Greetings, and welcome to the Medexus Fiscal Second Quarter 2024 earnings call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal 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, Magda Gardner of Investor Relations. Ma'am, you may begin.
Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals second fiscal quarter 2024 earnings call. On the call this morning are Ken d'Entremont, Chief Executive Officer, and Marcel Konrad, Chief Financial Officer. If you have any questions after the conference call or would like more information about the company, please contact Adelaide Capital at 416-206-8869. 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, this 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 very much, and welcome everyone to the call today. We're very pleased to report another great quarter, with solid performance in our product portfolio, in particular, continued strong demand growth, for Rupall. This has translated into a positive operating profit for the quarter and meant that we met our targeted, quarter-end cash position ahead of the October 16 maturity date for our convertible debentures, which we repaid fully in cash. Our fiscal Q2 2024 revenue of $30.3 million compares favorably to $27.7 million for the same period last year, or 9.4% growth year-over-year. The $2.6 million increase is mainly due to recognizing 100% of Gleolan sales in total revenue and continuing strong Rupall demand growth.
Adjusted EBITDA increased to $5.3 million for the quarter, compared to $4.2 million for the same period last year. The $1.1 million year-over-year increase is mainly due to increases in revenue and a reduction in operating expenses. We produced a net loss of $1.1 million for the quarter, an improvement compared to a net loss of $2.7 million for the same period last year. Overall, we are pleased to be reporting this quarter of financial results with positive key metrics and year-over-year revenue growth.
I will let Marcel comment on the details later in this call, but I also want to highlight our success in securing the accordion feature of our credit agreement with BMO, which we applied towards the convertible debentures, and our success in completing our October 2023 bought- deal public offering, which we intend to use for working capital and general corporate purposes, including our ongoing business development activities and initiatives.
I also want to highlight our success in executing the third amendment of our U.S. treosulfan agreement, which we think responds well to the current status of the FDA regulatory review process by one, further extending the agreed outside date for FDA approval, and two, outlining a process for potentially agreeing to adjust the value of unpaid milestone payments in light of future circumstances around treosulfan's prospects in the U.S. market. Turning to our specific products, IXINITY unit demand in the United States decreased during the quarter, and over the trailing 12-month period ending September 30th, 2023. Demand continues to reflect the effects of lower observed average quantities of product consumed by an increasing number of newer patients. We intend to continue monitoring these trends and assessing their potential impact on product level revenue.
We are optimistic about the prospects for a favorable FDA decision on the supplemental BLA for the treatment of pediatric patients, which the FDA accepted for review in June 2023. If approved, we think the new pediatric indication would, in addition to expanding the current market potential for the product, provide us with an opportunity to reinforce brand awareness and messaging for IXINITY in relevant markets. Our optimism here is partially due to our familiarity with the data presented at the National Hemophilia Foundation Bleeding Disorders Conference earlier this year in National Harbor, Maryland, where researchers reported that prophylaxis with IXINITY was associated with low annualized bleeding rates, effective control of bleeding episodes, consistent PK, and a consistent safety profile. On Rasuvo, we maintained a market-leading position during the quarter, as unit demand remained strong in the moderately growing U.S. brand methotrexate market.
We continued to deploy a highly efficient allocation of sales field resources, and our position remained strong despite sustained competition in the market. Rupall unit demand in Canada remained strong during the quarter, which is reflected in the unit demand growth of 22% over the trailing 12-month period, ended September 30th, 2023. This strong performance reflects successful execution of our sales and marketing initiatives, as well as the timing of certain orders during the quarter relative to planned price increases. This was partially offset by the effects of increased competition on relatively smaller unit demand in the pediatric segment. We see topical terbinafine, which we licensed in March, as a strategic fit with Rupall, and we expect that, if and when approved by Health Canada, that new product will both contribute to our Canadian revenues and engage our in-place commercial infrastructure currently supporting Rupall.
On Gleolan in the United States, we continued to execute our post-transition commercial plan, including new sales and marketing initiatives. This has included continued application of existing sales force resources to expand and deepen market coverage, improve distribution of relevant product information content in relevant forms, and increasing application of our broad range of commercial expertise to the relevant market. We expect to continue developing insights regarding market dynamics and the potential through these initiatives to inform our continued commercialization efforts as we seek to maximize product level revenue. Metoject unit demand in Canada increased by 14% in the trailing twelve-month period, ended September 30th, 2023, in spite of direct generic competition. Product level performance continues to experience disruption from the launch of a generic product in the Canadian methotrexate market in calendar 2020.
