Medicure Inc. (MPH) Earnings Call Transcript & Summary

Welcome to Medicure's earnings conference call for the quarter ended September 30, 2021. My name is Anders, and I will be your operator for today's call. [Operator Instructions]. 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 and 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 November 23, 2021. I would now like to turn the conference over to Dr. Albert Friesen, Chief Executive Officer of Medicure Inc. Please go ahead, Dr. Friesen.

Thank you, Anders, and good morning to you all on the call. We appreciate your interest and your participation in today's call. Joining me today is Chief Financial Officer; David Gurvey; and Dr. Neil Owens, President and Chief Operating Officer. This morning, we'll be discussing the third quarter of 2021. We are pleased with the positive trend of revenue and modest but increasing EBITDA quarter-over-quarter. The sales of AGGRASTAT have stabilized, and we are pleased with the positioning of our December 2020 acquisition Marley Drug as it gets set to launch our e-commerce platform, as we just recently announced. One of the reasons we acquired Marley Drug, a pharmacy uniquely positioned to dispense medications to Americans in all 50 states and territories through mail was to expand our sales reach for ZYPITAMAG. The acquisition also gives us the opportunity to provide all FDA-approved medications at affordable prices. We believe the best way to do this is through a direct-to-consumer approach through the e-commerce platform, coupled with our existing infrastructure. Marley Drug's new e-commerce website will be a platform where FDA-approved medications, including ZYPITAMAG can be purchased at a discount price by all Americans with home delivery to all 50 states with a valid prescription. The goal of the platform is to bypass the traditional framework run by health insurers and pharmacy benefit managers that has made access to affordable medications too expensive for many Americans, including both generic and branded drug products just as ZYPITAMAG. More than 120 million Americans uninsured and underinsured struggled to access affordable medications and are looking for a trusted and convenient source to fill their medications. Marley drug will offer industry-leading pricing on more than 100 of the most commonly prescribed generic chronic care medications with free nationwide delivery. Additional medication will also be on the platform. The platform will focus on ease of use and customer service and is differentiated by being able to ship to every state. That being said, the sales and marketing of AGGRASTAT franchise continues as does our dedication to growing ZYPITAMAG business with our direct marketing to patients. The new e-commerce Marley Drug platform will help accelerate this, and we are optimistic about the months ahead. The revenue of the third quarter of 2021 was $4.9 million. AGGRASTAT revenue was $2.9 million, similar to the previous quarter. Marley was $1.74 million, and ZYPITAMAG was $638,000. As mentioned, the main focus at present is on the sales and marketing of AGGRASTAT, ZYPITAMAG and further leveraging the Marley Drug pharmacy with the launch of a new e-commerce platform, which we believe can provide great margins and potential. We believe the investments in the past few quarters in our programs and onboarding new products will provide the growth in the revenue and profits for coming quarters and years. It takes time and persistence to make this reality. Medicure has a good cardiovascular product portfolio, a track record of growing sales and a great team with energy, talent and experience to build a strong growing company. I'll now turn over the call to Chief Financial Officer, David Gurvey.

Thank you, Dr. Friesen, and good morning, everyone. 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 can obtain a complete copy of our financial statements for the year ended December 31, 2020, and the quarter ended September 30, 2021, along with previous financial statements on the Investors page of our website, and a copy of all financial statements and management discussion and analysis can be obtained from sedar.com. Looking at the quarter ended September 30, 2021, total revenues for Q3 2021 were $4.9 million compared to $3.5 million for Q3 2020. Net revenues from AGGRASTAT for the quarter ended September 30, 2021, totaled $2.9 million, which is lower than the net revenues from AGGRASTAT for the same quarter of 2020 at $3.4 million due to higher cost of goods and pricing pressure. The company earned net revenues from ZYPITAMAG for Q3 2021 of $388,000, over 3x the net revenues from Q3 2020 of $105,000. The company continues to focus on ZYPITAMAG and expects revenues to grow through the remainder of 2021 and beyond. Then to the cost of goods sold. AGGRASTAT cost of goods sold for Q3 2021 totaled $849,000 compared with $733,000 for Q3 2020. This resulted in gross margins for the quarter of approximately 70%, a slight expected decrease due to competitive pressures from the approximately 78% for the same quarter of the prior year. ZYPITAMAG cost of goods sold for Q3 2021 totaled $638,000 and includes $56,000 related to products sold to customers, $570,000 from amortization of the ZYPITAMAG intangible assets and $12,000 relating to royalties on sale of ZYPITAMAG, resulting from the acquisition of the product in September 2019. Removing the amortization would result in a very strong gross margin from the product of approximately 82%. As a result of the acquisition of Marley Drug, the company recorded cost of goods sold of $550,000 during Q3 2021 pertaining to the cost of products sold by Marley Drug in-store and mail order pharmaceutical business. Selling expenses totaled $2.6 million for Q3 2021, up from $923,000 for Q3 2020. This increase in selling expenses when compared to the same quarter in the prior year, primarily due to the acquisition of Marley Drug and increase in marketing spend. General and administrative expenses totaled $538,000 for Q3 2021, down from $1.3 million from the same quarter in the prior year. The decrease in general and administrative expenses was primarily related to lower legal costs associated with the company's patent challenge, which were settled in the fourth quarter of 2020 and cost reductions implemented by the company during 2021. Research and development expenses for Q3 2021 totaled $488,000 compared to $737,000 for Q3 2020. The decrease is primarily a result of different levels of activity in regard to Medicure's research program quarter to quarter. The company recorded finance expense of $40,000 for Q3 2021. This relates to accretion on the company's AGGRASTAT royalty obligation, accretion on the ZYPITAMAG acquisition payable, accretion on the company's contingent consideration associated with the Marley Drug acquisition, finance expenses related to the company's lease obligations and bank charges. This compares to finance income for Q3 2020 of $99,000, which again, primarily relates to the accretion on the company's royalty obligation and acquisition payable, finance expenses related to the company's lease obligations and bank charges, partially offset by interest on cash held by the company. The company recorded a foreign exchange loss during Q3 2021 of $226,000 compared to a loss of $210,000 in Q3 2020. The change relates to changes in the U.S. dollar exchange rate during the respective periods, which led to the foreign exchange losses. This results in a net loss for the quarter of $946,000 or $0.09 per share compared to $1.05 million or $0.10 a share for the Q3 2020 period. The change in the net loss is due to increased revenue, reduced general and administrative expenses and research and development expenses and is primarily driven by the amortization of the ZYPITAMAG intangible assets. Adjusted EBITDA for Q3 '21 was a positive $282,000 compared to an adjusted EBITDA of just $4,000 in Q3 2020. The change is primarily due to the increase in revenues and decrease in general and admin expenses and research and development expenses, partially offset by increase in selling expenses. As of September 30, 2021, the company had cash totaling approximately $3.3 million, up from $2.7 million as of December 31, 2020. As of September 30, 2021, the company had net working capital of $3.1 million compared to net working capital at December 31, 2020, of $3.4 million. The company does not have any debt on its books. However, we are in the process of finalizing the revolving credit facility with a commercial bank to provide flexibility and to take advantages of opportunities should they arise. 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 and 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 operations.

