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Edited Transcript of RX.V earnings conference call or presentation 23-Aug-19 10:59am GMT

Q2 2019 Biosyent Inc Earnings Call

Mississauga Sep 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Biosyent Inc earnings conference call or presentation Friday, August 23, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* René C. Goehrum

BioSyent Inc. - Chairman, CEO & President

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Presentation

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René C. Goehrum, BioSyent Inc. - Chairman, CEO & President [1]

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Hello, and welcome to the Q2 2019 Results Presentation for BioSyent, Inc. My name is René Goehrum, and I'm the President and CEO of the company.

Before I go into the numbers, I want to tell you about 2 occurrences that came together in the second quarter and would have had a dampening effect on both our top line and bottom line results. So as we've been describing now for some time, there's been some choppiness in our sales of FeraMAX to international customers. These will be customers located outside of Canada.

So our largest customer, and we have got a high concentration with this one customer, has had some challenges with import quotas and availability of currency or currency controls. And so for the second consecutive quarter, we've had no sales to customers outside of Canada for pharmaceutical products, namely FeraMAX.

Also in the quarter, after about a year of dialogue with Health Canada regarding our dossier to get marketing approval for 2 cardiovascular products, we announced in June that we would be withdrawing our request to have those 2 products approved. It would -- became clear to us through this dialogue with Health Canada that we would not get those 2 products approved.

So the net effect of this onetime impairment of our cardiovascular product assets was $425,000 on the bottom line. And of course, the 0 sales of International Pharma products would have had an impact both on the top line and the bottom line. So the net effect for the quarter is that sales were just under $5.2 million. That was down 13% versus year ago. And our EBITDA and net income after tax, similarly effective although more so, EBITDA was down 59% from year ago and net income after tax down 57%.

So a demonstration of the resilience of our business and the platform that we've built is that we could have those 2 occurrences come together in the second quarter and yet report our 36th consecutive profitable quarter.

So looking at our results over a 6-year -- sorry, a 6-month basis, the 6 months ended June 30, once again, 0 International sales. So as I mentioned, that was both the first and second quarter and the onetime impairment of $425,000 affecting the bottom line. But taken over 6 months, the impact was a little less. So sales down 7% versus year ago, EBITDA down 42% and net income after tax down 40%.

And if you're following along, the lack of sales internationally have a greater impact on our net income after tax because that's run through an international subsidiary that is located in a more tax-efficient environment.

So we've been showing you this chart for quite some time. It looks at the rolling 20 months, so 5 years rolling. And you'll see here that sales of pharmaceutical products by quarter, reaching back to 2014, and you can see that up until the last 2 quarters, all but one had sales of pharmaceutical products to international customers. So 2019 Q1 and 2, you can see the conspicuous absence of the blue tip, and the net effect is as I just reported on the previous slides on our business on an overall basis.

In the second quarter, our Canadian pharma sales were down 4% versus year ago. That's a narrow enough margin. There were some puts and takes with respect to wholesaler inventories on a few of our products. And I'll do a little bit of a deeper dive on a by-brand basis in a couple of minutes. But you can see that, clearly, the absence of sales to international customers then has an impact on our overall business.

So looking at our Pharma business. We did $4.84 million, down 13% versus Q2 last year. In Canada, as I mentioned, down 4% versus Q2. That breaks down on a by-brand basis. In the quarter, FeraMAX was flat versus year ago, RepaGyn up 11%, Cathejell down 22%, the Aguettant System up 1% and Cysview down 30%.

To put some of those figures in context, though, we're going to have to look at the 6-month numbers. The Aguettant System has some ebbs and flows with respect to inventory management by customers, and we did have some pipelining for Cysview in the year ago period. So you'll see in both of those cases, the numbers are better measured over 6 months. Not to beat the dead horse, but 0 FeraMAX sales compares to $510,000 in the year ago quarter.

So what you should know, though, is that we had orders that were requested originally for shipping in Q1 and Q2, and we have 3 orders that have now shipped. So subsequent to the reporting period, which is June 30, we shipped 3 orders in July. These were originally scheduled in the first half, and they had a combined value of about $764,000. So that, obviously, will get added to our third quarter revenue.

We have additional orders on hand for shipping in both Q3 and Q4. We see some continued challenges that are going to affect the trade outside of Canada and really can't report anything there until we see actuals.

Our Legacy Business was $310,000, down 15% versus year ago. We do business in a couple of different markets there. There, once again, are some puts and takes. We have larger customers that do some inventory prepurchasing. And you'll see in a moment that on a 6-month basis, that business is up.

So looking at our business for the first half. So the 6 months ending June, total pharma sales of $9.11 million. That's down 8% versus year ago. The Canadian Pharma business is up 4%, so modest growth. Measured in units, FeraMAX up slightly, RepaGyn up 9%, Cathejell down 18%, and you can see here the Aguettant System up 56% and Cysview up 60 -- 76%.

So there are some puts and takes by our wholesale customers on several of these products from time to time and so it's not unusual. We've seen increased competitive activity on Cathejell. That's a brand that over the last 6 years has grown consistently by -- mostly by double digits. And so we've seen certainly a blunting of that growth and kind of a leveling off and some additional competitive activity, although not much of such activity that's affected our business that we can measure by their consumption of our customers as of the end of March.

