Medexus Pharmaceuticals Inc. (MDP) Earnings Call Transcript & Summary

Medexus is a Specialty Pharmaceutical Company that is focused on a number of therapeutic areas, including hematology, rheumatology, autoimmune diseases, specialty oncology and pediatrics. The company recently announced that it has submitted an application to list on the NASDAQ Exchange as the business continues to grow in the U.S. Joining us for today's update are Ken d'Entremont, who's the CEO of Medexus; and Roland Bolvin, who's the CFO. Before we begin, I'll just caution that the presentation may contain some forward-looking statements that can be viewed on the company's website and on the presentation. The update will be followed by a question-and-answer period. [Operator Instructions]. So Ken and Ron, thanks for being here. It seems like you've had a few busy months, so I'm looking forward to the update.

Thank you, Tina. We've had some very busy months. And I think that was the reason to have this update. So we could bring everybody up to speed on what's transpired of late and an appropriate way to start the year. And that -- it's a new calendar year in a challenging situation with the pandemic. So we thought it was wise to give a bit of an update for everyone. I've got a few prepared comments that I'll make, and then we will open it up to questions from the audience. There were some questions that came in before this call. So I'll try and include those in my prepared comments and then open the floor to investors. So let's just start. Again, I'm not going to go into who we are because it seems like most of people on the call are familiar with our business and our business model. So I won't spend much time on that and really focused on some of the activity that's occurred within our business. Clearly, we've had a very busy period of late. It's about a year now since we did the acquisition of IXINITY. We closed that February 28 of last year. So now we're starting to see our business in a consistent view. And we're seeing that business evolve, particularly in the U.S., where now we have 2 strong product entries, and we expect that business to continue to expand as we go forward. I did mention at the end of the last quarter that there was a shipment of IXINITY that was delayed and would have otherwise been included in the last quarter. That shipment did go out. It is in this quarter, and we expect to see another quarter that we've just closed. Fiscal Q3 is very much like what we've seen in the last few quarters with IXINITY included. So we're very, very eager to share those results with you, which we expect to release sometime in mid-February. So our business now is very much gaining momentum. We see ourselves being over $100 million net revenue this fiscal year, which we're obviously now in the fiscal fourth quarter. And producing strong EBITDA. So I think this is the new normal, and we are looking to expand our business now beyond where we are today. And I just remind you that we really see 3 avenues for us to expand our business. Clearly, organic growth is very important. We've got 4 good assets that are growing strongly and continue to perform well even in this COVID situation. Obviously, Rasuvo and IXINITY in the U.S. Rupall and Metoject in Canada. And someone asked the question, well, what about the rest of the portfolio, how is that performing? And so I can tell you that we're very, very excited about some of the new developments that we have in our portfolio. Trispan for intra articular injections for JIA and other forms of arthritis is now starting to get traction in the Canadian marketplace. Gliolan, which we announced, I guess, several weeks ago now before the holidays, it has been approved. We're working towards commercialization, which will be initiated now, we know, at the beginning of March. So it will start to make an impact in this fiscal quarter. And then you saw a price spend U.S. So obviously, TH U.S., we've now completed that deal. We think that will make a significant contribution going forward. We do believe now that we will get some revenue from that drug even before registration. Much like in Canada, the agency was interested in gaining and solving the drug shortage, the same situation exists in the U.S. So we are in regular discussions with the FDA. We're in regular discussions with the physician community that treats these patients to find a way to solve the drug shortage. So we think that we will start to deliver product to customers and hospitals in the near-term prior to registration. And the people were asking about Cuvposa, Techcell, Oralvisc, all of these products are growing nicely, just that they're not big products within our portfolio. So even in spite of the COVID situation, we are seeing growth in our portfolio because most of our drugs are for chronic diseases and people need these on a regular basis. I