I guess it's noon. That's my cue. Well, good afternoon, everybody. My name is Craig Millian. I'm the CEO of HLS Therapeutics. I've been with the company about three and a half years. With me today is Brian Walsh, our Chief Operating Officer. Dave Mason is our Head of Investor Relations. Pleased to be with you, and thanks for the invite to speak today. Forward-looking statements, the figures will be in USD unless otherwise noted. Some will be in CAD. HLS Therapeutics, we're a North American specialty pharmaceutical company. We are a cash-generating business with a profitable product portfolio, and I think what's interesting is we're, I believe, at an inflection point with a capacity for additional growth. We are focused in two therapeutic areas, neuropsychiatric disorders and cardiovascular medicine. We are in both Canada and the U.S. The majority of our infrastructure operations are in Canada.
About 80% of our revenues are generated there, but we have a very profitable business in the U.S. as well. You can see our 2025 financial figures. Of note, adjusted EBITDA is a healthy operating margin from our business. Our guidance for 2026, some modest growth in revenue, and we'll talk a little bit about that. We're launching some new medicines that are just getting off the ground, so we're just on the cusp of seeing that inflection, and relatively flat EBITDA for 2026 as we reinvest in our growth products. This is our product portfolio. I won't spend much time on this slide because I'm going to double-click on several of these medicines in a bit. Of note, our operating model, we don't do R&D. We acquire or in-license assets for both the U.S. and Canada, primarily to this point in Canada in-licensing.
We own the rights to Clozaril in both the U.S. and in Canada, and then the other products. We have various partners who we work with to maximize our performance in these markets. What's important is we don't bring in products that haven't been de-risked from a clinical regulatory perspective. These are all de-risked assets that are on the cusp of commercialization or generally have been successfully marketed in other geographies. The question is, why are we here? Why are we talking about HLS? Why now? We've done a lot of work in the last couple of years to strengthen the financial and operational performance of the company. Talk a little bit about the progress we've made there. We think that we're very solid fundamentally in terms of our balance sheet and the structure of our company.
We also think that not necessarily factored in just yet are the catalysts that we're about to see around, in particular, our cardiovascular portfolio. We'll talk a bit about that, which really sets us up for significant growth in 2027 and beyond, we think sustainable growth. Just a word on the financial performance of the company. When I joined several years ago, a large chunk of our revenue and actually about half of our adjusted EBITDA was actually driven by kind of a passive investment in royalty interests of several products that we just received revenues from, not driven from our own operations or our own product portfolio. Over the last couple of years, those royalties have either expired or we intentionally sold them to actually pay down debt.
Really, we made a very intentional decision to focus on growing our own product portfolio and really optimizing how we sell and market those products to grow EBITDA through our own operations. You can see at this point and through the first half of 2026, the vast majority of our revenue and EBITDA is not based on royalty streams, but actually on our products. That is important when we talk about some of the metrics as far as how our business has evolved. Here is some of the progress we have made over the last couple of years. You can see on revenue, modest growth of about 6% with our product portfolio, but significant growth in our cardiovascular medicine portfolio of 39%. We will talk about how that is just really the starting point for where we would like to go with our cardiovascular medicines.
Importantly, in the middle there, again, this is all carving out royalties and really looking at financial performance based entirely on the results of our product portfolio. You see our adjusted EBITDA has grown 73% over the last couple of years, and then our net debt has come down 57%. From a capital allocation perspective, we have leveraged the cash that we have generated primarily to this point to pay down our debt and lower our interest expense further, as we can see on the next slide that I will spend just a few moments on to explain. The bars are basically 12-month, rolling 12 months, ending each quarter, adjusted EBITDA, again, backing out royalties and actually backing out the interest paid, so kind of a surrogate for free cash from operations.
You can see over the last couple of years that run rate has gone from about a rolling 12 months of about $2.3 million up to most recently about $15 million and has consistently grown during that timeframe. That is due to, A, generating more profitability from our products, and B, paying down our debt and lowering what was a very cumbersome amount of interest paid for a company of our size. You can see back in the early part of 2024, we were paying about $8 million in interest expense to over $2 million a quarter. Most recent 12 months, we are down to about $3.2 million, and that will go even further as we report later this year. Obviously, lowering that leverage ratio, creating more optionality in terms of how we can use capital, and we will talk a bit about that as well in a few slides.
