Medicure Inc.

Welcome to Medicare's earnings conference call for the first quarter ended June 30, 2024. My name is Kelly and I will be your operator for today's call. At this time, all participants are on 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 in 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 August 15th, 2024. I would now like to turn the conference call over to Dr. Albert Friesen, Chief Executive Officer of Medicare Incorporated. Please go ahead.

Thank you, Kelly, and good morning to all on the call. We appreciate your interest and participation in today's call. Joining me today on the Q2 2024 financial statement call is Dr. Neal Owens, President and Chief Operating Officer at Horace Uten, Medicare's Chief Financial Officer. The net revenue for Q2 2024 was $5.2 million, which is down a bit from the previous quarter of $5.7 million, and a bit of an increase over the Q4 2023, which was $5.1 million. The quarter we had For the quarter, we had a loss of $1.2 million compared to a net income of $253,000 for the same quarter last year. The loss was primarily due to a significant increase in R&D expenses for the quarter, which were $868,000 for the MC1 PNPO clinical trial, as well as higher Marley drug costs of goods, lower Agristat revenue, as well as the general and administrative expenses. In summary, revenue for Agristat was down a bit and revenue for both Marley Drug and Zypidemag were up a bit. Again, our four focuses of the business are holding sales and profits for Agristat, growing Zypidemag revenue and profit, growing the Marley Drug online pharmacy and the pharmacy business, and the development of MC1 for the PNPO and deficiency I'd now like to turn the call over to our Chief Financial Officer, Harasudan, to review and provide some color on Q2.

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 quarter ended June 30th, 2024 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 a management discussion analysis can be obtained immediately from CDAR.com. I will now provide some key highlights of our financial performance for the three-month period ended June 30th, 2024. Total revenues for the quarter end of June 30, 2024 were $5.2 million compared to $6 million for the quarter end of June 30, 2023. Net revenues earned from Agristat during the current period totaled $1.8 million, a decrease from the prior year where net revenue from Agristat was $2.6 million. The decrease in Agristat revenue during the current year is a result of a lower number of units sold in addition to pricing pressures from increased competition stemming from the launch of generic tyrophib and hydrochloride. Net revenues earned from Zipidimic through the traditional insurance channel during the current quarter totaled $654,000, which is a slight decrease from the $722,000 net revenue earned during the same period in the prior year. The slight decrease in Zipidimic sales through the traditional insurance channel can be attributed to higher insurance rebates due to a change in customer mix. For Marley Drug, net revenue during the current quarter totaled $2.7 million, which is consistent with the same period in the prior year, when net revenue was also $2.7 million. The slight increase in Marley Drug sales during the current period is due to an increased volume of sales, including an increased volume of Zepidimax sales through Marley Drug, which are included within this figure. Offsetting these increases are higher pharmacy benefit manager, or PBM, rebates during the current period. The company continues to focus on growing Marley Drug and growing the sales of Cepidemag through Marley Drug into 2024 and beyond. Agristat cost of goods sold for the quarter ended June 30, 2024, totaled $604,000, a decrease from the prior year where cost of goods sold totaled $659,000. The decrease in cost of goods sold is the result of a lower volume of Agristat sold during the current period. Zepidemec cost of goods sold for the current quarter totals $353,000, a slight increase from the prior year where cost of goods sold for Zepidemec for the quarter ended total $300,000. Included within cost of goods sold for Zepidemec is $199,000 relating to products sold to customers and $154,000 of amortization of the Zepidemec intangible assets. The slight increase in cost of goods sold noted during the current quarter is due to a higher volume of products sold during the current year. Marley Drug Cost of Goods Sold totaled $1.25 million during the period ended June 30th, 2024. An increase in the period ended June 30th, 2023 where Cost of Goods Sold totaled $900,000. The increase in Cost of Goods Sold during the current year is a result of a higher volume and the nature of products sold through both the mail order and e-commerce platform during the current year. Selling expenses totaled $1.8 million for the quarter ended June 30, 2024, a decrease from the same period in the prior year, where selling expenses were also $2.1 million. The selling expenses decreased in the current period as a result of less consulting expenses incurred by the company with regards to regulatory reporting on its government contracts, in addition to an overall decrease in revenue noted during the current quarter, resulting in less logistics fees paid by the company. General and administrative expenses totaled $1.4 million for the quarter ended June 30, 2024, in comparison to $1.1 million during the same quarter in the prior year. The increase in general and administrative expenses in the current period is a result of higher legal fees offset by lower share-based compensation expense on the previously granted stock options to key employees and directors of the company. Research and development expenses for the quarter ended June 30, 2024 totaled $868,000 compared to $668,000 during the same quarter in the prior year. The increase during the current period is primarily due to the timing of research and development expenditures related to each development project the company is currently undertaking, which in the current quarter primarily related to the development of MC1. The company recorded finance income of $36,000 during the period ended June 30, 2024, in comparison to finance income of $22,000 during the three-month period ended June 30, 2023. The finance income recorded during the current period consisted primarily of interest income earned on cash held by the company, offset by bank charges and finance expenses on the company's lease obligations. The company recorded a foreign exchange loss of $25,000 during the quarter ended June 30, 2024, in comparison to a foreign exchange loss of $30,000 during the quarter ended June 30, 2023. The change in foreign exchange loss relates to changes in the U.S. dollar exchange rate during the respective years, which led to an unfavorable foreign exchange loss during the current period. Adjusted EBITDA for the quarter ended June 30th, 2024 was negative $514,000 compared to an adjusted EBITDA of $948,000 during the quarter ended June 30th, 2023. The decrease in adjusted EBITDA during the current period is due to higher market drug cost of goods sold, lower agri-stat revenue, as well as higher research and development expenses and higher general and administrative expenses. Offsetting these increases was was a decrease in selling expenses and higher epidemic sales through the Marley Drug Pharmacy business. As of June 30, 2024, the company had cash totaling approximately $5.8 million, a slight decrease from the $6.4 million of cash held as of December 31, 2023. 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 operation.

