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

Good day, and welcome to the Second Annual Winter Wonderland Best Ideas Conference. The next presenting company is Medexus Pharmaceuticals. [Operator Instructions] I'd now like to turn the floor over to today's host, Ken d'Entremont, CEO of Medexus Pharmaceuticals. Sir, the floor is yours.

Thank you very much, and thank you to the organizers of the Winter Wonderland Conference for the opportunity to present Medexus here today. Our forward-looking statements are available on our website at medexus.com. So just starting with an overview of the company, Medexus is really a focused commercial pharmaceutical company working in the orphan drug rare disease space in both the U.S. and Canada. We've got a fully built-out organization commercially in both territories, generating revenue of around USD 80 million off of about 16 products in total in the 2 countries, producing strong growth over the few years that we've been together. And about 12% ownership by management and Board, so interests are fully aligned with those of shareholders. So what we're looking to do is to significantly grow this organization and take advantage of having greater scale in these 2 markets. So the way we do that clearly is through organic growth of the existing portfolio. We have a portfolio, which I will show you on the next slide, which has got good growth potential, and so we think that will continue for some time into the future. And then we are always on the lookout for other opportunities within the therapeutic areas that we're interested in the territories that we're focused on. And so we are doing business development, both licensing and M&A, in order to continue to build the portfolio in both the U.S. and Canada. And then we do a little bit of product development. We don't do any true R&D, so there's no real R&D risk in this company. We do a little bit of product development, which typically in our hands, teams, we're improving the label for existing drug. So the only risk that you would find here would really be in the commercialization of the drugs we have on our portfolio. So this slide really describes the commercial organization in terms of field sales force. We have 40 people approximately in the U.S. when we deploy for treosulfan, and that's a drug I will speak to in a future slide. And then in Canada, we've got about 23 people who are calling on the specialist audience plus some primary care physicians. So the portfolio in Canada at this stage is a little further developed than it is in the U.S. and we are working to continue to grow the portfolio in the U.S. So when we're out talking to potential partners and acquisition targets, we use the fact that we've got a strong commercial organization that has launched many drugs within its history and built strong market positions. And that's really what we offer partners is that we have got the commercial infrastructure already in place. So obviously, when we add products to that infrastructure at good gross margins, it makes a significant contribution. This next slide really describes the product portfolio that we have today, a couple of points to be made here. First, that much of our portfolio is in the growth phase. We have products that will continue to grow into the future, specifically Metoject in Canada, IXINITY in the U.S., hopefully, we'll have it in Canada, and then Rupall in Canada. Those drugs, combined with Rasuvo in the U.S., that makes up a significantly large portion of our portfolio today. And then we have many products that were either in the process of launching or will launch in the near future, specifically Gleolan in Canada, treosulfan in both the U.S. and Canada, IXINITY in Canada, Triamcinolone in both territories. So we've got products that will drive future growth for our organization. And one of the main products is IXINITY. So IXINITY is a Factor IX for the treatment of Hemophilia B, that's basically the component of the blood that's missing from these hemophilia patients. This is about a $30 million drug in the U.S. It's got a very strong clinical profile. It's got a nice clean safety profile. Good recovery rate, which means the amount of product that the patient needs, and a good half-life. So it's got some competitive advantages over products that are in the market and so we think we can continue to grow this product as we go forward. And so that makes a significant contribution to our portfolio at this stage and will continue to do so. It has good patent coverage, IP coverage until 2030. Another product within our portfolio that's important and we are growing is Gleolan in Canada. This is a product for glioblastoma tumors. It basically causes the cancer tissue to fluoresce pink under blue light, which aids in the visualization of the tumor for the surgeon. And so that makes the surgery easier and hopefully more complete. So this is an important drug that we have recently launched in Canada, which we believe will grow into the future. In addition to that, Rupall, which is a prescription antihistamine, has been growing very, very strongly in the 4 years since it's been launched. You can see the kind of unusual growth curve. That's related to the seasonality of Rupall. It's a prescription antihistamine for seasonal allergies. So obviously, it peaked in the spring time and through the summer, kind of plateaus and then drops back down in the winter cycle. And then that cycle repeats itself. This drug last year grew above 30%, 4 years after it was launched. So we continue to expect this to grow strongly going forward. And then, Triamcinolone Hexacetonide is another drug we have in both territories. This is a prescription inter-articular injection for the treatment of Juvenile