Biosyent Inc

XTSX:RX

Earnings Call Transcript 2018-Q1

[René C. Goehrum, Chairman, CEO & President]

Hello, and welcome to the Q1 2018 results presentation. My name is René Goehrum, and I'm the President and CEO of BioSyent Inc. I want to draw your attention to our forward-looking statements disclaimer, and I'll start the presentation with a look at our quarterly sales, EBITDA and net income after tax results. So the first quarter of 2018 represented our 31st consecutive profitable quarter. Sales were just under $4.5 million, which represented a 16% increase versus the year-ago period. Our EBITDA was up 24%, and our net income after tax up 27%, just over $1.1 million. So you can see, the business reaccelerated in the first quarter on a year-ago and previous-year comparison basis. In the year-ago period, we did have some trade inventories that we're working through as well. So just looking at the Pharma business on its own, you can see that our Canadian Pharma sales were up 12% for the quarter. Our International Pharma sales up 90%. Represented on this graph, the blue tips are our International Pharma. We've now shipped FeraMAX and various SKUs to international customers in 13 consecutive quarters. I just wanted to caution, looking at the International results at a plus 90% and making an assumption of what that would look like through the course of the year, we certainly have got plenty of experience now over the last 3, 4 years, but there is some volatility in the orders that we receive from customers. Demand is good in the markets where the products are being promoted, but we do know that the size of our customer orders, the transit time and whatnot does have an impact on the business, and we wouldn't read too much into having a plus-90% quarter and assume that, that would occur for the balance of the year. I think that would -- safe to say that would exceed what our expectation is for the business this year. Drilling down a little bit on the quarter results in the Pharmaceutical business. Pharma sales were $4.3 million in the quarter, that was up 19% versus last year. The Canadian portion of that, the $3.8 million, was up 12%, as I mentioned earlier. Drilling down further, you can see that FeraMAX won 50 units were up 12%. FeraMAX Powder units up 5%. And then, we had some strong growth with RepaGyn and the Cathegel up 21% and 22%. So those 4 products were the main drivers of the top line growth performance in the Canadian Pharmaceutical business. As mentioned before, I gave you some comments about the International business. Sales were $566,000 in the quarter, and we're certainly seeing growing demand in these markets, but the variability in sales that we see quarter-to-quarter would be my cautionary note on that. So I want to update you on a couple of our launch products. You've heard me now talking for quite some period of time about the challenges that we've been having with the commercialization of CYSVIEW. I'd say reflected in the first quarter results is not much on the top line from CYSVIEW, but we have had, what I would consider to be, a breakthrough in -- on the implementation side that we think will filter through our results as we go into Q2 and especially, in Q3 and Q4 this year. So I've spoken in the past about the long selling cycle for this product, but we've now -- we're now seeing more that are hospitals adopting CYSVIEW. So we've had 2 hospitals that have been using it in surgical procedures and in the management of nonmuscle-invasive bladder cancer. That increased by 4 hospitals to a total of 6 now as of May. So that is after the quarter-end, obviously. We've got 4 additional hospitals that have made the move to implement Cysview and use it in their management of nonmuscle-invasive bladder cancer and this happened in the course of April and May. All of those 4 sites have ordered, and I believe 1 or 2 of them have already reordered. So that's being used in procedures, and we think that will filter through in terms of consumption, and obviously, filter through in our revenue results as the year progresses. In addition to those 6 that are now live with CYSVIEW, we've got 7 additional hospitals that have either completed successful evaluations or are intending to implement CYSVIEW without going to or going through an evaluation. All of those 7 sites are now working through a process to go live and use CYSVIEW with their patient population. In addition to that, we've got 2 additional hospital sites where the evaluation is underway or planned. On the assumption that we get all of those 15 sites up and running, that would give us a revenue runway that would put us on path to what our expectations were backdating probably about a year or so. But it's certainly what we expected, the kind of reception we would've expected from customers. It's just probably with a 1-year lag for what we thought we would do with this product. What's interesting here is that the first quarter reflects none of the results from a revenue perspective, but certainly, we've been promoting and working through the implementation on these new sites. Now we are not generating revenue from these additional hospital sites that have adopted, we'll start seeing the gross margin benefits of that filtering through the P&L. It certainly will have an effect as we go forward, and I'd say an effect on a -- in positive way. So I wanted to update you on the Aguettant System. As you know, we've relaunched the atropine sulfate product about 2 years ago, so we're now, kind of, coming to the end of what we would consider the launch period for a product like this. Now units in the first quarter for atropine were down 12%, Q1 '18 versus Q1 '17, but that isn't really alarming. We had a significant pipelining through the adoption of provincewide customers and hospitals last year in the first quarter. And so to be down just 