Earnings Call: Q3 2021

Sep 23, 2021

Earnings release

Good morning, ladies and gentlemen, and welcome to the Vallejo Pharma Inc. 3rd Quarter 2021 Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on September 23, 2021. I would now like to turn the conference over to Mr. Frederic DuMaitre. Please go ahead. Thank you, operator. Good morning, everyone. Present with me today on the call are Mr. Steve Saviach, our CEO Mr. Frederic Quasano, our President and Chief Operating Officer and Mr. Luc Miville, our Senior VP and Chief Financial Officer. Before we begin our Q3 2021 results and highlights conference call, I would like to remind everyone that this This conference call may contain certain forward looking statements regarding the company's expectations or future events. Such expectations are based on certain assumptions that are founded on currently available information. Other than as required by security laws. I would now like to pass the call over to our CEO, Mr. Steve Sajak. Please go ahead, Steve. Thank you, Fred. Good morning all and thank you for joining us for the Q3 2021 results and highlights conference call. I will start by quickly reviewing our Q3 highlights and recent milestones. Then I'll pass the microphone over to Mr. Fred Pizzano, our President and COO, We'll provide more details on our commercial efforts, completion of the implementation of our new corporate structure, Following which, Senior VP and CFO, Mick Mabill, will provide a short overview of the quarterly results before we open up the call for questions from analysts. 3rd quarter 2021 was clearly a pivotal quarter for Valleopharma. We recorded Record quarterly revenues and gross margin and again record year to date revenues. All of this stems from or in large part the launch of 3 very important products for us, Radhesca For the treatment of blood anticoagulant blood disorders, Enerzair and Aptura for the treatment of asthma. We are in the early stages of our sales growth for these products, which we expect will exceed $125,000,000 in peak sales. So significant growth starting in Q3. We've also implemented a new kind of corporate structure. If we look back to 6 months ago or 6 to 8 months ago, we had a total headcount of approximately 35 people. We are now 100 plus, Structure that's clearly positions us as a mid tier pharma company in Canada. One of the important aspects of any drug in Canada is the public private reimbursement, who pays for the drugs. And for our 3 key drugs, RODESCA, INRZAIRE and ATEQURA, we have extensive private coverage In the 75% to 80% range, we expect that to go to closer to 100% by the end of this year. Bradesco has extensive public coverage with only Quebec and British Columbia currently not reimbursing the drug At the retail level, and we expect that by the end of October to be rectified and that all provinces will be covering the drug. And we are well advanced in our discussions to have our 2 asthma therapies and our Zenera Tektura reimbursed at the provincial level. Rajeska is currently our top selling product. We launched it in End of April really, but May was the big month for Rudesca and we expect peak sales for Rudesca to exceed $30,000,000 So $30,000,000 of that 125 will come from Radhesca. And typically, the uptake and the sales growth will be earlier in the typical in the launch curve of products. So what we would expect is that for the next 3 or 4 quarters that Radhesco will be the workhorse in terms of driving our top line sales, Quickly followed up then by the asthma therapies that are now have now been launched by our sales team. We have a national sales force of 65 Managers and regional sales managers, which puts us on a par with even big pharma. So we are very we have a very extensive and complete Commercial team. Our asthma drugs, as I mentioned, have been launched. They were launched in June. The commercial team has been at full strength and in the field as of August. We are sampling the product extensively and the early indications from healthcare providers is very strong, which would pertain to the sampling and just general comments about new therapies and the benefits from our clinical data. So we think we're at a clearly are at an inflection point now. We're moving from that small pharma company that we were a year, year and a half ago to really into the mid tier With significant revenue targets going forward, we have a structure that is leverageable For additional products, which we expect to be able to launch in the coming years. And I think it's we're at a very attractive Point in our commercial history. With that, I'll pass the mic over to Fred to give you a bit more detail and color on the implementation of this corporate structure, A bit more on these three transformative products that I mentioned earlier and other of our latest accomplishments. So over to you Fred. Steve, thank you. Thank you so much and thank you the audience also to be on the call this morning. It's my pleasure today To report on the latest business update regarding our Q3 results and to share with you also our excitement to see things moving in the right direction of value. We are posting good Q3 results, and our focus is more than ever on, first, accelerating top line revenue growth and shortening our time to breakeven. The first point I want to report on this morning is where do we stand in terms of our new corporate structure. Steve has already Given