Idiopathic Arthritis and other forms of arthritis. We've got this now fully reimbursed and launched in Canada, and we're working to do the same thing in the U.S. We've got it licensed and preparing the registration documentation for the agency. So another drug that will produce some important revenue going forward. And then in addition to those, we've got Rasuvo and Metoject, which are basically injectable forms of methotrexate for the treatment of rheumatoid arthritis, different brand names in the 2 countries, so Rasuvo in the U.S., Metoject in Canada. Rasuvo in the U.S. has got over an 80% market share. So we launched this drug, drove it strongly with good marketing, sales support and reimbursement support to get a very strong market share in the U.S., which has been steady in the last few years during COVID. Metoject, the same product, basically in Canada with a different brand name. We've seen also strong growth and hold just under a 40% market share and expect that to grow. So we've got good drugs within our portfolio that will allow us to grow into the future. And then we have a nice pipeline. The pipeline, primarily at this stage, is a product called treosulfan for both the U.S. and Canada. We in-licensed this drug from Medac Pharma, a partner that we have in Europe. This drug is very attractive to us because it's a rare disease orphan drug. It's indicated or we expect it to be indicated for the treatment of stem cell, which is the treatment of bone marrow prior to stem cell transplant patient in various forms -- for various forms of leukemia. It has recently been approved and now commercially launched in Canada. It's attractive because it has a 7.5-year exclusivity and due to the fact that it's an orphan drug in the U.S. And so we've got good exclusivity for the drug and excellent market potential. The drug to which we compare ourselves head-to-head, called busulfan, produced over $126 million in revenue at its peak a few years ago prior to genericization. So treosulfan, which performed better than that drug, we believe, has got a very strong commercial potential. And so we do expect to capitalize on that in the near future. The drug did receive a complete response letter in August of this past year. We have now responded to that complete response letter with a Type A meeting, which was a few months ago and are in the process of resubmitting the application with the information that the agency wanted to see, which was not new information that had to be produced. So there was no new clinical work that had to be done. It's really just a collection of the raw data that the agency wanted to see in order to support the conclusion of the pivotal Phase III study. So we do believe that the resubmission will go in early in the second quarter of this year, and then it will take 2 to 6 months to review. So at the very outside, we think that a decision point will be October of this year. So at that point, we are confident that we will have the opportunity to market this drug in the U.S. as well. The reason we're confident that the drug will get approved is that it fits in the unique space for stem cell transplantation. The current strategies that exist today are myeloablative strategies, so a very strong and toxic drug. -- that bring along some pretty significant side effects. The other strategy is reduced intensity. So not quite as strong, but they don't have the same problematic side effect -- the issue with that strategy is that the leukemia often comes back. It comes back more often than with the myeloablative strategy. Treosulfan fits the unique space in that, it's very myeloablative so it's strong, but it doesn't have the same side effect profile as the other myeloablative conditioning agents. Therefore, it's more likely reduced intensity conditioning agents. So it has both the strength and the reduced side effect that puts it in quite a unique position. So for that reason, we believe that there is a very strong need for the product in the marketplace. And the slide that you're looking at now really is the pivotal study that basically demonstrates a significant improvement in survival relative to busulfan, the drug that I referenced earlier that did $126 million in peak sales. The slide on the left, the chart on the left basically demonstrates a 26% improvement in overall survival of patients that were treated with treosulfan, our drug, versus busulfan, the competitive drug. So a very significant improvement in overall survival for these leukemia patients. And so that's a very, very meaningful improvement. We also have very good pediatric data. The slide on the right basically demonstrates a 91% overall survival in children. So again, a very strong result. So we think that the drug has a very good commercial potential, and we are anxious to launch this in the U.S. The marketplace for it in the U.S. is basically 174 institutions that conduct the stem cell transplant. Of that 174, about 74% to 80% of the transplant, so it's a very targeted commercial opportunity to those institutions. And the good news for us is that about 41% of that 74% already have experience with the drug, either through the Phase II work, some of which was done in the U.S. or through investigator-initiated trials in the U.S. So we've got a group of physicians who already know the drug, who are looking forward to having access to the drug to treat their patients. So a very positive position for us to be in. This drug has now been registered in Canada, and we have launched it commercially. And it's beginning to generate the revenue in Canada, and we're anxious to do the same in the U.S. I'm going to turn it over to Marcel Konrad, who is our CFO, and he will speak to some of the more recent financial results.

