IntelGenx Technologies Corp.
Q3 2021 Earnings Call Transcript

Published: 11 Nov 2021

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the IntelGenx Third Quarter 2021 Financial Results. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Stephen Kilmer, Investor Relations. Sir, the floor is yours.

[Stephen Kilmer:]

Thank you. Good afternoon, everyone, and thank you for joining us on today's call. With me on the line are Dr. Horst Zerbe, IntelGenx's CEO; and Andre Godin, our President and CFO, Tommy Kenny, our General Counsel and Dr. Dana Matzen, the Company’s Vice President of Business and Corporate Development. Before we begin, I would like to remind you that all amounts mentioned today are in U.S. dollars, unless otherwise mentioned, and today's call may contain forward-looking information that represents our expectations as of today and, accordingly, are subject to change. We do not undertake any obligation to update any forward-looking statements, except as may be required by U.S. and Canadian Securities Laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks, and results may differ materially. Details on these risks and assumptions can be found in our filings with the U.S. and Canadian Securities Commissions. Finally, a quick administrative note in that regard. The SEC is close today, because of Memorial Day. So our filings for Q3 won't be accessible on EDGAR and SEDAR until tomorrow morning. With that said, I would now like to turn over the call to Dr. Zerbe. Horst.

[Horst Zerbe:]

Thank you, Steve. Good afternoon, everyone, and thank you for joining us for the IntelGenx third quarter 2021 conference call. On today's call, I will provide a corporate update and discuss the progress we have made on our key pipeline projects. Following that, Andre will review our Q3 2021 financial results. Then we will open up the line for your questions. First on the atai partnership. On August 4th, we appointed two atai delegates Frank Stegert to our Board of Directors. As a reminder our partnership agreement with atai provides that they are entitled to board representation proportional to their stake in the company. Their 25% ownership position entitles them to two board seats. Dr. Srinivas Rao is one of the cofounders of atai Life Sciences and currently serves as its Chief Scientific Officer. Mr. Rao as we refer to improve - process experience in the pharmaceutical and biotechnology industries. He was serve on IntelGenx’s compensation committee. We also welcome Frank Stegert, atai's Vice President of Investment Management and Operation. Frank serves on our audit committee. We very much look forward to Srini's and Frank's contributions as we continue to execute on our growth strategies. In September, we entered into an amended and restated secured loan agreement with atai Life Sciences which committed $6 million in future financial support to IntelGenx. We needed to secure this loan facility in order to meet certain requirements in conjunction with our uplisting to the TSX. Now moving on to RIZAPORT, we were pleased to announce earlier in the quarter that Exeltis our RIZAPORT commercialization partner in 27 European Union countries has finally launched RIZAPORT in Spain. This is a major milestone for IntelGenx as this is the first versatile based products to launch in the global pharmaceutical market. Because of this neutral flavor and favorable mode of administration, it does not require swallowing a pill for consuming water. We believe that RIZAPORT VersaFilm offers an attractive therapeutic alternatives for migraine patients, especially for those estimated 80% of patients who suffer from migraine related nausea, as well as those who suffer from dysphasia or difficulties swallowing. The European migraine drug market is expected to approach US$1.5 billion by 2024, we are looking forward to continuing to support EXORDIA launch of RIZAPORT in Spain and in additional European countries in the future. Now moving on to Tadalafil, in September, we announced that a Aquestive Therapeutics for co-development and commercialization partner for Tadalafil Oral Films entered into a definitive licensing supply agreement with an undisclosed leading men's health company. Tadalafil, as you will remember is approved for the treatment of erectile dysfunction and benign prostatic hyperplasia or BPH. This is an important development - with Aquestive that will help make Tadalafil Oral Films available to men suffering from these conditions. Now cannabis films, in August, we completed an initial shipment of CBD Filmstrips in support of the launch of Heritage Cannabis CB4 Control brands in Canada. This partnership helps IntelGenx with condition from a development to commercial stage company. And we are looking forward to continuing to work with Heritage on oral film cannabis products. On Montelukast, In August, we closed a $2.1 million convertible notes offering with U.S. investors, the proceeds of which will be used to finance our Montelukast study. In Q2 of 2020, we placed on hold of Phase IIa BUENA clinical trial in patients with mild to moderate Alzheimer's disease, because the target study population is considered to be a higher risk group for severe illness from COVID-19. This quarter, we resumed patient screening for this study, which is proceeding under the amended protocol with a higher daily dose that was previously cleared by Health Canada. We are very excited to resume this trial and evaluate the potential of Montelukast as much needed treatment for Alzheimer disease patients. And with that, I would now like to turn the call over to Andre for review of our financial results. Andre.

