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

Greetings. Welcome to the Medexus Pharmaceuticals fiscal fourth quarter and year end 2026 conference call. [Operator Instructions] Please note, this conference is being recorded. I will now like to turn the conference over to your host Victoria Rutherford, Investor Relations of Medexus. You may begin.

Thank you and good morning, everyone. Welcome to the Medexus Pharmaceuticals fiscal fourth quarter and year end 2026 earnings call. On the call this morning are Kenneth d'Entremont, Chief Executive Officer, and Brendon Buschman, Chief Financial Officer. If you have any questions after the conference call or would like further information about the company, please contact Adelaide Capital at (480) 625-5772. I would like to remind everyone that this discussion will include forward-looking information as defined in Canadian Securities Laws that is based on certain assumptions that Medexus believes to be reasonable in the circumstances, but is subject to risks and uncertainties. Actual results may differ materially from historical results or results anticipated by the forward-looking information. In addition, this discussion will also include non-GAAP measures, such as adjusted EBITDA, adjusted EBITDA margin, and adjusted gross margin and net debt, which do not have any standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. For more information about forward-looking information and non-GAAP measures, including reconciliations, please refer to the Company's MD&A, which along with the financial statements, is available on the company website at www.medexus.com and on SEDAR+ at www.sedarplus.ca. As a reminder, Medexus reports on a March 31 fiscal year basis. Medexus reports financial results in U.S. dollars, and all references are to U.S. dollars unless otherwise specified. I would now like to turn the call over to Ken d'Entremont.

Thank you, Victoria, and thanks, everyone, for joining us on the call today. We're proud to report that product-level net revenue performance for GRAFAPEX, net of working capital changes, was accretive to quarterly operating cash flows in fiscal Q4 2026, representing a significant milestone in the commercialization of the product. We're encouraged by GRAFAPEX's strong progress to date with product-level performance continuing to demonstrate strong momentum, and continue to expect annual product-level net revenue to exceed $100 million within 5 years after commercial launch. For the 12-month period ending March 31, 2026, we recognized product-level net revenue from GRAFAPEX of $11.6 million, exceeding the $11.2 million we invested in the GRAFAPEX launch over the same period. Building on this momentum, we expect GRAFAPEX to generate product-level net revenue between $30 million and $32 million for fiscal year 2027 and to drive our growth and operating cash flows moving forward. As of today, 74 of all 180 transplant centers have already ordered GRAFAPEX for procedures in their institutions, and 54 of those 74 institutions have reordered. Overall, our fiscal Q4 2026 results remain strong, delivering positive operating income, adjusted EBITDA, and operating cash flows. These results reflect the portfolio evolution we have discussed in past quarters as we build on the continued growth momentum from GRAFAPEX. We expect future periods to provide a clearer view of highlighting the growth of GRAFAPEX relative to the underlying strength and resilience of the rest of our portfolio of products outside the allo-HSCT space. The continued momentum of GRAFAPEX and our ongoing business development initiatives focused on allo-HSCT will build on that foundation and position Medexus for sustainable long-term growth. Our fiscal Q4 '26 net revenue was $24.7 million, a decrease compared to $24.8 million for the same period last year. Our fiscal Q4 '26 Adjusted EBITDA was $4.3 million, an increase compared to $2.3 million for the same period last year. Our net loss of $2.7 million for fiscal Q4 '26 is a decrease from the net loss of $0.6 million for the same period last year, and positive operating income of $1.2 million is an increase of $2.4 million compared to the operating loss of $1.2 million for the same period last year. We're also proud of the financial results we are reporting for our fiscal year 2026. Our fiscal year 2026 net revenue was $99.3 million, which compares to $108.3 million for fiscal year '25. The $9.0 million year-over-year decrease in net revenue primarily reflects the lower product-level net revenue from Gleolan in the United States following the March 2025 termination of our U.S. Gleolan agreement and from Rupall in Canada due to generic competition. The decrease was partially offset by contributions from GRAFAPEX and the strength in Rasuvo. We reported adjusted EBITDA of $16.5 million for fiscal year 2026, which compares to $20.2 million for fiscal year 2025. The $3.7 million decrease in adjusted EBITDA was primarily driven by the factors affecting net revenue that I just mentioned. We reported net loss of $2.4 million for fiscal year 2026 compared to net income of $2.2 million for fiscal year 2025. Last, I want to touch base on a new business development opportunity we secured in the HSCT space. Earlier this month, we signed agreements for the exclusive Canadian rights to commercialize UM171 Cell Therapy. This is a proprietary, advanced clinical stage investigational drug that recently received conditional marketing authorization in Europe from the European Commission as Zemcelpro. Given its current stage of development in Canada, we do not expect to begin commercialization of the product before calendar year 2028, with the exact timing to depend on a number of factors, including our ongoing evaluation of available regulatory pathways. The product candidate is an excellent strategic fit with treosulfan, our existing hemato-oncology product, which we commercialize in Canada, as Trecondyv. As you all know, our organization is already well acquainted with the allo-HSCT field, and although the field continues to rapidly evolve, we see this product candidate as an important potential contribution to the Canadian market and to our medium-term product pipeline. We otherwise remain focused on delivering strong overall performance across our portfolio of products in both the United States and Canada. We have continued building our momentum with GRAFAPEX in the United States, and we look to strategically position the company to capitalize on future revenue opportunities in the allo-HSCT space going forward. I'd now like to turn the call over to Brendon, who will discuss our financial results in more detail.