some part of it, but it is now fully completed and operational. The point underlying this new design of corporate structure is important. It's a strategic transformation of value of our organization, which has led us to design 2 different business units, led now by industry veterans And staffed with industry skilled and experienced people. Both business units are now fully operating in support of our branded products. The 2 products are part of the respiratory business unit and 6 are part of the specialty product business unit. Our 3rd arm, I would say, the hospital generic division includes now our generic products, mainly sold So hospital tenders without any promotional support. One important consideration at the time we started with this Aggressive hiring plan was really our ability to attract talent. I'm also happy this morning Report that we have been able to hire great professionals, attract great professionals to value even though we hear everywhere about the talent shortage, especially in the high-tech field. The idea to build an anchor Canadian pharma company has created a very attractive and exciting story for veterans of the pharma industry to join us. Interestingly enough, our number 100 employee will be our Vice President, Human Resources and Talent Management, We will join our organization as of the 1st October. It will be made public at this time. It has been quite an achievement to have managed Process from end to end in such a short period of time. As a result, now our field force is Supported by the strong and experienced head office staff comprised of marketing, medical affairs, Regulatory, quality assurance, business development and other functions like finance, HR and supply To ensure commercial efforts on the field are supported and revenue maximized. You may have seen that yesterday as well, we have launched Also to health care providers and patients. The second chapter, the second bucket of my report this morning is on our commercial launch, Of course, including Radhesca, our low molecular weight teparin biosimilar and Energir and Atektura, our 2 asthma product. Nationwide, our sales force is fully operational in both business units and is hitting the ground every day now with health care providers, either remotely or in person, depending upon the local COVID-nineteen recommendation. To that extent, a digital platform has been launched with the latest technology included, and this platform is allowing our team now Our chem team to call on more than 200 hospitals to get TREDESCA listed on hospital for billaries And our spec and GP respiratory team to call on more than 10,000 key asthma prescribers, among which pulmonologists, allergists, pediatricians and primary care physicians. From a product standpoint, Steve, alluded to that, Frudeska is rapidly becoming our best selling product, and we are working now to Secure more orders coming from hospitals as many tenders will kick in as of the 1st October. The product is now well covered by both public and private across the country, so that the next key step to build momentum is gaining on hospital listing. That's clearly the focus of our key account manager team, we're talking every day to GPOs, group purchase organization, hospital committees and hospital pharmacies to list Redescare. The launch of Enerzia Braselu and Atequra Braselu is also well on track with a series of medical and marketing activities having taken place. You may recall that both products were made available in the distribution channel last June, and they are ready to be delivered to patients In Retail Pharmacies, medical activities are started with a series of addboards conducted with top key opinion leaders to share and discuss the large So far, strong feedback have been received and high level of interest have been seen And more specifically, on how to prescribe this product and in which patient performed it. Commercial activities like product detailing, lunch and learn, Digital marketing have also started. And from the sales perspective, the early sign of product adoption have been observed. In parallel to those activities, the patient support program is now up and running, and it includes an early sampling service to healthcare providers. Interestingly enough, this activity is ramping up very quickly and we are shipping more than 50 samples a day of both protector and nail there Every day from our warehouse to health care providers. Lastly, we reported previously that private coverage of both products is above 85%. And as Steve mentioned, we are now working hard and seeking public coverage for both products. The 3rd point I wanted to bring to your attention this morning is around our business development activities. Our BD team is all at work To source continuously new opportunities and bring complementary products to value, certainly one priority Our PD team is bringing innovative products, which can be rapidly accretive on the revenues front. The recent deals we have been able to close have obviously provided credibility, visibility to Valeo as one of the go to Canadian pharma companies. So in conclusion, value is very well positioned to continue growing and posting further achievements as we are going forward. This will come as a result of leveraging our newly created medical and commercial platform. It will be less about upscaling and building infrastructure, but instead leveraging our current capabilities to