Good morning, everyone, and welcome to the Medexus Pharmaceuticals second quarter 2025 conference call. At this time, all participants are in a listen-only mode, and we will open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Victoria Rutherford, Investor Relations. Victoria, the floor is yours.
Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals second fiscal quarter 2025 earnings call. On the call this morning are Ken D'Entremont, Chief Executive Officer, and Brendon Bushman, Chief Financial Officer. If you have any questions after the call or would like further information about the company, please contact Adelaide Capital at 480-625-5772. I would like to remind everyone that this discussion will include forward-looking information as defined in securities laws. Actual results may differ materially from historical results or results anticipated by the forward-looking information. In addition, the discussion will also include non-GAAP measures such as adjusted net income and 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 forward-looking information and non-GAAP measures, including reconciliations to net income and loss, please refer to the company's MD&A, which, along with the financial statements, is available on the company's website at www.medexus.com and on SEDAR+ at www.sedarplus.ca. As a reminder, Medexus reports on a March 31st fiscal year basis. Medexus reports financial results in U.S. dollars. I would now like to turn the call over to Ken D'Entremont.
Thank you, Victoria, and thank you, everyone, for joining this call today. We're pleased with our fiscal Q2 '25 results, particularly our stable revenue, positive net income, and strong Adjusted EBITDA, which allowed us to begin preparations for potential approval of treosulfan by the end of January 2025 and comfortably pay down $4.1 million in principal under our credit facility during the quarter. Our fiscal Q2 '25 revenue was $26.3 million, a decrease compared to $30.3 million for the same period last year. We are proud of our fiscal Q2 Adjusted EBITDA of $6 million, an increase compared to $5.3 million for the same period last year.
We continue to produce positive net income of $0.1 million for the quarter, an improvement of $1.2 million over the same period last year, and positive operating income of $1.6 million, a decrease of $1.9 million compared to $3.6 million for the same period last year. These important metrics for fiscal Q2 2025 continue to be positively impacted by the financial discipline initiatives we have been working on, which continue to have a positive effect on operating costs and cost structure. Turning to our specific products, Ixinity unit demand in the United States decreased by 4% over the trailing 12-month period ending September 30th. We will continue seeking to maintain existing demand and to improve management of product supply to the market. Our investments in our Ixinity manufacturing process improvement initiative have had a positive impact on batch yield and manufacturing costs, now extending into fiscal Q2 2025.
Rupall unit demand in Canada increased by 17% over the trailing 12-month period ending September 30th. Rupall was a notable contributor to revenue for fiscal Q2 2025. We continue to see topical terbinafine, which has been under regulatory review with Health Canada since last December, as a strategic fit with Rupall. If and when approved, this product will enter a market we estimate to be CAD 88 million on an annual basis. Rasuvo unit demand in the United States remained strong during fiscal Q2 2025, although the factors we have discussed in the past continue to affect product-level revenue, and we may continue to have a moderate near-term effect on product-level revenue. Metoject unit demand was likewise strong, increasing 10% in the trailing 12-month period ending September 30th, in spite of direct generic competition.
Given overall market dynamics, we have been implementing unit-level pricing strategies for Metoject as well, with a view to defending the product's strong market position. Gleolan unit demand in the United States grew 7% over the trailing 12-month period ending September 30th, 2024, as our commercialization efforts continue to result in new customers adopting the product. We continue to discuss the future of our involvement in the commercializing of Gleolan in the United States with our licensee partner, and we will provide an update if and when warranted. On topical terbinafine, a pipeline product for us, our December 2023 new drug submission for terbinafine hydrochloride nail lacquer to treat fungal nail infections remains under ongoing review by Health Canada. We currently expect that Health Canada will complete its review of the NDS and issue a decision in fiscal Q4 2025.
This is consistent with our plan to target a commercial launch in the first half of calendar year 2025. As part of this process, we are monitoring potential regulatory changes in Ontario regarding expanded prescribing authority for pharmacists for common ailments, including fungal nail infections and also head lice. If adopted, these regulatory changes could enhance availability and accessibility of topical terbinafine, if and when approved, and also NYDA, a treatment for head lice, which could increase unit demand for these products in the important Ontario market. We also remain excited about treosulfan, which we hold commercialization rights to in both the Canadian and U.S. markets. In Canada, where we commercialize the product under the brand name Trecondyv, unit demand grew an impressive 49% over the trailing 12-month period ending September 30th, 2024.
In addition, we recently completed a collaborative negotiation process with the pCPA, an independent organization that negotiates framework terms for public access to pharmaceutical products on behalf of government organizations. This is a critical step in bringing Trecondyv closer to public access, and the next step will now be for participating government organizations to make their respective final decisions on public reimbursement for their regions. We are committed to continuing to work with participating jurisdictions to make Trecondyv available as soon as possible through public plans for eligible patients who need it. We see the positive experience we have had in Canada with treosulfan as an important indicator of treosulfan's prospects and potential in both the Canadian and U.S. markets.
