Medicure Inc. (MPH) Earnings Call Transcript & Summary

Welcome to Medicure's earnings conference call for the quarter ended September 30, 2023. My name is Holly, 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 risk and uncertainties include, amongst 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 22, 2023. I would now like to turn the conference call over to Dr. Albert Friesen, Chief Executive Officer of Medicure Inc. Please go ahead, Dr. Friesen.

Thank you, Holly. And good morning to everybody on the call. We appreciate your interest and participation in today's call. Joining me today on this Q3 2023 financial statement call is Dr. Neil Owens, President and Chief Operating Officer; and Haaris Uddin, Medicure's Chief Financial Officer. We're pleased to report that net revenue of $5.0 million for Q3 remained steady from the previous quarters with a net income of $77,000 or $0.01 per share, and EBITDA of $628,000, all showing consistent good financial returns, particularly when you consider we're also investing $508,000 in R&D in this past quarter for the growth potential. AGGRASTAT sales ZYPITAMAG sales and Marley Drug are provided net earnings. The 4 focuses of the business continues, that is sales and profits of AGGRASTAT, growing ZYPITAMAG revenue and profit, growing the Marley Drug Online business and development of MC-1 for the PNPO deficiency application. The acquisition of Marley Drug, the online pharmacy, delivering to homes in all 50 states and other territories through mail was to expand our sales reach of ZYPITAMAG, and it is contributing to the Medicure business. We believe the investments in experience over the past 25 years plus positions Medicure on a steady path for continued growth and success. I'd now like to turn the call over to Haaris Uddin, CFO, to review and provide some color on the financial results of the Q3 '23 financial statements.