deliver on expectations. We are confident that 2021, 2022, The tipping point for our company will confirm the strength of our business model as we continue to experience rapid growth. And furthermore, this will allow us, 1st of all, to be the leading Canadian pharma company. This is our mission statement. It will also allow us to provide new therapeutic options to patients in need and also to return value to our investors who believe in our story. So this concludes the product review section of our call, and I will now pass it over to Luc for a brief review of our quarterly financial results. Thank you. Thank you, Fred. During the last quarter, the corporation generated record quarterly revenues of 5,700,000 up 280% compared to $1,500,000 in Q3 2020 and up 114% over the prior Q2 2021. Net revenues for year to date 2021 were up 94% Compared to year to date 2020 at $10,200,000 compared to $5,200,000 The increases in net revenues for both the quarter and the year to date period We're due to the strong contribution of new products launched over the past 12 months, including revenues from Radhesca launched in April 21, Energizera Nadektura launched in June 2021, but also Amitab launched in Q3 'twenty And finally, Yandex. Asperco and Sejermotek grenade launched in the U. S. And all these products, the recent the later products were launched in the last quarter of 2020. Our product mix has also improved significantly compared to prior periods with higher margin products contributing a greater percentage of our total revenues. Due to revenues from recently launched higher margin products such as Radhesca, Actura, Enrizer, Yandex. Emitux, As well as the quarter over quarter growth of OnStarDrive, our gross margin ratio for the 3rd quarter has improved More than fourfold at 38% of revenues as compared to 9% in the Q3 of fiscal year 2020. The 30% increase in gross margin ratio combined with a 2 80% increase in net revenues contributed to increase Our gross margins by more than 16 times between the Q3 2020 and the Q3 fiscal year 2021 at $2,200,000 compared to $100,000 For the 9 months year to date 2021 period, The significant increase in revenues from higher margin products led to a greater mix of revenues for the period contributing to increase our gross margin ratio From 18% to 32% of net revenues, representing a 14% increase, the combined impact of The improved revenue mix as well as the growth in revenue led to a 2 45% increase in gross margin contribution for the year to date period 21 as compared to last year at $3,300,000 compared to $900,000 I'll now cover operating expenses. Starting with the Q3 2021, we're now presenting medical affairs and regulatory expenses as a separate line on our profit and loss statement. We believe that due to the increased spending related to medical affairs, QA, QC activities, pharmacovigilance and regulatory work, Which are all required to support our growing branded commercial portfolio. It will be important for the reader To better appreciate the level of G and A, sales and marketing and Med Affairs spending going forward and also better appreciate our efforts to leverage these three cost centers. Now sales and marketing. For sales and marketing expenses for the Q3 were $2,400,000 or 42% of revenue as compared to $500,000 or 34% of revenue for our Q3 2020. Sales and marketing expenses for the year to date were $4,000,000 or 39 percent of revenue as compared to $1,600,000 or 31 percent of revenue for the year to date period 2020. Earlier in fiscal year 2021, Valuance implemented a nationwide sales force of key account managers The launch of Radhesca in April 2021. So for the first time, expenses related to the Radhesca sales force were included in our sales and marketing expenses for the full quarter in the 3rd quarter as opposed to only a portion of the quarter in the second quarter. Also in the Q3 following the licensing of Energizer and Efectila from Novartis, the corporation started hiring a dedicated sales force of 65 experienced professionals. Most of the hiring related to the respiratory sales team has been completed prior to the end of the quarter. These factors contributed to increase our sales and marketing expenses, while revenue from the transformational products I've not yet reached their full potential. During the quarter, the corporation incurred a series of non recurring expenses that are typical of expanding sales force and new product launches, such as a $600,000 hiring fee compared to nil last year And $200,000 for market data and branding, some of these expense these non recurrent expenses have been deducted from our adjusted EBITDA calculation. Over time, we expect sales and marketing to be more representative of recurrent And should trend downwards as a percentage of revenue. G and A expenses for the Q3 2021 were 1 point $7,000,000 as compared to $800,000 for the Q3 2020, representing 125% increase. G and A expenses For the year to date 2021 were $3,500,000 as compared to $2,000,000 for year to date 2020, representing a 34% increase. The increase in G and A expenses for each of the 3rd quarter year to date period resulted from Incremental investor duration expenses as well as the addition of head office personnel such as a new President and new staff required to support the strong growth anticipated in fiscal year 2021 and beyond. Following the creation of a new corporate structure, we've created a few additional