Medicure Inc.
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Operator:]

Welcome to Medicure's Earnings Conference Call for the Year Ended December 31, 2020, and quarter ended March 31, 2021. My name is Colin, and I'll be your conference operator for today's call. At this time, all participants are in listen-only mode. Before we proceed. I would like to remind everyone that this presentation contains forward-looking statements related 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 May 11, 2021.

[Albert Friesen:]

Thank you, Colin, and good morning to all of you on the call. We appreciate your interest and participation in today's call. Joining me today in the call is our Chief Financial Officer, James Kinley; and President and Chief Operating Officer, Dr. Neil Owens. This morning we'll be discussing the year ending December 31, 2020, and the first quarter of 2021. The release as a financial statements for the year ending 2020 and the first quarter of 2021. We're so close that we decided to present them at the same call. COVID has provided challenges to a lot of businesses, including Medicure. Despite the challenges, we are delighted with positive trend of revenue and net income over the past few quarters. We experienced a modest but positive EBITDA for the first quarter of 2021. A positive change from the losses that had been reported in 2019 and the first half of 2020. The sales of AGGRASTAT have stabilized and we're pleased with the early stage performance of our December 2020 acquisition Marley Drug. One of the reasons we acquired Marley Drug, a mail order pharmacy was to expand our sales reach for ZYPITAMAG. The focus of our business is a sales and marketing of AGGRASTAT franchise and growing ZYPITAMAG business with more direct marketing to patients with the help of Marley Drug, as well as continuing the marketing to healthcare providers. The revenue for the first quarter of 2021 was $4.9 million, which is up substantially from the previous quarters, due mainly to the added revenue from Marley Drug. AGGRASTAT revenue of $2.63 million is similar to previous quarters, Marley was $2.1 million and ZYPITAMAG is $161,000. Medicure has transitioned away from the sales and marketing of the ReDS device, which reduced significantly operating costs expenses and associated losses while retaining value and are sensible medical investment. As mentioned, the main focus at present is on the sales and marketing of AGGRASTAT, ZYPITAMAG and further leveraging Marley Drug Pharmacy, which combined provide great margins and potential. We believe the past several quarters investments in our programs and onboarding of products will provide their growth, revenue and profits for the coming quarters and years. It takes time and persistence to make this a reality. Medicure has 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.

[James Kinley:]

Thank you, Bert 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 March 31, 2021 along with previous financial statements on the investors page of our website and a copy of all financial statements and management's discussion and analysis can be obtained from sedar.com. Starting with the 2020 annual results, revenues for 2020 total $11.6 million compared to $20.2 million from 2019. The decrease in revenues between the two years was primarily result of decreased AGGRASTAT revenues from $19.4 million in 2019 to $10.6 million in 2020. As a result of further generic sizing of the Integrilin market, which has created pricing pressures on AGGRASTAT, combined with lower hospital demand for the product including a reduction in procedures being performed as a result of COVID-19. ZYPITAMAG revenues increased to 453,000 for 2020, compared to 183,000 in 2019. The increase in revenues from ZYPITAMAG resulted from the increased demand in usage of the product experienced during 2020 as a result of the company's sales and marketing initiatives implemented since acquiring control of product. As a result of the acquisition of Marley Drug, which was completed on December 17, 2020, the company recorded revenue of 340,000 during the year ended December 31, 2020 pertaining to the Marley Drug in-store and mail order pharmaceutical business. Cost of goods sold decreased from $7.3 million in 2019 to $6.5 million in 2020. Selling expenses for 2020 totaled $5.4 million compared to $13.4 million for 2019 as a result of cost reductions implemented during late 2019 and throughout 2020, particularly as it relates to the sales and marketing costs associated with , as well as decreases in costs as a result of limitations to conference and travel related costs due to COVID-19. Beginning with the acquisition of Marley Drug, which again was completed in December 2020. Costs associated with the Marley Drug business are included in selling costs for the year ended December 31, 2020. General and administrative expenses for 2020 increased to $4.6 million from $3.4 million in 2019. The increase in G&A expenses during 2020 when compared to 2019 primarily relate to higher legal costs associated with the company's patent challenge, which was settled in the fourth quarter of 2020 partially offset by cost reductions implemented by the company during late 2019 and throughout 2020.

[Neil Owens:]

Thank you, James. And good morning, everyone. The COVID-19 pandemic continues to have an impact on businesses worldwide, especially in the healthcare industry. For Medicure, all meetings with health care professionals continue to be virtual. This has required adjustments by Medicure sales team, but also has resulted in reduced selling costs. Generally prescribers are receptive to video meeting. This has been a greater impact on meeting with interventional cardiologists regarding AGGRASTAT in a hospital setting compared to meeting with primary care providers regarding ZYPITAMAG. There have been no disruptions to manufacturing or distribution and Medicure continues to have normal supply of AGGRASTAT and ZYPITAMAG.

