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Edited Transcript of RX.V earnings conference call or presentation 20-Nov-19 10:59am GMT

Q3 2019 Biosyent Inc Earnings Call

Mississauga Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Biosyent Inc earnings conference call or presentation Wednesday, November 20, 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. Welcome to the BioSyent Q3 2019 Results Presentation. My name is René Goehrum, and I'm the President and CEO of BioSyent Inc.

I'm going to start today's presentation with a look at our quarter sales and profitability. So in the period ended September 30, our revenue hit $6.22 million, that was up 18% versus year ago. So the thing to note here is that $1 million of revenue was generated from FeraMAX customers outside of Canada. So we had reported in the past that we had somewhat of a backlog because of issues around import permits by our customer -- our largest customer. And so that backlog was shipped and -- to the end of September. And so that was $1 million of revenue essentially piled into 1 quarter and obviously had a positive impact on the quarter sales, and that trickled down through to both EBITDA and NIAT EBITDA up 15% to just under $2 million for the quarter and net income after tax at $1.53 million, up 21% versus a year ago. So this quarter represented our 37th consecutive profitable quarter.

Looking at the business on a 9-month basis. So for the 9 months ending September 30, revenue was up 2% and our EBITDA down 24% and net income after tax, down 21%. So a couple of things to speak to on the expense side of the equation. So we've already talked about withdrawing our cardiovascular products from Health Canada. So we had a onetime impairment of $425,000 that was reported for the second quarter. So that was reported in August for the period ending June 30. We also had a decrease in realized foreign exchange gains. So in the year ago period, we had a fair bit of volatility through the first 9 months of the year in the USD, Canadian dollar relationship, and we were able to capitalize on some opportunities to lock in some gains in that regard. So those same opportunities didn't present themselves in the year-to-date period.

And then finally, we have incurred $477,000 more in selling and marketing expenses. About 40% of that, it is related to, and let's call it, an ongoing investment in business intelligence. This is information on our competitors, on our products and how they're performing in the marketplace and an investment in a newer CRM system as we get ready to launch new products. And so some of that is increased headcount in the field, and then a lot of that is increased investment in business intelligence. So that essentially, those 3 together make up the delta on the EBITDA line versus 2018.

So looking at our pharmaceutical sales on a quarterly basis, you can see in the quarter ended September 30, we have that $1 million shipment to an international customer, so represented by the blue tips in this chart. So in the 2 previous quarters, we had no sales to international customers, and that represented the first time that we had gone a quarter, but in this case, 2 consecutive quarters without shipping like 1 pack over 4 years. So it's conspicuous in that our sales -- international pharmaceutical sales were up 259% versus a year ago, but it's not really a good measure on a comparable basis because last year's business was spread out more. Overall, that business is lagging, and I'll speak to that a little bit in a few slides.

So in the quarter itself, Canadian pharmaceutical sales were $4.79 million, up 2% versus year ago. That represents a big portion of $4.79 million -- of the $5.8 million we did in total. And on a unit basis, FeraMAX was up 4% versus the year ago quarter, RepaGyn, up 15%. And the next 3 are hospital products, Cathejell, down 32%, Aguettant System down 13% and Cysview down 23%.

And when I flip the deck over to the next slide, you'll see that on a 9-month basis, the comparables where the data is not as dire as it appears there, there's a couple of things happening. One is that we just had some ebbs and flows in shipments to customers from 1 quarter to the next. Cathejell business is down on a year-to-date basis as well, not just on a quarter basis. We did suffer some key account losses at the end of 2018. And in the first quarter of 2019, that business seems to have stabilized. But overall, we've made a change in our distribution to hospital customers. And that change in distribution has had an impact in our direct shipments, which is what we report on a financial basis. We also measure shipments to hospitals on a secondary basis. I think this would be through -- from our customers to hospitals. And on that basis, our business is stronger than is indicated in this data here. But I want to be very transparent on our performance on Cysview. This is definitely performing below expectation for management.