We continue to seek to defend the product's strong market position as we await the federal court's decision following the January 2023 trial in the patent litigation we initiated against Metoject's generic competitor in 2020. We continue to remain optimistic about treosulfan, an agent for the use in conditioning regimens as part of allogeneic hematopoietic stem cell transplantation protocols, or allo-HSCT. We have fully launched the product in the Canadian market under the trade name Trecondyv. In the U.S., treosulfan remains under an ongoing regulatory review process with the FDA. Medac, our licensor and the party responsible for the regulatory matters, continues to work towards responding to the FDA. As most of you are aware, the process for obtaining FDA approval has been delayed beyond the outside date for FDA approval, previously agreed to with medac.
As such, as I mentioned earlier, in September, we entered into a third amendment to our U.S. treosulfan agreement with medac to address this ongoing delay. We continue to expect that it will take medac a period extending into the first half of calendar year 2024 to collect and submit the information requested by the FDA and obtain FDA acceptance of medac's treosulfan NDA resubmission. We and medac will then have a specific negotiation period to agree to a further amendment on any adjustments to unpaid milestone payments. We have no obligation to make any milestone payments before the effective date of the further amendment, if any.
We expect that the commercial experience we are gaining in Canada and the positive data regarding the product will serve us well, if and when the FDA approves treosulfan in the United States, where treosulfan is an important pipeline product for us. If and when approved in the U.S., we expect that treosulfan will become a leading agent for the use in conditioning regimens as part of allo-HSCT and continue to benefit from the orphan drug exclusivity period that would begin to run from the FDA approval. While we continue to focus on maintaining stability of our base business and generating cash from operations, we also look to, look to, for near-term transaction opportunities to augment our product portfolio, increase the scale of our operations, and deliver long-term growth.
A key component of our growth strategy will be to continue to leverage our infrastructure through business development by executing new product acquisitions and partnerships. In the meantime, we continue working to increase revenue, develop and leverage our commercial infrastructure across existing products, and maintain strict financial discipline. I will now turn the call over to Marcel, who will discuss our financial results in more detail. Marcel?
Yes, thank you, Ken. We're pleased to report our sixth consecutive quarter of positive operating income and eighth consecutive quarter of positive adjusted EBITDA. In addition, our convertible debentures have now been fully repaid in cash. This has simplified our balance sheet and leaves our $56.5 million BMO credit facilities, which continue to benefit from an attractive interest rate as our only remaining debt. We were also able to bolster our balance sheet by completing a CAD 11.5 million bought-deal public offering of units in October. Turning to the quarterly results, total revenue for fiscal second quarter was $30.3 million. This quarterly revenue number compares favorably to revenue of $27.7 million for the three-month period ended September 30, 2022.
As Ken mentioned, the $2.6 million increase in second fiscal quarter 2024 revenues versus the prior year's second quarter is primarily due to recognizing 100% of Gleolan net sales in total revenue and continuing strong IXINITY demand growth. Gross profit was $16.3 million for the three-month period ended September 30, 2023, compared to gross profit of $16.1 million for the same period last year. The gross margin was 53.8% for the three-month period ended September 30, 2023, compared to 58.1% for the three-month period ended September 30, 2022. As we mentioned on last quarter's call, we continue to monitor this metric and the factors that contribute to gross margin.
The year-over-year decrease in gross margin primarily reflects changes in product mix, including changes in how we accounted for Gleolan sales in the United States under IFRS over the course of fiscal year 2023. Selling and administrative expenses were $11.9 million for the three-month period ended September 30, 2023, compared to $12.9 million for the three-month period ended September 30, 2022. Research and development was $0.7 million for the three-month period ended September 30, 2023. This compares to 0.9 million for the three-month period ended September 30, 2022. Adjusted EBITDA for the three-month period ended September 30, 2023, was + $5.3 million, compared to $4.2 million for the three-month period ended September 30, 2022.
As Ken mentioned, the $1.1 million year-over-year increase was primarily due to the increases in revenue and the reduction in operating expenses. The net loss for the three-month period ended September 30, 2023, was $1.1 million, compared to a net loss of $2.7 million for the same period last year. Net income or loss includes a non-cash unrealized gain or loss on fair value of the embedded derivatives in our now repaid convertible debentures, which were sensitive to, among other things, fluctuations in our share price. As such, we believe that adjusted net income or loss provides a better representation of performance of our operations, because it excludes these non-cash fair value adjustments on liabilities. Subsequent to quarter end, on October 16, we fully repaid these debentures in cash and maturity.
