Biosyent Inc

XTSX:RX

Earnings Call Transcript 2020-Q4

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

Hello. Welcome to the BioSyent Inc. Q4 and Fiscal Year 2020 Results Presentation. My name is René Goehrum, and I'm the President and CEO of the company. I'm going to start the presentation with a look at our sales, EBITDA and net income after tax for the quarter ended December 31, 2020. So this quarter represented our 42nd consecutive profitable quarter. Our sales were up 3% in the quarter to the year ago, reaching $5.72 million, and that was made up with a few puts and takes. On the put side, the Canadian pharmaceutical business was up 7% in dollars versus the year ago, and the legacy business was up 180% versus the year ago. But remarkably as well, our international pharmaceutical business was down 87% in the quarter. The net-net of all those puts and takes was growth of 3% corporately. On the income side, we had impacts of significant investment in growth assets. So we've been launching 3 products, namely Tibella, Combogesic and FeraMAX Pd. And as a group, we've invested just under $700,000 in those 3 assets in the fourth quarter.So let's look now at sales, EBITDA and net income after tax for the full year. So our sales were up 4% to $22.3 million, and this was driven by the Canadian pharmaceutical business. Our international business and our legacy business were most impacted by COVID last year: international pharma, down 84%; and our legacy business, down 16%. I've got some comments on the international pharmaceutical business in a couple of slides. So I'll reserve comments for that.So I spoke on the last slide about the investments in our launched products. So those products are all in launch mode, will be for some period of time. And obviously, they were before the fourth quarter as well. So in aggregate, we invested in development and launch expenses, marketing and sales for those 3 assets of $1.7 million. So that would have obviously had quite a significant impact on our EBITDA and net income after tax. But we -- as a continuing theme in this presentation is our commitment to revenue growth and making the investments that are required to drive that growth.So let's drill down a little bit into the quarter and full year on a business unit and brand basis for the Canadian pharmaceutical business. The Canadian pharma business in the quarter was just under $5.4 million, as I mentioned before, up 7%. For the year, it was $21.2 million, up by double digit at 12% growth. A thing to note here is Tibella was launched in late July of 2020, Combogesic in late December. And so Combogesic's contribution to revenue in the quarter was notional. It was some early wholesaler stocking orders but modest. Tibella contributed more relative to Combogesic, but nevertheless, it's still really in the early phase of introduction. So those 2 brands are how I would coin modestly revenue-generating, significant investment consumers as we get them up and on plane.Our FeraMAX business was up double-digit for the full year. RepaGyn business was up for the full year, 6%, although flat in the quarter; the Cathejell business, up double digit, both in the quarter and for the full year. And the Aguettant business was relatively flat in the quarter and up significant double digits for the full year 2020. The brand in Canada that has been the most impacted by COVID-19 was Cysview. It's a product used in the OR for management of nonmuscle-invasive bladder cancer. We saw with the onset of wave 1 of COVID that many of the ORs were shutting down, and certainly, when they reopened, the time allotted to ORs for uro-oncology seemed to be reduced. And so we saw a reduction in the Cysview business, both in the quarter and for the full year. And we don't imagine that's going to change much until operations in hospitals normalize, and we can't really make a call on to when we would expect that to happen. We're as hopeful as everyone else that vaccinations move at pace and that those times come sooner than later. You can see here that our international pharma contributed $57,000 for the quarter, reached $225,000 for the year, a marked drop from the year prior. Thing to note here is that we had a large order for FeraMAX that went out in the first quarter. You'll see reflected in financial statements and some comments in our MD&A that a large customer deposit -- the shipment went out in January. Balance of the shipment has been already been paid and will be credited, obviously, to the first quarter. So that business has a history of being lumpy. This would be the ultimate definition of that, where we have a year of such a low revenue. And then starting the year with a very large order will have a significant impact for the first quarter.Our legacy business had a large shipment go out towards the end of the year, so on a comp basis, up significantly. Don't read anything into a trend there. I would say that we expect that business to bounce back to what it would more typically have contributed in the past. For the full year, it was down 16%. So you can't really talk about 2020 without touching on COVID-19, as I've already done. We are through waves 1 and 2, arguably in wave 3. Vaccinations have started in the Canadian market and many other markets internationally. And so it's had an impact, a significant impact on our business, on our operations. We've been reporting on how we've been managing it. One impact it's had, I'd say kind of now looking back over the last 12 months, we've managed to continue to grow the Canadian pharmaceutical business in a COVID-19 environment. We launched 3 products. We made a strategic decision in early May last year that we weren't going to hold back, that we were going to push forward. We had to do some things differently in terms of reaching out and communicating with customers. You see at the bottom of the slide that it continues to be an issue for us and for industry in Canada to have access to the health care professional and even a dialogue with the pharmacist. And so launching 3 key products that are going to be growth drivers for us for the next several years in this environment certainly isn't ideal, but we've pushed forward and believe it's the right thing to do to set the stage for the, what I'll call, post-COVID-19 period. We've managed our supply chain. We've had minimal supply interruptions. We've had some. We had some out of stocks in the first half of last year. But since then, things have been under control and managed and expect that to continue going forward. We did have some delays that impacted the timing of our Tibella launch. That came certainly months later than we expected to be able to launch that product. But nevertheless, it's now in the market, and we are able to supply the demand that's being generated. Our experience was that our export markets, particularly for FeraMAX, were clearly the most effective -- affected and that we've managed to now secure that significant order that I spoke of. And we expect this year to be significantly better than it was last year for our international sales of FeraMAX. So on the FeraMAX brand, we announced in October last year a new -- a delivery system, FeraMAX Pd, as a platform for the brand