think the -- I've said on other calls, the only product that really has had a significant impact as a result of COVID is NYDA, which is for head lice. And so clearly, that's a communicable disease. So head lice, just like other viruses, we're separating and making all these public health maneuvers in order to prevent the spread of such diseases in this. So clearly, head life is also down pretty sharply. So it's clear that separation helps to reduce communal diseases. So clearly, that's down. But everything else in our portfolio was up nicely. You probably saw the news today that we did ironically say that we've extended the NYDA agreement, and that is very good news because it gives a much longer term to the drug and there is a pretty significant improvement coming in that drug. So once the COVID situation clears, obviously, something like head lice is going to respond in rebound. And so we fully expect that, that drug will significantly rebound post pandemic. So I guess the answer to the question is, all of our portfolio is growing nicely with small exceptions. And we do expect that to continue into the future. The other obvious mechanism for our growth is clearly business development, whether it be through licensing or acquisitions. And as you all know, we've been pretty active in that front and in that effort. The last time we spoke, I think, at the quarterly results, I did mention that we had 3 late-stage licensing deals that we were hoping that we would conclude. Obviously, one of them was TH in the U.S., and we now have concluded that. Now we have 2 pretty late-stage licensing deals that we're hopeful we can conclude. I hope we can get them both, but there's no guarantee until the agreements are signed. Both our licensing deals, both are very strategic and one is for the U.S., one is for Canada. So we're eager to find a way to continue to build our business. And once we get through the deals that are in front of us, clearly, we're looking for more opportunities that will become future products. And then finally, the third avenue for growth for us is product development, not R&D. As you all know, we don't really do any to true R&D. We do, do some product development to enhance the label of existing drugs and drugs within our portfolio. And so our R&D line that you're seeing now is all related to the pediatric study for IXINITY. And so that pediatric study is progressing nicely. I think we announced last time that we're at 50% enrollment. We're now at 64% enrollment. And again, we've made progress on that clinical trial, even in spite of the COVID situation, and we've been able to do that because we've initiated a lot of different sites throughout the world. So if COVID is a problem in one area, we can shift our attention to another clinical site in order to enroll patients. So we are excited, we think we'll finish that this calendar year. And if not this calendar year, certainly early next year. So that will be a significant progression for us going forward. And then I guess, finally, something that we just announced last week was really the work that we've been doing on our corporate development strategy. And clearly, we think that the NASDAQ listing is important for us. We think that will help close the valuation gap that exists between ourselves and many of our peers. And we have initiated that process. So we believe that we qualify for that exchange. And we're hopeful that in the not-too-distant future, we'll be able to list there. I would point out that part of the reason for the delay was the IXINITY transaction. The IXINITY transaction because it was so large, caused a hold of 12 months for listing on NASDAQ. So that hold is over on March 1. And so we think that following that, we will be in a strong position to list on that exchange. So we're very, very enthusiastic about our business going forward. We think that we have got lots of opportunity to grow. And so now we're very much focused on continuing to execute to see this business grow strongly to produce strong revenue, strong EBITDA. We've said from the very beginning that it's important to have scale in this business. We believe that we are starting to produce scale. We've got a portfolio today that can bring us to $150 million or $200 million net revenue. We think some of the licensing deals that we're working on can bring us well beyond that. So we're part of the way along our journey. We do want to see a much larger company. We want to continue to leverage the infrastructure that we have in place. I think that was well demonstrated with the IXINITY deal, where our ratio of SG&A to net revenue went from 65% to somewhere in the range of 45%. And so an excellent demonstration of what we think we want to do with this business. So that's the end of my formal comments. So we're happy to take questions to answer any questions anybody might have.