Our adjusted net loss for the three-month period ended September 30, 2023, was $1.2 million, compared to an adjusted net loss of $2.8 million for the same period last year. Our cash position continued to improve throughout the quarter, with cash and cash equivalents of $19.5 million at September 30, 2023, increasing from $16.8 million at June 30, 2023. We ultimately ended fiscal second quarter with $37.5 million of available liquidity, as we had $18 million available, but then undrawn under the accordion feature of the term facility under the senior secured credit agreement with BMO. Subsequent to quarter end, in October, we used the full $18 million, together with cash on hand, to repay our convertible debentures.
We made the final maturity payment of CAD 51 million or CAD 51.1 million, approximately, $37.5 million in cash, as we had guided previously. As mentioned earlier, in October 2023, we also completed a bought deal public offering, including full exercise of the over-allotment option, and issued an aggregate of 3.9 million units at a price of CAD 2.95 per unit. This yielded into a CAD 11.5 million aggregate gross proceeds, or CAD 10.8 million aggregate net proceeds before expenses. Each unit issued in the offering consisted of one common share and 1/2 of warrant, and 1/2 of one warrant, described in greater detail in this quarter's MD&A.
Adjusting our quarter-end cash balance for this series of subsequent October transactions, we had approximately $8.5 million in cash or $8 million after underwriting commissions and before expenses of the public offering, putting us on solid footing to continue maintaining our growth, continue to maintaining our growing our business over the coming quarters. We've been consistent in executing our plan quarter-over-quarter, which has put the company in a strong financial position with strong quarterly revenue and improved profitability. As always, there can be variability in quarter-to-quarter results, but we look forward and are energized to continuing to build the company and its portfolio in the coming quarters and beyond.
We're now open for questions, operator.
Thank you. At this time, we will be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question is coming from André Uddin with Research Capital. Your line is live.
Hi, Ken and Marcel. Nice to see the converts out of the way. And now that your converts are taken care of, where do you see the best opportunities right now for business development? Is it in the U.S. or Canada, and is there any particular therapeutic area that you're looking at right now? Thanks.
Thanks, Andre. Good question. Yeah, clearly, you know, we're looking to build a company through business development. We've been consistent in doing so in the past. I wouldn't say we're looking, you know, at any particular market. Obviously, we can get bigger hits in the U.S., and we very much would like to find some more business in the U.S., but we're certainly not ignoring Canada. We've got a very strong portfolio in Canada, excellent performance, and so, we're looking to do both. So we've got a full pipeline of BD, lined up, and we're assessing all those products, so we, you know, hope to start closing some of those deals.
Okay, that's great. And so just looking ahead, in terms of the decision on the Canadian Metoject lawsuit, is that still expected by calendar year end?
Yeah, there's no defined timeline, unfortunately. So you know, there's no means for us to put any pressure towards a decision. It's totally up to the court. We typically decisions come within 12 months of the trial. So yes, we would expect and hope that it would happen this calendar quarter. But there's no guarantee that that will happen.
Thank you. Our next question is coming from Rahul Sarugaser with Raymond James. Your line is live.
Hey, Ken and Marcel, this is Mike on for Rahul this morning. Congrats on the solid quarter and on executing the hard work of polishing up your balance sheet. Congrats. Yeah, first question here. You know, there's a note in the press release this morning, or I guess last night, indicating a focus on maintaining the stability of your base business. And I wonder, where are some of medac's priority areas for resource allocation during the next 12 months or so?
Thanks, Mike. A good question. You know, clearly, you know, the top four or five products are generating a fair bit of revenue, and growth is, you know, strongly coming out of Rupall. So, you know, IXINITY for sure, you know, it's a key focus for us. We've got the pediatric indication coming soon, we hope, which will give us a chance to more or less relaunch the product, which we think will drive some additional revenue out of that brand. Clearly, the Gleolan relaunch, which we're about a year into, you know, we're starting to see some traction. Not yet seeing the sort of sales revenue growth that we expect to happen, but we're seeing some good things happen in the marketplace. And then Rupall continues to perform extremely well.
You know, 22% growth in the quarter versus the previous year, you know, six years after launch is tremendous. So, you know, we've got those three that really we're focusing on, and then we got the whole rest of the specialty portfolio. You know, Rasuvo, Metoject continued to perform well, even with competition. So we're really focusing in those areas.
Okay, that's great. Thank you. Now, price increases on Rupall were noted in the press release. I wonder if you could describe, you know, sort of the proportionate size of these price increases, and also if there are any price increases anticipated for other of your products.