[Albert Friesen:]

Thank you, Neil. 2019 was a year in transition with a sales and marketing focus on two products, which were added in 2018 for diversification to our main cardiovascular drug AGGRASTAT there's considerable learning. 2020 as a drive to reduce investment losses and further learning the marketing of ZYPITAMAG. This learning led us to the acquisition of Marley Drug as a more efficient way to provide a great product at a very affordable price. We're thankful for AGGRASTAT in additional cardio assets and the addition of Marley Drug a mail order specialty pharmacy. We continue to focus on growing the business with a pipeline of cardiovascular products that will further diversify our revenue and asset base, carefully investing to grow our future profitability. My goal, the goal of our team, the goal of our board, management, staff, is to continue to build this business with a stable long-term outlook to generating value for our shareholders. And as always, I want to express my appreciation to the outstanding team of employees we have been blessed with. Thank you, our shareholders for your continued support and interest. And Colin, I'll turn it back to you to lead us to the Q&A. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. .One moment for your first question. Okay, so your first question comes from a Kurt Caramanidis from Carl M. Hennig Inc. Kurt, please go ahead.

[Kurt Caramanidis:]

Thank you. You guys talked about some other businesses that might be interested in Marley. And I'm just wondering if you could expand on different opportunities, although we've been ramping sales, which obviously is positive but other opportunities from Marley?

[Albert Friesen:]

I can add a little bit of color to that. I think in terms of other companies or other products being marketed through Marley Drug. I believe that was the question. It's been interesting to see the response from other companies because they also have branded products that they feel like have a lot of market potential. But the struggle to actually been that that market share or at least work through the . So we actually are continuing our discussions with other companies. We think that there are definitely opportunities to work with them on marketing new product. And I think the success we've had so far with Marley in terms of the response from providers gives us a good leverage point in terms of negotiation with them. So I think it's still pretty early to say exactly what that partnership would look like. But we have been approached by multiple companies and continue discussing with them.

[Kurt Caramanidis:]

You something in 2021 or is that maybe not even till next year?

[Albert Friesen:]

It's hard to say, Dr. Owens did a good job of describing the interest. But in negotiating agreement, we've learned in the past that sometimes it change over rapidly in weeks and months, like we did with Marley, sometimes it can take a year or two. So it's hard to predict. I understand you're interested in knowing but we're pursuing a number of that. And it's hard to say what the time is going to do.

[Kurt Caramanidis:]

Okay, great, good. Good to know there's that opportunity. Do you see sales trajectory throughout the year, because of – it’s Marley ramping through the year. Is there seasonality, how do you kind of see, do you see as a whole lot of 5 million run rate? Do you see as the year at 5.5 million, 6 million or just kind of in general how should we look at the quarters as you're building through the year?

[Albert Friesen:]

Again Kurt, I understand the interest. But we have – it’s been practice not to provide guidance. We -- as we said in our report, we do believe that there will be growth, the growth is hard to predict with where there are -- prediction that there is growth is because we've seen even in the first few months, a little bit of growth and a lot of interest. So if that interest does translate to sales, we see a steady growth over the year.

[Kurt Caramanidis:]

Okay. And then in my right in thinking that you've got real good leverage to the bottom line, as your sales increased with the margin profile does that make sense?

[Albert Friesen:]

Yes, as we describe the -- the margins on these products are high 70%, 80%. Not so much on the generics. Although some of the generics Marley Drug are very high. And it depends which product it is. But one of the reasons ReDS is a great product. We -- reason -- one of the reasons we dropped it there was that -- it was a ticket marketing push cost us money. But the margins weren't there. And so what we've focused on is trying to keep our eye on the ball of making money and profit. And so looking at higher margin products, three that we're focusing on now are very good margin.

[Kurt Caramanidis:]

Okay, great. And finally, are you be able to measure your advertising? You're doing targeted, like micro advertising? How are you feeling about that? Are you able to measure with the advertising for Marley in the ZYPITAMAG and that kind of thing?

[Albert Friesen:]

Yes, we can track and measure the return on ad spend through multiple channels. As you may have heard, Marley actually has a call centre as part of their teams that we actually get a lot of direct customer calls. And it's one of the ways that we can actually track quite a different marketing spend through different channels as to tie it back to the original ad. But it also gives us pretty great insight into their response to being able to order through Marley either for ZYPITAMAG or other products, which helps us kind of tune our marketing. So the -- there is a combination of different approaches we're taking and that that we can all trap either digitally or actually just listening to them how did they hear about Marley? And how did they hear about ZYPITAMAG. Interestingly, we do get calls from customers but also physicians and other pharmacists who are interested in Marley.

[Kurt Caramanidis:]

Okay, great. I appreciate it. I'm sorry, I thought of one more that PNPO deficiency drugs. Can you give us kind of a timeline on that voucher what kind of timeline where you might know if things go well, when you might get that voucher or not. Is that the yielding of what do you thinking there?