We have done a lot of the heavy lifting, I would say, over the last couple of years to strengthen our operations, refocus away from this kind of passive royalty income to really generating growth in our product portfolio and increasing margins on our product portfolio, paying down our debt, strengthening our balance sheet, creating this kind of virtuous cycle that will allow us again to do more with the cash that we generate. That is kind of where we have been and where we are today. I would like to talk a little bit about why we are so excited about the future of HLS and where we expect the company to go in the next few years. That is really driven by an increasingly diversified product portfolio, and we will spend a few minutes on each of these assets.
The company really was founded based on a single asset, that being Clozaril, which continues to have a very long tail, consistently generating significant amounts of cash that really help to fund a lot of the growth that we're trying to generate on an ongoing basis with our new products. Vascepa, NILEMDO, and NEXLIZET are our cardiovascular products. Vascepa, we're into year seven, still growing robustly, and we have two new assets that we just brought in within the last 18 to 24 months, NILEMDO , which we launched earlier this year, and then NEXLIZET , which we expect to launch early next year. Taking a little bit of time to talk about why we're so excited about these medicines and why we think there's such a remarkable opportunity to grow the company further.
We're really building what I would characterize as a leadership position for HLS in the Canadian market as a leading cardiovascular medicines company. We're a relatively small company, but I'd say we punch above our weight here. I think we're recognized across the industry and certainly across cardiology among the key opinion leaders as a major player. These medicines make up the portfolio, and they all are incredibly synergistic in terms of the messaging platform and the operating model. The messaging platform is really around three medicines, one goal, reducing cardiovascular risk for Canadians. Each of these medicines have significant clinical data behind them, large outcomes trials that have reported out demonstrating that they reduce cardiovascular risk in both secondary prevention. That's patients who've already had a cardiovascular event, heart attack, stroke, or in patients at risk of having a first cardiovascular event.
These are first and only in class medicines. There are no other medicines within these particular classes. It's an all-oral portfolio. It's well-tolerated. These medicines have been available in other geographies for many years, generating real-world evidence as well as proof of commercial viability. They're all integrated into global guidelines. In essence, as we introduce these medicines into Canada, they're new for Canadians, and there's a lot of excitement that they're now available, but these have been available to other global citizens for many years. The last point here is, we built a very, I think, impressive set of capabilities to launch and grow Vascepa in Canada, but it was a single asset. What we've been able to do by now tripling the number of medicines in this portfolio is leverage the capabilities we built in selling, marketing, medical affairs without having to really grow our footprint.
Now we can amortize that cost across multiple assets, thereby growing our margin every year as our revenues grow. Our revenues will vastly outpace our OpEx to support this portfolio, which was really the rationale to continue to build on that foundation. Just a word about each of the specific products. I don't know the background of everybody here in terms of how closely you follow life sciences or cardiovascular medicines in particular, but I'll spend a few minutes just to describe why from a clinical perspective, these are such important medicines. Vascepa is a drug that's unique. It's icosapent ethyl. There's nothing else like it. It is for patients who have either had a cardiovascular event or are at risk of having a first event. But patients who have elevated triglycerides and who are already being managed for their elevated cholesterol, so they're already on a statin.
In essence, they've already are actively managing their risk. This is a treated population, very difficult to show benefit in a population that's already being treated with statins. Their risk is already quite low. In the REDUCE-IT trial, what we were able to demonstrate is a further 25% reduction in cardiovascular risk. This is a composite endpoint, heart attack, stroke, as well as cardiovascular death. But importantly, as a single endpoint, cardiovascular death was reduced 20%. That was a statistically significant result. It's very unique. There's not a lot of clinical trials that have demonstrated as a single endpoint the ability to reduce death due to cardiovascular events. Usually, it's part of, again, a composite endpoint. This is a really important point of differentiation that we've leveraged, and that has helped us establish this as an important treatment. We're in year seven.
This was launched in Canada in 2020, and you can see, even in year seven, we're growing both units and net sales in the mid-teens, and importantly, expanding our operating margin because there was a large investment made to launch this product. It wasn't profitable for many years, and now it's profitable. As I said, as we add additional medicines to the portfolio, those margins are expanding further. We have patent protection in Canada through the late 2030s. Interestingly, we're growing faster in 2026 than we did in 2025, which is pretty unusual for a product that's been on the market for a few years. Why is that? In part, we've made some structural changes to our team. We've strengthened the team that sells and markets this product.