In the U.S., we continue to eagerly await a decision from the FDA on Medexus' April 2024 resubmission of the NDA for treosulfan, which we now expect no later than January 30th, 2025. We continue to believe that treosulfan would make a substantial contribution to this therapeutic space, as it has in Europe and Canada, and the FDA's commitment to continue reviewing the treosulfan NDA brings us a step closer to making the product a viable treatment option in the United States. Our plan remains to target a commercial launch in the first half of calendar year 2025. We have therefore begun making investments in personnel and infrastructure to prepare for potential positive FDA decision. If approved by the FDA, we expect treosulfan to have a material positive impact on our total revenue, among other key financial performance indicators.
Based on internal estimates and research, we believe that annual product-level revenue in the United States has the potential to exceed $100 million within five years after commercial launch. Under the terms of our U.S. agreement with Medac, we and our counterparts at Medac continue to discuss the terms of a further amendment to our agreement with respect to any adjustments to the value of unpaid milestone payments. We remain highly focused on quickly achieving clarity on the remaining contractual milestones under our agreement, and we are confident that the parties will ultimately arrive at a fair and commercially reasonable outcome. In sum, we continue to focus on maintaining stability in our base business and generating cash from operations as we prepare for the revenue opportunities presented by our pipeline products. I will now turn the call over to Brendon, who will discuss our financial results in more detail. Brendon.
Thank you, Ken. We are pleased to report our 10th consecutive quarter of positive operating income and 12th consecutive quarter of positive adjusted EBITDA, which speaks to the continued strength of our product portfolio and commercial execution. We are particularly pleased with our $6 million of adjusted EBITDA from $26.3 million of revenue. These results are due to a strong overall quarterly performance, successful execution of our targeted reductions in operating expenses, and a streamlined capital structure. We also continue to generate meaningful cash from our operating activities, with operating cash flow of $6.9 million in the quarter. Turning to the full quarterly results, total revenue for fiscal Q2 2025 was $26.3 million. This represents a decrease of $4 million compared to $30.3 million for the same period last year.
The $4 million year-over-year revenue decrease was primarily attributable to reduced net sales of Rasuvo and declines in net sales of Ixinity when compared to Q2 2024. These trends have impacted our year-over-year results since fiscal Q3 2024 and have largely stabilized. The decrease was partially offset by continuing growth in Rupall net sales, a slight year-over-year increase in Gleolan net sales, and a slight year-over-year increase in year-to-date net sales across the rest of our portfolio of products. Gross profit was $14.1 million for Q2 2025, compared to $16.3 million for the same period last year. Gross margin was 53.7% for Q2 2025, which is consistent with the 53.7% we achieved in the same period last year. We continue to expect this gross margin to persist for the near term.
Selling and administrative expenses were $9.7 million for Q2 2025, compared to $11.9 million for the same period last year. The $2.2 million year-over-year decrease in this line item was primarily attributable to the effects of our ongoing financial discipline efforts, including reductions in operating expenses. As Ken mentioned earlier, we have begun making more significant investments in personnel and infrastructure to prepare for a potentially positive FDA decision on treosulfan. This investment was $0.4 million in Q2 2025, and we expect this spending to grow meaningfully in fiscal Q3 2025. Adjusted EBITDA was $6 million for Q2 2025, an increase of $0.7 million compared to $5.3 million for the same period last year. The increase in adjusted EBITDA was primarily attributable to the effects of our ongoing financial discipline efforts and improvements in Ixinity cost of sales attributable to our Ixinity manufacturing process improvement initiative.
Net income of $0.1 million for Q2 2025 reflects a $1.2 million increase compared to a net loss of $1.1 million for the same period last year. We look forward to striving for positive net income in the quarters to come. Cash on hand of $7 million at September 30th, 2024, compares to $8.5 million at June 30th, 2024, and $5.3 million at March 31st, 2024. We continue to generate cash from our operating activities with quarterly operating cash flow of $6.9 million compared to $7.3 million for fiscal Q2 2024. As of September 30th, 2024, we had a combined $44.2 million outstanding under our two BMO credit facilities, consisting of $3.5 million drawn under our revolving credit facility and the remainder outstanding under our term loan facility.
As always, there can be variability in quarter-to-quarter results, but we look forward to continuing to build the company and its portfolio in the coming quarters and beyond. Operator, we will now open the call to questions.
Thank you very much. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press Star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Your first question is coming from André Uddin of Research Capital. André, your line is live.
Thank you, Operator. Hi, Ken and Brendon. Ken, I was just wondering, has the FDA asked any questions regarding treosulfan since the NDA was resubmitted?