As I mentioned, FeraMAX international sales, just over $1 million. So we shipped backlogs that we had. We have additional orders in hand for shipping prior to year-end. But I can say that the issues that we've had with respect to permits and import quotas by our key customers has -- had been ongoing. And I don't think it's kind of a quarter-to-quarter issue. I think this could last for some period of time longer.

And finally, in the quarter, our legacy business showed 55% growth versus the year ago period. The year ago comp was quite weak. The legacy business did not do well last year. So we're happy with the performance but not overly excited to think that there's a trend there.

So as I referenced, on a 9-month basis, some figures to look at. So sales for pharma reached just under $15 million for the first 9 months of the year. This is up less than 1% versus last year. Canadian pharma up 3%, measured in dollars. Measuring the Canadian pharma brands, the key brands in units, you see FeraMAX up 2%; RepaGyn, up 12%; Cathejell, down 23%. So that's -- as compared to the down 32% that you saw here on this previous slide, and Aguettant System and Cysview both positive on a year-to-date basis. This is certainly more indicative of the trend of what we've seen on the Aguettant System on an overall basis and measured in units. Cysview is up 33%, but still off of a modest year ago base. And as I mentioned before, management is not satisfied with the performance of that brand.

Our legacy business had sales for the first 9 months of the year of about $940,000, this was an increase of 25%, as I mentioned, versus a fairly weak comparable 2018.

So during 2019, some notable things. Obviously, what gives us a little bit of wind in our sales in terms of growth prospects is that we got Tibella approved in May. This is a women's health prescription product. I'll speak a little bit more on Tibella on the next slide.

For the fourth consecutive year, in May, FeraMAX was named the #1 recommended oral iron supplement brand in Canada. It speaks to the equity that we have built on this brand. Over 40% of physicians and 50% of pharmacists surveyed named FeraMAX as their #1 recommendation to patients. And this data is strong. It's an independent survey on an unaided recall basis. So they're not given a menu of names -- brand names. They are basically on an unaided recall basis, and it's a fairly broad survey. So we're quite pleased with the performance of FeraMAX in terms of its position and the equity we've built in the marketplace, and we see -- although modest growth, we continue to see growth in units and in dollars on this brand.

I spoke earlier about the fact that we withdrew our submission for approval to Health Canada of the 2 cardiovascular assets. This was done in June. And I've already talked about the financial impact of that, and we've, of course, disclosed that in the past.

In August, we relocated our head office to Mississauga, Ontario. For those of you that are not familiar with the Toronto region, Mississauga is a suburb contiguous to the city of Toronto. And we've moved to a new office that gives us more space and more functional space for us to get ready for the growth that we see coming in the near future.

And then finally, in September, BioSyent was named to the Growth 500 ranking of Canada's fastest growing companies, and this was for the seventh consecutive year.

So I mentioned before that we got Tibella approved in May. This has obviously been disclosed, and some folks may be waiting to hear kind of what our plans are. Just to remind you, Tibella is for short-term treatment of vasomotor symptoms resulting from estrogen deficiency in postmenopausal women. It will compete in a category of estrogen and progesterone products in the hormone replacement therapy market in Canada. That's about $200 million. This is per IQVIA data. And this market is growing, measured in dollars.

So launch preparations are well underway at this stage, and we will be launching the product in 2020. We just -- in the month of October, just participated in a national advisory board with influential key opinion leaders from across the country that have given us some very positive feedback on Tibella and their determination of its need and place in the marketplace in Canada. They've already identified to us certain patient populations amongst postmenopausal women they think Tibella will be ideal for. There's already an awareness. And this product is being discussed amongst the gynecologists across Canada. So there's some anticipation waiting for the launch of the product, and we will be doing that in 2020.