Yeah, the price increase in, with Rupall is in line with CPI. So we're allowed to take small price increases from time to time, and so that was the reference made in the press release. Other products in the U.S., from time to time, we're able to take small price increases, so it's nothing of significance. But when allowed, you know, we do take the price increase.
Okay. Okay, that's great. And now if I could chew on one more. The pediatric opportunity for IXINITY, you know, we have a relatively near-term outcome coming there, we hope. How would you describe the incremental opportunity bound up in that pediatric population?
Yes, it's difficult to quantify. You know, being a rare disease, there aren't a lot of newly diagnosed patients per year. But it does put us on equal footing with our competitors. You know, we've been at somewhat of a disadvantage not having the pediatric indication to this point, where all of our competitors have the pediatric indication already and had it since launch. So it's been somewhat of a disadvantage, which causes us to go after product, you know, and patient switches, which obviously are more difficult than new patient starts.
So I would say, you know, there obviously is an opportunity to start to get some new patient starts, but it also gives us an opportunity to relaunch the product, and then have something new to say to clinicians, which, you know, obviously they're more interested in talking to our sales force, when there's something new to say.
Gotcha. Okay, thanks very much. I'll pass it on.
Thank you. Once again, ladies and gentlemen, if you do have a question or comment, please press star one on your telephone keypad. Our next question is coming from Scott Henry with ROTH Capital. Your line is live.
Thank you. Good morning, and, you know, congratulations on the progress on the balance sheet. Tremendous progress over the past year. Couple questions. First, IXINITY, you know, can you talk about a little bit about why the quantities are going down and, you know, what I don't know if you can give any color on, on the revenues in the quarter for IXINITY in the U.S.?
Sure. I'll speak to, you know, demand, which, you know, ultimately drives revenue. So demand, we're noticing that we continue to get good patient initiation, so we're getting the switches. The switches that we're finding are at, you know, lower volume than what we've seen historically when we've gotten those switches, meaning those patients are tending to use less than, you know, our historical patients. And so we see that trend. The other trend that we see, and this is not anything new, is that quarter-to-quarter, you know, there can be a fair bit of variability.
You know, a low, a small group of patients, which we have, you know, a few of those patients don't fill in a particular quarter, it can have an effect on the quarter, and so, you know, that dynamic's at play as well. We haven't given any guidance on, IXINITY revenue, but, you know, it continues to be our number one product.
So is revenue, you know, without giving a point estimate, is it still increasing with price, or, you know, is it flat or a modest decline? How should we think of it, you know, in the big picture as far as the trend?
Yeah, on the quarter, it's a slight decline, slight to moderate decline. So you know, that is the trend that we're seeing. Demand is more or less flat, slight declining. So you know, we think that, you know, quarter-to-quarter, you can see this variability. In a quarter and a half or two quarters, you know, we do expect to relaunch with the pediatric indication, which will give us something new to say. So that's kind of how we're looking at it. So, you know, we're really pleased with the revenue number that we've had this quarter, you know, with, you know, second quarter of $30+ million in revenue, so, that's really good. So the whole portfolio is performing well.
We've got our eye on IXINITY to make sure that it continues to deliver what we expect.
Okay, great. And then just on the balance sheet, now that you're in a new stable phase, how should we think about the interest expense? Is this $4.2 million I see on the add back, is that representative of the number we should see going forward?
I'll let Marcel take that one.
Yes. Hi. Hi, Scott. Yeah, good, good question on the interest expense we see this quarter, and as you've noticed, that it hasn't really changed a lot versus last quarter, for example. It may have gone up a little bit, and we had this—there were several components that is interest expense this quarter with the debenture, with the accretion of the debenture still coming to its end and coming to its peak towards the end. So now going forward with the debentures gone, and the facility kicking in, as I mentioned, this is now a quite clean balance sheet with the $56.5 million of credit facility.
That includes a $2.5 million revolver in there, which we now basically amortize and with a very attractive interest rate moving forward. So the expense there, you will see coming through according to amortization schedule we have published in our disclosures. So the interest expense per se will be staying probably roughly at about that level, maybe a little bit lower, and then getting a little bit higher towards the end since the amortization schedule is structured that way.
But we're certainly very pleased with BMO specifically, with the $80 million that we've been granted from our partner towards the debentures, which leaves us with a very clean balance sheet at the end, yeah.
Okay, great. Thank you, Marcel. And when, with regards—because I don't believe all the documents or all the quarterly documents are available yet, at least not when I looked for them. With regards to the BMO credit facility, how much of that is outstanding, and is there a due date on that? Just trying to get a sense of the up-to-date capital structure.