and that it would give us a platform for product innovation into the future. So Pd is essentially a patented Polydextrose Iron Complex, and we intend to drive innovation off of this platform going forward. So it will be the foundation for future product developments. We've got a couple of things in process now and expect -- you should expect to be hearing news on FeraMAX now on an annual basis going forward. We expect there to be some technology news that's not necessarily related to the PDIC. That would be this year. And then you'll be hearing about products, '22, '23, likely '24 going forward. And these are product ideas, essentially, internally generated as part of a life cycle strategy to address some market segments that are not being well served by existing products and that we can better access to drive and address the needs of consumers and health care professionals and thereby gaining more market share for the FeraMAX brand.So far, I can report that what we've done on the FeraMAX 150 Therapeutic product has been successful. We essentially replaced the existing product with the new FeraMAX Therapeutic 150 starting in November. We're now 4.5 months into that process. And if you are wandering into a Canadian pharmacy and taking a look at what's on the shelf behind the pharmacist counter, it's highly likely that in most pharmacies in Canada that stock that product, that they switched over to the new FeraMAX Pd. So I've mentioned also driving our growth, not just for last year modestly, but for this year and next year, is Tibella, our hormone replacement therapy we launched in July of 2020. And in December, we launched Combogesic, which is a new combination of acetaminophen/ibuprofen product for pain relief, mild to moderate pain relief. And that's really just early days for us for that product. If you're listening to me from Canada, you'll start seeing that product show up in your local pharmacy, and you'll be seeing more promotional activity for that product as well. In October as well, we announced the in-licensing of a new women's health product, and we are preparing that product for launch. There are a number of steps that we're following. Got quite enough for our commercial folks to focus on Tibella, FeraMAX and Combogesic at this point in terms of commercial activities, customer-facing. So behind the scenes, we're doing some work on the new women's health product and expect to have that in the market at the very end of this year. It might spill over into the beginning of next just based on some delays and things we've experienced related to COVID. So I've already talked about our investment in these new products and, essentially, our commitment to investing in future growth. So these launch initiatives are underway. They are, in the short term, capital consumers. The benefit for us, obviously, is growth of our Canadian pharmaceutical business and the diversification of the revenue streams into new products. But this growth requires investments, so you'll see it reflected in our financials for the quarter and for the year that we're putting money into product development, marketing and selling and other promotional expenses. We've done that in 2020, and we'll continue to be doing that in 2021. And I expect, to a lesser degree, let's say, it would be less conspicuous in 2022, but we expect that to be a period of time of, call it, 24 months. While those products gain traction in the market, we're building a brand awareness, driving trial and adoption in some cases with health care professional, in some cases with the consumer. So these investments take time. And we've got experience doing it, and we're committed to driving growth. But if you're kind of looking at our P&L, you would expect to see different ratios of what you normally would have seen in the past in terms of profitability in our business. But we are, as we have been all along, very committed to operating a profitable business. So this is really just how it impacts ratios as opposed to outright profitability.Speaking of cash generation that we would derive from our business, in 2020, we generated just under $7 million of cash from operations that drove our cash and short-term investments balance to $25.5 million. As we have been for a long time, we do not have any long-term debt, don't have any short-term debt. Our working capital position is strong. If you're looking at the balance sheet, you'll see that our equity was reduced last year by just over $2.5 million when we repurchased 594,000 shares under our NCIB. So that was during fiscal 2020. Since we commenced operations under NCIB in December of '18, we've deployed over $10 million of capital in buying back our shares. So the one message I'd like to leave you with on this is that we are investing in growth, and our top priority is to grow the business, and we're in the process of doing that and we're committed to that. We're deploying capital against growth, and we'll continue to do that. But if the market wants to make shares available at prices that we deem attractive, we're still participants in our NCIB.So a quick update, a snapshot on the NCIB itself. We've coined the 3 approvals that we've received from the TSX Venture as NCIB 1, 2 and 3. And you can see on this chart a recap of the number of shares that we've repurchased under these programs. Take note, NCIB 3 was approved in December. And subsequent to period end, we've purchased 65,000 shares under that program as of March 15. So I'm recording this presentation on March 15. Overall, that represents an 11% reduction in fully diluted shares since we started our first NCIB in December of 2018. So I want to take a quick look at our fully diluted earnings per share. And other than noting our $0.05 per share performance in the fourth quarter, I wanted to point out a couple of things here. We've already spoken of our commitment to investing in growth and told you about the absolute dollars that we've invested in that growth. I thought it would be useful for you if we express that to you in fully diluted earnings per share. So the investments that we made in the fourth quarter represented $0.04 per share fully diluted EPS for the quarter; and for the full year, represented $0.10 per share. I'll leave it to you to do the math there. So snapshot kind of keeping score of our shares outstanding. You can see there, a little over 13 million shares now with the most recent purchase in March under our NCIB. And we are holding some shares in trust for RSUs that we have outstanding. So I wanted to thank you again for your interest and continued support of the company. It's been an interesting a year since kind of COVID arrived in Canada and wasn't just a story from kind of somewhere away, and it's been an interesting time to operate a business. But I'm really excited about what we've got in front of us as growth assets, the response that we're getting to those growth assets and the durability of our business and our people to operate in a difficult environment and continue to grow our business. So I look forward to sharing with you how we're progressing on that. The next time, I'll have a chance to do so is towards the end of May when we report our first quarter to you. Thank you.