BioSyent Inc.

Hello, and welcome to the BioSyent Inc. Q3 and YTD 2021 results presentation for the nine months ended September 30.

My name is René Goehrum, and I'm the President and CEO of the company. I'm going to start today's presentation with a look at our sales EBITDA and net income after tax for the three months ended September 30, of '21.

As you can see, our sales are just below $6.7 million in the quarter that was an increase of 16% versus the year ago, driven by our Canadian pharmaceutical business up 17% measured in dollars, and we did not ship to any international pharmaceutical customers in the quarter. I've got some more comments on that in subsequent slides.

And our legacy business was down 5% in the quarter. Our EBITDA was just under $2.3 million, representing a 64% increase to the year ago.

And our net profit of $1.72 million was up 80% to the year ago, it represented our 45th consecutive profitable quarter. And our net margin after tax of 26% represented a high watermark in quite some period of time.

For the nine months, our sales are up 29% versus the year ago to $21.4 million driven by all three sectors, 22% growth in the Canadian pharmaceutical business, very large growth in the international pharma and 31% growth in legacy for the later two international and the legacy business, we had significant down years in 2020 and we've seen a bounce back in those businesses, you've heard me speak for quite some years about how our international pharma business is lumpy. We had a very large shipment to go out in the first quarter of this year, and then not as much activity obviously in the third quarter, no activity we didn't make some shipments in Q2.

We've subsequently to the quarter and we've shipped several orders out to customers for that business. So the rebound is taking hold in that business, our legacy business has also had shipments go out in the fourth quarter, and that business has continued to progress as well.

So our established brands in the Canadian market are performing well. We're getting contribution to our top line growth from Tibella and Combogesic.

And our net margins of 21%. Net is up versus 19% head of year ago and just think back to what we were up to in the third quarter of last year and that was preparing to launch and launching Tibella and preparing to launch Combogesic.

So we had significant launch investments pre-revenue, and that would have had some impact on the profitability of the year ago quarter. I'm not going to go too deep on this information, I know that you can pause the slide and take a look that shows you both on a quarter basis and on a nine-month basis how we're doing in dollars on a roll up for Canadian pharma, international pharma and legacy, but also you can dig a little bit deeper into unit volumes.

The key takeaway here is that the FeraMAX's business is doing well and is strong. I've got some comments about that in a couple of slides.

The RepaGyn business didn't have a great quarter, but overall on the year is up 8% and Cathejell is affected certainly by what's happening with COVID and what's going on with hospitals and so from month-to-month there might be some ebbs and flows, but overall that business at plus 18% in units is performing and you can see with the Aguettant system, the numbers are green Cysview, the story of inconsistency continues units down 25% in the quarter, but 35% up over nine months. The one thing that just to kind of touch on for Tibella and Combogesic is the launch growth rate for those products is below what we expected.

And that's largely as a result of patient traffic through healthcare professional offices. Despite that Tibella's units are up 170% on the quarter and that is when you compare it to the pipeline fill launch period of July and August of a year ago obviously in the quarter that we're comparing.

And as I mentioned, we've shipped three additional international orders in the fourth quarter already. And we have had some significant volume in our legacy business in the fourth quarter as well.

So I've been keeping you updated on the impacts of COVID-19 on our business, I'm going to keep focused on how it's affecting us in our operating environment and our relationship with our customers as opposed to the more general environment which you can track in the news media. So our access to the doctor customers that we call on is improving It was better in the third quarter and of late better than it has been essentially since COVID started a year and a half ago.

And we had our first shutdowns in the first wave here in Canada, but it's still a third below pre-COVID. So that means we're interacting less on a face-to-face basis with our customers.

And those customers, healthcare professionals are seeing their patients in-person at below pre-COVID levels. And what they're finding is they're doing primarily telephone consults with patients.

Our new products are four different reasons for Tibella and Combogesic, they'll do better with face-to-face communication with healthcare professionals. And certainly, in the case of Combogesic the ability of that HCP to the sample patient.