Yes. Thanks, Ken. That was a great update. Obviously, the NASDAQ listing is pretty exciting, and I think a lot of the action that the company has taken over the last 12 months have definitely accumulated into this turning point for the company. I know the press release mentioned a 129% CAGR over the last 3 fiscal years. So that's obviously a pretty significant number. Can you tell us where most of that growth has been coming from?

Yes. I think it's 2 things. Obviously, our base portfolio, our organic growth has been strong. Rasuvo, high single-digit. Metoject, high double-digit. IXINITY, about a 40% growth. And then Rupall, 45% growth. So our core brands have been growing strongly. And then obviously, the acquisitions, you mean adding IXINITY, which was, I think, USD 32 million net revenue when we acquired it, growing at a 40% rate, adding that to the top line and then not really significantly changing our infrastructure had a really significant improvement in our results. So yes, I think that -- it's been a combination of both organic growth and the acquisitions that we've been doing, and we expect to continue along basically that path.

And for anyone who's new to the story, can you just give a bit of a refresher on IXINITY and then talk about the value proposition for the pediatric trial, but also the potential to launch in Canada and partner in the rest of the world.

Sure. So IXINITY, hemophilia B, it's a factor IX for the treatment of hemophilia B, rare disease, only been launched so far in the U.S. We did acquire international rights, as Tina has suggested. So the international rights, we will execute Canada on our own. So we are preparing the registration file. That should be completed this quarter. So we'll do Canada on our own. And then we're looking to out-license rest of world. We have no interest or plans to build infrastructure outside of the U.S. or Canada. And so we'll look for partners in those other territories. I guess 6 or 8 weeks ago we added Michael Pine, who is a VP of Business Development strategy. That's one of his objectives to find partners in other territories. So we think we can continue to grow IXINITY in the U.S., add Canada, out-license other territories. So it's got a lot of growth potential left in it. Obviously, factor IX is the core treatment for hemophilia B patients. And we're seeing that the standard half-life factor IX products continue to do well even in face of these extended half-life products. We're actually seeing some shifts back from extended half-life to standard half-life because an active patient gets better coverage with a standard half-life than they do it with an extended half-life, it's as simile as that. So we think a lot of growth in IXINITY. And that opens up another therapeutic market to us. I mean, obviously, we've got interest in hematology. And so that was a very good entry into that market, and we could adequately cover it with existing infrastructure.

TH is a bit of a smaller market in the U.S., but you were approached by the FDA to move into the U.S. with this product. So can you talk about the previous production issues and why the FDA approached you to do this?

Yes. So it's exactly the same situation that we corrected in Canada where it was subject to drug shortage. In Canada, we sold it via the SAP process, which is basically a name patient process for drugs that are in shortage that are critical drugs and then move to get it properly fully registered in Canada. We couldn't use the same drug in the U.S. because the manufacturing facility wasn't FDA approved. So we had to go out and find another facility that could produce the drug for us. We have found that. It's acceptable to the FDA. We are now moving to close that gap in drug shortage for the U.S., we think it's a significant opportunity. AristoSpan, which is the previous drug before the drug shortage hit was in the tens of millions of net revenue. I think it was in the range of $50 million or $60 million net revenue. Our objective is not quite that brand because we think we'll get a portion of that business back from the audience that we call on, which is primarily rheumatology. And so we think that we'll quickly get the juvenile idiopathic arthritis business back and then expand into adult patients when it's fully registered.

And given the history of the drug, I would think that this is a fairly lower risk and higher probability of FDA approval and meeting those time lines that you indicated in the press release?

Yes, absolutely. It's drug shortage for a drug that is the drug of choice for children. And so FDA is highly motivated to get this drug back on market because these children need it. I mean -- and it's not insignificant. I mean, this drug works twice as long as the other drug that's available to them. So no one wants to subject the child to an intra articular injection more frequently than necessary. So clearly, the agency, physicians and patients are all totally aligned to get this drug back to market. So we think we're doing the right thing by getting it to market. We're the right people to do it because we have the resources in rheumatology and knowledge of this area and knowledge of having done it before with Health Canada.

And you mentioned that the Canadian products, things are still progressing well on that side as well. I think a lot of attention is being focused on the U.S. space with this NASDAQ listing. But if we could spend a minute talking about Gliolan. How are things progressing on that front? And I know there's been good reception from the medical community. So maybe you can address that as well.

Sure. Gliolan is a fascinating drug because it's first-in-class. Gliolan, I'll just remind you, is for the treatment of glioblastoma tumors, the most common type of cancer is brain tumor. Typically when a neurosurgical goes to cut out such a tumor. They do it under white light with a microscope. But it's very hard to see the margins. So typically, there is residual cancer that's left behind after the surgery. Gliolan, because it fluoresces cancerous tissue, fluoresces pink when the surgeon uses blue light through the microscope so you can clearly see what is cancerous and what is not. So it allows a physician to do a more complete resection which leads to better outcomes. There is data that demonstrates a 6-month improvement in overall survival for these patients by using Gliolan versus traditional white light. So there's a strong amount of interest from the neurosurgeons to get access to this drug. Even in the COVID situation, it's fascinating to see the level of interest because we have to train these physicians how to use the drug during neurosurgery. And typically, what you would have done in pre-COVID times was go in to the OR with an expert, and they would share their knowledge. It obviously isn't possible now. So what we've been doing is doing it via teleconference, so close circuit television. And so you can get a much larger audience to watch the video of a surgeon actually conducting a live case and that's the way we're training people. So we're nearly to the end of that and almost got everybody trained who wants to be trained and has access to the equipment. And in March, we expect to receive our first commercial batch, and we'll start to actually sell the product out into the marketplace. So we expect to have pretty quick uptake. There's a ton of demand out there. Obviously, physicians want it. And more importantly, the patients want it because it's very helpful in what is a very devastating disease.