Thank you, Ken. As Ken mentioned, fiscal year 2026 was an important transitional year for Medexus, being the first fiscal year reflecting product-level performance of GRAFAPEX. Throughout the anticipated evolution of our established product portfolio, largely now reflected in our results, the company delivered positive operating income and continued to generate strong financial performance with GRAFAPEX contributing positively to operating cash flows in fiscal Q4 '26 as anticipated. Net revenue for fiscal Q4 '26 was $24.7 million, a decrease of $0.1 million compared to $24.8 million for the same period last year. Net revenue for the full year was $99.3 million, reflecting a $9 million decrease compared to $108.3 million in the prior year. These decreases were primarily due to reduced product-level net revenue resulting from the return of Gleolan in the United States to the licensor and the genericization of Rupall in Canada. In all, Medexus generated approximately $87.7 million of net revenue from our established portfolio and $11.6 million of net revenue from GRAFAPEX in fiscal year '26. Gross profit was $13.3 million and $54.4 million for the 3- and 12-month periods ended March 31, 2026, compared to Gross profit of $12.4 million and $56.6 million for the same periods in the previous year. Gross margin was 53.8% and 54.8% for the 3- and 12-month periods ending March 31, 2026, which is an improvement compared to 50.2% and 52.2% for the same periods in the previous year. The increase in gross margin was driven by the change we are seeing in the relative contribution of product-level net revenue, in particular, an increasing level of net sales of GRAFAPEX and the absence of sales of Gleolan in the US. Selling, general, and administrative expenses were $10.6 million and $45.9 million for the 3- and 12-month periods ended March 31, 2026, compared to $12.2 million and $43.2 million for the same periods in the previous year. Adjusted EBITDA for the 3- and 12-month periods ended March 31, 2026 was $4.3 million and $16.5 million, compared to $2.3 million and $20.2 million for the same periods in the previous year. A $2 million increase in Adjusted EBITDA for fiscal Q4 '26 benefited from product-level net revenue from GRAFAPEX of $3.4 million, exceeding the $2.7 million of GRAFAPEX personnel and infrastructure investments in the same period. Net loss for the 3- and 12-month periods ended March 31, 2026 was $2.7 million and $2.4 million, compared to net loss of $0.6 million and net income of $2.2 million for the same periods last year. We continue to generate cash from our operating activities with operating cash flow of $3.8 million and $18.9 million for the 3- and 12-month periods ending March 31, 2026, compared to $2.3 million and $24 million for the 3- and 12-month periods in the prior year. Even while continuing to invest in the launch of GRAFAPEX, we have generated an average of $4.2 million of cash from operating activities per quarter in the five quarters since launch. Cash on hand was $6.5 million at March 31, '26, compared to $24 million at March 31, '25. The notable factor in these changes was our payment in full of the $15 million regulatory milestone under our GRAFAPEX agreement over the course of fiscal year 2026. We've meaningfully strengthened our balance sheet with our new credit agreement with National Bank of Canada, which includes significantly lower quarterly principal repayments, with net debt to adjusted EBITDA of 0.95x for the trailing four fiscal quarters ended March 31, 2026. Our financial strength has enabled us to repurchase 1.2 million common shares to date under our NCIB. As of March 31, 2026, we had a combined $22.4 million of debt outstanding under our two National Bank credit facilities, consisting of $2.5 million drawn under our revolving credit facility and the remainder outstanding under our term loan facility. As we mentioned previously, our fiscal year 2026 results highlight the strength of our established portfolio and position Medexus for a more growth-oriented future through GRAFAPEX and within allo-HSCT. As always, there can be variability in quarter-to-quarter results, but we look forward and are energized to continue to build the company and its portfolio in the coming quarters and beyond. Operator, we will now open the call to analyst questions.