[Andre Godin:]

Thank you Horst. Good afternoon, everyone. As Horst mentioned, I will take a few minutes to discuss the Company’s financial performance for the third quarter of 2021. Total revenue for the third quarter of 2021 amounted to 593,000 compared to 510,000 same period last year. That was an increase of 16% and it is mainly attributable to an increase in sales milestones revenue of 320,000 and product revenue of 70,000. That was partially offset by a 308,000 decrease in revenues from licensing agreement. Operating costs and expenses were 2.2 million for Q3 2021 versus 1.9 million for the corresponding three month period of 2020. The increase is mainly attributable to increases of 26,000 in R&D expenses, 255,000 in manufacturing expenses, 37,000 in SG&A and 17,000 in depreciation of tangible assets. One of the factor for the increase in operating expense was related to the COVID-19 government assistance programs that we receive in 2020 but not just here in 2021. For Q3 2021, the Company had an operating loss of 1.6 million compared to an operating loss of 1.4 for the comparable period of 2020. Adjusted EBITDA was negative 1.4 for Q3 2021, compared to negative 1.2 million for the same period last year. Net comprehensive loss was 2.2 million or $0.01 on a basic and diluted per share basis for Q3 of this year compared to a net comprehensive loss of 1.6 million or also $0.01 per share for the comparable period of 2020. As of September 30, 2021, the Company’s cash and short-term investments totaled $12 million. As everybody knows last month, we achieved the major milestones by graduating to the TSX. Canada's premier stock exchange. We believe this uplifting will help increase IntelGenx visibility among a broader and more devices range of institutional investors. Also, following the end of the quarter, approximately 2.8 million shares were issued following debenture and no conversion, which has reduced our total debt by approximately 1.4 million. I will now turn the call back to Dr. Zerbe Horst.

[Horst Zerbe:]

Thanks Andre. In closing, I would like to once again recognize our team for continuing to execute our long-term strategy. And with that, I will now turn the call over for questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and to follow in QA. Thank you.

[Operator:]

Thank you. Your first question is coming from Steve. Please announce your affiliation and pose your question.

[Unidentified Analyst:]

Good afternoon, Steve. My question is the future of this company anticipation of the stock price. What is your estimate going ahead with all this pipeline stuff that you have in this company?

[Horst Zerbe:]

Andre, do you want to respond to share price related questions, so probably you should have asked that.

[Andre Godin:]

Yes, I mean, you know, we are not going to basically discuss where the share price might go and I think that we are working very hard to make an appreciation in the company. The market cap has interest drastically over the past 12-months. But at the end of the day, we focus on execution. So and I believe that with proper execution, we will be able to see and see the share price appreciate. And I think that this is what IntelGenx team is committed to but I wouldn't be in a position to discuss what kind of appreciation we could have in the next few years. But we are all very optimistic that obviously their share price should appreciate this execution is done properly which is the main mandate of our company.

[Unidentified Analyst:]

Okay, thank you.

[Andre Godin:]

You are welcome.

[Operator:]

Your next question is coming from . Please announce your affiliation and pose your question.

[Unidentified Analyst:]

Hi, my name is , and a longtime investor. Two questions. The first question would be, does the management team plan to buy personally into the stock of this company opposed to stock options? And my second question - you can answer. That is fine.

[Horst Zerbe:]

Yes. So my response to that would be, we are doing that and we have been doing that for quite some of the entire executive management team, or owns stock to some degrees. So we strongly every single member of the company strongly believes in the company and therefore, there is a shareholder.

[Unidentified Analyst:]

Okay. I would like to see more of that for confidence and just typical of executives at companies that we are with buying, especially at maybe a price at this point. Second would just be my next question. And we have a lot of cash on the books now. What do we plan to do with that cash?

[Horst Zerbe:]

Andre.

[Andre Godin:]

I mean, the reason why we lose money is obviously to be in a position where we can advance all our programs. So and this is what we are doing right now, we are committed to that. And as you know, we still have burn rates. So until we get to cash flow positive, we use that money to get there. And we are expecting that to happen in 2023. So, the cash is basically going to be there to help us get to cash flow positive position, at which point. We should be able to generate positive bottom-line.

[Horst Zerbe:]

And maybe more specific and add to that. We are focusing our development efforts on three strategic focal areas, animal health, psychedelics, cannabis and to a very large extent, the money that we have available is being used in support of advancing these programs, and get into the market as quickly as possible besides those programs that we discussed previously.

