Biosyent Inc

XTSX:RX

Earnings Call Transcript 2021-Q1

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

Hello and welcome to the BioSyent Inc. Q1 2021 Results Presentation. My name is René Goehrum, and I'm the President and CEO of the company.Start today's presentation with a look at our revenue, EBITDA and net income after tax for the recently ended quarter March 31, 2021. Overall, I'd like to say that the Canadian Pharmaceutical business continues to perform well, and we had a significant contribution from our FeraMAX international sales. And in tandem, together with a small uptick from our Legacy Business, they came together to give us our best first quarter ever. So the first quarter of 2021 was our 43rd consecutive profitable quarter. And what's interesting here is, though, Canadian pharma up modestly at plus 5%, that compares to a year ago where our pharmaceutical business was up 39% in Canada. So I'll take you back to the first wave of COVID. In March of 2020, we had a significant amount of trade and hospital loading kind of semi panic buying that resulted in a very sharp increase in sales in March. And together with a really strong first quarter last year, we were up double digits in January and February and came together to give us a very strong a year ago quarter. And we found immediately after that we had a significant drop-off in the month of April of 2020. So this year, our Canadian pharmaceutical business is competing against a very tough comp. It was up 5%. The international pharmaceutical business, I won't even say the percent out loud. It's a ridiculous number because it was against a really small number, but it is our best quarter for that business. We shipped 1 large order to a customer that hadn't had product for some period of time, the total value of $1.14 million that went out to mid-January this year. So through all of this, we continue to invest in launch products, Tibella and Combogesic. I've got a little bit more to say about those 2 products in a few slides. And I can say overall, at $7.4 million in revenue, we were up 22% to the year ago. Our EBITDA line came in just under $2.4 million, up 18% to the year ago. And our net income after tax came in at $1.66 million, up 15% to the year ago. So let's dive into the numbers a little bit here. So you see the Canadian pharma business at $6.2 million, up 5%. As I said, we've had contribution -- revenue contribution now from Tibella and Combogesic in the first quarter, more modest from Combogesic, a little bit more from Tibella. You see here the FeraMAX units essentially flat a year ago. So what's significant here is in that year ago period of Wave 1 COVID our FeraMAX business was up 44%. So to essentially be flat with that means that we held that growth, and that gives the brand some excellent momentum moving forward. You can see here that RepaGyn and Cathejell essentially flat. Cathejell was somewhat less impacted by COVID-19 stockpiling, although somewhat RepaGyn was up in the first quarter of 2021 versus a year ago, but modestly. The last two I want to stop on here are the Aguettant System. This is consumed in the hospital. There was a significant loading of hospitals last year as they were uncertain about supply products that they used in their operations. And so you've seen for this year, our business down 31%, but it doesn't surprise us. And then finally, Cysview, an eye-popping growth rate. Just to caution you here that the year ago period was extremely low, and so it doesn't necessarily kind of signal a big upswing in that business. And we've already touched on the international and legacy. It represented small dollar amounts. Percentage, solid, but we think that, that business is trending now to have a better year than we had last year. It represents proportionally a small part of our business, but it's always welcome, and it certainly is profitable. So I've got a couple of comments about COVID-19, and here we are in Wave 3. Last time I spoke to you in March. We were early stages of Wave 3. We went through a very intense time in the month of April. In parts of Canada, it has continued to persist very intensely. But overall, the trend is good. The trend that is in cases over the last number of weeks, have improved. It looks like Wave 3 has crested, and a lot of this is being driven by a fairly high uptake of vaccination amongst the Canadian population. As I record this presentation, we're now past half of all Canadians have received their first dose of a vaccine. So that is a good sign. And we look forward to things opening up somewhat more to us in terms of contact with customers as we move forward through the balance of the year. So I've already mentioned that our Canadian pharma business continued to perform well. The most impacted without a question are Tibella and Combogesic. Our selling activities are not what we had planned and scheduled and expected or what one normally would expect to launch products. We made decisions to push forward. We've had to modify how we take our message to market, and it's having some success, but I think things will improve on both of those products as we move through kind of an opening up of the economy later this year. For very minimal supply chain interruptions, we had some at the beginning, first wave, COVID, it's been fairly modest for us. We're working very closely with our supply partners and expect that situation to be stable. That large FeraMAX shipment was to our largest customer, and that customer hadn't received any FeraMAX from us in over 12 months. And so that was very much a COVID-19 and some geopolitics mixed in there. And so we're pleased to see that, that business is restarting, and we expect it to contribute. As we move forward in the business, I would say that one shouldn't expect that level of sales on an ongoing basis, but we do have shipments that are going out for that business this month and next month. So there'll be sales to report for that product for FeraMAX outside of Canada in the second quarter. So I want to touch on FeraMAX. Obviously, it's been a big story for BioSyent. In May, earlier this month, we announced that FeraMAX had been named for the sixth consecutive year, the #1 recommended oral iron supplement by both pharmacists and doctors across all of Canada. This, of course, is an impressive performance. We've been top of that perch for a while. Others have tried to knock us down off it. We've built off of that momentum. You'll know that last year, we announced a new formulation platform. We launched FeraMAX 150 Therapeutic in November. Late October and beginning of November. That is now pretty well completed in terms of position in the market on the shelf at your local pharmacy. As I mentioned before, seen continued strong momentum with the FeraMAX brand and really the move to the new formulation sets the foundation for future innovation. We've got an internally derived life cycle strategy. So these are products that there are ours. Of course, on the FeraMAX mark, we'll be transitioning our final existing FeraMAX product that's in the market now to the new Pd platform. And then the first of several new products to