AGM 2021

Sep 16, 2021

Morning, ladies and gentlemen. My name is Peter van der Velden, and I'm the Chair of the Board. I'd like to welcome my fellow shareholders and directors and our guests who have joined us at this year's annual and special meeting of shareholders, which is being held live via webcast due to the ongoing COVID-19 pandemic. As in the previous year, we are holding our meeting virtually, which means there are some differences from the way an in-person meeting would be conducted. However, our goal is to replicate, as best we can, the experience you would have if we were meeting in person. The people who will be speaking today are not all in the same physical location. As a result, I may pause from time to time to allow coordination from different locations. Through the virtual platform, shareholders have the opportunity to submit comments or questions during the meeting. Please keep in mind there is a 30-second delay between when we are speaking and when you hear us. So please be patient, and we will do our best to address your questions at the appropriate time. Given the virtual format of today's meeting, and in order for us to expediently undertake the business to be conducted at the meeting, we will request that shareholders or duly appointed proxy holders who have specific comments or questions on a formal item of business to make such written submissions now, clearly identifying the applicable form of business. During the course of this meeting, and at the appropriate time, such submissions will be addressed prior to the voting on the applicable motions. Following the formal business of the meeting, there will be a management presentation, and if you have questions, we will answer those at that time. If you have any questions not specifically relating to an item of formal business to be discussed at today's meeting, please feel free to submit those questions at any time, and we will do our best to ensure that those questions are addressed at the conclusion of the meeting. You can submit your questions by clicking on the message icon, typing in, and submitting your questions. We will do our best to answer all such shareholder questions, but if for any reason we are unable to do so, we will endeavor to follow up with you after the meeting. As in past years, we expect the vast majority of all votes will be cast in advance of the meeting by proxy. That said, registered shareholders and duly appointed proxy holders will be allowed to vote online during the meeting. Voting on all items of business will be open throughout the formal part of the meeting, and I will provide a 30-second warning before the polls close. Now, let's proceed with the business at hand. We have five matters of formal business to conduct today. One, the presentation of financial statements as at and for the financial years ended March 31, 2021, and 2020. The election of directors. The appointment of the corporation's auditors. The ratification, confirmation, and approval of the amendment and restated bylaw number one, and finally, the approval of the amendments to the omnibus plan. While the practice generally adopted at shareholder meetings is for the motion to be made by one person and seconded by another, such a process is not necessary in all cases. In light of the current context of this virtual meeting, we will forego having seconders for the formal business specified in the notice of this meeting. I will now call the meeting to order. In accordance with the corporation's bylaws, I will preside as chair for this meeting, and Jozef Zed will act as secretary of the meeting. Given the virtual format of the meeting, in the event of technical issues with either myself or Mr. Zed, Ken d'Entremont, the CEO, will step in for me and act as chair, and Marcel Konrad will step in for Mr. Zed and act as secretary as applicable. I hereby appoint Laura Stone of Computershare Trust Company of Canada to act as the scrutineer for the meeting. Before commencing with the procedural matters, I would like to call upon the secretary to make a statement concerning today's remarks. Thank you, Peter. Please note that in the course of today's meeting, officers or directors of Medexus may, in their remarks or in response to questions during the question period, make statements that will contain forward-looking information under Canadian securities legislation. Certain material factors and assumptions are applied in making these statements, and there are a number of factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by or on behalf of Medexus. Additional information concerning these factors and assumptions is contained in Medexus' filings with Canadian securities regulators, including the Corporation's MD&A for the fiscal years ended March 31st, 2021, and March 31st, 2020, and the annual information form for the year March 31st, 2021. Thank you, Joe Zed. The secretary has advised me that the notice calling this meeting, together with the form of the proxy and the management information circular, has been sent to each director of the corporation, the auditors of the corporation, and the shareholders of record of the corporation as at August 3, 2021, the record date for this meeting. The financial statements of the corporation for the years ended March 31, 2021, and 2020, and the auditor's report thereon were sent to each requesting shareholder as at the record date. Additional copies of such materials are available on SEDAR and the corporation's website. I will dispense with the reading of the notice of the meeting. The scrutineer has provided me with a preliminary report regarding shareholder attendance at the meeting, and I confirm that the requisite quorum of shareholders is present, and the meeting is duly and properly constituted for the transaction of business. I direct that the confirmation of mailing of the notice of meeting received by Computershare and the scrutineer's complete report on attendance will be annexed to the minutes of this meeting. Given this is a virtual meeting, the voting at today's meeting