Thank you. Thank you, Ken. Yes. So I'll give a next couple of slides, just a couple of financial points here. I've joined the company about 6 months ago. And what really attracted me to the company, other than what Ken has just talked through, is the financial results. If you look, I want to draw your attention to the chart on the right-hand side, first of all, this is a -- this is a growing -- really growing company, tripling sales, as you can see, between '19 and '21. So really good year-over-year growth. We are in the fiscal year March. So this year, you see here, you see the results after 6 months here versus 6 months prior year, where we disclosed the fact in November. We're obviously just close to earnings again, to give an update to that. But what we've disclosed back then from a company standpoint, we had a sequential growth quarter-over-quarter, what we announced that back then. You see we had an adjusted EBITDA, which is negative $2 million. As Ken had mentioned, that CRL. Obviously, back then, we had already spent funding for the launch of treosulfan. And now we've -- then obviously, stopped that spending and we're heading towards more positive territories, breakeven positive territories again. And our cash situation also is [ $8 billion ] back then. We're definitely here disclosing an update in a couple of days where we are at there. So essentially, that's the story of the company. The net income is here, $10 million. There's a fair value adjustment of our debentures in here, which caused that gain. The capital structure hasn't really changed much over the last few months. So I want to draw your attention again to 12% ownership here of management fully aligned to the company overall strategy. And our analyst coverage, we've added gross capital in the last 6 months in to [indiscernible] also that will enhance and spread the story, obviously, specifically in the U.S. as we as we're growing and expanding into the U.S. market then.

Thank you, Marcel. I'm just going to touch quickly on the management team. It's a group of people who we feel confident, have got capabilities to push this business forward and manage a much larger organization, a very active Board of Directors. And so we're fortunate to have a group of people who can help us reach our vision of growing a much, much bigger company. And so if you're looking for value drivers in the near future, clearly, resubmission of treosulfan and the subsequent FDA decision is one of them. Someone has asked a question about the resubmission. I think when we first -- I got the CRL this past August. We had anticipated that we would put the resubmission in towards the end of the first quarter, calendar quarter this year, which would be March. We're now thinking it's going to be April. So there's not really significant slippage in terms of the time line. It's probably about a month. And it's got nothing to do with new data or more data or anything like that. It's really just timeline needed in order to compile everything that the agency wants. And so we do have a clear view of the information that we're putting back in now. And that's being compiled, we feel good that it hopefully will answer the question that the agency has posed. Then you should also look for continued commercial execution in the current product portfolio and new products that we have. We've been talking about the IXINITY channel reset the last few quarters and what the impact of that is. We've got quarterly results going out later this week. So hope you tune into that to see the results of some of the work that we've been doing. Obviously, we continue to work on business development. And so we do have several active discussions ongoing, which we hope will bring new products to us in the near future. We are preparing for the filing of Triamcinolone Hexacetonide in U.S., which will be important. And then we have announced that the pediatric study on IXINITY is fully enrolled and should conclude around June of this year, which will give us 2 things. One, an opportunity to promote into pediatrics, which is a significant portion of the market. And two, our spending will come down as a result of concluding the trial. So that's where we are, and I'd be happy to take any questions.

