Medicure Inc. (MPH) Earnings Call Transcript & Summary

Welcome to Medicure's Earnings Conference Call for the First Quarter ended June 30, 2024. My name is Kelly, 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 August 15, 2024. I would now like to turn the conference call over to Dr. Albert Friesen, Chief Executive Officer of Medicure Inc. Please go ahead.

Thank you, Kelly, and good morning to all on the call. We appreciate your interest and participation in today's call. Joining me today on the Q2 2024 financial statement call Dr. Neil Owens, President and Chief Operating Officer; and Haaris Uddin, Medicure's Chief Financial Officer. The net revenue for Q2 '24 was $5.2 million, which is down a bit from the previous quarter of $5.7 million and a bit of an increase over the Q4 '23, which was $5.1 million. The quarter we had -- for the quarter, we had a loss of $1.2 million compared to a net income of $253,000 for the same quarter last year. The loss was primarily due to a significant increase in R&D expenses for the quarter, which were $868,000 for the MC-1, PNPO clinical trial as well as higher Marley Drug costs of goods, lower AGGRASTAT revenue as well as general and administrative expenses. In summary, revenue for AGGRASTAT was down a bit and revenue from both Marley Drug and ZYPITAMAG were up a bit. Again, our 4 focuses of the business are holding sales and profits for AGGRASTAT. Growing ZYPITAMAG revenue and profit, growing the Marley Drug online pharmacy and the pharmacy business and the development of MC-1 for the PNPO deficiency indication. And now I'd like to turn the call over to our Chief Financial Officer, Haaris Uddin, to review and provide some color on Q2.