Certainly, at this time, we will be conducting a question and answer session. [Operator Instructions] Your first question for today is from Scott Henry with Alliance Global Partners.

A lot of progress. Congratulations. It's really commendable. For starters, GRAFAPEX, it looks like your guidance is $30 million to $32 million for fiscal 2027, which is a pretty tight range, but also a pretty good range. Can you talk a little bit about how the cadence to reach those numbers? Where the inflection point would come, because that's certainly very strong growth over Q4 -- fiscal Q4.

Yeah, I'll take that. Thanks, Scott. Great question. Yeah, obviously, we're seeing very strong uptake in GRAFAPEX. The 50% growth sequentially quarter-over-quarter is very meaningful. As we've disclosed in previous quarters, there are a large number of hospitals who have the product under formulary review. So we expect that the increase in revenue for GRAFAPEX will come from two sources. One, hospitals who have already ordered, they'll increase the volume of their orders, and then two, new hospitals coming on board. So obviously, we expect to see quarter-over-quarter progression to get us to that $30 million to $32 million for the full year.

And is there any seasonality we should factor into the year when we think about the quarters? Because all the signals would be that fiscal Q4 would have to be a double-digit million quarter to reach these numbers. Can you talk to the seasonality and how we should expect that progression? Obviously, the tilt is upward throughout the year, but is there any kind of bolus quarter that we should think about?

Yeah, again, a good question. And so the seasonality that we observed last year was that in the summer months, there are fewer procedures, particularly for non-malignant disease. And so we would expect that, that's going to probably replay. So July and August ought to be a little bit slower. We've seen good quarter this quarter, it's kind of within -- and then, as we go forward, summer ought to be slower, and then it tends to accelerate through the fall months. Again, December with the holiday season, there are probably fewer procedures. So it's more related to the numbers of procedures, and the availability of transplanters than anything else. And so we do expect to see that play out. The magnitude of the changes, we don't really know. We're only into -- starting year 2 now. So, we don't know the magnitude of the change, but we do expect to see some seasonality.

Okay. It's an impressive target, I'll say that. And then with regards to Canada, obviously, the quarterly run rate a lot lower than it used to be. Should we think of that as kind of flattish for now, or do you expect some rebound? I'm sure the dollar strength is not helping those numbers either. But, how should we think about the Canadian revenues in fiscal year 2027?

I'll turn that over to Brendon.

Yeah, I think for the Canadian revenues and really all of our what we can kind of call our established portfolio, which is everything, but GRAFAPEX. The noise that would have come through the return of Gleolan to the licensor in the U.S. and the genericization of Rupall have been mostly -- we've just seen that noise kind of erased. So, I think if you're just kind of taking that and kind of considering that to be durable again on both sides of the border that would be the right way to look at it.