[Unidentified Analyst:]

Okay. And if I could just throw one more question in there. Because United States does not allow Americans to buy Canadian drugs, which has been discussed in politics. Is this a game changer if that law does change?

[Horst Zerbe:]

I mean, that wouldn't affect us all that much, because we can still and as we have been doing all along partner up with U.S. commercialization partners and then supply their distribution channels with our products and so they can sell. I think what you are discussing is not really applicable to us, because that concerns the purchase of finished product that is intended for the Canadian market by U.S. customers. We are not dealing with that situation at all.

[Unidentified Analyst:]

Okay. Thank you for your time and answers.

[Operator:]

Your next question is coming from . Please announce your affiliation and pose your question.

[Unidentified Analyst:]

Good afternoon, and thank you for the call. My name is David Mill and I'm a longtime investor. Two questions. With all the activity, positive things are happening, especially in the last few months. Could you give us an idea of any milestones and may be met within Q4 of this year, or Q1 early next year? And the second part of the question is that now that we have a couple of new board members from the atai leadership team, and one of them being involved with compensation, how are they looking at executive compensation or how are they involved with the executive compensation within IntelGenx?

[Horst Zerbe:]

They would be entitled to the same compensations scheme that we have in place for all other directors. They are being treated every other direction for our Board.

[Unidentified Analyst:]

Well, if I can interrupt I'm sorry, Dr. Zerbe. Do they have any involvement in determining executive compensation not so much the board compensation?

[Horst Zerbe:]

Yes. Particularly one of them which would be training is serving on our audit, I'm sorry, on our comp committee and to that extent, we would have involvement. But then the comp committee doesn't decide on executive compensation alone, it is the full board that eventually said. So yes, both client representatives have a direct, say and input in executive compensation.

[Unidentified Analyst:]

Thank you. And then in terms of milestones, do you foresee any more progress in the next two quarters?

[Horst Zerbe:]

Dana, do you want to comment on upcoming milestones?

[Dana Matzen:]

Yes, I can comment on that. So announcement milestones, you won't really see much during Q4, there is a lot of progress on our programs where we have, we will hit milestones to push those programs forward, but still got internal milestones, meeting certain batch requirements, submitting things to answer some questions, but nothing that I foresee that we will be announcing.

[Unidentified Analyst:]

Thank you.

[Operator:]

Your next question is coming from , please announce your affiliation and pose your question.

[Unidentified Analyst:]

Hello, my name is Adams Tobero. I'm a longtime shareholder. And I also cover your stock on social media on other platforms. Two questions for you guys. The first question is, can you give any clarity on the relationship with Cybin and what is going on with that? Because when we were reading through what was going on with atai deal, it seems that Cybin might end up, you guys might not be allowed to continue evolving that relationship because of atai? And the second question is, at any point do you guys plan on ramping up PR? I feel like you guys are very quiet and I understand that but in terms of spreading awareness on the company, you could be doing so much better or any message?

[Horst Zerbe:]

On PR, I will let Andre, probably Tommy, and/or Dana comment. In regards to Cybin the agreement that we have in place to them is very clear. It is a development agreement, we are providing formulation development services to them to the extent that upon completion of the development of a prototype, we supply them with material for a Phase I clinical study. And that is the end of that relationship. They under the agreement do not have any rights to commercialize the formulation that we developed for them. For any further questions regarding that relationships Tommy or General Counsel would be available to answer for the questions.

[Unidentified Analyst:]

Because of the atai relationship, would that put, like would that stop, you say, once you guys finish doing the stuff aside, and then say do you wants to move forward or something else. Where the atai, with the relationship to be atai be a conflict for continuing anything in segment?

[Horst Zerbe:]

The contract situation has been addressed contractually, but Tommy will comment on that further.

[Tommy Kenny:]

We are currently completing our obligation with the current agreement with Cybin. Anything further than that will have to be discussed with our current partner, which is atai. But we don't foresee anything in the future with Cybin at this time.

[Andre Godin:]

In regards to IR PR obviously, you are right, we have been recently and we haven't been able, obviously, to travel because of COVID. But our budget was obviously reduce during the pandemic. Even though it is not over, but obviously, it is working better. And we have great ambition for 2022. And we will go back on the road. And we should have more disclosure and probably more exposure as well. Because we are looking to maybe hire firms that could help us disseminate the story. So I think that you will see more and more of us and you will hear more and more of us. And we also have now a communication team that is basically addressing that is really after media and trying to put the company at a higher level. So I think 2022 you will see a big change in our IR PR approach.

[Unidentified Analyst:]

Alright, thank you very much.