Thank you, David, and good morning, everyone. As the COVID-19 pandemic has evolved, so has our sales approach. We have started to return to in-person meetings and conferences in United States, in addition to virtual meetings with health care professionals and above all, putting a greater emphasis on implementing innovative marketing strategies. We are still very limited in our ability to visit hospitals, and therefore, there has been a greater impact on meeting with interventional cardiologists regarding AGGRASTAT. We've also seen some disruptions to the supply chain of materials required for manufacturing. However, these remain limited and short-lived. AGGRASTAT continues to see consistent demand, with a 4% increase in units sold compared to Q2 2021 and a 9% increase compared to Q3 2020. There was also a 4% increase in net revenue compared to Q2. However, due to variation in wholesaler purchasing, cost of goods and price competition from generic eptifibatide, there has been a decrease in net selling price of AGGRASTAT in order to maintain market share, resulting in lower net revenue for the quarter compared to Q3 2020. Medicure, along with the SAVI-PCI Steering Committee, recently announced the results of the clinical study at the annual TCT national meeting, which provides the clinical and safety profile of using AGGRASTAT with shortened infusion. The randomized study met its primary endpoints to demonstrate non-inferiority compared to label-dosing INTEGRILIN or to a long infusion. Notably, there were 0 major bleeding events using AGGRASTAT with a shortened infusion. We think this study will provide important evidence to support use of AGGRASTAT in patients who require protection from ischemic events while limiting risk of bleeding. We thank the steering committee again for their efforts and contributions and seeing the study through to completion and publication. Turning to ZYPITAMAG. We continue to see consistent growth, prescriptions filled through Marley Drug, which translates to a threefold growth in net revenue compared to Q3 2020. However, we're still not satisfied and continue to push and do expect to see continued growth through the cash flow [indiscernible] as the response from providers is still very positive towards the ease of access and certainty of filling prescriptions through Marley Drug. We continue to invest in marketing through TV, print and digital media to consumers and providers. Sales of Marley Drug were below Q2. However, we expect those to rebound, especially through new sales initiatives, including the launch of an e-commerce platform, mentioned by Dr. Friesen and others we have yet to announce. As mentioned, being able to ship to all 50 states is a distinguishing feature that we plan to leverage. We continue to evaluate branded products and products with high market share potential to add to Medicure's portfolio. And those that would align well with our focus and contacts in the U.S. market, especially those that can be sold through Marley Drug. In Q4 2020, Medicure announced the filing of an IND for a pivotal Phase III study [ to become ] 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. We continue to make progress in patient recruitment and site setup and look forward to study kickoff. If successful, use of Medicure's legacy product MC-1 could lead to a priority review voucher, which can be redeemed to obtain priority review for any subsequent marketing application. Medicure continues to work to develop additional cardiovascular abbreviated new drug applications or ANDAs for in-hospital use. However, the regulatory review process has resulted in a delay in approval of one of ANDAs, due to deficiencies reported in Medicure's contracted manufacturing partner. Medicure is working with this partner on resolving these issues to obtain the necessary approvals. We are pleased to report a positive EBITDA in Q3. Our team wants our investors to know that we are driven and dedicated to growing revenue, controlling our costs and to making Medicure a long-term success. With that, I'd like to turn the call back to Dr. Friesen for final comments.

Thank you, Neil. There was considerable learning in the 2020 and 2021 period and significant developments for the company, which included the acquisition of Marley Drug, which we think strongly complements Medicure's business, including the sales and marketing of ZYPITAMAG. We're thankful for the continued strength in AGGRASTAT market share and strong balance sheet. We're still focused on growing the business with the pipeline of cardiovascular products that will further diversify our revenue and asset base, carefully investing to grow our future profitability. My goal and that of our Board, management and staff is to continue to build this business with a stable, long-term outlook to generate value for our shareholders. And as always, I want to express my sincere appreciation to the outstanding team of employees we've been so blessed with. Thank you to our shareholders for continued support and interest. Now moderator, I'll turn it back to you for the Q&A, and we welcome your questions.

[Operator Instructions] There are no questions at this time. Dr. Friesen, you may proceed.

Thank you, again, for all the -- who were on the call. I appreciate your time and look forward to further discussions at our next report. Wishing you all the best for the day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.