Okay. And then final question, Rasuvo and IXINITY are still meaningful franchises for you. How should we think about the revenue growth rates for those two franchises in the U.S. in fiscal year '27? Should we -- modest growth, modest decline? Just trying to get a sense of big picture directionally how we should think about those two franchises. Thank you.

I'll maybe quickly start on that one. Yeah. It would be the same answer. It's like, think of it as durable. I wouldn't model in any sort of meaningful growth, nor would I model in any sort of meaningful erosion in both of those products.

Your next question for today is from Michael Freeman with Raymond James.

Ken, Brendon, Victoria. Congratulations on the quarter, the year. GRAFAPEX is looking really good. So, on GRAFAPEX, I see that you've cited that 74 of the 180 transplant institutions have ordered GRAFAPEX as of, yeah, it looks like as of the date of the press release. So, around first quarter end. I'm curious, one, if you could confirm that's true, that is at first quarter end, and second, I wonder if you have the information of how many of these institutions have GRAFAPEX on formulary today.

Michael. Yeah, great question. So, the number of institutions ordering, that's as of the most recent information before the press release, so a few days ago. In terms of how many have them on formulary, most of them. There's no standard answer here. But typically, having on formulary creates access to the drug. But that's not always the case. There are some hospitals, many pediatric hospitals, where it doesn't need to be on formulary. They still have full access to the drug. So we're only tracking the ones where we have and reporting on the ones where we have listings. But we don't need them all listed. There are some hospitals that have full access of the drug without having it on the formulary, and that's fine for us. The important thing is, can they use it without restrictions? And so, we're reporting right now, I think, really good uptake in terms of formulary listings. It's very much on track for where we expect to be. And we'll continue to work on the rest of the hospitals through the rest of this year.

On commercial health plans covering GRAFAPEX. You in the MD&A cited some impressive total covered lives figures. Also cited that at the end of March -- end of the year, there were 42 total health plans that have established coverage pathways for GRAFAPEX. I noticed that this number has stepped down from the number cited in the fiscal third quarter, and I wonder if there's -- what would explain the difference in those numbers.

Yeah, so it's an impressive number. I mean, there's always changing in the landscape on the commercial payer side, plans consolidating, et cetera. So I think the important number is how many lives covered, and that's a very impressive number. I forget it exactly, but it's over $200 million. So we've got most of the lives covered. And I would add that we've had no issues in terms of getting product for people commercially. And so that, that isn't a problem at all. And so, yeah, the very broad access to the drug at the price that we've set. So on the reimbursement side we see it as quite positive.

Got it. All right. No, no issues with access. That's great. Now I wonder if you could touch on the -- your recent business development for UM171. I wonder if you could dive in a little further into the most likely regulatory pathways you see with Health Canada. And then I wonder how this deal sort of reframes your business development focus. Do you see more opportunity to pick up assets in the allo-HSCT space, or do you expect to go broader in the future?

Yeah, again, great question, because it speaks to our the strategy behind the business. In recent quarters, I think we've been describing a transition away from a diversified spec pharma company operating three therapeutic areas to a rare disease orphan drug company operating in one therapeutic area, specifically HSCT and adjacent areas. And so that transition has largely happened. I think UM171 is an example of that. We have developed a very strong presence and knowledge of HSCT transplant and adjacent areas. And so, yes, our business development effort is focused exclusively in HSCT and adjacent areas that -- that's where our strength is. That's where we have product portfolio. So UM171 is a perfect strategic fit, aligned with GRAFAPEX. If you think about it, GRAFAPEX is the first step in a transplant where they condition the bone marrow, and UM171 is a potential cell source. So where they replace what was there. So there -- it's an absolute perfect strategic fit, and we're super eager to start to pursue that. With respect to your question about the regulatory pathway, we obviously are investigating that. The way we see it is that there are two potential pathways. One like Europe, where there are patients who can't find donors where this could be a cell source. And that would likely be a faster regulatory pathway because there's unmet medical need and the regulator, we would hope, would find an expedited path in order to serve that need. The second pathway is complete the clinical development through a Phase III study that the partner would do and then register based on that clinical work. So, those two pathways we think exist, but of course, we have to sit down with the regulator and make sure that they see it the same way and take their advice and direction.

