delay between that sale to the wholesaler and when there's pull-through at the local retail pharmacy. But Marley Drug sales tend to be... like a very high correlation between obviously when we dispense the medication and an actual sale occurring.
spk02: Okay. Can you comment on when Agristat goes off patent and the implications?
spk04: Yeah. Well, I think part of the story of Agristat is we've been able to maintain that majority of market share in the U.S., and I believe that there is reasons for that, in part because of our branding, but also just the relationships we have with the hospitals. There's also been quite a bit of pricing pressure over the past few years from generic epiphybotide. So it's a little bit of a different situation than for most brands going generic. There's a huge price adjustment. We've already seen a lot of that price differentiation. But as I mentioned, we are actually doing quite a bit of work to maintain our market share through contracting, and then just through brand, strengthen our brand with hospitals. So, yeah, the actual patent doesn't expire until May 2023. Okay.
spk02: Can you comment on your efforts to utilize the cash?
spk05: Right now, we are basically building cash. The cash has continued to steadily increase, a little bit quarter over quarter. So we're not presently considering employment of the existing cash we have. We are looking at arrangements, business opportunities. But the business opportunities we're looking at are, in almost all cases, partnerships and relationships and non-cash acquisition. Like when we bought Epicor, we bought it without cash. We had less cash then and we used innovative ways of making the purchase.
spk04: Just was going to add that we are obviously retaining some cash for R&D work, but we've also made investments in our e-commerce platform to make it the best it can be, the best in class. So we have made investments in that sense as well.
spk01: So do you anticipate any acquisition you make would be immediately accretive to revenues and earnings?
spk05: I can't make that prediction. I mean, we'd like to, but we're looking at a variety of different arrangements right now, so I can't predict that there will be.
spk01: Okay, that's great. Thanks a lot.
spk00: Thank you.
spk04: Just to add to that question, we do feel like Zipidimac and Marley Drug have significant potential for revenue, so we are really trying to push those as hard as we can, but also thinking in parallel about acquisitions. But we still think there's quite a bit of room to move those.
spk02: Sorry, Kelsey.
spk00: Thank you. No, that's okay. Thank you. Ladies and gentlemen, just as a quick reminder, if you do have a question, please press start and then the number one. At this time, there are no further questions. You may please proceed.
spk05: Again, thank you to all those on the call. We appreciate your interest and look forward to further reporting in Q2. Have a great day. Thank you again.
spk00: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.
Disclaimer