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 June 30, 2024, by the end of day today, along with previous financial statements on the Investors page of our website. Alternatively, a copy of all financial statements and the 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 3-month period ended June 30, 2024. Total revenues for the quarter ended June 30, 2024, were $5.2 million compared to $6 million for the quarter ended June 30, 2023. Net revenues earned from AGGRASTAT during the current period totaled $1.8 million, a decrease from the prior year where net revenue from AGGRASTAT was $2.6 million. The decrease in AGGRASTAT revenue during the current year is a result of a lower number of units sold in addition to pricing pressures from increased competition stemming from the launch of generic tirofiban hydrochloride. Net revenues earned from ZYPITAMAG, through the traditional insurance channel during the current quarter totaled $654,000, which is a slight decrease from the $722,000 net revenue earned during the same period in the prior year. The slight decrease in ZYPITAMAG sales to the traditional insurance channel can be attributed can be attributed to higher insurance rebates due to a change in customer mix. For Marley Drugs, net revenue during the current quarter totaled $2.7 million, which is consistent with the same period in the prior year where net revenue was also $2.7 million. The slight increase in Marley Drug sales during the current period is due to an increased volume of sales, including an increased volume of ZYPITAMAG sales through Marley Drug, which are included within this figure. Offsetting these increases are higher pharmacy benefit manager, or PBM, rebates during the current period. The company continues to focus on growing Marley Drug and growing the sales of ZYPITAMAG through Marley Drug into 2024 and beyond. AGGRASTAT cost of goods sales for the quarter ended June 30, 2024, totaled $604,000 a decrease on the prior year, where cost of goods sold totaled $659,000. The decrease in cost of goods sold is the result of a lower volume of AGGRASTAT sold during the current period. The ZYPITAMAG cost of goods sold for the current quarter totaled $353,000, a slight increase from the prior year for cost of goods sold for ZYPITAMAG for the quarter ended totaled $300,000. Included within the cost of goods for ZYPITAMAG is a $199,000 [indiscernible] to products sold to customers and a $154,000 of amortization of the ZYPITAMAG intangible assets. The slight increase in cost of goods sold noted during the current quarter is due to a higher volume of products sold during the current year. Marley Drug cost of good sold totaled $1.25 million during the period ended June 30, 2024, and an increase in the period ended June 30, 2023, where cost of goods sold totaled $900,000. The increase in cost of goods sold during the current year as a result of a higher volume and the nature of products sold through both the mail order and e-commerce platform during the current year. Selling expenses totaled $1.8 million for the quarter ended June 30, 2024, a decrease from the same period in the prior year, where selling expenses were also $2.1 million. Selling expenses decreased in the current year as a result of less consulting expenses incurred by the company with regards to regulatory reporting on its government contracts in addition to an overall decrease in revenue noted during the current quarter, resulting in less logistics fees paid by the company. General and administrative expenses totaled $1.4 million for the quarter ended June 30, 2024, in comparison to $1.1 million during the same quarter in the prior year. The increase in general and administrative expenses in the current period is a result of higher legal fees, offset by lower share-based compensation expense on the previously granted stock options to key employees and directors of the company. Research and development expenses for the quarter ended June 30, 2024, totaled $868,000 compared to $668,000 during the same quarter in the prior year. The increase in -- during the current period is primarily due to the timing of research and development expenditures relating to each development project the company is currently undertaking, which in the current quarter primarily related to the development of MC-1. The company recorded finance income of $36,000 during the period ended June 30, 2024, in comparison to finance income of 22,000 during the 3-month period ended June 30, 2023. The finance income recorded during the current period consisted primarily of interest income earned on cash held by the company, offset by bank charges and finance expenses on the company's lease obligations. The company recorded a foreign exchange loss of $25,000 during the quarter ended June 30, 2024, in comparison to a foreign exchange loss of $30,000 during the quarter ended June 30, 2023. The change in foreign exchange loss related 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 June 30, 2024, was negative $514,000 compared to an adjusted EBITDA of $948,000 during the quarter ended June 30, 2023. The decrease in adjusted EBITDA during the current period is due to higher Marley Drug cost of goods sold, lower AGGRASTAT revenue as well as higher research and development expenses and higher general and administrative expenses. Offsetting these increases was the decrease in selling expenses and higher ZYPITAMAG sales to the Marley Drug Pharmacy business. As at June 30, 2024, the company had cash totaling approximately $5.8 million, a slight decrease from the $6.4 million of cash held as of December 31, 2023. 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'd like to start with some further details on our Marley Drug business. For Q2, net revenue was consistent with Q1 at $2.7 million. This is due to a 3% increase in ZYPITAMAG sold through the Pharmacy business. While there was a decline in some generic medication sales due to pricing competition, which offset overall growth. Medicure is still trying to leverage Marley Drugs reputation for customer service and national distribution and more business partnerships. Notably, the sale of BRENZAVVY tables through Marley Drug contributed revenue of $250,000 in Q2, which is an accessible alternative SGLT2 inhibitor to brand Jardiance and Farxiga. While still early, we are seeing uptake in growth, and we'll continue to focus on it and other branded solutions in 2024. A second example is the exclusive sale of sitagliptin which is a first generic entry for another popular diabetes medication. The company is still focused on growing brand awareness, through multiple media channels. And overall, we continue to look for ways to rapidly expand the pharmacy business. Challenges we have faced include not being able to control reimbursement through insurance companies for insured prescriptions and fluctuations in cost of goods, which impact our margins. Further on [indiscernible] ZYPITAMAG, net revenues for insured channels in the standard retail pharmacy model fell from $777,000 and in Q1 2024 to $654,000 in Q2 due to a modest decrease in purchasing from wholesalers and changes in the mix of our insured customers. We are in the process of a consolidated -- consolidating our insured customers through Marley Drug instead of other retail pharmacies as this approach is more profitable for the company. Patients still have challenges in accessing ZYPITAMAG through their insurance coverage, which is the reason why selling ZYPITAMAG through Marley Drug is such an effective approach. Similarly, due to wholesaler and coverage gap fees, low PBM reimbursement and product returns, selling from Marley Drug provides a much higher gross margin. Overall, we continue to focus on brand awareness through efforts of our sales and marketing team and are still seeing a lot of interest from providers and patients. In terms of our AGGRASTAT business, net revenue was impacted in Q2 by generic tirofiban [ entries ] and as a result, revenue decreased from $2.3 million in Q1 2024 to $1.8 million in Q2. The decrease was expected and is due to both a decrease in volume of products sold and pricing. Medicure remains the only manufacturer of the 3.75 milligram bolus 3.75 milligram bolus vial format, which is typically administered before the infusion units. We continue to provide support to our U.S. hospital accounts and plan to remain competitive in targeted ways and therefore, expect to maintain significant market share. 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 clinical study, Medicure is conducting several nonclinical studies to support the approval of MC-1 as requested by the FDA. If successful use of Medicure's legacy product MC-1 could lead to a priority review voucher, which can be redeemed or sold and provides significant value. The FDA granted approval to start enrollment and so the company is now in the launch phase of the study. Medicure also recently received Fast Track designation for MC-1 for its intended indication which will facilitate the review of Medicure's FDA new drug application. Medicure did decide to remove the entire coating on the MC-1 tablets to speed up absorption based on feedback from clinicians, and therefore, are in the process of producing that batch of product for patients waiting to enroll. Medicure recently announced that it's signed an asset purchase agreement for the acquisition of the patent and intellectual property related to the discovery of new chemical entities that can be developed for therapeutic use. We believe that these new chemical entities will promise to provide improvements over existing lead compounds, in alignment with the treatment of disease is being targeted by Medicure and could provide significant long-term value upon completion of all required non-clinical and clinical studies and regulatory approval. Despite similar overall revenue in Q2 compared to Q1 because of higher Marley Drug cost of goods, lower AGGRASTAT revenue as well as higher research and development expenses and general and administrative expenses this quarter, we are reporting a negative EBITDA of $514,000 and a net loss of $1.2 million. Medicure remains debt-free. And to reiterate the company's short-term goals are focused on maintaining AGGRASTAT, growing ZYPITAMAG and Marley Drug sales, growing our Pharmacy business through partnerships and acquisition and developments of new products. short term, seeking the approval of MC-1 to receive that priority review venture and long term, the development of our new intellectual property for diseases with large market potential. With that, I'd like to turn the call back to Dr. Friesen for final comments.

Thank you, Neil. We're not satisfied with the loss for the quarter. So we are looking at our cutting costs in some of our operations, but mostly looking at where we can improve our profitability and some of the sales. As we continue to be committed to the PNPO trial, which has a significant return on investment. Our management goal and that of our Board, continues to build -- is to continue to build this business with a stable long-term outlook to generate value for shareholders. And as always, I want to express my sincere appreciation to the outstanding team of employees we've been blessed with. Thank you, our shareholders for continued support and interest. And now I'll turn it back to the moderator for questions and answers.

[Operator Instructions]. There are no questions in queue at this time. I would now like to turn the floor back over to Dr. Friesen for any closing remarks.

Thank you for being on the call. We appreciate your interest and look forward to our call coming up for Q3. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.