Biosyent Inc

XTSX:RX

Earnings Call Transcript 2018-Q2

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

Hello, and welcome to the BioSyent Q2 and First Half Results Presentation. My name is René Goehrum, and I'm the President and CEO of BioSyent.I'm going to start today's presentation with a look at our sales for the quarter. Our revenue reached just over $5.9 million. That was a 5% increase versus year ago. Of note, on the revenue side, this represents a new record for the company, and in fact, 2 of the last 3 quarters have been record quarterly sales levels. Our EBITDA was 3% ahead of year ago with just under $2.1 million, and our net income after tax was just over $1.6 million plus 4% versus year ago. This now represents 32 consecutive profitable quarters for BioSyent.Looking at the 6-month ending June 30, our sales were 10% ahead of year ago at $10.4 million; our EBITDA, 11% ahead of year ago at $3.56 million; and our net income after tax, plus 13% versus a year ago at $2.76 million.Zooming down a little further into the pharmaceutical sales only, this chart represents the last 5 years of pharma sales progression. And if this is your first time to this presentation, the blue tips on each of the quarters represent sales to international customers. So for our pharma products, this is all made up of FeraMAX and FeraMAX Powder. Over time now, that business, which started out a little bit spotty from quarter-to-quarter, has now delivered sales in 14 consecutive quarters to international customers.Our Q2 '18 versus Q2 '17 in Canada, we were up 16% measured in dollars, and international sales were down 31% versus the year-ago period. So a couple of things of note there. One is that we had a strong Q1. We've talked in the past in our presentation about some lumpiness in our sales progression in this business. It wasn't a big surprise. However, we did hit some headwinds -- our business for FeraMAX international is focused in the Middle East. There have been some geopolitical issues. We had some orders in hand that were affected by import permit restrictions. And overall, our sales were down 31% versus year ago. So despite this, because of the strong first quarter, we had -- our sales through 6 months are up 4% versus the year ago period.So drilling down a little further into what contributed to the strong quarter in the Canadian Pharma business. Canadian Pharmaceutical sales contributed $5 million of a $5.5 million quarter. Overall, the $5.5 million represented increase of 9% versus last year. The Canadian business was up 16% versus the prior year, and that's measured in dollars. Measured in units, our FeraMAX 150 business was up double digit at 10%, FeraMAX Powder at 14%, RepaGyn at 23%, all of those in our community business unit.The Hospital Business unit saw sales increases in Cathejell of 20% and the Aguettant System of 184%. Part of the driver of the Aguettant System was a stockout by a key competitor, but we've managed to maintain some momentum with that product. And I'll show you in a moment what the 6-month business looked like.So internationally, FeraMAX was just over 500,000 for the quarter. As I mentioned before, that was a 31% decrease versus Q2 of '17. And we've talked about variability in sales and distribution complexities and some issues around import permits for that business line. In this particular situation, our customer actually had a partial import permit for a June shipment, which was held back for shipment in Q3 so that it could be combined with another permit request.Subsequent to the quarter end, the same customer received yet another permit to import another of our products, and we expect that to ship in the current quarter. So as you can see, there continue to be risks in this business, I guess, in alignment with doing business outside of the Canadian market. But it appears that commerce is normalizing for this particular customer.So for the first half, Pharma sales reached just under $10 million, $9.9 million, 13% up versus the first half of '17. And really, the driver of that growth was the Canadian Pharmaceutical business at $8.8 million, up 14%. On a brand basis, very similar to the percentages that you saw in the quarter: so FeraMAX and FeraMAX Powder up 10%; RepaGyn up 22% Cathejell continuing to show strong growth, up 21%; and the Aguettant System smoothed out now over a 6-month period, up 93% versus a year ago. So that's measured on a unit basis. FeraMAX international sales were just under $1.1 million, an increase of 4% versus year ago. So for quite some time, I've been giving updates on how we're progressing with CYSVIEW. We've been talking considerably about how it's been a very challenging situation to build that business and align all of the decision-making within hospitals and treatment sites to interests by health care professionals in that product. Nothing's changed about the long selling cycle. But what we can say is that now for 2 consecutive quarters, we can report really positive activity and progress on the business. That's now converting to further sites adopting. So we now have 7 hospital sites that are currently operational with CYSVIEW. The study is that they're using CYSVIEW in the treatment and management of patients with nonmuscle-invasive bladder cancer. This compares to 2 sites operational at the end of the first quarter of this year. We added 4 new sites in the second quarter and 1 new site in July. 5 of those sites, so all of those 4 and 1 placed first orders for CYSVIEW this year, and in fact, they have been placing repeat orders even though it's the summer months. We're very pleased to see that the product is being consumed in patient care at the various sites that are up and operating.So in addition to the 7 hospital sites that are now working with CYSVIEW and are live, we have 7 additional sites that have completed successful evaluations and a further 2 sites that have decided to implement CYSVIEW without evaluation. And the challenge here now will be converting these additional 9 sites to actually live sites. Our experience tells us that we have to be diligent in working with the health care professionals in the decision-making process within the hospital, even going