Just on the topic of sales and commercialization. We got a lot of questions about the compensation structure for the sales team. Can you talk about that and whether or not you're planning on hiring any more reps?

Sure. So I'll start with the compensation structure. It's a typical compensation structure for big pharma. It's a pretty satisfactory base salary plus expenses, travel expenses when they're traveling. These are typically all science grads, experienced salespeople who've been in pharma, they know how to sell the story to experts who are the physicians. And so we got a pretty healthy base salary and then are incented with sales increases. So obviously, there's sales component to motivate them to try and drive growth within our business. So that's the model that we use. And then in terms of sales force, additional sales force, we don't need any sales force for the current year -- we don't need any additional sales force for the current portfolio because we're reaching all the targets that we have. So as we add drugs like Trispan is an excellent example. We had a drug that could do another $20 million, say, in the U.S., and we don't need any additional infrastructure. We're already calling on all those targets. So that's a perfect fit for our portfolio. So that's the sort of licensing and acquisitions we're looking to do. Other products that leverage what already is in place in our commercial infrastructure, both U.S. and Canada.

So in terms of the current product portfolio, there's a significant percentage of the revenues that are coming from Rasuvo, Metoject, IXINITY, Rupall. What kind of revenues do you think that some of these other products, Gliolan, Trispan could generate over the next few years? Will those become a larger part of the portfolio? Or would you expect some of the other products to continue to outshine them, so to speak?

Yes, they definitely will become a larger part of the portfolio. Trispan or TH in the U.S., can be a very significant product for us. Gliolan can be a very significant product in Canada, in the millions of dollars range, probably single -- high single-digit sort of millions of dollars. It really depends on how broadly it gets used within glioblastomas, what stage of glioblastoma it gets used in. The other products are good complementary products like Cuvposa and Otixal. Cuvposa, we're waiting for some additional information, data, reimbursement which will give us opportunity to grow. So all of these things can be significant contributors around what right now is the 4-key products.

And someone was asking from the audience about your patent protection on some of your bigger drugs. Can you provide us with an overview of that?

Sure. So Rasuvo has got patent protection out to 2029. IXINITY has patent protection out to 2030. Even at 2030, we don't expect to see any generic competition, primarily because of the cost of developing biosimilars. You typically need $1 billion worldwide drugs before it makes any sense to develop a biosimilar for a biologic. So we have got patent protection up to 2030, but we think its exclusivity life goes beyond that. Rupall, we've got protection data -- data exclusivity out through 2024. Metoject, we have patent exclusivity up to 2027. Metoject is being -- patent is being challenged by a competitive product now. We're performing very well versus that competitive product. Our units are continuing to come in strong. So even in a competitive situation, I think we're performing well. And we're obviously challenging that situation in the courts. And anyone who knows the Canadian patent situation, court situation, it's a loser pay situation. So if we win, we will recoup all of our costs and lost profits. So we're obviously pursuing that to its fullest extent.

Okay. Great. We've got a couple of questions about the NASDAQ listing. I don't know if you can provide timing or what you're thinking in terms of timing on getting NASDAQ approval?

I don't think I can really say anything more than what I've already said. We've put the paperwork in as per our press release last week, it will be reviewed. It's a pretty short process. It's not a long drawn-out process. You know that we tick all the boxes for the requirements. So the path that we've chosen is the simplest path forward. And doesn't require a lot of review. And that's why we elected to wait until the whole period of 12 months was over, so we could use this specific path. And so we think it will happen in the not-too-distant future, assuming that we do indeed qualify as per the agency and the market.