head office position. The new structure should be completed prior to year end 2021 and will provide significant leverage thereafter. Consequently, G and A expenses as a percentage of net revenue should trend downward starting fiscal year 2022. As mentioned earlier, starting in Q3 We're no longer presenting midaffairs with MG and A. We feel these expenses deserve dedicated narratives and presenting them separately will add value The nonrecurring special provision has been eliminated from our adjusted EBITDA calculation. The said provision represents a preliminary charge specific to a loss incurred due to a bank fraud involving Valio and one of its major suppliers. Ultimate responsibility for the loss has not yet been fully determined, and we anticipate that the net loss to be incurred as a result However, at this time and until full responsibility and recovery is determined and due to accounting rules, We must fully account for the maximum $500,000 impact of this event in our Q3 financial statements And we'll account for additional impact of $400,000 in the last quarter less any recovery secured On the Q3 and Q4 provisions, by the time we report on our year end results, we believe that the net impact of For 2 value for each of the 3rd quarter and 4th quarter period will be assessed prior to reporting our year end results. As a result of this event, the corporation's management and Board of Directors have acted swiftly to reduce and recover the loss associated to this event, implementing new systems and procedures to protect the corporation going forward and we've made changes to personnel procedures to address the needs of the organization. The potential loss to be suffered by Valio as a result of this fraud will not affect the ongoing operation and activities of the corporation. I'll now discuss medical affairs and regulatory expenses. These expenses include costs Related to staff and activities such as medical liaison, sales liaison staff, cost to organize regional and national advisory boards, Build and maintain our KOL key opinion leader networks, pharmacovigilance, quality assurance and quality controls and regulatory activity needed to support our new and existing products. These expenses also cover costs for supporting patient support programs as well as compassionate use programs more specific to oncology projects. In order to support our fast growing branded product, We have expanded our Med Affairs and Reg team and activities during the quarters. Med Affairs and Reg expenses have increased by From $200,000 to $400,000 between Q3 'twenty and Q3 'twenty one, same expenses have increased $500,000 to $1,000,000 between year to date 2020 year to date 2021. Over time, we expect these expenses to trend downwards as a percentage of revenue as we take full advantage of the market opportunities for our products. Our financial expenses have increased by 51% and 77% respectively for the quarter year to date periods in fiscal year 2021 as compared to last year. These increases were due to a series of debenture financing closed over the past year. Valio secured debenture financings of $2,200,000 in Q2 'twenty $1,700,000 in the Q3 2020 as well as $6,600,000 non convertible debenture financing in April 2021, which were partly repaid after the end of the quarter, the recent quarter. These financing contributed to increase our financing costs $200,000 in Q3 2020 to $400,000 in Q3 2021 and from $400,000 to $800,000 between year to date 2020 year to date 2021 periods. Our net loss for the 3rd quarter stood at $3,000,000 as compared to $1,600,000 in the Q3 2020. Our net loss for the year to date stands at $6,600,000 compared to $3,600,000 for the year to date 'twenty period. During the last quarter year to date period, the favorable impact of our record revenue and the significant increase in gross margins have contributed to reduce the impact of adding Commercial medical support staff is required to capitalize on the significant market opportunities for Radhesca and Rezaire and Atekura as well as to accelerate the growth of other existing products such as Unstrive and Yandevis. Our net loss has been impacted by material nonrecurring Expenses such as hiring fees totaling $600,000 $800,000 for the quarter year to date period in fiscal year 2021 compared to nil last year as well as €500,000 special provision described earlier. We have completed most of the additions to our sales, medical and head office staff during the Q3 and we anticipate that the strong sequential quarterly growth of our net revenues and margins We'll contribute to lead value towards profitability during the course of fiscal year 2022. Now for our EBITDA loss. Our EBITDA loss increased from $1,300,000 in Q3 'twenty to $2,300,000 in Q3 'twenty one. EBITDA loss The year to date periods increased from $2,900,000 in year to date 2020 to $5,300,000 in 2021. Same as for our operating loss, the Q3 2021 year to date 2021 EBITDA results were impacted by several Non recurring material costs and the significant increase in our gross margin contribution did not fully cover our operating expenses, which now reflect the full impact of our new organization. However, we believe that adjusted EBITDA is a better indicator of our financial performance. Our adjusted EBITDA loss increased by $100,000 between Q3 'twenty and Q3 'twenty one at $800,000 compared to 0.7 Adjusted EBITDA loss for year to date 2021 was $3,100,000 as compared to $2,200,000 for year to date 2020 period. Our adjusted EBITDA loss was down 25% in the Q3 2021 as compared to the prior Q2 2021. I'll now comment on cash flow and financial resources. Cash used in operations was $9,800,000 in year to date period compared to $3,400,000 in year to date 2020. The $6,400,000 increase came from a $3,000,000 increase in net loss, but more importantly, A $4,400,000 increase in non cash working capital. This was only partially covered offset by increase In items not affecting cash of $1,000,000 During the year to date 2021 period, we've invested $5,200,000 for inventory and to support the increase in our trade and other receivable. This investment was required to support our strong growth We do not anticipate a significant investment in working capital assets over the coming quarters. Items not affecting cash increased due to the increase Expense on the debentures. Cash used by investing activities to acquire intangible assets during the period was CAD2,300,000 in year to date 2021 as compared to CAD1 1,000,000 year to date 2020. The $1,300,000 variance was mainly due to the $1,800,000 license fee paid to Novartis on signing of the Energizer Activa license as well as $300,000 investment to expand our warehouse and head office to support our growth. During year to date 2021 financing activities provided cash of $300,000 compared to $4,100,000 last year. During the year to date 2021 period, Valio secured $10,300,000 net proceeds From the issuance of units, dollars 6,600,000 from the issuance of non convertible debentures, plus $2,000,000 from the exercise of warrants, options and compensation warrants. During the corresponding year to date 2020 period, Valleos secured 1 €700,000 from the issuance of non convertible debenture, €1,100,000 net cash from advances into the convertible debenture financing as well as CAD1 1,000,000 from an increase in its operating loan. At the end of the last quarter, our cash position stood at CAD9 1,000,000 Following the end of the Q3, the corporation repaid $3,300,000 from the $6,600,000 bridge financing secured in April. The balance of this bridge will be repaid in January 2022. Following a series of successful financing in fiscal year 2020 year to date 2021, Including the recent $11,500,000 bought deal transaction in June 2021, we've secured significant capital to strengthen our balance sheet and our cash position And provide liquidity to support the implementation of our new corporate and sales structure and fund activities initiatives that are aimed at capturing the significant market opportunity, especially for Radhesca and Enercarettecheva. As evidenced by our record quarter in Q3 2021, The contribution of these transformational products is expected to materially impact both the corporation's revenues and gross margins going forward And consequently, value is still determined on reaching profitability by the end of fiscal year 2022. This concludes the financial review part of our call. Will now turn back the call to Steve. Well, thank you, Fred and Luc. We are now ready to open the call for questions. Although this portion of the call is reserved for questions from financial analysts, we invite all our shareholders or any other interested parties to contact us directly with any questions We will try to get back to you as quickly as we can. Operator, you may now proceed with the questions part of this call. Thank you, sir. Your first question comes from Scott McCauley with Barden Capital. Please go ahead. Hello, gentlemen, Steve, Fred and Luke. Congrats on the record quarter. Really, really great results. You had highlighted that Radhesco was the largest kind of revenue driver this quarter. I was just wondering if you can provide any additional color possible on kind of that revenue breakdown Either on a product basis or between the different business units, I know it's something you don't include in the financials, but any additional color would be great. And whether or not in the future you plan to kind of break that down in the statements? Luc, I think that you should answer that. Yes. Thank you. Well, Scott, thanks for being on the call and that's a great question. Well, obviously, we've just created the 2 business units and we're just starting To see the commercial penetration for the recently launched products. So I think it's a bit early for us to Start providing a breakdown of revenue, but we do anticipate in the near future When we started seeing recurrent product revenue from each of these drivers To be consistent and growing nicely, we'll be providing a little bit of a breakdown and that will provide the reader a better Appreciation of our sales and marketing efforts for the various business units. But at this time, I think it's more prudent that we just keep it the way it is. Yes. No, totally fair. Yes, and certainly look forward to those additional details. Just another one. Steve, I just wanted to kind of quickly follow-up on a comment you made earlier in the prepared remarks just to Kind of clarify, you had mentioned kind of peak sales of $125,000,000 Obviously, kind of the new deck still refers to $160,000,000 sales by 2025. Just want to make sure that everyone's on the same page on those numbers there. Yes. Well, the one the deck that you have that's 1st 160 is for all our products. And when I said in excess of 125 that was strictly for those 3 products, RODESCA