will be conducted by online ballot for all matters. If as a registered shareholder or duly appointed proxy holder, you are using your control number to log in to the meeting and you accept the terms and conditions, you will be provided the opportunity to vote online by online ballot. If you have already voted by proxy and you vote again during the meeting, your online vote will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again during the online ballot. The polls will be open for all items of business to be voted on at the same time. This will allow you to vote on each item immediately, or if you prefer, you may wait until the conclusion of the discussion on each item before casting your vote. The items of business to be voted on and your available voting options will be visible in the voting panel on your screen. To submit a vote, please click on the voting choice displayed on your screen. Once discussion has concluded on all items of business, we will provide a few additional moments for you to enter your votes. I will then declare the voting closed on all business matters. I now declare the online voting polls open on all matters of business. The first item of business is the presentation of the consolidated financial statements of the corporation as at and for the years ended March 31, 2021, and 2020, and the auditors report thereon. The financial statements of the corporation for the years ended March 31, 2021 and 2020 and the auditors report have been sent to each requesting shareholder as at the record date. I will dispense with the reading of the auditors report of the meeting. There is no vote required with respect to the financial statements. Have any comments or questions been submitted regarding the financial statements? There are no questions at this time. Hearing none, we will move on to the formal items of business that require a vote. Our next item of business is the election of directors. We have six directors to be elected. I now declare the meeting open for nominations. In the interest of expediency, I've asked Marcel Konrad to make the nominations on behalf of the management of the corporation. Thank you, Peter. Yes, Peter. I, Marcel Konrad, nominate those persons specified in the management information circular delivered with the notice of meeting, namely Peter van der Velden, Ken d'Entremont, Michael Mueller, Benoit Gravel, Stephen Nelson, and Adele Gulfo, to serve as directors of the corporation to hold office until the next annual meeting of shareholders, or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation. Thanks very much, Marcel. As the corporation did not previously receive timely notice of any further nominations of persons for election as directors of the corporation as required by advance notice provisions of the corporation's bylaw, I declare the nominations closed. Will someone please advise whether there are any questions that have been received on this matter from participants at the meeting? There are no questions at this time. Excuse me. There being none, we will now conduct a vote by way of the online ballot. As previously noted, registered shareholders or their duly appointed proxy holders can vote by online ballot by selecting the applicable voting options on the voting panel displayed on their screens. If you have previously submitted a completed proxy, you will have voted with respect to this item of business, and it is not necessary for you to vote again. I will now move to the reappointment of the auditors. May I have a motion that PricewaterhouseCoopers LLP be reappointed as the auditors of the corporation until the next meeting of shareholders or until a successor is appointed, and that the board of directors be authorized to fix the auditors' remuneration? I, Ken d'Entremont, so move. Thank you very much, Ken. Do we have any questions or comments with respect to this matter? We do not have any questions at this time. Hearing none, we will conduct a vote by way of the online ballot as previously described. The next item of business for your consideration is the approval of certain amendments to the amended and restated bylaw number 1, as adopted and approved by the board of directors on June 9, 2021, and as further described in the management information circular. The text of the ordinary resolution to approve the amended and restated bylaw has been set out on page 14 of the management information circular. In order for the amended and restated bylaw resolution to be passed, it must be approved by at least the majority of the votes cast at this meeting. May I have a motion that a resolution in the form of the resolution as appears on page 14 of the management information circular sent to shareholders ratifying, confirming, and approving the amendment and restated bylaw number 1 be passed by resolution of the corporation? I, Ken d'Entremont, so move. Thank you, Ken. Do we have any comments or questions submitted with respect to this matter? There are no questions at this time. There being none, we will conduct a vote again by way of an online ballot as previously described. The next item of business for your consideration is the approval of certain amendments to the amended and restated 2018 Omnibus Equity Incentive Plan as described in the management information circular. The text of the ordinary resolution to approve the amendments to the Omnibus Plan has been set out starting on page 14 and continuing on page 15 of the management information circular. In order for the Omnibus Plan resolution to be passed, it must be approved by at least a majority of the votes cast at the meeting. May I have a motion that a resolution in the form of the resolution as appears starting on page 14 and continuing on page 15 of the Management Information Circular sent to shareholders approving the amendments to the Omnibus Plan be passed as a resolution of the corporation? I, Ken d'Entremont, so move. Thank you very much, Ken. Do we have any comments or questions submitted with respect to this matter? There are no questions at this