So comparing FeraMAX sales of 0 in the first half of this year to just over $1 million last year. So both the size of the orders, the frequency of the shipments and these trade challenges look like they're going to persist. There is demand for products, but the challenge is for our customer to be able to show that demand that's being created. So our legacy products had sales of just over $0.5 million. That was an increase of 8% versus the first half of 2018.

So a fair amount of activity in the quarter, and actually, we're reporting here just over the half. So in May, as we announced, we received approval from Health Canada for the marketing authorization of Tibella. It is a prescription women's health product. I'll speak a little bit more detail on that product next slide.

In May, FeraMAX was named the #1 recommended iron supplement brand in Canada for the fourth consecutive year. So this is an independent survey of a fairly large sample size of physicians and pharmacists across Canada, and 41% of physicians had named FeraMAX as their #1 choice recommendation to patients that are iron deficient or iron -- have iron deficiency, iron-deficient anemia, and that number of pharmacists is 50%. So very significant in terms of our position with those health care professionals, and we see continued growth opportunities for the business as we go forward. We may be going at it in some different forms. That's something that you can stay tuned to over time.

So as I mentioned, we withdrew our Health Canada submission for 2 of our cardiovascular assets. That resulted in an impairment of $425,000. And just a few weeks ago, we relocated our head office to Mississauga, Ontario.

So as I mentioned, we got Tibella approved in May. This is a prescription product for women that consists of tibolone, that's the active pharmaceutical ingredient. The product is indicated for short-term treatment of vasomotor symptoms that result from estrogen deficiency in post-menopausal women. It's a fairly competitive category, and we'll compete with other estrogen and progesterone products in a $200 million therapeutic class that was growing just under 5% last year.

So this product was deemed by Health Canada to be a controlled substance. And as a result, we've had to do some additional kind of licensing activity through our supply chain, and that will result in a launch next year, so 2020. And as we get closer to launch, we will be keeping you informed.

So as we look at our product portfolio with some of those modifications, I'll just point them out. Taken out of the regulatory process of the 2 cardiovascular products. Moved from the regulatory process into prelaunch planning is Tibella. And the rest of our assets that are in the market now are considered growth assets. In other words, we are promoting those products in the marketplace and we have none that are in the kind of mature phase that we're just managing without promotion.

I wanted to bring you up-to-date on our Normal Course Issuer Bid. Last December, we announced that the TSX Venture had approved the BioSyent to repurchase up to 950,000 of its common shares over a 12-month period. We commenced immediately with the NCIB. And in December, as we've previously reported, we started purchasing. We've purchased also in the first quarter. The second quarter, another 397,700. And subsequent to the reporting period up until the recording of this presentation, another 6,000 shares.

So in total, we've repurchased just under 717,000 shares. And our fully diluted share count is now 13,992,189. So that continues. You can do the math in the delta between 950,000 and 717,000, and we still have authorization to go some further distance between now and the beginning of December, and we intend to do so.

So want to take a look at our balance sheet. Certainly, our cash position has been impacted by our investment in the Normal Course Issuer Bid. So you can see this snapshot shows you June 30 of this year and December 31 of last year. And you can see our cash is down 19%. That's predominantly as a result of our purchase -- repurchase of shares in the open market.

So we continue to work on new in-licensing and acquisition opportunities. So we're continuing to build the balance sheet or keep it available for deployment in those opportunities. We have no long-term debt. And you can see our equity has been impacted by the repurchase of -- in this reporting period here on the slide of 618,600 shares in the first half of this year.

So how does that then roll through our cash generation and our cash position? So you can see on June 30, we had $19.9 million in cash. So a negative cash generation on a year-to-date basis. And you can see that, that is fairly comparable to the June 30 last year, just $1 million less though, we've spent $4.5 million on repurchasing shares.

So then how does that flow through return on equity calculation? This is a chart with which you're familiar. We've been reporting on this for several years. It's something we look at carefully. Certainly, our ROE is affected not only by our profitability, but also our growth rate. And in the most recent period, 12 months ending June 30, our return on equity was 18% on our cash balance of, as I said, $19.9 million.

So I wanted to come to then our fully diluted earnings per share. This is impacted, obviously, by net income but also by the number of shares that we have outstanding. So as I started the presentation, talking about the impairment charge and also the lack of sales to international customers in the quarter, you can see the significant impact in the quarter. We report $0.05 per share fully diluted in Q2. And if you look at that on a TTM basis, that's $0.32 versus $0.38 a year ago, down 16%.

And as [Barry] pulling out the calculator, the effect of the impairment was over $0.02, so rounded to $0.02 per share. And on the right-hand side, you see the previous full fiscal year performance.

And that just recaps for you now with the new share counts. You see common shares outstanding of 13,814,000 change and then fully diluted with, I think, yes, there are 177,512 options outstanding, so under 14 million shares outstanding.

Certainly, this has not been an enjoyable quarter to prepare for a presentation and to report to you. But I can tell you that our business is profitable, cash generating. We're assessing more opportunities in our funnel than we have at any one time. I think we've got 6 term sheets that right now are under negotiation. And at some point in time, we're looking forward to reporting to you those new assets that will be joining our portfolio.

And I certainly expect, given the fact that, as I've mentioned already, that our impairment on cardiovascular assets was a onetime occurrence and that we will have sales to report for International, our International business, that we should see a fairly healthy bounce back on our net income and our EPS.

So once again, thank you for following the company and listening to this presentation, and we look forward to telling you in the future about progress that we continue to make. Thank you.