Thank you, Dr. Friesen. 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 will be able to obtain a complete copy of our financial statements for the quarter ended September 30, 2023 by the end of the day today, along with previous financial statements on the Investors page of our website. Alternatively, a copy of all financial statements and management's discussion and analysis can be obtained immediately from sedar.com. I will now provide some key highlights of our financial performance for the quarter ended September 30, 2023. Total revenues for the 3-month period ended September 30, 2023, were $5 million compared to $5.3 million for the period ended September 30, 2022. Net revenues earned from AGGRASTAT during the current quarter totaled $2.4 million, a slight decrease from the prior year, where our net revenue from AGGRASTAT was $3.1 million. The decrease in AGGRASTAT revenue during the current quarter is the result of higher wholesaler fees on units of products sold in addition to increased competition from generic tirofiban in the current quarter. Net revenues earned from ZYPITAMAG during the current quarter totaled $398,000, which is a decrease from the $434,000 net revenue recorded during the prior year. The decrease in net revenue can be attributed to coverage gap rebates paid during the current period, in addition to higher wholesaler fees, offset by a higher volume of the ZYPITAMAG sold during the current period. The company continues to focus on ZYPITAMAG and see the growth of sales through both the traditional insured channels and through Marley Drug. Net revenues from Marley Drug during the current quarter totaled $2.2 million, which is an increase from the $1.8 million earned from Marley Drug during the same period in the prior year. The increase in Marley Drug sales during the current quarter is due to an increased volume of sales, including an increase in ZYPITAMAG sales through Marley Drug, which are also included within this figure. Moving on to cost of goods sold. AGGRASTAT cost of goods sold for the quarter ended September 30, 2023, totaled $648,000, an increase from the prior year, where cost of goods totaled $477,000. The increase noted in cost of goods sold for AGGRASTAT is a result of a onetime discount provided on specific batch of AGGRASTAT in the prior year by the product manufacturer, offset by a lower volume of products sold in the current quarter. ZYPITAMAG cost of goods sold for the quarter ended September 30, 2023, totaled $34,000, a decrease from the prior year where cost of goods sold for ZYPITAMAG, was $363,000. Included within the cost to good sold towards ZYPITAMAG is $163,000 relating to products sold to customers, $152,000 from amortization of the ZYPITAMAG intangible asset offset by a $281,000 recovery of previously expensed royalties, which the company deemed in the current period were recoverable. Marley Drug cost of goods sold totaled $680,000 during the quarter ended September 30, 2023, which is an increase from the prior year, where cost of goods sold totaled $551,000. The increase in cost of goods sold during the current quarter is a result of a higher volume of products sold through Marley Drug, which corresponds with the higher revenue during the current period. Selling expenses totaled $2.1 million for the quarter ended September 30, 2023, in comparison to $1.7 million during the same period in the prior year. Selling expenses increased in the current year due to the company recording a higher volume of products sold during the current period, in addition to inflationary increases the company has been subject to during the current year. General and administrative expenses totaled $1 million during the current period, which is a slight decrease from the same period in the prior year. The decrease in general and administrative expenses is primarily related to a decrease in professional fees paid by the company during the current period. The company had incurred additional professional fees in the prior year as a result of its e-commerce platform launching during the prior year. The decrease in professional fees during the current quarter is offset by higher stock-based compensation expense during the current quarter. Research and development expenses for the current period totaled $508,000 compared to $314,000 during the prior year. The decrease during the current year is primarily due to the timing of research and development expenditures relating to each development project the company is currently undertaking. The company recorded finance income of $3,000 during the current period compared to finance expense of $33,000 during the period ended September 30, 2022. The finance income recorded during the current period consisted primarily of interest income, offset by finance expense related to the company's lease obligations and bank charges. The company recorded a foreign exchange loss during the period ended September 30, 2023, of $17,000 compared to a foreign exchange gain of $10,000 during the same period in the prior year. The change from the prior year relates to changes in the U.S. dollar exchange rate during the respective years, which led to an unfavorable foreign exchange loss during the current period. Adjusted EBITDA for the quarter ended September 30, 2023, was $429,000 compared to an adjusted EBITDA of $1.3 million during the quarter ended September 30, 2022. The decrease in adjusted EBITDA during the current year is due to an increase -- is due to a decrease in operating income, which primarily stemmed from a decrease in overall revenue, higher selling expenses and higher R&D expenses offset by lower general and administrative expenses and lower cost of goods sold. As of September 30, 2023, the company had cash totaling approximately $5.6 million, an increase from the $4.9 million of cash held as of December 31, 2022. The company does not have any debt on its books. 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 of 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, Haaris, and good morning, everyone. I'll start with some further details on the AGGRASTAT business. Net revenue was impacted by a 5% decrease in volume of products sold in Q3 compared to the previous quarter. In Q3, the first generic tirofiban hydrochloride was launched for 2 product formats. However, it has only gained minimal market share. We continue to provide support to our more than 1,200 U.S. hospital accounts and promote the brand in order to maintain market share. Medicure remains the only manufacturer of the 3.75 milligram bolus vial format which is typically administered before the infusion unit. Medicure has also secured a 7-year contract through a private label with its largest hospital purchasing group. However, the company still faces challenges from GPO and wholesaler fees, product returns and price competition. Regarding ZYPITAMAG, we continue to see growth in prescriptions filled through Marley Drug, including a 3% increase in units dispensed in Q3 2023 compared to the previous quarter. Units dispensed through insured channels also increased by 5% in the quarter. However, net revenue through insured channels was impacted significantly in Q3 from adjustments from product returns and increased coverage GAAP fees, which is another reason why selling ZYPITAMAG through Marley Drug is an effective approach. We continue to build brand awareness through efforts of our sales and marketing team and are adding hundreds of new ZYPITAMAG customers each month. We are focused on lowering our customer acquisition costs and increasing customer retention. The market opportunity remains very large and we are reinvesting profit into sales and marketing of ZYPITAMAG. In Q3, net revenue for the Marley Drug pharmacy business was impacted by unfavorable PBM reimbursements for insured prescriptions. However, the company continues to add hundreds of new customers per month and the rate of addition has accelerated over the past 12 months. We continue to invest in further improvements in the e-commerce website to improve customer experience and through additions to the website, Marley Drug has become a leader in search engine traffic results for online pharmacies. Through organic and paid search, there has been an 80% increase in website visitors compared to the previous year. Medicure still plans to leverage Marley Drug's fulfillment and distribution capabilities in more business partnerships. The company is still focused on growing brand awareness through multiple media channels and through PR publicity. Overall, we continue to look for ways to rapidly expand the pharmacy business. Medicure's R&D focus is primarily on its Phase III study to seek approval of MC-1 as 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. In parallel to the planned Phase III study, Medicure is conducting several non-clinical studies to support the approval of MC-1 as requested by the FDA. If successful, use of Medicure legacy product MC-1 could lead to a priority review voucher, which can be redeemed or sold and provides significant value. The issue that the company is addressing before the start of the study is that some patients may need to crush their tablet, and the FDA has requested additional data on the impact of crushing on product quality. The crush tablet study was completed and submitted to FDA, and we expect a response very soon. For Q3, we are able to report a positive EBITDA of $628,000 and a net income of $84,000 due to the noted adjustments this quarter, which is the fifth consecutive quarter we've reported net income. We remain debt free and cash flow positive. Our goal is to continue growing revenue, controlling our costs and 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. Medicure's business, including the sales and marketing of ZYPITAMAG continues to grow. We're thankful for the continued strength of AGGRASTAT market share and certainly very pleased to continue to grow cash and have a strong balance sheet. We're still focusing on growing the business with a pipeline of products that will further diversify our revenue and asset base, carefully invest in to growth for 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 generating value for our shareholders. And as always, I want to express my sincere appreciation to our outstanding team of employees we're so blessed with. Thank you to our shareholders for your continued support and interest. So now moderator, I'll turn it back to you to entertain any questions. Look forward to our continued discussion.

[Operator Instructions] There are no questions in queue.

Again, thank you for all that are on the call. I appreciate your interest and wishing you all the best.

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.