time. Thank you very much. We will conduct a vote by way of the online ballot as previously described. We have now addressed all the items of formal business. Voting will close in 30 seconds. For those of you who have not voted on all matters of business, please do so now. We will take a short break while the polls close and the results are tabulated by the scrutineer. I confirm the polls are now closed and the scrutineer has tabulated the results. I am pleased to confirm the scrutineer has reported to me that all matters put to the ballot have been passed by the requisite shareholder approval. Accordingly, I hereby declare the nominated individuals elected as directors, PwC reappointed as auditor, the amended and restated bylaw resolution approved, and the omnibus plan resolution approved. A report disclosing the voting results will be filed on SEDAR and disclosed in a press release promptly following this meeting. This concludes the formal business brought before the meeting. I wish to thank you all for attending, and I will now declare this meeting terminated. I would now like to ask Ken d'Entremont, our CEO, to make a few remarks about the business of Medexus and our strategy going forward. Over to you, Ken. Thank you, Peter. Are there any shareholders on the line? Lumi, can you confirm that there's anybody to present to? Yes, there is some guests, sir. Okay, perfect. What I'm going to do is just walk through our corporate deck. I won't spend a lot of time on items you're likely quite familiar with and perhaps spend a little more time on some new items. Happy to answer any questions that anyone might have at the conclusion of this presentation. These are our forward-looking statements. You can find these on our website at medexus.com. In general, you're probably quite familiar with the company. Clearly, we are a commercially focused pharmaceutical company looking at innovative and rare disease products in therapeutic areas. We've got a fully built-out commercial infrastructure in both the U.S. and Canada, and have been growing rapidly with the portfolio of products that we currently have. We are looking to significantly build our portfolio and grow our revenue and EBITDA as we move forward launching new products. The highlights are basically we've got $80 million worth of net revenue last year, US dollars, over roughly 16 products, four of which deliver about 80% of our revenue. Many others that are in launch mode and are expecting to grow significantly into the future. There are a few ways that we grow our business. Obviously, organic growth is really important to us. We've got a broad portfolio of products that we believe have significant future growth opportunities. It's been challenging through the COVID period. However, some of our products have grown nicely even in spite of COVID, namely Rupall, which is growing 44% year-over-year. IXINITY, which is growing demand quite significantly year-over-year. We're pleased with those products. Other products that are dependent on procedures are much more difficult to grow during the COVID period. For example, Gleolan, where obviously it doesn't get used unless there is a brain surgery being conducted. Many of these things have been postponed as a result of decreased operating time. We do build our business through business development. We are active in both licensing and M&A. We've made 3 fairly transformative deals in the last 2.5-3 years, and we believe we will continue to be successful in business development in building the portfolio. We are not an R&D company, so we don't do any basic research. We don't discover and develop drugs. We do do some product development. In our hands, that means taking existing products and perhaps improving the label to create additional opportunities. One example of that is the pediatric study on IXINITY, which we are rapidly concluding. Our sales force is broad in both the U.S. and Canada, focused on specific therapeutic areas, namely autoimmune disease, hematology, and hopefully in the future, stem cell transplantation. In Canada, we have a slightly broader portfolio simply because we have a larger sales infrastructure simply because we have a broader product portfolio, namely the allergy business, which is doing quite well. This is the selling point for future partners in that we do have this built-out commercial infrastructure that has successfully registered and launched products in the past. We certainly feel that we can continue to do that for partners or new drugs that we might acquire. This slide really just describes the nature of our portfolio in both U.S. and Canada. A couple points to be made on this chart. One is that much of our portfolio is either in growth phase or in launch phase or to be launched. We've got many growth opportunities in front of us. A relatively small proportion of our portfolio will be called mature, and Rasuvo being the largest of that group, which continues to grow, although at a low single-digit rate. I think the point here is that we do have good organic growth opportunities into the future. One of our best growth opportunities is IXINITY. It's a hemophilia B product, factor IX recombinant, for the treatment of hemophilia B. It has a nice profile in that it's got an excellent recovery rate, slightly better than the competitor at 98%. That simply means the amount of drug that goes to work. Our competitive product has a recovery rate of 87%, so you need more of their product than you do ours. Our half-life is a little bit longer, so you don't have to inject quite as frequently. A few clinical benefits that allow us to gain share relative to the competitive set. We like this market in that it's highly concentrated. There's only 4,000-5,000 patients in the U.S. with hemophilia B. Those patients are treated in about 140 hemophilia treatment centers, so a very highly concentrated target. We don't need a big sales force in order to reach those targets. We currently have a relatively small market share. We only hold about a 4% market share of the hemophilia B market, so