and Ozera and Tektura. And clearly, we're expecting much even greater revenues. And so when I say 125 plus, I'm really putting the emphasis on the plus kind of in bold letters. So And I think that's when you look at our sort of the rough breakdown in that 160, you'll see that I think Enerzera and Zektura and Rodesca were about $125,000,000 $130,000,000 of that $160,000,000 Okay, perfect. And then just quickly on this Bank fraud issue, again, you highlighted it in reports and talked about today. Just in terms of your any visibility on recovery of that cash, potential impact on your balance sheet, Kind of any other color you could provide on that impact on you guys? Luc? Yes. Well, again, I think we've said what we had I think we provided a little bit of color As to the event, what happened, I think the challenge we have is that from an accounting point of view, you've got you got to book the maximum exposure that at the time it happens. And because the event happened late in the prior to presenting our numbers, we didn't have time to fully Our recovery initiatives include as a secure insurance coverage reimbursement, But we do expect that those initiatives will be fruitful in the next coming months. So what's going to happen is that by the time we report our Year end results, actually our year end is October and we have 4 months to produce our statements. So by January, Feb, We'll be in a much better shape and by that time we'll have fully recovered the proceeds from the insurance and other recovery initiatives. So the impact will be fixed at that time. In terms of additional impact on Our numbers have quantified the loss in Q3 and the maximum potential loss in Q4. That maximum potential loss in Q4 We'll deduct any recovery from the whole initiatives at that time. So we might actually have a reversal of the Q3 provision At that time, so it's too early to tell. So that's for the P and L impact. As far as the cash situation, We have made arrangements to not for this event, not impact our cash flow Until the initiatives pan out, so we expect those initiatives, as I said, To come to, I guess, resolution over the course, I would say, of November, December. Thank you for that. And I guess just lastly for me and I'll hop back in the queue. Does these strong results kind of impact your expectations For the rest of the year, in terms of the revenue ramp, just wanted to get a sense on kind of the next few months, if possible? Hello, Fred? Yes. So Scott, the point here is We are waiting for kind of important event taking place in October that will support the Q4 results. But the trend on both sides, I would say the trend that we have seen on the weekly sales tracking dashboard that we have in place now That it is growing on the week over week basis on the Redesco side and of course on the Ayno Zebrander Tektura side. So We still have kind of some difficulty to see clearly where we're going to land at the end Fiscal, but certainly if you take 2 quarter kind of a lens on our results, it's clearly directed towards growing And providing value. Again, we've decided that Redesca will be certainly moving forward in a quicker way As we are expecting hospital listings and GPOs listing to come into effect to be effective, so I would certainly look at particularly the performance of Redesco in the upcoming months. That's great. Thank you, gentlemen. Again, I'll jump back in the queue. Thank you. Thank you. Your next question comes from Paul Stewardson with IA Capital. Please go ahead. Good morning, guys, and congratulations on the quarter. Just calling in on Chelsea's line. Just wondering if you could give us some color on the OnStripe sales. You mentioned it was a good quarter. Was that idiosyncratic? Sincradix, is that a new run rate and sort of how is the growth looking on OnStar? Maybe Lucie can Provide color on that? Yes. Well, I guess, Paul, the STR1VE is clearly not at the same level as Radhesca. As a contributor to the overall product, it's a contributor, but not the main contributor. So we're happy to see that OnStrive is contributing more not only to top line, but also margins and bottom line. So that's the reason why I made the comment, Because we do need the contribution of all products to make a bigger impact on our gross margins. But on STRIVE at point in time, is still suffering from lack of public reimbursement that we're working on. And until that happens, it's going to be not a marginal product, but a Smaller product in our portfolio. Okay. And just in terms of the growth that you did see in it, is that Do you expect to keep any more of that? Maybe I can jump in, Steve, if you allow me just to add one point. I think it's a good point. Actually, it comes as a result of really a growing interest that we have seen among neurologists in Canada. You know that the product was supported by a patient support program. We will continue we have changed actually the So great interest. We are receiving letters from neurologists around the importance Getting this product covered. So as Luc mentioned before, then Paul, the point here is really working out on trying to make this product covered As all of the competitors actually are covered and this with a special focus in Quebec and that could be certainly a turning point for this product, Even though we consider this product to be maybe $1,000,000 to $3,000,000 product and not a $30,000,000 product like Credescare, but see