Biosyent Inc

XTSX:RX

Earnings Call Transcript 2018-Q4

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

Hello, and welcome to the BioSyent Q4 and Full Year Fiscal '18 Results Presentation. My name is René Goehrum, and I'm the President and CEO of BioSyent. I want to start today's presentation with a look at our sales EBITDA and net income after tax for the quarter ended December 31. As you can see on the right side of your screen, our sales reached just above $5.9 million. That was essentially flat with year ago but enough to present a new record in quarter of sales. The breakdown for sales for the quarter was a growth of our Canadian pharmaceutical business of 2%, measured in dollars; our International pharmaceutical business was down 2% in dollars; and our legacy business was down 73% for the quarter. The legacy business represents traditionally a small portion of Q4 and certainly, in 2018, it represents an even smaller portion of the year. Our EBITDA for the quarter was just above $2.1 million. That was up 8% versus year ago. And our net income after tax was $1.67 million, up 15% versus year ago. So this quarter ended December 31 of '18 represented our 34th consecutive profitable quarter. So looking at the same metrics on a full year basis. You can see that our sales reached $21.52 million, up 4% versus 2017. Our Canadian pharma business was up 10%, measured in dollars; international was down 11%; and our legacy business was down 46%. So a couple of comments on the latter two. So we've been talking the last couple of quarters about some issues that we've had with our partner in getting import quota and import permits. And this caused a backlog in orders. I'll be going into a little bit more detail on subsequent slides. And that certainly caused some challenges during the course of the year. The legacy business has been representing a smaller and smaller portion of our overall business for quite some period of time. And we have seen variability year to year in sales over time, and not so much -- it wasn't as pronounced over the last couple of years. But -- although we did get surprised somewhat by the results for the legacy business, we were anticipating a down year. It just ended up being more of a down year than we had anticipated. My last comment on this slide is that 2018 represented our ninth consecutive year of growing the top line and the bottom line. So looking back over the last 5 years, using 2013 as a base year, a number metrics on the left-hand side of your screen. So we grew revenue over the period of time '14 through '18 by 2 net -- 2.8x. And we are now up to 8 marketed products. Our net income before tax at $7.5 million was 3x what it was in 2013. We generated 2.4x more cash than we did 5 years ago, and our cash position has grown by 5.5x to $24.5 million on December 31 of '18. If you've been following us for a while, you'll know that we've grown the business and managed the business over time without any debt on the balance sheet. Now we do have debt facilities in place, but we have not used those facilities through this entire growth period. A number that folks will be a little bit more interested in now that we've announced Normal Course Issuer Bid is what our fully diluted share count is. And you can see here over that 5-year period of time, our shares fully diluted only grew by slightly more than 0.5%. So looking at our net income on an EPS basis, fully diluted, we grew 3x, from $0.13 to $0.39, over that period of time. And of note, the last time we did an equity financing was in 2002. So this is a slide that you're familiar with. It looks back over the last 20 quarters and at the evolution of our pharmaceutical business. And it just shows you the representation of international and our Canadian business. So in Q4, Canadian pharma sales were up 2%; international, down 2%, as I've indicated in a prior slide. So for the international business, you can see quite a substantial quarter versus the prior quarter, represented by the blue tips on these bars. And we've now had sales in 16 consecutive quarters, but we do have significant variability quarter-over-quarter. We've been talking about the fact that this business is lumpy. We've been seeing it now to an extreme. And we expect this to persist for some period of time. So I suppose, we always live the risk of having streaks broken. So looking at a breakdown of our pharmaceutical sales and then our legacy business. So in Q4, pharma sales reached $5.89 million. That was up 1%, measured in dollars. So the Canadian business was up 2% at $5.04 million. On a brand basis, in the quarter, FeraMAX 150 was down 5% in units; FeraMAX Powder, up 1%; RepaGyn, up 16%; Cathejell, down 6%; and Aguettant System, up 208%. We generally look at our business over a longer period of time than a quarter, and you'll see in a moment that on a full year basis, those negatives were actually positives and we do see ordering pattern from our wholesale customers that may vary from month to month and throw an individual quarter out. Internationally, FeraMAX had sales of $850,000. This, as I said, was a decrease by 2% versus 2017. We've been having issues, or, our partner's been having issues with getting import permits and quotas. And this created a backlog of orders coming out of Q3 and into Q4. We managed to ship those orders before year-end, and that's reflected in the sales data that you see here. But as I mentioned before, this variability will continue quarter-to-quarter for some period of time as we go through this year and we build our order book and get those orders out the door. So the legacy business had sales of only $25,000 in the fourth quarter, a significant decrease versus year ago at 73%. And I'll show you here in a moment what that looked like on a full year basis. So looking at the business on a full year basis. Our pharmaceutical business in total reached $20.75 million. That was up 7% over 2017. The Canadian business was just above $18.5 million, up 10% versus year ago. On a unit basis, FeraMAX 150 was up by 4%; FeraMAX Powder, 6%; RepaGyn, 22%; Cathejell, 10%; and Aguettant System, 133%. Internationally, as mentioned before, the business contracted by 11%, measured in dollars. That is $2.21 million. I've already mentioned the issues that we've been having about the trade issues, permit issues, quota issues. And these restrictions have resulted in additional risk for us in that business. We think that this is going