there's great opportunity to grow this drug into the future. Rupall is another success story that we have. Rupall is a prescription antihistamine in Canada. It's growing at a 44% rate about five years after its launch, so continues to do extremely well as a result of being well promoted within our sales force and the fact that it's an excellent improvement relative to current antihistamines on the market. There's less drowsiness, and it's highly effective. This drug we expect to continue to grow out into the future. We do have good growth opportunities in our pipeline, and the most significant is Treosulfan. Treosulfan is a conditioning agent for the conditioning of bone marrow prior to stem cell transplantation, a way of treating various types of leukemia. It's desirable in that after initial remission, this could be curative for various forms of leukemia. Specifically for us, it's AML and MDS. This is highly desirable in that this may be a way to return the patient to a totally normal state and put them into permanent remission. We like this drug a lot because one, it's a very focused therapeutic area, being stem cell transplantation. It's an orphan drug, so it has exclusivity for seven and a half years. We do believe it will have the pediatric indication, so that affords it seven and a half years. It has excellent revenue potential in that a competitive product, Busulfan, hit peak sales of about $126 million prior to genericization. We believe that this product, which has excellent head-to-head clinical data against Busulfan, has that type of potential in the U.S. We've got this license for both U.S. and Canada. It is now launched and being commercialized in Canada as of the last couple of months. We do expect to get it launched in the U.S. as well. I'm sure you've been following the story, so you are aware that we did receive a CRL, or a complete response letter, from the FDA on August 2nd. We were expecting to get it approved on August 11th. Obviously, that didn't happen. We are pleased that the CRL can be addressed completely, we believe, through the collection of additional data from the already completed phase III study. This means that we don't expect that there is any new clinical data that needs to be generated, so there's no new clinical trial. This is simply collecting additional information on the patients that have completed the phase III study. We will collect 100% of the data, we believe, for the patients that are in question. We do certainly believe that we can answer the question that the FDA has posed, and we believe that when we do that will ultimately lead to an approval in the U.S. I should point out that this product was just recently approved in Canada, a submission that we managed ourselves, and it got expedited review in Canada. It has already been reviewed and approved throughout Western Europe, and there is no jurisdiction where the product wasn't approved. We feel strongly that eventually we will get it approved, and it will have very strong commercial opportunity. We are expecting to hold a Type A meeting with the FDA to review our resubmission plan. That is expected to happen in November. We will target resubmission in Q1 of 2022. That's coming up fast. The review for such CRLs is 2 or 6 months at the agency's discretion, and it's dependent on the amount of information that has been resubmitted. That will be up to the FDA to determine whether review will be 2 or 6 months. We feel strongly that we will have the opportunity to commercialize this brand at some point late next year. We like the drug a lot because it's got excellent clinical profile in that it's both myeloablative, which means it's strong, it knocks out the cells that you're targeting, and it is less toxic than the current treatments. It kind of falls in a space between myeloablative strategies and reduced intensity strategies, thereby combining the strength of myeloablative and the safety of reduced intensity. It holds a very strong marketing position that we believe will allow it to gain significant share within this marketplace. The data that we referred to that has been submitted to the FDA is basically this data you see here, which is a head-to-head comparison against the busulfan, a drug that's commonly used in this situation. That head-to-head comparison demonstrated a 26% improvement in overall survival at 24 months for AML and MDS leukemia patients, the two most common forms of leukemia. Excellent clinical data, which we believe will ultimately result in the drug being approved because clearly there is a very important patient need here. We do also have pediatric data. The chart on the right demonstrates a 91% overall survival in children. Again, an excellent result, and therefore, we do expect to get pediatric indication as well. We like this marketplace also because it's very focused. There's only 174 institutions in the U.S. that do stem cell transplant patients. 74% of those institutions do 80% of the transplants. We know it's a very highly concentrated target, and many of those institutions already have experience with Treosulfan, either through the phase II program or through investigator-initiated trials. There is experience in the marketplace with the drug that we believe will help facilitate uptake. The one positive of the CRL is the fact that we now do have sufficient time to prepare the market for the eventual launch of the drug. If you recall, we licensed this drug in February, and we're planning to launch it in October, which is an extremely short period of time to launch a new chemical entity. Now with the CRL, although we weren't anticipating the delay, we have that delay, which affords us time to prepare the market for the eventual launch. What we believe that does is it will accelerate the time to peak sales, where we had been expecting a longer ramp to peak. Now we think that time will be shortened, which will actually give the drug a better return. Other key products within our portfolio are Rasuvo, Metoject, Gleolan. Rasuvo is an auto-injector methotrexate, holds