from a yes to an implemented -- and everybody trying to take some time. So we're going to continue to work with our customers there, and of course, we're working on putting additional sites into the funnel. Overall, we went probably 1.5 years since we started with live site and CYSVIEW from having no consecutive months where we had sales of CYSVIEW. Now we have 5 consecutive months, so ending -- or including the month of August. So we're very encouraged by the fact that we're now -- more sites operational, they're consuming the product, and there's growing interest. So it's a little bit of a positive snowball effect through the interest in CYSVIEW now that we have more sites that are up and operating. On a volume basis, units were up 80% versus the first half of last year. All of that business done in the second quarter of this year, but just want to caution you that we're coming off an extremely low base. So I'm just going to say positive signs in this business. It's moving in the right direction, and we expect to be able to report more progress as we go forward for the balance of the year and into next. A couple of other things to talk about in terms of 2018 activity. You'll recall, we've already disclosed that Mr. Larry Andrews and Ms. Sara Elford have joined our Board of Directors that occurred in January. This was to replace 2 retirements of long-serving directors. In May of 2018, at our Annual General Meeting, Mr. Joseph Arcuri joined the board and he is also chair of our Audit Committee, and that was to replace a long-serving board member as well that retired.In May 2018, FeraMAX was named the #1 recommended iron supplement brand in Canada for the third consecutive year. This has showed continuous growth in the number of doctors recommending. Now we've got 43% of physicians and 35% of pharmacists surveyed by an independent third party. This is the EnsembleIQ, the Rogers Media brands reporting physicians and pharmacists, picking FeraMAX as their #1 recommended oral iron supplement.And then finally, I made note of the fact that our Hospital Business has been delivering solid growth in Q2. Measured in dollars, our Hospital Business delivered 71% revenue growth versus Q2 of last year, and that's all brands contributing to that growth. And so we see this as an important part of our diversification strategy plan to our business.As we look forward for the balance of the year and into the future, what's going to drive our growth? So this slide has not changed a lot over the last several quarters. We see continued growth coming from our existing portfolio and existing FeraMAX international markets, albeit with some headwinds that I've touched on. We have new products and new markets. So we have got 3 products going through a regulatory process at Health Canada. They are working on new FeraMAX international markets, though I would have no expectation that over the next, say, 18 months that we would see anything that would be incremental to existing revenue. We have to go through not only the partner selection and a regulatory process, then we've got to start shipping. So at least 18 months until we see some fruit from that process. But nevertheless, we see continued growth coming from our existing business. We've been talking for some period of time about work we're doing to continue to expand our portfolio. It's core to our strategy. We are also looking at acquisition of products. I've got a couple of comments on that on a subsequent slide. So that's an ongoing process. There's more activity today than we've had yet, but nothing yet to announce. And when we do have something, you will be the first to know. So a quick look at the balance sheet. Our working capital and our cash position has continued to grow. Working capital reached $22.9 million, up 14% from year-end last year. Cash and short-term investments now at $21 million, up 9% to December 31 of '17. So we continue to build our balance sheet for deployment opportunities. We've looked at -- 15 products we've evaluated, 15 products for acquisitions. These would be products that are in the market and generating revenue. Nothing has really progressed in that, but we're looking -- we're beating the bushes, and we're not seeing anything that meets our criteria both strategically and financially. We'll just continue to wait for the right situation at the right time. So as mentioned, our cash position reached $21 million, that's up 43% from 12 months ago, June 30. We generated $1.675 million in cash in the first 6 months of this year. You can see on this chart the progression of our cash position from '16, '17 and '18. Obviously, our return on equity is affected by our cash position. So you see, over the last couple of years, '16, '17, it's been moving, still to a good return, at 25% TTM, June 30, 2018, but nevertheless, down over the last couple of years. If you strip out the cash that we don't need to operate our business, which is most of the cash that we have, conservatively, we can operate our business on about $3 million. That would change our ROE calculation. We continue to report a textbook way to calculate return on equity. So looking at our earnings per share so that -- on the right-hand side of this slide, you can see the last full fiscal years, the last 5 years. So ending in 2017 at $0.36. On the left-hand side of the slide are the last 8 quarters. So Q2 2018, our diluted EPS was $0.11. This is up from $0.08 in Q1 but flat with a year ago. I think you'll recall early in this presentation, we talked about our net income after tax being up modestly, I believe, at 3% for the quarter. Based on rounding, I would expect to see it flat on a diluted EPS. Nevertheless, over the last 4 quarters, that's $0.38. If you compare that to the previous 4 quarters, ending at Q2 2017, at $0.33, that's up 15% over that period of time. A quick look at our stock information. Of note there is our fully diluted shares at 14,672,000 and change. Of that, we have 153,000 share options outstanding. And as always, I wanted to thank you for your interest in BioSyent, and we look forward to continuing to report on our progress. I think we'll have plenty to talk about over the next several quarters. Thank you.