Yeah, thanks, André. Yeah, so the process is typically, you know, they ask many questions, information requests or IRs, and it goes back and forth. I think in this instance, they've all been very manageable, and so that makes us bullish on our opinion that it will be a positive outcome this time around, so yeah, the ongoing dialogue has been very positive.
That's great. Just how many physicians will you initially be calling on for treosulfan, and how many reps do you think you will initially use?
Yeah, good question. So we're looking at terms of institutions, and so there's 175 institutions in total, all of which we've now profiled and reached out to with our MSLs. And so those institutions will be our primary target. Obviously, the larger ones, there's 11 that do 25% of all transplants. And so, you know, obviously, there'll be a prioritization of many of these institutions, but we've reached out to 100% and contacted 100%.
Okay. And just have you been speaking to payers, and have you had any pushback on treosulfan pricing, and what sort of pricing range do you think that would be? I don't know if you can discuss that, but if you could, that'd be great. Thanks.
Yeah, we said historically that, you know, we kind of see this to be in the same price range as busulfan prior to genericization, so we expect it to kind of be in that range. Our cost analysis, you know, our pharmaco-economic model shows a very strong benefit, primarily due to, you know, the lesser side effects, particularly GVHD, better overall survival. So there's fewer relapses. So there's many, many, you know, reasons to want to use this drug. And I think it's, you know, the evidence in Canada has been really strong. As you well know, the drug reimbursement situation in Canada is very difficult. Yet treosulfan, prior to reimbursement, which we have just now gotten, so, you know, we've been 18 months out there without reimbursement, yet 13 of 17 hospitals that do transplants are using treosulfan.
Funding it from their own internal budget with no reimbursement. Clearly, there's a cost-benefit to using this drug, you know, as evidenced by the fact that these hospitals are using it with no reimbursement because there is cost savings elsewhere.
That's great. Thanks, Ken.
Thank you very much. Your next question is coming from Michael Freeman of Raymond James. Michael, your line is live.
Hey, good morning, Ken and Brendon. Congrats on a strong quarter, and thanks for taking my questions. I think I'm curious about the nature of the investments that you're making to prepare for the treosulfan launch. You know, you just described some of the profiling you've done of institutions. I wonder if you could dive into some detail around the investments you've been making this year.
Yeah, thanks, Michael. Good question. So yeah, it's primarily related to people. I mean, we've got, you know, obviously infrastructure already in place that we will use and apply to treosulfan, but we have been adding additional people to strengthen our capability within the institutions. So primarily at this stage, it's being MSLs, and we are also hiring field reimbursement managers, so people who will work on the reimbursement side of it.
Okay. Okay, great. That's helpful. Now, maybe a few tougher ones. So given the headwinds we're seeing with Ixinity and Rasuvo sales, the U.S. Gleolan deal potentially concluding, Rupall's upcoming loss of exclusivity, I'm curious, which of your portfolio products do you expect to drive, you know, consistent or growing sales into the future and sort of don't have any headwinds or roadblocks in the near term?
Yeah, great question. So obviously, there's a lot of moving parts within our portfolio. Just remind everyone that we've got 17 products in total. So, you know, there's a lot of movement. So I think what will drive revenue going forward, it'll continue to be Ixinity. I mean, there's been some headwinds on Ixinity, but it still is, you know, a really important part of treatments for hemophilia B. And we've been making really good strides. Our team's done a great job in terms of driving down the cost of goods through the manufacturing improvement process. Rasuvo, Metoject, even though they face competition, you know, still have really strong market positions, so they will continue to perform well. Rupall, as you know, you know, is an important contributor to our revenue. It will get genericized next year, early next year, but we don't see this as a really quick erosion.
You know, we do believe that because it's only getting private reimbursement, the erosion is much, much slower. So we will continue to support it. And so it will continue to be an important contributor. And then terbinafine will come in to that sales group and kind of fill the gap that we might lose from Rupall. And then Gleolan, you know, there's no immediate effect on that. We're really looking at Gleolan over a longer period of time. And eventually, you know, we do believe that we will exit. But, you know, clearly, you know, Treosulfan in the U.S. is a really important contributor. And, you know, with a positive decision, we believe in January, you know, we'll start to generate revenue out of that. But, you know, we'll be, you know, far in excess of anything that we've got at this stage.
Okay. Excellent. Thanks very much for all that detail, and one last one. I noticed that $17.8 million of your debt is current. Curious, perhaps Brendon, you can answer this one. Curious how Medexus plans to service this debt coming up in the next year.