about an 80% share in the U.S. of the auto-injector market and is maintaining that share in the face of competition. We're very pleased with that performance. Metoject is basically the same product in Canada. It's in a pre-filled syringe rather than an auto-injector. It also has a very strong share and is returning to growth following a generic entry about a year ago. We're very pleased with that performance as well. Gleolan has now been launched in Canada. We've launched it and gotten everyone trained in spite of COVID, and we're starting to see more procedures open up. We're seeing a good uptake of Gleolan. We do believe that that will grow strongly into the future. I'm going to turn it over to Marcel Konrad, our CFO, to talk about the most recent financial results. Yeah. Thank you, Ken. I'll walk you through a couple of financial highlights, next two slides. First, I want to draw your attention to the graph on the right. To put this in a larger perspective, this is a growing company with a strong growth trajectory. See the tripling in sales between 2019 and 2021 fiscal year. Very strong results the last few years. Now, if you look at Q1, the Q1 results on the left-hand side, we've disclosed that August 16, exactly about a month ago, our results for Q1. Revenue is below last year. As Ken mentioned, we had a strong growth in Canada, selling Rupall. That was offset by IXINITY, which is still working through the channel as we have disclosed that in our statements in Q1. On the cost side, we've seen increasing costs, obviously because we were planning for the launch of Treosulfan in the U.S. We had a one-time provision in there for a manufacturing batch, $2.5 million, and then we also increased our R&D expenses versus last year. Our cash position's at $10.2 million as of end of June, and we're still holding a $20 million asset-based credit facility that is in place since May 2020. Going to the next slide. Briefly on our capital structure. Fundamentally hasn't changed. No big changes to our capital structure itself. Maybe want to just point out that the analyst coverage there, we've invited Roth Capital, Scott R. Henry's analyst, to specifically as we move further and more penetrate the U.S. market, telling the story in the U.S., Roth Capital and Scott R. Henry will be definitely adding to this picture. Other than that, our analyst coverage hasn't changed. Thank you, Marcel. Just to remind you, management, I'm pleased to have a team together that is highly capable of growing a much bigger business and managing a much bigger business. I believe that we are certainly staffed to support our growth. I'm fortunate to have a very strong board, a very active board led by Peter van der Velden. This board has provided excellent insight, and ideas, and I appreciate all the input that the group gives us. In summary, as a shareholder, of which I am a significant one, I think our interests are highly aligned with shareholders, and the value drivers that we look to are continued execution of the product portfolio I have in front of us, and new product launches that we have in front of us. We do believe there's strong growth potential in the current portfolio. The addition of Treosulfan in Canada and eventually in the U.S., will be a very significant event in that we believe that Treosulfan can be significantly higher than $100 million net revenue US dollars, so it more than doubles the potential of the current organization. We do continue to be very active in licensing and BD, and we do expect that we will have other products that we will add to the portfolio. TH is one of them, Triamcinolone Acetonide in the U.S., which we now are supplying via the expedited program in the U.S., and pediatric rheumatologists are taking the product up. I would also point out that the IXINITY pediatric study has now been fully enrolled, and we are expecting to wind that down over the next 12 months. R&D spending actually will decline over that period of time, and then will go quite low when we wrap up the study sometime mid-next year. That's where we are. I do want to address the issue of cash because that question has come up repeatedly as we're speaking to various investors. Clearly, our plan changed with the CRL for Treosulfan. We are now back focusing on the core business, which as you all know, produce positive EBITDA. I think what we should expect to see is, over the next few quarters, spending will come down, revenue should start to increase as we clear the channel for IXINITY, and then we will return to a positive EBITDA situation. We have sufficient cash on hand to support us throughout that period. We have no intention of raising equity at these prices. I think this is obviously a buying opportunity for investors, given the very low share price that we've had since the CRL. That is the story, and happy to take any questions that anyone might have. Thanks, Ken. Now that the formal part of the meeting and the management presentation have concluded, as Ken said, we'd be happy to take any questions from shareholders. I would ask that shareholders who would like to ask a question use the instant messaging feature in the virtual interface to do so. We will answer as many questions as time permits. When asking your question, please identify yourself and limit your questions to topics relating to today's subject matter. We would like to remind you that questions that were already answered or that are redundant or repetitive will not be answered. Please keep your questions short and to the point so that we can give you a focused answer to your questions. Now I'll give shareholders a moment to type in their questions. Doesn't look like we have any questions at this point. I just want to confirm that with the moderator. I confirm that we have not received any questions. Thank you, Tina. That is all for today. I would like to thank everyone for attending the business's meeting and for your interest in the corporation, and we look forward to continuing to build the business in the coming 12 months. Thank you, everyone.