Yes. So, the way to look at this, what's outstanding now is, as I mentioned, is the $56.5 million minus a bit of an amortization we've already done since the beginning of the facility. So it's a bit less. That's what's outstanding. There's nothing more to come. And this is essentially a three-year agreement. We amortize the facility over five years, and so that gives you a rough idea what to expect over the next few years, yeah.
Okay, great. Thank you for taking the question.
Thank you. Our next question is coming from Stefan Quenneville with Echelon Capital Markets. Your line is live.
Hi, guys. Thanks for taking the question, and congrats on all the hard work on the last couple of months. You've been very busy taking care of things. I wanted to ask a bit about the treosulfan and your the potential to renegotiate once the submission is accepted by the FDA. Are you? I guess it's like a big picture when you look at the opportunity in the U.S. You've seen how the drugs, you know, sort of performing in markets where it's approved or it's, you know, largely the standard of care. Do you feel that the opportunity may be sort of a similar size as what it was or was initially envisioned? Is question one.
And then question two, in terms of your renegotiation with medac or potential renegotiation, is it about the absolute numbers or maybe just a shuffling of when those payments are due? Or, you know, how are you thinking about that renegotiation, I guess, is the ultimate question.
So thanks, Stefan. Great questions. Yeah, I think the way we're thinking about it, treosulfan continues to be an excellent opportunity. You know, we see the performance of the drug in Canada, where we've launched it over the last, I guess, 18 months. And we're seeing the uptake, we're seeing, you know, how people are using it. So, you know, we feel good that there continues to be a strong place for the drug in the market, and we believe the same thing for the U.S. You know, obviously, there's been a two-year delay, so that is significant. So, you know, we obviously will be positioning that, you know, things have changed.
And so when we get into the negotiation with medac, we'll want to negotiate terms that, you know, we're obviously comfortable with, and recognize the, you know, the value of the drug at this stage. And so, you know, we're obviously getting prepared for those discussions, you know, assuming that medac completes the resubmission on the timeline that has been previously stated, and then we'll initiate that discussion, and then have that period between resubmission and decision to renegotiate those milestone payments. And so everything is on the table at this stage, and so we'll be looking to negotiate a deal that works for us.
Great. And just finally, you know, you guys have generated some nice data in Canada. None of that data, there's no consideration of trying to get any of that on the label. That's really not part of what medac is doing at all. Is that correct?
Correct. As far as we understand, there's no mechanism by which we can, you know, use what's been generated, you know, in the Canadian market, particularly at Princess Margaret Hospital, to influence the label in the U.S. Clearly, it will be part of a resubmission. The safety update would include all new markets, including Canada, and so that information will become available to the FDA, and obviously bodes well. You know, if anybody's looked at it, that data suggests a 30% improvement in overall survival for certain leukemia patients, you know, in a real-world setting at a top-notch institution like Princess Margaret. So the information bodes very well for the drug. It won't affect the label, though.
Okay, great. And I'm just gonna re-ask a question because, hopefully, I'll get a little more clarity or see if you can let something slip. Just in terms of your business development sort of activities. I mean, it sounds like you got quite a few irons in the fire, if I'm hearing correctly. Is this more a question of you just prioritizing one that makes the most sense for you, or we could see you do a couple of things in the next, you know, reasonable timeframe, if you can actually transact? Is it—a re both possibilities, or is it, you know, we should expect one, the best deal to come to the surface? Or maybe, you know, if I can get a little more clarity on that.
Yeah, I think you can expect a mix of deals. You know, the Canadian deals tend to be smaller—
Yeah.
R equire less capital upfront, so easier for us to execute. The U.S. deals tend to be bigger, require some capital upfront in most cases. And so, you know, that, those are, you know, more challenging to do, take longer to do. So, you know, I think you'll see a mix of those two.
Wonderful. That's all for me. Thanks, guys.
Thank you. If you have any remaining questions or comments, please press star one on your phone at this time. Okay, as we have no further questions in queue, I will hand it back to Mr. d'Entremont for his closing remarks.
I just want to thank everyone for joining the call today. We are proud of the financial results for fiscal Q2 2024 and the performance of our core portfolio. We look forward to building upon this and advancing our product portfolio and continue to deliver strong performance for the rest of the year and beyond. Thanks very much for your interest.
I do apologize, sir. Just as you started to speak, Oh, it's okay. The gentleman left the queue.
Thank you.
Thank you, ladies and gentlemen. Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.