12% units, we're quite pleased with. We've also seen fairly strong uptake in the second quarter, so April, May of this year, partially driven by a customer stock-out situation for a competing product. As a result of that, we've had a number of hospitals that have been in a process of making a positive decision for Aguettant atropine that have just accelerated that decision-making process. So coming into the end of the quarter, we expect the units to be up significantly from the year ago. Phenylephrine Hydrochloride was launched at the end of '16 for that product, and the first quarter units were up 17% versus a year ago. Overall, between those 2 molecules, we've now got a 136 hospitals that have made repeat purchases of the Aguettant System through April 30 of this year. Certainly, that is tracking to our expectations. During the first quarter and subsequent, just a couple of things I wanted to comment on. As you know, at the beginning of the year, we announced that Larry Andrews and Sara Elford had joined our Board of Directors. They replaced 2 gentlemen that -- long-serving Directors that retired at the beginning of January. And also just yesterday, Mr. Joseph Arcuri was elected to our Board of Directors at our Annual General Meeting. He replaces one further retirement of a Director, Mr. Paul Montador. So that was kind of planned, and in fact, all 3 of those moves have been planned for some period of time, now were kind of implemented the new group that we're moving forward with from a governance perspective. So also one exciting in May, that FeraMAX was named the #1 recommended iron supplement brand in Canada for the third consecutive year. This is an independent survey done of healthcare practitioners in Canada, so both doctors and pharmacists, they are asked what their #1 recommendation is for an iron supplement. It's well over 3,000 healthcare practitioners that are in their survey. So not only are we now 3 years in a row, but each year, the number of doctors or the percentage and the percentage of pharmacists that are recommending fair Max as their primary choice has increased. So '17 over 16 and '18 over '17 have increased, and I think we're seeing this in the continued strength in this business in Canada, both in unit growth and in dollar growth. So as we look at the completion of the second quarter and out through the balance of the year, and quite frankly beyond 2018 with a view of what we expect to be the growth drivers of our business, so we see additional growth coming from FeraMAX. I've spoken at some length in this presentation about what's happening now with CYSVIEW. Cathegel continues to show unit and dollar growth in the business, RepaGyn and Aguettant System as well, so we see all of those contributing. These are kind of in Canada and outside of Canada. We've got some new markets for FeraMAX internationally that we're working through a regulatory process. As we've disclosed before in our MD&A and other communication, we've got 2 cardiovascular prescription products that are going through Health Canada approval process and 1 women's health prescription product. Upon successful approval by Health Canada, those products will be introduced to the marketplace as well. We have a very active deal funnel. We don't do these things on a linear basis. I think we've got 6 or 7 live projects on the go right now that we expect to have some success with 1 or more of these negotiations and diligence on new opportunities. As we complete those we will be letting you know what's going on with the new product and licensing. So a quick look at our balance sheet, not a lot of change from December 31. Our working capital is up 6% to $21.3 million. Our cash and short-term investments went up by about $300,000 to $19.6 million. We're essentially building a balance sheet for deployment, and we continue to work on those opportunities to deploy capital, to diversify our portfolio and grow our business over the long term. If we focus specifically around cash generation, I would say that Q1 is historically our lowest quarter for cash generation. That's typically a result of the fact that we do our final tax catch-up payments in the first quarter. We also pay bonus in the first quarter of the year for the fiscal year previous. So historically, the first quarters are lowest in terms of cash generation, but you can see here, that our cash position on March 31 has grown strongly from $9.3 million in 2016 to $19.6 million in the March 31, just ended here in 2018. Our return on equity, as we continue to report for the 12 months ending March 31, was 26%. Obviously, that's coming down marginally, kind of, over the last couple of years from very high peaks 5, 6 years ago. Really this was a function of our growth rate and our cash position on the balance sheet. So we -- as I mentioned before, we're working hard on deployment opportunities. And when the time is right and the opportunities are right, we'll be there to deploy the capital that we have at our disposal. Looking on a trailing 12-month basis at our earnings per share, our EPS, reached $0.38 to March 31, TTM. That compares favorably to $0.29, I should say, for the previous 12-month period. So I just wanted to finish the presentation by thanking you for your continued interest in BioSyent. And if you wanted more information about our products, we have brand sites as you can see on the screen here. If you need any more information, our corporate website as well. And we look forward to reporting on our continued growth in the business. We've had a pretty strong start to the second quarter with a number of brands kind of hitting all-time records, and it's unusual for us to have that in April, May. Typically, we see that in October, November. So that seems to indicate well that we've got good momentum as we go towards the balance of this year. Thank you.