to continue for some time. Over a longer period of time, we think our partner's in the process of resolving these issues, and we're looking at ways that we can assist and accommodate our partner to do so. For the full year our legacy business delivered $776,000 in sales. This was a decrease of 46% versus the prior year. So we had been expecting this business to deliver less in sales for the year, but there were some adverse weather conditions during the harvest that impacted the business more than we expected. We do know that this business does have variability and in this case, this was a little bit more than we had reckoned with. So we've been talking a little bit about our Cysview business in prior quarters. We've certainly identified that there's a long implementation cycle -- a long sales cycle, then a long implementation cycle. This extended cycle of adoption has impacted sales, but we are now picking up some momentum. There are now 9 Canadian hospital sites that are using Cysview on a regular basis. So that's 7 new sites added in 2018. And all of those operational sites are now consistently using product and reordering. We have an additional 12 sites that are either in implementation phase or evaluating at this point in time. So on a unit basis, Cysview was up significantly, 333%. But that is certainly in comparison to a very low base in the year prior. We had a couple of highlights for the year that we've talked about a little bit in the past. Worth mentioning, in May 2018, FeraMAX was named the #1 recommended iron supplement brand in Canada. That was for the third consecutive year. We've had a preview of the data that will go into determining the 2019 winners, and let's just say it's put a smile on our face. FeraMAX is recommended #1 by 43% physicians that are surveyed and they're -- over 1/3 of pharmacists that are surveyed. And of note, this is a third-party survey done by media organizations that target these health care professionals. And the size of the sample is quite large, in excess of 1,000 of each of the health care professionals. In September of '18, BioSyent was named to the Growth 500 ranking of Canada's fastest-growing companies. This was our sixth year on that list, and our sales growth rate over the 5 years ending 2017, which was their measurement period, was 313%. The other highlight for the year was an announcement that we made in December that we had gotten TSX Venture approval for a Normal Course Issuer Bid to repurchase for cancellation up to 950,000 shares. That's done over a 12-month period of time. Certainly, the approval is for a 12-month period of time. We started in December repurchasing, purchased over 92,000 shares in December. You'll see that reflected in our financial statements and the MD&A for share counts. Subsequent to the year-end, January, February, we also purchased 55,700 shares. And in total, that's just under 148,000 shares that we've repurchased, and that's to March 18. And I imagine our share count is something you'll want to keep a close eye on as we go forward. This slide outlining our product portfolio on our product life cycle was featured before. We've got a number of products that are in the growth phase that we talked about, those brands that were contributing to our growth in the Canadian market and to our business outside of Canada. We've only got one product now that we consider in the launch stage. And we do have 3 assets in the regulatory process. They're all in with Health Canada, and we wait with bated breath. Quick look at our balance sheet. Our cash and short-term investments grew by 26% for the full year. And this, of course, is net of our investment, which was initiated in December for the NCIB. We continue to build our balance sheet for deployment opportunities. We're -- we've looked at a number of assets, some of them which would be immediately accretive, and that process continues. I've already talked about the fact that we had no debt at year-end, and that didn't change over the course of the year. Our equity, of course, through the NCIB would have reduced, in this case, just under by -- under $746,000. And one can anticipate that line changing somewhat as well. So that leads us into a look at our cash position and our cash generation. So this slide shows you over the last 3 years, our cash position growing from $13.7 million to $24.4 million and our cash generation on an annual basis. So you can see last year's cash generation of $5.09 million is somewhat below a year ago on cash generation, even though net income after tax was greater. But you see there, they -- the deployment -- the effect of the deployment of cash into our NCIB. So obviously, our profitability and our cash position affect our ROE calculation. Now you can see here the change in our cash position over the last 5 years, this growing from 2014 of just under $8 million to the $24.4 million that I've already mentioned. And our average return on equity coming in at 23% for the year. I've spoken about this before. We certainly don't need all of the cash on our balance sheet to run our business. In fact, we estimate that we need about 10% of it. So another way to look at our ROE is net of the cash position that we have. A quick look at our EPS. On the left-hand side of your screen, you see the last 8 quarters of net income after tax and diluted EPS. So in the fourth quarter, that was $0.11 per share of net income on a fully diluted basis. And on the right-hand side of your screen, you can see how that sums up to $0.39 and how that compared to year ago at $0.36 and how that's evolved over the last several years. So a snapshot of our shares outstanding options and fully diluted. So that's a number that you'll likely be wanting to keep an eye on, in light of the Normal Course Issuer Bid. So our common share count as of March 18 was 14,382,815, reading the screen here for you, highlighted in the red circle; and on a fully diluted basis, 14,527,000-and change. So those are 2 figures that, over time, had not been changing much, and they may change a little bit more here as we go forward into the balance of the year. Wanted to close the presentation by thanking you for your continued interest in the company. We may not look like there's much going on, but it's like the proverbial iceberg: There's many things happening below the surface, and we look forward to reporting on those activities and accomplishments as the year progresses. Thank you very much.