BioSyent Inc.

Hello and welcome to the BioSyent Inc. Q1 2021 Results Presentation.

My name is René Goehrum, and I am 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 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 will 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 one 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 mid-January this year. So through all of this, we continue to invest in launch products, Tibella and Combogesic, I have got a little bit more to say about those two products in a few slides.

When 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 have 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 to year ago. So what’s significant here is in that year ago period of wave one COVID, our FeraMAX business was up 44%.

So to essentially be flat with that means that we held that, that growth and that gives a brand some excellent momentum moving forward. You can see here that RepaGyn and Cathejell essentially flat.

And Cathejell was somewhat less impacted by COVID-19 stockpiling, although somewhat RepaGyn was up in the first quarter of 2021 versus 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 of products they used in their operations.

And so you see for this year, our business down 31%, but that 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 have already touched on the international and legacy, it represented small dollar amounts as a 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’s certainly is profitable.

So I have 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 crusted.

And a lot of this is being driven by fairly high uptake of vaccination amongst the Canadian population, as I record this presentation, where we are 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 have 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 have 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 are 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 are 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 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 will 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 number one recommended oral iron supplement by both pharmacists and doctors across all of Canada.

This, of course, is impressive performance. We have been top of that perch for a while.

Others have tried to knock us down off it. We have built off of that momentum.

You will know that last year we announced a new formulation platform we launched FeraMAX 150 Therapeutic in November, or late October, beginning of November, that is now pretty well completed in terms of positioned 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 have got an internally derived lifecycle strategy. So, these are products that are ours, of course on the FeraMAX mark.

We will 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 on the FeraMAX brand as we move forward with new product introductions. In addition to FeraMAX, we have got Tibella and Combogesic that are driving future growth for the company both diversification of our portfolio and top line growth.

I have 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 are really early days on that. With the feedback that we are getting is quite positive.

As I say we are 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 healthcare 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 are getting good feedback from those doctors and we are pleased with the response that we are 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 that we started shipping at the end of last year really has been in the process of building distribution across Canada and building awareness and our trial generation has commenced now.

So, it’s very modest contribution to the business till now. The feedback that we are getting is good, though 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 have got several launch initiatives underway, which we see as a strong diversification and expansion of the Canadian pharmaceutical business for us, obviously, launching products takes capital and we are making investments in marketing and selling and promotion, that 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 was 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 is adopted by either healthcare 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.

See, that’s up from year ago, $21 million and 2 years ago, $22.5 million. We have also invested in buying back shares over that period of time in total over $10 million has been spent buying back shares.

So, we have got a strong cash position. Obviously, our cash and short-term investments greater than our entire revenue for 2020 and bags 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 where even with the investments that we have been making, we are generating cash. We are 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 have seen nothing kind of fits our criteria and as a good fit. But I would 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 streams.

So, that’s job one of our leadership team and all the people at BioSyent, so as 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 expected 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 the business and to take advantage of long-term investing. When I touch on an update of our NCIB, so we are now about 2.5 years into buying back shares.

We have got it in essentially three waves approvals to do so. In each of those three programs, we have bought back shares under the announced NCIB, in total just about 1.67 million shares.

And we have reduced our outstanding, you can see here from just under 14.7 million shares to just under 13.1 million shares. It’s 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 buy-back shares, but we won’t do that unless we see good value.

And we will be measured in that. So, I think the opportunities that presented themselves as certainly over the last 14 months are different now that the equity markets kind of have somewhat righted themselves, doesn’t mean that 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 wanted to look quickly here at our fully diluted earnings per share.

So, in the quarter Q1 2021, we delivered $0.13, obviously, was up from $0.11 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 will leave the math to you as to the impact that our quarter would have had without that investing that we are doing for the long-term. Just a quick look here at our stock information and I am 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 will 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 it 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 obligations.

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 backup 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 thank you for your continued interest in BioSyent. And we look forward to sharing with you how we are doing with our business and our launch initiatives as we move forward.

Thank you.