So those are the two products that have been the most affected by COVID. Our incumbent brands, those that are entrenched, have done well, they're resilient, and they've grown during COVID.

And you can see that going back to last year's results and this year nine months as well. We have seen of late case counts rising.

There's not yet undue pressure on hospitals, other than here and there in some provinces. And it's a little bit of a fingers crossed mode, because there is some uncertainty as we are moving to colder weather.

And we're going to stay tune to see what public health and provincial governments and the federal government, but more provincial governments, what they decide and how they -- what decisions they take over the next four to five months. What we've learned through COVID is be ready for anything and everything and try to adapt quickly.

Not to be entrenched in one mode of operation or doing business or communicating and today flexible with how we're interacting with our customers. We made decisions, I guess, in plural, but a big decision in the early days of COVID last year in 2020 to push ahead with a number of launch initiatives that we had on the drawing board.

And you can see as our business has progressed through the balance of last year, and in through nine months of this year. I think we made the right decision.

We know that the operating environment isn't ideal for us. But we've moved the business ahead and the company is in a much better position now than it was when we made those challenging decisions to push ahead.

I want to update you on the growth drivers in the business. One of them is FeraMAX.

As you know, in the fourth quarter of last year, we introduced innovative product formulation FeraMAX Pd, it's a patented delivery system, polydextrose iron. This was a change in formulation and it's a formulation platform on which we are innovating with new products, improved products, and other products that are coming to market over the next several years.

So this is an internally derived lifecycle strategy. And it's being built on the foundation of a brand that's been the number one recommended oral iron supplement in Canada now for six years running.

Late last year, we launched new FeraMAX therapeutic 150. Just recently in October of this year, we launched FeraMAX Pd Powder 15, both of those are reformulations and brand refresh the packaging and product differentiation for existing products.

So for the -- in the case of FeraMAX 150 it replaced product and it pretty well as a 100% been replaced by now. That same process is underway with Pd Powder 15.

We have further launch activity that is planned now or some of it is product that's under development. Some of it is close to being developed.

And we see a lot further launch activity for FeraMAX during 2022 and 2023 and perhaps beyond that, that's for the Canadian market. And of course some of these innovations we'll see their way into our international business as well, which we hope will give us an opportunity to open up new markets as well.

The latest news on Tibella hormone replacement therapy that we launched late July last year is that Tibolone, which is the common name of the compound in Tibella has recently been added to the SOGC menopause treatment guidelines, society of Obstetrics and Gynecology of Canada. These treatment guidelines have not been updated, since I believe 2014.

So this is big news for Tibella. Not only are we promoting that now to healthcare professionals, but the SOGC is actually promoting it internally amongst those doctors that treat women for menopause symptoms.

Finally, as you know, we're in the process of launching and establishing Combogesic in the Canadian market. To-date product has been ordered by about 4,400 pharmacies across the country.

Last quarter, we gave you an update on how we see some changes unfolding in our product portfolio. Decided to focus on higher growth assets where we could earn a better return on investment and made the decision to return both the Aguettant system prefilled syringes and Cysview back to their owners.

And that will be concluded at the end of this year. One of the obvious questions and I have received it a couple of times is what impact does that have on the top-line.

And I can tell you that those two products or three products, actually two brands, three products together represent about 5% or 6% of our top-line for this year. How we see the business finishing up this year.

So I've already mentioned, our focus on growth assets FeraMAX, Combogesic and Tibella. We also have a technology application to support the FeraMAX business, that we in licensed that.

Earlier this year, we're doing some pre-launch testing, it looks like that application will come to market in early 2022. We think it'll be a vital tool to assist us and healthcare professionals building brand awareness, compliance to medication, treatment success, and therefore increasing share of FeraMAX across Canada, across the various product formats that that we have today.

And that we will have into the future that I mentioned a few minutes ago. We do also have a women's health asset that is we are just getting some changes made to the label for Canada and we'll be slotting that in for commercialization at a later date.