And there's a question about talking -- whether or not you're talking to U.S. analysts. Obviously, you're working with Crescendo, who's done a great job at making some U.S. introductions for investors as well. So maybe you can talk about the level of interest from the U.S. investment side.

Yes, Crescendo has been very helpful for us to identify investors, both institutional and retail investors and some of the investment banks that could provide coverage. And one thing that we heard consistently during those discussions was the need to upgrade our listing to a Tier-1 exchange. And so we clearly responded to that advice. And so we hope that as a result of now being listed on a U.S. exchange, that we'll start to get some U.S. coverage. We think that our business model is an attractive one. We think that we performed well in the past and delivered what we had planned to do. So we think that we will get some coverage once we get properly listed.

Okay. Great. And there are a couple more product-related questions. How would the other drugs, excluding IXINITY fare against generic competition?

There aren't really any other drugs that are experiencing generic competition right now.

I assume that means once -- they're asking once the patents are expired?

Yes, I think we would expect that other than IXINITY, which we think will have a long-life, the other drugs are fairly well positioned, and we will hold on to a share. We think that they will plateau at a point where generic competition comes in. And in some places, they may erode. But clearly, we've got antigeneric strategies in place where we will hopefully prove on -- improve on those products to extend their exclusivity. A good example is Rupall, the standard game plan for an antihistamine, prescription antihistamine is to bring it over-the-counter, which extends the effect of life. So clearly, we're thinking about that. We're also thinking about improvements on Rupall that would again extend its life, and we're doing that on all products. So our plan is to try and extend it as much as possible.

And I think you mentioned this already, but there was a question about the growth of the current portfolio. So if we don't -- if the company doesn't make any in-licensing or acquisitions, how big can that current portfolio get?

We think current portfolio can be in the range of $150 million to $200 million net revenue. That's with drugs that are in the portfolio. I think TH in the U.S. wasn't part of that calculation. So we think that will be incremental to those numbers. And then as you alluded to, additional business development is what we think helps drive us to a number more in the $400 million or $500 million net revenue range. I mean personally, that's where I would like to see it. I think at that stage, you've got sufficient scale. We'll be in a different category of products. We'll get a lot of attention, and that would be an attractive business for other players.

Okay. And I think you addressed this as well. But has there been any interest in IXINITY from markets outside of Canada and the U.S. for licensing opportunities?

Yes. So we've been fielding incoming inquiries because every time we do something like this, we certainly put the message out there. We're looking for partners. And so Michael Pine, who's our VP BD fielding those inquiries and responding. So there have been several from Asia, Latin America, and now we're looking for something in Western Europe.

Okay, great. And obviously, recently, there's been a lot more liquidity in the stock. It seems like there are more eyes on the story. What do you attribute that to? I think, obviously, the company has been doing more marketing and just getting the story out there.

Yes, absolutely. I mean, I think the marketing actually is a big piece of it. Obviously, the work we've been doing with Adelaide has helped us reach investors that we hadn't spoken to previously. Crescendo and Frank Candido, who does some IR work for us as well, are helping us reach out to investors who didn't know the story previously. So that has clearly helped. It's brought additional volume. We put the market maker in place in order to close the spread. That has led to better volume. And so we think we have momentum now. The underlying business is very strong, and we think we'll get stronger, and the markets seem to be responding.

Yes. It's definitely been a busy year for Medexus, which has been great. So why don't we leave it with one last question, which is that, what's the vision for the company in the next 5 years in terms of revenue, portfolio of drugs and sales force?

Yes. I think my personal goal is to see $100 million net revenue company. I can clearly see how we can get to $200 million to $250 million with existing portfolio, adding TH into it. And we're out there looking for the products that will drive us well beyond that. I think our U.S. business, 2 assets. It can handle a lot more. So we expect there will be good opportunities that get us up into a $500 million net revenue range. And that, to me, then we're beginning to have scale that. That will be -- that's a meaningful goal to me. I think we can achieve that.

Yes. Well, thanks for the update. Appreciate it. And it's great to see so much going on with the company and also a small cap delivering on such significant growth. I think it's rare to see a company and management team that's delivered on everything that they said they would do. And obviously, 129% CAGR is nothing to complain about. So that's great. And congratulations.

Thank you, Tina. Much appreciate it. Thanks to all the investors supporting us.

Thanks.