Meredith Corporation
Q4 2022 Earnings Call Transcript

Published: 23 Jun 2022

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Medexus Pharmaceuticals Fourth Quarter 2022 Earnings Call. [Operator Instructions]

[It is now my pleasure to turn the floor over to your host, Ms. Victoria Rutherford. Victoria, the floor is yours.:]

[Victoria Rutherford;Adelaide Capital;Investor Relations:]

Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals Fourth Quarter and Fiscal Year 2022 Earnings Call. On the call this morning are Ken d'Entremont, Chief Executive Officer; and Marcel Konrad, Chief Financial Officer. If you have any questions after the conference call or would like further information about the company, please contact Adelaide Capital at 480-625-5772.

[I'd like to remind everyone that this discussion will include forward-looking information that is based on certain material factors or assumptions and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information.:]

[In addition, during the course of this call, there may also be reference to certain non-IFRS financial measures or non-GAAP measures, including references to adjusted net loss and adjusted EBITDA, which do not have any standardized meaning under IFRS and therefore, may not be comparable to similar measures presented by other companies. For more information about both forward-looking information and non-GAAP measures, including a reconciliation of each of adjusted net loss and adjusted EBITDA to net loss, please refer to the company's Management Discussion and Analysis, which, along with the financial statements, are available on the company's website at www.medexus.com and the company's corporate filings on SEDAR at www.sedar.com.:]

[I'd now like to turn the call over to Ken d'Entremont.:]

[Kenneth d'Entremont:]

Thank you, Victoria, and thanks, everyone, for joining us on the call today.

[We continue to make progress on our growth objectives and are achieving several exciting initiatives that we believe will have a meaningful impact on our business going forward. During the fiscal fourth quarter that ended March 31, '22, we achieved revenue of $20.3 million compared to $17.6 million for the same period last year or 15% growth year-over-year. I am pleased to report that this represents the strongest fourth quarter at Medexus to date. The $2.6 million increase is primarily attributable to an increase in the net sales of IXINITY during the quarter as pharmacy and wholesale customers returned to buying patterns better aligned with patient unit demand. Rupall and Rasuvo also had solid sales during the quarter.:]

[Fourth quarter adjusted EBITDA increased to $1.1 million compared to negative $1.6 million for the same period last year. The $2.7 million increase is primarily attributable to the increase in net sales of IXINITY in the fourth quarter of '22 and a $0.9 million expense related to a onetime destruction of IXINITY inventory in the fourth quarter of '21.:]

[We produced a net loss of $5.3 million for Q4 compared to a net loss of $10.5 million for the same period last year. Our adjusted net loss, which adjusts for unrealized losses or gains related to our convertible debentures included in net loss was negative $4.6 million compared to negative $5.2 million for the same period last year.:]

[As at March 31, '22, we had $10 million in cash and cash equivalents with $11.2 million in total available liquidity.:]

[Overall, we are pleased to have achieved $76.7 million in revenue for the year, which compares to $79.7 million for fiscal '21. The adjusted EBITDA for the year was negative $3.9 million in '22 compared to positive $8.2 million last year.:]

[Turning to our specific product lines. Our core business remains strong. We are excited about new and potential additions to our product portfolio, which we believe will generate growth momentum over the coming years. Unit demand for IXINITY continues to grow. During the fourth quarter of '22, we saw sales normalize as pharmacy and wholesale customers have now worked through much of their accrued inventory and return to buying patterns better aligned with patient unit demand. We continue to invest in the manufacturing improvement initiatives, and we expect the resulting operational efficiencies to ultimately improve the gross margins for IXINITY over the coming quarters.:]

[We are also continuing to invest in a Phase IV pediatric study that if successful, we'll expand the IXINITY product label to include the pediatric population of patients under 12 years of age with hemophilia B. Medexus expects the analysis and clinical study report to be completed in the first quarter of '23. Once completed, a successful study could support a significant expansion of the indicated patient population for IXINITY, and we are exploring approaches to address this potentially expanded market.:]

[Rupall continued to see strong unit demand growth, achieving 31% growth for the trailing 12 months ended March 31, '22, continuing its trend as one of the fastest-growing antihistamine in the Canadian prescription market. Again, this growth reflects a severe allergy season across Canada and a successful sustained execution of our sales and marketing initiatives as physicians continue switching patients to Rupall from either generic prescription antihistamines or over-the-counter products.:]