And maybe one more for Brendon. I wonder if you could help us understand what we should expect for SG&A as revenue scales through this year.

Yeah, no, good question. So, we've kind of guided to the $3 million to $4 million that we expect to be incurring specific to GRAFAPEX. I am blanking on what it was this last quarter. I think it was $2.7 million. I know it was just in my -- what I said at the top of the call. So, we would see, we do expect a little bit of an increase to SG&A over the course of 2027 if you kind of compare it to 2026. What I would also just say, while we're kind of talking about OpEx or that part of the P&L, we also would expect an increase in R&D spending specific to IITs that are kind of happening in GRAFAPEX as well as we've commented on the spend to continue to improve the IXINITY process. So, I think we'll see a modest increase in SG&A, and then a little bit more of a meaningful increase in R&D in fiscal year 2027.

Okay. All right. Thank you very much for that. Congratulations again. I'll pass it on.

Your next question is from David Martin with Bloom Burton.

Yeah, good morning. I've got a couple of questions. First related to Michael's questions. You talked about potentially an expedited path or complete the clinical development. And I'm just wondering what the timeline for approval would be in both of those scenarios.

Thanks, David. I think that matches up with what we put in the press release, which was 2028 versus 2031. I think, was the dates that we laid out.

Okay. Second question, you talk about HSCT and adjacent areas. I'm wondering what the adjacent areas are.

Yeah, I think bringing patients into a transplant. Obviously, there's a lot of different disease states where they have to do the chemotherapy in order to prepare them for potential transplant. So, those areas we would be interested in. So AML, MDS, there's other bloodborne cancers that we would be interested in. So anything that would be in the transplant space specifically. We now have in Canada at least two products in transplant, specifically, nice to add something for GVHD prophylaxis, for example. Other areas within transplant, but then the adjacent areas and patients coming into transplant that obviously would be a target that we would have infrastructure and experience that we could address.

Okay, thanks. I think last quarter, you mentioned that wholesaler inventory was down to 1.5 to 2 months, and it looks like it was drawn down further this quarter with the patient level used at $3.9 million and the revenues of $3.4 million. Are wholesalers starting to stock back up, and should we expect, like, a surge in the current quarter?

Yeah, I'd speak to that. I wouldn't -- certainly wouldn't guide to a surge. The amount that the wholesaler will hold at any given time could be anywhere from, it typically doesn't go below one month, and it rarely goes above two, but where it is at quarter end can be kind of anywhere in between those two things. So yeah, I would typically guide towards expecting that it'll probably stay somewhere in the 1 to 1.5 months of inventory on hand going forward for this quarter, but -- or sorry, for this coming year and onwards, but we have no control over that ultimately.

So, the only thing I would add is that obviously, as our monthly volume grows, the amount of inventory they're going to hold will grow appropriately.

Okay. Okay. And then last question on Rasuvo. You talked about the increase because of withdrawal of a competitor, but then you finished with subject to future changes in competitive market dynamics. Are you anticipating the competitor will come back on the market? Are you anticipating another competitor might leave the market? Or is that just a general statement?

I think more or less a general statement. There's always the potential this competitor could come back. There's work that would be needed to be done in order to come back. There aren't any other competitor that could leave. I mean we're currently the only auto injector of methotrexate. So it's possible that there could be shortages in other forms of methotrexate, which has happened in the past. And so all those dynamics could happen, but it's more of a cautionary statement than anything.

[Operator Instructions] We have reached the end of the question and answer session, and I will now turn the call over to Ken for closing remarks.

Great. Thank you. I just want to thank everyone for joining us on the call today. We have to continue to build and advance on GRAFAPEX in the coming months and quarters. It's driven strong performance. We look to reporting on rest of the year fiscal 2027. Thank you very much.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.