address new markets, new consumers will be introduced starting next year. So we look forward to more growth of FeraMAX brand as we move forward with new product introductions. In addition to FeraMAX, we've got Tibella and Combogesic that are driving future growth for the company both diversification of our portfolio and top line growth. I've already spoken about those, and you can find more information product websites. I Encourage you to do so. Tibella was launched late in July. So we're really early days on that, with the feedback that we're getting is quite positive. As I say, we're somewhat constrained by our access to customers and kind of what I'll call the normal expected way of promoting products in face-to-face meetings with health care professionals. But those that have adopted and have started recommending Tibella as either a first-line or a second-line therapy have had strong results. We're getting good feedback from those doctors, and we're pleased with the response that we're getting from the market, and we look forward to getting that -- the word on that product out to more doctors and getting more women initiated on that therapy. Combogesic, though, we started shipping at the end of last year really has been in a process of building distribution across Canada and building awareness, and our trial generation has commenced now. So it's a very modest contribution to the business till now. The feedback that we're getting is good. They're not surprising. We know that it's an excellent product and that it has performed well in international markets where it has been launched. So I wanted to spend a few moments just talking about promotional investing in these new products. So we've got several launch initiatives underway, which we see as a strong diversification and expansion of the Canadian pharmaceutical business for us. We see launching products takes capital, and we're making investments in marketing and selling and promotion, the proportionate to our revenue are greater than you would have seen in the past. That first showed up in Q4 of last year. Big chunks of last year we were preparing as well to get FeraMAX Pd ready for market. Those investments in promotion and selling will continue through 2021 and 2022. So the ratio of marketing and selling expense to revenue will be greater than it has been historically at BioSyent. Over time, we expect that to normalize as revenue kind of comes in line with expectation and adopted by either health care professionals or core consumers. Let's speak a moment about our cash position and return on equity. You can see here on the 12 months ending March 31 or as at March 31, our cash position was $24 million, just above it. So that's up from a year ago, '21 and 2 years ago, $22.5 million. We've also invested in buying back shares over that period of time. In total, over $10 million has been spent buying back shares. So we've got a strong cash position. Obviously, our cash and short-term investments greater than our entire revenue for 2020 and begs the obvious question, what is your plan for that capital? At this stage, we continue to assess in-licensing opportunities. But with a fairly capital-light model, it's unlikely that -- our cash position is unlikely to be consumed by in-licensing and launch activity as we're -- even with the investments that we've been making, we are generating cash. We're looking at acquisition opportunities. These would be products that are in market and generating revenue. We continue to look at opportunities and to assess them. We've seen nothing it kind of fits our criteria as a good fit. But I'd like to say that $24 million in cash is a good, strong position. It allows the CEO to sleep at night, but our big challenge will be to deploy that capital to continue to grow our business and to diversify our revenue stream. So that's job 1 of our leadership team and all the people like BioSyent, always to do those things, and that's our first and best use of capital at this stage is to continue to grow the business and to grow profitability over the long term. We are being patient. There are some things that happened through COVID that we expect it to go somewhat differently from kind of our assessment early stage. We continue to look at the situation and to assess the levels of capital that we need to operate business and to take advantage of in long-term investing. I want to touch on an update of our NCIB. So we are now about 2.5 years into buying back shares. We got it in essentially 3 waves approvals to do so. In each of those 3 programs, we have bought back shares under the announced NCIB. In total, just about 1.67 million shares. And we've reduced our outstanding. You can see here from just under 14.7 million to just under 13.1 million shares. This represented an 11% reduction in fully diluted. And we invested, on average, $6.06 a share in this program. So kind of building off of my comments on the last slide, one of the obvious uses of capital is to buyback shares. But we won't do that unless we see good value, and we'll be measured in that. So I think the opportunities that presented them themselves certainly over the last 14 months are different now that the equity markets have somewhat righted themselves. Doesn't mean there won't be opportunities in the future, but we don't expect that in the short term to be quite as good as a value proposition as we were able to engage in over the last 14 months. I want to look quickly here at our fully diluted earnings per share. So in that quarter, Q1 2021, we delivered $0.13. Obviously, was up from the $0.11 of the year ago. But the thing to keep in mind here is that our promotional investing in Tibella and Combogesic, which was absent in the year ago period, equated to about $0.04 a share fully diluted in the first quarter. So I'll leave the math to you as to the impact that our quarter would have had without that investing that we're doing for the long term. Just a quick look here at our stock information. And I'm landing on this one just so that you can kind of stay with the bouncing ball in terms of share options and RSUs outstanding. So you'll be aware that we have introduced the use of RSUs as an element of our compensation for managers in our business. And we have not issued any share options now for -- goes back a couple of years. So we continue to keep the option plan open and operating. And we need to do that so that we can go into the open market and buy shares and hold them in treasury in trust for our RSU obligation. So that gives you a little bit of an explanation as to why do we continue with an option plan. For those of you that would have seen our recent information circular and kind of wondering why do we continue with an option plan, it helps us kind of go out and proactively acquire shares to back up the RSUs that are outstanding and to minimize dilution as we go forward. It does also give us some flexibility in our long-term compensation planning. I wanted to thank you for your continued interest in BioSyent. And we look forward to sharing with you how we're doing with our business and our launch initiatives as we move forward. Thank you.