[Albert Friesen:]

Again, it's hard to predict Kurt but the trial itself with this 12-month treatment. So -- and we expect to start shortly. So I would say probably a two-year kind of window. At the time you roll – get enrollment going and then doing the analysis and submission.

[Kurt Caramanidis:]

Great, thank you guys. Appreciate it. Look forward to the coming quarters.

[Albert Friesen:]

Thank you.

[James Kinley:]

Thanks.

[Operator:]

Your next question comes from Sam Rebotsky from SER Asset Management. Sam, please go ahead.

[Sam Rebotsky:]

Yes. Good morning, Bert.

[Albert Friesen:]

Good morning.

[Sam Rebotsky:]

I am surprised to see, I looked at my records. I've been involved since 2004. And I'm interested in knowing what's going on with reliable the Indian company. And do you have something you could do with India with the COVID? Is there anything that you thought of doing there?

[Albert Friesen:]

Not really. Thanks, Sam. We're -- we have a relationship and agreement with Reliance Life Sciences. A large a large one -- Reliance is the largest Indian company. And we certainly feel for them, they are going through a credible difficult time where they communicate with them on a reasonably regular basis. But in terms of your -- if your question is, do we have a COVID focus? No. Now we have mentioned COVID, which you probably remember that there were some physicians they were using AGGRASTAT to inhibit the clots that sometimes are associated with COVID. And it is very effective. It's a small number of patients that were treated, but the cost of getting that label for AGGRASTAT would be very expensive and take a long time. And so we didn't see it as our immediate commercial opportunity. Now, having said that, some physicians will be using AGGRASTAT for that treatment on their own as a physician directed treatment. So but that we don't see that as a big market opportunity.

[Sam Rebotsky:]

And as far as, are you are looking to raise some funds, do you have $1 amount and with the -- your account could financial gentlemen leaving, who are you working with to raise funds?

[Albert Friesen:]

We're not raising funds for equity, but we are -- we do have -- are working on our bank line. So a bank rate -- interest rate and that is just to replenish some of the cash that we had. So it'll be less than the -- probably less than 8 million we spent, but something to increase our working capital of it. So it's a bank loan.

[Sam Rebotsky:]

Okay. And the drug company, pharmacy, there seems to be some smaller pharmacies that are raising funds in New York, do you see the expansion or a basis for expanding your pharmacy?

[Albert Friesen:]

We look at the – I mean we --- the pharmacy that we acquired has several advantages with doctor owns they describe fairly well. And that is enables patients to buy very easily at a very low price. And it bypasses the cost of the PBMs and insurance at least people think because they have insurance they have a lower cost but there are many examples where even coverage costs you more with co-pays with minimus and where your insurance runs out and you're now end up paying more money for drugs. The approach that we're using with Marley Drug is a very low cost the lowest cost right to patient, mail order you get your prescription within to 48 hours mailed to your house, the doctor's convenience that process is a huge opportunity for us and I think will be a revolutionary change in the U.S. And that's what we're doing -- we're looking towards building on with the existing Marley Drug operation. And others are seeing it. But in conferences where Dr. Owens has participated, the industry is starting to recognisz Medicure's leadership in this area and the huge opportunity.

[Sam Rebotsky:]

And what amount of your purchase of the companies that you have bought is there -- are you using a brokerage firm to find a business for you? And has the company bought any stock in the open market? And what is the nature or size of stock that anybody has bought?

[Albert Friesen:]

Okay, there's two questions one is we have the normal course issuer bid. We've pretty much purchased that. There might be a little bit left. I'm not sure. And so we haven't bought recently because we've had this reporting and then blackout. So that's -- we haven't purchased more recently, but we have purchased in this year, I believe --

[James Kinley:]

Not in 2021.

[Albert Friesen:]

So 2020…

[James Kinley:]

I think there's about 100,000 left that we can buy under the normal course issuer bid.

[Albert Friesen:]

The other question you asked is, do we use a broker? While the broker approached us? So we don't have an agent that works for us. But there are agencies that have approached us about potential opportunities.

[Sam Rebotsky:]

Has the offices -- are is the period open to for the offices to buy stock in the open market? Is that allowable? And if it is, when is that?

[Albert Friesen:]

Well, I don't know when the blackout is going to come out. But we have some other transactions that we're looking at. But we -- It's hard to predict when a blackout will come out.

[Sam Rebotsky:]

Okay. Well, since being the stockholder since 2004, the size of my investment has increased pretty significantly. And I think we would be nice to show some positive results as is going on now. Good luck, Bert.

[Albert Friesen:]

Thank you, Sam. Appreciate your interest and your support.

[Sam Rebotsky:]

Okay, thank you.

[Operator:]

. Okay, it appears there are no further questions at this time. Please proceed.

[Albert Friesen:]

Thank you, again all on the call. We appreciate your interest and we look forward to sharing next quarter's results as the -- in the coming months. Thanks again, wish you all the best safe, be safe and well.

[Operator:]

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