[Turning to Rasuvo. On a unit sold basis, Rasuvo continues to maintain its strong market position and in fact, increased its market share in the United States in the trailing 12 months ended March 31, '22. However, increasing competition in the U.S. branded methotrexate market continued to negatively affect Rasuvo product level revenue. We implemented an effective unit level price reduction to defend the product's market-leading position.:]

[On Metoject, even with a generic entry in the Canadian methotrexate market in calendar 2020, Metoject saw unit demand increase in the trailing 12 months ended March 31, '22. Again, product revenue was negatively impacted by a similarly motivated decrease in effective unit level prices. We continue to work towards conclusion of the litigation against the generic competitor and a trial date has been set for calendar Q1 '23. We will continue to update shareholders on the material developments in this matter.:]

[These existing products have primarily driven our performance to date. We also actively pursue opportunities to complement our existing portfolio by licensing and acquiring new products. For example, we recently acquired the exclusive rights to commercialize Gleolan in the United States and Canada. Gleolan is currently used as an optical imaging agent indicated in patients with glioma as an adjunct for the visualization of malignant tissue during surgery. We estimate Gleolan's annualized revenue to be between 12 and $16 million. We expect to complete the transition of full responsibility for commercialization of Gleolan in the United States from our partners at NXDC and begin recognizing full product revenue in fiscal Q2 '23. Our U.S. relaunch of Gleolan will complement our existing commercialization rights to Gleolan in Canada, where we executed a full commercialization, a full commercial launch of Gleolan in February of '21.:]

[As we have discussed in the past, we continue to be excited about treosulfan. We expect that it will become a leading agent for the use of conditioning regimens as part of allogeneic hematopoietic stem cell transplantation protocols or thankfully, allo-HSCT. This is a therapeutic area of strong strategic interest for us. We recently shared the results and analysis of the pivotal Phase III clinical trial of treosulfan conducted by our partner, medac. We were very encouraged by these results and would like to point everyone to a presentation made by Dr. Filippo Milano, who reviewed the results of a pivotal study. Dr. Milano is a physician scientist, whose research is focused in the area of stem cell transplant patients to treat blood cancers. You can view Dr. Milano's presentation on our Investor Relations section of our website.:]

[In June of 2021, we received a notice of compliance from Health Canada to commercialize treosulfan, which we currently market in Canada under the trade name, Trecondyv. We have now fully launched in the Canadian market and expect that the commercial experience we're gaining in Canada will serve us well if and when the FDA approve treosulfan in the United States. Our partners at medac continue to collect data requested by the FDA in May of '22 to complete medac's resubmission of their new drug application for treosulfan. The data collection process is progressing well and medac continues to expect to respond to the FDA's information request in July of '22, which would be well within the 12-month time line required by the FDA's complete response letter.:]

[A final FDA decision is expected 2 to 6 months after the FDA considers medac's NDA resubmission to be complete. If the FDA approves treosulfan, we'll then be obliged to pay certain milestone payments to medac that would range anywhere between 15 and $45 million, depending on the terms of the FDA's approval. We continue to believe treosulfan could eventually overtake the current market-leading product in the U.S. busulfan, which realized $126 million in annual U.S. sales prior to genericization. In the meantime, we do not expect to make any additional milestone payments to medac until we have received FDA approval, and we are evaluating options to finance any milestones that may come due with a number of interested capital partners.:]

[We also continue to explore -- we also continue to regularly explore additional complementary product opportunities in both current and planned therapeutic areas in both the United States and Canada and regularly evaluate various other transaction opportunities based on our strategic plan. A key component of our growth strategy will continue to leverage our infrastructure through new product acquisitions and partnerships. We will continue to look at optimizing our portfolio and leveraging our resources with the goal of executing near-term accretive transactions to achieve our sales growth targets over the coming years. In the meantime, we continue to work to increase revenue, develop and leverage our commercialization infrastructure across products and maintain strict financial discipline.:]

[I will now turn the call over to Marcel, who will discuss our financial results in more detail. Marcel?:]

[Marcel Konrad:]

Yes. Thank you, Ken. I'm also very pleased with our strongest fourth quarter of Medexus to date. Total revenue for the fiscal fourth quarter was $20.3 million, and for the full year was $76.7 million. This compares to revenue of $17.6 million and EUR79.7 million for the 3 and 12 months period ended March 31, 2021. The $2.6 million increase in fourth fiscal quarter 2022 versus the prior year fourth quarter is primarily attributable to an increase in net sales of IXINITY, Rupall and we saw initial Gleolan sales. Rasuvo continues its strong performance, which is efficiently supported by a moderate allocation of sales personnel.