Also, I would say, by bringing in new assets and having new reasons to go in and speak to cardiologists, it's actually creating a more dynamic environment, even for a product that's been around for a number of years. I'm going to switch gears now and talk about, just keep an eye on time, about our new products, NILEMDO and NEXLIZET, which actually compete squarely within the LDL cholesterol-lowering paradigm. Just a word about this, LDL cholesterol, it's well known as a surrogate endpoint that is strongly correlated with cardiovascular events. Reducing LDL is associated strongly with lower coronary events, lower vascular events, to the point where guidelines are consistently changing to capture that lower is better.
Because of that, we're constantly chasing lower and lower goals, and most high-risk patients actually aren't at goal, despite the fact that very effective drugs like statins have been available literally for decades. Believe it or not, there's still a lot of patients out there that either aren't on them or can't tolerate them or can't get to goal. That's where NILEMDO and NEXLIZET come into play. NILEMDO is a novel agent. Its generic name is bempedoic acid. It works on a similar pathway as statins, but further upstream and eliminates some of the problematic side effects that are associated with statin use. So it's the first and only oral non-statin indicated for both LDL lowering and cardiovascular event prevention. It has terrific outcomes data that was presented in The New England Journal of Medicine. It's indicated in both primary and secondary prevention.
Importantly, it can be used with or without other LDL-lowering therapies. NILEMDO launched around April of this year, and the launch is going very well. NEXLIZET is a fixed combination of bempedoic acid and ezetimibe, which is another oral non-statin that is available as a generic. What is important about this product is it essentially doubles the efficacy of bempedoic acid alone. It takes it from about 19% lipid lowering to 38% in a single pill. We think there is going to be a built-in, we know there will be a built-in market for this drug, and we know there is a lot of interest in having this combo product available for patients in Canada. Where these products fit in in the treatment paradigm is as follows.
You would think that, again, it is a huge market, it is one where statins have been available for decades, that this would be a well-satisfied market, but it is actually not. Any patient who requires LDL lowering would typically be started on a statin, but many patients either drop off of statins because of perceived or real side effects, typically muscle aches or myalgias. Other patients cannot get to their treatment goal on statins alone. That is where they might add a drug like ezetimibe, or in extreme cases, they have to go onto a class of drugs called PCSK9s, which are highly effective but very expensive. They are injectable. They are really kind of the big gun, so to speak, and reserved for very rare instances. Very difficult to access in Canada.
NILEMDO and NEXLIZET fit in ahead of those PCSK9s at a price point that certainly is more expensive than generics, but significantly discounted to injectables. That value proposition, we had a hypothesis that this would be compelling, and that has actually been validated. Within months of us going out to private payers in Canada, we were successful in contracting with almost every large plan in Canada to the point where over 80% of privately insured Canadians have unrestricted access to NILEMDO . Within months of launching, we were able to get contracted with payers without restrictions based on the power of the data and the value proposition of where this fits in the treatment paradigm, because the goal is to get patients to goal, but to do it in a way that does not require the most expensive treatments.
What that translates into in terms of a market opportunity is the following. We estimate that about 5 million Canadians either have cardiovascular disease or are at elevated risk of cardiovascular disease. Of that, 3 million are on statins. We estimate that half a million of those patients are either not at their goal despite being on statins plus ezetimibe, or are statin intolerant. In other words, they are dropping off statin altogether and, of course, are not being treated. We think that is a relatively conservative estimate, but it is one that even in and of itself is a sizable market opportunity.
Based on a set of assumptions that we think are reasonably conservative around market penetration and a range of possibilities in terms of where net pricing will ultimately land after we finalize negotiations on the public payer side, we estimate this opportunity at peak would be somewhere between 50 and 100 million CAD. Based on the early uptake we've seen with NILEMDO , that's, again, early days, I don't want to get ahead of ourselves, but certainly there's nothing that we've seen that would not support this as a reasonable estimate. Here's where we are with the evolution of this franchise. As I mentioned, we've got very strong private coverage in place for NILEMDO . For those of you who are familiar with the process in Canada, the next step is to try to get public coverage. We are set to begin negotiations.
We expect those to begin in November with pCPA, who negotiates on behalf of all of the provinces to contract before, then you contract with the individual provinces to get public listings. Those are the next steps, which we expect will happen within weeks, not months. In parallel, we're waiting on a decision from Health Canada on NEXLIZET . Again, that's the combination product of NILEMDO plus ezetimibe, and we expect a decision by the end of this year, which would allow us to launch NEXLIZET , a second product, in the first half of 2027, which really sets us up for a number of catalysts for a very exciting 2027 and really an inflection point in terms of growth. Just a quick word on Clozaril. This is a very important product. This is branded clozapine. This is a product that has been around for something like 30+ years.