I'm just going to flip to what's been posted here. There's a question about our plans to uplift in the U.S. This has been something we've talked about. We are looking for a catalyst in order to do that. Our original plan had included the treosulfan as that catalyst, expecting that, that was going to happen in April of this past year. Obviously, it didn't with the CRL, but we still have that plan. We think that the capital markets in the U.S. are the right place for us. A big portion of our revenue is coming from the U.S. already. I think it's about 75% or 80% of our revenue comes from the U.S. And clearly, with treosulfan more than doubling our company revenue, that percentage is going to go nowhere but up. So we think that the U.S. is the right capital market for us, and we do want to have some kind of catalyst that supports us. So that when we do go there, there's interest in our store. There are questions about Rasuvo and the growth prospects there and the competitive landscape and a competitive product called OTREXUP, which some of you may have seen was transacted a few weeks ago. So first of all, Rasuvo is the dominant player in that market. We hold about an 80% market share relative to OTREXUP. And it's a steady product. I mean, I don't think we're going to see dramatic growth in the U.S. We will continue to see growth in Canada. But in the U.S., we're viewing it as more of a mature product, single-digit sort of growth on units. And we will protect our share in the face of any competition that might come along. OTREXUP is a very similar product. It's not exactly the same, but certainly, it is an auto-injector of methotrexate, which is Rasuvo. The only difference is that the way you produce the amount of drug that's going to be injected. So it's a very similar product, not exactly the same. You may have seen that it was transacted recently for 2.8x revenue. So that gives you some sense of what somebody thinks the product in that space is worth. Just looking for the rest. Yes, there's a question about the cash position, and maybe I'll turn that over to Marcel to speak to cash and where we see ourselves with respect to profitability going forward.

Yes, certainly. So we have -- we came out of the fiscal year '21 with about $18 million of cash. And as you've seen from the numbers before, we're about at 8%. We have an ABL and asset base loan in place with MidCap, so we've got a little bit more availability to draw. So we're comfortable with the current level of cash, and we're obviously, now looking ahead and refocusing on the base business for the foreseeable future up to the FDA decision later this year and our base business from as you've seen from the 2021 financial statement has been profitable and produced some cash. Now, however, we will be, obviously, the next few quarters planning carefully the next step and up to the FDA decision with including obviously launch preparation and beyond.

There's a question, in the last couple of minutes, a question about organic growth in the business versus new products and what will be the revenue driver going forward. So organic growth is primarily coming from IXINITY. Unfortunately, it's been kind of overshadowed by this channel reset that we've been talking about for the first -- last couple of quarters. So when we acquired this drug, just to fill everybody in, it had a lot of product in the channel, which we're clearly aware of. And we expected that patient -- new patient growth would eventually normalize that channel. Going into COVID, which is exactly when we purchased it, new patient growth is more difficult. We are still getting new starts, but not at exactly the same rate. So we elected to reconnect or normalize basically the channel to demand, which caused a couple of down quarters for IXINITY. So even though we continue to grow IXINITY on a patient basis, that wasn't obvious in our results because of the correction in the channel. So now going forward, I think we'll start to see more of a connection between demand and ex-factory sales. And so you'll be able to see what the sales force is doing and the process that we have initiated a few quarters ago. So there's a question about overhead post-FDA approval. Yes, I think we've said that we had hired a bunch of people for treosulfan, and we kept those people after the CRL. So much of the management, marketing, sales management, reimbursement is all in place. What we did not hire was the sales force. And so we would add 16 people, 1-6, to the sales force that would promote treosulfan exclusively. There's a question about IXINITY revenue. Batch of IXINITY revenue that wasn't reported. We did have a write-off of a batch a few quarters ago. I think we will be talking about IXINITY gross margin going forward. So I would suggest anybody who's interested to tune in for the quarterly results, we'll have some update in that regard. I think that's the end of our time. So I'd like to thank everybody for listening to the story, supporting Medexus. We certainly appreciate that, and please stay tuned for progress as we go forward.

Ladies and gentlemen, this does conclude the Medexus Pharmaceuticals presentation. The next session will begin in 5 minutes. Please consult the conference agenda for the next presenting company. Remember, one-on-one meeting requests are still open, so be sure to log in to the conference platform to request more meetings. You may now disconnect.