[Operator:]

Your next question is coming from . Please announce your affiliation and pose your question.

[Unidentified Analyst:]

Hi. I'm , I’m a Private Investor. Horst, I had a question in regards to the report saying. Congratulations on the launch this last quarter. Could you shed some light on the number and the sales guidance going into Q4 and 2022?

[Horst Zerbe:]

It is very early to comment meaningfully on numbers, but Dana can provide you with some insight there.

[Dana Matzen:]

Yes, yes, absolutely. So RIZAPORT launched in September 3rd, so we received kind of the first day, which was very well distributed in Spain. It is now in the commercial fees, we are discussing the effect sizes, how we can expand into other territories given the best or the remaining European Union the rights to it. But to get a full sets for the port, usually you, you have to be patient for the first quarter, because during the commercial launch, a lot of units are being distributed to pharmacies, they are ordered them as the demand goes up. So I know that they are in the full commercial phase at the moment, but I think in the next quarter, we have more insights into how to use we will be turning, and it is really too early at this moment.

[Unidentified Analyst:]

Okay, and another question for you, Dana, is in regards to the VetaFilm, any developments with that company that you are possibly going to partner with in the Q4?

[Dana Matzen:]

So on, animal health, as Horst mentioned, this is a key program and we are very active, several companies at this moment, and having discussions about contracts, we have signed an R&D agreement with a company to further develop a previous product with them. We didn't announce it at this moment, because we are, we can't disclose who we are working this and set early stage. So we are advancing on the product for U.S. companies. That is how much I can disclose. And we are in discussion with at least two other companies and late stage, but as you know and business development until you have agreement science, there is little we can say. So yes, we are really acting on several fronts, we also hired a consultant to help us be more visible, give us a larger animal health companies to show cause our technology. So there is a lot of activity, but I hope we can announce something in early next year.

[Unidentified Analyst:]

Okay. And Horst back to you. In regards to RIZAPORT U.S. the patches that you guys manufacture for the resubmission. How is that going? And when do you anticipate to resubmit the application to the FDA?

[Horst Zerbe:]

We are in the final stages of preparing those three patches go, literally, as we speak. We are involved with that over the next few weeks that will wrap up. The first patch is already on, put on stability, as I'm sure you know, before you can resubmit or it is not a resubmission. It is a response to the complete response. We need to generate stability data on those personnel infection patches. That will be the case throughout the first several months next year. So sometime mid next year, we will meet with FDA and then decide on the resubmission which will happen for sure. Sometime in the second half of next year, when exactly, it is too early to say.

[Unidentified Analyst:]

Okay. And just two more questions. So first question is in regards to Heritage. You said that you had a significantly larger order from them in the third quarter. How is that going and can you shed some light on Q4, and the further guidance on your relationship with them?

[Horst Zerbe:]

Yes. I would like to deferring to Dana.

[Dana Matzen:]

My pleasure. So this Heritage at this moment, absolutely right, we have a large order, we delivered high profits. The rest is still in our storage, given that they are launching in Canada or they have launched in Canada, and they had some storage issues that their sites didn't have space anymore. It is quite a large order, but coming back on once more. At this moment, both companies exploring other territories, we get some interest from large other territories that could potentially import our product, which would be very good for future business. We also looking at expanding our relationship to including other forms of film and other versions of the film. But for now, Canada launched, Australia launched, we are waiting for a similarly to RIZAPORT in Spain, we are for the waiting for the first quarter sales report. And so far, it is doing well.

[Unidentified Analyst:]

Okay. And when do you see the launch of the cannabis product in the U.S., because I heard that Heritage was looking into launching it in Missouri?

[Dana Matzen:]

Yes. So in the U.S., as you know, at this moment the Canadian government - and Tommy can shed some light on this too, but we are not allowed to export cannabis products into the U.S. So we would have to manufacture locally. We have explored that option to do a tech transfer and manufacturer with another company and for the U.S. market. It has been put on board, because there is a lot of discussions and we want to make sure we do it at the right time or if legislation changes that we do it from our facility, because the tech transfer always involves quite a bit of money to move the technology. So we wanted to make sure that the business case was right.

[Unidentified Analyst:]

Got you and my final question for Horst is in regards to the definitive agreement that Aquestive signed for the Cialis. What is IntelGenx getting out of this agreement, and if you can just shed some light on your partnership with them and definitely deal like what is in this for IntelGenx?

[Horst Zerbe:]

I would again like to refer to Dana, because that is one of her main programs. She is handling that. Dana.