[As a reminder, our product revenues can vary from quarter to quarter based on the timing of large orders. For example, revenue for the third quarter of fiscal year 2022 benefited from a large late December order totaling approximately $2 million, which was originally anticipated to be received in the fourth quarter of fiscal 2022.:]

[Gross profit was 10.1 and $37.9 million for the 3 and 12 months period ended March 31, 2022, respectively, compared to gross profit of 8.8 and $42 million for the same periods last year. The gross margin was 49.8% and 49.4% for the 3 and 12 months period ended March 31, 2022, respectively, compared to 50% and 52.7% for the 3 and 12 months period ended March 31, 2021. Full year 2022 gross profit includes a $1.9 million charge in cost of goods sold compared to a fiscal year 2021 caused by additional expenses related to the IXINITY manufacturing process. Without that additional expense, the gross margin for the full year this year is more in line with the gross margin portfolio in 2021. We've undertaken an initiative to improve the IXINITY manufacturing process and continue to invest in its initiative, which remains ongoing. Preliminary results for this initiative have been encouraging and is indicating improved yields.:]

[Selling and administrative expenses were 9.9 and $44 million for the 3 and 12 months period ended March 31, 2022, compared to 10.3 and $36.2 million for the 3 and 12 months periods ended March 31, 2021. The full year increase was primarily attributable to Medexus' significant investments in personnel and infrastructure to support its anticipated future growth, including continued essential preparation for a potential commercial launch of treosulfan in the United States.:]

[Research and development was 0.8 and $5.9 million for the 3 and 12 months periods ended March 31, 2022. This compares to 2 and $4.6 million for the 3 and 12 months periods ended March 31, 2021. As mentioned, we continue to fund the IXINITY pediatric study, for which we expect in the first quarter -- for which we expect in the calendar year quarter 2023 to complete the analysis and clinical study report as well as our ongoing IXINITY manufacturing process improvement initiatives.:]

[Adjusted EBITDA for the 3 and 12 months period ended March 31, 2022, was positive $1.1 million, a negative $3.9 million compared to negative $1.6 million and positive $8.2 million for the 3 and 12 months periods ended March 31, 2021. IXINITY sales have now normalized and the increase in adjusted EBITDA in fiscal year Q4 2022 compared with the same period last year is primarily attributable to the increase in net sales of IXINITY in the fourth quarter 2022 as well as a $0.9 million expense related to a onetime destruction of IXINITY inventory in the comparative period.:]

[Net loss for the 3 and 12 months periods ended March 31, 2022, was 5.3 and $2.9 million compared to a net loss of 10.5 and $28.3 million for the same periods last year. The net loss includes an impairment charge of intangible assets of $1.7 million. Most of that impairment is related to Metoject based on our year-end assessment of the impact of Accord's generic entry. This has resulted in a revised forecast in discount rate. We and medac intend to continue talking all appropriate steps -- taking all appropriate steps to enforce the intellectual property rights on the medac's relevant Canadian patent rights. We initiated a patent litigation against Accord in 2020, and a trial date has been set for the beginning of calendar year 2023.:]

[Also included in net income or loss is a noncash unrealized gain and loss on fair value of embedded derivatives in our outstanding convertible debentures, which are sensitive to, amongst others, fluctuation in our share price. We believe that adjusted net income or loss provides a better representation of performance of our operations because it excludes noncash fair value adjustments on liabilities, which may be settled for shares. Our adjusted net loss for the 3 and 12 months periods ended March 31, 2022, was negative $4.6 million and negative $24 million compared to negative $5.2 million and negative $7.6 million for the 3 and 12 months periods ended March 31, 2021.:]

[Cash and cash equivalents was $10 million at March 31, 2022, reflecting an increase of $0.4 million during the fourth quarter and a decrease of $8.7 million over the entire fiscal 2022. Our available liquidity was $11.2 million at March 31, 2022, which consisted of $10 million in cash and cash equivalents and an undrawn credit of $1.2 million available under our ADL facility.:]

[We are pleased with our quarterly performance and continually exploring various financing strategies to enhance our liquidity to support our execution of our business plan, which includes an eventual launch of treosulfan in the United States. We're exploring various options to bolster our liquidity, both pre and post FDA decision, including to fund any milestone payment amount that may become payable as a result of the FDA decision. As mentioned during previous earnings results, no further milestone payments will be owed to medac unless and until the FDA approval of treosulfan is obtained. Furthermore, we want to reiterate to investors that we do not expect the CRL for treosulfan to result in any default on our credit facility.:]

[Victoria Rutherford;Adelaide Capital;Investor Relations:]

Operator, we will now open the call to questions.

