HLS Therapeutics Inc. (HLS) Earnings Call Transcript & Summary

Good morning, and welcome to the Annual Meeting for HLS Therapeutics taking place here today, June 19 at 10 a.m. Eastern Daylight Time. [Operator Instructions] I would now like to turn the call over to Mr. Ryan Lennox, General Counsel and Corporate Secretary. Please go ahead, sir.

Thank you, operator, and thank you to everyone for your attendance today. Good morning. My name is Ryan Lennox, and I'm the General Counsel and Corporate Secretary of HLS Therapeutics, Inc. I would like to briefly read the following forward-looking information statement before turning the meeting over to Greg Gubitz, the Chief Executive Officer. In the course of today's meeting, directors and officers of HLS may, in their remarks or in response to questions, make certain statements that are forward-looking statements and our perspective. Forward-looking statements are neither promises nor guarantees, but are subject to risks and uncertainties that may cause the actual results, performance or achievements of HLS or developments in our business or industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. A more detailed discussion of risk factors affecting HLS' business and industry can be found in our current annual information form, dated March 18, 2020, for the year ended December 31, 2019, and in our management's discussion and analysis. Forward-looking statements are based on management's beliefs and opinions at the time the statements are made, and undue reliance should not be placed on any of these forward-looking statements. There should be no expectation that these forward-looking statements will be updated or supplemented as a result of changing circumstances or otherwise and, other than as required by applicable law, HLS disclaims any obligation to do so. We will now proceed with the formal business of the meeting, and I will turn the meeting over to Greg Gubitz, the Chief Executive Officer.

Thanks, Ryan. Good morning, ladies and gentlemen. My name is Gregory Gubitz, and I am the Chief Executive Officer and a Director of HLS. Given the need for physical distancing in the face of the COVID-19 pandemic, we've asked our directors and officers, other than myself; Tim Hendrickson, our Chief Financial Officer; and Ryan Lennox, our General Counsel and Corporate Secretary, not to attend the meeting in person. However, Bill Wells, our Executive Chairman; and Gilbert Godin, our President and Chief Operating Officer are joining us by teleconference. And we thank them and our other directors who have joined the webcast of today's meeting. With your consent, I will serve as the chair of today's meeting. As a reminder, the meeting is being conducted in person and only votes in person or by proxy will be counted at the meeting. The purpose of the webcast and conference call is to allow shareholders to follow along with the meeting. Now let's proceed with the business at hand. We have 3 matters of formal business to conduct today: one, the presentation of the financial statements of HLS Therapeutics, Inc. as at and for the financial year ended December 31, 2019; two, the election of directors; and three, the appointment of the corporation's auditor. Once the formal business of the meeting has been completed, our management team will be responding to questions we have received ahead of the meeting. I will now call the meeting to order. In accordance with the company's bylaws, Ryan Lennox will act as secretary of the meeting. I hereby appoint Arlene Agnew of Computershare Investor Services, Inc. to act as scrutineer of the meeting. The secretary has advised me that the notice calling this meeting, together with the formal proxy and management information circular, has been sent to each director of the corporation, the auditor of the corporation and shareholders of record of the corporation on May 15, 2020, the record date for the meeting. Financial statements for the financial year ended December 31, 2019, and auditor's report thereon were sent to each requesting holder of common shares of the corporation on May 13, 2020. Additional copies of these materials are also available at this meeting and on HLS' SEDAR profile at www.sedar.com. I will dispense with the reading of the notice of meeting. I will now ask the scrutineer to provide her preliminary report of shareholders' attendance at the meeting.

Mr. Chairman, we report that there are present at this meeting, in person or by proxy, shareholders holding 29,525,760 common shares, representing approximately 93.02% of the outstanding common shares.

Thank you, Ms. Agnew, and thank you to all of our shareholders for your strong show of support today. Pursuant to the corporation's bylaw, I declare that the meeting -- that the requisite quorum is present and that this meeting is duly and properly constituted for the transaction of business, and I direct that the confirmation of mailing of the notice of meeting received by Computershare and the scrutineers' complete report on attendance be annexed to the minutes of the meeting. Further, in order to expedite the meeting, I have requested that certain persons make and second the formal motions, and I will call on those persons at the appropriate time. The first item of business is the presentation of the consolidated financial statements of HLS Therapeutics, Inc. as and for the year ended December 31, 2019, and the auditor's report thereon. We will dispense with the reading of the audit reports to the meeting. Our next item of business is the election of directors. We have 7 directors to be elected, and I now declare the meeting open for the nominations. In the interest of expediency, I will ask Tim Hendrickson to make the nominations on behalf of the management of the corporation.