some growth Definitely a great interest from neurologists. Okay. Thanks guys. And again, just on another of the sort of Smaller products, but still important. In terms of the Montreal Heart Institute trial results are probably coming, I imagine quite soon. Have Hesperico sales been increasing throughout the last several months since launch? Or is it really just holding off until those results come out and then you can sort of map out the marquee plan? Fred, I'll answer this or deal with it and you can maybe chime in with some of the we're still waiting for the final report on the Montreal Heart There have been drafts going back and forth. So we're waiting to see whether they'll how they'll publish and in which context and which timing. I would say sales have been relatively flat and partially due to our focus on obviously our other products, Partially because of the kind of the waiting around for the results to come from the merger hardest, but also because of The listing of the products within the various retail banners, I think we'll start to see something happening there. We're feeling that we should be able to have some information on listing, mass listing in some of the bigger chains in the coming weeks. Okay. And in terms of the U. S. Launch, is there a date on that or what's the status? The U. S. Launch, we're still discussing with several U. S. Parties. I would expect the launch like late fall, November timeframe, early December. Again, the key really for the success of this product, I mean, as you've seen recently, COVID is continuing to be in the headlines. It's continuing to affect a lot of people in around the world. And we Certainly, we'd like to get this and intend to get the product we still have support behind the product. We still intend to get the product out there. We're just One of the key marketing drivers for it will be the results that we get from Montreal Heart Institute. Of course, of course. That's helpful. And just in terms of Enerzer and Atektera, Can we look for any sort of prescriber data to come as these ramp? Or is that Can we get any color on the number of prescribers? Fred? Yes. Thank you, Steve, and thank you, Paul, for the question. I think we have now kind of all the dashboard necessary to start to report on product adoption. So far, it's still very low numbers. But certainly, we are looking to have the necessary data set Look carefully at how many prescribers are taking on the product, are prescribing the product. So the short answer is, we're going to start to report on this adoption curve Probably in the months to come. And we have now the data set that we are buying to provide more color and information about that. To give you an idea what we are tracking here is sales data on a weekly basis and on a monthly basis, And we are starting things to moving on. And the current trend on sales is around 100 plus product. And interestingly enough, both products are starting to be used in approximately the same proportion. So we see things moving very early days, of course, but we see things moving on the sales data side. Okay. Yes. That makes sense. Last one from me, maybe for Luke. Just Can you touch on inventory in terms of as you guys keep heading towards bigger and bigger revenue numbers, how much More inventory are you going to be needing in the next couple of quarters? Well, good question. Think I mentioned that we of course we had to make a major commitment especially for Radheska and minimum batch Size being what it is, we needed to invest significantly. Of course, right now, we're eating up that inventory and we'll be Restocking over on a quarterly, semi annual basis. So of course, the level of inventory for that product We'll try to be just in time as much as possible, but because of shipping challenges and Difficulties in supply, we don't want to take any chances. There may be a we may foresee a little bit of an increase, but not a major increase, as I mentioned. We went from nothing to a significant stocking of Bradesco. As far as the other products, the other products We'll pick up slowly and clearly we'll adapt. We benefit on the Novartis supply agreement. We benefit from almost a just in time arrangement. So we have a little bit more flexibility on that one not to stock Year's worth of products. So all in all, nominal increase compared to last quarter, but That should be celebrated, as you know, Paul. We invest more because we need more to support the top line. So We'll see how things pan out. Yes, absolutely. Absolutely. Okay. Thanks for taking my questions guys and really again Congratulations on the call. Thank you very much, Mark. Thank you. Thank you. Your next question comes from Andre Uddin with Research Capital. Please go ahead. Hi, Steve. Good morning, Andre. Hi, Andre. I've been with this already, But had a nice quarter, definitely. So just looking at the bank fraud, can you just discuss maybe what some of the systems you've put in place to prevent this from Yes. Well, in terms of systems, we These events, of course, as much as you feel you were Caught in an unfortunate situation. It forces the company to look at everything. So we've looked at everything from That from IT systems to internal procedures, etcetera, etcetera. So without going too much into details of the event, because We still have not yet assessed if the full responsibility is on value or else. So we've got to be careful with our comments