[Operator:]

[Operator Instructions] Your first question is coming from Andre Uddin of Research Capital.

[Andre Uddin:]

Ken and Marcel, just was wondering if you could discuss your marketing plans for Gleolan in the U.S.? And also when would you start booking revenues? Is that going to be fiscal Q2 of 2023?

[Kenneth d'Entremont:]

Andre, thanks for the question. So the plan for Gleolan is to utilize a lot of the infrastructure we've already built for treosulfan. There's pretty significant overlap of institutions that do both stem cell transplantation, glioblastoma resection. So there's a good overlap there. They're the key oncology centers. So we're using infrastructure we've already built for treosulfan. We will add sales representatives. In fact, we're going to double the number of that NXDC had, and that will happen when we start to commercialize our own product, which is the point at which we would book full revenue. So the quarter we just reported, Gleolan really had a small impact. It was only 1 month and half of the product revenue. So going forward, we'll be booking -- going forward from August, we expect to book full product revenue, and we do expect to grow the product with the relaunch of the brand and the extra selling resources.

[Andre Uddin:]

And can you also give us a bit of an update on the competitive landscape or vicinity and also how you expect that to grow this year?

[Kenneth d'Entremont:]

Yes. So the growth that you've seen in the quarter now is both from patient demand and correcting the channel. I think a lot of it is due to correcting the channel as we discussed previously, we're largely done with that. Going forward, we do expect to see some competition from gene therapy late this year. But again, it's uncertain as to what impact that will have. As you probably know, gene therapy is expected to be extremely expensive, therefore, would only really be targeting severe patients. So we don't expect to lose significant number of patients, but we may lose some high-volume patients. The sales team has been doing a great job at adding new patients, so growing demand through the addition of new patients and their tax has gotten a lot easier, obviously, as things start to open up post COVID.

[Andre Uddin:]

That's great. And just one more thing, actually, could you just talk a little bit about in terms of the pricing needs where you mentioned something on the call about Rasuvo, how much did the price actually drop this quarter?

[Kenneth d'Entremont:]

I'll speak to the strategy behind that, and then I'll let Marcel speak to the numbers. So strategy, clearly, we are the market leader. We've got the strongest unit sales base. So we will defend that base. And usually, that means if a competitive threat comes, we will make sure that we hang on to any contractual business by adjusting price.

[Marcel Konrad:]

Yes. So in terms of Rasuvo's performance for this quarter, so we're seeing, at this point, a pretty steady -- it's a strong performance for the quarter and that is anticipated to go forward. Obviously, going forward, we will see an impact on pricing that we're obviously trying to offset with as much as we can through other initiatives. But this is a product for the quarter at least that has been quite steady compared to all the quarters for Q4.

[Operator:]

Your next question is coming from Scott Henry of ROTH Capital.

[Scott Henry:]

Just a couple of questions. First on Gleolan in the U.S. Can you talk about the economics for that product in the U.S.? How we should think about how much of the profit you will keep? And the royalties paid out, will that run through the cost of goods sold? Or will that be in the SG&A?

[Kenneth d'Entremont:]

Yes. Thanks for the question, Scott. So Gleolan, we've said previously, current revenue is between USD 12 million and USD 16 million. It's at the higher end of that range as we're finding out now. And we think we can grow that. The penetration of Gleolan into the U.S. market is much less than other developed markets, primarily in Europe. So we think there's good potential to grow it. The economics the way it's working currently is we're currently booking about half of the product revenue now. When we take over the distribution in August, we'll book 100% of the product revenue and the economics back to the license or was about 50% and it'll go back through cost of goods.

[Scott Henry:]

Now is that 50% of profits or 50% of revenues?