Mr. Chairman, I nominate those persons specified in the management information circular delivered with the notice of meeting, namely, William Wells, Greg Gubitz, Spencer Lanthier, Yvon Bastien, Rodney Hill, Don DeGolyer and Laura Brege, to serve as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation.

Thank you, Tim. In accordance with the advanced notice provisions of bylaw #1 of the corporation, no further nominations may be made at this time. Therefore, I declare the nominations closed. I request a motion that the 7 persons nominated as directors of the corporation be so elected.

Mr. Chairman, I so move.

Thank you. May I have a seconder?

I second the motion.

Thank you. Based on the proxies received prior to the meeting, I am pleased to confirm that all 7 nominees have received votes in their favor equal to at least 95% of the shares to be voted at this meeting. Accordingly, for expediency, I propose we conduct a vote for the 7 nominees to serve as directors of the corporation by a show of hands. All in favor of the motion to elect such 7 nominated directors, please signify by so raising your hand. Withheld votes, if any. [Voting]

I declare all those nominated to be elected to serve as directors of the corporation to hold office until the next Annual Meeting of Shareholders of the corporation. Actual voting results for directors based on the proxy results received will be filed on SEDAR later today in accordance with applicable requirements. We will now move to the reappointment of the auditor. May I have a motion that Ernst & Young LLP be reappointed as auditor of the corporation until the next Annual Meeting of Shareholders or until a successor is appointed and that the Board of Directors be authorized to fix the auditor's remuneration.

I so move.

Thank you. May I have the motion seconded?

I second the motion.

Thank you. Is there any discussion on this matter? I will now call for a vote on the motion by way of show of hands. All in favor, signify by raising your hand. Withheld votes, if any. [Voting]

I declare the motion carried. Is there any other formal business that may properly be brought before this meeting? If not, that concludes the formal business brought before the meeting. I wish to thank you for attending, and I now declare this meeting to be terminated. I would now like to take a few minutes to respond to questions that we received in advance. The questions and answers have been grouped together by theme so as to be efficient in our responses.

The first question, not surprisingly, is how has the COVID-19 situation affected your business? And maybe I'll ask Gilbert to respond to that, please.

Thank you, Greg, and good morning, everyone. There's actually several parts to the answer. First of all, like most people in our industry and many other industries, in the middle of March, we asked all of our employees to start working from home. So whether they were field-based or office-based. And we've adopted, therefore, social distancing policies in line with government regulation, and those are continuing to this day. This applies to our office staff and our field force, as I said. With respect to the actual commercial activity that was ongoing at the time that we had to address the needs of the pandemic or the consequences, Vascepa was in its launch. So I would say, a mere 4 weeks into that launch. And obviously, we're not -- now as a result of that pullback, we're not operating in typical launch environment. Usually, in the context of a launch, our aim is to create awareness for the product, ensure a good understanding of the patient profile, the benefits of the product, generate trial and eventually promote the adoption of the product. And clearly, I think no one disputes that face-to-face interactions are, by far, the most effective promotional means. So following the pullback, we had to pivot and adapt a lot of our activity to digital means of interactions. We've done so after a period of adaptation, I would say a few weeks, 3 or 4 weeks, adapting our tools, adapting our various types of activities, and we have basically resumed a fairly material coverage of our original target. Now those means are also conducive to broadening of the target because of the lower level of selectivity of those means, we can pull more people into the attendance of webinars and [ meetings ] of that sort. The responses we received to date are quite positive, and we think that the potential for the product is certainly as positive now as it has ever been. We think that while this has been a bit of an interruption of the initial uptake and [ adaptivity-related ] activities, longer term, the need is still as important as it ever was. The solution is still as unique and as efficient as it always was. So we don't see any meaningful impact in terms of peakier potential and peakier sales of the product. We certainly can attest to a slight shift to the right in terms of the uptake curve. But as we are about to resume some of those traditional activities during the course of the back end of June and, certainly, July and August, we think that restoring the uptake curve on the same path as it was at the time of mid-March is likely to happen. So Greg, these, I think, are the comments that I thought were most insightful related -- in relation to COVID and our commercial activity.