Yeah, no, thank you. So I will say of that $17 million, $3.5 million of it is just due to our revolver. And so there's no expectation to repay that. We just have to show it as current. But as far as servicing it over the next year, I guess I'll say two things. One is, you know, the company does continue to generate very good cash, and that will continue, you know, with or without Gleolan. And the second piece I'll say is we are sort of reevaluating our capital structure as a whole. You'll have seen possibly about shelf prospectus. So we really are looking at every option to kind of make sure we can optimize our capital structure, you know, sort of for the treosulfan launch. But, you know, we are still very confident in our ability to service that BMO debt.
Okay. Thanks very much. I'll pass it on now.
Thank you very much. And your next question is coming from Max Chmielewski of Ventum Capital Markets. Max, your line is live.
Hi guys. Thanks so much. Great quarter. I just had a few questions. Firstly, I know this was asked already, but if you can sort of characterize what treosulfan investments look like for the upcoming quarter, if you can, because I know you did just under $500,000 in Q2. So what does that look like for next quarter? And then second question being related to the contractual milestones. I know the language around filings indicates that there could be an expiration of those negotiations if you don't come to an agreement before December, but I want to get your language on what that actually means and if that will continue regardless of hitting that deadline. Thanks.
Great. Thanks, Max. So I'll deal with the strategy behind the increasing investments that we expect to make this quarter. So clearly, it will continue to be people, putting in the right people, MSLs and field reimbursement managers specific to treosulfan in the field and getting prepared for the decision that will come January 30th at the latest. So it will increase from where we are today. The exact number, obviously, is dependent on us finding the right people. We're clearly looking for people with experience in the territory with the relationship so that it's a special person. With respect to the milestones, those discussions have been ongoing. We do have a deadline of December 2nd. We do expect to conclude it before that deadline. And then there will be clarity as to the milestone payments that will be due to Medac upon approval.
Just remind everyone there are none due until approval, and there will be some payable at some point after approval. We will put that information out before the deadline.
That's great. And just one more question. Is it fair to say that given Rupall's sort of seasonality, that this last quarter, given its genericization in Q1, calendar Q1 next year, this is kind of the seasonally high watermark for the drug? And, you know, we're kind of seeing some step down. Obviously, we don't have numbers, but trending downwards into next year?
Yeah. So the high mark is always in the spring quarter, and then it remains kind of elevated through the summer, which is the quarter we're just reporting, and then seasonally kind of steps down in the winter and then repeat. So yeah, this time around, you know, we do expect some genericization in the first quarter, which is typically first calendar quarter, which is typically a pretty strong quarter for us. And so we'll see, you know, how much impact there is in that quarter. You know, as I said earlier, we don't see it being an immediate fall off the cliff sort of impact. It's going to be a slower erosion because we can defend it through the private reimbursement system. So it's not like there's any forced substitution that's mandatory. So it doesn't drop like you would expect with a publicly reimbursed drug.
Great. Thanks so much.
Thank you very much. Just a reminder, if anyone has any remaining questions, you can press star one on your phone keypad now. Your next question is coming from Justin Keywood of Stifel. Justin, your line is live.
Good morning. Thanks for taking my call. Nice to see the results. Just a follow-on and clarification with the Medac negotiations. Well, one is the timing, if we should see some disclosure, if I understand, in December, and then would that be the full negotiation, or would that just be negotiating the potential milestone payment on the FDA approval?
Yeah. Thanks, Justin. Yeah, good question. So the timeline is early December. I think it's the second or the third. I forget exactly the date. So it's the first week in December. Negotiation is on the regulatory milestones payable following approval. So that's the piece that we're negotiating.
What would the pieces be remaining then to negotiate?
Nothing. No. Yeah, sorry. That's the only piece that needs to be renegotiated. The rest of the deal is already in place.
Okay. Understood. And then just maybe a broader question with the new U.S. administration coming in. Any potential impact that you could see as it relates to Ixinity maybe and drug pricing or any other factors to note?
There's always risk there because there's a lot of attention on drug pricing everywhere in the world, including the U.S. So I think it really comes down to are we providing value? You know, Ixinity pricing is pretty well established, and, you know, all of the products are in very much the same range. So I don't see any specific exposure there. You know, the new one will be treosulfan. And, you know, with treosulfan, you know, I think we're asking a very reasonable price. And certainly, it's well justified in the cost savings that are available to the institution. So I don't see any risk there, but, you know, as you well know, it's very much a challenging environment for any new product launch.
Is there any disclosure around that potential pricing, or is that kept confidential for now?
I guess it will be published when we finalize it. So it will be published at some point after approval.
Okay. Great. Thank you for taking my questions.
Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to Ken for any closing comments.
I just want to thank everybody for tuning in to the call today. We certainly appreciate it. We're very pleased with the quarterly results, and we look forward to the opportunities that are presented from our pipeline and beyond. Thanks very much.
Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day and a wonderful weekend. Thanks for your participation.