[Kenneth d'Entremont:]

50% of revenues.

[Scott Henry:]

Okay. Great. And then when you think about fiscal 2023, obviously, revenues will get a bolus from Gleolan. How should we think about the rest of your business? Do you expect continued strong growth in 2023? Just trying to get a sense of what your expectations are looking out to next year?

[Kenneth d'Entremont:]

Yes. I think it varies product by product. So activity, I think we returned to more historical revenues with some growth built in. So product demand -- patient demand is increasing. But we also remember had those 2 or 3 quarters where we were correcting the channel. So that's behind us. So we're going to show pretty strong growth on IXINITY as a result of those 2 factors. Rasuvo and Metoject, I say would be more or less steady. They're mature. We've got very strong market positions with those products. So we're looking to maintain those. Rupall, I think we showed again another really strong quarter of 31% growth for Rupall many years after launch. And so we would expect that to continue as well. And then we've added Gleolan, and we do expect to grow Gleolan. We will be doubling the sales resources on Gleolan and Metoject historically. So we think there's good potential in Gleolan.

[Scott Henry:]

Okay. Great. A final question then on treosulfan, do we know that it's a 6-month review? Or will they tell you that after they accept the filing, is that firm?

[Kenneth d'Entremont:]

Yes. They will tell us within 30 days after accepting the resubmission and the time line can be either 2 months or 6 months. We've been assuming 6 months, but it could be a surprise to the upside.

[Operator:]

Your next question is coming from Justin Keywood of Stifel.

[Justin Keywood:]

I was just hoping to clarify the time line for treosulfan and to build on the prior question. So if I understand correctly, if the submission is for the end of July, will the FDA communicate the review time line at the end of August? Is that how to think of it?

[Kenneth d'Entremont:]

Yes. Thanks for your question, Justin. Yes. So certainly, we'll get it in by the end of -- we expect that medac will get it in by the end of July. And then the FDA has 30 days to communicate the review period. So we certainly expect that at some point during August we will know the time line to a decision point.

[Justin Keywood:]

And is there any risk that, that process can be disrupted, if there is a request for additional data or some other items?

[Kenneth d'Entremont:]

Yes. I think that risk always exists. There have been many data requests that have gone back and forth. Many had been satisfied prior to this resubmission. So we're really down to what we think is 3, 2 of which were very straightforward, one of which requires some data collection, which is ongoing, which we think will be completed soon. So there's always the risk that they could ask for something else or more information or a recalculation of something. So that risk exists, but we've been through this process many times with them now. So we hope that we're starting to narrow down the questions.

[Operator:]

Your next question is coming from Prasath Pandurangan of Bloom Burton.

[Prasath Pandurangan:]

I had just one. How do you think about potential capital raising options as we get closer to a milestone payment in terms of your equity raise or asset sales? Could you elaborate on that?

[Kenneth d'Entremont:]

Yes. Thanks, Prasath. That's a good question. Obviously, when we're moving towards the original PDUFA date, we had been working on raising the capital for the milestone payment. The preference at that point was debt. We had pretty much organized a good debt provider that would allow us to take care of that. We're thinking of all options now. Obviously, equity markets are awful. So that option certainly isn't preferred. There's always a debt option. There's always option of leaving selling current assets. So I think we've got many different options to deal with that. We also have the option of deferring some of those payments. So we're working with medac all the time just to make sure that we have an optimal launch. Our preference would be to use our capital, our cash to execute an excellent launch, which would be in line with medac's desires.

[Operator:]

[Operator Instructions] There appear to be no further questions in the queue. I'll now hand back over to Victoria.

[Kenneth d'Entremont:]

I think Victoria is actually going to hand it over to me. I just want to thank everybody for joining us on the call today. Our base business demonstrated incredible strength with IXINITY sales normalize, strong performance out of Rasuvo and Rupall and sales beginning to benefit from another severe allergy season. On top of this, we expect to begin recognizing revenue from Gleolan in the U.S. partway through fiscal Q2 and fully in fiscal Q3. This is a drug that we estimate generated $3 million to $4 million in revenue in the last full quarter before we licensed the product. For treosulfan, our partner, medac's collection of the recently requested data by the FDA is progressing well, and we are confident that we'll see an FDA resubmission in July. So we are looking forward to a very strong 2023 and look forward to updating investors.

[Thanks very much for joining the call today.:]

[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.