So this slide shows you kind of visual representation of where we are with products. So you see that we withdrew the cardiovascular products. They're out of the regulatory phase now. Tibella moved out of regulatory phase in the prelaunch preparation. And then the rest of our products, we have 8 products in market. So 2 under the Aguettant System brand name are in the market now.

We wanted to give you an update on our Normal Course Issuer Bid. Just to remind you, last December, we announced that we've gotten approval from the TSX Venture Exchange to repurchase up to 950,000 of our common shares in the 12 months to December of 2019. So we have now hit that maximum. And that breaks out as follows. So you see in this chart that we started immediately in the month of December last year. We purchased just over 92,000 shares. And then as the year progressed, you see our purchases in Q1, Q2. And in the quarter here that we're reporting, we purchased a further 172,132 shares, and that will be reflected in the financial statements and in the MD&A that you will be able to access on SEDAR. Subsequent to the quarter end, in October of 2019, we purchased a further 67,100. So this brought us to the maximum number of shares that we could repurchase under this NCIB. There are rules and limitations on that, and we can apply in December to -- for a new NCIB approval under the TSX Venture Exchange, and we intend to do so. So now our fully diluted share count is at 13,758,000 and change, down significantly from where it was a year ago at this time.

So a quick look at the balance sheet. A few moving parts here. One -- the key thing is that our cash and short-term investments as of September 30 stand at $19.8 million, so this includes our investments in the Normal Course Issuer Bid. With respect to moving into new office location, there is a new IFRS treatment of leases and obligations under those leases, so you'll see some things that are reflected in our financial statements with respect to that. So we have a $1.9 million right-of-use asset under our lease and then a lease liability. This is per IFRS 16. And then we've also made some leasehold improvements of about $0.5 million, which will get depreciated over a period of 10 years, which is the life of our lease.

And then finally, you'll see that our equity has been reduced by $5.7 million. And so this is for the $5.7 million that we've expanded during the 9 months. So this balance sheet snapshot essentially covers the year ending 2018 and then September 30. So that's a total of 790,732 shares that we've repurchased in that 9-month period for a total of $5.7 million. So that's the reduction in equity.

So rolling that forward into kind of where we stand with our cash position, cash generation. Our cash generation, down 12% versus last year -- or our cash position down 12%, and that's essentially entirely attributable to our NCIB. Of course, we're profitable and the business itself, we've demonstrated our ability to turn that income after tax into cash, and so the reduction in cash is attributable to our NCIB.

So return on equity for the 12 months ending September 30 was 19%. What you see here on this chart what that looked like on a full year basis. So full year 2018, 23%. That figure is now at 19% on a TTM basis.

Of note here, we've mentioned this before in past presentations. Of that $19.8 million in cash, we need about 10% to 15% of that to operate our business. So we see the balance of that being available to deploy in growth assets. As we move forward, we continue to review opportunities to acquire in-market revenue-generating assets. We've looked at a few during the course of this year. And we're obviously very active in reviewing in-licensing opportunities. Some of those opportunities would be more for near-term introduction into the marketplace. Some of those assets are already approved. So it's about what I can say on that topic. I would just say stay tuned.

Taking a look in our earnings per share. So what you see in this slide, on the left-hand side are our last 8 quarters. So we delivered $0.11 EPS fully diluted in the third quarter. That compared or equaled our best ever performance, which was also reached in Q4 of '18 and Q2 of 2018. On a TTM basis, that sums up to $0.34 a share, down $0.04 versus $0.38 in the previous 12 months. Of note there, the onetime impact of the impairment charge that we took on the cardiovascular assets was worth at $0.02 a share.

So this all then rolls through -- I just wanted to point out to you the common share count now is -- this would be issued shares and outstanding, 13,581,445, a net of all of the repurchases under NCIB. We have 177,512 options outstanding. And I've already mentioned the fully diluted share count.

So I wanted to thank you for your support and your interest in our company. And we're as excited as we've always been about what's going on in our pipeline with respect to new assets that we're looking at, and we hope to be able to report on some things in the future. Thank you very much.