and we have hired specialists to help us in that regard doing The proper fiber checks and forensic work to help us. But All at the end of these investigations and analysis, there will be reports to management and the Board And everything that needs to be done will be done. But at this point in time, we believe the event is specific to Only one supplier and one relationship. And so and nothing else will be as is You don't have to worry about any other events happening elsewhere in the organization. So Again, going back at what we're doing, Andre, got to be careful not to share too much, but Trust us that we've done everything we have to do to protect from these kind of events going forward. Hey, very good. So just looking at out of the 65 sales reps that you have, how many are right now promoting EnerZair and Tektura. Fred? So exactly, Andre, good morning. So the number in 2 quarter of our respiratory portfolio is exactly 47. And if you have management line, it's 54 And then you have other positions dedicated to this video, the 8 quarter. So that's where we come from. When we are seeing we are now able to cover more than 10,000 prescribers, including specialists and primary care physicians, this is coming as a target list derived from those Territories design all across Canada. That was great. And Fred, you were talking a little bit about this before, but given your larger sales force On the business development front, are you seeing companies actually approach value now that you have this larger sales force And what type of products are you focusing in on? And are there any specific other disease indications that you're looking at? Thanks. Yes. Thanks, Andrew. It's exactly what we are going to frame in our strategic thinking process and plan. I would say, we have been claiming for some months now where we are now, meaning Indeed, we've been investing in respiratory, so we are definitely in this therapeutic area to stay and other one like neurology or oncology, which It represents opportunities for us to eventually to bring more product. I think we are down to so to answer your question, definitely we are Well established now in the BD network, so we see opportunity around us. As I said, we have visibility and we have credibility. So we see definitely interesting product companies, international companies are seeking to A partner with Canadian companies. So we have this visibility. The one point I want to make clear is that anything that we are looking at today, He asked to answer to one prerequisite, which is helping us to accelerate the top line revenues and subsequently, of course, the bottom line. So not seeking for product with 2, 3 years time to be launched and effectively covered And all processes were in place. So we are running after short growth drivers. That's one point. And for the other question as which therapeutic area we're looking for, I think we are still an opportunistic way looking at the one we have currently announced, but potentially also one as well. That's great. Okay. Thanks a lot guys. Thank you. Thank you, Amari. Thank you, Amari. Thank you. We have the following question from Scott McCauley with Paradigm Capital. Scott, your line is now open. Thank you, guys. Just one quick follow-up for me. I know you've talked in the past about the uplifting kind of to the TSX. I was just wondering If you could provide any additional color on kind of timing or how that process is going? Yes. I mean, we've been working on that and We expect to be able to have more news before the end of the year, but clearly our timeframe is still the 6 to 9 month period To get listed meaning, I think we meet many of their listing requirements and the ones that are more subjective, we're And we're dealing with and hopefully can provide more information to the market, but clearly that's based on talking to our shareholders or potential future shareholders And looking at our peers that are on the TSX and who we really feel are now our peers, that TSX listing is very important to us. That's great. Thank you, guys. Thank you. There are no further questions at this time. You may proceed. Thank you, operator. Well, just in finalizing, On behalf of Fred and Luke and myself, we are all very pleased with the accomplishments that have happened over the last few months. This is a company that's certainly been transitioning On a quarter over quarter basis at a remarkable pace, we have innovative products, we have motivated people and a complete structure to deliver on our ambitious Objectives. We have positioned Vallejo to become a leading Canadian pharmaceutical company in its target therapeutic areas. We are in the very early stages of our revenue growth with a multi year runway ahead. We maintain our earlier guidance of a doubling of revenues from 2020 to 2021 And we expect at least the same for 'twenty two. We're totally committed and I think that's come through the comments that both Fred and Luke have made as well as myself in achieving positive cash flow in the second half of twenty twenty two. It's one of our key objectives. And again, all Vallejo Management, Board, employees are significant shareholders in the company. We remain very much aligned towards value creation for all shareholders. So Ken, thank you for your continued interest and support as we look forward to keeping you up to date with the various Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.