It's been available as a generic in both the U.S. and Canada for the last 20 years. Yet we enjoy a 50% share of the market, of the clozapine market. Our brand, Clozaril in Canada, has about half that market. It's important because this is a class of drugs that really has no alternative treatment. It's the only drug class that's approved for treatment-resistant schizophrenia, which is an absolutely horrendous end stage for patients who have schizophrenia, who've tried, in some cases, 10 or more treatments and really are out of options. Very high morbidity and mortality associated with this condition. It's a very profitable product for us. It generates, as you can see, upwards of around $27 million directly towards EBITDA, and one that has a very long tail because, as I said, it's been on the market for quite some time.
It's been relatively stable for us. The way we continue to compete to maintain that high share in Canada is based on both the services and kind of the bespoke technology that we offer to patients exclusively who are on branded Clozaril. Clozapine therapy requires patients to be registered into a manufacturer-sponsored registry that each manufacturer has to have. Ours is called CSAN, and I won't go into details here due to time, but essentially we provide a number of bespoke services that help ease the patient journey to a very large degree and are very much appreciated by patients, caregivers, and providers, and has helped us differentiate ourselves in Canada specifically. Just a couple of words to close out our talk. Maybe we'll have a couple minutes for questions. This is our balance sheet, which has strengthened considerably over the last couple of years, as I mentioned.
On the right are kind of our capital allocation priorities. If I had given this talk two years ago, the third one, debt repayment, would have been number one, two, and three because we had very high leverage ratio, a lot of debt on the balance sheet. That has come down considerably to the point now where it is really our third priority. Our first priority is to invest in growth, ensuring that the products we have are being adequately funded, but also looking constantly at opportunities to further leverage the infrastructure and capabilities that we have built in Canada and increasingly in the U.S. as well. Secondly, returning capital to shareholders. We are of a belief that the stock is underpriced.
I am sure most CEOs would say that, but we really believe it. As such, we launched an NCIB, which allows us to purchase up to 1.87 million shares.
We have already purchased back over 1 million shares through September 30th. Certainly doing our part there. To close out, hopefully what I have been able to share in this brief time, why we are so excited, why we are speaking today. We are a fundamentally stronger company than we were a couple of years ago. Balance sheet is stronger. Generating a lot of cash, certainly relative to our market cap and the company size. We are generating a growing amount of cash, but not to the exclusion of investing in growth, and that is the really exciting part is we are now at this point where we expect these new products to generate significant additional revenue in the years to come.
We have a number of catalysts that hopefully you will, now that you have heard the story, pay close attention to, and we will be able to deliver on again in weeks. In some cases, months, not years, we will start to feel the impact of these catalysts. I will end there and see if there is any questions. We have time for one question. Has to be an easy question. I will try to be succinct. Questions?
Hi. You put business development as the first category for capital deployment. I am just curious how you are thinking about it. Maybe if there is a checklist that you can point to, whether it is geographically where it fits-
Sure. Yep.
what sector, how are you going to pay for it
Yep
upfront versus anything else?
Yep.
Just to frame that out for us.
Sure. So the deals we've done have been very, I'd say, capital efficient. We generally have not, to this point, paid a lot upfront. Typically, we've had milestones that allow us to share in the upside as the assets get de-risked, even from a pricing and reimbursement perspective. Our focus would be certainly to continue to bring in assets within the therapeutic areas we're in or adjacent therapeutic areas within Canada that allow us to continue to leverage the infrastructure we have, the footprint we have, the capabilities we've built, cardiovascular, neuropsych, and even some adjacent specialty areas. We think there's a lot of opportunities to do that in licensed products based on the kind of the reputation we've built and the success we've had.
Beyond that, we're increasingly looking at the U.S. because we do have organizational capabilities, somewhat limited, but corporate capabilities within the U.S. that we would like to diversify further from a geographic perspective, and that will obviously require maybe a little bit more capital. But we'll be incredibly disciplined in terms of how we think about that. So I think it's really a two-tiered approach. But expect to see, I'd say, certainly some deal-making in the future, at minimum within additional, hopefully bringing additional products into Canada. Great. Thank you.