Thank you, Gilbert. The second question we received is, given COVID-19, when would you expect to hit peak sales for Vascepa? And does it change your estimate? And please remind us of the assumptions underlying your target sales estimate range. I guess the response would be as follows. So generally, one would expect to hit peak run rate at the end of the fourth or fifth year of a commercial launch. And early on in the launch, the main focus of the work is to seed or to educate the market and to create awareness and interest in the product. The slope of the curve, the uptake curve is usually steepest beginning in the middle or the end -- toward the end of the second year of commercial launch. I think we can probably all conceive of a curve that is unchanged in terms of its peak, but it is shifting to the right. And it's still, at this stage, a bit too early for us to tell how much it's going to shift to the right because we still are obviously in the middle of COVID situation and understand its impact. However, given the significant data results from the REDUCE-IT trial, the endorsement of a number of major medical societies around the world and the prevalence of cardiovascular disease in Canada, we believe that the potential for Vascepa is as positive now as it has ever been. And that includes our previously estimated peak sales of CAD 200 million to CAD 300 million. And you may recall, we've said previously that the assumptions underlying that range are that the estimated population that we could address with this product is between 1.2 million and 1.9 million Canadians. We have assumed a penetration rate in the mid- to high single-digit range. And we finally have assumed that the net monthly price would be approximately CAD 180 to CAD 200. And the third question we received is, I understand you have become the distributor of a new medical device called MyCare Insite. And could you expand on that? Maybe, Gilbert, you could say a few words about that?

Yes, most certainly, Greg. So in the earlier part of June, we announced that we had become the exclusive Canadian distribution -- distributor for the MyCare Insite point-of-care device and all its related line of diagnostic tests from a U.S.-based company called Saladax Biomedical in Bethlehem, Pennsylvania. The MyCare Insite device is, as we said, a point-of-care device that uses just a single drop of blood to measure up to 6 of the most commonly used antipsychotic drugs in a patient's blood, and that, of course, includes clozapine. So it's distinct from CSAN Pronto, but has very similar features in terms of conveniency. Its size is about the size of a coffee maker. And it provides results in minutes at the point-of-care. It has been granted market authorization by the U.S. FDA over the course of the past few months. And there are no such product that exists in the Canadian market today. And I would also say that it's very hard to actually get timely measurements of drug-blood concentration on a patient-to-patient basis in the Canadian landscape today. This measure of common psychotic drugs' blood level concentration could provide information to help determine if a patient is, first of all, are they taking their medication. We're dealing with a very sensitive patient population that certainly applies to schizophrenic patients, but also to bipolar disorder patients. And the second objective is that sometime, if optimal drug concentrations are being achieved, but the benefit is not being reached, a device such as this one may allow a physician to adapt a patient's therapy, move on to the next medication or combine different drugs to get to the desired effect. And therefore, it has great clinical merits. Physicians are quite enthusiastic about the possibility to eliminate the lack of compliance as a reason for a poor response and certainly are looking forward to a device that can tell them that, in spite of proper therapeutic level of certain drugs in their blood, if the patient is deemed nonresponsive, it allows for the migration to the next possibility in the treatment continuum. It will provide those results in about 7 minutes, can be done right in the doctor's office, so a very nimble tool and one that is definitely accretive to their mission with those patients. Finally, the device is complementary to our CNS psychiatry business, it reflects our commitment to bring a novel clinical tools to practitioners in this space to help them make informed decisions and enhance their level of patient care.

Thanks, Gilbert. And the final question that we're going to respond to is, what is the status of the trial investigation -- investigating the impact of Vascepa on COVID-19? Let me just start with a bit of context here. HLS is supporting the trial in collaboration with our partner, Amarin. The trial design is based on the scientific hypothesis that Vascepa may possess anti-inflammatory, anti-thrombotic and potentially antiviral properties, which could benefit patients suffering from COVID-19. They are looking to enroll about 100 patients in the trial and the duration of the trial for those selected is 14 days of Vascepa therapy. I just want to be clear, though, that HLS is not involved in executing or reporting on the trial, but it is our understanding from publicly available sources that enrollment in the trial has begun and that the target completion date for the trial is around the end of this year, 2020. So with that, this concludes the Q&A portion. So I want to thank everyone for attending today's meeting. Our second quarter ends June 30. And at this point, we expect to report our Q2 results in early August. Further details will be released closer to that date. On behalf of the Board of Directors and the broader team at HLS, we hope that you and your loved ones stay safe and healthy. That's all. Thank you very much, and goodbye.

Thank you, everyone. You may disconnect your line.