Thank you, Horace, and good morning, everyone. I'd like to start with some further details on our Marley Drug business. For Q2, net revenue was consistent with Q1 at $2.7 million. This is due to a 3% increase in Zepidemax sold through the pharmacy business. while there was a decline in some generic medication sales due to pricing competition, which offset overall growth. Medicare still plans to leverage Marley Drug's reputation for customer service and national distribution in more business partnerships. Notably, the sale of Branzavi tablets through Marley Drug contributed revenue of $250,000 in Q2, which is an accessible alternative STLT2 inhibitor to brand Jardiance and Farcega. While still early, we are seeing uptake and growth and will continue to focus on it and other branded solutions in 2024. A second example is the exclusive sale of Citagliptin, which is a first generic entry for another popular diabetes medication. The company is still focused on growing brand awareness through multiple media channels and overall, we continue to look for ways to rapidly expand the pharmacy business. Challenges we've faced include not being able to control reimbursement through insurance companies for insured prescriptions and fluctuations in cost of goods, which impact our margins. Further on Zepidemag, net revenue through insured channels in the standard retail pharmacy model fell from $777,000 in Q1 2024 to $654,000 in Q2 due to a modest decrease in purchasing from wholesalers and changes in the mix of our insured customers. We are in the process of consolidating our insured customers through Marley Drug instead of other retail pharmacies as this approach is more profitable for the company. Patients still have challenges in accessing Zipidimax through their insurance coverage, which is the reason why selling Zipidimax through Marley Drug is such an effective approach. Similarly, due to wholesaler and coverage gap fees, low PBM reimbursement, and product returns, selling through Marley Drug provides a much higher gross margin. Overall, we continue to focus on brand awareness through efforts of our sales and marketing team and are still seeing a lot of interest from providers and patients. In terms of our Agristat business, net revenue was impacted in Q2 by generic Tire 5N entries, and as a result, revenue decreased from $2.3 million in Q1 2024 to $1.8 million in Q2. The decrease was expected and is due to both the decrease in volume of products sold and pricing. Medicare remains the only manufacturer of the 3.75 mg bullous vial format which is typically administered before the infusion unit. We continue to provide support to our US hospital accounts and plan to remain competitive in targeted ways and therefore expect to maintain significant market share. Medicare's R&D focus is primarily on its Phase 3 study to seek approval of MC1 as the first FDA-approved therapy for patients with PNPO deficiency, which is a rare pediatric disease leading to seizures and is ultimately fatal if untreated. In parallel to the planned Phase 3 clinical study, Medicare is conducting several non-clinical studies to support the approval of MC1 as requested by the FDA. If successful, use of Medicare's legacy product MC1 could lead to a priority review voucher which can be redeemed or sold and provides significant value. The FDA granted approval to start enrollment and so the company is now in the launch phase of the study. Medicare also recently received fast track designation for MC1 for its intended indication which will facilitate the review of Medicare's FDA new drug application. Medicare did decide to remove the entire coding on the MC1 tablets. to speed up absorption based on feedback from clinicians and therefore are in the process of producing that batch product for patients waiting to enroll. Medicare recently announced that it signed an asset purchase agreement for the acquisition of the patent and intellectual property related to this discovery of new chemical entities that can be developed for therapeutic use. We believe that these new chemical entities will promise to provide improvements or existing lead compounds in alignment with the treatment of diseases being targeted by Medicare and could provide significant long-term value upon completion of all required non-clinical and clinical studies and regulatory approval. Despite similar overall revenue in Q2 compared to Q1, because of higher Marley drug cost of goods, lower Agristat revenue, as well as higher research and development expenses and general and administrative expenses this quarter, we are reporting a negative EBITDA of $514,000 and a net loss of $1.2 million. Medicare remains debt-free, and to reiterate, the company's short-term goals are focused on maintaining Agristat, growing Zepidemag and Marley drug sales, growing our pharmacy business through partnerships and acquisition, and developments of new products. Short-term, seeking the approval of MC1 to receive that priority review voucher, and long-term development of our new intellectual property for diseases with large market potential. With that, I'd like to turn the call back to Dr. Friesen for final comments.

Thank you, Neil. We're not satisfied with the loss for the quarter, so we are looking at our cutting costs in some of our operations, but mostly looking at where we can improve our profitability in some of the sales. As we continue to are to be committed to the PMPO trial which has a significant return on investment. Our management goal and that of our board is to continue to build this business with a stable long-term outlook to generate value for shareholders. And as always, I want to express my sincere appreciation to the outstanding team of employees we've been blessed with. Thank you. our shareholders for continued support and interest, and now I'll turn it back to the moderator for questions and answers.

Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for questions. There are no questions in queue at this time. I would now like to turn the floor back over to Dr. Friesen for any closing remarks.

Thank you for being on the call. We appreciate your interest and look forward to our calls coming up for Q3. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.