[Dana Matzen:]

Okay. So the partnership of Aquestive we signed an agreement a while ago, that is really the point that we are a true partner. Meaning from that partnership that we signed, I think two years ago, we are moving 50/50 on the program forward. Meaning any costs that are related to Tadalafil, we are going to share 50/50. But also any proceeds we are receiving from the program will go for, we will share 50/50. So for the longest time both companies have been quite active to find the right commercial partner. We found the right commercial partner, it is a very active man's head company. We, at this point are not allowed to disclose they wanted to wait a little bit closer to the product being ready for launch, so that they don't give away competitive advantage, which we understood. So what is in for us what we have the partnerships if months to come commercial company launches the product or the financial, the net sales of royalties will be shared 50/50 between Aquestive and IntelGenx.

[Unidentified Analyst:]

So did IntelGenx get any of the 1.2 million that they received?

[Dana Matzen:]

Of course we got our portion.

[Unidentified Analyst:]

Alright thank you so much. And I wish you guys the best of luck, and we are very proud of the progress that the company is making. God bless you.

[Horst Zerbe:]

Thank you.

[Operator:]

Your next question is coming from . Please announce your affiliation and post your question.

[Unidentified Analyst:]

Hi, David DeAngelo, private investor. Just a quick follow-up on the Aquestive royalties. Is that reflected in the current quarter or will that show up next the proceeds from that that were received?

[Horst Zerbe:]

Will show up in the next quarter.

[Unidentified Analyst:]

Next quarter, okay. And then all my other questions were answered, but I do have a follow-up on, actually a new question. Regarding the two undisclosed products. I know. There is not much you could say about them, but they are both listed on your on the pipeline chart as ready to launch or do launch. Can you say anything about what the timeframe is or expectations of possible launch during 2022 pdufa dates that might be coming up expected in 2022 or even revenues possible should that occur during the calendar year? Anything you could say to that in terms of timeline or expectations will be appreciated.

[Horst Zerbe:]

They are undisclosed for a reason and the reason is that we have a contractual obligation for confidentiality. So I'm apologizing for that, but we really cannot accommodate it. What I can say qualitatively is that we are making progress on those programs were in very close, in very close dialogue with. But that is really all I can say.

[Unidentified Analyst:]

Okay, alright. I think that is about it than everything else was answered. And looking forward to next year. I think it is going to be a very exciting year. Thank you.

[Horst Zerbe:]

Thank you.

[Operator:]

Your next question is coming from . Announce your affiliation and pose your question.

[Unidentified Analyst:]

Hi, I'm also a private investor. And my question also was about RIZAPORT in Spain. And I think that Dana has touched on this already, but I just wanted to confirm something because I have seen a number of press releases about the CBD filmstrips being shipped to Canada and Australia, but I haven't seen a maybe I missed it. Any kind of press releases about RIZAPORT being shipped to Spain. So I just wanted to confirm that have we actually shipped the product Spain and it is being distributed to pharmacies there?

[Horst Zerbe:]

Yes, but you couldn't possibly see a press release announcing shipping because we are not manufacturing the product here at IntelGenx rather that is being done by our German contract manufacturers or as a European manufacturer that makes our product and ships it to Exeltis.

[Unidentified Analyst:]

I said I wasn't aware of that. I'm sorry. And I guess in that case, IntelGenx is receiving a royalty on those sales.

[Horst Zerbe:]

That is correct.

[Unidentified Analyst:]

I see. Okay, thank you for the clarification.

[Operator:]

Your next question is coming from you . Please announce your affiliation and pose your question. Your next question is a return question from . Please post your question.

[Unidentified Analyst:]

Hey thanks again for letting me ask another question. Is there any conversations or can you give any insight on the relationship with Tilray, are you having conversations, again is there anything you can say about Tilray at all?

[Horst Zerbe:]

Very little, unfortunately, it is, there is communication ongoing. But we can't really disclosing any details. I'm sitting next to a general counsel and he is shaking his head. So really it is an ongoing negotiation. We cannot unfortunately comment on that.

[Unidentified Analyst:]

Okay. No problem. Thank you very much.

[Horst Zerbe:]

You are welcome.

[Operator:]

There appear to be no further questions in queue at this time. I would like to turn the floor back over to Dr. Zerbe for any closing comments.

[Horst Zerbe:]

Thank you. So this concludes our Q3 2021 investor update call. I would once again like to thank the entire IntelGenx team for its hard work and dedication. Like to thank our Board of Directors for their continued support of the management team and finally, our investors for continuing to believe in and supporting us. Thank you and goodbye.

[Operator:]

Thank you, ladies and gentlemen this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.