So this is a slide that's familiar if you've been following the company or an owner of the company on my quarterly updates. And this looks at our cash balance in the blue bars were at $27.1 million at the end of September, that position has advanced and we expect it to advance further by the end of the year in other words, advancing to a higher level.

As you know, we've been operating the company with zero long-term debt. And we have a significant amount of market cap actually in cash on a per share basis, when buying back shares so that has some impact on our equity, we bought just under 80,000 shares in the nine months ending September.

And you can see on the green line on this chart is our calculation of return on equity. And you see there that it's bounced up from 17% in the year-ago to 18% and that's a reflection of growth and profitability and us managing the amount of capital that is on the balance sheet.

So the obvious question is when you have a strong balance sheet and no debt, what is your plan for capital allocation? How do you think about it?

These are questions that we get with some regularity. And I thought the best way to address that is to put capital allocation in the context of our strategic plan first to share with you some fundamental thinking and then how we're kind of acting as we move our business forward.

So earlier this year, we updated our strategic plan. So this is a process that we do every several years, the plan has been refreshed and updated to reflect the 2021 through 2025.

And there are three key themes that came out of that process. And that is the number one priority for the company and for senior leadership and all Managers in our business and all employees for that matter is to focus on growth, growth of existing assets and new assets, overall growth of the company to diversify our revenue streams into additional brands or products and then the override to those two themes is longevity and that's to make sure that we're taking decisions and behaving and moving our business forward in a context of longevity that we are existing as a business for a long-time.

And that helps guide us and ensures that we're making good solid long-term decisions. This is essentially an exercise in where we'll invest, what our priorities will be, and how we're going to grow the business increased value for all of the stakeholders of the company.

And if you look back over the last six, seven, eight years in Canadian specialty pharma, there have been some examples of or many examples, I should say of potentially short term decision making or cutting corners. And so the net result of that has been some of those companies don't exist anymore, or they've been kind of merged out of existence at valuations that were far below the capital that went into the business.

And so we may appear to be moving in a methodical pace. But that is because we're focused on longevity.

We do know that we have growth assets in the business and we are growing the business, if we have capital that we believe is an excess to our strategy, and we will turn that to shareholders. So the obvious way to do that is dividends and share buybacks, we have chosen over the last three years or so to do it via share buybacks.

And I'll just give you an update on our NCIB. So we started buying back shares in December of 2018.

And since then, we've repurchased just over 1.7 million shares. That includes just under 63,000 shares that were actually purchased subsequent to quarter-end, so our fully diluted shares outstanding now is at 12.96 [indiscernible] million.

That represents about a 12% reduction in our fully diluted over that period of time. On average, we've paid $6.09 a share and invested about $10.6 million, cumulatively over that period of time to the benefit of shareholders.

Just before we wrap up the presentation, I just wanted to take a quick look at our earnings per share fully diluted, you see here on a quarter basis, going back eight quarters, the most recent quarter was $0.13 a share. I just wanted to point out to you did this in the last quarter as well that that included netting off about $0.03 a share of incremental investment in Tibella and Combogesic, neither of those brands are yet cash flow positive.

And so the net effect is what are we investing in those businesses to those brands to get them going. And that works out to about $0.03 a share that's above and beyond existing sales infrastructure that we would have had in the business when we got going on those two brands.

So looking back over the last, the trailing 12 months, four quarters we're at $0.39 a share and that compares favorably to the $0.32 a share in the prior period. Quick look at our cap table, reflecting the new number of fully diluted common shares, I think you're aware that we have stopped issuing or we paused issuing share options in essence, now it's been a couple of years, we haven't issued any new share options.

So we do have some outstanding, we are using RSUs as equity compensation incentive for leadership in the business and the company is using its strong balance sheet to actually buy shares in the open market and holds them in trust till vesting. So that is certainly shareholder friendly behavior and we think that accrues to the benefit of all shareholders and stakeholders in our business.

I wanted to thank you once again for your interest in the company and we look forward to reporting the results of a good quarter that we see, that we're in the process of right now and look forward to sharing that information with you in March when we update full-year results. Thank you.